SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 11, 1996
METROPOLITAN BANCORP
(Exact name of each registrant as specified in its charter)
Washington
(State or other jurisdiction of incorporation)
0-22218
(Commission File Number)
91-1600929
(IRS Employer Identification No.)
1520 Fourth Avenue, Seattle, WA 98101-1648
(Address of principal executive offices and zip code)
(206) 625-1818
(Registrant's telephone number, including area code)
None
(Former name or former address, if changed since last report)
Exhibit Index appears on page 6.
Item 5. Other Events
Agreement and Plan of Merger.
The following summary does not purport to be complete and is qualified in
its entirety by reference to the exhibits filed with this Current Report,
which are incorporated herein by reference.
On July 11, 1996, Metropolitan Bancorp, a Washington corporation
("Metropolitan"), and Washington Federal, Inc., a Washington corporation
("Washington Federal"), entered into an Agreement and Plan of Merger (the
"Agreement") which sets forth the terms and conditions under which
Metropolitan will merge with and into Washington Federal (the "Merger")
The Agreement provides that upon consummation of the Merger, each
outstanding share of Common Stock of Metropolitan (other than (i) shares with
respect to which dissenters' rights have been perfected under Washington law
and (ii) any shares held by Washington Federal or any of its subsidiaries
other than in a fiduciary capacity or in satisfaction of a debt previously
contracted) shall, by virtue of the Merger, and without any action on the part
of the holder thereof, be converted into the right to receive the number of
shares of Washington Federal Common Stock which is equal to (i) if the average
share price of Washington Federal Common Stock (as determined pursuant to the
terms of the Agreement) is equal to or greater than $18.00 but equal to or
less than $24.50 per share, the quotient determined by dividing (A) $18.00 by
(B) such average share price of Washington Federal Common Stock, (ii) if the
average share price of Washington Federal Common Stock is less than $18.00 per
share, one share or (iii) if the average share price of Washington Federal
Common Stock is greater than $24.50, 0.735 shares (the "Exchange Ratio"). If
the average share price of Washington Federal Common Stock is less than $17.00
per share, Metropolitan may terminate the Agreement, provided that in the
event Metropolitan elects to exercise this termination right and upon notice,
Washington Federal shall have the right to adjust the Exchange Ratio to an
amount equal to a number obtained by dividing (A) $17.00 by (B) such average
share price of Washington Federal Common Stock.
In connection with the execution of the Agreement, Metropolitan Federal
Savings and Loan Association of Seattle, a federally-chartered savings and
loan association and wholly-owned subsidiary of Metropolitan ("Metropolitan
Savings"), and Washington Federal Savings and Loan Association, a federally-
chartered savings and loan association and wholly-owned subsidiary of
Washington Federal ("Washington Savings"), entered into an Agreement and Plan
of Merger, dated as of July 11, 1996 (the "Bank Merger Agreement"). The Bank
Merger Agreement sets forth the terms and conditions, including consummation
of the Merger, under which Metropolitan Savings will merge with and into
Washington Savings immediately following the consummation of the Merger.
Concurrently with the execution and delivery of the Agreement, Metropolitan
entered into a Stock Option Agreement with Washington Federal (the "Stock
Option Agreement") whereby Metropolitan granted to Washington Federal an
option to purchase up to 657,000 shares of Metropolitan Common Stock, which
currently represents approximately 17.7% of the outstanding shares of
Metropolitan Common Stock, at a price of $13.50 per share, which is
exercisable only upon the occurrence of certain events. The Stock Option
Agreement provides Washington Federal (i) with the right, in certain
circumstances, to require Metropolitan to repurchase the option and any shares
acquired by exercise of the option and (ii) with the right to require
Metropolitan to register the Metropolitan Common Stock acquired by or issuable
upon exercise of the option under the Securities Act of 1933, as amended.
Concurrently with the execution and delivery of the Agreement, Washington
Federal entered into a Stockholder Agreement with certain stockholders of
Metropolitan, who serve as directors or officers of Metropolitan, pursuant to
which, among other things, such stockholders agreed to vote their shares of
Metropolitan Common Stock (which amount to 18.5% of the shares of such
Common Stock outstanding) in favor of the Merger.
Consummation of the Merger is subject to the approval of the shareholders
of Metropolitan, the receipt of all required regulatory approvals and the
effectiveness of a registration statement filed with the Securities and
Exchange Commission for the Washington Federal Common Stock to be issued in
the Merger, as well as other customary conditions.
Metropolitan, Metropolitan Savings, John H. Fairchild ("Fairchild") and
Sheryl Nilson ("Nilson", and together with Fairchild, "Phoenix Management")
entered into a Stock Redemption Agreement, dated July 11, 1996, which provides
that on or before the last date for consummating the Merger, and subject to
the satisfaction of certain conditions precedent, Metropolitan will redeem,
and Phoenix Management will transfer to Metropolitan, 453,297 outstanding
shares of common stock of Metropolitan owned by Phoenix Management in exchange
for (i) the transfer by Metropolitan to Phoenix Management of 81% of the
outstanding shares of common stock of Phoenix Mortgage & Investment, Inc., an
indirect, wholly-owned subsidiary of Metropolitan ("Phoenix"), and (ii) the
execution and delivery by Metropolitan to Phoenix Management of promissory
notes in the aggregate principal amount of $4,519,785, subject to certain
adjustments. Prior to the closing of this transaction, Metropolitan will
transfer certain intangible assets relating to Phoenix.
The Agreement, the Bank Merger Agreement, the Stock Option Agreement, the
Stockholder Agreement, the Stock Redemption Agreement and the press release
issued by Metropolitan and Washington Federal on July 12, 1996 regarding the
Merger are attached as exhibits to this report and are incorporated herein by
reference.
The foregoing summaries of the Merger Agreement, the Bank Merger Agreement,
the Stockholder Agreement, the Stock Option Agreement and the Stock Redemption
Agreement and the agreements and transactions contemplated thereby are
qualified in their entirety by reference to the Merger Agreement, the Bank
Merger Agreement, the Stockholder Agreement, the Stock Option Agreement and
the Stock Redemption Agreement which are filed as exhibits to this Current
Report and are incorporated herein by reference.
Item 7. Financial Statements and Exhibits
The following exhibits are filed with this report:
Exhibit Number Description
2.1 Agreement and Plan of Merger between Washington Federal,
Inc. and Metropolitan Bancorp dated July 11, 1996.
2.2 Agreement and Plan of Merger between Washington Federal
Savings and Loan Association and Metropolitan Federal
Savings and Loan Association of Seattle dated July 11,
1996.
10.1 Stock Redemption Agreement by and between Metropolitan
Bancorp, Metropolitan Federal Savings and Loan Association
of Seattle, John H. Fairchild and Sheryl Nilson dated July
11, 1996.
10.2 Stock Option Agreement by and between Metropolitan Bancorp
and Washington Federal, Inc. dated July 11, 1996.
10.3 Stockholder Agreement by and between Washington Federal,
Inc. and certain shareholders of Metropolitan Bancorp dated
July 11, 1996.
99.1 Press release issued on July 12, 1996 with respect to the
Merger.
SIGNATURE
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.
METROPOLITAN BANCORP
By: /s/ Patrick F. Patrick
Name: Patrick F. Patrick
Title: President and Chief
Executive Officer
Dated: July 18, 1996
EXHIBIT INDEX
Number Description
2.1 Agreement and Plan of Merger between Washington Federal, Inc.
and Metropolitan Bancorp dated July 11, 1996.
2.2 Agreement and Plan of Merger between Washington Federal Savings
and Loan Association and Metropolitan Federal Savings and Loan
Association of Seattle dated July 11, 1996.
10.1 Stock Redemption Agreement by and between Metropolitan Bancorp,
Metropolitan Federal Savings and Loan Association of Seattle, John
H. Fairchild and Sheryl Nilson dated July 11, 1996.
10.2 Stock Option Agreement by and between Metropolitan Bancorp and
Washington Federal, Inc. dated July 11, 1996.
10.3 Stockholder Agreement by and between Washington Federal, Inc. And
certain shareholders of Metropolitan Bancorp dated July 11, 1996.
99.1 Press release issued on July 12, 1996 with respect to the Merger.
Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
between
WASHINGTON FEDERAL, INC.
and
METROPOLITAN BANCORP
dated as of July 11, 1996
Exhibit A Form of Stock Option Agreement
Exhibit B Form of Stockholder Agreement
Exhibit C Form of Affiliate Letter
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of July 11, 1996,
between Washington Federal, Inc. (the "Acquiror"), a Washington corporation,
and Metropolitan Bancorp (the "Company"), a Washington corporation.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Acquiror and the Company have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transactions
provided for herein, including the merger of the Company with and into the
Acquiror, subject to the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Acquiror's willingness to
enter into this Agreement, (i) the Company is concurrently entering into a
Stock Option Agreement with the Acquiror (the "Stock Option Agreement"), in
substantially the form attached hereto as Exhibit A, pursuant to which the
Company is granting to the Acquiror the option to purchase shares of Company
Common Stock (as defined herein) under certain circumstances and (ii) certain
shareholders of the Company are concurrently entering into a Stockholder
Agreement with the Acquiror (the "Stockholder Agreement"), in substantially
the form attached hereto as Exhibit B, pursuant to which, among other things,
such stockholders agree to vote their shares of Company Common Stock in favor
of this Agreement and the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree
as follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Acquiror Bank" shall mean Washington Federal Savings and Loan Association,
a federally-chartered savings and loan association and a wholly-owned
subsidiary of the Acquiror.
"Acquiror Common Stock" shall mean the common stock, par value $1.00 per
share, of the Acquiror.
"Acquiror Employee Plans" shall have the meaning set forth in Section
4.14(a) hereof.
"Acquiror Employee Stock Benefit Plans" shall mean the following employee
benefit plans of the Acquiror: 1982 Employee Stock Compensation Program, 1987
Stock Option and Stock Appreciation Rights Plan, 1994 Stock Option and Stock
Appreciation Rights Plan and Washington Federal Savings Profit Sharing
Retirement Plan and Employee Stock Ownership Plan.
"Acquiror Financial Statements" shall mean (i) the consolidated statements
of financial condition (including related notes and schedules, if any) of the
Acquiror as of September 30, 1995, 1994 and 1993 and the consolidated
statements of operations, stockholders' equity and cash flows (including
related notes and schedules, if any) of the Acquiror for each of the three
years ended September 30, 1995, 1994 and 1993 as filed by the Acquiror in its
Securities Documents, and (ii) the consolidated statements of financial
condition of the Acquiror (including related notes and schedules, if any) and
the consolidated statements of operations, stockholders' equity and cash flows
(including related notes and schedules, if any) of the Acquiror included in
the Securities Documents filed by the Acquiror with respect to the quarterly
and annual periods ended subsequent to September 30, 1995.
"Acquiror Preferred Stock" shall mean the shares of preferred stock, par
value $1.00 per share, of the Acquiror.
"Articles of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Average Acquiror Share Price" shall mean the average closing price per
share of Acquiror Common Stock, as reported on the Nasdaq Stock Market's
National Market (as reported by The Wall Street Journal or, if not reported
thereby, another authoritative source), during the 20 trading days ending on
the fifth business day prior to the Effective Time.
"Bank" shall mean Metropolitan Federal Savings and Loan Association of
Seattle, a federally-chartered savings and loan association and a wholly-owned
subsidiary of the Company.
"Bank Merger" shall have the meaning set forth in Section 5.11 hereof.
"BIF" shall mean the Bank Insurance Fund administered by the FDIC or any
successor thereto.
"Bank Merger Agreement" shall have the meaning set forth in Section 5.11
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
"Company Common Stock" shall mean the common stock, par value $0.01 per
share, of the Company.
"Company Employee Plans" shall have the meaning set forth in Section
3.16(a) hereof.
"Company Financial Statements" shall mean (i) the consolidated statements
of financial condition (including related notes and schedules, if any) of the
Company as of March 31, 1996, 1995 and 1994 and the consolidated statements of
income, stockholders' equity and cash flows (including related notes and
schedules, if any) of the Company for each of the three years ended March 31,
1996, 1995 and 1994 as filed by the Company in its Securities Documents, and
(ii) the consolidated statements of financial condition of the Company
(including related notes and schedules, if any) and the consolidated
statements of income, stockholders' equity and cash flows (including related
notes and schedules, if any) of the Company included in the Securities
Documents filed by the Company with respect to the quarterly and annual
periods ended subsequent to March 31, 1996.
"Company Options" shall mean options to purchase shares of Company
Common Stock granted pursuant to the Company Option Plans.
"Company Option Plans" shall mean the following stock option plans of the
Company, as amended and as in effect as of the date hereof: Amended Stock
Option and Incentive Plan and Stock Option Plan for Nonemployee Directors.
"Company Preferred Stock" shall mean the shares of preferred stock, par
value $0.01 per share, of the Company.
"Dissenting Shares" shall have the meaning set forth in Section 2.5 hereof.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time specified pursuant to Section
2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental Entity
or third party alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on, or resulting from the presence, or
release into the environment, of any Materials of Environmental Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any
governmental entity relating to (1) the protection, preservation or
restoration of the environment (including, without limitation, air, water
vapor, surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural resource), and/or
(2) the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Materials
of Environment Concern. The term Environmental Law includes without
limitation (1) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. 9601, et seq; the Resource Conservation
and Recovery Act, as amended, 42 U.S.C. 6901, et seq; the Clean Air Act, as
amended, 42 U.S.C. 7401, et seq; the Federal Water Pollution Control Act, as
amended, 33 U.S.C. 1251, et seq; the Toxic Substances Control Act, as
amended, 15 U.S.C. 9601, et seq; the Emergency Planning and Community Right
to Know Act, 42 U.S.C. 1101, et seq; the Safe Drinking Water Act, 42 U.S.C.
300f, et seq; and all comparable state and local laws, and (2) any common law
(including without limitation common law that may impose strict liability)
that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Materials of
Environmental Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Ratio" shall have the meaning set forth in Section 2.3 hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean Federal Home Loan Bank.
"Form S-4" shall mean the registration statement on Form S-4 (or on any
successor or other appropriate form) to be filed by the Acquiror in connection
with the issuance of shares of Acquiror Common Stock pursuant to the Merger,
including the Proxy Statement which forms a part thereof, as amended and
supplemented.
"Governmental Entity" shall mean any federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Material Adverse Effect" shall mean, with respect to the Acquiror or the
Company, respectively, any effect that (i) is material and adverse to the
financial condition, results of operations or business of the Acquiror and its
Subsidiaries taken as whole or the Company and its Subsidiaries taken as a
whole, respectively, or (ii) materially impairs the ability of (x) either the
Company or the Bank to consummate the transactions contemplated by this
Agreement (including without limitation the transactions contemplated by the
Bank Merger Agreement and the Mortgage Company Agreement) or (y) either the
Acquiror or the Acquiror Bank to consummate the transactions contemplated by
this Agreement (including without limitation the transactions contemplated by
the Bank Merger Agreement), provided, however, that Material Adverse Effect
shall not be deemed to include the impact of (a) changes in laws and
regulations or interpretations thereof that are generally applicable to the
savings industry (including without limitation prospective changes which
result in assessments which are intended to recapitalize the SAIF), (b)
changes in generally accepted accounting principles that are generally
applicable to the savings industry, (c) reasonable expenses incurred in
connection with the transactions contemplated hereby or (d) actions or
omissions of a party (or any of its Subsidiaries) taken with the prior
informed written consent of the other party or parties in contemplation of the
transactions contemplated hereby, including without limitation any actions
taken by the Company pursuant to Section 5.12 hereof.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of the Company with and into the Acquiror
pursuant to the terms hereof.
"Mortgage Company" shall mean Phoenix Mortgage & Investment, Inc., a
wholly-owned subsidiary of the Company.
"Mortgage Company Agreement" shall mean the Mortgage Company Agreement,
dated as of the date hereof, among the Company, the Bank, John H. Fairchild
and Sheryl Nilson, which provides the terms and conditions under which the
Company would (i) distribute to Mr. Fairchild and Ms. Nilson (the
"Shareholders") not less than 81% of the outstanding shares of common stock of
the Mortgage Company and (ii) redeem shares of Company Common Stock held by
the Shareholders.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OTS" shall mean the Office of Thrift Supervision of the U.S. Department of
the Treasury or any successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.
"Previously Disclosed" shall mean disclosed (i) in a letter dated the date
hereof delivered from the disclosing party to the other party specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein, or (ii) a letter dated after
the date hereof from the disclosing party specifically referring to
this Agreement and describing in reasonable detail the matters contained therein
and delivered by the other party pursuant to Section 5.14 hereof.
"Proxy Statement" shall mean the prospectus/proxy statement contained in
the Form S-4, as amended or supplemented, and to be delivered to shareholders
of the Company in connection with the solicitation of their approval of this
Agreement and the transactions contemplated hereby.
"Real Estate Owned" shall mean real estate acquired by foreclosure or by
deed-in-lieu of foreclosure, real estate in judgment and subject to redemption
and in-substance foreclosures under generally accepted accounting principles.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests.
"SAIF" shall mean the Savings Association Insurance Fund administered by
the FDIC or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or
required to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of
1940, as amended; the Trust Indenture Act of 1939, as amended, and the rules
and regulations of the Commission promulgated thereunder.
"Subsidiary" and "Significant Subsidiary" shall have the meanings set forth
in Rule 1-02 of Regulation S-X of the Commission.
"WBCA" shall mean the Washington Business Corporation Act, as amended.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
ARTICLE II
THE MERGER
2.1 The Merger
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.2 hereof), the Company shall be merged
with and into the Acquiror (the "Merger") in accordance with the provisions of
Section 23B.11.010 of the WBCA. The Acquiror shall be the surviving
corporation (hereinafter sometimes called the "Surviving Corporation") of the
Merger, and shall continue its corporate existence under the laws of the State
of Washington. The name of the Surviving Corporation shall continue to be
"Washington Federal, Inc." Upon consummation of the Merger, the separate
corporate existence of the Company shall terminate.
(b) From and after the Effective Time, the Merger shall have the effects
set forth in Section 23B.11.060 of the WBCA.
(c) The Restated Articles of Incorporation and Bylaws of the Acquiror, as
in effect immediately prior to the Effective Time, shall be the Restated
Articles of Incorporation and Bylaws of the Surviving Corporation,
respectively, until altered, amended or repealed in accordance with their
terms and applicable law.
(d) The authorized capital stock of the Surviving Corporation shall be as
stated in the Restated Articles of Incorporation of the Acquiror immediately
prior to the Effective Time.
(e) Upon consummation of the Merger, (i) the directors of the Surviving
Corporation shall be the directors of the Acquiror immediately prior to the
Effective Time and (ii) the executive officers of the Surviving Corporation
shall be the executive officers of the Acquiror immediately prior to the
Effective Time and Patrick F. Patrick, who shall be elected as an Executive
Vice President of the Surviving Corporation. Each of the directors and
executive officers of the Surviving Corporation shall hold office in
accordance with the Restated Articles of Incorporation and Bylaws of the
Surviving Corporation.
2.2 Effective Time; Closing
The Merger shall become effective upon the occurrence of the filing of
articles of merger (the "Articles of Merger") with the Secretary of State of
the State of Washington pursuant to Section 23B.11.050 of the WBCA, unless a
later date and time is specified as the effective time in such Articles of
Merger (the "Effective Time"). A closing (the "Closing") shall take place
immediately prior to the Effective Time at 10:00 a.m., Pacific Time, on the
fifth business day following the satisfaction or waiver, to the extent
permitted hereunder, of the conditions to the consummation of the Merger
specified in Article VI of this Agreement (other than the delivery of
certificates, opinions and other instruments and documents to be delivered at
the Closing), at the principal executive offices of the Acquiror in Seattle,
Washington or at such other place, at such other time, or on such other date
as the parties may mutually agree upon. At the Closing, there shall be
delivered to the Acquiror and the Company the opinions, certificates and other
documents required to be delivered under Article VI hereof.
2.3 Treatment of Capital Stock
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Merger and without any action on the part of
any shareholder:
(a) each share of Acquiror Common Stock issued and outstanding immediately
prior to the Effective Time shall be unchanged and shall remain issued and
outstanding; and
(b) subject to Sections 2.5, 2.6 and 7.1(f) hereof, each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares held by the Acquiror or any of its Subsidiaries other than
in a fiduciary capacity that are beneficially owned by third parties or as a
result of debts previously contracted, which shall be canceled and retired)
shall become and be converted into the right to receive the number of shares
of Acquiror Common Stock (calculated to the nearest one-thousandth) which is
equal to (i) if the Average Acquiror Share Price is equal to or greater than
$18.00 per share but equal to or less than $24.50 per share, the quotient
determined by dividing (A) $18.00 by (B) the Average Acquiror Share Price,
(ii) if the Average Acquiror Share Price is less than $18.00 per share, one
share or (iii) if the Average Acquiror Share Price is greater than $24.50 per
share, .735 shares (in any case, subject to possible adjustment as set forth
in Sections 2.8 and 7.1(f) hereof, the "Exchange Ratio").
2.4 Shareholder Rights; Stock Transfers
Except as provided for in Section 2.5 hereof, at the Effective Time,
holders of Company Common Stock shall cease to be and shall have no rights as
shareholders of the Company, other than to receive the consideration provided
under this Article II. After the Effective Time, there shall be no transfers
on the stock transfers books of the Company or the Surviving Corporation of
shares of Company Common Stock.
2.5 Dissenting Shares
Each outstanding share of Company Common Stock the holder of which has
perfected his right to dissent under the WBCA and has not effectively
withdrawn or lost such right as of the Effective Time (the "Dissenting
Shares") shall not be converted into or represent a right to receive shares of
Acquiror Common Stock hereunder, and the holder thereof shall be entitled only
to such rights as are granted by the WBCA. The Company shall give the
Acquiror prompt notice upon receipt by the Company of any such written demands
for payment of the fair value of such shares of Company Common Stock and of
withdrawals of such demands and any other instruments provided pursuant to the
WBCA (any shareholder duly making such demand being hereinafter called a
"Dissenting Shareholder"). If any Dissenting Shareholder shall effectively
withdraw or lose (through failure to perfect or otherwise) his right to such
payment at any time, such holder's shares of Company Common Stock shall be
converted into the right to receive Acquiror Common Stock in accordance with
the applicable provisions of this Agreement.
2.6 Fractional Shares
Notwithstanding any other provision hereof, no fractional shares of
Acquiror Common Stock shall be issued to holders of Company Common Stock. In
lieu thereof, each holder of shares of Company Common Stock entitled to a
fraction of a share of Acquiror Common Stock shall, at the time of surrender
of the certificate or certificates representing such holder's shares, receive
an amount of cash (without interest) equal to the product arrived at by
multiplying such fraction of a share of Acquiror Common Stock by the Average
Acquiror Share Price, rounded to the nearest whole cent. No such holder shall
be entitled to dividends, voting rights or any other rights in respect of any
fractional share interest.
2.7 Exchange Procedures
(a) At or after the Effective Time, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Company
Common Stock, upon surrender of the same to an agent, duly appointed by the
Acquiror (the "Exchange Agent"), shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of full shares
of Acquiror Common Stock into which the shares of Company Common Stock
theretofore represented by the certificate or certificates so surrendered
shall have been converted as provided in Section 2.3(b) hereof. As promptly
as practicable after the Effective Time (and in no event later than the fifth
business day following the Effective Time), the Exchange Agent shall mail to
each holder of record of an outstanding certificate which immediately prior to
the Effective Time evidenced shares of Company Common Stock, and which is to
be exchanged for Acquiror Common Stock as provided in Section 2.3 hereof, a
form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to such certificate shall pass, only upon
delivery of such certificate to the Exchange Agent) advising such holder of
the terms of the exchange effected by the Merger and of the procedure for
surrendering to the Exchange Agent such certificate in exchange for a
certificate or certificates evidencing Acquiror Common Stock or cash in lieu
of any fractional share. Notwithstanding anything in this Agreement to the
contrary, certificates representing Company Common Stock surrendered for
exchange by any Affiliate of the Company (as defined in Section 5.13(a)
hereof) shall not be exchanged for certificates representing shares of
Acquiror Common Stock in accordance with the terms of this Agreement until the
Acquiror has received a written agreement from such person as specified in
Section 5.13(b).
(b) No holder of a certificate theretofore representing shares of Company
Common Stock shall be entitled to receive any dividends in respect of the
Acquiror Common Stock into which such shares shall have been converted by
virtue of the Merger until the certificate representing such shares is
surrendered in exchange for a certificate or certificates representing shares
of Acquiror Common Stock. In the event that dividends are declared and paid
by the Acquiror in respect of Acquiror Common Stock after the Effective Time
but prior to any holder's surrender of certificates representing shares of
Company Common Stock, dividends payable to such holder in respect of shares of
Acquiror Common Stock not then issued shall accrue (without interest). Any
such dividends shall be paid (without interest) upon surrender of the
certificates representing such shares of Company Common Stock. The Acquiror
shall be entitled, after the Effective Time, to treat certificates
representing shares of Company Common Stock as evidencing ownership of the
number of full shares of Acquiror Common Stock into which the shares of
Company Common Stock represented by such certificates shall have been
converted pursuant to this Agreement, notwithstanding the failure on the part
of the holder thereof to surrender such certificates.
(c) The Acquiror shall not be obligated to deliver a certificate or
certificates representing shares of Acquiror Common Stock to which a holder of
Company Common Stock would otherwise be entitled as a result of the Merger
until such holder surrenders the certificate or certificates representing the
shares of Company Common Stock for exchange as provided in this Section 2.7,
or, in default thereof, an appropriate affidavit of loss and indemnity
agreement and/or a bond in an amount as may be reasonably required in each
case by the Acquiror. If any certificate evidencing shares of Acquiror Common
Stock is to be issued in a name other than that in which the certificate
evidencing Company Common Stock surrendered in exchange therefor is
registered, it shall be a condition of the issuance thereof that the
certificate so surrendered shall be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange pay to the
Exchange Agent any transfer or other tax required by reason of the issuance of
a certificate for shares of Acquiror Common Stock in any name other than that
of the registered holder of the certificate surrendered or otherwise establish
to the satisfaction of the Exchange Agent that such tax has been paid or is
not payable.
2.8 Anti-Dilution Provisions
If, between the date hereof and the Effective Time, the shares of Acquiror
Common Stock shall be changed into a different number or class of shares by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within said period, the Exchange Ratio shall be
adjusted accordingly.
2.9 Options
On a mutually agreeable date prior to the Effective Time, but in no event
later than immediately before the Effective Time, the Company shall terminate
each of the Company Option Plans and terminate each Company Option that is
outstanding and unexercised at the time in exchange for a payment from the
Company, subject to required withholding taxes and the receipt of an
appropriate release as discussed below, of cash in an amount equal to the
difference between the exercise price of such Company Option and $18.00 for
each share of Company Common Stock subject to such Company Option. The
Company agrees to use its best efforts obtain an appropriate release from the
holder of a Company Option which is terminated pursuant to this Section 2.9
prior to making any payment in exchange therefor.
2.10 Additional Actions
If, at any time after the Effective Time, the Surviving Corporation shall
consider that any further assignments or assurances in law or any other acts
are necessary or desirable to (i) vest, perfect or confirm, of record or
otherwise, in the Surviving Corporation its right, title or interest in, to or
under any of the rights, properties or assets of the Company acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger, or (ii) otherwise carry out the purposes of this Agreement, the
Company and its proper officers and directors shall be deemed to have granted
to the Surviving Corporation an irrevocable power of attorney to execute and
deliver all such proper deeds, assignments and assurances in law and to do all
acts necessary or proper to vest, perfect or confirm title to and possession
of such rights, properties or assets in the Surviving Corporation and
otherwise to carry out the purposes of this Agreement; and the proper officers
and directors of the Surviving Corporation are fully authorized in the name of
the Company or otherwise to take any and all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Acquiror as follows:
3.1 Capital Structure
The authorized capital stock of the Company consists of 40,000,000 shares
of Company Common Stock and 10,000,000 shares of Company Preferred Stock. As
of the date hereof, 3,710,205 shares of Company Common Stock are issued and
outstanding, 383,648 shares of Company Common Stock are directly or indirectly
held by the Company as treasury stock and no shares of Company Preferred Stock
are issued and outstanding. All outstanding shares of Company Common Stock
have been duly authorized and validly issued and are fully paid and
nonassessable, and none of the outstanding shares of Company Common Stock has
been issued in violation of the preemptive rights of any person, firm or
entity. Except for the Stock Option Agreement and for Company Options to
acquire not more than 332,850 shares of Company Common Stock outstanding as of
the date hereof, a schedule of which has been Previously Disclosed, there are
no Rights authorized, issued or outstanding with respect to the capital stock
of the Company.
3.2 Organization, Standing and Authority of the Company
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington with full corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as now conducted and is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in
good standing would not have a Material Adverse Effect on the Company. The
Company is duly registered as a unitary savings and loan holding company under
the HOLA and the regulations of the OTS thereunder. The Company has
heretofore delivered to the Acquiror true and complete copies of the Articles
of Incorporation and Bylaws of the Company as in effect as of the date hereof.
3.3 Ownership of the Company Subsidiaries
The Company has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Company
Subsidiary. Except for (x) capital stock of the Company Subsidiaries,
(y) securities and other interests held in a fiduciary capacity and
beneficially owned by third parties or taken in consideration of debts
previously contracted and (z) securities and other interests which are
Previously Disclosed, the Company does not own or have the right to acquire,
directly or indirectly, any outstanding capital stock or other voting
securities or ownership interests of any corporation, bank, savings
association, partnership, joint venture or other organization. The
outstanding shares of capital stock or other ownership interests of each
Company Subsidiary have been duly authorized and validly issued, are fully
paid and nonassessable, and except as Previously Disclosed are directly owned
by the Company free and clear of all liens, claims, encumbrances, charges,
pledges, restrictions or rights of third parties of any kind whatsoever. No
Rights are authorized, issued or outstanding with respect to the capital stock
or other ownership interests of the Company Subsidiaries and, other than the
Mortgage Company Agreement, there are no agreements, understandings or
commitments relating to the right of the Company to vote or to dispose of such
capital stock or other ownership interests.
3.4 Organization, Standing and Authority of the Company Subsidiaries
Each of the Company Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it
is organized. Each of the Company Subsidiaries (i) has full power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and (ii) is duly licensed or qualified to do
business and is in good standing in each jurisdiction in which its ownership
or leasing of property or the conduct of its business requires such
qualification, except where the failure to be so licensed, qualified or in
good standing would not have a Material Adverse Effect on the Company. The
deposit accounts of the Bank are insured by the SAIF or the BIF to the maximum
extent permitted by the FDIA. The Bank has paid all deposit insurance
premiums and assessments required by the FDIA and the regulations thereunder.
The Company has heretofore delivered or made available to the Acquiror true
and complete copies of the Charter and Bylaws of the Bank and the Articles of
Incorporation and Bylaws of each other Company Subsidiary as in effect as of
the date hereof.
3.5 Authorized and Effective Agreement
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and (subject to receipt of all necessary governmental
approvals and the approval of the Company's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of the Company, except for the
approval of this Agreement by the Company's shareholders. This Agreement has
been duly and validly executed and delivered by the Company and, assuming due
authorization, execution and delivery by the Acquiror, constitutes a legal,
valid and binding obligation of the Company which is enforceable against the
Company in accordance with its terms, subject, as to enforceability, to
bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Bank
Merger), nor compliance by the Company with any of the provisions hereof (i)
does or will conflict with or result in a breach of any provisions of the
Articles of Incorporation or Bylaws of the Company or the equivalent documents
of any Company Subsidiary, (ii) violate, conflict with or result in a breach
of any term, condition or provision of, or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of the Company or a Company Subsidiary pursuant to,
any material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Company or a Company
Subsidiary is a party, or by which any of their respective properties or
assets may be bound or affected or (iii) subject to receipt of all required
governmental and shareholder approvals, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or a Company
Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consent and approval of, the OTS, (ii) the filing and effectiveness of the
Form S-4 with the Commission, (iii) compliance with applicable state
securities or "blue sky" laws and the NASD Bylaws in connection with the
issuance of Acquiror Common Stock pursuant to this Agreement, (iv) the
approval of this Agreement by the requisite vote of the shareholders of the
Company, (v) the filing of Articles of Merger with the Secretary of State of
the State of Washington pursuant to the WBCA in connection with the Merger,
(vi) the filing of Articles of Combination with the OTS in connection with the
Bank Merger and (vii) review of the Merger by the DOJ under federal antitrust
laws, and except for such filings, registrations, consents or approvals which
are Previously Disclosed, no consents or approvals of or filings or
registrations with any Governmental Entity or with any third party are
necessary on the part of the Company or any Company Subsidiary in connection
with (i) the execution and delivery by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby and (ii)
the execution and delivery by the Bank of the Bank Merger Agreement and the
consummation by the Bank of the transactions contemplated thereby.
(d) As of the date hereof, neither the Company nor any of the Company
Subsidiaries is aware of any reasons relating to the Company or any of the
Company Subsidiaries (including without limitation Community Reinvestment Act
compliance) why all consents and approvals shall not be procured from all
regulatory agencies having jurisdiction over the transactions contemplated by
this Agreement as shall be necessary for (i) consummation of the transactions
contemplated by this Agreement and the Bank Merger Agreement and (ii) the
continuation by the Acquiror after the Effective Time of the business of each
of the Acquiror and the Company as such business is carried on immediately
prior to the Effective Time, free of any conditions or requirements which, in
the reasonable opinion of the Company, could have a Material Adverse Effect on
the Acquiror or the Company or materially impair the value of the Company and
the Company Subsidiaries to the Acquiror.
3.6 Authorized and Effective Mortgage Company Agreement
(a) The Company has all requisite corporate power and authority to enter
into the Mortgage Company Agreement and to perform all of its obligations
under the Mortgage Company Agreement. The execution and delivery of the
Mortgage Company Agreement and the consummation of the transactions
contemplated thereby have been duly and validly authorized by all necessary
corporate action in respect thereof on the part of the Company. The Mortgage
Company Agreement has been duly and validly executed and delivered by the
Company and, assuming due authorization, execution and delivery by the other
parties thereto, constitutes a legal, valid and binding obligation of the
Company which is enforceable against the Company in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.
(b) Neither the execution and delivery of the Mortgage Company Agreement,
nor consummation of the transactions contemplated thereby, nor compliance by
the Company with any of the provisions thereof (i) does or will conflict with
or result in a breach of any provisions of the Articles of Incorporation or
Bylaws of the Company or the equivalent documents of any Company Subsidiary,
(ii) violate, conflict with or result in a breach of any term, condition or
provision of, or constitute a default (or an event which, with notice or lapse
of time, or both, would constitute a default) under, or give rise to any right
of termination, cancellation or acceleration with respect to, or result in the
creation of any lien, charge or encumbrance upon any property or asset of the
Company or a Company Subsidiary pursuant to, any material note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which the Company or a Company Subsidiary is a
party, or by which any of their respective properties or assets may be bound
or affected or (iii) violate any order, writ, injunction, decree, statute,
rule or regulation applicable to the Company or a Company Subsidiary.
3.7 Securities Documents and Regulatory Reports
(a) Since January 1, 1993, the Company has timely filed with the
Commission and the NASD all Securities Documents required by the Securities
Laws and such Securities Documents complied in all material respects with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(B) Since January 1, 1993, each of the Company and the Bank has duly filed
with the OTS, the FDIC and any other applicable federal or state banking
authority, as the case may be, in correct form the reports required to be
filed under applicable laws and regulations and such reports were in all
material respects complete and accurate and in compliance with the
requirements of applicable laws and regulations. In connection with the most
recent examinations of the Company and the Bank by the OTS, neither the
Company nor the Bank was required to correct or change any action, procedure
or proceeding which the Company or the Bank believes has not been corrected or
changed as required as of the date hereof.
3.8 Financial Statements
(a) The Company has previously delivered or made available to the Acquiror
accurate and complete copies of the Company Financial Statements which, in the
case of the consolidated statements of financial condition of the Company as
of March 31, 1996, 1995 and 1994 and the consolidated statements of income,
stockholders' equity and cash flows for each of the three years ended March
31, 1996, 1995 and 1994, are accompanied by the audit reports of Deloitte &
Touche LLP, independent public accountants with respect to the Company. The
Company Financial Statements referred to herein, as well as the Company
Financial Statements to be delivered pursuant to Section 5.8 hereof, fairly
present or will fairly present, as the case may be, the consolidated financial
condition of the Company as of the respective dates set forth therein, and the
consolidated results of operations, stockholders' equity and cash flows of the
Company for the respective periods or as of the respective dates set forth
therein.
(b) Each of the Company Financial Statements referred to in Section 3.8(a)
has been or will be, as the case may be, prepared in accordance with generally
accepted accounting principles consistently applied during the periods
involved, except as stated therein. The audits of the Company and the Company
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of the Company
and the Company Subsidiaries are being maintained in material compliance with
applicable legal and accounting requirements, and such books and records
accurately reflect in all material respects all dealings and transactions in
respect of the business, assets, liabilities and affairs of the Company and
its Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the consolidated statement of financial condition of the Company as of March
31, 1996 (including related notes) and (ii) of liabilities incurred since
March 31, 1996 in the ordinary course of business, neither the Company nor any
Company Subsidiary has any liabilities, whether absolute, accrued, contingent
or otherwise, material to the financial condition, results of operations or
business of the Company on a consolidated basis.
3.9 Material Adverse Change
Except as Previously Disclosed, since March 31, 1996 (i) the Company and
its Subsidiaries have conducted their respective businesses in the ordinary
and usual course (excluding the incurrence of reasonable expenses in
connection with the transactions contemplated hereby) and (ii) no event has
occurred or circumstance arisen that, individually or in the aggregate, has
had or is reasonably likely to have a Material Adverse Effect on the Company.
