FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 25, 2001
Klamath First Bancorp, Inc.
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(Exact name of registrant as specified in its charter)
Oregon 0-26556 93-1180440
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State or other jurisdiction Commission (I.R.S. Employer
of incorporation File Number Identification No.)
540 Main Street, Klamath Falls, Oregon 97601
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number (including area code): (541) 882-3444
Not Applicable
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(Former name or former address, if changed since last report)
Item 2. Other Events
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The Registrant's wholly-owned subsidiary, Klamath First Federal Savings
and Loan Association, has entered into a Branch Purchase and Assumption
Agreement dated May 25, 2001 ("Agreement") with Washington Mutual Bank
("Washington Mutual") to purchase twelve (12) Western Bank branch offices and
one Washington Mutual financial center ("Branches") located in the State of
Oregon. The purchase of the Branches includes deposit accounts and repurchase
liabilities of approximately $416 million and loans of approximately $178
million. The deposits are being purchased at an 8.0% premium, which based on
the current amounts equates to approximately $33.0 million.
In connection with the transaction, Klamath First Federal Savings and
Loan Association will be acquiring a presence in the following Oregon cities:
Astoria, Baker City, Bandon, Cave Junction, Clatskanie, Coos Bay(2), Florence,
La Grande, North Bend, Seaside and Tillamook(2).
Consummation of the transaction contemplated by the Agreement is
anticipated by the end of third quarter of 2001 and is subject to the receipt
of all applicable regulatory approvals.
For further information, reference is made to the Agreement and the
Registrant's press release dated May 29, 2001 which are attached hereto as
Exhibits 2 and 99, respectively, and incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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Exhibit
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2 Branch Purchase and Assumption Agreement dated May 25, 2001
99 Press Release dated May 29, 2001
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SIGNATURES
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
KLAMATH FIRST BANCORP, INC.
DATE: May 30, 2001 By: /s/Kermit K. Houser
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Kermit K. Houser
President and Chief Executive Officer
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Exhibit 2
Branch Purchase and Assumption Agreement Dated May 25, 2001
BRANCH PURCHASE AND ASSUMPTION AGREEMENT
BY AND BETWEEN
WASHINGTON MUTUAL BANK
AND
KLAMATH FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION
Dated
as of
May 25, 2001
SCHEDULES
Schedule 1.3(a) Assumed Contracts
Schedule 1.3(b) Contracts not Assumed
Schedule 1.6 Banking Offices
Schedule 1.11 Excluded Loans
Schedule 1.15 Liabilities
Schedule 1.22 Real Property
Schedule 1.25 Transferred Employees
Schedule 2.1 Liens and Encumbrances
Schedule 2.3 Trial Settlement Statement
Schedule 5.19 Transferred Assets
Schedule 7.4 Finders/Brokers
Schedule 7.9 Non-Contravention
Schedule 7.12 Employee Agreements
EXHIBITS
Exhibit A Deed
Exhibit B Assignment and Assumption Agreement
Exhibit C Bill of Sale and Assumption Agreement
BRANCH PURCHASE AND ASSUMPTION AGREEMENT
This Agreement is made and entered into this 25th day of May, 2001, by
and between WASHINGTON MUTUAL BANK, a Washington State chartered stock savings
bank ("WMB"), and Klamath First Federal Savings and Loan Association, a
federal savings association ("Buyer").
WHEREAS, WMB desires to sell certain depository accounts and other
liabilities and certain loans and other assets attributable to certain of its
branch banking offices located in the State of Oregon upon the terms and
conditions hereinafter set forth, and
WHEREAS, Buyer is willing to acquire such loans and other assets and to
assume such deposits and other liabilities upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, the parties to this Agreement do hereby agree as follows:
ARTICLE I
DEFINITIONS
Unless the context otherwise specifies and requires, the following terms
have the meanings given below:
1.1 "Agreement" means this Branch Purchase and Assumption Agreement
together with all exhibits and schedules attached hereto.
1.2 "Assets" means, subject to any adjustments described elsewhere in
this Agreement: (i) the equipment, personal property and other fixed assets
set forth on the list to be provided by Buyer pursuant to Section 5.19; (ii)
all inventories and supplies on hand at the Banking Offices as of the Closing
Date, except for supplies of the loan departments upon which the name or logo
of WMB or any affiliated entity are affixed; (iii) books and records of WMB as
described in Section 2.5 hereof; (iv) all rights of WMB under express or
implied warranties given or made in connection with the Assets, if any; (v)
all of WMB's right, title and interest in and to the Assumed Contracts, (vi)
all of WMB's right, title and interest in and to all the Real Property other
than the Excluded Real Property; (vii) all Transferred Loans; and (viii) cash
on hand at each Banking Office, cash due and cash items in the process of
collection for each Banking Office at the close of business on the Closing
Date. WMB and Buyer understand and agree that the Assets do not include loss
reserves on any Loan and that no loan loss reserves are being transferred
pursuant to this Agreement.
1.3 "Assumed Contracts" means all mortgages, real property leases,
contracts, equipment and personal property leases (including safety deposit
box leases), and other agreements of WMB attributable to the Banking Offices
that are assumed by Buyer hereunder.
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All such contracts, leases and agreements, etc. are set forth on Schedule
1.3(a) and the contracts not being assumed are set forth on Schedule 1.3(b).
1.4 "Average Deposit Liabilities" means the daily average of the
principal amount of the balances (excluding accrued interest payable thereon)
of the Deposit Liabilities for the 14 day period prior to and including the
Closing Date.
1.5 "Average Repurchase Liabilities" means the daily average of the
principal amount of Repurchase Liabilities attributable to the Banking Offices
for the 14 day period prior to and including the Closing Date.
1.6 "Banking Offices" means WMB's thirteen (13) banking offices
described on Schedule 1.6.
1.7 "Closing" means the closing of the transactions contemplated by this
Agreement, which is to take place via telephone by the parties' at their
respective headquarters or such other place and method as shall be mutually
agreed to in writing by the parties hereto, at 10:00 a.m. Pacific time, on the
Closing Date. Unless otherwise agreed to by the parties, the Closing will be
deemed to occur, and will be effective, at 11:59 p.m., Pacific Time, on the
Closing Date.
1.8 "Closing Date" means the first day which is the last business day of
a calendar month and is at least five business days after the receipt of all
regulatory approvals and the expiration of any legally required waiting,
protest or appeal periods and the satisfaction of the other conditions to
Closing (other than conditions which by their terms are to be satisfied at
Closing), or such other date as is mutually agreed to by the parties hereto.
1.9 "Confidentiality Agreement" means that letter agreement dated March
5, 2001, by and between WMB and Buyer.
1.10 "Deposit Liabilities" means those deposit liabilities attributable
to the Banking Offices, as of the Closing Date (plus accrued interest payable
thereon as of the Closing Date) including, without limitation, all passbook
accounts, statement savings accounts, checking accounts, NOW accounts, money
market deposit accounts, time deposits, certificates of deposit and IRA
accounts; provided, however, that Deposit Liabilities will not include (i) any
IRA accounts which are not transferred to Buyer's master agreement as provided
in Section 2.6(b) or (ii) any deposit liability owed to any customer with
respect to whom there exists an Excluded Loan.
1.11 "Excluded Loans" means (i) any Loan that is 90 days or more
delinquent or otherwise on non-accrual status at the Closing, and (ii) any
Loan that is classified by WMB as "substandard." WMB and Buyer agree that the
Loans listed on Schedule 1.11 constitute all of the Excluded Loans as of March
31, 2001. Additions to or removals from such list shall be made in accordance
with Section 2.4.
1.12 "Excluded Real Property" has the meaning set forth in Section 5.22.
1.13 "FDIC" means the Federal Deposit Insurance Corporation.
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1.14 "Leased Real Property" means the real property, and all
improvements thereon, leased by WMB on which the Banking Offices described on
Schedule 1.6 are located.
1.15 "Liabilities" means all Deposit Liabilities, all Repurchase
Liabilities, all obligations of WMB under the Assumed Contracts, and all other
miscellaneous liabilities specified on Schedule 1.15.
1.16 "Loan" means any loan, together with any accrued but unpaid
interest, owned by WMB as of the Closing Date that is attributable to the
Banking Offices.
1.17 "Long Term Leave" An employee of WMB or its affiliates shall be
deemed to be on "Long Term Leave" if at the Closing such employee has been
approved for long term disability leave under WMB's long term disability
program.
1.18 "Material Adverse Effect" means (a) with respect to the Banking
Offices, a material adverse effect on the business, financial condition or
results of operation of the Banking Offices, taken as a whole, and (b) with
respect to WMB or Buyer, as the case may be, a material adverse effect on such
party's ability to consummate the transactions contemplated hereby on a timely
basis; provided, however, that in determining whether a Material Adverse
Effect has occurred, there shall be excluded any effect the cause of which is
(i) any change in banking, savings association or similar laws, rules or
regulations or in laws, rules or regulations that affect in general the
business in which the Banking Offices engage or interpretations thereof by
courts or governmental authorities, (ii) any change in generally accepted
accounting principles or regulatory accounting requirements applicable to
banks, savings associations or their holding companies generally, (iii) the
announcement of this Agreement or action or omission taken in accordance with
this Agreement or with the prior written permission of the other party and
(iv) any changes in interest rates or general economic conditions affecting
banks, saving associations or their holding companies generally.
1.19 "Notes" has the meaning set forth in Section 7.10 of this
Agreement.
1.20 "Payment Amount" means the amount set forth in Section 3.1 of this
Agreement.
1.21 "Premium" means 8% of the sum of (i) the book value of the Average
Deposit Liabilities (stated as a positive number) and (ii) the book value of
the Average Repurchase Liabilities (stated as a positive number).
1.22 "Real Property" means the real property, and all improvements
thereon, owned by WMB on which the Banking Offices described on Schedule 1.22
are located.
1.23 "Repurchase Liabilities" means all obligations of WMB under
repurchase agreements between WMB and any customer of the Banking Offices.
1.24 "Short Term Leave" An employee of WMB or its affiliates shall be
deemed to be on "Short Term Leave" if at the Closing such employee is absent
from work for any reason other than: (i) an absence in connection with a
previously scheduled vacation lasting thirty or fewer days or (ii) an absence
because such employee is on Long Term Leave.
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1.25 "Transferred Employees" means the employees of WMB or its
affiliates listed on Schedule 1.25; provided that Transferred Employees shall
not include any employee on long term leave as of the Closing Date. Schedule
1.25 also contains the current salary and salary history of each Transferred
Employee and each Transferred Employee's accrued or earned vacation, sick and
disability leave.
1.26 "Transferred Loans" means all Loans other than the Excluded Loans.
1.27 Other Defined Terms. The following terms have the meanings given
such terms in the section set forth below:
AAA Section 9.7
Buyer Preamble
COBRA Section 7.12
DP Information Section 5.20
Estimated Amount Section 6.1
Indemnitee Section 9.1
Indemnitor Section 9.1
Liability Threshold Section 9.2
Notes Section 7.10
Payment Amount Section 3.1
Representatives Section 5.1
Real Property Appraised Value Section 2.3
Returned Item Section 12.5
WMB Preamble
ARTICLE II
TRANSFER OF ASSETS; ASSUMPTION OF LIABILITIES
2.1 Transfer of Assets. Subject to the terms and conditions of this
Agreement, on the Closing Date, WMB will transfer, convey, assign and deliver
to Buyer all of its right, title and interest in and to the Assets, free and
clear of all liens and encumbrances, except for those liens and encumbrances
set forth on Schedule 2.1.
2.2 Assumption of Liabilities. Subject to the terms and conditions of
this Agreement, from and after the Closing Date, Buyer will assume all of
WMB's obligations with respect to the Assumed Contracts, the Leased Real
Property, the Real Property, the Transferred Loans, and the Liabilities
including, without limitation, any reporting or filing obligations imposed by
the Internal Revenue Service or any other regulatory authority. Buyer will
assume and will pay, perform and discharge the Deposit Liabilities to
customers of WMB as stated in WMB's applicable account records, rules and
regulations attributed on the records of WMB to the applicable Banking Office.
