As filed with the Securities and Exchange Commission on April 29, 1996
Registration No. 333-2452
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
InterWest Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Washington 6036
(State or other jurisdiction of (Primary Standard
incorporation or organization) Industrial Classification Code Number)
91-1691216
(I.R.S. Employer Identification No.)
1259 West Pioneer Way
Oak Harbor, Washington 98277
(360) 679-4181
(Address, including ZIP code, and telephone number, including area code, of
Registrant's principal executive office)
John F. Breyer, Jr., Esq.
Aaron M. Kaslow, Esq.
Breyer & Aguggia
1300 I Street, N.W., Suite 470 East
Washington, D.C. 20005
(202) 737-7900
(Name and address, including ZIP code, and telephone number, including area
code, of agent for service)
with copies to:
Stephen M. Klein
Christi Muoneke
Graham & Dunn
1420 Fifth Avenue, 33rd Floor
Seattle, Washington 98101
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this Registration
Statement. If the securities being registered on this form are being offered
in connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
CALCULATION OF REGISTRATION FEE (previously paid)
Title of Proposed Proposed Amount
Each Class Amount Maximum Maximum Aggregate of
of Securities to be Offering Price Offering Registration
Being Registered Registered(1) Per Unit(2) Price(2) Fee(2)
- ---------------- ------------- -------------- ------------- ------------
Common Stock, $.20
par value 1,889,381 $15,853,000 $14.26 $5,467
(1) Represents the estimated maximum number of shares of common stock, par
value $.20 per share, issuable by InterWest
Bancorp, Inc. ("InterWest") upon consummation of the acquisition of
Central Bancorporation ("Central") by InterWest.
(2) Pursuant to Rules 457(f)(2) and 457(c), the registration fee for the
InterWest common stock is based on the book value of Central common
stock, $1.67 par value per share, on December 31, 1995 ($15,853,000), and
computed based on the estimated maximum number of such shares
(1,111,401), including shares issuable upon the exercise of outstanding
employee and director stock options, that may be exchanged for the
securities being registered.
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
Registration Statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
PAGE
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INTERWEST BANCORP, INC.
CROSS REFERENCE SHEET
FOR REGISTRATION STATEMENT ON FORM S-4
Form S-4 Location or Caption in
Item Number and Caption Prospectus/Joint Proxy Statement
----------------------- --------------------------------
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside Cover Page
Outside Front Cover Page of Prospectus
2. Inside Front and Outside Back Cover Available Information;
Pages of Prospectus Incorporation of Certain
Documents by Reference;
Table of Contents
3. Risk Factors, Ratio of Earnings to Summary; Selected Historical
Fixed Charges and Other Information and Pro Forma Financial Data;
Comparative Per Share
Data; Comparative Market Price
Data
4. Terms of the Transaction Summary; The Merger;
Description of InterWest
Capital Stock; Comparison of
Shareholders' Rights
5. Pro Forma Financial Information Pro Forma Condensed Combined
Financial Statements
6. Material Contacts with the Company Being Summary; The Merger
Acquired
7. Additional Information Required for *
Reoffering by Persons and Parties Deemed
to be Underwriters
8. Interests of Named Experts and Counsel *
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities *
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Incorporation of Certain
Registrants Documents by Reference;
Businesses of the Parties to
the Merger -- InterWest and
InterWest Savings
11. Incorporation of Certain Information by Incorporation of Certain
Reference Documents By Reference
12. Information with Respect to S-2 or S-3 *
Registrants
13. Incorporation of Certain Information by *
Reference
14. Information with Respect to Registrants *
Other than S-3 or S-2 Registrants
PAGE
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Form S-4 Location or Caption in
Item Number and Caption Prospectus/Joint Proxy Statement
----------------------- --------------------------------
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED.
15. Information with Respect to S-3 *
Companies
16. Information with Respect to S-2 or S-3 Incorporation of Certain
Companies Documents By Reference;
Businesses of the Parties to
the Merger -- Central; Central
1995 10-KSB
17. Information with Respect to Companies *
Other Than S-3 or S-2 Companies
D. VOTING AND MANAGEMENT INFORMATION.
18. Information if Proxies, Consents or Incorporation of Certain
Authorizations are to be Solicited Documents by Reference;
Summary; The Meetings; The
Merger; Election of Central
Directors; Certain Information
Concerning InterWest and
Central
19. Information if Proxies, Consents or *
Authorizations are not to be Solicited
or in an Exchange Offer
* Not applicable.
PAGE
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May __, 1996
Dear Shareholder:
You are cordially invited to attend a Special Meeting of
Shareholders of InterWest Bancorp, Inc. ("InterWest"), the holding company for
InterWest Savings Bank ("InterWest Savings"), to be held at the Elks Club,
6431 60th Avenue, N.W., Oak Harbor, Washington on , 1996 at
.m., local time.
The attached Notice of Special Meeting of Shareholders and
Prospectus/Joint Proxy Statement describe the formal business to be transacted
at the meeting. The primary purpose of the meeting is to consider and vote
upon a proposal to approve the Agreement and Plan of Mergers (the "Merger
Agreement") dated as of January 10, 1996 between InterWest and InterWest
Savings, and Central Bancorporation ("Central") and its subsidiaries, Central
Washington Bank and North Central Washington Bank (together, the "Banks").
The Merger Agreement provides that Central will be merged with and into
InterWest, with InterWest surviving the merger. Directors and officers of
InterWest, as well as representatives of Ernst & Young LLP, InterWest's
independent auditors, will be present to respond to any appropriate questions
shareholders may have.
The Merger Agreement provides that upon consummation of the merger
all outstanding shares of common stock of Central will be converted into
shares of common stock of InterWest. You are urged to review carefully the
enclosed Prospectus/Joint Proxy Statement, which contains a more complete
description of the terms of the merger.
The Board of Directors of InterWest has unanimously approved the
Merger Agreement and recommends that the shareholders vote FOR the approval of
the Merger Agreement. InterWest's financial advisor, Sandler O'Neill &
Partners, L.P., has issued its opinion to the effect that, as of the date
hereof and based on the factors and assumptions described therein, the
consideration to be paid by InterWest pursuant to the Merger Agreement is fair
to InterWest from a financial point of view. Approval of the Merger Agreement
requires the affirmative vote of a majority of the outstanding shares of
InterWest common stock.
It is very important that your shares be represented at the Special
Meeting, regardless of whether you plan to attend in person. A failure to
vote, either by not returning the enclosed proxy or by checking the "Abstain"
box thereon, will have the same effect as a vote against approval of the
Merger Agreement. To assure that your shares are represented in voting on
this very important matter, please sign, date and return the enclosed proxy
card in the enclosed postage-prepaid envelope whether or not you plan to
attend the meeting. If you do attend, you may, if you wish, revoke your proxy
and vote your shares in person at the meeting.
The merger is an important step for InterWest and its shareholders.
On behalf of the Board of Directors, we recommend that you vote FOR approval
of the Merger Agreement.
Sincerely,
Barney Beeksma Stephen M. Walden
Chairman of the Board Chief Executive Officer
PAGE
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INTERWEST BANCORP, INC.
1259 West Pioneer Way
Oak Harbor, Washington 98277
(360) 679-4181
___________________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on June __, 1996
___________________
NOTICE IS HEREBY GIVEN THAT a Special Meeting of Shareholders of
InterWest Bancorp, Inc. ("InterWest") will be held at the Elks Club, 6431 60th
Avenue, N.W., Oak Harbor, Washington, on _________, June__, 1996 at :00
.m., local time (as may be adjourned or postponed, the "Special Meeting").
The Meeting is for the purpose of considering and acting upon:
(1) A proposal to approve the Agreement and Plan of Mergers, dated
as of January 10, 1996 (the "Merger Agreement"), between InterWest and its
wholly-owned subsidiary, InterWest Savings Bank ("InterWest Savings"), and
Central Bancorporation ("Central") and its wholly-owned subsidiaries, Central
Washington Bank and North Central Washington Bank (together, the "Banks"), a
copy of which is attached as Appendix A to the accompanying Prospectus/Joint
Proxy Statement, under the terms of which (i) Central will merge with and into
InterWest (the "Merger") with InterWest as the surviving corporation, and (ii)
each outstanding share of common stock of Central will be converted into
shares of InterWest Common Stock in accordance with the terms of the Merger
Agreement.
(2) Such other matters as may properly come before the
Special Meeting or any adjournments or postponements thereof.
Any action may be taken on the foregoing proposal at the Special
Meeting on the date specified above or on any date or dates to which, by
original or later adjournment, the Special Meeting may be adjourned.
Shareholders of record at the close of business on April 25, 1996 are the
shareholders entitled to vote at the Special Meeting and any adjournments
thereof. The affirmative vote of the holders of a majority of the outstanding
shares of InterWest Common Stock is required for approval of the Merger
Agreement.
You are requested to fill in and sign the enclosed form of proxy,
which is solicited by the Board of Directors, and to mail it promptly in the
enclosed envelope. The proxy will not be used if you attend the Special
Meeting and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
MARGARET MORDHORST
SECRETARY
Oak Harbor, Washington
May __, 1996
Your vote is important regardless of the number of shares you own. Whether or
not you expect to attend the Special Meeting, please sign, date and promptly
return the accompanying proxy card using the enclosed postage-prepaid
envelope. If for any reason you should desire to revoke your proxy, you may
do so at any time before it is voted at the Special Meeting.
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May __, 1996
Dear Shareholder:
You are cordially invited to attend the Annual Meeting of
Shareholders of Central Bancorporation ("Central"), the holding company for
Central Washington Bank and North Central Washington Bank (together, the
"Banks") to be held at 301 North Chelan, Wenatchee, Washington on _____ __,
1996 at _______ _.m., local time.
The attached Notice of Annual Meeting of Shareholders and
Prospectus/Joint Proxy Statement describe the formal business to be transacted
at the meeting. At the Annual Meeting, in addition to the election of
directors, shareholders will be asked to consider and vote upon a proposal to
approve the Agreement and Plan of Mergers (the "Merger Agreement") dated as of
January 10, 1996 between InterWest Bancorp, Inc. ("InterWest") and InterWest
Savings Bank ("InterWest Savings"), and Central and the Banks. The Merger
Agreement provides that Central will be merged with and into InterWest, with
InterWest surviving the merger.
Upon consummation of the merger, each outstanding share of Central
common stock (excluding any dissenting shares and certain shares held by
InterWest and Central) will be converted into the right to receive a number of
shares of InterWest common stock pursuant to a formula, as follows: (a) 1.7
shares if the "InterWest Price" is $20.00 or less; (b) the result obtained by
dividing $34.00 by the InterWest Price if the InterWest Price is greater than
$20.00 and less than $24.12; or (c) 1.41 shares of InterWest common stock if
the InterWest Price is $24.12 or greater, in a transaction that is generally
tax-free for federal income tax purposes, all as more fully discussed in the
accompanying Prospectus/Joint Proxy Statement. For purposes of the above
formula, the "InterWest Price" will be the average of the bid and ask prices
per share of all market makers, as reported on Bloomberg Financial Markets, of
InterWest common stock on the Nasdaq Stock Market reporting system for the ten
trading days beginning on and including the twentieth trading day immediately
preceding the effective date of the merger. The last reported sale price of
InterWest common stock on the Nasdaq National Market ("IWBK") on May __, 1996
was $___ per share.
You are urged to review carefully the enclosed Prospectus/Joint
Proxy Statement, which contains a more complete description of the terms of
the merger.
The Board of Directors of Central has unanimously approved the
Merger Agreement and recommends that the shareholders vote FOR the approval of
the Merger Agreement. Central's financial advisor, Columbia Financial
Advisors, Inc., has issued its opinion to the effect that, as of the date
hereof and based on the factors and assumptions described therein, the
consideration to be paid by InterWest pursuant to the Merger Agreement is fair
to shareholders of Central from a financial point of view. Approval of the
Merger Agreement requires the affirmative vote of two-thirds of the
outstanding shares of Central common stock.
You will also be asked at the meeting to vote for the election of
two directors to serve for a three year term or until such time as the merger
is effective. The Central Board of Directors recommends that shareholders
vote FOR the proposed slate of directors named in the enclosed
Prospectus/Joint Proxy Statement.
It is very important that your shares be represented at the Annual
Meeting, regardless of whether you plan to attend in person. A failure to
vote, either by not returning the enclosed proxy or by checking the "Abstain"
box thereon, will have the same effect as a vote against approval of the
Merger Agreement. To assure that your shares are represented in voting on
this very important matter, please sign, date and return the enclosed proxy
card in the enclosed postage-prepaid envelope whether or not you plan to
attend the meeting. If you do attend, you may, if you wish, revoke your proxy
and vote your shares in person at the meeting.
On behalf of the Board of Directors, we recommend that you vote FOR
approval of the Merger Agreement.
Sincerely,
Donald Wm. Telford Gary M. Bolyard
Chairman of the Board President and Chief Executive Officer
<PAGE>
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CENTRAL BANCORPORATION
301 North Chelan
Wenatchee, Washington 98801
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that pursuant to call of its directors, the
regular Annual Meeting of Shareholders of Central Bancorporation will be held
at 301 North Chelan, Wenatchee, Washington, on __________, ________ ___, 1996,
at _______ p.m., for the purpose of considering and voting upon the following
matters:
1. MERGER WITH INTERWEST BANCORP. To approve the merger between
Central Bancorporation ("Central") and its subsidiary banks, Central
Washington Bank ("CWB") and North Central Washington Bank ("NCWB" and
collectively, the "Banks") and InterWest Bancorp, Inc. ("InterWest")
and its subsidiary bank, InterWest Savings Bank ("InterWest
Savings"), whereby Central will be merged with and into InterWest
(the "Merger"), pursuant to the Agreement and Plan of Mergers dated
January 10, 1996 ("Merger Agreement"), a copy of which is attached as
Appendix A.
2. ELECTION OF DIRECTORS. To elect two Directors for a term of three
years or until their successors have been elected and qualified.
3. WHATEVER OTHER BUSINESS may properly be brought before the meeting
or any adjournments thereof.
Only those shareholders of record at the close of business on April
25, 1996, shall be entitled to notice of, and to vote at, the meeting or any
adjournments thereof. The affirmative vote of the holders of two-thirds of
the outstanding shares of Central common stock is required for approval of the
Merger Agreement. As of April 25, 1996, there were 1,014,565 shares of
Central common stock outstanding.
Central shareholders have the right to dissent from the Merger and
obtain payment of the fair value of their shares of Central common stock under
the applicable provisions of Washington law. Further information regarding
voting rights and the business to be transacted at the Annual Meeting is given
in the accompanying Prospectus/Joint Proxy Statement. A copy of the
applicable Washington statutory provisions is set forth in Appendix E to the
accompanying Prospectus/Joint Proxy Statement and a summary of such provisions
is set forth under "THE MERGER -- Dissenters' Rights."
By Order of the Board of Directors
Wenatchee, Washington Larry Carlson
May __, 1996 Secretary
Your vote is important regardless of the number of shares you own. Whether or
not you expect to attend the Annual Meeting, please sign, date and promptly
return the accompanying proxy card using the enclosed postage-prepaid
envelope. If for any reason you should desire to revoke your proxy, you may
do so at any time before it is voted at the Annual Meeting.
<PAGE>
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INTERWEST BANCORP, INC.
AND
CENTRAL BANCORPORATION
JOINT PROXY STATEMENT
INTERWEST BANCORP, INC.
PROSPECTUS
This Prospectus/Joint Proxy Statement is being furnished by
InterWest Bancorp, Inc. ("InterWest") to the holders of InterWest common
stock, par value $.20 per share ("InterWest Common Stock"), in connection with
the solicitation of proxies by the Board of Directors of InterWest (the
"InterWest Board") for use at a special meeting of InterWest shareholders to
be held on-----------, 1996, and at any adjournments or postponements thereof
(the "InterWest Special Meeting"). This Prospectus/Joint Proxy Statement is
first being mailed to shareholders of InterWest on or about May __, 1996.
This Prospectus/Joint Proxy Statement is also being furnished by
Central Bancorporation ("Central") to the holders of Central common stock, par
value $1.67 per share ("Central Common Stock"), in connection with the
solicitation of proxies by the Board of Directors of Central (the "Central
Board") for use at the Annual Meeting of Central shareholders to be held on
- ------------, 1996 and at any adjournments or postponements thereof (the
"Central Annual Meeting," and together with the InterWest Special Meeting, the
"Meetings"). This Prospectus/Joint Proxy Statement is first being mailed to
shareholders of Central on or about May __, 1996.
At the Meetings, shareholders of InterWest and Central will consider
and vote upon a proposal to approve the Agreement and Plan of Mergers dated as
of January 10, 1996 (the "Merger Agreement"), by and between InterWest and its
wholly-owned subsidiary, InterWest Savings Bank ("InterWest Savings"), and
Central and its wholly-owned subsidiaries, Central Washington Bank ("CWB") and
North Central Washington Bank ("NCWB" and, together with CWB, the "Banks"),
pursuant to which, among other things, Central would be merged with and into
InterWest (the "Merger").
