SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 11, 1999
Horizon Financial Corp.
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(Exact name of registrant as specified in its charter)
Washington 0-27062 91-1695422
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State or other jurisdiction Commission (I.R.S. Employer
of incorporation File Number Identification No.)
1500 Cornwall Avenue, Bellingham, Washington 98225
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number (including area code) (360) 733-3050
Not Applicable
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(Former name or former address, if changed since last report)
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Item 5. Other Events
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On January 11, 1999, Horizon Financial Corp. ("Company") and its wholly-
owned subsidiary, Horizon Bank, a savings bank, entered into an Agreement and
Plan of Mergers ("Agreement") with Bellingham Bancorp ("Bancorp") and its
wholly-owned subsidiary, Bank of Bellingham, pursuant to which the Company
will acquire all of the outstanding stock of Bancorp. The Agreement provides
that shareholders of Bancorp will receive 2.74 shares of the Company's common
stock in exchange for each share of Bancorp common stock. The Company will
also assume all outstanding Bancorp stock options and warrants. The Company
anticipates issuing a maximum of 1,129,264 shares of common stock in the
transaction. It is anticipated that the transaction will be accounted for
using the pooling method of accounting.
Pursuant to the Agreement, Bancorp has agreed to pay the Company a
termination fee of $800,000 in the event the Agreement is terminated under
certain conditions, including the acquisition by a third party of securities
representing 25% or more of the voting shares of Bancorp or the agreement
between Bancorp and a third party to engage in a merger or consolidation.
Consummation of the acquisition is subject to several conditions,
including receipt of applicable regulatory approval, completion of due
diligence by the Company and approval by Bancorp's shareholders. For
information regarding the terms of the proposed transaction, reference is made
to the Agreement and the joint press release dated January 11, 1999,
respectively, which are attached hereto as Exhibits 2 and 99, respectively,
and incorporated herein by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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Exhibit
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2 Agreement and Plan of Mergers dated as of January 18, 1999 by and
among Horizon Financial Corp., Horizon Bank, a savings bank,
Bellingham Bancorporation and Bank of Bellingham.
99 Joint Press Release dated January 18, 1999.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
HORIZON FINANCIAL CORP.
DATE: January 22, 1999 By: /s/ V. Lawrence Evans
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V. Lawrence Evans
President and Chief Executive Officer
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Exhibit 2<PAGE>
AGREEMENT AND PLAN OF MERGERS
AGREEMENT AND PLAN OF MERGERS, dated as of the 18th day of January 1999
(this "Agreement"), by and among HORIZON FINANCIAL CORP. (the "Company"),
HORIZON BANK, A SAVINGS BANK ("Horizon"), BELLINGHAM BANCORPORATION
("Bancorp") and BANK OF BELLINGHAM (the "Bank").
RECITALS:
(A) THE COMPANY. The Company is a corporation duly organized and
existing in good standing under the laws of the State of Washington, with its
principal executive offices located in Bellingham, Washington. The Company is
a registered bank holding company with the Board of Governors of the Federal
Reserve System ("Federal Reserve Board") under the Bank Holding Company Act of
1956, as amended. As of the date hereof, the Company has 30,000,000
authorized shares of common stock of $1.00 par value per share ("Company
Common Stock") and 10,000,000 shares of preferred stock of $1.00 par value per
share ("Company Preferred Stock") (no other class of capital stock being
authorized), of which 7,496,294 shares of Company Common Stock and no shares
of Company Preferred Stock are issued and outstanding.
(B) HORIZON. Horizon is a state stock savings bank duly organized and
existing under the laws of the United States, with its principal executive
offices located in Bellingham, Washington. As of the date hereof, Horizon has
30,000,000 authorized shares of common stock, par value $1.00 per share
("Horizon Common Stock") and 10,000,000 authorized shares of serial preferred
stock (no other class of capital stock being authorized), of which 1,000
shares of Horizon Common Stock and no shares of serial preferred stock are
outstanding. All of the issued and outstanding shares of Horizon Common Stock
are owned by the Company.
(C) BANCORP. Bancorp is a corporation duly organized and existing in
good standing under the laws of the State of Washington, with its principal
executive offices located in Bellingham, Washington. Bancorp is a registered
bank holding company with the Federal Reserve Board under the Bank Holding
Company Act of 1956, as amended. As of the date hereof, Bancorp has 600,000
authorized shares of common stock of $1.00 par value per share ("Bancorp
Common Stock"), (no other class of capital stock being authorized), of which
358,874 shares of Bancorp Common Stock and no shares of Bancorp Preferred
Stock, are issued and outstanding.
(D) THE BANK. The Bank is a state chartered bank duly organized and
existing under the laws of the State of Washington, with its principal
executive offices located in Bellingham, Washington. As of the date hereof,
the Bank has 600,000 authorized shares of common stock of $1.00 par value per
share (the "Bank Common Stock") and no authorized shares of preferred stock
(the "Bank Preferred Stock") (no class of capital stock being authorized), of
which 179,437 shares of the Bank Common Stock and no shares of the Bank
Preferred Stock are issued and outstanding. All of the issued and outstanding
shares of Bank Common Stock are owned by Bancorp.
(E) VOTING AGREEMENT. As a condition and an inducement to the Company's
willingness to enter into this Agreement, the directors and executive officers
of Bancorp and all shareholders owning in excess of 10% of the outstanding
shares of Bancorp have entered into agreements with the Company pursuant to
which, among other things, they have agreed to vote in favor of approval of
the transactions contemplated by this Agreement at the Bancorp Meeting (as
hereinafter defined).
(F) RIGHTS, ETC. Except as Previously Disclosed (as hereinafter
defined) in Schedule 4.01(C), there are no shares of capital stock of Bancorp
or the Bank authorized and reserved for issuance, neither Bancorp nor the Bank
has any Rights (as defined below) issued or outstanding and neither Bancorp
nor the Bank has any commitment to authorize, issue or sell any such shares or
any Rights, except pursuant to this Agreement. The term "Rights" means
securities or obligations convertible into or exchangeable for, or giving any
person any right to subscribe for or acquire,
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or any options, calls or commitments relating to, shares of capital stock.
There are no preemptive rights in respect of Bancorp Common Stock or Bank
Common Stock.
(G) APPROVALS. The Board of Directors of each of Bancorp, the Bank, the
Company and Horizon has approved, at meetings of each of such Boards of
Directors, this Agreement and has authorized the execution hereof in
counterparts.
In consideration of their mutual promises and obligations, the parties
hereto adopt and make this Agreement and prescribe the terms and conditions
thereof and the manner and basis of carrying it into effect, which shall be as
follows:
DEFINITIONS
(A) DEFINITIONS. Capitalized terms used in this Agreement have the
following meanings:
"Acquisition Transaction" means: (a) a merger or consolidation, or any
similar transaction, involving Bancorp or the Bank, (b) a purchase, lease or
other acquisition of all or substantially all of the assets of Bancorp or the
Bank, or (c) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 10% or
more of the voting power of Bancorp or the Bank; or a bona fide proposal is
made by a third party to Bancorp or the Bank to engage in an Acquisition
Transaction and after such proposal is made any of the following events
occurs: Bancorp willfully breaches this Agreement and such breach entitles
the Company to terminate this Agreement; the holders of Bancorp Common Stock
do not approve this Agreement at the Bancorp Meeting; the Bancorp Meeting is
not held or is canceled prior to termination of this Agreement for reasons
other than the fault of the Company; or Bancorp's Board of Directors modifies
in a manner adverse to the Company the recommendation of Bancorp's Board of
Directors with respect to this Agreement.
"Agreement" means this Agreement and Plan of Mergers.
"Asset Classification" has the meaning assigned to such term in Section
4.01(T).
"Bancorp" means Bellingham Bancorporation.
"Bancorp Common Stock" has the meaning assigned to such term in Recital
(C).
"Bancorp Financial Reports" has the meaning assigned to such term in
Section 4.01(H).
"Bancorp Meeting" has the meaning assigned to such term in Section 5.03.
"Bancorp Option" has the meaning assigned to such term in Section 2.08.
"Bancorp Subsidiary(ies)" means any business entity five percent or more
of the equity interests of which are owned directly or indirectly by Bancorp.
"Bancorp Tax Returns" has the meaning assigned to such term in Section
4.01(Z).
"Bancorp Warrant" has the meaning assigned to such term in Section 2.08.
"Bank" means Bank of Bellingham.
"Bank Common Stock" has the meaning assigned to such term in Recital (D).
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"Bank Merger" has the meaning assigned to such term in Section 1.02(A).
"Bank Preferred Stock" has the meaning assigned to such term in Recital
(D).
"BIF" means the Bank Insurance Fund of the FDIC.
"Break-up Fee" has the meaning assigned to such term in Section 8.08.
"Business Day" means any day other than a Saturday, Sunday, or a legal
holiday in the State of Washington.
"Code" has the meaning assigned to such term in Section 4.01(Q)(2).
"Company" means Horizon Financial Corp.
"Company Common Stock"has the meaning assigned to such term in Recital
(A).
"Company Financial Reports" has the meaning assigned to such term in
Section 4.02(D).
"Company Option" has the meaning assigned to such term in Section 2.08.
"Company Preferred Stock"has the meaning assigned to such term in Recital
(A).
"Company Warrant" has the meaning assigned to such term in Section 2.08.
"Compensation and Benefit Plans" has the meaning assigned to such term in
Section 4.01(Q)(1).
"Continuing Bank" has the meaning assigned to such term in Section 1.02
(A).
"Continuing Corporation" has the meaning assigned to such term in Section
1.01(A).
"Corporate Merger" has the meaning assigned to such term in Section 1.01
(A).
"Derivatives Contract" has the meaning assigned to such term in Section
4.01(BB).
"Director" means the Director of the Washington Department of Financial
Institutions.
"Dissenters Shares" means the shares of Company Common stock held by
those shareholders of the Company who have timely and properly exercised their
dissenters' rights in accordance with the Appraisal Laws.
"Effective Date" has the meaning assigned to such term in Section 1.03.
"Effective Time" has the meaning assigned to such term in Section 1.03.
"Employment Agreement" shall mean any of Exhibits F-1 and F-2 attached
hereto.
"Environmental Law" means (1) any federal, state and local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, legal doctrine, order, judgment, decree, injunction, requirement or
agreement with any governmental entity, relating to (a) the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource) or to human health
or safety, or (b) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production,
release or disposal of
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Hazardous Material, in each case as amended and as now in effect, including
the Federal Comprehensive Environmental Response, Compensation, and Liability
Act of 1980, the Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Air Act, the Federal
Clean Water Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal
Solid Waste Disposal and the Federal Toxic Substances Control Act, and the
Federal Insecticide, Fungicide and Rodenticide Act, the Federal Occupational
Safety and Health Act of 1970, each as amended and as now in effect, and (2)
any common law or equitable doctrine (including injunctive relief and tort
doctrines such as negligence, nuisance, trespass and strict liability) that
may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Material.
"ERISA" has the meaning assigned to such term in Section 4.01(Q)(2).
"ERISA Affiliate" has the meaning assigned to such term in Section 4.01
(Q)(3).
"ERISA Plans" has the meaning assigned to such term in Section 4.01(Q)
(2).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
"Exchange Agent" has the meaning assigned to such term in Section 2.04.
"Excluded Shares" has the meaning assigned to such term in Section
2.01(B).
"FDIC" means the Federal Deposit Insurance Corporation.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"FHLB" means the Federal Home Loan Bank of Seattle, which is one of the
12 FHLBs that makes up the Federal Home Loan Bank System.
"GAAP" means generally accepted accounting principles consistently
applied.
"Hazardous Material" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or quantity,
including any oil or other petroleum product, toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste or petroleum or any derivative or by-product thereof, radon, radioactive
material, asbestos, asbestos containing material, urea formaldehyde foam
insulation, lead and polychiorinated biphenyl.
"Horizon" means Horizon Bank, a savings bank.
"Horizon Common Stock" has the meaning assigned to such term in Recital
(B).
"Joint Proxy Statement/Prospectus" has the meaning assigned to such term
in Section 5.02.
"Loan/Fiduciary Property" means any property owned or controlled by the
Company or any of its Subsidiaries or in which the Company or any of its
Subsidiaries holds a security or other interest, and, where required by the
context, includes any such property where the Company or any of its
Subsidiaries constitutes the owner or operator of such property, but only with
respect to such property.
