EXHIBIT 2(a)
Agreement and Plan of Merger,
dated as of July 11, 1996,
between Washington Federal and Metropolitan
AGREEMENT AND PLAN OF MERGER
between
WASHINGTON FEDERAL, INC.
and
METROPOLITAN BANCORP
dated as of July 11, 1996
AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
PAGE
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ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Effective Time; Closing. . . . . . . . . . . . . . . . . . . . 7
2.3 Treatment of Capital Stock . . . . . . . . . . . . . . . . . . 8
2.4 Shareholder Rights; Stock Transfers. . . . . . . . . . . . . . 8
2.5 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Exchange Procedures. . . . . . . . . . . . . . . . . . . . . . 9
2.8 Anti-Dilution Provisions . . . . . . . . . . . . . . . . . . . 10
2.9 Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10 Additional Actions . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1 Capital Structure. . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Organization, Standing and Authority of the Company. . . . . . 12
3.3 Ownership of the Company Subsidiaries. . . . . . . . . . . . . 12
3.4 Organization, Standing and Authority of
the Company Subsidiaries . . . . . . . . . . . . . . . . . . 12
3.5 Authorized and Effective Agreement . . . . . . . . . . . . . . 13
3.6 Authorized and Effective Mortgage Company Agreement. . . . . . 14
3.7 Securities Documents and Regulatory Reports. . . . . . . . . . 15
3.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . 15
3.9 Material Adverse Change . . . . . . . . . . . . . . . . . . . 16
3.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . 16
3.11 Loans, Allowance for Loan Losses, Real Estate
Owned and Investment and Mortgage-Backed Securities . . . . 17
3.12 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.13 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 19
3.14 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 19
3.15 Certain Information . . . . . . . . . . . . . . . . . . . . . 20
3.16 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 20
3.17 Certain Contracts . . . . . . . . . . . . . . . . . . . . . . 22
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3.18 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . 23
3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.20 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.21 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.22 Required Vote; Inapplicability of Antitakeover Statutes . . . 24
3.23 Ownership of Acquiror Common Stock . . . . . . . . . . . . . . 24
3.24 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE ACQUIROR . . . . . . . . . . . . . . . . . . . . . . . 25
4.1 Capital Structure . . . . . . . . . . . . . . . . . . . . . . 25
4.2 Organization, Standing and Authority of the Acquiror . . . . . 25
4.3 Ownership of the Acquiror Subsidiaries . . . . . . . . . . . . 25
4.4 Organization, Standing and Authority of the
Acquiror Subsidiaries . . . . . . . . . . . . . . . . . . . 26
4.5 Authorized and Effective Agreement . . . . . . . . . . . . . . 26
4.6 Securities Documents and Regulatory Reports . . . . . . . . . 27
4.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . 28
4.8 Material Adverse Change . . . . . . . . . . . . . . . . . . . 28
4.9 Environmental Matters . . . . . . . . . . . . . . . . . . . . 29
4.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.11 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 30
4.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 30
4.13 Certain Information . . . . . . . . . . . . . . . . . . . . . 31
4.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 31
4.15 Certain Contracts . . . . . . . . . . . . . . . . . . . . . . 33
4.16 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . 33
4.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.18 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.19 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.20 Ownership of Company Common Stock . . . . . . . . . . . . . . 34
4.21 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.1 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . 35
5.2 Shareholder Meeting . . . . . . . . . . . . . . . . . . . . . 35
5.3 Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . 35
5.4 Investigation and Confidentiality . . . . . . . . . . . . . . 36
5.5 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . 37
5.6 Business of the Parties . . . . . . . . . . . . . . . . . . . 38
5.7 Certain Actions . . . . . . . . . . . . . . . . . . . . . . . 41
5.8 Current Information . . . . . . . . . . . . . . . . . . . . . 42
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5.9 Indemnification; Insurance . . . . . . . . . . . . . . . . . . 42
5.10 Benefit Plans and Arrangements . . . . . . . . . . . . . . . . 43
5.11 Bank Merger . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.12 Certain Policies; Integration . . . . . . . . . . . . . . . . 45
5.13 Restrictions on Resale . . . . . . . . . . . . . . . . . . . . 45
5.14 Disclosure Supplements . . . . . . . . . . . . . . . . . . . . 45
5.15 Failure to Fulfill Conditions . . . . . . . . . . . . . . . . 46
ARTICLE VI CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 46
6.1 Conditions Precedent - The Acquiror and the Company . . . . . 46
6.2 Conditions Precedent - The Company . . . . . . . . . . . . . . 47
6.3 Conditions Precedent - The Acquiror . . . . . . . . . . . . . 48
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT50
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . 51
7.3 Survival of Representations, Warranties
and Covenants . . . . . . . . . . . . . . . . . . . . . . . 51
7.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.5 Amendment or Supplement . . . . . . . . . . . . . . . . . . . 52
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 52
8.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 52
8.3 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . 52
8.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.5 Alternative Structure . . . . . . . . . . . . . . . . . . . . 53
8.6 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . 54
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 54
8.9 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . 54
Exhibit A Form of Stock Option Agreement
Exhibit B Form of Stockholder Agreement
Exhibit C Form of Affiliate Letter
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of July 11, 1996,
between Washington Federal, Inc. (the "Acquiror"), a Washington corporation, and
Metropolitan Bancorp (the "Company"), a Washington corporation.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Acquiror and the Company have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transactions provided
for herein, including the merger of the Company with and into the Acquiror,
subject to the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Acquiror's willingness to
enter into this Agreement, (i) the Company is concurrently entering into a Stock
Option Agreement with the Acquiror (the "Stock Option Agreement"), in
substantially the form attached hereto as Exhibit A, pursuant to which the
Company is granting to the Acquiror the option to purchase shares of Company
Common Stock (as defined herein) under certain circumstances and (ii) certain
shareholders of the Company are concurrently entering into a Stockholder
Agreement with the Acquiror (the "Stockholder Agreement"), in substantially the
form attached hereto as Exhibit B, pursuant to which, among other things, such
stockholders agree to vote their shares of Company Common Stock in favor of this
Agreement and the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Acquiror Bank" shall mean Washington Federal Savings and Loan Association,
a federally-chartered savings and loan association and a wholly-owned subsidiary
of the Acquiror.
"Acquiror Common Stock" shall mean the common stock, par value $1.00 per
share, of the Acquiror.
"Acquiror Employee Plans" shall have the meaning set forth in Section
4.14(a) hereof.
"Acquiror Employee Stock Benefit Plans" shall mean the following employee
benefit plans of the Acquiror: 1982 Employee Stock Compensation Program, 1987
Stock Option and Stock Appreciation Rights Plan, 1994 Stock Option and Stock
Appreciation Rights Plan and Washington Federal Savings Profit Sharing
Retirement Plan and Employee Stock Ownership Plan.
"Acquiror Financial Statements" shall mean (i) the consolidated statements
of financial condition (including related notes and schedules, if any) of the
Acquiror as of September 30, 1995, 1994 and 1993 and the consolidated statements
of operations, stockholders' equity and cash flows (including related notes and
schedules, if any) of the Acquiror for each of the three years ended September
30, 1995, 1994 and 1993 as filed by the Acquiror in its Securities Documents,
and (ii) the consolidated statements of financial condition of the Acquiror
(including related notes and schedules, if any) and the consolidated statements
of operations, stockholders' equity and cash flows (including related notes and
schedules, if any) of the Acquiror included in the Securities Documents filed by
the Acquiror with respect to the quarterly and annual periods ended subsequent
to September 30, 1995.
"Acquiror Preferred Stock" shall mean the shares of preferred stock, par
value $1.00 per share, of the Acquiror.
"Articles of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Average Acquiror Share Price" shall mean the average closing price per
share of Acquiror Common Stock, as reported on the Nasdaq Stock Market's
National Market (as reported by THE WALL STREET JOURNAL or, if not reported
thereby, another authoritative source), during the 20 trading days ending on the
fifth business day prior to the Effective Time.
"Bank" shall mean Metropolitan Federal Savings and Loan Association of
Seattle, a federally-chartered savings and loan association and a wholly-owned
subsidiary of the Company.
"Bank Merger" shall have the meaning set forth in Section 5.11 hereof.
"BIF" shall mean the Bank Insurance Fund administered by the FDIC or any
successor thereto.
"Bank Merger Agreement" shall have the meaning set forth in Section 5.11
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
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"Company Common Stock" shall mean the common stock, par value $0.01 per
share, of the Company.
"Company Employee Plans" shall have the meaning set forth in Section
3.16(a) hereof.
"Company Financial Statements" shall mean (i) the consolidated statements
of financial condition (including related notes and schedules, if any) of the
Company as of March 31, 1996, 1995 and 1994 and the consolidated statements of
income, stockholders' equity and cash flows (including related notes and
schedules, if any) of the Company for each of the three years ended March 31,
1996, 1995 and 1994 as filed by the Company in its Securities Documents, and
(ii) the consolidated statements of financial condition of the Company
(including related notes and schedules, if any) and the consolidated statements
of income, stockholders' equity and cash flows (including related notes and
schedules, if any) of the Company included in the Securities Documents filed by
the Company with respect to the quarterly and annual periods ended subsequent to
March 31, 1996.
"Company Options" shall mean options to purchase shares of Company Common
Stock granted pursuant to the Company Option Plans.
"Company Option Plans" shall mean the following stock option plans of the
Company, as amended and as in effect as of the date hereof: Amended Stock
Option and Incentive Plan and Stock Option Plan for Nonemployee Directors.
"Company Preferred Stock" shall mean the shares of preferred stock, par
value $0.01 per share, of the Company.
"Dissenting Shares" shall have the meaning set forth in Section 2.5 hereof.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time specified pursuant to Section
2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental Entity
or third party alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on, or resulting from the presence, or
release into the environment, of any Materials of Environmental Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water
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vapor, surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural resource), and/or
(2) the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Materials
of Environment Concern. The term Environmental Law includes without
limitation (1) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601, ET SEQ; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901, ET SEQ;
the Clean Air Act, as amended, 42 U.S.C. Section 7401, ET SEQ; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. Section 1251, ET SEQ; the
Toxic Substances Control Act, as amended, 15 U.S.C. Section 9601, ET SEQ; the
Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 1101,
ET SEQ; the Safe Drinking Water Act, 42 U.S.C. Section 300f, ET SEQ; and all
comparable state and local laws, and (2) any common law (including without
limitation common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Materials of Environmental
Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Ratio" shall have the meaning set forth in Section 2.3 hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean Federal Home Loan Bank.
"Form S-4" shall mean the registration statement on Form S-4 (or on any
successor or other appropriate form) to be filed by the Acquiror in connection
with the issuance of shares of Acquiror Common Stock pursuant to the Merger,
including the Proxy Statement which forms a part thereof, as amended and
supplemented.
"Governmental Entity" shall mean any federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Material Adverse Effect" shall mean, with respect to the Acquiror or the
Company, respectively, any effect that (i) is material and adverse to the
financial condition, results of operations or business of the Acquiror and its
Subsidiaries taken as whole or the Company and its Subsidiaries taken as a
whole, respectively, or (ii) materially impairs the ability of (x) either the
Company or the Bank to consummate the transactions contemplated by this
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Agreement (including without limitation the transactions contemplated by the
Bank Merger Agreement and the Mortgage Company Agreement) or (y) either the
Acquiror or the Acquiror Bank to consummate the transactions contemplated by
this Agreement (including without limitation the transactions contemplated by
the Bank Merger Agreement), provided, however, that Material Adverse Effect
shall not be deemed to include the impact of (a) changes in laws and regulations
or interpretations thereof that are generally applicable to the savings industry
(including without limitation prospective changes which result in assessments
which are intended to recapitalize the SAIF), (b) changes in generally accepted
accounting principles that are generally applicable to the savings industry, (c)
reasonable expenses incurred in connection with the transactions contemplated
hereby or (d) actions or omissions of a party (or any of its Subsidiaries) taken
with the prior informed written consent of the other party or parties in
contemplation of the transactions contemplated hereby, including without
limitation any actions taken by the Company pursuant to Section 5.12 hereof.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of the Company with and into the Acquiror
pursuant to the terms hereof.
"Mortgage Company" shall mean Phoenix Mortgage & Investment, Inc., a
wholly-owned subsidiary of the Company.
"Mortgage Company Agreement" shall mean the Mortgage Company Agreement,
dated as of the date hereof, among the Company, the Bank, John H. Fairchild and
Sheryl Nilson, which provides the terms and conditions under which the Company
would (i) distribute to Mr. Fairchild and Ms. Nilson (the "Shareholders") not
less than 81% of the outstanding shares of common stock of the Mortgage Company
and (ii) redeem shares of Company Common Stock held by the Shareholders.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OTS" shall mean the Office of Thrift Supervision of the U.S. Department of
the Treasury or any successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.
"Previously Disclosed" shall mean disclosed (i) in a letter dated the date
hereof delivered from the disclosing party to the other party specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein, or (ii) a letter dated after
the date hereof from the disclosing party specifically referring to
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this Agreement and describing in reasonable detail the matters contained therein
and delivered by the other party pursuant to Section 5.14 hereof.
"Proxy Statement" shall mean the prospectus/proxy statement contained in
the Form S-4, as amended or supplemented, and to be delivered to shareholders of
the Company in connection with the solicitation of their approval of this
Agreement and the transactions contemplated hereby.
"Real Estate Owned" shall mean real estate acquired by foreclosure or by
deed-in-lieu of foreclosure, real estate in judgment and subject to redemption
and in-substance foreclosures under generally accepted accounting principles.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests.
