SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): June 15, 1998
First Savings Bank of Washington Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-26584 91-1632900
_________________ _________ ________________
State or other Commission (I.R.S. Employer
jurisdiction of File Number Identification No.)
incorporation
10 S. First Avenue, Walla Walla, Washington 99362
___________________________________________ __________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (including area code) (509) 527-3636
Not Applicable
______________
(Former name or former address, if changed since last report)
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Item 5. Other Events
_____________________
On June 15, 1998, First Savings Bank of Washington Bancorp, Inc. (the
"Company") and its wholly-owned subsidiary, First Savings Bank of
Washington ("First Savings") entered into an Agreement and Plan of Mergers
("Agreement") with Whatcom State Bancorp, Inc. ("Whatcom") and its
wholly-owned subsidiary, Whatcom State Bank, pursuant to which the Company
will acquire all of the outstanding stock of Whatcom. The Agreement
provides that shareholders of Whatcom will receive .6974 shares of the
Company's common stock in exchange for each share of Whatcom common stock.
The Company will also assume all outstanding Whatcom stock options. The
Company anticipates issuing a maximum of 497,590 shares of common stock in
the transaction. The transaction will be accounted for using the purchase
method of accounting.
Pursuant to the Agreement, Whatcom has agreed to pay the Company a
termination fee of $625,000 in the event the Agreement is terminated under
certain conditions, including the acquisition by a third party of
securities representing 25% or more of the voting shares of Whatcom or the
agreement between Whatcom and a third party to engage in a merger or
consolidation.
Consummation of the acquisition is subject to several conditions,
including receipt of applicable regulatory approval, completion of due
diligence by the Company and approval by Whatcom's shareholders. For
information regarding the terms of the proposed transaction, reference is
made to the Agreement and the press release dated June 15, 1998, which are
attached hereto as Exhibits 2 and 99, respectively, and incorporated herein
by reference.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
___________________________________________________________________________
Exhibit
_______
2 Agreement and Plan of Mergers dated as of June 15,
1998 by and among First Savings Bank of Washington
Bancorp, Inc., First Savings Bank of Washington,
Whatcom State Bancorp, Inc. and Whatcom State Bank.
99 Press Release dated June 15, 1998.
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SIGNATURES
__________
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned, hereunto duly authorized.
FIRST SAVINGS BANK OF WASHINGTON
BANCORP INC.
DATE: June 25, 1997 By: /s/ Gary Sirmon
______________________________
Gary Sirmon
President
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Exhibit 2
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AGREEMENT AND PLAN OF MERGERS
dated as of June 15, 1998
by and among
FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC.
and
FIRST SAVINGS BANK OF WASHINGTON
and
WHATCOM STATE BANCORP, INC.
and
WHATCOM STATE BANK
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TABLE OF CONTENTS Page
AGREEMENT AND PLAN OF MERGERS. . . . . . . . . . . .. . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 1
AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . 1
ARTICLE 1
DEFINITIONS
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2
THE MERGERS AND RELATED MATTERS
2.1 Corporate Merger
(a) Surviving Corporation. . . . . . . . . . . . . . . . . . . 6
(b) Certificate of Incorporation and Bylaws. . . . . . . . . . 6
(c) Effects of the Corporate Merger. . . . . . . . . . . . . . 6
(d) Transfer of Assets . . . . . . . . . . . . . . . . . . . . 6
(e) Assumption of Liabilities. . . . . . . . . . . . . . . . . 6
2.2 The Bank Merger
(a) The Continuing Bank. . . . . . . . . . . . . . . . . . . . 6
(b) Rights, Etc. . . . . . . . . . . . . . . . . . . . . . . . 6
(c) Liabilities. . . . . . . . . . . . . . . . . . . . . . . . 6
(d) Charter; Bylaws; Directors; Officers . . . . . . . . . . . 7
2.3 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . 7
2.4 Conversion of Whatcom Common Stock. . . . . . . . . . . . . . . 7
2.5 Acquiror Common Stock . . . . . . . . . . . . . . . . . . . . . 7
2.6 Dissenting Shares . . . . . . . . . . . . . . . . . . . . . . . 7
2.7 Fractional Shares . . . . . . . . . . . . . . . . . . . . . . . 7
2.8 Anti-Dilution Provisions. . . . . . . . . . . . . . . . . . . . 8
2.9 Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.10 Major Shareholder . . . . . . . . . . . . . . . . . . . . . . . 8
2.11 Exchange of Whatcom Common Stock. . . . . . . . . . . . . . . . 8
2.12 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.13 Reservation of Right to Revise Transaction. . . . . . . . . . . 9
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ACQUIROR
3.1 Organization and Corporate Authority of Acquiror . . . . . . . 10
3.2 Organization and Qualification of First Savings. . . . . . . . 10
3.3 Authorization, Execution and Delivery; Merger Agreement Not in
Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.4 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.5 Government Approvals . . . . . . . . . . . . . . . . . . . . . 11
3.6 Acquiror Financial Statements. . . . . . . . . . . . . . . . . 11
3.7 Absence of Certain Changes . . . . . . . . . . . . . . . . . . 11
(i)
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3.8 Capitalization of Acquiror . . . . . . . . . . . . . . . . . . 11
3.9 Capitalization of First Savings. . . . . . . . . . . . . . . . 12
3.10 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF WHATCOM AND THE BANK
4.1 Organization and Qualification of Whatcom and Subsidiaries . . 12
4.2 Organization and Qualification of the Bank . . . . . . . . . . 12
4.3 Authorization, Execution and Delivery; Merger Agreement Not in
Breach . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.4 No Legal Bar . . . . . . . . . . . . . . . . . . . . . . . . . 13
4.5 Government and Other Approvals . . . . . . . . . . . . . . . . 13
4.6 Compliance With Law. . . . . . . . . . . . . . . . . . . . . . 14
4.7 Charter Documents. . . . . . . . . . . . . . . . . . . . . . . 14
4.8 Financial Statements . . . . . . . . . . . . . . . . . . . . . 14
4.9 Absence of Certain Changes . . . . . . . . . . . . . . . . . . 15
4.10 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.11 Properties . . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.12 Whatcom Subsidiaries . . . . . . . . . . . . . . . . . . . . . 16
4.13 Condition of Fixed Assets and Equipment. . . . . . . . . . . . 16
4.14 Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . 16
4.15 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 17
4.16 Hazardous Materials. . . . . . . . . . . . . . . . . . . . . . 17
4.17 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 19
4.18 Labor and Employment Matters . . . . . . . . . . . . . . . . . 19
4.19 Records and Documents. . . . . . . . . . . . . . . . . . . . . 20
4.20 Capitalization of Whatcom. . . . . . . . . . . . . . . . . . . 20
4.21 Capitalization of the Bank . . . . . . . . . . . . . . . . . . 20
4.22 Sole Agreement . . . . . . . . . . . . . . . . . . . . . . . . 21
4.23 Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.24 Absence of Undisclosed Liabilities . . . . . . . . . . . . . . 21
4.25 Allowance for Loan Losses. . . . . . . . . . . . . . . . . . . 21
4.26 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 22
4.27 Absence of Regulatory Actions. . . . . . . . . . . . . . . . . 22
4.28 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . 22
4.29 Material Contracts . . . . . . . . . . . . . . . . . . . . . . 26
4.30 Material Contract Defaults . . . . . . . . . . . . . . . . . . 28
4.31 Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
4.32 Statements True and Correct. . . . . . . . . . . . . . . . . . 28
4.33 Brokers and Finders. . . . . . . . . . . . . . . . . . . . . . 28
4.34 Derivatives Contracts; Structured Notes, Etc.. . . . . . . . . 28
4.35 Year 2000 Issues.. . . . . . . . . . . . . . . . . . . . . . . 29
4.36 Loans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 5
COVENANTS OF ACQUIROR
5.1 Regulatory Approvals . . . . . . . . . . . . . . . . . . . . . 29
5.2 Preparation of Registration Statement. . . . . . . . . . . . . 29
5.3 Registration Statement Effectiveness . . . . . . . . . . . . . 29
5.4 Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
(ii)
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5.5 Reasonable Efforts to Close. . . . . . . . . . . . . . . . . . 31
5.6 Indemnification and Insurance. . . . . . . . . . . . . . . . . 31
5.7 Access . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
ARTICLE 6
COVENANTS OF WHATCOM AND THE BANK
6.1 Shareholders Meeting . . . . . . . . . . . . . . . . . . . . . 31
6.2 Conduct of Business -- Affirmative Covenants . . . . . . . . . 32
6.3 Conduct of Business -- Negative Covenants. . . . . . . . . . . 33
6.4 Conduct of Business -- Certain Actions . . . . . . . . . . . . 36
6.5 Accruals and Reserves. . . . . . . . . . . . . . . . . . . . . 36
6.6 Access; Information. . . . . . . . . . . . . . . . . . . . . . 36
6.7 Affiliate Agreements . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to the Obligations of Whatcom and the Bank. . . . . 37
(a) Performance . . . . . . . . . . . . . . . . . . . . . . . 37
(b) Representations and Warranties. . . . . . . . . . . . . . 37
(c) Documents . . . . . . . . . . . . . . . . . . . . . . . . 37
(d) Opinion of Acquiror's and First Savings's Counsel . . . . 37
7.2 Conditions to the Obligations of Acquiror and First Savings. . 38
(a) Performance . . . . . . . . . . . . . . . . . . . . . . . 38
(b) Representations and Warranties. . . . . . . . . . . . . . 38
(c) Documents . . . . . . . . . . . . . . . . . . . . . . . . 39
(d) Destruction of Property . . . . . . . . . . . . . . . . . 39
(e) Inspections Permitted . . . . . . . . . . . . . . . . . . 39
(f) No Material Adverse Change. . . . . . . . . . . . . . . . 39
(g) Opinion of Whatcom's and the Bank's Counsel . . . . . . . 40
(h) Other Business Combinations, Etc. . . . . . . . . . . . . 41
(i) Maintenance of Certain Covenants, Etc.. . . . . . . . . . 41
(j) Dissenting Shares . . . . . . . . . . . . . . . . . . . . 41
(k) Accruals and Reserves . . . . . . . . . . . . . . . . . . 41
(l) Employment Agreements . . . . . . . . . . . . . . . . . . 41
(m) Receipt of Affiliate Agreements . . . . . . . . . . . . . 41
(n) Major Shareholders and Directors. . . . . . . . . . . . . 41
7.3 Conditions to Obligations of All Parties . . . . . . . . . . . 41
(a) No Pending or Threatened Claims . . . . . . . . . . . . . 42
(b) Government Approvals and Acquiescence Obtained. . . . . . 42
(c) Effective Registration Statement. . . . . . . . . . . . . 42
(d) Tax Opinion . . . . . . . . . . . . . . . . . . . . . . . 42
(e) Shareholder Vote. . . . . . . . . . . . . . . . . . . . . 42
(iii)
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ARTICLE 8
TERMINATION
8.1 Termination. . . . . . . . . . . . . . . . . . . . . . . . . . 42
8.2 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 43
8.3 Termination Fee. . . . . . . . . . . . . . . . . . . . . . . . 44
8.4 Acquiror Fee . . . . . . . . . . . . . . . . . . . . . . . . . 44
ARTICLE 9
GENERAL PROVISIONS
9.1 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.2 Assignability and Parties in Interest. . . . . . . . . . . . . 45
9.3 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . 45
9.4 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.5 Best Efforts . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.6 Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.7 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . 45
9.8 Severability . . . . . . . . . . . . . . . . . . . . . . . . . 45
9.9 Modifications, Amendments and Waivers. . . . . . . . . . . . . 46
9.10 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . 46
9.11 Payment of Expenses. . . . . . . . . . . . . . . . . . . . . . 46
9.12 Equitable Remedies . . . . . . . . . . . . . . . . . . . . . . 46
9.13 Attorneys' Fees. . . . . . . . . . . . . . . . . . . . . . . . 46
9.14 No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . 48
9.15 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . 48
9.16 Non-Survival of Representations and Warranties . . . . . . . . 48
Exhibit A Plan of Merger
Exhibit B Plan of Merger
Exhibit C Voting Agreement
Exhibit D Affiliate Agreement
Exhibit E Employment Agreements
(iv)
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AGREEMENT AND PLAN OF MERGERS
THIS AGREEMENT AND PLAN OF MERGERS (the "Merger Agreement") is made
and entered into this 15th day of June 1998, by and between FIRST SAVINGS
BANK OF WASHINGTON BANCORP, INC. ("Acquiror"), a corporation chartered and
existing under the laws of the State of Delaware, WHATCOM STATE BANCORP,
INC., a corporation chartered and existing under the laws of the State of
Washington ("Whatcom"), FIRST SAVINGS BANK OF WASHINGTON, a state chartered
savings bank existing under the laws of the State of Washington ("First
Savings") and WHATCOM STATE BANK (the "Bank"), a commercial bank chartered
and existing under the laws of the State of Washington.
RECITALS
A. Acquiror, Whatcom, First Savings and the Bank, on the terms and
conditions hereinafter set forth, desire to effect an acquisition
transaction pursuant to which Acquiror will acquire all of the shares of
Whatcom Common Stock (as hereinafter defined) outstanding at the Effective
Time (as hereinafter defined) at a purchase price per share equal to the
amount set forth in Section 2.4(a) hereof.
B. To effect the acquisition, Whatcom shall be merged with and into
Acquiror (the "Corporate Merger") pursuant to the Plan of Merger
substantially in the form attached hereto as Exhibit A. Acquiror will be
the surviving corporate entity in the Corporate Merger (the "Surviving
Corporation"). The Bank shall be merged with and into First Savings (the
"Bank Merger") pursuant to the Plan of Merger substantially in the form
attached hereto as Exhibit B. First Savings will be the continuing
financial institution (the "Continuing Bank").
C. The parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the Corporate
Merger and also to prescribe various conditions to the Corporate Merger.
D. Concurrently with the execution and delivery of this Merger
Agreement, and as an inducement to Acquiror's willingness to enter into
this Merger Agreement, each member of the Board of Directors of Whatcom and
each Major Shareholder of Whatcom (as hereinafter defined) has entered into
an agreement with Acquiror pursuant to which, among other things, they have
agreed to vote in favor of approval of the transactions contemplated by
this Merger Agreement at the Shareholders Meeting (as hereinafter defined).
E. The respective Boards of Directors of Acquiror, Whatcom, First
Savings and the Bank have duly approved this Merger Agreement and have duly
authorized its execution and delivery.
NOW THEREFORE, in consideration of the foregoing premises and the
mutual representations, warranties, covenants and agreements herein
contained and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the Parties agree as follows:
AGREEMENT
ARTICLE 1
DEFINITIONS
1.1 Definitions. As used in this Merger Agreement, the following
terms have the definitions indicated:
1
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"Affiliate" of a party means any person, partnership,
corporation, association or other legal entity directly or indirectly
controlling, controlled by or under common control, with that party.
"Acquiror" shall mean First Savings Bank of Washington Bancorp,
Inc., a bank holding company having its principal place of business in
Walla Walla, Washington, that is currently incorporated under the laws of
the State of Delaware and is in the process of changing its state of
incorporation to the State of Washington.
"Acquiror Common Stock" shall mean the common stock, par value
$0.01 per share, of Acquiror.
"Acquiror Due Diligence Review" shall have the meaning assigned
to such term in Section 8.1(j) of this Merger Agreement.
"Acquiror Due Diligence Review Period" shall have meaning
assigned to such term in Section 8.1(j) of this Merger Agreement.
"Acquiror Fee" shall have the meaning assigned to such term in
Section 8.4 of this Merger Agreement.
"Acquiror Option" shall mean an option to acquire shares of
Acquiror Common Stock.
"Acquisition Proposal" shall have the meaning assigned to such
term in Section 6.4 of this Merger Agreement.
"Applicable Environmental Laws" shall have the meaning assigned
to such term in Section 4.16(a) of this Merger Agreement.
"Balance Sheet Date" shall have the meaning assigned to such term
in Section 4.9 of this Merger Agreement.
"Bank" shall mean Whatcom State Bank, a commercial bank chartered
and existing under the laws of the State of Washington.
"Bank Common Stock" shall have the meaning assigned to such term
in Section 4.21 of this Merger Agreement.
"Bank Merger" shall, as described in Section 2.2 of this Merger
Agreement, mean the merger of the Bank with and into First Savings, which
shall survive the Bank Merger as the Continuing Bank.
"BHCA" shall mean the Bank Holding Company Act.
"CERCLA" shall have the meaning set forth in Section 4.16(a) of
this Merger Agreement.
"Certificate" shall have the meaning assigned to such term in
Section 2.11 of this Merger Agreement.
"Closing" shall have the meaning assigned to such term in Section
2.12 of this Merger Agreement.
"Closing Date" shall have the meaning assigned to such term in
Section 2.12 of this Merger Agreement.
2
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"Continuing Bank" shall mean First Savings as the financial
institution resulting from the consummation of the Bank Merger as set forth
in Section 2.2 of this Merger Agreement.
"DGCL" shall mean the Delaware General Corporation Law.
"Deposits" shall mean all deposits (including, but not limited
to, certificates of deposit, savings accounts, NOW accounts and checking
accounts) of the Bank.
"Derivatives Contract" shall have the meaning assigned to such
term in Section 4.34 of this Merger Agreement.
"Dissenting Shares" shall have the meaning assigned to such term
in Section 2.6 of this Merger Agreement.
"Effective Date of the Merger" shall mean that date on which the
Effective Time shall have occurred.
"Effective Time" shall have the meaning assigned in Section 2.3
of this Merger Agreement.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended.
"Exchange Agent" shall mean the independent agent selected by
Acquiror to effect the exchange of certificates representing Whatcom Common
Stock for the consideration described in Section 2.4.
"FDIC" means the Federal Deposit Insurance Corporation, or any
successor thereto.
"First Savings" shall mean First Savings Bank of Washington, a
state chartered savings bank existing under the laws of the State of
Washington.
"FRB" shall mean the Board of Governors of the Federal Reserve
System.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Government Approvals" shall have the meaning assigned to such
term in Section 3.5 of this Merger Agreement.
"Hazardous Substances" shall have the meaning set forth in
Section 4.16(a) of this Merger Agreement.
"Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended.
"Loan Property" shall have the meaning assigned to such term in
Section 4.16(a) of this Merger Agreement.
"Corporate Merger" shall, as described in Section 2.1 of this
Merger Agreement, mean the merger of Whatcom with and into Acquiror, which
shall survive the Corporate Merger as the Surviving Corporation.
"Major Shareholder" shall have the meaning assigned to such term
in Section 2.10 of this Merger Agreement.
3
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"Merger Agreement" means this Agreement and Plan of Mergers
together with the Plans of Merger (Exhibit A and Exhibit B) and all
Exhibits and Schedules annexed to, and incorporated by specific reference
as a part of, this Merger Agreement.
"NASD" means the National Association of Securities Dealers, Inc.
"Officer" shall have the meaning set forth in Section 4.9(k) of
this Merger Agreement.
"Parties" shall mean Whatcom, the Bank, Acquiror and First
Savings collectively; Whatcom or the Bank on the one hand, or Acquiror and
First Savings on the other hand, may sometimes be referred to as a "Party."
"Pension Plan" shall mean any employee pension benefit plan as
such term is defined in Section 3(2) of ERISA which is maintained by the
referenced Party.
"Person" shall mean any natural person, fiduciary, corporation,
partnership, joint venture, association, business trust or any other entity
of any kind.
"Plans of Merger" shall mean the Plans of Merger substantially in
the form of Exhibit A hereto to be executed by authorized representatives
of Whatcom and Acquiror and filed with the Secretary of State of the State
of Washington along with the Articles of Merger in accordance with
Washington law and with the Secretary of State of the State of Delaware
along with a Certificate of Merger in accordance with Delaware or
Washington law and providing for the Corporate Merger of Whatcom with and
into Acquiror as contemplated by Section 2.1 of this Merger Agreement and
the Plan of Merger substantially in the form of Exhibit B hereto to be
executed by authorized representatives of the Bank and First Savings
providing for the merger of the Bank into First Savings as contemplated by
Section 2.2 of this Merger Agreement.
"Property" shall have the meaning assigned to such term in
Section 4.16(a) of this Merger Agreement.
"Proxy Statement/Prospectus" shall mean the proxy statement to be
used by Whatcom to solicit proxies with a view to securing the approval of
the Whatcom Shareholders of this Merger Agreement and the Plans of Merger,
which shall also serve as the prospectus for the shares of Acquiror Common
Stock to be issued to the Whatcom Shareholders.
"Realty" means the real property of the Bank owned or leased by
the Bank or any Subsidiary of the Bank.
"Records" means all available records, minutes of meetings of the
Board of Directors, committees and shareholders of Whatcom and the Bank,
original instruments and other documentation, pertaining to Whatcom and the
Bank, Whatcom's and the Bank's assets (including plans and specifications
relating to the Realty), and liabilities, the Whatcom Common Stock, the
Deposits and the loans, and all other business and financial records which
are necessary or customary for use in the conduct of Whatcom's and the
Bank's business by Acquiror and the Bank on and after the Effective Time as
it was conducted prior to the Closing Date.
"Registration Statement" shall have the meaning assigned to such
term in Section 5.2 of this Merger Agreement.
"Regulatory Authorities" shall mean, collectively, the Department
of Justice, the FRB, the FDIC, the SEC, the Washington Department, or any
other state or federal governmental or quasi-governmental entity which has,
or may hereafter have, jurisdiction over any of the transactions described
in this Merger Agreement.
4
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"Release" shall have the meaning assigned to such term in Section
4.16(b)(i) of this Merger Agreement.
"SEC" shall mean the Securities and Exchange Commission, or any
successor thereto.
"SEC Documents" shall mean all reports, proxy statements and
registration statements filed, or required to be filed, by a Party or any
of its Subsidiaries pursuant to the Securities Laws, whether filed, or
required to be filed, with the SEC, the FDIC, or with any other Regulatory
Authority pursuant to the Securities Laws.
"Securities Laws" shall mean the Securities Act of 1933, as
amended ("1933 Act"), the Securities Exchange Act of 1934, as amended,
("1934 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 SEC promulgated
thereunder, as well as any similar state securities laws and any similar
rules and regulations promulgated by the applicable federal bank Regulatory
Authorities.
"Shareholders Meeting" shall mean the special meeting of Whatcom
Shareholders to be held pursuant to Section 6.1 of this Merger Agreement,
including any adjournment or adjournments thereof.
