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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
July 11, 1996
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(Date of earliest event reported)
Washington Federal, Inc.
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(Exact name of registrant as specified in its charter)
Washington 0-25454 91-1661606
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
425 Pike Street, Seattle, Washington 98101
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(Address of principal executive offices) (Zip Code)
(206) 624-7930
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former adddress and formal fiscal year,
if changed since last report)
Exhibit Index appears on page 5.
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ITEM 5. OTHER EVENTS
On July 11, 1996, Washington Federal, Inc. ("Washington Federal"), a
Washington corporation, and Metropolitan Bancorp ("Metropolitan"), a Washington
corporation, entered into an Agreement and Plan of Merger (the "Agreement")
which sets forth the terms and conditions under which Metropolitan will merge
with and into Washington Federal (the "Merger").
The Agreement provides that upon consummation of the Merger, each
outstanding share of Common Stock of Metropolitan (other than (i) shares with
respect to which dissenters' rights have been perfected under Washington law and
(ii) any shares held by Washington Federal or any of its subsidiaries other than
in a fiduciary capacity or in satisfaction of a debt previously contracted)
shall, by virtue of the Merger, and without any action on the part of the holder
thereof, be converted into the right to receive the number of shares of
Washington Federal Common Stock which is equal to (the "Exchange Ratio") (i) if
the average share price of Washington Federal Common Stock (as determined
pursuant to the terms of the Agreement) is equal to or greater than $18.00 but
equal to or less than $24.50 per share, the quotient determined by dividing (a)
$18.00 by (b) such average share price of Washington Federal Common Stock, (ii)
if the average share price of Washington Federal Common Stock is less than
$18.00 per share, one share or (iii) if the average share price of Washington
Federal Common Stock is greater than $24.50, .735 shares. If the average share
price of Washington Federal Common Stock is less than $17.00 per share,
Metropolitan may terminate the Agreement, provided that in the event
Metropolitan elects to exercise this termination right and upon notice,
Washington Federal shall have the right to adjust the Exchange Ratio to an
amount equal to a number obtained by dividing (a) $17.00 by (b) such average
share price of Washington Federal Common Stock.
In connection with the execution of the Agreement, Washington Federal
Savings and Loan Association ("Washington Savings"), a federally-chartered
savings association and wholly-owned subsidiary of Washington Federal, and
Metropolitan Federal Savings and Loan Association of Seattle ("Metropolitan
Savings"), a federally-chartered savings association and wholly-owned subsidiary
of Metropolitan, entered into an Agreement and Plan of Merger, dated as of July
11, 1996 (the "Bank Merger Agreement"). The Bank Merger Agreement sets forth
the terms and conditions, including consummation of the Merger, under which
Metropolitan Savings will merge with and into Washington Savings immediately
following the consummation of the Merger.
Concurrently with the execution and delivery of the Agreement,
Metropolitan entered into a Stock Option Agreement with Washington Federal (the
"Stock Option Agreement") whereby Metropolitan granted to Washington Federal an
option to purchase up to 657,000 shares of Metropolitan Common Stock, which
currently represents approximately 17.7% of the outstanding shares of
Metropolitan Common Stock, at a price of $13.50 per share, which is exercisable
only upon the occurrence of certain events. The Stock Option Agreement
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provides Washington Federal (i) with the right, in certain circumstances, to
require Metropolitan to repurchase the option and any shares acquired by
exercise of the option and (ii) with the right to require Metropolitan to
register the Metropolitan Common Stock acquired by or issuable upon exercise of
the option under the Securities Act of 1933, as amended.
Concurrently with the execution and delivery of the Agreement, Washington
Federal entered into a Stockholder Agreement with certain stockholders of
Metropolitan, pursuant to which, among other things, such stockholders agreed to
vote their shares of Metropolitan Common Stock (which amount to 18.5% of the
shares of such Common Stock outstanding) in favor of the Merger.
Consummation of the Merger is subject to the approval of the shareholders
of Metropolitan and the receipt of all required regulatory approvals, as well as
other customary conditions.
The Agreement, the Stock Option Agreement, the Stockholder Agreement and
the press release issued by Washington Federal and Metropolitan on July 11, 1996
regarding the Merger are attached as exhibits to this report and are
incorporated herein by reference. The foregoing summaries of the Agreement, the
Stock Option Agreement and the Stockholder Agreement do not purport to be
complete and are qualified in their entirety by reference to such agreements.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
The following exhibits are filed with this report:
Exhibit Number Description
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2(a) Agreement and Plan of Merger, dated as of July 11, 1996,
between Washington Federal and Metropolitan
2(b) Agreement and Plan of Merger, dated as of July 11, 1996,
between Washington Savings and Metropolitan Savings
10(a) Stock Option Agreement, dated as of July 11, 1996, between
Washington Federal (as grantee) and Metropolitan (as
issuer)
10(b) Stockholder Agreement, dated as of July 11, 1996, among
Washington Federal and certain stockholders of
Metropolitan
20 Press Release issued on July 11, 1996 with respect to the
Agreement
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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.
WASHINGTON FEDERAL, INC.
Date: July 15, 1996 By: /s/ Ronald L. Saper
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Ronald L. Saper
Executive Vice President and
Chief Financial Officer
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EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
2(a) Agreement and Plan of Merger, dated as of July 11, 1996,
between Washington Federal and Metropolitan
2(b) Agreement and Plan of Merger, dated as of July 11, 1996,
between Washington Savings and Metropolitan Savings
10(a) Stock Option Agreement, dated as of July 11, 1996,
between Washington Federal (as grantee) and Metropolitan
(as issuer)
10(b) Stockholder Agreement, dated as of July 11, 1996, among
Washington Federal and certain stockholders of
Metropolitan
20 Press Release issued on July 11, 1996 with respect to the
Agreement
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EXHIBIT 2(a)
Agreement and Plan of Merger,
dated as of July 11, 1996,
between Washington Federal and Metropolitan
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AGREEMENT AND PLAN OF MERGER
between
WASHINGTON FEDERAL, INC.
and
METROPOLITAN BANCORP
dated as of July 11, 1996
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AGREEMENT AND PLAN OF MERGER
TABLE OF CONTENTS
PAGE
----
ARTICLE I DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.2 Effective Time; Closing. . . . . . . . . . . . . . . . . . . . 7
2.3 Treatment of Capital Stock . . . . . . . . . . . . . . . . . . 8
2.4 Shareholder Rights; Stock Transfers. . . . . . . . . . . . . . 8
2.5 Dissenting Shares. . . . . . . . . . . . . . . . . . . . . . . 8
2.6 Fractional Shares. . . . . . . . . . . . . . . . . . . . . . . 9
2.7 Exchange Procedures. . . . . . . . . . . . . . . . . . . . . . 9
2.8 Anti-Dilution Provisions . . . . . . . . . . . . . . . . . . . 10
2.9 Options. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.10 Additional Actions . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III REPRESENTATIONS AND WARRANTIES
OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . 11
3.1 Capital Structure. . . . . . . . . . . . . . . . . . . . . . . 11
3.2 Organization, Standing and Authority of the Company. . . . . . 12
3.3 Ownership of the Company Subsidiaries. . . . . . . . . . . . . 12
3.4 Organization, Standing and Authority of
the Company Subsidiaries . . . . . . . . . . . . . . . . . . 12
3.5 Authorized and Effective Agreement . . . . . . . . . . . . . . 13
3.6 Authorized and Effective Mortgage Company Agreement. . . . . . 14
3.7 Securities Documents and Regulatory Reports. . . . . . . . . . 15
3.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . 15
3.9 Material Adverse Change . . . . . . . . . . . . . . . . . . . 16
3.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . 16
3.11 Loans, Allowance for Loan Losses, Real Estate
Owned and Investment and Mortgage-Backed Securities . . . . 17
3.12 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.13 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 19
3.14 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 19
3.15 Certain Information . . . . . . . . . . . . . . . . . . . . . 20
3.16 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 20
3.17 Certain Contracts . . . . . . . . . . . . . . . . . . . . . . 22
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3.18 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . 23
3.19 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.20 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.21 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
3.22 Required Vote; Inapplicability of Antitakeover Statutes . . . 24
3.23 Ownership of Acquiror Common Stock . . . . . . . . . . . . . . 24
3.24 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE IV REPRESENTATIONS AND WARRANTIES
OF THE ACQUIROR . . . . . . . . . . . . . . . . . . . . . . . 25
4.1 Capital Structure . . . . . . . . . . . . . . . . . . . . . . 25
4.2 Organization, Standing and Authority of the Acquiror . . . . . 25
4.3 Ownership of the Acquiror Subsidiaries . . . . . . . . . . . . 25
4.4 Organization, Standing and Authority of the
Acquiror Subsidiaries . . . . . . . . . . . . . . . . . . . 26
4.5 Authorized and Effective Agreement . . . . . . . . . . . . . . 26
4.6 Securities Documents and Regulatory Reports . . . . . . . . . 27
4.7 Financial Statements . . . . . . . . . . . . . . . . . . . . . 28
4.8 Material Adverse Change . . . . . . . . . . . . . . . . . . . 28
4.9 Environmental Matters . . . . . . . . . . . . . . . . . . . . 29
4.10 Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.11 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . 30
4.12 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 30
4.13 Certain Information . . . . . . . . . . . . . . . . . . . . . 31
4.14 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 31
4.15 Certain Contracts . . . . . . . . . . . . . . . . . . . . . . 33
4.16 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . 33
4.17 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . 33
4.18 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.19 Labor . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
4.20 Ownership of Company Common Stock . . . . . . . . . . . . . . 34
4.21 Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE V COVENANTS . . . . . . . . . . . . . . . . . . . . . . . . . . 35
5.1 Reasonable Best Efforts . . . . . . . . . . . . . . . . . . . 35
5.2 Shareholder Meeting . . . . . . . . . . . . . . . . . . . . . 35
5.3 Regulatory Matters . . . . . . . . . . . . . . . . . . . . . . 35
5.4 Investigation and Confidentiality . . . . . . . . . . . . . . 36
5.5 Press Releases . . . . . . . . . . . . . . . . . . . . . . . . 37
5.6 Business of the Parties . . . . . . . . . . . . . . . . . . . 38
5.7 Certain Actions . . . . . . . . . . . . . . . . . . . . . . . 41
5.8 Current Information . . . . . . . . . . . . . . . . . . . . . 42
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5.9 Indemnification; Insurance . . . . . . . . . . . . . . . . . . 42
5.10 Benefit Plans and Arrangements . . . . . . . . . . . . . . . . 43
5.11 Bank Merger . . . . . . . . . . . . . . . . . . . . . . . . . 44
5.12 Certain Policies; Integration . . . . . . . . . . . . . . . . 45
5.13 Restrictions on Resale . . . . . . . . . . . . . . . . . . . . 45
5.14 Disclosure Supplements . . . . . . . . . . . . . . . . . . . . 45
5.15 Failure to Fulfill Conditions . . . . . . . . . . . . . . . . 46
ARTICLE VI CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 46
6.1 Conditions Precedent - The Acquiror and the Company . . . . . 46
6.2 Conditions Precedent - The Company . . . . . . . . . . . . . . 47
6.3 Conditions Precedent - The Acquiror . . . . . . . . . . . . . 48
ARTICLE VII TERMINATION, WAIVER AND AMENDMENT50
7.1 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 50
7.2 Effect of Termination . . . . . . . . . . . . . . . . . . . . 51
7.3 Survival of Representations, Warranties
and Covenants . . . . . . . . . . . . . . . . . . . . . . . 51
7.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
7.5 Amendment or Supplement . . . . . . . . . . . . . . . . . . . 52
ARTICLE VIII MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . 52
8.1 Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
8.2 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 52
8.3 No Assignment . . . . . . . . . . . . . . . . . . . . . . . . 52
8.4 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
8.5 Alternative Structure . . . . . . . . . . . . . . . . . . . . 53
8.6 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . 54
8.7 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 54
8.8 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 54
8.9 Dispute Resolution . . . . . . . . . . . . . . . . . . . . . . 54
Exhibit A Form of Stock Option Agreement
Exhibit B Form of Stockholder Agreement
Exhibit C Form of Affiliate Letter
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AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of July 11, 1996,
between Washington Federal, Inc. (the "Acquiror"), a Washington corporation, and
Metropolitan Bancorp (the "Company"), a Washington corporation.
W I T N E S S E T H:
WHEREAS, the Boards of Directors of the Acquiror and the Company have
determined that it is in the best interests of their respective companies and
their shareholders to consummate the business combination transactions provided
for herein, including the merger of the Company with and into the Acquiror,
subject to the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby; and
WHEREAS, as a condition and inducement to the Acquiror's willingness to
enter into this Agreement, (i) the Company is concurrently entering into a Stock
Option Agreement with the Acquiror (the "Stock Option Agreement"), in
substantially the form attached hereto as Exhibit A, pursuant to which the
Company is granting to the Acquiror the option to purchase shares of Company
Common Stock (as defined herein) under certain circumstances and (ii) certain
shareholders of the Company are concurrently entering into a Stockholder
Agreement with the Acquiror (the "Stockholder Agreement"), in substantially the
form attached hereto as Exhibit B, pursuant to which, among other things, such
stockholders agree to vote their shares of Company Common Stock in favor of this
Agreement and the transactions contemplated hereby;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties hereto do hereby agree as
follows:
ARTICLE I
DEFINITIONS
The following terms shall have the meanings ascribed to them for all
purposes of this Agreement.
"Acquiror Bank" shall mean Washington Federal Savings and Loan Association,
a federally-chartered savings and loan association and a wholly-owned subsidiary
of the Acquiror.
"Acquiror Common Stock" shall mean the common stock, par value $1.00 per
share, of the Acquiror.
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"Acquiror Employee Plans" shall have the meaning set forth in Section
4.14(a) hereof.
"Acquiror Employee Stock Benefit Plans" shall mean the following employee
benefit plans of the Acquiror: 1982 Employee Stock Compensation Program, 1987
Stock Option and Stock Appreciation Rights Plan, 1994 Stock Option and Stock
Appreciation Rights Plan and Washington Federal Savings Profit Sharing
Retirement Plan and Employee Stock Ownership Plan.
"Acquiror Financial Statements" shall mean (i) the consolidated statements
of financial condition (including related notes and schedules, if any) of the
Acquiror as of September 30, 1995, 1994 and 1993 and the consolidated statements
of operations, stockholders' equity and cash flows (including related notes and
schedules, if any) of the Acquiror for each of the three years ended September
30, 1995, 1994 and 1993 as filed by the Acquiror in its Securities Documents,
and (ii) the consolidated statements of financial condition of the Acquiror
(including related notes and schedules, if any) and the consolidated statements
of operations, stockholders' equity and cash flows (including related notes and
schedules, if any) of the Acquiror included in the Securities Documents filed by
the Acquiror with respect to the quarterly and annual periods ended subsequent
to September 30, 1995.
"Acquiror Preferred Stock" shall mean the shares of preferred stock, par
value $1.00 per share, of the Acquiror.
"Articles of Merger" shall have the meaning set forth in Section 2.2
hereof.
"Average Acquiror Share Price" shall mean the average closing price per
share of Acquiror Common Stock, as reported on the Nasdaq Stock Market's
National Market (as reported by THE WALL STREET JOURNAL or, if not reported
thereby, another authoritative source), during the 20 trading days ending on the
fifth business day prior to the Effective Time.
"Bank" shall mean Metropolitan Federal Savings and Loan Association of
Seattle, a federally-chartered savings and loan association and a wholly-owned
subsidiary of the Company.
"Bank Merger" shall have the meaning set forth in Section 5.11 hereof.
"BIF" shall mean the Bank Insurance Fund administered by the FDIC or any
successor thereto.
"Bank Merger Agreement" shall have the meaning set forth in Section 5.11
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
"Commission" shall mean the Securities and Exchange Commission.
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"Company Common Stock" shall mean the common stock, par value $0.01 per
share, of the Company.
"Company Employee Plans" shall have the meaning set forth in Section
3.16(a) hereof.
"Company Financial Statements" shall mean (i) the consolidated statements
of financial condition (including related notes and schedules, if any) of the
Company as of March 31, 1996, 1995 and 1994 and the consolidated statements of
income, stockholders' equity and cash flows (including related notes and
schedules, if any) of the Company for each of the three years ended March 31,
1996, 1995 and 1994 as filed by the Company in its Securities Documents, and
(ii) the consolidated statements of financial condition of the Company
(including related notes and schedules, if any) and the consolidated statements
of income, stockholders' equity and cash flows (including related notes and
schedules, if any) of the Company included in the Securities Documents filed by
the Company with respect to the quarterly and annual periods ended subsequent to
March 31, 1996.
"Company Options" shall mean options to purchase shares of Company Common
Stock granted pursuant to the Company Option Plans.
"Company Option Plans" shall mean the following stock option plans of the
Company, as amended and as in effect as of the date hereof: Amended Stock
Option and Incentive Plan and Stock Option Plan for Nonemployee Directors.
"Company Preferred Stock" shall mean the shares of preferred stock, par
value $0.01 per share, of the Company.
"Dissenting Shares" shall have the meaning set forth in Section 2.5 hereof.
"DOJ" shall mean the United States Department of Justice.
"Effective Time" shall mean the date and time specified pursuant to Section
2.2 hereof as the effective time of the Merger.
"Environmental Claim" means any written notice from any Governmental Entity
or third party alleging potential liability (including, without limitation,
potential liability for investigatory costs, cleanup costs, governmental
response costs, natural resources damages, property damages, personal injuries
or penalties) arising out of, based on, or resulting from the presence, or
release into the environment, of any Materials of Environmental Concern.
"Environmental Laws" means any federal, state or local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, order, judgment, decree, injunction or agreement with any governmental
entity relating to (1) the protection, preservation or restoration of the
environment (including, without limitation, air, water
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vapor, surface water, groundwater, drinking water supply, surface soil,
subsurface soil, plant and animal life or any other natural resource), and/or
(2) the use, storage, recycling, treatment, generation, transportation,
processing, handling, labeling, production, release or disposal of Materials
of Environment Concern. The term Environmental Law includes without
limitation (1) the Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601, ET SEQ; the Resource
Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901, ET SEQ;
the Clean Air Act, as amended, 42 U.S.C. Section 7401, ET SEQ; the Federal
Water Pollution Control Act, as amended, 33 U.S.C. Section 1251, ET SEQ; the
Toxic Substances Control Act, as amended, 15 U.S.C. Section 9601, ET SEQ; the
Emergency Planning and Community Right to Know Act, 42 U.S.C. Section 1101,
ET SEQ; the Safe Drinking Water Act, 42 U.S.C. Section 300f, ET SEQ; and all
comparable state and local laws, and (2) any common law (including without
limitation common law that may impose strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any Materials of Environmental
Concern.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Exchange Ratio" shall have the meaning set forth in Section 2.3 hereof.
"FDIA" shall mean the Federal Deposit Insurance Act, as amended.
"FDIC" shall mean the Federal Deposit Insurance Corporation or any
successor thereto.
"FHLB" shall mean Federal Home Loan Bank.
"Form S-4" shall mean the registration statement on Form S-4 (or on any
successor or other appropriate form) to be filed by the Acquiror in connection
with the issuance of shares of Acquiror Common Stock pursuant to the Merger,
including the Proxy Statement which forms a part thereof, as amended and
supplemented.
"Governmental Entity" shall mean any federal or state court, administrative
agency or commission or other governmental authority or instrumentality.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Material Adverse Effect" shall mean, with respect to the Acquiror or the
Company, respectively, any effect that (i) is material and adverse to the
financial condition, results of operations or business of the Acquiror and its
Subsidiaries taken as whole or the Company and its Subsidiaries taken as a
whole, respectively, or (ii) materially impairs the ability of (x) either the
Company or the Bank to consummate the transactions contemplated by this
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Agreement (including without limitation the transactions contemplated by the
Bank Merger Agreement and the Mortgage Company Agreement) or (y) either the
Acquiror or the Acquiror Bank to consummate the transactions contemplated by
this Agreement (including without limitation the transactions contemplated by
the Bank Merger Agreement), provided, however, that Material Adverse Effect
shall not be deemed to include the impact of (a) changes in laws and regulations
or interpretations thereof that are generally applicable to the savings industry
(including without limitation prospective changes which result in assessments
which are intended to recapitalize the SAIF), (b) changes in generally accepted
accounting principles that are generally applicable to the savings industry, (c)
reasonable expenses incurred in connection with the transactions contemplated
hereby or (d) actions or omissions of a party (or any of its Subsidiaries) taken
with the prior informed written consent of the other party or parties in
contemplation of the transactions contemplated hereby, including without
limitation any actions taken by the Company pursuant to Section 5.12 hereof.
"Materials of Environmental Concern" means pollutants, contaminants,
wastes, toxic substances, petroleum and petroleum products and any other
materials regulated under Environmental Laws.
"Merger" shall mean the merger of the Company with and into the Acquiror
pursuant to the terms hereof.
"Mortgage Company" shall mean Phoenix Mortgage & Investment, Inc., a
wholly-owned subsidiary of the Company.
"Mortgage Company Agreement" shall mean the Mortgage Company Agreement,
dated as of the date hereof, among the Company, the Bank, John H. Fairchild and
Sheryl Nilson, which provides the terms and conditions under which the Company
would (i) distribute to Mr. Fairchild and Ms. Nilson (the "Shareholders") not
less than 81% of the outstanding shares of common stock of the Mortgage Company
and (ii) redeem shares of Company Common Stock held by the Shareholders.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"OTS" shall mean the Office of Thrift Supervision of the U.S. Department of
the Treasury or any successor thereto.
"PBGC" shall mean the Pension Benefit Guaranty Corporation or any successor
thereto.
"Previously Disclosed" shall mean disclosed (i) in a letter dated the date
hereof delivered from the disclosing party to the other party specifically
referring to the appropriate section of this Agreement and describing in
reasonable detail the matters contained therein, or (ii) a letter dated after
the date hereof from the disclosing party specifically referring to
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this Agreement and describing in reasonable detail the matters contained therein
and delivered by the other party pursuant to Section 5.14 hereof.
"Proxy Statement" shall mean the prospectus/proxy statement contained in
the Form S-4, as amended or supplemented, and to be delivered to shareholders of
the Company in connection with the solicitation of their approval of this
Agreement and the transactions contemplated hereby.
"Real Estate Owned" shall mean real estate acquired by foreclosure or by
deed-in-lieu of foreclosure, real estate in judgment and subject to redemption
and in-substance foreclosures under generally accepted accounting principles.
"Rights" shall mean warrants, options, rights, convertible securities and
other arrangements or commitments which obligate an entity to issue or dispose
of any of its capital stock or other ownership interests.
"SAIF" shall mean the Savings Association Insurance Fund administered by
the FDIC or any successor thereto.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Securities Documents" shall mean all reports, offering circulars, proxy
statements, registration statements and all similar documents filed, or required
to be filed, pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act; the Exchange Act; the
Investment Company Act of 1940, as amended; the Investment Advisers Act of 1940,
as amended; the Trust Indenture Act of 1939, as amended, and the rules and
regulations of the Commission promulgated thereunder.
"Subsidiary" and "Significant Subsidiary" shall have the meanings set forth
in Rule 1-02 of Regulation S-X of the Commission.
"WBCA" shall mean the Washington Business Corporation Act, as amended.
Other terms used herein are defined in the preamble and elsewhere in this
Agreement.
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ARTICLE II
THE MERGER
2.1 THE MERGER
(a) Subject to the terms and conditions of this Agreement, at the
Effective Time (as defined in Section 2.2 hereof), the Company shall be merged
with and into the Acquiror (the "Merger") in accordance with the provisions of
Section 23B.11.010 of the WBCA. The Acquiror shall be the surviving corporation
(hereinafter sometimes called the "Surviving Corporation") of the Merger, and
shall continue its corporate existence under the laws of the State of
Washington. The name of the Surviving Corporation shall continue to be
"Washington Federal, Inc." Upon consummation of the Merger, the separate
corporate existence of the Company shall terminate.
