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As filed with the Securities and Exchange Commission on August 11, 2009
Registration No. 333-
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM S-4
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
 
SP ACQUISITION HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
         
Delaware
(State or other jurisdiction
of incorporation or organization)
  6770
(Primary Standard Industrial
Classification Code Number)
  20-8523583
(I.R.S. Employer
Identification No.)
SP Acquisition Holdings, Inc.
590 Madison Avenue
32
nd Floor
New York, New York 10022
(212) 520-2300

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Warren G. Lichtenstein
Chairman, President and Chief Executive Officer
SP Acquisition Holdings, Inc.
590 Madison Avenue
32
nd Floor
New York, New York 10022
(212) 520-2300
Fax: (212) 520-2343

(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
         
Steven Wolosky
Kenneth A. Schlesinger
Olshan Grundman Frome
Rosenzweig & Wolosky LLP
Park Avenue Tower
65 East 55
th Street
New York, New York 10022
(212) 451-2300
  Douglas S. Ellenoff
Stuart Neuhauser
Asim Grabowski-Shaikh
Ellenoff Grossman & Schole LLP
150 East 42nd Street
New York, New York 10017
(212) 370-1300
  Glen P. Garrison
Thomas A. Sterken
Keller Rohrback LLP
1201 Third Avenue, Suite 3200
Seattle, Washington 98101-3052
(206) 623-1900
Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective and all other conditions to the merger contemplated by the merger agreement described in the included proxy statement/prospectus have been satisfied or waived.
If the securities being registered on this Form are to be offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o
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. o
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. o
Indicate by check mark whether the registrant is a large accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
             
Large accelerated filer o   Accelerated filer þ   Non-accelerated filer o   Smaller reporting company o
        (Do not check if a smaller reporting company)    
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) o
Exchange Act Rule 14d-1(d) (Cross-Border Third-Party Tender Offer) o
CALCULATION OF REGISTRATION FEE
                                 
    Amount to     Proposed Maximum     Proposed Maximum     Amount of  
Title of each Class of Securities   be     Offering Price Per     Aggregate Offering     Registration  
to be Registered   Registered(1)     Security(2)     Price(2)     Fee(2)  
Common Stock, $0.001 par value
    2,500,000       N/A       $30,871,363.72 (2)       $1,722.62 (2)  
Warrants to purchase shares of Common Stock
    2,500,000       N/A       (3)       (3)  
     
(1)   Based upon the maximum number of shares of common stock of SP Acquisition Holdings, Inc. that may be issued in exchange for shares of common stock of Frontier Financial Corporation pursuant to the merger described in the joint proxy statement/prospectus which is a part of this registration statement. Pursuant to Rule 416, this registration statement also covers an indeterminate number of shares of common stock as may become issuable as a result of stock splits, stock dividends, or similar transactions.
 
(2)   Estimated solely for the purpose of calculating the registration fee required by Section 6(b) of the Securities Act of 1933, as amended. The proposed maximum aggregate offering price for SP Acquisition Holdings, Inc.’s common stock was calculated based upon the market value of shares of Frontier Financial Corporation common stock (the securities being cancelled in the merger) in accordance with Rules 457(c) and (f) of the Securities Act as follows: the product of (x) $0.655, the average of the high and low sales prices of Frontier Financial Corporation common stock, as reported on the NASDAQ Global Select Market, on August 4, 2009, and (y) 47,131,853, the estimated maximum number of shares of Frontier Financial Corporation common stock that may be exchanged for shares of common stock of SP Acquisition Holdings, Inc.
 
(3)   The registration fee is calculated in accordance with footnote 2 above. For each share of common stock of Frontier Financial Corporation exchanged in the merger, the holder thereof will be entitled to receive 0.0530 shares of common stock of SP Acquisition Holdings, Inc. and 0.0530 warrants to purchase common stock of SP Acquisition Holdings, Inc.
 
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 Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
 
 

 

 


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SP ACQUISITION HOLDINGS, INC.
590 Madison Avenue
32nd Floor
New York, New York 10022
 
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On [______], 2009
 
To the Stockholders of SP Acquisition Holdings, Inc.:
Notice is hereby given that a special meeting of the stockholders of SP Acquisition Holdings, Inc. (“SPAH”) will be held on [_____], [_____], 2009 at [_____]:00 [_____].m., local time, at [_____]. The special meeting is being called for the following purposes:
  1.   To consider and vote upon a proposal to adopt an amendment to the amended and restated certificate of incorporation of SPAH (the “SPAH Certificate of Amendment”) to eliminate the requirement that the fair market value of the target business equal at least 80% of the balance of SPAH’s trust account, to be effective immediately prior to the consummation of the merger described below (the “Initial Charter Amendment”);
  2.   To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of July 30, 2009, by and between SPAH and Frontier Financial Corporation (“Frontier”), as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of August 10, 2009, pursuant to which Frontier will merge with and into SPAH, as described in more detail in the accompanying joint proxy statement/prospectus;
  3.   To consider and vote upon a proposal to adopt an amendment to the SPAH Certificate of Amendment to (i) change SPAH’s corporate name to “Frontier Financial Corporation,” (ii) permit SPAH’s continued existence after October 10, 2009, and (iii) create a new class of common stock of SPAH (Non-Voting Common Stock) to have economic rights but no voting rights, in each case to be effective upon consummation of the merger (the “Subsequent Charter Amendments”); and
  4.   To consider and vote upon a proposal to elect to the Board of Directors of SPAH, Warren G. Lichtenstein, who will serve as Chairman of the Board, and, if the merger is consummated, four directors from Frontier, comprised of Patrick M. Fahey, [                    ], [                    ] and [                     ], each of whom currently serve on the Board of Directors of Frontier, in each case to serve until the next annual meeting of SPAH and until their successors shall have been elected and qualified.
At the special meeting, we may transact such other business as may properly come before the meeting and any adjournments or postponements thereof.
Immediately prior to the special meeting of stockholders, SPAH has scheduled a special meeting of warrantholders to consider and vote upon a proposal to amend certain terms of the warrant agreement that governs the terms of SPAH’s outstanding warrants to purchase common stock, as more fully described in the accompanying joint proxy statement/prospectus. If the requisite approval is received, the Initial Charter Amendment will be filed with the Delaware Secretary of State immediately upon its approval and prior to the stockholders’ consideration of the merger proposal at the special meeting of stockholders. Accordingly, the proposal to adopt the merger agreement will only be presented for a vote at the special meeting if (i) the Initial Charter Amendment is adopted by SPAH stockholders and (ii) the proposal to amend the warrant agreement is approved by SPAH warrantholders. The Subsequent Charter Amendments and the election of the Frontier nominees will only be effected in the event and at the time the merger with Frontier is consummated, although approval of the Subsequent Charter Amendments is a condition to closing the merger. The election of Mr. Lichtenstein does not require the approval of any other proposals to be effective.

 

 


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SPAH has fixed the close of business on [                    ], 2009 as the record date for determining those stockholders entitled to notice of, and to vote at, the special meeting and any adjournments or postponements thereof.
If you hold shares of common stock issued in SPAH’s initial public offering (whether such shares were acquired pursuant to such initial public offering or afterwards up to and until the record date), then you have the right to vote against the merger proposal and demand that SPAH convert such shares into cash equal to a pro rata share of the aggregate amount then on deposit in the trust account in which a substantial portion of the net proceeds of SPAH’s initial public offering are held. For more information regarding your conversion rights, see the discussion under the heading “The Merger and the Merger Agreement— Conversion Rights of SPAH Stockholders” of the accompanying joint proxy statement/prospectus.
Whether or not you plan to attend the special meeting in person, please complete, date, sign and return the enclosed proxy card as promptly as possible. SPAH has enclosed a postage prepaid envelope for that purpose. Any SPAH stockholder may revoke his or her proxy by following the instructions in the joint proxy statement/prospectus at any time before the proxy has been voted at the special meeting. Even if you have given your proxy, you may still vote in person if you attend the special meeting.
SPAH encourages you to vote on these very important matters. The Board of Directors of SPAH unanimously recommends that SPAH stockholders vote “FOR” each of the proposals above.
By Order of the Board of Directors,
Warren G. Lichtenstein
Chairman, President and Chief Executive Officer
[                    ], 2009
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting of Stockholders to Be
Held on [______], 2009. This Proxy Statement is available electronically at [______].

 

 


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SP ACQUISITION HOLDINGS, INC.
590 Madison Avenue
32nd Floor
New York, New York 10022
 
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
To Be Held On [______], 2009
 
To the Stockholders of SP Acquisition Holdings, Inc.:
You are cordially invited to attend a special meeting of the stockholders of SP Acquisition Holdings, Inc. (“SPAH”). The special meeting will be held on [_____], [_____], 2009 at [_____]:00 [_____].m., local time, at [_____].
At the special meeting, you will be asked to consider and vote on (1) a proposal to adopt an amendment to the amended and restated certificate of incorporation of SPAH (the “SPAH Certificate of Amendment”) to eliminate the requirement that the fair market value of the target business equal at least 80% of the balance of SPAH’s trust account, effective immediately prior to the consummation of the merger described below (the “Initial Charter Amendment”); (2) a proposal to adopt the Agreement and Plan of Merger, dated as of July 30, 2009, by and between SPAH and Frontier Financial Corporation (“Frontier”), as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of August 10, 2009, pursuant to which Frontier will merge with and into SPAH; (3) a proposal to adopt an amendment to the SPAH Certificate of Incorporation to (i) change SPAH’s corporate name to “Frontier Financial Corporation,” (ii) permit SPAH’s continued existence after October 10, 2009, and (iii) create a new class of common stock of SPAH (Non-Voting Common Stock) which will have economic rights but no voting rights, in each case effective upon consummation of the merger (the “Subsequent Charter Amendments”); (4) a proposal to elect to the Board of Directors of SPAH, Warren G. Lichtenstein, who will serve as Chairman of the Board, and, if the merger is consummated, four directors from Frontier, comprised of Patrick M. Fahey, [______], [______] and [______], each of whom currently serve on the Board of Directors of Frontier, in each case to serve until the next annual meeting of SPAH and until their successors shall have been elected and qualified, and (5) any other matters that may properly come before the special meeting or any adjournments or postponements thereof.
Adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of SPAH common stock entitled to vote at the special meeting. The SPAH Certificate of Incorporation also requires that the holders of a majority of SPAH’s outstanding shares of common stock issued in SPAH’s initial public offering are voted, in person or by proxy, in favor of the merger and that such SPAH public stockholders owning no more than 30% (minus one share) of the shares sold in SPAH’s initial public offering vote against the merger and thereafter exercise their conversion rights as described below. Notwithstanding the foregoing, it is a condition to closing the merger agreement that holders of no more than 10% of the shares (minus one share) sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights, although at SPAH’s discretion, this closing condition may be waived in order to consummate the merger. Accordingly, SPAH may not consummate the merger if 10% or more of the holders of shares sold in or subsequent to SPAH’s initial public offering elect to exercise their conversion rights. If SPAH elects to waive this closing condition, it may raise the conversion threshold to anywhere between 10% to 30% (minus one share). Adoption of the amendments to the SPAH Certificate of Incorporation requires the affirmative vote of a majority of the shares of SPAH’s outstanding common stock entitled to vote at the special meeting. Directors will be elected by a plurality of the votes cast by stockholders present in person or represented by proxy and entitled to vote at the special meeting.

 

 


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Immediately prior to the special meeting of stockholders, SPAH has scheduled a special meeting of warrantholders to consider and vote upon a proposal to amend certain terms of the warrant agreement that governs the terms of SPAH’s outstanding warrants to purchase common stock, as more fully described in the accompanying joint proxy statement/prospectus. If the requisite approval is received, the Initial Charter Amendment will be filed with the Delaware Secretary of State immediately upon its approval and prior to the stockholders’ consideration of the merger proposal at the special meeting of stockholders. Accordingly, the proposal to adopt the merger agreement will only be presented for a vote at the special meeting if (i) the Initial Charter Amendment is adopted by SPAH stockholders and (ii) the proposal to amend the warrant agreement is approved by SPAH warrantholders. The Subsequent Charter Amendments and the election of the Frontier nominees will only be effected in the event and at the time the merger with Frontier is consummated, although approval of the Subsequent Charter Amendments is a condition to closing the merger. The election of Mr. Lichtenstein does not require the approval of any other proposals to be effective.
Only holders of record of SPAH common stock at the close of business on [______], 2009 are entitled to notice of the special meeting and to vote and have their votes counted at the special meeting and any adjournments or postponements thereof.
If you hold shares of common stock issued in SPAH’s initial public offering (whether such shares were acquired pursuant to such initial public offering or afterwards up to and until the record date for the special meeting), then you have the right to vote against the merger proposal and demand that SPAH convert such shares into cash equal to a pro rata share of the aggregate amount then on deposit in the trust account in which a substantial portion of the net proceeds of SPAH’s initial public offering are held (before payment of deferred underwriting discounts and commissions and including interest earned on their pro rata portion of the trust account, net of income taxes payable on such interest and net of interest income of $3.5 million on the trust account balance previously released to SPAH to fund its working capital requirements). As of [______], 2009, there was $[______] in the trust account, including accrued interest on the funds in the trust account, or approximately $[______] per share issued in the initial public offering. The actual conversion price will differ from the $[______] per share due to any interest earned on the funds in the trust account since [______], 2009, and any taxes payable in respect of interest earned thereon.
If you wish to exercise your conversion rights, you must:
    affirmatively vote against the merger proposal in person or by submitting your proxy card before the vote on the merger proposal and checking the box that states “Against” for proposal number 1; and
    either:
    check the box that states “Exercise Conversion Rights” on the proxy card; or
    send a letter to SPAH’s transfer agent, Continental Stock Transfer & Trust Company, at 17 Battery Place, 8th Floor, New York, NY 10004, attn: Mark Zimkind, stating that you are exercising your conversion rights and demanding your shares of SPAH common stock be converted into cash; and
    either:
    physically tender, or if you hold your shares of SPAH common stock in “street name,” cause your broker to physically tender, your stock certificates representing shares of SPAH common stock to SPAH’s transfer agent; or
    deliver your shares electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, to SPAH’s transfer agent by [______], 2009. See “Summary Term Sheet—The Merger and the Merger Agreement—SPAH Conversion Rights” and “The Merger and the Merger Agreement—Conversion Rights of SPAH Stockholders.”
Prior to exercising your conversion rights, you should verify the market price of SPAH’s common stock, as you may receive higher proceeds from the sale of your common stock in the public market than from exercising your conversion rights. Shares of SPAH’s common stock are currently quoted on the NYSE AMEX LLC under the symbol “DSP.” On [______], 2009, the record date for the special meeting of stockholders, the last sale price of SPAH’s common stock was $[______]. Your shares will only be converted if the merger is consummated and you voted against the merger and properly demanded conversion rights according to the instructions in this letter and the joint proxy statement/prospectus.

 

 


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Each of SP Acq LLC, Steel Partners II, L.P. (“SP II”) and Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S. Nicholas Walker, each a director of SPAH, or their permitted transferees (collectively, the “SPAH insiders”), previously agreed to vote their 10,822,400 shares of SPAH common stock acquired prior to SPAH’s initial public offering (which constitute approximately 20% of SPAH’s outstanding shares of common stock), either for or against the merger proposal consistent with the majority of the votes cast on the merger by the holders of the shares of common stock issued in, or subsequent to, SPAH’s initial public offering. To the extent any SPAH insider or officer or director of SPAH has acquired shares of SPAH common stock in, or subsequent to, SPAH’s initial public offering, it, he or she has agreed to vote these acquired shares in favor of the merger proposal. As of the date hereof, none of the SPAH insiders or officers or directors of SPAH own any shares sold in, or subsequent to, SPAH’s initial public offering. The SPAH insiders have further indicated that they will vote all of their shares in favor of the adoption of the amendments to the SPAH Certificate of Incorporation and for the election of each director nominee to the Board of Directors of SPAH. Pursuant to a plan of reorganization, SP II has contributed certain assets, including its shares of SPAH common stock and warrants, to a liquidating trust. The trust has agreed to assume all of SP II’s rights and obligations with respect to these shares and warrants, including to vote in accordance with the foregoing.
Upon consummation of the merger, SP Acq LLC and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have agreed to forfeit an aggregate of 9,453,412 shares purchased prior to SPAH’s initial public offering, constituting approximately 17.5% of SPAH’s outstanding shares of common stock as of the record date.
The Board of Directors of SPAH has unanimously determined that the proposals and the transactions contemplated thereby are fair to and in the best interests of SPAH and its stockholders. The Board of Directors of SPAH recommends that you vote, or give instruction to vote, “FOR” the adoption of each of the proposals and that you vote in favor of each of the director nominees.
The accompanying joint proxy statement/prospectus contains detailed information concerning the merger proposal and the transactions contemplated by the merger agreement, as well as detailed information concerning each of the proposals. We urge you to read the joint proxy statement/prospectus and attached annexes carefully.
Your vote is important. Whether or not you plan to attend the special meeting in person, please sign, date and return the enclosed proxy card as soon as possible in the envelope provided.
I look forward to seeing you at the meeting.
By Order of the Board of Directors,
Warren G. Lichtenstein
Chairman, President and Chief Executive Officer
TAKING ANY ACTION THAT DOES NOT INCLUDE AN AFFIRMATIVE VOTE AGAINST THE MERGER, INCLUDING ABSTAINING FROM VOTING ON THE MERGER PROPOSAL, WILL PREVENT YOU FROM EXERCISING YOUR CONVERSION RIGHTS. YOU MUST AFFIRMATIVELY VOTE AGAINST THE MERGER PROPOSAL IN PERSON OR BY SUBMITTING YOUR PROXY CARD BEFORE THE VOTE ON THE MERGER PROPOSAL TO EXERCISE YOUR CONVERSION RIGHTS. IN ORDER TO CONVERT YOUR SHARES, YOU MUST ALSO EITHER PHYSICALLY TENDER, OR IF YOU HOLD YOUR SHARES OF SPAH COMMON STOCK IN “STREET NAME,” CAUSE YOUR BROKER TO PHYSICALLY TENDER, YOUR STOCK CERTIFICATES REPRESENTING SHARES OF SPAH COMMON STOCK TO SPAH’S TRANSFER AGENT OR DELIVER YOUR SHARES ELECTRONICALLY USING THE DEPOSITORY TRUST COMPANY’S DWAC SYSTEM, TO SPAH’S TRANSFER AGENT BY [______], 2009. FAILURE TO MEET THESE REQUIREMENTS WILL CAUSE YOUR CONVERSION DEMAND TO BE REJECTED. SEE THE SECTIONS ENTITLED “SUMMARY TERM SHEET—THE MERGER AND THE MERGER AGREEMENT—SPAH CONVERSION RIGHTS” AND “THE MERGER AND THE MERGER AGREEMENT— CONVERSION RIGHTS OF SPAH STOCKHOLDERS” FOR MORE SPECIFIC INSTRUCTIONS.

 

 


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SP ACQUISITION HOLDINGS, INC.
590 Madison Avenue
32nd Floor
New York, New York 10022
 
NOTICE OF SPECIAL MEETING OF WARRANTHOLDERS
To Be Held On [______], 2009
 
To the Warrantholders of SP Acquisition Holdings, Inc.:
Notice is hereby given that a special meeting of the warrantholders of SP Acquisition Holdings, Inc. (“SPAH”) will be held on [_____], [_____], 2009 at [_____]:00 [_____].m., local time, at [_____]. The special meeting is being called to consider and vote upon a proposal to amend certain terms of the Amended and Restated Warrant Agreement, dated as of October 4, 2007, by and between SPAH and Continental Stock Transfer & Trust Company, which governs the terms of SPAH’s outstanding warrants to purchase common stock (the “Warrant Agreement”), in connection with the consummation of the transactions contemplated by the Agreement and Plan of Merger, dated as of July 30, 2009, by and between SPAH and Frontier Financial Corporation (“Frontier”), as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of August 10, 2009, which, among other things, provides for the merger of Frontier with and into SPAH, with SPAH being the surviving entity.
The proposed amendment to the Warrant Agreement, to become effective upon consummation of the merger, will:
    increase the exercise price of the warrants from $7.50 per share to $11.50 per share of SPAH common stock;
    amend the warrant exercise period to (i) eliminate the requirement that the initial founder’s warrants owned by the SPAH insiders become exercisable only after the consummation of an initial business combination if and when the last sales price of SPAH common stock exceeds $14.25 per share for any 20 trading days within a 30 trading day period beginning 90 days after such business combination and (ii) extend the expiration date of the warrants to the earlier of (x) seven years from the consummation of the merger or (y) the date fixed for redemption of the warrants set forth in the warrant agreement;
    provide for the mandatory downward adjustment of the exercise price for each warrant to reflect any cash dividends paid with respect to the outstanding common stock of SPAH;
    provide that, in the event an effective registration statement is not in place on the date the warrants are set to expire, the warrants will remain outstanding until 90 days after an effective registration statement is filed, provided, that if SPAH has not filed an effective registration statement within 90 days after the expiration date, the warrants shall become exercisable for cash consideration;
    provide that no adjustment in the number of shares issuable upon exercise of each warrant will be made as a result of the issuance of SPAH shares and warrants to the shareholders of Frontier upon consummation of the merger agreement; and
    provide that each warrant will entitle the holder thereof to purchase, in its sole discretion, either one share of voting common stock or one share of non-voting common stock.
At the special meeting, we may transact such other business as may properly come before the special meeting or any adjournments or postponements thereof.
The merger and the transactions contemplated by the merger, as well as the amendment to the Warrant Agreement, are described in the accompanying joint proxy statement/prospectus, which you are encouraged to read in its entirety before voting. Only holders of record of SPAH warrants at the close of business on [______], 2009 are entitled to notice of the special meeting and to vote and have their votes counted at the special meeting and any adjournments or postponements thereof. The approval of the warrant amendment proposal is a condition to the consummation of the merger discussed above.

 

 


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After careful consideration, SPAH’s Board of Directors has determined that the proposals are fair to and in the best interests of SPAH and its warrantholders and unanimously recommends that you vote or give instruction to vote “FOR” the approval of the amendment proposal.
All SPAH warrantholders are cordially invited to attend the special meeting in person. To ensure your representation at the special meeting, however, you are urged to complete, sign, date and return the enclosed proxy card as soon as possible. If you are a warrantholder of record of SPAH, you may also cast your vote in person at the special meeting. If your warrants are held in an account at a brokerage firm or bank, you must instruct your broker or bank on how to vote your warrants or, if you wish to attend the meeting and vote in person, obtain a proxy from your broker or bank. If you do not vote or do not instruct your broker or bank how to vote, it will have the same effect as voting against the amendment proposal.
Your vote is important regardless of the number of warrants you own. Whether you plan to attend the special meeting or not, please sign, date and return the enclosed proxy card as soon as possible in the envelope provided. If your warrants are held in “street name” or are in a margin or similar account, you should contact your broker to ensure that votes related to the warrants you beneficially own are properly counted.
Thank you for your participation. We look forward to your continued support.
By Order of the Board of Directors,
Warren G. Lichtenstein
Chairman, President and Chief Executive Officer
[                    ], 2009
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting of Warrantholders to
Be Held on [______], 2009. This Proxy Statement is available electronically at [______].

 

 


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SP ACQUISITION HOLDINGS, INC.
590 Madison Avenue
32nd Floor
New York, New York 10022
 
PROXY STATEMENT
FOR
SPECIAL MEETING OF WARRANTHOLDERS
To Be Held On [______], 2009
 
To the Warrantholders of SP Acquisition Holdings, Inc.:
You are cordially invited to attend a special meeting of the warrantholders of SP Acquisition Holdings, Inc. (“SPAH”). The special meeting will be held on [_____], [_____], 2009 at [_____]:00 [_____].m., local time, at [_____].
The special meeting is being called to consider and vote upon a proposal to amend certain terms of the Amended and Restated Warrant Agreement, dated as of October 4, 2007, by and between SPAH and Continental Stock Transfer & Trust Company (the “Warrant Agreement”), which governs the terms of SPAH’s outstanding warrants to purchase common stock, in connection with the consummation of the transactions contemplated by the Agreement and Plan of Merger, dated as of July 30, 2009, by and between SPAH and Frontier Financial Corporation (“Frontier”), as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of August 10, 2009, which provides for the merger of Frontier with and into SPAH, with SPAH being the surviving entity, and for each holder of Frontier common stock to receive 0.0530 shares of common stock and 0.0530 warrants.
The proposed amendment to the Warrant Agreement, to become effective upon consummation of the merger, will (i) increase the exercise price of the warrants from $7.50 per share to $11.50 per share of SPAH common stock; (ii) amend the warrant exercise period to (A) eliminate the requirement that the initial founder’s warrants owned by the SPAH insiders become exercisable only after the consummation of an initial business combination if and when the last sales price of SPAH common stock exceeds $14.25 per share for any 20 trading days within a 30 trading day period beginning 90 days after such business combination and (B) extend the expiration date of the warrants to the earlier of (x) seven years from the consummation of the merger or (y) the date fixed for redemption of the warrants set forth in the warrant agreement; (iii) provide for the mandatory downward adjustment of the exercise price for each warrant to reflect any cash dividends paid with respect to the outstanding common stock of SPAH; (iv) provide that, in the event an effective registration statement is not in place on the date the warrants are set to expire, the warrants will remain outstanding until 90 days after an effective registration statement is filed, provided, that if SPAH has not filed an effective registration statement within 90 days after the expiration date, the warrants shall become exercisable for cash consideration; (v) provide that no adjustment in the number of shares issuable upon exercise of each warrant will be made as a result of the issuance of SPAH shares and warrants to the shareholders of Frontier upon consummation of the merger agreement; and (vi) provide that each warrant will entitle the holder thereof to purchase, in its sole discretion, either one share of voting common stock or one share of non-voting common stock. At the special meeting, we may transact such other business as may properly come before the special meeting or any adjournments or postponements thereof.
Only holders of record of SPAH warrants at the close of business on [______], 2009 are entitled to notice of the special meeting and to vote and have their votes counted at the special meeting and any adjournments or postponements thereof. Adoption of the amendment to the Warrant Agreement requires the affirmative vote of a majority of the warrantholders outstanding and entitled to vote at the special meeting. The Warrant Agreement also requires that the holders of a majority of SPAH’s outstanding warrants issued in, or subsequent to, SPAH’s initial public offering, are voted in favor of the warrant amendment. Each of SPAH’s directors and founding stockholders, including SP Acq LLC and Steel Partners II, L.P., or their permitted transferees (the “SPAH insiders”), which own, in the aggregate, 17,822,400 warrants issued prior to consummation of SPAH’s initial public offering, or approximately 29.2% of the total warrants outstanding as of [______], 2009, intend to vote in favor of the warrant amendment proposal.

 

 


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The approval of the warrant amendment proposal is a condition to the consummation of the merger discussed above. If the merger is consummated, Frontier shareholders will receive approximately 2.5 million newly issued warrants on the same terms and conditions as the publicly traded warrants, after giving effect to the warrant amendment proposal.
After careful consideration, SPAH’s Board of Directors has determined that the proposals are fair to and in the best interests of SPAH and its warrantholders and unanimously recommends that you vote or give instruction to vote “FOR” the approval of the amendment proposal.
Enclosed is the joint proxy statement/prospectus containing detailed information concerning the amendment proposal, the merger and the transactions contemplated by the merger agreement. We urge you to read the joint proxy statement/prospectus and attached annexes carefully.
Thank you for your participation. We look forward to your continued support.
By Order of the Board of Directors,
Warren G. Lichtenstein
Chairman, President and Chief Executive Officer
IF YOU RETURN YOUR PROXY CARD WITHOUT AN INDICATION OF HOW YOU WISH TO VOTE, YOUR WARRANTS WILL BE VOTED IN FAVOR OF THE WARRANT AMENDMENT PROPOSAL. IF THE MERGER IS NOT COMPLETED AND SPAH DOES NOT COMPLETE AN INITIAL BUSINESS COMBINATION PRIOR TO OCTOBER 10, 2009, THE WARRANTS WILL EXPIRE WORTHLESS.

 

 


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FRONTIER FINANCIAL CORPORATION
332 S.W. Everett Mall Way
P. O. Box 2215
Everett, Washington 98213
 
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held On [______], 2009
 
To the Shareholders of Frontier Financial Corporation:
Notice is hereby given that a special meeting of the shareholders of Frontier Financial Corporation (“Frontier”) will be held on [_____], [_____], 2009 at [_____]:00 [_____].m., local time, at [_____]. The special meeting is being called to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of July 30, 2009, by and between Frontier and SP Acquisition Holdings, Inc. (“SPAH”), as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of August 10, 2009, pursuant to which Frontier will merge with and into SPAH, as described in more detail in the accompanying joint proxy statement/prospectus. At the special meeting, we may transact such other business as may properly come before the special meeting and any adjournments or postponements thereof.
Frontier has fixed the close of business on [______], 2009 as the record date for determining those shareholders entitled to notice of, and to vote at, the special meeting and any adjournments or postponements thereof.
Frontier shareholders have the right to dissent from the merger and obtain payment of the fair value of their Frontier shares under Washington law. A copy of the applicable Washington statutory provisions regarding dissenters’ rights is attached as Annex F to the accompanying joint proxy statement/prospectus. For details of your dissenters’ rights and applicable procedures, please see the discussion under the heading “The Merger and the Merger Agreement— Frontier Dissenters’ Rights” of the attached joint proxy statement/prospectus.
Whether or not you plan to attend the special meeting in person, please complete, date, sign and return the enclosed proxy card as promptly as possible. Frontier has enclosed a postage prepaid envelope for that purpose. Any Frontier shareholder may revoke his or her proxy by following the instructions in the joint proxy statement/prospectus at any time before the proxy has been voted at the special meeting. Even if you have given your proxy, you may still vote in person if you attend the special meeting. Please do not send any share certificates to Frontier at this time.
Frontier encourages you to vote on this very important matter. The Board of Directors of Frontier unanimously recommends that Frontier shareholders vote “FOR” the proposals above.
By Order of the Board of Directors,
Patrick M. Fahey
Chairman and Chief Executive Officer
[                    ], 2009
Important Notice Regarding the Availability of Proxy Materials for the Special Meeting of Shareholders to
Be Held on [______], 2009. This Proxy Statement is available electronically at www.frontierbank.com.

 

 


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FRONTIER FINANCIAL CORPORATION
332 S.W. Everett Mall Way
P. O. Box 2215
Everett, Washington 98213
 
PROXY STATEMENT
FOR
SPECIAL MEETING OF STOCKHOLDERS
To Be Held On [______], 2009
 
To the Shareholders of Frontier Financial Corporation:
You are cordially invited to attend a special meeting of the shareholders of Frontier Financial Corporation (“Frontier”). The special meeting will be held on [_____], [_____], 2009 at [_____]:00 [_____].m., local time, at [_____].
At the special meeting, you will be asked to consider and vote on (i) a proposal to adopt the Agreement and Plan of Merger, dated as of July 30, 2009, by and between Frontier and SP Acquisition Holdings, Inc. (“SPAH”), as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of August 10, 2009; and (ii) any other matters that may properly come before the special meeting and any adjournments or postponements thereof.
Only holders of record of Frontier common stock at the close of business on [______], 2009 are entitled to notice of the special meeting and to vote and have their votes counted at the special meeting and any adjournments or postponements thereof. Adoption of the merger agreement requires the affirmative vote of at least two-thirds of the outstanding shares of Frontier’s outstanding common stock entitled to vote at the special meeting.
If the proposed merger is completed, Frontier shareholders will receive 0.0530 newly issued shares of SPAH common stock and 0.0530 newly issued warrants to purchase SPAH common stock for each share of Frontier common stock they own, subject to possible adjustment as described in this joint proxy statement/prospectus. Contemporaneously with the Frontier special meeting of stockholders, SPAH has scheduled a special meeting of warrantholders to consider and vote upon a proposal to amend certain terms of the warrant agreement that governs the terms of SPAH’s outstanding warrants, as more fully described in the accompanying joint proxy statement/prospectus. If the merger is consummated, Frontier shareholders will receive newly issued warrants on the same terms and conditions as the publicly traded warrants, after giving effect to the warrant amendment proposal. On July 30, 2009, the day before the public announcement of the merger agreement, the closing price of SPAH’s common stock on the NYSE AMEX LLC was $9.75 per share.
Each of Frontier’s insiders (including all of Frontier’s executive officers and directors) has agreed to vote their [______] shares of Frontier common stock (which constitute [_____]% of Frontier’s outstanding shares of common stock), “FOR” the merger proposal.
The Frontier Board has unanimously determined that the proposals and the transactions contemplated thereby are fair to and in the best interests of Frontier and its shareholders. The Board recommends that you vote, or give instruction to vote, “FOR” the adoption of the merger proposal.
Frontier shareholders have the right to dissent from the merger and obtain payment of the fair value of their Frontier shares under Washington law. A copy of the applicable Washington statutory provisions regarding dissenters’ rights is attached as Annex F to the accompanying joint proxy statement/prospectus. For details of your dissenters’ rights and applicable procedures, please see the discussion under the heading “The Merger and the Merger Agreement — Frontier Dissenters’ Rights” of the attached joint proxy statement/prospectus.

 

 


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Enclosed is a notice of special meeting and the joint proxy statement/prospectus containing detailed information concerning the merger proposal and the transactions contemplated by the merger agreement. We urge you to read the joint proxy statement/prospectus and attached annexes carefully.
Your vote is important. Because approval of the merger proposal requires the affirmative vote of at least two-thirds of the outstanding shares entitled to vote at the Frontier special meeting, abstaining from voting (including by way of a broker non-vote), either in person or by proxy, will have the same effect as a vote against approval of the merger agreement. Whether or not you plan to attend the special meeting in person, please sign, date and return the enclosed proxy card as soon as possible in the envelope provided. We look forward to seeing you at the special meeting, and we appreciate your continued loyalty and support. I look forward to seeing you at the meeting.
By Order of the Board of Directors,
Patrick M. Fahey
Chairman and Chief Executive Officer

 

 


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The information in this joint proxy statement/prospectus is not complete and may be changed. We may not issue these securities until the registration statement filed with the Securities and Exchange Commission is effective. This joint proxy statement/prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
SUBJECT TO AMENDMENT AND COMPLETION, DATED AUGUST 11, 2009
PROXY STATEMENT FOR THE SPECIAL MEETINGS OF STOCKHOLDERS AND
WARRANTHOLDERS OF SP ACQUISITION HOLDINGS, INC.
PROXY STATEMENT FOR THE SPECIAL MEETING OF SHAREHOLDERS
OF FRONTIER FINANCIAL CORPORATION
PROSPECTUS FOR UP TO 2,500,000 SHARES OF COMMON STOCK AND
UP TO 2,500,000 WARRANTS TO PURCHASE COMMON STOCK
OF SP ACQUISITION HOLDINGS, INC.
The Boards of Directors of SP Acquisition Holdings, Inc., a blank check company organized under the laws of the State of Delaware (“SPAH”), and Frontier Financial Corporation, a Washington corporation (“Frontier”), have unanimously agreed to a merger of our companies. If the proposed merger is completed, Frontier shareholders will receive 0.0530 shares of SPAH common stock and 0.0530 warrants to purchase common stock of SPAH for each share of Frontier common stock they own, subject to possible adjustment as described in this joint proxy statement/prospectus. This 0.0530 multiple, as it may be adjusted, is referred to as the “exchange ratio.”
SPAH was formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition or similar business combination, one or more businesses or assets. Its common stock and warrants are listed on the NYSE AMEX LLC under the symbols “DSP” and “DSP.W,” respectively. Frontier is a bank holding company that directly owns 100% of Frontier Bank, a Washington state chartered commercial bank. Frontier’s common stock is quoted on the NASDAQ Stock Market LLC under the symbol “FTBK.” Frontier’s common stock will no longer be traded following the consummation of the merger. The parties intend to seek to have the common stock and warrants of SPAH listed on the NYSE AMEX LLC following consummation of the merger under the symbol [______]. However, there is no assurance that the common stock and warrants will be listed on any exchange following consummation of the merger.
Based on the closing price of SPAH’s common stock and warrants on [______], 2009 of $[______] and $[______], respectively, Frontier shareholders will receive approximately $[______] worth of SPAH’s common stock and $[______] worth of SPAH’s warrants for each share of Frontier stock they own. The actual value of the SPAH common stock and warrants received by Frontier shareholders in the merger will depend on the market value of SPAH common stock and warrants at the time of closing.
We expect that the Frontier shareholders will hold approximately 2.5 million or 5.0% of the outstanding shares of SPAH common stock and approximately 2.5 million or 3.8% of the outstanding warrants of SPAH on a fully diluted basis immediately following the consummation of the merger, based on the number of shares of SPAH common stock outstanding as of [______], 2009, after giving effect to the forfeiture of 9,453,412 shares of common stock by certain insiders of SPAH and the co-investment by an affiliate of Steel Partners II, L.P. to purchase 3,000,000 units, each consisting of one share of common stock and one warrant it previously agreed to purchase at $10.00 per unit ($30.0 million in the aggregate) in a private placement that will occur immediately prior to the consummation of the merger. This private placement is referred to as the co-investment.
This joint proxy statement/prospectus provides detailed information about the merger, the special meeting of SPAH stockholders, the special meeting of SPAH warrantholders and the special meeting of Frontier shareholders. At the SPAH and Frontier stockholders meetings, stockholders are being asked to consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of July 30, 2009, by and between Frontier and SPAH, as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of August 10, 2009, pursuant to which Frontier will merge with and into SPAH. SPAH is also asking its stockholders to approve other matters in connection with the merger, that are described in this joint proxy statement/prospectus, including certain amendments to SPAH’s Amended and Restated Certificate of Incorporation and the election of directors to the Board of Directors of SPAH. At the SPAH warrantholders meeting, warrantholders are being asked to amend certain terms of the Amended and Restated Warrant Agreement, which governs the terms of SPAH’s outstanding warrants. If the merger is consummated, Frontier shareholders will receive warrants on the same terms and conditions as the publicly traded warrants, after giving effect to the warrant amendment proposal.

 

 


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As described in this joint proxy statement/prospectus, we cannot complete the merger unless SPAH stockholders approve the amendments to SPAH’s Amended and Restated Certificate of Incorporation, holders of no more than 10% of the shares (minus one share) sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights (unless SPAH waives this condition), stockholders of both SPAH and Frontier approve the merger proposal, SPAH warrantholders approve the warrant amendment proposal, SPAH’s application to become a bank holding company is approved, and we obtain the necessary government approvals, among other things.
Please carefully review and consider this joint proxy statement/prospectus which explains the merger proposal in detail, including the discussion under the heading “Risk Factors” beginning on page 39. It is important that your shares are represented at your stockholders’ or warrantholders’ meeting, whether or not you plan to attend. Accordingly, please complete, date, sign, and return promptly your proxy card in the enclosed envelope. You may attend the meeting and vote your shares in person if you wish, even if you have previously returned your proxy.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved the securities to be issued under this joint proxy statement/prospectus or determined if this joint proxy statement/prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
SPAH consummated its initial public offering on October 16, 2007. UBS Investment Bank, Ladenburg Thalmann & Co. Inc. and Jefferies & Company, the underwriters of SPAH’s initial public offering, may provide assistance to SPAH, Frontier and their respective directors and executive officers, and may be deemed to be participants in the solicitation of proxies. Approximately $17.3 million of the underwriters’ discounts and commissions relating to SPAH’s initial public offering were deferred pending stockholder approval of SPAH’s initial business combination and will be released to the underwriters upon consummation of the merger. SPAH is in negotiation with its underwriters regarding the amount and form of payment of such deferred underwriting fees from SPAH’s initial public offering. The results of these negotiations are uncertain and could result in $17,316,000 in additional costs for the proforma company which could be paid in cash. If the merger is not consummated and SPAH is required to be liquidated, the underwriters will not receive any of such fees. Stockholders are advised that the underwriters have a financial interest in the successful outcome of the proxy solicitation. In addition, Frontier engaged Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”) as a financial advisor to assist Frontier in pursuing all strategic alternatives. As part of such engagement, Sandler O’Neill has provided, and Frontier expects that Sandler O’Neill will continue to provide, financial advisory services to Frontier in connection with the proposed merger. Therefore, Sandler O’Neill may be deemed to be a participant in the solicitation of proxies. Sandler O’Neill has received a fee of $500,000 and upon consummation of the merger, will receive $9.5 million payable at the closing of the merger. Stockholders are advised that Sandler O’Neill has a financial interest in the successful outcome of the merger.
This joint proxy statement/prospectus is dated [______], 2009 and is first being mailed to SPAH and Frontier stockholders and SPAH warrantholders on or about [______], 2009.

 

 


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Annex A
  Agreement and Plan of Merger, dated as of July 30, 2009, as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of August 10, 2009.
Annex B
  Form of Certificate of Amendment to Amended and Restated Certificate of Incorporation of SP Acquisition Holdings, Inc.
Annex C
  Form of Second Amended and Restated Certificate of Incorporation of SP Acquisition Holdings, Inc.
Annex D
  Form of Supplement and Amendment to Amended and Restated Warrant Agreement
Annex E
  Fairness Opinion of Keefe, Bruyette & Woods, Inc.
Annex F
  Excerpt of Washington Law on Dissenters’ Rights
Annex G
  Opinion of Morris James LLP
Annex H
  Form of Proxy for SP Acquisition Holdings, Inc. Special Meeting of Stockholders
Annex I
  Form of Proxy for SP Acquisition Holdings, Inc. Special Meeting of Warrantholders
Annex J
  Form of Proxy for Frontier Financial Corporation Special Meeting of Shareholders
 
   
 Exhibit 8.1
 Exhibit 8.2
 EX-23.4 CONSENT OF J.H. COHN LLP
 EX-23.5 CONSENT OF MOSS ADAMS LLP
 EX-23.7 CONSENT OF KEEFE, BRUYETTE & WOODS, INC.
 EX-99.3 CONSENT OF PATRICK M FAHEY

 

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In this joint proxy statement/prospectus, except as otherwise indicated herein, or as the context may otherwise require, (i) all references to “SPAH” refer to SP Acquisition Holdings, Inc., (ii) all references to “Frontier” refer to Frontier Financial Corporation together with its subsidiary, Frontier Bank, (iii) all references to the “SPAH Board” refer to the Board of Directors of SPAH, (iv) all references to the “Frontier Board” refer to the Board of Directors of Frontier, (v) all references to “SP II” refer to Steel Partners II, L.P., (vi) all references to the “Steel Trust” refer to Steel Partners II Liquidating Series Trust, a liquidating trust established for the purpose of effecting the orderly liquidation of certain assets of SP II, (vii) all references to the “SPAH insiders” refer to SP Acq LLC, SP II, Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S. Nicholas Walker or each of their permitted transferees, (viii) all references to the “SPAH public stockholders” refer to purchasers of SPAH’s securities by persons other than SPAH’s insiders in, or subsequent to, SPAH’s initial public offering, (ix) all references to the “SPAH Certificate of Incorporation” refer to the Amended and Restated Certificate of Incorporation of SPAH, (x) all references to the “merger agreement” refer to the Agreement and Plan of Merger, dated as of July 30, 2009, by and between SPAH and Frontier, as amended by Amendment No. 1 to Agreement and Plan of Merger, dated as of August 10, 2009, (xi) all references to the “merger” refer to the merger of SPAH and Frontier pursuant to the terms and conditions of the merger agreement, and (xii) all references to the “Frontier insiders” refer to all of Frontier’s officers, directors and stockholders beneficially owning 5% or more of Frontier’s outstanding common stock (other than Barclay’s Global Investors, State Street Bank and Trust Company and other institutional investors).
GENERAL QUESTIONS AND ANSWERS
Q:     Why am I receiving this joint proxy statement/prospectus?
A:     SPAH and Frontier have agreed to combine their businesses under the terms of a merger agreement that is described in this joint proxy statement/prospectus. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A.
In order to complete the merger, SPAH must register the shares of SPAH common stock, SPAH warrants and shares of common stock underlying the warrants to be issued in the merger, and both SPAH stockholders and Frontier shareholders must adopt the merger agreement, among other things. SPAH will hold a special meeting of its stockholders and Frontier will hold a special meeting of its shareholders to obtain these approvals. SPAH is also asking its stockholders to approve other matters at the SPAH special meeting of stockholders that are described in this joint proxy statement/prospectus, including the Initial Charter Amendment, the Subsequent Charter Amendments, and the election of directors to the SPAH Board.
SPAH warrantholders are being asked to consider and vote upon a proposal to amend certain terms of the Amended and Restated Warrant Agreement, dated as of October 4, 2007, by and between SPAH and Continental Stock Transfer & Trust Company (the “Warrant Agreement”), to (i) increase the exercise price of SPAH’s warrants from $7.50 per share to $11.50 per share; (ii) amend the warrant exercise period to (A) eliminate the requirement that the initial founder’s warrants owned by the SPAH insiders become exercisable only after the consummation of an initial business combination if and when the last sales price of SPAH common stock exceeds $14.25 per share for any 20 trading days within a 30 trading day period beginning 90 days after such business combination and (B) extend the expiration date of the warrants to the earlier of (x) seven years from the consummation of the merger or (y) the date fixed for redemption of the warrants set forth in the warrant agreement; (iii) provide for the mandatory downward adjustment of the exercise price for each warrant to reflect any cash dividends paid with respect to the outstanding common stock of SPAH; (iv) provide that, in the event an effective registration statement is not in place on the date the warrants are set to expire, the warrants will remain outstanding until 90 days after an effective registration statement is filed, provided, that if SPAH has not filed an effective registration statement within 90 days after the expiration date, the warrants shall become exercisable for cash consideration; (v) provide that no adjustment in the number of shares issuable upon exercise of each warrant will be made as a result of the issuance of SPAH shares and warrants to the shareholders of Frontier upon consummation of the merger agreement; and (vi) provide that each warrant will entitle the holder thereof to purchase, in its sole discretion, either one share of voting common stock or one share of Non-Voting Common Stock. Upon consummation of the merger, Frontier shareholders will receive warrants on the same terms and conditions as the publicly traded warrants, after giving effect to the warrant amendment proposal.

 

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This joint proxy statement/prospectus contains important information about the merger and the special meetings of each of SPAH and Frontier, and we recommend you read it carefully.
Q:     Why is Frontier merging with and into SPAH?
A:     SPAH is proposing to acquire Frontier pursuant to the merger agreement. SPAH believes that Frontier, a registered bank holding company, is positioned for significant growth in its current and expected future markets and believes that a business combination with Frontier will provide SPAH stockholders with an opportunity to participate in a company with significant potential. The Frontier Board believes the merger provides Frontier shareholders with the potential to participate in a newly-capitalized company with the ability to take advantage of growth opportunities.
If the merger proposal and related proposals are approved by the stockholders of SPAH and Frontier and the other conditions to completion of the merger are satisfied, including receipt of all necessary government approvals, Frontier will merge with and into SPAH, and SPAH will survive the merger.
Frontier is a Washington corporation which was incorporated in 1983 and is registered as a bank holding company under the Bank Holding Company Act of 1956 (the “BHC Act”). Frontier has one operating subsidiary, Frontier Bank, which is engaged in a general banking business and in businesses related to banking.
SPAH is a blank check company organized to effect an acquisition, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination, of one or more businesses or assets. SPAH consummated its initial public offering on October 16, 2007, generating gross proceeds of approximately $439,896,000 from its initial public offering and sale of warrants (the “additional founder’s warrants”) in a private transaction to SP Acq LLC immediately prior to the initial public offering. SP Acq LLC, which is controlled by Warren G. Lichtenstein, SPAH’s Chairman, President, and Chief Executive Officer, is a holding company founded to form SPAH and hold an investment in SPAH’s units issued prior to SPAH’s initial public offering (the “founder’s units”), consisting of shares of common stock (the “founder’s shares”) and warrants (the “initial founder’s warrants”). SP Acq LLC has sold a total of 500,000 founder’s units to Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S. Nicholas Walker, each a director of SPAH, and has sold 668,988 founder’s units to SP II, an affiliate of SP Acq LLC.
Net proceeds of approximately $425,909,120 were deposited into a trust account, which SPAH intends to use to complete the merger and make payment of the deferred underwriting commissions and discounts. In the event SPAH is unable to complete the merger or another business combination by October 10, 2009, the funds in the trust account will be distributed to the SPAH public stockholders. As of [______], 2009, the balance in the trust account was approximately $[______] million, including approximately $17.3 million of deferred underwriting discounts and commissions. SPAH is in negotiation with its underwriters regarding the amount and form of payment of such deferred underwriting fees from SPAH’s initial public offering. The results of these negotiations are uncertain and could result in $17,316,000 in additional costs for the proforma company which could be paid in cash.
In connection with the initial public offering, SP II previously agreed to purchase an aggregate of 3,000,000 units (the “co-investment units”) at $10.00 per unit ($30.0 million in the aggregate) in a private placement that will occur immediately prior to the consummation of the merger. Pursuant to a plan of reorganization, SP II has contributed certain assets to the Steel Trust, a liquidating trust established for the purpose of effecting the orderly liquidation of such assets. As a result, all of the founder’s shares and initial founder’s warrants owned by SP II have been transferred to the Steel Trust in a private transaction exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). The Steel Trust has agreed to assume all of SP II’s rights and obligations with respect to the founder’s shares and initial founder’s warrants, as more fully described elsewhere in this joint proxy statement/prospectus, including the obligation to purchase the co-investment units.
Q:     How do the Board of Directors of each of SPAH and Frontier recommend that I vote on the merger?
A:     You are being asked to vote “FOR” the approval of the merger of Frontier with and into SPAH pursuant to the terms of the merger agreement. The Board of Directors of each of SPAH and Frontier has unanimously determined that the proposed merger is in the best interests of its stockholders, unanimously approved the merger agreement and unanimously recommend that its stockholders vote “FOR” the approval of the merger.

 

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Q:     When do you expect to complete the merger?
A:     We presently expect to complete the merger in the fourth quarter of 2009. However, we cannot assure you when or if the merger will occur. We must first obtain the approval of SPAH and Frontier stockholders at the special meetings, and receive the necessary regulatory approvals, among other things. Pursuant to the SPAH Certificate of Incorporation, if SPAH does not consummate an initial business combination by October 10, 2009, SPAH will be required to liquidate and dissolve and the SPAH public stockholders would be entitled to participate in liquidation distributions from SPAH’s trust account with respect to their shares.
Q:     What should I do now?
A:     After you have carefully read this joint proxy statement/prospectus, please indicate on your proxy card how you want to vote, and then date, sign and mail your proxy card in the enclosed envelope as soon as possible so that your shares will be represented at the meeting. If you date, sign and send in a proxy card but do not indicate how you want to vote, your proxy will be voted in favor of the merger proposal.
Q:     If my shares are held in “street name” by my broker, will my broker vote my shares for me?
A:     It depends. A broker holding your shares in “street name” must vote those shares according to any specific instructions it receives from you. You should instruct your broker how to vote your shares following the directions your broker provides. If specific instructions are not received, in certain limited circumstances your broker may vote your shares in its discretion. On certain “routine” matters, brokers have authority to vote their customers’ shares if their customers do not provide voting instructions. When brokers vote their customers’ shares on a routine matter without receiving voting instructions, these shares are counted both for establishing a quorum to conduct business at the meeting and in determining the number of shares voted “FOR” or “AGAINST” the routine matter. On “non-routine” matters, brokers cannot vote the shares on that proposal if they have not received voting instructions from the beneficial owner of such shares. If you hold your shares in “street name,” you can either obtain physical delivery of the shares into your name, and then vote your shares yourself, or request a “legal proxy” directly from your broker and bring it to the special meeting, and then vote your shares yourself. In order to obtain shares directly into your name, you must contact your brokerage house representative. Brokerage firms may assess a fee for your conversion; the amount of such fee varies from firm to firm.
SPAH. If you do not provide your broker with voting instructions, your broker may vote your shares at its discretion with regard to the election of directors to the SPAH Board, since these matters are routine. However, your broker may not vote your shares, unless you provide voting instructions, with regard to adoption of the merger agreement, or the adoption of the amendments to the SPAH Certificate of Incorporation, since these matters are not routine. Failure to instruct your broker how to vote your shares will have the same effect as a vote against the adoption of the merger agreement and the adoption of the amendments to the SPAH Certificate of Incorporation, but will have no effect on the election of directors to the SPAH Board.
Frontier. Your broker may not vote your shares, unless you provide voting instructions, with regard to approval of the merger proposal, since this matter is not routine. Failure to instruct your broker how to vote your shares will have the same effect as a vote against the merger proposal.
Q:     Can I change my vote after I have submitted my proxy?
A:     Yes. There are a number of ways you can change your vote. First, you may send a written notice to the person to whom you submitted your proxy stating that you would like to revoke your proxy. Second, you may complete and submit a later-dated proxy with new voting instructions. The latest vote actually received by SPAH or Frontier prior to the special meetings will be your vote. Any earlier votes will be revoked. Third, you may attend the special meeting and vote in person. Any earlier votes will be revoked. Simply attending the special meeting without voting, however, will not revoke your proxy. If you have instructed a broker to vote your shares, you must follow the directions you will receive from your broker to change or revoke your proxy.

