<PAGE>
As filed with the Securities and Exchange Commission on August 23, 1996
Registration No. 333-_____
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
Under
The Securities Act of 1933
WASHINGTON FEDERAL, INC.
---------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Washington 6711 91-1661606
---------- ---- ----------
(State or other juris- (Primary Standard (I.R.S. Employer
diction of incorporation Industrial Classification Identification No.)
or organization) Code No.)
425 Pike Street
Seattle, Washington 98101-2334
(206) 624-7930
--------------
(Address, including zip code and telephone number, including area code,
of Registrant's principal executive offices)
Guy C. Pinkerton
Chairman, President and Chief Executive Officer
Washington Federal, Inc.
425 Pike Street
Seattle, Washington 98101-2334
(206) 624-7930
--------------
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
with a copy to:
<TABLE>
<S> <C> <C>
Gerard L. Hawkins, Esq. Patrick F. Patrick Charles J. Katz, Jr., Esq.
Elias, Matz, Tiernan & Herrick L.L.P. President and Chief David F. McShea
734 15th Street, N.W. Executive Officer Perkins Coie
Washington, D.C. 20005 Metropolitan Bancorp 1201 Third Avenue
(202) 347-0300 1520 4th Avenue Seattle, Washington 98101-3099
Seattle, Washington 98101-1648 (206) 583-8888
(206) 625-1818
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: At the
Effective Time as described in the accompanying Prospectus/Proxy Statement.
----------------------------------------------
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. / /
----------------------------------------------
Calculation of Registration Fee
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Registered(1) Offering Price Per Aggregate Offering Amount of
Registered Share or Unit(2) Price(2) Registration Fee(2)
- -----------------------------------------------------------------------------------------------------------------------------
Common Stock, par
value $1.00 per share 3,544,933 shares $17.0625 $60,485,419 $20,857.04
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) This Registration Statement covers the maximum number of shares of common
stock of the Registrant issuable upon consummation of the merger of
Metropolitan Bancorp ("Metropolitan") with and into the Registrant.
(2) Estimated solely for the purpose of calculation of the registration fee.
Pursuant to Rules 457(f)(1) and 457(c) under the Securities Act of 1933,
the registration fee is based on the average of the high and low prices of
the Metropolitan Common Stock as reported on the Nasdaq Stock Market's
National Market on August 19, 1996, and computed based on the maximum
number of shares (3,544,933) that may be exchanged for the securities being
registered.
_______________________________________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
WASHINGTON FEDERAL
CROSS-REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM OF FORM S-4 LOCATION IN PROSPECTUS
<S> <C>
1. Forepart of Registration Statement Facing Page; Cross Reference Sheet;
and Outside Front Cover Page of Outside Front Cover Page of
Prospectus Prospectus/Proxy Statement
2. Inside Front and Outside Back Cover Inside Front Cover Page of Prospectus/
Pages of Prospectus Proxy Statement; Table of Contents;
Available Information; Incorporation of
Certain Documents by Reference
3. Risk Factors, Ratio of Earnings to Summary; Market for Common Stock
Fixed Charges and Other Information and Dividends; Comparative Per Share
Data; Selected Pro Forma
Consolidated Financial Data
4. Terms of the Transaction Summary; The Merger; Description of
Washington Federal Capital Stock;
Comparison of the Rights of
Shareholders
5. Pro Forma Financial Information Pro Forma Combined Consolidated
Financial Information
6. Material Contracts With the Company Being Acquired The Merger
7. Additional Information Required for Reoffering by Not Applicable
Persons and Parties Deemed to be Underwriters
8. Interests of Named Experts and Counsel Not Applicable
9. Disclosure of Commission Position on Indemnification Not Applicable
for Securities Act Liabilities
10. Information with Respect to S-3 Registrants Incorporation of Certain Documents
by Reference; Summary
11. Incorporation of Certain Information by Reference Incorporation of Certain Documents by Reference
12. Information with Respect to S-2 or S-3 Registrants Not Applicable
<PAGE>
13. Incorporation of Certain Information by Reference Not Applicable
14. Information with Respect to Registrants Other than Not Applicable
S-2 or S-3 Registrants
15. Information with Respect to S-3 Companies Not Applicable
16. Information with Respect to S-2 or S-3 Companies Incorporation of Certain Documents by Reference; Summary
17. Information with Respect to Companies other than Not Applicable
S-2 or S-3 Companies
18. Information if Proxies, Consents or Authorizations Summary; The Special Meeting; The Merger; Incorporation
are to be Solicited of Certain Documents by Reference
19. Information if Proxies, Consents or Authorizations Not Applicable
are not to be Solicited, or in an Exchange Offer
</TABLE>
<PAGE>
METROPOLITAN BANCORP
1520 4TH AVENUE
SEATTLE, WASHINGTON 98101-1648
(206) 625-1818
________ __, 1996
Dear Shareholder,
You are cordially invited to attend a Special Meeting of Shareholders of
Metropolitan Bancorp ("Metropolitan") at __:__ _.m., Pacific Time, on __________
__, 1996, at ______________, Seattle, Washington (the "Special Meeting"). This
is a very important meeting regarding your investment in Metropolitan.
At the Special Meeting, you will be asked (i) to consider and vote upon a
proposal to approve an Agreement and Plan of Merger, dated as of July 11, 1996
(the "Agreement"), by and between Washington Federal, Inc. ("Washington
Federal"), a Washington corporation, and Metropolitan, pursuant to which, among
other things, Metropolitan will be merged with and into Washington Federal (the
"Merger"), and (ii) to consider and act upon such other matters as may properly
come before the Special Meeting. If the Agreement is approved and the Merger is
consummated, each outstanding share of Metropolitan Common Stock will be
converted into the right to receive, subject to possible adjustment under
certain circumstances, a number of shares of Washington Federal Common Stock
which will be determined by applying a ratio (the "Exchange Ratio"), calculated
in the manner set forth in the Agreement, which is based on the average closing
price of the Washington Federal Common Stock over a 20 trading day period (the
"Pricing Period") ending on the fifth business day prior to the effective time
of the Merger (the "Average Washington Federal Price"), plus cash in lieu of any
fractional share interest. If, over the Pricing Period, the Average Washington
Federal Price is equal to or greater than $18.00 but equal to or less than
$24.50, shareholders of Metropolitan will receive for each share of Metropolitan
Common Stock that number of shares of Washington Federal Common Stock equal to
the ratio determined by dividing $18.00 by the Average Washington Federal Price.
If the Average Washington Federal Price is greater than $24.50, shareholders of
Metropolitan will receive 0.735 shares of Washington Federal Common Stock for
each share of Metropolitan Common Stock, while if the Average Washington Federal
Price is less than $18.00, they will receive one share of Washington Federal
Common Stock for each share of Metropolitan Common Stock. If the Average
Washington Federal Price 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 will have
the right to adjust the Exchange Ratio to the number obtained by dividing $17.00
by the Average Washington Federal Price, in which case the Agreement will not be
terminated.
After careful consideration, your Board of Directors has determined the
Merger to be fair to and in the best interests of Metropolitan and its
shareholders and has approved
<PAGE>
the Agreement and the transactions contemplated thereby, including the Merger.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE
AGREEMENT.
Enclosed are a proxy card, a Notice of Special Meeting of Shareholders and
a Prospectus/Proxy Statement which describes the Merger, its effects and the
background of the transaction. A copy of the Agreement is included as Annex I
to the enclosed Prospectus/Proxy Statement. Also enclosed are Metropolitan's
Annual Report on Form 10-K for the year ended March 31, 1996 and Quarterly
Report on Form 10-Q for the quarter ended June 30, 1996. You are urged to read
all of these materials carefully.
It is very important that your shares be represented at the Special
Meeting. BECAUSE THE MERGER REQUIRES THE APPROVAL OF THE HOLDERS OF TWO-THIRDS
OF THE OUTSTANDING METROPOLITAN COMMON STOCK, FAILURE TO RETURN A PROPERLY
EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE SAME EFFECT
AS A VOTE AGAINST THE AGREEMENT. Accordingly, even if you plan to be present at
the Special Meeting, you are requested to complete, date, sign, and return the
proxy card in the enclosed postage-paid envelope as soon as possible. If you
decide to attend the Special Meeting, you may vote your shares in person whether
or not you have previously submitted a proxy.
On behalf of the Board, I thank you for your attention to this important
matter.
Very truly yours,
Patrick F. Patrick
President and Chief Executive Officer
<PAGE>
METROPOLITAN BANCORP
1520 4TH AVENUE
SEATTLE, WASHINGTON 98101-1648
(206) 625-1818
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on ________ __, 1996
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the "Special
Meeting") of Metropolitan Bancorp ("Metropolitan") will be held at __:__ _.m.,
Pacific Time, on ________ __, 1996, at ___________________, Seattle, Washington,
for the following purposes:
1. To consider and vote upon a proposal to approve an Agreement and Plan
of Merger, dated as of July 11, 1996 (the "Agreement"), by and between
Washington Federal, Inc. ("Washington Federal"), and Metropolitan, which
provides, among other things, for (i) the merger of Metropolitan with and
into Washington Federal (the "Merger") and (ii) the conversion of each
share of common stock of Metropolitan outstanding immediately prior to the
Merger (other than any dissenting shares under Washington law and certain
shares held by Washington Federal) into the right to receive, subject to
possible adjustment under certain circumstances, a number of shares of
Washington Federal common stock which will be determined by applying a
ratio, set forth in the Agreement, which is based on the average closing
price of the Washington Federal common stock over a 20 trading day period
ending on the fifth business day prior to the effective time of the Merger,
plus cash in lieu of any fractional share interest; and
2. To consider and act upon such other matters as may properly come before
the Special Meeting.
Pursuant to the Bylaws of Metropolitan, the Board of Directors has fixed
the close of business on ________ __, 1996 as the record date for the
determination of shareholders entitled to notice of and to vote at the Special
Meeting. Only holders of common stock of Metropolitan of record at the close of
business on that date will be entitled to notice of and to vote at the Special
Meeting or any adjournment or adjournments thereof.
If the Agreement and the transactions contemplated thereby are approved by
shareholders at the Special Meeting and the Merger is consummated by
Metropolitan, any shareholder of record as of the record date for the Special
Meeting (i) who delivers to Metropolitan, before the shareholder vote on the
Agreement, a written notice of the shareholder's intent to demand payment for
his or her shares through the exercise of his or her statutory appraisal rights;
and (ii) whose shares are not voted in favor of approving the Agreement, shall
have the right to dissent from the Merger and to obtain payment of the fair
value of his or her shares. Metropolitan, its successor and any such
shareholder shall in such case have the rights and duties and shall follow the
procedures set forth in Chapter 23B.13 of the Washington Business Corporation
Act, which are described under "The Merger - Dissenters' Rights" in the
accompanying Prospectus/Proxy Statement and a copy of which is attached as Annex
V to such Prospectus/Proxy Statement.
THE BOARD OF DIRECTORS OF METROPOLITAN HAS DETERMINED THE MERGER TO BE FAIR
TO AND IN THE BEST INTERESTS OF METROPOLITAN AND ITS SHAREHOLDERS AND RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
By Order of the Board of Directors
Patrick F. Patrick
President and Chief Executive Officer
Seattle, Washington
_________ __, 1996
YOU ARE CORDIALLY INVITED TO ATTEND THE SPECIAL MEETING. FAILURE TO RETURN A
PROPERLY EXECUTED PROXY CARD OR TO VOTE AT THE SPECIAL MEETING WILL HAVE THE
SAME EFFECT AS A VOTE AGAINST THE AGREEMENT. ACCORDINGLY, EVEN IF YOU PLAN TO
BE PRESENT AT THE SPECIAL MEETING, YOU ARE REQUESTED TO COMPLETE, DATE, SIGN AND
RETURN THE PROXY CARD IN THE ENCLOSED POSTAGE-PAID ENVELOPE AS SOON AS POSSIBLE.
IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE EITHER IN PERSON OR BY PROXY.
ANY PROXY GIVEN MAY BE REVOKED BY YOU IN WRITING OR IN PERSON AT ANY TIME PRIOR
TO THE EXERCISE THEREOF.
<PAGE>
PROSPECTUS PROXY STATEMENT
WASHINGTON FEDERAL, INC. METROPOLITAN BANCORP
------------ ------------
Common Stock Special Meeting of Shareholders to be
(Par Value $1.00 Per Share) held on __________ __, 1996
___________________________________________
This Prospectus/Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Metropolitan Bancorp
("Metropolitan") to be used at a special meeting of shareholders of Metropolitan
to be held on __________ __, 1996 (the "Special Meeting"). The purposes of the
Special Meeting are (i) to consider and vote upon an Agreement and Plan of
Merger, dated as of July 11, 1996, by and between Washington Federal, Inc.
("Washington Federal") and Metropolitan (the "Agreement"), which provides, among
other things, for the merger of Metropolitan with and into Washington Federal
(the "Merger"), and (ii) to consider and act upon such other matters as may
properly come before the Special Meeting.
Upon consummation of the Merger, each share of common stock of
Metropolitan, par value $0.01 per share ("Metropolitan Common Stock") (other
than (i) any dissenting shares under Washington law and (ii) any shares held by
Washington Federal or a subsidiary thereof 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, subject to possible adjustment under certain circumstances, a
number of shares of Washington Federal Common Stock (as hereinafter defined)
which will be determined by applying a ratio (the "Exchange Ratio"), calculated
in the manner set forth in the Agreement, which is based on the average closing
price of the Washington Federal Common Stock over a 20 trading day period (the
"Pricing Period") ending on the fifth business day prior to the effective time
of the Merger (the "Average Washington Federal Price"), plus cash in lieu of any
fractional share interest, as more fully described in this Prospectus/Proxy
Statement. If, over the Pricing Period, the Average Washington Federal Price is
equal to or greater than $18.00 but equal to or less than $24.50, shareholders
of Metropolitan will receive for each share of Metropolitan Common Stock that
number of shares of Washington Federal Common Stock equal to the ratio
determined by dividing $18.00 by the Average Washington Federal Price. If the
Average Washington Federal Price is greater than $24.50, shareholders of
Metropolitan will receive 0.735 shares of Washington Federal Common Stock for
each share of Metropolitan Common Stock, while if the Average Washington Federal
Price is less than $18.00, they will receive one share of Washington Federal
Common Stock for each share of Metropolitan Common Stock. If the Average
Washington Federal Price 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 will have
the right to adjust the Exchange Ratio to the number obtained by dividing $17.00
by the Average Washington Federal Price, in which case the Agreement will not be
terminated. See "Summary," "The Merger" and Annex I.
This Prospectus/Proxy Statement also constitutes a prospectus of Washington
Federal relating to the shares of common stock of Washington Federal, par value
$1.00 per share (the "Washington Federal Common Stock"), issuable to holders of
Metropolitan Common Stock upon consummation of the Merger. Based on _________
shares of Metropolitan Common Stock outstanding on the date hereof and
outstanding options to purchase _______ of such shares as of the same date, a
maximum of 3,544,933 shares of Washington Federal Common Stock will be issuable
upon consummation of the Merger.
__________________________________
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS/
PROXY STATEMENT. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
__________________________________
The date of this Prospectus/Proxy Statement is ________ __, 1996.
<PAGE>
AVAILABLE INFORMATION
Each of Washington Federal and Metropolitan is subject to the informational
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (the "Exchange Act"), and, in accordance therewith,
files reports, proxy statements and other information with the Securities and
Exchange Commission (the "SEC"). Reports, proxy statements and other
information filed by Washington Federal and Metropolitan can be inspected and
copied at Room 1024 of the SEC's office at 450 Fifth Street, N.W., Washington,
D.C. 20549 and at the SEC's Regional Office in California (5670 Wilshire
Boulevard, 11th Floor, Los Angeles, California 90036-3648), and copies of such
material can be obtained from the Public Reference Section of the SEC at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. The SEC
maintains a World Wide Web site on the Internet that contains reports, proxy and
information statements and other information regarding registrants such as
Washington Federal and Metropolitan that file electronically with the SEC. The
address of such site is: http://www.sec.gov. Each of the Washington Federal
Common Stock and the Metropolitan Common Stock is quoted on the Nasdaq Stock
Market's National Market ("NASDAQ"). Consequently, reports, proxy statements
and other information relating to Washington Federal and Metropolitan also may
be inspected at the office of the National Association of Securities Dealers,
Inc. ("NASD") at 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus/Proxy Statement does not contain all of the information set
forth in the Registration Statement on Form S-4, of which this Prospectus/Proxy
Statement is a part, and exhibits thereto (together with the amendments thereto,
the "Registration Statement"), which has been filed by Washington Federal with
the SEC under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act"), certain portions of which have
been omitted pursuant to the rules and regulations of the SEC and to which
reference is hereby made for further information.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS OF WASHINGTON
FEDERAL AND METROPOLITAN BY REFERENCE WHICH ARE NOT PRESENTED HEREIN OR
DELIVERED HEREWITH. ALL SUCH DOCUMENTS WITH RESPECT TO WASHINGTON FEDERAL ARE
AVAILABLE WITHOUT CHARGE (OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS) UPON
WRITTEN OR ORAL REQUEST FROM: WASHINGTON FEDERAL, INC., 425 PIKE STREET,
SEATTLE, WASHINGTON 98101-2334, ATTENTION: ROBERT HAWKINS (TELEPHONE NUMBER
(206) 624-7930). ALL SUCH DOCUMENTS WITH RESPECT TO METROPOLITAN ARE AVAILABLE
WITHOUT CHARGE (OTHER THAN CERTAIN EXHIBITS TO SUCH DOCUMENTS) UPON WRITTEN OR
ORAL REQUEST FROM: METROPOLITAN BANCORP, 1520 4TH AVENUE, SEATTLE, WASHINGTON
98101-1648, ATTENTION: EDWIN C. HEDLUND (TELEPHONE NUMBER (206) 625-1818). IN
ORDER TO ENSURE TIMELY DELIVERY OF SUCH DOCUMENTS, ANY REQUEST SHOULD BE MADE BY
_______ __, 1996.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY WASHINGTON FEDERAL OR METROPOLITAN. NEITHER
THE DELIVERY OF THIS PROSPECTUS/PROXY STATEMENT NOR ANY DISTRIBUTION OF THE
SECURITIES TO WHICH THIS PROSPECTUS/ PROXY STATEMENT RELATES SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF WASHINGTON FEDERAL OR METROPOLITAN SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR SOLICITATION TO BUY SUCH SECURITIES IN
ANY CIRCUMSTANCES IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT LAWFUL.
2
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by Washington Federal (File No. 0-25454) and
Metropolitan (File No. 0-22218) with the SEC pursuant to the Exchange Act are
hereby incorporated by reference in this Prospectus/Proxy Statement:
(1) Washington Federal's Form 8-B Registration Statement filed by
Washington Federal with the SEC on January 26, 1995;
(2) Washington Federal's Annual Report on Form 10-K for the year
ended September 30, 1995;
(3) Washington Federal's Quarterly Reports on Form 10-Q for the three
months ended December 31, 1995, March 31, 1996 and June 30, 1996;
(4) Washington Federal's Current Report on Form 8-K, dated July 16,
1996;
(5) Metropolitan's Annual Report on Form 10-K for the year ended
March 31, 1996;
(6) Metropolitan's Quarterly Report on Form 10-Q for the three months
ended June 30, 1996; and
(7) Metropolitan's Current Report on Form 8-K, dated July 22, 1996.
Accompanying this Prospectus/Proxy Statement are Metropolitan's Annual
Report on Form 10-K for the year ended March 31, 1996 and Quarterly Report on
Form 10-Q for the quarter ended June 30, 1996.
All documents and reports filed by Washington Federal and Metropolitan
pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to
the date hereof and prior to the Special Meeting also are hereby incorporated
herein by reference into this Prospectus/Proxy Statement and shall be deemed a
part hereof from the date of filing of such documents or reports. Any statement
contained herein, in any supplement hereto or in a document or report
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of the Registration Statement and this
Prospectus/Proxy Statement to the extent that a statement contained herein, in
any supplement hereto or in any subsequently filed document or report which also
is or is deemed to be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of the
Registration Statement, this Prospectus/Proxy Statement or any supplement
hereto.
3
<PAGE>
TABLE OF CONTENTS
PAGE
Available Information. . . . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Documents by Reference. . . . . . . . . . 3
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Market for Common Stock and Dividends. . . . . . . . . . . . . . . 14
Comparative Per Share Data . . . . . . . . . . . . . . . . . . . . 16
Selected Consolidated Financial Data of Washington Federal . . . . 18
Selected Consolidated Financial Data of Metropolitan . . . . . . . 20
Selected Pro Forma Consolidated Financial Data . . . . . . . . . . 22
General Information. . . . . . . . . . . . . . . . . . . . . . . . 24
The Special Meeting. . . . . . . . . . . . . . . . . . . . . . . . 24
Time and Place . . . . . . . . . . . . . . . . . . . . . . . . . 24
Matters to be Considered . . . . . . . . . . . . . . . . . . . . 24
Shares Outstanding and Entitled to Vote; Record Date . . . . . . 24
Vote Required. . . . . . . . . . . . . . . . . . . . . . . . . . 25
Voting and Revocation of Proxies . . . . . . . . . . . . . . . . 25
Solicitation of Proxies. . . . . . . . . . . . . . . . . . . . . 26
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Background of the Merger . . . . . . . . . . . . . . . . . . . . 27
Reasons for the Merger; Recommendation of the Mertropolitan Board 29
Opinion of Financial Advisor . . . . . . . . . . . . . . . . . . 31
Exchange of Metropolitan Common Stock Certificates . . . . . . . 36
Treatment of Metropolitan Stock Options. . . . . . . . . . . . . 37
Representations and Warranties . . . . . . . . . . . . . . . . . 37
Conditions to the Merger . . . . . . . . . . . . . . . . . . . . 38
Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . . 39
Business Pending the Merger. . . . . . . . . . . . . . . . . . . 40
No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . 43
Effective Time of the Merger; Termination and Amendment. . . . . 43
Interests of Certain Persons in the Merger . . . . . . . . . . . 45
Certain Employee Matters . . . . . . . . . . . . . . . . . . . . 47
Resale of Washington Federal Common Stock. . . . . . . . . . . . 47
Certain Federal Income Tax Consequences. . . . . . . . . . . . . 48
Accounting Treatment of the Merger . . . . . . . . . . . . . . . 50
Expenses of the Merger . . . . . . . . . . . . . . . . . . . . . 50
Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . 50
Stockholder Agreement. . . . . . . . . . . . . . . . . . . . . . 53
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . 54
Pro Forma Combined Consolidated Financial Information. . . . . . . 56
Description of Washington Federal Capital Stock. . . . . . . . . . 63
Washington Federal Common Stock. . . . . . . . . . . . . . . . . 64
Washington Federal Preferred Stock . . . . . . . . . . . . . . . 64
Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . 65
Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . 65
Comparison of the Rights of Shareholders . . . . . . . . . . . . . 66
Authorized Capital Stock . . . . . . . . . . . . . . . . . . . . 66
4
<PAGE>
Issuance of Capital Stock. . . . . . . . . . . . . . . . . . . . 66
Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . 67
Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . 67
Board of Directors . . . . . . . . . . . . . . . . . . . . . . . 67
Indemnification of Directors, Officers and Employees . . . . . . 68
Special Meetings of Shareholders . . . . . . . . . . . . . . . . 69
Shareholder Nominations. . . . . . . . . . . . . . . . . . . . . 69
Shareholder Proposals. . . . . . . . . . . . . . . . . . . . . . 70
Shareholder's Right to Examine Books and Records . . . . . . . . 70
Mergers, Consolidations and Sales of Assets. . . . . . . . . . . 71
Business Combinations with Certain Shareholders. . . . . . . . . 71
Dissenters' Rights of Appraisal. . . . . . . . . . . . . . . . . 71
Amendment of Governing Instruments . . . . . . . . . . . . . . . 72
Certain Beneficial Owners of Washington Federal Common Stock . . . 73
Security Ownership of Management . . . . . . . . . . . . . . . . 73
Security Ownership of Certain Beneficial Owners. . . . . . . . . 74
Certain Beneficial Owners of Metropolitan Common Stock . . . . . . 75
Security Ownership of Management . . . . . . . . . . . . . . . . 75
Security Ownership of Certain Beneficial Owners. . . . . . . . . 76
Legal Opinion. . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
Proposals for the 1997 Annual Meeting. . . . . . . . . . . . . . . 77
Annexes:
Annex I - Agreement and Plan of Merger, dated as of July 11, 1996, by and
between Washington Federal and Metropolitan, and an Agreement and
Plan of Merger, dated as of July 11, 1996, by and between
Washington Savings and Metropolitan Savings
Annex II - Stock Option Agreement, dated as of July 11, 1996, between
Metropolitan (as issuer) and Washington Federal (as grantee)
Annex III - Stockholder Agreement, dated as of July 11, 1996, among
Washington Federal and certain shareholders of Metropolitan
Annex IV - Opinion of Montgomery Securities
Annex V - Chapter 23B.13 of the Washington Business Corporation Act
5
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY OF CERTAIN INFORMATION CONTAINED ELSEWHERE IN THIS
PROSPECTUS/PROXY STATEMENT AND IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE
IS NOT INTENDED TO BE A COMPLETE STATEMENT OF THE MATTERS DESCRIBED HEREIN OR
THEREIN. REFERENCE IS MADE TO, AND THIS SUMMARY IS QUALIFIED IN ITS ENTIRETY
BY, THE MORE DETAILED INFORMATION CONTAINED ELSEWHERE IN THIS PROSPECTUS/PROXY
STATEMENT AND IN THE ANNEXES ATTACHED HERETO, INCLUDING THE AGREEMENT, A COPY OF
WHICH IS ATTACHED HERETO AS ANNEX I, AND THE INFORMATION INCORPORATED HEREIN BY
REFERENCE. SHAREHOLDERS ARE URGED TO CAREFULLY READ ALL SUCH INFORMATION.
THE SPECIAL MEETING
The Special Meeting will be held at __:__ _.m., Pacific Time, on _________
__, 1996, at _____________, Seattle, Washington. Only the holders of record of
outstanding shares of Metropolitan Common Stock at the close of business on
______ __, 1996 (the "Record Date") are entitled to notice of and to vote at the
Special Meeting and any adjournment or adjournments thereof. On the Record
Date, __________ shares of Metropolitan Common Stock were outstanding and
entitled to be voted at the Special Meeting.
At the Special Meeting, shareholders of Metropolitan will (i) consider and
vote upon a proposal to approve the Agreement, and (ii) consider and act upon
such other matters as may properly come before the Special Meeting. The
affirmative vote of the holders of two- thirds of the outstanding shares of
Metropolitan Common Stock, voting in person or by proxy, is necessary to approve
the Agreement on behalf of Metropolitan. Because approval of the Agreement will
be based on the number of shares outstanding, rather than the number of shares
voting, the failure to vote, either in person or by proxy, or the abstention
from voting, by a shareholder of Metropolitan will have the same effect as a
vote against the Agreement. Under applicable stock exchange rules, brokers who
hold shares in street name for customers are prohibited from giving a proxy to
vote such customers' shares with respect to approval of the Agreement in the
absence of specific instructions from such customers. Accordingly, such broker
"non-votes" also will have the same effect as votes against approval of the
Agreement.
As of the Record Date, the directors and executive officers of Metropolitan
and their affiliates in the aggregate beneficially owned _______ shares, or
___%, of the outstanding Metropolitan Common Stock. In connection with the
execution of the Agreement, Washington Federal and certain shareholders of
Metropolitan entered into an agreement pursuant to which, among other things,
such shareholders agreed to vote their shares of Metropolitan Common Stock
(which amount to ____% of the shares of such stock outstanding as of the Record
Date) in favor of the Agreement. See "Certain Beneficial Owners of Metropolitan
Common Stock" and "The Merger - Stockholder Agreement."
6
<PAGE>
PARTIES TO THE MERGER
WASHINGTON FEDERAL. Washington Federal is a Washington corporation and a
unitary savings and loan holding company registered under the Home Owners' Loan
Act, as amended (the "HOLA"). Washington Federal is the parent holding company
of Washington Federal Savings and Loan Association, a federally-chartered
savings and loan association ("Washington Savings"). Washington Savings
currently conducts business through 89 offices located in Washington, Idaho,
Oregon, Utah and Arizona. The deposits of Washington Savings are insured to the
maximum extent provided by law by the Savings Association Insurance Fund
("SAIF"), which is administered by the Federal Deposit Insurance Corporation
("FDIC"). The principal business of Washington Savings consists of attracting
retail deposits from the general public and using such deposits and other funds
to originate loans secured by first mortgage liens on existing single-family
(one-to-four units) residential properties. To a lesser extent, Washington
Savings originates loans secured by existing multi-family residential real
estate as well as residential construction loans. Washington Savings also
invests in U.S. Government and federal agency obligations, municipal obligations
and mortgage-backed securities which are insured or guaranteed by federal
agencies. Washington Federal's principal executive offices are located at 425
Pike Street, Seattle, Washington 98101-2334, and its telephone number is (206)
624-7930. At June 30, 1996, Washington Federal had, on a consolidated basis,
total assets of $5.0 billion, total liabilities of $4.4 billion, including
deposits of $2.5 billion, and stockholders' equity of $597.5 million.