Upon consummation of the Merger, each outstanding share of Central
Common Stock (excluding any dissenting shares and certain shares held by
InterWest and Central) will be converted into the right to receive a number of
shares of InterWest Common Stock pursuant to a formula, as follows: (a) 1.7
shares if the "InterWest Price" is $20.00 or less; (b) the result obtained by
dividing $34.00 by the InterWest Price if the InterWest Price is greater than
$20.00 and less than $24.12; or (c) 1.41 shares of InterWest common stock if
the InterWest Price is $24.12 or greater (the "Exchange Ratio"). For purposes
of the above formula, the "InterWest Price" will be the average of the bid and
ask prices per share of all market makers, as reported on Bloomberg Financial
Markets, of InterWest Common Stock on the Nasdaq Stock Market reporting system
for the ten trading days beginning on and including the twentieth trading day
immediately preceding the effective date of the merger. If the InterWest
Price is less than $17.00, Central will have the right to terminate the Merger
Agreement unless InterWest elects to adjust the Exchange Ratio so that each
share of Central Common Stock will be converted into the right to receive the
number of shares of InterWest Common Stock that (if valued at the InterWest
Price) equals $28.90. The last reported sale price of InterWest Common Stock
on the Nasdaq National Market ("IWBK") on May __, 1996 was $___ per share.
For a more detailed description of the terms of the Merger, see "THE MERGER."
InterWest has filed a registration statement on Form S-4 (the
"Registration Statement") pursuant to the Securities Act of 1933, as amended
(the "Securities Act"), with respect to up to 1,889,381 shares of InterWest
Common Stock to be issued pursuant to the Merger Agreement. This
Prospectus/Joint Proxy Statement also constitutes the prospectus of InterWest
filed as part of the Registration Statement.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/JOINT PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT DEPOSITS, SAVINGS ACCOUNTS, OR OTHER
OBLIGATIONS OF A DEPOSITORY INSTITUTION AND ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENTAL AGENCY OR
INSTRUMENTALITY.
This Prospectus/Joint Proxy Statement does not cover any resale of
the securities to be received by shareholders of Central upon consummation of
the proposed transaction, and no person is authorized to make any use of this
Prospectus/Joint Proxy Statement in connection with any such resale.
The date of this Prospectus/Joint Proxy Statement is May ___, 1996.
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No person is authorized to give any information or to make any
representation not contained in this Prospectus/Joint Proxy Statement, and, if
given or made, such information or representation should not be relied upon as
having been authorized. This Prospectus/Joint Proxy Statement does not
constitute an offer to sell or a solicitation of an offer to purchase a
security, or a solicitation of a proxy, in any jurisdiction in which, or to
any person to whom, it would be unlawful to make such offer or solicitation.
Neither the delivery of this Prospectus/Joint Proxy Statement nor
any distribution of the securities made under this Prospectus/Joint Proxy
Statement shall, under any circumstances, create any implication that there
has been no change in the affairs of InterWest or Central or in the
information set forth herein since the date of this Prospectus/Joint Proxy
Statement.
AVAILABLE INFORMATION
InterWest and Central are subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith file reports, proxy statements and other information
with the Securities and Exchange Commission (the "SEC" or the "Commission").
Such reports, proxy statements and other information can be inspected and
copied at the public reference facilities maintained by the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
at the following regional offices of the Commission: 7 World Trade Center,
Suite 1300, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60621. Copies of such material also can be obtained at
prescribed rates from the Commission's Public Reference Section at Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, materials
filed by InterWest are available for inspection at the offices of The Nasdaq
Stock Market, 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus/Joint Proxy Statement constitutes part of a
Registration Statement on Form S-4 (File No. 333-2452) filed by InterWest with
the Commission under the Securities Act. This Prospectus/Joint Proxy
Statement omits certain of the information contained in the Registration
Statement in accordance with the rules and regulations of the Commission.
Reference is hereby made to the Registration Statement and related exhibits
for further information with respect to InterWest and the InterWest Common
Stock. Statements contained herein concerning the provisions of any document
are not necessarily complete and, in each instance, where a copy of such
document has been filed as an exhibit to the Registration Statement or
otherwise has been filed with the Commission, reference is made to the copy so
filed. Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by InterWest with the Commission
pursuant to the Exchange Act are incorporated in this Prospectus/Joint Proxy
Statement by reference:
1. InterWest's Annual Report on Form 10-K for the year ended September
30, 1995;
2. InterWest's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1995; and
3. InterWest's Current Reports on Form 8-K dated January 16, 1996 and
April 26, 1996.
All documents filed by InterWest pursuant to Section 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date hereof and prior to the
InterWest Special Meeting shall be deemed to be incorporated by reference
herein and to be a part hereof from the date of filing of such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for purposes
hereof to the extent that a statement contained herein or in any other
subsequently filed document that also is, or is deemed to be, incorporated by
reference herein modifies or supersedes such statement.
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Any such statement so modified or superseded shall not be deemed, except
as so modified or superseded, to constitute a part hereof.
A copy of Central's Annual Report on Form 10-KSB for the year ended
December 31, 1995 (the "Central 1995 10-KSB") accompanies this
Prospectus/Joint Proxy Statement.
The following documents filed by Central with the Commission
pursuant to the Exchange Act are incorporated in this Prospectus/Joint Proxy
Statement by reference:
1. Central's Annual Report on Form 10-KSB for the year ended December
31, 1995; and
2. Central's Current Report on Form 8-K dated January 12, 1996.
As described above, this Prospectus/Joint Proxy Statement
incorporates by reference documents that are not presented herein or delivered
herewith. These documents (other than exhibits to such documents that are
specifically incorporated by reference into the text of such documents) are
available, without charge, to each person, including any beneficial owner, to
whom a copy of this Prospectus/Joint Proxy Statement is delivered, upon
written or oral request to, in the case of documents relating to InterWest,
Ms. Margaret Mordhorst, Secretary, InterWest Bancorp, Inc., 1259 West Pioneer
Way, Oak Harbor, Washington 98277 (telephone number: (360) 679-4181) and in
the case of documents relating to Central, Ms. Rhonda Lawrence, Central
Bancorporation, 301 N. Chelan, Wenatchee, Washington 98801 (telephone number:
(509) 663-0733). In order to ensure timely delivery of the documents, any
request should be made by -----------, 1996.
All information contained or incorporated by reference in this
Prospectus/Joint Proxy Statement with respect to InterWest has been supplied
by InterWest, and Central is relying upon the accuracy of that information.
All information contained or incorporated by reference in this
Prospectus/Joint Proxy Statement with respect to Central has been supplied by
Central, and InterWest is relying upon the accuracy of that information.
<PAGE>
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TABLE OF CONTENTS
Page
Available Information. . . . . . . . . . . . . . . . . . . . . . . . . .
Incorporation of Certain Documents by Reference. . . . . . . . . . . . .
Summary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Historical and Pro Forma Financial Data . . . . . . . . . . . .
Comparative Per Share Data . . . . . . . . . . . . . . . . . . . . . . .
Comparative Market Price Data. . . . . . . . . . . . . . . . . . . . . .
The Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
InterWest Special Meeting. . . . . . . . . . . . . . . . . . . . . .
Central Special Meeting. . . . . . . . . . . . . . . . . . . . . . .
The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General; Exchange Ratio. . . . . . . . . . . . . . . . . . . . . . .
Effective Date of the Merger . . . . . . . . . . . . . . . . . . . .
Exchange of Central Stock Certificates . . . . . . . . . . . . . . .
Background of the Merger . . . . . . . . . . . . . . . . . . . . . .
Reasons for the Merger and Recommendations of the Boards of Directors
Opinions of Financial Advisors . . . . . . . . . . . . . . . . . . .
Interests of Certain Persons in the Merger . . . . . . . . . . . . .
Certain Federal Income Tax Consequences. . . . . . . . . . . . . . .
Conduct of Business Pending the Merger . . . . . . . . . . . . . . .
Conditions to Consummation of the Merger . . . . . . . . . . . . . .
Regulatory Requirements. . . . . . . . . . . . . . . . . . . . . . .
No Solicitation. . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock Option Agreement . . . . . . . . . . . . . . . . . . . . . . .
Dissenters' Rights . . . . . . . . . . . . . . . . . . . . . . . . .
Amendment; Waiver; Termination . . . . . . . . . . . . . . . . . . .
Accounting Treatment . . . . . . . . . . . . . . . . . . . . . . . .
Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro Forma Financial Information. . . . . . . . . . . . . . . . . . . . .
Businesses of the Parties to the Merger. . . . . . . . . . . . . . . . .
InterWest and InterWest Savings. . . . . . . . . . . . . . . . . . .
Central and the Banks. . . . . . . . . . . . . . . . . . . . . . . .
Description of InterWest Capital Stock . . . . . . . . . . . . . . . . .
Voting Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liquidation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Characteristics. . . . . . . . . . . . . . . . . . . . . . . .
Comparison of Shareholders' Rights . . . . . . . . . . . . . . . . . . .
Payment of Dividends . . . . . . . . . . . . . . . . . . . . . . . .
Size of Board of Directors . . . . . . . . . . . . . . . . . . . .
Classified Board of Directors . . . . . . . . . . . . . . . . . . .
Cumulative Voting . . . . . . . . . . . . . . . . . . . . . . . . .
Removal of Directors . . . . . . . . . . . . . . . . . . . . . . .
Vacancies on the Board of Directors . . . . . . . . . . . . . . . .
Special Meetings of Shareholders and Action Without a Meeting . . .
Advance Notice Requirements for Nominations of Directors and
Presentation of New Business at Meetings of Shareholders . . . . .
Approval of Mergers, Consolidations, Sale of Substantially All Assets and
Dissolution . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rights of Shareholders to Dissent. . . . . . . . . . . . . . . . . .
<PAGE>
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Page
Indemnification of Officers and Directors and Limitation of Liability
Amendment of Articles of Incorporation and Bylaws. . . . . . . . . .
Election of Central Directors. . . . . . . . . . . . . . . . . . . . . .
General. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Information with Respect to Nominees and Directors whose Terms Continue
Certain Committees of the Board of Directors . . . . . . . . . . . .
Compensation of Directors. . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . .
Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management . . .
Certain Information Concerning InterWest and Central . . . . . . . . . .
Legal Opinions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Experts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shareholder Proposals. . . . . . . . . . . . . . . . . . . . . . . . . .
Appendix A - Agreement and Plan of Mergers
Appendix B - Stock Option Agreement
Appendix C - Opinion of Sandler O'Neill & Partners, L.P.
Appendix D - Opinion of Columbia Financial Advisors
Appendix E - Chapter 13 of the Washington Business Corporation Act
<PAGE>
<PAGE>
SUMMARY
The following summary of certain information relating to the Merger
is not intended to be complete and is qualified by reference to, and should be
read in conjunction with, the more detailed information appearing elsewhere in
this Prospectus/Joint Proxy Statement, including the Appendices hereto, and
the Central 1995 Form 10-KSB accompanying this Prospectus/Joint Proxy
Statement and the documents incorporated herein by reference.
THE PARTIES TO THE MERGER
InterWest and InterWest Savings. InterWest is a bank holding
company registered under the Bank Holding Company Act of 1956, as amended (the
"BHC Act"). The business of InterWest consists primarily of holding 100% of
the capital stock of InterWest Savings. At December 31, 1995, InterWest had
total assets of $1.3 billion, total loans and mortgage-backed securities of
$1.1 billion, total deposits of $866 million and stockholders' equity of $91.7
million. The principal executive offices of InterWest are located at 1259
West Pioneer Way, Oak Harbor, Washington 98277 and its telephone number is
(360) 679-4181.
InterWest Savings is a state-chartered savings bank and is
regulated by the Department of Financial Institutions of the State of
Washington (the "Department") and by the Federal Deposit Insurance Corporation
("FDIC"), its primary federal regulator and the insurer of its deposits.
InterWest Savings' deposits are insured up to applicable limits under the
Savings Association Insurance Fund ("SAIF") of the FDIC. InterWest Savings'
principal business consists of attracting savings deposits from the general
public and originating loans for the purchase or construction of residential
real estate. To a lesser extent, the Savings Bank originates multi-family
residential, commercial real estate, consumer and other loans. At December
31, 1995, InterWest Savings conducted its business through 30 full-service
branch offices and one lending office located in western and central
Washington.
See "SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA" and
"BUSINESSES OF THE PARTIES TO THE MERGER -- InterWest and InterWest Savings."
Additional information concerning InterWest is included in the InterWest
documents incorporated by reference herein. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE."
Central and the Banks. Central is a bank holding company
incorporated under the laws of the State of Washington and is subject to the
BHC Act, which places Central under the supervision of the Board of Governors
of the Federal Reserve System. The principal role of Central is to supervise
and coordinate the activities of its wholly owned subsidiary banks, CWB and
NCWB. At December 31, 1995, Central had consolidated total assets of $203.4
million, total loans and mortgage backed securities of $137.9 million, total
customer deposits of $179.9 million, and total stockholder equity of $15.9
million. Central maintains its principal office at 301 North Chelan in
Wenatchee, Washington 98801 and its telephone number is (509) 663-0733.
The Banks are each Washington state chartered banks regulated by
the Department and the FDIC. Generally, customer deposits accounts in the
Banks are insured by the FDIC's Bank Insurance Fund for up to a maximum of
$100,000. The Banks perform banking services for their customers which are
customary for banks of similar size and character. Such services include
retail banking services to individuals and small and medium size businesses,
as well as savings accounts, checking accounts, and certificates of deposits.
The Banks are also active in the consumer and commercial banking business, and
provide individuals and businesses a variety of loan programs including real
estate, commercial and agricultural loans. CWB conducts its business at six
locations, principally throughout Chelan and, to a lesser degree, Douglas,
Grant and Okanogan Counties. NCWB conducts its business at four locations
principally throughout Okanogan County.
See "SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA," "BUSINESSES
OF THE PARTIES TO THE MERGER -- Central and the Banks" and the Central 1995
10-KSB accompanying this Prospectus/Joint Proxy Statement.
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<PAGE>
INTERWEST SPECIAL MEETING
Place, Time and Date; Purpose. The InterWest Special Meeting will
be held on ---------, ----------, 1996 at__:00 _.m., local time, at the Elks
Club, 6431 60th Avenue, N.W. Oak Harbor, Washington, for the purpose of
considering and voting upon a proposal to approve the Merger Agreement
attached hereto as Appendix A. See "THE MEETINGS -- InterWest Special Meeting
- -- Place, Time and Date" and "-- Purpose."
Record Date; Shares Entitled to Vote. The InterWest Board has
fixed the close of business on April 25, 1996 as the record date (the
"InterWest Record Date") for determining shareholders entitled to notice of
and to vote at the InterWest Special Meeting. Only those holders of shares of
InterWest Common Stock of record on the InterWest Record Date will be entitled
to notice of and to vote at the InterWest Special Meeting. Each share of
InterWest Common Stock will be entitled to one vote. Shareholders who execute
proxies retain the right to revoke them at any time prior to being voted at
the InterWest Special Meeting. At the InterWest Record Date, there were
1,014,565 shares of InterWest Common Stock outstanding and entitled to be
voted at the InterWest Special Meeting. See "THE MEETINGS -- InterWest
Special Meeting - - Record Date; Shares Entitled to Vote."
Vote Required. Approval of the Merger Agreement requires the
affirmative vote of the holders of a majority of the outstanding shares of
InterWest Common Stock. At the InterWest Record Date, the directors and
executive officers of InterWest and their affiliates beneficially owned
shares of InterWest Common Stock, which represents % of the shares entitled
to be voted at the InterWest Special Meeting. All of the directors and
executive officers of InterWest have indicated their intention to vote their
shares for the approval of the Merger Agreement. See "THE MEETINGS --
InterWest Special Meeting -- Vote Required."
A failure to vote, either by not returning the enclosed proxy or by
checking the "Abstain" box thereon, will have the same effect as a vote
against approval of the Merger Agreement.
CENTRAL ANNUAL MEETING
Place, Time and Date; Purpose. The Central Annual Meeting will be
held on ----------, ----------, 1996 at --:00 -.m. local time at 301 North
Chelan, Wenatchee, Washington, for the purpose of considering and voting upon
a proposal to approve the Merger Agreement attached hereto as Appendix A and
electing two directors to serve for a term of three years or until their
successors have been elected and qualified. See "THE MEETINGS -- Central
Annual Meeting -- Place, Time and Date" and "-- Purpose."
