AGREEMENT AND PLAN OF MERGER by and between STERLING FINANCIAL CORPORATION and UMPQUA HOLDINGS CORPORATION _____________________ DATED AS OF SEPTEMBER 11, 2013 TABLE OF CONTENTS

 

 

 

 

(ii) the Cash Consideration and (iii) cash in lieu of fractional shares which the shares of Sterling Common Stock represented by such Certificate have been converted into the right to receive pursuant to this Section 1.4 and Section 2.2(e), without any interest thereon.  Certificates previously representing shares of Sterling Common Stock shall, subject to Section 2.2(b), be exchanged for certificates representing whole shares of Umpqua Common Stock and cash representing the cash portion of the Merger Consideration upon the surrender of such Certificates in accordance with Section 2.1, without any interest thereon.  If, prior to the Effective Time, the outstanding shares of Umpqua Common Stock or Sterling 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 or stock distribution, stock split, reverse stock split or other similar change in capitalization, or there shall be any extraordinary dividend or distribution, an appropriate and proportionate adjustment shall be made to the Merger Consideration (it being understood that any dividend or distribution permitted under Section 5.2(b)(ii) shall not be deemed to constitute an extraordinary dividend or distribution and shall not result in any adjustment to the Merger Consideration hereunder).

 

 

 

 

Restricted Stock Unit”) equal to the product of the number of shares of Sterling Common Stock subject to the Sterling Restricted Stock Unit and the Equity Award Exchange Ratio (and rounded, as applicable, to the nearest whole share, with 0.50 being rounded upward).  Each Adjusted Restricted Stock Unit shall otherwise be subject to the same terms and conditions applicable to the converted Sterling Restricted Stock Unit under the applicable Sterling Stock Plan and the agreements evidencing grants thereunder, including as to vesting.  All dividend equivalents, if any, accrued but unpaid as of the Effective Time with respect to such Sterling Restricted Stock Units, shall remain accrued with respect to associated Adjusted Restricted Stock Units and be treated in accordance with the terms and conditions of such Adjusted Restricted Stock Unit.

 

 

 

 

Disclosure Schedule, as chosen by Sterling’s existing Board of Directors.  As of the Effective Time, the chairperson of the Board of Directors of the Surviving Corporation shall be the existing chairperson of the Board of Directors of Umpqua.  Each of the foregoing directors shall serve until their respective successors have been duly elected or appointed and qualified, or their earlier death, resignation or removal.  The Surviving Corporation shall nominate for re-election, at each annual meeting of the stockholders of the Surviving Corporation that is held after the Effective Time and before the 2016 annual meeting of the stockholders of the Surviving Corporation, each of the directors designated at the Effective Time pursuant to clause (z) of this Section 1.12(b).

 

 

 

 

(i) the location of the headquarters and principal executive offices of the Surviving Corporation shall be Portland, Oregon, (ii) the name of the Surviving Corporation shall be “Umpqua Holdings Corporation” and (iii) the name of the surviving entity in the Bank Merger shall be “Umpqua Bank”.

 

 

 

 

be entitled to receive in exchange therefor, as applicable, (i) a certificate representing that number of whole shares of Umpqua Common Stock to which such holder of Sterling Common Stock shall have become entitled pursuant to the provisions of Article I and (ii) a check representing the amount of the Cash Consideration, any cash in lieu of fractional shares which such holder has the right to receive in respect of the Certificate or Certificates surrendered pursuant to the provisions of Article II and any dividends or distributions that are then payable pursuant to Section 2.2(b), and the Certificate or Certificates so surrendered shall forthwith be cancelled.  No interest will be paid or accrued on any cash paid or payable in respect of the Merger Consideration.  Until surrendered as contemplated by this Section 2.2, except as set forth in Section 1.6, each Certificate shall be deemed at any time after the Effective Time to represent only the right to receive, upon surrender, the Merger Consideration and any dividends or distributions payable under Section 2.2(b). For purposes of this Agreement, “business day” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Law to close.

 

 

 

 

they shall be cancelled and exchanged for the Merger Consideration as provided in this Article II.

 

 

 

 

timely consummate the transactions contemplated hereby.  As used in this Agreement, the word “Subsidiary,” when used with respect to any person, means any corporation, partnership, limited liability company, bank or other entity or organization, whether incorporated or unincorporated, of which stock or other equity interests having ordinary voting power to elect more than 50% of the board of directors or other governing body are owned, directly or indirectly, by such person.  True and complete copies of the Restated Articles of Incorporation of Sterling, as amended through the date hereof (the “Sterling Articles”) and the Amended and Restated Bylaws of Sterling, as in effect as of the date of this Agreement, have previously been made available by Sterling to Umpqua.