(b) From and after the Effective Time, the Merger shall have the effects
set forth in Section 23B.11.060 of the WBCA.
(c) The Restated Articles of Incorporation and Bylaws of the Acquiror, as
in effect immediately prior to the Effective Time, shall be the Restated
Articles of Incorporation and Bylaws of the Surviving Corporation, respectively,
until altered, amended or repealed in accordance with their terms and applicable
law.
(d) The authorized capital stock of the Surviving Corporation shall be as
stated in the Restated Articles of Incorporation of the Acquiror immediately
prior to the Effective Time.
(e) Upon consummation of the Merger, (i) the directors of the Surviving
Corporation shall be the directors of the Acquiror immediately prior to the
Effective Time and (ii) the executive officers of the Surviving Corporation
shall be the executive officers of the Acquiror immediately prior to the
Effective Time and Patrick F. Patrick, who shall be elected as an Executive Vice
President of the Surviving Corporation. Each of the directors and executive
officers of the Surviving Corporation shall hold office in accordance with the
Restated Articles of Incorporation and Bylaws of the Surviving Corporation.
2.2 EFFECTIVE TIME; CLOSING
The Merger shall become effective upon the occurrence of the filing of
articles of merger (the "Articles of Merger") with the Secretary of State of the
State of Washington pursuant to Section 23B.11.050 of the WBCA, unless a later
date and time is specified as the effective time in such Articles of Merger (the
"Effective Time"). A closing (the "Closing") shall take place immediately prior
to the Effective Time at 10:00 a.m., Pacific Time, on the fifth business day
following the satisfaction or waiver, to the extent permitted hereunder, of the
conditions to the consummation of the Merger specified in Article VI of this
Agreement (other than the delivery of certificates, opinions and other
instruments and
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documents to be delivered at the Closing), at the principal executive
offices of the Acquiror in Seattle, Washington or at such other place, at
such other time, or on such other date as the parties may mutually agree
upon. At the Closing, there shall be delivered to the Acquiror and the
Company the opinions, certificates and other documents required to be
delivered under Article VI hereof.
2.3 TREATMENT OF CAPITAL STOCK
Subject to the provisions of this Agreement, at the Effective Time,
automatically by virtue of the Merger and without any action on the part of any
shareholder:
(a) each share of Acquiror Common Stock issued and outstanding immediately
prior to the Effective Time shall be unchanged and shall remain issued and
outstanding; and
(b) subject to Sections 2.5, 2.6 and 7.1(f) hereof, each share of Company
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares held by the Acquiror or any of its Subsidiaries other than in
a fiduciary capacity that are beneficially owned by third parties or as a result
of debts previously contracted, which shall be cancelled and retired) shall
become and be converted into the right to receive the number of shares of
Acquiror Common Stock (calculated to the nearest one-thousandth) which is equal
to (i) if the Average Acquiror Share Price is equal to or greater than $18.00
per share but equal to or less than $24.50 per share, the quotient determined by
dividing (A) $18.00 by (B) the Average Acquiror Share Price, (ii) if the Average
Acquiror Share Price is less than $18.00 per share, one share or (iii) if the
Average Acquiror Share Price is greater than $24.50 per share, .735 shares (in
any case, subject to possible adjustment as set forth in Sections 2.8 and 7.1(f)
hereof, the "Exchange Ratio").
2.4 SHAREHOLDER RIGHTS; STOCK TRANSFERS
Except as provided for in Section 2.5 hereof, at the Effective Time,
holders of Company Common Stock shall cease to be and shall have no rights as
shareholders of the Company, other than to receive the consideration provided
under this Article II. After the Effective Time, there shall be no transfers on
the stock transfers books of the Company or the Surviving Corporation of shares
of Company Common Stock.
2.5 DISSENTING SHARES
Each outstanding share of Company Common Stock the holder of which has
perfected his right to dissent under the WBCA and has not effectively withdrawn
or lost such right as of the Effective Time (the "Dissenting Shares") shall not
be converted into or represent a right to receive shares of Acquiror Common
Stock hereunder, and the holder thereof shall be entitled only to such rights as
are granted by the WBCA. The Company shall give the Acquiror prompt notice upon
receipt by the Company of any such written demands for payment of the fair value
of such shares of Company Common Stock and of
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withdrawals of such demands and any other instruments provided pursuant to
the WBCA (any shareholder duly making such demand being hereinafter called a
"Dissenting Shareholder"). If any Dissenting Shareholder shall effectively
withdraw or lose (through failure to perfect or otherwise) his right to such
payment at any time, such holder's shares of Company Common Stock shall be
converted into the right to receive Acquiror Common Stock in accordance with
the applicable provisions of this Agreement.
2.6 FRACTIONAL SHARES
Notwithstanding any other provision hereof, no fractional shares of
Acquiror Common Stock shall be issued to holders of Company Common Stock. In
lieu thereof, each holder of shares of Company Common Stock entitled to a
fraction of a share of Acquiror Common Stock shall, at the time of surrender of
the certificate or certificates representing such holder's shares, receive an
amount of cash (without interest) equal to the product arrived at by multiplying
such fraction of a share of Acquiror Common Stock by the Average Acquiror Share
Price, rounded to the nearest whole cent. No such holder shall be entitled to
dividends, voting rights or any other rights in respect of any fractional share
interest.
2.7 EXCHANGE PROCEDURES
(a) At or after the Effective Time, each holder of a certificate or
certificates theretofore evidencing issued and outstanding shares of Company
Common Stock, upon surrender of the same to an agent, duly appointed by the
Acquiror (the "Exchange Agent"), shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of full shares of
Acquiror Common Stock into which the shares of Company Common Stock theretofore
represented by the certificate or certificates so surrendered shall have been
converted as provided in Section 2.3(b) hereof. As promptly as practicable
after the Effective Time (and in no event later than the fifth business day
following the Effective Time), the Exchange Agent shall mail to each holder of
record of an outstanding certificate which immediately prior to the Effective
Time evidenced shares of Company Common Stock, and which is to be exchanged for
Acquiror Common Stock as provided in Section 2.3 hereof, a form of letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to such certificate shall pass, only upon delivery of such
certificate to the Exchange Agent) advising such holder of the terms of the
exchange effected by the Merger and of the procedure for surrendering to the
Exchange Agent such certificate in exchange for a certificate or certificates
evidencing Acquiror Common Stock or cash in lieu of any fractional share.
Notwithstanding anything in this Agreement to the contrary, certificates
representing Company Common Stock surrendered for exchange by any Affiliate of
the Company (as defined in Section 5.13(a) hereof) shall not be exchanged for
certificates representing shares of Acquiror Common Stock in accordance with the
terms of this Agreement until the Acquiror has received a written agreement from
such person as specified in Section 5.13(b).
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(b) No holder of a certificate theretofore representing shares of Company
Common Stock shall be entitled to receive any dividends in respect of the
Acquiror Common Stock into which such shares shall have been converted by virtue
of the Merger until the certificate representing such shares is surrendered in
exchange for a certificate or certificates representing shares of Acquiror
Common Stock. In the event that dividends are declared and paid by the Acquiror
in respect of Acquiror Common Stock after the Effective Time but prior to any
holder's surrender of certificates representing shares of Company Common Stock,
dividends payable to such holder in respect of shares of Acquiror Common Stock
not then issued shall accrue (without interest). Any such dividends shall be
paid (without interest) upon surrender of the certificates representing such
shares of Company Common Stock. The Acquiror shall be entitled, after the
Effective Time, to treat certificates representing shares of Company Common
Stock as evidencing ownership of the number of full shares of Acquiror Common
Stock into which the shares of Company Common Stock represented by such
certificates shall have been converted pursuant to this Agreement,
notwithstanding the failure on the part of the holder thereof to surrender such
certificates.
(c) The Acquiror shall not be obligated to deliver a certificate or
certificates representing shares of Acquiror Common Stock to which a holder of
Company Common Stock would otherwise be entitled as a result of the Merger until
such holder surrenders the certificate or certificates representing the shares
of Company Common Stock for exchange as provided in this Section 2.7, or, in
default thereof, an appropriate affidavit of loss and indemnity agreement and/or
a bond in an amount as may be reasonably required in each case by the Acquiror.
If any certificate evidencing shares of Acquiror Common Stock is to be issued in
a name other than that in which the certificate evidencing Company Common Stock
surrendered in exchange therefor is registered, it shall be a condition of the
issuance thereof that the certificate so surrendered shall be properly endorsed
and otherwise in proper form for transfer and that the person requesting such
exchange pay to the Exchange Agent any transfer or other tax required by reason
of the issuance of a certificate for shares of Acquiror Common Stock in any name
other than that of the registered holder of the certificate surrendered or
otherwise establish to the satisfaction of the Exchange Agent that such tax has
been paid or is not payable.
2.8 ANTI-DILUTION PROVISIONS
If, between the date hereof and the Effective Time, the shares of Acquiror
Common Stock shall be changed into a different number or class of shares by
reason of any reclassification, recapitalization, split-up, combination,
exchange of shares or readjustment, or a stock dividend thereon shall be
declared with a record date within said period, the Exchange Ratio shall be
adjusted accordingly.
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2.9 OPTIONS
On a mutually agreeable date prior to the Effective Time, but in no event
later than immediately before the Effective Time, the Company shall terminate
each of the Company Option Plans and terminate each Company Option that is
outstanding and unexercised at the time in exchange for a payment from the
Company, subject to required withholding taxes and the receipt of an appropriate
release as discussed below, of cash in an amount equal to the difference between
the exercise price of such Company Option and $18.00 for each share of Company
Common Stock subject to such Company Option. The Company agrees to use its best
efforts obtain an appropriate release from the holder of a Company Option which
is terminated pursuant to this Section 2.9 prior to making any payment in
exchange therefor.
2.10 ADDITIONAL ACTIONS
If, at any time after the Effective Time, the Surviving Corporation shall
consider that any further assignments or assurances in law or any other acts are
necessary or desirable to (i) vest, perfect or confirm, of record or otherwise,
in the Surviving Corporation its right, title or interest in, to or under any of
the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger, or
(ii) otherwise carry out the purposes of this Agreement, the Company and its
proper officers and directors shall be deemed to have granted to the Surviving
Corporation an irrevocable power of attorney to execute and deliver all such
proper deeds, assignments and assurances in law and to do all acts necessary or
proper to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
purposes of this Agreement; and the proper officers and directors of the
Surviving Corporation are fully authorized in the name of the Company or
otherwise to take any and all such action.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Acquiror as follows:
3.1 CAPITAL STRUCTURE
The authorized capital stock of the Company consists of 40,000,000 shares
of Company Common Stock and 10,000,000 shares of Company Preferred Stock. As of
the date hereof, 3,710,205 shares of Company Common Stock are issued and
outstanding, 383,648 shares of Company Common Stock are directly or indirectly
held by the Company as treasury stock and no shares of Company Preferred Stock
are issued and outstanding. All outstanding shares of Company Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable,
and none of the outstanding shares of Company
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Common Stock has been issued in violation of the preemptive rights of any
person, firm or entity. Except for the Stock Option Agreement and for
Company Options to acquire not more than 332,850 shares of Company Common
Stock outstanding as of the date hereof, a schedule of which has been
Previously Disclosed, there are no Rights authorized, issued or outstanding
with respect to the capital stock of the Company.
3.2 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY
The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Company. The Company
is duly registered as a unitary savings and loan holding company under the HOLA
and the regulations of the OTS thereunder. The Company has heretofore delivered
to the Acquiror true and complete copies of the Articles of Incorporation and
Bylaws of the Company as in effect as of the date hereof.
3.3 OWNERSHIP OF THE COMPANY SUBSIDIARIES
The Company has Previously Disclosed the name, jurisdiction of
incorporation and percentage ownership of each direct or indirect Company
Subsidiary. Except for (x) capital stock of the Company Subsidiaries, (y)
securities and other interests held in a fiduciary capacity and beneficially
owned by third parties or taken in consideration of debts previously contracted
and (z) securities and other interests which are Previously Disclosed, the
Company does not own or have the right to acquire, directly or indirectly, any
outstanding capital stock or other voting securities or ownership interests of
any corporation, bank, savings association, partnership, joint venture or other
organization. The outstanding shares of capital stock or other ownership
interests of each Company Subsidiary have been duly authorized and validly
issued, are fully paid and nonassessable, and except as Previously Disclosed are
directly owned by the Company free and clear of all liens, claims, encumbrances,
charges, pledges, restrictions or rights of third parties of any kind
whatsoever. No Rights are authorized, issued or outstanding with respect to the
capital stock or other ownership interests of the Company Subsidiaries and,
other than the Mortgage Company Agreement, there are no agreements,
understandings or commitments relating to the right of the Company to vote or to
dispose of such capital stock or other ownership interests.
3.4 ORGANIZATION, STANDING AND AUTHORITY OF THE COMPANY SUBSIDIARIES
Each of the Company Subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized. Each of the Company Subsidiaries (i) has full power and authority to
own or lease all of its properties
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and assets and to carry on its business as now conducted and (ii) is duly
licensed or qualified to do business and is in good standing in each
jurisdiction in which its ownership or leasing of property or the conduct
of its business requires such qualification, except where the failure to
be so licensed, qualified or in good standing would not have a Material
Adverse Effect on the Company. The deposit accounts of the Bank are
insured by the SAIF or the BIF to the maximum extent permitted by the FDIA.
The Bank has paid all deposit insurance premiums and assessments required by
the FDIA and the regulations thereunder. The Company has heretofore delivered
or made available to the Acquiror true and complete copies of the Charter and
Bylaws of the Bank and the Articles of Incorporation and Bylaws of each other
Company Subsidiary as in effect as of the date hereof.
3.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) The Company has all requisite corporate power and authority to enter
into this Agreement and (subject to receipt of all necessary governmental
approvals and the approval of the Company's shareholders of this Agreement) to
perform all of its obligations under this Agreement. The execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of the Company, except for the approval of this
Agreement by the Company's shareholders. This Agreement has been duly and
validly executed and delivered by the Company and, assuming due authorization,
execution and delivery by the Acquiror, constitutes a legal, valid and binding
obligation of the Company which is enforceable against the Company in accordance
with its terms, subject, as to enforceability, to bankruptcy, insolvency and
other laws of general applicability relating to or affecting creditors' rights
and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Bank
Merger), nor compliance by the Company with any of the provisions hereof (i)
does or will conflict with or result in a breach of any provisions of the
Articles of Incorporation or Bylaws of the Company or the equivalent documents
of any Company Subsidiary, (ii) violate, conflict with or result in a breach of
any term, condition or provision of, or constitute a default (or an event which,
with notice or lapse of time, or both, would constitute a default) under, or
give rise to any right of termination, cancellation or acceleration with respect
to, or result in the creation of any lien, charge or encumbrance upon any
property or asset of the Company or a Company Subsidiary pursuant to, any
material note, bond, mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which the Company or a Company
Subsidiary is a party, or by which any of their respective properties or assets
may be bound or affected or (iii) subject to receipt of all required
governmental and shareholder approvals, violate any order, writ, injunction,
decree, statute, rule or regulation applicable to the Company or a Company
Subsidiary.
(c) Except for (i) the filing of applications and notices with, and the
consent and approval of, the OTS, (ii) the filing and effectiveness of the Form
S-4 with the Commission,
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(iii) compliance with applicable state securities or "blue sky" laws and the
NASD Bylaws in connection with the issuance of Acquiror Common Stock pursuant
to this Agreement, (iv) the approval of this Agreement by the requisite vote
of the shareholders of the Company, (v) the filing of Articles of Merger with
the Secretary of State of the State of Washington pursuant to the WBCA in
connection with the Merger, (vi) the filing of Articles of Combination with
the OTS in connection with the Bank Merger and (vii) review of the Merger by
the DOJ under federal antitrust laws, and except for such filings,
registrations, consents or approvals which are Previously Disclosed, no
consents or approvals of or filings or registrations with any Governmental
Entity or with any third party are necessary on the part of the Company or
any Company Subsidiary in connection with (i) the execution and delivery by
the Company of this Agreement and the consummation by the Company of the
transactions contemplated hereby and (ii) the execution and delivery by the
Bank of the Bank Merger Agreement and the consummation by the Bank of the
transactions contemplated thereby.
(d) As of the date hereof, neither the Company nor any of the Company
Subsidiaries is aware of any reasons relating to the Company or any of the
Company Subsidiaries (including without limitation Community Reinvestment Act
compliance) why all consents and approvals shall not be procured from all
regulatory agencies having jurisdiction over the transactions contemplated by
this Agreement as shall be necessary for (i) consummation of the transactions
contemplated by this Agreement and the Bank Merger Agreement and (ii) the
continuation by the Acquiror after the Effective Time of the business of each of
the Acquiror and the Company as such business is carried on immediately prior to
the Effective Time, free of any conditions or requirements which, in the
reasonable opinion of the Company, could have a Material Adverse Effect on the
Acquiror or the Company or materially impair the value of the Company and the
Company Subsidiaries to the Acquiror.
3.6 AUTHORIZED AND EFFECTIVE MORTGAGE COMPANY AGREEMENT
(a) The Company has all requisite corporate power and authority to enter
into the Mortgage Company Agreement and to perform all of its obligations under
the Mortgage Company Agreement. The execution and delivery of the Mortgage
Company Agreement and the consummation of the transactions contemplated thereby
have been duly and validly authorized by all necessary corporate action in
respect thereof on the part of the Company. The Mortgage Company Agreement has
been duly and validly executed and delivered by the Company and, assuming due
authorization, execution and delivery by the other parties thereto, constitutes
a legal, valid and binding obligation of the Company which is enforceable
against the Company in accordance with its terms, subject, as to enforceability,
to bankruptcy, insolvency and other laws of general applicability relating to or
affecting creditors' rights and to general equity principles.
(b) Neither the execution and delivery of the Mortgage Company Agreement,
nor consummation of the transactions contemplated thereby, nor compliance by the
Company
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with any of the provisions thereof (i) does or will conflict with or result
in a breach of any provisions of the Articles of Incorporation or Bylaws of
the Company or the equivalent documents of any Company Subsidiary, (ii)
violate, conflict with or result in a breach of any term, condition or
provision of, or constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, or give rise to
any right of termination, cancellation or acceleration with respect to, or
result in the creation of any lien, charge or encumbrance upon any property
or asset of the Company or a Company Subsidiary pursuant to, any material
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Company or a Company Subsidiary
is a party, or by which any of their respective properties or assets may be
bound or affected or (iii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to the Company or a Company Subsidiary.
3.7 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Since January 1, 1993, the Company has timely filed with the
Commission and the NASD all Securities Documents required by the Securities Laws
and such Securities Documents complied in all material respects with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Since January 1, 1993, each of the Company and the Bank has duly filed
with the OTS, the FDIC and any other applicable federal or state banking
authority, as the case may be, in correct form the reports required to be filed
under applicable laws and regulations and such reports were in all material
respects complete and accurate and in compliance with the requirements of
applicable laws and regulations. In connection with the most recent
examinations of the Company and the Bank by the OTS, neither the Company nor the
Bank was required to correct or change any action, procedure or proceeding which
the Company or the Bank believes has not been corrected or changed as required
as of the date hereof.
3.8 FINANCIAL STATEMENTS
(a) The Company has previously delivered or made available to the Acquiror
accurate and complete copies of the Company Financial Statements which, in the
case of the consolidated statements of financial condition of the Company as of
March 31, 1996, 1995 and 1994 and the consolidated statements of income,
stockholders' equity and cash flows for each of the three years ended March 31,
1996, 1995 and 1994, are accompanied by the audit reports of Deloitte & Touche
LLP, independent public accountants with respect to the Company. The Company
Financial Statements referred to herein, as well as the Company Financial
Statements to be delivered pursuant to Section 5.8 hereof, fairly present or
will fairly present, as the case may be, the consolidated financial condition of
the Company as of the respective dates set forth therein, and the consolidated
results of
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operations, stockholders' equity and cash flows of the Company for
the respective periods or as of the respective dates set forth therein.
(b) Each of the Company Financial Statements referred to in Section 3.8(a)
has been or will be, as the case may be, prepared in accordance with generally
accepted accounting principles consistently applied during the periods involved,
except as stated therein. The audits of the Company and the Company
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of the Company and
the Company Subsidiaries are being maintained in material compliance with
applicable legal and accounting requirements, and such books and records
accurately reflect in all material respects all dealings and transactions in
respect of the business, assets, liabilities and affairs of the Company and its
Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the consolidated statement of financial condition of the Company as of March 31,
1996 (including related notes) and (ii) of liabilities incurred since March 31,
1996 in the ordinary course of business, neither the Company nor any Company
Subsidiary has any liabilities, whether absolute, accrued, contingent or
otherwise, material to the financial condition, results of operations or
business of the Company on a consolidated basis.
3.9 MATERIAL ADVERSE CHANGE
Except as Previously Disclosed, since March 31, 1996 (i) the Company and
its Subsidiaries have conducted their respective businesses in the ordinary and
usual course (excluding the incurrence of reasonable expenses in connection with
the transactions contemplated hereby) and (ii) no event has occurred or
circumstance arisen that, individually or in the aggregate, has had or is
reasonably likely to have a Material Adverse Effect on the Company.
3.10 ENVIRONMENTAL MATTERS
(a) To the best of the Company's knowledge, the Company and its
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would not, singly or in the aggregate,
have a Material Adverse Effect on the Company. Neither the Company nor a
Company Subsidiary has received in the past five years any communication from a
Governmental Entity alleging that the Company or a Company Subsidiary is not in
such compliance, or if such a communication has been received, the Company is
now in such compliance, and, to the best knowledge of the Company, there are no
present circumstances that would prevent or interfere with the continuation of
compliance with all Environmental Laws.
(b) To the best of the Company's knowledge, none of the properties owned,
leased or operated by the Company or a Company Subsidiary has been or is in
violation of or
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liable under any Environmental Law, except any such violations or liabilities
which would not singly or in the aggregate have a Material Adverse Effect on
the Company.
(c) To the best of the Company's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action or
governmental investigation that could result in the imposition of any liability
arising under any Environmental Law against the Company or a Company Subsidiary
or against any person or entity whose liability for any Environmental Claim the
Company or a Company Subsidiary has or may have retained or assumed either
contractually or by operation of law, except such which would not have a
Material Adverse Effect on the Company.
(d) Except as Previously Disclosed, the Company has not conducted any
environmental studies during the past five years with respect to any properties
owned by it or a Company Subsidiary as of the date hereof.
3.11 LOANS, ALLOWANCE FOR LOAN LOSSES, REAL ESTATE OWNED AND INVESTMENT AND
MORTGAGE-BACKED SECURITIES
(a) Each loan on the books and records of the Company and any Company
Subsidiary, including unfunded portions of outstanding lines of credit and loan
commitments, was made and has been serviced in all material respects in
accordance with customary lending standards in the ordinary course of business,
is evidenced in all material respects by appropriate and sufficient
documentation and, to the best knowledge of the Company, constitutes the legal,
valid and binding obligation of the obligor named therein, subject to
bankruptcy, insolvency, fraudulent conveyance and other laws of general
applicability relating to or affecting creditor's rights and to general equity
principles.
(b) The allowance for loan losses reflected on the Company's consolidated
statements of financial condition included in the Company Financial Statements
is, or will be in the case of subsequently delivered Company Financial
Statements, as the case may be, in the opinion of the Company's management
adequate in all material respects as of their respective dates under the
requirements of generally accepted accounting principles to provide for
reasonably anticipated losses on outstanding loans net of recoveries. The Real
Estate Owned reflected on the consolidated statements of financial condition
included in the Company Financial Statements is, or will be in the case of
subsequently delivered Company Financial Statements, as the case may be, carried
at the lower of cost or fair value, less estimated costs to sell, as required by
generally accepted accounting principles.
