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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
September 11, 1996 Date of
Report (Date of earliest event reported):
FIRST COMMUNITY FINANCIAL GROUP, INC.
(Exact name of registrant as specified in its charter)
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Washington 0-24024 91-1277503
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification Number)
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721 College Street S.E., P.O. Box 3800, Lacey, Washington 98509-3800
(Address of principal executive offices - zip code)
Registrant's telephone number, including area code: (360) 459-1100
Not applicable
(Former Name or Former Address, If Changed Since Last Report)
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ITEM 5 - OTHER EVENTS
On September 11, 1996, First Community Financial Group, Inc., Lacey,
Washington ("FCFG") and its wholly-owned subsidiary, First Community Bank of
Washington, Lacey, Washington ("Bank"), entered into a definitive agreement (the
"Merger Agreement") with Prairie Security Bank, Yelm, Washington ("PSB"). Under
the terms of the Merger Agreement, PSB will be merged with the Bank.
The Merger Agreement provides that FCFG will issue (i) cash, (ii)
shares of its common stock, or (iii) a combination of cash and shares of its
common stock in exchange for outstanding PSB shares held by PSB's shareholders.
In general, PSB shareholders will be able to elect which form of consideration
to receive for their PSB shares. The aggregate value of the consideration is
approximately $9.03 million, subject to certain adjustments.
Consummation of the acquisition is subject to several conditions,
including receipt of applicable regulatory approvals and approval by PSB's
shareholders. For information regarding the terms of the proposed transaction,
reference is made to the Merger Agreement and the press release dated September
12, 1996, which are attached hereto as Exhibits 2 and 99, respectively, and
incorporated herein by reference.
ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements - not applicable.
(b) Pro forma financial information - not applicable.
(c) Exhibits:
(2) Plan and Agreement of Reorganization and Merger dated
September 11, 1996
(99) Press Release issued by FCFG, dated September 12, 1996
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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.
Dated: September 12, 1996
FIRST COMMUNITY FINANCIAL GROUP, INC.
By: \s\ Ken F. Parsons
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Ken F. Parsons
Chief Executive Officer and President
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EXHIBIT (2)
PLAN AND AGREEMENT OF REORGANIZATION AND MERGER
BETWEEN
FIRST COMMUNITY FINANCIAL GROUP, INC.,
FIRST COMMUNITY BANK,
AND
PRAIRIE SECURITY BANK
DATED AS OF SEPTEMBER 11, 1996
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TABLE OF CONTENTS
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Page
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SECTION 1. DEFINITIONS 1
1.1. Defined Terms 1
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1.2. General Interpretation 7
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SECTION 2. TERMS OF TRANSACTION 7
2.1. Transaction 7
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2.2. Merger 7
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2.3. Consideration 9
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2.4. Alternative Structures 13
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2.5. Letter of Transmittal 13
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2.6. Undelivered Certificates 13
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SECTION 3. CLOSING OF THE TRANSACTION 14
3.1. Closing 14
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3.2. Events of Closing 14
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3.3. Place of Closing 14
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SECTION 4. REPRESENTATIONS AND WARRANTIES 14
4.1. Representations and Warranties of PSB and FCFG 14
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4.2. Exceptions to Representations and Warranties 24
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SECTION 5. CONDUCT AND TRANSACTIONS PRIOR TO CLOSING 25
5.1. Conduct of PSB's Business Prior to Closing 25
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5.2. Registration Statement 28
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5.3. Submission to Regulatory Authorities 29
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5.4. Announcements 29
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5.5. Consents 30
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5.6. Further Actions 30
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5.7. Notice 30
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5.8. Confidentiality 30
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5.9. Affiliate Letters 30
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5.10. Update of Financial Statements. 30
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5.11. Availability of FCFG's Books, Records and Properties. 31
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5.12. Conduct Regarding Representations and Warranties. 31
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SECTION 6. APPROVALS AND CONDITIONS 31
6.1. Required Approvals 31
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6.2. Conditions to Obligations of FCFG and the Bank 31
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6.3. Conditions to Obligations of PSB 34
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SECTION 7. DIRECTORS, OFFICERS AND EMPLOYEES 35
7.1. Directors 35
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7.2. Key Employees 35
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7.3. Employee Benefit Issues 35
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SECTION 8. TERMINATION OF AGREEMENT AND ABANDONMENT OF
TRANSACTION 36
8.1. Termination 36
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8.2. Cost Allocation Upon Termination 36
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SECTION 9. MISCELLANEOUS 37
9.1. Notices 37
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9.2. Waivers and Extensions 37
----------------------
9.3. Construction and Execution in Counterparts 38
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9.4. Survival of Representations, Warranties, and Covenants 38
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9.5. Attorneys' Fees and Costs 38
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9.6. Governing Law 38
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SECTION 10. AMENDMENTS 38
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SCHEDULES:
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SCHEDULE 1Offices of Bank and PSB
SCHEDULE 2Names and Addresses of Initial Directors and Officers
SCHEDULE 3General Exceptions to Representations and Warranties
SCHEDULE 4Subsidiaries
SCHEDULE 5Stock Option Plans of FCFG and PSB
SCHEDULE 6Third Party Consents
SCHEDULE 7Classified Assets
SCHEDULE 8Encumbrances
SCHEDULE 9Compliance With Laws and Litigation
SCHEDULE 10 Insurance
SCHEDULE 11 Employee Benefit Plans
SCHEDULE 12 Material Contracts
SCHEDULE 13 Key Employees
EXHIBITS:
EXHIBIT A Form of Opinion of Counsel for PSB
EXHIBIT B Form of Non-Competition Agreement for PSB Directors
EXHIBIT C Form of Employment Agreement for Michael D. Edwards
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PLAN AND AGREEMENT OF REORGANIZATION AND MERGER
BETWEEN
FIRST COMMUNITY FINANCIAL GROUP, INC.,
FIRST COMMUNITY BANK,
AND
PRAIRIE SECURITY BANK
This Plan and Agreement of Reorganization and Merger (the "Agreement")
is made and entered into as of September 11, 1996, between FIRST COMMUNITY
FINANCIAL GROUP, INC., a Washington corporation ("FCFG"), FIRST COMMUNITY BANK,
a banking corporation chartered under the laws of the State of Washington (the
"Bank"), and PRAIRIE SECURITY BANK, a banking corporation chartered under the
laws of the State of Washington ("PSB").
PREAMBLE
The management of FCFG and PSB believe that the merger of PSB with and
into the Bank, on the terms and conditions set forth in this Agreement, is in
the best interests of the stockholders of FCFG and PSB.
AGREEMENT
In consideration of the mutual agreements set forth in this Agreement,
FCFG, the Bank, and PSB agree as follows:
SECTION 1.
DEFINITIONS
1.1. DEFINED TERMS. Capitalized terms used in this Agreement have the
following meanings:
"AGREEMENT" means this Plan and Agreement of Reorganization and Merger.
"ASSET CLASSIFICATION" has the meaning assigned to such term in Section
4.1.7.
"BANK" has the meaning assigned to such term in the introductory
paragraph of this Agreement.
"BANK STOCK" means the capital stock of the Bank.
"BOOK VALUE" means stockholder common stock, surplus and retained
earnings, computed according to GAAP.
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"BUSINESS DAY" means any day other than a Saturday, Sunday, or a legal
holiday in the State of Washington.
"CAPITAL" means capital stock, surplus and retained earnings (undivided
profits) determined in accordance with GAAP, applied on a consistent basis.
"CLOSING" means the closing of the transactions contemplated by this
Agreement, as specified in Section 3.1.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMBINED BANK" has the meaning assigned to such term in Section 2.2.
"COMPENSATION PLANS" has the meaning assigned to such term in Section
4.1.15(a).
"CONTINUING EMPLOYEES" has the meaning assigned to such term in Section
7.3.1.
"CONTRACTS" has the meaning assigned to such term in Section 4.1.5(b).
"DIRECTOR" means the Director of the Department of Financial
Institutions of the State of Washington.
"DISSENTING SHARES" means those shares of PSB Common Stock as to which
shareholders have perfected their dissenters' rights pursuant to RCW 30.49.090.
"EFFECTIVE DATE" means the date on which all conditions to Closing have
occurred and on which the Merger takes place, as more fully specified in Section
3.1.
"ELIGIBLE HOLDERS" means holders of shares of PSB Common Stock other
than Mandatory Cash Recipients.
"EMPLOYEES" has the meaning assigned to such term in Section 4.1.15(a).
"ENVIRONMENTAL LAW" means any federal, state, local or foreign law,
regulation, agency policy, order, decree, judgment, judicial opinion, or any
agreement with any Governmental Entity, presently in effect or subsequently
adopted relating to (a) the manufacture, generation, transport, use, treatment,
storage, recycling, disposal, release, threatened release or presence of
Hazardous Substances, or (b) the preservation, restoration or protection of the
environment, natural resources or human health.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA AFFILIATE" has the meaning assigned to such term in Section
4.1.15(c).
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"ESOP" means the Employee Stock Ownership Plan (with 401(k) provisions)
for employees of PSB, effective as of January 1, 1992, as amended.
"EXCESS AMOUNT" has the meaning assigned to such term in Section
2.3.6(b).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
and related rules and regulations.
"EXCHANGE AGENT" means the agent described in Section 2.3.9.
"EXECUTIVE OFFICERS" means the Chief Executive Officer and Chief
Financial Officer.
"FCFG" has the meaning assigned to such term in the introductory
paragraph of this Agreement.
"FCFG COMMON STOCK" has the meaning assigned to such term in Section
4.1.3(a).
"FCFG EMPLOYEE STOCK OPTION PLAN" means the Employee Stock Option and
Restricted Stock Award Plan dated April 19, 1989, as amended.
"FCFG-KSOP" means the Employee Stock Ownership Plan effective as of
January 1, 1992, as amended.
"FCFG FINANCIAL STATEMENTS" means FCFG's audited consolidated
statements of financial condition as of December 31,1995, 1994, and 1993, and
the related audited statements of income, changes in cash flows and
stockholders' equity for each of the years ended December 31, 1995 and 1994.
"FCFG OPTIONS" means options issued to employees of FCFG and its
subsidiaries pursuant to the FCFG Employee Stock Option Plan.
"FCFG PREFERRED STOCK" has the meaning assigned to such term in Section
4.1.3(a).
"FCFG STOCK PLANS" has the meaning assigned to such term in Section
4.1.3(a).
"FDIA" has the meaning assigned to such term in Section 4.1.2.
"FDIC" means the Federal Deposit Insurance Corporation.
"FAULT" means (i) in the case of PSB, any agreement by PSB to merge or
consolidate with, or sell substantially all of its assets to, any entity other
than FCFG or the Bank, and (ii) intentional acts or omissions by, or lack of
good faith efforts of, PSB, FCFG or the Bank that result in the failure to
perform or fulfill any covenant, representation or warranty in this Agreement.
Good faith unilateral termination of the Agreement in accordance with Section
8.1 will not constitute Fault on the part of the party terminating.
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"FEDERAL RESERVE" means the Board of Governors of the Federal Reserve
System, or the Federal Reserve Bank of San Francisco acting under authority
delegated to it by the Board of Governors of the Federal Reserve System.
"FINANCIAL STATEMENTS" means (a) in the case of FCFG, the FCFG
Financial Statements or, for periods following December 31, 1995, the Subsequent
FCFG Financial Statements, and (b) in the case of PSB, the PSB Financial
Statements or, for periods following December 31, 1995, the Subsequent PSB
Financial Statements.
"GAAP" means generally accepted accounting principles, consistently
applied.
"GOVERNMENTAL ENTITY" has the meaning assigned to such term in Section
4.1.5(a).
"HAZARDOUS SUBSTANCES" means any hazardous or toxic substance, material
or waste that is regulated by any local governmental authority, any state
government or the United States Government, including any material or substance
that is (a) defined as a "hazardous substance" in 42 USC Section 9601(14), (b)
defined as a "pollutant or contaminant" in 42 USC Section 9604(a)(2), or (c)
defined as a "hazardous waste" in 42 USC Section 6903(5).
"INITIAL DIRECTORS" has the meaning assigned to such term in Section
2.2.3.
"INITIAL OFFICERS" has the meaning assigned to such term in Section
2.2.3.
"LIENS" has the meaning assigned to such term in Section 4.1.3(a).
"LIQUIDATED DAMAGES" means liquidated damages in the amount of
$400,000.
"MANDATORY CASH RECIPIENTS" means (a) Non-Residents, (b) holders of
fewer than 200 shares of PSB Common Stock, (c) holders of Dissenting Shares, and
(d) holders of PSB Common Stock who would be entitled to receive fractional
shares of FCFG Common Stock but for the provisions of Section 2.3.7.
"MATERIAL ADVERSE EFFECT" with respect to any corporation means an
effect that (a) is materially adverse to the business, financial condition,
results of operations or prospects of the corporation and its subsidiaries taken
as a whole, (b) significantly and adversely affects the ability of the
corporation to consummate the transactions contemplated by this Agreement by the
Termination Date or to perform its material obligations under this Agreement, or
(c) enables any person to prevent the consummation by the Termination Date of
the transactions contemplated by this Agreement; provided, however, that no
Material Adverse Effect shall be deemed to have occurred on the basis of any
effect resulting from (1) actions or omissions of the corporation taken with the
prior consent of the other parties to this Agreement or in contemplation of the
transactions provided for in this Agreement, or (2) circumstances affecting the
banking industry in the State of Washington generally.
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"MERGER" has the meaning assigned to such term in Section 2.1.
"NET CASH AMOUNT" means the absolute amount by which the aggregate
amount of cash payable to all Mandatory Cash Recipients pursuant to Section 2.3
is less than the Total Available Cash.
"NON-RESIDENTS" means (a) an individual whose principal residence is
not within the State of Washington, and (b) a corporation, partnership, trust,
or other form of business organization whose principal office is not within the
State of Washington; in each case determined on the record date for the PSB
shareholder meeting held to consider the Merger; provided, however, that when
shares are held by a nominee (e.g., in "street name"), the beneficial owner
shall be deemed to be the shareholder for the purpose of determining residency
if the beneficial owner has power to control the investment or, otherwise, the
entity having such power shall be deemed to be the shareholder for such purpose.
"PSB" has the meaning assigned to such term in the introductory
paragraph of this Agreement.
"PSB BOARD DUTY" means exercise of the fiduciary duty of the PSB board
of directors to PSB shareholders, exercised in good faith with reasonable care,
in a manner believed to be in the best interest of PSB, in accordance with
written advice from Rothgerber, Appel, Powers & Johnson LLP, or other counsel
acceptable to FCFG.
"PSB COMMON STOCK" has the meaning assigned to such term in Section
4.1.3(b).
"PSB FINAL CAPITAL" means PSB's Capital as of the Effective Date.
"PSB FINANCIAL STATEMENTS" means PSB's audited statements of financial
condition as of December 31, 1995 (and 1994 and 1993 if required by Section
5.1.9), and the related audited statements of income, changes in cash flows and
stockholders' equity.
"PSB OPTIONS" means options issued to employees of PSB pursuant to the
PSB Stock Option Plan.
"PSB STOCK OPTION PLAN" means PSB's Incentive Stock Option and
Nonstatutory Stock Option Plan , effective as of November 3, 1992.
"PSB STOCK PLANS" means the ESOP and the PSB Stock Option Plan.
"PSB TARGET CAPITAL" means $4,500,000.
"PENSION PLAN" has the meaning assigned to such term in Section
4.1.15(b).
"PLAN" or "PLANS" individually or collectively, means any "employee
benefit plan," as defined in Section 3(3) of ERISA, maintained by FCFG or PSB,
as the case may be.
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"PRICING DATE" has the meaning assigned to such term in Section 2.3.1.
"PROPERTY" means any real or personal property owned or leased by PSB,
or in which PSB holds any security interest, mortgage, other lien or interest.
"PROSPECTUS/PROXY STATEMENT" has the meaning assigned to such term in
Section 5.2.1.
"REGISTRATION STATEMENT" has the meaning assigned to such term in
Section 5.2.1.
"REGULATORY APPROVALS" means the required regulatory approvals of the
Transaction by the Director, FDIC, and Federal Reserve.
"REPORTS" has the meaning assigned to such term in Section 4.1.6(b).
"RESIDENTIAL MORTGAGE LOAN" means a loan up to $240,000 in principal
amount, originated by PSB for sale into the secondary market, secured by a first
deed of trust on owner occupied single family residential property, and in a
principal amount not exceeding 90% of the appraised value of the residence.
"SEC" means the Securities and Exchange Commission.
"SECURITIES ACT" means the Securities Act of 1933, as amended, and
related rules and regulations.
"SECURITIES LAWS" has the meaning assigned to such term in Section
4.1.6(b).
"SHORTFALL AMOUNT" has the meaning assigned to such term in Section
2.3.6(c).
"SUBJECT PROPERTY" with respect to any corporation means (a) all real
property at which the businesses of the corporation or any of its subsidiaries
have been conducted, all property in which it or any of its subsidiaries holds a
security or other interest (including a fiduciary interest), and any such
property where under any Environmental Law it or any of its subsidiaries is
deemed to be the owner or operator of such property, (b) any facility in which
the corporation or any of its subsidiaries participates in the management,
including participating in the management of the owner or operator of such
property, and (c) all other real property that, for purposes of any
Environmental Law, the corporation or any of its subsidiaries otherwise could be
deemed to be an owner or operator or otherwise control.
"SUBSEQUENT FCFG FINANCIAL STATEMENTS" means a consolidated balance
sheet and related statements of income and stockholders' equity for each of
FCFG's fiscal quarters ending after December 31, 1995 and prior to Closing.
