As filed with the Securities and Exchange Commission on September 17, 2009

Registration No. 333-161250

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

AMENDMENT NO. 2 TO

Form S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

SP ACQUISITION HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

SP Acquisition Holdings, Inc.

590 Madison Avenue

32nd 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

32nd 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:

 

 

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, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

(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

 

 

 

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.

 

 

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:

 

 

At the special meeting, we may transact such other business as may properly come before the meeting and any adjournments or postponements thereof.

 

The SPAH Certificate of Incorporation purports to prohibit amendments to certain of its provisions, including the proposed Initial Charter Amendments, without the unanimous consent of the holders of all of SPAH’s outstanding shares of common stock. However, SPAH believes, and has received an opinion from its special

Delaware counsel that while the matter has not been settled as a matter of Delaware law and, accordingly, is not entirely free from doubt, the Initial Charter Amendments, if duly approved by a majority of the shares of SPAH’s outstanding common stock entitled to vote at the special meeting, will be valid under Delaware law.

 

Since SPAH’s initial public offering prospectus did not disclose that SPAH would seek approval of the Initial Charter Amendments and the New Class Proposal, among other things, each SPAH 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 or damages. See “The Merger and the Merger Agreement — Rescission Rights” for additional information.

 

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 Amendments 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 Amendments are 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.

 

SPAH has fixed the close of business on September 17, 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,

 

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 [     ].

 

 

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:

 

 

The SPAH Certificate of Incorporation purports to prohibit amendments to certain of its provisions, including the proposed Initial Charter Amendments, without the unanimous consent of the holders of all of SPAH’s outstanding shares of common stock. However, SPAH believes, and has received an opinion from its special Delaware counsel that while the matter has not been settled as a matter of Delaware law and, accordingly, is not

entirely free from doubt, the Initial Charter Amendments, if duly approved by a majority of the shares of SPAH’s outstanding common stock entitled to vote at the special meeting, will be valid under Delaware law.

 

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. If Proposal No. 2 is approved and adopted, 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). SPAH does not believe it will raise the conversion threshold and currently intends only to raise the conversion threshold if it believes that the combined entity will have sufficient Tier 1 capital to return to compliance levels.

 

Adoption of the Subsequent Charter Amendments 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.

 

Since SPAH’s initial public offering prospectus did not disclose that SPAH would seek approval of the Initial Charter Amendments and the New Class Proposal, among other things, each SPAH 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 or damages. See “The Merger and the Merger Agreement — Rescission Rights” for additional information.

 

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 Amendments 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 Amendments are 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 September 17, 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 September 17, 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 September 17, 2009, and any taxes payable in respect of interest earned thereon.

If you wish to exercise your conversion rights, you must:

 

 

 

 

 

Accordingly, a SPAH stockholder would have from the time we send out this joint proxy statement/prospectus through the vote on the merger to deliver his or her shares if he or she wishes to seek to exercise his or her conversion rights. 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 September 17, 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.

 

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,

 

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 OR SUCH OTHER LATER DATE IF THE SPECIAL MEETING OF SPAH STOCKHOLDERS IS ADJOURNED OR POSTPONED. 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.

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:

 

 

 

 

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 September 17, 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.

 

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,

 

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 [     ].

 

 

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:

 

 

 

 

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 September 17, 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 September 17, 2009, intend to vote in favor of the warrant amendment proposal.

 

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 2,512,000 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,

 

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.

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 September 14, 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,

 

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.

 

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 September 14, 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. 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 3,103,451 shares of Frontier common stock (which constitute 6.56% 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.