(c) The Company has Previously Disclosed to the Acquiror as of June 30,
1996 or the latest practicable date prior thereto, as applicable: (i) any
written or, to the Company's knowledge, oral loan or similar agreement under the
terms of which the obligor is 30 or more days delinquent in payment of principal
or interest, or to the best of the Company's knowledge, in default of any other
provision thereof; (ii) each loan or similar
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agreement which has been classified as "substandard," "doubtful," "loss" or
"special mention" by the Company, a Company Subsidiary or an applicable
regulatory authority; (iii) a listing of the Real Estate Owned held by the
Company and the Company Subsidiaries; (iv) a schedule of all investment
securities and mortgage-backed securities of the Company and the Company
Subsidiaries, including securities held-to-maturity, available for sale and
held for trading, as well as the respective carrying values and fair values
of all such securities, and in each case, all such information as Previously
Disclosed is complete and accurate in all material respects.
3.12 TAX MATTERS
(a) The Company and its Subsidiaries, and each of their predecessors, have
timely filed all federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
required by applicable law to be filed by them (including, without limitation,
estimated tax returns, income tax returns, information returns and withholding
and employment tax returns) and have paid, or where payment is not required to
have been made, have set up an adequate reserve or accrual for the payment of,
all material taxes required to be paid in respect of the periods covered by such
returns and, as of the Effective Time, will have paid, or where payment is not
required to have been made, will have set up an adequate reserve or accrual for
the payment of, all material taxes for any subsequent periods ending on or prior
to the Effective Time. Neither the Company nor a Company Subsidiary will have
any material liability for any such taxes in excess of the amounts so paid or
reserves or accruals so established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Company and its Subsidiaries are complete and accurate in all
material respects. Neither the Company nor a Company Subsidiary is delinquent
in the payment of any tax, assessment or governmental charge or has requested
any extension of time within which to file any tax returns in respect of any
fiscal year or portion thereof which have not since been filed. Except as
Previously Disclosed, no deficiencies for any tax, assessment or governmental
charge have been proposed, asserted or assessed (tentatively or otherwise)
against the Company or a Company Subsidiary as a result of any examinations or
otherwise which have not been settled and paid. There are currently no
agreements in effect with respect to the Company or a Company Subsidiary to
extend the period of limitations for the assessment or collection of any tax.
As of the date hereof, no audit, examination or deficiency or refund litigation
with respect to such return is pending or, to the best of the Company's
knowledge, threatened.
(c) Except as Previously Disclosed, neither the Company nor any Company
Subsidiary (i) is a party to any agreement providing for the allocation or
sharing of taxes, (ii) is required to include in income any adjustment pursuant
to Section 481(a) of the Code by reason of a voluntary change in accounting
method initiated by the Company or a Company Subsidiary (nor does the Company
have any knowledge that the Internal Revenue
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Service has proposed any such adjustment or change of accounting method) or
(iii) has filed a consent pursuant to Section 341(f) of the Code or agreed to
have Section 341(f)(2) of the Code apply.
3.13 LEGAL PROCEEDINGS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Company,
threatened against the Company or a Company Subsidiary or against any asset,
interest or right of the Company or a Company Subsidiary, or, to the best
knowledge of the Company, against any officer, director or employee of any of
them that in any such case, if decided adversely, would have a Material Adverse
Effect on the Company. Neither the Company nor a Company Subsidiary is a party
to any order, judgment or decree which has or could reasonably be expected to
have a Material Adverse Effect on the Company.
3.14 COMPLIANCE WITH LAWS
(a) Each of the Company and the Company Subsidiaries has all permits,
licenses, certificates of authority, orders and approvals of, and has made all
filings, applications and registrations with, federal, state, local and foreign
governmental or regulatory bodies that are required in order to permit it to
carry on its business as it is presently being conducted and the absence of
which could reasonably be expected to have a Material Adverse Effect on the
Company; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Company, no suspension or cancellation of any of the same is threatened.
(b) Neither the Company nor a Company Subsidiary is in violation of its
respective Articles of Incorporation, Charter or Bylaws, or of any applicable
federal, state or local law or ordinance or any order, rule or regulation of any
federal, state, local or other governmental agency or body (including, without
limitation, all banking (including without limitation all regulatory capital
requirements), securities, municipal securities, safety, health, environmental,
zoning, anti-discrimination, antitrust, and wage and hour laws, ordinances,
orders, rules and regulations), or in default with respect to any order, writ,
injunction or decree of any court, or in default under any order, license,
regulation or demand of any Governmental Entity, any of which violations or
defaults could reasonably be expected to have a Material Adverse Effect on the
Company; and neither the Company nor a Company Subsidiary has received in the
past five years any notice or communication from a Governmental Entity asserting
that the Company or a Company Subsidiary is in violation of any of the foregoing
which could reasonably be expected to have a Material Adverse Effect on the
Company. Neither the Company nor a Company Subsidiary is subject to any
regulatory or supervisory cease and desist order, agreement, written directive,
memorandum of understanding or written commitment (other than those of general
applicability to all savings associations or savings and loan holding companies
issued by governmental authorities), and none of them has received in the past
five years any written communication
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requesting that it enter into any of the foregoing, or if such a communication
has been received, none of them is any longer subject to such request.
3.15 CERTAIN INFORMATION
None of the information relating to the Company and its Subsidiaries
supplied or to be supplied for inclusion or incorporation by reference in (i)
the Form S-4 will, at the time the Form S-4 and any amendment thereto becomes
effective under the Securities Act, contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading, and
(ii) the Proxy Statement, as of the date such Proxy Statement is mailed to
shareholders of the Company and up to and including the date of the meeting of
shareholders to which such Proxy Statement relates, will contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, provided that information as of a later date shall be
deemed to modify information as of an earlier date. The Proxy Statement mailed
by the Company to its shareholders in connection with the meeting of
shareholders at which this Agreement will be considered by such shareholders
will comply as to form in all material respects with the Exchange Act and the
rules and regulations promulgated thereunder.
3.16 EMPLOYEE BENEFIT PLANS
(a) The Company has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred compensation, consultant, bonus or group insurance contract or any
other incentive, health and welfare or employee benefit plan or agreement
maintained for the benefit of employees or former employees of the Company or
any Company Subsidiary (the "Company Employee Plans"), whether written or oral,
and the Company has previously furnished or made available to the Acquiror
accurate and complete copies of the same together with (i) the most recent
actuarial and financial reports prepared with respect to any qualified plans,
(ii) the most recent annual reports filed with any governmental agency, and
(iii) all rulings and determination letters and any open requests for rulings or
letters that pertain to any qualified plan.
(b) None of the Company, any Company Subsidiary, any pension plan
maintained by any of them and qualified under Section 401(a) of the Code or, to
the best of the Company's knowledge, any fiduciary (with respect to whom the
Company or a Company Subsidiary has an indemnification obligation) of such plan
has incurred any material liability to the PBGC or the Internal Revenue Service
with respect to any such plan. To the best of the Company's knowledge, no
reportable event under Section 4043(b) of ERISA has occurred with respect to any
such pension plan.
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(c) Neither the Company nor any Company Subsidiary participates in or has
incurred any liability (that has not already been satisfied) under Section 4201
of ERISA for a complete or partial withdrawal from a multiemployer plan (as such
term is defined in Section 4001(a)(3) of ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Company Employee Plan which is an "employee
pension benefit plan" (as defined in Section 3(2) of ERISA) (a "Company Pension
Plan") which is intended to qualify under Section 401(a) of the Code to the
effect that such plan is qualified under section 401(a) of the Code and the
trust associated with such employee pension plan is tax exempt under Section 501
of the Code. No such letter has been revoked or, to the best of the Company's
knowledge, is threatened to be revoked and, except as Previously Disclosed, the
Company does not know of any ground on which such revocation may be based.
Neither the Company nor any Company Subsidiary has any material liability under
any such plan that is not reflected on the consolidated statement of financial
condition of the Company at March 31, 1996 included in the Company Financial
Statements, other than liabilities incurred in the ordinary course of business
in connection therewith subsequent to the date thereof.
(e) To the best of the Company's knowledge, no prohibited transaction
(within the meaning of Section 406 of ERISA) that is not exempt from the
prohibition of such Section by virtue of a statutory or administrative exemption
has occurred with respect to any Company Employee Plan which would result in the
imposition, directly or indirectly, on the Company or a Company Subsidiary of a
material excise tax under Section 4975 of the Code or a material civil penalty
under Section 502(i) of ERISA or otherwise have a Material Adverse Effect on the
Company.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established) of
all contributions which are required for periods after the date hereof and prior
to the Effective Time, under the terms of each Company Employee Plan or ERISA;
no accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412 of the Code), whether or not waived, exists with respect to any Company
Pension Plan, and there is no "unfunded current liability" (as defined in
Section 412(l)(8)(A) of the Code) with respect to any Company Pension Plan.
(g) To the best of the Company's knowledge and except as Previously
Disclosed, the Company Employee Plans have been operated in compliance in all
material respects with the applicable provisions of ERISA, the Code, all
regulations, rulings and announcements promulgated or issued thereunder and all
other applicable governmental laws and regulations.
(h) There are no pending or, to the best of the Company's knowledge,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the
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Company Employee Plans or any trust related thereto or, to the best of the
Company's knowledge, any fiduciary thereof (with respect to whom the Company or
a Company Subsidiary has an indemnification obligation).
3.17 CERTAIN CONTRACTS
(a) Except as Previously Disclosed, neither the Company nor a Company
Subsidiary is a party to, is bound or affected by, receives, or is obligated to
pay, benefits under (i) any agreement, arrangement or commitment, including
without limitation any agreement, indenture or other instrument, relating to the
borrowing of money by the Company or a Company Subsidiary (other than in the
case of the Bank deposits, FHLB advances, federal funds purchased and securities
sold under agreements to repurchase in the ordinary course of business) or the
guarantee by the Company or a Company Subsidiary of any obligation of others,
(ii) any agreement, arrangement or commitment relating to the employment of a
consultant or the employment, election or retention in office of any present or
former director, officer or employee of the Company or a Company Subsidiary,
(iii) any agreement, arrangement or understanding pursuant to which any payment
(whether of severance pay or otherwise) became or may become due to any
director, officer or employee of the Company or a Company Subsidiary upon
execution of this Agreement or upon or following consummation of the
transactions contemplated by this Agreement (either alone or in connection with
the occurrence of any additional acts or events), (iv) any agreement,
arrangement or understanding pursuant to which the Company or a Company
Subsidiary is obligated to indemnify any director, officer, employee or agent of
the Company or a Company Subsidiary, (v) any agreement, arrangement or
understanding to which the Company or a Company Subsidiary is a party or by
which any of the same is bound which limits the freedom of the Company or a
Company Subsidiary to compete in any line of business or with any person, (vi)
any assistance agreement, supervisory agreement, memorandum of understanding,
consent order, cease and desist order or condition of any regulatory order or
decree with or by the OTS, the FDIC or any other regulatory agency, or (vii) any
other agreement, arrangement or understanding which would be required to be
filed as an exhibit to the Company's Annual Report on Form 10-K under the
Exchange Act and which has not been so filed.
(b) Neither the Company nor any Company Subsidiary is in default or in
non-compliance, which default or non-compliance could reasonably be expected to
have a Material Adverse Effect on the Company, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
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3.18 BROKERS AND FINDERS
Except as Previously Disclosed, neither the Company nor any Company
Subsidiary nor, to the best of the Company's knowledge, any of their respective
directors, officers or employees, has employed any broker or finder or incurred
any liability for any broker or finder fees or commissions in connection with
the transactions contemplated hereby which reasonably could be expected to be a
liability of the Company or a Company Subsidiary.
3.19 INSURANCE
Each of the Company and its Subsidiaries is insured for reasonable amounts
with financially sound and reputable insurance companies against such risks as
companies engaged in a similar business would, in accordance with good business
practice, customarily be insured and has maintained all insurance required by
applicable laws and regulations. The Company has Previously Disclosed all
policies of insurance maintained by it or a Company Subsidiary as of the date
hereof and any claims thereunder in excess of $50,000 since January 1, 1994.
3.20 PROPERTIES
All real and personal property owned by the Company or its Subsidiaries or
presently used by any of them in its respective business is in an adequate
condition (ordinary wear and tear excepted) and is sufficient to carry on the
business of the Company and its Subsidiaries in the ordinary course of business
consistent with their past practices. The Company and the Company Subsidiaries
have good and marketable title free and clear of all liens, encumbrances,
charges, defaults or equities (other than equities of redemption under
applicable foreclosure laws) to all of the material properties and assets, real
and personal, reflected on the consolidated statement of financial condition of
the Company as of March 31, 1996 included in the Company Financial Statements or
acquired after such date, except (i) liens for current taxes not yet due or
payable (ii) pledges to secure deposits and other liens incurred in the ordinary
course of its banking business, (iii) such imperfections of title, easements and
encumbrances, if any, as are not material in character, amount or extent and
(iv) as reflected on the consolidated statement of financial condition of the
Company as of March 31, 1996 included in the Company Financial Statements. All
real and personal property which is material to the Company's business on a
consolidated basis and leased or licensed by the Company or a Company Subsidiary
is held pursuant to leases or licenses which are valid and enforceable in
accordance with their respective terms and such leases will not terminate or
lapse prior to the Effective Time.
3.21 LABOR
No work stoppage involving the Company or a Company Subsidiary is pending
or, to the best knowledge of the Company, threatened. Neither the Company nor a
Company Subsidiary is involved in, or threatened with or affected by, any labor
dispute, arbitration,
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lawsuit or administrative proceeding involving the employees of the Company or a
Company Subsidiary which could have a Material Adverse Effect on the Company.
Employees of the Company and the Company Subsidiaries are not represented by any
labor union nor are any collective bargaining agreements otherwise in effect
with respect to such employees, and to the best of the Company's knowledge,
there have been no efforts to unionize or organize any employees of the Company
or any of the Company Subsidiaries during the past five years.
3.22 REQUIRED VOTE; INAPPLICABILITY OF ANTITAKEOVER STATUTES
(a) The affirmative vote of the holders of two thirds of the issued and
outstanding shares of Company Common Stock is necessary to approve this
Agreement and the transactions contemplated hereby on behalf of the Company.
(b) Assuming the accuracy of the representation and warranty of the
Acquiror contained in Section 4.20 hereof, no "fair price" or other form of
antitakeover statute or regulation, including without limitation Chapter 23B.19
of the WBCA, is applicable to this Agreement and the transactions contemplated
hereby.
3.23 OWNERSHIP OF ACQUIROR COMMON STOCK
As of the date hereof, neither the Company nor, to its best knowledge, any
of its affiliates or associates (as such terms are defined under the Exchange
Act), (i) beneficially own, directly or indirectly, or (ii) are parties to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of Acquiror Common Stock which in
the aggregate represent 10% or more of the outstanding shares of Acquiror Common
Stock (other than shares held in a fiduciary capacity and beneficially owned by
third parties or shares taken in consideration of debts previously contracted).
3.24 DISCLOSURES
None of the representations and warranties of the Company or any of the
written information or documents furnished or to be furnished by the Company to
the Acquiror in connection with or pursuant to this Agreement or the
consummation of the transactions contemplated hereby, when considered as a
whole, contains or will contain any untrue statement of a material fact, or
omits or will omit to state any material fact required to be stated or necessary
to make any such information or document, in light of the circumstances, not
misleading.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE ACQUIROR
The Acquiror represents and warrants to the Company as follows:
4.1 CAPITAL STRUCTURE
The authorized capital stock of the Acquiror consists of 100,000,000 shares
of Acquiror Common Stock and 5,000,000 shares of Acquiror Preferred Stock. As
of June 30, 1996, there were 42,246,383 shares of Acquiror Common Stock issued
and outstanding, 1,737,383 shares of Acquiror Common Stock were held as treasury
stock and not outstanding and there were no shares of Acquiror Preferred Stock
issued and outstanding. All outstanding shares of Acquiror Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable,
and none of the outstanding shares of Acquiror Common Stock has been issued in
violation of the preemptive rights of any person, firm or entity. As of the
date hereof, there are no Rights authorized, issued or outstanding with respect
to the capital stock of the Acquiror, except (i) for shares of Acquiror Common
Stock issuable pursuant to the Acquiror Employee Stock Benefit Plans and (ii) by
virtue of this Agreement.
4.2 ORGANIZATION, STANDING AND AUTHORITY OF THE ACQUIROR
The Acquiror is a corporation duly organized, validly existing and in good
standing under the laws of the State of Washington with full corporate power and
authority to own or lease all of its properties and assets and to carry on its
business as now conducted and is duly licensed or qualified to do business and
is in good standing in each jurisdiction in which its ownership or leasing of
property or the conduct of its business requires such licensing or
qualification, except where the failure to be so licensed, qualified or in good
standing would not have a Material Adverse Effect on the Acquiror. The Acquiror
is duly registered as a unitary savings and loan holding company under the HOLA
and the regulations of the OTS thereunder. The Acquiror has heretofore
delivered to the Company true and complete copies of the Restated Articles of
Incorporation and Bylaws of the Acquiror as in effect as of the date hereof.
4.3 OWNERSHIP OF THE ACQUIROR SUBSIDIARIES
The Acquiror has Previously Disclosed each direct or indirect Acquiror
Subsidiary and identified Acquiror Bank as its only Significant Subsidiary as of
the date hereof. The outstanding shares of capital stock of Acquiror Bank have
been duly authorized and validly issued, are fully paid and nonassessable, and
are directly owned by the Acquiror free and clear of all liens, claims,
encumbrances, charges, pledges, restrictions or rights of third parties of any
kind whatsoever. No Rights are authorized, issued or outstanding with respect
to the capital stock or other ownership interests of Acquiror Bank and there are
no
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agreements, understandings or commitments relating to the right of the Acquiror
to vote or to dispose of said shares or other ownership interests.
4.4 ORGANIZATION, STANDING AND AUTHORITY OF THE ACQUIROR SUBSIDIARIES
Acquiror Bank is a savings and loan association duly organized, validly
existing and in good standing under the laws of the United States. Acquiror
Bank (i) has full power and authority to own or lease all of its properties and
assets and to carry on its business as now conducted and (ii) is duly licensed
or qualified to do business and is in good standing in each jurisdiction in
which its ownership or leasing of property or the conduct of its business
requires such qualification and where the failure to be so licensed, qualified
or in good standing would have a Material Adverse Effect on the Acquiror. The
deposit accounts of Acquiror Bank are insured by the SAIF to the maximum extent
permitted by the FDIA. Acquiror Bank has paid all deposit insurance premiums
and assessments required by the FDIA and the regulations thereunder.
4.5 AUTHORIZED AND EFFECTIVE AGREEMENT
(a) Acquiror has all requisite corporate power and authority to enter into
this Agreement and (subject to receipt of all necessary governmental approvals)
to perform all of its obligations under this Agreement. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly and validly authorized by all necessary corporate action
in respect thereof on the part of the Acquiror. This Agreement has been duly
and validly executed and delivered by the Acquiror and, assuming due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of the Acquiror which is enforceable against the Acquiror
in accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency and other laws of general applicability relating to or affecting
creditors' rights and to general equity principles.
(b) Neither the execution and delivery of this Agreement, nor consummation
of the transactions contemplated hereby (including the Merger and the Bank
Merger) nor compliance by the Acquiror with any of the provisions hereof (i)
does or will conflict with or result in a breach of any provisions of the
Restated Articles of Incorporation or Bylaws of the Acquiror or the Charter or
Bylaws of the Acquiror Bank, (ii) violate, conflict with or result in a breach
of any term, condition or provision of, or constitute a default (or an event
which, with notice or lapse of time, or both, would constitute a default) under,
or give rise to any right of termination, cancellation or acceleration with
respect to, or result in the creation of any lien, charge or encumbrance upon
any property or asset of the Acquiror or Acquiror Bank pursuant to, any material
note, bond, mortgage, indenture, deed of trust, license, lease, agreement or
other instrument or obligation to which the Acquiror or Acquiror Bank is a
party, or by which any of their respective properties or assets may be
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bound or affected or (iii) subject to receipt of all required governmental
approvals, violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Acquiror or Acquiror Bank.
(c) Except for (i) the filing of applications and notices with, and the
consent and approval of, the OTS, (ii) the filing and effectiveness of the Form
S-4 with the Commission, (iii) compliance with applicable state securities or
"blue sky" laws and the NASD Bylaws in connection with the issuance of Acquiror
Common Stock pursuant to this Agreement, (iv) the approval of this Agreement by
the requisite vote of the shareholders of the Company, (v) the filing of
Articles of Merger with the Secretary of State of the State of Washington
pursuant to the WBCA in connection with the Merger, (vi) the filing of Articles
of Combination with the OTS in connection with the Bank Merger and (vii) review
of the Merger by the DOJ under federal antitrust laws, no consents or approvals
of or filings or registrations with any Governmental Entity or with any third
party are necessary on the part of the Acquiror or Acquiror Bank in connection
with (i) the execution and delivery by the Acquiror of this Agreement and the
consummation by the Acquiror of the transactions contemplated hereby and (ii)
the execution and delivery by the Acquiror Bank of the Bank Merger Agreement and
the consummation by the Acquiror Bank of the transactions contemplated thereby.
(d) As of the date hereof, the Acquiror is not aware of any reasons
relating to the Acquiror or any of its Subsidiaries (including without
limitation Community Reinvestment Act compliance) why all consents and approvals
shall not be procured from all regulatory agencies having jurisdiction over the
transactions contemplated by this Agreement as shall be necessary for (i)
consummation of the transactions contemplated by this Agreement and the Bank
Merger Agreement and (ii) the continuation by the Acquiror after the Effective
Time of the business of each of the Acquiror and the Company as such business is
carried on immediately prior to the Effective Time, free of any conditions or
requirements which, in the reasonable opinion of the Acquiror, could have a
Material Adverse Effect on the Acquiror or the Company or materially impair the
value of the Company and the Company Subsidiaries to the Acquiror.
4.6 SECURITIES DOCUMENTS AND REGULATORY REPORTS
(a) Since January 1, 1993, the Acquiror has timely filed with the
Commission and the NASD all Securities Documents required by the Securities Laws
and such Securities Documents complied in all material respects with the
Securities Laws and did not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading.
(b) Since January 1, 1993, each of the Acquiror and the Acquiror Bank has
duly filed with the OTS, the FDIC and any other applicable federal or state
banking authority, as the case may be, in correct form the reports required to
be filed under applicable laws
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and regulations and such reports were in all material respects complete and
accurate and in compliance with the requirements of applicable laws and
regulations. In connection with the most recent examinations of the Acquiror
and the Acquiror Bank by the OTS, neither the Acquiror nor the Acquiror Bank was
required to correct or change any action, procedure or proceeding which the
Acquiror or the Acquiror Bank believes has not been corrected or changed as
required as of the date hereof.
4.7 FINANCIAL STATEMENTS
(a) The Acquiror has previously delivered or made available to the Company
accurate and complete copies of the Acquiror Financial Statements which, in the
case of the consolidated statements of financial condition of the Acquiror as of
September 30, 1995, 1994 and 1993 and the consolidated statements of operations,
stockholders' equity and cash flows for each of the three years ended September
30, 1995, 1994 and 1993, are accompanied by the audit reports of Deloitte &
Touche LLP, independent public accountants with respect to the Acquiror. The
Acquiror Financial Statements referred to herein, as well as the Acquiror
Financial Statements to be delivered pursuant to Section 5.8 hereof, fairly
present or will fairly present, as the case may be, the consolidated financial
condition of the Acquiror as of the respective dates set forth therein, and the
consolidated results of operations, stockholders' equity and cash flows of the
Acquiror for the respective periods or as of the respective dates set forth
therein.
(b) Each of the Acquiror Financial Statements referred to in Section
4.7(a) has been or will be, as the case may be, prepared in accordance with
generally accepted accounting principles consistently applied during the periods
involved, except as stated therein. The audits of the Acquiror and the Acquiror
Subsidiaries have been conducted in all material respects in accordance with
generally accepted auditing standards. The books and records of the Acquiror
and the Acquiror Subsidiaries are being maintained in material compliance with
applicable legal and accounting requirements, and all such books and records
accurately reflect in all material respects all dealings and transactions in
respect of the business, assets, liabilities and affairs of the Acquiror and the
Acquiror Subsidiaries.