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"SUBSEQUENT PSB FINANCIAL STATEMENTS" means a balance sheet and related
statements of income and stockholders' equity for each of PSB's fiscal quarters
ending after December 31, 1995 and prior to Closing.
"TAX" includes any tax or similar governmental charge, impost or levy
(including income taxes, franchise taxes, transfer taxes or fees, stamp taxes,
sales taxes, use taxes, excise taxes, ad valorem taxes, withholding taxes,
employee withholding taxes, worker's compensation, payroll taxes, unemployment
insurance, social security, minimum taxes or windfall profits taxes), together
with any related liabilities, penalties, fines, additions to tax or interest,
imposed by the United States or any state, county, provincial, local or foreign
government or subdivision or agency of the United States.
"TERMINATION DATE" has the meaning assigned to such term in Section
3.1.
"TOTAL AVAILABLE CASH" has the meaning assigned to such term in Section
2.3.4.
"TRANSACTION" means the Merger, subject to any modification effected
pursuant to Section 2.4.
1.2. GENERAL INTERPRETATION. Except as otherwise expressly provided in
this Agreement or unless the context clearly requires otherwise, the terms
defined in this Section include the plural as well as the singular; the words
"hereof," "herein", "hereunder", "in this Agreement" and other words of similar
import refer to this Agreement as a whole and not to any particular Section or
other subdivision; and references in this Agreement to Sections, Schedules, and
Exhibits refer to Sections of and Schedules and Exhibits to this Agreement.
Whenever the words "include", "includes", or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation". Unless otherwise stated, references to Subsections refer to the
Subsections of the Section in which the reference appears. All pronouns used in
this Agreement include the masculine, feminine and neuter gender, as the context
requires. All accounting terms used in this Agreement that are not expressly
defined in this Agreement have the respective meanings given to them in
accordance with GAAP.
SECTION 2.
TERMS OF TRANSACTION
2.1. TRANSACTION. Subject to the terms and conditions set forth in this
Agreement, PSB will merge with and into the Bank (the "Merger").
2.2. MERGER. Upon Closing of the Merger, pursuant to RCW 30.49 and 12
USC Section 1828(c) and the related rules and regulations, all shares of PSB
Common Stock issued and outstanding immediately prior to Closing, except for
Dissenting Shares, will, by virtue of the Merger and without any action on the
part of the holder, be converted into the right to receive the consideration
described in Section 2.3. In the Merger, PSB will be merged into the Bank, and
the Bank will be the surviving banking corporation (the "Combined Bank"). The
shares of Bank Stock issued and outstanding on the Effective Date will continue
to be issued and outstanding
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shares of the Combined Bank. The name of the Combined Bank will be "First
Community Bank of Washington", and the Merger will not effect any change in the
articles of incorporation or bylaws of the Bank. The principal office of the
Bank before the Merger will be the principal office of the Combined Bank, and
all other offices of the Bank and PSB that are set forth in Schedule 1 will
become offices of the Combined Bank.
2.2.1. TRANSFER OF INTERESTS. Upon consummation of the Merger,
the Combined Bank will be deemed to be the same corporation as PSB and
the Bank. All rights, franchises and interests of PSB and the Bank in
and to every type of property (real, personal and mixed) and choses in
action will be transferred to and vested in the Combined Bank by virtue
of such Merger without any deed or other transfer, and the Combined
Bank, without any order or other action on the part of any court or
otherwise, will hold and enjoy all rights of property, franchises and
interests, including appointments, designations and nominations, and
all other rights and interests as trustee, executor, administrator,
registrar or transfer agent of stocks and bonds, guardian of estates,
assignee, receiver and committee of estates of incompetents, and in
every other fiduciary capacity, in the same manner and to the same
extent as such rights, franchises and interests were held or enjoyed by
PSB and the Bank immediately before consummation of the Merger.
2.2.2. LIABILITIES. Upon consummation of the Merger, the
Combined Bank will be liable for all liabilities of PSB and the Bank;
all deposits, debts, liabilities, obligations and contracts of PSB and
the Bank, matured or unmatured, whether accrued, absolute, contingent
or otherwise, and whether or not reflected or reserved against on
balance sheets, books of account or records of PSB or the Bank, as the
case may be, will be those of the Combined Bank, and will not be
released or impaired by the Merger; and all rights of creditors and
other obligees and all liens on property of either PSB or the Bank will
be preserved unimpaired.
2.2.3. DIRECTORS AND OFFICERS OF COMBINED BANK. Upon
consummation of the Merger, (i) the board of directors of the Combined
Bank will consist of all persons who are directors of the Bank
immediately before the Effective Date plus three additional PSB
directors designated by PSB and considered satisfactory by FCFG,
including Michael D. Edwards, the President and Chief Executive Officer
of PSB (collectively, the "Initial Directors"), and (ii) the officers
of the Combined Bank will consist of all persons who are officers of
the Bank immediately prior to the Effective Date, except that PSB's
President and Chief Executive Officer will serve as President of the
Bank and the PSB employees identified in Schedule 2 will hold the
offices indicated opposite their name (the "Initial Officers");
provided, however, that nothing in this Agreement will be deemed to
restrict in any way the rights of the shareholders and directors of the
Combined Bank at any time after the Effective Date to nominate, elect,
select or remove, as the case may be, such directors and officers of
the Combined Bank as they shall see fit, subject (i) to the rights of
any employees pursuant to employment agreements, if any, between such
employees and the Combined Bank, and (ii) as provided by Section 7.2.
The Initial Directors will serve on the board of directors of the
Combined Bank until the next annual meeting of the
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stockholders of the Combined Bank or until such time as their
successors have been elected and qualified. The names and mailing
addresses of the Initial Directors and Initial Officers are set forth
in Schedule 2.
2.3. CONSIDERATION. The aggregate consideration payable by FCFG to
PSB's stockholders in connection with the Merger shall be calculated and paid
pursuant to this Section 2.3.
2.3.1. EXCHANGE VALUE OF PSB COMMON STOCK. For all purposes of
this Agreement, each share of PSB Common Stock outstanding as of the
Effective Date shall have an exchange value equal to 200% of the Book
Value of such share as of the end of the calendar month immediately
preceding the Effective Date (the "Pricing Date"), determined in
accordance with GAAP.
2.3.2. EXCHANGE VALUE OF FCFG COMMON STOCK. For all purposes
of this Agreement, each share of FCFG Common Stock outstanding as of
the Effective Date shall have an exchange value equal to 196% of the
Book Value of such share as of the Pricing Date, determined in
accordance with GAAP.
2.3.3. ADJUSTMENT OF BOOK VALUE OF COMMON STOCK. If either PSB
or FCFG experiences a net loss (as determined in accordance with GAAP)
during the period commencing on the Pricing Date and ending on the
Effective Date, the Book Value of PSB or FCFG Common Stock, as
applicable, used to calculate the exchange value pursuant to Section
2.3.1 or 2.3.2 shall be reduced by the amount of such net loss and the
exchange value shall be recalculated after giving effect to such Book
Value reduction.
2.3.4. CONSIDERATION TO BE PAID. Subject to the terms and
conditions set forth in this Agreement, upon consummation of the Merger
and the surrender of his or her certificate or certificates in
accordance with Section 2.3.9(a), each holder of shares of PSB Common
Stock outstanding as of the Effective Date shall receive, in accordance
with the election procedures set forth in Section 2.3.5 and the
allocation procedures set forth in Section 2.3.6, (a) cash equal to the
exchange value of such shares, (b) shares of FCFG Common Stock with an
exchange value equal to the exchange value of such holder's shares of
PSB Common Stock, or (c) a combination of cash and shares of FCFG
Common Stock; provided, however, that (i) holders of fewer than 200
shares of PSB Common Stock and holders of PSB Common Stock who are
Non-Residents shall receive only cash equal to the exchange value of
their shares of PSB Common Stock, and (ii) in no event shall the
aggregate consideration paid to all holders consist of cash equal to
more than forty five percent (45%) of the aggregate exchange value of
all such holders' shares of PSB Common Stock ("Total Available Cash").
For illustrative purposes only (and disregarding the treatment of
fractional shares of FCFG Common Stock), a holder of 1,000 shares of
PSB Common Stock who has elected to receive 45% of the exchange value
of such shares in the form of cash and 55% of the exchange value of
such shares in the form of FCFG Common Stock would receive $20,700 plus
1,100 shares of FCFG Common Stock, assuming for purposes of this
illustration only that (1) PSB's per share Book Value determined in
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accordance with Section 2.3.1 is $23.00, (2) FCFG's per share Book
Value determined in accordance with Section 2.3.2 is $11.74, and (3)
neither PSB nor FCFG experiences a net loss as specified in Section
2.3.3 [i.e., cash of $20,700 because 450 times 200% of $23.00 equals
$20,700; and 1,100 shares of FCFG Common Stock because 550 times 200%
of $23.00 results in an aggregate exchange value of $25,300, and such
aggregate exchange value divided by 196% of $11.74 equals 1,100
shares].
2.3.5. ELECTION PROCEDURES. Each holder of shares of PSB
Common Stock as of the record dated fixed for the meeting of
shareholders to consider and vote upon this Agreement (except Mandatory
Cash Recipients) will be entitled to make an election to receive (a)
cash, (b) FCFG Common Stock, or (c) a combination of cash and FCFG
Common Stock. Such election will be made in writing on an election form
provided by PSB and satisfactory to FCFG, will be hand delivered or
promptly addressed and mailed to FCFG at its main office, U.S. mail,
postage prepaid, will bear a postmark on or before five Business Days
after the PSB shareholder meeting called for the purpose of approving
this Agreement. In the event that a holder of PSB Common Stock fails to
make a timely election, such holder will be deemed to have made an
election to receive cash except as otherwise provided in Section
2.3.6(b)(i). An election form may be revoked or changed by the person
submitting such form by substitution with another properly executed
election form before the deadline for making an election; provided,
however, that the board of directors of PSB, or its designee, will have
reasonable discretion to determine when any election, modification or
revocation has been properly made. In all other cases, an election will
be irrevocable unless changed in writing with the consent of the board
of directors of PSB and with the concurrence of the board of directors
of FCFG.
2.3.6. ALLOCATION OF CONSIDERATION TO BE PAID. Cash payable to
holders of shares of Common Stock will be allocated as follows:
(a) Insufficient Cash for Mandatory Cash Recipients. In the
event that the total amount of cash payable to all Mandatory Cash
Recipients pursuant to this Section 2.3 exceeds forty five percent
(45%) of the aggregate value of consideration payable to all holders of
PSB Common Stock in connection with the Transaction, the Total
Available Cash will be allocated among the Mandatory Cash Recipients in
the following order of priority: first, to holders who vote against the
Merger (but only with respect to shares so voted); second, to pay for
fractional shares of FCFG Common Stock to which holders of PSB Common
Stock would otherwise be entitled; third, to holders who are
Non-Residents; and fourth, to each other holder who owns fewer than 200
shares of PSB Common Stock.
(b) Insufficient Cash for Eligible Holders. If Eligible
Holders elect (or are deemed to have elected in accordance with Section
2.3.5) to receive cash in an aggregate amount that exceeds the Net Cash
Amount (such excess to be referred to as the "Excess Amount"), then the
following will occur:
(i) Those holders of shares of PSB Common Stock who
failed to make an election in a timely manner in accordance
with Section 2.3.5 will be deemed to
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have elected only to receive FCFG Common Stock for their
shares of PSB Common Stock;
(ii) The cash payable to Eligible Holders (other than
those holders referenced in Section 2.3.6(b)(i)) will be
reduced by the Excess Amount, and the reduction will be
effected pro rata among such Eligible Holders based upon the
respective number of shares of PSB Common Stock with respect
to which such Eligible Holders elected to receive cash; and
(iii) The number of shares of FCFG Common Stock to be
received by Eligible Holders (other than those holders
referenced in Section 2.3.6 (b)(i)) will be increased until
the aggregate exchange value of such shares is increased by
the Excess Amount, and the increase will be effected pro rata
among such Eligible Holders based upon the respective number
of shares of PSB Common Stock with respect to which such
Eligible Holders elected to receive cash.
(c) Excess Cash for Eligible Holders. If Eligible Holders
elect (or are deemed to have elected in accordance with Section 2.3.5)
to receive cash in an aggregate amount that is less than the Net Cash
Amount (the difference between such amounts to be referred to as the
"Shortfall Amount"), then the following will occur:
(i) The cash payable to such Eligible Holders will be
increased by the Shortfall Amount, and the increase will be
effected pro rata among such Eligible Holders based upon the
respective number of shares of PSB Common Stock with respect
to which such Eligible Holders elected to receive cash; and
(ii) The number of shares to be received by such
Eligible Holders will be reduced until the aggregate exchange
value of such shares is reduced by the Shortfall Amount, and
the reduction will be effected pro rata among such Eligible
Holders based upon the respective number of shares of PSB
Common Stock with respect to which such Eligible Holders
elected to receive cash.
2.3.7. FRACTIONAL SHARES. No fractional shares of FCFG Common
Stock will be issued to any holder of PSB Common Stock, but any holder
of PSB Common Stock otherwise entitled to receive such a fractional
share will receive payment in cash for such fractional share in an
amount equal to the product determined by multiplying such fraction by
the per share exchange value of FCFG Common Stock determined in
accordance with Section 2.3.2.
2.3.8. OPTIONS. All PSB Options outstanding as of the
Effective Date shall terminate at Closing, except that all PSB Options
held by an individual who will be an Initial Officer or Initial
Director will vest at Closing, and each such individual shall be
entitled to receive, in exchange for all of his or her PSB Options,
FCFG Options to purchase that number of FCFG Common Stock shares to
which such individual would have been entitled pursuant to this Section
2 if such individual had exercised such PSB
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Options immediately prior to Closing and elected to receive FCFG Common
Stock in connection with the Merger. All such FCFG Options received by
Initial Officers or Initial Directors shall have expiration dates that
are the same as the expiration dates of the PSB Options exchanged
pursuant to this Section.
2.3.9. CERTIFICATES.
(a) Surrender of Certificates. Until surrendered to an agent
designated by FCFG and PSB to effect the exchange of PSB Common Stock
for FCFG Common Stock or cash (the "Exchange Agent"), together with a
properly completed and executed form of transmittal letter, each
certificate evidencing PSB Common Stock (other than Dissenting Shares)
will, on and after the Effective Date, be deemed for all corporate
purposes to represent and evidence only the right to receive FCFG
Common Stock or cash in accordance with the provisions of this Section
2.3. Until any such certificate evidencing PSB Common Stock is so
surrendered, the holder of such PSB Common Stock will not have any
right to receive any certificates evidencing FCFG Common Stock or cash
in lieu of fractional shares.
(b) Issuance of Certificates in Other Names. If any
certificate evidencing FCFG Common Stock is to be issued in a name
other than that in which the certificate(s) for PSB Common Stock
surrendered in exchange is registered, it will be a condition of such
exchange that the person requesting the exchange will establish the
right to receive such certificate evidencing FCFG Common Stock and pay
to the Exchange Agent any transfer or other taxes required by reason of
the issuance of such certificate in a name other than registered holder
of the certificate surrendered, or will establish to the satisfaction
of the Exchange Agent that such tax has been paid or is not applicable.
(c) Lost, Stolen, and Destroyed Certificates. The Exchange
Agent will be authorized to issue FCFG Common Stock for any PSB Common
Stock certificate that has been lost, stolen or destroyed, upon the
Exchange Agent's receipt of satisfactory evidence of ownership of the
PSB Common Stock represented by the missing certificate, and after
appropriate indemnification.
(d) Rights to Dividends and Distributions. After the Effective
Date, no holder of a certificate evidencing shares of PSB Common Stock
will be entitled to receive any dividends or other distributions
otherwise payable to holders of record of FCFG Common Stock on any date
subsequent to the Effective Date unless such holder is entitled to
receive FCFG Common Stock and unless such holder has surrendered such
holder's certificates evidencing shares of PSB Common Stock in exchange
for FCFG Common Stock; provided, however, that such surrender will not
deprive such holder of any dividends or distributions to which such
holder is entitled as a record holder of PSB Common Stock as of a date
prior to such surrender. Upon surrender of such certificates, there
will be paid to the holder so surrendering such certificates the
amount, without interest, of any cash dividends and any other
distributions that have been distributed
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subsequent to the Effective Date on the whole number of shares of FCFG
Common Stock into which such PSB Common Stock was converted at the
Effective Date.
(e) Checks in Other Names. If any check for cash in lieu of
fractional shares is to be issued in a name other than that in which
the certificate(s) for PSB Common Stock surrendered in exchange is
registered, it will be a condition of such exchange that the person
requesting the exchange will establish the right to receive such cash
and pay to the Exchange Agent any transfer or other taxes required by
reason of the issuance of such check in a name other than registered
holder of the certificate surrendered, or will establish to the
satisfaction of the Exchange Agent that such tax has been paid or is
not applicable.
2.3.10. PAYMENT TO DISSENTING SHAREHOLDERS. Each outstanding
Dissenting Share shall be converted into the rights provided by RCW
30.49.090.
2.4. ALTERNATIVE STRUCTURES. In its sole discretion, within 30 days of
the execution of this Agreement and subject to the conditions set forth below,
FCFG may elect to consummate the transactions contemplated by this Agreement by
means other than the Merger and the related provisions of Section 2.3; provided,
however, that the type and aggregate amount of consideration set forth in
Section 2.3 will not be modified, and the tax consequences to PSB and its
shareholders will not be adversely affected, except by amendment of this
Agreement consistent with Section 10. If FCFG elects a structural alternative
pursuant to this Section, PSB will cooperate with and assist FCFG with any
necessary amendment to this Agreement, and with the preparation and filing of
such applications, documents, instruments and notices as may be necessary or
desirable, in the opinion of counsel for FCFG, to obtain the necessary
shareholder approvals and approvals of any regulatory agency, administrative
body or other governmental entity.