 

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Q:     What should I do if I receive more than one set of voting materials?
A:     You may receive more than one set of voting materials, including multiple copies of this joint proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares or warrants in more than one brokerage account, you will receive a separate voting instruction card for each brokerage account in which you hold shares or warrants. If you are a holder of record and your shares or warrants are registered in more than one name, you will receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive in order to cast your vote with respect to all of your shares and/or warrants.
Q:     Whom should I contact with questions about the merger?
A:     If you want additional copies of this joint proxy statement/prospectus, or if you want to ask questions about the merger or the transactions contemplated by the merger agreement, you should contact:
     
SP Acquisition Holdings, Inc.
590 Madison Avenue
32nd Floor
New York, New York 10022
Attn: John McNamara
(212) 520-2300
  Frontier Financial Corporation
332 S.W. Everett Mall Way
P. O. Box 2215
Everett, Washington 98213
Attn: Carol E. Wheeler
Chief Financial Officer
(425) 514-0700

 

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QUESTIONS AND ANSWERS FOR SPAH STOCKHOLDERS
Q:     When and where is the SPAH special meeting of stockholders?
A:     The special meeting of SPAH stockholders will be held on [_____], [_____], 2009 at [_____]:00 [_____].m., local time, at [_____].
Q:     How can I attend the SPAH special meeting?
A:     SPAH stockholders as of the close of business on [______], 2009, and those who hold a valid proxy for the special meeting are entitled to attend the SPAH special meeting. SPAH stockholders should be prepared to present photo identification for admittance. In addition, names of record holders will be verified against the list of record holders on the record date prior to being admitted to the meeting. SPAH stockholders who are not record holders but who hold shares through a broker or nominee (i.e., in street name), should provide proof of beneficial ownership on the record date, such as most recent account statement prior to [______], 2009, or other similar evidence of ownership. If SPAH stockholders do not provide photo identification or comply with the other procedures outlined above upon request, they will not be admitted to the SPAH special meeting.
The SPAH special meeting will begin promptly at [______] [______].m., local time. Check-in will begin at [______] [______].m., local time, and you should allow ample time for the check-in procedures.
Q:     What is being proposed, other than the merger, to be voted on at the SPAH special meeting?
A:     SPAH’s stockholders are being asked to (1) adopt an amendment to the SPAH Certificate of Incorporation to amend the definition of “initial business combination” to eliminate the requirement that the fair market value of the target business equal at least 80% of the balance of SPAH’s trust account (excluding underwriting discounts and commissions) plus the proceeds of the co-investment, to be effective immediately prior to the consummation of the merger (the “Initial Charter Amendment”), (2) adopt an amendment to the SPAH Certificate of Incorporation to (i) change SPAH’s corporate name to “Frontier Financial Corporation,” (ii) permit SPAH’s continued existence after October 10, 2009, and (iii) create a new class of common stock of SPAH (the “Non-Voting Common Stock”), which will have economic rights but no voting rights, in each case to be effective upon consummation of the merger (the “Subsequent Charter Amendments”); and (3) elect to the SPAH Board, Warren G. Lichtenstein, who will serve as Chairman of the Board, and, if the merger is consummated, four directors from Frontier, comprised of Patrick M. Fahey, [______], [______] and [______], each of whom currently serve on the Frontier Board, in each case to serve until the next annual meeting of SPAH and until their successors shall have been elected and qualified. At the special meeting, SPAH may also transact such other business as may properly come before the special meeting or any adjournments or postponements thereof.
Q:     Are the proposals conditioned on one another?
A:     Yes. Unless SPAH and Frontier agree otherwise, the merger proposal will only be presented for a vote at the special meeting if (i) the Initial Charter Amendment is approved by SPAH stockholders and (ii) the proposal to amend SPAH’s Warrant Agreement is approved at the special meeting of SPAH warrantholders to be held immediately prior to the special meeting of SPAH stockholders. The Subsequent Charter Amendments and the election of the Frontier nominees will only be effected in the event and at the time the merger with Frontier is consummated, although approval of the Subsequent Charter Amendments is a condition to closing the merger. The election of Mr. Lichtenstein does not require the approval of any other proposals to be effective.

 

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Q:     Why is SPAH proposing the Initial Charter Amendment?
A:     SPAH is proposing the Initial Charter Amendment to revise the definition of an “initial business combination” to eliminate the requirement that the fair market value of the target business equal at least 80% of the balance of SPAH’s trust account (excluding underwriting discounts and commissions) plus the proceeds of the co-investment. Because the fair market value of Frontier on the date of the merger will be less than 80% of the balance of the trust account (excluding underwriting discounts and commissions) plus the proceeds of the co- investment, the proposed merger does not meet the fair market value requirement. Accordingly, SPAH must amend the SPAH Certificate of Incorporation immediately prior to presenting the merger proposal for a vote at the special meeting of stockholders. SPAH believes that the proposed merger is an extremely attractive opportunity in the current market environment and therefore, SPAH public stockholders should be given the opportunity to consider the business combination. In considering the Initial Charter Amendment, the SPAH Board came to the conclusion that the potential benefits of the proposed merger with Frontier to SPAH and its stockholders outweighed the possibility of any liability described below as a result of this amendment being approved. SPAH is offering holders of up to 10% (minus one share) sold in SPAH’s initial public offering, the ability to affirmatively vote such shares against the merger proposal and demand that such shares be converted into a pro rata portion of the trust account. Accordingly, SPAH believes that the Initial Charter Amendment is consistent with the spirit in which SPAH offered its securities to the public. If the requisite approval is received, the Initial Charter Amendment will be filed with the Delaware Secretary of State immediately upon its approval and prior to the stockholders’ consideration of the merger proposal at the special meeting of stockholders.
Because the SPAH Certificate of Incorporation in its current form does not allow for SPAH to complete the proposed merger, each SPAH public stockholder at the time of the merger who purchased his or her shares in the initial public offering or afterwards up to and until the record date and who did not have the ability to convert his or her shares into cash in the event that holders of 10% or more, but less than 30% (minus one share), of shares sold in SPAH’s initial public offering elected to exercise their conversion rights, and the merger was not consummated, may have securities law claims against SPAH for rescission (under which a successful claimant has the right to receive the total amount paid for his or her securities pursuant to an allegedly deficient prospectus, plus interest and less any income earned on the securities, in exchange for surrender of the securities) or damages (compensation for loss on an investment caused by alleged material misrepresentations or omissions in the sale of a security). See “The Merger and the Merger Agreement—Rescission Rights” for additional information.
Q:     Why is SPAH proposing the Subsequent Charter Amendments?
A:     If the merger agreement is approved and adopted by SPAH stockholders, SPAH is proposing to amend the SPAH Certificate of Incorporation to (i) change SPAH’s corporate name from “SP Acquisition Holdings, Inc.” to “Frontier Financial Corporation”, (ii) permit SPAH’s continued corporate existence after October 10, 2009 and (iii) create a new class of common stock of SPAH which will have economic rights but no voting rights. SPAH is proposing the name change proposal because, in the event of a merger with Frontier, SPAH’s current name will not accurately reflect its business operations. SPAH is proposing the continued existence proposal because under the SPAH Certificate of Incorporation, SPAH must submit a proposal to amend the SPAH Certificate of Incorporation to permit SPAH’s continued corporate existence at the same time SPAH submits a proposal to stockholders to approve an initial business combination. SPAH also believes continued existence is the usual period of existence for most corporations.
SPAH is proposing to create a new class of common stock, the Non-Voting Common Stock that may be issued to stockholders and/or warrantholders, following the consummation of the merger, so that a stockholder or warrantholder, in its election, may, for example, remain below the ownership threshold which would subject them to regulation as a bank holding company as described below. The terms of the Non-Voting Common Stock are identical to the terms of SPAH’s voting common stock except that the Non-Voting Common Stock has no voting rights and holders of such Non-Voting Common Stock may convert their shares into an equal number of shares of voting common stock, under certain circumstances. In connection with the creation of the new class of Non-Voting Common Stock, the SPAH Certificate of Incorporation would also be amended so that holders of voting common stock may convert their shares into shares of Non-Voting Common Stock without limitation.

 

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Under the BHC Act, a company that directly or indirectly owns, controls or has the power to vote 25% or more of a class of voting stock of a bank or a bank holding company is a bank holding company for purposes of the BHC Act and is subject to regulation as a bank holding company as described in the section entitled “Regulation and Supervision — Federal Bank Holding Company Regulation.” In addition, a company that directly or indirectly owns, controls or has the power to vote 10% or more, but less than 25%, of a class of voting stock of a bank or a bank holding company may be presumed to control the bank and/or bank holding company. If the presumption of control is not rebutted, the company is subject to the regulation as a bank holding company as described in the section entitled “Regulation and Supervision — Federal Bank Holding Company Regulation.” The presumption of control may be rebutted by entering into a passivity agreement with the Federal Reserve, which contains specific terms to limit the ability to control the management and policies of the bank and/or bank holding company. A company that owns, controls or has the power to vote 10% or more, but less than 25%, of a class of voting stock of a bank or a bank holding company and that enters into a passivity agreement generally is not subject to regulation as a bank holding company. A company that directly or indirectly owns, controls or has the power to vote less than 10% of any class of voting stock of a bank or a bank holding company generally is not subject to regulation as a bank holding company.
Given these considerations, in order to permit investor flexibility, SPAH is also requesting warrantholder approval at a special meeting of warrantholders to amend the terms of the Warrant Agreement, and intends to amend certain agreements entered into with the SPAH insiders, which govern the terms and conditions of the initial founder’s warrants and additional founder’s warrants (the “Founder’s Agreements”), to provide warrantholders with the option to receive either voting shares of SPAH common stock or shares of Non-Voting Common Stock in certain situations. Amending the Warrant Agreement and Founder’s Agreements will require the prior written consent of the underwriters in SPAH’s initial public offering, which SPAH anticipates receiving prior to the closing of the merger.
This Subsequent Charter Amendment is being proposed for the benefit of SP Acq LLC and its affiliates, including the Steel Trust, who otherwise would acquire more than 10% of the voting securities of SPAH upon the exercise of their initial founder’s warrants, additional founder’s warrants and co-investment warrants following the consummation of the merger. However, all stockholders and/or warrantholders will be permitted to receive Non-Voting Common Stock at their election. SP Acq LLC and the Steel Trust have separately agreed, pursuant to letter agreements with SPAH, to receive Non-Voting Common Stock upon exercise of their initial founder’s warrants, additional founder’s warrants and co-investment warrants following the consummation of the merger, as necessary in order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock. At their discretion, SP Acq LLC and/or the Steel Trust will convert such shares into voting common stock in accordance with the SPAH Certificate of Incorporation, as amended by the Subsequent Charter Amendments and upon a distribution of the shares by Steel Trust to its beneficiaries, such shares will also be converted into voting common stock in accordance with the SPAH Certificate of Incorporation, as amended by the Subsequent Charter Amendments.
Q:     What vote is needed to adopt the merger agreement and to approve the other matters at the special meeting?
A:     Adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of SPAH common stock entitled to vote at the special meeting. The SPAH Certificate of Incorporation also requires that a majority of the shares of common stock voted by the SPAH public stockholders are voted, in person or by proxy, in favor of the merger and the SPAH public stockholders owning no more than 30% (minus one share) of the shares sold in SPAH’s initial public offering vote against the merger and thereafter exercise their conversion rights as described below. Notwithstanding the foregoing, it is a condition to closing the merger agreement that holders of no more than 10% of the shares (minus one share) sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights, although at SPAH’s discretion, this closing condition may be waived in order to consummate the merger. Accordingly, SPAH may not consummate the merger if 10% or more of the holders of shares sold in or subsequent to SPAH’s initial public offering elect to exercise their conversion rights. If SPAH elects to waive this closing condition, it may raise the conversion threshold to anywhere between 10% to 30% (minus one share).
Adoption of the amendments to the SPAH Certificate of Incorporation requires the affirmative vote of a majority of the shares of SPAH’s outstanding common stock entitled to vote at the special meeting. Directors will be elected by a plurality of the votes cast by stockholders present in person or represented by proxy and entitled to vote at the special meeting.

 

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Q:     How do the SPAH insiders intend to vote their shares?
A:     The SPAH insiders have agreed to vote all of their 10,822,400 founder’s shares, which constitutes approximately 20% of SPAH’s outstanding shares of common stock, either for or against the merger proposal consistent with the majority of the votes cast on the merger by the SPAH public stockholders. To the extent any SPAH insider or officer of director of SPAH has acquired shares of SPAH common stock in, or subsequent to, SPAH’s initial public offering, it, he or she has agreed to vote these acquired shares in favor of the merger proposal. As of the date hereof, none of the SPAH insiders or officers of directors of SPAH own any shares sold in, or subsequent to, the SPAH initial public offering. The SPAH insiders have further indicated that they will vote all of their shares in favor of the adoption of the amendments to the SPAH Certificate of Incorporation and for the election of each of the director nominees to the SPAH Board. While the founder’s shares voted by the SPAH insiders will count towards the voting and quorum requirements under Delaware law, they will not count towards the voting requirement under the SPAH Certificate of Incorporation because the founder’s shares were not issued in SPAH’s initial public offering. As described below, pursuant to a plan of reorganization, SP II has contributed certain assets, including its shares of SPAH common stock and warrants, to the Steel Trust. The trust has agreed to assume all of SP II’s rights and obligations with respect to these shares and warrants, including to vote in accordance with the foregoing.
Upon consummation of the merger, SP Acq LLC has agreed to forfeit 8,987,883 of its founder’s shares and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have agreed to forfeit an aggregate of 465,529 of their founder’s shares.
Q:     What will SPAH stockholders receive in the proposed merger?
A:     SPAH stockholders will receive nothing in the merger. SPAH stockholders will continue to hold the same number of shares of SPAH’s common stock that they owned prior to the merger, except that upon consummation of the merger, SP Acq LLC has agreed to forfeit 8,987,883 of its founder’s shares and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have agreed to forfeit an aggregate of 465,529 of their founder’s shares.
SPAH stockholders do not have appraisal rights in connection with the merger under applicable Delaware law, but do have conversion rights as described below.
Q:     What is the co-investment?
A:     In connection with the initial public offering, SP II previously agreed to purchase an aggregate of 3,000,000 co-investment units at $10.00 per unit ($30.0 million in the aggregate) in a private placement that will occur immediately prior to the consummation of the merger. Pursuant to a plan of reorganization, SP II has contributed certain assets to the Steel Trust, a liquidating trust established for the purpose of effecting the orderly liquidation of such assets. As a result, all of the founder’s shares and initial founder’s warrants owned by SP II have been transferred to the Steel Trust in a private transaction exempt from registration under the Securities Act. The Steel Trust has agreed to assume all of SP II’s rights and obligations with respect to the founder’s shares and initial founder’s warrants, as more fully described elsewhere in this joint proxy statement/prospectus, including the obligation to purchase the co-investment units. Since the agreement governing the co-investment and SPAH’s initial public offering prospectus disclosed that only SP II or SP Acq LLC may purchase the co-investment units, SPAH will need the prior written consent of the underwriters in its initial public offering to permit the Steel Trust to make the co-investment. SPAH anticipates receiving this consent prior to the closing of the merger. In addition, SPAH public stockholders may have a securities law claim against SPAH for rescission (under which a successful claimant has the right to receive the total amount paid for his or her securities pursuant to an allegedly deficient prospectus, plus interest and less any income earned on the securities, in exchange for surrender of the securities) or damages (compensation for loss on an investment caused by alleged material misrepresentations or omissions in the sale of a security), as described more fully under “The Merger and the Merger Agreement—Rescission Rights.”
The proceeds from the co-investment will be received by SPAH immediately prior to the consummation of the merger to provide SPAH with additional equity capital to fund the merger. If the merger is not consummated, the Steel Trust will not purchase the co-investment units and no proceeds will deposited into SPAH’s trust account or available for distribution to SPAH’s stockholders in the event of a liquidating distribution.

 

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Q:     How much of SPAH’s securities will existing SPAH stockholders own upon completion of the merger and co-investment?
A:     It depends. The percentage of SPAH’s securities that existing SPAH stockholders will own after the merger and co-investment will vary depending on whether:
    any Frontier shareholder exercises dissenters’ rights;
    any of SPAH’s 66,612,000 outstanding warrants (after reflecting the co-investment and merger) are exercised; and
    any SPAH public stockholder exercises their right to convert their shares into cash equal to a pro rata portion of the SPAH trust account.
Depending on the scenario, existing SPAH stockholders will own from 94.5% to 96.1% of SPAH’s securities after the merger and co-investment.
In addition to the foregoing, the percentage of SPAH’s voting common stock that existing SPAH stockholders will own after the merger and co-investment will depend on whether:
    any SPAH stockholder converts its voting common stock into Non-Voting Common Stock; and
    any SPAH warrantholder elects to receive shares of Non-Voting Common Stock in lieu of voting common stock upon exercise of their warrants.
SP Acq LLC and the Steel Trust have agreed to receive Non-Voting Common Stock as necessary in order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting. As a result, SPAH stockholders will hold from 94.3% to 95.4% of the voting interests of SPAH depending on whether any Frontier shareholder exercises dissenters’ rights, any of SPAH’s warrants are exercised and whether any SPAH public stockholders exercise their conversion rights. At their discretion, SP Acq LLC and/or the Steel Trust will convert such shares into voting common stock in accordance with the SPAH Certificate of Incorporation, as amended by the Subsequent Charter Amendments and, upon a distribution of the shares by Steel Trust to its beneficiaries, such shares will also be converted into voting common stock in accordance with the SPAH Certificate of Incorporation, as amended by the Subsequent Charter Amendments.
In addition, SPAH, the SPAH insiders, and/or certain of their respective affiliates may negotiate arrangements to provide for the purchase of shares from SPAH public stockholders who indicate their intention to vote against the merger and seek conversion or who otherwise wish to sell their shares. As a result, SPAH stockholders’ voting interests may be further increased or decreased accordingly in order for SP Acq LLC and the Steel Trust to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock.
For a table outlining the effect of the various scenarios on the percentage of SPAH’s securities and voting interests that existing SPAH stockholders will own after the merger with Frontier is completed, see “The Merger and the Merger Agreement — Stock Ownership of Existing SPAH and Frontier Stockholders After the Merger.”
Q:     Do the SPAH stockholders have conversion rights?
A:     Generally, yes. If you hold shares of common stock issued in SPAH’s initial public offering (whether such shares were acquired pursuant to such initial public offering or afterwards up to and until the record date), then you have the right to vote against the merger proposal and demand that SPAH convert such shares into cash equal to a pro rata share of the aggregate amount then on deposit in the trust account in which a substantial portion of the net proceeds of SPAH’s initial public offering are held (before payment of deferred underwriting discounts and commissions and including interest earned on their pro rata portion of the trust account, net of income taxes payable on such interest and net of interest income of $3.5 million on the trust account balance previously released to SPAH to fund its working capital requirements). We sometimes refer to these rights to vote against the merger proposal and demand conversion of the shares into a pro rata portion of the SPAH trust account as conversion rights.

 

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The SPAH Certificate of Incorporation requires that no more than 30% (minus one share) of the SPAH public stockholders vote against the merger and thereafter exercise their conversion rights. Notwithstanding the foregoing, it is a condition to closing the merger agreement that no more than 10% (minus one share) of the shares held by SPAH public stockholders vote against the merger and exercise their conversion rights, although at SPAH’s discretion, this closing condition may be waived in order to consummate the merger. Accordingly, SPAH may not consummate the merger if 10% or more of the holders of shares sold in or subsequent to SPAH’s initial public offering elect to exercise their conversion rights. If SPAH elects to waive this closing condition, it may raise the conversion threshold to anywhere between 10% to 30% (minus one share). If the merger is not consummated and SPAH does not consummate a business combination by October 10, 2009, SPAH will be required to dissolve and liquidate and SPAH public stockholders voting against the merger proposal who elected to exercise their conversion rights would not be entitled to convert their shares. However, all SPAH public stockholders would be entitled to participate in pro-rata liquidation distributions from SPAH’s trust account with respect to their shares.
Q:     If I am a SPAH stockholder and have conversion rights, how do I exercise them?
A:     If you wish to exercise your conversion rights, you must:
    affirmatively vote against the merger proposal in person or by submitting your proxy card before the vote on the merger proposal and checking the box that states “Against” for proposal number 1; and
    either:
    check the box that states “Exercise Conversion Rights” on the proxy card; or
    send a letter to SPAH’s transfer agent, Continental Stock Transfer & Trust Company, at 17 Battery Place, 8th Floor, New York, NY 10004, attn: Mark Zimkind, stating that you are exercising your conversion rights and demanding your shares of SPAH common stock be converted into cash; and
    either:
    physically tender, or if you hold your shares of SPAH common stock in “street name,” cause your broker to physically tender, your stock certificates representing shares of SPAH common stock to SPAH’s transfer agent; or
    deliver your shares electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, to SPAH’s transfer agent by [______], 2009.
Taking any action that does not include an affirmative vote against the merger, including abstaining from voting on the merger proposal, will prevent you from exercising your conversion rights. However, voting against the merger proposal does not obligate you to exercise your conversion rights. If the merger is not consummated, no shares will be converted to cash through the exercise of conversion rights. For more information, see “Summary Term Sheet—The Merger and the Merger Agreement—SPAH Conversion Rights” and “The Merger and the Merger Agreement — Conversion Rights of SPAH Stockholders.”

 

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Q:     Why has SPAH made it a condition to closing the merger agreement that holders of no more than 10% of the shares (minus one share) sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights when the threshold in SPAH’s initial public offering prospectus requires no more than 30% (minus one share)?
A:     SPAH has made it a condition to closing the merger agreement that holders of no more than 10% of the shares (minus one share) sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights in order to ensure that the combined company immediately following the consummation of the merger has sufficient Tier 1 capital to return to compliance levels. Pursuant to the terms of the FDIC Order, Frontier Bank is required to increase its Tier 1 capital in such an amount as to equal or exceed 10% of Frontier Bank’s total assets by July 29, 2009 and to maintain such capital level thereafter. If 10% or greater of SPAH’s public stockholders were to vote their shares against the merger and demand that SPAH convert such shares into cash equal to a pro rata share of the aggregate amount then on deposit in the trust account, the funds remaining may not be sufficient to meet Frontier Bank’s capital requirements. Accordingly, SPAH may not consummate the merger if 10% or more of the holders of shares sold in or subsequent to SPAH’s initial public offering elect to exercise their conversion rights. However, in SPAH’s sole discretion, this closing condition may be waived in order to consummate the merger. If SPAH elects to waive this closing condition, it may raise the conversion threshold to anywhere between 10% to 30% (minus one share).
Q:     What are the federal income tax consequences of exercising my conversion rights?
A:     SPAH stockholders who exercise their conversion rights and convert their shares of SPAH common stock into the right to receive cash from the trust account, will generally be required to treat the transaction as a sale of the shares and to recognize gain or loss upon the conversion. Such gain should be capital gain or loss if such shares were held as a capital asset on the date of the conversion, and will be measured by the difference between the amount of cash received and the tax basis of the shares of SPAH common stock converted. A stockholder’s tax basis in its shares of SPAH common stock generally will equal the cost of such shares. A stockholder who purchased SPAH units will have to allocate the cost between the shares of common stock and the warrants comprising the units based on their relative fair market values at the time of the purchase. See “Material U.S. Federal Income Tax Consequences— Certain Federal Tax Consequences to SPAH Stockholders.”
Q:     Will I lose my warrants or will they be converted to shares of common stock if the merger is consummated or if I exercise my conversion rights?
A:     No. Neither consummation of the merger with Frontier nor exercise of your conversion rights will result in the loss of your warrants. Your warrants will continue to be outstanding following consummation of the merger whether or not you exercise your conversion rights. However, in the event that SPAH does not consummate the merger with Frontier by October 10, 2009, SPAH will be required to liquidate and any SPAH warrants you own will expire without value.
Q:     What happens to the funds deposited in the SPAH trust account after completion of the merger?
A:     Upon consummation of the merger, the funds deposited in the SPAH trust account will be released (i) to pay SPAH public stockholders who properly exercise their conversion rights, (ii) to the underwriters in SPAH’s initial public offering who are entitled to receive approximately $17.3 million of deferred underwriting discounts and commissions currently held in SPAH’s trust account provided, however, that SPAH is in negotiation with its underwriters regarding the amount and form of payment of such deferred underwriting fees from SPAH’s initial public offering. The results of these negotiations are uncertain and could result in $17,316,000 in additional costs for the proforma company which could be paid in cash, (iii) to pay transaction fees and expenses associated with the merger, and (iv) for working capital and general corporate purposes of the combined company following the merger. In addition, the funds released from the trust account may be used to purchase up to approximately $[______] million of shares held by SPAH public stockholders who intend to vote against the merger and seek conversion or who otherwise wish to sell their shares.
Q:     What happens if the merger is not consummated or is terminated?
A:     If SPAH does not effect the merger with Frontier by October 10, 2009, SPAH must dissolve and liquidate. In any liquidation, the funds held in the trust account, plus any interest earned thereon (less any taxes due on such interest), together with any remaining net assets not held in trust, will be distributed pro rata to the SPAH public stockholders. The SPAH insiders have waived their right to participate in any liquidation distribution with respect to their shares. Additionally, if we do not complete an initial business combination and the trustee must distribute the balance of the trust account, the underwriters have agreed to forfeit any rights or claims to their deferred underwriting discounts and commissions then in the trust account, and those funds will be included in the pro rata liquidation distribution to the SPAH public stockholders.

 

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SPAH expects that all costs and expenses associated with implementing a plan of distribution, as well as payments to any creditors, will be funded from amounts remaining out of the $100,000 of proceeds held outside the trust account and from the $3.5 million in interest income on the balance of the trust account that was released to SPAH to fund working capital requirements. However, if those funds are not sufficient to cover the costs and expenses associated with implementing a plan of distribution, to the extent that there is any interest accrued in the trust account not required to pay income taxes on interest income earned on the trust account balance, SPAH may request that the trustee release to it an additional amount of up to $75,000 of such accrued interest to pay those costs and expenses.
In addition, if the merger is not consummated, the SPAH Certificate of Incorporation will not be amended pursuant to the proposals to adopt the amendments to the SPAH Certificate of Incorporation, the four (4) director nominees from Frontier will not be appointed to the SPAH Board and the Steel Trust will not purchase the co-investment units.
Frontier will pay to SPAH, an amount equal to $2,500,000 if the merger agreement is terminated under certain circumstances, including, but not limited to, if (i) SPAH terminates the merger agreement due to a breach by Frontier, (ii) either party terminates due to the failure of Frontier to obtain stockholder approval, (iii) either party terminates due to the failure to consummate the merger by December 31, 2009, and, in the case of a termination under clause (ii) or (iii) above, (x) there has been publicly announced and not withdrawn another acquisition proposal relating to Frontier or (y) Frontier has failed to perform and comply in all material respects with any of its obligations, agreements or covenants required by the merger agreement, and within 12 months of such termination Frontier either consummates another acquisition transaction or enters into a definitive agreement with respect to an acquisition transaction, (iv) SPAH terminates the merger agreement due to the Frontier Board failing to support the merger proposal or recommending any acquisition transaction other than the merger.
Q:     Since SPAH’s initial public offering prospectus contained certain differences in what is being proposed at the special meeting, what are my legal rights?
A:     You should be aware that because SPAH’s initial public offering prospectus did not disclose that (i) SPAH may seek to amend the SPAH Certificate of Incorporation prior to the consummation of a business combination to amend the definition of “initial business combination” to eliminate the requirement that the fair market value of the target business equal at least 80% of the balance of SPAH’s trust account (excluding underwriting discounts and commissions) plus the proceeds of the co-investment, (ii) SPAH may seek to amend the Warrant Agreement upon consummation of the merger to eliminate the requirement that the initial founder’s warrants owned by certain SPAH insiders become exercisable only after the consummation of an initial business combination if and when the last sales price of SPAH common stock exceeds $14.25 per share for any 20 trading days within a 30 trading day period beginning 90 days after such business combination, (iii) funds in its trust account might be used, directly or indirectly, to purchase shares from SPAH public stockholders in order to secure approval of SPAH’s stockholders on the merger, (iv) that SPAH may seek to amend the terms of the Warrant Agreement to increase the exercise price and extend the exercise period, among other things, upon consummation of the merger, and (v) that a party other than SP II or SP Acq LLC may purchase the co-investment units, each SPAH public stockholder at the time of the merger that purchased shares in, or subsequent to, SPAH’s initial public offering up to and until the record date, may have securities law claims against SPAH for rescission (under which a successful claimant has the right to receive the total amount paid for his or her securities pursuant to an allegedly deficient prospectus, plus interest and less any income earned on the securities, in exchange for surrender of the securities) or damages (compensation for loss on an investment caused by alleged material misrepresentations or omissions in the sale of a security). Such claims may entitle stockholders asserting them to up to $10.00 per share, based on the initial offering price of the units, each comprised of one share of common stock and a warrant exercisable for an additional share of common stock, less any amount received from the sale of the original warrants purchased with them, plus interest from the date of SPAH’s initial public offering (which, in the case of SPAH public stockholders, may be more than the pro rata share of the trust account to which they are entitled if they exercise their conversion rights or if SPAH liquidates). See “The Merger and the Merger Agreement—Actions That May Be Taken to Secure Approval of SPAH Stockholders,” and “The Merger and the Merger Agreement—Rescission Rights” for additional information.

 

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Q:     What will happen if I abstain from voting or fail to vote at the special meeting?
A:     SPAH will count a properly executed proxy marked “ABSTAIN” with respect to a particular proposal as present for purposes of determining whether a quorum is present. For purposes of approval, an abstention or failure to vote on the merger will have the same effect as a vote “AGAINST” the proposal but will preclude you from having your shares converted into a pro rata portion of the trust account. In order to exercise your conversion rights, you must cast a vote against the merger, make an election on the proxy card to convert such shares of common stock or submit a request in writing to SPAH’s transfer agent at the address listed on page 10, and deliver your shares to SPAH’s transfer agent physically or electronically through DTC prior to the special meeting.
An abstention from voting on the amendments to the SPAH Certificate of Incorporation will have the same effect as a vote “AGAINST” the proposals. Abstentions will not count either in favor of, or against, election of a director nominee.
Q:     What will happen if I sign and return my proxy card without indicating how I wish to vote?
A:     Signed and dated proxies received by SPAH without an indication of how the stockholder intends to vote on a proposal will be voted in favor of each proposal presented to the stockholders, as the case may be.
Stockholders will not be entitled to exercise their conversion rights if such stockholders return proxy cards to SPAH without an indication of how they desire to vote with respect to the merger proposal or, for stockholders holding their shares in “street name,” if such stockholders fail to provide voting instructions to their banks, brokers or other nominees.

 

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QUESTIONS AND ANSWERS FOR SPAH WARRANTHOLDERS
Q:     When and where is the SPAH special meeting of warrantholders?
A:     The special meeting of SPAH warrantholders will be held on [_____], [_____], 2009 at [_____]:00 [_____].m., local time, at [_____].
Q:     How can I attend the special meeting?
A:     Warrantholders as of the close of business on [______], 2009, and those who hold a valid proxy for the special meeting are entitled to attend the special meeting. Warrantholders should be prepared to present photo identification for admittance. In addition, names of record holders will be verified against the list of record holders on the record date prior to being admitted to the meeting. Warrantholders who are not record holders but who hold shares through a broker or nominee (i.e., in street name), should provide proof of beneficial ownership on the record date, such as most recent account statement prior to [______], 2009, or other similar evidence of ownership. If warrantholders do not provide photo identification or comply with the other procedures outlined above upon request, they will not be admitted to the special meeting.
The special meeting of warrantholders will begin promptly at [______] [______].m., local time. Check-in will begin at [______] [______].m., local time, and you should allow ample time for the check-in procedures.
Q:     What am I being asked to vote upon?
A:     At the special meeting, warrantholders will consider and vote upon a proposal to amend certain terms of the Warrant Agreement, in connection with the consummation of the transactions contemplated by the merger agreement, which provides for the merger of Frontier with and into SPAH, with SPAH being the surviving entity. Immediately following the consummation of the merger, SPAH will change its name to Frontier Financial Corporation and be headquartered in Everett, Washington.
The proposed amendment to the Warrant Agreement, to become effective upon consummation of the merger, will:
    increase the exercise price of the warrants from $7.50 per share to $11.50 per share of SPAH common stock;
    amend the warrant exercise period to (i) eliminate the requirement that the initial founder’s warrants owned by the SPAH insiders become exercisable only after the consummation of an initial business combination if and when the last sales price of SPAH common stock exceeds $14.25 per share for any 20 trading days within a 30 trading day period beginning 90 days after such business combination and (ii) extend the expiration date of the warrants to the earlier of (x) seven years from the consummation of the merger or (y) the date fixed for redemption of the warrants set forth in the warrant agreement;
    provide for the mandatory downward adjustment of the exercise price for each warrant to reflect any cash dividends paid with respect to the outstanding common stock of SPAH;
    provide that, in the event an effective registration statement is not in place on the date the warrants are set to expire, the warrants will remain outstanding until 90 days after an effective registration statement is filed, provided, that if SPAH has not filed an effective registration statement within 90 days after the expiration date, the warrants shall become exercisable for cash consideration;
    provide that no adjustment in the number of shares issuable upon exercise of each warrant will be made as a result of the issuance of SPAH shares and warrants to the shareholders of Frontier upon consummation of the merger agreement; and
    provide that each warrant will entitle the holder thereof to purchase, in its sole discretion, either one share of voting common stock or one share of Non-Voting Common Stock.

 

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At the special meeting, we may transact such other business as may properly come before the special meeting or any adjournments or postponements thereof.
Q:     Why is SPAH amending the warrants?
A:     SPAH believes increasing the exercise price, extending the expiration date, providing for a mandatory downward adjustment of the exercise price under certain circumstances, extending the expiration date if an effective registration statement is not in place and providing that no adjustment in the number of shares issuable upon exercise of the warrants will be made upon consummation of the merger, is appropriate given the change in structure of SPAH following completion of the merger. In addition, SPAH is proposing to amend the warrant exercise period to eliminate the requirement that the initial founder’s warrants owned by the SPAH insiders become exercisable only after the consummation of an initial business combination if and when the last sales price of SPAH common stock exceeds $14.25 per share for any 20 trading days within a 30 trading day period beginning 90 days after such business combination, in light of the forfeiture of 9,453,412 founder’s shares by SP Acq LLC and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker upon consummation of the merger. As a result, if the warrant amendment is approved, the initial founder’s warrants will become exercisable upon consummation of the merger, but the sale of such warrants or the shares underlying the warrants will still be subject to a one-year lock-up from the date we consummate the merger. This amendment will require the prior written consent of the underwriters in SPAH’s initial public offering, which SPAH anticipates receiving prior to the closing of the merger. We are further requesting warrantholder approval at the special meeting to provide warrantholders with the option to receive, in their sole discretion, upon exercise of their warrants, either voting shares of SPAH common stock or shares of Non-Voting Common Stock, such that the holder thereof would not exceed the ownership threshold which would make it subject to the regulation as a bank holding company as described in the section entitled “Supervision and Regulation — Federal Bank Holding Company Regulation.” SP Acq LLC and the Steel Trust have separately agreed, pursuant to letter agreements with SPAH, to receive Non-Voting Common Stock upon exercise of their initial founder’s warrants, additional founder’s warrants and co-investment warrants following the consummation of the merger, as necessary in order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock. At their discretion, SP Acq LLC and/or the Steel Trust will convert such shares into voting common stock in accordance with the SPAH Certificate of Incorporation, as amended by the Subsequent Charter Amendments and upon a distribution of the shares by Steel Trust to its beneficiaries, such shares will also be converted into voting common stock in accordance with the SPAH Certificate of Incorporation, as amended by the Subsequent Charter Amendments.
If the merger is not consummated and SPAH does not complete a different business combination by October 10, 2009, the warrants will expire worthless. If the warrant amendment proposal is approved, all other terms of SPAH’s warrants will remain the same. The approval of the warrant amendment proposal is a condition to the consummation of the merger.
Q:     What vote is required to approve the amendment?
A:     Adoption of the amendment to the Warrant Agreement requires the affirmative vote of a majority of the warrantholders outstanding and entitled to vote at the special meeting. The Warrant Agreement also requires that the holders of a majority of SPAH’s outstanding warrants issued in, or subsequent to, SPAH’s initial public offering, are voted in favor of the warrant amendment. The approval of the amendment proposal is also a condition to the consummation of the merger discussed above.
Q:     How do the holders of the initial founder’s warrants and additional founder’s warrants intend to vote their warrants?
A:     The SPAH insiders intend to vote their initial founder’s warrants and additional founder’s warrants in favor of the warrant amendment proposal. While the warrants voted by the SPAH insiders will count towards the voting and quorum requirements under Delaware law, they will not count towards the voting requirement under the Warrant Agreement, which requires that the holders of a majority of SPAH’s outstanding warrants issued in, or subsequent to, SPAH’s initial public offering, are voted in favor of the warrant amendment, because the initial founder’s warrants and additional founder’s warrants were not issued in SPAH’s initial public offering.

 

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Q:     What happens if the merger is not consummated or is terminated?
A:     If the merger is not consummated or terminated, the Warrant Agreement will not be amended as contemplated by the warrant amendment proposal and the Steel Trust will not purchase the co-investment units. If SPAH does not effect the merger with Frontier by October 10, 2009, SPAH must dissolve and liquidate. If SPAH must liquidate, there will be no distribution from the trust account with respect to any of the warrants and the warrants will expire worthless.
Q:     What are the U.S. federal income tax consequences of the amendment?
A:     For U.S. federal income tax purposes, if the terms of the warrants are amended, a warrantholder will be treated as exchanging his or her “old” warrants for “new” warrants in connection with the consummation of the transactions contemplated by the merger agreement. We expect the merger to qualify as a reorganization for U.S. federal income tax purposes. If the merger qualifies as a reorganization for U.S. federal income tax purposes, a warrantholder will not recognize any gain or loss on the deemed exchange of his or her old warrants for new warrants as a result of the amendment.
Q:     What will happen if I abstain from voting or fail to vote at the special meeting?
A:     SPAH will count a properly executed proxy marked “ABSTAIN” with respect to the warrant amendment proposal present for purposes of determining whether a quorum is present. For purposes of approval, an abstention or failure to vote on the warrant amendment proposal will have the same effect as a vote “AGAINST” the proposal.
Q:     What will happen if I sign and return my proxy card without indicating how I wish to vote?
A:     Signed and dated proxies received by SPAH without an indication of how the warrantholder intends to vote on the warrant amendment proposal will be voted in favor of the proposal.

 

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QUESTIONS AND ANSWERS FOR FRONTIER SHAREHOLDERS
Q:     When and where is the Frontier special meeting of shareholders?
A:     The special meeting of Frontier shareholders will be held on [_____], [_____], 2009 at [_____]:00 [_____].m., local time, at [_____].
Q:     How can I attend the Frontier special meeting?
A:     Frontier shareholders as of the close of business on [______], 2009, and those who hold a valid proxy for the special meeting are entitled to attend the Frontier special meeting. Frontier shareholders should be prepared to present photo identification for admittance. In addition, names of record holders will be verified against the list of record holders on the record date prior to being admitted to the meeting. Frontier shareholders who are not record holders but who hold shares through a broker or nominee (i.e., in street name), should provide proof of beneficial ownership on the record date, such as most recent account statement prior to [_____], 2009, or other similar evidence of ownership. If Frontier shareholders do not provide photo identification or comply with the other procedures outlined above upon request, they will not be admitted to the Frontier special meeting.
The Frontier special meeting will begin promptly at [______] [______].m., local time. Check-in will begin at [______] [______].m., local time, and you should allow ample time for the check-in procedures.
Q:     What am I being asked to vote upon?
A:     The Frontier special meeting is being called to consider and vote upon a proposal to adopt the merger agreement pursuant to which Frontier will merge with and into SPAH, with SPAH being the surviving entity. Immediately following the consummation of the merger, SPAH will change its name to Frontier Financial Corporation and be headquartered in Everett, Washington. At the special meeting, we may transact such other business as may properly come before the special meeting or any adjournments or postponements thereof.
Q:     What vote is required to approve the merger?
A:     Approval of the merger agreement requires the affirmative vote of at least two-thirds of the outstanding shares of Frontier’s common stock. As of the record date, there were [______] shares of Frontier common stock outstanding. Because at least two-thirds of all outstanding shares is required to approve the merger, your failure to vote will have the same effect as a vote against the merger proposal.
Q:     What will Frontier shareholders receive in the merger?
A:     Each issued and outstanding share of Frontier common stock you own will be converted into 0.0530 newly issued shares of SPAH common stock and 0.0530 newly issued warrants, subject to possible adjustment as described in this joint proxy statement/prospectus. Contemporaneously with the Frontier special meeting of stockholders, SPAH has scheduled a special meeting of warrantholders to consider and vote upon a proposal to amend certain terms of the Warrant Agreement that governs the terms of SPAH’s outstanding warrants, as more fully described in “The Special Meeting of SPAH Warrantholders and the Warrant Amendment Proposal.” If the merger is consummated, Frontier shareholders will receive newly issued warrants on the same terms and conditions as the publicly traded warrants, after giving effect to the warrant amendment proposal.
No fractional shares of SPAH common stock or warrants will be issued to any holder of Frontier common stock in the merger. If a holder of shares of Frontier common stock exchanged pursuant to the merger would be entitled to receive a fractional interest of a share of SPAH common stock or warrant, SPAH will round up or down the number of common stock of SPAH or warrants to be issued to the Frontier shareholder to the nearest whole number of shares of common stock.

 

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Q:     What if I have Frontier stock options, restricted stock or stock appreciation rights?
A:     Upon completion of the merger, each award, option, or other right to purchase or acquire shares of Frontier common stock pursuant to stock options, stock appreciation rights, or stock awards granted by Frontier under Frontier’s stock incentive plans, equity compensation plans and stock option plans, which are outstanding immediately prior to the merger, whether or not vested, will be cancelled. Each outstanding share of Frontier restricted stock will vest at the time of the merger, and be converted into and become rights with respect to SPAH common stock.
Q:     Will Frontier shareholders be taxed on the SPAH common stock and SPAH warrants that they receive in exchange for their Frontier shares?
A:     No. We expect the merger to qualify as a reorganization for U.S. federal income tax purposes. If the merger qualifies as a reorganization for U.S. federal income tax purposes, Frontier shareholders will not recognize any gain or loss to the extent Frontier shareholders receive SPAH common stock and SPAH warrants in exchange for their Frontier shares. We recommend that Frontier shareholders carefully read the complete explanation of the material U.S. federal income tax consequences of the merger as set forth under “Material U.S. Federal Income Tax Consequences,” and that Frontier shareholders consult their tax advisors for a full understanding of the tax consequences of their participation in the merger.
Q:     How much of SPAH’s securities will Frontier shareholders own upon completion of the merger and co-investment?
A:     It depends. The percentage of Frontier’s securities that existing Frontier shareholders will own after the merger and co-investment will vary depending on whether:
    any Frontier shareholder exercises dissenters’ rights;
    any of SPAH’s 66,612,000 outstanding warrants (after reflecting the co-investment and merger) are exercised; and
    any SPAH public stockholder exercises their right to convert their shares into cash equal to a pro rata portion of the SPAH trust account.
Depending on the scenario, the existing Frontier shareholders will own from 3.9% to 5.5% of SPAH’s securities after the merger and co-investment.
In addition to the foregoing, the percentage of SPAH’s voting common stock that existing Frontier shareholders will own after the merger and co-investment will depend on whether:
    any SPAH stockholder converts its voting common stock into Non-Voting Common Stock; and
    any SPAH warrantholder elects to receive shares of Non-Voting Common Stock in lieu of voting common stock upon exercise of their warrants.
SP Acq LLC and the Steel Trust have agreed to receive Non-Voting Common Stock as necessary in order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting. As a result, Frontier shareholders will hold from 4.6% to 5.7% of the voting interests of SPAH depending on whether any Frontier shareholder exercises dissenters’ rights, any of SPAH’s warrants are exercised and whether any SPAH public stockholders exercise their conversion rights. In addition, SPAH, the SPAH insiders, and/or certain of their respective affiliates may negotiate arrangements to provide for the purchase of shares from SPAH public stockholders who indicate their intention to vote against the merger and seek conversion or who otherwise wish to sell their shares. As a result, Frontier shareholders’ voting interests may be further increased or decreased accordingly in order for SP Acq LLC and the Steel Trust to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock.

 

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For a table outlining the effect of the various scenarios on the percentage of SPAH’s securities and voting interests that existing Frontier shareholders will own after the merger with Frontier is completed, see “The Merger and the Merger Agreement — Stock Ownership of Existing SPAH and Frontier Stockholders After the Merger.”
Q:     Do I have dissenters’ rights in respect of the merger?
A:     Yes. If you (i) do not vote in favor of the adoption of the merger agreement and (ii) deliver to Frontier before the special meeting a written notice of dissent and otherwise comply with the requirements of Washington law, you will be entitled to assert dissenters’ rights. A shareholder electing to dissent from the merger must strictly comply with all procedures required under Washington law. These procedures are described more fully under the heading “The Merger and the Merger Agreement — Frontier Dissenters’ Rights”, and a copy of the relevant Washington statutory provisions regarding dissenters’ rights is included in this joint proxy statement/prospectus as Annex F.
Q:     What are the U.S. federal income tax consequences of exercising my dissenters’ rights?
A:     The payment of cash to a Frontier shareholder, who exercises his or her dissenters’ rights with respect to such shareholder’s shares of Frontier, will give rise to capital gain or loss equal to the difference between such shareholder’s tax basis in those shares and the amount of cash received in exchange for those shares.
Q:     How do the Frontier insiders intend to vote their shares?
A:     Each of the Frontier’s insiders has agreed to vote their [______] shares of Frontier common stock (which constitute [______]% of Frontier’s outstanding shares of common stock), “FOR” the merger proposal.
Q:     Should I send in my share certificates now?
A:     No. You should not send in your share certificates at this time. Promptly after the effective time of the merger, you will receive transmittal materials with instructions for surrendering your Frontier shares. You should follow the instructions in the post-closing letter of transmittal regarding how and when to surrender your stock certificates.
Q:     What will happen if I abstain from voting or fail to vote at the special meeting?
A:     Frontier will count a properly executed proxy marked “ABSTAIN” with respect to the merger proposal as present for purposes of determining whether a quorum is present. For purposes of approval, an abstention or failure to vote on the merger will have the same effect as a vote “AGAINST” the proposal but will preclude you from exercising your dissenter’ rights. In order to exercise your dissenters’ rights, you must cast a vote against the merger, deliver to Frontier before the special meeting a written notice of dissent and otherwise comply with the requirements of Washington law.
Q:     What will happen if I sign and return my proxy card without indicating how I wish to vote?
A:     Signed and dated proxies received by Frontier without an indication of how the shareholder intends to vote on the merger proposal will be voted in favor of the merger.
Shareholders will not be entitled to exercise their dissenters’ rights if such shareholders return proxy cards to Frontier without an indication of how they desire to vote with respect to the merger proposal or, for shareholders holding their shares in “street name,” if such shareholders fail to provide voting instructions to their banks, brokers or other nominees.

 

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SUMMARY TERM SHEET
This summary highlights selected information from this joint proxy statement/prospectus. It does not contain all of the information that you should consider before deciding how to vote on any of the proposals described herein. You should read carefully the more detailed information set forth under “Risk Factors” and the other information included in this proxy statement/prospectus.
The Companies (pages 129 and 155)
SPAH.
SPAH is a blank check company organized under the laws of the State of Delaware on February 14, 2007 to effect an acquisition, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination, of one or more businesses or assets. SPAH consummated its initial public offering on October 16, 2007, generating gross proceeds of approximately $439,896,000 from its initial public offering and sale of the additional founder’s warrants to SP Acq LLC, approximately $426,330,720 of which is held in a trust account as of June 30, 2009. SP Acq LLC is a holding company founded to form SPAH and hold an investment in SPAH’s securities issued prior to SPAH’s initial public offering.
In connection with the initial public offering, SP II previously agreed to purchase an aggregate of 3,000,000 co-investment units at $10.00 per unit ($30.0 million in the aggregate) in a private placement that will occur immediately prior to the consummation of the merger. Pursuant to a plan of reorganization, SP II has contributed certain assets to the Steel Trust, a liquidating trust established for the purpose of effecting the orderly liquidation of such assets. As a result, all of the founder’s shares and initial founder’s warrants owned by SP II have been transferred to the Steel Trust in a private transaction exempt from registration under the Securities Act. The Steel Trust has agreed to assume all of SP II’s rights and obligations with respect to the founder’s shares and initial founder’s warrants, as more fully described elsewhere in this joint proxy statement/prospectus, including the obligation to purchase the co-investment units.
SPAH’s units, common stock and warrants are currently quoted on the NYSE AMEX LLC under the symbols ‘‘DSP.U,’’ “DSP,” and “DSP.W,” respectively.
SPAH’s principal executive office is located at 590 Madison Avenue, 32nd Floor, New York, New York 10022, and its telephone number is (212) 520-2300.
Frontier.
Frontier is a Washington corporation which was incorporated in 1983 and is registered as a bank holding company under the BHC Act. Frontier has one operating subsidiary, Frontier Bank, which is engaged in a general banking business and in businesses related to banking. Frontier is headquartered in Everett, Snohomish County, Washington. Frontier Bank was founded in September 1978, by Robert J. Dickson and local business persons and is an “insured bank” as defined in the Federal Deposit Insurance Act. Frontier engages in general banking business in Washington and Oregon, including the acceptance of demand, savings and time deposits and the origination of loans. As of June 30, 2009, Frontier serves its customers from fifty-one branches (with the downtown Poulsbo branch scheduled to close in October). Frontier had deposits of approximately $3.2 billion, net loans of $3.3 billion, assets of $4.0 billion and equity of $269.5 million, at June 30, 2009.
Frontier common stock is quoted on the NASDAQ Stock Market LLC under the symbol “FTBK.”
Frontier’s principal executive offices are located at 332 S.W. Everett Mall Way, P.O. Box 2215, Everett, Washington 98213 and its telephone number is (425) 347-0600.

 

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Recent Developments (page 165)
Frontier. On March 20, 2009, Frontier Bank entered into a Stipulation and Consent to the Issuance of an Order to Cease and Desist (the “FDIC Order”) with the Federal Deposit Insurance Corporation (the “FDIC”) and the Washington Department of Financial Institutions (the “Washington DFI”). The regulators alleged that Frontier Bank had engaged in unsafe or unsound banking practices by operating with inadequate management and board supervision; engaging in unsatisfactory lending and collection practices; operating with inadequate capital in relation to the kind and quality of assets held at Frontier Bank; operating with an inadequate loan valuation reserve; operating with a large volume of poor quality loans; operating in such a manner as to produce low earnings and operating with inadequate provisions for liquidity. By consenting to the FDIC Order, Frontier Bank neither admitted nor denied the alleged charges.
Under the terms of the FDIC Order, Frontier Bank cannot declare dividends or pay any management, consulting or other fees or funds to Frontier, without the prior written approval of the FDIC and the Washington DFI. Other material provisions of the FDIC Order require Frontier Bank to: (1) review the qualifications of Frontier Bank’s management, (2) provide the FDIC with 30 days written notice prior to adding any individual to the Board of Directors of Frontier Bank (the “Frontier Bank Board”) or employing any individual as a senior executive officer, (3) increase director participation and supervision of Frontier Bank affairs, (4) improve Frontier Bank’s lending and collection policies and procedures, particularly with respect to the origination and monitoring of real estate construction and land development loans, (5) develop a capital plan and increase Tier 1 leverage capital to 10% of Frontier Bank’s total assets by July 29, 2009, and maintain that capital level, in addition to maintaining a fully funded allowance for loan losses satisfactory to the regulators, (6) implement a comprehensive policy for determining the adequacy of the allowance for loan losses and limiting concentrations in commercial real estate and acquisition, development and construction loans, (7) formulate a written plan to reduce Frontier Bank’s risk exposure to adversely classified loans and nonperforming assets, (8) refrain from extending additional credit with respect to loans charged-off or classified as “loss” and uncollected, (9) refrain from extending additional credit with respect to other adversely classified loans without collecting all past due interest, without the prior approval of a majority of the directors on the Frontier Bank Board or its loan committee, (10) develop a plan to control overhead and other expenses to restore profitability, (11) implement a liquidity and funds management policy to reduce Frontier Bank’s reliance on brokered deposits and other non-core funding sources, and (12) prepare and submit progress reports to the FDIC and the Washington DFI. The FDIC Order will remain in effect until modified or terminated by the FDIC and the Washington DFI.
The FDIC Order does not restrict Frontier Bank from transacting its normal banking business. Frontier Bank will continue to serve its customers in all areas including making loans, establishing lines of credit, accepting deposits and processing banking transactions. Customer deposits remain fully insured to the highest limits set by FDIC. The FDIC and Washington DFI did not impose any monetary penalties in connection with the FDIC Order.
Frontier has been actively engaged in responding to the concerns raised in the FDIC Order. With the consummation of the merger, Frontier believes it can increase its Tier 1 capital to compliance levels.
In addition, on July 2, 2009, Frontier entered into a Written Agreement (the “FRB Written Agreement”) with the Federal Reserve Bank of San Francisco (the “FRB”). Under the terms of the FRB Written Agreement, Frontier has agreed to: (i) refrain from declaring or paying any dividends without prior written consent of the FRB; (ii) refrain from taking dividends or any other form of payment that represents a reduction in capital from Frontier Bank without prior written consent of the FRB; (iii) refrain from making any distributions of interest or principal on subordinated debentures or trust preferred securities without prior written consent of the FRB; (iv) refrain from incurring, increasing or guaranteeing any debt without prior written consent of the FRB; (v) refrain from purchasing or redeeming any shares of its stock without prior written consent of the FRB; (vi) implement a capital plan and maintain sufficient capital; (vii) comply with notice and approval requirements established by the FRB relating to the appointment of directors and senior executive officers as well as any change in the responsibility of any current senior executive officer; (viii) not pay or agree to pay any indemnification and severance payments except under certain circumstances, and with the prior approval of the FRB; and (ix) provide quarterly progress reports to the FRB.