Record Date; Shares Entitled to Vote. The Central Board has fixed
the close of business on April 25, 1996 as the record date (the "Central
Record Date") for determining shareholders entitled to notice of and to vote
at the Central Annual Meeting. Only those holders of shares of Central Common
Stock of record on the Central Record Date will be entitled to notice of and
to vote at the Central Annual Meeting. Each share of Central Common Stock
will be entitled to one vote. Shareholders who execute proxies retain the
right to revoke them at any time prior to being voted at the Central Annual
Meeting. At the Central Record Date, there were 1,014,565 shares of Central
Common Stock outstanding and entitled to be voted at the Central Annual
Meeting. See "THE MEETINGS -- Central Annual Meeting -- Record Date; Shares
Entitled to Vote."
Vote Required. Approval of the Merger Agreement requires the
affirmative vote of the holders of two-thirds of the outstanding shares of
Central Common Stock. At the Central Record Date, the directors and executive
officers of Central and their affiliates beneficially owned -------- shares
of Central Common Stock, which represents __% of the shares entitled to be
voted at the Central Annual Meeting. Simultaneous with the execution of the
Merger Agreement, all of the directors of Central entered into an agreement
with InterWest pursuant to which each director agreed to vote his or her
shares for approval of the Merger Agreement. A plurality of the votes cast at
the Central Annual Meeting by the holders of shares of Central Common Stock
entitled to vote is required for the election of persons nominated to serve as
directors. See "THE MEETINGS -- Central Annual Meeting -- Vote Required."
<PAGE>
<PAGE>
A failure to vote, either by not returning the enclosed proxy
or by checking the "Abstain" box thereon, will have the same effect as a vote
against approval of the Merger Agreement.
THE MERGERS; EXCHANGE RATIO
The Merger Agreement provides for the merger of Central with and
into InterWest, with InterWest to be the surviving corporation in the Merger.
As a result of the Merger, Central will cease to exist, and InterWest will
succeed to all of the assets and liabilities of Central. See "THE MERGER --
General; Exchange Ratio." It is currently intended that in connection with
the Merger, NCWB will be merged with CWB, with CWB surviving such merger, and
that after consummation of the Merger, CWB will operate as a wholly-owned
subsidiary of InterWest.
Upon consummation of the Merger, each outstanding share of Central
Common Stock (excluding any shares held by shareholders who perfect their
dissenters' rights of appraisal ("Dissenting Shares") and any shares of stock
held by InterWest or Central, other than in a fiduciary capacity or in
satisfaction of a debt previously contracted (together with the Dissenting
Shares, "Excluded Shares") will be automatically converted into the right to
receive a number of shares of InterWest Common Stock, as follows: (i) 1.7
shares of InterWest Common Stock if the "InterWest Price" is $20.00 or less;
(ii) the number of shares obtained by dividing $34.00 by the InterWest Price
if the InterWest Price is greater than $20.00 and less than $24.12, or (iii)
1.41 shares of InterWest Common Stock if the InterWest Price is $24.12 or
greater. Each holder of Central Common Stock who would otherwise be entitled
to a fractional share of InterWest Common Stock will receive cash in lieu
thereof determined by multiplying such fraction by the InterWest Price. If a
"Triggering Event" relating to certain business combinations between InterWest
and a third party shall have occurred, the Exchange Ratio will be based on a
ten trading day period prior to the Triggering Event. InterWest has no plans,
arrangements or understandings, written or oral, regarding any business
combination with a third party. Upon completion of the Merger, shareholders
of Central will no longer own any stock in Central.
Central shareholders should note that the market price of the
InterWest Common Stock they receive will continue to be subject to changes in
market value and may, therefore, have a market value as of the date they
receive certificates for their shares (or such shares are otherwise made
available to them) that is less than, or greater than, the value of such stock
at the date of such determination. For a more detailed discussion of the
calculation of the number of shares of InterWest Common Stock to be received
in exchange for Central Common Stock, see "THE MERGER -- General; Exchange
Ratio."
RECOMMENDATION OF THE INTERWEST BOARD
The InterWest Board has unanimously approved the Merger Agreement
as advisable and in the best interests of InterWest and the InterWest
shareholders and recommends that the shareholders of InterWest vote FOR
approval of the Merger Agreement.
For a discussion of the circumstances surrounding the Merger and
the factors considered by the InterWest Board in making its recommendation,
see "THE MERGER -- Background of the Merger" and "-- Reasons for the Merger
and Recommendations of the Boards of Directors -- InterWest." Approval of the
Merger Agreement by InterWest shareholders is a condition to consummation of
the Merger. See "THE MERGER -- Conditions to Consummation of the Merger."
<PAGE>
<PAGE>
RECOMMENDATION OF THE CENTRAL BOARD
The Central Board has unanimously approved the Merger Agreement as
advisable and in the best interests of Central and the Central shareholders
and recommends that the shareholders of Central vote FOR approval of the
Merger Agreement.
For a discussion of the circumstances surrounding the Merger and
the factors considered by the Central Board in making its recommendation, see
"THE MERGER -- Background of the Merger" and "-- Reasons for the Merger and
Recommendations of the Boards of Directors -- Central." Approval of the
Merger Agreement by Central shareholders is required by law and is a condition
to consummation of the Merger. See "THE MERGER -- Conditions to Consummation
of the Merger." For a description of certain economic interests directors of
Central may be deemed to have in the Merger, see "THE MERGER -- Interests of
Certain Persons in the Merger."
OPINIONS OF FINANCIAL ADVISORS
InterWest. Sandler O'Neill & Partners, L.P. ("Sandler O'Neill"),
InterWest's financial advisor, has delivered a written opinion to the
InterWest Board, dated the date of this Prospectus/Joint Proxy Statement, to
the effect that the Exchange Ratio is fair to InterWest shareholders from a
financial point of view. A copy of Sandler O'Neill's opinion, dated the date
of this Prospectus/Joint Proxy Statement, setting forth the assumptions made,
matters considered, procedures followed and limits of its review, is attached
hereto as Appendix C and should be read by shareholders in its entirety. See
"THE MERGER -- Opinions of Financial Advisors -- InterWest."
Central. Columbia Financial Advisors, Inc. ("CFA"), Central's
financial advisor, has delivered a written opinion to the Central Board, dated
the date of this Prospectus/Joint Proxy Statement, and a substantially
identical written opinion dated January 10, 1996, to the effect that the terms
of the Merger are fair to Central shareholders from a financial point of view.
A copy of CFA's opinion, dated the date of this Prospectus/Joint Proxy
Statement, setting forth the assumptions made, matters considered, procedures
followed and limits of its review, is attached hereto as Appendix D and should
be read by shareholders in its entirety. See "THE MERGER -- Opinions of
Financial Advisors -- Central."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Central's management and the Central Board may
be deemed to have interests in the Merger in addition to their interests as
shareholders of Central generally. These include, among other things,
provisions in the Merger Agreement relating to, indemnification, employment
agreements, and appointments to the InterWest Board.
The Merger Agreement provides that for the five-year period
following the Effective Date, InterWest will indemnify the directors, officers
and employees of Central against certain liabilities to the extent that such
persons were entitled to indemnification under Washington law and the Articles
of Incorporation and Bylaws
of Central.
Following the Effective Time, Gary M. Bolyard, the President and
Chief Executive of Central, and Joseph E. Riordan, the Treasurer, Assistant
Secretary and Chief Financial Officer of Central, will enter into employment
agreements with InterWest and InterWest Savings. Pursuant to Mr. Bolyard's
agreement, he will serve as Vice Chairman/Commercial Banking from consummation
of the Merger until June 30, 1998. Mr. Bolyard's base salary under the
agreement will be $132,000. Pursuant to Mr. Riordan's agreement, he will
serve as a Vice President of InterWest and InterWest Savings for a period of
three years commencing upon the consummation of the Merger. Mr. Riordan's
base salary under the agreement will be $75,000.
InterWest has agreed to appoint Mr. Bolyard and one other person
proposed by Central to the Boards of Directors of InterWest and InterWest
Savings immediately after consummation of the Merger and to use its best
<PAGE>
<PAGE>
efforts to cause the election of such persons at the next annual meeting
of InterWest shareholders. The other representative of Central is expected to
be Larry Carlson, who is currently on the Central Board. InterWest has also
agreed to appoint Mr. Bolyard to the Executive Committees and to appoint Mr.
Carlson to the Audit Committees of the Boards of Directors of InterWest and
InterWest Savings.
In addition, pursuant to the terms of Deferred Compensation
Agreements between CWB and six of CWB's directors (who are also directors of
Central), as a result of the Merger, such directors will become entitled to
receive deferred board of directors and committee fees over a ten-year period.
The aggregate amount of deferred compensation as of December 31, 1995 was
$700,000.
EFFECTIVE DATE OF THE MERGER
Unless the parties agree upon another date, the "Effective Date" of
the Merger will be the date ten business days after the fulfillment or waiver
of each of the conditions to the obligations of the parties to effect the
Merger and the granting of all regulatory approvals. Either InterWest or
Central may terminate the Merger Agreement if the Effective Date does not
occur on or before September 30, 1996.
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to, among other things: (i)
approval of the Merger Agreement by the holders of not less than two-thirds of
the outstanding shares of Central Common Stock and by the holders of not less
than a majority of the outstanding shares of InterWest Common Stock; (ii)
receipt of all applicable regulatory approvals without any condition that, in
the opinion of InterWest, would deprive InterWest of the material economic or
business benefits of the Merger; (iii) receipt by InterWest and Central of the
opinion of Breyer & Aguggia, dated as of the Effective Date, as to certain
federal income tax consequences of the Merger; (iv) the InterWest Common Stock
to be issued to Central shareholders having been approved for listing on the
Nasdaq National Market; (v) Gary M. Bolyard and Joseph E. Riordan having
entered into employment agreements with InterWest and InterWest Savings; (vi)
the receipt by InterWest of a letter from Central's independent certified
public accountants, dated as of or shortly prior to the Effective Date, with
respect to Central's financial position and results of operations; (vii)
receipt by InterWest of an agreement from each "affiliate" of Central
restricting the sale of InterWest Common Stock received by such affiliate in
the Merger; (viii) the number of Dissenting Shares does not exceed 10% of the
outstanding shares of Central Common Stock; and (ix) receipt by InterWest and
Central of letters from their respective certified public accountants to the
effect that the Merger will qualify for pooling of interests accounting
treatment. The obligations of Central are subject to the further condition
that if the InterWest Price is less than $17.00, Central may elect to
terminate the Merger Agreement unless InterWest elects to adjust the Exchange
Ratio so that each share of Central Common Stock is converted into $28.90 of
InterWest Common Stock, based on the InterWest Price. See "THE MERGER --
Conditions to Consummation of the Merger."
STOCK OPTION AGREEMENT
As a condition to InterWest's willingness to enter into the Merger
Agreement and in consideration thereof, Central entered into a Stock Option
Agreement with InterWest, dated as of January 10, 1996 (the "Stock Option
Agreement"). The Stock Option Agreement is set forth as Appendix B to this
Prospectus/Joint Proxy Statement. Pursuant to the Stock Option Agreement,
Central granted to InterWest an irrevocable option (the "Option"), exercisable
only under certain limited and specifically defined circumstances, none of
which, to the best of InterWest's and Central's knowledge, has occurred as of
the date hereof, to purchase up to 201,898 authorized but unissued shares of
Central Common Stock for a purchase price of $26.00 per share, subject to
adjustment in certain circumstances. The number of shares of Central Common
Stock subject to the Option represents approximately 19.9% of the outstanding
shares of Central Common Stock as of the Central Record Date, before giving
effect to the issuance of such shares. InterWest does not have any voting
rights with respect to the shares of Central Common Stock subject to the
Option prior to exercise of the Option.
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<PAGE>
The Stock Option Agreement and the Option are intended to make it
more difficult for another party to acquire Central, thereby increasing the
likelihood that the Merger will occur. See "The MERGER -- Stock Option
Agreement."
ACCOUNTING TREATMENT
It is anticipated that the Merger will be accounted for as a
pooling of interests by InterWest under generally accepted accounting
principles. The Merger agreement provides that a condition to InterWest's
obligation to consummate the Merger is the receipt by InterWest of a letter
from Ernst & Young LLP, InterWest's independent auditors, and the receipt by
Central of a letter from Deloitte & Touche LLP, Central's independent
auditors, to the effect that such firms concur with the respective
management's conclusions as to the appropriateness of pooling of interests
accounting for the Merger. See "THE MERGER -- Conditions to Consummation of
the Merger" and "-- Accounting Treatment."
REGULATORY REQUIREMENTS
The Merger is subject to the receipt of certain prior approvals
from the Board of Governors of the Federal Reserve System ("Federal Reserve
Board"), and the Department. An application for approval of the Merger was
filed with the Federal Reserve Board and the Department on -----, 1996. There
can be no assurance that such approval will be obtained, and, if obtained,
that it will not impose conditions that, in the opinion of InterWest, would
deprive InterWest of the economic and business benefits of the Merger so as to
render it inadvisable in the judgment of InterWest to proceed with the Merger.
See "THE MERGER -- Regulatory Requirements."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Consummation of the Merger is conditioned, among other things, on
receipt by InterWest and Central of an opinion of Breyer & Aguggia, special
counsel for InterWest to the effect that no gain or loss will be recognized
for federal income tax purposes by stockholders of Central who receive
InterWest Common Stock in exchange for their shares of Central Common Stock,
other than with respect to cash received in lieu of fractional share
interests. See "THE MERGER -- Certain Federal Income Tax Consequences."
Because certain tax consequences of the Merger may vary depending
on the particular circumstances of each shareholder, each Central shareholder
is urged to consult his or her own tax advisors as to the specific tax
consequences to such holder of the Merger, including the specific application
and effect of federal, state, local, foreign and other tax laws to such
shareholder.
DISSENTERS' RIGHTS
Central shareholders have the right to dissent from the Merger and
obtain payment of the fair value of their shares of Central Common Stock under
the provisions of Chapter 13 of the Washington Business Corporation Act
("WBCA"). A shareholder's failure to follow exactly the procedures specified
in Chapter 13 of the WBCA will result in loss of such shareholder's
dissenters' rights. Accordingly Central shareholders wishing to dissent from
the Merger are urged to read carefully "THE MERGER -- Dissenters' Rights" and
the copy of Chapter 13 of the WBCA set forth in Appendix E to this
Prospectus/Joint Proxy Statement, and to consult with their own legal
advisors. If Central shareholders perfect dissenters' rights with respect to
more than 10% of the outstanding shares of Central Common Stock, InterWest may
elect not to consummate the Merger. See "THE MERGER -- Conditions to
Consummation of the Merger." Additionally, if shareholders perfect
dissenters' rights with respect to more than 10% of the outstanding shares of
Central Common Stock and InterWest elects to consummate the Merger, the Merger
will not qualify for pooling of interests accounting treatment. See "THE
MERGER -- Accounting Treatment."
<PAGE>
<PAGE>
COMPARISON OF SHAREHOLDERS' RIGHTS
Shareholders of Central who receive shares of InterWest Common
Stock in exchange for their shares of Central Common Stock will be governed,
with respect to their rights as such shareholders, by InterWest's Articles of
Incorporation and Bylaws. For a discussion of certain material differences in
the rights of shareholders of InterWest and Central and an explanation of
certain possible antitakeover effects of certain provisions in InterWest's
Articles of Incorporation and Bylaws, see "COMPARISON OF SHAREHOLDERS'
RIGHTS."
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following tables set forth selected historical consolidated
financial data for InterWest and Central and selected unaudited pro forma
combined financial data, giving effect to the Merger using the pooling of
interests method of accounting. For pro forma purposes, InterWest's
consolidated statements of operations for the five fiscal years ended
September 30, 1995, 1994, 1993, 1992 and 1991 and for the three months ended
December 31, 1995 and 1994 have been combined with the consolidated statements
of operation of Central for the five fiscal years ended December 31, 1995,
1994, 1993, 1992 and 1991 and for the three months ended December 31, 1995 and
1994. For pro forma purposes, InterWest's consolidated statement of condition
as of December 31, 1995, has been combined with Central's consolidated
statement of condition as of December 31, 1995. This information should be
read in conjunction with the historical financial statements of InterWest
and Central, including the respective notes thereto, the unaudited pro forma
financial information appearing elsewhere in this Prospectus/Joint Proxy
Statement, including the notes thereto, and the other documents
incorporated by reference herein. See "AVAILABLE INFORMATION," "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE," "PRO FORMA FINANCIAL INFORMATION" and the
Central 1995 10-KSB accompanying this Prospectus/Joint Proxy Statement.
The InterWest historical consolidated financial statement data as
of and for the three months ended December 31, 1995 have been prepared on the
same basis as the historical information derived from audited
financial statements, and in the opinion of management, contain all
adjustments, consisting only of normal recurring accruals, necessary for the
fair presentation of results of operations for such periods.