"SAIF" shall mean the Savings Association Insurance Fund administered by
the FDIC or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or required
to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Subsidiary" and "Significant Subsidiary" shall have the meanings set forth
in Rule 1-02 of Regulation S-X of the Commission.
"WBCA" shall mean the Washington Business Corporation Act, as amended.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
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ARTICLE II
THE MERGER
2.1 THE MERGER
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.2 hereof), the Company shall be merged
with and into the Acquiror (the "Merger") in accordance with the provisions of
Section 23B.11.010 of the WBCA. The Acquiror shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") of the Merger, and
shall continue its corporate existence under the laws of the State of
Washington. The name of the Surviving Corporation shall continue to be
"Washington Federal, Inc." Upon consummation of the Merger, the separate
corporate existence of the Company shall terminate.
(b) From and after the Effective Time, the Merger shall have the effects
set forth in Section 23B.11.060 of the WBCA.
(c) The Restated Articles of Incorporation and Bylaws of the Acquiror, as
in effect immediately prior to the Effective Time, shall be the Restated
Articles of Incorporation and Bylaws of the Surviving Corporation, respectively,
until altered, amended or repealed in accordance with their terms and applicable
law.
(d) The authorized capital stock of the Surviving Corporation shall be as
stated in the Restated Articles of Incorporation of the Acquiror immediately
prior to the Effective Time.
(e) Upon consummation of the Merger, (i) the directors of the Surviving
Corporation shall be the directors of the Acquiror immediately prior to the
Effective Time and (ii) the executive officers of the Surviving Corporation
shall be the executive officers of the Acquiror immediately prior to the
Effective Time and Patrick F. Patrick, who shall be elected as an Executive Vice
President of the Surviving Corporation. Each of the directors and executive
officers of the Surviving Corporation shall hold office in accordance with the
Restated Articles of Incorporation and Bylaws of the Surviving Corporation.
2.2 EFFECTIVE TIME; CLOSING
The Merger shall become effective upon the occurrence of the filing of
articles of merger (the "Articles of Merger") with the Secretary of State of the
State of Washington pursuant to Section 23B.11.050 of the WBCA, unless a later
date and time is specified as the effective time in such Articles of Merger (the
"Effective Time"). A closing (the "Closing") shall take place immediately prior
to the Effective Time at 10:00 a.m., Pacific Time, on the fifth business day
following the satisfaction or waiver, to the extent permitted hereunder, of the
conditions to the consummation of the Merger specified in Article VI of this
Agreement (other than the delivery of certificates, opinions and other
instruments and
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documents to be delivered at the Closing), at the principal executive
offices of the Acquiror in Seattle, Washington or at such other place, at
such other time, or on such other date as the parties may mutually agree
upon. At the Closing, there shall be delivered to the Acquiror and the
Company the opinions, certificates and other documents required to be
delivered under Article VI hereof.
2.3 TREATMENT OF CAPITAL STOCK
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Merger and without any action on the part of any
shareholder:
(a) each share of Acquiror Common Stock issued and outstanding immediately
prior to the Effective Time shall be unchanged and shall remain issued and
outstanding; and
(b) subject to Sections 2.5, 2.6 and 7.1(f) hereof, each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares held by the Acquiror or any of its Subsidiaries other than in
a fiduciary capacity that are beneficially owned by third parties or as a result
of debts previously contracted, which shall be cancelled and retired) shall
become and be converted into the right to receive the number of shares of
Acquiror Common Stock (calculated to the nearest one-thousandth) which is equal
to (i) if the Average Acquiror Share Price is equal to or greater than $18.00
per share but equal to or less than $24.50 per share, the quotient determined by
dividing (A) $18.00 by (B) the Average Acquiror Share Price, (ii) if the Average
Acquiror Share Price is less than $18.00 per share, one share or (iii) if the
Average Acquiror Share Price is greater than $24.50 per share, .735 shares (in
any case, subject to possible adjustment as set forth in Sections 2.8 and 7.1(f)
hereof, the "Exchange Ratio").
2.4 SHAREHOLDER RIGHTS; STOCK TRANSFERS
Except as provided for in Section 2.5 hereof, at the Effective Time,
holders of Company Common Stock shall cease to be and shall have no rights as
shareholders of the Company, other than to receive the consideration provided
under this Article II. After the Effective Time, there shall be no transfers on
the stock transfers books of the Company or the Surviving Corporation of shares
of Company Common Stock.
2.5 DISSENTING SHARES
Each outstanding share of Company Common Stock the holder of which has
perfected his right to dissent under the WBCA and has not effectively withdrawn
or lost such right as of the Effective Time (the "Dissenting Shares") shall not
be converted into or represent a right to receive shares of Acquiror Common
Stock hereunder, and the holder thereof shall be entitled only to such rights as
are granted by the WBCA. The Company shall give the Acquiror prompt notice upon
receipt by the Company of any such written demands for payment of the fair value
of such shares of Company Common Stock and of
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withdrawals of such demands and any other instruments provided pursuant to
the WBCA (any shareholder duly making such demand being hereinafter called a
"Dissenting Shareholder"). If any Dissenting Shareholder shall effectively
withdraw or lose (through failure to perfect or otherwise) his right to such
payment at any time, such holder's shares of Company Common Stock shall be
converted into the right to receive Acquiror Common Stock in accordance with
the applicable provisions of this Agreement.
2.6 FRACTIONAL SHARES
Notwithstanding any other provision hereof, no fractional shares of
Acquiror Common Stock shall be issued to holders of Company Common Stock. In
lieu thereof, each holder of shares of Company Common Stock entitled to a
fraction of a share of Acquiror Common Stock shall, at the time of surrender of
the certificate or certificates representing such holder's shares, receive an
amount of cash (without interest) equal to the product arrived at by multiplying
such fraction of a share of Acquiror Common Stock by the Average Acquiror Share
Price, rounded to the nearest whole cent. No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any fractional share
interest.
2.7 EXCHANGE PROCEDURES
(a) At or after the Effective Time, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Company
Common Stock, upon surrender of the same to an agent, duly appointed by the
Acquiror (the "Exchange Agent"), shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of full shares of
Acquiror Common Stock into which the shares of Company Common Stock theretofore
represented by the certificate or certificates so surrendered shall have been
converted as provided in Section 2.3(b) hereof. As promptly as practicable
after the Effective Time (and in no event later than the fifth business day
following the Effective Time), the Exchange Agent shall mail to each holder of
record of an outstanding certificate which immediately prior to the Effective
Time evidenced shares of Company Common Stock, and which is to be exchanged for
Acquiror Common Stock as provided in Section 2.3 hereof, a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to such certificate shall pass, only upon delivery of such
certificate to the Exchange Agent) advising such holder of the terms of the
exchange effected by the Merger and of the procedure for surrendering to the
Exchange Agent such certificate in exchange for a certificate or certificates
evidencing Acquiror Common Stock or cash in lieu of any fractional share.
Notwithstanding anything in this Agreement to the contrary, certificates
representing Company Common Stock surrendered for exchange by any Affiliate of
the Company (as defined in Section 5.13(a) hereof) shall not be exchanged for
certificates representing shares of Acquiror Common Stock in accordance with the
terms of this Agreement until the Acquiror has received a written agreement from
such person as specified in Section 5.13(b).
9
(b) No holder of a certificate theretofore representing shares of Company
Common Stock shall be entitled to receive any dividends in respect of the
Acquiror Common Stock into which such shares shall have been converted by virtue
of the Merger until the certificate representing such shares is surrendered in
exchange for a certificate or certificates representing shares of Acquiror
Common Stock. In the event that dividends are declared and paid by the Acquiror
in respect of Acquiror Common Stock after the Effective Time but prior to any
holder's surrender of certificates representing shares of Company Common Stock,
dividends payable to such holder in respect of shares of Acquiror Common Stock
not then issued shall accrue (without interest). Any such dividends shall be
paid (without interest) upon surrender of the certificates representing such
shares of Company Common Stock. The Acquiror shall be entitled, after the
Effective Time, to treat certificates representing shares of Company Common
Stock as evidencing ownership of the number of full shares of Acquiror Common
Stock into which the shares of Company Common Stock represented by such
certificates shall have been converted pursuant to this Agreement,
notwithstanding the failure on the part of the holder thereof to surrender such
certificates.
(c) The Acquiror shall not be obligated to deliver a certificate or
certificates representing shares of Acquiror Common Stock to which a holder of
Company Common Stock would otherwise be entitled as a result of the Merger until
such holder surrenders the certificate or certificates representing the shares
of Company Common Stock for exchange as provided in this Section 2.7, or, in
default thereof, an appropriate affidavit of loss and indemnity agreement and/or
a bond in an amount as may be reasonably required in each case by the Acquiror.
If any certificate evidencing shares of Acquiror Common Stock is to be issued in
a name other than that in which the certificate evidencing Company Common Stock
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by reason
of the issuance of a certificate for shares of Acquiror Common Stock in any name
other than that of the registered holder of the certificate surrendered or
otherwise establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
2.8 ANTI-DILUTION PROVISIONS
If, between the date hereof and the Effective Time, the shares of Acquiror
Common Stock shall be changed into a different number or class of shares by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within said period, the Exchange Ratio shall be
adjusted accordingly.
10
2.9 OPTIONS
On a mutually agreeable date prior to the Effective Time, but in no event
later than immediately before the Effective Time, the Company shall terminate
each of the Company Option Plans and terminate each Company Option that is
outstanding and unexercised at the time in exchange for a payment from the
Company, subject to required withholding taxes and the receipt of an appropriate
release as discussed below, of cash in an amount equal to the difference between
the exercise price of such Company Option and $18.00 for each share of Company
Common Stock subject to such Company Option. The Company agrees to use its best
efforts obtain an appropriate release from the holder of a Company Option which
is terminated pursuant to this Section 2.9 prior to making any payment in
exchange therefor.
2.10 ADDITIONAL ACTIONS
If, at any time after the Effective Time, the Surviving Corporation shall
consider that any further assignments or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger, or
(ii) otherwise carry out the purposes of this Agreement, the Company and its
proper officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
proper deeds, assignments and assurances in law and to do all acts necessary or
proper to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
purposes of this Agreement; and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Company or
otherwise to take any and all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Acquiror as follows:
3.1 CAPITAL STRUCTURE
The authorized capital stock of the Company consists of 40,000,000 shares
of Company Common Stock and 10,000,000 shares of Company Preferred Stock. As of
the date hereof, 3,710,205 shares of Company Common Stock are issued and
outstanding, 383,648 shares of Company Common Stock are directly or indirectly
held by the Company as treasury stock and no shares of Company Preferred Stock
are issued and outstanding. All outstanding shares of Company Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable,
and none of the outstanding shares of Company
11
Common Stock has been issued in violation of the preemptive rights of any
person, firm or entity. Except for the Stock Option Agreement and for
Company Options to acquire not more than 332,850 shares of Company Common
Stock outstanding as of the date hereof, a schedule of which has been
Previously Disclosed, there are no Rights authorized, issued or outstanding
with respect to the capital stock of the Company.
3.2 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Company. The Company
is duly registered as a unitary savings and loan holding company under the HOLA
and the regulations of the OTS thereunder. The Company has heretofore delivered
to the Acquiror true and complete copies of the Articles of Incorporation and
Bylaws of the Company as in effect as of the date hereof.
3.3 OWNERSHIP OF THE COMPANY SUBSIDIARIES
The Company has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Company
Subsidiary. Except for (x) capital stock of the Company Subsidiaries, (y)
securities and other interests held in a fiduciary capacity and beneficially
owned by third parties or taken in consideration of debts previously contracted
and (z) securities and other interests which are Previously Disclosed, the
Company does not own or have the right to acquire, directly or indirectly, any
outstanding capital stock or other voting securities or ownership interests of
any corporation, bank, savings association, partnership, joint venture or other
organization. The outstanding shares of capital stock or other ownership
interests of each Company Subsidiary have been duly authorized and validly
issued, are fully paid and nonassessable, and except as Previously Disclosed are
directly owned by the Company free and clear of all liens, claims, encumbrances,
charges, pledges, restrictions or rights of third parties of any kind
whatsoever. No Rights are authorized, issued or outstanding with respect to the
capital stock or other ownership interests of the Company Subsidiaries and,
other than the Mortgage Company Agreement, there are no agreements,
understandings or commitments relating to the right of the Company to vote or to
dispose of such capital stock or other ownership interests.
3.4 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY SUBSIDIARIES
Each of the Company Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized. Each of the Company Subsidiaries (i) has full power and authority to
own or lease all of its properties
12
and assets and to carry on its business as now conducted and (ii) is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct
of its business requires such qualification, except where the failure to
be so licensed, qualified or in good standing would not have a Material
Adverse Effect on the Company. The deposit accounts of the Bank are
insured by the SAIF or the BIF to the maximum extent permitted by the FDIA.
The Bank has paid all deposit insurance premiums and assessments required by
the FDIA and the regulations thereunder. The Company has heretofore delivered
or made available to the Acquiror true and complete copies of the Charter and
Bylaws of the Bank and the Articles of Incorporation and Bylaws of each other
Company Subsidiary as in effect as of the date hereof.