 

 

 

 

pursuant to the THL Agreement at a price per share of Sterling Common Stock of $13.26 (in each of clauses (v) and (vi), subject to anti-dilution adjustments relating to events after September 5, 2013 pursuant to the terms of such Warrants), (vii) 10,000,000 shares of Series E Participating Cumulative Preferred Stock of Sterling, which had been reserved for issuance in accordance with the First Amended and Restated Shareholder Rights Plan, dated as of December 8, 2010, between Sterling and American Stock Transfer & Trust Company, LLC, as rights agent (the “Rights Agreement”), pursuant to which Sterling had issued rights to purchase shares of its Series E Participating Cumulative Preferred Stock and (viii) no other shares of capital stock or other voting securities of Sterling issued, reserved for issuance or outstanding.  All of the issued and outstanding shares of Sterling 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.  Except as set forth in this Section 3.2(a), and except for changes since September 5, 2013 resulting from the exercise of Sterling Stock Options outstanding on such date, the settlement of Sterling Restricted Stock Units outstanding on such date and the exercise of any Warrant, there are no outstanding (i) shares of capital stock or other voting securities or ownership interests in Sterling or (ii) subscriptions, options, warrants (other than the Warrants) or other rights to acquire from Sterling or any Sterling Subsidiary, or other obligation of Sterling or any Sterling Subsidiary to issue, any capital stock or other voting securities or ownership interests in, or any securities of Sterling or any Sterling Subsidiary convertible into or exchangeable or exercisable for capital stock or other voting securities or ownership interests in, Sterling.  Other than the Rights Agreement, the Warburg Agreement, the THL Agreement, the Warrants and the subscription agreements dated on or about August 19, 2010 between Sterling and certain investors set forth on Section 3.2(a) of the Sterling Disclosure Schedule in the form previously made available to Umpqua (the “Other Private Placement Agreements”) and the Investor Letter Agreements, there are no voting trusts, shareholder agreements, proxies or other agreements in effect with respect to the voting or transfer of the Sterling Common Stock, in each case, to which Sterling or any of its Subsidiaries is a party.  There are no bonds, debentures, notes or other indebtedness that have the right to vote on any matters on which shareholders of Sterling may vote.  Since September 5, 2013 through the date hereof, Sterling has not issued or repurchased any shares of its capital stock (other than in connection with the exercise, settlement or vesting of Sterling Stock Options, Sterling Restricted Stock Units or the Warrants in accordance with their respective terms).  No Sterling Subsidiary owns any capital stock of Sterling other than any Third Party Shares.

 

 

 

 

are issued or outstanding.  Sterling is not currently deferring interest payments with respect to any trust preferred securities or related junior subordinated debt securities issued by it or any of its affiliates.

 

 

 

 

performance required by, or result in the creation of any Lien upon any of the respective properties or assets of Sterling or any of its Subsidiaries under, any of the terms, conditions or provisions of any note, bond, mortgage, indenture, deed of trust, license, lease, agreement or other instrument or obligation to which Sterling or any of its Subsidiaries is a party, or by which they or any of their respective properties or assets is bound, except (in the case of clause (ii) above) for such matters which would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Sterling.

 

 

 

 

Subsidiaries, no Regulatory Agency has initiated or has pending any proceeding or, to the knowledge of Sterling, investigation into the business or operations of Sterling or any of its Subsidiaries since January 1, 2011, except where such proceedings or investigation would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Sterling.  There (a) is no unresolved violation, criticism, or exception by any Regulatory Agency with respect to any report or statement relating to any examinations or inspections of Sterling or any of its Subsidiaries and (b) has been no formal or informal inquiries by, or disagreements or disputes with, any Regulatory Agency with respect to the business, operations, policies or procedures of Sterling or any of its Subsidiaries since January 1, 2011, except in the case of each of clause (a) and (b), as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Sterling.

