Exhibit 2.1
AGREEMENT AND PLAN OF REORGANIZATION
DATED AS OF OCTOBER 10, 2006
AMONG
WASHINGTON FEDERAL, INC.,
WASHINGTON FEDERAL ACQUISITION, INC.
AND
FIRST FEDERAL BANC OF THE SOUTHWEST, INC.
TABLE OF CONTENTS
Page
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ARTICLE I CERTAIN DEFINITIONS.............................................1
1.01 Certain Definitions.............................................1
ARTICLE II THE MERGER......................................................7
2.01 The Merger......................................................7
2.02 Effective Date and Effective Time; Closing......................8
ARTICLE III MERGER CONSIDERATION; EXCHANGE PROCEDURES.......................8
3.01 Conversion of Shares............................................8
3.02 Exchange Procedures.............................................9
3.03 Dissenting Shares..............................................11
3.04 FFSW Options...................................................11
3.05 Bank Merger....................................................11
ARTICLE IV ACTIONS PENDING ACQUISITION....................................11
4.01 Forbearances of FFSW...........................................11
4.02 No Fundamental Washington Federal Changes......................15
ARTICLE V REPRESENTATIONS AND WARRANTIES.................................15
5.01 Disclosure Schedules...........................................15
5.02 Standard.......................................................16
5.03 Representations and Warranties of FFSW.........................16
5.04 Representations and Warranties of Washington Federal...........33
5.05 Representations and Warranties of Merger Sub...................35
ARTICLE VI COVENANTS......................................................36
6.01 Reasonable Best Efforts........................................36
6.02 Shareholder Approval...........................................36
6.03 Proxy Statement................................................37
6.04 Regulatory Filings.............................................38
6.05 Press Releases.................................................38
6.06 Access; Information............................................38
6.07 Acquisition Proposals..........................................40
6.08 Certain Policies...............................................41
6.09 Indemnification................................................42
6.10 Benefit Plans..................................................43
6.11 Notification of Certain Matters................................44
TABLE OF CONTENTS
(Continued)
6.12 Estoppel Letters...............................................44
6.13 Assumption of Indenture Obligations............................44
6.14 Antitakeover Statutes..........................................45
6.15 Disposition of Certain Assets..................................45
6.16 Regulatory Remediation.........................................45
ARTICLE VII CONDITIONS TO CONSUMMATION OF THE MERGER.......................45
7.01 Conditions to Each Party's Obligation to Effect the Merger.....45
7.02 Conditions to Obligation of FFSW...............................46
7.03 Conditions to Obligation of Washington Federal.................47
ARTICLE VIII TERMINATION....................................................48
8.01 Termination....................................................48
8.02 Effect of Termination and Abandonment..........................49
ARTICLE IX MISCELLANEOUS..................................................50
9.01 Survival.......................................................50
9.02 Waiver; Amendment..............................................51
9.03 Counterparts...................................................51
9.04 Governing Law..................................................51
9.05 Expenses.......................................................51
9.06 Notices........................................................51
9.07 Entire Understanding; No Third Party Beneficiaries.............52
9.08 Severability...................................................52
9.09 Enforcement of the Agreement...................................53
9.10 Interpretation.................................................53
9.11 Assignment.....................................................53
9.12 Alternative Structure..........................................53
ANNEX A Form of Shareholder Agreement
ANNEX B Form of Agreement of Plan of Merger and Liquidation
ANNEX C Form of Bank Merger Agreement
ANNEX D Form of Tenant Estoppel Letter
TABLE OF CONTENTS
(Continued)
ANNEX E Form of Landlord Estoppel Letter
ANNEX F Form of Non-Compete, Non-Solicitation Agreement
ANNEX G Form of Non-Solicitation Agreement
ANNEX E Form of Landlord Estoppel Letter
ANNEX F Form of Non-Compete, Non-Solicitation Agreement
ANNEX G Form of Non-Solicitation Agreement
AGREEMENT AND PLAN OF REORGANIZATION, dated as of October 10, 2006, among
Washington Federal, Inc. ("Washington Federal"), Washington Federal Acquisition,
Inc. ("Merger Sub") and First Federal Banc of the Southwest, Inc. ("FFSW").
RECITALS
A. Washington Federal. Washington Federal is a Washington corporation,
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having its executive offices in Seattle, Washington.
B. FFSW. FFSW is a Delaware corporation, having its executive offices
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in Roswell, New Mexico.
C. Merger Sub. Merger Sub is a Delaware corporation and a wholly owned
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indirect subsidiary of Washington Federal.
D. Board Action. The respective Boards of Directors of Washington
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Federal, Merger Sub and FFSW have determined that it is in the best interests of
their respective companies and their stockholders to consummate the Merger (as
defined herein) provided for herein.
E. Shareholder Agreements. As a material inducement to Washington
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Federal to enter into this Agreement, and simultaneously with the execution of
this Agreement, certain Shareholders (as defined herein) is entering into an
agreement, in the form of Annex A hereto (collectively, the "Shareholder
Agreements") pursuant to which they have agreed, among other things, to vote
their shares of FFSW Common Stock (as defined herein) in favor of the approval
and adoption of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 Certain Definitions. The following terms are used in this
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Agreement with the meanings set forth below:
"Acquisition Proposal" has the meaning set forth in Section 6.07(a).
"Agreement" means this Agreement and Plan of Reorganization, as amended
or modified from time to time in accordance with Section 9.02.
"Agreement and Plan of Merger and Liquidation" means the Agreement and
Plan of Merger and Liquidation between FFSW and Washington Federal, the form of
which is attached hereto to Annex B, as amended or modified from time to time in
accordance with its provisions.
"Bank Merger" has the meaning set forth in Section 3.05.
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"Bank Merger Agreement" means the Agreement of Merger to be entered into
by and between WFS and FFB, the form of which is attached hereto as Annex C and
which form shall be subject to such changes as Washington Federal shall
reasonably specify.
"Bank Secrecy Act" means the Bank Secrecy Act of 1970, as amended.
"Benefit Plans" has the meaning set forth in Section 5.03(m)(i).
"Burdensome Condition" has the meaning set forth in Section 7.01(b).
"Business Day" means Monday through Friday of each week, except a legal
holiday recognized as such by the U. S. Government or any day on which banking
institutions in the States of New Mexico or Washington are authorized or
obligated to close.
"Certificate" means a certificate that immediately prior to the
Effective Time evidenced shares of FFSW Common Stock.
"Change in Control Benefit" has the meaning set forth in Section
5.03(m)(viii).
"Change in Recommendation" has the meaning set forth in Section 6.02(a).
"Closing" has the meaning set forth in Section 2.02(b).
"Code" means the Internal Revenue Code of 1986, as amended.
"Community Reinvestment Act" means the Community Reinvestment Act of
1977, as amended.
"Confidentiality Agreement" has the meaning set forth in Section
6.06(d).
"Control Transaction" has the meaning set forth in Section
8.02(b)(ii).
"Derivatives Contract" has the meaning set forth in Section
5.03(q)(ii).
"DGCL" means the Delaware General Corporation Law.
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Dissenting Shares" has the meaning set forth in Section 3.03.
"DOL" has the meaning set forth in Section 5.03(m)(i).
"Effective Date" has the meaning set forth in Section 2.02(a).
"Effective Time" has the meaning set forth in Section 2.02(a).
"Employees" has the meaning set forth in Section 5.03(m)(i).
"Environmental Laws" has the meaning set forth in Section 5.03(o).
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"Equal Credit Opportunity Act" means the Equal Credit Opportunity Act,
as amended.
"Equity Investment" means (i) an Equity Security; and (ii) an ownership
interest in any company or other entity, any membership interest that includes a
voting right in any company or other entity, any interest in real estate, and
any investment or transaction which in substance falls into any of these
categories even though it may be structured as some other form of investment or
transaction.
"Equity Security" means any stock, certificate of interest or
participation in any profit-sharing agreement, collateral-trust certificate,
preorganization certificate or subscription, transferable share, investment
contract, or voting-trust certificate; any security convertible into such a
security; any security carrying any warrant or right to subscribe to or purchase
any such security; and any certificate of interest or participation in,
temporary or interim certificate for, or receipt for any of the foregoing.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m)(iii).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Agent" means an agent appointed by Washington Federal and
reasonably acceptable to FFSW for the purpose of exchanging Certificates.
"Exchange Fund" has the meaning set forth in Section 3.02(a).
"Fair Housing Act" means the Fair Housing Act, as amended.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLB" means the Federal Home Loan Bank of Dallas.
"FFB" means First Federal Bank, a federally chartered savings bank and
wholly owned subsidiary of FFSW.
"FFB Board" means the Board of Directors of FFB.
"FFSW" has the meaning set forth in the preamble to this Agreement.
"FFSW Articles" means the Certificate of Incorporation of FFSW, as
amended.
"FFSW Board" means the Board of Directors of FFSW.
"FFSW Bylaws" means the Bylaws of FFSW, as amended.
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"FFSW Common Stock" means the common stock, $0.01 par value per share,
of FFSW.
"FFSW Group" means any "affiliated group" (as defined in Section
1504(a) of the Code without regard to the limitations contained in Section
1504(b) of the Code) that includes FFSW and its Subsidiaries and any predecessor
of and any successor to FFSW (or to another such predecessor or successor).
"FFSW Loan Property" has the meaning set forth in Section 5.03(o).
"FFSW Meeting" has the meaning set forth in Section 6.02(a).
"FFSW Options" means the options to acquire FFSW Common Stock issued
under the FFSW Stock Option Plans.
"FFSW Preferred Stock" means the preferred stock, $0.01 par value per
share, of FFSW.
"FFSW Stock Option Plans" means the First Federal Bank 1995 Stock
Option Plan and the First Federal Banc of the Southwest, Inc. 2002 Stock Option
and Incentive Plan.
"GAAP" means generally accepted accounting principles and practices as
in effect from time to time in the United States.
"Governmental Authority" means any federal, state, local or foreign
court, administrative agency or commission or other governmental authority
or instrumentality or self-regulatory organization.
"Gross-Up Payment" has the meaning set forth in Section 5.03(m)(viii).
"Hazardous Substance" has the meaning set forth in Section 5.03(o).
"Indemnified Parties" and "Indemnifying Party" have the meanings set
forth in Section 6.09(a).
"Insurance Policies" has the meaning set forth in Section 5.03(v).
"IRS" has the meaning set forth in Section 5.03(m)(i).
"Liens" means any charge, mortgage, pledge, security interest,
restriction, claim, lien or encumbrance.
"Liquidation" has the meaning set forth in Section 2.01(a).
"Loans" has the meaning set forth in Section 4.01(s).
"Material Adverse Effect" means (i) with respect to FFSW, any
effect that is material and adverse to the financial condition, results of
operations or business of FFSW and its Subsidiaries taken as a whole; provided,
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however, that Material Adverse Effect shall not be deemed to include the impact
of (a) changes in banking, savings institution and similar laws of general
applicability or interpretations thereof by Governmental Authorities, (b)
changes in GAAP or regulatory accounting requirements applicable to banks,
federal savings institutions and their holding companies generally, (c) changes
in general economic conditions affecting banks and their holding companies
generally, or (d) the effects of any action or omission taken with the prior
written consent of Washington Federal or as otherwise required by this
Agreement, provided that the effect of such changes described in clauses (a),
(b) and (c) shall not be excluded as a Material Adverse Effect to the extent of
a materially disproportionate impact (if any) they have on FFSW and its
Subsidiaries as a whole as measured relative to similarly situated companies in
the savings institution industry, or (ii) with respect to FFSW or Washington
Federal, any effect that would materially impair the ability of FFSW and its
Subsidiaries or Washington Federal and its Subsidiaries, as the case may be, to
perform their respective obligations under this Agreement, the Agreement and
Plan of Merger and Liquidation or the Bank Merger Agreement on a timely basis or
otherwise materially impede the consummation of the Transaction.
"Material Contracts" has the meaning set forth in Section 5.03(k)(i).
"Maximum Insurance Amount" has the meaning set forth in Section
6.09(c).
"Measuring Date" has the meaning set forth in Section 7.03(f)(i).
"Merger" has the meaning set forth in Section 2.01(a).
"Merger Consideration" has the meaning set forth in Section 3.01(c).
"Merger Sub" has the meaning set forth in the preamble to this
Agreement.
"National Labor Relations Act" means the National Labor Relations Act,
as amended.
"Option Merger Consideration" has the meaning set forth in Section
3.04.
"OTS" means the Office of Thrift Supervision.
"Pension Plan" has the meaning set forth in Section 5.03(m)(ii).
"Person" means any individual, bank, corporation, partnership,
association, joint-stock company, business trust, limited liability company or
unincorporated organization.
"Previously Disclosed" by a party shall mean information set forth in a
section of its Disclosure Schedule corresponding to the section of this
Agreement where such term is used.
"Proxy Statement" has the meaning set forth in Section 6.03(a).
"REO" means real estate owned.
"Representatives" has the meaning set forth in Section 6.07(a).
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"Rights" means, with respect to any Person, warrants, options, rights,
convertible securities and other arrangements or commitments of any character
that obligate the Person to purchase, issue or dispose of any of its capital
stock or other ownership interests or other securities representing the right to
purchase or otherwise receive any of its capital stock or other ownership
interests.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Securities Documents" has the meaning set forth in Section 5.03(g)(i).
"Shareholder Agreements" has the meaning set forth in the recitals to
this Agreement.
"Shareholders" means each director and executive officer of FFSW,
except for Richard Kauzlaric.
"Significant Subsidiaries" has the meaning ascribed to such term in
Rule l-02 of Regulation S-X of the SEC.
"Subsidiary" has the meaning ascribed to such term in Rule l-02 of
Regulation S-X of the SEC.
"Superior Proposal" has the meaning set forth in Section 6.07(a).
"Surviving Corporation" has the meaning set forth in Section 2.01(a).
"Tax" and "Taxes" mean all federal, state, local or foreign income,
gross income, gains, gross receipts, sales, use, ad valorem, goods and services,
capital, production, transfer, franchise, windfall profits, license,
withholding, payroll, employment, disability, employer health, excise,
estimated, severance, stamp, occupation, property, environmental, custom duties,
unemployment or other taxes of any kind whatsoever, together with any interest,
additions or penalties thereto and any interest in respect of such interest and
penalties.
"Tax Returns" means any return (including any amended return),
declaration or other report (including elections, declarations, claims for
refund, schedules, estimates and information returns) with respect to any Taxes
(including estimated taxes).
"Termination Fee" has the meaning set forth in Section 8.02(b).
"Transaction" means the Merger, the Liquidation and any other
transactions contemplated by this Agreement.
"Treasury Stock" means shares of FFSW Common Stock held by FFSW, other
than in a fiduciary (including custodial or agency) capacity or as a result of
debts previously contracted in good faith.
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"WBCA" means the Washington Business Corporation Act.
"Washington Federal" has the meaning set forth in the preamble to this
Agreement.
"Washington Federal Benefit Plans" has the meaning set forth in Section
6.10(a).
"Washington Federal Board" means the Board of Directors of Washington
Federal.
"WFS" means Washington Federal Savings and Loan Association, a
federally chartered savings association and wholly owned subsidiary of
Washington Federal.
"WFS Board" means the Board of Directors of WFS.
ARTICLE II
THE MERGER
2.01 The Merger.
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(a) The Merger. Subject to the terms and conditions of this Agreement,
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at the Effective Time, Merger Sub shall merge with and into FFSW in
accordance with the applicable provisions of the DGCL ( the "Merger"), the
separate corporate existence of Merger Sub shall cease and FFSW shall
survive and continue to exist as a corporation incorporated under the DGCL
(FFSW, as the surviving corporation in the Merger, sometimes being referred
to herein as the "Surviving Corporation"). Immediately following the
Merger, the Surviving Corporation will be merged and liquidated into
Washington Federal (the "Liquidation") in accordance with this Agreement
and the Agreement and Plan of Merger and Liquidation.
(b) Name. The name of the Surviving Corporation shall be "First Federal
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Banc of the Southwest, Inc."
(c) Certificate of Incorporation and Bylaws. The certificate of
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incorporation and bylaws of the Surviving Corporation immediately after the
Merger shall be the FFSW Articles and FFSW Bylaws as in effect immediately prior
to the Merger.
(d) Directors and Executive Officers of the Surviving Corporation. The
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directors of the Surviving Corporation immediately after the Merger shall be the
directors of Merger Sub immediately prior to the Merger. The executive officers
of the Surviving Corporation immediately after the Merger shall be the executive
officers of Merger Sub immediately prior to the Merger, each of whom shall serve
until such time as their successors shall be duly elected and qualified.
(e) Effect of the Merger. At the Effective Time, the effect of the
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Merger shall be as provided in the DGCL.
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(f) Additional Actions. If, at any time after the Effective Time, the
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Surviving Corporation shall consider that any further assignments or assurances
in law or any other acts are necessary or desirable to (i) vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation its right, title
or interest in, to or under any of the rights, properties or assets of FFSW or
Merger Sub acquired or to be acquired by the Surviving Corporation as a result
of, or in connection with, the Merger, or (ii) otherwise carry out the purposes
of this Agreement, FFSW, Merger Sub and their proper officers and directors,
shall be deemed to have granted to the Surviving Corporation an irrevocable
power of attorney to execute and deliver all such proper deeds, assignments and
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such rights, properties or assets in the
Surviving Corporation and otherwise to carry out the purposes of this Agreement,
and the proper officers and directors of the Surviving Corporation are fully
authorized in the name of the Surviving Corporation or otherwise to take any and
all such action.
2.02 Effective Date and Effective Time; Closing.
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(a) Subject to the satisfaction or waiver of the conditions set forth
in Article VII (other than those conditions that by their nature are to be
satisfied at the consummation of the Merger, but subject to the fulfillment or
waiver of those conditions), the parties shall cause a certificate of merger
relating to the Merger to be filed with the Secretary of State of the State of
Delaware pursuant to the DGCL on (i) the fifth Business Day following such
satisfaction or waiver, or (ii) such other date to which the parties may
mutually agree in writing. The Merger provided for herein shall become effective
upon such filings or on such date as may be specified therein. The date of such
filings is herein called the "Effective Date." The "Effective Time" of the
Merger shall be the time of such filings or as set forth in such filings.
(b) A closing (the "Closing") shall take place at the offices of Patton
Boggs LLP, 2550 M Street, NW, Washington, DC 20037, or at such other place as
the parties may mutually agree upon, on the Effective Date. At the Closing,
there shall be delivered to Washington Federal and FFSW the documents required
to be delivered under Article VII hereof.
ARTICLE III
MERGER CONSIDERATION; EXCHANGE PROCEDURES
3.01 Conversion of Shares. Subject to the provisions of this
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Agreement, at the Effective Time, automatically by virtue of the Merger and
without any action on the part of any Person:
(a) Outstanding Merger Sub Stock. Each share of common stock of Merger
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Sub that is issued and outstanding immediately prior to the Effective Time
shall, by virtue of the Merger, be converted into one validly issued, fully paid
and nonassessable share of the Surviving Corporation.
(b) Treasury Stock. Each share of FFSW Common Stock held as Treasury
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Stock immediately prior to the Effective Time shall be canceled and retired at
the Effective Time and no consideration shall be issued in exchange therefor.
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(c) Effect on FFSW Common Stock. Subject to Sections 3.03 and 6.16,
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each share of FFSW Common Stock, except for shares of Treasury Stock, shall be
converted, by virtue of the Merger, into the right to receive $24.14 in cash,
without interest (the "Merger Consideration").
3.02 Exchange Procedures.
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(a) Immediately prior to the Effective Time, for the benefit of the
holders of Certificates, Washington Federal shall deliver to the Exchange Agent
an amount of cash sufficient to make all payments required to be made pursuant
to this Article III, in exchange for Certificates representing outstanding
shares of FFSW Common Stock in accordance with this Article III (such cash
amount, the "Exchange Fund"). The Exchange Agent shall invest such deposited
cash as directed by Washington Federal, provided that such investments shall be
in obligations of or guaranteed by the United States of America, in commercial
paper obligations rated A-1 or P-1 or better by Moody's Investors Service, Inc.
or Standard & Poor's Corporation, respectively, or in certificates of deposit,
bank repurchase agreements or banker's acceptances of commercial banks with
capital exceeding $500 million. Any net profit resulting from, or interest or
income produced by, such investments will be payable to Washington Federal.
(b) As soon as reasonably practicable after the Effective Time (but
in no event later than five (5) Business Days after the Effective Time), the
Exchange Agent shall mail to each holder of record of a Certificate or
Certificates, a form of letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent) and instructions
for use in effecting the surrender of the Certificates in exchange for the
Merger Consideration into which the shares of FFSW Common Stock represented by
such Certificate or Certificates shall have been converted pursuant to Section
3.01. Upon proper surrender of a Certificate for exchange and cancellation to
the Exchange Agent,together with a properly completed letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor, promptly after the Effective Time, the Merger Consideration.
Until surrendered as contemplated by this Section 3.02(b), each Certificate
(other than Certificates representing Treasury Stock and other than Dissenting
Shares) shall be deemed at any time after the Effective Time to represent only
the right to receive upon such surrender the Merger Consideration provided in
Section 3.01 and any unpaid dividends and distributions on the shares of FFSW
Common Stock represented thereby with a record date prior to the Effective Time
and which remain unpaid at the Effective Time.
(c) If payment of the Merger Consideration is to be made to a Person
other than the registered holder of the Certificate surrendered in exchange
therefor, it shall be a condition of payment that the Certificate so surrendered
shall be properly endorsed (or accompanied by an appropriate form of assignment
separate from the Certificate) and otherwise in proper form for transfer, and
the Person requesting such payment shall pay to the Exchange Agent in advance
any transfer or other Taxes required by reason of the payment of the Merger
Consideration to a Person other than that of the registered holder of the
Certificate surrendered or otherwise establish to the satisfaction of the
Exchange Agent that such Taxes have been paid or are not payable.
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(d) At and after the Effective Time, the stock transfer books of FFSW
shall be closed and there shall be no transfers on the stock transfer books of
FFSW of the shares of FFSW Common Stock which were issued and outstanding
immediately prior to the Effective Time. At the Effective Time, holders of FFSW
Common Stock shall cease to be, and shall have no rights as, shareholders of
FFSW other than to receive the consideration provided under this Article III,
subject to Section 3.03 of this Agreement. On or after the Effective Time, any
Certificates presented to Washington Federal or the Exchange Agent for transfer
shall be cancelled and, subject to Section 3.03, exchanged for the Merger
Consideration as provided herein.
(e) Any portion of the Exchange Fund that remains unclaimed by the
shareholders of FFSW for nine months after the Effective Time (as well as any
proceeds from any investment thereof) shall be delivered by the Exchange Agent
to Washington Federal. Any shareholders of FFSW who have not theretofore
complied with Section 3.02(b) shall thereafter look only to Washington Federal
for the Merger Consideration deliverable in respect of each share of FFSW Common
Stock such shareholder holds as determined pursuant to this Agreement, in each
case without any interest thereon. If outstanding Certificates for shares of
FFSW Common Stock are not surrendered or the payment for them is not claimed
prior to the date on which the applicable Merger Consideration would otherwise
escheat to or become the property of any Governmental Authority, the unclaimed
items shall, to the extent permitted by abandoned property and any other
applicable law, become the property of Washington Federal (and to the extent not
in its possession shall be delivered to it), free and clear of all claims or
interest of any Person previously entitled to such property. Neither the
Exchange Agent nor any party to this Agreement shall be liable to any holder of
stock represented by any Certificate for any consideration paid to a public
official pursuant to applicable abandoned property, escheat or similar laws.
Washington Federal and the Exchange Agent shall be entitled to rely upon the
stock transfer books of FFSW to establish the identity of those Persons entitled
to receive the Merger Consideration specified in this Agreement, which books
shall be conclusive with respect thereto. In the event of a dispute with respect
to ownership of stock represented by any Certificate, Washington Federal and the
Exchange Agent shall be entitled to deposit any Merger Consideration represented
thereby in escrow with an independent third party and thereafter be relieved
with respect to any claims thereto.
(f) Washington Federal (through the Exchange Agent, if applicable)
shall be entitled to deduct and withhold from the consideration otherwise
payable pursuant to this Agreement to any holder of shares of FFSW Common Stock
such amounts as Washington Federal or the Exchange Agent are required to deduct
and withhold under the Code or applicable law. Any amounts so withheld shall be
treated for all purposes of this Agreement as having been paid to the holder of
FFSW Common Stock in respect of which such deduction and withholding was made by
Washington Federal.
(g) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by Washington
Federal, the posting by such Person of a bond in such amount as Washington
Federal may determine is reasonably necessary as indemnity against any claim
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that may be made against it with respect to such Certificate, the Exchange Agent
will issue in exchange for such lost, stolen or destroyed Certificate the Merger
Consideration deliverable in respect thereof pursuant to this Agreement.