3.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and (subject to receipt of all necessary governmental
approvals and the approval of the Company's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of the Company, except for the approval of this
Agreement by the Company's shareholders. This Agreement has been duly and
validly executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Acquiror, constitutes a legal, valid and binding
obligation of the Company which is enforceable against the Company in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Bank
Merger), nor compliance by the Company with any of the provisions hereof (i)
does or will conflict with or result in a breach of any provisions of the
Articles of Incorporation or Bylaws of the Company or the equivalent documents
of any Company Subsidiary, (ii) violate, conflict with or result in a breach of
any term, condition or provision of, or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under, or
give rise to any right of termination, cancellation or acceleration with respect
to, or result in the creation of any lien, charge or encumbrance upon any
property or asset of the Company or a Company Subsidiary pursuant to, any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Company or a Company
Subsidiary is a party, or by which any of their respective properties or assets
may be bound or affected or (iii) subject to receipt of all required
governmental and shareholder approvals, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or a Company
Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consent and approval of, the OTS, (ii) the filing and effectiveness of the Form
S-4 with the Commission,
13
(iii) compliance with applicable state securities or "blue sky" laws and the
NASD Bylaws in connection with the issuance of Acquiror Common Stock pursuant
to this Agreement, (iv) the approval of this Agreement by the requisite vote
of the shareholders of the Company, (v) the filing of Articles of Merger with
the Secretary of State of the State of Washington pursuant to the WBCA in
connection with the Merger, (vi) the filing of Articles of Combination with
the OTS in connection with the Bank Merger and (vii) review of the Merger by
the DOJ under federal antitrust laws, and except for such filings,
registrations, consents or approvals which are Previously Disclosed, no
consents or approvals of or filings or registrations with any Governmental
Entity or with any third party are necessary on the part of the Company or
any Company Subsidiary in connection with (i) the execution and delivery by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby and (ii) the execution and delivery by the
Bank of the Bank Merger Agreement and the consummation by the Bank of the
transactions contemplated thereby.
(d) As of the date hereof, neither the Company nor any of the Company
Subsidiaries is aware of any reasons relating to the Company or any of the
Company Subsidiaries (including without limitation Community Reinvestment Act
compliance) why all consents and approvals shall not be procured from all
regulatory agencies having jurisdiction over the transactions contemplated by
this Agreement as shall be necessary for (i) consummation of the transactions
contemplated by this Agreement and the Bank Merger Agreement and (ii) the
continuation by the Acquiror after the Effective Time of the business of each of
the Acquiror and the Company as such business is carried on immediately prior to
the Effective Time, free of any conditions or requirements which, in the
reasonable opinion of the Company, could have a Material Adverse Effect on the
Acquiror or the Company or materially impair the value of the Company and the
Company Subsidiaries to the Acquiror.
3.6 AUTHORIZED AND EFFECTIVE MORTGAGE COMPANY AGREEMENT
(a) The Company has all requisite corporate power and authority to enter
into the Mortgage Company Agreement and to perform all of its obligations under
the Mortgage Company Agreement. The execution and delivery of the Mortgage
Company Agreement and the consummation of the transactions contemplated thereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of the Company. The Mortgage Company Agreement has
been duly and validly executed and delivered by the Company and, assuming due
authorization, execution and delivery by the other parties thereto, constitutes
a legal, valid and binding obligation of the Company which is enforceable
against the Company in accordance with its terms, subject, as to enforceability,
to bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(b) Neither the execution and delivery of the Mortgage Company Agreement,
nor consummation of the transactions contemplated thereby, nor compliance by the
Company
14
with any of the provisions thereof (i) does or will conflict with or result
in a breach of any provisions of the Articles of Incorporation or Bylaws of
the Company or the equivalent documents of any Company Subsidiary, (ii)
violate, conflict with or result in a breach of any term, condition or
provision of, or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or give rise to
any right of termination, cancellation or acceleration with respect to, or
result in the creation of any lien, charge or encumbrance upon any property
or asset of the Company or a Company Subsidiary pursuant to, any material
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Company or a Company Subsidiary
is a party, or by which any of their respective properties or assets may be
bound or affected or (iii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or a Company Subsidiary.
3.7 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Since January 1, 1993, the Company has timely filed with the
Commission and the NASD all Securities Documents required by the Securities Laws
and such Securities Documents complied in all material respects with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Since January 1, 1993, each of the Company and the Bank has duly filed
with the OTS, the FDIC and any other applicable federal or state banking
authority, as the case may be, in correct form the reports required to be filed
under applicable laws and regulations and such reports were in all material
respects complete and accurate and in compliance with the requirements of
applicable laws and regulations. In connection with the most recent
examinations of the Company and the Bank by the OTS, neither the Company nor the
Bank was required to correct or change any action, procedure or proceeding which
the Company or the Bank believes has not been corrected or changed as required
as of the date hereof.
3.8 FINANCIAL STATEMENTS
(a) The Company has previously delivered or made available to the Acquiror
accurate and complete copies of the Company Financial Statements which, in the
case of the consolidated statements of financial condition of the Company as of
March 31, 1996, 1995 and 1994 and the consolidated statements of income,
stockholders' equity and cash flows for each of the three years ended March 31,
1996, 1995 and 1994, are accompanied by the audit reports of Deloitte & Touche
LLP, independent public accountants with respect to the Company. The Company
Financial Statements referred to herein, as well as the Company Financial
Statements to be delivered pursuant to Section 5.8 hereof, fairly present or
will fairly present, as the case may be, the consolidated financial condition of
the Company as of the respective dates set forth therein, and the consolidated
results of
15
operations, stockholders' equity and cash flows of the Company for
the respective periods or as of the respective dates set forth therein.
(b) Each of the Company Financial Statements referred to in Section 3.8(a)
has been or will be, as the case may be, prepared in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as stated therein. The audits of the Company and the Company
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of the Company and
the Company Subsidiaries are being maintained in material compliance with
applicable legal and accounting requirements, and such books and records
accurately reflect in all material respects all dealings and transactions in
respect of the business, assets, liabilities and affairs of the Company and its
Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the consolidated statement of financial condition of the Company as of March 31,
1996 (including related notes) and (ii) of liabilities incurred since March 31,
1996 in the ordinary course of business, neither the Company nor any Company
Subsidiary has any liabilities, whether absolute, accrued, contingent or
otherwise, material to the financial condition, results of operations or
business of the Company on a consolidated basis.
3.9 MATERIAL ADVERSE CHANGE
Except as Previously Disclosed, since March 31, 1996 (i) the Company and
its Subsidiaries have conducted their respective businesses in the ordinary and
usual course (excluding the incurrence of reasonable expenses in connection with
the transactions contemplated hereby) and (ii) no event has occurred or
circumstance arisen that, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on the Company.
3.10 ENVIRONMENTAL MATTERS
(a) To the best of the Company's knowledge, the Company and its
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would not, singly or in the aggregate,
have a Material Adverse Effect on the Company. Neither the Company nor a
Company Subsidiary has received in the past five years any communication from a
Governmental Entity alleging that the Company or a Company Subsidiary is not in
such compliance, or if such a communication has been received, the Company is
now in such compliance, and, to the best knowledge of the Company, there are no
present circumstances that would prevent or interfere with the continuation of
compliance with all Environmental Laws.
(b) To the best of the Company's knowledge, none of the properties owned,
leased or operated by the Company or a Company Subsidiary has been or is in
violation of or
16
liable under any Environmental Law, except any such violations or liabilities
which would not singly or in the aggregate have a Material Adverse Effect on
the Company.
(c) To the best of the Company's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action or
governmental investigation that could result in the imposition of any liability
arising under any Environmental Law against the Company or a Company Subsidiary
or against any person or entity whose liability for any Environmental Claim the
Company or a Company Subsidiary has or may have retained or assumed either
contractually or by operation of law, except such which would not have a
Material Adverse Effect on the Company.
(d) Except as Previously Disclosed, the Company has not conducted any
environmental studies during the past five years with respect to any properties
owned by it or a Company Subsidiary as of the date hereof.
3.11 LOANS, ALLOWANCE FOR LOAN LOSSES, REAL ESTATE OWNED AND INVESTMENT AND
MORTGAGE-BACKED SECURITIES
(a) Each loan on the books and records of the Company and any Company
Subsidiary, including unfunded portions of outstanding lines of credit and loan
commitments, was made and has been serviced in all material respects in
accordance with customary lending standards in the ordinary course of business,
is evidenced in all material respects by appropriate and sufficient
documentation and, to the best knowledge of the Company, constitutes the legal,
valid and binding obligation of the obligor named therein, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditor's rights and to general equity
principles.
(b) The allowance for loan losses reflected on the Company's consolidated
statements of financial condition included in the Company Financial Statements
is, or will be in the case of subsequently delivered Company Financial
Statements, as the case may be, in the opinion of the Company's management
adequate in all material respects as of their respective dates under the
requirements of generally accepted accounting principles to provide for
reasonably anticipated losses on outstanding loans net of recoveries. The Real
Estate Owned reflected on the consolidated statements of financial condition
included in the Company Financial Statements is, or will be in the case of
subsequently delivered Company Financial Statements, as the case may be, carried
at the lower of cost or fair value, less estimated costs to sell, as required by
generally accepted accounting principles.
(c) The Company has Previously Disclosed to the Acquiror as of June 30,
1996 or the latest practicable date prior thereto, as applicable: (i) any
written or, to the Company's knowledge, oral loan or similar agreement under the
terms of which the obligor is 30 or more days delinquent in payment of principal
or interest, or to the best of the Company's knowledge, in default of any other
provision thereof; (ii) each loan or similar
17
agreement which has been classified as "substandard," "doubtful," "loss" or
"special mention" by the Company, a Company Subsidiary or an applicable
regulatory authority; (iii) a listing of the Real Estate Owned held by the
Company and the Company Subsidiaries; (iv) a schedule of all investment
securities and mortgage-backed securities of the Company and the Company
Subsidiaries, including securities held-to-maturity, available for sale and
held for trading, as well as the respective carrying values and fair values
of all such securities, and in each case, all such information as Previously
Disclosed is complete and accurate in all material respects.
3.12 TAX MATTERS
(a) The Company and its Subsidiaries, and each of their predecessors, have
timely filed all federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
required by applicable law to be filed by them (including, without limitation,
estimated tax returns, income tax returns, information returns and withholding
and employment tax returns) and have paid, or where payment is not required to
have been made, have set up an adequate reserve or accrual for the payment of,
all material taxes required to be paid in respect of the periods covered by such
returns and, as of the Effective Time, will have paid, or where payment is not
required to have been made, will have set up an adequate reserve or accrual for
the payment of, all material taxes for any subsequent periods ending on or prior
to the Effective Time. Neither the Company nor a Company Subsidiary will have
any material liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Company and its Subsidiaries are complete and accurate in all
material respects. Neither the Company nor a Company Subsidiary is delinquent
in the payment of any tax, assessment or governmental charge or has requested
any extension of time within which to file any tax returns in respect of any
fiscal year or portion thereof which have not since been filed. Except as
Previously Disclosed, no deficiencies for any tax, assessment or governmental
charge have been proposed, asserted or assessed (tentatively or otherwise)
against the Company or a Company Subsidiary as a result of any examinations or
otherwise which have not been settled and paid. There are currently no
agreements in effect with respect to the Company or a Company Subsidiary to
extend the period of limitations for the assessment or collection of any tax.
As of the date hereof, no audit, examination or deficiency or refund litigation
with respect to such return is pending or, to the best of the Company's
knowledge, threatened.
(c) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary (i) is a party to any agreement providing for the allocation or
sharing of taxes, (ii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by the Company or a Company Subsidiary (nor does the Company
have any knowledge that the Internal Revenue
18
Service has proposed any such adjustment or change of accounting method) or
(iii) has filed a consent pursuant to Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply.
3.13 LEGAL PROCEEDINGS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Company,
threatened against the Company or a Company Subsidiary or against any asset,
interest or right of the Company or a Company Subsidiary, or, to the best
knowledge of the Company, against any officer, director or employee of any of
them that in any such case, if decided adversely, would have a Material Adverse
Effect on the Company. Neither the Company nor a Company Subsidiary is a party
to any order, judgment or decree which has or could reasonably be expected to
have a Material Adverse Effect on the Company.
3.14 COMPLIANCE WITH LAWS
(a) Each of the Company and the Company Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently being conducted and the absence of
which could reasonably be expected to have a Material Adverse Effect on the
Company; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Company, no suspension or cancellation of any of the same is threatened.
(b) Neither the Company nor a Company Subsidiary is in violation of its
respective Articles of Incorporation, Charter or Bylaws, or of any applicable
federal, state or local law or ordinance or any order, rule or regulation of any
federal, state, local or other governmental agency or body (including, without
limitation, all banking (including without limitation all regulatory capital
requirements), securities, municipal securities, safety, health, environmental,
zoning, anti-discrimination, antitrust, and wage and hour laws, ordinances,
orders, rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any Governmental Entity, any of which violations or
defaults could reasonably be expected to have a Material Adverse Effect on the
Company; and neither the Company nor a Company Subsidiary has received in the
past five years any notice or communication from a Governmental Entity asserting
that the Company or a Company Subsidiary is in violation of any of the foregoing
which could reasonably be expected to have a Material Adverse Effect on the
Company. Neither the Company nor a Company Subsidiary is subject to any
regulatory or supervisory cease and desist order, agreement, written directive,
memorandum of understanding or written commitment (other than those of general
applicability to all savings associations or savings and loan holding companies
issued by governmental authorities), and none of them has received in the past
five years any written communication
19
requesting that it enter into any of the foregoing, or if such a communication
has been received, none of them is any longer subject to such request.