 

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Frontier Bank and the Frontier Bank Board also entered into an informal supervisory agreement, called a memorandum of understanding (“Memorandum of Understanding”) with the FDIC dated August 20, 2008 relating to the correction of certain violations of applicable consumer protection and fair lending laws and regulations, principally including the failure to provide certain notices to consumers pursuant to the Flood Disaster Protection Act of 1973, and certain violations of the Truth in Lending Act and Regulation Z.
The Memorandum of Understanding requires Frontier Bank and the Frontier Bank Board to (i) correct all violations found and implement procedures to prevent their recurrence; (ii) increase oversight of the Frontier Bank Board’s compliance function, including monthly reports from Frontier Bank’s compliance officer to the Frontier Bank Board detailing actions taken to comply with the Memorandum of Understanding; (iii) review its compliance policies and procedures and develop and implement detailed operating procedures and controls, where necessary, to ensure compliance with all consumer protection laws and regulations; (iv) establish monitoring procedures to ensure compliance with all consumer protection laws and regulations (including flood insurance), including the documentation and reporting of all exceptions to the Frontier Bank Board and its audit committee; (v) review, expand and improve the quality of such compliance with the frequency of compliance audits to be reviewed and approved annually by the Frontier Bank Board or audit committee, with a goal of auditing compliance at least annually; (vi) ensure that Frontier Bank’s compliance management function has adequate staff, resources, training and authority for the size and structure of Frontier Bank; (vii) establish flood insurance monitoring procedures to ensure loans are not closed without flood insurance and prior notices to customers required by law, that lapses of flood insurance do not occur, and to develop methods to ensure that adequate amounts of flood insurance are provided, with Frontier Bank agreeing to force - place flood insurance when necessary; (viii) provide additional training for all Frontier Bank personnel, including the Frontier Bank Board and audit and compliance staff for applicable laws and regulations; and (ix) furnish quarterly progress reports to the Regional Director of the FDIC detailing the actions taken to secure compliance with the Memorandum of Understanding until the Regional Director has released the institution, in writing, from submitting further reports. Frontier Bank was assessed civil monetary penalties of $48,895 for flood insurance violations and required to pay $10,974 in restitution to customers for certain violations of the Truth in Lending Act and Regulation Z.
These regulatory actions may adversely affect Frontier’s ability to obtain regulatory approval for future initiatives requiring regulatory action, such as acquisitions. The regulatory actions will remain in effect until modified or terminated by the regulators.
It is a condition to closing the merger that each of (i) the FDIC Order, (ii) the FRB Written Agreement, and (iii) the Memorandum of Understanding, will have been modified in a manner reasonably acceptable to SPAH, including by the elimination of certain provisions and consequences related thereto.
The Merger and the Merger Agreement (page 69)
SPAH and Frontier have agreed to combine their businesses under the terms of the merger agreement that is described in this joint proxy statement/prospectus. A copy of the merger agreement is attached to this joint proxy statement/prospectus as Annex A. Under the terms of the merger agreement, each share of Frontier common stock issued and outstanding at the effective time of the merger will be converted into 0.0530 shares of newly issued SPAH common stock and 0.0530 newly issued warrants of SPAH, having the same terms and conditions as the publicly traded SPAH warrants immediately prior to the effective time of the merger, after giving effect to the warrant amendment proposal.
SPAH stockholders will continue to own their existing shares of SPAH common stock after the merger, except that upon consummation of the merger, SP Acq LLC has agreed to forfeit 8,987,883 of its founder’s shares and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have agreed to forfeit an aggregate of 465,529 of their founder’s shares.
We cannot complete the merger unless, among other things, we obtain the necessary government approvals, SPAH’s application to become a bank holding company is approved, the stockholders of each of SPAH and Frontier approve the merger proposal, SPAH stockholders approve the amendments to SPAH’s Amended and Restated Certificate of Incorporation, and SPAH’s warrantholders approve the amendment to the Warrant Agreement.

 

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Upon consummation of the merger with Frontier, the funds currently held in SPAH’s trust account (less any amounts paid to stockholders who exercise their conversion rights, released as deferred underwriting compensation and/or used to purchase shares held by SPAH public stockholders who intend to vote against the merger and seek conversion or who otherwise wish to sell their shares) and proceeds from the co-investment will be released to SPAH. SPAH intends to pay any additional expenses related to the merger and hold the remaining funds as capital pending use for general corporate and strategic purposes. Such purposes could include increasing the capital of Frontier Bank, making additional loans, future mergers and acquisitions, branch construction, asset purchases, payment of dividends, repurchases of shares of SPAH common stock and general corporate purposes. Until such capital is fully leveraged or deployed, SPAH may not be able to successfully deploy such capital and SPAH’s return on equity could be negatively impacted.
Reasons for the Merger (pages 73 and 80)
SPAH. In reaching its decision to approve the merger agreement and recommend the merger to its stockholders, the SPAH Board reviewed various financial data, due diligence materials and other information. In addition, in reaching its decision to approve the merger agreement, the SPAH Board considered a number of factors, both positive and negative, including, among others:
    financial condition and results of operations of Frontier, including a tangible book value of $268.8 million, gross loans of $3.4 billion and total assets of $4.0 billion as of June 30, 2009;
    the growth potential associated with Frontier, including potential for loan growth, enhanced operating margins and operating efficiencies;
    the balance sheet make-up and product mix, including the loan and deposit mix of Frontier;
    the experience and skill of Frontier’s management, including Patrick M. Fahey, the current Chairman and Chief Executive Officer of Frontier who will become Chief Executive Officer of SPAH in the merger;
    the interests of certain officers, directors and affiliates of SPAH;
    the issuance of the FDIC Order and the Memorandum of Understanding;
    the issuance of the FRB Written Agreement; and
    the deterioration of Frontier’s loan portfolio, centered in its real estate construction and land development loans, including approximately $764.6 million in nonperforming loans predominately existing in construction real estate loans and land development and $98.6 million in loan loss reserves as of June 30, 2009.
These factors and others are more fully discussed under the heading “The Merger and the Merger Agreement—Reasons of SPAH for the Merger” beginning on page 73. After reviewing all of these factors, the SPAH Board unanimously determined that the merger proposal and the transactions contemplated thereby are in the best interests of SPAH and unanimously recommended that SPAH’s stockholders vote at the special meeting to adopt the merger agreement.
Frontier. In reaching its determination to adopt the merger agreement, the Frontier Board consulted with Frontier’s management and its financial and legal advisors, and considered a number of factors, including, among others:
    the ability of the merger to recapitalize and revitalize Frontier, restore its regulatory capital to well-capitalized levels, and achieve compliance with bank regulatory requirements;

 

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    the Frontier Board’s assessment of the financial condition of SPAH and of the business, operations, capital level, asset quality, financial condition and earnings of the combined company on a pro forma basis. This assessment was based in part on presentations by Sandler O’Neill & Partners, L.P. (“Sandler O’Neill”), Frontier’s financial advisor, and Keefe, Bruyette & Woods, Inc. (“Keefe Bruyette”), whom Frontier retained solely to render a fairness opinion, and Frontier’s management and the results of the due diligence investigation of SPAH conducted by Frontier’s management and financial and legal advisors;
    the financial and growth prospects for Frontier and its shareholders of a business combination with SPAH as compared to continuing to operate as a stand-alone entity;
    the information presented by Sandler O’Neill to the Frontier Board with respect to the merger and the opinion of Keefe Bruyette that, as of the date of that opinion, the merger consideration is fair from a financial point of view to the holders of Frontier common stock (see “— Opinion of Keefe Bruyette” below);
    the current and prospective economic, regulatory and competitive environment facing the financial services industry generally, and Frontier in particular, including the continued rapid consolidation in the financial services industry and the competitive effects of the increased consolidation on smaller financial institutions such as Frontier;
    the fact that SPAH has agreed to: (i) employ Patrick M. Fahey as Chief Executive Officer of the combined company, and (ii) appoint Mr. Fahey and three other member of the Frontier Board as directors of SPAH and Frontier Bank, which are expected to provide a degree of continuity and involvement by Frontier constituencies following the merger, in furtherance of the interests of Frontier’s shareholders, customers and employees;
    current conditions in the U.S. capital markets, including the unavailability of other sources of capital, strategic or other merger partners to Frontier;
    that directors and officers of Frontier have interests in the merger in addition to their interests generally as Frontier shareholders, including change of control agreements for five of its current executive officers;
    the effect of a termination fee of up to $2.5 million in favor of SPAH, including the risk that the termination fee might discourage third parties from offering to acquire Frontier by increasing the cost of a third party acquisition and, while SPAH has not agreed to pay Frontier any termination fee, Frontier was required to waive any claims against the trust account, if, for example, SPAH breaches the merger agreement;
    the risk to Frontier and its shareholders that SPAH may not be able to obtain required regulatory approvals, or necessary modifications to the FDIC Order, the FRB Agreement and the Memorandum of Understanding, and the risk of failing to consummate the transaction;
    the SPAH stock and SPAH warrants to be received in exchange for Frontier common stock pursuant to the merger agreement and resulting pro forma ownership levels in relation to the historical trading prices of Frontier common stock, as compared to other possible scenarios in the view of the Frontier Board’s financial advisor;
    the current condition of Frontier and the future prospects of the business in light of the current economic environment and the likelihood that Frontier would need to raise capital in order to protect against future loan losses and achieve compliance with the FDIC Order and the FRB Agreement;
    the fact that Frontier’s existing capital resources were limiting management’s ability to effectively manage certain problem credits;

 

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    uncertainty about how much of SPAH’s trust account will be available for working capital after closing; and
    the pending regulatory actions against Frontier, Frontier’s noncompliance with the capital requirement imposed by the FDIC Order, and their potential adverse impact on the profitability, operations and deposits of Frontier Bank, and the risk of further regulatory action and penalties, including the potential closure of Frontier Bank.
These factors and others are more fully discussed under the heading “The Merger and the Merger Agreement—Reasons of Frontier for the Merger” beginning on page 80. After reviewing all of these factors, the Frontier Board unanimously determined that the merger and the transactions contemplated thereby are in the best interests of Frontier and Frontier’s shareholders and unanimously recommended that Frontier’s shareholders vote at the Frontier special meeting to approve the merger agreement.
Regulatory Approvals (page 97)
SPAH and Frontier have agreed to obtain all regulatory approvals required to consummate the transactions contemplated by the merger agreement, which include approval from the Board of Governors of the Federal Reserve System (“Federal Reserve”) and the Washington DFI, each as detailed below. The merger cannot proceed in the absence of these regulatory approvals. Any approval granted by these federal and state bank regulatory agencies may include terms and conditions more onerous than SPAH’s management contemplates, and approval may not be granted in the timeframes desired by SPAH and Frontier. Regulatory approvals, if granted, may contain terms that relate to deteriorating economic conditions both nationally and in Washington; bank regulatory supervisory reactions to the current economic difficulties may not be specific to Bank or SPAH. Although SPAH and Frontier expect to obtain the timely required regulatory approvals, there can be no assurance as to if or when these regulatory approvals will be obtained, or the terms and conditions on which the approvals may be granted.
As noted, the merger is subject to the prior approval of the Federal Reserve. SPAH filed an application with the Federal Reserve on August [_____], 2009. In evaluating the merger, the Federal Reserve is required to consider, among other factors, (1) the financial condition, managerial resources and future prospects of the institutions involved in the transaction; and (2) the convenience and needs of the communities to be served, and the record of performance under the Community Reinvestment Act (the “CRA”). The BHC Act, and Regulation Y promulgated thereunder by the Federal Reserve (“Regulation Y”), prohibit the Federal Reserve from approving the merger if:
    it would result in a monopoly or be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any part of the United States; or
    its effect in any area of the country could be to substantially lessen competition or to tend to create a monopoly, or if it would result in a restraint of trade in any other manner, unless the Federal Reserve should find that any anti-competitive effects are outweighed clearly by the public interest and the probable effect of the merger in meeting the convenience and needs of the communities to be served.
The merger may not be consummated any earlier than the 15th day (or the 5th day if expedited processing is granted by the Federal Reserve) following the date of approval of SPAH’s bank holding company application by the Federal Reserve, during which time the United States Department of Justice is afforded the opportunity to challenge the merger on antitrust grounds. The commencement of any antitrust action would stay the effectiveness of the approval of the Federal Reserve, unless a court of competent jurisdiction were to specifically order otherwise.
The merger also is subject to the prior approval of the Washington DFI. SPAH filed an application with the Washington DFI on August [_____], 2009. The Washington DFI may disapprove a change of control of a state bank within 60 days of the filing of a complete application (or for an extended period not exceeding an additional 15 days) if it determines that the transaction is not in the public interest and for other reasons specified under Washington law.

 

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Expected Tax Treatment as a Result of the Merger (page 195)
We have structured the merger so that it will be considered a reorganization for U.S. federal income tax purposes. If the merger is a reorganization for U.S. federal income tax purposes, Frontier’s shareholders generally will not recognize any gain or loss on the exchange of shares of Frontier common stock for shares of SPAH common stock and SPAH warrants. Determining the actual tax consequences of the merger to a Frontier shareholder may be complex. These tax consequences will depend on each stockholder’s specific situation and on factors not within our control. Frontier’s shareholders should consult their own tax advisors for a full understanding of the tax consequences of their participation in the merger.
If you are a SPAH stockholder and exercise your conversion rights or if you are a Frontier shareholder and exercise your dissenters’ rights, you will generally be required to treat the exchange of your shares for cash as a sale of the shares and recognize gain or loss in connection with such sale.
In conjunction with the merger, SPAH warrantholders will vote on whether to amend the terms of their warrants. If the terms of the warrants are amended, a warrantholder will be treated as exchanging his or her “old” warrants for “new” warrants in connection with the consummation of the transactions contemplated by the merger agreement. We expect the merger to qualify as a reorganization for U.S. federal income tax purposes. If the merger qualifies as a reorganization for U.S. federal income tax purposes, a warrantholder will not recognize any gain or loss on the deemed exchange of his or her old warrants for new warrants as a result of the amendment.
Accounting Treatment (page 97)
The merger will be accounted for using the acquisition method of accounting, with SPAH being treated as the acquiring entity for accounting purposes pursuant to the provisions Statement of Financial Accounting Standards No. 141R (SFAS 141R). Pursuant to the requirements of SFAS 141R, SPAH is expected to be the acquirer for accounting purposes because SPAH is expected to own a majority interest upon consummation of the merger and the co-investment. Determination of control places emphasis on the stockholder group that retains the majority of voting rights in the combined entity. If the accounting acquirer cannot be determined based upon relative voting interests, other indicators of control are considered in the determination of the accounting acquirer, including: control of the combined entity’s board of directors, the existence of large organized minority groups, and senior management of the combined entity.
SFAS 141R requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the merger date. In addition, SFAS No. 141R establishes that the consideration transferred include the fair value of any contingent consideration arrangements and any equity or assets exchanged are measured at the closing date of the merger at the then-current market price.
Stock Ownership of Existing SPAH and Frontier Stockholders After the Merger (page 93)
Following the consummation of the merger, the SPAH insiders will beneficially own approximately 4,368,988 shares of SPAH common stock (after giving effect to the forfeiture of 9,453,412 founder’s shares by SP Acq LLC and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker and the co-investment) and will have, through the exercise of warrants, the right to acquire 20,822,400 additional shares of common stock (after giving effect to the co-investment), under certain circumstances. The percentage of SPAH’s securities that existing SPAH and Frontier stockholders will own after the merger and the co-investment is completed will depend on whether (i) Frontier shareholders exercise dissenters’ rights, (ii) SPAH public stockholder exercise conversion rights, and (iii) any of SPAH’s 66,612,000 warrants are exercised (after reflecting the co-investment and merger). Depending on the scenario, existing SPAH stockholders will own from 94.5% to 96.1% of SPAH’s securities after the merger and co-investment and Frontier will own from 3.9% to 5.5% of SPAH’s securities after the merger and co-investment.

 

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In addition to the foregoing, the percentage of SPAH’s voting common stock that existing SPAH and Frontier stockholders will own after the merger and co-investment will depend on whether (i) any SPAH stockholder converts its voting common stock into Non-Voting Common Stock, and (ii) any SPAH warrantholder elects to receive shares of Non-Voting Common Stock in lieu of voting common stock upon exercise of their warrants. SP Acq LLC and the Steel Trust have agreed to receive Non-Voting Common Stock as necessary in order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting. As a result, SPAH stockholders will hold from 94.3% to 95.4% of SPAH’s voting interests and Frontier shareholders will hold from 4.6% to 5.7% of SPAH’s voting interests depending on whether any Frontier shareholder exercises dissenters’ rights, any of SPAH’s warrants are exercised and whether any SPAH public stockholders exercise their conversion rights. At their discretion, SP Acq LLC and/or the Steel Trust will convert such shares into voting common stock in accordance with the SPAH Certificate of Incorporation, as amended by the Subsequent Charter Amendments and, upon a distribution of the shares by Steel Trust to its beneficiaries, such shares will also be converted into voting common stock in accordance with the SPAH Certificate of Incorporation, as amended by the Subsequent Charter Amendments.
In addition, SPAH, the SPAH insiders, and/or certain of their respective affiliates may negotiate arrangements to provide for the purchase of shares from SPAH public stockholders who indicate their intention to vote against the merger and seek conversion or who otherwise wish to sell their shares. As a result, existing SPAH and Frontier stockholders’ voting interests may be further increased or decreased accordingly in order for SP Acq LLC and the Steel Trust to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock.
For a table outlining the effect of the various scenarios on the percentage of SPAH’s securities and voting interests that existing SPAH and Frontier stockholders will own after the merger with Frontier is completed, see “The Merger and the Merger Agreement — Stock Ownership of Existing SPAH and Frontier Stockholders After the Merger.”
The SPAH Board After the Merger (page 95)
Under the terms of the merger agreement, SPAH will recommend for stockholder approval the election of Warren G. Lichtenstein and, if the merger is consummated, four directors from Frontier, comprised of Patrick M. Fahey, [______], [______] and [______], each of whom currently serve on the Frontier Board, in each case to serve until the next annual meeting of SPAH and until their successors shall have been elected and qualified. Upon the election of the Frontier nominees to the SPAH Board and, upon consummation of the merger, the SPAH Board will consist of five (5) members, with Mr. Lichtenstein serving as the Chairman of the Board.
The Frontier Bank Board After the Merger (page 95)
Under the terms of the merger agreement, upon consummation of the merger, the Frontier Bank Board will consist of five (5) directors, comprised of SPAH’s designee, John McNamara, to serve as Chairman of the Board, and four (4) directors from Frontier, comprised of Patrick M. Fahey, [______], [______] and [______].
Management and Operations After the Merger (page 95)
Each of the current executive officers of SPAH will resign upon consummation of the merger, other than Warren G. Lichtenstein who will continue to serve as Chairman of the Board, although he will resign as President and Chief Executive Officer of SPAH. The existing management team of Frontier will manage the business of the combined company following the merger.

 

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Comparative Rights of Stockholders (page 209)
The rights of SPAH stockholders are currently governed by Delaware law, the SPAH Certificate of Incorporation and the bylaws of SPAH (the “SPAH Bylaws”). The rights of Frontier’s shareholders are currently governed by Washington law and Frontier’s amended and restated articles of incorporation (the “Frontier Articles of Incorporation”) and 2003 restated bylaws (the “Frontier Bylaws”). Upon consummation of the merger, the stockholders of Frontier will become stockholders of SPAH and the SPAH Certificate of Incorporation, as proposed to be amended and restated, the SPAH Bylaws and Delaware law will govern their rights. The SPAH Certificate of Incorporation and SPAH Bylaws differ somewhat from those of Frontier. Material differences include:
    The SPAH Bylaws provide that a director can be removed with or without cause by a majority vote of the holders of the outstanding shares then entitled to vote at an election of directors; in comparison, the Frontier Articles of Incorporation provide that a director may be removed only for cause by the holders of not less than two-thirds of the shares entitled to elect the director whose removal is sought.
    The Frontier Articles of Incorporation and Frontier Bylaws divide the Frontier Board into three classes of directors, as nearly equal as possible, with each class being elected to a staggered three-year term; in comparison, SPAH does not have a staggered board and each director is elected for a term that expires at the next annual meeting of stockholders.
    The SPAH Certificate of Incorporation provides stockholders may not take action by written consent; in comparison, Frontier shareholders may take action by written consent if unanimous consent is given by all stockholders entitled to vote on such action.
    SPAH has elected not to be governed by Section 203 of the Delaware General Corporation Law (the “DGCL”), which limits business combinations, including mergers, with an “interested stockholder”; in comparison, under the WBCA, Frontier is prohibited, with certain exceptions, from engaging in certain “significant business transactions” with a person or group of persons beneficially owning 10% or more of its voting securities for a period of five years after the acquisition of such securities, unless the transaction or acquisition of shares is approved by a majority of the members of the board of directors prior to the date on which the acquiring person first obtained 10% share ownership.
    After the merger with Frontier is completed, adoption of a subsequent merger agreement or consolidation of SPAH with a different entity will require the affirmative vote of the holders of a majority of the outstanding shares of SPAH common stock entitled to vote; in comparison, certain mergers and share exchanges of Frontier must be approved by holders of at least two-thirds of the outstanding shares entitled to vote thereon.
For a more complete description of the difference between the rights of the stockholders of SPAH and the rights of shareholders of Frontier, please refer to the section entitled “Comparative Rights of SPAH and Frontier.”
SPAH Conversion Rights (page 76)
If you hold shares of common stock issued in SPAH’s initial public offering (whether such shares were acquired pursuant to such initial public offering or afterwards up to and until the record date), then you have the right to vote against the merger proposal and demand that SPAH convert such shares into cash equal to a pro rata share of the aggregate amount then on deposit in the trust account in which a substantial portion of the net proceeds of SPAH’s initial public offering are held (before payment of deferred underwriting discounts and commissions and including interest earned on their pro rata portion of the trust account, net of income taxes payable on such interest and net of interest income of $3.5 million on the trust account balance previously released to SPAH to fund its working capital requirements). As of [______], 2009, there was $[______] in the trust account, including accrued interest on the funds in the trust account, or approximately $[______] per share issued in the initial public offering. The actual conversion price will differ from the $[______] per share due to any interest earned on the funds in the trust account since [______], 2009, and any taxes payable in respect of interest earned thereon.
The SPAH Certificate of Incorporation requires that no more than 30% (minus one share) of the SPAH public stockholders vote against the merger and thereafter exercise their conversion rights. Notwithstanding the foregoing, it is a condition to closing the merger agreement that no more than 10% (minus one share) of the SPAH public stockholders vote against the merger and exercise their conversion rights, although at SPAH’s discretion, this closing condition may be waived in order to consummate the merger. Accordingly, SPAH may not consummate the merger if 10% or more of the holders of shares sold in or subsequent to SPAH’s initial public offering elect to exercise their conversion rights. If SPAH elects to waive this closing condition, it may raise the conversion threshold to anywhere between 10% to 30% (minus one share). If the merger is not consummated and SPAH does not consummate a business combination by October 10, 2009, SPAH will be required to dissolve and liquidate and SPAH public stockholders voting against the merger proposal who elected to exercise their conversion rights would not be entitled to convert their shares. However, all SPAH public stockholders would be entitled to participate in pro-rata liquidation distributions from SPAH’s trust account with respect to their shares.

 

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If you wish to exercise your conversion rights, you must:
    affirmatively vote against the merger proposal in person or by submitting your proxy card before the vote on the merger proposal and checking the box that states “Against” for proposal number 1; and
    either:
    check the box that states “Exercise Conversion Rights” on the proxy card; or
    send a letter to SPAH’s transfer agent, Continental Stock Transfer & Trust Company, at 17 Battery Place, 8th Floor, New York, NY 10004, attn: Mark Zimkind, stating that you are exercising your conversion rights and demanding your shares of SPAH common stock be converted into cash; and
    either:
    physically tender, or if you hold your shares of SPAH common stock in “street name,” cause your broker to physically tender, your stock certificates representing shares of SPAH common stock to SPAH’s transfer agent; or
    deliver your shares electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, to SPAH’s transfer agent by [______], 2009.
The DWAC delivery process can be accomplished, whether you are a record holder or your shares are held in “street name,” within a day, by simply contacting the transfer agent or your broker and requesting delivery of your shares through the DWAC System. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the stockholder or the tendering broker $35, and your broker may or may not pass this cost on to you.
Taking any action that does not include an affirmative vote against the merger, including abstaining from voting on the merger proposal, will prevent you from exercising your conversion rights. However, voting against the merger proposal does not obligate you to exercise your conversion rights.
Prior to exercising your conversion rights you should verify the market price of SPAH common stock. You may receive higher proceeds from the sale of your common stock in the public market than from exercising your conversion rights, if the market price per share is higher than the amount of cash that you would receive upon exercise of your conversion rights.
Any request to exercise your conversion rights, once made, may be withdrawn at any time up to immediately prior to the vote on the merger proposal at the special meeting (or any adjournment or postponement thereof). Furthermore, if you deliver your shares for conversion and subsequently decide prior to the special meeting not to elect conversion, you may simply request that the transfer agent return the certificate (physically or electronically) to you.
If the merger is not consummated, no shares will be converted to cash through the exercise of conversion rights. For more information regarding your conversion rights, see “The Merger and the Merger Agreement— Conversion Rights of SPAH Stockholders”.

 

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Frontier Dissenters’ Rights (page 127)
Frontier shareholders have the right under Washington law to dissent from the merger, obtain an appraisal of the fair value of their Frontier shares, and receive payment in cash equal to the appraised fair value of their Frontier shares instead of receiving the merger consideration. To exercise dissenters’ rights, among other things, a Frontier shareholder must (i) deliver to Frontier prior to the vote of its shareholders on the transaction is taken notice of the shareholder’s intent to demand payment for the shareholder’s shares, and (ii) not vote in favor of the merger agreement. Submitting a properly signed proxy card that is received prior to the vote at the special meeting (and is not properly revoked) that does not direct how the shares of Frontier common stock represented by proxy are to be voted will constitute a vote in favor of the merger agreement and a waiver of such shareholder’s dissenters’ rights.
A shareholder electing to dissent from the merger must strictly comply with all procedures required under Washington law. These procedures are described more fully beginning on page 127 of this joint proxy statement/prospectus, and a copy of the relevant Washington statutory provisions regarding dissenters’ rights is included in this joint proxy statement/prospectus as Annex F.
The Merger is Expected to Occur in the Fourth Quarter of 2009 (page 99)
The merger will occur shortly after all of the conditions to its completion have been satisfied or waived. Currently, we anticipate that the merger will occur in the fourth quarter of 2009. However, we cannot assure you when or if the merger will occur. We must first obtain the approval of the SPAH and Frontier stockholders at the special meetings, the approval of the warrant agreement amendment by SPAH’s warrantholders, all the necessary regulatory approvals, and the approval of SPAH’s application to become a bank holding company, among other things. If SPAH fails to consummate a business combination prior to October 10, 2009, SPAH will be forced to dissolve and liquidate.
Completion of the Merger is Subject to Certain Conditions (page 105)
Completion of the merger is subject to the satisfaction or waiver of a number of conditions, including the following:
    the adoption of the Initial Charter Amendment and the Subsequent Charter Amendments;
    the adoption of the warrant amendment proposal by SPAH warrantholders;
    the adoption of the merger agreement by SPAH and Frontier stockholders;
    no more than 10% (minus one share) of SPAH public stockholders vote against the merger agreement and thereafter exercise their conversion rights;
    no more than 10% of the holders of Frontier common stock entitled to vote on the merger exercise their dissenters’ rights;
    the approval of SPAH’s application to become a bank holding company;
    receipt of all required regulatory approvals, including the approval of the Federal Reserve and the Washington DFI; and
    each of (i) the FDIC Order, (ii) the FRB Written Agreement, and (iii) the Memorandum of Understanding , will have been modified in a manner reasonably acceptable to SPAH, including by the elimination of certain provisions and consequences related thereto.
These conditions and others are more fully discussed under the heading “The Merger and the Merger Agreement—The Merger Agreement— Conditions to the Closing of the Merger”. Some of these closing conditions, including the closing condition that no more than 10% (minus one share) of SPAH public stockholders may vote against the merger agreement and thereafter exercise their conversion rights, may be waived by SPAH.

 

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Termination of the Merger Agreement (page 106)
Notwithstanding the approval of the merger proposal by SPAH and Frontier stockholders, we can mutually agree at any time to terminate the merger agreement at any time prior to the effective time:
    By mutual written agreement of SPAH and Frontier;
    By either party if the other party is in breach of any of its representations, warranties or covenants under the merger agreement which cannot be or has not been cured within 5 days after the giving of written notice by the non-breaching party to the breaching party of such breach;
    By either party in the event (i) any consent of any regulatory authority required for consummation of the merger and the other transactions contemplated hereby shall have been denied by final nonappealable action of such authority or if any action taken by such authority is not appealed within the time limit for appeal, (ii) any law or order permanently restraining, enjoining or otherwise prohibiting the consummation of the merger shall have become final and nonappealable, (iii) the stockholders of SPAH or Frontier fail to vote their approval of the matters relating to the merger agreement and the transactions contemplated thereby at SPAH’s special meeting of stockholders or Frontier’s special meeting of shareholders, respectively, where such matters were presented to such stockholders for approval and voted upon, or (iv) if applicable, holders of 10% or more of the shares sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights;
    By either party in the event that the merger shall not have been consummated by December 31, 2009;
    By either party if the other party’s board of directors fails to reaffirm its approval upon the other party’s request for such reaffirmation of the merger or if such other party’s board of directors resolves not to reaffirm the merger;
    By either party if the other party’s board of directors fails to include in the joint proxy statement/prospectus its recommendation, without modification or qualification, that the stockholders approve the merger or if the party’s board of directors withdraws, qualifies, modifies, proposes publicly to withdraw, qualify, or modify, in a manner adverse to the other party, the recommendation that the stockholders approve the merger;
    By either party if the other party’s board of directors affirms, recommends, or authorizes entering into any acquisition transaction other than the merger or, within 10 business days after commencement of any tender or exchange offer for any shares of its common stock, the other party’s board of directors fails to recommend against acceptance of such tender or exchange offer or takes no position with respect to such tender or exchange offer;
    By either party if the other party’s board of directors negotiates or authorizes the conduct of negotiations (and five business days have elapsed without such negotiations being discontinued) with a third party regarding an acquisition proposal other than the merger; or
    By either party if the party terminating is not in material breach of any representation, warranty, or covenant, or other agreement in the merger agreement, and prior to the adoption of the merger proposal by the stockholders, the other party’s board of directors has (1) withdrawn or modified or changed its recommendation of approval of the merger agreement in a manner adverse to the terminating party in order to approve and permit the other party to accept a superior proposal and (2) determined, after consultation with, and the receipt of advice from outside legal counsel to the other party, that the failure to take such action as described in the preceding clause (1) would be likely to result in a breach of the board of directors’ fiduciary duties under applicable law, provided, however, that at least five business days prior to any such termination, the terminating party shall, and shall cause its advisors to, negotiate with the other party, if such party elects to do so, to make such adjustments in the terms and conditions of the merger agreement as would enable the other party to proceed with the merger on the adjusted terms.

 

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Actions That May Be Taken to Secure Approval of the SPAH Public Stockholders (page 78)
If 30% or more of the SPAH public stockholders properly elect to convert their shares for cash equal to a pro rata portion of the SPAH trust account in accordance with the SPAH Certificate of Incorporation, SPAH would not be permitted to consummate the merger, even if the required vote for the merger proposal was received. Notwithstanding the foregoing, it is a condition to closing the merger agreement that holders of no more than 10% of the shares (minus one share) sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights, although at SPAH’s discretion, this closing condition may be waived in order to consummate the merger. Accordingly, SPAH may not consummate the merger if 10% or more of the holders of shares sold in or subsequent to SPAH’s initial public offering elect to exercise their conversion rights. To preclude such possibility, SPAH, the SPAH insiders, and/or certain of their respective affiliates may negotiate arrangements to provide for the purchase of such shares from certain holders who indicate their intention to vote against the merger and seek conversion or who otherwise wish to sell their shares. SPAH, the SPAH insiders, and/or certain of their respective affiliates may also execute agreements to purchase shares from such holders in the future, or they or SPAH may enter into transactions with such persons and others to provide them with incentives to acquire shares of SPAH and vote in favor of the merger proposal.
Arrangements of such nature would only be entered into and effected with the prior approval of Frontier (with respect to shares purchased) in accordance with applicable law at any time prior to the special meeting of stockholders during a period when SPAH, the SPAH insiders, and/or certain of their respective affiliates are not aware of any material nonpublic information regarding SPAH and its securities or pursuant to agreements between the buyer and seller of such shares in a form that would not violate insider trading rules. If such transactions are effected, the consequence could be to cause the merger to be approved in circumstances where such approval could not otherwise be obtained. Purchases of shares by SPAH, the SPAH insiders, and/or certain of their respective affiliates would allow them to exert more influence over the approval of the merger and other proposals and would likely increase the chances that such proposals would be approved. Moreover, any such purchases may make it less likely that the holders of 10% or more of the shares sold in, or subsequent to, SPAH’s initial public offering will vote against the merger proposal and exercise their conversion rights.
As of the date of this joint proxy statement/prospectus, no arrangements to such effect have been entered into with any such investor or holder. In the event that any purchases of SPAH’s common stock are made by SPAH, the SPAH insiders, and certain of their respective affiliates after the mailing of this joint proxy statement/prospectus to stockholders but prior to the special meeting of stockholders of SPAH, SPAH will file a Current Report on Form 8-K within four business days of such purchases or otherwise prior to the special meeting. Any such report will include descriptions of the arrangements entered into or significant purchases by any of the aforementioned persons. If members of the SPAH Board or SPAH’s officers make purchases pursuant to such arrangements, they will be required to report these purchases on beneficial ownership reports filed within two business days of such transactions with the SEC.
Transfer Restrictions of SPAH Insiders and Frontier Insiders upon Consummation of the Merger (pages 75 and 96)
SPAH Insiders. Upon consummation of the merger, SP Acq LLC has agreed to forfeit 8,987,883 of the 9,653,412 founder’s shares it owns and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have agreed to forfeit an aggregate of 465,529 of the 500,000 founder’s shares they own. The SPAH insiders previously agreed not to sell or transfer their founder’s units and the founder’s shares and initial founder’s warrants comprising the founder’s units (including the common stock to be issued upon the exercise of the initial founder’s warrants) for a period of one year from the date the merger is consummated, except in each case to permitted transferees who agree to be subject to the same transfer restrictions. The Steel Trust has agreed to be subject to these transfer restrictions.

 

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SP II has previously agreed not to sell or transfer the co-investment units, co-investment shares or co-investment warrants (including the common stock to be issued upon exercise of the co-investment warrants) until one year after SPAH completes the merger except to permitted transferees who agree to be bound by such transfer restrictions. The Steel Trust has agreed to be subject to these transfer restrictions. We refer to these agreements with the SPAH insiders and their permitted transferees as “lock-up agreements.”
Frontier Insiders. The Frontier insiders have agreed not sell, pledge, transfer or otherwise dispose of the shares of SPAH common stock and SPAH warrants for a one year period ending on the first anniversary of the consummation of the merger.
The Co-Investment (page 92)
In connection with the initial public offering, SP II previously agreed to purchase an aggregate of 3,000,000 co-investment units at $10.00 per unit ($30.0 million in the aggregate) in a private placement that will occur immediately prior to the consummation of the merger. Pursuant to a plan of reorganization, SP II has contributed certain assets to the Steel Trust, a liquidating trust established for the purpose of effecting the orderly liquidation of such assets. As a result, all of the founder’s shares and initial founder’s warrants owned by SP II have been transferred to the Steel Trust in a private transaction exempt from registration under the Securities Act. The Steel Trust has agreed to assume all of SP II’s rights and obligations with respect to the founder’s shares and initial founder’s warrants, as more fully described elsewhere in this joint proxy statement/prospectus, including the obligation to purchase the co-investment units. Since the agreement governing the co-investment and SPAH’s initial public offering prospectus disclosed that only SP II or SP Acq LLC may purchase the co-investment units, SPAH will need the prior written consent of the underwriters in its initial public offering to permit the Steel Trust to make the co-investment. SPAH anticipates receiving this consent prior to the closing of the merger. In addition, SPAH public stockholders may have a securities law claim against SPAH for rescission (under which a successful claimant has the right to receive the total amount paid for his or her securities pursuant to an allegedly deficient prospectus, plus interest and less any income earned on the securities, in exchange for surrender of the securities) or damages (compensation for loss on an investment caused by alleged material misrepresentations or omissions in the sale of a security), as described more fully under “The Merger and the Merger Agreement—Rescission Rights.”
The units purchased in the co-investment will be identical to the units sold in SPAH’s initial public offering, except that they will be subject to certain transfer restrictions. The proceeds from the sale of the co-investment units will not be received by SPAH until immediately prior to the consummation of the merger. The proceeds from the sale of the co-investment units will provide SPAH with additional equity capital to fund the merger. If the merger is not consummated, the Steel Trust will not purchase the co-investment units and no proceeds will deposited into SPAH’s trust account or available for distribution to SPAH’s stockholders in the event of a liquidating distribution.
The Special Meeting of SPAH Stockholders (page 109)
SPAH will hold its special meeting of stockholders on [_____], [_____], 2009 at [_____]:00 [_____].m., local time, at [_____]. At the special meeting, SPAH’s stockholders will be asked to vote to approve the merger agreement, to adopt the Initial Charter Amendment, to adopt the Subsequent Charter Amendments, and to elect to the SPAH Board, Warren G. Lichtenstein, who will serve as Chairman of the Board, and, if the merger is consummated, four directors from Frontier, comprised of Patrick M. Fahey, [______], [______] and [______], each of whom currently serve on the Frontier Board, in each case to serve until the next annual meeting of SPAH and until their successors shall have been elected and qualified, and to consider any other matters that may properly come before the meeting.
SPAH Stockholders’ Meeting Record Date and Voting (page 109)
If you owned shares of SPAH common stock at the close of business on [______], 2009, SPAH’s record date, you are entitled to vote at the special meeting. On the record date, there were 54,112,000 shares of SPAH stock outstanding, including 3,982,016 shares comprising units of SPAH. You will have one vote at the meeting for each share of SPAH stock you owned on the record date. At the special meeting, we may transact such other business as may properly come before the special meeting and any adjournments or postponements thereof.

 

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Adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of SPAH common stock entitled to vote at the special meeting. The SPAH Certificate of Incorporation also requires that a majority of the shares of common stock voted by the SPAH public stockholders are voted, in person or by proxy, in favor of the merger and the SPAH public stockholders owning no more than 30% (minus one share) of the shares sold in SPAH’s initial public offering vote against the merger and thereafter exercise their conversion rights as described below. Notwithstanding the foregoing, it is a condition to closing the merger agreement that holders of no more than 10% of the shares (minus one share) sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights, although at SPAH’s discretion, this closing condition may be waived in order to consummate the merger. Accordingly, SPAH may not consummate the merger if 10% or more of the holders of shares sold in or subsequent to SPAH’s initial public offering elect to exercise their conversion rights. If SPAH elects to waive this closing condition, it may raise the conversion threshold to anywhere between 10% to 30% (minus one share).
Adoption of the amendments to the SPAH Certificate of Incorporation requires the affirmative vote of a majority of the shares of SPAH’s outstanding common stock entitled to vote at the special meeting. Directors will be elected by a plurality of the votes cast by stockholders present in person or represented by proxy and entitled to vote at the special meeting.
If the requisite approval is received, the Initial Charter Amendment will be filed with the Delaware Secretary of State immediately upon its approval and prior to the stockholders’ consideration of the merger proposal at the special meeting of stockholders. Accordingly, the proposal to adopt the merger agreement will only be presented for a vote at the special meeting if the Initial Charter Amendment is approved by SPAH stockholders and the warrant amendment proposal is approved at a special meeting of SPAH warrantholders to be held immediately prior to the special meeting of SPAH stockholders. The Subsequent Charter Amendments and the election of the Frontier nominees will only be effected in the event and at the time the merger with Frontier is consummated, although approval of the Subsequent Charter Amendments is a condition to closing the merger. The election of the Mr. Lichtenstein does not require the approval of any other proposals to be effective.
The SPAH insiders have agreed to vote all of their founder’s shares either for or against the merger proposal consistent with the majority of the votes cast on the merger by the SPAH public stockholders. To the extent any SPAH insider has acquired shares of SPAH common stock in, or subsequent to, SPAH’s initial public offering, such insider has agreed to vote these acquired shares in favor of the merger proposal. As of the date hereof, none of the SPAH insiders own any shares sold in, or subsequent to, the SPAH initial public offering. The SPAH insiders have further indicated that they will vote their shares in favor of the adoption of the amendments to the SPAH Certificate of Incorporation and for the election of each of the director nominees to the SPAH Board. While the founder’s shares voted by the SPAH insiders will count towards the voting and quorum requirements under Delaware law, they will not count towards the voting requirement under the SPAH Certificate of Incorporation because the founder’s shares were not issued in SPAH’s initial public offering. As described elsewhere in this joint proxy statement/prospectus, pursuant to a plan of reorganization, SP II has contributed certain assets, including its shares of SPAH common stock and warrants, to the Steel Trust. The trust has agreed to assume all of SP II’s rights and obligations with respect to these shares and warrants, including to vote in accordance with the foregoing.
Upon consummation of the merger, SP Acq LLC has agreed to forfeit 8,987,883 of its founder’s shares and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have agreed to forfeit an aggregate of 465,529 of their founder’s shares.
The SPAH Board Recommends Stockholder Approval (page 115)
The SPAH Board has unanimously approved each of the proposals to be brought before the special meeting of stockholders, and believes that the merger, the amendments to the SPAH Certificate of Incorporation and the election of the directors named in this joint proxy statement/prospectus are each in the best interest of SPAH and its stockholders.

 

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Interests of SPAH’s Directors and Officers and Others in the Merger (page 75)
When considering the recommendations of the SPAH Board, you should be aware that some of SPAH’s directors and officers and other have interests in the merger proposal that may differ from the interests of other stockholders:
    Warren G. Lichtenstein will serve as the Chairman of the SPAH Board following the consummation of the merger;
    John McNamara will serve as Chairman of the Frontier Bank Board following the consummation of the merger;
    if the merger is not approved and SPAH is required to liquidate, all the shares of common stock and all the warrants held by the SPAH insiders (including SP Acq LLC and SP II), which, as of the record date, for the shares, were worth $[______] per share and $[______] in the aggregate and, for the warrants, were worth $[______] per warrant and $[______] in the aggregate, will be worthless. Since Mr. Lichtenstein, SPAH’s Chairman of the Board, President and Chief Executive Officer, may be deemed the beneficial owner of shares held by SP Acq LLC and SP II, he may also have a conflict of interest in determining whether a particular target business is appropriate for SPAH and its stockholders. However, upon consummation of the merger, SP Acq LLC has agreed to forfeit 8,987,883 of its founder’s shares and Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S. Nicholas Walker have agreed to forfeit an aggregate of 465,529 of their founder’s shares;
    if SPAH liquidates prior to the consummation of a business combination, SP Acq LLC and Mr. Lichtenstein will be personally liable if and to the extent any claims by a third party for services rendered or products sold, or by a prospective business target, reduce the amounts in the trust account available for distribution to SPAH stockholders in the event of a dissolution and liquidation; and
    unless SPAH consummates an initial business combination, its officers and directors, its employees, and affiliates of SP Acq LLC and their employees will not receive reimbursement for any out-of-pocket expenses incurred by them to the extent that such expenses exceed the amount of available proceeds not deposited in the trust account and the $3.5 million in interest income on the balance of the trust account that has been released to SPAH to fund its working capital requirements.
Each board member was aware of these and other interests and considered them before approving and adopting the merger agreement. Additionally, upon consummation of the merger, the underwriters in SPAH’s initial public offering will be entitled to receive approximately $17.3 million of deferred underwriting discounts and commissions currently held in SPAH’s trust account. SPAH is in negotiation with its underwriters regarding the amount and form of payment of such deferred underwriting fees from SPAH’s initial public offering. The results of these negotiations are uncertain and could result in $17,316,000 in additional costs for the proforma company which could be paid in cash. If the merger is not consummated and SPAH is required to liquidate, the underwriters have agreed to forfeit any rights or claims to their deferred underwriting discounts and commissions then in the trust account, and those funds will be included in the pro rata liquidation distribution to the SPAH public stockholders.
The Special Meeting of SPAH Warrantholders (page 122)
SPAH will hold its special meeting of warrantholders on [_____], [_____], 2009 at [_____]:00 [_____].m., local time, at [_____]. At the special meeting, SPAH’s warrantholders will be asked to vote upon a proposal to amend certain terms of the Warrant Agreement, in connection with the consummation of the transactions contemplated by the merger. The proposed amendment to the Warrant Agreement, to become effective upon consummation of the merger, will (i) increase the exercise price of the warrants from $7.50 per share to $11.50 per share of SPAH common stock; (ii) amend the warrant exercise period to (A) eliminate the requirement that the initial founder’s warrants owned by the SPAH insiders become exercisable only after the consummation of an initial business combination if and when the last sales price of SPAH common stock exceeds $14.25 per share for any 20 trading days within a 30 trading day period beginning 90 days after such business combination and (B) extend the expiration date of the warrants to the earlier of (x) seven years from the consummation of the merger or (y) the date fixed for redemption of the warrants set forth in the warrant agreement; (iii) provide for the mandatory downward adjustment of the exercise price for each warrant to reflect any cash dividends paid with respect to the outstanding common stock of SPAH; (iv) provide that, in the event an effective registration statement is not in place on the date the warrants are set to expire, the warrants will remain outstanding until 90 days after an effective registration statement is filed, provided, that if SPAH has not filed an effective registration statement within 90 days after the expiration date, the warrants shall become exercisable for cash consideration; (v) provide that no adjustment in the number of shares issuable upon exercise of each warrant will be made as a result of the issuance of SPAH shares and warrants to the shareholders of Frontier upon consummation of the merger agreement; and (vi) provide that each warrant will entitle the holder thereof to purchase, in its sole discretion, either one share of voting common stock or one share of Non-Voting Common Stock.

 

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SPAH Warrantholders Meeting Record Date and Voting (page 122)
If you owned warrants of SPAH at the close of business on [______], 2009, SPAH’s record date, you are entitled to vote at the special meeting. On the record date, there were 61,112,000 warrants of SPAH outstanding, including 3,982,016 comprising units of SPAH. You will have one vote at the meeting for each warrant of SPAH stock you owned on the record date. At the special meeting, we may transact such other business as may properly come before the special meeting and any adjournment thereof.
Adoption of the amendment to the Warrant Agreement requires the affirmative vote of a majority of the warrantholders outstanding and entitled to vote at the special meeting. The Warrant Agreement also requires that the holders of a majority of SPAH’s outstanding warrants issued in, or subsequent to, SPAH’s initial public offering, are voted in favor of the warrant amendment. The approval of the amendment proposal is also a condition to the consummation of the merger discussed above.
The SPAH insiders intend to vote in favor of the warrant amendment proposal. While the warrants voted by the SPAH insiders will count towards the voting and quorum requirements under Delaware law, they will not count towards the voting requirement under the Warrant Agreement, which requires that the holders of a majority of SPAH’s outstanding warrants issued in, or subsequent to, SPAH’s initial public offering, are voted in favor of the warrant amendment, because the initial founder’s warrants and additional founder’s warrants were not issued in SPAH’s initial public offering.
The SPAH Board Recommends Warrantholder Approval (page 125)
The SPAH Board has determined that the warrant amendment proposal is fair to and in the best interests of SPAH and its warrantholders and unanimously recommends that you vote or give instruction to vote “FOR” the approval of the warrant amendment proposal.
The Special Meeting of Frontier Shareholders (page 126)
Frontier will hold its special meeting of shareholders on [_____], [_____], 2009 at [_____]:00 [_____].m., local time, at [_____]. At the special meeting, Frontier’s shareholders will be asked to vote to approve the merger agreement, and consider other matters that may properly come before the meeting. The Board recommends that you vote, or give instruction to vote, “FOR” the adoption of the merger agreement.
Frontier Shareholder’s Meeting Record Date and Voting (page 126)
If you owned shares of Frontier common stock at the close of business on [______], 2009, Frontier’s record date, you are entitled to vote at the special meeting. On the record date, there were [______] shares of Frontier stock outstanding. You will have one vote at the meeting for each share of Frontier stock you owned on the record date. At the special meeting, we may transact such other business as may properly come before the special meeting and any adjournments or postponements thereof.
Approval of the merger agreement requires the affirmative vote of at least two-thirds of the outstanding shares of Frontier’s common stock. Because at least two-thirds of all outstanding shares is required to approve the merger, your failure to vote will have the same effect as a vote against the merger proposal.

 

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All of Frontier’s insiders have agreed to vote their [______] shares of Frontier common stock (which constitutes [______]% of Frontier’s outstanding shares of common stock as of [______], 2009), “FOR” the merger proposal.
Frontier Obtained an Opinion that the Merger Proposal Consideration is Fair to Frontier’s Shareholders from a Financial Point of View (page 82)
Keefe Bruyette was retained by Frontier solely to render an opinion to the Frontier Board with respect to the fairness, from a financial point of view, of the merger proposal consideration.  Keefe Bruyette rendered an opinion to the Frontier Board that, as of July 29, 2009, the date the Frontier Board voted on the merger proposal, the consideration to be received in the transaction was fair to Frontier’s shareholders from a financial point of view.  A copy of the opinion delivered by Keefe Bruyette is attached to this joint proxy statement/prospectus as Annex E. Frontier’s shareholders should read the opinion completely to understand the assumptions made, matters considered, limitations and qualifications of the review undertaken by Keefe Bruyette in providing its opinion.
The Frontier Board Recommends Shareholder Approval (page 128)
The Frontier Board has unanimously approved the merger agreement and believes that the merger is in the best interest of Frontier and its shareholders. The Board recommends that you vote, or give instruction to vote, “FOR” the adoption of the merger agreement.
Certain Benefits of Directors and Officers of Frontier (page 89)
When considering the recommendations of the Frontier Board, you should be aware that some directors and officers have interests in the merger proposal that differ from the interests of other shareholders, including the following:
    Stock Ownership. The directors, executive officers and principal shareholders of Frontier, together with their affiliates, beneficially owned, as of the record date for the special meeting, a total of [_____] shares of Frontier common stock, including [______] shares of restricted stock that has or will be vested at the time of the merger, representing [_____]% of the total outstanding shares of Frontier common stock;
    Change of Control Agreements. Frontier is a party to change of control agreements with five of its current executive officers, John J. Dickson, Carol E. Wheeler, R. James Mathison, Robert W. Robinson and Lyle E. Ryan. These agreements generally provide that in the event of a termination of employment in connection with, or within 24 months after, a change of control, for reasons other than cause, the executive will receive a lump sum payment on the first day of the seventh month after the termination of his or her employment in an amount equal to two times the amount of his or her salary and bonus for the twelve months prior to the effective date of the change of control and will continue to be covered by applicable medical and dental plans for 24 months following termination of employment. In the event an executive, after attaining age 60, voluntarily retires within 12 months following a change of control, the executive will receive a lump sum payment equal to one times the amount of his or her salary and bonus, and will continue to be covered by applicable medical and dental plans for 12 months following termination of employment. If an executive receives a change of control payment under his or her agreement, the executive will be restricted by a noncompetition and nonsolicitation period of two years following termination of employment.
 
      In addition, the vesting of restricted stock awards granted under Frontier’s 2006 Stock Option Plan will accelerate upon the effective time of the merger.
    Insurance and Indemnification. SPAH has agreed to use reasonable best efforts to maintain Frontier’s existing policies of directors and officers liability insurance (or at SPAH’s option, obtain comparable coverage under its own insurance policies) for a period of six years after the merger with respect to claims arising from facts or events which occurred prior to the effective time of the merger, subject to a maximum premium limit of $1,150,000. SPAH has also agreed to continue to provide for the indemnification of the former and current directors, officers, employees and agents of Frontier for six years after the merger.
    Certain Employee Matters. The merger agreement contains certain agreements of the parties with respect to various employee matters.

 

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At and following the effective time of the merger, SPAH will assume and honor certain Frontier severance and change of control agreements that Frontier had with its officers and directors on July 24, 2009.
Rescission Rights (page 79)
If you are a SPAH stockholder at the time of the merger and you purchased your shares in SPAH’s initial public offering or afterwards up to and until the record date and have not exercised your conversion rights or you have voted in favor of the merger agreement, but the merger is not consummated because holders of 10% or more, but less than 30% (minus one share) of shares sold in SPAH’s initial public offering elect to exercise their conversion rights, you may have securities law claims against SPAH for rescission (under which a successful claimant has the right to receive the total amount paid for his or her securities pursuant to an allegedly deficient prospectus, plus interest and less any income earned on the securities, in exchange for surrender of the securities) or damages (compensation for loss on an investment caused by alleged material misrepresentations or omissions in the sale of a security) on the basis of, for example, SPAH’s initial public offering prospectus not disclosing that (i) SPAH may seek to amend the SPAH Certificate of Incorporation prior to the consummation of a business combination to amend the definition of “initial business combination” to eliminate the requirement that the fair market value of the target business equal at least 80% of the balance of SPAH’s trust account (excluding underwriting discounts and commissions) plus the proceeds of the co-investment, (ii) SPAH may agree to lower the percentage of shares that can exercise conversion rights as a condition to closing its initial business combination, (iii) SPAH may seek to amend the Warrant Agreement upon consummation of the merger to eliminate the requirement that the initial founder’s warrants owned by certain SPAH insiders become exercisable only after the consummation of an initial business combination if and when the last sales price of SPAH common stock exceeds $14.25 per share for any 20 trading days within a 30 trading day period beginning 90 days after such business combination, (iv) funds in its trust account might be used, directly or indirectly, to purchase shares from SPAH public stockholders in order to secure approval of SPAH’s stockholders on the merger, (v) that SPAH may seek to amend the terms of the Warrant Agreement to increase the exercise price and extend the exercise period, among other things, upon consummation of the merger, and (vi) that a party other than SP II or SP Acq LLC may purchase the co-investment units. The rescission right and corresponding liability will continue against SPAH in the event the merger is consummated.
Such claims may entitle stockholders asserting them to up to $10.00 per share, based on the initial offering price of the units sold in SPAH’s initial public offering, each comprised of one share of common stock and a warrant to purchase an additional share of common stock, less any amount received from the sale or fair market value of the original warrants purchased as part of the units, plus interest from the date of SPAH’s initial public offering. In the case of SPAH public stockholders, this amount may be more than the pro rata share of the trust account to which they are entitled upon exercise of their conversion rights or liquidation of SPAH. See “The Merger and the Merger Agreement—Rescission Rights” for additional information about rescission rights.

