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S-4 Form - Registration of securities, business combinations - Eagle Bancorp Montana, Inc. (0001478454) (Filer)

S-41ebmt20191007_s4.htmFORM S-4 ebmt20191007_s4.htm

Table of Contents

As filed with the Securities and Exchange Commission on October 11, 2019

 

Registration No. 333-

 



 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

_____________________________

 

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

_____________________________

 

EAGLE BANCORP MONTANA, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

(State or other jurisdiction of

incorporation or organization)

6022

(Primary Standard Industrial

Classification Code Number)

27-1449820

(I.R.S. Employer

Identification No.)

 

1400 Prospect Avenue

Helena, Montana 59601

(406) 442-3080

(Address, including zip code, and telephone number, including area code, of registrants principal executive offices)

 

_____________________________

 

Peter J. Johnson

Chief Executive Officer

Eagle Bancorp Montana, Inc.

1400 Prospect Avenue

Helena, Montana 59601

(406) 442-3080

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 

_____________________________

 

Copies to:

 

Lloyd H. Spencer

Nixon Peabody LLP

799 9th Street N.W., Suite 500

Washington D.C. 20001

Telephone: (202) 585-8000

Mark C. Dietzen

Ballard Spahr LLP

2000 IDS Center, 80 South 8th Street

Minneapolis, Minnesota 55402-2119

Telephone: (612) 371-3211

_____________________________

 

Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this registration statement becomes effective and upon completion of the merger described in the enclosed document.

 

 

If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. ☐

 

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

 

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering: ☐

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐ Accelerated filer ☒
Non-accelerated filer ☐ Smaller reporting company ☒
  Emerging growth company ☐

                  

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐

 

If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:

 

Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) ☐

Exchange Act Rule 14d-1(d) (Cross-Border Third-party Tender Offer) ☐

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class

of Securities to be

Registered

Amount to be

Registered

Proposed

Maximum

Offering Price
Per Unit

Proposed

Maximum

Aggregate

Offering Price(2)

Amount of

Registration Fee(2)

Common Stock

$0.01 par value

395,858(1)

Not applicable

$5,464,417

$709.28

         
 

(1)

Represents the maximum number of shares of Eagle common stock estimated to be issuable upon completion of the transaction described herein. Pursuant to Rule 416, this registration statement also covers additional shares that may be issued as a result of stock splits, stock dividends or similar transactions.

 

 

(2)

Computed in accordance with Rule 457(f)(2) solely for the purpose of calculating the registration fee. Based on the book value, as of September 30, 2019, of 2,206 shares of Western Holding Company of Wolf Point (“WHC”) common stock (the total number of shares of WHC common stock outstanding) minus $6.5 million (the estimated amount of cash to be paid to WHC shareholders in the merger).

 

The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

 



 

 

The information in this preliminary proxy statement/prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This proxy statement/prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state or jurisdiction where the offer or sale is not permitted.

 

SUBJECT TO COMPLETION, DATED OCTOBER 11, 2019

 

PROXY STATEMENT/PROSPECTUS

 

 

          

 

MERGER PROPOSED −YOUR VOTE IS IMPORTANT

 

To the Shareholders of Western Holding Company of Wolf Point.:

 

On August 8, 2019, Eagle Bancorp Montana, Inc., or Eagle, Opportunity Bank of Montana, or Opportunity Bank, Western Holding Company of Wolf Point, or WHC, and Western Bank of Wolf Point, or Western Bank, entered into an Agreement and Plan of Merger (which we refer to as the “merger agreement”) that provides for the acquisition of WHC by Eagle. Under the merger agreement, WHC will merge with and into Eagle, with Eagle as the surviving corporation (which we refer to as the “merger”). Immediately following the merger, Western Bank will merge with and into Opportunity Bank, with Opportunity Bank as the surviving bank (which we refer to as the “bank merger”).

 

In the merger, each share of WHC common stock (except for specified shares of WHC common stock held by WHC or Eagle and any dissenting shares) will be converted into the right to receive a combination of (i) 179.4464 shares of Eagle common stock (which we refer to as the “per share stock consideration”) and (ii) $2,946.51 in cash (which we refer to as the “per share cash consideration,” together with the per share stock consideration, the “merger consideration”).

 

The market value of the per share stock consideration will fluctuate with the market price of Eagle common stock and other factors and will not be known at the time WHC shareholders vote on the merger agreement. Based on the closing price of Eagle’s common stock on the Nasdaq Global Market on _________, 2019, the last practicable date before the date of this document, the value of the per share stock consideration was approximately $_____. We urge you to obtain current market quotations for Eagle (trading symbol EBMT) because the value of the per share stock consideration will fluctuate.

 

Based on the current number of shares of WHC common stock outstanding, Eagle expects to issue approximately 395,858 shares of common stock to WHC shareholders in the aggregate upon completion of the merger. Based on these numbers, upon completion of the merger, current WHC shareholders would own approximately 5.8% of the common stock of Eagle outstanding immediately following the merger. However, any increase or decrease in the number of shares of WHC common stock outstanding that occurs for any reason prior to the completion of the merger would cause the actual number of shares issued upon completion of the merger to change.

 

 

WHC will hold a special meeting of its shareholders in connection with the merger. Holders of WHC common stock will be asked to vote to approve the merger agreement and related matters as described in this proxy statement/prospectus. WHC shareholders will also be asked to approve the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the merger agreement and related matters, as described in this proxy statement/prospectus.

 

The special meeting of WHC shareholders will be held on ________, ___________, 2019 at _____________, Wolf Point, Montana ________, at __:00 a.m. local time.

 

WHCs board of directors has determined that the merger agreement and the transactions contemplated thereby, including the merger, are advisable and in the best interests of WHC and its shareholders, has unanimously approved the merger agreement and recommends that WHC shareholders vote FOR the proposal to approve the merger agreement and FOR the proposal to adjourn the WHC special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the merger agreement.

 

This document, which serves as a proxy statement for the special meeting of WHC shareholders and as a prospectus for the shares of Eagle common stock to be issued in the merger to WHC shareholders, describes the special meeting of WHC, the merger, the documents related to the merger and other related matters. Please carefully read this entire proxy statement/prospectus, including Risk Factors beginning on pag16 of this proxy statement/prospectus, for a discussion of the risks relating to the proposed merger. You also can obtain information about Eagle from documents that Eagle has filed with the Securities and Exchange Commission.

 

If you have any questions concerning the merger, WHC shareholders should contact Cathy Wanderaas, Corporate Secretary of WHC at (406) 653-5500. We look forward to seeing you at the meeting.

 

 

 

 

Duane Kurokawa

 

President

 

Western Holding Company of Wolf Point

 

Neither the Securities and Exchange Commission, the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, nor any state securities commission or any other bank regulatory agency has approved or disapproved the merger, the issuance of the Eagle common stock to be issued in the merger or the other transactions described in this document or passed upon the adequacy or accuracy of this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

 

The securities to be issued in the merger are not savings or deposit accounts or other obligations of any bank or non-bank subsidiary of either Eagle or WHC, and they are not insured by the Federal Deposit Insurance Corporation or any other governmental agency.

 

The date of this proxy statement/prospectus is______, 2019, and it is first being mailed to the shareholders of WHC on or about ______, 2019.

 

 

 

NOTICE OF SPECIAL MEETING OF SHAREHOLDERS

TO BE HELD ON ______, 2019

 

To the Shareholders of Western Holding Company of Wolf Point:

 

Western Holding Company of Wolf Point (“WHC” or “we”) will hold a special meeting of shareholders at __:00 am local time, on _________, __________, 2019, at ___________________, Wolf Point, Montana 59201, for the holders of WHC common stock to consider and vote on the following proposals:

 

 

a proposal to approve the Agreement and Plan of Merger, dated as of August 8, 2019, by and among Eagle Bancorp Montana, Inc., Opportunity Bank of Montana, WHC and Western Bank of Wolf Point, pursuant to which WHC will merge with and into Eagle Bancorp Montana, Inc., as more fully described in the attached proxy statement/prospectus; and

 

 

a proposal to adjourn the WHC special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the merger agreement.

 

We have fixed the close of business on __________, 2019 as the record date for the WHC special meeting. Only holders of record of WHC common stock at that time are entitled to notice of, and to vote at, the WHC special meeting, or any adjournment or postponement of the WHC special meeting. In order for the merger agreement to be approved, at least two-thirds of the outstanding shares of WHC common stock must be voted in favor of the proposal to approve the merger agreement. The special meeting may be adjourned from time to time upon approval of holders of WHC common stock without notice other than by announcement at the meeting of the adjournment thereof, and any and all business for which notices are hereby given may be transacted at such adjourned meeting.

 

WHC shareholders have rights under Montana state law entitling them to dissent from the merger and obtain payment of the fair value of their shares, provided they comply with each of the requirements under Montana law, including not voting in favor of the merger agreement and providing notice to WHC. For more information regarding dissenters’ rights, please see “Proposal 1: The MergerDissenters Rights for WHC Shareholders” beginning on page 43 of this proxy statement/prospectus.

 

Your vote is important. We cannot complete the merger unless WHC’s shareholders approve the merger agreement.

 

Regardless of whether you plan to attend the WHC special meeting, please vote as soon as possible. Please complete, sign, date and return the accompanying proxy card in the enclosed postage-paid return envelope as described on the proxy card.

 

The enclosed proxy statement/prospectus provides a detailed description of the special meeting, the merger, the documents related to the merger, including the merger agreement, and other related matters. We urge you to read the proxy statement/prospectus, including any documents incorporated in the proxy statement/prospectus by reference, and its appendices carefully and in their entirety. If you have any questions concerning the merger or the proxy statement/prospectus, would like additional copies of the proxy statement/prospectus or need help voting your shares of WHC common stock, please contact Cathy Wanderaas, Corporate Secretary of WHC at (406) 653-5500.

 

WHCs board of directors has determined that the merger agreement and the transactions contemplated by the merger agreement, including the merger, as advisable and in the best interests of WHC and its shareholders, has unanimously approved the merger and the merger agreement and recommends that WHC shareholders vote FOR the proposal to approve the merger agreement and FOR the proposal to adjourn the special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the merger agreement.

 

 

By Order of the Board of Directors,

 

 

 

 

 

Cathy Wanderaas

 

Corporate Secretary

 

Wolf Point, Montana

__________, 2019

 

 

WHERE YOU CAN FIND MORE INFORMATION

 

Eagle Bancorp Montana, Inc.

 

Eagle electronically files annual, quarterly, current and special reports, proxy statements and other business and financial information with the Securities and Exchange Commission (the “SEC”). The SEC maintains a website located at http://www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including Eagle. You also will be able to obtain these documents, free of charge, from Eagle by accessing Eagle’s website at www.opportunitybank.com. Copies can also be obtained, free of charge, by directing a written or oral request to:

 

Eagle Bancorp Montana, Inc.

1400 Prospect Avenue

Helena, Montana 59601

Attn: Investor Relations

Telephone: (406) 442-3080

 

Eagle has filed a Registration Statement on Form S-4 to register with the SEC up to 395,858 shares of Eagle common stock to be issued pursuant to the merger. This proxy statement/prospectus is a part of that Registration Statement on Form S-4. As permitted by SEC rules, this proxy statement/prospectus does not contain all of the information included in the Registration Statement on Form S-4 or in the exhibits or schedules to the Registration Statement on Form S-4. The Registration Statement on Form S-4, including any amendments, schedules and exhibits, is also available, free of charge, by accessing the websites of the SEC and Eagle or upon written or oral request to Eagle at the address or telephone number set forth above.

 

Statements contained in this proxy statement/prospectus as to the contents of any contract or other documents referred to in this proxy statement/prospectus are not necessarily complete. In each case, you should refer to the copy of the applicable contract or other document filed as an exhibit to the Registration Statement on Form S-4. This proxy statement/prospectus incorporates important business and financial information about Eagle that is not included in or delivered with this document, including incorporating by reference documents that Eagle has previously filed with the SEC. These documents contain important information about Eagle and its financial condition. See “Documents Incorporated by Reference” beginning on page 82 of this proxy statement/prospectus. These documents are available free of charge upon written or oral request to Eagle at the address listed above.

 

To obtain timely delivery of these documents, you must request them no later than __________ __, 2019 in order to receive them before the WHC special meeting of shareholders.

 

Except where the context otherwise specifically indicates, Eagle supplied all information contained in, or incorporated by reference into, this proxy statement/prospectus relating to Eagle, and WHC supplied all information contained in this proxy statement/prospectus relating to WHC.

 

Western Holding Company of Wolf Point

 

WHC does not have a class of securities registered under Section 12 of the Securities Exchange Act of 1934 (the “Exchange Act”), is not subject to the reporting requirements of Section 13(a) or 15(d) of the Exchange Act, and accordingly does not file documents and reports with the SEC.

 

If you have any questions concerning the merger or this proxy statement/prospectus, would like additional copies of this proxy statement/prospectus or need help voting your shares of WHC common stock, please contact Cathy Wanderaas, Corporate Secretary of WHC at (406) 653-5500.

 

 

You should rely only on the information contained in, or incorporated by reference into, this proxy statement/prospectus. No one has been authorized to give any information or make any representation about the merger or Eagle or WHC that differs from, or adds to, the information in this proxy statement/prospectus or in documents that are incorporated by reference herein and publicly filed with the SEC. Therefore, if anyone does give you different or additional information, you should not rely on it. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than the date of this proxy statement/prospectus, and you should not assume that any information incorporated by reference into this document is accurate as of any date other than the date of such other document, and neither the mailing of this proxy statement/prospectus to WHC shareholders nor the issuance of Eagle common stock in the merger shall create any implication to the contrary.

 

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to purchase, the securities offered by this proxy statement/prospectus, or the solicitation of a proxy, in any jurisdiction to or from any person to whom or from whom it is unlawful to make such offer, solicitation of an offer or proxy solicitation in such jurisdiction.

 

 

Table of Contents

 

Page

 

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING 1
   
SUMMARY 6
   
Information Regarding Eagle and WHC 6
The Merger 6
Closing and Effective Time of the Merger 6
Merger Consideration 7
Equivalent WHC Common Per Share Value 7
Procedures for Converting Shares of WHC Common Stock into Merger Consideration 8
Material U.S. Federal Income Tax Consequences of the Merger 8
Dissenters’ Rights 8
Opinion of WHC’s Financial Advisor 8
Recommendation of the WHC Board of Directors 8
Interests of WHC Directors and Executive Officers in the Merger 9
Regulatory Approvals 9
Conditions to Completion of the Merger 10
Third Party Proposals 11
Termination 11
Termination Fees 12
Break-Up Fee 12
Nasdaq Listing 13
WHC Special Meeting 13
Required Shareholder Vote 13
No Restrictions on Resale 13
Comparison of Shareholders’ Rights 13
Risk Factors 13
   
EAGLE SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA 14
   
MARKET PRICES AND DIVIDEND INFORMATION 15
   
RISK FACTORS 16
   
Risks Associated with the Merger 16
Risks Associated with Eagle’s Business 20
   
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS 21
   
INFORMATION ABOUT THE WHC SPECIAL MEETING 22
   
Time, Date, and Place 22
Matters to be Considered at the Meeting 22
Recommendation of the WHC Board of Directors 22
Record Date and Quorum 22
Required Vote 22
How to Vote 23
Revocation of Proxies 23
Shares Subject to Company Shareholder Support Agreements; Shares Held by Directors and Executive Officers 23
Solicitation of Proxies 24
Attending the Meeting 24
Questions and Additional Information 24
   
INFORMATION ABOUT THE COMPANIES 25
   
Eagle Bancorp Montana, Inc. 25
Western Holding Company of Wolf Point 25
   
PROPOSAL 1:  THE MERGER 26

 

 

Table of Contents (continued)

 

Page

 

Background of the Merger 26
WHC’s Reasons for the Merger and Recommendation of the WHC Board of Directors 28
Eagle’s Reasons for the Merger 31
Opinion of WHC’s Financial Advisor 31
Certain Financial Forecasts of WHC 37
Material U.S. Federal Income Tax Consequences of the Merger 39
Accounting Treatment 42
Regulatory Approvals 42
Dissenters’ Rights for WHC Shareholders 43
Board of Directors and Management of Eagle Following the Merger 44
Interests of WHC Directors and Executive Officers in the Merger 44
   
PROPOSAL 2:  ADJOURNMENT OF THE WHC SPECIAL MEETING 47
   
THE MERGER AGREEMENT 48
   
The Merger and the Bank Merger 48
Closing and Effective Time of the Merger 48
Merger Consideration 48
Exchange Procedures 49
Conduct of Business Pending the Merger 50
Company Shareholder Approval 53
Regulatory Matters 53
Nasdaq Listing 54
Employee Matters 54
Indemnification and Directors’ and Officers’ Insurance 54
Third Party Proposals 55
WHC Board Recommendation 56
Representations and Warranties 57
Conditions to Completion of the Merger 59
Termination 60
Termination Fees 61
Break-up Fee 61
Amendment; Waiver 62
Expenses 62
   
COMPARISON OF SHAREHOLDERS’ RIGHTS 63
   
BUSINESS OF WESTERN HOLDING COMPANY OF WOLF POINT 74
   
General 74
Banking Services 74
Employees 75
Properties 75
Legal Proceedings 75
Competition 75
Management 75
   
BENEFICIAL OWNERSHIP OF WHC COMMON STOCK BY MANAGEMENT AND PRINCIPAL SHAREHOLDERS OF WHC 76
   
DESCRIPTION OF EAGLE CAPITAL STOCK 77
   
General 77
Common Stock 77
Preferred Stock 77
Transfer Agent and Registrar 78
Certain Anti-Takeover Effects of Certain Provisions of the Company’s Amended and Restated Certificate of Incorporation, Bylaws and the Delaware General Corporation Law 78

 

 

Table of Contents (continued)

 

Page

 

EXPERTS 81
   
LEGAL MATTERS 82
   
OTHER MATTERS 82
   
DOCUMENTS INCORPORATED BY REFERENCE 82

 

 

APPENDICES:

 

Appendix A – Agreement and Plan of Merger  A-1
Appendix B – Opinion of Vining Sparks IBG, L.P. B-1
Appendix C – Provisions of Montana Business Corporations Act Relating to Dissenters’ Rights C-1

 

 

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

 

The following are answers to certain questions that you may have regarding the special meeting and merger. The parties urge you to read carefully the remainder of this document because the information in this section may not provide all the information that might be important to you in determining how to vote. Additional important information is also contained in the appendices to, and the documents incorporated by reference in, this document. In this proxy statement/prospectus we refer to Eagle Bancorp Montana, Inc. as Eagle, Opportunity Bank of Montana as Opportunity Bank, Western Holding Company of Wolf Point as WHC and Western Bank of Wolf Point as “Western Bank”.

 

Q:

Why am I receiving this proxy statement/prospectus?

 

A:

Eagle, Opportunity Bank, WHC and Western Bank have entered into an Agreement and Plan of Merger, dated as of August 8, 2019 (which we refer to as the “merger agreement”) pursuant to which WHC will be merged with and into Eagle, with Eagle continuing as the surviving company. Immediately following the merger, Western Bank, a wholly owned bank subsidiary of WHC, will merge with and into Eagle’s wholly owned bank subsidiary, Opportunity Bank, with Opportunity Bank continuing as the surviving bank and continuing under the name “Opportunity Bank of Montana” (which we refer to as the “bank merger”). A copy of the merger agreement is included in this proxy statement/prospectus as Appendix A.

 

The merger cannot be completed unless, among other things, the holders of two-thirds of the outstanding shares of WHC common stock vote in favor of the proposal to approve the merger agreement.

 

In addition, WHC is soliciting proxies from holders of WHC common stock with respect to a proposal to adjourn the WHC special meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the merger agreement if there are insufficient votes at the time of such adjournment to approve such proposal.

 

WHC will hold a special meeting to obtain these approvals. This proxy statement/prospectus contains important information about the merger and the other proposals being voted on at the special meeting, and you should read it carefully. It is a proxy statement because WHC’s board of directors is soliciting proxies from its shareholders. It is a prospectus because Eagle will issue shares of Eagle common stock to holders of WHC common stock in connection with the merger. The enclosed materials allow you to have your shares voted by proxy without attending the WHC special meeting. Your vote is important. We encourage you to submit your proxy as soon as possible.

 

Q:

What will I receive in the merger?

 

A:

If the merger is completed, each issued and outstanding share of WHC common stock, other than (i) any shares of WHC common stock held in the treasury of WHC or owned by Eagle, Opportunity Bank, Western Bank or by any of their respective subsidiaries (other than any such shares in trust accounts, managed accounts, and the like for the benefit of customers or as a result of debts previously contracted), which will each be cancelled and shall cease to exist, and no consideration shall be delivered in exchange therefor (the shares in (i) are referred to as “excluded shares”) and (ii) shares of WHC common stock held by WHC shareholders who have perfected and not effectively withdrawn a demand for, or lost the right to, dissent from the merger and obtain payment for their shares under Montana law, as described under “Proposal 1: The Merger Dissenters Rights for WHC Shareholders” beginning on page 43 of this proxy statement/prospectus (the shares in (ii) are referred to as “dissenting shares”), will be converted into the right to receive a combination of (i) 179.4464 shares of Eagle common stock (which we refer to as the “per share stock consideration”) and (ii) $2,946.51 in cash (which we refer to as the “per share cash consideration”, and together with the per share stock consideration, the “merger consideration”). Eagle will not issue any fractional shares of Eagle common stock in the merger. Rather, WHC shareholders who would otherwise be entitled to a fractional share of Eagle common stock upon the completion of the merger will instead receive an amount of cash (without interest and rounded to the nearest whole cent) determined by multiplying the fractional share amount by the average daily volume weighted average price of Eagle common stock on the Nasdaq Global Market for the 20 trading days preceding the fifth trading day immediately preceding the closing date.

 

 

The merger consideration is subject to the adjustments described below. WHC shareholders will own, in the aggregate, approximately 5.8% of Eagle’s outstanding common stock following the merger.

 

The stock portion of the merger consideration may be adjusted in certain circumstances based on whether Eagle common stock is trading either higher or lower than prices specified in the merger agreement immediately prior to the closing of the merger, in order to avoid termination of the merger agreement.

 

Q:

Will the value of the merger consideration change between the date of this proxy statement/prospectus and the time the merger is completed?

 

A:

Yes, the value of the per share stock consideration will fluctuate between the date of this proxy statement/prospectus and the completion of the merger based upon the market value of Eagle common stock. Any fluctuation in the market price of Eagle common stock after the date of this proxy statement/prospectus will change the value of the shares of Eagle common stock that WHC shareholders will receive.

 

Further, the per share stock consideration may be adjusted pursuant to the merger agreement as described in this proxy statement/prospectus. Adjustments in the per share stock consideration will also result in fluctuations in the value of the merger consideration to WHC shareholders.

 

Q:

What will happen if the trading price of Eagle common stock changes significantly prior to completion of the merger?

 

A:

Because the merger consideration is fixed, Eagle and WHC agreed to include provisions in the merger agreement by which (i) WHC would have an opportunity to terminate the merger agreement if the Eagle average stock price over a specified period prior to completion of the merger decreases below certain specified thresholds unless Eagle elects to increase the merger consideration by increasing the per share stock consideration and (ii) Eagle would have an opportunity to terminate the merger agreement if the Eagle average stock price over a specified period prior to completion of the merger increases above certain specified thresholds unless Eagle elects to decrease the merger consideration by decreasing the per share stock consideration, subject to certain limitations and as determined by a formula outlined in the merger agreement, as discussed in further detail on pages 48 and 49 of this proxy statement/prospectus.

 

Q:

How does WHCs board of directors recommend that I vote at the special meeting?

 

A:

WHC’s board of directors unanimously recommends that you vote “FOR” the proposal to approve the merger agreement and “FOR” the adjournment proposal.

 

Q:

Will the shares of Eagle common stock that I receive in the merger be freely transferable?

 

A:

Yes. The Eagle common stock issued in the merger will be transferable free of restrictions under federal and state securities laws.

 

Q:

When and where is the special meeting?

 

A:

The WHC special meeting will be held at ___________________, Wolf Point, Montana 59201, on ___________, _________ 2019, at _____ a.m. local time.

 

Q:

Who can vote at the special meeting of shareholders?

 

A:

Holders of record of WHC common stock at the close of business on __________, 2019, which is the date that the WHC board of directors has fixed as the record date for the special meeting, are entitled to vote at the special meeting.

 

 

Q:

What do I need to do now?

 

A:

After you have carefully read this proxy statement/prospectus and have decided how you wish to vote your shares, please vote your shares promptly so that your shares are represented and voted at the special meeting. You must complete, sign, date and mail your proxy card in the enclosed postage-paid return envelope as soon as possible.

 

Q:

What constitutes a quorum for the special meeting?

 

A:

The presence at the special meeting, in person or by proxy, of holders of record of not less than a majority of the outstanding shares of WHC common stock entitled to vote at such meeting, will constitute a quorum for the transaction of business. Abstentions, if any, will be included in determining the number of shares present at the meeting for the purpose of determining the presence of a quorum.

 

Q:

What is the vote required to approve each proposal?

 

A:

Approval of the merger agreement requires the affirmative vote of the holders of two-thirds of the outstanding shares of WHC common stock entitled to vote on the merger agreement as of the close of business on the record date for the special meeting. If you (1) fail to submit a proxy or vote in person at the special meeting or (2) mark “ABSTAIN” on your proxy, it will have the same effect as a vote “AGAINST” the merger proposal and no effect on the adjournment proposal. The adjournment proposal will be approved if the votes of WHC common stock cast in favor of the adjournment proposal exceed the votes cast against the adjournment proposal.

 

Q:

Why is my vote important?

 

A:

If you do not submit a proxy or vote in person, it may be more difficult for WHC to obtain the necessary quorum to hold its special meeting. In addition, your failure to submit a proxy or vote in person, or abstention will have the same effect as a vote against approval of the merger agreement. The merger agreement must be approved by the affirmative vote of the holders of two-thirds of the outstanding shares of WHC common stock entitled to vote on the merger agreement. WHC’s board of directors unanimously recommends that you vote “FOR” the proposal to approve the merger agreement.

 

Q:

How many votes do I have?

 

A:

You are entitled to one vote for each share of WHC common stock that you owned as of the close of business on the record date. As of the close of business on the record date, 2,206 shares of WHC common stock were outstanding and entitled to vote at the WHC special meeting.

 

Q:

Can I attend the special meeting and vote my shares in person?

 

A:

Yes. All WHC shareholders are invited to attend the special meeting. Holders of record of WHC common stock can vote in person at the special meeting. If you plan to attend the special meeting, you must bring a form of personal photo identification with you in order to be admitted.

 

Q:

Can I change my vote?

 

A:

Yes. You may revoke any proxy at any time before it is voted by (1) signing and returning a proxy card with a later date, (2) delivering a written revocation letter to WHC’s corporate secretary or (3) attending the special meeting in person, notifying the corporate secretary and voting by ballot at the special meeting. Attendance at the special meeting will not automatically revoke your proxy. A revocation or later-dated proxy received by WHC after the vote will not affect the vote. WHC’s corporate secretary’s mailing address is: 111 3rd Avenue S, Wolf Point, Montana 59201, Attention: WHC Corporate Secretary.

 

 

Q:

What are the material U.S. federal income tax consequences of the merger to holders of WHC common stock?

 

A:

The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, which we refer to as the “Code”, and it is a condition to the obligation of Eagle and WHC to complete the merger that they each receive a legal opinion to that effect. Assuming the merger so qualifies, holders of WHC common stock are not expected to recognize any gain or loss upon receipt of Eagle common stock in exchange for WHC common stock in the merger, except that gain (but not loss) will be recognized in an amount not to exceed cash received as part of the cash consideration (other than cash received in lieu of a fractional share) and gain or loss will be recognized with respect to any cash received in lieu of a fractional share of Eagle common stock. The discussion of the material U.S. federal income tax consequences contained in this proxy statement/prospectus is intended to provide only a general discussion and is not a complete analysis or description of all potential U.S. federal income tax consequences of the merger that may vary with, or are dependent on, individual circumstances. In addition, it does not address the effects of any foreign, state or local tax laws.

 

For further information, see “Proposal 1: The MergerMaterial U.S. Federal Income Tax Consequences of the Merger” beginning on page 39 of this proxy statement/prospectus.

 

TAX MATTERS ARE COMPLICATED AND THE TAX CONSEQUENCES OF THE MERGER WILL DEPEND ON THE FACTS OF YOUR OWN SITUATION. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO YOU IN YOUR PARTICULAR CIRCUMSTANCES.

 

Q:

Are WHC shareholders entitled to appraisal or dissenters rights under Montana law?

 

A:

Yes. If you are a WHC shareholder, you are entitled to dissent from the merger and receive the fair value of your shares of WHC common stock in cash instead of the aggregate merger consideration, if you take certain actions and meet certain conditions, including that you may not vote in favor of the merger agreement and must follow other procedures, both before and after the special meeting, as described in Appendix C to this proxy statement/prospectus. Note that if you return a signed proxy card without voting instructions or with instructions to vote “FOR” the merger agreement, then your shares will automatically be voted in favor of the merger agreement and you will lose all dissenters’ rights available under Montana law. A summary of these provisions can be found under “Proposal 1: The MergerDissenters Rights for WHC Shareholders” beginning on page 43 of this proxy statement/prospectus and detailed information about the special meeting can be found under “Information About the WHC Special Meeting” beginning on page 22 of this proxy statement/prospectus. Due to the complexity of the procedures for exercising the right to dissent, WHC shareholders who are considering exercising such rights are encouraged to seek the advice of legal counsel. Failure to strictly comply with the applicable Montana law provisions will result in the loss of dissenters’ rights. Additionally, certain WHC shareholders are subject to company shareholder support agreements, dated as of August 8, 2019, which provide for, among other things, the obligation of such WHC shareholders to vote for, consent to and raise no objections against, and not otherwise impede or delay, any sale of WHC. Such WHC shareholders have also agreed to waive all dissenters’ rights, appraisal rights and similar rights in connection with such approved sale.

 

Q:

What happens if the merger is not completed?

 

A:

If the merger is not completed, WHC shareholders will not receive any merger consideration for their shares of WHC common stock. Instead, WHC will remain an independent company. Under specified circumstances, WHC may be required to pay to Eagle, or Eagle may be required to pay to WHC, a $200,000 termination fee with respect to the termination of the merger agreement, as described under “The Merger AgreementTermination” and “The Merger AgreementTermination Fees” beginning on pages 60 and 61, respectively, of this proxy statement/prospectus. Under certain circumstances, WHC may be required to pay Eagle a $560,000 break-up fee, as described under “The Merger Agreement – Break-Up Fee” of this proxy statement/prospectus.

 

 

Q:

If I am a WHC shareholder, should I send in my stock certificates now?

 

A:

No. Please do not send in your WHC stock certificates with your proxy. Eagle’s transfer agent, Computershare Inc. has been selected as the exchange agent and will send you instructions for exchanging WHC stock certificates for the merger consideration. See “The Merger AgreementExchange Procedures” beginning on page 49 of this proxy statement/prospectus.

 

Q:

Whom may I contact if I cannot locate my WHC stock certificate(s)?

 

A:

If you are unable to locate your original WHC stock certificate(s), you should contact Cathy Wanderaas, Corporate Secretary of WHC, at (406) 653-5500. Following the merger, any inquiries should be directed to Eagle’s transfer agent, Computershare Inc. at shareholder@computershare.com, or at (800) 962-4284.

 

Q:

When do you expect to complete the merger?

 

A:

Eagle and WHC expect to complete the merger in the fourth quarter of 2019. However, neither Eagle nor WHC can assure you when or if the merger will occur. WHC must first obtain the approval of WHC shareholders for the merger and Eagle must receive the necessary regulatory approvals. See “The Merger AgreementConditions to Completion of the Merger” beginning on page 59 of this proxy statement/prospectus.