3.15 CERTAIN INFORMATION
None of the information relating to the Company and its Subsidiaries
supplied or to be supplied for inclusion or incorporation by reference in (i)
the Form S-4 will, at the time the Form S-4 and any amendment thereto becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(ii) the Proxy Statement, as of the date such Proxy Statement is mailed to
shareholders of the Company and up to and including the date of the meeting of
shareholders to which such Proxy Statement relates, will contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, provided that information as of a later date shall be
deemed to modify information as of an earlier date. The Proxy Statement mailed
by the Company to its shareholders in connection with the meeting of
shareholders at which this Agreement will be considered by such shareholders
will comply as to form in all material respects with the Exchange Act and the
rules and regulations promulgated thereunder.
3.16 EMPLOYEE BENEFIT PLANS
(a) The Company has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of the Company or
any Company Subsidiary (the "Company Employee Plans"), whether written or oral,
and the Company has previously furnished or made available to the Acquiror
accurate and complete copies of the same together with (i) the most recent
actuarial and financial reports prepared with respect to any qualified plans,
(ii) the most recent annual reports filed with any governmental agency, and
(iii) all rulings and determination letters and any open requests for rulings or
letters that pertain to any qualified plan.
(b) None of the Company, any Company Subsidiary, any pension plan
maintained by any of them and qualified under Section 401(a) of the Code or, to
the best of the Company's knowledge, any fiduciary (with respect to whom the
Company or a Company Subsidiary has an indemnification obligation) of such plan
has incurred any material liability to the PBGC or the Internal Revenue Service
with respect to any such plan. To the best of the Company's knowledge, no
reportable event under Section 4043(b) of ERISA has occurred with respect to any
such pension plan.
20
(c) Neither the Company nor any Company Subsidiary participates in or has
incurred any liability (that has not already been satisfied) under Section 4201
of ERISA for a complete or partial withdrawal from a multiemployer plan (as such
term is defined in Section 4001(a)(3) of ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Company Employee Plan which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) (a "Company Pension
Plan") which is intended to qualify under Section 401(a) of the Code to the
effect that such plan is qualified under section 401(a) of the Code and the
trust associated with such employee pension plan is tax exempt under Section 501
of the Code. No such letter has been revoked or, to the best of the Company's
knowledge, is threatened to be revoked and, except as Previously Disclosed, the
Company does not know of any ground on which such revocation may be based.
Neither the Company nor any Company Subsidiary has any material liability under
any such plan that is not reflected on the consolidated statement of financial
condition of the Company at March 31, 1996 included in the Company Financial
Statements, other than liabilities incurred in the ordinary course of business
in connection therewith subsequent to the date thereof.
(e) To the best of the Company's knowledge, no prohibited transaction
(within the meaning of Section 406 of ERISA) that is not exempt from the
prohibition of such Section by virtue of a statutory or administrative exemption
has occurred with respect to any Company Employee Plan which would result in the
imposition, directly or indirectly, on the Company or a Company Subsidiary of a
material excise tax under Section 4975 of the Code or a material civil penalty
under Section 502(i) of ERISA or otherwise have a Material Adverse Effect on the
Company.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established) of
all contributions which are required for periods after the date hereof and prior
to the Effective Time, under the terms of each Company Employee Plan or ERISA;
no accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, exists with respect to any Company
Pension Plan, and there is no "unfunded current liability" (as defined in
Section 412(l)(8)(A) of the Code) with respect to any Company Pension Plan.
(g) To the best of the Company's knowledge and except as Previously
Disclosed, the Company Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and all
other applicable governmental laws and regulations.
(h) There are no pending or, to the best of the Company's knowledge,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the
21
Company Employee Plans or any trust related thereto or, to the best of the
Company's knowledge, any fiduciary thereof (with respect to whom the Company or
a Company Subsidiary has an indemnification obligation).
3.17 CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither the Company nor a Company
Subsidiary is a party to, is bound or affected by, receives, or is obligated to
pay, benefits under (i) any agreement, arrangement or commitment, including
without limitation any agreement, indenture or other instrument, relating to the
borrowing of money by the Company or a Company Subsidiary (other than in the
case of the Bank deposits, FHLB advances, federal funds purchased and securities
sold under agreements to repurchase in the ordinary course of business) or the
guarantee by the Company or a Company Subsidiary of any obligation of others,
(ii) any agreement, arrangement or commitment relating to the employment of a
consultant or the employment, election or retention in office of any present or
former director, officer or employee of the Company or a Company Subsidiary,
(iii) any agreement, arrangement or understanding pursuant to which any payment
(whether of severance pay or otherwise) became or may become due to any
director, officer or employee of the Company or a Company Subsidiary upon
execution of this Agreement or upon or following consummation of the
transactions contemplated by this Agreement (either alone or in connection with
the occurrence of any additional acts or events), (iv) any agreement,
arrangement or understanding pursuant to which the Company or a Company
Subsidiary is obligated to indemnify any director, officer, employee or agent of
the Company or a Company Subsidiary, (v) any agreement, arrangement or
understanding to which the Company or a Company Subsidiary is a party or by
which any of the same is bound which limits the freedom of the Company or a
Company Subsidiary to compete in any line of business or with any person, (vi)
any assistance agreement, supervisory agreement, memorandum of understanding,
consent order, cease and desist order or condition of any regulatory order or
decree with or by the OTS, the FDIC or any other regulatory agency, or (vii) any
other agreement, arrangement or understanding which would be required to be
filed as an exhibit to the Company's Annual Report on Form 10-K under the
Exchange Act and which has not been so filed.
(b) Neither the Company nor any Company Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a Material Adverse Effect on the Company, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
22
3.18 BROKERS AND FINDERS
Except as Previously Disclosed, neither the Company nor any Company
Subsidiary nor, to the best of the Company's knowledge, any of their respective
directors, officers or employees, has employed any broker or finder or incurred
any liability for any broker or finder fees or commissions in connection with
the transactions contemplated hereby which reasonably could be expected to be a
liability of the Company or a Company Subsidiary.
3.19 INSURANCE
Each of the Company and its Subsidiaries is insured for reasonable amounts
with financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations. The Company has Previously Disclosed all
policies of insurance maintained by it or a Company Subsidiary as of the date
hereof and any claims thereunder in excess of $50,000 since January 1, 1994.
3.20 PROPERTIES
All real and personal property owned by the Company or its Subsidiaries or
presently used by any of them in its respective business is in an adequate
condition (ordinary wear and tear excepted) and is sufficient to carry on the
business of the Company and its Subsidiaries in the ordinary course of business
consistent with their past practices. The Company and the Company Subsidiaries
have good and marketable title free and clear of all liens, encumbrances,
charges, defaults or equities (other than equities of redemption under
applicable foreclosure laws) to all of the material properties and assets, real
and personal, reflected on the consolidated statement of financial condition of
the Company as of March 31, 1996 included in the Company Financial Statements or
acquired after such date, except (i) liens for current taxes not yet due or
payable (ii) pledges to secure deposits and other liens incurred in the ordinary
course of its banking business, (iii) such imperfections of title, easements and
encumbrances, if any, as are not material in character, amount or extent and
(iv) as reflected on the consolidated statement of financial condition of the
Company as of March 31, 1996 included in the Company Financial Statements. All
real and personal property which is material to the Company's business on a
consolidated basis and leased or licensed by the Company or a Company Subsidiary
is held pursuant to leases or licenses which are valid and enforceable in
accordance with their respective terms and such leases will not terminate or
lapse prior to the Effective Time.
3.21 LABOR
No work stoppage involving the Company or a Company Subsidiary is pending
or, to the best knowledge of the Company, threatened. Neither the Company nor a
Company Subsidiary is involved in, or threatened with or affected by, any labor
dispute, arbitration,
23
lawsuit or administrative proceeding involving the employees of the Company or a
Company Subsidiary which could have a Material Adverse Effect on the Company.
Employees of the Company and the Company Subsidiaries are not represented by any
labor union nor are any collective bargaining agreements otherwise in effect
with respect to such employees, and to the best of the Company's knowledge,
there have been no efforts to unionize or organize any employees of the Company
or any of the Company Subsidiaries during the past five years.
3.22 REQUIRED VOTE; INAPPLICABILITY OF ANTITAKEOVER STATUTES
(a) The affirmative vote of the holders of two thirds of the issued and
outstanding shares of Company Common Stock is necessary to approve this
Agreement and the transactions contemplated hereby on behalf of the Company.
(b) Assuming the accuracy of the representation and warranty of the
Acquiror contained in Section 4.20 hereof, no "fair price" or other form of
antitakeover statute or regulation, including without limitation Chapter 23B.19
of the WBCA, is applicable to this Agreement and the transactions contemplated
hereby.
3.23 OWNERSHIP OF ACQUIROR COMMON STOCK
As of the date hereof, neither the Company nor, to its best knowledge, any
of its affiliates or associates (as such terms are defined under the Exchange
Act), (i) beneficially own, directly or indirectly, or (ii) are parties to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of Acquiror Common Stock which in
the aggregate represent 10% or more of the outstanding shares of Acquiror Common
Stock (other than shares held in a fiduciary capacity and beneficially owned by
third parties or shares taken in consideration of debts previously contracted).
3.24 DISCLOSURES
None of the representations and warranties of the Company or any of the
written information or documents furnished or to be furnished by the Company to
the Acquiror in connection with or pursuant to this Agreement or the
consummation of the transactions contemplated hereby, when considered as a
whole, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated or necessary
to make any such information or document, in light of the circumstances, not
misleading.
24
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants to the Company as follows:
4.1 CAPITAL STRUCTURE
The authorized capital stock of the Acquiror consists of 100,000,000 shares
of Acquiror Common Stock and 5,000,000 shares of Acquiror Preferred Stock. As
of June 30, 1996, there were 42,246,383 shares of Acquiror Common Stock issued
and outstanding, 1,737,383 shares of Acquiror Common Stock were held as treasury
stock and not outstanding and there were no shares of Acquiror Preferred Stock
issued and outstanding. All outstanding shares of Acquiror Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable,
and none of the outstanding shares of Acquiror Common Stock has been issued in
violation of the preemptive rights of any person, firm or entity. As of the
date hereof, there are no Rights authorized, issued or outstanding with respect
to the capital stock of the Acquiror, except (i) for shares of Acquiror Common
Stock issuable pursuant to the Acquiror Employee Stock Benefit Plans and (ii) by
virtue of this Agreement.
4.2 ORGANIZATION, STANDING AND AUTHORITY OF THE ACQUIROR
The Acquiror is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Acquiror. The Acquiror
is duly registered as a unitary savings and loan holding company under the HOLA
and the regulations of the OTS thereunder. The Acquiror has heretofore
delivered to the Company true and complete copies of the Restated Articles of
Incorporation and Bylaws of the Acquiror as in effect as of the date hereof.
4.3 OWNERSHIP OF THE ACQUIROR SUBSIDIARIES
The Acquiror has Previously Disclosed each direct or indirect Acquiror
Subsidiary and identified Acquiror Bank as its only Significant Subsidiary as of
the date hereof. The outstanding shares of capital stock of Acquiror Bank have
been duly authorized and validly issued, are fully paid and nonassessable, and
are directly owned by the Acquiror free and clear of all liens, claims,
encumbrances, charges, pledges, restrictions or rights of third parties of any
kind whatsoever. No Rights are authorized, issued or outstanding with respect
to the capital stock or other ownership interests of Acquiror Bank and there are
no
25
agreements, understandings or commitments relating to the right of the Acquiror
to vote or to dispose of said shares or other ownership interests.
4.4 ORGANIZATION, STANDING AND AUTHORITY OF THE ACQUIROR SUBSIDIARIES
Acquiror Bank is a savings and loan association duly organized, validly
existing and in good standing under the laws of the United States. Acquiror
Bank (i) has full power and authority to own or lease all of its properties and
assets and to carry on its business as now conducted and (ii) is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which its ownership or leasing of property or the conduct of its business
requires such qualification and where the failure to be so licensed, qualified
or in good standing would have a Material Adverse Effect on the Acquiror. The
deposit accounts of Acquiror Bank are insured by the SAIF to the maximum extent
permitted by the FDIA. Acquiror Bank has paid all deposit insurance premiums
and assessments required by the FDIA and the regulations thereunder.
4.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Acquiror has all requisite corporate power and authority to enter into
this Agreement and (subject to receipt of all necessary governmental approvals)
to perform all of its obligations under this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of the Acquiror. This Agreement has been duly
and validly executed and delivered by the Acquiror and, assuming due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of the Acquiror which is enforceable against the Acquiror
in accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Bank
Merger) nor compliance by the Acquiror with any of the provisions hereof (i)
does or will conflict with or result in a breach of any provisions of the
Restated Articles of Incorporation or Bylaws of the Acquiror or the Charter or
Bylaws of the Acquiror Bank, (ii) violate, conflict with or result in a breach
of any term, condition or provision of, or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
or give rise to any right of termination, cancellation or acceleration with
respect to, or result in the creation of any lien, charge or encumbrance upon
any property or asset of the Acquiror or Acquiror Bank pursuant to, any material
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Acquiror or Acquiror Bank is a
party, or by which any of their respective properties or assets may be
26
bound or affected or (iii) subject to receipt of all required governmental
approvals, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Acquiror or Acquiror Bank.
