Exhibit 10.1
STOCK REDEMPTION AGREEMENT
FOR THE REDEMPTION OF THE COMMON STOCK OF METROPOLITAN
BANCORP OWNED BY JOHN FAIRCHILD AND SHERYL NILSON
BY AND AMONG
METROPOLITAN BANCORP AND
METROPOLITAN FEDERAL SAVINGS AND LOAN ASSOCIATION OF SEATTLE
AND
JOHN FAIRCHILD AND SHERYL NILSON
July 11, 1996
CONTENTS
ARTICLE 1. DEFINITIONS
1.1 Definitions........................................................2
1.2 References.........................................................2
ARTICLE 2. REDEMPTION OF SHAREHOLDERS' METROPOLITAN SHARES...................7
2.1 Redemption of Shareholders' Metropolitan Shares....................7
2.2 Redemption Price...................................................7
2.3 Adjustment to Redemption Price.....................................8
ARTICLE 3. THE CLOSING.......................................................8
3.1 Time of Closing....................................................8
3.2 Deliveries.........................................................8
3.3 Release of Bank and Metropolitan from Liabilities..................9
3.4 Closing Net Worth..................................................10
3.5 Final Balance Sheet................................................10
3.6 Settlement of Obligations..........................................16
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF METROPOLITAN AND THE BANK.......16
4.1 Organization and Qualification of Phoenix..........................16
4.2 Capitalization; Stock Ownership....................................17
4.3 Authority Relative to Agreement....................................17
4.4 Financial Statements; Balance Sheet Items..........................18
4.5 No Undisclosed Liabilities.........................................18
4.6 Absence of Certain Changes.........................................19
4.7 Permits, Authorizations............................................19
4.8 Compliance With Applicable Law.....................................19
4.9 Litigation; Claims.................................................19
4.10 Brokers and Finders................................................20
4.11 Environmental Matters..............................................20
4.12 Insurance..........................................................20
4.13 Employee Benefits..................................................21
4.14 Taxes..............................................................23
ARTICLE 4A. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF
METROPOLITAN AND BANK AS TO CERTAIN MORTGAGE LOANS.................24
4A.1 Investor Requirements..............................................24
4A.2 Repurchase Obligation..............................................24
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS................24
5.1 Authority and Consents.............................................25
5.2 Noncontravention...................................................25
5.3 Claims.............................................................25
5.4 Brokers and Finders................................................26
5.5 Title..............................................................26
ARTICLE 6. COVENANTS OF METROPOLITAN, THE BANK AND THE SHAREHOLDERS..........26
6.1 Conduct of Business................................................26
6.2 Access to Information..............................................28
6.3 Acquisition Proposals..............................................28
6.4 Further Assurances.................................................28
6.5 Metropolitan's Preclosing Transfer of Intangibles to Phoenix.......29
6.6 Distribution of Phoenix Common Stock to Metropolitan
Prior to Closing................................................29
6.7 Additional Covenants of the Shareholders...........................29
6.8 Appraisal of Phoenix...............................................30
6.9 Resignation of Bank Employees......................................30
6.10 Fairchild's Resignation as a Director of Metropolitan..............30
6.11 Tag Along Rights...................................................30
6.12 Take Along Rights..................................................32
6.13 Warehousing Line to Phoenix........................................33
6.14 Subservicing Arrangements..........................................33
6.15 Joint Office Sharing...............................................34
6.16 Termination of Prior Agreements....................................34
6.17 Transition Services; Cooperation...................................34
6.18 Insurance..........................................................34
6.19 Tax Matters........................................................35
ARTICLE 7. CONDITIONS PRECEDENT..............................................38
7.1 Shareholders' Conditions...........................................38
7.2 Metropolitan's Conditions..........................................39
7.3 Joint Conditions...................................................39
ARTICLE 8. ADDITIONAL UNDERTAKINGS AND AGREEMENTS............................40
8.1 Survival of Representations, Warranties and Covenants..............40
8.2 Indemnification....................................................40
ARTICLE 9. MISCELLANEOUS PROVISIONS..........................................43
9.1 Termination........................................................43
9.2 Assignment.........................................................44
9.3 Notices............................................................44
9.4 Choice of Law......................................................46
9.5 Entire Agreement; Amendments and Waivers; No Third Party
Beneficiaries................................................46
9.6 Severability.......................................................46
9.7 Expenses...........................................................46
9.8 Confidential Information...........................................47
9.9 Cooperation........................................................47
9.10 Construction.......................................................48
9.11 Counterparts.......................................................48
9.12 Spousal Joinder and Consent........................................48
9.13 Right to Specific Performance......................................48
9.14 Attachment of Schedules............................................48
EXHIBITS
Exhibit A - Form of Promissory Note
Exhibit B - Officers' Certificates
Exhibit C - Form of Opinion of Counsel to Shareholders
Exhibit D - Form of Opinion of Counsel to Metropolitan
STOCK REDEMPTION AGREEMENT
This STOCK REDEMPTION AGREEMENT (this "Agreement") is made and entered into
as of July 11, 1996 by and among Metropolitan Bancorp, a Washington
corporation ("Metropolitan"), Metropolitan Federal Savings and Loan of
Seattle, a federally chartered savings and loan association (the "Bank") and
John Fairchild ("Mr. Fairchild") and Sheryl Nilson ("Ms. Nilson"). Mr.
Fairchild and Ms. Nilson are referred to collectively as the "Shareholders."
RECITALS
WHEREAS, Metropolitan owns all of the issued and outstanding shares of
common stock of Metropolitan Federal Savings and Loan Association of Seattle,
a federally chartered savings and loan association (the "Bank"), and the Bank
owns all of the issued and outstanding shares of common stock of Phoenix
Mortgage & Investment, Inc., a Washington corporation ("Phoenix");
WHEREAS, Metropolitan has entered into an Agreement and Plan of Merger
dated as of July 11, 1996, with Washington Federal, Inc. ("Washington
Federal"), pursuant to which Metropolitan is to be merged with and into
Washington Federal;
WHEREAS, a condition to the merger is that Metropolitan spinoff Phoenix
prior to the consummation of the merger of Metropolitan with and into
Washington Federal;
WHEREAS, Mr. Fairchild and Ms. Nilson, two of the shareholders of
Metropolitan, are willing to acquire 81% of the issued and outstanding shares
of the common stock of Phoenix, and Metropolitan is prepared to transfer that
interest to the Shareholders in exchange for 158,717 of the Shareholders'
shares of common stock in Metropolitan;
WHEREAS, in order to consummate the spinoff, the Bank will dividend to
Metropolitan all of the issued and outstanding shares of Phoenix immediately
prior to the consummation of the redemption of the Shareholders' shares of
Metropolitan's common stock pursuant to the terms of this Agreement, which
shares will then be transferred to the Shareholders as part of the
consideration for redeeming their shares of the common stock of Metropolitan;
WHEREAS, Metropolitan desires to acquire the balance of the Shareholders'
shares of the Metropolitan common stock, constituting an additional 294,580
shares, in exchange for $4,519,785.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual promises of
the parties hereto, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1. DEFINITIONS
1.1 Definitions
Certain terms are defined elsewhere in this Agreement. Unless the context
otherwise requires, for the purposes of this Agreement, the following terms
have the respective meanings ascribed below:
"Accounting Firm" has the meaning set forth in Section 3.5(c).
"Accounting Principles" has the meaning set forth in Section 4.4.
"Acquisition Proposal" has the meaning set forth in Section 6.3.
"Agencies" means FHLMC, FNMA, GNMA, FHA, VA and any applicable federal or
state agency with authority to regulate the business of Metropolitan, Phoenix,
or Phoenix Escrow.
"Agreement" means this Stock Redemption Agreement, including the
Schedules and Exhibits hereto and all amendments hereof and thereof.
"Audited Net Worth" has the meaning set forth in Section 3.5.
"Bank" means Metropolitan Federal Savings and Loan Association of
Seattle, a federally chartered savings and loan association.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks in Seattle, Washington, are authorized or obligated by law to
be closed.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section 3.1.
"Closing Statement" has the meaning set forth in Section 3.5.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" has the meaning set forth in Section 9.8.
"Current Pipeline" means, with respect to any date of determination, all
rights and obligations with respect to those applications for Mortgage Loans
that are listed on attached Schedule 1.1(a), as then amended pursuant to
Section 6.2.
"Dispute Adjustments" has the meaning set forth in Section 3.5(b).
"Disputes Arbiter" has the meaning set forth in Section 3.5(d).
"Dollar" or "$" means the coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public
and private debts.
"Employee Benefit Plan" has the meaning set forth in Section 4.13.
"Encumbrance" means any encumbrance, lien, charge, pledge, mortgage,
title retention agreement, security interest, adverse claim, exception,
reservation, restriction, any matter capable of registration against title,
option, privilege, voting arrangements, or any agreement, indenture, contract,
option, instrument or other commitment, whether written or oral, to create any
of the foregoing, except, with respect to references to any encumbrances to
the Shareholders' shares of Metropolitan Common Stock, for such encumbrances
initially made in favor of Metropolitan, the Bank or their affiliates.
"Environmental Law" means and includes, without limitation, any and all
applicable laws, statutes, ordinances, rules, regulations, orders or
determinations of any federal, state or local Governmental Authority now or
hereafter existing pertaining to health or to the environment, and relating to
the Purchased Assets, including the Clean Air Act, as amended, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended ("CERCLA"), the Federal Water Pollution Control Act Amendments, the
Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, the Hazardous Materials
Transportation Act of 1975, as amended, the Safe Drinking Water Act, as
amended, and the Toxic Substances Control Act, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Funds" means the aggregate of all trust funds held by Phoenix or
Phoenix Escrow.
"FHA" means the Federal Housing Administration, or any successor thereof.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"Final Balance Sheet" has the meaning set forth in the first sentence of
Section 3.5.
"FNMA" means the Federal National Mortgage Association.
"GNMA" means the Government National Mortgage Association, or any
successor thereof.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Initiator" has the meaning set forth in Section 3.5(d)(i).
"Intangibles" means certain intangible assets of Metropolitan listed on
Schedule 1.1(c), including all intangible assets, obtained at the time
Metropolitan, together with its wholly owned subsidiary, Metropolitan Phoenix,
Inc., acquired certain assets, and assumed certain liabilities, of Phoenix
Mortgage & Investment, Inc., and constituting assets of Phoenix on or before
the Closing.
"Investor" means a Private Investor, the Bank, or an Agency.
"Liabilities" means liabilities, direct, secondary, or contingent, of
Metropolitan and the Bank as defined in Section 3.3.
"Merger" means the merger of Metropolitan with and into Washington
Federal, pursuant to the terms and conditions of the Agreement and Plan of
Merger, dated as of July 11, 1996, as such may be amended.
"Metropolitan" means Metropolitan Bancorp, a Washington corporation
"Metropolitan Common Stock" means the common stock, par value $.01 per
share, of Metropolitan as authorized in its articles of incorporation as such
articles exist at Closing.
"Metropolitan Portfolio Loans" means Mortgage Loans held by Metropolitan
or the Bank.
"Metropolitan's Auditor" has the meaning set forth in Section 3.5.
"Mortgage" means a mortgage, deed of trust, security deed, trust deed or
other real estate security instrument securing a promissory note and creating
a lien on the real estate securing the note, which instrument is customarily
used for such purpose in the jurisdiction where the real estate is located and
originated by Phoenix.
"Mortgage Loans" means mortgage loans evidenced by a Mortgage Note and
secured by a Mortgage on a one- to four-family residence.
"Mortgage Note" means the written promise to pay a sum of money at a
stated interest rate during a specified term and secured by a Mortgage.
"Phoenix" means Phoenix Mortgage & Investment, Inc., a Washington
corporation.
"Phoenix Common Stock" means the common stock, par value $0.01 per share,
of Phoenix as authorized in its articles of incorporation as such articles
exist at Closing.
"Phoenix Escrow" means Phoenix Escrow, Inc., a wholly owned subsidiary of
Phoenix.
"Phoenix Financial Statements" means the financial statements of Phoenix
described in Section 4.4.
"Phoenix's Net Worth" means Phoenix's total stockholders' equity,
computed as of the Closing Date, as stated on the Final Balance Sheet plus (i)
the amount of origination and other fees, the recognition of which is deferred
under generally accepted accounting principles until the sale of the related
loan, relating to Mortgage Loans that have not been sold or delivered to
Investors on or before the Closing Date, less a provision for federal and
state taxes on such fees; and minus (ii) $1 representing the intangibles
recorded on the Final Balance Sheet.
"Prior Agreements" means the specific agreements referenced in Section
6.16.
"Private Investor" means an owner or holder of a Mortgage Loan other than
the Agencies and the Bank.
"Promissory Note" means a Promissory Note of Metropolitan, referenced in
Section 2.2(b) of this Agreement, to be executed and delivered to each of the
Shareholders as partial consideration for redeeming the Shareholders'
Metropolitan Shares, the form of which is attached hereto as Exhibit A.
"Recipient" has the meaning set forth in Section 3.5(d)(i).
"Redemption Price" has the meaning set forth in Section 2.2, as such
Redemption Price may be adjusted pursuant to Section 2.3.
