UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 10, 2005
FirstBank NW Corp.
(Exact name of registrant as specified in its charter)
Washington 000-22435 84-1389562
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1300 16th Avenue, Clarkston, Washington 99403
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (including area code): (509) 295-5100
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions.
[ ] Written communications pursuant to Rule 425 under the Securities Act (17
CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an
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Off-Balance Sheet Arrangement of a Registrant.
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On June 10, 2005, FirstBank Northwest (the "Bank"), the wholly-owned
subsidiary of FirstBank NW Corp. (the "Company") entered into a Subordinated
Debenture Purchase Agreement (the "Agreement"), under which the Bank issued an
aggregate principal amount of $3.0 million in floating rate unsecured
subordinated debt. All amounts due under the subordinated debenture must be
repaid in full on June 10, 2015. The subordinated debenture currently bears
interest at one-month LIBOR plus 150 basis points, payable quarterly in
arrears. If the subordinated debenture ceases to qualify as Tier 2 capital
for capital reporting purposes, or at any time after June 10, 2010, the Bank
may, after receiving approval from the Federal Deposit Insurance Corporation
(the "FDIC"), prepay all or a portion of the outstanding amount of the
subordinated debenture. In addition, if the subordinated debenture no longer
qualifies as Tier 2 capital, the Bank and the lender may restructure the debt
as a senior unsecured obligation of the Bank or the Bank may repay the debt.
The Agreement contains certain covenants, including a requirement that
the Bank maintain its regulatory "well-capitalized" status and limitations on
the Bank's ability to incur additional debt and sell assets, other than
assets, including loans, sold in the ordinary course of business. Additional
restrictions apply if an event of default occurs, including prohibitions on
dividends paid by the Bank to the Company and payments by the Bank on debt
that ranks equally with or junior to the subordinated debenture. If an event
of default occurs, other than due to a breach of the Bank's covenant to
maintain its well-capitalized status, the lender may declare the subordinated
debenture and all other amounts owed to the lender under the Agreement
immediately due and payable, subject to FDIC approval. If the Bank receives
written notice from the FDIC that the subordinated debenture no longer
qualifies as Tier 2 capital, then the lender may declare the subordinated
debenture and all other amounts immediately due and payable upon the
subsequent occurrence of any event of default, including a loss of the Bank's
well-capitalized status.
The foregoing description is qualified in its entirety by reference to
the Agreement, which is attached to this current report on Form 8-K as Exhibit
4.1 and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits
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(c) Exhibits
4.1 Subordinated Debenture Purchase Agreement date June 10, 2005 by
and between Wisconsin Capital Corporation and FirstBank Northwest.
SIGNATURES
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.
FIRSTBANK NW CORP.
/s/Clyde E. Conklin
DATE: June 14, 2005 By: --------------------------------------
Clyde E. Conklin
President and Chief Executive Officer
Exhibit 4.1
SUBORDINATED
DEBENTURE PURCHASE AGREEMENT
between
WISCONSIN CAPITAL CORPORATION
and
FIRSTBANK NORTHWEST
Dated as of June 10, 2005
TABLE OF CONTENTS
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Page
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1. DEFINITIONS...................................................... 1
1.1. Defined Terms.............................................. 1
1.2. Certain UCC and Accounting Terms; Interpretations.......... 6
1.3. Exhibits and Schedules Incorporated........................ 6
2. SUBORDINATED DEBT................................................ 7
2.1. General Matters............................................ 7
2.2. The Subordinated Debenture................................. 7
2.3. Maturity Date.............................................. 7
2.4. Unsecured Facility......................................... 7
2.5. The Closing................................................ 7
2.6. Interest Rate Matters...................................... 7
2.7. Certain Provisions Regarding LIBO Rate Tranches............ 9
2.8. Payments................................................... 10
2.9. Capital Adequacy........................................... 11
3. DISBURSEMENTS.................................................... 11
3.1. Initial Disbursement....................................... 11
3.2. Conditions Precedent to Initial Disbursement............... 11
3.3. Conditions to All Disbursements; Renewals and Conversions.. 12
4. GENERAL REPRESENTATIONS AND WARRANTIES........................... 13
4.1. Organization and Authority................................. 13
4.2. No Impediment to Transactions.............................. 14
4.3. Use of Proceeds............................................ 14
4.4. Financial Condition........................................ 15
4.5. Title to Properties........................................ 16
4.6. No Material Adverse Change................................. 16
4.7. Legal Matters.............................................. 17
4.8. Borrower Status............................................ 18
4.9. No Misstatement............................................ 19
4.10. Representations and Warranties Generally................... 19
5. GENERAL COVENANTS, CONDITIONS AND AGREEMENTS..................... 19
5.1. Compliance with Transaction Documents...................... 19
5.2. Material Transactions...................................... 19
5.3. Business Operations........................................ 20
5.4. Compliance with Laws....................................... 21
5.5. Lender Expenses............................................ 22
5.6. Subordinated Debt.......................................... 23
5.7. Inspection Rights.......................................... 23
6. REPORTING........................................................ 23
6.1. Annual..................................................... 23
6.2. Quarterly.................................................. 24
6.3. Securities Filings......................................... 24
6.4. Compliance Certificate..................................... 24
6.5. Copies of Other Reports and Correspondence................. 24
6.6. Proceedings................................................ 24
6.7. Event of Default; Material Adverse Change.................. 24
i
6.8. Other Information Requested by Lender...................... 24
7. FINANCIAL COVENANT............................................... 25
8. BORROWER'S DEFAULT............................................... 25
8.1. Borrower's Defaults and Lender's Remedies.................. 25
8.2. Protective Advances........................................ 27
8.3. Other Remedies............................................. 27
8.4. No Lender Liability........................................ 27
8.5. Lender's Fees and Expenses................................. 27
9. MISCELLANEOUS.................................................... 27
9.1. Release; Indemnification................................... 27
9.2. Assignment and Participation............................... 27
9.3. Prohibition on Assignment.................................. 28
9.4. Time of the Essence........................................ 28
9.5. No Waiver.................................................. 28
9.6. Severability............................................... 29
9.7. Usury; Revival of Liabilities.............................. 29
9.8. Notices.................................................... 29
9.9. Successors and Assigns..................................... 30
9.10. No Joint Venture........................................... 30
9.11. Brokerage Commissions...................................... 30
9.12. Publicity.................................................. 31
9.13. Documentation.............................................. 31
9.14. Additional Assurances; Right of Sell-off................... 31
9.15. Entire Agreement........................................... 31
9.16. Choice of Law.............................................. 31
9.17. Forum; Agent; Venue........................................ 31
9.18. No Third Party Beneficiary................................. 32
9.19. Legal Tender of United States.............................. 32
9.20. Captions; Counterparts..................................... 32
9.21. Knowledge; Discretion...................................... 32
9.22. Lender's Representations and Warranties.................... 32
EXHIBITS:
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A Form of Subordinated Debenture
B Form of Rate Election Notice
C Form of Opinion of Borrower's Counsel
D Form of Authorization to Debit Account
E Form of Notice of Authorized Borrowers
F Form of Quarterly Compliance Certificate
DISCLOSURE SCHEDULES:
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4.1.2 Subsidiaries; Capital Stock of Borrower
4.4.1 Financial Statement Matters
4.4.3 Certain Loans
4.5.1 Financing Statements
4.7.3 Regulatory Enforcement Actions
4.7.4 Pending Litigation
4.7.6 ERISA
5.2.3 Indebtedness
ii
SUBORDINATED DEBENTURE PURCHASE AGREEMENT
This SUBORDINATED DEBENTURE PURCHASE AGREEMENT (this "Agreement") is
dated as of June 10, 2005 and is made by and between FIRSTBANK NORTHWEST, a
Washington state-chartered savings bank ("Borrower"), and WISCONSIN CAPITAL
CORPORATION, a Nevada corporation ("Lender").
R E C I T A L S :
- - - - - - - -
A. Borrower is a Washington state-chartered savings bank and a wholly-
owned subsidiary of FirstBank NW Corp., a Washington corporation ("Bancorp").
B. Borrower has requested that Lender purchase from Borrower
subordinated debt (the "Subordinated Debt") that qualifies as Tier 2 capital
under applicable rules and regulations of the Federal Deposit Insurance
Corporation ("FDIC"). The Subordinated Debt may be referred to in this
Agreement as the "Facility."
C. Lender is willing to purchase from Borrower a subordinated debenture
in an aggregate principal amount of $3,000,000 in accordance with the terms,
subject to the conditions and in reliance on, the recitals, representations,
warranties, covenants and agreements set forth herein and in the Subordinated
Debenture. The Subordinated Debt is intended to qualify as Tier 2 capital
under applicable rules and regulations promulgated by the FDIC.
THEREFORE, in consideration of the mutual covenants, conditions and
agreements herein contained, the parties hereto hereby agree as follows:
A G R E E M E N T:
- - - - - - - - -
1. DEFINITIONS.
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1.1. Defined Terms. The following capitalized terms generally used in
this Agreement and in the other Transaction Documents have the meanings
defined or referenced below. Certain other capitalized terms used only in
specific sections of this Agreement may be defined in such sections.
"Affiliate(s)" means, with respect to any Person, such Person's immediate
family members, partners, members or parent and subsidiary corporations, and
any other Person directly or indirectly controlling, controlled by, or under
common control with, said Person, and their respective Affiliates, members,
shareholders, directors, officers, employees, agents and representatives.
"Assignee Lender" has the meaning ascribed to such term in Section 9.2.
"Bancorp" has the meaning ascribed to such term in the recitals hereto.
"Base Rate" shall mean that rate of interest (expressed as a percent per
annum) equal to Lender's "base" or "prime" rate (which is not necessarily the
lowest or most favorable rate of interest charged by Lender on commercial
loans at any time) in effect from time to time, which means a base rate of
interest established by U.S. Bank from time to time that serves as the basis
upon which effective rates of interest are calculated for those loans making
reference thereto. Any change in the rate of interest hereunder due to a
change in the base or prime rate shall become effective on the date each
change in the base or prime rate is publicly announced by U.S. Bank.
"Base Rate Tranche" shall mean a Borrowing Tranche as to which the Base
Rate is applicable.
"Borrower" has the meaning ascribed to such term in the preamble hereto
and shall include any successor to FirstBank Northwest or such other Person
that shall assume the obligations of the borrower under the Transaction
Documents.
"Borrower 2004 Financial Statements" has the meaning ascribed to such
term in Section 4.4.
"Borrower 2004 Financial Statements Date" has the meaning ascribed to
such term in Section 4.4.
"Borrower Financial Statements" has the meaning ascribed to such term in
Section 4.4.
"Borrower's Accountant" means Moss Adams LLP, or such other nationally
recognized firm of certified public accountants selected by Borrower as shall
from time to time audit Borrower.
"Borrower's Liabilities" means Borrower's obligations under this
Agreement and any other Transaction Documents.
"Borrowing Date" means the date any Borrowing Tranche is disbursed,
renewed or converted (from a LIBO Tranche to a Base Rate Tranche or from a
Base Rate Tranche to a LIBO Tranche pursuant to Section 2.7.2 or 2.7.3).
"Borrowing Tranche" means a disbursement of proceeds under the Facility
pursuant to this Agreement.
"Business Day" means (a) for all purposes other than as covered by clause
(b) hereof, a day of the week (but not a Saturday, Sunday or a legal holiday
under the laws of the States of California or Washington or any other day on
which banking institutions located in California or Washington are required by
law or other governmental action to close) on which the Los Angeles,
California offices of U.S. Bank are open to the public for carrying on
substantially all of its business functions and (b) with respect to
determinations in connection with, and payments of principal and interest on
any LIBO Rate Tranche, any day which is a Business Day described in clause (a)
and which is also a day for trading by and between banks in U.S.
dollar-denominated deposits in the London Interbank Eurodollar Market. Unless
specifically referenced in this Agreement as a Business Day, all references to
"days" shall be to calendar days.
"Closing" means the meaning ascribed to such term in Section 2.5.
"Closing Date" means June 10, 2005.
"Code" means the Internal Revenue Code of 1986, as amended or recodified.
"Condition or Release" means any presence, use, storage, transportation,
discharge, disposal, release or threatened release of any Hazardous Materials.
"Default Rate" has the meaning ascribed to such term in Section 2.6.3.
"Disclosure Schedule" means, in aggregate, the disclosures contemplated
herein as included in the Disclosure Schedule, which has been delivered in
connection with the execution of this Agreement.
2
"Employee Benefit Plan" means an "employee benefit plan" within the
meaning of Section 3(3) of ERISA.
"Equity Interest" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person which is not a corporation
and any and all warrants, options or other rights to purchase any of the
foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended or recodified.
"ERISA Affiliate" means any person (as defined in Section 3(9) of ERISA)
which together with Borrower would be a member of the same "controlled group"
within the meaning of Sections 414(b), (m), (c) and (o) of the Code.
"Event of Default" has the meaning ascribed to such term in Section
8.1.1.
"Exchange Act" shall mean the Securities and Exchange Act of 1934, as
amended.
"Facility" has the meaning ascribed to such term in the recital hereto.
"FDIC" shall have the meaning ascribed to such term in the recitals
hereto and shall include any other Governmental Agency that serves as the
primary federal regulator of Borrower from time to time while the Facility is
outstanding.
"FDIC Notice" shall have the meaning ascribed to such term in Section
8.1.2.
"FDI Act" means the Federal Deposit Insurance Act, as amended or
recodified.
"FRB" means the Board of Governors of the Federal Reserve System.
"GAAP" means generally accepted accounting principles in effect from time
to time in the United States of America.
"Governmental Agency(ies)" means, individually or collectively, any
federal, state, county or local governmental department, commission, board,
regulatory authority or agency including, without limitation, the FDIC, the
WSDFI and the OTS.
"Hazardous Materials" means oil, flammable explosives, asbestos, urea
formaldehyde insulation, polychlorinated biphenyls, radioactive materials,
hazardous wastes, toxic or contaminated substances or similar materials,
including, without limitation, any substances which are "hazardous
substances," "hazardous wastes," "hazardous materials" or "toxic substances"
under the Hazardous Materials Laws and/or other applicable environmental laws,
ordinances or regulations.
"Hazardous Materials Claims" has the meaning ascribed to such term in
Section 4.7.7.
"Hazardous Materials Laws" mean any laws, regulations, permits, licenses
or requirements pertaining to the protection, preservation, conservation or
regulation of the environment which relates to real property, including,
without limitation: the Clean Air Act, as amended, 42 U.S.C. Section 7401 et
seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section
1251 et seq.; the Resource Conservation and Recovery Act of 1976, as amended,
42 U.S.C. Section 6901 et seq.; the Comprehensive Environment Response,
Compensation and Liability Act of 1980, as amended (including the Superfund
Amendments and Reauthorization Act of 1986), 42
3
U.S.C. Section 9601 et seq.; the Toxic Substances Control Act, as amended, 15
U.S.C. Section 2601 et seq.; the Occupational Safety and Health Act, as
amended, 29 U.S.C. Section 651, the Emergency Planning and Community
Right-to-Know Act of 1986, 42 U.S.C. Section 11001 et seq.; the Mine Safety
and Health Act of 1977, as amended, 30 U.S.C. Section 801 et seq.; the Safe
Drinking Water Act, 42 U.S.C. Section 300f et seq.; and all comparable state
and local laws, laws of other jurisdictions or orders and regulations.