The 1.41 Exchange Ratio used in the pro forma information is based
on the last reported sale price on the Nasdaq National Market of InterWest
Common Stock on April 19, 1996, which was $25.125 per share. The actual
Exchange Ratio will depend on the InterWest Price (which will not be known
until shortly before the Effective Date) and may be higher than 1.41. The pro
forma information would be different if the InterWest Price results in an
Exchange Ratio different from 1.41. Central shareholders are urged to obtain
current quotations of the market price of InterWest Common Stock. The selected
pro forma combined financial data is unaudited. Such data is intended for
illustrative purposes only and is not necessarily indicative of future results
of operations or the future financial position of the combined company or of
the results of operations and financial position of the combined company that
would have actually occurred had the Merger been in effect as of the dates or
for the periods presented.
Proposed federal legislation to recapitalize the SAIF would require
savings institutions like the InterWest Savings to pay a one-time assessment
to increase SAIF's reserves to $1.25 per $100 of deposits that is expected to
be approximately 80 basis points on the amount of deposits held by a
SAIF-member institution at March 31, 1995. The payment of a one-time fee
would have the effect of immediately reducing the capital and pre-tax earnings
of SAIF-member institutions by the amount of the fee. Based on InterWest
Savings' assessable deposits of $838.0 million at March 31, 1995, a one-time
assessment of 80 basis points would equal approximately $6.7 million. The
possible payment of such assessment has not been reflected in the selected
pro forma combined financial data.
<PAGE>
<PAGE>
InterWest Bancorp, Inc.
Consolidated Historical Selected Financial Data
At or For the At or For the
Three Months Years Ended
Ended December 31, September 30,
1995 1994 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ------
(Dollars in thousands, except for per share data)
Historical Consolidated Statement
of Operations Data:
Interest income $24,683 19,943 84,675 69,821 63,282 60,815 7,108
Interest expense 15,303 11,444 51,746 36,351 31,899 36,526 38,008
Net interest income before
provision for losses
on loans . 9,380 8,499 32,929 33,470 31,383 24,289 19,100
Provision for loan
losses 250 150 600 900 1,399 1,653 1,300
Net interest income after
provision for losses
on loans 9,130 8,349 32,329 32,570 29,984 22,636 17,800
Other operating
income 1,641 1,145 7,697 6,251 7,281 7,655 5,820
Other operating
expenses 5,621 5,245 22,133 20,703 20,983 18,870 17,674
Federal income tax
expense 1,755 1,392 6,087 6,416 5,613 3,400 1,333
Cumulative effect of
change in
accounting(1) -- -- -- -- -- 434 --
Net income $ 3,395 $ 2,857 $11,806 $11,702 $10,669 $ 8,455 $4,613
Historical Per Share Data:
Net income $ 0.52 $ 0.44 $ 1.81 $ 1.80 $ 1.65 $ 1.32 $ 0.93
Cash dividends
declared $ 0.10 $ 0.07 $ .32 $ .295 $ .223 $ .148 $ .091
Weighted average
shares outstanding
6,510,719 6,517,520 6,508,329 6,518,422 6,466,541 6,406,078 4,983,447
Historical Consolidated Statement
of Financial Condition Data:
1995 1994 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ------
Total assets $1,281,943 1,110,589 1,267,025 1,066,692 838,774 779,981 662,164
Loans and mortgage-backed
securities 1,127,184 1,005,067 1,155,283 962,224 751,154 672,664 552,268
Customer
deposits 865,995 805,770 860,397 784,154 659,434 639,517 583,697
Borrowings 315,926 221,786 308,981 197,270 104,753 75,000 18,000
Stockholders'
equity 91,694 82,511 89,887 80,180 69,801 60,105 52,477
Book value
per share 14.26 12.79 14.05 12.43 10.92 9.47 8.29
(1) Reflects cumulative effect of change in accounting for income taxes.
<PAGE>
<PAGE>
Central Bancorporation
Selected Historical Financial Data
At or For the
Years Ended
December 31,
1995 1994 1993 1992 1991
------ ------ ------ ------ ------
(Dollars in thousands, except for per share data)
Historical Consolidated Statement
of Operations Data:
Interest income $15,589 12,449 9,753 9,901 10,491
Interest expense 6,180 4,334 3,528 4,264 5,319
Net interest income
before provision for
losses on loans 9,409 8,115 6,225 5,637 5,172
Provision for
losses on loans 120 -- -- -- --
Net interest income after
provision for
losses on loans 9,289 8,115 6,225 5,637 5,172
Other operating
income 2,295 1,457 1,633 1,639 1,390
Other operating
expenses 7,769 6,943 5,295 4,772 4,337
Federal income
tax expense 1,260 864 749 763 591
Net income $2,555 $1,765 $1,814 $1,741 $1,634
Historical Per Share Data:
Net income $ 2.46 $ 1.71 $ 1.77 $ 1.72 $ 1.64
Cash dividends
declared $ 0.60 $ 0.60 $ 0.55 $ 0.47 $ 0.40
Weighted average shares
outstanding 1,038,120 1,035,120 1,023,001 1,009,737 998,929
Historical Consolidated Statement
of Financial Condition Data:
Total assets $203,412 $195,660 $136,601 $131,031 $123,919
Loans and
mortgage-backed
securities 137,895 127,991 87,496 79,892 75,706
Customer deposits179,913 175,190 117,065 116,195 109,512
Borrowings 5,190 5,394 5,465 2,464 3,397
Stockholders'
equity 15,853 13,398 12,619 11,201 9,913
Book value
per share 15.63 13.41 12.78 11.62 10.28
<PAGE>
<PAGE>
InterWest Bancorp, Inc.
Pro Forma Condensed Combined Selected Financial Data (unaudited)
At or For the At or For the
Three Months Years Ended
Ended December 31, September 30,
1995 1994 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ------
(Dollars in thousands, except for per share data)
Pro Forma Condensed Combined
Statement of Operations Data(1):
Interest income $28,717 23,555 100,264 82,270 73,035 70,716 67,599
Interest expense 16,923 12,738 57,926 40,685 35,427 40,790 43,327
Net interest income
before provision for
losses on loans 11,794 10,817 42,338 41,585 37,608 29,926 24,272
Provision for
loan losses. 250 150 720 900 1,399 1,653 1,300
Net interest income
after provision for
losses on loans 11,544 10,667 41,618 40,685 36,209 28,273 22,972
Other operating
income 2,235 1,613 9,992 7,708 8,914 9,294 7,210
Other operating
expenses 7,793 7,305 29,902 27,646 26,278 23,642 22,011
Federal income
tax expense 2,117 1,640 7,347 7,280 6,362 4,163 1,924
Cumulative effect of
change in accounting
principle -- -- -- -- -- 434 --
Net income $ 3,869 $ 3,335 $14,361 $13,467 $12,483 $10,196 $6,247
Pro Forma Condensed
Combined Per Share Data:
Net income $ 0.49 0.42 1.80 1.69 1.58 1.30 0.98
Cash dividends
declared $ 0.080 0.062 0.342 0.318 0.253 0.181 0.110
Weighted average
shares outstanding
7,973,212 7,987,217 7,972,078 7,977,941 7,908,972 7,829,807 6,391,937
Pro Forma Condensed Combined
Statement of Financial Condition Data(2):
Total assets $1,485,355 1,306,249 1,470,437 1,262,352 975,375 911,012 788,083
Loans and mortgage-backed
securities 1,265,079 1,133,058 1,293,178 1,090,215 838,650 752,556 627,974
Customer
deposits 1,045,908 980,960 1,040,310 959,344 776,499 755,712 693,209
Borrowings 321,116 227,180 314,171 202,664 110,218 77,464 21,397
Stockholders'
equity 106,961 95,909 105,740 93,578 82,420 71,306 62,390
Book value
per share 13.60 12.20 13.51 11.91 10.58 9.25 8.12
(1) Pro forma condensed combined statement of operations data is for the
periods indicated for InterWest and for the years ended December 31
of the years indicated for Central.
(2) Pro forma condensed combined statement of financial condition data
is as of December 31 for both InterWest and Central. Year end
financial condition data is as of InterWest's September 30 fiscal
year and Central's December 31 fiscal year end.
<PAGE>
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth selected comparative per share data
for InterWest on both a historical and pro forma combined basis and for
Central on both a historical and pro forma equivalent basis giving effect to
the Merger using the pooling of interests method of accounting. These tables
should be read in conjunction with the historical financial statements of
InterWest and Central, including the respective notes thereto, the unaudited
pro forma financial information appearing elsewhere in this Prospectus/Joint
Proxy Statement, including the notes thereto, and the other documents
incorporated by reference herein. See "AVAILABLE INFORMATION," "INCORPORATION
OF CERTAIN DOCUMENTS BY REFERENCE," "PRO FORMA FINANCIAL INFORMATION" and the
Central 1995 10-KSB accompanying this Prospectus/Joint Proxy Statement. The
pro forma information has been prepared to illustrate a 1.7 and a 1.41
Exchange Ratio. The actual Exchange Ratio will depend on the InterWest Price
(which will not be known until shortly before the Effective Date) and may be
different than 1.7 or 1.41. The pro forma information would be different if
the InterWest Price results in an Exchange Ratio different from 1.7 or 1.41.
Central shareholders are urged to obtain current quotations of the market
price of InterWest Common Stock.. The following information is not
necessarily indicative of the results of operations or combined financial
position that would have resulted had the Merger been consummated at the
beginning of the periods indicated, nor is it necessarily indicative of the
results of operations of future periods or future combined financial position.
At or For the At or For the Year Ended
Three Months Ended September 30,
December 31, 1995 1995 1994 1993
----------------- ------ ------ ------
Book value per share(1):
InterWest historical $14.26 $14.05 $12.43 $10.92
Central historical(2) 15.63 15.63 13.41 12.78
With 1.7 Exchange Ratio:
Pro forma combined 13.11 13.02 11.48 10.21
Central pro forma equivalent 22.29 22.13 19.52 17.36
With 1.41 Exchange Ratio:
Pro forma combined 13.61 13.51 11.91 10.59
Central pro forma equivalent 19.19 19.04 16.79 14.93
Cash dividends declared per share(3):
InterWest historical $0.100 $0.320 $0.295 $0.223
Central historical(2) -- 0.600 0.600 0.550
Pro forma combined .100 0.320 0.295 0.223
With 1.7 Exchange Ratio:
Central pro forma equivalent .170 0.544 0.502 0.379
With 1.41 Exchange Ratio:
Central pro forma equivalent .141 0.451 0.416 0.314
Net income per share(4):
InterWest historical $0.52 $1.81 $1.80 $1.65
Central historical(2) 0.46 2.46 1.71 1.77
With 1.7 Exchange Ratio:
Pro forma combined 0.47 1.74 1.63 1.52
Central pro forma equivalent 0.80 2.96 2.77 2.58
With 1.41 Exchange Ratio:
Pro forma combined 0.49 1.80 1.69 1.58
Central pro forma equivalent 0.68 2.54 2.38 2.23
<PAGE>
<PAGE>
(1) The pro forma combined book value per share of InterWest Common Stock is
based upon the historical total combined common stockholders' equity for
InterWest as of its September 30 fiscal year end and Central as of its
December 31 fiscal year end divided by total pro forma common shares of
the combined entities. The data presented assume the exercise of all
stock options and exclude any shares of Central Common Stock issuable to
InterWest upon exercise of options held by InterWest. The pro forma
equivalent book value per share of Central Common Stock represents the
pro forma combined book value of InterWest Common Stock multiplied by
the indicated Exchange Ratio.
(2) Information for Central is at or for Central's December 31 fiscal year
end.
(3) Assumes no changes in cash dividends per share. The pro forma
equivalent cash dividends declared per share of Central Common Stock
represent the pro forma combined cash dividends declared per share of
InterWest Common Stock multiplied by the indicated Exchange Ratio.
(4) The pro forma combined net income per share of InterWest Common Stock
(based on fully diluted net income and weighted average shares
outstanding) is based upon the combined historical net income for
InterWest for its fiscal year ended September 30 and Central for its
fiscal year ended December 31 divided by the average pro forma common
shares of the combined entities. The pro forma equivalent net income
per share of Central Common Stock represents the pro forma combined net
income per share multiplied by the indicated Exchange Ratio.
COMPARATIVE MARKET PRICE DATA
InterWest Common Stock is quoted on the Nasdaq National Market
under the symbol "IWBK." There is no established trading market for Central
Common Stock. The table below sets forth, for the calendar quarters
indicated, the high and low sales prices of InterWest Common Stock as reported
on the Nasdaq National Market, the high and low trading prices of Central
Common Stock known to management of Central, and the dividends per share
declared on InterWest and Central Common Stock in each such quarter. The
market for shares of Central Common Stock is highly illiquid and the shares
are neither traded on an established exchange or listed on the Nasdaq Stock
Market. Trades are generally undertaken in private transactions. Thus,
management of Central does not have knowledge of the prices paid in all
transactions involving its shares and has not necessarily verified the prices
indicated in the table with both parties to the relevant transaction.
InterWest Central
Common Stock Common Stock
High Low Dividends High Low Dividends
------ ----- --------- ------ ----- ---------
Year Ended September 30, 1994:
First Quarter $16.00 $12.75 $.070 $20.00 $20.00 $ --
Second Quarter 15.50 13.00 .075 20.00 20.00 0.35
Third Quarter 15.00 12.75 .075 20.00 20.00 --
Fourth Quarter 15.25 13.00 .075 20.00 20.00 0.25
Year Ended September 30, 1995:
First Quarter 14.50 12.38 .075 21.88 20.00 --
Second Quarter 14.75 12.00 .075 21.88 20.00 0.35
Third Quarter 14.37 12.75 .080 22.00 20.00 --
Fourth Quarter 16.00 15.19 .090 22.00 21.00 0.25
Year Ended September 30, 1996:
First Quarter 20.37 15.25 0.100 23.00 21.50 --
Second Quarter
Third Quarter (through
May __, 1996) 0.120 0.40
<PAGE>
<PAGE>
The following table sets forth the closing price per share for
InterWest Common Stock as reported on the Nasdaq National Market, for Central
Common Stock and the equivalent per share price for Central Common Stock on
January 10, 1996, the last full trading day prior to the public announcement
of the execution of the Merger Agreement, and on May __, 1996, which is the
most recent date for which it was practicable to obtain market price data
prior to the printing of this Prospectus/Joint Proxy Statement. Holders of
Central Common Stock are urged to obtain current market quotations for shares
of InterWest Common Stock.
January 10, 1996 May_____, 1996
Closing price per share:
InterWest. . . . . . . . . . . . . . $20.38
Central(1) . . . . . . . . . . . . . 23.00
Equivalent pro forma
per share of Central
Common Stock . . . . . . . . . . . 33.99(2) (3)
(1) There are no publicly available quotations of Central Common Stock. The
market price per share of Central Common Stock as of January 10, 1996
and May __, 1996, respectively, is the price paid for Central Common
Stock in the last transaction in Central Common Stock prior to such date
for which a price is known to management of Central.
(2) Computed by multiplying the closing price per share of InterWest Common
Stock on January 10, 1996 by a 1.668 Exchange Ratio, which is based on
an InterWest Price of $20.38.
(3) Computed by multiplying the closing price per share of InterWest Common
Stock on _________, 1996 by a 1.__ Exchange Ratio, which is based on an
InterWest Price of $_____.
<PAGE>
<PAGE>
THE MEETINGS
INTERWEST SPECIAL MEETING
Place, Time and Date. The InterWest Special Meeting will be held on
_______ __, June __, 1996 at __:00 a.m., local time, at the Elks Club, 6431
60th Avenue, N.W., Oak Harbor, Washington. This Prospectus/Joint Proxy
Statement is being sent to holders of InterWest Common Stock and is
accompanied by a form of proxy that is being solicited by the InterWest Board
for use at the InterWest Special Meeting and any adjournments or postponements
thereof.
Purpose. The purpose of the InterWest Special Meeting is (i) to
consider and vote upon a proposal to approve the Merger Agreement described
herein, providing for, among other things, the merger of Central
with and into InterWest, with InterWest surviving the Merger, and the issuance
of shares of InterWest Common Stock to the shareholders of Central and (ii) to
act upon such other matters, if any, as may properly come before the Special
Meeting.
Record Date; Shares Entitled to Vote. The InterWest Board has fixed the
close of business on April 25, 1996 as the InterWest Record Date for
determining shareholders entitled to notice of and to vote at the InterWest
Special Meeting. Only those holders of InterWest Common Stock of record on
the InterWest Record Date will be entitled to notice of and to vote at the
InterWest Special Meeting. Each share of InterWest Common Stock will be
entitled to one vote. At the InterWest Record Date, there were _____________
shares of InterWest Common Stock outstanding and entitled to be voted at the
InterWest Special Meeting.