2.5. LETTER OF TRANSMITTAL. FCFG will prepare a form of transmittal
letter reasonably acceptable to PSB for use by shareholders holding PSB Common
Stock. Certificates representing shares of PSB Common Stock must be delivered
for payment in the manner provided in the form of transmittal letter. The form
of transmittal letter will be mailed to shareholders on or about the Effective
Date.
2.6. UNDELIVERED CERTIFICATES. If outstanding certificates for PSB
Common stock are not surrendered or the payment for them is not claimed prior to
a date when such payments would otherwise escheat or become the property of any
governmental unit or agency, the unclaimed items will, to the extent permitted
by abandoned property or any other applicable law, become the property of FCFG
(and to the extent not in its possession shall be paid over to FCFG), free and
clear of all claims or interests of any person previously entitled to such
items. Notwithstanding the foregoing, neither FCFG nor any party to this
Agreement will be liable to any holder of PSB Common Stock for any amount paid
to any governmental unit or agency having jurisdiction over any such unclaimed
items pursuant to the abandoned property or other applicable law of such
jurisdiction, and no interest will be borne on amounts owed to shareholders for
shares of PSB Common Stock.
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SECTION 3.
CLOSING OF THE TRANSACTION
3.1. CLOSING. The Closing will occur on the Effective Date. Unless FCFG
and PSB agree upon another date, the Effective Date will be the date five
Business Days after the fulfillment or waiver of each condition precedent set
forth in, and the granting of each approval (and expiration of any waiting
period) required by, Section 6 of this Agreement; provided, however, that in no
event shall the Effective Date occur earlier than (a) January 22, 1997, or (b)
five Business Days following the end of any calendar month after January 22,
1997. If Closing does not occur on or prior to April 30, 1997 (the "Termination
Date"), FCFG or PSB may terminate this Agreement in accordance with Section 8.
3.2. EVENTS OF CLOSING. On the Effective Date, all properly executed
documents required by this Agreement will be delivered to the proper party, in
form consistent with this Agreement. If any party fails to deliver a required
document on the Effective Date or otherwise defaults under this Agreement on or
prior to the Effective Date, then no Transaction will occur unless the adversely
affected party (i) waives the default, or (ii) elects to proceed while reserving
rights arising due to the default.
3.3. PLACE OF CLOSING. Unless FCFG and PSB agree otherwise, the Closing
will occur at the Lacey offices of FCFG at 10:00 a.m. on the Effective Date, or
such other time during normal business hours as FCFG and PSB may fix.
SECTION 4.
REPRESENTATIONS AND WARRANTIES
4.1. REPRESENTATIONS AND WARRANTIES OF PSB AND FCFG. Subject to Section
4.2 and except as expressly set forth in Schedule 3, FCFG and the Bank each
represent and warrant to PSB, and PSB represents and warrants to FCFG and the
Bank, that:
4.1.1. CORPORATE ORGANIZATION AND QUALIFICATION. It is a
corporation (or, in the case of the Bank and PSB, a banking
corporation) duly organized and validly existing under the laws of the
State of Washington, and its activities do not require it to be
qualified in any foreign jurisdiction; it has the requisite corporate
power and authority to own or lease its properties and assets and to
carry on its businesses as they are now being conducted; the locations
of each of its offices are set forth in Schedule 1; and it has made
available to the other parties to this Agreement a complete and correct
copy of its articles of incorporation and bylaws, each as amended to
date and currently in full force and effect.
4.1.2. SUBSIDIARIES. Schedule 4 lists all of its subsidiaries
as of the date of this Agreement and the percent of its stock-ownership
of such subsidiaries; each of its subsidiaries that is a depository
institution is an "insured depository institution" as defined in the
Federal Deposit Insurance Act ("FDIA"), and applicable regulations
under
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<PAGE> 18
the FDIA, having its deposits insured by the FDIC, subject to
applicable FDIC coverage limitations; each of its subsidiaries is
either a commercial bank or a corporation duly organized and validly
existing under the laws of the State of Washington, and is duly
qualified to do business and in good standing in each jurisdiction
where the property owned, leased or operated, or the business
conducted, by such subsidiary requires such qualification; and each of
its subsidiaries has the requisite corporate power and authority to own
or lease its properties and assets and to carry on its business as it
is now being conducted.
4.1.3. CAPITAL STOCK.
(a) FCFG. In the case of the representations and warranties made
by FCFG: The authorized capital stock of FCFG consists of ten million
two hundred thousand (10,200,000) shares divided into two classes: ten
million (10,000,000) shares of common stock, par value $2.50 per share
(the "FCFG Common Stock"), 1,696,507 shares of which are issued and
outstanding; and two hundred thousand (200,000) shares of blank-check
preferred stock, no par value, none of which is outstanding (the "FCFG
Preferred Stock"); there are outstanding under the stock option plans
identified in Schedule 5 (the "FCFG Stock Plans") options or rights to
acquire not more than an aggregate of 374,159 shares of FCFG Common
Stock (subject to adjustment on the terms set forth in the FCFG Stock
Plans); FCFG has no shares of FCFG Common Stock reserved for issuance
other than the shares reserved for issuance under the FCFG Stock Plans,
and has no shares of FCFG Preferred Stock reserved for issuance; all of
the outstanding shares of FCFG Common Stock have been duly authorized
and validly issued and are fully paid and nonassessable; all of the
outstanding shares of capital stock of each of FCFG's subsidiaries
owned by FCFG or a subsidiary of FCFG have been duly authorized and
validly issued and are fully paid and nonassessable except to the
extent provided by RCW 30.12.180, and are owned by FCFG or a subsidiary
of FCFG free and clear of all liens, pledges, security interests,
claims, proxies, preemptive or subscriptive rights or other
encumbrances or restrictions of any kind (collectively, "Liens"); and
except as set forth in this Agreement or in the FCFG Stock Plans, there
are no shares of capital stock of FCFG authorized, issued or
outstanding, and there are no preemptive rights or any outstanding
subscriptions, options, warrants, rights, convertible securities or
other agreements or commitments of FCFG or any of its subsidiaries of
any character relating to the issued or unissued capital stock or other
equity securities of FCFG or any of its subsidiaries (including those
relating to the issuance, sale, purchase, redemption, conversion,
exchange, voting or transfer of such stock or securities).
(b) PSB. In the case of the representations and warranties made by
PSB: The authorized capital stock of PSB consists of Five Hundred
Thousand (500,000) shares of common stock, par value $1.00 per share
(the "PSB Common Stock"), 196,316 shares of which are issued and
outstanding; there were outstanding under the PSB Stock Plans; options
or rights to acquire not more than an aggregate of 45,367 shares of PSB
Common Stock (subject to adjustment on the terms set forth in the PSB
Stock Plans); PSB has no shares of PSB Common Stock reserved for
issuance other than the shares reserved for
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<PAGE> 19
issuance under the PSB Stock Plans; all of the outstanding shares of
PSB Common Stock have been duly authorized and validly issued and are
fully paid and nonassessable except to the extent provided by RCW
30.12.180; all of the outstanding shares of capital stock of each of
PSB's subsidiaries owned by PSB or a subsidiary of PSB have been duly
authorized and validly issued and are fully paid and nonassessable, and
are owned by PSB or a subsidiary of PSB free and clear of all Liens;
and except as set forth in this Agreement or in the PSB Stock Plans,
there are no shares of capital stock of PSB authorized, issued or
outstanding, and there are no preemptive rights or any outstanding
subscriptions, options, warrants, rights, convertible securities or
other agreements or commitments of PSB or any of its subsidiaries of
any character relating to the issued or unissued capital stock or other
equity securities of PSB or any of its subsidiaries (including those
relating to the issuance, sale, purchase, redemption, conversion,
exchange, registration, voting or transfer of such stock or
securities).
4.1.4. CORPORATE AUTHORITY. It has the requisite corporate
power and authority and has taken all corporate action necessary in
order to execute and deliver this Agreement and, in the case of PSB and
the Bank, subject only to the approval by its shareholders of the plan
of merger contained in this Agreement to the extent required by RCW
30.49 to consummate the transactions contemplated by this Agreement;
and this Agreement is a valid and legally binding agreement of it,
enforceable in accordance with the terms of this Agreement.
4.1.5. GOVERNMENTAL FILINGS; NO VIOLATIONS.
(a) Filings. Other than the Regulatory Approvals, and other than
as required under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, the Exchange Act, the Securities Act, state
securities and "Blue Sky" laws, no notices, reports or other filings
are required to be made by it with, nor are any consents,
registrations, approvals, permits or authorizations required to be
obtained by it from, any governmental or regulatory authority, agency,
court, commission or other entity, domestic or foreign ("Governmental
Entity"), in connection with the execution, delivery or performance of
this Agreement by it and the consummation by it of the transactions
contemplated by this Agreement.
(b) Violations. The execution, delivery and performance of this
Agreement does not and will not, and the consummation by it of any of
the transactions contemplated by this Agreement will not, constitute or
result in (i) a material breach or violation of, or a default under,
its articles of incorporation or bylaws, or the comparable governing
instruments of any of its subsidiaries, or (ii) a material breach or
violation of, or a default under, or the acceleration of or the
creation of a Lien (with or without the giving of notice, the lapse of
time or both) pursuant to, any provision of any agreement, lease,
contract, note, mortgage, indenture, arrangement or other obligation
("Contracts") of it or any of its subsidiaries or any law, rule,
ordinance or regulation or judgment, decree, order, award or
governmental or non-governmental permit or license to which it or any
of its subsidiaries is subject, or any change in the rights or
obligations of any party under any of
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the Contracts. Schedule 6 contains a list of all consents of third
parties required under any Contracts to be obtained by it or its
subsidiaries prior to consummation of the Merger.
4.1.6 REPORTS AND FINANCIAL STATEMENTS.
(a) Filing of Reports. With respect to periods since January 1,
1992, each of it and its subsidiaries has filed all reports and
statements, together with any amendments required to be made with
respect to such reports and statements, that it was required to file
with (i) the SEC, (ii) the Federal Reserve, (iii) the FDIC, (iv) the
Department, and (v) any other applicable federal or state banking,
insurance, securities, or other regulatory authorities, and, as of
their respective dates (and, in the case of reports or statements filed
prior to the date of this Agreement, without giving effect to any
amendments or modifications filed after the date of this Agreement),
each such report or statement, including the related financial
statements and exhibits, complied (or will comply, in the case of
reports or statements filed after the date of this Agreement) as to
form in all material respects with all applicable statutes, rules and
regulations.
(b) Delivery to Other Parties of Reports. It has delivered to the
other parties to this Agreement, a copy of each registration statement,
offering circular, report, definitive proxy statement or information
statement under the Securities Act, the Exchange Act, and state
securities and "Blue Sky" laws (collectively, the "Securities Laws")
filed, used or circulated by it with respect to periods since January
1, 1992 through the date of this Agreement, and will promptly deliver
to such other parties each such registration statement, offering
circular, report, definitive proxy statement or information statement
filed, used or circulated after the date of this Agreement
(collectively, its "Reports"), each in the form (including related
exhibits and amendments) filed with the SEC (or if not so filed, in the
form used or circulated).
(c) Compliance with Securities Laws. As of their respective dates
(and without giving effect to any amendments or modifications filed
after the date of this Agreement), each of the Reports, including the
related financial statements, exhibits and schedules, filed, used or
circulated prior to the date of this Agreement complied (and each of
the Reports filed after the date of this Agreement will comply) in all
material respects with applicable Securities Laws, and did not (or in
the case of reports, statements, or circulars filed after the date of
this Agreement, 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 the light of the
circumstances under which they were made, not misleading.
(d) Financial Statements. Each of its balance sheets included in
the Financial Statements fairly presents (or, in the case of Financial
Statements for periods ending on a date following the date of this
Agreement, will fairly present) the consolidated financial position of
it and its subsidiaries as of the date of such balance sheet, and each
of the consolidated statements of income, cash flows and stockholders'
equity included in the
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<PAGE> 21
Financial Statements fairly presents (or, in the case of Financial
Statements for periods ending on a date following the date of this
Agreement, will fairly present) the consolidated results of operations,
retained earnings and cash flows, as the case may be, of it and its
subsidiaries for the periods set forth in such statements (subject, in
the case of unaudited statements, to normal year-end audit
adjustments), in each case in accordance with GAAP, except as may be
noted in such statements.
(e) Loan and Lease Losses. Its Executive Officers know of no
reason why the provision for loan and lease losses shown in the
consolidated balance sheet included in the Subsequent PSB Financial
Statements for the quarter ended June 30, 1996 was not adequate as of
such date to provide for estimable and probable losses, net of
recoveries relating to loans previously charged off, inherent in its
loan portfolio.
4.1.7. ASSET CLASSIFICATION. Schedule 7 sets forth a list,
accurate and complete in all material respects except as otherwise
expressly noted in such Schedule, of the aggregate amounts of loans,
extensions of credit and other assets of it and its subsidiaries that
have been criticized or classified as of the Pricing Date by it,
separated by category of classification or criticism (the "Asset
Classification"); and, except as shown on Schedule 7, no amounts of
loans, extensions of credit or other assets that have been classified
or criticized as of such date by any representative of any Governmental
Entity as "Other Loans Especially Mentioned," "Substandard,"
"Doubtful," "Loss" or words of similar effect are excluded from the
amounts disclosed in the Asset Classification, other than amounts of
loans, extensions of credit or other assets that were paid off or
charged off by it or its subsidiaries prior to the date of this
Agreement.
4.1.8. ABSENCE OF CERTAIN EVENTS AND CHANGES. Except as
disclosed in its Financial Statements, since December 31, 1995, it and
its subsidiaries have conducted their respective businesses only in the
ordinary and usual course of such businesses, and there has not been
any change or development or combination of changes or developments
that, individually or in the aggregate, is reasonably likely to result
in a Material Adverse Effect with respect to it.
4.1.9. PROPERTIES. Except as disclosed or reserved against in
its Financial Statements or in Schedule 8, it and its subsidiaries have
good and marketable title, free and clear of all Liens (other than
Liens for current taxes not yet delinquent or pledges to secure
deposits) to all of the material properties and assets, tangible or
intangible, reflected in its Reports as being owned by it or its
subsidiaries as of the date of this Agreement; to the knowledge of its
Executive Officers, all buildings and all fixtures, equipment and other
property and assets that are material to its business on a consolidated
basis and are held under leases or subleases by it or its subsidiaries
are held under valid leases or subleases, enforceable in accordance
with their respective terms (except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws
affecting creditors' rights generally or by general equity principles);
and Schedule 1 lists all existing branches and offices of the
respective parties to this Agreement, and all new branches or offices
for which application has been made.
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4.1.10. COMPLIANCE WITH LAWS. Except as disclosed in Schedule
9, it and each of its subsidiaries:
(a) is in compliance, in the conduct of its business, with all
applicable federal, state, local and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders or decrees, including
the Truth in Lending Act, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage
Disclosure Act and all other applicable fair lending laws or other laws
relating to discrimination;
(b) has all permits, licenses, certificates of authority, orders,
and approvals of, and has made all filings, applications, and
registrations with, federal, state, local, and foreign governmental or
regulatory bodies (including the Federal Reserve) that are required in
order to permit it or such subsidiary to carry on its business as it is
presently conducted;
(c) has received since January 1, 1992 no notification or
communication from any Governmental Entity (including any bank,
insurance and securities regulatory authorities) or its staff (i)
asserting that it or any of its subsidiaries is not in compliance with
any of the statutes, regulations or ordinances that such Governmental
Entity enforces, (ii) threatening to revoke any license, franchise,
permit or governmental authorization, or (iii) threatening or
contemplating revocation or limitation of, or that would have the
effect of revoking or limiting, FDIC deposit insurance (nor, to the
knowledge of its Executive Officers, do any grounds for any of the
foregoing exist); and
(d) is not required to give prior notice to any federal
banking agency of the proposed addition of an individual to its board
of directors or the employment of an individual as a senior executive.
4.1.11. LITIGATION. Except as disclosed in its Financial
Statements or in Schedule 9, there are no criminal or administrative
investigations or hearings of, before or by any Governmental Entity, or
civil, criminal or administrative actions, suits, claims or proceedings
of, before or by any person (including any Governmental Entity) pending
or, to the knowledge of its Executive Officers, threatened, against it
or any of its subsidiaries (including under the Truth in Lending Act,
the Equal Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act, the Home Mortgage Disclosure Act or any other fair
lending law or other law relating to discrimination); and neither it
nor any of its subsidiaries (nor any officer, director, controlling
person or property of it or any of its subsidiaries) 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 Governmental Entity charged with the supervision or
regulation of depository institutions or engaged in the insurance of
deposits (including the FDIC) or the supervision or regulation of it or
of its subsidiaries, and neither it nor any of its subsidiaries has
been advised by any such Governmental Entity that such Governmental
Entity is contemplating issuing or requesting (or is considering the
appropriateness of
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issuing or requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter or similar submission.