"Indebtedness" means and includes: (a) all items arising from the
borrowing of money that, according to GAAP now in effect, would be included in
determining total liabilities as shown on the consolidated balance sheet of
Borrower or any Subsidiary; (b) all obligations secured by any lien in
property owned by Borrower whether or not such obligations shall have been
assumed; (c) all guaranties and similar contingent liabilities with respect to
obligations of others; and (d) all other obligations (including, without
limitation, letters of credit) evidencing obligations to others; provided,
however, Indebtedness shall not include (i) deposits or other indebtedness
incurred in the ordinary course of Borrower's business (including, without
limitation, federal funds purchased, advances from any Federal Home Loan Bank,
secured deposits of municipalities, letters of credit issued by Borrower's
depository institution and repurchase arrangements) and in accordance with
safe and sound banking practices and applicable laws and regulations or (ii)
indebtedness that is expressly subordinate and junior in all respects
(including, without limitation, with respect to the right of payment) to the
Facility.
"Initial Disbursement" has the meaning ascribed to such term in Section
3.1.
"Instructions" means disbursement instructions given by Borrower to
Lender specifying the duration of the initial LIBOR Period and the manner in
which proceeds of the Subordinated Debt should be disbursed at Closing.
"Interest Rate Protection Agreement" means an interest rate swap, cap,
collar or other hedging or derivative agreement, to which Lender or any
Affiliate of Lender is the counterparty, intended to mitigate interest rate
risk, along with any other related agreement or instrument executed in
connection therewith.
"Interim Financial Statements" has the meaning ascribed to such term in
Section 4.4.
"Leases" means all leases, licenses or other documents providing for the
use or occupancy of any portion of any Property, including all amendments,
extensions, renewals, supplements, modifications, sublets and assignments
thereof and all separate letters or separate agreements relating thereto.
"Lender" has the meaning ascribed to such term in the preamble hereto.
"LIBO Rate" means that rate of interest equal to the quotient of (i) the
average of the rates of interest, rounded upward, if necessary, to the nearest
whole multiple of .0625% (1/16 of 1%), quoted to Lender in accordance with
U.S. Bank National Association's normal and customary practices in the London
Inter-Bank Eurodollar Market for U.S. Dollar deposits with prime banks, as
such average appears on Telerate Page 3750, at approximately 11:00 a.m.,
London time, on the date that is two Business Days prior to any applicable
Borrowing Date for an amount approximately equal to the applicable LIBO Rate
Tranche and for a period of time approximately equal to a LIBOR Period,
divided by (ii) 100% minus the Reserve Percentage.
"LIBO Rate Tranche" means a Borrowing Tranche as to which the LIBO Rate
is applicable.
4
"LIBOR Period" means, with respect to any LIBO Rate Tranche, the period
commencing on the Borrowing Date with respect to such LIBO Rate Tranche and
ending on the numerically corresponding day in the calendar month that is one
or three months thereafter, as Borrower may elect pursuant to this Agreement;
provided, that (i) if any LIBOR Period would end on a day other than a
Business Day, such LIBOR Period shall be extended to the next succeeding
Business Day unless such next succeeding Business Day would fall in the next
calendar month, in which case such LIBOR Period shall end on the next
preceding Business Day and (ii) any LIBOR Period that commences on the last
Business Day of a calendar month (or on a day for which there is no
numerically corresponding day in the last calendar month of such LIBOR Period)
shall end on the last Business Day of the last calendar month of such LIBOR
Period, with respect to a LIBO Rate Tranche.
"Maturity Date" means June 10, 2015.
"OTS" means the Office of Thrift Supervision.
"Person" means an individual, a corporation (whether or not for profit),
a partnership, a limited liability company, a joint venture, an association, a
trust, an unincorporated organization, a government or any department or
agency thereof (including a Governmental Agency) or any other entity or
organization.
"Property" means any real property owned or leased by Borrower or any
Subsidiary.
"Rate Election Notice" shall mean a properly completed notice in the form
attached as Exhibit B hereto or a verbal notice conveyed to Lender in
accordance with its disbursement procedures from time to time.
"Reserve Percentage" means the percentage announced within Lender as the
reserve percentage under Regulation D of the FRB for loans and obligations
making reference to a LIBO Rate for a LIBOR Period. The Reserve Percentage
shall be based on Regulation D or other regulations from time to time in
effect concerning reserves for Eurocurrency Liabilities as defined in
Regulation D from related institutions as though Lender were in a net
borrowing position, as promulgated by the FRB, or its successor.
"RICO Related Law" means the Racketeer Influenced and Corrupt
Organizations Act of 1970 or any other federal, state or local law for which
forfeiture of assets is a potential penalty.
"SEC" means the United States Securities and Exchange Commission.
"Subordinated Debenture" means a subordinated debenture in the form
attached as Exhibit A hereto in the principal amount of the Subordinated Debt
Amount, as amended, restated, supplemented or modified from time to time and
each debenture delivered in substitution or exchange for such subordinated
debenture.
"Subordinated Debt" has the meaning ascribed to such term in the recitals
hereto.
"Subordinated Debt Amount" means $3,000,000.
"Subsidiaries" means Tri-Star Financial Corporation, Pioneer Development
Corporation, Pioneer Bank Investment Corporation and any corporation or other
entity of which any Equity Interest is directly or indirectly owned by
Borrower.
"Surviving Entity" has the meaning ascribed to such term in Section
5.2.1.
5
"Tier 2 Capital" has the definition provided in, and shall be determined
in accordance with, the rules and regulations of the FDIC or any successor
primary federal regulator of Borrower.
"Transaction Documents" means this Agreement and those other documents
and instruments (including, without limitation, all agreements, instruments
and documents, including, without limitation, guaranties, mortgages, deeds of
trust, pledges, powers of attorney, consents, assignments, contracts, notices
and all other written matter heretofore, now and/or from time to time
hereafter executed by and/or on behalf of Borrower in connection with this
Agreement and the Facility) entered into or delivered in connection with or
relating to the Facility, including any other documents listed on the
schedule of closing documents prepared in connection with the Closing.
Transaction Documents shall also include any Interest Rate Protection
Agreement between Borrower and Lender.
"UCC" shall mean the Uniform Commercial Code as enacted in the State of
Nevada, as amended or recodified.
"Unmatured Event of Default" means an event or circumstance that, with
the passage of time, the giving of notice or both, could reasonably be
expected to become an Event of Default.
"U.S. Bank" means U.S. Bank National Association and any successor
thereto.
"WSDFI" means the Washington State Department of Financial Institutions.
1.2. Certain UCC and Accounting Terms; Interpretations. Except as
otherwise defined in this Agreement or the other Transaction Documents, all
words, terms and/or phrases used herein and therein shall be defined by the
applicable definition therefore (if any) in the UCC. Notwithstanding the
foregoing, any accounting terms used in this Agreement which are not
specifically defined herein shall have the meaning customarily given to them
in accordance with GAAP. Where the character or amount of any asset or
liability or item of income or expense is required to be determined or any
consolidation or other accounting computation is required to be made for the
purposes of this Agreement, it shall be done in accordance with GAAP except
where such principles are inconsistent with the specific provisions of this
Agreement. The foregoing definitions are equally applicable to both the
singular and plural forms of the terms defined. The words "hereof", "herein"
and "hereunder" and words of like import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. The word "including" when used in this Agreement without the
phrase "without limitation," shall mean "including, without limitation." All
references to time of day herein are references to Los Angeles, California
time unless otherwise specifically provided. Any reference contained herein
to attorneys' fees and expenses shall be deemed to be reasonable fees and
expenses of Lender's outside counsel and of any other third-party experts or
consultants engaged by Lender's outside counsel on Lender's behalf. All
references to the Transaction Document shall be deemed to be to such document
as amended, modified or restated from time to time. With respect to any
reference in this Agreement to any defined term, (a) if such defined term
refers to a Person, then it shall also mean all heirs, legal representatives
and permitted successors and assigns of such Person, and (b) if such defined
term refers to a document, instrument or agreement, then it shall also include
any replacement, extension or other modification thereof.
1.3. Exhibits and Schedules Incorporated. All Exhibits and Schedules
attached hereto or referenced herein, are hereby incorporated into this
Agreement.
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2. SUBORDINATED DEBT.
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2.1. General Matters.
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2.1.1. Certain Terms. Lender agrees to extend the Subordinated
Debt to Borrower in accordance with the terms of, and subject to the
conditions set forth in, this Agreement, the Subordinated Debenture and the
other Transaction Documents. An initial Borrowing Tranche in an amount equal
to the entire principal amount of the Subordinated Debt shall be borrowed on
the Closing Date and, thereafter, any such Borrowing Tranche may be converted
or renewed from time to time in accordance with the terms and subject to the
conditions set forth in this Agreement. Subject to Section 2.6 and any other
conditions and limitations set forth in this Agreement, any Borrowing Tranche
under the Subordinated Debt shall be treated as, at Borrower's election
subject to and in accordance with the terms in this Agreement: (a) a LIBO Rate
Tranche and shall bear interest per annum at a rate equal to the LIBO Rate
plus 1.50% (150 basis points); or (b) a Base Rate Tranche and shall bear
interest at a rate equal to the Base Rate. The unpaid principal balance plus
all accrued but unpaid interest on the Subordinated Debt shall be due and
payable on the Maturity Date, or such earlier date on which such amount shall
become due and payable on account of acceleration by Lender in accordance with
the terms of the Subordinated Debenture or this Agreement.
2.1.2. Subordination. The Subordinated Debenture shall be
subordinated in accordance with the subordination provisions set forth
therein.
2.2. The Subordinated Debenture. The Facility shall be evidenced by the
Subordinated Debenture.
2.3. Maturity Date. On the Maturity Date, all sums due and owing under
this Agreement and the other Transaction Documents with respect to the
Subordinated Debenture shall be repaid in full. Borrower acknowledges and
agrees that Lender has not made any commitments, either express or implied, to
extend the terms of the Facility past its Maturity Date, unless Borrower and
Lender hereafter specifically otherwise agree in writing.
2.4. Unsecured Facility. The obligations of Borrower to Lender under
the Subordinated Debenture shall be unsecured.
2.5. The Closing. The initial funding of the Facility (the "Closing")
will occur at the offices of Barack Ferrazzano, et al. LLP, counsel to Lender,
at 333 West Wacker Drive, Suite 2700, Chicago, Illinois at 9:30 a.m. (local
time) on the Closing Date, or at such other place or time or on such other
date as the parties hereto may agree, by disbursing the proceeds of the
Facility in accordance with any Instructions received at least one Business
Day prior to Closing.
2.6. Interest Rate Matters. Borrower agrees that matters concerning the
election, payment, application, accrual and computation of interest and
interest rates shall be in accordance with Lender's practices set forth in
this Agreement and in the other Transaction Documents.
2.6.1. Applicable Interest Rate. The initial Borrowing Tranche
shall bear interest as a LIBO Rate Tranche. For any subsequent Borrowing
Tranche, Borrower shall make a LIBO Rate or Base Rate election by delivering a
Rate Election Notice on the second Business Day prior to the Borrowing Date,
before 12:00 p.m., Central time, in the case of a Base Rate Tranche or a LIBO
Rate Tranche, provided that no more than one LIBO Rate Tranche for the
Facility shall be outstanding at any one time. The LIBO Rate shall remain
fixed for all Borrowing Tranches that bear interest based on the LIBO Rate
until the next LIBOR Period commences. Borrower may elect, by designation on
a Rate Election Notice (i) to convert a LIBO Rate Tranche or any portion
thereof into a Base Rate
7
Tranche, (ii) to continue any LIBO Rate Tranche or any portion thereof for an
additional LIBOR Period having the same or an alternative duration, as
designated in the Rate Election Notice, or (iii) to convert a Base Rate
Tranche or any portion thereof to a LIBO Rate Tranche. For purposes of the
immediately preceding sentence, the amount of any "portion" shall be $300,000
or a multiple thereof. In the event Borrower fails to notify Lender that it
desires to continue any LIBO Rate Tranche or any portion thereof by the last
day of the applicable LIBOR Period, and Borrower otherwise fails to notify
Lender by delivering a Rate Election Notice, Borrower shall be deemed to have
elected to continue the LIBO Rate Tranche in question for an additional LIBOR
Period equal in length to the expiring LIBOR Period. Any Rate Election Notice
delivered by Borrower shall be irrevocable and may not be modified in any way
without the prior, written approval of Lender. The LIBOR Period for the
continuation of any LIBO Rate Tranche shall commence on the last day of the
next preceding LIBOR Period. Notwithstanding anything to the contrary
contained herein and subject to the default interest provisions contained
herein, if an Event of Default occurs, all LIBO Rate Tranches will convert to
Base Rate Tranches upon the expiration of the LIBOR Periods therefor. The
conversion of a LIBO Rate Tranche to a Base Rate Tranche pursuant to a
description in a Rate Election Notice shall only occur on the last Business
Day of the LIBOR Period relating to such LIBO Rate Tranche. Lender is hereby
authorized to rely upon Instructions, Rate Election Notices and other written
communications concerning the Facility delivered by any authorized officer of
Borrower, including Larry K. Moxley and Clyde E. Conklin, such additional
authorized agents as any of the above-referenced officers of Borrower shall
designate, in writing, to Lender from time to time, and any other person set
forth on the Notice of Authorized Borrowers delivered to Lender at Closing or
from time to time thereafter.
2.6.2. Interest Payments. Subject to Section 2.6.3 and except as
otherwise expressly provided in the Subordinated Debenture, interest accrued
(a) on each LIBO Rate Tranche shall be payable by Borrower in arrears on the
last day of each LIBOR Period and on the Maturity Date, and (b) on each Base
Rate Tranche or any other outstanding amount of the Facility shall be payable
by Borrower in arrears on the last day of each February, May, August and
November, and on the Maturity Date.
2.6.3. Default Interest. Notwithstanding the rates of interest
and the payment dates specified in this Section 2.6, effective immediately
upon the occurrence and during the continuance of any Event of Default, the
principal balance of the Facility then outstanding and, to the extent
permitted by applicable law, any interest payments not paid within five days
after the same becomes due shall bear interest payable upon demand at a rate
which is 3% per annum in excess of the rate of interest otherwise payable
under this Agreement (the "Default Rate"). Notwithstanding anything to the
contrary set forth in this Section 2.6.3 or elsewhere in this Agreement, the
Default Rate shall only apply with respect to an Event of Default relating to
the Subordinated Debt if such Event of Default is one with respect to which
Lender would be entitled to declare the Subordinated Debenture immediately due
and payable pursuant to Section 8.1.2. In addition, all other amounts due
Lender (whether directly or for reimbursement) under this Agreement or any of
the other Transaction Documents, if not paid when due or, in the event no time
period is expressed, if not paid within five days after written notice from
Lender that the same has become due, shall thereafter bear interest at the
foregoing Default Rate. Finally, any amount due on the Maturity Date which is
not then paid shall also bear interest thereafter at the Default Rate.