3.03 Dissenting Shares. Each outstanding share of FFSW Common Stock,
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the holder of which has perfected his right to dissent pursuant to Section 262
of the DGCL and has not effectively withdrawn or lost such right as of the
Effective Time (the "Dissenting Shares"), shall not be converted into or
represent a right to receive the Merger Consideration hereunder, and the holder
thereof shall be entitled only to such rights as are granted by the DGCL. FFSW
shall give Washington Federal prompt notice upon receipt by FFSW of any such
written demands for payment of the fair value of such shares of FFSW Common
Stock and of withdrawals of such demands and any other instruments provided
pursuant to the DGCL. If any holder of Dissenting Shares shall have effectively
withdrawn or lost the right to dissent (through failure to perfect or
otherwise), the Dissenting Shares held by such holder shall be converted on a
share by share basis into the right to receive the Merger Consideration in
accordance with the applicable provisions of this Agreement. Any payments made
in respect of Dissenting Shares shall be made by Washington Federal or the
Surviving Corporation.
3.04 FFSW Options. At the Effective Time, each FFSW Option which is
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outstanding, vested and unexercised immediately prior to the Effective Time,
shall be canceled in exchange for the right to receive a single lump sum cash
payment, equal to the product of (i) the number of shares of FFSW Common Stock
subject to such FFSW Option immediately prior to the Effective Time, and (ii)
the excess, if any, of the Merger Consideration over the exercise price per
share of such FFSW Option (the "Option Merger Consideration") less any
applicable Taxes required to be withheld with respect to such payment. If the
exercise price per share of any such FFSW Option is equal to or greater than the
Merger Consideration, such FFSW Option shall be canceled without any cash
payment being made in respect thereof. FFSW shall use its reasonable best
efforts to obtain the written acknowledgment of each holder of a
then-outstanding FFSW Option with regard to the cancellation of such FFSW Option
and the payment therefor in accordance with the terms of this Agreement. Subject
to the foregoing, the FFSW Stock Option Plans and all FFSW Options issued
thereunder shall terminate at the Effective Time.
3.05 Bank Merger. As soon as practicable after the execution of this
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Agreement,or on such later date as Washington Federal shall specify, Washington
Federal and FFSW shall cause WFS and FFB to enter into the Bank Merger
Agreement, which provides for the merger of FFB with and into WFS (the "Bank
Merger"), in accordance with applicable laws and regulations and the terms of
the Bank Merger Agreement and as soon as practicable after consummation of the
Merger (or on such later date as Washington Federal shall specify). The Bank
Merger Agreement provides that the directors of WFS upon consummation of the
Bank Merger shall be the directors of WFS immediately prior to the Bank Merger.
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01 Forbearances of FFSW. From the date hereof until the Effective
---------------------
Time, except as expressly contemplated or permitted by this Agreement or as
11
Previously Disclosed, without the prior written consent of Washington Federal,
not to be unreasonably withheld, FFSW will not, and will cause each of its
Subsidiaries not to:
(a) Ordinary Course. Conduct its business other than in the
----------------
ordinary and usualcourse consistent with past practice or fail to use reasonable
best efforts to preserve its business organization, keep available the present
services of its employees and preserve for itself and Washington Federal the
goodwill of the customers of FFSW and its Subsidiaries and others with whom
business relations exist.
(b) Capital Stock. Other than pursuant to Rights set forth on
-------------
Schedule 4.01(b)of FFSW's Disclosure Schedule and outstanding on the date
hereof, (i) issue, sell or otherwise permit to become outstanding, or authorize
the creation of, any additional shares of stock or any Rights or (ii) permit any
additional shares of stock to become subject to grants of employee or director
stock options or other Rights.
(c) Dividends; Etc. (i) Make, declare, pay or set aside for payment
--------------
any dividend on or in respect of, or declare or make any distribution on, any
shares of FFSW capital stock, other than (1) a cash dividend of $0.07 per share
to be declared in September 2006 and paid in October 2006 to holders of FFSW
Common Stock, (2) to the extent the Merger is not consummated by January 10,
2007, a cash dividend of $0.07 per share which shall be declared and paid during
January 2007, or (3) dividends from wholly owned Subsidiaries of FFSW to FFSW or
(ii) directly or indirectly adjust, split, combine, redeem, reclassify, purchase
or otherwise acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into or amend
------------------------------------------
or renew any employment, consulting, severance, change in control, bonus, salary
continuation or other similar agreements or arrangements with any director,
officer or employee of FFSW or its Subsidiaries or grant any salary or wage
increase or award any incentive or other bonus payment or increase any employee
benefit (including incentive or bonus payments), except for (i) changes that are
required by applicable law, and (ii) to satisfy contractual obligations existing
as of the date hereof and set forth in Schedule 4.01(d) of FFSW's Disclosure
Schedule.
(e) Hiring. Hire any person as an employee of FFSW or any of its
------
Subsidiaries or promote any employee, except (i) to satisfy contractual
obligations existing as of the date hereof and set forth on Schedule 4.01(e) of
FFSW's Disclosure Schedule and (ii) persons hired to fill any vacancies arising
after the date hereof and whose employment is terminable at the will of FFSW or
a Subsidiary of FFSW, and who are not subject to or eligible for any severance
or similar benefits or payments that would become payable as a result of the
Transaction or consummation thereof.
(f) Benefit Plans. Enter into, establish, adopt, amend or
--------------
terminate, or make any contributions to (except (i) as may be required by
applicable law, (ii) for contributions to FFSW's defined contribution Benefit
Plan in the ordinary course and consistent with prior practice or (iii) to
satisfy contractual obligations existing as of the date hereof and set forth on
Schedule 4.01(f) of FFSW's Disclosure Schedule), any pension, retirement, stock
option, stock purchase, savings, profit sharing, deferred compensation,
12
consulting, bonus, group insurance or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement (or similar
arrangement) related thereto, in respect of any director, officer or employee of
FFSW or its Subsidiaries or take any action to accelerate the vesting or
exercisability of stock options, restricted stock or other compensation or
benefits payable thereunder.
(g) Dispositions. Except as required by this Agreement, sell,
------------
transfer, mortgage, license, encumber or otherwise dispose of or discontinue any
of its assets, rights, deposits, business or properties except in the ordinary
course of business consistent with past practice and in a transaction that,
together with all other such transactions, is not material to FFSW and its
Subsidiaries taken as a whole.
(h) Acquisitions. Acquire (other than by way of foreclosures or
------------
acquisitions of control in a bona fide fiduciary capacity or in satisfaction of
debts previously contracted in good faith, in each case in the ordinary and
usual course of business consistent with past practice), including by merger or
consolidation or by investment in a partnership or joint venture, all or any
portion of the assets, business, securities (other than as permitted by Section
4.01(r)), deposits or properties of any other entity.
(i) Capital Expenditures. Make any capital expenditures other than
--------------------
those identified on Schedule 4.01(i) of FFSW's Disclosure Schedule and other
than capital expenditures in the ordinary course of business consistent with
past practice in amounts not exceeding $10,000 individually or $50,000 in the
aggregate.
(j) Governing Documents. Amend the FFSW Articles or the FFSW Bylaws
-------------------
or the articles of incorporation or bylaws (or equivalent documents) of any
Subsidiary of FFSW or enter into a plan of consolidation, merger, share exchange
or reorganization with any person (other than consolidations, mergers or
reorganizations solely among wholly owned Subsidiaries of FFSW), or a letter of
intent or agreement in principle with respect thereto.
(k) Accounting Methods. Implement or adopt any change in its
-------------------
accounting principles, practices or methods, other than as may be required by
changes in laws or regulations or GAAP.
(l) Contracts. Except as otherwise permitted under this Section
---------
4.01, enter into, cancel, fail to renew or terminate any Material Contract or
amend or modify in any material respect any of its existing Material Contracts.
(m) Claims. Enter into any settlement or similar agreement with
------
respect to any action, suit, proceeding, order or investigation to which FFSW or
any of its Subsidiaries is or becomes a party after the date of this Agreement,
which settlement, agreement or action involves payment by FFSW or any of its
Subsidiaries of an amount which exceeds $10,000 and/or would impose any material
restriction on the business of FFSW or any of its Subsidiaries or create
precedent for claims that are reasonably likely to be material to FFSW and its
Subsidiaries taken as a whole.
(n) Banking Operations. Enter into any new material line of
-------------------
business; introduce any material new products or services; change its material
lending, investment, underwriting, pricing, servicing, risk and asset liability
13
management and other material banking and operating policies, except as required
by applicable law, regulation or policies imposed by any Governmental Authority,
or the manner in which its investment securities or loan portfolio is classified
or reported; or invest in any mortgage-backed or mortgage-related security that
would be considered "high risk" under applicable regulatory guidance; or file
any application or enter into any contract with respect to the opening,
relocation or closing of, or open, relocate or close, any branch, office
servicing center or other facility other than those identified on Schedule
4.01(n) of FFSW's Disclosure Schedule.
(o) Marketing. Introduce any material marketing campaigns or any
---------
material new sales compensation or incentive programs or arrangements (except
those the material terms of which have been fully disclosed in writing to
Washington Federal prior to the date hereof).
(p) Derivatives Contracts. Enter into any Derivatives Contract.
---------------------
(q) Indebtedness. Incur any indebtedness for borrowed money (other
------------
than deposits, federal funds purchased, cash management accounts, Federal Home
Loan Bank borrowings that mature within 90 days and that have no put or call
features and securities sold under agreements to repurchase that mature within
90 days, in each case in the ordinary course of business consistent with past
practice); or assume, guarantee, endorse or otherwise as an accommodation become
responsible for the obligations of any other Person, other than with respect to
the collection of checks and other negotiable instruments in the ordinary course
of business consistent with past practice.
(r) Investment Securities. Acquire (other than by way of
-----------------------
foreclosures or acquisitions in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in each case in the
ordinary course of business consistent with past practice) any debt security or
Equity Investment other than federal funds or United States Government
securities or United States Government agency securities, in each case, with a
term of 90 days or less.
(s) Loans. (A) Make, renew or otherwise modify any loan, loan
-----
commitment, letter of credit or other extension of credit (collectively,
"Loans"), other than Loans made or acquired in the ordinary course of business
consistent with past practice which have (y) in the case of non-real estate
secured loans that are originated in compliance with the entity's internal loan
policies, a principal balance not in excess of $250,000 and, (z) in the case of
real estate secured loans that are originated in compliance with the entity's
internal loan policies, a principal balance not in excess of $1.0 million; (B)
take any action that would result in any discretionary release of collateral or
guarantees or otherwise restructure the respective amounts set forth in clause
(A) above; or (C) enter into any Loan securitization or create any special
purpose funding entity.
(t) Investments in Real Estate. Make any investment or commitment
--------------------------
to invest in real estate or in any real estate development project (other than
by way of foreclosure or acquisitions in a bona fide fiduciary capacity or in
satisfaction of a debt previously contracted in good faith, in each case in the
ordinary course of business consistent with past practice).
14
(u) Adverse Actions. Take any action that is intended or is
----------------
reasonably likely to result in (x) any of its representations and warranties set
forth in this Agreement being or becoming untrue in any material respect at any
time at or prior to the Effective Time, (y) any of the conditions to the Merger
set forth in Article VII not being satisfied or (z) a material violation of any
provision of this Agreement, the Agreement and Plan of Merger and Liquidation or
the Bank Merger Agreement, in either case, except as may be required by
applicable law or regulation.
(v) Tax Elections. Make or change any material Tax election, settle
-------------
or compromise any material Tax liability of FFSW or any of its Subsidiaries,
agree to an extension or waiver of the statute of limitations with respect to
the assessment or determination of a material amount of Taxes of FFSW or any of
its Subsidiaries, enter into any closing agreement with respect to any material
amount of Taxes or surrender any right to claim a material Tax refund, adopt or
change any method of accounting with respect to Taxes, or file any amended Tax
Return.
(w) Antitakeover Statutes. Take any action (i) that would cause
---------------------
this Agreement or the Transaction to be subject to the provisions of any state
antitakeover law or state law that purports to limit or restrict business
combinations or the ability to acquire or vote shares or (ii) to exempt or make
not subject to the provisions of any state antitakeover law or state law that
purports to limit or restrict business combinations or the ability to acquire or
vote shares, any Person (other than Washington Federal or its Subsidiaries) or
any action taken thereby, which Person or action would have otherwise been
subject to the restrictive provisions thereof and not exempt therefrom.
(x) Commitments. Enter into any contract with respect to, or
-----------
otherwise agree or commit to do, any of the foregoing.
4.02 No Fundamental Washington Federal Changes. Except as expressly
---------------------------------------------
contemplated or permitted by this Agreement or as required by applicable law,
rule or regulation, during the period from the date of this Agreement to the
Effective Time, Washington Federal shall not, without the prior written consent
of FFSW (which consent shall not be unreasonably withheld), (i) take any action
that is intended or may reasonably be expected to result in any of the
conditions to the Merger set forth in Article VII not being satisfied, (ii) take
any action or fail to take any action which would reasonably be expected to
materially and adversely impair or delay consummation of the transactions
contemplated hereby beyond the time period contemplated by this Agreement or
(iii) agree to, or make any commitment to, take any of the actions prohibited by
this Section 4.02.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Schedules. On or prior to the date hereof, FFSW has
---------------------
delivered to Washington Federal a schedule and Washington Federal has delivered
to FFSW a schedule (respectively, its "Disclosure Schedule") setting forth,
among other things, items the disclosure of which is necessary or appropriate
15
either in response to an express disclosure requirement contained in a provision
hereof or as an exception to one or more representations or warranties contained
in Section 5.03 or 5.04 or to one or more of its covenants contained in Article
IV or Article VI; provided, however, the mere inclusion of an item in a
Disclosure Schedule as an exception to a representation or warranty shall not be
deemed an admission by a party that such item represents a material exception or
fact, event or circumstance or that, absent such inclusion in the Disclosure
Schedule, such item is or would be reasonably likely to result in a Material
Adverse Effect.
5.02 Standard. Solely for purposes of determining whether the condition set
--------
forth in Section 7.02(a) or 7.03(a), as the case may be, has been satisfied (and
without otherwise qualifying any representation or warranty made on the date
hereof), no representation or warranty of FFSW or Washington Federal contained
in Sections 5.03 or 5.04, respectively, other than the representations and
warranties set forth in Section 5.03(b), the last sentence of Section
5.03(m)(vi), and Section 5.03(m)(viii), which shall be true in all material
respects, shall be deemed untrue or incorrect for purposes of Section 7.02(a) or
7.03(a), and no party hereto shall be deemed to have breached a representation
or warranty for purposes of such Sections, as a consequence of the existence of
any fact, event or circumstance unless such fact, circumstance or event,
individually or taken together with all other facts, events or circumstances
inconsistent with any representation or warranty contained in Sections 5.03 or
5.04, has had or is reasonably likely to have a Material Adverse Effect on the
party making such representation or warranty.
5.03 Representations and Warranties of FFSW. Subject to Section 5.01, FFSW
--------------------------------------
hereby represents and warrants to Washington Federal:
(a) Organization, Standing and Authority. FFSW is duly organized,
------------------------------------
validly existing and in good standing under the laws of the State of Delaware.
FFSW is duly licensed or qualified to do business and is in good standing in
each jurisdiction where its ownership or leasing of property or assets or the
conduct of its business requires it to be so licensed or qualified, except where
the failure to be so licensed or qualified would not have nor reasonably be
expected to have a Material Adverse Effect on FFSW. FFSW has in effect all
federal, state, local and foreign governmental authorizations necessary for it
to own or lease its properties and assets and to carry on its business as now
conducted. The copies of the FFSW Articles and FFSW Bylaws which have previously
been made available to Washington Federal are true, complete and correct copies
of such documents as in effect on the date of this Agreement. The minute books
of FFSW and each of its Subsidiaries previously made available to Washington
Federal contain true, complete and correct records in all material respects of
all meetings and other material corporate actions held or taken of their
respective stockholders and Board of Directors (including committees of their
respective Boards of Directors) through the date hereof.
(b) FFSW Capital Stock. The authorized capital stock of FFSW
--------------------
consists solely of 6,000,000 shares of FFSW Common Stock, of which 3,992,453
shares are issued and outstanding as of the date hereof, and 500,000 shares of
FFSW Preferred Stock, of which no shares are issued and outstanding as of the
date hereof. As of the date hereof, 320,592 shares of FFSW Common Stock were
held in treasury by FFSW or otherwise directly or indirectly owned by FFSW. The
outstanding shares of FFSW Common Stock have been duly authorized and validly
16
issued and are fully paid and non-assessable, and none of the outstanding shares
of FFSW Common Stock have been issued in violation of the preemptive rights of
any Person. Section 5.03(b) of FFSW's Disclosure Schedule sets forth for each
FFSW Option the name of the grantee, the date of the grant, the type of grant,
the status of the option grant as qualified or non-qualified under Section 422
of the Code, the number of shares of FFSW Common Stock subject to each FFSW
Option, the number of shares of FFSW Common Stock subject to FFSW Options that
are currently exercisable and the exercise price per share. Except as set forth
in the preceding sentence, there are no shares of FFSW Common Stock reserved for
issuance, FFSW does not have any Rights issued or outstanding with respect to
FFSW Common Stock and FFSW does not have any commitment to authorize, issue or
sell any FFSW Common Stock or Rights. No bonds, debentures, notes or other
indebtedness having the right to vote on any matters on which stockholders of
FFSW may vote are outstanding. No Equity Securities have been issued or
authorized for issuance by FFSW from June 30, 2006 through the date hereof.
(c) Subsidiaries.
------------
(i) (A) FFSW has Previously Disclosed a list of all of
its Subsidiaries together with the jurisdiction of organization of each such
Subsidiary, (B) except as set forth in Section 5.03(c)(i) of FFSW's Disclosure
Schedule, FFSW owns, directly or indirectly, all the issued and outstanding
Equity Securities of each of its Subsidiaries, (C) no Equity Securities of any
of its Subsidiaries are or may become required to be issued (other than to FFSW)
by reason of any Right or otherwise, (D) there are no contracts, commitments,
understandings or arrangements by which any of its Subsidiaries is or may be
bound to sell or otherwise transfer any of its Equity Securities (other than to
FFSW or any of its wholly owned Subsidiaries), (E) there are no contracts,
commitments, understandings, or arrangements relating to FFSW's rights to vote
or to dispose of such securities and (F) all the Equity Securities of FFSW's
Subsidiaries held by FFSW or its Subsidiaries are fully paid and nonassessable
and are owned by FFSW or its Subsidiaries free and clear of any Liens. No bonds,
debentures, notes or other indebtedness having the right to vote on any matters
on which stockholders of any of the FFSW Subsidiaries may vote are outstanding.
(ii) Except as set forth in Section 5.03(c)(ii) of
FFSW's Disclosure Schedule and except for securities and other interests held in
a fiduciary capacity and beneficially owned by third parties or taken in
consideration of debts previously contracted, ownership interests in FFSW's
Subsidiaries and stock in the FHLB, FFSW does not own beneficially, directly or
indirectly, any Equity Securities or similar interests of any Person or any
interest in a partnership or joint venture of any kind.
(iii) Each of FFSW's Subsidiaries has been duly
organized, is validly existing and, with respect to each FFSW Subsidiary other
than FFB, is in good standing, in each case under the laws of the jurisdiction
of its organization, and is duly licensed or qualified to do business and in
good standing in the jurisdictions where its ownership or leasing of property or
the conduct of its business requires it to be so licensed or qualified, except
where the failure to be so licensed or qualified would not have nor reasonably
be expected to have a Material Adverse Effect on FFSW. Each of FFSW's
Subsidiaries has in effect all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as now conducted.
17
(iv) The deposit accounts of FFB are insured by the
FDIC, in the manner and to the maximum extent provided by applicable law, and
FFB has paid all deposit insurance premiums and assessments required by
applicable laws and regulations.
(d) Corporate Power. Each of FFSW and its Subsidiaries has the
---------------
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and FFSW has the corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and the Agreement and Plan of Merger and Liquidation and to consummate
the Transaction and to cause FFB to consummate the Bank Merger Agreement, and
FFB has the corporate power and authority to execute, deliver and perform its
obligations under the Bank Merger Agreement, in each case, subject to receipt of
all necessary approvals of Governmental Authorities and the approval by FFSW's
stockholders of this Agreement.
(e) Corporate Authority. Subject to the approval of this Agreement
-------------------
by the holders of the outstanding FFSW Common Stock, this Agreement, the
Agreement and Plan of Merger and Liquidation and the Transaction and the Bank
Merger and Bank Merger Agreement have been authorized by all necessary corporate
action of FFSW and FFB and the FFSW Board and the FFB Board on or prior to the
date hereof and the FFSW Board has recommended that stockholders of FFSW adopt
this Agreement and directed that such matter be submitted for consideration by
FFSW's stockholders at the FFSW Meeting. FFSW has duly executed and delivered
this Agreement and, assuming due authorization, execution and delivery by
Washington Federal and Merger Sub, this Agreement is a valid and legally binding
obligation of FFSW, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles).
(f) Regulatory Approvals; No Defaults.
---------------------------------
(i) No consents or approvals of, or waivers by, or
filings or registrations with, any Governmental Authority or with any third
party are required to be made or obtained by FFSW or any of its Subsidiaries in
connection with the execution, delivery or performance by FFSW of this Agreement
and the Agreement and Plan of Merger and Liquidation and by FFB of the Bank
Merger Agreement, or to consummate the Transaction, except as Previously
Disclosed and except for (A) filings of applications or notices, and articles of
combination with, and approvals or waivers by, the OTS, (B) filings with the SEC
and state securities authorities, as applicable, in connection with the
submission of this Agreement for the approval of the holders of FFSW Common
Stock, (C) the filing of a certificate of merger with the Secretary of State of
the State of Delaware pursuant to the DGCL with respect to the Merger, (D) the
filing of articles of merger with the Secretary of State of the State of
Washington pursuant to the WBCA and a certificate of merger with the Secretary
of State of the State of Delaware pursuant to the DGCL, in each case with
respect to the Liquidation and (E) the approval of this Agreement by the holders
of a majority of the outstanding shares of FFSW Common Stock.
18
(ii) Subject to receipt, or the making, of the consents,
approvals, waivers and filings referred to in the preceding paragraph and the
expiration of related waiting periods, the execution, delivery and performance
of this Agreement, the Agreement and Plan of Merger and Liquidation and the Bank
Merger Agreement by FFSW and FFB, as applicable, and the consummation of the
Transaction do not and will not (A) except as Previously Disclosed, constitute a
breach or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies or any right of termination under, any law, code,
ordinance, rule or regulation or any judgment, decree, injunction, order,
governmental permit or license, or agreement, indenture or instrument of FFSW or
any of its Subsidiaries or to which FFSW or any of its Subsidiaries or any of
their respective properties is subject or bound, (B) constitute a breach or
violation of, or a default under, the FFSW Articles, the FFSW Bylaws or similar
governing documents of FFSW's Subsidiaries or (C) require any consent or
approval under any such law, code, ordinance, rule, regulation, judgment,
decree, injunction, order, governmental permit or license, agreement, indenture
or instrument.
(g) Financial Reports; Undisclosed Liabilities; Internal Controls.
-------------------------------------------------------------
(i) FFSW's Annual Report on Form 10-KSB for the fiscal
year ended September 30, 2005 and all other reports, registration statements,
definitive proxy statements or information statements filed or to be filed by it
subsequent to September 30, 2002 with the SEC (collectively, FFSW's "Securities
Documents"), as of the date filed or to be filed and as amended prior to the
date hereof, (A) complied or will comply in all material respects as to form
with the applicable regulations of the SEC as the case may be and (B) did not
and will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading; and each of the consolidated statements of financial condition
contained in any such Securities Documents (including the related notes and
schedules thereto) fairly presents, or will fairly present, the consolidated
financial position of FFSW and its Subsidiaries as of its date, and each of the
consolidated statements of income, stockholders' equity and cash flows or
equivalent statements in such Securities Documents (including any related notes
and schedules thereto) fairly presents, or will fairly present, the consolidated
results of operations, changes in stockholders' equity and cash flows of FFSW
and its Subsidiaries for the periods to which they relate, in each case in
accordance with GAAP consistently applied during the periods involved, except in
each case as may be noted therein. Each of such financial statements (including
any related notes and schedules thereto) complies in all material respects with
applicable accounting requirements and with the published rules and regulations
of the SEC with respect thereto. The books and records of FFSW and its
Subsidiaries have been, and are being, maintained in all material respects in
accordance with GAAP and any other applicable legal and accounting requirements
and reflect only actual transactions.