4.1.12. TAXES. All federal, state and local Tax returns,
including all information returns, required to be filed by or on behalf
of it or any of its subsidiaries have been timely filed or requests for
extensions have been timely filed, and any such extension shall have
been granted and not have expired, and all such filed returns are
complete and accurate in all material respects. Except as disclosed in
its Financial Statements, all taxes attributable to it or any of its
subsidiaries that are or were due or payable (without regard to whether
such taxes have been assessed) have been paid in full or have been
adequately provided for in its Financial Statements in accordance with
GAAP; adequate provision in accordance with GAAP has been made in its
Financial Statements relating to all Taxes for the periods covered by
such Financial Statements that were not yet due and payable as of the
dates of this Agreement, regardless of whether the liability for such
Taxes is disputed; as of the date of this Agreement and except as
disclosed in its Financial Statements, there is no outstanding audit
examination, deficiency, refund litigation or outstanding waiver or
agreement extending the applicable statute of limitations for the
assessment or collection of any Taxes for any period with respect to
any Taxes of it or its subsidiaries; all Taxes with respect to
completed and settled examinations or concluded litigation relating to
it or any of its subsidiaries have been paid in full or have been
recorded on its Financial Statements (in accordance with GAAP); neither
it nor any of its subsidiaries is a party to a Tax sharing or similar
agreement or any agreement pursuant to which it or any of its
subsidiaries has indemnified any party (other than it or one of its
subsidiaries) with respect to Taxes; and the proper and accurate
amounts have been withheld from all employees (and timely paid to the
appropriate Governmental Entity or set aside in an account for such
purposes) for all periods through the Closing Date in compliance with
all Tax withholding provisions of applicable federal, state, local and
foreign laws (including income, social security and employment tax
withholding for all types of compensation).
4.1.13. INSURANCE. Each of it and its subsidiaries has taken
all requisite action (including 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 under such policies
with respect to all matters (other than matters arising in connection
with, and the transactions contemplated by, this Agreement) that are
known to it. Schedule 10 to this Agreement contains a list of all
directors' and officers' liability insurance policies and other
material insurance policies maintained by it or its subsidiaries.
4.1.14. LABOR MATTERS. Neither it nor any of its subsidiaries
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, nor is it or any of its subsidiaries the subject of
any material proceeding asserting that it or any such subsidiary has
committed an unfair labor practice or seeking to compel it or such
subsidiary to bargain with any labor organization as to wages or
conditions of employment, nor is there any strike involving it or any
of its subsidiaries pending or, to the knowledge of its Executive
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Officers, threatened, nor are its Executive Officers aware of any
activity involving its or any of its subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in any other
organizational activity.
4.1.15. EMPLOYEE BENEFITS.
(a) Schedule 11 sets forth a list, as of the date of this
Agreement, 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 material
employment or severance contracts and all other material employee
benefit plans that cover employees or former employees of it and its
subsidiaries (its "Compensation Plans"); and true and complete copies
of the Compensation Plans (and, as applicable, copies of summary plan
descriptions, governmental filings (on Form 5500 series or otherwise),
actuarial reports and reports under Financial Accounting Standards
Board Statement No. 106 relating to such Compensation Plans) covering
current or former employees or directors of it or its subsidiaries (its
"Employees"), including Plans and related amendments, have been made
available to the other parties to this Agreement.
(b) All of its Plans covering Employees (other than
"multi-employer plans" within the meaning of Section 3(37) or
4001(a)(3) of ERISA), to the extent subject to ERISA, are in
substantial compliance with ERISA; each of its Plans that is an
"employee pension benefit plan" within the meaning of Section 3(2) of
ERISA ("Pension Plan") and that is intended to be qualified under
Section 401(a) of the Code has received a favorable determination
letter from the Internal Revenue Service, and it is not aware of any
circumstances likely to result in revocation of any such favorable
determination letter; there is no pending or, to the knowledge of its
Executive Officers, threatened litigation relating to its Plans; and
neither it nor any of its subsidiaries has engaged in a transaction
with respect to any Plan that, assuming the taxable period of such
transaction expired as of the date of this Agreement, could subject it
or any of its subsidiaries to a Tax or penalty imposed by either
Section 4975 of the Code or Section 502(i) of ERISA.
(c) No liability under Subtitle C or D of Title IV of ERISA
(other than payment of applicable premiums) has been or is expected to
be incurred by it or any of its subsidiaries with respect to any
ongoing, frozen or terminated "single-employer plan," within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly
maintained by any of them, or the single-employer plan of any entity
that is considered one employer with it under Section 4001 of ERISA or
Section 414 of the Code (an "ERISA Affiliate"); it and its subsidiaries
and ERISA Affiliates have not incurred and do not expect to incur any
material withdrawal liability with respect to a multi-employer plan
under Subtitle I of Title IV of ERISA (regardless of whether based on
contributions of ERISA Affiliates), nor has it or any of its
subsidiaries or ERISA Affiliates been notified by any multi-employer
plan to which it or any of its subsidiaries or ERISA Affiliates is
contributing, or may be obligated to contribute, that such
multi-employer plan is currently in reorganization or insolvency under
and within the meaning of Section 4241 or 4245 of ERISA or that such
multi-employer plan intends to terminate or has been terminated
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under Section 401(k) of ERISA; 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
of its Pension Plans or by any of its ERISA Affiliates within the
12-month period ending on the date of this Agreement; and neither it,
its subsidiaries nor any of their respective ERISA Affiliates has
incurred or is aware of any facts that are reasonably likely to result
in any liability pursuant to Sections 4069 or 4204 of ERISA.
(d) All material contributions required to be made by it and
its subsidiaries under the terms of any of its Plans have been timely
made or have been reflected in its Financial Statements; neither any of
its Pension Plans nor any single-employer plan of any of its ERISA
Affiliates has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA; and none of it, its subsidiaries or its ERISA Affiliates 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, Section 412(f)(3) of the Code or Sections 306,
307 or 4204 of ERISA.
(e) Under each of its and its ERISA Affiliates' Pension Plans
that is a single- employer plan, as of the last day of the most recent
plan year ended prior to the date of this Agreement, 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 Pension Plan's most recent
actuarial valuation), did not exceed the then-current value of the
assets of such Pension Plan, and to the knowledge of its Executive
Officers, there has been no change in the financial condition of such
Pension Plan since the last day of the most recent plan year that
reasonably could be expected to change such conclusion; and there would
be no withdrawal liability of it and its subsidiaries under each Plan
that is a multi-employer plan to which it, its subsidiaries or it ERISA
Affiliates has contributed during the preceding 12 months, if such
withdrawal liability were determined as if a "complete withdrawal,"
within the meaning of Section 4203 of ERISA, had occurred as of the
date of this Agreement.
(f) Except as disclosed in its Financial Statements, neither
it nor any of its subsidiaries has any obligations for retiree health
and life benefits.
(g) There are no restrictions on the rights of it or its
subsidiaries to amend or terminate any Plan without incurring any
liability under such Plan in addition to normal liabilities for
benefits.
(h) Except as disclosed in its Financial Statements or as
provided in this Agreement, the transactions contemplated by this
Agreement and the Stock Plans will not result in the vesting or
acceleration of any amounts under any Compensation Plan, any material
increase in benefits under any Compensation Plan or payment of any
severance or similar compensation under any Compensation Plan.
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4.1.16. ENVIRONMENTAL MATTERS.
(a) To the knowledge of its Executive Officers, it and each of
its subsidiaries and the Subject Property are, and have been, in
compliance with all Environmental Laws and there are no circumstances
that with the passage of time or the giving of notice would be
reasonably likely to result in noncompliance with such Environmental
Laws.
(b) To the knowledge of its Executive Officers, there are no
pending or threatened claims, actions, investigations, notices of
non-compliance, information requests or notices of potential
responsibility or proceedings involving it or any of its subsidiaries
or any Subject Property relating to:
(i) an asserted liability of it or any of its
subsidiaries or any prior owner, occupier or user of Subject
Property under any Environmental Law or the terms and
conditions of any permit, license, authority, settlement,
agreement, decree or other obligation arising under any
Environmental Law;
(ii) the handling, storage, use, transportation,
removal or disposal of Hazardous Substances;
(iii) the actual or threatened discharge, release or
emission of Hazardous Substances from, on or under or within
Subject Property into the air, water, surface water, ground
water, land surface or subsurface strata; or
(iv) personal injuries or damage to property related
to or arising out of exposure to Hazardous Substances;
and, to the knowledge of its Executive Officers, there is no reasonable
basis for any of the foregoing.
(c) To the knowledge of its Executive Officers: there are no
storage tanks underground or otherwise present on the Subject Property
or, if present, none of such tanks are leaking and each of them is in
full compliance with all Environmental Laws; with respect to any
Subject Property, it and its subsidiaries do not own, possess or
control any PCBs, PCB-contaminated fluids, wastes or equipment, or any
asbestos or asbestos- containing material; and no Hazardous Substances
have been used, handled, stored, discharged, released or emitted, or
are threatened to be discharged, released or emitted, at or on any
Subject Property, except for those types and quantities of Hazardous
Substances typically used in an office environment and that have not
created conditions requiring remediation under any Environmental Law.
(d) To the knowledge of its Executive Officers and except for
the investigation or monitoring by the Environmental Protection Agency
or similar state agencies in the ordinary course, no part of the
Subject Property has been or is scheduled for investigation or
monitoring pursuant to any Environmental Law.
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4.1.17. MATERIAL AGREEMENTS.
(a) Without giving effect to the second proviso of Section
4.2.1 and to Section 4.2.2, except for the Stock Plans and arrangements
made after the date and in accordance with the terms of this Agreement,
it and its subsidiaries are not bound by any material contract (as
defined in Item 601(b)(10) of Regulation S-K under the Securities Act)
that is to be performed after the date of this Agreement and has not
been filed with or incorporated by reference in its Reports or set
forth in Schedule 12.
(b) Neither it nor any of its subsidiaries is in default under
any contract, agreement, commitment, arrangement, lease, insurance
policy or other instrument.
4.1.18. KNOWLEDGE AS TO CONDITIONS. Its Executive Officers
know of no reason why the Regulatory Approvals and, to the extent
necessary, any other approvals, authorizations, filings, registrations,
and notices should not be obtained without the imposition of any
condition or restriction that is reasonably likely to have a Material
Adverse Effect with respect to it or the Combined Bank, or the opinion
of the tax experts referred to in Section 6.2.10.
4.1.19. BROKERS AND FINDERS. Neither it, its subsidiaries, nor
any of their respective officers, directors or employees has employed
any broker or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions
contemplated in this Agreement.
4.2. EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES.
4.2.1. DISCLOSURE OF EXCEPTIONS. Each exception set forth in a
Schedule shall only be deemed disclosed for purposes of the
representations and warranties referenced in such exception; provided,
however, that (a) no such exception is required to be set forth in a
Schedule if its absence would not result in the related representation
or warranty being deemed untrue or incorrect under the standard
established by Section 6.2.1, and (b) the mere inclusion of an
exception in a Schedule shall not be deemed an admission by a party
that such exception represents a material fact, event or circumstance
or would result in a Material Adverse Effect with respect to that
party.
4.2.2. NATURE OF EXCEPTIONS. No representation or warranty
contained in Section 4.1 shall be deemed untrue or incorrect, and no
party to this Agreement shall be deemed to have breached a
representation or warranty, as a consequence of the existence of any
fact, circumstance or event if such fact, circumstance or event,
individually or taken together with all similar facts, circumstances or
events, would not, or, in the case of Section 4.1.11, is not reasonably
likely to, have a Material Adverse Effect with respect to such party.
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SECTION 5.
CONDUCT AND TRANSACTIONS
PRIOR TO CLOSING
5.1. CONDUCT OF PSB'S BUSINESS PRIOR TO CLOSING. PSB covenants that,
prior to Closing:
5.1.1. AVAILABILITY OF PSB'S BOOKS, RECORDS AND PROPERTIES.
(a) The books, records, properties, contracts and documents of
PSB will be available at all reasonable times to FCFG and its counsel,
accountants and other representatives; such items will be open for
inspection, audit and direct verification of loan or deposit balances,
collateral receipts and such other transactions or documentation as
FCFG deems reasonably relevant to the Transaction; and PSB will
cooperate fully in such inspection and audit, and will make available
all information required by or on behalf of FCFG.
(b) Upon request by FCFG, PSB will request that any third
parties involved in the preparation or review of the PSB Financial
Statements or Subsequent PSB Financial Statements disclose to FCFG the
work papers or any similar materials related to such financial
statements.
5.1.2. ORDINARY AND USUAL COURSE. Without the prior written
consent of FCFG, PSB will conduct its business only in the ordinary and
usual course and will not do any of the following:
(a) Effect any stock split or other recapitalization with
respect to PSB Common Stock; issue, pledge or encumber in any way any
shares of such capital stock; or grant any option or other right to
shares of such capital stock.
(b) Declare or pay any dividend, or make any other
distribution, either directly or indirectly, with respect to PSB Common
Stock.
(c) Encumber or dispose of assets or make any commitment with
respect to assets other than in the ordinary and usual course of
business.
(d) Solicit or accept deposit accounts of a different type
from accounts previously accepted by PSB or at rates materially in
excess of rates previously paid by PSB, except to reflect changes in
prevailing interest rates, or incur any indebtedness greater than
$5,000.
(e) Acquire an ownership interest or a leasehold interest in
any real property, whether by foreclosure or otherwise, without making
an appropriate environmental evaluation in advance of obtaining such
interest and without providing to FCFG such evaluation and at least 30
days' advance written notice of the acquisition.
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(f) Except as otherwise required by the PSB Board Duty, enter
into or recommend the adoption by PSB's shareholders of any agreement
involving a possible merger or other business combination or asset sale
by PSB not involving the Transaction.
(h) Enter into or terminate any contracts (including real
property leases) with a term of one-year or more, except for PSB's
contracts of deposit and agreements to lend money not otherwise
restricted under this Agreement and (i) entered into in the ordinary
and usual course of business, (ii) consistent with past practices, and
(iii) providing for not less (in the case of loans) or more (in the
case of deposits) than prevailing market rates of interest.
(i) Enter into or amend any contract (other than contracts for
deposits at the Bank or agreements to lend money not otherwise
restricted by this Agreement) calling for a payment by it of more than
$25,000, unless the contract may be terminated without cause or penalty
upon 30 days notice or less.
(j) Sell any securities, whether held for investment or sale,
other than in the ordinary course of business, or sell any securities,
whether held for investment or sale, even in the ordinary course of
business, if the aggregate gain realized from all sales after the date
of this Agreement would be more than $50,000, or transfer any
investment securities between portfolios of securities available for
sale and portfolios of securities to be held to maturity.
(k) Amend its articles or bylaws or convert its charter or
form of entity.
(l) Implement or adopt any material changes in its operations
policies and procedures, unless the changes are necessary or advisable,
on the advice of legal counsel, to comply with applicable laws,
regulations, and regulatory policies.
(m) Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required (i) by
GAAP, or (ii) to take advantage of any beneficial tax or accounting
methods.
(n) Enter into any other transaction or make any expenditure
other than in the ordinary and usual course of its business, except for
expenses reasonably related to completion of the Transaction
contemplated by this Agreement, which expenses shall not exceed
$50,000.
5.1.3. CONDUCT REGARDING REPRESENTATIONS AND WARRANTIES. PSB
will not do or cause to be done anything that would cause any
representation or warranty in Section 4.1 to be untrue or inaccurate if
made at Closing, except as otherwise contemplated or required by this
Agreement or consented to in writing by FCFG.
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5.1.4. MAINTENANCE OF PROPERTIES. PSB will maintain its
properties and equipment (and related insurance or its equivalent) in
accordance with good business practice.
5.1.5. PRESERVATION OF BUSINESS ORGANIZATION. PSB will use all
reasonable effort to:
(a) Preserve its business organization.
(b) Retain the services of present management.
(c) Preserve the goodwill of suppliers, customers and others
with whom PSB has business relationships.
(d) Obtain for FCFG, within 30 days after execution of this
Agreement, the agreements required by Section 7.
5.1.6. SENIOR MANAGEMENT. Without the prior written consent of
FCFG, PSB will not make any change with respect to present management
personnel having the rank of vice-president or higher.
5.1.7. COMPENSATION. PSB will not permit any increase in the
current or deferred compensation payable or to become payable by PSB to
any of its directors, officers, employees, agents or consultants other
than normal increments in compensation in accordance with PSB's
established policies with respect to the timing and amounts of such
increments. Without the prior written approval of FCFG, PSB will not
execute or deliver (or commit to execute or deliver) any employment
agreement with any party not terminable upon two weeks' notice and
without expense.
5.1.8. UPDATE OF FINANCIAL STATEMENTS. PSB will deliver
Subsequent PSB Financial Statements to FCFG, as soon as possible and
not later than thirty (30) days following the end of each relevant
period. The Subsequent PSB Financial Statements:
(a) will be prepared from the books and records of PSB.
(b) will present fairly the financial position and operating
results of PSB at the times indicated and for the periods covered.
(c) will be prepared in accordance with GAAP (except for the
absence of notes) and with the regulations promulgated by applicable
regulatory authorities, to the extent then applicable, subject to
normal year-end adjustments.
(d) will reflect all liabilities, contingent or otherwise, of
PSB on the respective dates and for the respective periods covered,
except for liabilities not required to be so reflected in accordance
with GAAP or not significant in amount.
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5.1.9. AUDIT OF FINANCIAL STATEMENTS. To the extent necessary
to satisfy regulatory requirements in connection with the solicitation
of proxies from its stockholders, PSB will furnish audited statements
of financial condition and related statements of income changes in cash
flows and stockholder equity for the years ended December 31, 1993 and
1994.
5.1.10. NO SOLICITATION. Neither PSB nor any of its officers
or directors, directly or indirectly, will solicit, encourage,
entertain, or facilitate any other proposals or inquiries for an
acquisition of the shares or assets of PSB or enter into discussions
concerning any such acquisition, except as otherwise required by the
PSB Board Duty. No such party will make available to any person not
affiliated with PSB any information about its business or organization
that is not either routinely made available to the public generally or
required by the PSB Board Duty.