For additional information concerning Washington Federal, its business,
financial condition and results of operations, see "Available Information,"
"Incorporation of Certain Documents by Reference" and "Selected Consolidated
Financial Data of Washington Federal."
METROPOLITAN. Metropolitan is a Washington corporation and a unitary
savings and loan holding company registered under the HOLA. Metropolitan is the
parent holding company of Metropolitan Federal Savings and Loan Association of
Seattle, a federally-chartered savings and loan association ("Metropolitan
Savings"). Metropolitan Savings currently conducts business through ten full-
service offices located in the Seattle, Washington metropolitan area. The
deposits of Metropolitan Savings are insured to the maximum extent provided by
law by the SAIF and the Bank Insurance Fund ("BIF"), which are both administered
by the FDIC. The principal business of Metropolitan Savings consists of
attracting retail deposits from the general public and using such deposits and
other funds to originate loans secured by first mortgage liens on existing
single-family residential properties. To a lesser extent, Metropolitan Savings
originates loans secured by existing multi-family residential and commercial
real estate as well as construction and consumer and other loans. Metropolitan
Savings also invests in U.S. Government and federal agency obligations and
mortgage-backed and related securities. Metropolitan's principal executive
offices are located at 1520 4th Avenue, Seattle, Washington 98101-1648, and its
telephone number is (206) 625-1818. At June 30, 1996, Metropolitan had, on a
consolidated basis,
7
<PAGE>
total assets of $761.0 million, total liabilities of $709.8 million, including
deposits of $424.0 million, and stockholders' equity of $51.2 million.
For additional information concerning Metropolitan, its business, financial
condition and results of operations, see "Available Information," "Incorporation
of Certain Documents by Reference" and "Selected Consolidated Financial Data of
Metropolitan."
THE MERGER AND THE BANK MERGER
In accordance with the terms of and subject to the conditions set forth in
the Agreement, Metropolitan will be merged with and into Washington Federal,
with Washington Federal as the surviving corporation of the Merger. The
Agreement provides that at the effective time of the Merger, each outstanding
share of Metropolitan Common Stock (other than (i) any dissenting shares under
the Washington Business Corporation Act (the "WBCA") and (ii) any shares held by
Washington Federal or a subsidiary thereof other than in a fiduciary capacity or
in satisfaction of a debt previously contracted) will be converted into the
right to receive, subject to possible adjustment under certain circumstances, a
number of shares of Washington Federal Common Stock (the "Merger Consideration")
which will be determined by applying an Exchange Ratio, calculated in the manner
set forth in the Agreement and described herein. If, over the Pricing Period,
the Average Washington Federal Price is equal to or greater than $18.00 but
equal to or less than $24.50, shareholders of Metropolitan will receive for each
share of Metropolitan Common Stock that number of shares of Washington Federal
Common Stock equal to the ratio determined by dividing $18.00 by the Average
Washington Federal Price (calculated to the nearest one-thousandth). If the
Average Washington Federal Price is greater than $24.50, shareholders of
Metropolitan will receive 0.735 shares of Washington Federal Common Stock for
each share of Metropolitan Common Stock, while if the Average Washington Federal
Price is less than $18.00, they will receive one share of Washington Federal
Common Stock for each share of Metropolitan Common Stock. See "The Merger."
If the Average Washington Federal Price 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 will have the right to adjust the Exchange Ratio to the
number obtained by dividing $17.00 by such Average Washington Federal Price
(calculated to the nearest one-thousandth), in which case the Agreement will not
be terminated.
No fractional shares of Washington Federal Common Stock will be issued in
the Merger. In lieu thereof, each holder of shares of Metropolitan Common Stock
entitled to a fraction of a share of Washington Federal Common Stock shall be
entitled to receive an amount of cash determined by multiplying such holder's
fractional interest by the Average Washington Federal Price. See "The Merger."
8
<PAGE>
In connection with the execution of the Agreement, Washington Savings and
Metropolitan Savings entered into an Agreement and Plan of Merger, dated as of
July 11, 1996 (the "Bank Agreement"). The Bank Agreement sets forth the terms
and conditions, which conditions include consummation of the Merger, pursuant to
which Metropolitan Savings will merge with and into Washington Savings
substantially concurrently with the Merger (the "Bank Merger").
RECOMMENDATION OF THE BOARD OF DIRECTORS OF METROPOLITAN
The Board of Directors of Metropolitan (the "Metropolitan Board") has
determined the Merger to be fair to and in the best interests of Metropolitan
and its shareholders and has approved the Agreement and the transactions
contemplated thereby, including the Merger. ACCORDINGLY, THE METROPOLITAN BOARD
RECOMMENDS THAT SHAREHOLDERS OF METROPOLITAN VOTE "FOR" APPROVAL OF THE
AGREEMENT.
See "The Merger - Reasons for the Merger; Recommendation of the Board of
Directors."
OPINION OF FINANCIAL ADVISOR
Montgomery Securities ("Montgomery"), Metropolitan's financial advisor, has
delivered to the Metropolitan Board its written opinion of July 11, 1996, to the
effect that, as of the date of such opinion, the Merger Consideration to be
received by shareholders of Metropolitan pursuant to the Merger was fair, from a
financial point of view, to such shareholders.
For information on the assumptions made, matters considered and limits of
the review by Montgomery, see "The Merger - Opinion of Financial Advisor."
Shareholders are urged to read in its entirety the opinion of Montgomery, which
is attached as Annex IV to this Prospectus/Proxy Statement.
REGULATORY APPROVALS
Consummation of the Merger is subject to the prior receipt of all required
approvals of and consents to the Merger and the Bank Merger by all applicable
federal and state regulatory authorities, including the Office of Thrift
Supervision ("OTS"). Applications have been filed with the OTS for approval of
the Merger and the Bank Merger. There can be no assurance that the necessary
regulatory approvals will be obtained or as to the timing or conditions of such
approvals. See "The Merger - Regulatory Approvals."
9
<PAGE>
CONDITIONS TO THE MERGER
The obligations of Washington Federal and Metropolitan to consummate the
Merger are subject to, among other things, the following conditions: (i) the
Agreement shall have been approved by the requisite vote of the shareholders of
Metropolitan; (ii) all necessary regulatory approvals pertaining to the Merger
and the Bank Merger, without restrictions or conditions which would materially
impair the value of Metropolitan to Washington Federal, shall have been
received; (iii) no court or governmental or regulatory authority shall have
taken any action which prohibits, restricts or makes illegal the Merger, the
Bank Merger or any of the other transactions contemplated thereby; (iv) the
Registration Statement shall be effective; (v) the shares of Washington Federal
Common Stock to be issued in connection with the Merger shall have been approved
for quotation on NASDAQ; and (vi) each of Washington Federal and Metropolitan
shall have received a legal opinion with respect to certain income tax
considerations under the Internal Revenue Code of 1986, as amended (the "Code").
In addition, the obligation of each of Washington Federal and Metropolitan to
consummate the Merger is subject to the accuracy of the other party's
representations and warranties as of certain dates, the performance by the other
party of its obligations under the Agreement in all material respects and the
other party's delivery of an officer's certificate covering certain matters.
Furthermore, the obligation of Washington Federal to consummate the Merger is
subject to (i) a requirement that any dissenting shares of Metropolitan Common
Stock under Washington law constitute not more than 10% of the outstanding
shares of Metropolitan Common Stock prior to the Effective Time (as defined
below); (ii) Metropolitan's completion of the distribution of not less than 81%
of the common stock of Phoenix Mortgage & Investment, Inc. (the "Mortgage
Company"), a Washington corporation and wholly owned subsidiary of Metropolitan,
and the related redemption of shares of Metropolitan Common Stock pursuant to
the terms of a Stock Redemption Agreement, dated as of July 11, 1996 (the "Stock
Redemption Agreement"); (iii) Metropolitan not having to establish provisions
for loan losses or write-downs with respect to real estate owned in excess of,
in the aggregate, $1.0 million; and (iv) Metropolitan not incurring, in the
aggregate, $15.0 million or more of realized and/or unrealized losses (net of
realized and/or unrealized gains) with respect to Metropolitan's investment and
mortgage-backed securities portfolios. See "The Merger - Conditions to the
Merger." Substantially all of the conditions to consummation of the Merger
(except for required shareholder and regulatory approvals, effectiveness of the
Registration Statement, approval of listing on NASDAQ of the Washington Federal
Common Stock to be issued in connection with the Merger, and the receipt of the
legal opinion with respect to certain income tax considerations) may be waived
at any time by the party for whose benefit they were created, and the Agreement
may be amended at any time by written agreement of the parties, except that no
waiver or amendment occurring after approval of the Agreement by the
shareholders of Metropolitan shall change the amount or form of the
consideration which Metropolitan's shareholders are entitled to receive in the
Merger.
10
<PAGE>
EFFECTIVE TIME OF THE MERGER
The Merger shall become effective upon the filing of articles of merger
with the Secretary of State of the State of Washington, unless a later date and
time are specified as the effective time in such articles of merger (the
"Effective Time"). The articles of merger will be filed only after the receipt
of all requisite regulatory approvals of the Merger and the Bank Merger,
approval of the Agreement by the requisite vote of the shareholders of
Metropolitan and the satisfaction or waiver of all other conditions to the
Merger set forth in the Agreement.
TERMINATION; POSSIBLE ADJUSTMENT OF EXCHANGE RATIO
The Agreement may be terminated, either before or after approval by
shareholders of Metropolitan, under certain circumstances, including without
limitation if the Merger is not consummated on or before July 11, 1997. In
addition, if the Average Washington Federal Price 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 will have the right to adjust the Exchange Ratio to an amount
equal to a number obtained by dividing $17.00 by the Average Washington Federal
Price, in which case the Agreement will not be terminated. See "The Merger -
Effective Time of the Merger; Termination and Amendment."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Metropolitan and Washington Federal have received an opinion from Elias,
Matz, Tiernan & Herrick L.L.P. to the effect that, assuming the Merger is
consummated, a Metropolitan shareholder who receives shares of Washington
Federal Common Stock in exchange for shares of Metropolitan Common Stock upon
consummation of the Merger will recognize no gain or loss as a result of the
Merger, except in respect of cash received in lieu of a fractional share
interest. For a description of these and additional federal income tax
consequences of the Merger, including the federal income tax consequences of
exercising dissenters' rights and receiving cash in lieu of any fractional share
interest in Washington Federal Common Stock, see "The Merger - Certain Federal
Income Tax Consequences."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH METROPOLITAN SHAREHOLDER, EACH SUCH SHAREHOLDER
IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR CONCERNING THE FEDERAL AND ANY
APPLICABLE FOREIGN, STATE AND LOCAL INCOME TAX AND OTHER TAX CONSEQUENCES OF THE
MERGER IN HIS OR HER PARTICULAR CIRCUMSTANCES.
11
<PAGE>
ACCOUNTING TREATMENT OF THE MERGER
Washington Federal intends to account for the Merger under the purchase
method for accounting and financial reporting purposes. See "The Merger -
Accounting Treatment of the Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Pursuant to the Agreement, Washington Federal agreed (i) with respect to
certain employees of Metropolitan or its subsidiaries, to provide specified
severance payments to any such employee if the employee (A) becomes an employee
of Washington Federal and/or its subsidiaries and his or her employment is
involuntarily terminated for other than cause or (B) is offered employment with
Washington Federal and/or its subsidiaries at less than the employee's current
compensation or contingent upon relocating more than 30 miles and such employee
does not accept such offer and voluntarily resigns; and (ii) to continue rights
to indemnification for present and former directors, officers and employees of
Metropolitan and its subsidiaries for a specified period. In addition, one of
the conditions to Washington Federal's obligations to consummate the Merger is
the distribution of at least 81% of the common stock of the Mortgage Company, a
subsidiary of Metropolitan, to John H. Fairchild, the Chief Executive Officer of
the Mortgage Company, and Sheryl J. Nilson, the Chief Operating Officer of the
Mortgage Company, and the related redemption by Metropolitan of shares of
Metropolitan Common Stock held by Mr. Fairchild and Ms. Nilson pursuant to the
Stock Redemption Agreement. Mr. Fairchild is a director of Metropolitan.
Furthermore, although not required pursuant to the Agreement, it is currently
contemplated that Patrick F. Patrick, the President and Chief Executive Officer
of Metropolitan, will become an Executive Vice President of Washington Federal.
Other than as set forth above, no director or executive officer of Metropolitan
has any direct or indirect material interest in the Merger, except insofar as
ownership of Metropolitan Common Stock and options to acquire Metropolitan
Common Stock might be deemed such an interest. See "The Merger - Interests of
Certain Persons in the Merger."
DESCRIPTION OF WASHINGTON FEDERAL COMMON STOCK
Subject to the rights of the holders of any class of preferred stock of
Washington Federal if and when outstanding, the holders of Washington Federal
Common Stock possess exclusive voting rights in Washington Federal, are entitled
to such dividends as may be declared from time to time by the Board of Directors
of Washington Federal and would be entitled to receive all assets of Washington
Federal available for distribution in the event of any liquidation, dissolution
or winding up of Washington Federal. Holders of Washington Federal Common Stock
do not have any preemptive rights with respect to any shares which may be issued
by Washington Federal in the future. Upon receipt by Washington Federal of
certificates evidencing the shares of Metropolitan Common Stock surrendered in
exchange for Washington Federal Common Stock pursuant to the Merger, each share
of
12
<PAGE>
Washington Federal Common Stock offered hereby will be fully paid and
nonassessable. See "Description of Washington Federal Capital Stock."
DIFFERENCES IN SHAREHOLDERS' RIGHTS
Upon consummation of the Merger, shareholders of Metropolitan will become
shareholders of Washington Federal and their rights as shareholders of
Washington Federal will be governed by Washington Federal's Restated Articles of
Incorporation and Bylaws and the WBCA. The rights of shareholders of Washington
Federal differ in certain respects from the rights of shareholders of
Metropolitan. See "Comparison of the Rights of Shareholders."
RESALE OF WASHINGTON FEDERAL COMMON STOCK
The shares of Washington Federal Common Stock to be issued in connection
with the Merger will be freely tradeable by the holders of such shares, except
for those shares held by persons who may be deemed to be "affiliates" of
Washington Federal or Metropolitan under applicable federal securities laws.
See "The Merger - Resale of Washington Federal Common Stock."
STOCK OPTION AGREEMENT
As an inducement and a condition to Washington Federal's entering into the
Agreement, Washington Federal and Metropolitan also entered into a Stock Option
Agreement, dated as of July 11, 1996 (the "Stock Option Agreement"), pursuant to
which Metropolitan granted Washington Federal an option (the "Option") to
purchase, upon the occurrence of certain events (none of which has occurred as
of the date hereof to the best of the knowledge of Washington Federal and
Metropolitan), up to 657,000 shares of Metropolitan Common Stock, currently
representing 17.7% of the outstanding shares of Metropolitan Common Stock, at a
price of $13.50 per share, subject to adjustment in certain circumstances and
termination within certain periods. The Stock Option Agreement is intended to
increase the likelihood that the Merger will be consummated in accordance with
the terms of the Agreement and may have the effect of discouraging competing
offers to the Merger. A copy of the Stock Option Agreement is included as Annex
II to this Prospectus/ Proxy Statement and reference is made thereto for the
complete terms thereof. See "The Merger - Stock Option Agreement."
STOCKHOLDER AGREEMENT
In connection with the execution of the Agreement, Washington Federal
entered into a Stockholder Agreement, dated as of July 11, 1996, with certain of
the directors and senior executive officers of Metropolitan and Metropolitan
Savings in their capacities as shareholders of Metropolitan. Pursuant to the
Stockholder Agreement, a copy of which is
13
<PAGE>
included as Annex III hereto, each of such shareholders agreed, among other
things, to vote his or her shares of Metropolitan Common Stock in favor of the
Agreement. See "The Merger - Stockholder Agreement."
DISSENTERS' RIGHTS
Under Washington law, holders of Metropolitan Common Stock have the right
to dissent from the Merger and, if the Merger is consummated and all
requirements of Washington law are satisfied by holders seeking to exercise
dissenters' rights, to receive payment equal to the fair value of their shares
of Metropolitan Common Stock. The procedures which must be followed in
connection with the exercise of dissenters' rights by dissenting shareholders
are described herein under "The Merger - Dissenters' Rights" and in Chapter
23B.13 of the WBCA, a copy of which is attached as Annex V to this
Prospectus/Proxy Statement. Failure to take any required step in connection
with the exercise of such rights may result in termination or waiver thereof.
MARKET FOR COMMON STOCK AND DIVIDENDS
Each of the Washington Federal Common Stock and the Metropolitan Common
Stock is traded on NASDAQ under the symbol "WFSL" and "MSEA," respectively.
Application will be made to list the Washington Federal Common Stock to be
issued in connection with the Merger on NASDAQ. As of the Record Date, there
were __________ shares of Washington Federal Common Stock outstanding, which
were held by approximately _____ shareholders of record, and there were
_________ shares of Metropolitan Common Stock outstanding, which were held by
approximately ___ shareholders of record. Such numbers of shareholders do not
reflect the number of individuals or institutional investors holding stock in
nominee name through banks, brokerage firms and others.
14
<PAGE>
The following table sets forth during the periods indicated the high and
low prices of the Washington Federal Common Stock and the Metropolitan Common
Stock as reported on NASDAQ and the dividends declared per share of Washington
Federal Common Stock and Metropolitan Common Stock.
<TABLE>
<CAPTION>
Washington Federal(1) Metropolitan(1)
---------------------------------- --------------------------------
Market Price Dividends Market Price Dividends
----------------- Declared ---------------- Declared
1996 High Low Per Share High Low Per Share
- ---------------------------------- -------- ------- -------------- -------- ------ -------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter $23.52 $20.68 $ .22 $14.50 $12.00 $ --
Second Quarter 22.125 20.25 .23 15.063 13.00 --
Third Quarter (through
August 19) 22.375 19.25 -- 17.25 13.375 --
1995
- ----------------------------------
First Quarter 18.75 15.68 .20 9.75 7.75 --
Second Quarter 22.16 17.73 .21 11.75 8.00 --
Third Quarter 21.93 19.09 .21 12.50 9.875 --
Fourth Quarter 23.75 20.14 .22 13.625 11.50 --
1994
- ----------------------------------
First Quarter 21.70 19.09 .18 14.318 11.136 --
Second Quarter 20.68 18.64 .19 13.636 11.591 --
Third Quarter 20.00 17.84 .19 13.406 10.125 --
Fourth Quarter 18.64 15.00 .20 11.00 7.25 --
</TABLE>
- ----------------------------------
(1) Amounts have been adjusted to reflect prior stock splits and/or stock
dividends.
15
<PAGE>
Set forth below is information regarding the price per share of Washington
Federal Common Stock and Metropolitan Common Stock on July 11, 1996, the last
trading day preceding public announcement of the Agreement. The historical
prices are as reported on NASDAQ.
Historical Market
Value Per Share
-----------------------
Equivalent Market Value
Washington Per Share of
Date Federal Metropolitan Metropolitan(1)
- ------------- ------------ ------------------ --------------------------
July 11, 1996 $20.0625 $13.375 $16.99
- --------------
(1) Equivalent market value per share of Metropolitan Common Stock represents
the historical market value per share of Washington Federal Common Stock
multiplied by an assumed Exchange Ratio of 0.847 shares.
Shareholders are advised to obtain current market quotations for the
Washington Federal Common Stock and the Metropolitan Common Stock. The market
price of the Washington Federal Common Stock at the Effective Time may be higher
or lower than the market price at the time the Agreement was executed, at the
date of mailing of this Prospectus/Proxy Statement or at the time of the Special
Meeting.
COMPARATIVE PER SHARE DATA
The following table sets forth certain historical per share, pro forma
combined per share and pro forma equivalent per share information with respect
to the Washington Federal Common Stock and the Metropolitan Common Stock at the
dates and for the periods indicated, giving effect to the Merger using the
purchase method of accounting, assuming an Exchange Ratio of 0.847 shares in the
Merger and assuming that none of the outstanding options to purchase
Metropolitan Common Stock are exercised. See "The Merger - Accounting Treatment
of the Merger" and "Pro Forma Combined Consolidated Financial Information."
The selected per share data set forth below should be read in conjunction
with, and is qualified in its entirety by, the historical consolidated financial
statements of Washington Federal and Metropolitan, including the related notes,
incorporated herein by reference and the unaudited pro forma combined
consolidated financial information appearing elsewhere herein. See "Available
Information," "Incorporation of Certain Documents by Reference"
16
<PAGE>
and "Pro Forma Combined Consolidated Financial Information." The data set forth
below is not necessarily indicative of the results of the future operations of
Washington Federal upon consummation of the Merger or the actual results that
would have been achieved had the Merger been consummated prior to the periods
indicated.
<TABLE>
<CAPTION>
Washington Federal
Common Stock Metropolitan Common Stock
--------------------------- --------------------------------
Pro Forma Pro Forma
Historical Combined(1) Historical(2) Equivalent(3)
------------ ------------ --------------- --------------
<S> <C> <C> <C> <C>
Net income per share:
Nine months ended June 30, 1996 $1.53 $1.52 $1.22 $1.29
Year ended September 30, 1995 1.79 1.78 .91 1.51
Dividends declared per share:
Nine months ended June 30, 1996 .67 .62 -- .53
Year ended September 30, 1995 .82 .76 -- .65
Book value per share:
June 30, 1996 14.14 14.45 13.79 12.24
September 30, 1995 13.47 13.74 13.34 11.64
Tangible book value per share:
June 30, 1996 13.47 13.47 12.51 11.41
September 30, 1995 12.74 12.71 11.99 10.77
</TABLE>
- --------------
(1) Reflects (i) estimated purchase accounting adjustments to be recorded in
connection with the Merger, consisting of mark-to-market valuation
adjustments for significant tangible net assets acquired and adjustments
for intangible assets established, and the resultant amortization/accretion
of all such adjustments over appropriate future periods, and (ii) an
assumed Exchange Ratio of 0.847 shares.
(2) Washington Federal's fiscal year end is September 30 while Metropolitan's
fiscal year end is March 31. For purposes of the table above, Metropolitan
financial data is presented consistent with the fiscal year end of
Washington Federal.
(3) Represents the Washington Federal pro forma combined amounts multiplied by
an assumed Exchange Ratio of 0.847 shares.
17
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF WASHINGTON FEDERAL
(Dollars in Thousands, Except Per Share Data)
The following selected historical consolidated financial data for the five
years ended September 30, 1995 is derived in part from the audited consolidated
financial statements of Washington Federal. The historical consolidated
financial data for the nine months ended June 30, 1996 and 1995 is derived from
unaudited consolidated financial statements. The unaudited consolidated
financial statements include all adjustments, consisting of normal recurring
accruals, which Washington Federal considers necessary for a fair presentation
of the financial position and the results of operations for these periods.
Operating results for the nine months ended June 30, 1996 are not necessarily
indicative of the results that may be expected for any other interim period or
the entire year ending September 30, 1996. The selected consolidated financial
data set forth below should be read in conjunction with, and is qualified in its
entirety by, the consolidated financial statements of Washington Federal,
including the related notes, incorporated herein by reference. See "Available
Information" and "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
June 30, September 30,
------------------------------------------------------------------------
BALANCE SHEET DATA: 1996 1995 1994 1993 1992 1991
-------------- ------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Total assets $5,040,588 $4,577,402 $3,830,053 $3,159,267 $2,791,693 $2,785,074
Investment securities held-to-
maturity 40,288 44,845 195,165 168,847 220,903 173,027
Investment securities available-for-
sale 273,070 211,816 -- -- -- --
Mortgage-backed securities held-to-
maturity 629,051 931,045 979,918 600,815 548,832 567,720
Mortgage-backed securities
available-for-sale 251,655 149,809 -- -- -- --
Loans receivable, net 3,627,022 3,034,027 2,420,665 2,175,126 1,852,709 1,867,641
Costs in excess of net assets
acquired 28,344 31,002 34,346 37,461 22,055 23,536
Customer accounts 2,498,347 2,445,335 2,281,751 2,216,381 1,853,541 1,708,560
FHLB advances 1,063,500 527,000 310,100 336,000 393,500 228,000
Other borrowings 809,834 957,087 624,604 60,000 60,000 419,513
Stockholders' equity 597,495 575,929 546,773 486,183 424,116 368,353
Nonperforming assets(1) 43,493 37,870 24,597 29,310 27,306 36,508
Allowance for loan losses 13,366 11,651 11,720 14,674 16,896 18,278
Book value per share 14.14 13.47 12.47 11.11 9.72 8.47
Tangible book value per share 13.47 12.74 11.69 10.26 9.21 7.93
</TABLE>
<TABLE>
<CAPTION>
Nine Months Ended
June 30, Year Ended September 30,
------------------------ ----------------------------------------------------------------
OPERATIONS DATA: 1996 1995 1995 1994 1993 1992 1991
--------- ---------- ---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $299,916 $251,297 $343,766 $287,577 $275,345 $271,693 $270,712
Interest expense 171,374 133,684 188,253 121,114 116,677 133,537 160,454
-------- -------- -------- -------- -------- -------- --------
Net interest income 128,542 117,613 155,513 166,463 158,668 138,156 110,258
Provision for loan losses 2,060 1,306 6,245 401 2,731 179 105
-------- -------- -------- -------- -------- -------- --------
Net interest income after
provision for loan losses 126,482 116,307 149,268 166,062 155,937 137,977 110,153
Other income 4,817 3,826 9,704 8,359 12,852 4,963 10,218
Other expense 27,964 27,240 35,883 32,034 29,656 26,589 26,113
-------- -------- -------- -------- -------- -------- --------
Net income before income
taxes and extraordinary loss 103,335 92,893 123,089 142,387 139,133 116,351 94,258
Income taxes 37,802 34,013 44,746 49,600 45,843 34,415 24,923
Extraordinary loss, net of income
tax benefit -- -- -- -- (2,122) -- --
-------- -------- -------- -------- -------- -------- --------
Net income $ 65,533 $ 58,880 $ 78,343 $ 92,787 $ 91,168 $ 81,936 $ 69,335
-------- -------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- -------- --------
Net income per share $ 1.53 $ 1.34 $ 1.79 $ 2.11 $ 2.06 $ 1.86 $ 1.58
Dividends per share $ .67 $ .61 $ 0.82 $ 0.75 $ 0.68 $ 0.62 $ 0.54
Weighted average number of
shares outstanding 42,941,858 43,923,028 43,760,638 44,084,622 44,104,047 44,040,985 43,858,692
</TABLE>
18
<PAGE>
<TABLE>
<CAPTION>
At or For the
Nine Months Ended
June 30, At or For the Year Ended September 30,
------------------------ ----------------------------------------------------------------
OTHER DATA(2): 1996 1995 1995 1994 1993 1992 1991
--------- ---------- ---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets 1.80% 1.92% 1.87% 2.70% 3.01% 2.94% 2.59%
Return on average equity 15.12 14.11 13.99 18.19 20.39 21.07 20.58
Average equity to average
assets 11.98 13.70 13.41 15.05 15.03 14.22 12.81
Interest rate spread(3) 3.07 3.35 3.17 4.45 4.81 4.52 3.61
Net interest margin(3) 3.67 3.63 3.84 5.06 5.45 5.30 4.41
Dividend payout ratio 43.79 45.52 45.69 35.34 32.80 33.06 34.18
Nonperforming loans as a percent
of total loans at end of period(1) .75 .64 .74 .92 1.26 1.25 1.68
Nonperforming assets as a percent
of total assets at end of period(1) .86 .47 .83 .64 .93 .98 1.31
Allowance for loan losses as a
percent of nonperforming loans
at end of period 49.45 73.37 51.61 52.60 53.61 73.07 58.32
Banking offices 89 85 87 82 74 63 64
</TABLE>
- --------------
(1) Nonperforming assets consist of nonperforming loans and real estate
acquired by foreclosure or deed in lieu thereof. Nonperforming loans
consist of non-accrual loans, accruing loans 90 days or more overdue and
troubled debt restructurings.
(2) With the exception of end of period ratios, all ratios are based on average
daily balances during the indicated periods and are annualized where
appropriate.
(3) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of interest-
bearing liabilities, and net interest margin represents net interest income
as a percent of average interest-earning assets, in each case calculated on
a fully-taxable equivalent basis.
