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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)
September 24, 1996
WESTERFED FINANCIAL CORPORATION
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(Exact name of Registrant as specified in its charter)
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Delaware 0-22772 81-389950
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(State or other (Commission File No.) (IRS Employer
jurisdiction of Identification
incorporation) No.)
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110 East Broadway, Missoula, Montana 59802
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (406) 721-5254
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N/A
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(Former name or former address, if changed since last report)
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Item 5. Other Events
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On September 25, 1996, WesterFed Financial Corporation, a Delaware
Corporation ("WesterFed"), issued the press release included as Exhibit 99.1 to
this Report and incorporated by reference herein, announcing the execution of a
definitive agreement (the "Agreement") regarding WesterFed's acquisition of
Security Bancorp, a Montana corporation.
The Agreement is filed as Exhibit 2 to this Report and is incorporated
by reference herein.
Item 7. Financial Statements and Exhibits
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(c) Exhibits:
Exhibit 2 - Agreement and Plan of Merger dated as of September 24, 1996.
Exhibit 99.1 - Joint Press Release dated September 25, 1996.
Exhibit 99.2 - Stock Option Agreement #1 dated as of September 24, 1996.
Exhibit 99.3 - Stock Option Agreement #2 dated as of September 24, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
WESTERFED FINANCIAL CORPORATION
Date:September 25, 1996 By:/S/ Lyle R. Grimes
Lyle R. Grimes
President and Chief
Executive Officer
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EXHIBIT INDEX
Exhibit 2 - Agreement and Plan of Merger dated as of September 24, 1996.
Exhibit 99.1 - Press Release dated September 25, 1996.
Exhibit 99.2 - Stock Option Agreement #1 dated as of September 24, 1996.
Exhibit 99.3 - Stock Option Agreement #2 dated as of September 24, 1996.
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AGREEMENT AND PLAN OF MERGER
BETWEEN
WESTERFED FINANCIAL CORPORATION
AND
SECURITY BANCORP
DATED AS OF SEPTEMBER 24, 1996
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AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
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ARTICLE I .......................................................................................... 8
SECTION 1.01 EFFECTS OF THE MERGER .............................................................. 8
SECTION 1.02 CONVERSION OF STOCK ................................................................ 9
SECTION 1.03 CONVERSION ELECTION PROCEDURES ..................................................... 9
SECTION 1.04 TIME AND PLACE OF CLOSING .......................................................... 12
SECTION 1.05 EXCHANGE OF SECURITY COMMON STOCK .................................................. 13
SECTION 1.06 MERGER OF SECURITY BANK, FSB ....................................................... 14
ARTICLE II ......................................................................................... 15
SECTION 2.01 ORGANIZATION ....................................................................... 15
SECTION 2.02 AUTHORIZATION ...................................................................... 15
SECTION 2.03 CONFLICTS .......................................................................... 15
SECTION 2.04 ANTI-TAKEOVER PROVISIONS INAPPLICABLE .............................................. 16
SECTION 2.05 CAPITALIZATION ..................................................................... 16
SECTION 2.06 WESTERFED FINANCIAL STATEMENTS; MATERIAL CHANGES ................................... 17
SECTION 2.07 WESTERFED SUBSIDIARIES ............................................................. 17
SECTION 2.08 WESTERFED FILINGS .................................................................. 18
SECTION 2.09 WESTERFED REPORTS .................................................................. 18
SECTION 2.10 COMPLIANCE WITH LAWS ............................................................... 19
SECTION 2.11 DISCLOSURE ......................................................................... 19
SECTION 2.12 LITIGATION ......................................................................... 19
SECTION 2.13 LICENSES ........................................................................... 20
SECTION 2.14 TAXES .............................................................................. 20
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SECTION 2.15 INSURANCE .......................................................................... 21
SECTION 2.16 LOANS; INVESTMENTS ................................................................. 21
SECTION 2.17 ALLOWANCE FOR POSSIBLE LOAN LOSSES ................................................. 22
SECTION 2.18 WESTERFED BENEFIT PLANS ............................................................ 23
SECTION 2.19 COMPLIANCE WITH ENVIRONMENTAL LAWS ................................................. 24
SECTION 2.20 SUBMISSION OF DOCUMENTS ............................................................ 25
SECTION 2.21 DEFAULTS ........................................................................... 26
SECTION 2.22 OPERATIONS SINCE MARCH 31, 1996 .................................................... 26
SECTION 2.23 CORPORATE RECORDS .................................................................. 26
SECTION 2.24 UNDISCLOSED LIABILITIES ............................................................ 27
SECTION 2.25 ASSETS ............................................................................. 27
SECTION 2.26 INDEMNIFICATION .................................................................... 28
SECTION 2.27 INSIDER INTERESTS .................................................................. 28
ARTICLE III ........................................................................................ 28
SECTION 3.01 ORGANIZATION ....................................................................... 28
SECTION 3.02 AUTHORIZATION ...................................................................... 28
SECTION 3.03 CONFLICTS .......................................................................... 29
SECTION 3.04 ANTI-TAKEOVER PROVISIONS INAPPLICABLE .............................................. 29
SECTION 3.05 CAPITALIZATION AND STOCKHOLDERS .................................................... 29
SECTION 3.06 SECURITY FINANCIAL STATEMENTS; MATERIAL CHANGES .................................... 30
SECTION 3.07 SECURITY SUBSIDIARIES .............................................................. 30
SECTION 3.08 SECURITY FILINGS ................................................................... 31
SECTION 3.09 SECURITY REPORTS ................................................................... 31
SECTION 3.10 COMPLIANCE WITH LAWS ............................................................... 32
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SECTION 3.11 DISCLOSURE ......................................................................... 33
SECTION 3.12 LITIGATION ......................................................................... 33
SECTION 3.13 LICENSES ........................................................................... 33
SECTION 3.14 TAXES .............................................................................. 33
SECTION 3.15 INSURANCE .......................................................................... 34
SECTION 3.16 LOANS; INVESTMENTS ................................................................. 34
SECTION 3.17 ALLOWANCE FOR POSSIBLE LOAN LOSSES ................................................. 36
SECTION 3.18 SECURITY BENEFIT PLANS ............................................................. 36
SECTION 3.19 COMPLIANCE WITH ENVIRONMENTAL LAWS ................................................. 39
SECTION 3.20 CONTRACTS AND COMMITMENTS .......................................................... 40
SECTION 3.21 DEFAULTS ........................................................................... 43
SECTION 3.22 OPERATIONS SINCE MARCH 31, 1996 .................................................... 43
SECTION 3.23 CORPORATE RECORDS .................................................................. 45
SECTION 3.24 UNDISCLOSED LIABILITIES ............................................................ 45
SECTION 3.25 ASSETS ............................................................................. 45
SECTION 3.26 INDEMNIFICATION .................................................................... 46
SECTION 3.27 INSIDER INTERESTS .................................................................. 46
ARTICLE IV ......................................................................................... 46
SECTION 4.01 BUSINESS IN ORDINARY COURSE ........................................................ 46
SECTION 4.02 CONFORMING ACCOUNTING AND RESERVE POLICIES; RESTRUCTURING EXPENSES ................. 50
SECTION 4.03 CERTAIN ACTIONS .................................................................... 50
ARTICLE V .......................................................................................... 51
SECTION 5.01 INSPECTION OF RECORDS; CONFIDENTIALITY ............................................. 51
SECTION 5.02 REGISTRATION STATEMENT; STOCKHOLDER APPROVAL ....................................... 52
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SECTION 5.03 AFFILIATE LETTERS .................................................................. 53
SECTION 5.04 BROKERS ............................................................................ 53
SECTION 5.05 COOPERATION ........................................................................ 53
SECTION 5.06 REGULATORY APPLICATIONS ............................................................ 53
SECTION 5.07 FINANCIAL STATEMENTS AND REPORTS ................................................... 54
SECTION 5.08 NOTICE ............................................................................. 54
SECTION 5.09 PRESS RELEASE ...................................................................... 54
SECTION 5.10 DELIVERY OF SUPPLEMENTS TO DISCLOSURE SCHEDULES .................................... 54
SECTION 5.11 LITIGATION MATTERS ................................................................. 55
SECTION 5.12 NOTICE OF MATERIAL ADVERSE EFFECT .................................................. 55
SECTION 5.13 OPTIONS; EMPLOYMENT AGREEMENTS; BENEFITS AND RELATED MATTERS ....................... 55
SECTION 5.14 EXTENT OF KNOWLEDGE ................................................................ 56
SECTION 5.15 TAX TREATMENT ...................................................................... 57
SECTION 5.16 STOCK EXCHANGE LISTING ............................................................. 57
SECTION 5.17 DIRECTORS' AND OFFICERS' INDEMNIFICATION INSURANCE ................................. 57
ARTICLE VI ......................................................................................... 58
SECTION 6.01 CONDITIONS TO THE OBLIGATIONS OF WESTERFED ......................................... 58
SECTION 6.02 CONDITIONS TO THE OBLIGATIONS OF SECURITY .......................................... 58
SECTION 6.03 CONDITIONS TO THE OBLIGATIONS OF THE PARTIES ....................................... 59
ARTICLE VII ........................................................................................ 60
SECTION 7.01 TERMINATION ........................................................................ 60
SECTION 7.02 LIABILITIES AND REMEDIES ........................................................... 61
SECTION 7.03 SURVIVAL OF AGREEMENTS ............................................................. 62
SECTION 7.04 AMENDMENT .......................................................................... 62
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SECTION 7.05 WAIVER ............................................................................. 62
ARTICLE VIII ....................................................................................... 63
SECTION 8.01 SURVIVAL ........................................................................... 63
SECTION 8.02 NOTICES ............................................................................ 63
SECTION 8.03 APPLICABLE LAW ..................................................................... 64
SECTION 8.04 HEADINGS, ETC ...................................................................... 64
SECTION 8.05 SEVERABILITY ....................................................................... 64
SECTION 8.06 ENTIRE AGREEMENT; BINDING EFFECT; NON-ASSIGNMENT; COUNTERPARTS ..................... 64
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EXHIBITS
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Exhibit A Certification Election Form (omitted)
Exhibit B Bank Plan of Merger (omitted)
Exhibit C Representation Letter (omitted)
Exhibit D Cancellation Agreement (omitted)
Exhibit E List of Security/Security Bank FSB
Employees and New Employment Agreements
(omitted)
Exhibit F Security Stockholders Voting Agreement
(omitted)
Exhibit G Stock Option Agreement #1 (see Exhibit 99.2
to Report)
Exhibit H Stock Option Agreement #2 (see Exhibit 99.3
to Report)
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (the "Agreement") being made and
entered into as of the 24th day of September 1996, by and between WesterFed
Financial Corporation, a Delaware corporation ("WesterFed"), and Security
Bancorp, a Montana corporation ("Security").
WITNESSETH THAT:
WHEREAS, WesterFed and Security are registered savings and loan holding
companies under the Home Owner's Loan Act, as amended ("HOLA");
WHEREAS, the Boards of Directors of WesterFed and Security deem it
advisable and in the best interests of the stockholders of WesterFed and
Security that WesterFed and Security become affiliated by causing Security to be
merged with and into, and under the charter of, WesterFed in accordance with the
applicable corporation law of the States of Delaware and Montana ("Corporate
Law") with WesterFed deemed to be the continuing and surviving entity (the
"Merger"), pursuant to which the stockholders of Security (other than holders of
Excluded Shares (as defined in Section 1.02(b)) and Dissenting Shares (as
defined in Section 1.03(i))) will receive shares of common stock, $.01 par value
per share, of WesterFed ("WesterFed Common Stock") or cash, or a combination of
both as provided herein, in exchange for their shares of common stock, $1.00 par
value per share, of Security ("Security Common Stock"); and
WHEREAS, WesterFed and Security desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also
desire to set forth various conditions precedent to the Merger.
NOW THEREFORE, in consideration of the representations, warranties,
covenants and agreements herein contained, the parties agree as follows:
DEFINITIONS
(A) DEFINITIONS. Capitalized terms used in this Agreement have the
following meanings:
"Acquisition Transaction" means any of the following: (i) a merger or
consolidation, or any similar transaction (other than the Merger) of any company
with either Security or any Security Subsidiary; (ii) a purchase, lease or other
acquisition of all or substantially all the assets of either Security or any
Security Subsidiary; (iii) a purchase or other acquisition of "beneficial
ownership" by any "person" or "group" (as such terms are defined in Section
13(d)(3) of the Securities Exchange Act) (including by way of merger,
consolidation, share exchange, or otherwise) which would cause such person or
group to become the beneficial owner of securities representing more than 24.9%
of the voting power of either Security or any Security Subsidiary, but excluding
the acquisition of beneficial ownership by any employee benefit plan maintained
or sponsored by Security; (iv) a tender or exchange offer to acquire securities
representing 19.9% or
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more of the voting power of Security; (v) a public proxy or consent solicitation
made to stockholders of Security seeking proxies in opposition to any proposal
relating to any of the transactions contemplated by this Agreement; (vi) the
filing of an application or notice with the Federal Reserve Board, the OCC, the
OTS, or any other federal or state regulatory authority (which application has
been accepted for processing) seeking approval to engage in one or more of the
transactions referenced in clauses (i) through (iv) above; or (vii) the making
of a bona fide offer to the Board of Directors of Security by written
communication, that is or becomes the subject of public disclosure, to engage in
one or more of the transactions referenced in clauses (i) through (v) above.
"Additional Stock Election Shares" has the meaning assigned to such
term in Section 1.03(e)(i)(B).
"Aggrieved Party" has the meaning assigned to such term in Section
7.02(a).
"Agreement" has the meaning assigned to such term in the introductory
paragraph of this Agreement.
"Average WesterFed Stock Price" means the average (rounded down to the
nearest whole cent) of the closing per-share price of WesterFed Common Stock on
the National Association of Securities Dealers Automated Quotations system
("Nasdaq") for the twenty (20) consecutive trading days commencing on and
including the thirtieth trading day immediately prior to the date of Closing.
"Bank Merger" has the meaning assigned to such term in Section 1.06.
"Bank Plan of Merger" has the meaning assigned to such term in Section
1.06.
"Breaching Party" has the meaning assigned to such term in Section
7.02(a).
"Cash Distribution" has the meaning assigned to such term in Section
1.02(b)(i).
"Cash Election Shares" has the meaning assigned to such term in Section
1.03(b).
"Certificates" has the meaning assigned to such term in Section
1.05(a).
"Certification" has the meaning assigned to such term in Section
1.03(a).
"Change in Control Benefit" has the meaning assigned to such term in
Section 3.18(a).
"Closing" has the meaning assigned to such term in Section 1.04(a).
"Closing Date" has the meaning assigned to such term in Section
1.04(a).
"Code" means the Internal Revenue Code of 1986, as amended.
"Continuing Employees" has the meaning assigned to such term in Section
5.13(d).
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"Corporate Law" has the meaning assigned to such term in the recitals
to this Agreement.
"Derivative Securities" means interest rate swaps, caps, floors, option
agreements, and other interest rate management arrangements and other
instruments generally known as "derivatives", "structures notes", "high risk
mortgage derivatives", "capped floating rate notes", or "capped floating rate
mortgage derivatives".
"Dissenting Shares" has the meaning assigned to such term in Section
1.03(i).
"Effective Time" has the meaning assigned to such term in Section
1.01(c).
"Election Deadline" means the date of the Security Stockholders'
Meeting.
"Election Form" has the meaning assigned to such term in Section
1.03(a).
"Environmental Laws" means all laws (civil or common), ordinances,
rules, regulations, guidelines, and orders that: (a) regulate air, water, soil,
and solid waste management, including the generation, release, containment,
storage, handling, transportation, disposition, or management of any Hazardous
Substance; (b) regulate or prescribe requirements for air, water, or soil
quality; (c) are intended to protect public health or the environment; or (d)
establish liability for the investigation, removal, or cleanup of, or damage
caused by, any Hazardous Substance.
"ERISA" means the Employee Retirement Income Security Acts of 1974, as
amended.
"Exchange Agent" means a bank or trust company or affiliate thereof
selected by WesterFed and reasonably acceptable to Security to effect the
exchange of the Certificates for the Merger Consideration.
"Exchange Ratio" means $30.00 divided by the Average WesterFed Stock
Price, except that (a) if the Average WesterFed Stock Price is equal to or less
than $13.05, then the Exchange Ratio shall be 2.2989, (b) if the Average
WesterFed Stock Price is equal to or more than $15.95 but not greater than
$17.50, then the Exchange Ratio shall be 1.8809, (c) if the Average WesterFed
Stock Price exceeds $17.50 and no Triggering Event has occured, then the
Exchange Ratio shall be determined by dividing $32.91 by the Average WesterFed
Stock Price, and (d) if the Average WesterFed Stock Price exceeds $17.50 and a
Triggering Event has occured, then the Exchange Ratio shall be 1.88. The
calculation of the Exchange Ratio shall be rounded to two decimal places.
"Excluded Shares" has the meaning assigned to such term in Section
1.02(b).
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLB" has the meaning assigned to such term in Section 4.01(b)(vi).
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"GAAP" means generally accepted accounting principles.
"Hazardous Substance" has the meaning set forth in Section 9601 of the
Comprehensive Environmental Response Compensation and Liability Act of 1980, 42
U.S.C.A., Section 9601 et seq., and also includes any substance now or hereafter
regulated by or subject to any Environmental Laws and any other pollutant,
contaminant, or waste, including petroleum, asbestos, fiberglass, radon, and
polychlorinated biphenyls.
"HOLA" means the Home Owner's Loan Act, as amended.
"Liabilities" has the meaning assigned to such term in Section 2.24.
"Material Adverse Effect" with respect to an entity means any
condition, event, change or occurrence that has or may reasonably be expected to
have a material adverse effect on the condition (financial or otherwise),
properties, assets, business, deposit liabilities, operations or results of
operations, of such entity on a consolidated basis, it being understood that a
Material Adverse Effect shall not include: (i) a change with respect to, or
effect on, such entity and its Subsidiaries resulting from a change in law,
rule, regulation, GAAP or regulatory accounting principles, as such would apply
to the financial statements of such entity on a consolidated basis (ii) a change
with respect to, or effect on, such entity and its Subsidiaries resulting from
expenses (such as legal, accounting and investment bankers' fees) incurred in
connection with this Agreement; (iii) a change with respect to, or effect on,
such entity and its Subsidiaries resulting from any other matter affecting
depository institutions generally including changes in general economic
conditions and changes in prevailing interest and deposit rates; (iv) any
one-time special insurance premium assessed by the FDIC on deposits insured by
the SAIF; or (v) in the case of Security, any financial change resulting from
adjustments taken pursuant to Section 4.02 hereof.
"Maximum Stock Consideration Shares" means the number of shares of
WesterFed Common Stock with a market value (calculated at the Average WesterFed
Stock Price) equal to 45% of the aggregate Merger Consideration.
"Merger" has the meaning assigned to such term in the recitals to this
Agreement.
"Merger Consideration" has the meaning assigned to such term in Section
1.02(b).
"Minimum Stock Consideration Shares" means the number of shares of
WesterFed Common Stock with a market value (calculated at the Average WesterFed
Stock Price) equal to 40% of the aggregate Merger Consideration.
"Mortgaged Premises" has the meanings assigned to such term in Section
2.19(c) and Section 3.19(c), as applicable.
"NASD" means the National Association of Securities Dealers.
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"No Election Shares" has the meaning assigned to such term in Section
1.03(c).
"OTS" means the Office of Thrift Supervision.
"Participating Facility" has the meanings assigned to such term in
Section 2.19(c) and Section 3.19(c), as applicable.
"PBGC" has the meaning assigned to such term in Section 2.18(e).
"Proxy Statement" has the meaning assigned to such term in Section
2.03.
"Registration Statement" has the meaning assigned to such term in
Section 2.03.
"REO" has the meaning assigned to such term in Section 2.16(a).
"SAIF" means the FDIC's Savings Association Insurance Fund.
"SEC" means the Securities & Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Security" means Security Bancorp, a Montana corporation.
"Security Bank" has the meaning assigned to such term in Section
3.07(c).
"Security Benefit Plans" has the meaning assigned to such term in
Section 3.18(a).
"Security Common Stock" has the meaning assigned to such term in the
recitals to this Agreement.
"Security Disclosure Schedule" has the meaning assigned to such term in
Section 3.03.
"Security Financial Statements" has the meaning assigned to such term
in Section 3.06.
"Security Permitted Lien" has the meaning assigned to such term in
Section 3.22(c).
"Security Premises" has the meaning assigned to such term in Section
3.19(b).
"Security Qualified Plans" has the meaning assigned to such term in
Section 3.18(b).
"Security Stock Options" has the meaning assigned to such term in
Section 3.05(b).
"Security Stock Option Plan" has the meaning assigned to such term in
Section 3.05(b).
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"Security Stockholders' Meeting" has the meaning assigned to such term
in Section 2.03.
"Security Subsidiary" means each corporation, savings bank,
association, and other entity in which Security owns or controls directly or
indirectly 10% or more of the outstanding equity securities; provided, however,
there shall not be included any such entity acquired in good faith through
foreclosure, or any such entity to the extent that the equity securities of such
entity are owned or controlled in a bona fide fiduciary capacity.
"Stock Distribution" has the meaning assigned to such term in Section
1.02(b)(ii).
"Stock Election Shares" has the meaning assigned to such term in
Section 1.03(b).
"Stockholders' Meetings" means the WesterFed Stockholders' Meeting and
the Security Stockholders' Meeting.
"Subsidiaries" has the meaning assigned to such term in Section 1.02.
"Surviving Corporation" has the meaning assigned to such term in
Section 1.01(a).
"Tax" and "Taxes" include any federal, state, local or foreign income,
leasing, franchise, excise, gross receipts, sales, use, occupational,
employment, real property, ad valorem, tangible and intangible personal property
and state taxes, payments in lieu of taxes, levies, duties, imposts, business,
operations or financial condition assessments, fees, charges and withholdings of
any nature whatsoever, together with any related penalties, fines, additions to
tax and interest thereon.
"Triggering Event" means any of the following: (i) a merger or
consolidation, or any similar transaction (other than the Merger) of any company
with either WesterFed or Western; (ii) a purchase, lease or other acquisition of
all or substantially all the assets of either WesterFed or Western; (iii) a
purchase or other acquisition of "beneficial ownership" by any "person" or
"group" (as such terms are defined in Section 13(d)(3) of the Securities
Exchange Act) (including by way of merger, consolidation, share exchange, or
otherwise) which would cause such person or group to become the beneficial owner
of securities representing more than 24.9% of the voting power of either
WesterFed or Western, but excluding the acquisition of beneficial ownership by
any employee benefit plan maintained or sponsored by WesterFed; (iv) a tender or
exchange offer to acquire securities representing 19.9% or more of the voting
power of WesterFed; (v) the filing of an application or notice with the Federal
Reserve Board, the OCC, the OTS, or any other federal or state regulatory
authority (which application has been accepted for processing) seeking approval
to engage in one or more of the transactions referenced in clauses (i) through
(iv) above; or (vi) the making of a bona fide offer to the Board of Directors of
WesterFed by written communication, that is or becomes the subject of public
disclosure, to engage in one or more of the transactions referenced in clauses
(i) through (v) above.
"WesterFed" means WesterFed Financial Corporation, a Delaware
corporation.
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"WesterFed Benefit Plans" means all compensation, consulting,
employment, termination or collective bargaining, stock option, stock purchase,
stock appreciation right, management recognition plan, life, health, accident or
other insurance, bonus, deferred or incentive compensation, severance or
separation agreements or any other agreements providing any payment or benefit
resulting from a change in control, profit-sharing, retirement, or other
employee benefit plan, practice, policy or arrangement of any kind, oral or
written, covering employees, former employees, directors or former directors of
WesterFed or any WesterFed Subsidiary or their respective beneficiaries,
including any employee benefit plans within the meaning of Section 3(3) of ERISA
which WesterFed or any WesterFed Subsidiary maintains, to which WesterFed or any
WesterFed Subsidiary contributes, or under which any employee, former employee,
director or former director of WesterFed or any WesterFed Subsidiary is covered
or has benefit rights and pursuant to which any liability of WesterFed or any
WesterFed Subsidiary exists or is reasonably likely to occur, provided that the
term "Plan or "Plans" is used in this Agreement for convenience only and does
not constitute an acknowledgment that a particular arrangement is an employee
benefit plan within the meaning of Section 3(3) of ERISA.
"WesterFed Common Stock" has the meaning assigned to such in the
recitals to this Agreement.
"WesterFed Disclosure Schedule" has the meaning assigned to such term
in Section 2.03.
"WesterFed Financial Statements" has the meaning assigned to such term
in Section 2.06.
"WesterFed Option Plans" means the employee and director stock option
plans described in Section 2.18 of the WesterFed Disclosure Schedule.
"WesterFed Premises" has the meaning assigned to such term in Section
2.19(b).
"WesterFed Qualified Plans" has the meaning assigned to such term in
Section 2.18(b).
"WesterFed Stockholders' Meeting" has the meaning assigned to such term
in Section 2.03.
"WesterFed Subsidiary" means each corporation, financial institution
and other entity in which WesterFed own or controls directly or indirectly 10%
or more of the outstanding equity securities, excluding (i) any such entity
acquired in good faith through foreclosure, and (ii) any such entity to the
extent that the equity securities of such entity are owned or controlled in a
bona fide fiduciary capacity.
"Western" means Western Federal Savings Bank of Montana.
(B) GENERAL INTERPRETATION. Except as otherwise expressly provided in
this Agreement or unless the context clearly requires otherwise, the terms
defined in this Agreement include the plural as well as the singular; the words
"hereof," "herein", "hereunder", "in this Agreement" and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section or other subdivision; references in this Agreement to Articles,
Sections , Schedules, and Exhibits refer to Articles and Sections of and
Schedules and Exhibits to this Agreement; and
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pronouns used in this Agreement include the masculine, feminine and neuter
gender. Unless the context clearly requires otherwise, whenever the words
"include", "includes", or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation". All accounting terms
used in this Agreement that are not expressly defined in this Agreement have the
respective meanings given to them in accordance with GAAP.
ARTICLE I.
THE MERGER
SECTION 1.01 EFFECTS OF THE MERGER.
(a) SURVIVING CORPORATION. Subject to the terms and conditions
of this Agreement, Security shall be merged with and into, and under the charter
of, WesterFed at the Effective Time in accordance with the Corporate Law with
WesterFed being the continuing and surviving corporation (sometimes referred to
hereinafter as the "Surviving Corporation"), and the separate existence of
Security shall cease.
(b) ADDITIONAL ACTIONS. If, at any time after the Effective
Time, WesterFed shall consider or be advised that any further deeds, assignments
or assurances or any other acts are necessary or desirable to (a) 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
Security or (b) otherwise carry out the purposes of this Agreement, Security and
each of its officers and directors, shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such deeds, assignments or assurances and to do all acts necessary or
desirable to vest, perfect or confirm title and possession to such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
purposes of this Agreement, and the officers and directors of the Surviving
Corporation are authorized in the name of Security or otherwise to take any and
all such action.