(ii) FFSW has filed all forms, reports, statements,
certifications and other documents (including all exhibits, amendments and
supplements thereto) required to be filed by it with the SEC since September 30,
2002. None of FFSW's Subsidiaries is required to file periodic reports with the
SEC pursuant to the Exchange Act. FFSW has made available to Washington Federal
true, correct and complete copies of all written correspondence between the SEC,
on the one hand, and FFSW and any of its Subsidiaries, on the other hand,
19
occurring since September 30, 2002. As of the date of this Agreement, there are
no outstanding or unresolved comments in comment letters received from the SEC
staff with respect to FFSW's Securities Documents. To the knowledge of FFSW,
none of the FFSW's Securities Documents is the subject of ongoing SEC review or
outstanding SEC comment.
(iii) Except as set forth on the statement of financial
condition of FFSW dated as of June 30, 2006 and included in FFSW's Securities
Documents filed prior to the date hereof, neither FFSW nor any of its
Subsidiaries has any material liability (whether absolute, contingent or accrued
or otherwise and whether due or to become due) other than liabilities incurred
after June 30, 2006 in the ordinary course of business consistent with past
practice and, to FFSW's knowledge, there is no existing condition, event or
circumstance which could result in any such material liability in the future
other than the sale of certain assets required by this Agreement.
(iv) Since June 30, 2006, (A) FFSW and its Subsidiaries
have conducted their respective businesses in the ordinary and usual course
consistent with past practice, (B) except as Previously Disclosed, neither FFSW
nor any of its Subsidiaries has taken nor permitted or entered into any contract
with respect to, or otherwise agreed or committed to do or take, any of the
actions set forth in Section 4.01 and (C) no event has occurred or circumstance
arisen that, individually or taken together with all other facts, circumstances
and events (described in any paragraph of this Section 5.03 or otherwise), has
had or is reasonably likely to have a Material Adverse Effect with respect to
FFSW.
(v) No agreement pursuant to which any loans or other
assets have been or shall be sold by FFSW or its Subsidiaries entitled the buyer
of such loans or other assets, unless there is material breach of a
representation or covenant by FFSW or its Subsidiaries, to cause FFSW or its
Subsidiaries to repurchase such loan or other asset or the buyer to pursue any
other form of recourse against FFSW or its Subsidiaries. Section 5.03(g)(v) of
FFSW's Disclosure Schedule sets forth all cash, stock or other dividend or any
other distribution with respect to the capital stock of FFSW or any of its
Subsidiaries that has been declared, set aside or paid for the past two years,
as well as all shares of capital stock of FFSW that have been purchased,
redeemed or otherwise acquired, directly or indirectly, by FFSW or any of its
Subsidiaries for the past two years.
(vi) The records, systems, controls, data and
information of FFSW and its Subsidiaries are recorded, stored, maintained and
operated under means (including any electronic, mechanical or photographic
process, whether computerized or not) that are under the exclusive ownership and
direct control of FFSW or its Subsidiaries or accountants (including all means
of access thereto and therefrom), except for any non-exclusive ownership and
non-direct control that would not reasonably be expected to have a material
adverse effect on the system of internal accounting controls described below in
this Section 5.03(g)(vi). FFSW (i) has implemented and maintains disclosure
controls and procedures (as defined in Rule 13a-15(e) of the Exchange Act) to
ensure that material information relating to FFSW, including its consolidated
Subsidiaries, is made known to the chief executive officer and the chief
financial officer of FFSW by others within those entities and (ii) has
disclosed, based on its most recent evaluation prior to the date hereof, to
20
FFSW's outside auditors and the audit committee of the FFSW Board (x) any
significant deficiencies and material weaknesses in the design or operation of
internal controls over financial reporting (as defined in Rule 13a-15(f) of the
Exchange Act) which are reasonably likely to adversely affect FFSW's ability to
record, process, summarize and report financial information and (y) any fraud,
whether or not material, that involves management or other employees who have a
significant role in FFSW's internal controls over financial reporting. These
disclosures were made in writing by management to FFSW's auditors and audit
committee and a copy has previously been made available to Washington Federal.
The Chief Executive Officer and the Chief Financial Officer of FFSW have signed,
and FFSW has furnished to the SEC, all certifications required by Rule 13a-14 or
15d-14 under the Exchange Act or 18 U.S.C. ss. 1350; such certifications contain
no qualifications or exceptions to the matters certified therein and have not
been modified or withdrawn; and neither FFSW nor any of its officers has
received notice from any Governmental Authorities questioning or challenging the
accuracy, completeness, form or manner of filing or submission of such
certifications.
(vii) Since the enactment of the Sarbanes-Oxley Act, (i)
neither FFSW nor any of its Subsidiaries nor, to the knowledge of FFSW, any
director, officer, employee, auditor, accountant or representative of FFSW or
any of its Subsidiaries, has received or otherwise had or obtained knowledge of
any material complaint, allegation, assertion or claim, whether written or oral,
regarding the accounting or auditing practices, procedures, methodologies or
methods of FFSW or any of its Subsidiaries or their respective internal
accounting controls, including any material complaint, allegation, assertion or
claim that FFSW or any of its Subsidiaries has engaged in questionable
accounting or auditing practices, and (ii) no attorney representing FFSW or any
of its Subsidiaries, whether or not employed by FFSW or any of its Subsidiaries,
has reported evidence of a material violation of securities laws, breach of
fiduciary duty or similar violation by FFSW or any of its Subsidiaries or their
respective officers, directors, employees or agents to the FFSW Board or any
committee thereof or, to the knowledge of FFSW, to any director or officer of
FFSW.
(h) Legal Proceedings. Except as Previously Disclosed, no
-----------------
litigation, arbitration, claim or other proceeding before any court or
governmental agency is pending against FFSW or any of its Subsidiaries and, to
FFSW's knowledge, no such litigation, arbitration, claim or other proceeding has
been threatened and there are no facts which could reasonably give rise to such
litigation, arbitration, claim or other proceeding. Neither FFSW nor any of its
Subsidiaries nor any of their respective properties is a party to or subject to
any order, judgment, decree or regulatory restriction that, individually or in
the aggregate, has had or could reasonably be expected to have a Material
Adverse Effect with respect to FFSW.
(i) Regulatory Matters.
------------------
(i) Neither FFSW nor any of its Subsidiaries nor any of
their respective properties is a party to or is subject to any order, decree,
directive, agreement, memorandum of understanding or similar arrangement with,
or a commitment letter or similar submission to, or extraordinary supervisory
letter from, nor has FFSW or any of its Subsidiaries adopted any policies,
procedures or board resolutions at the request or suggestion of, any
Governmental Authority. FFSW and its Subsidiaries have paid all assessments made
or imposed by any Governmental Authority.
(ii) Except as Previously Disclosed, neither FFSW nor
any of its Subsidiaries has been advised by, nor does it have any knowledge of
21
facts which could give rise to an advisory notice by, any Governmental Authority
that such Governmental Authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, directive, agreement, memorandum of understanding, commitment letter,
supervisory letter or similar submission or any request for the adoption of any
policy, procedure or board resolution.
(iii) (A) Except as Previously Disclosed, no
Governmental Authority has initiated since September 30, 2001 or has pending any
proceeding, enforcement action or, to the knowledge of FFSW, investigation or
inquiry into the business, operations, policies, practices or disclosures of
FFSW or any of its Subsidiaries (other than normal examinations conducted by a
Governmental Authority in the ordinary course of the business of FFSW and its
Subsidiaries), or, to the knowledge of FFSW, threatened any of the foregoing,
and (B) there is no unresolved violation, criticism, comment or exception by any
Governmental Authority with respect to any report or statement relating to any
examinations or inspections of FFSW or any of its Subsidiaries.
(iv) The most recent regulatory rating given to FFB as
to compliance with the Community Reinvestment Act is "outstanding." To the
knowledge of FFSW, since the last regulatory examination of FFB with respect to
Community Reinvestment Act compliance, FFB has not received any complaints as to
Community Reinvestment Act compliance.
(j) Compliance With Laws. Each of FFSW and its Subsidiaries:
--------------------
(i) except as Previously Disclosed, is and at all times
since September 30, 2002 has been in material compliance with all applicable
federal, state, local and foreign statutes, laws, codes, regulations,
ordinances, rules, judgments, injunctions, orders, decrees or policies and/or
guidelines of any Governmental Authority applicable thereto or to the employees
conducting such businesses, including, without limitation, Sections 23A and 23B
of the Federal Reserve Act and OTS regulations pursuant thereto, the Equal
Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act,
the Home Mortgage Disclosure Act, the Bank Secrecy Act, the USA PATRIOT Act, all
other applicable fair lending laws and other laws relating to discriminatory
business practices and Environmental Laws and all posted and internal policies
of FFSW and its Subsidiaries relating to customer data, privacy and security;
(ii) has and at all times since September 30, 2002 has
had all permits, licenses, franchises, authorizations, orders and approvals of,
and has made all filings, applications and registrations with, all Governmental
Authorities (and has paid all fees and assessments due and payable in connection
therewith) that are required in order to permit it to own or lease its
properties and to conduct its business as presently conducted; all such permits,
licenses, franchises, certificates of authority, orders and approvals are in
full force and effect and, to FFSW's knowledge, no suspension or cancellation of
any of them is threatened; and
(iii) except as Previously Disclosed, has received,
since September 30, 2001, no notification or communication from any Governmental
Authority (A) asserting that FFSW or any of its Subsidiaries is not in
compliance with any of the statutes, regulations or ordinances which such
22
Governmental Authority enforces or (B) threatening to revoke any license,
franchise, permit or governmental authorization (nor, to FFSW's knowledge, do
any grounds for any of the foregoing exist).
(k) Material Contracts; Defaults.
----------------------------
(i) Except for documents listed as exhibits to FFSW's
Securities Documents, neither FFSW nor any of its Subsidiaries is a party to,
bound by or subject to any agreement, contract, arrangement, commitment or
understanding (whether written or oral) (A) with respect to the employment of
any of its directors, officers, employees or consultants, (B) which would
entitle any present or former director, officer, employee or agent of FFSW or
any of its Subsidiaries to indemnification from FFSW or any of its Subsidiaries,
(C) which is a material contract (as defined in Item 601(b)(10) of Regulation
S-K of the SEC), (D) which is an agreement (including data processing, software
programming, consulting and licensing contracts) not terminable on 60 days or
less notice and involving the payment or value of more than $20,000 per annum,
(E) which is with or to a labor union or guild (including any collective
bargaining agreement), (F) which relates to the incurrence of indebtedness
(other than deposit liabilities, advances and loans from the FHLB, and sales of
securities subject to repurchase, in each case in the ordinary course of
business), (G) which grants any person a right of first refusal, right of first
offer or similar right with respect to any material properties, rights, assets
or businesses of FFSW or its Subsidiaries, (H) which involves the purchase or
sale of assets with a purchase price of $100,000 or more in any single case or
$250,000 in all such cases, other than purchases and sales of investment
securities and loans in the ordinary course of business consistent with past
practice, (I) which is a consulting agreement, license or service contract
(including data processing, software programming and licensing contracts and
outsourcing contracts) which involve the payment of $20,000 or more in annual
fees (other than any such agreement, license or contract listed in Section
5.03(k)(i)(I) of FFSW's Disclosure Schedule), (J) which provides for the payment
by FFSW or its Subsidiaries of payments upon a change of control thereof other
than as set forth in Section 5.03(k)(i)(J) of FFSW's Disclosure Schedule, (K)
which is a lease for any real or material personal property owned or presently
used by FFSW or any of its Subsidiaries, (L) which materially restricts the
conduct of any business by FFSW or by any of its Subsidiaries or limits the
freedom of FFSW or any of its Subsidiaries to engage in any line of business in
any geographic area (or would so restrict the Surviving Corporation or any of
its affiliates after consummation of the Transaction) or which requires
exclusive referrals of business or requires FFSW or any of its Subsidiaries to
offer specified products or services to their customers or depositors on a
priority or exclusive basis, or (M) which is with respect to, or otherwise
commits FFSW or any of its Subsidiaries to do, any of the foregoing
(collectively, "Material Contracts"). FFSW has Previously Disclosed and made
available to Washington Federal true and correct copies of each such Material
Contract.
(ii) Each Material Contract is valid and binding on FFSW
and its Subsidiaries and is in full force and effect (other than due to the
ordinary expiration thereof) and, to the knowledge of FFSW, is valid and binding
on the other parties thereto. Neither FFSW or any of its Subsidiaries nor, to
the knowledge of FFSW, any other parties thereto, is in material default under
any contract, agreement, commitment, arrangement, lease, insurance policy or
23
other instrument to which it is a party, by which its assets, business, or
operations may be bound or affected, or under which it or its respective assets,
business, or operations receives benefits, and there has not occurred any event
that, with the lapse of time or the giving of notice or both, would constitute
such a default. Except as provided in this Agreement, no power of attorney or
similar authorization given directly or indirectly by FFSW or any of its
Subsidiaries is currently outstanding.
(iii) Section 5.03(k)(iii) of FFSW's Disclosure Schedule
sets forth a schedule of all officers and directors of FFSW and its Subsidiaries
who have outstanding loans from FFSW or any of its Subsidiaries, and there has
been no default on, or forgiveness or waiver of, in whole or in part, any such
loan during the two years immediately preceding the date hereof.
(l) No Brokers. No action has been taken by FFSW or any of its
----------
Subsidiaries that would give rise to any valid claim against any party hereto
for a brokerage commission, finder's fee or other like payment with respect to
the Transaction, excluding a Previously Disclosed fee to be paid to Baxter
Fentriss and Company. Copies of all agreements with Baxter Fentriss and Company
have been previously furnished to Washington Federal.
(m) Employee Benefit Plans.
----------------------
(i) All benefit and compensation plans, contracts,
policies or arrangements covering current or former employees of FFSW and its
Subsidiaries (the "Employees") and current or former directors or independent
contractors of FFSW and its Subsidiaries including, but not limited to,
"employee benefit plans" within the meaning of Section 3(3) of ERISA, and
severance, employment, change in control, fringe benefit, deferred compensation,
stock option, stock purchase, stock appreciation rights, stock based, incentive
and bonus plans, agreements, programs, policies or other arrangements (the
"Benefit Plans"), have been Previously Disclosed to Washington Federal. True and
complete copies of (A) all Benefit Plans including, but not limited to, any
trust instruments and insurance contracts forming a part of any Benefit Plans
and all amendments thereto; (B) the most recent annual report (Form 5500),
together with all schedules, as required, filed with the Internal Revenue
Service ("IRS") or Department of Labor (the "DOL"), as applicable, and any
financial statements and opinions required by Section 103(e)(3) of ERISA with
respect to each Benefit Plan; (C) for each Benefit Plan which is a "top-hat"
plan, a copy of filings with the DOL; (D) the most recent determination letter
issued by the IRS for each Benefit Plan that is intended to be "qualified" under
Section 401(a) of the Code; (E) the most recent summary plan description and any
summary of material modifications, as required, for each Benefit Plan; (F) the
most recent actuarial report, if any relating to each Benefit Plan; (G) the most
recent actuarial valuation, study or estimate of any retiree medical and life
insurance benefits plan or supplemental retirement benefits plan; and (H) the
most recent summary annual report for each Benefit Plan required to provide
summary annual reports by Section 104 of ERISA, have been provided or made
available to Washington Federal.
(ii) Each Benefit Plan has been established and
administered to date in all material respects in accordance with the applicable
provisions of ERISA, the Code and applicable law and with the terms and
provisions of all documents, contracts or agreements pursuant to which such
Benefit Plan is maintained. Each Benefit Plan which is an "employee pension
24
benefit plan" within the meaning of Section 3(2) of ERISA (a "Pension Plan") and
which is intended to be qualified under Section 401(a) of the Code, has received
a favorable determination letter from the IRS, and FFSW is not aware of any
circumstances likely to result in revocation of any such favorable determination
letter or the loss of the qualification of such Pension Plan under Section
401(a) of the Code. Neither FFSW nor any of its Subsidiaries has received any
correspondence or written or verbal notice from the IRS, DOL, any other
governmental agency, any participant in or beneficiary of, a Benefit Plan, or
any agent representing any of the foregoing that brings into question the
qualification of any such Benefit Plan. There is no material pending or, to
FFSW's knowledge, threatened litigation relating to the Benefit Plans. Neither
FFSW nor any of its Subsidiaries has engaged in a transaction with respect to
any Benefit Plan or Pension Plan that could subject FFSW or any of its
Subsidiaries to a tax or penalty imposed by either Section 4975 of the Code or
Section 502(i) of ERISA in an amount which would be material. There are no
matters pending before the IRS, DOL or other governmental agency with respect to
any Benefit Plan. No Benefit Plan or related trust has been the subject of an
audit, investigation or examination by a Governmental Authority.
(iii) No liability under Title IV of ERISA has been or
is expected to be incurred by FFSW or any of its Subsidiaries with respect to
any ongoing, frozen or terminated "single-employer plan," within the meaning of
Section 4001(a)(15) of ERISA, currently or formerly maintained by any of them or
the single-employer plan of any entity which is considered one employer with
FFSW under Section 4001 of ERISA or Section 414 of the Code (an "ERISA
Affiliate"). Neither FFSW nor any of its Subsidiaries has incurred, and neither
expects to incur, any withdrawal liability with respect to a multiemployer plan
(as defined in 4001(a)(3) of ERISA) under of Title IV of ERISA (regardless of
whether based on contributions of an ERISA Affiliate). No notice of a
"reportable event," within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any Pension Plan or by any ERISA Affiliate or will be required to be filed
in connection with the Transaction. There has been no termination or partial
termination, as defined in Section 411(d) of the Code and the regulations
thereunder, of any Pension Plan.
(iv) All contributions required to be made under the
terms of any Benefit Plan have been timely made or have been reflected on the
financial statements of FFSW included in FFSW's Securities Documents. Neither
any Pension Plan nor any single-employer plan of an ERISA Affiliate has an
"accumulated funding deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA and no ERISA Affiliate has an
outstanding funding waiver. Except as Previously Disclosed, neither FFSW nor any
of its Subsidiaries has provided, or is required to provide, security to any
Pension Plan or to any single-employer plan of an ERISA Affiliate pursuant to
Section 401(a)(29) of the Code.
(v) Neither FFSW nor any of its Subsidiaries has any
obligations for retiree health and life benefits under any Benefit Plan, other
than coverage as may be required under Section 4980B of the Code or Part 6 of
Title I of ERISA, or under the continuation of coverage provisions of the laws
of any state or locality. FFSW or any of its Subsidiaries may amend or terminate
any such Benefit Plan in accordance with and to the extent permitted by their
terms at any time without incurring any liability thereunder. No event or
condition exists with respect to a Benefit Plan that could subject FFSW to a
material tax under Section 4980B of the Code.
25
(vi) None of the execution of this Agreement,
shareholder approval of this Agreement or consummation of the Transaction,
either along or in connection with a subsequent event, will, except as
Previously Disclosed, (A) entitle any Employees or any current or former
director or independent contractor of FFSW or any of its Subsidiaries to
severance pay or any increase in severance pay upon any termination of
employment after the date hereof, (B) accelerate the time of payment or vesting
or trigger any payment or funding (through a grantor trust or otherwise) of
compensation or benefits under, increase the amount payable or trigger any other
material obligation pursuant to, any of the Benefit Plans, (C) result in any
breach or violation of, or a default under, any of the Benefit Plans or (D)
result in any payment that would be a "parachute payment" to a "disqualified
individual" as those terms are defined in Section 280G of the Code, without
regard to whether such payment is reasonable compensation for personal services
performed or to be performed in the future.
(vii) All required reports and descriptions (including
but not limited to Form 5500 annual reports and required attachments, Forms
1099-R, summary annual reports, Forms PBGC-1 and summary plan descriptions) have
been filed or distributed appropriately with respect to each Benefit Plan. All
required tax filings with respect to each Benefit Plan have been made, and any
taxes due in connection with such filings have been paid.
(viii) Section 5.03(m)(viii) of the FFSW Disclosure
Schedule sets forth the following: (A) the maximum amount of all payments and
benefits to which each individual set forth on such schedule is entitled to
receive, pursuant to all employment, salary continuation, bonus, change in
control, and all other agreements, plans and arrangements, in connection with a
termination of employment before or following, or otherwise in connection with
or contingent upon, the transactions contemplated under this Agreement, such
amounts to be adjusted to take into account only those changes expressly
identified in Section 5.03(m)(viii) of the FFSW Disclosure Schedule (each such
total amount in respect of each such individual, the "Change in Control
Benefit"), other than the payment any such individual shall otherwise be
entitled to receive as a gross-up payment in respect of any excise tax imposed
on the individual pursuant to Section 4999 of the Code as calculated pursuant to
the applicable agreement (each such payment, a "Gross-Up Payment"); (B) the
amount of any Gross-Up Payment payable to each such individual; and (C) the
maximum aggregate amount of all Change in Control Benefits and Gross-Up
Payments.
(ix) No Benefit Plan is or has been funded by,
associated with, or related to a "voluntary employee's beneficiary association"
within the meaning of Section 501(c)(9) of the Code, a "welfare benefit fund"
within the meaning of Section 419 of the Code, a "qualified asset account"
within the meaning of Section 419A of the Code or a "multiple employer welfare
arrangement" within the meaning of Section 3(40) of ERISA.
(x) Each Benefit Plan which is a "nonqualified deferred
compensation plan" (within the meaning of Section 409A of the Code) has been
operated in compliance with Section 409A of the Code and the guidance issued by
the IRS with respect to such plans.
(n) Labor Matters. Neither FFSW nor any of its Subsidiaries is a
-------------
party to or is bound by any collective bargaining agreement, contract or other
26
agreement or understanding with a labor union or labor organization, nor is FFSW
or any of its Subsidiaries the subject of a proceeding asserting that it has
committed an unfair labor practice (within the meaning of the National Labor
Relations Act) or seeking to compel FFSW or any of its Subsidiaries to bargain
with any labor organization as to wages or conditions of employment, nor is
there any strike or other labor dispute involving it or any of its Subsidiaries
pending or, to FFSW's knowledge, threatened, nor is FFSW or any of its
Subsidiaries aware of any activity involving its employees seeking to certify a
collective bargaining unit or engaging in other organizational activity. Each of
FFSW and its Subsidiaries has paid in full all wages, salaries, commissions,
bonuses, benefits and other compensation currently due to its employees or
otherwise arising on a current basis under any policy, practice, agreement,
plan, program, statute or other law.
(o) Environmental Matters. Except as Previously Disclosed, there
---------------------
are no legal, administrative, arbitral or other proceedings, claims, actions,
causes of action, private environmental investigations, remediation activities
or governmental investigations of any nature seeking to impose, or that
reasonably could be expected to result in the imposition, on FFSW or any of its
Subsidiaries of any liability or obligation arising under any Environmental Laws
pending or, to the knowledge of FFSW, threatened against FFSW or any of its
Subsidiaries, which liability or obligation could have or could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
FFSW or its Subsidiaries taken as a whole. To the knowledge of FFSW, there is no
reasonable basis for any such proceeding, claim, action, environmental
remediation or investigation that could impose any liability or obligation that
could have or could reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on FFSW or its Subsidiaries taken as a
whole. FFSW and its Subsidiaries are in compliance in all material respects with
applicable Environmental Laws. To FFSW's knowledge, no real property (including
buildings or other structures) currently or formerly owned or operated by FFSW
or any of its Subsidiaries, or any property in which FFSW or any of its
Subsidiaries has held a security interest, Lien or a fiduciary or management
role ("FFSW Loan Property"), has been contaminated with, or has had any release
of, any Hazardous Substance that has resulted, or would reasonably be expected
to result, in a Material Adverse Effect with respect to FFSW. Neither FFSW nor
any of its Subsidiaries could be deemed the owner or operator of, nor has it
participated in the management regarding Hazardous Substances of, any FFSW Loan
Property which has been contaminated with, or has had any release of, any
Hazardous Substance that has resulted, or would reasonably be expected to
result, in a Material Adverse Effect with respect to FFSW. Neither FFSW nor any
of its Subsidiaries has any liability for any Hazardous Substance disposal or
contamination on any third party property. Neither FFSW nor any of its
Subsidiaries nor, to FFSW's knowledge, any Person whose liability FFSW or any of
its Subsidiaries has assumed whether contractually or by operation of law, has
received any notice, demand letter, claim or request for information alleging
any material violation of, or material liability under, any Environmental Law.