19
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA OF METROPOLITAN
(Dollars in Thousands, Except Per Share Data)
The following selected historical consolidated financial data for the five
years ended March 31, 1996 is derived in part from the audited consolidated
financial statements of Metropolitan. The historical consolidated financial
data for the three months ended June 30, 1996 and 1995 is derived from unaudited
consolidated financial statements. The unaudited consolidated financial
statements include all adjustments, consisting of normal recurring accruals,
which Metropolitan considers necessary for a fair presentation of the financial
position and the results of operations for these periods. Operating results for
the three months ended June 30, 1996 are not necessarily indicative of the
results that may be expected for any other interim period or the entire year
ending March 31, 1997. The selected historical consolidated financial data set
forth below should be read in conjunction with, and is qualified in its entirety
by, the historical consolidated financial statements of Metropolitan, including
the related notes, incorporated herein by reference. See "Available
Information" and "Incorporation of Certain Documents by Reference."
<TABLE>
<CAPTION>
June 30, March 31,
------------------------------------------------------------------------
BALANCE SHEET DATA: 1996 1996 1995 1994 1993 1992
-------------- ------------- ------------ -------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Total assets $761,014 $778,165 $692,217 $632,648 $507,990 $380,320
Investment securities held-to-
maturity -- -- -- -- -- 18,671
Investment securities available-for-
sale 10,425 10,397 15,203 15,484 20,589 --
Mortgage-backed securities held-
to-maturity 165,517 171,008 191,050 298,380 137,694 42,690
Mortgage-backed securities
available-for-sale 189,290 192,240 82,829 12,433 27,138 --
Loans receivable, net 341,700 342,449 350,042 268,292 288,973 293,453
Costs in excess of net assets
acquired 4,764 4,856 5,373 407 -- --
Customer accounts 424,031 398,153 414,880 366,310 307,323 269,476
FHLB advances 193,000 219,474 206,394 192,750 150,520 70,300
Other borrowings 87,704 104,345 22,009 21,968 4,685 --
Stockholders' equity 51,166 50,882 42,095 46,645 39,834 33,822
Nonperforming assets(1) 4,212 4,564 1,721 11,103 15,122 10,587
Allowance for loan losses 6,283 6,133 6,036 5,776 5,632 5,665
Book value per share 13.79 13.71 11.33 12.92 11.10 9.44
Tangible book value per share 12.51 12.41 9.88 12.80 11.10 9.44
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
June 30, Year Ended March 31,
------------------------ ----------------------------------------------------------------
OPERATIONS DATA: 1996 1995 1996 1995 1994 1993 1992
--------- ---------- ---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Interest income $14,217 $12,890 $53,531 $45,878 $39,842 $34,553 $32,439
Interest expense 9,639 9,093 37,599 30,693 24,390 20,139 21,943
--------- ---------- ---------- ----------- ---------- --------- ----------
Net interest income 4,578 3,797 15,932 15,185 15,452 14,414 10,496
Provision (recovery) for
loan losses 150 -- 129 560 340 749 (127)
--------- ---------- ---------- ----------- ---------- --------- ----------
Net interest income after
provision (recovery) for
loan losses 4,428 3,797 15,803 14,625 15,112 13,665 10,623
Other income 1,551 1,288 5,460 4,036 1,992 2,464 521
Other expense 3,495 3,499 12,890 14,108 7,755 8,562 8,250
--------- ---------- ---------- ----------- ---------- --------- ----------
Income before income taxes,
extraordinary item and
cumulative effect of change
in accounting principle 2,484 1,586 8,373 4,553 9,349 7,567 2,894
Income taxes 845 539 2,808 1,447 3,106 2,691 977
--------- ---------- ---------- ----------- ---------- --------- ----------
Income before extraordinary
item and cumulative effect of a
change in accounting principle 1,639 1,047 5,565 3,106 6,243 4,876 1,917
Extraordinary item, net of
income taxes -- -- (413) -- -- 1,070 910
Cumulative effect of a change
in accounting principle -- -- -- -- 408 -- --
--------- ---------- ---------- ----------- ---------- --------- ----------
Net income $ 1,639 $ 1,047 $ 5,152 $ 3,106 $ 6,651 $ 5,946 $ 2,827
--------- ---------- ---------- ----------- ---------- --------- ----------
--------- ---------- ---------- ----------- ---------- --------- ----------
Net income per share $ .44 $ .28 $ 1.39 $ 0.82 $ 1.85 $ 1.65 $ 1.27
Weighted average number of
shares outstanding 3,714,749 3,723,409 3,716,739 3,781,522 3,601,432 3,586,804 2,222,413
</TABLE>
20
<PAGE>
<TABLE>
<CAPTION>
At or For the
Three Months Ended
June 30, At or For the Year Ended March 31,
------------------------ ----------------------------------------------------------------
OTHER DATA(2): 1996 1995 1996 1995 1994 1993 1992
--------- ---------- ---------- ----------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Return on average assets(3) .85% .60% .77% .47% 1.07% 1.06% .53%
Return on average equity(3) 12.76 9.58 11.54 6.99 14.42 13.22 9.12
Average equity to average
assets 6.66 6.27 6.71 6.76 7.44 8.03 5.83
Interest rate spread(4) 2.14 1.99 1.97 2.24 2.59 3.05 2.90
Net interest margin(4) 2.43 2.24 2.27 2.41 2.78 3.14 2.91
Nonperforming loans as a percent
of total loans at end of period(1) 1.09 .53 1.18 .47 1.63 2.13 .89
Nonperforming assets as a percent
of total assets at end of period(1) .55 .27 .59 .25 1.76 2.98 2.78
Allowance for loan losses as a
percent of nonperforming loans
at end of period 161.02 313.40 144.17 350.73 124.64 88.08 209.97
Banking offices 10 10 10 10 11 7 6
</TABLE>
- --------------
(1) Nonperforming assets consist of nonperforming loans and real estate
acquired by foreclosure or deed in lieu thereof. Nonperforming loans
consist of non-accrual loans, accruing loans 90 days or more overdue and
troubled debt restructurings.
(2) With the exception of end-of-period ratios, all ratios are based on average
daily balances during the indicated periods and are annualized where
appropriate.
(3) Before extraordinary items and cumulative effect of a change in accounting
principle.
(4) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of interest-
bearing liabilities, and net interest margin represents net interest income
as a percent of average interest-earning assets, in each case calculated on
a fully taxable equivalent basis.
21
<PAGE>
SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
(Dollars in Thousands, Except Per Share Data)
The following table sets forth unaudited selected pro forma consolidated
financial data of Washington Federal and Metropolitan at the dates and for the
periods indicated, giving effect to the Merger using the purchase method of
accounting and assuming an Exchange Ratio of 0.847 shares in the Merger. See
"The Merger - Accounting Treatment of the Merger" and "Pro Forma Combined
Consolidated Financial Information."
The selected pro forma consolidated financial data set forth below should
be read in conjunction with, and is qualified in its entirety by, the historical
consolidated financial statements of Washington Federal and Metropolitan,
including the related notes, incorporated by reference herein and the other
unaudited pro forma combined condensed consolidated financial information
appearing elsewhere herein. See "Available Information," "Incorporation of
Certain Documents by Reference" and "Pro Forma Combined Consolidated Financial
Information." The data set forth below is not necessarily indicative of the
results of the future operations of Washington Federal upon consummation of the
Merger or the actual results that would have been achieved had the Merger been
consummated prior to the periods indicated.
June 30,
BALANCE SHEET DATA: 1996
----------
Total assets $5,809,337
Investment securities held-to-maturity 40,288
Investment securities available-for-sale 284,041
Mortgage-backed securities held-to-
maturity 794,568
Mortgage-backed securities available-
for-sale 440,945
Loans receivable, net 3,977,677
Costs in excess of net assets acquired 44,045
Customer accounts 2,922,195
FHLB advances 1,256,500
Other borrowings 897,538
Stockholders' equity 650,458
Nonperforming assets(1) 47,705
Allowance for loan losses 19,649
Book value per share 14.45
Tangible book value per share 13.47
Weighted average number of shares
outstanding 45,704,072
22
<PAGE>
<TABLE>
<CAPTION>
OPERATIONS DATE: Nine Months Ended Year Ended
June 30, 1996 September 30, 1995
----------------- ------------------
<S> <C> <C>
Interest income $341,240 $394,515
Interest expense 199,953 223,531
----------- -----------
Net interest income 141,287 170,984
Provision for loan losses 2,339 6,770
----------- -----------
Net interest income after
provision for loan losses 138,948 164,214
Other income 6,524 11,118
Other expense 35,559 45,686
----------- -----------
Net income before income taxes and
extraordinary item 109,913 129,646
Income taxes 40,266 47,229
Extraordinary item, net of tax (413) --
----------- -----------
Net income $ 69,234 $ 82,417
----------- -----------
----------- -----------
Net income per share $ 1.51 $ 1.77
Dividends per share $ .62 $ .76
Weighted average number of shares
outstanding 45,704,072 46,546,317
OTHER DATA(2): At or For the At or For the
Nine Months Ended Year Ended
June 30, 1996 September 30, 1995
----------------- ------------------
Return on average assets 1.65% 1.70%
Return on average equity 14.58 13.60
Average equity to average assets 11.33 12.49
Interest rate spread(3) 2.93 3.06
Net interest margin(3) 3.50 3.68
Dividend payout ratio 41.09 43.04
Nonperforming loans as a percent
of total loans at end of period(1) .78 .72
Nonperforming assets as a percent
of total assets at end of period(1) .82 .75
Allowance for loan losses as a percent
of nonperforming loans at end of period 63.52 72.62
Banking offices 99 97
</TABLE>
- -------------------------
(1) Nonperforming assets consist of nonperforming loans and real estate
acquired by foreclosure or deed in lieu thereof. Nonperforming loans
consist of non-accrual loans, accruing loans 90 days or more overdue and
troubled debt restructurings.
(2) With the exception of end-of-period ratios, all ratios are based on average
daily balances during the indicated periods and are annualized where
appropriate.
(3) Interest rate spread represents the difference between the weighted average
yield on interest-earning assets and the weighted average cost of interest-
bearing liabilities, and net interest margin represents net interest income
as a percent of average interest-earning assets, in each case calculated on
a fully-taxable equivalent basis.
23
<PAGE>
GENERAL INFORMATION
This Prospectus/Proxy Statement is being furnished to the holders of
Metropolitan Common Stock in connection with the solicitation of proxies by the
Board of Directors of Metropolitan for use at the Special Meeting and at any
adjournment or adjournments thereof. This Prospectus/Proxy Statement also
serves as a prospectus of Washington Federal in connection with the issuance of
Washington Federal Common Stock to holders of Metropolitan Common Stock upon
consummation of the Merger.
All information contained or incorporated by reference in this
Prospectus/Proxy Statement with respect to Washington Federal has been supplied
by Washington Federal, and all information contained or incorporated by
reference in this Prospectus/Proxy Statement with respect to Metropolitan has
been supplied by Metropolitan.
This Prospectus/Proxy Statement and the other documents enclosed herewith
are first being mailed to shareholders of Metropolitan on or about _______ __,
1996.
THE SPECIAL MEETING
TIME AND PLACE
The Special Meeting will be held at __:__ _.m., Pacific Time, on ________
__, 1996, at __________________ Seattle, Washington.
MATTERS TO BE CONSIDERED
At the Special Meeting, shareholders of Metropolitan will (i) consider and
vote upon a proposal to approve the Agreement, and (ii) consider and act upon
such other matters as may properly come before the Special Meeting.
SHARES OUTSTANDING AND ENTITLED TO VOTE; RECORD DATE
The close of business on __________ __, 1996 has been fixed by the
Metropolitan Board as the Record Date for the determination of holders of
Metropolitan Common Stock entitled to notice of and to vote at the Special
Meeting and any adjournment or adjournments thereof. At the close of business
on the Record Date, there were _________ shares of Metropolitan Common Stock
outstanding and entitled to vote. Each share of Metropolitan Common Stock
entitles the holder thereof to one vote at the Special Meeting on all matters
properly presented thereat.
24
<PAGE>
VOTE REQUIRED
A quorum, consisting of the holders of a majority of the issued and
outstanding shares of Metropolitan Common Stock, must be present in person or by
proxy before any action may be taken at the Special Meeting. The affirmative
vote of the holders of two thirds of the outstanding shares of Metropolitan
Common Stock, voting in person or by proxy, is necessary to approve the
Agreement on behalf of Metropolitan.
The proposal to adopt the Agreement is considered a "non-discretionary
item" whereby brokerage firms may not vote in their discretion on behalf of
their clients if such clients have not furnished voting instructions.
Abstentions and such broker "non-votes" at the Special Meeting will be
considered in determining the presence of a quorum at the Special Meeting but
will not be counted as a vote cast with respect to the Agreement. Because the
proposal to adopt the Agreement is required to be approved by the holders of two
thirds of the outstanding shares of Metropolitan Common Stock, abstentions and
broker "non-votes" will have the same effect as a vote against this proposal at
the Special Meeting.
VOTING AND REVOCATION OF PROXIES
Each copy of this Prospectus/Proxy Statement mailed to holders of
Metropolitan Common Stock is accompanied by a form of proxy for use at the
Special Meeting. Any shareholder executing a proxy may revoke it at any time
before it is voted by (i) filing with the Secretary of Metropolitan at the
address of Metropolitan set forth on its Notice of Special Meeting of
Shareholders, written notice of such revocation; (ii) executing and delivering a
later-dated proxy prior to the vote being taken at the Special Meeting; or (iii)
attending the Special Meeting and giving notice of such revocation in person.
Attendance at the Special Meeting will not, in and of itself, constitute
revocation of a proxy.
Each proxy returned to Metropolitan (and not revoked) by a holder of
Metropolitan Common Stock will be voted in accordance with the instructions
indicated thereon. If no instructions are indicated, the proxy will be voted
for approval of the Agreement.
It is not expected that any matter other than those referred to herein will
be brought before the Special Meeting. If other matters are properly presented,
however, the persons named as proxies will vote in accordance with their
judgment with respect to such matters. The parties may propose one or more
adjournments of the Special Meeting in order to permit further solicitation of
proxies in favor of the Agreement. No proxy which is voted against the proposal
to approve the Agreement, however, will be voted in favor of any such
adjournment.
25
<PAGE>
SOLICITATION OF PROXIES
Metropolitan will bear its costs of mailing this Prospectus/Proxy Statement
to its shareholders, as well as all other costs incurred by it in connection
with the solicitation of proxies from its shareholders on behalf of its Board of
Directors, except that Washington Federal and Metropolitan will share equally
the cost of printing this Prospectus/Proxy Statement. In addition to
solicitation by mail, the directors, officers and employees of Metropolitan and
its subsidiaries may solicit proxies from Metropolitan's shareholders by
telephone, telegram or in person without compensation other than reimbursement
for their actual expenses. Arrangements also will be made with brokerage firms
and other custodians, nominees and fiduciaries for the forwarding of
solicitation material to the beneficial owners of stock held of record by such
persons, and Metropolitan will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection therewith.
THE MERGER
The following information relating to the Merger does not purport to be
complete and is qualified in its entirety by reference to the Agreement, a copy
of which is attached to this Prospectus/Proxy Statement as Annex I. All
shareholders are urged to read the Agreement carefully.
GENERAL
In accordance with the terms of and subject to the conditions set forth in
the Agreement, Metropolitan will be merged with and into Washington Federal,
with Washington Federal as the surviving corporation of the Merger. Upon
consummation of the Merger, Washington Federal shall succeed to all the rights,
obligations and properties of Metropolitan, the separate corporate existence of
which shall cease as a result of the Merger.
The Agreement provides that at the Effective Time each outstanding share of
Metropolitan Common Stock (other than (i) any dissenting shares under the WBCA
and (ii) any shares held by Washington Federal or a subsidiary thereof 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, subject to possible adjustment
under certain circumstances, a number of shares of Washington Federal Common
Stock which will be determined by applying an Exchange Ratio, calculated in the
manner set forth in the Agreement, which is based on the Average Washington
Federal Price over a 20 trading day period ending on the fifth business day
prior to the Effective Time, plus cash in lieu of any fractional share interest.
If, over the Pricing Period, the Average Washington Federal Price is equal to or
greater than $18.00 but equal to or less than $24.50, shareholders of
Metropolitan will receive for each share of
26
<PAGE>
Metropolitan Common Stock that number of shares of Washington Federal Common
Stock equal to the ratio determined by dividing $18.00 by the Average Washington
Federal Price (calculated to the nearest one-thousandth). If the Average
Washington Federal Price is greater than $24.50, shareholders of Metropolitan
will receive 0.735 shares of Washington Federal Common Stock for each share of
Metropolitan Common Stock, while if the Average Washington Federal Price is less
than $18.00, they will receive one share of Washington Federal Common Stock for
each share of Metropolitan Common Stock.
If the Average Washington Federal Price 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 will have the right to adjust the Exchange Ratio to the
number obtained by dividing $17.00 by the Average Washington Federal Price
(calculated to the nearest one-thousandth), in which case the Agreement will not
be terminated.
No fractional shares of Washington Federal Common Stock shall be issued in
the Merger to holders of shares of Metropolitan Common Stock. Each holder of
shares of Metropolitan Common Stock who otherwise would have been entitled to a
fraction of a share of Washington Federal Common Stock shall receive in lieu
thereof, at the time of surrender of the certificate or certificates
representing such holder's shares of Metropolitan Common Stock, an amount of
cash (without interest) determined by multiplying the fractional share interest
to which such holder would otherwise be entitled by the Average Washington
Federal Price.
The Metropolitan Board has approved the Agreement and the transactions
contemplated thereby and believes that the Merger is fair to and in the best
interests of Metropolitan and its shareholders. ACCORDINGLY, THE METROPOLITAN
BOARD RECOMMENDS THAT SHAREHOLDERS OF METROPOLITAN VOTE "FOR" APPROVAL OF THE
AGREEMENT.
BACKGROUND OF THE MERGER
In connection with its planning process, Metropolitan continuously reviews
its strategic alternatives to increase long-term shareholder value. As part of
this process, Metropolitan reviews the competitive changes in the banking and
financial services industries, devoting attention to the consolidation among
financial institutions in the Northwest. In recent years, competition within
the local banking and financial services industries has intensified, leading to
Metropolitan's exploration of possible business combinations with other
financial services companies. Since 1992, Metropolitan has considered
acquisition opportunities with smaller local banking entities. In September
1995, Metropolitan engaged Montgomery to, in part, assist Metropolitan in
evaluating various acquisition opportunities that might arise. None of the
acquisition opportunities considered by Metropolitan advanced beyond the
preliminary discussion stage.
27
<PAGE>
In early May 1996, Patrick F. Patrick, President and Chief Executive
Officer of Metropolitan, and Guy C. Pinkerton, Chairman, President and Chief
Executive Officer of Washington Federal, met and discussed, among other things,
the possibility of Mr. Patrick working for Washington Federal. Subsequently,
when Mr. Patrick and two members of the Executive Committee of the Metropolitan
Board discussed Mr. Patrick's discussion with Mr. Pinkerton, it was suggested
that Mr. Patrick should discuss with Mr. Pinkerton the competitive positions of
Metropolitan and Washington Federal and the reasons for a potential business
combination between them. Mr. Patrick and Mr. Pinkerton subsequently had
several discussions exploring the reasons for a potential business combination,
including the possibility of enhancing long-term value to the shareholders of
the two companies through a merger.
During the discussions, Mr. Pinkerton concluded that Washington Federal did
not want to acquire the Mortgage Company, a subsidiary of Metropolitan. On
June 4, 1996, Mr. Patrick met with John H. Fairchild, Chief Executive Officer of
the Mortgage Company, to discuss the possibility of Mr. Fairchild and Sheryl J.
Nilson, Chief Operating Officer of the Mortgage Company, purchasing the Mortgage
Company from Metropolitan. Over the next few weeks Mr. Patrick, Mr. Fairchild
and Ms. Nilson discussed a possible transaction.
In June 1996, Mr. Patrick met with the Human Resources Committee of the
Board of Directors of Washington Federal to determine if Mr. Patrick would
complement the management team at Washington Federal. Over several weeks
beginning on or about June 12, 1996, Mr. Pinkerton and Mr. Patrick discussed the
form and terms of a possible business combination and the parties exchanged
financial information. On June 13, 1996, Metropolitan engaged Montgomery to
advise it regarding a potential sale to Washington Federal and, in such event,
to render to the Metropolitan Board a fairness opinion. During the next several
weeks, the parties and their representatives continued their due diligence
review with respect to the other's financial condition and other relevant
matters, and the parties and their respective legal counsel began to negotiate
the terms of the Agreement, the Bank Agreement, the Stock Option Agreement, the
Stockholder Agreement and the Stock Redemption Agreement (collectively, the
"Transaction Documents"). On July 8, 1996, Metropolitan and Washington Federal
entered into mutual confidentiality agreements and the parties began negotiating
the exchange ratio.
On July 8, 1996, a meeting of the Metropolitan Board was held to review the
potential business combination between Metropolitan and Washington Federal and
to discuss Metropolitan's strategic options. Drafts of the Transaction
Documents were provided to the members of the Metropolitan Board prior to or at
the meeting. During the meeting, Mr. Patrick reviewed with the Metropolitan
Board the background of the proposal from Washington Federal, the potential
benefits of a business combination, and the proposed sale of the Mortgage
Company. Representatives of Montgomery made a presentation regarding financial
terms of the proposed Merger and the fairness, from a financial point of view,
of the consideration to be received by the shareholders of Metropolitan under
the terms of the Merger as they were then being discussed.
28
<PAGE>
Metropolitan's legal counsel was present and reviewed the terms of the proposed
Transaction Documents. The Metropolitan Board discussed the strategic options
available to Metropolitan, including the potential business combination with
Washington Federal, pursuing a merger with other institutions and remaining
independent. Subsequent to the meeting, Metropolitan and Washington Federal
continued their negotiations, including with respect to the exchange ratio.
On July 11, 1996, at a meeting of the Metropolitan Board, Mr. Patrick
reviewed with the Metropolitan Board the reasons for and the potential benefits
of the Merger. Montgomery made a detailed presentation regarding the financial
terms of the Merger as set forth in the definitive Agreement, and delivered to
the Metropolitan Board its oral opinion that the consideration to be received by
the shareholders of Metropolitan pursuant to the Merger was fair to such
shareholders from a financial point of view, as of July 11, 1996. Montgomery's
oral opinion was subsequently confirmed on July 11, 1996, in a written opinion
to the Metropolitan Board. Metropolitan's legal counsel reviewed the definitive
terms of the proposed Transaction Documents which had been provided to the
Metropolitan Board. After a thorough discussion and consideration of the
factors discussed below under "The Merger - Reasons for the Merger;
Recommendation of the Metropolitan Board," the Metropolitan Board, with all
directors voting in favor, except John H. Fairchild who abstained due to his
conflict of interest, approved the Agreement and the transactions contemplated
thereby (including the Bank Merger), and authorized the execution of the
Transaction Documents.
On July 11, 1996, at a meeting of the Board of Directors of Washington
Federal (the "Washington Federal Board"), Mr. Pinkerton reviewed with the
Washington Federal Board the reasons for, and the potential benefits of, the
Merger. The Washington Federal Board reviewed the terms of the Agreement, the
Stock Option Agreement, the Stockholder Agreement and the Bank Agreement. After
a thorough discussion and consideration of various factors, the Washington
Federal Board approved the Agreement and the transactions contemplated thereby
(including the Bank Merger), and authorized the execution of the Agreement, the
Stock Option Agreement, the Stockholder Agreement and the Bank Agreement. The
Transaction Documents were entered into on July 11, 1996.
REASONS FOR THE MERGER; RECOMMENDATION OF THE METROPOLITAN BOARD
In reaching its determination to approve and adopt the Agreement and the
transactions contemplated thereby, the Metropolitan Board considered a number of
factors, including, without limitation, the following:
(i) the Metropolitan Board's belief, based on the presentation of
the analysis of the Merger to the Metropolitan Board by Montgomery and
consideration of other alternatives, that the Merger represented an
attractive strategic alternative to Metropolitan for enhancing shareholder
value;
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(ii) the Metropolitan Board's review of the banking environment in
which Metropolitan is now, and in the future would be, competing,
including, but not limited to, the significant consolidation and
increasingly competitive climate in the banking and financial services
markets, both in the United States as a whole and in the Pacific Northwest
in particular, and the prospect for further changes in these markets;
(iii) the Metropolitan Board's view of the increasing importance of
the economies of scale and of access to greater financial resources to a
bank's ability to capitalize on opportunities in the banking and financial
services markets;
(iv) the Metropolitan Board's review, with the assistance of
management and Montgomery, of the financial condition, results of
operations, business and overall prospects of Washington Federal, as well
as of management's best estimates of Metropolitan's prospects;
(v) the financial presentation of Montgomery and the opinion of
Montgomery as to the fairness from a financial point of view of the Merger
Consideration to the shareholders of Metropolitan (see "The Merger -
Opinion of Financial Advisor");
(vi) the anticipated cost savings and operating efficiencies
available to the combined institution from the Merger;
(vii) the Metropolitan Board's belief that the terms of the Agreement
are attractive in that the Agreement allows Metropolitan shareholders to
become shareholders in a combined institution with a strong competitive
position;
(viii) the Metropolitan Board's belief that the Merger provides an
opportunity for the shareholders of Metropolitan to receive dividends;
(ix) the Metropolitan Board's assessment that affiliation with a
community-based institution would put Metropolitan in a good position to be
able to continue its high level of personal service to its customers and
the Washington communities that it serves;
(x) the expected effects of the Merger on Metropolitan's other
constituencies, including its senior management and other employees and the
communities served by Metropolitan and Metropolitan Savings;
(xi) the Metropolitan Board's awareness and assessment of the
potential that the Merger could be expected to provide more Metropolitan
employees with continued employment and other benefits than certain other
potential business combinations might have provided (see "The Merger -
Interests of Certain Persons in the Merger");
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(xii) the expectation that the Merger will generally be a tax-free
transaction to Metropolitan and its shareholders (see "The Merger - Certain
Federal Income Tax Consequences"); and
(xiii) the nature of, and likelihood of obtaining, the regulatory
approvals that would be required with respect to the Merger.
The foregoing discussion of the information and factors discussed by the
Metropolitan Board is not meant to be exhaustive but is believed to include all
material factors considered by Metropolitan's Board. The Metropolitan Board did
not quantify or attach any particular weight to the various factors that it
considered in reaching its determination that the Merger is in the best
interests of Metropolitan and its shareholders.
FOR THE REASONS DESCRIBED ABOVE, THE METROPOLITAN BOARD HAS DETERMINED THE
MERGER TO BE FAIR TO AND IN THE BEST INTERESTS OF METROPOLITAN AND ITS
SHAREHOLDERS AND HAS APPROVED THE AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, INCLUDING THE MERGER. ACCORDINGLY, THE METROPOLITAN BOARD RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF THE AGREEMENT.
OPINION OF FINANCIAL ADVISOR
GENERAL. Pursuant to an amendment, dated June 13, 1996, to an engagement
letter, dated September 1, 1995 (the "Engagement Letter"), Metropolitan engaged
Montgomery to render to the Metropolitan Board a fairness opinion with respect
to a potential sale of Metropolitan. Montgomery is a nationally recognized
investment banking firm and, as part of its investment banking activities, is
regularly engaged in the valuation of businesses and their securities in
connection with merger transactions and other types of acquisitions, negotiated
underwritings, placements and valuations for corporate and other purposes.
Metropolitan selected Montgomery to render the opinion on the basis of its
experience and expertise in transactions similar to the Merger and its
reputation in the banking and investment communities.
At a meeting of the Metropolitan Board on July 11, 1996, Montgomery
delivered its oral opinion that the consideration to be received by the holders
of Metropolitan Common Stock pursuant to the Merger was fair to such
shareholders from a financial point of view as of the date of such opinion.
Montgomery's oral opinion was subsequently confirmed in writing on July 11,
1996. No limitations were imposed by Metropolitan on Montgomery with respect to
the investigations made or procedures followed in rendering its opinion. The
full text of Montgomery's written opinion to the Metropolitan Board, dated July
11, 1996, which sets forth the assumptions made, matters considered, and
limitations of the review by Montgomery, is attached hereto as Annex IV and is
incorporated herein by reference. The following summary of Montgomery's opinion
is qualified in its entirety by reference to the full text of the opinion, which
should be read carefully and in its entirety. In furnishing such
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opinion, Montgomery does not admit that it is an expert with respect to the
Registration Statement of which this Proxy Statement/Prospectus is part within
the meaning of the term "experts" as used in the Securities Act and the rules
and regulations promulgated thereunder. Montgomery's opinion is addressed to
the Metropolitan Board and does not constitute a recommendation to any holder of
Metropolitan Common Stock as to how such shareholder should vote at the Special
Meeting.