(c) EFFECTIVE TIME. The Merger shall become effective when the
Certificate [Articles] of Merger shall be accepted for filing by the Secretaries
of State of the States of Delaware and Montana (the "Effective Time"). On the
Closing Date, the parties shall execute, acknowledge and file, in accordance
with the Corporate Law, the Certificate [Articles] of Merger.
(d) RIGHTS AND LIABILITIES. The Surviving Corporation shall be
called "WesterFed Financial Corporation", and shall possess all of the
properties, privileges, immunities, powers, franchises and rights of a public as
well as a private nature and be subject to all of the liabilities, restrictions
and duties of WesterFed and Security and be governed by the laws of the State of
Delaware.
(e) CERTIFICATE OF INCORPORATION. The Certificate of
Incorporation of WesterFed shall be the Certificate of Incorporation of the
Surviving Corporation until amended in accordance with the provisions thereof
and the applicable Corporate Law.
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(f) BYLAWS. The Bylaws of WesterFed in effect immediately
prior to the Effective Time shall be the Bylaws of the Surviving Corporation
until altered, amended or repealed as provided therein, or in the Certificate of
Incorporation of the Surviving Corporation or the applicable Corporate Law.
(g) DIRECTORS AND OFFICERS. The directors of the Surviving
Corporation shall be the persons who were directors immediately prior to the
Effective Time as well as two current directors of Security selected by
WesterFed after consulting with the Board of Directors of Security. The officers
of the Surviving Corporation shall be the persons who were officers of WesterFed
immediately prior to the Effective Time as well as one current officer of
Security selected by WesterFed after consulting with the Board of Directors of
Security.
SECTION 1.02 CONVERSION OF STOCK. At the Effective Time, by virtue of
the Merger and without any action on the part of WesterFed or Security:
(a) Each share of WesterFed Common Stock that is issued and
outstanding immediately prior to the Effective Time shall remain outstanding.
(b) Subject to Section 1.03 hereof, the shares of Security
Common Stock issued and outstanding immediately prior to the Effective Time
shall cease to be outstanding and shall be converted into either
(i) the right to receive an amount in cash equal to
$30.00 per share (the "Cash Distribution"), or
(ii) the right to receive a number of shares of
WesterFed Common Stock equal to the product of the Exchange
Ratio multiplied by the number of shares of Security Common
Stock to be converted ("Stock Distribution"),
in such proportions as the holder thereof shall elect or be deemed to have
elected as provided in Section 1.03 of this Agreement (the aggregate of the Cash
Distributions and the Stock Distributions payable or issuable pursuant to the
Merger is sometimes hereinafter referred to as the "Merger Consideration");
provided, however, that any shares of Security Common Stock held by Security or
any of its "Subsidiaries" (as defined in Rule 1.02 of Regulation S-X promulgated
by the SEC), or by WesterFed or any of its Subsidiaries, in each case other than
in a fiduciary capacity or as a result of debts previously contracted, shall be
cancelled and shall not be exchanged for the Merger Consideration ("Excluded
Shares").
SECTION 1.03 CONVERSION ELECTION PROCEDURES.
(a) Concurrently with the mailing of the Proxy Statement to
the stockholders of Security, WesterFed shall cause the Exchange Agent to mail
to each holder of record of Security Common Stock a form of election (an
"Election Form") on which such holder shall make the election as provided for in
Section 1.03(b) of this Agreement. Each Election Form provided to a holder of
Security Common Stock shall incorporate a certificate substantially in the form
of Exhibit A hereto (the "Certification"). WesterFed shall cause an Election
Form and other appropriate materials for purposes of making the election
provided for in Section 1.03(b) of
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this Agreement to be sent to each holder of Security Common Stock who Security
advised WesterFed has become a holder after the record date of the Security
Stockholders' Meeting.
(b) Each Election Form shall specify the type and amount of
Merger Consideration receivable for each share of Security Common Stock and
shall permit a holder to elect to receive, as provided in Section 1.02 of this
Agreement, (i) the Cash Distribution for all of his shares (in which case, such
holder's shares shall be deemed to be and shall be referred to herein as "Cash
Election Shares"), (ii) the Stock Distribution for all of his shares (in which
case, such holder's shares shall be deemed to be and shall be referred to herein
as "Stock Election Shares"), or (iii) the Cash Distribution for those shares
designated by the holder as Cash Election Shares and the Stock Distribution for
the holder's remaining shares.
(c) Any shares of Security Common Stock with respect to which
the holder thereof shall not, as of the Election Deadline, have made an election
to receive either the Cash Distribution or the Stock Distribution (such holder's
shares being deemed to be and shall be referred to herein as "No Election
Shares") by submission to the Exchange Agent of an effective, properly completed
Election Form shall be deemed to be Cash Election Shares, except as otherwise
set forth in Section 1.03(e). Any holder of 1% or more of the Security Common
Stock (determined as of the Closing Date) that shall not, on or before the
Election Deadline, have delivered to the Exchange Agent a properly executed
Certification (or such other representations as Silver, Friedman & Taff, L.L.P.,
in its sole discretion, shall deem acceptable) shall be deemed to have made a
timely election to receive the Cash Distribution, and all shares of Security
Common Stock held by such holder shall be deemed to be Cash Election Shares for
all purposes of this Agreement, including this Section 1.03. (The parties
acknowledge that the foregoing sentence will preclude a holder that acquires
additional shares of Security Common Stock and becomes a holder of 1% or more of
such shares after the Election Deadline from receiving the Stock Distribution.)
(d) Any election for purposes of Section 1.03(b) of this
Agreement shall be effective only if the Exchange Agent shall have received a
properly completed Election Form by the Election Deadline. Any Election Form may
be revoked or changed by the person submitting such Election Form or any other
person to whom the subject shares are subsequently transferred by written notice
by such person to the Exchange Agent at or prior to the Election Deadline. All
Election Forms shall be deemed to be revoked if the Exchange Agent is notified
in writing by either WesterFed or Security that this Agreement has been
terminated in accordance with its terms. The Exchange Agent shall have
reasonable discretion to determine when any election, modification or revocation
is received and whether any such election, modification or revocation is
effective, consistent with the duty of the Exchange Agent to give effect to such
elections, modifications or revocations to the maximum extent possible.
(e) As soon as practicable after the Effective Time, WesterFed
shall cause the Exchange Agent to allocate among the holders of Security Common
Stock the rights to receive the Cash Distribution or the Stock Distribution
pursuant to the Merger as follows:
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(i) if the number of shares of WesterFed Common Stock
distributable in respect of the Stock Election Shares is less than the number of
the Minimum Stock Consideration Shares, then
(A) First, all Stock Election Shares will be
converted into the right to receive the Stock Distribution;
(B) Second, the Exchange Agent shall convert all No
Election Shares to Stock Election Shares ("Additional Stock
Election Shares") and exchange the same for the Stock
Distribution, provided that the aggregate number of Stock
Election Shares (including Additional Stock Election Shares)
is equal or approximately equal to the number of Maximum Stock
Consideration Shares; in the event that conversion of all No
Election Shares to Additional Stock Election Shares would
cause the aggregate number of Stock Election Shares (including
Additional Stock Election Shares) to exceed the number of
Maximum Stock Consideration Shares, the number of No Election
Shares converted to Additional Stock Election Shares and
exchanged for the Stock Distribution shall be reduced so that
the aggregate number of Stock Election Shares (including
Additional Stock Election Shares) equals or approximately
equals the number of Maximum Stock Consideration Shares, with
the aggregate Additional Stock Election Shares created upon
the conversion of No Election Shares being allocated pro rata
to each holder of No Election Shares in the proportion that
the total No Election Shares of such holder bear to the total
number of No Election Shares of all holders;
(C) Third, in the event that conversion of all No
Election Shares to Additional Stock Election Shares pursuant
to clause (B) of this Section 1.03(e)(i) would cause the
aggregate number of Stock Election Shares (including
Additional Stock Election Shares) to be less than the number
of Minimum Stock Consideration Shares, the Exchange Agent (in
addition to converting all No Election Shares) shall convert a
number of Cash Election Shares (excluding shares tendered by
holders of less than 100 shares) to Stock Election Shares and
exchange the same for the Stock Distribution such that the
aggregate number of Stock Election Shares (including
Additional Stock Election Shares) shall equal or be
approximately equal to the number of Minimum Stock
Consideration Shares, with the aggregate Stock Election Shares
that are to be created upon the conversion of Cash Election
Shares being allocated pro rata to each holder of Cash
Election Shares in the proportion that the total Cash Election
Shares of such holder bear to the total number of Cash
Election Shares of all holders (excluding each holder of less
than 100 shares); and
(D) Fourth, after the allocations set forth in
clauses (A) through (C) of this Section 1.03(e)(i) have been
made, all remaining shares of Security Common Stock (other
than Dissenting Shares) shall be converted into the Cash
Distribution.
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(ii) if the number of shares of WesterFed Common Stock
distributable in respect of the Stock Election Shares is greater than
the number of Maximum Stock Consideration Shares, then:
(A) all Cash Election Shares (including No Election
Shares) will be converted into the right to receive the Cash
Distribution;
(B) the Exchange Agent will reallocate the Merger
Consideration payable to each holder of Stock Election Shares
pro rata (based upon the number of Stock Election Shares owned
by such holder, as compared with the total number of Stock
Election Shares owned by all holders) such that the holders of
the Stock Election Shares will receive, as Stock
Distributions, the number of shares of WesterFed Common Stock
which in the aggregate will be equal or approximately equal to
the Maximum Stock Consideration Shares and will receive the
balance of the Merger Consideration due to them in cash as
Cash Distributions.
(f) The pro rata computations to be used by the Exchange Agent
pursuant to this Section 1.03(e) shall be made by the Exchange Agent, in the
reasonable exercise of its discretion.
(g) For purposes of this Section , Dissenting Shares shall be
deemed to be Cash Election Shares.
(h) ACTIONS AFFECTING WESTERFED COMMON STOCK. If, prior to the
Effective Time, shares of WesterFed Common Stock shall be changed into a
different number of shares or a different class of shares by reason of any
reclassification, recapitalization, split-up, combination, exchange of shares or
readjustment, or there occurs a distribution of warrants or rights with respect
to WesterFed Common Stock, or a stock dividend, stock split or other general
distribution of WesterFed Common Stock is declared with a record date prior to
the Effective Time, then in any such event the Exchange Ratio shall be
appropriately adjusted.
(i) DISSENTING SHARES. Any shares of Security Common Stock
held by a holder who dissents from the Merger in accordance with the Corporate
Law and becomes entitled to obtain payment for the fair value of such shares of
Security Common Stock pursuant to the applicable provisions of the Corporate Law
shall be herein called "Dissenting Shares." Notwithstanding any other provision
of this Agreement, any Dissenting Shares shall not, after the Effective Time, be
entitled to vote for any purpose or receive any dividends or other distributions
and shall be entitled only to such rights as are afforded in respect of
Dissenting Shares pursuant to the Corporate Law. All payments in respect of
Dissenting Shares shall be from funds of WesterFed and not from the acquired
assets of Security.
SECTION 1.04 TIME AND PLACE OF CLOSING.
(a) CLOSING; CLOSING DATE. The closing of the transactions
contemplated by this Agreement (the "Closing") will be held on a date mutually
agreed upon by WesterFed and Security (the "Closing Date"). In the absence of
such agreement, the Closing shall be held on the
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tenth business day after the last to occur of: (i) the receipt of all consents
and approvals of government regulatory authorities as legally required to
consummate the Merger and the Bank Merger and the expiration of all applicable
statutory waiting periods; and (ii) the requisite approval of the Merger by the
stockholders of Security and WesterFed.
(b) CLOSING LOCATION.The closing shall take place at the
offices of WesterFed or such other place as WesterFed and Security may mutually
agree prior to the Closing Date.
SECTION 1.05 EXCHANGE OF SECURITY COMMON STOCK.
(a) EXCHANGE PROCEDURES. As soon as practicable after the
Effective Time, the Exchange Agent, who shall be appointed by WesterFed, shall
mail to each holder of record of a certificate or certificates (other than
certificates representing Dissenting Shares and Excluded Shares) which as of the
Effective Time represented outstanding shares of Security Common Stock (the
"Certificates"): (i) a form letter of transmittal which shall specify that
delivery shall be effected, and risk of loss and title to the Certificates shall
pass, only upon delivery of the Certificates (or a lost certificate affidavit
and bond in a form reasonably acceptable to the Exchange Agent); and (ii)
instructions for use in effecting the surrender of the Certificates in exchange
for the Merger Consideration. Upon surrender of a Certificate for cancellation
to the Exchange Agent (or a lost certificate affidavit and bond in a form
reasonably acceptable to the Exchange Agent), together with such letter of
transmittal, duly executed, the holder of such Certificate shall be entitled to
receive within ten business days or as soon thereafter as is practicable, the
Merger Consideration, without any interest thereon and subject to any required
withholding of Taxes, into which the shares of Security Common Stock represented
by the Certificate so surrendered shall have been converted pursuant to the
provisions of this Agreement, and the Certificate so surrendered shall forthwith
be delivered to the Surviving Corporation for cancellation. If the Merger
Consideration is to be paid to a person or entity other than the holder in whose
name the Certificate is registered as of the Election Deadline, it shall be a
condition of such payment that the Certificate so surrendered shall be properly
endorsed (or accompanied by an appropriate instrument of transfer) and otherwise
in proper form for transfer, and that the person or entity requesting such
exchange shall pay to the Exchange Agent, in advance, any applicable transfer or
other Taxes.
(b) DELIVERY OF MERGER CONSIDERATION TO EXCHANGE AGENT. At the
Effective Time, WesterFed shall deliver to the Exchange Agent the aggregate
Merger Consideration to be paid for all of the issued and outstanding shares of
Security Common Stock other than Dissenting Shares and Excluded Shares. On an
as-required basis, WesterFed shall promptly and timely tender to the Exchange
Agent additional cash funds required for the payment of cash in lieu of
fractional shares. The Merger Consideration remaining in the hands of the Escrow
Agent for non-surrendered Certificates shall be returned to WesterFed at the
expiration of six months from the Effective Time.
(c) DIVIDENDS AND DISTRIBUTIONS. In the case of the Security
Common Stock to be exchanged for the Stock Distribution, until the applicable
holder surrenders for exchange his/her Certificates, no dividends or other
distributions payable to holders of record of WesterFed
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Common Stock shall be paid thereon; however, upon the surrender of any such
Certificate there shall be paid to the holder, without interest, the full amount
of such dividends or distributions.
(d) FULL PAYMENT. All shares of WesterFed Common Stock issued
to satisfy Stock Distributions in exchange for Security Common Stock shall be
validly issued, fully paid and non-assessable, and shall not be liable to any
further call, nor shall the holder thereof be liable for any further payments
with respect thereto.
(e) FRACTIONAL SHARES. No certificates or scrip representing
fractional shares of WesterFed Common Stock shall be issued upon the surrender
for exchange of Certificates, no dividend or distribution of the Surviving
Corporation shall relate to any fractional share, and such fractional share
interests will not entitle the owner thereof to vote or to any other rights of a
stockholder of the Surviving Corporation. In lieu of any fractional share, the
Exchange Agent or the Surviving Corporation, as the case may be, shall pay to
each holder of shares of Security Common Stock who otherwise would be entitled
to receive a fractional share of WesterFed Common Stock an amount of cash
(without interest) equal to the product achieved when such fraction is
multiplied by $30.00 rounded to the nearest cent.
(f) CLOSING OF TRANSFER BOOKS. At the close of business on the
Election Deadline, the transfer books for Security Common Stock shall be closed,
and no transfer of shares shall thereafter be made on such books. If, after the
Election Deadline, Certificates are presented for transfer to the Exchange
Agent, they shall be held until the Effective Time and cancelled and exchanged
for the Merger Consideration as provided in Section 1.03 subject to the
procedures set forth in Section 1.05(a); provided however, such Certificates
shall be promptly returned if the Closing shall not occur for any reason.
(g) LIST OF SECURITY STOCKHOLDERS. At the Effective Time,
Security shall deliver a certified copy of a list of its stockholders to the
Exchange Agent. If, after the Effective Time, Certificates representing shares
of Security Common Stock are presented to Security or WesterFed, they shall be
canceled and exchanged as provided in this Article I.
SECTION 1.06 MERGER OF SECURITY BANK, FSB. WesterFed and Security
understand that it is the intention of WesterFed to have Security Bank merge
with and into Western (the "Bank Merger") at the Effective Time pursuant to a
plan of merger (the "Bank Plan of Merger") in substantially the form attached
hereto as Exhibit B. Security shall, and it shall cause Security Bank to, take
all such actions as are reasonably requested by WesterFed so that the Bank
Merger shall, at WesterFed's election, become effective at the Effective Time.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF WESTERFED
WesterFed represents and warrants to Security that:
SECTION 2.01 ORGANIZATION.
(a) WesterFed is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite power and authority, corporate and otherwise, to own, operate and
lease its assets, properties and business and to carry on its business
substantially as it has been and is now being conducted. WesterFed is duly
qualified to do business and is in good standing in each jurisdiction where the
character of the assets or properties owned or leased by it or the nature of the
business transacted by it requires that it be so qualified, except where the
failure to so qualify would not have a Material Adverse Effect on WesterFed or
its ability to consummate the transactions contemplated herein. WesterFed has
all requisite corporate power and authority to enter into this Agreement and,
subject to the receipt of all requisite regulatory approvals and the expiration
of applicable waiting periods, and to consummate the transactions contemplated
hereby. WesterFed is duly registered as a savings and loan holding company under
the HOLA.
SECTION 2.02 AUTHORIZATION. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly approved and authorized by WesterFed's Board of Directors, and no
other corporate action on the part of WesterFed is required to be taken, except
the approval of this Agreement and the Merger by its stockholders by the
requisite vote required by its Certificate of Incorporation and the Corporate
Law. This Agreement has been duly executed and delivered by WesterFed and
constitutes the valid and binding obligation of WesterFed and is enforceable
against WesterFed in accordance with its terms (except to the extent that
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles and
doctrines).
SECTION 2.03 CONFLICTS. Subject to the second sentence of this Section
2.03, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with or
result in any violation, breach or termination of, or default or loss of a
material benefit under, or permit the acceleration of any obligation under, or
result in the creation of any material lien, charge or encumbrance on any of the
property or assets under, any provision of the Certificate of Incorporation or
Bylaws of WesterFed or similar documents of any WesterFed Subsidiary or any
mortgage, indenture, lease, agreement or other instrument, permit, concession,
grant, franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to WesterFed or any WesterFed Subsidiary or their
respective properties, other than any such conflicts, violations or defaults
which (i) will be cured or waived prior to the Effective Time, (ii) are not
material to the conduct of business or operations of WesterFed or any WesterFed
Subsidiary, or (iii) are disclosed in Section 2.03 of that certain confidential
writing delivered by WesterFed to Security within two business days prior to the
date hereof (the "WesterFed Disclosure Schedule"). No consent, approval, order
or
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authorization of, or registration, declaration or filing with, any federal or
state governmental authority is required by or with respect to WesterFed in
connection with the execution and delivery of this Agreement or the consummation
by WesterFed of the transactions contemplated hereby except for: (a) the filing
of all applicable regulatory applications by WesterFed, Security and/or their
respective Subsidiaries for approval of the transactions contemplated by this
Agreement; (b) the filing by WesterFed of the registration statement relating to
the WesterFed Common Stock to be issued pursuant to this Agreement (the
"Registration Statement") with the SEC and various blue sky authorities, which
Registration Statement shall include the prospectus/proxy statement (the "Proxy
Statement") for use in connection with the meetings of stockholders to be held
by WesterFed (the "WesterFed Stockholders' Meeting") and Security (the "Security
Stockholders' Meeting") to vote on this Agreement and the Merger; (c) the filing
of the Certificate [Articles] of Merger with respect to the Merger with the
Secretaries of State of the States of Delaware and Montana; (d) the filing of
Articles of Combination with the OTS with respect to the Bank Merger; (e) any
filings, approvals or no-action letters with or from state securities
authorities; and (f) any anti-trust filings, consents, waivers or approvals.
SECTION 2.04 ANTI-TAKEOVER PROVISIONS INAPPLICABLE. No "business
combination," "moratorium," "control share" or other state anti-takeover statute
or regulation (i) prohibits or restricts WesterFed's ability to perform its
obligations under this Agreement or its ability to consummate the transactions
contemplated hereby, (ii) would have the effect of invalidating or voiding this
Agreement or any provision hereof, or (iii) would subject Security to any
material impediment or condition in connection with the exercise of any of its
rights under this Agreement.
SECTION 2.05 CAPITALIZATION.
(a) The authorized capital stock of WesterFed consists of (i)
10,000,000 shares of WesterFed Common Stock of which, as of the date hereof,
4,395,108 shares were issued and outstanding, and (ii) 5,000,000 shares of
preferred stock, $.01 par value per share, of which none are issued and
outstanding. All of the issued and outstanding shares of WesterFed Common Stock
have been, and all of the shares of WesterFed Common Stock to be issued in the
Merger will be, at the Effective Time, duly and validly authorized and issued,
and are or will be as of the Effective Time, as the case may be, fully paid and
non-assessable. None of the outstanding shares of WesterFed Common Stock has
been issued in violation of any preemptive rights of the current or past
stockholders of WesterFed or are subject to any preemptive rights of the current
or past stockholders of Security, and none of the outstanding shares of
WesterFed Common Stock is or will be entitled to any preemptive rights in
respect of the Merger or any of the other transactions contemplated by this
Agreement.
(b) As of the date hereof, WesterFed does not have outstanding
any securities or rights convertible into or exchangeable for WesterFed Common
Stock or any commitments, contracts, understandings or arrangements by which
WesterFed is or may be bound to issue additional shares of WesterFed Common
Stock, except pursuant to WesterFed Option Plans.
SECTION 2.06 WESTERFED FINANCIAL STATEMENTS; MATERIAL CHANGES.
WesterFed has heretofore delivered to Security its audited consolidated
financial statements for the fiscal years
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ended June 30, 1994, 1995, and 1996 (together, the "WesterFed Financial
Statements"). The WesterFed Financial Statements (a) are true and correct in all
material respects, (b) have been prepared in accordance with GAAP applied on a
consistent basis during the periods involved (except as may be indicated in the
notes thereto), and (c) fairly present the consolidated financial position of
WesterFed as of the dates thereof and the consolidated results of its
operations, stockholders' equity, cash flows and changes in financial position
for the periods then ended. Since June 30, 1996, WesterFed and the WesterFed
Subsidiaries have not undergone or suffered any changes in their respective
condition (financial or otherwise), properties, business or operations which
have been, in any case or in the aggregate, materially adverse to WesterFed on a
consolidated basis except as disclosed in Section 2.06 of the WesterFed
Disclosure Schedule. No facts or circumstances have been discovered from which
it reasonably appears that there is a significant risk and reasonable
probability that WesterFed will suffer or experience a Material Adverse Effect.
SECTION 2.07 WESTERFED SUBSIDIARIES.
(a) All of the WesterFed Subsidiaries as of the date of this
Agreement are listed in Section 2.07 of the WesterFed Disclosure Schedule.
WesterFed owns directly or indirectly all of the issued and outstanding shares
of capital stock of the WesterFed Subsidiaries. Section 2.07 of the WesterFed
Disclosure Schedule sets forth the number of shares of authorized and
outstanding capital stock of the WesterFed Subsidiaries. Except as set forth in
Section 2.07 of the WesterFed Disclosure Schedule, neither WesterFed nor the
WesterFed Subsidiaries owns directly or indirectly any debt or equity securities
or other proprietary interest in any other corporation, joint venture,
partnership, entity, association or other business. No capital stock of any of
the WesterFed Subsidiaries is, or may become required to be, issued (other than
to WesterFed) by reason of any options, warrants, scrip, right to subscribe to,
calls, or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of any
WesterFed Subsidiary. All of the shares of capital stock of each WesterFed
Subsidiary held by WesterFed or a WesterFed Subsidiary are fully paid and
non-assessable and are owned free and clear of any claim, lien or encumbrance,
except as disclosed in Section 2.07 of the WesterFed Disclosure Schedule.
(b) Each WesterFed Subsidiary is either a federally-chartered
stock savings bank or a corporation and is duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is incorporated
or organized, and is duly qualified to do business and in good standing in each
jurisdiction where the character of the assets or properties owned or leased by
it or the nature of the business transacted by it requires it to be so
qualified, except where the failure to so qualify, either individually or in the
aggregate, would not have a Material Adverse Effect on WesterFed or the ability
of WesterFed to consummate the transactions contemplated herein. Each WesterFed
Subsidiary has the corporate power and authority necessary for it to own,
operate or lease its assets, properties and business and to carry on its
business as it has been and is now being conducted.
(c) Western is a member in good standing of the Federal Home
Loan Bank System. All eligible deposit accounts issued by Western are insured by
the FDIC through the SAIF to the full extent permitted under applicable law.
Western is, and at all times since June 1,
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1990 has been, a "domestic building and loan association" as defined in Section
7701(a)(19) of the Code and a "qualified thrift lender" as defined in Section
10(m) of HOLA. The liquidation account established by Western in connection with
its conversion from mutual to stock form has been maintained since its
establishment in accordance with applicable laws and the records with respect to
said account are complete and accurate in all material respects.
SECTION 2.08 WESTERFED FILINGS. WesterFed has previously made
available, or will make available prior to the Effective Time, to Security true,
correct and complete copies of its (i) proxy statements relating to all meetings
of its stockholders (whether special or annual) during calendar years 1994, 1995
and 1996, and (ii) all other reports, as amended, or filings, as amended,
required to be filed under the Securities Exchange Act by WesterFed with the SEC
since January 1, 1994, including reports on Forms 10-K, 10-Q and 8-K.
SECTION 2.09 WESTERFED REPORTS. Since January 1, 1994, each of
WesterFed and the WesterFed Subsidiaries has filed, and will continue to file,
all reports and statements, together with any amendment required to be made with
respect thereto, that it was, or will be required to file with the SEC, the OTS,
the FDIC, the NASD and other applicable banking, securities and other regulatory
authorities (except filings which are not material). As of their respective
dates (and without giving effect to any amendments or modifications filed after
the date of this Agreement with respect to reports and documents filed before
the date of this Agreement), each of such reports and documents, including the
financial statements, exhibits, and schedules thereto, complied in all material
respects with all of the statutes, rules and regulations enforced or promulgated
by the authority with which they were filed and did not contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein, in light of the circumstances under
which they were made, not misleading. Except for normal examinations conducted
by the Internal Revenue Service, state and local taxing authorities, the OTS or
the FDIC in the regular course of the business of WesterFed or the WesterFed
Subsidiaries, no federal, state or local governmental agency, commission or
other entity has initiated any proceeding or, to the best knowledge of
WesterFed, investigation into the business or operations of WesterFed or the
WesterFed Subsidiaries within the past three (3) years except as set forth in
Section 2.09 of the WesterFed Disclosure Schedule. There is no unresolved
violation, criticism or exception by the SEC, OTS, FDIC or other agency,
commission or entity with respect to any report or statement referred to herein
that is material to WesterFed on a consolidated basis.