"Material Adverse Effect" means with respect to any Party an event,
occurrence or circumstance (including (i) the making of any provisions for
possible loan and lease losses, write-downs of other real estate and taxes and
(ii)
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any breach of a representation or warranty contained herein by such Party)
that (a) has or is reasonably likely to have a material adverse effect on the
financial condition, results of operations, business or prospects of such
Party and its subsidiaries, taken as a whole, or (b) would materially impair
such Party's ability to perform its obligations under this Plan or the Stock
Option Agreement or the consummation of any of the transactions contemplated
hereby or thereby.
"Mergers" has the meaning assigned to such term in Section 1.02(A).
"Multiemployer Plans" has the meaning assigned to such term in Section
4.01(Q)(2).
"Nasdaq" means the National Association of Securities Dealers Automated
Quotations system.
"Option" has the meaning assigned to such term in the Stock Option
Agreement.
"Option Shares" has the meaning assigned to such term in the Stock Option
Agreement.
"Participation Facility" means any facility in which the Company or any
of its Subsidiaries participates in the management and, where required by the
context, includes the owner or operator of such facility.
"Party" means a party to this Plan.
"Pension Plan" has the meaning assigned to such term in Section 4.01(Q)
(2).
"Previously Disclosed" means information provided by a Party in a
Schedule that is delivered by that Party to the other Party contemporaneously
with the execution of this Plan and specifically designated as information
"Previously Disclosed" pursuant to this Plan.
"Registration Statement" has the meaning assigned to such term in Section
5.02.
"Regulatory Authorities" means federal or state governmental agencies,
authorities or departments charged with the supervision or regulation of
depository institutions or engaged in the insurance of deposits.
"RCW" means the Revised Code of the State of Washington.
"Rights" has the meaning assigned to such term in Recital (F).
"Securities Act" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
"SEC" means the Securities and Exchange Commission.
"Subsidiary" with respect to any entity means each partnership or
corporation, the majority of the outstanding partnership interests, capital
stock or voting power of which is (or upon the exercise of all outstanding
warrants, options and other rights would be) owned, directly or indirectly, at
the time in question by such entity.
"Taxes" means federal, state, local or foreign income, gross receipts,
windfall profits, severance, property, production, sales, use, license,
excise, franchise, employment, withholding or similar taxes imposed on the
income, properties or operations of the respective Party or its Subsidiaries,
together with any interest, additions, or penalties with respect thereto and
any interest in respect of such additions or penalties.
"Third Party" means a person within the meaning of Sections 3(a)(9) and
13(d)(3) of the Exchange Act, excluding (1) Bancorp or any Bancorp Subsidiary
and (2) the Company or any subsidiary of the Company.
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"Washington Department" has the meaning assigned to such term in Section
4.01(H).
(B) GENERAL INTERPRETATION. Except as otherwise expressly provided in
this Agreement or unless the context clearly requires otherwise, the terms
defined in this Plan include the plural as well as the singular; the words
"hereof," "herein," "hereunder," "in this Plan" and other words of similar
import refer to this Plan as a whole and not to any particular Article,
Section or other subdivision; and references in this Plan to Articles,
Sections, Schedules, and Exhibits refer to Articles and Sections of and
Schedules and Exhibits to this Plan. Whenever the words "include,"
"includes," or "including" are used in this Plan, they shall be deemed to be
followed by the words "without limitation." Unless otherwise stated,
references to Subsections refer to the Subsections of the Section in which the
reference appears. All pronouns used in this Plan include the masculine,
feminine and neuter gender, as the context requires. All accounting terms
used in this Plan that are not expressly defined in this Plan have the
respective meanings given to them in accordance with GAAP.
I. THE MERGERS
1.01. THE CORPORATE MERGER. Subject to the provisions of this
Agreement, at the Effective Time (as hereinafter defined):
(A) THE CONTINUING CORPORATION. Bancorp shall be merged with and into
Company pursuant to the terms and conditions set forth herein and pursuant to
the Plan of Merger attached hereto as Exhibit A (the "Corporate Merger").
Upon consummation of the Corporate Merger, the separate existence of Bancorp
shall cease and the Company (the "Continuing Corporation") shall survive.
(B) RIGHTS, ETC. The Continuing Corporation shall thereupon and
thereafter possess all of the rights, privileges, immunities and franchises,
of a public as well as of a private nature, of each of the merging
corporations; and all property, real, personal and mixed, and all debts due on
whatever account, and all and every other interest, of or belonging to or due
to each of the corporations so merged, shall be deemed to be vested in the
Continuing Corporation without further act or deed; and the title to any real
estate or any interest therein, vested in each of such corporations, shall not
revert or be in any way impaired by reason of the Corporate Merger.
(C) LIABILITIES. The Continuing Corporation shall thenceforth be
responsible and liable for all the liabilities, obligations and penalties of
each of the corporations so merged, in accordance with applicable law.
(D) CERTIFICATE OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS. The
Certificate of Incorporation and Bylaws of the Continuing Corporation shall be
those of the Company, as in effect immediately prior to the Corporate Merger
becoming effective. The directors and officers of the Company in office
immediately prior to the Corporate Merger becoming effective shall be the
directors and officers of the Continuing Corporation, together with such
additional directors and officers as may thereafter be elected, who shall hold
office until such time as their successors are elected and qualified.
1.02. THE BANK MERGER. As soon as practicable following the Effective
Time:
(A) THE CONTINUING BANK. The Bank shall be merged into Horizon pursuant
to the terms and conditions set forth herein and pursuant to the Plan of
Merger attached hereto as Exhibit B (the "Bank Merger" and, together with the
Corporate Merger, the "Mergers"). Upon consummation of the Bank Merger, the
separate existence of the Bank shall cease and Horizon (the "Continuing Bank")
shall survive.
(B) RIGHTS, ETC. The Continuing Bank shall thereupon and thereafter
possess all of the rights, privileges, immunities and franchises, of a public
as well as of a private nature, of each of the institutions so merged; and all
property, real, personal and mixed, and all debts due on whatever account, and
all and every other interest, of or belonging to or due to each of the
institutions so merged, shall be deemed to be vested in the Continuing Bank
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without further act or deed; and the title to any real estate or any interest
therein, vested in each of such institutions, shall not revert or be in any
way impaired by reason of the Bank Merger.
(C) LIABILITIES. The Continuing Bank shall thenceforth be responsible
and liable for all the liabilities, obligations and penalties of each of the
institutions so merged, in accordance with applicable law.
(D) CHARTER; BYLAWS; DIRECTORS; OFFICERS. The Charter and Bylaws of the
Continuing Corporation shall be those of Horizon, as in effect immediately
prior to the Bank Merger becoming effective. The directors and officers of
Horizon in office immediately prior to the Bank Merger becoming effective
shall be the directors and officers of the Continuing Bank, together with such
additional directors and officers as may thereafter be elected, who shall hold
office until such time as their successors are elected and qualified.
(E) NAME. Subsequent to the Bank Merger and until September 30, 1999,
the former offices of the Bank will be operated as the Bank of Bellingham, a
division of Horizon Bank, a savings bank.
1.03. EFFECTIVE DATE. Subject to the conditions to the obligations of
the parties to effect the Mergers as set forth in Article VI, the effective
date (the "Effective Date") of the Corporate Merger shall be such date as the
Company shall notify Bancorp in writing not less than five days prior thereto,
which date shall be not later than the date set forth in Section 7.03 herein.
Prior to the Effective Date, the Company and Bancorp shall execute and deliver
to the Secretary of State of the State of Washington, Articles of Merger in
accordance with applicable law. The time on the Effective Date at which the
Corporate Merger becomes effective is referred to as the "Effective Time."
II. CONSIDERATION
2.01. CORPORATE MERGER CONSIDERATION. Subject to the provisions of this
Agreement, at the Effective Time:
(A) OUTSTANDING COMPANY COMMON STOCK. The shares of common stock of the
Company issued and outstanding immediately prior to the Effective Time shall,
on and after the Effective Time, remain as issued and outstanding shares of
Company Common Stock.
(B) OUTSTANDING BANCORP COMMON STOCK. Each share (excluding (i) shares
("Dissenters' Shares") that have not been voted in favor of approval of this
Agreement and with respect to which dissenters' rights have been perfected in
accordance with Section 23B.13 of the RCW or (ii) shares held by Bancorp or
any of its subsidiaries or by the Company or any of its subsidiaries, in each
case other than in a fiduciary capacity or as a result of debts previously
contracted ("Excluded Shares")) of Bancorp Common Stock issued and outstanding
immediately prior to the Effective Time shall become and be converted into, by
virtue of the Corporate Merger, automatically and without any action on the
part of the holder thereof, the right to receive 2.74 shares of Company Common
Stock.
2.02. STOCKHOLDER RIGHTS; STOCK TRANSFERS. At the Effective Time,
holders of Bancorp Common Stock shall cease to be, and shall have no rights
as, stockholders of Bancorp, other than to receive the consideration provided
under this Article II, without interest. After the Effective Time, there
shall be no transfers on the stock transfer books of Bancorp or the Continuing
Corporation of the shares of Bancorp Common Stock which were issued and
outstanding immediately prior to the Effective Time.
2.03. FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of Company Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the
Corporate Merger; instead, the Company shall pay to each holder of Bancorp
Common Stock who would otherwise be entitled to a fractional share an amount
in cash determined by multiplying such fraction by $13.75.
2.04 EXCHANGE PROCEDURES. As promptly as practicable after the
Effective Date, the Company shall send or cause to be sent to each former
stockholder of Bancorp of record immediately prior to the Effective Date
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transmittal materials for use in exchanging such stockholder's certificates
for Company Common Stock for the consideration set forth in this Article II.
The certificates representing the shares of Company Common Stock into which
shares of such shareholder's Bancorp Common Stock are converted on the
Effective Date, any fractional share checks which such stockholder shall be
entitled to receive, and any dividends paid on such shares of Company Common
Stock for which the record date for determination of stockholders entitled to
such dividends is on or after the Effective Date, will be delivered to such
stockholder only upon delivery to an independent exchange agent selected by
the Company (the "Exchange Agent") of the certificates representing all of
such shares of Bancorp Common Stock (or indemnity satisfactory to the Company
and the Exchange Agent, in their judgement, if any of such certificates are
lost, stolen or destroyed). No interest will be paid on any such fractional
share checks or dividends to which the holder of such shares shall be entitled
to receive upon such delivery. Certificates surrendered for exchange by any
person constituting an "affiliate" of Bancorp for purposes of Rule 145 of the
Securities Act, shall not be exchanged for certificates representing Company
Common Stock until the Company has received a written agreement from such
person as specified in Section 5.17.
2.05 ANTI-DILUTION PROVISIONS. In the event the Company changes the
number of shares of Company Common Stock issued and outstanding prior to the
Effective Date as a result of a stock split, stock dividend, recapitalization
or similar transaction with respect to the outstanding Company Common Stock
and the record date therefor shall be prior to the Effective Date, the
Exchange Ratio shall be proportionately adjusted.
2.06 EXCLUDED SHARES; DISSENTERS SHARES. Each of the Excluded Shares
shall be canceled and retired at the Effective Time, and no consideration
shall be issued in exchange therefor. Dissenters' Shares shall be purchased
and paid for in accordance with Section 23B.13 of the RCW.
2.07 RESERVATION OF RIGHT TO REVISE TRANSACTION. The Company may at
any time change the method of effecting the acquisition of Bancorp and the
Bank (including without limitation the provisions of this Article II) if and
to the extent it deems such change to be desirable; PROVIDED, HOWEVER, that no
such change shall (i) alter or change the amount or kind of consideration to
be issued to holders of Bancorp Common Stock as provided for in this Agreement
or (ii) adversely affect the tax treatment to Bancorp stockholders,
individually or collectively, as a result of receiving such consideration.