It is understood that Buyer may elect to make reasonable adjustments in
interest payment periods, payment options and similar adjustments required to
conform the accounts to the data processing capabilities of Buyer. Buyer will
make such adjustment in accordance with its understanding of its legal rights
and obligations and neither WMB nor its counsel express any opinion with
respect to such legal rights or obligations nor
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does WMB consent with respect to such changes. As between Buyer and WMB, any
such adjustments will have no effect on Buyer's agreement to pay the Deposit
Liabilities as herein stated, and WMB will have no liability to any customer
as a result of any such adjustments.
2.3 Value of Assets and Deposit Liabilities. Except as otherwise
provided in the Agreement or in any schedule or exhibit hereto, the value of
the Assets, the Repurchase Liabilities and the Deposit Liabilities (other than
the Real Property, which the parties agree shall be valued at its fair market
value as appraised by one of the following appraisers to be agreed upon by the
parties: Richard J. Duncan of Duncan & Brown, Inc., Margot E. Hansen of Hansen
Morton Annand, Inc., Steven L. Herrmann of Herrmann & Company and Daniel J.
Puffinburger of Duncan & Brown, Inc. (the "Real Property Appraised Value"))
will be the net book value thereof as of the Closing Date as established by
WMB in accordance with generally accepted accounting principles (or, in the
event the book value of an Asset cannot be determined or is zero, an agreed
upon price for such Asset, provided that if the parties fail to agree on the
price of an Asset covered by this parenthetical, then it will not be
transferred but will be retained by WMB). Attached hereto as Schedule 2.3 is
a trial settlement statement prepared for the transaction as if the Closing
Date had occurred on March 31, 2001. At the Closing, the same calculations
shall be made subject to adjustments in amounts reflecting transactions made
between March 31, 2001, and the Closing Date and for any other adjustments
made in the ordinary course of business or in accordance with this Agreement.
2.4 Excluded Loans. The list of Excluded Loans set forth in Schedule
1.12 hereof will be updated by WMB from time to time prior to the Closing.
Loans will be added or removed from Schedule 1.12 based upon WMB's customary
banking practices and policies and applicable laws and regulations and with
the concurrence of Buyer.
2.5 Books and Records. From and after the Closing, Buyer will have the
right to possession of any and all files, books of account and records
directly relating to the Banking Offices, the Assets or the Liabilities
affecting daily operations which are ordinarily maintained at the Banking
Offices. All books and records relating to the Banking Offices, the Assets or
the Liabilities held by either party will be open for inspection for
reasonable purposes by the other party and its authorized agents,
representatives, and regulators during regular business hours after the
Closing Date, and the party with the right of inspection may, at its own
expense, make copies of excerpts from such files, books of account and records
as it deems desirable. All books and records relating to the Banking Offices,
the Assets or the Liabilities will be maintained for a period at least equal
to the longer of the period required by law or the normal retention period
under WMB's or Buyer's (as the case may be) records management program, unless
the parties agree upon a shorter period.
2.6 IRA Accounts.
(a) Included in the Deposit Liabilities are deposits of customers
of the Banking Offices relating to IRA accounts (which the parties acknowledge
includes SEP IRA accounts, SIMPLE IRA accounts and any other type of
retirement account reflected on the general ledgers of the Banking Offices)
pursuant to which WMB is currently acting as custodian.
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(b) Within such period prior to the Closing Date as is required by
applicable law or regulation, WMB will, at its sole cost and expense, notify
the depositors who maintain such IRA accounts of WMB's intent to resign as
custodian as of Closing and to appoint Buyer as successor custodian and the
discharge and release of WMB from all liabilities as custodian from and after
the effective time of its resignation. Buyer will accept such appointment as
successor custodian, however, only if the customer accepts and agrees to such
appointment and to Buyer's master IRA agreement. It is agreed that WMB is
required to notify each such depositor only once, which notification will be
by means of a letter approved by Buyer and accompanied by all appropriate
forms and documents necessary to effect such replacement and release and to
adopt Buyer's master agreement. The IRA account of any customer not accepting
the appointment of Buyer and the Buyer's master plan will not be included in
the Deposit Liabilities.
ARTICLE III
CONSIDERATION
3.1 Consideration. In consideration of the transactions set forth
herein, WMB will pay to Buyer at Closing an amount (the "Payment Amount")
equal to the value of the Deposit Liabilities and the Repurchase Liabilities
(as valued pursuant to Section 2.3) plus the accrued amount for any vacation
days transferred to Buyer for any Transferred Employee pursuant to Section
5.12(d), less the value of the Assets other than the Real Property (as valued
pursuant to Section 2.3) less the Premium and less the Real Property Appraised
Value, subject to adjustments as provided in Article 12 or elsewhere in this
Agreement. The parties agree that at Closing at least one representative of
each party will jointly count the cash on hand at each Banking Office for the
purpose of determining the amount of post-Closing settlements set forth in
Article XII, if any.
3.2 Proration. Except as otherwise specifically provided in this
Agreement, it is acknowledged that WMB will operate for its own account the
Banking Offices through the Closing Date and that Buyer will operate for its
own account the Banking Offices after the Closing Date. Accordingly, except
as otherwise specifically provided in this Agreement, items of income and
expense allocable to the Assets and Liabilities will be prorated as of the
Closing Date, whether or not such adjustment would normally be made as of such
time.
3.3 Taxes and Assessments. All excise and real estate transfer taxes
which are payable or arise as a result of this Agreement will be paid by WMB.
All assessments, including local improvement district assessments, that are
levied against the Real Property or the Leased Real Property will be prorated.
Real estate taxes assessed against the Real Property or the Leased Real
Property will be apportioned at the Closing on the basis of the tax year
during which the Closing occurs in such manner that WMB will pay or, at its
option, allow Buyer as a credit against the consideration to be paid to WMB
hereunder that portion thereof which corresponds to the portion of such tax
year which has expired on the Closing Date, and Buyer will pay or assume the
balance. Water charges, sewer use charges, garbage and all other utility and
similar charges, if any, will be
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prorated and will be apportioned as of the Closing Date as estimated on the
basis of the best information available.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions Precedent to the Obligations of Both Parties. The
obligations of each of the parties to this Agreement are subject to
fulfillment at or prior to the Closing Date of each of the following
conditions, but compliance with or occurrence of any one or more of such
conditions precedent (other than the conditions set forth in Section 4.1(a))
may be waived by the parties in writing.
(a) Regulatory Approvals. All approvals and consents of any
relevant state and federal regulatory agencies required to consummate the
transaction contemplated hereby will have been obtained and all necessary
conditions, including all legally required waiting, protest or appeal periods,
of or relating to such approvals will have expired or been fully satisfied;
provided, however, that either party may deem this condition unfulfilled if
any such approval is subject to a qualification or condition which, in the
reasonable judgment of such party after consultation with the other party, (i)
prohibits any of the parties or their affiliates from engaging in any activity
which they currently conduct and which is otherwise permitted to it under
applicable law, or (ii) has a material and adverse impact on the value of the
transaction contemplated by this Agreement. Notwithstanding the preceding
sentence, in the event a regulatory agency fails to approve the transaction
contemplated by this Agreement or imposes a condition under (i) or (ii) above,
the parties agree to cooperate and use best efforts to meet and work with such
regulatory agency to resolve the problem and to obtain the appropriate
approvals.
(b) Absence of Litigation. No action or proceeding instituted by
any governmental agency or to prevent the consummation of the transactions
covered and contemplated by this Agreement will be pending at the time of the
Closing, and no order by any governmental authority prohibiting or preventing
the Closing will be in effect.
(c) Leases for Excluded Real Property. The parties shall have
executed and delivered the leases, if any, required under Section 5.22.
4.2 Condition Precedent to the Obligations of Buyer. The obligations of
Buyer under this Agreement are further subject to the satisfaction of each of
the further conditions precedent, as set forth in this Section 4.2, any one or
more of which may be expressly waived by Buyer in writing.
(a) Each of the obligations of WMB required to be performed by it
at or prior to the Closing pursuant to the terms of this Agreement will have
been duly performed and complied with in all material respects (without
reference to any materiality standard therein) and the representations and
warranties of WMB contained in this Agreement will be true and correct
(without reference to any materiality standard therein) as of the date of this
Agreement and as of the Closing Date as though made at and as of the Closing
Date except as to any representation or
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warranty that specifically relates to an earlier date and except where the
failure of such representations and warranties to be true and correct would
not have and would not be reasonably expected to have in the aggregate a
Material Adverse Effect on the Banking Offices.
(b) Buyer will have received a certificate from WMB substantially
in the form described in Section 6.2(e).
(c) On or prior to Closing, WMB will have obtained and delivered
all material consents reasonably necessary to authorize the transfer and
assignment to Buyer of, or the substitution of Buyer for WMB under, all
material Assumed Contracts (without any material alterations required by any
third party and preserving for Buyer all material rights and privileges
thereunder).
(d) On or prior to Closing, WMB will have obtained and delivered a
title insurance policy with owner's extended coverage, covering all the Real
Property showing no liens, encumbrances or charges, except those not objected
to by Buyer, and except for current taxes not delinquent, printed exceptions
generally contained in any owner's extended coverage policy of title
insurance, rights of government entities to make cuts and fills in connection
with construction and/or maintenance of any public roadways adjoining the Real
Property and easements and reservations of record which do not in the
aggregate have a Material Adverse Effect on the Banking Offices. Buyer will
reimburse WMB for the difference in cost between insurance policies with
owner's standard coverage and owner's extended coverage policies with respect
to the Real Property. WMB will have a preliminary title report delivered to
Buyer as soon as reasonably practical.
(e) Since the date hereof and subject to the provisions of Section
5.15, there will not have been any changes in the Assets or Liabilities or in
the condition (financial or otherwise), of properties, assets, liabilities,
business or operations of the Banking Offices which in the aggregate have or
would be reasonably expected to have a Material Adverse Effect on the Banking
Offices.
(f) Buyer has not delivered a notice of termination to WMB as
provided in Section 5.15.
(g) On or prior to Closing, WMB will have terminated all leases,
subleases, licenses or similar agreements permitting any affiliate of WMB to
lease, use or occupy space in any of the Banking Offices or in the Real
Property.
(h) On or prior to Closing, WMB will have delivered to Buyer any
landlord consent necessary for Buyer to occupy and use any of the Banking
Offices located on real property not owned by WMB.
(i) In addition to the obligations required to be performed by WMB
prior to Closing, if the average of the total Deposit Liabilities for the 30
calendar day period ending on the Closing Date is 10% or more greater than the
average of the total Deposit Liabilities for the 30 calendar day period ending
on the date hereof, then Buyer may, in its sole discretion, upon written
notice to WMB, cancel this Agreement without any liability therefore.
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4.3 Conditions Precedent to the Obligations of WMB. The obligations of
WMB under this Agreement are further subject to the satisfaction of each of
the further conditions precedent set forth in this Section 4.3, any one or
more of which may be expressly waived by WMB in writing.
(a) Each of the obligations of Buyer required to be performed by it
at or prior to the Closing pursuant to the terms of this Agreement will have
been duly performed and complied with in all material respects (without
reference to any materiality standard therein) and the representations and
warranties of Buyer contained in this Agreement will be true and correct in
all material respects (without reference to any materiality standard therein)
as of the date of this Agreement and as of the Closing Date as though made at
and as of the Closing Date except as to any representation or warranty that
specifically relates to an earlier date.
(b) WMB will have received a certificate from Buyer substantially
in the form described in Section 6.3(a).
(c) Since the date of this Agreement, there will not have been any
material adverse changes in the assets or liabilities or in the condition
(financial or otherwise) of properties, assets, liabilities, business or
operations of Buyer, where such change would prevent or materially impair
Buyer from fulfilling the terms and conditions of this Agreement.