 

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,

 

Chairman and Chief Executive Officer

 

 

SUBJECT TO AMENDMENT AND COMPLETION, DATED SEPTEMBER 17, 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 2,512,000 SHARES OF COMMON STOCK AND

UP TO 2,512,000 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. This 0.0530 multiple 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 September 17, 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 2,512,000 or 5.0% of the outstanding shares of SPAH common stock and approximately 2,512,000 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 September 17, 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 (the “merger proposal”). 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 (the “SPAH Certificate of Incorporation”) and the election of directors to the Board of Directors of SPAH. SPAH is asking its stockholders to approve certain amendments to the SPAH Certificate of Incorporation because in its current form, the SPAH Certificate of Incorporation does not allow for SPAH to complete the proposed merger. 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. Each SPAH public stockholder may have securities law claims against SPAH for rescission or damages on the basis that SPAH is seeking to take certain

action that may be inconsistent with the disclosure provided in its initial public offering prospectus. See “The Merger and the Merger Agreement — Rescission Rights” for additional information.

 

As described in this joint proxy statement/prospectus, we cannot complete the merger unless SPAH stockholders approve the amendments to the SPAH 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.

 

The businesses and operations of Frontier and its subsidiary, Frontier Bank, are currently subject to several regulatory actions. Frontier’s management believes it has addressed many of the concerns and is in compliance with most of the regulatory requirements, other than to increase its Tier 1 capital. However, Frontier may not be able to satisfy all regulatory requirements prior to the consummation of the merger, which could limit Frontier’s growth and adversely affect its earnings, businesses 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.

 

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 33. 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. As of the date hereof, SPAH has negotiated the reduction of underwriting fees by approximately $3.65 million and SPAH will continue to negotiate a further reduction of such fees until a mutual settlement can be reached. The results of these negotiations are uncertain since the underwriters can discontinue negotiations with SPAH at any time and require the full amount of their fees payable upon consummation of the merger. 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 September [  ], 2009 and is first being mailed to SPAH and Frontier stockholders and SPAH warrantholders on or about September [  ], 2009.

Table of Contents

 

 

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 — Series F, 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).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

RIDER A

 

 

 

 

 

 

 

 

 

 

 

SUMMARY TERM SHEET

 

The Companies (pages 116 and 141)

 

Recent Developments (page 153)

 

The Merger and the Merger Agreement (page 62)

 

Reasons for the Merger (pages 66 and 72)

	•	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.

	•	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 & 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;
	•	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.

	•	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.

	•	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, in the event SPAH extends its corporate life beyond October 10, 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.

	•	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 approximately $[     ] per share and approximately $[     ] in the aggregate and, for the warrants, were worth approximately $[     ] per warrant and approximately $[     ] 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 465,530 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.

	•	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 3,103,451 shares of Frontier common stock, including 253,154 shares of restricted stock that has or will be vested at the time of the merger, representing 6.56% 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. The maximum aggregate amount of such payments (based on two times their salaries and bonuses) due to Messrs. Dickson, Mathison, Robinson and Ryan, and Ms. Wheeler, upon such termination of their employment would be $698,250, $419,250, $409,500, $518,020, and $368,250, respectively.

	•	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.

 

Transfer Restrictions of SPAH Insiders and Frontier Insiders upon Consummation of the Merger (pages 68 and 86)

	•	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.
	•	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.

 

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.

 

The continued downturn in Frontier’s real estate market areas and weakness in the economy could adversely affect Frontier’s financial condition and profitability.

 

The Washington and Oregon economies and real estate markets experienced a significant, dramatic downturn in the past year, and with significant declines in real estate values. Average home sale prices declined by 16.1% year over year in Washington as of June 30, 2009, and 13.4% year over year as of December 31, 2008 and average home sale prices had declined by 9.8% year over year in Oregon as of September 30, 2008, according to data published by the National Association of Realtors, while home sales slowed significantly declining by 19.8% and 15.2% in Washington and Oregon, respectively. Unemployment increased by 3.8% to 9.1% in Washington over the twelve months ended June 30, 2009, and by 5.6% to 11.9% in Oregon over the same period, according to the National Bureau of Labor Statistics, while according to RealtyTrac foreclosures rose by 94% and 84% in Washington and Oregon, respectively.