"Related Party" means any company, trade or business that is a member of
the same controlled group of corporations (within the meaning of Section
4l4(b) of the Code), group of trades or businesses under common control
(within the meaning of Section 414(c) of the Code), or affiliated service
group (within the meaning of Section 414(m) or 414(o) of the Code) as
Metropolitan or the Bank., other than Phoenix as relates to its 40l(k) plan.
In addition, "Related Party" does not refer to any person who will become a
Related Party of Metropolitan or the Bank as a result of the Merger, which is
to be consummated immediately following the redemption of the Shareholders'
Metropolitan Shares pursuant to this Agreement.
"Report" has the meaning set forth in Section 6.4.
"Shareholders" means Mr. Fairchild and Ms. Nilson.
"Shareholders' Auditor" means Deloitte & Touche.
"Shareholders' Metropolitan Shares" means the 453,297 shares of the
Metropolitan Common Stock owned by the Shareholders, representing their entire
equity interest in Metropolitan, which are to be redeemed by Metropolitan
pursuant to the terms of this Agreement.
"Threshold Amount" has the meaning set forth in Section 8.2(a).
"VA" means the U.S. Department of Veterans Affairs, or any successor
thereof.
"Warehouse Loans" means all Mortgage Loans owned by Phoenix as of the
Closing Date other than the Metropolitan Portfolio Loans.
"Warehousing Line" means the warehousing financing referenced in Section
6.13.
"Washington Federal" means Washington Federal, Inc., a Washington
corporation.
1.2 References
(a) Words used herein denoting the singular include the plural and vice
versa, and pronouns of whatever gender will be deemed to include and designate
the masculine, feminine or neuter gender. When used herein, unless the
context otherwise clearly requires, the words "or" and "including" will not be
construed to be a limitation or exclusive but will be construed to be
inclusive.
(b) Unless the context otherwise requires, references to Article,
Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and
Schedules of or to this Agreement. Article and Section headings are for ease
of reference only and will not affect the construction of this Agreement.
(c) All references herein to any law, rule, regulation, agreement or other
instrument will be deemed to be references to such law, rule, regulation,
agreement or other instrument as amended from time to time.
(d) References to Metropolitan and the Bank herein shall, to the extent
applicable, refer to any successor thereof as well.
ARTICLE 2. REDEMPTION OF SHAREHOLDERS'
METROPOLITAN SHARES
2.1 Redemption of Shareholders' Metropolitan Shares
Upon the terms and subject to the conditions hereof and in reliance upon
the agreements, representations and warranties contained herein, at the
Closing, (a) Metropolitan shall redeem from the Shareholders the Shareholders'
Metropolitan Shares, and (b) Shareholders shall assign, transfer, convey and
deliver to Metropolitan all right, title, interest and benefit of the
Shareholders in the Shareholders' Metropolitan Shares free and clear of any
and all Encumbrances.
2.2 Redemption Price
In full consideration for the Shareholders' Metropolitan Shares, and
subject to the terms and conditions of this Agreement, at the Closing,
Metropolitan shall pay to the Shareholders the redemption price (the
"Redemption Price") as follows:
(a) Metropolitan shall assign, transfer, convey and deliver to the
Shareholders 81 shares of the Phoenix Common Stock, free and clear of any and
all Encumbrances, representing 81% of the issued and outstanding shares of the
Phoenix Common Stock, such shares to be allocated as follows: 46.5172% to Mr.
Fairchild and 34.4828% to Ms. Nilson; and
(b) Metropolitan shall execute and deliver to Mr. Fairchild a Promissory
Note, dated as of the Closing Date, in the amount of $4,145,978 and to Ms.
Nilson a Promissory Note, dated as of the Closing Date, in the amount of
$373,807, each such Promissory Note to be in the form attached hereto as
Exhibit A.
2.3 Adjustment to Redemption Price
(a) In the event that Phoenix's Net Worth as determined pursuant to
Section 3.5 is more than $1,900,000, the Shareholders shall cause Phoenix to
pay to Metropolitan, in accordance with Section 3.6, the amount of the excess.
(b) In the event that Phoenix's Net Worth as determined pursuant to
Section 3.5 is less than $1,900,000, Metropolitan shall pay to Phoenix, in
accordance with Section 3.6, the amount of the deficit.
ARTICLE 3. THE CLOSING
3.1 Time of Closing
The consummation of the redemption contemplated by this Agreement (the
"Closing") will take place at the offices of Perkins Coie located at 1201
Third Avenue, Seattle, Washington, at 10:00 a.m., Pacific daylight time, on
the first Business Day after the conditions specified in Article 7 have been
fulfilled, which date must be on or before the last date for consummating the
Merger, or at such other place, time or date as Metropolitan and the
Shareholders mutually agree (the "Closing Date").
3.2 Deliveries
(a) At the Closing, the Shareholders will deliver to Metropolitan:
(i) stock certificates representing all the Shareholders'
Metropolitan Shares duly executed in blank or accompanied by duly executed
instruments of transfer, and any other documents that are reasonably necessary
to transfer to Metropolitan all right, title and interest in the Shareholders'
Metropolitan Shares free and clear of any and all Encumbrances;
(ii) the releases of all Liabilities required by Section 3.3;
(iii) a certificate in the form attached hereto as Exhibit B(1) dated
the Closing Date and executed by the Shareholders;
(iv) opinions of the Shareholders' counsel in the form attached
hereto as Exhibit C; and
(v) all other documents, instruments and papers as are reasonably
necessary for the consummation of the transactions contemplated by this
Agreement and as Metropolitan may reasonably request.
(b) At the Closing, Metropolitan will deliver to the Shareholders:
(i) stock certificates for 81 shares of the Phoenix Common Stock,
representing 81% of the issued and outstanding shares of Phoenix as of the
Closing Date, duly executed in blank or accompanied by duly executed
instruments of transfer, and any other documents that are reasonably necessary
to transfer to the Shareholders all right, title and interest in such shares
of Phoenix Common Stock free and clear of any and all Encumbrances; such
shares are to be allocated between the Shareholders as provided in Section
2.2;
(ii) certificates in the form attached hereto as Exhibit B(2) dated
the Closing Date and executed by the President and the Secretary of
Metropolitan and the Bank;
(iii) the two Promissory Notes dated as of the Closing Date, in the
form attached hereto as Exhibit A, in the original principal amount required
by Section 2.2(b), payable to each of the Shareholders;
(iv) certified copies of resolutions of the Board of Directors of
Metropolitan authorizing the redemption of the Shareholders' Metropolitan
Shares in accordance with this Agreement;
(v) certified copies of the resolutions of the Board of Directors of
Metropolitan and the Bank authorizing Metropolitan and the Bank to execute and
perform their respective obligations under this Agreement;
(vi) an opinion of Metropolitan's counsel in the form attached hereto
as Exhibit D; and
(vii) all other documents, instruments and papers as are reasonably
necessary for the consummation of the transactions contemplated by this
Agreement and may be reasonably requested by the Shareholders.
3.3 Release of Bank and Metropolitan from Liabilities
On or prior to the Closing Date, the Shareholders will arrange for
Metropolitan and the Bank to be fully and completely released, at no cost or
expense to Metropolitan or the Bank, from: (a) any and all liabilities with
respect to the Escrow Funds; and (b) any and all other liabilities, if any,
except those arising in respect of or related to an obligation of Metropolitan
hereunder to indemnify the Shareholders, of either Phoenix or Phoenix Escrow
that have been assumed or guaranteed by Metropolitan or the Bank, secured by
assets of Metropolitan or the Bank, or as to which Metropolitan or the Bank
has, or may have, any liability, whether direct, secondary or contingent (all
such liabilities herein referred to collectively as the "Liabilities").
3.4 Closing Net Worth
Metropolitan and the Bank shall use their best efforts to ensure that, on
the Closing Date and just prior to Closing, Phoenix shall have a Phoenix's Net
Worth, determined in accordance with the Accounting Principles, of $1,900,000,
after taking into account an adjustment to eliminate all intercompany
balances.
3.5 Final Balance Sheet
The "Final Balance Sheet" shall be prepared, examined, any disputes in
respect thereof resolved, and finally determined according to the provisions
of this Section 3.5.
(a) Within forty-five (45) Business Days after the Closing Date, the
Shareholders shall provide to Metropolitan a balance sheet of Phoenix as of
the Closing Date, certified by the Shareholders' Auditor as presenting the
various items therein in accordance with the Accounting Principles, after
taking into account an adjustment to eliminate all intercompany balance (the
"Closing Statement"), and a calculation based upon the Closing Statement
showing Phoenix's Net Worth, certified by the Shareholders' Auditor in a
manner in form and substance satisfactory to the Shareholders as being
performed in accordance with this Agreement (the "Audited Net Worth"). The
audit and certifications by the Shareholders' Auditor shall be paid for by
Metropolitan; provided, however, that Phoenix or the Shareholders may pay the
Shareholders' Auditors fees on behalf of Metropolitan and seek reimbursement
pursuant to Section 3.6(a)(iv).
(b) Metropolitan shall have fifteen (15) Business Days after receipt of
the Closing Statement in which it and a nationally recognized independent
certified public accounting firm retained for such purpose ("Metropolitan's
Auditor") may examine the Closing Statement and such underlying records as
Metropolitan's Auditor deems necessary and appropriate to express an opinion
of the Closing Statement. The Shareholders and Shareholder's Auditor shall
cooperate fully and promptly with Metropolitan and Metropolitan's Auditor in
such examination and shall cause Phoenix promptly to make available to
Metropolitan and Metropolitan's Auditor any records under Phoenix's reasonable
control requested by Metropolitan and Metropolitan's Auditor in accordance
with the immediately preceding sentence. At the conclusion of the fifteen
(15) day period, Metropolitan must either accept the Closing Statement and the
Audited Net Worth as final (in which case they shall be deemed to have been
determined to be the Final Balance Sheet and Phoenix's Net Worth) or provide
the Shareholders with a set of proposed adjustments to the Closing Statement,
whose effect would result in a change in the Shareholders' calculation of
Audited Net Worth in excess of $25,000, concurred in by Metropolitan's Auditor
as being necessary to present the various items in the Closing Statement in
accordance with the Accounting Principles, after taking into account an
adjustment to eliminate all intercompany balances ("Dispute Adjustments'). If
Metropolitan does not provide Dispute Adjustments within the required fifteen
(15) day period, the Closing Statement and the Audited Net Worth shall become
final (in which case they shall be deemed to have been determined to be the
Final Balance Sheet and Phoenix's Net Worth).
(c) If Dispute Adjustments are timely delivered, the parties shall, for a
period of ten (10) Business Days thereafter, seek in good faith to resolve in
writing the matters of dispute giving rise to Dispute Adjustments.
(d) Following the ten (10) day period set forth in Section 3.5(c), either
party may invoke the process set forth in this Section 3.5(d) to select a
partner in a nationally recognized independent certificate public accounting
firm (other than those of a Shareholders' Auditor and Metropolitan's Auditor)
who shall resolve the matters of dispute giving rise to Dispute Adjustments in
accordance with Section 3.5(e) (the "Disputes Arbiter").
(i) Either the Shareholders or Metropolitan (the "Initiator") may
initiate the following selection process by notifying the Initiator's Auditor
and the other party (the "Recipient") in writing that it seeks the appointment
of a Disputes Arbiter.
(A) The Recipient shall then, within five (5) Business Days, notify
the Recipient's Auditor in writing (with a copy to the Initiator and the
Initiator's Auditor) to contact the Initiator's Auditor for the purpose of
selecting a Disputes Arbiter in accordance with this Section 3.5(d).
(B) Within five (5) Business Days after the Recipient's Auditor is
notified pursuant to Section 3.5(d)(i)(A), each of the Auditors shall select a
partner in their respective Seattle offices who has not worked on this matter
(each such partner, a "Resolution Partner") and shall notify the other and the
parties of such selection.
(C) Within five (5) Business Days of the selection of the two
Resolution Partners, such partners shall select a Disputes Arbiter. If the
two Resolution Partners cannot agree on a Disputes Arbiter, at the end of the
five (5) day period set forth in the preceding sentence, each Resolution
Partner shall nominate one qualified partner to be Disputes Arbiter and shall
notify Metropolitan and the Shareholders of such nomination in writing. If
Metropolitan and the Shareholders do not agree within five (5) Business Days
which of the two nominees shall be the Disputes Arbiter, at noon on the next
Business Day at the offices of the Initiator's nominee in the presence of the
two Resolution Partners, the Initiator's nominee shall flip a quarter in such
a manner that it falls at least five feet to rest on a flat surface, and the
Recipient's nominee shall call "heads" or "tails" while the quarter is in the
air. If the Recipient's nominee calls the flip correctly, he or she shall be
the Disputes Arbiter, otherwise the Initiator's nominee shall be the Disputes
Arbiters.
(ii) The following consequences shall result if a party misses a
deadline in the process set forth in Section 3.5(d)(i):
(A) If the Recipient fails to notify its Auditor to ace in
accordance with Section 3.5(d)(a)(A) and to send a copy of such notice to the
Initiator (in accordance with the provisions of Section 9.3 within the time
frame required by Section 3.5(d)(i)(A)), then the Initiator's position on the
disputed matters giving rise to the Dispute Adjustments shall be deemed
correct, and the Final Balance Sheet and Phoenix's Net Worth shall be prepared
based on the Initiator's position in respect of such matters (in which case
they shall be deemed to have been determined to be the Final Balance Sheet and
Phoenix's Net Worth).