ARTICLE V
COVENANTS AND AGREEMENTS OF THE PARTIES
5.1 Review; Confidentiality. To the extent that it is legally permitted
to do so and subject to Section 5.2, WMB will permit Buyer and its authorized
representatives, accountants, independent appraisers and counsel
(collectively, "Representatives") to have access during regular business
hours, upon prior reasonable notice and in such manner as will not interfere
with the conduct of WMB's business, to all of the properties and books and
records of or relating to the Banking Offices, the Assets or the Liabilities,
and to all other information with respect to the business affairs, financial
condition, and assets of the Banking Offices, as Buyer may from time to time
reasonably request. Buyer and WMB will provide each other promptly with
information as to any significant developments in the performance of this
Agreement and will promptly notify the other if either discovers that any of
its representations and warranties contained in this Agreement or in any
document delivered in connection with this Agreement was not true and correct
in all material respects or becomes untrue or incorrect in any material
respect. Buyer and its Representatives will treat all information furnished
to Buyer by WMB in connection with this Agreement in accordance with the
Confidentiality Agreement.
5.2 Right to Inspect. From and after the date of this Agreement, and so
long as this Agreement has not been terminated, Buyer shall have the right to
enter upon the Real Property or the Leased Real Property and make inspections,
studies and surveys thereof, but only in accordance with the following terms
and conditions:
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(a) Buyer may enter upon the Real Property or the Leased Real
Property for the purpose of inspections, studies and surveys, only upon three
(3) business days prior notice to WMB, and only in the presence of the manager
of the Banking Office or another agent or employee of WMB. At WMB's option,
Buyer shall provide WMB with lien waivers from those persons performing such
inspections, studies or surveys prior to the commencement of work.
(b) Buyer will not permit the creation of any lien in favor of any
contractor, subcontractor, materialman, mechanic, surveyor, architect or
laborer in the employ or acting at the request or direction of Buyer or any
agent of Buyer. Buyer hereby expressly agrees to protect, defend and
indemnify WMB against and hold WMB harmless with respect to any claims, liens,
encumbrances or causes of action which arise out of or are in any way related
to Buyer's activities at the Real Property or the Leased Real Property,
including without limitation WMB's costs, expenses and reasonable attorney's
fees incurred in connection with defending against or clearing WMB's title to
the Real Property or the Leased Real Property of such claims, liens,
encumbrances and causes of action. At WMB's option, Buyer shall provide WMB
with lien waivers from those persons performing such inspection, studies or
surveys prior to commencement of the work.
(c) Buyer hereby expressly agrees to indemnify WMB against and hold
WMB harmless from and against all liability and expense (including reasonable
attorneys' fees) in connection with all claims, suits and actions of every
name, kind and description brought against WMB, its agents or employees by any
person or entity as a result of or on account of injury (including death) or
damage to persons, entities and/or property received or sustained, arising out
of, in connection with or as a result of acts or omissions of Buyer or its
agents or employees in exercising its rights under this Section 5.2, except to
the extent caused by WMB's negligence.
(d) Buyer shall be entitled to review all information, leases,
contracts, studies, reports, operating information, and other documentation
relating to the Real Property or the Leased Real Property which is in the
possession of WMB. Notwithstanding anything contained in this Agreement to
the contrary, WMB shall not be obligated to disclose to Buyer (i) any
appraisal of the Real Property or the Leased Real Property or (ii) analyses
of, or conclusions drawn by WMB from, any information relating to the Real
Property or the Leased Real Property.
5.3 Conduct of Business Pending Closing. From the date of this
Agreement through the Closing Date, WMB will conduct its business and affairs
at the Banking Offices in the ordinary course and will offer at the Banking
Offices the same products and pay interest rates on deposits and charges for
non-deposit products and services consistent with past practice, except where
mutually agreed on by WMB and Buyer. Buyer and WMB will work together to
define and implement the operational procedures necessary to transfer the
Banking Offices to Buyer. Within two (2) days after the execution and
delivery of this Agreement, WMB and Buyer will each designate an individual to
serve as liaison concerning operations matters. WMB will use its best efforts
in good faith to provide to Buyer, on a monthly basis, WMB's internal loan
classifications for the Loans. From and after the date hereof through the
Closing Date, except as may be required by a regulatory authority, WMB will
not, without prior written consent of Buyer:
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(a) Cause or permit the Banking Offices to engage or participate in
any material transaction or incur or sustain any material obligation except in
the ordinary course of business consistent with past practice;
(b) Directly or indirectly solicit the depository banking business
or the non-residential lending business of any customer of Banking Offices;
provided, however, that this provision shall not be deemed to prohibit general
advertisements and solicitations not specifically directed or targeted to
customers of the Banking Offices or solicitations to any customers of the
Banking Offices with whom WMB or any affiliate maintains a banking, lending or
other financial relationship;
(c) Cause or permit the Banking Offices to transfer to WMB's other
operations any material amount of Assets or Liabilities, except for (i)
equipment and supplies, if any, which have a unique function in WMB's business
and ordinarily would not be useful to Buyer (such as, for example, computer
software and sign inserts which refer to WMB), and (ii) cash and other
customary inter-bank transfers made in the ordinary course of business in
accordance with WMB's normal banking practices;
(d) Cause or permit the Banking Offices to transfer to WMB's other
operations any deposits of the type included in the Deposit Liabilities
(except pursuant to an unsolicited customer request where it would be
customary banking practice to honor such request);
(e) Transfer, assign, encumber, or otherwise dispose of or enter
into any contract, agreement, or understanding to transfer, assign, encumber,
or otherwise dispose of the Real Property or any other Assets, except for
transactions in the ordinary course of business involving assets other than
Real Property or the Leased Real Property;
(f) Make any material capital investment in any Asset;
(g) Enter into or amend any material continuing contract relating
to the Banking Offices, the Real Property or the Leased Real Property which
would be included among the Liabilities, for the purchase or lease of
materials, supplies, equipment or services unless such contract can be
terminated on not more than thirty (30) days' notice without cause and without
payment of any material amount as a penalty, bonus, premium, or other
compensation for termination;
(h) Undertake any actions which (i) are inconsistent with a program
to use all reasonable efforts to maintain good relations with WMB's employees
employed at the Banking Offices and customers, unless such actions are
required or permitted by this Agreement, (ii) increase the personnel at the
Banking Offices, or (iii) increase the salaries or benefits of the Transferred
Employees, except as consistent with past practice;
(i) File any application with regulatory authorities to relocate
any Banking Office;
(j) Terminate the operations of any Banking Office or sell or
otherwise transfer any such operations to any third party;
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(k) Except as otherwise provided in Section 5.21, enter into any
leases, subleases, licenses or similar agreements permitting any affiliated or
non-affiliated parties to lease, use or occupy space in any Banking Office or
on the Real Property;
(l) Transfer employees to or from any Banking Office and WMB's
other operations other than temporary assignments of a fill-in nature in the
ordinary course of business;
(m) Take any action inconsistent with maintaining the tangible
personal property and equipment included among the Assets in good operating
condition and repair, except for ordinary and reasonable wear;
(n) Take any action that would cause the termination of or
reduction in coverage of any insurance policy currently in effect on or
relating to the Banking Offices, the Assets or the Liabilities;
(o) Fail to comply in any material respect with all laws,
regulations, ordinances, codes, orders, licenses and permits applicable to the
Assets, the Liabilities or the operation of the Banking Offices;
(p) Directly or indirectly solicit or encourage any customer of the
Banking Officers to transfer such customer's depository banking business or
the non-residential lending business to any office of WMB other than the
Banking Offices; provided, however, that this provision shall not be deemed to
prohibit general solicitations not specifically directed or targeted to
customers of the Banking Offices. Notwithstanding the provisions of this
Section 5.13(p), WMB or any affiliate may continue to engage in all customary
communications, including distribution of solicitations and promotional
materials, with any customers of the Banking Offices with whom WMB or any
affiliate maintains a banking, lending or other financial relationship
pursuant to the terms of this Agreement independently of the Banking Offices,
including but not limited to customers whose loans are Excluded Loans.
(q) Conduct advertising, solicitations or other promotional
activities specifically targeted at the geographic areas set forth in Section
5.17 or that specifically mention one or more of the Banking Offices,
provided, however, that this provision shall not be deemed to prohibit general
solicitations not specifically directed or targeted to customers of the
Banking Offices, and provided further that WMB shall not be deemed to be in
breach of this provision as the result of any advertisement, solicitation or
other promotional activity that occurs in the fourteen days immediately
following the date of this Agreement that was initiated or otherwise put in
place prior to the date hereof.
(r) Agree to do any of the foregoing.
5.4 Regulatory Approvals. Each party agrees to use its best efforts to
obtain and, where necessary, to assist the other party in obtaining the
regulatory approvals referred to in Section 4.1 of this Agreement. WMB and
Buyer agree to use their best efforts to file initial regulatory applications
for approvals as soon as reasonably practicable and no later than June 1, 2001
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5.5 Further Assurances; Transitional Matters. From and after the
Closing Date, WMB will execute, acknowledge, and deliver such assurances as
may be reasonably necessary to effectively vest in Buyer all of WMB's right,
title and interest in and to the Assets. From the date hereof through
Closing, WMB will provide Buyer all reasonable assistance requested by Buyer
in order to effect as of Closing the orderly transfer of the Banking Offices,
the other Assets and the Liabilities including providing information so Buyer
can provide the notifications and documents necessary hereunder or to effect
the transfer, and, except as otherwise provided in this Agreement, for a
period of six (6) months after the Closing Date, WMB will provide such similar
reasonable assistance to Buyer appropriate to effect the orderly transfer of
the Banking Offices, other Assets and the Liabilities.
5.6 Consents. WMB will use its best efforts to obtain and deliver to
Buyer on the Closing Date all consents reasonably necessary to authorize the
transfer and assignment to Buyer of, or the substitution of Buyer for WMB
under, all Assumed Contracts. Notwithstanding the foregoing, this Agreement
will not constitute an agreement to assign any Assumed Contract if any
attempted assignment thereof would constitute a breach thereof or would
materially and adversely affect the rights of WMB thereunder. Buyer will use
its best efforts to assist WMB in obtaining the above-described consents. In
no event shall either WMB or the Buyer be obligated to pay any money to any
person or entity or to offer or grant other financial or other accommodations
to any person or entity in connection with obtaining any consent, waiver,
confirmation or approval with respect to any Assumed Contract.
5.7 Termination of Contracts Not Assumed. As of or prior to the Closing
Date WMB will terminate with respect to the Banking Offices all existing
contracts listed on Schedule 1.3(b) that WMB does not wish to continue.
5.8 Indemnification by WMB. Subject to the provisions of Article 9
hereof, WMB will indemnify Buyer against and hold Buyer harmless from any and
all losses, costs, damages, and expenses in respect of suits, proceedings,
demands, judgments, expenses, and costs, including, without limitation, costs
and expenses of counsel, which Buyer may suffer or incur by reason of any of
the following: (i) breach of any representation, warranty, agreement or
covenant by WMB contained in this Agreement or in any other document to be
delivered at Closing; or (ii) act or omission of WMB occurring, on or prior to
the Closing Date, with respect to the operations of the Banking Offices
(including, without limitation, any Bank Secrecy Act violations occurring
prior to Closing, failure by WMB to correctly file or pay any taxes or tax
information with respect to the Assets or Liabilities prior to Closing and any
act or omission by WMB in connection with its acting as a custodian of IRA
accounts at the Banking Office prior to Closing; but not including (i) any
state of facts existing or any acts or omission of WMB relating to the Loans
except to the extent that such fact, act or omission constitutes a breach of a
representation or warranty by WMB herein, and (ii) any state of facts
existing, or act or omission of WMB with respect to hazardous substances
described in Section 7.6, the title to the Real Property and any claims, liens
or encumbrances thereon (it being understood and agreed that Buyer will rely
upon title insurance for these purposes) or the condition of the Real Property
or the Banking Offices). Buyer acknowledges and agrees that its right to
indemnification under this section does not include any costs or expenses of
paying or performing the Liabilities assumed by Buyer in accordance with their
terms.