 

Q:

Whom should I call with questions?

 

A:

If you have any questions concerning the merger or this proxy statement/prospectus, would like additional copies of this proxy statement/prospectus or need help voting your shares of WHC common stock, please contact: Cathy Wanderaas, Corporate Secretary of WHC, at (406) 653-5500.

 

 

SUMMARY

 

The following summary highlights selected information from this proxy statement/prospectus. It does not contain all of the information that is important to you. You should carefully read the entire proxy statement/prospectus and the other documents to which we refer to fully understand the merger. See Where You Can Find More Information on how to obtain copies of those documents. In addition, the merger agreement is attached as Appendix A to this proxy statement/prospectus. WHC and Eagle encourage you to read the merger agreement because it is the legal document that governs the merger.

 

Unless the context otherwise requires, throughout this document, we, and our refer collectively to Eagle and WHC. We refer to the proposed merger of WHC with and into Eagle as the merger, the merger of Western Bank with and into Opportunity Bank as the bank merger, and the Agreement and Plan of Merger dated as of August 8, 2019 by and among Eagle, Opportunity Bank, WHC and Western Bank as the merger agreement.

 

Information Regarding Eagle and WHC

 

Eagle Bancorp Montana, Inc.

 

Eagle is the holding company of Opportunity Bank. Opportunity Bank is a Montana state bank, which was founded in 1922 as a Montana-chartered building and loan association and has conducted operations in Helena since that time. In 1975, Opportunity Bank adopted a federal thrift charter and in October 2014 converted to a Montana-chartered commercial bank. Opportunity Bank offers a complete line of commercial, small business and consumer banking products and services. As of June 30, 2019, Eagle had total consolidated assets of $1,007.7 million, and has 22 branch offices and 18 automated teller machines located throughout Montana.

 

Western Holding Company of Wolf Point

 

WHC is the holding company of Western Bank. Western Bank is a Montana state bank, which was established in 1913, and is a full-service community bank offering banking products and services to individuals and businesses. At June 30, 2019, WHC had total assets of approximately $101.7 million, total deposits of approximately $77.4 million, total loans of approximately $40.6 million, and stockholders’ equity of approximately $11.3 million. Western Bank has one branch office located in Wolf Point, Montana.

 

The Merger

 

The terms and conditions of the merger are contained in the merger agreement, a copy of which is included as Appendix A to this proxy statement/prospectus and is incorporated by reference herein. You should read the merger agreement carefully and in its entirety, as it is the legal document governing the merger.

 

In the merger, WHC will merge with and into Eagle, with Eagle as the surviving company in the merger. Immediately following the merger of WHC into Eagle, Western Bank will merge with and into Opportunity Bank, with Opportunity Bank as the surviving bank of such bank merger.

 

Closing and Effective Time of the Merger

 

The closing date is currently expected to occur in the fourth quarter of 2019. Simultaneously with the closing of the merger, Eagle will file the articles of merger with the Secretary of State of the State of Montana and a certificate of merger with the Secretary of State of the State of Delaware. The merger will become effective at such time as the articles of merger are filed or such other time as may be specified in the articles of merger. Neither Eagle nor WHC can predict, however, the actual date on which the merger will be completed because it is subject to factors beyond each company’s control, including whether or when the required regulatory approvals and WHC’s shareholder approval will be received.

 

 

Merger Consideration

 

Under the terms of the merger agreement, each share of WHC common stock outstanding immediately prior to the effective time of the merger (other than excluded shares and dissenting shares described below) will be converted into the right to receive a combination of (i) 179.4464 shares of Eagle common stock (which we refer to as the “per share stock consideration”) and (ii) $2,946.51 in cash (which we refer to as the “per share cash consideration” and together with the per share stock consideration, the “merger consideration”). Please see “The Merger AgreementConsideration” for more information.

 

No holder of WHC common stock will be issued fractional shares of Eagle common stock in the merger. Each holder of WHC common stock who would otherwise have been entitled to receive a fraction of a share of Eagle common stock will receive, in lieu thereof, cash, without interest, in an amount equal to such fractional part of a share of Eagle common stock multiplied by the average daily volume weighted average price of Eagle common stock on the Nasdaq Global Market for the 20 trading days preceding the fifth trading day immediately preceding the closing date. See “The Merger Agreement—Merger Consideration” beginning on page 48 of this proxy statement/prospectus.

 

The merger consideration may be adjusted in certain circumstances based on whether Eagle common stock is trading either higher or lower than prices specified in the merger agreement immediately prior to the closing of the merger, in order to avoid termination of the merger agreement. If the “average closing price” (determined over a 20 trading day period prior to the closing of the merger) of Eagle’s common stock exceeds $20.41 per share and Eagle’s stock outperforms the Nasdaq Bank Index by more than 15%, Eagle may terminate the merger agreement, or elect to reduce on a per-share basis the number of shares of Eagle common stock to be issued in the merger, subject to certain limitations as described below under “—Termination.”

 

Conversely, if the “average closing price” is less than $15.09 per share and Eagle’s stock has also underperformed the Nasdaq Bank Index by more than 15%, WHC may terminate the merger agreement, unless Eagle elects to increase on a per-share basis the number of shares of Eagle common stock to be issued in the merger, subject to certain limitations as described below under “—Termination.”

 

The value of the shares of Eagle common stock to be issued in the merger will fluctuate between now and the closing date of the merger. Based on the closing price of Eagle common stock on August 8, 2019, the date of the signing of the merger agreement, the value of the merger consideration payable to holders of WHC common stock was approximately $6,104.77, consisting of per share stock consideration of $3,158.26 and per share cash consideration of $2,946.51. Based on the closing price of Eagle common stock on _________, 2019, the last practicable date before the date of this document, the value of the merger consideration payable to holders of WHC common stock was approximately $______, consisting of per share stock consideration of $_________ and per share cash consideration of $2,946.51. WHC shareholders should obtain current sale prices for Eagle common stock, which is traded on the Nasdaq Global Market under the symbol “EBMT.”

 

Equivalent WHC Common Per Share Value

 

Eagle common stock trades on the Nasdaq Global Market under the symbol “EBMT.” The WHC common stock is not listed or traded on any established securities exchange or quotation system. Accordingly, there is no established public trading market for the WHC common stock. The following table presents the closing price of Eagle common stock on August 8, 2019, the last trading date prior to the public announcement of the merger agreement, and ___________, 2019, the last practicable trading day prior to the printing of this proxy statement/prospectus. The table also presents the equivalent value of the merger consideration per share of WHC common stock on those dates, calculated by multiplying the closing sales price of Eagle common stock on those dates by the exchange ratio of 179.4464 plus the per share cash consideration of $2,946.51.

 

Date:

Eagle closing

Sale price

Equivalent WHC
per share value

August 8, 2019

$17.60

$6,104.77

_________, 2019

   

 

 

The value of the shares of Eagle common stock to be issued in the merger will fluctuate between now and the closing date of the merger. If Eagle shares increase in value, so will the value of the per share stock consideration. Similarly, if Eagle shares decline in value, so will the value of the consideration to be received by WHC shareholders. WHC shareholders should obtain current sale prices for the Eagle common stock.

 

Procedures for Converting Shares of WHC Common Stock into Merger Consideration

 

Promptly after the effective time of the merger, Eagle’s exchange agent, Computershare, will mail to each holder of record of WHC common stock that is converted into the right to receive the merger consideration a letter of transmittal and instructions for the surrender of the holder’s WHC stock certificate(s) for the merger consideration (including cash in lieu of any fractional Eagle shares), and any dividends or distributions to which such holder is entitled to pursuant to the merger agreement.

 

Please do not send in your certificates until you receive these instructions.

 

Material U.S. Federal Income Tax Consequences of the Merger 

 

For a detailed discussion of the material U.S. federal income tax consequences of the merger, see “Proposal 1: The Merger —Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 39 of this proxy statement/prospectus. The tax consequences of the merger to any particular WHC shareholder will depend on that shareholder’s particular facts and circumstances. Accordingly, please consult your tax advisor to determine the tax consequences to you from the merger.

 

Dissenters’ Rights

 

Under Montana law, WHC shareholders have the right to dissent from the merger and receive a cash payment equal to the fair value of their shares of WHC stock instead of receiving the merger consideration. To exercise dissenters’ rights, WHC shareholders must strictly follow the procedures established by Sections 35-1-826 through 35-1-839 of the Montana Business Corporations Act, or the MBCA, which include filing a written objection with WHC prior to the special meeting stating, among other things, that the shareholder will exercise his or her right to dissent if the merger is completed, and not voting for approval of the merger agreement. A shareholder’s failure to vote against the merger agreement will not constitute a waiver of such shareholder’s dissenters’ rights.

 

Opinion of WHC’s Financial Advisor

 

Vining Sparks IBG, LP (“Vining Sparks”) has delivered a written opinion to the board of directors of WHC that, as of August 8, 2019, based upon and subject to certain matters stated in the opinion, the merger consideration is fair, from a financial point of view, to WHC shareholders. We have attached this opinion to this proxy statement/prospectus as Appendix B. The opinion of Vining Sparks is not a recommendation to any WHC shareholder as to how to vote on the proposal to approve the merger agreement. You should read this opinion completely to understand the procedures followed, matters considered and limitations and qualifications on the reviews undertaken by Vining Sparks in providing its opinion.

 

For further information, please see the section entitled “Proposal 1: The Merger – Opinion of WHCs Financial Advisor” beginning on page 31.

 

Recommendation of the WHC Board of Directors

 

After careful consideration, the WHC board of directors unanimously recommends that WHC shareholders vote “FOR” the approval of the merger agreement and the approval of the adjournment proposal described in this document. Each of the directors of WHC has entered into a company shareholder support agreement with Eagle pursuant to which each, has agreed to vote “FOR” the approval of the merger agreement and any other matter required to be approved by the shareholders of WHC to facilitate the transactions contemplated by the merger agreement, subject to the terms of the company shareholder support agreements.

 

 

For more information regarding the company shareholder support agreements, please see the section entitled “Information About the WHC Special MeetingShares Subject to Company Shareholder Support Agreements; Shares Held by Directors and Executive Officers” on page 23 of this proxy statement/prospectus.

 

For a more complete description of WHC’s reasons for the merger and the recommendations of the WHC board of directors, please see the section entitled “Proposal 1: The MergerWHCs Reasons for the Merger and Recommendation of the WHC Board of Directors” beginning on page 28 of this proxy statement/prospectus.

 

Interests of WHC Directors and Executive Officers in the Merger

 

In the merger, the directors and executive officers of WHC will receive the same merger consideration for their WHC shares as the other WHC shareholders. In considering the recommendation of the WHC board of directors that you vote to approve the merger agreement, you should be aware that some of the executive officers and directors of WHC may have interests in the merger and may have arrangements that may be considered to be different from, or in addition to, those of WHC shareholders generally. These interests include, among others:

 

 

Pursuant to the terms of the merger agreement, WHC’s directors and executive officers are entitled to continued indemnification and insurance coverage after completion of the merger for acts and omissions occurring on or before completion of the merger.

 

 

Certain executive officers of WHC and Western Bank will be employed by Opportunity Bank after the effective date of the merger.

 

 

R.J. Doornek and Duane Kurokawa will become advisory board members of a newly created advisory board of Opportunity Bank upon completion of the merger and will receive compensation for such service.

 

 

Upon the closing of the merger, Eagle and Opportunity Bank will assume certain compensation arrangements and obligations of WHC and Western Bank regarding R.J. Doornek, Duane Kurokawa and certain other executive officers.

 

These interests are discussed in more detail in the section entitled “Proposal 1: The MergerInterests of WHC Directors and Executive Officers in the Merger” beginning on page 44 of this proxy statement/prospectus. The WHC board of directors was aware of these interests and considered them, along with other matters, in reaching its decision to adopt and approve the merger agreement and to recommend that WHC shareholders vote in favor of approving the merger agreement.

 

Regulatory Approvals

 

Completion of the merger and the bank merger are subject to various regulatory approvals, including approvals from the Board of Governors of the Federal Reserve System, or Federal Reserve, and the Montana Division of Banking and Financial Institutions. Notifications and/or applications requesting approvals for the merger or for the bank merger may also be submitted to other federal and state regulatory authorities and self-regulatory organizations. The parties have filed notices and applications to obtain the necessary regulatory approvals of the Federal Reserve and the Montana Division of Banking and Financial Institutions. The parties cannot be certain when or if they will obtain all of the regulatory approvals or, if obtained, whether they will contain terms, conditions or restrictions not currently contemplated that will be detrimental to or have a material adverse effect on the combined company after the completion of the merger. The regulatory approvals to which the completion of the merger and bank merger are subject are described in more detail under the section entitled “Proposal 1: The MergerRegulatory Approvals,” beginning on page 42 of this proxy statement/prospectus.

 

 

Conditions to Completion of the Merger 

 

The completion of the merger depends on a number of conditions being satisfied or, where permitted, waived, including but not limited to:

 

 

the approval of the merger agreement and the transactions contemplated thereby by WHC shareholders;

 

 

the receipt of all regulatory approvals required to consummate the merger and the bank merger shall have been obtained and remain in full force and effect, and all statutory waiting periods shall have expired or been terminated, and such regulatory approvals shall not impose any term, condition or restriction on Eagle or any of its subsidiaries that Eagle reasonably determines is a burdensome condition;

 

 

the absence of any (i) judgment, order, injunction or decree issued by any governmental authority or other legal restraint or prohibition preventing or making illegal the consummation of the merger or the bank merger, (ii) statute, rule, regulation, order, injunction or decree enacted, entered, promulgated or enforced by any governmental authority that prohibits or makes illegal the consummation of any of the merger or the bank merger;

 

 

the effectiveness of the Registration Statement on Form S-4, of which this proxy statement/prospectus is a part, under the Securities Act of 1933, as amended, or the “Securities Act”, and no stop order suspending such effectiveness having been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC;

 

 

the receipt by each of the parties of an opinion of its respective counsel to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code;

 

 

the authorization for listing on the Nasdaq Global Market of the shares of Eagle common stock to be issued in the merger;

 

 

the accuracy of the other party’s representations and warranties in the merger agreement on the date of the merger agreement and as of the closing date of the merger (or such other date specified in the merger agreement) other than, in most cases, inaccuracies that would not be material;

 

 

performance in all material respects by the other party of its respective obligations under the merger agreement;

 

 

the absence of any event which has had or is reasonably expected to have or result in a material adverse effect on the other party;

 

 

in the case of Eagle, the receipt of all consents, approvals, authorizations, clearances, exemptions, waivers, or similar affirmations required as a result of the transactions contemplated by the merger agreement pursuant to WHC’s material contracts;

 

 

in the case of Eagle, the officer agreements between certain officers and Eagle be in full force and effect;

 

 

in the case of Eagle, the execution and delivery by Western Bank of the plan of bank merger;

 

 

in the case of Eagle, the WHC board of directors shall not have, prior to approval of the merger agreement by the WHC shareholders (i) withheld, withdrawn or modified (or publicly proposed to withhold, withdraw or modify), in a manner adverse to Eagle, its recommendation that WHC shareholders approve the merger agreement, (ii) approved or recommended (or publicly proposed to approve or recommend) any acquisition proposal, or (iii) allowed WHC or any WHC representative to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or other agreement relating to an acquisition proposal;

 

 

 

in the case of Eagle, the receipt of all claims letters and restrictive covenant agreements from WHC and Western Bank’s directors and executive officers;

 

 

in the case of Eagle, dissenting shares shall not represent more than five percent of the outstanding shares of WHC common stock; and

 

 

in the case of Eagle, WHC’s adjusted tangible stockholders’ equity, as defined in the merger agreement shall not be less than $10 million as of the last day of the month prior to the month in which the merger is effective;

 

No assurance is given as to when, or if, the conditions to the merger will be satisfied or waived, or that the merger will be completed.

 

Third Party Proposals

 

WHC has agreed to a number of limitations with respect to soliciting, negotiating and discussing acquisition proposals involving persons other than Eagle, and to certain related matters, which we sometimes refer to as “no-shop” provisions. The merger agreement does not, however, prohibit WHC from considering a bona fide unsolicited written acquisition proposal from a third party if certain specified conditions are met.

 

Termination 

 

The merger agreement may be terminated at any time prior to the effective time of the merger:

 

 

by the mutual consent of the boards of directors of Eagle and WHC; or

 

 

by Eagle or WHC if approval of the merger agreement by the shareholders of WHC is not obtained at the meeting at which a vote was taken; or

 

 

by Eagle or WHC in the event of the breach of any representation, warranty, covenant or agreement by the other party that would prevent any closing condition from being satisfied and such breach cannot be or has not been cured within 30 days of written notice of such breach provided that the right to cure may not extend beyond two business days prior to the “expiration date” described below; or

 

 

by Eagle or WHC if the merger is not consummated by the expiration date of May 8, 2020; provided, that neither party has the right to terminate the merger agreement if such party was in breach of its obligations under the merger agreement and such breach was the cause of the failure of the merger to be consummated by such date, and provided further that, if on the expiration date all conditions to the merger have been satisfied or waived or are capable of being satisfied by the closing other than the condition relating to the receipt of required regulatory approvals, then either party has the right to extend the expiration date by an additional three month period; or

 

 

by the boards of directors of either Eagle or WHC if any governmental authority has denied any required regulatory approval or requested any application for regulatory approval be withdrawn; or

 

 

by Eagle prior to the receipt of approval of the merger from WHC shareholders in the event that (i) WHC breaches the no shop provision, (ii) the WHC board of directors or any committee thereof makes a company subsequent determination (see “The Merger AgreementWHC Board Recommendation” beginning on page 56 of this proxy statement/prospectus), (iii) the WHC board materially breaches its obligations under the merger agreement with respect to third party acquisition proposals or by failing to call, give notice of, convene and hold the special meeting, or (iv) the WHC board of directors has agreed to an acquisition proposal; or

 

 

by Eagle or WHC if any court or other governmental authority issues a final and non-appealable order permanently prohibiting the merger or the bank merger; or

 

 

 

by WHC in the event that (i) the average volume weighted average price of Eagle’s common stock for the 20 trading days ending on the trading day immediately prior to the later of (x) the date on which the last required regulatory consent is obtained or (y) the date on which WHC shareholder approval of the merger agreement is obtained, is less than $15.09 per share, (ii) Eagle’s common stock underperforms a peer group index (the Nasdaq Bank Index) by more than 15%, and (iii) Eagle does not elect to increase the per share stock consideration by a formula-based amount outlined in the merger agreement; or

 

 

by Eagle in the event that (i) the average volume weighted average price of Eagle’s common stock for the 20 trading days ending on the trading day immediately prior to the later of (x) the date on which the last required regulatory consent is obtained or (y) the date on which WHC shareholder approval of the merger agreement is obtained, is greater than $20.41 per share, (ii) Eagle’s common stock outperforms a peer group index (the Nasdaq Bank Index) by more than 15%, and (iii) Eagle does not elect to decrease the per share stock consideration by a formula-based amount outlined in the merger agreement; provided, however, that Eagle may not adjust the per share stock consideration in a manner that would result in the aggregate shares of Eagle common stock to be issued in the merger being less than 356,272 shares.

 

Termination Fees 

 

WHC will pay Eagle a termination fee of $200,000 if Eagle terminates the merger agreement based on a WHC breach of its representations or breach of its covenants. Eagle will pay WHC a termination fee of $200,000 if WHC terminates the merger agreement based on an Eagle breach of its representations or breach of its covenants.

 

Break-Up Fee

 

WHC will owe Eagle a break-up fee of $560,000 if:

 

 

Eagle terminates the merger agreement as a result of a material breach of the “no-shop” provisions; or

 

 

Eagle terminates the merger agreement as a result of the WHC board of directors or any committee thereof making a company subsequent determination (for more detail on company subsequent determinations, see “The Merger AgreementWHC Board Recommendation” beginning on page 56 of this proxy statement/prospectus); or

 

 

Eagle terminates the merger agreement as a result of WHC materially breaching its obligations under the merger agreement by failing to call, give notice of, convene and hold the special meeting; or

 

 

Eagle terminates the merger agreement as a result of the WHC board of directors or any committee thereof agreeing to an acquisition proposal; or

 

 

after the date of the merger agreement and prior to the termination of the merger agreement, an acquisition proposal is made known to the board or senior management of WHC or has been made directly to WHC shareholders generally or a public announcement of an acquisition proposal has been made and not withdrawn and (i) thereafter the merger agreement is terminated by (A) either Eagle or WHC because the WHC shareholders have not approved the merger agreement or the merger is not consummated by the expiration date described above or (B) by Eagle because of a material breach by WHC of any covenant set forth in the merger agreement that is not cured in accordance with the merger agreement; and (ii) WHC enters into any agreement to consummate or consummates an acquisition transaction (provided, that for purposes of this provision, the definition of acquisition transaction is revised to replace “15%” with “50%”) within 12 months of such termination.

 

The payment of the termination fee will fully discharge WHC from any losses that may be suffered by Eagle arising out of the termination of the merger agreement.

 

 

Nasdaq Listing 

 

Eagle common stock is listed and trades on the Nasdaq Global Market under the symbol “EBMT.” Eagle will cause the shares of Eagle common stock to be issued to the holders of WHC common stock in the merger to be authorized for listing on the Nasdaq Global Market, subject to official notice of issuance, prior to the effective time of the merger.

 

WHC Special Meeting

 

The special meeting of WHC shareholders will be held on _________, __________, 2019, at __:00 a.m., local time, at _________________________, Wolf Point, Montana 59201. At the special meeting, WHC shareholders will be asked to vote on:

 

 

the proposal to approve the merger agreement; and

 

 

the adjournment proposal.

 

Holders of WHC common stock as of the close of business on ___________, 2019, the record date, will be entitled to vote at the special meeting. As of the record date, there were outstanding and entitled to notice and to vote an aggregate of 2,206 shares of WHC common stock held by 16 shareholders of record. Each WHC shareholder can cast one vote for each share of WHC common stock owned on the record date.

 

As of the record date, directors and executive officers of WHC and their affiliates, owned and were entitled to vote 1,545 shares of WHC common stock, representing approximately 70.0% of the outstanding shares of WHC common stock entitled to vote on that date. Pursuant to his or her respective company shareholder support agreement, each such person has agreed at any meeting of WHC shareholders, however called, or any adjournment or postponement thereof (and subject to certain exceptions) to vote the shares owned in favor of the merger agreement and the adjournment proposal. As of the record date, Eagle did not own or have the right to vote any of the outstanding shares of WHC common stock.

 

Required Shareholder Vote 

 

In order to approve the merger agreement, the holders of two-thirds of the outstanding shares of WHC common stock, as of the record date, must vote in favor of the merger agreement.

 

No Restrictions on Resale

 

All shares of Eagle common stock received by WHC shareholders in the merger will be freely tradable, except that shares of Eagle received by persons who are or become affiliates of Eagle for purposes of Rule 144 under the Securities Act may be resold by them only in transactions permitted by Rule 144, or as otherwise permitted under the Securities Act.

 

Comparison of Shareholders’ Rights

 

The rights of WHC shareholders who continue as Eagle shareholders after the merger will be governed by the certificate of incorporation and bylaws of Eagle rather than the articles of incorporation and bylaws of WHC. For more information, please see the section entitled “Comparison of Shareholders Rights” beginning on page 63 of this proxy statement/prospectus.

 

Risk Factors

 

Before voting at the WHC special meeting, you should carefully consider all of the information contained or incorporated by reference into this proxy statement/prospectus, including the risk factors set forth in the section entitled “Risk Factors” beginning on page 16 of this proxy statement/prospectus or described in Eagle’s reports filed with the SEC, which are incorporated by reference into this proxy statement/prospectus. Please see the section entitled “Documents Incorporated by Reference” beginning on page 82 of this proxy statement/prospectus.

 

 

EAGLE SELECTED HISTORICAL CONSOLIDATED FINANCIAL DATA

 

The following selected historical consolidated financial data as of December 31, 2018 and 2017, and for the fiscal years ended December 31, 2018 and 2017, is derived from the audited consolidated financial statements of Eagle.

 

The following selected historical consolidated financial data as of and for the six months ended June 30, 2019 and 2018 is derived from the unaudited consolidated financial statements of Eagle and has been prepared on the same basis as the selected historical consolidated financial data derived from the audited consolidated financial statements and, in the opinion of Eagle’s management, reflects all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data for those dates.

 

The results of operations as of and for the six months ended June 30, 2019 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019 or any future period. You should read the following selected historical consolidated financial data in conjunction with: (i) the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Eagle’s audited consolidated financial statements and accompanying notes included in Eagle’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018; and (ii) the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Eagle’s unaudited consolidated financial statements and accompanying notes included in Eagle’s Quarterly Report on Form 10-Q for the six months ended June 30, 2019, both of which are incorporated by reference into this proxy statement/prospectus. See “Documents Incorporated by Reference” beginning on page 82 of this proxy statement/prospectus.

 

   

As of and for the six months

ended June 30,

   

As of and for the year
ended December 31,

 
   

2019

   

2018

   

2018

   

2017

 

(Dollars in thousands except per share data)

 

(unaudited)

                 

Balance sheet data:

                               

Investment securities

  $ 124,065     $ 154,265     $ 142,165     $ 132,044  

Mortgage loans held-for-sale

    23,760       11,700       7,318       8,949  

Gross loans receivable1

    752,434       581,728       616,933       513,154  

Allowances for loan losses

    7,750       6,150       6,600       5,750  

Total assets

    1,007,725       826,827       853,903       716,782  

Deposits

    748,388       613,175       626,611       520,564  

Borrowings2

    131,656       116,312       127,098       107,780  

Total liabilities

    892,031       735,022       759,097       633,166  

Total shareholders’ equity

    115,694       91,805       94,806       83,616  

Book value per share

    18.07       16.81       17.31       16.68  

Common shares outstanding

    6,403,693       5,460,452       5,477,652       5,013,678  
                                 

Income statement data:

                               

Net interest income

  $ 19,069     $ 14,657     $ 29,741     $ 23,766  

Loan loss provision

    1,301       526       980       1,228  

Noninterest income

    9,197       5,153       13,325       14,331  

Noninterest expense

    21,494       16,958       36,190       30,638  

Net income

    4,430       1,906       4,982       4,103  
                                 

Per common share data:

                               

Basic earnings per share

  $ 0.69     $ 0.35     $ 0.92     $ 1.01  

Diluted earnings per share

    0.69       0.35       0.91       0.99  
                                 

Performance ratios:

                               

Net interest margin

    4.32 %     3.91 %     3.96 %     3.71 %

Return on average assets

    0.90 %     0.46       0.60 %     0.59  

 


1

Net of deferred loan fees.

2

Includes Federal Home Loan Bank advances and other long-term debt.

 

 

MARKET PRICES AND DIVIDEND INFORMATION

 

Eagle common stock is listed and trades on the Nasdaq Global Market under the symbol “EBMT.” As of October 7, 2019, there were 6,403,693 shares of Eagle common stock outstanding. Eagle has approximately 925 shareholders of record.

 

WHC common stock is not listed or traded on any established securities exchange or quotation system. Accordingly, there is no established public trading market for the WHC common stock. Transactions in the shares are privately negotiated directly between the purchaser and the seller and sales, if they do occur, are not subject to any reporting system. As of __________, 2019, there were 2,206 shares of WHC common stock outstanding, which were held by 16 shareholders of record.

 

Historically, Eagle has declared cash dividends on a quarterly basis. Eagle’s board of directors considers the dividend amount quarterly and takes a broad perspective in its dividend deliberations, including a review of recent operating performance, capital levels and loan concentrations as a percentage of capital, growth projections and applicable federal and state regulations and regulatory guidance. There can be no assurance that Eagle will be able to continue paying dividends commensurate with recent levels.

 

 

RISK FACTORS

 

An investment in Eagle common stock in connection with the merger involves risks. Eagle describes below the material risks and uncertainties that it believes affect its business and an investment in the Eagle common stock. In addition to the other information contained in, or incorporated by reference into, this proxy statement/prospectus, including Eagles Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and the matters addressed under Forward-Looking Statements, you should carefully read and consider all of the risks and all other information contained in this proxy statement/prospectus in deciding how to vote on the proposals presented in this proxy statement/prospectus. If any of the risks described in this proxy statement/prospectus occur, Eagles financial condition, results of operations and cash flows could be materially and adversely affected. If this were to happen, the value of the Eagle common stock and the merger consideration could decline significantly, and, after consummation of the merger, you could lose all or part of your investment.

 

Risks Associated with the Merger

 

The market price of Eagle common stock after the merger may be affected by factors different from those currently affecting WHC or Eagle.

 

The businesses of Eagle and WHC differ in some respects and, accordingly, the results of operations of the combined company and the market price of Eagle’s shares of common stock after the merger may be affected by factors different from those currently affecting the independent results of operations of each of Eagle and WHC.

 

Because the sale price of Eagle common stock will fluctuate, you cannot be sure of the value of the per share stock consideration that you will receive in the merger until the closing.

 

Under the terms of the merger agreement, each share of WHC common stock outstanding immediately prior to the effective time of the merger (excluding excluded shares and dissenting shares) will be converted into the right to receive 179.4464 shares of Eagle common stock plus the per share cash consideration of $2,946.51. The value of the shares of Eagle common stock to be issued to WHC shareholders in the merger will fluctuate between now and the closing date of the merger due to a variety of factors, including general market and economic conditions, changes in the parties’ respective businesses, operations and prospects and regulatory considerations, among other things. Many of these factors are beyond the control of Eagle and WHC. Further, the merger consideration may be adjusted pursuant to the terms of the merger agreement as described in this proxy statement/prospectus. Adjustments in the merger consideration will also result in fluctuations in the value of the per share stock consideration to WHC shareholders. We make no assurances as to whether or when the merger will be completed. WHC shareholders should obtain current sale prices for shares of Eagle common stock before voting their shares of WHC common stock at the special meeting.

 

The merger will not be completed unless important conditions are satisfied or waived, including approval by WHC shareholders.

 

Specified conditions set forth in the merger agreement must be satisfied or waived to complete the merger and the bank merger. If the conditions are not satisfied or waived, to the extent permitted by law or stock exchange rules, the merger and the bank merger will not occur or will be delayed and each of Eagle and WHC may lose some or all of the intended benefits of the merger. The following conditions, in addition to other closing conditions, must be satisfied or waived, if permissible, before Eagle and WHC are obligated to complete the merger:

 

 

The merger agreement and the transactions contemplated thereby must have been approved by the affirmative vote of two-thirds of the outstanding shares of WHC common stock entitled to vote on the proposal;

 

 

All required regulatory approvals required to consummate the merger and the bank merger must have been obtained and all statutory waiting periods must have expired or been terminated;

 

 

 

No judgment, order, injunction or decree issued by any court or agency of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the merger shall be in effect and no statute, rule, regulation, order, injunction or decree shall have been enacted, entered, promulgated or enforced by any governmental authority that prohibits or makes illegal the consummation of the merger;

 

 

The registration statement (of which this proxy statement/prospectus is a part) registering shares of Eagle common stock to be issued in the merger must have been declared effective and no stop order may have been issued or threatened by the SEC or any governmental authority;

 

 

Each of Eagle and WHC shall have received from its tax counsel a U.S. federal income tax opinion that the merger qualifies as a “reorganization” within the meaning of Section 368(a) of the Code;

 

 

The shares of Eagle common stock to be issued pursuant to the merger shall have been approved for listing on the Nasdaq Global Market; and

 

 

The Plan of Bank Merger shall have been executed and delivered.

 

Shares of Eagle common stock to be received by holders of WHC common stock as a result of the merger will have rights different from the shares of WHC common stock.