(B) If a party's Auditor fails to notify the other party or the
other party's Auditor (in accordance with the provisions of Section 9.3 of the
Resolution Partner it has selected within the time frame required by Section
3.5(d)(i)(B)), then the Resolution Partner selected by the other party's
Auditor shall select the Disputes Arbiter.
(C) If the two Resolution Partners have not agreed on a Disputes
Arbiter within the time frame required by the first sentence of Section
3.5(d)(i)(C) and a party's Resolution Partner has not provided notice of its
nominee for disputes Arbiter.
(D) If a party's Resolution Partner or such partner's nominee is
not present for the coin flip required by the penultimate sentence of Section
3.5(d)(i)(C), then the other party's Resolution Partner's nominee shall be the
Disputes Arbiter.
(e)
(i) By no later than five (5) Business Days after the Disputes
Arbiter's selection, the Disputes Arbiter shall notify each party in writing
of the schedule for the dispute resolution proceeding. At a minimum, the
schedule shall include: a deadline for written submissions not less than
fifteen (15) nor more than twenty (20) Business Days after the Disputes
Arbiter's selection; an oral presentation session to be held at a location
specified by the Disputes Arbiter may be scheduled by the Disputes Arbiter as
soon as possible thereafter but no later than fifteen (15) Business Days after
the deadline for written submissions. Written submissions may be sent via
facsimile, with the original and any supporting documentation to follow by
reputable overnight carrier. Any written materials submitted under this
Section 5(3) shall be sent to the Disputes Arbiter and the other party at the
same time and in the same manner.
(ii) Each party's written submission shall include what it believes
the final Balance Sheet and Phoenix's Net Worth to be, without being
constrained by positions previously taken in the Closing Statement, Audited
Net Worth or Dispute Adjustments; provided, however, that the calculation of
Phoenix's Net Worth proposed in Metropolitan's submission must be at least
$25,000 different from the calculation of Audited Net Worth shall be prepared
based on the Closing Statement and the Audited Net Worth (in which case they
shall be deemed to have been determined to be the Final Balance Sheet and
Phoenix's Net Worth). Each party may incorporate such supporting
documentation into its submission as it deems appropriate.
(iii) Metropolitan and the shareholders shall, subject to the
penultimate sentence of this Section 3.5(e)(iii), have the right to be present
at the oral presentation at all times, accompanied by such advisers as they
see fit. the Disputes Arbiter shall, in his or her sole discretion, establish
a time limitation (which shall be the same for each party) during which each
party may present its position on the matters in dispute. Metropolitan shall
present its position first, and the Shareholders shall present their position
second. The presentations shall be informal, with a party speaking for itself
or allowing its advisers to present its position. The presentations may
include supplemental documentation rebutting claims made or documentation
contained in the other party's written submission. Following the
presentations, the Disputes Arbiter may question the parties and moderate the
parties' questions of each other. The Disputes Arbiter may, after one
specific warning, order the departure of any individual who refuses to abide
by the disputes Arbiter's authority to control the session and to moderate the
parties' questioning of each other. If a party fails to attend the oral
presentation session, the party in attendance shall provide the Disputes
Arbiter with the absent party's Closing Statement and calculation of Audited
Net Worth or dispute Adjustments, as the case may be.
(iv) The Disputes Arbiter shall, upon a review of all documentation,
testimony and argument determine the credibility and relevance of the
documentation and testimony offered. The Disputes Arbiter may, in his or her
sole discretion, require or allow the submission of further documentation
following the oral presentation session, which shall be provided within ten
(10) Business Days after the oral presentation session; provided however, that
the party not submitting the further documentation shall have five (5)
additional Business Days to comment on it. The Disputes Arbiter shall be
entitled to draw reasonable inferences from a party's failure to provide
further documentation within the required time frame.
(v) Promptly after considering all documentation and testimony, and
without any adjustment, the Disputes Arbiter shall decide which of the
parties' submissions (whether submitted by the party or on its behalf pursuant
to the last sentence of Section 3.5(3)(iii) most fairly presents the Final
Balance Sheet. The Disputes Arbiter shall notify the parties which submission
most fairly presents the Final Balance Sheet, and the Final Balance Sheet and
the calculation of Phoenix's Net Worth submitted by such party shall be deemed
final and to have been determined to be the Final Balance Sheet and Phoenix's
Net Worth, thus resolving the parties' dispute. The Disputes Arbiter shall
further determine and award to the prevailing party pursuant to Section
3.6(ii,iii); (A) interest on the amount of the adjustment determined pursuant
to Section 2.3 at the rate of twelve percent (12%) per annum from the Closing
Date, and (B) the prevailing party's actual outside adviser fees (including
without limitation its legal counsel) incurred during the course of the
dispute resolution process set forth in Section 3.5(d,e). The decision of the
Disputes Arbiter shall be final and binding on the parties. The Disputes
Arbiter shall resolve the parties' dispute even if one of the parties failed
to provide a written submission or to attend the oral presentation session.
(vi) The losing party shall bear one hundred percent (100%) of the
fees and costs of the Dispute Arbiter; provided, however, that either party
may pay up to one hundred percent (100%) of the Disputes Arbiter's fees and
costs and recover the other party's share of the fees and costs, if any,
pursuant to Section 3.6(a)(iv). In resolving the parties' dispute, the
Disputes Arbiter shall not be required to follow the practices and procedures
that would be required for any audit in accordance with GAAS and shall not be
required to issue any report, opinion or certification in respect of the Final
Balance Sheet or Phoenix's net Worth. The Disputes Arbiter (and, for purposes
of this Section 3.5(3)(vi), his or her firm and other partners) shall have no
liability whatsoever to the parties hereto or any other person or entity for
any action taken or omitted to be taken by the Disputes Arbiter with respect
to the parties' dispute, unless it is finally judicially determined that such
liability was caused by fraud or intentional misconduct on the part of the
Disputes Arbiter. The parties hereby agree jointly and severally to indemnify
and to hold harmless the Disputes Arbiter in respect of any and all
liabilities, costs and expenses (including reasonable attorney fees and
expenses), incurred or suffered by reason of or in any way relating to the
parties' dispute, except to the extent that it is finally judicially
determined that any such liability, cost or expense was caused by fraud or
intentional misconduct on the part of the Disputes Arbiter. The parties shall
agree to abide by such further terms and conditions, consistent with the
philosophy of this Section (3.5(e)(vi), as the Disputes Arbiter may reasonably
request. Any Disputes Arbiter selected under this Section 3.5 is an intended
beneficiary of the provisions of this Section 3.5(3)(vi).
3.6 Settlement of Obligations
(a) Within five (5) Business Days of the determination of the Final
Balance Sheet and Phoenix's Net Worth, the obligor shall deliver, by wire
transfer, in immediately available funds, in accordance with the obligee's
instructions, the amount of (i) the payment due pursuant to Section 2.3, plus
(ii) interest, if any, due pursuant to Section 3.5(e)(v), plus (iii) any aware
of adviser fees pursuant to Section 3.5(e)(v), plus (iv) any allocation of the
Disputes Arbiter's fee and costs under Section 3.5(e)(vi), all adjusted by (v)
any fees paid by one party on behalf of the other, but only to the extent
expressly authorized by Section 3.5
(b) If a party obligated to make a payment under Section 3.6(a) fails to
make such a payment, the obligee may immediately seek enforcement of such
obligations in a court of competent jurisdiction. The prevailing party shall
further be entitled to an award of any costs and fees (including without
limitation those of its legal counsel) incurred to obtain enforcement of an
obligation arising under Sections 3.5 and 3.6. Each party hereby consents to
the jurisdiction and venue of the federal and state courts in King County,
Washington for the purpose of enforcing this Section 3.6 Phoenix's Net Worth.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
OF METROPOLITAN AND THE BANK
Metropolitan and the Bank represents and warrants to the Shareholders as
follows, as of the date of this Agreement and as of the Closing Date, except
as may be set forth in writing by Metropolitan delivered to the Shareholders
in Metropolitan's Disclosure Letter and except as qualified by the final
paragraph of Article 4:
4.1 Organization and Qualification of Phoenix
Metropolitan is a corporation duly organized, validly existing and in good
standing under the laws of Washington, and Phoenix and Phoenix Escrow each is
a corporation duly organized, and is validly existing and in good standing
under the laws of Washington. Each of Metropolitan, Phoenix, and Phoenix
Escrow is duly qualified and authorized, and has obtained all necessary
approvals or exemptions, to do business in those states where the nature of
its activities or the character of the properties owned, leased or operated by
it requires such qualification and where failure so to qualify would have a
material adverse effect on business, operations, assets or financial
condition. The copies of the articles of incorporation and bylaws of each of
Metropolitan, Phoenix, Phoenix Escrow, which have been previously delivered to
the Shareholders, are true and complete.
4.2 Capitalization; Stock Ownership
On the Closing Date, the authorized capital stock of Metropolitan will
consist of 40,000,000 shares of common stock, par value $0.01 per share, of
which 3,710,205 shares will be issued and outstanding, and the capital stock
of Phoenix will consist of 50,000 shares of common stock, par value $0.01 per
share, of which 100 shares will be issued and outstanding. On the Closing
Date, Metropolitan will own all the outstanding shares of stock of Phoenix in
the amounts set forth on the attached Schedule 4.2, free and clear of all
Encumbrances, and Phoenix will own all the outstanding shares of stock of
Phoenix Escrow in the amounts set forth on the attached Schedule 4.2 free and
clear of all Encumbrances. On the Closing Date, there will be no outstanding
options, warrants, subscriptions, rights or agreements for the purchase or
acquisition from Metropolitan of any shares or securities exchangeable for or
convertible into shares of Phoenix or from Phoenix of any shares or securities
exchangeable for or convertible into shares of Phoenix Escrow.
4.3 Authority Relative to Agreement
Metropolitan has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement by Metropolitan and the Bank and the
consummation by it of the transactions contemplated hereby (a) have been duly
and validly authorized by all necessary corporate action, (b) except as set
forth on Schedule 4.3, do not otherwise require the consent, waiver, approval,
license or authorization of, or filing or registration with or notification
to, any person, entity or Governmental Authority (other than those that have
been made or obtained), (c) do not violate any provision of law applicable to
Metropolitan or the Bank, or the articles of incorporation or bylaws of
Metropolitan or the Bank, and (d) do not, with or without the giving of notice
or the passage of time, conflict with or result in a breach or termination of
any provision of, or constitute a default under, or result in the creation of
any lien, charge or encumbrance upon any of the property or assets of
Metropolitan or the Bank pursuant to, any mortgage, deed of trust, indenture,
license or other material agreement or instrument, or any law or other
restriction of any kind or character, to which Metropolitan is a party or by
which Metropolitan or any of its assets may be bound. This Agreement has been
duly executed and delivered by Metropolitan and the Bank and is a valid and
binding obligation of Metropolitan and the Bank enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, conservatorship, receivership, moratorium and other laws affecting
the rights of creditors generally and subject to general principles of equity,
including without limitation those regarding the availability of specific
performance.
4.4 Financial Statements; Balance Sheet Items
Phoenix's audited balance sheets as of March 31, 1996 and 1995 and the
related audited statements of operations, stockholders' equity and cash flows
for the years then ended, including the notes thereto, audited by independent
certified public accountants as reflected therein (collectively, the "Phoenix
Financial Statements"), true and complete copies of which have been previously
delivered to the Shareholders present fairly, in all material respects, the
financial position of Phoenix at March 31, 1996 and 1995 and the results of
its operations and cash flows for the years then ended in conformity with
generally accepted accounting principles (the "Accounting Principles"). The
unaudited balance sheet of Phoenix as of June 30, 1996 as reviewed by
Deloitte & Touche under SAS 71, copies of which are attached hereto as
Schedule 4.4, and the unaudited statement of income for the three-month period
ended June 30, 1996, copies of which as reviewed by Deloitte & Touche will be
delivered to the Shareholders within 15 days hereof, and the unaudited
statement of income for the three-month period ended June 30, 1995 present
fairly, in all material respects, the financial position of Phoenix at June
30, 1996 and the results of its operations for the three-month periods ended
June 30, 1996 and 1995 in conformity with the Accounting Principles.
4.5 No Undisclosed Liabilities
Since June 30, 1996, except for the transactions contemplated by this
Agreement:
(a) Phoenix has not incurred any material liability or obligation
(absolute, accrued, contingent or otherwise) of any nature, other than
liabilities and obligations incurred in the ordinary course of business, that
would properly be reflected or reserved against in a balance sheet prepared in
conformity with the Accounting Principles with that used in the preparation of
the balance sheet of Phoenix at June 30, 1996 referred to in Section 4.4; and
(b) Phoenix has not acquired any material amount of accounts receivable
that are or are believed to be uncollectible, and the frequency and amounts of
payments received by Phoenix with respect to the accounts receivable reflected
on the balance sheet of Phoenix at June 30, 1996 referred to in Section 4.4 do
not, in retrospect, render inadequate the reserve for uncollectible accounts
set forth on such balance sheet.