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5.9 Indemnification by Buyer. Subject to the provisions of Article 9
hereof, Buyer will indemnify WMB against and hold WMB harmless from any and
all losses, costs, damages, and expenses in respect of suits, proceedings,
demands, judgments, expenses, and costs, including, without limitation, costs
and expenses of counsel, which WMB may suffer or incur by reason of any of the
following: (i) breach of any representation, warranty, agreement or covenant
of Buyer contained in this Agreement or in any other document to be delivered
at Closing; or (ii) the operations or activities of the Banking Offices
hereafter conducted, as the case may be (including, without limitation, any
Bank Secrecy Act violations occurring after Closing, any failure by Buyer to
correctly file or pay tax or tax information with respect to the Assets or
Liabilities after Closing, any act or omission by Buyer in connection with its
acting as a custodian of IRA accounts at any Banking Office after Closing),
provided, however, that there shall be excluded from the foregoing indemnity
obligation any liability resulting from a fact or circumstance which
constitutes a breach of any representation, warranty, agreement or covenant of
WMB in this Agreement; or (iii) any adjustments with respect to Deposit
Liabilities made by Buyer pursuant to the third sentence of Section 2.2.
5.10 Further Assurances. From and after the Closing Date, Buyer will (i)
give such further assurances to WMB and will execute, acknowledge, and deliver
all such acknowledgments and other instruments and take such further action as
may be necessary and appropriate to effectively relieve and discharge WMB from
any obligations remaining under the Liabilities assumed by Buyer (other than
any such obligations arising from fraudulent conduct on the part of WMB), and
(ii) use its best efforts to assist WMB in the orderly transition of the
operations of the Banking Office being acquired by Buyer.
5.11 Notification of Customers; Change of Name.
(a) After all regulatory approvals have been obtained but prior to
the Closing and in compliance with all applicable laws and regulations, WMB
will at its expense prepare and deliver a letter, on WMB's stationery, in form
and substance reasonably satisfactory to Buyer, informing customers and
depositors of the Banking Offices who have Deposit Liabilities of the transfer
of Assets and Liabilities contemplated by this Agreement. With respect to any
customer notice which is required by applicable law or regulation to be mailed
by WMB, WMB will, no later than the applicable deadline and at Buyer's
expense, mail a letter prepared by WMB in form and substance reasonably
satisfactory to Buyer to each such customer.
(b) Within such period as may be required by applicable law and
regulations but no later than five (5) business days following the Closing
Date, Buyer at its expense will mail to each account holder of a checking,
money market deposit or NOW account: (i) a letter prepared by Buyer, in form
and substance reasonably satisfactory to WMB, notifying such depositor of the
transfer of his or her account to Buyer, requesting that such account holder
cease writing checks or drafts against his or her WMB's account immediately
following receipt of such letter (or such other period as may be required by
applicable law or regulation) and (ii) check order forms, replacement checks
bearing Buyer's transit and routing number and any other documents to be
signed by the account holder to establish a similar account with Buyer.
(c) Within five (5) business days after the Closing Date, Buyer
will, at its expense, mail a letter prepared by Buyer, in form and substance
reasonably satisfactory to WMB,
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to each customer whose Loan was transferred to Buyer and requesting that such
customer remit all payments on such Loan to Buyer.
(d) At Buyer's option and upon 30 days notice, WMB agrees to do the
mailings prior to Closing on Buyer's behalf provided that the costs of the
mailings will remain the liability of Buyer.
(e) WMB shall remove, at its own expense, any or all interior and
exterior signs at the Banking Offices identifying WMB or Western Bank. Signs
will be covered or removed by the opening of business on the first business
day after the Closing Date and all signs removed within ten business days
following the Closing Date. From and after the Closing Date, Buyer will at
its expense as soon as reasonably practicable change the name on all documents
and facilities relating to the Banking Offices to Buyer's name or to a name
which is not deceptively similar to Washington Mutual or Western Bank. Buyer
may not use the names "Washington Mutual," "Washington Mutual Bank," "Western
Bank" or any similar name in any way except as may be necessary to provide
notice to customers of the Banking Offices of the transactions made pursuant
to this Agreement.
Nothing in this Section 5.11 requires Buyer to undertake to reissue
deposits or rewrite other documents assumed by or assigned to Buyer on the
Closing Date, except in the ordinary course of business.
5.12 Employees.
(a) WMB shall terminate all Transferred Employees effective as of
the Closing Date, except for any Transferred Employee on Short Term Leave or
Long Term Leave at the Closing. WMB shall terminate each Transferred Employee
who is on Short Term Leave at the Closing upon such Transferred employee's
return to work or clearance to return to work. Buyer agrees that it will
offer employment to any Transferred Employee (including, upon such Transferred
Employee's return from leave or clearance to return from leave, any
Transferred Employee who is on Short Term Leave at the Closing Date, but not
including any Transferred Employee on Long Term Leave at the Closing Date) and
will employ, effective as of the Closing Date, any Transferred Employee who
accepts such offer of employment. Buyer agrees that it will pay to any
Transferred Employee who is terminated by Buyer other than for cause within 12
months after Closing severance benefits equal to the greater of (i) two weeks
of such employee's compensation at the time of termination per full year of
employment with WMB, but in no event to exceed 26 weeks, or (ii) two months of
such employee's compensation at the time of his or her termination. The
severance benefits shall be paid no later than the first regular pay date
following the date that any termination is effective. Except as expressly
stated in the immediately preceding two sentences, nothing in this section
shall be deemed to create or grant to any employee any right to receive
severance benefits.
(b) Buyer agrees that it will pay to each Transferred Employee
during the course of that Transferred Employee's employment with Buyer an
annual base salary no less than the greater of (i) the annual base salary of a
similarly situated Buyer employee performing the same or substantially similar
job, or (ii) that Transferred Employee's annual base salary as of the day
before the Closing Date.
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(c) Effective as of the Closing Date, all Transferred Employees
shall become participants in all Buyer's employee benefit plans, practices,
and policies on the same terms and conditions as similarly situated employees
of Buyer. Without limiting the generality of the foregoing, prior service
credit for each Transferred Employee's service with WMB, except as expressly
provided otherwise herein, shall be given by Buyer with respect to all Buyer's
employee benefit plans, practices, and policies to the extent that such
crediting of service does not result in duplication of benefits. If any of
the Transferred Employees becomes eligible to participate in any Buyer
employee benefit plan, practice, or policy that provides medical,
hospitalization or dental benefits, Buyer shall waive any pre-existing
condition exclusions and actively at work requirements (but shall not waive
general requirements of formal employment with Buyer). With respect to
Buyer's employee stock ownership plan, each Transferred Employee will enter
into Buyer's employee stock ownership plan on October 1, 2001, and will be
eligible for an allocation on September 30, 2002, provided that such
Transferred Employee will have worked a minimum of 1000 hours per fiscal year
and is at least 21 years of age. With respect to Buyer's pension plan, no
credit will be given for service prior to such Transferred Employee's
employment by Buyer.
(d) Buyer will make a one time payment on September 28, 2001 to
each Transferred Employee of the excess vacation hours that have been accrued
by such employee over the amount that would be permitted under the Buyer's
vacation policy. All sick leave and disability leave earned and not used by a
Transferred Employee prior to the Closing Date shall be maintained by Buyer
after the Closing Date. From and after the Closing Date, all vacation time,
sick leave and disability leave shall accrue for Transferred Employees at the
same rate as for similarly situated Buyer employees, except that no
Transferred Employee shall be entitled pursuant to this Agreement to accrue
additional sick leave and disability leave after the Closing Date during any
time such Transferred Employee has accrued but not used 480 or more hours of
sick leave and disability leave.
(e) For a period of one year after the Closing Date, WMB will not
recruit or solicit any Transferred Employee to transfer jobs; provided that
WMB may, with Buyer's consent, upon such an employee's initiation, transfer
the job or change the duties of such employee and/or continue to employ such
employee following the Closing Date.
(f) This Section 5.12 shall not be construed to grant any employee
of WMB a contractual right to employment by, or to receive any payment from,
Buyer or WMB or through any employee benefit plan.
5.13 Tax Information and Withholding. All tax information reporting and
filing requirements and all tax withholding requirements with respect to the
Assets and Liabilities are the responsibility of WMB up to and through the
Closing Date and the responsibility of Buyer thereafter.
5.14 No Solicitation. Neither WMB, nor any of its directors, executive
officers, lawyers, accountants or investment bankers will, directly or
indirectly encourage or solicit proposals or discussions with, or enter into
negotiations with, or provide any information to, any person, entity or group
other than Buyer concerning any sale or assumption of the Assets or
Liabilities or concerning any other possible transaction which would preclude
or materially
16
adversely affect the ability of WMB to consummate the purchase and assumption
of the Assets and Liabilities contemplated by this Agreement. Neither WMB,
nor any of its directors, executive officers, lawyers, accountants or
investment bankers has taken, since April 30, 2001, any of the actions
described in the first sentence of this Section 5.14.
5.15 Damage or Destruction. In the event that prior to Closing there
occurs material physical damage to or destruction of the Real Property or the
Leased Real Property or either Buyer or WMB receives or obtains written notice
of any condemnation or eminent domain proceeding which affects the Real
Property or the Leased Real Property, then Buyer will have the option, for a
period of 30 days following such damage, either (i) to terminate this
Agreement or (ii) to proceed with the transaction contemplated hereby. If
Buyer elects to proceed with the transaction contemplated hereby, Buyer shall
be entitled to receive and will be assigned all insurance proceeds payable
with respect to the damage or destruction of such Real Property and WMB will
pay over to Buyer any deductible under the applicable insurance policies;
however, in the event of a condemnation or eminent domain proceeding WMB shall
not be liable to restore the Real Property nor may Buyer be entitled to any
condemnation award or payment in lieu thereof payable to WMB.
5.16 Safe Deposit Boxes. Before Closing, WMB will provide to Buyer
access to all leases or other agreements relating to the safe deposit boxes
located in the Banking Offices. From and after the Closing, Buyer will
perform and discharge all of WMB's liabilities with respect to such safe
deposit boxes and the safe deposit business associated therewith, including
maintaining all necessary facilities and providing all necessary services for
the use of safe deposit boxes by the renters thereof, in accordance with the
terms and provisions of the applicable leases or other agreements relating to
such boxes, until such terms and provisions are properly modified by Buyer.
Buyer will not be liable for any actions or the breach of any such lease or
other agreement terms that occurred prior to Closing.
5.17 Customer Solicitation. For eighteen months following Closing, WMB
will not directly or indirectly solicit the depository banking business or the
non-residential lending business of any customer of the Banking Offices and
will not use customer information for the purpose of preparing or distributing
any solicitation, marketing, or other materials relating to such depository
banking business or non-residential lending business; provided, however, that
this provision shall not be deemed to prohibit general solicitations not
specifically directed or targeted to customers of the Banking Offices. For
eighteen months following Closing, WMB will not open a branch or
non-residential lending office located in the State of Oregon and within a 10
mile radius of any Banking Office; provided, however, that this restriction
shall not apply in the event that WMB or an affiliate is acquired by a company
that directly or indirectly owns one or more branches or non-residential
lending offices located within the State of Oregon and within a 10 mile radius
of any Banking Office or in the event that WMB or an affiliate acquires a
company that owns one or more branches or non-residential lending offices
located within the State of Oregon and within a 10 mile radius of any Banking
Office, if the acquired company is not principally engaged in the banking
business in the geographic areas described in this Section 5.17.
Notwithstanding the provisions of this Section 5.17, WMB or any affiliate may
continue to engage in all customary communications, including distribution of
solicitations and promotional materials, with any customers of the Banking
Offices with whom WMB or any affiliate maintains a banking, lending or other
financial relationship pursuant to the terms of this
17
Agreement after the Closing Date or independently of the Banking Offices,
including but not limited to customers whose loans are Excluded Loans.