 

Frontier is 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 and 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 nonperforming and nonaccrual loans increased significantly, from $205.2 million to $764.6 million, $513.2 million of which were residential construction and land development loans, which represent 43.1% of Frontier’s residential construction and land development loans. 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 of approximately $200 million, primarily as a result of decreased residential and commercial real estate values, increased financial stress on borrowers, bankruptcies and related expenses of collection, foreclosure and OREO, and such losses can be further increased if the adverse economic conditions become more severe or continue longer than Frontier anticipates. Any such additional loan losses, should they occur, would adversely affect Frontier’s financial condition and profitability.

 

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, and as of September 30, 2009, Frontier’s allowance for loan losses is expected to increase to $138.5 million or 4.17% of its total loans of $3.3 billion, as a result of significant additional provisions for loan losses and charge-offs in the third quarter of 2009. See “Management’s Discussion & Analysis of Financial Condition and Results of Operations — Allowance for Loan Losses — Subsequent Events.” 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.

 

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 future earnings may be adversely affected by the legal and regulatory actions taken against it, as well as those legal actions that Frontier has and may pursue.

 

Frontier and the Frontier Board (as well as SPAH) have been sued in the putative securities class action lawsuit described in “Information About Frontier — Legal Proceedings,” which, if adversely determined, could have a material adverse effect on its consolidated financial position, results of operations or cash flows and Frontier’s ability to consummate the merger or the consolidated financial position, results of operations or cash flows of the surviving entity. Further, Frontier and Frontier Bank are also involved in the regulatory, collection and potential foreclosure actions and proceedings described therein. Because Frontier is unable to predict the impact or resolution of these outstanding litigation and regulatory matters or to reasonably estimate the potential loss, if any, no reserves have yet been established therefor. Frontier may determine in the future that it is necessary to establish such reserves and, if so established, such reserves could have a material adverse impact on its financial condition.

 

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.

 

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 deposits.

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.

 

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 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 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.

 

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.

 

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 and 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”.

 

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.

 

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.

 

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.

 

The consummation of the merger does not provide for the introduction of a new management team or new members on the SPAH Board or the Frontier Bank Board post-merger with experience in the banking industry or with troubled banks.

 

Immediately following the consummation of the merger, Frontier’s business will continue to be operated by Frontier’s existing senior management team, and four of the five directors to serve on each of the SPAH Board and Frontier Bank Board post- merger will consist of existing directors on the current Frontier Board and the Frontier Bank Board. While a former independent director, Patrick M. Fahey, was recently appointed President and Chief Executive Officer of Frontier in December 2008, the merger does not include a new management team. In addition, it is anticipated that Mr. Lichtenstein will become Chairman of the Board of the SPAH Board and John McNamara will become Chairman of the Board of Frontier Bank, post-merger. Although Messrs. Lichtenstein and McNamara have significant investment, restructuring and board experience with public companies, neither have significant long-term experience in the banking industry or with troubled banks. The lack of new senior management and directors with significant long-term experience in the banking industry or with troubled banks, could make it more difficult for SPAH to comply with certain regulatory actions or successfully develop and implement its new business strategies and initiatives.

 

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. If Proposal No. 2 is approved and adopted, 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). SPAH does not believe it will raise the conversion threshold and currently intends only to raise the conversion threshold if it believes that the combined entity will have sufficient Tier 1 capital to return to compliance levels. 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 September 17, 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.

 

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 in its current form, provides that our initial business combination may only be consummated if SPAH public stockholders owning up to 30% of the shares sold in this offering (minus one share) exercise their conversion rights. SPAH is requesting its stockholders to approve Proposal No. 2 to provide for this lower threshold. 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. SPAH’s decreased conversion threshold may prevent the merger from being approved which would otherwise have been approved if SPAH kept its 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 SPAH 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). SPAH does not believe it will raise the conversion threshold and currently intends only to raise the conversion threshold if it believes that the combined entity will have sufficient Tier 1 capital to return to compliance levels.

 

The amount of capital in the trust account may be insufficient to satisfy banking regulatory concerns or allow Frontier to return to profitability.

 

Frontier and its subsidiary, Frontier Bank, are subject to various regulatory capital requirements administered by federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on Frontier’s financial statements and the financial statements of the combined entity upon consummation of the merger. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, Frontier must meet specific capital guidelines that involve quantitative measures of assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Upon consummation of the merger, the combined company will be subject to these same regulatory capital requirements.