(c) Except and to the extent (i) reflected, disclosed or provided for in
the consolidated statement of financial condition of the Acquiror as of March
31, 1996 (including related notes) and (ii) of liabilities incurred since March
31, 1996 in the ordinary course of business, neither the Acquiror nor any
Acquiror Subsidiary has any liabilities, whether absolute, accrued, contingent
or otherwise, material to the financial condition, results of operations or
business of the Acquiror on a consolidated basis.
4.8 MATERIAL ADVERSE CHANGE
Since March 31, 1996, no event has occurred or circumstance arisen that,
individually or in the aggregate, has had or is reasonably likely to have a
Material Adverse Effect on the Acquiror.
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4.9 ENVIRONMENTAL MATTERS
(a) To the best of the Acquiror's knowledge, the Acquiror and the Acquiror
Subsidiaries are in compliance with all Environmental Laws, except for any
violations of any Environmental Law which would not, singly or in the aggregate,
have a Material Adverse Effect on the Acquiror. Neither the Acquiror nor any
Acquiror Subsidiary has received in the past five years any communication from a
Governmental Entity alleging that the Acquiror or any Acquiror Subsidiary is not
in such compliance, or if such a communication has been received, the Acquiror
is now in such compliance, and, to the best knowledge of the Acquiror, there are
no present circumstances that would prevent or interfere with the continuation
of compliance with all Environmental Laws.
(b) To the best of the Acquiror's knowledge, none of the properties owned,
leased or operated by the Acquiror or the Acquiror Subsidiaries has been or is
in violation of or liable under any Environmental Law, except any such
violations or liabilities which would not singly or in the aggregate have a
Material Adverse Effect on the Acquiror.
(c) To the best of the Acquiror's knowledge, there are no past or present
actions, activities, circumstances, conditions, events or incidents that could
reasonably form the basis of any Environmental Claim or other claim or action or
governmental investigation that could result in the imposition of any liability
arising under any Environmental Law against the Acquiror or any Acquiror
Subsidiary or against any person or entity whose liability for any Environmental
Claim the Acquiror or any Acquiror Subsidiary has or may have retained or
assumed either contractually or by operation of law, except such which would not
have a Material Adverse Effect on the Acquiror.
4.10 TAX MATTERS
(a) The Acquiror and the Acquiror Subsidiaries, and each of their
predecessors, have timely filed all federal, state and local (and, if
applicable, foreign) income, franchise, bank, excise, real property, personal
property and other tax returns required by applicable law to be filed by them
(including, without limitation, estimated tax returns, income tax returns,
information returns and withholding and employment tax returns) and have paid,
or where payment is not required to have been made, have set up an adequate
reserve or accrual for the payment of, all material taxes required to be paid in
respect of the periods covered by such returns and, as of the Effective Time,
will have paid, or where payment is not required to have been made, will have
set up an adequate reserve or accrual for the payment of, all material taxes for
any subsequent periods ending on or prior to the Effective Time. Neither the
Acquiror nor any of the Acquiror Subsidiaries will have any material liability
for any such taxes in excess of the amounts so paid or reserves or accruals so
established.
(b) All federal, state and local (and, if applicable, foreign) income,
franchise, bank, excise, real property, personal property and other tax returns
filed by the Acquiror and its Subsidiaries are complete and accurate in all
material respects. Neither the Acquiror nor
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an Acquiror Subsidiary is delinquent in the payment of any tax, assessment or
governmental charge or has requested any extension of time within which to file
any tax returns in respect of any fiscal year or portion thereof which have not
since been filed. No deficiencies for any tax, assessment or governmental
charge have been proposed, asserted or assessed (tentatively or otherwise)
against the Acquiror or an Acquiror Subsidiary as a result of any examinations
or otherwise which have not been settled and paid. There are currently no
agreements in effect with respect to the Acquiror or an Acquiror Subsidiary to
extend the period of limitations for the assessment or collection of any tax.
Except as Previously Disclosed, as of the date hereof, no audit, examination or
deficiency or refund litigation with respect to any federal, state and local
(and, if applicable, foreign) income, franchise, bank, excise, real property,
personal property and other tax returns filed by the Acquiror and the Acquiror
Subsidiaries is pending or, to the best of the Acquiror's knowledge, threatened.
(c) Neither the Acquiror nor any Acquiror Subsidiary (i) is a party to any
agreement providing for the allocation or sharing of taxes, (ii) is required to
include in income any adjustment pursuant to Section 481(a) of the Code by
reason of a voluntary change in accounting method initiated by the Acquiror or
an Acquiror Subsidiary (nor does the Acquiror have any knowledge that the
Internal Revenue Service has proposed any such adjustment or change of
accounting method) or (iii) has filed a consent pursuant to Section 341(f) of
the Code or agreed to have Section 341(f)(2) of the Code apply.
4.11 LEGAL PROCEEDINGS
There are no actions, suits, claims, governmental investigations or
proceedings instituted, pending or, to the best knowledge of the Acquiror,
threatened against the Acquiror or any Acquiror Subsidiary or against any asset,
interest or right of the Acquiror or any Acquiror Subsidiary, or, to the best
knowledge of the Acquiror, against any officer, director or employee of any of
them that in any such case, if decided adversely, would have a Material Adverse
Effect on the Acquiror. Neither the Acquiror nor any of the Acquiror
Subsidiaries is a party to any order, judgment or decree which has or could
reasonably be expected to have a Material Adverse Effect on the Acquiror.
4.12 COMPLIANCE WITH LAWS
(a) Each of the Acquiror and each of the Acquiror Subsidiaries has all
permits, licenses, certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with, federal, state, local and
foreign governmental or regulatory bodies that are required in order to permit
it to carry on its business as it is presently being conducted and the absence
of which could reasonably be expected to have a Material Adverse Effect on the
Acquiror; all such permits, licenses, certificates of authority, orders and
approvals are in full force and effect; and to the best knowledge of the
Acquiror, no suspension or cancellation of any of the same is threatened.
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(b) Neither the Acquiror nor any of the Acquiror Subsidiaries is in
violation of its respective Articles of Incorporation, Charter or other
chartering instrument or Bylaws, or of any applicable federal, state or local
law or ordinance or any order, rule or regulation of any federal, state, local
or other governmental agency or body (including, without limitation, all banking
(including without limitation all regulatory capital requirements), securities,
municipal securities, safety, health, environmental, zoning, anti-
discrimination, antitrust, and wage and hour laws, ordinances, orders, rules and
regulations), or in default with respect to any order, writ, injunction or
decree of any court, or in default under any order, license, regulation or
demand of any Governmental Entity, any of which violations or defaults could
reasonably be expected to have a Material Adverse Effect on the Acquiror; and
neither the Acquiror nor any Acquiror Subsidiary has received in the past five
years any notice or communication from a Governmental Entity asserting that the
Acquiror or any Acquiror Subsidiary is in violation of any of the foregoing
which could reasonably be expected to have a Material Adverse Effect on the
Acquiror. Neither the Acquiror nor any Acquiror Subsidiary is subject to any
regulatory or supervisory cease and desist order, agreement, written directive,
memorandum of understanding or written commitment (other than those of general
applicability to all savings associations or savings and loan holding companies
thereof issued by governmental authorities), and none of them has received in
the past five years any written communication requesting that it enter into any
of the foregoing, or if such a communication has been received, none of them is
any longer subject to such request.
4.13 CERTAIN INFORMATION
None of the information relating to the Acquiror and the Acquiror
Subsidiaries to be included or incorporated by reference in (i) the Form S-4
will, at the time the Form S-4 and any amendment thereto becomes effective under
the Securities Act, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) the Proxy
Statement, as of the date such Proxy Statement is mailed to shareholders of the
Company and up to and including the date of the meeting of shareholders to which
such Proxy Statement relates, will contain any untrue statement of a material
fact or omit to state a material fact necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading,
provided that information as of a later date shall be deemed to modify
information as of an earlier date. The Proxy Statement mailed by the Acquiror
to shareholders of the Company in connection with the meeting of shareholders at
which this Agreement will be considered by such shareholders will comply as to
form in all material respects with the Securities Act and the rules and
regulations promulgated thereunder.
4.14 EMPLOYEE BENEFIT PLANS
(a) The Acquiror has Previously Disclosed all stock option, employee stock
purchase and stock bonus plans, qualified pension or profit-sharing plans, any
deferred
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compensation, consultant, bonus or group insurance contract or any other
incentive, health and welfare or employee benefit plan or agreement maintained
for the benefit of employees or former employees of the Acquiror or any Acquiror
Subsidiary (the "Acquiror Employee Plans"), whether written or oral.
(b) None of the Acquiror, any Acquiror Subsidiary, any pension plan
maintained by any of them and qualified under Section 401(a) of the Code or, to
the best of the Acquiror's knowledge, any fiduciary (with respect to whom the
Acquiror or an Acquiror Subsidiary has an indemnification obligation) of such
plan has incurred any material liability to the PBGC or the Internal Revenue
Service with respect to any such plan. To the best of the Acquiror's knowledge,
no reportable event under Section 4043(b) of ERISA has occurred with respect to
any such pension plan.
(c) Neither the Acquiror nor any Acquiror Subsidiary participates in or
has incurred any liability (that has not already been satisfied) under Section
4201 of ERISA for a complete or partial withdrawal from a multi-employer plan
(as such term is defined in Section 4001(a)(3)of ERISA).
(d) A favorable determination letter has been issued by the Internal
Revenue Service with respect to each Acquiror Employee Plan which is an
"employee pension benefit plan" (as defined in Section 3(2) of ERISA) (an
"Acquiror Pension Plan") which is intended to qualify under Section 401(a) of
the Code to the effect that such plan is qualified under Section 401(a) of the
Code and the trust associated with such employee pension plan is tax exempt
under Section 501 of the Code. No such letter has been revoked or, to the best
of the Acquiror's knowledge, is threatened to be revoked and the Acquiror does
not know of any ground on which such revocation may be based. Neither the
Acquiror nor any Acquiror Subsidiary has any liability under any such plan that
is not reflected on the consolidated statement of financial condition of the
Acquiror at March 31, 1996 included in the Acquiror Financial Statements, other
than liabilities incurred in the ordinary course of business in connection
therewith subsequent to the date thereof.
(e) To the best of the Acquiror's knowledge, no prohibited transaction
(within the meaning of Section 406 of ERISA) that is not exempt from the
prohibition of such section by virtue of a statutory or administrative exemption
has occurred with respect to any Acquiror Employee Plan which would result in
the imposition, directly or indirectly, of a material excise tax under Section
4975 of the Code or a material civil penalty under Section 502(i) of ERISA or
otherwise have a Material Adverse Effect on the Acquiror.
(f) Full payment has been made (or proper accruals have been established)
of all contributions which are required for periods prior to the date hereof,
and full payment will be so made (or proper accruals will be so established) of
all contributions which are required for periods after the date hereof and prior
to the Effective Time, under the terms of each Acquiror Employee Plan or ERISA;
no accumulated funding deficiency (as defined in Section 302 of ERISA or Section
412(1)(8)(A) of the Code), whether or not waived, exists
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with respect to any Acquiror Pension Plan, and there is no "unfunded current
liability" (as defined in Section 412 of the Code) with respect to any Acquiror
Pension Plan.
(g) To the best of the Acquiror's knowledge, the Acquiror Employee Plans
have been operated in compliance in all material respects with the applicable
provisions of ERISA, the Code, all regulations, rulings and announcements
promulgated or issued thereunder and all other applicable governmental laws and
regulations.
(h) There are no pending or, to the best knowledge of the Acquiror,
threatened claims (other than routine claims for benefits) by, on behalf of or
against any of the Acquiror Employee Plans or any trust related thereto or, to
the best of the Acquiror's knowledge, any fiduciary thereof (with respect to
whom the Acquiror or an Acquiror Subsidiary has an indemnification obligation).
4.15 CERTAIN CONTRACTS
Neither the Acquiror nor any Acquiror Subsidiary is in default or in non-
compliance, which default or non-compliance could reasonably be expected to have
a Material Adverse Effect on the Acquiror, under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party or by which its assets, business or operations may be bound or
affected, whether entered into in the ordinary course of business or otherwise
and whether written or oral, and there has not occurred any event that with the
lapse of time or the giving of notice, or both, would constitute such a default
or non-compliance.
4.16 BROKERS AND FINDERS
Neither the Acquiror nor any Acquiror Subsidiary, nor, to the best of the
Company's knowledge, any of their respective directors, officers or employees,
has employed any broker or finder or incurred any liability for any broker or
finder fees or commissions in connection with the transactions contemplated
hereby which reasonably could be expected to be a liability of the Acquiror or
an Acquiror Subsidiary.
4.17 INSURANCE
Except as Previously Disclosed, the Acquiror and each Acquiror Subsidiary
is insured for reasonable amounts with financially sound and reputable insurance
companies against such risks as companies engaged in a similar business would,
in accordance with good business practice, customarily be insured and has
maintained all insurance required by applicable laws and regulations.
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4.18 PROPERTIES
All real and personal property owned by the Acquiror or the Acquiror Bank
or presently used by either of them in its respective business is in an adequate
condition (ordinary wear and tear excepted) and is sufficient to carry on its
business in the ordinary course of business consistent with their past
practices. The Acquiror and the Acquiror Bank have good and marketable title
free and clear of all liens, encumbrances, charges, defaults or equities (other
than equities of redemption under applicable foreclosure laws) to all of the
material properties and assets, real and personal, reflected on the consolidated
statement of financial condition of the Acquiror as of March 31, 1996 included
in the Acquiror Financial Statements or acquired after such date, except (i)
liens for current taxes not yet due or payable (ii) pledges to secure deposits
and other liens incurred in the ordinary course of its banking business, (iii)
such imperfections of title, easements and encumbrances, if any, as are not
material in character, amount or extent and (iv) as reflected on the
consolidated statement of financial condition of the Acquiror as of March 31,
1996 included in the Acquiror Financial Statements. All real and personal
property which is material to the Acquiror's business on a consolidated basis
and leased or licensed by the Acquiror or an Acquiror Subsidiary is held
pursuant to leases or licenses which are valid and enforceable in accordance
with their respective terms and such leases will not terminate or lapse prior to
the Effective Time.
4.19 LABOR
No work stoppage involving the Acquiror or the Acquiror Bank is pending or,
to the best knowledge of the Acquiror, threatened. Neither the Acquiror nor the
Acquiror Bank is involved in, or threatened with or affected by, any labor
dispute, arbitration, lawsuit or administrative proceeding involving its
employees which could have a Material Adverse Effect on the Acquiror. Employees
of the Acquiror and the Acquiror Bank are not represented by any labor union nor
are any collective bargaining agreements otherwise in effect with respect to
such employees, and to the best of the Acquiror's knowledge, there have been no
efforts to unionize or organize any employees of the Acquiror or the Acquiror
Bank during the past five years.
4.20 OWNERSHIP OF COMPANY COMMON STOCK.
As of the date hereof, neither the Acquiror nor, to its best knowledge, any
of its affiliates or associates (as such terms are defined under the Exchange
Act), (i) beneficially own, directly or indirectly, or (ii) are parties to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of Company Common Stock which in
the aggregate represent 10% or more of the outstanding shares of Company Common
Stock (other than shares held in a fiduciary capacity and beneficially owned by
third parties, shares taken in consideration of debts previously contracted or
in the case of the Acquiror shares which may be acquired pursuant to the Stock
Option Agreement).
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4.21 DISCLOSURES
None of the representations and warranties of the Acquiror or any of the
written information or documents furnished or to be furnished by the Acquiror to
the Company in connection with or pursuant to this Agreement or the consummation
of the transactions contemplated hereby, when considered as a whole, contains or
will contain any untrue statement of a material fact, or omits or will omit to
state any material fact required to be stated or necessary to make any such
information or document, in light of the circumstances, not misleading.
ARTICLE V
COVENANTS
5.1 REASONABLE BEST EFFORTS
Subject to the terms and conditions of this Agreement, each of the Company
and the Acquiror shall use its reasonable best efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, all things necessary or
advisable under applicable laws and regulations so as to permit consummation of
the Merger (including, without limitation, satisfaction of the conditions to
consummation of the Merger specified in Article VI of this Agreement), the Bank
Merger and the other transactions contemplated hereby on or before December 31,
1996 or, in the event that requisite regulatory and other approvals have not yet
been obtained, as promptly as practicable thereafter, and to otherwise enable
consummation of the transactions contemplated hereby, and shall cooperate fully
with the other party hereto to that end.
5.2 SHAREHOLDER MEETING
The Company shall take all action necessary to properly call and convene a
meeting of its shareholders as soon as practicable after the date hereof to
consider and vote upon this Agreement and the transactions contemplated hereby.
The Board of Directors of the Company will recommend that the shareholders of
the Company approve this Agreement, provided that the Board of Directors of the
Company may fail to make such recommendation, or withdraw, modify or change any
such recommendation, if such Board of Directors, after having consulted with and
considered the advice of outside counsel, has determined that the making of such
recommendation, or the failure to withdraw, modify or change such
recommendation, would constitute a breach of the fiduciary duties of such
directors under applicable law.
5.3 REGULATORY MATTERS
(a) The parties hereto shall promptly cooperate with each other in the
preparation and filing of the Form S-4, including the Proxy Statement. Each of
the Acquiror and the Company shall use its reasonable best efforts to have the
Form S-4 declared effective under
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the Securities Act as promptly as practicable after such filing, and the Company
shall thereafter promptly mail the Proxy Statement to its shareholders. The
Acquiror also shall use its reasonable best efforts to obtain all necessary
state securities law or "blue sky" permits and approvals required to carry out
the issuance of Acquiror Common Stock pursuant to the Merger and all other
transactions contemplated by this Agreement, and the Company shall furnish all
information concerning the Company and the holders of the Company Common Stock
as may be reasonably requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, and
to obtain as promptly as practicable all permits, consents, approvals and
authorizations of all Governmental Entities and third parties which are
necessary or advisable to consummate the Merger, the Bank Merger and the other
transactions contemplated hereby. The Acquiror and the Company shall have the
right to review in advance, and to the extent practicable each will consult with
the other on, in each case subject to applicable laws relating to the exchange
of information, all the information which appears in any filing made with or
written materials submitted to any third party or any Governmental Entity in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Governmental Entities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(c) The Acquiror and the Company shall, upon request, furnish each other
with all information concerning themselves, their respective Subsidiaries,
directors, officers and shareholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement, the Form S-4 or
any other statement, filing, notice or application made by or on behalf of the
Acquiror, the Company or any of their respective Subsidiaries to any
Governmental Entity in connection with the Merger, the Bank Merger and the other
transactions contemplated hereby.
(d) The Acquiror and the Company shall promptly furnish each other with
copies of written communications received by the Acquiror or the Company, as the
case may be, or any of their respective Subsidiaries from, or delivered by any
of the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
5.4 INVESTIGATION AND CONFIDENTIALITY
(a) Each party shall permit the other party and its representatives
reasonable access to its properties and personnel, and shall disclose and make
available to such other
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party all books, papers and records relating to the assets, stock ownership,
properties, operations, obligations and liabilities of it and its
Subsidiaries, including, but not limited to, all books of account (including
the general ledger), tax records, minute books of meetings of boards of
directors (and any committees thereof) and shareholders, organizational
documents, bylaws, material contracts and agreements, filings with any
regulatory authority, accountants' work papers, litigation files, loan files,
plans affecting employees, and any other business activities or prospects in
which the other party may have a reasonable interest, provided that such
access shall be reasonably related to the transactions contemplated hereby
and, in the reasonable opinion of the respective parties providing such
access, not unduly interfere with normal operations. Each party and its
Subsidiaries shall make their respective directors, officers, employees and
agents and authorized representatives (including counsel and independent
public accountants) available to confer with the other party and its
representatives, provided that such access shall be reasonably related to the
transactions contemplated hereby and shall not unduly interfere with normal
operations.
(b) All information furnished previously in connection with the
transactions contemplated by this Agreement or pursuant hereto shall be treated
as the sole property of the party furnishing the information until consummation
of the transactions contemplated hereby and, if such transactions shall not
occur, the party receiving the information shall either destroy or return to the
party which furnished such information all documents or other materials
containing, reflecting or referring to such information, shall use its best
efforts to keep confidential all such information, and shall not directly or
indirectly use such information for any competitive or other commercial
purposes. The obligation to keep such information confidential shall continue
for five years from the date the proposed transactions are abandoned but shall
not apply to (i) any information which (x) the party receiving the information
can establish by convincing evidence was already in its possession prior to the
disclosure thereof by the party furnishing the information; (y) was then
generally known to the public; or (z) became known to the public through no
fault of the party receiving the information; or (ii) disclosures pursuant to a
legal requirement or in accordance with an order of a court of competent
jurisdiction, provided that the party which is the subject of any such legal
requirement or order shall use its best efforts to give the other party at least
ten business days prior notice thereof.
5.5 PRESS RELEASES
The Acquiror and the Company shall agree with each other as to the form and
substance of any press release related to this Agreement or the transactions
contemplated hereby, and consult with each other as to the form and substance of
other public disclosures which may relate to the transactions contemplated by
this Agreement, provided, however, that nothing contained herein shall prohibit
either party, following notification to the other party, from making any
disclosure which is required by law or regulation.