(c) Except for (i) the filing of applications and notices with, and the
consent and approval of, the OTS, (ii) the filing and effectiveness of the Form
S-4 with the Commission, (iii) compliance with applicable state securities or
"blue sky" laws and the NASD Bylaws in connection with the issuance of Acquiror
Common Stock pursuant to this Agreement, (iv) the approval of this Agreement by
the requisite vote of the shareholders of the Company, (v) the filing of
Articles of Merger with the Secretary of State of the State of Washington
pursuant to the WBCA in connection with the Merger, (vi) the filing of Articles
of Combination with the OTS in connection with the Bank Merger and (vii) review
of the Merger by the DOJ under federal antitrust laws, no consents or approvals
of or filings or registrations with any Governmental Entity or with any third
party are necessary on the part of the Acquiror or Acquiror Bank in connection
with (i) the execution and delivery by the Acquiror of this Agreement and the
consummation by the Acquiror of the transactions contemplated hereby and (ii)
the execution and delivery by the Acquiror Bank of the Bank Merger Agreement and
the consummation by the Acquiror Bank of the transactions contemplated thereby.
(d) As of the date hereof, the Acquiror is not aware of any reasons
relating to the Acquiror or any of its Subsidiaries (including without
limitation Community Reinvestment Act compliance) why all consents and approvals
shall not be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for (i)
consummation of the transactions contemplated by this Agreement and the Bank
Merger Agreement and (ii) the continuation by the Acquiror after the Effective
Time of the business of each of the Acquiror and the Company as such business is
carried on immediately prior to the Effective Time, free of any conditions or
requirements which, in the reasonable opinion of the Acquiror, could have a
Material Adverse Effect on the Acquiror or the Company or materially impair the
value of the Company and the Company Subsidiaries to the Acquiror.
4.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Since January 1, 1993, the Acquiror has timely filed with the
Commission and the NASD all Securities Documents required by the Securities Laws
and such Securities Documents complied in all material respects with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Since January 1, 1993, each of the Acquiror and the Acquiror Bank has
duly filed with the OTS, the FDIC and any other applicable federal or state
banking authority, as the case may be, in correct form the reports required to
be filed under applicable laws
27
and regulations and such reports were in all material respects complete and
accurate and in compliance with the requirements of applicable laws and
regulations. In connection with the most recent examinations of the Acquiror
and the Acquiror Bank by the OTS, neither the Acquiror nor the Acquiror Bank was
required to correct or change any action, procedure or proceeding which the
Acquiror or the Acquiror Bank believes has not been corrected or changed as
required as of the date hereof.
4.7 FINANCIAL STATEMENTS
(a) The Acquiror has previously delivered or made available to the Company
accurate and complete copies of the Acquiror Financial Statements which, in the
case of the consolidated statements of financial condition of the Acquiror as of
September 30, 1995, 1994 and 1993 and the consolidated statements of operations,
stockholders' equity and cash flows for each of the three years ended September
30, 1995, 1994 and 1993, are accompanied by the audit reports of Deloitte &
Touche LLP, independent public accountants with respect to the Acquiror. The
Acquiror Financial Statements referred to herein, as well as the Acquiror
Financial Statements to be delivered pursuant to Section 5.8 hereof, fairly
present or will fairly present, as the case may be, the consolidated financial
condition of the Acquiror as of the respective dates set forth therein, and the
consolidated results of operations, stockholders' equity and cash flows of the
Acquiror for the respective periods or as of the respective dates set forth
therein.
(b) Each of the Acquiror Financial Statements referred to in Section
4.7(a) has been or will be, as the case may be, prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as stated therein. The audits of the Acquiror and the Acquiror
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of the Acquiror
and the Acquiror Subsidiaries are being maintained in material compliance with
applicable legal and accounting requirements, and all such books and records
accurately reflect in all material respects all dealings and transactions in
respect of the business, assets, liabilities and affairs of the Acquiror and the
Acquiror Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the consolidated statement of financial condition of the Acquiror as of March
31, 1996 (including related notes) and (ii) of liabilities incurred since March
31, 1996 in the ordinary course of business, neither the Acquiror nor any
Acquiror Subsidiary has any liabilities, whether absolute, accrued, contingent
or otherwise, material to the financial condition, results of operations or
business of the Acquiror on a consolidated basis.
4.8 MATERIAL ADVERSE CHANGE
Since March 31, 1996, no event has occurred or circumstance arisen that,
individually or in the aggregate, has had or is reasonably likely to have a
Material Adverse Effect on the Acquiror.
28
4.9 ENVIRONMENTAL MATTERS
(a) To the best of the Acquiror's knowledge, the Acquiror and the Acquiror
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would not, singly or in the aggregate,
have a Material Adverse Effect on the Acquiror. Neither the Acquiror nor any
Acquiror Subsidiary has received in the past five years any communication from a
Governmental Entity alleging that the Acquiror or any Acquiror Subsidiary is not
in such compliance, or if such a communication has been received, the Acquiror
is now in such compliance, and, to the best knowledge of the Acquiror, there are
no present circumstances that would prevent or interfere with the continuation
of compliance with all Environmental Laws.
(b) To the best of the Acquiror's knowledge, none of the properties owned,
leased or operated by the Acquiror or the Acquiror Subsidiaries has been or is
in violation of or liable under any Environmental Law, except any such
violations or liabilities which would not singly or in the aggregate have a
Material Adverse Effect on the Acquiror.
(c) To the best of the Acquiror's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action or
governmental investigation that could result in the imposition of any liability
arising under any Environmental Law against the Acquiror or any Acquiror
Subsidiary or against any person or entity whose liability for any Environmental
Claim the Acquiror or any Acquiror Subsidiary has or may have retained or
assumed either contractually or by operation of law, except such which would not
have a Material Adverse Effect on the Acquiror.
4.10 TAX MATTERS
(a) The Acquiror and the Acquiror Subsidiaries, and each of their
predecessors, have timely filed all federal, state and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns required by applicable law to be filed by them
(including, without limitation, estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all material taxes required to be paid in
respect of the periods covered by such returns and, as of the Effective Time,
will have paid, or where payment is not required to have been made, will have
set up an adequate reserve or accrual for the payment of, all material taxes for
any subsequent periods ending on or prior to the Effective Time. Neither the
Acquiror nor any of the Acquiror Subsidiaries will have any material liability
for any such taxes in excess of the amounts so paid or reserves or accruals so
established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Acquiror and its Subsidiaries are complete and accurate in all
material respects. Neither the Acquiror nor
29
an Acquiror Subsidiary is delinquent in the payment of any tax, assessment or
governmental charge or has requested any extension of time within which to file
any tax returns in respect of any fiscal year or portion thereof which have not
since been filed. No deficiencies for any tax, assessment or governmental
charge have been proposed, asserted or assessed (tentatively or otherwise)
against the Acquiror or an Acquiror Subsidiary as a result of any examinations
or otherwise which have not been settled and paid. There are currently no
agreements in effect with respect to the Acquiror or an Acquiror Subsidiary to
extend the period of limitations for the assessment or collection of any tax.
Except as Previously Disclosed, as of the date hereof, no audit, examination or
deficiency or refund litigation with respect to any federal, state and local
(and, if applicable, foreign) income, franchise, bank, excise, real property,
personal property and other tax returns filed by the Acquiror and the Acquiror
Subsidiaries is pending or, to the best of the Acquiror's knowledge, threatened.
(c) Neither the Acquiror nor any Acquiror Subsidiary (i) is a party to any
agreement providing for the allocation or sharing of taxes, (ii) is required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by the Acquiror or
an Acquiror Subsidiary (nor does the Acquiror have any knowledge that the
Internal Revenue Service has proposed any such adjustment or change of
accounting method) or (iii) has filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply.
4.11 LEGAL PROCEEDINGS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Acquiror,
threatened against the Acquiror or any Acquiror Subsidiary or against any asset,
interest or right of the Acquiror or any Acquiror Subsidiary, or, to the best
knowledge of the Acquiror, against any officer, director or employee of any of
them that in any such case, if decided adversely, would have a Material Adverse
Effect on the Acquiror. Neither the Acquiror nor any of the Acquiror
Subsidiaries is a party to any order, judgment or decree which has or could
reasonably be expected to have a Material Adverse Effect on the Acquiror.
4.12 COMPLIANCE WITH LAWS
(a) Each of the Acquiror and each of the Acquiror Subsidiaries has all
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to permit
it to carry on its business as it is presently being conducted and the absence
of which could reasonably be expected to have a Material Adverse Effect on the
Acquiror; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Acquiror, no suspension or cancellation of any of the same is threatened.
30
(b) Neither the Acquiror nor any of the Acquiror Subsidiaries is in
violation of its respective Articles of Incorporation, Charter or other
chartering instrument or Bylaws, or of any applicable federal, state or local
law or ordinance or any order, rule or regulation of any federal, state, local
or other governmental agency or body (including, without limitation, all banking
(including without limitation all regulatory capital requirements), securities,
municipal securities, safety, health, environmental, zoning, anti-
discrimination, antitrust, and wage and hour laws, ordinances, orders, rules and
regulations), or in default with respect to any order, writ, injunction or
decree of any court, or in default under any order, license, regulation or
demand of any Governmental Entity, any of which violations or defaults could
reasonably be expected to have a Material Adverse Effect on the Acquiror; and
neither the Acquiror nor any Acquiror Subsidiary has received in the past five
years any notice or communication from a Governmental Entity asserting that the
Acquiror or any Acquiror Subsidiary is in violation of any of the foregoing
which could reasonably be expected to have a Material Adverse Effect on the
Acquiror. Neither the Acquiror nor any Acquiror Subsidiary is subject to any
regulatory or supervisory cease and desist order, agreement, written directive,
memorandum of understanding or written commitment (other than those of general
applicability to all savings associations or savings and loan holding companies
thereof issued by governmental authorities), and none of them has received in
the past five years any written communication requesting that it enter into any
of the foregoing, or if such a communication has been received, none of them is
any longer subject to such request.
4.13 CERTAIN INFORMATION
None of the information relating to the Acquiror and the Acquiror
Subsidiaries to be included or incorporated by reference in (i) the Form S-4
will, at the time the Form S-4 and any amendment thereto becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) the Proxy
Statement, as of the date such Proxy Statement is mailed to shareholders of the
Company and up to and including the date of the meeting of shareholders to which
such Proxy Statement relates, will contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
provided that information as of a later date shall be deemed to modify
information as of an earlier date. The Proxy Statement mailed by the Acquiror
to shareholders of the Company in connection with the meeting of shareholders at
which this Agreement will be considered by such shareholders will comply as to
form in all material respects with the Securities Act and the rules and
regulations promulgated thereunder.
4.14 EMPLOYEE BENEFIT PLANS
(a) The Acquiror has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred
31
compensation, consultant, bonus or group insurance contract or any other
incentive, health and welfare or employee benefit plan or agreement maintained
for the benefit of employees or former employees of the Acquiror or any Acquiror
Subsidiary (the "Acquiror Employee Plans"), whether written or oral.
(b) None of the Acquiror, any Acquiror Subsidiary, any pension plan
maintained by any of them and qualified under Section 401(a) of the Code or, to
the best of the Acquiror's knowledge, any fiduciary (with respect to whom the
Acquiror or an Acquiror Subsidiary has an indemnification obligation) of such
plan has incurred any material liability to the PBGC or the Internal Revenue
Service with respect to any such plan. To the best of the Acquiror's knowledge,
no reportable event under Section 4043(b) of ERISA has occurred with respect to
any such pension plan.
(c) Neither the Acquiror nor any Acquiror Subsidiary participates in or
has incurred any liability (that has not already been satisfied) under Section
4201 of ERISA for a complete or partial withdrawal from a multi-employer plan
(as such term is defined in Section 4001(a)(3)of ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Acquiror Employee Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (an
"Acquiror Pension Plan") which is intended to qualify under Section 401(a) of
the Code to the effect that such plan is qualified under Section 401(a) of the
Code and the trust associated with such employee pension plan is tax exempt
under Section 501 of the Code. No such letter has been revoked or, to the best
of the Acquiror's knowledge, is threatened to be revoked and the Acquiror does
not know of any ground on which such revocation may be based. Neither the
Acquiror nor any Acquiror Subsidiary has any liability under any such plan that
is not reflected on the consolidated statement of financial condition of the
Acquiror at March 31, 1996 included in the Acquiror Financial Statements, other
than liabilities incurred in the ordinary course of business in connection
therewith subsequent to the date thereof.
(e) To the best of the Acquiror's knowledge, no prohibited transaction
(within the meaning of Section 406 of ERISA) that is not exempt from the
prohibition of such section by virtue of a statutory or administrative exemption
has occurred with respect to any Acquiror Employee Plan which would result in
the imposition, directly or indirectly, of a material excise tax under Section
4975 of the Code or a material civil penalty under Section 502(i) of ERISA or
otherwise have a Material Adverse Effect on the Acquiror.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established) of
all contributions which are required for periods after the date hereof and prior
to the Effective Time, under the terms of each Acquiror Employee Plan or ERISA;
no accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412(1)(8)(A) of the Code), whether or not waived, exists
32
with respect to any Acquiror Pension Plan, and there is no "unfunded current
liability" (as defined in Section 412 of the Code) with respect to any Acquiror
Pension Plan.
(g) To the best of the Acquiror's knowledge, the Acquiror Employee Plans
have been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws and
regulations.
(h) There are no pending or, to the best knowledge of the Acquiror,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Acquiror Employee Plans or any trust related thereto or, to
the best of the Acquiror's knowledge, any fiduciary thereof (with respect to
whom the Acquiror or an Acquiror Subsidiary has an indemnification obligation).
4.15 CERTAIN CONTRACTS
Neither the Acquiror nor any Acquiror Subsidiary is in default or in non-
compliance, which default or non-compliance could reasonably be expected to have
a Material Adverse Effect on the Acquiror, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
4.16 BROKERS AND FINDERS
Neither the Acquiror nor any Acquiror Subsidiary, nor, to the best of the
Company's knowledge, any of their respective directors, officers or employees,
has employed any broker or finder or incurred any liability for any broker or
finder fees or commissions in connection with the transactions contemplated
hereby which reasonably could be expected to be a liability of the Acquiror or
an Acquiror Subsidiary.