Neither FFSW nor any of its Subsidiaries is subject to any order, decree,
injunction or other agreement with any Governmental Authority or any third party
relating to any Environmental Law. To FFSW's knowledge, there are no
circumstances or conditions (including the presence of asbestos, underground
storage tanks, lead products, polychlorinated biphenyls, prior manufacturing
operations, dry-cleaning, or automotive services) involving FFSW or any of its
Subsidiaries, any currently or formerly owned or operated property, any FFSW
Loan Property, or, to FFSW's knowledge, any Person whose liability FFSW or any
of its Subsidiaries has assumed whether contractually or by operation of
27
law,that could reasonably be expected to result in any material claims,
liability or investigations against FFSW or any of its Subsidiaries, result in
any material restrictions on the ownership, use, or transfer of any property
pursuant to any Environmental Law, or adversely affect the value of any FFSW
Loan Property. FFSW has Previously Disclosed and made available to Washington
Federal copies of all environmental reports or studies, sampling data,
correspondence and filings in its possession or reasonably available to it
relating to FFSW, its Subsidiaries and any currently or formerly owned or
operated property.
As used herein, the term "Environmental Laws" means any federal,
state, local or foreign law, statute, code, ordinance, injunction, regulation,
order, decree, permit, authorization, opinion or agency or Governmental
Authority requirement relating to: (A) the protection or restoration of the
environment, health, safety, or natural resources, (B) the handling, use,
presence, disposal, release or threatened release of any Hazardous Substance or
(C) wetlands, indoor air, pollution, contamination or any injury or threat of
injury to persons or property in connection with any Hazardous Substance; and
the term "Hazardous Substance" means any substance that is: (A) listed,
classified or regulated pursuant to any Environmental Law, (B) any petroleum,
petroleum product or by-product, asbestos-containing material, lead-containing
paint or plumbing, polychlorinated biphenyls, radioactive materials, radon or
urea-formaldehyde insulation or (C) any other substance which is the subject of
regulatory action by any Governmental Authority in connection with any
Environmental Law.
(p) Tax Matters.
-----------
(i) (A) All Tax Returns that are required to be filed
on or before the Effective Date (taking into account any extensions of time
within which to file which have not expired) by or with respect to the FFSW
Group, including FFSW and its Subsidiaries, have been or will be timely filed on
or before the Effective Date, (B) all such Tax Returns are or will be true and
complete in all material respects, (C) all Taxes shown to be due on the Tax
Returns referred to in clause (A) have been or will be timely paid in full and
all other Taxes that are imposed on any member of the FFSW Group and that have
due dates on or before the Effective Date have or will be paid, (D) the Tax
Returns referred to in clause (A) are not currently under examination and have
not been examined by the IRS or the appropriate Tax authority, the FFSW Group
has not extended or waived the statute of limitations for any such Tax Returns
and the period for assessment of the Taxes in respect of which such Tax Returns
were required to be filed has expired, (E) all deficiencies asserted or
assessments made as a result of examinations conducted by any taxing authority
have been paid in full, (F) no issues that have been raised by the appropriate
taxing authority in writing in connection with the examination of any of the Tax
Returns referred to in clause (A) are currently pending and (G) no member of the
FFSW Group has extended or waived any statutes of limitation with respect to any
Taxes of FFSW. There are no material Liens for Taxes upon the assets of FFSW or
its Subsidiaries, other than with respect to Taxes not yet due and payable or
that are being contested in good faith by appropriate proceedings and for which
reserves adequate in accordance with GAAP have been provided. No written claim
has ever been made by any Governmental Authority in a jurisdiction where neither
FFSW nor any of its Subsidiaries files Tax Returns that it is or may be subject
to taxation by that jurisdiction.
28
(ii) FFSW has made available to Washington Federal true
and correct copies of the United States federal income Tax Returns filed by FFSW
for each of the three most recent fiscal years for which such returns have been
filed.
(iii) Neither FFSW nor any of its Subsidiaries has any
liability with respect to income, franchise or similar Taxes that accrued on or
before the end of the most recent period covered by FFSW's Securities Documents
filed prior to the date hereof in excess of the amounts accrued or subject to a
reserve with respect thereto that are reflected in the financial statements
included in FFSW's Securities Documents filed on or prior to the date hereof.
(iv) Neither FFSW nor any of its Subsidiaries is a party
to any Tax allocation, Tax indemnity or Tax sharing agreement, is or has been a
member of an affiliated group filing consolidated unitary or combined Tax
Returns (other than a group the common parent of which is or was FFSW) or, to
the knowledge of FFSW, has any liability for Taxes of any Person (other than a
member of the FFSW Group) arising from the application of Treasury Regulation
section 1.1502-6 or any analogous provision of state, local or foreign law, or
otherwise has any liability for the Taxes of any Person (other than a member of
the FFSW Group) as a transferee or successor, by contract, or otherwise.
(v) No closing agreements, private letter rulings,
technical advice memoranda or similar agreements or rulings have been entered
into or issued by any taxing authority with respect to FFSW and its Subsidiaries
and no such agreement or ruling has been applied for and is currently pending.
(vi) Except as set forth in Section 5.03(p)(vi) of
FFSW's Disclosure Schedule, neither FFSW nor any of its Subsidiaries maintains
any compensation or benefits plans, programs or arrangements the payments under
which would not reasonably be expected to be deductible as a result of the
limitations under Section 162(m), 280G or 424 of the Code and the regulations
issued thereunder (or any similar provision of state or local laws).
(vii) (A) No Tax is required to be withheld pursuant to
Section 1445 of the Code as a result of the Transaction and (B) all Taxes that
FFSW or any of its Subsidiaries is or was required by law to withhold, collect
or deposit have been duly withheld, collected or deposited and, to the extent
required by applicable law, have been paid to the proper Governmental Authority
or other Person.
(viii) None of FFSW or any of its Subsidiaries has been
either a "distributing corporation" or a "controlled corporation" in a
distribution occurring during the last five years in which the parties to such
distribution treated the distribution as one to which Section 355 of the Code is
applicable.
(ix) None of FFSW or any of its Subsidiaries will be
required to include amounts in income, or exclude items of deduction, in a
taxable period beginning after the Effective Date as a result of (i) a change in
method of accounting occurring prior to the Effective Date, (ii) an installment
sale or open transaction arising in a taxable period (or portion thereof) ending
29
on or before the Effective Date, (iii) a prepaid amount received, or paid, prior
to the Effective Date or (iv) deferred intercompany gains or losses,
intercompany items, or similar items arising prior to the Effective Date.
(x) None of FFSW or any of its Subsidiaries has engaged
in any transaction that could give rise to (i) a registration obligation with
respect to any Person under Section 6111 of the Code or the regulations
thereunder, (ii) a list maintenance obligation with respect to any Person under
Section 6112 of the Code or the regulations thereunder, or (iii) a disclosure
obligation as a "reportable transaction" under Section 6011 of the Code and the
regulations thereunder.
(xi) None of FFSW or any of its Subsidiaries has or has
had a permanent establishment in any foreign country, as defined in any
applicable Tax treaty or convention between the United States and such foreign
country, and none of FFSW or any of its Subsidiaries has engaged in a trade or
business within, or derived any income from, any foreign country.
(q) Risk Management Instruments.
---------------------------
(i) Neither FFSW nor any of its Subsidiaries is a party
or has agreed to enter into a Derivatives Contract, whether for the account of
FFSW or any of its Subsidiaries.
(ii) "Derivatives Contract" means any swap transaction,
option, warrant, forward purchase or sale transaction, futures transaction, cap
transaction, floor transaction or collar transaction relating to one or more
currencies, commodities, bonds, equity securities, loans, interest rates,
credit-related events or conditions or any indexes, or any other similar
transaction or combination of any of these transactions, including
collateralized mortgage obligations or other similar instruments or any debt or
equity instruments evidencing or embedding any such types of transactions, and
any related credit support, collateral or other similar arrangements related to
such transactions; provided that, for the avoidance of doubt, the term
"Derivatives Contract" shall not include any FFSW Options.
(r) Loans; Nonperforming and Classified Assets.
------------------------------------------
(i) Each Loan on the books and records of FFSW and its
Subsidiaries was made and has been serviced in all material respects in
accordance with their customary lending standards in the ordinary course of
business, is evidenced in all material respects by appropriate and sufficient
documentation and, to the knowledge of FFSW, constitutes the legal, valid and
binding obligation of the obligor named therein, subject to bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws of
general applicability relating to or affecting creditor's rights or by general
equity principles.
(ii) FFSW has Previously Disclosed as to FFSW and each
FFSW Subsidiary as of the latest practicable date prior to the date of this
Agreement: (A) any written or, to FFSW's knowledge, oral Loan under the terms of
which the obligor is 60 or more days delinquent in payment of principal or
interest, or to FFSW's knowledge, in default of any other material provision
thereof; (B) each Loan which has been classified as "substandard," "doubtful,"
30
"loss" or "special mention" (or words of similar import) by FFSW, a FFSW
Subsidiary or an applicable regulatory authority (it being understood that no
representation is being made that the OTS would agree with the loan
classifications established by FFSW or any of the FFSW Subsidiaries); (C) a
listing of the REO acquired by foreclosure or by deed-in-lieu thereof, including
the book value thereof; and (D) each Loan with any director, executive officer
or five percent or greater shareholder of FFSW or a FFSW Subsidiary, or to the
knowledge of FFSW, any Person controlling, controlled by or under common control
with any of the foregoing.
(s) Properties. Except as set forth in Section 5.03(s) of FFSW's
----------
Disclosure Schedule, all real and personal property owned by FFSW or a
Subsidiary of FFSW or presently used by any of them in their respective business
is in good condition (ordinary wear and tear excepted) and is sufficient to
carry on its business in the ordinary course of business consistent with its
past practices. FFSW has good and marketable title free and clear of all Liens
to all of the material properties and assets, real and personal, reflected on
the consolidated statement of financial condition of FFSW as of June 30, 2006,
included in FFSW's Securities Documents or acquired after such date, other than
properties sold by FFSW in the ordinary course of business, except (i) Liens for
current taxes and assessments not yet due or payable for which adequate reserves
have been established, (ii) pledges to secure deposits incurred in the ordinary
course of its banking business consistent with past practice, (iii) such
imperfections of title, easements and encumbrances, if any, as are not material
in character, amount or extent and (iv) as reflected on the consolidated
statement of financial condition of FFSW as of June 30, 2006 included in FFSW's
Securities Documents filed prior to the date of this Agreement. All real and
personal property which is material to FFSW's business on a consolidated basis
and leased or licensed by FFSW or a Subsidiary of FFSW is held pursuant to
leases or licenses which are valid and enforceable in accordance with their
respective terms and such leases will not terminate or lapse prior to the
Effective Time.
(t) Intellectual Property. FFSW and each Subsidiary of FFSW owns or
---------------------
possesses valid and binding licenses and other rights to use without payment of
any material amount all material patents, copyrights, trade secrets, trade
names, service marks, trademarks and other intellectual property rights used in
its businesses, free and clear of any material Liens, all of which have been
Previously Disclosed by FFSW, and none of FFSW or any of its Subsidiaries has
received any notice of conflict or allegation of invalidity with respect thereto
or that asserts the intellectual property rights of others. To the knowledge of
FFSW, the operation of the business of FFSW and each of its Subsidiaries does
not infringe or violate the intellectual property of any third party. FFSW and
each of its Subsidiaries have performed in all material respects all the
obligations required to be performed by them and are not in default under any
contract, agreement, arrangement or commitment relating to any of the foregoing.
(u) Books and Records. Since September 30, 2001, the books and
-------------------
records of FFSW and its Subsidiaries have been fully, properly and accurately
maintained in material compliance with applicable legal and accounting
requirements, and such books and records accurately reflect in all material
respects all dealings and transactions in respect of the business, assets,
liabilities and affairs of FFSW and such Subsidiaries.
(v) Insurance. FFSW has Previously Disclosed all of the material
---------
insurance policies, binders, or bonds currently maintained by FFSW and its
31
Subsidiaries ("Insurance Policies"). Except as Previously Disclosed, FFSW and
its Subsidiaries are insured with reputable insurers against such risks and in
such amounts as the management of FFSW has reasonably determined to be prudent
in accordance with industry practices; all the Insurance Policies are in full
force and effect; FFSW and its Subsidiaries are not in material default
thereunder; and all claims thereunder have been filed in due and timely fashion.
(w) Allowance For Loan Losses. FFSW's allowance for loan losses is,
-------------------------
and shall be as of the Effective Date, in compliance with FFSW's existing
methodology for determining the adequacy of its allowance for loan losses as
well as the standards established by applicable Governmental Authorities and the
Financial Accounting Standards Board and is and shall be adequate under all such
standards.
(x) Required Vote; Antitakeover Provisions.
-------------
(i) The affirmative vote of the holders of a majority of
the issued and outstanding shares of FFSW Common Stock is necessary to approve
this Agreement and the Merger on behalf of FFSW. No other vote of the
stockholders of FFSW is required by law, the FFSW Articles, the FFSW Bylaws or
otherwise to approve this Agreement, the Agreement and Plan of Merger and
Liquidation, the Bank Merger Agreement and the Merger.
(ii) The Board of Directors of FFSW has taken all
necessary action so that no "control share acquisition," "business combination
moratorium," "fair price" or other forms of antitakeover statute or regulation
under the DGCL or any applicable provisions of the takeover laws of any other
state (and any comparable provisions of the FFSW Articles and FFSW Bylaws),
apply or will apply to this Agreement, the Agreement and Plan of Merger and
Liquidation, the Bank Merger Agreement or the Transaction.
(y) Fairness Opinion. The FFSW Board has received the opinion of
----------------
Baxter Fentriss and Company to the effect that as of the date hereof the Merger
Consideration is fair to the holders of FFSW Common Stock from a financial point
of view.
(z) Transactions in Securities.
--------------------------
(i) All offers and sales of FFSW Common Stock by FFSW
were at all relevant times exempt from or complied with the registration
requirements of the Securities Act.
(ii) Neither FFSW, none of FFSW's Subsidiaries nor, to
FFSW's knowledge, (a) any director or executive officer of FFSW, (b) any person
related to any such director or officer by blood, marriage or adoption and
residing in the same household and (c) any person who has been knowingly
provided material nonpublic information by any one or more of these persons, has
purchased or sold, or caused to be purchased or sold, any shares of FFSW Common
Stock or other securities issued by FFSW (i) during any period when FFSW or such
person was in possession of material nonpublic information or (ii) in violation
of any applicable provision of the Exchange Act or the rules and regulations of
the SEC thereunder.
32
(aa) Registration Obligation. Neither FFSW nor any of FFSW's
-----------------------
Subsidiaries is under any obligation, contingent or otherwise, to register any
of their respective securities under the Securities Act.
(bb) No Agreements on Directorships. Neither FFSW, any Subsidiary
------------------------------
of FFSW nor any affiliate of FFSW has entered into any agreement which obligates
FFSW or FFB to elect any individual to serve on the FFSW Board, the FFB Board or
the board of directors of any other Subsidiary of FFSW, and as of the date
hereof, there are no obligations or commitments on the part of FFSW, FFB or any
affiliate of FFSW to elect any individual to serve on the FFSW Board, the FFB
Board or the board of directors of any other Subsidiary of FFSW.
(cc) Disclosure. The representations and warranties contained in
----------
this Section 5.03, when considered as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements and information contained in this Section 5.03 not
misleading.
5.04 Representations and Warranties of Washington Federal. Subject to
--------------------------------------------------------
Sections 5.01, Washington Federal hereby represents and warrants to FFSW as
follows:
(a) Organization, Standing and Authority. Washington Federal is
-------------------------------------
duly organized and validly existing under the laws of the State of Washington.
Washington Federal is duly licensed or qualified to do business and is in good
standing in each jurisdiction where its ownership or leasing of property or
assets or the conduct of its business requires it to be so licensed or
qualified, except where failure to be so licensed or qualified would not have a
Material Adverse Effect on Washington Federal. Washington Federal has in effect
all federal, state, local and foreign governmental authorizations necessary for
it to own or lease its properties and assets and to carry on its business as it
is now conducted.
(b) Subsidiaries. WFS is duly organized and in good standing as a
------------
federal savings and loan association under the Home Owners' Loan Act, as
amended, and its deposits are insured by the FDIC in the manner and to the
maximum extent provided by law.
(c) Corporate Power. Washington Federal has the corporate power and
---------------
authority to carry on its business as it is now being conducted and to own all
its properties and assets. Washington Federal has the corporate power and
authority to execute, deliver and perform its obligations under this Agreement
and the Agreement and Plan of Merger and Liquidation and to consummate the
Transaction and to cause WFS to consummate the Bank Merger Agreement, and WFS
will have the corporate power and authority to execute, deliver and perform its
obligations under the Bank Merger Agreement, in each case subject to the receipt
of all necessary approvals of Governmental Authorities.
(d) Corporate Authority. This Agreement, the Agreement and Plan of
-------------------
Merger and Liquidation and the Merger and the Bank Merger Agreement and the Bank
Merger have been authorized by all necessary corporate action of Washington
Federal and the Washington Federal Board on or prior to the date hereof. This
Agreement has been duly executed and delivered by Washington Federal and,
assuming due authorization, execution and delivery by FFSW, this Agreement is a
33
valid and legally binding agreement of Washington Federal enforceable in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and
similar laws of general applicability relating to or affecting creditors' rights
or by general equity principles).
(e) Regulatory Approvals; No Defaults.
---------------------------------
(i) No consents or approvals of, or waivers by, or
filings or registrations with, any Governmental Authority or with any third
party are required to be madeor obtained by Washington Federal or any of its
Subsidiaries in connection with the execution, delivery or performance by
Washington Federal of this Agreement and the Agreement and Plan of Merger and
Liquidation, and by WFS of the Bank Merger Agreement, or to consummate the
Transaction, except for (A) filings of applications or notices, and articles of
combination with, and approvals or waivers by, the OTS, (B) the filing of the
certificate of merger with the Secretary of State of the State of Delaware
pursuant to the DGCL with respect to the Merger, and (C) the filing of articles
of merger with the Secretary of State of the State of Washington pursuant to the
WBCA and a certificate of merger with the Secretary of State of the State of
Delaware pursuant to the DGCL, in each case with respect to the Liquidation.
(ii) Subject to receipt, or the making, of the consents,
approvals, waivers and filings referred to in the preceding paragraph and
expiration of the related waiting periods, the execution, delivery and
performance of this Agreement, the Agreement and Plan of Merger and Liquidation
and the Bank Merger Agreement by Washington Federal and WFS, as applicable, and
the consummation of the Transaction do not and will not (A) constitute a breach
or violation of, or a default under, or give rise to any Lien, any acceleration
of remedies or any right of termination under, any law, code, ordinance, rule or
regulation or any judgment, decree, injunction, order, governmental permit or
license, or agreement, indenture or instrument of Washington Federal or of any
of its Subsidiaries or to which Washington Federal or any of its Subsidiaries or
properties is subject or bound, (B) constitute a breach or violation of, or a
default under, the articles of incorporation or bylaws (or similar governing
documents) of Washington Federal or any of its Subsidiaries or (C) require any
consent or approval under any such law, code, ordinance, rule, regulation,
judgment, decree, injunction, order, governmental permit or license, agreement,
indenture or instrument.
(f) Material Adverse Effect. Since June 30, 2006, no event has
-----------------------
occurred or circumstance arisen that, individually or taken together with all
other facts, circumstances and events (described in any paragraph of this
Section 5.04 or otherwise), has had or is reasonably likely to have a Material
Adverse Effect with respect to Washington Federal.
(g) Legal Proceedings.
-----------------
(i) Neither Washington Federal nor any of its
Subsidiaries is a party to any, and there are no pending or, to the best of
Washington Federal's knowledge, threatened, legal, administrative, arbitral or
other material proceedings, claims, actions or governmental or regulatory
investigations of any nature against Washington Federal or any of its
34
Subsidiaries, except for such litigation, claim or other proceeding which in the
good faith judgment of Washington Federal will not have a Material Adverse
Effect on Washington Federal.
(ii) There is no injunction, order, judgment, decree or
regulatory restriction of any Governmental Authority specifically imposed upon
Washington Federal, any of its Subsidiaries or the assets of Washington Federal
or any of its Subsidiaries which has had, or would reasonably be expected to
have, a Material Adverse Effect on Washington Federal.
(h) Ownership of FFSW Common Stock. None of Washington Federal, or
------------------------------
any of its Subsidiaries or, to Washington Federal's knowledge, any of its other
affiliates or associates (as such terms are defined under the Exchange Act),
owns beneficially or of record, directly or indirectly, or is a party to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of more than 5% of the outstanding shares of FFSW Common
Stock (other than shares held in a fiduciary capacity that are beneficially
owned by third parties or as a result of debts previously contracted).
(i) Financing. Washington Federal has and will have available to it
---------
at the Effective Time, immediately available funds necessary to consummate the
Transaction.
(j) Disclosure. The representations and warranties contained in
----------
this Section 5.04, when considered as a whole, do not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements and information contained in this Section 5.04 not
misleading.
5.05 Representations and Warranties of Merger Sub. Subject to Section 5.01,
--------------------------------------------
Merger Sub hereby represents and warrants to Washington Federal as follows:
(a) Organization, Standing and Authority. Merger Sub is duly
------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger is a wholly-owned Subsidiary of Washington Federal.
(b) Corporate Power. Merger Sub has the corporate power and
----------------
authority to execute, deliver and perform its obligations under this Agreement
and to consummate the Merger, subject to receipt of all necessary approvals of
Governmental Authorities.
(c) Corporate Authority. This Agreement and the Merger have been
-------------------
authorized by all necessary corporate action of Merger Sub and the Board of
Directors of Merger Sub on or prior to the date hereof. Merger Sub has duly
executed and delivered this Agreement and, assuming due authorization, execution
and delivery by FFSW, this Agreement is a valid and legally binding obligation
of Merger Sub, enforceable in accordance with its terms (except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by general equity
principles).
(d) No Business Activities. Merger Sub has not conducted any
-----------------------
activities or operations other than in connection with the organization of
35
Merger Sub, the negotiation and execution of this Agreement and the consummation
of the Transaction. Merger Sub has no Subsidiaries.
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. Subject to the terms and conditions of this
------------------------
Agreement, each of FFSW and Washington Federal agrees to use its reasonable best
efforts in good faith, and to cause its Subsidiaries to use their reasonable
best efforts in good faith, to take, or cause to be taken, all actions, and to
do, or cause to be done, all things necessary, proper or desirable, or advisable
under applicable laws, so as to permit consummation of the Transaction as
promptly as practicable and otherwise to enable consummation of the Transaction,
including the satisfaction of the conditions set forth in Article VII hereof,
and shall cooperate fully with the other party hereto to that end, including,
without limitation, using reasonable best efforts to (i) modify or amend any
contracts, plans or arrangements to which Washington Federal or FFSW is a party
(to the extent permitted by the terms thereof) if necessary in order to satisfy
the conditions to closing set forth in Article VII hereof, (ii) lift or rescind
any injunction or restraining order or other order adversely affecting the
ability of the parties to consummate the Transaction, and (iii) defend any
litigation seeking to enjoin, prevent or delay the consummation of the
Transaction or seeking material damages; provided, however, that FFSW shall not
be permitted without the consent of Washington Federal, and Washington Federal
shall not be required, to take any action that is reasonably likely to result in
a Burdensome Condition.
6.02 Shareholder Approval.
--------------------
(a) FFSW agrees to take, in accordance with applicable law and the
FFSW Articles and the FFSW Bylaws, all action necessary to convene as soon as
reasonably practicable a special meeting of its stockholders to consider and
vote upon the approval of this Agreement and any other matters required to be
approved by FFSW's stockholders for consummation of the Transaction (including
any adjournment or postponement, the "FFSW Meeting"). Except with the prior
written approval of Washington Federal, other than matters that would normally
be submitted at an annual meeting of FFSW stockholders, no other matters shall
be submitted for the approval of the FFSW stockholders at the FFSW Meeting. The
FFSW Board shall at all times prior to and during such meeting recommend such
approval and shall take all reasonable lawful action to solicit such approval by
its stockholders and, subject to Section 6.02(b), shall not (x) withdraw, modify
or qualify in any manner adverse to Washington Federal such recommendation or
(y) take any other action or make any other public statement in connection with
the FFSW Meeting inconsistent with such recommendation (collectively, a "Change
in Recommendation"), except as and to the extent permitted by Section 6.02(b).
Notwithstanding any Change in Recommendation, this Agreement shall be submitted
to the stockholders of FFSW at the FFSW Meeting for the purpose of approving the
Agreement and any other matters required to be approved by FFSW's stockholders
for consummation of the Transaction. In addition to the foregoing, FFSW shall
not submit to the vote of its stockholders any Acquisition Proposal other than
the Merger.