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5.6 BUSINESS OF THE PARTIES
(a) During the period from the date of this Agreement and continuing until
the Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of the Acquiror, the Company and its
Subsidiaries shall carry on their respective businesses in the ordinary course
consistent with past practice. During such period, the Company also will use
all reasonable efforts to (x) preserve its business organization and that of the
Company Subsidiaries intact, (y) keep available to itself and the Acquiror the
present services of the employees of the Company and the Company Subsidiaries
and (z) preserve for itself and the Acquiror the goodwill of the customers of
the Company and the Company Subsidiaries and others with whom business
relationships exist. Without limiting the generality of the foregoing, except
with the prior written consent of the Acquiror or as expressly contemplated
hereby, between the date hereof and the Effective Time, the Company shall not,
and shall cause each Company Subsidiary not to:
(i) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Company Common Stock, provided that nothing
contained herein shall be deemed to affect the ability of a Company
Subsidiary to pay dividends on its capital stock to the Company;
(ii) issue any shares of its capital stock, other than in the case of
the Company pursuant to the Stock Option Agreement or upon exercise of the
Company Options referred to in Section 3.1 hereof, or issue, grant, modify
or authorize any Rights, other than the Stock Option Agreement; purchase or
otherwise acquire any shares of Company Common Stock, other than pursuant
to the Mortgage Company Agreement or, subject to the requirements of
applicable laws and regulations, pursuant to an open market repurchase
program to purchase up to 410,205 shares of Company Common Stock after the
date hereof at a price of $18.00 or less per share; or effect any
recapitalization, reclassification, stock dividend, stock split or like
change in capitalization;
(iii) amend its Articles of Incorporation, Charter, Bylaws or similar
organizational documents; impose, or suffer the imposition, on any share
of stock or other ownership interest held by the Company in a Company
Subsidiary of any lien, charge or encumbrance or permit any such lien,
charge or encumbrance to exist; or waive or release any material right or
cancel or compromise any material debt or claim;
(iv) increase the rate of compensation of any of its directors,
officers or employees, or pay or agree to pay any bonus or severance to, or
provide any other new employee benefit or incentive to, any of its
directors, officers or employees, except as may be required pursuant to
binding commitments existing on the date hereof and Previously Disclosed;
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(v) enter into or, except as may be required by law or for purposes
of complying with Section 2.9 hereof, modify any pension, retirement, stock
option, stock purchase, stock appreciation right, savings, profit sharing,
deferred compensation, supplemental retirement, consulting, bonus, group
insurance or other employee benefit, incentive or welfare contract, plan or
arrangement, or any trust agreement related thereto, in respect of any of
its directors, officers or employees; make any contributions to the
Company's defined contribution plans not in the ordinary course of business
consistent with past practice; or make any contributions to the Company's
Employee Stock Ownership Plan;
(vi) enter into (w) any agreement, arrangement or commitment not made
in the ordinary course of business, (x) any agreement, indenture or other
instrument relating to the borrowing of money by the Company or a Company
Subsidiary or guarantee by the Company or any Company Subsidiary of any
such obligation of others, except in the case of the Bank for deposits,
FHLB advances, federal funds purchased and securities sold under agreements
to repurchase in the ordinary course of business consistent with past
practice, (y) any agreement, arrangement or commitment relating to the
employment of, or severance of, an employee, or amend any such existing
agreement, arrangement or commitment, provided that the Company and a
Company Subsidiary may employ an employee in the ordinary course of
business if the employment of such employee is terminable by the Company or
a Company Subsidiary or any successor thereof at will without liability,
other than as required by law; or (z) any contract, agreement or
understanding with a labor union;
(vii) change its method of accounting in effect for the year ended
March 31, 1996, except as required by changes in laws or regulations or
generally accepted accounting principles, or change any of its methods of
reporting income and deductions for federal income tax purposes from those
employed in the preparation of its federal income tax return for the fiscal
year ended March 31, 1996, except as required by changes in laws or
regulations;
(viii) purchase or otherwise acquire or, other than pursuant to the
Mortgage Company Agreement, sell or otherwise dispose of, any assets or
incur any liabilities other than in the ordinary course of business
consistent with past practice and policies;
(ix) make any capital expenditures in excess of $5,000, other than
pursuant to binding commitments existing on the date hereof and other than
expenditures necessary to maintain existing assets in good repair;
(x) originate, purchase or otherwise acquire, or extend, renew,
modify or otherwise alter any commercial real estate loan or any multi-
family residential loan, except pursuant to binding commitments existing on
the date hereof or following the
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Company's provision of not less than two business days' written notice
to the Acquiror describing the proposed activity in reasonable detail;
(xi) file any applications or make any contract with respect to
branching or site location or relocation;
(xii) acquire in any manner whatsoever (other than to realize upon
collateral for a defaulted loan) any business or entity;
(xiii) other than forward commitments to sell loans and hedging
activities entered into in the ordinary course of the Mortgage Company's
business and consistent with past practice, enter into any futures
contract, option contract, interest rate cap, interest rate floor, interest
rate exchange agreement or other agreement for purposes of hedging the
exposure of its interest-earning assets and interest-bearing liabilities to
changes in market rates of interest;
(xiv) engage in any transaction with an "affiliate," as defined at 12
C.F.R. Section 563.41(b)(1), other than pursuant to the Mortgage Company
Agreement;
(xv) discharge or satisfy any lien or encumbrance or pay any material
obligation or liability (absolute or contingent) other than at scheduled
maturity or in the ordinary course of business;
(xvi) enter or agree to enter into any agreement or arrangement
granting any preferential right to purchase any of its assets or rights or
requiring the consent of any party to the transfer and assignment of any
such assets or rights;
(xvii) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the
Code, provided, however, that nothing contained herein shall limit the
ability of the Company to execute the Stock Option Agreement or to perform
any action required by the terms thereof or hereof;
(xviii) take any action that would result in any of the
representations and warranties of the Company contained in this Agreement
not to be true and correct in any material respect at the Effective Time;
or
(xix) agree to do any of the foregoing.
(b) During the period from the date of this Agreement and continuing until
the Effective Time, the Acquiror shall continue to conduct its business and the
business of the Acquiror Bank in a manner designed in its reasonable judgment to
enhance the long-term value of the Acquiror Common Stock and the business
prospects of the Acquiror. Without limiting the generality of the foregoing,
except with the prior written consent of the
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Company or as expressly contemplated hereby, between the date hereof and the
Effective Time, the Acquiror shall not, and shall cause the Acquiror Bank not
to:
(i) amend its Restated Articles of Incorporation, Charter or Bylaws
in a manner which would adversely affect in any manner the terms of the
Acquiror Common Stock or the ability of the Acquiror to consummate the
transactions contemplated hereby;
(ii) make any acquisition or take any other action that individually
or in the aggregate could materially adversely affect the ability of the
Acquiror to consummate the transactions contemplated hereby in a reasonably
timely manner;
(iii) declare, set aside, make or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of the Acquiror Common Stock, except for regular
quarterly cash dividends in an amount determined by the Board of Directors
in the ordinary course of business and consistent with past practice,
provided, however, that nothing contained herein shall be deemed to affect
the ability of (x) an Acquiror Subsidiary to pay dividends on its capital
stock to the Acquiror or (y) the Acquiror to repurchase shares of Acquiror
Common Stock;
(iv) take any action that would prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the
Code; provided, however, that nothing contained herein shall limit the
ability of the Acquiror to exercise its rights under the Stock Option
Agreement;
(v) take any action that would result in any of the representations
and warranties of the Acquiror contained in this Agreement not to be true
and correct in any material respect at the Effective Time; or
(vi) agree to do any of the foregoing.
5.7 CERTAIN ACTIONS
The Company shall not, and shall cause each Company Subsidiary not to,
solicit or encourage inquiries or proposals with respect to, furnish any
information relating to, or participate in any negotiations or discussions
concerning, any acquisition, lease or purchase of all or a substantial portion
of the assets of, or any equity interest in, the Company or a Company Subsidiary
(other than with the Acquiror or an affiliate thereof), provided, however, that
the Board of Directors of the Company may furnish such information or
participate in such negotiations or discussions if such Board of Directors,
after having consulted with and considered the advice of outside counsel, has
determined that the failure to do the same would cause the members of such Board
of Directors to breach their fiduciary duties under applicable law. The Company
will promptly inform the Acquiror
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orally and in writing of any such request for information or of any such
negotiations or discussions, as well as instruct its and its Subsidiaries'
directors, officers, representatives and agents to refrain from taking any
action prohibited by this Section 5.7.
5.8 CURRENT INFORMATION
During the period from the date of this Agreement to the Effective Time,
each party shall, upon the request of the other party, cause one or more of its
designated representatives to confer on a monthly or more frequent basis with
representatives of the other party regarding its financial condition, operations
and business and matters relating to the completion of the transactions
contemplated hereby. As soon as reasonably available, but in no event more than
45 days after the end of each calendar quarter ending after the date of this
Agreement (other than the last quarter of each fiscal year ending March 31, in
the case of the Company, and September 30, in the case of the Acquiror), the
Company and the Acquiror will deliver to the other party its quarterly report on
Form 10-Q under the Exchange Act, and, as soon as reasonably available, but in
no event more than 90 days after the end of each fiscal year, the Company and
the Acquiror will deliver to the other party its Annual Report on Form 10-K.
Within 25 days after the end of each month, the Company and the Acquiror will
deliver to the other party a consolidated statement of financial condition and a
consolidated statement of operations, without related notes, for such month
prepared in accordance with generally accepted accounting principles.
5.9 INDEMNIFICATION; INSURANCE
(a) From and after the Effective Time through the sixth anniversary of the
Effective Time, the Acquiror (the "Indemnifying Party") shall indemnify and hold
harmless each present and former director, officer and employee of the Company
or a Company Subsidiary, in each case determined as of the Effective Time (the
"Indemnified Parties"), against any costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
(collectively, "Costs") incurred in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent to which such Indemnified Parties were entitled
under the Articles of Incorporation and Bylaws of the Company or in similar
organizational documents of a Company Subsidiary, in each case as in effect on
the date hereof, provided, however, that all rights to indemnification in
respect of any claim asserted or made within such period shall continue until
the final disposition of such claim. Without limiting the foregoing obligation,
the Acquiror also agrees that all limitations of liability existing in favor of
the Indemnified Parties in the Articles of Incorporation and Bylaws of the
Company or in similar organizational documents of a Company Subsidiary, in each
case as in effect on the date hereof, arising out of matters existing or
occurring at or prior to the Effective Time shall survive the Merger and shall
continue in full force and effect for a period of six years from the Effective
Time, provided,
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however, that all such rights in respect of any claim asserted or made within
such period shall continue until the final disposition of such claim.
(b) Any Indemnified Party wishing to claim indemnification under Section
5.9(a), upon learning of any such claim, action, suit, proceeding or
investigation, shall promptly notify the Indemnifying Party, but the failure to
so notify shall not relieve the Indemnifying Party of any liability it may have
to such Indemnified Party if such failure does not materially prejudice the
Indemnifying Party. In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Time), (i) the
Indemnifying Party shall have the right to assume the defense thereof and the
Indemnifying Party shall not be liable to such Indemnified Parties for any legal
expenses of other counsel or any other expenses subsequently incurred by such
Indemnified Parties in connection with the defense thereof, except that if the
Indemnifying Party elects not to assume such defense or counsel for the
Indemnified Parties advises that there are issues which raise conflicts of
interest between the Indemnifying Party and the Indemnified Parties, the
Indemnified Parties may retain counsel which is reasonably satisfactory to the
Indemnifying Party, and the Indemnifying Party shall pay, promptly as statements
therefor are received, the reasonable fees and expenses of such counsel for the
Indemnified Parties (which may not exceed one firm in any jurisdiction unless
the use of one counsel for such Indemnified Parties would present such counsel
with a conflict of interest), (ii) the Indemnified Parties will cooperate in the
defense of any such matter, (iii) the Indemnifying Party shall not be liable for
any settlement effected without its prior written consent and (iv) the
Indemnifying Party shall have no obligation hereunder in the event a federal
banking agency or a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of an Indemnified Party in the manner contemplated hereby is
prohibited by applicable law.
(c) In the event that the Acquiror or any of its respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then, and in each such case the successors and assigns of such
entity shall assume the obligations set forth in this Section 5.9, which
obligations are expressly intended to be for the irrevocable benefit of, and
shall be enforceable by, each director and officer covered hereby.
5.10 BENEFIT PLANS AND ARRANGEMENTS
(a) As soon as administratively practicable after the Effective Time, the
Acquiror shall take all reasonable action so that employees of the Company and
its Subsidiaries shall be entitled to participate in the Acquiror Employee Plans
of general applicability, and until such time the Company Employee Plans shall
remain in effect, provided that no employee of the Company or a Company
Subsidiary who becomes an employee of the Acquiror and subject to the Acquiror's
medical insurance plans shall be excluded from coverage thereunder on the basis
of a preexisting condition that was not also excluded under the Company's
medical insurance plans, except to the extent such preexisting condition was
excluded from coverage under the Company's medical insurance plans, in which
case this Section 5.10(a) shall not require coverage for such preexisting
condition. For purposes of
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determining eligibility to participate in and the vesting of benefits under
the Acquiror Employee Plans, the Acquiror shall recognize years of service
with the Company and a Company Subsidiary prior to the Effective Time.
(b) All employees of the Company or a Company Subsidiary as of the
Effective Time shall become employees of the Acquiror or an Acquiror Subsidiary
as of the Effective Time, provided that the Acquiror or an Acquiror Subsidiary
shall have no obligation to continue the employment of any such person and
nothing contained in this Agreement shall give any employee of the Company or
any Company Subsidiary a right to continuing employment with the Acquiror or an
Acquiror Subsidiary after the Effective Time.
(c) The Acquiror agrees to make a severance payment to each employee of
the Company and the Company Subsidiaries (other than an employee of the Company
or the Company Subsidiaries who was otherwise contractually entitled to receive
severance payments from the Company or the Company Subsidiaries) who (i) becomes
an employee of the Acquiror and/or the Acquiror Subsidiaries and whose
employment is terminated on or following the Effective Time, provided that the
employee does not leave the employ of the Acquiror and/or the Acquiror
Subsidiaries prior to the termination date due to (A) the employee's voluntary
resignation or retirement or (B) the employee's termination for cause, or (ii)
is offered continued employment by the Acquiror and/or the Acquiror Subsidiaries
following the Effective Time either (A) at a compensation level which is less
than the employee's compensation at the Company or the Company Subsidiaries
immediately prior thereto or (B) in connection with the relocation of such
employee more than 30 miles from the location of such employee's principal
office immediately prior thereto and, in either case, who does not accept such
offer and voluntarily resigns his employment. Any such employee shall be
entitled to receive a lump sum severance payment equal to two weeks base salary
as in effect immediately prior to the time of such termination for each year of
service with the Company and the Company Subsidiaries, with a minimum severance
payment equal to four weeks base salary and up to a maximum severance payment
equal to 40 weeks base salary. As used herein, the term "cause" shall mean a
good faith determination by the Acquiror that an employee engaged in willful
misconduct in the performance of his or her duties or willfully or intentionally
failed substantially to perform or habitually neglected to perform reasonably
assigned duties.
5.11 BANK MERGER
The Acquiror and the Company shall take, and shall respectively cause the
Acquiror Bank and the Bank to take, all necessary and appropriate actions,
including causing the execution by the Acquiror Bank and the Bank of a merger
agreement (the "Bank Merger Agreement"), to cause the Bank to merge with and
into the Acquiror Bank (the "Bank Merger") immediately after consummation of the
Merger in accordance with the laws of the United States and the regulations of
the OTS thereunder. The Acquiror Bank shall be the surviving corporation in the
Bank Merger and shall continue its corporate existence under the name
"Washington Federal Savings and Loan Association" under the laws of the United
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States as a direct wholly-owned subsidiary of the Acquiror. Upon consummation
of the Bank Merger, the separate corporate existence of the Bank shall cease.
The directors and executive officers of the Acquiror Bank upon consummation of
the Bank Merger shall be as set forth in the Bank Merger Agreement.
5.12 CERTAIN POLICIES; INTEGRATION
(a) If requested by the Acquiror, on the business day immediately prior to
the Effective Time, the Company shall, consistent with generally accepted
accounting principles, establish or adjust accruals and reserves as may be
necessary to conform the Company's accounting and credit loss reserve practices
and methods to those of the Acquiror (as such practices and methods are to be
applied to the Company or its Subsidiaries from and after the Effective Time)
and reflect the Acquiror's plans with respect to the conduct of the Company's
business following the Merger and to provide for the costs and expenses relating
to the consummation by the Company of the transactions contemplated by this
Agreement; provided, however, that the Company shall not be required to take
such action (i) if such action is prohibited by applicable law or (ii) unless
the Acquiror informs the Company that it has no reason to believe that all
conditions to the Acquiror's obligations to consummate the transactions
contemplated by this Agreement set forth in Article VI hereof will not be
satisfied or waived. The establishment or adjustment of such accruals and
reserves shall not constitute a breach of any representation or warranty of the
Company contained in this Agreement.
(b) During the period from the date of this Agreement to the Effective
Time, the Company shall, and shall cause its directors, officers and employees
to, cooperate with and assist the Company in the formulation of a plan of
integration for the Acquiror and the Company and their respective banking
subsidiaries.
5.13 RESTRICTIONS ON RESALE
(a) The Company has Previously Disclosed to the Acquiror a schedule of
each person that, to the best of its knowledge, is deemed to be an "affiliate"
of the Company (each an "Affiliate"), as that term is used in Rule 145 under the
Securities Act.
(b) The Company shall use its reasonable best efforts to cause each person
who may be deemed to be an Affiliate of the Company to execute and deliver to
the Acquiror an agreement in the form attached hereto as Exhibit C.
5.14 DISCLOSURE SUPPLEMENTS
From time to time prior to the Effective Time, each party shall promptly
supplement or amend any materials Previously Disclosed and delivered to the
other party pursuant hereto with respect to any matter hereafter arising which,
if existing, occurring or known at the date of this Agreement, would have been
required to be set forth or described in
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materials Previously Disclosed to the other party or which is necessary to
correct any information in such materials which has been rendered materially
inaccurate thereby; no such supplement or amendment to such materials shall
be deemed to have modified the representations, warranties and covenants of
the parties for the purpose of determining whether the conditions set forth
in Article VI hereof have been satisfied.
5.15 FAILURE TO FULFILL CONDITIONS
In the event that either of the parties hereto determines that a condition
to its respective obligations to consummate the transactions contemplated may
not be fulfilled on or prior to the termination of this Agreement, it will
promptly notify the other party or parties. Each party will promptly inform the
other party or parties of any facts applicable to it that would be likely to
prevent or materially delay approval of the Merger or the Bank Merger by any
Governmental Entity or third party or which would otherwise prevent or
materially delay completion of the Merger, the Bank Merger or any of the other
transactions contemplated hereby.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS PRECEDENT - THE ACQUIROR AND THE COMPANY
The respective obligations of the Acquiror and the Company to effect the
Merger shall be subject to satisfaction of the following conditions at or prior
to the Effective Time.
(a) All corporate action necessary to authorize the execution and delivery
of this Agreement and consummation of the Merger shall have been duly and
validly taken by the Acquiror and the Company, including approval by the
requisite vote of the shareholders of the Company of this Agreement, and all
corporate and shareholder action necessary to authorize the execution and
delivery of the Bank Merger Agreement and consummation of the transactions
contemplated thereby shall have been duly and validly taken by the Bank and the
Acquiror Bank.
(b) All approvals and consents from the OTS and any other Governmental
Entity the approval or consent of which is required for the consummation of the
Merger, the Bank Merger and the other transactions contemplated hereby shall
have been received and all statutory waiting periods in respect thereof shall
have expired; and the Acquiror and the Company shall have procured all other
approvals, consents and waivers of each person (other than the Governmental
Entities referred to above) whose approval, consent or waiver is necessary to
the consummation of the Merger, the Bank Merger and the other transactions
contemplated hereby and the failure of which to obtain would have the effects
set forth in the following proviso clause; provided, however, that no approval
or consent referred to in this Section 6.1(b) shall be deemed to have been
received if it shall include
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any condition or requirement that, individually or in the aggregate, would so
materially reduce the economic or business benefits of the transactions
contemplated by this Agreement to the Acquiror that had such condition or
requirement been known the Acquiror, in its reasonable judgment, would not
have entered into this Agreement.
(c) None of the Acquiror, the Company or their respective Subsidiaries
shall be subject to any statute, rule, regulation, injunction or other order or
decree which shall have been enacted, entered, promulgated or enforced by any
governmental or judicial authority which prohibits, restricts or makes illegal
consummation of the Merger, the Bank Merger or any of the other transactions
contemplated hereby.
(d) The Form S-4 shall have become effective under the Securities Act, and
the Acquiror shall have received all state securities laws or "blue sky" permits
and other authorizations or there shall be exemptions from registration
requirements necessary to issue the Acquiror Common Stock in connection with the
Merger, and neither the Form S-4 nor any such permit, authorization or exemption
shall be subject to a stop order or threatened stop order by the Commission or
any state securities authority.
(e) The shares of Acquiror Common Stock to be issued in connection with
the Merger shall have been approved for quotation on the Nasdaq Stock Market's
National Market.
(f) The Acquiror and the Company shall have received the written opinion
of Elias, Matz, Tiernan & Herrick L.L.P. to the effect that the Merger and the
Bank Merger will each constitute a reorganization within the meaning of Section
368 of the Code and to the effect that (i) none of the Company, the Bank, the
Acquiror or the Acquiror Bank will recognize any gain or loss with respect to
the Merger or the Bank Merger, (ii) except for cash received in lieu of
fractional share interests, holders of Company Common Stock who receive Acquiror
Common Stock in the Merger will not recognize income, gain or loss for federal
income tax purposes, (iii) the basis of such Acquiror Common Stock will equal
the basis of the Company Common Stock for which it is exchanged and (iv) the
holding period of such Acquiror Common Stock will include the holding period of
the Company Common Stock for which it is exchanged, assuming that such stock is
a capital asset in the hands of the holder thereof at the Effective Time. Each
such opinion shall be based on such written representations from the Acquiror,
the Company and others as such counsel shall reasonably request as to factual
matters.
6.2 CONDITIONS PRECEDENT - THE COMPANY
The obligations of the Company to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Company pursuant to Section 7.4 hereof.
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(a) The representations and warranties of the Acquiror as set forth in
Article IV hereof shall be true and correct as of the date of this Agreement and
as of the Effective Time as though made on and as of the Effective Time (or on
the date when made in the case of any representation and warranty which
specifically relates to an earlier date), provided, however, that
notwithstanding anything herein to the contrary, this Section 6.2(a) shall be
deemed to have been satisfied even if such representations or warranties are not
true and correct unless the failure of any of the representations or warranties
to be so true and correct would have, individually or in the aggregate, a
Material Adverse Effect on the Acquiror.
(b) The Acquiror shall have performed in all material respects all
obligations and complied with all covenants required to be performed and
complied with by it pursuant to this Agreement on or prior to the Effective
Time.
(c) The Acquiror shall have delivered to the Company a certificate, dated
the date of the Closing and signed by its Chairman and President and by its
Chief Financial Officer, to the effect that the conditions set forth in Sections
6.2(a) and 6.2(b) have been satisfied.
(d) The Acquiror shall have furnished the Company with such certificates
of its respective officers or others and such other documents to evidence
fulfillment of the conditions set forth in Sections 6.1 and 6.2 as such
conditions relate to the Acquiror as the Company may reasonably request.
6.3 CONDITIONS PRECEDENT - THE ACQUIROR
The obligations of the Acquiror to effect the Merger shall be subject to
satisfaction of the following conditions at or prior to the Effective Time
unless waived by the Acquiror pursuant to Section 7.4 hereof.
(a) The representations and warranties of the Company set forth in
Article III hereof shall be true and correct as of the date of this Agreement
and as of the Effective Time as though made on and as of the Effective Time
(or on the date when made in the case of any representation and warranty
which specifically relates to an earlier date), provided, however, that
notwithstanding anything herein to the contrary, this Section 6.3(a) shall be
deemed to have been satisfied even if such representations or warranties are
not true and correct unless the failure of any of the representations or
warranties to be so true and correct would have, individually or in the
aggregate, a Material Adverse Effect on the Company.
(b) The Company shall have performed in all material respects all
obligations and covenants required to be performed by it pursuant to this
Agreement on or prior to the Effective Time.
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(c) The Company shall have delivered to the Acquiror a certificate, dated
the date of the Closing and signed by its President and by its Chief Financial
Officer, to the effect that the conditions set forth in Sections 6.3(a) and
6.3(b) have been satisfied.
(d) Dissenting Shares shall constitute not more than 10.0% of the
outstanding shares of Company Common Stock immediately prior to the Effective
Time.
(e) The Company shall have completed immediately prior to the Closing the
distribution of not less than 81% of the common stock of the Mortgage Company to
the Shareholders and the related redemption of Company Common Stock held by such
persons pursuant to the terms of the Mortgage Company Agreement.
(f) For the period from March 31, 1996 through the Effective Time, (i) the
Company shall not have established provisions for loan losses and/or write-downs
with respect to Real Estate Owned which exceed, in the aggregate, $1.0 million,
or (ii) the Acquiror shall not have determined, in its reasonable judgment, that
an aggregate of $1.0 million of additional provisions for loan losses and/or
write-downs with respect to Real Estate Owned are necessary to provide for
reasonably anticipated losses on the Company's loans, net of recoveries, or to
reflect the Company's Real Estate Owned at fair value (less estimated costs to
sell) in accordance with generally accepted accounting principles.
(g) For the period from March 31, 1996 through the Effective Time, (i) the
Company shall not have incurred, in the aggregate, $15.0 million or more of
realized and/or unrealized losses (net of realized and/or unrealized gains) with
respect to the Company's investment securities and mortgage-backed securities,
including securities held-to-maturity, available for sale and held for trading,
or (ii) the Acquiror shall not have determined, in its reasonable judgment, that
the Company has incurred, in the aggregate, $15.0 million or more of realized
and/or unrealized losses (net of realized and/or unrealized gains) with respect
to the Company's investment securities and mortgage-backed securities, including
securities held-to-maturity, available for sale and held for trading.
(h) The Company shall have furnished the Acquiror with such certificates
of its officers or others and such other documents to evidence fulfillment of
the conditions set forth in Sections 6.1 and 6.3 as such conditions relate to
the Company as the Acquiror may reasonably request.