 

 

 

 

electronic, mechanical or photographic process, whether computerized or not) that are under the exclusive ownership and direct control of Sterling or its Subsidiaries or accountants (including all means of access thereto and therefrom), except for any non-exclusive ownership and non-direct control that would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Sterling.  Sterling (x) has implemented and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) designed to ensure that material information relating to Sterling, including its Subsidiaries, is made known to the management of Sterling, including Sterling’s principal executive and principal financial officers (or persons performing similar functions), by others within those entities as appropriate to allow timely decisions regarding required disclosures and to make the certifications required by the Exchange Act and Sections 302 and 906 of the Sarbanes-Oxley Act of 2002, as amended (the “Sarbanes-Oxley Act”), and (y) has disclosed, based on its most recent evaluation prior to the date hereof, to Sterling’s outside auditors and the audit committee of Sterling’s Board of Directors (i) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) which are reasonably likely to adversely affect Sterling’s ability to record, process, summarize and report financial information, and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in Sterling’s internal controls over financial reporting.  These disclosures were made in writing by management to Sterling’s auditors and audit committee and a copy has previously been made available to Umpqua.  To the knowledge of Sterling, there is no reason to believe that Sterling’s outside auditors and its chief executive officer and chief financial officer will not be able to give the certifications and attestations required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, without qualification, when next due.

 

 

 

 

connection with the engagement of Sandler O’Neill + Partners, LP relating to the Merger and the other transactions contemplated hereunder.

 

 

 

 

to which the applicable period for assessment under applicable Law, after giving effect to extensions or waivers, has expired.  Neither Sterling nor any of its Subsidiaries has received written notice of assessment or proposed assessment in connection with any material amount of Taxes, and there are no threatened in writing or pending disputes, claims, audits, examinations or other proceedings regarding any material Tax with respect to Sterling and its Subsidiaries or the assets of Sterling and its Subsidiaries.  Sterling has made available to Umpqua true and complete copies of any private letter ruling requests, closing agreements or gain recognition agreements with respect to Taxes requested or executed in the last six years.  Neither Sterling nor any of its Subsidiaries is a party to or is bound by any Tax sharing, allocation or indemnification agreement or arrangement (other than such an agreement or arrangement exclusively between or among Sterling and its Subsidiaries or that has a principal purpose other than Tax matters).  Neither Sterling nor any of its Subsidiaries (A) has been a member of an affiliated group filing a consolidated federal income Tax Return (other than a group the common parent of which was Sterling) or (B) has any liability for the Taxes of any person (other than Sterling or any of its Subsidiaries) under Treasury Regulation Section 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by contract or otherwise.  Neither Sterling nor any of its Subsidiaries has been, within the past three years or otherwise as part of a “plan (or series of related transactions)” within the meaning of Section 355(e) of the Code of which the Merger is also a part, a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock intending to qualify for tax-free treatment under Section 355 of the Code.  Neither Sterling nor any of its Subsidiaries has participated in a “reportable transaction” within the meaning of Treasury Regulation section 1.6011-4(b)(1).  At no time during the past five years has Sterling been a United States real property holding corporation within the meaning of Section 897(c)(2) of the Code.

 

 

 

 

 incorporated, all of which together with Sterling would be deemed a “single employer” within the meaning of Section 4001 of ERISA (a “Sterling ERISA Affiliate”), is a party or has any current or future obligation or that are maintained, contributed to or sponsored by Sterling or any of its Subsidiaries or any of their respective Sterling ERISA Affiliates for the benefit of any current or former employee, officer, director or independent contractor of Sterling or any of its Subsidiaries or any of their respective Sterling ERISA Affiliates, in each case to the extent material (all such plans, programs, arrangements, contracts or agreements, collectively, the “Sterling Benefit Plans”).

 

 

 

 

respective Sterling ERISA Affiliates has incurred any material liability to a Title IV Plan or a Multiemployer Plan or Multiple Employer Plan as a result of a complete or partial withdrawal (as those terms are defined in Part I of Subtitle E of Title IV of ERISA) from a Multiemployer Plan or Multiple Employer Plan.

 

 

 

 

vehicle, and the transactions contemplated by this Agreement will not cause or require Sterling or any of its affiliates to establish or make any contribution to a rabbi trust or similar funding vehicle.  No Sterling Benefit Plan provides for the gross-up or reimbursement of Taxes under Section 4999 or 409A of the Code.

 

 

 

 

rights and assets under and pursuant to applicable Law (and have paid all fees and assessments due and payable in connection therewith), except where the failure to so hold any such licenses, registrations, franchises, permits or authorizations or the failure to so pay any such fees or assessments would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Sterling and, to the knowledge of Sterling, no suspension or cancellation of any such necessary license, registration, franchise, permit or authorization is threatened in writing that would reasonably be expected to have any such effect.  Sterling and each of its Subsidiaries have complied with and are not in default or violation under any applicable law, statute, order, rule, regulation, judgment, injunction, decree, policy and/or guideline of any Governmental Entity (each, a “Law”) relating to Sterling or any of its Subsidiaries, including without limitation all applicable 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 applicable 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, except for such failures to comply, defaults or violations that would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Sterling.