Vote Required. A majority of the shares entitled to vote, represented
in person or by proxy, will constitute a quorum of InterWest shareholders at
the Special Meeting. Abstentions and broker non-votes (i.e., proxies from
brokers or nominees indicating that such person has not received instructions
from the beneficial owners or other persons entitled to vote shares as to a
matter with respect to which the brokers or nominees do not have
discretionary power to vote) will be considered present for purposes of
determining whether a quorum exists. Approval of the Merger Agreement
requires the affirmative vote of the holders of a majority of the outstanding
shares of InterWest Common Stock. Abstentions and broker non-votes will have
the same effect as votes cast against approval of the Reorganization
Agreement.
At the InterWest Record Date, the directors and executive officers of
InterWest and their affiliates beneficially owned an aggregate of __________
shares of InterWest Common Stock, which represents ___% of the shares entitled
to be voted at the InterWest Special Meeting.
Proxies. Holders of InterWest Common Stock may vote either in person
or by properly executed proxy. Shares of InterWest Common Stock represented
by a properly executed proxy received prior to or at the InterWest Special
Meeting will, unless such proxy is revoked, be voted in accordance with the
instructions indicated on such proxy. If no instructions are indicated on a
properly executed proxy, the shares covered thereby will be voted FOR the
proposal to approve the Merger Agreement. Failure to return the proxy card
or to vote in person at the InterWest Special Meeting will have the effect of
a vote cast against the Merger Agreement. If any other matters are properly
presented at the InterWest Special Meeting for consideration, including, among
other things, a motion to adjourn the InterWest Special Meeting to another
time and/or place (including, without limitation, for the purpose of
soliciting additional proxies), the persons named in the proxy and acting
thereunder will have discretion to vote on such matters in accordance with
their best judgment; provided, however, that no proxy which is voted against
the proposal to approve the Merger Agreement will be voted in favor of any
such adjournment or postponement. As of the date hereof, the InterWest Board
knows of no such other matters.
Any proxy given pursuant to this solicitation or otherwise may be
revoked by the person giving it at any time before it is voted by delivering
to the Secretary of InterWest, on or before the taking of the vote at the
<PAGE>
<PAGE>
InterWest Special Meeting, a written notice of revocation bearing a later date
than the proxy or a later dated proxy relating to the same shares of InterWest
Common Stock, or by attending the InterWest Special Meeting and voting in
person. Attendance at the InterWest Special Meeting will not in itself
constitute revocation of a proxy.
The proxy for the InterWest Special Meeting is being solicited on behalf
of the InterWest Board. The expense of soliciting proxies for the InterWest
Special Meeting will be borne by InterWest. The expense of printing this
Prospectus/Joint Proxy Statement is to be shared equally by InterWest and
Central. All other costs and expenses incurred in connection with the
Reorganization Agreement and the transactions contemplated thereby are to be
paid by the party incurring such expenses. Proxies will be solicited
principally by mail, but may also be solicited by the directors, officers and
other employees of InterWest in person or by telephone, facsimile or other
means of communication. Such directors, officers and employees will receive
no compensation therefor in addition to their regular compensation, but may be
reimbursed for out-of-pocket expenses in connection with such solicitation.
Brokers and others who hold InterWest Common Stock on behalf of another will
be asked to forward proxy material and related documents to the beneficial
owners of such stock, and InterWest will reimburse them for their expenses in
doing so.
CENTRAL ANNUAL MEETING
Place, Time and Date. The Central Annual Meeting will be held on June,
, 1996 at :00 .m., local time, at 301 North Chelan, Wenatchee,
Washington. This Prospectus/Joint Proxy Statement is being sent to holders of
Central Common Stock and is accompanied by a form of proxy which is being
solicited by the Central Board for use at the Central Annual Meeting and any
adjournments or postponements thereof.
Purpose. The purpose of the Central Annual Meeting is (i) to consider
and vote upon a proposal to approve the Merger Agreement described herein,
providing for, among other things, the merger of Central with and into
InterWest, with InterWest surviving the Merger, and the conversion of shares
of Central Common Stock into shares of InterWest Common Stock, (ii) to elect
two directors to serve for a term of three years or until their successors
have been elected and qualified and (iii) to act upon such other matters, if
any, as may properly come before the Central Annual Meeting.
Record Date; Shares Entitled to Vote. The Central Board has fixed the
close of business on April 25, 1996 as the Central Record Date for determining
shareholders entitled to notice of and to vote at the Central Annual Meeting.
Only those holders of Central Common Stock of record on the Central Record
Date will be entitled to notice of and to vote at the Central Annual Meeting.
Each share of Central Common Stock will be entitled to one vote. At the
Central Record Date, there were 1,014,565 shares of Central Common
Stock outstanding and entitled to be voted at the Central Annual Meeting.
Vote Required. A majority of the shares entitled to vote, represented
in person or by proxy, will constitute a quorum for the transaction of
business at the Central Annual Meeting. Abstentions and broker non-votes
will be considered present for purposes of determining whether a quorum
exists. Approval of the Merger Agreement requires the affirmative vote of the
holders of two-thirds of the shares of Central Common Stock entitled to vote
at the Central Annual Meeting. Abstentions and broker non-votes will have the
same effect as votes cast against approval of the Reorganization Agreement. A
plurality of the votes cast at the Central Annual Meeting by the holders of
shares of Central Common Stock entitled to vote is required for the election
of persons nominated to serve as directors. Any shares not voted will have no
effect on the election of directors provided that a quorum for the transaction
of business is present at the Central Annual Meeting.
<PAGE>
<PAGE>
At the Central Record Date, the directors and executive officers of
Central and their affiliates beneficially owned an aggregate of _______ shares
of Central Common Stock, which represents _____% of the shares entitled to be
voted at the Central Annual Meeting. Simultaneous with the execution of the
Merger Agreement, all of the directors of Central entered into an agreement
with InterWest pursuant to which each director agreed to vote his or her
shares for approval of the Merger Agreement.
Proxies. Holders of Central Common Stock may vote either in person or
by properly executed proxy. Shares of Central Common Stock represented by a
properly executed proxy received prior to or at the Central Annual Meeting
will, unless such proxy is revoked, be voted in accordance with the
instructions indicated on such proxy. If no instructions are indicated on a
properly executed proxy, the shares covered thereby will be voted FOR the
proposal to approve the Merger Agreement. Failure to return the proxy card or
to vote in person at the Central Annual Meeting will have the effect of a vote
cast against the Merger Agreement. If any other matters are properly
presented at the Central Annual Meeting for consideration, including, among
other things, a motion to adjourn the Central Annual Meeting to another time
and/or place (including, without limitation, for the purpose of soliciting
additional proxies), the persons named in the proxy and acting thereunder will
have discretion to vote on such matters in accordance with their best
judgment; provided, however, that no proxy which is voted against the proposal
to approve the Merger Agreement will be voted in favor of any such adjournment
or postponement. As of the date hereof, the Central Board knows of no such
other matters.
Any proxy given pursuant to this solicitation or otherwise may be
revoked by the person giving it at any time before it is voted by delivering
to the Secretary of Central, on or before the taking of the vote at the
Central Annual Meeting, a written notice of revocation bearing a later date
than the proxy or a later dated proxy relating to the same shares of Central
Common Stock, or by attending the Central Annual Meeting and voting in person.
Attendance at the Central Annual Meeting will not in itself constitute a
revocation of a proxy.
The proxy for the Central Annual Meeting is being solicited on behalf of
the Central Board. The expense of soliciting proxies for the Central Annual
Meeting will be borne by Central. The expense of printing this
Prospectus/Joint Proxy Statement is to be shared equally by Central and
InterWest. All other costs and expenses incurred in connection with the
Reorganization Agreement and the transactions contemplated thereby are to be
paid by the party incurring such expenses. Proxies will be solicited
principally by mail, but may also be solicited by the directors, officers and
other employees of Central in person or by telephone, facsimile or other means
of communication. Such directors, officers and employees will receive no
compensation therefor in addition to their regular compensation, but may be
reimbursed for out-of-pocket expenses in connection with such solicitation.
Brokers and others who hold Central Common Stock on behalf of another will be
asked to forward proxy materials and related documents to the beneficial
owners of such stock, and Central will reimburse them for their expenses in
doing so.
THE MERGER
The descriptions in this Prospectus/Joint Proxy Statement of the terms
and conditions of the Merger and related transactions are qualified in their
entirety by reference to the Merger Agreement, a copy of which is attached as
Appendix A to this Prospectus/Joint Proxy Statement and is incorporated herein
by reference.
General; Exchange Ratio
The Merger Agreement provides for the merger of Central with and into
InterWest, with InterWest surviving the Merger. The separate existence of
Central and the Banks will cease upon completion of the respective Mergers.
While InterWest and Central believe that they will receive the requisite
regulatory approvals for the Merger, there can be no assurance that such
approvals will be received or, if received, as to the timing of such approvals
or as to the ability to obtain such approvals on satisfactory terms. See "--
<PAGE>
<PAGE>
Conditions to Consummation of the Merger" and "--Regulatory Requirements."
It is currently intended that in connection with the Merger, NCWB will be
merged with CWB, with CWB surviving such merger, and that after consummation
of the Merger, CWB will operate as a wholly-owned subsidiary of InterWest.
Upon consummation of the Merger, each outstanding share of Central
Common Stock (excluding any Excluded Shares) will be automatically converted
into the right to receive a number of shares of InterWest Common Stock, as
follows: (i) 1.7 shares of InterWest Common Stock if the InterWest Price is
$20.00 or less; (ii) the number of shares obtained by dividing $34.00 by the
InterWest Price if the InterWest Price is greater than $20.00 and less than
$24.12; or (iii) 1.41 shares of InterWest Common Stock if the InterWest Price
is $24.12 or greater. If the InterWest Price is less than $17.00, Central
will have the right to terminate the Merger Agreement unless InterWest elects
to adjust the Exchange Ratio so that each share of Central Common Stock will
be converted into the right to receive the number of shares of InterWest
Common Stock that (if valued at the InterWest Price) equals $28.90. Each
holder of Central Common Stock who would otherwise be entitled to a fractional
share of InterWest Common Stock will receive cash in lieu thereof determined
by multiplying such fraction by the InterWest Price. Pursuant to the terms of
the Merger Agreement, all outstanding stock options under Central's stock
option plans will be assumed by InterWest.
If a "Triggering Event" relating to certain business combinations
between InterWest and a third party shall have occurred, the Exchange Ratio
will be based on the ten trading days beginning on and including the
twentieth trading day immediately preceding the Triggering Event. A
"Triggering Event" is defined in the Merger Agreement to mean any one or more
of the following events: (i) InterWest shall have authorized, recommended,
publicly proposed or entered into an agreement with any third party to effect
(a) a merger, consolidation or similar transaction involving InterWest or any
of its significant subsidiaries, (b) the disposition of assets or deposits of
InterWest representing 25% or more of the consolidated assets or deposits of
InterWest and its subsidiaries, or (c) the issuance, sale or other disposition
of securities representing 25% or more of the voting power of InterWest or any
of its significant subsidiaries other than the issuance of InterWest Common
Stock upon the exercise of outstanding options or the conversion of
outstanding convertible securities of InterWest (an "Acquisition
Transaction"); (ii) a third party shall have made a proposal to InterWest or
its stockholders to engage in an Acquisition Transaction; (iii) a third party,
other than in connection with a transaction to which Central has given its
prior written consent, shall have filed an application or notice with the any
regulatory authority for approval to engage in an Acquisition Transaction; and
(iv) a third party shall have commenced, or shall have filed a registration
statement with respect to, a tender offer or exchange offer that would result
in such third party owning or controlling 20% or more of the then outstanding
shares of InterWest Common Stock. InterWest has no plans, arrangements or
understandings, written or oral, regarding any business combination with a
third party or any event that would constitute a Triggering Event.
On May __, 1996, the most recent date for which it was practicable to
obtain information prior to the printing of this Prospectus/Joint Proxy
Statement, the closing price per share of InterWest Common Stock, as reported
on the Nasdaq National Market, was $_____. By way of example only, if the
InterWest Price is also $_____, each share of that holder's Central Common
Stock would be converted into ______ shares of InterWest Common Stock, which
would have a value, determined on the basis of the InterWest Price, equal to
$____. Central shareholders should note, however, that the market price of
the InterWest Common Stock they receive will continue to be subject to market
fluctuations, as well as the future results of operations and financial
condition of InterWest, among other factors, and therefore may be worth less
than, or more than, the InterWest Price as of the date they receive their
InterWest Common Stock certificates.
EFFECTIVE DATE OF THE MERGER
Unless the parties agree upon another date, the Effective Date of the
Merger will be the date ten business days after the fulfillment or waiver of
each of the conditions to the obligations of the parties to effect the Merger
and the granting of all regulatory approvals. Subject to the foregoing, it is
currently anticipated that the Merger will be consummated in the second
quarter of 1996. Either InterWest or Central may terminate the Merger
Agreement if the Effective Date does not occur on or before September 30,
1996.
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EXCHANGE OF CENTRAL STOCK CERTIFICATES
As promptly as practicable after the Effective Date, InterWest will send
or cause to be sent to each holder of record of Central Common Stock
transmittal materials for use in exchanging all of such holder's certificates
representing Central Common Stock for a certificate or certificates
representing the InterWest Common Shares to which such holder is entitled and
a check or checks for such holder's fractional share interests, as
appropriate. The transmittal materials will contain information and
instructions with respect to the surrender and exchange of such certificates.
CENTRAL SHAREHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS.
Upon surrender of all of the certificates for Central Common Stock
registered in the name of a holder of such certificates (or indemnity
satisfactory to InterWest and the exchange agent selected by InterWest, if any
of such certificates are lost, stolen or destroyed), together with a properly
completed letter of transmittal, such exchange agent will mail to such holder
a certificate or certificates representing the number of InterWest Common
Shares to which such holder is entitled, together with all undelivered
dividends or distributions in respect of such shares and, where applicable, a
check for any fractional share interest (in each case, without interest).
All InterWest Common Shares issued to the holders of Central Common
Stock pursuant to the Merger will be deemed issued as of the Effective Date.
InterWest dividends having a record date after the Effective Date will include
dividends on all InterWest Common Shares issued in the Merger, but no dividend
or other distribution payable to the holders of record of InterWest Common
Shares at or as of any time after the Effective Date will be distributed to
the holder of any Central Common Stock certificates until such holder
physically surrenders all such certificates as hereinabove described.
Promptly after such surrender, all undelivered dividends and other
distributions and, where applicable, a check for any fractional share
interest, will be delivered to such holder, in each case, without interest.
After the Effective Date, the stock transfer books of Central will be closed,
and there will be no transfers on the transfer books of Central of the shares
of Central Common Stock that were outstanding immediately prior to the
Effective Date.
BACKGROUND OF THE MERGER
During the fall of 1994, in view of Central's past performance and
desire to more effectively employ its resources, the Central Board directed
management to prepare and present a report on Central's long-term strategic
options. In December 1994, management presented three options: growth through
acquisition; reengineering and consolidation of Central's two subsidiary
banks, or a strategic alliance with another financial institution. After
lengthy consideration of the options, the Central Board determined to seek the
advice of legal, accounting, and investment banking professionals. Taking
into account the advice of its financial, legal and accounting advisors and
after thorough consideration, the Central Board chose to pursue the long-term
option of strategically allying itself with another financial institution.
Central did not pursue the strategy of growth through acquisition because
after surveying its market area it determined that there were limited
acquisition opportunities. Central also concluded that reengineering and
consolidation of Central's two subsidiary banks would not provide access to
new markets or provide in-market growth opportunities. In addition Central
concluded that the cost savings of the consolidation would not be significant
enough to warrant a merger of Central's two subsidiary banks and would not
offer a solution to the illiquidity of Central's Common Stock. In January
1995, Central engaged CFA to act as its financial advisor. In pursuit of the
chosen option and over the course of several months, Central had discussions
with various smaller and larger financial institutions with no productive
results.
In March 1995, management of InterWest met with Sandler O'Neill to
discuss goals for growth, capital and return on equity and to formulate
strategies for accomplishing these goals. At that time, InterWest determined
to attempt to grow, including through acquisitions, after it completed its
pending holding company reorganization.
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In August 1995, shortly after consummation of InterWest's holding
company reorganization, CFA independently initiated contact with InterWest to
discuss InterWest's interest in acquiring a commercial bank. This inquiry
ultimately led to InterWest contacting Central regarding a potential business
combination between the two parties. During August, a meeting between Stephen
M. Walden, the President and Chief Executive Officer of InterWest, and Gary M.
Bolyard, the President and Chief Executive Officer of Central, was arranged.
Mr. Walden and Mr. Bolyard met in Chelan, Washington in late August to discuss
a possible business combination of InterWest and Central and determined that a
combination of the two institutions appeared to meet the objectives of both
parties. These discussions were preliminary in nature and did not result in
general agreement on the possibility or terms of such a transaction.
Following this initial meeting, Mr. Bolyard was introduced to the entire
InterWest management team.