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ARTICLE VII
TERMINATION, WAIVER AND AMENDMENT
7.1 TERMINATION
This Agreement may be terminated:
(a) at any time on or prior to the Effective Time, by the mutual consent
in writing of the parties hereto;
(b) at any time on or prior to the Effective Time, by the Acquiror in
writing if the Company has, or by the Company in writing if the Acquiror has, in
any material respect, breached (i) any material covenant or undertaking
contained herein or (ii) any representation or warranty contained herein the
breach of which reasonably would be expected to have, individually or in the
aggregate, a Material Adverse Effect on the party that made the representation
or warranty, in any case if such breach has not been cured by the earlier of 30
days after the date on which written notice of such breach is given to the party
committing such breach or the Effective Time;
(c) at any time, by any party hereto in writing, if any of the
applications for prior approval referred to in Section 5.3 hereof are denied or
are approved in a manner which does not satisfy the requirements of Section
6.1(b) hereof, and the time period for appeals and requests for reconsideration
has run;
(d) at any time, by any party hereto in writing, if the shareholders of
the Company do not approve this Agreement after a vote taken thereon at a
meeting duly called for such purpose (or at any adjournment thereof), unless the
failure of such occurrence shall be due to the failure of the party seeking to
terminate to perform or observe in any material respect its agreements set forth
herein to be performed or observed by such party at or before the Effective
Time;
(e) by either the Company or the Acquiror in writing if the Effective Time
has not occurred by the close of business on the first anniversary of the date
hereof, provided that this right to terminate shall not be available to any
party whose failure to perform an obligation in breach of such party's
obligations under this Agreement has been the cause of, or resulted in, the
failure of the Merger and the other transactions contemplated hereby to be
consummated by such date; and
(f) by the Company at any time during the three-day period commencing with
the Determination Date (as defined below) if the Average Acquiror Share Price
shall be less than $17.00, subject, however, to the following three sentences.
If the Company elects to exercise its termination right pursuant to this Section
7.1(f), it shall give written notice to the Acquiror (provided that such notice
of election to terminate may be withdrawn at any time within the aforementioned
three-day period). During the three-day period commencing
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with its receipt of such notice, the Acquiror shall have the option to
increase the consideration to be received by the holders of the Company
Common Stock hereunder by adjusting the Exchange Ratio to equal a number
(calculated to the nearest one-thousandth) obtained by dividing (A) $17.00 by
(B) the Average Acquiror Share Price. If the Acquiror so elects within such
three-day period, it shall give prompt written notice to the Company of such
election and the revised Exchange Ratio, whereupon no termination shall have
occurred pursuant to this Section 7.1(f) and this Agreement shall remain in
effect in accordance with its terms (except as the Exchange Ratio shall have
been so modified). For purposes of this Section 7.1(f), the term
"Determination Date" means the last business day in the period referred to in
the definition of the Average Acquiror Share Price.
7.2 EFFECT OF TERMINATION
In the event that this Agreement is terminated pursuant to Section 7.1
hereof, this Agreement shall become void and have no effect, except that (i) the
provisions relating to confidentiality and expenses set forth in Section 5.4 and
Section 8.1, respectively, and this Section 7.2 shall survive any such
termination and (ii) a termination pursuant to Section 7.1(b), (d) or (e) shall
not relieve the breaching party from liability for willful breach of any
covenant, undertaking, representation or warranty giving rise to such
termination.
7.3 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
All representations, warranties and covenants in this Agreement or in any
instrument delivered pursuant hereto or thereto shall expire on, and be
terminated and extinguished at, the Effective Time other than covenants that by
their terms are to be performed after the Effective Time (including without
limitation the covenants set forth in Sections 5.9 and 5.10 hereof), provided
that no such representations, warranties or covenants shall be deemed to be
terminated or extinguished so as to deprive the Acquiror or the Company (or any
director, officer or controlling person thereof) of any defense at law or in
equity which otherwise would be available against the claims of any person,
including, without limitation, any shareholder or former shareholder of either
the Acquiror or the Company.
7.4 WAIVER
Each party hereto by written instrument signed by an executive officer of
such party, may at any time (whether before or after approval of this Agreement
by the shareholders of the Company) extend the time for the performance of any
of the obligations or other acts of the other party hereto and may waive (i) any
inaccuracies of the other party in the representations or warranties contained
in this Agreement or any document delivered pursuant hereto, (ii) compliance
with any of the covenants, undertakings or agreements of the other party, (iii)
to the extent permitted by law, satisfaction of any of the conditions precedent
to its obligations contained herein or (iv) the performance by the other party
of any of its obligations set forth herein, provided that any such waiver
granted, or any amendment or supplement pursuant to Section 7.5 hereof executed
after shareholders of the
51
<PAGE>
Acquiror or the Company have approved this Agreement shall not modify either
the amount or form of the consideration to be provided hereby to the holders
of Company Common Stock upon consummation of the Merger or otherwise
materially adversely affect such shareholders without the approval of the
shareholders who would be so affected.
7.5 AMENDMENT OR SUPPLEMENT
This Agreement may be amended or supplemented at any time by mutual
agreement of the Acquiror and the Company, subject to the proviso to Section 7.4
hereof. Any such amendment or supplement must be in writing and authorized by
or under the direction of their respective Boards of Directors.
ARTICLE VIII
MISCELLANEOUS
8.1 EXPENSES
Each party hereto shall bear and pay all costs and expenses incurred by it
in connection with the transactions contemplated by this Agreement, including
fees and expenses of its own financial consultants, accountants and counsel,
provided that (i) expenses of printing the Form S-4 and the registration fee to
be paid to the Commission in connection therewith shall be shared equally
between the Company and the Acquiror and (ii) notwithstanding anything to the
contrary contained in this Agreement, neither the Acquiror nor the Company shall
be released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement.
8.2 ENTIRE AGREEMENT
This Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereby and supersedes all prior
arrangements or understandings with respect thereto, written or oral, other than
documents referred to herein and therein. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the parties hereto
and thereto and their respective successors. Nothing in this Agreement,
expressed or implied, is intended to confer upon any party, other than the
parties hereto, and their respective successors, any rights, remedies,
obligations or liabilities other than as set forth in Section 5.9 hereof.
8.3 NO ASSIGNMENT
None of the parties hereto may assign any of its rights or obligations
under this Agreement to any other person.
52
<PAGE>
8.4 NOTICES
All notices or other communications which are required or permitted
hereunder shall be in writing and sufficient if delivered personally, telecopied
(with confirmation) or sent by overnight mail service or by registered or
certified mail (return receipt requested), postage prepaid, addressed as
follows:
If to the Acquiror:
Washington Federal, Inc.
425 Pike Street
Seattle, Washington 98101
Attn: Guy C. Pinkerton
Chairman, President and Chief Executive Officer
Fax: 206-624-2334
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, DC 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-2172
If to the Company:
Metropolitan Bancorp
1520 4th Avenue
Seattle, Washington 98101-1648
Attn: Patrick F. Patrick
President and Chief Executive Officer
Fax: 206-654-7883
With a required copy to:
Perkins Coie
1201 Third Avenue
40th Floor
Seattle, Washington 98101-3099
Attn: Charles Katz, Esq.
Fax: 206-583-8500
8.5 ALTERNATIVE STRUCTURE
Notwithstanding any provision of this Agreement to the contrary, the
Acquiror may, with the written consent of the Company, elect, subject to the
filing of all necessary
53
<PAGE>
applications and the receipt of all required regulatory approvals, to modify
the structure of the acquisition of the Company set forth herein, provided
that (i) the federal income tax consequences of any transactions created by
such modification shall not be other than those set forth in Section 6.1(f)
hereof, (ii) consideration to be paid to the holders of the Company Common
Stock is not thereby changed in kind or reduced in amount as a result of such
modification and (iii) such modification will not materially delay or
jeopardize receipt of any required regulatory approvals or any other
condition to the obligations of the Acquiror set forth in Sections 6.1 and
6.3 hereof.
8.6 INTERPRETATION
The captions contained in this Agreement are for reference purposes only
and are not part of this Agreement.
8.7 COUNTERPARTS
This Agreement may be executed in any number of counterparts, and each such
counterpart shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
8.8 GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the
laws of the State of Washington applicable to agreements made and entirely to be
performed within such jurisdiction.
8.9 DISPUTE RESOLUTION
In the event that the Company disagrees with any judgment(s) made by the
Acquiror pursuant to Section 6.3(f) and/or 6.3(g) of this Agreement, the
judgment(s) shall be submitted for review by the respective independent public
accountants of the Company and the Acquiror, or such other respective
independent public accountants that may be selected by the Company or the
Acquiror, as the case may be, for this purpose, whose determination shall be
final, provided that if the independent public accountants engaged for this
purpose do not agree, the Acquiror's judgment(s) shall be submitted for further
review by another independent public accounting firm mutually agreeable to the
Company and the Acquiror, whose determination shall be final and the expense of
which shall be equally born by the Company and the Acquiror.
54
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers and their corporate
seal to be hereunto affixed and attested by their officers thereunto duly
authorized, all as of the day and year first above written.
WASHINGTON FEDERAL, INC.
Attest:
/s/ RONALD L. SAPER By: /s/ GUY C. PINKERTON
- ------------------------------------ -------------------------------
Name: Ronald L. Saper Name: Guy C. Pinkerton
Title: Senior Vice President Title: Chairman, President
and Chief Financial Officer and Chief Executive Officer
METROPOLITAN BANCORP
Attest:
/s/ EDWIN C. HEDLUND By: /s/ PATRICK F. PATRICK
- ----------------------------------- ---------------------------------
Name: Edwin C. Hedlund Name: Patrick F. Patrick
Title: Secretary Title: President and Chief
Executive Officer
55
<PAGE>
Exhibit 2(b)
Agreement and Plan of Merger,
dated as of July 11, 1996,
between Washington Savings
and Metropolitan Savings
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger, dated as of July 11, 1996, by and between
Washington Federal Savings and Loan Association (the "Acquiror Bank") and
Metropolitan Federal Savings and Loan Association of Seattle (the "Bank").
WITNESSETH:
WHEREAS, the Bank is a federally-chartered savings and loan association
and a wholly-owned subsidiary of Metropolitan Bancorp (the "Company"); and
WHEREAS, the Acquiror Bank is a federally-chartered savings and loan
association and a wholly-owned subsidiary of Washington Federal, Inc. (the
"Acquiror"); and
WHEREAS, the Acquiror and the Company have entered into an Agreement and
Plan of Merger, dated as of July 11, 1996 (the "Agreement"), pursuant to which
the Company will merge with and into the Acquiror (the "Parent Merger"); and
WHEREAS, the Bank and the Acquiror Bank (the "Constituent Banks") desire
to merge on the terms and conditions herein provided immediately following the
effective time of the Parent Merger.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements herein contained, the parties hereto, intending to be legally
bound hereby, agree as follows:
1. THE MERGER. Subject to the terms and conditions of this Agreement
and Plan of Merger, at the Effective Time (as defined in Section 2 hereof), the
Bank shall merge with and into the Acquiror Bank (the "Merger") under the laws
of the United States. The Acquiror Bank shall be the surviving bank of the
Merger (the "Surviving Bank").
2. EFFECTIVE TIME. The Merger shall become effective on the date and
at the time that Articles of Combination are endorsed by the Office of Thrift
Supervision (the "OTS"), unless a later date and time is specified as the
effective time in such Articles of Combination (the "Effective Time").
3. CHARTER; BYLAWS. The Charter and Bylaws of the Acquiror Bank in
effect immediately prior to the Effective Time shall be the Charter and Bylaws
of the Surviving Bank, until altered, amended or repealed in accordance with
their terms and applicable law.
4. NAME; OFFICES. The name of the Surviving Bank shall be "Washington
Federal Savings and Loan Association." The main office of the Surviving Bank
shall be the main office of the Acquiror Bank immediately prior to the Effective
Time. All branch offices of the Bank and the Acquiror Bank which were in lawful
operation immediately prior to the
<PAGE>
Effective Time shall be the branch offices of the Surviving Bank upon
consummation of the Merger, subject to the opening or closing of any offices
which may be authorized by the Bank or the Acquiror Bank and applicable
regulatory authorities after the date hereof. Schedule I hereto contains a list
of each of the deposit taking offices of the Bank and the Acquiror Bank which
shall be operated by the Surviving Bank, subject to the opening or closing of
any offices which may be authorized by the Bank or the Acquiror Bank and
applicable regulatory authorities after the date hereof.
5. DIRECTORS AND EXECUTIVE OFFICERS. Upon consummation of the Merger,
(i) the directors of the Surviving Bank shall consist of nine persons the names
and residence addresses of which are set forth as Schedule II hereto and (ii)
the executive officers of the Surviving Bank shall be the executive officers of
the Acquiror Bank immediately prior to the Effective Time.
6. EFFECTS OF THE MERGER. Upon consummation of the Merger, the
Surviving Bank shall be considered the same business and corporate entity as
each of the Constituent Banks and thereupon and thereafter all the property,
rights, powers and franchises of each of the Constituent Banks shall vest in the
Surviving Bank and the Surviving Bank shall be subject to and be deemed to have
assumed all of the debts, liabilities, obligations and duties of each of the
Constituent Banks and shall have succeeded to all of each of their
relationships, fiduciary or otherwise, as fully and to the same extent as if
such property, rights, privileges, powers, franchises, debts, obligations,
duties and relationships had been originally acquired, incurred or entered into
by the Surviving Bank. In addition, any reference to either of the Constituent
Banks in any contract, will or document, whether executed or taking effect
before or after the Effective Time, shall be considered a reference to the
Surviving Bank if not inconsistent with the other provisions of the contract,
will or document; and any pending action or other judicial proceeding to which
either of the Constituent Banks is a party shall not be deemed to have abated or
to have been discontinued by reason of the Merger, but may be prosecuted to
final judgment, order or decree in the same manner as if the Merger had not
occurred or the Surviving Bank may be substituted as a party to such action or
proceeding, and any judgment, order or decree may be rendered for or against it
that might have been rendered for or against either of the Constituent Banks if
the Merger had not occurred. In accordance with 12 C.F.R. Section 563b.3(f),
the Surviving Bank shall assume and maintain the liquidation account established
by the Bank in connection with its conversion to stock form.
7. EFFECT ON SHARES OF STOCK.
(a) Each share of Acquiror Bank common stock issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding.
(b) At the Effective Time, each share of Bank common stock issued and
outstanding prior to the Merger shall, by virtue of the Merger and without any
action on the
2
<PAGE>
part of the holder thereof, be canceled. Any shares of Bank common stock held
in the treasury of the Bank immediately prior to the Effective Time shall be
retired and canceled.
8. ADDITIONAL ACTIONS. If, at any time after the Effective Time, the
Surviving Bank shall consider that any further assignments or assurances in law
or any other acts are necessary or desirable to (i) vest, perfect or confirm, of
record or otherwise, in the Surviving Bank its rights, title or interest in, to
or under any of the rights, properties or assets of the Bank acquired or to be
acquired by the Surviving Bank as a result of, or in connection with, the
Merger, or (ii) otherwise carry out the purposes of this Agreement and Plan of
Merger, the Bank and its proper officers and directors shall be deemed to have
granted to the Surviving Bank an irrevocable power of attorney to execute and
deliver all such proper deeds, assignments and assurances in law and to do all
acts necessary or proper to vest, perfect or confirm title to and possession of
such rights, properties or assets in the Surviving Bank and otherwise to carry
out the purposes of this Agreement and Plan of Merger; and the proper officers
and directors of the Surviving Bank are fully authorized in the name of the Bank
or otherwise to take any and all such action.
9. COUNTERPARTS. This Agreement and Plan of Merger may be executed in
one or more counterparts, each of which shall be deemed to be an original but
all of which together shall constitute one agreement.
10. GOVERNING LAW. This Agreement and Plan of Merger shall be governed
in all respects, including, but not limited to, validity, interpretation, effect
and performance, by the laws of the United States and, to the extent applicable,
the State of Washington.
11. AMENDMENT. Subject to applicable law, this Agreement and Plan of
Merger may be amended, modified or supplemented only by written agreement of the
Acquiror Bank and the Bank at any time prior to the Effective Time.
12. WAIVER. Any of the terms or conditions of this Agreement and Plan
of Merger may be waived at any time by whichever of the parties hereto is, or
the shareholders of which are, entitled to the benefit thereof by action taken
by the Board of Directors of such waiving party.
13. ASSIGNMENT. This Agreement and Plan of Merger may not be assigned
by any party hereto without the prior written consent of the other party.
14. TERMINATION. This Agreement and Plan of Merger shall terminate
upon the termination of the Agreement in accordance with its terms.
15. PROCUREMENT OF APPROVALS. This Agreement and Plan of Merger shall
be subject to the approval of the Acquiror as the sole shareholder of the
Acquiror Bank and the Company as the sole shareholder of the Bank at a meeting
to be called and held by each in accordance with the applicable provisions of
law and their respective Charter and
3
<PAGE>
Bylaws (or a consent or consents in lieu thereof). The Acquiror Bank and the
Bank shall proceed expeditiously and cooperate fully in the procurement of any
other consents and approvals and in the taking of any other action, and the
satisfaction of all other requirements prescribed by law or otherwise necessary
for consummation of the Merger on the terms provided herein, including without
limitation the preparation and submission of such applications or other filings
for approval of the Merger to the OTS as may be required by applicable laws and
regulations.
16. CONDITIONS PRECEDENT. The obligations of the parties under this
Agreement and Plan of Merger shall be subject to: (i) the approval of this
Agreement and Plan of Merger by the Acquiror as the sole shareholder of the
Acquiror Bank and the Company as the sole shareholder of the Bank at meetings of
shareholders duly called and held (or by consent or consents in lieu thereof);
(ii) receipt of approval of the Merger from all governmental and banking
authorities whose approval is required; (iii) receipt of any necessary
regulatory approval to operate the main office and the branch offices of the
Bank as offices of the Surviving Bank; and (iv) the consummation of the Parent
Merger pursuant to the Agreement on or before the Effective Time.
4
<PAGE>
IN WITNESS WHEREOF, each of the Acquiror Bank and the Bank has caused this
Agreement and Plan of Merger to be executed on its behalf by its duly authorized
officers.
WASHINGTON FEDERAL SAVINGS
AND LOAN ASSOCIATION
Attest:
/s/ Ronald L. Saper By:/s/ Guy C. Pinkerton
- --------------------------------------- ----------------------------------
Name: Ronald L. Saper Name: Guy C. Pinkerton
Title: Senior Vice President Title: Chairman, President and Chief
and Chief Financial Officer Executive Officer
METROPOLITAN FEDERAL SAVINGS
AND LOAN ASSOCIATION OF SEATTLE
Attest:
/s/ Edwin C. Hedlund By: /s/ Patrick F. Patrick
- --------------------------------------- ------------------------------
Name: Edwin C. Hedlund Name: Patrick F. Patrick
Title: Secretary Title: President and Chief Executive
Officer
5
<PAGE>
SCHEDULE I
OFFICES OF THE SURVIVING BANK
HOME OFFICE: 425 Pike Street
- ----------- Seattle, WA 98101
OTHER OFFICES:
- -------------
SOUTHERN WASHINGTON DIVISION:
Arctic Building Office 700 Third Avenue
Seattle, WA 98104
Ballard Office 2020 N.W. Market Street
Seattle, WA 98107
Bellevue/Redmond Office 14801 N.E. Bellevue-Redmond Rd.
Bellevue, WA 98007
Bothell Office 10116 N.E. 183rd
Bothell, WA 98011
Bremerton Office 4250 Wheaton Way
Bremerton, WA 98310
Centralia Office 110 No. Pearl Street
Centralia, WA 98531
Federal Way Office 2206 South 320th
Federal Way, WA 98003
6
<PAGE>
Kent Office 10415 S.E. 240th Street
Kent, WA 98031
Kirkland Office 116 Kirkland Avenue
Kirkland, WA 98033
Lacey Office 4110 Pacific Avenue S.E.
Lacey, WA 98503
Lynnwood Office 5809 196th S.W.
Lynnwood, WA 98036
Magnolia Office 3219 West McGraw Street
Seattle, WA 98199
Olympia Office 422 Capitol Way So.
Olympia, WA 98501
Poulsbo Office 18960 State Hwy. N., #104
Poulsbo, WA 98370
Rainier Office 4800 Rainier Avenue South
Seattle, WA 98118
Sequim Office 191 W. Washington Street
Sequim, WA 98382
University Place Office 3702-A Budgeport Way West
Tacoma, WA 98466
Wedgwood Office 7334 35th Avenue, N.E.
Seattle, WA 98115
7
<PAGE>
West Seattle Office 4700 42nd Avenue, S.W.
Seattle, WA 98116
NORTHERN WASHINGTON DIVISION:
Mount Vernon Office 317 Second Street
Mount Vernon, WA 98273
Anacortes Office 1017 Commercial Avenue
Anacortes, WA 98221
Bellingham Office 1100 Lakeway Drive
Bellingham, WA 98226
Burlington Office 300 East Fairhaven Avenue
Burlington, WA 98233
Eastsound Office Eastsound Square
Eastsound, WA 98245
La Conner Office 620 Morris Street
La Conner, WA 98257
Mount Vernon Mall Office 225 East College Way
Mount Vernon, WA 98273
Oak Harbor Office 9067 90th N.W.
Oak Harbor, WA 98277
Sedro-Woolley Office Fourth and State Streets
Sedro Woolley, WA 98284
8
<PAGE>
Stanwood Office 9025 271st N.W.
Stanwood, WA 98292
WESTERN IDAHO DIVISION:
Boise Main Office 1001 West Idaho Street
Boise, ID 83702
Broadway Office 1789 Broadway Avenue
Boise, ID 83706
Caldwell Office 515 Cleveland Boulevard
Caldwell, ID 83605
Cole & Ustick Office 3197 North Cole Road
Boise, ID 83704
Eagle Office 560 East State Street
Eagle, ID 83616
Fairview Office 10150 Fairview Avenue
Boise, ID 83704
Hillcrest Office 1581 South Orchard
Boise, ID 83705
Jerome Office 140 East Main Street
Jerome, ID 83338
McCall Office 101 E. Lake Street
McCall, ID 83638
9
<PAGE>
Meridian Office 713 East First Street
Meridian, ID 83642
Mountain Home Office 310 American Legion Blvd.
Mountain Home, ID 83647
Nampa Office 223 11th Avenue South
Nampa, ID 83651
Nampa Midland Office 1001 Nampa/Caldwell Blvd.
Nampa, ID 83651
Orchard Office 10 South Orchard Street
Boise, ID 83705
Twin Falls Office 494 Blue Lakes Blvd. North
Twin Falls, ID 83301
EASTERN IDAHO DIVISION:
Idaho Falls Office 500 North Capital
Idaho Falls, ID 83402
17th Street Office 2287 East 17th Street
Idaho Falls, ID 83404
Blackfoot Office 715 West Judicial
Blackfoot, ID 83221
Pocatello-Yellowstone Office 1045 Yellowstone Avenue
Pocatello, ID 83201
10
<PAGE>
Rexburg Office 80 North 200 East
Rexburg, ID 83440
OREGON DIVISION:
Albany Main Office 300 Ellsworth St., S.W.
Albany, OR 97321
Bend Office 2415 N.E. Highway 20
Bend, OR 97701
Corvallis Office 1111-A N.W. Ninth Street
Corvallis, OR 97330
Dallas Office 611 Main Street
Dallas, OR 97338
East Salem Office 1677 Hawthorne Ave., N.E.
Salem, OR 97301
Eugene Coburg Office 1745 Coburg Road
Eugene, OR 97401
Eugene - 11th Avenue Office 200 East 11th Avenue
Eugene, OR 97401
Florence Office 620 Highway 101
Florence, OR 97439
Hillsboro Office 1234 W. Baseline
Hillsboro, OR 97123
11
<PAGE>
Hood River Office 215 Oak Street
Hood River, OR 97031
Lincoln City Office 1545 North Highway 101
Lincoln City, OR 97367
Monmouth Office 523 Main Street East
Monmouth, OR 97361
Newport Office 505 North Coast Highway
Newport, OR 97365
Portland Office 435 S.W. 5th Avenue
Portland, OR 97204
Salem Office 198 Liberty Street, N.E.