"Subsidiaries" shall mean all of those corporations, or other
entities of which the entity in question owns or controls 5% or more of the
outstanding voting equity securities either directly or through an unbroken
chain of entities as to each of which 5% or more of the outstanding equity
securities is owned directly or indirectly by its parent.
"Surviving Corporation" shall mean Acquiror as the corporation
resulting from the consummation of the Corporate Merger as set forth in
Section 2.1 of this Merger Agreement.
"WBCA" shall mean the Washington Business Corporation Act.
"Washington Department" shall mean the Department of Financial
Institutions of the State of Washington.
"Whatcom" shall mean Whatcom Bancorp, Inc., a
Washington-chartered bank holding company having its principal place of
business in Bellingham, Washington.
"Whatcom Common Stock" has the meaning assigned to such terms in
Section 2.4(a) of this Merger Agreement.
"Whatcom Financial Statements" shall have the meaning assigned to
such term in Section 4.8 of this Merger Agreement.
"Whatcom Option" shall mean an option granted by Whatcom to
purchase shares of Whatcom Common Stock.
"Whatcom Shareholders" shall mean the holders of the Whatcom
Common Stock.
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ARTICLE 2
THE MERGERS AND RELATED MATTERS
2.1 Corporate Merger. Subject to the terms and conditions of
this Merger Agreement, and pursuant to the provisions of the WBCA, the
DGCL, the BHCA and the rules and regulations promulgated thereunder, at the
Effective Time (as hereinafter defined):
(a) Surviving Corporation. Whatcom shall be merged with
and into Acquiror pursuant to the terms and conditions set forth herein and
pursuant to the Plan of Merger attached hereto as Exhibit A. Upon
consummation of the Corporate Merger, the separate existence of Whatcom
shall cease and Acquiror shall continue as the Surviving Corporation.
(b) Certificate of Incorporation and Bylaws. The
certificate of incorporation and bylaws of Acquiror, in effect immediately
prior to the Effective Time, shall become the certificate of incorporation
and bylaws of the Surviving Corporation.
(c) Effects of the Corporate Merger. The separate
existence of Whatcom shall cease, and Whatcom shall be merged with and into
Acquiror which, as the Surviving Corporation, shall thereupon and
thereafter possess all of the assets, rights, privileges, appointments,
powers, licenses, permits and franchises of the two merged corporations,
whether of a public or a private nature, and shall be subject to all of the
liabilities, restrictions, disabilities and duties of both Acquiror and
Whatcom.
(d) Transfer of Assets. All rights, assets, licenses,
permits, franchises and interests of Acquiror and Whatcom in and to every
type of property, whether real, personal, or mixed, whether tangible or
intangible, shall be deemed to be vested in Acquiror as the Surviving
Corporation by virtue of the Corporate Merger becoming effective and
without any deed or other instrument or act of transfer whatsoever.
(e) Assumption of Liabilities. The Surviving Corporation
shall become and be liable for all debts, liabilities, obligations and
contracts of Acquiror as well as those of Whatcom, whether the same shall
be matured or unmatured; whether accrued, absolute, contingent or
otherwise; and whether or not reflected or reserved against in the balance
sheets, other financial statements, books of account or records of Acquiror
or Whatcom.
2.2. The Bank Merger. As soon as practicable following the
Effective Time:
(a) The Continuing Bank. The Bank shall be merged into
First Savings pursuant to the terms and conditions set forth herein and
pursuant to the Plan of Merger attached hereto as Exhibit B. Upon
consummation of the Bank Merger, the separate existence of the Bank shall
cease and First Savings shall survive as the Continuing Bank.
(b) Rights, Etc. The Continuing Bank shall thereupon and
thereafter possess all of the rights, privileges, immunities and
franchises, of a public as well as of a private nature, of each of the
institutions so merged; and all property, real, personal and mixed, and all
debts due on whatever account, and all and every other interest, of or
belonging to or due to each of the institutions so merged, shall be deemed
to be vested in the Continuing Bank without further act or deed; and the
title to any real estate or any interest therein, vested in each of such
institutions, shall not revert or be in any way impaired by reason of the
Bank Merger.
(c) Liabilities. The Continuing Bank shall thenceforth be
responsible and liable for all the liabilities, obligations and penalties
of each of the institutions so merged, in accordance with applicable law.
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(d) Charter; Bylaws; Directors; Officers. The Charter and
Bylaws of the Continuing Bank shall be those of First Savings, as in effect
immediately prior to the Bank Merger becoming effective. The directors and
officers of First Savings in office immediately prior to the Bank Merger
becoming effective shall be the directors and officers of the Continuing
Bank, together with such additional directors and officers as may
thereafter be elected, who shall hold office until such time as their
successors are elected and qualified.
2.3 Effective Time. As soon as practicable after each of the
conditions set forth in Article 7 hereof have been satisfied or waived, the
Parties will file, or cause to be filed, with the Secretary of State of the
State of Washington and the Secretary of State of the State of Delaware
such articles of merger and certificate of merger as they may deem
necessary or appropriate for the Corporate Merger which articles of merger
shall be in the form required by and executed in accordance with the
applicable provisions of the WBCA and the DGCL. The Corporate Merger shall
become effective at such time as may be specified in such articles of
merger and certificate of merger (the "Effective Time"). The Bank Merger
will be consummated as soon as practicable after the Corporate Merger at
the discretion of the Acquiror.
2.4 Conversion of Whatcom Common Stock. At the Effective Time:
(a) Each share of common stock of Whatcom, $1.00 par value
per share ("Whatcom Common Stock"), issued and outstanding immediately
prior to the Effective Time (except for Dissenting Shares, as defined
herein) shall, by virtue of the Corporate Merger and without any action on
the part of the holder thereof, be converted into the right to receive from
Acquiror .6974 shares of Acquiror Common Stock (the "Exchange Ratio").
Notwithstanding any other provision of this Merger
Agreement, any shares of Whatcom Common Stock issued and outstanding
immediately prior to the Effective Time which are then owned beneficially
or of record by Acquiror, Whatcom or by any direct or indirect Subsidiary
of any of them or are held in the treasury of Whatcom shall, by virtue of
the Corporate Merger, be canceled without payment of any consideration
therefor and without any conversion thereof.
(b) The holders of certificates representing shares of
Whatcom Common Stock shall cease to have any rights as stockholders of
Whatcom, except such rights, if any, as they may have pursuant to the WBCA.
Except as provided above, until certificates representing shares of Whatcom
Common Stock are surrendered for exchange, each such certificate shall,
after the Effective Time, represent for all purposes only the right to
receive the amount of consideration into which their shares of Whatcom
Common Stock shall have been converted by the Corporate Merger as provided
above.
(c) The stock transfer books of Whatcom shall be closed and
no transfer of shares of Whatcom Common Stock shall be made thereafter.
2.5 Acquiror Common Stock. At the Effective Time, the shares of
Acquiror Common Stock issued and outstanding immediately prior to the
Effective Time shall, on and after the Effective Time, remain issued and
outstanding as shares of Acquiror Common Stock.
2.6 Dissenting Shares. Any shares of Whatcom Common Stock held
by a holder who dissents from the Corporate Merger in accordance with the
WBCA and becomes entitled to obtain payment for the fair value of such
shares of Whatcom Common Stock pursuant to the applicable provisions of the
WBCA shall be herein called "Dissenting Shares." Notwithstanding any other
provision of this Merger Agreement, any Dissenting Shares shall not, after
the Effective Time, be entitled to vote for any purpose or receive any
dividends or other distributions and shall be entitled only to such rights
as are afforded in respect of Dissenting Shares pursuant to the WBCA.
2.7 Fractional Shares. Notwithstanding any other provision
hereof, no fractional shares of Acquiror Common Stock and no certificates
or scrip therefor, or other evidence of ownership thereof, will be issued
in
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the Corporate Merger; instead, Acquiror shall pay to each holder of Whatcom
Common Stock who would otherwise be entitled to a fractional share an
amount in cash determined by multiplying such fraction by $24.983.
2.8 Anti-Dilution Provisions. In the event Acquiror changes the
number of shares of Acquiror Common Stock issued and outstanding prior to
the Effective Time as a result of a stock split, stock dividend or
recapitalization with respect to the outstanding Acquiror Common Stock and
the record date therefor shall be prior to the Effective Date, the number
of shares of Acquiror Common Stock into which each share of Whatcom Common
Stock may be converted shall be proportionately adjusted.
2.9 Options. At the Effective Time, by virtue of the Corporate
Merger, and without any action on the part of any holder of an option, each
Whatcom Option that is then outstanding and unexercised shall be converted
into and become an Acquiror Option on the same terms and conditions as are
in effect with respect to the Whatcom Option immediately prior to the
Effective Time, except that (i) each such Whatcom Option assumed may be
exercised solely for shares of Acquiror Common Stock, (ii) the number of
shares of Acquiror Common Stock subject to such Whatcom Option shall be
equal to the number of shares of Whatcom Common Stock subject to such
Whatcom Option immediately prior to the Effective Time multiplied by the
Exchange Ratio, the product being rounded, if necessary, up or down to the
nearest whole share, and (iii) the per share exercise price under each such
Acquiror Option shall be adjusted by dividing the per share exercise price
of the Whatcom Option by the Exchange Ratio, and rounding up to the nearest
cent. It is intended that the foregoing assumption shall be effected in a
manner which is consistent with the requirements of Section 424 of the
Internal Revenue Code, as to any Whatcom Stock Option that is an incentive
stock option. The number of shares of Whatcom Common Stock which are
issuable upon exercise of Whatcom Options as of the date hereof is set
forth on Schedule 2.9.
2.10 Major Shareholder. As used in this Merger Agreement, the
term "Major Shareholders" shall mean any person who as of the date hereof
owns or controls more than five percent of the issued and outstanding
shares of Whatcom Common Stock. Simultaneous with the execution and
delivery of this Merger Agreement, each Major Shareholder and director of
Whatcom will execute and deliver to Acquiror a Voting Agreement in the form
attached hereto as Exhibit C.
2.11 Exchange of Whatcom Common Stock.
(a) As soon as practicable after the Effective Time, each
holder of record of certificates formerly representing shares of Whatcom
Common Stock (the "Certificates") shall be instructed to tender such
Certificates to the Exchange Agent pursuant to a letter of transmittal that
Acquiror shall deliver or cause to be delivered to such holder. Such
letter of transmittal shall specify that risk of loss and title to
Certificates shall pass only upon acceptance of such Certificates by the
Exchange Agent.
(b) After the Effective Time, each holder of a Certificate
that surrenders such Certificate to the Exchange Agent will, upon
acceptance thereof by the Exchange Agent, be entitled to the consideration
payable in respect of the shares represented thereby.
(c) The Exchange Agent shall accept Certificates upon
compliance with such reasonable terms and conditions as Acquiror or the
Exchange Agent may impose to effect an orderly exchange thereof in
accordance with customary exchange practices. Certificates shall be
appropriately endorsed or accompanied by such instruments of transfer as
Acquiror or the Exchange Agent may reasonably require in accordance with
customary and prudent exchange procedures.
(d) Each outstanding Certificate, other than those
representing Dissenting Shares, shall until duly surrendered to Acquiror or
the Exchange Agent be deemed to evidence the right to receive the
consideration.
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(e) After the Effective Time, holders of Certificates shall
cease to have rights with respect to Whatcom Common Stock previously
represented by such Certificates, and their sole rights (other than the
holders of Certificates representing Dissenting Shares) shall be to
exchange such Certificates for the consideration. After the Effective
Time, there shall be no further transfer on the records of Whatcom of
Certificates, and if such Certificates are presented to Whatcom for
transfer, they shall be canceled against delivery of the consideration.
Acquiror shall not be obligated to deliver the consideration to any holder
of Whatcom Common Stock until such holder surrenders the Certificates as
provided herein. Any shareholders of Whatcom who have not theretofore
complied with this Section 2.11 shall thereafter look only to Acquiror for
payment of their consideration deliverable in respect of each share of
Whatcom Common Stock such stockholder holds as determined pursuant to this
Merger Agreement without any interest thereon. If outstanding Certificates
are not surrendered or the payment for them not claimed prior to the date
on which such payments would otherwise escheat to or become the property of
any governmental unit or agency, the unclaimed items shall, to the extent
permitted by abandoned property and any other applicable law, become the
property of Acquiror (and to the extent not in its possession shall be paid
over to it), free and clear of all claims or interest of any person
previously entitled to such claims. Neither the Exchange Agent nor any
party to this Merger Agreement nor any affiliate thereof shall be liable to
any holder of Whatcom Common Stock represented by any Certificate for any
consideration paid to a public official pursuant to applicable abandoned
property, escheat or similar laws. Acquiror and the Exchange Agent shall
be entitled to rely upon the stock transfer books of Whatcom to establish
the identity of those persons entitled to receive the consideration, which
books shall be conclusive with respect thereto. In the event of a dispute
with respect to ownership of stock represented by any Certificate, Acquiror
and the Exchange Agent shall be entitled to deposit any consideration in
respect thereof in escrow with an independent third party and thereafter be
relieved with respect to any claims thereto.
2.12 Closing. Subject to the provisions of Article 7 hereof,
the closing of the transactions contemplated by this Merger Agreement (the
"Closing") shall take place as soon as practicable after satisfaction or
waiver of all of the conditions to Closing, and shall be on such date, time
and location as is mutually agreed to by Acquiror and Whatcom. At the
Closing the Parties shall use their respective best efforts to deliver the
certificates, letters and opinions which constitute conditions to effecting
the Corporate Merger and the Bank Merger and each Party will provide the
other Parties with such proof or indication of satisfaction of the
conditions to the obligations of such other Parties to consummate the
Corporate Merger and the Bank Merger as such other Parties may reasonably
require. If all conditions to the obligations of each of the Parties shall
have been satisfied or lawfully waived by the Party entitled to the
benefits thereof, the Parties shall, at the Closing, duly execute the Plans
of Merger for filing with the Secretary of State of the State of Washington
and the Secretary of State of the State of Delaware and promptly thereafter
shall take all steps necessary or desirable to consummate the Corporate
Merger in accordance with all applicable laws, rules and regulations and
the Plan of Merger which is attached hereto as Exhibit A and incorporated
by reference as part of this Merger Agreement. The Bank Merger will be
consummated as soon as practicable after the Corporate Merger at the
discretion of the Acquiror and pursuant to the terms of the Plan of Merger
which is attached hereto as Exhibit B. The Parties shall thereupon take
such other and further actions as may be required by law or this Merger
Agreement to consummate the transactions contemplated herein. The date on
which the Closing actually occurs is herein referred to as the "Closing
Date."
2.13 Reservation of Right to Revise Transaction. Acquiror shall
have the unilateral right to revise the method of effecting either the
Corporate Merger, the Bank Merger or both in order to achieve tax benefits
or for any other reason which Acquiror may deem advisable; provided,
however, that Acquiror shall not have the right, without the prior written
approval of the Board of Directors of Whatcom, and, if required, the
approval of the Whatcom Shareholders, to make any revision to the structure
of the Corporate Merger which (i) changes the amount or kind of the
consideration which the Whatcom Shareholders are entitled to receive
(determined in the manner provided in Section 2.4 of this Merger Agreement)
or (ii) adversely affects the intended tax-free treatment to the Whatcom
Shareholders as a result of receiving such consideration. Acquiror may
exercise this right of revision by giving written notice thereof to Whatcom
in the manner provided in Section 9.1 of this Merger Agreement.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF ACQUIROR AND FIRST SAVINGS
Each of Acquiror and First Savings hereby represents and warrants
to Whatcom and the Bank as follows:
3.1 Organization and Corporate Authority of Acquiror. Acquiror
is a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware and is in the process of changing
its state of incorporation to the State of Washington subject to
shareholder approval. Acquiror (i) has the requisite corporate power and
authority to own, operate and lease its material properties and carry on
its businesses as they are currently being conducted; (ii) is in good
standing and is duly qualified to do business in each jurisdiction where
the character of its properties owned or held under lease or the nature of
its business makes such qualification necessary and where the failure to so
qualify would individually or in the aggregate have a material adverse
affect on the condition (financial or otherwise), affairs, business, assets
or prospects of Acquiror and; (iii) has in effect all federal, state, local
and foreign governmental authorizations, permits and licenses necessary for
it to own or lease its properties and assets and to carry on its businesses
as they are currently being conducted. The Certificate of Incorporation
and Bylaws of Acquiror, as amended to date, are in full force and effect as
of the date of this Merger Agreement.
3.2 Organization and Qualification of First Savings. First
Savings is a Washington-chartered savings bank, duly organized, validly
existing and in good standing under the laws of the State of Washington and
engages only in activities (and holds properties only of the types)
permitted by Washington law and the rules and regulations promulgated by
the Washington Department thereunder or the FDIC for insured depository
institutions. First Savings (a) has all requisite corporate power and
authority to own, operate and lease its properties and to carry on its
business as it is currently being conducted (including all requisite
authority to operate branches in the State of Washington) and (b) is in
good standing and is duly qualified to do business in each jurisdiction
where the character of its properties owned or held under lease or the
nature of its business makes such qualification necessary and where the
failure to so qualify would individually or in the aggregate have a
material adverse effect on the condition (financial or otherwise), affairs,
business, assets or prospects of First Savings and all Acquiror
Subsidiaries, taken as a whole. First Savings's deposit accounts are
insured by the Savings Association Insurance Fund as administered by the
FDIC to the fullest extent permitted under applicable law.
3.3 Authorization, Execution and Delivery; Merger Agreement Not
in Breach.
(a) Acquiror and First Savings have all requisite corporate
power and authority to execute and deliver this Merger Agreement and to
consummate the transactions contemplated hereby. This Merger Agreement,
and all other agreements and instruments contemplated to be executed in
connection herewith by Acquiror and First Savings, have been (or upon
execution will have been) duly executed and delivered by Acquiror and First
Savings, have been (or upon execution will have been) effectively
authorized by all necessary action, corporate or otherwise, and no other
corporate proceedings on the part of Acquiror and First Savings are (or
will be) necessary to authorize such execution and delivery, and, subject
to receipt of any required Government Approvals, constitute (or upon
execution will constitute) legal, valid and enforceable obligations of
Acquiror and First Savings, subject, as to enforceability, to applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally, and to the
application of equitable principles and judicial discretion.
(b) The execution and delivery of this Merger Agreement,
the consummation of the transactions contemplated hereby and the
fulfillment of the terms hereof will not result in a breach of any of the
terms or provisions of, or constitute a default under (or an event which,
with the passage of time or the giving of notice or both, would constitute
a default under), or conflict with, or permit the acceleration of any
obligation under, (i) any material mortgage, lease, covenant, agreement,
indenture or other instrument to which Acquiror and First Savings are a
party or by which Acquiror or First Savings or their respective property or
any of their respective assets are bound,
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(ii) the Certificate of Incorporation or Bylaws of Acquiror and First
Savings, (iii) any material judgment, decree, order or award of any court,
governmental body or arbitrator by which Acquiror and First Savings are
bound, or (iv) any material permit, concession, grant, franchise, license,
law, statute, ordinance, rule or regulation applicable to Acquiror and
First Savings or their respective properties; or result in the creation of
any lien, claim, security interest, encumbrance, charge, restriction or
right of any third party of any kind whatsoever upon the property or assets
of Acquiror and First Savings, except that the Government Approvals shall
be required in order for Acquiror and First Savings to consummate the
Corporate Merger.
3.4 No Legal Bar. Neither Acquiror nor First Savings is a party
to, subject to or bound by any agreement, judgment, order, writ,
prohibition, injunction or decree of any court or other governmental body
of competent jurisdiction which would prevent the execution of this Merger
Agreement by Acquiror or First Savings, its delivery to Whatcom and the
Bank or (upon receipt of Governmental Approvals) the consummation of the
transactions contemplated hereby, and no action or proceeding is pending or
threatened against Acquiror or First Savings in which the validity of this
Merger Agreement, any of the transactions contemplated hereby or any action
which has been taken by any of the Parties in connection herewith or in
connection with any of the transactions contemplated hereby is at issue.
3.5 Government Approvals. No consent, approval, order or
authorization of, or registration, declaration or filing with, any federal,
state or local governmental authority is required to be made or obtained by
Acquiror or First Savings in connection with the execution and delivery of
this Merger Agreement or the consummation of the transactions contemplated
hereby by Acquiror or First Savings, except for the prior approval of the
FRB, the FDIC, the Washington Department and such other agencies as may
have jurisdiction (collectively, the "Government Approvals"). Acquiror and
First Savings are not aware of any facts, circumstances or reasons why such
Government Approvals should not be forthcoming or which would prevent or
hinder such approvals from being obtained.
3.6 Acquiror Financial Statements. The consolidated balance
sheets of Acquiror as of March 31, 1998 and 1997, and the related
consolidated statements of income and changes in stockholders' equity and
cash flows of Acquiror for the years ended March 31, 1998, 1997 and 1996
which will be included in Acquiror's Annual Report on Form 10-K for the
fiscal year ended March 31, 1998 as filed with the SEC and the comparative
interim financial statements for any subsequent quarter ending after March
31, 1998 and prior to the date hereof included in Acquiror's Quarterly
Reports on Form 10-Q as filed with the SEC (collectively, the "Acquiror
Financial Statements") (i) were prepared from the books and records of
Acquiror, which are complete and accurate in all material respects and have
been maintained in accordance with good business practices; (ii) were
prepared in accordance with GAAP; (iii) accurately present Acquiror's
consolidated financial condition and the consolidated results of its
operations, changes in stockholders' equity and cash flows as stated
including any amendments thereto at the relevant dates thereof and for the
periods covered thereby (subject, in the case of financial statements for
interim periods, to normal recurring adjustments); (iv) do contain or
reflect all necessary adjustments and accruals for an accurate presentation
of Acquiror's consolidated financial condition and the consolidated results
of Acquiror's operations and cash flows for the periods covered by the
Acquiror Financial Statements; (v) do contain and reflect adequate
provisions for loan losses, for real estate owned reserves and for all
reasonably anticipatable liabilities for all taxes, federal, state, local
or foreign, with respect to the periods then ended; and (vi) do contain and
reflect adequate provisions for all reasonably anticipated liabilities for
Post Retirement Benefits Other Than Pensions ("OPEB") pursuant to FASB 106
and 112.
3.7 Absence of Certain Changes. Since March 31, 1998 there has
not been any material adverse change in the financial condition or results
of operations of Acquiror, First Savings and their respective subsidiaries
taken as a whole.