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SECTION 2.10 COMPLIANCE WITH LAWS.
(a) Except as disclosed in Section 2.10 of the WesterFed
Disclosure Schedule, the businesses of WesterFed and the WesterFed Subsidiaries
are not being conducted in violation of any law, ordinance or regulation of any
governmental entity, including any laws affecting financial institutions
(including those pertaining to the Bank Secrecy Act, the investment of funds,
the lending of money, the collection of interest and the extension of credit),
federal and state securities laws, laws and regulations relating to financial
statements and reports, truth-in-lending, truth-in-savings, usury, fair credit
reporting, consumer protection, occupational safety, fair employment practices,
fair labor standards and laws and regulations relating to employee benefits, and
any statutes or ordinances relating to the properties occupied or used by
WesterFed or any WesterFed Subsidiary, except for possible violations which
either singly or in the aggregate do not and, insofar as reasonably can be
foreseen in the future, will not have a Material Adverse Effect on WesterFed.
(b) Except as disclosed in Section 2.10 of the WesterFed
Disclosure Schedule, no investigation or review by any governmental entity with
respect to WesterFed or any WesterFed Subsidiary is pending or, to the best
knowledge of WesterFed, threatened, nor has any governmental entity indicated to
WesterFed an intention to conduct the same, other than normal thrift regulatory
examinations and those the outcome of which will not have a Material Adverse
Effect on WesterFed.
(c) WesterFed and each of the WesterFed Subsidiaries, where
applicable, are in substantial compliance with the applicable provisions of the
Community Reinvestment Act of 1977 and the regulations promulgated thereunder.
As of the date of this Agreement, WesterFed has not been advised of the
existence of any fact or circumstance or set of facts or circumstances which, if
true, would cause WesterFed or any of the WesterFed Subsidiaries to fail to be
in substantial compliance with such provisions. No WesterFed Subsidiary that is
a financial institution has received a rating from an applicable regulatory
authority which is less than "satisfactory."
SECTION 2.11 DISCLOSURE. None of the information supplied by WesterFed
for inclusion in the Proxy Statement or in the Registration Statement, will, in
the case of the Proxy Statement or any amendments thereof or supplements
thereto, at the time of the Stockholders' Meetings or, in the case of the
Registration Statement, at the time it becomes effective and at the Effective
Time, contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Registration
Statement will comply as to form in all material respects with the provisions of
the Securities Act.
SECTION 2.12 LITIGATION. Except as disclosed in Section 2.12 of the
WesterFed Disclosure Schedule, there is no suit, action, investigation or
proceeding, legal, quasi-judicial, administrative or otherwise, pending or, to
the best knowledge of WesterFed, threatened, against or affecting WesterFed or
any WesterFed Subsidiary, or any of their respective officers, directors,
employees or agents, in their capacities as such, which involves a monetary
demand in excess of $25,000 or requests equitable relief in the form of specific
performance or an injunction, or
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which would materially affect the ability of WesterFed to consummate the
transactions contemplated herein or which is seeking to enjoin consummation of
the transactions provided for herein or to obtain other relief in connection
with this Agreement or the transactions contemplated hereby, nor is there any
judgment, decree, injunction, rule or order of any court, governmental
department, commission agency, instrumentality or arbitrator outstanding against
WesterFed or any WesterFed Subsidiary or any of their respective officers,
directors, employees or agents, in their capacities as such, having, or which,
insofar as reasonably can be foreseen in the future, would have any material
effect on WesterFed or any WesterFed Subsidiary.
SECTION 2.13 LICENSES. WesterFed and the WesterFed Subsidiaries hold
all licenses, certificates, permits, franchises and all patents, trademarks,
service marks, trade names, copyrights or rights thereto, and required
authorizations, approvals, consents, licenses, clearances and orders or
registrations with all appropriate federal, state or other authorities, that are
material to the conduct of their respective businesses as now conducted and as
presently proposed to be conducted.
SECTION 2.14 TAXES.
(a) Except as disclosed in Section 2.14 of the WesterFed
Disclosure Schedule, WesterFed and the WesterFed Subsidiaries have each timely
filed all Tax and information returns required to be filed and have paid (or
WesterFed has paid on behalf of its Subsidiaries), or have accrued on their
respective books and set up an adequate reserve for the payment of, all Taxes
reflected on such returns as required to be paid in respect of the periods
covered by such returns and have accrued on their respective books and set up an
adequate reserve for the payment of all income and other Taxes anticipated to be
payable in respect of periods through the end of the calendar month next
preceding the date hereof. Neither WesterFed nor any WesterFed Subsidiary is
delinquent in the payment of any Tax, assessment or governmental charge. No
deficiencies for any Taxes have been proposed, asserted or assessed against
WesterFed or any WesterFed Subsidiary that have not been resolved or settled,
and no requests for waivers of the time to assess any such Tax are pending or
have been agreed to. The income tax returns of WesterFed and the WesterFed
Subsidiaries have not been audited by the Internal Revenue Service since June
1989 and have not been audited by any state, municipal or other taxing authority
since June 1990. Neither WesterFed nor any WesterFed Subsidiary is a party to
any action or proceeding by any governmental authority for the assessment or the
collection of Taxes. Deferred Taxes of WesterFed and the WesterFed Subsidiaries
have been accounted for in accordance with GAAP.
(b) WesterFed has not filed any consolidated federal income
tax return with an "affiliated group" within the meaning of Section 1504 of the
Code, where WesterFed was not the common parent of the group. Neither WesterFed
nor any WesterFed Subsidiary is or has been a party to any Tax allocation
agreement or arrangement pursuant to which it has any contingent or outstanding
liability to anyone other than WesterFed or a WesterFed Subsidiary.
(c) WesterFed and the WesterFed Subsidiaries have each
withheld amounts from its employees, stockholders or holders of public deposit
accounts in compliance with the Tax withholding provisions of applicable
federal, state
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and local laws, have filed all federal, state and local returns and reports for
all periods for which such returns or reports would be due with respect to
income tax withholding, social security, unemployment taxes, income and other
Taxes and all payments or deposits with respect to such Taxes have been timely
made and, except as set forth in Section 2.14 of the WesterFed Disclosure
Schedule, have notified all employees, stockholders, and holders of public
deposit accounts of their obligations to file all forms, statements and reports
with it in accordance with applicable federal, state and local Tax laws and have
taken reasonable steps to insure that such employees, stockholders and holders
of public deposit accounts have filed all such forms, statements and reports
with it.
SECTION 2.15 INSURANCE. WesterFed and the WesterFed Subsidiaries
maintain insurance with insurers which in the best judgment of management of
WesterFed are sound and reputable, on their respective assets, and upon their
respective businesses and operations, against loss or damage, risks, hazards and
liabilities as in their judgment they deem appropriate. WesterFed and the
WesterFed Subsidiaries maintain in effect all insurance required to be carried
by law or by any agreement by which they are bound. All material claims under
all policies of insurance maintained by WesterFed and the WesterFed Subsidiaries
have been filed in due and timely fashion.
SECTION 2.16 LOANS; INVESTMENTS.
(a) Except as otherwise disclosed in Section 2.16 of the WesterFed
Disclosure Schedule, each material loan reflected as an asset on the WesterFed
Financial Statements as of June 30, 1996 is evidenced by appropriate and
sufficient documentation and constitutes, to the best knowledge of WesterFed,
the legal, valid and binding obligation of the obligor named in such
documentation, enforceable in accordance with its terms except to the extent
that the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles or doctrines.
Except as set forth in Section 2.16 of the WesterFed Disclosure Schedule, all
such loans are, and at the Effective Time will be, free and clear of any
security interest, lien, encumbrance or other charge. Except as set forth in
Section 2.16 of the WesterFed Disclosure Schedule, there is no loan or other
asset of WesterFed or any WesterFed Subsidiary in excess of $250,000 that has
been classified by examiners, management, the Board of Directors, or others as
"Other Loans Especially Mentioned," "Substandard," "Doubtful" or "Loss" as of
August 31, 1996. Set forth in Section 2.16 of the WesterFed Disclosure Schedule
is a list of all real estate owned through the exercise of creditors rights or
deed in lieu thereof ("REO") by, and in-substance foreclosures of, WesterFed and
the WesterFed Subsidiaries as of August 31, 1996.
(b) All guarantees of indebtedness owed to WesterFed or any
WesterFed Subsidiary, including those of the Federal Housing Administration, the
Small Business Administration, and other state and federal agencies, are, to the
best knowledge of WesterFed, valid and enforceable, except to the extent
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles or doctrines
and except as would not have a Material Adverse Effect on WesterFed.
(c) Section 2.16 of the WesterFed Disclosure Schedule sets
forth an accurate and complete list of all Derivative Securities to which
WesterFed or any WesterFed Subsidiary is
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a party or by which any of their properties or assets may be bound, or that are
owned by WesterFed or any WesterFed Subsidiary. Neither WesterFed nor any
WesterFed Subsidiary has purchased any Derivative Security for, or invested in
any Derivative Security any assets of, any account or person for which it acts
as a trustee, fiduciary, or investment advisor. All Derivative Securities to
which WesterFed or any WesterFed Subsidiary is a party or by which any of their
properties or assets may be bound were entered into in the ordinary course of
business and, to the best knowledge of WesterFed, in accordance with applicable
rules, regulations and policies of thrift regulatory authorities and with
counterparties believed to be financially responsible at the time, and are
legal, valid and binding obligations and are in full force and effect. WesterFed
and the WesterFed Subsidiaries have duly performed in all material respects all
of their respective obligations thereunder to the extent that such obligations
to perform have accrued, and to the best knowledge of WesterFed, there are no
material breaches, violations or defaults or allegations or assertions of such
by any party thereunder. None of the transactions contemplated by this Agreement
would permit a counterparty under any Derivative Security, or any party to any
mortgage-backed security financing arrangement, to accelerate, discontinue,
terminate, or otherwise modify any such Derivative Security or arrangement or
would require WesterFed or any WesterFed Subsidiary to recognize any gain or
loss with respect to such Derivative Security or arrangement.
(d) Except as set forth in Section 2.16 of the WesterFed
Disclosure Schedule and except for pledges to secure public and trust deposits,
none of the investments reflected in the WesterFed Financial Statements as of
June 30, 1996 under the heading "Investment Securities," and none of the
investments made by WesterFed and the WesterFed Subsidiaries since June 30,
1996, is subject to any restriction, whether contractual or statutory, which
materially impairs the ability of WesterFed or any WesterFed Subsidiary to
freely dispose of such investment at any time. With respect to all material
repurchase agreements to which WesterFed or any WesterFed Subsidiary is a party,
WesterFed or such WesterFed Subsidiary has a valid, perfected first lien, or
security interest in the government securities or other collateral securing each
such repurchase agreement, and the value of the collateral securing each such
repurchase agreement equals or exceeds the amount of the debt secured by such
collateral under such agreement.
(e) All United States Treasury securities, obligations of
other United States Government agencies and corporations, obligations of any
States of the United States and their political subdivisions, and other
investment securities classified as "held to maturity" and "available for sale"
held by WesterFed and the WesterFed Subsidiaries, as reflected in the WesterFed
Financial Statements as of June 30, 1996, were classified and accounted for in
accordance with F.A.S.B. 115 and the intentions of management.
SECTION 2.17 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for
possible loan losses shown on the WesterFed Financial Statements as of June 30,
1996, (and as shown on any financial statements to be delivered by WesterFed to
Security pursuant to Section 5.07 hereof), to the best knowledge of WesterFed,
as of such date was (and will be as of such subsequent financial statement
dates) adequate in all respects to provide for possible or specific losses, net
of recoveries relating to loans previously charged off, on loans outstanding,
and contained (or will contain) an additional amount of unallocated reserves for
unanticipated future losses at a level
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considered adequate under the standards applied by applicable federal regulatory
authorities and based upon GAAP applicable to thrift institutions. To the best
knowledge of WesterFed, the aggregate principal amount of loans contained (or to
be contained) in the loan portfolio of WesterFed and the WesterFed Subsidiaries
as of the date of this Agreement (and as of the dates of any financial
statements to be delivered by WesterFed to Security pursuant to Section 5.07
hereof) in excess of such reserve was (and will be) fully collectible.
SECTION 2.18 WESTERFED BENEFIT PLANS.
(a) No WesterFed Benefit Plan is a multi-employer plan within
the meaning of Section 3(37) of ERISA.
(b) Each of the WesterFed Benefit Plans that is intended to be
a pension, profit sharing, stock bonus, thrift, savings or employee stock
ownership plan that is qualified under Section 401(a) of the Code ("WesterFed
Qualified Plans") has been determined by the Internal Revenue Service to qualify
under Section 401(a) of the Code, or an application for determination of such
qualification has been timely made to the Internal Revenue Service prior to the
end of the applicable remedial amendment period under Section 401(b) of the
Code, and, to the best of WesterFed's knowledge, there exist no circumstances
likely to materially adversely affect the qualified status of any such WesterFed
Qualified Plan. All such WesterFed Qualified Plans established or maintained by
WesterFed or any of the WesterFed Subsidiaries or to which WesterFed or any of
the WesterFed Subsidiaries contribute are in compliance in all material respects
with all applicable requirements of ERISA, and are in compliance in all material
respects with all applicable requirements (including qualification and
non-discrimination requirements in effect as of the Effective Time) of the Code
for obtaining the Tax benefits the Code thereupon permits with respect to such
WesterFed Qualified Plans. All accrued contributions and other payments required
to be made by WesterFed or any WesterFed Subsidiary to any WesterFed Benefit
Plan through June 30, 1996 have been made or reserves adequate for such purposes
as of such date have been set aside therefor and reflected in the WesterFed
Financial Statements as of June 30, 1996. Neither WesterFed nor any WesterFed
Subsidiary is in material default in performing any of its respective
contractual obligations under any of the WesterFed Benefit Plans or any related
trust agreement or insurance contract, and there are no material outstanding
liabilities of any such Plan other than liabilities for benefits to be paid to
participants in such Plan and their beneficiaries in accordance with the terms
of such Plan.
(c) Under each WesterFed Qualified Plan that is a defined
benefit plan, as of the last day of the most recent plan year, the actuarially
determined present value of all "benefit liabilities", within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in the Plan's most recent actuarial valuation) did not
exceed the then current value of the assets of such Plan, and there has been no
material change in the financial condition of such Plan since the last day of
the most recent plan year.
(d) There is no pending or, to the best knowledge of
WesterFed, threatened litigation or pending claim (other than benefit claims
made in the ordinary course) by or on behalf of or against any of the WesterFed
Benefit Plans (or with respect to the administration of
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any of the such Plans) now or heretofore maintained by WesterFed or any
WesterFed Subsidiary which allege violations of applicable state or federal law
which are reasonably likely to result in a liability on the part of WesterFed or
any WesterFed Subsidiary or any such Plan.
(e) WesterFed and the WesterFed Subsidiaries and all other
persons having fiduciary or other responsibilities or duties with respect to any
WesterFed Benefit Plan are and have since the inception of each such Plan been
in substantial compliance with, and each such Plan is and has been operated in
substantial accordance with, its provisions and in substantial compliance with
the applicable laws, rules and regulations promulgated by the Department of
Labor, the Pension Benefit Guaranty Corporation ("PBGC") and the Internal
Revenue Service under ERISA, the Code or any other applicable law.
Notwithstanding the foregoing, no representation is made with respect to
compliance by a third party insurance company. No "reportable event" (as defined
in Section 4043(b) of ERISA) has occurred with respect to any WesterFed
Qualified Plan. Neither WesterFed, any WesterFed Subsidiary nor any WesterFed
Benefit Plan has incurred or is reasonably likely to incur any liability for any
"prohibited transactions" (as defined in Section 406 of ERISA or Section 4975(c)
of the Code), or any material liability under Section 601 of ERISA or Section
4980B of the Code.
(f) WesterFed and the WesterFed Subsidiaries have filed or
caused to be filed, and will continue to file or cause to be filed, in a timely
manner all filings pertaining to each WesterFed Benefit Plan with the Internal
Revenue Service, the PBGC, the Department of Labor, and as prescribed by the
Code or ERISA, or regulations issued thereunder. All such filings, as amended,
were complete and accurate in all material respects as of the dates of such
filings, and there were no misstatements or omissions in any such filing which
would be material to the financial condition of WesterFed on a consolidated
basis. Notwithstanding the foregoing, no representation is made with respect to
filings by a third party insurance company.
SECTION 2.19 COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) Except as set forth in Section 2.19 of the WesterFed
Disclosure Schedule: (i) to the best knowledge of WesterFed, the operations of
WesterFed and each of the WesterFed Subsidiaries comply in all material respects
with all applicable past and present Environmental Laws; (ii) to the best
knowledge of WesterFed, none of the operations of WesterFed or any WesterFed
Subsidiary, no assets presently or formerly owned or leased by WesterFed or any
WesterFed Subsidiary and no Mortgaged Premises or a Participating Facility are
subject to any judicial or administrative proceedings alleging the violation of
any past or present Environmental Law, nor are they the subject of any claims
alleging damages to health or property, pursuant to which WesterFed, any
WesterFed Subsidiary or any owner of a Mortgaged Premises or a Participating
Facility would be liable in law or equity; (iii) none of the operations of
WesterFed or any WesterFed Subsidiary, no assets presently owned or, to the best
knowledge of WesterFed, formerly owned by WesterFed or any WesterFed Subsidiary,
and, to the best knowledge of WesterFed, no Mortgaged Premises or Participating
Facility, is the subject of any federal, state or local investigation evaluating
whether any remedial action is needed to respond to a release or threatened
release of any Hazardous Substance, or any other substance into the environment,
nor has WesterFed or any WesterFed Subsidiary, or, to the best knowledge of
WesterFed, any owner of a Mortgaged Premises or a Participating Facility, been
directed to conduct such investigation,
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formally or informally, by any governmental agency, nor has WesterFed or any
WesterFed Subsidiary, or, to the best knowledge of WesterFed, any owner of a
Mortgaged Premises or a Participating Facility, agreed with any governmental
agency or private person to conduct any such investigation; and (iv) neither
WesterFed or any WesterFed Subsidiary, nor, to the best knowledge of WesterFed,
any owner of a Mortgaged Premises or a Participating Facility has filed any
notice under any Environmental Law indicating past or present treatment, storage
or disposal of a hazardous or toxic waste or reporting a spill or release of a
Hazardous Substance, or any other substance into the environment.
(b) With respect to real property presently or formerly owned
(including REO) or currently leased by WesterFed or any WesterFed Subsidiary
(the "WesterFed Premises"), to the best knowledge of WesterFed: (i) no part of
the WesterFed Premises has been used for the generation, manufacture, unlawful
handling, unlawful storage, or unlawful disposal of Hazardous Substances; (ii)
except as set forth in Section 2.19 of the WesterFed Disclosure Schedule, the
WesterFed Premises do not contain any underground storage tank; and (iii) the
WesterFed Premises do not contain and are not contaminated by any quantity of a
Hazardous Substance from any source. With respect to any underground storage
tank listed in Section 2.19 of the WesterFed Disclosure Schedule as an exception
to the foregoing, to the best knowledge of WesterFed, such underground storage
tank located on a WesterFed Premises is being maintained in compliance with the
Environmental Laws, and has not been the source of any release of a Hazardous
Substance into the environment, unless otherwise set forth in Section 2.19 of
the WesterFed Disclosure Schedule.
(c) For purposes of this Section 2.19, "Mortgaged Premises"
shall mean each (i) real property interest (including any fee or leasehold
interest) which is encumbered or affected by any mortgage, deed of trust, deed
to secure debt or other similar document or instrument granting to WesterFed or
any WesterFed Subsidiary a lien on or security interest in such real property
interest, and (ii) any other real property interest upon which is situated
assets or other property affected or encumbered by any document or instrument
granting to WesterFed or any WesterFed Subsidiary a lien thereon or security
interest therein. For purposes of this Section , "Participating Facility" means
any property in which WesterFed or any WesterFed Subsidiary participates in the
management of such property and, where the context requires, includes the owner
or operator of such property.
SECTION 2.20 SUBMISSION OF DOCUMENTS. Section 2.20 of the WesterFed
Disclosure Schedule contains, and shall be supplemented by WesterFed, as
required by Section 5.10 hereof, so as to contain at the Closing Date, copies of
each of the following documents, certified by an officer of WesterFed to be true
and correct copies of such documents on the dates of such certificates.
(a) The Certificate of Incorporation, Charters and Bylaws and
specimen certificates of each type of security issued by WesterFed and each
WesterFed Subsidiary.
(b) All judgments, orders, injunctions, court decrees or
settlement agreements arising out of or relating to the labor and employment
practices or decisions of WesterFed or any
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WesterFed Subsidiary which, by their terms, continue to bind or affect WesterFed
or any WesterFed Subsidiary.
(c) All orders, decrees, memorandums, agreements or
understandings with regulatory agencies binding upon or affecting the current
operations of WesterFed or any WesterFed Subsidiary or any of their directors or
officers in their capacities as such.
SECTION 2.21 DEFAULTS. There has not been any default in any material
obligation to be performed by WesterFed or any WesterFed Subsidiary under any
material contract or commitment, and neither WesterFed nor any WesterFed
Subsidiary has waived, and will not waive prior to the Effective Time, any
material right under any material contract or commitment. To the best knowledge
of WesterFed, no other party to any material contract or commitment is in
default in any material obligation to be performed by such party.
SECTION 2.22 OPERATIONS SINCE JUNE 30, 1996. Between June 30, 1996 and
the date of this Agreement, except as set forth in Section 2.22 of the WesterFed
Disclosure Schedule, there has not been:
(a) any payment of dividends by WesterFed or any other
distribution to its stockholders generally, other than the payment on August 20,
1996, of a dividend in the aggregate amount of $0.123 per share;
(b) any creation or assumption of indebtedness (including the
extension or renewal of any existing indebtedness, or the increase thereof) by
WesterFed or any WesterFed Subsidiary for borrowed money, or otherwise, other
than in the ordinary course of business, none of which (except those which are
being disputed in good faith) is in default;
(c) any change in WesterFed's independent auditors, historic
methods of accounting (other than as required by GAAP or regulatory accounting
principles), or in its system for maintaining its equipment and real estate; or
(d) any event or condition of any character (other than
changes in legal, economic or other conditions which are not specially or
uniquely applicable to WesterFed or any WesterFed Subsidiary) materially
adversely affecting the business, assets, deposit liabilities, operations or
financial condition of WesterFed on a consolidated basis.
SECTION 2.23 CORPORATE RECORDS. The corporate record books, transfer
books and stock ledgers of WesterFed and each WesterFed Subsidiary are complete
and accurate in all material respects and reflect all meetings, consents and
other material actions of the organizers, incorporators, stockholders, Boards of
Directors and committees of the Boards of Directors of WesterFed and each such
WesterFed Subsidiary, and all transactions in their respective capital stocks,
since their respective inceptions.
SECTION 2.24 UNDISCLOSED LIABILITIES. All of the obligations or
liabilities (whether accrued, absolute, contingent, unliquidated or otherwise,
whether due or to become due, and regardless of when asserted) arising out of
transactions or events heretofore entered into, or any action or inaction,
including Taxes with respect to or based upon transactions or events
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heretofore occurring, that are required to be reflected, disclosed or reserved
against in audited consolidated financial statements in accordance with GAAP
("Liabilities") have, in the case of WesterFed and the WesterFed Subsidiaries,
been so reflected, disclosed or reserved against in the audited consolidated
financial statements of WesterFed as of June 30, 1996 or in the notes thereto,
and WesterFed and the WesterFed Subsidiaries have no other Liabilities except
(a) Liabilities incurred since June 30, 1996 in the ordinary course of business,
or (b) as disclosed in Section 2.24 of the WesterFed Disclosure Schedule.
SECTION 2.25 ASSETS.
(a) WesterFed and the WesterFed Subsidiaries have good, and
marketable title to their real properties, including leaseholds, and their other
assets and properties, all as reflected as owned or held by WesterFed in the
WesterFed Financial Statements dated as of June 30, 1996, and those acquired
since such date, except for (i) assets and properties disposed of since such
date in the ordinary course of business, and (ii) liens that, in the aggregate,
except as set forth in Section 2.25 of the WesterFed Disclosure Schedule, are
not material to the assets of WesterFed on a consolidated basis. All buildings,
structures, fixtures and appurtenances comprising part of the real properties of
WesterFed and the WesterFed Subsidiaries (whether owned or leased) are in good
operating condition and have been well maintained, reasonable wear and tear
excepted. Title to all real property owned by WesterFed and the WesterFed
Subsidiaries is held in fee simple, except as otherwise noted in the WesterFed
Financial Statements dated as of June 30, 1996 or as set forth in Section 2.25
of the WesterFed Disclosure Schedule. WesterFed and the WesterFed Subsidiaries
have title or other rights to its assets sufficient in all material respects for
the conduct of their respective businesses as presently conducted, and except as
set forth in the WesterFed Financial Statements dated as of June 30, 1996, or in
Section 2.25 of the WesterFed Disclosure Schedule, free, clear and discharged of
and from any and all liens, charges, encumbrances, security interests and/or
equities which are material to WesterFed or any WesterFed Subsidiary.
(b) All leases pursuant to which WesterFed or any WesterFed
Subsidiary, as lessee, leases real or personal property which are material to
the business of WesterFed on a consolidated basis are, to the best knowledge of
WesterFed, valid, effective, and enforceable against the lessor in accordance
with their respective terms. There is not under any of such leases any existing
default, or any event which, with notice or lapse of time or both, would
constitute a default, with respect to WesterFed or any WesterFed Subsidiary, or
to the best knowledge of WesterFed, the other party.
SECTION 2.26 INDEMNIFICATION. To the best knowledge of WesterFed,
except as set forth in Section 2.26 of the WesterFed Disclosure Schedule, no
action or failure to take action by any director, officer, employee or agent of
WesterFed or any WesterFed Subsidiary has occurred which would give rise to a
claim by any such person for indemnification from WesterFed or any WesterFed
Subsidiary under the corporate indemnification provisions of the charter,
bylaws, or Corporate Law applicable to such entity on the date of this
Agreement.
SECTION 2.27 INSIDER INTERESTS. All outstanding loans and other
contractual arrangements (including deposit relationships) between WesterFed or
any WesterFed Subsidiary
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and any of its officers, directors or employees conform to applicable rules and
regulations and requirements of all applicable regulatory agencies which were in
effect when such loans and other contractual arrangements were entered into.