4.6 Absence of Certain Changes
Except as otherwise contemplated by this Agreement, since June 30, 1996 (a)
Phoenix has conducted its business only in the ordinary and usual course
consistent with past practices; (b) there has not been any material adverse
change in the condition (financial or otherwise), results of operations,
assets, properties, business, operations or prospects of Phoenix or Phoenix
Escrow, or to the extent there has been such a material adverse change,
it will be fully reflected in Phoenix's Closing Balance Sheet, (c) Phoenix has
not lost any major accounts, or suffered or knows of any impending similar
material loss.
4.7 Permits, Authorizations
Each of Phoenix and Phoenix Escrow possesses, and is current and in good
standing under, all approvals, authorizations, consents, licenses, orders and
other permits of FNMA, FHLMC, and all other Governmental Authorities required
to permit its operations as currently conducted. Neither Phoenix nor Phoenix
Escrow has received any notice that any Governmental Authority intends to
cancel, terminate or not renew any such approval, authorization, consent,
license, order or other permit.
4.8 Compliance With Applicable Law
Each of Phoenix and Phoenix Escrow has conducted, and is in the conduct of,
its business, obligations relating to the Current Pipeline and the Escrow
Funds, and all sales of Mortgage Loans and Servicing Agreements have been
entered into by Phoenix, in material compliance with all laws, statutes,
rules, ordinances, regulations, licenses, permits, standards, requirements,
administrative rulings, orders or processes applicable to it and to the
processing, originating, underwriting and servicing of the applications listed
on Schedule 1.1(a), as amended, including, without limitation, those laws
relating to real estate settlement procedures, consumer credit protection,
truth in lending laws, usury limitations, fair housing, transfers of
servicing, collection practices, equal credit opportunity and adjustable rate
mortgages. Each of Phoenix and Phoenix Escrow has duly filed with the
applicable Agency or Governmental Authority any material reports, applications
or other documents or information required to be filed therewith.
4.9 Litigation; Claims
Except as set forth on attached Schedule 4.9, there is no action, suit,
arbitration or other proceeding pending or, to the best of Metropolitan's
knowledge, threatened against Phoenix or Phoenix Escrow that would
individually or in the aggregate, if decided adversely to Phoenix, have a
material adverse effect on Phoenix or that seeks to prevent or impair the
consummation of the transactions contemplated hereby. Except as set forth on
attached Schedule 4.9, there is no customer claim or dispute of which
Metropolitan is aware relating to Phoenix's or Phoenix Escrow's conduct of its
business that would, individually or in the aggregate, have a material adverse
effect on Phoenix.
4.10 Brokers and Finders
Metropolitan has not employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
Metropolitan, in connection with this Agreement or the transactions
contemplated hereby.
4.11 Environmental Matters
To the best of Metropolitan's knowledge, none of the property of Phoenix
(the "subject property") is in violation in any material respect of any
Environmental Law applicable to it. To the best of Metropolitan's knowledge,
(i) the subject property does not contain any underground storage tanks,
asbestos, ureaformaldehyde, polychlorinated biphenyls, solid wastes or
hazardous substances, as such terms may be defined by any applicable
Environmental Law, (ii) no part of such property has been listed or proposed
for listing on the National Priorities List pursuant to CERCLA or on a
registry or inventory of inactive hazardous waste sites maintained by any
Governmental Authority and no notices have been received by Metropolitan or
Phoenix alleging that Phoenix is a potentially responsible person under CERCLA
or any similar Environmental Law, and (iii) there is no suit, claim, action or
proceeding pending or threatened before any Governmental Authority in which
Phoenix in respect of the subject properties may be named as a defendant for
alleged noncompliance with any applicable Environmental Law.
4.12 Insurance
Metropolitan, Bank, Phoenix and Phoenix Escrow maintain the insurance
policies described in Schedule 4.12 on the assets or business of Phoenix or
Phoenix Escrow, all such policies of insurance coverage are in full force and
effect; the insureds are not in default with respect to any of the provisions
contained in any such insurance policy. Schedule 4.12 includes a list of all
claims filed or pending under the insurance policies. To the knowledge of
Metropolitan or the Bank, except as set forth in Schedule 4.12, there are no
events or occurrences which have occurred, or which would occur upon the
giving of notice or the lapse of time or both, that would constitute the basis
for the filing of a material claim under any insurance policy on Schedule 4.12.
4.13 Employee Benefits
(a) Schedule 4.13 lists and briefly summarizes each employee benefit plan
(other than the 40l(k) plan maintained by Phoenix, which is not the subject of
this representation, and as to which neither Metropolitan nor the Bank make
any representations or warranties) (the referenced plans herein referred to
individually as the "Employee Benefit Plan") that Phoenix or Phoenix Escrow
maintains or to which they contribute and except as provided in Schedule 4.13,
to the knowledge of Metropolitan or Bank:
(i) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) in form and in operation comply in all respects
with all applicable laws, rules, orders and regulations, including but not
limited to ERISA and the Code.
(ii) All contributions (including all employer contributions and
employee salary reduction contributions), reserves or premium payments accrued
through the Closing Date have been paid to each such Employee Benefit Plan or
otherwise provided for.
(iii) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan and is intended to qualify under Code Section 401(a) has received
a determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Code Section 401(a) and no event has occurred, no
amendment has been adopted or action taken which would cause such Plan to lose
its qualified status.
(iv) The market value of assets under each such Employee Benefit Plan
which is an Employee Pension Plan (including without limitation any
Multi-employer Plan) equals or exceeds the present value of liabilities
thereunder (determined in accordance with current funding assumptions).
(v) Metropolitan has delivered the Shareholders correct and complete
copies of the plan documents and summary plan descriptions and all material
modifications thereto, the most recent determination letter received from the
Internal Revenue Service, the most recent Form 5500 Annual Report (including
schedules attached thereto), the last financial statement and actuarial report
for each plan and trust required to have such statements and/or reports, and
all related trust agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that Metropolitan or Bank
or any Related Party of either of them maintain or ever have maintained or to
which Metropolitan or Bank or any Related Party of Metropolitan or Bank
contribute, ever have contributed, or ever have been required to contribute:
(i) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan has been completely or partially terminated or been the subject
of a Reportable Event as to which notices would be required to be filed with
the PBGC. No proceeding by the PBGC to terminate any such Employee Pension
Benefit Plan has been instituted.
(ii) No action, suit, proceeding, hearing, or investigation with
respect to any such Employee Benefit Plan (other than routine claims for
benefits) has been filed or is occurring or pending or, to Metropolitan's or
Bank's knowledge, threatened.
(iii) Neither Metropolitan or Bank (nor any of them) nor any Related
Party of either have incurred any liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA (including any
withdrawal liability) with respect to any such Employee Benefit Plan which is
an Employee Pension Benefit Plan.
(iv) No "prohibited transaction" (as such term is used in Section 406
of ERISA or Section 4975 of the Code), or "accumulated funding deficiency" (as
such term is used in Section 412 or Section 4971 of the Code) has heretofore
occurred with respect to any Employee Benefit Plan.
(v) Neither Metropolitan or Bank nor any Related Party of either
including Phoenix or Phoenix Escrow has contributed to or participated in any
Employee Pension Benefit Plan which is a "multiemployer plan," as defined in
Section 3(37) of ERISA, or in any "multiple employer" plan within the meaning
of Section 4063 or 4064 of ERISA.
(vi) The consummation of the transactions contemplated by this
Agreement will not result in an increase in the amount of compensation or
benefits or accelerate the vesting of any benefits payable to or in respect of
any employee or former employee of Phoenix or Phoenix Escrow, or beneficiary
or dependent of such employee or former employee.
(vii) Neither Metropolitan or Bank nor any Related Party of either
including Phoenix or Phoenix Escrow have any obligations for retiree health
and life benefits under any Employee Benefit Plan. There are no restrictions
on the rights of Phoenix or Phoenix Escrow to amend or terminate any Employee
Benefit Plan without incurring any liability thereunder. Neither Metropolitan
or Bank nor any Related Party have engaged in or are a successor parent
corporation to or otherwise related to an entity that has engaged in a
transaction described in ERISA Sections 4069 or 4212(c).
(viii) No tax under Code Section 4980B of the Code has been incurred
in respect of any Employee Welfare Benefit Plan that is a group health plan,
as defined in Section 5000(b)(1) of the Code.
4.14 Taxes
All returns, reports and other forms related to Taxes (as defined below)
required to be filed on or before the Closing Date with respect to Phoenix or
Phoenix Escrow under the laws of any jurisdiction, domestic or foreign, have
been filed, which returns, reports and statements are true, correct and
complete in all material respects, and all taxes, fees, and other governmental
charges of any nature whatsoever (hereinafter "Taxes") which were required to
be paid in connection with such returns, reports and forms have been paid, and
no penalties or other charges are due or will become due with respect to the
late filing of any such return, report or form. All Taxes shown to be due on
such returns, reports and forms have been paid. No audit of any such return,
report or form is pending for any period ending on or after December 31, 1994
and on or before the Closing Date with respect to Phoenix or Phoenix Escrow.
Schedule 4.14 sets forth the states in which returns, reports or forms with
respect to Phoenix or Phoenix Escrow have been filed relating to Taxes for any
year or portion of a year which ended on or after December 31, 1994. Complete
and correct copies of all federal income tax and state tax returns of or with
respect to Phoenix or Phoenix Escrow for any year or portion of a year which
ended on or after December 31, 1994, as filed with the Internal Revenue
Service and all state taxing authorities, have previously been supplied to the
Shareholders. No subsequent federal income tax or state tax return has become
due or has been filed by or with respect to Phoenix or Phoenix Escrow. With
respect to any taxable year ending on or before December 31, 1994 or any other
"open" year for which the Internal Revenue Service or other taxing authority
is not precluded from assessing a deficiency: (i) Phoenix or Phoenix Escrow
have not been notified that there is any assessment or proposed assessment of
deficiency or additional Tax with respect to Phoenix or Phoenix Escrow,
threatened Tax audit or investigation with respect to Phoenix or Phoenix
Escrow. No consent has been filed under Section 341(f) of the Code with
respect to Phoenix or Phoenix Escrow. None of Phoenix or Phoenix Escrow is
required to include in income any adjustment pursuant to Section 481(a) of the
Code (or similar provisions of other law or regulations) in its current or in
any future taxable period by reason of a change in accounting method for any
period prior to Closing nor do Metropolitan or Bank have any knowledge that
the IRS (or other taxing authority) has proposed, or is considering, any such
change in accounting method. The amounts reflected for Taxes in the Balance
Sheet are and will be sufficient for the payment of all unpaid federal, state,
local, and foreign taxes, assessments, and deficiencies of Phoenix and Phoenix
Escrow for all periods prior to Closing.
If either of the Shareholders has actual knowledge of facts that would make
any of the representations and warranties of Metropolitan and/or the Bank
contained in this Article 4 or elsewhere in this Agreement false or
misleading, and has not brought those facts to the attention of Metropolitan's
executive management, such facts will be regarded as exceptions to the
applicable representations and warranties of Metropolitan and/or the Bank and
will not constitute a basis for making claims against either Metropolitan or
the Bank for breach of representations and warranties.
ARTICLE 4A. ADDITIONAL REPRESENTATIONS,
WARRANTIES AND COVENANTS OF METROPOLITAN AND
BANK AS TO CERTAIN MORTGAGE LOANS
In regard to Mortgage Loans made by Phoenix but originated by Metropolitan
through its Wholesale or Community Lending programs or through Metropolitan
branch managers ("Metropolitan Mortgages"), Metropolitan and the Bank further
represent, warrant and covenant the following:
4A.1 Investor Requirements
Any originator of any Metropolitan Mortgage has performed all obligations
to be performed under any Investor requirements and no event has occurred and
is continuing that with the passage of time or the giving of notice, or both,
would constitute an event of default thereunder.
4A.2 Repurchase Obligation
In the event Phoenix, after closing, receives a repurchase demand from an
Agency or Investor regarding a Metropolitan Mortgage, Metropolitan and the
Bank agree to repurchase such Metropolitan Mortgage(s) from the Agency or
Investor upon the terms and conditions and at the repurchase price specified
by such Agency or Investor pursuant to the terms of the agreement with such
Agency or Investor.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each of the Shareholders represents and warrants to Metropolitan severally
and not jointly as follows, as of the date of this Agreement and as of the
Closing Date, except as may be set forth in writing by such Shareholder in
Shareholders' Disclosure Letter delivered to Metropolitan:
5.1 Authority and Consents
Such Shareholder has full power, capacity and authority to execute and
deliver this Agreement and the Related Agreements and to perform the
obligations of such Shareholder hereunder and thereunder. This Agreement and
the Related Agreements have been duly authorized, executed and delivered by
such Shareholder and constitute the legal, valid and binding obligations of
such Shareholder enforceable against such Shareholder in accordance with their
terms, subject to applicable bankruptcy, reorganization, insolvency,
conservatorship, receivership, moratorium or other laws affecting the rights
of creditors generally and subject to general principles of equity, including
without limitation those regarding the availability of specific performance.
No consent, waiver, approval, license or authorization of, or filing or
registration with or notification to any person, entity or Governmental
Authority (other than those that have been made or obtained) is required for
or in connection with the execution and delivery of this Agreement and the
Related Agreements by such Shareholder or the consummation by such Shareholder
of the transactions contemplated hereby or thereby.