 

 

 

 

custodian, personal representative, guardian, conservator or investment adviser, in accordance with the terms of the applicable governing documents and applicable Laws, except where the failure to so administer such accounts would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Sterling.  Since January 1, 2011, none of Sterling or any of its Subsidiaries, or, to Sterling’s knowledge, any director, officer, or employee of Sterling or its Subsidiaries, 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, except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Sterling.

 

 

 

 

aggregate, a Material Adverse Effect on Sterling, (iii) to Sterling’s knowledge no third-party counterparty to any Sterling Contract is in breach or violation of any provision of any Sterling Contract, except where such breach or violation would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Sterling, and (iv) no event or condition exists which constitutes or, after notice or lapse of time or both, will constitute, a material default on the part of Sterling or any of its Subsidiaries under any such Sterling Contract, except where such default would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Sterling.

 

 

 

 

resources or to human health and safety as it relates to hazardous substance exposure; (ii) the handling, use, presence, disposal, release or threatened release of, or exposure to, any hazardous substance; or (iii) noise, odor, wetlands, indoor air, pollution, contamination or any injury to persons or property from exposure to any hazardous substance (collectively, “Environmental Laws”).  There are no legal, administrative, arbitral or other proceedings, claims, actions, causes of action, private environmental investigations or remediation activities or governmental investigations of any nature seeking to impose, or that could reasonably result in the imposition, on Sterling or any of its Subsidiaries of any liability or obligation arising under any applicable Environmental Law, pending or threatened against Sterling, which liability or obligation would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Sterling.  To the knowledge of Sterling, there is no reasonable basis for any such proceeding, claim, action, cause of action or investigation that would impose any liability or obligation arising under any applicable Environmental Law that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Sterling.  Sterling is not subject to any agreement, order, judgment, decree, letter or memorandum by or with any court, Governmental Entity, or third party imposing any liability or obligation arising under any applicable Environmental Law with respect to the foregoing that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Sterling.

 

 

 

 

not materially affect the value or use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties as currently conducted and (iv) such imperfections or irregularities of title or Liens as do not materially affect the value or use of the properties or assets subject thereto or affected thereby or otherwise materially impair business operations at such properties as currently conducted (collectively, “Permitted Encumbrances”), and xii) is the lessee of all leasehold estates reflected in the latest audited financial statements included in such Sterling Reports or leased after the date thereof (except for leases that have expired by their terms since the date thereof) (the “Sterling Leased Properties” and, collectively with the Sterling Owned Properties, the “Sterling 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, to Sterling’s knowledge, the lessor.  There are no pending or, to the knowledge of Sterling, threatened condemnation proceedings against any material Sterling Real Property.

 

 

 

 

its Subsidiaries will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder.

 

 

 

 

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 Sterling and its Subsidiaries, Sterling 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.

 

 

 

 

individually or in the aggregate, a Material Adverse Effect on Umpqua.  True and complete copies of the Umpqua Articles and Bylaws of Umpqua, in each case as in effect as of the date of this Agreement, have previously been made available by Umpqua to Sterling.

 

 

 

 

the terms hereof, duly authorized and validly issued and fully paid, nonassessable and free of preemptive rights, with no personal liability attaching to the ownership thereof.  Except as set forth in this Section 4.2(a), and except for changes since August 31, 2013 resulting from the exercise of Umpqua Stock Options outstanding on such date and the settlement of Umpqua Restricted Stock Units outstanding on such date, there are no outstanding (i) shares of capital stock or other voting securities or ownership interests in Umpqua or (ii) subscriptions, options, warrants or other rights to acquire from Umpqua or any Umpqua Subsidiary, or other obligation of Umpqua or any Umpqua Subsidiary to issue, any capital stock or other voting securities or ownership interests in, or any securities of Umpqua or any Umpqua Subsidiary convertible into or exchangeable or exercisable for capital stock or other voting securities or ownership interests in, Umpqua.  There are no voting trusts, shareholder agreements, proxies or other agreements in effect with respect to the voting or transfer of the Umpqua Common Stock, in each case, to which Umpqua or any of its Subsidiaries is a party.  There are no bonds, debentures, notes or other indebtedness that have the right to vote on any matters on which shareholders of Umpqua may vote.  Since August 31, 2013 through the date hereof, Umpqua has not issued or repurchased any shares of its capital stock (other than in connection with the exercise, settlement or vesting of Umpqua Stock Options, Umpqua Restricted Stock Units or Umpqua Restricted Stock Awards in accordance with their respective terms).  No Umpqua Subsidiary owns any capital stock of Umpqua other than any Third Party Shares.