Except as set forth in Section 2.27 of the WesterFed Disclosure Schedule, no
officer, director or employee of WesterFed or any WesterFed Subsidiary has any
material interest in any property, real or personal, tangible or intangible,
used in or pertaining to the business of WesterFed or any WesterFed Subsidiary.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SECURITY
Security represents and warrants to WesterFed that:
SECTION 3.01 ORGANIZATION. Security is a corporation duly organized,
validly existing and in good standing under the laws of the State of Montana and
has all requisite power and authority, corporate and otherwise, to own, operate
and lease its assets, properties and business and to carry on its business
substantially as it has been and is now being conducted. Security is duly
qualified to do business and is in good standing in each jurisdiction where the
character of the assets or properties owned or leased by it or the nature of the
business transacted by it requires that it be so qualified, except where the
failure to so qualify would not have a Material Adverse Effect on Security or
its ability to consummate the transactions contemplated herein. Security has all
requisite corporate power and authority to enter into this Agreement and,
subject to receipt of all requisite regulatory approvals and the expiration of
any applicable waiting periods, to consummate the transactions contemplated
hereby. Security is duly registered as a savings and loan holding company under
HOLA.
SECTION 3.02 AUTHORIZATION. The execution, delivery and performance of
this Agreement and the consummation of the transactions contemplated hereby have
been duly approved and authorized by Security's Board of Directors, and no other
corporate action on the part of Security is required to be taken, except the
approval of this Agreement and the Merger by the stockholders of Security by the
requisite vote required by its Articles of Incorporation and the Corporate Law.
This Agreement has been duly executed and delivered by Security and constitutes
the valid and binding obligation of Security and is enforceable against Security
in accordance with its terms (except to the extent that enforceability thereof
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium
or similar laws or equitable principles or doctrines).
SECTION 3.03 CONFLICTS. Subject to the second sentence of this Section
3.03, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby will not, conflict with or
result in any violation, breach or termination of, or default or loss of a
material benefit under, or permit the acceleration of any obligation under, or
result in the creation of any material lien, charge or encumbrance on any
property or assets under, any provision of the Articles of Incorporation or
Bylaws of Security or similar documents of any Security Subsidiary, or any
mortgage, indenture, lease, agreement or other instrument, permit, concession,
grant, franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to Security or any Security Subsidiary or their
respective properties, other
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than any such conflicts, violations or defaults which (i) will be cured or
waived prior to the Effective Time, (ii) are not material to the conduct of
business or operations of Security or any Security Subsidiary, or (iii) are
disclosed in Section 3.03 of that certain confidential writing delivered by
Security to WesterFed within two business days prior to the date hereof (the
"Security Disclosure Schedule"). No consent, approval, order or authorization
of, or registration, declaration or filing with, any federal or state
governmental authority is required by or with respect to Security in connection
with the execution and delivery of this Agreement or the consummation by
Security of the transactions contemplated hereby except for: (a) the filing of
all applicable regulatory applications by WesterFed, Security and/or their
respective Subsidiaries for approval of the transactions contemplated by this
Agreement, (b) the filing by WesterFed of the Registration Statement with the
SEC and various blue sky authorities, (c) the filing of the Certificate
[Articles] of Merger with respect to the Merger with the Secretaries of State of
the States of Delaware and Montana, (d) the filing of Articles of Combination
with the OTS with respect to the Bank Merger, (e) any filings, approvals or
no-action letters with or from state securities authorities, and (f) any
anti-trust filings, consents, waivers or approvals.
SECTION 3.04 ANTI-TAKEOVER PROVISIONS INAPPLICABLE. No "business
combination," "moratorium," "control share" or other state anti-takeover statute
or regulation, (i) prohibits or restricts Security's ability to perform its
obligations under this Agreement, or its ability to consummate the transactions
contemplated hereby, (ii) would have the effect of invalidating or voiding this
Agreement or any provision hereof, or (iii) would subject WesterFed to any
material impediment or condition in connection with the exercise of any of its
rights under this Agreement.
SECTION 3.05 CAPITALIZATION AND STOCKHOLDERS.
(a) The authorized capital stock of Security consists of (i)
10,000,000 shares of Security Common Stock, $1.00 par value, of which, as of the
date of this Agreement, 1,466,682 shares were issued and outstanding and no
shares were held as treasury, and (ii) 5,000,000 shares of preferred stock,
$1.00 par value, of which none are issued and outstanding. All of the issued and
outstanding shares of Security Common Stock have been duly and validly
authorized and issued, and are fully paid and non-assessable. None of the
outstanding shares of Security Common Stock has been issued in violation of any
preemptive rights of current or past stockholders or are subject to any
preemptive rights of the current or past stockholders of Security. All of the
issued and outstanding shares of Security Common Stock will be entitled to vote
to approve this Agreement and the Merger.
(b) As of the date of this Agreement, Security has 146,000
shares of Security Common Stock reserved for issuance under Security's 1993
Stock Option and Stock Appreciation Rights Plan (the "Security Stock Option
Plan") for the benefit of employees and directors of Security and Security Bank,
pursuant to which options covering 105,700 shares of Security Common Stock are
outstanding (the "Security Stock Options") with an average exercise price of
$14.00 per share. Except as set forth in this Section , there are no shares of
capital stock or other equity securities of Security outstanding and no
outstanding options, warrants, scrip, rights to subscribe to, calls or
commitments of any character whatsoever relating to, or securities or rights
convertible into or exchangeable for, shares of the capital stock of Security,
or contracts,
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commitments, understandings, or arrangements by which Security is or may be
bound to issue additional shares of its capital stock or options, warrants, or
rights to purchase or acquire any additional shares of its capital stock.
SECTION 3.06 SECURITY FINANCIAL STATEMENTS; MATERIAL CHANGES. Security
has heretofore delivered to WesterFed its audited, consolidated financial
statements for fiscal years ended June 30, 1996, June 30, 1995, and June 30,
1994 (together the "Security Financial Statements"). The Security Financial
Statements (a) are true and correct in all material respects, (b) have been
prepared in accordance with GAAP applied on a consistent basis during the
periods involved (except as may be indicated in the notes thereto), and (c)
fairly present the consolidated financial position of Security as of the dates
thereof and the consolidated results of its operations, stockholders' equity,
cash flows and changes in financial position for the periods then ended. Since
June 30, 1996, Security and the Security Subsidiaries have not undergone or
suffered any changes in their respective condition (financial or otherwise),
properties, business or operations which have been, in any case or in the
aggregate, materially adverse to Security on a consolidated basis except as
disclosed in Section 3.06 of the Security Disclosure Schedule. No facts or
circumstances have been discovered from which it reasonably appears that there
is a significant risk and reasonable probability that Security will suffer or
experience a Material Adverse Effect.
SECTION 3.07 SECURITY SUBSIDIARIES.
(a) All of the Security Subsidiaries as of the date of this
Agreement are listed in Section 3.07 of the Security Disclosure Schedule.
Security owns directly or indirectly all of the issued and outstanding shares of
capital stock of the Security Subsidiaries. Section 3.07 of the Security
Disclosure Schedule sets forth the number of shares of authorized and
outstanding capital stock of the Security Subsidiaries. Except as set forth in
Section 3.07 of the Security Disclosure Schedule, neither Security nor the
Security Subsidiaries own directly or indirectly any debt or equity securities,
or other proprietary interest in any other corporation, joint venture,
partnership, entity, association or other business. No capital stock of any of
the Security Subsidiaries is or may become required to be issued (other than to
Security) by reason of any options, warrants, scrip, rights to subscribe to,
calls, or commitments of any character whatsoever relating to, or securities or
rights convertible into or exchangeable for, shares of the capital stock of any
Security Subsidiary. There are no contracts, commitments, understandings or
arrangements relating to the rights of Security to vote or to dispose of shares
of the capital stock of any Security Subsidiary. All of the shares of capital
stock of each Security Subsidiary held by Security or any Security Subsidiary
are fully paid and non-assessable and are owned free and clear of any claim,
lien or encumbrance, except as disclosed in Section 3.07 of the Security
Disclosure Schedule.
(b) Each Security Subsidiary is either a federally-chartered
stock savings bank or a corporation and is duly organized, validly existing and
in good standing under the laws of the jurisdiction in which it is incorporated
or organized, and is duly qualified to do business and in good standing in each
jurisdiction where the character of the assets or properties owned or leased by
it or the nature of the business transacted by it requires it to be so
qualified, except where the failure to so qualify, either individually or in the
aggregate, would not have a Material
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Adverse Effect on Security or its ability to consummate the transactions
contemplated herein. Each Security Subsidiary has the corporate power and
authority necessary for it to own, operate or lease its assets, properties and
business and to carry on its business substantially as it has been and is now
being conducted.
(c) Security Bank, FSB ("Security Bank") is a member in good
standing of the Federal Home Loan Bank System. All eligible deposit accounts
issued by Security Bank are insured by the FDIC through the SAIF to the full
extent permitted under applicable law. Security Bank is, and at all times since
June 1, 1990 has been, a "domestic building and loan association" as defined in
Section 7701(a)(19) of the Code and a "qualified thrift lender" as defined in
Section 10(m) of HOLA. The liquidation account established by Security Bank in
connection with its conversion from mutual to stock form has been maintained
since its establishment in accordance with applicable laws and the records with
respect to said account are complete and accurate in all material respects.
SECTION 3.08 SECURITY FILINGS. Security has previously made available,
or will make available prior to the Effective Time, to WesterFed true, correct,
and complete copies of the (i) proxy statements relating to all meetings of
stockholders (whether special or annual) of Security during calendar years 1994,
1995 and 1996, and (ii) all other reports, as amended, or filings, as amended,
required to be filed under the Securities Exchange Act by Security with the SEC
since January 1, 1994, including reports on Forms 10-K, 10-Q and 8-K.
SECTION 3.09 SECURITY REPORTS. Since January 1, 1994, each of Security
and the Security Subsidiaries has filed, and will continue to file, all reports
and statements, together with any amendment required to be made with respect
thereto, that it has, or will be, required to file with the SEC, the OTS, the
FDIC, and the NASD. As of their respective dates (and without giving effect to
any amendments or modifications filed after the date of this Agreement with
respect to reports and documents filed before the date of this Agreement), each
of such reports and documents, including the financial statements, exhibits, and
schedules thereto, complied in all material respects with all of the statutes,
rules and regulations enforced or promulgated by the authority with which they
were filed and did not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements made
therein, in light of the circumstances under which they were made, not
misleading. Except for normal examinations conducted by the Internal Revenue
Service, state and local taxing authorities, the OTS or the FDIC in the regular
course of the business of Security or the Security Subsidiaries, no federal,
state or local governmental agency, commission or other entity has initiated any
proceeding or, to the best knowledge of Security, investigation into the
business or operations of Security or the Security Subsidiaries within the past
three (3) years except as set forth in Section 3.09 of the Security Disclosure
Schedule. There is no unresolved violation, criticism or exception by the SEC,
OTS, FDIC or other agency, commission or entity with respect to any report or
statement referred to herein that is material to Security or any Security
Subsidiary.
SECTION 3.10 COMPLIANCE WITH LAWS.
(a) Except as disclosed in Section 3.10 of the Security
Disclosure Schedule, the businesses of Security and the Security Subsidiaries
are being conducted, in all material
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respects, in compliance with all laws, ordinances or regulations of governmental
authorities, including laws affecting financial institutions (including those
pertaining to the Bank Secrecy Act, the investment of funds, the lending of
money, the collection of interest and the extension of credit), federal and
state securities laws, laws and regulations relating to financial statements and
reports, truth-in-lending, truth-in-savings, usury, fair credit reporting,
consumer protection, occupational safety, fair employment practices, fair labor
standards and laws and regulations relating to employee benefits, and any
statutes or ordinances relating to the properties occupied or used by Security
or any Security Subsidiary, except for possible violations which, singly or in
the aggregate, do not and, insofar as reasonably can be foreseen in the future,
will not have a Material Adverse Effect on Security.
(b) Except as disclosed in Section 3.10 of the Security
Disclosure Schedule, no investigation or review by any governmental entity with
respect to Security or any Security Subsidiary is pending or, to the best
knowledge of Security, threatened, nor has any governmental entity indicated to
Security an intention to conduct the same, other than normal thrift regulatory
examinations and those the outcome of which will not have a Material Adverse
Effect on Security.
(c) Security and each of the Security Subsidiaries, where
applicable, are in substantial compliance with the applicable provisions of the
Community Reinvestment Act of 1977 and the regulations promulgated thereunder.
As of the date of this Agreement, Security has not been advised of the existence
of any fact or circumstance or set of facts or circumstances which, if true,
would cause Security or any of the Security Subsidiaries to fail to be in
substantial compliance with such provisions. Security Bank does not have a
rating from an applicable regulatory authority which is less than
"satisfactory."
SECTION 3.11 DISCLOSURE. None of the information supplied by Security
for inclusion in the Proxy Statement or in the Registration Statement, will, in
the case of the Proxy Statement or any amendments thereof, at the time of the
Stockholders' Meetings or, in the case of the Registration Statement, at the
time it becomes effective and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
SECTION 3.12 LITIGATION. Except as disclosed in Section 3.12 of the
Security Disclosure Schedule, there is no suit, action, investigation or
proceeding, legal, quasi-judicial, administrative or otherwise, pending or, to
the best knowledge of Security threatened, against or affecting Security or any
Security Subsidiary, or any of their respective officers, directors, employees
or agents, in their capacities as such, which is seeking equitable relief or
damages against Security, any Security Subsidiary, or any of their respective
officers, directors, employees or agents, in their capacities as such, in excess
of $25,000, or which would materially affect the ability of Security to
consummate the transactions contemplated herein or which is seeking to enjoin
consummation of the transactions provided for herein or to obtain other relief
in connection with this Agreement or the transactions contemplated hereby, nor
is there any judgment, decree, injunction, rule or order of any court,
governmental department, commission, agency, instrumentality or arbitrator
outstanding against Security or any Security Subsidiary or any of
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their respective officers, directors, employees or agents, in their capacities
as such, having, or which, insofar as reasonably can be foreseen in the future,
would have any such effect.
SECTION 3.13 LICENSES. Security and the Security Subsidiaries hold all
licenses, certificates, permits, franchises and all patents, trademarks, service
marks, trade names, copyrights or right thereto, and required authorizations,
approvals, consents, licenses, clearances and orders or registrations with all
appropriate federal, state or other authorities, that are material to the
conduct of their respective businesses as now conducted and as presently
proposed to be conducted.
SECTION 3.14 TAXES.
(a) Except as disclosed in Section 3.14 of the Security
Disclosure Schedule, Security and the Security Subsidiaries have each timely
filed all Tax and information returns required to be filed and have paid (or
Security has paid on behalf of its Subsidiaries), or have accrued on their
respective books and set up an adequate reserve for the payment of, all Taxes
reflected on such returns as required to be paid in respect of the periods
covered by such returns and have accrued on their respective books and set up an
adequate reserve for the payment of all income and other Taxes anticipated to be
payable in respect of periods through the end of the calendar month next
preceding the date hereof. Neither Security nor any Security Subsidiary is
delinquent in the payment of any Tax, assessment or governmental charge. No
deficiencies for any Taxes have been proposed, asserted or assessed against
Security or any Security Subsidiary that have not been resolved or settled and
no requests for waivers of the time to assess any such Tax are pending or have
been agreed to. The income tax returns of Security and Security Subsidiaries
have not been audited by the Internal Revenue Service, state, municipal or other
taxing authority for any of the last three (3) years. Neither Security nor any
Security Subsidiary is a party to any action or proceeding by any governmental
authority for the assessment or the collection of Taxes. Deferred Taxes of
Security and the Security Subsidiaries have been accounted for in accordance
with GAAP.
(b) Security has not filed any consolidated federal income tax
return with an "affiliated group" (within the meaning of Section 1504 of the
Code) where Security was not the common parent of the group. Neither Security
nor any Security Subsidiary is, or has been, a party to any Tax allocation
agreement or arrangement pursuant to which it has any contingent or outstanding
liability to anyone other than Security or any Security Subsidiary.
(c) Security and the Security Subsidiaries have each withheld
amounts from its employees, stockholders, or holders of public deposit accounts
in compliance with the Tax withholding provisions of applicable federal, state
and local laws, have filed all federal, state and local returns and reports for
all periods for which such returns or reports would be due with respect to
income tax withholding, social security, unemployment taxes, income and other
Taxes and all payments or deposits with respect to such Taxes have been timely
made and except as set forth in Section 3.14 of the Security Disclosure
Schedule, have notified all employees, stockholders and holders of public
deposit accounts of their obligations to file all forms, statements and reports
with it in accordance with applicable federal, state and local Tax laws and
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have taken reasonable steps to insure that such employees, stockholders and
holders of public deposit accounts have filed all such forms statements and
reports with it.
SECTION 3.15 INSURANCE. Security and the Security Subsidiaries maintain
insurance with insurers which in the best judgment of management of Security are
sound and reputable, on their respective assets, and upon their respective
businesses and operations, against loss or damage, risks, hazards and
liabilities as in their judgment they deem appropriate. Security and the
Security Subsidiaries maintain in effect all insurance required to be carried by
law or by any agreement by which they are bound. All material claims under all
policies of insurance maintained by Security and the Security Subsidiaries have
been filed in due and timely fashion.
SECTION 3.16 LOANS; INVESTMENTS.
(a) Except as otherwise disclosed in Section 3.16 of the
Security Disclosure Schedule, each material loan reflected as an asset on the
Security Financial Statements dated as of June 30, 1996, is evidenced by
appropriate and sufficient documentation and constitutes, to the best knowledge
of Security, the legal, valid and binding obligation of the obligor named in
such documentation, enforceable in accordance with its terms except to the
extent that the enforceability thereof may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles or doctrines.
Except as set forth in Section 3.16 of the Security Disclosure Schedule, all
such loans are, and at the Effective Time will be, free and clear of any
security interest, lien, encumbrance or other charge. Except as set forth in
Section 3.16 of the Security Disclosure Schedule, there is no loan or other
asset of Security or of any Security Subsidiary in excess of $250,000 that has
been classified by examiners, management, the Board of Directors, or others as
"Other Loans Especially Mentioned," "Substandard," "Doubtful" or "Loss" as of
August 31, 1996. Set forth in Section 3.16 of the Security Disclosure Schedule
is a complete list of the REO and in-substance foreclosures of Security and the
Security Subsidiaries as of August 31, 1996.
(b) All guarantees of indebtedness owed to Security or any
Security Subsidiary, including those of the Federal Housing Administration, the
Small Business Administration, and other state and federal agencies, are, to the
best knowledge of Security, valid and enforceable, except to the extent
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles or doctrines
and except as would not have a Material Adverse Effect on Security.
(c) Section 3.16 of the Security Disclosure Schedule sets
forth an accurate and complete list of all Derivative Securities to which
Security or any Security Subsidiary is a party or by which any of their
properties or assets may be bound, or that are owned by Security or any Security
Subsidiary. Neither Security nor any Security Subsidiary has purchased any
Derivative Security for, or invested in any Derivative Security any assets of,
any account or person for which it acts as a trustee, fiduciary, or investment
advisor. All Derivative Securities to which Security or any Security Subsidiary
is a party or by which any of their properties or assets may be bound were
entered into in the ordinary course of business and, to the best knowledge of
Security, in accordance with then-customary practice and applicable rules,
regulations and policies of thrift regulatory authorities and with
counterparties believed to be financially responsible at the time
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and are legal, valid and binding obligations and are in full force and effect.
Security and the Security Subsidiaries have duly performed in all material
respects all of their respective obligations thereunder to the extent that such
obligations to perform have accrued, and to the best knowledge of Security,
there are no material breaches, violations or defaults or allegation or
assertions of such by any party thereunder. None of the transactions
contemplated by this Agreement would permit a counterparty under any Derivative
Security or any party to any mortgage-backed security financing arrangement to
accelerate, discontinue, terminate or otherwise modify any such Derivative
Security or arrangement or would require Security or any Security Subsidiary to
recognize any gain or loss with respect to such Derivative Security or
arrangement.
(d) Except as set forth in Section 3.16 of the Security
Disclosure Schedule and except for pledges to secure public and trust deposits,
none of the investments reflected in the Security Financial Statements dated as
of June 30, 1996 under the heading "Investment Securities, " and none of the
investments made by Security and the Security Subsidiaries since June 30, 1996,
is subject to any restriction, whether contractual or statutory, which
materially impairs the ability of Security or any Security Subsidiary to freely
dispose of such investment at any time. With respect to all material repurchase
agreements to which Security or any Security Subsidiary is a party, Security or
such Subsidiary has a valid, perfected first lien or security interest in the
government securities or other collateral securing each such repurchase
agreement, and the value of the collateral securing each such repurchase
agreement equals or exceeds the amount of the debt secured by such collateral
under such agreement. Except as set forth in Section 3.16 of the Security
Disclosure Schedule, neither Security nor any Security Subsidiary has sold or
otherwise disposed of any assets in a transaction in which the acquirer of such
assets or other person has a right of recourse (other than with respect to
warranty of title) against Security or any Security Subsidiary or the right,
either conditionally or absolutely, to require Security or any Security
Subsidiary to repurchase or otherwise reacquire any such assets. Set forth in
Section 3.16 of the Security Disclosure Schedule is a complete and accurate list
of each investment and debt security, mortgage-backed and related securities,
marketable equity securities and securities purchased under agreements to resell
owned by Security or any Security Subsidiary, showing as of August 31, 1996, the
carrying values and estimated fair values of investment and debt securities, the
gross carrying value and estimated fair value of the mortgage-backed and related
securities and the estimated cost and estimated fair value of the marketable
equity securities.
(e) All United States Treasury securities, obligations of
other United States Government agencies and corporations, obligations of States
of the United States and their political subdivisions, and other investment
securities classified as "held to maturity" and "available for sale" held by
Security and the Security Subsidiaries, as reflected in the Security Financial
Statements dated as of June 30, 1996, were classified and accounted for in
accordance with F.A.S.B. 115 and the intentions of management.
SECTION 3.17 ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for
possible loan losses shown on the Security Financial Statements dated as of June
30, 1996 (and as shown on any financial statements to be delivered by Security
to WesterFed pursuant to Section 5.07 hereof), to the best knowledge of
Security, as of such date was (and will be as of such subsequent
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financial statement dates) adequate in all respects to provide for possible or
specific losses, net of recoveries relating to loans previously charged off, on
loans outstanding, and contained or will contain an additional amount of
unallocated reserves for unanticipated future losses at a level considered
adequate under the standards applied by applicable federal regulatory
authorities and based upon GAAP applicable to thrift institutions. To the best
knowledge of Security, the aggregate principal amount of loans contained (or to
be contained) in the loan portfolio of Security and the Security Subsidiaries as
of the date of this Agreement (and as of the dates of any financial statements
to be delivered by Security to WesterFed pursuant to Section 5.07 hereof) in
excess of such reserve was (and will be) fully collectible.
SECTION 3.18 SECURITY BENEFIT PLANS.
(a) Section 3.18 of the Security Disclosure Schedule contains
a list and a true and correct copy (or, a description with respect to any oral
employee benefit plan, practice, policy or arrangement), including all
amendments thereto, of each compensation, consulting, employment, termination or
collective bargaining, stock option, stock purchase, stock appreciation right,
life, health, accident or other insurance, bonus, deferred or incentive
compensation, severance or separation agreements or any other agreements
providing any payment or benefit resulting from a change in control, profit
sharing, retirement, or other employee benefit plan, practice, policy or
arrangement of any kind, oral or written, covering employees, former employees,
directors or former directors of Security or any Security Subsidiary or their
respective beneficiaries, including any employee benefit plans within the
meaning of Section 3(3) of ERISA, which Security or any Security Subsidiary
maintains, to which Security or any Security Subsidiary contributes, or under
which any employee, former employee, director or former director of Security or
any Security Subsidiary is covered or has benefit rights and pursuant to which
any liability of Security or any Security Subsidiary exists or is reasonably
likely to occur (the "Security Benefit Plans"). Except as set forth in Section
3.18 of the Security Disclosure Schedule, Security and the Security Subsidiaries
neither maintain nor have entered into any Security Benefit Plan or other
document, plan or agreement which contains any change in control provisions
which would cause an increase or acceleration of benefits or benefit
entitlements to employees or former employees of Security or any Security
Subsidiary or their respective beneficiaries, or other provisions which would
cause an increase in the liability of Security or any Security Subsidiary or to
WesterFed or any WesterFed Subsidiary as a result of the transactions
contemplated by this Agreement or any related action thereafter (a "Change in
Control Benefit"). The term "Security Benefit Plans" as used herein refers to
all plans contemplated under the preceding sentences of this Section 3.18,
provided that the term "Plan" or "Plans" is used in this Agreement for
convenience only and does not constitute an acknowledgment that a particular
arrangement is an employee benefit plan within the meaning of Section 3(3) of
ERISA. Except as disclosed in the Disclosure Schedule of Security, no Security
Benefit Plan is a multi-employer plan within the meaning of Section 3(37) of
ERISA.
(b) Each of the Security Benefit Plans that is intended to be
a pension, profit sharing, stock bonus, thrift, savings plan that is qualified
under Section 401(a) of the Code ("Security Qualified Plans") has been
determined by the Internal Revenue Service to qualify under Section 401(a) of
the Code, or an application for determination of such qualification has been
timely made to the Internal Revenue Service prior to the end of the applicable
remedial
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amendment period under Section 401(b) of the Code (a copy of each such
determination letter or pending application is included in Section 3.18 of the
Security Disclosure Schedule) and, to the best of Security's knowledge, there
exist no circumstances likely to materially adversely affect the qualified
status of any such Security Qualified Plan. All such Security Qualified Plans
established or maintained by Security or any of the Security Subsidiaries or to
which Security or any of the Security Subsidiaries contribute are in compliance
in all material respects with all applicable requirements of ERISA, and are in
compliance in all material respects with all applicable requirements (including
qualification and non-discrimination requirements in effect as of the Effective
Time) of the Code for obtaining the Tax benefits the Code thereupon permits with
respect to such Security Qualified Plans. All accrued contributions and other
payments required to be made by Security or any Security Subsidiary to any
Security Benefit Plan through June 30, 1996, have been made or reserves adequate
for such purposes as of June 30, 1996, have been set aside therefor and will be
reflected in the Security Financial Statements dated as of June 30, 1996.
Neither Security nor any Security Subsidiary is in material default in
performing any of its respective contractual obligations under any of the
Security Benefit Plans or any related trust agreement or insurance contract, and
there are no material outstanding liabilities of any such Plan other than
liabilities for benefits to be paid to participants in such Plan and their
beneficiaries in accordance with the terms of such Plan.