5.1.11. STATUS OF TITLE/LEASEHOLD INTERESTS. PSB will provide
FCFG with title reports issued by a title insurance company reasonably
satisfactory to FCFG, showing unencumbered fee simple title or vendee's
interest to all real Property owned by PSB, other than other real
estate owned, and unencumbered leasehold interests in all real Property
leased by PSB, and containing only such exceptions, reservations and
encumbrances as may be consented to in writing by FCFG or may be
consistent with Section 4.1.9 (without reference to any exceptions that
may be set forth in Schedule 8). PSB will also provide to FCFG copies
of existing title policies held in its files, unless PSB has reason to
know of subsequent changes affecting such policies or unless FCFG
expressly requests an updated policy for any specific piece of
property.
5.1.12. REVIEW OF LOANS. Immediately after the signing of this
Agreement, PSB will permit FCFG to update its examination of PSB's
loans to determine credit quality and the adequacy of PSB's allowance
for loan losses. A designated representative of FCFG will review
proposed investments or sale of investments and proposed loans or loan
renewals, other than loans less than $50,000 and Residential Mortgage
Loans. Loans made by PSB following disapproval by the review
representative of FCFG will be, if requested by FCFG, purchased from
PSB by the directors of PSB at or prior to Closing. Investments made
after disapproval by the representative of FCFG will at FCFG's request
be purchased from PSB by the directors of PSB at or prior to Closing.
Disapprovals by FCFG's designated representative will be in writing
within 48 hours of presentation of proposed loans, loan renewals, sale
or purchase of investments. Purchase of loans and investments by the
directors of PSB at or prior to Closing will be at par with appropriate
accruals, collateral and other elements of the loans or investments.
5.2. REGISTRATION STATEMENT.
5.2.1. PREPARATION OF REGISTRATION STATEMENT. FCFG and PSB
contemplate that a Registration Statement on Form S-4 (the
"Registration Statement") will be filed by FCFG with the SEC under the
Securities Act for registration of the FCFG Common Stock
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to be issued in connection with the Transaction and that the parties
will prepare a related prospectus/proxy statement to be mailed to the
shareholders of PSB (together with any amendments and supplements to
such prospectus/proxy statement, the "Prospectus/Proxy Statement"). The
parties will cooperate with each other in preparing the Registration
Statement and Prospectus/Proxy Statement, and will use their best
efforts to (a) file the Registration Statement with the SEC within 45
days following the date on which this Agreement is executed, and (b)
obtain the clearance of the SEC, any appropriate state securities
regulators, and any other required regulatory approvals, to issue such
Prospectus/Proxy Statement. Without limiting the generality of the
foregoing, nothing will be contained in the Registration Statement or
the Prospectus/Proxy Statement or any proxy solicitation materials with
respect to any party to this Agreement unless approved by such party,
which approval will not be unreasonably withheld.
5.2.2. SUBMISSION TO SHAREHOLDERS.
(a) PSB will submit the Prospectus/Proxy Statement to, and
will use its best efforts in good faith to obtain the prompt approval
of the Prospectus/Proxy Statement by, all applicable regulatory
authorities. PSB will provide copies of such submissions for review by
FCFG.
(b) PSB will promptly take the action necessary in accordance
with applicable law and its articles of incorporation and bylaws to
convene a shareholders meeting to consider the approval of this
Agreement and to authorize the transactions contemplated by this
Agreement, such date to be the earliest practical date after the date
the Prospectus/Proxy Statement may first be sent to PSB shareholders
without objection by the SEC or other Governmental Entities having
jurisdiction with respect to proxy solicitation or other aspects of the
Transaction, provided that PSB will have at least 30 days to solicit
proxies. Except as otherwise required by law, the board of directors
and officers of PSB will recommend to the shareholders of PSB that such
shareholders approve the Transaction.
5.3. SUBMISSION TO REGULATORY AUTHORITIES. Representatives of FCFG and
the Bank will prepare and file with applicable regulatory agencies, applications
for approvals, waivers or other actions deemed necessary or desirable, in the
opinion of their counsel, in order to consummate the Transaction. FCFG will
provide copies of such applications for review by PSB. These are expected to
include:
(a) An application to or request for waiver from the Federal Reserve.
(b) An application to the FDIC and related filings regarding the
Merger.
(c) An application to the Director and related filings regarding the
Merger.
5.4. ANNOUNCEMENTS. Without prior consultation with the other parties
to this Agreement, neither PSB, FCFG nor the Bank will hold any press interview
or conference or
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make any written announcements or statements to the public or to PSB's employees
concerning the Transaction.
5.5. CONSENTS. PSB, FCFG and the Bank each will use their best efforts
to obtain the consent or approval of any person, organization or other entity
whose consent or approval is required in order to permit FCFG, the Bank, and PSB
to consummate the Transaction.
5.6. FURTHER ACTIONS. The proper officers of FCFG, the Bank, and PSB,
in the name and on behalf of those respective parties, will use their best
efforts in good faith to make all such arrangements (including requesting
accounting waivers), do or cause to be done all such acts and things, and
execute and deliver all such certificates and other instruments and documents as
may be reasonably necessary or appropriate in order to consummate the
Transaction promptly.
5.7. NOTICE. PSB will provide FCFG and the Bank with prompt written
notice of:
(a) Any events, individually or in the aggregate, that could
have a Material Adverse Effect with respect to PSB.
(b) The commencement of any proceeding against PSB by or
before any court or governmental agency, individually or in the
aggregate, that might have a Material Adverse Effect with respect to
PSB.
(c) Acquisition of an ownership or leasehold interest in any
real property or, if other than in the ordinary and usual course of its
business, any personal property.
5.8. CONFIDENTIALITY. FCFG, the Bank, and PSB each will hold in
confidence all nonpublic information obtained from the other in connection with
the Transaction, other than information that is required by law to be disclosed,
otherwise is available on a nonconfidential basis, or has become public without
fault of the receiving party. If the Transaction is not completed, FCFG, the
Bank and PSB each will return to the others all confidential documents obtained
from them, and each agrees that it will not use any nonpublic information
obtained pursuant to this Agreement or in connection with the Transaction.
5.9. AFFILIATE LETTERS. No later than thirty (30) days following the
execution and delivery of this Agreement, PSB will deliver to FCFG, after
consultation with legal counsel, a list of names and addresses of those persons
deemed to be "affiliates" of PSB with respect to the Merger within the meaning
of SEC Rule 145. PSB will deliver, or cause to be delivered, to FCFG not later
than the Effective Date, from each of the "affiliates" of PSB so identified, a
letter dated as of the date of its delivery, in form satisfactory to FCFG.
5.10. UPDATE OF FINANCIAL STATEMENTS. FCFG will deliver Subsequent FCFG
Financial Statements to PSB, as soon as possible and not later than thirty (30)
days following the end of each relevant period. The Subsequent FCFG Financial
Statements:
(a) will be prepared from the books and records of FCFG.
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(b) will present fairly the financial position and operating
results of FCFG at the times indicated and for the periods covered.
(c) will be prepared in accordance with GAAP (except for the
absence of notes) and with the regulations promulgated by applicable
regulatory authorities, to the extent then applicable, subject to
normal year-end adjustments.
(d) will reflect all liabilities, contingent or otherwise, of
FCFG on the respective dates and for the respective periods covered,
except for liabilities not required to be so reflected in accordance
with GAAP or not significant in amount.
5.11. AVAILABILITY OF FCFG'S BOOKS, RECORDS AND PROPERTIES. FCFG will
provide PSB with access to board and committee minutes and regulatory reports
and correspondence of FCFG and the Bank.
5.12. CONDUCT REGARDING REPRESENTATIONS AND WARRANTIES. FCFG will not
do or cause to be done anything that would cause any representation or warranty
in Section 4.1 to be untrue or inaccurate if made at Closing, except as
otherwise contemplated or required by this Agreement or consented to in writing
by PSB.
SECTION 6.
APPROVALS AND CONDITIONS
6.1. REQUIRED APPROVALS. The obligations of the parties to this
Agreement are subject to the approval of the Agreement and Transaction by all
appropriate regulatory agencies having jurisdiction with respect to the
Transaction.
6.2. CONDITIONS TO OBLIGATIONS OF FCFG AND THE BANK. All obligations of
FCFG and the Bank pursuant to this Agreement are subject to satisfaction of the
following conditions at or before Closing:
6.2.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of PSB contained in this Agreement or in any certificate or
other instrument delivered in connection with this Agreement will be
true and correct in all material respects at Closing, with the same
force and effect as though such representations and warranties had been
made on and as of Closing (except to the extent that such
representations and warranties expressly relate to an earlier date, in
which case such representations and warranties shall be true in all
material respects as of such earlier date). PSB will have delivered to
FCFG and the Bank its certificate to that effect, executed by an
Executive Officer of PSB and dated as of Closing.
6.2.2. COMPLIANCE. PSB will have performed and complied with
all terms, covenants and conditions of this Agreement on or before
Closing. PSB will have
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delivered to FCFG and the Bank its certificate to that effect, executed
by an Executive Officer of PSB and dated as of Closing.
6.2.3. NO MATERIAL ADVERSE EFFECT. There will have been no
material damage, destruction or loss (whether or not covered by
insurance) and no other event, individually or in the aggregate, having
or potentially having a Material Adverse effect with respect to PSB,
and the certificate of PSB referred to in Section 6.2.2 will so state.
6.2.4. FINANCIAL CONDITION. The following will be true as of
Closing, and the certificate of PSB referred to in Section 6.2.2 will
so state:
(a) PSB Final Capital will not be less than the PSB Target
Capital.
(b) PSB's allowance for possible loan and lease losses will be
adequate to absorb PSB's anticipated loan and lease losses and, in any
case, will not be less than the greater of (i) $400,000 or (ii) an
amount determined by Knight, Vale & Gregory by applying to each of
PSB's loans FCFG's standard reserve factors.
(c) The reserves set aside for the contingent liabilities
reflected in the Subsequent PSB Financial Statements will be adequate
to absorb all reasonably anticipated losses.
6.2.5. NO GOVERNMENTAL PROCEEDINGS. No action or proceeding
will have been commenced or threatened by any governmental agency to
restrain or prohibit or invalidate the Transaction.
6.2.6. EXECUTION OF ADDITIONAL AGREEMENTS. The agreements
described in Section 7 will have been executed and delivered to FCFG
and the Bank.
6.2.7. APPROVAL BY COUNSEL. All actions, proceedings,
instruments and documents required in connection with this Agreement,
the Transaction, and all other related legal matters will have been
approved by counsel for FCFG and the Bank.
6.2.8. SCHEDULES AND EXHIBITS. The contracts, proceedings and
other information that are set forth in summary form in the Schedules
and the Exhibits will have been reviewed in detail and expressly
accepted or otherwise acted upon by FCFG within 45 days after the date
of this Agreement.
6.2.9. CORPORATE AND SHAREHOLDER ACTION. The board of
directors and shareholders of PSB will each have approved the
Transaction.
6.2.10. TAX OPINION. FCFG and the Bank will have obtained from
Knight, Vale & Gregory, and delivered to PSB, an opinion addressed to
PSB and in form and substance reasonably satisfactory to PSB and its
counsel, to the effect that consummation of the
32
<PAGE> 36
Transaction in accordance with this Agreement will not result in a
taxable event for PSB or FCFG, and otherwise will have each of the
effects specified below:
(a) The Merger will qualify as a reorganization within the
meaning of Section 368(a)(1)(A) of the Code.
(b) Pursuant to the provisions of Section 354(a)(1) of the
Code, no gain or loss will be recognized with respect to each
stockholder of PSB who, pursuant to the provisions of Section 2,
exchanges his or her shares of PSB Common Stock solely for shares of
FCFG Common Stock.
(c) The payment of cash to a PSB shareholder in lieu of a
fractional share of FCFG Common Stock will be treated as a distribution
in redemption of the fractional share interest, subject to the
limitations of Section 302 of the Code.
6.2.11. LEGAL OPINION. FCFG and the Bank will have obtained
from Rothgerber, Appel, Powers & Johnson LLP, counsel for PSB, a legal
opinion in the form of Exhibit A.
6.2.12. AFFILIATE LETTERS. FCFG and the Bank will have
received the affiliate list and letters specified in Section 5.9.
6.2.13. REGISTRATION STATEMENT. The Registration Statement, as
it may have been amended, required in connection with the shares of
FCFG Common Stock to be issued to PSB shareholders pursuant to Section
2 will have become effective, and no stop order suspending the
effectiveness of such Registration Statement shall have been issued and
shall remain in effect, and no proceedings for that purpose shall have
been initiated or threatened by the SEC the basis for which shall and
remain in effect.
6.2.14. CONSENTS. PSB will have obtained the consents listed
in Schedule 6.
6.2.15. PSB DIRECTORS TO SERVE ON COMBINED BANK BOARD. PSB
will have identified two PSB directors who are satisfactory to FCFG and
willing to serve on the Combined Bank's board of directors.
6.2.16. SOLICITATION OF EMPLOYEES. Neither any member of the
board of directors of PSB nor any entity with which any such director
is affiliated will have solicited any employee of PSB, FCFG or the Bank
with the intention of causing such employee to terminate his or her
employment with PSB, FCFG or the Bank, as the case may be.
6.2.17. PSB OPTIONS. The board of directors of PSB or any
committee administering the PSB Stock Option Plan will have caused each
PSB Option that is not exercised prior to the Effective Date or held by
an individual who is entitled to receive FCFG Options pursuant to
Section 2.3.8 to terminate as of the Effective Date.
33
<PAGE> 37
6.2.18. TERMINATION OF BENEFIT PLANS. The board of directors
of PSB shall have taken all necessary action to terminate, as of the
Effective Date, all Plans and other employee benefit arrangements
(whether in written form or not) maintained by PSB solely for the
benefit of its executive employees, except the Executive Supplemental
Income Agreements with Messrs. Edwards, Johansen, Arthur, and Ms.
Colleen Dorian.
6.2.19. OTHER MATTERS. FCFG will have received such other
opinions, certificates, and documents as FCFG may reasonably request in
connection with this Agreement and the Transaction.
6.3. CONDITIONS TO OBLIGATIONS OF PSB. All obligations of PSB pursuant
to this Agreement are subject to satisfaction of the following conditions at or
before Closing:
6.3.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of FCFG and the Bank contained in this Agreement or in any
certificate or other instrument delivered in connection with this
Agreement will be true and correct in all material respects at Closing,
with the same force and effect as though such representations and
warranties had been made on and as of Closing (except to the extent
that such representations and warranties expressly relate to an earlier
date, in which case such representations and warranties shall be true
in all material respects as of such earlier date). FCFG and the Bank
will have delivered to PSB their respective certificates to that
effect, executed by duly authorized officers of FCFG and the Bank and
dated as of Closing.
6.3.2. COMPLIANCE. FCFG and the Bank each will have performed
and complied with all terms, covenants and conditions of this Agreement
on or before Closing. FCFG and the Bank will have delivered to PSB
their respective certificates to that effect, executed by duly
authorized officers of FCFG and the Bank and dated as of Closing.
6.3.3. NO GOVERNMENTAL PROCEEDINGS. No action or proceeding
will have been commenced or threatened by any governmental agency to
restrain or prohibit or invalidate the Transaction.
6.3.4. CORPORATE AND SHAREHOLDER ACTION. The board of
directors of FCFG and the Bank, and the shareholder of the Bank, will
each have approved the Transaction.
6.3.5. TAX OPINION. The tax opinion specified in Section
6.2.10 will have been delivered to PSB.
6.3.6. MATERIAL ADVERSE CHANGE. There will have been no
material damage, destruction or loss (whether or not covered by
insurance) and no other event, individually or in the aggregate, having
or potentially having a Material Adverse effect with respect to FCFG,
and the certificate of FCFG referred to in Section 6.3.2 will so state.
34
<PAGE> 38
6.3.7. REGISTRATION STATEMENT. The Registration Statement, as
it may have been amended, required in connection with the shares of
FCFG Common Stock to be issued to Shareholders pursuant to Section 2.2
and as described in Section 2.3 will have become effective, and no stop
order suspending the effectiveness of such Registration Statement shall
have been issued and shall remain in effect, and no proceedings for
that purpose shall have been initiated or threatened by the SEC the
basis for which shall remain in effect.
SECTION 7.
DIRECTORS, OFFICERS AND EMPLOYEES
7.1. DIRECTORS. Each of the directors of PSB who are appointed to the
board of directors of the Combined Bank pursuant to Section 2.2.3 will enter
into written agreements, in the form attached as Exhibit B, providing that for a
period of three years after Closing, no such person will become involved,
directly or indirectly, as a principal shareholder, director or officer of any
financial institution that competes with FCFG, the Bank, PSB or any of their
affiliates.
7.2. KEY EMPLOYEES. Michael D. Edwards and the Bank will enter into an
employment agreement in the form of Exhibit C. Each of the other PSB employees
who are listed in Schedule 13 will be retained by the Bank in substantially the
same position held at PSB prior to closing for one year following the Closing
and shall be paid salaries that are generally comparable to the salaries
received by such employees in connection with their employment by PSB, except
that any such employee may be terminated at any time, with or without cause, by
Michael D. Edwards or, if Edwards terminates his employment with the Bank
without good reason or his employment is terminated by the Bank for cause, by
the Bank.
7.3. EMPLOYEE BENEFIT ISSUES.
7.3.1 BENEFITS. FCFG and the Bank presently intend to allow
current employees of PSB who are employed with the Combined Bank following
consummation of the Transaction ("Continuing Employees") to participate in
certain employee benefit plans and stock purchase plans in which employees of
FCFG and the Bank currently participate. In connection with such participation,
Continuing Employees will receive credit for prior service with PSB for purposes
of determining eligibility and vesting. Subject to the foregoing, FCFG confirms
to PSB its present intention to provide Continuing Employees with employee
benefit programs in the aggregate generally not less favorable to such employees
than those being provided to employees of FCFG.