2.08 OPTIONS AND WARRANTS. At the Effective Time, by virtue of the
Corporate Merger, and without any action on the part of any holder of an
option, each option granted by Bancorp to purchase shares of Bancorp Common
Stock ("Bancorp Option") that is then outstanding and unexercised shall be
converted into and become an option to purchase Company Common Stock ("Company
Option") on the same terms and conditions as are in effect with respect to the
Bancorp Option immediately prior to the Effective Time and each warrant to
purchase Bancorp Common Stock ("Bancorp Warrant") shall be converted into and
become a warrant to purchase Company Common Stock ("Company Warrant"), except
that (i) each such Company Option and Company Warrant may be exercised solely
for shares of Company Common Stock, (ii) the number of shares of Company
Common Stock subject to such Company Option and Company Warrant shall be equal
to the number of shares of Bancorp Common Stock subject to such Option and
Warrant immediately prior to the Effective Time multiplied by 2.74, the
product being rounded, if necessary, up or down to the nearest whole share,
and (iii) the per share exercise price under each such Company Option and
Company Warrant shall be adjusted by dividing the per share exercise price of
the Bancorp Option and the Bancorp Warrant by 2.74 and rounding up to the
nearest cent. The number of shares of Bancorp Common Stock which are issuable
upon exercise of Options and Warrants as of the date hereof are Previously
Disclosed in Schedule 2.08.
III. ACTIONS PENDING CONSUMMATION
Without the prior written consent of the Company, each of Bancorp and the
Bank shall conduct its and each of the Bancorp Subsidiaries' (as hereinafter
defined) business in the ordinary and usual course consistent with past
practice and shall use its best efforts to maintain and preserve its and each
of the Bancorp Subsidiaries' business organization, employees and advantageous
business relationships and retain the services of its and each of the Bancorp
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Subsidiaries' officers and key employees, and each of Bancorp and the Bank
will not, and will cause each of the Bancorp Subsidiaries not to, agree to:
3.01. CAPITAL STOCK. Except for or as otherwise permitted in or
expressly contemplated by this Agreement or as Previously Disclosed in
Schedule 4.01(C), issue, sell or otherwise permit to become outstanding any
additional shares of capital stock of Bancorp, the Bank or any Bancorp
Subsidiary, or any Rights with respect thereto, or enter into any agreement
with respect to the foregoing, or permit any additional shares of Bancorp
Common Stock to become subject to grants of employee stock options, stock
appreciation rights or similar stock based employee compensation rights.
3.02. DIVIDENDS, ETC. Make, declare or pay any dividend on or in
respect of, or declare or make any distribution on, or directly or indirectly
combine, redeem, reclassify, purchase or otherwise acquire, any shares of its
capital stock or, other than as permitted in or contemplated by this
Agreement, authorize the creation or issuance of, or issue, any additional
shares of its capital stock or any Rights with respect thereto.
3.03. INDEBTEDNESS; LIABILITIES; ETC. Other than in the ordinary course
of business consistent with past practice, incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other individual, corporation
or other entity.
3.04. LINE OF BUSINESS; OPERATING PROCEDURES; ETC. Except as may be
directed by any regulatory agency, (i) change its lending, investment,
liability management or other material banking policies in any material
respect, except such changes as are in accordance and in an effort to comply
with Section 5.10, or (ii) commit to incur any further capital expenditures
beyond those Previously Disclosed in Schedule 3.04 other than in the ordinary
course of business and not exceeding $5,000 individually or $10,000 in the
aggregate.
3.05. LIENS AND ENCUMBRANCES. Other than in the ordinary course of
business consistent with prior business activities, impose, or suffer the
imposition, on any shares of capital stock of any of the Bancorp Subsidiaries,
or on any of its or the Bancorp Subsidiaries' other assets, any lien, charge
or encumbrance, or permit any such lien, charge or encumbrance to exist.
3.06. COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. Except as Previously
Disclosed in Schedule 3.06, enter into or amend any employment, severance or
similar agreement or arrangement with any of its directors, officers or
employees, or grant any salary or wage increase, amend the terms of any stock
option or increase any employee benefit (including incentive or bonus
payments), except normal individual increases in regular compensation to
employees in the ordinary course of business consistent with past practice.
3.07. BENEFIT PLANS. Except as Previously Disclosed in Schedule 3.07,
enter into or modify (except as may be required by applicable law) any
pension, retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any trust
agreement related thereto, in respect of any of its directors, officers or
other employees, including without limitation taking any action that
accelerates the vesting or exercise of any benefits payable thereunder.
3.08. CONTINUANCE OF BUSINESS. Dispose of or discontinue any portion of
its assets, business or properties, which is material to Bancorp and the
Bancorp Subsidiaries taken as a whole, or merge or consolidate with, or
acquire all or any portion of, the business or property of any other entity
which is material to Bancorp and the Bancorp Subsidiaries taken as a whole
(except foreclosures or acquisitions by the Bank in a fiduciary capacity, in
each case in the ordinary course of business consistent with past practice).
3.09. AMENDMENTS. Amend its Articles of Incorporation, Charter or
Bylaws.
3.10. CLAIMS. Settle any claim, litigation, action or proceeding
involving any liability for money damages in excess of $25,000 or restrictions
upon the operations of Bancorp or any Bancorp Subsidiary.
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3.11 CONTRACTS. Except as previously disclosed on Schedule 3.11, enter
into, renew, terminate or make any change in any material contract, agreement
or lease, except in the ordinary course of business consistent with past
practice with respect to contracts, agreements and leases that are terminable
by it without penalty on more than 60 days prior written notice.
3.12. LOANS. Extend credit other than in the ordinary course of
business consistent with prior lending practices.
3.13 DEPOSIT RATES. Change the pricing structure of its deposit
liabilities, except in the ordinary course of business consistent with past
practice.
IV. REPRESENTATIONS AND WARRANTIES
4.01. REPRESENTATIONS AND WARRANTIES OF BANCORP AND THE BANK. Each of
Bancorp and the Bank hereby represents and warrants to the Company and Horizon
as follows:
(A) RECITALS. The facts set forth in the Recitals of this Agreement
with respect to it are true and correct.
(B) ORGANIZATION, STANDING AND AUTHORITY. It is duly qualified to do
business and is in good standing in the States of the United States and
foreign jurisdictions where the failure to be duly qualified, individually or
in the aggregate, is reasonably likely to have a Material Adverse Effect (as
hereinafter defined) on it. Each of Bancorp and the Bancorp 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 it is now conducted, the absence of which, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on it.
(C) SHARES. The outstanding shares of it are validly issued and
outstanding, fully paid and nonassessable, and subject to no preemptive
rights. Except as Previously Disclosed in Schedule 4.01(C), there are no
shares of capital stock or other equity securities of Bancorp or the Bank
outstanding and no outstanding Rights with respect thereto.
(D) BANCORP SUBSIDIARIES. Bancorp has Previously Disclosed in Schedule
4.01(D) a list of all the Bancorp Subsidiaries. Each of the Bancorp
Subsidiaries that is a banking association is an "insured depository
institution" as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder. No equity securities of any of the Bancorp
Subsidiaries are or may become required to be issued (other than to Bancorp or
a wholly-owned Bancorp Subsidiary) by reason of any Rights with respect
thereto. There are no contracts, commitments, understandings or arrangements
by which any of the Bancorp Subsidiaries is or may be bound to sell or
otherwise issue any shares of its capital stock, and there are no contracts,
commitments, understandings or arrangements relating to the rights of Bancorp
or the Bank, as applicable, to vote or to dispose of such shares. All of the
shares of capital stock of each Bancorp Subsidiary held by Bancorp or a
Bancorp Subsidiary are fully paid and nonassessable and are owned by Bancorp
or a Bancorp Subsidiary free and clear of any charge, mortgage, pledge,
security interest, restriction, claim, lien or encumbrance. Each Bancorp
Subsidiary is in good standing under the laws of the jurisdiction in which it
is incorporated or organized, and is duly qualified to do business and in good
standing in the jurisdictions where the failure to be duly qualified is
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on it. Except as Previously Disclosed in Schedule 4.01(D),
Bancorp does not own beneficially, directly or indirectly, any shares of any
equity securities or similar interests of any corporation, bank, partnership,
joint venture, business trust, association or other organization. The
deposits of the Bank are insured by the BIF of the FDIC. The Bank is a member
in good standing with the FHLB of Seattle.
(E) CORPORATE POWER. It and each of the Bancorp Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its material properties and assets.
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(F) CORPORATE AUTHORITY. Subject to any necessary receipt of approval
by its stockholders referred to in Section 6.01, this Agreement has been
authorized by all necessary corporate action of it and is a valid and binding
agreement of it enforceable against it in accordance with its terms, subject
as to enforcement as to bankruptcy, insolvency and other similar laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.
(G) NO DEFAULTS. Subject to the approval by its stockholders referred
to in Section 6.01, the required regulatory approvals referred to in Section
6.02, and the required filings under federal and state securities laws, and
except as Previously Disclosed in Schedule 4.01(G), the execution, delivery
and performance of this Agreement and the consummation by it of the
transactions contemplated hereby, does not and will not (i) constitute a
breach or violation of, or a default under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of it or of any of the Bancorp Subsidiaries or to
which it or any of the Bancorp Subsidiaries or its or their properties is
subject or bound, which breach, violation or default is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on it,
(ii) constitute a breach or violation of, or a default under, its Articles of
Incorporation, Charter or Bylaws, or (iii) require any consent or approval
under any such law, rule, regulation, judgment, decree, order, governmental
permit or license or the consent or approval of any other party to any such
agreement, indenture or instrument, other than any such consent or approval,
which if not obtained, would not be reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on Bancorp.
(H) FINANCIAL REPORTS. Except as Previously Disclosed in Schedule
4.01(H), (i) as to Bancorp, its audited consolidated balance sheet as of
September 30, 1998 and 1997 and related consolidated statements of income and
changes in stockholders' equity and cash flows for the years ended September
30, 1998, 1997 and 1996, and (ii) as to the Bank, its call report for the
fiscal year ended September 30, 1998, and all other financial reports filed or
to be filed subsequent to September 30, 1998, in the form filed with the FDIC
and the Washington Department of Banking ("Washington Department") (together,
the "Bancorp Financial Reports") 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 made therein, in light of
the circumstances under which they were made, not misleading; and each of the
balance sheets in or incorporated by reference into the Bancorp Financial
Reports (including the related notes and schedules thereto) fairly presents
and will fairly present the financial position of the entity or entities to
which it relates as of its date and each of the statements of income and
changes in stockholders' equity and cash flows or equivalent statements in the
Bancorp Financial Reports (including any related notes and schedules thereto)
fairly presents and will fairly present the results of operations, changes in
stockholders' equity and cash flows, as the case may be, of the entity or
entities to which it relates for the periods set forth therein, in each case
in accordance with generally accepted accounting principles consistently
applied during the periods involved, except in each case as may be noted
therein, subject to normal and recurring year-end audit adjustments in the
case of unaudited statements.
(I) ABSENCE OF UNDISCLOSED LIABILITIES. None of Bancorp or the Bancorp
Subsidiaries has any obligation or liability (contingent or otherwise) that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on it, except (i) as reflected in Bancorp Financial Reports
prior to the date of this Agreement, and (ii) for commitments and obligations
made, or liabilities incurred, in the ordinary course of its business
consistent with past practice since September 30, 1998. Since September 30,
1998, none of Bancorp or the Bancorp Subsidiaries has incurred or paid any
obligation or liability (including any obligation or liability incurred in
connection with any acquisitions in which any form of direct financial
assistance of the federal government or any agency thereof has been provided
to any Bancorp Subsidiary) which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on it.
(J) NO EVENTS. Except as Previously Disclosed on Schedule 4.01(J),
since September 30, 1998, no events have occurred which, individually or in
the aggregate, have had or are reasonably likely to have a Material Adverse
Effect on it.
(K) PROPERTIES. Except as reserved against in the Bancorp Financial
Reports, Bancorp and the Bancorp Subsidiaries have good and marketable title,
free and clear of all liens, encumbrances, charges, defaults, or
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equities of any character, to all of the properties and assets, tangible and
intangible, reflected in the Bancorp Financial Reports as being owned by
Bancorp or the Bancorp Subsidiaries as of the dates thereof other than those
that, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect on it, except those properties or assets sold or
otherwise disposed of in the ordinary course of business. All buildings and
all material fixtures, equipment, and other property and assets which are held
under leases or subleases by any of Bancorp or Bancorp Subsidiaries are held
under valid leases or subleases enforceable in accordance with their
respective terms, other than any such exceptions to validity or enforceability
that, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect on Bancorp.