5.18 Escrow Agent. WMB and Buyer shall select a mutually acceptable
escrow agent to use in connection with the sale of the Real Property. WMB and
Buyer shall share equally all costs associated with the retention of such
escrow agent.
5.19 Transferred Assets. No more than 10 days prior to the Closing
Date, Buyer shall provide to WMB a list of the equipment, personal property
and other fixed assets it shall purchase from WMB, which shall be attached to
this Agreement as Schedule 5.19.
5.20 DP Information. WMB agrees to deliver to Buyer within two weeks of
executing this Agreement a preliminary draft of certain data processing
information (the "DP Information") then in existence on WMB's data processing
system that relates to the Deposit Liabilities and Loans. Additionally, WMB
agrees to deliver to Buyer within 30 days prior to and at the Closing Date all
DP Information on WMB's data processing system that relates to the Deposit
Liabilities and Loans. For Loans this shall include, but not be limited to,
the account number, the name of the account owner, the type of account and
maturity date (if a certificate of deposit), the account balance, accrued and
unpaid interest, and the interest rate. The Buyer agrees and understands that
when the DP Information is delivered by WMB it may be in a form that is not
compatible with the Buyer's data processing system. WMB will bear the cost of
preparing the DP Information to be received by the Buyer in WMB form. The
Buyer will bear the cost incurred to receive the DP Information.
5.21 North Bend Banking Office. WMB will extend the lease with respect
to the Banking Office located in North Bend for a term ending on June 30, 2007
and otherwise in substance reasonably satisfactory to Buyer. WMB and Buyer
agree that if the Closing does not occur for any reason other than a
termination of this Agreement pursuant to Sections 10.1(b) or 10.1(d), Buyer
will pay WMB an amount equal to the lesser of (i) twelve month's lease
payments under such extended lease, excluding common area charges or (ii)
WMB's actual expenses incurred in connection with its good faith efforts to
terminate such lease or to sublease such Banking Office, including but not
limited to lease payments and advertising expenses.
5.22 Environmental Survey.
(a) As soon as practicable following the execution of this
Agreement, Buyer shall engage a company of Buyer's choosing to prepare Phase I
environmental survey of the Real Property and to deliver a copies of the
survey to Buyer and to WMB. WMB shall bear the cost of the survey.
(b) During a period of fifteen (15) days following the delivery of
the survey (or, in the event the survey is delivered with respect to
individual parcels of the Real Property on which individual Banking Offices
are located, the delivery of such portion of the survey with respect to such
individual parcels) to Buyer, Buyer shall have the right to deliver a written
notice to WMB excluding from the assets to be acquired by Buyer pursuant to
this Agreement the real property owned by WMB on which one or more Banking
Offices is located (the "Excluded Real
18
Property"). If Buyer fails to provide such notice on a timely basis, Buyer
shall not be permitted to exclude any Real Property pursuant to this Section
5.22.
(c) In the event Buyer provides the notice described in Section
5.22(b), WMB and Buyer will negotiate and enter into a mutually acceptable
lease with respect to each Banking Office located on Excluded Real Property.
The parties agree that any such lease shall include a five year term at a
market rate and shall provide Buyer with the option to purchase the applicable
Excluded Real Property at the termination of such lease at a purchase price
determined by a third party property appraisal.
5.23 Delinquent Loan Report. At Closing, WMB will deliver to Buyer a
report listing each Transferred Loan that, as of such date, is 60 days
delinquent and each Transferred Loan that, as of such date, is 30 days
delinquent.
ARTICLE VI
CLOSING TRANSACTIONS
6.1 Estimate and Payment of Payment Amount.
(a) As of a date agreed to by WMB and Buyer three to six business
days prior to the Closing Date, Buyer and WMB will compute an amount (the
"Estimated Amount") equal to what the Payment Amount would be on such date.
(b) At Closing, WMB will deliver and pay to Buyer the Estimated
Amount in immediately available funds.
(c) The Payment Amount will be calculated in the manner set forth
in Article 12 and post-closing adjustments and transactions will be handled as
set forth in Article 12.
6.2 Documents, Instruments, Certificates, Etc. to be Delivered by WMB at
the Closing. At the Closing, WMB will deliver to Buyer:
(a) Deeds substantially in the form of Exhibit A hereto for the
Real Property;
(b) Assignments and Assumption Agreements substantially in the form
of Exhibit B hereto for all Assumed Contracts and the Deposit Liabilities;
(c) Bill of Sale and Assumption Agreement substantially in the form
of Exhibit C hereto for all other personal property Assets;
(d) Copies of the Charter and By-laws of WMB certified by WMB's
Secretary or Assistant Secretary;
(e) Certificates signed by duly authorized officers of WMB to the
effect that:
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(i) The representations and warranties of WMB are true and
correct (without reference to any materiality standard therein) as of the date
of this Agreement and as of the Closing Date as if made on the Closing Date
except as to any representation or warranty that specifically relates to an
earlier date and except where the failure of such representations and
warranties to be true and correct would not have and would not be reasonably
expected to have in the aggregate a Material Adverse Effect on the Banking
Offices; and
(ii) The covenants of WMB to be performed on or before the
Closing Date have been performed and complied with in all material respects
(without reference to any materiality standard therein);
(f) Resolutions of WMB, certified by its Secretary or Assistant
Secretary, authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(g) Title insurance policy described in Section 4.2(d); and
(h) Such other documents, instruments and certificates as Buyer or
its counsel may reasonably request.
6.3 Instruments, Documents, Certificates, Etc. to be Delivered by Buyer
at the Closing. At the Closing, Buyer will deliver to WMB:
(a) Certificates signed by duly authorized officers of Buyer to the
effect that:
(i) The representations and warranties of Buyer are true and
correct in all material respects (without reference to any materiality
standard therein) as of the date of this Agreement and as of the Closing Date
as if made on the Closing Date except as to any representation or warranty
that specifically relates to an earlier date and except where the failure of
such representations and warranties to be true and correct would not have and
would not be reasonably expected to have in the aggregate a Material Adverse
Effect on Buyer;
(ii) The covenants of Buyer to be performed on or before the
Closing Date have been performed and complied with in all material respects
(without reference to any materiality standard therein);
(b) Resolutions of Buyer, certified by its Secretary or Assistant
Secretary, authorizing the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby;
(c) A certified copy of the Charter and By-laws of Buyer; and
(d) Such other documents, instruments and certificates as WMB or
its counsel may reasonably request.
6.4 Notes and Security Agreements. In order to assign each Transferred
Loan to Buyer, on or prior to Closing WMB will endorse the promissory note
associated with each Transferred Loan. On or prior to Closing, WMB will also
prepare and execute assignments of
20
trust deeds and amendments of Uniform Commercial Code filings. Buyer will be
responsible for the filing of any such assignments and amendments following
the Closing.
6.5 Current Information. WMB will update the information provided in
the schedules to this Agreement prior to Closing.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES OF WMB
To induce Buyer to enter into this Agreement, WMB hereby represents and
warrants to Buyer as follows:
7.1 Organization. WMB is a stock savings bank duly organized and
validly existing under the laws of the State of Washington and is authorized
to conduct the business of a savings bank under applicable laws.
7.2 Authority. WMB has the corporate power and authority to enter into
and perform its obligations under this Agreement. This Agreement and the
execution and delivery of this Agreement, and performance of the obligations
hereunder, have been approved by the Board of Directors of WMB and this
Agreement constitutes a valid and binding obligation of WMB, enforceable in
accordance with its terms, subject as to enforcement, to bankruptcy,
insolvency, receivership, conservatorship, reorganization, and other laws of
general applicability relating to or affecting creditors' rights, and to
general equity principles. No approval of its shareholder is required in
connection with the transaction contemplated by this Agreement.
7.3 Legal Proceedings. There are no actions, suits, or proceedings
pending or, to the knowledge of WMB, threatened against or affecting the
Assets or the Liabilities that would be reasonably expected to have a Material
Adverse Effect on the Banking Offices. WMB has not received notice from any
governmental agency, instrumentality or department of the United States, the
State of Oregon or any other state indicating that it would oppose or not
grant or issue its consent or approval, if required, with respect to the
transactions contemplated by this Agreement.
7.4 Finders or Brokers. Except as set forth on Schedule 7.4, WMB has
not engaged or employed a broker or finder in connection with this Agreement
or the transactions contemplated hereunder.
7.5 Compliance with Applicable Law. Except where failure to do so would
not have or be reasonably expected to have in the aggregate a Material Adverse
Effect on the Banking Offices, WMB holds all licenses, certificates,
franchises, permits and other governmental authorizations necessary for the
lawful conduct of the business and operations of the Banking Offices, and such
licenses, certificates, franchises, permits and other governmental
authorizations are in full force and effect and WMB is in compliance
therewith. The business and operations of the Banking Offices have been and
are being conducted in compliance with all applicable laws,
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rules, regulations and authorities except where failure to do so would not
have and would not be reasonably expected to have in the aggregate a Material
Adverse Effect on the Banking Offices.
7.6 Real Property.
(a) Other than those with affiliates of WMB, there are no leases,
subleases, licenses or similar agreements permitting any party to lease, use
or occupy space in any of the Banking Offices or in the Real Property. There
are no outstanding options to purchase or similar agreements with respect to
the Real Property.
(b) Subject to the provisions of Section 5.15, other than as
specifically set forth above, WMB makes no representations or warranties with
respect to, and shall have no liability for: (i) the condition of the Real
Property or the Leased Real Property or any buildings, structures or
improvements located on the Real Property or the Leased Real Property or the
suitability of the property for habitation or for Buyer's intended use or for
any use whatsoever; (ii) any applicable building, zoning or fire laws or
regulations or with respect to compliance therewith or with respect to the
existence of or compliance with any required permits, if any, of any
governmental agency; (iii) the availability or existence of any water, sewer
or utilities, any rights thereto, or any water, sewer or utility districts;
(iv) access to any public or private sanitary sewer system; or (v) the
presence of any hazardous substances in any improvements on the Real Property
or the Leased Real Property, including without limitation asbestos or
urea-formaldehyde, or the presence of any environmentally hazardous wastes or
materials on or under the Real Property or the Leased Real Property. Without
limiting the generality of the foregoing, WMB shall have no liability to Buyer
with respect to the condition of the Real Property under common law, or any
federal, state, or local law or regulation, including but not limited to the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
as amended, 42 U.S.C.A. sections 9601 et seq. and Buyer hereby releases and
waives any and all claims which the Buyer has or may have against WMB under
any such laws or with respect to the condition of the Real Property or the
Leased Real Property. Buyer acknowledges to WMB that Buyer is given the
opportunity under this agreement to fully inspect the Real Property or the
Leased Real Property and Buyer assumes the responsibility and risks of all
defects and conditions, including such defects and conditions, if any, that
cannot be observed by casual inspection. Without limiting the generality of
the foregoing, by closing the transaction as contemplated herein, Buyer agrees
that: (i) Buyer shall be deemed to have accepted all risk associated with
adverse physical characteristics and existing environmental conditions that
may or may not have been revealed by Buyer's investigation of the Real
Property or the Leased Real Property or any reports provided or made available
to Buyer, and (ii) as between WMB and Buyer, Buyer shall be deemed to have
accepted all costs and liabilities associated in any way with the physical and
environmental condition of the Real Property or the Leased Real Property.
Buyer acknowledges and agrees that WMB makes no representations or warranties
regarding the truth, accuracy or thoroughness of the investigation,
preparation or content of any such reports, or the competence or ability of
the persons or companies preparing such reports. Buyer agrees that, by
closing the transaction contemplated herein, Buyer will have had an
opportunity to review such reports prior to the closing date in order to make
an independent verification of the information contained therein, and that
Buyer and its environmental consultants will have had an opportunity to
conduct tests on the Real Property or the Leased Real Property.