 

Regardless of how few SPAH public stockholders may elect to convert their shares into a pro rata portion of the trust account, there is no certainty that the combined company or Frontier Bank will have sufficient capital to satisfy various regulatory capital requirements administered by federal and state banking agencies or to return to profitability.

 

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 common stock (whether voting or non-voting) 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 66,624,000 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 95.3% 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. 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. Moreover, the merger agreement contains certain agreements of the parties with respect to various employee matters, including an agreement by SPAH to adopt stock option or other equity plans for officers and employees of Frontier as the SPAH Board of the combined company deems appropriate.

 

For a table outlining the effect of the various scenarios on the percentage of SPAH’s common stock 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.”

 

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, up to 2,512,000 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 66,624,000 shares of SPAH common stock (after adjusting for the granting of 2,512,000 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, SPAH will have approximately 50,170,588 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 66,624,000 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 47,385,007, which is the maximum number of shares of Frontier common stock that may be outstanding prior to the effective time of the merger (including 253,154 shares of restricted stock which will vest upon consummation 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 47,385,007, which is the maximum number of shares of Frontier common stock that may be outstanding prior to the effective time of the merger (including 253,154 shares of restricted stock which will vest upon consummation 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, 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 seek to amend the SPAH Certificate of Incorporation prior to the consummation of a business combination to provide 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 the current form of the SPAH Certificate of Incorporation requires no more than 30% (minus one share), (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) 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.

 

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.

 

The proposed amendments to the Warrant Agreement may be deemed to constitute the issuance of new warrants.

 

The proposed amendments to the Warrant Agreement may be deemed to constitute a material change in the rights of warrantholders and may be deemed to be the functional equivalent to the issuance of new warrants under Rule 145 of the Securities Act, which would require the registration of the amended warrants. Although SPAH does not believe the proposed amendments will result in a material change in the rights of warrantholders’, no assurance can be given that the SEC will not take action against SPAH for failing to register the amended warrants. In addition, stockholders and/or warrantholders who purchased shares and/or warrants in SPAH’s initial public offering or afterwards 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) on the basis of, for example, SPAH’s initial public offering prospectus not disclosing that SPAH may seek to amend certain terms of the Warrant Agreement, including to increase the exercise price and amend the exercise period of the warrants, among other things.

 

The SPAH Certificate of Incorporation purports to prohibit amendments to certain of its provisions, including the proposed Initial Charter Amendments, without the unanimous consent of the holders of all of SPAH’s outstanding shares of common stock, which could be upheld by a court under Delaware law.

 

The SPAH Certificate of Incorporation purports to prohibit amendments to certain of its provisions, including the proposed Initial Charter Amendments, without the unanimous consent of the holders of all of SPAH’s outstanding shares of common stock. SPAH believes, and has received an opinion from its special Delaware counsel that while the matter has not been settled as a matter of Delaware law and, accordingly, is not entirely free from doubt, the Initial Charter Amendments, if duly approved by a majority of the shares of SPAH’s outstanding common stock entitled to vote at the special meeting, will be valid under Delaware law. However, no assurance can

be given that a court will not uphold the provision of the law which would require unanimous consent to adopt the Initial Charter Amendments.

 

In addition, because the SPAH Certificate of Incorporation in its current form requires unanimous consent to approve the Initial Charter Amendments, if the Initial Charter Amendments are approved with less than unanimous consent and the merger is approved and consummated thereafter, 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, 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. Neither SPAH nor Frontier can predict whether stockholders will bring such claims or whether such claims would be successful.

 

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, SPAH will seek to effectuate an alternative business combination. However, if SPAH does not complete a business combination by October 10, 2009, it 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.”

 

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:

 

 

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:

 

 

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.

 

Approval of the warrant amendment proposal may negatively affect existing SPAH stockholders and SPAH warrantholders.