36
(b) Notwithstanding the foregoing, FFSW and the FFSW Board shall be
permitted to effect a Change in Recommendation if and only to the extent that:
(i) FFSW shall have complied in all material respects
with Section 6.07;
(ii) the FFSW Board, based on advice of its outside
counsel, shall have determined in good faith that failure to do so would result
in a violation of its fiduciary duties under applicable law; and
(iii) if the FFSW Board intends to effect a Change in
Recommendation following an Acquisition Proposal, (A) the FFSW Board shall have
concluded in good faith, after giving effect to all of the adjustments which may
be offered by Washington Federal pursuant to clause (C) below, that such
Acquisition Proposal constitutes a Superior Proposal, (B) FFSW shall notify
Washington Federal, at least five Business Days in advance, of its intention to
effect a Change in Recommendation in response to such Superior Proposal
(including the identity of the party making such Acquisition Proposal) and
furnish to Washington Federal a copy of the relevant proposed transaction
agreements with the party making such Superior Proposal and all other material
documents, and (C) prior to effecting such a Change in Recommendation, FFSW
shall, and shall cause its financial and legal advisors to, during the period
following FFSW's delivery of the notice referred to in clause (B) above,
negotiate with Washington Federal in good faith for a period of up to five
Business Days (to the extent Washington Federal desires to negotiate) to make
such adjustments in the terms and condition of this Agreement so that such
Acquisition Proposal ceases to constitute a Superior Proposal.
6.03 Proxy Statement.
---------------
(a) FFSW agrees to prepare the proxy statement relating to the FFSW
Meeting (together with the proxy solicitation materials of FFSW constituting a
part thereof, the "Proxy Statement") to be filed by FFSW with the SEC as soon as
reasonably practicable after the date hereof and in any event not later than the
45th day following the date hereof. Washington Federal and FFSW shall prepare
and furnish such information relating to it and its directors, officers and
stockholders as may be reasonably required in connection with the Proxy
Statement, and Washington Federal, and its legal, financial and accounting
advisors, shall have the right to review in advance and comment upon such Proxy
Statement prior to its filing and mailing to stockholders.
(b) Each of FFSW and Washington Federal agrees that none of the
information supplied or to be supplied by it for inclusion or incorporation by
reference in the Proxy Statement and any amendment or supplement thereto shall,
at the date(s) of mailing to FFSW's stockholders and at the time of the FFSW
Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading. Each of FFSW and Washington Federal further agrees that
if such party shall become aware prior to the Effective Date of any information
furnished by such party that would cause any of the statements in the Proxy
37
Statement to be false or misleading with respect to any material fact, or to
omit to state any material fact necessary to make the statements therein not
false or misleading, to promptly inform the other parties thereof and to take
the necessary steps to correct the Proxy Statement.
6.04 Regulatory Filings.
------------------
(a) Subject to the other provisions of this Agreement, each of
Washington Federal and FFSW and their respective Subsidiaries shall cooperate
and use their respective reasonable best efforts to prepare all documentation,
to effect all filings and to obtain all permits, consents, approvals and
authorizations of all third parties and Governmental Authorities necessary to
consummate the Transaction; and any initial filings with Governmental
Authorities shall be made by Washington Federal (and FFSW, if applicable) as
soon as reasonably practicable after the execution hereof and in no event
(except for delays caused by FFSW or its Subsidiaries) later than the 45th day
following the date hereof. Notwithstanding the foregoing, nothing contained in
this Agreement shall be deemed to require Washington Federal to take any action,
or commit to take any action, or agree to any condition or restriction, in
connection with obtaining the foregoing permits, consents, approvals and
authorizations of Governmental Authorities or third parties that would
reasonably be expected to result in a Burdensome Condition. Each of Washington
Federal and FFSW shall have the right to review in advance, subject to
applicable laws relating to the exchange of information, all of the information
relating to such party and any of its Subsidiaries that appears in any filing
made by the other party with, or written information submitted to, any third
party or any Governmental Authority in connection with the Transaction.
(b) Each party agrees, upon request, to furnish the other parties
with all information concerning itself, its Subsidiaries (if applicable),
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with any filing, notice or application made
by or on behalf of such other parties or any of their respective Subsidiaries to
any third party or Governmental Authority.
6.05 Press Releases. FFSW and Washington Federal shall consult with each
---------------
other before issuing any press release with respect to the Transaction or this
Agreement and shall not issue any such press release or make any such public
statements without the prior consent of the other party, which shall not be
unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party (but after such consultation, to the extent
practicable under the circumstances), issue such press release or make such
public statements as may upon the advice of outside counsel be required by law
or the rules or regulations of the securities exchange on which it trades. FFSW
and Washington Federal shall cooperate to develop all public announcement
materials and make appropriate management available at presentations related to
the Transaction as reasonably requested by the other party.
6.06 Access; Information.
-------------------
(a) FFSW agrees that upon reasonable notice and subject to
applicable laws relating to the exchange of information, it shall, and shall
cause its Subsidiaries to, afford Washington Federal and Washington Federal's
officers, employees, counsel, accountants and other authorized representatives
such access during normal business hours throughout the period prior to the
38
Effective Time to the books, records (including, without limitation, Tax Returns
and work papers of independent auditors), properties, personnel and advisors of
FFSW and to such other information relating to FFSW as Washington Federal may
reasonably request and, during such period, it shall furnish promptly to
Washington Federal (i) a copy of each report, schedule, registration statement
and other document filed or received during such period pursuant to the
requirements of federal securities laws and federal or state banking, lending,
consumer finance or privacy laws and (ii) all other information concerning the
business, properties and personnel of FFSW as Washington Federal may reasonably
request. Notwithstanding the foregoing, except as set forth in Section 6.07
hereof, FFSW shall not be required to furnish any information regarding FFSW
Board deliberations concerning the transactions contemplated by this Agreement
or with respect to an Acquisition Proposal.
(b) As soon as reasonably practicable and as soon as they are
available, but in no event more than 15 days, after the end of each calendar
month ending after the date of this Agreement, FFSW shall furnish to Washington
Federal (i) a consolidated statement of income of FFSW and its Subsidiaries for
the month then ended, (ii) a balance sheet for FFSW for the month then ended,
(iii) a balance sheet for FFB for the month then ended and (iv) any key internal
management reports relating to the foregoing.
(c) From the date of this Agreement until the Effective Time, the
Washington Federal senior manager responsible for the integration of FFSW with
Washington Federal, and the FFSW senior manager responsible for the integration
of FFSW with Washington Federal, shall confer on a regular basis regarding the
business and operations of Washington Federal and FFSW.
(d) All information furnished pursuant to this Section 6.06 shall
be subject to the provisions of the Confidentiality Agreement, dated as of March
1, 2006 between Washington Federal and Baxter Fentriss and Company, on behalf of
FFSW (the "Confidentiality Agreement").
(e) No investigation by any of the parties or their respective
representatives shall affect the representations, warranties, covenants or
agreements of the other parties set forth herein.
(f) FFSW shall allow a representative of Washington Federal to
attend as an observer all FFSW Board and committee meetings as well as all Board
of Directors and committee meetings for each Subsidiary of FFSW, except that no
Washington Federal representative will be entitled to attend any meeting in
which the FFSW Board considers the Merger or an Acquisition Proposal. FFSW shall
give reasonable notice to Washington Federal of any such meeting and, if known,
the agenda for or business to be discussed at such meeting. FFSW shall also
provide to Washington Federal all written agendas and meeting or written consent
materials provided to the directors of FFSW and each FFSW Subsidiary in
connection with Board and committee meetings. All information obtained by
Washington Federal at these meetings shall be treated in confidence as provided
in this Section 6.06.
39
6.07 Acquisition Proposals.
---------------------
(a) FFSW agrees that it shall, and shall direct and use its
reasonable best efforts to cause its affiliates, directors, officers, employees,
agents and representatives (including without limitation any investment banker,
financial advisor, attorney, accountant or other representative retained by it)
(all of the foregoing, collectively, "Representatives") to, immediately cease
any discussions or negotiations with any other parties that may be ongoing with
respect to the possibility or consideration of any Acquisition Proposal (as
defined below), and will use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to any Acquisition Proposal,
including by requesting the other party to promptly return or destroy any
confidential information previously furnished by or on behalf of FFSW thereunder
and by specifically enforcing the terms thereof in a court of competent
jurisdiction. From the date of this Agreement through the Effective Time, FFSW
shall not, and shall cause its directors, officers or employees (and those of
any FFSW Subsidiary) or any Representative retained by it (or any Subsidiary)
not to, directly or indirectly through another person, (i) solicit, initiate or
encourage (including by way of furnishing information or assistance), or take
any other action designed to facilitate or that is likely to result in, any
inquiries or the making of any proposal or offer that constitutes, or is
reasonably likely to lead to, any Acquisition Proposal, (ii) provide any
confidential information or data to any person relating to any Acquisition
Proposal, (iii) participate in any discussions or negotiations regarding any
Acquisition Proposal, (iv) waive, terminate, modify or fail to enforce any
provision of any contractual "standstill" or similar obligations of any Person
other than Washington Federal or its affiliates, (v) approve or recommend,
propose to approve or recommend, or execute or enter into, any letter of intent,
agreement in principle, merger agreement, asset purchase agreement or share
exchange agreement, option agreement or other similar agreement related to any
Acquisition Proposal or propose to do any of the foregoing, or (vi) make or
authorize any statement, recommendation or solicitation in support of any
Acquisition Proposal; provided, however, that prior to the date of the FFSW
Meeting, if the FFSW Board determines in good faith, after consulting with its
outside legal and financial advisors, that the failure to do so would breach, or
would reasonably be expected to result in a breach of, the FFSW Board's
fiduciary duties under applicable law, FFSW may, in response to a bona fide,
written Acquisition Proposal not solicited in violation of this Section 6.07(a)
that the FFSW Board determines in good faith constitutes a Superior Proposal (as
defined below), subject to providing 48 hour prior written notice of its
decision to take such action to Washington Federal and identifying the person
making the proposal and all the material terms and conditions of such proposal
and compliance with Section 6.07(b), (1) furnish information with respect to
itself and its Subsidiaries to any person making such a Superior Proposal
pursuant to a customary confidentiality agreement (as determined by FFSW after
consultation with its outside counsel) on terms no more favorable to such person
than the terms contained in the Confidentiality Agreement are to Washington
Federal, and (2) participate in discussions or negotiations regarding such a
Superior Proposal. For purposes of this Agreement, the term "Acquisition
Proposal" means any inquiry, proposal or offer, filing of any regulatory
application or notice (whether in draft or final form) or disclosure of an
40
intention to do any of the foregoing from any person relating to any (w) direct
or indirect acquisition or purchase of a business that constitutes 10% or more
of the total revenues, net income, assets or deposits of FFSW and its
Subsidiaries taken as a whole, (x) direct or indirect acquisition or purchase of
any class of Equity Securities representing 10% or more of the voting power of
FFSW or any of its Significant Subsidiaries, (y) tender offer or exchange offer
that if consummated would result in any person beneficially owning 10% or more
of any class of Equity Securities of FFSW or (z) merger, consolidation, business
combination, recapitalization, liquidation, dissolution or similar transaction
involving FFSW or any of its Significant Subsidiaries, other than the
transactions contemplated by this Agreement. For purposes of this Agreement, the
term "Superior Proposal" means any bona fide written proposal made by a third
party to acquire, directly or indirectly, including pursuant to a tender offer,
exchange offer, merger, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction, for consideration consisting of
cash and/or securities, more than 50% of the combined voting power of the shares
of FFSW Common Stock then outstanding or all or substantially all of FFSW's
consolidated assets, which the FFSW Board determines in good faith, after taking
into account all legal, financial, regulatory and other aspects of the proposal
and the person making the proposal (including any break-up fees, expense
reimbursement provisions and conditions to consummation), and after taking into
account the advice of FFSW's financial advisor (which shall be a nationally
recognized investment banking firm and it being agreed that Baxter Fentriss and
Company meets this requirement) and outside counsel, (i) is more favorable from
a financial point of view to its stockholders than the Merger, (ii) is
reasonably likely to be consummated on the terms set forth, and (iii) for which
financing, to the extent required, is then committed or which, in the good faith
judgment of the FFSW Board, is reasonably likely to be obtained by such third
party.
(b) In addition to the obligations of FFSW set forth in Section
6.07(a), FFSW shall promptly (within 24 hours) advise Washington Federal orally
and in writing of its receipt of any Acquisition Proposal (or any inquiry which
could lead to an Acquisition Proposal) and keep Washington Federal informed, on
a current basis, of the continuing status thereof, including the terms and
conditions thereof and any changes thereto, and shall contemporaneously provide
to Washington Federal all materials provided to or made available to any third
party pursuant to this Section 6.07 which were not previously provided to
Washington Federal.
(c) Notwithstanding anything herein to the contrary, FFSW and the
FFSW Board shall be permitted to comply with Rule 14d-9 and Rule 14e-2
promulgated under the Exchange Act; provided, however, that compliance with such
rules will in no way limit or modify the effect that any action pursuant to such
rules would otherwise have under this Agreement.
(d) FFSW agrees that any violation of the restrictions set forth in
this Section 6.07 by any Representative of FFSW or its Subsidiaries shall be
deemed a breach of this Section 6.07 by FFSW.
6.08 Certain Policies. Prior to the Effective Date and after FFSW has been
----------------
advised in writing that all of Washington Federal's conditions to Closing have
been satisfied or waived, each of FFSW and its Subsidiaries, as may be requested
by Washington Federal, shall, consistent with GAAP, the rules and regulations of
the SEC and applicable banking laws and regulations, modify or change its loan,
REO, accrual, reserve, tax, litigation and real estate valuation policies and
practices (including loan classifications and levels of reserves) so as to be
applied on a basis that is consistent with that of Washington Federal; provided,
however, that no such modifications or changes need be made prior to the
41
satisfaction of the conditions set forth in Section 7.01(b); and further
provided that in any event, no accrual or reserve made by FFSW or any of its
Subsidiaries pursuant to this Section 6.08 shall constitute or be deemed to be a
breach, violation of or failure to satisfy any representation, warranty,
covenant, agreement, condition or other provision of this Agreement or otherwise
be considered in determining whether any such breach, violation or failure to
satisfy shall have occurred. The recording of any such adjustments shall not be
deemed to imply any misstatement of previously furnished financial statements or
information and shall not be construed as concurrence of FFSW or its management
with any such adjustments.
6.09 Indemnification.
---------------
(a) From and after the Effective Time through the sixth anniversary
of the Effective Time, Washington Federal (the "Indemnifying Party") shall
indemnify and hold harmless each present and former director and officer of FFSW
or a FFSW Subsidiary, as applicable, determined as of the Effective Time (the
"Indemnified Parties") against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, arising
out of matters existing or occurring at or prior to the Effective Time, whether
asserted or claimed prior to, at or after the Effective Time, arising in whole
or in part out of or pertaining to the fact that he or she was a director,
officer, employee, fiduciary or agent of FFSW or any FFSW Subsidiary or is or
was serving at the request of FFSW or any of the FFSW Subsidiaries as a
director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust or other enterprise, including without
limitation matters related to the negotiation, execution and performance of this
Agreement or consummation of the Transaction, to the fullest extent which such
Indemnified Parties would be entitled under the FFSW Articles and the FFSW
Bylaws or equivalent documents of any FFSW Subsidiary, as applicable, or any
agreement, arrangement or understanding which has been Previously Disclosed by
FFSW pursuant to this Section 6.09, in each case as in effect on the date
hereof.
(b) Any Indemnified Party wishing to claim indemnification under
this Section 6.09, upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not actually prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties that make
joint representation inappropriate, the Indemnified Parties may retain counsel
which is reasonably satisfactory to the Indemnifying Party, and the Indemnifying
Party shall pay, promptly as statements therefor are received, the reasonable
fees and expenses of such counsel for the Indemnified Parties (which may not
exceed one firm in any jurisdiction), (ii) the Indemnified Parties will
cooperate in the defense of any such matter, (iii) the Indemnifying Party shall
not be liable for any settlement effected without its prior written consent
42
which shall not be unreasonably withheld and (iv) the Indemnifying Party shall
have no obligation hereunder in the event that a federal or state banking agency
or a court of competent jurisdiction shall determine that indemnification of an
Indemnified Party in the manner contemplated hereby is prohibited by applicable
laws and regulations.
(c) Washington Federal shall maintain FFSW's existing directors'
and officers' liability insurance policy (or provide a policy providing
comparable coverage and amounts on terms no less favorable to the persons
currently covered by FFSW's existing policy, including Washington Federal's
existing policy if it meets the foregoing standard) covering persons who are
currently covered by such insurance for a period of three (3) years after the
Effective Time; provided, however, that in no event shall Washington Federal be
obligated to expend, in order to maintain or provide insurance coverage pursuant
to this Section 6.09(c), an amount in excess of 150% of the annual premiums paid
by FFSW as of the date hereof for such insurance ("Maximum Insurance Amount");
provided further, that if the amount of the annual premiums necessary to
maintain or procure such insurance coverage exceeds the Maximum Insurance
Amount, Washington Federal shall obtain the most advantageous coverage
obtainable for an annual premium equal to the Maximum Insurance Amount.
6.10 Benefit Plans.
-------------
(a) As soon as administratively practicable after the Effective
Time, Washington Federal shall take all reasonable action so that employees of
FFSW and its Subsidiaries shall be entitled to participate in each employee
benefit plan, program or arrangement of Washington Federal of general
applicability (the "Washington Federal Benefit Plans") to the same extent as
similarly-situated employees of Washington Federal and its Subsidiaries (it
being understood that inclusion of the employees of FFSW and its Subsidiaries in
the Washington Federal Benefit Plans may occur at different times with respect
to different plans), provided that coverage shall be continued under
corresponding Benefit Plans of FFSW and its Subsidiaries until such employees
are permitted to participate in the Washington Federal Benefit Plans and
provided further, however, that nothing contained herein shall require
Washington Federal or any of its Subsidiaries to make any grants to any former
employee of FFSW under any discretionary equity compensation plan of Washington
Federal. Washington Federal shall cause each Washington Federal Benefit Plan in
which employees of FFSW and its Subsidiaries are eligible to participate to
recognize, for purposes of determining eligibility to participate in, the
vesting of benefits and for all other purposes (but not for purposes of
eligibility to participate in, vesting of benefits under or accrual of benefits
under, any defined benefit pension plan) under the Washington Federal Benefit
Plans, the service of such employees with FFSW and its Subsidiaries to the same
extent as such service was credited for such purpose by FFSW, provided, however,
that such service shall not be recognized to the extent that such recognition
would result in a duplication of benefits. Except for the commitment to continue
those Benefit Plans of FFSW and its Subsidiaries that correspond to Washington
Federal Benefit Plans until employees of FFSW and its Subsidiaries are included
in such Washington Federal Benefit Plans, nothing herein shall limit the ability
of Washington Federal to amend or terminate any of FFSW's Benefit Plans in
accordance with and to the extent permitted by their terms at any time permitted
by such terms.
(b) At and following the Effective Time, Washington Federal shall
honor, and the Surviving Corporation shall continue to be obligated to perform,
in accordance with their terms, all benefit obligations to, and contractual
43
rights of, current and former employees of FFSW and its Subsidiaries and current
and former directors of FFSW and its Subsidiaries existing as of the Effective
Date, as well as all employment, severance, bonus, salary continuation, deferred
compensation, split dollar, supplemental retirement or "change-in-control"
agreements, plans or policies of FFSW to the extent that each of the foregoing
are Previously Disclosed. The severance or termination payments which are
payable pursuant to such agreements, plans or policies of FFSW (which have been
quantified in reasonable detail) have been Previously Disclosed.
(c) At such time as employees and current and former directors of
FFSW and its Subsidiaries become eligible to participate in a medical, dental or
health plan of Washington Federal or its Subsidiaries, Washington Federal shall
cause each such plan to (i) waive any preexisting condition limitations to the
extent such conditions covered under the applicable medical, health or dental
plans of Washington Federal, (ii) provide full credit under such plans for any
deductibles, co-payment and out-of-pocket expenses incurred by the employees and
directors and their beneficiaries during the portion of the calendar year prior
to such participation and (iii) waive any waiting period limitation or evidence
of insurability requirement which would otherwise be applicable to such employee
or director on or after the Effective Time to the extent such employee or
director had satisfied any similar limitation or requirement under an analogous
Benefit Plan prior to the Effective Time.
(d) Each of FFSW, its Subsidiaries, and Washington Federal
acknowledges and agrees that all provisions contained within this Section 6.10
with respect to Employees and directors are included for the sole benefit of
FFSW and Washington Federal and shall not create any right (i) in any other
Person, including, Benefit Plans or any beneficiary thereof or (ii) to continued
employment with FFSW, its Subsidiaries, Washington Federal or any of their
respective affiliates.
6.11 Notification of Certain Matters. Each of FFSW and Washington Federal
-------------------------------
shall give prompt notice to the other of any fact, event or circumstance known
to it that (i) is reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in any Material
Adverse Effect with respect to it or (ii) would cause or constitute a material
breach of any of its representations, warranties, covenants or agreements
contained herein.
6.12 Estoppel Letters. FFSW shall use its commercially reasonable efforts
----------------
to obtain and deliver to Washington Federal at the Closing with respect to all
real estate (i) owned by FFSW or its Subsidiaries, an estoppel letter dated as
of the Closing in the form of Annex D from all tenants and (ii) leased by FFSW
or its Subsidiaries, an estoppel letter dated as of the Closing in the form of
Annex E from all lessors.
6.13 Assumption of Indenture Obligations. Following the Merger, Washington
-----------------------------------
Federal shall execute such supplemental indentures and provide such documents,
including without limitation legal opinions, as are reasonably required upon a
merger or consolidation of FFSW under the indentures, trust agreements,
guarantee agreements and other agreements Previously Disclosed by FFSW or any of
its Subsidiaries.
44
6.14 Antitakeover Statutes. Each of Washington Federal and FFSW and their
----------------------
respective Boards of Directors shall, if any state antitakeover statute or
similar statute becomes applicable to this Agreement and the Transaction, take
all action reasonably necessary to ensure that the Transaction may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise to minimize the effect of such statute or regulation on this Agreement
and the Transaction.
6.15 Disposition of Certain Assets.
-----------------------------
(a) FFSW will cause FFB to dispose of the loans which are set forth
in Section 6.15(a) of FFSW's Disclosure Schedule at a price as set forth in
Section 6.15(a) of FFSW's Disclosure Schedule. FFSW will use its best efforts to
minimize any loss associated with the disposition of such loans.
(b) Prior to the Closing, FFSW shall sell the property which is set
forth in Section 6.15(b) of FFSW's Disclosure Schedule for an amount of net
proceeds which is set forth in Section 6.15(b) of FFSW's Disclosure Schedule.
6.16 Regulatory Remediation.
----------------------
Sections 5.03(i)(ii) and (iii) and 5.03(j)(i) and (iii) of FFSW's
Disclosure Schedule set forth certain possible regulatory issues concerning FFB.
Washington Federal agrees to the extent the Merger is consummated, it will pay
all costs associated or incurred in connection with the remediation of such
regulatory issues by FFB as required by FFB's primary federal regulator;
provided, however, that Washington Federal shall not be liable or responsible
for any monetary penalties, if any, that may be imposed on FFB relating to such
regulatory issues. In the event that any such monetary penalties are imposed on
FFB, FFSW can elect, in its discretion, to (i) reduce the aggregate Merger
Consideration to be paid by Washington Federal pursuant to Section 3.01(c)
hereof dollar for dollar by the amount of such penalties or (ii) to terminate
this Agreement pursuant to Section 8.01(h), provided that to the extent FFSW
elects to terminate the Merger Agreement, it shall notify Washington Federal in
writing promptly and Washington Federal may elect in its discretion to notify
FFSW in writing within five Business Days of receiving FFSW's election to pay
such monetary penalties without adjusting the Merger Consideration, in which
case the Agreement shall not be terminated. To the extent, Washington Federal
does not make such election and the Agreement is terminated, FFSW shall
reimburse Washington Federal for its accountable expenses incurred in connection
with the transactions contemplated hereby, which shall be paid by wire transfer
by FFSW to Washington Federal on the business day immediately following FFSW's
election to terminate this Agreement.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01 Conditions to Each Party's Obligation to Effect the Merger.
-------------------------------------------------------------------
The respective obligation of each of the parties hereto to consummate the Merger
is subject to the fulfillment or, to the extent permitted by applicable law,
written waiver by the parties hereto prior to the Effective Date of each of the
following conditions:
45
(a) Shareholder Approval. This Agreement and the Merger shall have
--------------------
been duly approved by the requisite vote of the holders of outstanding shares of
FFSW Common Stock.