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(c) No notice of violation of any applicable federal, state or
local statute, law, ordinance, rule, regulation, order or requirement, or any
covenant, condition, restriction or easement affecting the Real Property or
with respect to the use or occupancy of the Real Property, has been given to
WMB by a governmental authority having jurisdiction over the Real Property or
by any other person entitled to enforce the same, except where such violations
would not have and would not reasonably be expected to have a Material Adverse
Effect on the Banking Offices.
(d) To the best of WMB's knowledge, there is no plan, study or
effort by any governmental authority or any nongovernmental person or agency
which may adversely affect the current or planned use of the Real Property. To
the best of WMB's knowledge and except as set forth on Schedule 2.1, there is
no existing, proposed or contemplated plan to modify or realign any street or
highway or any existing, proposed or contemplated eminent domain proceeding
that would result in the taking of all or any part of the Real Property or
that would have a Material Adverse Effect on the Banking Offices.
(e) Except as set forth on Schedule 2.1, WMB has not subjected, and
will not subject or suffer to be subjected hereafter the Real Property or any
portion thereof to any lease, sublease, tenancy, occupancy agreement or
similar right, mortgage, deed of trust, lien, encumbrance, claim, charge,
covenant, condition, restriction, easement, right of way or other matter
affecting the Real Property or any portion thereof that would have a Material
Adverse Effect on the Banking Offices.
(f) WMB has, and on the Closing Date will have, good and marketable
title to the Real Property.
(g) WMB has, and on the Closing Date will have, valid leases under
which it is entitled to occupy and use the Leased Real Property.
7.7 Title to Personal Property. WMB has, and on the Closing Date will
have, good and marketable title to the machinery, equipment, materials,
supplies, and other property of every kind, tangible or intangible, included
among the Assets free and clear of all liens, encumbrances, and charges,
except for those shown in Schedule 2.1.
7.8 Taxes. All tax information reporting and filing requirements and
all other requirements relating to tax returns and reports with respect to the
business or operations of the Banking Offices or the Assets or the Liabilities
have been complied with by WMB as of the date hereof and will have been
complied with as of Closing except for tax returns not yet due (including
appropriately filed extensions) and with respect to which WMB agrees that the
returns will be timely filed.
7.9 Non-Contravention. The execution and delivery of this Agreement by
WMB does not, and the consummation of the transactions contemplated hereby by
it will not, constitute (i) a breach or violation of or default under any law,
rule, or regulation, or any judgment, decree, order, governmental permit, or
license, or, except as set forth on Schedule 7.9 hereto, agreement,
indenture,or instrument to which WMB is subject, which breach, violation, or
default would have a Material Adverse Effect on the Banking Offices or on WMB;
or (ii) a breach or violation
23
of or a default under the Charter or By-Laws of WMB. Except as set forth on
Schedule 7.9, the consummation of the transactions contemplated hereby will
not require any consent or approval under any such law, rule, regulation,
judgment, consent, decree, order, governmental permits, or license or the
consent or approval of any other party to any such agreement, indenture, or
instrument other than those referred to in Section 4.1, the required approvals
of the applicable regulatory authorities or the approvals required to be
delivered pursuant to Section 4.2(h).
7.10 Loans.
(a) WMB has good title to and is the sole owner of record of each
Transferred Loan as of the date of this Agreement and of the indebtedness
represented by the notes evidencing such Loans (the "Notes"), in each case of
record and free of any lien, encumbrance or claim by any other person.
(b) No Transferred Loan transferred to Buyer at the Closing will be
delinquent 90 or more days, on non-accrual status or classified by WMB as
"substandard.".
(c) To the best of WMB's knowledge, no Transferred Loan is subject
to any rights of rescission, set-off, counterclaim or defense, and, except as
previously disclosed in writing to Buyer, no such rights or defenses have been
asserted with respect thereto.
(d) To the best of WMB's knowledge, no approval or consent of the
borrower is required with respect to the transfer to Buyer of any Transferred
Loan.
(e) Each of the Transferred Loans has been originated in conformity
with then applicable law and has been documented in such a manner so as to
render the rights and remedies of the holder thereof adequate for the
realization against the collateral securing the obligations of such
Transferred Loan.
(f) Except as expressly set forth in this Section 7.10, WMB makes
no representation or warranty in respect of the Transferred Loans and shall
have no liability for any losses, costs damages or expenses in respect
thereof.
7.11 FDIC Insurance. The deposits at the Banking Offices are insured by
the FDIC to the extent permitted by applicable law.
7.12 Employment Agreements. Except as set forth in Schedule 7.12, none
of the Transferred Employees are party to any written employment or deferred
compensation agreement with WMB or any affiliate. WMB is not a party to any
contract or arrangement with any union relating to the business conducted at
the Banking Offices, and WMB is not aware of any pending organizational
efforts at the Branch Offices. To the best of WMB's knowledge, there has been
no indication to WMB that a union organizational effort or labor disturbance
is likely at the Banking Offices prior to the Closing Date. To the extent
required by law, as of the Closing Date, WMB will have provided all required
notification under the Consolidated Omnibus Budget Reconciliation Act of 1985
("COBRA") to all former employees of WMB at the Banking Office after Closing
Date and to all other persons who become "qualified beneficiaries" under COBRA
with respect to any group health plans maintained by WMB for its employees,
and WMB will have provided any required COBRA coverage to all such former
24
employees and other qualified beneficiaries of WMB who elect COBRA coverage
within the time period specified by COBRA and the regulations promulgated
thereunder.
7.13 Safe Deposit Boxes. WMB is in material compliance with the terms
and conditions of the applicable leases or other agreements relating to the
safe deposit boxes located in the Banking Office.
7.14 Deposit Liabilities. WMB has properly accrued interest on the
Deposit Liabilities and its records respecting the Deposit Liabilities
accurately reflect such accruals of interest except where failure to do so
would not have a material adverse effect on the Banking Offices. WMB has
delivered to Buyer a true and correct copy of the current account forms for
each of the types of Deposit Liabilities offered by WMB out of the Banking
Offices. Except as expressly set forth in this Section 7.14, WMB makes no
representation or warranty in respect of the Deposit Liabilities and shall
have no liability for any losses, costs damages or expenses in respect
thereof.
7.15 Representations Complete. No representation or warranty by WMB in
this Agreement or any certificate delivered pursuant hereto contains any
untrue statement of a material fact or omits to state any material fact
necessary to make such representation or warranty not misleading.
7.16 Survival. All representations and warranties made in this
Agreement by WMB will survive until April 30, 2003.
7.17 Employees. None of the Transferred Employees are, nor to WMB's
knowledge are any of the Transferred Employees entitled to be, receiving
benefits under any WMB long term disability program.
ARTICLE VIII
REPRESENTATIONS AND WARRANTIES
OF BUYER
To induce WMB to enter into this Agreement, Buyer hereby represents and
warrants to WMB as follows:
8.1 Organization. Buyer is duly incorporated, validly existing and in
good standing as a federal savings association.
8.2 Authority. Buyer has the corporate power and authority to enter
into and perform its obligations this Agreement. This Agreement and the
execution and delivery of this Agreement has been approved by the Board of
Directors of Buyer and this Agreement constitutes a valid and binding
obligation of Buyer, enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, receivership, conservatorship,
reorganization, and other laws of general applicability relating to or
affecting creditors' rights, and to general equity principles. No approval of
its shareholders is required in connection with the transactions contemplated
by this Agreement.
25
8.3 Non-Contravention. The execution and delivery of this Agreement by
Buyer does not, and subject to the receipt of the aforementioned approvals and
consents, the consummation of the transactions contemplated hereby by Buyer
will not constitute (i) a breach or violation of or default under any law,
rule, or regulation, or any judgment, decree, order, governmental permit, or
license, or agreement, indenture, or instrument to which Buyer is subject,
which breach, violation, or default would have a Material Adverse Effect on
the Buyer; or (ii) a breach or violation of or a default under the Charter or
By-Laws of Buyer. The consummation of the transactions contemplated hereby
will not require any consent or approval under any such law, rule, regulation,
judgment, consent, decree, order, governmental permits, or license or the
consent or approval of any other party to any such agreement, indenture, or
instrument other than those referred to in Section 4.1, the required approvals
of the applicable regulatory authorities or the approvals required to be
delivered pursuant to Section 4.2(h).
8.4 Legal Proceedings. There are no actions, suits, or proceedings
pending or, to the knowledge of Buyer, threatened against or affecting Buyer
which would have or be reasonably expected to have a Material Adverse Effect
on Buyer. Buyer has not received notice from any governmental agency,
instrumentality or department of the United States or any state indicating
that it would oppose or not grant or issue its consent or approval, if
required, with respect to the transactions contemplated by this Agreement.
8.5 Finders or Brokers. Except as set forth on Schedule 7.4, Buyer has
not engaged or employed a broker or finder in connection with this Agreement
or the transaction contemplated hereunder.
8.6 Representations Complete. No representation or warranty made or
given by Buyer in this Agreement or any certificate delivered pursuant hereto
contains any untrue statement of material fact or omits to state any material
fact necessary to make such representation or warranty not misleading.
8.7 Survival. All representations and warranties made in this Agreement
by Buyer will survive one year after the Closing Date.
ARTICLE IX
INDEMNIFICATION
9.1 Indemnity Procedures. Promptly upon receipt of notice of any claim,
demand, or assessment or the commencement of any suit, action, or proceeding
in respect of which indemnity may be sought on account of an indemnity
contained in Section 5.8 or 5.9, the party seeking indemnification (the
"Indemnitee") will give notice thereof to the party from whom indemnification
is sought (the "Indemnitor"), within sufficient time to enable the Indemnitor
to respond to such claims or answer or other plea in such action. The
omission of such Indemnitee so to notify promptly the Indemnitor of any such
claim, demand, assessment, suit, action, or proceeding will not relieve such
Indemnitor from any liability which it may have to such Indemnitee in
connection therewith on account of the indemnity contained in Section 5.8 or
5.9 unless and only to the extent that the Indemnitor is prejudiced thereby.
In the event any claim,
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demand, or assessments will be asserted or suit, action, or proceeding
commenced against an Indemnitee, the Indemnitee will notify the Indemnitor of
the commencement thereof, and the Indemnitor will be entitled to participate
therein and, to the extent that it may elect to do so, to assume the defense,
conduct, or settlement thereof, using counsel approved by the Indemnitee,
which approval will not unreasonably be withheld. After notice from the
Indemnitor to the Indemnitee of its election so to assume the defense,
conduct, or settlement thereof, the Indemnitor will not be liable to the
Indemnitee for any legal or other expenses subsequently incurred by the
Indemnitee in connection with such defense, conduct, or settlement. The
Indemnitee will (i) cooperate with the Indemnitor in connection with any such
claim, demand, assessment, suit, action, or proceeding; (ii) make personnel,
books, and records relevant thereto available to the Indemnitor; and (iii)
grant such authorizations or powers of attorney to the agents, representatives
and counsel of the Indemnitor as such Indemnitor may reasonably consider
desirable and as such Indemnitee may reasonably consider necessary in
connection therewith.
9.2 Liability Thresholds. Notwithstanding anything in this Article to
the contrary, no amount will be payable by an Indemnitor pursuant to this
Article or Sections 5.8 or 5.9 with respect to breaches of representations
and warranties or any covenant in Section 5.3 unless and until the aggregate
indemnified losses asserted for such breaches by the Indemnitor equals or
exceeds $500,000 (the "Liability Threshold"). Once the Liability Threshold
for the Indemnitor is reached, the Indemnitee will be entitled to the benefit
of this indemnity for such breaches to the extent of any and all losses above
the Liability Threshold.
9.3 Claims Survival Period. Notwithstanding any other provision herein,
no claim may be asserted under this Agreement unless the Indemnitee gives the
other party notice of such claim before April 30, 2003; provided, that where
notice of such claim has been timely given, such claim will survive beyond
April 30, 2003.
9.4 Exclusive Remedy. If the transaction closes, the rights of
indemnification of either party under this Article will be the exclusive
remedy as to any matters addressed in this Agreement, except as otherwise set
forth in Article XII and Section 13.11. Prior to the Closing, the rights of
the parties set forth in Article X and in Section 13.11 will be the exclusive
remedies of the parties as to the matters addressed therein.