4.17 INSURANCE
Except as Previously Disclosed, the Acquiror and each Acquiror Subsidiary
is insured for reasonable amounts with financially sound and reputable insurance
companies against such risks as companies engaged in a similar business would,
in accordance with good business practice, customarily be insured and has
maintained all insurance required by applicable laws and regulations.
33
4.18 PROPERTIES
All real and personal property owned by the Acquiror or the Acquiror Bank
or presently used by either of them in its respective business is in an adequate
condition (ordinary wear and tear excepted) and is sufficient to carry on its
business in the ordinary course of business consistent with their past
practices. The Acquiror and the Acquiror Bank have good and marketable title
free and clear of all liens, encumbrances, charges, defaults or equities (other
than equities of redemption under applicable foreclosure laws) to all of the
material properties and assets, real and personal, reflected on the consolidated
statement of financial condition of the Acquiror as of March 31, 1996 included
in the Acquiror Financial Statements or acquired after such date, except (i)
liens for current taxes not yet due or payable (ii) pledges to secure deposits
and other liens incurred in the ordinary course of its banking business, (iii)
such imperfections of title, easements and encumbrances, if any, as are not
material in character, amount or extent and (iv) as reflected on the
consolidated statement of financial condition of the Acquiror as of March 31,
1996 included in the Acquiror Financial Statements. All real and personal
property which is material to the Acquiror's business on a consolidated basis
and leased or licensed by the Acquiror or an Acquiror Subsidiary is held
pursuant to leases or licenses which are valid and enforceable in accordance
with their respective terms and such leases will not terminate or lapse prior to
the Effective Time.
4.19 LABOR
No work stoppage involving the Acquiror or the Acquiror Bank is pending or,
to the best knowledge of the Acquiror, threatened. Neither the Acquiror nor the
Acquiror Bank is involved in, or threatened with or affected by, any labor
dispute, arbitration, lawsuit or administrative proceeding involving its
employees which could have a Material Adverse Effect on the Acquiror. Employees
of the Acquiror and the Acquiror Bank are not represented by any labor union nor
are any collective bargaining agreements otherwise in effect with respect to
such employees, and to the best of the Acquiror's knowledge, there have been no
efforts to unionize or organize any employees of the Acquiror or the Acquiror
Bank during the past five years.
4.20 OWNERSHIP OF COMPANY COMMON STOCK.
As of the date hereof, neither the Acquiror nor, to its best knowledge, any
of its affiliates or associates (as such terms are defined under the Exchange
Act), (i) beneficially own, directly or indirectly, or (ii) are parties to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of Company Common Stock which in
the aggregate represent 10% or more of the outstanding shares of Company Common
Stock (other than shares held in a fiduciary capacity and beneficially owned by
third parties, shares taken in consideration of debts previously contracted or
in the case of the Acquiror shares which may be acquired pursuant to the Stock
Option Agreement).
34
4.21 DISCLOSURES
None of the representations and warranties of the Acquiror or any of the
written information or documents furnished or to be furnished by the Acquiror to
the Company in connection with or pursuant to this Agreement or the consummation
of the transactions contemplated hereby, when considered as a whole, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
ARTICLE V
COVENANTS
5.1 REASONABLE BEST EFFORTS
Subject to the terms and conditions of this Agreement, each of the Company
and the Acquiror shall use its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary or
advisable under applicable laws and regulations so as to permit consummation of
the Merger (including, without limitation, satisfaction of the conditions to
consummation of the Merger specified in Article VI of this Agreement), the Bank
Merger and the other transactions contemplated hereby on or before December 31,
1996 or, in the event that requisite regulatory and other approvals have not yet
been obtained, as promptly as practicable thereafter, and to otherwise enable
consummation of the transactions contemplated hereby, and shall cooperate fully
with the other party hereto to that end.
5.2 SHAREHOLDER MEETING
The Company shall take all action necessary to properly call and convene a
meeting of its shareholders as soon as practicable after the date hereof to
consider and vote upon this Agreement and the transactions contemplated hereby.
The Board of Directors of the Company will recommend that the shareholders of
the Company approve this Agreement, provided that the Board of Directors of the
Company may fail to make such recommendation, or withdraw, modify or change any
such recommendation, if such Board of Directors, after having consulted with and
considered the advice of outside counsel, has determined that the making of such
recommendation, or the failure to withdraw, modify or change such
recommendation, would constitute a breach of the fiduciary duties of such
directors under applicable law.
5.3 REGULATORY MATTERS
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Form S-4, including the Proxy Statement. Each of
the Acquiror and the Company shall use its reasonable best efforts to have the
Form S-4 declared effective under
35
the Securities Act as promptly as practicable after such filing, and the Company
shall thereafter promptly mail the Proxy Statement to its shareholders. The
Acquiror also shall use its reasonable best efforts to obtain all necessary
state securities law or "blue sky" permits and approvals required to carry out
the issuance of Acquiror Common Stock pursuant to the Merger and all other
transactions contemplated by this Agreement, and the Company shall furnish all
information concerning the Company and the holders of the Company Common Stock
as may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the Merger, the Bank Merger and the other
transactions contemplated hereby. The Acquiror and the Company shall have the
right to review in advance, and to the extent practicable each will consult with
the other on, in each case subject to applicable laws relating to the exchange
of information, all the information which appears in any filing made with or
written materials submitted to any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(c) The Acquiror and the Company shall, upon request, furnish each other
with all information concerning themselves, their respective Subsidiaries,
directors, officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement, the Form S-4 or
any other statement, filing, notice or application made by or on behalf of the
Acquiror, the Company or any of their respective Subsidiaries to any
Governmental Entity in connection with the Merger, the Bank Merger and the other
transactions contemplated hereby.
(d) The Acquiror and the Company shall promptly furnish each other with
copies of written communications received by the Acquiror or the Company, as the
case may be, or any of their respective Subsidiaries from, or delivered by any
of the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
5.4 INVESTIGATION AND CONFIDENTIALITY
(a) Each party shall permit the other party and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to such other
36
party all books, papers and records relating to the assets, stock ownership,
properties, operations, obligations and liabilities of it and its
Subsidiaries, including, but not limited to, all books of account (including
the general ledger), tax records, minute books of meetings of boards of
directors (and any committees thereof) and shareholders, organizational
documents, bylaws, material contracts and agreements, filings with any
regulatory authority, accountants' work papers, litigation files, loan files,
plans affecting employees, and any other business activities or prospects in
which the other party may have a reasonable interest, provided that such
access shall be reasonably related to the transactions contemplated hereby
and, in the reasonable opinion of the respective parties providing such
access, not unduly interfere with normal operations. Each party and its
Subsidiaries shall make their respective directors, officers, employees and
agents and authorized representatives (including counsel and independent
public accountants) available to confer with the other party and its
representatives, provided that such access shall be reasonably related to the
transactions contemplated hereby and shall not unduly interfere with normal
operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, the party receiving the information shall either destroy or return to the
party which furnished such information all documents or other materials
containing, reflecting or referring to such information, shall use its best
efforts to keep confidential all such information, and shall not directly or
indirectly use such information for any competitive or other commercial
purposes. The obligation to keep such information confidential shall continue
for five years from the date the proposed transactions are abandoned but shall
not apply to (i) any information which (x) the party receiving the information
can establish by convincing evidence was already in its possession prior to the
disclosure thereof by the party furnishing the information; (y) was then
generally known to the public; or (z) became known to the public through no
fault of the party receiving the information; or (ii) disclosures pursuant to a
legal requirement or in accordance with an order of a court of competent
jurisdiction, provided that the party which is the subject of any such legal
requirement or order shall use its best efforts to give the other party at least
ten business days prior notice thereof.
5.5 PRESS RELEASES
The Acquiror and the Company shall agree with each other as to the form and
substance of any press release related to this Agreement or the transactions
contemplated hereby, and consult with each other as to the form and substance of
other public disclosures which may relate to the transactions contemplated by
this Agreement, provided, however, that nothing contained herein shall prohibit
either party, following notification to the other party, from making any
disclosure which is required by law or regulation.
37
5.6 BUSINESS OF THE PARTIES
(a) During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of the Acquiror, the Company and its
Subsidiaries shall carry on their respective businesses in the ordinary course
consistent with past practice. During such period, the Company also will use
all reasonable efforts to (x) preserve its business organization and that of the
Company Subsidiaries intact, (y) keep available to itself and the Acquiror the
present services of the employees of the Company and the Company Subsidiaries
and (z) preserve for itself and the Acquiror the goodwill of the customers of
the Company and the Company Subsidiaries and others with whom business
relationships exist. Without limiting the generality of the foregoing, except
with the prior written consent of the Acquiror or as expressly contemplated
hereby, between the date hereof and the Effective Time, the Company shall not,
and shall cause each Company Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Company Common Stock, provided that nothing
contained herein shall be deemed to affect the ability of a Company
Subsidiary to pay dividends on its capital stock to the Company;
(ii) issue any shares of its capital stock, other than in the case of
the Company pursuant to the Stock Option Agreement or upon exercise of the
Company Options referred to in Section 3.1 hereof, or issue, grant, modify
or authorize any Rights, other than the Stock Option Agreement; purchase or
otherwise acquire any shares of Company Common Stock, other than pursuant
to the Mortgage Company Agreement or, subject to the requirements of
applicable laws and regulations, pursuant to an open market repurchase
program to purchase up to 410,205 shares of Company Common Stock after the
date hereof at a price of $18.00 or less per share; or effect any
recapitalization, reclassification, stock dividend, stock split or like
change in capitalization;
(iii) amend its Articles of Incorporation, Charter, Bylaws or similar
organizational documents; impose, or suffer the imposition, on any share
of stock or other ownership interest held by the Company in a Company
Subsidiary of any lien, charge or encumbrance or permit any such lien,
charge or encumbrance to exist; or waive or release any material right or
cancel or compromise any material debt or claim;
(iv) increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus or severance to, or
provide any other new employee benefit or incentive to, any of its
directors, officers or employees, except as may be required pursuant to
binding commitments existing on the date hereof and Previously Disclosed;
38
(v) enter into or, except as may be required by law or for purposes
of complying with Section 2.9 hereof, modify any pension, retirement, stock
option, stock purchase, stock appreciation right, savings, profit sharing,
deferred compensation, supplemental retirement, consulting, bonus, group
insurance or other employee benefit, incentive or welfare contract, plan or
arrangement, or any trust agreement related thereto, in respect of any of
its directors, officers or employees; make any contributions to the
Company's defined contribution plans not in the ordinary course of business
consistent with past practice; or make any contributions to the Company's
Employee Stock Ownership Plan;
(vi) enter into (w) any agreement, arrangement or commitment not made
in the ordinary course of business, (x) any agreement, indenture or other
instrument relating to the borrowing of money by the Company or a Company
Subsidiary or guarantee by the Company or any Company Subsidiary of any
such obligation of others, except in the case of the Bank for deposits,
FHLB advances, federal funds purchased and securities sold under agreements
to repurchase in the ordinary course of business consistent with past
practice, (y) any agreement, arrangement or commitment relating to the
employment of, or severance of, an employee, or amend any such existing
agreement, arrangement or commitment, provided that the Company and a
Company Subsidiary may employ an employee in the ordinary course of
business if the employment of such employee is terminable by the Company or
a Company Subsidiary or any successor thereof at will without liability,
other than as required by law; or (z) any contract, agreement or
understanding with a labor union;
(vii) change its method of accounting in effect for the year ended
March 31, 1996, except as required by changes in laws or regulations or
generally accepted accounting principles, or change any of its methods of
reporting income and deductions for federal income tax purposes from those
employed in the preparation of its federal income tax return for the fiscal
year ended March 31, 1996, except as required by changes in laws or
regulations;
(viii) purchase or otherwise acquire or, other than pursuant to the
Mortgage Company Agreement, sell or otherwise dispose of, any assets or
incur any liabilities other than in the ordinary course of business
consistent with past practice and policies;
(ix) make any capital expenditures in excess of $5,000, other than
pursuant to binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair;
(x) originate, purchase or otherwise acquire, or extend, renew,
modify or otherwise alter any commercial real estate loan or any multi-
family residential loan, except pursuant to binding commitments existing on
the date hereof or following the
39
Company's provision of not less than two business days' written notice
to the Acquiror describing the proposed activity in reasonable detail;
(xi) file any applications or make any contract with respect to
branching or site location or relocation;
(xii) acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity;
(xiii) other than forward commitments to sell loans and hedging
activities entered into in the ordinary course of the Mortgage Company's
business and consistent with past practice, enter into any futures
contract, option contract, interest rate cap, interest rate floor, interest
rate exchange agreement or other agreement for purposes of hedging the
exposure of its interest-earning assets and interest-bearing liabilities to
changes in market rates of interest;
(xiv) engage in any transaction with an "affiliate," as defined at 12
C.F.R. Section 563.41(b)(1), other than pursuant to the Mortgage Company
Agreement;
(xv) discharge or satisfy any lien or encumbrance or pay any material
obligation or liability (absolute or contingent) other than at scheduled
maturity or in the ordinary course of business;
(xvi) enter or agree to enter into any agreement or arrangement
granting any preferential right to purchase any of its assets or rights or
requiring the consent of any party to the transfer and assignment of any
such assets or rights;
(xvii) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the
Code, provided, however, that nothing contained herein shall limit the
ability of the Company to execute the Stock Option Agreement or to perform
any action required by the terms thereof or hereof;
(xviii) take any action that would result in any of the
representations and warranties of the Company contained in this Agreement
not to be true and correct in any material respect at the Effective Time;
or
(xix) agree to do any of the foregoing.