7.3.2. TRANSFER OR MERGER OF GROUP PLAN. Unless prior to
Closing participants in the ESOP have elected to terminate the ESOP,
the ESOP shall be merged into the FCFG-KSOP at Closing.
7.3.3. NO CONTRACT CREATED. Nothing in this Agreement will
give any employee of PSB a right to continuing employment, except as
provided in Exhibit C.
35
<PAGE> 39
SECTION 8.
TERMINATION OF AGREEMENT AND ABANDONMENT OF TRANSACTION
8.1. TERMINATION. This Agreement and the Transaction may be terminated
at any time before Closing, whether before or after applicable approval of this
Agreement by the shareholders of PSB, as follows:
8.1.1. MUTUAL CONSENT. By mutual consent of the parties to
this Agreement, provided that the board of directors of each such party
so determines by a vote of a majority of the members of the entire
Board.
8.1.2. CONDITIONS TO OBLIGATIONS OF FCFG/BANK NOT MET. By the
board of directors of FCFG and the Bank if, by April 30, 1997, any of
the conditions set forth in Sections 6.1 and 6.2 has not been
satisfied.
8.1.3. CONDITIONS TO OBLIGATIONS OF PSB NOT MET. By the board
of directors of PSB, if, by April 30, 1997, any of the conditions set
forth in Sections 6.1 and 6.3 has not been satisfied.
8.1.4. BOOK VALUE OF FCFG COMMON STOCK. By the board of
directors of PSB if the per share Book Value of FCFG Common Stock as of
the Pricing Date, determined in accordance with GAAP, is less than
$11.38.
8.1.5. BOOK VALUE OF PSB COMMON STOCK. By the board of
directors of FCFG if the per-share Book Value of PSB Common Stock as of
the Pricing Date, determined in accordance with GAAP, is less than
$22.60.
8.1.6. ADJUSTMENTS TO ALLOWANCE. By the board of directors of
PSB if (i) the amount computed in accordance with Section 6.2.4(b)(ii)
is greater than the amount that Knight, Vale & Gregory have determined
(based upon the application of PSB's standard reserve factor) to be
adequate to absorb PSB's anticipated loan and lease losses and (ii)
FCFG has not waived compliance with Section 6.2.4(b)(ii).
8.2. COST ALLOCATION UPON TERMINATION. In connection with the
termination of this Agreement pursuant to Section 8.1, PSB, FCFG and the Bank
each will pay their own out-of-pocket costs incurred in connection with this
Agreement, and will have no other liability to any other party; provided,
however, that upon unilateral termination of this Agreement as a result of the
Fault of any party to this Agreement, the party at fault will be liable to the
other unaffiliated party or parties to this Agreement for Liquidated Damages.
36
<PAGE> 40
SECTION 9.
MISCELLANEOUS
9.1. NOTICES. Any notice, request, instruction or other document to be
given under this Agreement will be in writing and will be delivered personally
or sent by registered or certified mail, postage prepaid, addressed as follows:
PRAIRIE SECURITY BANK
608 Yelm Avenue East
P.O. Box 5060
Yelm, WA 98597-5060
Attn: Michael D. Edwards
with a copy to: William P. Johnson
Rothgerber, Appel, Powers & Johnson LLP
1200 17th Street, Suite 3000
Denver, Colorado 80202
FCFG AND THE BANK
721 College Avenue
P.O. Box 3800 (98509-3800)
Lacey, Washington (98503)
Attn: Ken F. Parsons
with a copy to: Mark C. Lewington
Graham & Dunn
1420 Fifth Avenue, 33rd Floor
Seattle, WA 98101-2390
or to such other address or person as any party may designate by written notice
to the other.
9.2. WAIVERS AND EXTENSIONS. PSB, FCFG or the Bank may, by written
instrument, extend the time for the performance of any of the obligations or
other acts of any other party, and may waive:
(a) any inaccuracies of any other party in the representations
and warranties contained in this Agreement or in any document delivered
in connection with this Agreement;
(b) compliance with any of the covenants of any other party;
and
(c) any other party's performance of any obligations pursuant
to this Agreement and any other condition precedent set out in Section
6.
37
<PAGE> 41
Any waiver or extension pursuant to this Agreement will be executed by the Chief
Executive Officer of the party granting such waiver or extension.
9.3. CONSTRUCTION AND EXECUTION IN COUNTERPARTS. Except as otherwise
expressly provided in this Agreement, this Agreement: (a) contains the entire
understanding of the parties, and no modification or amendment of its terms or
conditions will be effective unless in writing and signed by the parties, or
their respective duly authorized agents; (b) will not be interpreted by
reference to any of the titles or headings to the Sections or Subsections, which
have been inserted for convenience only and are not deemed a substantive part of
this Agreement; (c) is deemed to include all amendments to this Agreement, each
of which is made a part of this Agreement by this reference; and (d) may be
executed in one or more counterparts, each of which will be deemed an original,
but all of which taken together will constitute one and the same document.
9.4. SURVIVAL OF REPRESENTATIONS, WARRANTIES, AND COVENANTS. Except for
the covenants set forth in Section 5.8 (as to confidentiality), the
representations, warranties and covenants set forth in this Agreement will not
survive Closing or the termination of this Agreement.
9.5. ATTORNEYS' FEES AND COSTS. In the event of any dispute or
litigation with respect to the terms and conditions or enforcement of rights or
obligations arising by reason of this Agreement or the Transaction, the
prevailing party in any such litigation will be entitled to receipt of its costs
and expenses, including reasonable attorneys' fees.
9.6. GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of Washington, except to the extent that
certain matters may be governed by federal law.
SECTION 10.
AMENDMENTS
Subject to applicable law, this Agreement and the form of any attached
Exhibit or Schedule may be amended upon authorization of the Boards of Directors
of PSB, FCFG and the Bank, whether before or after the meeting of shareholders
referred to in Section 5.2.2.
38
<PAGE> 42
TO WITNESS THE FOREGOING, the parties have executed this Agreement as
of the date first above written.
FIRST COMMUNITY FINANCIAL
GROUP, INC.
By /s/ Ken F. Parsons
-------------------------------------------
Name: Ken F. Parsons
Title: President and CEO
FIRST COMMUNITY BANK
By /s/ Ken F. Parsons
-------------------------------------------
Name: Ken F. Parsons
Title: Chairman and CEO
PRAIRIE SECURITY BANK
By /s/ Michael D. Edwards
-------------------------------------------
Name: Michael D. Edwards
Title: CEO
STATE OF WASHINGTON )
) ss.
COUNTY OF THURSTON )
On this 11th day of September, 1996, before me personally appeared Ken
F. Parsons, to me known to be the President and Chief Executive Officer of FIRST
COMMUNITY FINANCIAL GROUP, INC., the corporation that executed the foregoing
instrument, who acknowledged said instrument to be the free and voluntary act
and deed of said corporation, for the uses and purposes mentioned there, and who
stated on oath that he or she was authorized to execute said instrument, and
that the seal affixed (if any) was the official seal of said corporation.
39
<PAGE> 43
IN WITNESS OF THE FOREGOING, I have set my hand and official seal to
this document as of the day and year first written above.
________________________________________
Print Name______________________________
NOTARY PUBLIC in and for the State
of Washington, residing at______________
My commission expires___________________
STATE OF WASHINGTON )
) ss.
COUNTY OF THURSTON )
On this 11th day of September, 1996, before me personally appeared Ken
F. Parsons to me known to be the Chief Executive Officer of FIRST COMMUNITY
BANK, the banking corporation that executed the foregoing instrument, who
acknowledged said instrument to be the free and voluntary act and deed of said
banking corporation, for the uses and purposes mentioned there, and who stated
on oath that he or she was authorized to execute said instrument, and that the
seal affixed (if any) was the official seal of said banking corporation.
IN WITNESS OF THE FOREGOING, I have set my hand and official seal to
this document as of the day and year first written above.
________________________________________
Print Name______________________________
NOTARY PUBLIC in and for the State
of Washington, residing at______________
My commission expires___________________
STATE OF WASHINGTON )
) ss.
COUNTY OF PIERCE )
On this 11th day of September, 1996, before me personally appeared
Michael D. Edwards, to me known to be the Chief Executive Officer of PRAIRIE
SECURITY BANK, the banking corporation that executed the foregoing instrument,
who acknowledged said instrument to be the free and voluntary act and deed of
said banking corporation, for the uses and purposes mentioned there, and who
stated on oath that he or she was authorized to execute said instrument, and
that the seal affixed (if any) was the official seal of said banking
corporation.
40
<PAGE> 44
IN WITNESS OF THE FOREGOING, I have set my hand and official seal to
this document as of the day and year first written above.
________________________________________
Print Name______________________________
NOTARY PUBLIC in and for the State
of Washington, residing at______________
My commission expires___________________
41
<PAGE> 45
The undersigned, being a member of the board of directors of PRAIRIE
SECURITY BANK ("PSB"), hereby consents to the Plan and Agreement of
Reorganization and Merger dated as of September 11, 1996, between First
Community Financial Group, Inc., First Community Bank, and PSB (the
"Agreement"), and agrees, subject only to the PSB Board Duty, to support the
Agreement, to recommend its adoption by the other shareholders of PSB, and (in
his capacity as shareholder) to vote his shares of capital stock in favor of the
Agreement.
Subject only to the PSB Board Duty, the undersigned hereby further
agrees to refrain from (a) negotiating or accepting any offer of merger,
consolidation, or acquisition of any of the shares or all or substantially all
of the assets of PSB from the date of the Agreement through the special meeting
of the shareholders of PSB at which the transactions contemplated by the
Agreement will be considered, and (b) any other actions or omissions
inconsistent with the transactions contemplated by the Agreement.
In the event of an unsolicited offer by a third person to acquire
substantially all of the stock or assets of PSB, should the undersigned, as a
member of the board of directors of PSB, in the exercise of the PSB Board Duty,
refuse to consummate the Merger contemplated in the Agreement or refuse to vote
his shares in favor of the Agreement, damages shall be limited to the Liquidated
Damages in accordance with Section 8.2, and there shall be no personal liability
to the undersigned. However, nothing contained in this paragraph shall be
construed to limit the right of FCFG or the Bank against any person not a
signatory hereto, or against those directors who voted not to consummate the
exchange and did so other than in the exercise of the PSB Board Duty.
The capitalized terms above have the meaning set forth in Section 1 of
the Agreement.
/s/_____________________________________
Director Name
42
<PAGE> 46
SCHEDULE 1
(SECTION 2.2)
OFFICES
FIRST COMMUNITY FINANCIAL GROUP, INC. AND FIRST COMMUNITY BANK
<TABLE>
<CAPTION>
<S> <C>
Main Office 721 SE College Street
Lacey, Washington 98503
5th and Franklin Branch 223 SE 5th Avenue
Olympia, Washington 98501
Olympia East Branch 2124 Pacific Avenue
Olympia, Washington 98506
Tumwater Branch 5210 Capitol Boulevard
Tumwater, Washington 98501
Yelm Branch 101 Yelm Avenue West
Yelm, Washington 98597
Elma Branch 313 West Waldrip
Elma, Washington 98541
Hoquiam Branch 2543 Simpson Avenue
Hoquiam, Washington 98550
Fircrest Branch 1902 64th Avenue West
Tacoma, Washington 98466
74th Street Branch 3906-A South 74th Street, Suite 105
Tacoma, Washington 98409-1047
Centralia Branch 1230 S. Gold Street
Centralia, Washington 98531
</TABLE>
<PAGE> 47
SCHEDULE 1 (CONTINUED)
PRAIRIE SECURITY BANK
<TABLE>
<CAPTION>
<S> <C>
Yelm Branch* 608 Yelm Avenue East
Yelm, Washington 98597
Olympia Branch 711 South Capitol Way
Suite 606
Olympia, Washington 98501
Eatonville Branch 121 Washington Avenue North
Eatonville, Washington 98328
</TABLE>
* Mortgage Department located in separate building at this location.
<PAGE> 48
SCHEDULE 2
(SECTION 2.2.3)
NAMES AND ADDRESSES OF INITIAL DIRECTORS AND OFFICERS
OF COMBINED BANK
INITIAL DIRECTORS OF COMBINED BANK
Directors from First Community Bank*
Ken F. Parsons, Chairman
A. Richard Panowicz, Vice Chairman
Lowell E. Bridges
Linda E. Buckner
E. Paul DeTray
John D. Durney
William E. Hartman, Jr.
John A. Huber
Jewell C. Manspeaker
Patrick L. Martin
Willis G. Martin
Michael N. Murphy
Michael A. Price
Roland A. Rants
Kenneth M. Wilcox
Directors from Prairie Security Bank
Michael D. Edwards
Larry Schorno
Thomas Gorman
* Mailing addresses for directors and officers: First Community Bank, PO Box
3800, Lacey, WA 98509-3800.
<PAGE> 49
SCHEDULE 2 (CONTINUED)
INITIAL OFFICERS OF COMBINED BANK
Officers from First Community Bank*
<TABLE>
<CAPTION>
<S> <C>
Ken F. Parsons Chief Executive Officer
James F. Arneson Executive Vice President, Chief Financial Officer and
Treasurer
John Huber Executive Vice President, Grays Harbor Regional
Manager
Stan Wisch Senior Vice President, Loan Administrator
Mark D. Frieburg Senior Vice President, Special Credits
Douglas S. Prull Senior Vice President, Regional Manager
Jon M. Jones Vice President, Regional Manager
Lori L. Fobes Vice President, Facilities and Administration
Joseph Beaulieu Vice President, Marketing
Patricia A. Graves Vice President, Operations
Judy Johnson Vice President, Pierce County Regional Manager
Patrick E. McClelland Assistant Vice President,
Investment Services Manager
Rose Sparkman Vice President, Grays Harbor District Manager
Kathleen J. O'Neil Vice President, Business Banking Manager
Sarah Sandvold Vice President, Business Banking Manager
Joe Goralski Assistant Vice President,
Business Banking Manager
Kris Dunham Assistant Vice President,
Business Banking Manager
Bruce W. Kilen Assistant Vice President,
Business Banking Manager
Sandi K. Wilson Assistant Vice President,
Business Banking Manager
</TABLE>
* Mailing addresses for directors and officers: First Community Bank, PO Box
3800, Lacey, WA 98509-3800.
<PAGE> 50
<TABLE>
<CAPTION>
<S> <C>
Debbie Schonack Assistant Vice President,
Marketing Product Manager
Cathie Varnadore Assistant Vice President,
Business Banking Manager
Mary James Assistant Vice President,
Business Development Officer
Barbara A. Johnson Assistant Vice President -
Mortgage Loan Underwriter
Lynn Paylor Business Banking Manager
Carlotta Strickland Branch Customer Service Manager
Becky Cleary Branch Customer Service Manager
Jeannette Zwarum Branch Customer Service Manager
Lois Zillges Operations Officer
Peggy Byrne Lending Officer
</TABLE>
* Mailing addresses for directors and officers: First Community Bank, PO Box
3800, Lacey, WA 98509-3800.
<PAGE> 51
Officers from Prairie Security Bank
<TABLE>
<CAPTION>
<S> <C>
Michael D. Edwards President, PSB
Roger Johansen Vice President, PSB
James Arthur Vice President, PSB
Colleen Dorian Assistant Cashier, PSB
Debi Hamilton Operations Manager, PSB
Sharon Scholl Executive Admin., PSB
Patti Wheeler AVP Marketing, PSB
</TABLE>
<PAGE> 52
SCHEDULE 3
(SECTION 4.1)
GENERAL EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES
FIRST COMMUNITY FINANCIAL GROUP, INC.
An August 27, 1996, the Internal Revenue Service commenced an audit of the 1994
consolidated income tax return for First Community Financial Group, Inc. and
Subsidiaries. Management has received no indication from the IRS that there will
be any change in income tax liability. The audit is still in process, however,
and final results will not be known until its conclusion.
FIRST COMMUNITY BANK
None.
PRAIRIE SECURITY BANK
None.
<PAGE> 53
SCHEDULE 4
(SECTION 4.1.2)
SUBSIDIARIES
FIRST COMMUNITY FINANCIAL GROUP, INC.
<TABLE>
<CAPTION>
Subsidiary % Ownership by FCFG or Sub.
<S> <C>
First Community Bank 100% by FCFG
Premises, Inc. 100% by FCFG
Information Management Systems, Inc. 100% by FCFG
First Financial Investment Services, Inc. 100% by FCB
(Undergoing name change to:
FCB Financial Services, Inc.)
</TABLE>
PRAIRIE SECURITY BANK
PSB Capital, Inc.
- Corporation formed July 5, 1995; capitalized with $50,000 bank's
funds.
- Existing officers: M. D. Edwards, Chairman; Jim Arthur,
Secretary-Treasurer.
- Directors: M.D. Edwards, Jim Arthur, Roger Johnasen.
- Company provided secondary market commercial real estate loans
primarily in the $250,000 up category. Principals has broad base
of institutional, insurance companies and pension fund lenders.
- Corporation is in process of being phased out and is presently
located at the Yelm branch. Operations office in Tacoma ceased
operating April 30, 1996. Office has not been sub-let.
<PAGE> 54
SCHEDULE 5
(SECTION 4.1.3)
STOCK OPTION PLANS
FIRST COMMUNITY FINANCIAL GROUP, INC.
<TABLE>
<CAPTION>
Name of Plan No. Options Outstanding
<S> <C>
Employee Stock Ownership Plan 0
Employee Stock Option and Restricted Stock Award Plan 298,879
Stock Option Plan for Non-Employee Directors 75,280
FIRST COMMUNITY BANK
None.