In connection with its opinion, Montgomery, among other things: (i)
reviewed certain publicly available financial and other data with respect to
Metropolitan and Washington Federal, including the consolidated financial
statements for recent years and interim periods to March 31, 1996, and other
relevant financial and operating data relating to Metropolitan and Washington
Federal made available to Montgomery from published sources and from the
internal records of Metropolitan; (ii) reviewed the Agreement; (iii) reviewed
certain historical market prices and trading volumes of Metropolitan Common
Stock and Washington Federal Common Stock on the NASDAQ; (iv) compared
Metropolitan and Washington Federal from a financial point of view with certain
other companies in the savings and loan industry that Montgomery deemed to be
relevant; (v) considered the financial terms, to the extent publicly available,
of selected recent business combinations of companies in the savings and loan
industry that Montgomery deemed to be comparable, in whole or in part, to the
Merger; (vi) reviewed and discussed with representatives of the management of
Metropolitan and Washington Federal certain information of a business and
financial nature regarding Metropolitan and Washington Federal, respectively;
(vii) reviewed and discussed with representatives of the management of
Metropolitan and Washington Federal certain financial forecasts and related
assumptions prepared by Metropolitan with respect to Metropolitan and published
by independent securities analysts with respect to Washington Federal; (viii)
made inquiries regarding and discussed the Merger, the Agreement and other
matters related thereto with Metropolitan's counsel; and (ix) performed such
other analyses and examinations as Montgomery deemed appropriate.
In connection with its review, Montgomery did not independently verify any
of the foregoing information, and relied on such information and assumed such
information was complete and accurate in all material respects. With respect to
the financial forecasts for Metropolitan provided to Montgomery by
Metropolitan's management, Montgomery assumed for purposes of its opinion that
such forecasts were reasonably prepared on bases reflecting the best available
estimates and judgments of Metropolitan's management at the time of preparation
as to the future financial performance of Metropolitan and provided a reasonable
basis upon which Montgomery could form its opinion. Montgomery also assumed
that there were no material changes in Metropolitan's or Washington Federal's
assets, financial condition, results of operations, business or prospects since
the respective dates of the last financial statements made available to
Montgomery. Montgomery relied on advice of counsel to Metropolitan as to all
legal matters with respect to Metropolitan, the Merger and the Agreement.
Montgomery is not an expert in the evaluation of loan portfolios for purposes of
assessing the adequacy of the allowances for losses with respect thereto and
assumed that such allowances for each of Metropolitan and Washington Federal
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are in the aggregate adequate to cover such losses. In addition, Montgomery did
not review any individual credit files, did not make an independent evaluation,
appraisal or physical inspection of the assets or individual properties of
Metropolitan or Washington Federal, and was not furnished with any such
appraisals. Further, Montgomery's oral and written opinions were based on
economic, monetary and market conditions existing as of July 11, 1996 and on the
assumption that the Merger will be consummated in accordance with the terms of
the Agreement, without any amendment thereto and without waiver by Metropolitan
of any of the conditions to its obligations thereunder.
Set forth below is a brief summary of the report presented by Montgomery to
the Metropolitan Board on July 11, 1996 in connection with its opinion.
ANALYSIS OF SELECTED BANK MERGER TRANSACTIONS. Montgomery reviewed the
consideration paid in recently announced transactions whereby certain thrifts
were acquired. Specifically, Montgomery reviewed 36 transactions involving
acquisitions of thrifts in the Western region of the United States announced
since January 1, 1992 (the "Western Acquisitions"). For each thrift acquired or
to be acquired in such transactions, Montgomery compiled figures illustrating,
among other things, the ratio of the premium (i.e., purchase price in excess of
book value) to core deposits, purchase price to deposits, purchase price to book
value and purchase price to last twelve-months ("LTM") earnings.
The figures for the Western Acquisitions produced: (i) median percentage of
premium to core deposits of 4.02%; (ii) median percentage of purchase price to
deposits of 12.48%; (iii) median ratio of purchase price to tangible book value
of 1.36; and (iv) median ratio of purchase price to LTM earnings of 13.4. In
comparison, based upon an exchange ratio in the Merger of 0.90 shares of
Washington Federal Common Stock for each share of Metropolitan Common Stock,
representing shares of Washington Federal Common Stock with a value of $18.00
per share at July 11, 1996, Montgomery determined that the consideration to be
received by the holders of Metropolitan Common Stock in the Merger represented a
percentage of premium to core deposits of 6.80%, a percentage of price to
deposits of 16.18%, a ratio of price to tangible book value of 1.37 and a ratio
of price to Metropolitan's LTM earnings for the twelve months ended March 31,
1996 of 11.92.
In addition, Montgomery analyzed 52 thrift transactions of a similar size
since January 1, 1994 to analyze stock price premiums paid relative to other
sellers' stock price at various times before the announcement of the
transaction. These figures produced: (i) a median premium to the seller's stock
price one month prior to the announcement of 27.9%; (ii) a median premium to the
seller's stock price six days prior to the announcement of 21.0%; and (iii) a
median premium to the seller's stock price the day before the announcement of
18.4%. In comparison, Washington Federal's offer of $18.00 per share exceeded
Metropolitan's stock price one month prior to July 11, 1996 by 32.1%, the stock
price six days prior to July 11, 1996 by 32.1% and the stock price one day prior
to July 11, 1996 by 33.3%.
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No other company or transaction used in the above analysis as a comparison
is identical to Metropolitan or the Merger. Accordingly, an analysis of the
results of the foregoing is not mathematical; rather, it involves complex
considerations and judgments concerning differences in financial and operating
characteristics of the companies and other factors that could affect the public
trading value of the companies to which Metropolitan and the Merger are being
compared.
CONTRIBUTION ANALYSIS. Montgomery analyzed the contribution of each of
Metropolitan and Washington Federal to, among other things, total equity, assets
and core deposits of the pro forma combined companies for the period ending
March 31, 1996, and projected net income for the calendar years ending December
31, 1996 and December 31, 1997. This analysis showed, among other things, that
based on pro forma combined balance sheets for Metropolitan and Washington
Federal at March 31, 1996, Metropolitan would have contributed 6.7% of the total
equity, 13.5% of the total assets and 13.1% of the core deposits. Pro forma
projected income statements for the calendar years ending December 31, 1996 and
December 31, 1997, showed that Metropolitan would contribute 6.1% and 5.7% of
the net income, respectively. Based upon an exchange ratio in the Merger of
0.90 shares of Washington Federal Common Stock for each share of Metropolitan
Common Stock, holders of Metropolitan Common Stock would own approximately 7.03%
of the combined companies based on common shares outstanding on July 11, 1996.
DILUTION ANALYSIS. Using estimates of future earnings prepared by
Metropolitan management and analysts' estimates for Washington Federal,
Montgomery compared the calendar year 1997 estimated earnings per share of
Metropolitan Common Stock and Washington Federal Common Stock to the calendar
year 1997 estimated earnings per share of the common stock of the pro forma
combined companies. Based on such analysis and an exchange ratio in the Merger
of 0.90 shares of Washington Federal Common Stock for each share of Metropolitan
Common Stock, the proposed transaction would be dilutive to Washington Federal's
earnings per share in 1997 by approximately $0.05 per share or 2.0%. This
analysis did not account for costs associated with the completion of the Merger
or savings as a result of the Merger.
PRESENT VALUE ANALYSIS. In performing the present value analysis,
Montgomery assumed that the Merger was consummated as of March 31, 1996 on the
basis of an exchange ratio of 0.90 shares of Washington Federal Common Stock for
each share of Metropolitan Common Stock. This ratio was derived from the
consideration to be paid in the Merger assuming Washington Federal, with a stock
price of $20.00, offered $18.00 per share for each share of Metropolitan Common
Stock. In performing the analysis, Montgomery estimated the future streams of
earnings that Metropolitan could produce over a five year period under various
assumptions and multiplied the figure in 2001 by an estimated price to earnings
multiple (ranging from 7.5x to 10.5x). This number was then discounted at
14.0%. This analysis indicated that the present value of Metropolitan's future
stock price ranged from $12.45 to $17.43 per share.
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The summary set forth above does not purport to be a complete description
of the presentation by Montgomery to the Metropolitan Board or of the analyses
performed by Montgomery. The foregoing disclosure describes all analyses
presented by Montgomery to the Metropolitan Board that were material to
Montgomery's finding of fairness. The preparation of a fairness opinion is not
necessarily susceptible to partial analysis or summary description. Montgomery
believes that its analyses and the summary set forth above must be considered as
a whole and that selecting a portion of its analyses and factors, without
considering all analyses and factors, would create an incomplete view of the
process underlying the analyses, set forth in its presentation to the
Metropolitan Board. In addition, Montgomery did not provide the Metropolitan
Board with any specific weight that may have been given to its various analyses,
and may have deemed various assumptions more or less probable than other
assumptions, so that the ranges of valuations resulting from any particular
analysis described above should not be taken to be Montgomery's view of the
actual value of Metropolitan or the combined companies. The fact that any
specific analysis has been referred to in the summary above is not meant to
indicate that such analysis was given greater weight than any other analysis.
In performing its analyses, Montgomery made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Metropolitan or
Washington Federal. The analyses performed by Montgomery are not necessarily
indicative of actual values or actual future results, which may be significantly
more or less favorable than suggested by such analyses. Such analyses were
prepared solely as part of Montgomery's analysis of the fairness of the
consideration to be received by the holders of the Metropolitan Common Stock in
the Merger and were provided to the Metropolitan Board in connection with the
delivery of Montgomery's opinion. The analyses do not purport to be appraisals
or to reflect the prices at which a company might actually be sold or the prices
at which any securities may trade at the present time or any time in the future.
The projections are based on numerous variables and assumptions which are
inherently unpredictable and must be considered not certain of occurrence as
projected. Accordingly, actual results could vary significantly from those set
forth in such projections.
As described above, Montgomery's opinion and presentation to the
Metropolitan Board were among the many factors taken into consideration by the
Metropolitan Board in making its determination to approve the Agreement.
Pursuant to the Engagement Letter, Metropolitan paid Montgomery, for
services in connection with rendering to the Metropolitan Board a fairness
opinion with respect to the sale of Metropolitan, a retainer fee of $25,000 and
$175,000 upon delivery of the fairness opinion. Additionally, Montgomery will
receive $200,000 on the earlier of (i) five months from the date of the delivery
of the opinion or (ii) the closing of the sale of Metropolitan. Under the terms
of the Engagement Letter, the payment of Montgomery's fees was not contingent
upon consummation of the Merger, or of any future merger. Metropolitan has also
agreed to reimburse Montgomery for its reasonable out-of-pocket expenses,
including
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any fees and disbursements for attorneys, appraisers and other experts retained
by Montgomery in connection with the performance of Montgomery's services.
Metropolitan has agreed to indemnify Montgomery, its affiliates, and their
respective partners, directors, officers, agents, consultants, employees and
controlling persons against certain liabilities, including liabilities under the
federal securities laws. Over the past two years, Montgomery has provided
investment banking services to Metropolitan for which it has been paid fees
totaling $130,000.
In the ordinary course of its business, Montgomery may trade equity
securities of Washington Federal and Metropolitan for its own account and for
the accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
EXCHANGE OF METROPOLITAN COMMON STOCK CERTIFICATES
At the Effective Time, each holder of a certificate or certificates
theretofore evidencing issued and outstanding shares of Metropolitan Common
Stock, upon surrender of the same to an agent, duly appointed by Washington
Federal (the "Exchange Agent"), shall be entitled to receive in exchange
therefor a certificate or certificates representing the number of full shares of
Washington Federal Common Stock into which the shares of Metropolitan Common
Stock theretofore represented by the certificate or certificates so surrendered
shall have been converted by virtue of the Merger. 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 Metropolitan Common Stock, and which is to be exchanged
for Washington Federal Common Stock by virtue of the Merger, 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 Washington Federal Common Stock and cash in lieu of any fractional
share interest. Upon surrender to the Exchange Agent of one or more
certificates evidencing shares of Metropolitan Common Stock, together with a
properly completed and executed letter of transmittal, the Exchange Agent will
mail to the holder thereof after the Effective Time a certificate or
certificates representing the number of full shares of Washington Federal Common
Stock into which the aggregate number of shares of Metropolitan Common Stock
previously represented by such certificate or certificates surrendered shall
have been converted pursuant to the Agreement, plus cash in lieu of any
fractional share interest. Washington Federal shall be entitled, after the
Effective Time, to treat certificates representing shares of Metropolitan Common
Stock as evidencing ownership of the number of full shares of Washington Federal
Common Stock into which the shares of Metropolitan Common Stock represented by
such certificates shall have been converted pursuant to the Agreement,
notwithstanding the failure on the part of the holder thereof to surrender such
certificates.
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After the Effective Time, there shall be no further transfer on the records
of Metropolitan of certificates representing shares of Metropolitan Common
Stock. If any such certificates are presented to Metropolitan or the transfer
agent for the Metropolitan Common Stock for transfer after the Effective Time,
they shall be cancelled against delivery of certificates for Washington Federal
Common Stock in accordance with the Agreement.
No dividends which have been declared on the Washington Federal Common
Stock will be remitted to any person entitled to receive shares of Washington
Federal Common Stock under the Agreement until such person surrenders the
certificate or certificates representing Metropolitan Common Stock, at which
time such dividends shall be remitted to such person, without interest.
TREATMENT OF METROPOLITAN STOCK OPTIONS
Directors, officers and employees of Metropolitan have been granted options
(the "Metropolitan Options") to purchase shares of Metropolitan Common Stock,
generally pursuant to Metropolitan's Amended Stock Option and Incentive Plan and
Stock Option Plan for Nonemployee Directors (collectively, the "Metropolitan
Stock Option Plans"). Pursuant to the Agreement, on a mutually agreeable date
prior to the Effective Time, but in no event later than immediately before the
Effective Time, Metropolitan shall terminate each of the Metropolitan Stock
Option Plans and terminate each Metropolitan Option that is outstanding and
unexercised at the time in exchange for a payment from Metropolitan, subject to
required withholding taxes and the receipt of an appropriate release, of cash in
an amount equal to the difference between the exercise price of such
Metropolitan Option and $18.00 for each share of Metropolitan Common Stock
subject to such Metropolitan Option.
REPRESENTATIONS AND WARRANTIES
In the Agreement each of Washington Federal and Metropolitan made customary
representations and warranties relating to, among other things, (i) corporate
organization and similar corporate matters; (ii) capital structure; (iii)
authorization, execution, delivery, performance and enforceability of the
Agreement; (iv) the absence of material conflicts or violations with
organizational documents, applicable laws or material contracts or agreements;
(v) required regulatory approvals; (vi) the absence of a Material Adverse
Effect, as defined in the Agreement, since March 31, 1996; (vii) the absence of
material litigation; (viii) compliance with applicable laws; (ix) the accuracy
of documents filed with the SEC and banking authorities; (x) employee benefit
plans and related matters; (xi) tax returns and payment of taxes; (xii)
environmental matters; (xiii) brokers' and finders' fees; and (xiv) the accuracy
of information relating to it in this Prospectus/Proxy Statement.
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CONDITIONS TO THE MERGER
The Agreement provides that consummation of the Merger is subject to the
satisfaction of certain conditions, or the waiver of such conditions by the
party or parties entitled to do so, at or before the Effective Time. Each of
the parties' obligations under the Agreement is subject to the following
conditions: (i) all corporate action (including without limitation approval by
the requisite vote of the shareholders of Metropolitan) necessary to authorize
the execution and delivery of the Agreement, the Bank Merger Agreement and
consummation of the transactions contemplated thereby shall have been duly and
validly taken; (ii) the receipt of all necessary regulatory approvals and
consents required to consummate the Merger, the Bank Merger and the other
transactions contemplated thereby by any governmental authority, and the
expiration of all notice periods and waiting periods with respect thereto;
provided, however, that no required approval or consent shall be deemed to have
been received if it shall include any condition or requirement that,
individually or in the aggregate, would so materially reduce the economic or
business benefits of the transactions contemplated by the Agreement to
Washington Federal that had such condition or requirement been known Washington
Federal, in its reasonable judgment, would not have entered into the Agreement
(this condition is referred to hereinafter as the "Regulatory Approval
Condition"); (iii) none of Washington Federal or Metropolitan or their
respective subsidiaries shall be subject to any statute, rule, regulation,
injunction, order or decree which prohibits, restricts or makes illegal the
consummation of the Merger, the Bank Merger or any of the other transactions
contemplated thereby; (iv) the Registration Statement shall have become
effective under the Securities Act, and Washington Federal shall have received
all permits, authorizations or exemptions necessary under all state securities
laws to issue Washington Federal Common Stock in connection with the Merger, and
neither the Registration Statement nor any such permit, authorization or
exemption shall be subject to a stop order or threatened stop order by any
governmental authority; (v) the shares of Washington Federal Common Stock to be
issued in connection with the Merger shall have been approved for quotation on
NASDAQ; and (vi) each of Washington Federal and Metropolitan shall have received
an opinion of counsel to the effect that the Merger qualifies as a
reorganization within the meaning of Section 368 of the Code and with respect to
certain other related federal income tax considerations.
In addition to the foregoing conditions, the obligations of Washington
Federal under the Agreement are conditioned upon (i) the accuracy in all
material respects as of the date of the Agreement and as of the Effective Time
of the representations and warranties of Metropolitan set forth in the
Agreement, except as to any representation or warranty which specifically
relates to an earlier date and except as otherwise contemplated by the
Agreement; (ii) the performance in all material respects of all covenants and
obligations required to be complied with and satisfied by Metropolitan; (iii)
the receipt of a certificate from specified officers of Metropolitan with
respect to compliance with the conditions relating to (i) and (ii) immediately
above as set forth in the Agreement; (iv) any dissenting shares of Metropolitan
Common Stock under the WBCA constituting not more than 10%
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of the outstanding shares of Metropolitan Common Stock immediately prior to the
Effective Time; (v) Metropolitan's completion of the distribution of not less
than 81% of the common stock of the Mortgage Company and the related redemption
of shares of Metropolitan Common Stock pursuant to the terms of the Stock
Redemption Agreement; (vi) Metropolitan not having to establish provisions for
loan losses or write-downs with respect to real estate owned in excess of, in
the aggregate, $1.0 million; (vii) Metropolitan not incurring, in the aggregate,
$15.0 million or more of realized and/or unrealized losses (net of realized
and/or unrealized gains) with respect to Metropolitan's investment and mortgage-
backed securities portfolios; and (viii) the receipt by Washington Federal of
such certificates of Metropolitan's officers or others and such other documents
to evidence fulfillment of the conditions relating to Metropolitan as Washington
Federal may reasonably request. Any of the foregoing conditions may be waived
by Washington Federal.
In addition to the other conditions set forth above, Metropolitan's
obligations under the Agreement are conditioned upon (i) the accuracy in all
material respects as of the date of the Agreement and as of the Effective Time
of the representations and warranties of Washington Federal set forth in the
Agreement, except as to any representation or warranty which specifically
relates to an earlier date and except as otherwise contemplated by the
Agreement; (ii) the performance in all material respects of all covenants and
obligations required to be complied with and satisfied by Washington Federal;
(iii) the receipt of a certificate from specified officers of Washington Federal
with respect to compliance with the conditions relating to (i) and (ii)
immediately above as set forth in the Agreement; and (iv) the receipt by
Metropolitan of such certificates of Washington Federal's officers or others and
such other documents to evidence fulfillment of the conditions relating to
Washington Federal as Metropolitan may reasonably request. Any of the foregoing
conditions may be waived by Metropolitan.
REGULATORY APPROVALS
Consummation of the Merger is subject to prior receipt of all required
approvals and consents of the Merger and the Bank Merger by all applicable
federal and state regulatory authorities. In order to consummate the Merger and
the Bank Merger, Washington Federal must obtain the prior consent and approval,
as applicable, of the OTS.
The Merger is subject to the prior approval of the OTS under Section 10(e)
of the HOLA and regulations of the OTS thereunder and the Bank Merger is subject
to the prior approval of the OTS under the Bank Merger Act provisions of the
Federal Deposit Insurance Act. The OTS may deny an application by an acquiror
to acquire control of a savings association if (i) the OTS finds that the
financial and managerial resources and future prospects of the acquiror and the
savings association would be detrimental to the savings association or the
insurance risk to the FDIC or (ii) the acquiror fails or refuses to furnish
information requested by the OTS. Pursuant to the applicable provisions of the
HOLA, the Bank Merger Act and regulations thereunder, the OTS may not approve an
acquisition of control of a savings association if (i) such transaction would
result in a
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monopoly or would be in furtherance of any combination or conspiracy to
monopolize or attempt to monopolize the business of banking in any part of the
United States; (ii) the effect of such transaction, in any section of the
country, may be to substantially lessen competition, or tend to create a
monopoly, or in any other manner to restrain trade, in each case unless the OTS
finds that the anticompetitive effects of the proposed transaction are clearly
outweighed in the public interests by the probable effect of the transaction in
meeting the convenience and needs of the community to be served; or (iii) the
acquiror fails to provide adequate assurances to the OTS that the acquiror will
make available to the OTS such information on the operations or activities of
the acquiror and any affiliate thereof as the OTS determines to be appropriate
to determine and enforce compliance with the HOLA. Consideration of the
managerial resources of an acquiror or savings association shall include
consideration of the competence, experience and integrity of the directors,
officers and controlling shareholders of the acquiror and the savings
association.
Each of the HOLA and the Bank Merger Act provides that a transaction
approved by the OTS generally may not be consummated until 30 days after
approval by such agency. If the U.S. Department of Justice and the OTS
otherwise agree, this 30-day period may be reduced to as few as 15 days. During
such period, the U.S. Department of Justice may commence a legal action
challenging the transaction under the antitrust laws. The commencement of an
action would stay the effectiveness of the approval of the OTS unless a court
specifically orders otherwise. If, however, the U.S. Department of Justice does
not commence a legal action during such waiting period, it may not thereafter
challenge the transaction except in an action commenced under Section 2 of the
Sherman Antitrust Act.
Applications have been filed with the OTS for approval of the Merger and
the Bank Merger. Although neither Washington Federal nor Metropolitan is aware
of any basis for disapproving the Merger and the Bank Merger, there can be no
assurance that all requisite approvals will be obtained, that such approvals
will be received on a timely basis or that such approvals will not impose
conditions or requirements which, individually or in the aggregate, would so
materially reduce the economic or business benefits of the transactions
contemplated by the Agreement to Washington Federal that had such condition or
requirement been known Washington Federal, in its reasonable judgment, would not
have entered into the Agreement. If any such condition or requirement is
imposed, the Agreement permits the Board of Directors of Washington Federal to
terminate the Agreement.
BUSINESS PENDING THE MERGER
Pursuant to the Agreement, Metropolitan agreed that, except as contemplated
by the Agreement or with the prior written consent of Washington Federal, during
the period from the date of the Agreement and continuing until the Effective
Time Metropolitan and its subsidiaries shall carry on their respective
businesses in the ordinary course consistent with past practice. Pursuant to
the Agreement, Metropolitan also agreed to use all reasonable efforts to (i)
preserve its business organization and that of its subsidiaries intact, (ii)
keep
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available to itself and Washington Federal the present services of the employees
of Metropolitan and its subsidiaries and (iii) preserve for itself and
Washington Federal the goodwill of the customers of Metropolitan and its
subsidiaries and others with whom business relationships exist. In addition,
under the terms of the Agreement, Metropolitan agreed not to take certain
actions, nor permit its subsidiaries to take certain actions, without the prior
written consent of Washington Federal, including, among other things, the
following: (i) declare, set aside, make or pay any dividend or other
distribution in respect of Metropolitan Common Stock; (ii) issue, grant or
authorize any capital stock or rights to acquire the same, other than in each
case pursuant to the Stock Option Agreement or upon the exercise of Metropolitan
Options; purchase any shares of Metropolitan Common Stock, other than pursuant
to the terms of the Stock Redemption 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 Metropolitan Common Stock 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 or bylaws; impose, or suffer the imposition
of, any lien, charge or encumbrance on any share of stock held by Metropolitan
in a subsidiary of Metropolitan, or permit any such lien 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, 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 as of the date of the Agreement; (v) enter into or modify
any employee benefit plan, or make any contributions to Metropolitan's defined
contribution plan other than in the ordinary course of business consistent with
past practice, or make any contributions to Metropolitan'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 Metropolitan or a subsidiary of
Metropolitan or guarantee by Metropolitan or a subsidiary of Metropolitan of any
such obligation, except for deposits and certain other borrowings in the
ordinary course of business consistent with past practice, (y) any employment,
consulting or severance contracts or agreements, or amend any such existing
agreement, or (z) any contract, agreement or understanding with a labor union;
(vii) change its methods of accounting or tax reporting, except as may be
required by changes in generally accepted accounting principles or applicable
law; (viii) purchase or otherwise acquire or, other than pursuant to the Stock
Redemption 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 of the Agreement
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 of
the Agreement or following Metropolitan's provision of not less than two
business days' written notice to Washington Federal; (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
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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 interest rate risk; (xiv) engage in any transaction with
an "affiliate," as defined in OTS regulations, other than pursuant to the Stock
Redemption 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 that this covenant shall
not limit the ability of Metropolitan to exercise its rights under the Stock
Option Agreement; (xviii) take any action that would result in any of the
representations and warranties of Metropolitan contained in the Agreement not to
be true and correct in any material respect at the Effective Time; or (xix)
agree to do any of the foregoing.
Pursuant to the Agreement, Washington Federal agreed that during the period
from the date of the Agreement to the Effective Time it shall continue to
conduct its business in a manner designed in its reasonable judgment to enhance
the long-term value of the Washington Federal Common Stock and the business
prospects of Washington Federal. In addition, under the terms of the Agreement,
Washington Federal agreed not to take the following actions, nor permit
Washington Savings to take the following actions, without the prior written
consent of Metropolitan: (i) amend its restated articles of incorporation,
charter or bylaws in a manner which would adversely affect the terms of the
Washington Federal Common Stock or the ability of Washington Federal to
consummate the transactions contemplated by the Agreement; (ii) make any
acquisition or take any other action that individually or in the aggregate could
materially adversely affect the ability of Washington Federal to consummate the
transactions contemplated by the Agreement in a reasonably timely manner; (iii)
declare, set aside, make or pay any dividend or other distribution in respect of
Washington Federal Common Stock, except for regular quarterly cash dividends in
an amount determined by the Board of Directors of Washington Federal in the
ordinary course of business and consistent with past practice; (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 that this
covenant shall not limit the ability of Washington Federal to exercise its
rights under the Stock Option Agreement; (v) take any action that would result
in any of the representations and warranties of Washington Federal contained in
the Agreement not to be true and correct in any material respect at the
Effective Time; or (vi) agree to do any of the foregoing.
Pursuant to the Agreement, Washington Federal and Metropolitan also agreed
to provide the other party and its representatives with such financial data and
other information with respect to its and its subsidiaries' business and
properties as such party
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shall from time to time reasonably request. Each party will cause all nonpublic
financial and business information obtained by it from the other to be treated
confidentially. If the Merger is not consummated, each party will return to the
other all nonpublic financial statements, documents and other materials
previously furnished by such party.
NO SOLICITATION
Pursuant to the Agreement, Metropolitan agreed not to, and to cause its
subsidiaries 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, Metropolitan or
any of its subsidiaries, other than as contemplated by the Agreement; provided,
however, that the Metropolitan Board may furnish such information or participate
in such negotiations or discussions if the Metropolitan Board, 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 the Metropolitan Board to
breach their fiduciary duties under applicable law. Metropolitan shall promptly
inform Washington Federal of any such request for information or of any such
negotiations or discussions, as well to instruct its and its subsidiaries'
directors, officers, representatives and agents to refrain from taking any
action prohibited by the above-described restrictions.
EFFECTIVE TIME OF THE MERGER; TERMINATION AND AMENDMENT
The Effective Time of the Merger shall be the date and time of the filing
of articles of merger with the Secretary of State of Washington pursuant to the
WBCA, unless a later date and time are specified as the effective time in such
articles of merger. The Effective Time shall be as set forth in such articles
of merger, which will be filed only after the receipt of all requisite
regulatory approvals of the Merger, approval of the Agreement by the requisite
vote of the shareholders of Metropolitan and the satisfaction or waiver of all
other conditions to the Merger set forth in the Agreement.
A closing (the "Closing") shall take place immediately prior to the
Effective Time on the fifth business day following the satisfaction or waiver
(to the extent permitted) of all the conditions to consummation of the Merger
specified in the Agreement (other than the delivery of certificates, opinions
and other instruments and documents to be delivered at the Closing), or on such
other date as the parties may mutually agree upon.