(b) Regulatory Approvals. All regulatory approvals required to
--------------------
consummate the Transaction shall have been obtained and shall remain in full
force and effect and all statutory waiting periods in respect thereof shall have
expired and no such approvals shall contain any conditions, restrictions or
requirements which the Washington Federal Board reasonably determines in good
faith would, individually or in the aggregate, materially reduce the benefits of
the Transaction to such a degree that Washington Federal would not have entered
into this Agreement had such conditions, restrictions or requirements been known
at the date hereof (any such condition, restriction or requirement, a
"Burdensome Condition").
(c) No Injunction. No Governmental Authority of competent
--------------
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and prohibits or makes
illegal consummation of the Transaction.
(d) Non-Compete, Non-Solicitation Agreements. Washington Federal,
-----------------------------------------
FFSW and Aubrey L. Dunn, Jr. shall have entered into a Non-Compete,
Non-Solicitation Agreement, the form of which is attached hereto as Annex F.
Washington Federal, FFSW and each director of FFSW shall have entered into a
Non-Solicitation Agreement, the form of which is attached hereto as Annex G.
7.02 Conditions to Obligation of FFSW. The obligation of FFSW to consummate
--------------------------------
the Merger is also subject to the fulfillment or written waiver by FFSW prior to
the Effective Date of each of the following conditions:
(a) Representations and Warranties. The representations and
--------------------------------
warranties of Washington Federal set forth in this Agreement, subject in all
cases to the standard set forth in Section 5.02, shall be true and correct as of
the date of this Agreement and as of the Effective Date as though made on and as
of the Effective Date (except that representations and warranties that by their
terms speak as of the date of this Agreement or some other date shall be true
and correct as of such date), and FFSW shall have received a certificate, dated
the Effective Date, signed on behalf of Washington Federal by the Chief
Executive Officer and the Chief Financial Officer of Washington Federal to such
effect.
(b) Performance of Obligations of Washington Federal. Washington
---------------------------------------------------
Federal shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Effective Date,
and FFSW shall have received a certificate, dated the Effective Date, signed on
behalf of Washington Federal by the Chief Executive Officer and the Chief
Financial Officer of Washington Federal to such effect.
(c) Other Actions. Washington Federal shall have furnished FFSW
--------------
with such certificates of its respective officers or others and such other
documents to evidence fulfillment of the conditions set forth in Sections 7.01
and 7.02 as FFSW may reasonably request.
46
7.03 Conditions to Obligation of Washington Federal. The obligation of
------------------------------------------------
Washington Federal to consummate the Merger is also subject to the fulfillment
or written waiver by Washington Federal prior to the Effective Date of each of
the following conditions:
(a) Representations and Warranties. The representations and
---------------------------------
warranties of FFSW set forth in this Agreement, subject in all cases to the
standard set forth in Section 5.02, shall be true and correct as of the date of
this Agreement and as of the Effective Date as though made on and as of the
Effective Date (except that representations and warranties that by their terms
speak as of the date of this Agreement or some other date shall be true and
correct as of such date), and Washington Federal shall have received a
certificate, dated the Effective Date, signed on behalf of FFSW by the Chief
Executive Officer and the Chief Financial Officer of FFSW to such effect.
(b) Performance of Obligations of FFSW. FFSW shall have performed
----------------------------------
in all material respects all obligations required to be performed by it under
this Agreement at or prior to the Effective Date, and Washington Federal shall
have received a certificate, dated the Effective Date, signed on behalf of FFSW
by the Chief Executive Officer and the Chief Financial Officer of FFSW to such
effect.
(c) Bank Merger. All regulatory approvals required to consummate
------------
the Bank Merger, including without limitation the approval of the OTS, shall
have been obtained and shall remain in full force and effect and all statutory
waiting periods in respect thereof shall have expired or been terminated. No
order, injunction or decree issued by any Governmental Authority of competent
jurisdiction or other legal restraint or prohibition preventing the consummation
of the Bank Merger shall be in effect. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or enforced
by any Governmental Authority which prohibits or makes illegal the consummation
of the Bank Merger.
(d) Asset Dispositions. The asset dispositions set forth in Section
------------------
6.15 hereof shall have been consummated in accordance with the terms of Section
6.15.
(e) Expenses. The expenses incurred by FFSW and its Subsidiaries
--------
pursuant to Section 9.05 hereof shall not exceed $1,500,000.
(f) Minimum Stockholders' Equity. (i) At least five (5) Business
----------------------------
Days prior to the Effective Date, FFSW shall provide Washington Federal with
FFSW's consolidated financial statements presenting the financial condition of
FFSW as of the close of business as of the end of the month immediately
preceding the Effective Date (the "Measuring Date"). Such consolidated financial
statements shall have been prepared in all material respects in accordance with
GAAP consistently applied and other applicable legal and accounting
requirements, and reflect all period-end accruals and other adjustments.
Washington Federal shall also receive a certificate of FFSW's Chief Financial
Officer, dated as of the Effective Date, to the effect that such consolidated
financial statements continue to reflect accurately, as of the date of the
certificate, the financial condition of FFSW in all material respects.
(ii) As of the Measuring Date, FFSW's total
consolidated stockholders' equity shall not be less than $50,000,000.
47
(g) Other Actions. FFSW shall have furnished Washington Federal
--------------
with such certificates of its officers or others and such other documents to
evidence fulfillment of the conditions set forth in Sections 7.01 and 7.03 as
Washington Federal may reasonably request.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated, and the
-----------
Transaction may be abandoned, at any time prior to the Effective Time:
(a) Mutual Consent. By the mutual consent in writing of Washington
--------------
Federal and FFSW.
(b) Breach. Provided that the terminating party is not then in
------
material breach of any representation, warranty, covenant or agreement contained
herein, by Washington Federal or FFSW, in the event of a breach by the other
party of any representation, warranty, covenant or agreement contained herein,
which breach (i) cannot be or has not been cured within 30 days after the giving
of written notice to the breaching party or parties of such breach and (ii)
would entitle the non-breaching party not to consummate the transactions
contemplated hereby under Section 7.02(a) or (b) or 7.03(a) or (b), as the case
may be.
(c) Delay. By Washington Federal or FFSW, in the event that the
-----
Merger is not consummated by March 31, 2007, except to the extent that the
failure of the Merger then to be consummated by such date shall be due to (i)
the failure of the party seeking to terminate pursuant to this Section 8.01(c)
to perform or observe the covenants and agreements of such party set forth in
this Agreement or (ii) the failure of any of the Shareholders (if FFSW is the
party seeking to terminate) to perform or observe their respective covenants and
agreements under the relevant Shareholder Agreement.
(d) No Regulatory Approval. By Washington Federal or FFSW in the
------------------------
event the approval of any Governmental Authority required for consummation of
the Merger and the other transactions contemplated by this Agreement shall have
been denied by final nonappealable action of such Governmental Authority or an
application therefor shall have been permanently withdrawn at the request of a
Governmental Authority, provided, however, that no party shall have the right to
terminate this Agreement pursuant to this Section 8.01(d) if such denial shall
be due to the failure of the party seeking to terminate this Agreement to
perform or observe the covenants of such party set forth herein.
(e) No FFSW Stockholder Approval. By either Washington Federal or
----------------------------
FFSW, if any approval of the stockholders of FFSW contemplated by this Agreement
shall not have been obtained by reason of the failure to obtain the required
vote at the FFSW Meeting or at any adjournment or postponement thereof.
(f) FFSW Failure to Recommend; Etc. By Washington Federal if (i)
---------------------------------
FFSW shall have materially breached the provisions of Section 6.08 in any
respect adverse to Washington Federal, (ii) the FFSW Board shall have failed to
make its recommendation referred to in Section 6.02, withdrawn such
recommendation or modified or changed such recommendation in a manner adverse in
48
any respect to the interests of Washington Federal, or (iii) FFSW shall have
materially breached its obligations under Section 6.02 by failing to call, give
notice of, convene and hold the FFSW Meeting in accordance with Section 6.02.
(g) Certain Tender or Exchange Offers. By Washington Federal if a
---------------------------------
tender offer or exchange offer for 15% or more of the outstanding shares of FFSW
Common Stock is commenced (other than by Washington Federal or a Subsidiary
thereof), and the FFSW Board recommends that the stockholders of FFSW tender
their shares in such tender or exchange offer or otherwise fails to recommend
that such stockholders reject such tender offer or exchange offer within the
ten-Business Day period specified in Rule 14e-2(a) under the Exchange Act.
(h) Bank Secrecy Act. By FFSW to the extent monetary penalties
----------------
have been imposed on FFB relating to regulatory matters set forth in Sections
5.03(i)(ii) and (iii) and 5.03(j)(i) and (iii) of FFSW's Disclosure Schedule and
FFSW does not elect to reduce the Merger Consideration in an amount equal to
such monetary penalties; provided that (i) FFSW notifies Washington Federal in
writing promptly that monetary penalties have been imposed and that FFSW intends
to terminate the Agreement, (ii) within five Business Days of receipt of such
written notice, Washington Federal does not notify FFSW in writing that
Washington Federal will agree to pay such monetary penalties without adjusting
the Merger Consideration (in which case, the Agreement shall not be terminated)
and (iii) FFSW reimburses Washington Federal for its accountable expenses
incurred in connection with the transactions contemplated by this Agreement,
which shall be paid by wire transfer by FFSW to Washington Federal on the
business day immediately following FFSW's election to terminate this Agreement.
8.02 Effect of Termination and Abandonment.
-------------------------------------
(a) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article VIII, no party to this
Agreement shall have any liability or further obligation to any other party
hereunder except that (i) this Section 8.02, Section 6.06(d) and Article IX
(except for Section 9.12) shall survive any termination of this Agreement and
(ii) notwithstanding anything to the contrary, neither Washington Federal or
FFSW shall be relieved or released from any liabilities or damages arising out
of its fraud or willful breach of any provision of this Agreement.
(b) The parties hereto agree that FFSW shall pay Washington Federal
the sum of $5.0 million (the "Termination Fee") if this Agreement is terminated
as follows:
(i) if this Agreement is terminated by Washington
Federal pursuant to Section 8.01(f) or (g), FFSW shall pay the entire FFSW
Termination Fee to Washington Federal on the second Business Day following the
termination of this Agreement; or
(ii) if this Agreement is terminated by (A) Washington
Federal pursuant to Section 8.01(b), (B) by either Washington Federal or FFSW
pursuant to Section 8.01(c) and at the time of such termination no vote of the
FFSW stockholders contemplated by this Agreement at the FFSW Meeting shall have
occurred, or (C) by either Washington Federal or FFSW pursuant to Section
8.01(e), and in the case of any termination pursuant to clause (A), (B) or (C),
49
an Acquisition Proposal shall have been publicly announced or otherwise
communicated or made known to the senior management of FFSW or the FFSW Board
(or any Person shall have publicly announced, communicated or made known an
intention, whether or not conditional, to make an Acquisition Proposal, or
reiterated a previously expressed plan or intention to make an Acquisition
Proposal) at any time after the date of this Agreement and prior to the taking
of the vote of the stockholders of FFSW contemplated by this Agreement at the
FFSW Meeting, in the case of clause (C), or the date of termination, in the case
of clause (A) or (B), then (1) if within 15 months after such termination FFSW
enters into an agreement with respect to a Control Transaction, then FFSW shall
pay to Washington Federal an amount equal to $2.5 million on the date of
execution of such agreement and upon consummation of any such Control
Transaction at any time thereafter, FFSW shall pay to Washington Federal the
remainder of the Termination Fee on the date of such consummation and (2) if a
Control Transaction is consummated otherwise than pursuant to an agreement with
FFSW within 18 months after such termination, then FFSW shall pay to Washington
Federal the Termination Fee (less any amount previously paid by FFSW pursuant to
clause (1) above) on the date of such consummation of such Control Transaction.
As used in this Section 8.02(b), a "Control Transaction" means (i) the
acquisition by any Person whether by purchase, merger, consolidation, sale,
transfer or otherwise, in one transaction or any series of transactions, of a
majority of the voting power of the outstanding securities of FFSW or FFB or a
majority of the assets or FFSW or FFB, (ii) any issuance of securities resulting
in the ownership by any Person of more than 50% of the voting power of FFSW or
by any Person other than FFSW or its Subsidiaries of more than 50% of the voting
power of FFB or (iii) any merger, consolidation or other business combination
transaction involving FFSW or any of its Subsidiaries as a result of which the
stockholders of FFSW cease to own, in the aggregate, at least 50% of the total
voting power of the entity surviving or resulting from such transaction.
Any amount that becomes payable pursuant to this Section 8.02(b) shall be paid
by wire transfer of immediately available funds to an account designated by
Washington Federal.
(c) FFSW and Washington Federal agree that the agreement contained
in paragraph (b) above is an integral part of the transactions contemplated by
this Agreement, that without such agreement Washington Federal would not have
entered into this Agreement, and that such amounts do not constitute a penalty
or liquidated damages in the event of a breach of this Agreement by FFSW. If
FFSW fails to pay Washington Federal the amounts due under paragraph (b) above
within the time periods specified in such paragraph (b), FFSW shall pay the
costs and expenses (including reasonable legal fees and expenses) incurred by
Washington Federal in connection with any action, including the filing of any
lawsuit, taken to collect payment of such amounts, provided Washington Federal
prevails on the merits, together with interest on the amount of any such unpaid
amounts at the prime lending rate prevailing during such period as published in
The Wall Street Journal, calculated on a daily basis from the date such amounts
were required to be paid until the date of actual payment.
ARTICLE IX
MISCELLANEOUS
9.01 Survival. No representations, warranties, agreements and covenants
--------
contained in this Agreement shall survive the Effective Time (other than
50
agreements or covenants contained herein that by their express terms are to be
performed in whole or in part after the Effective Time) or the termination of
this Agreement if this Agreement is terminated prior to the Effective Time
(other than Sections 6.06(d), 8.02 and, excepting Section 9.12 hereof, this
Article IX, which shall survive any such termination). Notwithstanding anything
in the foregoing to the contrary, no representations, warranties, agreements and
covenants contained in this Agreement shall be deemed to be terminated or
extinguished so as to deprive a party hereto or any of its affiliates of any
defense at law or in equity which otherwise would be available against the
claims of any Person, including without limitation any shareholder or former
shareholder.
9.02 Waiver; Amendment. Prior to the Effective Time, any provision of this
-----------------
Agreement may be (i) waived, by the party benefited by the provision or (ii)
amended or modified at any time, by an agreement in writing among the parties
hereto executed in the same manner as this Agreement, except that after the FFSW
Meeting no amendment shall be made which by law requires further approval by the
stockholders of FFSW without obtaining such approval.
9.03 Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed to constitute an original.
9.04 Governing Law. This Agreement shall be governed by, and interpreted in
-------------
accordance with, the laws of the State of Washington (without giving effect to
choice of law principles thereof).
9.05 Expenses. Subject to Section 6.16 hereof, each party hereto will bear
--------
all expenses incurred by it in connection with this Agreement and the
transactions contemplated hereby, including fees and expenses of its own
financial consultants, accountants and counsel, provided that nothing contained
herein shall limit either party's rights to recover any liabilities or damages
arising out of the other party's fraud or willful breach of any provision of
this Agreement, and provided further that the expenses incurred by FFSW and its
Subsidiaries shall in no event exceed $1,500,000.
9.06 Notices. All notices, requests and other communications hereunder to a
-------
party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail (return
receipt requested) or delivered by an overnight courier (with confirmation) to
such party at its address set forth below or such other address as such party
may specify by notice to the parties hereto.
If to Washington Federal or Merger Sub to:
Washington Federal, Inc.
425 Pike Street
Seattle, WA 98101
Attention: Roy Whitehead, Chairman, President
and Chief Executive Officer
Fax: (206) 624-2334
51
With a copy to:
Patton Boggs LLP
2550 M Street, N.W.
Washington, D.C. 20037
Attention: Norman B. Antin, Esq.
Jeffrey D. Haas, Esq.
Fax: (202) 457-6315
If to FFSW to:
First Federal Banc of the Southwest, Inc.
300 North Pennsylvania Avenue
Roswell, New Mexico 88201
Attention: Aubrey L. Dunn, Jr., President
and Chief Executive Officer
Fax: (505) 627-2412
With a copy to:
Luse Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W., Suite 400
Washington, D.C. 20015
Attention: Alan Schick, Esq.
Gary A. Lax, Esq.
Fax: (202) 362-2902
9.07 Entire Understanding; No Third Party Beneficiaries. This Agreement,
----------------------------------------------------
the Agreement and Plan of Merger and Liquidation, the Bank Merger Agreement, the
Shareholder Agreements and the Confidentiality Agreement represent the entire
understanding of the parties hereto and thereto with reference to the
Transaction, and this Agreement, the Agreement and Plan of Merger and
Liquidation, the Bank Merger Agreement, the Shareholder Agreements and the
Confidentiality Agreement supersede any and all other oral or written agreements
heretofore made. Except for the Indemnified Parties' right to enforce Washington
Federal's obligation under Section 6.09, which are expressly intended to be for
the irrevocable benefit of, and shall be enforceable by, each Indemnified Party
and his or her heirs and representatives, and the rights of any employees of
FFSW under Section 6.10, nothing in this Agreement, expressed or implied, is
intended to confer upon any Person, other than the parties hereto or their
respective successors, any rights, remedies, obligations or liabilities under or
by reason of this Agreement.
9.08 Severability. Except to the extent that application of this Section
------------
9.08 would have a Material Adverse Effect on FFSW or Washington Federal, any
term or provision of this Agreement which is invalid or unenforceable in any
jurisdiction shall, as to that jurisdiction, be ineffective to the extent of
such invalidity or unenforceability without rendering invalid or unenforceable
the remaining terms and provisions of this Agreement or affecting the validity
52
or enforceability of any of the terms or provisions of this Agreement in any
other jurisdiction. If any provision of this Agreement is so broad as to be
unenforceable, the provision shall be interpreted to be only so broad as is
enforceable. In all such cases, the parties shall use their reasonable best
efforts to substitute a valid, legal and enforceable provision which, insofar as
practicable, implements the original purposes and intents of this Agreement.
9.09 Enforcement of the Agreement. The parties hereto agree that
-------------------------------
irreparable damage would occur in the event that any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any court of the United
States or any state having jurisdiction, this being in addition to any other
remedy to which they are entitled at law or in equity. In the event attorneys'
fees or other costs are incurred to secure performance of any of the obligations
herein provided for, or to establish damages for the breach thereof, or to
obtain any other appropriate relief, whether by way of prosecution or defense,
the prevailing party shall be entitled to recover reasonable attorneys' fees and
costs incurred therein.
9.10 Interpretation. When a reference is made in this Agreement to
--------------
Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and are not part of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." Whenever the words "as of the date
hereof" are used in this Agreement, they shall be deemed to mean the day and
year first above written.
9.11 Assignment. No party may assign either this Agreement or any of its
----------
rights, interests or obligations hereunder without the prior written approval of
the other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
9.12 Alternative Structure. Notwithstanding any provision of this Agreement
---------------------
to the contrary, Washington Federal may at any time modify the structure of the
acquisition of FFSW set forth herein, including to provide for a merger of FFSW
with and into Washington Federal or another wholly owned Subsidiary of
Washington Federal, provided that (i) the Merger Consideration to be paid to the
holders of FFSW Common Stock is not thereby changed in kind or reduced in amount
as a result of such modification, (ii) the modification does not change the
intended federal income tax consequences of the transactions contemplated by
this Agreement and (iii) such modification will not materially delay or
jeopardize receipt of any required approvals of Governmental Authorities. In the
event Washington Federal elects to make such a change, the parties agree to
execute appropriate documents to reflect the change.
53
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
WASHINGTON FEDERAL, INC.
By: /s/ Roy Whitehead
----------------------------------------
Name: Roy Whitehead
Title: Chairman, President and Chief Executive
Officer
WASHINGTON FEDERAL ACQUISITION, INC.
By: /s/ Roy Whitehead
----------------------------------------
Name: Roy Whitehead
Title: President and Chief Executive Officer
FIRST FEDERAL BANC OF THE SOUTHWEST, INC.
By: /s/ Aubrey L. Dunn, Jr.
----------------------------------------
Name: Aubrey L. Dunn, Jr.
Title: President and Chief Executive Officer
54
ANNEX A
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (the "Agreement"), dated as of October 10, 2006,
among __________________, a shareholder ("Shareholder") of First Federal Banc of
the Southwest, Inc., a Delaware corporation ("FFSW"), Washington Federal, Inc.,
a Washington corporation ("Washington Federal"), and, solely for purposes of the
last sentence of Section 9, FFSW. All terms used herein and not defined herein
shall have the meanings assigned thereto in the Merger Agreement (defined
below).
WHEREAS, FFSW and Washington Federal are entering into an Agreement and
Plan of Reorganization, dated as of the date hereof (the "Merger Agreement"),
pursuant to which FFSW will merge with a subsidiary of Washington Federal on the
terms and conditions set forth therein (the "Merger") and, in connection
therewith, outstanding shares of FFSW Common Stock will be converted into cash
in the manner set forth therein; and
WHEREAS, Shareholder owns the shares of FFSW Common Stock identified on
Exhibit I hereto (such shares, together with all shares of FFSW Common Stock
subsequently acquired by Shareholder during the term of this Agreement, being
referred to as the "Shares"); and
WHEREAS, in order to induce Washington Federal to enter into the Merger
Agreement, Shareholder, solely in such Shareholder's capacity as a shareholder
of FFSW and not in any other capacity, has agreed to enter into and perform this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which are hereby acknowledged, the parties hereto
agree as follows:
1. Agreement to Vote Shares. Shareholder agrees that at any meeting of the
------------------------
stockholders of FFSW, or in connection with any written consent of the
stockholders of FFSW, Shareholder shall:
(a) appear at each such meeting or otherwise cause the Shares
to be counted as present thereat for purposes of calculating a quorum; and
(b) vote (or cause to be voted), in person or by proxy, or
deliver a written consent (or cause a consent to be delivered) covering, all the
Shares (whether acquired heretofore or hereafter) that are beneficially owned by
Shareholder or as to which Shareholder has, directly or indirectly, the right to
vote or direct the voting, (w) in favor of adoption and approval of the Merger
Agreement and the Merger; (x) against any action or agreement that could
reasonably be expected to result in a breach of any covenant, representation or
warranty or any other obligation or agreement of FFSW contained in the Merger
Agreement or of Shareholder contained in this Agreement; (y) against any
Acquisition Proposal or any other action, agreement or transaction that is
A-1
intended, or could reasonably be expected, to materially impede, interfere or be
inconsistent with, delay, postpone, discourage or materially and adversely
affect consummation of the Merger or the performance by Shareholder of his, her
or its obligations under this Agreement; and (z) against the election of new
members of FFSW's board of directors, other than the nominees of the majority of
the board of directors in office on the date of this Agreement.
2. Transfer of Shares.
------------------
(a) Prohibition on Transfers of Shares; Other Actions.
-------------------------------------------------------
Shareholder hereby agrees that while this Agreement is in effect, Shareholder
shall not, except with the written approval of Washington Federal, (i) sell,
transfer, pledge, encumber, distribute by gift or donation, or otherwise dispose
of any of the Shares (or any securities convertible into or exercisable or
exchangeable for Shares) or any interest therein, whether by actual disposition,
physical settlement or effective economic disposition through hedging
transactions, derivative instruments or other means, (ii) enter into any
agreement, arrangement or understanding with any Person, or take any other
action, that violates or conflicts with or could reasonably be expected to
violate or conflict with Shareholder's representations, warranties, covenants
and obligations under this Agreement, or (iii) take any other action that could
reasonably be expected to impair or otherwise adversely affect, in any material
respect, Shareholder's power, authority and ability to comply with and perform
his, her or its covenants and obligations under this Agreement.
(b) Transfer of Voting Rights. Shareholder hereby agrees that
-------------------------
Shareholder shall not deposit any Shares in a voting trust, grant any proxy or
enter into any voting agreement or similar agreement or arrangement with respect
to any of the Shares.
3. Representations and Warranties of Shareholder. Shareholder represents
and warrants to and agrees with Washington Federal as follows:
(a) Capacity. Shareholder has all requisite capacity and
--------
authority to enter into and perform his, her or its obligations under this
Agreement.
(b) Binding Agreement. This Agreement has been duly executed
-----------------
and delivered by Shareholder and constitutes the valid and legally binding
obligation of Shareholder, subject to bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium and similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(c) Non-Contravention. The execution and delivery of this
-----------------
Agreement by Shareholder does not, and the performance by Shareholder of his,
her or its obligations hereunder and the consummation by Shareholder of the
transactions contemplated hereby will not, violate or conflict with, or
constitute a default under, any agreement, instrument, contract or other
obligation or any order, arbitration award, judgment or decree to which
Shareholder is a party or by which Shareholder is bound, or any statute, rule or
regulation to which Shareholder is subject or, in the event that Shareholder is
a corporation, partnership, trust or other entity, any charter, bylaw or other
organizational document of Shareholder.