3.10 Environmental Matters
(a) To the best of the Company's knowledge, the Company and its
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would not, singly or in the
aggregate, have a Material Adverse Effect on the Company. Neither the Company
nor a Company Subsidiary has received in the past five years any communication
from a Governmental Entity alleging that the Company or a Company Subsidiary
is not in such compliance, or if such a communication has been received, the
Company is now in such compliance, and, to the best knowledge of the Company,
there are no present circumstances that would prevent or interfere with the
continuation of compliance with all Environmental Laws.
(b) To the best of the Company's knowledge, none of the properties owned,
leased or operated by the Company or a Company Subsidiary has been or is in
violation of or liable under any Environmental Law, except any such violations
or liabilities which would not singly or in the aggregate have a Material
Adverse Effect on the Company.
(c) To the best of the Company's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action
or governmental investigation that could result in the imposition of any
liability arising under any Environmental Law against the Company or a Company
Subsidiary or against any person or entity whose liability for any
Environmental Claim the Company or a Company Subsidiary has or may have
retained or assumed either contractually or by operation of law, except such
which would not have a Material Adverse Effect on the Company
(d) Except as Previously Disclosed, the Company has not conducted any
environmental studies during the past five years with respect to any
properties owned by it or a Company Subsidiary as of the date hereof.
3.11 Loans, Allowance for Loan Losses, Real Estate Owned and Investment
and Mortgage-Backed Securities
(a) Each loan on the books and records of the Company and any Company
Subsidiary, including unfunded portions of outstanding lines of credit and
loan commitments, was made and has been serviced in all material respects in
accordance with customary lending standards in the ordinary course of
business, is evidenced in all material respects by appropriate and sufficient
documentation and, to the best knowledge of the Company, constitutes the
legal, valid and binding obligation of the obligor named therein, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditor's rights and to general equity
principles.
(b) The allowance for loan losses reflected on the Company's consolidated
statements of financial condition included in the Company Financial Statements
is, or will be in the case of subsequently delivered Company Financial
Statements, as the case may be, in the opinion of the Company's management
adequate in all material respects as of their respective dates under the
requirements of generally accepted accounting principles to provide for
reasonably anticipated losses on outstanding loans net of recoveries. The
Real Estate Owned reflected on the consolidated statements of financial
condition included in the Company Financial Statements is, or will be in the
case of subsequently delivered Company Financial Statements, as the case may
be, carried at the lower of cost or fair value, less estimated costs to sell,
as required by generally accepted accounting principles.
(c) The Company has Previously Disclosed to the Acquiror as of June 30,
1996 or the latest practicable date prior thereto, as applicable: (i) any
written or, to the Company's knowledge, oral loan or similar agreement under
the terms of which the obligor is 30 or more days delinquent in payment of
principal or interest, or to the best of the Company's knowledge, in default
of any other provision thereof; (ii) each loan or similar agreement which has
been classified as "substandard," "doubtful," "loss" or "special mention" by
the Company, a Company Subsidiary or an applicable regulatory authority; (iii)
a listing of the Real Estate Owned held by the Company and the Company
Subsidiaries; (iv) a schedule of all investment securities and mortgage-backed
securities of the Company and the Company Subsidiaries, including securities
held-to-maturity, available for sale and held for trading, as well as the
respective carrying values and fair values of all such securities, and in each
case, all such information as Previously Disclosed is complete and accurate in
all material respects.
3.12 Tax Matters
(a) The Company and its Subsidiaries, and each of their predecessors, have
timely filed all federal, state and local (and, if applicable, foreign)
income, franchise, bank, excise, real property, personal property and other
tax returns required by applicable law to be filed by them (including, without
limitation, estimated tax returns, income tax returns, information returns and
withholding and employment tax returns) and have paid, or where payment is not
required to have been made, have set up an adequate reserve or accrual for the
payment of, all material taxes required to be paid in respect of the periods
covered by such returns and, as of the Effective Time, will have paid, or
where payment is not required to have been made, will have set up an adequate
reserve or accrual for the payment of, all material taxes for any subsequent
periods ending on or prior to the Effective Time. Neither the Company nor a
Company Subsidiary will have any material liability for any such taxes in
excess of the amounts so paid or reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax
returns filed by the Company and its Subsidiaries are complete and accurate in
all material respects. Neither the Company nor a Company Subsidiary is
delinquent in the payment of any tax, assessment or governmental charge or has
requested any extension of time within which to file any tax returns in
respect of any fiscal year or portion thereof which have not since been filed.
Except as Previously Disclosed, no deficiencies for any tax, assessment or
governmental charge have been proposed, asserted or assessed (tentatively or
otherwise) against the Company or a Company Subsidiary as a result of any
examinations or otherwise which have not been settled and paid. There are
currently no agreements in effect with respect to the Company or a Company
Subsidiary to extend the period of limitations for the assessment or
collection of any tax. As of the date hereof, no audit, examination or
deficiency or refund litigation with respect to such return is pending or, to
the best of the Company's knowledge, threatened.
(c) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary (i) is a party to any agreement providing for the allocation or
sharing of taxes, (ii) is required to include in income any adjustment
pursuant to Section 481(a) of the Code by reason of a voluntary change in
accounting method initiated by the Company or a Company Subsidiary (nor does
the Company have any knowledge that the Internal Revenue Service has proposed
any such adjustment or change of accounting method) or (iii) has filed a
consent pursuant to Section 341(f) of the Code or agreed to have Section
341(f)(2) of the Code apply.
3.13 Legal Proceedings
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Company,
threatened against the Company or a Company Subsidiary or against any asset,
interest or right of the Company or a Company Subsidiary, or, to the best
knowledge of the Company, against any officer, director or employee of any of
them that in any such case, if decided adversely, would have a Material
Adverse Effect on the Company. Neither the Company nor a Company Subsidiary
is a party to any order, judgment or decree which has or could reasonably be
expected to have a Material Adverse Effect on the Company.
3.14 Compliance with Laws
(a) Each of the Company and the Company Subsidiaries 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 that are required in order to permit
it to carry on its business as it is presently being conducted and the absence
of which could reasonably be expected to have a Material Adverse Effect on the
Company; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Company, no suspension or cancellation of any of the same is threatened.
(b) Neither the Company nor a Company Subsidiary is in violation of its
respective Articles of Incorporation, Charter or Bylaws, or of any applicable
federal, state or local law or ordinance or any order, rule or regulation of
any federal, state, local or other governmental agency or body (including,
without limitation, all banking (including without limitation all regulatory
capital requirements), securities, municipal securities, safety, health,
environmental, zoning, anti-discrimination, antitrust, and wage and hour laws,
ordinances, orders, rules and regulations), or in default with respect to any
order, writ, injunction or decree of any court, or in default under any order,
license, regulation or demand of any Governmental Entity, any of which
violations or defaults could reasonably be expected to have a Material Adverse
Effect on the Company; and neither the Company nor a Company Subsidiary has
received in the past five years any notice or communication from a
Governmental Entity asserting that the Company or a Company Subsidiary is in
violation of any of the foregoing which could reasonably be expected to have a
Material Adverse Effect on the Company. Neither the Company nor a Company
Subsidiary is subject to any regulatory or supervisory cease and desist order,
agreement, written directive, memorandum of understanding or written
commitment (other than those of general applicability to all savings
associations or savings and loan holding companies issued by governmental
authorities), and none of them has received in the past five years any written
communication requesting that it enter into any of the foregoing, or if such a
communication has been received, none of them is any longer subject to such
request.
3.15 Certain Information
None of the information relating to the Company and its Subsidiaries
supplied or to be supplied for inclusion or incorporation by reference in (I)
the Form S-4 will, at the time the Form S-4 and any amendment thereto becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (ii) the Proxy Statement, as of the date such Proxy Statement
is mailed to shareholders of the Company and up to and including the date of
the meeting of shareholders to which such Proxy Statement relates, will
contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, provided that information as of a
later date shall be deemed to modify information as of an earlier date. The
Proxy Statement mailed by the Company to its shareholders in connection with
the meeting of shareholders at which this Agreement will be considered by such
shareholders will comply as to form in all material respects with the Exchange
Act and the rules and regulations promulgated thereunder.
3.16 Employee Benefit Plans
(a) The Company has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of the Company or
any Company Subsidiary (the "Company Employee Plans"), whether written or
oral, and the Company has previously furnished or made available to the
Acquiror accurate and complete copies of the same together with (i) the most
recent actuarial and financial reports prepared with respect to any qualified
plans, (ii) the most recent annual reports filed with any governmental agency,
and (iii) all rulings and determination letters and any open requests for
rulings or letters that pertain to any qualified plan.
(b) None of the Company, any Company Subsidiary, any pension plan
maintained by any of them and qualified under Section 401(a) of the Code or,
to the best of the Company's knowledge, any fiduciary (with respect to whom
the Company or a Company Subsidiary has an indemnification obligation) of such
plan has incurred any material liability to the PBGC or the Internal Revenue
Service with respect to any such plan. To the best of the Company's
knowledge, no reportable event under Section 4043(b) of ERISA has occurred
with respect to any such pension plan.
(c) Neither the Company nor any Company Subsidiary participates in or has
incurred any liability (that has not already been satisfied) under Section
4201 of ERISA for a complete or partial withdrawal from a multi-employer plan
(as such term is defined in Section 4001(a)(3) of ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Company Employee Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (a
"Company Pension Plan") which is intended to qualify under Section 401(a) of
the Code to the effect that such plan is qualified under section 401(a) of the
Code and the trust associated with such employee pension plan is tax exempt
under Section 501 of the Code. No such letter has been revoked or, to the
best of the Company's knowledge, is threatened to be revoked and, except as
Previously Disclosed, the Company does not know of any ground on which such
revocation may be based. Neither the Company nor any Company Subsidiary has
any material liability under any such plan that is not reflected on the
consolidated statement of financial condition of the Company at March 31, 1996
included in the Company Financial Statements, other than liabilities incurred
in the ordinary course of business in connection therewith subsequent to the
date thereof.
(e) To the best of the Company's knowledge, no prohibited transaction
(within the meaning of Section 406 of ERISA) that is not exempt from the
prohibition of such Section by virtue of a statutory or administrative
exemption has occurred with respect to any Company Employee Plan which would
result in the imposition, directly or indirectly, on the Company or a Company
Subsidiary of a material excise tax under Section 4975 of the Code or a
material civil penalty under Section 502(i) of ERISA or otherwise have a
Material Adverse Effect on the Company.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established)
of all contributions which are required for periods after the date hereof and
prior to the Effective Time, under the terms of each Company Employee Plan or
ERISA; no accumulated funding deficiency (as defined in Section 302 of ERISA
or Section 412 of the Code), whether or not waived, exists with respect to any
Company Pension Plan, and there is no "unfunded current liability" (as defined
in Section 412(l)(8)(A) of the Code) with respect to any Company Pension Plan.
(g) To the best of the Company's knowledge and except as Previously
Disclosed, the Company Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and
all other applicable governmental laws and regulations.
(h) There are no pending or, to the best of the Company's knowledge,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Company Employee Plans or any trust related thereto or, to
the best of the Company's knowledge, any fiduciary thereof (with respect to
whom the Company or a Company Subsidiary has an indemnification obligation).
3.17 Certain Contracts
(a) Except as Previously Disclosed, neither the Company nor a Company
Subsidiary is a party to, is bound or affected by, receives, or is obligated
to pay, benefits under (i) any agreement, arrangement or commitment, including
without limitation any agreement, indenture or other instrument, relating to
the borrowing of money by the Company or a Company Subsidiary (other than in
the case of the Bank deposits, FHLB advances, federal funds purchased and
securities sold under agreements to repurchase in the ordinary course of
business) or the guarantee by the Company or a Company Subsidiary of any
obligation of others, (ii) any agreement, arrangement or commitment relating
to the employment of a consultant or the employment, election or retention in
office of any present or former director, officer or employee of the Company
or a Company Subsidiary, (iii) any agreement, arrangement or understanding
pursuant to which any payment (whether of severance pay or otherwise) became
or may become due to any director, officer or employee of the Company or a
Company Subsidiary upon execution of this Agreement or upon or following
consummation of the transactions contemplated by this Agreement (either alone
or in connection with the occurrence of any additional acts or events), (iv)
any agreement, arrangement or understanding pursuant to which the Company or a
Company Subsidiary is obligated to indemnify any director, officer, employee
or agent of the Company or a Company Subsidiary, (v) any agreement,
arrangement or understanding to which the Company or a Company Subsidiary is a
party or by which any of the same is bound which limits the freedom of the
Company or a Company Subsidiary to compete in any line of business or with any
person, (vi) any assistance agreement, supervisory agreement, memorandum of
understanding, consent order, cease and desist order or condition of any
regulatory order or decree with or by the OTS, the FDIC or any other
regulatory agency, or (vii) any other agreement, arrangement or understanding
which would be required to be filed as an exhibit to the Company's Annual
Report on Form 10-K under the Exchange Act and which has not been so filed.
(b) Neither the Company nor any Company Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected
to have a Material Adverse Effect on the Company, under any contract,
agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party or by which its assets, business or
operations may be bound or affected, whether entered into in the ordinary
course of business or otherwise and whether written or oral, and there has not
occurred any event that with the lapse of time or the giving of notice, or
both, would constitute such a default or non-compliance.
3.18 Brokers and Finders
Except as Previously Disclosed, neither the Company nor any Company
Subsidiary nor, to the best of the Company's knowledge, any of their
respective directors, officers or employees, has employed any broker or finder
or incurred any liability for any broker or finder fees or commissions in
connection with the transactions contemplated hereby which reasonably could be
expected to be a liability of the Company or a Company Subsidiary.
3.19 Insurance
Each of the Company and its Subsidiaries is insured for reasonable amounts
with financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good
business practice, customarily be insured and has maintained all insurance
required by applicable laws and regulations. The Company has Previously
Disclosed all policies of insurance maintained by it or a Company Subsidiary
as of the date hereof and any claims thereunder in excess of $50,000 since
January 1, 1994.
3.20 Properties
All real and personal property owned by the Company or its Subsidiaries or
presently used by any of them in its respective business is in an adequate
condition (ordinary wear and tear excepted) and is sufficient to carry on the
business of the Company and its Subsidiaries in the ordinary course of
business consistent with their past practices. The Company and the Company
Subsidiaries have good and marketable title free and clear of all liens,
encumbrances, charges, defaults or equities (other than equities of redemption
under applicable foreclosure laws) to all of the material properties and
assets, real and personal, reflected on the consolidated statement of
financial condition of the Company as of March 31, 1996 included in the
Company Financial Statements or acquired after such date, except (i) liens for
current taxes not yet due or payable (ii) pledges to secure deposits and other
liens incurred in the ordinary course of its banking business, (iii) such
imperfections of title, easements and encumbrances, if any, as are not
material in character, amount or extent and (iv) as reflected on the
consolidated statement of financial condition of the Company as of March 31,
1996 included in the Company Financial Statements. All real and personal
property which is material to the Company's business on a consolidated basis
and leased or licensed by the Company or a Company Subsidiary is held pursuant
to leases or licenses which are valid and enforceable in accordance with their
respective terms and such leases will not terminate or lapse prior to the
Effective Time.
3.21 Labor
No work stoppage involving the Company or a Company Subsidiary is pending
or, to the best knowledge of the Company, threatened. Neither the Company nor
a Company Subsidiary is involved in, or threatened with or affected by, any
labor dispute, arbitration, lawsuit or administrative proceeding involving the
employees of the Company or a Company Subsidiary which could have a Material
Adverse Effect on the Company. Employees of the Company and the Company
Subsidiaries are not represented by any labor union nor are any collective
bargaining agreements otherwise in effect with respect to such employees, and
to the best of the Company's knowledge, there have been no efforts to unionize
or organize any employees of the Company or any of the Company Subsidiaries
during the past five years.
3.22 Required Vote; Inapplicability of Antitakeover Statutes
(a) The affirmative vote of the holders of two thirds of the issued and
outstanding shares of Company Common Stock is necessary to approve this
Agreement and the transactions contemplated hereby on behalf of the Company.
(b) Assuming the accuracy of the representation and warranty of the
Acquiror contained in Section 4.20 hereof, no "fair price" or other form of
antitakeover statute or regulation, including without limitation Chapter
23B.19 of the WBCA, is applicable to this Agreement and the transactions
contemplated hereby.
3.23 Ownership of Acquiror Common Stock
As of the date hereof, neither the Company nor, to its best knowledge, any
of its affiliates or associates (as such terms are defined under the Exchange
Act), (i) beneficially own, directly or indirectly, or (ii) are parties to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of Acquiror Common Stock which in
the aggregate represent 10% or more of the outstanding shares of Acquiror
Common Stock (other than shares held in a fiduciary capacity and beneficially
owned by third parties or shares taken in consideration of debts previously
contracted).
3.24 Disclosures
None of the representations and warranties of the Company or any of the
written information or documents furnished or to be furnished by the Company
to the Acquiror in connection with or pursuant to this Agreement or the
consummation of the transactions contemplated hereby, when considered as a
whole, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated or
necessary to make any such information or document, in light of the
circumstances, not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants to the Company as follows:
4.1 Capital Structure
The authorized capital stock of the Acquiror consists of 100,000,000 shares
of Acquiror Common Stock and 5,000,000 shares of Acquiror Preferred Stock. As
of June 30, 1996, there were 42,246,383 shares of Acquiror Common Stock issued
and outstanding, 1,737,383 shares of Acquiror Common Stock were held as
treasury stock and not outstanding and there were no shares of Acquiror
Preferred Stock issued and outstanding. All outstanding shares of Acquiror
Common Stock have been duly authorized and validly issued and are fully paid
and nonassessable, and none of the outstanding shares of Acquiror Common Stock
has been issued in violation of the preemptive rights of any person, firm or
entity. As of the date hereof, there are no Rights authorized, issued or
outstanding with respect to the capital stock of the Acquiror, except (i) for
shares of Acquiror Common Stock issuable pursuant to the Acquiror Employee
Stock Benefit Plans and (ii) by virtue of this Agreement.
4.2 Organization, Standing and Authority of the Acquiror
The Acquiror is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington with full corporate power
and authority to own or lease all of its properties and assets and to carry on
its business as now conducted and is duly licensed or qualified to do business
and is in good standing in each jurisdiction in which its ownership or leasing
of property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in
good standing would not have a Material Adverse Effect on the Acquiror. The
Acquiror is duly registered as a unitary savings and loan holding company
under the HOLA and the regulations of the OTS thereunder. The Acquiror has
heretofore delivered to the Company true and complete copies of the Restated
Articles of Incorporation and Bylaws of the Acquiror as in effect as of the
date hereof.
4.3 Ownership of the Acquiror Subsidiaries
The Acquiror has Previously Disclosed each direct or indirect Acquiror
Subsidiary and identified Acquiror Bank as its only Significant Subsidiary as
of the date hereof. The outstanding shares of capital stock of Acquiror Bank
have been duly authorized and validly issued, are fully paid and
nonassessable, and are directly owned by the Acquiror free and clear of all
liens, claims, encumbrances, charges, pledges, restrictions or rights of third
parties of any kind whatsoever. No Rights are authorized, issued or
outstanding with respect to the capital stock or other ownership interests of
Acquiror Bank and there are no agreements, understandings or commitments
relating to the right of the Acquiror to vote or to dispose of said shares or
other ownership interests.
4.4 Organization, Standing and Authority of the Acquiror Subsidiaries
Acquiror Bank is a savings and loan association duly organized, validly
existing and in good standing under the laws of the United States. Acquiror
Bank (i) has full power and authority to own or lease all of its properties
and assets and to carry on its business as now conducted and (ii) is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct of
its business requires such qualification and where the failure to be so
licensed, qualified or in good standing would have a Material Adverse Effect
on the Acquiror. The deposit accounts of Acquiror Bank are insured by the
SAIF to the maximum extent permitted by the FDIA. Acquiror Bank has paid all
deposit insurance premiums and assessments required by the FDIA and the
regulations thereunder.
4.5 Authorized and Effective Agreement
(a) Acquiror has all requisite corporate power and authority to enter into
this Agreement and (subject to receipt of all necessary governmental
approvals) to perform all of its obligations under this Agreement. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action in respect thereof on the part of the Acquiror.
This Agreement has been duly and validly executed and delivered by the
Acquiror and, assuming due authorization, execution and delivery by the
Company, constitutes a legal, valid and binding obligation of the Acquiror
which is enforceable against the Acquiror in accordance with its terms,
subject, as to enforceability, to bankruptcy, insolvency and other laws of
general applicability relating to or affecting creditors' rights and to
general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Bank
Merger) nor compliance by the Acquiror with any of the provisions hereof (I)
does or will conflict with or result in a breach of any provisions of the
Restated Articles of Incorporation or Bylaws of the Acquiror or the Charter or
Bylaws of the Acquiror Bank, (ii) violate, conflict with or result in a breach
of any term, condition or provision of, or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default)
under, or give rise to any right of termination, cancellation or acceleration
with respect to, or result in the creation of any lien, charge or encumbrance
upon any property or asset of the Acquiror or Acquiror Bank pursuant to, any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Acquiror or Acquiror
Bank is a party, or by which any of their respective properties or assets may
be bound or affected or (iii) subject to receipt of all required governmental
approvals, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Acquiror or Acquiror Bank.
(c) Except for (i) the filing of applications and notices with, and the
consent and approval of, the OTS, (ii) the filing and effectiveness of the
Form S-4 with the Commission, (iii) compliance with applicable state
securities or "blue sky" laws and the NASD Bylaws in connection with the
issuance of Acquiror Common Stock pursuant to this Agreement, (iv) the
approval of this Agreement by the requisite vote of the shareholders of the
Company, (v) the filing of Articles of Merger with the Secretary of State of
the State of Washington pursuant to the WBCA in connection with the Merger,
(vi) the filing of Articles of Combination with the OTS in connection with the
Bank Merger and (vii) review of the Merger by the DOJ under federal antitrust
laws, no consents or approvals of or filings or registrations with any
Governmental Entity or with any third party are necessary on the part of the
Acquiror or Acquiror Bank in connection with (i) the execution and delivery by
the Acquiror of this Agreement and the consummation by the Acquiror of the
transactions contemplated hereby and (ii) the execution and delivery by the
Acquiror Bank of the Bank Merger Agreement and the consummation by the
Acquiror Bank of the transactions contemplated thereby.
(d) As of the date hereof, the Acquiror is not aware of any reasons
relating to the Acquiror or any of its Subsidiaries (including without
limitation Community Reinvestment Act compliance) why all consents and
approvals shall not be procured from all regulatory agencies having
jurisdiction over the transactions contemplated by this Agreement as shall be
necessary for (i) consummation of the transactions contemplated by this
Agreement and the Bank Merger Agreement and (ii) the continuation by the
Acquiror after the Effective Time of the business of each of the Acquiror and
the Company as such business is carried on immediately prior to the Effective
Time, free of any conditions or requirements which, in the reasonable opinion
of the Acquiror, could have a Material Adverse Effect on the Acquiror or the
Company or materially impair the value of the Company and the Company
Subsidiaries to the Acquiror.
4.6 Securities Documents and Regulatory Reports
(a) Since January 1, 1993, the Acquiror has timely filed with the
Commission and the NASD all Securities Documents required by the Securities
Laws and such Securities Documents complied in all material respects with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
(b) Since January 1, 1993, each of the Acquiror and the Acquiror Bank has
duly filed with the OTS, the FDIC and any other applicable federal or state
banking authority, as the case may be, in correct form the reports required to
be filed under applicable laws and regulations and such reports were in all
material respects complete and accurate and in compliance with the
requirements of applicable laws and regulations. In connection with the most
recent examinations of the Acquiror and the Acquiror Bank by the OTS, neither
the Acquiror nor the Acquiror Bank was required to correct or change any
action, procedure or proceeding which the Acquiror or the Acquiror Bank
believes has not been corrected or changed as required as of the date hereof.
4.7 Financial Statements
(a) The Acquiror has previously delivered or made available to the Company
accurate and complete copies of the Acquiror Financial Statements which, in
the case of the consolidated statements of financial condition of the Acquiror
as of September 30, 1995, 1994 and 1993 and the consolidated statements of
operations, stockholders' equity and cash flows for each of the three years
ended September 30, 1995, 1994 and 1993, are accompanied by the audit reports
of Deloitte & Touche LLP, independent public accountants with respect to the
Acquiror. The Acquiror Financial Statements referred to herein, as well as
the Acquiror Financial Statements to be delivered pursuant to Section 5.8
hereof, fairly present or will fairly present, as the case may be, the
consolidated financial condition of the Acquiror as of the respective dates
set forth therein, and the consolidated results of operations, stockholders'
equity and cash flows of the Acquiror for the respective periods or as of the
respective dates set forth therein.
(b) Each of the Acquiror Financial Statements referred to in Section
4.7(a) has been or will be, as the case may be, prepared in accordance with
generally accepted accounting principles consistently applied during the
periods involved, except as stated therein. The audits of the Acquiror and
the Acquiror Subsidiaries have been conducted in all material respects in
accordance with generally accepted auditing standards. The books and records
of the Acquiror and the Acquiror Subsidiaries are being maintained in material
compliance with applicable legal and accounting requirements, and all such
books and records accurately reflect in all material respects all dealings and
transactions in respect of the business, assets, liabilities and affairs of
the Acquiror and the Acquiror Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the consolidated statement of financial condition of the Acquiror as of March
31, 1996 (including related notes) and (ii) of liabilities incurred since
March 31, 1996 in the ordinary course of business, neither the Acquiror nor
any Acquiror Subsidiary has any liabilities, whether absolute, accrued,
contingent or otherwise, material to the financial condition, results of
operations or business of the Acquiror on a consolidated basis.
4.8 Material Adverse Change
Since March 31, 1996, no event has occurred or circumstance arisen that,
individually or in the aggregate, has had or is reasonably likely to have a
Material Adverse Effect on the Acquiror.
4.9 Environmental Matters
(a) To the best of the Acquiror's knowledge, the Acquiror and the Acquiror
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would not, singly or in the
aggregate, have a Material Adverse Effect on the Acquiror. Neither the
Acquiror nor any Acquiror Subsidiary has received in the past five years any
communication from a Governmental Entity alleging that the Acquiror or any
Acquiror Subsidiary is not in such compliance, or if such a communication has
been received, the Acquiror is now in such compliance, and, to the best
knowledge of the Acquiror, there are no present circumstances that would
prevent or interfere with the continuation of compliance with all
Environmental Laws.
(b) To the best of the Acquiror's knowledge, none of the properties owned,
leased or operated by the Acquiror or the Acquiror Subsidiaries has been or is
in violation of or liable under any Environmental Law, except any such
violations or liabilities which would not singly or in the aggregate have a
Material Adverse Effect on the Acquiror.
(c) To the best of the Acquiror's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action
or governmental investigation that could result in the imposition of any
liability arising under any Environmental Law against the Acquiror or any
Acquiror Subsidiary or against any person or entity whose liability for any
Environmental Claim the Acquiror or any Acquiror Subsidiary has or may have
retained or assumed either contractually or by operation of law, except such
which would not have a Material Adverse Effect on the Acquiror.
4.10 Tax Matters
(a) The Acquiror and the Acquiror Subsidiaries, and each of their
predecessors, have timely filed all federal, state and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns required by applicable law to be filed by them
(including, without limitation, estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all material taxes required to be paid
in respect of the periods covered by such returns and, as of the Effective
Time, will have paid, or where payment is not required to have been made, will
have set up an adequate reserve or accrual for the payment of, all material
taxes for any subsequent periods ending on or prior to the Effective Time.
Neither the Acquiror nor any of the Acquiror Subsidiaries will have any
material liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax
returns filed by the Acquiror and its Subsidiaries are complete and accurate
in all material respects. Neither the Acquiror nor an Acquiror Subsidiary is
delinquent in the payment of any tax, assessment or governmental charge or has
requested any extension of time within which to file any tax returns in
respect of any fiscal year or portion thereof which have not since been filed.
No deficiencies for any tax, assessment or governmental charge have been
proposed, asserted or assessed (tentatively or otherwise) against the Acquiror
or an Acquiror Subsidiary as a result of any examinations or otherwise which
have not been settled and paid. There are currently no agreements in effect
with respect to the Acquiror or an Acquiror Subsidiary to extend the period of
limitations for the assessment or collection of any tax. Except as Previously
Disclosed, as of the date hereof, no audit, examination or deficiency or
refund litigation with respect to any federal, state and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns filed by the Acquiror and the Acquiror
Subsidiaries is pending or, to the best of the Acquiror's knowledge,
threatened.
(c) Neither the Acquiror nor any Acquiror Subsidiary (i) is a party to any
agreement providing for the allocation or sharing of taxes, (ii) is required
to include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by the Acquiror or
an Acquiror Subsidiary (nor does the Acquiror have any knowledge that the
Internal Revenue Service has proposed any such adjustment or change of
accounting method) or (iii) has filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply.
4.11 Legal Proceedings
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Acquiror,
threatened against the Acquiror or any Acquiror Subsidiary or against any
asset, interest or right of the Acquiror or any Acquiror Subsidiary, or, to
the best knowledge of the Acquiror, against any officer, director or employee
of any of them that in any such case, if decided adversely, would have a
Material Adverse Effect on the Acquiror. Neither the Acquiror nor any of the
Acquiror Subsidiaries is a party to any order, judgment or decree which has or
could reasonably be expected to have a Material Adverse Effect on the
Acquiror.
4.12 Compliance with Laws
(a) Each of the Acquiror and each of the Acquiror Subsidiaries 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 that are required in order to
permit it to carry on its business as it is presently being conducted and the
absence of which could reasonably be expected to have a Material Adverse
Effect on the Acquiror; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect; and to the best
knowledge of the Acquiror, no suspension or cancellation of any of the same is
threatened.
(b) Neither the Acquiror nor any of the Acquiror Subsidiaries is in
violation of its respective Articles of Incorporation, Charter or other
chartering instrument or Bylaws, or of any applicable federal, state or local
law or ordinance or any order, rule or regulation of any federal, state, local
or other governmental agency or body (including, without limitation, all
banking (including without limitation all regulatory capital requirements),
securities, municipal securities, safety, health, environmental, zoning, anti-
discrimination, antitrust, and wage and hour laws, ordinances, orders, rules
and regulations), or in default with respect to any order, writ, injunction or
decree of any court, or in default under any order, license, regulation or
demand of any Governmental Entity, any of which violations or defaults could
reasonably be expected to have a Material Adverse Effect on the Acquiror; and
neither the Acquiror nor any Acquiror Subsidiary has received in the past five
years any notice or communication from a Governmental Entity asserting that
the Acquiror or any Acquiror Subsidiary is in violation of any of the
foregoing which could reasonably be expected to have a Material Adverse Effect
on the Acquiror. Neither the Acquiror nor any Acquiror Subsidiary is subject
to any regulatory or supervisory cease and desist order, agreement, written
directive, memorandum of understanding or written commitment (other than those
of general applicability to all savings associations or savings and loan
holding companies thereof issued by governmental authorities), and none of
them has received in the past five years any written communication requesting
that it enter into any of the foregoing, or if such a communication has been
received, none of them is any longer subject to such request.
4.13 Certain Information
None of the information relating to the Acquiror and the Acquiror
Subsidiaries to be included or incorporated by reference in (i) the Form S-4
will, at the time the Form S-4 and any amendment thereto becomes effective
under the Securities Act, contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, and
(ii) the Proxy Statement, as of the date such Proxy Statement is mailed to
shareholders of the Company and up to and including the date of the meeting of
shareholders to which such Proxy Statement relates, will contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading, provided that information as of a later date shall
be deemed to modify information as of an earlier date. The Proxy Statement
mailed by the Acquiror to shareholders of the Company in connection with the
meeting of shareholders at which this Agreement will be considered by such
shareholders will comply as to form in all material respects with the
Securities Act and the rules and regulations promulgated thereunder.
4.14 Employee Benefit Plans
(a) The Acquiror has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of the Acquiror or
any Acquiror Subsidiary (the "Acquiror Employee Plans"), whether written or
oral.
(b) None of the Acquiror, any Acquiror Subsidiary, any pension plan
maintained by any of them and qualified under Section 401(a) of the Code or,
to the best of the Acquiror's knowledge, any fiduciary (with respect to whom
the Acquiror or an Acquiror Subsidiary has an indemnification obligation) of
such plan has incurred any material liability to the PBGC or the Internal
Revenue Service with respect to any such plan. To the best of the Acquiror's
knowledge, no reportable event under Section 4043(b) of ERISA has occurred
with respect to any such pension plan.
(c) Neither the Acquiror nor any Acquiror Subsidiary participates in or
has incurred any liability (that has not already been satisfied) under Section
4201 of ERISA for a complete or partial withdrawal from a multi-employer plan
(as such term is defined in Section 4001(a)(3)of ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Acquiror Employee Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (an
"Acquiror Pension Plan") which is intended to qualify under Section 401(a) of
the Code to the effect that such plan is qualified under Section 401(a) of the
Code and the trust associated with such employee pension plan is tax exempt
under Section 501 of the Code. No such letter has been revoked or, to the
best of the Acquiror's knowledge, is threatened to be revoked and the Acquiror
does not know of any ground on which such revocation may be based. Neither
the Acquiror nor any Acquiror Subsidiary has any liability under any such plan
that is not reflected on the consolidated statement of financial condition of
the Acquiror at March 31, 1996 included in the Acquiror Financial Statements,
other than liabilities incurred in the ordinary course of business in
connection therewith subsequent to the date thereof.
(e) To the best of the Acquiror's knowledge, no prohibited transaction
(within the meaning of Section 406 of ERISA) that is not exempt from the
prohibition of such section by virtue of a statutory or administrative
exemption has occurred with respect to any Acquiror Employee Plan which would
result in the imposition, directly or indirectly, of a material excise tax
under Section 4975 of the Code or a material civil penalty under Section
502(i) of ERISA or otherwise have a Material Adverse Effect on the Acquiror.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established)
of all contributions which are required for periods after the date hereof and
prior to the Effective Time, under the terms of each Acquiror Employee Plan or
ERISA; no accumulated funding deficiency (as defined in Section 302 of ERISA
or Section 412(1)(8)(A) of the Code), whether or not waived, exists with
respect to any Acquiror Pension Plan, and there is no "unfunded current
liability" (as defined in Section 412 of the Code) with respect to any
Acquiror Pension Plan.
(g) To the best of the Acquiror's knowledge, the Acquiror Employee Plans
have been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws
and regulations.
(h) There are no pending or, to the best knowledge of the Acquiror,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Acquiror Employee Plans or any trust related thereto or, to
the best of the Acquiror's knowledge, any fiduciary thereof (with respect to
whom the Acquiror or an Acquiror Subsidiary has an indemnification
obligation).
4.15 Certain Contracts
Neither the Acquiror nor any Acquiror Subsidiary is in default or in non-
compliance, which default or non-compliance could reasonably be expected to
have a Material Adverse Effect on the Acquiror, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which
it is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with
the lapse of time or the giving of notice, or both, would constitute such a
default or non-compliance.
4.16 Brokers and Finders
Neither the Acquiror nor any Acquiror Subsidiary, nor, to the best of the
Company's knowledge, any of their respective directors, officers or employees,
has employed any broker or finder or incurred any liability for any broker or
finder fees or commissions in connection with the transactions contemplated
hereby which reasonably could be expected to be a liability of the Acquiror or
an Acquiror Subsidiary.
4.17 Insurance
Except as Previously Disclosed, the Acquiror and each Acquiror Subsidiary
is insured for reasonable amounts with financially sound and reputable
insurance companies against such risks as companies engaged in a similar
business would, in accordance with good business practice, customarily be
insured and has maintained all insurance required by applicable laws and
regulations.
4.18 Properties
All real and personal property owned by the Acquiror or the Acquiror Bank
or presently used by either of them in its respective business is in an
adequate condition (ordinary wear and tear excepted) and is sufficient to
carry on its business in the ordinary course of business consistent with their
past practices. The Acquiror and the Acquiror Bank have good and marketable
title free and clear of all liens, encumbrances, charges, defaults or equities
(other than equities of redemption under applicable foreclosure laws) to all
of the material properties and assets, real and personal, reflected on the
consolidated statement of financial condition of the Acquiror as of March 31,
1996 included in the Acquiror Financial Statements or acquired after such
date, except (i) liens for current taxes not yet due or payable (ii) pledges
to secure deposits and other liens incurred in the ordinary course of its
banking business, (iii) such imperfections of title, easements and
encumbrances, if any, as are not material in character, amount or extent and
(iv) as reflected on the consolidated statement of financial condition of the
Acquiror as of March 31, 1996 included in the Acquiror Financial Statements.
All real and personal property which is material to the Acquiror's business on
a consolidated basis and leased or licensed by the Acquiror or an Acquiror
Subsidiary is held pursuant to leases or licenses which are valid and
enforceable in accordance with their respective terms and such leases will not
terminate or lapse prior to the Effective Time.
4.19 Labor
No work stoppage involving the Acquiror or the Acquiror Bank is pending or,
to the best knowledge of the Acquiror, threatened. Neither the Acquiror nor
the Acquiror Bank is involved in, or threatened with or affected by, any labor
dispute, arbitration, lawsuit or administrative proceeding involving its
employees which could have a Material Adverse Effect on the Acquiror.
Employees of the Acquiror and the Acquiror Bank are not represented by any
labor union nor are any collective bargaining agreements otherwise in effect
with respect to such employees, and to the best of the Acquiror's knowledge,
there have been no efforts to unionize or organize any employees of the
Acquiror or the Acquiror Bank during the past five years.
4.20 Ownership of Company Common Stock.
As of the date hereof, neither the Acquiror nor, to its best knowledge, any
of its affiliates or associates (as such terms are defined under the Exchange
Act), (i) beneficially own, directly or indirectly, or (ii) are parties to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of Company Common Stock which in
the aggregate represent 10% or more of the outstanding shares of Company
Common Stock (other than shares held in a fiduciary capacity and beneficially
owned by third parties, shares taken in consideration of debts previously
contracted or in the case of the Acquiror shares which may be acquired
pursuant to the Stock Option Agreement).