 

Upon completion of the merger, WHC shareholders will become Eagle shareholders. Their rights as Eagle shareholders will be governed by Delaware corporate law and the certificate of incorporation, as amended, and bylaws of Eagle. The rights associated with WHC common stock are governed by Montana corporate law and the articles of incorporation and bylaws of WHC and are different from the rights associated with Eagle common stock.

 

WHC shareholders who receive shares of Eagle common stock in the merger will have a reduced ownership and voting interest after the merger and will exercise less influence over management.

 

WHC shareholders currently have the right to vote in the election of the board of directors of WHC and on other matters affecting WHC. Upon the completion of the merger, WHC shareholders who receive shares of Eagle common stock in the merger will be shareholders of Eagle with a percentage ownership in Eagle that is smaller than such shareholder’s current percentage ownership of WHC. It is currently expected that the former shareholders of WHC as a group will receive shares in the merger constituting approximately 5.8 of the outstanding shares of the combined company’s common stock immediately after the merger assuming an exchange ratio of 179.4464 shares of Eagle common stock for each share of WHC common stock. Because of this, WHC shareholders who receive shares of Eagle common stock in the merger will have less influence on the management and policies of the combined company than they now have on the management and policies of WHC.

 

Eagle and WHC will be subject to business uncertainties and contractual restrictions while the merger is pending.

 

Uncertainty about the effect of the merger on employees, customers, suppliers and vendors may have an adverse effect on the business, financial condition and results of operations of WHC and Eagle. These uncertainties may impair Eagle’s or WHC’s ability to attract, retain and motivate key personnel, depositors and borrowers pending the consummation of the merger, as such personnel, depositors and borrowers may experience uncertainty about their future roles following the consummation of the merger. Additionally, these uncertainties could cause customers (including depositors and borrowers), suppliers, vendors and others who deal with Eagle or WHC to seek to change existing business relationships with Eagle or WHC or fail to extend an existing relationship. In addition, competitors may target each party’s existing customers by highlighting potential uncertainties and integration difficulties that may result from the merger.

 

Eagle and WHC have a small number of key personnel. The pursuit of the merger and the preparation for the integration in connection therewith may place a burden on each company’s management and internal resources. Any significant diversion of management attention away from ongoing business concerns and any difficulties encountered in the transition and integration process could have a material adverse effect on each company’s business, financial condition and results of operations.

 

 

In addition, the merger agreement restricts WHC from taking certain actions without Eagle’s consent while the merger is pending. These restrictions may, among other matters, prevent WHC from pursuing otherwise attractive business opportunities, selling assets, incurring indebtedness, engaging in significant capital expenditures in excess of certain limits set forth in the merger agreement, entering into other transactions or making other changes to WHC’s business prior to consummation of the merger or termination of the merger agreement. These restrictions could have a material adverse effect on WHC’s business, financial condition and results of operations.

 

Eagle may fail to realize the cost savings estimated for the merger.

 

Although Eagle estimates that it will realize cost savings from the merger when fully phased in, it is possible that the estimates of the potential cost savings could turn out to be incorrect. For example, the combined purchasing power may not be as strong as expected, and therefore the cost savings could be reduced. In addition, unanticipated growth in Eagle’s business may require Eagle to continue to operate or maintain some facilities or support functions that are currently expected to be combined or reduced. The cost savings estimates also depend on Eagle’s ability to combine the businesses of Eagle and WHC in a manner that permits those costs savings to be realized. If the estimates turn out to be incorrect or Eagle is not able to combine the two companies successfully, the anticipated cost savings may not be fully realized or realized at all, or may take longer to realize than expected.

 

The combined company expects to incur substantial expenses related to the merger.

 

The combined company expects to incur substantial expenses in connection with completing the merger and combining the business, operations, networks, systems, technologies, policies and procedures of Eagle and WHC. Although Eagle and WHC have assumed that a certain level of transaction and combination expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of these expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. Due to these factors, the transaction and combination expenses associated with the merger could, particularly in the near term, exceed the savings that the combined company expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the combination of the businesses following the completion of the merger. In addition, prior to completion of the merger, each of WHC and Eagle will incur or have incurred substantial expenses in connection with the negotiation and completion of the transactions contemplated by the merger agreement. If the merger is not completed, Eagle and WHC would have to recognize these expenses without realizing the anticipated benefits of the merger.

 

Eagle and WHC may waive one or more of the conditions to the merger without re-soliciting WHC shareholder approval for the merger agreement.

 

Each of the conditions to the obligations of Eagle and WHC to complete the merger may be waived, in whole or in part, to the extent permitted by applicable law, by agreement of Eagle and WHC, if the condition is a condition to both parties’ obligation to complete the merger, or by the party for which such condition is a condition of its obligation to complete the merger. The boards of directors of Eagle and WHC may evaluate the materiality of any such waiver to determine whether amendment of this proxy statement/prospectus and re-solicitation of proxies is necessary. Eagle and WHC, however, generally do not expect any such waiver to be significant enough to require re-solicitation of WHC’s shareholders. In the event that any such waiver is not determined to be significant enough to require re-solicitation of WHC’s shareholders, the companies will have the discretion to complete the merger without seeking further shareholder approval.

 

If the merger fails to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, WHC shareholders may be required to recognize additional gain or recognize loss on the exchange of their shares of WHC common stock in the merger for U.S. federal income tax purposes.

 

The merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and it is a condition to the obligations of Eagle and WHC to complete the merger that each receives a legal opinion to that effect. These opinions will not be binding on the Internal Revenue Service. WHC and Eagle have not sought and will not seek any ruling from the Internal Revenue Service regarding any matters relating to the merger, and as a result, there can be no assurance that the Internal Revenue Service will not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth herein. If the merger fails to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, WHC shareholders may be required to recognize gain or loss on the exchange of their shares of WHC common stock in the merger for U.S. federal income tax purposes.

 

 

Regulatory approvals may not be received, may take longer than expected or impose conditions that are not presently anticipated.

 

Before the transactions contemplated by the merger agreement, including the merger and the bank merger, may be completed, various approvals must be obtained from bank regulatory authorities. These governmental entities may impose conditions on the granting of such approvals. Such conditions or changes and the process of obtaining regulatory approvals could have the effect of delaying completion of the merger or of imposing additional costs or limitations on Eagle following the merger. The regulatory approvals may not be received at all, may not be received in a timely fashion, and may contain conditions on the completion of the merger that are not anticipated or have a material adverse effect. If the consummation of the merger is delayed, including by a delay in receipt of necessary governmental approvals, the business, financial condition and results of operations of each company may also be materially adversely affected.

 

If for a specified period prior to completion of the merger (a) the Eagle volume weighted average price of its common stock fluctuates beyond a price range and (b) the fluctuations underperform or outperform the NASDAQ Bank Index during a specified time prior to the completion of the merger, then Eagle or WHC have the right to terminate the merger agreement and the merger would not occur.

 

If for a specified period prior to completion of the merger (a) the Eagle average stock price is less than $15.09 per share and (b) Eagle’s common stock has underperformed the Nasdaq Bank Index by more than 15% during a specified time prior to completion of the merger, then WHC may terminate the merger agreement subject to Eagle’s discretion (but not obligation) to increase the merger consideration by increasing the per share stock consideration based on a formula in the merger agreement. If Eagle elects not to increase the merger consideration, WHC may then terminate the merger agreement. In addition, if for a specified period of time prior to completion of the merger (x) the Eagle average stock price is greater than $20.41 per share and (y) Eagle’s common stock has outperformed the Nasdaq Bank Index by more than 15% during a specified time prior to completion of the merger, then Eagle may terminate the merger agreement or, subject to the terms of the merger agreement, decrease the merger consideration.

 

As a result, even if WHC shareholders approve the merger, the merger may ultimately not be completed. Although the Eagle board of directors has the ability to increase the merger consideration and WHC board of directors has the power to choose not to terminate the merger agreement and proceed with the merger if Eagle does not increase the merger consideration, there is no obligation of either board to exercise such power.

 

The fairness opinion of WHCs financial advisor will not reflect changes in circumstances between the date of the opinion and the completion of the merger.

 

WHC’s board of directors received an opinion from its financial advisor to address the fairness of the merger consideration, from a financial point of view, to the holders of WHC’s common stock as of August 8, 2019. Subsequent changes in the operation and prospects of Eagle or WHC, general market and economic conditions and other factors that may be beyond the control of Eagle or WHC, and on which WHC’s financial advisor’s opinion was based, may significantly alter the value of Eagle or the price of the shares of Eagle common stock by the time the merger is completed. Because WHC does not anticipate asking its advisor to update its opinion, the opinion will not address the fairness of the merger consideration from a financial point of view at the time the merger is completed, or as of any other date other than the date of such opinion.

 

 

WHC’s executive officers and directors have financial interests in the merger that are different from, or in addition to, the interests of WHC shareholders generally.

 

Executive officers of WHC negotiated the terms of the merger agreement with Eagle, and the WHC board of directors unanimously approved and recommended that WHC shareholders vote to approve the merger agreement. In considering these facts and the other information contained in this proxy statement/prospectus, you should be aware that certain WHC and Western Bank executive officers and directors have financial interests in the merger that are different from, or in addition to, the interests of WHC shareholders generally.

 

The break-up fee and the restrictions on third party acquisition proposals set forth in the merger agreement may discourage others from trying to acquire WHC.

 

The merger agreement contains provisions that make it more difficult for WHC to sell its business to a party other than Eagle. Until the completion of the merger, with some limited exceptions, WHC and its subsidiaries and representatives are prohibited from initiating, soliciting, knowingly inducing or encouraging, or knowingly taking any action to facilitate, or participating in any discussions or negotiations concerning, a proposal to acquire WHC, such as a merger or other business combination transaction, with any person other than Eagle. In addition, WHC has agreed to pay to Eagle in certain circumstances a break-up fee equal to $560,000. These provisions could discourage other companies from trying to acquire WHC even though those other companies might be willing to offer greater value to WHC shareholders than Eagle has offered in the merger. The payment of any break-up fee could also have an adverse effect on WHC’s financial condition.

 

Failure of the merger to be completed, the termination of the merger agreement or a significant delay in the consummation of the merger could negatively impact Eagle and WHC.

 

If the merger is not consummated, the ongoing business, financial condition and results of operations of each party may be materially adversely affected and the market price of Eagle’s common stock may decline significantly, particularly to the extent that the current market price reflects a market assumption that the merger will be consummated. If the consummation of the merger is delayed, the business, financial condition and results of operations of each company may be materially adversely affected. If the merger agreement is terminated and WHC’s board of directors seeks another merger or business combination, WHC’s shareholders cannot be certain that WHC will be able to find a party willing to engage in a transaction on more attractive terms than the merger.

 

Risks Associated with Eagle’s Business

 

Additional Risk Factors specific to Eagle’s business that will also effect the combined company after the merger included in Item 1A in Eagle’s Annual Report on Form 10-K for the fiscal year ended December 31, 2018 are incorporated herein by reference. You should read and consider those Risk Factors in addition to the Risk Factors listed below.

 

Anti-takeover provisions in Eagle’s certificate of incorporation, by-laws and federal banking laws may make it more difficult for takeover attempts that have not been approved by Eagle’s board of directors.

 

Provisions of Eagle’s amended and restated certificate of incorporation, as amended, and by-laws and federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire Eagle, even if doing so would be perceived to be beneficial to Eagle’s shareholders. The combination of these provisions effectively inhibits a non-negotiated merger or other business combination, which, in turn, could adversely affect the market price of Eagle’s common stock. These provisions could also discourage proxy contests and make it more difficult for holders of Eagle’s common stock to elect directors other than the candidates nominated by Eagle’s board of directors.

 

 

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS

 

Certain statements contained in this proxy statement/prospectus, including statements included or incorporated by reference in this proxy statement/prospectus, are not statements of historical fact and constitute “forward-looking statements” within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, and are intended to be protected by the safe harbor provided by such provisions. These statements are subject to risks and uncertainties, and include information about possible or assumed future results of operations of Eagle after the merger is completed as well as information about the merger. Words such as “believes,” “expects,” “anticipates,” “estimates,” “intends,” “would,” “continue,” “should,” “may,” or similar expressions, or the negatives thereof, are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. Many possible events or factors could affect the future financial results and performance of each of Eagle and WHC before the merger or Eagle after the merger, and could cause those results or performance to differ materially from those expressed in the forward-looking statements. These possible events or factors include, but are not limited to:

 

 

the failure to obtain the approval of WHC’s shareholders in connection with the merger;

 

 

the timing to consummate the proposed merger;

 

 

the risk that a condition to closing of the proposed merger may not be satisfied;

 

 

the risk that a regulatory approval that may be required for the proposed merger is not obtained or is obtained subject to conditions that are not anticipated;

 

 

the parties’ ability to achieve the synergies and value creation contemplated by the proposed merger;

 

 

the parties’ ability to promptly and effectively integrate the businesses of Eagle and WHC;

 

 

the diversion of management time on issues related to the merger;

 

 

the occurrence of any event, change or other circumstance that could give rise to the termination of the merger agreement;

 

 

the failure to consummate or delay in consummating the merger for other reasons;

 

 

the effect of the announcement or pendency of the merger on Eagle’s or WHC’s customers, employees and business relationships, operating results, and businesses generally;

 

 

the dilution caused by Eagle’s issuance of additional shares of its common stock in the merger or related to the merger;

 

 

the stock price of Eagle common stock could decline before the completion of the merger, including as a result of the financial performance of Eagle or WHC or more generally due to broader stock market movements and the performance of financial companies and peer group companies;

 

 

changes in laws or regulations; and

 

 

changes in general economic conditions.

 

For additional information concerning factors that could cause actual conditions, events or results to materially differ from those described in the forward-looking statements, please refer to the “Risk Factors” section of this proxy statement/prospectus, as well as the factors set forth under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Eagle’s most recent Form 10-K report and to Eagle’s most recent Form 10-Q and 8-K reports, which are available online at www.sec.gov, and are incorporated herein by reference. No assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or if any of them do so, what impact they will have on the results of operations or financial condition of Eagle or WHC. The forward-looking statements are made as of the date of this proxy statement/prospectus or the date of the applicable document incorporated by reference into this proxy statement/prospectus. Neither Eagle nor WHC undertake any obligation to publicly update or otherwise revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

 

INFORMATION ABOUT THE WHC SPECIAL MEETING

 

This section contains information about the special meeting that WHC has called to allow WHC shareholders to vote on the approval of the merger agreement. The WHC board of directors is mailing this proxy statement/prospectus to you, as a WHC shareholder, on or about _____________, 2019. Together with this proxy statement/prospectus, the WHC board of directors is also sending you a notice of the special meeting of WHC shareholders and a form of proxy that the WHC board of directors is soliciting for use at the special meeting and at any adjournments or postponements of the special meeting.

 

Time, Date, and Place

 

The special meeting is scheduled to be held on _____________, ________, 2019 at __:00 a.m., local time, at _____________, Wolf Point, Montana 59201.

 

Matters to be Considered at the Meeting

 

At the special meeting, WHC shareholders will be asked to consider and vote on:

 

 

a proposal to approve the merger agreement, which we refer to as the merger proposal; and

 

 

a proposal of the WHC board of directors to adjourn or postpone the special meeting, if necessary or appropriate, including to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to approve the merger agreement, which we refer to as the adjournment proposal.

 

A copy of the merger agreement is included in this proxy statement/prospectus as Appendix A, and we encourage you to read it carefully in its entirety.

 

Recommendation of the WHC Board of Directors

 

The WHC board of directors unanimously recommends that WHC shareholders vote “FOR” the merger proposal and “FOR” the adjournment proposal. See “Proposal 1: The Merger —WHCs Reasons for the Merger and Recommendations of the WHC Board of Directors.”

 

Record Date and Quorum

 

The WHC board of directors has fixed ____________, 2019 as the record date for the determination of WHC shareholders entitled to notice of, and to vote at, the special meeting and any adjournment or postponement thereof. At the close of business on the record date, there were 2,206 shares of WHC common stock outstanding and entitled to vote at the special meeting, held by approximately ___ holders of record.

 

A quorum is necessary to transact business at the special meeting. A quorum may, but need not be present, for the WHC shareholders present in person or by proxy to take action on the adjournment proposal. The presence, in person or by proxy, of the holders of a majority of the outstanding shares of WHC common stock entitled to vote at the meeting is necessary to constitute a quorum. Shares of WHC common stock represented at the special meeting but not voted, including shares that a shareholder abstains from voting will be counted for purposes of establishing a quorum. Once a share of WHC common stock is represented at the special meeting, it will be counted for the purpose of determining a quorum not only at the special meeting but also at any adjournment or postponement of the special meeting. In the event that a quorum is not present at the special meeting, it is expected that the special meeting will be adjourned or postponed.

 

Required Vote

 

The affirmative vote of the holders of two-thirds of the outstanding shares of WHC common stock is required to approve the merger agreement. If you vote to “ABSTAIN” with respect to the merger proposal or if you fail to vote on the merger proposal, this will have the same effect as voting “AGAINST” the merger proposal.

 

 

The adjournment proposal will be approved if the votes of WHC common stock cast in favor of the adjournment proposal exceed the votes cast against the adjournment proposal. If you vote to “ABSTAIN” with respect to the adjournment proposal or if you fail to vote on the adjournment proposal, this will have no effect on the outcome of the vote on the adjournment proposal.

 

Each share of WHC common stock you own as of the record date for the special meeting entitles you to one vote at the special meeting on all matters properly presented at the meeting.

 

How to Vote

 

Voting in Person. You can vote in person by submitting a ballot at the special meeting. Nevertheless, we recommend that you vote by proxy as promptly as possible, even if you plan to attend the special meeting. This will ensure that your vote is received. If you attend the special meeting, you may vote by ballot, thereby canceling any proxy previously submitted.

 

Voting by Proxy. Your proxy card includes instructions on how to vote by mailing in the proxy card. If you choose to vote by proxy, please mark each proxy card you receive, sign and date it, and promptly return it in the envelope enclosed with the proxy card. If you sign and return your proxy without instruction on how to vote your shares, your shares will be voted “FOR” the merger proposal and “FOR” the adjournment proposal. Please do not send in your stock certificates with your proxy card. You will receive a separate letter of transmittal and instructions on how to surrender your WHC stock certificates for the merger consideration, if the merger is completed.

 

YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY CARD AND PROMPTLY RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE. SHAREHOLDERS WHO ATTEND THE SPECIAL MEETING MAY REVOKE THEIR PROXIES BY VOTING IN PERSON.

 

Revocation of Proxies

 

You can revoke your proxy at any time before your shares are voted. You can revoke your proxy by:

 

 

submitting another valid proxy card bearing a later date;

 

 

attending the special meeting and voting your shares in person; or

 

 

delivering prior to the special meeting a written notice of revocation to WHC’s Corporate Secretary at the following address: 111 3rd Avenue S, Wolf Point, Montana 59201.

 

If you choose to send a completed proxy card bearing a later date or a notice of revocation, the new proxy card or notice of revocation must be received before the beginning of the special meeting. Attendance at the special meeting will not, in and of itself, constitute revocation of a proxy. Your last vote will be the vote that is counted.

 

Shares Subject to Company Shareholder Support Agreements; Shares Held by Directors and Executive Officers

 

A total of 1,545 shares of WHC common stock, representing approximately 70.0% of the outstanding shares of WHC common stock entitled to vote at the special meeting are subject to company shareholder support agreements between Eagle and each of WHC’s directors and executive officers. Pursuant to these company shareholder support agreement, each such director and executive officer has agreed to vote (or cause to be voted) his or her shares of WHC common stock beneficially owned at any meeting of WHC shareholders, however called, or any adjournment or postponement thereof in favor of the approval of the merger agreement:

 

 

in favor of the approval of the merger agreement;

 

 

against any acquisition proposal, without regard to any recommendation to the shareholders of WHC by the board of directors of WHC concerning such acquisition proposal, and without regard to the terms of such acquisition proposal, or other proposal made in opposition to or that is otherwise in competition or inconsistent with the transactions contemplated by the merger agreement;

 

 

 

against any agreement, amendment of any agreement, or any other action that is intended or would reasonably be expected to prevent, impede, or, in any material respect, interfere with, delay, postpone, or discourage the transactions contemplated by the merger agreement; and

 

 

against any action, agreement, transaction, or proposal that would reasonably be expected to result in a breach of any representation, warranty, covenant, agreement or other obligation of WHC in the merger agreement.

 

Each director and executive officer who is party to a company shareholder support agreement has agreed not to sell or otherwise transfer any shares of WHC common stock until the expiration time of the merger agreement subject to certain exceptions for estate planning purposes.

 

Through the company shareholder support agreement, each director and executive officer party has waived any rights to dissent from the merger that such shareholder may have under applicable law.

 

Each director and executive officer party to a company shareholder support agreement has also agreed to “no-shop” provisions and must use his or her reasonable best efforts to cause his or her affiliates and each of their respective officers, directors, employees and representatives to comply with the no-shop provisions applicable to WHC in the merger agreement.

 

The foregoing summary of the company shareholder support agreements entered into by WHC’s directors and executive officers, does not purport to be complete, and is qualified in its entirety by reference to the form of company shareholder support agreement attached as Exhibit A to the merger agreement, which is attached as Appendix A to this document.

 

For more information about the beneficial ownership of WHC common stock by certain shareholders, see “Beneficial Ownership of WHC Common Stock by Management and Principal Shareholders of WHC.”

 

Solicitation of Proxies

 

The proxy for the special meeting is being solicited on behalf of the WHC board of directors. WHC will bear the entire cost of soliciting proxies from you. WHC may use its directors, officers and employees, who will not be specially compensated, to solicit proxies from WHC shareholders, either personally or by telephone, facsimile, letter or other electronic means.

 

Attending the Meeting

 

All holders of WHC common stock are cordially invited to attend the special meeting. Shareholders of record can vote in person at the special meeting.

 

Questions and Additional Information

 

If you have more questions about the merger or how to submit your proxy or vote, or if you need additional copies of this proxy statement/prospectus or the enclosed proxy card, please contact Cathy Wanderaas, Corporate Secretary of WHC, at (406) 653-5500.

 

 

INFORMATION ABOUT THE COMPANIES

 

Eagle Bancorp Montana, Inc.

 

Eagle is a bank holding company registered under the Bank Holding Company Act of 1956, as amended (the “BHC Act”), and is incorporated under the state laws of Delaware. Eagle is the holding company for Opportunity Bank, a Montana-chartered state member bank headquartered in Helena, Montana.

 

The principal business of Eagle is to provide, through Opportunity Bank, commercial banking, retail banking and other banking services to individual, corporate and agricultural customers. Traditional banking activities are conducted entirely within the state of Montana and include extending secured and unsecured commercial and consumer loans, originating mortgage loans secured by residential and commercial properties, agricultural loans and accepting consumer, commercial and municipal deposits. These products and services are delivered through a variety of channels including Opportunity Bank’s 22 full-service branches, the Internet and mobile applications.

 

At June 30, 2019, Eagle had total consolidated assets of $1,007.7 million, loans of $752.4 million, deposits of $748.4 million and stockholders’ equity of $115.7 million.

 

The address of Eagle’s principal executive offices is 1400 Prospect Avenue, Helena, Montana 59601, and its telephone number is (406) 442-3080. For additional information about Eagle, see “Where You Can Find More Information” beginning on page i.

 

Western Holding Company of Wolf Point

 

WHC is a bank holding company registered under the BHC Act and is incorporated under the state laws of Montana. WHC is the holding company for Western Bank, a Montana-chartered state member bank headquartered in Wolf Point, Montana.

 

Western Bank offers a line of commercial, small business, agricultural and consumer banking products and services to customers in eastern Montana. Western Bank maintains one branch office located in Wolf Point, Montana.

 

At June 30, 2019, WHC had total assets of $101.7 million, loans of $40.6 million, deposits of $77.4 million and stockholders’ equity of $11.3 million.

 

The address of WHC’s principal executive offices is 111 3rd Avenue S, Wolf Point, Montana 59201, and its telephone number is (406) 653-5500. For additional information about WHC, see “Business of Western Holding Company of Wolf Point” beginning on page 74.

 

 

PROPOSAL 1: THE MERGER

 

Background of the Merger

 

As part of their ongoing consideration and evaluation of Eagle’s long-term prospects and strategies, Eagle’s board of directors and senior management regularly review and assess its business strategies and objectives. With the goal of enhancing long term value for Eagle shareholders, Eagle’s board of directors and senior management have considered various strategic opportunities, including mergers and acquisitions. Over the past couple of years, Eagle’s board of directors discussed the Montana banking market and acquisition opportunities generally and identified potential acquisition opportunities in the near term, based on conversations between Eagle’s President and CEO, Peter J. Johnson, and other bank CEOs in the state. In November 2016, Eagle engaged Panoramic Capital Advisors, Inc. (“Panoramic Capital”) as a consultant to assist Eagle with its M&A activities.

 

From time to time, the board of directors of WHC has engaged in reviews and discussions of WHC’s long-term strategies and objectives, considering ways in which the company might enhance shareholder value and performance in light of competitive and other relevant factors. Generally, these reviews have centered on strategies to improve WHC’s existing operations or to pursue opportunities in new markets or lines of business. Often these assessments included discussions and analyses of potential merger transactions as a means to enhance or improve shareholder value.

 

Beginning in March 2019, Duane Kurokawa, WHC’s President, and Peter J. Johnson engaged in discussions regarding a possible combination of WHC and Eagle. Johnson and Kurokawa initially met in Nashville, Tennessee during the week of March 18, 2019. After this meeting and follow up discussions, WHC and Eagle entered into a non-disclosure agreement on April 1, 2019. Eagle then requested additional information from WHC and began preparing an indication of interest.

 

Eagle instructed Panoramic Capital and Nixon Peabody LLP, counsel to Eagle (“Nixon Peabody”), to prepare an initial letter of interest that was delivered to the WHC management team on April 23, 2019 for consideration by the WHC board of directors. During the period from April 25, 2019 through May 15, 2019, there were a series of discussions among Kurokawa and Johnson related to pricing and other items in the Eagle letter of interest.

 

At its April 29, 2019 meeting, WHC’s board of directors thoroughly reviewed the initial letter of interest from Eagle and resolved to further investigate the proposal from Eagle and its impact on WHC shareholders. The final non-binding letter of interest was delivered by Eagle’s President and CEO Johnson to WHC on May 16, 2019, which was accepted by WHC’s President Kurokawa on the same day. The letter of interest contemplated an aggregate consideration range of $13 million to $14 million, based on a 70/30 stock and cash combination, or an aggregate consideration range of $12.5 million to $13.5 million based on a 50/50 stock and cash combination, which would be finalized after due diligence and confirmed in the definitive merger agreement.

 

Eagle began its diligence review, including credit due diligence, of WHC in late May 2019. Based on discussions between the parties, an electronic data room was opened for Eagle and its advisors to review diligence documents, and WHC’s responses to diligence questions. Upon the conclusion of its preliminary review of WHC’s loan portfolio, representatives of Eagle communicated its continued interest in a strategic business combination. The parties continued to negotiate the principal terms of the transaction.

 

On June 18, 2019, Nixon Peabody circulated an initial draft of the merger agreement, based on the terms outlined in the letter of interest and certain revised terms agreed to by the parties, to Ballard Spahr LLP (“Ballard”), counsel to WHC, and the parties began negotiations of the terms of the agreement.

 

From July 4, 2019 to August 7, 2019, Eagle and its representatives continued negotiations with WHC and its representatives with respect to the terms of the potential transaction and the draft merger agreement and related documents. The issues raised in these negotiations included the respective representations and warranties of the parties, respective covenants of the parties pending closing of the transaction and termination fees payable in certain circumstances. Representatives of Eagle had multiple telephonic conference calls with representatives of WHC to negotiate the terms of the draft merger agreement and ancillary agreements.

 

 

On July 3, 2019, Ballard sent comments on the draft of the merger agreement to Nixon Peabody. On July 22, 2019, Nixon Peabody circulated a revised draft of the merger agreement. On July 30, 2019, Ballard and Nixon Peabody preliminarily reviewed and discussed issues relating to the terms of the merger agreement. On July 31, 2019, Ballard provided comments on the revised draft merger agreement. After completing its due diligence and taking into account shifts in market conditions since the letter of intent was signed, Eagle determined to set the valuation of WHC for the proposed merger at $13 million, and Peter Johnson and Duane Kurokawa discussed this valuation. Based upon these negotiations, the parties agreed upon a valuation of WHC of $13 million and merger consideration of a 50/50 stock and cash combination. On August 2, 2019, Nixon Peabody circulated a revised draft of the merger agreement and received comments from Ballard on August 6, 2019. Following various email exchanges among the parties on August 6, Nixon Peabody circulated a revised draft of the merger agreement to the working group on August 7, 2019, and Nixon Peabody and Ballard Spahr substantially finalized the merger agreement and related documents.

 

On June 4, 2019, management of WHC initiated discussions with Vining Sparks IBG, LP (“Vining Sparks”) to provide financial advice regarding the proposed merger with Eagle. On August 1, 2019, WHC formally engaged Vining Sparks.

 

On August 8, 2019, the boards of directors of WHC and WB held a joint meeting to consider the merger agreement and the transactions contemplated therein. WHC management and representatives of Vining Sparks summarized aspects of the merger agreement, the ancillary documents related to the merger agreement and the transactions contemplated therein. Representatives of Vining Sparks then provided a presentation regarding the fairness of the proposed merger consideration to the WHC shareholders from a financial point of view given the exchange ratio of $2,946.51 in cash and 179.4464 shares of Eagle common stock for each share of WHC common stock. The value of the cash and stock consideration was approximately $13 million and the stock consideration was based on the volume weighted average closing price of Eagle’s common stock over a period of 20 trading days. At the conclusion of the joint meeting, Vining Sparks delivered its oral opinion, which was confirmed by delivery of a written opinion dated August 8, 2019, to the WHC board of directors that, as of that date and based upon and subject to factors and assumptions set forth therein, the merger consideration to be received by the holders of WHC common stock was fair, from a financial point of view.

 

Following further discussion, the WHC board of directors unanimously (i) determined and declared that the merger agreement, the merger, and the other transactions contemplated by the merger agreement are advisable and in the best interests of WHC and its shareholders, (ii) authorized, adopted and approved the merger agreement, the merger and the other transactions contemplated by the merger agreement, (iii) recommended the adoption of the merger agreement, the merger and the other transactions contemplated by the merger agreement to the WHC shareholders and (iv) resolved that the merger agreement be submitted to the WHC shareholders for adoption thereof.

 

On August 8, 2019, the boards of directors of Eagle and Opportunity Bank held joint meetings to review and consider the merger agreement and the transactions and agreements contemplated by it. The management team made a presentation relating to the strategic and financial considerations and rationale of the transaction. A representative of Panoramic Capital reviewed the principal terms of the proposed transaction and the financial impacts of the merger on Eagle and provided comparable transaction analysis for Montana and national bank mergers. Nixon Peabody reviewed for the directors the terms and conditions of the merger agreement, the merger and the various ancillary agreements to be signed in connection with the merger agreement, and engaged in discussions with the board members on such matters. After additional discussion and deliberation, the Eagle and Opportunity Bank boards of directors adopted and approved the draft merger agreement and the transactions and agreements contemplated by it and determined that the merger agreement and the transactions contemplated by it were in the best interests of Eagle and its shareholders.

 

The parties signed the merger agreement on August 8, 2019, and a press release announcing the transaction was issued on August 9, 2019, prior to the open of trading in Eagle common stock. A conference call to discuss the merger was held later in the morning of August 9, 2019.