The Agreement may be terminated as follows: (i) at any time on or prior to
the Effective Time by the mutual consent in writing of the parties; (ii) at any
time on or prior to the Effective Time by either party in the event of a
material breach by the other party of any material covenant or agreement or
representation and warranty, in any case which would have a material adverse
effect, as defined in the Agreement, and which has not been cured within the
time period specified in the Agreement; (iii) at any time by any party in
writing if any application for any required federal or state regulatory approval
has been
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denied or is approved with any condition or requirement which would prevent
satisfaction of the Regulatory Approval Condition, and the time period for
appeals and requests for reconsideration has run; (iv) at any time by any party
in writing if the shareholders of Metropolitan fail to approve the Agreement at
a meeting duly called for the purpose, unless the failure of such occurrence is
due to the failure of the party seeking to terminate to perform or observe in
any material respect its agreements set forth in the Agreement; (v) by any party
in writing in the event that the Merger is not consummated by July 11, 1997,
provided that this right to terminate shall not be available to any party whose
failure to perform an obligation under the Agreement resulted in the failure of
the Merger to be consummated by such date; and (vi) by Metropolitan at any time
during the three-day period following the Pricing Period if the Average
Washington Federal Price is less than $17.00, subject, however, to the following
three sentences. If Metropolitan elects to exercise its termination right
pursuant to clause (vi) above, it shall give written notice to Washington
Federal (which may be withdrawn by it at any time during the aforementioned
three-day period). During the three-day period commencing with its receipt of
such notice, Washington Federal shall have the option to increase the
consideration to be received by the holders of Metropolitan Common Stock under
the Agreement by adjusting the Exchange Ratio to equal a number (calculated to
the nearest one-thousandth) obtained by dividing (x) $17.00 by (y) the Average
Washington Federal Price. If Washington Federal so elects within such three-day
period, it shall give prompt written notice to Metropolitan of such election and
the revised Exchange Ratio, whereupon no termination shall have occurred
pursuant to clause (vi) above and the Agreement shall remain in effect in
accordance with its terms (except as the Exchange Ratio shall have been so
modified).
Metropolitan may elect not to terminate the Agreement even if the Average
Washington Federal Price is below $17.00 per share. In determining whether to
elect to terminate the Agreement in these circumstances, the Metropolitan Board
will take into account, consistent with its fiduciary duties, all relevant facts
and circumstances existing at the time, including, without limitation, the
market for bank and thrift stocks in general, the relative value of the
Washington Federal Common Stock in the market and the advice of its financial
advisors and legal counsel. By approving the Agreement, the Metropolitan
shareholders would be permitting the Metropolitan Board to determine, in the
exercise of its fiduciary duties, to proceed with the Merger even if the Average
Washington Federal Price of the Washington Federal Common Stock during the
Pricing Period is less than $17.00 per share.
In the event of termination, the Agreement shall become null and void,
except that certain provisions thereof relating to expenses and confidentiality
shall survive any such termination and any such termination shall not relieve
any breaching party from liability for any willful breach of any covenant,
undertaking, representation or warranty giving rise to such termination.
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To the extent permitted under applicable law, the Agreement may be amended
or supplemented at any time by written agreement of the parties whether before
or after the approval of the shareholders of Metropolitan, provided that after
any such approval the Agreement may not be amended or supplemented in a manner
which modifies either the amount or form of the consideration to be received by
Metropolitan's shareholders or otherwise materially adversely affects
Metropolitan's shareholders without further approval by such shareholders.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain directors and executive officers of Metropolitan may be deemed to
have interests in the Merger in addition to their interests as shareholders
generally. The Metropolitan Board was aware of these factors and considered
them, among other matters, in approving the Agreement and the transactions
contemplated thereby.
SEVERANCE ARRANGEMENTS. Pursuant to the Agreement, Washington Federal has
agreed to make a severance payment to each employee of Metropolitan and its
subsidiaries (other than an employee of Metropolitan or its subsidiaries who was
otherwise contractually entitled to receive severance payments from Metropolitan
or its subsidiaries) who (i) becomes an employee of Washington Federal and/or
Washington Federal's subsidiaries and whose employment is terminated on or
following the Effective Time, provided that the employee does not leave the
employ of Washington Federal and/or Washington Federal's subsidiaries prior to
the termination date due to (A) the employee's voluntary resignation or
retirement or (B) the employee's termination for cause, as defined in the
Agreement, or (ii) is offered continued employment by Washington Federal and/or
Washington Federal's subsidiaries following the Effective Time either (A) at a
compensation level which is less than the employee's compensation at
Metropolitan or its 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 Metropolitan and its 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.
INDEMNIFICATION. Pursuant to the Agreement, Washington Federal agreed,
from and after the Effective Time through the sixth anniversary of the Effective
Time, to indemnify and hold harmless each present and former director, officer
and employee of Metropolitan or a Metropolitan 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 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,
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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 Metropolitan or in similar
organizational documents of a Metropolitan subsidiary, in each case as in effect
on the date of the Agreement, 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, Washington Federal also agreed that all limitations of
liability existing in favor of the Indemnified Parties in the Articles of
Incorporation and Bylaws of Metropolitan or in similar organizational documents
of a Metropolitan subsidiary, in each case as in effect on the date of the
Agreement, arising out of matters existing or occurring at or prior to the
Effective Time shall survive the Merger and shall continue in full force and
effect for a period of six years from the Effective Time, provided, however,
that all such rights in respect of any claim asserted or made within such period
shall continue until the final disposition of such claim.
OTHER MATTERS. One of the conditions to Washington Federal's obligation to
consummate the Merger is the distribution of at least 81% of the common stock of
the Mortgage Company, a subsidiary of Metropolitan, to John H. Fairchild, the
Chief Executive Officer of the Mortgage Company, and Sheryl J. Nilson, the Chief
Operating Officer of the Mortgage Company, and the related redemption by
Metropolitan of shares of Metropolitan Common Stock held by Mr. Fairchild and
Ms. Nilson. Pursuant to the terms of the Stock Redemption Agreement among
Metropolitan, Metropolitan Savings, Mr. Fairchild and Ms. Nilson, on or before
the last date for consummating the Merger, Metropolitan will redeem 362,637
shares and 90,659 shares of Metropolitan Common Stock owned by Mr. Fairchild and
Ms. Nilson, respectively, in exchange for (i) the transfer by Metropolitan of
46.5172% and 34.4828% of the outstanding shares of the Mortgage Company to Mr.
Fairchild and Ms. Nilson, respectively; and (ii) the issuance by Metropolitan to
Mr. Fairchild and Ms. Nilson of promissory notes in the principal amount of
$4,145,978 and $373,807, respectively, subject to certain adjustments. Prior to
the closing of the transactions contemplated by the Stock Redemption Agreement,
Metropolitan will transfer certain intangible assets relating to the Mortgage
Company to the Mortgage Company.
Mr. Fairchild is a director of Metropolitan. He abstained from the votes
of the Metropolitan Board approving the Merger and the transaction contemplated
by the Stock Redemption Agreement because of his conflict of interest with
respect to the transactions.
In addition, although not required pursuant to the Agreement, it is
currently contemplated that Patrick F. Patrick, the President and Chief
Executive Officer of Metropolitan, will become an Executive Vice President of
Washington Federal.
Other than as set forth above, no director or executive officer of
Metropolitan has any direct or indirect material interest in the Merger, except
insofar as ownership of Metropolitan Common Stock and options to acquire
Metropolitan Common Stock might be deemed such an interest.
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CERTAIN EMPLOYEE MATTERS
The Agreement provides that as soon as administratively practicable after
the Effective Time, Washington Federal shall take all reasonable action so that
employees of Metropolitan and its subsidiaries shall be entitled to participate
in Washington Federal's employee benefit plans of general applicability, and
until such time Metropolitan's employee benefit plans shall remain in effect,
provided that no employee of Metropolitan or a Metropolitan subsidiary who
becomes an employee of Washington Federal and subject to Washington Federal's
medical insurance plans shall be excluded coverage thereunder on the basis of a
preexisting condition that was not also excluded under Metropolitan's medical
insurance plans, except to the extent such preexisting condition was excluded
from coverage under Metropolitan's medical insurance plans, in which case the
Agreement does not require coverage for such preexisting condition. For
purposes of determining eligibility to participate in and the vesting of
benefits under Washington Federal's employee benefit plans, Washington Federal
shall recognize years of service with Metropolitan and a Metropolitan subsidiary
prior to the Effective Time.
All employees of Metropolitan or a Metropolitan subsidiary as of the
Effective Time shall become employees of Washington Federal or a Washington
Federal subsidiary as of the Effective Time, provided that Washington Federal or
a Washington Federal subsidiary shall have no obligation to continue the
employment of any such person and nothing contained in the Agreement shall give
any employee of Metropolitan or a Metropolitan subsidiary a right to continuing
employment with Washington Federal or a Washington Federal subsidiary after the
Effective Time.
RESALE OF WASHINGTON FEDERAL COMMON STOCK
The Washington Federal Common Stock issued pursuant to the Merger will be
freely transferable under the Securities Act, except for shares issued to any
Metropolitan shareholder who may be deemed to be an affiliate of Washington
Federal for purposes of Rule 144 promulgated under the Securities Act ("Rule
144") or an affiliate of Metropolitan for purposes of Rule 145 promulgated under
the Securities Act ("Rule 145") (each an "Affiliate"). Affiliates will include
persons (generally executive officers, directors and 10% shareholders) who
control, are controlled by or are under common control with (i) Washington
Federal or Metropolitan at the time of the Special Meeting or (ii) Washington
Federal at or after the Effective Time.
Rules 144 and 145 will restrict the sale of Washington Federal Common Stock
received in the Merger by Affiliates and certain of their family members and
related interests. Generally speaking, during the two years following the
Effective Time, those persons who are Affiliates of Metropolitan at the time of
the Special Meeting, provided they are not Affiliates of Washington Federal at
or following the Effective Time, may publicly resell any Washington Federal
Common Stock received by them in the Merger, subject to certain limitations as
to, among other things, the amount of Washington Federal Common Stock sold by
them in any three-month period and as to the manner of sale. After the two-
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year period, such Affiliates may resell their shares without such restrictions
so long as there is adequate current public information with respect to
Washington Federal as required by Rule 144. Persons who are Affiliates of
Washington Federal after the Effective Time may publicly resell the Washington
Federal Common Stock received by them in the Merger subject to similar
limitations and subject to certain filing requirements specified in Rule 144.
The ability of Affiliates to resell shares of Washington Federal Common
Stock received in the Merger under Rule 144 or 145 as summarized herein
generally will be subject to Washington Federal's having satisfied its Exchange
Act reporting requirements for specified periods prior to the time of sale.
Affiliates also would be permitted to resell Washington Federal Common Stock
received in the Merger pursuant to an effective registration statement under the
Securities Act or another available exemption from the Securities Act
registration requirements. This Prospectus/Proxy Statement does not cover any
resales of Washington Federal Common Stock received by persons who may be deemed
to be Affiliates of Washington Federal or Metropolitan in the Merger.
Washington Federal has received from each person who may be deemed to be an
Affiliate (for purposes of Rule 145) of Metropolitan a letter agreement intended
to ensure compliance with the foregoing provisions of the Securities Act.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING DISCUSSION GENERALLY DESCRIBES THE MATERIAL UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES TO HOLDERS OF METROPOLITAN COMMON STOCK AS A
RESULT OF THE MERGER. THE DISCUSSION IS INTENDED AS A GENERAL SUMMARY OF THE
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER TO SUCH
HOLDERS AND IS NOT INTENDED AS A SUBSTITUTE FOR PROFESSIONAL TAX ADVICE THAT
TAKES INTO ACCOUNT THE PARTICULAR CIRCUMSTANCES RELEVANT TO A SPECIFIC HOLDER.
IN ADDITION, HOLDERS SHOULD NOTE THAT THE FOLLOWING DISCUSSION DOES NOT ADDRESS
STATE OR LOCAL TAX CONSIDERATIONS OR TAXATION UNDER THE LAWS OF JURISDICTIONS
OTHER THAN THOSE OF THE UNITED STATES.
THE SUMMARY IS BASED ON THE CODE, ADMINISTRATIVE PRONOUNCEMENTS, JUDICIAL
DECISIONS AND EXISTING AND PROPOSED U.S. TREASURY REGULATIONS, CHANGES TO ANY OF
WHICH SUBSEQUENT TO THE DATE HEREOF MAY AFFECT THE TAX CONSEQUENCES DESCRIBED
HEREIN. THE SUMMARY DISCUSSES ONLY SHARES THAT ARE HELD AS CAPITAL ASSETS
WITHIN THE MEANING OF SECTION 1221 OF THE CODE. IT DOES NOT DISCUSS ALL OF THE
TAX CONSEQUENCES THAT MAY BE RELEVANT TO A HOLDER OF STOCK OR STOCK OPTIONS IN
LIGHT OF SUCH HOLDER'S PARTICULAR CIRCUMSTANCES, OR TO HOLDERS SUBJECT TO
SPECIAL RULES, SUCH AS CERTAIN FINANCIAL INSTITUTIONS, INSURANCE COMPANIES, TAX-
EXEMPT INVESTORS AND DEALERS IN SECURITIES; NOR DOES IT DISCUSS THE TAX
CONSEQUENCES TO A HOLDER THAT, FOR UNITED STATES FEDERAL INCOME TAX PURPOSES,
IS A NON-RESIDENT ALIEN INDIVIDUAL, A FOREIGN CORPORATION, A FOREIGN PARTNERSHIP
OR A FOREIGN ESTATE OR TRUST. HOLDERS SHOULD CONSULT THEIR OWN PROFESSIONAL TAX
ADVISORS WITH REGARD TO THE APPLICATION OF THE UNITED STATES FEDERAL INCOME TAX
LAWS TO THEIR PARTICULAR SITUATIONS.
Elias, Matz, Tiernan & Herrick L.L.P. has rendered an opinion to Washington
Federal and Metropolitan, as set forth below. The opinion of Elias, Matz,
Tiernan & Herrick L.L.P. is not binding upon the Internal Revenue Service, and
there can be no
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assurance that the Internal Revenue Service will not contest the conclusions
expressed in the opinion. The opinion states that Elias, Matz, Tiernan &
Herrick L.L.P. are of opinion, as of the date thereof and under existing law,
for United States federal income tax purposes, as follows:
1. The Merger and the Bank Merger each will constitute a reorganization
within the meaning of Section 368 of the Code and, accordingly, none of
Washington Federal, Washington Savings, Metropolitan Savings or Metropolitan
will recognize any gain or loss as a result of the Merger or the Bank Merger.
2. Except to the extent of cash received in lieu of fractional shares, as
described below, no gain or loss will be recognized by the stockholders of
Metropolitan who in the Merger receive shares of Washington Federal Common Stock
in exchange for their shares of Metropolitan Common Stock.
3. Cash received in lieu of a fractional share interest in Washington
Federal Common Stock will be treated as if the fractional share interest had
been distributed in exchange for shares of Washington Federal Common Stock and
then the fractional share had been redeemed by Washington Federal. The cash
will be treated as a distribution in full payment in exchange for the fractional
share interest, provided the redemption is not essentially equivalent to a
dividend, and will accordingly result in the recognition of gain, if any,
measured by the difference between the portion of the basis of the shares of
Metropolitan Common Stock allocable to such fractional share and the cash
received in full payment therefor. If such shares of Metropolitan Common Stock
are capital assets in the hands of the Metropolitan shareholder, then such gain
will be capital gain.
4. The aggregate basis of the Washington Federal Common Stock received by
a Metropolitan shareholder in the Merger will be the same as the aggregate basis
of the Metropolitan Common Stock surrendered in exchange therefor.
5. The holding period for each share of Washington Federal Common Stock
received by a Metropolitan shareholder in exchange for Metropolitan Common Stock
will include the period for which such shareholder held such Metropolitan Common
Stock, so long as the shareholder's Metropolitan Common Stock is held as a
capital asset at the Effective Time.
6. A Metropolitan shareholder who validly exercises dissenters' rights as
to all such holder's shares of Metropolitan Common Stock and who is not deemed
to be an owner of any shares of Metropolitan Common Stock held by others will
recognize gain or loss measured by the difference between the basis of such
shareholder's dissenting shares and the cash received in exchange therefor.
Such gain or loss will be capital gain or loss, provided that the holder's
dissenting shares are held as a capital asset at the Effective Time.
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These opinions are based upon certain customary representations made by
Metropolitan and Washington Federal and upon certain factual assumptions. If
any of these representations or assumptions is not correct, then each holder of
Metropolitan Common Stock may be required to recognize gain or loss with respect
to each share of Metropolitan Common Stock surrendered in the Merger, equal to
the difference between (i) such shareholder's basis in the share and (ii) the
fair market value of the Washington Federal Common Stock received in exchange
for the share plus the cash received in lieu of any fractional share interest.
In such event, the shareholder's aggregate basis in the shares of Washington
Federal Common Stock received in the exchange would equal the fair market value
of such shares, and the shareholder's holding period for such shares of
Washington Federal Common Stock would not include the period during which the
shareholder had held the Metropolitan shares exchanged therefor. In addition,
Metropolitan would recognize taxable gain in an amount equal to the difference
between the fair market value of its assets and its tax basis in such assets.
ACCOUNTING TREATMENT OF THE MERGER
It is expected that the Merger will be accounted for as a purchase under
generally accepted accounting principles. Under the purchase method of
accounting, the acquired assets and liabilities as of the effective date of the
acquisition are recorded at their respective fair market values and added to
those of Washington Federal. Financial statements of Washington Federal issued
after consummation of the transaction shall reflect such values. Financial
statements of Washington Federal issued before consummation of a transaction
recorded under the purchase method are not restated retroactively to reflect the
historical financial position or results of operations of the acquired assets
and liabilities. The unaudited pro forma financial information contained in
this Prospectus/Proxy Statement has been prepared using the purchase method to
account for the Merger. See "Selected Pro Forma Consolidated Financial Data"
and "Pro Forma Combined Consolidated Financial Information."
EXPENSES OF THE MERGER
The Agreement provides that each party thereto shall each bear and pay all
costs and expenses incurred by it in connection with the transactions
contemplated by the Agreement, including fees and expenses of its own financial
consultants, accountants and counsel, except that expenses of printing the
Registration Statement and the registration fee to be paid to the SEC in
connection therewith shall be shared equally between Washington Federal and
Metropolitan.
STOCK OPTION AGREEMENT
As an inducement and a condition to Washington Federal's entering into the
Agreement, Washington Federal and Metropolitan also entered into the Stock
Option Agreement, pursuant to which Metropolitan, as issuer, granted Washington
Federal, as grantee, the Option, upon the occurrence of certain events (none of
which has occurred as
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of the date hereof to the best of the knowledge of Washington Federal and
Metropolitan), to purchase up to 657,000 shares of Metropolitan Common Stock,
which currently represents 17.7% of the outstanding shares of Metropolitan
Common Stock, at a price of $13.50 per share, subject to adjustment in certain
circumstances and termination within certain periods.
Provided that the holder of the Option (which is initially Washington
Federal) is not in material breach of the Agreement or the Stock Option
Agreement and there is no applicable injunction or order in effect, the holder
of the Option 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 defined in the
Stock Option Agreement), provided that the Option shall terminate and be of no
further force and effect upon the earliest to occur of (i) the Effective Time,
(ii) termination of the Agreement in accordance with its terms prior to the
occurrence of a Purchase Event or a Preliminary Purchase Event (as defined in
the Stock Option Agreement), other than a termination of the Agreement by
Washington Federal as a result of Metropolitan having breached a material
covenant or obligation in the Agreement (a "Default Termination"); (iii) 12
months after termination of the Agreement by Washington Federal pursuant to a
Default Termination, and (iv) 12 months after termination of the Agreement
(other than pursuant to a Default Termination) following the occurrence of a
Purchase Event or a Preliminary Purchase Event. The purchase of any shares of
Metropolitan Common Stock pursuant to the Stock Option Agreement is subject to
compliance with applicable law, including the receipt of necessary approvals
under the HOLA.
The Stock Option Agreement defines a "Purchase Event" to mean any of the
following events:
(i) without Washington Federal's prior written consent,
Metropolitan 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 Washington Federal or
any subsidiary of Washington Federal) to effect (A) a merger, consolidation
or similar transaction involving Metropolitan or any of its subsidiaries,
(B) other than pursuant to the Stock Redemption Agreement, the disposition,
by sale, lease, exchange or otherwise, of assets of Metropolitan or any of
its subsidiaries representing in either case 15% or more of the
consolidated assets of Metropolitan and its subsidiaries, or (C) the
issuance, sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities
representing 15% or more of the voting power of Metropolitan or any of its
subsidiaries (any of the foregoing an "Acquisition Transaction"); or
(ii) any person (other than Washington Federal or any subsidiary of
Washington Federal) 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) shall have been formed
which beneficially owns or has
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the right to acquire beneficial ownership of, 25% or more of the then
outstanding shares of Metropolitan Common Stock.
The Stock Option Agreement defines a "Preliminary Purchase Event" to
include any of the following events:
(i) any person (other than Washington Federal or any subsidiary of
Washington Federal) shall have commenced (as such term is defined in Rule
14d-2 under the Exchange Act), or shall have filed a registration statement
under the Securities Act with respect to, a tender offer or exchange offer
to purchase any shares of Metropolitan Common Stock such that, upon
consummation of such offer, such person would own or control 10% or more of
the then outstanding shares of Metropolitan Common Stock (such an offer
being referred to as a "Tender Offer" and an "Exchange Offer,"
respectively); or
(ii) (A) the holders of Metropolitan Common Stock shall not have
approved the Agreement at the meeting of such shareholders held for the
purpose of voting on the Agreement, (B) such meeting shall not have been
held or shall have been canceled prior to termination of the Agreement, or
(C) the Metropolitan Board shall have withdrawn or modified in a manner
adverse to Washington Federal the recommendation of the Metropolitan Board
with respect to the Agreement, in each case after it shall have been
publicly announced that any person (other than Washington Federal or any
subsidiary of Washington Federal) 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
certain banking laws for approval to engage in an Acquisition Transaction;
or
(iii) Metropolitan shall have breached any representation, warranty,
covenant or obligation contained in the Agreement and such breach would
entitle Washington Federal to terminate the Agreement in accordance with
its terms (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 Agreement), after (x) a bona fide
proposal is made by any person (other than Washington Federal or any
subsidiary of Washington Federal) to Metropolitan or its shareholders to
engage in an Acquisition Transaction, (y) any person (other than Washington
Federal or any subsidiary of Washington Federal) states its intention to
Metropolitan or its shareholders to make a proposal to engage in an
Acquisition Transaction if the Agreement terminates, or (z) any person
(other than Washington Federal or any subsidiary of Washington Federal)
shall have filed an application or notice with an applicable governmental
authority to engage in an Acquisition Transaction.
52
<PAGE>
As used in the Stock Option Agreement, "person" shall have the meaning
specified in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
The Stock Option Agreement provides that, subject to limitations set forth
therein, the holder of the Option may demand that Metropolitan promptly prepare,
file and keep current a registration statement under the Securities Act covering
the shares of Metropolitan Common Stock subject to the Option ("Option Shares")
and use its reasonable efforts to cause such registration statement to become
effective and remain current in order to permit the disposition of the Option
Shares by such holder.
The Stock Option Agreement provides for adjustment in the number of Option
Shares to reflect any change in Metropolitan Common Stock by reason of a stock
dividend, stock split, split-up, recapitalization, exchange of shares or similar
transaction. The Stock Option Agreement also provides that upon the occurrence
of certain events set forth therein the Option must be converted into, or
exchanged for, an option, at the election of the holder of the Option, covering
the stock of another corporation or Metropolitan (the "Substitute Option"). The
number of shares subject to the Substitute Option and the exercise price per
share will be determined in accordance with a formula set forth in the Stock
Option Agreement.
At the request of a holder of the Option at any time beginning on the first
occurrence of certain events, including, among others, the acquisition by a
third party of beneficial ownership of 50% or more of the outstanding
Metropolitan Common Stock, and ending 12 months thereafter, Metropolitan will
repurchase from the holder of the Option (i) the Option and (ii) all shares of
Metropolitan Common Stock purchased by the holder of the Option pursuant to the
Stock Option Agreement with respect to which such holder then has beneficial
ownership. The manner for determining the repurchase price of the Option and
such shares of Metropolitan Common Stock is set forth in the Stock Option
Agreement.
The Stock Option Agreement is intended to increase the likelihood that the
Merger will be consummated in accordance with the terms of the Agreement and may
have the effect of discouraging competing offers to the Merger.
A Copy of the Stock Option Agreement is included as Annex II to this
Prospectus/Proxy Statement and reference is made thereto for the complete terms
thereof.
STOCKHOLDER AGREEMENT
In conjunction with the Agreement, Washington Federal also entered into a
Stockholder Agreement, dated as of July 11, 1996, with certain of the directors
and senior executive officers of Metropolitan and Metropolitan Savings.
Pursuant to the Stockholder Agreement, a copy of which is included as Annex III
hereto, each of such persons, solely in his or her capacity as a shareholder of
Metropolitan, agreed, among other things, not to sell,
53
<PAGE>
pledge, transfer or otherwise dispose of his or her shares of Metropolitan
Common Stock (which amount to ____% of the shares of such stock outstanding as
of the Record Date) prior to the meeting of shareholders of Metropolitan at
which the Agreement is considered and to vote such shares of Metropolitan Common
Stock in favor of the Agreement. See "Certain Beneficial Owners of Metropolitan
Common Stock."
DISSENTERS' RIGHTS
Shareholders of record of Metropolitan as of the Record Date have the
statutory right to dissent from the Merger and, if the Merger is consummated, to
receive compensation equal to the fair value of their shares in accordance with
Chapter 23B.13 of the WBCA. The text of Chapter 23B.13 of the WBCA is set forth
in full in Annex V attached hereto, which all Metropolitan shareholders are
urged to read in its entirety.
A shareholder electing to exercise his or her statutory appraisal rights (a
"Dissenting Shareholder") must: (i) deliver to Metropolitan before the
shareholder vote on the Agreement a written notice of the Dissenting
Shareholder's intent to demand payment for his or her shares through the
exercise of his or her statutory appraisal rights; and (ii) not vote such shares
in favor of approval of the Agreement. Failure to vote will not constitute a
waiver of appraisal rights. Neither a vote against the proposed Merger nor a
proxy directing such vote will, by itself, satisfy the requirement that a
written notice be delivered to Metropolitan. Written notices of a Dissenting
Shareholder's intent to assert dissenters' rights must be delivered to
Metropolitan before the vote at the Special Meeting, at Metropolitan Bancorp,
1520 4th Avenue, Seattle, Washington 98101-1648, Attention: Edwin C. Hedlund,
Secretary. Within ten days after the Effective Time, Washington Federal, as
Metropolitan's successor, will give notice to each shareholder who has complied
with conditions (i) and (ii) above that the Merger was effective as of the
Effective Time and (A) state where the payment demand must be sent and where and
when certificates must be deposited; (B) supply a form for demanding payment
that includes the date of the first public announcement of the Merger (i.e.,
July 12, 1996) and requires that the Dissenting Shareholder certify whether or
not the person acquired beneficial ownership of the shares before that date; (C)
set a date by which Washington Federal must receive the payment demand, which
date may not be fewer than 30 or more than 60 days after the date the notice is
delivered; and (D) be accompanied by a copy of Chapter 23B.13 of the WBCA.
Shareholders who fail to comply with the procedures set forth in the notice and
more fully described in Annex V will lose their ability to assert dissenters'
rights and will receive shares of Washington Federal Common Stock in exchange
for each share of Metropolitan Common Stock held by such shareholders in
accordance with the terms of the Agreement.
Except as described below, Washington Federal will be required to make
payment of the fair value of the shares owned by each Dissenting Shareholder
within 30 days after the later of the Effective Time of the Merger or the date
the demand for payment has been made. Such payment must be accompanied by (i)
certain recent financial statements with respect to Washington Federal; (ii) an
explanation of how Washington Federal estimated
54
<PAGE>
the fair value of the shares; (iii) an explanation of how the interest was
calculated; (iv) a statement of the Dissenting Shareholder's right to notify
Washington Federal of his or her own estimate of the fair value of the
Dissenting Shareholder's shares and demand payment of such amount; and (v) a
copy of Chapter 23B.13 of the WBCA.
Washington Federal may elect to withhold any required payment from a
Dissenting Shareholder unless the Dissenting Shareholder was the beneficial
owner of the shares before the date set forth in the dissenters' notice as the
date of the first public announcement of the Merger (i.e., July 12, 1996). A
Dissenting Shareholder may notify Washington Federal in writing of his or her
own estimate of the fair value of the Dissenting Shareholder's shares and demand
payment of the Dissenting Shareholder's estimate under certain conditions set
forth in Chapter 23B.13 of the WBCA. A Dissenting Shareholder waives the right
to submit his or her own estimate unless the Dissenting Shareholder notifies
Washington Federal within 30 days of Washington Federal's offer of payment for
such Dissenting Shareholder's shares. If Washington Federal and any such
Dissenting Shareholder fail to agree as to the value of such shares of
Metropolitan Common Stock, Washington Federal may, within 60 days after the
receipt of the payment demand, petition the Superior Court of King County,
Washington for determination of the fair value of the shares held by all
Dissenting Shareholders who have not reached agreement with Washington Federal
as to the value of their shares of Metropolitan Common Stock.