PRAIRIE SECURITY BANK
Name of Plan No. Options Outstanding
Incentive Stock Option & Nonstatutory Stock Option Plan
Employees 34,479
Directors 10,888
</TABLE>
<PAGE> 55
SCHEDULE 6
(SECTION 4.1.5)
THIRD PARTY CONSENTS
FIRST COMMUNITY FINANCIAL GROUP, INC. AND FIRST COMMUNITY BANK
None.
PRAIRIE SECURITY BANK
None.
<PAGE> 56
SCHEDULE 7
(SECTION 4.1.7)
CLASSIFIED ASSETS
FIRST COMMUNITY FINANCIAL GROUP, INC. AND FIRST COMMUNITY BANK
[To be determined as of pricing date.]
PRAIRIE SECURITY BANK
[To be determined as of pricing date.]
<PAGE> 57
SCHEDULE 8
(SECTION 4.1.9)
ENCUMBRANCES
FIRST COMMUNITY FINANCIAL GROUP, INC.
None.
FIRST COMMUNITY BANK
Yelm Branch
Purchase Contract with George and Vila Narozonick -- $100,000 (August 31,
1996)
- $125,000 down with two payments of $100,000 each, payable June
1996 and June 1997, plus accrued interest at a rate of 6%.
5th & Franklin Branch
Key Bank of Washington Loan -- $742,000 (August 31, 1996)
- 10 year term loan entered into September 1994
- Terms: 1.25% above prime
Tumwater Branch
Lease (Land Only)
- 5 year term with four - 10 year extensions (45 year lease, expires
2034)
- Lease payments of $2,841 per month.
PRAIRIE SECURITY BANK
Eatonville Branch
Ground lease (PSB owns building).
- 5 year term commencing May 1, 1994, with options to extend lease
for three additional five year lease periods.
- Beginning payment: $1,200 per month, with 5% increases yearly on
anniversary through 60th month.
Olympia Branch
Lease.
- Commenced May 15, 1993 and ended May 30, 1996. Presently renting
month-to-month at $1,853.80 per month.
<PAGE> 58
SCHEDULE 8 (CONTINUED)
Mortgage Department
Lease
- Lease of 2497 sq. ft. in the Prairie Park Business Park located
behind Yelm Branch.
- Two year lease which commenced September 1, 1995 and ending
September 1, 1997.
- Monthly rent is $2,621.85.
Federal Home Loan Bank
$2,385,000 (as of September 3, 1996)
Key Bank and U.S. Bank
Two lines of credit for $1,000,000 each. Neither line of credit is
being used as of September 3, 1996.
<PAGE> 59
SCHEDULE 9
(SECTION 4.1.10)
COMPLIANCE WITH LAWS AND LITIGATION
FIRST COMMUNITY FINANCIAL GROUP, INC.
None.
FIRST COMMUNITY BANK
The Bank is subject to various pending and threatened legal actions which arise
in the ordinary course of business. In the opinion of Management, liabilities
arising from these claims, if any, will not have a material effect on the
financial position of the Bank.
PRAIRIE SECURITY BANK
In compliance with all laws; no litigation.
<PAGE> 60
SCHEDULE 10
(SECTION 4.1.13)
INSURANCE
FIRST COMMUNITY FINANCIAL GROUP, INC. AND FIRST COMMUNITY BANK
1 Directors and Officers Liability Insurance.
Company: Progressive Insurance
Due Date: June 1, 1997
2 Financial Institutions Bond.
(Including Excess Bank Employees Dishonesty Bond)
Company: Progressive Insurance
Due Date: June 1, 1997
3 Property, Liability, Umbrella
Agent: Durney Agency, Inc.
Company: USF&G
Due Date: 10/17/96
PRAIRIE SECURITY BANK
1 Property, Liability
Company: SAFECO
Due Date: 7/1/97
2 Financial Institutions Bond
Company: BancInsure
Due Date: 5/16/97
<PAGE> 61
SCHEDULE 11
(SECTION 4.1.15)
EMPLOYEE BENEFIT PLANS
FIRST COMMUNITY FINANCIAL GROUP, INC.
Benefit Plans
- - Employee Stock Ownership Plan with 401(k) Provisions
- - Employee Stock Option and Restricted Stock Award Plan
- - Stock Option Plan for Non-Employee Directors
- - Incentive Compensation Plan
- - Executive Supplemental Income Plan
- - Director Deferred Income Plan
Agreements
- - Employment Agreement between Ken F. Parsons and FCFG, dated November 20,
1992.
- - Employment Agreement between James F. Arneson and FCFG, dated March 1, 1993.
FIRST COMMUNITY BANK
Benefit Plans
Same as FCFG.
Agreements
Same as FCFG.
PRAIRIE SECURITY BANK
Benefit Plans
- - Employee Stock Ownership Plan
- - Incentive Compensation Plan
- - Executive Supplemental Income Plan
- - Director Deferred Income Plan
- - Incentive Stock Option & Nonstatutory Stock Option Plan
Agreements
None
<PAGE> 62
SCHEDULE 12
(SECTION 4.1.17)
MATERIAL CONTRACTS
FIRST COMMUNITY FINANCIAL GROUP, INC
None.
FIRST COMMUNITY BANK
None.
PRAIRIE SECURITY BANK
<TABLE>
<CAPTION>
NAME OF PROVIDER: SERVICES PROVIDED: EXP. DATE:
<S> <C> <C>
Armored Express Courier for Cash Shipments to/from Fed 7/3/97
Compliance Services, Inc. Compliance auditing and consulting 7/31/97
ETAdvantage ATM maintenance & repair 6/30/97
Patty Lally & Co. Monthly payroll & budget reports 12/31/96
Mark Woytowich Outside Marketing Promos 12/31/96
System Analysis, Inc. Data processing 12/31/97
Deluxe Check Printers Check printing 8/1/97
Knight, Vale & Gregory Computer Consultant n/a
Knight, Vale & Gregory Auditing n/a
Kleen Sweep Janitorial
Tolechek Debt Referral n/a
ChekSystems Check Verification
Buildings by Juarez Janitorial-Eatonville annually 9/1
Transalliance ATM-Debit Card Program 3/31/98
Alexandra Ross Human Resources Consultant n/a
Capitol Alarm Alarm Monitoring annually on 12/15
Mosler, Inc. Equipment Maintenance, vault, etc. annually on 3/12
Bankers Systems, Inc. IRA Reporting n/a
</TABLE>
<PAGE> 63
SCHEDULE 13
(SECTION 7.2)
KEY EMPLOYEES
PRAIRIE SECURITY BANK
Roger Johansen
Vice President
Jim Arthur
Vice President
Patti Wheeler
Assistant Vice President
Sharon Scholl
Executive Administrator
Colleen Dorian
Assistant Cashier
<PAGE> 64
EXHIBIT A
OPINION OF COUNSEL FOR PSB
______________, 1996
First Community Financial Group, Inc.
First Community Bank
721 College
Lacey, WA 98503
Ladies and Gentlemen:
We have acted as counsel for Prairie Security Bank, a banking
corporation organized under the laws of the State of Washington ("PSB"), in
connection with the negotiation, execution, and delivery of the Plan and
Agreement of Merger dated as of __________, 1996, between First Community
Financial Group, Inc. ("FCFG"), First Community Bank (the "Bank"), and PSB (the
"Agreement"). This opinion letter is rendered pursuant to Section 6.2.11 of the
Agreement. Capitalized terms used but not defined in this opinion letter have
the meanings assigned to such terms in the Agreement.
In rendering the opinions set forth below, we have reviewed original,
or copies certified or otherwise identified to our satisfaction, of the
Agreement and such other documents, corporate records, certificates of public
authorities and other instruments as we have deemed necessary for purposes of
such opinions. In reviewing the foregoing, we have assumed the genuineness of
all signatures, the legal competence of all natural persons signing the
Agreement, the authenticity of all documents submitted to or reviewed by us as
originals, and the conformity to the authentic original documents of all other
documents submitted to or examined by us as certified, conformed or reproduced
copies. As to questions of fact material to these opinions, we have relied upon
representations in the Agreement, certificates of public officials and
statements, certificates or representations, written or oral, of officers or
representatives of PSB without seeming to independently establish or otherwise
verify them.
In furnishing our opinions, we also have assumed that (a) the Agreement
has been duly authorized, executed, and delivered by FCFG and the Bank, (b) the
Agreement constitutes a legal, valid, binding, and enforceable obligation of
FCFG and the Bank, and (c) except as stated in the Agreement, there are no
documents or agreements between FCFG or the Bank and any third party that
would have an effect on the opinions expressed in this letter, and (d) there
has been no mutual mistake of fact or misunderstanding, fraud, duress, or
undue influence.
<PAGE> 65
As used in this opinion letter, the expressions "to the best of our
knowledge" and "of which we have knowledge" mean the conscious awareness of
facts or other information by the lawyers in our office representing the PSB in
connection with the negotiation and preparation of the Agreement and by the
lawyers in our office who within the last twelve months have represented PSB in
connection with any other matters. Such expressions do not include information
that might be revealed if there were to be undertaken a canvass of all lawyers
in all of our offices or a review of all of our files.
Based upon the foregoing and subject to the qualifications,
limitations, and assumptions set forth in this opinion letter, it is our opinion
that:
1. PSB is a bank validly existing and in good standing under the laws
of the State of Washington.
2. The execution and delivery of the Agreement by PSB, and the
consummation by PSB, have been duly authorized by all requisite corporate action
on the part of PSB.
4. The Agreement has been duly executed and delivered by PSB and is a
valid and binding obligation of PSB, enforceable in accordance with its terms,
except as the enforceability thereof may be limited by (A) bankruptcy,
insolvency, moratorium, reorganization, receivership, conservatorship or similar
laws relating to or affecting the enforcement of creditors' rights generally or
the rights of creditors of depository institutions whose accounts are insured by
the FDIC, and (B) general principles of equity, whether applied by a court of
law or equity.
5. The execution and delivery by PSB of, and the performance of its
agreements in, the Agreement, do not (A) violate any Washington or federal
statutory law or regulation applicable to PSB or any judgment, decree or order
of which we have knowledge, (B) constitute a breach of or default under any
agreement listed in Schedule 12 of the Agreement, (C) violate the Articles of
Incorporation or Bylaws of PSB, or (D) require any consent or approval under any
such law or regulation or under any such judgment, decree or order, or the
consent or approval of any other party to any such agreement or other
arrangement, other than such consents and approvals as have been obtained.
6. To the best of our knowledge: (A) there is no litigation or
proceeding against PSB or any of its subsidiaries pending before any court or
governmental agency, or that 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 no such litigation or proceeding has been
threatened; (B) neither PSB nor any of its subsidiaries nor any of its or their
properties, officers, directors, or controlling persons is a part 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
Governmental Entity; and (C) PSB has not been advised by any such Governmental
Entity that such entity is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any such order,
decree, agreement, memorandum of understanding, commitment letter or similar
submission.
<PAGE> 66
7. The Merger has been duly approved by the shareholders of PSB.
In addition to the qualifications, limitations, and assumptions set
forth above, our opinions are subject to the following:
A. We express no opinion as to the enforceability of:
(1) Provisions relating to the waivers relating to
rights, remedies, and defenses;
(2) Any reservation of the right to pursue inconsistent
or cumulative remedies;
(3) Provisions for payment or reimbursement of costs and
expenses (including without limitation attorneys
fees) in excess of statutory limits or amounts
determined to be reasonable by any court or other
tribunal, and any provision for payment of attorneys
fees other than to the prevailing party;
(4) Provisions relating to jurisdiction, venue or choice
of law;
(5) Limitations on the liabilities of parties for their
own negligence or misconduct;
(6) Severability and indemnification provisions; and
(7) The availability of equitable remedies.
B. A Washington court, or federal court applying Washington law,
may consider extrinsic evidence of the circumstances
surrounding the mailing of the Agreement to ascertain the
intent of the parties using the language employed in the
Agreement, regardless of whether or not the language used is
plain and unambiguous on its face, and may incorporate
additional or supplementary terms into the Agreement.
This opinion letter is limited to the application of the laws of the
State of Washington and the federal laws of the United States of America, and we
express no opinion as to the laws of any other jurisdictions. This opinion
letter is issued solely for your benefit in connection with the Agreement and
the transactions contemplated by the Agreement and is not to be relied upon by
any other person without our prior written consent.
Sincerely,
GRAHAM & DUNN
<PAGE> 67
EXHIBIT B
FORM OF NONCOMPETITION AGREEMENT
(PURSUANT TO SECTION 7.1)
DIRECTOR'S AGREEMENT
This Agreement is made and entered into as of the 11th day of
September, 1996, between FIRST COMMUNITY FINANCIAL GROUP, INC. ("FCFG"), FIRST
COMMUNITY BANK ("the Bank"), PRAIRIE SECURITY BANK ("PSB"), and
____________________, a Director ("Director") of PSB.
1. FCFG, the Bank and PSB have entered into a Plan and Agreement of
Reorganization and Merger dated as of September 11, 1996 (the "Merger
Agreement"), pursuant to which PSB will merge with and into the Bank.
2. The obligations of FCFG and the Bank to consummate the transactions
contemplated by the Merger Agreement is conditioned upon their receipt of
noncompetition agreements from certain directors of PSB.
3. FCFG, the Bank, PSB and Director believe that the future success and
profitability of the Bank require that certain of the existing directors of PSB
be available to continue to serve as directors of the Bank and not be affiliated
in any substantial way with a competing financial institution for a reasonable
period of time after Closing, as that term is defined in Section 3.1 of the
Merger Agreement.
AGREEMENT
In consideration of FCFG's and the Bank's performance under the Merger
Agreement, Director agrees that he or she will make himself or herself available
to serve as a director of the Bank, if requested to do so by FCFG, for a period
of one year after Closing, and, for a period of three (3) years after Closing,
he or she will not become involved, directly or indirectly, as a shareholder,
member, partner, director, officer, or manager of any financial institution that
competes with FCFG, the Bank or any of their affiliates within Pierce, Lewis and
Thurston Counties.
<PAGE> 68
Director recognizes and agrees that any breach of this Agreement by
Director will entitle FCFG and the Bank, together with their successors or
assigns, to injunctive relief and/or specific performance, as well as to any
other legal or equitable remedies to which such entities may be entitled.
EXECUTED as of the 11th day of September, 1996.
Director:
--------------------------------------
FIRST COMMUNITY FINANCIAL GROUP, INC.
By____________________________________
Its______________________________
FIRST COMMUNITY BANK
By____________________________________
Its______________________________
PRAIRIE SECURITY BANK
By____________________________________
Its______________________________
<PAGE> 69
EXHIBIT C
FORM OF EMPLOYMENT AGREEMENT FOR MICHAEL D. EDWARDS
FIRST COMMUNITY BANK OF WASHINGTON
EMPLOYMENT AGREEMENT
Michael D. Edwards
This AGREEMENT is made and entered into the ____ day of September,
1996, by and between FIRST COMMUNITY BANK and/or assigns, a Washington Banking
Corporation (the "Company") and Michael D. Edwards ("Edwards"). This AGREEMENT
will become effective upon the day (the "Effective Date") following the merger
(the "Merger") of Prairie Security Bank ("PSB") and First Community Bank.
WHEREAS, Edwards has agreed to become employed by the Company and
occupy the position of President; and
WHEREAS, Edwards desires to serve as President of the Company, and the
Company desires to obtain his services and to provide incentive for him to
remain with the company; it is, therefore, agreed:
1. Employment. Edwards agrees to serve the Company as President and
Director and to perform all services generally performed by a person in the
capacity of President. He will be appointed to serve on the Executive Committee
of the Company. Organizational charts and general executive responsibilities
(subject to change in the ordinary course of corporate planning) are attached as
Exhibit A. This position shall be an exempt position as defined by the Fair
Labor Standards Act (FLSA) and not subject to overtime compensation. The Company
and Chairman will nominate Edwards as a Director of First Community Financial
Group ("FCFG") and use their best efforts to have him appointed/elected to the
FCFG Board of Directors.
2. Duties. Edwards shall serve the Company faithfully and to the best
of his ability, devote his entire time and energy to his employment, and use his
best efforts and ability to promote the Company's interests. Edwards shall not
become involved with any business activity which may conflict with his duties
and responsibilities, without written approval of the Chairman. The Company
acknowledges that Edwards will continue private and family real estate
investments and holdings, but will not let those activities impact his
performance and responsibilities to the Company.
3. Compensation. The Company shall pay Edwards, as compensation for his
full-time services during the term of employment:
A. A salary of $120,000 per annum, which salary shall be payable in
equal installments, at least monthly, as set forth in the Company's Policy
Manual and subject to review and adjustment annually. Edwards will receive a
minimum salary increase of 10% on September 1,
<PAGE> 70
1997. Twelve months after his 10% salary increase and annually thereafter,
Edwards will be entitled to raises at least commensurate with raises granted
other executive officers and in no event will Edwards' salary be reduced.
B. Edwards shall be entitled to paid vacation and sick leave, all as
more fully specified in the Company's Policy Manual and modified from time to
time. Edwards' annual paid vacation accrual shall not be less than five (5)
weeks.