(L) LITIGATION; REGULATORY ACTION. Except as Previously Disclosed in
Schedule 4.01(L), no litigation, proceeding or controversy before any court or
governmental agency is pending which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on Bancorp or which
alleges claims under any fair lending law or other law relating to
discrimination, including, without limitation, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act and the Home
Mortgage Disclosure Act, and, to the best of its knowledge, no such
litigation, proceeding or controversy has been threatened; and except as
Previously Disclosed in Schedule 4.01(L), neither it nor any of the Bancorp
Subsidiaries or any of its or their material properties or their officers,
directors or controlling persons is a party to or is subject to any order,
decree, agreement, memorandum of understanding or similar arrangement with, or
a commitment letter or similar submission to, any federal or state
governmental agency or authority charged with the supervision or regulation of
depository institutions or engaged in the insurance of deposits (together with
any and all agencies or departments of federal, state or local government
(including, without limitation, the Washington Department, the FHLB, the
Federal Reserve Board, the FDIC, the Internal Revenue Service, the Department
of Revenue of the State of Washington, the Securities Exchange Commission
("SEC") and any other federal or state bank, or other financial institution,
insurance and securities regulatory authorities, the "Regulatory
Authorities")) and neither it nor any of the Bancorp Subsidiaries has been
advised by any of such Regulatory Authorities that such authority is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum or
understanding, commitment letter or similar submission.
(M) COMPLIANCE WITH LAWS. Except as Previously Disclosed in Schedule
4.01(M), each of Bancorp and the Bancorp Subsidiaries:
(1) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with,
all Regulatory Authorities that are required in order to permit it
to own its businesses presently conducted and that are material to
the business of Bancorp and the Bancorp Subsidiaries taken as a
whole; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect and, to the best of its
knowledge, no suspension or cancellation of any of them is
threatened; and all such filings, applications and registrations are
current;
(2) has received no notification or communication from any
Regulatory Authority or the staff thereof (i) asserting that any of
Bancorp or the Bancorp Subsidiaries is not in compliance with any of
the statutes, regulations or ordinances which such Regulatory
Authority enforces, which, as a result of such noncompliance in any
such instance, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on Bancorp, (ii)
threatening to revoke any license, franchise, permit or governmental
authorization, which revocation, individually or in the aggregate,
is reasonably likely to have a Material Adverse Effect on Bancorp or
the Bancorp Subsidiaries, or (iii) requiring any of Bancorp or the
Bancorp Subsidiaries (or any of its officers, directors or
controlling persons) to enter into a cease and desist order,
agreement or memorandum of understanding (or requiring the board of
directors thereof to adopt any resolution or policy);
(3) is not required to give prior notice to any federal banking or
thrift agency of the proposed addition of an individual to its board
of directors or the employment of an individual as a senior
executive; and
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(4) is in compliance in all material respects with all fair lending
laws or other laws relating to discrimination, including, without
limitation, the Truth in Lending Act, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act and the
Home Mortgage Disclosure Act.
(N) MATERIAL CONTRACTS.
(1) Except as Previously Disclosed in Schedule 4.01(N), (and with a
true and correct copy of the document or other item in question
attached to such Schedule), neither Bancorp nor any Bancorp
Subsidiary is a party or subject to any of the following (whether
written or oral, express or implied):
(i) any agreement, arrangement or commitment (a) not made in
the ordinary course of business or (b) pursuant to which Bancorp or
any Bancorp Subsidiary is or may become obligated to invest in or
contribute capital to any Bancorp Subsidiary or any other entity;
(ii) any agreement, indenture or other instrument not
disclosed in the Bancorp Financial Reports relating to the borrowing
of money by Bancorp or any Bancorp Subsidiary or the guarantee by
Bancorp or any Bancorp Subsidiary of any such obligation (other than
trade payables or instruments related to transactions entered into
in the ordinary course of business by any Bancorp Subsidiary, such
as deposits, Fed Funds borrowings and repurchase agreements);
(iii) any contract containing covenants that limit the ability
of Bancorp or any Bancorp Subsidiary to compete in any line of
business or with any person or containing any restriction of the
geographical area in which, or method by which, Bancorp or any
Bancorp Subsidiary may carry on its business (other than as may be
required by law or any applicable Regulatory Authority);
(iv) any contract or agreement which is a "material contract"
within the meaning of Item 601(b)(10) of Regulation S-K promulgated
by the SEC;
(v) any lease with annual rental payments aggregating $10,000
or more;
(vi) consulting agreement (other than data processing,
software programming and licensing contracts entered into in the
ordinary course of business) involving the payment of more than
$10,000 per annum;
(vii) any agreement with any executive officer or other key
employee of Bancorp or any Bancorp Subsidiary the benefits of which
are contingent, or the terms of which are materially altered or any
payments or rights are accelerated, upon the occurrence of a
transaction involving Bancorp or any of Bancorp Subsidiaries of the
nature contemplated by this Agreement;
(viii) any agreement with respect any executive officer of
Bancorp or any Bancorp Subsidiary providing any term of employment
or compensation guarantee extending for a period longer than one
year and for the payment of in excess of $50,000 per annum; or
(ix) agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase
plan, any of the benefits of which will be increased, or the vesting
of the benefits of which will be accelerated, by the occurrence of
any of the transactions contemplated by this Agreement or the value
of any of the benefits of which will be calculated on the basis of
any of the transactions contemplated by this Agreement.
(2) Except as Previously Disclosed on Schedule 4.01(N), no officer
or director of Bancorp or any "associate" (as such term is defined
in Rule 12b-2 under the Securities Exchange Act of 1934, as amended
(the "Exchange Act")) of any such officer or director, has any
material interest in any
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material contract or property (real or personal), tangible or
intangible, used in or pertaining to the business of Bancorp or any
Bancorp Subsidiary.
(3) None of Bancorp or the Bancorp Subsidiaries is in default under
any contract, agreement, commitment, arrangement, lease, insurance
policy or other instrument to which it is a party, by which its
respective assets, business or operations may be bound or affected,
or under which it or any of its respective assets, business or
operations receives benefits, which default, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on
Bancorp, 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 Previously Disclosed in Schedule 4.01(N),
neither Bancorp nor any Bancorp Subsidiary is subject to or bound by
any contract containing covenants which limit the ability of Bancorp
or any Bancorp Subsidiary to compete in any line of business or with
any person or which involve any restriction of geographical area in
which, or method by which, Bancorp or any Bancorp Subsidiary may
carry on its business (other than as may be required by law or any
applicable Authority).
(O) REPORTS. Since January 1, 1996, each of Bancorp and the Bancorp
Subsidiaries has filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with (i) the FDIC, (ii) the Washington Department, (iii) the FHLB and the
FHLB System, (iv) the Federal Reserve Board and (v) any other applicable
Regulatory Authorities. As of their respective dates (and without giving
effect to any amendments or modifications filed after the date of this
Agreement with respect to reports and documents filed before the date of this
Agreement), each of such reports and documents, including the financial
statements, exhibits and schedules thereto, complied in all material respects
with all of the statutes, rules and regulations enforced or promulgated by the
Regulatory Authority with which they were filed and did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading.
(P) NO BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by it directly with the
other parties hereto and no action has been taken by it that would give rise
to any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment.
(Q) EMPLOYEE BENEFIT PLANS.
(1) Schedule 4.01(Q)(1) contains a complete list of all bonus,
deferred compensation, pension, retirement, profit-sharing, thrift
savings, employee stock ownership, stock bonus, stock purchase
restricted stock and stock option plans, all employment or severance
contracts, all personnel codes, practices, procedures, policies,
manuals, affirmative action materials, all medical, dental, health
and life insurance plans, all other employee benefit plans,
contracts or arrangements and any applicable "change of control" or
similar provisions in any plan, contract or arrangement maintained
or contributed to by it or any of the Bancorp Subsidiaries for the
benefit of employees, former employees, directors, former directors
or their beneficiaries (the Compensation and Benefit Plans"). True
and complete copies of all Compensation and Benefit Plans,
including, but not limited to, any trust instruments and/or
insurance contracts, if any, forming a part thereof, and all
amendments thereto have been supplied to the Company.
(2) All "employee benefit plans" within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), other than "multiemployer plans" within the meaning of
Section 3(37) of ERISA ("Multiemployer Plans"), covering employees
or former employees of it and the Bancorp Subsidiaries (the "ERISA
Plans"), to the extent subject to ERISA, are in substantial
compliance with ERISA. Except as Previously Disclosed in Schedule
4.01(Q)(2) each ERISA Plan which is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA ("Pension Plan")
and which is intended to be qualified under Section 401(a) of the
Internal
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Revenue Code of 1986 (as amended, the "Code") has received a
favorable determination letter from the Internal Revenue Service,
and it is not aware of any circumstances reasonably likely to result
in the revocation or denial of any such favorable determination
letter or the inability to receive such a favorable determination
letter. There is no material pending or, to its knowledge,
threatened litigation relating to the ERISA Plans. Neither it nor
any of the Bancorp Subsidiaries has engaged in a transaction with
respect to any ERISA Plan that could subject it or any of the
Bancorp 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.
(3) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by it or any of the Bancorp
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 it under Section 4001(a)(15) of ERISA or Section 414 of the
Code (an "ERISA Affiliate"). Neither it nor any of the Bancorp
Subsidiaries presently contributes to a Multiemployer Plan, nor have
they contributed to such a plan within the past five calendar years.
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 within the past 12-month period.
(4) All contributions required to be made under the terms of any
ERISA Plan have been timely made. 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. Neither it nor any
of the Bancorp 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.
(5) Under each Pension Plan which is a single-employer plan, as of
the last day of the most recent plan year, the actuarially
determined present value of all "benefit liabilities," within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis
of the actuarial assumptions contained in the plan's most recent
actuarial valuation) did not exceed the then current value of the
assets of such plan, and there has been no material change in the
financial condition of such plan since the last day of the most
recent plan year.
(6) Neither it nor any of the Bancorp Subsidiaries has any
obligations for retiree health and life benefits under any plan,
except as set forth in Schedule 4.01(Q)(6). There are no
restrictions on the rights of it or any of the Bancorp Subsidiaries
to amend or terminate any such plan without incurring any liability
thereunder.
(7) Except as Previously Disclosed in Schedule 4.01(Q)(7), neither
the execution and delivery of this Agreement nor the consummation of
the transactions contemplated hereby will (i) result in any payment
(including, without limitation, severance, unemployment
compensation, golden parachute or otherwise) becoming due to any
director or any employee of it or any of the Bancorp Subsidiaries
under any Compensation and Benefit Plan or otherwise from it or any
of the Bancorp Subsidiaries, (ii) increase any benefits otherwise
payable under any Compensation and Benefit Plan, or (iii) result in
any acceleration of the time of payment or vesting of any such
benefit.
(R) NO KNOWLEDGE. It knows of no reason why the regulatory approvals
referred to in Section 6.02 should not be obtained.
(S) LABOR AGREEMENTS. Neither it nor any Bancorp Subsidiary is a party
to, or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization,
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nor is it or any Bancorp Subsidiary the subject of a proceeding asserting that
it or any such subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel it or such
subsidiary to bargain with any labor organization as to wages and conditions
of employment, nor is there any strike or other labor dispute involving it or
any Bancorp Subsidiary, pending or, to the best of its knowledge, threatened,
nor is it aware of any activity involving its or any Bancorp Subsidiary's
employees seeking to certify a collective bargaining unit or engaging in any
other organization activity.
(T) ASSET CLASSIFICATION. It has Previously Disclosed in Schedule
4.01(T) a list, accurate and complete in all material respects, of the
aggregate amounts of loans, extensions of credit or other assets of Bancorp
and the Bancorp Subsidiaries that have been classified by it as of September
30, 1998 (the "Asset Classification"); and no amounts of loans, extensions of
credit or other assets that have been classified as of September 30, 1998 by
any regulatory examiner as "Other Loans Specially Mentioned," "Substandard,"
"Doubtful," "Loss," or words of similar import are excluded from the amounts
disclosed in the Asset Classification, other than amounts of loans, extensions
of credit or other assets that were charged off by Bancorp or any Bancorp
Subsidiary prior to September 30, 1998.