5.2 Noncontravention
Other than as set forth in the Shareholders' Disclosure Letter delivered to
Metropolitan and dated as of the date hereof, the execution and delivery of
this Agreement and the Related Agreements by such Shareholder does not, and
the consummation by such Shareholder of the transactions contemplated hereby
and thereby do not, with or without the giving of notice or the passage of
time, conflict with or result in a breach or termination of any provisions of,
or constitute a default under or a violation of any provision of, or result in
the acceleration of or entitle any party to accelerate any material obligation
under, any mortgage, deed, trust, indenture, license or other material
agreement or instrument, or any law or other restriction of any kind or
character, to which such Shareholder is a party or by which such Shareholder
is bound or his or her assets are bound.
5.3 Claims
There is no claim, action, suit, arbitration or other proceeding pending
or, to the best of such Shareholder's knowledge, threatened against such
Shareholder that question the validity or legality of this Agreement and the
Related Agreements or any action taken or to be taken by such Shareholder
pursuant to or in connection with this Agreement and the Related Agreements
and, to the best of such Shareholder's knowledge, there is no valid basis for
any such claim, action, suit, arbitration, proceeding or investigation.
5.4 Brokers and Finders
The Shareholder has not employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
the Shareholder, in connection with this Agreement or the transactions
contemplated hereby.
5.5 Title
Each of the Shareholders has good title to such Shareholder's Metropolitan
Shares free and clear of any and all Encumbrances.
ARTICLE 6. COVENANTS OF METROPOLITAN, THE BANK
AND THE SHAREHOLDERS
6.1 Conduct of Business
Between the date of this Agreement and the Closing Date, unless the
Shareholders otherwise agree in writing or as otherwise contemplated by this
Agreement, Metropolitan and the Bank will:
(a) not enter into any transaction or make any agreement or commitment,
and use its best efforts not to permit any event to occur, that would result
in any of the representations or warranties of Metropolitan or the Bank
contained in this Agreement not being true and correct in all material
respects at and as of the time immediately after the occurrence of the
transaction or event or the entering into of such agreement or commitment;
(b) not cause or permit Phoenix or Phoenix Escrow to purchase or acquire
any fixed asset with a purchase price or value in excess of $5,000, except as
described on attached Schedule 6.1;
(c) use its best efforts to (i) preserve Phoenix's business organization
(including, without limitation, its employees and the mortgage origination
network) intact in all material respects, (ii) preserve generally the goodwill
of those persons and entities with whom Phoenix has business relationships,
and (iii) obtain all consents and approvals required to permit Metropolitan
and the Bank to complete the transactions contemplated herein;
(d) not cause or permit Phoenix to enter into any transaction or make any
agreement or commitment that would require Phoenix, after the Closing Date, to
provide servicing that is materially different from current practice;
(e) not cause or permit Phoenix to originate or otherwise acquire any
Mortgage Loan or loan commitment except in the usual and ordinary course of
business of Phoenix consistent with its past practices;
(f) not cause or permit Phoenix to sell, transfer, assign, encumber or
otherwise dispose of any Servicing Rights, or solicit, negotiate or otherwise
entertain any proposals related thereto, or amend or terminate any Servicing
Agreement, or sell, transfer, assign, encumber or otherwise dispose of any
other assets of Phoenix, or solicit, negotiate or otherwise entertain any
proposals related thereto, except sales in the usual and ordinary course of
business of Phoenix consistent with its past practices;
(g) not cause or permit Phoenix to enter into any transaction or make any
agreement or commitment that could reasonably be expected to have a materially
adverse effect on Phoenix's or Phoenix Escrow's business or financial
condition;
(h) not cause or permit Phoenix or Phoenix Escrow to increase the
compensation payable to any employee, or make any material change in the
compensation policies applicable to Phoenix's employees, other than pursuant
to a contractual obligation disclosed on Schedule 6.1;
(i) immediately inform the Shareholders if, at any time prior to the
Closing, (i) any representation or warranty of Metropolitan or the Bank set
forth in this Agreement ceases to be true and correct in all material respects
or (ii) Metropolitan, the Bank or Phoenix receive from any Agency or
Governmental Authority any correspondence or communication relating to an
examination, report, inquiry or investigation regarding Phoenix or the conduct
of Phoenix's business;
(j) promptly furnish to the Shareholders copies of any and all consents,
communications, letters, reports, applications, notices or other documents
submitted to or received from any Agency or Private Investor in connection
with redemption of the Shareholders' Metropolitan Shares; and
(k) use its business efforts to cause Phoenix to maintain substantially
the same insurance coverage as that currently maintained by Phoenix with
respect to the assets and operations of Phoenix's business.
Mr. Fairchild is the president and chief executive officer of Phoenix and
Ms. Nilson the executive vice president and chief operating officer of
Phoenix. In those executive capacities, each of the Shareholders will be
responsible for affairs of Phoenix and Phoenix Escrow prior to the Closing
consistent with past practices. Neither of the Shareholders will take, or
cause any of the employees, agents, or representatives of Phoenix or Phoenix
Escrow to take, any action that would cause a breach of Metropolitan's or the
Bank's covenants in this Article 6 or elsewhere in this Agreement.
6.2 Access to Information
Phoenix and Phoenix Escrow will permit Metropolitan's and the Bank's agents
and representatives to consult with Phoenix's and Phoenix Escrow's employees
regarding the operations of Phoenix, provided that such access does not
unreasonably interfere with the normal operations or customer or employee
relations of Phoenix and Phoenix Escrow. Similarly, Metropolitan and the Bank
will permit Shareholders' agents and representatives to consult with
Metropolitan's and the Bank's employees regarding operations and matters
concerning Phoenix and Phoenix Escrow within their control.
6.3 Acquisition Proposals
Metropolitan agrees that until the earlier of 180 days after the date
hereof or the date on which Metropolitan and the Shareholders mutually agree
to terminate this Agreement pursuant to Section 9.1, neither Metropolitan, the
Bank, Phoenix nor any of their officers and directors shall, and Metropolitan
and Phoenix shall direct and use each of their best efforts to cause each of
their employees, agents and representatives (including, without limitation,
any investment banker, attorney or accountant retained by either Metropolitan
or Phoenix) not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making of any proposal or offer with respect to a merger,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of, Phoenix (an
"Acquisition Proposal") or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal. Metropolitan will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. Metropolitan will notify the Shareholders
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with Metropolitan or Phoenix.
6.4 Further Assurances
Metropolitan, the Bank and the Shareholders will use their best efforts to
take, or cause to be taken, all action, and to do or cause to be done, all
things necessary or appropriate under applicable laws and regulations to
consummate and make effective the redemption of the Shareholders' Metropolitan
Shares by Metropolitan, the transfer of the Phoenix Common Stock to the
Shareholders, and such other actions as are contemplated by this Agreement.
From time to time after the Closing Date, Metropolitan, the Bank and the
Shareholders will, at their own expense (except as otherwise provided by this
Agreement), execute and deliver to each other such documents as may reasonably
be required to consummate and perfect the transactions provided for in this
Agreement. In the event that Metropolitan is obligated to report the
consummation of the transactions under the Securities Exchange Act of 1934, as
amended, on a Current Report on Form 8-K (the "Report"), then Metropolitan
shall cause such report to be timely filed with the Securities and Exchange
Commission. In the event that Mr. Fairchild is required to report a change in
his beneficial ownership of Metropolitan Common Stock as a result of the
consummation of the transactions provided for in this Agreement under the
Securities Exchange Act of 1934, as amended, on Form 3 or Schedule 13D, as the
case may be, Metropolitan shall provide such information to Mr. Fairchild as
may be necessary for such report or reports and Mr. Fairchild agrees to make
such filing within the prescribed time. Each of the parties hereto will use
its best efforts to obtain the authorizations, waivers and consents of all
persons, entities and Governmental Authorities necessary to consummate such
transactions.
6.5 Metropolitan's Preclosing Transfer of Intangibles to Phoenix
Prior to the Closing, Metropolitan shall sell, transfer, convey and assign
all of its right, title and interest in the Intangibles to Phoenix, free and
clear of Encumbrances, for $1.00.
6.6 Distribution of Phoenix Common Stock to Metropolitan Prior to Closing
Prior to the Closing, Metropolitan will cause the Bank to make a dividend
to Metropolitan so that Metropolitan, after giving effect to the dividend,
owns and holds of record at least 81% of the Phoenix Common Stock.
6.7 Additional Covenants of the Shareholders
Between the date of this Agreement and the Closing Date, unless
Metropolitan otherwise agrees in writing or as otherwise contemplated in this
Agreement, the Shareholders will not enter into any transaction or make any
agreement or commitment, and use commercially reasonable efforts not to permit
any event to occur, that would result in any of the representations or
warranties of either of the Shareholders contained in this Agreement not being
true and correct in all material respects at and as of the time immediately
after the occurrence of the transaction or event or the entering into of such
agreement or commitment.
6.8 Appraisal of Phoenix
The Shareholders may, at their election and cost, select an appraiser with
experience appraising operating businesses and with background in performing
valuations of mortgage companies similar to Phoenix (the "Appraiser"). The
Appraiser shall, if so selected, conduct an appraisal of the fair market value
of Phoenix, taking into account all assets and liabilities, including the
Intangibles, to determine the appraised value of the company. If the
Shareholders decide to have such an appraisal conducted, they will advise
Metropolitan of their decision, identify the Appraiser selected to perform the
appraisal and notify Metropolitan of the instructions given or to be given to
the Appraiser regarding the valuation of Phoenix. Following the receipt of
such information, Metropolitan may, if it desires, request that the appraisal
be addressed to both the Shareholders and Metropolitan. The Shareholders will
provide a copy of the Appraiser's report to Metropolitan. Metropolitan and
the Bank will cause Phoenix to grant to the Appraiser, if engaged by the
Shareholders, full access to the property, books and records of Phoenix and of
Phoenix Escrow for purposes of conducting the appraisal, subject to such
confidentiality restrictions as Metropolitan and the Bank may reasonably
impose to preserve the confidentiality of information regarding Phoenix and
Phoenix Escrow.
6.9 Resignation of Bank Employees
Effective as of the Closing Date, Metropolitan will cause any directors,
officers or employees of Metropolitan or the Bank who hold concurrently
positions with Phoenix or Phoenix Escrow to resign as directors, officers or
employees of Phoenix or Phoenix Escrow.
6.10 Fairchild's Resignation as a Director of Metropolitan
Mr. Fairchild will remain as a director of Metropolitan, and as a director
and the chief executive officer of Phoenix and Phoenix Escrow through the
Closing Date and will, as of the execution of this Agreement, resign as an
executive officer of Metropolitan and the Bank. Effective as of the Closing
Date, Mr. Fairchild will resign as a director of Metropolitan.
6.11 Tag Along Rights
(a) Except as provided in paragraph (e), if, any time after the Closing
Date, Mr. Fairchild (the "Transferor") proposes to sell or exchange (in a
business combination or otherwise) any of the shares of Phoenix Common Stock
owned by the Transferor in a bona fide arms length transaction, in a single or
a series of transactions, to any third party (the "Third Party Purchaser"),
other than to a Permitted Transferee (as defined below), Transferor shall
notify in writing (the "Tag Along Notice") Metropolitan (the "Tag Along
Shareholder") of the proposed sale or exchange.
(b) The Tag Along Shareholder shall have the option, exercisable by
written notice to the Transferor, within 10 business days after the Transferor
notifies the Tag Along Shareholder of its intention to effect such sale or
exchange, to require the Transferor to provide as part of its proposed sale or
exchange that the Tag Along Shareholder be given the right (the "Tag Along
Rights") to participate, pro rata in proportion to its respective percentage
interest in Phoenix (except as expressly provided in paragraph (f) below), in
such transaction or series of transactions, on the same terms and conditions
(including but not limited to obligations with respect to indemnification) as
the Transferor, and, if such option is exercised by the Tag Along Shareholder,
the Transferor will not proceed with such exchange and sale unless the Tag
Along Shareholder who has exercised such option is given the right so to
participate.
(c) Each of the Tag Along Notices shall state (i) the name and address of
the Third Party Purchaser, (ii) the price to be paid for the Phoenix Common
Stock of the Transferor and the form of the consideration to be paid by the
Third Party Purchaser for such Phoenix Common Stock, (iii) the percentage of
the shares of Phoenix Common Stock owned by the Transferor that is being sold
or exchanged, and (iv) the method of payment and other terms and conditions of
the proposed transfer.
(d) For purposes of this Section, "Permitted Transferee" means, with
respect to the Transferor, the spouse or any natural or adoptive lineal
descendent, the spouses of such descendants or trusts for his, her or their
benefit: provided, however, that such Permitted Transferee shall take an
interest in the shares of the Transferor subject to the same restrictions that
are applicable to the Transferor and as a condition to the transfer shall be
required to execute a document or instrument, in form and substance
satisfactory to Metropolitan, confirming that the Permitted Transferee holds
such shares subject to such restrictions.
