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Item 1.01
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Entry Into a Material Definitive Agreement.
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On January 9, 2017, Pacific Continental Corporation,
an Oregon corporation (“PCC”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Columbia Banking System, Inc., a Washington corporation (“Columbia”), and a to-be-formed Oregon corporation and a
wholly owned subsidiary of Columbia (“Merger Sub”). The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Merger Sub will merge with and into PCC, with PCC as the surviving corporation (the
“First Merger”). Immediately following the First Merger, PCC will merge with and into Columbia (the “Subsequent Merger”), with Columbia continuing as the surviving corporation (the “Surviving Corporation”). Immediately
after the Subsequent Merger, Pacific Continental Bank, an Oregon state-chartered bank and wholly owned subsidiary of PCC (“PCB”), will merge with and into Columbia State Bank, a Washington state-chartered bank and wholly owned subsidiary
of Columbia (“Columbia State Bank”) (the “Bank Merger”, and together with the First Merger and Subsequent Merger, the “Mergers”). The Merger Agreement was approved and adopted by the Board of Directors of each of PCC
and Columbia.
Subject to the terms and conditions of the Merger Agreement, at the date and time when the First Merger becomes effective (the
“Effective Time”), PCC shareholders will have the right to receive, in respect of each share of common stock of PCC (“Pacific Continental Common Stock”), a number of common shares of Columbia (“Columbia Common Stock”)
equal to the Exchange Ratio (as defined below), subject to any adjustments set forth in the Merger Agreement (the “Merger Consideration”). “Exchange Ratio” means the following: (i) if the average daily closing price of
Columbia Common Stock on Nasdaq (the “Columbia Average Closing Price”) for the twenty (20) consecutive trading days prior to the fifth business day immediately prior to the closing date (the “Determination Period”) is
greater than or equal to $27.76 and less than or equal to $37.56, then the Exchange Ratio will be 0.6430; (ii) if the Columbia Average Closing Price for the Determination Period is greater than $37.56, and the Columbia Average Closing Price for
the Determination Period outperforms the Keefe, Bruyette & Woods Regional Banking Index (the “Index”) by greater than fifteen percent (15%), then the Exchange Ratio will be the quotient, rounded to the nearest ten-thousandth,
obtained by dividing (A) $24.151 by (B) the Columbia Average Closing Price for the Determination Period; (iii) if the Columbia Average Closing Price for the Determination Period is greater than $37.56, and the Columbia Average Closing
Price for the Determination Period does not outperform the Index by greater than fifteen percent (15%), then the Exchange Ratio will be 0.6430; (iv) if the Columbia Average Closing Price for the Determination Period is less than $27.76, and the
Columbia Average Closing Price for the Determination Period underperforms the Index by greater than fifteen percent (15%), then the Exchange Ratio will be (A) the quotient, rounded to the nearest ten-thousandth, obtained by dividing $17.850 by
the Columbia Average Closing Price for the Determination Period if Columbia does not choose to adjust the Merger Consideration in accordance with the Merger Agreement, or (B) 0.6430 if Columbia does choose to adjust the Merger Consideration as
set forth in the Merger Agreement and described below; and (v) if the Columbia Average Closing Price for the Determination Period is less than $27.76, and the Columbia Average Closing Price for the Determination Period does not underperform the
Index by greater than fifteen percent (15%), then the Exchange Ratio will be 0.6430. In connection with clause (iv) above, if Columbia chooses to adjust the Merger Consideration, which it may do in its sole discretion, the Merger Consideration
will include an amount in cash equal to (A) $17.850 minus (B) (x) 0.6430 multiplied by (y) the Columbia Average Closing Price for the Determination Period, and the Exchange Ratio will be 0.6430.