2.6.4. Computation of Interest. Interest shall be computed on
the basis of the actual number of days elapsed in the period during which
interest accrues and a year of 360 days. In computing interest, the date of
funding shall be included and the date of payment (with respect to the amount
timely paid on such date) shall be excluded; provided, however, that if any
funding is repaid on the same day on which it is made, one day's interest
shall be paid thereon. The last day of a LIBOR Period is considered a date of
payment for purposes of the immediately preceding sentence. The parties
hereto intend to conform strictly to applicable usury laws as in effect from
8
time to time during the term of the Facility. Accordingly, if the transaction
contemplated hereby would be usurious under applicable law (including the laws
of the United States of America, or of any other jurisdiction whose laws may
be mandatorily applicable), then, in that event, notwithstanding anything to
the contrary in this Agreement or the Subordinated Debenture, Borrower and
Lender agree that the aggregate of all consideration that constitutes interest
under applicable law that is contracted for, charged or received under or in
connection with this Agreement shall under no circumstances exceed the maximum
amount of interest allowed by applicable law, and any excess shall be credited
to Borrower by Lender (or if such consideration shall have been paid in full,
such excess refunded to Borrower by Lender).
2.7. Certain Provisions Regarding LIBO Rate Tranches.
-----------------------------------------------
2.7.1. Changes; Legal Restrictions. In the event the adoption of
or any change in any law, treaty, rule, regulation, guideline or the
interpretation or application thereof by a Governmental Agency (whether or not
the failure to comply therewith would be unlawful) either (a) subjects Lender
to any tax (other than income taxes or franchise taxes not specifically based
on loan transactions), duty or other charge of any kind with respect to any
LIBO Rate Tranche or changes the basis of taxation of payments to Lender of
principal, fees, interest or any other amount payable in connection with a
LIBO Rate Tranche, or (b) imposes on Lender any other condition materially
more burdensome in nature, extent or consequence than those in existence as of
the date of this Agreement, and the result of any of the foregoing is to
increase the cost to Lender of making, renewing or maintaining any LIBO Rate
Tranches or to reduce any amount receivable thereunder; then, in any such
case, Borrower shall promptly pay to Lender, as applicable, upon demand, such
amount or amounts as may be necessary to compensate Lender for any such
additional cost incurred or reduced amounts received.
2.7.2. LIBO Rate Lending Unlawful. If Lender shall determine
(which determination shall, upon notice thereof to Borrower, be conclusive and
binding in the absence of readily demonstrable error) that the adoption of or
any change in any law, treaty, rule, regulation, guideline or in the
interpretation or application thereof by any Governmental Agency makes it
unlawful for Lender to make or maintain any LIBO Rate Tranche, (a) the
obligation of Lender to make or continue any LIBO Rate Tranche shall, upon
such determination, forthwith be suspended until Lender shall notify Borrower
that the circumstances causing such suspension no longer exist, and (b) if
required by such law, interpretation or application, all LIBO Rate Tranches
shall automatically convert into Base Rate Tranches.
2.7.3. Unascertainable Interest Rate. If Lender shall have
determined in good faith that adequate means do not exist for ascertaining the
interest rate applicable hereunder to LIBO Rate Tranches, then, upon notice
from Lender to Borrower, the obligations of Lender to make or continue LIBO
Rate Tranches shall forthwith be suspended, and thereafter the Facility shall
continue as a Base Rate Tranche until Lender shall notify Borrower that the
circumstances causing such suspension no longer exist. Lender will give such
notice when it determines, in good faith, that such circumstances no longer
exist; provided, however, that Lender shall not have any liability with
respect to any delay in giving such notice.
2.7.4. Funding Losses. In the event Lender shall incur any loss
or expense (including, without limitation, any loss or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired
by Lender to make or maintain any LIBO Rate Tranche) as a result of any
continuance, conversion, repayment or prepayment of the principal amount of,
or failure to make or termination of, any LIBO Rate Tranche on a date other
than the scheduled last day of the LIBOR Period applicable thereto, then, upon
the written notice of such from Lender to Borrower, Borrower shall reimburse
Lender for such loss or expense within three
9
Business Days after receipt of such notice. Such written notice (which shall
include calculations in reasonable detail) shall be conclusive and binding in
the absence of readily demonstrable error.
2.7.5. Additional Interest on LIBO Rate Tranches. So long as and
to the extent Lender shall be required under regulations of the FRB to
maintain reserves with respect to liabilities or assets consisting of or
including Eurocurrency Liabilities (as defined in the definition of Reserve
Percentage), and Lender's performance under this Agreement shall have given
rise to additional reserve requirements for Lender thereunder, Borrower shall
pay to Lender additional interest on the unpaid principal amount of each LIBO
Rate Tranche. Such additional interest shall accrue from the later of the
date such reserve requirement commences and the date of the first disbursement
under such LIBO Rate Tranche until the earlier of the date such reserve
requirement ends and the date the principal amount of such LIBO Rate Tranche
is paid in full, at an interest rate per annum equal at all times to the
remainder obtained by subtracting (a) the LIBO Rate for the LIBOR Period for
such LIBO Rate Tranche from (b) the rate obtained by dividing the LIBO Rate by
a percentage equal to 100% minus the Reserve Percentage as in effect from time
to time during such LIBOR Period. Lender shall, as soon as practicable but
not later than the last day of the LIBOR Period, provide notice to Borrower of
any such additional interest arising in connection with such LIBO Rate Tranche
and the certification of Lender that the additional amount is due and that the
additional reserve requirement is applicable to such LIBO Rate Tranche. Such
additional interest shall be payable directly to Lender on the dates specified
herein for payment of interest.
2.7.6. Notice of Changes or Increased Costs Relating to LIBO Rate
Tranches. Lender agrees that, as promptly as reasonably practicable after it
becomes aware of the occurrence of an event or the existence of a condition
which would cause it to be affected by any of the events or conditions
described in this Section 2.7, it will notify Borrower of such event and the
possible effects thereof, provided that the failure to provide such notice
shall not affect Lender's rights to reimbursement provided for herein.
2.8. Payments. Borrower agrees that matters concerning prepayments,
payments and application of payments shall be in accordance with Lender's
practices set forth in this Agreement and in the other Transaction Documents.
2.8.1. Prepayment. Subject to Section 2.7.4 hereof (a) if the
Facility no longer constitutes Tier 2 Capital of the Borrower or (b) at any
time after June 10, 2010, Borrower may, upon at least one Business Day's
notice to Lender, prepay, without penalty, all or a portion of the principal
amount outstanding under the Subordinated Debt in a minimum aggregate amount
of $100,000 or any larger integral multiple of $100,000 by paying the
principal amount to be prepaid, together with unpaid accrued interest thereon
to the date of prepayment. Borrower is required under regulations of the FDIC
to obtain prior FDIC approval before making any prepayment (including payment
pursuant to an acceleration clause or redemption prior to maturity); however,
Lender shall have no responsibility to verify whether Borrower has obtained
FDIC approval for any prepayment.
2.8.2. Manner and Time of Payment. All payments of principal,
interest and fees hereunder payable to Lender shall be made, without condition
or reservation of right and free of set-off or counterclaim, in U.S. dollars
and by wire transfer (pursuant to Lender's written wire transfer instructions)
of immediately available funds delivered to Lender not later than 11:00 a.m.
(Pacific time) on the date due. Funds received by Lender after that time and
date shall be deemed to have been paid on the next succeeding Business Day.
2.8.3. Payments on Non-Business Days. Whenever any payment to be
made by Borrower hereunder shall be stated to be due on a day which is not a
Business Day, payments shall be made on the next succeeding Business Day.
10
2.8.4. Application of Payments. All payments received by Lender
from or on behalf of Borrower shall be applied first to amounts due to Lender
to reimburse Lender's costs and expenses, including those pursuant to Section
5.5 or Section 8.5, second to accrued interest under the Subordinated
Debenture, and third to principal amounts outstanding under the Subordinated
Debenture; provided, however, subject to Section 8.1.2 of this Agreement, that
after the date on which the final payment of principal with respect to the
Facility is due or following and during any Event of Default, all payments
received on account of Borrower's Liabilities shall be applied in whatever
order, combination and amounts as Lender, in its sole and absolute discretion,
decides, to all costs, expenses and other indebtedness owing to Lender. No
amount paid or prepaid under the Subordinated Debenture may be reborrowed.
2.9. Capital Adequacy. If Lender shall reasonably determine that the
application or adoption of any law, rule, regulation, directive,
interpretation, treaty or guideline regarding capital adequacy, or any change
therein or in the interpretation or administration thereof (including, without
limitation, application of changes to Regulation H and Regulation Y of the FRB
issued by the FRB on January 19, 1989 and regulations of the Comptroller of
the Currency, Department of Treasury, 12 CFR Part 3, Appendix A, issued by the
Comptroller of the Currency on January 27, 1989) increases the capital
required or expected to be maintained by Lender or any person or entity
controlling Lender, and such increase is based upon the existence of Lender's
obligations hereunder and under other commitments of this type, then, within
10 days after demand from Lender, Borrower shall pay to Lender, from time to
time, such amount or amounts as will compensate Lender or such controlling
person or entity, as the case may be, for such increased capital requirement.
The determination of any amount to be paid by Borrower under this Section 2.9
shall take into consideration the policies of Lender or of any Person
controlling Lender with respect to capital adequacy and shall be based upon
any reasonable averaging, attribution and allocation methods. A certificate
of Lender setting forth the amount or amounts as shall be necessary to
compensate Lender as specified in this Section 2.9 shall be delivered to
Borrower and shall be conclusive in the absence of manifest error.
3. DISBURSEMENTS.
-------------
3.1. Initial Disbursement. At such time as all of the terms and
conditions set forth in Sections 3.2 and 3.3 have been satisfied by Borrower
and Borrower has executed and delivered to Lender each of the Transaction
Documents and any other related documents in form and substance satisfactory
to Lender, in its sole and absolute discretion, Lender shall disburse to
Borrower an amount under the Subordinated Debenture equal to $3,000,000 (the
"Initial Disbursement"), as set forth in the Instructions; which shall be
delivered to Lender at least one Business Day prior to the date of the Initial
Disbursement.
3.2. Conditions Precedent to Initial Disbursement. In conjunction with
and as additional (but independent) supporting evidence for certain of the
covenants, representations and warranties made by Borrower herein, prior to
and as a condition of the Initial Disbursement, Borrower shall deliver or
cause to be delivered to Lender each of the following, each of which shall be
in form and substance satisfactory to Lender, in its sole and absolute
discretion:
3.2.1. Opinion. An opinion of counsel of Borrower in
substantially the form attached as Exhibit C hereto and otherwise satisfactory
to Lender, dated on or about the date of the Initial Disbursement.
3.2.2. Transaction Documents. The Transaction Documents,
including, without limitation, the Subordinated Debenture.
11
3.2.3. Authority Documents.
3.2.3.1. A copy, certified by the appropriate secretary
of state or Governmental Agency, of the charter of Borrower;
3.2.3.2. A good standing certificate of Borrower issued
by the appropriate secretary of state or Governmental Agency;
3.2.3.3. A copy, certified by the Secretary or an
Assistant Secretary of Borrower, of the Bylaws of Borrower;
3.2.3.4. A copy, certified by the Secretary or an
Assistant Secretary of Borrower, of the resolutions of the board of directors
of Borrower authorizing the execution, delivery and performance of this
Agreement, the Subordinated Debenture and the other Transaction Documents; and
3.2.3.5. An incumbency certificate of the Secretary or an
Assistant Secretary of Borrower certifying the names of the officer or
officers of Borrower authorized to sign this Agreement, the Subordinated
Debenture and the other documents provided for in this Agreement, together
with a sample of the true signature of each such officer (Lender may
conclusively rely on such certificate until formally advised by a like
certificate of any changes therein).
3.2.4. Regulatory Consents. Copies certified by the Secretary or
an Assistant Secretary of Borrower of all documents evidencing all necessary
consents, approvals and determinations of any Governmental Agency with respect
to the transactions contemplated in the Transaction Documents and any other
transactions between Lender and Borrower.
3.2.5. Instructions. The Instructions.
3.2.6. Certain Costs of Lender. Payment of certain costs and
expenses incurred by Lender to date in connection with the transactions
contemplated herein, such as Lender's attorneys' fees and expenses, that
Borrower is obligated to pay pursuant to Section 5.5.
3.2.7. Authorization to Debit Account. An Authorization to Debit
Account, substantially in the form of Exhibit D hereto.
3.2.8. Notice of Authorized Borrowers. A Notice of Authorized
Borrowers, substantially in the form of Exhibit E hereto.
3.3. Conditions to All Disbursements; Renewals and Conversions.
Notwithstanding anything to the contrary contained herein, the continued
performance, observance and compliance by Borrower of and with all of the
covenants, conditions and agreements of Borrower contained herein (whether or
not non-performance constitutes an Event of Default) and in the other
Transaction Documents shall be further conditions precedent to any
disbursements of the proceeds under the Facility. In addition, Lender shall
not be required to disburse proceeds under the Facility or to renew or convert
any Borrowing Tranche at any time that any of the following are true:
3.3.1. Default. There exists an Event of Default or Unmatured
Event of Default.
3.3.2. Legislation or Proceedings. Any legislation has been
passed or any suit or other proceeding has been instituted the effect of which
is to prohibit, enjoin (or to declare unlawful or improper) or otherwise
adversely affect, in Lender's reasonable judgment, Borrower's
12
performance of its obligations hereunder, or any litigation or governmental
proceeding has been instituted or threatened against Borrower or any
Subsidiary or any of their officers or shareholders which, in the reasonable
judgment of Lender, may materially adversely affect the financial condition or
operations of Borrower or any Subsidiary.
3.3.3. Material Adverse Change. There has occurred, in Lender's
sole and complete discretion, a material adverse change in the financial
condition or affairs of Borrower since the Borrower 2004 Financial Statements
Date.
3.3.4. Representations and Warranties. Any representation or
warranty of Borrower contained herein or any information set forth in the
recitals hereto, shall not be true on and as of the date of any Borrowing
Tranche, with the same effect as though such representations and warranties
had been made, or such information had been presented, on and as of such date.
3.3.5. Approvals. All necessary or appropriate actions and
proceedings have not been taken in connection with, or relating to, the
transactions contemplated hereby and all documents incident thereto have not
been completed and tendered for delivery, in substance and form satisfactory
to Lender, including, without limitation, if appropriate in the opinion of
Lender, Lender's failure to have received evidence of all necessary approvals
from Governmental Agencies.
3.3.6. Other Documents. Lender has not received in substance and
form reasonably satisfactory to Lender, all certificates, affidavits,
schedules, resolutions, opinions, notes, and/or other documents which are
provided for hereunder or which it may reasonably request.