(d) Ownership. Shareholder's Shares are, and through the term
---------
of this Agreement will be, owned beneficially and of record solely by
Shareholder except as otherwise disclosed on Exhibit I hereto. Shareholder has
good and marketable title to the Shares, free and clear of any lien, pledge,
mortgage, security interest or other encumbrance. As of the date hereof, the
Shares identified on Exhibit I hereto constitute all of the shares of FFSW
A-2
Common Stock owned beneficially or of record by Shareholder. Shareholder has and
will have at all times during the term of this Agreement (i) sole voting power
and sole power to issue instructions with respect to the matters set forth in
Section 1 hereof, (ii) sole power of disposition and (iii) sole power to agree
to all of the matters set forth in this Agreement, in each case with respect to
all of the Shares owned by Shareholder on the date of this Agreement and all of
the Shares hereafter acquired by Shareholder and owned beneficially or of record
by him, her or it during the term of this Agreement. For purposes of this
Agreement, the term "beneficial ownership" shall be interpreted in accordance
with Rule 13d-3 under the Exchange Act, provided that a Person shall be deemed
to beneficially own any securities which may be acquired by such Person pursuant
to any agreement, arrangement or understanding or upon the exercise of
conversion rights, exchange rights, warrants or options, or otherwise
(irrespective of whether the right to acquire such securities is exercisable
immediately or only after the passage of time, including the passage of time
within 60 days, the satisfaction of any conditions, the occurrence of any event
or any combination of the foregoing).
(e) Consents and Approvals. The execution and delivery of this
----------------------
Agreement by Shareholder does not, and the performance by Shareholder of his,
her or its obligations under this Agreement and the consummation by him, her or
it of the transactions contemplated hereby will not, require Shareholder to
obtain any consent, approval, authorization or permit of, or to make any filing
with or notification to, any Governmental Authority.
(f) Absence of Litigation. There is no suit, action,
-------------------------
investigation or proceeding pending or, to the knowledge of Shareholder,
threatened against or affecting Shareholder or any of his, her or its affiliates
before or by any Governmental Authority that could reasonably be expected to
materially impair the ability of Shareholder to perform his, her or its
obligations hereunder or to consummate the transactions contemplated hereby on a
timely basis.
4. No Solicitation. Shareholder hereby agrees that during the term of
----------------
this Agreement he, she or it shall not, and shall not permit any investment
banker, financial advisor, attorney, accountant or other representative retained
by him, her or it to, directly or indirectly, (a) take any of the actions
specified in clauses (i)-(vi) of Section 6.07 of the Merger Agreement, (b) agree
to release, or release, any Person from any obligation under any existing
standstill agreement or arrangement relating to FFSW, or (c) participate in,
directly or indirectly, a "solicitation" of "proxies" (as such terms are used in
the rules of the SEC) or powers of attorney or similar rights to vote, or seek
to advise or influence any Person with respect to the voting of, any shares of
FFSW Common Stock in connection with any vote or other action on any matter of a
type described in Section 1(b), other than to recommend that stockholders of
FFSW vote in favor of the adoption and approval of the Merger Agreement and the
Merger and as otherwise expressly permitted by this Agreement. Shareholder
agrees immediately to cease and cause to be terminated any activities,
discussions or negotiations conducted before the date of this Agreement with any
Persons other than Washington Federal with respect to any possible Acquisition
Proposal and will take all necessary steps to inform any investment banker,
financial advisor, attorney, accountant or other representative retained by him,
her or it of the obligations undertaken by Shareholder pursuant to this Section
5. Nothing contained in this Section 5 shall prevent a Shareholder who is an
officer or a member of the FFSW Board from discharging his or her fiduciary
duties solely in his or her capacity as such an officer or director.
A-3
5. Notice of Acquisitions; Proposals Regarding Prohibited Transactions.
-----------------------------------------------------------------------
Shareholder hereby agrees to notify Washington Federal promptly (and in any
event within 2 Business Days) in writing of the number of any additional shares
of FFSW Common Stock or other securities of FFSW of which Shareholder acquires
beneficial or record ownership on or after the date hereof. Shareholder will
comply with the provisions of Section 6.07(b) of the Merger Agreement as if he,
she or it were FFSW.
6. Specific Performance and Remedies. Shareholder acknowledges that it
-----------------------------------
will be impossible to measure in money the damage to Washington Federal if
Shareholder fails to comply with the obligations imposed by this Agreement and
that, in the event of any such failure, Washington Federal will not have an
adequate remedy at law. Accordingly, Shareholder agrees that injunctive relief
or other equitable remedy, in addition to remedies at law or in damages, is the
appropriate remedy for any such failure and will not oppose the granting of such
relief on the basis that Washington Federal may have an adequate remedy at law.
Shareholder agrees that Shareholder will not seek, and agrees to waive any
requirement for, the securing or posting of a bond in connection with Washington
Federal's seeking or obtaining such equitable relief.
7. Term of Agreement; Termination.
------------------------------
(a) The term of this Agreement shall commence on the date hereof.
(b) This Agreement shall terminate upon the earlier to occur of
(i) the date, if any, of termination of the Merger Agreement in accordance with
its terms, or (ii) the Effective Time of the Merger. Upon such termination, no
party shall have any further obligations or liabilities hereunder; provided,
however, such termination shall not relieve any party from liability for any
willful breach of this Agreement prior to such termination.
8. Stop Transfer Order. In furtherance of this Agreement, Shareholder
--------------------
hereby authorizes and instructs FFSW to instruct its transfer agent to enter a
stop transfer order with respect to all of Shareholder's Shares for the period
from the date hereof through the date this Agreement is terminated in accordance
with Section 8. FFSW agrees that as promptly as practicable after the date of
this Agreement it shall give such stop transfer instructions to the transfer
agent for the FFSW Common Stock.
9. Entire Agreement. This Agreement supersedes all prior agreements,
-----------------
written or oral, among the parties hereto with respect to the subject matter
hereof and contains the entire agreement among the parties with respect to the
subject matter hereof. This Agreement may not be amended, supplemented or
modified, and no provisions hereof may be modified or waived, except by an
instrument in writing signed by each party hereto. No waiver of any provisions
hereof by any party shall be deemed a waiver of any other provisions hereof by
any such party, nor shall any such waiver be deemed a continuing waiver of any
provision hereof by such party.
10. Notices. All notices, requests, claims, demands or other communications
-------
hereunder shall be in writing and shall be deemed given when delivered
personally, upon receipt of a transmission confirmation if sent by telecopy or
like transmission and on the next Business Day when sent by a reputable
A-4
overnight courier service to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
If to Washington Federal to:
Washington Federal, Inc.
425 Pike Street
Seattle, WA 98101
Attention: Roy Whitehead, Chairman, President
and Chief Executive Officer
Fax: (206) 624-2334
With a copy to:
Patton Boggs LLP
2550 M Street, N.W.
Washington, D.C. 20037
Attention: Norman B. Antin, Esq.
Jeffrey D. Haas, Esq.
Fax: (202) 457-6315
If to FFSW or Shareholder to:
First Federal Banc of the Southwest, Inc.
300 North Pennsylvania Avenue
Roswell, New Mexico 88201
Attention: Aubrey L. Dunn, Jr., President
and Chief Executive Officer
Fax: (505) 627-2412
With a copy to:
Luse Gorman Pomerenk & Schick, P.C.
5335 Wisconsin Avenue, N.W., Suite 400
Washington, D.C. 20015
Attention: Alan Schick, Esq.
Gary A. Lax, Esq.
Fax: (202) 362-2902
11. Miscellaneous.
-------------
(a) Severability. If any provision of this Agreement or the
------------
application of such provision to any person or circumstances shall be held
invalid or unenforceable by a court of competent jurisdiction, such provision or
application shall be unenforceable only to the extent of such invalidity or
unenforceability, and the remainder of the provision held invalid or
unenforceable and the application of such provision to persons or circumstances,
other than the party as to which it is held invalid, and the remainder of this
Agreement, shall not be affected.
A-5
(b) Capacity. The covenants contained herein shall apply to
--------
Shareholder solely in his or her capacity as a shareholder of FFSW, and no
covenant contained herein shall apply to Shareholder in his or her capacity as a
director, officer or employee of FFSW or in any other capacity. Nothing
contained in this Agreement shall be deemed to apply to, or limit in any manner,
the obligations of the Shareholder to comply with his or her fiduciary duties as
a director, officer or employee of FFSW.
(c) Counterparts. This Agreement may be executed in one or
------------
more counterparts, each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
(d) Headings. All Section headings herein are for convenience
--------
of reference only and are not part of this Agreement, and no construction or
reference shall be derived therefrom.
(e) Governing Law; Consent to Jurisdiction; Waiver of Jury Trial.
------------------------------------------------------------
(i) This Agreement shall be governed by and construed
in accordance with the laws of the State of Washington without giving effect to
the principles of conflicts of law. Each of the parties hereto hereby
irrevocably and unconditionally consents to submit to the exclusive jurisdiction
of the King County Superior Court of the State of Washington or, if under
applicable law exclusive jurisdiction over the Litigation (as defined below)
lies with the courts of the United States, any court of the United States
located in the State of Washington, for any action, suit, proceeding or
investigation in any court or before any Governmental Authority ("Litigation")
arising out of or relating to this Agreement and the transactions contemplated
hereby. Each of the parties hereto hereby irrevocably and unconditionally
waives, and agrees not to assert, by way of motion, as a defense, counterclaim
or otherwise, in any such Litigation, any claim that he, she or it is not
personally subject to the jurisdiction of the aforesaid courts for any reason,
other than the failure to serve process in accordance with this Section 12(e),
that he, she or it or his, her or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and to the fullest extent permitted by applicable law, that the Litigation in
any such court is brought in an inconvenient forum, that the venue of such
Litigation is improper, or that this Agreement, or the subject matter hereof,
may not be enforced in or by such courts and further irrevocably waives, to the
fullest extent permitted by applicable law, the benefit of any defense that
would hinder, fetter or delay the levy, execution or collection of any amount to
which the party is entitled pursuant to the final judgment of any court having
jurisdiction. Each of the parties irrevocably and unconditionally waives, to the
fullest extent permitted by applicable law, any and all rights to trial by jury
in connection with any Litigation arising out of or relating to this Agreement
or the transactions contemplated hereby.
(ii) Each of the parties hereto irrevocably consents
to the service of process out of any of the aforementioned courts in any such
Litigation by the mailing of copies thereof by registered mail, postage prepaid,
to such party at his, her or its address set forth in this Agreement, such
service of process to be effective upon acknowledgment of receipt of such
registered mail.
A-6
(iii) Each of the parties hereto expressly acknowledges
that the foregoing waivers are intended to be irrevocable under the laws of the
State of Washington and of the United States of America; provided that consent
by the parties to jurisdiction and service contained in this Section 12(e) is
solely for the purpose referred to in this Section 12(e) and shall not be deemed
to be a general submission to said courts or in the State of Washington other
than for such purpose.
(f) Successors and Assigns; Third Party Beneficiaries. Neither
---------------------------------------------------
this Agreement nor any of the rights or obligations of any party under this
Agreement shall be assigned, in whole or in part, by any party without the prior
written consent of the other parties hereto. Subject to the foregoing, this
Agreement shall bind and inure to the benefit of and be enforceable by the
parties hereto and their respective successors and permitted assigns. Nothing in
this Agreement, express or implied, is intended to confer on any Person other
than the parties hereto or their respective successors and permitted assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement.
12. Attorney's Fees. The prevailing party or parties in any litigation,
----------------
arbitration, mediation, bankruptcy, insolvency or other proceeding
("Proceeding") relating to the enforcement or interpretation of this Agreement
may recover from the unsuccessful party or parties all reasonable fees and
disbursements of counsel (including expert witness and other consultants' fees
and costs) relating to or arising out of (a) the Proceeding (whether or not the
Proceeding proceeds to judgment), and (b) any post-judgment or post-award
proceeding including, without limitation, one to enforce or collect any judgment
or award resulting from the Proceeding. All such judgments and awards shall
contain a specific provision for the recovery of all such subsequently incurred
costs, expenses, and fees and disbursements of counsel.
[13. Non-Solicitation.
----------------
(a) In order that Washington Federal may have and enjoy the full
benefit of ownership of FFSW and the businesses it conducts following the
Effective Time, Shareholder agrees that for a period of 24 months after the
Effective Date, Shareholder will not take any affirmative action to hire,
attempt to hire, contact or solicit with respect to hiring, any Person who was
an employee of FFSW or any affiliate of FFSW prior to the Effective Time of the
Merger or becomes an employee of Washington Federal or any of its subsidiaries
in connection with the Merger, or induce or otherwise counsel, advise or
knowingly encourage any such Person to leave the employ of Washington Federal or
any of its subsidiaries, provided that the foregoing shall not apply to any
Person whose employment with Washington Federal or any of its subsidiaries
terminated more than six months prior to the time Shareholder first solicited
such Person for employment following the Effective Date or was involuntarily
terminated by Washington Federal or any of its subsidiaries. Nothing contained
in this Section 13 is intended to prohibit general advertising or general
solicitation not specifically directed at employees of Washington Federal or its
subsidiaries.
(b) Shareholder acknowledges and agrees that the businesses
conducted by FFSW are highly competitive, a significant portion of FFSW's
competitiveness and its value as a going enterprise is derived from its
workforce, and that the covenant made by Shareholder in this Section 13 is made
in consideration of the payments of the Merger Consideration and as a necessary
inducement for Washington Federal to enter into the Merger Agreement and
consummate the transactions contemplated thereby. It is the desire and intent of
A-7
the parties to this Agreement that the provisions of this Section 13 shall be
enforced to the fullest extent permissible under the laws and public policies of
each jurisdiction in which enforcement is sought. It is expressly understood and
agreed that, although Shareholder and Washington Federal each consider the
restrictions contained in this Section 13 to be reasonable, if a final
determination is made by a court of competent jurisdiction or an arbitrator that
any restriction contained in this Section 13 is unenforceable against any party,
the provisions of this Section 13 shall be deemed amended to apply as to such
maximum extent as such court may judicially determine or indicate to be
enforceable. Shareholder acknowledges that breach of Section 13 would cause
Washington Federal irreparable harm and consents to the entry of an injunction
without bond in the event Shareholder breaches or threatens to breach Section
13.] [This Section 13 will be included only in the Agreement with George A.
Rosenbaum, Jr.]
A-8
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Agreement as of the date first written above.
WASHINGTON FEDERAL, INC.
By:
----------------------------------------
Name: Roy Whitehead
Title: Chairman, President and Chief Executive
Officer
FIRST FEDERAL BANC OF THE SOUTHWEST, INC.
By:
----------------------------------------
Name: Aubrey L. Dunn, Jr.
Title: President and Chief Executive Officer
SHAREHOLDER
--------------------------------
(Signature)
A-9
EXHIBIT I
SHAREHOLDER AGREEMENT
Shares of
FFSW Common Stock
Beneficially Owned
(exclusive of
unexercised stock
Name of Shareholder options or warrants) Options on FFSW Common Stock
- --------------------- ------------------------ -----------------------------
A-10
ANNEX B
FORM OF
AGREEMENT AND PLAN OF MERGER AND LIQUIDATION OF
FIRST FEDERAL BANC OF THE SOUTHWEST, INC.
BY WASHINGTON FEDERAL, INC.
AGREEMENT AND PLAN OF MERGER AND LIQUIDATION agreed to this ___ day of
_______________ 2006, between WASHINGTON FEDERAL, INC., a Washington corporation
("Washington Federal"), and FIRST FEDERAL BANC OF THE SOUTHWEST, INC., a
Delaware corporation ("FFSW").
WHEREAS, Washington Federal owns all of the issued and outstanding capital
stock of FFSW; and
WHEREAS, Washington Federal wishes to approve, authorize, and consent to
(i) the merger of FFSW with and into Washington Federal pursuant to the Delaware
General Corporation Law and the Washington Business Corporation Act and (ii) the
voluntary liquidation of FFSW in accordance with Section 332 of the Internal
Revenue Code of 1986, as amended ("Code"), in connection with the consummation
of the transactions contemplated by the related Agreement and Plan of
Reorganization, dated as of October 10, 2006, among Washington Federal,
Washington Federal Acquisition, Inc., a Delaware corporation and a wholly-owned
subsidiary of Washington Federal ("Merger Sub"), and FFSW ("Merger Agreement");
and
WHEREAS, Merger Sub previously merged with and into FFSW pursuant to the
Merger Agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Washington Federal approves, authorizes, and consents to the merger and
liquidation of FFSW.
2. Following the consummation of this Agreement and Plan of Merger and
Liquidation, FFSW shall be liquidated in accordance with the provisions of
Section 332 of the Code.
3. The officers of FFSW are authorized and directed to distribute FFSW's
assets (subject to its liabilities) within one year in cancellation of its stock
to Washington Federal, as owner of all of its issued and outstanding stock.
4. The officers of FFSW are further authorized and directed to take all
appropriate and necessary actions to liquidate FFSW in accordance with the Code.
B-1
IN WITNESS WHEREOF, the parties hereto have caused this Agreement and Plan
of Merger and Liquidation to be executed by their respective duly authorized
officers as of the day and year first above written.
FIRST FEDERAL BANC OF THE
SOUTHWEST, INC.
By:
----------------------------------------
Name: Roy Whitehead
Title: President and Chief Executive Officer
WASHINGTON FEDERAL, INC.
By:
----------------------------------------
Name: Roy Whitehead
Title: Chairman, President and Chief Executive
Officer
B-2
ANNEX C
AGREEMENT OF MERGER
Agreement of Merger, dated as of ______ ___, 2006, by and between
Washington Federal Savings and Loan Association (the "Acquiror Bank) and First
Federal Bank (the "Bank").
WlTNESSETH:
WHEREAS, the Bank is a federally chartered savings bank and a wholly-owned
subsidiary of First Federal Banc of the Southwest, Inc. ("FFSW"); and
WHEREAS, the Acquiror Bank is a federally chartered savings and loan
association and a wholly owned subsidiary of Washington Federal, Inc., a
Washington corporation ("Washington Federal"); and
WHEREAS, FFSW, Washington Federal, and Washington Federal Acquisition,
Inc., a wholly owned subsidiary of Washington Federal ("Merger Sub"), have
entered into an Agreement and Plan of Reorganization, dated as of October 10,
2006 (the "Agreement"), pursuant to which Merger Sub will merge with and into
FFSW (the "Parent Merger"); and
WHEREAS, the Boards of Directors of Bank and the Acquiror Bank have
approved, and deem it advisable to consummate the merger provided for herein in
which the Bank would merge with and into the Acquiror Bank on the terms and
conditions herein provided immediately following the effective time of the
Parent Merger.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements in the Agreement and herein contained, the parties hereto,
intending to be legally bound hereby, agree as follows:
1. The Merger. Subject to the terms and conditions of this Agreement of
Merger, at the Effective Time (as defined in Section 2 hereof), the separate
existence of the Bank shall cease and the Bank shall merge with and into the
Acquiror Bank (the "Merger") under the laws of the United States. The Acquiror
Bank shall be the surviving bank of the Merger (the "Surviving Bank").
2. Effective Time. The Merger shall become effective on the date and at the
time that the Articles of Combination are filed with the Office of Thrift
Supervision ("OTS"), unless a later date and time is specified as the effective
time in such Articles of Combination (the "Effective Time").
3. Charter; Bylaws. The Federal Stock Charter and Bylaws of the Acquiror
Bank in effect immediately prior to the Effective Time shall be the Federal
Stock Charter and Bylaws of the Surviving Bank, until altered, amended or
repealed in accordance with their terms and applicable law.
C-1
4. Name; Offices. The name of the Surviving Bank shall be "Washington
Federal Savings and Loan Association." The main office of the Surviving Bank
shall be the main office of the Acquiror Bank immediately prior to the Effective
Time. All branch offices of the Bank and the Acquiror Bank which were in lawful
operation immediately prior to the Effective Time shall be the branch offices of
the Surviving Bank upon consummation of the Merger, subject to the opening or
closing of any offices which may be authorized by the Bank or the Acquiror Bank
and the OTS after the date hereof. Schedule I hereto contains a list of each of
the deposit taking offices of the Bank and the Acquiror Bank which shall be
operated by the Surviving Bank, subject to the opening or closing of any offices
which may be authorized by the Bank or the Acquiror Bank and the OTS after the
date hereof.
5. Directors and Executive Officers. Upon consummation of the Merger, until
changed in accordance with the Federal Stock Charter and Bylaws of the Surviving
Bank, (i) the directors of the Surviving Bank shall consist of those persons who
shall be directors of the Acquiror Bank immediately prior to the Effective Time,
the names and residence addresses of which are set forth on Schedule II hereto
and (ii) the officers of the Surviving Bank shall be the officers of the
Acquiror Bank immediately prior to the Effective Time. The directors and
officers of the Surviving Bank shall hold office in accordance with the Federal
Stock Charter and Bylaws of the Surviving Bank.
6. Effects of the Merger. Upon consummation of the Merger, and in addition
to the effects set forth at 12. C.F.R. ss. 552.13 and other applicable law:
(i) all rights, franchises and interests of the Bank in and to every
type of property (real, personal and mixed), tangible and intangible, and
chooses in action shall be transferred to and vested in the Surviving Bank
by virtue of the Merger without any deed or other transfer, and the
Surviving Bank, without any order or other action on the part of any court
or otherwise, shall hold and enjoy all rights of property, franchises and
interests, including appointments, designations and nominations, and all
other rights and interests as trustee, executor, administrator, registrar
of stocks and bonds, guardian of estates, assignee, receiver and committee,
and in every other fiduciary capacity, in the same manner and to the same
extent as such rights, franchises and interest were held or enjoyed by the
Bank immediately prior to the Effective Time;
(ii) the Surviving Bank shall be liable for all liabilities of the
Bank, fixed or contingent, including all deposits, accounts, debts,
obligations and contracts thereof, matured or unmatured, whether accrued,
absolute, contingent or otherwise, and whether or not reflected or reserved
against on balance sheets, books of account or records thereof, and all
rights of creditors or obligees and all liens on property of the Bank shall
be preserved unimpaired; after the Effective Time, the Surviving Bank will
continue to issue savings accounts on the same basis as immediately prior
to the Effective Time; and
(iii) the home office and other offices of the Surviving Bank shall be
as set forth on Schedule I hereto.
C-2
7. Effect on Shares of Stock.
(a) Each share of Acquiror Bank common stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding.
(b) At the Effective Time, each share of Bank common stock issued and
outstanding prior to the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, be canceled. Any shares of Bank common
stock held in the treasury of the Bank immediately prior to the Effective Time
shall be retired and canceled.
8. Additional Actions. If, at any time after the Effective Time, the
Surviving Bank shall consider that any further assignments or assurances in law
or any other acts are necessary or desirable to (i) vest, perfect or confirm, of
record or otherwise, in the Surviving Bank its rights, title or interest in, to
or under any of the rights, properties or assets of the Bank acquired or to be
acquired by the Surviving Bank as a result of, or in connection with, the
Merger, or (ii) otherwise carry out the purposes of this Agreement of Merger,
the Bank and its proper officers and directors shall be deemed to have granted
to the Surviving Bank an irrevocable power of attorney to execute and deliver
all such proper deeds, assignments and assurances in law and to do all acts
necessary or proper to vest, perfect or confirm title to and possession of such
rights, properties or assets in the Surviving Bank and otherwise to carry out
the purposes of this Agreement of Merger; and the proper officers and directors
of the Surviving Bank are fully authorized in the name of the Bank or otherwise
to take any and all such action.
9. Counterparts. This Agreement of Merger may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one agreement.
10. Governing Law. This Agreement of Merger shall be governed in all
respects, including, but not limited to, validity, interpretation, effect and
performance, by the laws of the United States.
11. Amendment. Subject to applicable law, this Agreement of Merger may be
amended, modified or supplemented only by written agreement of the Acquiror Bank
and the Bank at any time prior to the Effective Time.
12. Waiver. Any of the terms or conditions of this Agreement of Merger may
be waived at any time by whichever of the parties hereto is, or the shareholders
of which are, entitled to the benefit thereof by action taken by the Board of
Directors of such waiving party.
13. Assignment. This Agreement of Merger may not be assigned by any party
hereto without the prior written consent of the other party.
14. Termination. This Agreement of Merger shall terminate upon the
termination of the Agreement in accordance with its terms. This Agreement of
Merger may also be terminated
C-3
<Page>
at any time prior to the Effective Time by an instrument executed by the
Acquiror Bank and the Bank.