4.21 Disclosures
None of the representations and warranties of the Acquiror or any of the
written information or documents furnished or to be furnished by the Acquiror
to the Company in connection with or pursuant to this Agreement or the
consummation of the transactions contemplated hereby, when considered as a
whole, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated or
necessary to make any such information or document, in light of the
circumstances, not misleading.
ARTICLE V
COVENANTS
5.1 Reasonable Best Efforts
Subject to the terms and conditions of this Agreement, each of the Company
and the Acquiror shall use its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary or
advisable under applicable laws and regulations so as to permit consummation
of the Merger (including, without limitation, satisfaction of the conditions
to consummation of the Merger specified in Article VI of this Agreement), the
Bank Merger and the other transactions contemplated hereby on or before
December 31, 1996 or, in the event that requisite regulatory and other
approvals have not yet been obtained, as promptly as practicable thereafter,
and to otherwise enable consummation of the transactions contemplated hereby,
and shall cooperate fully with the other party hereto to that end.
5.2 Shareholder Meeting
The Company shall take all action necessary to properly call and convene a
meeting of its shareholders as soon as practicable after the date hereof to
consider and vote upon this Agreement and the transactions contemplated
hereby. The Board of Directors of the Company will recommend that the
shareholders of the Company approve this Agreement, provided that the Board
of Directors of the Company may fail to make such recommendation, or withdraw,
modify or change any such recommendation, if such Board of Directors, after
having consulted with and considered the advice of outside counsel, has
determined that the making of such recommendation, or the failure to withdraw,
modify or change such recommendation, would constitute a breach of the
fiduciary duties of such directors under applicable law.
5.3 Regulatory Matters
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Form S-4, including the Proxy Statement. Each
of the Acquiror and the Company shall use its reasonable best efforts to have
the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing, and the Company shall thereafter promptly mail
the Proxy Statement to its shareholders. The Acquiror also shall use its
reasonable best efforts to obtain all necessary state securities law or "blue
sky" permits and approvals required to carry out the issuance of Acquiror
Common Stock pursuant to the Merger and all other transactions contemplated by
this Agreement, and the Company shall furnish all information concerning the
Company and the holders of the Company Common Stock as may be reasonably
requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the Merger, the Bank Merger and the other
transactions contemplated hereby. The Acquiror and the Company shall have the
right to review in advance, and to the extent practicable each will consult
with the other on, in each case subject to applicable laws relating to the
exchange of information, all the information which appears in any filing made
with or written materials submitted to any third party or any Governmental
Entity in connection with the transactions contemplated by this Agreement. In
exercising the foregoing right, each of the parties hereto shall act
reasonably and as promptly as practicable. The parties hereto agree that they
will consult with each other with respect to the obtaining of all permits,
consents, approvals and authorizations of all third parties and Governmental
Entities necessary or advisable to consummate the transactions contemplated by
this Agreement and each party will keep the other apprised of the status of
matters relating to completion of the transactions contemplated herein.
(c) The Acquiror and the Company shall, upon request, furnish each other
with all information concerning themselves, their respective Subsidiaries,
directors, officers and shareholders and such other matters as may be
reasonably necessary or advisable in connection with the Proxy Statement, the
Form S-4 or any other statement, filing, notice or application made by or on
behalf of the Acquiror, the Company or any of their respective Subsidiaries to
any Governmental Entity in connection with the Merger, the Bank Merger and the
other transactions contemplated hereby.
(d) The Acquiror and the Company shall promptly furnish each other with
copies of written communications received by the Acquiror or the Company, as
the case may be, or any of their respective Subsidiaries from, or delivered by
any of the foregoing to, any Governmental Entity in respect of the
transactions contemplated hereby.
5.4 Investigation and Confidentiality
(a) Each party shall permit the other party and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to such other party all books, papers and records relating to the
assets, stock ownership, properties, operations, obligations and liabilities
of it and its Subsidiaries, including, but not limited to, all books of
account (including the general ledger), tax records, minute books of meetings
of boards of directors (and any committees thereof) and shareholders,
organizational documents, bylaws, material contracts and agreements, filings
with any regulatory authority, accountants' work papers, litigation files,
loan files, plans affecting employees, and any other business activities or
prospects in which the other party may have a reasonable interest, provided
that such access shall be reasonably related to the transactions contemplated
hereby and, in the reasonable opinion of the respective parties providing such
access, not unduly interfere with normal operations. Each party and its
Subsidiaries shall make their respective directors, officers, employees and
agents and authorized representatives (including counsel and independent
public accountants) available to confer with the other party and its
representatives, provided that such access shall be reasonably related to the
transactions contemplated hereby and shall not unduly interfere with normal
operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be
treated as the sole property of the party furnishing the information until
consummation of the transactions contemplated hereby and, if such transactions
shall not occur, the party receiving the information shall either destroy or
return to the party which furnished such information all documents or other
materials containing, reflecting or referring to such information, shall use
its best efforts to keep confidential all such information, and shall not
directly or indirectly use such information for any competitive or other
commercial purposes. The obligation to keep such information confidential
shall continue for five years from the date the proposed transactions are
abandoned but shall not apply to (i) any information which (x) the party
receiving the information can establish by convincing evidence was already in
its possession prior to the disclosure thereof by the party furnishing the
information; (y) was then generally known to the public; or (z) became known
to the public through no fault of the party receiving the information; or (ii)
disclosures pursuant to a legal requirement or in accordance with an order of
a court of competent jurisdiction, provided that the party which is the
subject of any such legal requirement or order shall use its best efforts to
give the other party at least ten business days prior notice thereof.
5.5 Press Releases
The Acquiror and the Company shall agree with each other as to the form and
substance of any press release related to this Agreement or the transactions
contemplated hereby, and consult with each other as to the form and substance
of other public disclosures which may relate to the transactions contemplated
by this Agreement, provided, however, that nothing contained herein shall
prohibit either party, following notification to the other party, from making
any disclosure which is required by law or regulation.
5.6 Business of the Parties
(a) During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of the Acquiror, the Company and
its Subsidiaries shall carry on their respective businesses in the ordinary
course consistent with past practice. During such period, the Company also
will use all reasonable efforts to (x) preserve its business organization and
that of the Company Subsidiaries intact, (y) keep available to itself and the
Acquiror the present services of the employees of the Company and the Company
Subsidiaries and (z) preserve for itself and the Acquiror the goodwill of the
customers of the Company and the Company Subsidiaries and others with whom
business relationships exist. Without limiting the generality of the
foregoing, except with the prior written consent of the Acquiror or as
expressly contemplated hereby, between the date hereof and the Effective Time,
the Company shall not, and shall cause each Company Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of the Company Common Stock, provided that nothing contained herein
shall be deemed to affect the ability of a Company Subsidiary to pay dividends
on its capital stock to the Company;
(ii) issue any shares of its capital stock, other than in the case of
the Company pursuant to the Stock Option Agreement or upon exercise of the
Company Options referred to in Section 3.1 hereof, or issue, grant, modify or
authorize any Rights, other than the Stock Option Agreement; purchase or
otherwise acquire any shares of Company Common Stock, other than pursuant to
the Mortgage Company Agreement or, subject to the requirements of applicable
laws and regulations, pursuant to an open market repurchase program to
purchase up to 410,205 shares of Company Common Stock after the date hereof at
a price of $18.00 or less per share; or effect any recapitalization,
reclassification, stock dividend, stock split or like change in
capitalization;
(iii) amend its Articles of Incorporation, Charter, Bylaws or similar
organizational documents; impose, or suffer the imposition, on any share of
stock or other ownership interest held by the Company in a Company Subsidiary
of any lien, charge or encumbrance or permit any such lien, charge or
encumbrance to exist; or waive or release any material right or cancel or
compromise any material debt or claim;
(iv) increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus or severance to, or
provide any other new employee benefit or incentive to, any of its directors,
officers or employees, except as may be required pursuant to binding
commitments existing on the date hereof and Previously Disclosed;
(v) enter into or, except as may be required by law or for purposes
of complying with Section 2.9 hereof, modify any pension, retirement, stock
option, stock purchase, stock appreciation right, savings, profit sharing,
deferred compensation, supplemental retirement, consulting, bonus, group
insurance or other employee benefit, incentive or welfare contract, plan or
arrangement, or any trust agreement related thereto, in respect of any of its
directors, officers or employees; make any contributions to the Company's
defined contribution plans not in the ordinary course of business consistent
with past practice; or make any contributions to the Company's Employee Stock
Ownership Plan;
(vi) enter into (w) any agreement, arrangement or commitment not made
in the ordinary course of business, (x) any agreement, indenture or other
instrument relating to the borrowing of money by the Company or a Company
Subsidiary or guarantee by the Company or any Company Subsidiary of any such
obligation of others, except in the case of the Bank for deposits, FHLB
advances, federal funds purchased and securities sold under agreements to
repurchase in the ordinary course of business consistent with past practice,
(y) any agreement, arrangement or commitment relating to the employment of, or
severance of, an employee, or amend any such existing agreement, arrangement
or commitment, provided that the Company and a Company Subsidiary may employ
an employee in the ordinary course of business if the employment of such
employee is terminable by the Company or a Company Subsidiary or any successor
thereof at will without liability, other than as required by law; or (z) any
contract, agreement or understanding with a labor union;
(vii) change its method of accounting in effect for the year ended
March 31, 1996, except as required by changes in laws or regulations or
generally accepted accounting principles, or change any of its methods of
reporting income and deductions for federal income tax purposes from those
employed in the preparation of its federal income tax return for the fiscal
year ended March 31, 1996, except as required by changes in laws or
regulations;
(viii) purchase or otherwise acquire or, other than pursuant to the
Mortgage Company Agreement, sell or otherwise dispose of, any assets or incur
any liabilities other than in the ordinary course of business consistent with
past practice and policies;
(ix) make any capital expenditures in excess of $5,000, other than
pursuant to binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair;
(x) originate, purchase or otherwise acquire, or extend, renew,
modify or otherwise alter any commercial real estate loan or any multi-family
residential loan, except pursuant to binding commitments existing on the date
hereof or following the Company's provision of not less than two business
days' written notice to the Acquiror describing the proposed activity in
reasonable detail;
(xi) file any applications or make any contract with respect to
branching or site location or relocation;
(xii) acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity;
(xiii) other than forward commitments to sell loans and hedging
activities entered into in the ordinary course of the Mortgage Company's
business and consistent with past practice, enter into any futures contract,
option contract, interest rate cap, interest rate floor, interest rate
exchange agreement or other agreement for purposes of hedging the exposure of
its interest-earning assets and interest-bearing liabilities to changes in
market rates of interest;
(xiv) engage in any transaction with an "affiliate," as defined at 12
C.F.R. 563.41(b)(1), other than pursuant to the Mortgage Company Agreement,
(xv) discharge or satisfy any lien or encumbrance or pay any material
obligation or liability (absolute or contingent) other than at scheduled
maturity or in the ordinary course of business;
(xvi) enter or agree to enter into any agreement or arrangement
granting any preferential right to purchase any of its assets or rights or
requiring the consent of any party to the transfer and assignment of any such
assets or rights;
(xvii) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the Code,
provided, however, that nothing contained herein shall limit the ability of
the Company to execute the Stock Option Agreement or to perform any action
required by the terms thereof or hereof;
(xviii) take any action that would result in any of the
representations and warranties of the Company contained in this Agreement not
to be true and correct in any material respect at the Effective Time; or
(xix) agree to do any of the foregoing.
(b) During the period from the date of this Agreement and continuing until
the Effective Time, the Acquiror shall continue to conduct its business and
the business of the Acquiror Bank in a manner designed in its reasonable
judgment to enhance the long-term value of the Acquiror Common Stock and the
business prospects of the Acquiror. Without limiting the generality of the
foregoing, except with the prior written consent of the Company or as
expressly contemplated hereby, between the date hereof and the Effective Time,
the Acquiror shall not, and shall cause the Acquiror Bank not to:
(i) amend its Restated Articles of Incorporation, Charter or Bylaws
in a manner which would adversely affect in any manner the terms of the
Acquiror Common Stock or the ability of the Acquiror to consummate the
transactions contemplated hereby;
(ii) make any acquisition or take any other action that individually
or in the aggregate could materially adversely affect the ability of the
Acquiror to consummate the transactions contemplated hereby in a reasonably
timely manner;
(iii) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination thereof)
in respect of the Acquiror Common Stock, except for regular quarterly cash
dividends in an amount determined by the Board of Directors in the ordinary
course of business and consistent with past practice, provided, however, that
nothing contained herein shall be deemed to affect the ability of (x) an
Acquiror Subsidiary to pay dividends on its capital stock to the Acquiror or
(y) the Acquiror to repurchase shares of Acquiror Common Stock;
(iv) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the Code;
provided, however, that nothing contained herein shall limit the ability of
the Acquiror to exercise its rights under the Stock Option Agreement;
(v) take any action that would result in any of the representations
and warranties of the Acquiror contained in this Agreement not to be true and
correct in any material respect at the Effective Time; or
(vi) agree to do any of the foregoing.
5.7 Certain Actions
The Company shall not, and shall cause each Company Subsidiary not to,
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in any negotiations or discussions
concerning, any acquisition, lease or purchase of all or a substantial portion
of the assets of, or any equity interest in, the Company or a Company
Subsidiary (other than with the Acquiror or an affiliate thereof), provided,
however, that the Board of Directors of the Company may furnish such
information or participate in such negotiations or discussions if such Board
of Directors, after having consulted with and considered the advice of outside
counsel, has determined that the failure to do the same would cause the
members of such Board of Directors to breach their fiduciary duties under
applicable law. The Company will promptly inform the Acquiror orally and in
writing of any such request for information or of any such negotiations or
discussions, as well as instruct its and its Subsidiaries' directors,
officers, representatives and agents to refrain from taking any action
prohibited by this Section 5.7.
5.8 Current Information
During the period from the date of this Agreement to the Effective Time,
each party shall, upon the request of the other party, cause one or more of
its designated representatives to confer on a monthly or more frequent basis
with representatives of the other party regarding its financial condition,
operations and business and matters relating to the completion of the
transactions contemplated hereby. As soon as reasonably available, but in no
event more than 45 days after the end of each calendar quarter ending after
the date of this Agreement (other than the last quarter of each fiscal year
ending March 31, in the case of the Company, and September 30, in the case of
the Acquiror), the Company and the Acquiror will deliver to the other party
its quarterly report on Form 10-Q under the Exchange Act, and, as soon as
reasonably available, but in no event more than 90 days after the end of each
fiscal year, the Company and the Acquiror will deliver to the other party its
Annual Report on Form 10-K. Within 25 days after the end of each month, the
Company and the Acquiror will deliver to the other party a consolidated
statement of financial condition and a consolidated statement of operations,
without related notes, for such month prepared in accordance with generally
accepted accounting principles.
5.9 Indemnification; Insurance
(a) From and after the Effective Time through the sixth anniversary of the
Effective Time, the Acquiror (the "Indemnifying Party") shall indemnify and
hold harmless each present and former director, officer and employee of the
Company or a Company Subsidiary, in each case determined as of the Effective
Time (the "Indemnified Parties"), against any costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") incurred in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of matters existing or occurring
at or prior to the Effective Time, whether asserted or claimed prior to, at or
after the Effective Time, to the fullest extent to which such Indemnified
Parties were entitled under the Articles of Incorporation and Bylaws of the
Company or in similar organizational documents of a Company Subsidiary, in
each case as in effect on the date hereof, provided, however, that all rights
to indemnification in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim. Without limiting
the foregoing obligation, the Acquiror also agrees that all limitations of
liability existing in favor of the Indemnified Parties in the Articles of
Incorporation and Bylaws of the Company or in similar organizational documents
of a Company Subsidiary, in each case as in effect on the date hereof, arising
out of matters existing or occurring at or prior to the Effective Time shall
survive the Merger and shall continue in full force and effect for a period of
six years from the Effective Time, provided, however, that all such rights in
respect of any claim asserted or made within such period shall continue until
the final disposition of such claim.
(b) Any Indemnified Party wishing to claim indemnification under Section
5.9(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure
to so notify shall not relieve the Indemnifying Party of any liability it may
have to such Indemnified Party if such failure does not materially prejudice
the Indemnifying Party. In the event of any such claim, action, suit,
proceeding or investigation (whether arising before or after the Effective
Time), (i) the Indemnifying Party shall have the right to assume the defense
thereof and the Indemnifying Party shall not be liable to such Indemnified
Parties for any legal expenses of other counsel or any other expenses
subsequently incurred by such Indemnified Parties in connection with the
defense thereof, except that if the Indemnifying Party elects not to assume
such defense or counsel for the Indemnified Parties advises that there are
issues which raise conflicts of interest between the Indemnifying Party and
the Indemnified Parties, the Indemnified Parties may retain counsel which is
reasonably satisfactory to the Indemnifying Party, and the Indemnifying Party
shall pay, promptly as statements therefor are received, the reasonable fees
and expenses of such counsel for the Indemnified Parties (which may not exceed
one firm in any jurisdiction unless the use of one counsel for such
Indemnified Parties would present such counsel with a conflict of interest),
(ii) the Indemnified Parties will cooperate in the defense of any such matter,
(iii) the Indemnifying Party shall not be liable for any settlement effected
without its prior written consent and (iv) the Indemnifying Party shall have
no obligation hereunder in the event a federal banking agency or a court of
competent jurisdiction shall ultimately determine, and such determination
shall have become final and nonappealable, that indemnification of an
Indemnified Party in the manner contemplated hereby is prohibited by
applicable law.
(c) In the event that the Acquiror or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section 5.9, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director and officer covered hereby.
5.10 Benefit Plans and Arrangements
(a) As soon as administratively practicable after the Effective Time, the
Acquiror shall take all reasonable action so that employees of the Company and
its Subsidiaries shall be entitled to participate in the Acquiror Employee
Plans of general applicability, and until such time the Company Employee Plans
shall remain in effect, provided that no employee of the Company or a Company
Subsidiary who becomes an employee of the Acquiror and subject to the
Acquiror's medical insurance plans shall be excluded from coverage thereunder
on the basis of a preexisting condition that was not also excluded under the
Company's medical insurance plans, except to the extent such preexisting
condition was excluded from coverage under the Company's medical insurance
plans, in which case this Section 5.10(a) shall not require coverage for such
preexisting condition. For purposes of determining eligibility to participate
in and the vesting of benefits under the Acquiror Employee Plans, the Acquiror
shall recognize years of service with the Company and a Company Subsidiary
prior to the Effective Time.
(b) All employees of the Company or a Company Subsidiary as of the
Effective Time shall become employees of the Acquiror or an Acquiror
Subsidiary as of the Effective Time, provided that the Acquiror or an Acquiror
Subsidiary shall have no obligation to continue the employment of any such
person and nothing contained in this Agreement shall give any employee of the
Company or any Company Subsidiary a right to continuing employment with the
Acquiror or an Acquiror Subsidiary after the Effective Time.
(c) The Acquiror agrees to make a severance payment to each employee of
the Company and the Company Subsidiaries (other than an employee of the
Company or the Company Subsidiaries who was otherwise contractually entitled
to receive severance payments from the Company or the Company Subsidiaries)
who (i) becomes an employee of the Acquiror and/or the Acquiror Subsidiaries
and whose employment is terminated on or following the Effective Time,
provided that the employee does not leave the employ of the Acquiror and/or
the Acquiror Subsidiaries prior to the termination date due to (A) the
employee's voluntary resignation or retirement or (B) the employee's
termination for cause, or (ii) is offered continued employment by the Acquiror
and/or the Acquiror Subsidiaries following the Effective Time either (A) at a
compensation level which is less than the employee's compensation at the
Company or the Company Subsidiaries immediately prior thereto or (B) in
connection with the relocation of such employee more than 30 miles from the
location of such employee's principal office immediately prior thereto and, in
either case, who does not accept such offer and voluntarily resigns his
employment. Any such employee shall be entitled to receive a lump sum
severance payment equal to two weeks base salary as in effect immediately
prior to the time of such termination for each year of service with the
Company and the Company Subsidiaries, with a minimum severance payment equal
to four weeks base salary and up to a maximum severance payment equal to 40
weeks base salary. As used herein, the term "cause" shall mean a good faith
determination by the Acquiror that an employee engaged in willful misconduct
in the performance of his or her duties or willfully or intentionally failed
substantially to perform or habitually neglected to perform reasonably
assigned duties.
5.11 Bank Merger
The Acquiror and the Company shall take, and shall respectively cause the
Acquiror Bank and the Bank to take, all necessary and appropriate actions,
including causing the execution by the Acquiror Bank and the Bank of a merger
agreement (the "Bank Merger Agreement"), to cause the Bank to merge with and
into the Acquiror Bank (the "Bank Merger") immediately after consummation of
the Merger in accordance with the laws of the United States and the
regulations of the OTS thereunder. The Acquiror Bank shall be the surviving
corporation in the Bank Merger and shall continue its corporate existence
under the name "Washington Federal Savings and Loan Association" under the
laws of the United States as a direct wholly-owned subsidiary of the Acquiror.
Upon consummation of the Bank Merger, the separate corporate existence of the
Bank shall cease. The directors and executive officers of the Acquiror Bank
upon consummation of the Bank Merger shall be as set forth in the Bank Merger
Agreement.
5.12 Certain Policies; Integration
(a) If requested by the Acquiror, on the business day immediately prior to
the Effective Time, the Company shall, consistent with generally accepted
accounting principles, establish or adjust accruals and reserves as may be
necessary to conform the Company's accounting and credit loss reserve
practices and methods to those of the Acquiror (as such practices and methods
are to be applied to the Company or its Subsidiaries from and after the
Effective Time) and reflect the Acquiror's plans with respect to the conduct
of the Company's business following the Merger and to provide for the costs
and expenses relating to the consummation by the Company of the transactions
contemplated by this Agreement; provided, however, that the Company shall not
be required to take such action (i) if such action is prohibited by applicable
law or (ii) unless the Acquiror informs the Company that it has no reason to
believe that all conditions to the Acquiror's obligations to consummate the
transactions contemplated by this Agreement set forth in Article VI hereof
will not be satisfied or waived. The establishment or adjustment of such
accruals and reserves shall not constitute a breach of any representation or
warranty of the Company contained in this Agreement.
(b) During the period from the date of this Agreement to the Effective
Time, the Company shall, and shall cause its directors, officers and employees
to, cooperate with and assist the Company in the formulation of a plan of
integration for the Acquiror and the Company and their respective banking
subsidiaries.
5.13 Restrictions on Resale
(a) The Company has Previously Disclosed to the Acquiror a schedule of each
person that, to the best of its knowledge, is deemed to be an "affiliate" of
the Company (each an "Affiliate"), as that term is used in Rule 145 under the
Securities Act.
(b) The Company shall use its reasonable best efforts to cause each person
who may be deemed to be an Affiliate of the Company to execute and deliver to
the Acquiror an agreement in the form attached hereto as Exhibit C.
5.14 Disclosure Supplements
From time to time prior to the Effective Time, each party shall promptly
supplement or amend any materials Previously Disclosed and delivered to the
other party pursuant hereto with respect to any matter hereafter arising
which, if existing, occurring or known at the date of this Agreement, would
have been required to be set forth or described in materials Previously
Disclosed to the other party or which is necessary to correct any information
in such materials which has been rendered materially inaccurate thereby; no
such supplement or amendment to such materials shall be deemed to have
modified the representations, warranties and covenants of the parties for the
purpose of determining whether the conditions set forth in Article VI hereof
have been satisfied.
5.15 Failure to Fulfill Conditions
In the event that either of the parties hereto determines that a condition
to its respective obligations to consummate the transactions contemplated may
not be fulfilled on or prior to the termination of this Agreement, it will
promptly notify the other party or parties. Each party will promptly inform
the other party or parties of any facts applicable to it that would be likely
to prevent or materially delay approval of the Merger or the Bank Merger by
any Governmental Entity or third party or which would otherwise prevent or
materially delay completion of the Merger, the Bank Merger or any of the other
transactions contemplated hereby.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions Precedent - The Acquiror and the Company
The respective obligations of the Acquiror and the Company to effect the
Merger shall be subject to satisfaction of the following conditions at or
prior to the Effective Time.
(a) All corporate action necessary to authorize the execution and delivery
of this Agreement and consummation of the Merger shall have been duly and
validly taken by the Acquiror and the Company, including approval by the
requisite vote of the shareholders of the Company of this Agreement, and all
corporate and shareholder action necessary to authorize the execution and
delivery of the Bank Merger Agreement and consummation of the transactions
contemplated thereby shall have been duly and validly taken by the Bank and
the Acquiror Bank.
(b) All approvals and consents from the OTS and any other Governmental
Entity the approval or consent of which is required for the consummation of
the Merger, the Bank Merger and the other transactions contemplated hereby
shall have been received and all statutory waiting periods in respect thereof
shall have expired; and the Acquiror and the Company shall have procured all
other approvals, consents and waivers of each person (other than the
Governmental Entities referred to above) whose approval, consent or waiver is
necessary to the consummation of the Merger, the Bank Merger and the other
transactions contemplated hereby and the failure of which to obtain would have
the effects set forth in the following proviso clause; provided, however, that
no approval or consent referred to in this Section 6.1(b) shall be deemed to
have been received if it shall include any condition or requirement that,
individually or in the aggregate, would so materially reduce the economic or
business benefits of the transactions contemplated by this Agreement to the
Acquiror that had such condition or requirement been known the Acquiror, in
its reasonable judgment, would not have entered into this Agreement.
(c) None of the Acquiror, the Company or their respective Subsidiaries
shall be subject to any statute, rule, regulation, injunction or other order
or decree which shall have been enacted, entered, promulgated or enforced by
any governmental or judicial authority which prohibits, restricts or makes
illegal consummation of the Merger, the Bank Merger or any of the other
transactions contemplated hereby.
(d) The Form S-4 shall have become effective under the Securities Act, and
the Acquiror shall have received all state securities laws or "blue sky"
permits and other authorizations or there shall be exemptions from
registration requirements necessary to issue the Acquiror Common Stock in
connection with the Merger, and neither the Form S-4 nor any such permit,
authorization or exemption shall be subject to a stop order or threatened stop
order by the Commission or any state securities authority.
(e) The shares of Acquiror Common Stock to be issued in connection with
the Merger shall have been approved for quotation on the Nasdaq Stock Market's
National Market.
(f) The Acquiror and the Company shall have received the written opinion
of Elias, Matz, Tiernan & Herrick L.L.P. to the effect that the Merger and the
Bank Merger will each constitute a reorganization within the meaning of
Section 368 of the Code and to the effect that (i) none of the Company, the
Bank, the Acquiror or the Acquiror Bank will recognize any gain or loss with
respect to the Merger or the Bank Merger, (ii) except for cash received in
lieu of fractional share interests, holders of Company Common Stock who
receive Acquiror Common Stock in the Merger will not recognize income, gain or
loss for federal income tax purposes, (iii) the basis of such Acquiror Common
Stock will equal the basis of the Company Common Stock for which it is
exchanged and (iv) the holding period of such Acquiror Common Stock will
include the holding period of the Company Common Stock for which it is
exchanged, assuming that such stock is a capital asset in the hands of the
holder thereof at the Effective Time. Each such opinion shall be based on
such written representations from the Acquiror, the Company and others as such
counsel shall reasonably request as to factual matters.
6.2 Conditions Precedent - The Company
The obligations of the Company to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Company pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Acquiror as set forth in
Article IV hereof shall be true and correct as of the date of this Agreement
and as of the Effective Time as though made on and as of the Effective Time
(or on the date when made in the case of any representation and warranty which
specifically relates to an earlier date), provided, however, that
notwithstanding anything herein to the contrary, this Section 6.2(a) shall be
deemed to have been satisfied even if such representations or warranties are
not true and correct unless the failure of any of the representations or
warranties to be so true and correct would have, individually or in the
aggregate, a Material Adverse Effect on the Acquiror.
(b) The Acquiror shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Effective
Time.
(c) The Acquiror shall have delivered to the Company a certificate, dated
the date of the Closing and signed by its Chairman and President and by its
Chief Financial Officer, to the effect that the conditions set forth in
Sections 6.2(a) and 6.2(b) have been satisfied.
(d) The Acquiror shall have furnished the Company with such certificates
of its respective officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 6.1 and 6.2 as such
conditions relate to the Acquiror as the Company may reasonably request.
6.3 Conditions Precedent - The Acquiror
The obligations of the Acquiror to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Acquiror pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Company set forth in Article
III hereof shall be true and correct as of the date of this Agreement and as
of the Effective Time as though made on and as of the Effective Time (or on
the date when made in the case of any representation and warranty which
specifically relates to an earlier date), provided, however, that
notwithstanding anything herein to the contrary, this Section 6.3(a) shall be
deemed to have been satisfied even if such representations or warranties are
not true and correct unless the failure of any of the representations or
warranties to be so true and correct would have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
(c) The Company shall have delivered to the Acquiror a certificate, dated
the date of the Closing and signed by its President and by its Chief Financial
Officer, to the effect that the conditions set forth in Sections 6.3(a) and
6.3(b) have been satisfied.
(d) Dissenting Shares shall constitute not more than 10.0% of the
outstanding shares of Company Common Stock immediately prior to the Effective
Time.
(e) The Company shall have completed immediately prior to the Closing the
distribution of not less than 81% of the common stock of the Mortgage Company
to the Shareholders and the related redemption of Company Common Stock held by
such persons pursuant to the terms of the Mortgage Company Agreement.
(f) For the period from March 31, 1996 through the Effective Time, (i) the
Company shall not have established provisions for loan losses and/or write-
downs with respect to Real Estate Owned which exceed, in the aggregate, $1.0
million, or (ii) the Acquiror shall not have determined, in its reasonable
judgment, that an aggregate of $1.0 million of additional provisions for loan
losses and/or write-downs with respect to Real Estate Owned are necessary to
provide for reasonably anticipated losses on the Company's loans, net of
recoveries, or to reflect the Company's Real Estate Owned at fair value (less
estimated costs to sell) in accordance with generally accepted accounting
principles.
(g) For the period from March 31, 1996 through the Effective Time, (i) the
Company shall not have incurred, in the aggregate, $15.0 million or more of
realized and/or unrealized losses (net of realized and/or unrealized gains)
with respect to the Company's investment securities and mortgage-backed
securities, including securities held-to-maturity, available for sale and held
for trading, or (ii) the Acquiror shall not have determined, in its reasonable
judgment, that the Company has incurred, in the aggregate, $15.0 million or
more of realized and/or unrealized losses (net of realized and/or unrealized
gains) with respect to the Company's investment securities and mortgage-backed
securities, including securities held-to-maturity, available for sale and held
for trading.
(h) The Company shall have furnished the Acquiror with such certificates
of its officers or others and such other documents to evidence fulfillment of
the conditions set forth in Sections 6.1 and 6.3 as such conditions relate to
the Company as the Acquiror may reasonably request.
ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 Termination
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual consent
in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by the Acquiror in
writing if the Company has, or by the Company in writing if the Acquiror has,
in any material respect, breached (i) any material covenant or undertaking
contained herein or (ii) any representation or warranty contained herein the
breach of which reasonably would be expected to have, individually or in the
aggregate, a Material Adverse Effect on the party that made the representation
or warranty, in any case if such breach has not been cured by the earlier of
30 days after the date on which written notice of such breach is given to the
party committing such breach or the Effective Time;
(c) at any time, by any party hereto in writing, if any of the
applications for prior approval referred to in Section 5.3 hereof are denied
or are approved in a manner which does not satisfy the requirements of Section
6.1(b) hereof, and the time period for appeals and requests for
reconsideration has run;
(d) at any time, by any party hereto in writing, if the shareholders of
the Company do not approve this Agreement after a vote taken thereon at a
meeting duly called for such purpose (or at any adjournment thereof), unless
the failure of such occurrence shall be due to the failure of the party
seeking to terminate to perform or observe in any material respect its
agreements set forth herein to be performed or observed by such party at or
before the Effective Time;
(e) by either the Company or the Acquiror in writing if the Effective Time
has not occurred by the close of business on the first anniversary of the date
hereof, provided that this right to terminate shall not be available to any
party whose failure to perform an obligation in breach of such party's
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Merger and the other transactions contemplated hereby to be
consummated by such date; and
(f) by the Company at any time during the three-day period commencing with
the Determination Date (as defined below) if the Average Acquiror Share Price
shall be less than $17.00, subject, however, to the following three sentences.
If the Company elects to exercise its termination right pursuant to this
Section 7.1(f), it shall give written notice to the Acquiror (provided that
such notice of election to terminate may be withdrawn at any time within the
aforementioned three-day period). During the three-day period commencing with
its receipt of such notice, the Acquiror shall have the option to increase the
consideration to be received by the holders of the Company Common Stock
hereunder by adjusting the Exchange Ratio to equal a number (calculated to the
nearest one-thousandth) obtained by dividing (A) $17.00 by (B) the Average
Acquiror Share Price. If the Acquiror so elects within such three-day period,
it shall give prompt written notice to the Company of such election and the
revised Exchange Ratio, whereupon no termination shall have occurred pursuant
to this Section 7.1(f) and this Agreement shall remain in effect in accordance
with its terms (except as the Exchange Ratio shall have been so modified).
For purposes of this Section 7.1(f), the term "Determination Date" means the
last business day in the period referred to in the definition of the Average
Acquiror Share Price.
7.2 Effect of Termination
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i)
the provisions relating to confidentiality and expenses set forth in Section
5.4 and Section 8.1, respectively, and this Section 7.2 shall survive any such
termination and (ii) a termination pursuant to Section 7.1(b), (d) or (e)
shall not relieve the breaching party from liability for willful breach of any
covenant, undertaking, representation or warranty giving rise to such
termination.
7.3 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that
by their terms are to be performed after the Effective Time (including without
limitation the covenants set forth in Sections 5.9 and 5.10 hereof), provided
that no such representations, warranties or covenants shall be deemed to be
terminated or extinguished so as to deprive the Acquiror or the Company (or
any director, officer or controlling person thereof) of any defense at law or
in equity which otherwise would be available against the claims of any person,
including, without limitation, any shareholder or former shareholder of either
the Acquiror or the Company.
7.4 Waiver
Each party hereto by written instrument signed by an executive officer of
such party, may at any time (whether before or after approval of this
Agreement by the shareholders of the Company) extend the time for the
performance of any of the obligations or other acts of the other party hereto
and may waive (i) any inaccuracies of the other party in the representations
or warranties contained in this Agreement or any document delivered pursuant
hereto, (ii) compliance with any of the covenants, undertakings or agreements
of the other party, (iii) to the extent permitted by law, satisfaction of any
of the conditions precedent to its obligations contained herein or (iv) the
performance by the other party of any of its obligations set forth herein,
provided that any such waiver granted, or any amendment or supplement pursuant
to Section 7.5 hereof executed after shareholders of the Acquiror or the
Company have approved this Agreement shall not modify either the amount or
form of the consideration to be provided hereby to the holders of Company
Common Stock upon consummation of the Merger or otherwise materially adversely
affect such shareholders without the approval of the shareholders who would
be so affected.
7.5 Amendment or Supplement
This Agreement may be amended or supplemented at any time by mutual
agreement of the Acquiror and the Company, subject to the proviso to Section
7.4 hereof. Any such amendment or supplement must be in writing and
authorized by or under the direction of their respective Boards of Directors.
ARTICLE VIII
MISCELLANEOUS
8.1 Expenses
Each party hereto shall bear and pay all costs and expenses incurred by it
in connection with the transactions contemplated by this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel,
provided that (i) expenses of printing the Form S-4 and the registration fee
to be paid to the Commission in connection therewith shall be shared equally
between the Company and the Acquiror and (ii) notwithstanding anything to the
contrary contained in this Agreement, neither the Acquiror nor the Company
shall be released from any liabilities or damages arising out of its willful
breach of any provision of this Agreement.
8.2 Entire Agreement
This Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other
than documents referred to herein and therein. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the parties
hereto and thereto and their respective successors. Nothing in this
Agreement, expressed or implied, is intended to confer upon any party, other
than the parties hereto, and their respective successors, any rights,
remedies, obligations or liabilities other than as set forth in Section 5.9
hereof.
8.3 No Assignment
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
8.4 Notices
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally,
telecopied (with confirmation) or sent by overnight mail service or by
registered or certified mail (return receipt requested), postage prepaid,
addressed as follows:
If to the Acquiror:
Washington Federal, Inc.
425 Pike Street
Seattle, Washington 98101
Attn: Guy C. Pinkerton
Chairman, President and Chief Executive Officer
Fax: 206-624-2334
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
If to the Company:
Metropolitan Bancorp
1520 4th Avenue
Seattle, Washington 98101-1648
Attn: Patrick F. Patrick
President and Chief Executive Officer
Fax: 206-654-7883
With a required copy to:
Perkins Coie
1201 Third Avenue
40th Floor
Seattle, Washington 98101-3099
Attn: Charles Katz, Esq.
Fax: 206-583-8500
8.5 Alternative Structure
Notwithstanding any provision of this Agreement to the contrary, the
Acquiror may, with the written consent of the Company, elect, subject to the
filing of all necessary applications and the receipt of all required
regulatory approvals, to modify the structure of the acquisition of the
Company set forth herein, provided that (i) the federal income tax
consequences of any transactions created by such modification shall not be
other than those set forth in Section 6.1(f) hereof, (ii) consideration to be
paid to the holders of the Company Common Stock is not thereby changed in kind
or reduced in amount as a result of such modification and (iii) such
modification will not materially delay or jeopardize receipt of any required
regulatory approvals or any other condition to the obligations of the Acquiror
set forth in Sections 6.1 and 6.3 hereof.
8.6 Interpretation
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement.
8.7 Counterparts
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 Governing Law
This Agreement shall be governed by and construed in accordance with the
laws of the State of Washington applicable to agreements made and entirely to
be performed within such jurisdiction.