Lender's refusal to disburse any proceeds of the Facility on account of the
provisions of this Section 3.3 shall not alter or diminish any of Borrower's
other obligations hereunder or otherwise prevent any breach or default of
Borrower hereunder from becoming an Event of Default.
4. GENERAL REPRESENTATIONS AND WARRANTIES. Borrower hereby covenants,
represents and warrants to Lender as follows:
4.1. Organization and Authority.
4.1.1. Organization Matters. Borrower is a Washington
state-chartered savings bank, validly existing and in good standing under the
laws of the State of Washington and has all requisite corporate power and
authority, and possesses all licenses necessary, to conduct business and
activities as presently conducted, to own its properties and to perform its
obligations under this Agreement, except where the failure to obtain a license
would not have a material adverse effect on the financial condition, business
or operations of the Borrower. The deposit accounts of Borrower are insured
by the FDIC to the fullest extent permitted by applicable law. Borrower has
not received any notice or other information indicating that Borrower is not
an "insured depository institution" as defined in 12 U.S.C. 1813, nor has any
event occurred which could reasonably be expected to adversely affect the
status of Borrower as an FDIC-insured institution. Borrower and the
Subsidiaries have made payment of all franchise and similar taxes in all of
the respective jurisdictions in which they are incorporated, chartered or
qualified, except for any such taxes (i) where the failure to pay such taxes
will not have a material adverse effect on the financial condition, business
or operations of Borrower or any Subsidiary, (ii) the validity of which is
being contested in good faith and (iii) for which proper reserves have been
set aside on the books of Borrower or any applicable Subsidiary, as the case
may be.
4.1.2. Capital Stock and Related Matters. Section 4.1.2 of the
Disclosure Schedule correctly sets forth (a) the state or states in which
Borrower has branches or loan production offices, (b) a list of all
Subsidiaries of Borrower, all of which are directly wholly owned by Borrower,
13
and (c) a list of each class of stock of Borrower and the number of authorized
and issued and outstanding shares of each class of stock of Borrower. Except
as otherwise stated in Section 4.1.2 of the Disclosure Schedule, there is no
plan, agreement or understanding providing for, or contemplating, the issuance
of any additional shares of capital stock of Borrower. All of the outstanding
capital stock of Borrower is owned beneficially and of record by Bancorp and
has been duly authorized, legally and validly issued, fully paid and
nonassessable. Except as otherwise stated in Section 4.1.2 of the Disclosure
Schedule, there are, as of the date hereof, no outstanding options, rights,
warrants or other agreements or instruments obligating Borrower to issue,
deliver or sell, or cause to be issued, delivered or sold, additional shares
of the capital stock of Borrower or obligating Borrower to grant, extend or
enter into any such agreement or commitment.
4.1.3. Subsidiaries. Each of Borrower's Subsidiaries is validly
existing and in good standing under the laws of its jurisdiction or
organization, and each Subsidiary has all requisite power and authority,
corporate or otherwise, and possess all licenses necessary, to conduct its
business and own its properties, except where the failure to obtain a license
would not have a material adverse effect on the financial condition, business
or operations of the Borrower.
4.2. No Impediment to Transactions.
4.2.1. Transaction is Legal and Authorized. The borrowing of the
principal amount of the Facility, the execution of this Agreement and the
other Transaction Documents and compliance by Borrower with all of the
provisions of this Agreement and of the other Transaction Documents are within
the corporate and other powers of Borrower. This Agreement and the other
Transaction Documents to which Borrower is a party have been duly authorized,
executed and delivered by Borrower, and are the legal, valid and binding
obligations of Borrower, enforceable in accordance with their terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other laws relating to or limiting creditors' rights or
equitable principles generally.
4.2.2. No Defaults or Restrictions. Neither the execution and
delivery of the Transaction Documents nor compliance with their terms and
conditions will: (a) violate, conflict with or result in a material breach of,
or constitute a material default under (i) any of the terms, obligations,
covenants, conditions or provisions of any corporate restriction or of any
indenture, mortgage, deed of trust, pledge, bank loan or credit agreement,
charter, bylaw or any other material agreement or instrument to which Borrower
or any Subsidiary is now a party or by which any of them or any of their
properties may be bound or affected, or (ii) any judgment, order, writ,
injunction, decree or demand of any court, arbitrator, grand jury, or
Governmental Agency; or (b) result in the creation or imposition of any lien,
charge or encumbrance of any nature whatsoever upon any property or asset of
Borrower or any Subsidiary. None of Borrower or any Subsidiary is in material
default in the performance, observance or fulfillment of any of the terms,
obligations, covenants, conditions or provisions contained in any indenture or
other agreement creating, evidencing or securing indebtedness of any kind or
pursuant to which any such indebtedness is issued, or other agreement or
instrument to which Borrower or any Subsidiary is a party or by which Borrower
or any Subsidiary or their respective properties may be bound or affected.
4.2.3. Governmental Consent. Except for those furnished pursuant
to Section 3.2.4, no governmental orders, permissions, consents, approvals or
authorizations are required to be obtained by Borrower and no registrations or
declarations are required to be filed by Borrower in connection with, or
contemplation of, the execution and delivery of, and performance under, this
Agreement and the other Transaction Documents.
4.3. Use of Proceeds. Borrower shall use the proceeds of the Facility
for general corporate purposes. The Facility is an exempt transaction under
the Truth-in-Lending Act, as
14
amended or recodified. Borrower does not own any "margin security" as such
term is defined in Regulation G of the FRB. Borrower will not use any part of
the proceeds of the Facility (a) directly or indirectly to purchase or carry
any margin security or reduce or retire any indebtedness originally incurred
to purchase any such margin security within the meaning of Regulation U of the
FRB, or (b) so as to involve Borrower or Lender in a violation of Regulation U
of the FRB. Borrower agrees to execute, or cause to be executed, all
instruments necessary for this Facility to comply with all of the requirements
of Regulation U of the FRB.
4.4. Financial Condition.
4.4.1. Borrower Financial Statements. Borrower has delivered to
Lender copies of regulatory financial statements on the appropriate FFIEC form
filed by Borrower (the "Borrower 2004 Financial Statements") for the 12 months
ended March 31, 2004 (the "Borrower 2004 Financial Statements Date"). The
Borrower 2004 Financial Statements are true and correct in all material
respects, are prepared in accordance with the respective books of account and
records of Borrower and its Subsidiaries and have been prepared in accordance
with applicable banking regulations, rules and guidelines on a basis
consistent with prior periods, and fairly and accurately present in all
material respects the financial condition of Borrower and its assets and
liabilities and the results of its operations as at, and for the period
ending at, such date. In addition, Borrower has delivered to Lender copies of
its regulatory financial statements on the appropriate FFIEC form filed by
Borrower for the period ending December 31, 2004 ("Interim Financial
Statements" and together with the Borrower 2004 Financial Statements, the
"Borrower Financial Statements"). The Interim Financial Statements are true
and correct in all material respects, are prepared in accordance with the
respective books of account and records of Borrower and its Subsidiaries and
have been prepared in accordance with applicable banking regulations, rules
and guidelines on a basis consistent with prior periods, and fairly and
accurately present in all material respects the financial condition of
Borrower and its assets and liabilities and the results of its operations as
of, and for the period ending at, such date. The Borrower Financial
Statements contain and reflect provisions for taxes, reserves and other
liabilities of Borrower in accordance with applicable banking regulations,
rules and guidelines, respectively. Except as otherwise stated in Section
4.4.1 of the Disclosure Schedule, Borrower does not have any material debt,
liability or obligation of any nature (whether accrued, contingent, absolute
or otherwise) which is not provided for or disclosed in the Borrower
Financial Statements.
4.4.2. Absence of Default. No event has occurred which either of
itself or with the lapse of time or the giving of notice or both, would give
any creditor of Borrower the right to accelerate the maturity of any material
indebtedness of Borrower for borrowed money. Borrower is not in default under
any other lease, agreement or instrument, or any law, rule, regulation, order,
writ, injunction, decree, determination or award, non-compliance with which
could materially adversely affect Borrower's properties, financial condition
or business operations.
4.4.3. Loans. Except as otherwise stated in Section 4.4.3 of the
Disclosure Schedule, each loan having an outstanding balance of more than
$250,000 and reflected as an asset of Borrower in the Borrower Financial
Statements is the legal, valid and binding obligation of the obligor named
therein, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium, or other laws relating to or limiting creditors' rights or
equitable principles generally. To Borrower's knowledge, except as otherwise
stated in Section 4.4.3 of the Disclosure Schedule, (a) no obligor named
therein is seeking to avoid the enforceability of the terms of any loan, and
(b) no loan having an unpaid balance (principal and accrued interest) in
excess of $250,000 is subject to any defense, offset or counterclaim.
15
4.4.4. Allowance for Loan Losses. The allowance for loan losses
shown in the Borrower Financial Statements has been established in accordance
with GAAP and, based on such establishment, is adequate in all material
respects to provide for losses, net of recoveries relating to loans previously
charged off, on loans and leases outstanding as of the date of such statements
or reports.
4.4.5. Solvency. After giving effect to the consummation of the
transactions contemplated by this Agreement, Borrower has capital sufficient
to carry on its business and transactions and all businesses and transactions
in which it is about to engage and is solvent and able to pay its debts as
they mature. No transfer of property is being made and no indebtedness is
being incurred in connection with the transactions contemplated by this
Agreement with the intent to hinder, delay or defraud either present or future
creditors of Borrower or any Subsidiary.
4.5. Title to Properties.
4.5.1. Owned Property. Borrower and the Subsidiaries have,
respectively, good and marketable fee title to all the Properties, and good
and marketable title to all other property and assets reflected in the
Borrower Financial Statements, except for (a) real property and other assets
acquired and/or being acquired from debtors in full or partial satisfaction of
obligations owed to Borrower or the Subsidiaries, as the case may be, and (b)
property or other assets leased by Borrower or the Subsidiaries, property and
assets sold or otherwise disposed of for their fair market value subsequent to
the date of the Borrower Financial Statements. Except for Properties and
other assets acquired and/or being acquired from debtors in full or partial
satisfaction of obligations owed to Borrower or any Subsidiary and property or
other assets leased by Borrower or any Subsidiary, all property and assets of
any kind (real or personal, tangible or intangible) of Borrower and any
Subsidiary are free from any liens, encumbrances or defects in title, except
for any liens granted previously by Borrower and reflected in the Borrower
Financial Statements. Except as identified in Section 4.5.1 of the Disclosure
Schedule, to Borrower's knowledge, no financing statement under the UCC that
names Borrower or any Subsidiary has been filed and none of Borrower or any
Subsidiary has signed any financing statement or any pledge agreement
authorizing any secured party thereunder to file any such financing statement.
4.5.2. Leased Property. For assets or property leased by
Borrower or any Subsidiary, Borrower and each such Subsidiary enjoy peaceful
and undisturbed possession under all of the Leases under which they are
operating, all of which permit the customary operations of Borrower and any
Subsidiary, as applicable. Neither Borrower nor any Subsidiary is in material
default, and no event has occurred which with the passage of time or the
giving of notice, or both, would constitute a material default by Borrower or
any Subsidiary under any of such Leases.
4.6. No Material Adverse Change. Since the Borrower 2004 Financial
Statements Date, neither the business, operations, properties nor assets of
Borrower or any Subsidiary have been materially and adversely affected in any
way, as the result of any act or event, including, without limitation, fire,
explosion, accident, act of God, strike, lockout, flood, drought, storm,
earthquake, combination of workmen or other labor disturbance, riot, activity
of armed forces or of the public enemy, embargo, or nationalization,
condemnation, requisition or taking of property, or cancellation or
modification of contracts, by any domestic or foreign government or any
instrumentality or agency thereof. Since the Borrower 2004 Financial
Statements Date, there have been no material adverse changes in the assets,
liabilities, or financial condition of Borrower or any Subsidiary other than
changes arising from transactions in the ordinary course of business, and none
of such changes has been materially adverse, whether in the ordinary course of
business or otherwise.
16
4.7. Legal Matters.
4.7.1. Compliance with Law. Borrower and the Subsidiaries have
complied with all applicable statutes, rules, regulations, orders and
restrictions of any domestic or foreign government, or any instrumentality or
agency thereof, having jurisdiction over the conduct of their respective
businesses or the ownership of their respective properties, except where any
such failure to comply would not materially and adversely affect the financial
condition, business or operations of Borrower or any Subsidiary.
4.7.2. Taxes. Borrower and each Subsidiary have filed all United
States income tax returns and all state and municipal tax returns which are
required to be filed, and have paid, or made adequate provision for the
payment of, all material taxes which have become due pursuant to said returns
or pursuant to any assessment received by Borrower or any Subsidiary, except
such taxes, if any, as are being contested in good faith and as to which
adequate reserves have been provided. Borrower is unaware of any audit,
assessment or other proposed action or inquiry of the Internal Revenue Service
with respect to the United States income tax liability of Borrower or any
Subsidiary. To the best of Borrower's knowledge, Borrower and each Subsidiary
have withheld amounts from their employees, shareholders or holders of public
deposit accounts in full and complete compliance with the tax withholding
provisions of applicable federal, state and local laws and each has filed all
federal, state and local returns and reports for all years for which any such
return or report would be due with respect to employee income tax withholding,
social security, unemployment taxes, income and other taxes and all payments
or deposits with respect to such taxes have been made within the time period
required by law.
4.7.3. Regulatory Enforcement Actions. Except as set forth in
Section 4.7.3 of the Disclosure Schedule, none of Borrower, any Subsidiary or
any of their respective officers or directors is now operating under any
restrictions, agreements, memoranda, or commitments (other than restrictions
of general application) imposed by any Governmental Agency, nor to Borrower's
knowledge are (a) any such restrictions threatened or (b) any agreements,
memoranda or commitments being sought by any Governmental Agency.
4.7.4. Pending Litigation. Except as otherwise disclosed in
Section 4.7.4 of the Disclosure Schedule, there are no actions, suits,
proceedings or written agreements pending, or, to the best of Borrower's
knowledge, threatened or proposed, against Borrower or any Subsidiary at law
or in equity or before or by any federal, state, municipal, or other
governmental department, commission, board, or other administrative agency,
domestic or foreign, that, either separately or in the aggregate, will
materially and adversely affect the financial condition, business, or
operations of any of Borrower or any Subsidiary; and none of Borrower or any
Subsidiary is in default with respect to any order, writ, injunction, or
decree of, or any written agreement with, any court, commission, board or
agency, domestic or foreign, that, either separately or in the aggregate, will
materially and adversely affect the financial condition, business, or
operations of Borrower or any Subsidiary.
4.7.5. RICO. There are no suits, actions or proceedings pending
or, to Borrower's knowledge, threatened against Borrower or any Subsidiary, or
any officer or director thereof, under a RICO Related Law.