In September 1995, InterWest requested that Sandler O'Neill analyze the
combination of the two companies and act as financial advisor to InterWest
with respect to a possible transaction with Central. Until that time, the
parties had been discussing the acquisition of Central by InterWest in
exchange for a combination of cash and InterWest Common Stock. Central then
informed InterWest that it desired that the transaction be tax-free for
Central shareholders.
Discussions between the parties and their financial advisors continued,
and in mid-October 1995 the parties met again to discuss the pricing of the
proposed transaction. Because the price of InterWest Common Stock had
increased since discussions had begun and because Central desired a tax-free
transaction for its shareholders, the parties began to consider structuring
the transaction so that Central shareholders would receive solely InterWest
Common Stock in exchange for the their shares of Central Common Stock. The
parties met again twice in October to discuss employee and benefits issues and
to continue discussions regarding the pricing of a possible transaction.
General discussion between InterWest and Central continued through
November 1995. Pursuant to a letter agreement dated as of November 29,1995,
InterWest retained Sandler O'Neill to act as financial advisor to InterWest in
connection with the Merger and to provide a written fairness opinion. The
Central Board decided that it would continue discussions if the exchange ratio
were fixed at 1.7 so long as InterWest Common Stock traded above $17.00.
During December 1995 and early January 1996, Central permitted InterWest to
conduct a detailed due diligence examination of the assets, business and
financial condition of Central. Because InterWest Common Stock would be
issued as consideration to Central shareholders under the terms of the
proposed transaction, Central conducted a due diligence examination of
InterWest. During this time, the executive officers of InterWest and Central
and their respective counsels and financial advisors engaged in numerous
discussions to negotiate the terms of a definitive merger agreement and
related documents. The Exchange Ratio was negotiated on an arm's length basis
between representatives of InterWest and Central with the assistance of
Sandler O'Neill and CFA. The parties established an exchange ratio of 1.7 so
long as the price of InterWest Common Stock was above $17.00 and below $20.00
per share. The parties determined that if the price of InterWest Common Stock
exceeded $20.00, Central shareholders would receive $34.00 in value of
InterWest Common Stock for each share of Central Common Stock. The minimum
exchange ratio of 1.41 was established to ensure that dividend payments to
Central shareholders did not decline after the merger based on the current
dividend paid by InterWest.
On January 10, 1996, the InterWest Board, along with Sandler O'Neill and
InterWest's special legal counsel, Breyer & Aguggia, reviewed the contents of
the Merger Agreement together with its exhibits. The InterWest Board also
considered the potential benefits of the transaction, the financial and
valuation analyses of the transaction, the terms of the Merger Agreement, and
related questions and answers. At this meeting, Sandler O'Neill presented a
financial analysis illustrating the effect of the Merger on InterWest, and the
InterWest Board unanimously approved the Merger Agreement.
On January 10, 1996, the Central Board carefully considered the nature,
value, and prospectus for future appreciation and liquidity of the shares of
InterWest Common Stock to be received by Central shareholders in the proposed
merger. A report from a financial point of view regarding the fairness of the
transaction was presented by Columbia Financial Advisors and a report of due
diligence was presented by Central management regarding their
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findings. The Central Board, along with its counsel, Graham & Dunn, reviewed
the Merger Agreement and considered the potential benefit of the proposed
merger to Central and its shareholders, taking into account the financial and
valuation analyses of the Merger, and the terms of the Merger Agreement. At
this meeting, the Central Board unanimously determined that the proposed
transaction was fair to and in the best interest of Central and its
shareholders, and therefore recommended the Merger Agreement be submitted to
Central's shareholders for approval.
REASONS FOR THE MERGER AND RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
InterWest. The InterWest Board believes that the terms of the Merger,
which are the product of arms length negotiations between representatives of
InterWest and Central, are fair and in the best interests of InterWest and its
shareholders. In the course of reaching its determination, the InterWest
Board consulted with legal counsel with respect to the legal duties of the
InterWest Board, the terms of the Merger Agreement and the issues related
thereto; with its accountants with respect to certain financial aspects of the
transaction; with its financial advisor with respect to the financial aspects
and fairness of the transaction; and with senior management regarding, among
other things, operational and due diligence matters.
In reaching its determination to approve the Merger Agreement, the
InterWest Board considered the following factors, which it deemed material:
(i) information concerning the business, market area, financial condition,
earnings, operations, asset quality and capital levels of Central and
information concerning the two companies on a combined basis; (ii) the terms
of the Merger Agreement and the other documents related to the Merger; (iii)
the structure of the transaction as a tax-free reorganization, which was
desired by Central; (iv) the availability of the pooling of interests method
of accounting, which does not require the recognition of goodwill which must
be written off as a charge against operations over time; (v) the financial
advice provided by Sandler O'Neill, including Sandler O'Neill's opinion that
the Exchange Ratio is fair from a financial point of view; (vi) the terms of
other recent comparable combinations of thrift institutions and thrift holding
companies; and (vii) current industry, economic and market conditions, which
indicated continuing consolidation and increasing competition in the banking
and financial services industries.
In considering the foregoing factors, the InterWest Board came to the
following conclusions:
* The Merger would expand InterWest's presence in central Washington
and thereby give it a broader base from which to sell InterWest's
product offerings.
* The Merger would permit InterWest to expand Central's commercial,
small business and consumer lending activities throughout
InterWest's existing branch network faster and more efficiently than
InterWest could develop such lines of business on its own.
* Central's management possesses the depth and experience in
commercial lending to help integrate Central's commercial banking
business into InterWest.
* Central is large enough in relation to InterWest to provide
InterWest a sufficient base from which to expand Central's product
offerings and to contribute meaningfully to InterWest's income, but
not so large as to make the combination of the two companies
difficult and costly.
The InterWest Board did not ascribe relative or specific weights to the
factors that it considered or the conclusions that it reached.
FOR THE REASONS SET FORTH ABOVE, THE INTERWEST BOARD HAS APPROVED THE
MERGER AGREEMENT AS ADVISABLE AND IN THE BEST INTERESTS OF INTERWEST AND
INTERWEST SHAREHOLDERS AND RECOMMENDS THAT THE SHAREHOLDERS OF INTERWEST
VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT.
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Central. The Central Board, at its meeting held on January 10, 1996,
considered the Merger Agreement and determined it to be fair, and in the best
interests of, Central and its shareholders, customers, and employees. In
reaching its determination, the Central Board consulted with Central
management, as well as its financial and legal advisors regarding,
respectively, the financial fairness of the Merger to Central and its
shareholders, and the legal duties of the Central Board, in connection with
the Merger and the terms of the Merger Agreement, and considered a number of
factors. Below is a listing of the material factors the Central Board
considered in their decision. The Central Board did not assign any specific
or relative weight to the below listed factors.
* The Central Board determined that a merger with InterWest would be a
better alternative than expanding independently through internal
growth and/or acquisitions. After the Merger, Central's ten
branches combined with InterWest's four branches in North Central
Washington will make Central the largest financial institution in
North Central Washington. In addition, combining with a larger
financial institution will enhance Central's ability to compete more
effectively in the rapidly changing market place for banking and
financial services while maintaining its community bank flavor.
* Confronted with changing shareholder demographics and shareholder
desires, the Central Board determined that combining with a larger
company whose stock is traded through market professionals would
result in significantly improved liquidity for Central's
stockholders.
* Combining the management resources of both companies should result
in a greater depth of management, which should strengthen the
combined organization.
* Because of InterWest's relative size and resources, Central should
benefit as a result of enhanced technology and employee training
which should enable employees to better serve customers. In
addition, aligning with a larger organization should provide
enhanced career opportunities to Central's employees.
FOR THE REASONS SET FORTH ABOVE, THE CENTRAL BOARD HAS APPROVED THE
MERGER AGREEMENT AS ADVISABLE AND IN THE BEST INTERESTS OF CENTRAL AND CENTRAL
SHAREHOLDERS AND RECOMMENDS THAT THE SHAREHOLDERS OF CENTRAL VOTE FOR THE
APPROVAL OF THE MERGER AGREEMENT.
OPINIONS OF FINANCIAL ADVISORS
InterWest. Pursuant to a letter agreement dated as of November 29, 1995
(the "Sandler O'Neill Agreement"), InterWest retained Sandler O'Neill as an
independent financial advisor in connection with a possible business
combination involving InterWest and Central. Sandler O'Neill is a nationally
recognized investment banking firm whose principal business specialty is banks
and savings institutions and, in that connection, is regularly engaged in the
valuation of such businesses and their securities in connection with mergers
and acquisitions and other corporate transactions.
Pursuant to the terms of the Sander O'Neill Agreement, Sandler O'Neill
acted as financial advisor to InterWest in connection with the Merger. In
connection therewith, at the January 10, 1996 meeting at which the InterWest
Board approved and adopted the Merger Agreement, Sandler O'Neill presented a
financial analysis illustrating the effect of the Merger on InterWest. At
that meeting Sandler O'Neill discussed the Exchange Ratio in the Merger. As
of the date of this proxy, Sandler O'Neill delivered a written opinion to the
InterWest Board that the Exchange Ratio in the Merger is fair, from a
financial point of view, to the holders of InterWest Common Stock (the
"Fairness Opinion").
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The full text of Sandler O'Neill's Fairness Opinion, which sets forth
the procedures followed, assumptions made, matters considered and
qualifications and considerations on the review undertaken, is attached as
Appendix C to this Prospectus/Joint Proxy Statement and is incorporated herein
by reference. The description of such opinion set forth herein is qualified
in its entirety by reference to Appendix C. Holders of InterWest Common Stock
are urged to read the Fairness Opinion in its entirety. Sander O'Neill's
fairness opinion is directed only to the Exchange Ratio in the Merger and does
not constitute a recommendation to any shareholder of InterWest as to how such
shareholder should vote at the InterWest Special Meeting.
In connection with rendering its Fairness Opinion, Sandler O'Neill
performed a variety of financial analyses. The following is a summary of such
analyses, but does not purport to be a complete description of Sandler
O'Neill's analysis. The preparation of a fairness opinion is a complex
process involving subject judgements and is not necessarily susceptible to a
partial analysis or summary description. Sandler O'Neill believes that its
analyses must be considered as a whole and that selecting portions of such
analyses and factors considered therein, without considering all factors and
analyses, could create an incomplete view of such analyses and processes
underlying Sandler O'Neill's opinion. In performing its analyses, Sandler
O'Neill made numerous assumptions with respect to industry performance,
business and economic conditions and various other matters, many of which
cannot be predicted and are beyond the control of InterWest, Central and
Sandler O'Neill. Any estimates contained in Sandler O'Neill's analyses are
not necessarily indicative of future results or values, which may be
significantly more or less favorable than such estimates. Estimates on the
values of companies do not purport to be appraisals or necessarily reflect the
prices at which companies or their securities may actually be sold. Because
such estimates are inherently subject to uncertainty, neither InterWest nor
Sandler O'Neill assumes responsibility for their accuracy.
Stock Trading History. Sandler O'Neill examined the history of trading
prices and the volume of InterWest Common Stock and Central Common Stock, the
relationship between the movements in the prices of both stocks to movements
in certain stock indices, including Standard & Poor's 500 Index and the Nasdaq
Banking Index and a composite group of publicly traded savings institutions in
geographic proximity and of similar asset size. The stock trading history of
InterWest established the range at which InterWest common stock traded over
the past year. The analysis indicated that InterWest Common Stock
outperformed the S&P 500 index by approximately 28%, the Nasdaq Banking Index
by approximately 22% and the composite group by approximately 17%. The stock
trading history showed that Central Common Stock is highly illiquid and that
trades are infrequent.
Comparable Company Analysis. Using publicly available information,
Sandler O'Neill compared selected financial information and common stock
trading data for Central with similar information for selected companies that
Sandler O'Neill deemed comparable to Central. Such comparable companies were
West Coast Bancorp, Columbia Banking System, Inc., Centennial Bancorp, United
Security Bancorporation, Cascade Bancorp, VRB Bancorp,and Evergreen Bank
(collectively, the "Comparable Institutions"). The analysis compared the
median financial performance and statistics of the Comparable Institutions
with Central's financial performance and statistics.
This comparison showed, among other things, that using financial data
for the last twelve months ended or as of September 30, 1995, (i) the equity
to assets ratio was 7.57% for Central and 9.50% for the Comparable
Institutions; (ii) the net loan to total assets ratio was 63.12% for Central
and 63.07% for the Comparable Institutions; (iii) the net interest margin was
5.23% for Central and 6.21% for the Comparable Institutions; (iv) the return
on average assets was 1.30% for Central and 1.50% for the Comparable
Institutions; (v) the return on average equity was 18.19% for Central and
17.89% for the Comparable Institutions; (vi) the ratio of market price per
share at January 2, 1996 to earnings per share for Central was 8.70x and
10.39x for the Comparable Institutions; (vii) the ratio of the market price
per share at January 2, 1996 to tangible book value per share was 142.43% for
Central and 163.60% for the Comparable Institutions.
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Analyses of Selected Merger Transactions. Sandler O'Neill reviewed 113
transactions announced from January 1, 1995 to December 27, 1995 involving
public commercial banks nationwide as targets with transaction values over $15
million ("All Transactions") and 7 transactions announced from January 1, 1995
to October 12, 1995 involving public commercial banks in Idaho, Montana,
Oregon and Washington with transaction values over $15 million ("Regional
Transactions"). Sandler O'Neill reviewed the ratios of price to earnings,
price to book value, price to tangible book value, price to deposits, price to
assets, and deposit premium paid in each such transaction and computed high,
low, mean, and median ratios and premiums for the respective groups of
transactions. Based upon the median multiples for All Transactions, Sandler
O'Neill derived an imputed range of values per share of Central's Common Stock
of $30.28 to $42.13. Based upon the median multiples for Regional
Transactions, Sandler O'Neill derived an imputed range of values per share on
Central's Common Stock of $31.09 to $40.64. The following analyses assumes
that the merger consideration to be received by Central shareholders is $34.00
per share. The balance sheet ratios are calculated based on Central's
September 30, 1995 financial information and the income statement multiples
are calculated based on the quarter annulized and year ended September 30,
1995. The merger consideration represents 13.48x Central's twelve months
ended September 30, 1995 earnings and 11.06x Central's three months annualized
earnings. The median multiple for All Transactions was 16.14x and for
Regional Transactions was 13.85x. The merger consideration represents 225.24%
of Central's book value. The median multiple for All Transactions was 201.00%
of book value and for Regional Transactions was 206.00% of book value. The
merger consideration represents 225.24% of Central's tangible book value, the
median multiple for All Transactions was 209.00% of tangible book value and
for Regional Transactions was 213.00% of tangible book value. The merger
consideration represents 19.22% of Central's total deposits. The median
multiple for All Transactions was 19.88% of total deposits and for Regional
Transactions was 22.72% of total deposits. The merger consideration
represents 17.04% of Central's total assets. The median multiple for All
Transactions was 17.10% of total assets and for Regional Transactions was
20.33% of total assets. The merger consideration represents an 11.25% deposit
premium for Central's core deposits. The median deposit premium for All
Transactions was 11.30% of core deposits and for Regional Transactions was
14.36% of core deposits.
Discounted Dividend Stream and Terminal Value Analysis. Sandler O'Neill
also performed an analysis which estimated the future stream of after-tax
dividend flows of InterWest through the year 2000 under various circumstances,
assuming InterWest performed in accordance with the earnings forecasts of its
management and certain variations thereof (including variation with respect to
the growth rate of assets, net interest spread, non-interest income,
non-interest expense, stock repurchases and dividend payout ratio) (the
"stand-alone projections"). To approximate the terminal value of InterWest
Common Stock at the end of the five year period, Sandler O'Neill applied
price-to-earnings multiples ranging from 8x to 17x and applied multiples of
book value ranging from 90.0% to 180.0%. The dividend income streams and
terminal values were then discounted to present values using different
discount rates (ranging from 9.0% to 14.0%) chosen to reflect different
assumptions regarding required rates of return of holders of prospective
buyers of InterWest Common Stock. This analysis, assuming the current
dividend payout ratio, indicated an imputed range of values per share of
InterWest Common Stock between $13.58 and $41.55. In connection with its
analysis, Sandler O'Neill extensively used sensitivity analyses to illustrate
the effects changes in the underlying assumptions would have on the resulting
present value, and discussed these changes with the InterWest Board.