8.9 Dispute Resolution
In the event that the Company disagrees with any judgment(s) made by the
Acquiror pursuant to Section 6.3(f) and/or 6.3(g) of this Agreement, the
judgment(s) shall be submitted for review by the respective independent public
accountants of the Company and the Acquiror, or such other respective
independent public accountants that may be selected by the Company or the
Acquiror, as the case may be, for this purpose, whose determination shall be
final, provided that if the independent public accountants engaged for this
purpose do not agree, the Acquiror's judgment(s) shall be submitted for
further review by another independent public accounting firm mutually
agreeable to the Company and the Acquiror, whose determination shall be final
and the expense of which shall be equally born by the Company and the
Acquiror.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
WASHINGTON FEDERAL, INC.
Attest:
/s/ Ronald L. Saper By: /s/ Guy C. Pinkerton
Name: Ronald L. Saper Name: Guy C. Pinkerton
Title: Senior Vice President Title: Chairman, President
and Chief Financial Officer and Chief Executive Officer
METROPOLITAN BANCORP
Attest:
/s/ Edwin C. Hedlund By: /s/ Patrick F. Patrick
Name: Edwin C. Hedlund Name: Patrick F. Patrick
Title: Secretary Title: President and Chief
Executive Officer
The Disclosure Memorandum to the Merger Agreement has been omitted pursuant
to Item 601(b)(2) of Regulation S-K. A copy of the Disclosure Memorandum will
be furnished supplementally to the Securities and Exchange Commission upon
request.
EXHIBIT A
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of July 11, 1996 (the "Agreement"), by and
between Metropolitan Bancorp, a Washington corporation ("Issuer"), and
Washington Federal, Inc., a Washington corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of July 11, 1996 (the "Plan"), providing for, among other
things, the merger of Issuer with and into Grantee (the "Merger"), with
Grantee as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the Plan,
Grantee has required that Issuer agree, and Issuer has agreed, to grant to
Grantee the Option (as hereinafter defined);
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree
as follows:
1. Defined Terms. Capitalized terms which are used but not defined herein
shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 657,000 shares (as adjusted as set forth herein) (the "Option
Shares," which shall include the Option Shares before and after any transfer
of such Option Shares) of Common Stock, par value $0.01 per share ("Issuer
Common Stock"), of Issuer at a purchase price per Option Share (the "Purchase
Price") of $13.50, provided, however, that in no event shall the number of
Option Shares for which the Option is exercisable exceed 19.9% of the issued
and outstanding shares of Issuer Common Stock without giving effect to any
shares subject to or issued pursuant to the Option.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States shall be in
effect, Holder may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (A) the Effective Time of the Merger,
(B) termination of the Plan in accordance with the terms thereof prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event, other than a
termination of the Plan by Grantee pursuant to Section 7.1(b)(i) (a "Default
Termination"), (C) 12 months after the termination of the Plan by Grantee
pursuant to a Default Termination, and (D) 12 months after termination of the
Plan (other than pursuant to a Default Termination) following the occurrence
of a Purchase Event or a Preliminary Purchase Event; and provided, further,
that any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable laws, including without limitation the Home Owners'
Loan Act, as amended ("HOLA"). The term "Holder" shall mean the holder or
holders of the Option from time to time, and which is initially Grantee. The
rights set forth in Section 8 hereof shall terminate when the right to
exercise the Option terminates (other than as a result of a complete exercise
of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any subsidiary of Grantee) to effect
(A) a merger, consolidation or similar transaction involving Issuer or any of
its subsidiaries, (B) other than pursuant to the Mortgage Company Agreement,
the disposition, by sale, lease, exchange or otherwise, of assets of Issuer or
any of its subsidiaries representing in either case 15% or more of the
consolidated assets of Issuer and its subsidiaries, or (C) the issuance, sale
or other disposition by Issuer of (including by way of merger, consolidation,
share exchange or any similar transaction) securities representing 15% or more
of the voting power of Issuer or any of its subsidiaries (any of the foregoing
an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule 13d-
3 promulgated under the Exchange Act) of or the right to acquire beneficial
ownership of, or any "group" (as such term is defined in Section 13(d)(3) of
the Exchange Act), other than any group of which Grantee or any Grantee
subsidiary is a part, shall have been formed which beneficially owns or has
the right to acquire beneficial ownership of, 25% or more of the then
outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities Act
with respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 10% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer" and
an "Exchange Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have approved
the Plan at the meeting of such stockholders held for the purpose of voting on
the Plan, (B) such meeting shall not have been held or shall have been
canceled prior to termination of the Plan or (C) Issuer's Board of Directors
shall have withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect to the Plan, in
each case after it shall have been publicly announced that any person (other
than Grantee or any subsidiary of Grantee) shall have (x) made, or disclosed
an intention to make, a proposal to engage in an Acquisition Transaction, (y)
commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (z) filed an application
(or given notice), whether in draft or final form, under the Bank Holding
Company Act of 1956, as amended, the HOLA, the Bank Merger Act, as amended, or
the Change in Bank Control Act of 1978, as amended, for approval to engage in
an Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would entitle
Grantee to terminate the Plan under Section 7.1(b) thereof (without regard to
the cure period provided for therein unless such cure is promptly effected
without jeopardizing consummation of the Merger pursuant to the terms of the
Plan) after (x) a bona fide proposal is made by any person (other than Grantee
or any subsidiary of Grantee) to Issuer or its stockholders to engage in an
Acquisition Transaction, (y) any person (other than Grantee or any
subsidiary of Grantee) states its intention to Issuer or its stockholders to
make a proposal to engage in an Acquisition Transaction if the Plan terminates
or (z) any person (other than Grantee or any subsidiary of Grantee) shall have
filed an application or notice with any Governmental Entity to engage in an
Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event, it being understood that the
giving of such notice by Issuer shall not be a condition to the right of
Holder to exercise the Option.
(e) In the event Holder is entitled to under the terms hereof and wishes
to exercise the Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying (i) the total
number of Option Shares it intends to purchase pursuant to such exercise, and
(ii) a place and date not earlier than three business days nor later than 15
business days from the Notice Date for the closing (the "Closing") of such
purchase (the "Closing Date"). If prior notification to or approval of the
Office of Thrift Supervision ("OTS") or any other Governmental Entity is
required in connection with such purchase, Issuer shall cooperate with Grantee
in the filing of the required notice or application for approval and the
obtaining of such approval and the Closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately
available funds by wire transfer to a bank account designated by Issuer, an
amount equal to the Purchase Price multiplied by the number of Option Shares
to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to Issuer at the address of Issuer specified in Section 12(f)
hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a),
(i) Issuer shall deliver to Holder (A) a certificate or certificates
representing the Option Shares to be purchased at such Closing, which Option
Shares shall be free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever and subject to no preemptive rights, and (B) if the
Option is exercised in part only, an executed new agreement with the same
terms as this Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall
deliver to Issuer a letter agreeing that Holder shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION
AGREEMENT DATED AS OF JULY 11, 1996. A COPY OF SUCH AGREEMENT
WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE UPON
RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer and
its counsel, to the effect that such legend is not required for purposes of
the Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of exercise
of the Option provided for under Section 3(e), the tender of the applicable
purchase price in immediately available funds and the tender of this Agreement
to Issuer, Holder shall be deemed to be the holder of record of the shares of
Issuer Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Issuer Common Stock shall not then be actually
delivered to Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer, (iii) promptly to take all action as may from time to
time be required (including (A) complying with all premerger notification,
reporting and waiting period requirements and (B) in the event prior approval
of or notice to any Governmental Entity is necessary before the Option may be
exercised, cooperating fully with Holder in preparing such applications or
notices and providing such information to such Governmental Entity as it may
require) in order to permit Holder to exercise the Option and Issuer duly and
effectively to issue shares of Issuer Common Stock pursuant hereto, and (iv)
promptly to take all action provided herein to protect the rights of Holder
against dilution.
5. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals referred
to herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Issuer, and this Agreement has been duly executed and
delivered by Issuer.
(b) No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Incorporation or Bylaws or a
default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, debenture, mortgage, indenture, license, material agreement or other
material instrument or obligation to which Issuer is a party, or by which it
or any of its properties or assets may be bound, or (ii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Issuer or
any of its properties or assets, which conflict, violation or default could
have a material adverse effect on Issuer or Grantee's rights under this
Agreement.
(c) Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue, and at all
times from the date hereof until the obligation to deliver Issuer Common Stock
upon the exercise of the Option terminates, will have reserved for issuance
upon exercise of the Option that number of shares of Issuer Common Stock equal
to the maximum number of shares of Issuer Common Stock at any time and from
time to time purchasable upon exercise of the Option, and all such shares,
upon issuance pursuant to the Option, will be duly and validly issued, fully
paid and nonassessable, and will be delivered free and clear of all liens,
claims, charges and encumbrances of any kind or nature whatsoever and not
subject to any preemptive rights.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee, and this Agreement has been
duly executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization, etc.
(a) In the event of any change in Issuer Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option,
the number and class of shares or other securities or property that Holder
would have received in respect of Issuer Common Stock if the Option had been
exercised immediately prior to such event, or the record date therefor, as
applicable. If any additional shares of Issuer Common Stock are issued after
the date of this Agreement (other than pursuant to an event described in the
first sentence of this Section 7(a)), the number of shares of Issuer Common
Stock subject to the Option shall be adjusted so that, after such issuance,
it, together with any shares of Issuer Common Stock previously issued pursuant
hereto, equals 19.9% of the number of shares of Issuer Common Stock then
issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Option.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one
of its subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged
for stock or other securities of Issuer or any other person or cash or any
other property or the outstanding shares of Issuer Common Stock immediately
prior to such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company, or (iii) to
sell or otherwise transfer all or substantially all of its assets to any
person, other than Grantee or one of its subsidiaries, then, and in each such
case, the agreement governing such transaction shall make proper provisions so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged
for, an option (the "Substitute Option"), at the election of Holder, of any of
(x) the Acquiring Corporation (as hereinafter defined), (y) any person that
controls the Acquiring Corporation or (z) in the case of a merger described in
clause (ii), Issuer (such person being referred to as "Substitute Option
Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Holder. Substitute Option Issuer also
shall enter into an agreement with Holder in substantially the same form as
this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable, divided
by the Average Price (as hereinafter defined). The exercise price of
Substitute Option per share of Substitute Common Stock (the "Substitute Option
Price") shall then be equal to the Purchase Price multiplied by a fraction in
which the numerator is the number of shares of Issuer Common Stock for which
the Option was theretofore exercisable and the denominator is the number of
shares of the Substitute Common Stock for which the Substitute Option is
exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, or (iii) the transferee of all or substantially all of
Issuer's assets (or a substantial part of the assets of its subsidiaries taken
as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power in respect of the
election of directors (or persons similarly responsible for the direction of
the business and affairs) of the Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per
share of Issuer Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (x) the price per share of Issuer Common Stock to be
paid by any third party pursuant to an agreement with Issuer, (y) the highest
closing price for shares of Issuer Common Stock within the six-month period
immediately preceding the consolidation, merger or sale in question and (z) in
the event of a sale of all or substantially all of Issuer's assets or
deposits, an amount equal to (i) the sum of the price paid in such sale for
such assets (and/or deposits) and the current market value of the remaining
assets of Issuer, as determined by a nationally-recognized investment banking
firm selected by Holder, divided by (ii) the number of shares of Issuer Common
Stock outstanding at such time. In the event that a Tender Offer or an
Exchange Offer is made for Issuer Common Stock or an agreement is entered into
for a merger or consolidation involving consideration other than cash, the
value of the securities or other property issuable or deliverable in exchange
for Issuer Common Stock shall be determined by a nationally-recognized
investment banking firm selected by Holder.
(4) "Average Price" shall mean the average closing price of a share
of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer of
the Substitute Option, the Average Price shall be computed with respect to a
share of common stock issued by Issuer, the person merging into Issuer or by
any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the aggregate of the shares of Substitute
Common Stock but for the limitation in the first sentence of this Section
7(f), Substitute Option Issuer shall make a cash payment to Holder equal to
the excess of (i) the value of the Substitute Option without giving effect to
the limitation in the first sentence of this Section 7(f) over (ii) the value
of the Substitute Option after giving effect to the limitation in the first
sentence of this Section 7(f). This difference in value shall be determined
by a nationally-recognized investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section 7(b)
unless the Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder and take
all other actions that may be necessary so that the provisions of this Section
7 are given full force and effect (including, without limitation, any action
that may be necessary so that the holders of the other shares of common stock
issued by Substitute Option Issuer are not entitled to exercise any rights by
reason of the issuance or exercise of the Substitute Option and the shares of
Substitute Common Stock are otherwise in no way distinguishable from or have
lesser economic value (other than any diminution in value resulting from the
fact that the shares of Substitute Common Stock are restricted securities, as
defined in Rule 144 under the Securities Act or any successor provision) than
other shares of common stock issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a), at the request of Holder
at any time commencing upon the first occurrence of a Repurchase Event (as
defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer
Common Stock purchased by Holder pursuant hereto with respect to which Holder
then has beneficial ownership. The date on which Holder exercises its rights
under this Section 8 is referred to as the "Request Date." Such repurchase
shall be at an aggregate price (the "Section 8 Repurchase Consideration")
equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case of
Option Shares with respect to which the Option has been exercised but the
Closing Date has not occurred, payable) by Holder for each share of Issuer
Common Stock with respect to which the Option has been exercised and with
respect to which Holder then has beneficial ownership, multiplied by the
number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the OTS or any other Governmental Entity is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to Section 8, in whole or in part, or to
require that Issuer deliver from time to time that portion of the Section 8
Repurchase Consideration that it is not then so prohibited from paying and
promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate with the other
in the filing of any such notice or application and the obtaining of any such
approval). If the OTS or any other Governmental Entity disapproves of any
part of Issuer's proposed repurchase pursuant to this Section 8, Issuer shall
promptly give notice of such fact to Holder. If the OTS or any other
Governmental Entity prohibits the repurchase in part but not in whole, then
Holder shall have the right (i) to revoke the repurchase request or (ii) to
the extent permitted by the OTS or other Governmental Entity, determine
whether the repurchase should apply to the Option and/or Option Shares and to
what extent to each, and Holder shall thereupon have the right to exercise the
Option as to the number of Option Shares for which the Option was exercisable
at the Request Date less the sum of the number of shares covered by the Option
in respect of which payment has been made pursuant to Section 8(a)(ii) and the
number of shares covered by the portion of the Option (if any) that has been
repurchased. Holder shall notify Issuer of its determination under the
preceding sentence within five business days of receipt of notice of
disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Grantee's rights
under this Section 8 shall terminate on the date of termination of the Option
pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq
Stock Market's National Market ("NASDAQ/NMS") (or if Issuer Common Stock is
not quoted on NASDAQ/NMS, the highest bid price per share as quoted on the
principal trading market or securities exchange on which such shares are
traded, as reported by a recognized source chosen by Holder) during the 60
business days preceding the Request Date; provided, however, that in the event
of a sale of less than all of Issuer's assets, the Applicable Price shall be
the sum of the price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined by a nationally-
recognized investment banking firm selected by Holder, divided by the number
of shares of Issuer Common Stock outstanding at the time of such sale. If the
consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally-
recognized investment banking firm selected by Holder and reasonably
acceptable to Issuer, which determination shall be conclusive for all purposes
of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired
beneficial ownership of (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), or the right to acquire beneficial ownership of, or
any "group" (as such term is defined in Section 13(d)(3) of the Exchange Act),
other than any group of which Grantee or any Grantee subsidiary is a part,
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 50% or more of the then outstanding shares of Issuer
Common Stock, or (ii) any of the transactions described in Section 7(b)(i),
Section 7(b)(ii) or Section 7(b)(iii) shall be consummated.
(e) Notwithstanding anything herein to the contrary, the aggregate amount
payable to Holder pursuant to this Section 8 shall not exceed $3.0 million.
9. Registration Rights.
(a) demand registration rights. Issuer shall, subject to the conditions
of section 9(c), if requested by any holder, as expeditiously as possible
prepare and file a registration statement under the securities act if such
registration is necessary in order to permit the sale or other disposition of
any or all shares of issuer common stock or other securities that have been
acquired by or are issuable to holder upon exercise of the option in
accordance with the intended method of sale or other disposition stated by
holder in such request, including without limitation a "shelf" registration
statement under rule 415 under the securities act or any successor provision,
and issuer shall use its best efforts to qualify such shares or other
securities for sale under any applicable state securities laws.
(B) Additional Registration Rights. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder
of its intention to do so and, upon the written request of Holder given within
30 days after receipt of any such notice (which request shall specify the
number of shares of Issuer Common Stock intended to be included in such
underwritten public offering by Holder), Issuer will cause all such shares for
which a Holder shall have requested participation in such registration to be
so registered and included in such underwritten public offering; provided,
however, that Issuer may elect to not cause any such shares to be so
registered (i) if the underwriters in good faith object for valid business
reasons, or (ii) in the case of a registration solely to implement an employee
benefit plan or a registration filed on Form S-4 under the Securities Act or
any successor form; provided, further, however, that such election pursuant to
clause (i) may only be made one time. If some but not all the shares of
Issuer Common Stock with respect to which Issuer shall have received requests
for registration pursuant to this Section 9(b) shall be excluded from such
registration, Issuer shall make appropriate allocation of shares to be
registered among Holders permitted to register their shares of Issuer Common
Stock in connection with such registration pro rata in the proportion that the
number of shares requested to be registered by each such Holder bears to the
total number of shares requested to be registered by all such Holders then
desiring to have Issuer Common Stock registered for sale.
(c) Conditions to Required Registration. Issuer shall use all reasonable
efforts to cause each registration statement referred to in Section 9(a) to
become effective and to obtain all consents or waivers of other parties which
are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if Issuer
shall in good faith determine that any such registration would adversely
affect an offering or contemplated offering of other securities by Issuer, and
Issuer shall not be required to register Option Shares under the Securities
Act pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan pursuant to
Article VII thereof, and (B) a Purchase Event or a Preliminary Purchase Event;
(ii) on more than one occasion during any calendar year and on more
than two occasions in total;
(iii) within 90 days after the effective date of a registration
referred to in Section 9(b) pursuant to which the Holder or Holders concerned
were afforded the opportunity to register such shares under the Securities Act
and such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by the Holder or
Holders of at least 25% or more of the aggregate number of Option Shares
(including shares of Issuer Common Stock issuable upon exercise of the Option)
then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, provided, however, that
Issuer shall not be required to consent to general jurisdiction or to qualify
to do business in any state where it is not otherwise required to so consent
to such jurisdiction or to so qualify to do business.
(d) Expenses. Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses, accounting
expenses, legal expenses and printing expenses incurred by it) in connection
with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered
and any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) Indemnification. In connection with any registration under Section
9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person, if any, who controls such Holder or
underwriter within the meaning of Section 15 of the Securities Act, against
all expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement of a material fact contained in any registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission, or alleged omission, to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such expenses, losses, claims, damages or
liabilities of such indemnified party are caused by any untrue statement or
alleged untrue statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such indemnified party expressly
for use therein, and Issuer and each officer, director and controlling person
of Issuer shall be indemnified by such Holder, or by such underwriter, as the
case may be, for all such expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement that was included by Issuer
in any such registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) in reliance upon,
and in conformity with, information furnished in writing to Issuer by such
Holder or such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall
notify the indemnifying party in writing of the commencement of such action,
but, except to the extent of any actual prejudice to the indemnifying party,
the failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be
given to the indemnifying party as above provided, the indemnifying party
shall be entitled to participate in and, to the extent it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense of
such action at its own expense, with counsel chosen by it and reasonably
satisfactory to such indemnified party. The indemnified party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the indemnified party
unless (i) the indemnifying party agrees to pay the same, (ii) the
indemnifying party fails to assume the defense of such action with counsel
reasonably satisfactory to the indemnified party, or (iii) the indemnified
party has been advised by counsel that one or more legal defenses may be
available to the indemnifying party that may be contrary to the interest of
the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear
fees and expenses of such counsel. No indemnifying party shall be liable for
any settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable to
a party otherwise entitled to be indemnified in respect of any expenses,
losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to
be indemnified, shall contribute to the amount paid or payable by such party
to be indemnified as a result of such expenses, losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative
benefits received by Issuer, the selling Holders and the underwriters from the
offering of the securities and also the relative fault of Issuer, the selling
Holders and the underwriters in connection with the statement or omissions
which results in such expenses, losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The amount paid or
payable by a party as a result of the expenses, losses, claims, damages and
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, however, that in no
case shall the selling Holders be responsible, in the aggregate, for any
amount in excess of the net offering proceeds attributable to its Option
Shares included in the offering. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(g) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Any obligation by any Holder to indemnify shall
be several and not joint with other Holders.
In connection with any registration pursuant to Section 9(a) or (b) above,
Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit
the expeditious sale at any time of any Option Shares by the Holder(s) in
accordance with and to the extent permitted by any rule or regulation
permitting nonregistered sales of securities promulgated by the Commission
from time to time, including, without limitation, Rule 144A. Issuer shall at
its expense provide the Holder with any information necessary in connection
with the completion and filing of any reports or forms required to be filed by
them under the Securities Act or the Exchange Act, or required pursuant to any
state securities laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to
time, against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities to
be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon the
request of Holder, will promptly file an application, if required, to
authorize for quotation or trading or listing the shares of Issuer Common
Stock or other securities to be acquired upon exercise of the Option on
NASDAQ/NMS or such other securities exchange and will use its best efforts to
obtain approval, if required, of such quotation or listing as soon as
practicable.
11. Division of Option. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of the Issuer for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of
Issuer Common Stock purchasable hereunder. The terms "Agreement" and "Option"
as used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits of such provision.
This Agreement may not be modified, amended, altered or supplemented except
upon the execution and delivery of a written agreement executed by the parties
hereto.
(c) Entire Agreement; No Third Party Beneficiaries; Severability. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter
hereof, and (ii) is not intended to confer upon any person other than the
parties hereto (other than the indemnified parties under Section 9(e) and any
transferee of the Option Shares or any permitted transferee of this Agreement
pursuant to Section 12(h)) any rights or remedies hereunder. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or a federal or state regulatory agency to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court
or regulatory agency determines that the Option does not permit Holder to
acquire, or does not require Issuer to repurchase, the full number of shares
of Issuer Common Stock as provided in Sections 3 and 8 (as adjusted pursuant
to Section 7), it is the express intention of Issuer to allow Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible without any amendment or modification hereof
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Washington without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning
or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at
the following address (or at such other address for a party as shall be
specified by like notice):
If to Grantee:
Washington Federal, Inc.
425 Pike Street
Seattle, Washington 98101
Attn: Guy C. Pinkerton
Chairman, President and Chief Executive Officer
Fax: 206-624-2334
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-0300
If to Issuer:
Metropolitan Bancorp
1520 4th Avenue
Seattle, Washington 98107-1648
Attn: Patrick F. Patrick
President and Chief Executive Officer
Fax: 206-654-7883
With a required copy to:
Perkins Coie
1201 Third Avenue
40th Floor
Seattle, Washington 98101-3099
Attn: Charles Katz, Esq.
Fax: 206-583-8500
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder or under the Option shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other party, except that Holder may assign
this Agreement to a wholly-owned subsidiary of Holder and Holder may assign
its rights hereunder in whole or in part after the occurrence of a Purchase
Event. Subject to the preceding sentence, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in
order to consummate the transactions provided for by such exercise
(j) Specific Performance. The parties hereto agree that this Agreement
may be enforced by either party through specific performance, injunctive
relief and other equitable relief. Both parties further agree to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
Attest: METROPOLITAN BANCORP
/s/ Edwin C. Hedlund By: /s/ Patrick F. Patrick
Name: Edwin C. Hedlund Name: Patrick F. Patrick
Title: Secretary Title: President and Chief
Executive Officer
Attest: WASHINGTON FEDERAL, INC.
/s/ Ronald L. Saper By:/s/ Guy C. Pinkerton
Name: Ronald L. Saper Name: Guy C. Pinkerton
Title: Senior Vice President Title: Chairman, President and
and Chief Financial Officer Chief Executive Officer
EXHIBIT B
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of July 11, 1996, by and between Washington
Federal, Inc. (the "Acquiror"), a Washington corporation, and certain
shareholders of Metropolitan Bancorp (the "Company"), a Washington
corporation, named on Schedule I hereto (collectively the "Stockholders").
WITNESSETH:
WHEREAS, the Acquiror and the Company have entered into an Agreement and
Plan of Merger, dated as of the date hereof (the "Agreement"), which is being
executed simultaneously with the execution of this Stockholder Agreement and
provides for, among other things, the merger of the Company with and into the
Acquiror (the "Merger"); and
WHEREAS, in order to induce the Acquiror to enter into the Agreement, each
of the Stockholders agrees to, among other things, vote in favor of the
Agreement in his or her capacities as stockholders of the Company,
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Ownership of Company Common Stock. Each Stockholder represents and
warrants that the Stockholder has or shares the right to vote and dispose of
the number of shares of common stock of the Company, par value $.01 per share
("Company Common Stock"), as set forth opposite such Stockholder's name on
Schedule I hereto.
2. Agreements of the Stockholders. Each Stockholder covenants and agrees
that:
(a) such Stockholder shall, at any meeting of the Company's
stockholders called for the purpose, vote, or cause to be voted, all shares of
Company Common Stock in which such stockholder has the right to vote (whether
owned as of the date hereof or hereafter acquired) in favor of the Agreement
and against any plan or proposal pursuant to which the Company is to be
acquired by or merged with, or pursuant to which the Company proposes to sell
all or substantially all of its assets and liabilities to, any person entity
or group (other than the Acquiror or any subsidiary thereof);
(b) except as otherwise expressly permitted hereby or by the Mortgage
Company Agreement (as defined in the Agreement), such Stockholder shall not,
prior to the meeting of the Company's stockholders referred to in Section 2(a)
hereof or the earlier termination of the Agreement in accordance with its
terms, sell, pledge, transfer or otherwise dispose of the Stockholder's shares
of Company Common Stock; and
(c) such Stockholder shall not in his capacity as a stockholder of
the Company directly or indirectly encourage or solicit or hold discussions or
negotiations with, or provide any information to, any person, entity or group
(other than the Acquiror or an affiliate thereof) concerning any merger, sale
of substantial assets or liabilities not in the ordinary course of business,
sale of shares of capital stock or similar transactions involving the Company
or any subsidiary of the Company (provided that nothing in this letter
agreement shall be deemed to affect the ability of any Stockholder to fulfill
his duties as a director or officer of the Company).
Each Stockholder further agrees that the Company's transfer agent shall be
given an appropriate stop transfer order and shall not be required to register
any attempted transfer of shares of Company Common Stock, unless the transfer
has been effected in compliance with the terms of this letter agreement.
3. Successors and Assigns. A Stockholder may sell, pledge, transfer or
otherwise dispose of his shares of Company Common Stock, provided that, with
respect to any sale, transfer or disposition which would occur on or before
the meeting of the Company's stockholders referred to in Section 2(a) hereof,
such Stockholder obtains the prior written consent of the Acquiror and that
any acquiror of such Company Common Stock agree in writing to be bound by the
terms of this Stockholder Agreement.
4. Termination. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual
written consent of the parties hereto and shall be automatically terminated in
the event that the Agreement is terminated in accordance with its terms.
5. Notices. Notices may be provided to the Acquiror and the Stockholders
in the manner specified in Section 8.4 of the Agreement, with all notices to
the Stockholders being provided to them at the Company in the manner specified
in such section.
6. Governing Law. This Stockholder Agreement shall be governed by the
laws of the State of Washington without giving effect to the principles of
conflicts of laws thereof.
7. Counterparts. This Stockholder Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same and each
of which shall be deemed an original.
8. Headings and Gender. The Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine gender
herein shall be considered to represent the masculine, feminine or neuter
gender whenever appropriate.
IN WITNESS WHEREOF, the Acquiror, by a duly authorized officer, and each of
the Stockholders have caused this Stockholder Agreement to be executed as of
the day and year first above written.
WASHINGTON FEDERAL INC.
By: /s/ Guy C. Pinkerton
Name: Guy C. Pinkerton
Title: Chairman, President and
Chief Executive Officer
COMPANY STOCKHOLDERS:
/s/ Allen E. Doan
Allen E. Doan
/s/ John F. Clearman
John F. Clearman
/s/ David C. Cortelyou
David C. Cortelyou
/s/ W. Gordon Dowling
W. Gordon Dowling
/s/ John H. Fairchild
John H. Fairchild
/s/ Virgil Fassio
Virgil Fassio
/s/ H. Dennis Halvorson
H. Dennis Halvorson
/s/ Larry O. Hillis
Larry O. Hillis
/s/ John J. Knight
John J. Knight
/s/ Patrick F. Patrick
Patrick F. Patrick
/s/ Michael M. Pete
Michael M. Pete
SCHEDULE I
Name of Stockholder Number of Shares of Company
Common Stock Beneficially Owned
Allen E. Doan 32,720
John F. Clearman 4,100
David C. Cortelyou 3,100
W. Gordon Dowling 104,090
John H. Fairchild 362,637
Virgil Fassio 15,100
H. Dennis Halvorson 8,100
Larry O. Hillis 46,326
John J. Knight 31,160
Patrick F. Patrick 74,225
Michael M. Pete 3,000
EXHIBIT C
Washington Federal, Inc.
425 Pike Street
Seattle, Washington 98101
Ladies and Gentlemen:
Pursuant to Section 5.13 of the Agreement and Plan of Merger, dated as of
July 11, 1996 (the "Agreement"), between Washington Federal, Inc. (the
"Acquiror") and Metropolitan Bancorp (the "Company"), I hereby agree that I
will comply with paragraph (d) of Rule 145 under the Securities Act of 1933,
as amended (the "1993 Act"), and will not sell, pledge, transfer or otherwise
dispose of any shares of Acquiror Common Stock received by me in exchange for
shares of Company Common Stock pursuant to the Merger (as defined in the
Agreement), except upon the Acquiror's receipt of an opinion of counsel, at
the Acquiror's expense, that the proposed disposition will not violate
paragraph (d) of Rule 145.
The transfer agent of the Acquiror shall be given an appropriate stop
transfer order and shall not be required to register any attempted transfer of
shares of Acquiror Common Stock unless the transfer has been effected in
compliance with the terms of this letter agreement. In addition, the
certificates evidencing shares of Acquiror Common Stock acquired by me in
exchange for Company Common Stock pursuant to the Merger shall bear a legend
noting the restrictions on transfer set forth in this letter agreement.
Very truly yours,
__________________________________
Name:
Agreed and accepted this
___ day of ___________, 1996 by
Washington Federal, Inc.
By:
Name:
Title:
Exhibit 2.2
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger, dated as of July 11, 1996, by and between
Washington Federal Savings and Loan Association (the "Acquiror Bank") and
Metropolitan Federal Savings and Loan Association of Seattle (the "Bank").
WITNESSETH:
WHEREAS, the Bank is a federally-chartered savings and loan association
and a wholly-owned subsidiary of Metropolitan Bancorp (the "Company"); and
WHEREAS, the Acquiror Bank is a federally-chartered savings and loan
association and a wholly-owned subsidiary of Washington Federal, Inc. (The
"Acquiror"); and
WHEREAS, the Acquiror and the Company have entered into an Agreement and
Plan of Merger, dated as of July 11, 1996 (the "Agreement"), pursuant to which
the Company will merge with and into the Acquiror (the "Parent Merger"); and
WHEREAS, the Bank and the Acquiror Bank (the "Constituent Banks") desire
to merge on the terms and conditions herein provided immediately following the
effective time of the Parent Merger.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. The Merger. Subject to the terms and conditions of this Agreement and
Plan of Merger, at the Effective Time (as defined in Section 2 hereof), the
Bank shall merge with and into the Acquiror Bank (the "Merger") under the laws
of the United States. The Acquiror Bank shall be the surviving bank of the
Merger (the "Surviving Bank").
2. Effective Time. The Merger shall become effective on the date and at
the time that Articles of Combination are endorsed by the Office of Thrift
Supervision (the "OTS"), unless a later date and time is specified as the
effective time in such Articles of Combination (the "Effective Time").
3. Charter; Bylaws. The Charter and Bylaws of the Acquiror Bank in
effect immediately prior to the Effective Time shall be the Charter and Bylaws
of the Surviving Bank, until altered, amended or repealed in accordance with
their terms and applicable law.
4. Name; Offices. The name of the Surviving Bank shall be "Washington
Federal Savings and Loan Association." The main office of the Surviving Bank
shall be the main office of the Acquiror Bank immediately prior to the
Effective Time. All branch offices of the Bank and the Acquiror Bank which
were in lawful operation immediately prior to the Effective Time shall be the
branch offices of the Surviving Bank upon consummation of the Merger, subject
to the opening or closing of any offices which may be authorized by the Bank
or the Acquiror Bank and applicable regulatory authorities after the date
hereof. Schedule I hereto contains a list of each of the deposit taking
offices of the Bank and the Acquiror Bank which shall be operated by the
Surviving Bank, subject to the opening or closing of any offices which may be
authorized by the Bank or the Acquiror Bank and applicable regulatory
authorities after the date hereof.
5. Directors and Executive Officers. Upon consummation of the Merger,
(i) the directors of the Surviving Bank shall consist of nine persons the
names and residence addresses of which are set forth as Schedule II hereto and
(ii) the executive officers of the Surviving Bank shall be the executive
officers of the Acquiror Bank immediately prior to the Effective Time.
6. Effects of the Merger. Upon consummation of the Merger, the Surviving
Bank shall be considered the same business and corporate entity as each of the
Constituent Banks and thereupon and thereafter all the property, rights,
powers and franchises of each of the Constituent Banks shall vest in the
Surviving Bank and the Surviving Bank shall be subject to and be deemed to
have assumed all of the debts, liabilities, obligations and duties of each of
the Constituent Banks and shall have succeeded to all of each of their
relationships, fiduciary or otherwise, as fully and to the same extent as if
such property, rights, privileges, powers, franchises, debts, obligations,
duties and relationships had been originally acquired, incurred or entered
into by the Surviving Bank. In addition, any reference to either of the
Constituent Banks in any contract, will or document, whether executed or
taking effect before or after the Effective Time, shall be considered a
reference to the Surviving Bank if not inconsistent with the other provisions
of the contract, will or document; and any pending action or other judicial
proceeding to which either of the Constituent Banks is a party shall not be
deemed to have abated or to have been discontinued by reason of the Merger,
but may be prosecuted to final judgment, order or decree in the same manner as
if the Merger had not occurred or the Surviving Bank may be substituted as a
party to such action or proceeding, and any judgment, order or decree may be
rendered for or against it that might have been rendered for or against either
of the Constituent Banks if the Merger had not occurred. In accordance with
12 C.F.R. 563b.3(f), the Surviving Bank shall assume and maintain the
liquidation account established by the Bank in connection with its conversion
to stock form.
7. Effect on Shares of Stock.
(a) Each share of Acquiror Bank common stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding.
(b) At the Effective Time, each share of Bank common stock issued and
outstanding prior to the Merger shall, by virtue of the Merger and without any
action on the part of the holder thereof, be canceled. Any shares of Bank
common stock held in the treasury of the Bank immediately prior to the
Effective Time shall be retired and canceled.
8. Additional Actions. If, at any time after the Effective Time, the
Surviving Bank shall consider that any further assignments or assurances in
law or any other acts are necessary or desirable to (i) vest, perfect or
confirm, of record or otherwise, in the Surviving Bank its rights, title or
interest in, to or under any of the rights, properties or assets of the Bank
acquired or to be acquired by the Surviving Bank as a result of, or in
connection with, the Merger, or (ii) otherwise carry out the purposes of this
Agreement and Plan of Merger, the Bank and its proper officers and directors
shall be deemed to have granted to the Surviving Bank an irrevocable power of
attorney to execute and deliver all such proper deeds, assignments and
assurances in law and to do all acts necessary or proper to vest, perfect or
confirm title to and possession of such rights, properties or assets in the
Surviving Bank and otherwise to carry out the purposes of this Agreement and
Plan of Merger; and the proper officers and directors of the Surviving Bank
are fully authorized in the name of the Bank or otherwise to take any and all
such action.
9. Counterparts. This Agreement and Plan of Merger may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one agreement.
10. Governing Law. This Agreement and Plan of Merger shall be governed
in all respects, including, but not limited to, validity, interpretation,
effect and performance, by the laws of the United States and, to the extent
applicable, the State of Washington.
11. Amendment. Subject to applicable law, this Agreement and Plan of
Merger may be amended, modified or supplemented only by written agreement of
the Acquiror Bank and the Bank at any time prior to the Effective Time.
12. Waiver. Any of the terms or conditions of this Agreement and Plan of
Merger may be waived at any time by whichever of the parties hereto is, or the
shareholders of which are, entitled to the benefit thereof by action taken by
the Board of Directors of such waiving party.
13. Assignment. This Agreement and Plan of Merger may not be assigned by
any party hereto without the prior written consent of the other party.
14. Termination. This Agreement and Plan of Merger shall terminate upon
the termination of the Agreement in accordance with its terms.
15. Procurement of Approvals. This Agreement and Plan of Merger shall be
subject to the approval of the Acquiror as the sole shareholder of the
Acquiror Bank and the Company as the sole shareholder of the Bank at a meeting
to be called and held by each in accordance with the applicable provisions of
law and their respective Charter and Bylaws (or a consent or consents in lieu
thereof). The Acquiror Bank and the Bank shall proceed expeditiously and
cooperate fully in the procurement of any other consents and approvals and in
the taking of any other action, and the satisfaction of all other requirements
prescribed by law or otherwise necessary for consummation of the Merger on the
terms provided herein, including without limitation the preparation and
submission of such applications or other filings for approval of the Merger to
the OTS as may be required by applicable laws and regulations.