4.7.6. ERISA. All Employee Benefit Plans (as defined in Section
3(3) of ERISA) established or maintained by Borrower or any ERISA Affiliate or
to which Borrower or any ERISA Affiliate contributes are in material
compliance with applicable requirements of ERISA, and are in material
compliance with applicable requirements (including qualification and
non-discrimination requirements) of the Code for obtaining the tax benefits
the Code thereupon permits with respect to such plans. Each Employee Benefit
Plan which is a group health plan (within the meaning of Section 5000(b)(1) of
the Code) complies with and has been maintained and operated in material
17
compliance with each of the requirements of Section 4980B of the Code.
Neither Borrower nor any ERISA Affiliate has failed to make on a timely basis
any required contributions or to pay on a timely basis any amounts with
respect to any Employee Benefit Plan or ERISA or any other applicable law. No
"reportable event" or non-exempt "prohibited transaction," as defined in
ERISA, has occurred and is continuing as to any Employee Benefit Plan and no
excise taxes have been incurred or security is required with respect to any
Employee Benefit Plan. Except as set forth in Section 4.7.6 of the Disclosure
Schedule, no Employee Benefit Plan has, or as of the Closing Date will have,
any amount of unfunded benefit liabilities (as defined in Section 4001(a)(18)
of ERISA) for which Borrower or any ERISA Affiliate could be liable to any
Person under Title IV of ERISA if any such plan were terminated. All
Employee Benefit Plans are funded in accordance with Section 412 of the Code
(if applicable). There would be no obligations under Title IV of ERISA
relating to any Employee Benefit Plan that is a multiemployer plan if any such
plan were terminated or if Borrower or any ERISA Affiliate withdrew from any
such plan. Except as required by Section 4980B of the Code or applicable
state insurance laws, neither Borrower nor any ERISA Affiliate has promised
any employee medical coverage after termination of employment, or promised
medical coverage to any former employee or other individual not employed by
Borrower or any ERISA Affiliate, and neither Borrower nor any ERISA Affiliate
maintains or contributes to any plan or arrangement providing medical benefits
to employees after their termination of employment or any other individual not
employed by Borrower or any ERISA Affiliate.
4.7.7. Environmental. No Property is or, to the best of
Borrower's knowledge, has been a site for the use, generation, manufacture,
storage, treatment, release, threatened release, discharge, disposal,
transportation or presence of any Hazardous Materials and neither Borrower nor
any Subsidiary has engaged in such activities. Each Property, and Borrower
and each Subsidiary, are in material compliance with all Hazardous Materials
Laws. There are no claims or actions ("Hazardous Materials Claims") pending
or, to the best of Borrower's knowledge, threatened, nor have there been any
such claims or actions in the past, against Borrower or any Subsidiary or any
Property by any Governmental Agency or by any other Person relating to any
Hazardous Materials or pursuant to any Hazardous Materials Law.
4.7.8. Brokerage Commissions. Neither Borrower nor any Affiliate
of Borrower is obligated to pay any brokerage commission or finder's fee to
any Person in connection with the transactions contemplated by this Agreement.
4.8. Borrower Status.
4.8.1. Restrictions on Borrower. None of Borrower or any
Subsidiary is a party, nor is bound by, any contract or agreement or
instrument, or subject to any charter or other corporate restriction
materially and adversely affecting its financial condition, business or
operations.
4.8.2. Non-Foreign Status. Borrower is not a nonresident alien
for purposes of U.S. income taxation and is not a foreign corporation, foreign
partnership, foreign trust or foreign estate (as said terms are defined in the
Code or regulations promulgated thereunder).
4.8.3. Investment Company Act. Borrower is not an "investment
company" or a company "controlled" by an "investment company," within the
meaning of the Investment Company Act of 1940, as amended.
4.8.4. No Burdensome Agreements. None of Borrower or any
Subsidiary is a party to any agreement, instrument or undertaking or subject
to any other restriction (a) which presently has a material adverse affect
upon the property, financial condition or business operations of Borrower or
any Subsidiary, or (b) under or pursuant to which Borrower or any Subsidiary
is or will be required to place (or under which any other Person may place) a
lien upon any of its properties
18
securing indebtedness either upon demand or upon the happening of a condition,
with or without such demand other than in connection with borrowings from the
Federal Home Loan Bank of Seattle and other borrowings by Borrower in the
ordinary course of business.
4.9. No Misstatement. Except with respect to information the source of
which is not Borrower or an Affiliate of Borrower, no information, exhibit,
report, schedule or document furnished by Borrower to Lender in connection
with the negotiation or execution of this Agreement or the funding of the
Facility contains any untrue statement of a material fact, or omits to state a
material fact or any fact necessary to make the statements contained therein
not misleading in light of the circumstances when made or furnished to Lender.
4.10. Representations and Warranties Generally. The representations and
warranties set forth in this Agreement or in any other Transaction Document
will be true and correct (a) on the date of this Agreement, and (b) as
otherwise provided in the quarterly compliance certificates delivered pursuant
to Section 6.4 with the same force and effect as if made on each such date.
All representations, warranties, covenants and agreements made in this
Agreement or in any certificate or other document delivered to Lender by or on
behalf of Borrower pursuant to or in connection with this Agreement shall be
deemed to have been relied upon by Lender notwithstanding Lender's review of
any documents or materials delivered by Borrower to Lender pursuant to the
terms hereof and notwithstanding any investigation heretofore or hereafter
made by Lender or on its behalf (and Borrower hereby acknowledges such
reliance by Lender in making the Facility and all disbursements thereunder)
and, furthermore, shall survive the making of any or all of the disbursements
of proceeds under the Facility and continue in full force and effect as long
as there remains unperformed any obligations to Lender hereunder or under any
of the other Transaction Documents.
5. GENERAL COVENANTS, CONDITIONS AND AGREEMENTS. Borrower hereby further
covenants and agrees with Lender as follows:
5.1. Compliance with Transaction Documents. Borrower shall comply
with, observe and timely perform each and every one of the covenants,
agreements and obligations under each and every one of the Transaction
Documents.
5.2. Material Transactions.
5.2.1. Merger and Consolidation. Borrower shall not consolidate
with or merge with any Person unless: (a) the successor entity which results
from such consolidation or merger, if not Borrower (the "Surviving Entity"),
(i) shall be a solvent FDIC-insured depository institution organized and
existing under the laws of the United States of America or any State thereof
or the District of Columbia, and (ii) shall have executed and delivered to the
holder of the Subordinated Debenture its assumption of the due and punctual
payment of the principal of and premium, if any, and interest on the
Subordinated Debenture, and the due and punctual performance and observation
of all of the covenants in the Subordinated Debenture, this Agreement and any
other Transaction Document to be performed or observed by Borrower and shall
furnish to such holder an opinion of counsel to the effect that the instrument
of assumption has been duly authorized, executed and delivered and constitutes
the legal, valid and binding contract and agreement of the Surviving Entity
enforceable in accordance with its terms, except as enforcement of such terms
may be limited by bankruptcy, insolvency, reorganization, moratorium and
similar laws affecting the enforcement of creditors' rights generally and by
general equitable principles; and (b) immediately after giving effect to such
transaction and treating any indebtedness that becomes an obligation of
Borrower or any of its Subsidiaries as a result of such transaction as having
been incurred by Borrower or such Subsidiary at the time of such transaction,
no Event of Default or Unmatured Event of Default would exist.
19
5.2.2. Restricted Payments. If an Event of Default has occurred
and is continuing, Borrower shall not (a) declare or pay any dividend on, make
any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock, (b) make loans
or advances to Bancorp, (c) make any payments of interest, principal or
premium on, or repay, repurchase or redeem (i) any indebtedness of Borrower
payable to Bancorp, or (ii) any other indebtedness of Borrower that ranks
equally with or junior to the Subordinated Debenture, or (d) make any
guarantee payments on any obligations ranking parri pasu with or junior to the
Subordinated Debenture.
5.2.3. Incurring Debt. Without the prior written consent of
Lender, which consent shall not be unreasonably withheld, Borrower shall not
itself, nor shall it cause, permit or allow any Subsidiary to (a) create,
assume, incur, have outstanding, or in any manner become liable in respect of
any Indebtedness, other than as reflected in Section 5.2.3 of the Disclosure
Schedule, or (b) create, assume, incur, suffer or permit to exist any
mortgage, pledge, deed of trust, encumbrance (including the lien or retained
security title of a conditional vendor), security interest, assignment, lien
or charge of any kind or character upon or with respect to any of their real
or personal property, including, without limitation, any capital stock owned
by Borrower whether owned at the date hereof or hereafter acquired, or assign
or otherwise convey any right to receive income.
5.2.4. Asset Sales. Borrower shall not itself, nor shall it
cause, permit or allow any Subsidiary to dispose of by sale, assignment, lease
or otherwise, property or assets now owned or hereafter acquired if such
property or assets plus all other properties and assets sold, leased,
transferred or otherwise disposed of during the 12-month period ending on the
date of such sale, lease or other disposition shall have an aggregate value of
more than 10% of the consolidated assets of Borrower as reflected in the most
recent balance sheet delivered to Lender pursuant to Section 6.1, except that
Borrower may sell assets, including loans, in the ordinary course of its
banking business and consistent with safe and sound banking practices. No
sale, lease or transfer of substantially all of the assets of Borrower shall
have the effect of releasing Borrower, or any transferee that satisfies the
requirements of a Surviving Entity set forth in Section 5.2.1(a)(i) and (ii),
from its liability under this Agreement and the Subordinated Debenture.
5.2.5. Capital Stock Matters. Borrower shall not redeem or
purchase any of its capital stock or its other outstanding securities, declare
a stock dividend, otherwise change its capital structure or cease to be a
wholly owned subsidiary of Bancorp.
5.2.6. Other Matters. Borrower shall notify Lender of any of the
following at least 10 days prior to the effectiveness thereof: (a) any change
in the name of Borrower or any Subsidiary; (b) any change in the headquarters
or principal place of business of Borrower or any Subsidiary; (c) the
issuance, execution or adoption of any formal or informal (whether voluntary
or involuntary) regulatory action with respect to Borrower or any Subsidiary
at the request of any Governmental Agency.
5.3. Business Operations.
5.3.1. Banking Practices. Borrower shall not itself, nor shall
it cause, permit or allow any Subsidiary to engage in any unsafe or unsound
banking practices as determined by a Governmental Agency.
5.3.2. Affiliate Transactions. Borrower shall not itself, nor
shall it cause, permit or allow any Subsidiary to enter into any transaction
including, without limitation, the purchase, sale or exchange of property or
the rendering of any service, with any Affiliate except in the ordinary course
of business and pursuant to the reasonable requirements of Borrower's or such
Affiliate's business and upon terms consistent with applicable laws and
regulations and reasonably found by
20
the appropriate board(s) of directors to be fair and reasonable and no less
favorable to Borrower or such Affiliate than would be obtained in a comparable
arm's length transaction with a Person not an Affiliate.
5.3.3. Insurance. At its sole cost and expense, Borrower will
maintain, and will cause each Subsidiary to maintain, bonds and insurance to
such extent, covering such risks as is usual and customary for owners of
similar businesses and properties in the same general area in which Borrower
or a Subsidiary operates, including, without limitation, insurance for fire
and other risks insured against by extended coverage, public liability
insurance, workers' compensation insurance and such additional bonds and
insurance as may reasonably be requested by Lender. All such bonds and
policies of insurance shall be in a form, in an amount and with
issuers/insurers recognized as adequate by prudent business persons.
5.4. Compliance with Laws.
5.4.1. Generally. Borrower shall comply and cause each
Subsidiary to comply with all applicable statutes, rules, regulations, orders
and restrictions in respect of the conduct of their respective businesses and
the ownership of their respective properties, except where the failure to so
comply would not have a material adverse effect on the financial condition,
business or operations of Borrower or such Subsidiary.
5.4.2. Regulated Activities. Borrower shall not itself, nor
shall it cause, permit or allow any Subsidiary to engage in any business or
activity not permitted by all applicable laws and regulations, including
without limitation, the FDI Act and any regulations promulgated thereunder.
5.4.3. Taxes. Borrower shall promptly pay and discharge all
taxes, assessments and other governmental charges imposed upon Borrower or any
Subsidiary or upon the income, profits, or property of Borrower or any
Subsidiary and all claims for labor, material or supplies which, if unpaid,
might by law become a lien or charge upon the property of Borrower or any
Subsidiary. None of Borrower or any Subsidiary shall be required to pay any
such tax, assessment, charge or claim, so long as the validity thereof shall
be contested in good faith by appropriate proceedings, and reserves therefor
shall be maintained on the books of Borrower and such Subsidiary as are deemed
adequate by Lender.
5.4.4. ERISA. As soon as possible, and in any event within ten
Business Days, after: (a) Borrower or any ERISA Affiliate knows that with
respect to any Employee Benefit Plan, a "prohibited transaction," a
"reportable event," or any other event or condition which could subject
Borrower or any ERISA Affiliate to liability under ERISA or the Code; or (b)
the institution of steps by Borrower or any ERISA Affiliate to withdraw from,
or the institution of any steps by any party to terminate, any Employee
Benefit Plan; has or may have occurred, Borrower shall deliver to Lender a
certificate of a responsible officer setting forth the details of such matter,
the action that Borrower proposes to take with respect thereto, and, when
known, any action taken or threatened by the Internal Revenue Service, the
U.S. Department of Labor, or the Pension Benefit Guarantee Corporation. For
purposes of this covenant, Borrower shall be deemed to have knowledge of all
facts known by the fiduciaries of any plan of Borrower or any ERISA Affiliate.
5.4.5. Environmental Matters. Borrower shall: (a) exercise, and
cause each Subsidiary to exercise, due diligence in order to comply with all
Hazardous Materials Laws; (b) promptly advise Lender in writing and in
reasonable detail of (i) any Condition or Release required to be reported to
any Governmental Agency under any applicable Hazardous Materials Laws, (ii)
any and all written communications with respect to Hazardous Materials Claims
or any Condition or Release required to be reported to any Governmental
Agency, (iii) any remedial action taken by Borrower or any other Person in
response to (A) any Hazardous Material on, under or about any
21
Property, the existence of which is reasonably likely to give rise to an
Environmental Claim, or (B) any Environmental Claim that could reasonably be
expected to have a material adverse effect on Borrower or any Subsidiary, (iv)
Borrower's discovery of any occurrence or condition on any real property
adjoining or in the vicinity of any Property that could cause such Property or
any part thereof to be subject to any materially adverse restrictions on the
ownership, occupancy, transferability or use thereof under any Hazardous
Materials Law, and (v) any request for information from any Governmental
Agency indicating that such agency has initiated an investigation as to
whether Borrower or any Subsidiary may be potentially responsible for a
Condition or Release or threatened Condition or Release of Hazardous
Materials; (c) at its own expense, provide copies of such documents or
information as Lender may reasonably request in relation to any matters
disclosed pursuant to this Section 5.4.5; (d) promptly take any and all
necessary remedial action in connection with any Condition or Release or
threatened Condition or Release on, under or about any Property in order to
comply with all applicable Hazardous Materials Laws. In the event Borrower or
any Subsidiary undertakes any remedial action with respect to such Hazardous
Material on, under or about any Property, Borrower or such Subsidiary shall
conduct and complete such remedial action in compliance with all applicable
Hazardous Materials Laws and in accordance with the policies, orders and
directives of all Governmental Agencies. Borrower shall permit Lender, from
time to time and in its sole and absolute discretion, to retain, at Borrower's
expense, an independent professional consultant to review any report relating
to Hazardous Materials prepared by or for Borrower or any Subsidiary, and at
reasonable times and subject to reasonable conditions to conduct its own
investigation of any Property, and Borrower agrees to use commercially
reasonable efforts to obtain permission for Lender's professional consultant
to conduct its own investigation of any Property and shall cause each
Subsidiary to do the same. Borrower hereby grants to Lender, its agents,
employees, consultants, and contractors the right to enter into or on to, at
reasonable times, any Property to perform such tests on such Property as are
reasonably necessary to conduct such investigation. Borrower shall promptly
notify Lender of (1) any acquisition of stock, assets, or property by Borrower
or any Subsidiary that reasonably could be expected to expose Borrower or any
Subsidiary to, or result in, a Hazardous Materials Claim that could have a
material adverse effect or that could be expected to have a material adverse
effect on any governmental authorization, license, permit or approval then
held by Borrower or any Subsidiary, and (2) any proposed action outside the
normal course of business to be taken by Borrower or any Subsidiary to
commence industrial or other operations that could subject Borrower or any
Subsidiary to additional laws, rules or regulations, including, without
limitation, laws, rules and regulations requiring additional environmental
permits or licenses.