 

 

 

 

SEC of the Joint Proxy Statement and the S-4 in which the Joint Proxy Statement will be included as a prospectus, and declaration of effectiveness of the S-4, (iv) the filing of the Articles of Merger (which shall include the Articles Amendment) with the Washington Secretary pursuant to the WBCA and the Oregon Secretary pursuant to the OBCA and the filing of the Bank Merger Certificates, (v) 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 Umpqua Common Stock pursuant to this Agreement and (vi) such filings as are required to be made under the Exchange Act, no material consents or approvals of or filings or registrations with any Governmental Entity are necessary in connection with (A) the execution and delivery by Umpqua of this Agreement or (B) the consummation by Umpqua of the Merger, the Bank Merger and the other transactions contemplated hereby.  As of the date of this Agreement, Umpqua has no knowledge of any reason why any of the Requisite Regulatory Approvals should not be granted on a timely basis.

 

 

 

 

material respects with applicable accounting requirements and with the published rules and regulations of the SEC with respect thereto, and (iv) in all material respects 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 Umpqua and its Subsidiaries have been, and are being, maintained in all material respects in accordance with GAAP and any other applicable legal and accounting requirements and in all material respects reflect only actual transactions.  Moss Adams LLP has not resigned (or informed Umpqua that it intends to resign) or been dismissed as independent public accountants of Umpqua as a result of or in connection with any disagreements with Umpqua on a matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure.

 

 

 

 

required pursuant to the rules and regulations adopted pursuant to Section 404 of the Sarbanes-Oxley Act, without qualification, when next due.

 

 

 

 

investigations of any nature against Umpqua or any of its Subsidiaries or any of their current or former directors or executive officers.

 

 

 

 

Umpqua or any of its Subsidiaries in connection with the transactions contemplated hereby (either solely as a result thereof or as a result of such transactions in conjunction with any other event) will be an “excess parachute payment” within the meaning of Section 280G of the Code.  Neither Umpqua nor any of its Subsidiaries maintains or contributes to a rabbi trust or similar funding vehicle, and the transactions contemplated by this Agreement will not cause or require Umpqua or any of its affiliates to establish or make any contribution to a rabbi trust or similar funding vehicle.  No Umpqua Benefit Plan provides for the gross-up or reimbursement of Taxes under Section 4999 or 409A of the Code.

 

 

 

 

assessments would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Umpqua and, to the knowledge of Umpqua, no suspension or cancellation of any such necessary license, registration, franchise, permit or authorization is threatened in writing that would reasonably be expected to have any such effect.  Umpqua and each of its Subsidiaries have complied with and are not in default or violation under any Law relating to Umpqua or any of its Subsidiaries, including without limitation all applicable 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 applicable 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, except for such failures to comply, defaults or violations that would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Umpqua.

 

 

 

 

employee of Umpqua or its Subsidiaries, 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, except as would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Umpqua.

 

 

 

 

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) in the principal amount of $1,000,000 or more, including any sale and leaseback transactions, capitalized leases and other similar financing transactions;

 

 

 

 

condition exists which constitutes or, after notice or lapse of time or both, will constitute, a material default on the part of Umpqua or any of its Subsidiaries under any such Umpqua Contract, except where such default would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Umpqua.

 

 

 

 

obligation would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Umpqua.  To the knowledge of Umpqua, there is no reasonable basis for any such proceeding, claim, action, cause of action or investigation that would impose any liability or obligation arising under any applicable Environmental Law that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Umpqua.  Umpqua is not subject to any agreement, order, judgment, decree, letter or memorandum by or with any court, Governmental Entity, or third party imposing any liability or obligation arising under any applicable Environmental Law with respect to the foregoing that would reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect on Umpqua.