16. Conditions Precedent. The obligations of the parties under this
Agreement and Plan of Merger shall be subject to: (i) the approval of this
Agreement and Plan of Merger by the Acquiror as the sole shareholder of the
Acquiror Bank and the Company as the sole shareholder of the Bank at meetings
of shareholders duly called and held (or by consent or consents in lieu
thereof); (ii) receipt of approval of the Merger from all governmental and
banking authorities whose approval is required; (iii) receipt of any necessary
regulatory approval to operate the main office and the branch offices of the
Bank as offices of the Surviving Bank; and (iv) the consummation of the Parent
Merger pursuant to the Agreement on or before the Effective Time.
IN WITNESS WHEREOF, each of the Acquiror Bank and the Bank has caused
this Agreement and Plan of Merger to be executed on its behalf by its duly
authorized officers.
WASHINGTON FEDERAL SAVINGS
AND LOAN ASSOCIATION
Attest:
/s/ Ronald L. Saper By:/s/ Guy C. Pinkerton
Name: Ronald L. Saper Name: Guy C. Pinkerton
Title: Senior Vice President Title: Chairman, President and
and Chief Financial Officer Chief Executive Officer
METROPOLITAN FEDERAL SAVINGS
AND LOAN ASSOCIATION OF SEATTLE
Attest:
/s/ Edwin C. Hedlund By: /s/ Patrick F. Patrick
Name: Edwin C. Hedlund Name: Patrick F. Patrick
Title: Secretary Title: President and Chief
Executive Officer
SCHEDULE I
Offices of the Surviving Bank
Home Office: 425 Pike Street
Seattle, WA 98101
Other Offices:
Southern Washington Division:
Arctic Building Office 700 Third Avenue
Seattle, WA 98104
Ballard Office 2020 N.W. Market Street
Seattle, WA 98107
Bellevue/Redmond Office 14801 N.E. Bellevue-Redmond Rd.
Bellevue, WA 98007
Bothell Office 10116 N.E. 183rd
Bothell, WA 98011
Bremerton Office 4250 Wheaton Way
Bremerton, WA 98310
Centralia Office 110 No. Pearl Street
Centralia, WA 98531
Federal Way Office 2206 South 320th
Federal Way, WA 98003
Kent Office 10415 S.E. 240th Street
Kent, WA 98031
Kirkland Office 116 Kirkland Avenue
Kirkland, WA 98033
Lacey Office 4110 Pacific Avenue S.E.
Lacey, WA 98503
Lynnwood Office 5809 196th S.W.
Lynnwood, WA 98036
Magnolia Office 3219 West McGraw Street
Seattle, WA 98199
Olympia Office 422 Capitol Way So.
Olympia, WA 98501
Poulsbo Office 18960 State Hwy. N., #104
Poulsbo, WA 98370
Rainier Office 4800 Rainier Avenue South
Seattle, WA 98118
Sequim Office 191 W. Washington Street
Sequim, WA 98382
University Place Office 3702-A Bridgeport Way West
Tacoma, WA 98466
Wedgwood Office 7334 35th Avenue, N.E.
Seattle, WA 98115
West Seattle Office 4700 42nd Avenue, S.W.
Seattle, WA 98116
Northern Washington Division:
Mount Vernon Office 317 Second Street
Mount Vernon, WA 98273
Anacortes Office 1017 Commercial Avenue
Anacortes, WA 98221
Bellingham Office 1100 Lakeway Drive
Bellingham, WA 98226
Burlington Office 300 East Fairhaven Avenue
Burlington, WA 98233
Eastsound Office Eastsound Square
Eastsound, WA 98245
La Conner Office 620 Morris Street
La Conner, WA 98257
Mount Vernon Mall Office 225 East College Way
Mount Vernon, WA 98273
Oak Harbor Office 9067 90th N.W.
Oak Harbor, WA 98277
Sedro-Woolley Office Fourth and State Streets
Sedro Woolley, WA 98284
Stanwood Office 9025 271st N.W.
Stanwood, WA 98292
Western Idaho Division:
Boise Main Office 1001 West Idaho Street
Boise, ID 83702
Broadway Office 1789 Broadway Avenue
Boise, ID 83706
Caldwell Office 515 Cleveland Boulevard
Caldwell, ID 83605
Cole & Ustick Office 3197 North Cole Road
Boise, ID 83704
Eagle Office 560 East State Street
Eagle, ID 83616
Fairview Office 10150 Fairview Avenue
Boise, ID 83704
Hillcrest Office 1581 South Orchard
Boise, ID 83705
Jerome Office 140 East Main Street
Jerome, ID 83338
McCall Office 101 E. Lake Street
McCall, ID 83638
Meridian Office 713 East First Street
Meridian, ID 83642
Mountain Home Office 310 American Legion Blvd.
Mountain Home, ID 83647
Nampa Office 223 11th Avenue South
Nampa, ID 83651
Nampa Midland Office 1001 Nampa/Caldwell Blvd.
Nampa, ID 83651
Orchard Office 10 South Orchard Street
Boise, ID 83705
Twin Falls Office 494 Blue Lakes Blvd. North
Twin Falls, ID 83301
Eastern Idaho Division:
Idaho Falls Office 500 North Capital
Idaho Falls, ID 83402
17th Street Office 2287 East 17th Street
Idaho Falls, ID 83404
Blackfoot Office 715 West Judicial
Blackfoot, ID 83221
Pocatello-Yellowstone Office 1045 Yellowstone Avenue
Pocatello, ID 83201
Rexburg Office 80 North 200 East
Rexburg, ID 83440
Oregon Division:
Albany Main Office 300 Ellsworth St., S.W.
Albany, OR 97321
Bend Office 2415 N.E. Highway 20
Bend, OR 97701
Corvallis Office 1111-A N.W. Ninth Street
Corvallis, OR 97330
Dallas Office 611 Main Street
Dallas, OR 97338
East Salem Office 1677 Hawthorne Ave., N.E.
Salem, OR 97301
Eugene Coburg Office 1745 Coburg Road
Eugene, OR 97401
Eugene - 11th Avenue Office 200 East 11th Avenue
Eugene, OR 97401
Florence Office 620 Highway 101
Florence, OR 97439
Hillsboro Office 1234 W. Baseline
Hillsboro, OR 97123
Hood River Office 215 Oak Street
Hood River, OR 97031
Lincoln City Office 1545 North Highway 101
Lincoln City, OR 97367
Monmouth Office 523 Main Street East
Monmouth, OR 97361
Newport Office 505 North Coast Highway
Newport, OR 97365
Portland Office 435 S.W. 5th Avenue
Portland, OR 97204
Salem Office 198 Liberty Street, N.E.
Salem, OR 97301
The Dalles Office 235 E. Third Street
The Dalles, OR 97058
Vancouver Office 13411 S.E. Mill Plain Blvd.
Suite A-1
Vancouver, WA 98383
Waldport Office 325 N.W. Hemlock
Waldport, OR 97394
West Salem Office 777 Wallace Road N.W.
Salem, OR 97304
Wilsonville Office 29028 Town Center Loop, E.
Wilsonville, OR 97070
Woodburn Office 999 N. Cascade Drive
Woodburn, OR 97071
Utah Division:
Plaza Main Office 505 East 200 South
Salt Lake City, UT 84147
Cottonwood Office 4748 S. Highland Drive
Salt Lake City, UT 84117
Eagle Gate Office 60 East South Temple
Suite 110-63
Salt Lake City, UT 84111
Fashion Place Office 181 East 6100 South
Murray, UT 84107
Foothill Office 1442 Foothill Dr.
Salt Lake City, UT 84108
Layton Office 1597 N. Woodland Park Dr.
Layton, UT 84041
Logan Office 399 North Main
Logan, UT 84321
Olympus Hills Office 3983 S. Wasatch Blvd.
Salt Lake City, UT 84124
Price Office 308 East Main
Price, UT 84501
Sugar House Office 2262 S. Highland Drive
Salt Lake City, UT 84106
Tremonton Office 340 E. Main Street
Tremonton, UT 84337
Arizona Division:
South Tucson Office 1833 South 6th Ave.
Tucson, AZ 85713
Speedway/El Rancho Office 3333 E. Speedway Blvd.
Tucson, AZ 85716
Swan Sunrise Office 4788 E. Sunrise Dr.
Tucson, AZ 85718
Flowing Wells Office 1315 W. Prince Rd.
Tucson, AZ 85705
Camino Seco/Broadway Office 8675 E. Broadway Blvd.
Tucson, AZ 85710
Grant & Craycroft Office 5520 E. Grant Road
Tuscon, AZ 85712
Green Valley Office 303 E. Esperanza Blvd.
Green Valley, AZ 85614
Bank Offices:
Corporate Headquarters 1520 Fourth Avenue
Seattle, WA 98101
Auburn Office 55 "A" Street S.E.
Auburn, WA 98002
Crown Hill Office 8318 15th Avenue, N.W.
Seattle, WA 98117
Eastgate Office 3712 150th S.E.
Bellevue, WA 98006
Edmonds Office 229 Main Street
Edmonds, WA 98020
Federal Way Office 1627 S. 312th
Federal Way, WA 98003
Lakewood Office 9919 Bridgeport Way S.W.
Tacoma, WA 98499
Rainier Beach Office 9325 Rainier Avenue S.
Seattle, WA 98118
Redmond Office 16200 Redmond Way
Redmond, WA 98052
West Seattle Office 6428 California Avenue S.W.
Seattle, WA 98136
Westlake Park Office 1516 Fourth Avenue
Seattle, WA 98101
SCHEDULE II
Term
Name Residence Address Expires
Kermit O. Hanson 17760 - 14th N.W.
Seattle, WA 98177 1998
W. Alden Harris 111 W. Highland Dr., #8W
Seattle, WA 98119 1997
Anna C. Johnson 3715 West Fulton
Seattle, WA 98199 1999
Harold C. Kean 10509 Culpepper Ct., N.W.
Seattle, WA 98177 1997
Vernon Keener 460 2nd Ave. South, #201
Kirkland, WA 98033 1999
E.W. Mersereau, Jr. 831 E. Pacific View Dr.
Bellingham, WA 98226 1998
Guy C. Pinkerton 514 N.E. 97th, #301
Seattle, WA 98115 1998
Richard C. Reed 2010 Killarney Way
Bellevue, WA 98004 1999
Charles R. Richmond 10112 NE 38th Court, #906
Kirkland, WA 98033 1999
Exhibit 10.1
STOCK REDEMPTION AGREEMENT
FOR THE REDEMPTION OF THE COMMON STOCK OF METROPOLITAN
BANCORP OWNED BY JOHN FAIRCHILD AND SHERYL NILSON
BY AND AMONG
METROPOLITAN BANCORP AND
METROPOLITAN FEDERAL SAVINGS AND LOAN ASSOCIATION OF SEATTLE
AND
JOHN FAIRCHILD AND SHERYL NILSON
July 11, 1996
CONTENTS
ARTICLE 1. DEFINITIONS
1.1 Definitions........................................................2
1.2 References.........................................................2
ARTICLE 2. REDEMPTION OF SHAREHOLDERS' METROPOLITAN SHARES...................7
2.1 Redemption of Shareholders' Metropolitan Shares....................7
2.2 Redemption Price...................................................7
2.3 Adjustment to Redemption Price.....................................8
ARTICLE 3. THE CLOSING.......................................................8
3.1 Time of Closing....................................................8
3.2 Deliveries.........................................................8
3.3 Release of Bank and Metropolitan from Liabilities..................9
3.4 Closing Net Worth..................................................10
3.5 Final Balance Sheet................................................10
3.6 Settlement of Obligations..........................................16
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF METROPOLITAN AND THE BANK.......16
4.1 Organization and Qualification of Phoenix..........................16
4.2 Capitalization; Stock Ownership....................................17
4.3 Authority Relative to Agreement....................................17
4.4 Financial Statements; Balance Sheet Items..........................18
4.5 No Undisclosed Liabilities.........................................18
4.6 Absence of Certain Changes.........................................19
4.7 Permits, Authorizations............................................19
4.8 Compliance With Applicable Law.....................................19
4.9 Litigation; Claims.................................................19
4.10 Brokers and Finders................................................20
4.11 Environmental Matters..............................................20
4.12 Insurance..........................................................20
4.13 Employee Benefits..................................................21
4.14 Taxes..............................................................23
ARTICLE 4A. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS OF
METROPOLITAN AND BANK AS TO CERTAIN MORTGAGE LOANS.................24
4A.1 Investor Requirements..............................................24
4A.2 Repurchase Obligation..............................................24
ARTICLE 5. REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDERS................24
5.1 Authority and Consents.............................................25
5.2 Noncontravention...................................................25
5.3 Claims.............................................................25
5.4 Brokers and Finders................................................26
5.5 Title..............................................................26
ARTICLE 6. COVENANTS OF METROPOLITAN, THE BANK AND THE SHAREHOLDERS..........26
6.1 Conduct of Business................................................26
6.2 Access to Information..............................................28
6.3 Acquisition Proposals..............................................28
6.4 Further Assurances.................................................28
6.5 Metropolitan's Preclosing Transfer of Intangibles to Phoenix.......29
6.6 Distribution of Phoenix Common Stock to Metropolitan
Prior to Closing................................................29
6.7 Additional Covenants of the Shareholders...........................29
6.8 Appraisal of Phoenix...............................................30
6.9 Resignation of Bank Employees......................................30
6.10 Fairchild's Resignation as a Director of Metropolitan..............30
6.11 Tag Along Rights...................................................30
6.12 Take Along Rights..................................................32
6.13 Warehousing Line to Phoenix........................................33
6.14 Subservicing Arrangements..........................................33
6.15 Joint Office Sharing...............................................34
6.16 Termination of Prior Agreements....................................34
6.17 Transition Services; Cooperation...................................34
6.18 Insurance..........................................................34
6.19 Tax Matters........................................................35
ARTICLE 7. CONDITIONS PRECEDENT..............................................38
7.1 Shareholders' Conditions...........................................38
7.2 Metropolitan's Conditions..........................................39
7.3 Joint Conditions...................................................39
ARTICLE 8. ADDITIONAL UNDERTAKINGS AND AGREEMENTS............................40
8.1 Survival of Representations, Warranties and Covenants..............40
8.2 Indemnification....................................................40
ARTICLE 9. MISCELLANEOUS PROVISIONS..........................................43
9.1 Termination........................................................43
9.2 Assignment.........................................................44
9.3 Notices............................................................44
9.4 Choice of Law......................................................46
9.5 Entire Agreement; Amendments and Waivers; No Third Party
Beneficiaries................................................46
9.6 Severability.......................................................46
9.7 Expenses...........................................................46
9.8 Confidential Information...........................................47
9.9 Cooperation........................................................47
9.10 Construction.......................................................48
9.11 Counterparts.......................................................48
9.12 Spousal Joinder and Consent........................................48
9.13 Right to Specific Performance......................................48
9.14 Attachment of Schedules............................................48
EXHIBITS
Exhibit A - Form of Promissory Note
Exhibit B - Officers' Certificates
Exhibit C - Form of Opinion of Counsel to Shareholders
Exhibit D - Form of Opinion of Counsel to Metropolitan
STOCK REDEMPTION AGREEMENT
This STOCK REDEMPTION AGREEMENT (this "Agreement") is made and entered into
as of July 11, 1996 by and among Metropolitan Bancorp, a Washington
corporation ("Metropolitan"), Metropolitan Federal Savings and Loan of
Seattle, a federally chartered savings and loan association (the "Bank") and
John Fairchild ("Mr. Fairchild") and Sheryl Nilson ("Ms. Nilson"). Mr.
Fairchild and Ms. Nilson are referred to collectively as the "Shareholders."
RECITALS
WHEREAS, Metropolitan owns all of the issued and outstanding shares of
common stock of Metropolitan Federal Savings and Loan Association of Seattle,
a federally chartered savings and loan association (the "Bank"), and the Bank
owns all of the issued and outstanding shares of common stock of Phoenix
Mortgage & Investment, Inc., a Washington corporation ("Phoenix");
WHEREAS, Metropolitan has entered into an Agreement and Plan of Merger
dated as of July 11, 1996, with Washington Federal, Inc. ("Washington
Federal"), pursuant to which Metropolitan is to be merged with and into
Washington Federal;
WHEREAS, a condition to the merger is that Metropolitan spinoff Phoenix
prior to the consummation of the merger of Metropolitan with and into
Washington Federal;
WHEREAS, Mr. Fairchild and Ms. Nilson, two of the shareholders of
Metropolitan, are willing to acquire 81% of the issued and outstanding shares
of the common stock of Phoenix, and Metropolitan is prepared to transfer that
interest to the Shareholders in exchange for 158,717 of the Shareholders'
shares of common stock in Metropolitan;
WHEREAS, in order to consummate the spinoff, the Bank will dividend to
Metropolitan all of the issued and outstanding shares of Phoenix immediately
prior to the consummation of the redemption of the Shareholders' shares of
Metropolitan's common stock pursuant to the terms of this Agreement, which
shares will then be transferred to the Shareholders as part of the
consideration for redeeming their shares of the common stock of Metropolitan;
WHEREAS, Metropolitan desires to acquire the balance of the Shareholders'
shares of the Metropolitan common stock, constituting an additional 294,580
shares, in exchange for $4,519,785.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing, the mutual promises of
the parties hereto, and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1. DEFINITIONS
1.1 Definitions
Certain terms are defined elsewhere in this Agreement. Unless the context
otherwise requires, for the purposes of this Agreement, the following terms
have the respective meanings ascribed below:
"Accounting Firm" has the meaning set forth in Section 3.5(c).
"Accounting Principles" has the meaning set forth in Section 4.4.
"Acquisition Proposal" has the meaning set forth in Section 6.3.
"Agencies" means FHLMC, FNMA, GNMA, FHA, VA and any applicable federal or
state agency with authority to regulate the business of Metropolitan, Phoenix,
or Phoenix Escrow.
"Agreement" means this Stock Redemption Agreement, including the
Schedules and Exhibits hereto and all amendments hereof and thereof.
"Audited Net Worth" has the meaning set forth in Section 3.5.
"Bank" means Metropolitan Federal Savings and Loan Association of
Seattle, a federally chartered savings and loan association.
"Business Day" means any day other than a Saturday, Sunday or other day
on which banks in Seattle, Washington, are authorized or obligated by law to
be closed.
"Closing" has the meaning set forth in Section 3.1.
"Closing Date" has the meaning set forth in Section 3.1.
"Closing Statement" has the meaning set forth in Section 3.5.
"Code" means the Internal Revenue Code of 1986, as amended.
"Confidential Information" has the meaning set forth in Section 9.8.
"Current Pipeline" means, with respect to any date of determination, all
rights and obligations with respect to those applications for Mortgage Loans
that are listed on attached Schedule 1.1(a), as then amended pursuant to
Section 6.2.
"Dispute Adjustments" has the meaning set forth in Section 3.5(b).
"Disputes Arbiter" has the meaning set forth in Section 3.5(d).
"Dollar" or "$" means the coin or currency of the United States of
America as at the time of payment is legal tender for the payment of public
and private debts.
"Employee Benefit Plan" has the meaning set forth in Section 4.13.
"Encumbrance" means any encumbrance, lien, charge, pledge, mortgage,
title retention agreement, security interest, adverse claim, exception,
reservation, restriction, any matter capable of registration against title,
option, privilege, voting arrangements, or any agreement, indenture, contract,
option, instrument or other commitment, whether written or oral, to create any
of the foregoing, except, with respect to references to any encumbrances to
the Shareholders' shares of Metropolitan Common Stock, for such encumbrances
initially made in favor of Metropolitan, the Bank or their affiliates.
"Environmental Law" means and includes, without limitation, any and all
applicable laws, statutes, ordinances, rules, regulations, orders or
determinations of any federal, state or local Governmental Authority now or
hereafter existing pertaining to health or to the environment, and relating to
the Purchased Assets, including the Clean Air Act, as amended, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended ("CERCLA"), the Federal Water Pollution Control Act Amendments, the
Occupational Safety and Health Act of 1970, as amended, the Resource
Conservation and Recovery Act of 1976, as amended, the Hazardous Materials
Transportation Act of 1975, as amended, the Safe Drinking Water Act, as
amended, and the Toxic Substances Control Act, as amended.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Escrow Funds" means the aggregate of all trust funds held by Phoenix or
Phoenix Escrow.
"FHA" means the Federal Housing Administration, or any successor thereof.
"FHLMC" means the Federal Home Loan Mortgage Corporation.
"Final Balance Sheet" has the meaning set forth in the first sentence of
Section 3.5.
"FNMA" means the Federal National Mortgage Association.
"GNMA" means the Government National Mortgage Association, or any
successor thereof.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Initiator" has the meaning set forth in Section 3.5(d)(i).
"Intangibles" means certain intangible assets of Metropolitan listed on
Schedule 1.1(c), including all intangible assets, obtained at the time
Metropolitan, together with its wholly owned subsidiary, Metropolitan Phoenix,
Inc., acquired certain assets, and assumed certain liabilities, of Phoenix
Mortgage & Investment, Inc., and constituting assets of Phoenix on or before
the Closing.
"Investor" means a Private Investor, the Bank, or an Agency.
"Liabilities" means liabilities, direct, secondary, or contingent, of
Metropolitan and the Bank as defined in Section 3.3.
"Merger" means the merger of Metropolitan with and into Washington
Federal, pursuant to the terms and conditions of the Agreement and Plan of
Merger, dated as of July 11, 1996, as such may be amended.
"Metropolitan" means Metropolitan Bancorp, a Washington corporation
"Metropolitan Common Stock" means the common stock, par value $.01 per
share, of Metropolitan as authorized in its articles of incorporation as such
articles exist at Closing.
"Metropolitan Portfolio Loans" means Mortgage Loans held by Metropolitan
or the Bank.
"Metropolitan's Auditor" has the meaning set forth in Section 3.5.
"Mortgage" means a mortgage, deed of trust, security deed, trust deed or
other real estate security instrument securing a promissory note and creating
a lien on the real estate securing the note, which instrument is customarily
used for such purpose in the jurisdiction where the real estate is located and
originated by Phoenix.
"Mortgage Loans" means mortgage loans evidenced by a Mortgage Note and
secured by a Mortgage on a one- to four-family residence.
"Mortgage Note" means the written promise to pay a sum of money at a
stated interest rate during a specified term and secured by a Mortgage.
"Phoenix" means Phoenix Mortgage & Investment, Inc., a Washington
corporation.
"Phoenix Common Stock" means the common stock, par value $0.01 per share,
of Phoenix as authorized in its articles of incorporation as such articles
exist at Closing.
"Phoenix Escrow" means Phoenix Escrow, Inc., a wholly owned subsidiary of
Phoenix.
"Phoenix Financial Statements" means the financial statements of Phoenix
described in Section 4.4.
"Phoenix's Net Worth" means Phoenix's total stockholders' equity,
computed as of the Closing Date, as stated on the Final Balance Sheet plus (i)
the amount of origination and other fees, the recognition of which is deferred
under generally accepted accounting principles until the sale of the related
loan, relating to Mortgage Loans that have not been sold or delivered to
Investors on or before the Closing Date, less a provision for federal and
state taxes on such fees; and minus (ii) $1 representing the intangibles
recorded on the Final Balance Sheet.
"Prior Agreements" means the specific agreements referenced in Section
6.16.
"Private Investor" means an owner or holder of a Mortgage Loan other than
the Agencies and the Bank.
"Promissory Note" means a Promissory Note of Metropolitan, referenced in
Section 2.2(b) of this Agreement, to be executed and delivered to each of the
Shareholders as partial consideration for redeeming the Shareholders'
Metropolitan Shares, the form of which is attached hereto as Exhibit A.
"Recipient" has the meaning set forth in Section 3.5(d)(i).
"Redemption Price" has the meaning set forth in Section 2.2, as such
Redemption Price may be adjusted pursuant to Section 2.3.
"Related Party" means any company, trade or business that is a member of
the same controlled group of corporations (within the meaning of Section
4l4(b) of the Code), group of trades or businesses under common control
(within the meaning of Section 414(c) of the Code), or affiliated service
group (within the meaning of Section 414(m) or 414(o) of the Code) as
Metropolitan or the Bank., other than Phoenix as relates to its 40l(k) plan.
In addition, "Related Party" does not refer to any person who will become a
Related Party of Metropolitan or the Bank as a result of the Merger, which is
to be consummated immediately following the redemption of the Shareholders'
Metropolitan Shares pursuant to this Agreement.
"Report" has the meaning set forth in Section 6.4.
"Shareholders" means Mr. Fairchild and Ms. Nilson.
"Shareholders' Auditor" means Deloitte & Touche.
"Shareholders' Metropolitan Shares" means the 453,297 shares of the
Metropolitan Common Stock owned by the Shareholders, representing their entire
equity interest in Metropolitan, which are to be redeemed by Metropolitan
pursuant to the terms of this Agreement.
"Threshold Amount" has the meaning set forth in Section 8.2(a).
"VA" means the U.S. Department of Veterans Affairs, or any successor
thereof.
"Warehouse Loans" means all Mortgage Loans owned by Phoenix as of the
Closing Date other than the Metropolitan Portfolio Loans.
"Warehousing Line" means the warehousing financing referenced in Section
6.13.
"Washington Federal" means Washington Federal, Inc., a Washington
corporation.
1.2 References
(a) Words used herein denoting the singular include the plural and vice
versa, and pronouns of whatever gender will be deemed to include and designate
the masculine, feminine or neuter gender. When used herein, unless the
context otherwise clearly requires, the words "or" and "including" will not be
construed to be a limitation or exclusive but will be construed to be
inclusive.
(b) Unless the context otherwise requires, references to Article,
Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and
Schedules of or to this Agreement. Article and Section headings are for ease
of reference only and will not affect the construction of this Agreement.
(c) All references herein to any law, rule, regulation, agreement or other
instrument will be deemed to be references to such law, rule, regulation,
agreement or other instrument as amended from time to time.
(d) References to Metropolitan and the Bank herein shall, to the extent
applicable, refer to any successor thereof as well.
ARTICLE 2. REDEMPTION OF SHAREHOLDERS'
METROPOLITAN SHARES
2.1 Redemption of Shareholders' Metropolitan Shares
Upon the terms and subject to the conditions hereof and in reliance upon
the agreements, representations and warranties contained herein, at the
Closing, (a) Metropolitan shall redeem from the Shareholders the Shareholders'
Metropolitan Shares, and (b) Shareholders shall assign, transfer, convey and
deliver to Metropolitan all right, title, interest and benefit of the
Shareholders in the Shareholders' Metropolitan Shares free and clear of any
and all Encumbrances.
2.2 Redemption Price
In full consideration for the Shareholders' Metropolitan Shares, and
subject to the terms and conditions of this Agreement, at the Closing,
Metropolitan shall pay to the Shareholders the redemption price (the
"Redemption Price") as follows:
(a) Metropolitan shall assign, transfer, convey and deliver to the
Shareholders 81 shares of the Phoenix Common Stock, free and clear of any and
all Encumbrances, representing 81% of the issued and outstanding shares of the
Phoenix Common Stock, such shares to be allocated as follows: 46.5172% to Mr.
Fairchild and 34.4828% to Ms. Nilson; and
(b) Metropolitan shall execute and deliver to Mr. Fairchild a Promissory
Note, dated as of the Closing Date, in the amount of $4,145,978 and to Ms.
Nilson a Promissory Note, dated as of the Closing Date, in the amount of
$373,807, each such Promissory Note to be in the form attached hereto as
Exhibit A.
2.3 Adjustment to Redemption Price
(a) In the event that Phoenix's Net Worth as determined pursuant to
Section 3.5 is more than $1,900,000, the Shareholders shall cause Phoenix to
pay to Metropolitan, in accordance with Section 3.6, the amount of the excess.
(b) In the event that Phoenix's Net Worth as determined pursuant to
Section 3.5 is less than $1,900,000, Metropolitan shall pay to Phoenix, in
accordance with Section 3.6, the amount of the deficit.
ARTICLE 3. THE CLOSING
3.1 Time of Closing
The consummation of the redemption contemplated by this Agreement (the
"Closing") will take place at the offices of Perkins Coie located at 1201
Third Avenue, Seattle, Washington, at 10:00 a.m., Pacific daylight time, on
the first Business Day after the conditions specified in Article 7 have been
fulfilled, which date must be on or before the last date for consummating the
Merger, or at such other place, time or date as Metropolitan and the
Shareholders mutually agree (the "Closing Date").
3.2 Deliveries
(a) At the Closing, the Shareholders will deliver to Metropolitan:
(i) stock certificates representing all the Shareholders'
Metropolitan Shares duly executed in blank or accompanied by duly executed
instruments of transfer, and any other documents that are reasonably necessary
to transfer to Metropolitan all right, title and interest in the Shareholders'
Metropolitan Shares free and clear of any and all Encumbrances;
(ii) the releases of all Liabilities required by Section 3.3;
(iii) a certificate in the form attached hereto as Exhibit B(1) dated
the Closing Date and executed by the Shareholders;
(iv) opinions of the Shareholders' counsel in the form attached
hereto as Exhibit C; and
(v) all other documents, instruments and papers as are reasonably
necessary for the consummation of the transactions contemplated by this
Agreement and as Metropolitan may reasonably request.
(b) At the Closing, Metropolitan will deliver to the Shareholders:
(i) stock certificates for 81 shares of the Phoenix Common Stock,
representing 81% of the issued and outstanding shares of Phoenix as of the
Closing Date, duly executed in blank or accompanied by duly executed
instruments of transfer, and any other documents that are reasonably necessary
to transfer to the Shareholders all right, title and interest in such shares
of Phoenix Common Stock free and clear of any and all Encumbrances; such
shares are to be allocated between the Shareholders as provided in Section
2.2;
(ii) certificates in the form attached hereto as Exhibit B(2) dated
the Closing Date and executed by the President and the Secretary of
Metropolitan and the Bank;
(iii) the two Promissory Notes dated as of the Closing Date, in the
form attached hereto as Exhibit A, in the original principal amount required
by Section 2.2(b), payable to each of the Shareholders;
(iv) certified copies of resolutions of the Board of Directors of
Metropolitan authorizing the redemption of the Shareholders' Metropolitan
Shares in accordance with this Agreement;
(v) certified copies of the resolutions of the Board of Directors of
Metropolitan and the Bank authorizing Metropolitan and the Bank to execute and
perform their respective obligations under this Agreement;
(vi) an opinion of Metropolitan's counsel in the form attached hereto
as Exhibit D; and
(vii) all other documents, instruments and papers as are reasonably
necessary for the consummation of the transactions contemplated by this
Agreement and may be reasonably requested by the Shareholders.
3.3 Release of Bank and Metropolitan from Liabilities
On or prior to the Closing Date, the Shareholders will arrange for
Metropolitan and the Bank to be fully and completely released, at no cost or
expense to Metropolitan or the Bank, from: (a) any and all liabilities with
respect to the Escrow Funds; and (b) any and all other liabilities, if any,
except those arising in respect of or related to an obligation of Metropolitan
hereunder to indemnify the Shareholders, of either Phoenix or Phoenix Escrow
that have been assumed or guaranteed by Metropolitan or the Bank, secured by
assets of Metropolitan or the Bank, or as to which Metropolitan or the Bank
has, or may have, any liability, whether direct, secondary or contingent (all
such liabilities herein referred to collectively as the "Liabilities").
3.4 Closing Net Worth
Metropolitan and the Bank shall use their best efforts to ensure that, on
the Closing Date and just prior to Closing, Phoenix shall have a Phoenix's Net
Worth, determined in accordance with the Accounting Principles, of $1,900,000,
after taking into account an adjustment to eliminate all intercompany
balances.
3.5 Final Balance Sheet
The "Final Balance Sheet" shall be prepared, examined, any disputes in
respect thereof resolved, and finally determined according to the provisions
of this Section 3.5.
(a) Within forty-five (45) Business Days after the Closing Date, the
Shareholders shall provide to Metropolitan a balance sheet of Phoenix as of
the Closing Date, certified by the Shareholders' Auditor as presenting the
various items therein in accordance with the Accounting Principles, after
taking into account an adjustment to eliminate all intercompany balance (the
"Closing Statement"), and a calculation based upon the Closing Statement
showing Phoenix's Net Worth, certified by the Shareholders' Auditor in a
manner in form and substance satisfactory to the Shareholders as being
performed in accordance with this Agreement (the "Audited Net Worth"). The
audit and certifications by the Shareholders' Auditor shall be paid for by
Metropolitan; provided, however, that Phoenix or the Shareholders may pay the
Shareholders' Auditors fees on behalf of Metropolitan and seek reimbursement
pursuant to Section 3.6(a)(iv).
(b) Metropolitan shall have fifteen (15) Business Days after receipt of
the Closing Statement in which it and a nationally recognized independent
certified public accounting firm retained for such purpose ("Metropolitan's
Auditor") may examine the Closing Statement and such underlying records as
Metropolitan's Auditor deems necessary and appropriate to express an opinion
of the Closing Statement. The Shareholders and Shareholder's Auditor shall
cooperate fully and promptly with Metropolitan and Metropolitan's Auditor in
such examination and shall cause Phoenix promptly to make available to
Metropolitan and Metropolitan's Auditor any records under Phoenix's reasonable
control requested by Metropolitan and Metropolitan's Auditor in accordance
with the immediately preceding sentence. At the conclusion of the fifteen
(15) day period, Metropolitan must either accept the Closing Statement and the
Audited Net Worth as final (in which case they shall be deemed to have been
determined to be the Final Balance Sheet and Phoenix's Net Worth) or provide
the Shareholders with a set of proposed adjustments to the Closing Statement,
whose effect would result in a change in the Shareholders' calculation of
Audited Net Worth in excess of $25,000, concurred in by Metropolitan's Auditor
as being necessary to present the various items in the Closing Statement in
accordance with the Accounting Principles, after taking into account an
adjustment to eliminate all intercompany balances ("Dispute Adjustments'). If
Metropolitan does not provide Dispute Adjustments within the required fifteen
(15) day period, the Closing Statement and the Audited Net Worth shall become
final (in which case they shall be deemed to have been determined to be the
Final Balance Sheet and Phoenix's Net Worth).
(c) If Dispute Adjustments are timely delivered, the parties shall, for a
period of ten (10) Business Days thereafter, seek in good faith to resolve in
writing the matters of dispute giving rise to Dispute Adjustments.
(d) Following the ten (10) day period set forth in Section 3.5(c), either
party may invoke the process set forth in this Section 3.5(d) to select a
partner in a nationally recognized independent certificate public accounting
firm (other than those of a Shareholders' Auditor and Metropolitan's Auditor)
who shall resolve the matters of dispute giving rise to Dispute Adjustments in
accordance with Section 3.5(e) (the "Disputes Arbiter").
(i) Either the Shareholders or Metropolitan (the "Initiator") may
initiate the following selection process by notifying the Initiator's Auditor
and the other party (the "Recipient") in writing that it seeks the appointment
of a Disputes Arbiter.
(A) The Recipient shall then, within five (5) Business Days, notify
the Recipient's Auditor in writing (with a copy to the Initiator and the
Initiator's Auditor) to contact the Initiator's Auditor for the purpose of
selecting a Disputes Arbiter in accordance with this Section 3.5(d).
(B) Within five (5) Business Days after the Recipient's Auditor is
notified pursuant to Section 3.5(d)(i)(A), each of the Auditors shall select a
partner in their respective Seattle offices who has not worked on this matter
(each such partner, a "Resolution Partner") and shall notify the other and the
parties of such selection.
(C) Within five (5) Business Days of the selection of the two
Resolution Partners, such partners shall select a Disputes Arbiter. If the
two Resolution Partners cannot agree on a Disputes Arbiter, at the end of the
five (5) day period set forth in the preceding sentence, each Resolution
Partner shall nominate one qualified partner to be Disputes Arbiter and shall
notify Metropolitan and the Shareholders of such nomination in writing. If
Metropolitan and the Shareholders do not agree within five (5) Business Days
which of the two nominees shall be the Disputes Arbiter, at noon on the next
Business Day at the offices of the Initiator's nominee in the presence of the
two Resolution Partners, the Initiator's nominee shall flip a quarter in such
a manner that it falls at least five feet to rest on a flat surface, and the
Recipient's nominee shall call "heads" or "tails" while the quarter is in the
air. If the Recipient's nominee calls the flip correctly, he or she shall be
the Disputes Arbiter, otherwise the Initiator's nominee shall be the Disputes
Arbiters.
(ii) The following consequences shall result if a party misses a
deadline in the process set forth in Section 3.5(d)(i):
(A) If the Recipient fails to notify its Auditor to ace in
accordance with Section 3.5(d)(a)(A) and to send a copy of such notice to the
Initiator (in accordance with the provisions of Section 9.3 within the time
frame required by Section 3.5(d)(i)(A)), then the Initiator's position on the
disputed matters giving rise to the Dispute Adjustments shall be deemed
correct, and the Final Balance Sheet and Phoenix's Net Worth shall be prepared
based on the Initiator's position in respect of such matters (in which case
they shall be deemed to have been determined to be the Final Balance Sheet and
Phoenix's Net Worth).
(B) If a party's Auditor fails to notify the other party or the
other party's Auditor (in accordance with the provisions of Section 9.3 of the
Resolution Partner it has selected within the time frame required by Section
3.5(d)(i)(B)), then the Resolution Partner selected by the other party's
Auditor shall select the Disputes Arbiter.
(C) If the two Resolution Partners have not agreed on a Disputes
Arbiter within the time frame required by the first sentence of Section
3.5(d)(i)(C) and a party's Resolution Partner has not provided notice of its
nominee for disputes Arbiter.
(D) If a party's Resolution Partner or such partner's nominee is
not present for the coin flip required by the penultimate sentence of Section
3.5(d)(i)(C), then the other party's Resolution Partner's nominee shall be the
Disputes Arbiter.