 

 

WHC’s Reasons for the Merger and Recommendation of the WHC Board of Directors

 

After careful consideration, at its meeting on August 8, 2019, the WHC board of directors determined that the merger agreement and the transactions contemplated thereby, including the merger and bank merger, taken together, were fair to and in the best interests of the WHC shareholders. Accordingly, the WHC board of directors unanimously approved the merger agreement and the transactions contemplated thereby and recommended that the WHC shareholders vote “FOR” the merger proposal.

 

In reaching its decision to approve the merger and recommend the merger to WHC shareholders, WHC’s board of directors consulted with the WHC management, as well as WHC’s financial, legal, and accounting advisors, and considered a number of factors weighing in favor of the merger, including the following, which are not presented in order of priority:

 

 

WHC’s board of directors’ belief that the merger consideration to be received by WHC shareholders pursuant to the merger represented an attractive value for the shares of WHC common stock;

 

 

the WHC board of directors’ belief that a merger with Eagle would allow WHC shareholders to participate in the future performance of a combined company that would have better future prospects than WHC was likely to achieve on a stand-alone basis or through other strategic alternatives available to WHC;

 

 

Eagle’s business and financial condition, results of operations, earnings, prospects, stock price performance, and financial obligations, taking into account the results of WHC’s due diligence investigation of Eagle;

 

 

WHC’s business, historical, current and projected financial performance, the competitive operating environment, current management strengths, existing trends in the industry in which WHC operates, including the national and local economic conditions, the interest rate environment, regulatory environment, escalating technology demands, and the execution risks of continuing with WHC’s current strategy in light of the foregoing;

 

 

WHC shareholders will receive a portion of the merger consideration in cash and the merger was not subject to any financing contingency, which would provide certainty of value and liquidity to the WHC shareholders;

 

 

WHC shareholders will receive a portion of the merger consideration in shares of Eagle common stock, which will be registered with the SEC and listed on the Nasdaq Stock Market in connection with the merger, contrasted with the lack of liquidity and restrictions on transfer currently applicable to the WHC common stock;

 

 

the stock portion of the merger consideration is fixed so that if the market price of Eagle common stock is higher at the time of the closing of the merger, the economic value of the merger consideration to be received by WHC shareholders in exchange for their shares of WHC common stock will also be higher;

 

 

WHC shareholders will receive a portion of the merger consideration in shares of Eagle common stock, which will allow WHC shareholders who wish to participate in the future performance of the combined WHC and Eagle businesses and synergies resulting from the merger to do so, and, in particular, the following factors relating to the combination of the WHC and Eagle businesses:

 

 

the attractive locations of Eagle’s branches in Montana and the potential for expansion and diversification of WHC’s market footprint through the merger;

 

 

 

the merger may allow the combined company to compete more effectively through broader product offerings and a larger legal lending limit;

 

 

the common business vision and commitment to their respective customers, shareholders, employees and other constituencies shared by WHC’s and Eagle’s management teams;

 

 

WHC management’s expectations regarding cost synergies, earnings accretion and internal rate of return for the combined company;

 

 

the merger will position the combined company to sustain the positive loan and deposit origination trends experienced by WHC and Eagle in the combined company markets;

 

 

the merger of WHC with Eagle as a larger bank holding company would provide the combined company with the opportunity to realize economies of scale, increase efficiencies of operations, and enhance the development of new products and services;

 

 

the expanded possibilities, including organic growth and to acquire, be acquired or combine with other third parties, that would be available to the combined company, given its larger size, asset base, capital and footprint; and

 

 

the likelihood of successful integration of WHC with Eagle, given Eagle’s history in other acquisition transactions.

 

 

the regulatory and other approvals required in connection with the merger and the expectation that the approvals will be received in a timely manner and without imposition of unacceptable conditions;

 

 

the financial terms of recent merger and acquisition transactions involving banks and bank holding companies, particularly in Montana, and a comparison of the financial metrics of such transactions with the terms of the proposed merger with Eagle;

 

 

the financial presentation of Vining Sparks, WHC’s financial advisor, to the WHC board of directors on August 8, 2019 and the oral opinion of Vining Sparks delivered to WHC’s board of directors on August 8, 2019, which was confirmed by delivery of a written opinion dated August 8, 2019 to the effect that, as of the date of such opinion, and subject to the procedures followed, assumptions made, matters considered, and qualifications and limitations on the review undertaken by Vining Sparks as set forth in its opinion, the consideration to be received in the proposed merger was fair, from a financial point of view, to the holders of WHC common stock, as more fully described in the section entitled “Proposal 1: The Merger – Opinion of WHC’s Financial Advisor” beginning on page 31 of this proxy statement/prospectus;

 

 

the fact that the merger is structured as a reorganization and the expected tax benefits to the WHC shareholders from the structure of the merger;

 

 

the fact that WHC may elect to declare and pay a special cash dividend to its shareholders prior to closing if WHC achieves a minimum adjusted tangible stockholders’ equity, which dividend would allow the shareholders to receive additional value in respect of their WHC common stock;

 

 

the fact that Eagle is required to pay WHC a termination fee of $200,000 if WHC terminates the merger agreement under certain circumstances; and

 

 

the financial and other terms of the merger agreement, including the ability of WHC’s board of directors, under certain circumstances, to withdraw, qualify, amend or modify its recommendation to WHC shareholders that they approve the merger agreement (subject to payment of a break-up fee).

 

 

After taking into account all of the factors set forth above, as well as others, the WHC board of directors concluded that the potential benefits of the merger to the WHC shareholders outweighed the potentially negative factors associated with the merger.

 

WHC’s board of directors also considered potential risks and uncertainties associated with the merger in connection with its deliberations, including, without limitation, the following:

 

 

the possibility that Eagle will not be able to achieve anticipated cost savings or successfully integrate WHC’s business, operations, and employees with those of Eagle and the risk that the anticipated benefits of the merger may not be realized in the expected time frame, if ever;

 

 

the fact that a portion of the merger consideration consists of shares of Eagle common stock, provides less certainty of value to WHC shareholders compared to a transaction in which they would receive only cash consideration due to the potential for a decline in the value of Eagle common stock—whether before or after consummation of the merger—which would reduce the value of the stock portion of the consideration received by WHC shareholders;

 

 

the risk of potential delays in receiving necessary regulatory approvals, the risk that all conditions to the parties’ obligations to consummate the merger may not be satisfied, including as a result of factors outside either party’s control, and the risk that the merger may not be consummated, even if WHC shareholders approve the merger proposal;

 

 

the requirement that WHC conduct its business in the ordinary course and the restrictions on WHC’s conduct of its business during the pendency of the merger, which may delay or prevent WHC from undertaking business opportunities that may arise during the pendency of the merger, whether or not the merger is completed;

 

 

that under the merger agreement, subject to certain exceptions, WHC cannot solicit competing acquisition proposals;

 

 

the possibility that WHC will have to pay a $560,000 break-up fee to Eagle if the merger agreement is terminated under certain circumstances;

 

 

the possibility WHC will be required to pay Eagle a termination fee of $200,000 if Eagle terminates the merger agreement under certain circumstances and is not otherwise required to pay the break-up fee to Eagle;

 

 

the significant costs involved in connection with entering into and completing the merger and the substantial time and effort of management required to consummate the merger, which could disrupt WHC’s business operations;

 

 

the potential harm that the announcement and pendency of the merger, or the failure to complete the merger, may cause to WHC’s relationships with its customers and employees, including making it more difficult to attract and retain personnel and the possible loss of personnel; and

 

 

that WHC’s directors and executive officers have financial interests in the merger that are different from, or in addition to, their interests as WHC shareholders, which are further described in the section of this proxy statement/prospectus entitled “Proposal 1: The Merger - Interests of WHC Directors and Executive Officers in the Merger.”

 

 

In considering the recommendation of the WHC board of directors, you should be aware that certain directors and officers of WHC may have interests in the merger that are different from, or in addition to, interests of WHC shareholders generally and may create potential conflicts of interest. The WHC board of directors was aware of these interests and considered them when evaluating and negotiation the merger agreement, the merger and the other transactions contemplated by the merger agreement, and in recommending to WHC shareholders that they vote in favor of the proposal to approve the merger agreement. See “Proposal 1: The Merger - Interests of WHC Directors and Executive Officers in the Merger.”

 

The foregoing discussion of the factors and risks considered by WHC’s board of directors is not exhaustive, but includes the material factors and risks considered by the board of directors. In view of the wide variety of factors and risks considered by WHC’s board of directors in connection with its evaluation of the merger and the complexity of those matters, the board of directors did not consider it practical to, nor did it attempt to, quantify, rank, or otherwise assign relative weights to the specific factors that it considered in reaching its decision. In considering the factors and risks described above, individual members of WHC’s board of directors may have given different priority to different factors.

 

WHC’s entry into the Merger Agreement was unanimously approved by WHC’s board of directors on August 8, 2019 and WHC’s board unanimously recommends that you vote “FOR” the merger proposal and “FOR” the adjournment proposal.

 

Each of the directors of WHC has entered into a support agreement with Eagle, pursuant to which they have agreed to vote in favor of the merger proposal and the other proposals to be voted on at the WHC special meeting. The support agreements are discussed in more detail in the section entitled “Information About the WHC Special Meeting – Shares Subject to Company Shareholder Support Agreements; Shares Held by Directors and Executive Officers” beginning on page 23 of this proxy statement/prospectus.

 

Eagle’s Reasons for the Merger

 

As a part of Eagle’s growth strategy, Eagle routinely evaluates opportunities to acquire financial institutions. The acquisition of WHC is consistent with Eagle’s expansion strategy. Eagle’s board of directors, senior management and other officers of Opportunity Bank reviewed the business, financial condition, results of operations and prospects for WHC, the market condition of the market area in which WHC conducts business, the compatibility of the management and the proposed financial terms of the merger. In addition, management of Eagle believes that the merger will provide opportunities for future growth and provide the potential to realize cost savings. Eagle’s board of directors also considered the financial condition and valuation for both WHC and Eagle as well as the financial and other effects the merger would have on Eagle’s shareholders and stakeholders. The board considered the fact that the acquisition is expected to be accretive, Opportunity Bank’s ability to leverage the agricultural lending expertise it has recently acquired, Western Bank’s highly liquid balance sheet, and that it is a low-risk alternative to de novo expansion into eastern Montana. In addition, the board of directors also considered the analysis and presentations from its outside financial advisor, Panoramic Capital.

 

While management of Eagle believes that revenue opportunities will be achieved and costs savings will be obtained following the merger, Eagle has not quantified the amount of enhancements or projected the areas of operation in which such enhancements will occur.

 

In view of the variety of factors considered in connection with its evaluation of the merger, the Eagle board did not find it useful to, and did not attempt to quantify, rank or otherwise assign relative weights to factors it considered. Further, individual directors may have given differing weights to different factors. In addition, the Eagle board did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination. Rather, the board conducted an overall analysis of the factors it considered material, including thorough discussions with, and questioning of, Eagle’s management.

 

Opinion of WHC’s Financial Advisor

 

WHC’s board of directors retained Vining Sparks to render financial advisory and investment banking services. Vining Sparks is a nationally recognized investment banking firm with substantial expertise in transactions similar to the proposed transaction and is familiar with WHC and its business. As part of its investment banking business, Vining Sparks is regularly engaged in the valuation of financial services companies and their securities in connection with mergers and acquisitions, private placements and valuations for estate, corporate and other purposes.

 

 

On August 8, 2019, Vining Sparks delivered its opinion to WHC that the merger consideration to be received by WHC common shareholders in the proposed transaction is fair, from a financial point of view, to WHC’s common shareholders. The full text of Vining Sparks’ opinion is attached as Appendix B to this proxy statement/prospectus and should be read in its entirety.

 

Vining Sparks’ opinion was directed to WHC’s board of directors and is limited to the fairness, from a financial point of view, of the consideration to be received by WHC common shareholders in the proposed transaction. It did not address WHC’s underlying business decision to proceed with the proposed transaction or constitute a recommendation to the WHC board of directors as to how it should vote on the merger and does not constitute a recommendation to any holder of WHC common stock as to how such shareholder should vote in connection with the merger.

 

Vining Sparks’ opinion was reviewed and approved by Vining Sparks’ Fairness Opinion Committee in conformity with its policies and procedures established under the requirements of Rule 5150 of the Financial Industry Regulatory Authority.

 

For purposes of Vining Sparks’ opinion and in connection with its review of the proposed transaction, Vining Sparks has, among other things:

 

 

reviewed the terms of the merger agreement made available to Vining Sparks;

 

 

reviewed certain publicly available financial statements, both audited (where available) and un-audited, and related financial information of WHC and Eagle, including those included in their respective annual reports for the past two years and their respective quarterly reports for the past two years;

 

 

reviewed publicly available consensus “street estimates” of Eagle earnings for 2019 and 2020 and reviewed publicly available research reports;

 

 

reviewed certain financial forecasts and projections of WHC, prepared by WHC management, as well as the amount and timing of the cost savings and related expenses and synergies expected to result from the merger discussed with WHC management;

 

 

held discussions with senior management of WHC concerning the past and current results of operations of WHC, its current financial condition and management’s opinion of its future prospects;

 

 

reviewed reported market prices and historical trading activity of Eagle common stock and reviewed the trading collar for Eagle as defined in Section 7.01 of the merger agreement;

 

 

reviewed certain aspects of the financial performance of Eagle and compared such financial performance of Eagle, together with stock market data relating to Eagle common stock, with similar data available for certain other financial institutions the securities of which are publicly traded;

 

 

compared the proposed financial terms of the merger with the financial terms of certain other transactions that Vining Sparks deemed to be relevant;

 

 

reviewed the potential pro forma financial impact of the merger on WHC; and

 

 

reviewed such other information, financial studies, analyses and investigations, as Vining Sparks considered appropriate under the circumstances.

 

 

In conducting its review and arriving at its opinion, Vining Sparks has assumed and relied, without independent verification, upon the accuracy and completeness of all the financial and other information that has been provided to it by WHC and Eagle, and their respective representatives, and of the publicly available information that was reviewed by Vining Sparks. Vining Sparks is not an expert in the evaluation of the adequacy of allowances for loan losses and it did not independently verify the adequacy of such allowances. Vining Sparks assumed that the allowance for loan losses set forth in the financial statements of Eagle and WHC were adequate to cover such losses and complied fully with applicable law, regulatory policy and sound banking practice as of the date of such financial statements. Vining Sparks did not conduct a physical inspection of any of the properties or facilities of WHC or Eagle, did not make any independent evaluation or appraisal of the assets, liabilities or prospects of WHC or Eagle, was not furnished with any such evaluation or appraisal, and did not review any individual credit files. Vining Sparks assumed that any projections provided by or approved by WHC were reasonably prepared and reflect the best currently available estimates and judgments of WHC management.

 

Vining Sparks’ opinion is necessarily based on economic, market, and other conditions as in effect on, and the information made available to it as of, the date of its opinion. Events occurring after the date thereof, including but not limited to, changes affecting the securities markets, the results of operations or material changes in the assets or liabilities of Eagle or WHC could materially affect the assumptions used in preparing the opinion. Vining Sparks assumed that there were no material changes in the assets, liabilities, financial condition, results of operations, business or prospects of either WHC or Eagle since the date of the last financial statements of each entity that were made available to Vining Sparks. Vining Sparks assumed that all of the representations and warranties contained in the merger agreement and all related agreements are true and correct, that each party to the merger agreement will perform all of the covenants required to be performed by each party under such agreement and that the conditions precedent in the merger agreement are not waived.

 

In delivering its opinion to the board of directors of WHC, Vining Sparks prepared and delivered written materials containing various analyses and other information. The following is a summary of the material financial analyses performed by Vining Sparks in connection with the preparation of its opinion and does not purport to be a complete description of all the analyses performed by Vining Sparks. The summary includes information presented in tabular format, which should be read together with the text that accompanies those tables. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, an opinion is not necessarily susceptible to partial analysis or summary description. Vining Sparks believes that its analyses must be considered as a whole and that selecting portions of such analyses and the factors considered therein, without considering all factors and analyses, could create an incomplete view of the analyses and the processes underlying its opinion. In its analyses, Vining Sparks made numerous assumptions with respect to industry performance, business and economic conditions, and other matters, many of which are beyond the control of WHC, Eagle and Vining Sparks. Any estimates contained in Vining Sparks’ analyses are not necessarily indicative of future results or values, which may be significantly more or less favorable than such estimates. Estimates of values of companies do not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold.

 

Vining Sparks’ opinion was based on information available to Vining Sparks through the date of its opinion and conditions as they existed and could be evaluated on the date thereof. Vining Sparks reviewed the financial terms of the proposed transaction set forth in the merger agreement. As described in the merger agreement, each outstanding share of common stock of WHC will be converted into the right to receive (i) $2,946.51 in cash and (ii) 179.4464 shares of Eagle. For purposes of the financial analyses described below, based on a value of $16.42 per share for Eagle, the merger consideration represented an implied value of $5,893.02 per share of WHC. Based on 2,206 shares of WHC common stock outstanding, aggregate merger consideration would equal $13.0 million. Additionally, per the merger agreement, WHC’s adjusted tangible stockholders equity as of the last day of the month prior to the month in which the Effective Time is expected to occur shall be an amount not less than $10,000,000. WHC is allowed to incur permitted transaction expenses up to $800,000 and any excess may be paid as a special dividend to shareholders.       

 

 

Selected Company Analysis - Eagle. Vining Sparks used publicly available information to compare selected financial information and stock pricing for Eagle with a selected group of financial institutions. The Eagle peer group consisted of publicly traded Montana, Idaho, North Dakota, South Dakota and Wyoming banking organizations with total assets between $125 million and $10 billion, excluding merger targets. While Vining Sparks believes that the companies listed below are similar to Eagle, none of these companies have the same composition, operations, size or financial profile as Eagle.

 

Company Ticker City State
Alerus Financial Corporation

ALRS

Grand Forks ND
BNCCORP, INC. BNCC Bismarck ND
Coeur d'Alene Bancorp CDAB Coeur d'Alene ID
Crazy Woman Creek Bancorp Inc. CRZY Buffalo WY
Dacotah Banks, Inc. DBIN Aberdeen SD
Idaho First Bank IDFB McCall ID
Meta Financial Group, Inc. CASH Sioux Falls SD
Security National Corporation SNLC Dakota Dunes SD

 

To perform this analysis, Vining Sparks used financial information as of June 30, 2019, a price of $16.42 for Eagle (the 20-day volume weighted average closing price for Eagle) and pricing data for the peer group as of July 31, 2019 obtained from S&P Global Market Intelligence. The following table sets forth the comparative financial and market data:

 

           

Peer Group

 
   

Eagle

   

Low

   

Median

   

Mean

   

High

 

Total Assets (in millions)

  $ 1,007.7     $ 126.2     $ 1,211.1     $ 1,722.2     $ 6,101.1  

LTM Return on Average Assets

    0.82 %     0.35 %     1.05 %     0.96 %     1.47 %

LTM Return on Average Equity

    7.35 %     3.93 %     9.27 %     9.36 %     14.17 %

Equity/Assets

    11.48 %     8.30 %     10.84 %     10.97 %     13.86 %

Loans/Deposits

    100.54 %     52.92 %     80.19 %     79.44 %     97.72 %

Loan Loss Reserve/Gross Loans

    1.00 %     1.18 %     1.51 %     1.49 %     2.03 %

Nonperforming Assets/Assets

    0.37 %     0.07 %     0.49 %     0.70 %     2.34 %

Efficiency Ratio

    74.73 %     56.71 %     73.41 %     72.63 %     86.46 %

Price/Book Value Per Share

 

0.91x

   

0.76x

   

1.21x

   

1.17x

   

1.43x

 

Price/Tangible Book Value Per Share

 

1.09x

   

0.76x

   

1.22x

   

1.38x

   

2.57x

 

Price/LTM Earnings Per Share

 

13.1x

   

8.9x

   

13.8x

   

14.8x

   

26.8x

 

 

 

Stock Trading History. Vining Sparks reviewed the closing per share market prices and volumes for Eagle common stock on a daily basis from January 1, 2019 to July 26, 2019. Eagle is listed for trading on NASDAQ under the symbol “EBMT”. For the period between January 1, 2019 to July 26, 2019, the closing price of Eagle common stock ranged from a low of $15.53 to a high of $18.28. The closing price on July 26, 2019 was $16.85 per share. For the period between January 1, 2019 and July 26, 2019, the average daily trading volume for Eagle was 7,111 shares.

 

Analysis of Selected Financial Institution Transactions. Vining Sparks reviewed certain publicly available information regarding selected merger and acquisition transactions (which we refer to as the “comparable transactions”) announced from January 1, 2018 to July 31, 2019 involving U.S. financial institutions located in a rural area, with total assets under $300 million and a return on assets over 0.00%. The transactions included in the group are shown in the following chart. This data was obtained from S&P Global Market Intelligence.

 

Buyer State Seller State
Chebelle Corporation IA Victor State Bank IA
First US Bancshares, Inc. AL Peoples Bank VA
Ames National Corporation IA Clarke County State Bank IA
Century Next Financial Corp. LA Ashley Bancstock Company AR
Emclaire Financial Corp PA Community First Bancorp, Inc. PA
Southern Missouri Bancorp, Inc. MO Gideon Bancshares Company MO
Citizens Community Bancorp, Inc. WI United Bank WI
Platte Valley Financial Service Cos. NE American Bank of Sidney, Nebraska NE
City Holding Company WV Farmers Deposit Bancorp, Inc. KY
Geneva State Company NE First National Fairbury Corporation NE
Geneva State Company NE Jefferson County Bancshares, Inc. NE
Summit Financial Group, Inc. WV Peoples Bankshares, Inc. WV
Eagle Bancorp Montana, Inc. MT Big Muddy Bancorp, Inc. MT
BancorpSouth Bank MS Merchants Trust, Inc. AL
Citizens Community Bancorp, Inc. WI F. & M. Bancorp of Tomah, Inc. WI
Blue Ridge Bankshares, Inc. VA Virginia Community Bankshares VA
Premier Financial Bancorp, Inc. WV First National Bank of Jackson KY
Investar Holding Corporation LA Bank of York AL

 

 

Vining Sparks reviewed the multiples of transaction value to book, transaction value to tangible book, transaction value to earnings, and tangible book premium to core deposits and calculated high, low, median and mean multiples for the comparable transactions. These ratios were compared with corresponding transaction ratios for the proposed merger based on the merger consideration of $5,893.02 per share for WHC common stock. The results of the analysis are set forth in the following table:

 



Transaction Multiples:

 


WHC
Transaction

   

Comparable
Transaction
Low

   

Comparable
Transaction
Median

   

Comparable
Transaction
Mean

   

Comparable
Transaction
High

 

Transaction Value/Required Tangible Book Value

 

1.30x

   

0.78x

   

1.33x

   

1.35x

   

1.95x

 

Transaction Value/2018 Pre-Tax Earnings

 

13.53x

   

3.97x

   

10.63X

   

12.96x

   

41.05x

 

Transaction Value /Estimated 2019 Pre-Tax Earnings

 

13.68x

   

3.97x

   

10.63x

   

12.96x

   

41.05x

 

Tangible Premium/6/30/19 Core Deposits

    4.02 %     (5.35 )%     5.64 %     5.10 %     11.56 %

 

No company or transaction used as a comparison in the above analysis is identical to WHC or the proposed transaction. Accordingly, an analysis of these results is not strictly mathematical. An analysis of the results of the foregoing involves complex considerations and judgments concerning differences in financial and operating characteristics of WHC and the companies included in the comparable transactions. The transaction multiples resulting from the merger consideration of $5,893.02 per share are within the range of multiples computed using the comparable transactions.

 

Present Value Analysis. Vining Sparks calculated the present value of theoretical future earnings of WHC and compared the transaction value to the calculated present value of WHC’s common stock on a stand-alone basis. Based on projected earnings for WHC of $950,000 in 2019, $1.1 million in 2020, $1.2 million in 2021, $1.3 million in 2022 and $1.4 million in 2023, discount rates ranging from 12% to 18%, and including a residual value, the stand-alone present value of WHC indicated an implied range of values per share of $3,435.07 to $5,831.00 as shown in the table below.

 

   

Discount Rate

 
      18 %     16 %     14 %     12 %

Present Value (in thousands)

  $ 7,578     $ 8,794     $ 10,457     $ 12,863  

Present Value (per share)

  $ 3,435.07     $ 3,986.59     $ 4,740.26     $ 5,831.00  

 

 

Discounted Cash Flow Analysis. Using a discounted cash flow analysis, Vining Sparks estimated the net present value of the future streams of after-tax cash flow that WHC could produce to benefit a potential acquirer, referred to as dividendable net income, and added a terminal value. Based on projected earnings for WHC for 2019 through 2023 (indicated above), we assumed after-tax distributions to a potential acquirer such that its tier 1 leverage ratio would be maintained at 9.00%. The terminal value for WHC was calculated based on WHC’s projected 2023 equity and earnings, the median price to tangible book multiple and the median price to earnings multiple paid in the comparable transactions and utilized discount rate of 12%. This discounted cash flow analysis indicated implied values of $5,390.34 per share and $5,728.68 per share.

 

Pro Forma Merger Analysis. Vining Sparks performed pro forma merger analyses to calculate the financial implications of the merger to WHC common shareholders. This analysis assumes, among other things, the terms of the transaction as indicated above, that the merger closes at December 31, 2019 and cost savings and revenue enhancement opportunities of $1,000,000 annually in the years 2020 through 2023, which consists of cost saves of $538,000 or approximately 25% of WHC’s total overhead expense in 2018 and the remainder as revenue enhancements for Eagle’s ability to generate additional loans given its loan to deposit ratio equaled 100.54% at June 30, 2019 and WHC’s loan to deposit ratio equaled only 52.52%. This analysis utilized earnings estimates of $1.60 per share in 2019, $1.78 per share in 2020 and $1.96 per share in 2021 for Eagle and earnings estimates of $430.65 per share in 2019, $478.19 per share in 2020 and $526.01 in 2021 for WHC. This analysis indicated that the merger could be accretive to WHC’s projected earnings per share in 2020 and 2021.

 

In the two years prior to the issuance of this opinion, Vining Sparks engaged in securities and loan sales and trading activity with WHC and/or its subsidiary bank and with Eagle and/or its subsidiary bank for which Vining Sparks was paid an immaterial amount of commissions or other fees, which may include mark-ups on the purchase or sale of loans and securities. Pursuant to the terms of an engagement letter with WHC, Vining Sparks received a fee of $25,000 upon delivery of its opinion. Vining Sparks’ opinion fee is not contingent upon consummation of the proposed transaction. In addition, WHC has agreed to indemnify Vining Sparks against certain liabilities and expenses arising out of or incurred in connection with its engagement, including liabilities and expenses which may arise under the federal securities laws.

 

Certain Financial Forecasts of WHC

 

WHC does not, as a matter of course, publicly disclose forecasts or internal projections as to its future performance, earnings or other results due to, among other reasons, the uncertainty of the underlying assumptions and estimates, the risk that they will prove incorrect and the inherent difficulty of accurately predicting financial performance for future periods. However, in connection with the merger, WHC’s management provided its financial advisor, Vining Sparks with certain nonpublic unaudited forecasted financial information regarding WHC, on a stand-alone basis, prepared by WHC’s management that was considered by Vining Sparks for the purpose of preparing its fairness opinion to WHC’s board of directors, as described in this proxy statement/prospectus under the heading “—Opinion of WHC’s Financial Advisor” beginning on page 31. This nonpublic unaudited forecasted financial information was prepared as part of WHC’s overall process of analyzing various strategic initiatives, and was not prepared for the purposes of, or with a view toward, public disclosure or with a view toward complying with the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of forecasted financial information, published guidelines of the SEC regarding forward-looking statements or GAAP. A summary of certain significant elements of this information is set forth below, and is included in this proxy statement/prospectus solely because such information was made available to Vining Sparks in connection with the preparation of its fairness opinion and analyses. The information included below does not comprise all of the forecasted financial information provided by WHC to Vining Sparks.

 

The financial forecasts set forth below were presented to the board of directors of WHC on August 8, 2019. Although presented with numeric specificity, the financial forecasts reflect numerous estimates and assumptions of WHC management made at the time they were prepared, including based on management’s expectation of low interest rates and low-growth economic environment. These and the other estimates and assumptions underlying the financial forecasts involve judgments with respect to, among other things, the future interest rate environment and other economic, competitive, regulatory and financial market conditions and future business decisions that may not be realized and that are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, including, among other things, the inherent uncertainty of the business and economic conditions affecting the industry in which WHC and Eagle operate, and the risks and uncertainties described under the sections entitled “Risk Factors” and “Cautionary Statements About Forward-Looking Statements” beginning on pages 16 and 21, respectively, all of which are difficult to predict and many of which are outside the control of WHC and will be beyond the control of the combined company. There can be no assurance that the underlying assumptions would prove to be accurate or that the projected results would be realized, and actual results likely would differ materially from those reflected in the financial forecasts, whether or not the merger is completed. Further, these assumptions do not include all potential actions that management could or might have taken during these time periods. The inclusion in this proxy statement/prospectus of the unaudited forecasted financial information below should not be regarded as an indication that WHC, Eagle, their respective boards of directors, or Vining Sparks considered, or now consider, these projections and forecasts to be a reliable predictor of future results or to be material information to any WHC shareholder particularly in light of the inherent risks and uncertainties associated with such projections and forecasts. The financial forecasts are not fact and should not be relied upon as being necessarily indicative of future results, and this information should not be relied on as such. In addition, this information represents WHC’s management’s evaluation at the time it was prepared of certain measures of WHC’s expected future financial performance on a standalone basis, based on certain assumptions regarding strategic investment expenses and without reference to the proposed merger or transaction-related costs or benefits. No assurances can be given that these financial forecasts and the underlying assumptions are reasonable or that, if they had been prepared as of the date of this proxy statement/prospectus, similar assumptions would be used. In addition, the financial forecasts may not reflect the manner in which Eagle would operate the WHC business after the merger.

 

 

The financial forecasts summarized in this section were prepared by and are the responsibility of the management of WHC. No independent registered public accounting firm has examined, compiled or otherwise performed any procedures with respect to the forecasted financial information and, accordingly, no independent registered public accounting firm has expressed any opinion or given any other form of assurance with respect thereto and no independent registered public accounting firm assumes any responsibility for the forecasted financial information. By including the forecasted financial information in this proxy statement/prospectus, neither Eagle nor WHC nor any of their respective representatives has made or makes any representation to any person regarding the ultimate performance of WHC or Eagle compared to the information contained in or implied by the forecasted financial information. Neither WHC, Eagle nor, after completion of the merger, the combined company undertakes any obligation to update or otherwise revise the forecasted financial information to reflect circumstances existing since their preparation or to reflect the occurrence of subsequent or unanticipated events, even in the event that any or all of the underlying assumptions are shown to be in error, or to reflect changes in general economic or industry conditions.

 

The forecasted financial information is not being included in this proxy statement/prospectus in order to induce any WHC shareholder to vote in favor of the merger proposal but is included solely for the purpose of providing WHC shareholders with access to certain nonpublic information that was made available to WHC’s financial advisor for the purposes of performing financial analyses regarding the proposed merger.

 

In light of the foregoing as well as the uncertainties inherent in any forecasted information, WHC shareholders are strongly cautioned not to place unwarranted reliance on such information.

 

The following table presents select unaudited forecasted financial information for the fiscal years ended December 31, 2019 through December 31, 2023 prepared by WHC’s management and considered by Vining Sparks for the purpose of preparing its fairness opinion to WHC’s board of directors, as described in this proxy statement/prospectus under the heading “—Opinion of WHC’s Financial Advisor” beginning on page 31.