3.8 Capitalization of Acquiror. The authorized capital stock of
Acquiror consists of 25,000,000 shares of Acquiror Common Stock and 500,000
shares of preferred stock having a par value of $.01 per share. As of the
close of business on March 31, 1998, 9,952,953 shares of Acquiror Common
Stock were issued and outstanding,
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957,672 shares of Acquiror Common Stock were held by Acquiror as treasury
stock and no shares of the preferred stock were issued and outstanding.
3.9 Capitalization of First Savings. The authorized capital
stock of First Savings consists of 5,000,000 shares of common stock having
a par value of $1.00 per share . As of the date of this Merger Agreement,
1,000 shares of First Savings's common stock were issued and outstanding
and no shares of the common stock were held by First Savings as treasury
stock. All of the outstanding common stock of First Savings is held
beneficially and of record by the Acquiror, free and clear of any lien,
claim, security interest, encumbrance, charge, restriction or right of any
third party of any kind whatsoever.
3.10 Disclosure. The information concerning, and the
representations or warranties made by Acquiror and First Savings as set
forth in this Merger Agreement, or in any document, statement, certificate
or other writing furnished or to be furnished by Acquiror and First Savings
to Whatcom and the Bank pursuant hereto, do not and will not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated herein or therein which is necessary to make the
statements and facts contained herein or therein, in light of the
circumstances under which they were or are made, not false or misleading.
Copies of all documents heretofore or hereafter delivered or made available
to Whatcom and the Bank by Acquiror and First Savings pursuant hereto were
complete and accurate copies of such documents.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF WHATCOM AND THE BANK
Each of Whatcom and the Bank hereby represents and warrants to
Acquiror as follows:
4.1 Organization and Qualification of Whatcom and Subsidiaries.
Whatcom is a corporation, duly organized, validly existing and in good
standing under the laws of the State of Washington. Whatcom is registered
as a bank holding company with the FRB and engages only in activities
permitted by the BHCA and the rules and regulations promulgated by the FRB
thereunder. Whatcom (a) has all requisite corporate power and authority to
own, operate and lease its properties and to carry on its business as it is
currently being conducted and (b) is in good standing and is duly qualified
to do business in each jurisdiction where the character of its properties
owned or held under lease or the nature of its business makes such
qualification necessary and where the failure to so qualify would
individually or in the aggregate have a material adverse effect on the
condition (financial or otherwise), affairs, business, assets or prospects
of Whatcom, the Bank and all Whatcom Subsidiaries, taken as a whole. Each
Whatcom Subsidiary is duly organized, validly existing and in good standing
under the laws of the state or jurisdiction of its organization and (a) has
all requisite corporate power and authority to own, operate and lease its
properties and to carry on its business as it is currently being conducted
and (b) is in good standing and is duly qualified to do business in each
jurisdiction where the character of its properties owned or held under
lease or the nature of its business makes such qualification necessary and
where the failure to so qualify would individually or in the aggregate have
a material adverse effect on the condition (financial or other), affairs,
business, assets or prospects of Whatcom, the Bank and the Whatcom
Subsidiaries taken as a whole. The activities of the Whatcom Subsidiaries
are permitted for subsidiaries of bank holding companies pursuant to the
BHCA.
4.2 Organization and Qualification of the Bank. The Bank is a
Washington-chartered bank, duly organized, validly existing and in good
standing under the laws of the State of Washington and engages only in
activities (and holds properties only of the types) permitted by Washington
law and the rules and regulations promulgated by the Washington Department
thereunder or the FDIC for insured depository institutions. The Bank (a)
has all requisite corporate power and authority to own, operate and lease
its properties and to carry on its business as it is currently being
conducted (including all requisite authority to operate branches in the
State of Washington) and (b) is in good standing and is duly qualified to
do business in each jurisdiction where the character of its properties
owned or held under lease or the nature of its business makes such
qualification necessary and where the failure to so qualify would
individually
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or in the aggregate have a material adverse effect on the condition
(financial or otherwise), affairs, business, assets or prospects of the
Bank and all Whatcom Subsidiaries, taken as a whole. The Bank's deposit
accounts are insured by the Bank Insurance Fund as administered by the FDIC
to the fullest extent permitted under applicable law.
4.3 Authorization, Execution and Delivery; Merger Agreement Not
in Breach.
(a) Whatcom and the Bank have all requisite corporate power
and authority to execute and deliver this Merger Agreement and the Plans of
Merger and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Merger Agreement and the Plans of Merger
and the consummation of the proposed transaction have been duly authorized
by the Boards of Directors of Whatcom and the Bank and, except for the
approval of the Whatcom Shareholders, no other corporate proceedings on the
part of Whatcom and the Bank are necessary to authorize the execution and
delivery of this Merger Agreement and the Plans of Merger and the
consummation of the transactions contemplated hereby and thereby. This
Merger Agreement and all other agreements and instruments herein
contemplated to be executed and delivered by Whatcom and the Bank have been
(or upon execution and delivery will have been) duly executed and delivered
by Whatcom and the Bank and (subject to any requisite shareholder approval
and Government Approvals hereof) constitute (or upon execution and delivery
will constitute) legal, valid and enforceable obligations of Whatcom and
the Bank, subject, as to enforceability, to applicable bankruptcy,
insolvency, receivership, conservatorship, reorganization, moratorium or
similar laws affecting the enforcement of creditors' rights generally and
to the application of equitable principles and judicial discretion.
(b) The execution and delivery of this Merger Agreement,
the consummation of the transactions contemplated hereby, and the
fulfillment of the terms hereof and thereof will not result in a violation
or breach of any of the terms or provisions of, or constitute a default
under (or an event which, with the passage of time or the giving of notice,
or both, would constitute a default under), or conflict with, or permit the
acceleration of, any obligation under (i) any mortgage, lease, covenant,
agreement, indenture or other instrument to which Whatcom, the Bank or any
Whatcom Subsidiary is a party or by which Whatcom, the Bank or any Whatcom
Subsidiary is bound, (ii) the Articles of Incorporation or Bylaws of
Whatcom and the Bank, (iii) any judgment, decree, order, regulatory letter
of understanding or award of any court, governmental body, authority or
arbitrator or, (iv) (subject to the receipt of the Government Approvals)
any permit, concession, grant, franchise, license, law, statute, ordinance,
rule or regulation applicable to Whatcom, the Bank or any Whatcom
Subsidiary or the properties of any of them; or result in the creation of
any lien, claim, security interest, encumbrance, charge, restriction or
right of any third party of any kind whatsoever upon the properties or
assets of Whatcom, the Bank or any Whatcom Subsidiary.
4.4 No Legal Bar. Neither Whatcom nor the Bank is a party to,
or subject to, or bound by, any agreement or judgment, order, letter of
understanding, writ, prohibition, injunction or decree of any court or
other governmental authority or body, or any law which would prevent the
execution of this Merger Agreement or the Plans of Merger by Whatcom or the
Bank, the delivery thereof to Acquiror and First Savings, or (upon receipt
of Government Approvals) the consummation of the transactions contemplated
hereby and thereby, and no action or proceeding is pending against Whatcom
or the Bank in which the validity of this Merger Agreement, the
transactions contemplated hereby or any action which has been taken by any
of the Parties in connection herewith or in connection with the
transactions contemplated hereby is at issue.
4.5 Government and Other Approvals. Except for the Government
Approvals described in Section 3.5 and the approvals and consents listed on
Schedule 4.5 hereto, no consent, approval, order or authorization of, or
registration, declaration or filing with, any federal, state or local
governmental authority is required to be made or obtained by Whatcom or the
Bank in connection with the execution and delivery of this Merger Agreement
or the consummation of the transactions contemplated by this Merger
Agreement nor is any consent or approval required from any landlord,
licensor or other non-governmental party which has granted rights to
Whatcom or the Bank in order to avoid forfeiture or impairment of such
rights. Neither Whatcom nor the Bank is aware of any facts, circumstances
or reasons why such Government Approvals should not be forthcoming or which
would prevent or hinder such approvals from being obtained.
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4.6 Compliance With Law. Whatcom, the Bank and all Whatcom
Subsidiaries hold all licenses, franchises, permits and authorizations
necessary for them to own or lease their respective properties and assets
and for the lawful conduct of their respective businesses, as they are
presently conducted, and Whatcom and the Bank have complied in all material
respects with all applicable statutes, laws, ordinances, rules and
regulations of all federal, state and local governmental bodies, agencies
and subdivisions having, asserting or claiming jurisdiction over Whatcom
and the Bank's properties or over any other part of Whatcom's and the
Bank's assets, liabilities or operations. The benefits of all of such
licenses, franchises, permits and authorizations are in full force and
effect and, to the best knowledge of Whatcom and the Bank, may continue to
be enjoyed by Whatcom and the Bank subsequent to the Closing of the
transactions contemplated herein without any consent or approval. Neither
Whatcom, the Bank nor any Whatcom Subsidiary has received notice of any
proceeding for the suspension or revocation of any such license, franchise,
permit, or authorization and no such proceeding is pending or has been
threatened by any governmental authority.
4.7 Charter Documents. Included in Schedule 4.7 hereto are true
and correct copies of the Articles of Incorporation and Bylaws of Whatcom
and the Bank. The Articles of Incorporation and Bylaws of Whatcom and the
Bank, as amended to date, are in full force and effect.
4.8 Financial Statements.
(a) Attached as Schedule 4.8(a) hereto are true copies of
the consolidated balance sheets of Whatcom as of December 31, 1997 and
1996, and the related consolidated statements of income and changes in
stockholders' equity and cash flows of Whatcom for the years ended December
31, 1997, 1996 and 1995 ("Whatcom Financial Statements"). Such financial
statements (i) were prepared from the books and records of Whatcom, which
are complete and accurate in all material respects and have been
maintained in accordance with good business practices; (ii) were prepared
in accordance with GAAP; (iii) accurately present Whatcom's consolidated
financial condition and the consolidated results of its operations, changes
in stockholders' equity and cash flows as stated including any amendments
thereto at the relevant dates thereof and for the periods covered thereby;
(iv) do contain or reflect all necessary adjustments and accruals for an
accurate presentation of Whatcom's consolidated financial condition and the
consolidated results of Whatcom's operations and cash flows for the periods
covered by the Whatcom Financial Statements; (v) do contain and reflect
adequate provisions for loan losses, for real estate owned reserves and for
all reasonably anticipatable liabilities for all taxes, federal, state,
local or foreign, with respect to the periods then ended; and (vi) do
contain and reflect adequate provisions for all reasonably anticipated
liabilities for OPEB pursuant to FASB 106 and 112.
(b) Whatcom has delivered to Acquiror (or will deliver,
when available, with respect to periods ended after the date of this Merger
Agreement) true, correct and complete copies of (i) all Call Reports,
including any amendments thereto, filed with any Regulatory Authorities by
the Bank and (ii) all reports, including any amendments thereto filed with
any Regulatory Authorities by Whatcom, each for any quarter ending after
December 31, 1997. Such reports (i) were (or will be) prepared from the
books and records of Whatcom or the Bank, which are complete and accurate
in all material respects and have been maintained in accordance with good
business practices; (ii) were (or will be) prepared in accordance with
regulatory accounting principles consistently applied; (iii) accurately
present (or, when prepared, will present) Whatcom's and the Bank's
consolidated financial condition and the consolidated results of its
operations and changes in stockholders' equity at the relevant dates
thereof and for the periods covered thereby; (iv) do contain or reflect
(or, when prepared, will contain and reflect) all necessary adjustments and
accruals for an accurate presentation of Whatcom's or the Bank's
consolidated financial condition and the consolidated results of Whatcom's
or the Bank's operations for the periods covered thereby; (v) do contain
and reflect (or, when prepared, will contain and reflect) adequate
provisions for loan losses, for real estate owned reserves and for all
reasonably anticipatable liabilities for all taxes, federal, state, local
or foreign, with respect to the periods then ended; and (vi) do contain and
reflect adequate provisions for all reasonably anticipated liabilities for
OPEB pursuant to FASB 106 and 112.
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4.9 Absence of Certain Changes. Except as disclosed in Schedule
4.9 or as provided for or contemplated in this Merger Agreement, since
December 31, 1997 (the "Balance Sheet Date") there has not been:
(a) any material transaction by Whatcom or the Bank not in
the ordinary course of business and in conformity with past practice;
(b) any material adverse change in the business, property,
assets (including loan portfolios), liabilities (whether absolute, accrued,
contingent or otherwise), prospects, operations, liquidity, income,
condition (financial or otherwise) or net worth of Whatcom or the Bank;
(c) any damage, destruction or loss, whether or not covered
by insurance, which has had or may have a material adverse effect on any of
the properties, business or prospects of Whatcom and the Bank or their
future use and operation by Whatcom and the Bank;
(d) any acquisition or disposition by Whatcom or the Bank
of any property or asset of Whatcom or the Bank, whether real or personal,
having a fair market value, singularly or in the aggregate, in an amount
greater than Twenty Thousand Dollars ($20,000), except in the ordinary
course of business and in conformity with past practice;
(e) any mortgage, pledge or subjection to lien, charge or
encumbrance of any kind on any of the respective properties or assets of
Whatcom or the Bank, except to secure extensions of credit in the ordinary
course of business and in conformity with past practice;
(f) any amendment, modification or termination of any
contract or agreement, relating to Whatcom or the Bank, to which Whatcom or
the Bank is a party which would have a material adverse effect upon the
financial condition or operations of Whatcom and the Bank;
(g) any increase in, or commitment to increase, the
compensation payable or to become payable to any officer, director,
employee or agent of Whatcom or the Bank, or any bonus payment or similar
arrangement made to or with any of such officers, directors, employees or
agents, other than routine increases made in the ordinary course of
business not exceeding the greater of five percent (5%) per annum or $5,000
for any of them individually;
(h) any incurring of, assumption of, or taking of, by
Whatcom or the Bank, any property subject to, any liability, except for
liabilities incurred or assumed or property taken subsequent to the Balance
Sheet Date in the ordinary course of business and in conformity with past
practice;
(i) any material alteration in the manner of keeping the
books, accounts or Records of the Bank, or in the accounting policies or
practices therein reflected;
(j) any release or discharge of any obligation or liability
of any person or entity related to or arising out of any loan made by the
Bank of any nature whatsoever, except in the ordinary course of business
and in conformity with past practice; or
(k) any loan by the Bank to any Officer, director or 2%
shareholder of the Bank or any Affiliate of the Bank; or to any member of
the immediate family of such Officer, director or 2% shareholder of the
Bank or any Affiliate of the Bank; or to any Person in which such Officer,
director or 2% shareholder directly or indirectly owns beneficially or of
record ten percent (10%) or more of any class of equity securities in the
case of a corporation, or of any equity interest, in the case of a
partnership or other non-corporate entity; or to any trust or estate in
which such Officer, director or 2% shareholder has a ten percent (10%) or
more beneficial interest; or as to which such Officer, director or 2%
shareholder serves as a trustee or in a similar capacity. As used herein,
"Officer" shall refer to a person
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who holds the title of chairman, president, executive vice president,
senior vice president, controller, chief financial officer, secretary,
cashier or treasurer.
4.10 Deposits. Except as set forth in Schedule 4.10, none of
the Bank Deposits is a "brokered" Deposit or subject to any encumbrance,
legal restraint or other legal process and no portion of the Deposits
represents a Deposit in excess of $50,000 by any Affiliate or Major
Shareholder of the Bank.
4.11 Properties. Except as described in Schedule 4.11 hereto or
adequately reserved against in the Whatcom Financial Statements, Whatcom,
the Bank and each Whatcom Subsidiary have good and marketable title free
and clear of all material liens, encumbrances, charges, defaults, or
equities of whatever character to all of its properties and assets,
tangible or intangible, other than as reflected in the Whatcom Financial
Statements. All buildings, and all fixtures, equipment, and other property
and assets that are material to the business of Whatcom, the Bank and the
Whatcom Subsidiaries, taken as a whole, held under leases or subleases by
Whatcom, the Bank or any Whatcom Subsidiary, are held under valid
instruments enforceable in accordance with their respective terms (except
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, or other laws affecting the enforcement of
creditors' rights generally, and except that the availability of the
equitable remedy of specific performance or injunctive relief is subject to
the discretion of the court before which any proceedings may be pending).
4.12 Whatcom Subsidiaries. Schedule 4.12 hereto lists all of
the active and inactive Whatcom Subsidiaries as of the date of this Merger
Agreement and describes generally the business activities conducted, or
permitted to be conducted, by each Whatcom Subsidiary. No equity
securities of any of the Whatcom Subsidiaries are or may become required to
be issued (other than to the Bank) by reason of any options, warrants,
scrip, rights to subscribe to, calls, or commitments of any character
whatsoever relating to, or securities or rights convertible into or
exchangeable for, shares of the capital stock of any Whatcom Subsidiary,
and there are no contracts, commitments, understandings, or arrangements by
which any Whatcom Subsidiary is bound to issue (other than to the Bank) any
additional shares of its capital stock or options, warrants, or rights to
purchase or acquire any additional shares of its capital stock. All of the
shares of capital stock of each Whatcom Subsidiary held by the Bank or by
any Whatcom Subsidiary are fully paid and nonassessable and are owned by
the Bank or such Whatcom Subsidiary free and clear of any claim, lien, or
encumbrance of any nature whatsoever, whether perfected or not. Except as
set forth on Schedule 4.12, neither the Bank nor any Whatcom Subsidiary
holds any interest in a partnership or joint venture of any kind.
4.13 Condition of Fixed Assets and Equipment. Except as
disclosed in Schedule 4.13 hereto, all of Whatcom's, the Bank's and the
Whatcom Subsidiaries' buildings, structures and equipment in regular use
are in good and serviceable condition, normal wear and tear excepted. None
of the buildings, structures and equipment of Whatcom, the Bank or any
Whatcom Subsidiary violates or fails to comply in any material respect with
any applicable health, fire, environmental, safety, zoning or building laws
or ordinances or any restrictive covenant pertaining thereto.
4.14 Tax Matters. Except as described in Schedule 4.14 hereto:
(a) All federal, state, local, and foreign tax returns and
information returns required to be filed by or on behalf of Whatcom, the
Bank and each Whatcom Subsidiary have been timely filed or requests for
extensions have been timely filed, granted, and have not expired for
periods ended on or before the date of this Merger Agreement, and all
returns filed are, and the information contained therein is, complete and
accurate. All tax obligations reflected in such returns have been paid or
adequately provided for. As of the date of this Merger Agreement, there is
no audit examination, deficiency, or refund litigation or matter in
controversy with respect to any taxes that might result in a determination
materially adverse to Whatcom, the Bank or any Whatcom Subsidiary except as
fully reserved for in the Whatcom Financial Statements. All taxes,
interest, additions, and penalties due with respect to completed and
settled examinations or concluded tax litigation have been paid.
(b) Neither Whatcom, the Bank nor any Whatcom Subsidiary
has executed an extension or waiver of any statute of limitations on the
assessment or collection of any tax due that is currently in effect.
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(c) Adequate provision for any federal, state, local, or
foreign taxes due or to become due for Whatcom, the Bank and all Whatcom
Subsidiaries for all periods through and including December 31, 1997, has
been made and is reflected on the December 31, 1997 financial statements
included in the Whatcom Financial Statements and has been and will continue
to be made with respect to periods ending after December 31, 1997 and
subsequent periods.
(d) Deferred taxes of Whatcom, the Bank and each Whatcom
Subsidiary have been and will be provided for in accordance with GAAP.
(e) To the best knowledge of Whatcom and the Bank, neither
the Internal Revenue Service nor any foreign, state, local or other taxing
authority is now asserting or threatening to assert against Whatcom, the
Bank or any Whatcom Subsidiary any deficiency or claim for additional
taxes, or interest thereon or penalties in connection therewith. All
income, payroll, withholding, property, excise, sales, use, franchise and
transfer taxes, and all other taxes, charges, fees, levies or other
assessments, imposed upon Whatcom or the Bank by the United States or by
any state, municipality, subdivision or instrumentality of the United
States or by any other taxing authority, including all interest, penalties
or additions attributable thereto, which are due and payable by Whatcom,
the Bank or any Whatcom Subsidiary, either have been paid in full, or have
been properly accrued and reflected in the Whatcom Financial Statements.
4.15 Litigation. Except as set forth in Schedule 4.15 hereto,
there is no action, suit or proceeding pending, or to the best knowledge of
Whatcom and the Bank, threatened against Whatcom, the Bank or any Whatcom
Subsidiary before any court or arbitrator or any governmental body, agency
or official, including, but not limited to, any action suit or proceeding
that (i) has been brought by or on behalf of any person employed or
formerly employed by Whatcom, the Bank or any Whatcom Subsidiary or (ii)
purports or seeks to enjoin or restrain the transactions contemplated by
this Merger Agreement. Except as set forth on Schedule 4.15 there are no
actions, suits, or proceedings pending or, to the best knowledge of Whatcom
and the Bank, threatened against any officers or directors of Whatcom, the
Bank or any Whatcom Subsidiary by any stockholder of Whatcom, the Bank or
any Whatcom Subsidiary (or by any former stockholder of Whatcom, the Bank
or any Whatcom Subsidiary) relating to or arising out of such person's
status as a stockholder.
4.16 Hazardous Materials.
(a) To the best knowledge of Whatcom and the Bank, Whatcom,
the Bank and all the Whatcom Subsidiaries have obtained all permits,
licenses and other authorizations which are required to be obtained by them
with respect to the Property (as defined herein) under all Applicable
Environmental Laws (as defined herein). All Property controlled, directly
or indirectly, by Whatcom, the Bank or any Whatcom Subsidiary is in
compliance with the terms and conditions of all of such permits, licenses
and authorizations, and, to the best of knowledge of Whatcom and the Bank,
is also in compliance with all other limitations, restrictions, conditions,
standards, prohibitions, requirements, obligations, schedules and
timetables contained in any Applicable Environmental Laws or in any
regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder, except
as described in detail in Schedule 4.16 hereto. For purposes hereof, the
following terms shall have the following meanings:
"Applicable Environmental Laws" shall mean all federal,
state, local and municipal environmental laws, rules or regulations to the
extent applicable to the Property, including, but not limited to, (a) the
Comprehensive Environmental Response, Compensation and Liability Act, 42
U.S.C. Section 9601 et seq. ("CERCLA"); (b) the Resource Conservation and
Recovery Act, 42 U.S.C. Section 6901 et seq. "RCRA"; (c) the Federal Water
Pollution Control Act, 33 U.S.C. Section 1251 et seq.; (d) the Clean Air
Act, 42 U.S.C. Section 7401 et seq.; (e) the Hazardous Materials
Transportation Act, 49 U.S.C. Section 1471 et seq.; (f) the Toxic
Substances Control Act, 15 U.S.C. Section 2601 et seq.; (g) the Emergency
Planning and Community Right-to-Know Act, 42 U.S.C. Section 11001 et seq.;
(h) the National Environmental Policy Act, 42 U.S.C. Section 4321 et seq.;
(i) the Rivers and Harbours Act of
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1899, 33 U.S.C. Section 401 et seq.; (j) the Occupational Safety and Health
Act, 29 U.S.C. Section 651 et seq.; (k) the Safe Drinking Water Act, 42
U.S.C. Section 300(f) et seq.; (l) the Oil Pollution Act of 1990, 33 U.S.C.