 

If the SPAH warrantholders approve the warrant amendment proposal, the exercise price of the warrants will increase from $7.50 per share to $11.50 per share of common stock, which at the increased price will exceed the current and recent market prices of SPAH’s common stock. If the market price of SPAH’s common stock does not exceed the exercise price of the warrants during the period in which the warrants are exercisable, the warrants may not have any value. By increasing the warrant exercise price to $11.50 per share, it will be more difficult for SPAH warrantholders to exercise the SPAH warrants.

 

The warrant amendment proposal also eliminates 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. The elimination of the restrictions on exercisability will make it easier for SPAH insiders to exercise their insider warrants, which could result in the interests of our stockholders being diluted, notwithstanding the higher warrant exercise price discussed above.

 

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 September 17, 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.”

 

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’ and others’ 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. As of September 17, 2009, the estimated out-of-pocket expenses incurred by SPAH’s officers and directors and affiliates of SP Acq LLC and their employees is minimal. While SPAH has not finalized how much fees and expenses it will incur relating to the investigation, structuring and negotiating the

transaction, it is unlikely that such fees and expenses would exceed cash and cash equivalents on hand, which was approximately $1.59 million, as of June 30, 2009, in which event if a transaction is not consummated, SPAH believes it will be able to negotiate with its third party vendors to ensure that the amount of such fees and expenses will ultimately not exceed its cash and cash equivalents. 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.

 

If SPAH’s due diligence investigation of Frontier regarding the merger fails to identify issues specific to Frontier or the environment in which Frontier operates, SPAH may be required 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 was required to conduct a due diligence investigation of Frontier. As part of its due diligence, SPAH management attended several weekly special assets group meetings of Frontier, a group consisting of 37 managers and employees of Frontier which focuses on reducing Frontier’s nonperforming assets. SPAH management also reviewed Frontier’s largest performing and nonperforming loans and spoke with Frontier’s loan officers. SPAH management also met with third party loan reviewers as they performed a loan by loan analysis of Frontier’s loan portfolio. In addition, in July 2009, in anticipation of a possible transaction, Frontier hired a third party loan specialist to perform due diligence procedures on Frontier Bank’s loan portfolio, including a review of loan documents, files, appraisals, balances, payment history and other loan data of a relevant sample of loans selected from a pool of approximately $2.4 billion of approximately 10,206 commercial real estate, land development, commercial and industrial, construction, residential first lien, residential second lien, home equity, letters of credit and consumer loans selected from Frontier Bank’s $3.6 billion loan portfolio. SPAH management participated in group meetings with the loan specialist, but ultimately performed and relied upon its own due diligence (which included the due diligence procedures described above) of Frontier’s loan portfolio, allowance for loan losses, loan charge-offs and loan recoveries, in determining to proceed with a transaction with Frontier. In order to determine the fair value of Frontier’s loan portfolio, including the adjustments made to determine the fair value of the loan portfolio for purposes of preparing the pro forma financial statements set forth elsewhere in this joint proxy statement/prospectus, SPAH relied upon the fair value analysis prepared by RP Financial, LC, which provided SPAH with the preliminary fair valuation adjustments for recording the acquisition of Frontier pursuant to SFAS No. 141-R. To that end, the preliminary valuation calculated the fair value adjustments for the acquired portfolios of loans, investment securities, deposits, and borrowed funds and calculated the core deposit value.

 

While SPAH believes it has conducted a sufficient due diligence on Frontier’s operations, no assurance can be made that this diligence has uncovered 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 reports

charges of this nature could contribute to negative market perceptions about SPAH and/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. 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.

 

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.

 

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.

 

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.

 

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 is requiring SPAH public 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 is requiring SPAH public stockholders who wish to convert their shares in connection with the merger to either tender their certificates to SPAH’s transfer agent at any time prior to the vote taken at the special meeting of SPAH stockholders 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.

 

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:

 

 

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.

 

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:

 

 

 

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.”

 

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.

 

 

 

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.

 

 

 

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:

 

 

 

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.

 

SP Acquisition Holdings, Inc and Subsidiaries

 

Selected Unaudited Condensed Combined Pro Forma Statement of Operations Data

For the Six Months Ended June 30, 2009