(e) The Tag Along Rights granted to Metropolitan under this Section 6.11
may not be exercised by Metropolitan as to any sales of Phoenix Common Stock
by Mr. Fairchild to the employees of Phoenix, consummated during the first 90
days after the Closing Date, until the aggregate value of the cash and/or
other consideration received by Mr. Fairchild from such sales is up to
$300,000. To the extent that the cash and/or other consideration received by
Mr. Fairchild from such sales have a value in excess of $300,000, Metropolitan
shall have no Tag Along Rights as to the first sales by Mr. Fairchild of
Phoenix Common until the aggregate cash and/or other consideration received by
him equals $300,000 and thereafter Metropolitan shall have Tag Along Rights as
to all additional sales by him of his Phoenix Common Stock. Furthermore, to
the extent that sales that resulted in Mr. Fairchild's receiving consideration
in excess of $300,000 occurred on the same day, or in related transactions,
making it impracticable to distinguish between the first sales up to $300,000
and later sales in excess of that amount, Metropolitan will be entitled to
exercise Tag Along Rights with respect to all sales on such day or made in
connection with such related transactions based upon that portion of the
consideration in excess of $300,000 received on that day or from such related
transactions over the aggregate consideration received on that day or from
such related transactions.
(f) With respect to any sales or other disposition of Phoenix Common Stock
by Mr. Fairchild as to which Metropolitan has Tag Along Rights, Metropolitan's
Tag Along Rights will be proportionate to the size of its then remaining
interest in Phoenix to that of Mr. Fairchild, until the number of shares of
Phoenix Common Stock held by him or his Permitted Transferees is reduced to
50% of the number of shares of Phoenix Common Stock received by him pursuant
to this Agreement; thereafter, Metropolitan's Tag Along Rights will permit it
to sell all of its remaining shares of Phoenix Common Stock before the sale or
other disposition of any other shares of Phoenix Common Stock by Mr. Fairchild
or his Permitted Transferees.
6.12 Take Along Rights
(a) Except as provided in paragraph (e) below, if, any time after the
Closing Date, either of the Shareholders (the "Transferor") proposes to sell
or exchange (in a business combination or otherwise) any of the shares of
Phoenix Common Stock owned by the Transferor in a bona fide arms length
transaction, in a single or a series of transactions, to any third party (the
"Third Party Purchaser"), then, subject to the terms of this Section,
Transferor shall have the right (the "Take Along Right") to require
Metropolitan to sell or exchange the same percentage of the shares of Phoenix
Common Stock then beneficially owned by Metropolitan to the Third Party
Purchaser on the same terms and subject to the same conditions (including but
not limited to obligations with respect to indemnification) as the sale or
exchange by the Transferor.
(b) To exercise the Take Along Right, the Transferor shall give written
notice thereof (a "Take Along Notice") to Metropolitan. The Take Along Notice
shall state (i) the name and address of the Third Party Purchaser, (ii) the
price to be paid for the shares of the Phoenix Common Stock of the Transferor
and the form of the consideration to be pay by the Third Party Purchaser for
such shares, (iii) the percentage of the shares owned by the Transferor that
is being sold or exchanged, and (iv) the method of payment and other terms and
conditions of the proposed transfer.
(c) The Take Along Right may be exercised by the Transferor only if the
consideration to be received by Metropolitan will include cash in an amount
sufficient to satisfy any income tax liability attributable to the sale of
such shares.
(d) The exercise of the Take Along Right and the purchase and sale of the
shares resulting from the exercise of such right shall take place at the
principal offices of Phoenix on the 20th business day following the date of
the delivery of the Take Along Notice, or at such other place, on such other
date, or both, as the Transferor and the Third Party Purchaser shall agree
upon in writing.
(e) The Take Along Right may not be exercised by either of the
Shareholders as to any sales of Phoenix Common Stock that Mr. Fairchild may
make to employees of Phoenix during the first 90 days following the execution
of this Agreement as contemplated by Section 6.11(f).
6.13 Warehousing Line to Phoenix
The Bank currently provides warehousing financing to Phoenix to permit it
to acquire Mortgage Loans prior to their sale to Investors. As soon as
possible after the execution of this Agreement, the Shareholders will engage
in negotiations with officers of the Bank, and officers of Washington Federal,
to discuss the terms upon which a Warehousing Line, which will be available
for a period of at least 18 months after the Closing Date, might be available
to Phoenix after the consummation of the transactions contemplated by this
Agreement. By executing this Agreement, Metropolitan does not commit itself,
the Bank, Washington Federal, or any related or affiliated party to make the
Warehousing Line available to Phoenix, and whether or not such financing is
available, and the applicable terms and conditions of the Warehousing Line,
including the interest rate, maturity, collateral requirements and
documentation, will be determined through negotiations between the relevant
parties.
6.14 Subservicing Arrangements
As soon as reasonably practicable following the execution of this
Agreement, and in any event within 30 days, Metropolitan and the Shareholders,
together with representatives of Washington Federal, will confer to discuss
the terms upon which the Bank, or the successor to the Bank following the
Merger, would agree to provide subservicing services to Phoenix, during the
first 18 months after the Closing Date, with respect to (i) Mortgage Loans
originated and held by Phoenix and (ii) Mortgage Loans sold by Phoenix to
Investors prior to the timing that the servicing of such Mortgage Loans is
assumed by the Investors or their designees.
6.15 Joint Office Sharing
As soon as reasonably practicable following the execution of this
Agreement, and in any event within 30 days, Metropolitan, the Bank and the
Shareholders will meet to resolve any questions that need to be resolved
regarding the office sharing between the Bank and Phoenix at the Lakewood and
Federal Way branches. Neither the Bank nor Metropolitan is under obligation
to continue making space available to Phoenix, Phoenix Escrow and their
employees after the Closing, to permit the conduct of Phoenix's and Phoenix
Escrow's business, unless mutually agreeable arrangements for the leasing of
such space can be worked out by the parties.
6.16 Termination of Prior Agreements
Conditioned upon and effective with the Closing, the Shareholders'
Agreement between Metropolitan and Mr. Fairchild and Ms. Nilson dated as of
July 1, 1994 and the Noncompetition and Nonsolicitation Agreements between
Metropolitan and Mr. Fairchild and Ms. Nilson dated as of July 1, 1994, and
the Stock Pledge Agreements between Metropolitan and Mr. Fairchild and Ms.
Nilson dated as of July 1,1994 (the "Prior Agreements") shall be terminated.
The parties agree to take any and all other actions necessary to cause and
effectuate the termination of the Prior Agreements on the Closing.
6.17 Transition Services; Cooperation
Commencing on the Closing Date, Metropolitan or the Bank respectively
shall, upon the request of the Shareholders, provide to Phoenix and Phoenix
Escrow the services set forth on Schedule 6.17 for such time period as the
parties shall agree and at Metropolitan's or the Bank's cost for such
services, it being the intent of the parties for Metropolitan or the Bank to
provide such services to Phoenix and Phoenix Escrow for as short as a period
of time as practical, in any event no longer than 30 days.
6.18 Insurance
(a) To the extent that (i) there are insurance policies maintained by
Metropolitan or Bank or their affiliates (other than Phoenix or Phoenix
Escrow) ("Metropolitan's Insurance Policies") insuring against any loss,
liability, damage or expense relating to the assets, businesses, operations,
conduct, products and employees (including former employees) of the business
of Phoenix or Phoenix Escrow including errors and omissions coverage (all such
losses, liabilities, claims, damages or expenses, regardless of the
availability of insurance coverage, are herein referred to collectively as the
"Business Liabilities") and relating to or arising out of occurrences prior to
the Closing, and (ii) Metropolitan's Insurance Policies continue after the
Closing to permit claims to be made with respect to such Business Liabilities
relating to or arising out of occurrences prior to the Closing, Metropolitan
agrees to cooperate and cause such affiliates to cooperate with the
Shareholders and Phoenix or Phoenix Escrow and in submitting claims on behalf
of Phoenix or Phoenix Escrow under Metropolitan's Insurance Policies with
respect to such Business Liabilities relating to occurrences prior to the
Closing.
(b) Prior to the Closing Date, to the extent not currently provided for in
Metropolitan's Insurance Policies, Metropolitan shall enter into agreements
with, or obtain binding commitments from its insurers to provide adequate
insurance coverage for any Business Liability incurred before the Closing and
providing for claims to be made by Phoenix or Phoenix Escrow after closing
(e.g., "tail coverage"). For purposes hereof, "adequate insurance" is
insurance at least reasonably comparable to that covering the Business
Liabilities (including any self-insurance program) immediately prior to the
Closing Date except for the timing of claims.
(c) Neither Metropolitan nor the Bank shall, prior to the Closing date,
terminate any of Phoenix or Phoenix Escrow's insurance policies or coverage of
Phoenix or Phoenix Escrow under the Metropolitan Insurance Policies without
giving the Shareholders prior notice thereof.
6.19 Tax Matters
(a) Metropolitan shall cause Phoenix and Phoenix Escrow to be included in
the consolidated federal Income Tax Returns that include Metropolitan for all
periods for which they are required under applicable tax laws to be so
included, including but not limited to the period from and including January
1, 1996 to the Closing Date, and in any other required state, local and
foreign consolidated, affiliated, combined, unitary or other similar group
income tax returns that include Metropolitan or any affiliate of Metropolitan,
for all pre-Closing periods for which Phoenix and Phoenix Escrow are required
under applicable tax laws to be so included. Metropolitan shall timely
prepare and file, or cause to be prepared and filed, all income tax returns of
Phoenix and Phoenix Escrow for all taxable periods of Phoenix and Phoenix
Escrow ending on or before the Closing date and pay, or cause to be paid, when
due all Taxes relating to such returns. Metropolitan shall be entitled to all
refunds (including but not limited to interest with respect thereto) of income
taxes received by or on behalf of Phoenix and Phoenix Escrow relating to any
pre-Closing period, and Shareholders shall cause Phoenix or Phoenix Escrow to
pay to Metropolitan any such refund promptly after receipt thereof. At the
request of Metropolitan, Shareholders shall cause Phoenix or Phoenix Escrow to
file, any claims for such refunds, and Metropolitan shall reimburse Phoenix or
Phoenix Escrow for any out-of-pocket expenses.
(b) If Phoenix or Phoenix Escrow has liability for income Taxes (other
than federal income taxes) or Washington Sate business and occupation tax
(collectively, for purposes of this paragraph (b), "Income Taxes") or is
eligible for an Income Tax benefit for a tax period beginning before the
Closing date and ending after the Closing date (an "Overlap Period"), the
liability for such Income Taxes or the amount of such Income Tax benefit shall
be apportioned to Metropolitan for the portion of the Overlap Period on or
prior to the Closing Date and to Phoenix and Phoenix Escrow for the reminder
of the Overlap Period (i) as determined from the books and records of Phoenix
and Phoenix Escrow for such periods, and (ii) based on accounting methods,
elections and conventions in effect on the date hereof or that are mutually
agreeable and do not have the effect of distorting income or expenses. The
Shareholders shall cause Phoenix or Phoenix Escrow to file any Income Tax
returns for any Overlap Period and pay, or cause to be paid, when due, any
Income Taxes as shown as due on any such returns. At least fifteen (15)
business days prior to the due date for filing of any Overlap Period income
tax return, the Shareholders shall provide Metropolitan with a substantially
final draft of such return and a notice setting forth in reasonable detail the
calculations regarding Metropolitan's share of Income Taxes shown as due on
such return (calculated as described in this Section 6.16(b), and Metropolitan
shall have the right to review such return and such notice. Metropolitan
shall notify the Shareholders of any objections Metropolitan may have to any
items set forth in such return and to Shareholder's calculations regarding
Metropolitan's share of Income Taxes, and Shareholders agree to consult and
resolve in good faith any such objection and to mutually consent to the filing
of such returns. Metropolitan shall pay Phoenix its share of any Income Taxes
(to the extent Metropolitan is liable therefor in accordance with this Section
6.16(b) and to the extent not already paid by Metropolitan or Phoenix or
accrued or otherwise reflected as a liability on the Final Balance Sheet) due
pursuant to the filing of any such returns under the provisions of this
Section 6.16(b) and Phoenix shall pay to Metropolitan its share of the Income
Tax benefits for the period on or prior to the Closing Date.
(c) Notwithstanding anything in this Agreement to the contrary,
Metropolitan shall have the right to represent the interests of Phoenix and
Phoenix Escrow in (i) any income tax audit or administrative or court
proceeding relating to income tax returns and (ii) any Tax audit or
administrative or court proceeding relating to Tax returns filed on a
consolidated or combined basis by Metropolitan or any affiliate of
Metropolitan, in the case of each of clauses (i) and (ii) with respect to
which Metropolitan may be liable under this Agreement (including without
limitation any such proceedings relating to the income, properties or
operations of Phoenix and Phoenix Escrow for pre-closing periods).
Shareholders agree that they will cause Phoenix to cooperate fully with
Metropolitan and its counsel in the defense against or compromise of any claim
in any such audit or proceeding. Metropolitan and Metropolitan's affiliates
and Phoenix and Phoenix's affiliates shall not settle any audit or proceeding
in a manner which would have a materially adverse effect on the other party
without the prior written consent of the other such party, which consent shall
not unreasonably be withheld.
(d) Phoenix shall promptly notify Metropolitan in writing upon receipt by
Phoenix or any affiliate of Phoenix of notice of (i) any pending or threatened
federal, state, local or foreign Tax audits or assessments of Phoenix or
Phoenix Escrow, so long as any pre-Closing period remains open, and (ii) any
pending or threatened federal, state, local or foreign Tax audits or
assessments of Phoenix or Phoenix Escrow or any affiliate of Phoenix or
Phoenix Escrow which may directly or indirectly affect the Tax liabilities of
Phoenix or Phoenix Escrow, in each case for pre-Closing periods only.