 

   

For the Year Ended

 

(in thousands)

 

December 31,

2019

   

December 31,

2020

   

December 31,

2021

   

December 31,

2022

   

December 31,

2023

 

Net earnings

  $ 950     $ 1,100     $ 1,200     $ 1,300     $ 1,400  

 

 

Material U.S. Federal Income Tax Consequences of the Merger

 

The following section constitutes the opinion of Nixon Peabody as to the anticipated material U.S. federal income tax consequences of the merger generally applicable to U.S. holders (as defined below) of WHC common stock. These opinions and the following discussion are based on, and subject to, the Code, the treasury regulations promulgated under the Code, existing interpretations, court decisions, and administrative rulings, all of which are in effect as of the date of this proxy statement/prospectus, and all of which are subject to change, possibly with retroactive effect. Any such change could affect the accuracy of the statements and conclusions set forth in this discussion. This discussion does not address any U.S. state or local or non-U.S. tax considerations or any U.S. federal estate, gift, alternative minimum tax, or Medicare contribution tax considerations.

 

This summary only addresses the material U.S. federal income tax consequences of the merger to U.S. holders of WHC common stock who hold such shares as a capital asset within the meaning of Section 1221 of the Code. This summary does not address all aspects of U.S. federal income taxation that may be applicable to WHC shareholders in light of their particular circumstances or to WHC shareholders subject to special treatment under U.S. federal income tax law, such as:

 

 

shareholders who are not U.S. holders;

 

 

pass-through entities or investors in pass-through entities;

 

 

financial institutions;

 

 

insurance companies;

 

 

tax-exempt organizations;

 

 

brokers, banks or dealers in securities or currencies;

 

 

traders in securities that elect to use a mark-to-market method of accounting;

 

 

persons whose functional currency is not the U.S. dollar;

 

 

persons who purchased or sell their shares of WHC common stock as part of a wash sale;

 

 

shareholders who hold their shares of WHC common stock as part of a hedge, straddle, constructive sale or conversion transaction;

 

 

regulated investment companies;

 

 

real estate investment trusts; and

 

 

shareholders who acquired their shares of WHC common stock pursuant to the exercise of employee stock options or otherwise acquired shares as compensation or through a tax-qualified retirement plan.

 

In addition, the discussion does not address any alternative minimum tax or any state, local or foreign tax consequences of the merger.

 

U.S. Holders

 

For purposes of this summary, the term “U.S. holder” means a beneficial holder of WHC common stock that is:

 

 

a citizen or resident of the U.S.; or

 

 

 

a corporation (including any entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the U.S. or any of its political subdivisions; or

 

 

a trust that: (i) is subject to both the primary supervision of a court within the U.S. and the control of one or more U.S. persons; or (ii) has a valid election in effect under applicable U.S. Treasury regulations to be treated as a U.S. person; or

 

 

an estate that is subject to U.S. federal income tax on its income regardless of its source.

 

If a partnership (including any entity or arrangement that is taxed as a partnership for U.S. federal income tax purposes) holds WHC common stock, the tax treatment of a partner will generally depend on the status of the partners and the activities of the partnership. Partnerships and partners in such a partnership should consult their tax advisers about the tax consequences of the merger to them.

 

The Merger

 

The parties intend for the merger to qualify as a “reorganization” within the meaning of Section 368(a) of the Code. It is a condition to Eagle’s and WHC’s obligation to complete the merger that they each receive an opinion from their respective counsel, dated as of the closing date of the merger, to the effect that the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code. In addition, in connection with the filing of the registration statement of which this document is a part, Nixon Peabody has delivered an opinion to Eagle, to the same effect as the opinions described above. These tax opinions will be based on representation letters provided by WHC and Eagle and which set forth customary factual assumptions. None of the opinions described above will be binding on the Internal Revenue Service. WHC and Eagle have not sought and will not seek any ruling from the Internal Revenue Service regarding any matters relating to the merger, and as a result, there can be no assurance that the Internal Revenue Service will not assert, or that a court would not sustain, a position contrary to any of the conclusions set forth below. In addition, if any of the representations or assumptions upon which those opinions are based are inconsistent with the actual facts, the United States federal income tax consequences of the merger could be adversely affected. Based on factual representations contained in the representation letters provided by WHC and Eagle, and which representations must continue to be true and accurate as of the effective time of the merger, in the opinion of Nixon Peabody, the merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code.

 

The tax consequences of the merger to a U.S. holder of WHC common stock will generally depend upon the form of consideration such U.S. holder receives in the merger.

 

Tax Consequences to U.S. Holders. Subject to the discussions below relating to the potential recharacterization of gain as a dividend and the receipt of cash in lieu of a fractional share, a U.S. holder that exchanges its WHC common stock for a combination of shares of Eagle common stock and cash:

 

 

will generally recognize capital gain (but not loss) equal to the lesser of  (i) the excess, if any, of the amount of cash plus the fair market value of the Eagle common stock received in the merger over the U.S. holder’s tax basis in the shares of WHC common stock surrendered in exchange therefor and (ii) the amount of cash received by the U.S. holder in the merger (other than cash received in lieu of a fractional share);

 

 

will generally have a tax basis in the Eagle common stock received equal to the tax basis of the WHC common stock surrendered in exchange therefor, increased by the amount of taxable gain, if any, recognized by the U.S. holder in the merger (other than with respect to cash received in lieu of a fractional share), and decreased by the amount of any cash received by the U.S. holder in the merger (other than cash received in lieu of a fractional share); and

 

 

will generally have a holding period for shares of Eagle common stock received in the merger that includes its holding period for its shares of WHC common stock surrendered in exchange therefor.

 

 

Such capital gain will generally be long-term capital gain if, as of the effective date of the merger, the holding period for such shares of WHC common stock is more than one year. Long-term capital gain of certain non-corporate taxpayers, including individuals, is generally taxed at preferential rates.

 

In the case of any U.S. holder that acquired different blocks of WHC common stock at different times and at different prices, any realized gain or loss generally will be determined separately for each identifiable block of shares exchanged in the merger. Such U.S. holder should consult the U.S. holder’s own tax advisor regarding the manner in which gain or loss should be determined for each identifiable block of WHC shares.

 

Potential Recharacterization of Gain as a Dividend. Any gain recognized by a U.S. holder of WHC common stock in connection with the merger generally will be capital gain unless such U.S. holder’s receipt of cash has the effect of a distribution of a dividend, in which case the gain will generally be treated as a dividend to the extent of such holder’s ratable share of WHC’s accumulated earnings and profits, as calculated for U.S. federal income tax purposes. For purposes of determining whether a U.S. holder’s receipt of cash in the merger has the effect of a distribution of a dividend, such U.S. holder will generally be treated as if it first exchanged all of its WHC common stock solely in exchange for Eagle common stock and then Eagle immediately redeemed a portion of that stock for the cash that such U.S. holder actually received in the merger (referred to herein as the “deemed redemption”). Receipt of cash will generally not have the effect of a dividend to a U.S. holder if such receipt is “not essentially equivalent to a dividend” or “substantially disproportionate,” in each case within the meaning of Section 302(b) of the Code. In order for the deemed redemption to be “not essentially equivalent to a dividend,” the deemed redemption must result in a “meaningful reduction” in the U.S. holder’s deemed percentage stock ownership of Eagle following the merger. The determination generally requires a comparison of the percentage of the outstanding stock of Eagle that such U.S. holder is considered to have owned immediately before the deemed redemption to the percentage of the outstanding stock of Eagle that such U.S. holder owned immediately after the deemed redemption, including shares deemed owned under the constructive ownership rules of the Code. The Internal Revenue Service has indicated in rulings that any reduction in the interest of a minority shareholder that owns, actually and constructively, a small number of shares in a publicly and widely held corporation and that exercises no control over such corporation’s corporate affairs would generally result in capital gain (as opposed to dividend) treatment.

 

The determination as to whether a U.S. holder will recognize a capital gain or dividend income as a result of the exchange of WHC common stock for Eagle common stock and cash in the merger is complex and is determined on a shareholder-by-shareholder basis. Accordingly, we urge each U.S. holder to consult its own tax advisor with respect to any such determination.

 

Cash Instead of a Fractional Share. If you receive cash in the merger instead of a fractional share interest in Eagle common stock, you will be treated as having received such fractional share in the merger, and then as having received cash in exchange for such fractional share. Gain or loss would be recognized in an amount equal to the difference between the amount of cash received and your adjusted tax basis allocable to such fractional share. Except as described in the section entitled “Potential Recharacterization of Gain as a Dividend” above, this gain or loss will generally be a capital gain or loss, and will be long-term capital gain or loss if, as of the effective date of the merger, you have held your shares of WHC common stock for more than one year.

 

Backup Withholding and Information Reporting

 

In general, information reporting requirements may apply to any cash payments made to a U.S. holder in connection with the merger, unless an exemption applies. Backup withholding (currently 24%) may be imposed on the above payments if a U.S. holder (1) fails to provide a taxpayer identification number or appropriate certificates or (2) otherwise fails to comply with all applicable requirements of the backup withholding rules.

 

Any amounts withheld from payments to a U.S. holder under the backup withholding rules are not an additional tax and will be allowed as a refund or credit against its applicable U.S. federal income tax liability, provided the required information is furnished to the IRS. U.S. holders should consult their own tax advisors regarding the application of backup withholding based on their particular circumstances and the availability and procedure for obtaining an exemption from backup withholding.

 

 

A U.S. holder of WHC common stock who receives Eagle common stock as a result of the merger will be required to retain records pertaining to the merger. Each U.S. holder of WHC common stock who is required to file a U.S. federal income tax return and who is a “significant holder” that receives Eagle common stock in the merger will be required to file a statement with such U.S. federal income tax return in accordance with Treasury Regulations Section 1.368-3 setting forth information regarding the parties to the merger, the date of the merger, such holder’s basis in the WHC common stock surrendered and the fair market value of Eagle common stock received in the merger. A “significant holder” is a holder of WHC common stock who, immediately before the merger, owned at least 1% (by vote or value) of the outstanding stock of WHC or securities of WHC with a basis for U.S. federal income tax purposes of at least $1 million.

 

The preceding discussion is for general information purposes only and is not intended to be a complete analysis or description of all potential U.S. federal income tax consequences of the merger. The discussion does not address tax consequences which may vary with, or are contingent on, your individual circumstances. Moreover, the discussion does not address any non-income tax or any foreign, state or local tax consequences of the merger. Accordingly, you are strongly encouraged to consult with your own tax advisor as to the tax consequences of the merger in your particular circumstances, including any state, local or foreign and other tax laws and of changes in those laws.

 

Accounting Treatment

 

The merger will be accounted for using the acquisition method of accounting pursuant to U.S. GAAP. Eagle will be treated as the acquiror. Under the acquisition method of accounting, WHC’s assets and liabilities will be recorded in Eagle’s consolidated financial statements at their respective fair values as of the date of completion of the merger. Financial statements of Eagle issued after the merger will reflect these values but will not be restated retroactively to reflect the historical financial position or results of operations of WHC before the merger date.

 

Regulatory Approvals

 

Completion of the merger and the bank merger are subject to the receipt of all approvals and consents required to complete the transactions contemplated by the merger agreement from (i) the Federal Reserve Board, (ii) the Montana Division of Banking and Financial Institutions, and (iii) any other regulatory approval, the failure of which to obtain would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on Eagle, and the expiration of any applicable statutory waiting periods, in each case, without the imposition of a materially burdensome regulatory condition. Notifications regarding, and/or applications requesting approval for, the transactions contemplated by the merger agreement may also be submitted to various other federal and state regulatory authorities and self-regulatory organizations. WHC and Eagle have agreed to use their commercially reasonable efforts to obtain as promptly as practicable all required regulatory approvals and consents. Eagle, WHC and/or their respective subsidiaries have filed applications and/or notifications to obtain these required regulatory approvals and consents or applicable waivers therefrom.

 

Although we currently believe we should be able to obtain all required regulatory approvals in a timely manner, we cannot be certain when or if we will obtain them or, if obtained, whether they will contain terms, conditions or restrictions not currently contemplated that will be detrimental to Eagle after the completion of the merger, or will contain a materially burdensome regulatory condition.

 

Board of Governors of the Federal Reserve System – The Merger

 

Eagle is a bank holding company as defined in the BHC Act. The primary regulator of Eagle is the Federal Reserve Board. Eagle has filed with the Federal Reserve a combined application and notification under Sections 3, 4(c)(8) and 4(j) of the BHC Act for the transactions contemplated by the merger agreement. In considering the approval of the merger, the Federal Reserve Board is required by the BHC Act to review, with respect to Eagle and the companies and insured depository institution to be acquired: (1) the effect of the proposal on competition, (2) the financial condition and future prospects of the combined company and the banks concerned and the managerial resources, including the competence, experience, and integrity of the officers, directors and principal stockholders of Eagle, WHC and their subsidiary banks, (3) the convenience and needs of the communities to be served, including the record of performance under the Community Reinvestment Act of 1977 and the regulations issued thereunder (which we refer to as the "CRA"), (4) the companies' effectiveness in combating money-laundering activities, (5) the banks' record of compliance with the CRA and (6) the risk to the stability of the United States banking or financial system presented by the merger and the related transactions.

 

 

In connection with its review of the application and notification, the Federal Reserve Board will provide an opportunity for public comment on the application and notification, and is authorized to hold a public meeting or other proceeding if it determines such meeting or other proceeding would be appropriate. Eagle filed its application and notification for approval of the merger with the Federal Reserve on October 4, 2019.

 

Board of Governors of the Federal Reserve System – The Bank Merger

 

In order to consummate the merger of Western Bank with and into Opportunity Bank, Opportunity Bank must receive the approval of the Federal Reserve under Section 18(c) of the Federal Deposit Insurance Act (which we refer to as the "Bank Merger Act"). In considering an application under the Bank Merger Act, the Federal Reserve reviews certain factors, including: (i) the competitive impact of the transaction, (ii) the financial and managerial resources of the depository institutions party to the bank merger and future prospects of the resulting institution, (iii) the convenience and needs of the communities to be served, (iv) the depository institutions' effectiveness in combating money-laundering activities, (v) the risk to the stability of the United States banking and financial system and (vi) the records of performance of the relevant insured depository institutions under the CRA.

 

Furthermore, the Bank Merger Act and Federal Reserve regulations require published notice of, and the opportunity for public comment on, the application to the Federal Reserve, and authorize the Federal Reserve to hold a public hearing or meeting if the Federal Reserve determines that a hearing or meeting would be appropriate. The Federal Reserve takes into account the views of third-party commenters, particularly on the subject of the merging parties' CRA performance and record of service to their communities. As part of the review process in merger transactions, the Federal Reserve frequently receives protests from community groups and others. Any hearing, meeting or comments provided by third parties could prolong the period during which the application is under review by the Federal Reserve.

 

Opportunity Bank's establishment and operation of a branch at Western Bank's existing branch location is also subject to approval by the Federal Reserve. Opportunity Bank filed its application for approval of the bank merger with the Federal Reserve on October 4, 2019.

 

Montana Division of Banking and Financial Institutions

 

Completion of the bank merger is subject to the approval of the Montana Division of Banking and Financial Institutions (which we refer to as the "Montana Division") pursuant to the Banking Law of the State of Montana. The Montana Division requires a 30-day public comment period on a merger application and may consider any comments received and other factors in considering the merger. Opportunity Bank filed an application regarding the bank merger pursuant to the Banking Law of the State of Montana, with the Montana Commissioner on October 4, 2019.

 

Eagle and WHC believe that the merger and the bank merger should not raise substantial antitrust or other significant regulatory concerns and that Eagle will be able to obtain all requisite regulatory approvals in a timely manner. However, there can be no assurance that all of the regulatory approvals described above will be obtained and, if obtained, as to the timing of any such approvals. In addition, there can be no assurance that such approvals will not impose conditions or requirements that would reasonably be likely to have a material adverse effect on Eagle and its subsidiaries, taken as a whole, after giving effect to the merger. There can likewise be no assurances that U.S. federal or state regulatory authorities will not attempt to challenge the merger on antitrust grounds or for other reasons, or if such a challenge is made, as to the result of such challenge.

 

Dissenters’ Rights for WHC Shareholders

 

Holders of WHC common stock as of the record date are entitled to dissenters’ rights under the MBCA. Pursuant to Section 35-1-827 of the MBCA, a WHC shareholder who does not wish to accept the consideration to be received pursuant to the terms of the merger agreement may dissent from the merger and elect to receive the fair value of his or her shares of WHC common stock. Pursuant to Section 35-1-830, any WHC shareholder who desires to assert dissenters’ rights must deliver notice of such intention to WHC before the date of the special meeting to vote on the proposal to approve the merger agreement. Under the terms of the merger agreement, if holders of 5% or more of the outstanding shares of WHC common stock validly exercise their dissenters’ rights, then Eagle will not be obligated to complete the merger.

 

 

In order to exercise dissenters’ rights, a dissenting WHC shareholder must strictly comply with the statutory procedures of Sections 35-1-826 through 35-1-839 of the MBCA. A copy of the full text of those Sections is included as Appendix C to this proxy statement/prospectus. WHC shareholders are urged to read Appendix C in its entirety and to consult with their legal advisors. Failure to adhere strictly to the requirements of Montana law in any regard will cause a forfeiture of any dissenters’ rights.

 

Certain WHC shareholders are subject to company shareholder support agreements, dated as of August 8, 2019, by which such WHC shareholders have agreed to waive all dissenters’ rights, appraisal rights and similar rights in connection with the merger.

 

BECAUSE OF THE COMPLEXITY OF THE PROVISIONS OF MONTANA LAW RELATING TO DISSENTERS’ APPRAISAL RIGHTS, SHAREHOLDERS WHO ARE CONSIDERING DISSENTING FROM THE MERGER ARE URGED TO CONSULT THEIR OWN LEGAL ADVISORS.

 

Board of Directors and Management of Eagle Following the Merger

 

The members of the board of directors of Eagle and Opportunity Bank immediately prior to the effective time of the merger will be the directors of the surviving companies. Directors will hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

 

Pursuant to the merger agreement, Opportunity Bank has agreed to establish an advisory board, at or promptly following the effective time of the merger, to assist with retaining Western Bank customers, developing new business and representing the combined bank positively in the communities served by Western Bank. R.J. Doornek and Duane Kurokawa will be appointed to the newly created advisory board of Opportunity Bank. While Opportunity Bank intends to maintain the advisory board for approximately three (3) years, it will consider the composition, compensation and need for the advisory board after the completion of each one-year term.

 

The executive officers of Eagle and Opportunity Bank immediately prior to the effective time of the merger will be the executive officers of the surviving companies and will hold office until their respective successors are duly elected and qualified, or their earlier death, resignation or removal.

 

Information regarding the executive officers and directors of Eagle is contained in documents filed by Eagle with the SEC and incorporated by reference into this proxy statement/prospectus, including Eagle’s Annual Report on Form 10-K for the year ended December 31, 2018 and its definitive proxy statement on Schedule 14A for its 2019 annual meeting, filed with the SEC on March 12, 2019. See “Where You Can Find More Information and Documents Incorporated by Reference.”

 

Interests of WHC Directors and Executive Officers in the Merger

 

In the merger, the directors and executive officers of WHC will receive the same merger consideration for their WHC shares as the other WHC shareholders. In considering the recommendation of the WHC board of directors that you vote to approve the merger agreement, you should be aware that some of the executive officers and directors of WHC may have interests in the merger and may have arrangements, as described below, that may be considered to be different from, or in addition to, those of WHC shareholders generally. The WHC board of directors was aware of these interests and considered them, among other matters, in reaching its decision to adopt and approve the merger agreement and to recommend that WHC shareholders vote in favor of approving the merger agreement. For a more complete description of WHC’s reasons for the merger and the recommendations of the WHC board of directors, please see the section entitled “Proposal 1: The MergerBackground of the Merger” and “Proposal 1: The MergerWHCs Reasons for the Merger and Recommendations of the WHC Board of Directors” beginning on pages 26, and 28, respectively of this proxy statement/prospectus. WHC’s shareholders should take these interests into account in deciding whether to vote “FOR” the proposal to approve the merger agreement. These interests are described in more detail below.

 

 

Director Restrictive Covenant Agreement; Claims Letters

 

Each member of the WHC and Western Bank boards of directors have entered into a restrictive covenant agreement, covering a two-year period commencing with the effective time of the merger, with Eagle in the form attached as Exhibit E to the merger agreement attached as Appendix A to this document. However, directors would be permitted to serve on other bank boards within the restricted territory after the first anniversary of the restrictive covenant agreement. In addition, each of the members of the WHC and Western Bank boards of directors have entered into a claims letter in the form attached as Exhibit D to the merger agreement attached as Appendix A to this proxy statement/prospectus, by which they have agreed to release certain claims against WHC, effective as of the effective time of the merger.

 

Indemnification and Insurance

 

As described under “The Merger Agreement —Indemnification and Directors and Officers Insurance” beginning on page 54 of this proxy statement/prospectus, for a period of six years from and after the effective time of the merger, Eagle will indemnify and defend the present and former directors and officers of WHC and its subsidiaries against claims pertaining to matters occurring at or prior to the closing of the merger as permitted by WHC’s articles of incorporation and bylaws in effect as of the date of the merger agreement and under applicable law. Eagle also has agreed, for a period of six years after the effective time of the merger, to provide coverage to present and former directors and officers of WHC pursuant to WHC’s existing directors’ and officers’ liability insurance. This insurance policy may be substituted, but must contain at least the same coverage and amounts, and contain terms no less advantageous than the coverage currently provided by WHC. In no event shall Eagle be required to expend for the tail insurance a premium amount in excess of 250% of the annual premiums paid by WHC for its directors’ and officers’ liability insurance in effect as of the date of the merger agreement.

 

Split Dollar Arrangements and Salary Continuation Agreements

 

Western Bank purchased insurance policies on the life of each of R.J. Doornek, Duane Kurokawa, Cathy Wanderaas and Jerald Petersen (collectively, the “Policies”). The amount of the life insurance benefits and the distribution provisions and other terms of such Policies are set forth in a Split-Dollar Agreement executed by each executive officer, the terms of which are described below, and each of which will be assumed by Opportunity Bank as a result of the merger.

 

Each Split-Dollar Agreement provides that, at the Eligibility Age (as set forth in each respective agreement), the executive can designate a beneficiary of the death benefit. The death benefit amount for Messrs. Doornek, Kurokawa, Petersen and Ms. Wanderaas are $150,000, $150,000, $50,000 and $50,000, respectively. Upon the death of the respective executive officer, his or her beneficiaries will be entitled to receive the death benefit. The Split Dollar Agreement includes an option to purchase whereby Western Bank cannot sell, surrender, or transfer ownership of the policy while the arrangement is in effect without first giving the executive the option to purchase the policy. The Split Dollar Agreement automatically terminates upon the executive’s termination of employment prior to the Eligibility Age. Western Bank is entitled to any death proceeds payable under the Policies that remain after payment to the executive officer’s beneficiaries. Western Bank and the executive officer’s beneficiaries share pro rata in any interest due on the death proceeds of the Policies, based on the amount of proceeds due each person, excluding any such interest.

 

Messrs. Doornek, Kurokawa, Petersen and Ms. Wanderaas previously entered into salary continuation agreements (which we refer to as the “SCAs”) with Western Bank, each of which will be assumed by Opportunity Bank as a result of the merger. The SCAs pay a benefit upon retirement, disability, early termination, or death. The benefit amount varies based on the termination event. The SCAs all promise to pay the normal retirement annual benefit (as set forth in each respective agreement) in 12 equal monthly installments for a period of 20 years. The agreements allow the executive to name a beneficiary for the payments. In the event the executive dies prior to the completion of 20 years of payments, the beneficiary will receive all remaining payments.

 

 

Upon an early termination, Western Bank is required to pay a fixed annuity which is payable in 20 annual equal installments. Upon a termination due to disability, Western Bank is required to pay the executive’s actual benefit accrual at the time of termination in a lump sum. If the executive dies while employed by Western Bank, Western Bank is required to pay to the executive’s beneficiary the normal retirement annual benefit in 12 equal monthly installments over a period of 20 years.

 

Upon a “change of control,” defined as the transfer of shares of Western Bank’s voting stock such that one entity or one person acquires more than 50% of Western Bank’s outstanding voting common stock followed within 12 months by the executive’s termination of employment for reasons other than death, disability, or retirement, executive is entitled to a benefit equal to the actual benefit accrual payable in a lump sum.

 

The SCAs include a non-competition provision whereby the executive will not receive his or her benefit if the executive engages in, becomes interested in, directly or indirectly (without the prior written consent of Western Bank) as a sole proprietor, a partner, substantial shareholder, or becomes associated with, in the capacity of employee, director, officer, principal, agent, trustee, any enterprise conducted in a 50 mile radius of Western Bank that is competitive with the business of Western Bank. The non-competition provision is not applicable following a change of control.

 

Advisory Board

 

As described above, Opportunity Bank has agreed to establish an advisory board, at or promptly following the effective time of the merger, and R.J. Doornek and Duane Kurokawa will be appointed to the newly created advisory board. Members of the advisory board, including Messrs. Doornek and Kurokawa, will receive an annual retainer of $1,200.

 

 

PROPOSAL 2: ADJOURNMENT OF THE WHC SPECIAL MEETING

 

WHC shareholders are being asked to approve the adjournment proposal.

 

If this adjournment proposal is approved, the WHC special meeting could be adjourned to any date if necessary or appropriate to solicit additional proxies if there are insufficient votes to approve the merger agreement at the time of the special meeting. If the adjournment proposal is approved, we may also adjourn the meeting and use the additional time to solicit proxies from WHC shareholders that have previously returned proxies voting against the merger proposal and seek to convince the holders of those WHC shares to change their votes to votes in favor of the merger proposal.

 

If the WHC special meeting is adjourned, WHC shareholders who have already submitted their proxies will be able to revoke them at any time prior to their use. If you sign and return a proxy and do not indicate how you wish to vote on the adjournment proposal, your shares of WHC common stock will be voted in favor of the adjournment proposal.

 

We do not anticipate calling a vote on the adjournment proposal if the merger proposal is approved by the requisite number of WHC shares of common stock at the special meeting.

 

The adjournment proposal will be approved if the votes of WHC common stock cast in favor of the adjournment proposal exceed the votes cast against the adjournment proposal.

 

THE WHC BOARD OF DIRECTORS RECOMMENDS THAT WHC SHAREHOLDERS VOTE FOR THE APPROVAL OF THE ADJOURNMENT PROPOSAL.

 

 

THE MERGER AGREEMENT

 

The following is a summary of the material provisions of the merger agreement. This summary is qualified in its entirety by reference to the merger agreement, a copy of which is included as Appendix A to this proxy statement/prospectus and is incorporated herein by reference. You should read the merger agreement carefully and in its entirety, as it is the legal document governing the merger.

 

The Merger and the Bank Merger

 

The boards of directors of Eagle and WHC have each unanimously approved and adopted the merger agreement, which provides for the merger of WHC with and into Eagle, with Eagle as the surviving company in the merger.

 

The merger agreement also provides that immediately after the effective time of the merger, Western Bank, a Montana state bank and wholly-owned subsidiary of WHC, will merge with and into Opportunity Bank, a Montana state bank and wholly owned subsidiary of Eagle, with Opportunity Bank as the surviving bank of such merger. The terms and conditions of the merger of Western Bank and Opportunity Bank are set forth in a separate plan of merger and merger agreement (referred to as the “plan of bank merger”), the form of which is attached as Exhibit C to the merger agreement, included as Appendix A to this proxy statement/prospectus. We refer to the merger of Western Bank and Opportunity Bank as the “bank merger.”

 

Closing and Effective Time of the Merger

 

Unless both Eagle and WHC otherwise agree, the closing of the merger will take place at 10:00 a.m., Mountain time, on a date which shall be no later than five business days after all the conditions to the closing (other than conditions to be satisfied at the closing, which shall be satisfied or waived at the closing) have been satisfied or waived in accordance with the terms of the merger agreement, unless another date or time is agreed to by Eagle and WHC. Eagle will file articles of merger with the Secretary of State of the State of Montana and a certificate of merger with the Secretary of State of the State of Delaware. The merger will become effective at such time as the articles of merger and certificate of merger are filed or such other time as may be specified in the articles of merger and certificate of merger.

 

We currently expect that the merger will be completed in the fourth quarter of 2019, subject to the approval of the merger agreement by WHC shareholders, certain bank regulators and other conditions. However, completion of the merger could be delayed if there is a delay in satisfying any other conditions to the merger. No assurance is made as to whether, or when, Eagle and WHC will complete the merger. See “The Merger AgreementConditions to Completion of the Merger” on page 59 of this proxy statement/prospectus.

 

Merger Consideration

 

Under the terms of the merger agreement, each share of WHC common stock outstanding immediately prior to the effective time of the merger (excluding certain shares held by WHC, Eagle and their wholly-owned subsidiaries and dissenting shares described below) will be automatically converted into the right to receive (i) 179.4464 shares of Eagle common stock (which we refer to as the “per share stock consideration”) and (ii) $2,946.51 in cash (which we refer to as the “per share cash consideration,” together with the per share stock consideration, the “merger consideration”).

 

No fractional shares of Eagle common stock will be issued in connection with the merger. Instead, Eagle will make to each WHC shareholder who would otherwise receive a fractional share of Eagle common stock a cash payment, without interest and rounded to the nearest whole cent, equal to: (i) the fractional share amount multiplied by (ii) the average daily volume weighted average price of Eagle common stock on the Nasdaq Global Market for the 20 trading days preceding the fifth trading day immediately preceding the closing date.

 

 

In order to avoid termination of the merger agreement, the merger consideration may be adjusted in certain circumstances based on whether Eagle common stock is trading either higher or lower than prices specified in the merger agreement immediately prior to the closing of the merger. If the “average closing price” (determined over a 20 trading day period prior to the determination date, as defined in the merger agreement) of Eagle’s common stock exceeds $20.41 per share and Eagle’s stock outperforms the Nasdaq Bank Index by more than 15%, Eagle may terminate the merger agreement, or elect to reduce the per share stock consideration, provided, however, that Eagle may not adjust the per share stock consideration in a manner that would result in the aggregate shares of Eagle common stock to be issued in the merger being less than 356,272 shares.

 

Conversely, if the “average closing price” is less than $15.09 per share and Eagle’s stock has also underperformed the Nasdaq Bank Index by more than 15%, WHC may terminate the merger agreement, unless Eagle elects to increase the per share stock consideration. See “Proposal 1: The Merger – Termination.”

 

All shares of Eagle common stock received by WHC shareholders in the merger will be freely tradable, except that shares of Eagle common stock received by persons who become affiliates of Eagle for purposes of Rule 144 under the Securities Act may be resold by them only in transactions permitted by Rule 144, or as otherwise permitted under the Securities Act.

 

A WHC shareholder has the right to dissent from the merger and obtain the fair value of his or her shares of WHC common stock in lieu of receiving the merger consideration by strictly following the dissenters’ rights procedures under the MBCA. Shares of WHC common stock outstanding immediately prior to the effective time of the merger and which are held by a shareholder who does not vote to approve the merger agreement and who properly demands the fair value of such shares pursuant to, and who complies with, the dissenters’ rights procedures under the MBCA are referred to as “dissenting shares.” See “Proposal 1: The MergerDissenters Rights for WHC Shareholders” and Appendix CProvisions of Montana Business Corporation Act relating to Dissenters Rights on pages 43 and C-1, respectively.

 

If Eagle or any company belonging in the Nasdaq Bank Index declares or effects a stock dividend, reclassification, recapitalization, split-up, combination, exchange of shares or similar transaction between the date of the merger agreement and the relevant determination date, the prices for and amount of shares of Eagle common stock or the common stock of such other company, as the case may be, will be appropriately adjusted for the purposes of calculating the adjustments described above.