 

 

 

 

currently conducted; (b) to the knowledge of Umpqua, the use of any Intellectual Property by Umpqua and its Subsidiaries does not infringe on, misappropriate or otherwise violate the rights of any person and, to the extent applicable, is in accordance with any applicable license pursuant to which Umpqua or any Umpqua Subsidiary acquired the right to use such Intellectual Property; (c) no person has asserted in writing that Umpqua or any of its Subsidiaries has infringed on, misappropriated or otherwise violated the Intellectual Property rights of such person; (d) to the knowledge of Umpqua, no person is challenging, infringing on or otherwise violating any right of Umpqua or any of its Subsidiaries with respect to any Intellectual Property owned by and/or exclusively licensed to Umpqua or its Subsidiaries; (e) neither Umpqua nor any Umpqua Subsidiary has received any written notice of any pending claim with respect to any Intellectual Property used by Umpqua or any Umpqua Subsidiary; and (f) to the knowledge of Umpqua, no Intellectual Property owned and/or exclusively licensed by Umpqua or any Umpqua Subsidiary is being used or enforced in a manner that would reasonably be expected to result in the abandonment, cancellation or unenforceability of such Intellectual Property.

 

 

 

 

upon and subject to the matters set forth therein, the Merger Consideration to be paid to the holders of Sterling Common Stock in the Merger is fair, from a financial point of view, to Umpqua.  Such opinion has not been amended or rescinded as of the date of this Agreement.

 

 

 

 

participation was originally created due to concerns regarding the borrower's ability to pay in accordance with such initial terms, or (5) where a specific reserve allocation exists in connection therewith, and (D) all assets classified by Umpqua as real estate acquired through foreclosure or in lieu of foreclosure, including in substance foreclosures, and all other assets currently held that were acquired through foreclosure or in lieu of foreclosure.

 

 

 

 

hereof or granted after the date hereof in compliance with this Agreement, in each case in accordance with past practice and the terms of the applicable award agreements);

 

 

 

 

to any current or former employee, officer, director or consultant (other than any annual salary, wage or benefit increases in the ordinary course of business and consistent with past practice to employees, not to exceed the amount or value set forth on Section 5.2(f)(iii) of the Umpqua Disclosure Schedule or Section 5.2(f)(iii) of the Sterling Disclosure Schedule; (x) of Sterling below the level of Executive Vice President or (y) of Umpqua below the level of Executive Vice President), (iv) pay or award, or commit to pay or award, any bonuses or incentive compensation other than in the ordinary course of business consistent with past practice, (v) grant or accelerate the vesting of any equity or equity-based awards or other compensation, (vi) enter into any new, or amend any existing, employment, severance, change in control, retention, bonus guarantee, collective bargaining agreement or similar agreement or arrangement, (vii) fund any rabbi trust or similar arrangement, (viii) terminate the employment or services of any officer or any employee whose target annual compensation is greater than the amount set forth on Section 5.2(f)(viii) of the Umpqua Disclosure Schedule or Section 5.2(f)(viii) of the Sterling Disclosure Schedule, other than for cause or, in the case of such officers or employees below the level of Executive Vice President, for performance related reasons, provided that Sterling or Umpqua, as applicable, shall consult with the other party prior to terminating any such employee for performance related reasons, (ix) hire any officer or employee who has an annual base salary greater than the amount set forth on Section 5.2(f)(ix) of the Umpqua Disclosure Schedule or Section 5.2(f)(ix) of the Sterling Disclosure Schedule; or (x) hire any individual independent contractor or consultant who will receive annual compensation greater than the amount set forth on Section 5.2(f)(x) of the Umpqua Disclosure Schedule or Section 5.2(f)(x) of the Sterling Disclosure Schedule.

 

 

 

 

(45) days after the date of this Agreement.  Umpqua and Sterling 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 relating to the exchange of information, all  information relating to Sterling or Umpqua, as the case may be, and any of their respective Subsidiaries (excluding any confidential financial information relating to individuals or to Warburg Pincus Private Equity X, L.P., Warburg Pincus X Partners, L.P., Thomas H. Lee Equity Fund VI, L.P., Thomas H. Lee Parallel Fund VI, L.P. or Thomas H. Lee Parallel (DT) Fund VI, L.P. or any of their respective affiliates (excluding Sterling and its Subsidiaries)), which appears 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 hereto shall act reasonably and as promptly as practicable.  The parties hereto agree that they will consult with each other with respect to the obtaining of all permits, consents, approvals and authorizations of all third parties and Governmental Entities necessary or advisable to consummate the transactions contemplated by this Agreement and each party will keep the other apprised of the status of matters relating to completion of the transactions contemplated herein, including by delivery of a copy of any applications, notices, petitions or filings made by a party to the other party, subject to the limitations set forth above.  Wherever practicable under the circumstances, each party shall consult with the other in advance of any meeting or conference with any Governmental scheduled in advance for the express purpose of discussing applications for approval of the transactions contemplated herein and, to the extent permitted by such Governmental Entity, give the other party and its counsel the opportunity to attend and participate in such meetings and conferences.  Notwithstanding the foregoing, nothing contained herein shall be deemed to require either party to, in connection with obtaining the foregoing permits, consents, approvals and authorizations of Governmental Entities or third parties, take any action, or commit to take any action, or agree to any condition or restriction that would reasonably be expected to have a material adverse effect on the Surviving Corporation (assuming for this purpose that the Surviving Corporation consists of Umpqua and Sterling and their respective Subsidiaries taken as a whole) (a “Materially Burdensome Regulatory Condition”), provided that the sale of one or more branches of Sterling or Umpqua in a geographic banking market shall not constitute, or be taken into account in determining whether there would be, a Materially Burdensome Regulatory Condition.