(e)
(i) By no later than five (5) Business Days after the Disputes
Arbiter's selection, the Disputes Arbiter shall notify each party in writing
of the schedule for the dispute resolution proceeding. At a minimum, the
schedule shall include: a deadline for written submissions not less than
fifteen (15) nor more than twenty (20) Business Days after the Disputes
Arbiter's selection; an oral presentation session to be held at a location
specified by the Disputes Arbiter may be scheduled by the Disputes Arbiter as
soon as possible thereafter but no later than fifteen (15) Business Days after
the deadline for written submissions. Written submissions may be sent via
facsimile, with the original and any supporting documentation to follow by
reputable overnight carrier. Any written materials submitted under this
Section 5(3) shall be sent to the Disputes Arbiter and the other party at the
same time and in the same manner.
(ii) Each party's written submission shall include what it believes
the final Balance Sheet and Phoenix's Net Worth to be, without being
constrained by positions previously taken in the Closing Statement, Audited
Net Worth or Dispute Adjustments; provided, however, that the calculation of
Phoenix's Net Worth proposed in Metropolitan's submission must be at least
$25,000 different from the calculation of Audited Net Worth shall be prepared
based on the Closing Statement and the Audited Net Worth (in which case they
shall be deemed to have been determined to be the Final Balance Sheet and
Phoenix's Net Worth). Each party may incorporate such supporting
documentation into its submission as it deems appropriate.
(iii) Metropolitan and the shareholders shall, subject to the
penultimate sentence of this Section 3.5(e)(iii), have the right to be present
at the oral presentation at all times, accompanied by such advisers as they
see fit. the Disputes Arbiter shall, in his or her sole discretion, establish
a time limitation (which shall be the same for each party) during which each
party may present its position on the matters in dispute. Metropolitan shall
present its position first, and the Shareholders shall present their position
second. The presentations shall be informal, with a party speaking for itself
or allowing its advisers to present its position. The presentations may
include supplemental documentation rebutting claims made or documentation
contained in the other party's written submission. Following the
presentations, the Disputes Arbiter may question the parties and moderate the
parties' questions of each other. The Disputes Arbiter may, after one
specific warning, order the departure of any individual who refuses to abide
by the disputes Arbiter's authority to control the session and to moderate the
parties' questioning of each other. If a party fails to attend the oral
presentation session, the party in attendance shall provide the Disputes
Arbiter with the absent party's Closing Statement and calculation of Audited
Net Worth or dispute Adjustments, as the case may be.
(iv) The Disputes Arbiter shall, upon a review of all documentation,
testimony and argument determine the credibility and relevance of the
documentation and testimony offered. The Disputes Arbiter may, in his or her
sole discretion, require or allow the submission of further documentation
following the oral presentation session, which shall be provided within ten
(10) Business Days after the oral presentation session; provided however, that
the party not submitting the further documentation shall have five (5)
additional Business Days to comment on it. The Disputes Arbiter shall be
entitled to draw reasonable inferences from a party's failure to provide
further documentation within the required time frame.
(v) Promptly after considering all documentation and testimony, and
without any adjustment, the Disputes Arbiter shall decide which of the
parties' submissions (whether submitted by the party or on its behalf pursuant
to the last sentence of Section 3.5(3)(iii) most fairly presents the Final
Balance Sheet. The Disputes Arbiter shall notify the parties which submission
most fairly presents the Final Balance Sheet, and the Final Balance Sheet and
the calculation of Phoenix's Net Worth submitted by such party shall be deemed
final and to have been determined to be the Final Balance Sheet and Phoenix's
Net Worth, thus resolving the parties' dispute. The Disputes Arbiter shall
further determine and award to the prevailing party pursuant to Section
3.6(ii,iii); (A) interest on the amount of the adjustment determined pursuant
to Section 2.3 at the rate of twelve percent (12%) per annum from the Closing
Date, and (B) the prevailing party's actual outside adviser fees (including
without limitation its legal counsel) incurred during the course of the
dispute resolution process set forth in Section 3.5(d,e). The decision of the
Disputes Arbiter shall be final and binding on the parties. The Disputes
Arbiter shall resolve the parties' dispute even if one of the parties failed
to provide a written submission or to attend the oral presentation session.
(vi) The losing party shall bear one hundred percent (100%) of the
fees and costs of the Dispute Arbiter; provided, however, that either party
may pay up to one hundred percent (100%) of the Disputes Arbiter's fees and
costs and recover the other party's share of the fees and costs, if any,
pursuant to Section 3.6(a)(iv). In resolving the parties' dispute, the
Disputes Arbiter shall not be required to follow the practices and procedures
that would be required for any audit in accordance with GAAS and shall not be
required to issue any report, opinion or certification in respect of the Final
Balance Sheet or Phoenix's net Worth. The Disputes Arbiter (and, for purposes
of this Section 3.5(3)(vi), his or her firm and other partners) shall have no
liability whatsoever to the parties hereto or any other person or entity for
any action taken or omitted to be taken by the Disputes Arbiter with respect
to the parties' dispute, unless it is finally judicially determined that such
liability was caused by fraud or intentional misconduct on the part of the
Disputes Arbiter. The parties hereby agree jointly and severally to indemnify
and to hold harmless the Disputes Arbiter in respect of any and all
liabilities, costs and expenses (including reasonable attorney fees and
expenses), incurred or suffered by reason of or in any way relating to the
parties' dispute, except to the extent that it is finally judicially
determined that any such liability, cost or expense was caused by fraud or
intentional misconduct on the part of the Disputes Arbiter. The parties shall
agree to abide by such further terms and conditions, consistent with the
philosophy of this Section (3.5(e)(vi), as the Disputes Arbiter may reasonably
request. Any Disputes Arbiter selected under this Section 3.5 is an intended
beneficiary of the provisions of this Section 3.5(3)(vi).
3.6 Settlement of Obligations
(a) Within five (5) Business Days of the determination of the Final
Balance Sheet and Phoenix's Net Worth, the obligor shall deliver, by wire
transfer, in immediately available funds, in accordance with the obligee's
instructions, the amount of (i) the payment due pursuant to Section 2.3, plus
(ii) interest, if any, due pursuant to Section 3.5(e)(v), plus (iii) any aware
of adviser fees pursuant to Section 3.5(e)(v), plus (iv) any allocation of the
Disputes Arbiter's fee and costs under Section 3.5(e)(vi), all adjusted by (v)
any fees paid by one party on behalf of the other, but only to the extent
expressly authorized by Section 3.5
(b) If a party obligated to make a payment under Section 3.6(a) fails to
make such a payment, the obligee may immediately seek enforcement of such
obligations in a court of competent jurisdiction. The prevailing party shall
further be entitled to an award of any costs and fees (including without
limitation those of its legal counsel) incurred to obtain enforcement of an
obligation arising under Sections 3.5 and 3.6. Each party hereby consents to
the jurisdiction and venue of the federal and state courts in King County,
Washington for the purpose of enforcing this Section 3.6 Phoenix's Net Worth.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES
OF METROPOLITAN AND THE BANK
Metropolitan and the Bank represents and warrants to the Shareholders as
follows, as of the date of this Agreement and as of the Closing Date, except
as may be set forth in writing by Metropolitan delivered to the Shareholders
in Metropolitan's Disclosure Letter and except as qualified by the final
paragraph of Article 4:
4.1 Organization and Qualification of Phoenix
Metropolitan is a corporation duly organized, validly existing and in good
standing under the laws of Washington, and Phoenix and Phoenix Escrow each is
a corporation duly organized, and is validly existing and in good standing
under the laws of Washington. Each of Metropolitan, Phoenix, and Phoenix
Escrow is duly qualified and authorized, and has obtained all necessary
approvals or exemptions, to do business in those states where the nature of
its activities or the character of the properties owned, leased or operated by
it requires such qualification and where failure so to qualify would have a
material adverse effect on business, operations, assets or financial
condition. The copies of the articles of incorporation and bylaws of each of
Metropolitan, Phoenix, Phoenix Escrow, which have been previously delivered to
the Shareholders, are true and complete.
4.2 Capitalization; Stock Ownership
On the Closing Date, the authorized capital stock of Metropolitan will
consist of 40,000,000 shares of common stock, par value $0.01 per share, of
which 3,710,205 shares will be issued and outstanding, and the capital stock
of Phoenix will consist of 50,000 shares of common stock, par value $0.01 per
share, of which 100 shares will be issued and outstanding. On the Closing
Date, Metropolitan will own all the outstanding shares of stock of Phoenix in
the amounts set forth on the attached Schedule 4.2, free and clear of all
Encumbrances, and Phoenix will own all the outstanding shares of stock of
Phoenix Escrow in the amounts set forth on the attached Schedule 4.2 free and
clear of all Encumbrances. On the Closing Date, there will be no outstanding
options, warrants, subscriptions, rights or agreements for the purchase or
acquisition from Metropolitan of any shares or securities exchangeable for or
convertible into shares of Phoenix or from Phoenix of any shares or securities
exchangeable for or convertible into shares of Phoenix Escrow.
4.3 Authority Relative to Agreement
Metropolitan has all requisite corporate power and authority to execute and
deliver this Agreement and to perform its obligations hereunder. The
execution and delivery of this Agreement by Metropolitan and the Bank and the
consummation by it of the transactions contemplated hereby (a) have been duly
and validly authorized by all necessary corporate action, (b) except as set
forth on Schedule 4.3, do not otherwise require the consent, waiver, approval,
license or authorization of, or filing or registration with or notification
to, any person, entity or Governmental Authority (other than those that have
been made or obtained), (c) do not violate any provision of law applicable to
Metropolitan or the Bank, or the articles of incorporation or bylaws of
Metropolitan or the Bank, and (d) do not, with or without the giving of notice
or the passage of time, conflict with or result in a breach or termination of
any provision of, or constitute a default under, or result in the creation of
any lien, charge or encumbrance upon any of the property or assets of
Metropolitan or the Bank pursuant to, any mortgage, deed of trust, indenture,
license or other material agreement or instrument, or any law or other
restriction of any kind or character, to which Metropolitan is a party or by
which Metropolitan or any of its assets may be bound. This Agreement has been
duly executed and delivered by Metropolitan and the Bank and is a valid and
binding obligation of Metropolitan and the Bank enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
insolvency, conservatorship, receivership, moratorium and other laws affecting
the rights of creditors generally and subject to general principles of equity,
including without limitation those regarding the availability of specific
performance.
4.4 Financial Statements; Balance Sheet Items
Phoenix's audited balance sheets as of March 31, 1996 and 1995 and the
related audited statements of operations, stockholders' equity and cash flows
for the years then ended, including the notes thereto, audited by independent
certified public accountants as reflected therein (collectively, the "Phoenix
Financial Statements"), true and complete copies of which have been previously
delivered to the Shareholders present fairly, in all material respects, the
financial position of Phoenix at March 31, 1996 and 1995 and the results of
its operations and cash flows for the years then ended in conformity with
generally accepted accounting principles (the "Accounting Principles"). The
unaudited balance sheet of Phoenix as of June 30, 1996 as reviewed by
Deloitte & Touche under SAS 71, copies of which are attached hereto as
Schedule 4.4, and the unaudited statement of income for the three-month period
ended June 30, 1996, copies of which as reviewed by Deloitte & Touche will be
delivered to the Shareholders within 15 days hereof, and the unaudited
statement of income for the three-month period ended June 30, 1995 present
fairly, in all material respects, the financial position of Phoenix at June
30, 1996 and the results of its operations for the three-month periods ended
June 30, 1996 and 1995 in conformity with the Accounting Principles.
4.5 No Undisclosed Liabilities
Since June 30, 1996, except for the transactions contemplated by this
Agreement:
(a) Phoenix has not incurred any material liability or obligation
(absolute, accrued, contingent or otherwise) of any nature, other than
liabilities and obligations incurred in the ordinary course of business, that
would properly be reflected or reserved against in a balance sheet prepared in
conformity with the Accounting Principles with that used in the preparation of
the balance sheet of Phoenix at June 30, 1996 referred to in Section 4.4; and
(b) Phoenix has not acquired any material amount of accounts receivable
that are or are believed to be uncollectible, and the frequency and amounts of
payments received by Phoenix with respect to the accounts receivable reflected
on the balance sheet of Phoenix at June 30, 1996 referred to in Section 4.4 do
not, in retrospect, render inadequate the reserve for uncollectible accounts
set forth on such balance sheet.
4.6 Absence of Certain Changes
Except as otherwise contemplated by this Agreement, since June 30, 1996 (a)
Phoenix has conducted its business only in the ordinary and usual course
consistent with past practices; (b) there has not been any material adverse
change in the condition (financial or otherwise), results of operations,
assets, properties, business, operations or prospects of Phoenix or Phoenix
Escrow, or to the extent there has been such a material adverse change,
it will be fully reflected in Phoenix's Closing Balance Sheet, (c) Phoenix has
not lost any major accounts, or suffered or knows of any impending similar
material loss.
4.7 Permits, Authorizations
Each of Phoenix and Phoenix Escrow possesses, and is current and in good
standing under, all approvals, authorizations, consents, licenses, orders and
other permits of FNMA, FHLMC, and all other Governmental Authorities required
to permit its operations as currently conducted. Neither Phoenix nor Phoenix
Escrow has received any notice that any Governmental Authority intends to
cancel, terminate or not renew any such approval, authorization, consent,
license, order or other permit.
4.8 Compliance With Applicable Law
Each of Phoenix and Phoenix Escrow has conducted, and is in the conduct of,
its business, obligations relating to the Current Pipeline and the Escrow
Funds, and all sales of Mortgage Loans and Servicing Agreements have been
entered into by Phoenix, in material compliance with all laws, statutes,
rules, ordinances, regulations, licenses, permits, standards, requirements,
administrative rulings, orders or processes applicable to it and to the
processing, originating, underwriting and servicing of the applications listed
on Schedule 1.1(a), as amended, including, without limitation, those laws
relating to real estate settlement procedures, consumer credit protection,
truth in lending laws, usury limitations, fair housing, transfers of
servicing, collection practices, equal credit opportunity and adjustable rate
mortgages. Each of Phoenix and Phoenix Escrow has duly filed with the
applicable Agency or Governmental Authority any material reports, applications
or other documents or information required to be filed therewith.
4.9 Litigation; Claims
Except as set forth on attached Schedule 4.9, there is no action, suit,
arbitration or other proceeding pending or, to the best of Metropolitan's
knowledge, threatened against Phoenix or Phoenix Escrow that would
individually or in the aggregate, if decided adversely to Phoenix, have a
material adverse effect on Phoenix or that seeks to prevent or impair the
consummation of the transactions contemplated hereby. Except as set forth on
attached Schedule 4.9, there is no customer claim or dispute of which
Metropolitan is aware relating to Phoenix's or Phoenix Escrow's conduct of its
business that would, individually or in the aggregate, have a material adverse
effect on Phoenix.
4.10 Brokers and Finders
Metropolitan has not employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
Metropolitan, in connection with this Agreement or the transactions
contemplated hereby.
4.11 Environmental Matters
To the best of Metropolitan's knowledge, none of the property of Phoenix
(the "subject property") is in violation in any material respect of any
Environmental Law applicable to it. To the best of Metropolitan's knowledge,
(i) the subject property does not contain any underground storage tanks,
asbestos, ureaformaldehyde, polychlorinated biphenyls, solid wastes or
hazardous substances, as such terms may be defined by any applicable
Environmental Law, (ii) no part of such property has been listed or proposed
for listing on the National Priorities List pursuant to CERCLA or on a
registry or inventory of inactive hazardous waste sites maintained by any
Governmental Authority and no notices have been received by Metropolitan or
Phoenix alleging that Phoenix is a potentially responsible person under CERCLA
or any similar Environmental Law, and (iii) there is no suit, claim, action or
proceeding pending or threatened before any Governmental Authority in which
Phoenix in respect of the subject properties may be named as a defendant for
alleged noncompliance with any applicable Environmental Law.
4.12 Insurance
Metropolitan, Bank, Phoenix and Phoenix Escrow maintain the insurance
policies described in Schedule 4.12 on the assets or business of Phoenix or
Phoenix Escrow, all such policies of insurance coverage are in full force and
effect; the insureds are not in default with respect to any of the provisions
contained in any such insurance policy. Schedule 4.12 includes a list of all
claims filed or pending under the insurance policies. To the knowledge of
Metropolitan or the Bank, except as set forth in Schedule 4.12, there are no
events or occurrences which have occurred, or which would occur upon the
giving of notice or the lapse of time or both, that would constitute the basis
for the filing of a material claim under any insurance policy on Schedule 4.12.
4.13 Employee Benefits
(a) Schedule 4.13 lists and briefly summarizes each employee benefit plan
(other than the 40l(k) plan maintained by Phoenix, which is not the subject of
this representation, and as to which neither Metropolitan nor the Bank make
any representations or warranties) (the referenced plans herein referred to
individually as the "Employee Benefit Plan") that Phoenix or Phoenix Escrow
maintains or to which they contribute and except as provided in Schedule 4.13,
to the knowledge of Metropolitan or Bank:
(i) Each such Employee Benefit Plan (and each related trust,
insurance contract, or fund) in form and in operation comply in all respects
with all applicable laws, rules, orders and regulations, including but not
limited to ERISA and the Code.
(ii) All contributions (including all employer contributions and
employee salary reduction contributions), reserves or premium payments accrued
through the Closing Date have been paid to each such Employee Benefit Plan or
otherwise provided for.
(iii) Each such Employee Benefit Plan which is an Employee Pension
Benefit Plan and is intended to qualify under Code Section 401(a) has received
a determination letter from the Internal Revenue Service to the effect that it
meets the requirements of Code Section 401(a) and no event has occurred, no
amendment has been adopted or action taken which would cause such Plan to lose
its qualified status.
(iv) The market value of assets under each such Employee Benefit Plan
which is an Employee Pension Plan (including without limitation any
Multi-employer Plan) equals or exceeds the present value of liabilities
thereunder (determined in accordance with current funding assumptions).
(v) Metropolitan has delivered the Shareholders correct and complete
copies of the plan documents and summary plan descriptions and all material
modifications thereto, the most recent determination letter received from the
Internal Revenue Service, the most recent Form 5500 Annual Report (including
schedules attached thereto), the last financial statement and actuarial report
for each plan and trust required to have such statements and/or reports, and
all related trust agreements, insurance contracts, and other funding
agreements which implement each such Employee Benefit Plan.
(b) With respect to each Employee Benefit Plan that Metropolitan or Bank
or any Related Party of either of them maintain or ever have maintained or to
which Metropolitan or Bank or any Related Party of Metropolitan or Bank
contribute, ever have contributed, or ever have been required to contribute:
(i) No such Employee Benefit Plan which is an Employee Pension
Benefit Plan has been completely or partially terminated or been the subject
of a Reportable Event as to which notices would be required to be filed with
the PBGC. No proceeding by the PBGC to terminate any such Employee Pension
Benefit Plan has been instituted.
(ii) No action, suit, proceeding, hearing, or investigation with
respect to any such Employee Benefit Plan (other than routine claims for
benefits) has been filed or is occurring or pending or, to Metropolitan's or
Bank's knowledge, threatened.
(iii) Neither Metropolitan or Bank (nor any of them) nor any Related
Party of either have incurred any liability to the PBGC (other than PBGC
premium payments) or otherwise under Title IV of ERISA (including any
withdrawal liability) with respect to any such Employee Benefit Plan which is
an Employee Pension Benefit Plan.
(iv) No "prohibited transaction" (as such term is used in Section 406
of ERISA or Section 4975 of the Code), or "accumulated funding deficiency" (as
such term is used in Section 412 or Section 4971 of the Code) has heretofore
occurred with respect to any Employee Benefit Plan.
(v) Neither Metropolitan or Bank nor any Related Party of either
including Phoenix or Phoenix Escrow has contributed to or participated in any
Employee Pension Benefit Plan which is a "multiemployer plan," as defined in
Section 3(37) of ERISA, or in any "multiple employer" plan within the meaning
of Section 4063 or 4064 of ERISA.
(vi) The consummation of the transactions contemplated by this
Agreement will not result in an increase in the amount of compensation or
benefits or accelerate the vesting of any benefits payable to or in respect of
any employee or former employee of Phoenix or Phoenix Escrow, or beneficiary
or dependent of such employee or former employee.
(vii) Neither Metropolitan or Bank nor any Related Party of either
including Phoenix or Phoenix Escrow have any obligations for retiree health
and life benefits under any Employee Benefit Plan. There are no restrictions
on the rights of Phoenix or Phoenix Escrow to amend or terminate any Employee
Benefit Plan without incurring any liability thereunder. Neither Metropolitan
or Bank nor any Related Party have engaged in or are a successor parent
corporation to or otherwise related to an entity that has engaged in a
transaction described in ERISA Sections 4069 or 4212(c).
(viii) No tax under Code Section 4980B of the Code has been incurred
in respect of any Employee Welfare Benefit Plan that is a group health plan,
as defined in Section 5000(b)(1) of the Code.
4.14 Taxes
All returns, reports and other forms related to Taxes (as defined below)
required to be filed on or before the Closing Date with respect to Phoenix or
Phoenix Escrow under the laws of any jurisdiction, domestic or foreign, have
been filed, which returns, reports and statements are true, correct and
complete in all material respects, and all taxes, fees, and other governmental
charges of any nature whatsoever (hereinafter "Taxes") which were required to
be paid in connection with such returns, reports and forms have been paid, and
no penalties or other charges are due or will become due with respect to the
late filing of any such return, report or form. All Taxes shown to be due on
such returns, reports and forms have been paid. No audit of any such return,
report or form is pending for any period ending on or after December 31, 1994
and on or before the Closing Date with respect to Phoenix or Phoenix Escrow.
Schedule 4.14 sets forth the states in which returns, reports or forms with
respect to Phoenix or Phoenix Escrow have been filed relating to Taxes for any
year or portion of a year which ended on or after December 31, 1994. Complete
and correct copies of all federal income tax and state tax returns of or with
respect to Phoenix or Phoenix Escrow for any year or portion of a year which
ended on or after December 31, 1994, as filed with the Internal Revenue
Service and all state taxing authorities, have previously been supplied to the
Shareholders. No subsequent federal income tax or state tax return has become
due or has been filed by or with respect to Phoenix or Phoenix Escrow. With
respect to any taxable year ending on or before December 31, 1994 or any other
"open" year for which the Internal Revenue Service or other taxing authority
is not precluded from assessing a deficiency: (i) Phoenix or Phoenix Escrow
have not been notified that there is any assessment or proposed assessment of
deficiency or additional Tax with respect to Phoenix or Phoenix Escrow,
threatened Tax audit or investigation with respect to Phoenix or Phoenix
Escrow. No consent has been filed under Section 341(f) of the Code with
respect to Phoenix or Phoenix Escrow. None of Phoenix or Phoenix Escrow is
required to include in income any adjustment pursuant to Section 481(a) of the
Code (or similar provisions of other law or regulations) in its current or in
any future taxable period by reason of a change in accounting method for any
period prior to Closing nor do Metropolitan or Bank have any knowledge that
the IRS (or other taxing authority) has proposed, or is considering, any such
change in accounting method. The amounts reflected for Taxes in the Balance
Sheet are and will be sufficient for the payment of all unpaid federal, state,
local, and foreign taxes, assessments, and deficiencies of Phoenix and Phoenix
Escrow for all periods prior to Closing.
If either of the Shareholders has actual knowledge of facts that would make
any of the representations and warranties of Metropolitan and/or the Bank
contained in this Article 4 or elsewhere in this Agreement false or
misleading, and has not brought those facts to the attention of Metropolitan's
executive management, such facts will be regarded as exceptions to the
applicable representations and warranties of Metropolitan and/or the Bank and
will not constitute a basis for making claims against either Metropolitan or
the Bank for breach of representations and warranties.
ARTICLE 4A. ADDITIONAL REPRESENTATIONS,
WARRANTIES AND COVENANTS OF METROPOLITAN AND
BANK AS TO CERTAIN MORTGAGE LOANS
In regard to Mortgage Loans made by Phoenix but originated by Metropolitan
through its Wholesale or Community Lending programs or through Metropolitan
branch managers ("Metropolitan Mortgages"), Metropolitan and the Bank further
represent, warrant and covenant the following:
4A.1 Investor Requirements
Any originator of any Metropolitan Mortgage has performed all obligations
to be performed under any Investor requirements and no event has occurred and
is continuing that with the passage of time or the giving of notice, or both,
would constitute an event of default thereunder.
4A.2 Repurchase Obligation
In the event Phoenix, after closing, receives a repurchase demand from an
Agency or Investor regarding a Metropolitan Mortgage, Metropolitan and the
Bank agree to repurchase such Metropolitan Mortgage(s) from the Agency or
Investor upon the terms and conditions and at the repurchase price specified
by such Agency or Investor pursuant to the terms of the agreement with such
Agency or Investor.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
OF THE SHAREHOLDERS
Each of the Shareholders represents and warrants to Metropolitan severally
and not jointly as follows, as of the date of this Agreement and as of the
Closing Date, except as may be set forth in writing by such Shareholder in
Shareholders' Disclosure Letter delivered to Metropolitan:
5.1 Authority and Consents
Such Shareholder has full power, capacity and authority to execute and
deliver this Agreement and the Related Agreements and to perform the
obligations of such Shareholder hereunder and thereunder. This Agreement and
the Related Agreements have been duly authorized, executed and delivered by
such Shareholder and constitute the legal, valid and binding obligations of
such Shareholder enforceable against such Shareholder in accordance with their
terms, subject to applicable bankruptcy, reorganization, insolvency,
conservatorship, receivership, moratorium or other laws affecting the rights
of creditors generally and subject to general principles of equity, including
without limitation those regarding the availability of specific performance.
No consent, waiver, approval, license or authorization of, or filing or
registration with or notification to any person, entity or Governmental
Authority (other than those that have been made or obtained) is required for
or in connection with the execution and delivery of this Agreement and the
Related Agreements by such Shareholder or the consummation by such Shareholder
of the transactions contemplated hereby or thereby.
5.2 Noncontravention
Other than as set forth in the Shareholders' Disclosure Letter delivered to
Metropolitan and dated as of the date hereof, the execution and delivery of
this Agreement and the Related Agreements by such Shareholder does not, and
the consummation by such Shareholder of the transactions contemplated hereby
and thereby do not, with or without the giving of notice or the passage of
time, conflict with or result in a breach or termination of any provisions of,
or constitute a default under or a violation of any provision of, or result in
the acceleration of or entitle any party to accelerate any material obligation
under, any mortgage, deed, trust, indenture, license or other material
agreement or instrument, or any law or other restriction of any kind or
character, to which such Shareholder is a party or by which such Shareholder
is bound or his or her assets are bound.
5.3 Claims
There is no claim, action, suit, arbitration or other proceeding pending
or, to the best of such Shareholder's knowledge, threatened against such
Shareholder that question the validity or legality of this Agreement and the
Related Agreements or any action taken or to be taken by such Shareholder
pursuant to or in connection with this Agreement and the Related Agreements
and, to the best of such Shareholder's knowledge, there is no valid basis for
any such claim, action, suit, arbitration, proceeding or investigation.
5.4 Brokers and Finders
The Shareholder has not employed any broker or finder or incurred any
liability for any financial advisory fees, brokerage fees, commissions or
finder's fees, and no broker or finder has acted directly or indirectly for
the Shareholder, in connection with this Agreement or the transactions
contemplated hereby.
5.5 Title
Each of the Shareholders has good title to such Shareholder's Metropolitan
Shares free and clear of any and all Encumbrances.
ARTICLE 6. COVENANTS OF METROPOLITAN, THE BANK
AND THE SHAREHOLDERS
6.1 Conduct of Business
Between the date of this Agreement and the Closing Date, unless the
Shareholders otherwise agree in writing or as otherwise contemplated by this
Agreement, Metropolitan and the Bank will:
(a) not enter into any transaction or make any agreement or commitment,
and use its best efforts not to permit any event to occur, that would result
in any of the representations or warranties of Metropolitan or the Bank
contained in this Agreement not being true and correct in all material
respects at and as of the time immediately after the occurrence of the
transaction or event or the entering into of such agreement or commitment;
(b) not cause or permit Phoenix or Phoenix Escrow to purchase or acquire
any fixed asset with a purchase price or value in excess of $5,000, except as
described on attached Schedule 6.1;
(c) use its best efforts to (i) preserve Phoenix's business organization
(including, without limitation, its employees and the mortgage origination
network) intact in all material respects, (ii) preserve generally the goodwill
of those persons and entities with whom Phoenix has business relationships,
and (iii) obtain all consents and approvals required to permit Metropolitan
and the Bank to complete the transactions contemplated herein;
(d) not cause or permit Phoenix to enter into any transaction or make any
agreement or commitment that would require Phoenix, after the Closing Date, to
provide servicing that is materially different from current practice;
(e) not cause or permit Phoenix to originate or otherwise acquire any
Mortgage Loan or loan commitment except in the usual and ordinary course of
business of Phoenix consistent with its past practices;
(f) not cause or permit Phoenix to sell, transfer, assign, encumber or
otherwise dispose of any Servicing Rights, or solicit, negotiate or otherwise
entertain any proposals related thereto, or amend or terminate any Servicing
Agreement, or sell, transfer, assign, encumber or otherwise dispose of any
other assets of Phoenix, or solicit, negotiate or otherwise entertain any
proposals related thereto, except sales in the usual and ordinary course of
business of Phoenix consistent with its past practices;
(g) not cause or permit Phoenix to enter into any transaction or make any
agreement or commitment that could reasonably be expected to have a materially
adverse effect on Phoenix's or Phoenix Escrow's business or financial
condition;
(h) not cause or permit Phoenix or Phoenix Escrow to increase the
compensation payable to any employee, or make any material change in the
compensation policies applicable to Phoenix's employees, other than pursuant
to a contractual obligation disclosed on Schedule 6.1;
(i) immediately inform the Shareholders if, at any time prior to the
Closing, (i) any representation or warranty of Metropolitan or the Bank set
forth in this Agreement ceases to be true and correct in all material respects
or (ii) Metropolitan, the Bank or Phoenix receive from any Agency or
Governmental Authority any correspondence or communication relating to an
examination, report, inquiry or investigation regarding Phoenix or the conduct
of Phoenix's business;
(j) promptly furnish to the Shareholders copies of any and all consents,
communications, letters, reports, applications, notices or other documents
submitted to or received from any Agency or Private Investor in connection
with redemption of the Shareholders' Metropolitan Shares; and
(k) use its business efforts to cause Phoenix to maintain substantially
the same insurance coverage as that currently maintained by Phoenix with
respect to the assets and operations of Phoenix's business.
Mr. Fairchild is the president and chief executive officer of Phoenix and
Ms. Nilson the executive vice president and chief operating officer of
Phoenix. In those executive capacities, each of the Shareholders will be
responsible for affairs of Phoenix and Phoenix Escrow prior to the Closing
consistent with past practices. Neither of the Shareholders will take, or
cause any of the employees, agents, or representatives of Phoenix or Phoenix
Escrow to take, any action that would cause a breach of Metropolitan's or the
Bank's covenants in this Article 6 or elsewhere in this Agreement.
6.2 Access to Information
Phoenix and Phoenix Escrow will permit Metropolitan's and the Bank's agents
and representatives to consult with Phoenix's and Phoenix Escrow's employees
regarding the operations of Phoenix, provided that such access does not
unreasonably interfere with the normal operations or customer or employee
relations of Phoenix and Phoenix Escrow. Similarly, Metropolitan and the Bank
will permit Shareholders' agents and representatives to consult with
Metropolitan's and the Bank's employees regarding operations and matters
concerning Phoenix and Phoenix Escrow within their control.
6.3 Acquisition Proposals
Metropolitan agrees that until the earlier of 180 days after the date
hereof or the date on which Metropolitan and the Shareholders mutually agree
to terminate this Agreement pursuant to Section 9.1, neither Metropolitan, the
Bank, Phoenix nor any of their officers and directors shall, and Metropolitan
and Phoenix shall direct and use each of their best efforts to cause each of
their employees, agents and representatives (including, without limitation,
any investment banker, attorney or accountant retained by either Metropolitan
or Phoenix) not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making of any proposal or offer with respect to a merger,
consolidation or similar transaction involving, or any purchase of all or any
significant portion of the assets or any equity securities of, Phoenix (an
"Acquisition Proposal") or engage in any negotiations concerning, or provide
any confidential information or data to, or have any discussions with, any
person relating to an Acquisition Proposal, or otherwise facilitate any effort
or attempt to make or implement an Acquisition Proposal. Metropolitan will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any of the foregoing. Metropolitan will notify the Shareholders
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with Metropolitan or Phoenix.
6.4 Further Assurances
Metropolitan, the Bank and the Shareholders will use their best efforts to
take, or cause to be taken, all action, and to do or cause to be done, all
things necessary or appropriate under applicable laws and regulations to
consummate and make effective the redemption of the Shareholders' Metropolitan
Shares by Metropolitan, the transfer of the Phoenix Common Stock to the
Shareholders, and such other actions as are contemplated by this Agreement.
From time to time after the Closing Date, Metropolitan, the Bank and the
Shareholders will, at their own expense (except as otherwise provided by this
Agreement), execute and deliver to each other such documents as may reasonably
be required to consummate and perfect the transactions provided for in this
Agreement. In the event that Metropolitan is obligated to report the
consummation of the transactions under the Securities Exchange Act of 1934, as
amended, on a Current Report on Form 8-K (the "Report"), then Metropolitan
shall cause such report to be timely filed with the Securities and Exchange
Commission. In the event that Mr. Fairchild is required to report a change in
his beneficial ownership of Metropolitan Common Stock as a result of the
consummation of the transactions provided for in this Agreement under the
Securities Exchange Act of 1934, as amended, on Form 3 or Schedule 13D, as the
case may be, Metropolitan shall provide such information to Mr. Fairchild as
may be necessary for such report or reports and Mr. Fairchild agrees to make
such filing within the prescribed time. Each of the parties hereto will use
its best efforts to obtain the authorizations, waivers and consents of all
persons, entities and Governmental Authorities necessary to consummate such
transactions.
6.5 Metropolitan's Preclosing Transfer of Intangibles to Phoenix
Prior to the Closing, Metropolitan shall sell, transfer, convey and assign
all of its right, title and interest in the Intangibles to Phoenix, free and
clear of Encumbrances, for $1.00.
6.6 Distribution of Phoenix Common Stock to Metropolitan Prior to Closing
Prior to the Closing, Metropolitan will cause the Bank to make a dividend
to Metropolitan so that Metropolitan, after giving effect to the dividend,
owns and holds of record at least 81% of the Phoenix Common Stock.
6.7 Additional Covenants of the Shareholders
Between the date of this Agreement and the Closing Date, unless
Metropolitan otherwise agrees in writing or as otherwise contemplated in this
Agreement, the Shareholders will not enter into any transaction or make any
agreement or commitment, and use commercially reasonable efforts not to permit
any event to occur, that would result in any of the representations or
warranties of either of the Shareholders contained in this Agreement not being
true and correct in all material respects at and as of the time immediately
after the occurrence of the transaction or event or the entering into of such
agreement or commitment.
6.8 Appraisal of Phoenix
The Shareholders may, at their election and cost, select an appraiser with
experience appraising operating businesses and with background in performing
valuations of mortgage companies similar to Phoenix (the "Appraiser"). The
Appraiser shall, if so selected, conduct an appraisal of the fair market value
of Phoenix, taking into account all assets and liabilities, including the
Intangibles, to determine the appraised value of the company. If the
Shareholders decide to have such an appraisal conducted, they will advise
Metropolitan of their decision, identify the Appraiser selected to perform the
appraisal and notify Metropolitan of the instructions given or to be given to
the Appraiser regarding the valuation of Phoenix. Following the receipt of
such information, Metropolitan may, if it desires, request that the appraisal
be addressed to both the Shareholders and Metropolitan. The Shareholders will
provide a copy of the Appraiser's report to Metropolitan. Metropolitan and
the Bank will cause Phoenix to grant to the Appraiser, if engaged by the
Shareholders, full access to the property, books and records of Phoenix and of
Phoenix Escrow for purposes of conducting the appraisal, subject to such
confidentiality restrictions as Metropolitan and the Bank may reasonably
impose to preserve the confidentiality of information regarding Phoenix and
Phoenix Escrow.
6.9 Resignation of Bank Employees
Effective as of the Closing Date, Metropolitan will cause any directors,
officers or employees of Metropolitan or the Bank who hold concurrently
positions with Phoenix or Phoenix Escrow to resign as directors, officers or
employees of Phoenix or Phoenix Escrow.
6.10 Fairchild's Resignation as a Director of Metropolitan
Mr. Fairchild will remain as a director of Metropolitan, and as a director
and the chief executive officer of Phoenix and Phoenix Escrow through the
Closing Date and will, as of the execution of this Agreement, resign as an
executive officer of Metropolitan and the Bank. Effective as of the Closing
Date, Mr. Fairchild will resign as a director of Metropolitan.
6.11 Tag Along Rights
(a) Except as provided in paragraph (e), if, any time after the Closing
Date, Mr. Fairchild (the "Transferor") proposes to sell or exchange (in a
business combination or otherwise) any of the shares of Phoenix Common Stock
owned by the Transferor in a bona fide arms length transaction, in a single or
a series of transactions, to any third party (the "Third Party Purchaser"),
other than to a Permitted Transferee (as defined below), Transferor shall
notify in writing (the "Tag Along Notice") Metropolitan (the "Tag Along
Shareholder") of the proposed sale or exchange.
(b) The Tag Along Shareholder shall have the option, exercisable by
written notice to the Transferor, within 10 business days after the Transferor
notifies the Tag Along Shareholder of its intention to effect such sale or
exchange, to require the Transferor to provide as part of its proposed sale or
exchange that the Tag Along Shareholder be given the right (the "Tag Along
Rights") to participate, pro rata in proportion to its respective percentage
interest in Phoenix (except as expressly provided in paragraph (f) below), in
such transaction or series of transactions, on the same terms and conditions
(including but not limited to obligations with respect to indemnification) as
the Transferor, and, if such option is exercised by the Tag Along Shareholder,
the Transferor will not proceed with such exchange and sale unless the Tag
Along Shareholder who has exercised such option is given the right so to
participate.