 

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RISK FACTORS
You should carefully consider the following risk factors, together with all of the other information included in this joint proxy statement/prospectus, before you decide whether to vote or instruct your vote to be cast to approve the proposals described in this joint proxy statement/prospectus.
Risks Related to the Business of Frontier
The continued downturn in Frontier’s real estate market areas and weakness in the economy could adversely affect Frontier’s financial condition and profitability.
Frontier’s banking and lending are concentrated in western Washington and Oregon. As a result of this geographic concentration, Frontier’s financial condition and earnings largely depend upon economic conditions in this area, although they also depend on economic conditions in other areas.
We are currently operating in a challenging and uncertain economic environment, both nationally and locally. Like many other financial institutions, Frontier is being affected by sharp declines in the real estate market, constrained financial markets and a weak economy. Continued declines in real estate values, home sales and financial stress on borrowers as a result of the uncertain economic environment, including job losses, could have an adverse effect on Frontier’s borrowers or their customers and demand for Frontier’s products and services, which could adversely affect Frontier’s financial condition and earnings, increase loan delinquencies, defaults and foreclosures, and significantly impair the value of Frontier’s collateral and its ability to sell the collateral upon foreclosure.
Frontier is experiencing deterioration in its loan portfolio, centered in its residential construction and land development loans.
As of June 30, 2009, approximately 85.4% of Frontier’s loan portfolio was comprised of loans secured by real estate. Of this 85.4% of real estate loans, 35% are commercial real estate loans, 21% are residential construction loans, 16% are land development loans, 15% are term 1-4 family residential loans, 9% are lot loans and 4% are commercial construction loans. Frontier has been experiencing deterioration in its loan portfolio, centered in its residential construction and land development loans. Many of these loans are maturing and classified as nonperforming assets while Frontier works with the borrowers to maximize its recovery. If loan payments from borrowers are over 90 days past due, or sooner if normal repayment cannot resume, the loans are placed on nonaccrual status, thereby reducing and/or reversing previously accrued interest income. From third quarter 2008 to June 30, 2009, Frontier’s nonaccrual loans increased significantly, from $205.2 million to $764.6 million, primarily as a result of construction and land development loans that Frontier is choosing not to renew in order to keep all of its legal remedy options available. The contraction or expansion of Frontier’s nonaccrual loan portfolio and other real estate owned (“OREO”) properties in future periods will depend upon the company’s ongoing collection efforts and changes in market conditions. Frontier has a dedicated a team of 38 employees focused on the management of problem loans, but there is no guarantee that this team will be able to effectively manage the amount of problem loans Frontier may encounter in the future. Additional information regarding credit risk is included in “Information About Frontier—Management’s Discussion and Analysis of Financial Condition and Results of Operations — Loans.”
Frontier’s management believes that there is the potential for additional loan losses beyond those recognized as of June 30, 2009, particularly with respect to Frontier Bank’s construction and land development portfolio, and these losses could be significantly greater than management presently expects, particularly if economic conditions deteriorate further.
Frontier Bank’s loan portfolio and allowance for loan losses are assessed each quarter by management, and were subject to recent examinations by its federal and state regulators. Further, in its efforts to refine Frontier Bank’s assessment of inherent risk in Frontier Bank’s loan portfolio, Frontier Bank has performed extensive reviews and analyses. As a result of these reviews and analyses, assuming a continuing weak economy, Frontier believes the potential for additional deterioration in the Bank’s loan portfolio may result in additional loan losses and such losses can be further increased if the adverse economic conditions become more severe or continue longer than we anticipate. The Frontier Board has concluded that, in its judgment, Frontier’s allowance for loan losses is appropriate in the present economic environment. Further, even if economic conditions were to deteriorate further, Frontier believes that the substantial additional funds which will be provided by the merger will give Frontier Bank a substantial cushion of capital to weather such an adverse economic environment and maintain acceptable capital levels, and support the combined company’s business strategy.

 

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Due to unforeseen circumstances and/or changes in estimates, Frontier’s allowance for loan losses may not be adequate to cover actual losses.
An essential element of Frontier’s business is to make loans. Frontier maintains an allowance for loan losses that it believes is a reasonable estimate of known and inherent losses within the loan portfolio. At June 30, 2009, Frontier’s allowance for loan losses was $98.6 million or 2.89% of its total loans of $3.4 billion. The determination of the appropriate level of loan loss allowance as well as the appropriate amount of loan charge-offs (net of loan recoveries) is an inherently difficult process and is based on numerous assumptions and there may be a range of potential estimates. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in Frontier’s real estate markets and interest rates that are beyond Frontier’s control. Frontier’s underwriting policies, credit monitoring processes and risk management systems and controls may not prevent unexpected losses. In addition, bank regulators periodically review Frontier’s allowance for loan losses and may require Frontier to increase its provision for loan losses or recognize further loan charge-offs.
While SPAH has reviewed Frontier’s loan portfolio, allowance for loan losses, loan charge-offs and loan recoveries, there is no precise method for predicting credit losses since any estimate of loan losses is necessarily subjective and the accuracy depends on the outcome of future events. Upon consummation of the merger, management of the combined company will make its own independent evaluation of the loan portfolio and make adjustments to the loan loss allowance as necessary. The allowance for loan losses may be further changed upon the continued review of bank regulators. Although SPAH believes, based on its review of Frontier’s loan portfolio, that upon a post merger evaluation of the loan portfolio the combined company will have sufficient capital following the consummation of the merger to absorb potential increases in loan charge-offs, while maintaining adequate capital ratios, there can be no assurance that any revised allowance for loan losses will be adequate to cover actual loan losses. Any significant increases in the allowance for loan losses would adversely affect the capital base and earnings of the combined company.
Defaults and related losses in Frontier’s residential construction and land development loan portfolio could result in a significant increase in OREO balances and the number of properties to be disposed of, which would adversely affect Frontier’s financial results.
As part of Frontier’s collection process for all nonperforming real estate loans, the company may foreclose on and take title to the property serving as collateral for the loan. Real estate owned by Frontier and not used in the ordinary course of its operations is referred to as other real estate owned (OREO) property. Frontier expects to take additional properties into OREO. Increased OREO balances lead to greater expenses as the company incurs costs to manage and dispose of the properties and, in certain cases, complete construction of improvements prior to sale. Any decrease in sale prices on properties may lead to OREO write-downs with a corresponding expense in Frontier’s income statement. Frontier’s management expects that earnings over the next several quarters could be negatively affected by various expenses associated with OREO, including personnel costs, insurance and taxes, completion and repair costs, and other costs associated with property ownership, as well as by the funding costs associated with assets that are tied up in real estate during the period they are held in OREO. The management and oversight of OREO is time consuming and can be complex and can require significant resources of Frontier’s management and employees. Frontier will also be at risk of further declines in real estate prices in the market areas in which the company conducts its lending business.

 

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Restrictions imposed by regulatory actions could have an adverse effect on Frontier and failure to comply with any of its provisions could result in further regulatory action or restrictions.
The businesses and operations of Frontier and its subsidiary, Frontier Bank, are currently subject to regulatory actions, including the FDIC Order and the FRB Written Agreement, which , for example, generally prohibit Frontier Bank from paying dividends (effectively prohibiting any dividends by its holding company, Frontier, because substantially all earnings of Frontier are derived from Frontier Bank), repurchasing stock, retaining new directors or senior managers or changing the duties of senior management, paying management or consulting fees or other funds to Frontier, and extending additional credit with respect to nonperforming and adversely classified loans which management believes, complicates the workout of troubled loans. The FDIC Order also requires Frontier Bank to raise its Tier 1 leverage capital ratio to a higher than normal level of 10% of its assets, by July 29, 2009, and to maintain that capital level, in addition to maintaining a fully funded allowance for loan losses satisfactory to the FDIC and the Washington DFI. These and other regulatory actions are described in more detail in “Information About Frontier—Management’s Discussion and Analysis of Financial Condition and Results of Operations — Regulatory Actions.” The FDIC identified deficiencies in the management and supervision of Frontier Bank that primarily relate to loan underwriting, procedures and monitoring, excessive concentrations in construction and land development loans, and related concerns about Frontier Bank’s capital and liquidity. Management believes it has addressed the concerns and that it is in compliance with all the requirements of the FDIC Order and the FRB Written Agreement, other than the Tier 1 capital requirement for Frontier Bank. Frontier believes it can increase its Tier 1 capital to compliance levels with the consummation of the merger. However, these regulatory actions and any future actions could continue to limit Frontier’s growth and adversely affect its earnings, business and operations. In addition, failure to comply with these regulatory actions or any future actions could result in further regulatory actions or restrictions, including monetary penalties and the potential closure of Frontier Bank.
Frontier’s profitability and the value of stockholder’s investments may suffer because of rapid and unpredictable changes in the highly regulated environment in which Frontier operates.
Frontier is subject to extensive supervision by several governmental regulatory agencies at the federal and state levels in the financial services area. See “Supervision and Regulation”. Recently enacted, proposed and future legislation and regulations have had, and will continue to have, or may have a significant impact on the financial services industry. These regulations, which are generally intended to protect depositors and not stockholders, and the interpretation and application of them by federal and state regulators, are beyond Frontier’s control, may change rapidly and unpredictably and can be expected to influence earnings and growth. For example, the FDIC and the Federal Reserve recently issued joint Guidance on Concentrations in Commercial Real Estate Lending, Sound Risk Management Practices that sets forth supervisory criteria to assist bank examiners in identifying banks with potentially significant commercial real estate loan concentrations that may warrant greater supervisory scrutiny. The Guidance applies to Frontier Bank, based on Frontier’s current loan portfolio, and Frontier’s management expects that the company’s business and operations will be subject to enhanced regulatory review for the foreseeable future. Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on operations, the classification of assets and determination of the level of allowance for loan losses. Frontier’s success depends on Frontier’s continued ability to maintain compliance with these regulations. Increased regulation and supervision of the banking and financial industry as a result of the existing financial crisis. Such additional regulation and supervision may increase our costs and limit our ability to pursue business opportunities.
Market and other constraints on Frontier’s construction loan origination volume are expected to lead to decreases in the company’s interest and fee income that are not expected to be fully offset by reductions in its noninterest expenses.
Due to existing conditions in housing markets in the areas where Frontier operates, the recession and other factors, Frontier projects the company’s construction loan originations to be materially constrained in 2009 and beyond. Additionally, management’s revised business plan will de-emphasize the origination of construction loans. This will lower interest income and fees generated from this part of Frontier’s business. Unless this revenue decline is offset by other areas of Frontier’s operations, the company’s total revenues may decline relative to its total noninterest expense. Frontier expects that it will be difficult to find new revenue sources in the near term to completely offset expected declines in the company’s interest income. In that regard, the adverse economic conditions that began in 2007 and that have continued into 2009 have significantly reduced Frontier’s origination of all new loans, and Frontier’s management cannot assure you that the company’s total loans or assets will increase or not decline in 2009.

 

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Fluctuations in interest rates could reduce Frontier’s profitability and affect the value of its assets.
Frontier’s earnings and cash flows are largely dependent upon the company’s net interest income. Net interest income is the difference between interest income earned on interest-earning assets such as loans and securities and interest expense paid on interest-bearing liabilities such as deposits and borrowed funds. Interest rates are highly sensitive to many factors that are beyond Frontier’s control, including but not limited to; general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve. Changes in monetary policy, including changes in interest rates, could influence not only the amount of interest Frontier receives on loans and securities and the amount of interest Frontier pay on deposits and borrowings, but such changes could also affect the company’s ability to originate loans and obtain deposits as well as the fair value of its financial assets and liabilities. If the interest Frontier pays on deposits and other borrowings increases at a faster rate than the interest it receives on loans and other investments, Frontier’s net interest income, and therefore earnings, could be adversely effected. Earnings could also be adversely affected if the interest Frontier receives on loans and other investments fall more quickly than the interest it pays on deposits and other borrowings.
Concern of customers over the safety of their deposits may cause a decrease in deposits.
With recent increased concerns about bank failures, customers increasingly are concerned about the safety of their deposits and the extent to which their deposits are insured by the FDIC. Customers may not believe Frontier is a safe place to keep their deposit accounts and they may remove their deposit accounts. Additionally, customers may withdraw deposits from Frontier Bank in an effort to ensure that the amount they have on deposit at Frontier Bank is fully insured. Decreases in deposits may adversely affect Frontier’s funding costs, liquidity and net income. In addition, if the FDIC reduces the limit on FDIC coverage to $100,000 per account after December 31, 2013, customers may become increasingly more concerned about the safety of their depositions.
Liquidity risk could impair Frontier’s ability to fund operations and jeopardize the company’s financial condition.
Liquidity is essential to Frontier’s business. An inability to raise funds through deposits, borrowings, the sale of loans and other sources could have a substantial negative effect on Frontier’s liquidity. Frontier’s access to funding sources in amounts adequate to finance the company’s activities or the terms of which are acceptable to the company could be impaired by factors that affect us specifically, including our existing regulatory agreements, or the financial services industry in general. Factors that could detrimentally impact Frontier’s access to liquidity sources include a decrease in the level of the company’s business activity as a result of weak economic conditions in the western Washington and Oregon markets in which Frontier’s loans are concentrated or additional adverse regulatory action against the company. Frontier’s ability to borrow could also be impaired by factors that are not specific to Frontier, such as a disruption in the financial markets or negative views and expectations about the prospects for the financial services industry in light of the turmoil currently faced by financial institutions and the continued deterioration in credit markets and the economy. Additional information regarding liquidity risk is included in “Information About Frontier—Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity Resources.”
Strong competition within its market areas may limit Frontier’s growth and adversely affect the company’s operating results.
The banking and financial services industry is highly competitive. Frontier competes in its market areas with commercial banks, savings institutions, mortgage brokerage firms, credit unions, finance companies, mutual funds, insurance companies, and brokerage and investment banking firms operating locally and elsewhere. Some of these competitors have substantially greater resources and lending limits than Frontier, have greater name recognition and market presence that benefit them in attracting business and deposits, and offer certain services that Frontier does not or cannot provide. In addition, larger competitors may be able to price loans and deposits more aggressively than Frontier. Frontier’s results of operations depend upon the company’s continued ability to successfully compete in its market area. The greater resources and deposit and loan products offered by some of Frontier’s competitors may limit the company’s ability to increase or maintain its interest earning assets.

 

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Frontier will be required to pay significantly higher FDIC premiums in the future.
Recent insured institution failures, as well as deterioration in banking and economic conditions, have significantly increased FDIC loss provisions, resulting in a decline in the designated reserve ratio to historical lows. The FDIC expects a higher rate of insured institution failures in the next few years compared to recent years; thus, the reserve ratio may continue to decline. In addition, the FDIC temporarily increased the limit on FDIC coverage to $250,000 through December 31, 2013. These developments will cause the premiums assessed to us by the FDIC to increase. Under the final rule adopted December 16, 2008, Frontier Bank’s assessment rate will increase from 5 to 7 basis points per $100 of deposits to approximately 31 to 38 basis points in 2009. The increased deposit insurance premiums are expected to result in a significant increase in our non-interest expense, which will have a material impact on our results of operations beginning in 2009.
Frontier’s controls and procedures may fail or be circumvented.
Management regularly reviews and updates Frontier’s internal controls, disclosure controls and procedures, and corporate governance policies and procedures. Any system of controls, however well designed and operated, is based in part on certain assumptions and can provide only reasonable, not absolute, assurances that the objectives of the system are met. Any failure or circumvention of Frontier’s controls and procedures or failure to comply with regulations related to controls and procedures could have a material adverse effect on Frontier’s financial condition and results of operations.
Frontier continually encounters technological change.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new technology-driven products and services. The effective use of technology increases efficiency and enables financial institutions to better serve customers and to reduce costs. Frontier’s future success depends, in part, upon the company’s ability to address the needs of its customers by using technology to provide products and services that will satisfy customer demands, as well as to create additional efficiencies in the company’s operations. Many of Frontier’s competitors have substantially greater resources to invest in technological improvements. Frontier may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to the company’s customers. Failure to successfully keep pace with technological change affecting the financial services industry could have a material adverse effect on Frontier’s financial condition and results of operations.
Frontier is subject to operational risk, which may result in incurring financial and reputation losses.
Frontier is exposed to many types of operational risk, including the risk of fraud by employees or outsiders, the risk of operational errors, including clerical or record-keeping errors or those resulting from faulty or disabled computer or telecommunications systems. Given Frontier’s high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully corrected. Frontier’s dependence upon automated systems to record and process transactions may further increase the risk that technical system flaws or employee tampering with or manipulation of those systems will result in losses that are difficult to detect.
Frontier may be subject to disruptions of its systems, arising from events that are wholly or partially beyond the company’s control (including, for example, computer viruses or electrical or telecommunications outages), which may give rise to losses in service to customers and to financial loss or liability. Frontier is further exposed to the risk that its external vendors may be unable to fulfill their contractual obligations (or will be subject to the same risk of fraud or operational errors by their respective employees as Frontier is) and to the risk that Frontier’s (or its vendors’) business continuity and data security systems prove to be inadequate.

 

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Frontier is exposed to risk of environmental liabilities with respect to properties to which it takes title.
Approximately 85.4% of Frontier’s outstanding loan portfolio at June 30, 2009 was secured by real estate. In the course of its business, Frontier may foreclose and take title to real estate, and could be subject to environmental liabilities with respect to these properties. Frontier may be held liable to a governmental entity or to third-parties for property damage, personal injury, investigation and clean-up costs incurred by these parties in connection with environmental contamination, or may be required to investigate or clean up hazardous or toxic substances, or chemical releases at a property. The costs associated with investigation or remediation activities could be substantial. In addition, if Frontier is the owner or former owner of a contaminated site, the company may be subject to common law claims by third-parties based on damages and costs resulting from environmental contamination emanating from the property. If Frontier ever becomes subject to significant environmental liabilities, the company’s business, financial condition, liquidity and results of operations could be materially and adversely affected.
Frontier depends on key personnel for success.
Frontier’s operating results and ability to adequately manage its growth and minimize loan and lease losses are highly dependent on the services, managerial abilities and performance of Frontier’s current executive officers and other key personnel. Frontier has an experienced management team that the Board of Directors believes is capable of managing and growing Frontier’s operations. However, losses of or changes in Frontier’s current executive officers or other key personnel and their responsibilities may disrupt Frontier’s business and could adversely affect financial condition, results of operations and liquidity. Frontier may not be successful in retaining its current executive officers or other key personnel.
Frontier’s earnings may be affected by changes in accounting principles and tax laws.
Changes in U.S. generally accepted accounting principles could have a significant adverse effect on Frontier’s reported financial results. Although these changes may not have an economic impact on the company’s business, they could affect Frontier’s ability to attain targeted levels for certain performance or regulatory measures.
Frontier is subject to tax laws, rules and regulations. Changes to tax laws, rules and regulations, including changes in the interpretation or implementation of tax laws, rules and regulations by the Internal Revenue Service or other governmental bodies, could affect the company in substantial and unpredictable ways. Such changes could subject Frontier to additional costs, among other things. Failure to appropriately comply with tax laws, rules and regulations could result in sanctions by regulatory agencies, civil money penalties and/or reputation damage, which could have a material adverse effect on Frontier’s business, financial condition and results of operations.
Severe weather, natural disasters, acts of war or terrorism and other external events could significantly impact Frontier’s business.
Severe weather, natural disasters, acts of war or terrorism and other adverse external events could have a significant impact on Frontier’s ability to conduct business. Such events could affect the stability of our deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, interrupt our information systems, and/or cause us to incur additional expenses. Although management has established disaster recovery plans and procedures, the occurrence of any such event could have a material adverse effect on Frontier’s business, which, in turn, could have a material adverse effect on its financial condition and results of operations.
The merger agreement limits Frontier’s ability to pursue other transactions and provides for payment of termination fees if it does.
While the merger agreement is in effect and subject to very narrow exceptions, Frontier and its directors, officers and agents are prohibited from initiating or encouraging inquiries with respect to alternative acquisition proposals. The prohibition limits Frontier’s ability to seek offers from other possible acquirers which may be superior from a financial point of view, or otherwise more desirable. If Frontier receives an unsolicited proposal from a third party that is superior from a financial point of view to that made by SPAH and the merger agreement is terminated, Frontier would be required to pay a $2.5 million termination fee in most circumstances. This fee makes it less likely that a third party would make an alternative acquisition proposal.

 

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If the merger is not approved by shareholders or regulators or is terminated for some other reason, Frontier may experience adverse consequences.
Frontier’s management has expended substantial time and effort in negotiating the merger agreement and the related arrangements connected with the transaction described in this joint proxy statement/prospectus. Additionally, Frontier has, at significant expense, engaged numerous outside consultants for the specific purpose of evaluating and negotiating this transaction. Moreover, the Frontier Board has agreed to certain arrangements intended to avert any unsolicited attempt to gain control of Frontier during the pendency of this transaction, including certain breakup fees and expense reimbursements. Additionally, the merger reflects a substantial aspect of management’s strategic planning for Frontier’s future. Were the merger not to be consummated, Frontier would be forced to make substantial adjustments in its strategic plans, which would require additional management time and effort and which might not be successful. Therefore, if the merger is not consummated, Frontier may experience adverse impacts on its strategic direction and its operating capabilities, and these impacts may be material. Finally, the termination or abandonment of the merger would likely have an adverse impact upon investors’ views as to the attractiveness of Frontier’s common stock and customers’ views of Frontier’s safety and soundness, which would likely result in a reduced market price for Frontier’s common stock and a reduction in Frontier’s future business prospects, and such reductions may be material.
Directors and officers of Frontier have interests in the merger that are in addition to or different than the interests of other shareholders.
When considering the recommendation of the Frontier Board, you should be aware that some executive officers and directors of Frontier have interests in the merger that are somewhat different from your interests. For example, certain officers and directors of Frontier have change of control agreements which will be assumed by SPAH, and certain officers and directors of Frontier will receive a portion of the merger consideration for their shares of Frontier stock. In addition, all of the executive management team of Frontier will continue to be employed with similar title, role and responsibilities. Four board members from the current Frontier Board and Frontier Bank Board will be invited to become members of the new SPAH Board and Frontier Bank Board, respectively, following the consummation of the merger. These arrangements may create potential conflicts of interest. These and certain other additional interests of Frontier’s directors and executive officers may cause some of these persons to view the proposed transaction differently than you view it, as a shareholder. See “The Merger and the Merger Agreement — Certain Benefits of Directors and Officers of Frontier”.
Risks Related to the Merger
To implement its operating strategy following the merger, SPAH must successfully identify opportunities for expansion and successfully integrate its new strategic initiatives into Frontier’s existing operating platform.
Following the merger, SPAH intends to further implement an operating strategy that results in a more diversified earning asset portfolio, lower cost funding base and expansion of noninterest income channels. This strategy will be driven largely by focused efforts in business and retail banking within our existing footprint. This strategy will require the development of new products and services. This strategy will also require that Frontier penetrate customer segments that have not historically been a focus for the company. If following the merger, SPAH is unable to generate products and services that are attractive to its target customers or successfully deliver those products and services to customers, an important component of its strategy may be lost. Additionally, it is anticipated that SPAH will have substantial capital resources after the merger. SPAH may not be able to produce sufficient organic growth to profitably leverage the pro forma capital resources. As part of its operating strategy SPAH intends to use its capital resources to consider expansion and acquisition opportunities. Any future expansion or acquisition efforts may entail substantial costs and may not produce the revenue, earnings or synergies that SPAH had anticipated. Any future expansion or acquisitions that SPAH undertakes will involve operational risks and uncertainties. Acquired companies may have unforeseen liabilities, exposure to asset quality problems, key employee and customer retention problems and other problems that could negatively affect SPAH.

 

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The operations of Frontier may still be restricted by the FDIC Order and the FRB Written Agreement after Frontier and Frontier Bank are integrated with SPAH.
On March 20, 2009, Frontier Bank entered into the FDIC Order with the FDIC and the Washington DFI. The regulators alleged that Frontier Bank had engaged in unsafe or unsound banking practices by operating with inadequate management and board supervision; engaging in unsatisfactory lending and collection practices; operating with inadequate capital in relation to the kind and quality of assets held at Frontier Bank; operating with an inadequate loan valuation reserve; operating with a large volume of poor quality loans; operating in such a manner as to produce low earnings and operating with inadequate provisions for liquidity. By consenting to the FDIC Order, Frontier Bank neither admitted nor denied the alleged charges.
Under the terms of the FDIC Order, Frontier Bank cannot declare dividends or pay any management, consulting or other fees or funds to Frontier, without the prior written approval of the FDIC and the Washington DFI. Other material provisions of the FDIC Order require Frontier Bank to: (1) review the qualifications of Frontier Bank’s management, (2) provide the FDIC with 30 days written notice prior to adding any individual to the Frontier Bank Board or employing any individual as a senior executive officer, (3) increase director participation and supervision of Frontier Bank affairs, (4) improve Frontier Bank’s lending and collection policies and procedures, particularly with respect to the origination and monitoring of real estate construction and land development loans, (5) develop a capital plan and increase Tier 1 leverage capital to 10% of Frontier Bank’s total assets by July 29, 2009, and maintain that capital level, in addition to maintaining a fully funded allowance for loan losses satisfactory to the regulators, (6) implement a comprehensive policy for determining the adequacy of the allowance for loan losses and limiting concentrations in commercial real estate and acquisition, development and construction loans, (7) formulate a written plan to reduce Frontier Bank’s risk exposure to adversely classified loans and nonperforming assets, (8) refrain from extending additional credit with respect to loans charged-off or classified as “loss” and uncollected, (9) refrain from extending additional credit with respect to other adversely classified loans without collecting all past due interest, without the prior approval of a majority of the directors on the Frontier Bank Board or its loan committee, (10) develop a plan to control overhead and other expenses to restore profitability, (11) implement a liquidity and funds management policy to reduce Frontier Bank’s reliance on brokered deposits and other non-core funding sources, and (12) prepare and submit progress reports to the FDIC and the Washington DFI. The FDIC Order will remain in effect until modified or terminated by the FDIC and the Washington DFI.
In addition, on July 2, 2009, Frontier entered into a written agreement with the FRB. Under the terms of the FRB Written Agreement, Frontier has agreed to: (i) refrain from declaring or paying any dividends without prior written consent of the FRB; (ii) refrain from taking dividends or any other form of payment that represents a reduction in capital from Frontier Bank without prior written consent of the FRB; (iii) refrain from making any distributions of interest or principal on subordinated debentures or trust preferred securities without prior written consent of the FRB; (iv) refrain from incurring, increasing or guaranteeing any debt without prior written consent of the FRB; (v) refrain from purchasing or redeeming any shares of its stock without prior written consent of the FRB; (vi) implement a capital plan and maintain sufficient capital; (vii) comply with notice and approval requirements established by the FRB relating to the appointment of directors and senior executive officers as well as any change in the responsibility of any current senior executive officer; (viii) not pay or agree to pay any indemnification and severance payments except under certain circumstances, and with the prior approval of the FRB; and (ix) provide quarterly progress reports to the FRB.
The Frontier Bank Board also entered into the Memorandum of Understanding with the FDIC dated August 20, 2008 relating to the correction of certain violation of applicable consumer protection and fair lending laws and regulations, principally including the failure to provide certain notices to consumers pursuant to the Flood Disaster Protection Act of 1973, and certain violations of the Truth in Lending Act and Regulation Z.

 

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The Memorandum of Understanding requires the Frontier Bank Board to (i) correct all violations found and implement procedures to prevent their recurrence; (ii) increase oversight of the Frontier Bank Board’s compliance function, including monthly reports from Frontier Bank’s compliance officer to the Frontier Bank Board detailing actions taken to comply with the Memorandum of Understanding; (iii) review its compliance policies and procedures and develop and implement detailed operating procedures and controls, where necessary, to ensure compliance with all consumer protection laws and regulations; (iv) establish monitoring procedures to ensure compliance with all consumer protection laws and regulations (including flood insurance), including the documentation and reporting of all exceptions to the Frontier Bank Board and its audit committee; (v) review, expand and improve the quality of such compliance with the frequency of compliance audits to be reviewed and approved annually by the Frontier Bank Board or audit committee, with a goal of auditing compliance at least annually; (vi) ensure that Frontier Bank’s compliance management function has adequate staff, resources, training and authority for the size and structure of Frontier Bank; (vii) establish flood insurance monitoring procedures to ensure loans are not closed without flood insurance and prior notices to customers required by law, that lapses of flood insurance do not occur, and to develop methods to ensure that adequate amounts of flood insurance are provided, with Frontier Bank agreeing to force - place flood insurance when necessary; (viii) provide additional training for all Frontier Bank personnel, including the Frontier Bank Board and audit and compliance staff for applicable laws and regulations; and (ix) furnish quarterly progress reports to the Regional Director of the FDIC detailing the actions taken to secure compliance with the Memorandum of Understanding until the Regional Director has released the institution, in writing, from submitting further reports. Frontier Bank was assessed civil monetary penalties of $48,895 for flood insurance violations and required to pay $10,974 in restitution to customers for certain violations of the Truth in Lending Act and Regulation Z.
The consummation of the merger is conditioned upon the modification of the (i) FDIC Order, (ii) the FRB Written Agreement, and (iii) the Memorandum of Understanding , in a manner reasonably acceptable to SPAH, including by the elimination of certain provisions and consequences related thereto. Frontier has been actively engaged in responding to the concerns raised in the FDIC Order. With the consummation of the merger, Frontier believes it can increase its Tier 1 capital to compliance levels.
If the FDIC Order and FRB Written Agreement are not appropriately modified or dismissed, the FDIC Order and the FRB Written Agreement will continue to restrict the payment of dividends by Frontier Bank and restrict the business activities of Frontier Bank as discussed above. The occurrence of either of these events could adversely impact the future value of SPAH common stock and warrants.
SPAH’s working capital could be reduced if SPAH stockholders exercise their right to convert their shares into cash equal to a pro rata portion of the SPAH trust account.
Pursuant to the SPAH Certificate of Incorporation, holders of shares issued in SPAH’s initial public offering may vote against the merger and demand that SPAH convert their shares into cash equal to a pro rata portion of the SPAH trust account. Under the SPAH Certificate of Incorporation, SPAH will not consummate the merger if holders of 30% or more of the shares of common stock issued in its initial public offering exercise these conversion rights. Notwithstanding the foregoing, it is a condition to closing the merger agreement that holders of no more than 10% of the shares (minus one share) sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights, although at SPAH’s discretion, this closing condition may be waived in order to consummate the merger. Accordingly, SPAH may not consummate the merger if 10% or more of the holders of shares sold in or subsequent to SPAH’s initial public offering elect to exercise their conversion rights. If SPAH elects to waive this closing condition, it may raise the conversion threshold to anywhere between 10% to 30% (minus one share). To the extent the merger is consummated and holders of less than 10% of the common stock issued in SPAH’s initial public offering have demanded to convert their shares, working capital available to SPAH following the merger will be reduced by the amount paid out of the trust to stockholders exercising their conversion rights.
Additionally, if holders demand to convert their shares, there may be a corresponding reduction in the value of each share of common stock of SPAH. As of [_____], 2009, assuming the merger proposal is adopted, the maximum amount of funds that could be disbursed to the SPAH public stockholders upon the exercise of the conversion rights would be approximately $[______], or approximately [______]% of the funds currently held in trust as of the record date for the SPAH special meeting.

 

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SPAH has lowered the percentage of shares that can exercise conversion rights below the level a typical blank check company with a similar business plan as ours would permit.
SPAH has made it a condition to closing the merger agreement that holders of no more than 10% of the shares (minus one share) sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights even though the SPAH Certificate of Incorporation, provides that our initial business combination may be consummated if SPAH public stockholders owning up to 30% of the shares sold in this offering (minus one share) exercise their conversion rights. Most blank check companies with similar business plans as ours are structured so that their initial business combination may be consummated if public stockholders owning up to 20% of the shares sold in their initial public offering (minus one share) exercise their conversion rights. Our decreased conversion threshold may prevent the merger from being approved which would otherwise have been approved if we kept our original 30% (minus one share) conversion threshold as stated in the SPAH Certificate of Incorporation and the prospectus for SPAH’s initial public offering. As a result, it is less likely that we will be able to consummate the proposed merger, although at SPAH’s discretion, this closing condition may be waived in order to consummate the merger. If SPAH elects to waive this closing condition, it may raise the conversion threshold to anywhere between 10% to 30% (minus one share).
The lowered percentage of shares with regard to which SPAH public stockholders can exercise their conversion rights may deplete substantially all of the funds held in SPAH’s trust account, and further deprive SPAH of working capital following consummation of the merger.
Although the SPAH Certificate of Incorporation prohibits it from pursuing an initial business combination in which holders of more than 30% (minus one share) of the shares sold in SPAH’s initial public offering (up to and including the record date) exercise their conversion rights, SPAH has made it a closing condition to the merger agreement that if holders of 10% or more of SPAH’s shares sold in its initial public offering (up to and including the record date) elect to exercise their conversion rights, SPAH may not consummate the merger. Consequently, the lowered conversion threshold will make it more difficult for SPAH to consummate the merger.
In order to secure the approval of the merger with SPAH’s public stockholders, SPAH may use the funds in the trust account to purchase shares from such holders who have indicated an intention to vote against the merger and thereafter exercise their conversion rights. As a result of the lowered conversion threshold from 30% (minus one share) to 10% (minus one share), and in order to secure approval of the merger, SPAH may be forced to spend additional funds from the trust account to purchase shares from SPAH public stockholders who have indicated their intention to vote against the merger and convert their shares. If SPAH spends additional funds from the trust account to secure approval of the merger, SPAH may deplete a significant portion of the trust funds, and may not have sufficient working capital following the merger to meet bank regulatory concerns, or successfully operate its business.
SPAH, the SPAH insiders and/or certain of their respective affiliates may purchase additional shares of SPAH common stock from SPAH public stockholders, which may give them greater influence over the approval of the merger.
The ability of SPAH, SPAH insiders and/or their respective affiliates to acquire additional SPAH common stock, vote such acquired shares as they desire and effectively reduce the number of shares that other SPAH public stockholders may elect to convert into a pro rata portion of the trust account may allow SPAH and Frontier to consummate the merger even if it would not have otherwise been approved but for such additional purchases. Any privately negotiated transaction between SPAH, the SPAH insiders and/or certain of their respective affiliates on the one hand, and holders of SPAH’s common stock on the other hand, which holders would otherwise choose to vote against the merger, would include a contractual acknowledgement that such stockholder, although still the record holder of our shares is no longer the beneficial owner thereof and therefore agrees to vote the applicable shares of common stock as directed by the purchaser of such securities. In the event that SPAH, the SPAH insiders and/or certain of their respective affiliates purchase shares in privately negotiated transactions from SPAH public stockholders who have already cast votes against the merger and requested conversion of their shares, such selling stockholders would be required to revoke their prior votes against the merger and to revoke their prior elections to convert their shares and to cast new votes in favor of the merger. The revocation of prior negative votes and substitution therefor of votes in favor of the proposed merger would have the effect of reducing conversions and increasing votes in favor of the proposed merger, thereby making it more likely that the merger would be approved. Investors are cautioned that none of SPAH, the SPAH insiders and/or certain of their respective affiliates or any third parties has agreed to purchase any such shares, and the failure to so agree at the applicable time could adversely impair our ability to approve the merger. Moreover, even if SPAH, the SPAH insiders and/or certain of their respective affiliates were to undertake such purchases, such purchases could be subject to limitations under applicable securities laws and regulations, including Regulation M and regulations regarding tender offers. The inability of such persons to effect such purchases could adversely impair our ability to effect the merger.

 

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SPAH, the SPAH insiders and/or certain of their respective affiliates may diminish funds in the trust account for the purchase, directly or indirectly, of shares held by the SPAH public stockholders in order to secure the approval of the merger.
After the payment of expenses associated with the merger, including deferred underwriting commissions, the balance of funds in SPAH’s trust account will be available to SPAH for working capital and general corporate purposes. However, a portion of the funds in the trust account may be used to acquire shares held by SPAH public stockholders, either from holders who indicate their intention to vote against the merger and seek conversion or who otherwise wish to sell their shares, so that such shares will be voted in favor of the merger and related proposals. As a result, the amount of funds from SPAH’s trust account that will be released to SPAH following the merger for working capital and general corporate purposes may be diminished.
SPAH’s existing stockholders will incur immediate dilution of their ownership and voting interests upon completion of the merger.
SPAH’s existing stockholders’ ownership would be diluted from 100% to as little 94.5% or as much as 96.1% after the merger, based on the number of shares of SPAH and Frontier issued and outstanding as of the date of the merger agreement and after reflecting the co-investment. This dilution may adversely affect the then-prevailing market price for SPAH’s common stock. The percentage of SPAH’s securities that existing SPAH stockholders will own after the merger and the co-investment is completed will depend on whether (i) Frontier shareholders exercise dissenters’ rights, (ii) SPAH public stockholder exercise conversion rights, and (iii) any of SPAH’s 66,612,000 warrants are exercised (after reflecting the co-investment and merger).
In addition to the foregoing, the percentage of SPAH’s voting common stock that existing SPAH stockholders will own after the merger and co-investment will depend on whether (i) any SPAH stockholder converts its voting common stock into Non-Voting Common Stock, and (ii) any SPAH warrantholder elects to receive shares of Non-Voting Common Stock in lieu of voting common stock upon exercise of their warrants. SP Acq LLC and the Steel Trust have agreed to receive Non-Voting Common Stock as necessary in order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting. As a result, SPAH stockholders will hold from 94.3% to 95.4% of SPAH’s voting interests depending on whether any Frontier shareholder exercises dissenters’ rights, any of SPAH’s warrants are exercised and whether any SPAH public stockholders exercise their conversion rights. In addition, SPAH, the SPAH insiders, and/or certain of their respective affiliates may negotiate arrangements to provide for the purchase of shares from SPAH public stockholders who indicate their intention to vote against the merger and seek conversion or who otherwise wish to sell their shares. As a result, existing SPAH stockholders’ voting interests may be further increased or decreased accordingly in order for SP Acq LLC and the Steel Trust to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock.
Also, after the merger, SPAH may issue additional shares of common or preferred stock, including through convertible debt securities, in subsequent public offerings or private placements to acquire new assets or for other purposes. SPAH is not required to offer any such shares to existing stockholders on a preemptive basis. Therefore, it may not be possible for existing SPAH stockholders to participate in such future share issuances, which may dilute the existing stockholders’ interests in SPAH.
For a table outlining the effect of the various scenarios on the percentage of SPAH’s securities and voting interests that existing SPAH stockholders will own after the merger with Frontier is completed, see “The Merger and the Merger Agreement — Stock Ownership of Existing SPAH and Frontier Stockholders After the Merger.”

 

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A substantial number of SPAH’s shares and warrants will be issued in the merger and will be eligible for future resale in the public market after the merger, which could have an adverse effect on the market price of those shares and warrant.
If the merger is consummated, assuming the exchange ratio is not adjusted, up to 2,500,000 shares of SPAH common stock will be issued to the former shareholders of Frontier common stock and 3,000,000 shares will be issued to the Steel Trust in the co-investment. In addition, outstanding warrants to purchase an aggregate of 66,612,000 shares of SPAH common stock (after adjusting for the granting of 2,500,000 warrants to Frontier shareholders in connection with the merger and 3,000,000 warrants in connection with the co-investment) will be exercisable at $11.50 per share on the date of the completion of the merger (if the warrant amendment proposal is approved by SPAH warrantholders as described elsewhere in this joint proxy statement/prospectus) and the initial founder’s warrants to purchase an additional 10,322,400 shares and the co-investment warrants to purchase an additional 3,000,000 shares will be exercisable following a one year lock-up period, all as described under “Description of Securities of SPAH.” Thus, if the merger is consummated, assuming the exchange ratio is not adjusted, SPAH will have approximately 50,158,588 shares of common stock outstanding (after adjusting for the co-investment and the forfeiture of the 9,453,412 shares by SP Acq LLC and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker) and outstanding warrants to purchase 66,612,000 shares of common stock (after adjusting for the co-investment) will be exercisable. This number of shares of SPAH common stock was determined by adding the product of the exchange ratio of 0.0530 and 47,131,853, which is the maximum number of shares of Frontier common stock that may be outstanding prior to the effective time of the merger, to 54,112,000 and 3,000,000, the number of shares of SPAH common stock outstanding on SPAH’s record date and the number of shares that will be issued to the Steel Trust in the co-investment, respectively, minus the forfeiture of 9,453,412 founder’s shares by SP Acq LLC and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker immediately following the consummation of the merger. The number of warrants was determined by adding the product of the exchange ratio of 0.0530 and 47,131,853, which is the maximum number of shares of Frontier common stock that may be outstanding prior to the effective time of the merger, to 61,112,000 and 3,000,000, the number of warrants outstanding on SPAH’s record date and the number of warrants that will be issued to the Steel Trust in the co-investment, respectively. Consequently, after completion of the merger, a substantial number of additional shares of SPAH common stock will be eligible for resale in the public market and a substantial number of warrants will be exercisable into shares of common stock which may be ultimately resold in the public market. As long as warrants remain outstanding, there will be a drag on any increase in the price of SPAH’s common stock in excess of $11.50 per share. To the extent such warrants are exercised, additional shares of SPAH common stock will be issued, which would dilute the ownership of existing stockholders. Sales of substantial numbers of such shares in the public market could adversely affect the market price of such shares and of the warrants.
A stockholder may make a securities law claim against SPAH for taking actions inconsistent with its initial public offering prospectus.
Stockholders who purchased shares in SPAH’s initial public offering or afterwards up to and until the record date and have not exercised their conversion rights or vote in favor of the merger, but the merger is not consummated because holders of 10% or more, but less than 30% (minus one share) of shares sold in SPAH’s initial public offering elect to exercise their conversion rights, may have securities law claims against SPAH for rescission (under which a successful claimant has the right to receive the total amount paid for his or her securities pursuant to an allegedly deficient prospectus, plus interest and less any income earned on the securities, in exchange for surrender of the securities) or damages (compensation for loss on an investment caused by alleged material misrepresentations or omissions in the sale of a security) on the basis of, for example, SPAH’s initial public offering prospectus not disclosing that (i) SPAH may seek to amend the SPAH Certificate of Incorporation prior to the consummation of a business combination to amend the definition of “initial business combination” to eliminate the requirement that the fair market value of the target business equal at least 80% of the balance of SPAH’s trust account (excluding underwriting discounts and commissions) plus the proceeds of the co-investment, (ii) SPAH may agree to lower the percentage of shares that can exercise conversion rights as a condition to closing its initial business combination, (iii) SPAH may seek to amend the Warrant Agreement upon consummation of the merger to eliminate the requirement that the initial founder’s warrants owned by certain SPAH insiders become exercisable only after the consummation of an initial business combination if and when the last sales price of SPAH common stock exceeds $14.25 per share for any 20 trading days within a 30 trading day period beginning 90 days after such business combination, (iv) funds in its trust account might be used, directly or indirectly, to purchase shares from SPAH public stockholders in order to secure approval of SPAH’s stockholders on the merger, (v) that SPAH may seek to amend the terms of the Warrant Agreement to increase the exercise price and extend the exercise period, among other things, upon consummation of the merger, and (vi) that a party other than SP II or SP Acq LLC may purchase the co-investment units.

 

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Such claims may entitle stockholders asserting them to up to $10.00 per share, based on the initial offering price of the units sold in SPAH’s initial public offering, each comprised of one share of common stock and a warrant to purchase an additional share of common stock, less any amount received from the sale or fair market value of the original warrants purchased as part of the units, plus interest from the date of SPAH’s initial public offering. In the case of SPAH public stockholders, this amount may be more than the pro rata share of the trust account to which they are entitled upon exercise of their conversion rights or liquidation of SPAH.
Concentration of ownership of SPAH common stock after the merger could delay or prevent a change of control.
Following the consummation of the merger, the SPAH insiders will beneficially own approximately 4,368,988 shares of SPAH common stock (after giving effect to the forfeiture of 9,453,412 founder’s shares by SP Acq LLC and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker and the co-investment) and will have, through the exercise of warrants, the right to acquire 20,822,400 additional shares of common stock (after giving effect to the co-investment), under certain circumstances. As a result, these stockholders, if acting together, have the ability to significantly influence the outcome of corporate actions requiring stockholder approval. The concentration of ownership among the SPAH insiders may have the effect of delaying or preventing a change in control in SPAH following the merger even if such a change in control would be in the SPAH public stockholders’ interest.
Completion of the merger is subject to a number of conditions.
The obligations of SPAH and Frontier to consummate the merger are subject to the satisfaction or waiver of specified conditions set forth in the merger agreement. Such conditions include, but are not limited to, the adoption of the Initial Charter Amendment, the adoption of the merger agreement by SPAH and Frontier stockholders, the adoption of the warrant amendment proposal by SPAH warrantholders, the approval of SPAH’s application to become a bank holding company, and receipt of all required regulatory approvals, including the approval of the Federal Reserve and Washington DFI. It is possible some or all of these conditions will not be satisfied or waived by SPAH or Frontier, as the case may be, and therefore, the merger may not be consummated. See “The Merger and the Merger Agreement—The Merger Agreement—Conditions to the Closing of the Merger.” In the event the merger is not consummated, we will seek to effectuate an alternative business combination. However, if we do not complete a business combination by October 10, 2009, SPAH will be forced to liquidate and dissolve.
The fairness opinion obtained by Frontier from Keefe Bruyette will not reflect changes in circumstances prior to the completion of the merger.
Frontier obtained a fairness opinion dated as of July 29, 2009, from Keefe Bruyette in connection with the merger.
Frontier will not obtain an additional or updated fairness opinion prior to completion of the merger. Changes in the operations and prospects of SPAH or Frontier, general market and economic conditions and other factors that may be beyond the control of SPAH and Frontier, on which the fairness opinion was based, may alter the value of SPAH or Frontier or the price of shares of SPAH common stock or Frontier common stock by the time the merger is completed. The fairness opinion by Keefe Bruyette does not speak to any date other than the date of such opinion, and as such, the opinion will not address the fairness of the merger consideration, from a financial point of view, at any date after the date of such opinion, including at the time the merger is completed. For a description of the opinion that Frontier received from Keefe Bruyette, please see “The Merger and the Merger Agreement — Opinion of Keefe Bruyette.”

 

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SPAH’s common stock or warrant price could fluctuate and could cause stockholders and warrantholders to lose a significant part of their investment.
Following consummation of the merger, the market price of SPAH’s securities may be influenced by many factors, some of which are beyond its control, including those described in other parts of this section and the following:
    fluctuations in its quarterly financial results or the quarterly financial results of companies perceived to be similar to it;
    whether and when the FDIC Order and FRB Written Agreement are ultimately dismissed;
    general economic conditions;
    changes in market valuations of similar companies;
    terrorist acts;
    changes in its capital structure, such as future issuances of securities or the incurrence of additional debt;
    future sales of its common stock;
    regulatory and legislative developments in the United States, foreign countries or both;
    litigation involving SPAH, its subsidiaries or its general industry; and
    additions or departures of key personnel at Frontier.
If the merger’s benefits do not meet the expectations of financial or industry analysts, the market price of SPAH common stock may decline.
The market price of SPAH common stock may decline as a result of the merger if:
    SPAH does not achieve the perceived benefits of the merger as rapidly, or to the extent anticipated by, financial or industry analysts; or
    the effect of the merger on SPAH’s financial results is not consistent with the expectations of financial or industry analysts.
Accordingly, investors may experience a loss as a result of a decline in the market price of SPAH common stock following the merger. A decline in the market price of SPAH common stock also could adversely affect its ability to issue additional securities and its ability to obtain additional financing in the future.
Certain current directors and executive officers of SPAH own shares of SPAH common stock and warrants that will be worthless if the merger is not approved. Such interests may have influenced their decision to approve the merger with SPAH.
Following the consummation of the merger, the current directors and executive officers of SPAH will beneficially own approximately 4,368,988 shares of SPAH common stock (after giving effect to the forfeiture of 9,453,412 founder’s shares by SP Acq LLC and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker) and have the right to acquire an additional 20,822,400 shares through the exercise of warrants (after giving effect to the co-investment), subject to certain limitations. Such persons are not entitled to receive any of the cash proceeds that may be distributed upon SPAH’s liquidation with respect to shares they acquired prior to its initial public offering. Therefore, if the merger is not approved and SPAH does not consummate another business combination by October 10, 2009 and is forced to liquidate, such founder’s shares, initial founder’s warrants and additional founder’s warrants held by such persons will be worthless. As of [______], 2009, the record date for the special meeting, SPAH’s current directors and executive officers beneficially held $[______] in common stock (based on a market price of $[______]) and $[______] in warrants (based on a market price of $[______]). These financial interests of SPAH’s current directors and executive officers may have influenced their decision to approve the merger and to continue to pursue the merger. See “The Merger and the Merger Agreement — Interests of SPAH’s Directors and Officers and Others in the Merger.”

 

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The exercise of SPAH’s directors’ and officers’ discretion in agreeing to changes or waivers in the terms of the merger may result in a conflict of interest when determining whether such changes to the terms of the merger or waivers of conditions are appropriate and in SPAH’s stockholders’ best interest.
In the period leading up to the closing of the merger, events may occur that, pursuant to the merger agreement, would cause SPAH to agree to amend the merger agreement, to consent to certain actions taken by Frontier or to waive rights that SPAH is entitled to under the merger agreement. Such events could arise because of a request by Frontier to undertake actions that would otherwise be prohibited by the terms of the merger agreement or the occurrence of other events that would have a material adverse effect on Frontier’s business and would entitle SPAH to terminate the merger agreement. In any of such circumstances, it would be discretionary on SPAH, acting through its board of directors, to grant its consent or waive its rights. The existence of the financial and personal interests of the directors described in the preceding risk factor may result in a conflict of interest on the part of one or more of the directors between what he may believe is best for SPAH and what he may believe is best for himself in determining whether or not to take the requested action. As of the date of this joint proxy statement/prospectus, SPAH does not believe there will be any changes or waivers that its directors and officers would be likely to make after stockholder approval of the merger proposal has been obtained. Although certain changes could be made without further stockholder approval, to the extent that SPAH has determined that a change to a term to the transaction may have a material effect on stockholders, SPAH will circulate a new or amended joint proxy statement/prospectus and resolicit its stockholders prior to the stockholder vote on the merger proposal.
SPAH officers’ and directors’ interests in obtaining reimbursement for any out-of-pocket expenses incurred by them may have led to a conflict of interest in determining whether the merger was an appropriate initial business combination and in the public stockholders’ best interest.
Unless SPAH consummates the merger or another initial business combination, its officers and directors and affiliates of SP Acq LLC and their employees will not receive reimbursement for any out-of-pocket expenses incurred by them to the extent that such expenses exceed the amount of available proceeds not deposited in the trust account and the amount of interest income from the trust account up to a maximum of $3.5 million that may be released to SPAH as working capital. These amounts are based on management’s estimates of the funds needed to finance SPAH’s operations until the consummation of the merger or another initial business combination and to pay expenses in identifying and consummating such transaction. Those estimates may prove to be inaccurate, especially if a portion of the available proceeds is used to make a down payment in connection with an initial business combination or pay exclusivity or similar fees or if SPAH expends a significant portion in pursuit of the merger or another initial business combination that is not consummated. SPAH’s officers and directors may, as part of any business combination, negotiate the repayment of some or all of any such expenses. If the target business’s owners do not agree to such repayment, this could cause management to view such potential business combination unfavorably, thereby resulting in a conflict of interest. The financial interest of SPAH officers and directors and SP Acq LLC could influence SPAH’s officers’ and directors’ motivation in selecting a target business and therefore there may be a conflict of interest when determining whether a particular business combination is in SPAH stockholders’ best interest. In addition, the proceeds SPAH will receive from the co-investment (as well as the proceeds of the initial public offering not being placed in the trust account or the income interest earned on the trust account balance) may be used to repay the expenses for which SPAH’s directors may negotiate repayment as part of its initial business combination.