Section 2701 et seq.; and (m) any rule, regulation, order, injunction,
judgment, declaration or decree implementing or interpreting any of the
foregoing Acts, as amended.
"Hazardous Substances" shall mean any substance,
material, waste, or pollutant that is now (or prior to the Closing) listed,
defined, characterized or regulated as hazardous, toxic or dangerous under
or pursuant to any statute, law, ordinance, rule or regulation of any
federal, state, regional, county or local governmental authority having
jurisdiction over the Property of Whatcom, the Bank or any Whatcom
Subsidiary or its use or operation, including, without limitation, (a) any
substance, material, element, compound, mixture, solution, waste, chemical
or pollutant listed, defined, characterized or regulated as hazardous,
toxic or dangerous under any Applicable Environmental Laws, (b) petroleum,
petroleum derivatives or by-products, and other hydrocarbons, (c)
polychlorinated biphenyls (PCBs), asbestos and urea formaldehyde, and (d)
radioactive substances, materials or waste.
"Loan Property" means any property in which Whatcom,
the Bank or a Whatcom Subsidiary holds a security interest.
"Property" means any real property owned, controlled,
leased or held by Whatcom, the Bank or a Whatcom Subsidiary, in whole or in
part, solely or in a joint venture or other business arrangement, either
for operational or investment purposes, and whether assigned, purchased, or
obtained through foreclosure (or similar action) or in satisfaction of
debts previously contracted.
(b) In addition, except as set forth in Schedule 4.16(b)
hereto:
(i) No notice, notification, demand, request for
information, citation, summons or order has been received by Whatcom
or the Bank, no complaint has been filed and served on the Bank, no
penalty has been assessed and to the best knowledge of Whatcom and the
Bank no investigation or review is pending by any governmental or
other entity with respect to any alleged failure by Whatcom, the Bank
or any Whatcom Subsidiary to have any permit, license or authorization
required in connection with the conduct of the business of Whatcom,
the Bank or any Whatcom Subsidiary or with respect to any generation,
treatment, storage, recycling, transportation, release or disposal, or
any release as defined in 42 U.S.C. Section 9601(22) ("Release"), of
any Hazardous Substances at any Property or any Loan Property;
(ii) To the best knowledge of Whatcom and the Bank, no
Property or Loan Property has received or held any Hazardous
Substances in such amount and in such manner as to constitute a
violation of the Applicable Environmental Laws, and no Hazardous
Substances have been Released or disposed of on, in or under any of
the Property during or prior to Whatcom's, the Bank's or any Whatcom
Subsidiary's occupancy thereof, or during or prior to the occupancy
thereof by any assignee or sublessee of the Bank or any Whatcom
Subsidiary, except in compliance with all Applicable Environmental
Laws;
(iii) To the best knowledge of Whatcom and the Bank,
there are no Hazardous Substances being stored at any Property or Loan
Property or located in, on or upon, any Property or Loan Property
(including the subsurface thereof) or installed or affixed to
structures or equipment on any Property or Loan Property; and, to the
best knowledge of Whatcom and the Bank, there are no underground
storage tanks for Hazardous Substances, active or abandoned, at any
Property; and
(iv) To the best knowledge of Whatcom and the Bank, no
Hazardous Substances have been Released in a reportable quantity,
where such a quantity has been established by statute, ordinance,
rule, regulation or order, at, on or under any Property.
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(c) Neither Whatcom, the Bank nor any Affiliate of Whatcom
has knowingly transported or arranged for the transportation of any
Hazardous Substances to any location which is listed on the National
Priorities List under CERCLA, listed for possible inclusion on the National
Priorities List by the Environmental Protection Agency in the CERCLA
Information System ("CERCLIS") or on any similar state list or which is the
subject of federal, state or local enforcement actions or other
investigations which may lead to claims against the owner of the Property
for cleanup costs, remedial work, damages to natural resources or for
personal injury claims, including, but not limited to, claims under CERCLA.
(d) No Hazardous Substances have been knowingly generated,
recycled, treated, stored, disposed of or Released by, Whatcom, the Bank or
any Affiliate of Whatcom in violation of Applicable Environmental Laws.
(e) No oral or written notification of a Release of
Hazardous Substances has been given or filed by or on behalf of Whatcom,
the Bank or any Affiliate of Whatcom relating to any Property and no
Property is listed or proposed for listing on the National Priority List
promulgated pursuant to CERCLA, on CERCLIS or on any similar state list of
sites requiring investigation or clean-up.
(f) To the best knowledge of Whatcom and the Bank, there
are no liens arising under or pursuant to any Applicable Environmental Laws
on any Property, and no government actions have been taken or, to the best
knowledge of Whatcom and the Bank, threatened, or are in process which
could subject any Property to such liens and none of the Property would be
required to place any notice or restriction relating to the presence of
Hazardous Substances at any Property in any deed to such Property.
(g) There have been no environmental investigations,
studies, audits, tests, reviews or other analyses conducted by or which are
in the possession of Whatcom, the Bank or any Affiliate of Whatcom and the
Bank in relation to any Property, which have not been made available to
Acquiror.
(h) Neither Whatcom nor the Bank is aware of any facts
which might suggest that Whatcom, the Bank or any Whatcom Subsidiary has
engaged in any management practice with respect to any of its past or
existing borrowers which could reasonably be expected to subject Whatcom,
the Bank or any Whatcom Subsidiary or any Property or Loan Property to any
liability under any Applicable Environmental Laws.
4.17 Insurance. Whatcom, the Bank and all of Whatcom's and the
Bank's material assets, businesses, real property and other material
properties are insured against fire, casualty, theft, liability, loss,
interruption, title and such other events against which it is customary in
the banking industry to insure, all such insurance policies being in
amounts that are believed by Whatcom and the Bank to be adequate and
consistent with past practice and experience. Set forth on Schedule 4.17
is a list of all insurance policies (excluding policies maintained on one-
to four- family residential properties acquired through foreclosure)
maintained by or for the benefit of Whatcom, the Bank or any of the Whatcom
Subsidiaries or their respective directors, officers, employees or agents.
All such insurance policies are in full force and effect. Each of Whatcom,
the Bank and the Whatcom Subsidiaries has taken or will take all requisite
action (including without limitation the making of claims and the giving of
notices) pursuant to its directors' and officers' liability insurance
policy or policies in order to preserve all rights thereunder with respect
to all matters (other than matters arising in connection with this Merger
Agreement and the transactions contemplated hereby) occurring prior to the
Effective Time that are known to Whatcom or the Bank. Neither Whatcom, the
Bank nor any of the Whatcom Subsidiaries has had an insurance policy
canceled or been denied insurance coverage for which any of such companies
has applied. The fidelity bonds in effect as to which the Bank is a named
insured are believed by Whatcom and the Bank to be sufficient.
4.18 Labor and Employment Matters. Except as reflected in
Schedule 4.18 hereto, there is no (i) collective bargaining agreement or
other labor agreement to which Whatcom, the Bank or any Whatcom Subsidiary
is a party or by which any of them is bound; (ii) employment, profit
sharing, deferred compensation, bonus, stock
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option, purchase, retainer, consulting, retirement, welfare or incentive
plan or contract to which Whatcom, the Bank or any Whatcom Subsidiary is a
party or by which it is bound; or (iii) plan or agreement under which
"fringe benefits" (including, but not limited to, vacation plans or
programs, sick leave plans or programs and related benefits) are afforded
any of the employees of Whatcom, the Bank or any Whatcom Subsidiary.
Neither Whatcom nor the Bank has received any notice that any party to any
such agreement, plan or contract is in default with respect to any material
term or condition thereof, nor has any event occurred which, through the
passage of time or the giving of notice, or both, would constitute a
default thereunder or would cause the acceleration of any obligation of any
party thereto. Neither Whatcom, the Bank nor any Whatcom Subsidiary has
received notice from any governmental agency of any alleged violation of
applicable laws that remains unresolved respecting employment and
employment practices, terms and conditions of employment and wages and
hours. Whatcom, the Bank and each Whatcom Subsidiary have complied in all
material respects with all applicable laws, rules and regulations relating
to the employment of labor, including those related to its employment
practices, employee disabilities, wages, hours, collective bargaining and
the payment and withholding of taxes and other sums as required by the
appropriate governmental authorities, and Whatcom, the Bank and each
Whatcom Subsidiary have withheld and paid to the appropriate governmental
authorities or are holding for payment not yet due to such authorities, all
amounts required to be withheld from the employees of Whatcom, the Bank and
each Whatcom Subsidiary and are not liable for any arrears of wages, taxes,
penalties or other sums for failure to comply with any of the foregoing.
Except as set forth in Schedule 4.18, there is no: unfair labor practice
complaint against Whatcom, the Bank or any Whatcom Subsidiary pending
before the National Labor Relations Board or any state or local agency;
pending labor strike or, to the best of knowledge of Whatcom and the Bank,
other labor trouble affecting Whatcom, the Bank or any Whatcom Subsidiary;
labor grievance pending against Whatcom, the Bank or any Whatcom
Subsidiary; to the best knowledge of Whatcom and the Bank, pending
representation question respecting the employees of Whatcom, the Bank or
any Whatcom Subsidiary; pending arbitration proceedings arising out of or
under any collective bargaining agreement to which Whatcom, the Bank or any
Whatcom Subsidiary is a party, or to the best knowledge of Whatcom and the
Bank, any basis for which a claim may be made under any collective
bargaining agreement to which Whatcom, the Bank or any Whatcom Subsidiary
is a party.
4.19 Records and Documents. The Records of Whatcom and the Bank
are and will be sufficient to enable the Bank to continue conducting its
business under similar standards as Whatcom and the Bank has heretofore
conducted such business.
4.20 Capitalization of Whatcom. The authorized capital stock of
Whatcom consists of 2,000,000 shares of Whatcom Common Stock. As of the
date of this Merger Agreement, 638,209 shares of the Whatcom Common Stock
were issued and outstanding and no shares of the Whatcom Common Stock were
held by Whatcom as treasury stock. All of the outstanding Whatcom Common
Stock is validly issued, fully-paid and nonassessable and has not been
issued in violation of any preemptive rights of any Whatcom Shareholder.
Except as described on Schedule 4.20 hereto, as of the date hereof, there
are no outstanding securities or other obligations which are convertible
into Whatcom Common Stock or into any other equity or debt security of
Whatcom, and there are no outstanding options, warrants, rights, scrip,
rights to subscribe to, calls or other commitments of any nature which
would entitle the holder, upon exercise thereof, to be issued Whatcom
Common Stock or any other equity or debt security of Whatcom. Accordingly,
immediately prior to the Effective Time, there will be not more than
713,493 shares of Whatcom Common Stock issued and outstanding.
4.21 Capitalization of the Bank. The authorized capital stock
of the Bank consists of 750,000 shares of common stock having a par value
of $1.00 per share (the "Bank Common Stock"). As of the date of this
Merger Agreement, 626,329 shares of Bank Common Stock were issued and
outstanding and no shares of Bank Common Stock were held by the Bank as
treasury stock. All of the outstanding Bank Common Stock is held
beneficially and of record by Whatcom, free and clear of any lien, claim,
security interest, encumbrance, charge, restriction or right of any third
party of any kind whatsoever. All of the outstanding Bank Common Stock is
validly issued, fully-paid and nonassessable and has not been issued in
violation of any preemptive rights of any shareholder of the Bank. There
are no outstanding securities or other obligations which are convertible
into Bank Common Stock or into any other equity or debt security of the
Bank, and there are no outstanding options, warrants, rights, scrip, rights
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to subscribe to, calls or other commitments of any nature which would
entitle the holder, upon exercise thereof, to be issued Bank Common Stock
or any other equity or debt security of the Bank.
4.22 Sole Agreement. With the exception of this Merger
Agreement, neither Whatcom, the Bank nor any Whatcom Subsidiary has been a
party to: any letter of intent or agreement to merge, to consolidate, to
sell or purchase assets (other than in the normal course of its business)
or to any other agreement which contemplates the involvement of Whatcom,
the Bank or any Whatcom Subsidiary of either (or any of their assets) in
any business combination of any kind; or any agreement obligating Whatcom
or the Bank to issue or sell or authorize the sale or transfer of Bank
Common Stock. Except as described in Schedule 4.22 hereto, there are no
(nor will there be at the Effective Time any) shares of capital stock or
other equity securities of the Bank outstanding, except for shares of the
Bank Common Stock presently issued and outstanding, and there are no (nor
will there be at the Effective Time any) contracts, commitments,
understandings, or arrangements by which Whatcom or the Bank is or may be
bound to issue additional shares of their capital stock or options,
warrants, or rights to purchase or acquire any additional shares of their
capital stock. There are no (nor will there be at the Effective Time any)
contracts, commitments, understandings, or arrangements by which Whatcom or
any Whatcom Subsidiary is or may be bound to transfer or issue to any third
party any shares of the capital stock of any Whatcom Subsidiary, and there
are no (nor will there be at the Effective Time any) contracts, agreements,
understandings or commitments relating to the right of Whatcom or the Bank
to vote or to dispose of any such shares.
4.23 Disclosure. The information concerning, and
representations and warranties made by, Whatcom and the Bank set forth in
this Merger Agreement, or in the Schedules of Whatcom and the Bank hereto,
or in any document, statement, certificate or other writing furnished or to
be furnished by Whatcom and the Bank to Acquiror pursuant hereto, does not
and will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated herein or therein necessary to
make the statements and facts contained herein or therein, in light of the
circumstances in which they were or are made, not false or misleading.
Copies of all documents heretofore or hereafter delivered or made available
to Acquiror by Whatcom and the Bank pursuant hereto were or will be
complete and accurate copies of such documents.
4.24 Absence of Undisclosed Liabilities. Except as described in
Schedule 4.24 hereto, neither Whatcom, the Bank nor any Whatcom Subsidiary
has any obligation or liability (contingent or otherwise) that is material
to the financial condition or operations of Whatcom, the Bank or any
Whatcom Subsidiary, or that, when combined with all similar obligations or
liabilities, would be material to the financial condition or operations of
Whatcom, the Bank or any Whatcom Subsidiary (i) except as disclosed in the
Whatcom Financial Statements delivered to Acquiror prior to the date of
this Merger Agreement or (ii) except obligations or liabilities incurred in
the ordinary course of its business consistent with past practices or (iii)
except as contemplated under this Merger Agreement. Since December 31,
1997, neither Whatcom, the Bank nor any Whatcom Subsidiary has incurred or
paid any obligation or liability which would be material to the financial
condition or operations of Whatcom, the Bank or such Whatcom Subsidiary,
except for obligations paid by the Bank under the terms of this Merger
Agreement (all such obligations or payments are fully described by the Bank
in Schedule 4.24 hereto) or in connection with transactions made by it in
the ordinary course of its business consistent with past practices, laws
and regulations applicable to the Bank or any Whatcom Subsidiary.
4.25 Allowance for Loan Losses. The allowance for loan losses
shown on the Whatcom Financial Statements is (with respect to periods ended
on or before December 31, 1997) or will be (with respect to periods ending
subsequent to December 31, 1997) adequate in all respects to provide for
anticipated losses inherent in loans outstanding or for commitments to
extend credit or similar off-balance sheet items (including accrued
interest receivable) as of the dates thereof and is in compliance with the
requirements of GAAP. Except as disclosed in Schedule 4.25 hereto, as of
the date thereof, the Bank does not have any loan which has been criticized
or classified by bank examiners representing any Regulatory Authority or by
its independent auditors as "Special Mention," "Substandard," "Doubtful" or
"Loss" or as a "Potential Problem Loan."
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The allowance for possible losses on other real estate owned
("OREO") shown on the Whatcom Financial Statements is (with respect to
periods ended on or before December 31, 1997) or will be (with respect to
periods ending subsequent to December 31, 1997) adequate in all respects to
provide for anticipated losses inherent in OREO or held by the Bank or any
Whatcom Subsidiary and the net book value of OREO on the Balance Sheet of
the Whatcom Financial Statements is the fair value of the OREO in
accordance with Statement of Position 92-3.
4.26 Compliance with Laws. Whatcom, the Bank and each Whatcom
Subsidiary:
(a) Is in compliance with all laws, rules, regulations,
reporting and licensing requirements, and orders applicable to its business
or employees conducting its business (including, but not limited to, those
relating to consumer disclosure and currency transaction reporting) the
breach or violation of which would or could reasonably be expected to have
a material adverse effect on the financial condition or operations of
Whatcom, the Bank or any Whatcom Subsidiary, or which would or could
reasonably be expected to subject Whatcom, the Bank or any Whatcom
Subsidiary or any of its directors or officers to civil money penalties;
(b) Has received no notification or communication from any
agency or department of federal, state, or local government or any of the
Regulatory Authorities, or the staff thereof (i) asserting that Whatcom,
the Bank or any Whatcom Subsidiary is or may not be in compliance with any
of the statutes, rules, regulations, or ordinances which such governmental
authority or Regulatory Authority enforces, which, as a result of such
noncompliance, would result in a material adverse impact on Whatcom, the
Bank or any Whatcom Subsidiary, (ii) threatening to revoke any license,
franchise, permit, or governmental authorization which is material to the
financial condition or operations of Whatcom, the Bank or any Whatcom
Subsidiary, or (iii) requiring Whatcom, the Bank or any Whatcom Subsidiary
to enter into a cease and desist order, consent, agreement, or memorandum
of understanding; and
(c) Is in material compliance with the applicable
provisions of the Community Reinvestment Act ("CRA") and the regulations
promulgated thereunder, and the Bank currently has a CRA rating of
satisfactory or better. To the best knowledge of Whatcom and the Bank,
there is no fact or circumstance or set of facts or circumstances which
would cause the Bank to fail to comply with such provisions or cause the
CRA rating of the Bank to fall below satisfactory.
4.27 Absence of Regulatory Actions. Neither Whatcom, the Bank
nor any of the Whatcom Subsidiaries is a party to any cease and desist
order, written agreement or memorandum of understanding with, or a party to
any commitment letter or similar undertaking to, or is subject to any order
or directive by, or is a recipient of any extraordinary supervisory letter
from, or has adopted any board resolutions at the request of, federal or
state governmental authorities charged with the supervision or regulation
of depository institutions or depository institution holding companies or
engaged in the insurance of bank and/or savings and loan deposits nor has
it been advised by any such governmental authority that it is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, directive, written agreement, memorandum of
understanding, extraordinary supervisory letter, commitment letter, board
resolutions or similar undertaking.
4.28 Employee Benefit Plans.
(a) Whatcom and the Bank have previously provided to
Acquiror and First Savings true and complete copies of each "employee
pension benefit plan," as defined in Section 3(2) of ERISA which, to the
best of knowledge of Whatcom and the Bank, is subject to any provision of
ERISA and covers any employee, whether active or retired, of Whatcom, the
Bank or any Whatcom Subsidiary or any other entity which is a member of a
controlled group or is under common control with Whatcom, the Bank or any
Whatcom Subsidiary in the manner defined and further described in Section
414(b), (c), or (m) of the Internal Revenue Code. Such plans are
hereinafter referred to collectively as the "Employee Pension Benefit
Plans", and each such Employee Pension Benefit Plan is listed in Schedule
4.28(a) hereto. Whatcom and the Bank have also provided to Acquiror and
First Savings true and complete
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copies of all trust agreements, collective bargaining agreements, and
insurance contracts related to such Employee Pension Benefit Plans.
To the best knowledge of Whatcom and the Bank, each Employee
Pension Benefit Plan which is intended to be qualified under Section 401(a)
of the Internal Revenue Code is so qualified and each trust forming a part
thereof is exempt from tax pursuant to Section 501(a) of the Internal
Revenue Code. Copies of the latest determination letters concerning the
qualified status of each Employee Pension Benefit Plan which is intended to
be qualified under Section 401(a) of the Internal Revenue Code have been
provided to Acquiror and First Savings. Requests for determination letters
relating to amendments required to cause such Employee Pension Benefit
Plans to be in compliance with the Tax Equity and Fiscal Responsibility Act
of 1982, the Deficit Reduction Act of 1984 and the Retirement Equity Act of
1984 were timely filed and have been received by Whatcom, the Bank and the
Whatcom Subsidiaries. Requests for determination letters relating to any
subsequent amendments to such plans which are currently pending have been
provided to Acquiror and First Savings. All such requests were timely and
properly filed and appropriate notice of any such filing was timely and
properly provided to affected plan participants and beneficiaries.
Each of the Employee Pension Benefit Plans has been operated
in substantial conformity with the written provisions of the applicable
plan documents which have been delivered to Acquiror and First Savings and
in compliance with the requirements prescribed by all statutes, orders,
rules, and regulations including, but not limited to, ERISA and the
Internal Revenue Code, which are applicable to such Employee Pension
Benefit Plans. To the extent that the operation of an Employee Pension
Benefit Plan has deviated from the written provisions of the plan, such
operational deviations have been disclosed in Schedule 4.28(a) hereto. All
such deviations have been made in conformity with applicable laws,
including ERISA and the Internal Revenue Code.
With respect to Employee Pension Benefit Plans which are
subject to the annual report requirement of ERISA Section 103 or to the
annual return requirement of Internal Revenue Code Section 6047, all
required annual reports and annual returns, or such other documents as may
have been required as alternative means of compliance with the annual
report requirement, have been timely filed. Copies of all such annual
returns/reports, including all attachments and Schedules, for the three (3)
plan years immediately preceding the current date have been delivered to
Acquiror and First Savings. With respect to Employee Pension Benefit Plans
which complied with the annual return requirement by satisfaction of an
alternate compliance method, any documents required to be filed with the
Department of Labor in satisfaction of such requirements have been provided
to Acquiror and First Savings.