The Merger Agreement may be terminated in certain circumstances, including: (i) by mutual written consent of
the parties; (ii) by either party in the event that any required regulatory approval is not obtained; (iii) by either party in the event that, under certain circumstances, the First Merger will not have been consummated by November 9,
2017 which may be extended to January 9, 2018 in certain circumstances; (iv) by either party in the event of a breach by the other party of any covenant or agreement or any representation or warranty that would result in the failure of
certain conditions to the Merger Agreement; (v) by either party if the requisite Columbia shareholder approval or PCC shareholder approval is not obtained; (vi) by Columbia in the event PCC fails to recommend approval of the Merger
Agreement to its shareholders; (vii) by PCC, prior to PCC shareholder approval, to enter into a superior proposal; and (viii) by either party in the event the Columbia Average Closing Price for the Determination Period is less than $26.13;
provided, however, if Columbia exercises its termination right described in clause (viii), PCC will have the option of reinstating the First Merger by adjusting the Exchange Ratio to 0.6430 and adding to the per share Merger Consideration an amount
in cash equal to $1.048.
The Merger Agreement provides that all PCC restricted stock units, PCC stock options and PCC stock appreciation rights, whether
cash-settled or stock-settled, will be canceled and paid out in cash. The Merger Agreement also provides that all PCC restricted stock awards (subject to certain exceptions) will vest immediately prior to closing and be treated the same as all other
shares of PCC common stock as described above. Consummation of the Mergers is subject to customary conditions, including, among others, approval by PCC and Columbia shareholders and receipt of required regulatory approvals.
Upon consummation of the Mergers, the Board of Directors of the Surviving Corporation will consist of the directors serving on the Board of Directors of
Columbia prior to the effective time of the First Merger plus one community-based independent director from the Board of Directors of PCC, to be selected by Columbia’s Nominating and Corporate Governance Committee.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger
Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference. The Merger Agreement should not be read alone, but should instead be read in conjunction with the other information regarding PCC, Columbia, their respective
affiliates or their respective businesses, the Merger Agreement and the Mergers that will be contained in, or incorporated by reference into, the Joint Proxy Statement of PCC and Columbia and the Registration Statement on Form S-4 of Columbia, which
will include PCC and Columbia’s Joint Proxy Statement and a Prospectus of Columbia, as well as in the Forms 10-K, Forms 10-Q and other filings that each of PCC and Columbia make with the Securities and Exchange Commission (the “SEC”).
The Merger Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other factual
information about PCC, Columbia or their respective subsidiaries or affiliates. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement and as of specific dates, were solely
for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the
parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party
beneficiaries under the Merger Agreement and should not rely on the representations, warranties and
covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover,
information concerning the subject matter of representations and warranties may change after the date of the Merger Agreement, which subsequent information may or may not be fully reflected in PCC’s and Columbia’s public disclosures.
Concurrently with the execution of the Merger Agreement, each of the directors of PCC have entered into a Voting and Non-Competition Agreement with PCC and
Columbia pursuant to which such directors have agreed, subject to the terms set forth therein (and subject to certain exceptions), to vote their shares of PCC common stock in favor of the Mergers and related matters, and to become subject to
transfer, non-solicitation and non-competition restrictions. In addition, concurrently with the execution of the Merger Agreement, the directors of Columbia have entered into a Voting Agreement with PCC, pursuant to which such directors have agreed,
among other things, to vote their shares of Columbia Common Stock in favor of approval of the issuance of Columbia Common Stock pursuant to the Merger Agreement and to become subject to certain transfer restrictions. Each of these agreements
terminates in accordance with its terms if the Merger Agreement is terminated and in other specified circumstances.
The foregoing summary of the
agreements described above does not purport to be complete and is qualified in its entirety by the text of such agreements, which are attached as Exhibit 99.1 (Form of Voting and Non-Competition Agreement by and among Columbia and the members of the
PCC Board dated January 9, 2017) and Exhibit 99.2 (Form of Voting Agreement by and among PCC and the members of the Columbia Board, dated January 9, 2017) hereto and are incorporated herein by reference.