5.4.6. Environmental Indemnity. Borrower hereby agrees to defend,
indemnify and hold harmless Lender, its directors, officers, employees,
agents, successors and assigns (including, without limitation, any
participants in the Facility) from and against any and all losses, damages,
liabilities, claims, actions, judgments, court costs and legal or other
expenses (including, without limitation, attorney's fees and expenses) which
Lender may incur as a direct or indirect consequence of (a) any Hazardous
Materials Claim or any other violation of a Hazardous Materials Law, or (b)
the use, generation, manufacture, storage, disposal, threatened disposal,
transportation or presence of Hazardous Materials in, on, under or about the
Property or otherwise by Borrower or any Subsidiary. Borrower's duty and
obligations to defend, indemnify and hold harmless Lender shall survive the
cancellation of the Subordinated Debenture and any other Transaction
Documents.
5.4.7. Corporate Existence. Borrower shall do or cause to be done
all things necessary to maintain, preserve and renew its corporate existence
and that of the Subsidiaries and its and their rights and franchises, and
comply with all related laws applicable to Borrower or the Subsidiaries.
5.5. Lender Expenses. Whether or not the Initial Disbursement is made,
Borrower will (a) pay all reasonable costs and expenses of Lender incident to
the transactions contemplated by this
22
Agreement including, without limitation, all costs and expenses incurred in
connection with the preparation, negotiation and execution of the Transaction
Documents, or in connection with any modification, amendment, alteration, or
the enforcement of this Agreement, the Subordinated Debenture or the other
Transaction Documents, including, without limitation, Lender's out-of-pocket
expenses and the charges and disbursements to counsel retained by Lender, and
(b) pay and save Lender and all other holders of the Subordinated Debenture
harmless against any and all liability with respect to amounts payable as a
result of (i) any taxes which may be determined to be payable in connection
with the execution and delivery of this Agreement, the Subordinated Debenture
or the other Transaction Documents or any modification, amendment or
alteration of the terms or provisions of this Agreement, the Subordinated
Debenture or the other Transaction Documents, (ii) any interest or penalties
resulting from nonpayment or delay in payment of such expenses, charges,
disbursements, liabilities or taxes, and (iii) any income taxes in respect of
any reimbursement by Borrower for any of such violations, taxes, interests or
penalties paid by Lender. The obligations of Borrower under this Section 5.5
shall survive the repayment in full of the Subordinated Debenture. Any of the
foregoing amounts incurred by Lender and not paid by Borrower within five
Business Days of the date initially due and payable shall bear interest from
the date incurred at the rate of interest in effect or announced by Lender
from time to time as its Base Rate plus 3% per annum and shall be deemed part
of Borrower's Liabilities hereunder.
5.6. Subordinated Debt. If the Subordinated Debt ceases to be deemed
to be Tier 2 Capital, other than due to the limitation imposed by the FDIC on
the capital treatment of subordinated debt during the five years immediately
preceding the maturity date of the subordinated debt, Borrower shall: (a)
immediately notify Lender; and (b) immediately upon request of Lender engage
in good faith discussions concerning the restructuring (as a senior, unsecured
obligation of Borrower with the same interest rate and Maturity Date as is
provided in this Agreement for the Subordinated Debt) or repayment of the
obligations evidenced by the Subordinated Debt. No later than 180 days after
the date of Lender's request pursuant to the immediately preceding sentence,
Borrower shall execute and deliver all agreements (including, without
limitation, replacement notes) as Lender may reasonably request in connection
with the restructuring contemplated by clause (b) of the immediately preceding
sentence, unless the obligations evidenced by the Subordinated Debt have been
repaid prior to the expiration of such 180-day period.
5.7. Inspection Rights. Borrower shall permit and cause the
Subsidiaries to permit Lender, through Lender's employees, attorneys,
accountants or other agents, to inspect any of the properties, corporate books
and financial books and records of Borrower and any Subsidiary (excluding any
customer lists and non-public information relating to product development
initiatives) at such times and as often as Lender reasonably may request;
provided, however, this right shall not be exercised more than once per year
and only with 15 days' prior notice so long as (a) Borrower shall be "well
capitalized" in accordance with the rules and regulations of its primary
federal regulator and (b) no Event of Default shall have occurred and be
continuing.
6. REPORTING. Borrower shall furnish and deliver or cause to be furnished
and delivered to Lender:
6.1. Annual. As soon as available, but in any event not more than 90
days after the close of each fiscal year of Borrower, or, if Bancorp shall
file notification of its inability to timely file its Form 10-K under Rule
12b-25 of the Exchange Act, then, upon the filing of such Form 10-K, but in no
event more than 105 days after the close of such fiscal year (provided that in
such event, Borrower shall, no later than one Business Day following the due
date for such Form 10-K, provide Lender with a copy of its Form 12b-25 as
filed with the SEC), or within such further time as Lender may permit,
consolidated and consolidating audited financial statements for Bancorp,
Borrower and the Subsidiaries, including a balance sheet and related profit
and loss statement, prepared in accordance with GAAP consistently applied
throughout the periods reflected therein by Borrower's
23
Accountant or other independent certified public accountants acceptable to
Lender, who shall give their unqualified opinion with respect thereto.
6.2. Quarterly. As soon as available, but in any event not more than
45 days after the close of each quarterly period of each fiscal year of
Borrower, or, if Bancorp shall file notification of its inability to timely
file its Form 10-Q under Rule 12b-25 of the Exchange Act, then, upon the
filing of such Form 10-Q, but in no event more than 50 days after the close of
such quarterly period (provided that in such event, Borrower shall, no later
than one Business Day following the due date for such Form 10-Q, provide
Lender with a copy of its Form 12b-25 as filed with the SEC), or within such
further time as Lender may permit, (a) the call reports filed by Borrower with
state or federal bank regulatory agencies, (b) the internally prepared "watch
list" or other reports of Borrower with respect to delinquent, classified or
assets requiring special attention, and (c) Forms H-(b)11 filed by Bancorp
with the OTS.
6.3. Securities Filings. If an Event of Default shall have occurred
and be continuing, as soon as practicable, but in any event not more than
three Business Days after any such filings shall be made with the Securities
and Exchange Commission or any exchange or market on which the capital stock
of Bancorp may be traded, all annual and quarterly reports made by Bancorp,
pursuant to the Exchange Act.
6.4. Compliance Certificate. Borrower shall furnish Lender, at the
same time as it furnishes the quarterly financial reports referred to in
Section 6.2, a quarterly compliance certificate in the form attached as
Exhibit F hereto. Such quarterly compliance certificate shall be signed by
the Chief Executive Officer, President or Chief Financial Officer of Borrower.
6.5. Copies of Other Reports and Correspondence. To the extent
permitted by law, promptly after same are available, copies of each of the
following: (a) each annual report, proxy or financial statement or other
report or communication sent by Borrower or any Subsidiary to the shareholders
of Borrower; (b) all annual, regular, periodic and special reports and
registration statements which Borrower or any Subsidiary may file or be
required to file with any federal or state banking regulatory agency or any
other Governmental Agency or with any securities exchange; (c) each Uniform
Bank Performance Report with respect to Borrower; (d) all written reports
presented to the board of directors of Borrower, as Lender may from time to
time reasonably request; and (e) promptly upon receipt thereof, one copy of
each written audit report submitted to Borrower by Borrower's Accountant.
6.6. Proceedings. Immediately after receiving knowledge thereof, notice
in writing of all charges, assessments, actions, suits and proceedings (as
well as notice of the outcome of any such charges, assessments, actions, suits
and proceedings) that are initiated by, or brought before, any court or
Governmental Agency, in connection with Borrower or any Subsidiary, other than
ordinary course of business litigation not involving the FDIC, WSDFI or OTS,
which, if adversely decided, would not have a material adverse effect on the
financial condition or operations of Borrower.
6.7. Event of Default; Material Adverse Change. Promptly after the
occurrence thereof, notice of any other matter which has resulted in, or could
reasonably be expected to result in, an Unmatured Event of Default, an Event
of Default or a materially adverse change in the financial condition, business
or operations of Borrower or any Subsidiary, so long as (i) delivery of such
notice is not prohibited by applicable laws and regulations, and (ii) if
reasonably requested by Borrower or any Subsidiary, Lender agrees in writing
not to disclose such information to any other person, except as required by
law or regulation or as agreed to by Borrower or such Subsidiary.
6.8. Other Information Requested by Lender. Such other information
concerning the business, operations, financial condition and regulatory status
of Borrower or any Subsidiary as
24
Lender may from time to time reasonably request, so long as such information
is not confidential and related to a customer of Borrower or any Subsidiary,
and provided that (i) Borrower or any such Subsidiary is not prohibited by
law, rule, regulation or the terms of any contract or other agreement from
disclosing such information to Lender, and (ii) if reasonably requested by
Borrower or any Subsidiary, Lender agrees in writing not to disclose such
information to any other person, except as required by law or regulation or as
agreed to by Borrower or such Subsidiary.
7. FINANCIAL COVENANT. Borrower shall maintain such capital as may be
necessary to cause Borrower to be classified at all times as "well
capitalized", in accordance with the rules and regulations of its primary
federal regulator, as in effect from time to time and consistent with the
financial information and reports contemplated in Section 6.
8. BORROWER'S DEFAULT.
8.1. Borrower's Defaults and Lender's Remedies.
8.1.1. Events of Default. Notwithstanding any cure periods
described below, Borrower will immediately notify Lender, so long as delivery
of such notice is not prohibited by applicable laws and regulations, in
writing when Borrower obtains knowledge of the occurrence of any default
specified below. Regardless of whether Borrower has given the required notice,
the occurrence of one or more of the following will constitute an "Event of
Default" under this Agreement:
8.1.1.1. Borrower fails to pay (a) any principal,
interest or other amount due on the Subordinated Debenture, when due, or (b)
any other fees, charges, costs or expenses under the this Agreement or any
other Transaction Document within 15 days after the same becomes due; or
8.1.1.2. Borrower fails to perform or observe (a) any
agreement, term, provision, condition, or covenant (other than any such
failure that results in an Event of Default as expressly provided in any other
clause of this Section 8.1.1) required to be performed or observed by Borrower
hereunder or under any other Transaction Document, or (b) in any material
respect any agreement, term, provision, condition, or covenant required to be
performed or observed by Borrower under any other agreement with or in favor
of Lender or any Affiliate of Lender, and in each case such failure continues
uncured for a period of 30 days after written notice of failure to perform or
observe is given to Borrower by Lender; or
8.1.1.3. Any financial information, statement,
certificate, representation or warranty given to Lender by Borrower (or any of
its representatives) in connection with entering into this Agreement or any
other Transaction Documents, or required to be furnished under the terms
hereof or thereof, proves untrue or misleading in any material respect (as
determined by Lender in the reasonable exercise of its judgment) as of the
time when given and such untrue or misleading condition continues uncured for
30 days after written notice thereof is given to Borrower by Lender; or
8.1.1.4. Borrower defaults, or otherwise fails to satisfy
in any material respect all of its obligations, under the terms of any loan
agreement, promissory note, lease, conditional sale contract or other
agreement, document or instrument evidencing, governing or securing any
indebtedness, other than the Facility, owing by Borrower to Lender or any
other indebtedness in excess of $500,000 owing by Borrower to any third party,
in each case beyond any period of grace provided for in the instrument or
instruments evidencing such indebtedness; or
25
8.1.1.5. Any failure of Borrower to satisfy a final,
unstayed judgment in excess of 10% of the equity capital of Borrower as
determined in accordance with GAAP and is consistent with the most recent
balance sheet delivered to Lender pursuant to Section 6.1; or
8.1.1.6. (a) Borrower ceases to exist, except for a
transaction pursuant to Section 5.2.1; (b) any bankruptcy, insolvency,
receivership, readjustment of debt, dissolution or liquidation proceedings, or
marshalling of Borrower's assets or an assignment for the benefit of
creditors, is commenced under any federal or state law by or against Borrower;
(c) Borrower becomes the subject of any out-of-court settlement with its
creditors; (d) Borrower is unable or admits in writing its inability to pay
its debts as they mature; (e) Borrower is in default in the payment of
Indebtedness to a party other than Lender in excess of 10% of the equity
capital of Borrower as determined in accordance with GAAP and is consistent
with the most recent balance sheet delivered to Lender pursuant to Section
6.1; (f) Borrower is notified that it is considered an institution in
"troubled condition" within the meaning of 12 U.S.C. 1831i and the regulations
promulgated thereunder; (g) a conservator or liquidator is appointed for, or
consented to by, Borrower in any insolvency, readjustment or debts or
marshalling of assets; (h) Borrower is closed or taken over by a Governmental
Agency; or
8.1.1.7. The FDIC, the WSDFI, the OTS, or other
Governmental Agency charged with the regulation of depository institutions:
(a) issues to Borrower, or initiates any action, suit or proceeding to obtain
against, impose on or require from Borrower, a cease and desist order or
similar regulatory order, the assessment of civil monetary penalties, articles
of agreement, a memorandum of understanding, a capital directive, a capital
restoration plan, restrictions that prevent or as a practical matter impair
the payment of the Subordinated Debt by Borrower in accordance with this
Agreement, a notice or finding under Section 8(a) of the FDI Act, or any
similar enforcement action, measure or proceeding; or (b) proposes or issues
to any executive officer or director of Borrower, or initiates any action,
suit or proceeding to obtain against, impose on or require from any such
officer or director, a cease and desist order or similar regulatory order, a
removal order or suspension order, or the assessment of civil monetary
penalties, in each case which prevents or as a practical matter impairs the
payment of the Subordinated Debt by Borrower in accordance with this
Agreement; or
8.1.1.8. Borrower shall cease to be an insured
institution under the FDI Act, except pursuant to Section 5.2.1; or
8.1.1.9. The filing of formal charges by any Governmental
Agency, including without limitation, the issuance of an indictment, under a
RICO Related Law against Borrower.