Metropolitan shall promptly notify Phoenix or Phoenix Escrow in writing upon
receipt by Metropolitan or any affiliate of Metropolitan of notice of (i) any
pending or threatened federal, state, local or foreign Tax audits or
assessments of Phoenix or Phoenix Escrow, so long as any pre-Closing period
remains open, and (ii) any pending or threatened federal, state, local or
foreign Tax audits or assessments of Metropolitan or any affiliate of
Metropolitan which may affect the Tax liabilities of Phoenix or Phoenix
Escrow, in each case for post-Closing periods only.
(e) After the Closing date, Metropolitan shall provide Phoenix, and the
Shareholders shall cause Phoenix to provide Metropolitan, with such
cooperation and information relating to Phoenix as either party reasonably may
request in filing any return (or amended return) or refund claim, determining
any Tax liability or a right to refund, conducting or defending any audit or
other proceeding in respect of Taxes or effectuating the terms of this
Agreement. The parties shall retain, and Shareholders shall cause Phoenix to
retain, all returns, schedules, work papers and other material documents
relating thereto, until the expiration of any relevant statute of limitations
(and, to the extent notified by any party, any extensions thereof) and, unless
such returns and other documents are offered and delivered to the other, as
applicable, until the final determination of any Tax in respect of such years.
Any information obtained under this Section 6.16 shall be kept confidential,
except as may be otherwise necessary in connection with filing any return (or
amended return) or refund claim, determining any Tax liability or a right to a
refund, conducting or defending any audit or other proceeding in respect of
Taxes or otherwise effectuating the terms of this Agreement.
(f) If, after the Closing Date, Phoenix or Phoenix Escrow or any successor
or affiliate thereof realize a net operating loss for federal income tax
purposes that it properly elects to carry back to a taxable year of the
affiliated group filing a consolidated return with Metropolitan, the parties
shall negotiate in good faith the portion of any refund that will be payable
to Metropolitan or Phoenix.
(g) The parties hereto intend that, and shall not take any action
inconsistent with the intent that, the sale of the Intangibles from
Metropolitan to Phoenix contemplated herein will be treated as a sale for
federal income tax purposes, resulting in the recognition of a taxable loss by
Metropolitan with respect to such sale in an amount equal to the excess of the
tax basis in such Intangibles over $1 paid as consideration for such sale. If
all or any portion of such loss is denied by the Internal Revenue Service and
if as a result Phoenix becomes entitled to a deduction with respect to such
Intangibles, then the Shareholders shall cause Phoenix to pay the same portion
of $160,000 as the amount of such loss allowable to Phoenix for any open
taxable years bears to $810,000.
ARTICLE 7. CONDITIONS PRECEDENT
7.1 Shareholders' Conditions
The obligation of the Shareholders to effect the transactions contemplated
hereby are subject to the fulfillment of the conditions, which may be waived
in writing by the Shareholders, that:
(a) the representations and warranties of Metropolitan and the Bank herein
shall have been and shall be true and correct in all material respects on the
date of this Agreement and the Closing Date;
(b) Metropolitan and the Bank each shall have performed in all material
respects all its obligations and complied with all covenants under this
Agreement required to be performed at or prior to the Closing Date;
(c) Metropolitan and the Bank shall have received the approval of each
Governmental Authority having jurisdiction over Metropolitan, the Bank and
Phoenix or the transactions contemplated by this Agreement;
(d) Phoenix has received all necessary approvals from Governmental
Authorities and the Investors to serve as an approved servicer and seller of
Mortgage Loans after the Closing Date;
(e) the Shareholders shall have received an opinion of Metropolitan's
counsel in the form attached hereto as Exhibit C.
7.2 Metropolitan's Conditions
The obligations of Metropolitan to effect the transactions contemplated
hereby are subject to the fulfillment of the conditions, which may be waived
in writing by Metropolitan, that:
(a) the representations and warranties of the Shareholders herein shall
have been true and correct in all material respects on the date of this
Agreement and the Closing Date;
(b) the Shareholders shall have performed in all material respects all
their obligations under this Agreement required to be performed at or prior to
the Closing Date;
(c) Metropolitan shall have received the approval of each Governmental
Authority having jurisdiction over Metropolitan, Phoenix, or the transactions
contemplated by this Agreement;
(d) Metropolitan and the Bank shall have been released from all
Liabilities as required by Section 3.3;
(e) Metropolitan hall have received an opinion of the Shareholders'
counsel in the form attached hereto as Exhibit D;
(f) All of the conditions to the merger of Metropolitan with and into
Washington Federal have been satisfied or are expected to be satisfied
immediately following the consummation of transactions contemplated by this
Agreement, Metropolitan and Washington Federal have taken all steps necessary
to consummate the merger, but for the final ministerial steps necessary to
consummate the merger, and there are no events, circumstances or causes, to
the best of Metropolitan's knowledge, that would prevent the merger from being
consummated immediately following the redemption of the Shareholders'
Metropolitan Shares.
7.3 Joint Conditions
Neither Metropolitan nor the Shareholders will be obligated to effect the
transactions contemplated hereby if on the Closing Date Metropolitan, the Bank
or either of the Shareholders is subject to any order, decree, rule or
regulation or any Governmental Authority that prevents, or delays to any
material extent, the consummation of any of the transactions contemplated by
this Agreement or that would impose any material limitation on Metropolitan's
ability to redeem the Shareholders' Metropolitan Shares or the Shareholders'
ability to acquire the 81% equity interest in the Phoenix Common Stock.
ARTICLE 8. ADDITIONAL UNDERTAKINGS AND AGREEMENTS
8.1 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants made by the parties in this
Agreement will survive the Closing; provided that:
(a) no claim may be made by any party under this Agreement, and no party
will have any liability with respect to any such misrepresentation or breach
of warranty or covenant under this Agreement, unless written notification of
claim therefor is given by the party claiming misrepresentation or breach to
the party alleged to have made such misrepresentation or caused such breach
within two years after the Closing Date and suit thereon is commenced within
nine months after such written notification; and
(b) no claim may be made by the Shareholders, Metropolitan, and the Bank
will have no liability, for any United States federal, state or local taxes,
including, but not limited to, any business and occupation taxes not reflected
on the returns and reports filed by Phoenix that may at any time be assessed
against Metropolitan or Phoenix for any periods ending on or prior to the
Closing Date and that are not included in any reserve for taxes reflected on
the balance sheet of Phoenix as of June 30, 1996, unless written notification
of claim therefor is given by the Shareholders within the earlier of five
years after the Closing Date or the applicable statute of limitations and suit
thereon is commenced within nine months after such written notification.
No investigation or any right to investigate in favor of any party to this
Agreement will in any manner limit, affect or impair the right and ability of
such party to rely upon the representations, warranties and covenants of the
parties set forth in this Agreement.
8.2 Indemnification
(a) From and after the Closing, Metropolitan and the Bank will indemnify
and hold harmless the Shareholders from and against any and all claims,
demands, losses, liabilities, damages and expenses (net of any tax benefit
derived by the Shareholders, Phoenix or any of their affiliates from the
accrual or payment of such claim, demand, loss, liability, damage or expense),
including amounts paid in settlement, reasonable costs of investigation and
reasonable fees and disbursements of counsel, asserted against or suffered by
the Shareholders arising out of, or resulting from: (i) the material
inaccuracy of any representation or warranty of Metropolitan; (ii) the
nonperformance, partial or total, of any covenant by Metropolitan or the Bank
contained herein. The Shareholders will make no claim against Metropolitan or
the Bank for indemnification under this Section 8.2(a) for a breach of a
representation, warranty or covenant (other than a knowing and intentional
breach) contained herein unless and to the extent the aggregate amount of such
claims exceeds $75,000 (the "Threshold Amount").
(b) From and after the Closing, the Shareholders jointly and severally
will indemnify and hold harmless Metropolitan and the Bank from and against
any and all claims, demands, losses, liabilities, damages and expenses (net of
any tax benefit derived by Metropolitan , the Ban or any affiliate from the
accrual or payment of such claim, demand, loss, liability, damage or expense),
amounts paid in settlement, reasonable costs of investigation and reasonable
fees and disbursements of counsel, asserted against or suffered by
Metropolitan or the Bank arising out of, or resulting from: (i) the material
inaccuracy of any representation or warranty by the Shareholders; (ii) the
nonperformance, partial or total, of any covenant by the Shareholders
contained herein. Metropolitan and the Bank will make no claim against the
Shareholders for indemnification under this Section 8.2(b) for a breach of a
representation, warranty or covenant (other than a knowing and intentional
breach) contained herein unless and to the extent the aggregate amount of such
claims exceeds the Threshold Amount.
(c) The indemnification provided for in this Section 8.2 will be limited
to claims asserted within the applicable time period set forth in Section 8.1.
Metropolitan and the Bank will have no liability or obligation under this
Section 8.2 in excess of an amount equal in the Redemption Price of the
Shareholders' Metropolitan Shares received by the Shareholders pursuant to
this Agreement, equal to $6,700,000 net of applicable Taxes as to the
indemnifying party. The Shareholders will have no liability or obligation
under this Section 8.2 in excess of an amount equal in value to that
established pursuant to the preceding sentence provided, however, that each of
Mr. Fairchild and Ms. Nilson will have no liability or obligation under this
Section 8.2 in excess of the product of the total liability times 80% of such
amount in the case of Mr. Fairchild and times 20% of such amount in the case
of Ms. Nilson.
(d) A party seeking indemnification (an "Indemnified Party") will promptly
notify the party against whom indemnification is sought (an "Indemnifying
Party") in writing of any claim for indemnification under this Agreement,
specifying in reasonable detail the basis of such claim, the facts pertaining
thereto and, if known, the amount, or an estimate of the amount, of the
liability arising therefrom. The Indemnified Party will provide to the
Indemnifying Party as promptly as practicable thereafter information and
documentation reasonably requested by the Indemnifying Party to support and
verify the claims asserted.
(e) If the facts giving rise to a right to indemnification arise out of
the claim of any third party, or if there is any claim against a third party,
an Indemnifying Party may assume the defense or the prosecution thereof,
including the employment of counsel, at its cost and expense. An Indemnified
Party will have the right to employ counsel separate from counsel employed by
an Indemnifying Party in any such action and to participate therein, but the
fees and expenses of such counsel employed by an Indemnified Party will be at
its expense. Following an Indemnifying Party's assumption of the defense or
prosecution of any claim, the Indemnifying Party will have no further
liability to the Indemnified Party for any legal or other expense in
connection with such defense or prosecution as long as the Indemnifying Party
maintains such defense or prosecution. The Indemnifying Party will be
entitled to settle any claim for monetary damages if the Indemnifying Party
will be fully responsible to the Indemnified Party for all amounts payable in
settlement of the claims. An Indemnifying Party will not be liable for any
settlement of any such claim effected without its prior written consent.
Whether or not an Indemnifying Party chooses to so defend or prosecute such
claim, the parties hereto will cooperate in the defense of prosecution thereof
and will furnish such records, information and testimony, and attend such
conferences, discovery proceedings, hearings, trials and appeals, as may be
reasonably requested in connection therewith. An Indemnifying Party will be
subrogated to all rights and remedies of an Indemnified Party.
(f) This Section 8.2 sets forth the only responsibility of the parties
hereto to indemnify one another against any claims or damages arising out of,
or related to, the transactions contemplated by this Agreement.
(g) To the extent any party as any Indemnified Party receives any
insurance proceeds from its insurance carrier as indemnification for any
claim, loss, damage or liability, as between the parties hereto, the
obligation of the Indemnifying Party to the Indemnified Party will be reduced
by the amount of such insurance proceeds actually received by the Indemnified
Party. Moreover, to the extent that such insurance proceeds are received
after an indemnification payment has been made by the Indemifying Party, the
Indemnified Party shall promptly remit to the Indemnifying Party such
insurance proceeds.
(h) At the request of any party hereto, any controversy or claim regarding
the right of an Indemnified Party to be indemnified or the amount of the
liability arising from such claim of indemnification that cannot be resolved
by the parties within 30 days after receipt of a notice for indemnification
pursuant to Section 8.2(d) shall be referred to an arbitrator for decision,
which decision shall be final and binding on the parties. The parties agree
that they will require the arbitrator to render its decision within 30 days
after the referral of the dispute to the arbitrator for decision pursuant
hereto. Before referring a matter to an arbitrator, the parties shall agree
on procedures to be followed by the arbitrator (including procedures for
hearing the dispute and related matters such as the presentation of evidence).
Such arbitration shall be conducted in Seattle, Washington by a single
arbitrator mutually acceptable to Metropolitan and the Shareholders. If the
parties are unable to agree on the selection of an arbitrator, either party
may petition the King County Superior Court for appointment of an arbitrator.
If the parties are unable to agree on the procedures to be used in the
arbitration before the end of 45 days after receipt of a notice for
indemnification pursuant to Section 8.2(d), the arbitrator shall establish the
procedures, which procedures may, but need not be, those proposed by either
party. The parties shall, as promptly as practicable, submit evidence in
accordance with the procedures agreed upon or established by the arbitrator,
and the arbitrator shall decide the dispute in accordance therewith as
promptly as practicable. Judgment upon the award rendered by arbitration may
be entered in any court having jurisdiction thereof.