(c) Each of the Tag Along Notices shall state (i) the name and address of
the Third Party Purchaser, (ii) the price to be paid for the Phoenix Common
Stock of the Transferor and the form of the consideration to be paid by the
Third Party Purchaser for such Phoenix Common Stock, (iii) the percentage of
the shares of Phoenix Common Stock owned by the Transferor that is being sold
or exchanged, and (iv) the method of payment and other terms and conditions of
the proposed transfer.
(d) For purposes of this Section, "Permitted Transferee" means, with
respect to the Transferor, the spouse or any natural or adoptive lineal
descendent, the spouses of such descendants or trusts for his, her or their
benefit: provided, however, that such Permitted Transferee shall take an
interest in the shares of the Transferor subject to the same restrictions that
are applicable to the Transferor and as a condition to the transfer shall be
required to execute a document or instrument, in form and substance
satisfactory to Metropolitan, confirming that the Permitted Transferee holds
such shares subject to such restrictions.
(e) The Tag Along Rights granted to Metropolitan under this Section 6.11
may not be exercised by Metropolitan as to any sales of Phoenix Common Stock
by Mr. Fairchild to the employees of Phoenix, consummated during the first 90
days after the Closing Date, until the aggregate value of the cash and/or
other consideration received by Mr. Fairchild from such sales is up to
$300,000. To the extent that the cash and/or other consideration received by
Mr. Fairchild from such sales have a value in excess of $300,000, Metropolitan
shall have no Tag Along Rights as to the first sales by Mr. Fairchild of
Phoenix Common until the aggregate cash and/or other consideration received by
him equals $300,000 and thereafter Metropolitan shall have Tag Along Rights as
to all additional sales by him of his Phoenix Common Stock. Furthermore, to
the extent that sales that resulted in Mr. Fairchild's receiving consideration
in excess of $300,000 occurred on the same day, or in related transactions,
making it impracticable to distinguish between the first sales up to $300,000
and later sales in excess of that amount, Metropolitan will be entitled to
exercise Tag Along Rights with respect to all sales on such day or made in
connection with such related transactions based upon that portion of the
consideration in excess of $300,000 received on that day or from such related
transactions over the aggregate consideration received on that day or from
such related transactions.
(f) With respect to any sales or other disposition of Phoenix Common Stock
by Mr. Fairchild as to which Metropolitan has Tag Along Rights, Metropolitan's
Tag Along Rights will be proportionate to the size of its then remaining
interest in Phoenix to that of Mr. Fairchild, until the number of shares of
Phoenix Common Stock held by him or his Permitted Transferees is reduced to
50% of the number of shares of Phoenix Common Stock received by him pursuant
to this Agreement; thereafter, Metropolitan's Tag Along Rights will permit it
to sell all of its remaining shares of Phoenix Common Stock before the sale or
other disposition of any other shares of Phoenix Common Stock by Mr. Fairchild
or his Permitted Transferees.
6.12 Take Along Rights
(a) Except as provided in paragraph (e) below, if, any time after the
Closing Date, either of the Shareholders (the "Transferor") proposes to sell
or exchange (in a business combination or otherwise) any of the shares of
Phoenix Common Stock owned by the Transferor in a bona fide arms length
transaction, in a single or a series of transactions, to any third party (the
"Third Party Purchaser"), then, subject to the terms of this Section,
Transferor shall have the right (the "Take Along Right") to require
Metropolitan to sell or exchange the same percentage of the shares of Phoenix
Common Stock then beneficially owned by Metropolitan to the Third Party
Purchaser on the same terms and subject to the same conditions (including but
not limited to obligations with respect to indemnification) as the sale or
exchange by the Transferor.
(b) To exercise the Take Along Right, the Transferor shall give written
notice thereof (a "Take Along Notice") to Metropolitan. The Take Along Notice
shall state (i) the name and address of the Third Party Purchaser, (ii) the
price to be paid for the shares of the Phoenix Common Stock of the Transferor
and the form of the consideration to be pay by the Third Party Purchaser for
such shares, (iii) the percentage of the shares owned by the Transferor that
is being sold or exchanged, and (iv) the method of payment and other terms and
conditions of the proposed transfer.
(c) The Take Along Right may be exercised by the Transferor only if the
consideration to be received by Metropolitan will include cash in an amount
sufficient to satisfy any income tax liability attributable to the sale of
such shares.
(d) The exercise of the Take Along Right and the purchase and sale of the
shares resulting from the exercise of such right shall take place at the
principal offices of Phoenix on the 20th business day following the date of
the delivery of the Take Along Notice, or at such other place, on such other
date, or both, as the Transferor and the Third Party Purchaser shall agree
upon in writing.
(e) The Take Along Right may not be exercised by either of the
Shareholders as to any sales of Phoenix Common Stock that Mr. Fairchild may
make to employees of Phoenix during the first 90 days following the execution
of this Agreement as contemplated by Section 6.11(f).
6.13 Warehousing Line to Phoenix
The Bank currently provides warehousing financing to Phoenix to permit it
to acquire Mortgage Loans prior to their sale to Investors. As soon as
possible after the execution of this Agreement, the Shareholders will engage
in negotiations with officers of the Bank, and officers of Washington Federal,
to discuss the terms upon which a Warehousing Line, which will be available
for a period of at least 18 months after the Closing Date, might be available
to Phoenix after the consummation of the transactions contemplated by this
Agreement. By executing this Agreement, Metropolitan does not commit itself,
the Bank, Washington Federal, or any related or affiliated party to make the
Warehousing Line available to Phoenix, and whether or not such financing is
available, and the applicable terms and conditions of the Warehousing Line,
including the interest rate, maturity, collateral requirements and
documentation, will be determined through negotiations between the relevant
parties.
6.14 Subservicing Arrangements
As soon as reasonably practicable following the execution of this
Agreement, and in any event within 30 days, Metropolitan and the Shareholders,
together with representatives of Washington Federal, will confer to discuss
the terms upon which the Bank, or the successor to the Bank following the
Merger, would agree to provide subservicing services to Phoenix, during the
first 18 months after the Closing Date, with respect to (i) Mortgage Loans
originated and held by Phoenix and (ii) Mortgage Loans sold by Phoenix to
Investors prior to the timing that the servicing of such Mortgage Loans is
assumed by the Investors or their designees.
6.15 Joint Office Sharing
As soon as reasonably practicable following the execution of this
Agreement, and in any event within 30 days, Metropolitan, the Bank and the
Shareholders will meet to resolve any questions that need to be resolved
regarding the office sharing between the Bank and Phoenix at the Lakewood and
Federal Way branches. Neither the Bank nor Metropolitan is under obligation
to continue making space available to Phoenix, Phoenix Escrow and their
employees after the Closing, to permit the conduct of Phoenix's and Phoenix
Escrow's business, unless mutually agreeable arrangements for the leasing of
such space can be worked out by the parties.
6.16 Termination of Prior Agreements
Conditioned upon and effective with the Closing, the Shareholders'
Agreement between Metropolitan and Mr. Fairchild and Ms. Nilson dated as of
July 1, 1994 and the Noncompetition and Nonsolicitation Agreements between
Metropolitan and Mr. Fairchild and Ms. Nilson dated as of July 1, 1994, and
the Stock Pledge Agreements between Metropolitan and Mr. Fairchild and Ms.
Nilson dated as of July 1,1994 (the "Prior Agreements") shall be terminated.
The parties agree to take any and all other actions necessary to cause and
effectuate the termination of the Prior Agreements on the Closing.
6.17 Transition Services; Cooperation
Commencing on the Closing Date, Metropolitan or the Bank respectively
shall, upon the request of the Shareholders, provide to Phoenix and Phoenix
Escrow the services set forth on Schedule 6.17 for such time period as the
parties shall agree and at Metropolitan's or the Bank's cost for such
services, it being the intent of the parties for Metropolitan or the Bank to
provide such services to Phoenix and Phoenix Escrow for as short as a period
of time as practical, in any event no longer than 30 days.
6.18 Insurance
(a) To the extent that (i) there are insurance policies maintained by
Metropolitan or Bank or their affiliates (other than Phoenix or Phoenix
Escrow) ("Metropolitan's Insurance Policies") insuring against any loss,
liability, damage or expense relating to the assets, businesses, operations,
conduct, products and employees (including former employees) of the business
of Phoenix or Phoenix Escrow including errors and omissions coverage (all such
losses, liabilities, claims, damages or expenses, regardless of the
availability of insurance coverage, are herein referred to collectively as the
"Business Liabilities") and relating to or arising out of occurrences prior to
the Closing, and (ii) Metropolitan's Insurance Policies continue after the
Closing to permit claims to be made with respect to such Business Liabilities
relating to or arising out of occurrences prior to the Closing, Metropolitan
agrees to cooperate and cause such affiliates to cooperate with the
Shareholders and Phoenix or Phoenix Escrow and in submitting claims on behalf
of Phoenix or Phoenix Escrow under Metropolitan's Insurance Policies with
respect to such Business Liabilities relating to occurrences prior to the
Closing.
(b) Prior to the Closing Date, to the extent not currently provided for in
Metropolitan's Insurance Policies, Metropolitan shall enter into agreements
with, or obtain binding commitments from its insurers to provide adequate
insurance coverage for any Business Liability incurred before the Closing and
providing for claims to be made by Phoenix or Phoenix Escrow after closing
(e.g., "tail coverage"). For purposes hereof, "adequate insurance" is
insurance at least reasonably comparable to that covering the Business
Liabilities (including any self-insurance program) immediately prior to the
Closing Date except for the timing of claims.
(c) Neither Metropolitan nor the Bank shall, prior to the Closing date,
terminate any of Phoenix or Phoenix Escrow's insurance policies or coverage of
Phoenix or Phoenix Escrow under the Metropolitan Insurance Policies without
giving the Shareholders prior notice thereof.
6.19 Tax Matters
(a) Metropolitan shall cause Phoenix and Phoenix Escrow to be included in
the consolidated federal Income Tax Returns that include Metropolitan for all
periods for which they are required under applicable tax laws to be so
included, including but not limited to the period from and including January
1, 1996 to the Closing Date, and in any other required state, local and
foreign consolidated, affiliated, combined, unitary or other similar group
income tax returns that include Metropolitan or any affiliate of Metropolitan,
for all pre-Closing periods for which Phoenix and Phoenix Escrow are required
under applicable tax laws to be so included. Metropolitan shall timely
prepare and file, or cause to be prepared and filed, all income tax returns of
Phoenix and Phoenix Escrow for all taxable periods of Phoenix and Phoenix
Escrow ending on or before the Closing date and pay, or cause to be paid, when
due all Taxes relating to such returns. Metropolitan shall be entitled to all
refunds (including but not limited to interest with respect thereto) of income
taxes received by or on behalf of Phoenix and Phoenix Escrow relating to any
pre-Closing period, and Shareholders shall cause Phoenix or Phoenix Escrow to
pay to Metropolitan any such refund promptly after receipt thereof. At the
request of Metropolitan, Shareholders shall cause Phoenix or Phoenix Escrow to
file, any claims for such refunds, and Metropolitan shall reimburse Phoenix or
Phoenix Escrow for any out-of-pocket expenses.
(b) If Phoenix or Phoenix Escrow has liability for income Taxes (other
than federal income taxes) or Washington Sate business and occupation tax
(collectively, for purposes of this paragraph (b), "Income Taxes") or is
eligible for an Income Tax benefit for a tax period beginning before the
Closing date and ending after the Closing date (an "Overlap Period"), the
liability for such Income Taxes or the amount of such Income Tax benefit shall
be apportioned to Metropolitan for the portion of the Overlap Period on or
prior to the Closing Date and to Phoenix and Phoenix Escrow for the reminder
of the Overlap Period (i) as determined from the books and records of Phoenix
and Phoenix Escrow for such periods, and (ii) based on accounting methods,
elections and conventions in effect on the date hereof or that are mutually
agreeable and do not have the effect of distorting income or expenses. The
Shareholders shall cause Phoenix or Phoenix Escrow to file any Income Tax
returns for any Overlap Period and pay, or cause to be paid, when due, any
Income Taxes as shown as due on any such returns. At least fifteen (15)
business days prior to the due date for filing of any Overlap Period income
tax return, the Shareholders shall provide Metropolitan with a substantially
final draft of such return and a notice setting forth in reasonable detail the
calculations regarding Metropolitan's share of Income Taxes shown as due on
such return (calculated as described in this Section 6.16(b), and Metropolitan
shall have the right to review such return and such notice. Metropolitan
shall notify the Shareholders of any objections Metropolitan may have to any
items set forth in such return and to Shareholder's calculations regarding
Metropolitan's share of Income Taxes, and Shareholders agree to consult and
resolve in good faith any such objection and to mutually consent to the filing
of such returns. Metropolitan shall pay Phoenix its share of any Income Taxes
(to the extent Metropolitan is liable therefor in accordance with this Section
6.16(b) and to the extent not already paid by Metropolitan or Phoenix or
accrued or otherwise reflected as a liability on the Final Balance Sheet) due
pursuant to the filing of any such returns under the provisions of this
Section 6.16(b) and Phoenix shall pay to Metropolitan its share of the Income
Tax benefits for the period on or prior to the Closing Date.
(c) Notwithstanding anything in this Agreement to the contrary,
Metropolitan shall have the right to represent the interests of Phoenix and
Phoenix Escrow in (i) any income tax audit or administrative or court
proceeding relating to income tax returns and (ii) any Tax audit or
administrative or court proceeding relating to Tax returns filed on a
consolidated or combined basis by Metropolitan or any affiliate of
Metropolitan, in the case of each of clauses (i) and (ii) with respect to
which Metropolitan may be liable under this Agreement (including without
limitation any such proceedings relating to the income, properties or
operations of Phoenix and Phoenix Escrow for pre-closing periods).
Shareholders agree that they will cause Phoenix to cooperate fully with
Metropolitan and its counsel in the defense against or compromise of any claim
in any such audit or proceeding. Metropolitan and Metropolitan's affiliates
and Phoenix and Phoenix's affiliates shall not settle any audit or proceeding
in a manner which would have a materially adverse effect on the other party
without the prior written consent of the other such party, which consent shall
not unreasonably be withheld.
(d) Phoenix shall promptly notify Metropolitan in writing upon receipt by
Phoenix or any affiliate of Phoenix of notice of (i) any pending or threatened
federal, state, local or foreign Tax audits or assessments of Phoenix or
Phoenix Escrow, so long as any pre-Closing period remains open, and (ii) any
pending or threatened federal, state, local or foreign Tax audits or
assessments of Phoenix or Phoenix Escrow or any affiliate of Phoenix or
Phoenix Escrow which may directly or indirectly affect the Tax liabilities of
Phoenix or Phoenix Escrow, in each case for pre-Closing periods only.
Metropolitan shall promptly notify Phoenix or Phoenix Escrow in writing upon
receipt by Metropolitan or any affiliate of Metropolitan of notice of (i) any
pending or threatened federal, state, local or foreign Tax audits or
assessments of Phoenix or Phoenix Escrow, so long as any pre-Closing period
remains open, and (ii) any pending or threatened federal, state, local or
foreign Tax audits or assessments of Metropolitan or any affiliate of
Metropolitan which may affect the Tax liabilities of Phoenix or Phoenix
Escrow, in each case for post-Closing periods only.
(e) After the Closing date, Metropolitan shall provide Phoenix, and the
Shareholders shall cause Phoenix to provide Metropolitan, with such
cooperation and information relating to Phoenix as either party reasonably may
request in filing any return (or amended return) or refund claim, determining
any Tax liability or a right to refund, conducting or defending any audit or
other proceeding in respect of Taxes or effectuating the terms of this
Agreement. The parties shall retain, and Shareholders shall cause Phoenix to
retain, all returns, schedules, work papers and other material documents
relating thereto, until the expiration of any relevant statute of limitations
(and, to the extent notified by any party, any extensions thereof) and, unless
such returns and other documents are offered and delivered to the other, as
applicable, until the final determination of any Tax in respect of such years.
Any information obtained under this Section 6.16 shall be kept confidential,
except as may be otherwise necessary in connection with filing any return (or
amended return) or refund claim, determining any Tax liability or a right to a
refund, conducting or defending any audit or other proceeding in respect of
Taxes or otherwise effectuating the terms of this Agreement.
(f) If, after the Closing Date, Phoenix or Phoenix Escrow or any successor
or affiliate thereof realize a net operating loss for federal income tax
purposes that it properly elects to carry back to a taxable year of the
affiliated group filing a consolidated return with Metropolitan, the parties
shall negotiate in good faith the portion of any refund that will be payable
to Metropolitan or Phoenix.
(g) The parties hereto intend that, and shall not take any action
inconsistent with the intent that, the sale of the Intangibles from
Metropolitan to Phoenix contemplated herein will be treated as a sale for
federal income tax purposes, resulting in the recognition of a taxable loss by
Metropolitan with respect to such sale in an amount equal to the excess of the
tax basis in such Intangibles over $1 paid as consideration for such sale. If
all or any portion of such loss is denied by the Internal Revenue Service and
if as a result Phoenix becomes entitled to a deduction with respect to such
Intangibles, then the Shareholders shall cause Phoenix to pay the same portion
of $160,000 as the amount of such loss allowable to Phoenix for any open
taxable years bears to $810,000.
ARTICLE 7. CONDITIONS PRECEDENT
7.1 Shareholders' Conditions
The obligation of the Shareholders to effect the transactions contemplated
hereby are subject to the fulfillment of the conditions, which may be waived
in writing by the Shareholders, that:
(a) the representations and warranties of Metropolitan and the Bank herein
shall have been and shall be true and correct in all material respects on the
date of this Agreement and the Closing Date;
(b) Metropolitan and the Bank each shall have performed in all material
respects all its obligations and complied with all covenants under this
Agreement required to be performed at or prior to the Closing Date;
(c) Metropolitan and the Bank shall have received the approval of each
Governmental Authority having jurisdiction over Metropolitan, the Bank and
Phoenix or the transactions contemplated by this Agreement;
(d) Phoenix has received all necessary approvals from Governmental
Authorities and the Investors to serve as an approved servicer and seller of
Mortgage Loans after the Closing Date;
(e) the Shareholders shall have received an opinion of Metropolitan's
counsel in the form attached hereto as Exhibit C.
7.2 Metropolitan's Conditions
The obligations of Metropolitan to effect the transactions contemplated
hereby are subject to the fulfillment of the conditions, which may be waived
in writing by Metropolitan, that:
(a) the representations and warranties of the Shareholders herein shall
have been true and correct in all material respects on the date of this
Agreement and the Closing Date;
(b) the Shareholders shall have performed in all material respects all
their obligations under this Agreement required to be performed at or prior to
the Closing Date;
(c) Metropolitan shall have received the approval of each Governmental
Authority having jurisdiction over Metropolitan, Phoenix, or the transactions
contemplated by this Agreement;
(d) Metropolitan and the Bank shall have been released from all
Liabilities as required by Section 3.3;
(e) Metropolitan hall have received an opinion of the Shareholders'
counsel in the form attached hereto as Exhibit D;
(f) All of the conditions to the merger of Metropolitan with and into
Washington Federal have been satisfied or are expected to be satisfied
immediately following the consummation of transactions contemplated by this
Agreement, Metropolitan and Washington Federal have taken all steps necessary
to consummate the merger, but for the final ministerial steps necessary to
consummate the merger, and there are no events, circumstances or causes, to
the best of Metropolitan's knowledge, that would prevent the merger from being
consummated immediately following the redemption of the Shareholders'
Metropolitan Shares.
7.3 Joint Conditions
Neither Metropolitan nor the Shareholders will be obligated to effect the
transactions contemplated hereby if on the Closing Date Metropolitan, the Bank
or either of the Shareholders is subject to any order, decree, rule or
regulation or any Governmental Authority that prevents, or delays to any
material extent, the consummation of any of the transactions contemplated by
this Agreement or that would impose any material limitation on Metropolitan's
ability to redeem the Shareholders' Metropolitan Shares or the Shareholders'
ability to acquire the 81% equity interest in the Phoenix Common Stock.
ARTICLE 8. ADDITIONAL UNDERTAKINGS AND AGREEMENTS
8.1 Survival of Representations, Warranties and Covenants
All representations, warranties and covenants made by the parties in this
Agreement will survive the Closing; provided that:
(a) no claim may be made by any party under this Agreement, and no party
will have any liability with respect to any such misrepresentation or breach
of warranty or covenant under this Agreement, unless written notification of
claim therefor is given by the party claiming misrepresentation or breach to
the party alleged to have made such misrepresentation or caused such breach
within two years after the Closing Date and suit thereon is commenced within
nine months after such written notification; and
(b) no claim may be made by the Shareholders, Metropolitan, and the Bank
will have no liability, for any United States federal, state or local taxes,
including, but not limited to, any business and occupation taxes not reflected
on the returns and reports filed by Phoenix that may at any time be assessed
against Metropolitan or Phoenix for any periods ending on or prior to the
Closing Date and that are not included in any reserve for taxes reflected on
the balance sheet of Phoenix as of June 30, 1996, unless written notification
of claim therefor is given by the Shareholders within the earlier of five
years after the Closing Date or the applicable statute of limitations and suit
thereon is commenced within nine months after such written notification.
No investigation or any right to investigate in favor of any party to this
Agreement will in any manner limit, affect or impair the right and ability of
such party to rely upon the representations, warranties and covenants of the
parties set forth in this Agreement.
8.2 Indemnification
(a) From and after the Closing, Metropolitan and the Bank will indemnify
and hold harmless the Shareholders from and against any and all claims,
demands, losses, liabilities, damages and expenses (net of any tax benefit
derived by the Shareholders, Phoenix or any of their affiliates from the
accrual or payment of such claim, demand, loss, liability, damage or expense),
including amounts paid in settlement, reasonable costs of investigation and
reasonable fees and disbursements of counsel, asserted against or suffered by
the Shareholders arising out of, or resulting from: (i) the material
inaccuracy of any representation or warranty of Metropolitan; (ii) the
nonperformance, partial or total, of any covenant by Metropolitan or the Bank
contained herein. The Shareholders will make no claim against Metropolitan or
the Bank for indemnification under this Section 8.2(a) for a breach of a
representation, warranty or covenant (other than a knowing and intentional
breach) contained herein unless and to the extent the aggregate amount of such
claims exceeds $75,000 (the "Threshold Amount").
(b) From and after the Closing, the Shareholders jointly and severally
will indemnify and hold harmless Metropolitan and the Bank from and against
any and all claims, demands, losses, liabilities, damages and expenses (net of
any tax benefit derived by Metropolitan , the Ban or any affiliate from the
accrual or payment of such claim, demand, loss, liability, damage or expense),
amounts paid in settlement, reasonable costs of investigation and reasonable
fees and disbursements of counsel, asserted against or suffered by
Metropolitan or the Bank arising out of, or resulting from: (i) the material
inaccuracy of any representation or warranty by the Shareholders; (ii) the
nonperformance, partial or total, of any covenant by the Shareholders
contained herein. Metropolitan and the Bank will make no claim against the
Shareholders for indemnification under this Section 8.2(b) for a breach of a
representation, warranty or covenant (other than a knowing and intentional
breach) contained herein unless and to the extent the aggregate amount of such
claims exceeds the Threshold Amount.
(c) The indemnification provided for in this Section 8.2 will be limited
to claims asserted within the applicable time period set forth in Section 8.1.
Metropolitan and the Bank will have no liability or obligation under this
Section 8.2 in excess of an amount equal in the Redemption Price of the
Shareholders' Metropolitan Shares received by the Shareholders pursuant to
this Agreement, equal to $6,700,000 net of applicable Taxes as to the
indemnifying party. The Shareholders will have no liability or obligation
under this Section 8.2 in excess of an amount equal in value to that
established pursuant to the preceding sentence provided, however, that each of
Mr. Fairchild and Ms. Nilson will have no liability or obligation under this
Section 8.2 in excess of the product of the total liability times 80% of such
amount in the case of Mr. Fairchild and times 20% of such amount in the case
of Ms. Nilson.
(d) A party seeking indemnification (an "Indemnified Party") will promptly
notify the party against whom indemnification is sought (an "Indemnifying
Party") in writing of any claim for indemnification under this Agreement,
specifying in reasonable detail the basis of such claim, the facts pertaining
thereto and, if known, the amount, or an estimate of the amount, of the
liability arising therefrom. The Indemnified Party will provide to the
Indemnifying Party as promptly as practicable thereafter information and
documentation reasonably requested by the Indemnifying Party to support and
verify the claims asserted.
(e) If the facts giving rise to a right to indemnification arise out of
the claim of any third party, or if there is any claim against a third party,
an Indemnifying Party may assume the defense or the prosecution thereof,
including the employment of counsel, at its cost and expense. An Indemnified
Party will have the right to employ counsel separate from counsel employed by
an Indemnifying Party in any such action and to participate therein, but the
fees and expenses of such counsel employed by an Indemnified Party will be at
its expense. Following an Indemnifying Party's assumption of the defense or
prosecution of any claim, the Indemnifying Party will have no further
liability to the Indemnified Party for any legal or other expense in
connection with such defense or prosecution as long as the Indemnifying Party
maintains such defense or prosecution. The Indemnifying Party will be
entitled to settle any claim for monetary damages if the Indemnifying Party
will be fully responsible to the Indemnified Party for all amounts payable in
settlement of the claims. An Indemnifying Party will not be liable for any
settlement of any such claim effected without its prior written consent.
Whether or not an Indemnifying Party chooses to so defend or prosecute such
claim, the parties hereto will cooperate in the defense of prosecution thereof
and will furnish such records, information and testimony, and attend such
conferences, discovery proceedings, hearings, trials and appeals, as may be
reasonably requested in connection therewith. An Indemnifying Party will be
subrogated to all rights and remedies of an Indemnified Party.
(f) This Section 8.2 sets forth the only responsibility of the parties
hereto to indemnify one another against any claims or damages arising out of,
or related to, the transactions contemplated by this Agreement.
(g) To the extent any party as any Indemnified Party receives any
insurance proceeds from its insurance carrier as indemnification for any
claim, loss, damage or liability, as between the parties hereto, the
obligation of the Indemnifying Party to the Indemnified Party will be reduced
by the amount of such insurance proceeds actually received by the Indemnified
Party. Moreover, to the extent that such insurance proceeds are received
after an indemnification payment has been made by the Indemifying Party, the
Indemnified Party shall promptly remit to the Indemnifying Party such
insurance proceeds.
(h) At the request of any party hereto, any controversy or claim regarding
the right of an Indemnified Party to be indemnified or the amount of the
liability arising from such claim of indemnification that cannot be resolved
by the parties within 30 days after receipt of a notice for indemnification
pursuant to Section 8.2(d) shall be referred to an arbitrator for decision,
which decision shall be final and binding on the parties. The parties agree
that they will require the arbitrator to render its decision within 30 days
after the referral of the dispute to the arbitrator for decision pursuant
hereto. Before referring a matter to an arbitrator, the parties shall agree
on procedures to be followed by the arbitrator (including procedures for
hearing the dispute and related matters such as the presentation of evidence).
Such arbitration shall be conducted in Seattle, Washington by a single
arbitrator mutually acceptable to Metropolitan and the Shareholders. If the
parties are unable to agree on the selection of an arbitrator, either party
may petition the King County Superior Court for appointment of an arbitrator.
If the parties are unable to agree on the procedures to be used in the
arbitration before the end of 45 days after receipt of a notice for
indemnification pursuant to Section 8.2(d), the arbitrator shall establish the
procedures, which procedures may, but need not be, those proposed by either
party. The parties shall, as promptly as practicable, submit evidence in
accordance with the procedures agreed upon or established by the arbitrator,
and the arbitrator shall decide the dispute in accordance therewith as
promptly as practicable. Judgment upon the award rendered by arbitration may
be entered in any court having jurisdiction thereof.
(i) If any dispute with respect to this Agreement of whatever nature
arises between the parties to this Agreement, the prevailing party, if any, in
such dispute will be reimbursed for the reasonable fees and disbursements of
its counsel in such dispute by the losing party, if any.
ARTICLE 9. MISCELLANEOUS PROVISIONS
9.1 Termination
This Agreement may be terminated at any time prior to the Closing:
(a) by written notice by the Shareholders to Metropolitan if at any time
any of the conditions sets forth in Section 7.1 becomes impossible to fulfill
and the Shareholders have not waived in writing the fulfillment of such
condition;
(b) by written notice by Metropolitan to the Shareholders if at any time
any of the conditions set forth in Section 7.2 becomes impossible to fulfill
and Metropolitan has not waived in writing the fulfillment of such condition;
(c) by mutual agreement of Metropolitan and the Shareholders;
(d) immediately upon written notice from Metropolitan that the Merger will
not occur.
In the event of termination of this Agreement pursuant to this Section 9.1,
this Agreement shall immediately become void and of no force or effect except
(i) with respect to Section 9.7 and Section 9.8 and (ii) no party shall be
relieved or released from any liabilities or damages arising out of the
willful breach of this Agreement.
9.2 Assignment
Neither this Agreement nor any of the rights or obligations of any party
hereunder may be assigned without the prior written consent of the parties
hereto; provided that Metropolitan may assign this Agreement to any subsidiary
or affiliate of Metropolitan, but any such assignment will not relieve
Metropolitan of any of its obligations hereunder. Subject to the foregoing,
this Agreement will be binding upon and will inure to the benefit of the
parties hereto and their respective successors and assigns, but no other
person will have any right, benefit or obligation hereunder.
9.3 Notices
All notices, requests, demands and other communications hereunder shall be
in writing (including by telecopy, telegraph or telex) or by telephone and,
unless otherwise expressly provided in this Agreement, shall be deemed to have
been duly given or made when delivered by hand, or when deposited in the mail,
postage prepaid or, in the case of telecopy notice, when received or, in the
case of telegraphic notice, when delivered to the telegraph company or, in the
case of telex notice, when sent, answer back received or, in the case of
telephonic notice, when the verbal exchange is made with the individual named
on the attention line below, and in each case addressed or at the telephone
numbers or telecopy numbers set forth below or to such other address or
telephone number or telecopy number as may be hereafter notified by the
respective parties to this Agreement:
(a) If to Mr. Fairchild, to:
Mr. John Fairchild
12116 11th Avenue NE
Marysville, WA 98270
Telephone: (206) 653-9827
Telecopy: (206) 653-2369
with a copy to:
C. Kent Carlson
Preston Gates & Ellis
5000 Columbia Center
701 Fifth Avenue
Seattle, WA 98104-7078
Telephone: (206) 623-7580
Telecopy: (206) 623-7022
(b) If to Ms. Sheryl Nilson, to:
Ms. Sheryl Nilson
17753 Beach Drive N.E.
Seattle, WA 98155
Telephone: (206) 364-2996
Telecopy: (206) 364-2834
with a copy to:
C. Kent Carlson
Preston Gates & Ellis
5000 Columbia Center
701 Fifth Avenue
Seattle, WA 98104-7078
Telephone: (206) 623-7580
Telecopy: (206) 623-7022
(c) If to Metropolitan to:
Metropolitan Bancorp
1520 Fourth Avenue
Seattle, WA 98101-1648
Telephone: (206) 625-1818
Telecopy: (206) 654-7883
Attention: Patrick F. Patrick
with a copy to:
Charles Katz
George M. Beal
Perkins Coie
1201 Third Avenue, 40th Floor
Seattle, WA 98101-3099
Telephone: (206) 583-8519
Telecopy: (206) 583-8500
9.4 Choice of Law
This Agreement will be governed by, and construed in accordance with, the
laws of Washington without giving effect to the principles of conflict of laws
thereof.
9.5 Entire Agreement; Amendments and Waivers; No Third Party Beneficiaries
This Agreement, together with the Schedules and Exhibits hereto,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, among
the parties and may not be contradicted, explained or supplemented by evidence
of any prior agreement, any contemporaneous oral agreement or any consistent
additional terms. There are no restrictions, promises, representations,
warranties, covenants or undertakings, other than those expressly set forth or
referred to herein. No supplement, modification or waiver of this Agreement
will be binding unless executed in writing by the party to be bound thereby.
No waiver of any provision of this Agreement will constitute a waiver of any
other provision hereof (whether or not similar), nor will such waiver
constitute a continuing waiver unless otherwise expressly provided. This
Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
9.6 Severability
Any term or provision of this Agreement that is prohibited or unenforceable
in any jurisdiction will, as to such jurisdiction, be ineffective to the
extent of such prohibition or unenforceability without invalidating the
remaining terms and provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction. If any term or
provision of this Agreement is held by any court of competent jurisdiction to
be void, voidable, invalid or unenforceable in any given circumstance or
situation (the "challenged provision"), then all other terms and provisions,
being severable, will remain in full force and effect in such circumstance or
situation, and such challenged provision will remain valid and in effect in
any other circumstances or situations.
9.7 Expenses
Except as otherwise specifically provided in this Agreement, all costs and
expenses incurred in connection with this Agreement will be paid by the party
incurring such expenses provided that Metropolitan shall pay such expenses for
the Bank and Phoenix and the Shareholders shall pay the expenses of their
counsel only. Any expenses paid by a party that are required to be borne by
another party as provided in this Agreement will be reimbursed by such party
to the party so paying the expense promptly after request by the paying party.
This Section 9.7 will survive any termination of this Agreement.
9.8 Confidential Information
The parties hereto agree that any and all nonpublic information regarding
any party hereto or its business, properties and personnel or those of its
subsidiaries (the "Confidential Information") that is derived or results from
another party's access to the properties, books and records of such first
party pursuant to the provisions of this Agreement or otherwise, whether
obtained before or after the execution of this Agreement, will be held in
strict confidence; and the parties hereto will exercise the same degree of
care with respect thereto that they use to preserve and safeguard their own
confidential proprietary information. Except as otherwise required by law,
the Confidential Information will not directly or indirectly be divulged,
disclosed or communicated to any other person or entity or used for any
purposes other than those purposes expressly contemplated by this Agreement.
In the event the transactions contemplated by this Agreement are not
consummated for any reason, the confidentiality of the Confidential
Information will be maintained (except to the extent that the Confidential
Information is or becomes publicly available other than as a result of
disclosure that is not permitted hereunder or has been or is acquired without
obligation to maintain the confidentiality thereof), and all copies of all
documents, work papers and other recorded material comprising the Confidential
Information will immediately be returned to the party to which such
information relates and will not thereafter be used for any purpose by the
other party hereto or any subsidiary or affiliate thereof. Except as
otherwise required by law, in the reasonable opinion of its counsel, and/or so
long as this Agreement is in effect, neither Metropolitan, the Bank nor the
Shareholders shall, or shall permit any of their respective affiliates to,
issue or cause the issuance of any press release or other public announcement
with respect to this Agreement or the transactions contemplated hereby without
the prior written consent of the other party (which consent shall not be
unreasonably withheld). This Section 9.8 will survive any termination of this
Agreement.
9.9 Cooperation
The parties hereto will cooperate with each other in carrying out the
provisions of this Agreement and will execute and deliver, or cause to be
executed and delivered, such governmental notifications and additional
reasonable documents and instruments and do, or cause to be done, all
reasonable things necessary, proper or advisable under applicable law to
consummate and make effective the transactions contemplated hereby.
9.10 Construction
This Agreement has been submitted to the scrutiny of, and has been
negotiated by, all parties hereto and their counsel, and shall be given a fair
and reasonable interpretation in accordance with the terms hereof, without
consideration or weight being given to its having been drafted by any party
hereto or its counsel.
9.11 Counterparts
This Agreement may be executed in a number of identical counterparts. If
so executed, each of such counterparts is to be deemed an original for all
purposes, and all such counterparts shall collectively constitute one
agreement, but in making proof of this Agreement it shall not be necessary to
produce or account for more than one such counterpart.
9.12 Spousal Joinder and Consent
Spouses of the parties join in and consent to the execution of this
Agreement for the limited purpose of evidencing their knowledge of its
existence, and their agreement to the provisions of this Agreement so as to
bind their community interests, if any, in the assets of their spouses to the
performance of this Agreement. However, nothing contained in this Section is
intended to, nor shall be deemed to, confer or create any community property
interest in the subject matter of this Agreement upon any such spouse.
9.13 Right to Specific Performance
In addition to all other remedies available to the parties, the parties
shall have the rights to specific performance.
9.14 Attachment of Schedules
As of the date of this Agreement, the parties have not prepared the
schedules to be attached to this Agreement. It is agreed that such schedules
will be prepared and attached within 30 days of the execution date of the
Agreement.
IN WITNESS WHEREOF, the parties hereto have entered into and signed this
Agreement as of the date and year first above written.
METROPOLITAN BANCORP, a
Washington corporation
By: /s/ Patrick F. Patrick
Name: Patrick F. Patrick
Its: President and Chief
Executive Officer
METROPOLITAN FEDERAL SAVINGS
AND LOAN OF SEATTLE, a federally
chartered savings and loan association
By: /s/ Patrick F. Patrick
Name: Patrick F. Patrick
Its: President and Chief
Executive Officer
/s/ John H. Fairchild
Name: JOHN FAIRCHILD
/s/ Sheryl Nilson
Name: SHERYL NILSON
Spousal Joinder and Consent
The spouses of the Shareholders join in and consent to the execution of
this Agreement for the limited purpose of evidencing their knowledge of its
existence, and their agreement to the provisions of this Agreement so as to
bind their community interest, if any, in the consideration to be given by
Metropolitan in exchange for the Shareholders' Metropolitan Shares and to the
performance of this Agreement by the Shareholders. However, nothing contained
in this Spousal Joinder and Consent is intended to, nor shall be deemed to,
confer or create any community property interest in the Shareholders'
Metropolitan Shares upon any such spouse.