Under such circumstances, the King County Superior Court will appraise the
shares and determine their fair value which may be greater or less than the
consideration offered to the shareholders of Metropolitan under the Agreement.
The court will direct payment by Washington Federal of the fair value of the
shares held by the Dissenting Shareholders, together with accrued interest, if
any. The costs of the proceeding would be determined by the court and assessed
against Washington Federal, except that the court may assess costs, in an amount
the court finds equitable, against the Dissenting Shareholders if the court
finds that the Dissenting Shareholders acted arbitrarily, vexatiously or not in
good faith in demanding payment under RCW 23B.13.280 of the WBCA.
The above summary of Chapter 23B.13 of the WBCA does not purport to be
complete and is qualified in its entirety by reference to such provisions in
Annex V hereto, which should be reviewed carefully by any holder of Metropolitan
Common Stock who wishes to exercises statutory appraisal rights with respect
thereto or who wishes to preserve the right to do so. Failure to comply with
the procedures set forth in Chapter 23B.13 of the WBCA may result in the loss of
appraisal rights.
55
<PAGE>
PRO FORMA COMBINED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed consolidated statement
of financial condition presents the combined statements of financial condition
of Washington Federal and Metropolitan, assuming the Merger was consummated as
of June 30, 1996, and the following unaudited pro forma combined condensed
consolidated statements of operations present the combined consolidated
statements of operations of Washington Federal and Metropolitan assuming the
Merger was consummated as of the beginning of the indicated periods. The Merger
will be accounted for under the purchase method of accounting. For a
description of the purchase method of accounting, see "The Merger - Accounting
Treatment of the Merger." Certain insignificant reclassifications have been
reflected in the pro forma information to conform statement presentations.
The pro forma information presented is not necessarily indicative of the
combined financial position that would have resulted had the Merger been
consummated at June 30, 1996 or the combined results of operations that would
have resulted had the Merger been consummated at the beginning of the indicated
periods, nor is the pro forma information necessarily indicative of the future
financial position or results of operations of the combined entities.
Metropolitan's consolidated financial statements have been restated to reflect
the sale of the Mortgage Company as if the transaction had occurred at the
beginning of the indicated periods. Consummation of the sale of 81% of the
Mortgage Company by Metropolitan is a condition precedent to the Merger.
The pro forma information should be read in conjunction with the historical
consolidated financial statements of Washington Federal and Metropolitan,
including the related notes, incorporated by reference herein and the selected
consolidated and other pro forma financial information, including the notes
thereto, appearing elsewhere in this Prospectus/Proxy Statement. See
"Incorporation of Certain Documents by Reference."
56
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF FINANCIAL CONDITION
WASHINGTON FEDERAL AND METROPOLITAN
JUNE 30, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Sale of
Washington Mortgage Restated Pro Forma Pro Forma
Federal Metropolitan Company Metropolitan Adjustments Combined
---------- ------------ -------- ------------ ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash $ 22,099 $ 10,939 $ (40)(1) $ 10,899 $ (1,463)(d) $ 31,535
Available-for-sale
securities 524,725 199,715 546(1) 200,261 -- 724,986
Held-to-maturity securities 669,339 165,517 165,517 -- 834,856
Loans receivable 3,627,022 339,283 11,372(1) 350,655 -- 3,977,677
Loans held for sale -- 2,417 (646)(1) 1,771 -- 1,771
Investor receivables -- 12,423 (12,423)(1) -- -- --
Interest receivable 34,355 4,798 65(1) 4,863 -- 39,218
Real estate held for sale 33,924 310 -- 310 -- 34,234
FHLB stock 54,312 13,051 -- 13,051 -- 67,363
Premises and equipment, net 40,887 4,454 (479)(1) 3,975 -- 44,862
Costs in excess of net
assets acquired 28,344 4,764 (4,764)(1) -- 12,701(a) 44,045
3,000(b)
Other assets 5,581 3,343 (134)(1) 3,209 -- 8,790
---------- ---------- ---------- ---------- ---------- ----------
Total assets $5,040,588 $ 761,014 $ (6,503) $ 754,511 $ 14,238 $5,809,337
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
LIABILITIES AND STOCKHOLDERS'
EQUITY
Customer accounts $2,498,347 $ 424,031 $ (183)(1) $ 423,848 $ -- $2,922,195
FHLB advances 1,063,500 193,000 -- 193,000 -- 1,256,500
Subordinated debt -- 22,113 -- 22,113 -- 22,113
Other borrowings 809,834 65,591 4,520(2) 70,111 -- 879,945
Federal and state
income taxes 35,680 591 (1,399)(1) (808) -- 34,872
Accrued expenses and
other liabilities 35,732 4,522 -- 4,522 3,000(b) 43,254
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities 4,443,093 709,848 2,938 712,786 3,000 5,158,879
---------- ---------- ---------- ---------- ---------- ----------
Stockholders' equity:
Common Stock 43,984 41 -- 41 (41)(a) 46,742
2,758(a)
Additional paid-in capital 405,181 34,884 -- 34,884 (34,884)(a) 461,038
55,857(a)
Retained earnings 178,626 25,970 (2,572)(1) 23,398 (21,935) 178,626
(1,463)(d)
Valuation reserve for
available-for-sale securities 4,000 (5,652) -- (5,652) -- (1,652)
Treasury stock (34,296) (4,077) (2,349)(1) (10,946) -- (34,296)
(4,520)(2)
10,946(a)
---------- ---------- ---------- ---------- ---------- ----------
Total stockholders' equity 597,495 51,166 (9,441) 41,725 11,238 650,458
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity $5,040,588 $ 761,014 $ (6,503) $ 754,511 $ 14,238 $5,809,337
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
</TABLE>
57
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
WASHINGTON FEDERAL AND METROPOLITAN
NINE MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Sale of
Washington Mortgage Restated Pro Forma Pro Forma
Federal Metropolitan Company Metropolitan Adjustments Combined
---------- ------------ ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 224,676 $ 22,925 $ (379)(4) $ 22,546 $ $ 247,222
Mortgage-backed securities 57,464 17,551 -- 17,551 -- 75,015
Investment securities 17,776 1,227 -- 1,227 -- 19,003
---------- ---------- ---------- ---------- ---------- ----------
Total interest income 299,916 41,703 (379) 41,324 341,240
INTEREST EXPENSE
Customer accounts 98,979 16,242 16,242 -- 115,221
FHLB advances and other borrowings 72,395 12,582 (245)(4) 12,337 84,732
---------- ---------- ---------- ---------- ---------- ----------
Total interest expense 171,374 28,824 (245) 28,579 199,953
---------- ---------- ---------- ---------- ---------- ----------
Net interest income 128,542 12,879 (134) 12,745 141,287
Provision for loan losses 2,060 279 -- 279 -- 2,339
---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision for
loan losses 126,482 12,600 (134) 12,466 138,948
---------- ---------- ---------- ---------- ---------- ----------
OTHER INCOME
Gains on sale of securities 1,444 -- -- -- -- 1,444
Other 3,373 5,573 (3,866)(4) 1,707 5,080
---------- ---------- ---------- ---------- ---------- ----------
Total other income 4,817 5,573 (3,866) 1,707 6,524
OTHER EXPENSE
Compensation and fringe benefits 14,985 4,782 (1,962)(4) 2,820 (1,000)(e) 16,805
Federal insurance premiums 4,144 622 -- 622 4,766
Occupancy expense 2,458 1,813 (587) 1,226 (500)(e) 3,184
Other 6,423 3,516 (275)(3) 2,142 785(c) 8,850
(1,099)(4) (500)(e)
---------- ---------- ---------- ---------- ---------- ----------
Total other expense 28,010 10,733 (3,923) 6,810 (1,215) 33,605
Gains on real estate owned, net 46 -- -- -- -- 46
---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 103,335 7,440 (77) 7,363 1,215 111,913
Income taxes 37,802 2,491 (27) 2,464 700 40,966
---------- ---------- ---------- ---------- ---------- ----------
Income before extraordinary item 65,533 4,949 (50) 4,899 515 70,947
Extraordinary loss on early
extinguishment of debt -- (413) -- (413) -- (413)
---------- ---------- ---------- ---------- ---------- ----------
NET INCOME $ 65,533 $ 4,536 $ (50) $ 4,486 $ 515 $ 70,534
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Net income per share $ 1.53 $ 1.22 $ .02 $ 1.38 $ .01 $ 1.54
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Weighted average number of shares
outstanding, including dilutive
stock options 42,941,851 3,714,749 -- 3,261,452 -- 45,704,072
</TABLE>
58
<PAGE>
PRO FORMA COMBINED CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
WASHINGTON FEDERAL AND METROPOLITAN
YEAR ENDED SEPTEMBER 30, 1995
(UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Sale of
Washington Mortgage Restated Pro Forma Pro Forma
Federal Metropolitan Company Metropolitan Adjustments Combined
---------- ------------ ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans $ 238,086 $ 28,654 $ 209(5) $ 28,863 $ -- $ 266,949
Mortgage-backed securities 84,125 20,716 -- 20,716 -- 104,841
Investment securities 21,555 1,170 -- 1,170 -- 22,725
---------- ---------- ---------- ---------- ---------- ----------
Total interest income 343,766 50,540 209 50,749 -- 394,515
INTEREST EXPENSE
Customer accounts 115,348 20,933 20,933 -- 136,281
FHLB advances and other borrowings 72,905 14,201 144(5) 14,345 -- 87,250
---------- ---------- ---------- ---------- ---------- ----------
Total interest expense 188,253 35,134 144 35,278 -- 223,531
---------- ---------- ---------- ---------- ---------- ----------
Net interest income 155,513 15,406 65 15,471 -- 170,984
Provision for loan losses 6,245 525 -- 525 -- 6,770
---------- ---------- ---------- ---------- ---------- ----------
Net interest income after provision
for loan losses 149,268 14,881 65 14,946 -- 164,214
OTHER INCOME
Gains on sale of securities 4,518 -- -- -- -- 4,518
Other 5,186 6,148 (4,734)(5) 1,414 -- 6,600
---------- ---------- ---------- ---------- ---------- ----------
Total other income 9,704 6,148 (4,734) 1,414 -- 11,118
OTHER EXPENSE
Compensation and fringe benefits 18,627 6,845 (3,401)(5) 3,444 (1,333)(e) 20,738
Federal insurance premiums 5,013 865 -- 865 -- 5,878
Occupancy expense 2,959 3,395 (1,136)(5) 2,259 (667)(e) 4,551
Other 9,482 4,941 (367)(3) 2,188 (667)(e) 12,050
(2,386)(5) 1,047(c)
---------- ---------- ---------- ---------- ---------- ----------
Total other expense 36,081 16,046 (7,290) 8,756 (1,620) 43,217
Gains on real estate owned, net 198 -- -- -- -- 198
---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes 123,089 4,983 2,621 7,604 1,620 132,313
Income taxes 44,746 1,593 890(5) 2,483 933(e) 48,162(e)
---------- ---------- ---------- ---------- ---------- ----------
NET INCOME $ 78,343 $ 3,390 $ 1,731 $ 5,121 $ 687 $ 84,151
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Net income per share $ 1.79 $ .91 $ .53 $ 1.56 $ .01 $ 1.81
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Weighted average number of shares
outstanding, including dilutive
stock options 43,760,638 3,742,444 -- 3,289,147 -- 46,546,317
</TABLE>
59
<PAGE>
NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Adjusting entries required to restate the consolidated financial statements of
Metropolitan as a result of the sale of the Mortgage Company:
(1) Reflects the sale of the Mortgage Company for 158,717 shares of
Metropolitan Common Stock at $14.80 per share. The loss on the sale of
the Mortgage Company is reflected in the Pro Forma Combined Condensed
Consolidated Statement of Financial Condition but not in the Pro Forma
Combined Condensed Consolidated Statements of Operations because it is
nonrecurring. Washington Federal will retain a 19% interest in the
Mortgage Company, but will not have significant influence or control over
the management of the Mortgage Company. The accounting entries below
reflect the elimination of the balance sheet accounts of the Mortgage
Company resulting in a loss on its sale which has been debited to
retained earnings, net of tax.
Debit Credit
---------- ----------
(In Thousands)
Cash -- 40
Investment in the Mortgage Company 1,872 1,326
Loans and contracts 11,372 --
Loans held for sale -- 646
Investor receivables -- 12,423
Interest receivable 65 --
Premises and equipment -- 479
Other assets -- 134
Customer accounts 183 --
Federal and state income taxes 1,399 --
Costs in excess of net assets acquired -- 4,764
Treasury stock 2,349 --
Loss on sale of the Mortgage
Company (3,956,924 x 65%) 2,572 --
(2) Reflects the repurchase of 294,580 shares of Metropolitan Common Stock at
$15.34 per share from the shareholders of the Mortgage Company in exchange
for a promissory note from Metropolitan.
(3) Reflects restatement of goodwill amortization associated with the Mortgage
Company's assets.
60
<PAGE>
(4) Reflects the sale of 81% of the Mortgage Company as a condition precedent
to the Merger requiring restatement of the consolidated financial
statements of Metropolitan by eliminating the operating results of the
Mortgage Company for the nine months ended June 30, 1996. The operating
results eliminated were as follows:
Debit Credit
---------- ----------
(In Thousands)
Interest income-loans 379 --
Other income 3,866 --
Interest expense-FHLB advances and
other borrowings -- 245
Compensation and fringe benefits -- 1,962
Occupancy expense -- 587
Other expense -- 1,099
Income taxes -- 27
(5) Reflects the sale of 81% of the Mortgage Company as a condition precedent
to the Merger requiring restatement of the consolidated financial
statements of Metropolitan by eliminating the operating results of the
Mortgage Company for the year ended September 30, 1995. The operating
results eliminated were as follows:
Debit Credit
---------- ----------
(In Thousands)
Other income 4,734 --
Interest expense-FHLB advances and
other borrowings 144 --
Income taxes 890 --
Interest income-loans -- 209
Compensation and fringe benefits -- 3,401
Occupancy expense -- 1,136
Other expense -- 2,386
61
<PAGE>
Pro forma purchase accounting entries of the Merger:
(a) Reflects elimination of Metropolitan stockholders' equity accounts and
adjustment of paid-in capital and common stock to reflect the market value
of the Washington Federal Common Stock to be issued in the Merger. The
Merger Consideration is based on an assumed Exchange Ratio of 0.847 shares
of Washington Federal Common Stock for each outstanding share of
Metropolitan Common Stock.
The estimated total market value of the Washington Federal Common Stock to
be issued in connection with the Merger is calculated as follows:
Number of shares of Metropolitan Common Stock outstanding 3,710,205
on July 11, 1996
Less Metropolitan Common Stock received from the Mortgage (158,717)
Company shareholders to purchase the Mortgage Company
Less Metropolitan Common Stock repurchased from the (294,580)
Mortgage Company shareholders ----------
Total assumed number of outstanding shares of Metropolitan 3,256,908
Common Stock
Assumed Exchange Ratio .847
Total number of shares of Washington Federal Common Stock 2,758,601
assumed to be issued in the Merger
Assumed market price per share of Washington Federal 21.25
Common Stock ----------
Total market value of Washington Federal Common Stock to $ 58,615
be issued in the Merger (in thousands)
62
<PAGE>
The following entries reflect purchase accounting adjustments to the equity
accounts of the combined entity.
Debit Credit
---------- ----------
(In Thousands)
Common stock - Metropolitan 41 --
Paid-in capital - Metropolitan 34,884 --
Retained earnings - Metropolitan 22,300 --
Costs in excess of net assets acquired 9,987
Treasury stock - Metropolitan -- 8,597
Common stock - Washington Federal -- 2,758
Paid-in capital - Washington Federal -- 55,857
(b) Reflects $3.0 million of estimated acquisition costs related to the Merger.
Such costs include professional fees, severance costs and miscellaneous
other costs. The effect of these charges has been reflected in the Pro
Forma Combined Condensed Consolidated Statement of Financial Condition but
not in the Pro Forma Combined Condensed Consolidated Statements of
Operations because it is nonrecurring.
(c) Reflects amortization of goodwill (amortized over a 15-year period).
(d) Reflects compensation, net of taxes, for Metropolitan stock options
exchanged for cash payments representing the difference between the
purchase price of $18.00 for each share less the exercise price after
deducting required withholding taxes. Metropolitan had 332,850 stock
options exercisable at $11.50 per share.
(e) Reflects direct cost reductions as a result of the Merger, primarily
attibutable to declines in employee compensation and fringe benefits.
DESCRIPTION OF WASHINGTON FEDERAL CAPITAL STOCK
Washington Federal is authorized to issue up to 100,000,000 shares of
Washington Federal Common Stock and up to 5,000,000 shares of preferred stock,
par value $1.00 per share ("Washington Federal Preferred Stock"). The capital
stock of Washington Federal does not represent or constitute a deposit account
and is not insured by the FDIC.
The following description of the Washington Federal capital stock does not
purport to be complete and is qualified in all respects by reference to the
Restated Articles of Incorporation ("Articles") and Bylaws of Washington Federal
and the WBCA.
63
<PAGE>
WASHINGTON FEDERAL COMMON STOCK
GENERAL. Each share of Washington Federal Common Stock has the same
relative rights and is identical in all respects with each other share of
Washington Federal Common Stock. The Washington Federal Common Stock is not
subject to call for redemption and, upon receipt by Washington Federal of the
shares of Metropolitan Common Stock surrendered in exchange for Washington
Federal Common Stock, each share of Washington Federal Common Stock offered
hereby will be fully paid and non-assessable.
VOTING RIGHTS. Except as provided in any resolution or resolutions adopted
by the Board of Directors of Washington Federal establishing any series of
Washington Federal Preferred Stock, the holders of Washington Federal Common
Stock possess exclusive voting rights in Washington Federal. Each holder of
Washington Federal Common Stock is entitled to one vote for each share held on
all matters voted upon by shareholders, and shareholders are permitted to
cumulate votes in elections of directors.
DIVIDENDS. Subject to the rights of the holders of any series of
Washington Federal Preferred Stock, the holders of the Washington Federal Common
Stock are entitled to such dividends as may be declared from time to time by the
Board of Directors of Washington Federal out of funds legally available
therefor.
PREEMPTIVE RIGHTS. Holders of Washington Federal Common Stock do not have
any preemptive rights with respect to any shares which may be issued by
Washington Federal in the future; thus, Washington Federal may sell shares of
Washington Federal Common Stock without first offering them to the then holders
of the Washington Federal Common Stock.
LIQUIDATION. In the event of any liquidation, dissolution or winding up of
Washington Federal, the holders of the Washington Federal Common Stock would be
entitled to receive, after payment of all debts and liabilities of Washington
Federal, all assets of Washington Federal available for distribution, subject to
the rights of the holders of any Washington Federal Preferred Stock which may be
issued with a priority in liquidation or dissolution over the holders of the
Washington Federal Common Stock.
WASHINGTON FEDERAL PREFERRED STOCK
The Board of Directors of Washington Federal is authorized to issue
Washington Federal Preferred Stock and to fix and state voting powers,
designations, preferences or other special rights of such shares and the
qualifications, limitations and restrictions thereof. The Washington Federal
Preferred Stock may be issued in distinctly designated series, may be
convertible into Washington Federal Common Stock and may rank prior to the
Washington Federal Common Stock as to dividend rights, liquidation preferences,
or both.
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The authorized but unissued shares of Washington Federal Preferred Stock
(as well as the authorized but unissued and unreserved shares of Washington
Federal Common Stock) are available for issuance in future mergers or
acquisitions, in a future public offering or private placement or for other
general corporate purposes. Except as otherwise required to approve the
transaction in which the additional authorized shares of Washington Federal
Preferred Stock (as well as Washington Federal Common Stock) would be issued,
shareholder approval generally would not be required for the issuance of these
shares. Depending on the circumstances, however, shareholder approval may be
required pursuant to the requirements for continued listing of the Washington
Federal Common Stock on the NASDAQ or the requirements of any exchange on which
the Washington Federal Common Stock may then be listed.
OTHER PROVISIONS
Certain provisions of Washington Federal's Articles and Bylaws which deal
with matters of corporate governance and rights of shareholders might be deemed
to have a potential anti-takeover effect. These provisions, which are described
under "Comparison of the Rights of Shareholders" below, provide, among other
things, (i) that the Board of Directors of Washington Federal shall be divided
into three classes; (ii) that special meetings of shareholders may only be
called by the Chairman of the Board, President, by a majority of the Board of
Directors of Washington Federal or upon written request by the holders of 10% or
more of the outstanding capital stock of Washington Federal; (iii) that
shareholders generally must provide Washington Federal advance notice of
shareholder proposals and nominations for director and provide certain specified
related information; and (iv) for the authority of the Washington Federal Board
to issue shares of authorized but unissued Washington Federal Common Stock and
Washington Federal Preferred Stock and to establish the terms of any one or more
series of Washington Federal Preferred Stock, including voting rights. In
addition to the foregoing, and also as described under "Comparison of the Rights
of Shareholders" below, the WBCA generally restricts Washington Federal's
ability to engage in certain significant business transactions with an
"acquiring person" (defined generally as a person or affiliated group who
acquires 10% or more of the outstanding voting securities of Washington
Federal).
The foregoing provisions of the Articles and Bylaws of Washington Federal
and the WBCA could have the effect of discouraging an acquisition of Washington
Federal or purchases of shares of Washington Federal Common Stock in furtherance
of an acquisition, and could accordingly, under certain circumstances,
discourage transactions which might otherwise have a favorable effect on the
price of Washington Federal Common Stock.
TRANSFER AGENT
The transfer agent and registrar for the Washington Federal Common Stock is
Chase Mellon Shareholder Services, San Francisco, California.
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<PAGE>
COMPARISON OF THE RIGHTS OF SHAREHOLDERS
The rights of holders of Washington Federal Common Stock are governed by
the WBCA and Washington Federal's Articles and Bylaws, while the rights of
holders of Metropolitan Common Stock are governed by the WBCA and Metropolitan's
Articles of Incorporation ("Articles") and Bylaws. Upon consummation of the
Merger, shareholders of Metropolitan will become shareholders of Washington
Federal and their rights as shareholders of Washington Federal will be governed
by the Articles and Bylaws of Washington Federal and the WBCA.
THE FOLLOWING SUMMARY IS NOT INTENDED TO BE A COMPLETE STATEMENT OF THE
DIFFERENCES AFFECTING THE RIGHTS OF METROPOLITAN'S SHAREHOLDERS, BUT RATHER
SUMMARIZES THE MORE SIGNIFICANT DIFFERENCES AFFECTING THE RIGHTS OF SUCH
SHAREHOLDERS AND CERTAIN IMPORTANT SIMILARITIES; THE SUMMARY IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO THE ARTICLES AND BYLAWS OF METROPOLITAN, THE ARTICLES
AND BYLAWS OF WASHINGTON FEDERAL AND APPLICABLE LAWS AND REGULATIONS.
AUTHORIZED CAPITAL STOCK
METROPOLITAN. Metropolitan's Articles authorize the issuance of up to
40,000,000 shares of Metropolitan Common Stock, of which _________ shares were
outstanding as of the Record Date, and up to 10,000,000 shares of preferred
stock, $0.01 par value per share ("Metropolitan Preferred Stock"), of which no
shares are issued and outstanding. The Metropolitan Preferred Stock is issuable
in series, each series having such rights and preferences as the Metropolitan
Board may fix and determine by resolution.
WASHINGTON FEDERAL. Washington Federal's Articles authorize the issuance
of up to 100,000,000 shares of Washington Federal Common Stock, of which
__________ shares were outstanding as of the Record Date, and up to 5,000,000
shares of Washington Federal Preferred Stock, of which no shares are issued and
outstanding. The Washington Federal Preferred Stock is issuable in series, each
series having such rights and preferences as the Washington Federal Board may
fix and determine by resolution.
ISSUANCE OF CAPITAL STOCK
Under the WBCA, Metropolitan and Washington Federal may issue shares of
their capital stock and rights or options for the purchase of shares of their
capital stock on such terms and for such consideration as may be determined by
the respective Boards. Neither the WBCA nor Metropolitan's Articles and Bylaws
or Washington Federal's Articles or Bylaws require shareholder approval of any
such actions. However, the Bylaws of the NASD generally require corporations,
such as Metropolitan and Washington Federal, with securities which are quoted on
the NASDAQ to obtain shareholder approval of certain issuances of common stock
and most stock compensation
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<PAGE>
plans for directors, officers and key employees of the corporation. Shareholder
approval of stock-related compensation plans also may be sought in certain
instances in order to qualify such plans for favorable federal income tax and
securities law treatment under current laws and regulations.
Holders of capital stock of Metropolitan and Washington Federal are not
entitled to pre-emptive rights with respect to any shares of their respective
capital stock which may be issued.
VOTING RIGHTS
METROPOLITAN. Each share of Metropolitan Common Stock is entitled to one
vote per share on all matters properly presented at meetings of shareholders of
Metropolitan. Holders of Metropolitan Common Stock are not permitted to
cumulate votes in elections of directors.
WASHINGTON FEDERAL. Each share of Washington Federal Common Stock is
entitled to one vote per share on all matters properly presented at meetings of
shareholders of Washington Federal. Holders of Washington Federal Common Stock
are permitted to cumulate votes in elections of directors.
For additional information relating to voting rights, see "Mergers,
Consolidations and Sales of Assets" and "Business Combinations with Certain
Shareholders" below.
PAYMENT OF DIVIDENDS
Both Metropolitan and Washington Federal can pay dividends on their
outstanding shares in accordance with the terms of the WBCA. The WBCA generally
provides that, subject to any restrictions in the corporation's articles of
incorporation, a board of directors of a corporation may authorize and the
corporation may make distributions to its shareholders, provided that no
distribution may be made if, after giving it effect, (i) the corporation would
not be able to pay its debts as they become due in the usual course of business
or (ii) the corporation's total assets would be less than the sum of its total
liabilities plus, unless the articles of incorporation permit otherwise, the
amount that would be needed, if the corporation were to be dissolved at the time
of distribution, to satisfy the preferential rights upon dissolution of
shareholders whose preferential rights are superior to those receiving the
distribution.
BOARD OF DIRECTORS
Metropolitan's Articles and Bylaws and the Articles and Bylaws of
Washington Federal respectively require each Board to be divided into three
classes as nearly equal in number as possible and that the members of each class
shall be elected for a term of three years and until their successors are
elected and qualified, with one class being elected annually.
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<PAGE>
Metropolitan's Articles and Washington Federal's Articles respectively
provide that the number of directors shall be determined in the manner provided
in their respective Bylaws, which permit a range in the number of directors from
five to 15 and allow for an increase or decrease in such number by a vote of a
majority of the directors present at a meeting, as long as any decrease in the
number would not shorten the term of any incumbent director.
Under Metropolitan's Bylaws, any vacancy in the Metropolitan Board
(including vacancy resulting from an increase in the number of directors) may be
filled by the shareholders, the Metropolitan Board or the affirmative vote of a
majority of the remaining directors, if such directors are less than a quorum of
the Board, and directors so chosen shall hold office for a term expiring at the
next election of directors by shareholders. Under Washington Federal's Bylaws,
any vacancy occurring in the Washington Federal Board, including any vacancy
created by reason of an increase in the number of directors, similarly may be
filled by a majority vote of the remaining directors, and any director so chosen
shall hold office until the next shareholders' meeting at which directors are
elected and until his or her successor is elected and qualified.
Under Metropolitan's Bylaws, any director may be removed only for cause and
only by a majority of the votes cast at a meeting of the shareholders called for
that purpose. Washington Federal's Articles provide that any director may be
removed only for cause by the holders of a majority of the outstanding voting
shares of Washington Federal at a duly constituted meeting of shareholders
called expressly for such purpose, provided that a director may not be removed
if the number of votes sufficient to elect the director under cumulative voting
is voted against the director's removal.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND EMPLOYEES
Metropolitan's and Washington Federal's Bylaws each provide that each
person who was, is or is threatened to be made a named party to or is otherwise
involved (including, without limitation, as a witness) in any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative and whether formal or informal (hereinafter a
"proceeding"), by reason of the fact that he is or was a director, officer or
employee of such company or, that being or having been such a director, officer
or an employee of such company, he is or was serving at the request of such
company as a director, officer, partner, trustee, employee or agent of another
corporation or of a partnership, joint venture, trust, employee benefit plan or
other enterprise (hereinafter an "indemnitee"), shall be indemnified and held
harmless by such company against all expense, liability and loss actually and
reasonably incurred or suffered by such indemnitee in connection therewith, and
such indemnification shall continue as to an indemnitee who has ceased to be a
director, officer, partner, trustee, employee or agent and shall inure to the
benefit of the indemnitee's heirs, executors and administrators. No
indemnification shall be provided to any indemnitee, however, for acts or
omissions of the indemnitee finally adjudged to be intentional misconduct or a
knowing violation of law, for conduct of the
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<PAGE>
indemnitee finally adjudged to be in violation of the provision of the WBCA
dealing with distributions to shareholders, for any transaction with respect to
which it was finally adjudged that such indemnitee personally received a benefit
in money, property or services to which the indemnitee was not legally entitled
or if such company is otherwise prohibited by applicable law from paying such
indemnification.