(U) ALLOWANCE FOR LOAN AND LEASE LOSSES. The allowance for loan and
lease losses shown on the consolidated balance sheets of Bancorp included in
the September 30, 1998 Bancorp Financial Reports was, and the allowance for
possible loan losses to be shown on subsequent Bancorp Financial Reports, will
be, adequate in the opinion of the Board of Directors and management of
Bancorp, to provide for possible losses, net of recoveries relating to loans
previously charged off, on loans outstanding (including accrued interest
receivable) as of the date thereof.
(V) INSURANCE. Each of Bancorp and the Bancorp Subsidiaries has taken
all requisite action (including without limitation the making of claims and
the giving of notices) pursuant to its directors' and officers' liability
insurance policy or policies in order to preserve all rights thereunder with
respect to all matters that are known to Bancorp, except for such matters
which, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect on it. Previously Disclosed in Schedule 4.01(V) is a
list of all insurance policies maintained by or for the benefit of Bancorp or
the Bancorp Subsidiaries or their directors, officers, employees or agents.
(W) STATE TAKEOVER LAWS; ARTICLES OF INCORPORATION. It has taken all
necessary action to exempt this Agreement and the transactions contemplated
hereby and thereby from, and this Agreement and the transactions contemplated
hereby are exempt from, (i) any applicable state takeover laws, and (ii) any
supermajority provisions or other provisions imposing special conditions on
business combinations contained in Bancorp's Articles of Incorporation.
(X) NO FURTHER ACTION. It has taken all action so that the entering
into of this Agreement and the consummation of the transactions contemplated
hereby (including without limitation the Merger), or any other action or
combination of actions, or any other transactions, contemplated hereby or
thereby do not and will not (i) require a vote of stockholders (other than as
set forth in Section 6.01), or (ii) result in the grant of any rights to any
person under the Articles of Incorporation, Charter or Bylaws of Bancorp or
any Bancorp Subsidiary or under any agreement to which Bancorp or any Bancorp
Subsidiary is a party, or (iii) restrict or impair in any way the ability of
the Company to exercise the rights granted hereunder.
(Y) ENVIRONMENTAL MATTERS.
(1) To its knowledge, it and each of the Bancorp Subsidiaries, the
Participation Facilities and the Loan/Fiduciary Properties (each as
defined below) are, and have been, in compliance with all
Environmental Laws (as defined below), except for instances of
noncompliance which are not reasonably likely, individually or in
the aggregate, to have a Material Adverse Effect on Bancorp.
(2) There is no proceeding pending or, to its knowledge, threatened
before any court, governmental agency or board or other forum in
which it or any of the Bancorp Subsidiaries or any Participation
Facility has been, or with respect to threatened proceedings,
reasonably would be
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expected to be, named as a defendant or potentially responsible
party (i) for alleged noncompliance (including by any predecessor)
with any Environmental Law, or (ii) relating to the release or
threatened release into the environment of any Hazardous Material
(as defined below), whether or not occurring at or on a site owned,
leased or operated by it or any of the Bancorp Subsidiaries or any
Participation Facility, except for such proceedings pending or
threatened that are not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on it or have been
Previously Disclosed in Schedule 4.01(Y)(2).
(3) There is no proceeding pending or, to its knowledge, threatened
before any court, governmental agency or board or other forum in
which any Loan/Fiduciary Property (or it or any of the Bancorp
Subsidiaries in respect of any Loan/Fiduciary Property) has been, or
with respect to threatened proceedings, reasonably would be expected
to be, named as a defendant or potentially responsible party (i) for
alleged noncompliance (including by any predecessor) with any
Environmental Law, or (ii) relating to the release or threatened
release into the environment of any Hazardous Material, whether or
not occurring at or on a Loan/Fiduciary Property, except for such
proceedings pending or threatened that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect
on it or have been Previously Disclosed in Schedule 4.01(Y)(3).
(4) To its knowledge, there is no reasonable basis for any
proceeding of a type described in subparagraphs (2) or (3) above,
except as has been Previously Disclosed in Schedule 4.01(Y)(4).
(5) To its knowledge, during the period of (i) its or any of the
Bancorp Subsidiaries' ownership or operation of any of their
respective current properties, (ii) its or any of the Bancorp
Subsidiaries' participation in the management of any Participation
Facility, or (iii) its or any of Bancorp Subsidiaries' holding of a
security or other interest in a Loan/ Fiduciary Property, there have
been no releases of Hazardous Material in, on, under or affecting
any such property, Participation Facility or Loan/Fiduciary
Property, except for such releases that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect
on it or have been Previously Disclosed in Schedule 4.01(Y)(5).
(6) To its knowledge, prior to the period of (i) its or any of the
Bancorp Subsidiaries' ownership or operation of any of their
respective current properties, (ii) its or any of the Bancorp
Subsidiaries' participation in the management of any Participation
Facility, or (iii) its or any of the Bancorp Subsidiaries' holding
of a security or other interest in a Loan/ Fiduciary Property, there
were no releases of Hazardous Material in, on, under or affecting
any such property, Participation Facility or Loan/Fiduciary
Property, except for such releases that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect
on it or have been Previously Disclosed in Schedule 4.01(Y)(6).
(Z) TAX REPORTS. Except as Previously Disclosed in Schedule 4.01(Z),
(i) all reports and returns with respect to Taxes (as defined below) that are
required to be filed by or with respect to it or the Bancorp Subsidiaries,
including without limitation consolidated federal income tax returns of it and
the Bancorp Subsidiaries (collectively, the "Bancorp Tax Returns"), have been
duly filed, or requests for extensions have been timely filed and have not
expired, except to the extent all such failures to file, taken together, are
not reasonably likely to have a Material Adverse Effect on it, and such
Bancorp Tax Returns were true, complete and accurate in all material respects,
(ii) all taxes (which shall mean federal, state, local or foreign income,
gross receipts, windfall profits, severance, property, production, sales, use,
license, excise, franchise, employment, withholding or similar taxes imposed
on the income, properties or operations of it or the Bancorp Subsidiaries,
together with any interest, additions, or penalties with respect thereto and
any interest in respect of such additions or penalties, collectively the
"Taxes") shown to be due on Bancorp Tax Returns have been paid in full, (iii)
the Bancorp Tax Returns have been examined by the Internal Revenue Service or
the appropriate state, local or foreign taxing authority or the period for
assessment of the Taxes in respect of which such Bancorp Tax Returns were
required to be filed has expired, (iv) all Taxes due with respect to completed
and settled
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examinations have been paid in full, (v) no issues have been raised by the
relevant taxing authority in connection with the examination of any of the
Bancorp Tax Returns which are reasonably likely, individually or in the
aggregate, to result in a determination that would have a Material Adverse
Effect on it, except as reserved against in the Bancorp Financial Reports, and
(vi) no waivers of statutes of limitations (excluding such statutes that
relate to years under examination by the Internal Revenue Service) have been
given by or requested with respect to any Taxes of it or the Bancorp
Subsidiaries.
(AA) ACCURACY OF INFORMATION. The statements with respect to Bancorp and
the Bancorp Subsidiaries contained in this Agreement, the Schedules and any
other written documents executed and delivered by or on behalf of Company or
the Bank pursuant to the terms of this Agreement are true and correct in all
material respects, and such statements and documents do not omit any material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(BB) DERIVATIVES CONTRACTS. None of Bancorp or the Bancorp Subsidiaries
is a party to or has agreed to enter into an exchange-traded or over-the-
counter swap, forward, future, option, cap, floor or collar financial contract
or any other contract not included on the balance sheet which is a derivative
contract (including various combinations thereof) (each a "Derivatives
Contract") or owns securities that are referred to as "structured notes"
except for those Derivatives Contracts and structured notes Previously
Disclosed in Schedule 4.01(BB), including a list, as applicable, of any
Bancorp or Bancorp Subsidiary assets pledged as security for each such
Derivatives Contract.
(CC) ACCOUNTING CONTROLS. Each of Bancorp and the Bancorp Subsidiaries
has devised and maintained systems of internal accounting controls sufficient
to provide reasonable assurances that (i) all material transactions are
executed in accordance with management's general or specific authorization;
(ii) all material transactions are recorded as necessary to permit the
preparation of financial statements in conformity with generally accepted
accounting principles consistently applied with respect to banks or any other
criteria applicable to such statements, and to maintain proper accountability
for items; (iii) access to the material property and assets of Bancorp and the
Bancorp Subsidiaries is permitted only in accordance with management's general
or specific authorization; and (iv) the recorded accountability for items is
compared with the actual levels at reasonable intervals and appropriate action
is taken with respect to any differences.
(DD) DEPOSITS. Except as set forth in Schedule 4.01 (DD), none of the
Bank's deposits is a brokered deposit as defined in 12 CFR Section 337.6 or
subject to any encumbrance, legal testament or other legal process, and no
portion of the deposits represents a deposit by any affiliate of the Bank.
(EE) MINUTE BOOKS. The minute books of Bancorp and the Bank contain
complete and accurate records of all meetings held and other corporate action
taken since January 1, 1992 by their respective stockholders, Boards of
Directors and committees thereof.
(FF) AFFILIATE TRANSACTIONS. Except as Previously Disclosed on Schedule
4.01(FF), no officer or director of Bancorp or the Bank or any "associate" of
such person has any material interest in any contract with Bancorp or any
Bancorp subsidiary or in any real or personal property used in the business of
Bancorp or any Bancorp Subsidiary. For the purposes of this section,
"associate" of a person means (i) any corporation or organization (other than
Bancorp or any Bancorp Subsidiary) of which such person is an officer or
partner or is, directly or indirectly, the beneficial owner of 10% or more of
any class of equity securities, (ii) any trust or other estate in which such
person has a substantial beneficial interest or as to which such person serves
as trustee or in a similar fiduciary capacity, and (iii) any relative or
spouse of such person, or any relative of such spouse, who has the same home
as such person.
(GG) LOAN PORTFOLIO. To the knowledge of Bancorp and the Bank:
(1) All evidences of indebtedness ("Loans") reflected as assets on
the books and records of Bancorp or the Bank are in all respects
legal, valid and binding obligations of the respective obligor named
therein and no such indebtedness is subject to any defenses which
have been or may be
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asserted, except for defenses arising from applicable bankruptcy,
insolvency, moratorium or other similar laws relating to creditors'
rights generally and general principles of equity.
(2) The Bank has good title to and is the sole owner of record of
each Loan or any participation interest shown as an asset on the
books and records of the Bank, free of any lien, encumbrance or
claim by any other person, except for Loans securing borrowings from
the FHLB of Seattle or Loans subject to repurchase obligations as
Previously Disclosed in Schedule 4.01(GG)(2).
(3) Except as Previously Disclosed in Schedule 4.01(GG)(3) all
Loans reflected as assets on he books and records of the Bank that
are primarily secured by an interest in real property are secured by
a valid and perfected lien, as stated in the loan documentation.
(4) Except as Previously Disclosed in Schedule 4.01(GG)(4), no
Loan, all or any part of which is an asset of the Bank was, as of
September 30, 1998, more than 30 days past due.
(5) Except as Previously Disclosed in Schedule 4.01(GG)(5), none of
the agreements pursuant to which the Bank has sold Loans or pools of
Loans or participation in Loans or pools of participations of Loans,
if any, contains any obligation to repurchase such Loans or
interests therein solely on account of a payment default by the
obligor on any such Loan.
(6) Previously Disclosed on Schedule 4.01(GG)(6) are all Loans by
Bancorp or the Bank to employees of Bancorp or the Bank. There are
no Loans to any employee, officer, director or other affiliate of
Bancorp or the Bank on which the borrower is paying a rate other
than that reflected in the note or the relevant credit agreement or
on which the borrower is paying a rate which was below market at the
time the Loan was made; and, except as Previously Disclosed in
Schedule 4.01(GG)(6), all such Loans are and were made in compliance
with all applicable federal laws and regulations.