 

 

 

 

(excluding Sterling and its Subsidiaries), this Section 6.1(d) shall apply if, and only to the extent, Sterling is in possession of such information and is permitted to furnish such information to Umpqua) and such other matters as may be reasonably necessary or advisable in connection with the Joint Proxy Statement, the S-4 or any other statement, filing, notice or application made by or on behalf of Umpqua, Sterling or any of their respective Subsidiaries to any Governmental Entity in connection with the Merger, the Bank Merger and the other transactions contemplated by this Agreement.  Each of Umpqua and Sterling agrees that none of the information supplied or to be supplied by it for inclusion or incorporation by reference in (i) the S-4 will, at the time the 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 and any amendment or supplement thereto will, at the date of mailing to the shareholders of Umpqua and Sterling and at the time of the Sterling Meeting and Umpqua Meeting, as the case may be, 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 statement was made, not misleading.  Each of Umpqua and Sterling further agrees that if it becomes aware that any information furnished by it would cause any of the statements in the S-4 or the Joint Proxy Statement 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 S-4 or the Joint Proxy Statement.

 

 

 

 

requirements of such auditors).  Notwithstanding the foregoing, neither Umpqua nor Sterling nor any of their respective Subsidiaries shall be required to provide access to or to disclose (x) information where such access or disclosure would jeopardize the attorney-client privilege of the institution in possession or control of such information (after giving due consideration to the existence of any common interest, joint defense or similar agreement between the parties) or contravene any Law, fiduciary duty or binding agreement entered into prior to the date of this Agreement or (y) personnel records that, in its good faith opinion, could subject it to risk of liability.  The parties hereto will use reasonable best efforts to make appropriate substitute disclosure arrangements under circumstances in which the restrictions of the preceding sentence apply.  Any investigation pursuant to this Section shall be conducted in such manner as not to interfere unreasonably with the conduct of business of the other party or any of its Subsidiaries.

 

 

 

 

in clauses (x), (y) and (z), each a “Change in Board Recommendation”), in each case in response to (1) a material event, fact, circumstance, development or occurrence which is unknown and not reasonably foreseeable to or by the Board of Directors of such party as of the date hereof (and does not relate to a Superior Proposal, which is addressed in the following clause (2)), but becomes known to or by the Board of Directors of such party prior to obtaining the Requisite Sterling Vote or Requisite Umpqua Vote, as applicable (an “Intervening Business Event”) or (2) the receipt of an unsolicited bona fide Acquisition Proposal which the Board of Directors of such party determines in its good faith judgment, after receiving the advice of outside legal counsel, is a Superior Proposal (a “Superior Proposal Event”), in each case, if and only if, the Board of Directors of such party determines in its good faith judgment, after receiving the advice of outside legal counsel, that failure to take such action would be inconsistent with its fiduciary duties under applicable Law.  Prior to Umpqua or Sterling, as the case may be, making a Change in Board Recommendation, (i) in the case of a Change in Board Recommendation in connection with an Intervening Business Event, (A) three business days shall have elapsed following delivery by such party to the other party of written notice advising the other party that such party’s Board of Directors intends to resolve to effect a Change in Board Recommendation and (B) the other party shall not have proposed adjustments to the terms and conditions hereof during such three (3) business day period (during which period the party delivering notice of its intention to effect a Change in Board Recommendation shall have negotiated with the other party to this Agreement in good faith (to the extent such other party to this Agreement desires to negotiate) with respect to such adjustments) that, in the opinion of the Board of Directors of the party proposing to effect a Change in Board Recommendation, obviate the need for such Change in Board Recommendation, and (ii) in the case of a Change in Board Recommendation in connection with a Superior Proposal Event, (A) three (3) business days (subject to extension as set forth below in this sentence) shall have elapsed following delivery by such party to the other party of written notice advising the other party that such party’s Board of Directors intends to resolve to effect a Change in Board Recommendation absent modification of the terms and conditions of this Agreement, which notice shall specify the identity of the person making such Superior Proposal and the material terms and conditions thereof and include a copy of the relevant proposed transaction agreements with the person making such Superior Proposal and all other material documents provided by such person relating thereto, (B) assuming this Agreement was amended to reflect all adjustments to the terms and conditions hereof proposed by the other party to this Agreement during such three (3) business day period (during which period the party delivering the notice of its intention to effect a Change in Board Recommendation shall have negotiated with the other party to this Agreement in good faith (to the extent such other party to this Agreement desires to negotiate) with respect to such adjustments), such Acquisition Proposal nonetheless continues, in the good faith judgment, after receiving the advice of outside legal counsel, of the Board of Directors of the party proposing to make a Change in Board Recommendation, to constitute a Superior Proposal and (C) the party delivering the notice of its intention to effect a Change in Board Recommendation shall have complied to date with its obligations set forth in this Section 6.3(a) and Section 6.11; provided, however, that following any material revision to such Superior Proposal, such party shall be required to deliver a new written notice to the other party in accordance with this sentence and to again comply with the requirements of this sentence.  Notwithstanding anything to the contrary in this Agreement, (1) nothing in this Agreement shall be interpreted to excuse either party and its Board of Directors from complying with its obligation to submit this Agreement to its shareholders at the Umpqua