 

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If SPAH does not conduct an adequate due diligence investigation of Frontier regarding the merger, it may be required subsequently to take write downs or write-offs, restructuring, and impairment or other charges that could have a significant negative effect on its financial condition, results of operations and stock price, which could cause SPAH stockholders to lose some or all of their investment.
In order to meet disclosure and financial reporting obligations under the federal securities laws, and in order to develop and seek to execute strategic plans for how SPAH can increase the profitability of Frontier or capitalize on market opportunities, SPAH must conduct a due diligence investigation of Frontier. Intensive due diligence is time consuming and expensive due to the operations, accounting, finance and legal professionals who must be involved in the due diligence process. SPAH will have limited time to conduct such due diligence due to the provision in the SPAH Certificate of Incorporation that it complete an initial business combination by October 10, 2009. Even if SPAH conducts extensive due diligence on Frontier, SPAH cannot make assurances that this diligence will uncover all material issues relating to Frontier, or that factors outside of Frontier’s business and outside of SPAH’s control will not later arise. If SPAH’s diligence fails to identify issues specific to Frontier or the environment in which Frontier operates, SPAH may be forced to write-down or write-off assets, restructure its operations, or incur impairment or other charges that could result in reporting losses. Even though these charges may be non-cash items and not have an immediate impact on liquidity, the fact that SPAH report charges of this nature could contribute to negative market perceptions about SPAH or its common stock. In addition, charges of this nature may cause SPAH to violate net worth or other covenants to which it may be subject as a result of assuming pre-existing debt held by Frontier or by virtue of obtaining post-combination debt financing.
The SPAH Board did not obtain a fairness opinion or independent valuation analysis of Frontier, or that the consideration being paid to Frontier was fair to the stockholders of SPAH in determining whether or not to proceed with the merger and, as a result, the terms may not be fair from a financial point of view to SPAH’s public stockholders and you may not receive the value of your investment.
The SPAH Board conducted due diligence on Frontier’s proposed business model and investment strategy but did not obtain an opinion from an investment banking firm as to the fair market value of Frontier or that the terms of the merger are fair to the stockholders of SPAH. The SPAH Board believes that because of the financial skills and background of its directors, it was qualified to conclude that the merger was fair from a financial perspective to its stockholders. An independent analysis may not arrive at the same conclusion and the SPAH Board may be incorrect in its assessment of the transaction. It is possible that the actual value of Frontier’s business is lower than SPAH could realize on a sale of the combined company or its assets. While the SPAH Board feels that its assessment was reasonable, you may not realize the value of your investment. See the section entitled “The Merger and the Merger Agreement—Interests of SPAH’s Directors and Officers and Others in the Merger.”
If the merger is completed, a large portion of the funds in the trust account established by SPAH in connection with its initial public offering for the benefit of the SPAH public stockholders may be used to pay converting stockholders or for the purchase, directly or indirectly, of shares held by SPAH public stockholders who intend to vote against the merger proposal. As a consequence, if the merger is completed, the number of beneficial holders of SPAH’s securities may be reduced to a number that may preclude the quotation, trading or listing of SPAH’s securities other than on an Over-the-Counter Bulletin Board.
Pursuant to the SPAH Certificate of Incorporation, public stockholders may vote against the merger proposal and demand that SPAH convert their shares into a pro rata share of the trust account. As a consequence of such purchases, the number of beneficial holders of SPAH’s securities may be reduced, which may make it difficult to maintain the quotation, listing or trading of SPAH’s securities on the NYSE AMEX LLC or any other national securities exchange.

 

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Risks Related To SPAH
SPAH may not be able to consummate the merger or another initial business combination, in which case it would be forced to dissolve and liquidate.
If SPAH fails to consummate a business combination prior to October 10, 2009, SPAH will be forced to dissolve and liquidate. SPAH may not be able to consummate the merger or find another suitable target business within the required time frame. In addition, its negotiating position and ability to conduct adequate due diligence on Frontier or another potential target business may be reduced as SPAH approaches the deadline for the consummation of an initial business combination. Upon liquidation and dissolution, SPAH stockholders would receive less than $10.00 per share, the initial public offering purchase price, because of the expenses of the initial public offering, funds reserved to pay creditors or potential creditors, general and administrative expenses and the costs of seeking an initial business combination.
SPAH expects that all costs and expenses associated with implementing a plan of distribution, as well as payments to any creditors, will be funded from amounts remaining out of the $100,000 of proceeds held outside the trust account and from the $3.5 million in interest income on the balance of the trust account that was released to SPAH to fund working capital requirements. However, if those funds are not sufficient to cover the costs and expenses associated with implementing a plan of distribution, to the extent that there is any interest accrued in the trust account not required to pay income taxes on interest income earned on the trust account balance, SPAH may request that the trustee release to it an additional amount of up to $75,000 of such accrued interest to pay those costs and expenses.
If SPAH is unable to effect a business combination and is forced to liquidate, its warrants will expire worthless.
If SPAH does not complete the merger or another business combination by October 10, 2009, the SPAH Certificate of Incorporation provides that its corporate existence will automatically terminate and it will distribute to all holders of its public shares, in proportion to the number of public shares held by them, an aggregate sum equal to the amount in the trust fund, inclusive of any interest plus any other net assets not used for or reserved to pay obligations and claims or such other corporate expenses relating to or arising from SPAH’s plan of dissolution and distribution, including costs of dissolving and liquidating SPAH. In such event, there will be no distribution with respect to SPAH’s outstanding warrants. Accordingly, the warrants will expire worthless.
If SPAH liquidates, SPAH’s stockholders may be held liable for claims by third parties against SPAH to the extent of distributions received by them.
The SPAH Certificate of Incorporation provides that SPAH will continue in existence only until October 10, 2009. If SPAH consummates the merger or another business combination prior to that date, it will seek to amend this provision to permit its continued existence. If SPAH has not completed the merger or other business combination by that date, SPAH’s corporate existence will cease except for the purposes of winding up its affairs and liquidating pursuant to Section 278 of the DGCL. In this event, SPAH will automatically dissolve and as promptly as practicable thereafter adopt a plan of distribution in accordance with Section 281(b) of the DGCL, which requires SPAH to pay or make reasonable provision for all then-existing claims and obligations, including all contingent, conditional, or unmatured contractual claims known to SPAH, and to make such provision as will be reasonably likely to be sufficient to provide compensation for any then-pending claims and for claims that have not been made known or that have not arisen but that, based on facts known at the time, are likely to arise or to become known to SPAH within 10 years after the date of dissolution. Under Section 281(b), the plan of distribution must provide for all of such claims to be paid in full or make provision for payments to be made in full, as applicable, if there are sufficient assets. If there are insufficient assets, the plan must provide that such claims and obligations be paid or provided for according to their priority and, among claims of equal priority, ratably to the extent of legally available assets.
SP Acq LLC and Mr. Lichtenstein have agreed that they will be liable to SPAH if and to the extent claims by third parties reduce the amounts in the trust account available for payment to its stockholders in the event of a liquidation and the claims are made by a vendor for services rendered, or products sold, to SPAH, or by a prospective target business. To the extent that SP Acq LLC and Mr. Lichtenstein refuse to indemnify SPAH for a claim it believes should be indemnified, SPAH’s officers and directors by virtue of their fiduciary obligation will be obligated to bring a claim against SP Acq LLC and Mr. Lichtenstein to enforce such indemnification. SPAH currently believes that SP Acq LLC and Mr. Lichtenstein are capable of funding their indemnity obligations, even though SPAH has not asked them to reserve for such an eventuality. SP Acq LLC and Mr. Lichtenstein may not be able to satisfy those obligations. Under Delaware law, creditors of a corporation have a superior right to stockholders in the distribution of assets upon liquidation. Consequently, if the trust account is liquidated and paid out to SPAH public stockholders prior to satisfaction of the claims of all of SPAH creditors, it is possible that SPAH stockholders may be held liable for third parties’ claims against it to the extent of the distributions received by them. Accordingly, pursuant to Section 280-282 of the DGCL, third parties may not seek to recover from SPAH’s stockholders amounts owed to them by SPAH.

 

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However, if the corporation complies with certain procedures intended to ensure that it makes reasonable provision for all claims against it, the liability of stockholders with respect to any claim against the corporation is limited to the lesser of such stockholder’s pro rata share of the claim or the amount distributed to the stockholder. In addition, if the corporation undertakes additional specified procedures, including a 60-day notice period during which any third-party claims can be brought against the corporation, a 90-day period during which the corporation may reject any claims brought, and an additional 150-day waiting period before any liquidation distributions are made to stockholders, any liability of stockholders would be barred with respect to any claim on which an action, suit or proceeding is not brought by the third anniversary of the dissolution (or such longer period directed by the Delaware Court of Chancery). While SPAH intends to adopt a plan of distribution making reasonable provision for claims against the company in compliance with the DGCL, it does not intend to comply with these additional procedures, as it instead intends to distribute the balance in the trust account to the SPAH public stockholders as promptly as practicable following termination of its corporate existence. Accordingly, any liability stockholders may have could extend beyond the third anniversary of a dissolution. SPAH cannot make assurances that any reserves for claims and liabilities that it believes to be reasonably adequate when it adopts a plan of dissolution and distribution will suffice. If such reserves are insufficient, stockholders who receive liquidation distributions may subsequently be held liable for claims by creditors of SPAH to the extent of such distributions.
Furthermore, because SPAH intends to distribute the proceeds held in the trust account to the SPAH public stockholders promptly after October 10, 2009 if it has not completed a business combination by such date, this may be viewed or interpreted as giving preference to SPAH’s public stockholders over any potential creditors with respect to access to or distributions from SPAH’s assets. The SPAH Board may be viewed as having breached their fiduciary duties to SPAH’s creditors and/or having acted in bad faith, thereby exposing itself and SPAH to claims of punitive damages, by paying SPAH public stockholders from the trust account prior to addressing the claims of creditors. There can be no assurance that claims will not be brought against SPAH for these reasons.
If third parties bring claims against SPAH, or if SPAH goes bankrupt, the proceeds held in trust could be reduced and the per-share liquidation price received by SPAH stockholders will be less than approximately $9.85 per share.
SPAH’s placing of funds in the trust account may not protect those funds from adverse third-party claims. Although SPAH has and will seek to have all third parties (including any vendors or other entities engaged) and any prospective target businesses enter into valid and enforceable agreements with it waiving any right, title, interest or claim of any kind in or to any monies held in the trust account, there is no guarantee that they will execute such agreements. It is possible that such waiver agreements would be held unenforceable and there is no guarantee that the third parties would not otherwise challenge the agreements and later bring claims against the trust account for monies owed to them. In addition, there is no guarantee that such entities will agree to waive any claims they may have in the future as a result of, or arising out of, any negotiations, contracts or agreements with SPAH and will not seek recourse against the trust account for any reason. Accordingly, the proceeds held in trust could be subject to claims that would take priority over the claims of SPAH public stockholders and, as a result, the per-share liquidation price could be less than approximately $9.85, the conversion price based upon restricted amounts held in trust at June 30, 2009.
SP Acq LLC and Mr. Lichtenstein have agreed that they will be liable to the company if and to the extent claims by third parties reduce the amounts in the trust account available for payment to stockholders in the event of a liquidation and the claims are made by a vendor for services rendered, or products sold, to SPAH or by a prospective business target. However, the agreement entered into by SP Acq LLC and Mr. Lichtenstein specifically provides for two exceptions to the indemnity given: there will be no liability (1) as to any claimed amounts owed to a third party who executed a legally enforceable waiver, or (2) as to any claims under SPAH’s indemnity of the underwriters of the initial public offering against certain liabilities, including liabilities under the Securities Act. Furthermore, there could be claims from parties other than vendors, third parties with which SPAH entered into a contractual relationship or target businesses that would not be covered by the indemnity from SP Acq LLC and Mr. Lichtenstein, such as shareholders and other claimants who are not parties in contract with SPAH who file a claim for damages against SPAH. To the extent that SP Acq LLC and Mr. Lichtenstein refuse to indemnify SPAH for a claim it believes should be indemnified, SPAH’s officers and directors by virtue of their fiduciary obligations will be obligated to bring a claim against SP Acq LLC and Mr. Lichtenstein to enforce such indemnification. Based on representations as to its status as an accredited investor (as such term is defined in Regulation D under the Securities Act), SPAH currently believes that SP Acq LLC and Mr. Lichtenstein are capable of funding their indemnity obligations, even though SPAH has not asked them to reserve for such an eventuality. SP Acq LLC and Mr. Lichtenstein may not be able to satisfy those obligations.

 

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Additionally, if SPAH is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it that is not dismissed, the proceeds held in the trust account could be subject to applicable bankruptcy law, and may be included in its bankruptcy estate and subject to the claims of third parties with priority over the claims of stockholders. To the extent any bankruptcy claims deplete the trust account, SPAH cannot make assurances that it will be able to return at least approximately $9.85 per share to the public stockholders. In addition, any distributions received by SPAH public stockholders could be viewed under applicable debtor/creditor and/or bankruptcy laws as either a “preferential transfer” or a “fraudulent conveyance.” As a result, a bankruptcy court could seek to recover all amounts received by SPAH’s stockholders.
An effective registration statement must be in place in order for a warrantholder to be able to exercise the warrants.
No warrants will be exercisable and SPAH will not be obligated to issue shares of common stock upon exercise of warrants by a warrantholder unless, at the time of such exercise, SPAH has an effective registration statement under the Securities Act covering the shares of common stock issuable upon exercise of the warrants and a current prospectus relating to them is available. Although SPAH has undertaken in the Warrant Agreement, and therefore has a contractual obligation, to use its best efforts to have an effective registration statement covering shares of common stock issuable upon exercise of the warrants from the date the warrants become exercisable and to maintain a current prospectus relating to that common stock until the warrants expire or are redeemed, and SPAH intends to comply with its undertaking, it cannot make assurances that it will be able to do so. SPAH’s initial founder’s warrants are identical to the warrants sold in the initial public offering except that (i) they only become exercisable after consummation of an initial business combination if and when the last sales price of SPAH common stock exceeds $14.25 per share for any 20 trading days within a 30 trading day period beginning 90 days after such business combination and (ii) they are non-redeemable. If warrantholders approve the warrant amendment proposal at the special meeting of warrantholders, SPAH will eliminate this minimum price requirement to exercise the initial founder’s warrants. SPAH’s additional founder’s warrants are identical to the warrants sold in the initial public offering except that they are non-redeemable. SPAH’s co-investment warrants will be identical to the warrants sold in the initial public offering except that they will be non-redeemable. Warrantholders may not be able to exercise their warrants, the market for the warrants may be limited and the warrants may be deprived of any value if there is no effective registration statement covering the shares of common stock issuable upon exercise of the warrants or the prospectus relating to the common stock issuable upon the exercise of the warrants is not current. In such event, the holder of a unit will have paid the entire unit purchase price for the common stock contained in the unit as the warrant will be worthless.

 

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An investor will only be able to exercise a warrant if the issuance of common stock upon such exercise has been registered or qualified or is deemed exempt under the securities laws of the state of residence of the warrantholder.
No warrants will be exercisable and SPAH will not be obligated to issue shares of common stock unless the common stock issuable upon such exercise has been registered or qualified or deemed to be exempt under the securities laws of the state of residence of the warrantholder. Because the exemptions from qualification in certain states for resales of warrants and for issuances of common stock by the issuer upon exercise of a warrant may be different, a warrant may be held by a warrantholder in a state where an exemption is not available for issuance of common stock upon an exercise and the warrantholder will be precluded from exercise of the warrant. Nevertheless, SPAH expects that resales of the warrants as well as issuances of common stock by SPAH upon exercise of a warrant may be made in every state because at the time that the warrants become exercisable (following its completion of the merger or another initial business combination) SPAH expects they will continue to be listed on the NYSE AMEX LLC or another national securities exchange, which would provide an exemption from registration in every state, or SPAH would register the warrants in every state (or seek another exemption from registration in such states). To the extent an exemption is not available, SPAH will use its best efforts to register the underlying common stock in all states where the warrantholders reside. Accordingly, SPAH believes warrantholders in every state will be able to exercise their warrants as long as the prospectus relating to the common stock issuable upon exercise of the warrants is current. However, SPAH cannot make assurances of this fact. As a result, the warrants may be deprived of any value, the market for the warrants may be limited and the warrantholders may not be able to exercise their warrants and they may expire worthless if the common stock issuable upon such exercise is not qualified or exempt from qualification in the jurisdictions in which the warrantholders reside.
Most of SPAH’s current directors and all of its current officers will resign upon consummation of the merger or other business combination.
SPAH’s ability to effect the merger or other business combination successfully will be largely dependent upon the efforts of its officers and directors. However, each of the current executive officers and directors of SPAH will resign upon consummation of the merger, other than Warren G. Lichtenstein who will continue to serve as the Chairman of the Board, although he will resign as President and Chief Executive Officer of SPAH.
SPAH may require stockholders who wish to convert their shares in connection with a proposed business combination to comply with specific requirements for conversion that may make it more difficult for them to exercise their conversion rights prior to the deadline for exercising their rights.
SPAH may require public stockholders who wish to convert their shares in connection with the merger or other business combination to either tender their certificates to SPAH’s transfer agent at any time prior to the vote taken at the special meeting or other stockholder meeting relating to such initial business combination or to deliver their shares to the transfer agent electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System. In order to obtain a physical stock certificate, a stockholder’s broker and/or clearing broker, DTC and SPAH’s transfer agent will need to act to facilitate this request. It is SPAH’s understanding that stockholders should generally allot at least two weeks to obtain physical certificates from the transfer agent. However, because SPAH does not have any control over this process or over the brokers or DTC, it may take significantly longer than two weeks to obtain a physical stock certificate. While SPAH has been advised that it takes a short time to deliver shares through the DWAC System, SPAH cannot make assurances of this fact. Accordingly, if it takes longer than anticipated for stockholders to deliver their shares, stockholders who wish to convert may be unable to meet the deadline for exercising their conversion rights and thus may be unable to convert their shares. In addition, there is a nominal cost associated with the above-referenced tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the tendering broker $35 and it would be up to the broker whether or not to pass this cost on to the converting holder.
SPAH expects to rely upon access to investment professionals of certain affiliates of SP Acq LLC in completing the merger or another initial business combination.
SPAH expects that it will depend, to a significant extent, on access to the investment professionals of certain affiliates of SP Acq LLC and the information and deal flow generated by such investment professionals in the course of their investment and portfolio management activities to complete the merger or other initial business combination. Consequently, the departure of a significant number of these investment professionals could have a material adverse effect on the ability to consummate the merger or another initial business combination.

 

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The registration rights of the SPAH insiders may adversely affect the market price of SPAH common stock.
Pursuant to an agreement SPAH has entered into, (i) the SPAH insiders can demand that SPAH register the resale of the founder’s units, the founder’s shares and the initial founder’s warrants, and the shares of common stock issuable upon exercise of the initial founder’s warrants, (ii) SP Acq LLC and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker can demand that SPAH register the additional founder’s warrants and the shares of common stock issuable upon exercise of the additional founder’s warrants and (iii) SP II (or its permitted transferee, the Steel Trust) can demand that SPAH register the resale of the co-investment units, the co-investment shares and the co-investment warrants and the shares of common stock issuable upon exercise of the co-investment warrants. The registration rights will be exercisable with respect to the founder’s units, the founder’s shares, the initial founder’s warrants and shares of common stock issuable upon exercise of such warrants, the co-investment units, the co-investment shares and co-investment warrants and shares of common stock issuable upon exercise of such warrants at any time commencing three months prior to the date on which the relevant securities are no longer subject to transfer restrictions, and with respect to the additional founder’s warrants and the underlying shares of common stock at any time after the execution of a definitive agreement for an initial business combination, which includes the merger agreement. SPAH will bear the cost of registering these securities. If the SPAH insiders exercise their registration rights in full, there will be an additional 4,368,988 shares of common stock (including 3,000,000 co-investment shares and after the 9,453,412 shares subject to forfeiture) and up to 20,822,400 shares (including 3,000,000 shares issuable upon the exercise of co-investment warrants) of common stock issuable on exercise of the warrants eligible for trading in the public market. The registration and availability of such a significant number of securities for trading in the public market may have an adverse effect on the market price of SPAH common stock.
The loss of Mr. Lichtenstein could adversely affect SPAH’s ability to complete the merger or another initial business combination.
SPAH’s ability to consummate a business combination is dependent to a large degree upon Mr. Lichtenstein. SPAH believe that its success depends on his continued service to SPAH, at least until SPAH has consummated a business combination. Due to his ownership of SP Acq LLC and his relationship with SP II, Mr. Lichtenstein has incentives to remain with SPAH. Nevertheless, SPAH does not have an employment agreement with him, or key-man insurance on his life. He may choose to devote his time to other affairs, or may become unavailable for reasons beyond his control, such as death or disability. The unexpected loss of his services for any reason could have a detrimental effect on SPAH.
The NYSE AMEX LLC may delist SPAH’s securities, which could limit investors’ ability to transact in its securities and subject it to additional trading restrictions.
While SPAH securities are currently listed on the NYSE AMEX LLC, it cannot assure investors that its securities will continue to be listed. Additionally, the NYSE AMEX LLC may require SPAH to file a new initial listing application and meet its initial listing requirements, as opposed to its more lenient continued listing requirements, at the time of the merger or other initial business combination. SPAH cannot make assurances that it will be able to meet those initial listing requirements at that time.
If the NYSE AMEX LLC delists its securities from trading, SPAH could face significant consequences, including:
    a limited availability for market quotations for SPAH securities;
    reduced liquidity with respect to its securities;
    a determination that SPAH common stock is a “penny stock,” which will require brokers trading in its common stock to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for the common stock;
    limited amount of news and analyst coverage for SPAH; and
    a decreased ability to issue additional securities or obtain additional financing in the future.
In addition, SPAH would no longer be subject to NYSE AMEX LLC rules, including rules requiring it to have a certain number of independent directors and to meet other corporate governance standards.

 

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FORWARD LOOKING STATEMENTS
This joint proxy statement/prospectus contains forward-looking statements with respect to the financial condition, results of operations, plans, objectives, future performance, and business of SPAH following the merger. These statements are preceded by, followed by, or include the words “believes,” “expects,” “anticipates,” or “estimates,” or similar expressions. Many possible events or factors could affect the future financial results and performance of SPAH following the merger. This could cause the results or performance of SPAH to differ materially from those expressed in the forward-looking statements. You should consider these important factors when you vote on the merger proposal. Factors that may cause actual results to differ materially from those contemplated by the forward-looking statements include the following:
    we may experience delays in closing the merger whether due to the inability to obtain stockholder or regulatory approval or otherwise;
    we could lose key personnel or spend a greater amount of resources attracting, retaining and motivating key personnel than we have in the past;
    competition among depository and other financial institutions may increase significantly;
    changes in the interest rate environment may reduce operating margins;
    general economic conditions, either nationally or in Washington and Oregon, may be less favorable than expected resulting in, among other things, a deterioration in credit quality and an increase in credit risk-related losses and expenses;
    loan losses may exceed the level of allowance for loan losses of the surviving corporation;
    the rate of delinquencies and amount of charge-offs may be greater than expected;
    the rates of loan growth and deposit growth may not increase as expected;
    legislative or regulatory changes may adversely affect our businesses;
    modification of pending regulatory actions against Frontier in a manner reasonably acceptable to SPAH, including by the elimination of certain provisions and consequences related thereto;
    costs related to the merger may reduce SPAH’s working capital; and
    SPAH may fail to close the merger and may be forced to dissolve and liquidate.
The forward-looking statements are based on current expectations about future events. Although SPAH believes that the expectations reflected in the forward-looking statements are reasonable, SPAH cannot guarantee you that these expectations actually will be achieved. SPAH is under no duty to update any of the forward-looking statements after the date of this joint proxy statement/prospectus to conform those statements to actual results. In evaluating these statements, you should consider various factors, including the risks outlined in the section entitled “Risk Factors.”

 

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SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
Selected Summary Historical Consolidated Financial Information of Frontier
Frontier is providing the following selected historical financial information to assist you in your analysis of the financial aspects of the merger and co-investment.
The following selected historical consolidated financial information of Frontier as of June 30, 2009 and for the six months ended June 30, 2009 and 2008 are derived from Frontier’s unaudited financial statements, which are included elsewhere in this joint proxy statement/prospectus. The following selected historical consolidated financial information of Frontier as of December 31, 2008 and 2007 and for the years ended December 31, 2008, 2007 and 2006 are derived from Frontier’s audited financial statements, which are included elsewhere in this joint proxy statement/prospectus. The following selected historical consolidated financial information of Frontier as of December 31, 2006, 2005 and 2004 and for the years ended December 31, 2005 and 2004 are derived from Frontier’s audited financial statements, which are not included elsewhere in this joint proxy statement/prospectus. The results of operations for interim periods are not necessarily indicative of the results of operations which might be expected for the entire year.
The following information is only a summary and should be read in conjunction with the unaudited interim consolidated financial statements of Frontier for the six months ended June 30, 2009 and 2008 and the notes thereto and the audited consolidated financial statements of Frontier for the years ended December 31, 2008, 2007 and 2006 and the notes thereto and “Information about Frontier—Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this joint proxy statement/prospectus.

 

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    Six Months Ended        
    June 30,     Year ended December 31,  
(dollars in thousands except per share amounts)   2009     2008     2008     2007     2006     2005     2004  
    (Unaudited)                                          
Consolidated Statements of Operations:
                                                       
Interest income:
                                                       
Interest income
  $ 96,072     $ 149,842     $ 279,055     $ 299,672     $ 250,144     $ 178,886     $ 140,228  
Interest expense
    50,869       57,553       112,185       113,041       86,942       51,736       34,939  
 
Net interest income
    45,203       92,289       166,870       186,631       163,202       127,150       105,289  
 
Securities gains (losses)
    (102 )     2,468       4,570       (937 )     (25 )     (211 )     (44 )
Provision for loan losses
    135,000       33,500       120,000       11,400       7,500       4,200       3,500  
Net income (loss)
    (83,805 )     17,575       (89,737 )     73,938       68,910       51,584       43,045  
 
                                                       
Basic earnings (loss) per share
  $ (1.78 )   $ 0.37     $ (1.91 )   $ 1.63     $ 1.53     $ 1.21     $ 1.03  
Weighted average number of shares outstanding — basic
    47,127       47,297       46,992       45,266       45,010       42,482       41,927  
Diluted earnings (loss) per share
  $ (1.78 )   $ 0.37     $ (1.91 )   $ 1.62     $ 1.52     $ 1.21     $ 1.02  
Weighted average number of shares outstanding — diluted
    47,127       47,386       46,992       45,601       45,485       42,743       42,206  
Cash dividends declared per common share
  $     $     $ 0.48     $ 0.65     $ 0.50     $ 0.40     $ 0.34  
                                                 
    June 30,     December 31,  
(dollars in thousands)   2009     2008     2007     2006     2005     2004  
    (Unaudited)                             (Unaudited)  
Consolidated Balance Sheet Data (at period end):
                                               
Total assets
  $ 3,987,403     $ 4,104,445     $ 3,995,689     $ 3,238,464     $ 2,640,275     $ 2,243,396  
Net loans
    3,317,636       3,666,177       3,558,127       2,867,351       2,355,419       1,945,324  
Securities
    83,399       93,961       135,121       114,711       110,617       153,451  
Deposits
    3,249,133       3,275,165       2,943,236       2,453,632       2,061,380       1,795,842  
Shareholders’ equity
    269,486       352,043       459,612       395,283       296,097       254,230  

 

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Selected Historical Financial Information of SPAH
SPAH is providing the following selected historical financial information to assist you in your analysis of the financial aspects of the merger and co-investment.
The following selected historical financial information of SPAH as of June 30, 2009 and for the six months ended June 30, 2009 and 2008 are derived from SPAH’s unaudited financial statements, which are included elsewhere in this joint proxy statement/prospectus. The following selected historical financial information of SPAH as of December 31, 2008 and 2007 and for the year ended December 31, 2008 and for the period from February 14, 2007 (inception) through December 31, 2007 are derived from SPAH’s audited financial statements, which are included elsewhere in this joint proxy statement/prospectus. The results of operations for interim periods are not necessarily indicative of the results of operations which might be expected for the entire year.
The following information is only a summary and should be read in conjunction with the unaudited interim financial statements of SPAH for the six months ended June 30, 2009 and 2008 and the notes thereto and the audited financial statements of SPAH for the year ended December 31, 2008 for the period from February 14, 2007 (inception) through December 31, 2007 and the notes thereto and “Information about SPAH— Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this joint proxy statement/prospectus.

 

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    June 30,     December 31,     December 31,  
    2009     2008     2007  
    (unaudited)                  
Balance Sheet Data:
                       
Total current assets
  $ 19,080,295     $ 19,777,900     $ 20,226,763  
Total current liabilities
    17,511,802       17,588,609       18,956,480  
Total assets
    428,804,996       429,776,214       428,945,449  
Common stock subject to conversion, 12,986,879 shares at conversion value
    128,147,514       128,194,236       127,772,726  
Common Stock, $0.0001 par value, authorized 200,000,000 shares; issued and outstanding 54,112,000 (less 12,986,879 subject to possible conversion)
    41,125       41,125       41,125  
Total stockholders’ equity
    283,145,680       283,993,369       282,216,243  
Total liabilities and stockholders’ equity
  $ 428,804,996     $ 429,776,214     $ 428,945,449  
                                 
                            For the Period from  
                            February 14, 2007  
    For the Six Months Ended     For the Year     (Inception) through  
    June 30,     Ended December 31,     December 31,  
    2009     2008     2008     2007  
    (unaudited)              
Operations Statement Data:
                               
Operating costs
  $ 678,261     $ 499,229     $ 1,052,648     $ 264,373  
 
Other income — Interest, net
    265,709       4,341,829       6,407,849       2,941,038  
 
                               
Net (loss) income
    (894,411 )     1,685,378       1,777,126       1,466,293  
 
                               
Accretion of trust account income relating to common stock subject to possible conversion
    46,722       (111,035 )     (421,510 )      
 
                               
Net (loss) income attributable to other common stockholders
  $ (847,689 )   $ 1,574,343     $ 1,777,126     $ 1,466,293  
 
                               
Net (loss) income per share-basic and diluted
  $ (0.02 )   $ 0.04     $ 0.04     $ 0.09  
 
                               
Weighted average number of common shares subject to possible conversion — basic and diluted
    41,125,121       45,125,121       41,125,121       17,245,726  

 

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Selected Unaudited Condensed Combined Pro Forma Financial Information
The selected unaudited condensed combined pro forma financial information has been derived from, and should be read in conjunction with, the unaudited condensed combined pro forma financial information included elsewhere in this joint proxy statement/prospectus.
The unaudited condensed combined pro forma statements of operations for the six months ended June 30, 2009 and the year ended December 31, 2008 give pro forma effect to the merger and co-investment as if it had occurred on January 1, 2008. The unaudited condensed combined pro forma balance sheet as of June 30, 2009 gives pro forma effect to the merger and co-investment as if they had occurred on such date. The unaudited condensed combined pro forma statements of operations and balance sheet are based on the historical financial statements of Frontier and SPAH as of and for the six months ended June 30, 2009 and the year ended December 31, 2008.
The historical financial information has been adjusted to give effect to pro forma events that are related and/or directly attributable to the merger and co-investment, are factually supportable and, in the case of the unaudited pro forma statement of operations data, are expected to have a continuing impact on the combined results. The adjustments presented on the unaudited condensed combined pro forma financial information have been identified and presented in “Unaudited Condensed Combined Pro Forma Financial Data” to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the merger and co-investment.
This information should be read together with the consolidated financial statements of Frontier and the notes thereto, the financial statements of SPAH and the notes thereto, “Unaudited Condensed Combined Pro Forma Financial Data,” “Information about Frontier— Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Information about SPAH— Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this joint proxy statement/prospectus.
The unaudited condensed combined pro forma financial statements have been prepared using the assumptions below with respect to the number of outstanding shares of SPAH common stock:
    Assuming Minimum Conversion: This presentation assumes that no SPAH stockholders exercise conversion rights with respect to their shares of SPAH common stock into a pro rata portion of the trust account; and
    Assuming Maximum Conversion: This presentation assumes that SPAH public stockholders holding 10% of the shares sold in or subsequently to SPAH’s initial public offering, less one share (4,328,959 shares), exercise their conversion rights and that such shares were converted into their pro rata share of the funds in the trust account.
The unaudited condensed combined pro forma financial statements reflect the acquisition of Frontier being accounted for under the acquisition method of accounting pursuant to the provisions SFAS 141R. Pursuant to the requirements of SFAS 141R, SPAH is expected to be the acquirer for accounting purposes because SPAH is expected to own a majority interest upon consummation of the merger and the co-investment. Determination of control places emphasis on the shareholder group that retains the majority of voting rights in the combined entity. If the accounting acquirer cannot be determined based upon relative voting interests, other indicators of control are considered in the determination of the accounting acquirer, including: control of the combined entity’s board of directors, the existence of large organized minority groups, and senior management of the combined entity.
The unaudited condensed combined pro forma financial statements are presented for informational purposes only and are subject to a number of uncertainties and assumptions and do not purport to represent what the companies’ actual performance or financial position would have been had the transaction occurred on the dates indicated and does not purport to indicate the financial position or results of operations as of any future date or for any future period.

 

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SP Acquisition Holdings, Inc and Subsidiaries
Selected Unaudited Condensed Combined Pro Forma Statement of Operations Data
For the Six Months Ended June 30, 2009
                 
    Combined Pro     Combined Pro  
    Forma     Forma  
    (assuming     (assuming  
    minimum     maximum  
(In thousands, except per share amounts)   conversion)     conversion)  
Interest income:
               
Interest income
  $ 96,338     $ 96,311  
Interest expense
    50,869       50,869  
 
           
 
               
Net interest income
    45,469       45,442  
 
           
 
               
Securities (losses)
    (102 )     (102 )
Provision for loan losses
    135,000       135,000  
Net income (loss)
    (90,273 )     (90,291 )
 
               
Basic earnings (loss) per share
  $ (1.80 )   $ (1.97 )
Weighted average number of shares outstanding — basic and diluted
    50,158       45,829  
SP Acquisition Holdings, Inc and Subsidiaries
Selected Unaudited Condensed Combined Pro Forma Statement of Operations Data
For the Year Ended December 31, 2008
                 
    Combined Pro     Combined Pro  
    Forma     Forma  
    (assuming     (assuming  
    minimum     maximum  
(In thousands, except per share amounts)   conversion)     conversion)  
Interest income:
               
Interest income
  $ 285,463     $ 284,822  
Interest expense
    112,185       112,185  
 
           
 
               
Net interest income
    173,278       172,637  
 
           
 
               
Securities gains
    (6,430 )     (6,430 )
Provision for loan losses
    120,000       120,000  
Net (loss)
    (98,687 )     (99,294 )
 
               
Loss per share — basic and diluted
  $ (1.97 )   $ (2.17 )
Weighted average number of shares outstanding — basic and diluted
    50,158       45,829  

 

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SP Acquisition Holdings, Inc. and Subsidiaries
Selected Unaudited Consolidated Pro Forma Balance Sheet Data at June 30, 2009
                 
    Combined Pro     Combined Pro  
    Forma     Forma  
    (assuming     (assuming  
    minimum     maximum  
(Dollars in thousands)   conversion)     conversion)  
Total assets
  $ 4,301,013     $ 4,258,293  
Net loans
    3,116,327       3,116,327  
Securities
    83,344       83,344  
Deposits
    3,267,692       3,267,692  
Total stockholders’ equity
  $ 562,082     $ 519,362  

 

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COMPARATIVE PER SHARE DATA
The following table sets forth selected historical equity ownership information for SPAH and Frontier, and unaudited pro forma combined per share ownership information after giving effect to the merger and co-investment, assuming (i) that no SPAH public stockholders exercise their conversion rights and (ii) that holders of 10% of the shares (minus one share) sold in or subsequently to SPAH’s initial public offering have exercised their conversion rights. SPAH is providing this information to aid you in your analysis of the financial aspects of the merger and co-investment. The historical information should be read in conjunction with “Selected Historical and Pro Forma Consolidated Financial Data — Selected Summary Historical Consolidated Financial Information of Frontier and — Selected Historical Financial Information of SPAH” included elsewhere in this joint proxy statement/prospectus and the historical consolidated and combined financial statements of SPAH and Frontier and the related notes thereto included elsewhere in this joint proxy statement/prospectus. The unaudited pro forma per share information is derived from, and should be read in conjunction with, the unaudited condensed combined pro forma financial data and related notes included elsewhere in this joint proxy statement/prospectus.
The unaudited pro forma consolidated per share information reflects the acquisition of Frontier being accounted for under the acquisition method of accounting pursuant to the provisions SFAS 141R. Pursuant to the requirements of SFAS 141R, SPAH is expected to be the acquirer for accounting purposes because SPAH is expected to own a majority interest upon consummation of the merger and co-investment. Determination of control places emphasis on the shareholder group that retains the majority of voting rights in the combined entity. If the accounting acquirer cannot be determined based upon relative voting interests, other indicators of control are considered in the determination of the accounting acquirer, including: control of the combined entity’s board of directors, the existence of large organized minority groups, and senior management of the combined entity.
The unaudited pro forma consolidated per share information does not purport to represent what the actual results of operations of SPAH and Frontier would have been had the merger and co-investment been completed or to project SPAH’s or Frontier’s results of operations that may be achieved after the merger and co-investment. The unaudited pro forma book value per share information below does not purport to represent what the value of SPAH and Frontier would have been had the merger and co-investment been completed nor the book value per share for any future date or period.
Unaudited Pro Forma Consolidated Per Share Information
                                 
                    Pro Forma     Pro Forma  
                    Assuming     Assuming  
                    No     Maximum  
    SPAH     Frontier     Conversions     Conversions  
Six Months ended June 30, 2009
                               
Basic earnings per share
  $ (0.02 )   $ (1.78 )   $ (1.80 )   $ (1.97 )
Diluted earnings per share
  $ (0.02 )   $ (1.78 )   $ (1.80 )   $ (1.97 )
Book value per share at June 30, 2009(1)
  $ 7.60     $ 5.72     $ 11.21     $ 11.33  
Year Ended December 31, 2008
                               
Basic earnings (loss) per share
  $ 0.04     $ (1.91 )   $ (1.97 )   $ (2.17 )
Diluted earnings (loss) per share
  $ 0.04     $ (1.91 )   $ (1.97 )   $ (2.17 )
     
(1)   Book value per share of SPAH is computed by dividing the sum of total stockholders’ equity plus common stock subject to possible conversion by the 54,112,000 shares outstanding at the balance sheet date. Book value per share for the pro forma columns is computed by dividing the sum of total stockholders’ equity plus common stock subject to possible conversion by the 54,112,000 shares outstanding plus the additional shares issued in conjunction with the merger and co-investment.

 

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THE MERGER AND THE MERGER AGREEMENT
The descriptions of the terms and conditions of the merger, the merger agreement and any related documents in this joint proxy statement/prospectus are qualified in their entirety by reference to the copy of the merger agreement attached as Annex A to this joint proxy statement/prospectus, to the registration statement, of which this joint proxy statement/prospectus is a part, and to the exhibits to the registration statement.
Background of the Merger
The terms of the merger agreement are the result of negotiations between the representatives of SPAH and Frontier. The following is a brief description of the background of these negotiations, the merger and related transactions.
Transaction Activities of SPAH Prior to Discussions with Frontier
SPAH is a blank check company organized under the laws of the State of Delaware on February 14, 2007. SPAH was formed for the purpose of acquiring, through a merger, capital stock exchange, asset acquisition or other similar business combination, one or more businesses or assets.
A registration statement for SPAH’s initial public offering was declared effective on October 10, 2007. On October 16, 2007, SPAH sold 40,000,000 units in its initial public offering, and on October 31, 2007 the underwriters for its initial public offering purchased an additional 3,289,600 units pursuant to an over-allotment option. Each of SPAH’s units consists of one share of common stock and one warrant. On November 2, 2007, the warrants and common stock underlying SPAH’s units began to trade separately. Each warrant currently entitles the holder to purchase one share of SPAH’s common stock at a price of $7.50 commencing on the consummation of a business combination, provided that there is an effective registration statement covering the shares of common stock underlying the warrants in effect. The warrants currently expire on October 10, 2012, unless earlier redeemed.
SPAH received gross proceeds of approximately $439,896,000 from its initial public offering and sale of the additional founder’s warrants to SP Acq LLC. Net proceeds of approximately $425,909,120 were deposited into a trust account and will be part of the funds distributed to the SPAH public stockholders in the event SPAH is unable to complete the merger or another business combination.
Prior to the consummation of its initial public offering, neither SPAH, nor anyone on its behalf, contacted any prospective target business or had any substantive discussions, formal or otherwise, with respect to such a transaction with Frontier.
Subsequent to the consummation of its initial public offering on October 16, 2007, SPAH commenced consideration of potential target companies with the objective of consummating a business combination. SPAH compiled a list of potential targets and updated and supplemented such list from time to time. SPAH contacted several private equity firms, venture capital firms, numerous other business relationships, investment bankers and consulting firms, as well as, legal and accounting firms. Through these efforts, SPAH identified and reviewed information with respect to over 100 potential target companies. On several occasions, SPAH engaged in multiple meetings with potential targets and engaged in serious discussions with a select few businesses. SPAH made numerous proposals and negotiated a number of letters of intent over the approximately 22 month period.
Examination of Strategic Alternatives by Frontier Prior to Discussions with SPAH
At a strategic retreat on September 19, 2008, the Frontier Board and management along with Sandler O’Neill discussed strategies to improve Frontier’s capital position and the relative impact on Frontier’s capital position from possible deterioration in Frontier’s credit portfolio. Strategies discussed included raising capital through the issuance of capital securities, sale of existing loans and securities, reducing growth, reducing expenses, reducing the shareholder’s cash dividend and the possible sale of branches, real estate and/or business lines.

 

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In early October 2008, the Frontier Board and management determined, in conjunction with the anticipated results from a Joint Report of Examination, dated July 21, 2008 (but not yet delivered to Frontier), by the FDIC and the Washington DFI, that the losses in Frontier Bank’s loan portfolio made it imperative that Frontier take immediate steps to substantially increase its capital. Given the size of the potential capital raise and the anticipated offering price of Frontier stock, the Frontier Board believed it would be prudent to explore the viability of a merger transaction with a strategic partner.
On October 8 and 9, 2008, representatives of Sandler O’Neill were onsite at Frontier’s offices along with other financial and legal advisors to conduct due diligence.
On October 9, 2008, the Frontier Board engaged Sandler O’Neill, as a financial advisor, to provide financial advice and assist the Frontier Board and management in pursuing all strategic alternatives. These included, but were not limited to, the offering and sale of certain securities of Frontier in a transaction to provide additional capital to Frontier or a possible business combination.
On October 14, 2008, under the Troubled Asset Relief Program’s Capital Purchase Plan (“TARP CPP”), the United States Treasury announced details regarding its proposed investment of $250 billion in Tier 1 qualifying capital into eligible FDIC insured depositories across the United States.
On October 15, 2008, the Frontier Board met with Sandler O’Neill to discuss its available alternatives relative to the TARP CPP.
On October 17, 2008 Frontier submitted its application for participation in the TARP CPP.
On October 23, 2008, Frontier announced its third quarter financial results including a quarterly net loss of $18.0 million.
On November 16, 2008, Sandler O’Neill began contacting strategic partners and potential capital investors regarding Frontier. Sandler O’Neill contacted over 35 potential financial investors and 10 financial institutions between November 2008 and May 2009.
On November 17, 2008, Frontier established a virtual online data room in which they made available to prospective investors and strategic partners certain confidential financial, operational and legal data regarding Frontier, and from which an interested party could make an acquisition or investment proposal.
On July 7, 2008, Frontier Bank retained a nationally recognized independent consultant to review Frontier’s loan portfolio, the results of which were provided to interested investors and strategic partners. The independent loan review team began their onsite due diligence of the loan portfolio during the week of December 8, 2008.
Between late November, 2008 and mid May, 2009, 18 potential merger partners and/or investors signed confidentiality agreements accessed the data room or received confidential information regarding Frontier and were provided the opportunity to ask questions of senior management. During this period, Sandler O’Neill regularly addressed the Frontier Board to update them on the interest level of the parties in the data room.
On December 2, 2008, members of Frontier’s executive management team and a representative of Sandler O’Neill met with the FDIC in San Francisco to present Frontier’s efforts to preserve capital since the examination and to check on the status of its TARP CPP application. The regulators indicated that they were holding Frontier’s application for TARP CPP investment pending its efforts to raise matching equity.
On December 8, 2008, Frontier announced changes to its management team, most notably that Patrick M. Fahey, a director, would become the Chairman and Chief Executive Officer of Frontier and that Michael J. Clementz would become President of Frontier and Chief Executive Officer of Frontier Bank. As part of the management change, Mr. Fahey announced that Frontier would begin implementation of a new business plan focused on core deposit funding and a diversified loan portfolio.

 

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On December 19, 2008, Frontier announced the suspension of the quarterly cash dividend paid to shareholders.
On January 29, 2009, Frontier announced its fourth quarter financial results, including a loss of $89.5 million, $77.0 million of which was a non-cash charge for impairment of goodwill.
The process of exploring strategic alternatives continued throughout the beginning of 2009. At the same time, on March 24, 2009, the Frontier Board entered into an agreement with the FDIC and the Washington DFI consenting to the FDIC Order, which provided, among other things, that Frontier Bank increase its Tier 1 capital in such an amount as to equal or exceed 10% of Frontier Bank’s total assets by July 29, 2009, and to maintain such capital level thereafter. Frontier also announced publicly on March 24, 2009, that it had retained a financial advisor to help it identify new sources of capital.
On April 23, 2009, Frontier announced its first quarter financial results, which included a loss of $33.8 million.
Discussions and Negotiations between SPAH and Frontier
On April 16, 2009, SPAH representatives had an initial conference call with Sandler O’Neill to discuss possibilities of utilizing SPAH cash to recapitalize a bank. A follow up meeting with Sandler O’Neill occurred on April 27, 2009 with further discussion on potential transaction partners. SPAH representatives met again with Sandler O’Neill on May 1, 2009 to discuss specific transaction partners. A confidentiality agreement was signed between SPAH and Sandler O’Neill as Frontier’s authorized representative on May 6, 2009. SPAH representatives met with Frontier’s management in Seattle, Washington on May 27, 2009. Between early May and the end of June, representatives of SPAH began conducting preliminary due diligence on Frontier and made numerous visits to Frontier headquarters in Everett, Washington where they also met with Sandler O’Neill and bank management and began to formulate the parameters of an offer to infuse capital into Frontier Bank.
On June 11, 2009 Frontier announced a workforce reduction of approximately 6% of its staff.
On June 28, 2009, the SPAH Board held a Board meeting to discuss a possible nonbinding Letter of Intent between SPAH and Frontier. Members of management gave a presentation to the SPAH Board which described the terms of the nonbinding Letter of Intent and gave a background of Frontier and its business, loan portfolio, potential performance, growth prospects, valuation, and the fairness of the proposed transaction. SPAH management outlined the rationale for the transaction, which included the opportunity to recapitalize Frontier at a reasonable valuation, resulting in the combined entity having the capital and capabilities to take advantage of the dislocation in the current credit markets. At the conclusion of its presentation, and after discussions thereon, the SPAH Board authorized management to enter into a nonbinding Letter of Intent with Frontier, subject to additional changes agreed to by management, and to continue doing due diligence and work toward a definitive merger agreement.
On June 29, 2009, Frontier Bank received a draft of a proposed nonbinding Letter of Intent from SPAH setting forth the terms of a proposed business combination. Following receipt of the proposed Letter of Intent, management met with representatives of Sandler O’Neill and its outside legal counsel, Keller Rohrback L.L.P. (“Keller Rohrback”), to clarify terms of the proposal and a revised nonbinding Letter of Intent was finalized on June 30, 2009, and circulated to the Frontier Board.
On July 1, 2009, the Frontier Board met with representatives of Sandler O’Neill and Keller Rohrback and reviewed the proposal in detail. On the same date, the Frontier Board met with representatives of SPAH who answered questions regarding the proposal and structure of SPAH. After making their presentation, the representatives of SPAH were excused from the meeting and the Frontier Board further considered the proposal.

 

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After a lengthy discussion of the terms of the proposal, the Frontier Board authorized management to execute the nonbinding Letter of Intent. This authorization was based on the following conclusions of the Frontier Board:
    The proposed offer would provide sufficient capital for Frontier to survive and continue to remain viable in the current economic environment.
    The proposed offer would give Frontier shareholders an opportunity to have shares in the pro forma organization and benefit in any increase in the stock price of the business going forward.
    A merger with SPAH and the infusion of significant capital would likely expedite removal of the regulatory restrictions currently facing Frontier and allow Frontier Bank to better serve its customers.
    Frontier does not presently have sufficient capital to meet the capital requirements of the regulatory agencies through organic resources. As of June 30, 2009, Frontier was no longer considered “well capitalized” using the standard regulatory criteria.
    The proposed exchange ratio was reasonable in the context of the current market environment and when compared to Frontier’s other possible alternatives.
    Other efforts to raise capital over the past six months had resulted in no actionable alternatives.
On July 1, 2009, SPAH and Frontier entered into the nonbinding Letter of Intent.
On July 2, 2009, representatives of Frontier, SPAH, Keller Rohrback and Sandler O’Neill traveled to San Francisco to meet with representatives from the FDIC, FRB and Washington DFI to discuss the terms of the nonbinding Letter of Intent and other aspects of the transaction in general.
During the weeks of July 6, 2009 and July 13, 2009, SPAH continued financial and business due diligence and commenced legal and regulatory due diligence on Frontier and Olshan Grundman Frome Rosenzweig & Wolosky LLP (“Olshan”), Sidley Austin LLP and SPAH prepared the first draft of the merger agreement. Olshan circulated a draft of the merger agreement to Frontier on July 18, 2009. Discussions between the various parties and due diligence continued throughout the week of July 20, 2009 and on July 24, 2009, Olshan received Frontier’s cumulative comments to the merger agreement. Also during this time period SPAH management met with Frontier’s independent consultant to discuss findings of the second loan review. During the next several days, the various parties continued to negotiate the terms and conditions of the merger agreement and Olshan distributed revised drafts of the merger agreement on each of July 27, 28 and 29, 2009.
On July 24, 2009, SPAH’s Audit Committee met to review SPAH’s Form 10-Q for the six months ended June 30, 2009. SPAH’s Audit Committee was given an update on the status of the negotiations with Frontier.
On July 29, 2009 the SPAH Board met. SPAH management made a lengthy presentation regarding the terms and conditions of the transactions, Frontier’s current business and loan portfolio, regulatory issues, timing of shareholder approval and the fact that the acquisition of Frontier does not satisfy the requirement that the fair market value of the target business equals at least 80% of the balance of SPAH’s trust account (excluding underwriting discounts and commissions) plus the proceeds of the co-investment. The SPAH Board approved the transaction based on the strong capital position of the combined entity, the solid franchise value of Frontier and the opportunity for the recapitalized entity to take advantage of the favorable market for making both loans and acquisitions. At the conclusion of the meeting, the SPAH Board approved entering into the merger agreement with Frontier subject to whatever additional changes were agreed to by management. As part of this approval, the SPAH Board also approved certain amendments to SPAH’s Warrant Agreement and Amended and Restated Certificate of Incorporation (including a provision which would eliminate the requirement that SPAH enter into a business combination whereby the fair market value of the target business equals at least 80% of the balance of SPAH’s trust account (excluding underwriting discounts and commissions) plus the proceeds of the co-investment), subject to stockholder approval. Members of the SPAH Board also agreed to forfeit an aggregate of 465,529 shares of SPAH common stock and SP Acq LLC agreed to forfeit 8,987,883 shares of SPAH common stock.