The rights of indemnification provided in each of Metropolitan's Bylaws and
Washington Federal's Bylaws are not exclusive of any other rights that may be
available under Metropolitan's Bylaws and Washington Federal's Bylaws,
respectively, any insurance or other agreement, by vote of shareholders or
disinterested directors or otherwise. In addition, Metropolitan's and
Washington Federal's respective Bylaws authorize each company to maintain
insurance on behalf of any person who is or was a director, officer or employee
of such company, whether or not such company would have the power to provide
indemnification to such person. By action of the respective Boards, each
company may create and fund a trust fund or fund of any nature, and may enter
into agreements with its officers and directors, for securing or insuring in any
manner its obligation to indemnify or advance expenses provided for in the
provisions in its respective Bylaws regarding indemnification.
SPECIAL MEETINGS OF SHAREHOLDERS
Washington Federal's Bylaws provide that special meetings of the
shareholders of Washington Federal may be called by the Chairman, President, a
majority of the Board of Directors or the holders of not less than one-tenth of
the outstanding capital stock of Washington Federal entitled to vote at the
meeting. The Bylaws of Metropolitan provide the same with respect to special
meetings of shareholders of Metropolitan, except that any such special meeting
may be called by the holders of not less than 20% of the outstanding capital
stock of Metropolitan entitled to vote at the meeting.
SHAREHOLDER NOMINATIONS
METROPOLITAN. Metropolitan's Bylaws provide that nominations by
shareholders for election as a director must be made in writing and delivered or
mailed to the Secretary of Metropolitan (i) not less than 60 days or more than
90 days prior to the date of the scheduled annual meeting, provided, however,
that if less than 60 days' notice or prior public disclosure of the date of the
scheduled annual meeting is given or made, notice by the shareholder to be
timely must be so delivered or received not later than the tenth day following
the day on which such notice of the date of the scheduled annual meeting was
mailed or the day on which such public disclosure was made or (ii) with respect
to an election to be held at a special meeting of the shareholders, by the close
of business on the seventh business day following the date on which notice of
such meeting is first given to shareholders. A shareholder's notice shall set
forth the information specified in Metropolitan's Bylaws.
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<PAGE>
WASHINGTON FEDERAL. Washington Federal's Bylaws provide that nominations
by shareholders for election as a director must be made in writing and delivered
or mailed to the Secretary of Washington Federal not later than (i) 90 days
prior to the anniversary date of the mailing of proxy materials by Washington
Federal in connection with the immediately preceding annual meeting, and (ii)
with respect to an election to be held at a special meeting of shareholders for
the election of directors, the close of business on the tenth day following the
date on which notice of such meeting is first given to shareholders. A
shareholder's notice shall set forth the information specified in Washington
Federal's Bylaws.
SHAREHOLDER PROPOSALS
METROPOLITAN. Metropolitan's Bylaws provide that a proposal by
shareholders for submission to a vote of shareholders at an annual meeting must
be delivered to, or mailed and received by, the Secretary of Metropolitan not
less than 60 days or more than 90 days prior to the scheduled annual meeting,
provided, however, that if less than 60 days' notice or prior public disclosure
of the date of the scheduled annual meeting is given or made, notice by the
shareholder to be timely must be so delivered or received not later than the
tenth day following the day on which such notice of the date of the scheduled
annual meeting was mailed or the day on which public disclosure was made. A
shareholder's notice shall set forth as to each matter the shareholder proposes
to bring before the annual meeting the information specified in Metropolitan's
Bylaws.
WASHINGTON FEDERAL. Washington Federal's Bylaws provide that a proposal by
shareholders for submission to a vote of shareholders at an annual meeting must
be made in writing and delivered or mailed to the Secretary of Washington
Federal not less than 90 days prior to the anniversary date of the mailing of
proxy materials by Washington Federal in connection with the immediately
preceding annual meeting. A shareholder's notice shall set forth as to each
matter the shareholder proposes to bring before the annual meeting the
information specified in Washington Federal's Bylaws.
SHAREHOLDER'S RIGHT TO EXAMINE BOOKS AND RECORDS
Neither Metropolitan's Articles or Bylaws nor Washington Federal's Articles
or Bylaws address a shareholder's right to examine the books and records of such
respective company. Nevertheless, the WBCA provides that a shareholder of
either Metropolitan or Washington Federal may inspect and copy certain records
of such company if the shareholder gives written notice to such company at least
five business days before the date on which the shareholder wishes to inspect
and copy such records. The WBCA also provides that shareholders of either
Metropolitan or Washington Federal may inspect and copy certain other records of
such respective company upon the notice to the company if the shareholder's
demand is made in good faith and for a proper purpose, the shareholder
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describes with reasonable particularity the shareholder's purpose and the
records the shareholder desires to inspect, and the records are directly
connected with the shareholder's purpose.
MERGERS, CONSOLIDATIONS AND SALES OF ASSETS
The WBCA generally requires the approval of the board of directors of a
company and the holders of two-thirds of the outstanding stock of a company
entitled to vote thereon for mergers or consolidations, share exchanges and
sales, leases, exchanges or other dispositions of all or substantially all of a
company's assets other than in the usual and regular course of business. The
WBCA permits a company to merge with another corporation without obtaining the
approval of the shareholders of the surviving corporation if: (i) the articles
of incorporation of the surviving corporation will not differ in any respect,
subject to certain exceptions; (ii) each share of the corporation outstanding
immediately prior to the effective date of the merger is to continue as, or to
be converted into, an identical share of the surviving or new corporation after
the effective date of the merger; and (iii) the number of voting shares or
shares entitling a holder to participate in distributions that are outstanding
immediately following the merger, plus the number of such shares issuable in
connection with the merger, do not exceed the number of such shares authorized
by the articles of incorporation of the surviving corporation immediately prior
to the effective date of the merger. The WBCA permits a company to merge a
subsidiary into itself without approval of the shareholders of either
corporation if the company owns at least 90% or more of the outstanding shares
of each class of the subsidiary.
BUSINESS COMBINATIONS WITH CERTAIN SHAREHOLDERS
Neither Metropolitan's Articles or Bylaws nor Washington Federal's Articles
or Bylaws include a "fair price" provision because of certain provisions of the
WBCA which are applicable to Washington corporations such as Metropolitan and
Washington Federal. Chapter 23B.19 of the WBCA prohibits, subject to certain
exceptions, a corporation from entering into any "significant business
transaction" with an "Acquiring Person" (defined generally as a person or
affiliated group which acquires 10% or more of the outstanding voting securities
of a corporation) without the prior approval of the corporation's board of
directors for a period of five years after such person or affiliated group
becomes an Acquiring Person.
DISSENTERS' RIGHTS OF APPRAISAL
The rights of appraisal of dissenting shareholders of Metropolitan and
Washington Federal are governed by the WBCA. Pursuant thereto, a shareholder of
a Washington corporation generally has the right to dissent from any merger or
consolidation involving the corporation or the sale of all or substantially all
of the corporation's assets other than in the ordinary course of business if the
shareholder is entitled to vote on the transaction, subject to specified
procedural requirements. A shareholder exercising dissenters' rights is
entitled
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to receive the value of the shares immediately before the action giving rise to
dissenters' rights, excluding any appreciation or depreciation in anticipation
of the corporate action, unless exclusion would be inequitable.
AMENDMENT OF GOVERNING INSTRUMENTS
METROPOLITAN. No amendment of Metropolitan's Articles may be made unless,
to the extent required by the WBCA, it is approved by the shareholders by a vote
of two-thirds of the total votes eligible to be cast at a legal meeting. The
Bylaws of Metropolitan may be altered, amended or repealed by the Metropolitan
Board or by the shareholders by a vote of two-thirds of the total votes eligible
to be cast at a legal meeting; provided, however, that the Metropolitan Board
may not alter, amend or repeal any Bylaw that the shareholders have expressly
provided may not be altered, amended or repealed by the Metropolitan Board.
WASHINGTON FEDERAL. Washington Federal's Articles provide that no
amendment, addition, alteration, change or repeal of the Articles may be made
unless it is first approved by the Washington Federal Board pursuant to a
resolution adopted by the affirmative vote of a majority of the directors then
in office, and, to the extent required by the WBCA or otherwise, thereafter is
approved by the holders of a majority of the shares of Washington Federal
entitled to vote generally in an election of directors. The Bylaws of
Washington Federal may be altered, amended or repealed by the affirmative vote
of a majority of the Washington Federal Board, provided that the Washington
Federal Board may not alter, amend or repeal any Bylaw that the shareholders
have expressly provided, in altering, amending or repealing such Bylaw, may not
be altered, amended or repealed by the Washington Federal Board. The Bylaws of
Washington Federal may also be amended by the affirmative vote of the holders of
a majority of the votes cast by shareholders at an annual or special meeting.
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<PAGE>
CERTAIN BENEFICIAL OWNERS OF WASHINGTON FEDERAL COMMON STOCK
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as to the Washington Federal
Common Stock beneficially owned as of June 30, 1996 by (i) each director and
executive officer of Washington Federal and (ii) all directors and executive
officers of Washington Federal as a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned
as of June 30, 1996(1)
-------------------------
Name of Beneficial Owner Amount Percent
- ------------------------------------------------------ ---------- ----------
<S> <C> <C>
Directors:
Kermit O. Hanson. . . . . . . . . . . . . . . . . . 32,300 --%
W. Alden Harris . . . . . . . . . . . . . . . . . . 110,687 --
Anna C. Johnson . . . . . . . . . . . . . . . . . . 712 --
Harold C. Kean. . . . . . . . . . . . . . . . . . . 43,764 --
Vernon Keener . . . . . . . . . . . . . . . . . . . 9,762 --
E. W. Mersereau, Jr.. . . . . . . . . . . . . . . . 20,079 --
Guy C. Pinkerton. . . . . . . . . . . . . . . . . . 462,292(2) 1.1
Richard C. Reed . . . . . . . . . . . . . . . . . . 96,200 --
Charles R. Richmond . . . . . . . . . . . . . . . . 218,325(2) --
Executive officers who are not directors:
William A. Cassels. . . . . . . . . . . . . . . . . 78,468(2) --
Lawrence D. Cierpiszewski . . . . . . . . . . . . . 16,334(2) --
Ronald L. Saper . . . . . . . . . . . . . . . . . . 7,456(2) --
Keith D. Taylor . . . . . . . . . . . . . . . . . . 51,307 --
All directors and executive officers of
Washington Federal as a group (13 persons). . . . . . 1,147,686(3) 2.7%
</TABLE>
- -------------------------
(1) The number of shares beneficially owned by the persons set forth above is
determined pursuant to rules under Section 13 of the Exchange Act, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, an individual is considered to
beneficially own any shares of Washington Federal Common Stock if he or she
directly or indirectly has or shares: (i) voting power, which includes the
power to vote or to direct the voting of the shares, or (ii) investment
power, which includes the power to dispose or direct the disposition of the
shares. Unless otherwise indicated, an individual has sole voting power and
sole investment power with respect to the indicated shares, and all
individual holdings amount to less than 1% of the outstanding Washington
Federal Common Stock.
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<PAGE>
(2) Includes in the case of Messrs. Pinkerton, Richmond and Cierpiszewski,
options to purchase 48,400, 10,871 and 6,437 shares of Washington Federal
Common Stock, respectively, which are exercisable within 60 days of June
30, 1996, as well as 213,457, 143,723, 6,160, 6,955 and 3,162 shares of
Washington Federal Common Stock, respectively, which are held by Messrs.
Pinkerton, Richmond, Cassels, Cierpiszewski and Saper pursuant to the
Washington Federal Savings Profit Sharing Retirement Plan and Employee
Stock Ownership Plan ("Retirement Plan").
(3) Includes ownership of options to purchase Washington Federal Common Stock
that may be exercised by all directors and executive officers as a group
within 60 days of June 30, 1996, aggregating 65,708 shares. Also includes
373,457 shares held by the Retirement Plan for the benefit of all directors
and executive officers of Washington Federal as a group.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to Washington Federal Common
Stock beneficially owned by each person or entity, including any "group" as that
term is used in Section 13(d)(3) of the Exchange Act, who or which was known by
Washington Federal to be the beneficial owner of 5% or more of the outstanding
Washington Federal Common Stock as of June 30, 1996.
<TABLE>
<CAPTION>
Shares Beneficially Owned
as of June 30, 1996
----------------------------------
Name and Address of Beneficial Owner Amount Percent
- ------------------------------------------------- ------------- -------------
<S> <C> <C>
Sirach Capital Management, Inc. . . . . . . . . . 2,534,079(1) 6.0%
3323 One Union Square
Seattle, Washington 98101
</TABLE>
- --------------------
(1) Based on a Schedule 13G filed pursuant to the Exchange Act, Sirach Capital
Management, Inc. has sole voting and dispositive power with respect to the
indicated shares.
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<PAGE>
CERTAIN BENEFICIAL OWNERS OF METROPOLITAN COMMON STOCK
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as to the Metropolitan Common
Stock beneficially owned as of June 30, 1996 by (i) each director and executive
officer of Metropolitan and (ii) all directors and executive officers of
Metropolitan as a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned
as of June 30, 1996(1)
------------------------------
Name of Beneficial Owner Amount Percent
- ------------------------------------------------------ ------------- -------------
<S> <C> <C>
Directors:
John F. Clearman. . . . . . . . . . . . . . . . . . 10,700(2) --%
David C. Cortelyou. . . . . . . . . . . . . . . . . 9,700(2) --
Allen E. Doan . . . . . . . . . . . . . . . . . . . 39,320(2) 1.1
W. Gordon Dowling . . . . . . . . . . . . . . . . . 110,690(2)(3) 3.0
John H. Fairchild . . . . . . . . . . . . . . . . . 362,637 9.8
Virgil Fassio . . . . . . . . . . . . . . . . . . . 21,700(2) --
H. Dennis Halvorson . . . . . . . . . . . . . . . . 12,500(4) --
Larry O. Hillis . . . . . . . . . . . . . . . . . . 52,926(2) 1.4
John J. Knight. . . . . . . . . . . . . . . . . . . 37,760(2) 1.0
Patrick F. Patrick. . . . . . . . . . . . . . . . . 134,726(5) 3.6
Executive officers who are not directors:
Michael M. Pete . . . . . . . . . . . . . . . . . . 23,000(6) --
Dan P. Abercrombie. . . . . . . . . . . . . . . . . 21,600(7) --
All directors and executive officers of
Metropolitan as a group (12 persons). . . . . . . . . 927,917(8) 24.0%
</TABLE>
- --------------------
(1) The number of shares beneficially owned by the persons set forth above is
determined pursuant to rules under Section 13 of the Exchange Act, and the
information is not necessarily indicative of beneficial ownership for any
other purpose. Under such rules, an individual is considered to
beneficially own any shares of Metropolitan Common Stock if he or she
directly or indirectly has or shares: (i) voting power, which includes the
power to vote or to direct the voting of the shares, or (ii) investment
power, which includes the power to dispose or direct the disposition of the
shares. Unless otherwise indicated, an individual has sole voting power
and sole investment power with respect to the indicated shares and all
individual holdings amount to less than 1% of the outstanding Metropolitan
Common Stock.
(2) Includes options to purchase 6,600 shares exercisable within 60 days of
June 30, 1996.
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<PAGE>
(3) Includes 3,090 shares owned by Mr. Dowling directly. Also includes 90,000
shares owned in partnership with Mr. Herman Anderson and 11,000 shares
owned by Mr. Anderson for which Mr. Dowling holds voting rights.
(4) Includes options to purchase 4,400 shares exercisable within 60 days of
June 30, 1996.
(5) Includes options to purchase 60,500 shares exercisable within 60 days of
June 30, 1996.
(6) Includes options to purchase 20,000 shares exercisable within 60 days of
June 30, 1996.
(7) Includes options to purchase 17,600 shares exercisable within 60 days of
June 30, 1996.
(8) Includes 90,659 shares that are held by Sheryl J. Nilson, an executive
officer of a subsidiary of Metropolitan.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth information as to Metropolitan Common Stock
beneficially owned by each person or entity, including any "group" as that term
is used in Section 13(d)(3) of the Exchange Act, who or which was known by
Metropolitan to be the beneficial owner of 5% or more of the outstanding
Metropolitan Common Stock as of June 30, 1996.
<TABLE>
<CAPTION>
Shares Beneficially Owned
as of June 30, 1996
------------------------------
Name and Address of Beneficial Owner Amount Percent
- ------------------------------------------------------------ ------------- -------------
<S> <C> <C>
Heartland Advisors, Inc. . . . . . . . . . . . . . . . . . . 468,950(1) 12.6%
790 N. Milwaukee Street
Milwaukee, Wisconsin 53202
</TABLE>
- --------------------
(1) Based on a Schedule 13G filed pursuant to the Exchange Act, Heartland
Advisors, Inc. has sole dispositive power with respect to the indicated
shares and sole voting power with respect to 379,000 of such shares.
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<PAGE>
LEGAL OPINION
The validity of the Washington Federal Common Stock offered hereby will be
passed upon for Washington Federal by Elias, Matz, Tiernan & Herrick L.L.P.,
Washington, D.C.
EXPERTS
The consolidated financial statements of Washington Federal as of September
30, 1995 and 1994, and for each of the years in the three-year period ended
September 30, 1995 incorporated by reference herein and elsewhere in the
Registration Statement from the Washington Federal Annual Report on Form 10-K,
have been audited by Deloitte & Touche LLP, independent auditors-accountants, as
stated in their report, which is incorporated by reference herein, and has been
so incorporated in reliance upon the report of such firm given upon their
authority as experts in accounting and auditing.
The consolidated financial statements of Metropolitan as of March 31, 1996
and 1995, and for each of the years in the three-year period ended March 31,
1996 incorporated by reference herein and elsewhere in the Registration
Statement from the Metropolitan Annual Report on Form 10-K, have been audited by
Deloitte & Touche LLP, independent auditors-accountants, as stated in their
report, which is incorporated by reference herein, and has been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
Representatives of Deloitte & Touche LLP are expected to be at the Special
Meeting and will be available to respond to questions, and will also have the
opportunity to make a statement at such time if they desire to do so.
PROPOSALS FOR THE 1997
ANNUAL MEETING
Any proposal which a shareholder of Metropolitan wishes to present at
Metropolitan's 1997 Annual Meeting of Shareholders, which absent prior
consummation of the Merger is scheduled to be held in July 1997, must be
received at the principal executive offices of Metropolitan Bancorp, 1520 4th
Avenue, Seattle, Washington 98101-1648, Attention: Secretary, between April 17,
1997 and May 18, 1997, to be eligible for inclusion in Metropolitan's proxy
statement and on the form of proxy relating to such meeting. If such proposal
is in compliance with all of the requirements of Rule 14a-8 under the Exchange
Act, it will be included in the proxy statement and set forth on the form of
proxy issued for the next annual meeting of shareholders. It is urged that any
shareholder proposals be sent certified mail, return-receipt requested.
77
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ANNEX I
AGREEMENT AND PLAN OF MERGER
BETWEEN
WASHINGTON FEDERAL, INC.
AND
METROPOLITAN BANCORP
DATED AS OF JULY 11, 1996
<PAGE>
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 AMENDMENT. . . . . . . . . . . . . . .50
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
iii
<PAGE>
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.
<PAGE>
"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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<PAGE>
"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
3
<PAGE>
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
4
<PAGE>
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
5
<PAGE>
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.
6
<PAGE>
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
7
<PAGE>
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
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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.
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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
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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>
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
and Chief Financial Officer Chief Executive Officer
METROPOLITAN FEDERAL SAVINGS
AND LOAN ASSOCIATION OF
SEATTLE
Attest:
/s/ Edwin C. Hedlund By: /s/ Patrick F. Patrick
- ------------------------------ -------------------------
Name: Edwin C. Hedlund Name: Patrick F. Patrick
Title: Secretary Title: President and Chief
Executive Officer
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>
ANNEX II
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
2
<PAGE>
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
3
<PAGE>
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
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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>
ANNEX III
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 32,720
John F. Clearman 4,100
David C. Cortelyou 3,100
W. Gordon Dowling 104,090
John H. Fairchild 362,637
Virgil Fassio 15,100
H. Dennis Halvorson 8,100
Larry O. Hillis 46,326
John J. Knight 31,160
Patrick F. Patrick 74,225
Michael M. Pete 3,000
<PAGE>
ANNEX IV
[MONTGOMERY SECURITIES LETTERHEAD]
July 11, 1996
Members of the Board of Directors
Metropolitan Bancorp
1520 Fourth Avenue
Seattle, WA 98101-1648
Gentlemen:
We understand that Metropolitan Bancorp, a Washington corporation (the
"Company"), and Washington Federal, Inc., a Washington corporation ("Acquiror"),
propose to enter into an Agreement and Plan of Merger dated July 11, 1996 (the
"Merger Agreement"), pursuant to which the Company will be merged with and into
Acquiror, which will be the surviving entity (the "Merger"). Pursuant to the
Merger, as more fully described in the Merger Agreement provided to us by the
Company and as further described to us by management of the Company, we
understand that each outstanding share of the common stock, $0.01 par value per
share, of the Company (the "Company Common Stock") will become and be converted
into the right to receive the number of shares of the common stock, $1.00 par
value per share, of Acquiror (the "Acquiror Common Stock"), which is equal to
(i) if the Average Acquiror Share Price (as defined in the Merger Agreement) is
equal to or greater than $17.00 but less than $18.00 per share, one share, (ii)
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, or (iii) if the Average
Acquiror Share Price is greater than $24.50 per share, 0.735 shares, subject to
certain adjustments (the "Consideration"). If the Average Acquiror Share Price
is less than $17.00, the Company may terminate the Agreement unless Acquiror
agrees to modify the exchange ratio in the manner described in the Merger
Agreement.
You have asked for our opinion as investment bankers as to whether the
Consideration to be received by the shareholders of the Company pursuant to the
Merger is fair to the shareholders of the Company from a financial point of
view, as of the date hereof. As you are aware, we were not retained to nor did
we advise the Company with respect to alternatives to the Merger or the
Company's underlying decision to proceed with or effect the Merger. Further, we
were not requested to nor did we solicit or assist the Company in soliciting
offers for the Company from other potential acquirors.
<PAGE>
Metropolitan Bancorp
July 11, 1996
Page 2
In connection with our opinion, we have, among other things: (i) reviewed
certain publicly available financial and other data with respect to the Company
and Acquiror, including the consolidated financial statements for recent years
and interim periods to March 31, 1996 and certain other relevant financial and
operating data relating to the Company and Acquiror made available to us from
published sources and from the internal records of the Company and Acquiror;
(ii) reviewed the Merger Agreement; (iii) reviewed certain publicly available
information concerning the trading of, and the trading market for, the Company
Common Stock and the Acquiror Common Stock; (iv) compared the Company and
Acquiror from a financial point of view with certain other companies in the
thrift industry which we deemed to be relevant; (v) considered the financial
terms, to the extent publicly available, of selected recent business
combinations of companies in the thrift industry which we deemed to be
comparable, in whole or in part, to the Merger; (vi) reviewed and discussed with
representatives of the management of the Company and Acquiror certain
information of a business and financial nature regarding the Company and
Acquiror, furnished to us by them; (vii) reviewed and discussed with
representatives of the management of the Company and Acquiror certain financial
forecasts and related assumptions prepared by the Company with respect to the
Company and published by securities analysts with respect to Acquiror; (viii)
made inquiries regarding and discussed the Merger and the Merger Agreement and
other matters related thereto with the Company's counsel; and (ix) performed
such other analyses and examinations as we have deemed appropriate.
In connection with our review, we have relied on the accuracy and
completeness of the foregoing information and have not assumed any obligation
independently to verify such information. With respect to the financial
forecasts for the Company provided to us by its management, with your consent we
have assumed for purposes of our opinion that the forecasts have been reasonably
prepared on bases reflecting the best available estimates and judgments of the
Company's management at the time of preparation as to the future financial
performance of the Company and that they provide a reasonable basis upon which
we can form our opinion. With respect to the financial forecasts for Acquiror
published by securities analysts, based on discussions with representatives of
the management of Acquiror and with your consent we have assumed that they
provide a reasonable basis upon which we can form our opinion. We have also
assumed that there have been no material changes in the Company's or Acquiror's
assets, financial condition, results of operations, business or prospects since
the respective dates of their last financial statements made available to us.
We have relied on advice of counsel to the Company as to all legal and financial
reporting matters with respect to the Company, the Merger and the Merger
Agreement. We are not experts in the evaluation of loan portfolios for purposes
of assessing the adequacy of the allowances for losses with respect thereto and
have assumed, with your consent, that such allowances for each of the Company
and Acquiror are in the aggregate adequate to cover
<PAGE>
Metropolitan Bancorp
July 11, 1996
Page 3
such losses. In addition, we have not assumed responsibility for reviewing any
individual credit files making an independent evaluation, appraisal or physical
inspection of any of the assets (including investment securities) or liabilities
(contingent or otherwise) of the Company or Acquiror, nor have we been furnished
with any such appraisals. Finally, our opinion is based on economic, monetary
and market and other conditions as in effect on, and the information made
available to us as of, the date hereof. Accordingly, although subsequent
developments may affect this opinion, we have not assumed any obligation to
update, revise or reaffirm this opinion.
We have further assumed with your consent that the Merger will be
consummated in accordance with the terms described in the Merger Agreement,
without any further amendments thereto, and without waiver by the Company of any
of the conditions to its obligations thereunder.
In the ordinary course of our business, we actively trade the equity
securities of the Company and Acquiror for our own account and for the accounts
of customers and, accordingly, may at any time hold a long or short position in
such securities. We have also performed various investment banking services for
the Company.
Based upon the foregoing and in reliance thereon, it is our opinion as
investment bankers that the Consideration to be received by the shareholders of
the Company pursuant to the Merger is fair to such shareholders from a financial
point of view, as of the date hereof.
This opinion is furnished pursuant to our engagement letter, dated June 13,
1996. This opinion is addressed to the Board of Directors of the Company and is
not intended to be and shall not be deemed to be a recommendation to any
shareholder as to how such shareholder should vote with respect to the Merger.
This opinion may not be used or referred to by the Company, or quoted or
disclosed to any person in any manner, without our prior written consent. In
furnishing this opinion, we do not admit that we are experts within the meaning
of the term "experts" as used in the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder, nor do we admit that this opinion
constitutes a report or valuation within the meaning of Section 11 of the
Securities Act of 1933, as amended.
Very truly yours,
/s/ Montgomery Securities
MONTGOMERY SECURITIES
<PAGE>
ANNEX V
CHAPTER 23B.13
DISSENTERS' RIGHTS
23B.13.010 DEFINITIONS. --- As used in this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by merger
or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RCW 23B.13.020 and who exercises that right when and in
the manner required by RCW 23B.13.200 through 23B.13.280.
(3) "Fair value," with respect to a dissenter's shares, means the value of
the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair and
equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares to
the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner of
shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
23B.13.020 RIGHT TO DISSENT. --- (1) A shareholder is entitled to dissent
from, and obtain payment of the fair value of the shareholders' shares in the
event of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a party
(i) if shareholder approval is required for the merger by RCW 23B.11.030,
23B.11.080, or the articles of incorporation and the shareholder is entitled to
vote on the merger, or (ii) if the corporation is a subsidiary that is merged
with its parent under RCW 23B.11.040;
(b) Consummation of a plan of share exchange to which the corporation is a
party as the corporation whose shares will be acquired, if the shareholder is
entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all, of
the property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale;
<PAGE>
2
(d) An amendment of the articles of incorporation that materially reduces
the number of shares owned by the shareholder to a fraction of a share if the
fractional share so created is to be acquired for cash under RCW 23B.06.040; or
(e) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to dissent
and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter may not challenge the corporate action
creating the shareholder's entitlement unless the action fails to comply with
the procedural requirements imposed by this title, RCW 25.10.900 through
25.10.955, the articles of incorporation, or the bylaws, or is fraudulent with
respect to the shareholder or the corporation.
(3) The right of a dissenting shareholder to obtain payment of the fair
value of the shareholder's shares shall terminate upon the occurrence of any one
of the following events:
(a) The proposed corporate action is abandoned or rescinded;
(b) A court having jurisdiction permanently enjoins or sets aside the
corporate action; or
(c) The shareholder's demand for payment is withdrawn with the written
consent of the corporation.