(c) Under each Security Qualified Plan that is a defined
benefit plan, as of the last day of the most recent plan year, the actuarially
determined present value of all "benefit liabilities", within the meaning of
Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in the Plan's most recent actuarial valuation) did not
exceed the then current value of the assets of such Plan, and there has been no
material change in the financial condition of such Plan since the last day of
the most recent plan year.
(d) There is no pending or, to the best knowledge of Security,
threatened litigation or pending claim (other than benefit claims made in the
ordinary course) by or on behalf of or against any of the Security Benefit Plans
(or with respect to the administration of any such Plans) now or heretofore
maintained by Security or any Security Subsidiary which allege violations of
applicable state or federal law which are reasonably likely to result in a
liability on the part of Security or any Security Subsidiary or any such Plan.
(e) Security and the Security Subsidiaries and all other
persons having fiduciary or other responsibilities or duties with respect to any
Security Benefit Plan are and have since the inception of each such Plan been in
substantial compliance with, and each such Plan is and has been operated in
substantial accordance with, its provisions and in substantial compliance with
the applicable laws, rules and regulations governing such Plan, including the
rules and regulations promulgated by the Department of Labor, the PBGC and the
Internal Revenue Service under ERISA, the Code or any other applicable law.
Notwithstanding the foregoing, no representation is made with respect to
compliance by a third party insurance company. No "reportable event" (as defined
in Section 4043(b) of ERISA) has occurred with respect to any Security Benefit
Plan. No Security Benefit Plan has engaged in or been a party to a "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975(c) of the
Code). All Security Benefit Plans that are group health plans have been operated
in compliance with the
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group health plan continuation requirements of Section 4980B of the Code and
Section 601 of ERISA.
(f) Neither Security nor any Security Subsidiary has made any
payments, or is or has been a party to any agreement or any Security Benefit
Plan, that under any circumstances could obligate it to make payments that are
or will not be deductible because of Sections 162(m) or 280G of the Code.
(g) Section 3.18 of the Security Disclosure Schedule describes
any obligation that Security or any Security Subsidiary has to provide health or
welfare benefits to retirees or other former employees, directors or their
dependents (other than rights under Section 4980B of the Code or Section 601 of
ERISA), including information as to the number of retirees, other former
employees or directors and dependents entitled to such coverage and their ages.
(h) Section 3.18 of the Security Disclosure Schedule lists:
(i) each officer and director of Security and any Security Subsidiary who is
eligible to receive a Change in Control Benefit, showing the amount of each such
Change in Control Benefit, estimated compensation for 1996 based upon
compensation received to the date of this Agreement, the individual's
participation in any bonus or other employee benefit plan, and such individual's
compensation from Security or any Security Subsidiary for each of the calendar
years 1991 through 1995 as reported by Security or a Security Subsidiary on Form
W-2 or Form 1099; (ii) each other employee of Security or the Security
Subsidiaries who may be eligible for a Change in Control Benefit, showing the
number of years of service of each such employee together with his or her
estimated compensation for 1996; and (iii) a listing of each Security Stock
Option, showing the holder thereof, the number of shares, the exercise price per
share, the vesting dates thereof, and a copy of the option agreements relating
thereto.
(i) Security and the Security Subsidiaries have filed or
caused to be filed, and will continue to file or cause to be filed, in a timely
manner all filings pertaining to each Security Benefit Plan with the Internal
Revenue Service, the PBGC, and the Department of Labor, as prescribed by the
Code or ERISA, or regulations issued thereunder. All such filings, as amended,
were complete and accurate in all material respects as of the dates of such
filings, and there were no misstatements or omissions in any such filing which
would be material to the financial condition of Security on a consolidated
basis. Notwithstanding the foregoing, no representation is made with respect to
filings by a third party insurance company.
SECTION 3.19 COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) Except as set forth in Section 3.19 of the Security
Disclosure Schedule: (i) to the best knowledge of Security, the operations of
Security and each of the Security Subsidiaries comply in all material respects
with all applicable past and present Environmental Laws; (ii) to the best
knowledge of Security, none of the operations of Security or any Security
Subsidiary, no assets presently or formerly owned or leased by Security or any
Security Subsidiary and no Mortgaged Premises or Participating Facility are
subject to any judicial or administrative proceedings alleging the violation of
any past or present Environmental Law, nor are they the subject of any claims
alleging damages to health or property, pursuant to which
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Security, any Security Subsidiary or any owner of a Mortgaged Premises or a
Participating Facility would be liable in law or equity; (iii) none of the
operations of Security or any Security Subsidiary, no assets presently owned or,
to the best knowledge of Security, formerly owned by Security or any Security
Subsidiary, and to the best knowledge of Security, no Mortgaged Premises or a
Participating Facility, is the subject of any federal, state or local
investigation evaluating whether any remedial action is needed to respond to a
release or threatened release of any Hazardous Substance, or any other substance
into the environment, nor has Security or any Security Subsidiary, or, to the
best knowledge of Security, any owner of a Mortgaged Premises or a Participating
Facility, been directed to conduct such investigation, formally or informally,
by any governmental agency, nor has Security or any Security Subsidiary, or, to
the best knowledge of Security, any owner of a Mortgaged Premises or a
Participating Facility, agreed with any governmental agency or private person to
conduct any such investigation; and (iv) neither Security nor any Security
Subsidiary, nor, to the best knowledge of Security, any owner of a Mortgaged
Premises or a Participating Facility has filed any notice under any
Environmental Law indicating past or present treatment, storage of disposal of a
Hazardous Substance or reporting a spill or release of a Hazardous Substance, or
any other substance into the environment.
(b) With respect to real property presently or formerly owned
(including REO) or currently leased by Security or any Security Subsidiary (the
"Security Premises") to the best knowledge of Security: (i) no part of the
Security Premises has been used for the generation, manufacture, unlawful
handling, unlawful storage, or unlawful disposal of Hazardous Substances; (ii)
except as disclosed in Section 3.19 of the Security Disclosure Schedule, the
Security Premises do not contain any underground storage tank; and (iii) the
Security Premises do not contain and are not contaminated by any quantity of a
Hazardous Substance from any source. With respect to any underground storage
tank listed in Section 3.19 of the Security Disclosure Statement as an exception
to the foregoing, to the best knowledge of Security, such underground storage
tank located on a Security Premises is being maintained in compliance with the
Environmental Laws, and has not been the source of any release of a Hazardous
Substance into the environment, unless otherwise set forth in Section 3.19 of
the Security Disclosure Schedule.
(c) For purposes of this Section 3.19, "Mortgaged Premises"
shall mean each (i) real property interest (including any fee or leasehold
interest) which is encumbered or affected by any mortgage, deed of trust, deed
to secure debt or other similar document or instrument granting to Security or
any Security Subsidiary a lien on or security interest in such real property
interest and (ii) any other real property interest upon which is situated assets
or other property affected or encumbered by any document or instrument granting
to Security or any Security Subsidiary a lien thereon or security interest
therein. For purposes of this Section 3.19, "Participating Facility" means any
property in which Security or any Security Subsidiary participates in the
management of such property and, where the context requires, includes the owner
or operator of such property.
SECTION 3.20 CONTRACTS AND COMMITMENTS. Section 3.20 of the Security
Disclosure Schedule contains, and shall be supplemented by Security, as required
by Section 5.10 hereof, so as to contain at the Closing Date, copies of each of
the following documents, certified by an
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officer of Security to be true and correct copies of such documents on the dates
of such certificates:
(a) A list of each outstanding loan or commitment to extend
credit to any officer or director of Security or any Security Subsidiary, as
well as a listing of all deposits or deposit surrogates, including the amount,
type and interest being paid thereon, to which Security or any Security
Subsidiary is a party under which it may (contingently or otherwise) have any
liability involving any officer or director of Security or any Security
Subsidiary;
(b) A list of each outstanding letter of credit and each
commitment to issue a letter of credit in excess of $25,000 to which Security or
any Security Subsidiary is a party and/or under which it may (contingently or
otherwise) have any liability;
(c) A list of each contract or agreement (not otherwise
included in the Security Disclosure Schedule or specifically excluded therefrom
in accordance with the terms of this Agreement) involving goods, services or
occupancy and which (i) has a term of more than six months, (ii) cannot be
terminated on thirty days (or less) written notice without penalty, and (iii)
involves an annual expenditure by Security or any Security Subsidiary in excess
of $25,000;
(d) A list of each contract or commitment (other than Security
Permitted Liens) affecting ownership of, title to, use of, or any interest in,
real property which is currently owned by Security or any Security Subsidiary,
and a list of all real property owned, leased or licensed by Security or any
Security Subsidiary.
(e) A list of all fees, salaries, bonuses and other forms of
compensation, including country club memberships, automobiles available for
personal use, and credit cards available for personal use, provided by Security
or any Security Subsidiary to any employee, officer, or director or former
employee, officer or director of Security or any Security Subsidiary who earns
in excess of $35,000 annually.
(f) A list of each commitment made by Security or any Security
Subsidiary to or with any of its officers, directors or employees extending for
a period of more than six months from the date hereof or providing for earlier
termination only upon the payment of a penalty or equivalent thereto.
(g) The Articles of Incorporation, Charters and Bylaws and
specimen certificates of each type of security issued by Security and each
Security Subsidiary.
(h) A list of each other contract or commitment providing for
payment based in any manner upon outstanding loans or profits of Security or any
Security Subsidiary.
(i) A list of all powers of attorney granted by Security or
any Security Subsidiary which are currently in force.
(j) A list of all policies of insurance currently maintained
by Security or any Security Subsidiary and a list and description of all
unsettled or outstanding claims of Security or any Security Subsidiary which
have been, or to the best knowledge of Security, will be, filed with
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the companies providing insurance coverage for Security or any Security
Subsidiary (except for routine claims for health benefits).
(k) Each collective bargaining agreement to which Security or
any Security Subsidiary is a party and all affirmative action plans or programs
covering employees of Security or any Security Subsidiary, as well as all
employee handbooks, policy manuals, rules and standards of employment
promulgated by Security or any Security Subsidiary.
(l) Each lease or license with respect to real or personal
property, whether as lessor, lessee, licensor or licensee, with annual rental or
other payments due thereunder in excess of $10,000 to which Security or any
Security Subsidiary is a party, which does not expire within six months from the
date hereof and cannot be terminated upon thirty days (or less) written notice
without penalty.
(m) All employment, consulting and professional services
contracts to which Security or any Security Subsidiary is a party.
(n) All judgments, orders, injunctions, court decrees or
settlement agreements arising out of or relating to the labor and employment
practices or decisions of Security or any Security Subsidiary which, by their
terms, continue to bind or affect Security or any Security Subsidiary.
(o) All orders, decrees, memorandums, agreements or
understandings with regulatory agencies binding upon or affecting the current
operations of Security or any Security Subsidiary or any of their directors of
officers in their capacities as such.
(p) All trademarks, trade names, service marks, patents, or
copyrights, whether registered or the subject of an application for
registration, which are owned by Security or any Security Subsidiary or licensed
from a third party.
(q) All policies formally adopted by the Board of Directors of
Security or any Security Subsidiary as currently in effect with respect to
environmental matters and copies of all policies that have been in effect during
the last five (5) years regarding the performance of environmental
investigations of properties accepted as collateral for loans, including the
effective dates of all such policies.
(r) Each other agreement to which Security or any Security
Subsidiary is a party (which does not expire within six months from the date
hereof and cannot be terminated upon thirty days (or less) written notice
without penalty) which individually during its term could commit Security or any
Security Subsidiary to an expenditure (either individually or through a series
of installments) in excess of $25,000 or which creates a material right or
benefit to receive payments, goods or services, not referred to elsewhere in
this Section 3.20, including:
(i) each agreement of guaranty or
indemnification running to any person;
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(ii) each agreement containing any covenant
limiting the right of Security or any
Security Subsidiary to engage in any line of
business or to compete with any person;
(iii) each agreement with respect to any license,
permit and similar matter that is necessary
to the operations of Security or any
Security Subsidiary;
(iv) each agreement that requires the consent or
approval of any other party in order to
consummate the Merger or the Bank Merger;
(v) each agreement relating to the servicing of
loans and each mortgage forward commitment
and similar agreement pursuant to which
Security or any Security Subsidiary sells to
others mortgages which it originates;
(vi) each contract relating to the purchase or
sale of financial or other futures, or any
put or call option relating to cash,
securities or commodities and each
Derivative Security and each agreement or
arrangement described in Section 3.16(d)
hereof; and
(vii) each contract or agreement (with the
exception of the Federal National Mortgage
Association or Federal Home Loan Mortgage
Corporation Seller's Guide), including each
contract or agreement pursuant to which
Security or any Security Subsidiary has
sold, transferred, assigned or agreed to
service any loan, which provides for any
recourse obligation on the part of Security
or any Security Subsidiary; the name and
address of each person which might or could
have been entitled to recourse against
Security or any Security Subsidiary; and the
monetary amount of each actual or potential
recourse obligation under each such contract
or agreement.
SECTION 3.21 DEFAULTS. There has not been any default in any material
obligation to be performed by Security or any Security Subsidiary under any
material contract or commitment, and neither Security or any Security Subsidiary
has waived, and will not waive prior to the Effective Time, any material right
under any material contract or commitment. To the best knowledge of Security, no
other party to any material contract or commitment is in default in any material
obligation to be performed by such party.
SECTION 3.22 OPERATIONS SINCE JUNE 30, 1996. Between June 30, 1996 and
the date of this Agreement, except as set forth in Section 3.22 of the Security
Disclosure Schedule, there has not been:
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(a) any material increase in the compensation payable or to
become payable by Security or any Security Subsidiary to any executive officer
or director other than normal annual salary and bonus increases;
(b) any payment of dividends or other distributions by
Security to its stockholders or any redemption by Security of its capital stock;
(c) any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind of or on any asset, tangible or intangible, of Security
or any Security Subsidiary, except the following (each of which, whether arising
before or after the date hereof, is herein referred to as a "Security Permitted
Lien"): (i) liens arising out of judgments or awards in respect of which
Security or any Security Subsidiary is in good faith prosecuting an appeal or
proceeding for review and in respect of which it has secured a subsisting stay
of execution pending such appeal of proceeding; (ii) liens for Taxes,
assessments, and other governmental charges or levies, the payment of which is
not past due, or as to which Security or any Security Subsidiary is diligently
contesting in good faith and by appropriate proceeding either the amount thereof
or the liability therefor or both; (iii) deposits, liens or pledges to secure
payments of worker's compensation, unemployment insurance, pensions, or other
social security obligations, or the performance of bids, tenders, leases,
contracts (other than contracts for the payment of money), public or statutory
obligations, surety, stay or appeal bonds, or similar obligations arising in the
ordinary course of business; (iv) zoning restrictions, easements, licenses and
other restrictions on the use of real property or any interest therein, or minor
irregularities in title thereto, which do not materially impair the use of such
property in the operation of the business of Security or any Security Subsidiary
or the merchantability or the value of such property or interest therein for the
purpose of such business; (v) purchase money mortgages or other purchase money
or vendor's liens or security interest (including finance leases), provided that
no such mortgage, lien or security interest shall extend to or cover any other
property of Security or any Security Subsidiary other than that so purchased;
and (vi) pledges and liens given to secure deposits and other liabilities of
Security or any Security Subsidiary arising in the ordinary course of its
banking business;
(d) any creation or assumption of indebtedness (including the
extension or renewal of any existing indebtedness, or the increase thereof) by
Security or any Security Subsidiary for borrowed money, or otherwise, other than
in the ordinary course of business, none of which (except those which are being
disputed in good faith) is in default;
(e) the establishment of any new, or increase in the formula
for contributions to or benefits under any existing, retirement, pension, profit
sharing, stock bonus, savings or thrift plan, or any similar plan, whether
funded or unfunded and whether qualified or unqualified (within the meaning of
the Code) by Security or any Security Subsidiary;
(f) any action by Security or any Security Subsidiary seeking
any cancellation of, or decrease in the insured limit under, or increase in the
deductible amount or the insured's retention (whether pursuant to coinsurance or
otherwise) of or under, any policy of insurance maintained directly or
indirectly by Security or any Security Subsidiary on any of their respective
assets or businesses, including fire and other hazard insurance on its assets,
automobile liability
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insurance, general public liability insurance, and directors' and officers'
liability insurance; and if an insurer takes any such action, Security shall
promptly notify WesterFed;
(g) any change in Security's independent auditors, historic
methods of accounting (other than as required by GAAP or regulatory accounting
principles), or in its system for maintaining its equipment and real estate;
(h) any purchase, whether for cash or secured or unsecured
obligations (including finance leases) by Security or any Security Subsidiary,
of any fixed asset which either (i) has a purchase price individually or in the
aggregate in excess of $25,000, or (ii) is outside of the ordinary course of
business;
(i) any sale or transfer of any asset in excess of $25,000 of
Security or any Security Subsidiary or outside of the ordinary course of
business with the exception of loans and marketable securities that are held for
sale and sold in the ordinary course of business at market prices;
(j) any cancellation or compromise of any debt to, claim by or
right of, Security or any Security Subsidiary except in the ordinary course of
business;
(k) any amendment or termination of any material contract or
commitment to which Security or any Security Subsidiary is a party, other than
in the ordinary course of business;
(l) any material damage or destruction to any material assets
or property of Security or any Security Subsidiary whether or not covered by
insurance; or
(m) any event or condition of any character (other than
changes in legal, economic or other conditions which are not specially or
uniquely applicable to Security or any Security Subsidiary) materially adversely
affecting the business, assets, deposit liabilities, operations or financial
condition of Security on a consolidated basis.
SECTION 3.23 CORPORATE RECORDS. To the best knowledge of Security's
management, the corporate record books, transfer books and stock ledgers of
Security and each Security Subsidiary are complete and accurate in all material
respects and reflect all meetings, consents and other material actions of the
organizers, incorporators, stockholders, Boards of Directors and committees of
the Boards of Directors of Security and each Security Subsidiary, and all
transactions in their respective capital stocks, since their respective
inceptions.
SECTION 3.24 UNDISCLOSED LIABILITIES. All Liabilities of Security and
the Security Subsidiaries have been reflected, disclosed or reserved against in
Security Financial Statements dated as of June 30, 1996 or in the notes thereto,
and Security and the Security Subsidiaries have no other Liabilities except (a)
Liabilities incurred since June 30, 1996 in the ordinary course of business, and
(b) as disclosed in Section 3.24 of the Security Disclosure Schedule.
SECTION 3.25 ASSETS.
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(a) Security and the Security Subsidiaries have good and
marketable title to their real properties, including any leaseholds, and their
other assets and properties, all as reflected as owned or held by Security or
any Security Subsidiary in the Security Financial Statements dated as of June
30, 1996, and those acquired since such date, except for (i) assets and
properties disposed of since such date in the ordinary course of business, and
(ii) Security Permitted Liens none of which, in the aggregate, except as set
forth in Section 3.25 of the Security Disclosure Schedule, are material to the
assets of Security on a consolidated basis. All buildings, structures, fixtures
and appurtenances comprising part of the real properties of Security and the
Security Subsidiaries (whether owned or leased) are in good operating condition
and have been well maintained, reasonable wear and tear excepted. Title to all
real property owned by Security and the Security Subsidiaries is held in fee
simple, except as otherwise noted in the Security Financial Statements dated as
of June 30, 1996, or as set forth in Section 3.25 of the Security Disclosure
Schedule. Security or the Security Subsidiaries have title or other rights to
its assets sufficient in all material respects for the conduct of their
respective businesses as presently conducted, and except as set forth in the
Security Financial Statements dated as of June 30, 1996 or in Section 3.25 of
the Security Disclosure Schedule, free, clear and discharged of and from any and
all liens, charges, encumbrances, security interests and/or equities which are
material to Security or any Security Subsidiary.
(b) All leases pursuant to which Security or any Security
Subsidiary, as lessee, leases real or personal property which are material to
the business of Security on a consolidated basis are, to the best knowledge of
Security, valid, effective, and enforceable against the lessor in accordance
with their respective terms. There is not under any of such leases any existing
default, or any event which with notice or lapse of time or both would
constitute a default, with respect to either Security or any Security
Subsidiary, or to the best knowledge of Security, the other party. Except as
disclosed in Section 3.25 of the Security Disclosure Schedule, none of such
leases contains a prohibition against assignment by Security or any Security
Subsidiary, by operation of law or otherwise, or any other provision which would
preclude the surviving entity in the Merger and Bank Merger or any WesterFed
Subsidiary from possessing and using the leased premises for the same purposes
and upon the same rental and other terms upon the consummation of the Merger and
the Bank Merger as are applicable to the use by Security or any Security
Subsidiary as of the date of this Agreement.
SECTION 3.26 INDEMNIFICATION. To the best knowledge of Security, except
as set forth in Section 3.26 of the Security Disclosure Schedule, no action or
failure to take action by any director, officer, employee or agent of Security
or any Security Subsidiary has occurred which would give rise to a claim or a
potential claim by any such person for indemnification from Security or any
Security Subsidiary under the corporate indemnification provisions of the
charter, bylaws, or Corporate Law applicable to Security or any Security
Subsidiary on the date of this Agreement.
SECTION 3.27 INSIDER INTERESTS. All outstanding loans and other
contractual arrangements (including deposit relationships) between Security or
any Security Subsidiary and any officer, director or employee of Security or any
Security Subsidiary conform to the applicable rules and regulations and
requirements of all applicable regulatory agencies which were in effect when
such loans and other contractual arrangements were entered into. Except as set
forth in
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Section 3.27 of the Security Disclosure Schedule, no officer, director or
employee of Security or any Security Subsidiary has any material interest in any
property, real or personal, tangible or intangible, used in or pertaining to the
business of Security or any Security Subsidiary.
ARTICLE IV.
COVENANTS OF SECURITY
SECTION 4.01 BUSINESS IN ORDINARY COURSE.
(a) Without the prior written consent of WesterFed, Security
shall not declare or pay any dividend or make any other distribution with
respect to its capital stock whether in cash, stock or other property, after the
date of this Agreement except regular periodic dividends in amounts (or, if
applicable, with such increases in amounts), and at points of time, not
inconsistent with past practices; provided, however, that (i) the foregoing
shall not be construed to prohibit the payment of the dividend declared by
Security on September 11, 1996, and (ii) the declaration of the last dividend by
Security prior to consummation of the Merger and the payment thereof shall be
coordinated with WesterFed so as to preclude duplication of dividend benefits.
(b) Security and the Security Subsidiaries shall continue to
carry on, after the date hereof, their respective businesses and the discharge
or incurring of obligations and liabilities, only in the usual, regular and
ordinary course of business, as heretofore conducted, and by way of
amplification and not limitation, Security and each of the Security Subsidiaries
will not, without the prior written consent of WesterFed:
(i) issue any capital stock or any options,
warrants, or other rights to subscribe for
or purchase capital stock or any securities
convertible into or exchangeable for any
capital stock, except pursuant to options
outstanding on the date hereof under the
Security Stock Option Plan;
(ii) directly or indirectly redeem, purchase or
otherwise acquire any capital stock or
ownership interests of Security or any of
the Security Subsidiaries;
(iii) effect a reclassification, recapitalization,
split-up, exchange of shares, readjustment
or other similar change in or to any capital
stock or otherwise reorganize or
recapitalize;
(iv) change its Articles of Incorporation,
Charter, or Bylaws;
(v) enter into any employment agreement (except
as otherwise permitted pursuant in Section
5.13(b) of this Agreement), severance
agreement, change of control agreement, or
plan relative to the foregoing; or grant any
increase (other than ordinary and normal
increases consistent with past practices) in
the
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compensation payable or to become payable to
directors, officers or employees except as
required by law; pay or agree to pay any
bonus inconsistent with past practices, or
adopt or make any material change in any
bonus, insurance, pension, or other Security
Benefit Plan; or, except as required by law
or necessary in connection with insurance
requirements, adopt any change to any
Security Qualified Plan;
(vi) except for the short-term renewal of Federal
Home Loan Bank ("FHLB") advances outstanding
at the date of this Agreement, raising
short-term funds against its existing line
of credit with the FHLB, and engaging in
repurchase transactions and deposit-taking
in the ordinary course of its business,
borrow or agree to borrow any funds or
indirectly guarantee or agree to guarantee
any obligations of others;
(vii) make or commit to make any new loan or
letter of credit or any new or additional
discretionary advance under any existing
line of credit, in a principal amount in
excess of $500,000 or that would increase
the aggregate credit outstanding to any one
borrower (or group of affiliated borrowers)
to more than $1,500,000 (excluding for this
purpose any accrued interest or overdrafts),
without the prior written consent of
WesterFed acting through its Chief Executive
Officer in a written notice to Security,
which approval shall not be unreasonably
withheld and approval or rejection shall be
given within two business days after
delivery by Security to such officer of
WesterFed of the complete loan package;
(viii) make any changes in its policies concerning
which persons may approve loans;
(ix) enter into any securities transaction for
its own account or purchase or otherwise
acquire any investment security for its own
account, provided that (A) Security and the
Security Subsidiaries may enter into
transactions for its own account involving,
and purchase or sell for its own account,
U.S. Treasury obligations and securities
issued or guaranteed by the Government
National Mortgage Association, the Federal
National Mortgage Association or the Federal
Home Loan Mortgage Corporation, (B) Security
and the Security Subsidiaries may make
deposits in an overnight account at the FHLB
of Seattle, and (C) WesterFed's consent to
transactions otherwise restricted by this
paragraph (ix) shall not be unreasonably
withheld or delayed;
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(x) increase or decrease the rate of interest
paid on time deposits or on certificates of
deposit, except in a manner and pursuant to
policies consistent with past practices;
(xi) enter into, modify or extend any agreement,
contract or commitment out of the ordinary
course of business or having a term in
excess of six months and involving an
expenditure in excess of ten thousand
dollars ($25,000), other than letters of
credit, loan agreements, deposit agreements,
and other lending, credit and deposit
documents made in the ordinary course of
business;
(xii) except in the ordinary course of business,
place on any of its assets or properties any
mortgage, pledge, lien, charge, or other
encumbrance;
(xiii) cancel any material indebtedness owing to it
or any material claims which it may possess
or waive any rights of material value;
(xiv) sell or otherwise dispose of any real
property or any material amount of tangible
or intangible personal property other than
(A) properties acquired in foreclosure or
otherwise in the ordinary collection of
indebtedness owed to Security Bank, (B)
student loans, or (C) loans which are held
for sale by Security Bank and are sold in
the secondary market within sixty (60) days
of origination;
(xv) foreclose upon or otherwise take title to or
possession or control of any real property
without first obtaining a phase one
environmental report thereon; provided,
however, that Security Bank and its
Subsidiaries shall not be required to obtain
such a report with respect to single family,
non-agricultural residential property of one
acre or less to be foreclosed upon unless it
has reason to believe that such property
might contain Hazardous Substances;
(xvi) knowingly or willfully commit any act or
fail to commit any act which will cause a
material breach of any material agreement,
contract or commitment;
(xvii) violate any law, statute, rule, governmental
regulation, or order, which violation might
have a Material Adverse Effect on Security;
(xviii) purchase any real or personal property or
make any capital expenditure where the
amount paid or committed therefor is in
excess of twenty-five thousand dollars
($25,000), except for outstanding
commitments set forth in Section 3.20 of the
Security Disclosure Schedule;
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(xix) in the case of Security Bank, voluntarily
make any material changes in or to its asset
and deposit mix;
(xx) engage in any activity or transaction
outside the ordinary course of business;
(xxi) enter into or acquire, or modify, amend or
extend the terms of any existing,
Derivative Securities; or
(xxii) enter into any new, or modify, amend or
extend the terms of any existing, contracts
relating to the purchase or sale of
financial or other futures, or any put or
call option relating to cash, securities or
commodities.