 

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At a Frontier Board meeting held on July 29, 2009, after reviewing presentations by Keller Rohrback and Sandler O’Neill, receiving a fairness opinion from Keefe Bruyette and lengthy discussion of the terms and conditions of the transaction and other possible alternatives, the Frontier Board unanimously resolved to approve the merger transaction subject to certain adjustments.
On July 30, 2009, representatives of Frontier and SPAH negotiated a finalized, mutually agreeable merger agreement and on such date, SPAH and Frontier executed the merger agreement.
Reasons of SPAH for the Merger
In reaching its decision to approve the merger agreement and recommend the merger to its stockholders, the SPAH Board reviewed various financial data and due diligence and evaluation materials and made an independent determination of fair market value. The SPAH Board consulted with SPAH management, SPAH’s legal counsel regarding the legal terms of the merger, and certain employees and certain affiliates of SP Acq LLC regarding the strategic and financial aspects of the merger, and the fairness, from a financial point of view, of the exchange ratio to SPAH.
In addition, in reaching its decision to approve the merger agreement, the SPAH Board considered a number of factors, both positive and negative. It believes that the non-exhaustive list of factors below strongly supports its determination to approve the merger agreement and recommendation that its stockholders adopt the merger agreement. The positive factors included:
    financial condition and results of operations of Frontier, including a tangible book value of $268.8 million, gross loans of $3.4 billion and total assets of $4.0 billion as of June 30, 2009;
    the growth potential associated with Frontier, including potential for enhanced operating margins and operating efficiencies;
    the balance sheet make-up and product mix, including the loan and deposit mix of Frontier;
    opportunities to grow existing revenue streams and create new revenue streams associated with Frontier;
    the competitive position of Frontier within its operating markets;
    the industry dynamics, including barriers to entry;
    the experience and skill of Frontier’s management, including Patrick M. Fahey, the current Chairman and Chief Executive Officer of Frontier who will become Chief Executive Officer of SPAH in the merger;
    acquisition opportunities in the industry;
    the opportunity for further consolidation and cost savings in the banking industry; and
    the valuation of comparable companies.
Negative factors that the SPAH Board considered included:
    Frontier’s depressed stock price may adversely affect prevailing market prices for SPAH’s common stock;
    the issuance of the FDIC Order and the Memorandum of Understanding;

 

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    the issuance of the FRB Written Agreement;
    the deterioration of Frontier’s loan portfolio, centered in its real estate construction and land development loans, including approximately $764.6 million in nonperforming loans predominately existing in construction real estate loans and land development and $98.6 million in loan loss reserves as of June 30, 2009;
    impact of new regulation in the banking industry; and
    the continued downturn in Frontier’s real estate market areas and the general weakness in the economy.
The SPAH Board concluded, however, the potentially negative factors associated with the merger were outweighed by the potential benefits of the merger. The above discussion of the material factors considered by the SPAH Board is not intended to be exhaustive, but does set forth the principal factors considered by the SPAH Board.
At a SPAH Board meeting held on July 29, 2009, the SPAH Board collectively reached the unanimous conclusion to approve the merger agreement and the merger in light of the various factors described above and other factors that each member of the SPAH Board felt were appropriate. In view of the wide variety of factors considered by the SPAH Board in connection with its evaluation of the merger and the complexity of these matters, the SPAH Board did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision. Rather, the SPAH Board made its recommendation based on the totality of information presented to and the investigation conducted by it. In considering the factors discussed above, individual directors may have given different weights to different factors.
Experience of SPAH Board and Management in Analyzing Business Combinations
The members of the SPAH Board and SPAH’s management have extensive investment, trading, restructuring, accounting, mergers and acquisitions, financing, tax, operating and legal experience, including active participation on boards of directors, particularly in the areas of financial management, management oversight and compensation, and acquisitions and dispositions. In particular, Mr. Lichtenstein, SPAH’s Chairman, President and Chief Executive Officer, has over 21 years of experience investing globally in public and private companies including debt and equity securities, and serving on boards of directors. In addition, Jack Howard, SPAH’s Chief Operating Officer and Secretary, has more than 24 years of experience in sourcing, evaluating, structuring and managing investments, and serving on boards of directors.
Consequences to SPAH if the Merger Proposal is Not Approved
If the merger proposal is not approved by either the SPAH stockholders or the Frontier shareholders, if 10% or more of the SPAH public stockholders properly elect to convert their shares for cash equal to a pro rata portion of the SPAH trust account (and this closing condition is not waived by SPAH), if required regulatory approvals are denied or delayed, if the warrant amendment proposal is not approved by the SPAH warrantholders or certain other closing conditions are not met and are not waived, the merger will not occur. In addition, if SPAH does not effect the merger with Frontier or cannot complete an alternative business combination by October 10, 2009, SPAH will automatically dissolve and liquidate. In any liquidation, the funds held in the trust account, plus any interest earned thereon (less any taxes due on such interest and payment of deferred underwriting discounts and commissions), together with any remaining net assets not held in trust, will be distributed pro rata to SPAH public stockholders and SPAH will be dissolved in accordance with the SPAH Certificate of Incorporation. The SPAH insiders have waived any right to any liquidation distribution with respect to their shares acquired prior to the initial public offering.

 

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Interests of SPAH’s Directors and Officers and Others in the Merger
When considering the recommendations of the SPAH Board, you should be aware that some of SPAH’s directors, officers and affiliates have interests in the merger proposal that differ from the interests of other stockholders:
    Warren G. Lichtenstein will serve as the Chairman of the SPAH Board following the consummation of the merger;
    John McNamara will serve as the Chairman of the Frontier Bank Board following the consummation of the merger;
    if the merger is not approved and SPAH is required to liquidate, all the shares of common stock and all the warrants held by the SPAH insiders (including SP Acq LLC and the Steel Trust), which, as of the record date, for the shares, were worth $[______] per share and $[______] in the aggregate and, for the warrants, were worth $[______] per warrant and $[______] in the aggregate, will be worthless. Since Mr. Lichtenstein, SPAH’s Chairman of the Board, President and Chief Executive Officer, may be deemed the beneficial owner of shares held by SP Acq LLC and the Steel Trust, he may also have a conflict of interest in determining whether a particular target business is appropriate for SPAH and its stockholders. However, upon consummation of the merger, SP Acq LLC has agreed to forfeit 8,987,883 of its founder’s shares and Anthony Bergamo, Ronald LaBow, Howard M. Lorber, Leonard Toboroff and S. Nicholas Walker have agreed to forfeit an aggregate of 465,529 of their founder’s shares;
    if SPAH liquidates prior to the consummation of a business combination, SP Acq LLC and Mr. Lichtenstein will be personally liable if and to the extent any claims by a third party for services rendered or products sold, or by a prospective business target, reduce the amounts in the trust account available for distribution to SPAH stockholders in the event of a dissolution and liquidation; and
    unless SPAH consummates an initial business combination, its officers and directors, its employees, and affiliates of SP Acq LLC and their employees will not receive reimbursement for any out-of-pocket expenses incurred by them to the extent that such expenses exceed the amount of available proceeds not deposited in the trust account and the $3.5 million in interest income on the balance of the trust account that has been released to SPAH to fund its working capital requirements. SPAH’s officers and directors may tend to favor potential initial business combinations with target businesses that offer to reimburse any expenses that SPAH did not have the funds to reimburse itself.
Each board member was aware of these and other interests and considered them before approving and adopting the merger agreement. Additionally, upon consummation of the merger, the underwriters in SPAH’s initial public offering will be entitled to receive approximately $17.3 million of deferred underwriting discounts and commissions currently held in SPAH’s trust account. SPAH is in negotiation with its underwriters regarding the amount and form of payment of such deferred underwriting fees from SPAH’s initial public offering. The results of these negotiations are uncertain and could result in $17,316,000 in additional costs for the proforma company which could be paid in cash. If the merger is not consummated and SPAH is required to liquidate, the underwriters have agreed to forfeit any rights or claims to their deferred underwriting discounts and commissions then in the trust account, and those funds will be included in the pro rata liquidation distribution to the SPAH public stockholders.
Transfer Restrictions of SPAH Insiders upon Consummation of the Merger
Upon consummation of the merger, SP Acq LLC has agreed to forfeit 8,987,883 of the 9,653,412 founder’s shares it owns and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have agreed to forfeit an aggregate of 465,529 of the 500,000 founder’s shares they own. The SPAH insiders previously agreed not to sell or transfer their founder’s units and the founder’s shares and initial founder’s warrants comprising the founder’s units (including the common stock to be issued upon the exercise of the initial founder’s warrants) for a period of one year from the date the merger is consummated, except in each case to permitted transferees who agree to be subject to the same transfer restrictions. The Steel Trust has agreed to be bound by these transfer restrictions.

 

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SP II previously agreed not to sell or transfer the co-investment units, co-investment shares or co-investment warrants (including the common stock to be issued upon exercise of the co-investment warrants) until one year after SPAH completes the merger except to permitted transferees who agree to be bound by such transfer restrictions. The Steel Trust has agreed to be bound by these transfer restrictions.
The permitted transferees under the lock-up agreements are SPAH’s officers, directors and employees and other persons or entities associated or affiliated with SP II or Steel Partners, Ltd. (other than, in the case of SP II and SP Acq LLC, their respective limited partners or members in their capacity as limited partners or members). Any transfer to a permitted transferee will be in a private transaction exempt from registration under the Securities Act, pursuant to Section 4(i) thereof.
During the lock-up period, the SPAH insiders and any permitted transferees to whom they transfer shares of common stock will retain all other rights of holders of SPAH common stock, including, without limitation, the right to vote their shares of common stock (except to the extent they convert their voting common stock into Non-Voting Common Stock or receive Non-Voting Common Stock upon exercise of their warrants) and the right to receive cash dividends, if declared. If dividends are declared and payable in shares of common stock, such dividends will also be subject to the lock-up agreement. If SPAH is unable to effect the merger and liquidates, the SPAH insiders have waived the right to receive any portion of the liquidation proceeds with respect to the founder’s shares. Any permitted transferees to whom the founder’s shares are transferred will also agree to waive that right.
Conversion Rights of SPAH Stockholders
If you hold shares of common stock issued in SPAH’s initial public offering (whether such shares were acquired pursuant to such initial public offering or afterwards up to and until the record date), then you have the right to vote against the merger proposal and demand that SPAH convert such shares into cash equal to a pro rata share of the aggregate amount then on deposit in the trust account in which a substantial portion of the net proceeds of SPAH’s initial public offering are held (before payment of deferred underwriting discounts and commissions and including interest earned on their pro rata portion of the trust account, net of income taxes payable on such interest and net of interest income of $3.5 million on the trust account balance previously released to SPAH to fund its working capital requirements).
As of [______], 2009, there was $[______] in SPAH’s trust account, including accrued interest on the funds in the trust account, or approximately $[______] per share issued in the initial public offering. The actual per share conversion price will differ from the $[______] per share due to any interest earned on the funds in the trust account since [______], 2009, and any taxes payable in respect of interest earned thereon. The actual per share conversion price will be calculated as of two business days prior to the consummation of the merger, divided by the number of shares sold in the initial public offering.
You may request conversion at any time after the mailing of this joint proxy statement/prospectus and prior to the vote taken with respect to the merger proposal at the special meeting, but the request will not be granted unless you vote against the merger and the merger is approved and completed. If the merger is not consummated, no shares will be converted to cash through the exercise of conversion rights. Prior to exercising your conversion rights you should verify the market price of SPAH common stock. You may receive higher proceeds from the sale of your common stock in the public market than from exercising your conversion rights, if the market price per share is higher than the amount of cash that you would receive upon exercise of your conversion rights.
If you wish to exercise your conversion rights, you must:
    affirmatively vote against the merger proposal in person or by submitting your proxy card before the vote on the merger proposal and checking the box that states “Against” for proposal number 1;

 

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    either:
    check the box that states “Exercise Conversion Rights” on the proxy card; or
    send a letter to SPAH’s transfer agent, Continental Stock Transfer & Trust Company, at 17 Battery Place, 8th Floor, New York, NY 10004, attn: Mark Zimkind, stating that you are exercising your conversion rights and demanding your shares of SPAH common stock be converted into cash; and
    either:
    physically tender, or if you hold your shares of SPAH common stock in “street name,” cause your broker to physically tender, your stock certificates representing shares of SPAH common stock to SPAH’s transfer agent; or
    deliver your shares electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, to SPAH’s transfer agent by [______], 2009.
The DWAC delivery process can be accomplished, whether you are a record holder or your shares are held in “street name,” within a day, by simply contacting the transfer agent or your broker and requesting delivery of your shares through the DWAC System. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the stockholder or the tendering broker $35, and your broker may or may not pass this cost on to you.
Taking any action that does not include an affirmative vote against the merger, including abstaining from voting on the merger proposal, will prevent you from exercising your conversion rights. However, voting against the merger proposal does not obligate you to exercise your conversion rights. In addition, if you do not properly exercise your conversion rights (as outlined above), you will not be able to convert your shares of common stock into cash at the conversion price.
Any request to exercise your conversion rights, once made, may be withdrawn at any time up to immediately prior to the vote on the merger proposal at the special meeting (or any adjournment or postponement thereof). If you (1) initially vote for the merger proposal but then wish to vote against it and exercise your conversion rights or (2) initially vote against the merger proposal and wish to exercise your conversion rights but do not check the box on the proxy card providing for the exercise of your conversion rights or do not send a written request to SPAH’s transfer agent to exercise your conversion rights, or (3) initially vote against the merger proposal but later wish to vote for it, you may request SPAH’s transfer agent to send you another proxy card on which you may indicate your intended vote and, if that vote is against the merger proposal, exercise your conversion rights by checking the box provided for such purpose on the proxy card. You may make such request by contacting Continental Stock Transfer & Trust Company at 17 Battery Place, 8th Floor, New York, NY 10004, attn: Mark Zimkind. Any corrected or changed proxy card or written demand of conversion rights must be received by Continental Stock Transfer & Trust Company prior to the special meeting.
Please note, however, that once the vote on the merger proposal is held at the special meeting, you may not withdraw your request to exercise your conversion rights and request the return of your shares. If the merger is not consummated, your shares will be automatically returned to you.
In connection with the vote to approve the merger, SPAH stockholders may elect to vote a portion of their shares for and a portion of their shares against the merger. If the merger is approved and consummated, SPAH stockholders who elected to convert the portion of their shares voted against the merger will receive the conversion price with respect to those shares and may retain any other shares they own.
If you properly exercise your conversion rights, then you will be exchanging your shares of SPAH common stock for cash equal to a pro rata portion of the SPAH trust account and will no longer own these shares. SPAH anticipates that the funds to be distributed to SPAH stockholders entitled to convert their shares who elect conversion will be distributed promptly after completion of the merger. SPAH will not complete the merger if SPAH stockholders owning 10% or more of the shares sold in SPAH’s initial public offering exercise their conversion rights, although at SPAH’s discretion, this closing condition may be waived in order to consummate the merger. If SPAH elects to waive this closing condition, it may raise the conversion threshold to anywhere between 10% to 30% (minus one share).

 

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SPAH has made it a condition to closing the merger agreement that no more than 10% of the shares (minus one share) sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights in order to ensure that the combined company immediately following the consummation of the merger has sufficient Tier 1 capital to return to compliance levels. Pursuant to the terms of the FDIC Order, Frontier Bank is required to increase its Tier 1 capital in such an amount as to equal or exceed 10% of Frontier Bank’s total assets by July 29, 2009 and to maintain such capital level thereafter. If 10% or greater of SPAH’s public stockholders were to vote their shares against the merger and demand that SPAH convert such shares into cash equal to a pro rata share of the aggregate amount then on deposit in the trust account, the funds remaining may not be sufficient to meet Frontier Bank’s capital requirements. However, in SPAH’s sole discretion, this closing condition may be waived in order to consummate the merger. If SPAH elects to waive this closing condition, it may raise the conversion threshold to anywhere between 10% to 30% (minus one share).
Actions That May Be Taken to Secure Approval of SPAH Stockholders
If 30% or more of the SPAH public stockholders properly elect to convert their shares for cash equal to a pro rata portion of the SPAH trust account in accordance with the SPAH Certificate of Incorporation, SPAH would not be permitted to consummate the merger, even if the required vote for the merger proposal was received. Notwithstanding the foregoing, it is a condition to closing the merger agreement that holders of no more than 10% of the shares (minus one share) sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights, although at SPAH’s discretion, this closing condition may be waived in order to consummate the merger. Accordingly, SPAH may not consummate the merger if 10% or more of the holders of shares sold in or subsequent to SPAH’s initial public offering elect to exercise their conversion rights. To preclude such possibility, SPAH, the SPAH insiders, and/or certain of their respective affiliates may negotiate arrangements to provide for the purchase of such shares from certain holders who indicate their intention to vote against the merger and seek conversion or who otherwise wish to sell their shares. SPAH, the SPAH insiders, and/or certain of their respective affiliates may also execute agreements to purchase shares from such holders in the future, or they or SPAH may enter into transactions with such holders and others to provide them with incentives to acquire shares of SPAH and vote in favor of the merger proposal.
Arrangements of such nature would only be entered into and effected with the prior approval of Frontier (with respect to shares purchased) in accordance with applicable law at a time when SPAH, the SPAH insiders, and/or certain of their respective affiliates are not aware of any material nonpublic information regarding SPAH and its securities or pursuant to agreements between the buyer and seller of such shares in a form that would not violate insider trading rules. Definitive arrangements have not yet been determined but might include:
    Agreements between SPAH and the SPAH public stockholders pursuant to which SPAH would agree to purchase the shares from such holders immediately after the closing of the merger for the price and fees specified in the arrangements.
    Agreements with third parties to be identified pursuant to which the third parties would purchase public shares during the period beginning on the date that the registration statement of which this joint proxy statement/prospectus is a part is declared effective. Such arrangements would also provide for SPAH, immediately after the closing of the merger, to purchase from the third parties all of the public shares purchased by them for the price and fees specified in the arrangements.
    Agreements with third parties pursuant to which SPAH would borrow funds to make purchases of public shares for its own account. SPAH would repay such borrowings with funds transferred to it from SPAH’s trust account upon closing of the merger.
As a result of the purchases that may be effected through such arrangements, it is likely that the number of shares of common stock of SPAH in its public float will be reduced and that the number of beneficial holders of SPAH’s and SPAH’s securities also will be reduced from what it would have been if SPAH did not purchase such securities in this manner. This may inhibit SPAH’s ability to list its common stock on the NYSE AMEX LLC or any other national securities exchange due to minimum holder requirements.

 

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As of the date of this joint proxy statement/prospectus, no arrangements to such effect have been entered into with any such investor or holder. In the event that any purchases of SPAH’s common stock are made by SPAH, the SPAH insiders, and certain of their respective affiliates after the mailing of this joint proxy statement/prospectus to stockholders but prior to the special meeting of stockholders of SPAH, SPAH will file a Current Report on Form 8-K within four business days of such purchases or otherwise prior to the special meeting. Any such report will include descriptions of the arrangements entered into or significant purchases by any of the aforementioned persons. If members of the SPAH Board or SPAH’s officers make purchases pursuant to such arrangements, they will be required to report these purchases on beneficial ownership reports filed within two business days of such transactions with the SEC.
The purpose of such arrangements would be to increase the likelihood of obtaining the required vote (a majority of the shares of common stock voted by the SPAH public stockholders are voted, in person or by proxy, in favor of the merger) and reduce the likelihood that holders of 10% or more of the shares sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights. All shares purchased pursuant to such arrangements would be voted in favor of the merger and all other proposals presented at the special meeting of stockholders of SPAH. Neither SPAH nor its officers and directors purchasing shares would affect the fact that 30% less one share of the shares sold in SPAH’s initial public offering could be converted by SPAH public stockholders without the merger being prohibited from closing because the number of shares of the shares sold in SPAH’s initial public offering that may be converted without prohibiting the consummation of the merger is fixed in the SPAH Certificate of Incorporation at one share less than 30% of the shares sold in SPAH’s initial public offering. Notwithstanding the foregoing, it is a condition to closing the merger agreement that holders of no more than 10% of the shares (minus one share) sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights, although at SPAH’s discretion, this closing condition may be waived in order to consummate the merger. Accordingly, SPAH may not consummate the merger if 10% or more of the holders of shares sold in or subsequent to SPAH’s initial public offering elect to exercise their conversion rights. If the merger is not consummated, the purchasers, other than SPAH and the SPAH insiders, would be entitled to participate in liquidation distributions from SPAH’s trust account with respect to such shares.
Purchases pursuant to such arrangements ultimately paid for with funds originating from SPAH’s trust account would reduce the funds available to SPAH after the merger for working capital and general corporate purposes. Nevertheless, in all events there will be sufficient funds available to SPAH from the trust account to pay the SPAH public stockholders that are properly converted.
If these arrangements are entered into, the consequence could be that the merger would be approved when, without such arrangements, the merger might not have otherwise been approved. Purchases of shares by the persons described above would allow them to exert more influence over the approval of the merger and other proposals and would likely increase the chances that such proposals would be approved. Moreover, any such purchases may make it less likely that the holders of 10% or more of the shares sold in SPAH’s initial public offering will vote against the merger and exercise their conversion rights.
Rescission Rights
If you are a SPAH stockholder at the time of the merger and you purchased your shares in SPAH’s initial public offering or afterwards up to and until the record date and have not exercised your conversion rights or you have voted in favor of the merger agreement, but the merger is not consummated because holders of 10% or more, but less than 30% (minus one share) of shares sold in SPAH’s initial public offering elect to exercise their conversion rights, you may have securities law claims against SPAH for rescission (under which a successful claimant has the right to receive the total amount paid for his or her securities pursuant to an allegedly deficient prospectus, plus interest and less any income earned on the securities, in exchange for surrender of the securities) or damages (compensation for loss on an investment caused by alleged material misrepresentations or omissions in the sale of a security) on the basis of, for example, SPAH’s initial public offering prospectus not disclosing that (i) SPAH may seek to amend the SPAH Certificate of Incorporation prior to the consummation of a business combination to amend the definition of “initial business combination” to eliminate the requirement that the fair market value of the target business equal at least 80% of the balance of SPAH’s trust account (excluding underwriting discounts and commissions) plus the proceeds of the co-investment, (ii) SPAH may agree to lower the percentage of shares that can exercise conversion rights as a condition to closing its initial business combination, (iii) SPAH may seek to amend the Warrant Agreement upon consummation of the merger to eliminate the requirement that the initial founder’s warrants owned by certain SPAH insiders become exercisable only after the consummation of an initial business combination if and when the last sales price of SPAH common stock exceeds $14.25 per share for any 20 trading days within a 30 trading day period beginning 90 days after such business combination, (iv) funds in its trust account might be used, directly or indirectly, to purchase shares from SPAH public stockholders in order to secure approval of SPAH’s stockholders on the merger, (v) that SPAH may seek to amend the terms of the Warrant Agreement to increase the exercise price and extend the exercise period, among other things, upon consummation of the merger, and (vi) that a party other than SP II or SP Acq LLC may purchase the co-investment units. The rescission right and corresponding liability will continue against SPAH in the event the merger is consummated.

 

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Such claims may entitle stockholders asserting them to up to $10.00 per share, based on the initial offering price of the units sold in SPAH’s initial public offering, each comprised of one share of common stock and a warrant to purchase an additional share of common stock, less any amount received from the sale or fair market value of the original warrants purchased as part of the units, plus interest from the date of SPAH’s initial public offering. In the case of SPAH public stockholders, this amount may be more than the pro rata share of the trust account to which they are entitled upon exercise of their conversion rights or liquidation of SPAH.
In general, a person who contends that he or she purchased a security pursuant to a prospectus which contains a material misstatement or omission must make a claim for rescission within the applicable statute of limitations period, which, for claims made under Section 12 of the Securities Act and some state statutes, is one year from the time the claimant discovered or reasonably should have discovered the facts giving rise to the claim, but not more than three years from the occurrence of the event giving rise to the claim. A successful claimant for damages under federal or state law could be awarded an amount to compensate for the decrease in value of his or her shares caused by the alleged violation (including, possibly, punitive damages), together with interest, while retaining the shares. Claims under the anti-fraud provisions of the federal securities laws must generally be brought within two years of discovery, but not more than five years after occurrence. Rescission and damages claims would not necessarily be finally adjudicated by the time the merger is completed, and such claims would not be extinguished by consummation of that transaction.
Even if you do not pursue such claims, others, who may include all other SPAH public stockholders, may do so. Neither SPAH nor Frontier can predict whether stockholders will bring such claims or whether such claims would be successful.
Reasons of Frontier for the Merger
The Frontier Board believes the merger is in the best interests of Frontier and the Frontier shareholders. The Frontier Board unanimously recommends that Frontier shareholders vote for the approval of the merger agreement and the consummation of the transactions contemplated by that agreement.
In reaching its determination to adopt the merger agreement, the Frontier Board consulted with Frontier’s management and its financial and legal advisors, and considered a number of factors. The following is a description of the material factors that the Frontier Board believes favor the merger:
    the ability of the merger to recapitalize and revitalize Frontier, restore its regulatory capital to well-capitalized levels, and achieve compliance with bank regulatory requirements;
    the Frontier Board’s assessment of the financial condition of SPAH, and of the business, operations, capital level, asset quality, financial condition and earnings of the combined company on a pro forma basis. This assessment was based in part on presentations by Sandler O’Neill, Frontier’s financial advisor, and Keefe Bruyette, whom Frontier retained solely to render a fairness opinion, and Frontier’s management and the results of the due diligence investigation of SPAH conducted by Frontier’s management and financial and legal advisors;

 

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    the financial and growth prospects for Frontier and its shareholders of a business combination with SPAH as compared to continuing to operate as a stand-alone entity;
    the information presented by Sandler O’Neill to the Frontier Board with respect to the merger and the opinion of Keefe Bruyette that, as of the date of that opinion, the merger consideration is fair from a financial point of view to the holders of Frontier common stock (see “— Opinion of Keefe Bruyette” below);
    the current and prospective economic, regulatory and competitive environment facing the financial services industry generally, and Frontier in particular, including the continued rapid consolidation in the financial services industry and the competitive effects of the increased consolidation on smaller financial institutions such as Frontier;
    the fact that SPAH has agreed to: (i) employ Patrick M. Fahey as Chief Executive Officer of the combined company, and (ii) appoint Mr. Fahey and three other members of the Frontier Board as directors of SPAH and Frontier Bank, which are expected to provide a degree of continuity and involvement by Frontier constituencies following the merger, in furtherance of the interests of Frontier’s shareholders, customers and employees;
    current conditions in the U.S. capital markets, including the unavailability of other sources of capital, strategic or other merger partners to Frontier;
    the SPAH stock and SPAH warrants to be received in exchange for Frontier common stock pursuant to the merger agreement and resulting pro forma ownership levels in relation to the historical trading prices of Frontier common stock, as compared to other possible scenarios in the view of the Frontier Board’s financial advisor;
    the current condition of Frontier and the future prospects of the business in light of the current economic environment and the likelihood that Frontier would need to raise capital in order to protect against future loan losses and achieve compliance with the FDIC Order and the FRB Agreement; and
    the fact that Frontier’s existing capital resources were limiting management’s ability to effectively manage certain problem credits.
In the course of its deliberations regarding the merger, the Frontier Board also considered the following information that the Frontier Board determined did not outweigh the benefits to Frontier and its shareholders expected to be generated by the merger:
    that directors and officers of Frontier have interests in the merger in addition to their interests generally as Frontier shareholders, including change of control agreements for five of its executive officers;
    the effect of a termination fee of up to $2.5 million in favor of SPAH, including the risk that the termination fee might discourage third parties from offering to acquire Frontier by increasing the cost of a third party acquisition and, while SPAH has not agreed to pay Frontier any termination fee, Frontier was required to waive any claims against the trust account, if, for example, SPAH breaches the merger agreement;
    the risk to Frontier and its shareholders that SPAH may not be able to obtain required regulatory approvals, or necessary modifications to the FDIC Order, FRB Written Agreement and Memorandum of Understanding, and the risk of failing to consummate the transaction;
    uncertainty about how much of SPAH’s trust account will be available for working capital after closing;
    the adverse economic and regulatory environment; and
    the pending regulatory actions against Frontier, Frontier’s noncompliance with the capital requirement imposed by the FDIC Order, and their potential adverse impact on the profitability, operations and deposits of Frontier Bank, and the risk of further regulatory action and penalties, including the potential closure of Frontier Bank.

 

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The Frontier Board did not assign any relative or specific weights to the factors considered in reaching that determination, and individual directors may have given differing weights to different factors.
Engagement of Financial Advisors
In November 2008, Frontier engaged Sandler O’Neill as a financial advisor to assist Frontier’s Board and management in pursuing strategic alternatives. These services included, but were not limited to, the offering and sale of certain securities of Frontier in a transaction to provide additional capital to Frontier or a possible business combination. Pursuant to its engagement, Sandler O’Neill acted as a financial advisor to Frontier’s board of directors in connection with the negotiation of the merger agreement. In addition, Frontier expects that Sandler O’Neill will continue to provide ongoing advisory services to Frontier in connection with the merger, including arranging for presentations by Frontier’s management and preparing them for such presentations. Under the terms of the engagement letter, as amended, between Sandler O’Neill and Frontier, Sandler O’Neill has received a fee of $500,000 and upon consummation of the merger, will receive $9.5 million payable at the closing of the merger. In addition, Sandler O’Neill has a right of first refusal for a period of 12 months following the closing of the merger to act as a (i) a co-manager or co-placement agent in any capital raising transaction entered into by Frontier and (ii) financial advisor in any business combination entered into by Frontier and a second party. As a result, stockholders are advised that Sandler O’Neill has a financial interest in the successful outcome of the merger.
The Frontier Board has also retained Keefe Bruyette solely to issue a fairness opinion for a fee of $500,000.
Opinion of Keefe Bruyette
By letter dated July 28, 2009, Frontier retained Keefe Bruyette to provide a fairness opinion to the Frontier Board in connection with a possible business combination with SPAH. Keefe Bruyette is a nationally recognized investment banking firm whose principal business specialty is financial institutions. In the ordinary course of its investment banking business, Keefe Bruyette is regularly engaged in the valuation of financial institutions and their securities in connection with mergers and acquisitions and other corporate transactions.
At the July 29, 2009 meeting at which the Frontier Board considered and approved the merger agreement, Keefe Bruyette delivered to the Frontier Board its oral opinion, subsequently confirmed in writing, that, as of such date, the exchange ratio was fair to Frontier’s shareholders from a financial point of view. The full text of Keefe Bruyette’s opinion is attached as Annex E to this joint proxy statement/prospectus. The opinion outlines the procedures followed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Keefe Bruyette in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the opinion. Frontier shareholders are urged to read the entire opinion carefully in connection with their consideration of the proposed merger.
Keefe Bruyette’s opinion speaks only as of the date of the opinion. The opinion was directed to the Frontier Board and is directed only to the fairness of the exchange ratio to Frontier shareholders from a financial point of view. It does not address the underlying business decision of Frontier to engage in the merger or any other aspect of the merger, including the likelihood or the ability of Frontier or SPAH to obtain the necessary regulatory, contractual or other consents or approvals of the merger or the relative merits of the merger as compared to any other strategic alternative that may be available to Frontier. Keefe Bruyette’s opinion is not a recommendation to any Frontier shareholder as to how such shareholder should vote at the special meeting with respect to the merger or any other matter.

 

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In connection with rendering its opinion, Keefe Bruyette reviewed and considered, among other things:
  1.   the merger agreement;
 
  2.   the Annual Report to Stockholders and Annual Report on Form 10-K for the three years ended December 31, 2008 of Frontier;
 
  3.   the Annual Report to Stockholders and Annual Report on Form 10-K for the period from February 14, 2007 through December 31, 2007 and the year ended December 31, 2008 of;
 
  4.   certain interim reports to stockholders and quarterly reports on Form 10-Q of Frontier and SPAH and certain other communications from Frontier and SPAH to their respective shareholders;
 
  5.   the publicly reported historical price and trading activity for Frontier’s and SPAH’s common stock, including a comparison of certain financial and stock market information for Frontier and SPAH with similar publicly available information for certain other companies the securities of which are publicly traded;
 
  6.   the financial terms of certain recent business combinations in the banking industry, to the extent publicly available;
 
  7.   the current market environment generally and the banking environment in particular; and
 
  8.   such other information, financial studies, analyses and investigations and financial, economic and market criteria as they considered relevant.
Keefe Bruyette also discussed with certain members of senior management of Frontier the past and current business, regulatory relations, financial condition, results of operations and future prospects of Frontier, including its liquidity and capital position and funding sources and held similar discussions with certain members of senior management of SPAH regarding the past and current business, regulatory relations, financial condition, results of operations and future prospects of SPAH, including its liquidity and capital position and funding sources.

 

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In performing its reviews and in rendering its opinion, Keefe Bruyette assumed and relied upon the accuracy and completeness of all the financial information, analyses and other information that was publicly available or otherwise furnished to, reviewed by or discussed with it and further relied on the assurances of senior management of Frontier and SPAH that they were not aware of any facts or circumstances that would make such information inaccurate or misleading. Keefe Bruyette was not asked to and did not independently verify the accuracy or completeness of any of such information and they did not assume any responsibility or liability for its accuracy or completeness. Keefe Bruyette relied upon the management of Frontier and SPAH as to the reasonableness and achievability of the financial and operating forecasts and projections (and the assumptions and bases therefore) provided to them, and assumed that such forecasts and projections reflected the best currently available estimates and judgments of such managements and that such forecasts and projections will be realized in the amounts and in the time periods estimated by such managements. Keefe Bruyette expressed no opinion as to such financial projections or the assumptions on which they were based. Keefe Bruyette did not make an independent evaluation or appraisal of the assets or property, the collateral securing assets or the liabilities, contingent or otherwise, of Frontier or SPAH or any of their respective subsidiaries, or the collectability of any such assets, nor was it furnished with any such evaluations or appraisals. Keefe Bruyette is not an expert in the evaluation of allowances for loan and lease losses and it did not make an independent evaluation of the adequacy of the allowance for loan or lease losses of Frontier or the combined entity, nor did it review any individual credit files relating to Frontier. With Frontier’s consent, Keefe Bruyette assumed that the respective allowances for loan and lease losses for Frontier were adequate to cover such losses and will be adequate on a pro forma basis for the combined entity.
Keefe Bruyette’s opinion was necessarily based upon market, economic and other conditions as they existed on, and could be evaluated as of, the date of the opinion. Keefe Bruyette assumed, in all respects material to its analysis, that all of the representations and warranties contained in the merger agreement and all related agreements are true and correct, that each party to such agreements will perform all of the covenants required to be performed by such party under such agreements and that the conditions precedent in the merger agreement are not waived or modified. Keefe Bruyette also assumed, with Frontier’s consent, that there had been no material change in Frontier’s and SPAH’s assets, financial condition, results of operations, business or prospects since the date of the last financial statements made available to them, that Frontier and SPAH will remain as going concerns for all periods relevant to its analyses, and that the merger will qualify as a tax-free reorganization for federal income tax purposes. Keefe Bruyette expresses no opinion as to legal, regulatory, accounting and tax matters relating to the merger and the other transactions contemplated by the merger agreement.
In rendering its July 29, 2009 opinion, Keefe Bruyette performed a variety of financial analyses. The following is a summary of the material analyses performed by Keefe Bruyette, but is not a complete description of all the analyses underlying Keefe Bruyette’s opinion. The summary includes information presented in tabular format. In order to fully understand the financial analyses, these tables must be read together with the accompanying text. The tables alone do not constitute a complete description of the financial analyses. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. The process, therefore, is not necessarily susceptible to a partial analysis or summary description. Keefe Bruyette believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion. Also, no company included in Keefe Bruyette’s comparative analyses described below is identical to Frontier or SPAH and no transaction is identical to the merger. Accordingly, an analysis of comparable companies or transactions involves complex considerations and judgments concerning differences in financial and operating characteristics of the companies and other factors that could affect the public trading values or merger transaction values, as the case may be, of Frontier or SPAH and the companies to which they are being compared.
In performing its analyses, Keefe Bruyette also made numerous assumptions with respect to industry performance, business and economic conditions and various other matters, many of which cannot be predicted and are beyond the control of Frontier, SPAH and Keefe Bruyette. The analyses performed by Keefe Bruyette are not necessarily indicative of actual values or future results, which may be significantly more or less favorable than suggested by such analyses. Keefe Bruyette prepared its analyses solely for purposes of rendering its opinion and provided such analyses to the Frontier Board at the July 29, 2009 meeting. Accordingly, Keefe Bruyette’s analyses do not necessarily reflect the value of Frontier’s common stock or SPAH’s common stock or the prices at which Frontier’s or SPAH’s common stock may be sold at any time.

 

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Summary of Proposal. Keefe Bruyette reviewed the financial terms of the proposed transaction. SPAH is offering shareholders of Frontier common stock (other than shares to be excluded or cancelled) the right to receive .0530 shares of newly issued SPAH common stock and .0530 newly issued SPAH warrants (the exchange ratio_. Based upon the closing price of SPAH’s common stock on July 28, 2009 of $9.73, Keefe Bruyette calculated implied consideration of $.51569 per share of Frontier common stock.
Based upon financial information for Frontier for the twelve months ended June 30, 2009, Keefe Bruyette calculated the following ratios:
Transaction Ratios
         
Transaction price/last twelve months’ earnings per share
  NM x
Transaction price/mean First Call 2009 EPS estimates
  NM x
Transaction price/tangible book value per share
    9.04 %
Transaction price/stated book value per share
    9.02 %
Tangible book premium/core deposits (1)
    -8.9 %
Premium to market price (2)
    -42.06 %
     
(1)   Core deposits exclude time deposits with balances greater than $100,000.
 
(2)   Based on Frontier’s trailing 20 day average closing price of $.89 as of July 28, 2009.
For purposes of Keefe Bruyette’s analyses, earnings per share were based on fully diluted earnings per share. The aggregate transaction value was approximately $24.31 million, based upon 47,131,853 shares of Frontier common stock outstanding, including the intrinsic value of options to purchase an aggregate of 1,271,272 shares with a weighted average strike price of $16.73.
Comparable Company Analysis. Keefe Bruyette used publicly available information to compare selected financial and market trading information for Frontier and a group of financial institutions headquartered in the Pacific Northwest with total assets between $950 million and $12.5 billion selected by Keefe Bruyette, or the “Frontier Peer Group”. The Frontier Peer Group consisted of the following publicly traded financial institutions:
         
 
  Cascade Financial Corp.   Pacific Continental Corp.
 
  Columbia Bancorp*   Sterling Financial Corporation
 
  Heritage Financial Corp.*   Glacier Bancorp, Inc.
 
  Intermountain Community Bancorp*   PremierWest Bancorp*
 
  City Bank*   Umpqua Holdings Corporation
 
  West Coast Bancorp   Banner Corporation*
 
  Cascade Bancorp*   Columbia Banking System, Inc.
 
  AmericanWest Bancorporation*   Horizon Financial Corp.*
 
In the table above, * denotes financial data for the three months ended March 31, 2009.

 

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The analysis compared financial information for Frontier and the median data for the financial institutions in the Frontier Peer Group. The table below sets forth the comparative data as of and for the three months ending June 30, 2009, with pricing data as of July 28, 2009:
                 
            Frontier Peer  
            Group  
    Frontier     Median  
Total assets (in millions)
  $ 3,987     $ NM  
Tangible equity/tangible assets
    6.74 %     8.81 %
Tier 1 Risk Based Capital Ratio
    8.15 %     10.79 %
Total Risk Based Capital Ratio
    9.42 %     12.60 %
Return on average assets
    -4.91 %     -.95 %
Return on average tangible equity
    -75.6 %     -13.4 %
Net interest margin
    2.21 %     3.68 %
Efficiency ratio
    90.7 %     78.5 %
Transaction accounts/deposits
    12.5 %   NA %
Loan loss reserve/loans
    2.89 %     2.35 %
Texas Ratio
    222.9 %     100.4 %
Reserves / Non Performing Loans
    12.9 %     33.2 %
Nonperforming assets/Loans & OREO
    23.59 %     8.76 %
Price/tangible book value per share
    20.2 %     30.0 %
Price/LTM EPS
    -.28 x     33.2 x
Price/estimated 2009 EPS
  NM x   NA x
Price/estimated 2010 EPS
  NM x   NA x
Dividend yield
    0.00 %     0.00 %
Market capitalization (in millions)
  $ 54.2     $ NM  
The publicly obtained comparative data above illustrates that Frontier’s operating metrics are of a poorer quality when compared to its peers.
Stock Trading History. Keefe Bruyette reviewed the history of the reported trading prices and volume of Frontier’s common stock and the relationship between the movements in the prices of Frontier’s common stock to movements in certain stock indices, including the KBW Regional Banking Index and the NASDAQ Bank Index,. During the one-year period ended July 28, 2009, Frontier’s common stock underperformed each of the indices to which it was compared.
Frontier’s One-Year Stock Performance
         
    Ending Value  
    July 28, 2009  
Frontier
    -88.0 %
NASDAQ Bank Index
    -22.9 %
KBW Regional Banking Index
    -26.9 %

 

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Net Present Value Analysis. Keefe Bruyette also performed an analysis that estimated the present value of the projected future stream of after-tax net income of Frontier through 5 years of projected financials under various circumstances, assuming that Frontier performed in accordance with growth and operating assumptions and projections provided by Frontiers’ management. Financial data for the quarter ended June 30, 2009 was used to generate the projections. A stress test was applied to common equity to reflect a charge off scenario that would impact Frontier’s balance sheet and loan portfolio. A common equity raise of $250 million to $500 million was assumed in the projections to offset the stress scenario, newly raised common equity was risk weighted 100%.
Certain assumptions and performance targets were used throughout this analysis, they include but are not limited to:
    moderate balance sheet growth in years one and two with enhanced growth in years three through five
 
    year five target net interest margin of 4.75%
 
    year five target return on assets of 1.35%
 
    year five target efficiency ratio of 52%
 
    year five target tangible common equity ratio of 10%
 
    year five target total risk based capital of 15%
To approximate the terminal value of Frontier common stock after 5 years of projections, Keefe Bruyette applied price to earnings multiple of 15x in year 5 of its analysis. The income streams and terminal values were then discounted to present values using a discount rate of 12.5%. As illustrated in the following tables, this analysis indicated a range of net present values available to current shareholders.
Net Present Value to Current Shareholders Aggregate ($)
Offering Amount ($000’s)
                                                 
Issue Price $   $250,000     $300,000     $350,000     $400,000     $450,000     $500,000  
$0.15
  $ 16.75     $ 14.02     $ 12.06     $ 10.58     $ 9.42     $ 8.49  
$0.25
  $ 27.41     $ 23.01     $ 19.83     $ 17.42     $ 15.54     $ 14.02  
$0.35
  $ 37.69     $ 31.74     $ 27.41     $ 24.12     $ 21.53     $ 19.45  
$0.45
  $ 47.62     $ 40.21     $ 34.79     $ 30.66     $ 27.41     $ 24.78  
$0.55
  $ 57.21     $ 48.43     $ 41.99     $ 37.06     $ 33.17     $ 30.01  
$0.65
  $ 66.47     $ 56.42     $ 49.01     $ 43.32     $ 38.81     $ 35.16  
$0.75
  $ 75.43     $ 64.19     $ 55.86     $ 49.44     $ 44.35     $ 40.21  
$0.85
  $ 84.10     $ 71.74     $ 62.54     $ 55.43     $ 49.78     $ 45.17  
$0.95
  $ 92.49     $ 79.08     $ 69.06     $ 61.30     $ 55.11     $ 50.05  
Net Present Value to Current Shareholders Per Share ($)
Offering Amount ($000’s)
                                                 
Issue Price $   $250,000     $300,000     $350,000     $400,000     $450,000     $500,000  
$0.15
  $ 0.36     $ 0.30     $ 0.26     $ 0.22     $ 0.20     $ 0.18  
$0.25
  $ 0.58     $ 0.49     $ 0.42     $ 0.37     $ 0.33     $ 0.30  
$0.35
  $ 0.80     $ 0.67     $ 0.58     $ 0.51     $ 0.46     $ 0.41  
$0.45
  $ 1.01     $ 0.85     $ 0.74     $ 0.65     $ 0.58     $ 0.53  
$0.55
  $ 1.21     $ 1.03     $ 0.89     $ 0.79     $ 0.70     $ 0.64  
$0.65
  $ 1.41     $ 1.20     $ 1.04     $ 0.92     $ 0.82     $ 0.75  
$0.75
  $ 1.60     $ 1.36     $ 1.19     $ 1.05     $ 0.94     $ 0.85  
$0.85
  $ 1.78     $ 1.52     $ 1.33     $ 1.18     $ 1.06     $ 0.96  
$0.95
  $ 1.96     $ 1.68     $ 1.47     $ 1.30     $ 1.17     $ 1.06  

 

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Keefe Bruyette performed a sensitivity analysis which shows the effects of different capital infusion amounts on Frontier’s capital levels. The table below reflects the previously mentioned stress scenario and illustrates the effects of different capital infusion amounts on the tangible common equity, tier 1 and total risked based ratios.
Tang. Common Equity / Tang. Assets (%)
Offering Amount ($000’s)
                                                 
$250,000      
 
    $300,000       $350,000       $400,000       $450,000       $500,000  
6.35%      
 
    7.44 %     8.51 %     9.56 %     10.58 %     11.58 %
Tier 1 Risk Based Capital (%)
Offering Amount ($000’s)
                                                 
$250,000      
 
    $300,000       $350,000       $400,000       $450,000       $500,000  
7.64%      
 
    8.93 %     10.17 %     11.38 %     12.56 %     13.71 %
Total Risk Based Capital (%)
Offering Amount ($000’s)
                                                 
$250,000      
 
    $300,000       $350,000       $400,000       $450,000       $500,000  
8.89%      
 
    10.18 %     11.42 %     12.63 %     13.81 %     14.96 %
In connection with its analyses, Keefe Bruyette considered and discussed with the Frontier Board how the present value analyses would be affected by changes in the underlying assumptions, Keefe Bruyette noted that the net present value analysis is a widely used valuation methodology, but the results of such methodology are highly dependent upon the numerous assumptions that must be made, and the results thereof are not necessarily indicative of actual values or future results.
The actual results achieved by the combined company may vary from projected results and the variations may be material.
In connection with its analyses, Keefe Bruyette considered and discussed with the Frontier Board how the pro forma analyses would be affected by changes in the underlying assumptions, including variations with respect to the growth rate of earnings per share of each company. Keefe Bruyette noted that the actual results achieved by the combined company may vary from projected results and the variations may be material.
Frontier has agreed to pay Keefe Bruyette a fee of $500,000 in connection with the rendering of this opinion, all of which was paid upon Keefe Bruyette’s delivery of the opinion. Frontier has agreed to indemnify Keefe Bruyette and its affiliates and their respective partners, directors, officers, employees, agents, and controlling persons against certain expenses and liabilities, including liabilities under securities laws.

 

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Keefe Bruyette may provide investment banking services to SPAH, and receive compensation for, such services in the future, including during the period prior to the closing of the merger. In the ordinary course of its business as a broker-dealer, Keefe Bruyette may purchase securities from and sell securities to Frontier and SPAH and their respective affiliates and may actively trade the debt and/or equity securities of Frontier and SPAH and their respective affiliates for its own account and for the accounts of customers and, accordingly, may at any time hold a long or short position in such securities.
Certain Benefits of Directors and Officers of Frontier
When considering the recommendations of the Frontier Board, you should be aware that some directors and officers have interests in the merger proposal that differ from the interests of other shareholders. The Frontier Board is aware of those interests and considered them, among other matters, in approving the merger agreement and the transactions contemplated thereby, including the following:
    Stock Ownership. The directors, executive officers and principal shareholders of Frontier, together with their affiliates, beneficially owned, as of the record date for the special meeting, a total of [                    ] shares of Frontier common stock, including [______] shares of restricted stock that has or will be vested at the time of the merger, representing [_____]% of the total outstanding shares of Frontier common stock;
    Change of Control Agreements. Frontier is a party to change of control agreements with five of its current executive officers, John J. Dickson, Carol E. Wheeler, R. James Mathison, Robert W. Robinson and Lyle E. Ryan. These agreements generally provide that in the event of a termination of employment in connection with, or within 24 months after, a change of control, for reasons other than cause, the executive will receive a lump sum payment on the first day of the seventh month after the termination of his or her employment in an amount equal to two times the amount of his or her salary and bonus for the twelve months prior to the effective date of the change of control and will continue to be covered by applicable medical and dental plans for 24 months following termination of employment. In the event an executive, after attaining age 60, voluntarily retires within 12 months following a change of control, the executive will receive a lump sum payment equal to one times the amount of his or her salary and bonus, and will continue to be covered by applicable medical and dental plans for 12 months following termination of employment. If an executive receives a change of control payment under his or her agreement, the executive will be restricted by a noncompetition and nonsolicitation period of two years following termination of employment.

 

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In addition, the vesting of restricted stock awards granted under Frontier’s 2006 Stock Option Plan will accelerate upon the effective time of the merger.
    Insurance and Indemnification. SPAH has agreed to use reasonable best efforts to maintain Frontier’s existing policies of directors and officers liability insurance (or at SPAH’s option, obtain comparable coverage under its own insurance policies) for a period of six years after the merger with respect to claims arising from facts or events which occurred prior to the effective time of the merger, subject to a maximum premium limit of $1,150,000. SPAH has also agreed to continue to provide for the indemnification of the former and current directors, officers, employees and agents of Frontier for six years after the merger.
    Certain Employee Matters. The merger agreement contains certain agreements of the parties with respect to various employee matters. Following the effective time of the merger, SPAH will provide generally to the officers and employees of Frontier employee benefits under employee benefit and welfare plans, on terms and conditions which when taken as a whole are comparable to or better than those currently provided by Frontier to its similarly-situated employees. For purposes of determining eligibility to participate in the vesting of benefits and for all other purposes under the employee benefit plans post-merger, the service of the Frontier employees prior to the effective time of the merger will be treated as service with SPAH participating in such employee benefit plan.
    Stock Plans. Any Frontier shares issued with respect to any Frontier options exercised prior to closing, and restricted shares and stock awards, will be converted into the merger consideration. All Frontier stock option and other equity-based plans, agreements and awards, will be terminated upon closing, as provided in the plans. Frontier will notify the optionees and other employees of such termination prior to closing. Following the consummation of the merger, SPAH will adopt such stock option or other equity plans for officers and employees of Frontier as the SPAH Board of the combined company deems appropriate.
    Board. The SPAH Board following the merger will be comprised of Warren G. Lichtenstein, who will serve as Chairman of the SPAH Board, and four directors from Frontier, comprised of Patrick M. Fahey, [______], [______] and [______], each of whom currently serve on the Frontier Board. The Frontier Bank Board will consist of five (5) directors, comprised of SPAH’s designee, John McNamara, to serve as Chairman of the Board, and four (4) directors from Frontier, comprised of Patrick M. Fahey, [______], [______] and [______].
    Officers. Following the merger, Mr. Fahey will serve as the Chief Executive Officer of the combined company, and the other officers and employees of Frontier are expected to be retained in their current positions. Neither Mr. Fahey nor any other employee will have an employment contract with SPAH following the merger.
At and following the effective time of the merger, SPAH will assume and honor certain Frontier severance and change of control agreements that Frontier had with its officers and directors on July 24, 2009.

 

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Frontier Dissenters’ Rights
In accordance with Chapter 13 of the Washington Business Corporation Act (Chapter 23B.13 of the Revised Code of Washington, the “WBCA”), Frontier’s shareholders have the right to dissent from the merger and to receive payment in cash for the “fair value” of their Frontier common stock.
Frontier shareholders electing to exercise dissenters’ rights must comply with the provisions of Chapter 13 in order to perfect their rights. Frontier and SPAH will require strict compliance with the statutory procedures. The following is intended as a brief summary of the material provisions of the Washington statutory procedures required to be followed by a Frontier shareholder in order to dissent from the merger and perfect the shareholder’s dissenters’ rights. This summary, however, is not a complete statement of all applicable requirements and is qualified in its entirety by reference to Chapter 13 of the WBCA, the full text of which is set forth in Annex F.
A shareholder who wishes to assert dissenters’ rights must (i) deliver to Frontier before the vote is taken by Frontier shareholders notice of the shareholder’s intent to demand payment for the shareholder’s shares if the merger is effected, and (ii) not vote such shares in favor of the merger. A shareholder wishing to deliver such notice should hand deliver or mail such notice to Frontier at the following address within the requisite time period:
Frontier Financial Corporation
Attn: Corporate Secretary
332 S.W. Everett Mall Way
P.O. Box 2215
Everett, WA 98213
A shareholder who wishes to exercise dissenters’ rights generally must dissent with respect to all the shares the shareholder owns or over which the shareholder has power to direct the vote. However, if a record shareholder is a nominee for several beneficial shareholders some of whom wish to dissent and some of whom do not, then the record holder may dissent with respect to all the shares beneficially owned by any one person by delivering to Frontier a notice of the name and address of each person on whose behalf the record shareholder asserts dissenters’ rights. A beneficial shareholder may assert dissenters’ rights directly by submitting to Frontier the record shareholder’s written consent and by dissenting with respect to all the shares of which such shareholder is the beneficial shareholder or over which such shareholder has power to direct the vote.
A shareholder who does not deliver to Frontier prior to the vote being taken by Frontier shareholders a notice of the shareholder’s intent to demand payment for the “fair value” of the shares will lose the right to exercise dissenters’ rights. In addition, any shareholder electing to exercise dissenters’ rights must either vote against the merger agreement or abstain from voting. Submitting a properly signed proxy card that is received prior to the vote at the special meeting (and is not properly revoked) that does not direct how the shares of Frontier common stock represented by proxy are to be voted will constitute a vote in favor of the merger agreement and a waiver of such shareholder’s statutory dissenters’ rights.
If the merger is effected, SPAH as the surviving corporation shall, within ten days after the effective date of the merger, deliver a written notice to all shareholders who properly perfected their dissenters’ rights in accordance with Chapter 13 of the WBCA. Such notice will, among other things: (i) state where the payment demand must be sent and where and when certificates for certificated shares must be deposited; (ii) inform holders of uncertificated shares to what extent transfer of the shares will be restricted after the payment demand is received; (iii) supply a form for demanding payment that includes the date of the first announcement to news media or to shareholders of the terms of the proposed merger and requires that the person asserting dissenters’ rights certify whether or not the person acquired beneficial ownership of the shares before that date; (iv) set a date by which SPAH must receive the payment demand, which date will be between 30 and 60 days after notice is delivered; and (v) be accompanied by a copy of Chapter 23B.13 of the WBCA. A shareholder wishing to exercise dissenters’ rights must timely file the payment demand and deliver share certificates as required in the notice. Failure to do so will cause such person to lose his or her dissenters’ rights.
Within 30 days after the merger occurs or receipt of the payment demand, whichever is later, SPAH shall pay each dissenter with properly perfected dissenters’ rights SPAH’s estimate of the “fair value” of the shareholder’s interest, plus accrued interest from the effective date of the merger. The payment must be accompanied by: (i) the corporation’s latest annual and quarterly financial statements; (ii) an explanation of how SPAH estimated the fair value of the shares; (iii) an explanation of how the interest was calculated; (iv) a statement of the dissenter’s right to demand payment under Chapter 23B.13.280 of the WBCA; and (v) a copy of Chapter 23B.13 of the WBCA. With respect to a dissenter who did not beneficially own Frontier shares prior to the public announcement of the merger, SPAH is required to make the payment only after the dissenter has agreed to accept the payment in full satisfaction of the dissenter’s demands. “Fair value” means the value of the shares immediately before the effective date of the merger, excluding any appreciation or depreciation in anticipation of the merger unless such exclusion would be inequitable. The rate of interest is generally required to be the rate at which SPAH currently pays on its principal bank loans.