Salem, OR 97301
The Dalles Office 235 E. Third Street
The Dalles, OR 97058
Vancouver Office 13411 S.E. Mill Plain Blvd.
Suite A-1
Vancouver, WA 98383
Waldport Office 325 N.W. Hemlock
Waldport, OR 97394
West Salem Office 777 Wallace Road N.W.
Salem, OR 97304
Wilsonville Office 29028 Town Center Loop, E.
Wilsonville, OR 97070
12
<PAGE>
Woodburn Office 999 N. Cascade Drive
Woodburn, OR 97071
UTAH DIVISION:
Plaza Main Office 505 East 200 South
Salt Lake City, UT 84147
Cottonwood Office 4748 S. Highland Drive
Salt Lake City, UT 84117
Eagle Gate Office 60 East South Temple
Suite 110-63
Salt Lake City, UT 84111
Fashion Place Office 181 East 6100 South
Murray, UT 84107
Foothill Office 1442 Foothill Dr.
Salt Lake City, UT 84108
Layton Office 1597 N. Woodland Park Dr.
Layton, UT 84041
Logan Office 399 North Main
Logan, UT 84321
Olympus Hills Office 3983 S. Wasatch Blvd.
Salt Lake City, UT 84124
Price Office 308 East Main
Price, UT 84501
13
<PAGE>
Sugar House Office 2262 S. Highland Drive
Salt Lake City, UT 84106
Tremonton Office 340 E. Main Street
Tremonton, UT 84337
ARIZONA DIVISION:
South Tucson Office 1833 South 6th Ave.
Tucson, AZ 85713
Speedway/El Rancho Office 3333 E. Speedway Blvd.
Tucson, AZ 85716
Swan Sunrise Office 4788 E. Sunrise Dr.
Tucson, AZ 85718
Flowing Wells Office 1315 W. Prince Rd.
Tucson, AZ 85705
Camino Seco/Broadway Office 8675 E. Broadway Blvd.
Tucson, AZ 85710
Grant & Craycroft Office 5520 E. Grant Road
Tuscon, AZ 85712
Green Valley Office 303 E. Esperanza Blvd.
Green Valey, AZ 85614
14
<PAGE>
BANK OFFICES:
Corporate Headquarters 1520 Fourth Avenue
Seattle, WA 98101
Auburn Office 55 "A" Street S.E.
Auburn, WA 98002
Crown Hill Office 8318 15th Avenue, N.W.
Seattle, WA 98117
Eastgate Office 3712 150th S.E.
Bellevue, WA 98006
Edmonds Office 229 Main Street
Edmonds, WA 98020
Federal Way Office 1627 S. 312th
Federal Way, WA 98003
Lakewood Office 9919 Bridgeport Way S.W.
Tacoma, WA 98499
Rainier Beach Office 9325 Rainier Avenue S.
Seattle, WA 98118
Redmond Office 16200 Redmond Way
Redmond, WA 98052
West Seattle Office 6428 California Avenue S.W.
Seattle, WA 98136
15
<PAGE>
Westlake Park Office 1516 Fourth Avenue
Seattle, WA 98101
16
<PAGE>
SCHEDULE II
Term
Name Residence Address Expires
- -------------------------- ----------------------------------- -----------
Kermit O. Hanson 17760 - 14th N.W.
Seattle, WA 98177 1998
W. Alden Harris 111 W. Highland Dr., #8W
Seattle, WA 98119 1997
Anna C. Johnson 3715 West Fulton
Seattle, WA 98199 1999
Harold C. Kean 10509 Culpepper Ct., N.W.
Seattle, WA 98177 1997
Vernon Keener 460 2nd Ave. South, #201
Kirkland, WA 98033 1999
E.W. Mersereau, Jr. 831 E. Pacific View Dr.
Bellingham, WA 98226 1998
Guy C. Pinkerton 514 N.E. 97th, #301
Seattle, WA 98115 1998
Richard C. Reed 2010 Killarney Way
Bellevue, WA 98004 1999
Charles R. Richmond 10112 NE 38th Court, #906
Kirkland, WA 98033 1999
17
<PAGE>
Exhibit 10(a)
Stock Option Agreement,
dated as of July 11, 1996,
between Washington Federal (as grantee)
and Metropolitan (as issuer)
<PAGE>
STOCK OPTION AGREEMENT
Stock Option Agreement, dated as of July 11, 1996 (the "Agreement"), by and
between Metropolitan Bancorp, a Washington corporation ("Issuer"), and
Washington Federal, Inc., a Washington corporation ("Grantee").
WITNESSETH:
WHEREAS, Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of July 11, 1996 (the "Plan"), providing for, among other
things, the merger of Issuer with and into Grantee (the "Merger"), with Grantee
as the surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the Plan,
Grantee has required that Issuer agree, and Issuer has agreed, to grant to
Grantee the Option (as hereinafter defined);
NOW THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree as
follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Plan.
2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option") to
purchase up to 657,000 shares (as adjusted as set forth herein) (the "Option
Shares," which shall include the Option Shares before and after any transfer of
such Option Shares) of Common Stock, par value $0.01 per share ("Issuer Common
Stock"), of Issuer at a purchase price per Option Share (the "Purchase Price")
of $13.50, provided, however, that in no event shall the number of Option Shares
for which the Option is exercisable exceed 19.9% of the issued and outstanding
shares of Issuer Common Stock without giving effect to any shares subject to or
issued pursuant to the Option.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as hereinafter defined), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States shall be in
effect, Holder may exercise the Option, in whole or in part, at any time and
from time to time following the occurrence of a Purchase Event (as hereinafter
<PAGE>
defined); provided that the Option shall terminate and be of no further force
and effect upon the earliest to occur of (A) the Effective Time of the Merger,
(B) termination of the Plan in accordance with the terms thereof prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event, other than a
termination of the Plan by Grantee pursuant to Section 7.1(b)(i) (a "Default
Termination"), (C) 12 months after the termination of the Plan by Grantee
pursuant to a Default Termination, and (D) 12 months after termination of the
Plan (other than pursuant to a Default Termination) following the occurrence of
a Purchase Event or a Preliminary Purchase Event; and provided, further, that
any purchase of shares upon exercise of the Option shall be subject to
compliance with applicable laws, including without limitation the Home Owners'
Loan Act, as amended ("HOLA"). The term "Holder" shall mean the holder or
holders of the Option from time to time, and which is initially Grantee. The
rights set forth in Section 8 hereof shall terminate when the right to exercise
the Option terminates (other than as a result of a complete exercise of the
Option) as set forth above.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended or publicly-proposed, or publicly announced an
intention to authorize, recommend or propose, or entered into an agreement
with any person (other than Grantee or any subsidiary of Grantee) to effect
(A) a merger, consolidation or similar transaction involving Issuer or any
of its subsidiaries, (B) other than pursuant to the Mortgage Company
Agreement, the disposition, by sale, lease, exchange or otherwise, of
assets of Issuer or any of its subsidiaries representing in either case 15%
or more of the consolidated assets of Issuer and its subsidiaries, or (C)
the issuance, sale or other disposition by Issuer of (including by way of
merger, consolidation, share exchange or any similar transaction)
securities representing 15% or more of the voting power of Issuer or any of
its subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(ii) any person (other than Grantee or any subsidiary of Grantee)
shall have acquired beneficial ownership (as such term is defined in
Rule 13d-3 promulgated under the Exchange Act) of or the right to acquire
beneficial ownership of, or any "group" (as such term is defined in
Section 13(d)(3) of the Exchange Act), other than any group of which
Grantee or any Grantee subsidiary is a part, shall have been formed
which beneficially owns or has the right to acquire beneficial ownership
of, 25% or more of the then outstanding shares of Issuer Common Stock.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the
Exchange Act), or shall have filed a registration statement under the
Securities Act with respect to, a tender
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offer or exchange offer to purchase any shares of Issuer Common Stock such
that, upon consummation of such offer, such person would own or control 10%
or more of the then outstanding shares of Issuer Common Stock (such an
offer being referred to herein as a "Tender Offer" and an "Exchange Offer,"
respectively); or
(ii) (A) the holders of Issuer Common Stock shall not have approved
the Plan at the meeting of such stockholders held for the purpose of voting
on the Plan, (B) such meeting shall not have been held or shall have been
canceled prior to termination of the Plan or (C) Issuer's Board of
Directors shall have withdrawn or modified in a manner adverse to Grantee
the recommendation of Issuer's Board of Directors with respect to the Plan,
in each case after it shall have been publicly announced that any person
(other than Grantee or any subsidiary of Grantee) shall have (x) made, or
disclosed an intention to make, a proposal to engage in an Acquisition
Transaction, (y) commenced a Tender Offer or filed a registration statement
under the Securities Act with respect to an Exchange Offer, or (z) filed an
application (or given notice), whether in draft or final form, under the
Bank Holding Company Act of 1956, as amended, the HOLA, the Bank Merger
Act, as amended, or the Change in Bank Control Act of 1978, as amended, for
approval to engage in an Acquisition Transaction; or
(iii) Issuer shall have breached any representation, warranty,
covenant or obligation contained in the Plan and such breach would entitle
Grantee to terminate the Plan under Section 7.1(b) thereof (without regard
to the cure period provided for therein unless such cure is promptly
effected without jeopardizing consummation of the Merger pursuant to the
terms of the Plan) after (x) a bona fide proposal is made by any person
(other than Grantee or any subsidiary of Grantee) to Issuer or its
stockholders to engage in an Acquisition Transaction, (y) any person (other
than Grantee or any subsidiary of Grantee) states its intention to Issuer
or its stockholders to make a proposal to engage in an Acquisition
Transaction if the Plan terminates or (z) any person (other than Grantee or
any subsidiary of Grantee) shall have filed an application or notice with
any Governmental Entity to engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified in
Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event, it being understood that the
giving of such notice by Issuer shall not be a condition to the right of Holder
to exercise the Option.
(e) In the event Holder is entitled to under the terms hereof and wishes
to exercise the Option, it shall send to Issuer a written notice (the date of
which being herein referred to as the "Notice Date") specifying (i) the total
number of Option Shares it intends to purchase pursuant to such exercise, and
(ii) a place and date not earlier than three business
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days nor later than 15 business days from the Notice Date for the closing (the
"Closing") of such purchase (the "Closing Date"). If prior notification to or
approval of the Office of Thrift Supervision ("OTS") or any other Governmental
Entity is required in connection with such purchase, Issuer shall cooperate with
Grantee in the filing of the required notice or application for approval and the
obtaining of such approval and the Closing shall occur immediately following
such regulatory approvals (and any mandatory waiting periods).
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately
available funds by wire transfer to a bank account designated by Issuer, an
amount equal to the Purchase Price multiplied by the number of Option Shares to
be purchased on such Closing Date, and (ii) present and surrender this Agreement
to Issuer at the address of Issuer specified in Section 12(f) hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in Section 4(a), (i)
Issuer shall deliver to Holder (A) a certificate or certificates representing
the Option Shares to be purchased at such Closing, which Option Shares shall be
free and clear of all liens, claims, charges and encumbrances of any kind
whatsoever and subject to no preemptive rights, and (B) if the Option is
exercised in part only, an executed new agreement with the same terms as this
Agreement evidencing the right to purchase the balance of the shares of Issuer
Common Stock purchasable hereunder, and (ii) Holder shall deliver to Issuer a
letter agreeing that Holder shall not offer to sell or otherwise dispose of such
Option Shares in violation of applicable federal and state law or of the
provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED
AS OF JULY 11, 1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE
HOLDER HEREOF WITHOUT CHARGE UPON RECEIPT BY ISSUER OF A WRITTEN
REQUEST THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy of a letter from the staff of the Commission, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer and
its counsel, to the effect that such legend is not required for purposes of the
Securities Act.
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(d) Upon the giving by Holder to Issuer of the written notice of exercise
of the Option provided for under Section 3(e), the tender of the applicable
purchase price in immediately available funds and the tender of this Agreement
to Issuer, Holder shall be deemed to be the holder of record of the shares of
Issuer Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates representing
such shares of Issuer Common Stock shall not then be actually delivered to
Holder.
(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer, (iii) promptly to take all action as may from time to time be required
(including (A) complying with all premerger notification, reporting and waiting
period requirements and (B) in the event prior approval of or notice to any
Governmental Entity is necessary before the Option may be exercised, cooperating
fully with Holder in preparing such applications or notices and providing such
information to such Governmental Entity as it may require) in order to permit
Holder to exercise the Option and Issuer duly and effectively to issue shares of
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby represents
and warrants to Grantee (and Holder, if different than Grantee) as follows:
(a) DUE AUTHORIZATION. Issuer has all requisite corporate power and
authority to enter into this Agreement, and subject to any approvals referred to
herein, to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of Issuer, and this Agreement has been duly executed and delivered by Issuer.
(b) NO VIOLATIONS. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Issuer
with any of the provisions hereof will not (i) conflict with or result in a
breach of any provision of its Articles of Incorporation or Bylaws or a default
(or give rise to any right of termination, cancellation or acceleration) under
any of the terms, conditions or provisions of any note, bond, debenture,
mortgage, indenture, license, material agreement or other material instrument or
obligation to which Issuer is a party, or by which it or any of its properties
or assets may be bound, or (ii) violate any order, writ, injunction, decree,
statute, rule or regulation applicable to Issuer or any of its properties or
assets, which conflict, violation or
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default could have a material adverse effect on Issuer or Grantee's rights under
this Agreement.
(c) AUTHORIZED STOCK. Issuer has taken all necessary corporate and other
action to authorize and reserve and to permit it to issue, and at all times from
the date hereof until the obligation to deliver Issuer Common Stock upon the
exercise of the Option terminates, will have reserved for issuance upon exercise
of the Option that number of shares of Issuer Common Stock equal to the maximum
number of shares of Issuer Common Stock at any time and from time to time
purchasable upon exercise of the Option, and all such shares, upon issuance
pursuant to the Option, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever and not subject to any
preemptive rights.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby
represents and warrants to Issuer that Grantee has all requisite corporate power
and authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of Grantee, and this Agreement has been duly
executed and delivered by Grantee.
7. ADJUSTMENT UPON CHANGES IN ISSUER CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, combination, exchange of
shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transactions so that Holder shall receive, upon exercise of the Option, the
number and class of shares or other securities or property that Holder would
have received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such event, or the record date therefor, as applicable. If
any additional shares of Issuer Common Stock are issued after the date of this
Agreement (other than pursuant to an event described in the first sentence of
this Section 7(a)), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 19.9% of
the number of shares of Issuer Common Stock then issued and outstanding, without
giving effect to any shares subject to or issued pursuant to the Option.
(b) In the event that Issuer shall enter in an agreement: (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one of
its subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock
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or other securities of Issuer or any other person or cash or any other property
or the outstanding shares of Issuer Common Stock immediately prior to such
merger shall after such merger represent less than 50% of the outstanding shares
and share equivalents of the merged company, or (iii) to sell or otherwise
transfer all or substantially all of its assets to any person, other than
Grantee or one of its subsidiaries, then, and in each such case, the agreement
governing such transaction shall make proper provisions so that the Option
shall, upon the consummation of any such transaction and upon the terms and
conditions set forth herein, be converted into, or exchanged for, an option (the
"Substitute Option"), at the election of Holder, of any of (x) the Acquiring
Corporation (as hereinafter defined), (y) any person that controls the Acquiring
Corporation or (z) in the case of a merger described in clause (ii), Issuer
(such person being referred to as "Substitute Option Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided that, if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Holder. Substitute Option Issuer also shall enter
into an agreement with Holder in substantially the same form as this Agreement,
which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock (as hereinafter defined) as is equal to the Assigned
Value (as hereinafter defined) multiplied by the number of shares of Issuer
Common Stock for which the Option was theretofore exercisable, divided by the
Average Price (as hereinafter defined). The exercise price of Substitute Option
per share of Substitute Common Stock (the "Substitute Option Price") shall then
be equal to the Purchase Price multiplied by a fraction in which the numerator
is the number of shares of Issuer Common Stock for which the Option was
theretofore exercisable and the denominator is the number of shares of the
Substitute Common Stock for which the Substitute Option is exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, or (iii) the transferee of all or substantially all of
Issuer's assets (or a substantial part of the assets of its subsidiaries
taken as a whole).
(2) "Substitute Common Stock" shall mean the shares of capital stock
(or similar equity interest) with the greatest voting power in respect of
the election of directors (or persons similarly responsible for the
direction of the business and affairs) of the Substitute Option Issuer.
(3) "Assigned Value" shall mean the highest of (w) the price per
share of Issuer Common Stock at which a Tender Offer or an Exchange Offer
therefor has been made, (x) the price per share of Issuer Common Stock to
be paid by any third
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party pursuant to an agreement with Issuer, (y) the highest closing price
for shares of Issuer Common Stock within the six-month period immediately
preceding the consolidation, merger or sale in question and (z) in the
event of a sale of all or substantially all of Issuer's assets or deposits,
an amount equal to (i) the sum of the price paid in such sale for such
assets (and/or deposits) and the current market value of the remaining
assets of Issuer, as determined by a nationally-recognized investment
banking firm selected by Holder, divided by (ii) the number of shares of
Issuer Common Stock outstanding at such time. In the event that a Tender
Offer or an Exchange Offer is made for Issuer Common Stock or an agreement
is entered into for a merger or consolidation involving consideration other
than cash, the value of the securities or other property issuable or
deliverable in exchange for Issuer Common Stock shall be determined by a
nationally-recognized investment banking firm selected by Holder.
(4) "Average Price" shall mean the average closing price of a share
of Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by Issuer, the person merging into Issuer
or by any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of Substitute Common Stock
but for the limitation in the first sentence of this Section 7(f), Substitute
Option Issuer shall make a cash payment to Holder equal to the excess of (i) the
value of the Substitute Option without giving effect to the limitation in the
first sentence of this Section 7(f) over (ii) the value of the Substitute Option
after giving effect to the limitation in the first sentence of this
Section 7(f). This difference in value shall be determined by a
nationally-recognized investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in Section 7(b)
unless the Acquiring Corporation and any person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder and take
all other actions that may be necessary so that the provisions of this Section 7
are given full force and effect (including, without limitation, any action that
may be necessary so that the holders of the other shares of common stock issued
by Substitute Option Issuer are not entitled to exercise any rights by reason of
the issuance or exercise of the Substitute Option and the shares of Substitute
Common Stock are otherwise in no way distinguishable from or have lesser
economic value (other than any diminution in value resulting from the fact that
the shares of Substitute Common Stock are restricted securities, as defined in
Rule 144 under the Securities Act or
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any successor provision) than other shares of common stock issued by Substitute
Option Issuer).
8. REPURCHASE AT THE OPTION OF HOLDER.
(a) Subject to the last sentence of Section 3(a), at the request of Holder
at any time commencing upon the first occurrence of a Repurchase Event (as
defined in Section 8(d)) and ending 12 months immediately thereafter, Issuer
shall repurchase from Holder (i) the Option and (ii) all shares of Issuer Common
Stock purchased by Holder pursuant hereto with respect to which Holder then has
beneficial ownership. The date on which Holder exercises its rights under this
Section 8 is referred to as the "Request Date." Such repurchase shall be at an
aggregate price (the "Section 8 Repurchase Consideration") equal to the sum of:
(i) the aggregate Purchase Price paid by Holder for any shares of
Issuer Common Stock acquired pursuant to the Option with respect to which
Holder then has beneficial ownership;
(ii) the excess, if any, of (x) the Applicable Price (as defined
below) for each share of Issuer Common Stock over (y) the Purchase Price
(subject to adjustment pursuant to Section 7), multiplied by the number of
shares of Issuer Common Stock with respect to which the Option has not been
exercised; and
(iii) the excess, if any, of the Applicable Price over the Purchase
Price (subject to adjustment pursuant to Section 7) paid (or, in the case
of Option Shares with respect to which the Option has been exercised but
the Closing Date has not occurred, payable) by Holder for each share of
Issuer Common Stock with respect to which the Option has been exercised and
with respect to which Holder then has beneficial ownership, multiplied by
the number of such shares.
(b) If Holder exercises its rights under this Section 8, Issuer shall,
within 10 business days after the Request Date, pay the Section 8 Repurchase
Consideration to Holder in immediately available funds, and contemporaneously
with such payment Holder shall surrender to Issuer the Option and the
certificates evidencing the shares of Issuer Common Stock purchased thereunder
with respect to which Holder then has beneficial ownership, and shall warrant
that it has sole record and beneficial ownership of such shares and that the
same are then free and clear of all liens, claims, charges and encumbrances of
any kind whatsoever. Notwithstanding the foregoing, to the extent that prior
notification to or approval of the OTS or any other Governmental Entity is
required in connection with the payment of all or any portion of the Section 8
Repurchase Consideration, Holder shall have the ongoing option to revoke its
request for repurchase pursuant to Section 8, in whole or in part, or to require
that Issuer deliver from time to time that portion of the Section 8 Repurchase
Consideration that it is not then so prohibited from paying and promptly file
the required notice or application for approval and expeditiously process the
same (and each
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party shall cooperate with the other in the filing of any such notice or
application and the obtaining of any such approval). If the OTS or any other
Governmental Entity disapproves of any part of Issuer's proposed repurchase
pursuant to this Section 8, Issuer shall promptly give notice of such fact to
Holder. If the OTS or any other Governmental Entity prohibits the repurchase in
part but not in whole, then Holder shall have the right (i) to revoke the
repurchase request or (ii) to the extent permitted by the OTS or other
Governmental Entity, determine whether the repurchase should apply to the Option
and/or Option Shares and to what extent to each, and Holder shall thereupon have
the right to exercise the Option as to the number of Option Shares for which the
Option was exercisable at the Request Date less the sum of the number of shares
covered by the Option in respect of which payment has been made pursuant to
Section 8(a)(ii) and the number of shares covered by the portion of the Option
(if any) that has been repurchased. Holder shall notify Issuer of its
determination under the preceding sentence within five business days of receipt
of notice of disapproval of the repurchase.
Notwithstanding anything herein to the contrary, all of Grantee's rights
under this Section 8 shall terminate on the date of termination of the Option
pursuant to Section 3(a).
(c) For purposes of this Agreement, the "Applicable Price" means the
highest of (i) the highest price per share of Issuer Common Stock paid for any
such share by the person or groups described in Section 8(d)(i), (ii) the price
per share of Issuer Common Stock received by holders of Issuer Common Stock in
connection with any merger or other business combination transaction described
in Section 7(b)(i), 7(b)(ii) or 7(b)(iii), or (iii) the highest closing sales
price per share of Issuer Common Stock quoted on the Nasdaq Stock Market's
National Market ("NASDAQ/NMS") (or if Issuer Common Stock is not quoted on
NASDAQ/NMS, the highest bid price per share as quoted on the principal trading
market or securities exchange on which such shares are traded, as reported by a
recognized source chosen by Holder) during the 60 business days preceding the
Request Date; provided, however, that in the event of a sale of less than all of
Issuer's assets, the Applicable Price shall be the sum of the price paid in such
sale for such assets and the current market value of the remaining assets of
Issuer as determined by a nationally-recognized investment banking firm selected
by Holder, divided by the number of shares of Issuer Common Stock outstanding at
the time of such sale. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (i) or (ii) shall be other than in
cash, the value of such consideration shall be determined in good faith by an
independent nationally-recognized investment banking firm selected by Holder and
reasonably acceptable to Issuer, which determination shall be conclusive for all
purposes of this Agreement.