(HH) Year 2000 Issues. Expenses associated with resolving Year 2000
technology issues are not expected to have a material adverse effect on the
financial condition or results of operations of the Bancorp or the Bank, nor
are Year 2000 technology issues expected to have a material adverse effect on
the operations of the Bancorp or the Bank. Neither the Bancorp or any of the
Bank Subsidiaries has received, or reasonably expects to receive, a "Year 2000
Deficiency Notification Letter" (as such term is employed in the Federal
Reserve's Supervision and Regulation Letter No. SR-98-3 (SUP), dated March 4,
1998). The Bank has made available to the Company and Horizon a complete and
accurate copy of its plans, including an estimate of the anticipated
associated costs, for addressing the issues ("Year 2000 Issues") set forth in
the statements of the Federal Financial Institutions Examinations Council,
dated May 5, 1997, entitled "Year 2000 Project Management Awareness" and
December 1997, entitled "Safety and Soundness Guidelines Concerning the Year
2000 Business Risk" as such issues affect the Bancorp and the Bancorp
Subsidiaries. Between the date hereof and the Effective Time, the Bancorp
shall use its commercially practicable efforts to implement its plans.
4.02. REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND HORIZON.
Each of the Company and Horizon hereby represents and warrants to Bancorp
and the Bank, as follows:
(A) RECITALS. The facts set forth in the Recitals of this Agreement
with respect to it are true and correct.
(B) CORPORATE AUTHORITY. Subject to the required regulatory approvals
referred to in Section 6.02, this Agreement has been authorized by all
necessary corporate action of it and is a valid and binding agreement of it
enforceable against it in accordance with its terms, subject as to enforcement
as to bankruptcy, insolvency and other similar laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
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(C) NO DEFAULTS. Subject to the required regulatory approvals referred
to in Section 6.02 and the required filings under federal and state
securities' laws, the execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby and thereby by
it, do not and will not (i) constitute a breach or violation of, or a default
under, any law, rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, indenture or instrument of it or
of any of its subsidiaries or to which it or any of its subsidiaries or
properties is subject or bound, which breach, violation or default is
reasonably likely to have a Material Adverse Effect on it, (ii) constitute a
breach or violation of, or a default under, its Certificate of Incorporation,
Charter or Bylaws, or (iii) require any consent or approval under any such
law, rule, regulation, judgment, decree, order, governmental permit or
license, or the consent or approval of any other party to any such agreement,
indenture or instrument.
(D) FINANCIAL REPORTS. In the case of the Company, its Annual Report on
Form 10-K for the fiscal year ended March 31, 1998 and all documents filed or
to be filed under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act, in
the form filed with the SEC (in each such case, the "Company Financial
Reports"), 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 made therein, in light of the circumstances
under which they were made, not misleading; and each of the balance sheets in
or incorporated by reference into the Company Financial Reports (including the
related notes and schedules thereto) fairly presents and will fairly present
the financial position of the entity or entities to which it relates as of its
date and each of the statements of income and changes in stockholders' equity
and cash flows or equivalent statements in the Company Financial Reports
(including any related notes and schedules thereto) fairly presents and will
fairly present the results of operations, changes in stockholders' equity and
changes in cash flows, as the case may be, of the entity or entities to which
it relates for the periods set forth therein, in each case in accordance with
generally accepted accounting principles consistently applied to savings banks
and bank holding companies during the periods involved, except as may be noted
therein, subject to normal and recurring year-end audit adjustments in the
case of unaudited statements.
(E) NO EVENTS. Since March 31, 1998, no events have occurred which,
individually or in the aggregate, have had or are reasonably likely to have a
Material Adverse Effect on it.
(F) SHARES AUTHORIZED. In the case of the Company, the shares of
Company Common Stock to be issued in exchange for shares of Bancorp Common
Stock upon consummation of the Corporate Merger in accordance with Article II
of this Agreement have been duly authorized and, when issued in accordance
with the terms of this Agreement, will be validly issued, fully paid and
nonassessable and subject to no preemptive rights.
(G) CORPORATE POWER. The Company and Horizon each has the corporate
power and authority to carry on its business as it is now being conducted and
to own all its material properties and assets.
(H) ACCURACY OF INFORMATION. The statements with respect to the Company
and Horizon contained in this Agreement, the Schedules and any other written
documents executed and delivered by or on behalf of the Company pursuant to
the terms of this Agreement are true and correct in all material respects, and
such statements and documents do not omit any material fact necessary to make
the statements contained therein, in light of the circumstances under which
they were made, not misleading.
V. COVENANTS
Each of Bancorp and the Bank hereby covenants to the Company and Horizon
and each of the Company and Horizon hereby covenants to Bancorp and the Bank,
that:
5.01. BEST EFFORTS. Subject to the terms and conditions of this
Agreement and to the exercise by its Board of Directors of such Board's
fiduciary duties, it shall use its 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 Mergers on the Effective Date and to otherwise
enable consummation of the transactions contemplated hereby and shall
cooperate fully with the other parties hereto to that end.
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5.02. REGISTRATION STATEMENT. The Company, in cooperation with Bancorp,
shall prepare and file with the SEC a Registration Statement with respect to
the shares of Company Common Stock to be issued in the Corporate Merger. Such
Registration Statement shall contain a Joint Proxy Statement/Prospectus which
shall serve as the proxy statement of Bancorp for the Bancorp Meeting (as
defined below), and as the prospectus of the Company for the shares of
Company Common Stock to be issued in the Corporate Merger. The Company shall
use its best efforts to cause the Registration Statement to become effective.
5.03 BANCORP MEETING. With respect to Bancorp, it shall call a special
meeting (the "Bancorp Meeting") of the holders of Bancorp Common Stock to be
held as soon as practicable for purposes of voting upon the transactions
contemplated hereby and Bancorp shall use its best efforts to solicit and
obtain the votes of the holders of Bancorp Common Stock in favor of the
transactions contemplated hereby and, subject to the exercise of its fiduciary
duties, the Board of Directors of Bancorp shall recommend approval of such
transactions by such holders. In connection with the Bancorp Meeting, the
Company and Bancorp shall cooperate in the preparation of the Joint Proxy
Statement/Prospectus and, with the approval of each of the Company and
Bancorp, which approvals will not be unreasonably withheld, the Joint Proxy
Statement/Prospectus will be mailed to the shareholders of Bancorp.
5.04. REGISTRATION STATEMENT EFFECTIVENESS. The Company will advise
Bancorp, promptly after the Company receives notice thereof, of the time when
the Registration Statement has become effective or any supplement or amendment
has been filed, of the issuance of any stop order or the suspension of the
qualification of the Company Common Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
5.05. REGISTRATION STATEMENT COMPLIANCE WITH SECURITIES LAWS. When the
Registration Statement or any post-effective amendment or supplement thereto
shall become effective, and at all times subsequent to such effectiveness, up
to and including the date of the Meeting, such Registration Statement and all
amendments or supplements thereto, with respect to all information set forth
therein furnished or to be furnished by or on behalf of Bancorp relating to
Bancorp or the Bancorp Subsidiaries and by or on behalf of the Company
relating to the Company or its subsidiaries, (i) will comply in all material
respects with the provisions of the Securities Act and any other applicable
statutory or regulatory requirements, and (ii) 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 contained therein not
misleading; PROVIDED, HOWEVER, in no event shall any party hereto be liable
for any untrue statement of a material fact or omission to state a material
fact in the Registration Statement made in reliance upon, and in conformity
with, written information concerning another party furnished by or on behalf
of such other party specifically for use in the Registration Statement.
5.06. PRESS RELEASES. Bancorp and the Bank will not, without the prior
approval of the Company, and the Company and Horizon will not, without the
prior approval of Bancorp, issue any press release or written statement for
general circulation relating to the transactions contemplated hereby, except
as otherwise required by law.
5.07. ACCESS; INFORMATION.
(1) Upon reasonable notice, Bancorp and the Bank shall afford the
Company and its officers, employees, counsel, accountants and other authorized
representatives, access, during normal business hours throughout the period up
to the Effective Date, to all of its and the Bancorp Subsidiaries' properties,
books, contracts, commitments and records and, during such period, Bancorp and
the Bank shall furnish promptly to the Company (i) a copy of each material
report, schedule and other document filed by Bancorp and the Bancorp
Subsidiaries with any Regulatory Authority, and (ii) all other information
concerning the business, properties and personnel of Bancorp and the Bancorp
Subsidiaries as the Company may reasonably request, provided that no
investigation pursuant to this Section 5.07 shall affect or be deemed to
modify or waive any representation or warranty made by Bancorp or the Bank or
the conditions to the obligations of Bancorp and the Bank to consummate the
transactions contemplated by this Agreement; and
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(2) The Company will not use any information obtained pursuant to
this Section 5.07 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement and, if this Agreement is
terminated, will hold all information and documents obtained pursuant to this
paragraph in confidence (as provided in Section 8.06) unless and until such
time as such information or documents become publicly available other than by
reason of any action or failure to act by the Company or as it is advised by
counsel that any such information or document is required by law or applicable
stock exchange rule to be disclosed, and in the event of the termination of
this Agreement, the Company will, upon request by Bancorp, deliver to Bancorp
all documents so obtained by the Company or destroy such documents and, in the
case of destruction, will certify such fact to Bancorp.
5.08. ACQUISITION PROPOSALS. In the case of Bancorp, without the prior
written consent of the Company, it shall not, and it shall cause the Bancorp
Subsidiaries not to, solicit, initiate or encourage inquiries or proposals
with respect to, or furnish any nonpublic information relating to or
participate in any negotiations or discussions concerning, any acquisition or
purchase of all or a substantial portion of the assets of, or a substantial
equity interest in, Bancorp or any of the Bancorp Subsidiaries or any merger
or other business combination with Bancorp or any of the Bancorp Subsidiaries
other than as contemplated by this Agreement; it shall instruct its and the
Bancorp Subsidiaries' officers, directors, agents, advisors and affiliates to
refrain from doing any of the foregoing; and it shall notify the Company
immediately if any such inquiries or proposals are received by, or any such
negotiations or discussions are sought to be initiated with, Company or any of
the Bancorp Subsidiaries.
5.09. BLUE-SKY FILINGS. In the case of the Company, it shall use its
best efforts to obtain all necessary state securities laws or "blue sky"
permits and approvals, provided that the Company shall not be required by
virtue thereof to submit to general jurisdiction in any state.
5.10. CERTAIN POLICIES OF BANCORP AND THE BANK. In the case of each of
Bancorp and the Bank, it shall, at the Company's request: (i) modify and
change its loan, litigation and other reserve and real estate valuation
policies and practices (including loan classifications and levels of
reserves), and (ii) generally conform its operating, lending and compliance
policies and procedures, prior to the Effective Date so as to be consistent on
a mutually satisfactory basis with those of the Company and generally accepted
accounting principles; PROVIDED, HOWEVER, Bancorp and the Bank shall not be
required to take any such action set forth in (i) above until all regulatory
approvals set forth in Section 6.02 shall have been obtained. Bancorp's and
the Bank's representations, warranties and covenants contained in this
Agreement shall not be deemed to be untrue or breached in any respect for any
purpose as a consequence of any modifications or changes undertaken solely on
account of this Section 5.10.
5.11. STATE TAKEOVER LAW. In the case of Bancorp, Bancorp shall not
take any action that would cause the transactions contemplated by this
Agreement to be subject to any applicable state takeover statute and Bancorp
shall take all necessary steps to exempt (or ensure the continued exemption
of) the transactions contemplated by this Agreement from, or, if necessary,
challenge the validity or applicability of, any applicable state takeover law,
as now or hereafter in effect.
5.12. NO RIGHTS TRIGGERED. Except as Previously Disclosed], in the case
of Bancorp, Bancorp shall take all necessary steps to ensure that the entering
into of this Agreement and the consummation of the transactions contemplated
hereby and thereby (including without limitation the Merger) and any other
action or combination of actions, or any other transactions contemplated
hereby or thereby do not and will not (i) result in the grant of any rights to
any person under the Articles of Incorporation or Bylaws of Bancorp or under
any agreement to which Bancorp or any Bancorp Subsidiary is a party, or (ii)
restrict or impair in any way the ability of the Company and Horizon to
exercise the rights granted hereunder.
5.13. SHARES LISTED. In the case of the Company, it shall file with the
Nasdaq Stock Market a Notification Form for Listing of Additional Shares.
5.14. REGULATORY APPLICATIONS. In the case of the Company and Horizon,
(i) it shall promptly prepare and submit applications to the appropriate
Regulatory Authorities for approval of the Mergers, and (ii) promptly
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make all other appropriate filings to secure all other approvals, consents and
rulings which are necessary for the consummation of the Mergers by the Company
and Horizon.