 

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A dissenter who is dissatisfied with SPAH’s estimate of the fair value or believes that interest due is incorrectly calculated may notify Frontier of the dissenters’ estimate of the fair value and amount of interest due. If SPAH does not accept the dissenters’ estimate and the parties do not otherwise settle on a fair value then SPAH must, within 60 days, petition a court to determine the fair value.
In view of the complexity of Chapter 13 of the WBCA and the requirement that shareholders must strictly comply with the provisions of Chapter 13 of the WBCA, shareholders of Frontier who may wish to dissent from the merger and pursue appraisal rights should consult their legal advisors.
The Co-Investment
In connection with the initial public offering, SP II previously agreed to purchase an aggregate of 3,000,000 co-investment units at $10.00 per unit ($30.0 million in the aggregate) in a private placement that will occur immediately prior to the consummation of the merger. Pursuant to a plan of reorganization, SP II has contributed certain assets to the Steel Trust, a liquidating trust established for the purpose of effecting the orderly liquidation of such assets. As a result, all of the founder’s shares and initial founder’s warrants owned by SP II have been transferred to the Steel Trust in a private transaction exempt from registration under the Securities Act. The Steel Trust has agreed to assume all of SP II’s rights and obligations with respect to the founder’s shares and initial founder’s warrants, as more fully described elsewhere in this joint proxy statement/prospectus, including the obligation to purchase the co-investment units. Since the agreement governing the co-investment and SPAH’s initial public offering prospectus disclosed that only SP II or SP Acq LLC may purchase the co-investment units, SPAH will need the prior written consent of the underwriters in its initial public offering to permit the Steel Trust to make the co-investment. SPAH anticipates receiving this consent prior to the closing of the merger. In addition, SPAH public stockholders may have a securities law claim against SPAH for rescission (under which a successful claimant has the right to receive the total amount paid for his or her securities pursuant to an allegedly deficient prospectus, plus interest and less any income earned on the securities, in exchange for surrender of the securities) or damages (compensation for loss on an investment caused by alleged material misrepresentations or omissions in the sale of a security), as described more fully under “The Merger and the Merger Agreement—Rescission Rights.”
The proceeds from the sale of the co-investment units will not be received by SPAH until immediately prior to the consummation of the merger. The proceeds from the sale of the co-investment units will provide SPAH with additional equity capital to fund the merger. If the merger is not consummated, the Steel Trust will not purchase the co-investment units and no proceeds will deposited into SPAH’s trust account or available for distribution to SPAH’s stockholders in the event of a liquidating distribution.
The units purchased in the co-investment will be identical to the units sold in SPAH’s initial public offering, after giving effect to the warrant amendment proposal, except that the warrants included therein will be non-redeemable so long as they are held by the Steel Trust or its permitted transferees. SP II previously agreed, subject to certain exceptions described below, not to sell or otherwise transfer any of its units, shares or warrants (including the common stock to be issued upon exercise of these warrants) purchased in the co-investment for a period of one year from the date of the consummation of the merger. The Steel Trust has agreed to be bound by these transfer restrictions. The Steel Trust will be permitted to transfer its units, shares or warrants (including the common stock to be issued upon exercise of these warrants) purchased in the co-investment to SPAH’s officers and directors, and other persons or entities associated or affiliated with SP II or Steel Partners, Ltd., but the transferees receiving such securities will be subject to the same agreement regarding transfer as SP II.
Upon the sale of the co-investment units and after taking into account the issuance of approximately 2.5 million shares as a result of the merger and the forfeiture of 9,453,412 shares, the SPAH insiders will collectively own approximately 8.7% of SPAH’s issued and outstanding shares of common stock, which could permit them to effectively influence the outcome of all matters requiring approval by SPAH’s stockholders at such time, including the election of directors and approval of significant corporate transactions, following the consummation of the merger.

 

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Stock Ownership of Existing SPAH and Frontier Stockholders After the Merger
Following the consummation of the merger, the SPAH insiders will beneficially own approximately 4,368,988 shares of SPAH common stock (after giving effect to the forfeiture of 9,453,412 founder’s shares by SP Acq LLC and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker and the co-investment) and will have, through the exercise of warrants, the right to acquire 20,822,400 additional shares of common stock (after giving effect to the co-investment), under certain circumstances.
The percentage of SPAH’s securities that existing SPAH and Frontier stockholders will own after the merger and the co-investment is completed will depend on whether (i) Frontier shareholders exercise dissenters’ rights, (ii) SPAH public stockholder exercise conversion rights, and (iii) any of SPAH’s 66,612,000 outstanding warrants (after reflecting the co-investment and merger) are exercised. The table below outlines the effect of these various scenarios on the percentage of SPAH’s voting interests that existing SPAH and Frontier stockholders will own after the merger and the co-investment is completed, based on the number of shares of each of SPAH and Frontier issued and outstanding as of the date of the merger agreement. Depending on the scenario, SPAH’s stockholders will own from 94.5% to 96.1% of SPAH’s securities after the merger and co-investment, and Frontier will own from 3.9% to 5.5% of SPAH’s securities after the merger and co-investment.
                                                 
                                    10% (minus        
                    10% of     None of     one share) of        
                    Frontier     SPAH Public     SPAH Public        
                    Shareholders     Stockholders     Stockholders     66,612,000  
Percent Ownership     Exercise     Conversion     Conversion     Warrants  
SPAH   Frontier           Dissenters’     Rights are     Rights are     are  
Stockholders   Shareholders     Total     Rights     Exercised     Exercised     Exercised  
    95.0%(1)
        5.0%       100.00%               X                  
95.7(2)
    4.3       100.00%               X               X  
94.5(3)
    5.5       100.00%                       X          
95.6(4)
    4.4       100.00%                       X       X  
95.5(5)
    4.5       100.00%       X       X                  
96.1(6)
    3.9       100.00%       X       X               X  
95.1(7)
    4.9       100.00%       X               X          
96.0(8)
    4.0       100.00%       X               X       X  
X — denotes that event occurred
 
 
     
(1)   In order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock, the Steel Trust has agreed to convert 2,063,806 shares of common stock into Non-Voting Common Stock upon consummation of the merger (including 1,687,500 shares acquired in connection with the co-investment), which will result in SPAH stockholders holding 94.8% of the voting interests in SPAH and Frontier’s shareholders holding 5.2% of the voting interests in SPAH.
 
(2)   In order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock, SP Acq LLC and the Steel Trust have agreed to receive Non-Voting Common Stock upon exercise of their initial founder’s warrants, additional founder’s warrants and co-investment warrants. Assuming all 66,612,000 warrants are exercised and SP Acq LLC and the Steel Trust do not transfer their securities to a non-affiliated entity, the Steel Trust will convert 2,063,806 shares of voting common stock into shares of Non-Voting Common Stock (including 1,687,500 shares acquired in connection with the co-investment) and SP Acq LLC and the Steel Trust will elect to receive 17,228,968 shares of Non-Voting Common Stock upon exercise of their warrants, which will result in SPAH stockholders holding 94.9% of the voting interests in SPAH and Frontier’s shareholders holding 5.1% of the voting interests in SPAH.

 

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(3)   In order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock, and if 10% (minus one share) of the SPAH public stockholders exercise their conversion rights, SP Acq LLC and the Steel Trust will convert 2,155,161 shares of voting common stock into shares of Non-Voting Common Stock (including 1,687,500 shares acquired in connection with the co-investment), which will result in SPAH stockholders holding 94.3% of the voting interests in SPAH and Frontier’s shareholders holding 5.7% of the voting interests in SPAH.
 
(4)   In order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock, and if 10% (minus one share) of the SPAH public stockholders exercise their conversion rights and all 66,612,000 warrants are exercised, the Steel Trust will convert 2,155,161 shares of voting common stock into shares of Non-Voting Common Stock (including 1,687,500 shares acquired in connection with the co-investment) and SP Acq LLC and the Steel Trust will elect to receive 17,364,973 shares of Non-Voting Common Stock upon exercise of their warrants, which will result in SPAH stockholders holding 94.6% of the voting interests in SPAH and Frontier’s shareholders holding 5.4% of the voting interests in SPAH.
 
(5)   In order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock, and if 10% of the Frontier shareholders exercise and perfect their dissenters’ rights, the Steel Trust has agreed to convert 2,063,806 shares of common stock into Non-Voting Common Stock upon consummation of the merger (including 1,687,500 shares acquired in connection with the co-investment), which will result in SPAH stockholders holding 95.3% of the voting interests in SPAH and Frontier’s shareholders holding 4.7% of the voting interests in SPAH.
 
(6)   In order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock, and if 10% of the Frontier shareholders exercise and perfect their dissenters’ rights, the Steel Trust will convert 2,063,806 shares of voting common stock into shares of Non-Voting Common Stock (including 1,687,500 shares acquired in connection with the co-investment) and SP Acq LLC and the Steel Trust will elect to receive 17,255,229 shares of Non-Voting Common Stock upon exercise of their warrants, which will result in SPAH stockholders holding 95.4% of the voting interests in SPAH and Frontier’s shareholders holding 4.6% of the voting interests in SPAH.
 
(7)   In order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock, and if 10% (minus one share) of the SPAH public stockholders exercise their conversion rights and 10% of the Frontier shareholders exercise and perfect their dissenters’ rights, SP Acq LLC and the Steel Trust will convert 2,168,291 shares of voting common stock into shares of Non-Voting Common Stock (including 1,687,500 shares acquired in connection with the co-investment), which will result in SPAH stockholders holding 94.8% of the voting interests in SPAH and Frontier’s shareholders holding 5.2% of the voting interests in SPAH.
 
(8)   In order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock, and if 10% (minus one share) of the SPAH public stockholders exercise their conversion rights and 10% of the Frontier shareholders exercise and perfect their dissenters’ rights and all 66,612,000 warrants are exercised, the Steel Trust will convert 2,168,291 shares of voting common stock into shares of Non-Voting Common Stock (including 1,687,500 shares acquired in connection with the co-investment) and SP Acq LLC and the Steel Trust will elect to receive 17,378,104 shares of Non-Voting Common Stock upon exercise of their warrants, which will result in SPAH stockholders holding 95.1% of the voting interests in SPAH and Frontier’s shareholders holding 4.9% of the voting interests in SPAH.
In addition, SPAH, the SPAH insiders, and/or certain of their respective affiliates may negotiate arrangements to provide for the purchase of shares from SPAH public stockholders who indicate their intention to vote against the merger and seek conversion or who otherwise wish to sell their shares. As a result, SPAH stockholders’ voting interests may be further increased or decreased accordingly in order for SP Acq LLC and the Steel Trust to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock.
At their discretion, SP Acq LLC and/or the Steel Trust will convert their shares into voting common stock in accordance with the SPAH Certificate of Incorporation, as amended by the Subsequent Charter Amendments and, upon a distribution of the shares by Steel Trust to its beneficiaries, such shares will also be converted into voting common stock in accordance with the SPAH Certificate of Incorporation, as amended by the Subsequent Charter Amendments.

 

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The SPAH Board After the Merger
Under the terms of the merger agreement, SPAH will recommend for stockholder approval the election to the SPAH Board of, Warren G. Lichtenstein and, if the merger is consummated, four directors from Frontier, comprised of Patrick M. Fahey, [______], [______] and [______], each of whom currently serve on the Frontier Board, in each case to serve until the next annual meeting of SPAH and until their successors shall have been elected and qualified. Upon the election of the Frontier nominees to the SPAH Board and, upon consummation of the merger, the SPAH Board will consist of five (5) members, with Mr. Lichtenstein serving as the Chairman of the Board.
The Frontier Bank Board After the Merger
Under the terms of the merger agreement, upon consummation of the merger, the Frontier Bank Board will consist of five (5) directors, comprised of SPAH’s designee, John McNamara, to serve as Chairman of the Board, and four (4) directors from Frontier, comprised of Patrick M. Fahey, [______], [______] and [______]. Set forth below are the principal occupations at present and for the past five years of each of the directors that will serve on the Frontier Bank Board following the consummation of the merger. For information relating to each of these directors, see “Proposals to be Considered by SPAH Stockholders—Proposal No. 4: The Election of Directors—About the Nominees.”
John McNamara, Managing Director and investment professional of Steel Partners LLC — Mr. McNamara has been associated with Steel Partners LLC, a global management firm, and its affiliates since May 2006. Mr. McNamara has served as a director of the Fox and Hound Restaurant Group, an owner and operator of entertainment restaurants, since April 2008, SL Industries, Inc., a designer and manufacturer of power electronics, power motion equipment, power protection equipment, and teleprotection and specialized communication equipment, since May 2008 and WHX Corporation, a holding company, since February 2008. Mr. McNamara has been the Chairman of the Board of WebBank, a wholly-owned subsidiary of Steel Partners Holdings L.P., since March 2009. He was Chief Executive Officer from June 2008 to December 2008 of the predecessor entity of Steel Partners Holdings L.P., a global diversified holding company that engages or has interests in a variety of operating businesses through its subsidiary companies. From 1995 until April 2006, Mr. McNamara served in various capacities at Imperial Capital, an investment banking firm, where his last position was Managing Director and Partner. As a member of Imperial Capital’s Corporate Finance Group, he provided advisory services for middle market companies in the areas of mergers and acquisitions, restructurings and financings. From 1988 to 1995, Mr. McNamara held various positions with Bay Banks, Inc., a commercial bank, where he served in lending and work-out capacities. Mr. McNamara graduated from Ithaca College with a B.S. in Economics.
For information relating to Patrick M. Fahey, see “Proposals to be Considered by SPAH Stockholders—Proposal No. 4: The Election of Directors—About the Nominees.”
Management and Operations After the Merger
Each of the current executive officers of SPAH will resign upon consummation of the merger, other than Warren G. Lichtenstein who will continue to serve as Chairman of the Board, although he will resign as President and Chief Executive Officer of SPAH. The existing management team of Frontier will manage the business of the combined company following the merger.
Patrick M. Fahey (Age 67), Chief Executive Officer of Frontier Mr. Fahey has over 40 years in the banking industry. He has been the Chairman of the Frontier Board, Chief Executive Officer of Frontier and the Chairman of the Frontier Bank Board since December 2008, and has been a director of Frontier and Frontier Bank since 2006. Prior to joining the Frontier Board in 2006, he was retired after leaving Wells Fargo Bank in 2004. From 2003 to 2004, Mr. Fahey was the Chairman of Regional Banking, Wells Fargo Bank. Prior to that, Mr. Fahey was the Chairman, President and Chief Executive Officer of Pacific Northwest Bank from 1988 to 2003. Mr. Fahey is a graduate of Seattle University, Pacific Coast Banking School, and the Management Program of the University Of Washington School Of Business.

 

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Michael J. Clementz, (Age 65), Chief Executive Officer of Frontier Bank, President of Frontier — Mr. Clementz has been in the banking industry for over 45 years. He joined Frontier in July 2000 through the merger of Liberty Bay Financial Corporation and North Sound Bank where he was founder, president, Chief Executive Officer and chairman. From 2003 until 2005, Mike served as President and Chief Executive Officer of Frontier and as President of Frontier Financial Properties from 2006 until December of 2008. He currently serves as President of Frontier and Chief Executive Officer of Frontier Bank. He is a past president of Washington Bankers Association.
John J. Dickson (Age 48), President of Frontier Bank — Mr. Dickson has been with Frontier since April 1985. He became president of Frontier Bank in December 2008 and was previously its Chief Executive Officer from May 2003 to November 2008. In addition he served as president and Chief Executive Officer of Frontier from January 2006 through November 2008. John spent most of his early tenure in the financial area of the bank, along with several years in credit administration and as a loan officer. He is a graduate of the University of Puget Sound (1982), earning a BA in business and economics. He earned his CPA designation and spent three years in the audit division of a large accounting firm. In 1994, John graduated with honors from the Bank Administration Institute (BAI) School for Bank Administration at the University of Wisconsin. He is past chairman of the Washington Bankers Association.
Carol E. Wheeler (Age 52), Chief Financial Officer and Secretary of Frontier — Ms. Wheeler has been with Frontier since 1978. She established its Audit Department (1983), and she served as senior vice president and internal auditor as the bank grew from $100 million to $2 billion, including the holding company and subsidiaries. A graduate of Northwest Intermediate Banking School (1985), Carol received her BAI EDP Audit Certificate (1991) and her Certified Trust Auditor (1995) from Cannon Financial Institution. She was appointed to her current position in May 2003.
Robert W. Robinson (Age 52), Executive Vice President and Chief Credit Officer of Frontier— Mr. Robinson has spent more than 28 years in the banking industry. He joined Frontier in July 2000 through the merger of Liberty Bay Financial Corporation. Rob was formerly the president and director of Liberty Bay Financial Corporation and North Sound Bank. A graduate of California State University (1981), he earned a BA in finance. Rob graduated from the University of Washington Pacific Coast Banking School (1994) and from Northwestern University Kellogg Graduate School of Management CEO Management Program (1999). He was appointed to his current position in July 2002.
Frontier Support Agreement
Each of the Frontier insiders has executed and delivered to SPAH a support agreement in connection with the execution of the merger agreement. In the support agreement, each individual agreed to vote the shares that he or she owns in favor of the merger and against any competing transactions that may arise. In addition, each individual agreed to not transfer such shares prior to the consummation of the merger as provided in the support agreement. A copy of the support agreement is attached as Exhibit C to the merger agreement which is attached hereto as Annex A hereto.
Frontier Lock-Up Agreements
Frontier will cause each of the Frontier insiders and each other person who Frontier reasonably believes may be deemed an “affiliate” of Frontier for purposes of Rule 145 under the Securities Act, to deliver to SPAH not later than 30 days prior to the effective time of the merger, a written agreement, in substantially the form of Exhibit D to the merger agreement, which is attached as Annex A hereto, providing that such person will not sell, pledge, transfer or otherwise dispose of the shares of SPAH common stock or warrants of SPAH for a one year period ending on the first anniversary of the consummation of the merger, except in compliance with applicable provisions of the Securities Act and the rules and regulations thereunder.

 

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Accounting Treatment of the Merger
The merger will be accounted for using the acquisition method of accounting, with SPAH being treated as the acquiring entity for accounting purposes pursuant to the provisions SFAS 141R. Pursuant to the requirements of SFAS 141R, SPAH is expected to be the acquirer for accounting purposes because SPAH is expected to own a majority interest upon consummation of the merger and the co-investment. Determination of control places emphasis on the stockholder group that retains the majority of voting rights in the combined entity. If the accounting acquirer cannot be determined based upon relative voting interests, other indicators of control are considered in the determination of the accounting acquirer, including: control of the combined entity’s board of directors, the existence of large organized minority groups, and senior management of the combined entity.
SFAS 141R requires, among other things, that most assets acquired and liabilities assumed be recognized at their fair values as of the merger date. In addition, SFAS No. 141R establishes that the consideration transferred include the fair value of any contingent consideration arrangements and any equity or assets exchanged are measured at the closing date of the merger at the then-current market price.
Regulatory Filings and Approvals Required to Complete the Merger
SPAH and Frontier have agreed to obtain all regulatory approvals required to consummate the transactions contemplated by the merger agreement, which include approval from the Federal Reserve and the Washington DFI, each as detailed below. The merger cannot proceed in the absence of these regulatory approvals. Any approval granted by these federal and state bank regulatory agencies may include terms and conditions more onerous than SPAH’s management contemplates, and approval may not be granted in the timeframes desired by SPAH and Frontier. Regulatory approvals, if granted, may contain terms that relate to deteriorating economic conditions both nationally and in Washington; bank regulatory supervisory reactions to the current economic difficulties may not be specific to Bank or SPAH. Although SPAH and Frontier expect to obtain the timely required regulatory approvals, there can be no assurance as to if or when these regulatory approvals will be obtained, or the terms and conditions on which the approvals may be granted.
As noted, the merger is subject to the prior approval of the Federal Reserve. SPAH filed an application with the Federal Reserve on August [_____], 2009. In evaluating the merger, the Federal Reserve is required to consider, among other factors, (1) the financial condition, managerial resources and future prospects of the institutions involved in the transaction; and (2) the convenience and needs of the communities to be served, and the record of performance under the CRA. The BHC Act, and Regulation Y prohibit the Federal Reserve from approving the merger if:
    it would result in a monopoly or be in furtherance of any combination or conspiracy to monopolize or attempt to monopolize the business of banking in any part of the United States; or
    its effect in any area of the country could be to substantially lessen competition or to tend to create a monopoly, or if it would result in a restraint of trade in any other manner, unless the Federal Reserve should find that any anti-competitive effects are outweighed clearly by the public interest and the probable effect of the merger in meeting the convenience and needs of the communities to be served.
The merger may not be consummated any earlier than the 15th day (or the 5th day if expedited processing is granted by the Federal Reserve) following the date of approval of SPAH’s bank holding company application by the Federal Reserve, during which time the United States Department of Justice is afforded the opportunity to challenge the merger on antitrust grounds. The commencement of any antitrust action would stay the effectiveness of the approval of the Federal Reserve, unless a court of competent jurisdiction were to specifically order otherwise.

 

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The merger also is subject to the prior approval of the Washington DFI. SPAH filed an application with the Washington DFI on August [_____], 2009. The Washington DFI may disapprove a change of control of a state bank within 60 days of the filing of a complete application (or for an extended period not exceeding an additional 15 days) if it determines that the transaction is not in the public interest and for other reasons specified under Washington law.
The Merger Agreement
The following summary of the material provisions of the merger agreement does not purport to describe all of the terms of the merger agreement. The following summary is qualified by reference to the complete text of the merger agreement, a copy of which is attached as Annex A to this joint proxy statement/prospectus and incorporated herein by reference. We urge you to read the full text of the merger agreement in its entirety for a more complete description of the terms and conditions of the merger.
Structure of the Merger
The merger agreement provides for the merger of Frontier with and into SPAH. SPAH will be the surviving corporation in the merger, change its name to Frontier Financial Corporation and be headquartered in Everett, Washington. Frontier Bank, a wholly owned subsidiary of Frontier, will become a wholly owned subsidiary of SPAH following the merger. Each share of Frontier common stock issued and outstanding at the effective time of the merger will be converted into 0.0530 shares of newly issued SPAH common stock and 0.0530 newly issued warrants of SPAH, having the same terms and conditions as the publicly traded SPAH warrants immediately prior to the effective time of the merger (as defined below), after giving effect to the warrant amendment proposal.
Following the merger, the surviving corporation will file a second amended and restated certificate of incorporation substantially in the form attached as Annex C to this joint proxy statement/prospectus, incorporating the Initial Charter Amendment and Subsequent Charter Amendments being considered by SPAH stockholders at the special meeting of stockholders, assuming they are adopted. In addition, the provisions of Article SIXTH will be removed from the SPAH Certificate of Incorporation to reflect that, pursuant to their terms, they are terminated automatically with no action required by the SPAH Board or the stockholders in the event an initial business combination, such as the merger with Frontier, is consummated.
Upon consummation of the merger with Frontier, the funds currently held in SPAH’s trust account, less (i) any amounts paid to stockholders who exercise their conversion rights, (ii) the deferred underwriting compensation and (iii) any funds used to purchase shares from SPAH public stockholders who intend to vote against the merger, and proceeds from the co-investment will be released to SPAH. SPAH intends to pay any additional expenses related to the merger and hold the remaining funds as capital pending use for general corporate and strategic purposes. Such purposes could include increasing the capital of Frontier Bank, future mergers and acquisitions, branch construction, asset purchases, payment of dividends, repurchases of shares of SPAH common stock and general corporate purposes. Until such capital is fully leveraged or deployed, SPAH may not be able to successfully deploy such capital and SPAH’s return on equity could be negatively impacted.

 

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Closing and Effective Time of the Merger
The merger and other transactions contemplated by the merger agreement shall become effective on the date and time stated in the Certificate of Merger reflecting the merger to be filed and become effective with the Secretary of State of the State of Delaware as provided in Section 252 of the DGCL and the Articles of Merger reflecting the merger to be filed and become effective with the Secretary of State of the State of Washington. The closing of the merger and other transactions contemplated by the merger agreement will take place at 9:00 A.M. Eastern Time on the date that the effective time occurs, or at such other time as the parties, acting through their authorized officers, may mutually agree.
Merger Consideration
If you are a Frontier shareholder, as a result of the merger, each share of Frontier common stock you own immediately prior to the completion of the merger will be automatically converted into the right to receive 0.0530 shares of newly issued SPAH common stock and 0.0530 newly issued warrants of SPAH, having the same terms and conditions as the publicly traded SPAH warrants immediately prior to the effective time of the merger, after giving effect to the warrant amendment proposal.
As of the record date for the Frontier special meeting, Frontier had [______] shares of common stock issued and outstanding. Based on the exchange ratio of 0.0530, SPAH would issue approximately 2.5 million shares of SPAH common stock and approximately 2.5 million newly issued warrants to purchase shares of SPAH common stock in consideration of the merger. Accordingly, SPAH would have then issued and outstanding approximately [______] shares of SPAH common stock based on the number of shares of SPAH common stock issued and outstanding on the record date for SPAH’s special meeting of stockholders (as adjusted to reflect the forfeiture of 9,453,412 founder’s shares by SP Acq LLC and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker) and [______] warrants based on the number of warrants of SPAH issued and outstanding on the record date for SPAH’s special meeting of warrantholders (as adjusted to reflect the co-investment). Based on the closing price of SPAH common stock and warrants of $[______] and $[______], respectively, on [______], 2009, the total value of the consideration SPAH will pay in the merger to the stockholders of Frontier is approximately $[______] million.
No assurance can be given that the current fair market value of SPAH common stock or warrants will be equivalent to the fair market value of SPAH common stock or warrants on the date that stock or warrants are received by a Frontier shareholder or at any other time. The fair market value of SPAH common stock or warrants received by a Frontier shareholder may be greater or less than the current fair market value of SPAH due to numerous market factors.
Fractional Shares
No fractional shares of SPAH common stock or warrants will be issued to any holder of Frontier common stock in the merger. If a holder of shares of Frontier common stock exchanged pursuant to the merger would be entitled to receive a fractional interest of a share of SPAH common stock or warrant, SPAH will round up or down the number of common stock or warrants of SPAH to be issued to the Frontier shareholder to the nearest whole number of shares of common stock or warrants.
Treatment of Stock Options, Stock Appreciation Rights and Restricted Stock
Upon completion of the merger, each award, option, or other right to purchase or acquire shares of Frontier common stock pursuant to stock options, stock appreciation rights, or stock awards granted by Frontier under Frontier’s stock incentive plans, equity compensation plans and stock option plans, which are outstanding immediately prior to the merger, whether or not vested, will be cancelled. Each outstanding share of Frontier restricted stock will vest at the time of the merger, and be converted into and become rights with respect to SPAH common stock.

 

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Exchange of Certificates
As soon as reasonably practicable after the effective time of the merger, SPAH shall cause the exchange agent selected by SPAH, which shall be an independent transfer agent or trust company, to mail appropriate transmittal materials to each record holder of Frontier common stock for use in effecting the surrender and cancellation of those certificates in exchange for SPAH common stock and SPAH warrants. Risk of loss and title to the certificates will remain with the holder until proper delivery of such certificates to SPAH by Frontier’s shareholders. After the effective time of the merger, each holder of shares of Frontier common stock, except holders exercising dissenters’ rights, issued and outstanding at the effective time must surrender the certificate or certificates representing their shares of Frontier common stock to SPAH and will, as soon as reasonably practicable after surrender, receive the consideration they are entitled to under the merger agreement (without interest). SPAH will not be obligated to deliver the consideration to which any former holder of Frontier common stock is entitled until the holder surrenders the certificate or certificates representing his or her shares for exchange. The certificate or certificates so surrendered must be duly endorsed as the exchange agent may require. SPAH, the exchange agent or Frontier or any subsidiary of Frontier will not be liable to a holder of Frontier common stock for any property delivered in good faith to a public official pursuant to any applicable abandoned property, escheat or similar law.
After the effective time of the merger (and prior to the surrender of certificates of Frontier common stock to SPAH), record holders of certificates that represented outstanding Frontier common stock immediately prior to the effective time of the merger will have no rights with respect to the certificates for Frontier common stock other than the right to surrender the certificates and receive the merger consideration in exchange for the certificates.
Each of SPAH and the exchange agent will be entitled to deduct and withhold from the consideration otherwise payable pursuant to the merger agreement to any holder of shares of Frontier common stock such amounts, if any, as it is required to deduct and withhold with respect to the making of such payment under the Code or any provision of state, local or foreign tax law or by any taxing authority or governmental authority.
SPAH stockholders will not be required to exchange certificates representing their shares of SPAH common stock or otherwise take any action after the merger is completed.
Representations and Warranties
The merger agreement contains a number of representations and warranties that each of Frontier and SPAH have made to each other. These representations and warranties relate to the following:
    Organization, Standing and Power;
 
    Authority; No Breach By the Agreement;
 
    Capital Stock;
 
    Subsidiaries;
 
    Exchange Act Filings; Securities Offerings; Financial Statements;
 
    Absence of Undisclosed Liabilities;
 
    Absence of Certain Changes or Events;
 
    Tax Matters;
 
    Assets;
 
    Intellectual Property;
 
    Environmental Matters;
 
    Compliance with Laws;
 
    Labor Relations;

 

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    Employee Benefit Plans;
 
    Material Contracts;
 
    Properties and Leases;
 
    Legal Proceedings;
 
    Reports;
 
    Books and Records;
 
    Independence of Directors;
 
    Tax and Regulatory Matters; Consents;
 
    Brokers and Finders;
 
    Board Recommendation; and
 
    Statements True and Correct.
The merger agreement contains additional representations and warranties of Frontier relating to the following:
    Allowance for Possible Loan Losses; Loan and Investment Portfolio, etc.;
    Privacy of Customer Information;
    Loans to Executive Officers, Directors and Principal Shareholders;
    Fiduciary Activities;
    State Takeover Laws;
    Stockholders’ Support Agreements;
    Opinion of Financial Advisor;
    No Participation In TARP; and
    Approvals;
The merger agreement contains additional representations and warranties of SPAH relating to the following:
    Loans to Executive Officers and Directors;
    SPAH Trust Fund; and
    Prior Business Operations.
Conduct of Business Pending Consummation of the Merger
Under the merger agreement, each of SPAH and Frontier has agreed, except as otherwise contemplated by the merger agreement or with the prior consent of the other party, and to cause its subsidiaries to:
    operate its business only in the usual, regular, and ordinary course;
    use reasonable efforts to preserve intact its business organization and assets and maintain its rights and franchises;
    use reasonable efforts to cause its representations and warranties to be correct at all times

 

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    use reasonable efforts to provide all information requested by a party related to loans or other transactions made by the other party with a value equal to or exceeding $1,000,000;
    consult with the other party prior to entering into or making any loans or other transactions with a value equal to or exceeding $1,000,000; and
    take no action which would (1) adversely affect the ability of any party to obtain any consents required for the transactions contemplated by the merger agreement without imposition of a condition or restriction which, in the reasonable judgment of the SPAH Board or Frontier Board, would so materially adversely impact the economic or business benefits of the transactions contemplated by the merger agreement as to render inadvisable the consummation of the merger, or (2) materially adversely affect the ability of either party to perform its covenants and agreements under the merger agreement.
In addition, each of SPAH and Frontier has agreed in the merger agreement not to take certain actions or agree or commit to take certain actions, or permit its subsidiaries to take or agree or commit to take certain actions pending consummation of the merger without the prior consent of the other party and except as otherwise expressly contemplated by the merger agreement. Such actions include, without limitation:
    except as contemplated by the merger agreement, amending its certificate of incorporation, articles of incorporation, bylaws, or other governing corporate instruments;
    in the case of Frontier only, modifying Frontier Bank’s lending policy;
    incurring any obligation for borrowed money in excess of an aggregate of $1,000,000, except in the ordinary course of business consistent with past practices and that are prepayable without penalty, charge or other payment, or imposing or suffering the imposition of any lien on any asset or permit a lien to exist, with certain limited exceptions;
    repurchasing, redeeming or otherwise acquiring or exchanging (other than exchanges in the ordinary course under employee benefit plans) any shares, or securities convertible into any shares, of the capital stock of SPAH or Frontier or any Frontier subsidiary or declaring or paying any dividend or making any other distribution in respect of either party’s common stock;
    subject to certain limited exceptions, issuing, selling, or pledging, encumbering, authorizing the issuance of, entering into any contract to issue, sell, pledge, encumber, or authorize the issuance of, or otherwise permit to become outstanding any additional shares of SPAH or Frontier common stock, any capital stock of any of Frontier’s subsidiaries or any rights to acquire any such shares;
    adjusting, splitting, combining or reclassifying any SPAH or Frontier capital stock or the capital stock of any Frontier subsidiary, or issuing or authorizing the issuance of any other securities in respect of, or in substitution for, shares of SPAH or Frontier common stock, or selling, leasing, mortgaging or otherwise disposing of, in the case of Frontier only, any shares of capital stock of any subsidiary, and, in the case of either SPAH or Frontier, any asset, other than in the ordinary course for reasonable and adequate consideration;
    purchasing any securities or making any material investments in any person or otherwise acquiring direct or indirect control over any person, except in the ordinary course of business consistent with past practice, subject to certain limited exceptions;
    granting any bonus or increase in compensation or benefits to the employees, officers or directors of SPAH or Frontier or any Frontier subsidiary (subject to certain limited exceptions), committing or agreeing to pay any severance or termination pay, or any stay or other bonus to any SPAH or Frontier director, officer or employee, as applicable, entering into or amending any severance agreements with officers, employees, directors, independent contractors or agents of SPAH or any Frontier subsidiary, changing any fees or other compensation or other benefits to directors of SPAH or Frontier or any Frontier subsidiary, or waiving any stock repurchase rights, accelerating, amending or changing the period of exercisability of any rights or restricted stock, as applicable, or in the case of Frontier, repricing rights granted under its stock incentive plans, equity compensation plans and stock option plans or authorizing cash payments in exchange for any rights, or accelerating or vesting or committing or agreeing to accelerate or vest any amounts, benefits or rights payable by SPAH or Frontier or any Frontier subsidiary;

 

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    entering into or amending (unless required by law) any employment contract that does not give SPAH, Frontier or the Frontier subsidiary the unconditional right to terminate the agreement following the effective time of the merger without liability other than for services already rendered;
    entering into any severance or change of control agreements or arrangements, or deferred compensation agreements or arrangements between SPAH, Frontier or the Frontier subsidiary and any person;
    subject to certain limited exceptions relating to requirements of law and maintaining tax qualified status, adopting any new employee benefit plan or terminating or withdrawing from or materially changing any existing employee benefit plans, welfare plans, insurance, stock or other plans, or making any distributions from such employee benefit or welfare plans, except as required by law, the terms of such plans or consistent with past practice;
    making any change in any tax or accounting methods or systems of internal accounting controls, except, without the review and consent of the other party, as may be appropriate and necessary to conform to changes in tax laws, regulatory accounting requirements or generally accepted accounting principles or file any amended tax return, enter into any closing agreement, settle any tax claim or assessment relating to SPAH or Frontier or any Frontier subsidiary, as applicable, surrender any right to claim a refund of taxes, consent to any extension or waiver of the limitation period applicable to any tax claim or assessment relating to SPAH or Frontier and any Frontier subsidiary, as applicable, or take any other similar action relating to the filing of any tax return or the payment of any tax;
    commencing any litigation other than in accordance with past practice (including collection and foreclosure by Frontier on defaulted loans) or settling any litigation involving any liability in excess of $500,000 individually or $1,000,000 in the aggregate for money damages or restrictions on the operations of SPAH or Frontier or any Frontier subsidiary;
    entering into, modifying, amending, or terminating any material contract (including any loan contract with respect to any extension of credit with an unpaid balance exceeding $1,000,000) or waiving, releasing, compromising or assigning any material rights or claims, or, in the case of Frontier, making any adverse changes in the mix, rates, terms, or maturities of Frontier Bank’s deposits and other liabilities; or
    taking any action or failing to take any action that at the time of such action or inaction is reasonably likely to prevent, or would be reasonably likely to materially interfere with, the consummation of the merger.
Additional Agreements
The merger agreement also contains additional agreements of the parties, including the following, among others:
    No Claims against SPAH Trust Fund. Frontier agrees that it does not have any claim to, or have the right to make any claim against the trust fund established for the benefit of the SPAH public stockholders for any monies that may be owed to it by SPAH;
    Registration Statement; Joint Proxy Statement. Each of SPAH and Frontier will cooperate in the preparation of any filings to be made with the SEC by either party. SPAH and Frontier will prepare, and SPAH shall file with the SEC, a registration statement on Form S-4, of which this joint proxy statement/prospectus forms a part, which shall include a prospectus for the issuance of shares of SPAH common stock and warrants in the merger, a proxy statement of SPAH for use in connection with the solicitation of proxies for the SPAH stockholders’ meeting, a proxy statement of Frontier for use in connection with the solicitation of proxies for the Frontier shareholders’ meeting, and a proxy statement of SPAH for use in connection with the solicitation of proxies for the SPAH warrantholders’ meeting. Each of SPAH and Frontier has agreed to use its commercially reasonable efforts to cause the registration statement to be filed within ten (10) business days of the date of the merger agreement, have the registration statement declared effective by the SEC as promptly as reasonably practicable after such filing with the SEC and have agreed to fully cooperate with the other party hereto and its respective representatives in the preparation of this joint proxy statement/prospectus. As soon as reasonably practicable after this joint proxy statement/prospectus is declared effective by the SEC, SPAH and Frontier shall cause this joint proxy statement/prospectus to be mailed to their respective stockholders;

 

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    Other Offers. The merger agreement provides that neither SPAH or Frontier nor any of their respective affiliates and representatives will solicit any acquisition proposal (generally, a tender offer or proposal for a merger, asset acquisition or other business combination which would compete with the merger). SPAH and Frontier have also agreed not to and not to permit their respective affiliates and representatives to furnish any confidential information, negotiate, or enter into any contract, with respect to any acquisition proposal. However, the merger agreement also provides that either party may furnish nonpublic information regarding itself and may enter into a confidentiality agreement or discussions or negotiations in response to a bona fide unsolicited written acquisition proposal if: (i) such party has not violated any of the restrictions against soliciting acquisition proposals; (ii) its board of directors, in its good faith judgment believes (based on, among other things, the advice of its financial advisor) that such acquisition proposal constitutes a superior proposal; (iii) its board of directors concludes in good faith, after consultation with and receipt of a written opinion from its outside legal counsel, that the failure to take such action would be inconsistent with its fiduciary duties, to its stockholders; (iv) (1) at least five business days prior to furnishing any such nonpublic information to, or entering into discussions or negotiations, the party gives the other party written notice of such party’s intention to furnish nonpublic information to, or enter into discussions or negotiations and the identity of such prospective purchaser, and (2) such party receives from such prospective purchaser an executed confidentiality agreement containing terms no less favorable to the disclosing party than the confidentiality terms of the merger agreement; and (v) contemporaneously with furnishing any such nonpublic information, such party furnishes such nonpublic information to the other party (to the extent such nonpublic information has not been previously furnished by such party). In addition, each of SPAH and Frontier have agreed to provide the other party with at least five business days’ prior written notice of a meeting of its board of directors at which meeting such board of directors is reasonably expected to resolve to recommend the acquisition proposal to its stockholders and together with such notice, a copy of the most recently proposed documentation or revisions relating to the acquisition proposal;
    Consents of Regulatory Authorities. SPAH and Frontier have agreed to cooperate with each other and use commercially reasonable efforts to promptly prepare and file all necessary documentation and applications, to effect all applications, notices, petitions and filings, and to obtain as promptly as practicable all consents of all regulatory authorities and other persons which are necessary or advisable to consummate the merger and the transactions contemplated by the merger agreement;
    Agreement as to Efforts to Consummate. SPAH and Frontier have each agreed to use commercially reasonable efforts to take such actions as are necessary, proper or advisable to consummate the merger;
    Investigation and Confidentiality. The protection of confidential information of the parties and, subject to the confidentiality requirements, the provision of reasonable access to information. SPAH and Frontier agree to keep each other advised of all material developments relevant to its business and the consummation of the merger;
    Employee Benefits and Contracts. Following the effective time, SPAH shall provide generally to officers and employees of Frontier or Frontier’s subsidiary, employee benefits under employee benefit and welfare plans (other than stock option or other plans involving the potential issuance of SPAH Common Stock) on terms and conditions which when taken as a whole are comparable to or better than those then provided by Frontier or Frontier’s subsidiary to their similarly situated officers and employees. In addition, following the effective time, SPAH will adopt such stock option or other equity plans for officers and employees of Frontier or Frontier’s subsidiary as the SPAH Board (post-merger) deems appropriate. Following the effective time, SPAH will assume and honor certain Frontier severance and change of control agreements; and

 

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    Indemnification. The merger agreement provides that, for a period of six years following the effective time of the merger, SPAH will indemnify the officers, directors, employees and agents of Frontier with respect to all acts or omissions by them in their capacities as such at or prior to the effective time to the fullest extent permitted by law (including with respect to advancement of expenses and whether or not SPAH is insured against any such matter). The merger agreement further requires the combined company to, for a period of six years following the effective time of the merger, use commercially reasonable efforts to maintain coverage under Frontier’s existing officers’ and directors’ liability insurance policy (or a substitute policy with coverage and amounts no less favorable than those Frontier maintained for its directors prior to the merger under the existing Frontier officers’ and directors’ liability insurance policy), provided, that neither Frontier nor SPAH will be obligated to make aggregate premium payments longer than six years in respect of such policy (or coverage replacing such policy) and which exceed, for the portion related to Frontier’s directors and officers, 400% of the annual premium payments on Frontier’s current policy.
Conditions to the Closing of the Merger
The obligations of SPAH and Frontier to consummate the merger are subject to the satisfaction or waiver (to the extent permitted) of several conditions, including:
    The Initial Charter Amendment and the Subsequent Charter Amendments must have been approved by SPAH stockholders;
    Holders of two-thirds of the outstanding shares of Frontier must have approved the merger proposal and both (1) holders of a majority of the outstanding shares of SPAH common stock entitled to vote at the special meeting and (2) a majority of the shares of common stock voted by the SPAH public stockholders are voted, in person or by proxy, in favor of the merger, and the SPAH public stockholders owning 10% or more of the shares sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights;
    The warrant amendment proposal must have been approved by SPAH warrantholders;
    The required regulatory approvals described under “— Regulatory Approvals” must have been received, generally without any conditions or requirements;
    Each party must have received all consents required for consummation of the merger and for the prevention of a default under any contract or permit of such party which, if not obtained or made, is reasonably likely to have, individually or in the aggregate, a material adverse effect on such party;
    No court or governmental authority may have taken any action which prohibits, restricts, or makes illegal the consummation of the transactions contemplated by the merger agreement;
    The shares of SPAH common stock to be issued as consideration in the merger will have been approved for listing on the NYSE AMEX or the Nasdaq Global Market, subject to official notice of issuance;
    The registration statement shall have become effective under the Securities Act and no stop order suspending the effectiveness of the registration statement shall have been issued and no proceedings for that purpose shall have been initiated or threatened by the SEC;
    The representations and warranties of SPAH and Frontier in the merger agreement must be true and correct, without any qualifications, subject to an exception generally for inaccuracies with an aggregate effect not likely to have a material adverse effect on the applicable party, and the other party must have performed all of the agreements and covenants to be performed by it pursuant to the merger agreement, and must have delivered certificates confirming satisfaction of the foregoing requirements and certain other matters;

 

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    Each Frontier insider will have executed and delivered to SPAH a support agreement as described above. Each of Frontier insider and each other person whom Frontier reasonably believes may be deemed an “affiliate” of Frontier for purposes of Rule 145 under the Securities Act will have executed and delivered to SPAH the lock-up agreements as described above;
    SPAH will have received from Continental Stock Transfer & Trust Company a duly executed Warrant Amendment Agreement;
    There must not have been since the date of the merger agreement any material changes in the members of the Frontier Board or Frontier management;
    Each party will have received certain legal opinions and tax opinions from its outside counsel and Frontier will have received an opinion as to the fairness from a financial point of view of the merger consideration to its shareholders;
    Each of (i) FDIC Order, (ii) the FRB Written Agreement, and (iii) the Memorandum of Understanding, will have been modified in a manner reasonably acceptable to SPAH, including by the elimination of certain provisions and consequences related thereto;
    Holders of no more than 10% of the outstanding shares of Frontier common stock entitled to vote on the merger will have exercised their dissenters’ rights;
    SP Acq LLC will have forfeited 8,987,883 of its founder’s shares and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker will have forfeited 465,529 of its founder’s shares;
    SPAH will have taken all necessary action to allow the distribution of all the assets in the trust account to SPAH in the merger at the effective time of the merger;
    There must not have been since the date of the merger agreement and the effective time, occurred or be threatened, no event related to or involving Frontier/or its subsidiaries which is reasonably likely, individually or in the aggregate to have an a material adverse effect; and
    Frontier shall have received the required third-party consents.
Termination
Notwithstanding the approval of the merger proposal by SPAH and Frontier stockholders, we can mutually agree at any time to terminate the merger agreement at any time prior to the effective time:
    By mutual written agreement of SPAH and Frontier;
    By either party if the other party is in breach of any of its representations, warranties or covenants under the merger agreement which cannot be or has not been cured within 5 days after the giving of written notice by the non-breaching party to the breaching party of such breach;
    By either party in the event (i) any consent of any regulatory authority required for consummation of the merger and the other transactions contemplated hereby shall have been denied by final nonappealable action of such authority or if any action taken by such authority is not appealed within the time limit for appeal, (ii) any law or order permanently restraining, enjoining or otherwise prohibiting the consummation of the merger shall have become final and nonappealable, (iii) the stockholders of SPAH or Frontier fail to vote their approval of the matters relating to the merger agreement and the transactions contemplated thereby at SPAH’s special meeting of stockholders or Frontier’s special meeting of shareholders, respectively, where such matters were presented to such stockholders for approval and voted upon, or (iv) if applicable, holders of 10% or more of the shares sold in or subsequent to SPAH’s initial public offering vote against the merger and elect to exercise their conversion rights;

 

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    By either party in the event that the merger shall not have been consummated by December 31, 2009;
    By either party if the other party’s board of directors fails to reaffirm its approval upon the other party’s request for such reaffirmation of the merger or if such other party’s board of directors resolves not to reaffirm the merger;
    By either party if the other party’s board of directors fails to include in the joint proxy statement/prospectus its recommendation, without modification or qualification, that the stockholders approve the merger or if the party’s board of directors withdraws, qualifies, modifies, proposes publicly to withdraw, qualify, or modify, in a manner adverse to the other party, the recommendation that the stockholders approve the merger;
    By either party if the other party’s board of directors affirms, recommends, or authorizes entering into any acquisition transaction other than the merger or, within 10 business days after commencement of any tender or exchange offer for any shares of its common stock, the other party’s board of directors fails to recommend against acceptance of such tender or exchange offer or takes no position with respect to such tender or exchange offer;
    By either party if the other party’s board of directors negotiates or authorizes the conduct of negotiations (and five business days have elapsed without such negotiations being discontinued) with a third party regarding an acquisition proposal other than the merger; or
    By either party if the party terminating is not in material breach of any representation, warranty, or covenant, or other agreement in the merger agreement, and prior to the adoption of the merger proposal by the stockholders, the other party’s board of directors has (1) withdrawn or modified or changed its recommendation of approval of the merger agreement in a manner adverse to the terminating party in order to approve and permit the other party to accept a superior proposal and (2) determined, after consultation with, and the receipt of advice from outside legal counsel to the other party, that the failure to take such action as described in the preceding clause (1) would be likely to result in a breach of the board of directors’ fiduciary duties under applicable law, provided, however, that at least five business days prior to any such termination, the terminating party shall, and shall cause its advisors to, negotiate with the other party, if such party elects to do so, to make such adjustments in the terms and conditions of the merger agreement as would enable the other party to proceed with the merger on the adjusted terms.
Expenses and Termination Fees
The merger agreement provides that, subject to certain exceptions, each party will be responsible for its own direct costs and expenses incurred in connection with the transactions contemplated by the merger agreement.
The merger agreement provides that if:
    (i) SPAH terminates the merger agreement due to a breach by Frontier, (ii) either party terminates due to the failure of Frontier to obtain stockholder approval, (iii) either party terminates due to the failure to consummate the merger by December 31, 2009, and, in the case of a termination under clause (ii) or (iii) above, (x) there has been publicly announced and not withdrawn another acquisition proposal relating to Frontier or (y) Frontier has failed to perform and comply in all material respects with any of its obligations, agreements or covenants required by the merger agreement, and within 12 months of such termination Frontier either (A) consummates an acquisition transaction (other than the merger with SPAH) or (B) enters into a definitive agreement with respect to an acquisition transaction (other than the merger with SPAH), whether or not such acquisition transaction is subsequently consummated (but changing, in the case of (A) and (B), the references to 5% and 90% amounts in the definition of, acquisition transaction in the merger agreement, to 50% and 80%, respectively); or

 

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    SPAH terminates the merger agreement (i) due to the failure of the Frontier Board to reaffirm its approval upon SPAH’s request for such reaffirmation of the merger or if the Frontier Board resolves not to reaffirm the merger, (ii) due to the failure of the Frontier Board to include in the joint proxy statement/prospectus its recommendation, without modification or qualification, that the Frontier stockholders approve the merger or if the Frontier Board withdraws, qualifies, modifies, proposes publicly to withdraw, qualify, or modify, in a manner adverse to SPAH, the recommendation that the Frontier stockholders approve the merger, (iii) if the Frontier Board affirms, recommends, or authorizes entering into any acquisition transaction other than the merger or, within 10 business days after commencement of any tender or exchange offer for any shares of Frontier common stock, the Frontier Board fails to recommend against acceptance of such tender or exchange offer or takes no position with respect to such tender or exchange offer; or (iv) if the Frontier Board negotiates or authorizes the conduct of negotiations (and five business days have elapsed without such negotiations being discontinued) with a third party regarding an acquisition proposal other than the merger;
then, Frontier shall pay to SPAH, an amount equal to $2,500,000.
Amendments and Waivers
The merger agreement may be amended by a subsequent writing signed by each of the parties upon the approval of each of SPAH and Frontier, whether before or after stockholder approval of the merger agreement has been obtained; provided that after any such approval by the holders of Frontier common stock, there shall be made no amendment that reduces or modifies in any respect the consideration to be received by holders of Frontier common stock.
Prior to or at the effective time of the merger, either SPAH or Frontier may waive any default in the performance of any term of the merger agreement by the other party, may waive or extend the time for the fulfillment by the other party of any of its obligations under the merger agreement, and may waive any of the conditions precedent to the obligations of such party under the merger agreement, except any condition that, if not satisfied, would result in the violation of an applicable law.
On August 10, 2009, SPAH and Frontier entered into Amendment No. 1 to Agreement and Plan of Merger. The Amendment reduced the number of Directors who will serve on the Board of Directors of each of SPAH and Frontier Bank from seven (7) to five (5) and also changed the composition of the Board of Directors of each of SPAH and Frontier Bank.

 

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THE SPECIAL MEETING OF SPAH STOCKHOLDERS
General
The SPAH Board is providing this joint proxy statement/prospectus to you in connection with its solicitation of proxies for use at the special meeting of SPAH’s stockholders and at any adjournments or postponements of the special meeting.
Your vote is important. Please complete, date and sign the accompanying proxy card and return it in the enclosed, postage prepaid envelope. If your shares are held in “street name,” you should instruct your broker how to vote by following the directions provided by your broker.
Meeting Date, Time, and Place and Record Date
SPAH will hold the special meeting on [______], [______], 2009 at [______]:00 [______].m., local time, at [______]. Only holders of SPAH common stock of record at the close of business on [______], 2009, the SPAH record date, will be entitled to receive notice of and to vote at the special meeting. As of the record date, there were 54,112,000 shares of SPAH common stock outstanding and entitled to vote, with each such share entitled to one vote.
Matters to Be Considered
At the special meeting, SPAH’s stockholders will be asked:
  1.   To consider and vote upon a proposal to amend the SPAH Certificate of Amendment to amend the definition of “initial business combination” to eliminate the requirement that the fair market value of the target business equal at least 80% of the balance of SPAH’s trust account (excluding underwriting discounts and commissions) plus the proceeds of the co-investment, to be effective immediately prior to the consummation of the merger;
  2.   To consider and vote upon a proposal to adopt the merger agreement pursuant to which Frontier will merge with and into SPAH and each share of Frontier common stock will be converted into the right to receive 0.0530 newly issued shares of SPAH common stock and 0.0530 newly issued warrants to purchase common stock, subject to possible adjustment, as further described in more detail in this joint proxy statement/prospectus;
  3.   To consider and vote upon a proposal to amend the SPAH Certificate of Amendment to (i) change SPAH’s corporate name to “Frontier Financial Corporation,” (ii) permit SPAH’s continued existence after October 10, 2009, and (iii) create a new class of common stock of SPAH (Non-Voting Common Stock) which will have economic rights but no voting rights, in each case effective upon consummation of the merger; and
  4.   To consider and vote upon the election to the SPAH Board of, Warren G. Lichtenstein, who will serve as Chairman of the Board, and, if the merger is consummated, four directors from Frontier, comprised of Patrick M. Fahey, [______], [______] and [______], each of whom currently serve on the Frontier Board, in each case to serve until the next annual meeting of SPAH and until their successors shall have been elected and qualified.
If the requisite approval is received, the Initial Charter Amendment will be filed with the Delaware Secretary of State immediately upon its approval and prior to the stockholders’ consideration of the merger proposal at the special meeting of stockholders. Accordingly, the merger proposal will only be presented for a vote at the special meeting if (i) the Initial Charter Amendment is approved by SPAH stockholders and (ii) the warrant agreement proposal is approved at the special meeting of SPAH warrantholders to be held immediately prior to this special meeting of stockholders. The Subsequent Charter Amendments and the election of the Frontier nominees will only be effected in the event and at the time the merger with Frontier is consummated, although approval of the Subsequent Charter Amendments is a condition to closing the merger. The election of Mr. Lichtenstein does not require the approval of any other proposals to be effective. SPAH may transact such other business as may properly come before the special meeting or any adjournment thereof.