8.1.2. Effect of Event of Default; Acceleration and Termination
of the Commitment. If an Event of Default shall occur (other than with
respect to any failure by Borrower to perform its obligations under Article
7), Lender may declare the Subordinated Debenture and any other amounts due
Lender immediately due and payable, whereupon, subject to prior FDIC approval,
the Subordinated Debenture and such other amounts payable hereunder shall
immediately become due and payable, without presentment, demand, protest or
notice of any kind. If Borrower receives a written notification from the FDIC
that the Subordinated Debenture no longer constitutes Tier 2 Capital of
Borrower (the "FDIC Notice") and if thereafter any Event of Default shall
occur under Section 8.1.1, Lender may declare the Subordinated Debenture and
any other amounts due Lender immediately due and payable, whereupon the
Subordinated Debenture and such other amounts payable hereunder shall
immediately become due and payable, without presentment, demand, protest or
notice of any kind. Upon the occurrence of an Event of Default, it is
specifically understood and agreed that notwithstanding the curing of such
Event of Default, Borrower shall not be released from any of its covenants
hereunder unless and until the Subordinated Debenture is paid
26
in full. The parties agree that until the earlier of the Maturity Date or the
delivery of an FDIC Notice, Lender may only enforce this Agreement in
accordance with this Section 8.1.2. In addition, if Borrower fails to comply
with any of the its covenants under this Agreement, the Subordinated Debenture
or any other Transaction Document, Lender may pursue Borrower to ensure and
enforce Borrower's compliance with such covenants.
8.2. Protective Advances. If an Event of Default occurs, Lender may
(but shall in no event be required to) cure any such Event of Default and any
amounts expended by Lender in so doing, as determined by Lender in its sole
and absolute discretion, shall (a) be deemed advanced by Lender under an
obligation to do so regardless of the identity of the person or persons to
whom such funds are furnished, (b) constitute additional advances hereunder,
the payment of which is additional indebtedness evidenced by the Subordinated
Debenture, and (c) become due and owing, at Lender's demand, with interest
accruing from the date of disbursement thereof until fully paid at the Default
Rate.
8.3. Other Remedies. Nothing in this Article 8 is intended to restrict
Lender's rights under any of the other Transaction Documents, other related
documents, or at law or in equity, and Lender may exercise such rights and
remedies as and when they are available.
8.4. No Lender Liability. To the extent permitted by law, Lender shall
have no liability for any loss, damage, injury, cost or expense resulting from
any action or omission by it, or any of its representatives, which was taken,
omitted or made in good faith other than any loss, damage, injury cost or
expense arising by reason of Lender's or its Affiliates' willful misconduct or
gross negligence.
8.5. Lender's Fees and Expenses. In case of any Event of Default
hereunder, Borrower shall pay Lender's fees and expenses including, without
limitation, reasonable attorneys' fees and expenses, in connection with the
enforcement of this Agreement or any of the other Transaction Documents or
other related documents.
9. MISCELLANEOUS.
9.1. Release; Indemnification. Borrower hereby releases Lender from
any and all causes of action, claims or rights which Borrower may now or
hereafter have for, or which may arise from, any loss or damage caused by or
resulting from (a) any failure of Lender to protect, enforce or collect in
whole or in part any of the Facility and (b) any other act or omission to act
on the part of Lender, its officers, agents or employees, except in each
instance for those caused by Lender's willful misconduct and gross negligence
and any material breach by Lender of this Agreement or any Transaction
Document. Borrower shall indemnify, defend and hold Lender and its Affiliates
harmless from and against any and all losses, liabilities, obligations,
penalties, claims, fines, demands, litigation, defenses, costs, judgments,
suits, proceedings, actual damages, disbursements or expenses of any kind or
nature whatsoever (including, without limitation, attorneys' fees and
expenses) which may at any time be either directly or indirectly imposed upon,
incurred by or asserted or awarded against Lender or any of Lender's
Affiliates in connection with, arising from or relating to Lender's entering
into or carrying out the terms of this Agreement or being the holder of the
Subordinated Debenture, unless Borrower establishes that the loss, liability,
obligations, penalty, claim, fine, demand, litigation, defense, cost,
judgment, suit, proceeding, damage, disbursement or expense arose solely by
reason of Lender's or any of Lender's Affiliates' willful misconduct or gross
negligence.
9.2. Assignment and Participation. Lender may pledge or otherwise
hypothecate all or any portion of this Agreement or grant participations
herein (provided Lender acts as agent for any participants, except as provided
below) or in any of its rights and security hereunder. Lender may
27
also assign all or any part of the Facility and Lender's obligations in
connection therewith to one or more commercial banks or other financial
institutions or investors with the consent of Borrower, which shall not be
unreasonably withheld or delayed (each an "Assignee Lender"). Lender shall
notify Borrower in advance of the identity of any proposed Assignee Lender.
Upon delivery to Borrower of an executed copy of the Assignee Lender's
assignment and acceptance (a) each such Assignee Lender shall be deemed to be
a party hereto and, to the extent that rights and obligations hereunder have
been assigned and delegated to such Assignee Lender, such Assignee Lender
shall have the rights and obligations of Lender hereunder and under the other
Transaction Documents and other related documents, and (b) Lender, to the
extent that rights and obligations hereunder have been assigned and delegated
by it, shall be released from its obligations hereunder and under the other
Transaction Documents and other related documents. Within five Business Days
after receipt of a copy of the executed assignment and acceptance document,
Borrower shall execute and deliver to Lender a new subordinated debenture, as
applicable (for delivery to the relevant Assignee Lender), in the form of
Exhibit A hereto but substituting Assignee Lender's name and evidencing such
Assignee Lender's assigned portion of the Facility and a replacement
subordinated debenture, as applicable, in the principal amount of the Facility
retained by Lender (such subordinated debenture to be in exchange for, but not
in payment of, the subordinated debenture then held by Lender). Such
subordinated debenture shall be dated the date of the predecessor Subordinated
Debenture. Lender shall mark the predecessor Subordinated Debenture
"exchanged" and deliver it to Borrower. Accrued interest on that part of the
predecessor Subordinated Debenture evidenced by the new subordinated
debenture, and accrued fees, shall be paid as provided in the assignment
agreement between Lender and to the Assignee Lender. Accrued interest on that
part of the predecessor Subordinated Debenture evidenced by the replacement
subordinated debenture shall be paid to Lender. Accrued interest and accrued
fees shall be so apportioned between the subordinated debenture and paid at
the same time or times provided in the predecessor Subordinated Debenture and
in this Agreement. Borrower authorizes Lender to disclose to any prospective
Assignee Lender any financial or other information pertaining to Borrower or
the Facility, provided that such prospective Assignee Lender agrees in writing
not to disclose such information to any other Person, except as required by
law or regulation or as agreed to by Borrower. In addition, Borrower agrees
that, if so requested by Lender, Borrower will cause all insurance policies,
binders and commitments (including, without limitation, casualty insurance and
title insurance) required by the Transaction Documents or other related
documents to be delivered to Lender to name the Assignee Lender as an
additional insured or obligee, as Lender may request. Anything in this
Agreement to the contrary notwithstanding, and without the need to comply with
any of the formal or procedural requirements of this Agreement, including this
Section 9.2, Lender may at any time and from time to time pledge and assign
all or any portion of its rights under all or any of the Transaction
Documents and other related documents to a Federal Reserve Bank; provided that
no such pledge or assignment shall release Lender from its obligations
thereunder.
9.3. Prohibition on Assignment. Borrower shall not assign or attempt
to assign its rights under this Agreement, either voluntarily or, except to
the extent permitted by the terms of Section 5.2.1 of this Agreement, by
operation of law.
9.4. Time of the Essence. Time is of the essence of this Agreement.
9.5. No Waiver. No waiver of any term, provision, condition, covenant
or agreement herein contained shall be effective unless set forth in a writing
signed by Lender, and any such waiver shall be effective only to the extent
set forth in such writing. No failure to exercise or delay in exercising, by
Lender or any holder of the Subordinated Debenture, of any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power or privilege preclude any other or
further exercise thereof, or the exercise of any other right or remedy
provided by law. The rights and remedies provided in this Agreement are
cumulative and not exclusive of any right or remedy provided by law or equity.
No notice or
28
demand on Borrower in any case shall, in itself, entitle Borrower to any other
or further notice or demand in similar or other circumstances or constitute a
waiver of the rights of Lender to any other or further action in any
circumstances without notice or demand. No consent or waiver, expressed or
implied, by Lender to or of any breach or default by Borrower in the
performance of its obligations hereunder shall be deemed or construed to be a
consent or waiver to or of any other breach or default in the performance of
the same or any other obligations of Borrower hereunder. Failure on the part
of Lender to complain of any acts or failure to act or to declare an Event of
Default, irrespective of how long such failure continues, shall not constitute
a waiver by Lender of its rights hereunder or impair any rights, powers or
remedies on account of any breach or default by Borrower.
9.6. Severability. Any provision of this Agreement which is
unenforceable or invalid or contrary to law, or the inclusion of which would
adversely affect the validity, legality or enforcement of this Agreement,
shall be of no effect and, in such case, all the remaining terms and
provisions of this Agreement shall subsist and be fully effective according to
the tenor of this Agreement the same as though any such invalid portion had
never been included herein. Notwithstanding any of the foregoing to the
contrary, if any provisions of this Agreement or the application thereof are
held invalid or unenforceable only as to particular persons or situations, the
remainder of this Agreement, and the application of such provision to persons
or situations other than those to which it shall have been held invalid or
unenforceable, shall not be affected thereby, but shall continue valid and
enforceable to the fullest extent permitted by law.
9.7. Usury; Revival of Liabilities. All agreements between Borrower
and Lender (including, without limitation, this Agreement and any other
Transaction Documents) are expressly limited so that in no event whatsoever
shall the amount paid or agreed to be paid to Lender exceed the highest lawful
rate of interest permissible under the laws of the State of Nevada. If, from
any circumstances whatsoever, fulfillment of any provision hereof or of any
other Transaction Documents, at the time performance of such provision shall
be due, shall involve exceeding the limit of validity prescribed by law which
a court of competent jurisdiction may deem applicable hereto, then, ipso
facto, the obligation to be fulfilled shall be reduced to the highest lawful
rate of interest permissible under the laws of the State of Nevada, and if for
any reason whatsoever, Lender shall ever receive as interest an amount which
would be deemed unlawful, such interest shall be applied to the payment of the
last maturing installment or installments of the indebtedness to Lender
(whether or not then due and payable) and not to the payment of interest. To
the extent that Lender received any payment on account of Borrower's
Liabilities and any such payment(s) and/or proceeds or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set
aside, subordinated and/or required to be repaid to a trustee, receiver or any
other Person under any bankruptcy act, state or federal law, common law or
equitable cause, then to the extent of such payment(s) or proceeds received,
Borrower's Liabilities or part thereof intended to be satisfied shall be
revived and continue in full force and effect, as if such payment(s) and/or
proceeds had not been received by Lender and applied on account of Borrower's
Liabilities; provided, however, if Lender successfully contests any such
invalidation, declaration, set aside, subordination or other order to pay any
such payment and/or proceeds to any third party, the revived Borrower's
Liabilities shall be deemed satisfied.
9.8. Notices. Any notice which either party hereto may be required or
may desire to give hereunder shall be deemed to have been given if in writing
and if delivered personally, or if mailed, postage prepaid, by United States
registered or certified mail, return receipt requested, or if delivered by a
responsible overnight courier, addressed:
29
if to Borrower: FirstBank Northwest
1300 16th Avenue
Clarkston, Washington 99403
Attn: Larry Moxley, Chief Financial Officer
Telephone No.: 509-295-5106
Fax No.: 509-295-5107
E-Mail Address: lmoxley@fbnw.com
if to Lender: Wisconsin Capital Corporation
c/o U.S. Bank National Association
633 W. Fifth Street, 29th Floor
Los Angeles, California 90071
Attn: Heath M. Finn, Vice President
Telephone No.: 866-514-9664
Fax No.: 213-615-6585
E-Mail Address: heath.m.finn@usbank.com
and: Wisconsin Capital Corporation
c/o U.S. Bank National Association
One US Bank Plaza
TRAM SL MO TI2M
St. Louis, Missouri 63101
Attn: Louis T. Dubuque, Vice President
Telephone No.: (314) 418-8371
Fax No.: (314) 418-3571
E-Mail Address: louis.t.dubuque@usbank.com
or to such other address or addresses as the party to be given notice may have
furnished in writing to the party seeking or desiring to give notice, as a
place for the giving of notice, provided that no change in address shall be
effective until seven days after being given to the other party in the manner
provided for above. Any notice given in accordance with the foregoing shall
be deemed given when delivered personally or, if mailed, five Business Days
after it shall have been deposited in the United States mails as aforesaid or,
if sent by overnight courier, the Business Day following the date of delivery
to such courier.
9.9. Successors and Assigns. This Agreement shall inure to the benefit
of the parties and their respective heirs, legal representatives, successors
and assigns except that, unless Lender consents in writing, no assignment made
by Borrower in violation of this Agreement shall confer any rights on any
assignee of Borrower.
9.10. No Joint Venture. Nothing contained herein or in any document
executed pursuant hereto and no action or inaction whatsoever on the part of
Lender, shall be deemed to make Lender a partner or joint venturer with
Borrower.
9.11. Brokerage Commissions. Lender and Borrower each represent and
warrant to the other that they have not dealt with any brokers or finders to
whom a brokerage commission or finders fee is due in connection with the
Facility. Each of Lender and Borrower hereby indemnifies and holds harmless
the other from all loss, cost and expenses (including reasonable attorneys'
fees and expenses) arising out of a breach of its representation and warranty
set forth in this Section 9.11. The provisions of this Section 9.11 shall
survive the Closing and the termination of this Agreement.
30
9.12. Publicity. Borrower shall not publicize the Facility without the
prior written consent of Lender, except that Borrower may make any required
filings with the SEC directly related to this Agreement, provided that, prior
to the disclosure thereof, Borrower shall use its best efforts to obtain
confidential treatment with respect to material terms contained in any such
filings, and Borrower shall take such other actions as may reasonably be
requested by Lender to ensure the confidentiality of the materials to be
disclosed.
9.13. Documentation. All documents and other matters required by any
of the provisions of this Agreement to be submitted or furnished to Lender
shall be in form and substance satisfactory to Lender.