With respect to all Employee Pension Benefit Plans which are
subject to the summary plan description requirement of ERISA Section 102,
all such summary plan descriptions as were or will be required to be filed
with the Department of Labor and distributed to participants and
beneficiaries have been filed and timely distributed. Copies of all such
summary plan descriptions have been delivered to Acquiror and First
Savings. No Employee Pension Benefit Plan constitutes a "multi-employer
plan" as defined in Section 4001(a)(3) of ERISA.
No Employee Pension Benefit Plan subject to Part III of
Subtitle B of ERISA or Section 412 of the Internal Revenue Code, or both,
has incurred an "accumulated funding deficiency" within the meaning of
Internal Revenue Code Section 412, whether or not waived. All required
contributions to all Employee Pension Benefit Plans have been timely made.
Any penalties or taxes which have been incurred by Whatcom, the Bank or any
Whatcom Subsidiary or by any Employee Pension Benefit Plan with respect to
the timing or amount of payment of any contribution to an Employee Pension
Benefit Plan have been timely paid. The limitations of Internal Revenue
Code Section 415 have not been exceeded with respect to any Employee
Pension Benefit Plan or combination of such plans to which such limitations
apply.
Except as disclosed in Schedule 4.28(a) hereto, no
"reportable event" (as described in Section 4043(b) of ERISA) has occurred
with respect to any Employee Pension Benefit Plan. No Employee Pension
Benefit Plan or any trust created thereunder, nor any "disqualified person"
with respect to the plan (as defined in
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Section 4975 of the Internal Revenue Code), has engaged in a "prohibited
transaction", as such term is defined in Section 4975 of the Internal
Revenue Code, which could subject such Employee Pension Benefit Plan, any
such trust or any such disqualified person (other than a person for whom
neither Whatcom, the Bank nor any Whatcom Subsidiary is directly or
indirectly responsible) to liability under Title I of ERISA or to the
imposition of any tax under Section 4975 of the Internal Revenue Code.
No condition exists with regard to any Employee Pension
Benefit Plan which constitutes grounds for the termination of such plan
pursuant to Section 4042 of ERISA.
No Employee Pension Benefit Plan is subject to Title IV of
ERISA.
No tax has been, will be, or is reasonably anticipated to be
imposed under Internal Revenue Code Section 4978, 4978A, 4978B, or 4979A
due to the operation of an Employee Pension Benefit Plan sponsored by
Whatcom, the Bank or any Whatcom Subsidiary which is an employee stock
ownership plan ("ESOP").
Except as disclosed in Schedule 4.28(a) hereto, all Employee
Pension Benefit Plans were in effect for substantially all of calendar year
1997. There has been no material amendment of any such plans (other than
amendments required to comply with applicable law) or material increase in
the cost of maintaining such plans or providing benefits thereunder on or
after the last day of the plan year which ended in calendar year 1997 for
each such Employee Pension Benefit Plan.
Whatcom and the Bank have provided to Acquiror and First
Savings copies of the annual actuarial valuation or allocation report for
each Employee Pension Benefit Plan for the three (3) plan years for such
plan immediately preceding the current date. With regard to Employee
Pension Benefit Plans which are not intended to be qualified under Section
401(a) of the Internal Revenue Code, copies of financial statements or
reports containing information regarding the expense of maintaining any
such Employee Pension Benefit Plan for the three (3) plan years preceding
the current date have been delivered to Acquiror and First Savings.
Whatcom and the Bank have provided to Acquiror and First
Savings copies of all filings regarding the Employee Pension Benefit Plans
which have been made with the Regulatory Authorities for the three (3) plan
years preceding the current date.
(b) Whatcom and the Bank have furnished to Acquiror and First
Savings true and complete copies of each "Employee Welfare Benefit Plan" as
defined in Section 3(1) of ERISA, which, to the best knowledge of Whatcom
and the Bank, is subject to any provision of ERISA and covers any employee,
whether active or retired, of Whatcom, the Bank or any Whatcom Subsidiary
or members of a controlled group or entities under common control with
Whatcom, the Bank or the Whatcom Subsidiaries in the manner defined and
further described in Section 414(b), (c), or (m) of the Internal Revenue
Code. Such plans are hereinafter referred to collectively as the "Employee
Welfare Benefit Plans", and each such Employee Welfare Benefit Plan is
listed in Schedule 4.28(b) hereto.
Whatcom and the Bank have also provided to Acquiror and
First Savings true and complete copies of documents establishing all
funding instruments for such Employee Welfare Benefit Plans, including but
not limited to, trust agreements, cafeteria plans (pursuant to Internal
Revenue Code Section 125), and voluntary employee beneficiary associations
(pursuant to Internal Revenue Code Section 501(c)(9)). Each of the
Employee Welfare Benefit Plans has been operated in substantial conformity
with the written provisions of the plan documents which have been delivered
to Acquiror and First Savings and in compliance with the requirements
prescribed by all statutes, orders, rules, and regulations including, but
not limited to, ERISA and the Internal Revenue Code, which are applicable
to such Employee Welfare Benefit Plans. Any deviation in the operation of
such plans from the requirements of the plan documents or of applicable
laws have been listed in Schedule 4.28(b) hereto. Whatcom and the Bank
have provided any notification required by law to any participant covered
under any Employee Welfare Benefit Plan which has failed
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to comply with the requirements of any Internal Revenue Code section which
results in the imposition of a tax on benefits provided to such
participants under such plan.
With respect to all Employee Welfare Benefit Plans which are
subject to the annual report requirement of ERISA Section 103 or to the
annual return requirement of Internal Revenue Code Section 6039D, all
annual reports and annual returns as were required to be filed pursuant to
such sections have been timely filed. Copies of all such annual
returns/reports, including all attachments and Schedules, for the three (3)
plan years immediately preceding the current date for all plans subject to
such requirements have been delivered to Acquiror and First Savings. With
respect to all Employee Welfare Benefit Plans which are subject to the
summary plan description requirement of ERISA Section 102, all such summary
plan descriptions as were required to be filed with the Department of Labor
and distributed to participants and beneficiaries have been timely filed
and distributed. Copies of all such summary plan descriptions have been
delivered to Acquiror and First Savings.
Except as disclosed in Schedule 4.28(b) hereto, all Employee
Welfare Benefit Plans which are in effect were in effect for substantially
all of calendar year 1997. Except as disclosed in Schedule 4.28(b) hereto,
there has been with respect to such Employee Welfare Benefit Plans no
material amendment thereof or material increase in the cost thereof or
benefits payable thereunder on or after January 1, 1998.
No Employee Welfare Benefit Plan or any trust created
thereunder, nor any "party in interest" with respect to the plan (as
defined in Section 3(14) of ERISA), has engaged in a "prohibited
transaction," as such term is defined in Section 406 of ERISA, which could
subject such Employee Welfare Benefit Plan, any such trust, or any party in
interest (other than a person for whom neither Whatcom, the Bank nor any
Whatcom Subsidiary is directly or indirectly responsible) to the imposition
of a penalty for such prohibited transaction under Section 502(i) of ERISA.
The Department of Labor has not assessed any such penalty or served notice
to Whatcom, the Bank or any Whatcom Subsidiary that such a penalty may be
imposed upon any Employee Welfare Benefit Plan.
Neither Whatcom, the Bank nor any Whatcom Subsidiary has
failed to make any contribution to, or pay any amount due and owing by
Whatcom, the Bank or a Whatcom Subsidiary under the terms of, an Employee
Welfare Benefit Plan. Except as disclosed in Schedule 4.28(b) hereto, no
claims have been incurred with respect to any Employee Welfare Benefit Plan
which may, to the best knowledge of Whatcom and the Bank, constitute a
liability for Whatcom, the Bank or any Whatcom Subsidiary after the
application of any insurance, trust or other funds which are applicable to
the payment of such claims.
Except as disclosed in Schedule 4.28(b) hereto, to the best
knowledge of Whatcom and the Bank, no condition exists that could subject
any Employee Welfare Benefit Plan or any person (other than a person for
whom neither Whatcom, the Bank nor any Whatcom Subsidiary is directly or
indirectly responsible) to liabilities, damages, losses, taxes, or
sanctions that arise under Section 4980B of the Internal Revenue Code or
Sections 601 through 608 of ERISA for failure to comply with the
continuation health care coverage requirements of ERISA Sections 601
through 608 and Internal Revenue Code Section 4980B with respect to any
current or former employee of Whatcom, the Bank or any Whatcom Subsidiary,
or the beneficiaries of such employee.
(c) Whatcom and the Bank have furnished to Acquiror and First
Savings true and complete copies and/or descriptions of each plan or
arrangement maintained or otherwise contributed to by Whatcom, the Bank or
any Whatcom Subsidiary which is not an Employee Pension Benefit Plan and is
not an Employee Welfare Benefit Plan and which (exclusive of base salary
and base wages) provides for any form of current or deferred compensation,
bonus, stock option, profit sharing, retirement, group health or insurance,
welfare benefits, fringe benefits, or similar plan or arrangement for the
benefit of any employee or class of employees, whether active or retired,
or independent contractors of Whatcom, the Bank or any Whatcom Subsidiary.
Such plans and arrangements shall collectively be referred to herein as
"Benefit Arrangements" and all such Benefit Arrangements of Whatcom, the
Bank and the Whatcom Subsidiaries are listed on Schedule 4.28(c) hereto.
Except as disclosed in Schedule 4.28(c) hereto, there are no other benefit
arrangements of Whatcom and the Bank and all Benefit Arrangements which are
in effect were in effect
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for substantially all of calendar year 1997. Except as disclosed in
Schedule 4.28(c) hereto, there has been with respect to Benefit
Arrangements no material amendment thereof or material increase in the cost
thereof or benefits payable thereunder on or after January 1, 1998. There
has been no material increase in the base salary and wage levels of
Whatcom, the Bank or any Whatcom Subsidiary and, except in the ordinary
course of business, no change in the terms or conditions of employment
(including severance benefits) compared, in each case, to those prevailing
for substantially all of calendar year 1997. Except as disclosed in
Schedule 4.28(c) hereto, there has been no material increase in the
compensation of, or benefits payable to, any senior executive employee of
Whatcom, the Bank or any Whatcom Subsidiary on or after January 1, 1998 nor
has any employment, severance, or similar contract been entered into with
any such employee, nor has any amendment to any such contract been made on
or after January 1, 1998.
With respect to all Benefit Arrangements which are subject
to the annual return requirement of Internal Revenue Code Section 6039D,
all annual returns as were required to be filed have been timely filed.
Copies of all such annual returns for the three (3) plan years immediately
preceding the current date have been delivered to Acquiror and First
Savings.
(d) Listed in Schedule 4.28(d) hereto are all Employee Pension
Benefit Plans, Employee Welfare Benefit Plans, and Benefit Arrangements
which provide compensation or benefits which become effective upon a change
in control of Whatcom, the Bank or any Whatcom Subsidiary, including, but
not limited to, additional compensation or benefits, or acceleration in the
amount or timing of payment of compensation or benefits which had become
effective prior to the date of such acceleration. Except as disclosed in
Schedule 4.28(d) hereto, there is no Employee Pension Benefit Plan,
Employee Welfare Benefit Plan, or Benefit Arrangement covering any employee
of Whatcom, the Bank or any Whatcom Subsidiary which individually or
collectively could give rise to the payment of any amount which would
constitute an "excess parachute payment", as such term is defined in
Section 280G of the Internal Revenue Code and Regulations proposed pursuant
to that section.
(e) Except as described in Schedule 4.28(e) hereto, each
Employee Pension Benefit Plan, Employee Welfare Benefit Plan, or Benefit
Arrangement and each personal services contract, fringe benefit, consulting
contract or similar arrangement with or for the benefit of any officer,
director, employee, or other person may be terminated by Whatcom or the
Bank within a period of no more than thirty (30) days following the
effective time of the merger, without payment of any amount as a penalty,
bonus, premium, severance pay, or other compensation for such termination.
No limitation on the right to terminate any such plan has been communicated
by Whatcom, the Bank or any Whatcom Subsidiary to employees, former
employees, or retirees who are or may be participants in or beneficiaries
of such plans or arrangements. No Employee Pension Benefit Plan which is
qualified under Section 401(a) of the Internal Revenue Code is a qualified
defined benefit pension plan.
(f) Except as disclosed in Schedule 4.28(f) hereto, neither
Whatcom, the Bank nor any Whatcom Subsidiary has received notice from any
governmental agency of any alleged violation of applicable laws or of any
prospective audit or other investigation for the purpose of reviewing
compliance with applicable laws with respect to any Employee Pension
Benefit Plan, Employee Welfare Benefit Plan or Benefit Arrangement.
Except as disclosed in Schedule 4.28(f) hereto, no suits,
actions, or claims have been filed in any court of law or with any
governmental agency regarding the operation of any Employee Pension Benefit
Plan, Employee Welfare Benefit Plan, or Benefit Arrangement and no such
additional suits, actions, or claims are, to the best knowledge of Whatcom
and the Bank, anticipated to be filed.
4.29 Material Contracts. (a) Except as set forth on Schedule
4.29 (and with a true and correct copy of the document or other item in
question attached to such Schedule), neither Whatcom, the Bank nor any
Whatcom Subsidiary is a party or subject to any of the following (whether
written or oral, express or implied):
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(i) any agreement, arrangement or commitment (A)
not made in the ordinary course of business or (B) pursuant to which
Whatcom, the Bank or any Whatcom Subsidiary is or may become obligated
to invest in or contribute capital to any Whatcom Subsidiary or any
other entity;
(ii) any agreement, indenture or other instrument
not disclosed in the Whatcom Financial Statements relating to the
borrowing of money by Whatcom, the Bank or any Whatcom Subsidiary or
the guarantee by Whatcom, the Bank or any Whatcom Subsidiary of any
such obligation (other than trade payables or instruments related to
transactions entered into in the ordinary course of business by any
Whatcom Subsidiary, such as deposits, Fed Funds borrowings and
repurchase agreements);
(iii) any contract, agreement or understanding
with any labor union or collective bargaining organization;
(iv) any contract containing covenants which
limit the ability of Whatcom, the Bank or any Whatcom Subsidiary to
compete in any line of business or with any person or containing any
restriction of the geographical area in which, or method by which,
Whatcom, the Bank or any Whatcom Subsidiary may carry on its business
(other than as may be required by law or any applicable Regulatory
Authority);
(v) any contract or agreement which is a
"material contract" within the meaning of Item 601(b)(10) of
Regulation S-K promulgated by the SEC;
(vi) any lease with annual rental payments
aggregating $25,000 or more;
(vii) consulting agreement (other than data
processing, software programming and licensing contracts entered into
in the ordinary course of business) involving the payment of more than
$25,000 per annum;
(viii) any agreement with any executive officer or
other key employee of Whatcom, the Bank or any Whatcom Subsidiary the
benefits of which are contingent, or the terms of which are materially
altered or any payments or rights are accelerated, upon the occurrence
of a transaction involving Whatcom, the Bank or any of the Whatcom
Subsidiaries of the nature contemplated by this Merger Agreement;
(ix) any agreement with respect of any executive
officer of Whatcom, the Bank or any Whatcom Subsidiary providing any
term of employment or compensation guarantee extending for a period
longer than one year and for the payment of in excess of $50,000 per
annum;
(x) any agreement with any director or executive
officer of Whatcom, the Bank or any Whatcom Subsidiary providing for
indemnification of such person; or
(xi) agreement or plan, including any stock
option plan, stock appreciation rights plan, restricted stock plan or
stock purchase plan, any of the benefits of which will be increased,
or the vesting of the benefits of which will be accelerated, by the
occurrence of any of the transactions contemplated by this Merger
Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by
this Merger Agreement.
(b) Except as disclosed on Schedule 4.29, no officer or
director of Whatcom, the Bank or any "associate" (as such term is defined
in Rule 12b-2 under the Securities Exchange Act) of any such officer or
director, has any material interest in any material contract or property
(real or personal), tangible or intangible, used in or pertaining to the
business of Whatcom, the Bank or any of the Whatcom Subsidiaries.
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4.30 Material Contract Defaults. Neither Whatcom, the Bank nor
any Whatcom Subsidiary is in default in any respect under any contract,
agreement, commitment, arrangement, lease, insurance policy, or other
instrument to which it is a party or by which its respective assets,
business, or operations may be bound or affected or under which it or its
respective assets, business, or operations receives benefits, and which
default is reasonably expected to have either individually or in the
aggregate a material adverse effect on the condition (financial or other)
of Whatcom, the Bank or any Whatcom Subsidiary, 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.
4.31 Reports. Since January 1, 1995, Whatcom and the Bank have
filed all reports and statements, together with any amendments required to
be made with respect thereto, that it was required to file with (i) the
FDIC; (ii) the FRB; and (iii) any other applicable federal or state
securities or banking authorities. As of their respective dates, each of
such reports and documents, including the financial statements, exhibits,
and schedules thereto, complied in all material respects with all of the
requirements of their respective forms and all of the statutes, rules, and
regulations enforced or promulgated by the Regulatory Authority with which
they were filed. All such reports were true and complete in all material
respects and did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading. Whatcom and the Bank have previously provided
to Acquiror and First Savings true and correct copies of all such reports
and any amendments thereto filed by Whatcom or the Bank after January 1,
1995.
4.32 Statements True and Correct. None of the information
prepared by, or on behalf of, Whatcom, the Bank or any Whatcom Subsidiary
regarding Whatcom, the Bank or any Whatcom Subsidiary included in the Proxy
Statement/Prospectus mailed to Whatcom's shareholders in connection with
the Shareholders Meeting, and any other documents filed with the FRB, the
FDIC or any other Regulatory Authority in connection with the transaction
contemplated herein (if applicable), will be, at the respective times such
documents are filed, and, with respect to the Proxy Statement/Prospectus,
when first mailed to the shareholders of Whatcom, false or misleading with
respect to any material fact, or will omit to state any material fact
necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, or, in the case of the Proxy
Statement/Prospectus or any amendment thereof or supplement thereto, at the
time of the Shareholders Meeting, false or misleading with respect to any
material fact, or omit to state any material fact necessary to make any
statements therein, in light of the circumstances under which they were
made, not misleading.
4.33 Brokers and Finders. Except as set forth in the agreement
with Columbia Financial Advisors, Inc. dated May 6 1998, which has not been
amended since such date, neither Whatcom, the Bank nor any Whatcom
Subsidiary nor any of their respective officers, directors or employees has
employed any broker or finder, or agreed to pay any fees to any director or
former director or incurred any liability for any financial advisory fees,
brokerage fees, commissions or finder's fees, and no broker or finder, or
director or former director of Whatcom and the Bank, has acted directly or
indirectly for Whatcom, the Bank or any Whatcom Subsidiary, in connection
with this Merger Agreement or the transactions contemplated hereby.
4.34 Derivatives Contracts; Structured Notes; Etc. Neither
Whatcom, the Bank nor any Whatcom Subsidiary is a party to or has agreed to
enter into an exchange traded or over-the-counter equity, interest rate,
foreign exchange or other swap, forward, future, option, cap, floor or
collar or any other contract that is not included on the balance sheet and
is a derivative contract (including various combinations thereof) (each a
"Derivatives Contract") or owns securities that (1) are referred to
generically as "structured notes," "high risk mortgage derivatives,"
"capped floating rate notes" or "capped floating rate mortgage derivatives"
or (2) are likely to have changes in value as a result of interest or
exchange rate changes that significantly exceed normal changes in value
attributable to interest or exchange rate changes, except for those
Derivatives Contracts, structured notes and other instruments legally
purchased or entered into in the ordinary course of business, consistent
with safe and sound banking practices and regulatory guidance, and listed
(as of the date hereof) on Schedule 4.34.
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4.35 Year 2000 Issues. Expenses associated with resolving Year
2000 technology issues are not expected to have a material adverse effect
on the financial condition or results of operations of Whatcom or the Bank,
nor are Year 2000 technology issues expected to have a material adverse
effect on the operations of Whatcom or the Bank.
4.36 Loans. To the best knowledge of Whatcom, with respect to
each loan owned by Whatcom in whole or in part: (i) the note and any
related mortgage are each legal, valid and binding obligations of the maker
or obligor thereof, enforceable against such maker or obligor in accordance
with their terms; (ii) neither Whatcom nor any prior holder of a loan has
modified the related documents in any material respect or satisfied,
canceled or subordinated such mortgage or note except as otherwise
disclosed by documents in the applicable loan file; (iii) Whatcom is the
sole holder of legal and beneficial title to each loan (or Whatcom's
applicable participation interest), as applicable and there has not been
any assignment or pledge of any loan; and (iv) the note, mortgage and any
other collateral documents, copies of which are included in the loan files,
are true and correct copies of the documents they purport to be and have
not been superseded, amended, modified, canceled or otherwise changed
except as disclosed by documents in the applicable loan file.
ARTICLE 5
COVENANTS OF ACQUIROR
5.1 Regulatory Approvals. Within a reasonable time after
execution of this Merger Agreement, Acquiror shall file any and all
applications with the appropriate government Regulatory Authorities in
order to obtain the Government Approvals and shall take such other actions
as may be reasonably required to consummate the transactions contemplated
in this Merger Agreement and the Plans of Merger with reasonable
promptness. Acquiror shall pay all fees and expenses arising in connection
with such applications for regulatory approval. Acquiror agrees to provide
the appropriate Regulatory Authorities with the information required by
such authorities in connection with Acquiror's applications for regulatory
approval and Acquiror agrees to use its best efforts to obtain such
regulatory approvals, and any other approvals and consents as may be
required for the Closing, as promptly as practicable; provided, however,
that nothing in this Section 5.1 shall be construed to obligate Acquiror to
take any action to meet any condition required to obtain prior regulatory
approval if any such condition materially differs from conditions
customarily imposed by such Regulatory Authorities in orders approving
acquisitions of the type contemplated by this Merger Agreement, constitutes
a significant impediment upon Acquiror's ability to carry on its business
or acquisition programs (as may be determined in the sole discretion of
Acquiror) or requires Acquiror to increase the Bank's capital ratios to
amounts in excess of the FDIC's minimum capital ratio guidelines which may
be in effect from time to time.