9.5 Subrogation. Following indemnification as provided for hereunder,
the Indemnitor will be subrogated to all rights of the Indemnitee with respect
to all persons relating to the matter for which indemnification has been made.
9.6 Insured Losses. Notwithstanding any other term or provision of this
Agreement, the Indemnitor will not be required to indemnify the Indemnitee for
a loss to the extent that the Indemnitee receives insurance payments covering
such loss; provided, that this provision would not result in the loss of, or a
requirement to repay, such insurance by the Indemnitee. In the event that
insurance is not paid to the Indemnitee to cover the full amount of the loss,
the Indemnitor will remain liable for the difference between the insurance
payment as described above and the amount of the loss.
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9.7 Arbitration. Any controversy or claim between or among WMB and
Buyer, including but not limited to those arising out of or relating to this
Agreement or any related agreements or instruments, including any claim based
on or arising from an alleged tort, will be determined by arbitration in
accordance with Title 9 of the U.S. Code and the Commercial Arbitration Rules
of the American Arbitration Association ("AAA"). Any single controversy or
claim between or among WMB and Buyer, including but not limited to one arising
out of or relating to this Agreement or any related agreements or instruments,
including any claim based on or arising from an alleged tort, in which the
amount in dispute exceeds $500,000 will be determined by arbitration by a
panel of three arbitrators in accordance with Title 9 of the U.S. Code and the
Commercial Arbitration Rules of the AAA. All statutes of limitations which
would otherwise be applicable will apply to any arbitration proceeding under
this paragraph. Judgment upon the award rendered may be entered in any court
having jurisdiction.
ARTICLE X
TERMINATION
10.1 Termination of Agreement. This Agreement will terminate and be of
no further force or effect as between the parties hereto, except as to the
liability of Buyer under Section 5.21 and the liability for any willful breach
of any material covenant, agreement, representation, or warranty occurring or
arising prior to the date of termination, upon the occurrence of any of the
following:
(a) Immediately upon the expiration of thirty (30) days from the
date that WMB has given notice to Buyer of a breach or default by Buyer in the
performance of any covenant, agreement, representation, warranty, duty, or
obligation hereunder, provided, however, that no such termination will be
effective if, within such thirty (30) day period, Buyer will have
substantially corrected and cured to WMB's reasonable satisfaction the grounds
for termination as set forth in such notice of termination or WMB will have
waived such default or breach or will have extended the time for such cure;
(b) Immediately upon the expiration of thirty (30) days from the
date that Buyer has given notice to WMB of a breach or default by WMB in the
performance of any covenant, agreement, representation, warranty, duty, or
obligation hereunder, provided, however, that no such termination will be
effective if, within such thirty (30) day period, WMB will have substantially
corrected and cured to Buyer's reasonable satisfaction the grounds for
termination as set forth in such notice of termination or Buyer will have
waived such default or breach or will have extended the time for such cure;
(c) By either Buyer or WMB if the Closing has not occurred on or
before August 31, 2001, or
(d) By Buyer as provided in Section 5.15 or by Buyer, pursuant to
written notice by Buyer to WMB, if any of the conditions set forth in Section
4.2 of this Agreement have not been satisfied at or prior to the Closing, or
if it has become reasonably and objectively certain that any of such
conditions, other than a condition within the control of Buyer, will not be
satisfied
28
at or prior to the Closing, such written notice to set forth such conditions
which have not been or will not be so satisfied.
(e) By WMB if Buyer has not received the approvals required under
Section 4.1(a) on or prior to August 15, 2001 or by WMB, pursuant to written
notice by WMB to Buyer, if any of the conditions set forth in Section 4.3 of
this Agreement have not been satisfied at or prior to the Closing, or if it
has become reasonably and objectively certain that any of such conditions,
other than a condition within the control of WMB, will not be satisfied at or
prior to the Closing, such written notice to set forth such conditions which
have not been or will not be so satisfied.
10.2 Immaterial Breach. Notwithstanding anything to the contrary
contained herein, no party hereto will have the right to terminate this
Agreement on account of its own breach or because of any immaterial breach by
the other party hereto of any covenant, agreement, representation, warranty,
duty, or obligation hereunder.
10.3 Waiver of Right to Terminate. Any party may, at its election,
waive in writing any of its respective rights to terminate this Agreement
under the foregoing provisions of this Article 10, and the parties will be
deemed to have waived such rights from and after the Closing Date even though
actual settlement may have been delayed pursuant to the provisions of Article
12 or otherwise.
10.4 Effect of Termination. Except as otherwise provided in this
Agreement, in the event of termination of this Agreement, each party is
responsible for its own expenses and neither party will be liable in damages
to the other unless termination results from the willful breach or default of
this Agreement by one of the parties, provided, however that Buyer will be
liable to WMB for any liabilities arising pursuant to Section 5.21.
ARTICLE XI
EFFECT ON THIRD PARTIES
Except as otherwise provided by law, neither the rights of creditors and
depositors of WMB, nor any liability or obligation for payment of money, nor
any claim or cause of action against WMB will be in any manner released or
impaired by this Agreement or by the transactions contemplated hereunder, and
the rights and obligations of all creditors and depositors and of all other
persons will remain unimpaired, but Buyer will succeed to all such obligations
and liabilities which are actually included among the Liabilities as of the
Closing Date and will be liable from then and thereafter to pay, discharge,
and perform all such liabilities and obligations of WMB assumed pursuant to
this Agreement and in connection with the transactions contemplated hereunder
in the same manner as if Buyer had itself incurred the liabilities or
obligations, and Buyer will succeed to all of the rights, offsets, and
defenses of WMB in connection therewith.
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ARTICLE XII
SETTLEMENT, ADJUSTMENTS AND TRANSITIONAL MATTERS
12.1 Post-Closing Calculations and Settlements. Within fifteen (15)
calendar days following the Closing Date, Buyer and WMB will compute the
amount of the Payment Amount according to the provisions of Section 3.1, and
if the actual Payment Amount is different from the Estimated Amount calculated
as provided in Section 6.1, then Buyer (if the Estimated Amount exceeds the
Payment Amount) or WMB (if the Payment Amount exceeds the Estimated Amount)
will immediately pay such excess amount in immediately available funds to the
other party, together with interest on such excess from the Closing Date to
the date of payment at a simple per annum rate, without any compounding, at
the effective federal funds rates (based on the average of the closing bid and
offered quotations) as published daily by the Wall Street Journal. Any
additional payments or adjustments arising out of this Agreement may be
computed and paid, with interest calculated pursuant to this Section 12.1, in
subsequent settlements by mutual agreement of the parties.
12.2 Disputes as to Calculations. Buyer and WMB agree to use their best
efforts to agree on the calculation of the Payment Amount. In the event that
the parties should fail to agree on either calculation, the parties agree to
refer the matters in dispute with respect to such calculations to an
independent firm of certified public accountants of national standing
reasonably acceptable to Buyer and WMB, and Buyer and WMB agree to be bound by
the determination of such firm with respect to the disputed matter relating to
the calculation of the Payment Amount. Buyer and WMB agree to share equally
the fees and charges of such accounting firm for its services in resolving
such dispute. If in the resolution of the dispute, it is determined that one
party owes an amount to the other party, the paying party will also pay
interest on such amount from the date it should have been paid to the date of
payment at the same rate as provided in Section 12.1.
12.3 Check Processing and Reimbursements. For a period of four months
after the Closing Date, WMB will continue to clear checks or drafts drawn on
checking accounts, NOW accounts and money market deposit accounts drawn on
accounts transferred to Buyer pursuant to this Agreement, and Buyer will
reimburse WMB for the amount of funds paid on such checks or drafts as herein
provided. During such four month period, WMB or its servicing agent will
transmit by facsimile to Buyer by 7:30 p.m. each day a report of all such
checks or drafts for such day, and Buyer will pay WMB the amount of such
checks and drafts by the close of the following business day by means of a
wire transfer from Buyer's account to WMB's account; WMB will provide Buyer
with wiring instructions at or prior to Closing. During such four month
period, WMB or its servicing agent will place all such checks or drafts
received for collection on Deposit Accounts into the possession of a courier
for delivery to Buyer by the morning of the second business day following such
receipt. Buyer will be responsible for determining if each such check or
draft delivered is properly payable. If any such check or draft is not
properly payable, Buyer may dishonor such check or draft and return it to WMB,
which will return such check or draft to the Federal Reserve Bank with
jurisdiction over WMB and Buyer for credit to WMB's account. WMB will be
obligated to reimburse Buyer for such amount, and it is agreed that Buyer may
deduct the amount of any returned check or draft from its next daily transfer
of funds. However, WMB will have no obligation to reimburse Buyer in the
event its account at
30
the Federal Reserve Bank is not so credited, and, in such an event, Buyer will
be obligated to pay back to WMB the amount it had previously deducted pursuant
to the preceding sentence. After the four month period, WMB will not accept
any such checks and such checks will be returned marked "UTL" (unable to
locate). Any additional charges by WMB's servicing agent in order to comply
with this Section 12.3 will be shared equally between Buyer and WMB.
12.4 ACH Transactions. With respect to the direct pay and automated
clearing house transactions requested by customers of the acquired branch
after the Closing Date, Buyer agrees to use its best efforts to notify, within
30 days after Closing, the appropriate Federal Reserve Bank to redirect such
direct pay and automated clearing house transactions from WMB to Buyer. WMB
agrees that for a period of four months following the Closing Date it will
effectuate such requests in the same manner and with the same diligence as it
would have prior to the Closing Date. WMB agrees to provide Buyer with the
daily detail necessary for Buyer to timely credit or debit the customer's
account and to allow Buyer to send Notifications of Changes. WMB and Buyer
agree to a timely net daily settlement of these transactions. At the end of
such period of four months, WMB will discontinue accepting and forwarding ACH
entries and funds and return them to the originators marked "Account Closed."
Buyer agrees to reimburse WMB for any reasonable out of pocket expenses
incurred by WMB in complying with this Section 12.4. The parties may agree to
other procedures to handle ACH transactions.
12.5 Returned Items. With respect to any items that are credited as of
the Closing Date to an account being transferred to Buyer pursuant hereto that
are returned unpaid ("Returned Item"), and if there are sufficient funds in
the account to which such Returned Item was credited or any other accounts on
deposit at the Banking Office of Buyer standing in the name of the party
liable for such Returned Item, and if Buyer has a right of charge-back against
the account to which such Returned Item was credited or a right of set-off
against such other accounts in respect of the charge-back, Buyer will debit
any or all of such accounts an amount equal in the aggregate to the Returned
Item and will repay that amount to WMB, reduced, however, by the amount of the
Premium, if any, attributable to such Returned Item. If the charge-backs or
set-offs do not provide sufficient funds for such purposes, Buyer will have no
obligation to repay WMB the amount of such deficiency unless and until
Buyer obtains reimbursement from the party liable for the Returned Item.
Buyer will use commercially reasonable efforts to obtain such reimbursement.
12.6 Records and Financial Information. The party having control of the
relevant records and financial information used in connection with any
adjustment provided for in this Article 12 will, at the expense of the other
party, certify the accuracy of such record and financial information if so
requested by the other party.
12.7 Pre-Closing Training. WMB and Buyer will agree to mutually
acceptable terms and conditions under which Buyer may provide training to the
Transferred Employees, including the placement of one or more training
terminals in the Banking Offices and reasonable access to the Banking Offices.
Any such training will be conducted at times and in a manner that will not
interfere with the business activities of the Banking Offices. Buyer will
reimburse WMB for the time spent by any Transferred Employees in connection
with such training activities, whether such activities take place at a Banking
Office or off-site, and for any reasonable measures taken by WMB to mitigate
the impact of such training on the business activities of the Banking Offices
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(including, by way of example and not limitation, the use of temporary workers
or the scheduling of overtime). Buyer also will reimburse all related,
reasonable travel expenses to WMB or the Transferred Employees, as
appropriate.