9.14. Additional Assurances; Right of Sell-off. Borrower agrees that,
at any time or from time to time, upon the written request of Lender, it will
execute all such further documents and do all such other acts and things as
Lender may reasonably request to effectuate the transaction herein
contemplated. If any Event of Default that permits Lender to accelerate the
obligations of Borrower pursuant to Section 8.1.2 shall have occurred and be
continuing, Lender is hereby authorized at any time and from time to time to
set-off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and any and all other indebtedness at
any time owing by Lender to or for the credit or the account of Borrower
against any and all of Borrower's Liabilities irrespective of whether or not
Lender shall have made any demand hereunder or thereunder. Lender agrees
promptly to notify Borrower after any such set-off and application made by
Lender; provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of Lender
under this Section 9.14 are in addition to any other rights and remedies
(including, without limitation, other rights of set-off) which Lender may
have. Nothing contained in this Agreement or any other Transaction Document
shall impair the right of Lender to exercise any right of set-off or
counterclaim it may have against Borrower and to apply the amount subject to
such exercise to the payment of indebtedness of Borrower unrelated to this
Agreement or the other Transaction Documents.
9.15. Entire Agreement. This Agreement and the Disclosure Schedule and
Exhibits hereto constitute the entire agreement between the parties hereto
with respect to the subject matter hereof and may not be modified or amended
in any manner other than by supplemental written agreement executed by the
parties hereto.
9.16. Choice of Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of Nevada. Nothing herein
shall be deemed to limit any rights, powers or privileges which Lender may
have pursuant to any law of the United States of America or any rule,
regulation or order of any department or agency thereof and nothing herein
shall be deemed to make unlawful any transaction or conduct by Lender which is
lawful pursuant to, or which is permitted by, any of the foregoing.
9.17. Forum; Agent; Venue. To induce Lender to accept this Agreement
and the other Transaction Documents, Borrower irrevocably agrees that all
actions or proceedings in any way, manner, or respect, arising out of or from
or related to this Agreement or the other Transaction Documents shall be
litigated only in courts having situs within Los Angeles, California.
Borrower hereby consents and submits to the jurisdiction of any local, state,
or federal court located within said city. Borrower hereby irrevocably
appoints and designates CT Corporation, 818 W. Seventh Street, Los Angeles, CA
90017, or any other person having and maintaining a place of business in such
state, whom Borrower may from time to time hereafter designate (having give
five days' written notice thereof to Lender) as Borrower's true and lawful
attorney and duly authorized agent for acceptance of service of legal process.
Borrower agrees that service of such process upon such person shall constitute
personal service of such process upon Borrower. Borrower hereby waives
31
any right it may have to transfer or change the venue of any litigation
brought against Borrower by Lender.
9.18. No Third Party Beneficiary. This Agreement is made for the sole
benefit of Borrower and Lender, and no other person shall be deemed to have
any privity of contract hereunder nor any right to rely hereon to any extent
or for any purpose whatsoever, nor shall any other person have any right of
action of any kind hereon or be deemed to be a third party beneficiary
hereunder.
9.19. Legal Tender of United States. All payments hereunder shall be
made in coin or currency which at the time of payment is legal tender in the
United States of America for public and private debts.
9.20. Captions; Counterparts. Captions contained in this Agreement in
no way define, limit or extend the scope or intent of their respective
provisions. This Agreement may be executed by facsimile and in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed to be an original and all
of which taken together shall constitute but one and the same instrument.
9.21. Knowledge; Discretion. All references herein to a party's best
knowledge shall be deemed to mean the best knowledge of such party based on
commercially reasonable inquiry. All references herein to Borrower's
knowledge shall be deemed to refer to the best knowledge of Borrower and each
Subsidiary. Unless specified to the contrary herein, all references herein to
an exercise of discretion or judgment by Lender, to the making of a
determination or designation by Lender, to the application of Lender's
discretion or opinion, to the granting or withholding of Lender's consent or
approval, to the consideration of whether a matter or thing is satisfactory or
acceptable to Lender, or otherwise involving the decision making of Lender,
shall be deemed to mean that Lender shall decide unilaterally using its sole
and absolute discretion or judgment.
9.22. Lender's Representations and Warranties. Lender hereby
covenants, represents and warrants to Borrower that this Agreement and the
other Transaction Documents have been duly authorized, executed and delivered,
and are the legal, valid and binding obligations of Lender, enforceable in
accordance with their terms, except as enforceability thereof may be limited
by applicable bankruptcy, insolvency, fraudulent conveyance, reorganization or
other similar laws relating to or affecting the rights of creditors generally,
by general principles of equity and by federal or state securities laws or the
public policy underlying such laws.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
32
WAIVER OF RIGHT TO JURY TRIAL. BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVES ANY RIGHT THAT IT MAY HAVE TO A TRIAL BY JURY IN ANY
LITIGATION ARISING IN ANY WAY IN CONNECTION WITH THIS AGREEMENT, THE
SUBORDINATED DEBENTURE OR ANY OF THE OTHER TRANSACTION DOCUMENTS, OR ANY OTHER
STATEMENTS OR ACTIONS OF BORROWER OR LENDER. BORROWER ACKNOWLEDGES THAT IT
HAS BEEN REPRESENTED IN THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF
THIS WAIVER BY INDEPENDENT LEGAL COUNSEL SELECTED OF ITS OWN FREE WILL, AND
THAT IT HAS DISCUSSED THIS WAIVER WITH SUCH LEGAL COUNSEL. BORROWER FURTHER
ACKNOWLEDGES THAT (a) IT HAS READ AND UNDERSTANDS THE MEANING AND
RAMIFICATIONS OF THIS WAIVER, (b) THIS WAIVER HAS BEEN REVIEWED BY BORROWER
AND BORROWER'S COUNSEL AND IS A MATERIAL INDUCEMENT FOR LENDER TO ENTER INTO
THIS AGREEMENT AND THE OTHER TRANSACTION DOCUMENTS AND (c) THIS WAIVER SHALL
BE EFFECTIVE AS TO EACH OF SUCH TRANSACTION DOCUMENTS AS IF FULLY INCORPORATED
THEREIN.
IN WITNESS WHEREOF, the parties hereto have caused this Subordinated
Debenture Purchase Agreement to be executed by their duly authorized
representatives as of the date first above written.
FIRSTBANK NORTHWEST
/s/Larry K. Moxley
By: ------------------------------
Name: Larry K. Moxley
Title: Chief Financial Officer
WISCONSIN CAPITAL CORPORATION
/s/Louis T. Dubuque
By: ------------------------------
Name: Louis T. Dubuque
Title: Vice President
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EXHIBIT A
---------
FORM OF SUBORDINATED DEBENTURE
---------------------------------------
THIS SUBORDINATED DEBENTURE IS NOT A DEPOSIT AND IT IS NOT INSURED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION.
---------------------------------------
$3,000,000.00 Los Angeles, California
June 10, 2005
FOR VALUE RECEIVED, the undersigned, FIRSTBANK NORTHWEST, a Washington
state-chartered savings bank ("Borrower"), hereby promises to pay to the order
of WISCONSIN CAPITAL CORPORATION, a Nevada corporation, or any holder hereof
from time to time ("Lender"), at such place as may be designated in writing by
Lender, the principal sum of THREE MILLION AND NO/100 DOLLARS ($3,000,000.00)
(or so much thereof that has been advanced and remains outstanding) with
interest thereon as hereinafter provided. This Subordinated Debenture (this
"Subordinated Debenture") is issued pursuant to the terms of that certain
Subordinated Debenture Purchase Agreement of even date herewith by and between
Borrower and Lender (as may be amended, restated, supplemented or modified
from time to time, the "Purchase Agreement"). All capitalized terms used but
not defined herein shall have the respective meanings ascribed to them in the
Agreement.
The unpaid principal amount outstanding under this Subordinated Debenture
from time to time shall bear interest before maturity in accordance with the
Purchase Agreement. Under certain circumstances as provided in the Purchase
Agreement, overdue interest payments under this Subordinated Debenture shall
bear interest from the due date thereof until paid at a daily rate equal to
the Default Rate of interest.
Lender will note on its internal records the amount of each payment in
respect of the Subordinated Debenture. Whenever any payment to be made under
this Subordinated Debenture shall be due on a day that is other than a
Business Day, such payment shall be made on the next succeeding Business Day.
There shall be no penalties or other charges payable by Borrower to
Lender hereunder other than those payments expressly described in the Purchase
Agreement. Except as otherwise provided in the Purchase Agreement, all
payments hereunder shall be credited first to accrued interest and second to
the unpaid principal balance outstanding at the time of such payment.
The Subordinated Debenture may not be prepaid in any amount or at any
time prior to June 10, 2010, unless the Facility no longer constitutes Tier 2
capital of Borrower under applicable rules and regulations of the FDIC. From
and after June 10, 2010 (or any time if the Facility no longer constitutes
Tier 2 capital of Borrower under applicable rules and regulations of the
FDIC), Borrower may prepay all or part, of the outstanding unpaid principal
balance under this Subordinated Debenture without penalty as provided in the
Purchase Agreement. Borrower is required under regulations of the FDIC to
obtain prior FDIC approval before making any prepayment (including payment
pursuant to an acceleration clause or redemption prior to maturity); however,
Lender shall have no responsibility to verify whether Borrower has obtained
FDIC approval for any prepayment.
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This Subordinated Debenture is not secured by any assets of Borrower.
The indebtedness of Borrower evidenced by this Subordinated Debenture,
including the principal, premium, if any, and interest, shall be subordinate
and junior in right of payment to Borrower's obligations to its depositors,
and its other obligations to its general and secured creditors, except such
other creditors holding obligations of Borrower ranking on a parity with or
junior to this Subordinated Debenture, if any. This Subordinated Debenture is
ineligible as collateral for any loan made by Borrower.
If the Lender is a depository institution, Lender expressly waives any
right of offset it may have against Borrower.
In the event of any dissolution, liquidation or winding up of Borrower,
whether voluntary or involuntary, all obligations to Borrower's depositors,
general creditors and secured creditors, except such creditors holding
obligations of Borrower ranking on a parity with or junior to this
Subordinated Debenture, if any, shall be entitled to be paid in full before
any payment shall be made on account of the principal of or interest on this
Subordinated Debenture. In the event of any such proceeding, after payment in
full of all such sums owing with respect to such prior obligations, Lender,
together with the holders of any obligations of Borrower ranking on a parity
with this Subordinated Debenture, shall be entitled to be paid, from the
remaining assets of Borrower, the unpaid principal and interest of this
Subordinated Debenture or such obligations before any payment or other
distribution, whether in cash, property or otherwise, shall be made on account
of any capital stock or any obligation of Borrower ranking junior to this
Subordinated Debenture.
If an Event of Default shall occur, Lender shall have the rights set
forth in Article 8 of the Purchase Agreement. Borrower shall reimburse and
indemnify Lender and shall hold Lender harmless against any reasonable costs
(including court costs and attorneys' fees) incurred by Lender in the
collection of any amounts due as a result of an Event of Default or as
otherwise provided in the Purchase Agreement.
Lender may sell, assign, pledge or otherwise transfer or encumber any or
all of its interest under this Subordinated Debenture at any time and from
time to time. In the event of a transfer of the Subordinated Debenture, all
terms and conditions of this Subordinated Debenture shall be binding upon and
inure to the benefit of both the transferee and Borrower after such transfer;
provided, however, that Borrower shall have no obligation hereunder to any
such transferee unless and until any transfer of this Subordinated Debenture
is recorded on the books and records of Borrower.
Upon receipt of evidence reasonably satisfactory to Borrower of the loss,
theft, destruction or mutilation of this Subordinated Debenture, Borrower
shall, at Lender's expense, execute and deliver in lieu thereof a new
debenture in principal amount equal to the unpaid principal amount of such
lost, stolen, destroyed or mutilated debenture, dated the date to which
interest has been paid on such lost, stolen, destroyed or mutilated
Subordinated Debenture; provided that: (i) in the case of any such loss, theft
or destruction, Lender shall have delivered to Borrower an indemnity
reasonably satisfactory to Borrower indemnifying and holding Borrower harmless
from any and all liability, claim or damage resulting from such loss, theft or
destruction; or (ii) in the case of any such mutilation, upon surrender of
this Subordinated Debenture to Borrower.
Nothing herein shall impair the obligation of Borrower, which is absolute
and unconditional, to pay the principal of and any premium and interest on
this Subordinated Debenture according to its terms.
No provision of this Subordinated Debenture shall be amended or waived
except by a written instrument signed by a duly authorized officer of each of
Borrower and Lender. Any notices
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or other communications permitted or required hereunder shall be sent and
addressed in accordance with the requirements of the Purchase Agreement.
This Subordinated Debenture shall be governed by and construed in
accordance with the internal laws of the State of Nevada. Nothing herein
shall be deemed to limit any rights, powers or privileges which Lender may
have pursuant to any law of the United States of America or any rule,
regulation or order of any department or agency thereof and nothing herein
shall be deemed to make unlawful any transaction or conduct by Lender which is
lawful pursuant to, or which is permitted by, any of the foregoing.
To induce Lender to accept this Subordinated Debenture and the other
Transaction Documents, Borrower irrevocably agrees that all actions or
proceedings in any way, manner, or respect, arising out of or from or related
to this Subordinated Debenture shall be litigated only in courts having situs
within Los Angeles, California. Borrower hereby consents and submits to the
jurisdiction of any local, state, or federal court located within said city.
Borrower hereby irrevocably appoints and designates CT Corporation, or any
other person having and maintaining a place of business in such state, whom
Borrower may from time to time hereafter designate (having give five days'
written notice thereof to Lender) as Borrower's true and lawful attorney and
duly authorized agent for acceptance of service of legal process. Borrower
agrees that service of such process upon such person shall constitute personal
service of such process upon Borrower. Borrower hereby waives any right it
may have to transfer or change the venue of any litigation brought against
Borrower by Lender.
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BORROWER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT THAT
IT MAY HAVE TO A TRIAL BY JURY IN ANY LITIGATION ARISING IN ANY WAY IN
CONNECTION WITH THIS Subordinated DEBENTURE OR ANY OF THE OTHER TRANSACTION
DOCUMENTS, OR ANY OTHER STATEMENTS OR ACTIONS OF BORROWER OR LENDER.
BORROWER ACKNOWLEDGES THAT IT HAS BEEN REPRESENTED IN THE SIGNING OF THIS
SUBORDINATED DEBENTURE AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT LEGAL
COUNSEL SELECTED OF ITS OWN FREE WILL, AND THAT IT HAS DISCUSSED THIS WAIVER
WITH SUCH LEGAL COUNSEL. BORROWER FURTHER ACKNOWLEDGES THAT (i) IT HAS READ
AND UNDERSTANDS THE MEANING AND RAMIFICATIONS OF THIS WAIVER, (ii) THIS WAIVER
HAS BEEN REVIEWED BY BORROWER AND BORROWER'S COUNSEL AND IS A MATERIAL
INDUCEMENT FOR LENDER TO ENTER INTO THE TRANSACTION DOCUMENTS, AND (iii) THIS
WAIVER SHALL BE EFFECTIVE AS TO EACH OF THE TRANSACTION DOCUMENTS AS IF FULLY
INCORPORATED THEREIN.
IN WITNESS WHEREOF, the undersigned has executed this Subordinated
Debenture or caused this Subordinated Debenture to be executed by its duly
authorized representative as of the date first above written.
FIRSTBANK NORTHWEST
/s/Larry K. Moxley
By: ------------------------------
Name: Larry K. Moxley
Title: Chief Financial Officer
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