Dated: July __, 1996 ____________________________________
Kerry J. Fairchild
Dated: July__, 1996 ____________________________________
Michael Asplund
EXHIBIT A
$__________________ Seattle, Washington
______________________, 199_
FOR VALUE RECEIVED, Metropolitan Bancorp, a Washington corporation,
promises to pay in lawful money of the United States to the order of
____________________________________ at _______________________________ the
principal sum of Dollars ($____________) with interest on the outstanding
principal balance at a rate equal to the interest rate paid on money market
deposit accounts of Washington Federal Savings and Loan Association of Seattle
as of the date of this note.
The outstanding principal balance, plus accrued but unpaid interest, shall
be due and payable in full on __________, 199_, which is the next business day
after the date of this note.
If default be made in the payment of this note when due, then, the entire
indebtedness hereby represented shall become immediately due and payable. As
long as this note is in default, without prior notice, this note shall bear
interest at the rate of percent (__ %) per annum.
If suit is brought on this note after any default in any payment, the
undersigned promises and agrees to pay reasonable attorneys' fees incurred
thereby.
This note shall be construed according to the laws of the State of
Washington.
Metropolitan Bancorp, a
Washington corporation
___________________________________
Name:______________________________
Title: ___________________________
EXHIBIT B(1)
SHAREHOLDERS' CERTIFICATE
John Fairchild and Sheryl Nilson, two of the shareholders of Metropolitan
Bancorp (the "Shareholders"), pursuant to Section 3.2(a) of the Stock
Redemption Agreement (the "Redemption Agreement") dated July 11, 1996 by and
among Metropolitan Bancorp (the "Company"), John Fairchild and Sheryl Nilson
hereby certify that to their knowledge after due inquiry:
1. The representations and warranties of the Shareholders contained in
Article 5 of the Redemption Agreement were true in all material respects when
made and are true and correct in all material respects on and as of the date
hereof with the same force and effect as though made on and as of the date
hereof, except for those representations and warranties that speak as of a
certain date.
2. Each of the Shareholders has performed in all material respects all his
or her obligations under, and has complied in all material respects with all
of the covenants contained in, Article 6 of the Redemption Agreement required
to be performed or complied with by him or her prior to or as of the date
hereof.
3. Each of the conditions to the Shareholders' obligation to effect the
transactions as set forth in Section 7.1 the Redemption Agreement has been
satisfied or waived.
Dated: ___________, 199_
__________________________________
John Fairchild
__________________________________
Sheryl Nilson
EXHIBIT B(2)
METROPOLITAN BANCORP
OFFICERS' CERTIFICATE
Patrick F. Patrick and Michael M. Pete, the President and Chief Executive
Officer and the Senior Vice President and Chief Financial Officer,
respectively, of Metropolitan Bancorp (the "Company"), pursuant to Section
3.2(b) of the Stock Redemption Agreement (the "Redemption Agreement") dated
July 11, 1996 by and among the Company, John Fairchild and Sheryl Nilson
hereby certify that to their knowledge after due inquiry:
1. The representations and warranties of the Company contained in Article
4 of the Redemption Agreement were true in all material respects when made and
are true and correct in all material respects on and as of the date hereof
with the same force and effect as though made on and as of the date hereof,
except for those representations and warranties that speak as of a certain
date.
2. The Company has performed in all material respects all its obligations
under, and has complied in all material respects with all of the covenants
contained in, Article 6 of the Redemption Agreement required to be performed
or complied with by it prior to or as of the date hereof.
3. Each of the conditions to the Company's obligation to effect the
transactions as set forth in Section 7.2 the Redemption Agreement has been
satisfied or waived.
Dated: ___________, 199_
________________________________
Patrick F. Patrick
President and Chief Executive Officer
________________________________
Michael M. Pete
Senior Vice President and
Chief Financial Officer
Exhibit 10.2
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of July 11, 1996 (the "Agreement"), by and
between Metropolitan Bancorp, a Washington corporation ("Issuer"), and
Washington Federal, Inc., a Washington corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of July 11, 1996 (the "Plan"), providing for, among other
things, the merger of Issuer with and into Grantee (the "Merger"), with
Grantee as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the Plan,
Grantee has required that Issuer agree, and Issuer has agreed, to grant to
Grantee the Option (as hereinafter defined);
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree
as follows:
1. Defined Terms. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Plan.
2. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 657,000 shares (as adjusted as set forth herein) (the "Option
Shares," which shall include the Option Shares before and after any transfer
of such Option Shares) of Common Stock, par value $0.01 per share ("Issuer
Common Stock"), of Issuer at a purchase price per Option Share (the "Purchase
Price") of $13.50, provided, however, that in no event shall the number of
Option Shares for which the Option is exercisable exceed 19.9% of the issued
and outstanding shares of Issuer Common Stock without giving effect to any
shares subject to or issued pursuant to the Option.
3. Exercise of Option.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States shall be in
effect, Holder may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as hereinafter
defined); provided that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (A) the Effective Time of the Merger,
(B) termination of the Plan in accordance with the terms thereof prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event, other than a
termination of the Plan by Grantee pursuant to Section 7.1(b)(i) (a "Default
Termination"), (C) 12 months after the termination of the Plan by Grantee
pursuant to a Default Termination, and (D) 12 months after termination of the
Plan (other than pursuant to a Default Termination) following the occurrence
of a Purchase Event or a Preliminary Purchase Event; and provided, further,
that any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable laws, including without limitation the Home Owners'
Loan Act, as amended ("HOLA"). The term "Holder" shall mean the holder or
holders of the Option from time to time, and which is initially Grantee. The
rights set forth in Section 8 hereof shall terminate when the right to
exercise the Option terminates (other than as a result of a complete exercise
of the Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any subsidiary of Grantee) to effect
(A) a merger, consolidation or similar transaction involving Issuer or any of
its subsidiaries, (B) other than pursuant to the Mortgage Company Agreement,
the disposition, by sale, lease, exchange or otherwise, of assets of Issuer or
any of its subsidiaries representing in either case 15% or more of the
consolidated assets of Issuer and its subsidiaries, or (C) the issuance, sale
or other disposition by Issuer of (including by way of merger, consolidation,
share exchange or any similar transaction) securities representing 15% or more
of the voting power of Issuer or any of its subsidiaries (any of the foregoing
an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in Rule 13d-
3 promulgated under the Exchange Act) of or the right to acquire beneficial
ownership of, or any "group" (as such term is defined in Section 13(d)(3) of
the Exchange Act), other than any group of which Grantee or any Grantee
subsidiary is a part, shall have been formed which beneficially owns or has
the right to acquire beneficial ownership of, 25% or more of the then
outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act), or shall have filed a registration statement under the Securities Act
with respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 10% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer" and
an "Exchange Offer," respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have approved
the Plan at the meeting of such stockholders held for the purpose of voting on
the Plan, (B) such meeting shall not have been held or shall have been
canceled prior to termination of the Plan or (C) Issuer's Board of Directors
shall have withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect to the Plan, in
each case after it shall have been publicly announced that any person (other
than Grantee or any subsidiary of Grantee) shall have (x) made, or disclosed
an intention to make, a proposal to engage in an Acquisition Transaction, (y)
commenced a Tender Offer or filed a registration statement under the
Securities Act with respect to an Exchange Offer, or (z) filed an application
(or given notice), whether in draft or final form, under the Bank Holding
Company Act of 1956, as amended, the HOLA, the Bank Merger Act, as amended, or
the Change in Bank Control Act of 1978, as amended, for approval to engage in
an Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would entitle
Grantee to terminate the Plan under Section 7.1(b) thereof (without regard to
the cure period provided for therein unless such cure is promptly effected
without jeopardizing consummation of the Merger pursuant to the terms of the
Plan) after (x) a bona fide proposal is made by any person (other than Grantee
or any subsidiary of Grantee) to Issuer or its stockholders to engage in an
Acquisition Transaction, (y) any person (other than Grantee or any subsidiary
of Grantee) states its intention to Issuer or its stockholders to make a
proposal to engage in an Acquisition Transaction if the Plan terminates or (z)
any person (other than Grantee or any subsidiary of Grantee) shall have filed
an application or notice with any Governmental Entity to engage in an
Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event, it being understood that
the giving of such notice by Issuer shall not be a condition to the right of
Holder to exercise the Option.
(e) In the event Holder is entitled to under the terms hereof and wishes
to exercise the Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying (i) the total
number of Option Shares it intends to purchase pursuant to such exercise, and
(ii) a place and date not earlier than three business days nor later than 15
business days from the Notice Date for the closing (the "Closing") of such
purchase (the "Closing Date"). If prior notification to or approval of the
Office of Thrift Supervision ("OTS") or any other Governmental Entity is
required in connection with such purchase, Issuer shall cooperate with Grantee
in the filing of the required notice or application for approval and the
obtaining of such approval and the Closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods).
4. Payment and Delivery of Certificates.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately
available funds by wire transfer to a bank account designated by Issuer, an
amount equal to the Purchase Price multiplied by the number of Option Shares
to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to Issuer at the address of Issuer specified in Section 12(f)
hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a),
(i) Issuer shall deliver to Holder (A) a certificate or certificates
representing the Option Shares to be purchased at such Closing, which Option
Shares shall be free and clear of all liens, claims, charges and encumbrances
of any kind whatsoever and subject to no preemptive rights, and (B) if the
Option is exercised in part only, an executed new agreement with the same
terms as this Agreement evidencing the right to purchase the balance of the
shares of Issuer Common Stock purchasable hereunder, and (ii) Holder shall
deliver to Issuer a letter agreeing that Holder shall not offer to sell or
otherwise dispose of such Option Shares in violation of applicable federal and
state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF JULY 11, 1996.
A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF WITHOUT CHARGE
UPON RECEIPT BY ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer and
its counsel, to the effect that such legend is not required for purposes of
the Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of exercise
of the Option provided for under Section 3(e), the tender of the applicable
purchase price in immediately available funds and the tender of this Agreement
to Issuer, Holder shall be deemed to be the holder of record of the shares of
Issuer Common Stock issuable upon such exercise, notwithstanding that the
stock transfer books of Issuer shall then be closed or that certificates
representing such shares of Issuer Common Stock shall not then be actually
delivered to Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer, (iii) promptly to take all action as may from time to
time be required (including (A) complying with all premerger notification,
reporting and waiting period requirements and (B) in the event prior approval
of or notice to any Governmental Entity is necessary before the Option may be
exercised, cooperating fully with Holder in preparing such applications or
notices and providing such information to such Governmental Entity as it may
require) in order to permit Holder to exercise the Option and Issuer duly and
effectively to issue shares of Issuer Common Stock pursuant hereto, and (iv)
promptly to take all action provided herein to protect the rights of Holder
against dilution.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals referred
to herein, to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate
action on the part of Issuer, and this Agreement has been duly executed and
delivered by Issuer.
(b) No Violations. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Incorporation or Bylaws or a
default (or give rise to any right of termination, cancellation or
acceleration) under any of the terms, conditions or provisions of any note,
bond, debenture, mortgage, indenture, license, material agreement or other
material instrument or obligation to which Issuer is a party, or by which it
or any of its properties or assets may be bound, or (ii) violate any order,
writ, injunction, decree, statute, rule or regulation applicable to Issuer or
any of its properties or assets, which conflict, violation or default could
have a material adverse effect on Issuer or Grantee's rights under this
Agreement.
(c) Authorized Stock. Issuer has taken all necessary corporate and
other action to authorize and reserve and to permit it to issue, and at all
times from the date hereof until the obligation to deliver Issuer Common Stock
upon the exercise of the Option terminates, will have reserved for issuance
upon exercise of the Option that number of shares of Issuer Common Stock equal
to the maximum number of shares of Issuer Common Stock at any time and from
time to time purchasable upon exercise of the Option, and all such shares,
upon issuance pursuant to the Option, will be duly and validly issued, fully
paid and nonassessable, and will be delivered free and clear of all liens,
claims, charges and encumbrances of any kind or nature whatsoever and not
subject to any preemptive rights.
6. Representations and Warranties of Grantee. Grantee hereby represents
and warrants to Issuer that Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee, and this Agreement has been
duly executed and delivered by Grantee.
7. Adjustment upon Changes in Issuer Capitalization, etc.
(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option,
the number and class of shares or other securities or property that Holder
would have received in respect of Issuer Common Stock if the Option had been
exercised immediately prior to such event, or the record date therefor, as
applicable. If any additional shares of Issuer Common Stock are issued after
the date of this Agreement (other than pursuant to an event described in the
first sentence of this Section 7(a)), the number of shares of Issuer Common
Stock subject to the Option shall be adjusted so that, after such issuance,
it, together with any shares of Issuer Common Stock previously issued pursuant
hereto, equals 19.9% of the number of shares of Issuer Common Stock then
issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Option.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one
of its subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged
for stock or other securities of Issuer or any other person or cash or any
other property or the outstanding shares of Issuer Common Stock immediately
prior to such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company, or (iii) to
sell or otherwise transfer all or substantially all of its assets to any
person, other than Grantee or one of its subsidiaries, then, and in each such
case, the agreement governing such transaction shall make proper provisions so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged
for, an option (the "Substitute Option"), at the election of Holder, of any of
(x) the Acquiring Corporation (as hereinafter defined), (y) any person that
controls the Acquiring Corporation or (z) in the case of a merger described in
clause (ii), Issuer (such person being referred to as "Substitute Option
Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Holder. Substitute Option Issuer also
shall enter into an agreement with Holder in substantially the same form as
this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable, divided
by the Average Price (as hereinafter defined). The exercise price of
Substitute Option per share of Substitute Common Stock (the "Substitute Option
Price") shall then be equal to the Purchase Price multiplied by a fraction in
which the numerator is the number of shares of Issuer Common Stock for which
the Option was theretofore exercisable and the denominator is the number of
shares of the Substitute Common Stock for which the Substitute Option is
exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, or (iii) the transferee of all or substantially all of
Issuer's assets (or a substantial part of the assets of its subsidiaries taken
as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital
stock (or similar equity interest) with the greatest voting power in respect
of the election of directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per
share of Issuer Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (x) the price per share of Issuer Common Stock to be
paid by any third party pursuant to an agreement with Issuer, (y) the highest
closing price for shares of Issuer Common Stock within the six-month period
immediately preceding the consolidation, merger or sale in question and (z) in
the event of a sale of all or substantially all of Issuer's assets or
deposits, an amount equal to (i) the sum of the price paid in such sale for
such assets (and/or deposits) and the current market value of the remaining
assets of Issuer, as determined by a nationally-recognized investment banking
firm selected by Holder, divided by (ii) the number of shares of Issuer Common
Stock outstanding at such time. In the event that a Tender Offer or an
Exchange Offer is made for Issuer Common Stock or an agreement is entered into
for a merger or consolidation involving consideration other than cash, the
value of the securities or other property issuable or deliverable in exchange
for Issuer Common Stock shall be determined by a nationally-recognized
investment banking firm selected by Holder.
(4) "Average Price" shall mean the average closing price of a share
of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer of
the Substitute Option, the Average Price shall be computed with respect to a
share of common stock issued by Issuer, the person merging into Issuer or by
any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the aggregate of the shares of Substitute
Common Stock but for the limitation in the first sentence of this Section
7(f), Substitute Option Issuer shall make a cash payment to Holder equal to
the excess of (i) the value of the Substitute Option without giving effect to
the limitation in the first sentence of this Section 7(f) over (ii) the value
of the Substitute Option after giving effect to the limitation in the first
sentence of this Section 7(f). This difference in value shall be determined
by a nationally-recognized investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section 7(b)
unless the Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder and take
all other actions that may be necessary so that the provisions of this Section
7 are given full force and effect (including, without limitation, any action
that may be necessary so that the holders of the other shares of common stock
issued by Substitute Option Issuer are not entitled to exercise any rights by
reason of the issuance or exercise of the Substitute Option and the shares of
Substitute Common Stock are otherwise in no way distinguishable from or have
lesser economic value (other than any diminution in value resulting from the
fact that the shares of Substitute Common Stock are restricted securities, as
defined in Rule 144 under the Securities Act or any successor provision) than
other shares of common stock issued by Substitute Option Issuer).
8. Repurchase at the Option of Holder.
(a) Subject to the last sentence of Section 3(a), at the request of
Holder at any time commencing upon the first occurrence of a Repurchase Event
(as defined in Section 8(d) and ending 12 months immediately thereafter,
Issuer shall repurchase from Holder (i) the Option and (ii) all shares of
Issuer Common Stock purchased by Holder pursuant hereto with respect to which
Holder then has beneficial ownership. The date on which Holder exercises its
rights under this Section 8 is referred to as the "Request Date." Such
repurchase shall be at an aggregate price (the "Section 8 Repurchase
Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case of
Option Shares with respect to which the Option has been exercised but the
Closing Date has not occurred, payable) by Holder for each share of Issuer
Common Stock with respect to which the Option has been exercised and with
respect to which Holder then has beneficial ownership, multiplied by the
number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the OTS or any other Governmental Entity is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to Section 8, in whole or in part, or to
require that Issuer deliver from time to time that portion of the Section 8
Repurchase Consideration that it is not then so prohibited from paying and
promptly file the required notice or application for approval and
expeditiously process the same (and each party shall cooperate with the other
in the filing of any such notice or application and the obtaining of any such
approval). If the OTS or any other Governmental Entity disapproves of any
part of Issuer's proposed repurchase pursuant to this Section 8, Issuer shall
promptly give notice of such fact to Holder. If the OTS or any other
Governmental Entity prohibits the repurchase in part but not in whole, then
Holder shall have the right (i) to revoke the repurchase request or (ii) to
the extent permitted by the OTS or other Governmental Entity, determine
whether the repurchase should apply to the Option and/or Option Shares and to
what extent to each, and Holder shall thereupon have the right to exercise the
Option as to the number of Option Shares for which the Option was exercisable
at the Request Date less the sum of the number of shares covered by the Option
in respect of which payment has been made pursuant to Section 8(a)(ii) and the
number of shares covered by the portion of the Option (if any) that has been
repurchased. Holder shall notify Issuer of its determination under the
preceding sentence within five business days of receipt of notice of
disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Grantee's rights
under this Section 8 shall terminate on the date of termination of the Option
pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the
price per share of Issuer Common Stock received by holders of Issuer Common
Stock in connection with any merger or other business combination transaction
described in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest
closing sales price per share of Issuer Common Stock quoted on the Nasdaq
Stock Market's National Market ("NASDAQ/NMS") (or if Issuer Common Stock is
not quoted on NASDAQ/NMS, the highest bid price per share as quoted on the
principal trading market or securities exchange on which such shares are
traded, as reported by a recognized source chosen by Holder) during the 60
business days preceding the Request Date; provided, however, that in the event
of a sale of less than all of Issuer's assets, the Applicable Price shall be
the sum of the price paid in such sale for such assets and the current market
value of the remaining assets of Issuer as determined by a nationally-
recognized investment banking firm selected by Holder, divided by the number
of shares of Issuer Common Stock outstanding at the time of such sale. If the
consideration to be offered, paid or received pursuant to either of the
foregoing clauses (i) or (ii) shall be other than in cash, the value of such
consideration shall be determined in good faith by an independent nationally-
recognized investment banking firm selected by Holder and reasonably
acceptable to Issuer, which determination shall be conclusive for all purposes
of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired
beneficial ownership of (as such term is defined in Rule 13d-3 promulgated
under the Exchange Act), or the right to acquire beneficial ownership of, or
any "group" (as such term is defined in Section 13(d)(3) of the Exchange Act),
other than any group of which Grantee or any Grantee subsidiary is a part,
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 50% or more of the then outstanding shares of Issuer
Common Stock, or (ii) any of the transactions described in Section 7(b)(i),
Section 7(b)(ii) or Section 7(b)(iii) shall be consummated.
(e) Notwithstanding anything herein to the contrary, the aggregate amount
payable to Holder pursuant to this Section 8 shall not exceed $3.0 million.
9. Registration Rights.
(a) Demand Registration Rights. Issuer shall, subject to the conditions
of Section 9(c), if requested by any Holder, as expeditiously as possible
prepare and file a registration statement under the Securities Act if such
registration is necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Holder upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by
Holder in such request, including without limitation a "shelf" registration
statement under Rule 415 under the Securities Act or any successor provision,
and Issuer shall use its best efforts to qualify such shares or other
securities for sale under any applicable state securities laws.
(b) Additional Registration Rights. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder
of its intention to do so and, upon the written request of Holder given within
30 days after receipt of any such notice (which request shall specify the
number of shares of Issuer Common Stock intended to be included in such
underwritten public offering by Holder), Issuer will cause all such shares for
which a Holder shall have requested participation in such registration to be
so registered and included in such underwritten public offering; provided,
however, that Issuer may elect to not cause any such shares to be so
registered (i) if the underwriters in good faith object for valid business
reasons, or (ii) in the case of a registration solely to implement an employee
benefit plan or a registration filed on Form S-4 under the Securities Act or
any successor form; provided, further, however, that such election pursuant to
clause (i) may only be made one time. If some but not all the shares of
Issuer Common Stock with respect to which Issuer shall have received requests
for registration pursuant to this Section 9(b) shall be excluded from such
registration, Issuer shall make appropriate allocation of shares to be
registered among Holders permitted to register their shares of Issuer Common
Stock in connection with such registration pro rata in the proportion that the
number of shares requested to be registered by each such Holder bears to the
total number of shares requested to be registered by all such Holders then
desiring to have Issuer Common Stock registered for sale.
(c) Conditions to Required Registration. Issuer shall use all reasonable
efforts to cause each registration statement referred to in Section 9(a) to
become effective and to obtain all consents or waivers of other parties which
are required therefor and to keep such registration statement effective;
provided, however, that Issuer may delay any registration of Option Shares
required pursuant to Section 9(a) for a period not exceeding 90 days if Issuer
shall in good faith determine that any such registration would adversely
affect an offering or contemplated offering of other securities by Issuer, and
Issuer shall not be required to register Option Shares under the Securities
Act pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan pursuant to
Article VII thereof, and (B) a Purchase Event or a Preliminary Purchase Event;
(ii) on more than one occasion during any calendar year and on more
than two occasions in total;
(iii) within 90 days after the effective date of a registration
referred to in Section 9(b) pursuant to which the Holder or Holders concerned
were afforded the opportunity to register such shares under the Securities Act
and such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by the Holder or
Holders of at least 25% or more of the aggregate number of Option Shares
(including shares of Issuer Common Stock issuable upon exercise of the Option)
then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, provided, however, that
Issuer shall not be required to consent to general jurisdiction or to qualify
to do business in any state where it is not otherwise required to so consent
to such jurisdiction or to so qualify to do business.
(d) Expenses. Issuer will pay all expenses (including without limitation
registration fees, qualification fees, blue sky fees and expenses, accounting
expenses, legal expenses and printing expenses incurred by it) in connection
with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered
and any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) Indemnification. In connection with any registration under Section
9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person, if any, who controls such Holder or
underwriter within the meaning of Section 15 of the Securities Act, against
all expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement of a material fact contained in any registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission, or alleged omission, to state therein a material fact required
to be stated therein or necessary to make the statements therein not
misleading, except insofar as such expenses, losses, claims, damages or
liabilities of such indemnified party are caused by any untrue statement or
alleged untrue statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such indemnified party expressly
for use therein, and Issuer and each officer, director and controlling person
of Issuer shall be indemnified by such Holder, or by such underwriter, as the
case may be, for all such expenses, losses, claims, damages and liabilities
caused by any untrue, or alleged untrue, statement that was included by Issuer
in any such registration statement or prospectus or notification or offering
circular (including any amendments or supplements thereto) in reliance upon,
and in conformity with, information furnished in writing to Issuer by such
Holder or such underwriter, as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall
notify the indemnifying party in writing of the commencement of such action,
but, except to the extent of any actual prejudice to the indemnifying party,
the failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be
given to the indemnifying party as above provided, the indemnifying party
shall be entitled to participate in and, to the extent it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense of
such action at its own expense, with counsel chosen by it and reasonably
satisfactory to such indemnified party. The indemnified party shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel (other than
reasonable costs of investigation) shall be paid by the indemnified party
unless (i) the indemnifying party agrees to pay the same, (ii) the
indemnifying party fails to assume the defense of such action with counsel
reasonably satisfactory to the indemnified party, or (iii) the indemnified
party has been advised by counsel that one or more legal defenses may be
available to the indemnifying party that may be contrary to the interest of
the indemnified party, in which case the indemnifying party shall be entitled
to assume the defense of such action notwithstanding its obligation to bear
fees and expenses of such counsel. No indemnifying party shall be liable for
any settlement entered into without its consent, which consent may not be
unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable to
a party otherwise entitled to be indemnified in respect of any expenses,
losses, claims, damages or liabilities referred to herein, then the
indemnifying party, in lieu of indemnifying such party otherwise entitled to
be indemnified, shall contribute to the amount paid or payable by such party
to be indemnified as a result of such expenses, losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative
benefits received by Issuer, the selling Holders and the underwriters from the
offering of the securities and also the relative fault of Issuer, the selling
Holders and the underwriters in connection with the statement or omissions
which results in such expenses, losses, claims, damages or liabilities, as
well as any other relevant equitable considerations. The amount paid or
payable by a party as a result of the expenses, losses, claims, damages and
liabilities referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim; provided, however, that in no
case shall the selling Holders be responsible, in the aggregate, for any
amount in excess of the net offering proceeds attributable to its Option
Shares included in the offering. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(g) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. Any obligation by any Holder to indemnify shall
be several and not joint with other Holders.
In connection with any registration pursuant to Section 9(a) or (b) above,
Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit
the expeditious sale at any time of any Option Shares by the Holder(s) in
accordance with and to the extent permitted by any rule or regulation
permitting nonregistered sales of securities promulgated by the Commission
from time to time, including, without limitation, Rule 144A. Issuer shall at
its expense provide the Holder with any information necessary in connection
with the completion and filing of any reports or forms required to be filed by
them under the Securities Act or the Exchange Act, or required pursuant to any
state securities laws or the rules of any stock exchange.
(g) Issue Taxes. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to
time, against any and all liabilities, with respect to all such taxes.
10. Quotation; Listing. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation
or trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon
the request of Holder, will promptly file an application, if required, to
authorize for quotation or trading or listing the shares of Issuer Common
Stock or other securities to be acquired upon exercise of the Option on
NASDAQ/NMS or such other securities exchange and will use its best efforts to
obtain approval, if required, of such quotation or listing as soon as
practicable.
11. Division of Option. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of the Issuer for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of
Issuer Common Stock purchasable hereunder. The terms "Agreement" and "Option"
as used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits of such provision.
This Agreement may not be modified, amended, altered or supplemented except
upon the execution and delivery of a written agreement executed by the parties
hereto.
(c) Entire Agreement; No Third Party Beneficiaries; Severability. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter
hereof, and (ii) is not intended to confer upon any person other than the
parties hereto (other than the indemnified parties under Section 9(e) and any
transferee of the Option Shares or any permitted transferee of this Agreement
pursuant to Section 12(h)) any rights or remedies hereunder. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or a federal or state regulatory agency to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court
or regulatory agency determines that the Option does not permit Holder to
acquire, or does not require Issuer to repurchase, the full number of shares
of Issuer Common Stock as provided in Sections 3 and 8 (as adjusted pursuant
to Section 7), it is the express intention of Issuer to allow Holder to
acquire or to require Issuer to repurchase such lesser number of shares as may
be permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Washington without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning
or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at
the following address (or at such other address for a party as shall be
specified by like notice):
If to Grantee:
Washington Federal, Inc.
425 Pike Street
Seattle, Washington 98101
Attn: Guy C. Pinkerton
Chairman, President and Chief Executive Officer
Fax: 206-624-2334
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-0300
If to Issuer:
Metropolitan Bancorp
1520 4th Avenue
Seattle, Washington 98107-1648
Attn: Patrick F. Patrick
President and Chief Executive Officer
Fax: 206-654-7883
With a required copy to:
Perkins Coie
1201 Third Avenue
40th Floor
Seattle, Washington 98101-3099
Attn: Charles Katz, Esq.
Fax: 206-583-8500
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this
Agreement to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in
order to consummate the transactions provided for by such exercise.
(j) Specific Performance. The parties hereto agree that this Agreement
may be enforced by either party through specific performance, injunctive
relief and other equitable relief. Both parties further agree to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
Attest: METROPOLITAN BANCORP
/s/ Edwin C. Hedlund By: /s/ Patrick F. Patrick
Name: Edwin C. Hedlund Name: Patrick F. Patrick
Title: Secretary Title: President and Chief
Executive Officer
Attest: WASHINGTON FEDERAL, INC.
/s/ Ronald L. Saper By:/s/ Guy C. Pinkerton
Name: Ronald L. Saper Name: Guy C. Pinkerton
Title: Senior Vice President and Title: Chairman, President and
and Chief Financial Officer Chief Executive Officer
Exhibit 10.3
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of July 11, 1996, by and between
Washington Federal, Inc. (the "Acquiror"), a Washington corporation, and
certain shareholders of Metropolitan Bancorp (the "Company"), a Washington
corporation, named on Schedule I hereto (collectively the "Stockholders").
WITNESSETH:
WHEREAS, the Acquiror and the Company have entered into an Agreement and
Plan of Merger, dated as of the date hereof (the "Agreement"), which is being
executed simultaneously with the execution of this Stockholder Agreement and
provides for, among other things, the merger of the Company with and into the
Acquiror (the "Merger"); and
WHEREAS, in order to induce the Acquiror to enter into the Agreement,
each of the Stockholders agrees to, among other things, vote in favor of the
Agreement in his or her capacities as stockholders of the Company;
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Ownership of Company Common Stock. Each Stockholder represents and
warrants that the Stockholder has or shares the right to vote and dispose of
the number of shares of common stock of the Company, par value $.01 per share
("Company Common Stock"), as set forth opposite such Stockholder's name on
Schedule I hereto.
2. Agreements of the Stockholders. Each Stockholder covenants and agrees
that:
(a) such Stockholder shall, at any meeting of the Company's
stockholders called for the purpose, vote, or cause to be voted, all shares of
Company Common Stock in which such stockholder has the right to vote (whether
owned as of the date hereof or hereafter acquired) in favor of the Agreement
and against any plan or proposal pursuant to which the Company is to be
acquired by or merged with, or pursuant to which the Company proposes to sell
all or substantially all of its assets and liabilities to, any person entity
or group (other than the Acquiror or any subsidiary thereof);
(b) except as otherwise expressly permitted hereby or by the Mortgage
Company Agreement (as defined in the Agreement), such Stockholder shall not,
prior to the meeting of the Company's stockholders referred to in Section 2(a)
hereof or the earlier termination of the Agreement in accordance with its
terms, sell, pledge, transfer or otherwise dispose of the Stockholder's shares
of Company Common Stock; and
(c) such Stockholder shall not in his capacity as a stockholder of
the Company directly or indirectly encourage or solicit or hold discussions or
negotiations with, or provide any information to, any person, entity or group
(other than the Acquiror or an affiliate thereof) concerning any merger, sale
of substantial assets or liabilities not in the ordinary course of business,
sale of shares of capital stock or similar transactions involving the Company
or any subsidiary of the Company (provided that nothing in this letter
agreement shall be deemed to affect the ability of any Stockholder to fulfill
his duties as a director or officer of the Company).
Each Stockholder further agrees that the Company's transfer agent shall
be given an appropriate stop transfer order and shall not be required to
register any attempted transfer of shares of Company Common Stock, unless the
transfer has been effected in compliance with the terms of this letter
agreement.
3. Successors and Assigns. A Stockholder may sell, pledge, transfer or
otherwise dispose of his shares of Company Common Stock, provided that, with
respect to any sale, transfer or disposition which would occur on or before
the meeting of the Company's stockholders referred to in Section 2(a) hereof,
such Stockholder obtains the prior written consent of the Acquiror and that
any acquiror of such Company Common Stock agree in writing to be bound by the
terms of this Stockholder Agreement.
4. Termination. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual
written consent of the parties hereto and shall be automatically terminated in
the event that the Agreement is terminated in accordance with its terms.
5. Notices. Notices may be provided to the Acquiror and the Stockholders
in the manner specified in Section 8.4 of the Agreement, with all notices to
the Stockholders being provided to them at the Company in the manner specified
in such section.
6. Governing Law. This Stockholder Agreement shall be governed by
the laws of the State of Washington without giving effect to the principles of
conflicts of laws thereof.
7. Counterparts. This Stockholder Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same and each
of which shall be deemed an original.
8. Headings and Gender. The Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine gender
herein shall be considered to represent the masculine, feminine or neuter
gender whenever appropriate.
IN WITNESS WHEREOF, the Acquiror, by a duly authorized officer, and each
of the Stockholders have caused this Stockholder Agreement to be executed as
of the day and year first above written.
WASHINGTON FEDERAL INC.
By: /s/ Guy C. Pinkerton
Name: Guy C. Pinkerton
Title: Chairman, President and
Chief Executive Officer
COMPANY STOCKHOLDERS:
/s/ Allen E. Doan
Allen E. Doan
/s/ John F. Clearman
John F. Clearman
/s/ David C. Cortelyou
David C. Cortelyou
/s/ W. Gordon Dowling
W. Gordon Dowling
/s/ John H. Fairchild
John H. Fairchild
/s/ Virgil Fassio
Virgil Fassio
/s/ H. Dennis Halvorson
H. Dennis Halvorson
/s/ Larry O. Hillis
Larry O. Hillis
/s/ John J. Knight
John J. Knight
/s/ Patrick F. Patrick
Patrick F. Patrick
/s/ Michael M. Pete
Michael M. Pete
SCHEDULE I
Name of Stockholder Number of Shares of Company
Common Stock Beneficially Owned
Allen E. Doan 32,720
John F. Clearman 4,100
David C. Cortelyou 3,100
W. Gordon Dowling 104,090
John H. Fairchild 362,637
Virgil Fassio 15,100
H. Dennis Halvorson 8,100
Larry O. Hillis 46,326
John J. Knight 31,160
Patrick F. Patrick 74,225
Michael M. Pete 3,000
Exhibit 99.1
Press release issued July 12, 1996
Washington Federal, Inc.
425 Pike Street
Seattle, WA 98101
(206) 624-7930, Contact: Bob Hawkins
Metropolitan Bancorp
1520 Fourth Avenue
Seattle, WA 98101
(206) 654-7820, Contact: Patrick Patrick
Friday, July 12, 1996
FOR IMMEDIATE RELEASE
WASHINGTON FEDERAL, INC. AND METROPOLITAN BANCORP
ANNOUNCE MERGER
SEATTLE, WASHINGTON-Washington Federal, Inc. (NASDAQ-WFSL) and Metropolitan
Bancorp (NASDAQ-MSEA) announced today the execution of a definitive agreement
pursuant to which Metropolitan will merge with and into Washington Federal
(the "Merger"). In connection with the Merger, each stockholder of
Metropolitan will receive shares of Washington Federal Common Stock at an
expected value of $18.00 in exchange for each share of his or her Metropolitan
Common Stock, subject to the pricing and other provisions set forth in the
agreement.
It is intended that the transaction constitute a tax-free reorganization
under the Internal Revenue Code so that stockholders of Metropolitan will not
recognize gain or loss in connection with the receipt of Washington Federal
Common Stock.
The transaction has been unanimously approved by the Boards of Directors of
both companies. It is anticipated that the merger will be completed by
December 31, 1996. Approval is required from the applicable regulatory
authorities and the shareholders of Metropolitan.
July 12, 1996 page 2
The number of shares of Washington Federal Common Stock that will be
exchanged for each share of Metropolitan Common Stock will be determined by
applying a formula, set forth in the definitive agreement, which is based on
the average market price of Washington Federal Common Stock over a 20 trading
day period ending on the fifth business day prior to the closing of the
Merger. If, over the pricing period, the average market price of Washington
Federal Common Stock is between $18.00 and $24.50, Metropolitan stockholders
will receive a number of shares of Washington Federal Common Stock equal to
the ratio determined by dividing $18.00 by the average market price of
Washington Federal Common Stock multiplied by the number of shares of
Metropolitan Common Stock exchanged. If the average market price of
Washington Federal Common Stock exceeds $24.50, the exchange ratio will equal
.735 shares of Washington Federal Common Stock for each share of Metropolitan
Common Stock, whereas the exchange ratio will be one-for-one if the Washington
Federal Common Stock average market price for the 20-day period is less than
$18.00 per share.
In connection with the Merger, Phoenix Mortgage & Investment, Inc., a
subsidiary of Metropolitan, will be acquired by Phoenix management.
July 12, 1996 page 3
Patrick F. Patrick, President and Chief Executive Officer of Metropolitan
commented, "We are very excited about our affiliation with Washington Federal.
Washington Federal is the premier company in the thrift industry and offers
our stockholders an excellent return and investment. The larger company
offers more opportunities for employees to apply their time and talents. The
customer, most valued of all, will continue to receive a high level of
uninterrupted personal service and the utmost safety in one of the strongest
financial institutions in the country"
Guy C. Pinkerton, Chairman, President and Chief Executive Officer of
Washington Federal stated, "We look forward to joining with Metropolitan. The
combination will provide enhanced management capabilities, improved cost
efficiencies and increased market penetration which will lead to improved
financial performance in the years ahead."
In connection with the agreement, Metropolitan granted Washington Federal
an option to acquire up to 19.9% of the outstanding Metropolitan Common Stock
upon the occurrence of certain events.
Metropolitan Bancorp is the holding company of Metropolitan Federal Savings
and Loan Association of Seattle which operates
July 12, 1996 page 4
ten offices in the greater Puget Sound area. At June 30, 1996, Metropolitan
Bancorp had $761 million in assets, $424 million in deposits and $51 million
in equity.
Washington Federal, Inc. is the holding company of Washington Federal
Savings which operates 89 offices in Washington, Idaho, Oregon, Utah and
Arizona. At June 30, 1996, Washington Federal, Inc. had $5.0 billion in
assets, $2.5 billion in deposits and $597 million in equity.