5.2 Preparation of Registration Statement. Acquiror, in
cooperation with Whatcom, shall prepare and file with the SEC a
Registration Statement on Form S-4 with respect to the shares of Acquiror
Common Stock to be issued in the Corporate Merger ("Registration
Statement"). Such Registration Statement shall contain a Proxy
Statement/Prospectus which shall serve as the proxy statement of Whatcom
for the Shareholders Meeting and as the prospectus of Acquiror for the
shares of Acquiror Common Stock to be issued in the Corporate Merger.
Acquiror shall use its best efforts to cause the Registration Statement to
become effective.
5.3 Registration Statement Effectiveness. Acquiror will advise
Whatcom, promptly after Acquiror receives notice thereof, of the time when
the Registration Statement has become effective or any supplement or
amendment has been filed, of the issuance of any stop order or the
suspension of the qualification of the Acquiror Common Stock for offering
or sale in any jurisdiction, of the initiation or threat of any proceeding
for any such purpose, or of any request by the SEC for the amendment or
supplement of the Registration Statement or for additional information.
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5.4 Employees. Upon consummation of the Corporate Merger, all
employees of Whatcom, the Bank and the Whatcom Subsidiaries shall be deemed
to be at- will employees except for those employees who are parties to a
written employment agreement.
(a) As soon as administratively practicable after the Effective
Time, employees of Whatcom and the Bank who continue as employees of the
Acquiror and First Savings shall be entitled to participate on an equitable
basis in the same benefit plans, programs or policies as are generally
available to Acquiror's and First Savings's employees of similar rank and
status. For purposes of eligibility and vesting (but not for the accrual
of benefits) under such plans, programs or policies, employees of Whatcom
and the Bank who continue as Acquiror's or First Savings's employees will
be credited for prior years of service with Whatcom and the Bank, and there
shall be no exclusion from coverage under the Acquiror's or First Savings's
health insurance plan as a result of pre-existing conditions to the extent
such conditions were covered under any health insurance plan maintained by
Whatcom prior to the Effective Time.
(b) Prior to the Effective Time, the Bank shall terminate the
Whatcom State Bank Employee Stock Ownership Plan ("ESOP") by proper action
of the Board of Directors of the Bank. At or as soon as administratively
practicable after the Effective Time, the ESOP shall convert to cash a
sufficient number of shares of Acquiror Common Stock as may be received by
the ESOP with respect to unallocated shares of Whatcom Common Stock held by
the ESOP at the Effective Time to the repayment in full of the outstanding
ESOP indebtedness to Key Bank. Any surplus of cash and/or Acquiror Common
Stock remaining after repayment of such indebtedness shall be allocated as
investment earnings of the ESOP to the accounts of ESOP participants (and,
if required, to the accounts of former participants or their beneficiaries)
in proportion to their account balances at the Effective Time (except to
the extent that such allocations would be subject to the limitations of
Section 415 of the Internal Revenue Code for that year). In connection
with the termination of the ESOP, the ESOP shall be submitted to the
Internal Revenue Service for a determination regarding its qualification,
including the proposed allocation of unallocated surplus, and, upon receipt
of a favorable determination, distributions shall be made to ESOP
participants or beneficiaries in accordance with ERISA and the Internal
Revenue Code. In the event that any portion of the surplus is only
allocable subject to the limitations of Section 415 of the Internal Revenue
Code, such amount shall be allocated to the greatest extent possible
subject to Section 415 and, in the event the combined benefits allocable
under the ESOP and any tax-qualified plan of the Acquiror in the year of
allocation exceed the limitations of Section 415, any required reduction in
such allocations shall be made first to benefits allocable under the
Acquiror's plans.
(c) Prior to the Effective Time, Whatcom and the Bank shall
terminate the Whatcom State Bank 401(k) Profit Sharing Plan (the "401(k)
Plan") by proper action of the Board of Directors of Whatcom and the Bank;
provided, however, that, in the event such action is not taken prior to the
Effective Time, the 401(k) Plan shall thereafter be merged with and into a
comparable plan of the Acquiror. In connection with such termination, the
401(k) Plan shall be submitted to the Internal Revenue Service for a
determination regarding its qualification and, upon receipt of a favorable
determination, distributions shall be made to participants in accordance
with ERISA and the Internal Revenue Code. Neither the Acquiror nor First
Savings shall have any obligation to make contributions to the 401(k) Plan
after the Effective Time.
(d) The Acquiror agrees to honor the terms of the Whatcom
employment and deferred compensation agreements set forth in Schedule 4.28;
provided, however, in no event shall the Acquiror or First Savings be
obligated to make any payment or provide any benefits whatsoever to any
officer or employee of Whatcom under any circumstance in which such
payments or benefits, whether due under such agreements or otherwise, is or
will not be deductible by the Acquiror or First Savings by reason of
Section 280G of the Internal Revenue Code.
(e) If any employee of Whatcom who is not a party to an
employment, severance or similar agreement with Whatcom is terminated by
the Acquiror or First Savings without cause within six months after the
Effective Time (as determined in the reasonable discretion of the Board of
Directors of the Company), such employee shall be paid a severance payment
by the Company or First Savings equal to one week's compensation for each
full year's employment at Whatcom and First Savings, not to exceed a
maximum of 12 weeks compensation.
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5.5 Reasonable Efforts to Close. Subject to the terms and
conditions of this Merger Agreement, Acquiror agrees to use all its best
efforts and to take, or to cause to be taken, all actions, and to do, or to
cause to be done, all things necessary, proper, or advisable under
applicable laws and regulations to consummate and make effective, with
reasonable promptness after the date of this Merger Agreement, the
transactions contemplated by this Merger Agreement, including, without
limitation, using reasonable efforts to lift or rescind any injunction or
restraining or other order adversely affecting the ability of the Parties
to consummate the transaction contemplated by this Merger Agreement;
provided, however, that such efforts do not impose unreasonable expense or
obligations on Acquiror. Acquiror shall use, and shall cause each of its
Subsidiaries to use, its best efforts to obtain consents of all third
parties and Regulatory Authorities necessary or desirable for the
consummation of each of the transactions contemplated by this Merger
Agreement.
5.6 Indemnification and Insurance.
(a) Acquiror agrees that all rights to indemnification or
exculpation now existing in favor of the directors and officers of Whatcom
and the Bank as provided in their respective articles, bylaws,
indemnification agreements or other written agreements in effect as of the
date hereof with respect to matters occurring prior to the Closing Date
shall survive the Corporate Merger and shall continue in full force and
effect. If Acquiror or any of its successors or assigns (i) shall
consolidate with or merge into any other corporation or entity and shall
not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) shall transfer all or substantially all of
its properties and assets to any individual, corporation or other entity,
then, in each such case, Acquiror shall use its best efforts to cause the
successor and assigns of Acquiror to assume the obligations set forth in
this Section 5.6.
(b) Acquiror, or Whatcom with the consent of Acquiror,
shall use its best efforts to cause the persons serving as officers and
directors of Whatcom and the Bank immediately prior to the Closing Date to
be covered for a period of two years after the Closing Date by the current
policies of directors and officers liability insurance maintained by
Whatcom with respect to acts or omissions occurring prior to the Closing
Date which were committed to such officers and directors in their capacity
as such (provided that Acquiror may substitute therefor policies of at
least the same coverage and amounts containing the terms and conditions
which are no less advantageous to such officers and directors); provided,
however, that Acquiror shall not be obligated to make annual premium
payments for such insurance to the extent such premiums exceed 150% of the
premiums paid as of the date hereof by Whatcom for such insurance. The
provision of this Section 5.6 are intended to be for the benefit of, and
shall be enforceable by, each of the present and former officers and
directors of Whatcom and the Bank and each such person's respective heirs
and representatives.
5.7 Access. Upon notice of at least 48 hours, Acquiror shall
afford Whatcom and its representatives access, during normal business hours
throughout the period up to the Effective Date, to all of the properties,
books and records, provided that no investigation pursuant to this Section
5.7 shall affect or be deemed to modify or waive any representation or
warranty made by Acquiror in this Merger Agreement or the conditions to the
obligations of Acquiror to consummate the transactions contemplated by this
Merger Agreement.
ARTICLE 6
COVENANTS OF WHATCOM AND THE BANK
6.1 Shareholders Meeting. Whatcom shall call a special meeting
of the holders of Whatcom Common Stock to be held as soon as practicable
for purposes of voting upon the transactions contemplated hereby and
Whatcom shall use its best efforts to solicit and obtain the votes of the
holders of Whatcom Common Stock in favor of the transactions contemplated
hereby and, subject to the exercise of its fiduciary duties, the Board of
Directors of Whatcom shall recommend approval of such transactions by such
holders. In connection with the Shareholders Meeting, the Acquiror and
Whatcom shall cooperate in the preparation of the Proxy
Statement/Prospectus and, with the approval
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of each of the Acquiror and Whatcom, which approvals will not be
unreasonably withheld, the Proxy Statement/Prospectus will be mailed to the
shareholders of Whatcom.
6.2 Conduct of Business -- Affirmative Covenants. Unless the
prior written consent of Acquiror shall have been obtained, and, except as
otherwise contemplated herein:
(a) Whatcom and the Bank shall, and shall cause each
Whatcom Subsidiary to:
(i) Operate its business only in the usual, regular,
and ordinary course;
(ii) Preserve intact its business organizations and
assets and to maintain its rights and franchises;
(iii) Take no action, unless otherwise required by law,
rules or regulation, that would (A) materially adversely affect the
ability of any of them or Acquiror to obtain any necessary approvals
of Regulatory Authorities required to consummate the transactions
contemplated by this Merger Agreement, or (B) adversely affect the
ability of such Party to perform its covenants and agreements under
this Merger Agreement;
(iv) Except as they may terminate in accordance with
their terms, keep in full force and effect, and not default in any of
their obligations under, all material contracts;
(v) Keep in full force and effect insurance coverage
with responsible insurance carriers which is reasonably adequate in
coverage and amount for companies the size of the Whatcom, Bank or
such Whatcom Subsidiary and for the businesses and properties owned by
each and in which each is engaged, to the extent that such insurance
is reasonably available;
(vi) Use its best efforts to retain the Bank's present
customer base and to facilitate the retention of such customers after
the Effective Time;
(vii) Maintain, renew, keep in full force and effect,
and preserve its business organization and material rights and
franchises, permits and licenses, and to use its best efforts to
maintain positive relations with its present employees so that such
employees will continue to perform effectively and will be available
to Whatcom and the Bank or Acquiror and Acquiror's Subsidiaries at and
after the Effective Time, and to use its best efforts to maintain its
existing, or substantially equivalent, credit arrangements with banks
and other financial institutions and to assure the continuance of the
Bank's customer relationships; and
(b) Whatcom and the Bank agree to use their best efforts to
assist Acquiror and First Savings in obtaining the Government Approvals
necessary to complete the transactions contemplated hereby, and Whatcom and
the Bank shall provide to Acquiror and First Savings or to the appropriate
governmental authorities all information reasonably required to be
submitted in connection with obtaining such approvals;
(c) Whatcom and the Bank, at their own cost and expense,
shall use their best efforts to secure all consents and releases, if any,
of third parties necessary or desirable for the consummation of the
transactions contemplated by this Merger Agreement and shall comply with
all applicable laws, regulations and rulings in connection with this Merger
Agreement and the consummation of the transactions contemplated hereby;
(d) At all times to and including, and as of, the Closing,
Whatcom and the Bank shall inform Acquiror and First Savings in writing of
any and all facts necessary to amend or supplement the representations and
warranties made herein and the Schedules attached hereto as necessary so
that the representations and warranties and information provided in the
schedules remain true and correct in all respects; provided, however, that
any such
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updates to Schedules shall be required prior to the Closing only with
respect to matters which represent material changes to the Schedules and
the information contained therein; and provided further, that before such
amendment, supplement or update may be deemed to be a part of this Merger
Agreement, Acquiror and First Savings shall have agreed in writing to each
amendment, supplement or update to the Schedules made subsequent to the
date of this Merger Agreement as an amendment to this Merger Agreement;
(e) At all times to and including, and as of, the Closing,
Whatcom and the Bank shall give such further assistance to Acquiror and
First Savings and shall execute, acknowledge and deliver all such documents
and instruments as Acquiror and First Savings may reasonably request and
take such further action as may be reasonably necessary or appropriate
effectively to consummate the transactions contemplated by this Merger
Agreement;
(f) Between the date of this Merger Agreement and the
Closing Date, Whatcom and the Bank shall afford Acquiror and First Savings
and its authorized agents and representatives reasonable access during
normal business hours to the properties, operations, books, records,
contracts, documents, loan files and other information of, or relating to
Whatcom and the Bank. Whatcom and the Bank shall provide reasonable
assistance to Acquiror and First Savings in its investigation of matters
relating to Whatcom and the Bank;
(g) Whatcom and the Bank have taken or will take all steps
necessary to exempt the transactions contemplated by this Merger Agreement
from any applicable state takeover or similar law or takeover or similar
provision in the charter documents or bylaws of Whatcom and the Bank,
including without limitation any provisions of the Articles of
Incorporation of Whatcom restricting the ownership or acquisition of
Whatcom's capital stock or imposing any "fair price" or supermajority
director or stockholder vote requirements;
(h) Subject to the terms and conditions of this Merger
Agreement, Whatcom and the Bank agree to use all reasonable efforts and to
take, or to cause to be taken, all actions, and to do, or to cause to be
done, all things necessary, proper, or advisable under applicable laws and
regulations to consummate and make effective, with reasonable promptness
after the date of this Merger Agreement, the transactions contemplated by
this Merger Agreement, including, without limitation, using reasonable
efforts to lift or rescind any injunction or restraining or other order
adversely affecting the ability of the Parties to consummate the
transaction contemplated by this Merger Agreement; provided, however, that
such efforts do not impose unreasonable expense or obligations on Whatcom
and the Bank.
(i) At the request of Acquiror and First Savings, Whatcom
and the Bank shall hire an outside consultant reasonably acceptable to
Acquiror and First Savings to undertake to determine as soon as reasonably
practicable but in any event prior to Closing whether or not there are any
underground storage tanks, asbestos, ureaformaldehyde, polychlorinated
biphenyls, solid wastes or hazard substances, as defined in the Model
Toxics Control Act, CERCLA or any other applicable Environmental Laws,
present at or on any of the "other real estate owned" of Whatcom, the Bank
or any Whatcom Subsidiary (excluding any one- to four-family residential
property with appraised value less than $150,000) or at or on any of the
branch or office facilities owned by Whatcom, the Bank or any Whatcom
Subsidiary. Such investigation shall be conducted in a manner reasonably
satisfactory to Acquiror and First Savings, and the results of such
investigation shall be set forth in a written report delivered to Acquiror
and First Savings prior to Closing. The scope and detail of such report
shall be reasonably satisfactory to Acquiror and First Savings. It is
understood that the investigation shall be a "Phase I." In the event the
Corporate Merger is not consummated and the failure to consummate the
Corporate Merger is not due to an adverse environmental assessment or other
actions on the part of Whatcom or the Bank, Acquiror will reimburse Whatcom
and the Bank for the cost of any environmental assessment requested by
Acquiror pursuant to this section.
6.3 Conduct of Business -- Negative Covenants. From the date of
this Merger Agreement until the earlier of the Effective Time or the
termination of this Merger Agreement, Whatcom and the Bank covenant and
agree they will neither do, nor agree or commit to do, nor permit any
Whatcom Subsidiary to do or commit or agree to
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do, any of the following without the prior written consent of the chief
executive officer, president, or chief financial officer of Acquiror:
(a) Except as expressly contemplated by this Merger
Agreement or the Plans of Merger, amend its Articles of Incorporation or
Bylaws; or
(b) Impose, or suffer the imposition, on any share of
capital stock held by it or by any of its Subsidiaries of any lien, charge,
or encumbrance, or permit any such lien, charge, or encumbrance to exist;
or
(c) (i) Repurchase, redeem, or otherwise acquire or
exchange, directly or indirectly, any shares of its capital stock or other
equity securities or any securities or instruments convertible into any
shares of its capital stock, or any rights or options to acquire any shares
of its capital stock or other equity securities except as expressly
permitted by this Merger Agreement or the Plans of Merger; or (ii) split or
otherwise subdivide its capital stock; or (iii) recapitalize in any way; or
(iv) declare a stock dividend on the Whatcom Common Stock; or (v) pay or
declare a cash dividend or make or declare any other type of distribution
on the Whatcom Common Stock; or
(d) Except as expressly permitted by this Merger Agreement,
acquire direct or indirect control over any corporation, association, firm,
organization or other entity, other than in connection with (i) mergers,
acquisitions, or other transactions approved in writing by Acquiror, (ii)
internal reorganizations or consolidations involving existing Subsidiaries,
(iii) foreclosures in the ordinary course of business and not knowingly
exposing it to liability by reason of Hazardous Substances, (iv)
acquisitions of control in its fiduciary capacity, or (v) the creation of
new subsidiaries organized to conduct or continue activities otherwise
permitted by this Merger Agreement; or
(e) Except as expressly permitted by this Merger Agreement
or the Plans of Merger, to (i) issue, sell, agree to sell, or otherwise
dispose of or otherwise permit to become outstanding any additional shares
of Whatcom Common Stock or any other capital stock of Whatcom, the Bank or
of any Whatcom Subsidiary, or any stock appreciation rights, or any option,
warrant, conversion, call, scrip, or other right to acquire any such stock,
or any security convertible into any such stock, unless any such shares of
such stock are directly sold or otherwise directly transferred to Whatcom,
the Bank or any Whatcom Subsidiary, or (ii) sell, agree to sell, or
otherwise dispose of any substantial part of the assets or earning power of
Whatcom, the Bank or of any Whatcom Subsidiary; or (iii) sell, agree to
sell, or otherwise dispose of any asset of Whatcom, the Bank or any Whatcom
Subsidiary other than in the ordinary course of business for reasonable and
adequate consideration; or (iv) buy, agree to buy or otherwise acquire a
substantial part of the assets or earning power of any other Person or
entity; or
(f) Incur, or permit any Whatcom Subsidiary to incur, any
additional debt obligation or other obligation for borrowed money except in
the ordinary course of the business of Whatcom, the Bank or such Whatcom
Subsidiary consistent with past practices; or
(g) Grant any increase in compensation or benefits to any
of its employees or officers; pay any bonus; enter into any severance
agreements with any of its officers or employees; grant any increase in
fees or other increases in compensation or other benefits to any director
of Whatcom, the Bank or of any Whatcom Subsidiary; or effect any change in
retirement benefits for any class of its employees or officers, unless such
change is required by applicable law; or
(h) Amend any existing employment contract between it and
any person (unless such amendment is required by law); enter into or amend
any indemnification agreement with any person; or enter into any new
employment contract with any person that Whatcom or the Bank (or its
successors) does not have the unconditional right to terminate without
liability (other than liability for services already rendered), at any time
on or after the Effective Time; or
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(i) Adopt any new employee benefit plan or terminate or
make any material change in or to any existing employee benefit plan other
than any change that is required by law or that, in the opinion of counsel,
is necessary or advisable to maintain the tax-qualified status of any such
plan (except for a termination resulting from Acquiror's decision not to
continue any such plan); or
(j) Enter into any new service contracts, purchase or sale
agreements or lease agreements that are material to Whatcom, the Bank or
any Whatcom Subsidiary; or
(k) Make any capital expenditure except for ordinary
purchases, repairs, renewals or replacements in an amount less than $15,000
per individual expenditure and $50,000 in the aggregate; or
(l) Other than in the ordinary course of business
consistent with past practice, sell, transfer, mortgage, encumber or
otherwise dispose of any of its properties, leases or assets to any person,
or cancel, release or assign any indebtedness of any person, except
pursuant to contracts or agreements in force at the date of this Merger
Agreement; or
(m) Other than as contemplated by this Merger Agreement,
enter into, renew or terminate any material contract or agreement or make
any change in any of its material leases or contracts; or
(n) Settle any claim, action or proceeding involving any
liability of Whatcom, the Bank or any Whatcom Subsidiaries for money
damages in excess of $25,000 or agree in connection with any such
settlement to material restrictions upon the operations of Whatcom, the
Bank or any Whatcom Subsidiaries; or
(o) Change its method of accounting in effect at December
31, 1997, except as required by changes in GAAP as concurred in by
Whatcom's independent auditors or as required by regulatory accounting
principles or regulatory requirements; or
(p) Enter into any new activities or lines of business, or
cease to conduct any material activities or lines of business that it
conducts on the date hereof, or conduct any material business activity not
consistent with past practice; or
(q) Except in the ordinary course of business, make,
renegotiate, renew, increase, extend or purchase any loan, lease (credit
equivalent), advance, credit enhancement or other extension of credit, or
make any commitment in respect of any of the foregoing; or
(r) Enter into, renew or purchase any Derivatives
Contracts; or
(s) Purchase any investment securities other than in the
ordinary course of business consistent with past practices; or
(t) Enter into any transactions other than in the ordinary
course of business; or
(u) Grant or commit to grant any new extension of credit to
any officer, director or holder of 2% or more of the outstanding the
Whatcom Common Stock, or to any corporation, partnership, trust or other
entity controlled by any such person, if such extension of credit, together
with all other credits then outstanding to the same borrower and all
affiliated persons of such borrower, would exceed two percent (2%) of the
capital of the Bank or amend the terms of any such credit outstanding on
the date hereof; or
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(v) Agree in writing or otherwise to take any of the
foregoing actions or engage in any activity, enter into any transaction or
take or omit to take any other act which would make any of the
representations and warranties in Article 4 of this Merger Agreement untrue
or incorrect in any material respect if made anew after engaging in such
activity, entering into such transaction, or taking or omitting such other
act.
6.4 Conduct of Business -- Certain Actions.
(a) Whatcom and the Bank shall not, and shall use their
best efforts to ensure that their directors, officers, employees, and
advisors do not, directly or indirectly, institute, solicit, or knowingly
encourage (including by way of furnishing any information not legally
required to be furnished) any inquiry, discussion, or proposal, or
participate in any discussions or negotiations with, or, except for actions
reasonably considered by the Boards of Directors of Whatcom and the Bank
based upon the written advice of outside legal counsel to be required in
order to fulfill its fiduciary obligations, provide any confidential or
non-public information to or negotiate with, any corporation, partnership,
person or other entity or group (other than to Acquiror or any Acquiror
Subsidiary) concerning any "Acquisition Proposal" (as defined below).