(c) Security and the Security Subsidiaries shall not, without
the prior written consent of WesterFed, willfully engage in any transaction or
willfully take any action that would render untrue any of the representations
and warranties of Security contained in Article III hereof, if such
representations and warranties were given as of the date of such transaction or
action.
(d) Security will, and will cause each of the Security
Subsidiaries to, use its best efforts to maintain its respective properties and
assets in their present state of repair, order and condition, reasonable wear
and tear excepted, and to maintain and keep in full force and effect all
policies of insurance presently in effect, including the insurance of accounts
with the FDIC. Security will, and will cause each of the Security Subsidiaries
to, take all requisite action (including the making of claims and the giving of
notices) pursuant to its directors' and officers' liability insurance policy or
policies in order to (i) increase by $1,000,000 the amount of coverage available
under such policy or policies, and (ii) preserve all rights thereunder with
respect to all matters known by Security which could reasonably give rise to a
claim prior to the Effective Time.
(e) Security shall promptly notify WesterFed in writing of the
occurrence of any matter or event known to and directly involving Security or
any Security Subsidiary that is reasonably likely to result in a Material
Adverse Effect on Security or impair the ability of Security to consummate the
transactions contemplated herein.
(f) Security shall not make or cause to be made any material
change to the credit underwriting policies of Security Bank without the prior
written consent of WesterFed, which consent shall not be unreasonably withheld
or delayed.
(g) Security shall provide to WesterFed such reports on
litigation involving Security and each of the Security Subsidiaries as WesterFed
shall reasonably request, provided that Security shall not be required to
divulge information to the extent that, in the good faith opinion of its
counsel, by doing so, it would risk waiver of the attorney-client privilege to
its detriment.
SECTION 4.02 CONFORMING ACCOUNTING AND RESERVE POLICIES; RESTRUCTURING
EXPENSES. At the request of WesterFed, Security shall cause Security Bank,
immediately prior to
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Closing and after satisfaction or waiver of the conditions to Closing set forth
in Article VI hereof, to establish and take such reserves and accruals as
WesterFed reasonably shall request to conform Security Bank's loan, accrual,
reserve and other accounting policies to the policies of Western; provided,
however, that such requested conforming adjustment shall not be taken into
account in determining whether Security has experienced a Material Adverse
Effect.
SECTION 4.03 CERTAIN ACTIONS. Neither Security nor any of the Security
Subsidiaries shall (a) solicit, initiate, or encourage or take any other action
to facilitate (including by way of the disclosing or furnishing of any
information that it is not legally obligated to disclose or furnish) any inquiry
or the making of any proposal relating to any Acquisition Transaction, or (b)(i)
solicit, initiate, or encourage or take any other action to facilitate any
inquiry or proposal, or (ii) enter into any agreement, arrangement, or
understanding (whether written or oral) regarding any proposal or transaction,
providing for or requiring it to abandon, terminate or fail to consummate this
Agreement, or compensating it or any of the Security Subsidiaries under any of
the instances described in this clause. Security shall immediately instruct and
otherwise use its best efforts to cause its directors, officers, employees,
agents, advisors (including any investment banker, attorney, or accountant
retained by it or any of the Security Subsidiaries), consultants and other
representatives to comply with such prohibitions. Security shall immediately
cease and cause to be terminated any existing activities, discussions, or
negotiations with any parties conducted heretofore with respect to such
activities. Notwithstanding anything in this Agreement to the contrary, Security
may provide information at the request of or enter into negotiations with a
third party with respect to an Acquisition Transaction if the Board of Directors
of Security determines, in good faith after consultation with counsel, that the
exercise of its fiduciary duties to Security's stockholders under applicable law
requires it to take such action; provided, however, that Security may not, in
any event, provide to such third party any information which it has not provided
to WesterFed. Security shall promptly notify WesterFed orally and in writing in
the event it receives any such inquiry or proposal and shall provide reasonable
detail of all relevant facts relating to such inquiries. Nothing in this
Agreement shall prohibit accurate disclosure by Security in any document
(including the Proxy Statement and the Registration Statement) or other
disclosure under applicable law if in the opinion of the Board of Directors of
Security, disclosure is appropriate under applicable law.
ARTICLE V.
ADDITIONAL AGREEMENTS
SECTION 5.01 INSPECTION OF RECORDS; CONFIDENTIALITY.
(a) WesterFed and Security shall each afford to the other and
to the other's accountants, counsel and other representatives (and their
respective Subsidiaries) full access during normal business hours during the
period prior to the Effective Time to all of their respective properties, books,
contracts, commitments and records, including all attorneys' responses to
auditors' requests for information, and accountants' work papers, developed by
either of them or their respective Subsidiaries or their respective accountants
or attorneys, and will permit each other and their respective representatives to
discuss such information directly with each other's officers, directors,
employees, attorneys and accountants. WesterFed and
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Security shall each use their best efforts to furnish to the other all other
information concerning its business, properties and personnel as such other
party may reasonably request. Any failure to comply with this covenant shall be
disregarded if promptly corrected without material adverse consequences to the
other party. The availability or actual delivery of information shall not affect
the representations, warranties, covenants, and agreements of the party
providing such information that are contained in this Agreement or in any
certificates or other documents delivered pursuant hereto. Nothing in this
Section 5.01(a) shall be construed to obligate WesterFed or Security to take any
action or omit to take any action to the extent that, in the good faith opinion
of its counsel, such action or omission would risk waiver of the attorney-client
privilege.
(b) In the event that this Agreement is terminated, each party
shall return all non-public documents furnished hereunder, shall destroy all
documents or portions thereof prepared by such other party that contain
non-public information furnished by the other party pursuant hereto and, in any
event, shall hold all non-public information confidential unless or until such
information is or becomes a matter of public knowledge or is or becomes known to
the party receiving the information through persons other than the party
providing such information.
(c) Security shall consider in good faith any request by
WesterFed to allow a representative of WesterFed to attend as an observer (i)
any meeting of the Board of Directors of Security and the Security Subsidiaries,
(ii) any meeting of any committee of either such Board, including the audit and
executive committees thereof, or (iii) any other meeting of Security officials
at which policy is being made, except for any such meeting if and to the extent
that any amendment to this Agreement or the merits of any Acquisition
Transaction described in Section 4.03 hereof is discussed. Security shall give
reasonable notice to WesterFed of any such meeting and, if known, the agenda for
or business to be discussed at such meeting. Security shall provide to WesterFed
all written information provided to the directors on all such boards and
committees in connection with all such meetings or otherwise provided in writing
to the directors, and shall provide any other written financial reports or other
analysis prepared for senior management of Security. In the event that Security
grants any request by WesterFed to participate in any such meeting, it is
understood by the parties that WesterFed's representative will not have any
voting rights with respect to matters discussed at these meetings and that
WesterFed is not managing the business or affairs of Security or any Security
Subsidiary. All information obtained by WesterFed at or in connection with these
meetings shall be treated as confidential to the extent provided in Section
5.01(b) hereof.
SECTION 5.02 REGISTRATION STATEMENT; STOCKHOLDER APPROVAL. As soon as
practicable after the date of this Agreement, WesterFed shall file the
Registration Statement with the SEC, and Security and WesterFed shall use their
best efforts to cause the Registration Statement to become effective under the
Securities Act. WesterFed will take any action required to be taken under the
applicable blue sky or securities laws in connection with the issuance of the
shares of WesterFed Common Stock in the Merger. Each party shall furnish all
information concerning it and the holders of its capital stock as the other
party may reasonably request in connection with such action. WesterFed and
Security shall call the Stockholders' Meetings as soon as reasonably practicable
after the Registration Statement is declared effective by the SEC for the
purpose of voting upon this Agreement and the Merger. In connection with the
Stockholders' Meetings, (a)
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WesterFed and Security shall jointly prepare the Proxy Statement as part of the
Registration Statement and WesterFed and Security shall mail the Proxy Statement
to their respective stockholders, and (b) the Board of Directors of WesterFed
and Security shall recommend to their respective stockholders the approval of
this Agreement and the Merger; provided, however, that such recommendation by
Security may be withdrawn, modified, or amended, or not made at all, after the
receipt by Security of an offer to effect an Acquisition Transaction with
Security to the extent the Board of Directors of Security reasonably determines
that, in the exercise of its fiduciary obligations after consultation with
counsel, it has a duty to do so.
SECTION 5.03 AFFILIATE LETTERS. Security shall use its best efforts to
obtain and deliver to WesterFed as promptly as practicable after (and shall use
its reasonable best efforts to obtain and deliver within five (5) business days
after) the date hereof a signed representation letter substantially in the form
of Exhibit C from each executive officer and director of Security and each
stockholder of Security who Security reasonably believes is an "affiliate" of
Security within the meaning of such term as used in Rule 145 under the
Securities Act and shall use its best efforts to obtain and deliver to WesterFed
a signed representation letter substantially in the form of Exhibit C from any
person who becomes an executive officer or director of Security or any
stockholder who becomes such an "affiliate" after the date hereof as promptly as
practicable after (and shall use its reasonable best efforts to obtain and
deliver within five business days after) such person achieves such status.
SECTION 5.04 BROKERS. Each of WesterFed and Security represents, as to
itself and its Subsidiaries, that no agent, broker, investment banker or other
firm or person or officer or director of either is or will be entitled to any
broker's or finder's fee or any other commission, bonus or similar fee in
connection with any of the transactions contemplated by this Agreement, other
than as to WesterFed, Alex. Brown & Sons Incorporated and as to Security,
Montgomery Securities, which has provided advice to Security at its request in
connection with the Merger.
SECTION 5.05 COOPERATION. Each party to this Agreement covenants that
it will use its best efforts to bring about the transactions contemplated by
this Agreement as soon as practicable, unless this Agreement is terminated as
provided herein. Subject to the terms and conditions herein provided, each of
the parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Agreement at the earliest
practicable time. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Agreement,
the proper officers and/or directors of WesterFed or Security or their
respective Subsidiaries, as the case may be, shall take all such necessary
action. Each party shall use its reasonable best efforts to preserve for itself
and the other party each available legal privilege with respect to the
confidentiality of their negotiations and related communications, including the
attorney-client privilege.
SECTION 5.06 REGULATORY APPLICATIONS. WesterFed, Security and/or their
respective Subsidiaries shall, as soon as practicable after the date of this
Agreement, file all necessary applications with all applicable regulatory
authorities, and shall use their best efforts to respond as promptly as
practicable to all inquiries received concerning said applications. In the event
the
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Merger or Bank Merger is challenged or opposed by any administrative or legal
proceeding, whether by the United States Department of Justice or otherwise, the
determination of whether and to what extent to seek appeal or review,
administrative or otherwise, or other appropriate remedies shall be made by
WesterFed. The party filing an application shall deliver a copy thereof to the
other party in advance of filing and copies of all responses or written
communications from regulatory authorities relating to the Merger, the Bank
Merger or this Agreement (to the extent permitted by law), and the filing party
shall also deliver a final copy of each regulatory application to the other
party promptly after it is filed with the appropriate regulatory authority. Each
party shall advise the other party periodically of the status of each regulatory
application.
SECTION 5.07 FINANCIAL STATEMENTS AND REPORTS. From the date of this
Agreement and prior to the Effective Time: (a) each party will deliver to the
other, not later than ninety (90) days after the end of any fiscal year, its
Annual Report on Form 10-K (and all schedules and exhibits thereto) for the
fiscal period then ended prepared in conformity with GAAP, and not later than
forty-five (45) days after the end of any fiscal quarter, its thrift financial
reports as filed with the OTS; (b) each party will deliver to the other not
later than forty-five (45) days after the end of each quarter, its Report on
Form 10-Q for such quarter as filed with the SEC, which shall be prepared in
conformity with GAAP and the rules and regulations of the SEC; and (c) each
party will deliver to the other any and all other material reports filed with
the SEC, the FDIC, the OTS, or any other regulatory agency within five (5)
business days of the filing of any such report.
SECTION 5.08 NOTICE. At all times prior to the Effective Time, each
party shall promptly notify the other in writing of the occurrence of any event
which will or may result in the failure to satisfy any of the conditions
specified in Sections 6.01 or 6.02. In the event that either party becomes aware
of the occurrence or impending occurrence of any event which would constitute or
cause a breach by it of any of its representations and warranties, covenants or
agreements herein in any material respect, or would have constituted or caused a
breach by it of its representations and warranties, covenants or agreements
herein in any material respect, had such an event occurred or been known prior
to the date hereof, said party shall immediately give detailed and written
notice thereof to the other party, and shall, unless the same has been waived in
writing by the other party, use its reasonable efforts to remedy the same within
30 days, provided that such efforts, if not successful, shall not be deemed to
satisfy any condition precedent to the Merger.
SECTION 5.09 PRESS RELEASE. Except as provided in Section 4.03(a) or as
otherwise reasonably determined by a party to comply with its legal obligations,
at all times prior to the Effective Time, each party shall mutually agree with
the other prior to the issuance of any press release or other information to the
press or any third party for general circulation with respect to this Agreement
or the transactions contemplated hereby.
SECTION 5.10 DELIVERY OF SUPPLEMENTS TO DISCLOSURE SCHEDULES. Five (5)
business days prior to the Effective Time, each party will supplement or amend
its Disclosure Schedule with respect to any matter hereafter arising which, if
existing or occurring at or prior to the date of this Agreement, would have been
required to be set forth or described in such Disclosure Schedule or which is
necessary to correct any information in the Disclosure Schedule or in any
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representation and warranty made by the disclosing party which has been rendered
inaccurate thereby. For purposes of determining the accuracy of the
representations and warranties of WesterFed and Security contained,
respectively, in Articles II and III hereof in order to determine the
fulfillment of the conditions set forth in Sections 6.01(a) and 6.02(a) as of
the date of this Agreement, the Disclosure Schedule of each party shall be
deemed to include only that information contained therein on the date it is
initially delivered to the other party.
SECTION 5.11 LITIGATION MATTERS. Security will consult with WesterFed
about any proposed settlement, or any disposition of, any litigation involving
amounts in excess of $10,000.
SECTION 5.12 NOTICE OF MATERIAL ADVERSE EFFECT. WesterFed shall
promptly notify Security in writing of the occurrence of any matter or event
known to and directly involving WesterFed or any WesterFed Subsidiary that is
reasonably likely to result in a Material Adverse Effect on WesterFed or impair
the ability of WesterFed to consummate the transactions contemplated herein.
SECTION 5.13 OPTIONS; EMPLOYMENT AGREEMENTS; BENEFITS AND RELATED
MATTERS.
(a) SECURITY STOCK OPTIONS HELD BY NON-EMPLOYEES. At the
Effective Time, by virtue of the Merger, and without any action on the part of
any person or entity, each Security Stock Option outstanding on the date hereof
and remaining outstanding immediately prior to the Effective Time and held by a
holder who is not an employee of Security or any Security Subsidiary immediately
prior to the Effective Time shall be converted into and become a right to
receive from WesterFed, whether or not the option is then exercisable or vested,
a cash payment in an amount equal to the product of (A) the number of shares of
Security Common Stock subject to such option immediately prior to the Effective
Time, and (B) the excess, if any, of $30 over the exercise price per share of
such option, net of any cash which must be withheld under federal and state
income and employment tax requirements. Such cash payments shall be in
consideration of, and shall result in, the settlement and cancellation of all
such options. As a condition to the receipt of a cash payment in cancellation of
options, each such holder of a Security Stock Option shall execute a
cancellation agreement in the form of Exhibit D.
(b) SECURITY STOCK OPTIONS HELD BY EMPLOYEES. At the Effective
Time, by virtue of the Merger, and without any action on the part of any person
or entity, each Security Stock Option outstanding on the date hereof and
remaining outstanding immediately prior to the Effective Time and held by a
holder who is an employee of Security or a Security Subsidiary immediately prior
to the Effective Time shall be converted into and become, upon the election of
such holder, either the right to receive cash on the terms set forth in Section
5.13(a) or an option to purchase shares of WesterFed Common Stock on the same
terms as are in effect with respect to the Security Stock Option immediately
prior to the Effective Time, except that (i) each such converted option will be
exercisable solely for shares of WesterFed Common Stock, (ii) the number of
shares of WesterFed Common Stock subject to such converted option shall be equal
to the number of shares of Security Common Stock subject to the Security Stock
Option immediately prior to the Effective Time multiplied by the Exchange Ratio,
the product being rounded, if necessary, up or down to the nearest whole share,
and (iii) the per-share exercise price under each such converted option shall be
adjusted by dividing the per-share exercise price of the
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Security Stock Option by the Exchange Ratio, and rounding up to the nearest
cent. The failure of any holder of a Security Stock Option to deliver to
WesterFed prior to the Effective Time written evidence of the election referred
to in this Section 5.13(b) shall be deemed to be an election by such holder to
receive, in exchange for such Security Stock Option, an option to purchase
shares of WesterFed Common Stock on the terms set forth in this Section 5.13(b).
As soon as practicable after the Effective Time, WesterFed shall take all action
necessary to register under the Securities Act the shares of WesterFed Common
Stock subject to options resulting from the conversion of Security Stock Options
pursuant to this Section 5.13(b).
(c) WRITTEN AGREEMENTS WITH EMPLOYEES. Simultaneously with the
execution of this Agreement, Western and the seven (7) Security/Security Bank
employees listed in Exhibit E shall execute new employment agreements in the
form attached to Exhibit E, which new employment agreements shall supersede and
replace the existing employment agreements of said employees at the Effective
Time.
(d) CONTINUING EMPLOYEES. To the extent permitted by
applicable law, the former employees of Security and the Security Subsidiaries
who become employees of WesterFed or any WesterFed Subsidiary (the "Continuing
Employees") shall continue to participate in the Security Benefit Plans.
WesterFed or any WesterFed Subsidiary may amend or terminate any Security
Benefit Plan at any time, provided, that if the termination or amendment
adversely affects the benefits provided to the Continuing Employees, WesterFed
or a WesterFed Subsidiary shall provide the Continuing Employees with benefits
that are substantially equivalent to the benefits being received by other
similarly situated employees of WesterFed or a WesterFed Subsidiary under
comparable plans then in effect. Neither WesterFed nor any WesterFed Subsidiary
shall amend any Security Qualified Plan in a manner which adversely affects the
benefits to participants therein, except (i) to comply with applicable laws and
regulations including the Code and ERISA, or (ii) when a similar amendment is
being made to a comparable WesterFed Qualified Plan. Nothing herein shall
preclude WesterFed or a WesterFed Subsidiary from terminating a Security
Qualified Plan or merging a Security Qualified Plan into a WesterFed Qualified
Plan, provided that in doing so WesterFed complies with the applicable
comparability test under the Code, ERISA and any other applicable laws and
regulations and the other provisions of this paragraph. Whenever a Continuing
Employee becomes a participant in a WesterFed Benefit Plan, such Continuing
Employee shall receive full credit for his past service with Security or a
Security Subsidiary for purposes of determining eligibility to participate in
and the vesting benefits of such WesterFed Benefit Plan (but not for the purpose
of accrual of benefits thereunder). In such regard, years of service with
Security or any Security Subsidiary shall be deemed service with WesterFed or a
WesterFed Subsidiary. Continuing Employees will not be subject to any exclusion
or penalty for pre-existing conditions that were covered under the Security
health plan immediately prior to the Effective Time or any waiting period
relating to coverage under the WesterFed health plan.
SECTION 5.14 EXTENT OF KNOWLEDGE. For purposes of this Agreement and
any other certificate or document delivered by one party to the other pursuant
hereto, the "best knowledge" of WesterFed or Security shall be limited to
matters actually known to each of its directors and each of its officers holding
the position of Senior Vice President or above.
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SECTION 5.15 TAX TREATMENT. Neither Security or any of the Security
Subsidiaries, nor WesterFed or any of the WesterFed Subsidiaries, shall
voluntarily take any action which would disqualify the Merger or Bank Merger as
a "reorganization" pursuant to Section 368(a) of the Code.
SECTION 5.16 STOCK EXCHANGE LISTING. WesterFed shall use its best
efforts to list on the Nasdaq National Market, subject to official notice of
issuance, the shares of WesterFed Common Stock to be issued in the Merger.
SECTION 5.17 DIRECTORS' AND OFFICERS' INDEMNIFICATION INSURANCE. For a
period of six years following the Effective Time, WesterFed shall indemnify,
defend and hold harmless the present and former directors, officers and
employees of Security and the Security Subsidiaries (each, an "Indemnified
Party") against all costs or expenses (including reasonable attorneys' fees),
judgments, fines, losses, claims, damages or liabilities incurred in connection
with any claim, action, suit, proceeding or investigation, whether civil,
criminal, administrative or investigative, and arising out of matters existing
or occurring at or prior to the Effective Time (including the transactions
contemplated by this Agreement and the agreements executed pursuant to this
Agreement), whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent that Security would have been permitted under
Montana law and its Articles of Incorporation or Bylaws in effect on the date of
this Agreement to indemnify such person (and WesterFed will also advance
expenses as incurred to the fullest extent permitted under applicable law so
long as the person to whom expenses are advanced provides an undertaking to
repay such advances if it is ultimately determined that such person is not
entitled to indemnification); provided, however, that (a) any determination
required to be made with respect to whether a person's conduct complies with the
standards set forth under Montana law and Security's Articles of Incorporation
and Bylaws shall be made by independent counsel mutually agreed upon between
WesterFed and the Indemnified Party, and (b) WesterFed shall be obligated
pursuant to this Section 5.17 to pay for only one firm of counsel for all
Indemnified Parties, unless an Indemnified Party shall have reasonably
concluded, based on the advice of counsel, that in order to be adequately
represented, separate counsel is necessary for such Indemnified Party, in which
case WesterFed shall be obligated to pay for such separate counsel. WesterFed
shall cause the persons serving as officers and directors of Security and the
Security Subsidiaries immediately prior to the Effective Time to be covered for
a period of six years following the Effective Time by the directors' and
officers' liability insurance policy maintained by WesterFed and Western
(provided that WesterFed may substitute or cause Security to substitute therefor
single premium tail coverage with a policy limit equal to Security's existing
annual coverage limit) with respect to acts or omissions occurring prior to the
Effective Time which were committed by such officers and directors in their
capacity as such, provided that the additional premium cost to WesterFed does
not exceed 300% of Security's present annual premium cost and that the insurance
is available.
ARTICLE VI.
CONDITIONS
SECTION 6.01 CONDITIONS TO THE OBLIGATIONS OF WESTERFED.
Notwithstanding any other provision of this Agreement, the obligations of
WesterFed to consummate the Merger are subject
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to the following conditions precedent (except as to those which WesterFed may
choose to waive in writing):
(a) Subject to the cure provisions set forth in Section 5.08,
all of the representations and warranties made by Security in this Agreement and
in any documents or certificates provided by Security shall have been true and
correct in all material respects as of the date of this Agreement and as of the
Effective Time as though made on and as of the Effective Time, except (i) to the
extent that such representations and warranties are by their express provisions
made as of a specified date, in which case such representations and warranties
shall have been true and correct in all material respects as of such specified
date, and (ii) for information contained in a subsequent Disclosure Schedule of
Security relating to an event or series of events arising after the date hereof
which does not have a Material Adverse Effect on Security;
(b) Subject to the cure provisions set forth in Section 5.08,
Security shall have performed in all material respects all obligations and shall
have complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it prior to or at
the Effective Time;
(c) Since the date hereof, Security shall not have suffered a
Material Adverse Effect;
(d) WesterFed shall have received the opinion of Graham &
Dunn, counsel to Security, in form and substance satisfactory to WesterFed;
(e) WesterFed shall have received from Hanson, Roybal, Lee &
Todd, Montana counsel for Security, a written opinion satisfactory in form and
substance to WesterFed, dated the Closing Date, with respect to (i) the
corporate status, corporate authority, good standing, capitalization, and
litigation proceedings of Security, (ii) the enforceability of the Agreement,
and (iii) and such other matters with respect to which legal opinions are
customarily given in transactions such as the Merger; and
(f) WesterFed shall have received a certificate signed by the
President and Chief Executive Officer of Security, dated as of the Effective
Time, certifying that based upon his best knowledge, the conditions set forth in
Sections 6.01(a), (b), and (c) hereof have been satisfied.
SECTION 6.02 CONDITIONS TO THE OBLIGATIONS OF SECURITY. Notwithstanding
any other provision of this Agreement, the obligations of Security to consummate
the Merger are subject to the following conditions precedent (except as to those
which Security may choose to waive in writing):
(a) Subject to the cure provisions set forth in Section 5.08,
all of the representations and warranties made by WesterFed in this Agreement
and in any documents or certificates provided by WesterFed shall have been true
and correct in all material respects as of the date of this Agreement and as of
the Effective Time as though made on and as of the Effective Time, except (i) to
the extent that such representations and warranties are by their
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express provisions made as of a specified date, in which case such
representations and warranties shall have been true and correct in all material
respects as of such specified date, and (ii) for information contained in a
subsequent Disclosure Schedule of WesterFed relating to an event or series of
events arising after the date hereof which does not have a Material Adverse
Effect on WesterFed;
(b) Subject to the cure provisions set forth in Section 5.08,
WesterFed shall have performed in all material respects all obligations and
shall have complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it prior to or at
the Effective Time;
(c) Since the date hereof, WesterFed shall not have suffered a
Material Adverse Effect;
(d) Security shall have received the opinion of Silver,
Freedman & Taff, L.L.P., counsel to WesterFed, in form and substance
satisfactory to Security; and
(e) Security shall have received a certificate signed by the
President and Chief Executive Officer of WesterFed, dated as of the Effective
Time, that based upon his best knowledge, the conditions set forth in Sections
6.02(a), (b), and (c) have been satisfied.
SECTION 6.03 CONDITIONS TO THE OBLIGATIONS OF THE PARTIES.