15. Procurement of Approvals. The Acquiror Bank and the Bank shall use
reasonable best efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement of Merger, subject to and in accordance with the
applicable provisions of the Agreement, including without limitation the
preparation and submission of such applications or other filings for approval of
the Merger to the OTS as may be required by applicable laws and regulations.
16. Conditions Precedent. The obligations of the parties under this
Agreement of Merger shall be subject to: (i) receipt of approval of the Merger
from all governmental and banking authorities whose approval is required; (ii)
receipt of any necessary regulatory approval to operate the main office and the
branch offices of the Bank as offices of the Surviving Bank; and (iii) the
consummation of the Parent Merger pursuant to the Agreement on or before the
Effective Time.
17. Effectiveness of Agreement. Notwithstanding anything to the contrary
contained herein, the execution and delivery of this Agreement of Merger by the
parties hereto shall not be deemed to be effective unless and until the
requirements of 12 C.F.R. ss. 552.13 are met.
18. Entire Agreement. Except as otherwise set forth in this Agreement of
Merger and the Agreement, this Agreement of Merger (including the documents and
the instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof.
C-4
IN WITNESS WHEREOF, each of the Acquiror Bank and the Bank has caused this
Agreement of Merger to be executed on its behalf by its duly authorized
officers.
FIRST FEDERAL BANK
By:
------------------------------------------
Name:
Title:
WASHINGTON FEDERAL SAVINGS
AND LOAN ASSOCIATION
By:
------------------------------------------
Name:
Title:
C-5
Schedule I
C-6
Schedule II
C-7
ANNEX D
TENANT ESTOPPEL LETTER
__________, 2006
Washington Federal, Inc.
425 Pike Street
Seattle, WA 98101
Re: ___________________, as amended __________________ ("Lease") by
and between ___________________ ("Landlord") and ______________
("Tenant") for the premises commonly known as _________________
("Premises")
Dear __________:
In connection with the acquisition of First Federal Banc of the Southwest,
Inc. and its subsidiaries, by Washington Federal, Inc. ("Assignee"), and the
corresponding assignment of the above referenced Lease, the undersigned Tenant
hereby certifies to Assignee that the following statements are true, correct and
complete as of the date hereof:
1. Tenant is the tenant under the Lease for the Premises. There have been
no amendments, modifications or revisions to the Lease, and there are no
agreements of any kind between Landlord and Tenant regarding the Premises,
except as provided in the attached Lease.
2. Attached hereto as Schedule A is a true, correct and complete copy of
the Lease which has been duly authorized and executed by Tenant and which is in
full force and effect.
3. Tenant has accepted and is in sole possession of the Premises and is
presently occupying the Premises. The Lease has not been assigned, by operation
of law or otherwise, by Tenant, and no sublease, concession agreement or
license, covering the Premises, or any portion of the Premises, has been entered
into by Tenant. If the landlord named in the Lease is other than Landlord,
Tenant has received notice of the assignment to Landlord of the landlord's
interest in the Lease and Tenant recognizes Landlord as the landlord under the
Lease.
4. No rent under the Lease has been paid more than one (1) month in
advance, and no other sums or security deposits have been deposited with
Landlord, except in the amount of $__________. (If none, state "NONE"). Tenant
is not entitled to rent concessions or free rent.
5. All conditions and obligations of Landlord relating to completion of
tenant improvements and making the Premises ready for occupancy by Tenant have
been satisfied or performed and all other conditions and obligations under the
Lease to be satisfied or performed by Landlord as of the date hereof have been
fully satisfied or performed.
D-1
6. There exists no defense to, or right of offset against, enforcement of
the Lease by Landlord. Neither Landlord nor Tenant is in default under the Lease
and no event has occurred which, with the giving of notice or passage of time,
or both, could result in such a default.
7. Tenant has not received any notice of any present violation of any
federal, state, county or municipal laws, regulations, ordinances, orders or
directives relating to the use or condition of the Premises.
8. Except as specifically stated herein, Tenant has not been granted (a)
any option to extend the term of the Lease; (b) any option to expand the
Premises or to lease additional space with in the Premises; (c) any right to
terminate the Lease prior to its stated expiration; or (d) any option or right
of first refusal to purchase the Premises or any part thereof.
9. Tenant acknowledges having been notified that Landlord's interest in and
to the Lease has been, or will be, assigned to Assignee. Until further notice
from Landlord, however, Tenant will continue to make all payments under the
Lease to Landlord and otherwise look solely to Landlord for the performance of
the Landlord's obligations under the Lease.
The agreements and certifications set forth herein are made with the
knowledge and intent that Assignee will rely on them in purchasing the Premises,
and Assignee's successors and assigns may rely upon them for that purpose.
Very truly yours,
[TENANT]
--------------------------------
By: ____________________________
Name: __________________________
Title: ___________________________
D-2
SCHEDULE A
LEASE
D-3
ANNEX E
LANDLORD ESTOPPEL LETTER
__________, 2006
Washington Federal, Inc.
425 Pike Street
Seattle, WA 98101
Re: ___________________, as amended __________________ ("Lease") by and
between __________________________________________________________
("Landlord") and __________________________________ ("Tenant") for
the premises commonly known as _________________________ ("Premises")
Dear __________:
In connection with the acquisition of First Federal Banc of the Southwest,
Inc. and its subsidiaries by Washington Federal, Inc. ("Assignee"), and the
corresponding assignment of the above referenced Lease, the undersigned Landlord
hereby certifies to Assignee that the following statements are true, correct and
complete as of the date hereof:
1. Tenant is the tenant under the Lease for the Premises. There have been
no amendments, modifications or revisions to the Lease, and there are no
agreements of any kind between Landlord and Tenant regarding the Premises,
except as provided in the attached Lease.
2. Attached hereto as Schedule A is a true, correct and complete copy of
the Lease which has been duly authorized and executed by Landlord and which is
in full force and effect.
3. Tenant has accepted and is in sole possession of the Premises and is
presently occupying the Premises. To the Landlord's knowledge, the Lease has not
been assigned, by operation of law or otherwise, by Tenant, and no sublease,
concession agreement or license, covering the Premises, or any portion of the
Premises, has been entered into by Tenant.
4. No rent under the Lease has been paid to Landlord more than one (1)
month in advance, and no other sums or security deposits have been deposited
with Landlord, except in the amount $__________. (If none, state "NONE"). Tenant
is not entitled to rent concessions or free rent.
5. All conditions and obligations under the Lease to be satisfied or
performed by Landlord and Tenant as of the date hereof have been fully satisfied
or performed.
6. Neither Landlord nor Tenant is in default under the Lease and no event
has occurred which, with the giving of notice or passage of time, or both, could
result in such a default.
E-1
7. Landlord has not received any notice of any present violation of any
federal, state, county or municipal laws, regulations, ordinances, orders or
directives relating to the use or condition of the Premises.
8. Except as specifically stated herein, Tenant has not been granted (a)
any option to extend the term of the Lease, except as set forth in the Lease.
The agreements and certifications set forth herein are made with the
knowledge and intent that Assignee will rely on them in purchasing the Premises,
and Assignee's successors and assigns may rely upon them for that purpose.
Very truly yours,
[LANDLORD]
-------------------------------------
By:
------------------------------
Name:
------------------------------
Title:
------------------------------
E-2
SCHEDULE A
LEASE
E-3
ANNEX F
NON-COMPETE, NON-SOLICITATION AGREEMENT
Dated as of _____ __, 2006
Between
AUBREY L. DUNN, JR.
and
WASHINGTON FEDERAL, INC.
F-1
This NON-COMPETE and NON-SOLICITATION AGREEMENT (this "Agreement") is dated
as of _______ __, 2006, and which will be effective as of the Effective Time (as
defined below), by and between Aubrey L. Dunn, Jr. ("Executive"), First Federal
Banc of the Southwest, Inc. ("FFSW") and Washington Federal, Inc. ("Washington
Federal"), a Washington corporation.
RECITALS
WHEREAS, Executive is President and Chief Executive Officer of FFSW;
WHEREAS, FFSW, Washington Federal and Washington Federal Acquisition, Inc.
("Merger Sub") propose to enter into an Agreement and Plan of Reorganization,
dated as of October 10, 2006 (the "Merger Agreement"), pursuant to which Merger
Sub will merge with and into FFSW, with FFSW as the surviving corporation (the
"Merger"), and thereafter FFSW will be merged and liquidated into Washington
Federal in accordance with the Agreement and an Agreement and Plan of Merger and
Liquidation;
WHEREAS, in order to induce Washington Federal to enter into the Merger
Agreement and to minimize the risk that Washington Federal will lose the benefit
of the goodwill and other assets being acquired by it, and to protect the trade
secrets and other confidential and proprietary information of FFSW known to
Executive and being acquired by Washington Federal, Executive has agreed to
restrict his activities in accordance with the terms and conditions of this
Agreement; and
WHEREAS, this Agreement is subject to, and will only become effective, upon
consummation of the transactions contemplated by the Merger Agreement (the
"Effective Time").
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
1. Covenants.
---------
(a) Non-Compete. Commencing as of the Effective Time and continuing
-----------
for a period of six (6) consecutive months thereafter, Executive agrees not to
compete with Washington Federal or any of its subsidiaries in any city, town or
county in which FFSW has an office, determined as of the Effective Time, except
as agreed to pursuant to a resolution duly adopted by the Board of Directors of
Washington Federal. Executive agrees that during such period and within said
area, cities, towns and counties, Executive shall not work for or advise,
consult or otherwise serve with, directly or indirectly, any entity whose
business materially competes with the depository, lending or other current
business activities of Washington Federal or any of its subsidiaries. The
parties hereto, recognizing that irreparable injury would result to Washington
Federal, its business and property in the event of Executive's breach of this
Section 1(a), agree that in the event of any such breach by Executive,
Washington Federal would be entitled, in addition to any other remedies and
damages available to it, to an injunction to restrain the violation hereof by
Executive, Executive's partners, agents, employers, employees and all persons
acting for or with Executive. Nothing herein shall be construed as prohibiting
F-2
Washington Federal from pursuing any other remedies available to Washington
Federal for such breach, including the recovery of damages from Executive.
(b) Non-Solicitation.
----------------
(1) Executive agrees that as of the Effective Time, and
for a period of two (2)consecutive years thereafter, he shall not, directly or
indirectly, hire, attempt to hire, contact or solicit with regard to hiring any
individual who, immediately prior to the Effective Time (1) is a current
employee of FFSW or any affiliate of FFSW, or (2) becomes an employee of
Washington Federal or any of its subsidiaries in connection with the Merger
(collectively, the "Prohibited Class"), or induce or otherwise counsel, advise
or knowingly encourage any such person to leave the employ of Washington Federal
or any of its subsidiaries.
(2) Nothing contained in this Section 1(b) is intended to
prohibit general advertising or general solicitation not specifically directed
at the Prohibited Class.
(3) For purposes of this Section 1(b), Executive shall not be
prohibited from soliciting any former employees of FFSW (A) who have been
terminated involuntarily by Washington Federal or its subsidiaries, or (B) whose
employment with Washington Federal or its subsidiaries was voluntarily
terminated at least six (6) months prior to the time Executive first solicited
such person for employment following the Effective Time.
(c) Consideration. In consideration of Executive's entering into this
-------------
Agreement, FFSW shall pay the Executive, immediately prior to the Effective
Time, the sum of Six Hundred Fifty Thousand Dollars ($650,000.00), less
applicable withholding taxes.
(d) Reformation. Each party hereto acknowledges that the potential
-----------
restrictions on Executive's future activities imposed by the covenants in this
Section 1 are reasonable in both duration and geographic scope and in all other
respects. In the event that the provisions of this Section 1 should ever be
deemed to exceed the duration or geographic limitations or scope permitted by
applicable law, then such provisions shall be reformed to the maximum time or
geographic limitations or scope, as the case may be, permitted by applicable
law, and each party agrees that the restrictions and prohibitions contained
herein shall be effective to the fullest extent allowed under applicable law in
such jurisdiction.
(e) Specific Performance. Executive acknowledges that it would be
---------------------
impossible to determine the amount of damages that would result from any breach
of any of the provisions of this Section 1 and that the remedy at law for any
breach of any of such provisions would likely be inadequate and, accordingly,
agrees that Washington Federal shall, in addition to any other rights or
remedies which it may have at law or in equity, be entitled to seek such
equitable and injunctive relief as may be available from any court of competent
jurisdiction to restrain Executive from violating any of such provisions of this
Agreement. In connection with any action or proceeding for such equitable or
injunctive relief, Executive hereby waives any claim or defense that a remedy at
law alone is adequate and agrees, to the maximum extent permitted by law, to
have each such provision of this Section 1 specifically enforced against
Executive, without the necessity of posting bond or other security against
Executive, and consents to the entry of equitable or injunctive relief against
F-3
Executive enjoining or restraining any breach of any of the provisions of this
Section 1.
2. Miscellaneous.
-------------
(a) Effective Time. This Agreement shall be effective as of the
----------------
Effective Time of the Merger (as defined in the Merger Agreement).
(b) Amendment; Waiver. This Agreement shall not be amended, altered or
-----------------
modified in any manner whatsoever, except by a written instrument executed by
the parties hereto. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach of the same
or similar nature.
(c) Counterparts. This Agreement may be executed in one or more
------------
counterparts (including by facsimile), each of which shall be deemed to be an
original, but all of which shall constitute one and the same instrument.
(d) Governing Law. This Agreement shall be deemed to be made in and in
-------------
all respects shall be interpreted, construed and governed by and in accordance
with the laws of the State of New Mexico, without regard to the conflict of law
principles thereof.
(e) Attorney's Fees. The prevailing party in any litigation,
-----------------
arbitration, mediation, bankruptcy, insolvency or other proceeding
("Proceeding") relating to the enforcement or interpretation of this Agreement
may recover from the unsuccessful party all fees and disbursements of counsel
(including expert witness and other consultants' fees and costs) relating to or
arising out of (a) such Proceeding (whether or not the Proceeding results in a
judgment) and (b) any post-judgment or post-award Proceeding including, without
limitation, one to enforce or collect any judgment or award resulting from any
Proceeding. All such judgments and awards shall contain a specific provision for
the recovery of all such subsequently incurred costs, expenses, fees and
disbursements of counsel.
(f) Notices. All notices, requests, instructions and other
-------
communications to be given hereunder by any party to the other shall be in
writing and shall be deemed given if personally delivered, telecopied (with
confirmation) or mailed by registered or certified mail, postage prepaid (return
receipt requested), to such party at its address set forth below or such other
address as such party may specify to the other party by notice provided in
accordance with this Section 2(e).
if to Washington Federal, to:
Washington Federal, Inc.
425 Pike Street
Seattle, WA 98101
Facsimile: (206) 624-2334
Attention: Roy Whitehead, President
and Chief Executive Officer
F-4
if to Executive, to:
Aubrey L. Dunn, Jr.
P.O. Box 1047
Roswell, NM 88202-1047
(g) Entire Agreement. This Agreement and the Merger Agreement and
-----------------
the agreements set forth as annexes to the Merger Agreement constitute the
entire agreement of the parties hereto with reference to the transactions
contemplated hereby and supersede all other prior agreements, understandings,
representations and warranties, both written and oral, between the parties or
their respective representatives, agents or attorneys, with respect to the
subject matter hereof.
(h) Parties In Interest. This Agreement shall be binding upon and
--------------------
inure solely to the benefit of each party hereto and their respective
successors, assigns, estate, heirs, executors, administrators and other legal
representatives, as the case may be. Nothing in this Agreement, express or
implied, is intended to confer upon any other person, other than parties hereto
and their respective successors, assigns, estate, heirs, executors,
administrators and other legal representatives, as the case may be, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
(i) Assignment. This Agreement shall not be assignable by law or
----------
otherwise without the prior written consent of the other party hereto; provided,
however, that Washington Federal may assign any of its rights and obligations
hereunder to any of its affiliates or to any other entity which may acquire all
or substantially all of the assets, shares or business of Washington Federal or
any of its subsidiaries or any entity with or into which Washington Federal or
any of its subsidiaries may be consolidated or merged.
(j) Captions. The section and paragraph captions herein are for
--------
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
(k) Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity and unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
[signature page follows]
F-5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
WASHINGTON FEDERAL, INC.
By:
---------------------------------------------
Name: Roy Whitehead
Title: President and CEO
FIRST FEDERAL BANC
OF THE SOUTHWEST, INC.
By:
----------------------------------------------
Name:
----------------------------
Title:
----------------------------
EXECUTIVE
-------------------------------------------
Name: Aubrey L. Dunn, Jr.
F-6
ANNEX G
NON-SOLICITATION AGREEMENT
Dated as of _____ __, 2006
Between
[Director]
and
WASHINGTON FEDERAL, INC.
G-1
This NON-SOLICITATION AGREEMENT (this "Agreement") is dated as of _______
__, 2006, and which will be effective as of the Effective Time (as defined
below), by and between _________________ ("Director"), First Federal Banc of the
Southwest, Inc. ("FFSW") and Washington Federal, Inc. ("Washington Federal"), a
Washington corporation.
RECITALS
WHEREAS, Director serves on the Board of Directors of FFSW;
WHEREAS, FFSW, Washington Federal and Washington Federal Acquisition, Inc.
("Merger Sub") propose to enter into an Agreement and Plan of Reorganization,
dated as of October 10, 2006 (the "Merger Agreement"), pursuant to which Merger
Sub will merge with and into FFSW, with FFSW as the surviving corporation (the
"Merger"), and thereafter FFSW will be merged and liquidated into Washington
Federal in accordance with the Agreement and an Agreement and Plan of Merger and
Liquidation (the "Liquidation Agreement");
WHEREAS, in order to induce Washington Federal to enter into the Merger
Agreement and to minimize the risk that Washington Federal will lose the benefit
of the goodwill and other assets being acquired by it, and to protect the trade
secrets and other confidential and proprietary information of FFSW known to
Director and being acquired by Washington Federal, Director has agreed to
restrict his activities in accordance with the terms and conditions of this
Agreement; and
WHEREAS, this Agreement is subject to, and will only become effective, upon
consummation of the transactions contemplated by the Merger Agreement (the
"Effective Time").
NOW, THEREFORE, in consideration of the premises, and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereby agree as follows:
1. Covenants.
---------
(a) Non-Solicitation.
----------------
(1) Director agrees that as of the Effective Time, and for a
period of thirty (30) consecutive months thereafter, he shall not, directly or
indirectly, take any affirmative action to (A) induce or attempt to induce or
(B) following the Effective Time otherwise knowingly counsel, advise, or
encourage any individual who immediately prior to the Effective Time is (1) a
current employee of FFSW or any affiliate of FFSW, or (2) becomes an employee of
Washington Federal or any of its subsidiaries in connection with the Merger
(collectively, the "Prohibited Class"), to do any of the following:
(i) leave the employ of Washington Federal or any of its
subsidiaries or to accept employment with an employer other than
Washington Federal or its subsidiaries or affiliates, or
G-2
(ii) offer employment to or hire such person, or work for any
person or entity that offers employment to or hires such person.
(2) Nothing contained in this Section 1(a) is intended to
prohibit general advertising or general solicitation not specifically directed
at the Prohibited Class.
(3) For purposes of this Section 1(a), Director shall not be
prohibited from soliciting any former employees of FFSW (A) who have been
involuntarily terminated by Washington Federal or any of its subsidiaries, or
(B) whose employment with Washington Federal or any of its subsidiaries was
voluntarily terminated at least six (6) months after the Effective Time.
(b) Reformation. Each party hereto acknowledges that the potential
-----------
restrictions on Director's future activities imposed by the covenants in this
Section 1 are reasonable in duration and in all other respects. In the event
that the provisions of this Section 1 should ever be deemed to exceed the
duration or scope permitted by applicable law, then such provisions shall be
reformed to the maximum time or scope, as the case may be, permitted by
applicable law, and each party agrees that the restrictions and prohibitions
contained herein shall be effective to the fullest extent allowed under
applicable law in such jurisdiction.
(c) Specific Performance. Director acknowledges that it would be
---------------------
impossible to determine the amount of damages that would result from any breach
of any of the provisions of this Section 1 and that the remedy at law for any
breach of any of such provisions would likely be inadequate and, accordingly,
agrees that Washington Federal shall, in addition to any other rights or
remedies which it may have at law or in equity, be entitled to seek such
equitable and injunctive relief as may be available from any court of competent
jurisdiction to restrain Director from violating any of such provisions of this
Agreement. In connection with any action or proceeding for such equitable or
injunctive relief, Director hereby waives any claim or defense that a remedy at
law alone is adequate and agrees, to the maximum extent permitted by law, to
have each such provision of this Section 1 specifically enforced against
Director, without the necessity of posting bond or other security against
Director, and consents to the entry of equitable or injunctive relief against
Director enjoining or restraining any breach of any of the provisions of this
Section 1.
2. Miscellaneous.
-------------
(a) Effective Time. This Agreement shall be effective as of the
--------------
Effective Time of the Merger (as defined in the Merger Agreement).
(b) Amendment; Waiver. This Agreement shall not be amended, altered or
-----------------
modified in any manner whatsoever, except by a written instrument executed by
the parties hereto. No waiver of any breach or default hereunder shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach of the same
or similar nature.
(c) Counterparts. This Agreement may be executed in one or more
------------
counterparts (including by facsimile), each of which shall be deemed to be an
original, but all of which shall constitute one and the same instrument.
G-3
(d) Governing Law. This Agreement shall be deemed to be made in and in
-------------
all respects shall be interpreted, construed and governed by and in accordance
with the laws of the State of New Mexico, without regard to the conflict of law
principles thereof.
(e) Attorney's Fees. The prevailing party in any litigation,
-----------------
arbitration, mediation, bankruptcy, insolvency or other proceeding
("Proceeding") relating to the enforcement or interpretation of this Agreement
may recover from the unsuccessful party all fees and disbursements of counsel
(including expert witness and other consultants' fees and costs) relating to or
arising out of (a) such Proceeding (whether or not the Proceeding results in a
judgment) and (b) any post-judgment or post-award Proceeding including, without
limitation, one to enforce or collect any judgment or award resulting from any
Proceeding. All such judgments and awards shall contain a specific provision for
the recovery of all such subsequently incurred costs, expenses, fees and
disbursements of counsel.
(f) Notices. All notices, requests, instructions and other
-------
communications to be given hereunder by any party to the other shall be in
writing and shall be deemed given if personally delivered, telecopied (with
confirmation) or mailed by registered or certified mail, postage prepaid (return
receipt requested), to such party at its address set forth below or such other
address as such party may specify to the other party by notice provided in
accordance with this Section 2(e).
if to Washington Federal, to:
Washington Federal, Inc.
425 Pike Street
Seattle, WA 98101
Facsimile: (206) 624-2334
Attention: Roy Whitehead, President
and Chief Director Officer
if to Director, to:
[Home Address]
(g) Entire Agreement. This Agreement and the Merger Agreement and the
-----------------
agreements set forth as annexes to the Merger Agreement constitute the entire
agreement of the parties hereto with reference to the transactions contemplated
hereby and supersede all other prior agreements, understandings, representations
and warranties, both written and oral, between the parties or their respective
representatives, agents or attorneys, with respect to the subject matter hereof.
(h) Parties In Interest. This Agreement shall be binding upon and inure
-------------------
solely to the benefit of each party hereto and their respective successors,
assigns, estate, heirs, executors, administrators and other legal
representatives, as the case may be. Nothing in this Agreement, express or
implied, is intended to confer upon any other person, other than parties hereto
and their respective successors, assigns, estate, heirs, executors,
administrators and other
G-4
<page>
legal representatives, as the case may be, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
(i) Assignment. This Agreement shall not be assignable by law or
----------
otherwise without the prior written consent of the other party hereto; provided,
however, that Washington Federal may assign any of its rights and obligations
hereunder to any of its affiliates or to any other entity which may acquire all
or substantially all of the assets, shares or business of Washington Federal or
any of its subsidiaries or any entity with or into which Washington Federal or
any of its subsidiaries may be consolidated or merged.
(j) Captions. The section and paragraph captions herein are for
--------
convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
(k) Severability. Any term or provision of this Agreement which is
------------
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity and unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement in any other jurisdiction. If any provision of this Agreement is so
broad as to be unenforceable, the provision shall be interpreted to be only so
broad as is enforceable.
[signature page follows]
G-5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
WASHINGTON FEDERAL
By:
------------------------------------
Name: Roy Whitehead
Title: President and CEO
FIRST FEDERAL BANC
OF THE SOUTHWEST, INC.
By:
-----------------------------------
Name:
-----------------------------
Title:
-----------------------------
DIRECTOR
--------------------------------------
Name:
---------------------------------
G-6