Whatcom and the Bank shall notify Acquiror and First Savings immediately if
any Acquisition Proposal has been or should hereafter be received by
Whatcom or the Bank, such notice to contain, at a minimum, the identity of
such persons, and, subject to disclosure being consistent with the
fiduciary obligations of Whatcom's and the Bank's Boards of Directors, a
copy of any written inquiry, the terms of any proposal or inquiry, any
information requested or discussions sought to be initiated, and the status
of any reports, negotiations or expressions of interest. For purposes of
this Section, "Acquisition Proposal" means any tender offer, agreement,
understanding or other proposal of any nature pursuant to which any
corporation, partnership, person or other entity or group, other than
Acquiror, First Savings or of their respective Subsidiaries, would directly
or indirectly (i) acquire or participate in a merger, share exchange,
consolidation or any other business combination involving Whatcom or the
Bank; (ii) acquire the right to vote ten percent (10%) or more of the
outstanding Whatcom Common Stock; (iii) acquire a significant portion of
the assets or earning power of the Bank; or (iv) acquire in excess of ten
percent (10%) of the outstanding Whatcom Common Stock.
(b) Whatcom and the Bank shall immediately terminate all
negotiations or discussions concerning any Acquisition Proposal with
parties other than Acquiror and First Savings and enforce the terms of all
confidentiality agreements with such other parties.
6.5 Accruals and Reserves. At the request of Acquiror and First
Savings, Whatcom and the Bank shall establish such additional accruals and
reserves as may be necessary to conform Whatcom's and the Bank's accounting
and credit loss reserve practices and methods to those of Acquiror and
First Savings; provided, however, that Whatcom and the Bank shall not be
required to take such action prior to the receipt of all Government
Approvals as contemplated by Section 7.3(b).
6.6 Access; Information. Upon reasonable notice, Whatcom and
the Bank shall afford Acquiror and First Savings and each of their
officers, employees, counsel, accountants and other authorized
representatives, access, during normal business hours throughout the period
up to the Effective Date, to all of the properties, books, contracts,
commitments and records of Whatcom, the Bank and the Whatcom Subsidiaries
and, during such period, Whatcom and the Bank shall furnish promptly to
Acquiror and First Savings (i) a copy of each material report, schedule and
other document filed by Whatcom, the Bank and the Whatcom Subsidiaries with
any Regulatory Authority and (ii) all other information concerning the
business, properties and personnel of Whatcom, the Bank and the Whatcom
Subsidiaries as Acquiror and First Savings may reasonably request, provided
that no investigation pursuant to this Section 6.6 shall affect or be
deemed to modify or waive any representation or warranty made by Whatcom
and the Bank in this Merger Agreement or the conditions to the obligations
of Whatcom and the Bank to consummate the transactions contemplated by this
Merger Agreement.
6.7 Affiliate Agreements. Whatcom will cause each person who is
an affiliate of Whatcom for purposes of Rule 145 under the 1933 Act to
execute and deliver to Acquiror and First Savings on or before the mailing
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of the Proxy Statement/Prospectus for the Shareholders Meeting an agreement
in the form attached hereto as Exhibit D restricting the disposition of the
shares of Acquiror Common Stock to be received by such person in exchange
for such person's shares of Whatcom Common Stock. Schedule 6.7 hereto
lists the affiliates of Whatcom as of the date hereof.
ARTICLE 7
CONDITIONS TO CLOSING
7.1 Conditions to the Obligations of Whatcom and the Bank.
Unless waived in writing by Whatcom and the Bank, the obligations of
Whatcom and the Bank to consummate the transaction contemplated by this
Merger Agreement are subject to the satisfaction at or prior to the Closing
Date of the following conditions:
(a) Performance. Each of the material acts and
undertakings of Acquiror and First Savings to be performed at or prior to
the Closing Date pursuant to this Merger Agreement shall have been duly
performed;
(b) Representations and Warranties. The representations
and warranties of Acquiror and First Savings contained in Article 3 of this
Merger Agreement shall be true and correct, in all material respects, on
and as of the Effective Time with the same effect as though made on and as
of the Effective Time;
(c) Documents. In addition to the other deliveries of
Acquiror and First Savings described elsewhere in this Merger Agreement,
Whatcom and the Bank shall have received the following documents and
instruments:
(i) a certificate signed by the Secretary or an
assistant secretary of Acquiror and First Savings dated as of the
Closing Date certifying that:
(A) Acquiror's and First Savings's Boards of
Directors have duly adopted resolutions (copies of which shall be
attached to such certificate) approving the substantive terms of
this Merger Agreement (including the Plans of Merger) and
authorizing the consummation of the transactions contemplated by
this Merger Agreement and certifying that such resolutions have
not been amended or modified and remain in full force and effect;
(B) each person executing this Merger Agreement
on behalf of Acquiror and First Savings is an officer of Acquiror
and First Savings holding the office or offices specified
therein, with full power and authority to execute this Merger
Agreement and any and all other documents in connection with the
Corporate Merger and the Bank Merger, and that the signature of
each person set forth on such certificate is his or her genuine
signature; and
(C) the charter documents of Acquiror and First
Savings attached to such certificate remain in full force and
effect.
(ii) a certificate signed by a duly authorized officer
of Acquiror and First Savings stating that the conditions set forth in
Section 7.1(a) and Section 7.1(b) of this Merger Agreement have been
fulfilled;
(d) Opinion of Acquiror's and First Savings's Counsel.
Whatcom and the Bank shall have been furnished with an opinion of counsel
to Acquiror and First Savings, dated as of the Closing Date, addressed to
and in form and substance satisfactory to Whatcom and the Bank, to the
effect that:
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(i) Acquiror is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware
and is qualified to do business as a foreign corporation in the State
of Washington.
(ii) First Savings is a bank duly organized, validly
existing and in good standing under the laws of the State of
Washington.
(iii) The execution and delivery of the Merger
Agreement by Acquiror, and the consummation by Acquiror and First
Savings of the transactions provided for therein, have been duly
authorized by all requisite corporate action on the part of Acquiror
and First Savings.
(iv) The Merger Agreement has been duly executed and
delivered by Acquiror and First Savings and is a valid and binding
obligation of Acquiror and First Savings enforceable in accordance
with its terms, except as the enforceability thereof may be limited by
(1) bankruptcy, insolvency, moratorium, reorganization, receivership,
conservatorship or similar laws relating to or affecting the
enforcement of creditors' rights generally and (2) general principles
of equity, whether applied by a court of law or equity.
(v) Except for the filing of articles of merger with
the Secretary of State for the State of Washington and a certificate
of merger with the Secretary of State for the State of Delaware, no
consent or approval under any statutory law or regulation applicable
to Acquiror or First Savings, other than such consents and approvals
as have been obtained, is required for Acquiror and First Savings to
consummate the transactions provided for in the Merger Agreement.
(vi) The Registration Statement has become effective
under the 1933 Act, and, to the best of our knowledge, no stop order
suspending the effectiveness of the Registration Statement has been
issued and no proceedings for that purpose have been instituted or are
pending or contemplated by the SEC or any state securities or other
regulatory authority.
(vii) The shares of Acquiror Common Stock to be issued
in exchange for shares of Whatcom Common Stock in connection with the
consummation of the transactions contemplated in the Merger Agreement
have been duly authorized and, when issued in accordance with the
terms of the Agreement will be validly issued, fully paid and
non-assessable, and conform as to legal matters in all material
respects to the description of such shares contained in the
Registration Statement.
Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of Acquiror and First Savings or
appropriate government officials; (ii) in the case of matters of law
governed by the laws of the states in which they are not licensed,
reasonably rely upon the opinions of legal counsel duly licensed in such
states and may be limited, in any event, to Federal Law and the laws of the
States of Washington and Delaware; and (iii) incorporate, be guided by, and
be interpreted in accordance with, the Legal Opinion Accord of the ABA
Section of Business Law (1991); and
7.2 Conditions to the Obligations of Acquiror and First Savings.
Unless waived in writing by Acquiror and First Savings, the obligation of
Acquiror and First Savings to consummate the transactions contemplated by
this Merger Agreement is subject to the satisfaction at or prior to the
Closing Date of the following conditions:
(a) Performance. Each of the material acts and
undertakings of Whatcom and the Bank to be performed at or before the
Closing Date pursuant to this Merger Agreement shall have been duly
performed;
(b) Representations and Warranties. The representations
and warranties of Whatcom and the Bank contained in Article 4 of this
Merger Agreement shall be true and correct, in all material respects, on
and as of the Closing Date with the same effect as though made on and as of
the Closing Date;
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(c) Documents. In addition to the documents described
elsewhere in this Merger Agreement, Acquiror and First Savings shall have
received the following documents and instruments:
(i) a certificate signed by the Secretary or an
assistant secretary of Whatcom and the Bank dated as of the Closing
Date certifying that:
(A) Whatcom's and the Bank's Boards of Directors
and shareholders have duly adopted resolutions (copies of which
shall be attached to such certificate) approving the substantive
terms of this Merger Agreement (including the Plans of Merger)
and authorizing the consummation of the transactions contemplated
by this Merger Agreement and certifying that such resolutions
have not been amended or modified and remain in full force and
effect;
(B) each person executing this Merger Agreement
on behalf of Whatcom and the Bank, is an officer of Whatcom or
the Bank, as the case may be, holding the office or offices
specified therein, with full power and authority to execute this
Merger Agreement and any and all other documents in connection
with the Merger, and that the signature of each person set forth
on such certificate is his or her genuine signature; and
(C) the charter documents of Whatcom and the Bank
attached to such certificate remain in full force and effect; and
(ii) a certificate signed by the President, Chief
Executive Officer or an Executive Vice President of Whatcom and the
Bank stating that the conditions set forth in Section 7.2(a), Section
7.2(b) and Section 7.2(f) this Merger Agreement have been satisfied.
(d) Destruction of Property. Between the date of this
Merger Agreement and the Closing Date, there shall have been no damage to
or destruction of real property, improvements or personal property of
Whatcom and the Bank which materially reduces the market value of such
property, and no zoning or other order, limitation or restriction imposed
against the same that might have a material adverse impact upon the
operations, business or prospects of Whatcom, the Bank and the Whatcom
Subsidiaries taken as a whole; provided, however, that the availability of
insurance coverage shall be taken into account in determining whether there
has been such a material adverse impact or material reduction in market
value. In the event of such damage, destruction, order, limitation or
restriction, Acquiror and First Savings may elect either (i) to close the
contemplated transactions in accordance with the terms of this Merger
Agreement or (ii) to terminate this Merger Agreement without penalty;
(e) Inspections Permitted. Between the date of this Merger
Agreement and the Closing Date, Whatcom and the Bank shall have afforded
Acquiror and First Savings and their authorized agents and representatives
reasonable access during normal business hours to the properties,
operations, books, records, contracts, documents, loan files and other
information of or relating to Whatcom and the Bank. Whatcom and the Bank
shall have caused all Whatcom and Bank personnel to provide reasonable
assistance to Acquiror and First Savings in its investigation of matters
relating to Whatcom and the Bank;
(f) No Material Adverse Change. No material adverse change
in the business, property, assets (including loan portfolios), liabilities
(whether absolute, contingent or otherwise), prospects, operations,
liquidity, income, or condition (financial or otherwise) of Whatcom and the
Bank shall have occurred since the date of this Merger Agreement. In the
event of such a material adverse change with respect to Whatcom and the
Bank, Acquiror and First Savings may elect either (i) to close the
contemplated transactions in accordance with the terms of this Merger
Agreement or (ii) to terminate this Merger Agreement without penalty;
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(g) Opinion of Whatcom's and the Bank's Counsel. Acquiror
and First Savings shall have been furnished with an opinion of legal
counsel to Whatcom and the Bank, dated the Closing Date, addressed to and
in form and substance satisfactory to Acquiror and First Savings, to the
effect that:
(i) Whatcom is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Washington.
(ii) The Bank is a bank duly organized, validly
existing and in good standing under the laws of the State of
Washington.
(iii) Each of the Whatcom Subsidiaries is a
corporation duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation or organization.
(iv) The Bank is an "insured depository institution"
as defined in the Federal Deposit Insurance Act and applicable
regulations thereunder.
(v) The execution and delivery of the Merger Agreement
by Whatcom and the Bank, and the consummation by Whatcom and the Bank
of the transactions provided for therein, have been duly authorized by
all requisite corporate action on the part of Whatcom and the Bank.
(vi) The Merger Agreement has been duly executed and
delivered by Whatcom and the Bank and is a valid and binding
obligation of Whatcom and the Bank enforceable in accordance with its
terms, except as the enforceability thereof may be limited by (1)
bankruptcy, insolvency, moratorium, reorganization, receivership,
conservatorship or similar laws relating to or affecting the
enforcement of creditors' rights generally or the rights of creditors
of depository institutions whose accounts are insured by the FDIC and
(2) general principles of equity, whether applied by a court of law or
equity.
(vii) The execution, delivery and performance of the
Merger Agreement by Whatcom and the Bank did not, and the consummation
of the transactions contemplated thereby by Whatcom and the Bank does
not and will not (i) violate any statutory law or regulation
applicable to Whatcom, the Bank or any of the Whatcom Subsidiaries or
any judgment, decree or order that specifically names Whatcom or the
Bank, which violation is reasonably likely, individually or in the
aggregate, to have a material adverse effect on the financial
condition and results of operations of Whatcom, the Bank and the
Whatcom Subsidiaries, taken as a whole; (ii) constitute a breach of or
default under any agreement or other arrangement that is listed on
Schedule 4.28 to the Merger Agreement, which breach or default is
reasonably likely, individually or in the aggregate, to have a
material adverse effect on the financial condition or results of
operations of Whatcom, the Bank and the Whatcom Subsidiaries, taken as
a whole; (iii) violate the Articles of Incorporation, Charter or
Bylaws of Whatcom, the Bank or any of the Whatcom Subsidiaries; or
(iv) require any consent or approval under any such law or regulation
or under any such judgment, decree or order, or the consent or
approval of any other party to any such agreement or other
arrangement, other than such consents and approvals as have been
obtained.
(viii) To the best of such counsel's knowledge: (i)
there is no litigation or proceeding against Whatcom, the Bank or any
Whatcom Subsidiary pending before any court or governmental agency
which, individually or in the aggregate, is reasonably likely to have
a material adverse effect on the financial condition or results of
operations of Whatcom, the Bank and the Whatcom Subsidiaries, taken as
a whole, or which alleges claims under any fair lending law or other
law relating to discrimination, including, without limitation, the
Equal Credit Opportunity Act, the Fair Housing Act, the Community
Reinvestment Act and the Home Mortgage Disclosure Act, and no such
litigation or proceeding has been threatened; (ii) neither Whatcom,
the Bank nor any Whatcom Subsidiary or any of its or their properties,
officers, directors, or controlling persons is a party to or is
subject to any order, decree, agreement, memorandum of understanding
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or similar arrangement with, or a commitment letter or similar
submission to, any Regulatory Authority; and (iii) neither Whatcom,
the Bank nor any Whatcom Subsidiary has been advised by any such
Regulatory Authority that such authority is contemplating issuing or
requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of
understanding, commitment letter or similar submission.
(ix) The Corporate Merger has been duly approved by
the Whatcom Shareholders.
Such opinion may (i) expressly rely as to matters of fact upon certificates
furnished by appropriate officers of Whatcom and the Bank or appropriate
government officials; (ii) in the case of matters of law governed by the
laws of the states in which they are not licensed, reasonably rely upon the
opinions of legal counsel duly licensed in such states and may be limited,
in any event, to Federal Law and the law of the State of Washington and
(iii) incorporate, be guided by, and be interpreted in accordance with, the
Legal Opinion Accord of the ABA Section of Business Law (1991);
(h) Other Business Combinations, Etc. Other than as
contemplated hereunder, subsequent to the date of this Merger Agreement,
neither Whatcom nor the Bank shall have entered into any agreement, letter
of intent, understanding or other arrangement pursuant to which Whatcom or
the Bank would merge; consolidate with; effect a business combination with;
sell any substantial part of Whatcom's or the Bank's assets; acquire a
significant part of the shares or assets of any other Person or entity
(financial or otherwise); adopt any "poison pill" or other type of
anti-takeover arrangement, any shareholder rights provision, any "golden
parachute" or similar program which would have the effect of materially
decreasing the value of Whatcom and the Bank or the benefits of acquiring
the Whatcom Common Stock;
(i) Maintenance of Certain Covenants, Etc. At the time of
Closing (i) neither Whatcom nor the Bank shall have issued or repurchased
from the date hereof any additional equity or debt securities, or any
rights to purchase or repurchase such securities (therefore, there shall be
not more than 713,493 shares of Whatcom Common Stock validly issued and
outstanding at the Effective Time); and (ii) from December 31, 1997, there
shall have been no extraordinary sale of assets.
(j) Dissenting Shares. Whatcom Shareholders holding or
controlling no more than five percent (5%) of the shares of the Whatcom
Common Stock issued and outstanding immediately prior to the Effective Time
shall have perfected and maintained in perfected status their dissenters'
rights in accordance with the WBCA;
(k) Accruals and Reserves. Whatcom and the Bank shall have
established the accruals and reserves described in Section 6.5; and
(l) Employment Agreements. The Employment Agreements
between Acquiror, the Bank and Phillip V. Stephenson, Cliff Frydenburg,
Marilyn Brink and Jim Logghe substantially in the form attached as Exhibit
E shall have been duly executed and delivered by all parties to such
agreements;
(m) Receipt of Affiliate Agreements. Acquiror shall have
received from each affiliate of Whatcom the agreements referred to in
Section 6.7; and
(n) Major Shareholders and Directors. Simultaneous with
the execution and delivery of this Merger Agreement, each of the Major
Shareholders and directors of the Bank shall have executed and delivered to
Acquiror a Voting Agreement in the form attached hereto as Exhibit C.
7.3 Conditions to Obligations of All Parties. The obligation of
each party to effect the transactions contemplated hereby shall be subject
to the fulfillment, at or prior to the Closing, of the following
conditions:
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(a) No Pending or Threatened Claims. That no claim,
action, suit, investigation or other proceeding shall be pending or
threatened before any court or governmental agency which presents a
substantial risk of the restraint or prohibition of the transactions
contemplated by this Merger Agreement or the obtaining of material damages
or other relief in connection therewith; and
(b) Government Approvals and Acquiescence Obtained. The
Parties hereto shall have received all applicable Government Approvals for
the consummation of the transactions contemplated herein and all waiting
periods incidental to such approvals or notices given shall have expired.
(c) Effective Registration Statement. The Registration
Statement shall have become effective and no stop order or other order
suspending the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC or any other Regulatory Authority.
(d) Tax Opinion. Acquiror and Whatcom shall have received
an opinion from Breyer & Aguggia LLP to the effect that (i) the Corporate
Merger constitutes a reorganization under Section 368 of the Code, and (ii)
no gain or loss will be recognized by Whatcom Shareholders to the extent
they receive shares of the Acquiror Common Stock in exchange for their
shares of Whatcom Common Stock, and, in rendering their opinion, Breyer &
Aguggia LLP may require and rely upon representations contained in
certificates of officers of the Company, Whatcom and others.
(e) Shareholder Vote. The Whatcom Shareholders shall have
approved of the transactions contemplated hereby by the requisite vote.
ARTICLE 8
TERMINATION
8.1 Termination. This Merger Agreement and the Plans of Merger
may be terminated at any time prior to the Closing, as follows:
(a) By mutual consent in writing of the Parties;
(b) By Acquiror and First Savings, should Whatcom, the Bank
or any Whatcom Subsidiary fail to conduct its business pursuant to the
covenants made in Article 6;
(c) By Acquiror or Whatcom in the event the Closing shall
not have occurred by March 31, 1999, unless the failure of the Closing to
occur shall be due to the failure of the Party seeking to terminate this
Merger Agreement to perform its obligations hereunder in a timely manner.
If Acquiror and First Savings shall have filed any and all applications to
obtain the requisite Government Approvals within sixty (60) days of the
date hereof, and if the Closing shall not have occurred solely because of a
delay caused by a government regulatory agency or authority in its review
of the application before it, then Whatcom and the Bank shall, upon
Acquiror's and First Savings's written request, extend the Closing Date
until such time as all Government Approvals have been obtained and any
stipulated waiting periods have expired.
(d) By either Acquiror or Whatcom, upon written notice to
the other Party, upon denial of any Governmental Approval necessary for the
consummation of the Corporate Merger or the Bank Merger (or should such
approval be conditioned upon a substantial deviation from the transactions
contemplated); provided, however, that either Acquiror or Whatcom may, upon
written notice to the other, extend the term of this Merger Agreement for
only one sixty (60) day period to prosecute diligently and overturn such
denial, provided that such denial has been appealed within ten (10)
business days of the receipt thereof;
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(e) By Acquiror in the event the conditions set forth in
Section 7.2 or Section 7.3 are not satisfied in all material respects as of
the Closing Date, or by Whatcom if the conditions set forth in Section 7.1
or Section 7.3 are not satisfied in all material respects as of the Closing
Date, and such failure has not been waived prior to the Closing;
(f) By Acquiror or Whatcom in the event that there shall
have been a material breach of any obligation of the other Party hereunder
and such breach shall not have been remedied within thirty (30) days after
receipt by the breaching Party of written notice from the other Party
specifying the nature of such breach and requesting that it be remedied;
(g) By Acquiror should Whatcom, the Bank or any Whatcom
Subsidiary enter into any letter of intent or agreement with a view to
being acquired by or effecting a business combination with any other
Person; or any agreement to merge, to consolidate, to combine or to sell a
material portion of its assets or to be acquired in any other manner by any
other Person or to acquire a material amount of assets or a material equity
position in any other Person, whether financial or otherwise; or
(h) By Acquiror should Whatcom, the Bank or any Whatcom
Subsidiary enter into any formal agreement, letter of understanding,
supervisory agreement, cease and desist order, consent agreement,
memorandum or other similar arrangement with any bank regulatory agency.