C. Stock Options. On the Effective Date, FCFG will grant Edwards
options to acquire 40,000 shares of FCFG common stock at the current market
price as of the Effective Date. Vesting for 20,000 shares will be over 5 years
with the first 4,000 shares vested after twelve full months of employment, 4,000
shares vested one year later, 4,000 one year later, 4,000 one year later, and
the remaining 4,000 vested one year later. The remaining 20,000 will be vested
or expire based upon the year end ROA of the Company, as shown in the following
table:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
ROA 1.1 1.2 1.3 1.4 1.5 1.6
- -------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
1997 Shares 500 1,000 2,000 3,000 4,000 5,000
- -------------------------------------------------------------------------------------------
1998 Shares 500 1,000 2,000 3,000 4,000 5,000
- -------------------------------------------------------------------------------------------
1999 Shares 500 1,000 2,000 3,000 4,000 5,000
- -------------------------------------------------------------------------------------------
2000 Shares 500 1,000 2,000 3,000 4,000 5,000
- -------------------------------------------------------------------------------------------
</TABLE>
The Company may provide additional stock option opportunities to Edwards, from
time to time, at the discretion of the Board of Directors. Additional options
granted during the first two (2) years of employment will be commensurate with
the options granted to the Chairman during this same time period, based on a
ratio of options granted to total base salary; for example, if the Chairman's
salary is 50% more than Edwards' salary, Edwards would be entitled to be granted
two-thirds of the number of options granted to the Chairman. All unexpired
options granted under the Company's Employee Stock Option and Restricted Stock
Award Plan "Plan" will vest in the event of a Change of Control. In addition to
options granted above, all PSB options to Edwards will be converted in the
Merger into options for FCFG common stock, with the number of options and
exercise price adjusted by the merger ratio (as defined in the FCFG/PSB
Definitive Agreement). Edwards' vested portion of the PSB plan shall be deemed
vested in the FCFG Plan.
The above ROA performance scale for additional vested stock options shall be
adjusted for extraordinary income and expense items which may not have been
included within the annual budget. This would include such Items as special
investments sales, sales of unused assets, expansion or acquisition costs, etc.
D. Edwards will participate in an Incentive Program with annual incentive as
determined by the Company from time to time based on factors including, but not
limited to, the quality of Edward's performance of his assigned duties and the
net profits of the Company and FCFG. If Edwards were employed by the Company for
the entire year of 1996, his incentive opportunity for each ROA category would
have been:
<PAGE> 71
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
1.1% 1.2% 1.3% 1.4% 1.5% 1.6% 1.7% 1.8% 1.9% 2.0%
- --------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$10,634 $15,519 $23,778 $33,531 $39,089 $44,262 $49,052 $53,459 $57,483 $61,124
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
In 1996, Edwards shall participate in the above ROA incentive on a prorata
basis, based on the number of months he was employed in 1996. The Company
minimum target for 1996 is 1.35% ROA and the Company's budget is based on a 1.5%
ROA. The incentive for Edwards for the first two (2) years of employment will be
the same relationship as the current (1996) incentive relationship to the
Chairman; for example, if the Chairman's incentive is 50% more than Edwards',
Edwards would be entitled to incentive target equal to two-thirds of the
incentive targeted for the Chairman.
The following table shows the ROA Incentive Bonus for Edwards for 1997:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
1.1% 1.2% 1.3% 1.4% 1.5% 1.6% 1.7% 1.8% 1.9% 2.0%
- ---------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$13,825 $20,176 $30,912 $43,591 $50,815 $57,540 $63,768 $69,497 $74,728 $79,461
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The above ROA performance scale for Incentive Bonus shall be adjusted for
extraordinary income and expense items which may not have been included within
the annual budget. This would include such items as special investments sales,
sales of unused assets, expansion or acquisition costs, etc.
E. The Executive Supplemental Income (ESI) Agreement for Edwards dated
November 1, 1992 along with the Income Agreement Addendum dated November 1, 1992
shall remain in place. Edwards agrees to waive accelerated vesting of benefits
under his ESI Agreement that may be triggered by the Merger, but otherwise will
have a vested and nonforfeitable right to the retirement benefits provided in
his ESI Agreement.
4. Other benefits. Edwards is entitled to the following benefits:
A. Medical, Dental, Vision, Life insurance and Long-Term Disability
insurance as provided to regular full-time employees of the Company;
B. Voluntary Life Insurance as available to regular full-time employees
of the Company;
C. KSOP Program as provided to regular full-time employees of the
Company;
D. Other benefits as outlined in the Personnel Manual.
5. Reimbursable Expenses. Edwards is authorized to incur reasonable
expenses in performing his duties. The Company acknowledges and agrees that it
may be advisable for Edwards to join clubs and/or professional organizations and
for the Company to pay the membership fees therefore, all as may hereafter be
determined appropriate by the Chairman based on proposals therefore submitted by
Edwards. Edwards will be permitted to continue holding IBAA positions currently
held and remain active in the financial industry as an integral part of his
responsibilities. Edwards shall retain his current bank-owned vehicle. Operating
<PAGE> 72
expenses will be paid by the bank until July 1999. Thereafter, the Company will
provide an automobile allowance of $500.00 each month in lieu of providing a
Company owned vehicle.
6. Working Facilities. Edwards shall be furnished with such working
facilities as are reasonably required by a President to perform his duties.
7. Term of Employment.
A. This Agreement will terminate after sixty (60) months of
employment, and may be terminated prior to that date by either party with 30
days notice.
B. If this Agreement is terminated (i) by the Company without
"cause" (as defined in Section 8, below) or (ii) by Edwards for "good reason"
(as defined in paragraph 7.C below), Edwards will be entitled to receive the
following:
(i) Base Compensation (as defined in Section 3.A) and
Other Benefits (as defined in Section 4) until the sixtieth (60th) month after
the Effective Date,
(ii) fully vested rights to all stock options granted
or awarded under the Plan, including any "PSB options" (all options will expire
if not exercised within three (3) months of termination or such longer period as
may he provided under the terms of the Plan or amendments to the Plan), and paid
benefits under the ESI Agreement, and
(iii) if termination occurs later than 36 months
after the Effective Date, payment under Section 11.C for any part of the
"noncompete period" that continues after the date sixty (60) months after the
Effective Date.
C. Edwards has "good reason" to terminate this Agreement if action
taken by the Company's Chairman or Board of Directors effectively withdraws from
Edwards the authority and responsibility customarily associated with the
position of President of a bank subsidiary of a holding company.
D. In no event will Edwards be entitled to any payments under this
Agreement that would violate any applicable banking regulations (including
regulations of the Federal Deposit Insurance Corporation as set forth at 12 CFR
Part 359). Any payments under this Agreement will terminate if Edwards violates
Section 11.
8. Cause. Notwithstanding any provision of this Agreement, the benefits
payable on termination which are provided in paragraph 7 and paragraph 11.A,
shall not be payable if Edwards' employment is terminated for cause. For the
purposes of this Agreement, termination for "cause" means termination because
Edwards (a) willfully and continually fails to substantially perform his
principal responsibilities with the Company, as outlined in Section 2 (other
than any such failure resulting from Edwards' incapacity due to injury or
illness), and such failures continue for a period of at least sixty (60) days
after a written demand for performance to Edwards by a duly authorized member or
representative of the board of directors of the Company that specifically
identifies the manner in which it is alleged that Edwards has not substantially
<PAGE> 73
performed such duties, (b) is adjudged guilty of any crime involving a breach of
his fiduciary duties to the Company or involving moral turpitude, or (c) is
adjudged guilty of any felony or (d) willfully and continually fails to comply
with any law, rule, or regulation (other than traffic violations or similar
minor offenses) or any final cease and desist order of any government agency
having jurisdiction over the Company. For purposes of this Agreement, no act or
failure to act on the part of Edwards shall be considered "willful" unless done
or omitted to be done in bad faith without reasonable belief that such action or
omission was in, or not opposed to, the best interests of the Company.
9. Compliance. Edwards agrees to provide his best efforts to comply
with all rules and regulations of the Federal Deposit Insurance Corporation and
the State of Washington Department of Financial Institutions.
10. Confidential Information. Edwards acknowledges that in the course
of his employment, he will have or obtain knowledge of confidential information
and other secrets concerning the Company and its business, actual and
prospective customers, and other matters which are valuable to the Company and
which the Company does not want disclosed. Edwards promises during employment at
the Company and thereafter to maintain all such information on a confidential
basis and not to disclose it to any third party, without the Company's prior
written consent or at the Company's express instruction. This confidentiality
promise of Edwards is intended to and shall apply in the broadest sense possible
to information regarding the Company's business activities and actual and
prospective customers, and is not intended to be limited solely to matters which
might meet the legal definition of "trade secrets" under Washington law. Prior
to termination of his employment with the Company Edwards will return all
records, files, handbooks, manuals, and any other form of documentation related
in any way to the business of the Company. Edwards acknowledges that he shall
not be entitled to retain, copy, utilize, or rely upon all or part of any such
materials. This section shall survive termination of this Agreement. The
existence of any claim or cause of action against the Company, whether
predicated upon this Agreement or otherwise, shall not constitute a defense to
the enforcement by the Company of this Section.
11. Restrictive Covenant.
A. If the Company terminates Edwards employment without "cause," or
Edwards terminates for "good reason" as defined in Section 7.C of this
Agreement, or the Company does not extend an offer for contract renewal for a
minimum term of one year at substantially the same compensation and corporate
standing in effect at the completion of this Agreement; then Edwards shall not,
before the later of sixty (60) months after the Effective Date or twenty-four
(24) months after the date of termination (the "Noncompete Period"), be employed
or act in any capacity, either directly or indirectly, or by or far himself or
for any partnership, corporation, trust, or company, "participate" (as defined
below) in any business similar to the type of business conducted by the Company
at the time of termination of employment in any market area in which the Company
or its affiliates conduct business at the time of termination. For purposes of
this Agreement, the term "participate" includes, without limitation, any direct
or indirect interest in any business, whether as an officer, director,
consultant, employee, partner, sole proprietor, stockholder, owner, or
otherwise, other than by ownership of less than one percent (1%) of the
<PAGE> 74
stock of a publicly held corporation whose stock is traded on a national
securities exchange or on the over-the-counter market. The term "participate"
shall also include participation, planning, or consulting for any startup
financial organization. For the purpose of this Agreement market areas covered
by the bank shall be the service areas as delineated in the Company's CRA
(Community Reinvestment Act) plan at the time of termination.
B. If Edwards voluntarily terminates his employment without "good
reason" or the Company terminates Edwards for "cause", then Edwards shall not,
for a period of 12 months that commences on the date of termination (the
"noncompete period"), be employed or act in any capacity, either directly or
indirectly, or by or for himself or for any partnership, corporation, trust, or
company, "participate" (as defined below), in any business similar to the type
of business conducted by the Company at the time of termination of employment in
any market area in which the Company or it's affiliates conduct business at the
time of termination. For purposes of this Agreement, the term "participate"
includes, without limitation, any direct or indirect interest in any business,
whether as an officer, director, consultant, employee, partner, sole proprietor,
stockholder, owner, or otherwise, other than by ownership of less than one
percent (1%) of the stock of a publicly held corporation whose stock is traded
on a national securities exchange or on the over the counter market. The term
"participate" shall also include participation, planning, or consulting for any
startup financial organization.
C. In addition, Edwards agrees that for a period of 24 months following
his termination (whether voluntary or not) he will not (a) induce or attempt to
induce any other employee of the Company to leave the employ of the Company, or
in any way interfere with the relationship between the Company and any other
employee of the Company or (b) induce or attempt to induce any customer,
supplier, licensee, or other business relations of the Company to cease doing
business with the Company.
During the applicable noncompete period (24 months in subparagraph A or 12
months in subparagraph B), and if Edwards is not receiving compensation from the
Company, the Company shall pay Edwards 50% of his base salary. The Company's
portion of health insurance premiums shall also continue during this noncompete
period. Edwards agrees that in the event of violation by Edwards of this
covenant not to compete, then all payments to Edwards under this restrictive
covenant shall immediately cease and Edwards shall pay liquidated damages to the
Company in the amount of 50% of his base salary per month for each month or part
of a month that Edwards is in violation of and continues to violate such
agreement.
It is recognized and agreed that damages in such event would be difficult or
impossible to ascertain, though great and irreparable, and that this agreement
with respect to liquidated damages shall in no event disentitle the Company to
injunctive relief.
D. This Restrictive Covenant may be enforced by an action at law for
damages and by an injunction to prohibit the restricted activity. Nothing set
forth herein shall prohibit the Company from pursuing all remedies available to
it. The parties agree that if a trial judge with jurisdictions over a dispute
related to this agreement should determine that any portion of the restrictive
covenants set forth in this section is unreasonably broad, that the parties
authorize said trial judge
<PAGE> 75
narrow same so as to make it reasonable, given all relevant circumstances, and
to enforce same.
E. It is agreed between the parties that this Agreement in its
entirety, and in particular the restraints imposed herein upon Edwards, are
reasonable both as to time and a to area. The parties additionally agree (i)
that the restraints imposed herein upon Edwards are necessary for the protection
of the business and goodwill of the Company: (ii) that the restraints imposed
herein upon Edwards are not any greater than are reasonably necessary to secure
the business of the Company and the goodwill thereof, and (iii) that the degree
of injury to the public due to the loss of the service and skill of Edwards upon
enforcement of said restraints does not and will not warrant nonenforcement of
said restraints.
F. This section shall survive the termination of this agreement.
12. Directorship. The Company agrees to extend it's best efforts to
maintain Edwards as a Director on the Board of the Company and as a Director on
the Board of FCFG. Edwards shall be compensated for his participation as a
member of the Board, on the same basis as other employee directors are so paid.
Employee directors are not compensated for attending and participating in
meetings of committees of the Board.
13. Proceedings and Attorney's Fees. It is the intention of the
parties hereto that this Agreement, the performance hereunder, and all suits and
special proceedings hereunder be construed in accordance with, under, and
pursuant to the laws of the State of Washington. The substantially prevailing
party in any suits or special proceedings shall be entitled to reasonable
attorney's fees and costs of suit. The parties agree that the venue of any legal
proceedings involving, in whole or in part, any provision of this agreement
shall be in Thurston County, Washington, regardless of which party initiates
such proceedings.
14. Notice. Any notice to be delivered under this Agreement shall be
given in writing and delivered, personally or by certified mail, postage
prepaid, addressed to the Company or to Edwards at their last known addresses.
15. Non Waiver. No delay or failure by either party to exercise any
right under this Agreement shall constitute a waiver of that or any other right.
16. Severability. If any provision of this Agreement shall be held by
a court of competent jurisdiction to be invalid or unenforceable, the remaining
provisions shall continue to be fully effective.
17. Entire Agreement. This Agreement represents the entire agreement
of the parties. This Agreement supersedes any prior oral or written agreements
between the parties on the subject matter hereof. It may be modified only by a
subsequent agreement in writing signed by the parties.
<PAGE> 76
18. Binding Effect. It is agreed that all covenants, terms, and
conditions of this Agreement shall extend, apply to, and firmly bind the heirs,
executors, administrators, assigns, and successors in interest of the respective
parties hereto as fully as the respective parties themselves are bound.
must provide notice of a special shareholders' meeting at least ten
days, and no more than sixty days, prior to the meetingIN WITNESS WHEREOF, the
parties have signed this Agreement on the day and year first above written.
- -----------------------------
Michael D. Edwards
FIRST COMMUNITY BANK
By:
--------------------------
Ken F. Parsons, Chairman
<PAGE> 1
EXHIBIT (99)
FOR IMMEDIATE RELEASE
Date: September 12, 1996
Contact: Joseph Beaulieu, Vice President/Marketing - First Community
(360) 459-1100, Fax: (360) 459-0137
FIRST COMMUNITY FINANCIAL GROUP, INC. AND
PRAIRIE SECURITY BANK ANNOUNCE MERGER AGREEMENT
Ken F. Parsons, President and CEO of First Community Financial Group,
Inc. (FCFG) and Michael D. Edwards, President and CEO of Prairie Security Bank
(PSB) jointly announced today an agreement to merge First Community Bank and
Prairie Security Bank creating a $230 million banking organization serving
customers in Thurston, Pierce, Lewis and Grays Harbor Counties.
The merger, which has been approved by both boards of directors, is
targeted to be completed in early 1997, following shareholder and regulatory
approvals. In the transaction, PSB shareholders will receive a combination of
shares of FCFG stock and cash for a total deal value of approximately $9
million.
Following completion of the merger, PSB's three branches will become
branches of First Community Bank. Parsons will remain Chairman and Edwards will
become President of First Community Bank. Additionally, Edwards and two other
PSB directors will become members of First Community Bank's Board of Directors.
"This merger creates the opportunity for both institutions to improve
shareholder value by the achievement of economies-of-scale in operations," said
Parsons. "In addition, the merger will incorporate a well known Bank President
along with other quality employees into our team."
Edwards said, "The two community-minded organizations will meld
together readily. We have complementary cultures, comparable lending
philosophies, and a similar customer base. Ken and I are committed to bringing
our organizations together and continue our focus on customer serve to our
communities."
Both banks have strong community ownership with local management and
local Boards of Directors.
<PAGE> 2
September 19, 1996
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street NW
Judiciary Plaza
Washington D.C. 20549
RE: FIRST COMMUNITY FINANCIAL GROUP, INC., LACEY, WASHINGTON;
CURRENT REPORT OF FORM 8-K
COMMISSION FILE NO. 0-24024
Ladies and Gentlemen:
On behalf of First Community Financial Group, Inc., Lacey, Washington
("FCFG"), we are transmitting a Current Report on Form 8-K, which is being filed
electronically via the EDGAR system. Manually signed copies of the Form 8-K are
being maintained in FCFG's files.
The Current Report is being filed pursuant to Section 13 of the
Securities Exchange Act of 1934, as amended, to report the execution of a
definitive agreement between FCFG, First Community Bank, Lacey, Washington
("FCB"), and Prairie Security Bank, Yelm, Washington ("Prairie"), whereby
Prairie will be merged with and into FCB.
In the event that you have any questions concerning the enclosed
Current Report, please contact the undersigned at (206) 340-9687.
Very truly yours,
GRAHAM & DUNN
Mark C. Lewington
Enclosure
cc: First Community Financial Group, Inc.
Prairie Security Bank