 

 

 

 

Meeting or Sterling Meeting, as the case may be, or from complying with the obligations set forth in Section 6.3(d), and (2) neither party shall submit to the vote of its shareholders any Acquisition Proposal or Alternative Transaction other than the Merger.  Without limiting the foregoing, if the Board of Directors of Umpqua or Sterling has effected a Change in Board Recommendation as expressly permitted by this Section 6.3(a), then the Board of Directors of such party may submit this Agreement to its shareholders without the Board Recommendation (although the resolutions approving this Agreement as of the date hereof may not be rescinded or amended), in which event the Board of Directors of such party may communicate the basis for its Change in Recommendation to its shareholders in the Joint Proxy Statement or an appropriate amendment or supplement thereto.

 

 

 

 

its Subsidiaries, for all purposes in any New Benefit Plan in which such employees first become eligible to participate after the Effective Time to the same extent that such service was taken into account under one or more of the comparable Sterling Benefit Plans prior to the Effective Time; provided, that the foregoing service recognition shall not apply (A) to the extent it would result in duplication of benefits for the same period of services, (B) for purposes of any defined benefit retirement plan or benefit plan that provides retiree welfare benefits, or (C) to any benefit plan that, as of the Effective Time, is a frozen plan or provides grandfathered benefits.

 

 

 

 

Time, the applicable performance metrics for the period following the Effective Time shall be appropriately adjusted as mutually agreed in good faith between Sterling and Umpqua prior to the Effective Time.

 

 

 

 

determines, in its good faith judgment, after receiving the advice of outside counsel, constitutes, or could reasonably be expected to result in, a Superior Proposal, if and only if, the Board of Directors of such party determines in its good faith judgment, after receiving the advice of outside counsel, that failure to take such action would be inconsistent with its fiduciary duties under applicable Law, such party and its Representatives, as applicable, may (A) furnish information with respect to it and its Subsidiaries to the party making such Acquisition Proposal and its Representatives and financing sources pursuant to a customary confidentiality agreement containing terms no less restrictive to the party making the Acquisition Proposal than the terms contained in the Confidentiality Agreement, provided that a copy of all such written information is substantially simultaneously provided to the other party to this Agreement (if not previously provided), and (B) participate in discussions and negotiations regarding such Acquisition Proposal.

 

 

 

 

Preferred Securities. In connection therewith, Umpqua and Sterling shall execute and deliver any supplemental indentures or other documents, and the parties hereto shall provide any opinion of counsel, in each case reasonably requested by the trustee thereof, to the trustee thereof, required to make such assumptions effective.

 

 

 

 

Governmental Entity which prohibits or makes illegal consummation of the Merger, the Bank Merger or any of the other material transactions contemplated by this Agreement.

 

 

 

 

reduces the amount or changes the form of the consideration to be delivered to the holders of Sterling Common Stock hereunder or that otherwise requires the approval of such shareholders under applicable Law.  Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party, 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.

 

 

 

 

prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof (including the parties’ obligation to consummate the Merger), in addition to any other remedy to which they are entitled at law or in equity.  The parties hereto further agree to waive any requirement for the securing or posting of any bond in connection with any such remedy.