12.8 Electronic Installation. Buyer shall have a reasonable right to
enter the Banking Offices in the thirty (30) calendar day period prior to the
Closing Date for the purpose of installing necessary wiring for Buyer's teller
terminals and data processing equipment to be utilized after the Closing,
subject to satisfaction by Buyer of the following conditions:
(a) reasonable advance notice of such entry shall be given to WMB,
such entry shall comply with WMB's security procedures and WMB shall have the
right to have its employees or contractors present to inspect the work being
done;
(b) all such work shall be done so as not to unreasonably
interfere with WMB's business in the Banking Office; and
(c) all such work will be done in compliance with the laws and
applicable governmental regulations and Buyer shall be responsible for the
procurement, at Buyer's expense, of all required governmental or
administrative permits and approvals.
Buyer agrees that if for any reason the transactions contemplated
hereunder are not consummated, Buyer will, at its sole cost and expense,
remove any installations it shall have made in the Banking Offices and shall
repair and restore the Banking Offices to their condition immediately prior to
such installation.
12.9 Conversion Delay. Unless such failure is the direct result of any
breach of this Agreement by WMB, in the event that Buyer fails to complete the
systems conversions with respect to the Banking Offices by September 10, 2001,
Buyer agrees to pay WMB $7,500 per processing day between September 10, 2001
and September 15, 2001, and $15,000 per processing day thereafter until the
conversion process is complete. Buyer acknowledges that conversions will not
be permitted from September 15, 2001 through and including September 30, 2001.
ARTICLE XIII
MISCELLANEOUS
13.1 Expenses. Except as is otherwise specifically provided in this
Agreement, whether the Closing takes place or whether this Agreement is
terminated, each party will pay its own costs and expenses in connection with
this Agreement and the transactions contemplated hereby, including, but not by
way of limitation, all regulatory fees, attorneys' fees, accounting fees and
other expenses.
13.2 Notices. All notices, demands, and other such communications
hereunder must be in writing and will be deemed to have been duly given if
delivered in person or by Federal Express or similar overnight courier
service, fees prepaid, or otherwise actually delivered, as follows:
32
(a) If to WMB, to:
Washington Mutual Bank
The Washington Mutual Tower
1201 Third Avenue WMT 1501
Seattle, Washington 98101
Attention: James B. Fitzgerald
with copy to:
Heller Ehrman White & McAuliffe LLP
Suite 6100
701 Fifth Avenue
Seattle, WA 98104-7098
Attention: Bernard L. Russell, Esquire
(b) If to Buyer, to:
Klamath First Federal Savings and Loan
Association
540 Main Street
Klamath Falls, OR 97601
Attention: Kermit K. Houser
with copy to:
Breyer & Associates PC
1100 New York Avenue, N.W.
Suite 700 East
Washington, D.C. 20005-3934
Attention: John F. Breyer, Jr., Esquire
The persons or addresses to which deliveries will be made may change from
time to time by notice given pursuant to the provisions of this Section 13.2.
13.3 Successors and Assigns. All terms and provisions of this Agreement
will be binding upon and inure to the benefit of the parties hereto and their
respective transferees, successors, and assigns, provided, however, that this
Agreement and all rights, privileges, duties, and obligations of the parties
hereto may not be assigned or delegated by either party hereto prior to the
day after the Closing Date without the written consent of the other party to
this Agreement and provided further that in case of any such assignment or
delegation, the party assigning or delegating also will remain responsible as
a party hereto.
13.4 Third-Party Beneficiaries. Each party hereto intends that this
Agreement does not benefit or create any right or cause of action in or on
behalf of any person other than the parties hereto (except for Section 5.12,
which is intended to benefit third party beneficiaries).
33
13.5 Counterparts. This Agreement may be executed in one or more
counterparts, all of which taken together constitute one instrument.
13.6 Governing Law. This Agreement is made and entered into in the
State of Oregon, and the laws of that State govern the validity and
interpretation hereof and the performance of the parties hereto of their
respective duties and obligations hereunder.
13.7 Captions. The captions contained in this Agreement are for
convenience of reference only and do not constitute a part of this Agreement.
13.8 Entire Agreement; Limitations. The making, execution, and delivery
of this Agreement by the parties hereto have been induced by no
representations, statements, warranties, or agreements other than those herein
expressed. This Agreement (including exhibits and schedules hereto) embodies
the entire understanding of the parties and supersedes any prior agreements or
understandings, and there are no further or other agreements or
understandings, written or oral, in effect between the parties relating to the
subject matter hereof, except for the Confidentiality Agreement, which remains
in full force and effect. This instrument and the agreements contained herein
may be amended or modified only by an instrument of equal formality signed by
the parties or their duly authorized agents.
13.9 Confidentiality. The undertakings in Section 5.1 with regard to
confidentiality and in the Confidentiality Agreement will survive termination
of this Agreement and the Closing. It is understood and agreed that this
Agreement (including schedules and exhibits) will be filed with certain
regulators.
13.10 Press Releases. No press release will be issued relating to the
transactions contemplated by this Agreement without prior approval of WMB and
Buyer. However, either WMB or Buyer may issue at any time any press release
it believes, on the advice of its counsel, it is obligated to issue to avoid
liability under any law relating to disclosures, but the party issuing such a
press release will make every reasonable effort to give the other party prior
notice and an opportunity to participate in such release and any press release
must conform to the confidentiality provisions of Section 13.9. It is
understood and agreed that certain public notices must be made in
connection with regulatory approval of the transaction contemplated by this
Agreement.
13.11 Attorneys' Fees. In the event of any suit, action or proceeding
arising out of or in connection with this Agreement (other than a dispute
referred to an accounting firm as provided in Section 12.2), the prevailing
party will be entitled to its costs, expenses and reasonable attorneys' fees
incurred in connection with such suit, action or proceeding and on appeal
13.12 Survival. Except as otherwise provided in this agreement and
subject to any limitation set forth in this Agreement, the provisions of this
Agreement shall survive Closing.
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the day and year first above written.
WASHINGTON MUTUAL BANK
By: /s/James B. Fitzgerald
--------------------------------
James B. Fitzgerald
Senior Vice President
KLAMATH FIRST FEDERAL SAVINGS
AND LOAN ASSOCIATION
By: /s/Kermit K. Houser
--------------------------------
Kermit K. Houser
President and Chief Executive
Officer
Exhibit 99
Press Release Dated May 29, 2001
Klamath First Bancorp [Logo]
Tuesday May 29, 9:05 am Eastern Time
Press Release
Klamath First to Purchase 12 Western Bank Branches,
One Financial Center From Washington Mutual
KLAMATH FALLS, Ore. & SEATTLE--(BUSINESS WIRE)--May 29, 2001-- Klamath
First Bancorp, Inc. (Nasdaq:KFBI) and its subsidiary Klamath First, and
Washington Mutual, Inc. (NYSE:WM )today announced that Klamath First will
purchase 12 Western Bank branches and one Washington Mutual Bank financial
center located in Oregon from Washington Mutual Bank.
"These key locations strengthen our banking franchise and extend the
breadth of our coverage into new regions of our state," said Kermit K. Houser,
Klamath First President and Chief Executive Officer. "With the acquisition
of these branches we welcome a quality team of relationship bankers. In
addition, we will assume an attractive mix of deposits that lower our cost of
funds at Klamath First and a commercial portfolio that enhances our overall
yield on loans."
Houser added that the acquisition fits very well with Klamath's
previously announced desire to become a more commercial bank-like financial
institution.
"We are excited by the opportunity to serve our existing and new
customers in these communities," said Houser. "Both Klamath First and
Washington Mutual are committed to making the transition as smooth as possible
for all customers, employees and the local communities served by the branches.
Customers will be notified directly as to how Klamath First will assist them
with the transition," Houser continued.
The transaction is expected to be completed by the end of the third
quarter of 2001, pending regulatory approval. The sale includes deposit
accounts and repurchase liabilities of approximately $416 million and loans of
approximately $178 million. Post-transaction Klamath First will have
approximately $1.4 billion in assets, $730 million in loans, $1.1 billion in
deposits and 49 branches in 25 of Oregon's 36 counties. Klamath First expects
to retain all 133 current employees of the acquired branches. The deposits are
being purchased at an 8.0% premium, which based on current amounts, equates to
approximately $33.0 million. The deposit premium creates a core deposit
intangible, resulting in a reduction to Klamath First's regulatory capital. In
connection with the transaction, Klamath First Bancorp, Inc. plans to secure
additional capital by issuing debt instruments. Post-transaction the company
will remain ``well-capitalized'' according to regulatory capital definitions.
The transaction is expected to be immediately accretive to Klamath First
Bancorp, Inc.'s earnings per share.
Steve Pumphrey, Executive Vice President and Manager of Washington Mutual
Business Banking, said the sale is part of a larger move designed to more
closely align the company's business banking operations with its consumer
banking business, which currently operates more than 1,100 financial centers
in eight states. In the fourth quarter of 2001, Washington Mutual will
integrate its remaining Western Bank branches under the Washington Mutual
brand, which will allow both small- and mid-sized customers, and consumer
customers to
transact business at most of the bank's financial centers.
Currently, Washington Mutual operates a dual strategy for its business
bank: a full-service community bank branded Western Bank that operates from 45
branches in the Northwest, and a regional network of full-service business
banking centers (BBCs) branded Western in the Northwest and WM Business Bank
in California.
"We have conducted a thoughtful evaluation of our branch networks to
determine which locations are best suited to efficiently grow our combined
business and consumer franchise," added Pumphrey. "As a result, we identified
13 financial centers primarily located along the Oregon Coast where we could
not combine our operations to achieve our financial goals. We were very
fortunate to find a partner who shares our commitment to delivering superior
customer service.
Klamath First will be acquiring a presence in the following Oregon
cities: Astoria, Baker City, Bandon, Cave Junction, Clatskanie, Coos Bay (2),
Florence, La Grande, North Bend, Seaside, and Tillamook (2).
SAFE HARBOR CLAUSE: Except for the historical information in this news
release, the matters described herein are forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of 1995 and are
subject to risks and uncertainties that could cause actual results to differ
materially. Such risks and uncertainties include those related to changes in
interest rates and other economic conditions, particularly in the region where
Klamath First Bancorp, Inc. operates, competitive products and pricing, fiscal
and monetary policies of the U.S. Government, acquisitions and the integration
of acquired businesses, credit risk management, change in government
regulations affecting financial institutions, and other risks and
uncertainties discussed from time to time in Klamath First Bancorp, Inc.'s SEC
filings including its 2000 Form 10-K. Klamath First Bancorp, Inc. disclaims
any obligation to publicly announce future events or developments that affect
the forward-looking statements herein.
About Klamath First Bancorp, Inc.
Klamath First Bancorp, Inc. (Nasdaq:KFBI - news) is a unitary savings and
loan holding company headquartered in Klamath Falls, Oregon. The company's
subsidiary, Klamath First, has a 66-year history, dating back to 1934, of
serving Oregon individuals, families and small businesses. Consolidated assets
were $1.0 billion at March 31, 2001 and net earnings were $4.6 million for the
six months ending March 31, 2001. The company's press releases are available
at www.klamathfirstfederal.com.
About Washington Mutual
With a history dating back to 1889, Washington Mutual, Inc. (NYSE:WM -
news) is a national financial services company that provides a diversified
line of products and services to consumers and small- to mid-sized businesses.
At March 31, 2001, Washington Mutual and its subsidiaries had assets of
$219.93 billion. Washington Mutual currently operates more than 2,300 consumer
banking, mortgage lending, commercial banking, consumer finance and financial
services offices throughout the nation. Washington Mutual's news releases are
available at.www.wamu.com.
Contact: Klamath First
Kermit K. Houser, 541/882-3444 ext. 133
Marshall J. Alexander, 541/882-3444 ext. 120
or
Washington Mutual
Alan Gulick, 206/377-3637