(i) By Acquiror in the event that (i) any situation, event,
circumstance or other matter shall come to the attention of Acquiror during
the course of the Acquiror Due Diligence Review which Acquiror shall, in a
good faith exercise of its reasonable discretion, believe (A) to be
inconsistent in any material respect with any of the representations and
warranties of Whatcom and the Bank, (B) to be of such significance as to
have a material adverse effect on the financial condition, prospects,
results of operations or business of Whatcom and the Bank, or (C) is a
material deviation from the Whatcom Financial Statements, and (ii) Acquiror
notifies Whatcom and the Bank of such matters within five (5) business days
after the end of the Acquiror Due Diligence Review Period and such matters
are not capable of being cured or have not been cured within thirty (30)
days after written notice thereof to Whatcom and the Bank. For purposes of
this Section, (i) "Acquiror Due Diligence Review" shall mean a review by
Acquiror of Whatcom's and the Bank's operations, business affairs,
prospects and financial condition, including without limitation, those
matters which are the subject of the representations and warranties of
Whatcom and the Bank and (ii) "Acquiror Due Diligence Review Period" shall
mean a fifteen (15) day period beginning on the date of this Merger
Agreement. Notwithstanding anything in this Section contained or implied
to the contrary, the Acquiror Due Diligence Review shall not limit,
restrict or preclude Acquiror, at any time or from time to time, from
conducting such reviews or from exercising any rights available to it
hereunder as a result of the existence or occurrence prior to the Acquiror
Due Diligence Review Period of any event or condition which was not
detected in the Acquiror Due Diligence Review by Acquiror and which
constitutes a breach of any representation or warranty of Whatcom and the
Bank under this Merger Agreement.
If a Party should elect to terminate this Merger Agreement pursuant to
subsections (b), (c), (d), (e), (f), (g), (h), or (i) of this Section 8.1,
it shall give notice to the other Party, in writing, of its election in the
manner prescribed in Section 9.1 ("Notices") of this Merger Agreement.
8.2 Effect of Termination. In the event that this Merger
Agreement should be terminated pursuant to Section 8.1 hereof, all further
obligations of the Parties under this Merger Agreement shall terminate
without further liability of any Party to another; provided, however, that
a termination under Section 8.1 hereof shall not relieve any Party of any
liability for a breach of this Merger Agreement or for any misstatement or
misrepresentation made hereunder prior to such termination, or be deemed to
constitute a waiver of any available remedy for any such breach,
misstatement or misrepresentation.
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8.3 Termination Fee. The parties hereby acknowledge that, in
negotiating and executing this Merger Agreement and in taking the steps
necessary or appropriate to effect the transaction contemplated hereby,
Acquiror and First Savings have incurred and will incur direct and indirect
monetary and other costs (including without limitation attorneys' fees and
costs of Acquiror's and First Savings's employee and management time) and
will forego discussions with respect to other potential acquisitions.
(a) To compensate Acquiror and First Savings for such costs
and to induce it to forego initiating discussions regarding other
acquisitions, if (i) this Merger Agreement terminates because Whatcom and
the Bank do not use their best efforts to consummate the transactions
contemplated by this Merger Agreement in accordance with the terms of this
Merger Agreement (unless a condition set forth in Section 7.1 is not
satisfied and such nonsatisfaction has not been the result of the failure
of Whatcom and the Bank to use their best efforts to consummate this Merger
Agreement in accordance to the terms of this Merger Agreement); (ii)
Whatcom terminates this Merger Agreement for any reason other than the
grounds for termination set out in Sections 8.1(a), 8.1(c), 8.1(d), 8.1(e)
or 8.1(f) or (iii) the Whatcom Shareholders do not approve the Corporate
Merger, then Whatcom and the Bank shall be obligated to pay Acquiror on
demand (and in no event more than three days after such demand) in
immediately available funds Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00). It is further understood and agreed that the fee payable
under this Section shall be due and owing even though the event or
condition which caused the fee to be payable was the result (in part or in
whole) of the directors of Whatcom and the Bank complying with their
fiduciary duties.
(b) To compensate Whatcom for such costs and to induce it
to forego initiating discussions regarding other acquisitions, if (i) this
Merger Agreement terminates because Acquiror does not use its best efforts
to consummate the transactions contemplated by this Merger Agreement in
accordance with the terms of this Merger Agreement (unless a condition set
forth in Section 7.2 is not satisfied and such nonsatisfaction has not been
the result of the failure of Acquiror to use its best efforts to consummate
this Merger Agreement in accordance to the terms of this Agreement); or
(ii) Acquiror terminates this Merger Agreement for any reason other than
the grounds for termination set out in Sections 8.1, then Acquiror shall be
obligated to pay Whatcom on demand (and in no event more than three days
after such demand) in immediately available funds Two Hundred Fifty
Thousands and No/100 Dollars ($250,000.00).
8.4 Acquiror Fee. Whatcom and the Bank hereby agree to pay
Acquiror and First Savings on demand (and in no event more than three days
after such demand) in immediately available funds $625,000 (the "Acquiror
Fee") if within 18 months after the date hereof the Corporate Merger has
not been completed and there occurs any of the events set forth in
subparagraphs (a), (b) or (c) below.
(a) Any person other than Acquiror or First Savings or an
affiliate of Acquiror or First Savings acquires beneficial ownership of 25%
or more of the then- outstanding Whatcom Common Stock;
(b) Whatcom or the Bank, without having received Acquiror's and
First Savings's prior written consent, enters into an agreement to engage
in an Acquisition Transaction (as defined below) with any person (the term
"person" for purposes of this section having the meaning assigned thereto
in Sections 3(a)(9) and 13(d)(3) of the 1934 Act and the rules and
regulations thereunder) other than Acquiror and First Savings or any of
their respective Subsidiaries, or Whatcom's Board of Directors recommends
that the Whatcom Shareholders approve or accept any Acquisition Transaction
with any person other than Acquiror and First Savings or any of their
respective Subsidiaries. For purposes of this section, "Acquisition
Transaction" shall mean (a) a merger or consolidation, or any similar
transaction, involving Whatcom or the Bank, (b) a purchase, lease or other
acquisition of all or substantially all of the assets of Whatcom or the
Bank, or (c) a purchase or other acquisition (including by way of merger,
consolidation, share exchange or otherwise) of securities representing 10%
or more of the voting power of Whatcom or the Bank; or
(c) A bona fide proposal is made by a third party to Whatcom or
the Bank to engage in an Acquisition Transaction and after such proposal is
made any of the following events occurs: Whatcom or the Bank willfully
breaches this Merger Agreement and such breach entitles Acquiror and First
Savings to terminate this Merger
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Agreement; the Whatcom Shareholders do not approve this Merger Agreement at
the Shareholders Meeting; the Shareholders Meeting is not held or is
canceled prior to termination of this Merger Agreement for reasons other
than the fault of Acquiror and First Savings; or Whatcom's Board of
Directors modifies in a manner adverse to Acquiror and First Savings its
recommendation with respect to this Merger Agreement.
Notwithstanding the foregoing, Whatcom and the Bank shall not be
obligated to pay to Acquiror and First Savings the Acquiror Fee if, prior
to the occurrence of any of the events specified in 8.4(a), (b), or (c),
either (i) Acquiror terminates the Merger Agreement in accordance with the
terms hereof other than pursuant to Section 8.1(f) hereof as a result of a
willful breach of any obligation of Whatcom or the Bank hereunder or (ii)
Whatcom validly terminates this Merger Agreement pursuant to Section 8.1(a)
or 8.1(f) (but only in the event that Acquiror or First Savings materially
breaches a representation, warranty or covenant contained herein and, as a
result thereof, Whatcom exercises its right to terminate this Merger
Agreement under Section 8.1(f) at a time when Acquiror and First Savings
were not entitled to terminate this Merger Agreement under Section 8.1(c),
8.1(f)) or Section 8.1(d)). The parties further agree that this Section
8.4 is without prejudice to any other rights that the parties hereto may
have for any failure to perform this Merger Agreement.
ARTICLE 9
GENERAL PROVISIONS
9.1 Notices. Any notice, request, demand and other
communication which either Party hereto may desire or may be required
hereunder to give shall be in writing and shall be deemed to be duly given
if delivered personally or mailed by certified or registered mail (postage
prepaid, return receipt requested), air courier or facsimile transmission,
addressed or transmitted to such other Party as follows:
If to Whatcom and the Bank: Whatcom State Bancorp, Inc.
Whatcom State Bank
1600 Cornwall Avenue
Bellingham, Washington 98225
Fax: (360) 738-8095
Attn: Phil Stephenson, President and
Chief Executive Officer
With a copy to: Keller Rohrback
1201 Third Avenue
Suite 3200
Seattle, Washington 98101
Fax: (206) 623-3384
Attn: Glen P. Garrison, Esq.
If to Acquiror and First Savings Bank of Washington Bancorp, Inc.
First Savings: 10 South First Avenue
Walla Walla, Washington
Fax: (509) 527-3633
Attn: Gary Sirmon, President and
Chief Executive Officer
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With a copy to: Breyer & Aguggia LLP
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005
Fax: (202) 737-7979
Attn: John F. Breyer, Jr., Esq.
or to such other address as any Party hereto may hereafter designate to the
other Parties in writing. Notice shall be deemed to have been given on the
date reflected in the proof or evidence of delivery, or if none, on the
date actually received.
9.2 Assignability and Parties in Interest. This Merger
Agreement shall not be assignable by any of the Parties hereto; provided,
however, that Acquiror and First Savings may assign, set over and transfer
all, or any part of their rights and obligations under this Merger
Agreement to any one or more of their present or future Affiliates. This
Merger Agreement shall inure to the benefit of, and be binding only upon
the Parties hereto and their respective successors and permitted assigns
and no other Persons.
9.3 Governing Law. This Merger Agreement shall be governed by,
and construed and enforced in accordance with, the internal laws, and not
the laws pertaining to choice or conflicts of laws, of the State of
Washington, unless and to the extent that federal law controls. Any
dispute arising between the Parties in connection with the transactions
which are the subject of this Merger Agreement shall be heard in a court of
competent jurisdiction located in Walla Walla County, Washington.
9.4 Counterparts. This Merger Agreement may be executed
simultaneously in one or more counterparts (any of which may be facsimile
copies), each of which shall be deemed an original, but all of which shall
constitute but one and the same instrument.
9.5 Best Efforts. Whatcom, the Bank, Acquiror and First Savings
each agrees to use its best efforts to complete the transactions
contemplated by this Merger Agreement; provided, however, that the use of
best efforts by Acquiror and First Savings shall not obligate Acquiror and
First Savings to obtain or to provide Whatcom additional capital in an
amount, to divest any Subsidiary or branch, or to meet any other condition
which may be imposed by any Regulatory Authority as a condition to approval
which Acquiror and First Savings shall deem, in good faith, to be
unreasonable in the circumstances.
9.6 Publicity. The Parties agree that press releases and other
public announcements to be made by any of them with respect to the
transactions contemplated hereby shall be subject to mutual agreement.
9.7 Entire Agreement. This Merger Agreement, together with the
Plans of Merger which are attached as Exhibit A and Exhibit B hereto, the
Schedules, Exhibits and certificates required to be delivered hereunder and
any amendments or addenda hereafter executed and delivered in accordance
with Section 9.9 hereof constitute the entire agreement of the Parties
hereto pertaining to the transaction contemplated hereby and supersede all
prior written and oral (and all contemporaneous oral) agreements and
understandings of the Parties hereto concerning the subject matter hereof.
The schedules, annexes, exhibits and certificates attached hereto or
furnished pursuant to this Merger Agreement are hereby incorporated as
integral parts of this Merger Agreement. Except as provided herein, by
specific language and not by mere implication, this Merger Agreement is not
intended to confer upon any other person not a Party to this Merger
Agreement any rights or remedies hereunder.
9.8 Severability. If any portion or provision of this Merger
Agreement should be determined by a court of competent jurisdiction to be
invalid, illegal or unenforceable in any jurisdiction, such portion or
provision shall be ineffective as to that jurisdiction to the extent of
such invalidity, illegality or unenforceability, without affecting in any
way the validity or enforceability of the remaining portions or provisions
hereof in such jurisdiction or rendering
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that or any other portions or provisions of this Merger Agreement invalid,
illegal or unenforceable in any other jurisdiction.
9.9 Modifications, Amendments and Waivers. At any time prior to
the Closing or termination of this Merger Agreement, the Parties may,
solely by written agreement executed by their duly authorized officers:
(a) extend the time for the performance of any of the
obligations or other acts of the other Party hereto;
(b) waive any inaccuracies in the representations and
warranties made by the other Party contained in this Merger Agreement or in
the Schedules or Exhibits hereto or any other document delivered pursuant
to this Merger Agreement;
(c) waive compliance with any of the covenants or
agreements of the other Party contained in this Merger Agreement; and
(d) amend or add to any provision of this Merger Agreement
or the Plans of Merger; provided, however, that no provision of this Merger
Agreement may be amended or added to except by an agreement in writing
signed by the Parties hereto or their respective successors in interest and
expressly stating that it is an amendment to this Merger Agreement.
9.10 Interpretation. The headings contained in this Merger
Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Merger Agreement.
9.11 Payment of Expenses. Except as set forth herein, Acquiror,
First Savings and Whatcom and the Bank shall each pay its own fees and
expenses (including, without limitation, legal fees and expenses) incurred
by it in connection with the transactions contemplated hereunder.
9.12 Equitable Remedies. The Parties hereto agree that, in the
event of a breach of this Merger Agreement by Whatcom and the Bank,
Acquiror and First Savings will be without an adequate remedy at law by
reason of the unique nature of Whatcom and the Bank. In recognition
thereof, in addition to (and not in lieu of) any remedies at law which may
be available to Acquiror, Acquiror shall be entitled, at its sole
discretion, either (i) to obtain equitable relief, including the remedies
of specific performance and injunction, in the event of a breach of this
Merger Agreement by Whatcom or the Bank or (ii) if applicable, to receive
the payment described in Section 8.3 hereof. Whatcom and the Bank covenant
that they shall not contend in any such proceeding that Acquiror and First
Savings are not entitled to a decree of specific performance by reason of
having an adequate remedy at law. Notwithstanding the foregoing, if
Whatcom and the Bank accept an Acquisition Proposal from a third party and
Acquiror and First Savings receive an opinion of counsel from Whatcom and
the Bank that the failure of the Boards of Directors of Whatcom and the
Bank to accept such Acquisition Proposal would constitute a breach of such
directors' fiduciary duty to the shareholders of Whatcom, Acquiror and
First Savings shall not be entitled to the equitable remedy of specific
performance. No attempt on the part of Acquiror and First Savings to
obtain such equitable relief shall be deemed to constitute an election of
remedies by Acquiror which would preclude Acquiror from obtaining any
remedies at law to which they would otherwise be entitled.
9.13 Attorneys' Fees. If any Party hereto shall bring an action
at law or in equity to enforce its rights under this Merger Agreement
(including an action based upon a misrepresentation or the breach of any
warranty, covenant, agreement or obligation contained herein), the
prevailing Party in such action shall be entitled to recover from the other
Party its reasonable costs and expenses necessarily incurred in connection
with such action (including fees, disbursements and expenses of attorneys
and costs of investigation).
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9.14 No Waiver. No failure, delay or omission of or by any
Party in exercising any right, power or remedy upon any breach or default
of any other Party shall impair any such rights, powers or remedies of the
Party not in breach or default, nor shall it be construed to be a waiver of
any such right, power or remedy, or an acquiescence in any similar breach
or default; nor shall any waiver of any single breach or default be deemed
a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any Party of any provisions of this Merger
Agreement must be in writing and must be executed by the Parties to this
Merger Agreement and shall be effective only to the extent specifically set
forth in such writing.
9.15 Remedies Cumulative. All remedies provided in this Merger
Agreement, by law, equity or otherwise, shall be cumulative and not
alternative.
9.16 Non-Survival of Representations and Warranties. No
representations and warranties made by the Parties hereto or in any
instrument or document furnished in connection herewith shall survive the
Closing. This Section 9.16 shall not apply to covenants and agreements
which by their terms are intended to be performed after the Closing or the
termination of this Merger Agreement. Nothing in this Section 9.16 shall
limit Whatcom's and the Bank's or Acquiror's and First Saving's rights or
remedies for misrepresentations, breaches of this Merger Agreement or any
other improper action or inaction by the other Party hereto prior to its
termination.
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IN WITNESS WHEREOF, each of the Parties hereto has duly executed and
delivered this Merger Agreement or has caused this Merger Agreement to be
executed and delivered in its name and on its behalf by its representative
thereunto duly authorized, all as of the date first written above.
WHATCOM STATE BANCORP, INC.
By: /s/ Phil Stephenson
Phil Stephenson
Its: President and Chief Executive Officer
ATTEST:
/s/ Marilyn Brink
Secretary
WHATCOM STATE BANK
By: /s/ Phil Stephenson
Phil Stephenson
Its: President and Chief Executive Officer
ATTEST:
/s/ Marilyn Brink
Secretary
FIRST SAVINGS BANK OF WASHINGTON
BANCORP, INC.
By: /s/ Gary Sirmon
Gary Sirmon
Its: President and Chief Executive Officer
ATTEST:
/s/ D. Allan Roth
D. Allan Roth, Secretary
FIRST SAVINGS BANK OF WASHINGTON
By: /s/ Gary Sirmon
Gary Sirmon
Its: President and Chief Executive Officer
ATTEST:
/s/ D. Allan Roth
D. Allan Roth, Secretary
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Exhibit 99
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Len Cereghino & Co. CLIENT: FIRST SAVINGS BANK
CORPORATE INVESTOR RELATIONS CONTACTS: FWWB - Gary Sirmon, CEO
2605 Western Avenue, Seattle, WA 98121 (509) 527-3636
(206) 448-1996 WSB - Phil Stephenson
(360) 384-3300
NEWS RELEASE
FIRST SAVINGS BANK OF WASHINGTON BANCORP, INC. SIGNS
DEFINITIVE AGREEMENT TO ACQUIRE WHATCOM STATE BANCORP, INC.
Walla Walla, WA - June 15, 1998 -- First Savings Bank of Washington
Bancorp, Inc. (Nasdaq: FWWB) today announced it has signed a definitive
agreement to acquire Whatcom State Bancorp, Inc., in an all stock offer
valued at approximately $12.5 million, including the assumption of
outstanding Whatcom State Bancorp stock options. Whatcom State Bancorp,
Inc., the holding company for Whatcom State Bank in Bellingham, Washington,
is not a publicly traded institution. This valuation represents 2.10 times
book value and 19.6 times earnings for the twelve months ended March 31,
1998 for Whatcom State Bancorp, Inc. This will be the third commercial
bank acquisition for FWWB in the past two years.
According to the terms of the definitive agreement, First Savings Bank
of Washington Bancorp will exchange 0.697 shares of its common stock for
each Whatcom State Bancorp share. The acquisition, which has been approved
by the Board of Directors of each company, is subject to, among other
contingencies, approval by regulators and Whatcom State Bancorp
shareholders. The transaction is expected to close by the end of the year.
Founded in 1980, Whatcom State Bank is a commercial community bank
with approximately $89.4 million in assets, $76.5 million in deposits,
$67.6 million in loans and $5.9 million in shareholders' equity at March
31, 1998. Whatcom State Bank operates five full service branches serving
the communities of Bellingham, Ferndale, Lynden, Blaine and Point Roberts.
It also operates the Mt. Baker Home Loan Center in Oak Harbor. The Bank
has focused its lending operations on small business and consumer loans
within Whatcom County, although it has recently expanded its real estate
lending activities to include areas of Island County serviced by the Mt.
Baker Home Loan Center.
"This acquisition broadens our franchise into the state's northwest
corner and opens another strong market in the growing economies along the
I-5 corridor in western Washington," said Gary Sirmon, president and CEO of
FWWB. "The Bank's experienced management team shares our dedication to
delivering premium financial services to customers. Whatcom State Bank is
poised for excellent growth fueled by a strong retail sector, continued
growth in commerce with Canadian businesses and shoppers, and the rich
agricultural and natural resources of the area. Whatcom State Bank will
become part of First Savings Bank of Washington but will retain its name
and maintain its strong local identity."
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"We are very pleased to be joining the First Savings Bank team, which
brings financial strength, additional management experience and new
technological capabilities to our organization," stated Phil Stephenson,
president and CEO of Whatcom State Bank. "The acquisition provides us with
a source of capital to fund higher lending limits, increase lending
relationships with existing customers and the potential to establish
relationships with new borrowers. In addition, it will provide our
customers with a broader array of technological advances, including online
banking and an expanded ATM network, complementing our current automated
phone service and debit and credit card services. We anticipate a very
smooth transition for customers and employees, because both banks share
core values of customer service and run similar operations in many
respects, including using the same data processing system.
"With the merger, we anticipate business as usual -- same name -- same
management -- same local decision making authority, but with additional
resources. We are looking forward to providing our customers with FWWB's
additional capabilities -- especially in being able to expand our
commercial and real estate lending," Stephenson added.
This is the third commercial bank acquisition for FWWB since its
inception in 1995. Expanding commercial lending, which includes business,
commercial real estate, construction, and agricultural loans, is the
primary direction for all units of FWWB, including First Savings Bank. To
reflect its emphasis on commercial banking, FWWB will ask its shareholders
at July's annual meeting to change the company's name to First Washington
Bancorp. First Savings Bank of Washington Bancorp acquired Inland Empire
Bank in Hermiston, Oregon in August 1996 and Towne Bank in Woodinville,
Washington during April 1998. Following the completion of this
transaction, FWWB's institutions will have a total of 31 branch offices and
six loan offices operating in 15 counties in Washington and Oregon.
"Using growth assumptions in line with Whatcom State Bank's historical
trends, and making moderate provision for operating cost savings, we expect
this acquisition to immediately add to net income and to cause only minor
dilution to earnings per share in fiscal year 1999," said Allan Roth, CFO
of First Savings Bank. "The acquisition will be treated as a purchase
transaction on our financial statements."
FWWB generated a 1.21% return on average assets and a return on
average equity of 8.70% for the fiscal year ended March 31, 1998, with a
9.31% return on average equity for the fourth quarter of fiscal 1998. The
Bancorp had total assets of $1.15 billion, shareholders' equity of $150.2
million and book value of $16.26 per share at the end of its fiscal year.
Total assets and shareholders' equity at that date did not reflect the
subsequent action of Towne Bank, which closed on April 1, 1998.
First Savings Bank of Washington, Inland Empire Bank, and Towne Bank
are community-oriented institutions which operate a combined total of 25
branch offices and 5 loan offices in Washington and Oregon. First Savings
Bank's lending business has been primarily residential mortgage loans for
the purchase of homes and for home construction, although it is becoming
increasingly involved in non-mortgage commercial and agricultural lending.
Inland Empire Bank specializes in agricultural, commercial and consumer
lending, and has recently established a construction lending operation.
Towne Bank's primary focus is as a premier community business bank.
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