(b) During the period from the date of this Agreement and continuing until
the Effective Time, the Acquiror shall continue to conduct its business and the
business of the Acquiror Bank in a manner designed in its reasonable judgment to
enhance the long-term value of the Acquiror Common Stock and the business
prospects of the Acquiror. Without limiting the generality of the foregoing,
except with the prior written consent of the
40
Company or as expressly contemplated hereby, between the date hereof and the
Effective Time, the Acquiror shall not, and shall cause the Acquiror Bank not
to:
(i) amend its Restated Articles of Incorporation, Charter or Bylaws
in a manner which would adversely affect in any manner the terms of the
Acquiror Common Stock or the ability of the Acquiror to consummate the
transactions contemplated hereby;
(ii) make any acquisition or take any other action that individually
or in the aggregate could materially adversely affect the ability of the
Acquiror to consummate the transactions contemplated hereby in a reasonably
timely manner;
(iii) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Acquiror Common Stock, except for regular
quarterly cash dividends in an amount determined by the Board of Directors
in the ordinary course of business and consistent with past practice,
provided, however, that nothing contained herein shall be deemed to affect
the ability of (x) an Acquiror Subsidiary to pay dividends on its capital
stock to the Acquiror or (y) the Acquiror to repurchase shares of Acquiror
Common Stock;
(iv) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the
Code; provided, however, that nothing contained herein shall limit the
ability of the Acquiror to exercise its rights under the Stock Option
Agreement;
(v) take any action that would result in any of the representations
and warranties of the Acquiror contained in this Agreement not to be true
and correct in any material respect at the Effective Time; or
(vi) agree to do any of the foregoing.
5.7 CERTAIN ACTIONS
The Company shall not, and shall cause each Company Subsidiary not to,
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in any negotiations or discussions
concerning, any acquisition, lease or purchase of all or a substantial portion
of the assets of, or any equity interest in, the Company or a Company Subsidiary
(other than with the Acquiror or an affiliate thereof), provided, however, that
the Board of Directors of the Company may furnish such information or
participate in such negotiations or discussions if such Board of Directors,
after having consulted with and considered the advice of outside counsel, has
determined that the failure to do the same would cause the members of such Board
of Directors to breach their fiduciary duties under applicable law. The Company
will promptly inform the Acquiror
41
orally and in writing of any such request for information or of any such
negotiations or discussions, as well as instruct its and its Subsidiaries'
directors, officers, representatives and agents to refrain from taking any
action prohibited by this Section 5.7.
5.8 CURRENT INFORMATION
During the period from the date of this Agreement to the Effective Time,
each party shall, upon the request of the other party, cause one or more of its
designated representatives to confer on a monthly or more frequent basis with
representatives of the other party regarding its financial condition, operations
and business and matters relating to the completion of the transactions
contemplated hereby. As soon as reasonably available, but in no event more than
45 days after the end of each calendar quarter ending after the date of this
Agreement (other than the last quarter of each fiscal year ending March 31, in
the case of the Company, and September 30, in the case of the Acquiror), the
Company and the Acquiror will deliver to the other party its quarterly report on
Form 10-Q under the Exchange Act, and, as soon as reasonably available, but in
no event more than 90 days after the end of each fiscal year, the Company and
the Acquiror will deliver to the other party its Annual Report on Form 10-K.
Within 25 days after the end of each month, the Company and the Acquiror will
deliver to the other party a consolidated statement of financial condition and a
consolidated statement of operations, without related notes, for such month
prepared in accordance with generally accepted accounting principles.
5.9 INDEMNIFICATION; INSURANCE
(a) From and after the Effective Time through the sixth anniversary of the
Effective Time, the Acquiror (the "Indemnifying Party") shall indemnify and hold
harmless each present and former director, officer and employee of the Company
or a Company Subsidiary, in each case determined as of the Effective Time (the
"Indemnified Parties"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent to which such Indemnified Parties were entitled
under the Articles of Incorporation and Bylaws of the Company or in similar
organizational documents of a Company Subsidiary, in each case as in effect on
the date hereof, provided, however, that all rights to indemnification in
respect of any claim asserted or made within such period shall continue until
the final disposition of such claim. Without limiting the foregoing obligation,
the Acquiror also agrees that all limitations of liability existing in favor of
the Indemnified Parties in the Articles of Incorporation and Bylaws of the
Company or in similar organizational documents of a Company Subsidiary, in each
case as in effect on the date hereof, arising out of matters existing or
occurring at or prior to the Effective Time shall survive the Merger and shall
continue in full force and effect for a period of six years from the Effective
Time, provided,
42
however, that all such rights in respect of any claim asserted or made within
such period shall continue until the final disposition of such claim.
(b) Any Indemnified Party wishing to claim indemnification under Section
5.9(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to the
Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements
therefor are received, the reasonable fees and expenses of such counsel for the
Indemnified Parties (which may not exceed one firm in any jurisdiction unless
the use of one counsel for such Indemnified Parties would present such counsel
with a conflict of interest), (ii) the Indemnified Parties will cooperate in the
defense of any such matter, (iii) the Indemnifying Party shall not be liable for
any settlement effected without its prior written consent and (iv) the
Indemnifying Party shall have no obligation hereunder in the event a federal
banking agency or a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of an Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(c) In the event that the Acquiror or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section 5.9, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director and officer covered hereby.
5.10 BENEFIT PLANS AND ARRANGEMENTS
(a) As soon as administratively practicable after the Effective Time, the
Acquiror shall take all reasonable action so that employees of the Company and
its Subsidiaries shall be entitled to participate in the Acquiror Employee Plans
of general applicability, and until such time the Company Employee Plans shall
remain in effect, provided that no employee of the Company or a Company
Subsidiary who becomes an employee of the Acquiror and subject to the Acquiror's
medical insurance plans shall be excluded from coverage thereunder on the basis
of a preexisting condition that was not also excluded under the Company's
medical insurance plans, except to the extent such preexisting condition was
excluded from coverage under the Company's medical insurance plans, in which
case this Section 5.10(a) shall not require coverage for such preexisting
condition. For purposes of
43
determining eligibility to participate in and the vesting of benefits under
the Acquiror Employee Plans, the Acquiror shall recognize years of service
with the Company and a Company Subsidiary prior to the Effective Time.
(b) All employees of the Company or a Company Subsidiary as of the
Effective Time shall become employees of the Acquiror or an Acquiror Subsidiary
as of the Effective Time, provided that the Acquiror or an Acquiror Subsidiary
shall have no obligation to continue the employment of any such person and
nothing contained in this Agreement shall give any employee of the Company or
any Company Subsidiary a right to continuing employment with the Acquiror or an
Acquiror Subsidiary after the Effective Time.
(c) The Acquiror agrees to make a severance payment to each employee of
the Company and the Company Subsidiaries (other than an employee of the Company
or the Company Subsidiaries who was otherwise contractually entitled to receive
severance payments from the Company or the Company Subsidiaries) who (i) becomes
an employee of the Acquiror and/or the Acquiror Subsidiaries and whose
employment is terminated on or following the Effective Time, provided that the
employee does not leave the employ of the Acquiror and/or the Acquiror
Subsidiaries prior to the termination date due to (A) the employee's voluntary
resignation or retirement or (B) the employee's termination for cause, or (ii)
is offered continued employment by the Acquiror and/or the Acquiror Subsidiaries
following the Effective Time either (A) at a compensation level which is less
than the employee's compensation at the Company or the Company Subsidiaries
immediately prior thereto or (B) in connection with the relocation of such
employee more than 30 miles from the location of such employee's principal
office immediately prior thereto and, in either case, who does not accept such
offer and voluntarily resigns his employment. Any such employee shall be
entitled to receive a lump sum severance payment equal to two weeks base salary
as in effect immediately prior to the time of such termination for each year of
service with the Company and the Company Subsidiaries, with a minimum severance
payment equal to four weeks base salary and up to a maximum severance payment
equal to 40 weeks base salary. As used herein, the term "cause" shall mean a
good faith determination by the Acquiror that an employee engaged in willful
misconduct in the performance of his or her duties or willfully or intentionally
failed substantially to perform or habitually neglected to perform reasonably
assigned duties.
5.11 BANK MERGER
The Acquiror and the Company shall take, and shall respectively cause the
Acquiror Bank and the Bank to take, all necessary and appropriate actions,
including causing the execution by the Acquiror Bank and the Bank of a merger
agreement (the "Bank Merger Agreement"), to cause the Bank to merge with and
into the Acquiror Bank (the "Bank Merger") immediately after consummation of the
Merger in accordance with the laws of the United States and the regulations of
the OTS thereunder. The Acquiror Bank shall be the surviving corporation in the
Bank Merger and shall continue its corporate existence under the name
"Washington Federal Savings and Loan Association" under the laws of the United
44
States as a direct wholly-owned subsidiary of the Acquiror. Upon consummation
of the Bank Merger, the separate corporate existence of the Bank shall cease.
The directors and executive officers of the Acquiror Bank upon consummation of
the Bank Merger shall be as set forth in the Bank Merger Agreement.
5.12 CERTAIN POLICIES; INTEGRATION
(a) If requested by the Acquiror, on the business day immediately prior to
the Effective Time, the Company shall, consistent with generally accepted
accounting principles, establish or adjust accruals and reserves as may be
necessary to conform the Company's accounting and credit loss reserve practices
and methods to those of the Acquiror (as such practices and methods are to be
applied to the Company or its Subsidiaries from and after the Effective Time)
and reflect the Acquiror's plans with respect to the conduct of the Company's
business following the Merger and to provide for the costs and expenses relating
to the consummation by the Company of the transactions contemplated by this
Agreement; provided, however, that the Company shall not be required to take
such action (i) if such action is prohibited by applicable law or (ii) unless
the Acquiror informs the Company that it has no reason to believe that all
conditions to the Acquiror's obligations to consummate the transactions
contemplated by this Agreement set forth in Article VI hereof will not be
satisfied or waived. The establishment or adjustment of such accruals and
reserves shall not constitute a breach of any representation or warranty of the
Company contained in this Agreement.
(b) During the period from the date of this Agreement to the Effective
Time, the Company shall, and shall cause its directors, officers and employees
to, cooperate with and assist the Company in the formulation of a plan of
integration for the Acquiror and the Company and their respective banking
subsidiaries.
5.13 RESTRICTIONS ON RESALE
(a) The Company has Previously Disclosed to the Acquiror a schedule of
each person that, to the best of its knowledge, is deemed to be an "affiliate"
of the Company (each an "Affiliate"), as that term is used in Rule 145 under the
Securities Act.
(b) The Company shall use its reasonable best efforts to cause each person
who may be deemed to be an Affiliate of the Company to execute and deliver to
the Acquiror an agreement in the form attached hereto as Exhibit C.
5.14 DISCLOSURE SUPPLEMENTS
From time to time prior to the Effective Time, each party shall promptly
supplement or amend any materials Previously Disclosed and delivered to the
other party pursuant hereto with respect to any matter hereafter arising which,
if existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in
45
materials Previously Disclosed to the other party or which is necessary to
correct any information in such materials which has been rendered materially
inaccurate thereby; no such supplement or amendment to such materials shall
be deemed to have modified the representations, warranties and covenants of
the parties for the purpose of determining whether the conditions set forth
in Article VI hereof have been satisfied.
5.15 FAILURE TO FULFILL CONDITIONS
In the event that either of the parties hereto determines that a condition
to its respective obligations to consummate the transactions contemplated may
not be fulfilled on or prior to the termination of this Agreement, it will
promptly notify the other party or parties. Each party will promptly inform the
other party or parties of any facts applicable to it that would be likely to
prevent or materially delay approval of the Merger or the Bank Merger by any
Governmental Entity or third party or which would otherwise prevent or
materially delay completion of the Merger, the Bank Merger or any of the other
transactions contemplated hereby.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT - THE ACQUIROR AND THE COMPANY
The respective obligations of the Acquiror and the Company to effect the
Merger shall be subject to satisfaction of the following conditions at or prior
to the Effective Time.
(a) All corporate action necessary to authorize the execution and delivery
of this Agreement and consummation of the Merger shall have been duly and
validly taken by the Acquiror and the Company, including approval by the
requisite vote of the shareholders of the Company of this Agreement, and all
corporate and shareholder action necessary to authorize the execution and
delivery of the Bank Merger Agreement and consummation of the transactions
contemplated thereby shall have been duly and validly taken by the Bank and the
Acquiror Bank.
(b) All approvals and consents from the OTS and any other Governmental
Entity the approval or consent of which is required for the consummation of the
Merger, the Bank Merger and the other transactions contemplated hereby shall
have been received and all statutory waiting periods in respect thereof shall
have expired; and the Acquiror and the Company shall have procured all other
approvals, consents and waivers of each person (other than the Governmental
Entities referred to above) whose approval, consent or waiver is necessary to
the consummation of the Merger, the Bank Merger and the other transactions
contemplated hereby and the failure of which to obtain would have the effects
set forth in the following proviso clause; provided, however, that no approval
or consent referred to in this Section 6.1(b) shall be deemed to have been
received if it shall include
46
any condition or requirement that, individually or in the aggregate, would so
materially reduce the economic or business benefits of the transactions
contemplated by this Agreement to the Acquiror that had such condition or
requirement been known the Acquiror, in its reasonable judgment, would not
have entered into this Agreement.