(d) As used herein, a "Repurchase Event" shall occur if (i) any person
(other than Grantee or any subsidiary of Grantee) shall have acquired beneficial
ownership of (as such term is defined in Rule 13d-3 promulgated under the
Exchange Act), or the right to acquire beneficial ownership of, or any "group"
(as such term is defined in Section 13(d)(3) of the Exchange Act), other than
any group of which Grantee or any Grantee subsidiary is a part,
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shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 50% or more of the then outstanding shares of Issuer
Common Stock, or (ii) any of the transactions described in Section 7(b)(i),
Section 7(b)(ii) or Section 7(b)(iii) shall be consummated.
(e) Notwithstanding anything herein to the contrary, the aggregate amount
payable to Holder pursuant to this Section 8 shall not exceed $3.0 million.
9. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. Issuer shall, subject to the conditions
of Section 9(c), if requested by any Holder, as expeditiously as possible
prepare and file a registration statement under the Securities Act if such
registration is necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to Holder upon exercise of the Option in accordance
with the intended method of sale or other disposition stated by Holder in such
request, including without limitation a "shelf" registration statement under
Rule 415 under the Securities Act or any successor provision, and Issuer shall
use its best efforts to qualify such shares or other securities for sale under
any applicable state securities laws.
(b) ADDITIONAL REGISTRATION RIGHTS. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to Holder of
its intention to do so and, upon the written request of Holder given within 30
days after receipt of any such notice (which request shall specify the number of
shares of Issuer Common Stock intended to be included in such underwritten
public offering by Holder), Issuer will cause all such shares for which a Holder
shall have requested participation in such registration to be so registered and
included in such underwritten public offering; provided, however, that Issuer
may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4 under the Securities Act or any successor form;
provided, further, however, that such election pursuant to clause (i) may only
be made one time. If some but not all the shares of Issuer Common Stock with
respect to which Issuer shall have received requests for registration pursuant
to this Section 9(b) shall be excluded from such registration, Issuer shall make
appropriate allocation of shares to be registered among Holders permitted to
register their shares of Issuer Common Stock in connection with such
registration pro rata in the proportion that the number of shares requested to
be registered by each such Holder bears to the total number of shares requested
to be registered by all such Holders then desiring to have Issuer Common Stock
registered for sale.
(c) CONDITIONS TO REQUIRED REGISTRATION. Issuer shall use all
reasonable efforts to cause each registration statement referred to in
Section 9(a) to become effective and to obtain all consents or waivers of other
parties which are required therefor and to keep such
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registration statement effective; provided, however, that Issuer may delay any
registration of Option Shares required pursuant to Section 9(a) for a period not
exceeding 90 days if Issuer shall in good faith determine that any such
registration would adversely affect an offering or contemplated offering of
other securities by Issuer, and Issuer shall not be required to register Option
Shares under the Securities Act pursuant to Section 9(a):
(i) prior to the earliest of (A) termination of the Plan pursuant to
Article VII thereof, and (B) a Purchase Event or a Preliminary Purchase
Event;
(ii) on more than one occasion during any calendar year and on more
than two occasions in total;
(iii)within 90 days after the effective date of a registration
referred to in Section 9(b) pursuant to which the Holder or Holders
concerned were afforded the opportunity to register such shares under the
Securities Act and such shares were registered as requested; and
(iv) unless a request therefor is made to Issuer by the Holder or
Holders of at least 25% or more of the aggregate number of Option Shares
(including shares of Issuer Common Stock issuable upon exercise of the
Option) then outstanding.
In addition to the foregoing, Issuer shall not be required to maintain the
effectiveness of any registration statement after the expiration of nine months
from the effective date of such registration statement. Issuer shall use all
reasonable efforts to make any filings, and take all steps, under all applicable
state securities laws to the extent necessary to permit the sale or other
disposition of the Option Shares so registered in accordance with the intended
method of distribution for such shares, provided, however, that Issuer shall not
be required to consent to general jurisdiction or to qualify to do business in
any state where it is not otherwise required to so consent to such jurisdiction
or to so qualify to do business.
(d) EXPENSES. Issuer will pay all expenses (including without
limitation registration fees, qualification fees, blue sky fees and expenses,
accounting expenses, legal expenses and printing expenses incurred by it) in
connection with each registration pursuant to Section 9(a) or (b) and all other
qualifications, notifications or exemptions pursuant to Section 9(a) or (b).
Underwriting discounts and commissions relating to Option Shares, fees and
disbursements of counsel to the Holder(s) of Option Shares being registered and
any other expenses incurred by such Holder(s) in connection with any such
registration shall be borne by such Holder(s).
(e) INDEMNIFICATION. In connection with any registration under
Section 9(a) or (b), Issuer hereby indemnifies each Holder, and each underwriter
thereof, including each person, if any, who controls such Holder or underwriter
within the meaning of Section 15 of the Securities Act, against all expenses,
losses, claims, damages and liabilities caused by any untrue, or alleged untrue,
statement of a material fact contained in any registration
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statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) or any preliminary prospectus, or caused by
any omission, or alleged omission, to state therein a material fact required to
be stated therein or necessary to make the statements therein not misleading,
except insofar as such expenses, losses, claims, damages or liabilities of such
indemnified party are caused by any untrue statement or alleged untrue statement
that was included by Issuer in any such registration statement or prospectus or
notification or offering circular (including any amendments or supplements
thereto) in reliance upon, and in conformity with, information furnished in
writing to Issuer by such indemnified party expressly for use therein, and
Issuer and each officer, director and controlling person of Issuer shall be
indemnified by such Holder, or by such underwriter, as the case may be, for all
such expenses, losses, claims, damages and liabilities caused by any untrue, or
alleged untrue, statement that was included by Issuer in any such registration
statement or prospectus or notification or offering circular (including any
amendments or supplements thereto) in reliance upon, and in conformity with,
information furnished in writing to Issuer by such Holder or such underwriter,
as the case may be, expressly for such use.
Promptly upon receipt by a party indemnified under this Section 9(e) of
notice of the commencement of any action against such indemnified party in
respect of which indemnity or reimbursement may be sought against any
indemnifying party under this Section 9(e), such indemnified party shall notify
the indemnifying party in writing of the commencement of such action, but,
except to the extent of any actual prejudice to the indemnifying party, the
failure so to notify the indemnifying party shall not relieve it of any
liability which it may otherwise have to any indemnified party under this
Section 9(e). In case notice of commencement of any such action shall be given
to the indemnifying party as above provided, the indemnifying party shall be
entitled to participate in and, to the extent it may wish, jointly with any
other indemnifying party similarly notified, to assume the defense of such
action at its own expense, with counsel chosen by it and reasonably satisfactory
to such indemnified party. The indemnified party shall have the right to employ
separate counsel in any such action and participate in the defense thereof, but
the fees and expenses of such counsel (other than reasonable costs of
investigation) shall be paid by the indemnified party unless (i) the
indemnifying party agrees to pay the same, (ii) the indemnifying party fails to
assume the defense of such action with counsel reasonably satisfactory to the
indemnified party, or (iii) the indemnified party has been advised by counsel
that one or more legal defenses may be available to the indemnifying party that
may be contrary to the interest of the indemnified party, in which case the
indemnifying party shall be entitled to assume the defense of such action
notwithstanding its obligation to bear fees and expenses of such counsel. No
indemnifying party shall be liable for any settlement entered into without its
consent, which consent may not be unreasonably withheld.
If the indemnification provided for in this Section 9(e) is unavailable to
a party otherwise entitled to be indemnified in respect of any expenses, losses,
claims, damages or liabilities referred to herein, then the indemnifying party,
in lieu of indemnifying such party otherwise entitled to be indemnified, shall
contribute to the amount paid or payable by such
13
<PAGE>
party to be indemnified as a result of such expenses, losses, claims, damages or
liabilities in such proportion as is appropriate to reflect the relative
benefits received by Issuer, the selling Holders and the underwriters from the
offering of the securities and also the relative fault of Issuer, the selling
Holders and the underwriters in connection with the statement or omissions which
results in such expenses, losses, claims, damages or liabilities, as well as any
other relevant equitable considerations. The amount paid or payable by a party
as a result of the expenses, losses, claims, damages and liabilities referred to
above shall be deemed to include any legal or other fees or expenses reasonably
incurred by such party in connection with investigating or defending any action
or claim; provided, however, that in no case shall the selling Holders be
responsible, in the aggregate, for any amount in excess of the net offering
proceeds attributable to its Option Shares included in the offering. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(g) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. Any obligation by any Holder
to indemnify shall be several and not joint with other Holders.
In connection with any registration pursuant to Section 9(a) or (b) above,
Issuer and each selling Holder (other than Grantee) shall enter into an
agreement containing the indemnification provisions of this Section 9(e).
(f) MISCELLANEOUS REPORTING. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit the
expeditious sale at any time of any Option Shares by the Holder(s) in accordance
with and to the extent permitted by any rule or regulation permitting
nonregistered sales of securities promulgated by the Commission from time to
time, including, without limitation, Rule 144A. Issuer shall at its expense
provide the Holder with any information necessary in connection with the
completion and filing of any reports or forms required to be filed by them under
the Securities Act or the Exchange Act, or required pursuant to any state
securities laws or the rules of any stock exchange.
(g) ISSUE TAXES. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save any Holder harmless, without limitation as to time,
against any and all liabilities, with respect to all such taxes.
10. QUOTATION; LISTING. If Issuer Common Stock or any other securities
to be acquired upon exercise of the Option are then authorized for quotation or
trading or listing on NASDAQ/NMS or any securities exchange, Issuer, upon the
request of Holder, will promptly file an application, if required, to authorize
for quotation or trading or listing the shares of Issuer Common Stock or other
securities to be acquired upon exercise of the Option on NASDAQ/NMS or such
other securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
14
<PAGE>
11. DIVISION OF OPTION. Upon the occurrence of a Purchase Event or a
Preliminary Purchase Event, this Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of Holder, upon presentation and
surrender of this Agreement at the principal office of the Issuer for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase in the aggregate the same number of shares of Issuer Common
Stock purchasable hereunder. The terms "Agreement" and "Option" as used herein
include any other Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
12. MISCELLANEOUS.
(a) EXPENSES. Except as otherwise provided in Section 9, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits of such provision.
This Agreement may not be modified, amended, altered or supplemented except upon
the execution and delivery of a written agreement executed by the parties
hereto.
(c) ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES; SEVERABILITY. This
Agreement, together with the Plan and the other documents and instruments
referred to herein and therein, between Grantee and Issuer (i) constitutes the
entire agreement and supersedes all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter hereof,
and (ii) is not intended to confer upon any person other than the parties hereto
(other than the indemnified parties under Section 9(e) and any transferee of the
Option Shares or any permitted transferee of this Agreement pursuant to
Section 12(h)) any rights or remedies hereunder. If any term, provision,
covenant or restriction of this Agreement is held by a court of competent
jurisdiction or a federal or state regulatory agency to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way be affected, impaired or invalidated. If for any reason such court or
regulatory agency determines that the Option does not permit Holder to acquire,
or does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided in Sections 3 and 8 (as adjusted pursuant to
Section 7), it is the express intention
15
<PAGE>
of Issuer to allow Holder to acquire or to require Issuer to repurchase such
lesser number of shares as may be permissible without any amendment or
modification hereof.
(d) GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Washington without regard to any
applicable conflicts of law rules.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or sent by overnight mail service or mailed by registered or
certified mail (return receipt requested) postage prepaid, to the parties at the
following address (or at such other address for a party as shall be specified by
like notice):
If to Grantee:
Washington Federal, Inc.
425 Pike Street
Seattle, Washington 98101
Attn: Guy C. Pinkerton
Chairman, President and Chief Executive Officer
Fax: 206-624-2334
With a required copy to:
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, N.W.
Washington, D.C. 20005
Attn: Gerard L. Hawkins, Esq.
Fax: 202-347-0300
If to Issuer:
Metropolitan Bancorp
1520 4th Avenue
Seattle, Washington 98107-1648
Attn: Patrick F. Patrick
President and Chief Executive Officer
Fax: 206-654-7883
16
<PAGE>
With a required copy to:
Perkins Coie
1201 Third Avenue
40th Floor
Seattle, Washington 98101-3099
Attn: Charles Katz, Esq.
Fax: 206-583-8500
(g) COUNTERPARTS. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed, it
being understood that both parties need not sign the same counterpart.
(h) ASSIGNMENT. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this Agreement
to a wholly-owned subsidiary of Holder and Holder may assign its rights
hereunder in whole or in part after the occurrence of a Purchase Event. Subject
to the preceding sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties and their respective successors and
assigns.
(i) FURTHER ASSURANCES. In the event of any exercise of the Option by
Holder, Issuer and Holder shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
(j) SPECIFIC PERFORMANCE. The parties hereto agree that this Agreement
may be enforced by either party through specific performance, injunctive relief
and other equitable relief. Both parties further agree to waive any requirement
for the securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any other
rights that the parties hereto may have for any failure to perform this
Agreement.
17
<PAGE>
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
Attest: METROPOLITAN BANCORP
/s/ Edwin C. Hedlund By: /s/ Patrick F. Patrick
- --------------------------------------- ------------------------
Name: Edwin C. Hedlund Name: Patrick F. Patrick
Title: Secretary Title: President and Chief
Executive Officer
Attest: WASHINGTON FEDERAL, INC.
/s/ Ronald L. Saper By: /s/ Guy C. Pinkerton
- --------------------------------------- --------------------
Name: Ronald L. Saper Name: Guy C. Pinkerton
Title: Senior Vice President Title: Chairman, President and
and Chief Financial Officer
18
<PAGE>
Exhibit 10(b)
Stockholder Agreement
dated as of July 11, 1996,
among Washington Federal and
certain stockholders of Metropolitan
<PAGE>
STOCKHOLDER AGREEMENT
STOCKHOLDER AGREEMENT, dated as of July 11, 1996, by and between Washington
Federal, Inc. (the "Acquiror"), a Washington corporation, and certain
shareholders of Metropolitan Bancorp (the "Company"), a Washington corporation,
named on Schedule I hereto (collectively the "Stockholders").
WITNESSETH:
WHEREAS, the Acquiror and the Company have entered into an Agreement and
Plan of Merger, dated as of the date hereof (the "Agreement"), which is being
executed simultaneously with the execution of this Stockholder Agreement and
provides for, among other things, the merger of the Company with and into the
Acquiror (the "Merger"); and
WHEREAS, in order to induce the Acquiror to enter into the Agreement, each
of the Stockholders agrees to, among other things, vote in favor of the
Agreement in his or her capacities as stockholders of the Company;
NOW, THEREFORE, in consideration of the premises, the mutual covenants and
agreements set forth herein and other good and valuable consideration, the
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. OWNERSHIP OF COMPANY COMMON STOCK. Each Stockholder represents and
warrants that the Stockholder has or shares the right to vote and dispose of the
number of shares of common stock of the Company, par value $.01 per share
("Company Common Stock"), as set forth opposite such Stockholder's name on
Schedule I hereto.
2. AGREEMENTS OF THE STOCKHOLDERS. Each Stockholder covenants and
agrees that:
(a) such Stockholder shall, at any meeting of the Company's
stockholders called for the purpose, vote, or cause to be voted, all shares
of Company Common Stock in which such stockholder has the right to vote
(whether owned as of the date hereof or hereafter acquired) in favor of the
Agreement and against any plan or proposal pursuant to which the Company is
to be acquired by or merged with, or pursuant to which the Company proposes
to sell all or substantially all of its assets and liabilities to, any
person entity or group (other than the Acquiror or any subsidiary thereof);
(b) except as otherwise expressly permitted hereby or by the Mortgage
Company Agreement (as defined in the Agreement), such Stockholder shall
not, prior to the meeting of the Company's stockholders referred to in
Section 2(a) hereof or the earlier termination of the Agreement in
accordance with its terms, sell, pledge, transfer or otherwise dispose of
the Stockholder's shares of Company Common Stock; and
<PAGE>
(c) such Stockholder shall not in his capacity as a stockholder of
the Company directly or indirectly encourage or solicit or hold discussions
or negotiations with, or provide any information to, any person, entity or
group (other than the Acquiror or an affiliate thereof) concerning any
merger, sale of substantial assets or liabilities not in the ordinary
course of business, sale of shares of capital stock or similar transactions
involving the Company or any subsidiary of the Company (provided that
nothing in this letter agreement shall be deemed to affect the ability of
any Stockholder to fulfill his duties as a director or officer of the
Company).
Each Stockholder further agrees that the Company's transfer agent shall be
given an appropriate stop transfer order and shall not be required to register
any attempted transfer of shares of Company Common Stock, unless the transfer
has been effected in compliance with the terms of this letter agreement.
3. SUCCESSORS AND ASSIGNS. A Stockholder may sell, pledge, transfer or
otherwise dispose of his shares of Company Common Stock, provided that, with
respect to any sale, transfer or disposition which would occur on or before the
meeting of the Company's stockholders referred to in Section 2(a) hereof, such
Stockholder obtains the prior written consent of the Acquiror and that any
acquiror of such Company Common Stock agree in writing to be bound by the terms
of this Stockholder Agreement.
4. TERMINATION. The parties agree and intend that this Stockholder
Agreement be a valid and binding agreement enforceable against the parties
hereto and that damages and other remedies at law for the breach of this
Stockholder Agreement are inadequate. This Stockholder Agreement may be
terminated at any time prior to the consummation of the Merger by mutual written
consent of the parties hereto and shall be automatically terminated in the event
that the Agreement is terminated in accordance with its terms.
5. NOTICES. Notices may be provided to the Acquiror and the
Stockholders in the manner specified in Section 8.4 of the Agreement, with all
notices to the Stockholders being provided to them at the Company in the manner
specified in such section.
6. GOVERNING LAW. This Stockholder Agreement shall be governed by the
laws of the State of Washington without giving effect to the principles of
conflicts of laws thereof.
7. COUNTERPARTS. This Stockholder Agreement may be executed in one or
more counterparts, all of which shall be considered one and the same and each of
which shall be deemed an original.
8. HEADINGS AND GENDER. The Section headings contained herein are for
reference purposes only and shall not affect in any way the meaning or
interpretation of this Stockholder Agreement. Use of the masculine gender
herein shall be considered to represent the masculine, feminine or neuter gender
whenever appropriate.
2
<PAGE>
IN WITNESS WHEREOF, the Acquiror, by a duly authorized officer, and each of
the Stockholders have caused this Stockholder Agreement to be executed as of the
day and year first above written.
WASHINGTON FEDERAL INC.
By: /S/ Guy C. Pinkerton
--------------------
Name: Guy C. Pinkerton
Title: Chairman, President and
Chief Executive Officer
COMPANY STOCKHOLDERS:
/s/ Allen E. Doan
--------------------------------------
Allen E. Doan
/s/ John F. Clearman
--------------------------------------
John F. Clearman
/s/ David C. Cortelyou
--------------------------------------
David C. Cortelyou
/s/ W. Gordon Dowling
--------------------------------------
W. Gordon Dowling
3
<PAGE>
/s/ John H. Fairchild
--------------------------------------
John H. Fairchild
/s/ Virgil Fassio
--------------------------------------
Virgil Fassio
/s/ H. Dennis Halvorson
--------------------------------------
H. Dennis Halvorson
/s/ Larry O. Hillis
--------------------------------------
Larry O. Hillis
/s/ John J. Knight
--------------------------------------
John J. Knight
/s/ Patrick F. Patrick
--------------------------------------
Patrick F. Patrick
/s/ Michael M. Pete
--------------------------------------
Michael M. Pete
4
<PAGE>
SCHEDULE I
Number of Shares of
Company Common Stock
Name of Stockholder Beneficially Owned
- ------------------------------- ------------------------
Allen E. Doan 39,320
John F. Clearman 10,700
David C. Cortelyou 9,700
W. Gordon Dowling 110,690
John H. Fairchild 362,637
Virgil Fassio 21,700
H. Dennis Halvorson 14,700
Larry O. Hillis 52,926
John J. Knight 37,760
Patrick F. Patrick 134,725
Michael M. Pete 33,000
<PAGE>
Exhibit 20
Press Release issued
on July 11, 1996
with respect to the Agreement
<PAGE>
Washington Federal, Inc.
425 Pike Street, Seattle, WA 98101
(206) 624 7930 Contact: Bob Hawkins
Metropolitan Bancorp
1520 Fourth Avenue, Seattle, WA 98101
(206) 654 7820 Contact: Patrick Patrick
Friday, July 12, 1996
FOR IMMEDIATE RELEASE
WASHINGTON FEDERAL, INC. AND METROPOLITAN BANCORP
ANNOUNCE MERGER
SEATTLE, WASHINGTON-Washington Federal, Inc. (NASDAQ-WFSL) and Metropolitan
Bancorp (NASDAQ-MSEA) announced today the execution of a definitive agreement
pursuant to which Metropolitan will merge with and into Washington Federal (the
"Merger"). In connection with the Merger, each stockholder of Metropolitan will
receive shares of Washington Federal Common Stock at an expected value of $18.00
in exchange for each share of his or her Metropolitan Common Stock, subject to
the pricing and other provisions set forth in the agreement.
It is intended that the transaction constitute a tax-free reorganization under
the Internal Revenue Code so that stockholders of Metropolitan will not
recognize gain or loss in connection with the receipt of Washington Federal
Common Stock.
The transaction has been unanimously approved by the Boards of Directors of both
companies. It is anticipated that the merger will be completed by December 31,
1996. Approval is required from the applicable regulatory authorities and the
shareholders of Metropolitan.
<PAGE>
July 11, 1996 Page 2
The number of shares of Washington Federal Common Stock that will be exchanged
for each share of Metropolitan Common Stock will be determined by applying a
formula, set forth in the definitive agreement, which is based on the average
market price of Washington Federal Common Stock over a 20 trading day period
ending on the fifth business day prior to the closing of the Merger. If, over
the pricing period, the average market price of Washington Federal Common Stock
is between $18.00 and $24.50, Metropolitan stockholders will receive a number of
shares of Washington Federal Common Stock equal to the ratio determined by
dividing $18.00 by the average market price of Washington Federal Common Stock
multiplied by the number of shares of Metropolitan Common Stock exchanged. If
the average market price of Washington Federal Common Stock exceeds $24.50, the
exchange ratio will equal .735 shares of Washington Federal Common Stock for
each share of Metropolitan Common Stock, whereas the exchange ratio will be
one-for-one if the Washington Federal Common Stock average market price for the
20-day period is less than $18.00 per share.
In connection with the Merger, Phoenix Mortgage & Investment, Inc., a subsidiary
of Metropolitan, will be acquired by Phoenix management.
Patrick F. Patrick, President and Chief Executive Officer of Metropolitan
commented, "We are very excited about our affiliation with Washington Federal.
Washington Federal is the premier company in the thrift industry and offers our
stockholders an excellent return and investment. The larger company offers more
opportunities for employees to apply their time
<PAGE>
July 11, 1996 Page 3
and talents. The customer, most valued of all, will continue to receive a high
level of uninterrupted personal service and the utmost safety in one of the
strongest financial institutions in the country".
Guy C. Pinkerton, Chairman, President and Chief Executive Officer of Washington
Federal stated, "We look forward to joining with Metropolitan. The combination
will provide enhanced management capabilities, improved cost efficiencies and
increased market penetration which will lead to improved financial performance
in the years ahead."
In connection with the agreement, Metropolitan granted Washington Federal an
option to acquire up to 19.9% of the outstanding Metropolitan Common Stock upon
the occurrence of certain events.
Metropolitan Bancorp is the holding company of Metropolitan Federal Savings and
Loan Association of Seattle which operates ten offices in the greater Puget
Sound area. At June 30, 1996, Metropolitan Bancorp had $761 million in assets,
$424 million in deposits and $51 million in equity.
<PAGE>
July 11, 1996 Page 4
Washington Federal, Inc. is the holding company of Washington Federal Savings
which operates 89 offices in Washington, Idaho, Oregon, Utah and Arizona. At
June 30, 1996, Washington Federal, Inc. had $5.0 billion in assets, $2.5 billion
in deposits and $597 million in equity.
X X X X