In addition, Sandler O'Neill performed an analysis which estimated the
future stream of after-tax dividend flows of the combined institution
(InterWest and Central) through the year 2000 under various circumstances (the
"Combined Institution"). In this analysis Sandler O'Neill assumed that the
Combined Institution performed in accordance with the earnings forecasts of
both InterWest's and Central's management and certain variations thereof
(including variation with respect to the Exchange Ratio, the projected cost
savings to be achieved, the growth rate of assets, net interest spread,
non-interest income, non-interest expense, and dividend payout ratio). To
approximate the terminal value of Combined Institution's common stock at the
end of the five year period, Sandler O'Neill applied price-to-earnings
multiples ranging from 8x to 17x and applied multiples of book value ranging
from 90.0% to 180.0%. The dividend income streams and terminal values were
than discounted to present values using different discount rates (ranging from
9.0% to 14.0%) chosen to reflect different assumptions regarding required
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rates of return of holders of prospective buyers of the Combined Institution's
common stock. This analysis, assuming the current dividend payout ratio,
indicated an imputed range of values per share of the Combined Institution's
common stock between $15.72 and $51.22. In connection with its analysis,
Sandler O'Neill extensively used sensitivity analyses to illustrate the
effects changes in the underlying assumptions would have on the resulting
present value, and discussed these changes with the InterWest Board.
Pro Forma Merger Analysis. Sandler O'Neill analyzed, using projections
confirmed by InterWest and Central, certain pro forma effects resulting from
the Merger. This analysis indicated that the transaction would increase
earnings per share of InterWest Common Stock in 1997, based on the number of
shares of InterWest Common Stock that may be issued pursuant to the Merger
Agreement. The analysis further indicated that, based on the number of shares
of InterWest Common Stock that may be issued in the Merger, the transaction
would result in tangible book value per share dilution to InterWest Common
Stock at June 30, 1996. In regard to the decrease in tangible book value per
share, Sandler O'Neill considered among other matters, capitalization level
and the projected equity generation capability of the Combined Institution.
The projected increase in earnings per share of InterWest Common Stock in 1997
and the projected tangible book value per share dilution of InterWest Common
Stock at June 30, 1996, is directly related to the actual Exchange Ratio,
which will not be determined until shortly before the Effective Date. The
increase in earnings per share in 1997 is estimated to range from
approximately .87% at the top end of the exchange ratio to approximately 4.85%
at the bottom end of the exchange ratio. The dilution to tangible book value
per share is estimated to range from approximately 7.92% at the top end of the
exchange ratio to approximately 4.47% at the bottom end of the exchange ratio.
This analysis is dependent upon numerous assumptions with regard to the
financial performance and results of operations of both institutions. These
assumptions were reviewed with management and are assumed to have been
reasonably prepared on bases reflecting the best currently available estimates
and judgements of the respective managements of the respective future
financial performances of InterWest and Central and that such performances
will be achieved. It was also assumed that there has been no material change
in InterWest's or Central's assets, financial condition, results of
operations, business or prospects since the date of the last financial
statements noted above. Sandler O'Neill further assumed that the Merger will
qualify for pooling of interests accounting treatment and that InterWest will
remain as a going concern for all periods relevant to out analyses.
In connection with the Fairness Opinion, Sandler O'Neill reviewed, among
other things: (1) the Merger Agreement; (ii) the Stock Option Agreement dated
as of January 10, 1996 by and between InterWest and Central; (iii) this
Prospectus/Joint Proxy Statement; (iv) InterWest's audited consolidated
financial statements and management's discussion and analysis of the financial
condition and results of operations contained in its annual report to
shareholders for the year ended September 30, 1995; (v) Central's audited
financial statements for the year ended December 31, 19945; (vi) InterWest's
unaudited consolidated financial statements and management's discussion and
analysis of the financial condition and results of operations contained in its
Quarterly Report on Form 10-Q for the quarter ended December 31, 1995; (vii)
certain financial analyses and forecasts of InterWest prepared by and reviewed
with management of InterWest; (viii) the views of senior management of
InterWest and Central of their respective past and current business
operations, results thereof, financial condition and future prospects; (ix)
the pro forma impact of the Merger on InterWest; (x) the historical reported
price and trading activity for Central's and InterWest's common stock,
including a comparison of certain financial and stock market information for
Central and InterWest with similar information for certain other companies the
securities of which are publicly traded; (xi) the financial terms of recent
business combinations in the savings institution and banking industries; (xii)
the current market environment generally and the banking environment in
particular; and (xiii) such other information, financial studies, analyses and
investigation and financial, economic and market criteria as we considered
relevant.
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In performing its review, Sandler O'Neill assumed and relied upon,
without independent verification, the accuracy and completeness of all of the
financial information, analyses and other information reviewed by and
discussed with them. Sandler O'Neill did not make an independent evaluation
or appraisal of the specific assets, the collateral securing assets or the
liabilities of InterWest or Central or any of their subsidiaries, or the
collectibility of any such assets (relying, where relevant, on the analyses
and estimates of InterWest and Central). With respect to the financial
projections reviewed with management, Sandler O'Neill assumed that they were
reasonably prepared on bases reflecting the best currently available estimates
and judgements of the respective managements of the respective future
financial performances will be achieved. Sandler O'Neill also assumed that
there has been no material change in InterWest's or Central's assets,
financial condition, results of operations, business or prospects since the
date of the last financial statements noted above. Sandler O'Neill further
assumed that InterWest will remain a going concern for all periods relevant to
its analyses and that the conditions precedent in the Merger Agreement are not
waived.
Under the Sandler O'Neill Agreement, InterWest will pay Sandler O'Neill
a transaction fee in connection with the Merger, a substantial portion of
which is contingent upon the consummation of the Merger. Under the terms of
the Agreement, InterWest will pay Sandler O'Neill a transaction fee equal to
$300,000 of which 40% (or $120,000) was due and paid upon signing of the
Agreement, with the remainder payable upon the consummation of the Merger.
InterWest will also pay Sandler O'Neill a fee of $50,000 for rendering the
Fairness Opinion, such fee will be credited against any fees that may become
due and payable at the Effective Date. InterWest has also agreed to reimburse
Sandler O'Neill for its reasonable out-of-pocket expenses incurred in
connection with its engagement and to indemnify Sandler O'Neill and its
affiliates and their respective partners, directors, officers, employees,
agents, and controlling persons against certain expenses and liabilities,
including liabilities under securities laws. Sandler O'Neill has in the past
two years provided financial advisory services for InterWest for which it has
received fees totalling approximately $40,000.
Central. CFA has delivered a written opinion to the Central Board to
the effect that, as of the date of this Prospectus/Joint Proxy Statement, the
consideration to be received by Central common shareholders pursuant to the
terms of the Merger Agreement is fair to such shareholders from a financial
point of view (the "CFA Opinion"). The Exchange Ratio has been determined by
Central and InterWest through negotiations. The CFA Opinion is directed only
to the fairness, from a financial point of view, of the consideration to be
received and does not constitute a recommendation to any Central shareholder
as to how such shareholder should vote at the Central Annual Meeting.
Central retained CFA as its exclusive financial advisor pursuant to an
engagement letter dated January 24, 1995 (the "Engagement Letter") in
connection with the Merger. CFA is a regionally recognized investment banking
firm that is regularly engaged in the valuation of businesses and securities
in connection with mergers and acquisitions. CFA is familiar with Central,
having acted as its financial advisor in connection with the Merger, having
initiated the negotiations with InterWest, and having participated in certain
of the negotiations leading to the Merger Agreement.
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The Central Board selected CFA to act as Central's exclusive financial advisor
based on CFA's experience in mergers and acquisitions and in securities
valuation generally.
On January 10, 1996, CFA issued its opinion to the Central Board that,
in its opinion as investment bankers, the terms of the Merger as provided in
the Merger Agreement are fair, from a financial view point, to Central and it
shareholders. Such opinion has been updated as of the date of this
Prospectus/Joint Proxy Statement. The full text of the CFA Opinion which sets
forth the assumptions made, matters considered, and limits on its review, is
attached hereto as Appendix D. The summary of the CFA Opinion in this
Prospectus/Joint Proxy Statement is qualified in its entirety by reference to
the full text of such opinion. CENTRAL SHAREHOLDERS ARE URGED TO READ THE
ENTIRE CFA OPINION.
In rendering its opinion to Central, CFA reviewed, among other things,
historical financial data of Central, certain internal financial data and
assumptions of Central prepared for financial planning and budgeting purposes
furnished by the management of Central and, to the extent publicly available,
the financial terms of certain change of control transactions involving
Northwest community banks. CFA discussed with Central's management the
financial condition, current operating results, and business outlook for
Central. CFA also reviewed certain publicly available information concerning
InterWest and certain financial and securities data of InterWest and companies
deemed similar to InterWest. CFA discussed with InterWest's management the
financial condition, current operating results, and business outlook for
InterWest and InterWest's plans relating to Central. In rendering its
opinion, CFA relied, without independent verification, on the accuracy and
completeness of all financial and other information reviewed by it and did not
attempt to verify or to make any independent evaluation or appraisal of the
assets of Central or InterWest nor was it furnished any such appraisals.
Central did not impose any limitations on the scope of the CFA investigation
in arriving at its opinion.
CFA analyzed the aggregate merger consideration on a cash equivalent
fair market value basis using standard evaluation techniques (as discussed
below) including comparable sales multiples, net present value analysis, and
net asset value based on certain assumption of projected growth, earnings and
dividends and a range of discount rates from 16% to 18%.
Net Asset Value is the value of the net equity of a bank, including
every kind of property and value. This approach normally assumes the
liquidation on the date of appraisal with the recognition of the investment
securities gains or losses, real estate appreciation or depreciation,
adjustments to the loan loss reserve, discounts to the loan portfolio and
changes in the net value of other assets. As such, it is not the best
evaluation approach when valuing a going concern because it is based on
historical costs and varying accounting methods. Even if the assets and
liabilities are adjusted to reflect prevailing market prices and yields (which
is often of limited accuracy due to the lack of readily available data), it
still results in a liquidation value, In addition, since this approach fails
to account for the values attributable to the going concern such as the
interrelationship among Central's assets and liabilities, customer relations,
market presence, image and reputation, staff expertise an depth, little weight
was given by CFA to the net asset value approach to valuation.
Market Value is generally defined as the price, established on an "arms
length" basis, at which knowledgeable, unrelated buyers and sellers would
agree. The "hypothetical" market value for a small bank with a thin market
for its common stock is normally determined by comparison to the average price
to stockholders equity, price to earnings, and price to total assets,
adjusting for significant differences in financial performance criteria and
for any lack of marketability or liquidity of the buyer. The market value in
connection with the evaluation of control of a bank is determined by the
previous sales of small banks in the state or region. In valuing a business
enterprise, when sufficient comparable trade data are available, the market
value approach deserves greater weighting than the net asset value approach
and similar weight as the investment value approach as discussed below.
CFA maintains a substantial data base concerning prices paid for banking
institution in the Northwest, particularly Washington banking institutions,
during 1988 through 1996. This data base provides comparable pricing and
financial performance data for banking institutions sold or acquired.
Organized by different peer groups, these data present medians of financial
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performance and purchase price levels, thereby facilitating a valid
comparative purchase price analysis. In analyzing the transaction value of
Central, CFA has considered the market approach, and has evaluated price to
stockholders equity and price to earnings multiples and the price to total
assets percentage for transactions involving Washington, Oregon, and Idaho
banking organizations with total assets less than $1 billion that sold for
100% common stock from January 1988 to January 1996.
Comparable Sales Multiples. Columbia calculated an "Adjusted Book
Value" for the Merger using Central's adjusted September 30, 1995 stockholders
equity and the estimated June 30, 1996 stockholders equity of $32.24 and
$28.85 per share, respectively for a sample of Northwest banking institutions
with assets below $1 billion which sold between January 1988 through January
1996 and a sample of Northwest banking institutions with total assets between
$100 million and $1 billion which sold between March 1990 and October 1995.
CFA calculated an "Adjusted Earnings Value" of $32.73 per share based on
Central's 1995 earnings and the median price to earnings multiple of 12.30 for
Northwest banking organizations with assets below $1 billion which sold
between January 1988 through January 1996 and a sample of Northwest banking
institutions with total assets between $100 million and $1 billion which sold
between March 1990 and October 1995. In comparison with the InterWest price
of $28.90 to $34.00, this approach indicates that the proposed transaction is
fair from a financial point of view.
Transaction Value as a Percentage of Total Assets. CFA calculated a
range of values for the ratio of the total estimated Merger consideration as a
percentage of Central's total assets as of September 30, 1995 and estimated
total assets at June 30, 1996 as a price level indicator. The transaction
value as a percentage of total assets facilitates a truer price level
comparison with comparable banking organizations, regardless of the differing
levels of stockholders' equity and earnings. In this instance, a total
estimated Merger consideration based on $28.90 and $34.00 per share results in
a median ratio of total assets of 17.05%. The median price as a percentage of
total assets for a sample of Northwest banking institutions with assets below
$1 billion which sold between January 1988 through January 1996 and a sample
of Northwest banking institutions with total assets between $100 million and
$1 billion which sold between March 1990 and October 1995 is 14% and 15%,
respectively.
Investment Value is sometimes referred to as the income earnings value.
One investment value method frequented used estimates the present value of an
institution's future earnings or cash flow which is discussed below.
Net Present Value Analysis. The investment or earnings value of any
banking organization's stock is an estimate of the present value of future
benefits, usually earnings, dividends, or cash flow, which will accrue to the
stock. An earnings value is calculated using an annual future earning stream
over a period of item of not less than five years and the residual or terminal
value of the earnings stream after five years, using Central's estimates of
future growth and an appropriate capitalization or discount rate. CFA's
calculations were based on an analysis of the banking industry, Central's
earnings estimates for 1996-2000, historical levels of growth and earnings,
and the competitive situation in Central's market area. Using discount rates
of 16% and 18%, acceptable discount rates considering the risk-return
relationship most investors would demand for an investment of this type as of
the valuation date, the "Net Present Value of Future Earnings" provided a
range of $27.80 to $32.93 per share. In comparison with the proposed range of
$28.90 to $34.00 per share which Central shareholders would receive in
InterWest common stock depending upon the InterWest price, the valuation range
determined from the Net Present Value analysis is similar, which supports the
conclusion that the transaction is fair from a financial point of view.
When the net asset value, market value and investment value approaches
are subjectively weighed, using the appraiser's experience and judgement, it
is CFA's opinion that the proposed transaction is fair, from a financial point
of view.
Pursuant to the terms of the Engagement Letter, Central has agreed to
pay CFA a fee, which varies based on InterWest's stock price and the number of
Central shares outstanding, of a minimum of $50,000 and a maximum of $336,000
upon the consummation of the Merger. In addition, Central has agreed to
reimburse CFA for its reasonable out-of-pocket expenses, including the fees
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and disbursement of its counsel, and to indemnify CFA against certain
liabilities.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The directors and executive officers of Central, together with their
affiliates, beneficially owned a total of ________ shares of Central Common
Stock (representing ____% of all outstanding shares of Central Common Stock)
as of the Central Record Date. The directors and executive officers will
receive the same consideration in the Merger for their shares, including any
shares which they may acquire prior to the Effective Date pursuant to the
exercise of stock options, as the other shareholders of Central. Certain
members of Central's management and the Central Board have certain interests
in the Merger as described below that are in addition to their interest as
shareholders of Central generally. The Central Board was aware of these
interests and considered them, among other matters, in approving the Merger
Agreement and the transactions contemplated thereby.
Directors' and Officers' Liability. The Merger Agreement provides that
for the five-year period following the Effective Date, InterWest will
indemnify the directors, officers and employees of Central against certain
liabilities to the extent that such persons were entitled to indemnification
under Washington law and the Articles of Incorporation and Bylaws of Central.
Employment Agreements. Following the Merger, Mr. Bolyard and Mr.
Riordan will enter into employment agreements with InterWest and InterWest
Savings. Pursuant to Mr. Bolyard's agreement he will serve as Vice
Chairman/Commercial Banking of InterWest and InterWest Savings from the
Effective Date until June 30, 1998. Mr. Bolyard's initial base salary under
the agreement will be $132,000. The agreement further provides that Mr.
Bolyard will receive all benefits that are generally provided to similarly
situated senior executive officers and that he will be eligible to participate
in executive compensation and benefit programs of InterWest and InterWest
Savings. Mr. Bolyard will also receive certain fringe benefits, including the
use of a company automobile and payment of club dues. If Mr. Bolyard is
terminated without cause under the agreement, he is entitled to receive his
base salary for the remaining term of the agreement. InterWest and InterWest
Savings will also assume the obligations to Mr. Bolyard under his existing
deferred compensation agreement with Central. See "Election of Central
Directors -- Executive Compensation -- Deferred Compensation and Change in
Control Agreements."
Pursuant to Mr. Riordan's employment agreement, he will serve as a Vice
President of InterWest and InterWest Savings for a period of three years
commencing on the Effective Date. Mr. Riordan's initial base salary under the
agreement will be $75,000. The agreement further provides that Mr. Riordan
will receive all benefits that are generally provided to similarly situated
full-time employees of InterWest Savings and that he will be eligible to
participate in InterWest Saving's executive compensation and benefit programs.