 

Based upon the closing sale price of the Eagle common stock on the Nasdaq Global Market of ____ on _________, 2019, the last practicable trading date prior to the printing of this proxy statement/prospectus, the aggregate value of the stock merger consideration was approximately $_____ and the aggregate value of the merger consideration was approximately $_____.

 

The value of the shares of Eagle common stock to be issued to WHC shareholders in the merger will fluctuate between now and the closing date of the merger. We make no assurances as to whether or when the merger will be completed, and you are advised to obtain current sale prices for the Eagle common stock. See “Risk FactorsBecause the sale price of the Eagle common stock will fluctuate, you cannot be sure of the value of the per share stock consideration that you will receive in the merger until the closing.”

 

Exchange Procedures

 

Eagle has appointed as the exchange agent under the merger agreement its transfer agent, Computershare Inc. The merger agreement requires Eagle to cause the exchange agent as promptly as practicable after the effective time but in no event later than five business days after the closing date, to mail or otherwise deliver transmittal materials, which will include instructions to effect the surrender of certificates, to each holder of WHC common stock. Upon surrender to the exchange agent of its certificates representing outstanding shares of WHC common stock, a WHC shareholder will be entitled to receive the merger consideration and any cash in lieu of a fractional share or Eagle common stock to be issued.

 

Subject to law, following the surrender of any certificate, there shall be issued and/or paid to the holder of the certificates representing whole shares of Eagle common stock issued, and cash in exchange for WHC common stock, without interest: (i) at the time of such surrender, the dividends or other distributions with a record date after the effective time of the merger payable with respect to the whole shares of Eagle common stock and not paid; and (ii) at the appropriate payment date, the dividends or other distributions payable with respect to shares of Eagle common stock with a record date after the effective time of the merger and with a payment date subsequent to surrender.

 

 

After the effective time of the merger, there will be no registration of transfers on the stock transfer books of WHC of WHC common stock.

 

Conduct of Business Pending the Merger

 

Pursuant to the merger agreement, WHC has agreed to certain restrictions on its activities until the effective time of the merger. WHC has agreed that, except as otherwise permitted by the merger agreement, or as required by applicable law, or with the prior written consent of Eagle, it will:

 

 

carry on its business, including the business of its subsidiary, in the ordinary course of business and in compliance in all material respects with all applicable laws;

 

 

operate in all material respects in the ordinary course of business in respect of loan loss provisioning, securities, portfolio management, compensation and other expense management and other operations which might impact WHC’s equity capital;

 

 

use commercially reasonable efforts to preserve its business organizations and assets intact;

 

 

use commercially reasonable efforts to keep available the present services of the current officers and employees of WHC and its subsidiaries;

 

 

use commercially reasonable efforts to preserve the goodwill of its customers, employees, lessors and others with whom business relationships exist; and

 

 

use commercially reasonable efforts to continue diligent collection efforts with respect to delinquent loans and, to the extent within its control, not allow any material increase in delinquent loans.

 

Until the effective time of the merger, Eagle has agreed to use commercially reasonable efforts to carry on its business consistent with prudent banking practices and in compliance in all material respects with all applicable laws. Eagle has also agreed not to (i) amend or propose to amend its certificate of incorporation or bylaws in a manner that would prohibit or hinder, impede or delay in any material respect the transactions contemplated by the merger agreement, (ii) take any action or knowingly fail to take any action not contemplated by the merger agreement that is intended or reasonably likely to (x) prevent, delay or impair Eagle’s ability to consummate the merger or the transactions contemplated by the merger agreement or (y) prevent the merger from qualifying as a “reorganization” within the meaning of Section 368(a) of the Code, or (iii) agree to take, make any commitment to take or adopt any resolutions of its board of directors in support of any of the actions prohibited as described above.

 

Each of the Eagle and WHC have agreed to use commercially reasonable 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 advisable under applicable laws, so as to permit consummation of the transactions contemplated by the merger agreement as promptly as practicable.

 

WHC has also agreed that except as otherwise permitted by the merger agreement or required by applicable law, or with the prior written consent of Eagle (not to be unreasonably withheld or delayed) it will not:

 

 

issue, sell, grant, pledge, dispose of, encumber, or otherwise permit to become outstanding, or authorize the creation of, any additional shares of its stock, any rights, any award or grant under any WHC stock plan or otherwise, or any other securities of WHC or its subsidiaries, or enter into any agreement with respect to any of the foregoing;

 

 

 

except as expressly permitted by the merger agreement, accelerate the vesting of any existing rights of WHC shareholders that would obligate WHC to issue or dispose of any of its capital stock or other ownership interests;

 

 

adjust, split, combine, redeem, reclassify, exchange, purchase or otherwise acquire any shares of its capital stock;

 

 

make, declare, pay or set aside for payment of dividends payable in cash, stock or property on or in respect of, or declare or make any distribution on, any shares of its capital stock, except for (i) payments from Western Bank to WHC or from any subsidiary of Western Bank to Western Bank and (ii) a special dividend in the event that its adjusted tangible stockholders’ equity exceeds $10 million as of a certain date prior to closing of the merger;

 

 

enter into, establish, adopt, amend, terminate or renew any WHC benefit plan, or grant any salary, wage or fee increase, increase any employee benefit or grant or pay any incentive or bonus payments, adopt or enter into any collective bargaining agreement or any other similar agreement with any labor organization, group or association, accelerate any rights or benefits under any WHC benefit plan (including accelerating the vesting of WHC option awards) or hire or terminate (other than for cause) any employee or other service provider with annual base salary, anticipated service fees or wages that is reasonably anticipated to exceed $100,000, except (i) normal increases in base salary to non-officer employees in the ordinary course of business consistent with past practice and pursuant to policies currently in effect, (ii) as may be required by law, and (iii) to satisfy contractual obligations under the terms of WHC benefit plans as of the date of the merger agreement and certain bonus payments;

 

 

except as disclosed to Eagle, engage in certain transactions (other than compensation, business expense advancements, reimbursements in the ordinary course of business or as part of the terms of employment or service as a director and other than deposits held by Western Bank in the ordinary course of business consistent with past practice) with any director, officer or any of their immediate family members or any affiliates or associates of any of its officers or directors;

 

 

except in the ordinary course of business, sell, license, lease, transfer, mortgage, pledge, encumber or otherwise dispose of or discontinue any of its rights, assets, deposits, business or properties or cancel or release any indebtedness owed;

 

 

acquire all or any portion of the assets, debt, business, deposits or properties of any other entity or person with a value or purchase price in the aggregate in excess of $50,000;

 

 

except in the ordinary course of business or as disclosed to Eagle, make any capital expenditures exceeding $50,000 individually, or $100,000 in the aggregate;

 

 

amend or propose to amend its organizational documents or any resolution or agreement concerning indemnification of its directors or officers;

 

 

revalue any of its or its subsidiaries’ assets or implement or adopt any change in its accounting principles, practices or methods, other than as may be required by GAAP or applicable regulatory accounting requirements;

 

 

enter into, amend, modify, terminate, extend or waive any material provision of any material contract, lease or insurance policy or make any change in any instrument or agreement governing the terms of any of its securities or enter into any material contract;

 

 

enter into any material new line of business, introduce any material new products or services, any material marketing campaigns or any material new sales compensation or incentive programs or arrangements;

 

 

change in any material respect its lending, investment, underwriting, risk and asset liability management and other banking and operating policies, except as required by applicable law, regulation or policies imposed by any governmental authority;

 

 

 

make any material changes in its policies and practices with respect to underwriting, pricing, originating, acquiring, selling, servicing, or buying or selling rights to service loans, its hedging practices and policies;

 

 

make any changes in the mix, rates, terms or maturities of Western Bank’s deposits or other liabilities, except in a manner and pursuant to policies in the ordinary course of business and competitive factors in the market place;

 

 

open any new branch or deposit taking facility or close, relocate or materially renovate any existing branch or facility;

 

 

other than purchases of investment securities in the ordinary course of business, restructure or change its investment securities portfolio or its gap position, through purchases, sales or otherwise, or the manner in which the portfolio is classified or reported;

 

 

incur, modify, extend or renegotiate any indebtedness of WHC or Western Bank or assume, guarantee, endorse or otherwise become responsible for the obligations of any other person (other than creation of deposit liabilities, purchases of federal funds, FHLB borrowings and sales of certificates of deposits in the ordinary course of business);

 

 

cancel, release or assign any indebtedness of any person or any claims against any person except pursuant to contracts currently in force and disclosed to Eagle or in the ordinary course of business, or waive any right of substantial value or discharge or satisfy any material noncurrent liability;

 

 

commit any act or omission which constitutes a breach or default by WHC or any of its subsidiaries under any agreement with any governmental authority or under any material contract or that could reasonably be expected to result in one of the conditions to the merger not being satisfied on the closing date;

 

 

take any action or knowingly fail to take any action not contemplated by the merger agreement that is intended or is reasonably likely to (i) result in any of the conditions to the merger not being satisfied, except as may be required by applicable law, (ii) prevent, delay or impair WHC’s ability to consummate the merger or the transactions contemplated by the merger agreement, or (iii) prevent the merger or bank merger from qualifying as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code;

 

 

merge or consolidate WHC or any of its subsidiaries with any other person;

 

 

restructure, reorganize or completely or partially liquidate or dissolve WHC or any of its subsidiaries;

 

 

make any investment in any other person (either by purchase of stock or securities, contributions to capital, property transfers, or purchases of any property or assets), other than in the ordinary course of business;

 

 

transfer, agree to transfer or grant, or agree to grant a license to, any of its material intellectual property;

 

 

commence, settle or agree to settle any litigation claims, actions or proceedings, except in the ordinary course of business that (i) involves only the payment of money damages not in excess of $50,000 individually or $200,000 in the aggregate, (ii) does not involve the imposition of any equitable relief on, or the admission of wrongdoing by, WHC or its applicable subsidiary and (iii) would not create precedent for claims that are reasonably likely to be material to WHC or any of its subsidiaries, or, after the closing, Eagle or any of its subsidiaries;

 

 

file or amend any income tax return;

 

 

settle or compromise any income tax liability claims or assessment;

 

 

make, change or revoke any material tax election or change any method of tax accounting;

 

 

 

enter into any “closing agreement” as described in Section 7121 of the Code (or any similar provision or state, local or foreign law);

 

 

surrender any claim for a refund of taxes;

 

 

consent to any extension or waiver of the limitations period applicable to any claim or assessment with respect to taxes;

 

 

take any action or fail to take any action that will cause WHC to no longer have a valid S-Corp election under the Code;

 

 

change its fiscal or tax year;

 

 

make any extension of credit that, when added to other extensions of credit to a borrower and its affiliates, would exceed its applicable regulatory limits;

 

 

make any loans, or enter into any commitments to make loans, which vary other than in immaterial respects from Western Bank’s written loan policies (subject to certain exceptions and thresholds and provided that Western Bank may extend or renew credit or loans in the ordinary course of business or in connection with the workout or renegotiation of current loans);

 

 

charge off (except as may otherwise be required by law or by regulatory authorities or by GAAP) or sell (except in the ordinary course of business) any of its portfolio of loans or sell any asset held as other real estate owned or other foreclosed assets for an amount less than its book value, except for the taking of any real estate by any governmental authority by eminent domain proceedings or litigation;

 

 

terminate or allow to be terminated any of the policies of insurance maintained on its business or property other than renewal of such policies on their present terms;

 

 

encumber any asset having a book value in excess of $10,000 except in the ordinary course of business for reasonable and adequate consideration; or

 

 

agree to take, make any commitment to take, or adopt any resolutions of its board of directors in support of, any of the actions set forth above.

 

Company Shareholder Approval

 

WHC has agreed to take all action necessary to convene a special meeting of its shareholders as promptly as practicable after the Registration Statement on Form S-4 of which this proxy statement/prospectus is a part is declared effective by the SEC to consider and vote upon the approval of the merger agreement and the transactions contemplated by the merger agreement, including the merger, and any other matters required to be approved by WHC’s shareholders. WHC has further agreed to ensure that the shareholder meeting is called, noticed, convened, held and conducted in accordance with its articles of incorporation and bylaws and all other applicable legal requirements.

 

Unless WHC’s board changes its recommendation to shareholders relating to the merger in accordance with the merger agreement, WHC has agreed to use its reasonable best efforts to obtain the required WHC shareholder approval to consummate the merger and the other transactions contemplated by the merger agreement. However, even if WHC’s board changes its recommendation to shareholders relating to the merger in accordance with the merger agreement, WHC is obligated to convene the meeting and submit the merger agreement to the WHC shareholders for approval unless the merger agreement has been terminated in accordance with its terms.

 

Regulatory Matters

 

This proxy statement/prospectus forms part of a Registration Statement on Form S-4 which Eagle has filed with the SEC. Each of Eagle and WHC has agreed to use reasonable best efforts to cause the Registration Statement to be declared effective by the SEC as promptly as reasonably practicable after filing.

 

 

Eagle also agrees to use commercially reasonable efforts to obtain any necessary state securities law or “blue sky” permits and approvals required to carry out the transactions contemplated by the merger agreement.

 

Each of Eagle and WHC has agreed to use reasonable best efforts to prepare all documentation, to effect all filings and to obtain all permits, consents, approvals and authorizations of all third parties and governmental authorities necessary to consummate the transactions contemplated by the merger agreement, and each of Eagle and WHC has agreed to comply with the terms and conditions of such permits, consents, approvals and authorizations and to cause the transactions contemplated by the merger agreement to be consummated as expeditiously as practicable.

 

Additionally, each of Eagle and WHC has agreed to furnish information to the other party, and each party has the right to review and approve in advance all characterizations of the information relating to such party that appear in any filing made in connection with the transactions contemplated by the merger agreement. Each party has agreed to promptly notify and apprise the other party of the substance of any communication from any governmental authority received by such party with respect to the regulatory applications filed solely in connection with the transactions contemplated by the merger agreement.

 

In connection with seeking regulatory approval for the merger, Eagle is not required to take any action or agree to any condition or restriction that would reasonably be likely to have a material and adverse effect on Eagle and its subsidiaries, taken as a whole and after giving effect to the merger, measured on a scale relative to WHC and its subsidiaries taken as a whole.

 

Nasdaq Listing

 

Eagle has agreed to use commercially reasonable efforts to cause the shares of Eagle common stock to be issued to the holders of WHC common stock in the merger to be approved for listing on the Nasdaq Global Market, subject to official notice of issuance, prior to the effective time of the merger.

 

Employee Matters

 

Under the merger agreement, WHC agreed, upon Eagle’s reasonable request, to facilitate discussions between Eagle and WHC employees regarding arrangements to be effective prior to or following the effective time of the merger and, if directed by Eagle, take all actions required to fully fund, terminate or merge any benefit plan of WHC. Following the closing, if Eagle terminates a WHC benefit plan and there is a comparable Eagle benefit plan, WHC employees who continue to be employed with Eagle and its affiliates after closing will be entitled to participate in such Eagle benefit plans to the same extent as similarly-situated employees of Eagle or Opportunity Bank, except for closed or frozen benefit plans. To the extent allowable under Eagle benefit plans, continuing WHC employees will be given credit for prior service or employment with WHC for all purposes, except to the extent that it would result in duplication of benefits. For continuing WHC employees who participate in Eagle benefit plans, Eagle will use commercially reasonable efforts to waive certain pre-existing condition limitations and waiting periods or evidence of insurability requirements and, to the extent allowed by the applicable insurance company, provide credit for deductibles from the same year and analogous WHC benefit plans.

 

Under the merger agreement, Eagle agreed to provide each full-time employee of WHC, other than an employee who is a party to an employment agreement, change in control agreement or other separation agreement that provides a benefit on a termination of employment, who is terminated by Eagle or its subsidiaries (other than for cause) within six months following the effective time with a lump sum severance payment in a specified amount based upon length of service, subject to such employee entering into a release of claims in a form satisfactory to Eagle.

 

Indemnification and Directors’ and Officers’ Insurance

 

For a period of six years from and after the effective time of the merger, Eagle has agreed to indemnify and hold harmless the present and former directors and officers of WHC and Western Bank against all costs or expenses (including reasonable attorney’s fees), judgments, fines, losses, claims, damages or liabilities incurred in connection with any threatened or actual claim, action, suit, proceeding or investigation, whether civil, criminal, administrative or investigative arising out of actions or omissions of such persons in the course of performing their duties for WHC or Western Bank or any of their respective subsidiaries occurring at or before the effective time of the merger, to the fullest extent as such persons are indemnified or have the right to advancement of expenses pursuant to the organizational documents of WHC or its subsidiaries and the MBCA.

 

 

For a period of six years after the effective time of the merger, Eagle will provide directors’ and officers’ liability insurance that serves to reimburse the present and former officers and directors of WHC or its subsidiaries with respect to claims against them arising from acts and omissions occurring before the effective time of the merger (including the transactions contemplated by the merger agreement). The directors’ and officers’ liability insurance will contain at least the same coverage and amounts, and contain terms and conditions no less advantageous to the indemnified persons as the coverage currently provided by WHC. In no event shall Eagle be required to expend for the tail insurance a premium in an aggregate amount in excess of 250% of the annual premiums paid by WHC for its directors’ and officers’ liability insurance in effect as of the date of the merger agreement.

 

Third Party Proposals

 

WHC has agreed that it will not, and will cause its subsidiaries and their respective officers, directors, employees not to, and will not authorize any investment bankers, financial advisors, attorneys, accountants, consultants, affiliates or other agent to, directly or indirectly: (a) initiate, solicit, knowingly induce or encourage, or knowingly take any action to facilitate the making of, inquiries, offers or proposals which constitute, or could reasonably be expected to lead to an acquisition proposal, (b) participate in any discussions or negotiations regarding any acquisition proposal or furnish or otherwise afford access to any person any non-public information or data with respect to WHC or its subsidiaries in connection with any acquisition proposal, (c) release any person from, waive any provisions of, or fail to enforce any confidentiality agreement or standstill agreement to which WHC is a party, or (d) enter into any agreement, agreement in principle or letter of intent with respect to any acquisition proposal or approve or resolve to approve any acquisition proposal or any agreement, agreement in principle or letter of intent relating to any acquisition proposal. An “acquisition proposal” is defined as any inquiry, offer or proposal (other than an inquiry, offer or proposal from Eagle), whether or not in writing, contemplating, relating to, or that could reasonably be expected to lead to, an acquisition transaction. An “acquisition transaction” is defined as: (A) any transaction or series of transactions involving any merger, consolidation, recapitalization, share exchange, liquidation, dissolution or similar transaction involving WHC or Western Bank that, in any such case, results in any person (or, in the case of a direct merger between such third party and WHC, Western Bank or any other subsidiary of WHC, the shareholders of such third party) acquiring 15% or more of any class of equity of WHC or Western Bank; (B) any transaction pursuant to which any third party or group acquires or would acquire (whether through sale, lease or other disposition), directly or indirectly, 15% or more of the consolidated assets of WHC or Western Bank; (C) any issuance, sale or other disposition of (including by way of merger, consolidation, share exchange or any similar transaction) securities (or options, rights or warrants to purchase or securities convertible into, such securities) representing 15% or more of the votes attached to the outstanding securities of WHC or Western Bank; (D) any tender offer or exchange offer that, if consummated, would result in any third party or group beneficially owning 15% or more of any class of equity securities of WHC or Western Bank; or (E) any transaction which is similar in form, substance or purpose to any of the foregoing transactions, or any combination of the foregoing.

 

However, the merger agreement provides that at any time prior to the date of the shareholder meeting for WHC shareholders to vote on approval of the merger agreement, if WHC receives a bona fide unsolicited written acquisition proposal that does not violate the “no shop” provisions in the merger agreement and WHC’s board of directors reasonably determines in good faith (after consultation with and having considered the advice of its outside legal counsel and financial advisor) that such acquisition proposal constitutes or could reasonably be expected to lead to a superior proposal (as defined below) and the failure to take such actions would be inconsistent with its fiduciary duties under applicable law, then WHC may: (i) enter into a confidentiality agreement with the third party making the acquisition proposal with terms and conditions no less favorable to WHC than the confidentiality agreement entered into by WHC and Eagle prior to the execution of the merger agreement; (ii) furnish non-public information or data to the third party making the acquisition proposal pursuant to such confidentiality agreement (and provide to Eagle any information not previously provided to Eagle); and (iii) participate in such negotiations or discussions with the third party making the acquisition proposal regarding such proposal. WHC must promptly advise Eagle in writing within 24 hours following receipt of any proposal or offer, or of any request for information, or request for any negotiations or discussions, each in connection with any acquisition proposal. WHC must furnish a copy of, or a description of the material terms and conditions of such proposal or offer and must keep Eagle informed on a reasonably current basis of the status of any proposal, offer, information request, negotiations or discussions.

 

 

WHC Board Recommendation

 

The merger agreement generally prohibits WHC’s board of directors from making a company subsequent determination (i.e., from (i) withholding, withdrawing, changing, modifying, amending or qualifying, or publicly proposing to withdraw, change, qualify, amend or modify, in a manner adverse to Eagle the recommendation that the WHC shareholders vote to approve the merger agreement and the transactions contemplated thereby, or taking any other action or making any other public statement inconsistent with such recommendation, failing to reaffirm such recommendation within five business days following a request by Eagle, or making any public statement, filing or release inconsistent with such recommendation, (ii) approving, recommending, or endorsing (or publicly proposing to approve, recommend or endorse), any acquisition proposal, (iii) submitting the merger agreement to WHC’s shareholders for approval without recommendation or (iv) resolving to take, or publicly announcing an intention to take, any of the foregoing actions). In addition, WHC’s board of directors and any committee of the board of directors may not approve or recommend or propose to approve or recommend any acquisition proposal or enter into any letter of intent, agreement in principle, acquisition agreement or other agreement related to any acquisition transaction or requiring WHC to abandon, terminate or fail to consummate the merger or any other transaction contemplated by the merger agreement. However, prior to the date of the shareholder meeting for WHC shareholders to vote on the approval of the merger agreement, the WHC board of directors may effect a company subsequent determination if the WHC board has determined reasonably and in good faith, after consultation with and considering the advice of its outside legal counsel and its financial advisor, that a bona fide unsolicited written acquisition proposal that it received after the date of the merger agreement (that did not result from a breach of its “no-shop” provisions under the merger agreement) constitutes a superior proposal if, but only if, the WHC board determined reasonably and in good faith after consultation with and having considered the advice of its outside legal counsel and its financial advisor, that because of the existence of such superior proposal, the failure to take such actions would be inconsistent with its fiduciary duties under applicable law.

 

The board of directors of WHC may not make a company subsequent determination without providing Eagle with at least five business days’ prior written notice of its intention to take such action and with a reasonably detailed description of the acquisition proposal giving rise to its determination to take such action, and without cooperating and negotiating in good faith with Eagle during such five business day notice period (to the extent Eagle seeks to negotiate) and taking into account in good faith, at the end of such notice period, any adjustment, amendment or modification of the merger agreement proposed by Eagle and determining reasonably and in good faith, after consultation with and considering the advice of its outside legal counsel and its financial advisor, that such acquisition proposal continues to constitute a superior proposal and that because of the existence of such superior proposal, the failure to take such actions would be inconsistent with its fiduciary duties under applicable law. Any material amendment to any acquisition proposal will require a new notice period as referred to above, except that such notice period shall be three business days.

 

A “superior proposal” means a bona fide, unsolicited written acquisition proposal (i) that if consummated would result in a third party (or, in the case of a direct merger between such third party and WHC, Western Bank or any other subsidiary of WHC, the shareholders of such third party) acquiring, directly or indirectly, more than 50% of the outstanding shares of WHC common stock or more than 50% of the assets of WHC and its subsidiaries, taken as a whole, for consideration consisting of cash and/or securities and (ii) that the WHC board of directors reasonably determines in good faith, after consultation with its outside financial advisor and outside legal counsel, (A) is reasonably capable of being completed, taking into account all financial, legal, regulatory and other aspects of such proposal, including all conditions contained therein and the person making such acquisition proposal, and (B) taking into account any changes to the merger agreement proposed by Eagle in response to such acquisition proposal, as contemplated by the merger agreement, and all financial, legal, regulatory and other aspects of such acquisition proposal, including all conditions contained therein and the person making such proposal, is more favorable to the shareholders of WHC from a financial point of view than the merger and the other transactions contemplated by the merger agreement.

 

 

If the WHC board of directors makes a company subsequent determination or if WHC terminates the merger agreement to enter into an agreement with respect to a superior proposal, WHC could be required to pay Eagle a break-up fee of $560,000 in cash. See “The Merger AgreementTermination,” beginning on page 60 of this proxy statement/ prospectus and “The Merger AgreementBreak-Up Fee” beginning on page 61 of this proxy statement/prospectus.

 

Representations and Warranties

 

The merger agreement contains generally customary representations and warranties of WHC and Eagle relating to their respective businesses. The representations and warranties of each of WHC and Eagle have been made solely for the benefit of the other party, and these representations and warranties should not be relied on by any other person. In addition, these representations and warranties:

 

 

have been qualified by information set forth in confidential disclosure schedules in connection with signing the merger agreement – the information contained in these schedules modifies, qualifies and creates exceptions to the representations and warranties in the merger agreement;

 

 

will not survive consummation of the merger;

 

 

may be intended not as statements of fact, but rather as a way of allocating the risk to one of the parties to the merger agreement if those statements turn out to be inaccurate;

 

 

are in some cases subject to a materiality standard described in the merger agreement which may differ from what may be viewed as material by you; and

 

 

were made only as of the date of the merger agreement or such other date as is specified in the merger agreement.

 

The representations and warranties made by WHC and Eagle to each other primarily relate to:

 

 

corporate organization, standing, and authority;

 

 

capitalization;

 

 

corporate power to carry on its business as it is currently conducted;

 

 

corporate authorization to enter into the merger agreement and to consummate the merger;

 

 

absence of any breach of organizational documents, violation of law or breach of agreements as a result of the merger;

 

 

regulatory approvals required in connection with the merger;

 

 

reports filed with governmental entities, including, in the case of Eagle, the SEC;

 

 

financial statements;

 

 

compliance with laws and the absence of regulatory agreements;

 

 

absence of a material adverse effect since June 30, 2019;

 

 

fees paid to financial advisors;

 

 

regulatory capitalization;

 

 

litigation;

 

 

Community Reinvestment Act compliance;

 

 

tax matters;

 

 

ownership of subsidiaries; and

 

 

 

employee benefits.

 

WHC has also made representations and warranties to Eagle with respect to:

 

 

the inapplicability to the merger of state takeover laws;

 

 

material contracts;

 

 

environmental matters;

 

 

intellectual property;

 

 

real and personal property;

 

 

loan matters;

 

 

adequacy of allowances for loan and lease losses;

 

 

administration of fiduciary accounts;

 

 

investment management and related activities;

 

 

repurchase agreements;

 

 

deposit insurance;

 

 

maintenance of insurance policies;

 

 

contingency planning;

 

 

liquidity of investment portfolio;

 

 

privacy of customer information;

 

 

anti-money laundering laws, questionable payments and OFAC;

 

 

transactions with affiliates;

 

 

fairness opinion;

 

 

accuracy of books and records; and

 

 

accuracy of the information contained in the representations and warranties.

 

Eagle has also made a representation and warranty to WHC with respect to the legality of Eagle common stock to be issued in connection with the merger and its ability to finance the merger.

 

Certain of the representations and warranties of WHC and Eagle are qualified as to “materiality” or “material adverse effect.” For purposes of the merger agreement, the term “material adverse effect” means, with respect to any party, any event, occurrence, fact, condition, change, development or effect that individually or in the aggregate (i) is material and adverse to the condition (financial or otherwise), results of operations, liquidity, assets or liabilities, properties, or business of such party and its subsidiaries, taken as a whole, or (ii) would materially impair the ability of such party to perform its obligations under the merger agreement or otherwise materially impairs the ability of such party to timely consummate the merger, the bank merger or the transactions contemplated by the merger agreement; provided, however, that, in the case of clause (i) only, the following shall not constitute a “material adverse effect”, nor shall the occurrence, impact or results of such events be taken into account in determining whether there has been or will be a “material adverse effect”: (A) changes after the date of the merger agreement in laws of general applicability to companies in the industry in which the applicable party or its subsidiaries operate or interpretations thereof by governmental authorities (except to the extent that such change disproportionately adversely affects WHC and its subsidiaries or Eagle and its subsidiaries, as the case may be, compared to other companies of similar size operating in the same industry in which WHC and Eagle operate), (B) changes after the date of the merger agreement in GAAP, or regulatory accounting requirements applicable to banks or bank holding companies generally, or interpretations thereof (except to the extent that such change disproportionately adversely affects WHC and its subsidiaries or Eagle and its subsidiaries, as the case may be, compared to other companies of similar size operating in the same industry in which WHC and Eagle operate), (C) changes after the date of the merger agreement in global or national political or economic or capital or credit market conditions generally, including, but not limited to, changes in levels of interest rates (except to the extent that such change disproportionately adversely affects WHC and its subsidiaries or Eagle and its subsidiaries, as the case may be, compared to other companies of similar size operating in the same industry in which WHC and Eagle operate), (D) solely in the case of whether a material adverse effect has or may occur with respect to Eagle, changes after the date of the merger agreement resulting from any failure to meet internal projections or forecasts or estimates of revenues or earnings for any period (it being understood that the circumstances giving rise thereto that are not otherwise excluded from the definition of material adverse effect may be considered in determining whether a material adverse effect exists), (E) solely in the case of whether a material adverse effect has or may occur with respect to Eagle, any change in the trading price or trading volume of Eagle common stock on the Nasdaq Global Market (it being understood that the circumstances giving rise thereto that are not otherwise excluded from the definition of material adverse effect may be considered in determining whether a material adverse effect exists), and (F) the impact of the merger agreement and the transactions contemplated by the merger agreement, including the public announcement thereof on relationships with customers or employees (including the loss of personnel subsequent to the date of the merger agreement).

 

 

Conditions to Completion of the Merger

 

Mutual Closing Conditions. The obligations of Eagle and WHC to complete the merger are subject to the satisfaction of the following conditions:

 

 

the approval of the merger agreement and the transactions contemplated thereby by WHC shareholders;

 

 

all regulatory approvals required to consummate the merger and the bank merger shall have been obtained and remain in full force and effect, and all statutory waiting periods shall have expired or been terminated, and such regulatory approvals shall not impose any term, condition or restriction on Eagle or any of its subsidiaries that Eagle reasonably determines is a burdensome condition;

 

 

the absence of (i) any judgment, order, injunction or decree issued by any governmental authority or other legal restraint or prohibition preventing the consummation of the merger or the bank merger or (ii) statute, rule, regulation, order, injunction or decree enacted, entered, promulgated or enforced by any governmental authority that prohibits or makes illegal the consummation of the transactions contemplated by the merger agreement;

 

 

the effectiveness of the Registration Statement on Form S-4, of which this proxy statement/prospectus is a part, under the Securities Act, and no stop order suspending such effectiveness having been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC;

 

 

the receipt by each of Eagle and WHC of an opinion of its counsel to the effect that the merger will qualify as a reorganization within the meaning of Section 368(a) of the Internal Revenue Code;

 

 

the authorization for listing on the Nasdaq Global Market of the shares of Eagle common stock to be issued in the merger, subject to official notice of issuance;

 

 

the accuracy of the other party’s representations and warranties in the merger agreement on the date of the merger agreement and as of the closing date of the merger (or such other date specified in the merger agreement) other than, in most cases, inaccuracies that would not be material;

 

 

the performance in all material respects by the other party of its respective obligations under the merger agreement; and

 

 

the absence of any event which has had or is reasonably expected to have or result in a material adverse effect on the other party.