5.15 REGULATORY DIVESTITURES. In the case of Bancorp, effective on or
before the Effective Date, Bancorp and the Bancorp Subsidiaries shall cease
engaging in such activities as the Company shall advise Bancorp in writing are
not permitted to be engaged in by the Company under applicable law following
the Effective Date and, to the extent required by any Regulatory Authority as
a conditional approval of the transactions contemplated by this Agreement,
Bancorp shall divest any subsidiary engaged in activities or holding assets
that are impermissible for the Company on terms and conditions agreed to by
the Company.
5.16 CURRENT INFORMATION.
(a) During the period from the date of this Agreement to the Effective
Date, each of Bancorp, the Bank, the Company and Horizon shall, and shall
cause its representatives to, confer on a regular and frequent basis with
representatives of the other.
(b) Bancorp and the Bank shall promptly notify the Company of (i) any
material change in the business or operations of Bancorp, the Bank or any
Bancorp Subsidiary, (ii) any material complaints, investigations or hearings
(or communications indicating that the same may be contemplated) of any
Regulatory Authority relating to Bancorp, the Bank, or any Bancorp Subsidiary,
(iii) the initiation or threat of material litigation involving or relating to
Bancorp, the Bank or any Bancorp Subsidiary, or (iv) any event or condition
that might reasonably be expected to cause any of Bancorp's or the Bank's
representation or warranties set forth herein not to be true and correct in
all material respects as of the Effective Date or prevent Bancorp or the Bank
from fulfilling its or their obligations hereunder; and in each case shall
keep the Company informed with respect thereto.
(c) The Company shall (i) promptly notify Bancorp of any event or
condition that might reasonably be expected to cause any of the Company's and
Horizon's representations or warranties set forth herein not to be true and
correct in all material respects as of the Effective Date, and (ii) notify
Bancorp immediately of any denial of any application filed by the Company or
Horizon with any Regulatory Authority with respect to this Agreement, and in
each case shall keep Bancorp and the Bank informed with respect thereto.
5.17 AFFILIATE AGREEMENTS. In the case of Bancorp, it will cause each
person who is an "affiliate" of Bancorp for purposes of Rule 145 under the
Securities Act (each an "Affiliate") to execute and deliver to the Company on
or before the mailing of the Joint Proxy Statement/Prospectus for the Bancorp
Meeting an agreement in the form attached hereto as Exhibit C restricting the
disposition of the shares of Company Common Stock to be received by such
person in exchange for such person's shares of Bancorp Common Stock.
Previously Disclosed on Schedule 5.17 is a list of Affiliates as of the date
hereof.
5.18 COMPANY BOARD OF DIRECTORS. In the case of Horizon, it shall take
such action as may be necessary to cause the appointment of John M. Daughters
to its Boards of Directors effective as of the Effective Time.
5.19 POOLING OF INTERESTS. In the case of Bancorp and the Bank,
neither Bancorp nor the Bank shall take any action which would disqualify the
Corporate Merger as a "pooling of interest" for accounting purposes.
5.20 CONSENTS AND APPROVALS. In the case of Bancorp and the Bank, they
shall take such action as may be necessary, but without the incurrence of
substantial expense, to obtain any required consents from the lessor or
sublessor on each lease pursuant to which Bancorp or the Bank leases as lessee
real or personal property for the assumption of such lease by the Company or
Horizon.
5.21 BENEFITS. Bancorp's qualified and non-qualified plans, as well as
the incentive plans of the Bank, will be terminated immediately prior to the
Effective Time, except for the Bank's commercial lending incentive program,
which will continue through September 30, 1999. All Bank employees will be
offered continued employment
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<PAGE>
in similar positions, with no reduction in compensation subsequent to the
Effective Time until September 30, 1999. Attached hereto is a list of all
employees of Bancorp and the titles that will be in effect as of the Effective
Date subject to Horizon's employment practices and such changes as may be
agreed upon prior to such date. All such continued employees will be deemed
employees at will. The foregoing is subject to the satisfactory compliance by
the employee with Horizon's personnel policies. Staff reductions that occur
after September 30, 1999 will be paid severance in accordance with Horizon's
severance policy with credit given for prior service at the Bank. In
addition, as soon as administratively practicable following the Effective
Date, employees of the Bank who are retained by Horizon shall be entitled to
participate in the same benefit plans as are generally available to Horizon
employees of similar rank and service. Employees of the Bank who continue as
Horizon employees following the Effective Date shall be credited with prior
years of service with the Bank for purposes of eligibility and vesting (but
not for the accrual of benefits) under the Horizon benefit plans, and accrued
sick leave of Bank employees will be transferred to Horizon subject to the
limitations of Horizon's sick leave policy.
Subject to the limitations of applicable law, rules and regulations and
Horizon's lending policy, individuals will be eligible to receive loans from
Horizon for the purchase of stock upon the exercise of stock options and
warrants. Such loans shall be made at prime plus 1%, and for fully amortized
five-year terms with principle and interest. In the alternative, Horizon will
make arrangements for such loans to be made through a correspondent bank.
5.22 SEVERANCE AGREEMENTS. To the extent that the employment of any
employee who is employed by the Bank as of the Effective Date, is terminated
by Horizon or any of its subsidiaries within one (1) year following the
Effective Date, such employee shall be entitled to a severance payment as
follows:
Service Severance
------- ---------
Non-Officers
------------
Over six months to two years Two weeks
Over two years to four years Three weeks
Over five years Four weeks
Officers
--------
Over six months to one year Two weeks
Over one year to two years Three weeks
Over two years to three years Four weeks
Over three years to four years Six weeks
Over four year to six years Seven weeks
Over six years Eight weeks
5.23 INSURANCE. The Company shall use its best efforts to cause the
persons serving as officers and directors of Bancorp and the Bank immediately
prior to the Effective Date to be covered for a period of three years after
the Closing Date by the Company's present carrier with respect to acts or
omissions occurring prior to the Effective Date which were committed by such
officers and directors in their capacity as such; provided, however, that the
Company shall not be obligated to incur additional costs for such insurance to
the extent such premiums exceed 150% of the annual premiums paid as of the
date hereof by Bancorp and the Bank for such insurance.
VI. CONDITIONS TO CONSUMMATION OF THE MERGERS
Consummation of the Mergers is conditioned upon:
6.01. SHAREHOLDER VOTE. Approval of the transactions contemplated
hereby by the requisite vote of the stockholders of Bancorp.
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6.02. REGULATORY APPROVALS. Procurement by the Company of all required
regulatory consents and approvals by the appropriate Regulatory Authorities
and the expiration of the statutory waiting period relating thereto; PROVIDED,
HOWEVER, that no such approval or consent shall have imposed any condition or
requirement which, in the opinion of the Company, would so materially
adversely impact the economic or business benefits to the Company of the
transactions contemplated by this Agreement so as to render inadvisable the
consummation of the Mergers.
6.03. NO INJUNCTION. There shall not be in effect any order, decree or
injunction of any court or agency of competent jurisdiction that enjoins or
prohibits consummation of any of the transactions contemplated hereby.
6.04. LEGAL OPINION. Bancorp and the Bank shall have received an
opinion, dated the Effective Date, of Breyer & Associates PC, special counsel
for the Company and Horizon, in form reasonably satisfactory to Bancorp, which
shall cover the matters contained in Exhibit D hereto.
6.05. LEGAL OPINION. The Company shall have received an opinion, dated
the Effective Date, of Sloan Bobrick & Oldfield, Inc. P.S., counsel for
Bancorp and the Bank, in form reasonably satisfactory to the Company, which
shall cover the matters contained in Exhibit E hereto.
6.06. OFFICER'S CERTIFICATE. (i) Each of the representations and
warranties contained herein of the Company and Horizon shall be true and
correct as of the date of this Agreement and upon the Effective Date with the
same effect as though all such representations and warranties had been made on
the Effective Date, except for any such representations and warranties made as
of a specified date, which shall be true and correct as of such date, and (ii)
each and all of the agreements and covenants of the Company and Horizon to be
performed and complied with pursuant to this Agreement on or prior to the
Effective Date shall have been duly performed and complied with in all
material respects, and Bancorp and the Bank shall have received a certificate
signed by the Chief Executive Officers and the Chief Financial Officers of the
Company and Horizon dated the Effective Date, to such effect.
6.07. OFFICERS' CERTIFICATE. (i) Each of the representations and
warranties contained herein of Bancorp and the Bank shall be true and correct
as of the date of this Agreement and upon the Effective Date with the same
effect as though all such representations and warranties had been made on the
Effective Date, except for any such representations and warranties made as of
a specified date, which shall be true and correct as of such date and except
as otherwise provided in Section 5.10, and (ii) each and all of the agreements
and covenants of Bancorp and the Bank to be performed and complied with
pursuant to this Agreement on or prior to the Effective Date shall have been
duly performed and complied with in all material respects, and the Company and
Horizon shall have received a certificate signed by the Chief Executive
Officers and the Chief Financial Officers of Bancorp and the Bank dated the
Effective Date, to such effect.
6.08. EFFECTIVE REGISTRATION STATEMENT. The Registration Statement
shall have become effective and no stop order or other order suspending the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been initiated or threatened by the SEC or any other
Regulatory Authority.
6.09. BLUE-SKY PERMITS. The Company shall have received all state
securities laws and "blue sky" permits necessary to consummate the Corporate
Merger.
6.10. TAX OPINION. The Company and Bancorp shall have received an
opinion from Breyer & Associates PC to the effect that (i) the Corporate
Merger constitutes a reorganization under Section 368 of the Code, and (ii) no
gain or loss will be recognized by stockholders of Bancorp who receive shares
of the Company Common Stock in exchange for their shares of Bancorp Common
Stock, and, in rendering their opinion, Breyer & Associates PC may require and
rely upon representations contained in certificates of officers of the
Company, Bancorp and others.
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<PAGE>
6.11. EMPLOYMENT AGREEMENTS. The Employment Agreements between the
Company, Horizon and John M. Daughters and A.R. Ayala substantially in the
form attached hereto as Exhibits F-1 and F-2, respectively, shall have been
duly executed and delivered by all parties to such agreements.
6.12. NON-COMPETE AGREEMENTS. Each member of the Board of Directors of
the Bancorp and the Bank shall have entered into a non-compete agreement with
the Company substantially in the form attached hereto as Exhibit G.
6.13. ADVERSE CHANGE. During the period from September 30, 1998 to the
Effective Date, there shall not have been any material adverse change in the
financial position or results of operations of Bancorp or the Bank, nor shall
Bancorp or the Bank have sustained any loss or damage to its properties,
whether or not insured, that materially affects its ability to conduct its
business; and the Company shall have received a certificate dated the
Effective Date signed by the Chief Executive Officers of Bancorp and the Bank
to such effect.
6.14. DISSENTERS' RIGHTS. The number of Dissenters' Shares shall not
exceed in the aggregate five percent of the outstanding shares of Bancorp
Common Stock.
6.15. RECEIPT OF AFFILIATE AGREEMENTS. The Company shall have received
from each Affiliate of Bancorp the agreements referred to in Section 5.17.
6.16 POOLING LETTERS. The Company and the Bancorp shall have received
a letter dated as of the Effective Date, in form and substance acceptable to
the Company and the Bancorp from Moss Adams LLP to the effect that the
Mergers will qualify for pooling of interests accounting treatment.
PROVIDED, HOWEVER, that a failure to satisfy any of the conditions set
forth in the proviso following Section 6.02 or in Sections 6.05, 6.07, 6.11,
6.12, 6.13, 6.14, 6.15, or 6.16 shall only constitute conditions if asserted
by the Company, and a failure to satisfy any of the conditions set forth in
Section 6.04 or 6.07 shall only constitute conditions if asserted by Bancorp.
VII. TERMINATION
This Agreement may be terminated prior to the Effective Date, either
before or after receipt of required stockholder approvals:
7.01. MUTUAL CONSENT. By the mutual consent of the Company and Bancorp,
if the Board of Directors of each so determines by vote of a majority of the
members of its entire Board.
7.02. BREACH. By the Company or Bancorp, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event of (i) a material breach by the other party of any representation or
warranty contained herein, which breach cannot be or has not been cured within
thirty (30) days after the giving of written notice to the breaching party of
such breach, or (ii) a breach by the other party of any of the material
covenants or agreements contained herein, which breach cannot be or has not
been cured within thirty (30) days after the giving of written notice to the
breaching party of such breach.