(c) None of the Acquiror, the Company or their respective Subsidiaries
shall be subject to any statute, rule, regulation, injunction or other order or
decree which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
consummation of the Merger, the Bank Merger or any of the other transactions
contemplated hereby.
(d) The Form S-4 shall have become effective under the Securities Act, and
the Acquiror shall have received all state securities laws or "blue sky" permits
and other authorizations or there shall be exemptions from registration
requirements necessary to issue the Acquiror Common Stock in connection with the
Merger, and neither the Form S-4 nor any such permit, authorization or exemption
shall be subject to a stop order or threatened stop order by the Commission or
any state securities authority.
(e) The shares of Acquiror Common Stock to be issued in connection with
the Merger shall have been approved for quotation on the Nasdaq Stock Market's
National Market.
(f) The Acquiror and the Company shall have received the written opinion
of Elias, Matz, Tiernan & Herrick L.L.P. to the effect that the Merger and the
Bank Merger will each constitute a reorganization within the meaning of Section
368 of the Code and to the effect that (i) none of the Company, the Bank, the
Acquiror or the Acquiror Bank will recognize any gain or loss with respect to
the Merger or the Bank Merger, (ii) except for cash received in lieu of
fractional share interests, holders of Company Common Stock who receive Acquiror
Common Stock in the Merger will not recognize income, gain or loss for federal
income tax purposes, (iii) the basis of such Acquiror Common Stock will equal
the basis of the Company Common Stock for which it is exchanged and (iv) the
holding period of such Acquiror Common Stock will include the holding period of
the Company Common Stock for which it is exchanged, assuming that such stock is
a capital asset in the hands of the holder thereof at the Effective Time. Each
such opinion shall be based on such written representations from the Acquiror,
the Company and others as such counsel shall reasonably request as to factual
matters.
6.2 CONDITIONS PRECEDENT - THE COMPANY
The obligations of the Company to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Company pursuant to Section 7.4 hereof.
47
(a) The representations and warranties of the Acquiror as set forth in
Article IV hereof shall be true and correct as of the date of this Agreement and
as of the Effective Time as though made on and as of the Effective Time (or on
the date when made in the case of any representation and warranty which
specifically relates to an earlier date), provided, however, that
notwithstanding anything herein to the contrary, this Section 6.2(a) shall be
deemed to have been satisfied even if such representations or warranties are not
true and correct unless the failure of any of the representations or warranties
to be so true and correct would have, individually or in the aggregate, a
Material Adverse Effect on the Acquiror.
(b) The Acquiror shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Effective
Time.
(c) The Acquiror shall have delivered to the Company a certificate, dated
the date of the Closing and signed by its Chairman and President and by its
Chief Financial Officer, to the effect that the conditions set forth in Sections
6.2(a) and 6.2(b) have been satisfied.
(d) The Acquiror shall have furnished the Company with such certificates
of its respective officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 6.1 and 6.2 as such
conditions relate to the Acquiror as the Company may reasonably request.
6.3 CONDITIONS PRECEDENT - THE ACQUIROR
The obligations of the Acquiror to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Acquiror pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Company set forth in
Article III hereof shall be true and correct as of the date of this Agreement
and as of the Effective Time as though made on and as of the Effective Time
(or on the date when made in the case of any representation and warranty
which specifically relates to an earlier date), provided, however, that
notwithstanding anything herein to the contrary, this Section 6.3(a) shall be
deemed to have been satisfied even if such representations or warranties are
not true and correct unless the failure of any of the representations or
warranties to be so true and correct would have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
48
(c) The Company shall have delivered to the Acquiror a certificate, dated
the date of the Closing and signed by its President and by its Chief Financial
Officer, to the effect that the conditions set forth in Sections 6.3(a) and
6.3(b) have been satisfied.
(d) Dissenting Shares shall constitute not more than 10.0% of the
outstanding shares of Company Common Stock immediately prior to the Effective
Time.
(e) The Company shall have completed immediately prior to the Closing the
distribution of not less than 81% of the common stock of the Mortgage Company to
the Shareholders and the related redemption of Company Common Stock held by such
persons pursuant to the terms of the Mortgage Company Agreement.
(f) For the period from March 31, 1996 through the Effective Time, (i) the
Company shall not have established provisions for loan losses and/or write-downs
with respect to Real Estate Owned which exceed, in the aggregate, $1.0 million,
or (ii) the Acquiror shall not have determined, in its reasonable judgment, that
an aggregate of $1.0 million of additional provisions for loan losses and/or
write-downs with respect to Real Estate Owned are necessary to provide for
reasonably anticipated losses on the Company's loans, net of recoveries, or to
reflect the Company's Real Estate Owned at fair value (less estimated costs to
sell) in accordance with generally accepted accounting principles.
(g) For the period from March 31, 1996 through the Effective Time, (i) the
Company shall not have incurred, in the aggregate, $15.0 million or more of
realized and/or unrealized losses (net of realized and/or unrealized gains) with
respect to the Company's investment securities and mortgage-backed securities,
including securities held-to-maturity, available for sale and held for trading,
or (ii) the Acquiror shall not have determined, in its reasonable judgment, that
the Company has incurred, in the aggregate, $15.0 million or more of realized
and/or unrealized losses (net of realized and/or unrealized gains) with respect
to the Company's investment securities and mortgage-backed securities, including
securities held-to-maturity, available for sale and held for trading.
(h) The Company shall have furnished the Acquiror with such certificates
of its officers or others and such other documents to evidence fulfillment of
the conditions set forth in Sections 6.1 and 6.3 as such conditions relate to
the Company as the Acquiror may reasonably request.
49
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 TERMINATION
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual consent
in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by the Acquiror in
writing if the Company has, or by the Company in writing if the Acquiror has, in
any material respect, breached (i) any material covenant or undertaking
contained herein or (ii) any representation or warranty contained herein the
breach of which reasonably would be expected to have, individually or in the
aggregate, a Material Adverse Effect on the party that made the representation
or warranty, in any case if such breach has not been cured by the earlier of 30
days after the date on which written notice of such breach is given to the party
committing such breach or the Effective Time;
(c) at any time, by any party hereto in writing, if any of the
applications for prior approval referred to in Section 5.3 hereof are denied or
are approved in a manner which does not satisfy the requirements of Section
6.1(b) hereof, and the time period for appeals and requests for reconsideration
has run;
(d) at any time, by any party hereto in writing, if the shareholders of
the Company do not approve this Agreement after a vote taken thereon at a
meeting duly called for such purpose (or at any adjournment thereof), unless the
failure of such occurrence shall be due to the failure of the party seeking to
terminate to perform or observe in any material respect its agreements set forth
herein to be performed or observed by such party at or before the Effective
Time;
(e) by either the Company or the Acquiror in writing if the Effective Time
has not occurred by the close of business on the first anniversary of the date
hereof, provided that this right to terminate shall not be available to any
party whose failure to perform an obligation in breach of such party's
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Merger and the other transactions contemplated hereby to be
consummated by such date; and
(f) by the Company at any time during the three-day period commencing with
the Determination Date (as defined below) if the Average Acquiror Share Price
shall be less than $17.00, subject, however, to the following three sentences.
If the Company elects to exercise its termination right pursuant to this Section
7.1(f), it shall give written notice to the Acquiror (provided that such notice
of election to terminate may be withdrawn at any time within the aforementioned
three-day period). During the three-day period commencing
50
with its receipt of such notice, the Acquiror shall have the option to
increase the consideration to be received by the holders of the Company
Common Stock hereunder by adjusting the Exchange Ratio to equal a number
(calculated to the nearest one-thousandth) obtained by dividing (A) $17.00 by
(B) the Average Acquiror Share Price. If the Acquiror so elects within such
three-day period, it shall give prompt written notice to the Company of such
election and the revised Exchange Ratio, whereupon no termination shall have
occurred pursuant to this Section 7.1(f) and this Agreement shall remain in
effect in accordance with its terms (except as the Exchange Ratio shall have
been so modified). For purposes of this Section 7.1(f), the term
"Determination Date" means the last business day in the period referred to in
the definition of the Average Acquiror Share Price.
7.2 EFFECT OF TERMINATION
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i) the
provisions relating to confidentiality and expenses set forth in Section 5.4 and
Section 8.1, respectively, and this Section 7.2 shall survive any such
termination and (ii) a termination pursuant to Section 7.1(b), (d) or (e) shall
not relieve the breaching party from liability for willful breach of any
covenant, undertaking, representation or warranty giving rise to such
termination.
7.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including without
limitation the covenants set forth in Sections 5.9 and 5.10 hereof), provided
that no such representations, warranties or covenants shall be deemed to be
terminated or extinguished so as to deprive the Acquiror or the Company (or any
director, officer or controlling person thereof) of any defense at law or in
equity which otherwise would be available against the claims of any person,
including, without limitation, any shareholder or former shareholder of either
the Acquiror or the Company.
7.4 WAIVER
Each party hereto by written instrument signed by an executive officer of
such party, may at any time (whether before or after approval of this Agreement
by the shareholders of the Company) extend the time for the performance of any
of the obligations or other acts of the other party hereto and may waive (i) any
inaccuracies of the other party in the representations or warranties contained
in this Agreement or any document delivered pursuant hereto, (ii) compliance
with any of the covenants, undertakings or agreements of the other party, (iii)
to the extent permitted by law, satisfaction of any of the conditions precedent
to its obligations contained herein or (iv) the performance by the other party
of any of its obligations set forth herein, provided that any such waiver
granted, or any amendment or supplement pursuant to Section 7.5 hereof executed
after shareholders of the
51
Acquiror or the Company have approved this Agreement shall not modify either
the amount or form of the consideration to be provided hereby to the holders
of Company Common Stock upon consummation of the Merger or otherwise
materially adversely affect such shareholders without the approval of the
shareholders who would be so affected.
7.5 AMENDMENT OR SUPPLEMENT
This Agreement may be amended or supplemented at any time by mutual
agreement of the Acquiror and the Company, subject to the proviso to Section 7.4
hereof. Any such amendment or supplement must be in writing and authorized by
or under the direction of their respective Boards of Directors.
ARTICLE VIII
MISCELLANEOUS
8.1 EXPENSES
Each party hereto shall bear and pay all costs and expenses incurred by it
in connection with the transactions contemplated by this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel,
provided that (i) expenses of printing the Form S-4 and the registration fee to
be paid to the Commission in connection therewith shall be shared equally
between the Company and the Acquiror and (ii) notwithstanding anything to the
contrary contained in this Agreement, neither the Acquiror nor the Company shall
be released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement.
8.2 ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein and therein. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and thereto and their respective successors. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors, any rights, remedies,
obligations or liabilities other than as set forth in Section 5.9 hereof.
8.3 NO ASSIGNMENT
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
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8.4 NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to the Acquiror:
Washington Federal, Inc.
425 Pike Street
Seattle, Washington 98101
Attn: Guy C. Pinkerton
Chairman, President and Chief Executive Officer
Fax: 206-624-2334
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
If to the Company:
Metropolitan Bancorp
1520 4th Avenue
Seattle, Washington 98101-1648
Attn: Patrick F. Patrick
President and Chief Executive Officer
Fax: 206-654-7883
With a required copy to:
Perkins Coie
1201 Third Avenue
40th Floor
Seattle, Washington 98101-3099
Attn: Charles Katz, Esq.
Fax: 206-583-8500
8.5 ALTERNATIVE STRUCTURE
Notwithstanding any provision of this Agreement to the contrary, the
Acquiror may, with the written consent of the Company, elect, subject to the
filing of all necessary
53
applications and the receipt of all required regulatory approvals, to modify
the structure of the acquisition of the Company set forth herein, provided
that (i) the federal income tax consequences of any transactions created by
such modification shall not be other than those set forth in Section 6.1(f)
hereof, (ii) consideration to be paid to the holders of the Company Common
Stock is not thereby changed in kind or reduced in amount as a result of such
modification and (iii) such modification will not materially delay or
jeopardize receipt of any required regulatory approvals or any other
condition to the obligations of the Acquiror set forth in Sections 6.1 and
6.3 hereof.
8.6 INTERPRETATION
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement.
8.7 COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Washington applicable to agreements made and entirely to be
performed within such jurisdiction.
8.9 DISPUTE RESOLUTION
In the event that the Company disagrees with any judgment(s) made by the
Acquiror pursuant to Section 6.3(f) and/or 6.3(g) of this Agreement, the
judgment(s) shall be submitted for review by the respective independent public
accountants of the Company and the Acquiror, or such other respective
independent public accountants that may be selected by the Company or the
Acquiror, as the case may be, for this purpose, whose determination shall be
final, provided that if the independent public accountants engaged for this
purpose do not agree, the Acquiror's judgment(s) shall be submitted for further
review by another independent public accounting firm mutually agreeable to the
Company and the Acquiror, whose determination shall be final and the expense of
which shall be equally born by the Company and the Acquiror.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
WASHINGTON FEDERAL, INC.
Attest:
/s/ RONALD L. SAPER By: /s/ GUY C. PINKERTON
- ------------------------------------ -------------------------------
Name: Ronald L. Saper Name: Guy C. Pinkerton
Title: Senior Vice President Title: Chairman, President
and Chief Financial Officer and Chief Executive Officer
METROPOLITAN BANCORP
Attest:
/s/ EDWIN C. HEDLUND By: /s/ PATRICK F. PATRICK
- ----------------------------------- ---------------------------------
Name: Edwin C. Hedlund Name: Patrick F. Patrick
Title: Secretary Title: President and Chief
Executive Officer
55