Notwithstanding any other provision of this Agreement, the obligations of
WesterFed on the one hand, and Security on the other hand, to consummate the
Merger are subject to the following conditions precedent (except as to those
which WesterFed or Security may choose to waive in writing):
(a) Each party to this Agreement shall have received from its
financial advisor a written fairness opinion, dated on or about the date on
which the Proxy Statement is distributed to such party's stockholders, to the
effect that the Merger Consideration is fair to such party's stockholders from a
financial point of view;
(b) As of the date of this Agreement, each member of the Board
of Directors of Security and any executive officer who is a stockholder of
Security owning 1,000 shares or more of Security Common Stock shall have
executed and delivered to WesterFed a Stockholder Voting Agreement in the form
of Exhibit F;
(c) As of the date of this Agreement, Security and WesterFed
shall execute and deliver to each other Stock Option Agreement #1 and Stock
Option Agreement #2, in the forms of Exhibits G and H, respectively;
(d) As of the date of the Agreement, the new employment
agreements referred to in Section 5.13(c) shall have been executed and delivered
by the parties named therein;
(e) No preliminary or permanent injunction or other order by
any federal or state court which prevents the consummation of the Merger or Bank
Merger shall have been issued and shall remain in effect;
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(f) The parties shall have received all applicable regulatory
approvals and consents to consummate the transactions contemplated in this
Agreement and all required waiting periods shall have expired;
(g) The Registration Statement shall have been declared
effective under the Securities Act and no stop orders shall be in effect and no
proceedings for such purpose shall be pending or threatened by the SEC;
(h) Each of WesterFed and Security shall have received from
Silver, Friedman & Taff, L.L.P. a written opinion, dated the Closing Date,
substantially to the effect that the Merger and the Bank Merger will each
constitute a "reorganization" within the meaning of Section 368(a) of the Code.
(i) The WesterFed Common Stock to be issued to holders of
Security Common Stock shall have been approved for listing on the Nasdaq
National Market subject to official notice of issuance; and
(j) There shall not have been any action taken or any statute,
rule, regulation or order enacted, promulgated or issued or deemed applicable to
the Merger by any federal or state government or governmental agency or
instrumentality or court, which would prohibit WesterFed's ownership or
operation of all or a material portion of the business or assets of Security, or
would compel WesterFed or Western to dispose of all or a material portion of the
business or assets of Security Bank or would prohibit the Bank Merger, as a
result of this Agreement, or which would render WesterFed or Security unable to
consummate the transactions contemplated by this Agreement;
ARTICLE VII.
TERMINATION; AMENDMENT; WAIVER
SECTION 7.01 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time:
(a) By the mutual written consent of the Boards of Directors
of WesterFed and Security;
(b) At any time prior to the Effective Time, by WesterFed or
Security if there shall have been a final judicial or regulatory determination
(as to which all periods for appeal shall have expired and no appeal shall be
pending) that any material provision of this Agreement is illegal, invalid or
unenforceable (unless the enforcement thereof is waived by the affected party)
or denying any regulatory application the approval of which is a condition
precedent to either party's obligations hereunder;
(c) At any time on or before the date specified in 7.01(f)
hereof, by WesterFed or Security in the event that any of the conditions
precedent to the obligations of the other party
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to the Merger or Bank Merger are rendered impossible to be satisfied or
fulfilled by said date (other than by reason of a breach by the party seeking to
terminate);
(d) By either party at any time after the stockholders of
WesterFed or Security fail to approve this Agreement and the Merger by the
required vote at the respective Stockholders' Meetings;
(e) By WesterFed or Security, in the event of a material
breach by the other party of any representation, warranty, covenant or agreement
contained herein or in any Schedule or document delivered pursuant hereto, which
breach would result in the failure to satisfy the closing condition set forth in
Section 6.01(a) or 6.01(b), in the case of WesterFed, or Section 6.02(a) or
6.02(b), in the case of Security, and which breach cannot be or is not cured
within thirty (30) days after written notice of such breach is given by the
non-breaching party to the party committing such breach; or
(f) By either party on or after 270 days following the date of
this Agreement, in the event the Merger has not been consummated by such date
(provided that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein); or
(g) By Security if:
(i) the Average WesterFed Stock Price
is less than $11.75; and
(ii) the Board of WesterFed does not
increase the Exchange Ratio such
that the shareholders of Security
who are entitled to exchange their
shares for WesterFed Common Stock
will receive a Stock Distribution
equal to $27.01 per share based
upon the Average WesterFed Stock
Price.
In the event either party elects to effect any termination
pursuant to Section 7.01(b) through 7.01(g) above, it shall give written notice
to the other party hereto specifying the basis for such termination and
certifying that such termination has been approved by the vote of a majority of
the members of its Board of Directors.
SECTION 7.02 LIABILITIES AND REMEDIES.
(a) In the event that this Agreement is terminated by a party
(the "Aggrieved Party") solely by reason of the willful material breach by the
other party ("Breaching Party") of any of its representations, warranties,
covenants or agreements contained herein, then the Aggrieved Party shall be
entitled to such remedies and relief against the Breaching Party as are
available at law or in equity. Moreover, the Aggrieved Party without terminating
this Agreement shall be entitled to specifically enforce the terms hereof
against the Breaching Party in order to cause the Merger and the Bank Merger to
be consummated. Each party acknowledges that there is not an adequate remedy at
law to compensate the other party relating to the non-consummation of the Merger
and the Bank Merger. To this end, each party, to the extent permitted by law,
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irrevocably waives any defense it might have based on the adequacy of a remedy
at law which might be asserted as a bar to specific performance, injunctive
relief or other equitable relief.
(b) Except as provided in Section 7.02(a), each of the parties
to this Agreement shall bear its own costs, fees and expenses incurred in
connection with this Agreement and the transactions contemplated hereby;
provided, however, all application and filing fees to be paid by either party to
regulatory authorities in connection with the transactions contemplated by this
Agreement and the printing and mailing costs of the Proxy Statement shall be
shared equally by the parties.
SECTION 7.03 SURVIVAL OF AGREEMENTS. In the event of termination of
this Agreement by either WesterFed or Security as provided in Section 7.01, this
Agreement shall forthwith become void and have no effect except that the
agreements contained in Sections 5.01(b) and 7.02 hereof shall survive the
termination hereof.
SECTION 7.04 AMENDMENT. This Agreement may be amended by the parties
hereto by action taken by their respective Boards of Directors at any time
before or after approval hereof by their stockholders but, after such
stockholder approval, no amendment shall be made which changes the form of
consideration or the value of the consideration to be received by the
stockholders of Security without the approval of the stockholders of Security.
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto. WesterFed and Security may, without
approval of their respective Boards of Directors, make such changes to this
Agreement, not inconsistent with the purposes hereof, as may be required to
effect or facilitate any regulatory approval or acceptance of the Merger, the
Bank Merger or this Agreement or to effect or facilitate any regulatory or
governmental filing or recording required for the consummation of any of the
transactions contemplated hereby.
SECTION 7.05 WAIVER. Any term, provision or condition of this Agreement
(other than the requirement of stockholders' approval) may be waived in writing
at any time by the party which is entitled to the benefits hereof. Each and
every right granted to any party hereunder, or under any other document
delivered in connection herewith or therewith, and each and every right allowed
it by law or equity, shall be cumulative and may be exercised from time to time.
The failure of either party at any time or times to require performance of any
provision hereof shall in no manner affect such party's right at a later time to
enforce the same. No waiver by any party of a condition or of the breach of any
term, covenant, representation or warranty contained in this Agreement, whether
by conduct or otherwise, in any one or more instances shall be deemed to be or
construed as a further or continuing waiver of any such condition or breach or a
waiver of any other condition or of the breach of any other term, covenant,
representation or warranty of this Agreement. No investigation, review or audit
by WesterFed of Security or Security of WesterFed prior to or after the date
hereof shall estop or prevent either party from exercising any right hereunder
or be deemed to be a waiver of any such right.
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ARTICLE VIII.
GENERAL PROVISIONS
SECTION 8.01 SURVIVAL. None of the representations, warranties,
covenants and agreements of the parties in this Agreement or in any instrument
delivered by the parties pursuant to this Agreement (other than the agreements,
covenants and obligations set forth herein which are contemplated to be
performed after the Effective Time) shall survive the Effective Time, provided
that no such representations, warranties or covenants shall be deemed to be
terminated or extinguished so as to deprive WesterFed or Security (or any of
their respective directors, officers, employees or agents) of any defense in law
or equity which otherwise would be available against the claims of any person,
including any stockholder or former stockholder of either WesterFed of Security,
the aforesaid representations, warranties, and covenants being material
inducements to consummation by WesterFed, Security and the Surviving Corporation
of the Merger contemplated hereby.
SECTION 8.02 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally, by
facsimile transmission or by registered or certified mail to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice) and shall be deemed to be delivered on the date so delivered:
(a) if to WesterFed: Lyle R. Grimes
President and Chief Executive Officer
WesterFed Financial Corporation
100 East Broadway
Missoula, Montana 59802
copy to: Silver, Freedman & Taff
1100 New York Avenue, Suite 700 East
Washington, D.C. 20005
Attn: Barry Taff
(b) if to Security: David W. Jorgenson
President and Chief Executive Officer
Security Bancorp
219 North 26th Street
Billings, Montana
copy to: Graham & Dunn
1420 Fifth Avenue
Suite 3300
Seattle, WA 98101
Attention: Stephen M. Klein
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SECTION 8.03 APPLICABLE LAW. This Agreement shall be construed and
interpreted according to the laws of the State of Delaware without regard to
conflicts of laws principles thereof, except to the extent that the federal laws
of the United States apply.
SECTION 8.04 HEADINGS, ETC. The article headings and section headings
contained in this Agreement are inserted for convenience only and shall not
affect in any way the meaning or interpretation of this Agreement.
SECTION 8.05 SEVERABILITY. If any term, provision, covenant, or
restriction contained in this Agreement is held by a final and unappealable
order of a court of competent jurisdiction to be invalid, void, or
unenforceable, then the remainder of the terms, provisions, covenants, and
restrictions contained in this Agreement shall remain in full force and effect,
and shall in no way be affected, impaired, or invalidated unless the effect
would be to cause this Agreement to not achieve its essential purposes.
SECTION 8.06 ENTIRE AGREEMENT; BINDING EFFECT; NON-ASSIGNMENT;
COUNTERPARTS. Except as otherwise expressly provided herein, this Agreement
(including the documents and instruments referred to herein) (a) constitutes the
entire agreement between the parties hereto and supersedes all other prior
agreements and undertakings, both written and oral, between the parties, with
respect to the subject matter hereof; and (b) is not intended to confer upon any
other person any rights or remedies hereunder except as specifically provided
herein. This Agreement shall be binding upon and inure to the benefit of the
parties named herein and their respective successors. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
party hereto without the prior written consent of the other party hereto. This
Agreement may be executed in two or more counterparts which together shall
constitute a single agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed as of the day and year first above written.
WESTERFED FINANCIAL CORPORATION
By: /s/ Lyle R. Grimes
-------------------------------------
Lyle R. Grimes
President and Chief Executive Officer
/s/
- -------------------------------------
____________, Secretary
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SECURITY BANCORP
By: /s/ David W. Jorgenson
-------------------------------------
David W. Jorgenson
President and Chief Executive Officer
/s/
- -------------------------------------
Secretary
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<PAGE> 1
EXHIBIT 99.1
WESTERFED FINANCIAL CORPORATION AND
SECURITY BANCORP ANNOUNCE MERGER
Missoula, Montana -- September 25, 1996 -- WesterFed Financial
Corporation ("WesterFed") (Nasdaq: WSTR), the holding company for Western
Federal Savings Bank of Montana ("Western Federal"), and Security Bancorp
("Security") (Nasdaq: SFBM) announced today the signing of a definitive
agreement whereby Security will merge with WesterFed. Headquartered in
Billings, Montana, Security is the holding company for Security Bank FSB, which
has 16 offices located in 12 Montana communities. As of June 30, 1996, Security
had $372.2 million in assets, $289.2 million in deposits and $26.3 million of
tangible stockholders' equity. The combined company will be the largest
publicly traded banking institution headquartered in Montana, with combined
total consolidated assets approaching $1 billion, total deposits of
approximately $640 million, tangible stockholders' equity of approximately $82
million and 35 offices in 20 Montana communities throughout the state.
Under the terms of the agreement, Security shareholders may elect to
receive for each share of Security common stock held either $30.00 in cash, a
number of shares of WesterFed common stock equal to the "exchange ratio" or a
combination of cash and stock, subject to the stock component being 40% to 45%
of the total consideration. The "exchange ratio" is $30.00 divided by the
average closing price of WesterFed common stock for the twenty trading days
commencing thirty trading days prior to the closing. However, if the average
WesterFed stock price is (a) equal to or less than $13.05, the exchange ratio
will be 2.2989, (b) equal to or greater than $15.95 but not greater than
$17.50, the exchange ratio will be 1.8809, or (c) in excess of $17.50, the
exchange ratio will be (absent extraordinary circumstances) $32.91 divided by
the average price. Security may terminate the agreement if the average
WesterFed stock price is less
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<PAGE> 2
than $11.75 and WesterFed does not agree to an exchange ratio that produces a
value of $27.01 per share for the stock component of the merger consideration.
On September 24, 1996, WesterFed common stock closed at $15.25 per share.
Based on such value, the merger consideration, excluding the value of
outstanding Security stock options, is approximately $44 million as of such
date. The merger will be accounted for as a purchase.
The transaction will result in the issuance of approximately 1.3
million WesterFed shares, and is expected to be accretive to earnings per share
in the first full fiscal year of combined operations, assuming only modest cost
reductions. Market liquidity should be enhanced, with the increase in the
total number of shares outstanding from 4.4 million to approximately 5.7
million.
The merger will provide geographic diversity with minimal overlap of
existing branch facilities in most Montana markets and will allow the expansion
of Security's commercial banking to franchise into WesterFed's markets.
Security Bank's primary market, the Billings, Montana metropolitan area, and
the other areas in Montana served by Security Bank, have experienced
considerable economic growth during the last four years. From June 30, 1994
to June 30, 1996, Security's loans increased 60.2% from $117.1 million to
$187.6 million. Security's $64 million commercial and agricultural loan
portfolio will diversify WesterFed's balance sheet and is expected to increase
the loan portfolio yield and reduce interest rate sensitivity. The resulting
organization will be well capitalized, with a tangible equity to assets ratio of
approximately 9.0%.
WesterFed President/Chief Executive Officer Lyle R. Grimes stated,
"This community banking combination will increase the franchise value of
WesterFed and put a significant portion of our excess capital to work in the
Montana market. In addition to increasing our market share in key markets, this
transaction will bring a highly experienced group of commercial banking
officers, led by David W. Jorgenson, into the Western Federal operation.
Security Bank has
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<PAGE> 3
maintained steady earnings over the years while successfully developing a
significant commercial banking business. Security's acquisition of facilities
and deposits in Lewistown, Anaconda, and Butte from Norwest Corporation in
1994, along with the establishment of a substantial commercial banking business
in Billings, furthers significantly WesterFed's goal of becoming Montana's
preeminent community bank."
"The merger will bring together two of the best banking operations in
Montana," said David W. Jorgenson, Security's President and Chief Executive
Officer. "We are very pleased to join forces with WesterFed in a combination
which will benefit our respective communities, customers and shareholders. The
combined entity will be able to take advantage of cost efficiencies,
administrative and management enhancements and market synergies, which will
keep our operation competitive and enhance future earnings potential for
shareholders."
The transaction has been approved by the Boards of Directors of both
companies. In connection with the transaction, Security has granted WesterFed
mutually exclusive options, one of which is exercisable under certain limited
circumstances, to purchase up to 19.9% of Security's outstanding common stock
at $26.00 per share and the other (exercisable in the event that Security
stockholders fail to vote on the transaction or reject the transaction for any
reason) to purchase up to 5.98% of Security's outstanding common stock at
$24.00 per share. If WesterFed exercises its rights under one of the options,
it loses its rights under the other.
It is anticipated that WesterFed will expand its Board to include two
directors from Security, including Mr. Jorgenson, who will oversee the
expansion of commercial lending activities of the subsidiary finanical
institution. The merger is expected to be completed by the end of the first
quarter of 1997,
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subject to approval from the applicable regulatory authorities and the
shareholders of both WesterFed and Security.
WesterFed reported total assets of $563.9 million, total deposits of
$350.2 million and stockholders' equity of $78.6 million at June 30, 1996.
WesterFed currently serves Montana through its main office in Missoula and 18
branch offices and one loan servicing office.
CONTACT: Lyle R. Grimes, President/CEO
Dale W. Brevik, Vice President/Investor Relations
James A. Salisbury, Treasurer/Chief Financial Officer
(406) 721-5254
Statements contained in this press release that are not historical facts may be
forward-looking statements within the meaning of Section 21 E of the
Securities Exchange Act of 1934 and Section 27A of the Securities Act of 1933.
Such statements are subject to important factors that could cause actual results
to differ materially from those suggested in this press release, including the
following: regional and national economic conditions; changes in levels of
market interest rates; credit risks of real estate, consumer and other leading
activities; regulatory factors; and WesterFed's ability to achieve synergies
in the Security acquisition and to sustain or improve the performance of
Security.
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<PAGE> 1
E>
STOCK OPTION AGREEMENT #1
THIS STOCK OPTION AGREEMENT #1 (the "Agreement") is dated as of
September 24, 1996 between WesterFed Financial Corporation ("WesterFed"), a
Delaware corporation registered as a savings and loan holding company under the
Home Owner's Loan Act, as amended ("HOLA"), and Security Bancorp ("Bancorp"), a
Montana corporation registered as a savings and loan holding company under the
HOLA.
WITNESSETH
WHEREAS, the Boards of Directors of WesterFed and Bancorp have
approved an Agreement and Plan of Merger dated as of the date hereof (the
"Merger Agreement"), providing for the merger of Bancorp with and into
WesterFed (the "Merger"); and
WHEREAS, to further induce WesterFed to enter into the Merger
Agreement, WesterFed has required that Bancorp agree, and Bancorp has agreed,
to grant to WesterFed the option set forth herein to purchase shares of
Bancorp's authorized but unissued common stock, par value $1.00 per share
("Bancorp Common Stock").
NOW THEREFORE, in consideration of the premises herein contained,
the parties agree as follows:
l. Definitions. Capitalized terms defined in the Merger
Agreement and used herein shall have the same meaning as in the Merger
Agreement.
2. Grant of Options. Subject to the terms and conditions
set forth herein, Bancorp hereby grants to WesterFed an unconditional,
irrevocable option (the "Option") to purchase up to 390,642 shares of Bancorp
Common Stock (the "Option Shares") at an exercise price of $26.00 per share
(with the number of Option Shares and exercise price per share being subject to
adjustment pursuant to Section 7 hereof), payable in cash as provided in
Section 4 hereof; provided, however, that in the event Bancorp issues or agrees
to issue any shares of Bancorp Common Stock (except for shares issued pursuant
to options outstanding on the date hereof under Bancorp's 1993 Stock Option and
Stock Appreciation Rights Plan ("Bancorp Stock Options")) after the date hereof
at a price less than $26.00 per share (as adjusted pursuant to Section 7
hereof), the exercise price with respect to the Option Shares shall be equal to
such lesser price; provided further, that in no event shall the aggregate
number of Option Shares issuable under the Option exceed 19.9% of the number of
shares of Bancorp Common Stock then issued and outstanding after giving effect
to the issuance of Bancorp Stock Options and the Option Shares.
3. Exercise of Option.
(a) Expiration of Option. Subject to compliance with
applicable provisions of law, WesterFed may exercise the Option, in whole or in
part, at any time or from time to time after the occurrence of a Purchase Event
(as defined below); provided, however, that to the extent the Option shall not
have been previously exercised, it shall terminate and be of no further force
and effect
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<PAGE> 2
upon the earliest to occur of the following: (i) the Effective Time; (ii) the
termination of the Merger Agreement after approval of the Merger by the Bancorp
stockholders, except a termination by WesterFed pursuant to Section 7.01(e) of
the Merger Agreement; (iii) the termination of the Merger Agreement by Bancorp
pursuant to Section 7.01(e) thereof; (iv) the termination of the Merger
Agreement after the stockholders of WesterFed reject the Merger; (v) any other
termination of the Merger Agreement pursuant to Section 7.01 thereof except a
termination by WesterFed under Section 7.01(e), if no Purchase Event shall have
occurred prior to such termination; (vi) except as set forth in clauses (ii)
and (iii) of this Section 3(a), on the 730th day after the termination of the
Merger Agreement (such 730-day period after termination of the Merger Agreement
is referred to herein as the "Post-Termination Period") if no Purchase Event
has occurred during the term of the Merger Agreement or during the
Post-Termination Period; (vii) on the 730th day after the discontinuance of all
Purchase Events that occurred during the term of the Merger Agreement or during
the Post-Termination Period if a Purchase Event occurred during any such
period; or (viii) termination of the Option as provided in Section 10(b)
hereof.
(b) Purchase Event. As used herein, "Purchase Event" shall
mean any person (other than WesterFed or its Subsidiaries) shall have commenced
or initiated an Acquisition Transaction. If more than one of the transactions
giving rise to a Purchase Event under this Section 3(b) is undertaken or
effected, then all such transactions shall give rise only to one Purchase
Event, which Purchase Event shall be deemed continuing for all purposes hereof
until all such transactions are abandoned. As used in this Agreement, "person"
shall have the meanings specified in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended.
(c) Notice of Purchase Event. Bancorp shall notify WesterFed
promptly in writing of the occurrence of any Purchase Event; provided, however,
that the giving of such notice by Bancorp shall not be a condition to the right
of WesterFed to exercise the Option.
(d) Notice of Exercise. In the event WesterFed wishes to
exercise the Option, it shall send to Bancorp a written notice (the date of
which being herein referred to as the "Notice Date") specifying (i) the total
number of shares it will purchase pursuant to such exercise, and (ii) a place
and date not earlier than ten business days nor later than twenty business days
from the Notice Date for the closing of such purchase (the "Closing Date").
Notwithstanding the foregoing, if prior notification to or approval of the OTS
or any other regulatory agency is required in connection with such purchase,
WesterFed shall promptly file the required notice or application for approval
and shall expeditiously process the same, and the period of time that otherwise
would run pursuant to the preceding sentence shall run instead from the date on
which any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
4. Payment and Delivery of Certificates.
(a) Payment. At the closing referred to in Section 3(d)
hereof, WesterFed shall pay to Bancorp the aggregate purchase price for the
shares purchased pursuant to the exercise of the Option in immediately
available funds by a wire transfer to a bank designated by Bancorp;
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<PAGE> 3
provided that the failure or refusal of Bancorp to designate such a bank
account shall not preclude WesterFed from exercising the Option.
(b) Delivery of Certificate. At such closing, simultaneously
with the delivery of cash as provided in subsection (a), Bancorp shall deliver
to WesterFed a certificate or certificates representing the number of shares of
Bancorp Common Stock purchased by WesterFed, which certificates may bear the
legend set forth in Section 4(c) below, and WesterFed shall deliver to Bancorp
a letter agreeing that WesterFed will not offer to sell or otherwise dispose of
such shares in violation of this Agreement or applicable law or in a manner
that would result in WesterFed becoming an "underwriter" within the meaning of
that term under the Securities Act of 1933, as amended (the "Securities Act").
Bancorp shall pay all expenses and any and all United States federal, state and
local taxes and other charges that may be payable in connection with the
preparation, issuance and delivery of stock certificates under this Section 4
in the name of WesterFed or its assignee, transferee or designee. Upon the
giving by WesterFed to Bancorp of the written notice of exercise of the Option
provided for under Section 3(d) above and the tender of the applicable purchase
price in immediately available funds, WesterFed shall be deemed to be the
holder of record of the shares of Bancorp Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of Bancorp shall then
be closed or that certificates representing such shares of Bancorp Common Stock
shall not then be actually delivered to WesterFed.
(c) Restrictive legend. Certificates for Bancorp Common
Stock delivered at a closing hereunder may be endorsed with a restrictive
legend that shall read substantially as follows:
"The transfer of the shares represented by this
certificate is subject to certain provisions of an agreement between
the registered holder hereof and the Issuer, a copy of which agreement
is on file at the principal place of business of the Issuer, and to
resa1e restrictions arising under the Securities Act of 1933, as
amended, and any applicable state securities laws. A copy of such
agreement will be mailed to the holder hereof without charge within
five days after the receipt by the Issuer of a written request."
It is understood that (i) the reference to the resale restrictions of the
Securities Act in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if WesterFed shall have delivered to
Bancorp a copy of a letter from the staff of the SEC, or an opinion of counsel,
in form and substance reasonably satisfactory to Bancorp, to the effect that
such legend is not required for purposes of the Securities Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
5. Bancorp Representations. Bancorp hereby represents and
warrants to WesterFed as follows:
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<PAGE> 4
(a) Reservation of Shares. Bancorp has taken all necessary
corporate action to authorize and reserve for issuance a sufficient number of
shares of Bancorp Common Stock to satisfy its obligations upon the exercise of
the Option without additional authorization of Bancorp Common Stock after
giving effect to all other options, warrants, convertible securities and other
rights to purchase Bancorp Common Stock. Bancorp shall 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 Bancorp.
(b) Duly Authorized Shares. The shares of Bancorp Common
Stock to be issued upon exercise, in whole or in part, of the Option, when paid
for as provided herein, will be duly authorized, validly issued, fully paid and
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and will not be subject to any preemptive
rights.
(c) Additional Actions. Bancorp shall promptly take all
reasonable action as may from time to time be required to be taken by it
(including (A) complying with all pre-merger notification, reporting and
waiting period requirements applicable to it and (B) in the event that, under
the HOLA or a state thrift or banking law, prior approval of or notice to the
OTS or to any state or other federal regulatory authority is necessary before
the Option may be exercised, cooperating fully with WesterFed in preparing such
applications or notices and providing such information to the applicable
regulatory body as may be required) in order to permit WesterFed to exercise
the Option and Bancorp duly and effectively to issue shares of Bancorp Common
Stock pursuant thereto. Bancorp shall promptly take all other reasonable
action provided herein to protect the rights of WesterFed against dilution as
set forth in Section 7.
6. WesterFed Representations. WesterFed hereby represents
and warrants to Bancorp that WesterFed shall not transfer or otherwise dispose
of any shares purchased by WesterFed pursuant to this Agreement except in a
transaction registered or exempt from registration under the Securities Act.
7. Adjustment Upon Changes in Capitalization.
(a) Stock Dividends. In the event of any change in the
outstanding Bancorp Common Stock by reason of stock dividends, split- ups,
mergers, recapitalizations, combinations, exchanges of shares, or the like (but
excluding any exercise of Bancorp Stock Options)(each an "Adjustment Event"),
the type and number of shares subject to the Option, or the purchase price per
share, as the case may be, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing any such transaction so
that WesterFed shall receive upon exercise of the Option the number and class
of shares, other securities or property that WesterFed would have received in
respect of the shares of Bancorp Common Stock subject to the Option if the
Option had been exercised and the Bancorp Common Stock subject to the Option
had been issued to WesterFed immediately prior to such Adjustment Event or the
record date therefor, as applicable.