7.03. DELAY. By the Company or Bancorp, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event that the Corporate Merger is not consummated by September 30, 1999.
7.04. NO STOCKHOLDER OR REGULATORY APPROVAL. By the Company or Bancorp,
if its Board of Directors so determines by a vote of a majority of the members
of its entire Board, (i) in the event that any stockholder approval
contemplated by Section 6.01 is not obtained at the Bancorp Meeting ,
including any adjournment or adjournments thereof, or (ii) in the event that
written notice is received which states that any required regulatory approval
contemplated by Section 6.02 has not been approved or has been denied.
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VIII. OTHER MATTERS
8.01. SURVIVAL. If the Effective Date occurs, all representations,
warranties, agreements and covenants contained in this Agreement shall not
survive the Effective Date. If this Agreement is terminated prior to the
Effective Date, the agreements and representations of the parties in Section
4.01(P), Sections 5.05, 5.07(2), 5.11 and 5.12, and Sections 8.01, 8.03, 8.04,
8.05, 8.06, 8.07, 8.08 and 8.10 shall survive such termination.
8.02. WAIVER; AMENDMENT. Prior to the Effective Date, any provision of
this Agreement may be (i) waived in writing by the party benefitted by the
provision, or (ii) amended or modified at any time (including the structure of
the transactions contemplated hereby) by an agreement in writing among the
parties hereto approved by their respective Boards of Directors and executed
in the same manner as this Agreement, except that, after the vote by the
stockholders of Bancorp, the consideration to be received by the stockholders
of Bancorp for each share of Bancorp Common Stock shall not thereby be
decreased.
8.03. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original. This
Agreement shall become effective when one counterpart has been signed by each
party hereto.
8.04. GOVERNING LAW. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of Washington, except as
federal law may be applicable.
8.05. EXPENSES. Each party hereto will bear all expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby.
8.06. CONFIDENTIALITY. Except as otherwise provided in Section 5.06(2),
each of the parties hereto and their respective agents, attorneys and
accountants will maintain the confidentiality of all information provided in
connection herewith which has not been publicly disclosed.
8.07. NOTICES. All notices, requests and other communications hereunder
to a party shall be in writing and shall be deemed to have been duly given
when delivered by hand, telegram or telecopied (with confirmation) or mailed
by registered or certified mail (return receipt requested) 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 the Company or Horizon to: Horizon Financial Corporation
1500 Cornwall Avenue
Bellingham, Washington 98225
Telecopy Number: (360)733-7019
Attn: V. Lawrence Evans, President & CEO
Copies to: Breyer & Associates PC
1100 New York Avenue, N.W.
Suite 700 East
Washington, D.C. 20005
Telecopy Number: (202) 737-7979
Attn: John F. Breyer, Jr., Esq.
If to Bancorp or the Bank to: Bellingham Bancorporation
211 East Holly Street
Bellingham, Washington 98225
Telecopy Number: (360) 671-6990
Attn: John M. Daughters, President & CEO<PAGE>
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<PAGE>
Copies to: Sloan Bobrick & Oldfield, Inc. P.S.
2601 North Alder Street
Tacoma, Washington 94807
Telecopy Number: (206)752-5324
Attn: Thomas H. Oldfield, Esq.
8.08. BREAK-UP FEE. The parties hereby acknowledge that, in negotiating
and executing this Agreement and in taking the steps necessary or appropriate
to effect the transaction contemplated hereby, the Company has incurred and
will incur direct and indirect monetary and other costs (including, without
limitation, attorney's fees and costs and costs of the Company employee and
management time) and will forego discussion with respect to other potential
acquisitions. To compensate the Company for such cost and to induce it to
forego initiating discussions regarding other acquisitions, Bancorp and the
Bank shall be obligated to pay the Company on demand (and in no event more
than three days after such demand) in immediately available funds $800,000
("Break-up Fee") if:
(A) within 24 months after the date hereof, the Corporate Merger has not
been completed and there occurs any of the events set forth in subparagraphs
(i), (ii) or (iii) below.
(i) Any person other than the Company or an affiliate of the
Company acquires beneficial ownership of 25% or more of the then-outstanding
Bancorp Common Stock;
(ii) Bancorp or any of its affiliates, without having received the
Company's prior written consent, enters into an agreement to engage in an
Acquisition Transaction (as previously defined) with any Third Party, or
Bancorp's Board of Directors recommends that the shareholders of Bancorp
approve or accept any Acquisition Transaction with any person other than the
Company or any of its subsidiaries.
(iii) A bona fide proposal is made by a third party to Bancorp or
the Bank to engage in an Acquisition Transaction and after such proposal is
made any of the following events occurs: Bancorp willfully breaches this
Agreement and such breach entitles the Company to terminate this Agreement;
the holders of Bancorp Common Stock do not approve this Agreement at the
Meeting; the Meeting is not held or is canceled prior to termination of this
Agreement for reasons other than the fault of the Company; or Bancorp's Board
of Directors modifies in a manner adverse to the Company the recommendation of
Bancorp's Board of Directors with respect to this Agreement.
Notwithstanding the foregoing, Bancorp and the Bank shall not be
obligated to pay to the Company the Break- up Fee if, prior to the occurrence
of any of the events specified in 8.08(A)(i), (ii) or (iii), Bancorp validly
terminates this Agreement pursuant to Section 7.01 or clause (ii) of Section
7.04. The parties further agree that this Section 8.08 is without prejudice
to any other rights that the parties hereto may have for any failure to
perform this Agreement.
8.09. ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This
Agreement together represent the entire understanding of the parties hereto
with reference to the transactions contemplated hereby and thereby and
supersede any and all other oral or written agreements heretofore made.
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.
8.10. HEADINGS. The headings contained in this Agreement are for
reference purposes only and are not part of this Agreement.
8.11 ATTORNEY FEES. If any Party hereto shall bring an action at law
or in equity to enforce its rights under this Agreement (including an action
based upon a misrepresentation or the breach of any warranty, covenant,
agreement or obligation contained herein), the prevailing Party in such action
shall be entitled to recover from the other Party its reasonable costs and
expenses necessarily incurred in connection with such action (including fees,
disbursements and expenses of attorneys and costs of investigation).
* * * * *
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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
HORIZON FINANCIAL CORP.
By: /s/ V. Lawrence Evans
------------------------------------
NAME: V. Lawrence Evans
TITLE: President and Chief Executive Officer
HORIZON BANK, A SAVINGS BANK
By: /s/ V. Lawrence Evans
------------------------------------
NAME: V. Lawrence Evans
TITLE: President and Chief Executive Officer
BELLINGHAM BANCORPORATION
By: /s/ John M. Daughters
------------------------------------
NAME: John M. Daughters
TITLE: President and Chief Executive Officer
BANK OF BELLINGHAM
By: /s/ John M. Daughters
------------------------------------
NAME: John M. Daughters
TITLE: President and Chief Executive Officer
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Exhibit 99
<PAGE>
<PAGE>
Horizon
---------------
FINANCIAL CORP.
---------------
FOR IMMEDIATE RELEASE
NEWS RELEASE
HORIZON FINANCIAL CORP. CONTACTS:
V. Lawrence Evans Rich Jacobson David Eldred
President Finance Officer Investor Relations
(360) 756-2564 (360) 756-2566 (360) 756-2568
BELLINGHAM BANCORPORATION CONTACTS:
Jack Daughters Gus Ayala
President Finance Officer
(360) 671-8888 (360) 671-8888
HORIZON FINANCIAL CORP. SIGNS DEFINITIVE MERGER
AGREEMENT WITH BELLINGHAM BANCORPORATION
BELLINGHAM, WA - January 18, 1999 - Horizon Financial Corp. (Nasd: HRZB) and
Bellingham Bancorporation today announced a definitive agreement to merge,
creating a company with combined assets in excess of $652 million.
As a result of the transaction, Bellingham Bancorporation will be merged into
Horizon Financial Corp., based in Bellingham, Washington. Bellingham
Bancorporation operates the Bank of Bellingham, a wholly owned commercial bank
subsidiary with three offices in Bellingham.
The acquisition will be accomplished in an all stock offer valued at
approximately $15.5 million, including the assumption of outstanding
Bellingham Bancorporation stock options and warrants. According to terms of
the definitive agreement, Horizon Financial Corp. will exchange 2.74 shares
of its common stock for each Bellingham Bancorporation share. In this
regard, Horizon will issue 1,129,264 shares of its common stock . The
acquisition, which has been approved by the Board of Directors of each
company, is subject to, among other contingencies, approval by regulators and
Bellingham Bancorporation
<PAGE>
<PAGE>
Horizon Financial Corp. Merger, Page 2.
shareholders. The transaction is expected to close by June 1, 1999. Horizon
Financial Corp. expects the merger to be accretive to earnings within one year
of combined operations.
The transaction is expected to be accounted for as a pooling of interests. To
comply with the accounting rules for a pooling of interests transaction, the
Board of Directors rescinded Horizon's stock repurchase plan, effective with
the signing of the definitive agreement to merge.
Bank of Bellingham President and CEO, Jack Daughters, said, ``Joining Horizon
Bank is a good fit. It provides us with a unique opportunity to associate
ourselves with an organization that is centered on the concepts of service
excellence and local control. Horizon's expertise with real estate lending,
combined with our commercial banking experience will benefit both
organizations and help to propel us to the next level of community banking
service. Also, merging with Horizon will provide us with access to the
resources of a larger community bank. This will translate into higher lending
limits for our customers and provide us with a larger branch network to
distribute our products and services. We are happy with the prospects of
this merger and we believe our customers, stockholders, and employees will
enjoy the benefits.''
Horizon Financial Corp.'s President and CEO, V. Lawrence Evans, said, ``The
merger will accelerate our entry into commercial banking and give our
customers access to expanded product lines. Horizon is a local community
bank and this merger is the next logical step in expanding our services in
our current market area. The Bank of Bellingham has employees with many
years of commercial banking experience and we look forward to having them
join our team. Jack Daughters will be made an Executive Vice President and
member of the Board of Directors of Horizon Bank.''
According to Horizon, the merger expands the Corporation's capabilities and
will not change existing lines of business. ``We have specialized in real
estate lending for decades and real estate lending will continue to be very
important to our business goals,'' commented Evans. As the Corporation adds
commercial lending to its product offering, and increases consumer lending,
Horizon anticipates that the mix of its loan portfolio will change, and should
enhance profitability. More commercial and consumer loans, coupled with
low-cost, commercial deposits, should increase the Corporation's operating
spread. Also, the efficiency of combining both organizations under one
umbrella should help save costs. All of these additional benefits may be
achieved without loss of the local decision making and service excellence that
both the Bank of Bellingham and Horizon's customers have come to expect.
Horizon Financial Corp., a Washington corporation, is a $588 million, bank
holding company, headquartered in Bellingham, Washington. The Corporation's
primary subsidiary, Horizon Bank, operates 12 full-
<PAGE>
<PAGE>
Horizon Financial Corp. Merger, Page 3.
service offices throughout Whatcom, Skagit and Snohomish County. Prior to
this announcement, Horizon Bank has operated as a traditional savings bank,
specializing in real estate lending and attracting retail deposits. The
Corporation's common stock is traded on the Nasdaq stock market under the
ticker symbol ``HRZB.''
Bellingham Bancorporation, a Washington corporation, is a $64.3 million, bank
holding company, headquartered in Bellingham, Washington. The Bank of
Bellingham, the Corporation's primary subsidiary, was founded in 1992 by a
group of local business people for the purpose of providing commercial banking
services to the local community, and operates three full-service banking
facilities in Bellingham.
Horizon Financial Corp. may include certain ``forward looking statements''
within the meaning and protection of such safe harbor as provided by the
Private Securities Litigation and Reform Act of 1995. Management's ability to
predict results or the effect of future plans and strategies is inherently
uncertain. Factors that could affect results include, but are not limited to:
the future level of interest rates, industry trends, general economic
conditions, loan delinquency rates, and changes in state and federal
regulations. These factors should be considered when evaluating any ``forward
looking statements'' and undue reliance should not be placed on such
statements.
# # #
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