23B.13.030 DISSENT OF NOMINEES AND BENEFICIAL OWNERS. --- (1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in the shareholder's name only if the shareholder dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the shareholder asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares as to which the dissenter
dissents and the dissenter's other shares were registered in the names of
different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder does so with respect to all shares of which
such shareholder is the beneficial shareholder or over which such shareholder
has power to direct the vote.
23B.13.200 NOTICE OF DISSENTERS' RIGHTS. --- (1) If proposed corporate
action creating dissenters' rights under RCW 23B.13.020 is submitted to a vote
at a shareholders' meeting, the meeting notice must state that shareholders are
or may be entitled to assert dissenters' rights under this chapter and be
accompanied by a copy of this chapter.
<PAGE>
3
(2) If corporate action creating dissenters' rights under RCW 23B.13.020
is taken without a vote of shareholders, the corporation, within ten days after
the effective date of such corporate action, shall notify in writing all
shareholders entitled to assert dissenters' rights that the action was taken and
send them the dissenters' notice described in RCW 23B.13.220.
23B.13.210 NOTICE OF INTENT TO DEMAND PAYMENT. --- (1) If proposed
corporate action creating dissenters' rights under RCW 23B.13.020 is submitted
to a vote at a shareholders' meeting, a shareholder who wishes to assert
dissenters' rights must (a) deliver to the corporation before the vote is taken
written notice of the shareholder's intent to demand payment for the
shareholder's shares if the proposed action is effected, and (b) not vote such
shares in favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section is not entitled to payment for the shareholder's shares under
this chapter.
23B.13.220 DISSENTERS' NOTICE. --- (1) If proposed corporate action
creating dissenters' rights under RCW 23B.13.020 is authorized at a
shareholders' meeting, the corporation shall deliver a written dissenters'
notice to all shareholders who satisfied the requirements of RCW 23B.13.210.
(2) The dissenters' notice must be sent within ten days after the
effective date of the corporate action, and must:
(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent transfer of the
shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of the
first announcement to news media or to shareholders of the terms of the proposed
corporate action and requires that the person asserting dissenters' rights
certify whether or not the person acquired beneficial ownership of the shares
before that date;
(d) Set a date by which the corporation must receive the payment demand,
which date may not be fewer than thirty nor more than sixty days after the date
the notice in subsection (1) of this section is delivered; and
(e) Be accompanied by a copy of this chapter.
23B.13.230 DUTY TO DEMAND PAYMENT. --- (1) A shareholder sent a
dissenters' notice described in RCW 23B.13.220 must demand payment, certify
whether the shareholder acquired beneficial ownership of the shares before the
date required to be set forth in the dissenters' notice pursuant to RCW
23B.13.220(2)(c), and deposit the shareholder's certificates in accordance with
the terms of the notice.
(2) The shareholder who demands payment and deposits the shareholder's
share certificates under subsection (1) of this section retains all other rights
of a shareholder until the proposed corporate action is effected.
<PAGE>
4
(3) A shareholder who does not demand payment or deposit the shareholder's
share certificates where required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
chapter.
23B.13.240 SHARE RESTRICTIONS.--- (1) The corporation may restrict the
transfer of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is effected or the restriction is
released under RCW 23B.13.260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until the
effective date of the proposed corporate action.
23B.13.250 PAYMENT. --- (1) Except as provided in RCW 23B.13.270, within
thirty days of the later of the effective date of the proposed corporate action,
or the date the payment demand is received, the corporation shall pay each
dissenter who complied with RCW 23B.13.230 the amount the corporation estimates
to be the fair value of the shareholder's shares, plus accrued interest.
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year ending
not more than sixteen months before the date of payment, an income statement for
that year, a statement of changes in shareholders' equity for that year, and the
latest available interim financial statements, if any;
(b) An explanation of how the corporation estimated the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under RCW
23B.13.280; and
(e) A copy of this chapter.
23B.13.260 FAILURE TO TAKE ACTION. --- (1) If the corporation does not
effect the proposed action within sixty days after the date set for demanding
payment and depositing share certificates, the corporation shall return the
deposited certificates and release any transfer restrictions imposed on
uncertificated shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation wishes to undertake the proposed action, it must
send a new dissenters' notice under RCW 23B.13.220 and repeat the payment demand
procedure.
23B.13.270 AFTER-ACQUIRED SHARES. --- (1) A corporation may elect to
withhold payment required by RCW 23B.13.250 from a dissenter unless the
dissenter was the beneficial owner of the shares before the date set forth in
the dissenters' notice as the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of
<PAGE>
5
the shares, plus accrued interest, and shall pay this amount to each dissenter
who agrees to accept it in full satisfaction of the dissenter's demand. The
corporation shall send with its offer an explanation of how it estimated the
fair value of the shares, an explanation of how the interest was calculated, and
a statement of the dissenter's right to demand payment under RCW 23B.13.280.
23B.13.280 PROCEDURE IF SHAREHOLDER DISSATISFIED WITH PAYMENT OR OFFER.
- --- (1) A dissenter may notify the corporation in writing of the dissenter's
own estimate of the fair value of the dissenter's shares and amount of interest
due, and demand payment of the dissenter's estimate, less any payment under RCW
23B.13.250, or reject the corporation's offer under RCW 23B.13.270 and demand
payment of the dissenter's estimate of the fair value of the dissenter's shares
and interest due, if:
(a) The dissenter believes that the amount paid under RCW 23B.13.250 or
offered under RCW 23B.13.270 is less than the fair value of the dissenter's
shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under RCW 23B.13.250 within
sixty days after the date set for demanding payment; or
(c) The corporation does not effect the proposed action and does not
return the deposited certificates or release the transfer restrictions imposed
on uncertified shares within sixty days after the date set forth demanding
payment.
(2) A dissenter waives the right to demand payment under this section
unless the dissenter notifies the corporation of the dissenter's demand in
writing under subsection (1) of this section within thirty days after the
corporation made or offered payment for the dissenter's shares.
23B.13.300 COURT ACTION. --- (1) If a demand for payment under RCW
23B.13.280 remains unsettled, the corporation shall commence a proceeding within
sixty days after receiving the payment demand and petition the court to
determine the fair value of the shares and accrued interest. If the corporation
does not commence the proceeding within the sixty-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the superior court of
the county where a corporation's principal office, or, if none in this state,
its registered office, is located. If the corporation is a foreign corporation
without a registered office in this state, it shall commence the proceeding in
the county in this state where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign corporation was
located.
(3) The corporation shall make all dissenters, whether or not residents of
this state, whose demands remain unsettled, parties to the proceeding as in an
action against their shares and all parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
<PAGE>
6
(4) The corporation may join as a party to the proceeding any shareholder
who claims to be a dissenter but who has not, in the opinion of the corporation,
complied with the provisions of this chapter. If the court determines that such
shareholder has not complied with the provisions of this chapter, the
shareholder shall be dismissed as a party.
(5) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointed them, or in any amendment to it. The
dissenters are entitled to the same discovery rights as parties in other civil
proceedings.
(6) Each dissenter made a party to the proceeding is entitled to judgement
(a) for the amount, if any, by which the court finds the fair value of the
dissenter's shares, plus interest, exceeds the amount paid by the corporation,
or (b) for the fair value, plus accrued interest, of the dissenter's after-
acquired shares for which the corporation elected to withhold payment under RCW
23B.13.270.
23B.13.310 COURT COSTS AND COUNSEL FEES. --- (1) The court in a proceeding
commenced under RCW 23B.13.300 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers appointed by
the court. The court shall assess the costs against the corporation, except
that the court may assess the costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the dissenters
acted arbitrarily, vexatiously, or not in good faith in demanding payment under
RCW 23B.13.280.
(2) The court may also assess the fees and expenses of counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters if the
court finds the corporation did not substantially comply with the requirements
of RCW 23B.13.200 through 23B.13.280;
(b) Against either the corporation or a dissenter, in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously, or not in good faith with respect to
the rights provided by Chapter 23B.13 RCW.
(3) If the courts finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that the
fees for those services should not be assessed against the corporation, the
court may award to these counsel reasonable fees to be paid out of the amounts
awarded the dissenters who were benefited.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The WBCA sets forth certain circumstances under which directors, officers,
employees and agents may be indemnified against liability which they may incur
in their capacity as such. Pursuant thereto, Washington Federal's Bylaws
provide that each person who was, is or is threatened to be made a named party
to or is otherwise involved (including, without limitation, as a witness) in any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative and whether formal or informal
(hereinafter a "proceeding"), by reason of the fact that he is or was a
director, officer or employee of Washington Federal or, that being or having
been such a director, officer or an employee of Washington Federal, he is or was
serving at the request of Washington Federal as a director, officer, partner,
trustee, employee or agent of another corporation or of a partnership, joint
venture, trust, employee benefit plan or other enterprise (hereinafter an
"indemnitee"), shall be indemnified and held harmless by Washington Federal
against all expense, liability and loss actually and reasonably incurred or
suffered by such indemnitee in connection therewith, and such indemnification
shall continue as to an indemnitee who has ceased to be a director, officer,
partner, trustee, employee or agent and shall inure to the benefit of the
indemnitee's heirs, executors and administrators. No indemnification shall be
provided to any indemnitee, however, for acts or omissions of the indemnitee
finally adjudged to be intentional misconduct or a knowing violation of law, for
conduct of the indemnitee finally adjudged to be in violation of the provision
of the WBCA dealing with distributions to shareholders, for any transaction with
respect to which it was finally adjudged that such indemnitee personally
received a benefit in money, property or services to which the indemnitee was
not legally entitled or if Washington Federal is otherwise prohibited by
applicable law from paying such indemnification.
The rights of indemnification provided in Washington Federal's Bylaws are
not exclusive of any other rights that may be available under Washington
Federal's Bylaws, any insurance or other agreement, by vote of shareholders or
disinterested directors or otherwise. In addition, the Bylaws authorize
Washington Federal to maintain insurance on behalf of any person who is or was a
director, officer or employee of Washington Federal, whether or not Washington
Federal would have the power to provide indemnification to such person. By
action of the Board of Directors, Washington Federal may create and fund a trust
fund or fund of any nature, and may enter into agreements with its officers and
directors, for securing or insuring in any manner its obligation to indemnify or
advance expenses provided for in the provisions in the Bylaws regarding
indemnification.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
The exhibits and financial statement schedules filed as a part of this
Registration Statement are as follows:
(a) List of Exhibits:
Exhibit No. Exhibit Location
- ----------- ------- --------
2(a) Agreement and Plan of Merger, dated as of July 11,
1996, between Washington Federal and Metropolitan,
and the Agreement and Plan of Merger, dated as
of July 11, 1996, between Washington Savings and
Metropolitan Savings (1)
2(b) Stock Option Agreement, dated as of July 11, 1996,
between Washington Federal (as grantee) and
Metropolitan (as issuer) (1)
2(c) Stockholder Agreement, dated as of July 11, 1996,
among Washington Federal and certain shareholders of
Metropolitan (1)
3(a) Restated Articles of Incorporation of
Washington Federal (2)
3(b) Bylaws of Washington Federal (2)
4(a) Specimen Common Stock certificate (2)
5 Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding legality of securities being registered E-1
8 Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding certain federal income tax consequences E-2
10(a) 1982 Employee Stock Compensation Program (2)
10(b) 1987 Stock Option and Stock Appreciation Rights Plan (2)
10(c) 1994 Stock Option and Stock Appreciation Rights Plan (2)
21 Subsidiaries of Washington Federal (3)
23(a) Consent of Elias, Matz, Tiernan & Herrick L.L.P.
(contained in the opinion included as Exhibit 5)
23(b) Consent of Deloitte & Touche LLP E-5
23(c) Consent of Montgomery Securities E-6
24 Power of Attorney (included in the signature page to the
initial filing of this Registration Statement)
99 Form of proxy for the Special Meeting E-7
II-2
<PAGE>
- ---------------------------------
(1) Exhibit is incorporated by reference to the Form 8-K report filed by
Washington Federal with the SEC on July 16, 1996. In addition, the exhibit
is attached as an Annex to the Prospectus/Proxy Statement included herein.
(2) Exhibit is incorporated by reference to the Form 8-B Registration Statement
filed by Washington Federal with the SEC on January 26, 1995.
(3) Exhibit is incorporated by reference from Item 1, "Business - Subsidiaries"
of Washington Federal's Annual Report on Form 10-K for the year ended
September 30, 1995.
Washington Federal's compensatory plans or arrangements consist of Exhibit
Nos. 10(a)-(c) listed above.
(b) Financial Statement Schedules.
No financial statement schedules are filed because the required information
is not applicable or is included in the consolidated financial statements or
related notes.
ITEM 22. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes as follows:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
PROVIDED, HOWEVER, that paragraphs (a) (1) (i) and (a) (1) (ii)
do not apply if the registration statement is on Form S-3 or Form S-8,
and the
II-3
<PAGE>
information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the
Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934 that are incorporated by reference in the
registration statement.
(2) That, for purposes of determining any liability under the
Securities Act of 1933, each filing of the Registrant's annual report
pursuant to Section 13(a) or Section 15(d) of the Securities Exchange Act
of 1934 (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in the registration statement shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
(3) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items
of the applicable form.
(4) That every prospectus (i) that is filed pursuant to paragraph (3)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
(5) That, for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(6) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(7) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been
II-4
<PAGE>
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be
governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the prospectus pursuant
to Items 4, 10(b) 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through the
date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Seattle, State of
Washington, on the 21st day of August 1996.
WASHINGTON FEDERAL, INC.
By: /s/ Guy C. Pinkerton
-------------------------------------
Guy C. Pinkerton
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated. Each of the directors and/or officers of
Washington Federal, Inc. whose signature appears below hereby appoints Guy C.
Pinkerton, as his attorney-in-fact to sign in his name and behalf, in any and
all capacities stated below and to file with the Securities and Exchange
Commission any and all amendments, including post-effective amendments, to this
Registration Statement on Form S-4, making such changes in the Registration
Statement as appropriate, and generally to do all such things in their behalf in
their capacities as directors and/or officers to enable Washington Federal, Inc.
to comply with the provisions of the Securities Act of 1933, and all
requirements of the Securities and Exchange Commission.
/s/ Kermit O. Hanson Date: August 21, 1996
- --------------------------------------
Kermit O. Hanson
Director
/s/ W. Alden Harris Date: August 21, 1996
- --------------------------------------
W. Alden Harris
Director
/s/ Anna C. Johnson Date: August 21, 1996
- --------------------------------------
Anna C. Johnson
Director
II-6
<PAGE>
/s/ Harold C. Kean Date: August 21, 1996
- --------------------------------------
Harold C. Kean
Director
/s/ Vernon Keener Date: August 21, 1996
- --------------------------------------
Vernon Keener
Director
/s/ E. W. Mersereau, Jr. Date: August 21, 1996
- --------------------------------------
E. W. Mersereau, Jr.
Director and Vice Chairman of
the Board
/s/ Guy C. Pinkerton Date: August 21, 1996
- --------------------------------------
Guy C. Pinkerton
Chairman, President and Chief
Executive Officer
/s/ Richard C. Reed Date: August 21, 1996
- --------------------------------------
Richard C. Reed
Director
/s/ Charles R. Richmond Date: August 21, 1996
- --------------------------------------
Charles R. Richmond
Director, Executive Vice President
and Secretary
/s/ Ronald L. Saper Date: August 21, 1996
- --------------------------------------
Ronald L. Saper
Executive Vice President and Chief
Financial Officer
(principal financial officer)
/s/ Keith D. Taylor Date: August 21, 1996
- --------------------------------------
Keith D. Taylor
Senior Vice President and Treasurer
(principal accounting officer)
II-7
<PAGE>
Exhibit No. Exhibit Location
- ----------- ------- --------
2(a) Agreement and Plan of Merger, dated as of July 11,
1996, between Washington Federal and Metropolitan,
and the Agreement and Plan of Merger, dated as
of July 11, 1996, between Washington Savings and
Metropolitan Savings (1)
2(b) Stock Option Agreement, dated as of July 11, 1996,
between Washington Federal (as grantee) and
Metropolitan (as issuer) (1)
2(c) Stockholder Agreement, dated as of July 11, 1996,
among Washington Federal and certain shareholders of
Metropolitan (1)
3(a) Restated Articles of Incorporation of
Washington Federal (2)
3(b) Bylaws of Washington Federal (2)
4(a) Specimen Common Stock certificate (2)
5 Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding legality of securities being registered E-1
8 Opinion of Elias, Matz, Tiernan & Herrick L.L.P.
regarding certain federal income tax consequences E-2
10(a) 1982 Employee Stock Compensation Program (2)
10(b) 1987 Stock Option and Stock Appreciation Rights Plan (2)
10(c) 1994 Stock Option and Stock Appreciation Rights Plan (2)
21 Subsidiaries of Washington Federal (3)
23(a) Consent of Elias, Matz, Tiernan & Herrick L.L.P.
(contained in the opinion included as Exhibit 5)
23(b) Consent of Deloitte & Touche LLP E-5
23(c) Consent of Montgomery Securities E-6
24 Power of Attorney (included in the signature page to the
initial filing of this Registration Statement)
99 Form of proxy for the Special Meeting E-7
- ---------------------------------
(1) Exhibit is incorporated by reference to the Form 8-K report filed by
Washington Federal with the SEC on July 16, 1996. In addition, the exhibit
is attached as an Annex to the Prospectus/Proxy Statement included herein.
(2) Exhibit is incorporated by reference to the Form 8-B Registration Statement
filed by Washington Federal with the SEC on January 26, 1995.
(3) Exhibit is incorporated by reference from Item 1, "Business - Subsidiaries"
of Washington Federal's Annual Report on Form 10-K for the year ended
September 30, 1995.
<PAGE>
EXHIBIT 5
August 22, 1996
Board of Directors
Washington Federal, Inc.
425 Pike Street
Seattle, Washington 98101-2334
Re: Registration Statement on Form S-4
3,544,933 Shares of Common Stock
Ladies and Gentlemen:
We have acted as special counsel to Washington Federal, Inc. (the
"Company") in connection with the preparation and filing with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, as amended, of the
registration statement on Form S-4 (the "Registration Statement") relating to
the issuance of up to 3,544,933 shares of the Company's common stock, $1.00 par
value per share (the "Shares"), in connection with the proposed merger of
Metropolitan Bancorp with and into the Company, all as described in the
Registration Statement. As such counsel, we have made such legal and factual
examinations and inquiries as we deemed advisable for the purpose of rendering
this opinion.
Based upon the foregoing, it is our opinion that the Shares, when issued,
delivered and sold in the manner described in the Registration Statement, will
be legally issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Company's Registration Statement, and we consent to the use of our name under
the heading "Legal Opinion" in the Prospectus/Proxy Statement constituting a
part thereof.
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By: /s/ Gerard L. Hawkins
----------------------------------------
Gerard L. Hawkins, a Partner
E-1
<PAGE>
EXHIBIT 8
August 22, 1996
Board of Directors
Washington Federal, Inc.
425 Pike Street
3rd Floor
Seattle, Washington 98101-2334
Board of Directors
Metropolitan Bancorp
1520 4th Avenue
Seattle, Washington 98101-1648
Gentlemen:
We have acted as special counsel to Washington Federal, Inc. ("Washington
Federal"), a Washington corporation, in connection with the following
transactions: (1) the holding company merger (the "Merger") of Metropolitan
Bancorp ("Metropolitan"), a Washington corporation, with and into Washington
Federal, pursuant to the terms of an Agreement and Plan of Merger between
Washington Federal and Metropolitan, dated as of July 11, 1996 (the
"Agreement"); and (2) the bank merger (the "Bank Merger") of Metropolitan
Savings and Loan Association of Seattle, a federally-chartered savings and loan
association and wholly-owned subsidiary of Metropolitan ("Metropolitan
Savings"), with and into Washington Federal Savings and Loan Association, a
federally-chartered savings and loan association and wholly-owned subsidiary of
Washington Federal ("Washington Federal Savings"), pursuant to an Agreement and
Plan of Merger, dated as of July 11, 1996 ("Bank Merger Agreement"). At your
request, and pursuant to Section 6.1(f) of the Agreement, we are rendering our
opinion concerning certain of the income tax consequences of the Merger under
the Internal Revenue Code of 1986, as amended (the "Code"). Terms defined in
the Agreement are used herein as therein defined, unless otherwise defined
herein or required by the context.
E-2
<PAGE>
For purposes of the opinions set forth below, we have relied, with the
consent of Washington Federal, Metropolitan, Washington Federal Savings, and
Metropolitan Savings, upon the accuracy and completeness of the statements and
representations (which statements and representations we have neither
investigated nor verified) contained, respectively, in the certificates of
certain of the officers of Washington Federal, Metropolitan, Washington Federal
Savings, and Metropolitan Savings, copies of which are attached hereto and which
are incorporated herein by reference. In addition, for purposes of such
opinions, we have assumed that the Merger and the Bank Merger will be
consummated in accordance with the terms of the Agreement and the Bank Merger
Agreement and the description thereof contained in the Registration Statement on
Form S-4 filed by Washington Federal with the Securities and Exchange
Commission.
Based on the foregoing, as of the date hereof we are of the opinion that:
(i) The Merger and the Bank Merger each will be treated
as a reorganization within the meaning of Section 368(a) of the Code;
(ii) No gain or loss will be recognized by Washington
Federal, Metropolitan, Washington Federal Savings, or Metropolitan Savings as a
result of the Merger or the Bank Merger;
(iii) Except to the extent of cash received in lieu of
fractional shares, as described below, no gain or loss will be recognized by the
stockholders of Metropolitan who receive shares of common stock of Washington
Federal, par value $1.00 per share in the Merger ("Washington Federal Common
Stock");
(iv) Cash received in lieu of a fractional share of
Washington Federal Common Stock will be treated as if the fractional share had
been initially distributed in exchange for shares of common stock of
Metropolitan, par value $.01 per share ("Metropolitan Common Stock"), and then
had been redeemed by Washington Federal. The cash will be treated as a
distribution in full payment in exchange for the fractional share interest,
provided the redemption is not essentially equivalent to a dividend, and will
accordingly result in the recognition of gain or loss, if any, measured by the
difference between the portion of the basis of the shares of Metropolitan Common
Stock allocable to such fractional share and the cash received in full payment
therefor. If such shares of Metropolitan Common Stock are capital assets in the
hands of the Metropolitan stockholder, then such gain or loss will be capital
gain or capital loss;
E-3
<PAGE>
(v) The aggregate basis of the Washington Federal Common
Stock received by a Metropolitan stockholder in the Merger will be the same as
the aggregate basis of the Metropolitan Common Stock surrendered in exchange
therefor;
(vi) The holding period for each share of Washington
Federal Common Stock received by a Metropolitan stockholder in exchange for
Metropolitan Common Stock will include the period for which such stockholder
held such Metropolitan Common Stock, so long as the stockholder's Metropolitan
Common Stock is held as a capital asset at the Effective Time as defined in the
Agreement; and
(vii) A Metropolitan stockholder who does not vote in
favor of the Merger, who exercises dissenters' rights as to all such holder's
shares of Metropolitan Common Stock and who is not deemed to be an owner of any
shares of Metropolitan Common Stock held by others will recognize gain or loss
measured by the difference between the basis of such stockholder's dissenting
shares and the cash received in exchange therefor. Such gain or loss will be
capital gain or loss, provided that the holder's dissenting shares are held as a
capital asset at the Effective Time as defined in the Agreement.
Our opinions are based on the Code, applicable Treasury Regulations,
current published administrative decisions of the Internal Revenue Service
("IRS") and existing judicial decisions as of the date hereof. No assurance can
be given that legislative, administrative or judicial decisions or
interpretations may not be forthcoming that will significantly change the
opinions set forth herein. Further, our opinion is not binding on the IRS, and
the tax effects discussed above are not subject to absolute resolution prior to
the running of the statute of limitations or the rendering of a final
determination by a court of law or by closing agreement with the IRS.
Very truly yours,
ELIAS, MATZ, TIERNAN & HERRICK L.L.P.
By: /s/ Gerard L. Hawkins
--------------------------------
Gerard L. Hawkins, a Partner
E-4
<PAGE>
EXHIBIT 23(b)
INDEPENDENT AUDITORS' CONSENT
- -------------------------------------------------------------------------------
We consent to the incorporation by reference in this Registration Statement of
Washington Federal, Inc. on Form S-4 of our report dated October 24, 1995,
appearing in the Annual Report of Washington Federal, Inc. on Form 10-K for the
year ended September 30, 1995 and of our report dated May 1, 1996, appearing in
the Annual Report of Metropolitan Bancorp on Form 10-K for the year ended March
31, 1996. We also consent to the references to us under the heading "Experts"
in the Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Seattle, Washington
August 19, 1996
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<PAGE>
EXHIBIT 23(c)
August 20, 1996
Members of the Board of Directors
Metropolitan Bancorp
1520 fourth Avenue
Seattle, WA 98101-1648
Gentlemen:
We hereby consent to the inclusion of our opinion letter dated July 11,
1996 to the Board of Directors of Metropolitan Bancorp (the "Company') regarding
the acquisition of Metropolitan Bancorp by Washington Federal, Inc., in
Washington Federal's Registration Statement on Form S-4 (the "Registration
Statement") and to the references therein to our firm and to our opinion under
the appropriate headings. In giving the foregoing consent, we do not admit (i)
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of the 1933, as amended (the "Securities Act"),
or the rules and regulations of the Securities and Exchange Commission
promulgated thereunder, and (ii) that we are experts with respect to any part of
the Registration Statement within the meaning of the term "experts" as used in
the Securities Act and the rules and regulations of the Securities and Exchange
Commission promulgated thereunder.
Very truly yours,
/s/ Montgomery Securities
MONTGOMERY SECURITIES
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EXHIBIT 99
METROPOLITAN BANCORP
REVOCABLE PROXY
SPECIAL MEETING OF SHAREHOLDERS
___________ __, 1996
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned, as a holder of Common Stock of Metropolitan Bancorp
("Metropolitan"), hereby appoints the Board of Directors of Metropolitan, or any
successors thereto, as Proxies, with full powers of substitution, to represent
and to vote as designated on the reverse of this card all of the shares of
Common Stock of Metropolitan which the undersigned is entitled to vote at the
Special Meeting of Shareholders to be held at _____________________________,
Seattle, Washington, on _________ __, 1996 at __:__ _.m., Pacific Time, or any
adjournment thereof.
THIS PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS EXERCISED.
SHARES OF COMMON STOCK OF METROPOLITAN WILL BE VOTED AS SPECIFIED. UNLESS
OTHERWISE SPECIFIED, THIS PROXY WILL BE VOTED FOR THE PROPOSAL TO ADOPT AN
AGREEMENT AND PLAN OF MERGER, DATED AS OF JULY 11, 1996, BY AND BETWEEN
WASHINGTON FEDERAL, INC. AND METROPOLITAN. IF ANY OTHER MATTER IS PROPERLY
PRESENTED AT THE SPECIAL MEETING OF SHAREHOLDERS, THE PROXY WILL BE VOTED IN
ACCORDANCE WITH THE JUDGMENT OF THE PERSONS APPOINTED AS PROXIES.
IMPORTANT: PLEASE DATE AND SIGN THE PROXY ON REVERSE SIDE.
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PLEASE MARK YOUR CHOICE LIKE THIS [X] IN BLUE OR BLACK INK
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I plan to attend the meeting / /
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1. Proposal to adopt an Agreement and Plan of Merger, dated as of July 11,
1996 (the "Agreement"), by and between Washington Federal, Inc.
("Washington Federal") and Metropolitan Bancorp ("Metropolitan"), which
provides, among other things, for (i) the merger of Metropolitan with and
into Washington Federal (the "Merger") and (ii) the conversion of each
share of common stock of Metropolitan outstanding immediately prior to the
Merger (other than any dissenting shares under Washington law and certain
shares held by Washington Federal) into the right to receive, subject to
possible adjustment under certain circumstances, a number of shares of
Washington Federal common stock which will be determined by applying a
ratio, set forth in the Agreement, which is based on the average closing
price of the Washington Federal common stock over a 20 trading day period
ending on the fifth business day prior to the effective time of the
Merger, plus cash in lieu of any fractional share interest.
FOR AGAINST ABSTAIN
/ / / / / /
THE BOARD OF DIRECTORS OF METROPOLITAN RECOMMENDS A VOTE FOR APPROVAL OF
THE AGREEMENT. SUCH VOTES ARE HEREBY SOLICITED BY THE BOARD OF DIRECTORS.
Dated: __________________________________________, 1996
Signature ______________________________________________
Signature ______________________________________________
(print name)
IMPORTANT: Please sign your name exactly as it appears
hereon. When shares are held as joint tenants, either
may sign. When signing as an attorney, executor,
administrator, trustee or guardian, add such title to
your signature.
NOTE: If you receive more than one proxy card, please
date and sign each card and return all proxy cards in
the enclosed envelope.
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