 

 

Additional Closing Conditions for the Benefit of Eagle. In addition to the mutual closing conditions, Eagle’s obligation to complete the merger is subject to the satisfaction or waiver of the following conditions:

 

 

the plan of bank merger shall have been executed and delivered by Western Bank;

 

 

the restrictive covenant agreements between certain officers of WHC and Eagle are in full force and effect;

 

 

the WHC board of directors shall not have, prior to approval of the merger agreement by the WHC shareholders (i) withheld, withdrawn or modified (or publicly proposed to do any of the foregoing), in a manner adverse to Eagle, its recommendation that WHC shareholders approve the merger agreement, (ii) approved or recommended (or publicly proposed to approve or recommend) any acquisition proposal, or (iii) allowed WHC or any WHC representative to enter into any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or other agreement relating to an acquisition proposal;

 

 

the receipt of all consents, approvals, authorizations, clearances, exemptions, waivers, or similar affirmations required as a result of the transactions contemplated by the merger agreement pursuant to WHC’s material contracts;

 

 

the receipt of all claims letters and restrictive covenant agreements from WHC and Western Bank’s directors;

 

 

dissenting shares shall not represent more than five percent of the outstanding shares of WHC common stock; and

 

 

WHC’s adjusted tangible stockholders’ equity as of the last day of the month prior to the month in which the effective time of the merger is expected to occur shall be an amount not less than $10 million.

 

Termination

 

The merger agreement may be terminated at any time prior to the effective time of the merger, as follows:

 

 

by the mutual consent of the boards of directors of Eagle and WHC; or

 

 

by the boards of directors of either Eagle or WHC if any governmental authority has denied any required regulatory approval or requested any application for regulatory approval be permanently withdrawn; or

 

 

by Eagle or WHC if approval of the merger agreement by the shareholders of WHC is not obtained at a meeting at which a vote was taken; or

 

 

by Eagle or WHC in the event of the breach of any representation, warranty, covenant or agreement by the other party that would prevent any closing condition from being satisfied and such breach cannot be or has not been cured within 30 days of written notice of such breach (provided that the right to cure may not extend beyond two business days prior to the “expiration date” described below); or

 

 

by Eagle or WHC if the merger is not consummated by 5:00 p.m., Mountain time, on the expiration date of May 8, 2020; provided, that neither party has the right to terminate the merger agreement if such party was in breach of its obligations under the merger agreement and such breach was the cause of the failure of the merger to be consummated by such date, and provided further that, if on the expiration date all conditions to the merger have been satisfied or waived or are capable of being satisfied by the closing other than the condition relating to the receipt of required regulatory approvals, then either party has the right to extend the expiration date by an additional three month period; or

 

 

by Eagle or WHC if any court or other governmental authority issues a final and non-appealable order permanently prohibiting the merger or the bank merger; or

 

 

 

by Eagle prior to the receipt of approval of the merger from WHC shareholders in the event that (i) the WHC board of directors or any committee thereof makes a company subsequent determination (see “The Merger Agreement—WHC Board Recommendation” beginning on page 56 of this proxy statement/prospectus), (ii) the WHC board of directors has materially breached its obligations under the merger agreement with respect to third party acquisition proposals or by failing to call, give notice of, convene and hold the special meeting, or (iii) the WHC board of directors has agreed to an acquisition proposal; or

 

 

by WHC in the event that (i) the average volume weighted average price of Eagle’s common stock for the 20 trading days ending on the trading day immediately prior to the later of (x) the date on which the last required regulatory consent is obtained or (y) the date on which WHC shareholder approval of the merger agreement is obtained, is less than $15.09 per share, (ii) Eagle’s common stock underperforms a peer group index (the Nasdaq Bank Index) by more than 15%, and (iii) Eagle does not elect to increase the per share stock consideration by a formula-based amount outlined in the merger agreement; or

 

 

by Eagle in the event that (i) the average volume weighted average price of Eagle’s common stock for the 20 trading days ending on the trading day immediately prior to the later of (x) the date on which the last required regulatory consent is obtained or (y) the date on which WHC shareholder approval of the merger agreement is obtained, is greater than $20.41 per share, (ii) Eagle’s common stock outperforms a peer group index (the Nasdaq Bank Index) by more than 15%, and (iii) Eagle does not elect to decrease the per share stock consideration by a formula-based amount outlined in the merger agreement, provided, however, that Eagle may not adjust the per share stock consideration in a manner that would result in the aggregate shares of Eagle common stock to be issued in the merger being less than 356,272 shares.

 

Termination Fees

 

WHC will pay Eagle a termination fee of $200,000 if Eagle terminates the merger agreement based on a WHC breach of its representations or breach of its covenants. Eagle will pay WHC a termination fee of $200,000 if WHC terminates the merger agreement based on an Eagle breach of its representations or breach of its covenants.

 

Break-up Fee

 

WHC will owe Eagle a $560,000 break-up fee if:

 

 

Eagle terminates the merger agreement as a result of a material breach of the “no-shop” provisions of the merger agreement by WHC; or

 

 

Eagle terminates the merger agreement as a result of the WHC board of directors or any committee thereof making a company subsequent determination (for more detail on company subsequent determinations, see “The Merger AgreementWHC Board Recommendation” beginning on page 56 of this proxy statement/prospectus); or

 

 

Eagle terminates the merger agreement as a result of WHC materially breaching and not curing its obligations under the merger agreement by failing to call, give notice of, convene and hold the special meeting; or

 

 

Eagle terminates the merger agreement as a result of the WHC board of directors or any committee thereof agreeing to an acquisition proposal; or

 

 

after the date of the merger agreement and prior to the termination of the merger agreement, an acquisition proposal is made known to the board or senior management of WHC or has been made directly to WHC shareholders generally or a public announcement of an acquisition proposal has been made and not withdrawn and (i) thereafter the merger agreement is terminated by (A) either Eagle or WHC because the WHC shareholders have not approved the merger agreement or the merger is not consummated by the expiration date described above or (B) by Eagle because of a material breach by WHC of any covenant set forth in the merger agreement that is not cured in accordance with the merger agreement; and (ii) WHC enters into any agreement to consummate or consummates an acquisition transaction (provided, that for purposes of this provision, the definition of acquisition transaction is revised to replace “15%” with “50%”) within 12 months of such termination.

 

 

The payment of the break-up fee will fully discharge WHC from any losses that may be suffered by Eagle arising out of the termination of the merger agreement.

 

Amendment; Waiver

 

Prior to the effective time of the merger and to the extent permitted by applicable law, any provision of the merger agreement may be (a) waived, or the time for compliance with such provision may be extended, by the party benefited by the provision, provided such waiver is in writing and signed by such party, or (b) amended or modified at any time, by an agreement in writing among the parties hereto executed in the same manner as the merger agreement, except that after the required shareholder approval has been obtained, no amendment shall be made which by law requires further approval by the shareholders of WHC without obtaining such approval. The failure of any party at any time or times to require performance of any provision of the merger agreement shall in no manner affect the right of such party at a later time to enforce the same or any other provision of the merger agreement. No waiver of any condition or of the breach of any term contained in the merger agreement in one or more instances shall be deemed to be or construed as a further or continuing waiver of such condition or breach or waiver of any other condition or of the breach of any other term of the merger agreement.

 

Expenses

 

Regardless of whether the merger is completed, all expenses incurred in connection with the merger, the bank merger, the merger agreement and other transactions contemplated thereby will be paid by the party incurring the expenses.

 

 

COMPARISON OF SHAREHOLDERS’ RIGHTS

 

Eagle and WHC are incorporated under the laws of the State of Delaware and the State of Montana, respectively, and, accordingly, the rights of their shareholders are governed by such laws and their respective certificate and articles of incorporation and bylaws. After the merger, the rights of former shareholders of WHC who receive shares of Eagle common stock in the merger will be determined by reference to Eagle’s certificate of incorporation and bylaws and Delaware law. Set forth below is a description of the material differences between the rights of WHC shareholders and Eagle shareholders.

 

 

WHC

 

EAGLE

Capital Stock

Holders of WHC capital stock are entitled to all the rights and obligations provided to capital shareholders under the MBCA and WHC’s articles of incorporation and bylaws.

 

Holders of Eagle capital stock are entitled to all the rights and obligations provided to capital shareholders under the DGCL and Eagle’s certificate of incorporation and bylaws.

       

Authorized

WHC’s authorized capital stock consists of 20,000 shares of common stock, no par value.

 

Eagle’s authorized capital stock consists of 20,000,000 shares of common stock, par value $0.01 per share, and 1,000,000 shares of preferred stock, par value $0.01 per share.

       

Outstanding

As of October 7, 2019 there were 2,206 shares of WHC common stock outstanding.

 

As of October 7, 2019, there were 6,403,693 shares of Eagle common stock outstanding and no shares of Eagle preferred stock outstanding.

       

Voting Rights

Holders of WHC common stock generally are entitled to one vote for each share having voting power registered on the books of the corporation.

 

Holders of Eagle common stock and holders of Eagle preferred stock are entitled to one vote per share on all matters on which shareholders are generally entitled to vote.

       

Cumulative Voting

Shareholders have the right of cumulative voting in the election of directors.

 

Shareholders do not have the right of cumulative voting in the election of directors.

       

Stock Transfer Restrictions

The transfer of WHC common stock is governed by the Shareholder Agreements. In general, under the terms of the Shareholder Agreements, no shareholder of WHC may transfer shares of WHC common stock except as expressly provided in the Shareholder Agreements.

 

None.

       

Dividends

WHC’s bylaws are silent on dividends.

 

Under the MBCA, a corporation may make a distribution, unless after giving effect to the distribution:

 

The corporation would not be able to pay its debts as they come due in the usual course of business; or

 

The corporation’s total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the corporation were to be dissolved at the time of the distribution, to satisfy the preferential rights upon dissolution of shareholders whose preferential rights are superior to those receiving the distribution.

 

In addition, under Federal Reserve policy adopted in 2009, a bank holding company should consult with the Federal Reserve and eliminate, defer or significantly reduce its dividends if:

 

its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective financial condition; or it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.

 

Eagle’s bylaws permit the board to declare and pay dividends upon shares of, and authorize repurchase programs for, stock, but only out of funds available for the payment of dividends or repurchase of shares as provided by law.

 

Under the DGCL, a corporation may make a distribution, unless after giving effect to the distribution:

 

The capital of the corporation shall have been diminished by depreciation in the value of its property, or by losses, or otherwise, to an amount less than the aggregate amount of the capital represented by the issued and outstanding stock of all classes having a preference upon the distribution of assets.

 

In addition, under Federal Reserve policy adopted in 2009, a bank holding company should consult with the Federal Reserve and eliminate, defer or significantly reduce its dividends if:

 

its net income available to shareholders for the past four quarters, net of dividends previously paid during that period, is not sufficient to fully fund the dividends; its prospective rate of earnings retention is not consistent with its capital needs and overall current and prospective financial condition; or it will not meet, or is in danger of not meeting, its minimum regulatory capital adequacy ratios.

 

 

  WHC   EAGLE

Number of Directors

WHC’s bylaws provide that the number of directors serving on WHC’s board of directors will be not less than five (5) nor more than twelve (12) shareholders.

 

There are currently six (6) directors serving on the WHC board of directors.

 

Each director holds office upon election for one year and until his or her successor is elected and qualified.

 

Eagle’s bylaws provide that the number of directors serving on Eagle’s board of directors will be such number as determined from time to time under direction of the board, subject to any right of the holder of any series of preferred stock then outstanding to election additional directors under specified circumstances, but in no event will be fewer than five (5) directors nor greater than fifteen (15) directors.

       
     

There are currently ten (10) directors serving on the Eagle board of directors divided into three classes.

       
     

Each director holds office upon election and until the third succeeding annual meeting of shareholders after their election.

       

Election of Directors

WHC’s bylaws provide that directors shall be elected annually by the shareholders at the annual meeting. Each shareholder has the right to vote, in person or by proxy, the number of shares owned by him or her. Shareholders may cumulate votes in the election of directors.

 

The Eagle board of directors is divided into three classes, with the members of each class of directors serving staggered three-year terms and with approximately one-third of the directors being elected annually. As a result, it would take a dissident shareholder or shareholder group at least two annual meetings of shareholders to replace a majority of the directors of Eagle. Each director holds office for the term for which he or she is elected and until the third succeeding annual meeting of shareholders after their election, subject to such directors’ death, resignation, retirement, disqualification, removal from office or other cause.

       

Removal of Directors

The MBCA provides that any director may be removed, with or without cause, by a vote of shareholders holding two-thirds of the shares entitled to vote for directors. Because WHC has fewer than 100 shareholders, the MBCA provides that the entire board of directors may be removed by a vote of a majority of the shares then entitled to vote. If less than the entire board is to be removed, no one of the directors may be removed if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire board of directors or, if there be classes of directors, at an election of the class of directors of which he is a part. The MBCA provides that a director may be removed only at a shareholders meeting called for the purposes of removing the director.

 

WHC’s bylaws are silent on removal of directors.

 

The DGCL provides that any director or the entire board of directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, except in certain circumstances. Whenever the holders of any class or series are entitled to elect one or more directors, the DGCL provides that the preceding sentence shall apply in respect to the removal without cause of a director or directors to the vote of the holders of the outstanding shares of that class or series and not the vote of the outstanding shares as a whole.

 

However, Eagle’s certificate of incorporation and bylaws provide that directors may be removed from office at any time, but only for cause and only by the affirmative vote of the holders of at least 80% of the voting power of all of the shares entitled to vote generally in the election of directors, voting together as a single class.

 

 

  WHC   EAGLE

Vacancies on the
Board of Directors

WHC’s bylaws provide that any vacancies in the WHC board of directors shall be filled by appointment by the remaining directors of the board, and any director so appointed shall hold office until the next election.

 

Vacancies on the board resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority vote of the directors then in office, and directors so chosen shall hold office for a term expiring at the annual meeting at which the term of the class to which they have been elected expires. No decrease in the number of directors constituting the board of directors shall shorten the term of any incumbent director.

       

Action by Written
Consent

WHC’s bylaws provide are silent on shareholder action by written consent.

 

Under the MBCA, action may be taken by shareholders without a meeting if all shareholder entitled to vote on the action sign a written consent describing the action taken.

 

Under the DGCL, unless otherwise provided in the certificate of incorporation, any action required to be taken at an annual or special meeting of the shareholders of a corporation, or any action which may be taken at an annual or special meeting of such shareholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the corporation.

 

Eagle’s certificate of incorporation provides that no action may be taken by shareholders by written consent.

       
Advance Notice
Requirements for
Shareholder
Nominations and
Other Proposals
None.   Eagle’s bylaws provide that, at any meeting of its shareholders, only such business shall be conducted as shall have been properly brought before such meeting. Nominations of persons for election to the Eagle board and the proposal of business to be considered by Eagle shareholders may be made at an annual meeting of shareholders only (i) by or at the direction of the Eagle board; (ii) pursuant to Eagles proxy materials with respect to such meeting; (iii) by any shareholder who complies with the notice provisions set forth in the bylaws.

 

 

  WHC   EAGLE

 

 

 

For director nominations, the shareholder’s notice to the secretary is required to set forth: (i) the name and address of the shareholder who intends to make the nomination and of the person or persons to be nominated; (ii) a representation that the shareholder is a holder of record of Eagle stock entitled to vote at such meeting and intends to appear in person or by proxy at the meeting and nominate the person or persons specified in the notice; (iii) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock) has been made, the effect or intent of which is to mitigate loss to or manage risk of stock price changes for, or to increase the voting power of, such shareholder or any of its affiliates with respect to any share of Eagle stock; (iv) a description of all arrangements or understandings between the shareholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the shareholder; (v) such other information regarding each nominee proposed by such shareholder as would be required to be included in a proxy statement filed pursuant to the proxy rules of the SEC had the nominee been nominated, or intended to be nominated, by the board; and (vi) the consent of each nominee to serve as a director if so elected. In addition, the shareholder making such nomination is required to promptly provide any other information reasonably requested by Eagle.

 

For business proposals other than nominations, the shareholder’s notice to the secretary is required to set forth: (1) as to each matter the shareholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (2) the name and address, as they appear on Eagle’s books, of the shareholder proposing such business, (3) the class and number of Eagle shares that are beneficially owned by the shareholder, (4) whether and the extent to which any hedging or other transaction or series of transactions has been entered into by or on behalf of, or any other agreement, arrangement or understanding (including any short position or any borrowing or lending of shares of stock) has been made, the effect or intent of which is to mitigate loss to or manage risk of stock price changes for, or to increase the voting power of, such shareholder or any of its affiliates with respect to any share of Eagle stock, and (5) as to each matter the shareholder proposes to bring before the meeting, any material interest of the shareholder in such business. In addition, the shareholder making such proposal is required to promptly provide any other information reasonably requested by Eagle.

 

 

  WHC   EAGLE
      To be timely, a shareholder’s notice must be delivered to the secretary of Eagle not later than 60 days in advance of the first anniversary of the previous year’s annual meeting if such meeting is to be held on a day which is within 30 days of the anniversary of the previous year’s annual meeting; and with respect to any other annual meeting of shareholders, not later than the close of business on the seventh day following the date of public announcement of such meeting.
       

Notice of Shareholder
Meeting

WHC’s bylaws provide that notice of the time, place and purpose of each annual meeting and each special meeting shall be mailed not less than ten (10) days prior to such meeting.

 

Eagle’s bylaws provide that written notice of the time, place and purpose of every meeting of shareholders to be mailed, or delivered personally, not less than ten (10) nor more than 60 days before the date of the meeting.

       

Amendments to
Charter

WHC’s articles of incorporation may be amended in accordance with the MBCA.

 

Under the MBCA:

 

A corporation’s board of directors may propose one or more amendments to the articles of incorporation for submission to the shareholders.

 

The board of directors shall recommend the amendment to the shareholders unless the board of directors determines that because of conflict of interest or other special circumstances it should make no recommendation and communicates the basis for its determination to the shareholders with the amendment, and the shareholders entitled to vote on the amendment shall approve the amendment by a majority of the votes entitled to be cast on the amendment by any voting group with respect to which the amendment would create dissenters’ rights.

 

The board of directors may condition its submission of the proposed amendment on any basis.

 

 

The DGCL provides that an amendment to a corporation’s certificate of incorporation requires that (i) the board of directors adopt a resolution setting forth the proposed amendment and either call a special meeting of the shareholders entitled to vote in respect thereof for consideration of such amendment or direct that the amendment be considered at the next annual meeting of the shareholders and (ii) the shareholders approve the amendment by a majority of outstanding shares entitled to vote (and a majority of the outstanding shares of each class entitled to vote, if any).

 

Eagle’s certificate of incorporation follows similar amendment provisions, except that (i) the affirmative vote of 80% of all votes entitled to be cast in the election of directors, voting as a single class, is required for Articles V (Business Combinations), VI (Board of Directors), VII (Stockholder Action), VIII (Bylaw Amendments), IX (Acquisition of Stock), X (Director Liability), XI (Amendments to Certification of Incorporation), or XIII (Indemnification), and (ii) the affirmative vote of the holders of at least 80% of the voting stock entitled to be cast at the election of directors, excluding voting stock beneficially owned by the interested stockholder, unless the amendment, repeal or adoption is declared advisable by two-thirds of the entire board of directors and a majority of the disinterested directors, is required for Article XII (Certain Business Combinations).

 

 

  WHC   EAGLE
 

The corporation shall notify each shareholder, whether or not entitled to vote, of the proposed shareholders’ meeting. The notice of meeting must also state that the purpose or one of the purposes of the meeting is to consider the proposed amendment and must contain or be accompanied by a copy or summary of the amendment.

 

The amendment to be adopted must be approved by a majority of the votes entitled to be cast on the amendment by any voting group with respect to which the amendment would create dissenters’ rights; and

 

A corporation’s board of directors may adopt one or more amendments to the corporation’s articles of incorporation without shareholder action in certain discrete circumstances (for example, to extend the duration of the corporation if it was incorporated at a time when limited duration was required by law; to delete the names and addresses of the initial directors; to change each issued and unissued authorized share of an outstanding class into a greater number of whole shares if the corporation has only shares of that class outstanding; to change the corporate name in certain situations).

   
       

Amendments to
Bylaws

WHC’s bylaws provide that such bylaws may be amended by a vote of the majority of the entire board of directors at any meeting, provided that ten (10) days’ notice of such proposed amendment shall have been given to the directors. No amendment may be made unless the bylaw, as amended, is consistent with the requirements of the law of the United States, the State of Montana, and the articles of association.

 

Under MBCA, the shareholders may also amend or repeal any bylaw by a majority of votes.

 

WHC’s bylaws are silent on shareholder rights to amend bylaws.

 

Eagle’s certificate of incorporation and bylaws provide that the board shall have the power to make, alter, amend and repeal the bylaws by an affirmative vote of not less than a majority of the board, except that the affirmative vote of 80% of all votes entitled to be cast in the election of directors, voting as a single class, is required for Section 2 of Article II of the bylaws (special meetings) and Sections 1 through 6 of Article III of the bylaws (number of directors, terms of directors, resignation of directors and vacancies, removal of directors, newly created directorships and vacancies, and place and manner or meeting).

 

Eagle’s bylaws provide that the stockholders may amend or repeal the bylaws or adopt new bylaws by a vote of the majority of the shares present or represented by proxy and entitled to vote at any annual or special meetings.

       

Special Meeting of
Shareholders

WHC’s bylaws and Montana law provide that special meetings of the shareholders, for any purpose, may be called by the Chairman, board of directors, or by any three or more shareholders holding in the aggregate ten percent (10%) or more of the shares entitled to vote on the matters to be presented at such meeting.

 

Eagle’s certificate of incorporation and bylaws provide that, except as otherwise required by law and subject to the rights of the holders of any class of preferred stock, special meetings of shareholders, for any purpose, may be called only by the board of directors pursuant to a resolution approved by a majority of the entire board of directors.

 

 

  WHC   EAGLE

Quorum

Under the MBCA, a majority of the shares entitled to vote at any meeting constitutes a quorum. Once a share is represented for any purpose at a meeting, it is considered present for quorum purposes for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for that adjourned meeting.

 

WHC’s articles of incorporation are silent on shareholder quorum.

 

Eagle’s bylaws provide that the holders of a majority of the shares of capital stock issued and outstanding and entitled to vote, present in person or represented by proxy, shall constitute a quorum. The shareholders present in person or by proxy at a meeting at which a quorum is present may continue to do business until adjournment, notwithstanding withdrawal of enough shareholders to leave less than a quorum.

       

Proxy

WHC’s bylaws provide that a proxy is valid for only one meeting, to be specified therein, and any adjournments of such meeting.

 

Eagle’s bylaws provide that a proxy is valid for three years from the date of its signing, unless the proxy provides for a longer period.

       

Preemptive Rights

Under the MBCA, shareholders do not have preemptive rights unless the corporation’s articles of incorporation provide otherwise. WHC’s articles of incorporation, as amended, do not provide for preemptive rights.

 

Eagle’s shareholders do not have preemptive rights.

       

Shareholder Rights
Plan/Shareholders’
Agreement

WHC does not have a rights plan. WHC and WHC’s shareholders are parties to the Shareholder Agreements.

 

Eagle does not have a rights plan. Neither Eagle nor Eagle shareholders are parties to a shareholders’ agreement with respect to Eagle’s capital stock.

       

Indemnification of
Directors and
Officers

WHC’s bylaws and articles of incorporation are silent on indemnification of its current and former directors, officers and employees of WHC.

 

The MBCA allows a corporation to indemnify directors and officers against liability incurred in connection with a proceeding, if such person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, WHC’s best interests, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

 

Unless limited by the articles of incorporation, the MBCA requires a corporation to indemnify a director who was wholly successful, on the merits or otherwise, in the defense of any proceeding to which the director was a party because the individual is or was a director of the corporation, against reasonable expenses incurred by the director in connection with the proceeding.

 

Eagle’s bylaws provide that Eagle shall indemnify its current and former directors and officers serving at the request of Eagle, and may indemnify any employee and agent of Eagle, against liability incurred in connection with that employee made or threated to be made a party in an action, suit or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director or officer of Eagle.

 

Eagle’s bylaws state that the intention of this bylaw is to provide indemnification with the broadest and most inclusive coverage permitted by law (a) at the time of the act or omission to be indemnified against, or (b) so permitted at the time of carrying out such indemnification, whichever of (a) or (b) may be broader or more inclusive and permitted by law to be applicable. If the indemnification permitted by law at this present time, or at any future time, shall be broader or more inclusive than the provisions of this Bylaw, then indemnification shall nevertheless extend to the broadest and most inclusive permitted by law at any time and this Bylaw shall be deemed to have been amended accordingly.

 

 

  WHC   EAGLE
     

Under the DGCL, a corporation must indemnify its present or former directors and officers against expenses (including attorneys’ fees) actually and reasonably incurred to the extent that the officer or director has been successful on the merits or otherwise in defense of any action, suit or proceeding brought against him or by reason of the fact that he or she is or was a director or officer of the corporation.

 

The DGCL provides that a corporation may indemnify its officers, directors, employees and agents against liabilities and expenses incurred in proceedings if the person acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best interest of the corporation and, with respect to any criminal action, had no reasonable cause to believe that the person’s conduct was unlawful.

 

However, under the DGCL, no indemnification is available in respect of a claim as to which the person has been adjudged to be liable to the corporation, unless and only to the extent that a court determines that in view of all the circumstances, such person is fairly and reasonably entitled to indemnity for such expenses that the court deems proper.

 

Eagle’s certificate of incorporation provides that a director of Eagle shall not be personally liable to Eagle or any of its shareholders for monetary damages for breach of fiduciary duty as a director, except for liability (1) for any breach of the director’s loyalty to Eagle or shareholders, (2) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of the law, (3) under Section 174 of the DGCL or (4) for any transaction from which the director derived a personal benefit. Additionally, the certificate of incorporation provides that Eagle will indemnify to the fullest outlined in the bylaws.

       
Restrictions on
Business
Combinations with
Significant
Shareholders
WHC’s articles of incorporation do not contain any provision regarding business combinations between WHC and significant shareholders.   Eagle’s certificate of incorporation provides that, subject to certain exceptions, a business combination with any interested shareholder or any affiliate or associate of any interested shareholder or any person who after such business combination would be an affiliate or associate of such interested shareholder, shall require the approval of the board and the affirmative vote of the holders of at least 80% of the voting power of the then outstanding voting stock which is not owned by the interested shareholder or any affiliate or associate of such interested shareholder.

 

 

  WHC   EAGLE

 

 

 

Eagle’s certificate of incorporation provides that Eagle does not need the 80% affirmative if the transaction is approved by a majority of disinterested directors or if the following conditions are met:

 

(1) minimum price requirements. with respect to every class or series of voting stock of the corporation, whether or not the interested shareholder has previously acquired beneficial ownership of any shares of such class or series of voting stock:

 

(i) the aggregate amount of the cash and the fair market value as of the date of the consummation of the business combination of consideration other than cash to be received per share by holders of common stock in such business combination shall be at least equal to the higher of the following:

 

(a)(if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by or on behalf of the interested shareholder for any share of common stock in connection with the acquisition by the interested shareholder of beneficial ownership of shares of common stock (1) within the two-year period immediately prior to the first public announcement of the proposal of the business combination (the “announcement date”), or (2) in the transaction or series of related transactions in which it became an interested shareholder, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to common stock; and

 

(b) the fair market value per share of common stock on the announcement date or on the date on which the interested shareholder became an interested shareholder (such latter date is referred to in this article xii as the “determination date”), whichever is higher, as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to common stock.

 

(ii) the aggregate amount of the cash and the fair market value as of the date of the consummation of the business combination of consideration other than cash to be received per share by holders of shares of any other class or series of outstanding voting stock shall be at least equal to the highest of the following (it being intended that the requirements of this paragraph (b)(ii) shall be required to be met with respect to every class or series of outstanding voting stock, whether or not the interested shareholder has previously acquired any shares of a particular class or series of voting stock):

 

 

  WHC   EAGLE
     

(a)(if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers’ fees) paid by or on behalf of the interested shareholder for any shares of such class or series of voting stock in connection with the acquisition by the interested shareholder of beneficial ownership of such shares (1) within the two-year period immediately prior to the announcement date, or (2) in the transaction in which it became an interested shareholder, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of voting stock;

 

(b)(if applicable) the highest preferential amount per share to which the holders of shares of such class or series of voting stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation; and

 

(c) the fair market value per share of such class or series of voting stock on the announcement date or on the determination date, whichever is higher, in either case as adjusted for any subsequent stock split, stock dividend, subdivision or reclassification with respect to such class or series of voting stock.

       

Restrictions on
Related Party
Transactions

Neither WHC’s articles of incorporation nor bylaws contain any provision that restricts related party transactions.

 

Neither Eagle’s certificate of incorporation nor bylaws contains any provision that restricts related party transactions.

       

Prevention of
Greenmail

WHC’s articles of incorporation do not contain a provision designed to prevent greenmail.

 

Eagle’s certificate of incorporation does not contain a provision designed to prevent greenmail.

       

Fundamental
Business
Transactions

Under the MBCA, a two-thirds vote is generally required for approval of mergers or share exchanges, unless otherwise provided in a company’s articles of incorporation. WHC’s articles of incorporation do not contain any provisions regarding shareholder approval of any merger, share exchange or sale, lease, exchange or other transfer of all or substantially all of the corporation’s assets by holders of common stock.

 

Eagle’s certification of incorporation does not contain any provisions regarding shareholder approval of any merger, share exchange or sale, lease, exchange or other transfer of all or substantially all of the corporation’s assets by holders of common stock.

 

 

  WHC   EAGLE

Non-Shareholder
Constituency
Provision

WHC’s articles of incorporation do not contain a provision that expressly permits the board of directors to consider constituencies other than the shareholders when evaluating certain offers.

 

Eagle’s certificate of incorporation does not contain a provision that expressly permits the board of directors to consider constituencies other than the shareholders when evaluating certain offers.

       

Appraisal/Dissenters’
Rights

Under the MBCA, a shareholder generally has the right to dissent and obtain payments of fair value of his or her shares for any merger to which the corporation is a party, shareholder approval is required for the merger by 35-1-815 or the articles of incorporation and the shareholder is entitled to vote on the merger; or the corporation is a subsidiary that is merged with its parent corporation under 35-1-818.

 

A shareholder entitled to dissent and to obtain payment for shares may not challenge the corporate action creating the shareholder’s entitlement unless the action is unlawful or fraudulent with respect to the shareholder or the corporation

 

Under the DGCL, a shareholder may dissent from, and receive payments in cash for, the fair value of his or her shares as appraised by the Delaware Court of Chancery in the event of certain mergers and consolidations. However, shareholders do not have appraisal rights if the shares of stock they hold, at the record date for determination of shareholders entitled to vote at the meeting of shareholders to act upon the merger or consolidation, or on the record date with respect to action by written consent, are either (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders. Further, no appraisal rights are available to shareholders of the surviving corporation if the merger did not require the vote of the shareholders of the surviving corporation. Notwithstanding the foregoing, appraisal rights are available if shareholders are required by the terms of the merger agreement to accept for their shares anything other than (a) shares of stock of the surviving corporation, (b) shares of stock of another corporation that will either be listed on a national securities exchange or held of record by more than 2,000 holders, (c) cash instead of fractional shares or (d) any combination of clauses (a)-(c). Appraisal rights are also available under the DGCL in certain other circumstances, including in certain parent-subsidiary corporation mergers and in certain circumstances where the certificate of incorporation so provides.

 

Eagle’s certificate of incorporation does not provide for appraisal rights in any additional circumstance.