 

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Each copy of this joint proxy statement/prospectus mailed to SPAH stockholders is accompanied by a proxy card for use at the special meeting.
Vote Required
Amendments to SPAH Certificate of Incorporation. Adoption of the amendments to the SPAH Certificate of Incorporation requires the affirmative vote of a majority of the shares of SPAH’s outstanding common stock entitled to vote at the special meeting.
Merger Agreement. Adoption of the merger agreement requires the affirmative vote of the holders of a majority of the outstanding shares of SPAH common stock entitled to vote at the special meeting. The SPAH Certificate of Incorporation also requires that a majority of the shares of common stock voted by the SPAH public stockholders are voted, in person or by proxy, in favor of the merger and the SPAH public stockholders owning no more than 30% of the shares (minus one share) sold in SPAH’s initial public offering vote against the merger and thereafter exercise their conversion rights. Notwithstanding the foregoing, it is a condition to closing the merger agreement that holders of no more than 10% of the shares (minus one share) sold in SPAH’s initial public offering vote against the merger and exercise their conversion rights, although at SPAH’s discretion, this closing condition may be waived in order to consummate the merger. Accordingly, SPAH may not consummate the merger if 10% or more of the holders of shares sold in or subsequent to SPAH’s initial public offering elect to exercise their conversion rights. If SPAH elects to waive this closing condition, it may raise the conversion threshold to anywhere between 10% to 30% (minus one share). You cannot seek conversion unless you affirmatively vote against the merger proposal.
Election of Directors. Directors will be elected by a plurality of the votes cast by stockholders present in person or represented by proxy and entitled to vote at the special meeting.
On the record date, there were 54,112,000 outstanding shares of SPAH common stock, each of which is entitled to one vote at the special meeting. On the record date, the SPAH insiders beneficially owned a total of approximately 20% of the outstanding shares of SPAH common stock. The SPAH insiders have agreed to vote all of their founder’s shares either for or against the merger proposal consistent with the majority of the votes cast on the merger by the SPAH public stockholders. To the extent any SPAH insider has acquired shares of SPAH common stock in, or subsequent to, SPAH’s initial public offering, such insider has agreed to vote these acquired shares in favor of the merger proposal. As of the date hereof, none of the SPAH insiders own any shares sold in, or subsequent to, the SPAH initial public offering. The SPAH insiders have further indicated that they will vote their shares in favor of the adoption of the amendments to the SPAH Certificate of Incorporation and for the election of each of the director nominees to the SPAH Board. While the founder’s shares voted by the SPAH insiders will count towards the voting and quorum requirements under Delaware law, they will not count towards the voting requirement under the SPAH Certificate of Incorporation because the founder’s shares were not issued in SPAH’s initial public offering. As described elsewhere in this joint proxy statement/prospectus, pursuant to a plan of reorganization, SP II has contributed certain assets, including its shares of SPAH common stock and warrants, to the Steel Trust. The trust has agreed to assume all of SP II’s rights and obligations with respect to these shares and warrants, including to vote in accordance with the foregoing.
Upon consummation of the merger, SP Acq LLC has agreed to forfeit 8,987,883 of the 9,653,412 founder’s shares it owns and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker have agreed to forfeit an aggregate of 465,529 of the 500,000 founder’s shares they own.
Voting
Stockholders may vote their shares:
    by attending the special meeting and voting their shares in person, or
    by completing the enclosed proxy card, signing and dating it and mailing it in the enclosed post-prepaid envelope.

 

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Stockholders who have their shares in “street name”, meaning the name of a broker or other nominee who is the record holder, must either direct the record holder of their shares to vote their shares or obtain a proxy from the record holder to vote their shares at the special meeting.
Quorum
The presence in person or representation by proxy, of shares of SPAH common stock representing a majority of SPAH outstanding shares entitled to vote at the special meeting is necessary in order for there to be a quorum at the special meeting. A quorum must be present in order for the vote on the merger agreement, the amendments to the SPAH Certificate of Incorporation and the nominees for director. If there is no quorum present at the opening of the meeting, the special meeting may be adjourned by the vote of a majority of the shares of SPAH common stock, present in person or represented by proxy and entitled to vote at the special meeting.
Voting of Proxies
Shares of common stock represented by properly executed proxies received at or prior to the special meeting will be voted at the special meeting in the manner specified by the holders of such shares. If you are a stockholder of record (that is, you hold stock certificates registered in your own name), you may vote by following the instructions described on your proxy card. If your shares are held in nominee or “street name,” you will receive separate voting instructions from your broker or nominee with your proxy materials. If you hold your shares in “street name,” you can either obtain physical delivery of the shares directly into your name, and then vote your shares yourself, or request a “legal proxy” directly from your broker and bring it to the special meeting, and then vote your shares yourself. In order to obtain shares directly into your name, you must contact your brokerage house representative. Brokerage firms may assess a fee for your conversion; the amount of such fee varies.
Properly executed proxies that do not contain voting instructions will be voted “FOR” the approval of the merger agreement, “FOR” the approval of the amendments to the SPAH Certificate of Incorporation and “FOR” the election of directors to the SPAH Board.
Shares of any stockholder present in person or represented by proxy (including broker non-votes, which generally occur when a broker who holds shares in street name for a customer does not have the authority to vote on certain non-routine matters because its customer has not provided any voting instructions with respect to the matter) at the special meeting who abstains from voting will be counted for purposes of determining whether a quorum exists.
Abstaining from voting (including by way of a broker non-vote), either in person or by proxy, will have the same effect as a vote against the adoption of the merger agreement and adoption of the amendments to the SPAH Certificate of Incorporation, but will have no effect on the vote relating to the election of directors. An abstention will not be considered a vote against the merger proposal, and, if you abstain, you will be unable to exercise any conversion rights. Accordingly, the SPAH Board urges its stockholders to complete, date and sign the accompanying proxy card and return it promptly in the enclosed, postage-paid envelope.
Revocability of Proxies
The grant of a proxy on the enclosed proxy card does not preclude you from voting in person or otherwise revoking your proxy. If you are a stockholder of record, there are a number of ways you can change your vote. First, you may send a written notice to the person to whom you submitted your proxy stating that you would like to revoke your proxy. Second, you may complete and submit a later dated proxy with new voting instructions. Third, you may attend the special meeting and vote in person. The latest vote actually received by SPAH prior to or at the special meeting will be your vote. Any earlier votes will be revoked. Simply attending the special meeting without voting, however, will not revoke your proxy.

 

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If you have instructed a broker to vote your shares, you must follow the directions you will receive from your broker to change or revoke your proxy.
Solicitation of Proxies
SPAH will pay all of the costs of filing the registration statement with the SEC (of which this joint proxy statement/prospectus is a part) and of soliciting proxies in connection with the special meeting of stockholders as well as the special meeting of warrantholders. SPAH will also pay the costs associated with printing the copies of this joint proxy statement/prospectus that are sent to SPAH stockholders and the mailing fees associated with mailing this joint proxy statement/prospectus to SPAH stockholders. Solicitation of proxies may be made in person or by mail, telephone, or other electronic means, or other form of communication by directors, officers, and stockholders of SPAH who will not be specially compensated for such solicitation. In addition, SPAH has engaged [______] as its proxy solicitation firm. Such firm will be paid its customary fee of approximately $[______] plus solicitation and out of pocket expenses. Banks, brokers, nominees, fiduciaries, and other custodians will be requested to forward solicitation materials to beneficial owners and to secure their voting instructions, if necessary, and will be reimbursed for the expenses incurred in sending proxy materials to beneficial owners.
SPAH, Frontier and their respective directors and executive officers, may be deemed to be participants in the solicitation of proxies. The underwriters of SPAH’s initial public offering may provide assistance to SPAH, Frontier and their respective directors and executive officers, and may be deemed to be participants in the solicitation of proxies. Approximately $17.3 million of the underwriters’ fees relating to SPAH’s initial public offering were deferred pending stockholder approval of SPAH’s initial business combination, and stockholders are advised that the underwriters have a financial interest in the successful outcome of the proxy solicitation. SPAH is in negotiation with its underwriters regarding the amount and form of payment of such deferred underwriting fees from SPAH’s initial public offering. The results of these negotiations are uncertain and could result in $17,316,000 in additional costs for the proforma company which could be paid in cash.
No person is authorized to give any information or to make any representation not contained in this joint proxy statement/prospectus and, if given or made, such information or representation should not be relied upon as having been authorized by SPAH, Frontier, or any other person. The delivery of this joint proxy statement/prospectus does not, under any circumstances, create any implication that there has been no change in the business or affairs of SPAH or Frontier since the date of this joint proxy statement/prospectus.
Conversion Rights of SPAH Stockholders
Pursuant to the SPAH Certificate of Incorporation, if you hold shares of common stock issued in SPAH’s initial public offering (whether such shares were acquired pursuant to such initial public offering or afterwards up to and until the record date), then you have the right to vote against the merger proposal and demand that SPAH convert such shares into cash equal to a pro rata share of the aggregate amount then on deposit in the trust account in which a substantial portion of the net proceeds of SPAH’s initial public offering are held (before payment of deferred underwriting discounts and commissions and including interest earned on their pro rata portion of the trust account, net of income taxes payable on such interest and net of interest income of $3.5 million on the trust account balance previously released to SPAH to fund its working capital requirements). If demand is properly made immediately prior to the merger, shares will cease to be outstanding and will represent only the right to receive a pro-rata portion of the trust account plus interest.
As of [______], 2009, there was $[______] in SPAH’s trust account, including accrued interest on the funds in the trust account, or approximately $[______] per share issued in the initial public offering. The actual per share conversion price will differ from the $[______] per share due to any interest earned on the funds in the trust account since [______], 2009, and any taxes payable in respect of interest earned thereon. The actual per share conversion price will be calculated as of two business days prior to the consummation of the merger, divided by the number of shares sold in the initial public offering.
You may request conversion at any time after the mailing of this joint proxy statement/prospectus and prior to the vote taken with respect to the merger proposal at the special meeting, but the request will not be granted unless you vote against the merger and the merger is approved and completed. If the merger is not consummated, no shares will be converted to cash through the exercise of conversion rights. Prior to exercising your conversion rights you should verify the market price of SPAH common stock. You may receive higher proceeds from the sale of your common stock in the public market than from exercising your conversion rights, if the market price per share is higher than the amount of cash that you would receive upon exercise of your conversion rights.

 

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If you wish to exercise your conversion rights, you must:
    affirmatively vote against the merger proposal in person or by submitting your proxy card before the vote on the merger proposal and checking the box that states “Against” for proposal number 1;
    either:
    check the box that states “Exercise Conversion Rights” on the proxy card; or
    send a letter to SPAH’s transfer agent, Continental Stock Transfer & Trust Company, at 17 Battery Place, 8th Floor, New York, NY 10004, attn: Mark Zimkind, stating that you are exercising your conversion rights and demanding your shares of SPAH common stock be converted into cash; and
    either:
    physically tender, or if you hold your shares of SPAH common stock in “street name,” cause your broker to physically tender, your stock certificates representing shares of SPAH common stock to SPAH’s transfer agent; or
    deliver your shares electronically using the Depository Trust Company’s DWAC (Deposit/Withdrawal At Custodian) System, to SPAH’s transfer agent by [______], 2009.
The DWAC delivery process can be accomplished, whether you are a record holder or your shares are held in “street name,” within a day, by simply contacting the transfer agent or your broker and requesting delivery of your shares through the DWAC System. There is a nominal cost associated with this tendering process and the act of certificating the shares or delivering them through the DWAC system. The transfer agent will typically charge the stockholder or the tendering broker $35, and your broker may or may not pass this cost on to you.
Taking any action that does not include an affirmative vote against the merger, including abstaining from voting on the merger proposal, will prevent you from exercising your conversion rights. However, voting against the merger proposal does not obligate you to exercise your conversion rights. In addition, if you do not properly exercise your conversion rights (as outlined above), you will not be able to convert your shares of common stock into cash at the conversion price.
Any request to exercise your conversion rights, once made, may be withdrawn at any time up to immediately prior to the vote on the merger proposal at the special meeting (or any adjournment or postponement thereof). If you (1) initially vote for the merger proposal but then wish to vote against it and exercise your conversion rights or (2) initially vote against the merger proposal and wish to exercise your conversion rights but do not check the box on the proxy card providing for the exercise of your conversion rights or do not send a written request to SPAH’s transfer agent to exercise your conversion rights, or (3) initially vote against the merger proposal but later wish to vote for it, you may request SPAH’s transfer agent to send you another proxy card on which you may indicate your intended vote and, if that vote is against the merger proposal, exercise your conversion rights by checking the box provided for such purpose on the proxy card. You may make such request by contacting Continental Stock Transfer & Trust Company at 17 Battery Place, 8th Floor, New York, NY 10004, attn: Mark Zimkind. Any corrected or changed proxy card or written demand of conversion rights must be received by Continental Stock Transfer & Trust Company prior to the special meeting.
Please note, however, that once the vote on the merger proposal is held at the special meeting, you may not withdraw your request to exercise your conversion rights and request the return of your shares. If the merger is not consummated, your shares will be automatically returned to you.

 

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In connection with the vote to approve the merger, SPAH stockholders may elect to vote a portion of their shares for and a portion of their shares against the merger. If the merger is approved and consummated, SPAH stockholders who elected to convert the portion of their shares voted against the merger will receive the conversion price with respect to those shares and may retain any other shares they own.
If you properly exercise your conversion rights, then you will be exchanging your shares of SPAH common stock for cash equal to a pro rata portion of the SPAH trust account and will no longer own these shares. SPAH anticipates that the funds to be distributed to SPAH stockholders entitled to convert their shares who elect conversion will be distributed promptly after completion of the merger.
The SPAH Certificate of Incorporation requires that no more than 30% (minus one share) of the SPAH public stockholders vote against the merger and thereafter exercise their conversion rights. Notwithstanding the foregoing, it is a condition to closing the merger agreement that no more than 10% of the SPAH public stockholders vote against the merger and exercise their conversion rights, although at SPAH’s discretion, this closing condition may be waived in order to consummate the merger. Accordingly, SPAH may not consummate the merger if 10% or more of the holders of shares sold in or subsequent to SPAH’s initial public offering elect to exercise their conversion rights. If SPAH elects to waive this closing condition, it may raise the conversion threshold to anywhere between 10% to 30% (minus one share). If the merger is not consummated and SPAH does not consummate a business combination by October 10, 2009, SPAH will be required to dissolve and liquidate and SPAH public stockholders voting against the merger proposal who elected to exercise their conversion rights would not be entitled to convert their shares. However, all SPAH public stockholders would be entitled to participate in pro-rata liquidation distributions from SPAH’s trust account with respect to their shares.
Submission of SPAH Stockholders Proposals
The SPAH Bylaws provide that nominations of persons for election to the SPAH Board may be made at any annual meeting of stockholders, or at any special meeting of stockholders called for the purpose of electing directors, by any stockholder of SPAH who is a stockholder of record on the date notice of the meeting is given and on the record date for the determination of stockholders entitled to vote at such meeting and who complies with the notice procedures set forth in the SPAH Bylaws. To be timely, a stockholder’s notice to SPAH’s Secretary must be delivered to or mailed and received at the principal executive offices of SPAH (a) in the case of an annual meeting, not later than the close of business on the ninetieth (90th) day, nor earlier than the close of business on the one hundred twentieth (120th) day, prior to the date of the anniversary of the previous year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the annual meeting is scheduled to be held on a date more than thirty (30) days prior to or delayed by more than sixty (60) days after such anniversary date, notice by the stockholder in order to be timely must be received not later than the later of the close of business ninety (90) days prior to the annual meeting or the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made and (b) in the case of a special meeting of stockholders called for the purpose of electing directors, not later than the close of business on the tenth (10th) day following the day on which notice of the date of the special meeting was mailed or public disclosure of the date of the special meeting was made, whichever occurs first.
The SPAH Bylaws also require that for business to be properly brought before an annual meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to SPAH’s Secretary. To be timely, a stockholder’s notice to the Secretary must be delivered to or mailed and received at SPAH’s principal executive offices not later than the close of business on the ninetieth (90th) day, nor earlier than the close of business on the one hundred twentieth (120th) day, prior to the date of the anniversary of the previous year’s annual meeting; provided, however, that in the event that no annual meeting was held in the previous year or the annual meeting is scheduled to be held on a date more than thirty (30) days prior to or delayed by more than sixty (60) days after such anniversary date, notice by the stockholder in order to be timely must be so received not later than the later of the close of business ninety (90) days prior to the annual meeting or the tenth (10th) day following the day on which such notice of the date of the annual meeting was mailed or such public disclosure of the date of the annual meeting was made.

 

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Recommendation of the SPAH Board
The SPAH Board has unanimously determined that the proposals and the transactions contemplated thereby are in the best interests of SPAH and its stockholders. The members of the SPAH Board unanimously recommend that the SPAH stockholders vote at the special meeting to adopt the merger agreement, adopt the amendments to the SPAH Certificate of Incorporation and elect all of the director nominees to the SPAH Board.
SPAH’s stockholders should note that SPAH’s directors and officers have certain interests in, and may derive benefits as a result of, the merger that are in addition to their interests as stockholders of SPAH. See “The Merger and the Merger Agreement — Interests of SPAH’s Directors and Officers and Others in the Merger.”

 

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PROPOSALS TO BE CONSIDERED BY SPAH STOCKHOLDERS
Proposal No. 1: Initial Charter Amendment
SPAH is proposing to amend the SPAH Certificate of Incorporation to revise the definition of an “initial business combination” and to eliminate the requirement that the fair market value of the target business equal at least 80% of the balance of SPAH’s trust account (excluding underwriting discounts and commissions) plus the proceeds of the co-investment. An “initial business combination” is defined in the SPAH Certificate of Incorporation as follows:
An “Initial Business Combination” shall mean the acquisition by the Corporation, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination or transaction or transactions, of one or more businesses or assets (the “Target Business” or “Target Businesses”) having, individually or collectively, a fair market value equal to at least 80% of sum of the balance in the Trust Account (excluding deferred underwriting discounts and commissions of $16,000,000 or $18,400,000 if the underwriters’ over-allotment option is exercised in full) plus the proceeds of the co-investment of $30,000,000 by the Steel Trust at the time of such acquisition and resulting in ownership by the Corporation of at least 51% of the voting equity interests of the Target Business or Businesses and control by the Corporation of the majority of any governing body of the Target Business or Businesses. Any acquisition of multiple Target Businesses shall occur simultaneously.
“Fair market value” for purposes of this Article Sixth shall be determined by the Board of Directors of the Corporation based upon financial standards generally accepted by the financial community, such as actual and potential gross margins, the values of comparable businesses, earnings and cash flow, and book value. If the Corporation’s Board of Directors is not able to determine independently that the Target Business or Businesses has a sufficient fair market value to meet the threshold criterion, it will obtain an opinion in that regard from an unaffiliated, independent investment banking firm that is a member of the National Association of Securities Dealers, Inc. The Corporation is not required to obtain an opinion from an investment banking firm as to the fair market value of the Target Business or Businesses if its Board of Directors independently determines that the Target Business or Businesses have sufficient fair market value to meet the threshold criterion.”
Because the fair market value of Frontier on the date of the transaction is less than 80% of the balance of the trust account (excluding underwriting discounts and commissions) plus the proceeds of the co-investment, the proposed transaction does not meet the requirements as set forth above. Accordingly, SPAH must amend the SPAH Certificate of Incorporation immediately prior to the presentation of the merger proposal.
The SPAH Certificate of Incorporation purports to prohibit amendment to certain of its provisions, including the definition of an initial business combination, prior to consummation of an initial business combination, without the unanimous consent of the holders of all of SPAH’s outstanding shares of common stock. The prospectus issued by SPAH in its initial public offering stated that SPAH had been advised that such provision limiting its ability to amend the SPAH Certificate of Incorporation without unanimous consent may not be enforceable under Delaware law. SPAH believes that the proposed merger is an extremely attractive opportunity in the current market environment and therefore, SPAH public stockholders should be given the opportunity to consider the business combination. In considering the Initial Charter Amendment, the SPAH Board came to the conclusion that the potential benefits of the proposed merger with Frontier to SPAH and its stockholders outweighed the possibility of any liability described below as a result of this amendment being approved. SPAH is offering holders of up to 10% (minus one share) sold in SPAH’s initial public offering, the ability to affirmatively vote such shares against the merger proposal and demand that such shares be converted into a pro rata portion of the trust account. Accordingly, SPAH believes that the Initial Charter Amendment is consistent with the spirit in which SPAH offered its securities to the public.
SPAH has also received an opinion from special Delaware counsel, Morris James LLP concerning the validity of the Initial Charter Amendment. SPAH did not request Morris James LLP to opine on whether the clause currently contained in Article Sixth of the SPAH Certificate of Incorporation prohibiting amendment of Article Sixth prior to consummation of an initial business combination without the unanimous consent of stockholders was valid when adopted and does not intend on seeking advice of counsel on that question from any other source. Morris James LLP concluded in its opinion, based upon the analysis set forth therein and its examination of Delaware law, and subject to the assumptions, qualifications, limitations and exceptions set forth in its opinion, that “the Amendment, if duly adopted by the Board of Directors of the Corporation and duly approved by the holders of a majority of the outstanding shares of capital stock of the Corporation in accordance with the General Corporation Law, would be valid under the General Corporation Law.” A copy of Morris James LLP’s opinion is included as Annex F to this joint proxy statement/prospectus, and stockholders are urged to review it in its entirety.

 

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Because the SPAH Certificate of Incorporation in its current form does not allow for SPAH to complete the proposed merger, each SPAH public stockholder at the time of the merger who purchased his or her shares in the initial public offering or afterwards up to and until the record date and who did not have the ability to convert his or her shares into cash in the event that holders of 10% or more, but less than 30% (minus one share), of shares sold in SPAH’s initial public offering elected to exercise their conversion rights, and the merger was not consummated, may have securities law claims against SPAH for rescission (under which a successful claimant has the right to receive the total amount paid for his or her securities pursuant to an allegedly deficient prospectus, plus interest and less any income earned on the securities, in exchange for surrender of the securities) or damages (compensation for loss on an investment caused by alleged material misrepresentations or omissions in the sale of a security).
Such claims may entitle stockholders asserting them to up to $10.00 per share, based on the initial offering price of the units sold in SPAH’s initial public offering, each comprised of one share of common stock and a warrant to purchase an additional share of common stock, less any amount received from the sale or fair market value of the original warrants purchased as part of the units, plus interest from the date of SPAH’s initial public offering. In the case of SPAH public stockholders, this amount may be more than the pro rata share of the trust account to which they are entitled upon exercise of their conversion rights or liquidation of SPAH.
In general, a person who contends that he or she purchased a security pursuant to a prospectus which contains a material misstatement or omission must make a claim for rescission within the applicable statute of limitations period, which, for claims made under Section 12 of the Securities Act and some state statutes, is one year from the time the claimant discovered or reasonably should have discovered the facts giving rise to the claim, but not more than three years from the occurrence of the event giving rise to the claim. A successful claimant for damages under federal or state law could be awarded an amount to compensate for the decrease in value of his or her shares caused by the alleged violation (including, possibly, punitive damages), together with interest, while retaining the shares. Claims under the anti-fraud provisions of the federal securities laws must generally be brought within two years of discovery, but not more than five years after occurrence. Rescission and damages claims would not necessarily be finally adjudicated by the time the merger is completed, and such claims would not be extinguished by consummation of that transaction.
Even if you do not pursue such claims, others, who may include all other SPAH public stockholders, may do so. Neither SPAH nor Frontier can predict whether stockholders will bring such claims or whether such claims would be successful.
The approval of the Initial Charter Amendment requires the affirmative vote of the holders of a majority of the outstanding shares of SPAH common stock on the record date.
If the Initial Charter Amendment is approved, SPAH will present the other proposals to stockholders and warrantholders for their approval. If all of such proposals are approved, the following will occur:
    SPAH will file a certificate of amendment to the SPAH Certificate of Incorporation, substantially in the form attached as Annex B, with the Secretary of State of the State of Delaware to amend the second paragraph of Article Sixth to revise the definition of a “initial business combination” as set forth below, and to delete all references to “fair market value”:
“An “Initial Business Combination” shall mean the acquisition by the Corporation, through a merger, capital stock exchange, asset acquisition, stock purchase, reorganization or other similar business combination or transaction or transactions, of one or more businesses or assets (the “Target Business” or “Target Businesses”), resulting in ownership by the Corporation of more than 50% of the voting equity interests of the Target Business or Businesses and control by the Corporation of the majority of any governing body of the Target Business or Businesses. Any acquisition of multiple Target Businesses shall occur simultaneously.”

 

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    Immediately after the filing of such certificate of amendment, SPAH will be authorized to complete the proposed merger. Thereafter, SPAH will look to satisfy all necessary conditions to closing the merger.
    Once all conditions to closing the transaction are satisfied, SPAH will file all necessary documents with the Secretary of State of the State of Delaware to effectuate the merger.
If the Initial Charter Amendment is not approved, the remaining proposals will not be submitted to stockholders and warrantholders for their approval.
Vote Required
Adoption of the Initial Charter Amendment requires the affirmative vote of a majority of the shares of SPAH common stock entitled to vote at the special meeting. Abstaining from voting, not voting on a proposal, or failing to instruct your broker how to vote your shares, will have the same effect as a vote against adoption of the Initial Charter Amendment.
Board Recommendation
THE SPAH BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ADOPTION OF THE INITIAL CHARTER AMENDMENT.
Proposal No. 2: The Merger Agreement
As discussed elsewhere in this joint proxy statement/prospectus, SPAH stockholders are considering and voting to adopt the merger agreement. SPAH stockholders should read carefully this joint proxy statement/prospectus in its entirety for more detailed information concerning the merger agreement and the merger. In particular, SPAH stockholders are directed to the merger agreement which is attached as Annex A to this joint proxy statement/prospectus.
THE SPAH BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ADOPTION OF THE MERGER AGREEMENT.
Proposal No. 3: The Subsequent Charter Amendments
Name Change Amendment
If the merger agreement is approved and adopted by SPAH stockholders, SPAH is proposing to amend Article FIRST of the SPAH Certificate of Incorporation to change SPAH’s corporate name from “SP Acquisition Holdings, Inc.” to “Frontier Financial Corporation.” The reason for this amendment is that, in the event of a merger with Frontier, SPAH’s current name will not accurately reflect its business operations. Accordingly, the SPAH Board believes that changing its name to “Frontier Financial Corporation” in connection with the merger will better reflect its business operations upon completion of the merger.
Existing SPAH stockholders will not be required to exchange outstanding stock certificates for new stock certificates if the amendment is adopted.
Continued Existence Amendment
If the merger agreement is approved and adopted by SPAH stockholders, SPAH is proposing to amend Article FOURTH of the SPAH Certificate of Incorporation to permit SPAH’s continued corporate existence after October 10, 2009. Pursuant to the SPAH Certificate of Incorporation, SPAH must submit a proposal to amend the SPAH Certificate of Incorporation to permit SPAH’s continued corporate existence at the same time SPAH submits a proposal to stockholders to approve an initial business combination. In addition, continued existence is the usual period of existence for most corporations.

 

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New Class of Non-Voting Common Stock Amendment
If the merger agreement is approved and adopted by SPAH stockholders, SPAH is proposing to amend Article FIFTH of the SPAH Certificate of Incorporation to create a new class of common stock, the Non-Voting Common Stock, that may be issued to stockholders and/or warrantholders, following the consummation of the merger, so that a stockholder or warrantholder, in its election, may, for example, remain below the ownership threshold which would subject them to regulation as a bank holding company as described below.
The terms of the Non-Voting Common Stock are identical to the terms of SPAH’s voting common stock except that the Non-Voting Common Stock have no voting rights and holders of such Non-Voting Common Stock may convert their shares into an equal number of shares of voting common stock, if such conversion is in connection with (i) a transfer that is part of an underwritten public offering of voting common stock, (ii) a transfer that is part of a private placement of voting common stock in which no one party acquires the rights to purchase in excess of 2% of the voting common stock then outstanding, (iii) a transfer of voting common stock not requiring registration under the Securities Act, in reliance on Rule 144 thereunder in which no one party acquires in excess of 2% of the voting common stock then outstanding, (iv) a transaction approved by the Federal Reserve, or (v) a transfer to a person that would control more than 50% of the “voting securities” of SPAH as defined by the Federal Reserve without giving effect to such transfer. In connection with the creation of the new class of Non-Voting Common Stock, the SPAH Certificate of Incorporation would also be amended so that holders of voting common stock may convert their shares into shares of Non-Voting Common Stock without limitation.
Under the BHC Act, a company that directly or indirectly owns, controls or has the power to vote 25% or more of a class of voting stock of a bank or a bank holding company is a bank holding company for purposes of the BHC Act and is subject to regulation as a bank holding company as described in the section entitled “Supervision and Regulation — Federal Bank Holding Company Regulation.” In addition, a company that directly or indirectly owns, controls or has the power to vote 10% or more, but less than 25%, of a class of voting stock of a bank or a bank holding company may be presumed to control the bank and/or bank holding company. If the presumption of control is not rebutted, the company is subject to the regulation as a bank holding company as described in the section entitled “Supervision and Regulation — Federal Bank Holding Company Regulation.” The presumption of control may be rebutted by entering into a passivity agreement with the Federal Reserve, which contains specific terms to limit the ability to control the management and policies of the bank and/or bank holding company. A company that owns, controls or has the power to vote 10% or more, but less than 25%, of a class of voting stock of a bank or a bank holding company and that enters into a passivity agreement generally is not subject to regulation as a bank holding company. A company that directly or indirectly owns, controls or has the power to vote less than 10% of any class of voting stock of a bank or a bank holding company generally is not subject to regulation as a bank holding company.
Given these considerations, in order to permit investor flexibility, SPAH is also requesting warrantholder approval at a special meeting of warrantholders to amend the terms of the Warrant Agreement, and intends to amend the Founder’s Agreements, to provide warrantholders with the option to receive either voting shares of SPAH common stock or shares of Non-Voting Common Stock in certain situations. Amending the Warrant Agreement and Founder’s Agreements will require the prior written consent of the underwriters in SPAH’s initial public offering, which SPAH anticipates receiving prior to the closing of the merger.
This Subsequent Charter Amendment is being proposed for the benefit of SP Acq LLC and its affiliates, including the Steel Trust, who otherwise would acquire more than 10% of the voting securities of SPAH upon the exercise of their initial founder’s warrants, additional founder’s warrants and co-investment warrants following the consummation of the merger. However, all stockholders and/or warrantholders will be permitted to receive Non-Voting Common Stock at their election. SP Acq LLC and the Steel Trust have separately agreed, pursuant to letter agreements with SPAH, to receive Non-Voting Common Stock upon exercise of their initial founder’s warrants, additional founder’s warrants and co-investment warrants following the consummation of the merger, as necessary in order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock. At their discretion, SP Acq LLC and/or the Steel Trust will convert such shares into voting common stock in accordance with the SPAH Certificate of Incorporation, as amended by the Subsequent Charter Amendments and upon a distribution of the shares by Steel Trust to its beneficiaries, such shares will also be converted into voting common stock in accordance with the SPAH Certificate of Incorporation, as amended by the Subsequent Charter Amendments.

 

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Filing of Second Amended and Restated Certificate of Incorporation
Following the merger, the surviving corporation will file a second amended and restated certificate of incorporation substantially in the form attached as Annex C to this joint proxy statement/prospectus, incorporating the amendments being considered by SPAH stockholders at the special meeting, assuming they are adopted.
Vote Required
Adoption of the Subsequent Charter Amendments requires the affirmative vote of a majority of the shares of SPAH common stock entitled to vote at the special meeting. Abstaining from voting, not voting on a proposal, or failing to instruct your broker how to vote your shares, will have the same effect as a vote against adoption of the Subsequent Charter Amendments.
Approval of the Subsequent Charter Amendments is a condition to closing the merger.
Board Recommendation
THE SPAH BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ADOPTION OF THE SUBSEQUENT CHARTER AMENDMENTS.
Proposal No. 4: The Election of Directors
General
The SPAH Bylaws provides for a board not less than one (1) nor more than nine (9) directors and authorizes the Board to determine from time to time the number of directors within that range that will constitute the board. The SPAH Board has fixed the number of directors to be elected at the special meeting at five (5), in the event the merger is consummated. If the merger is not consummated, the SPAH Board will be fixed at one (1).
The SPAH Board has proposed the election of Warren G. Lichtenstein as a director at the special meeting. If the merger is consummated, the SPAH Board has also proposed four director nominees from Frontier for election as directors at the special meeting including, Patrick M. Fahey, [______], [______] and [______], each of whom currently serve on the Frontier Board, with Mr. Lichtenstein to serve as Chairman of the Board. Each nominee elected as a director will continue in office until the next annual meeting of stockholders at which his or her successor has been elected, or until his or her resignation, removal from office, or death, whichever is earlier.
About the Nominees
Set forth below are the names and ages of the nominees for directors and their principal occupations at present and for the past five years. There are, to the knowledge of SPAH, no agreements or understandings by which these individuals were so selected. No family relationships exist between any directors or executive officers, as such term is defined in Item 402 of Regulation S-K promulgated under the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). The information concerning the nominees set forth below is given as of June 30, 2009.

 

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Warren G. Lichtenstein (Age 44) has been SPAH’s Chairman of the Board, President and Chief Executive Officer since February 2007. Mr. Lichtenstein is the Chief Executive Officer of Steel Partners LLC, a global management firm. Steel Partners LLC is the manager of Steel Partners II, L.P. and Steel Partners Holdings L.P. Mr. Lichtenstein has been associated with Steel Partners LLC and its affiliates since 1990. Mr. Lichtenstein has been the Chairman of the Board and Chief Executive Officer of Steel Partners Holdings L.P., a global diversified holding company that engages or has interests in a variety of operating businesses through its subsidiary companies, since July 2009. Mr. Lichtenstein co-founded Steel Partners II, L.P. in 1993. He is also a Co-Founder of Steel Partners Japan Strategic Fund (Offshore), L.P., a private investment partnership investing in Japan, and Steel Partners China Access I LP, a private equity partnership investing in China. Mr. Lichtenstein has served as a director of GenCorp Inc., a manufacturer of aerospace and defense products and systems with a real estate business segment, since March 2008. He was a director (formerly Chairman of the Board) of SL Industries, Inc., a designer and manufacturer of power electronics, power motion equipment, power protection equipment, and teleprotection and specialized communication equipment, from January 2002 to May 2008 and served as Chief Executive Officer from February 2002 to August 2005. He has served as Chairman of the Board of WHX Corporation, a holding company, since July 2005. He served as a director of the predecessor entity of Steel Partners Holdings L.P., from 1996 to June 2005, as Chairman and Chief Executive Officer from December 1997 to June 2005 and as President from December 1997 to December 2003. Prior to the formation of Steel Partners II, L.P. in 1993, Mr. Lichtenstein co-founded Steel Partners, L.P., an investment partnership, in 1990 and co-managed its business and operations. From 1988 to 1990, Mr. Lichtenstein was an acquisition/arbitrage analyst with Ballantrae Partners, L.P., which invested in risk arbitrage, special situations, and undervalued companies. From 1987 to 1988, he was an analyst at Para Partners, L.P., a partnership that invested in arbitrage and related situations. Mr. Lichtenstein has previously served as a director of the following companies: Alpha Technologies Group, Inc. (Synercom Technology), Aydin Corporation (Chairman), BKF Capital Group Inc., CPX Corp. (f/k/a CellPro, Incorporated), ECC International Corporation, Gateway Industries, Inc., KT&G Corporation, Layne Christensen Company, PLM International, Inc. Puroflow Incorporated, Saratoga Beverage Group, Inc., Synercom Technology, Inc., TAB Products Co., Tandycrafts Inc., Tech-Sym Corporation, United Industrial Corporation (Chairman) and U.S. Diagnostic Labs, Inc. Mr. Lichtenstein graduated from the University of Pennsylvania with a B.A. in Economics.
Patrick M. Fahey (Age 67) has over 40 years in the banking industry. He has been the Chairman of the Frontier Board, Chief Executive Officer of Frontier and the Chairman of the Frontier Bank Board since December 2008, and has been a director of Frontier and Frontier Bank since 2006. Prior to joining the Frontier Board in 2006, he was retired after leaving Wells Fargo Bank in 2004. From 2003 to 2004, Mr. Fahey was the Chairman of Regional Banking, Wells Fargo Bank. Prior to that, Mr. Fahey was the Chairman, President and Chief Executive Officer of Pacific Northwest Bank from 1988 to 2003. Mr. Fahey is a graduate of Seattle University, Pacific Coast Banking School, and the Management Program of the University Of Washington School Of Business.
Vote Required
In the event the merger is approved, directors will be elected by the plurality of the votes cast by stockholders present in person or represented by proxy and entitled to vote at the special meeting. The SPAH Certificate of Incorporation does not allow for cumulative voting. Votes cast for a nominee will be counted in favor of election. Abstentions and broker non-votes will not count either in favor of, or against, election of a nominee.
It is the intention of the persons named in the accompanying form of proxy to vote for the election of all director nominees, unless authorization to do so is withheld. Proxies cannot be voted for a greater number of persons than the number of directors set by the SPAH Board for election. If, prior to the special meeting, a nominee becomes unable to serve as a director for any reason, the proxy holders reserve the right to substitute another person of their choice in such nominee’s place and stead. It is not anticipated that any nominee will be unavailable for election at the special meeting.
Board Recommendation
THE SPAH BOARD UNANIMOUSLY RECOMMENDS THAT YOU VOTE “FOR” THE ELECTION OF EACH OF THE DIRECTOR NOMINEES.

 

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THE SPECIAL MEETING OF SPAH WARRANTHOLDERS AND THE WARRANT AMENDMENT PROPOSAL
General
The SPAH Board is providing this joint proxy statement/prospectus to you in connection with its solicitation of proxies for use at the special meeting of SPAH’s warrantholders and at any adjournments or postponements thereof.
Your vote is important. Please complete, date and sign the accompanying proxy card and return it in the enclosed, postage prepaid envelope. If your warrants are held in “street name,” you should instruct your broker how to vote by following the directions provided by your broker.
Meeting Date, Time and Place and Record Date
SPAH will hold the special meeting on [______], [______], 2009 at [______]:00 [______].m., local time, at [______]. Only holders of SPAH warrants of record at the close of business on [______], 2009, the SPAH record date, will be entitled to receive notice of and to vote at the special meeting. As of the record date, there were 61,112,000 warrants outstanding and entitled to vote, with each such warrant entitled to one vote.
Matters to Be Considered
At the special meeting, SPAH’s warrantholders will be asked to consider and vote upon a proposal to amend Sections 6(a), 6(d), 6(f), 11(c), 11(d), and 11(e) of the Warrant Agreement in connection with the consummation of the transactions contemplated by the merger agreement. The proposed amendment to the Warrant Agreement, to become effective upon consummation of the merger, will:
    increase the exercise price of the warrants from $7.50 per share to $11.50 per share of SPAH common stock;
    amend the warrant exercise period to (i) eliminate the requirement that the initial founder’s warrants owned by the SPAH insiders become exercisable only after the consummation of an initial business combination if and when the last sales price of SPAH common stock exceeds $14.25 per share for any 20 trading days within a 30 trading day period beginning 90 days after such business combination and (ii) extend the expiration date of the warrants to the earlier of (x) seven years from the consummation of the merger or (y) the date fixed for redemption of the warrants set forth in the warrant agreement;
    provide for the mandatory downward adjustment of the exercise price for each warrant to reflect any cash dividends paid with respect to the outstanding common stock of SPAH;
    provide that, in the event an effective registration statement is not in place on the date the warrants are set to expire, the warrants will remain outstanding until 90 days after an effective registration statement is filed, provided, that if SPAH has not filed an effective registration statement within 90 days after the expiration date, the warrants shall become exercisable for cash consideration;
    provide that no adjustment in the number of shares issuable upon exercise of each warrant will be made as a result of the issuance of SPAH shares and warrants to the shareholders of Frontier upon consummation of the merger agreement; and
    provide that each warrant will entitle the holder thereof to purchase, in its sole discretion, either one share of voting common stock or one share of Non-Voting Common Stock.
At the special meeting, we may transact such other business as may properly come before the special meeting or any adjournments or postponements thereof. A copy of the Supplement and Amendment to Amended and Restated Warrant Agreement is attached as Annex D to this joint proxy statement/prospectus and is incorporated into this joint proxy statement/prospectus by reference.

 

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Reasons for the Amendment
SPAH believes increasing the exercise price, extending the expiration date, providing for a mandatory downward adjustment of the exercise price under certain circumstances, extending the expiration date if an effective registration statement is not in place and providing that no adjustment in the number of shares issuable upon exercise of the warrants will be made upon consummation of the merger, is appropriate given the change in structure of SPAH following completion of the merger. In addition, SPAH is proposing to amend the warrant exercise period to eliminate the requirement that the initial founder’s warrants owned by the SPAH insiders become exercisable only after the consummation of an initial business combination if and when the last sales price of SPAH common stock exceeds $14.25 per share for any 20 trading days within a 30 trading day period beginning 90 days after such business combination, in light of the forfeiture of 9,453,412 founder’s shares by SP Acq LLC and Messrs. Bergamo, LaBow, Lorber, Toboroff and Walker upon consummation of the merger. As a result, if the warrant amendment is approved, the initial founder’s warrants will become exercisable upon consummation of the merger, but the sale of such warrants or the shares underlying the warrants will still be subject to a one-year lock-up from the date we consummate the merger. This amendment will require the prior written consent of the underwriters in SPAH’s initial public offering, which SPAH anticipates receiving prior to the closing of the merger.
We are further requesting warrantholder approval at the special meeting to provide warrantholders with the option to receive, in their sole discretion, upon exercise of their warrants, either voting shares of SPAH common stock or shares of Non-Voting Common Stock, such that the holder thereof would not exceed the ownership threshold which would make it subject to regulation as a bank holding company. Under the BHC Act, a company that directly or indirectly owns, controls or has the power to vote 25% or more of a class of voting stock of a bank or a bank holding company is a bank holding company for purposes of the BHC Act and is subject to regulation as a bank holding company as described in the section entitled “Supervision and Regulation — Federal Bank Holding Company Regulation.” In addition, a company that directly or indirectly owns, controls or has the power to vote 10% or more, but less than 25%, of a class of voting stock of a bank or a bank holding company may be presumed to control the bank and/or bank holding company. If the presumption of control is not rebutted, the company is subject to the regulation as a bank holding company as described in the section entitled “Supervision and Regulation— Federal Bank Holding Company Regulation.” The presumption of control may be rebutted by entering into a passivity agreement with the Federal Reserve, which contains specific terms to limit the ability to control the management and policies of the bank and/or bank holding company. A company that owns, controls or has the power to vote 10% or more, but less than 25%, of a class of voting stock of a bank or a bank holding company and that enters into a passivity agreement generally is not subject to regulation as a bank holding company. A company that directly or indirectly owns, controls or has the power to vote less than 10% of any class of voting stock of a bank or a bank holding company generally is not subject to regulation as a bank holding company.
Given these considerations, in order to permit investor flexibility, SPAH is also requesting warrantholder approval to amend the terms of the Warrant Agreement, and intends to amend the Founder’s Agreements to, provide warrantholders with the option to receive either voting shares of SPAH common stock or shares of Non-Voting Common Stock in certain situations. Amending the Warrant Agreement and Founder’s Agreements will require the prior written consent of the underwriters in SPAH’s initial public offering, which SPAH anticipates receiving prior to the closing of the merger.
SP Acq LLC and the Steel Trust have separately agreed, pursuant to letter agreements with SPAH, to receive Non-Voting Common Stock upon exercise of their initial founder’s warrants, additional founder’s warrants and co-investment warrants following the consummation of the merger, as necessary in order to maintain an ownership level of voting common stock below 5% of the total outstanding shares of voting common stock. At their discretion, SP Acq LLC and/or the Steel Trust will convert such shares into voting common stock in accordance with the SPAH Certificate of Incorporation, as amended by the Subsequent Charter Amendments and upon a distribution of the shares by Steel Trust to its beneficiaries, such shares will also be converted into voting common stock in accordance with the SPAH Certificate of Incorporation, as amended by the Subsequent Charter Amendments.

 

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If the merger is not consummated and SPAH does not complete a different initial business combination by October 10, 2009, the warrants will expire worthless. If the warrant amendment proposal is approved, all other terms of SPAH’s warrants will remain the same.
The approval of the warrant amendment proposal is a condition to the consummation of the merger. Frontier shareholders will receive approximately 2,500,000 newly issued warrants in connection with the merger, having the same terms and conditions as the publicly traded SPAH warrants immediately prior to the effective time of the merger, after giving effect to the warrant amendment proposal.
Vote Required
Pursuant to Section 18 of the Warrant Agreement, adoption of the amendment to the Warrant Agreement requires the affirmative vote of a majority of the warrantholders outstanding and entitled to vote at the special meeting. The Warrant Agreement also requires that the holders of a majority of SPAH’s outstanding warrants issued in, or subsequent to, SPAH’s initial public offering, are voted in favor of the warrant amendment.
The SPAH insiders intend to vote in favor of the warrant amendment proposal. While the warrants voted by the SPAH insiders will count towards the voting and quorum requirements under Delaware law, they will not count towards the voting requirement under the Warrant Agreement, which requires that the holders of a majority of SPAH’s outstanding warrants issued in, or subsequent to, SPAH’s initial public offering, are voted in favor of the warrant amendment, because the initial founder’s warrants and additional founder’s warrants were not issued in SPAH’s initial public offering.
Voting
    Warrantholders may vote their warrants:
 
    by attending the special meeting and voting their warrants in person, or
 
    by completing the enclosed proxy card, signing and dating it and mailing it in the enclosed post-prepaid envelope.
Warrants represented by properly executed proxies received at or prior to the special meeting of warrantholders will be voted at the special meeting in the manner specified by the holders of such warrants. Warrantholders who have their warrants in “street name”, meaning the name of a broker or other nominee who is the record holder, must either direct the record holder of their warrants to vote their warrants or obtain a proxy from the record holder to vote their warrants at the special meeting.
Quorum
The presence, in person or by proxy, of a majority of all the outstanding warrants entitled to vote constitutes a quorum at the special meeting of warrantholders.
Abstentions and Broker Non-Votes
Proxies that are marked “abstain” and proxies relating to “street name” warrants that are returned to SPAH but marked by brokers as “not voted” will be treated as warrants present for purposes of determining the presence of a quorum on all matters. The latter will not be treated as warrants entitled to vote on the matter as to which authority to vote is withheld from the broker. If you do not give the broker voting instructions, under applicable self-regulatory organization rules, your broker may not vote your warrants on “non-routine” proposals, such as the proposal to amend certain terms of the Warrant Agreement.

 

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Revoking Your Proxy
If you give a proxy, you may revoke it at any time before it is exercised by doing any one of the following:
    you may send another proxy card with a later date;
    you may notify Continental Stock Transfer & Trust Company, SPAH’s warrant agent, in writing before the special meeting that you have revoked your proxy; or
    you may attend the special meeting, revoke your proxy, and vote in person, as indicated above.
Proxy Solicitation Costs
SPAH will pay all of the costs of filing the registration statement with the SEC (of which this joint proxy statement/prospectus is a part) and of soliciting proxies in connection with the special meeting of stockholders as well as the special meeting of warrantholders. SPAH will also pay the costs associated with printing the copies of this joint proxy statement/prospectus that are sent to SPAH stockholders and the mailing fees associated with mailing this joint proxy statement/prospectus to SPAH stockholders. Solicitation of proxies may be made in person or by mail, telephone, or other electronic means, or other form of communication by directors, officers, and stockholders of SPAH who will not be specially compensated for such solicitation. In addition, SPAH has engaged [______] as its proxy solicitation firm. Such firm will be paid its customary fee of approximately $[______] plus solicitation and out of pocket expenses. Banks, brokers, nominees, fiduciaries, and other custodians will be requested to forward solicitation materials to beneficial owners and to secure their voting instructions, if necessary, and will be reimbursed for the expenses incurred in sending proxy materials to beneficial owners.
SPAH, Frontier and their respective directors and executive officers, may be deemed to be participants in the solicitation of proxies. The underwriters of SPAH’s initial public offering may provide assistance to SPAH, Frontier and their respective directors and executive officers, and may be deemed to be participants in the solicitation of proxies. Approximately $17.3 million of the underwriters’ fees relating to SPAH’s initial public offering were deferred pending stockholder approval of SPAH’s initial business combination, and stockholders are advised that the underwriters have a financial interest in the successful outcome of the proxy solicitation. SPAH is in negotiation with its underwriters regarding the amount and form of payment of such deferred underwriting fees from SPAH’s initial public offering. The results of these negotiations are uncertain and could result in $17,316,000 in additional costs for the proforma company which could be paid in cash.
No person is authorized to give any information or to make any representation not contained in this joint proxy statement/prospectus and, if given or made, such information or representation should not be relied upon as having been authorized by SPAH, Frontier, or any other person. The delivery of this joint proxy statement/prospectus does not, under any circumstances, create any implication that there has been no change in the business or affairs of SPAH or Frontier since the date of this joint proxy statement/prospectus.
Recommendation of the SPAH Board
THE SPAH BOARD HAS DETERMINED THAT THE WARRANT AMENDMENT PROPOSAL IS FAIR TO AND IN THE BEST INTERESTS OF SPAH AND ITS WARRANTHOLDERS, HAS UNANIMOUSLY APPROVED THE PROPOSAL AND UNANIMOUSLY RECOMMENDS THAT SPAH’S WARRANTHOLDERS VOTE “FOR” THE WARRANT AMENDMENT PROPOSAL.

 

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THE SPECIAL MEETING OF FRONTIER SHAREHOLDERS AND THE MERGER PROPOSAL
General
The Frontier Board is providing this joint proxy statement/prospectus to you in connection with its solicitation of proxies for use at the special meeting of shareholders of Frontier and at any adjournments or postponements thereof.
SPAH is also providing this joint proxy statement/prospectus to you as a prospectus in connection with the offer and sale by SPAH of shares of its common stock to shareholders of Frontier in the merger.
Your vote is important. Please complete, date and sign the accompanying proxy card and return it in the enclosed, postage prepaid envelope. If your shares are held in “street name,” you should instruct your broker how to vote by following the directions provided by your broker.
Meeting Date, Time, and Place and Record Date
Frontier will hold the special meeting on [_____], at [_____] [____].m., local time, at [___]. Only holders of Frontier common stock of record at the close of business on [_____] [_____], 2009, the record date for the special meeting, will be entitled to receive notice of and to vote at the meeting.
Matters to be Considered
At the special meeting, Frontier’s shareholders will be asked to approve the merger agreement, pursuant to which Frontier will merge with and into SPAH and each share of Frontier common stock will be converted into the right to receive 0.0530 shares of newly issued SPAH common stock and 0.0530 newly issued warrants of SPAH, having the same terms and conditions as the publicly traded SPAH warrants immediately prior to the effective time of the merger, after giving effect to the warrant amendment proposal, subject to possible adjustment as described in this joint proxy statement/prospectus.
Each copy of this joint proxy statement/prospectus mailed to Frontier’s shareholders is accompanied by a proxy card for use at the special meeting.
Vote Required
Approval of the merger proposal requires the affirmative vote of at least two-thirds of the shares entitled to vote at the Frontier special meeting.
On the record date, there were [_____] outstanding shares of Frontier common stock, each of which is entitled to one vote at the special meeting. All of the Frontier’s insiders have agreed to vote their [_____] shares of Frontier common stock (which constitute [_____]% of Frontier’s outstanding shares of common stock), “FOR” the merger proposal.
Quorum
The presence, in person or by proxy, of shares of Frontier common stock representing a majority of Frontier outstanding shares entitled to vote at the special meeting is necessary in order for there to be a quorum at the special meeting. A quorum must be present in order for the vote on the merger agreement to occur. If there is no quorum present at the opening of the meeting, the special meeting may be adjourned by the vote of a majority of shares voting on the motion to adjourn.

 

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Voting of Proxies
Shares of common stock represented by properly executed proxies received at or prior to the Frontier special meeting will be voted at the special meeting in the manner specified by the holders of such shares. If you are a shareholder of record (that is, you hold stock certificates registered in your own name), you may vote by following the instructions described on your proxy card. If your shares are held in nominee or “street name,” you will receive separate voting instructions from your broker or nominee with your proxy materials. If you hold your shares in “street name,” you can either obtain physical delivery of the shares directly into your name, and then vote your shares yourself, or request a “legal proxy” directly from your broker and bring it to the special meeting, and then vote your shares yourself. In order to obtain shares directly into your name, you must contact your brokerage house representative. Brokerage firms may assess a fee for your conversion; the amount of such fee varies.
Properly executed proxies which do not contain voting instructions will be voted “FOR” approval of the merger agreement.
Shares of any shareholder represented in person or by proxy (including broker non-votes, which generally occur when a broker who holds shares in street name for a customer does not have the authority to vote on certain non-routine matters because its customer has not provided any voting instructions with respect to the matter) at the special meeting who abstains from voting will be counted