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(b) Issuance of Additional Shares. In the event that any
additional shares of Bancorp Common Stock are issued after the date of this
Agreement (other than pursuant to this Agreement or in connection with an
Adjustment Event or the exercise of Bancorp Stock Options), the number of
shares subject to the Option shall be adjusted after such issuance, so that it
equals 19.9% of the number of shares of Bancorp Common Stock then issued and
outstanding after giving effect to the issuance of the Option Shares; provided,
however, that nothing contained in this Section 7 shall be deemed to authorize
Bancorp to issue any shares of its Common Stock in breach of the provisions of
the Merger Agreement; and provided further, that in no event shall the number
of shares subject to the Option exceed 19.9% of Bancorp's issued and
outstanding Common Stock, after giving effect to the issuance of Bancorp Stock
Options and the Option Shares.
8. Registration Rights.
(a) Registration Procedure. If requested by WesterFed at any
time during the four-year period beginning on the date of the first acquisition
of any of the Option Shares, Bancorp, as expeditiously as possible, will use
its best efforts to effect the registration of the Option Shares, on a form of
general use under the Securities Act, in order to permit the sale or other
disposition of such shares in accordance with the intended method of sale or
other disposition requested by WesterFed and by any underwriter selected by
WesterFed; provided, however, that Bancorp shall not be required to register
the Option Shares under the Securities Act (i) on more than one occasion during
any calendar year or on more than two occasions during the term of this
Agreement, (ii) prior to the earlier of termination of the Merger Agreement
pursuant to Section 7 thereof or the occurrence of a Purchase Event, or (iii)
within 120 days after the effective date of a registration with respect to
which WesterFed exercised "piggy-back" rights under this Section 8(a). The
registrations effected under this Section 8(a) shall be at Bancorp's expense.
In connection with such registrations or any piggy-back registrations, each
party shall pay the fees and expenses of its own legal counsel, and WesterFed
shall pay all underwriting discounts and commissions applicable to the sale of
Option Shares. WesterFed shall provide such information as may be necessary
for Bancorp's preparation of the registration statement. Bancorp will use its
best efforts to cause such registration statement first to become effective and
then to remain effective for such period not in excess of 180 days from the day
such registration statement first becomes effective or such shorter time as may
be reasonably necessary to effect such sales or other dispositions. The
obligations of Bancorp hereunder to file a registration statement and to
maintain its effectiveness may be suspended for one or more periods of time
that do not exceed 180 days in the aggregate if the Board of Directors of
Bancorp shall have determined that the filing of such registration statement or
the maintenance of its effectiveness would require a special audit of Bancorp
or any of its Subsidiaries or the disclosure of nonpublic information that
would materially and adversely affect Bancorp. In addition to the foregoing,
WesterFed shall have unlimited piggy-back registration rights relating to the
Option Shares in connection with any registration of an underwritten public
offering of Bancorp Common Stock, and the costs of such piggy-back registration
shall be borne by Bancorp. The foregoing notwithstanding, if, at the time of
any request by WesterFed for piggy-back registration of the Option Shares as
provided above, in the good faith judgment of the managing underwriter or
managing underwriters, or, if none, the sole underwriter or underwriters of
such offering, the inclusion of the Option Shares would interfere with the
successful marketing of the shares of Bancorp Common Stock offered by Bancorp,
the number of shares represented by Option Shares
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which are to be covered in the registration statement may be reduced; provided,
however, that after any such required reduction of the number of Option Shares
to be included in such offering for the account of WesterFed shall constitute
at least 5% of the total number of shares to be sold by WesterFed and Bancorp
in such offering in the aggregate; and provided further, that if such reduction
occurs, then Bancorp shall file a registration statement for the balance as
promptly as practical and no reduction shall thereafter occur.
(b) Registration Indemnification. In connection with the
filing of any such registration statement, Bancorp shall indemnify and hold
harmless WesterFed or its transferee against any losses, claims, damages or
liabilities, joint or several, to which WesterFed or its transferee may become
subject, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement,
including any prospectus included therein, or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; and Bancorp shall reimburse
WesterFed or its transferee for any legal or other expense reasonably incurred
by WesterFed or its transferee in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that
Bancorp shall not be liable in any case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or omission or an alleged untrue statement or omission made in such
registration statement, and any prospectus included therein, or any amendment
or supplement thereto, in reliance upon and in conformity with written
information furnished by or on behalf of WesterFed or its transferee
specifically for use in the preparation thereof. WesterFed or its transferee
shall indemnify and hold harmless Bancorp to the same extent as set forth in
the immediately preceding sentence but only with reference to written
information furnished by or on behalf of WesterFed or its transferee for use in
the preparation of such registration statement, and any prospectus included
therein, or any amendment or supplement thereto; and WesterFed or its
transferee shall reimburse Bancorp for any legal or other expenses reasonably
incurred by Bancorp in connection with investigation or defense of any such
loss, claim, damage, liability or action.
9. Severability. If any term, provision, covenant or
restriction contained in this Agreement is held by a court or a federal or
state regulatory agency of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions and covenants and
restrictions contained in 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 will not permit the
holder to acquire the full number of Option Shares provided in Section 2 hereof
(as adjusted pursuant to Section 7 hereof), it is the express intention of
Bancorp to allow the holder to acquire such lesser number of shares as may be
permissible, without any amendment or modification hereof.
10. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the
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transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
(b) Stock Option Agreement #2. The parties are
contemporaneously entering into Stock Option Agreement #2 pursuant to which
separate option rights are being granted by Bancorp to WesterFed.
Notwithstanding anything contained herein to the contrary, if WesterFed
acquires any option shares under Stock Option Agreement #2, then its rights
under this Agreement shall cease and this Agreement shall have no further force
or effect.
(c) Entire Agreement. Except as otherwise expressly provided
herein, this Agreement contains the entire agreement between the parties with
respect to the transaction contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
(d) Assignment. Neither of the parties hereto may assign any
of its rights or obligations under this Agreement or the Option to any other
person, without the express written consent of the other party, except that in
the event a Purchase Event shall have occurred and be continuing WesterFed may
assign in whole or in part the Option, and its rights and obligations
hereunder.
(e) Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or by reliable overnight courier or sent by registered or certified
mail, postage prepaid, addressed as follows:
If to WesterFed: Lyle R. Grimes
President and Chief Executive Officer
WesterFed Financial Corporation
100 East Broadway
Missoula, Montana 59802
with a copy to: Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Seventh Floor, East Tower
Washington, D.C. 20005
Attn: Barry P. Taff, P.C.
If to Bancorp: David W. Jorgenson
President and Chief Executive Officer
Security Bancorp
219 North 26th Street
Billings, Montana
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with a copy to: Graham & Dunn
1420 Fifth Avenue
Suite 3300
Seattle, Washington 98101
Attn: Stephen M. Klein
A party may change its address for notice purposes by written notice to the
other party hereto. All such notices and communications shall be deemed
delivered when received by all parties entitled to such receipt hereunder.
(f) Extension of Time. All time periods specified herein
shall be extended, if necessary, by the length of time required for any
necessary governmental approval to be sought and received or governmental
notice to be given and the waiting period to expire, provided that any
governmental application or notice shall be made or given promptly. All of the
parties hereto shall use their best efforts to secure any required governmental
approval and to give any required governmental notice. Notwithstanding
anything to the contrary contained herein, no party shall be required to
proceed with any transaction described herein if any required governmental
approval is not obtained or if, upon the giving of any required governmental
notice, the notified governmental agency prohibits any such transaction. If
any required governmental approval is not obtained or if a governmental agency
prohibits any such transaction upon receipt of a required notice, the decision
to appeal such governmental action shall be solely that of WesterFed; provided,
however, that WesterFed shall bear all of the costs and expenses, including
legal and accounting fees, incurred by any of the parties hereto in prosecuting
such an appeal. Periods of time that otherwise would run under the terms of
this Agreement shall also be extended to the extent necessary to avoid
liability under Section 16(b) of the Securities Exchange Act of 1934, as
amended.
(g) 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.
(h) Specific Performance. The parties agree that damages
would be an inadequate remedy for a breach of the provisions of this Agreement
by Bancorp and that this Agreement may be enforced by WesterFed through
injunctive or other equitable relief.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Montana applicable to
agreements made and entirely to be performed within such state and such federal
laws as may be applicable.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first above written.
WESTERFED FINANCIAL CORPORATION
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BY: /s/ Lyle R. Grimes
--------------------------------
Lyle R. Grimes
President and Chief Executive Officer
SECURITY BANCORP
BY: /s/ David W. Jorgenson
-----------------------------------
David W. Jorgenson
President and Chief Executive Officer
9
<PAGE> 1
STOCK OPTION AGREEMENT NUMBER #2
THIS STOCK OPTION AGREEMENT #2 (the "Agreement") is dated as of
September 24, 1996 between WesterFed Financial Corporation ("WesterFed"), a
Delaware corporation registered as a savings and loan holding company under the
Home Owner's Loan Act, as amended ("HOLA"), and Security Bancorp ("Bancorp"), a
Montana corporation registered as a savings and loan holding company under the
HOLA.
W I T N E S S E T H
WHEREAS, the Boards of Directors of WesterFed and Bancorp have
approved an Agreement and Plan of Merger dated as of the date hereof (the
"Merger Agreement"), providing for the merger of Bancorp with and into
WesterFed (the "Merger"); and
WHEREAS, to further induce WesterFed to enter into the Merger
Agreement, WesterFed has required that Bancorp agree, and Bancorp has agreed,
to grant to WesterFed the option set forth in Stock Option Agreement No. #1, of
even date herewith ("Stock Option Agreement #1") to purchase certain shares of
Bancorp's authorized but unissued common stock, par value $1.00 per share
("Bancorp Common Stock"), and to separately grant to WesterFed the option set
forth herein to purchase certain shares of Bancorp's Common Stock upon the
terms and conditions set forth herein.
NOW THEREFORE, in consideration of the premises herein contained, the
parties agree as follows:
1. Definitions. Capitalized terms defined in the Merger
Agreement and used herein shall have the same meaning as in the Merger
Agreement.
2. Grant of Options. Subject to the terms and conditions set
forth herein, Bancorp hereby grants to WesterFed an unconditional, irrevocable
option (the "Option") to purchase up to 100,000 shares of Bancorp Common Stock
(the "Option Shares") at an exercise price of $24.00 per share (with the number
of Option Shares and exercise price per share being subject to adjustment
pursuant to Section 7 hereof), payable in cash as provided in Section 4 hereof;
provided, however, that in the event Bancorp issues or agrees to issue any
shares of Bancorp Common Stock (except for shares issued pursuant to options
outstanding on the date hereof under Bancorp's 1993 Stock Option and Stock
Appreciation Rights Plan ("Bancorp Stock Options")) after the date hereof at a
price less than $24.00 per share (as adjusted pursuant to Section 7 hereof),
the exercise price with respect to the Option Shares shall be equal to such
lesser price; provided further, that in no event shall the aggregate number of
Option Shares issuable under the Option exceed 5.98% of the number of shares of
Bancorp Common Stock then issued and outstanding after giving effect to the
issuance of Bancorp Stock Options and the Option Shares.
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3. Exercise of Option.
(a) Expiration of Option. Subject to compliance with applicable
provisions of law, WesterFed may exercise the Option, in whole or part, at any
time or from time to time following the failure of Bancorp Stockholders to
approve the Merger Agreement at a duly held stockholder meeting or the failure
of Bancorp to hold a meeting to vote on the Merger (each such event, a
"Purchase Event"), provided that to the extent the Option shall not have been
previously exercised, it shall terminate and be of no further force and effect
upon the earliest to occur of the following: (i) the Effective Time; (ii)
termination of the Merger Agreement by Bancorp pursuant to Section 7.01(e)
thereof; (iii) on the date two years after termination of the Merger Agreement,
pursuant to provisions of the Merger Agreement other than Section 7.01(e); or
(iv) termination of the Option as provided in Section 10(b) hereof.
(b) Notice of Stockholder Vote. Bancorp shall notify WesterFed
promptly in writing of the failure to achieve the requisite approval of Bancorp
stockholders of the Merger Agreement; provided, however, that the giving of
such notice by Bancorp shall not be a condition to the right of WesterFed to
exercise the Option.
(c) Notice of Exercise. In the event WesterFed wishes to exercise
the Option, it shall send to Bancorp a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise, and (ii) a place and date
not earlier than ten business days nor later than twenty business days from the
Notice Date for the closing of such purchase (the "Closing Date").
Notwithstanding the foregoing, if prior notification to or approval of the OTS
or any other regulatory agency is required in connection with such purchase,
WesterFed shall promptly file the required notice or application for approval
and shall expeditiously process the same, and the period of time that otherwise
would run pursuant to the preceding sentence shall run instead from the date on
which any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
4. Payment and Delivery of Certificates.
(a) Payment. At the closing referred to in Section 3(c) hereof,
WesterFed shall pay to Bancorp the aggregate purchase price for the shares
purchased pursuant to the exercise of the Option in immediately available funds
by a wire transfer to a bank designated by Bancorp; provided that the failure
or refusal of Bancorp to designate such a bank account shall not preclude
WesterFed from exercising the Option.
(b) Delivery of Certificate. At such closing, simultaneously with
the delivery of cash as provided in subsection (a), Bancorp shall deliver to
WesterFed a certificate or certificates representing the number of shares of
Bancorp Common Stock purchased by WesterFed, which certificates may bear the
legend set forth in Section 4(c) below, and WesterFed shall deliver to Bancorp
a letter agreeing that WesterFed will not offer to sell or otherwise dispose of
such shares in violation of this Agreement or applicable law or in a manner
that would result in WesterFed becoming an "underwriter" within the meaning of
that term under the Securities Act of 1933, as
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amended (the "Securities Act"). Bancorp shall pay all expenses and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issuance and delivery of stock
certificates under this Section 4 in the name of WesterFed or its assignee,
transferee or designee. Upon the giving by WesterFed to Bancorp of the written
notice of exercise of the Option provided for under Section 3(c) above and the
tender of the applicable purchase price in immediately available funds,
WesterFed shall be deemed to be the holder of record of the shares of Bancorp
Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Bancorp shall then be closed or that certificates
representing such shares of Bancorp Common Stock shall not then be actually
delivered to WesterFed.
(c) Restrictive Legend. Certificates for Bancorp Common Stock
delivered at a closing hereunder may be endorsed with a restrictive legend that
shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the registered
holder hereof and the Issuer, a copy of which agreement is on file at
the principal office of the Issuer, and to resale restrictions arising
under the Securities Act of 1933, as amended, and any applicable state
securities laws. A copy of such agreement will be mailed to the
holder hereof without charge within five days after the receipt by the
Issuer of a written request."
It is understood that (i) the reference to the resale restrictions of the
Securities Act in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if WesterFed shall have delivered to
Bancorp a copy of a letter from the staff of the SEC, or an opinion of counsel,
in form and substance reasonably satisfactory to Bancorp, to the effect that
such legend is not required for purposes of the Securities Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference; and (iii) the legend shall be removed in its entirety if the
conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
5. Bancorp Representations. Bancorp hereby represents and
warrants to WesterFed as follows:
(a) Reservation of Shares. Bancorp has taken all necessary
corporate action to authorize and reserve for issuance a sufficient number of
shares of Bancorp Common Stock to satisfy its obligations upon the exercise of
the Option without additional authorization of Bancorp Common Stock after
giving effect to all other options, warrants, convertible securities and other
rights to purchase Bancorp Common Stock. Bancorp shall not, by charter
amendment or through reorganization, consolidation, merger, dissolution or sale
of assets or by any other
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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 Bancorp.
(b) Duly Authorized Shares. The shares of Bancorp Common Stock to
be issued upon exercise, in whole or in part, of the Option, when paid for as
provided herein, will be duly authorized, validly issued, fully paid and
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrances and security interests and will not be subject to any preemptive
rights.
(c) Additional Actions. Bancorp shall promptly take all
reasonable action as may from time to time be required to be taken by it
(including (A) complying with all pre-merger notification, reporting and
waiting period requirements applicable to it, and (B) in the event that, under
the HOLA or a state thrift or banking law, prior approval of or notice to the
OTS or to any state or other federal regulatory authority is necessary before
the Option may be exercised, cooperating fully with WesterFed in preparing such
applications or notices and providing such information to the applicable
regulatory body as may be required) in order to permit WesterFed to exercise
the Option and Bancorp duly and effectively to issue shares of Bancorp Common
Stock pursuant thereto. Bancorp shall promptly take all other reasonable
action provided herein to protect the rights of WesterFed against dilution as
set forth in Section 7.
6. WesterFed Representations. WesterFed hereby represents and
warrants to Bancorp that WesterFed will not transfer or otherwise dispose of
any shares purchased by WesterFed pursuant to this Agreement except in a
transaction registered or exempt from registration under the Securities Act.
7. Adjustment Upon Changes in Capitalization.
(a) Stock Dividends. In the event of any change in the
outstanding Bancorp Common Stock by reason of stock dividends, split-ups,
mergers, recapitalizations, combinations, exchanges of shares, or the like (but
excluding any exercise of Bancorp Stock Options)(each an "Adjustment Event"),
the type and number of shares subject to the Option, or the purchase price per
share, as the case may be, shall be adjusted appropriately, and proper
provision shall be made in the agreements governing any such transaction so
that WesterFed shall receive upon exercise of the Option the number and class
of shares, other securities or property that WesterFed would have received in
respect of the shares of Bancorp Common Stock subject to the Option if the
Option had been exercised and the Bancorp Common Stock subject to the Option
had been issued to WesterFed immediately prior to such Adjustment Event or the
record date therefor, as applicable.
(b) Issuance of Additional Shares. In the event that any
additional shares of Bancorp Common Stock are issued after the date of this
Agreement (other than pursuant to this Agreement or in connection with an
Adjustment Event or the exercise of Bancorp Stock Options), the number of
shares subject to the Option shall be adjusted after such issuance, so that it
equals 4.85% of the number of shares of Bancorp Common Stock then issued and
outstanding after giving effect to the issuance of the Option Shares; provided,
however, that nothing contained in this Section 7 shall be deemed to authorize
Bancorp to issue any shares of its
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<PAGE> 5
Common Stock in breach of the provisions of the Merger Agreement; and provided
further, that in no event shall the number of shares subject to the Option
exceed 4.85% of Bancorp's issued and outstanding Common Stock, after giving
effect to the issuance of Bancorp Stock Options and the Option Shares.
8. Registration Rights.
(a) Registration Procedure. If requested by WesterFed at any time
during the four-year period beginning on the date of the first acquisition of
any of the Option Shares, Bancorp, as expeditiously as possible, will use its
best efforts to effect the registration of the Option Shares, on a form of
general use under the Securities Act, in order to permit the sale or other
disposition of such shares in accordance with the intended method of sale or
other disposition requested by WesterFed and by any underwriter selected by
WesterFed; provided, however, that Bancorp shall not be required to register
the Option Shares under the Securities Act (i) on more than one occasion during
any calendar year or on more than two occasions during the term of this
Agreement, (ii) prior to the earlier of termination of the Merger Agreement
pursuant to Section 7 thereof or the occurrence of a Purchase Event, or (iii)
within 120 days after the effective date of a registration with respect to
which WesterFed exercised "piggy-back" rights under this Section 8(a). The
first registration effected under this Section 8(a) shall be at Bancorp's
expense; provided, however, that WesterFed shall reimburse Bancorp for actual
accountable out-of-pocket expenses up to a maximum of $25,000. If a second
registration is requested hereunder by WesterFed, it shall be paid for equally
by WesterFed and Bancorp. In connection with such registrations or any
piggy-back registrations, each party shall pay the fees and expenses of its own
legal counsel, and WesterFed shall pay all underwriting discounts and
commissions applicable to the sale of Option Shares. WesterFed shall provide
such information as may be necessary for Bancorp's preparation of the
registration statement. Bancorp will use its best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. The obligations of
Bancorp hereunder to file a registration statement and to maintain its
effectiveness may be suspended for one or more periods of time that do not
exceed 180 days in the aggregate if the Board of Directors of Bancorp shall
have determined that the filing of such registration statement or the
maintenance of its effectiveness would require a special audit of Bancorp or
any of its Subsidiaries or the disclosure of nonpublic information that would
materially and adversely affect Bancorp. In addition to the foregoing,
WesterFed shall have unlimited piggy-back registration rights relating to the
Option Shares in connection with any registration of an underwritten public
offering of Bancorp Common Stock, and the costs of such piggy-back registration
shall be borne by Bancorp. The foregoing notwithstanding, if, at the time of
any request by WesterFed for piggy-back registration of the Option Shares as
provided above, in the good faith judgment of the managing underwriter or
managing underwriters, or, if none, the sole underwriter or underwriters, of
such offering, the inclusion of the Option Shares would interfere with the
successful marketing of the shares of Bancorp Common Stock offered by Bancorp,
the number of shares represented by Option Shares which are to be covered in
the registration statement may be reduced; provided, however, that after any
such required reduction of the number of Option Shares to be included in such
offering for the
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account of WesterFed shall constitute at least 5% of the total number of shares
to be sold by WesterFed and Bancorp in such offering in the aggregate; and
provided further, that if such reduction occurs, then Bancorp shall file a
registration statement for the balance as promptly as practical and no
reduction shall thereafter occur.
(b) Registration Indemnification. In connection with the filing
of any such registration statement, Bancorp shall indemnify and hold harmless
WesterFed or its transferee against any losses, claims, damages or liabilities,
joint or several, to which WesterFed or its transferee may become subject,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in any registration statement,
including any prospectus included therein, or any amendment or supplement
thereto, or arise out of or are based upon the omission or the alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; and Bancorp shall reimburse
WesterFed or its transferee for any legal or other expense reasonably incurred
by WesterFed or its transferee in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that
Bancorp shall not be liable in any case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or omission or an alleged untrue statement or omission made in such
registration statement, and any prospectus included therein, or any amendment
or supplement thereto, in reliance upon and in conformity with written
information furnished by or on behalf of WesterFed or its transferee
specifically for use in the preparation thereof. WesterFed or its transferee
shall indemnify and hold harmless Bancorp to the same extent as set forth in
the immediately preceding sentence but only with reference to written
information furnished by or on behalf of WesterFed or its transferee for use in
the preparation of such registration statement, and any prospectus included
therein, or any amendment or supplement thereto; and WesterFed or its
transferee shall reimburse Bancorp for any legal or other expenses reasonably
incurred by Bancorp in connection with investigation or defense of any such
loss, claim, damage, liability or action.
9. Severability. If any term, provision, covenant or restriction
contained in this Agreement is held by a court or a federal or state regulatory
agency of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions and covenants and restrictions contained in
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 will not permit the holder to acquire the
full number of Option Shares provided in Section 2 hereof (as adjusted pursuant
to Section 7 hereof), it is the express intention of Bancorp to allow the
holder to acquire such lesser number of shares as may be permissible, without
any amendment or modification hereof.
10. Miscellaneous.
(a) Expenses. Except as otherwise provided herein, 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.
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(b) Stock Option Agreement #1. The parties are contemporaneously
entering into Stock Option Agreement #1 pursuant to which separate option
rights are being granted by Bancorp to WesterFed. Notwithstanding anything
contained herein to the contrary, if WesterFed acquires any option shares under
Stock Option Agreement #1, then its rights under this Agreement shall cease and
this Agreement shall have no further force or effect.
(c) Entire Agreement. Except as otherwise expressly provided
herein, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereto, written or oral. The
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the parties hereto and their respective successors and assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto and their respective successors and
assigns, any rights, remedies, obligations or liabilities under or by reason of
this Agreement, except as expressly provided herein.
(d) Assignment. Neither of the parties hereto may assign any of
its rights or obligations under this Agreement or the Option to any other
person, without the express written consent of the other party, except that in
the event the Option becomes exercisable, WesterFed may assign in whole or in
part the Option, and its rights and obligations hereunder, to one or more third
parties approved by Bancorp, which approval shall not be unreasonably withheld
or delayed.
(e) Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally or by reliable overnight courier or sent by registered or certified
mail, postage prepaid, addressed as follows:
If to WesterFed: Lyle R. Grimes
President and Chief Executive Officer
WesterFed Financial Corporation
100 East Broadway
Missoula, Montana 59802
with a copy to: Silver, Freedman & Taff, L.L.P.
1100 New York Avenue, N.W.
Seventh Floor, East Tower
Washington, D.C. 20005
Attn: Barry P. Taff, P.C.
If to Bancorp: David W. Jorgenson
President and Chief Executive Officer
Security Bancorp
219 North 26th Street
Billings, Montana
7
<PAGE> 8
with a copy to: Graham & Dunn
1420 Fifth Avenue
Suite 3300
Seattle, Washington 98101
Attn: Stephen M. Klein
A party may change its address for notice purposes by written notice to the
other party hereto. All such notices and communications shall be deemed
delivered when received by all parties entitled to such receipt hereunder.
(f) Extension of Time. All time periods specified herein shall be
extended, if necessary, by the length of time required for any necessary
governmental approval to be sought and received or governmental notice to be
given and the waiting period to expire, provided that any governmental
application or notice shall be made or given promptly. All of the parties
hereto shall use their best efforts to secure any required governmental
approval and to give any required governmental notice. Notwithstanding
anything to the contrary contained herein, no party shall be required to
proceed with any transaction described herein if any required governmental
approval is not obtained or if, upon the giving of any required governmental
notice, the notified governmental agency prohibits any such transaction. If
any required governmental approval is not obtained or if a governmental agency
prohibits any such transaction upon receipt of a required notice, the decision
to appeal such governmental action shall be solely that of WesterFed; provided,
however, that WesterFed shall bear all of the costs and expenses, including
legal and accounting fees, incurred by any of the parties hereto in prosecuting
such an appeal. Periods of time that otherwise would run under the terms of
this Agreement shall also be extended to the extent necessary to avoid
liability under Section 16(b) of the Securities Exchange Act of 1934, as
amended.
(g) 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.
(h) Specific Performance. The parties agree that damages would be
an inadequate remedy for a breach of the provisions of this Agreement by
Bancorp and that this Agreement may be enforced by WesterFed through injunctive
or other equitable relief.
(i) Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Montana applicable to
agreements made and entirely to be performed within such state and such federal
laws as may be applicable.
IN WITNESS WHEREOF, each of the parties hereto has executed this
Agreement as of the day and year first above written.
WESTERFED FINANCIAL CORPORATION
8
<PAGE> 9
BY: /s/ Lyle R. Grimes
-----------------------------
Lyle R. Grimes
President and Chief Executive Officer
SECURITY BANCORP
BY: /s/ David W. Jorgenson
-----------------------------
David W. Jorgenson
President and Chief Executive Officer
9