 

 

BUSINESS OF WESTERN HOLDING COMPANY OF WOLF POINT

 

General

 

WHC is a bank holding company under the Bank Holding Company Act of 1956, as amended, for Western Bank, and is subject to the supervision and regulation of the Federal Reserve and is a corporation organized under the laws of the State of Montana. Its main office is located at 111 3rd Avenue S., Wolf Point, Montana 59201. Western Bank is a Montana state member bank, which was established in 1913, and is subject to the supervision and regulation of the Montana Division and the Federal Reserve. Western Bank is a full-service commercial bank, providing a wide range of business and consumer financial services to individual and corporate customers through its banking office located in Wolf Point, Montana.

 

At June 30, 2019, WHC had total assets of approximately $101.7 million, total deposits of approximately $77.4 million, total loans of approximately $40.6 million, and stockholders’ equity of approximately $11.3 million.

 

Banking Services

 

Western Bank serves the McCone, Roosevelt and Valley Counties of Montana and provides a range of agricultural, commercial and consumer banking services to small to medium size businesses, professionals and executives, and individuals. The business model incorporates a community banking relationship approach, delivered by experienced and highly trained professionals. Western Bank’s range of loan products to consumers and businesses includes but is not limited to: home equity lines of credit for owner-occupied real estate, construction, multi-family properties, business assets, agricultural loans, and other consumer loan needs. Western Bank also provides a range of depository services to consumers and businesses, including, but not limited to: non-interest bearing and interest-bearing demand deposit accounts, savings accounts, and certificates of deposits. Western Bank’s services also include, but are not limited to: ATM, wire, ACH, online and mobile banking products and credit cards.

 

The revenues of Western Bank are primarily derived from interest on, and fees received in connection with lending activities, from interest and dividends on cash and investment securities, as well as periodic loan sales. The principal sources of funds for Western Bank’s lending activities are customer deposits, loan repayments, and proceeds from investment securities, as well as its equity. The principal expenses of Western Bank include interest paid on deposits and operating and general administrative expenses. As is the case with banking institutions generally, Western Bank’s operations are materially and significantly influenced by general economic conditions and by related monetary and fiscal policies of financial institution regulatory agencies, including the Federal Reserve and the FDIC. Deposit flows and costs of funds are influenced by interest rates on competing investments and general market rates of interest. Lending activities are affected by the demand for financing of real estate, business, and other types of loans, which in turn is affected by the interest rates at which such financing may be offered and other factors affecting local demand and availability of funds. Western Bank faces strong competition in the attraction of deposits (the primary source of lendable funds) and in the origination of loans.

 

Agricultural banking. Western Bank provides operating, term, livestock, equipment and long term real estate loans. The bank is a certified lender for USDA Farm Service Agency guaranteed loan programs. Western Bank’s experienced staff understands the unique characteristics of agricultural lending which is a large part of its credit portfolio.

 

Commercial Banking. Western Bank focuses its commercial loan originations on small- and mid-sized businesses and such loans are usually accompanied by significant related deposits. Commercial underwriting is driven by cash flow analysis, supported by collateral analysis and review. Commercial loan products include commercial real estate construction and owner-occupied and non-owner occupied term and construction loans; working capital loans and lines of credit; demand, term, and time loans; SBA guaranteed loans; and equipment, inventory and accounts receivable financing.

 

Retail Banking. Western Bank’s consumer banking activities include consumer deposit and checking accounts. In addition to traditional products and services, Western Bank offers additional products and services, such as debit cards, online banking, mobile banking, and electronic bill payment services. Consumer loan products offered by Western Bank include consumer loans, and unsecured personal credit lines.

 

 

Employees

 

As of June 30, 2019, Western Bank had 16 full-time equivalent employees. The employees are not represented by a collective bargaining unit. Western Bank considers relations with employees to be good.

 

Properties

 

The main office and only branch of WHC and Western Bank is located at 111 3rd Avenue S, Wolf Point, Montana 59201.

 

Legal Proceedings

 

Western Bank is periodically a party to or otherwise involved in legal proceedings arising in the normal course of business, such as claims to enforce liens, claims involving the making and servicing of real property loans, and other issues incident to its business. As of the date hereof, and except as disclosed in this proxy statement/prospectus, management does not believe that there is any pending or threatened proceeding against WHC or Western Bank which, if determined adversely, would have a material adverse effect on WHC’s financial position, liquidity, or results of operations.

 

Competition

 

Western Bank encounters strong competition both in making loans and in attracting deposits. In one or more aspects of its business, Western Bank competes with other commercial banks, credit unions, finance companies, mutual funds, insurance companies, brokerage and investment banking companies, and other financial intermediaries. Many of these competitors have substantially greater resources and lending limits and may offer certain services that Western Bank does not currently provide. In addition, many of Western Bank’s non-bank competitors are not subject to the same extensive federal regulations that govern bank holding companies and federally insured banks. Recent federal and state legislation has heightened the competitive environment in which financial institutions must conduct their business, and the potential for competition among financial institutions of all types has increased significantly. There is no assurance that increased competition from other financial institutions will not have an adverse effect on Western Bank’s operations.

 

Management

 

Directors and Executive Officers. The board of directors of WHC is comprised of six individuals. The directors are elected for terms of one year or until their successors are duly qualified and elected. The same individuals serve as directors of Western Bank. The officers of WHC serve at the pleasure of the board of directors.

 

Name

      Position

Held with WHC 

Principal Occupation

     

R.J. Doornek

Chairman

Senior Vice President and Chairman of Western Bank Board of Directors

     

Duane Kurokawa

President, CEO and Vice Chairman

President, Chief Executive Officer and Director of Western Bank

     

Cathy Wanderaas

Corporate Secretary, Director

Vice President/IT Officer, Western Bank

     

Jerald Petersen

Treasurer, Director

Vice President/Loan Officer, Western Bank

     

Aaron Kurokawa

Vice President, Director

Vice President/Loan Officer, Western Bank

     

Brian Berreth

Director

Retired securities dealer

 

 

BENEFICIAL OWNERSHIP OF WHC COMMON STOCK BY
MANAGEMENT AND PRINCIPAL SHAREHOLDERS OF WHC

 

The following table sets forth the beneficial ownership of WHC common stock as of _____ 2019 by: (i) each person who is known by WHC to beneficially own more than 5% of the outstanding shares of WHC common stock; (ii) each director and executive officer of WHC; and (iii) all directors and executive officers of WHC as a group. The information has been obtained from WHC, or from information furnished directly by the person named below to WHC.

 

Beneficial ownership is determined in accordance with the rules of the SEC, based on factors including voting and investment power with respect to shares. The percentage of beneficial ownership is calculated based upon 2,206 shares of WHC common stock issued and outstanding as of _______, 2019. As of ______, 2019, there were no outstanding options or other rights to acquire shares of WHC common stock.

 

In connection with the merger agreement, each director and executive officer of WHC entered into a company shareholder support agreement with Eagle by which such shareholders agreed to vote the shares of WHC owned by them in favor of the merger proposal, subject to the terms and conditions of such agreement.

 

Unless otherwise indicated, to WHC’s knowledge, the persons identified in the table below have sole voting and investment power with respect to all shares shown as beneficially owned by them.

 

Name and Address of Beneficial Owner(1)

 

Shares of WHC

Common Stock

Beneficially Owned

   

Percent of

Class

 

5% Shareholder:

               

Russell Cowen

631 Big Sky Dr.

Richland, WA 99352

    325       14.7 %
                 

Brent Applegren

735 Lenna Joy Dr.

Whitefish, MT 59937

    160       7.3  
                 

Directors and Executive Officers:

               

R.J. Doornek(2)

    654       29.6  

Duane Kurokawa(3)

    603       27.3  

Jerald Petersen(3)

    116       5.3  

Cathy Wanderaas(3)

    106       4.8  

Brian Berreth

    40       1.8  

Aaron Kurokawa

    26       1.2  
                 

All Directors and Executive Officers as a Group (6 individuals)

    1,545       70.0  

 

(1)

The address of each of WHC’s executive officers and directors is c/o Western Holding Company of Wolf Point, 111 3rd Avenue S., Wolf Point, Montana 59201.

(2)

Held through trust.

(3)

Held jointly with spouse.

 

Shareholder Agreements

 

WHC and its shareholders are parties to the Western Holding Company Shareholder Agreement, dated January 1, 1998 (the “1998 Shareholder Agreement”) and the Shareholder Agreement, effective as of September 25, 2002, (the “2002 Shareholder Agreement”), as amended by the Amendment to Shareholder Agreement, effective as of January 1, 2007 (the “2007 Amendment”, and, together with the 1998 Shareholder Agreement and the 2002 Shareholder Agreement, the “Shareholder Agreements”). Among other things, the Shareholder Agreements generally restrict transfers of shares of WHC common stock except for certain permitted transfers and include provisions designed to preserve WHC’s S-corporation election and status. The 2002 Shareholder Agreement also provides a right of first refusal by WHC and other shareholders to purchase shares that are the subject of a permitted transfer, and a demand right that permits a shareholder to make demand upon WHC and other shareholders to purchase his or her shares of common stock on the terms described in the 2002 Shareholder Agreement. Upon consummation of the merger, the Shareholder Agreements will terminate by their terms.

 

 

DESCRIPTION OF EAGLE CAPITAL STOCK

 

The following is a description of our capital stock and a summary of the rights of our stockholders and provisions pertaining to indemnification of our directors and officers. You should also refer to our amended and restated certificate of incorporation and bylaws, which are incorporated by reference in this prospectus, and to Delaware law.

 

General

 

Eagle has an authorized capitalization of 21,000,000 shares of capital stock, consisting of 20,000,000 shares of common stock, par value $0.01 per share, and 1,000,000 shares of undesignated preferred stock, par value $0.01 per share. As of October 7, 2019, we had a total of 60,160 shares of our common stock reserved and remaining to be issued for grants of options and restricted stock awards under our stock plans. As of October 7, 2019 there were 6,403,693 shares of common stock, and no shares of preferred stock outstanding. As of such date, there were approximately 925 holders of record of common stock.

 

Common Stock

 

Subject to the prior or special rights of holders of shares of preferred stock:

 

Dividends. The holders of shares of common stock are entitled to any dividends that may be declared by our board of directors out of legally available funds;

 

Liquidation, Dissolution or Winding Up. In the event of a liquidation, dissolution or winding up of Eagle, the holders of shares of our common stock are entitled upon liquidation to share ratably in all assets remaining after payment of liabilities and the satisfaction of the liquidation preferences of any outstanding shares of preferred stock;

 

Redemption. The holders of shares of our common stock are not subject to, or entitled to the benefits of, any redemption or sinking fund provision;

 

Conversion. No holder of common stock has the right to convert or exchange any such shares with or into any other shares of capital stock of Eagle;

 

Preemptive Rights. No holder of common stock has preemptive rights; and

 

Voting. Each share of common stock entitles the holder thereof to one vote, in person or by proxy, on all matters submitted to a vote of stockholders generally. Voting is non-cumulative. The outstanding shares of our common stock are fully paid and non-assessable. Except as specifically provided in the Delaware General Corporation Law (the “DGCL”) or in Eagle’s certificate of incorporation or bylaws, the affirmative vote required for stockholder action shall be that of a majority of the shares present in person or represented by proxy at the meeting (as counted for purposes of determining the existence of a quorum at the meeting). Directors are elected by a plurality of the votes cast in the election.

 

Preferred Stock

 

Under Eagle’s amended and restated certificate of incorporation, its board of directors is authorized, without shareholder approval, to adopt resolutions providing for the issuance of up to 1,000,000 shares of preferred stock, par value $0.01 per share. The preferred stock may be issued from time to time by our board of directors as shares of one or more classes or series. Subject to the provisions of our amended and restated certificate of incorporation and limitations prescribed by law, our board of directors is expressly authorized to adopt resolutions to issue the shares, to fix the number of shares, to change the number of shares constituting any series and to provide for or change the voting powers, designations, preferences and relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof, including dividend rights (including whether dividends are cumulative), dividend rates, terms of redemption (including sinking fund provisions), redemption prices, conversion rights and liquidation preferences of the shares constituting any class or series of the preferred stock.

 

 

The issuance of shares of preferred stock, or the issuance of rights to purchase shares of preferred stock, could be used to discourage an unsolicited acquisition proposal. For instance, the issuance of a series of preferred stock might impede a business combination by including class voting rights that would enable the holders to block such a transaction; or the issuance might facilitate a business combination by including voting rights that would provide a required percentage vote of the stockholders. In addition, under some circumstances, the issuance of preferred stock could adversely affect the voting power of the holders of the common stock. Although our board of directors is required to make any determination to issue preferred stock based on its judgment as to the best interests of our stockholders, the board of directors could act in a manner that would discourage an acquisition attempt or other transaction that some or a majority of the stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then market price of the stock. The board of directors does not currently intend to seek stockholder approval prior to any issuance of currently authorized stock, unless otherwise required by law or the rules of any market on which our securities are traded.

 

Transfer Agent and Registrar

 

The transfer agent and registrar for Eagle common stock is Computershare Inc.

 

Certain Anti-Takeover Effects of Certain Provisions of the Company’s Amended and Restated Certificate of Incorporation, Bylaws and the Delaware General Corporation Law

 

The following discussion is a general summary of the material provisions of Eagle’s amended and restated certificate of incorporation and bylaws and certain other regulatory provisions that may be deemed to have an “anti-takeover” effect. The following description of certain of these provisions is necessarily general and reference should be made in each case to the actual document or regulatory provision in question.

 

Eagles Amended and Restated Certificate of Incorporation and Bylaws

 

Eagle’s amended and restated certificate of incorporation and bylaws contain a number of provisions relating to corporate governance and rights of stockholders that might discourage future takeover attempts. As a result, stockholders who might desire to participate in such transactions may not have an opportunity to do so. In addition, these provisions will also render the removal of the board of directors or management of Eagle more difficult.

 

Prohibition of Cumulative VotingThe amended and restated certificate of incorporation prohibits cumulative voting for the election of directors.

 

Restrictions on Removing Directors from OfficeThe amended and restated certificate of incorporation provides that directors may be removed only for cause, and only by the affirmative vote of the holders of at least 80% of the voting power of all of our then-outstanding common stock entitled to vote.

 

Classified Board of DirectorsEagle’s amended and restated certificate of incorporation provides for a classified board to which approximately one-third of its board of directors is elected each year at its annual meeting of shareholders. Accordingly, Eagle’s directors serve three-year terms rather than one-year terms. The classification of Eagle’s board of directors has the effect of making it more difficult for shareholders to change the composition of its board of directors. At least two annual meetings of shareholders, instead of one, will generally be required to effect a change in a majority of Eagle’s board of directors. Such a delay may help ensure that its directors, if confronted by a shareholder attempting to force a proxy contest, a tender or exchange offer, or an extraordinary corporate transaction, would have sufficient time to review the proposal as well as any available alternatives to the proposal and to act in what they believe to be the best interests of Eagle’s shareholders. The classification provisions apply to every election of directors, however, regardless of whether a change in the composition of Eagle’s board of directors would be beneficial to Eagle and its shareholders and whether or not a majority of its shareholders believe that such a change would be desirable.

 

The classification or Eagle’s board of directors could also have the effect of discouraging a third party from initiating a proxy contest, making a tender offer or otherwise attempting to obtain control of Eagle, even though such an attempt might be beneficial to Eagle and its shareholders. The classification of Eagle’s board of directors could thus increase the likelihood that incumbent directors will retain their positions. In addition, because the classification of Eagle’s board of directors may discourage accumulations of large blocks or its stock by purchasers whose objective is to take control of Eagle and remove a majority of its board of directors, the classification of its board of directors could tend to reduce the likelihood or fluctuations in the market price of its common stock that might result from accumulations of large blocks of its common stock for such a purpose. Accordingly, Eagle’s shareholders could be deprived of certain opportunities to sell their shares at a higher market price than might otherwise be the case.

 

 

Authorized but Unissued Shares Eagle has authorized but unissued shares of common and preferred stock. Eagle is authorized to issue preferred stock from time to time in one or more series subject to applicable provisions of law, and the board of directors is authorized to fix the designations, and relative preferences, limitations, voting rights, if any, including without limitation, offering rights of such shares (which could be multiple or as a separate class). In the event of a proposed merger, tender offer or other attempt to gain control of Eagle that the board of directors does not approve, it might be possible for the board of directors to authorize the issuance of a series of preferred stock with rights and preferences that would impede the completion of the transaction. An effect of the possible issuance of preferred stock therefore may be to deter a future attempt to gain control of Eagle. The board of directors has no present plan or understanding to issue any preferred stock.

 

Amendments to Amended and Restated Certificate of Incorporation and BylawsAmendments to the amended and restated certificate of incorporation must be approved by our board of directors and also by at least a majority of the outstanding shares of our voting stock; provided, however, that approval by at least 80% of the outstanding voting stock is generally required to amend the following provisions:

 

 

(i)

the applicability of Section 203 of the Delaware General Corporation Law;

 

 

(ii)

the division of the board of directors into three classes;

 

 

(iii)

the limitation on voting rights of persons who directly or indirectly beneficially own more than 10% of the outstanding shares of common stock;

 

 

(iv)

the indemnification of current and former directors and officers by Eagle;

 

 

(v)

the requirement of an 80% stockholder approval for business combination transactions with interested stockholders;

 

 

(vi)

the prohibition of stockholder action by written consent;

 

 

(vii)

the requirement that the holders of at least 80% of the outstanding shares of common stock must vote to remove directors, and can only remove directors for cause;

 

 

(viii)

the limitation of liability of officers and directors to Eagle for money damages; and

 

 

(ix)

the provision of the amended and restated certificate of incorporation requiring approval of at least 80% of the outstanding voting stock to amend the provisions of the amended and restated certificate of incorporation provided in (i) through (viii) of this list.

 

The amended and restated certificate of incorporation also provides that certain bylaws may be amended by the affirmative vote of a majority of our directors or by the stockholders and that specified provisions in the bylaws may only be amended by the stockholders by the affirmative vote of at least 80% of the total votes eligible to be voted at a duly constituted meeting of stockholders. Any amendment of this supermajority requirement for amendment of the bylaws would also require the approval of 80% of the outstanding voting stock.

 

Stockholder Vote Required to Approve Business Combinations with Principal Shareholders. The amended and restated certificate of incorporation of Eagle requires the approval of the holders of at least 80% of Eagle’s outstanding shares of voting stock to approve certain “Business Combinations,” as defined therein, and related transactions. Under Delaware law, absent this provision, Business Combinations, including mergers, consolidations and sales of all or substantially all of the assets of a corporation must, subject to certain exceptions, be approved by the vote of the holders of only a majority of the outstanding shares of common stock of Eagle and any other affected class of stock. Under the amended and restated certificate of incorporation, at least 80% approval of stockholders is required in connection with any transaction involving an interested stockholder (as defined below) except (i) in cases where the proposed transaction has been approved in advance by a majority of those members of Eagle’s board of directors who are unaffiliated with the interested stockholder and were directors prior to the time when the interested stockholder became an interested stockholder or (ii) if the proposed transaction meets certain conditions set forth in the amended and restated certificate of incorporation, which are designed to afford the stockholders a fair price in consideration for their shares in which case, if a stockholder vote is required, approval of only a majority of the outstanding shares of voting stock would be sufficient.

 

 

The term “interested stockholder” is defined to include any individual, corporation, partnership or other entity (other than Eagle or its subsidiary) which owns beneficially or controls, directly or indirectly, 15% or more of the outstanding shares of voting stock of Eagle. This provision of the amended and restated certificate of incorporation applies to any “Business Combination,” which is defined to include (i) any merger, consolidation or share exchange of Eagle or any of its subsidiaries with or into any interested stockholder or affiliate of an interested stockholder; (ii) any sale, lease, exchange, mortgage, pledge, transfer, or other disposition to or with any interested stockholder or affiliate of assets of Eagle having an aggregate market value of 10% or more of either the aggregate market value of the total consolidated assets of Eagle or the aggregate market value of the outstanding stock of Eagle; (iii) the issuance or transfer to any interested stockholder or its affiliate by Eagle (or any subsidiary) of any securities of Eagle subject to certain exceptions; (iv) the adoption of any plan for the liquidation or dissolution of Eagle proposed by or on behalf of any interested stockholder or affiliate thereof; (v) any reclassification of securities, recapitalization, merger or consolidation of Eagle which has the effect of increasing the proportionate share of outstanding shares of common stock or any class of equity or convertible securities of Eagle owned directly or indirectly by an interested stockholder or affiliate thereof; (vi) any transaction involving Eagle or any subsidiary that has the effect of increasing the proportionate share of the stock of any class or securities convertible into stock of any class or series owned by the interested stockholder except for immaterial changes due to fractional share adjustments or as a result of stock repurchases not caused by the interested stockholder; and (vii) any receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through Eagle or any subsidiary.

 

Our board of directors believes that the provisions described above or below are prudent and will reduce our vulnerability to takeover attempts and certain other transactions that have not been negotiated with and approved by our board of directors. Our board of directors believes these provisions are in the best interests of Eagle and its stockholders. Our board of directors believes that it will be in the best position to determine the true value of Eagle and to negotiate more effectively for what may be in the best interests of its stockholders. Accordingly, our board of directors believes that it is in the best interests of Eagle and its stockholders to encourage potential acquirers to negotiate directly with the board of directors and that these provisions will encourage such negotiations and discourage hostile takeover attempts. It is also the view of our board of directors that these provisions should not discourage persons from proposing a merger or other transaction at a price reflective of the true value of Eagle and that is in the best interests of all stockholders.

 

Takeover attempts that have not been negotiated with and approved by our board of directors present the risk of a takeover on terms that may be less favorable than might otherwise be available. A transaction that is negotiated and approved by our board of directors, on the other hand, can be carefully planned and undertaken at an opportune time in order to obtain maximum value of Eagle for our stockholders, with due consideration given to matters such as the management and business of the acquiring corporation and maximum strategic development of Eagle’s assets.

 

Despite our belief as to the benefits to stockholders of these provisions of Eagle’s amended and restated certificate of incorporation and bylaws, these provisions may also have the effect of discouraging a future takeover attempt that would not be approved by our board of directors, but pursuant to which stockholders may receive a substantial premium for their shares over then current market prices. As a result, stockholders who might desire to participate in such a transaction may not have any opportunity to do so. Such provisions will also make it more difficult to remove our board of directors and management. Our board of directors, however, has concluded that the potential benefits outweigh the possible disadvantages.

 

Pursuant to applicable law and, if required, following the approval by stockholders, we may adopt additional anti-takeover provisions in our amended and restated certificate of incorporation or other devices regarding the acquisition of our equity securities that would be permitted for a Delaware business corporation.

 

 

The cumulative effect of the restrictions on acquisition of Eagle contained in our amended and restated certificate of incorporation and bylaws and in Delaware law may be to discourage potential takeover attempts and perpetuate incumbent management, even though certain stockholders of Eagle may deem a potential acquisition to be in their best interests, or deem existing management not to be acting in their best interests.

 

Delaware Corporate Law

 

In addition, the state of Delaware has a statute designed to provide Delaware corporations, such as Eagle, with additional protection against hostile takeovers. The takeover statute, which is codified in Section 203 of the Delaware General Corporation Law is intended to discourage certain takeover practices by impeding the ability of a hostile acquiror to engage in certain transactions with the target company.

 

In general Section 203 provides that a “Person” who owns 15% or more of the outstanding voting stock of a Delaware corporation (referred to in Section 203 as an “Interested Shareholder”) may not consummate a merger or other business combination transaction with such corporation at any time during the three-year period following the date such “Person” became an Interested Shareholder. The term “business combination” is defined broadly to cover a wide range of corporate transactions including mergers, sales of assets, issuances of stock, transactions with subsidiaries and the receipt of disproportionate financial benefits.

 

The statute exempts the following transactions from the requirements of Section 203: (i) any business combination if, prior to the date a person became an Interested Shareholder, the board of directors approved either the business combination or the transaction which resulted in the shareholder becoming an Interested Shareholder; (ii) any business combination involving a person who acquired at least 85% of the outstanding voting stock in the transaction in which he became an Interested Shareholder, with the number of shares outstanding calculated without regard to those shares owned by the corporation’s directors who are also officers and by certain employee stock plans; (iii) any business combination with an Interested Shareholder that is approved by the board of directors and by a two-thirds vote of the outstanding voting stock not owned by the Interested Shareholder; and (iv) certain business combinations that are proposed after the corporation had received other acquisition proposals and which are approved or not opposed by a majority of certain continuing members of the board of directors. A corporation may exempt itself from the requirements of the statute by adopting an amendment to its certificate of incorporation or bylaws electing not to be governed by Section 203. At the present time, the board of directors does not intend to propose any such amendment.

 

Bank Regulatory Requirements

 

The Bank Holding Company Act requires any “bank holding company,” as defined in the Bank Holding Company Act, to obtain the approval of the FRB before acquiring 5% or more of our common stock. Any person, other than a bank holding company, is required to obtain the approval of the FRB before acquiring 25% or more of our voting stock and in certain circumstances, more than 10% of our voting stock. Under the Federal Change in Bank Control Act (the “Control Act”), a 60-day prior written notice must be submitted to the FRB if any person, or any group acting in concert, seeks to acquire 10% or more of any class of outstanding voting securities of a bank holding company, unless the FRB determines that the acquisition will not result in a change of control. Under the Control Act, the FRB has 60 days within which to act on such notice taking into consideration certain factors, including the financial and managerial resources of the acquirer, the convenience and needs of the community served by the bank holding company and its subsidiary banks and the antitrust effects of the acquisition.

 

EXPERTS

 

The consolidated financial statements of Eagle Bancorp Montana, Inc. and subsidiaries for the years ended December 31, 2018 and 2017, have been incorporated by reference herein in reliance upon the report of Eide Bailly LLP, independent registered public accounting firm, incorporated by reference herein, and upon the authority of said firm as experts in accounting and auditing.

 

 

LEGAL MATTERS

 

The validity of the shares of Eagle common stock to be issued by Eagle in connection with the merger will be passed upon by Nixon Peabody LLP, Washington D.C.

 

OTHER MATTERS

 

No matters other than the matters described in this proxy statement/prospectus are anticipated to be presented for action at the special meeting, or at any adjournment or postponement of such meeting.

 

DOCUMENTS INCORPORATED BY REFERENCE

 

The SEC allows Eagle to “incorporate by reference” information in this proxy statement/prospectus. This means that Eagle can disclose important business and financial information to you by referring you to another document filed separately with the SEC. The information that Eagle incorporates by reference is considered to be part of this proxy statement/prospectus, and later information that Eagle files with the SEC will automatically update and supersede the information Eagle included in this proxy statement/prospectus. This document incorporates by reference the documents that are listed below that Eagle has previously filed with the SEC, except to the extent that any information contained in such filings is deemed “furnished” in connection with SEC rules.

 

 

Annual Report on Form 10-K for the year ended December 31, 2018, filed on March 12, 2019;

 

 

Quarterly Reports on Form 10-Q for the quarters ended March 31, 2019 and June 30, 2019, filed on May 9, 2019 and August 7, 2019, respectively.

 

 

The information incorporated by reference into Part III of Eagle’s Annual Report from Eagle’s Proxy Statement for 2019 Annual Meeting, filed on March 12, 2019;

 

 

Current Reports on Form 8-K or Form 8-K/A, as applicable, filed on January 7, 2019, April 3, 2019, April 23, 2019, May 20, 2019 and August 9, 2019; and

 

 

The description of Eagle’s common stock contained in Eagle’s Registration Statement filed with the SEC pursuant to Section 12 of the Exchange Act, including any amendment or report filed for purposes of updating such description.

 

Eagle also incorporates by reference any future filings it makes with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement/prospectus and before the WHC shareholder meeting. Any statement contained in this proxy statement/prospectus or in a document incorporated or deemed to be incorporated by reference in this proxy statement/prospectus is deemed to be modified or superseded to the extent that a statement contained herein or in any subsequently filed document that also is, or is deemed to be, incorporated by reference herein modified or superseded such statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute a part of this proxy statement/prospectus.

 

Documents incorporated by reference are available from Eagle without charge (except for exhibits to the documents unless the exhibits are specifically incorporated in the document by reference). You may obtain documents incorporated by following the instructions set forth under “Where You Can Find More Information”:

 

 

 

Eagle Bancorp Montana, Inc.

1400 Prospect Avenue

Helena, Montana 59601

Attn: Investor Relations

Telephone: (406) 442-3080

 

To obtain timely delivery, you must make a written or oral request for a copy of such information by __________, 2019.

 

 

 

Appendix A

EXECUTION COPY

 

 

 

 

 

AGREEMENT AND PLAN OF MERGER

 

DATED AS OF AUGUST 8, 2019

 

BY AND AMONG

 

EAGLE BANCORP MONTANA, INC.,

 

OPPORTUNITY BANK OF MONTANA,

 

WESTERN HOLDING COMPANY OF WOLF POINT

 

AND

 

WESTERN BANK OF WOLF POINT

 

 

 

 

 

 

 

 

Table of Contents

 

 

 

    Page
     

ARTICLE 1. THE MERGER

A-1

   

Section 1.01.

The Merger

A-1

Section 1.02.

Certificate of Incorporation and Bylaws

A-1

Section 1.03.

Directors and Officers of Surviving Entity

A-2

Section 1.04.

Bank Merger

A-2

Section 1.05.

Effective Time; Closing

A-2

Section 1.06.

Structure Change

A-2

     

ARTICLE 2. MERGER CONSIDERATION; EXCHANGE PROCEDURES

A-3

   

Section 2.01.

Merger Consideration

A-3

Section 2.02.

Rights as Shareholders; Stock Transfers

A-3

Section 2.03.

Fractional Shares

A-3

Section 2.04.

Plan of Reorganization

A-3

Section 2.05.

Exchange Procedures

A-3

Section 2.06.

Dissenting Shares

A-4

Section 2.07.

Deposit of Merger Consideration

A-4

Section 2.08.

Delivery of Merger Consideration

A-5

Section 2.09.

Anti-Dilution Provisions

A-6

     

ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF COMPANY AND COMPANY BANK

A-6

   

Section 3.01.

Making of Representations and Warranties

A-6

Section 3.02.

Organization, Standing and Authority

A-6

Section 3.03.

Capital Stock

A-6

Section 3.04.

Subsidiaries

A-7

Section 3.05.

Corporate Power

A-8

Section 3.06.

Corporate Authority

A-8

Section 3.07.

Regulatory Approvals; No Defaults

A-9

Section 3.08.

Financial Statements

A-9

Section 3.09.

Regulatory Reports

A-11

Section 3.10.

Absence of Certain Changes or Events

A-11

Section 3.11.

Legal Proceedings

A-11

Section 3.12.

Compliance with Laws

A-12

Section 3.13.

Company Material Contracts; Defaults

A-13

Section 3.14.

Agreements with Regulatory Agencies

A-14

Section 3.15.

Brokers

A-14

Section 3.16.

Employee Benefit Plans

A-15

Section 3.17.

Labor Matters

A-16

Section 3.18.

Environmental Matters

A-18

Section 3.19.

Tax Matters

A-18

Section 3.20.

Regulatory Capitalization

A-20

Section 3.21.

Loans; Nonperforming and Classified Assets

A-20

Section 3.22.

Allowance for Loan and Lease Losses

A-21

Section 3.23.

Trust Business; Administration of Fiduciary Accounts

A-22

Section 3.24.

Investment Management and Related Activities

A-22

Section 3.25.

Repurchase Agreements

A-22

Section 3.26.

Deposit Insurance and Deposits

A-22

Section 3.27.

Community Reinvestment Act and Privacy and Customer Information Security

A-22

Section 3.28.

Transactions with Affiliates

A-22

Section 3.29.

Tangible Properties and Assets

A-23

Section 3.30.

Intellectual Property

A-24

Section 3.31.

Insurance

A-25

Section 3.32.

Questionable Payments

A-26

 

A-i