(i) If any dispute with respect to this Agreement of whatever nature
arises between the parties to this Agreement, the prevailing party, if any, in
such dispute will be reimbursed for the reasonable fees and disbursements of
its counsel in such dispute by the losing party, if any.
ARTICLE 9. MISCELLANEOUS PROVISIONS
9.1 Termination
This Agreement may be terminated at any time prior to the Closing:
(a) by written notice by the Shareholders to Metropolitan if at any time
any of the conditions sets forth in Section 7.1 becomes impossible to fulfill
and the Shareholders have not waived in writing the fulfillment of such
condition;
(b) by written notice by Metropolitan to the Shareholders if at any time
any of the conditions set forth in Section 7.2 becomes impossible to fulfill
and Metropolitan has not waived in writing the fulfillment of such condition;
(c) by mutual agreement of Metropolitan and the Shareholders;
(d) immediately upon written notice from Metropolitan that the Merger will
not occur.
In the event of termination of this Agreement pursuant to this Section 9.1,
this Agreement shall immediately become void and of no force or effect except
(i) with respect to Section 9.7 and Section 9.8 and (ii) no party shall be
relieved or released from any liabilities or damages arising out of the
willful breach of this Agreement.
9.2 Assignment
Neither this Agreement nor any of the rights or obligations of any party
hereunder may be assigned without the prior written consent of the parties
hereto; provided that Metropolitan may assign this Agreement to any subsidiary
or affiliate of Metropolitan, but any such assignment will not relieve
Metropolitan of any of its obligations hereunder. Subject to the foregoing,
this Agreement will be binding upon and will inure to the benefit of the
parties hereto and their respective successors and assigns, but no other
person will have any right, benefit or obligation hereunder.
9.3 Notices
All notices, requests, demands and other communications hereunder shall be
in writing (including by telecopy, telegraph or telex) or by telephone and,
unless otherwise expressly provided in this Agreement, shall be deemed to have
been duly given or made when delivered by hand, or when deposited in the mail,
postage prepaid or, in the case of telecopy notice, when received or, in the
case of telegraphic notice, when delivered to the telegraph company or, in the
case of telex notice, when sent, answer back received or, in the case of
telephonic notice, when the verbal exchange is made with the individual named
on the attention line below, and in each case addressed or at the telephone
numbers or telecopy numbers set forth below or to such other address or
telephone number or telecopy number as may be hereafter notified by the
respective parties to this Agreement:
(a) If to Mr. Fairchild, to:
Mr. John Fairchild
12116 11th Avenue NE
Marysville, WA 98270
Telephone: (206) 653-9827
Telecopy: (206) 653-2369
with a copy to:
C. Kent Carlson
Preston Gates & Ellis
5000 Columbia Center
701 Fifth Avenue
Seattle, WA 98104-7078
Telephone: (206) 623-7580
Telecopy: (206) 623-7022
(b) If to Ms. Sheryl Nilson, to:
Ms. Sheryl Nilson
17753 Beach Drive N.E.
Seattle, WA 98155
Telephone: (206) 364-2996
Telecopy: (206) 364-2834
with a copy to:
C. Kent Carlson
Preston Gates & Ellis
5000 Columbia Center
701 Fifth Avenue
Seattle, WA 98104-7078
Telephone: (206) 623-7580
Telecopy: (206) 623-7022
(c) If to Metropolitan to:
Metropolitan Bancorp
1520 Fourth Avenue
Seattle, WA 98101-1648
Telephone: (206) 625-1818
Telecopy: (206) 654-7883
Attention: Patrick F. Patrick
with a copy to:
Charles Katz
George M. Beal
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3099
Telephone: (206) 583-8519
Telecopy: (206) 583-8500
9.4 Choice of Law
This Agreement will be governed by, and construed in accordance with, the
laws of Washington without giving effect to the principles of conflict of laws
thereof.
9.5 Entire Agreement; Amendments and Waivers; No Third Party Beneficiaries
This Agreement, together with the Schedules and Exhibits hereto,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, among
the parties and may not be contradicted, explained or supplemented by evidence
of any prior agreement, any contemporaneous oral agreement or any consistent
additional terms. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. No supplement, modification or waiver of this Agreement
will be binding unless executed in writing by the party to be bound thereby.
No waiver of any provision of this Agreement will constitute a waiver of any
other provision hereof (whether or not similar), nor will such waiver
constitute a continuing waiver unless otherwise expressly provided. This
Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
9.6 Severability
Any term or provision of this Agreement that is prohibited or unenforceable
in any jurisdiction will, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining terms and provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. If any term or
provision of this Agreement is held by any court of competent jurisdiction to
be void, voidable, invalid or unenforceable in any given circumstance or
situation (the "challenged provision"), then all other terms and provisions,
being severable, will remain in full force and effect in such circumstance or
situation, and such challenged provision will remain valid and in effect in
any other circumstances or situations.
9.7 Expenses
Except as otherwise specifically provided in this Agreement, all costs and
expenses incurred in connection with this Agreement will be paid by the party
incurring such expenses provided that Metropolitan shall pay such expenses for
the Bank and Phoenix and the Shareholders shall pay the expenses of their
counsel only. Any expenses paid by a party that are required to be borne by
another party as provided in this Agreement will be reimbursed by such party
to the party so paying the expense promptly after request by the paying party.
This Section 9.7 will survive any termination of this Agreement.
9.8 Confidential Information
The parties hereto agree that any and all nonpublic information regarding
any party hereto or its business, properties and personnel or those of its
subsidiaries (the "Confidential Information") that is derived or results from
another party's access to the properties, books and records of such first
party pursuant to the provisions of this Agreement or otherwise, whether
obtained before or after the execution of this Agreement, will be held in
strict confidence; and the parties hereto will exercise the same degree of
care with respect thereto that they use to preserve and safeguard their own
confidential proprietary information. Except as otherwise required by law,
the Confidential Information will not directly or indirectly be divulged,
disclosed or communicated to any other person or entity or used for any
purposes other than those purposes expressly contemplated by this Agreement.
In the event the transactions contemplated by this Agreement are not
consummated for any reason, the confidentiality of the Confidential
Information will be maintained (except to the extent that the Confidential
Information is or becomes publicly available other than as a result of
disclosure that is not permitted hereunder or has been or is acquired without
obligation to maintain the confidentiality thereof), and all copies of all
documents, work papers and other recorded material comprising the Confidential
Information will immediately be returned to the party to which such
information relates and will not thereafter be used for any purpose by the
other party hereto or any subsidiary or affiliate thereof. Except as
otherwise required by law, in the reasonable opinion of its counsel, and/or so
long as this Agreement is in effect, neither Metropolitan, the Bank nor the
Shareholders shall, or shall permit any of their respective affiliates to,
issue or cause the issuance of any press release or other public announcement
with respect to this Agreement or the transactions contemplated hereby without
the prior written consent of the other party (which consent shall not be
unreasonably withheld). This Section 9.8 will survive any termination of this
Agreement.
9.9 Cooperation
The parties hereto will cooperate with each other in carrying out the
provisions of this Agreement and will execute and deliver, or cause to be
executed and delivered, such governmental notifications and additional
reasonable documents and instruments and do, or cause to be done, all
reasonable things necessary, proper or advisable under applicable law to
consummate and make effective the transactions contemplated hereby.
9.10 Construction
This Agreement has been submitted to the scrutiny of, and has been
negotiated by, all parties hereto and their counsel, and shall be given a fair
and reasonable interpretation in accordance with the terms hereof, without
consideration or weight being given to its having been drafted by any party
hereto or its counsel.
9.11 Counterparts
This Agreement may be executed in a number of identical counterparts. If
so executed, each of such counterparts is to be deemed an original for all
purposes, and all such counterparts shall collectively constitute one
agreement, but in making proof of this Agreement it shall not be necessary to
produce or account for more than one such counterpart.
9.12 Spousal Joinder and Consent
Spouses of the parties join in and consent to the execution of this
Agreement for the limited purpose of evidencing their knowledge of its
existence, and their agreement to the provisions of this Agreement so as to
bind their community interests, if any, in the assets of their spouses to the
performance of this Agreement. However, nothing contained in this Section is
intended to, nor shall be deemed to, confer or create any community property
interest in the subject matter of this Agreement upon any such spouse.
9.13 Right to Specific Performance
In addition to all other remedies available to the parties, the parties
shall have the rights to specific performance.
9.14 Attachment of Schedules
As of the date of this Agreement, the parties have not prepared the
schedules to be attached to this Agreement. It is agreed that such schedules
will be prepared and attached within 30 days of the execution date of the
Agreement.
IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement as of the date and year first above written.
METROPOLITAN BANCORP, a
Washington corporation
By: /s/ Patrick F. Patrick
Name: Patrick F. Patrick
Its: President and Chief
Executive Officer
METROPOLITAN FEDERAL SAVINGS
AND LOAN OF SEATTLE, a federally
chartered savings and loan association
By: /s/ Patrick F. Patrick
Name: Patrick F. Patrick
Its: President and Chief
Executive Officer
/s/ John H. Fairchild
Name: JOHN FAIRCHILD
/s/ Sheryl Nilson
Name: SHERYL NILSON
Spousal Joinder and Consent
The spouses of the Shareholders join in and consent to the execution of
this Agreement for the limited purpose of evidencing their knowledge of its
existence, and their agreement to the provisions of this Agreement so as to
bind their community interest, if any, in the consideration to be given by
Metropolitan in exchange for the Shareholders' Metropolitan Shares and to the
performance of this Agreement by the Shareholders. However, nothing contained
in this Spousal Joinder and Consent is intended to, nor shall be deemed to,
confer or create any community property interest in the Shareholders'
Metropolitan Shares upon any such spouse.
Dated: July __, 1996 ____________________________________
Kerry J. Fairchild
Dated: July__, 1996 ____________________________________
Michael Asplund
EXHIBIT A
$__________________ Seattle, Washington
______________________, 199_
FOR VALUE RECEIVED, Metropolitan Bancorp, a Washington corporation,
promises to pay in lawful money of the United States to the order of
____________________________________ at _______________________________ the
principal sum of Dollars ($____________) with interest on the outstanding
principal balance at a rate equal to the interest rate paid on money market
deposit accounts of Washington Federal Savings and Loan Association of Seattle
as of the date of this note.
The outstanding principal balance, plus accrued but unpaid interest, shall
be due and payable in full on __________, 199_, which is the next business day
after the date of this note.
If default be made in the payment of this note when due, then, the entire
indebtedness hereby represented shall become immediately due and payable. As
long as this note is in default, without prior notice, this note shall bear
interest at the rate of percent (__ %) per annum.
If suit is brought on this note after any default in any payment, the
undersigned promises and agrees to pay reasonable attorneys' fees incurred
thereby.
This note shall be construed according to the laws of the State of
Washington.
Metropolitan Bancorp, a
Washington corporation
___________________________________
Name:______________________________
Title: ___________________________
EXHIBIT B(1)
SHAREHOLDERS' CERTIFICATE
John Fairchild and Sheryl Nilson, two of the shareholders of Metropolitan
Bancorp (the "Shareholders"), pursuant to Section 3.2(a) of the Stock
Redemption Agreement (the "Redemption Agreement") dated July 11, 1996 by and
among Metropolitan Bancorp (the "Company"), John Fairchild and Sheryl Nilson
hereby certify that to their knowledge after due inquiry:
1. The representations and warranties of the Shareholders contained in
Article 5 of the Redemption Agreement were true in all material respects when
made and are true and correct in all material respects on and as of the date
hereof with the same force and effect as though made on and as of the date
hereof, except for those representations and warranties that speak as of a
certain date.
2. Each of the Shareholders has performed in all material respects all his
or her obligations under, and has complied in all material respects with all
of the covenants contained in, Article 6 of the Redemption Agreement required
to be performed or complied with by him or her prior to or as of the date
hereof.
3. Each of the conditions to the Shareholders' obligation to effect the
transactions as set forth in Section 7.1 the Redemption Agreement has been
satisfied or waived.
Dated: ___________, 199_
__________________________________
John Fairchild
__________________________________
Sheryl Nilson
EXHIBIT B(2)
METROPOLITAN BANCORP
OFFICERS' CERTIFICATE
Patrick F. Patrick and Michael M. Pete, the President and Chief Executive
Officer and the Senior Vice President and Chief Financial Officer,
respectively, of Metropolitan Bancorp (the "Company"), pursuant to Section
3.2(b) of the Stock Redemption Agreement (the "Redemption Agreement") dated
July 11, 1996 by and among the Company, John Fairchild and Sheryl Nilson
hereby certify that to their knowledge after due inquiry:
1. The representations and warranties of the Company contained in Article
4 of the Redemption Agreement were true in all material respects when made and
are true and correct in all material respects on and as of the date hereof
with the same force and effect as though made on and as of the date hereof,
except for those representations and warranties that speak as of a certain
date.
2. The Company has performed in all material respects all its obligations
under, and has complied in all material respects with all of the covenants
contained in, Article 6 of the Redemption Agreement required to be performed
or complied with by it prior to or as of the date hereof.
3. Each of the conditions to the Company's obligation to effect the
transactions as set forth in Section 7.2 the Redemption Agreement has been
satisfied or waived.
Dated: ___________, 199_
________________________________
Patrick F. Patrick
President and Chief Executive Officer
________________________________
Michael M. Pete
Senior Vice President and
Chief Financial Officer