If Mr. Riordan is terminated without cause under the agreement, he is entitled
to receive his base salary for the remaining term of the agreement, unless he
is terminated without cause following a change in control of InterWest (as
defined in the agreement), in which case he is entitled to receive the greater
of his base salary for the prior 12 months or the remaining term of the
agreement. Mr. Riordan's employment agreement with InterWest will supersede
his existing employment agreement with Central.
Appointments to the InterWest Board. InterWest has agreed to appoint
Mr. Bolyard and one other person proposed by Central to the Boards of
Directors of InterWest and InterWest Savings immediately after the Effective
Date. The other representative of Central who will be appointed to the Boards
of Directors of InterWest and InterWest Savings is expected to be Larry
Carlson. Mr. Bolyard and Mr. Carlson are expected to be appointed to terms
expiring at the 1997 Annual Meetings of Shareholders of InterWest and
InterWest has agreed to use its best efforts to cause the election of Mr.
Bolyard and Mr. Carlson to the InterWest Board for three-year terms at such
meeting. InterWest has also agreed to appoint Mr. Bolyard to the Executive
Committees of the Boards of Directors of InterWest and InterWest Savings and
to appoint Mr. Carlson to the Audit Committees of the Boards of Directors of
InterWest and InterWest Savings.
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Deferred Compensation Agreements. CWB has entered into Deferred
Compensation Agreements with six of CWB's directors (who are also directors of
Central) which allow the directors, at their option, to defer regular monthly
Board of Directors and Executive Committee fees to be paid upon retirement,
termination of the agreement, or a change in control of CWB. As a result of
the Merger, such directors will become entitled to payment of the deferred
fees. Under the terms of the agreements, CWB has agreed to pay the deferred
amounts plus interest over a ten-year period. The amount of interest paid
will be calculated using the September Federal Home Loan Bank Cost of Funds
Index, which is currently 5.01 percent. The aggregate amount of deferred
compensation as of December 31, 1995, was $700,000. CWB has purchased
insurance policies on the lives of these directors as a vehicle to fund the
benefits payable under the agreements.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of the material federal income tax
consequences of the Merger that are generally applicable to Central
shareholders. This discussion is based on currently existing provisions of
the Internal Revenue Code of 1986, as amended ("Code"), existing regulations
thereunder (including final, temporary or proposed), and current
administrative rulings and court decisions, all of which are subject to
change. Any such change, which may or may not be retroactive, could alter the
tax consequences described herein. The following discussion is intended only
as a summary of the material federal income tax consequences of the Merger and
does not purport to be a complete analysis or listing of all of the potential
tax effects relevant to a decision on whether to vote in favor of approval of
the Merger Agreement.
The Merger is expected to qualify as a reorganization under Section
368(a) of the Code. Except for cash received in lieu of a fractional share
interest in InterWest Common Stock, holders of shares of Central Common Stock
will recognize no gain or loss on the receipt of InterWest Common Stock.
Consummation of the Merger is conditioned upon the receipt by InterWest
of an opinion of Breyer & Aguggia, special counsel to InterWest, to the effect
that if the Merger is consummated in accordance with the terms set forth in
the Merger Agreement (i) the Merger will constitute a reorganization within
the meaning of Section 368(a) of the Code; (ii) no gain or loss will be
recognized by Central shareholders who exchange all of their Central Common
Stock solely for shares of InterWest Common Stock (except for cash received in
lieu of fractional shares); (iii) the basis of shares of InterWest Common
Stock received by the shareholders of Central will be the same as the basis of
shares of Central Common Stock exchanged therefor; and (iv) the holding period
of the shares of InterWest Common Stock received by such shareholders will
include the holding period of the shares of Central Common Stock exchanged
therefor, provided such shares were held as capital assets as of the Effective
Time.
The opinion of counsel, which will be delivered on the Closing Date, is
filed as an exhibit to the Registration Statement, and the foregoing is only a
summary of such tax consequences as described in the opinion. An opinion of
counsel only represents counsel's best legal judgment, and has no binding
effect or official status of any kind, and no assurance can be given that
contrary positions may not be taken by the Internal Revenue Service (the
"IRS") or a court considering the issues. Neither Central nor InterWest has
requested or will request a ruling from the IRS with regard to the federal
income tax consequences of the Merger.
The foregoing is a general summary of all of the material federal income
tax consequences of the Merger to Central shareholders, without regard to the
particular facts and circumstances of each shareholder's tax situation and
status. Because certain tax consequences of the Merger may vary depending
upon the particular circumstances of each shareholder, each Central
shareholder should consult his or her own taxadvisor regarding such
shareholder's specific tax situation and status, including the specific
application and effect of federal, state, local and foreign laws to such
shareholder and the possible effect of changes in federal and other tax laws.
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CONDUCT OF BUSINESS PENDING THE MERGER
Central and the Banks have agreed in the Merger Agreement not to take
certain actions without the prior approval of InterWest relating to their
operations pending consummation of the Merger. These actions include, among
other things, (i) issuing or selling any Central Common Stock; (ii) paying any
dividends, other than a $.40 per share dividend declared on January 10, 1996
and an additional $.40 per share dividend that may be declared on July 10,
1996 if the Merger has not been completed by that date; (iii) incurring any
indebtedness for borrowed money or becoming liable for the obligations of any
other entity other than in the ordinary course of business; (iv) changing its
lending, investment, liability management or other material banking policies
in any respect; (v) imposing any lien on any share of stock held by Central;
(vi) entering into or amending any employment agreements or any employee
benefit plans or granting any salary increases (other than in the ordinary
course of business); (vii) disposing of any material portion of its assets or
acquiring any material portion of the business or property of any other
entity; (viii) amending its articles of incorporation or bylaws; (ix) settling
any claims involving any liability for material money damages; (x) entering
into, terminating or changing any material agreements, except for those
agreements that may be terminated by Central without penalty upon not more
than 60 days' prior written notice; and (xi) extending credit other than in
accordance with existing lending policies. Moreover, Central and the Banks
are required, among other things, to operate their businesses in the usual,
regular and ordinary course and to use their best efforts to preserve their
business relationships and to retain key employees.
CONDITIONS TO CONSUMMATION OF THE MERGER
The obligations of Central and InterWest to consummate the Merger are
subject to, among other things, the satisfaction of the following conditions:
(i) approval of the Merger Agreement by the holders of not less than
two-thirds of the outstanding shares of Central Common Stock and by the
holders of not less than a majority of the outstanding shares of InterWest
Common Stock; (ii) receipt of all applicable regulatory approvals without any
condition that, in the opinion of InterWest, would deprive InterWest of the
material economic or business benefits of the Merger; (iv) no court or
government or regulatory authority having taken any action which enjoins or
prohibits the Merger; (v) receipt by InterWest and Central of the opinion of
Breyer & Aguggia, dated as of the Effective Date, as to certain federal income
tax consequences of the Merger; (vi) the InterWest Common Stock to be issued
to Central shareholders having been approved for listing on the Nasdaq
National Market; and (vii) Gary Bolyard and Joseph Riordan having entered into
employment agreements with InterWest and InterWest Savings.
The obligations of InterWest are subject to the satisfaction or waiver
of certain additional conditions, including: (i) the delivery by Central of
opinions of its legal counsel and certificates executed by certain of its
executive officers as to compliance with the Merger Agreement; (ii) the
accuracy of the representations and warranties, and compliance in all material
respects with the agreements and covenants of Central; (iii) the receipt by
InterWest of a letter from Central's independent certified public accountants,
dated as of or shortly prior to the Effective Date, with respect to Central's
financial position and results of operations; (iv) receipt by InterWest of an
agreement from each "affiliate" of Central restricting the sale of InterWest
Common Stock received by such affiliate in the Merger; (v) the absence of any
material adverse change in the financial position or results of operations of
Central; (vi) the number of Dissenting Shares does not exceed 10% of the
outstanding shares of Central Common Stock; and (vii) receipt by InterWest and
Central of letters from their respective certified public accountants to the
effect that such firms concur with the respective management's conclusions as
to the appropriateness of pooling of interests accounting for the Merger,
assuming the Merger is consummated in accordance with the Merger Agreement.
The obligations of Central are also subject to the satisfaction or
waiver of certain additional conditions, including: (i) the delivery by
InterWest of opinions of its legal counsel and certificates executed by
certain of its executive officers as to compliance with the Merger Agreement;
(ii) the accuracy of the representations and warranties, and compliance in all
material respects with the agreements and covenants of InterWest; (iii) the
absence of any material adverse change in the financial position or results of
operations of InterWest.
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REGULATORY REQUIREMENTS
The Merger is subject to prior approval by the Federal Reserve Board
under the BHC Act. The Merger is also subject to the approval of the
Department. An application for approval of the Merger was filed with the
Federal Reserve Board and the Department on ______________, 1996.
The approval of any application merely implies satisfaction of
regulatory criteria for approval, which do not include review of the Merger
from the standpoint of the adequacy of the consideration to be received by, or
fairness to, shareholders. Regulatory approvals do not constitute an
endorsement or recommendation of the proposed Merger.
InterWest and Central are not aware of any governmental approvals or
compliance with banking laws and regulations that are required for
consummation of the Merger other than those described above. Should any other
approval or action be required, it is presently contemplated that such
approval or action would be sought. There can be no assurance that any such
approval or action, if needed, could be obtained and, if such approvals or
actions are obtained, there can be no assurance as to the timing thereof. The
Merger cannot proceed in the absence of all requisite regulatory approvals.
See "-- Effective Date of the Merger," "-- Conditions to Consummation of the
Merger," and "-- Amendment; Waiver; Termination."
The Merger Agreement provides that if the Merger has not been
consummated by September 30, 1996, the Merger Agreement may be terminated by
InterWest or Central. Since there is the possibility that regulatory approval
may not be obtained for a substantial period of time after approval of the
Merger Agreement by InterWest's and Central's shareholders, there can be no
assurance that the Merger will be consummated by September 30, 1996. In
addition, should regulatory approval require any material change, a
resolicitation of shareholders may be required if regulatory approval is
obtained after shareholder approval of the Merger Agreement.
NO SOLICITATION
Central has agreed in the Merger Agreement that neither it nor any of
its subsidiaries will solicit, initiate or encourage inquiries or proposals
with respect to or, except as required by the fiduciary duties of the Central
Board, furnish any nonpublic information relating to or participate in any
negotiations concerning, any acquisition or purchase of all or a substantial
portion of the assets of, or a substantial equity interest in, Central or any
of its subsidiaries or any merger or other business combination with Central
or any of its subsidiaries.
STOCK OPTION AGREEMENT
As a condition to InterWest's willingness to enter into the Merger
Agreement, and in consideration thereof, Central issued to InterWest the
Option to purchase, under certain conditions, up to 201,898 shares of Central
Common Stock at a Purchase Price of $26.00 per share, subject to adjustment in
certain circumstances. The Option was granted to InterWest pursuant to the
Stock Option Agreement. The number of shares of Central Common Stock subject
to the Option represents approximately 19.9% of the outstanding shares of
Central Common Stock as of the Central Record Date, before giving effect to
the issuance of such shares. InterWest does not have any voting rights with
respect to the shares of Central Common Stock subject to the Option prior to
exercise of the Option.
If InterWest is not in material breach of the Stock Option Agreement or
the Merger Agreement and no injunction against delivery of the shares covered
by the Option is in effect, InterWest may exercise the Option in whole or in
part, at any time and from time to time following the happening of certain
events (each a "Purchase Event"), including, among others:
(i) Central taking certain actions (each an "Acquisition Transaction"),
including, among others, authorizing, recommending or entering into
an agreement with any third party to effect (a) a merger,
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consolidation or similar transaction involving Central or any of
its significant subsidiaries, (b) the sale, lease, exchange or
other disposition of 20% or more of the consolidated assets or
deposits of Central and its subsidiaries, or (c) the issuance, sale
or other disposition of 20% or more of the voting power of Central
or any of its significant subsidiaries (other than the issuance of
Central Common Stock upon exercise of options outstanding under the
Central Option Plan); or
(ii) the acquisition or the right to acquire by any third party of 15%
or more (or, if such party beneficially owned more than 15% on the
date of the Merger Agreement, such party acquires an additional 5%
or more) of the voting power of Central or any of its significant
subsidiaries.
The Option will terminate upon the earliest of certain events,
including: (i) consummation of the Merger; (ii) termination of the Merger
Agreement by Central (a "Central Termination") prior to the happening of a
Purchase Event or a Preliminary Purchase Event (as defined below); (iii) 15
months after termination of the Merger Agreement by Central other than
pursuant to a Central Termination; or (iv) 15 months after termination of the
Merger Agreement by InterWest. A "Preliminary Purchase Event" is defined to
include, among others: (a) commencement by any third party of a tender or
exchange offer to purchase 20% or more of the outstanding shares of Central
Common Stock (a "Tender or Exchange Offer"); (b) failure of the holders of
Central Common Stock to approve the Merger Agreement after public announcement
that a third party proposes to engage in an Acquisition Transaction or
commences or files a registration statement under the Securities Act with
respect to a Tender or Exchange Offer; (c) any third party shall have proposed
to Central or its shareholders, publicly or in any writing that becomes
publicly disclosed, to engage in an Acquisition Transaction; (d) after a
proposal is made by a third party to Central or its shareholders to engage in
an Acquisition Transaction, Central breaches any covenant or obligation in the
Merger Agreement (subject to certain limitations set forth in the Stock Option
Agreement); or (e) any third party files an application with any federal or
state bank regulatory authority for approval to engage in an Acquisition
Transaction.
The Stock Option Agreement and the Option are intended to increase the
likelihood that the Merger will be consummated according to the terms set
forth in the Merger Agreement and may be expected to discourage competing
offers to acquire Central from potential third party acquirors because the
Option could increase the cost of such an acquisition.
To InterWest and Central's knowledge, no event which would permit the
exercise of the Option has occurred as of the date of this Prospectus/Joint
Proxy Statement.
A copy of the Stock Option Agreement is set forth as Appendix B to this
Prospectus/Joint Proxy Statement, and reference is made thereto for the
complete terms of the Stock Option Agreement and the Option. The foregoing
discussion is qualified in its entirety by reference to the Stock Option
Agreement.
DISSENTERS' RIGHTS
In accordance with Chapter 13 of the WBCA (Chapter 23B.13 of the Revised
Code of Washington), Central's shareholders have the right to dissent from the
Merger and to receive payment in cash for the "fair value" of their Central
Common Stock. Under applicable Washington law, InterWest shareholders will
not have any dissenters' rights.
If Central shareholders perfect dissenters' rights with respect to more
than 10% of the outstanding shares of Central Common Stock, InterWest may
elect not to consummate the Merger. Additionally, if Central shareholders
perfect dissenters' rights with respect to more than 10% of the outstanding
shares of Central Common Stock and InterWest elects to consummate the Merger,
the Merger will not qualify for pooling of interests accounting treatment.
Central shareholders electing to exercise dissenters' rights must comply with
the provisions of Chapter 13 in order to perfect their rights. Central and
InterWest will require strict compliance with the statutory procedures. The
following is intended as a brief summary of the material provisions of the
Washington statutory procedures required to be followed by a Central
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shareholder in order to dissent from the Merger and perfect the shareholder's
dissenters' rights. This summary, however, is not a complete statement of all
applicable requirements and is qualified in its entirety by reference to
Chapter 13 of the WBCA, the full text of which is set forth in Appendix E
hereto.
A shareholder who wishes to assert dissenters' rights must (a) deliver
to Central before the Central Special Meeting written notice of the
shareholder's intent to demand payment for the shareholder's shares if the
Merger is effected, and (b) not vote such shares in favor of the Merger. A
shareholder wishing to deliver such notice should hand deliver or mail such
notice to Central at the following address:
Central Bancorporation
301 North Chelan
Wenatchee, Washington 98801
Attn: Corporate Secretary
A shareholder who wishes to exercise dissenters' rights generally must
dissent with respect to all the shares the shareholder owns or over which the
shareholder has power to direct the vote. However, if a record shareholder is
a nominee for several beneficial shareholders some of whom wish to dissent and
some of whom do not, then the record holder may dissent with respect to all
the shares beneficially owned by any one person by notifying Central in
writing of the name and address of each person on whose behalf the record
shareholder asserts dissenters' rights. A beneficial shareholder may assert
dissenters' rights directly by submitting to Central the record shareholder's
written consent and by dissenting with respect to all the shares of which such
shareholder is the beneficial shareholder or over which such shareholder has
power to direct the vote.
A shareholder who does not deliver to Central prior to the Central
Special Meeting a written notice of the shareholder's intent to demand payment
for the "fair value" of the shares will lose the right to exercise dissenters'
rights. In addition, any shareholder electing to exercise dissenters' rights
must either vote against the Merger or abstain from voting.
If the Merger is effected, InterWest shall, within ten days after the
Effective Date of the Merger, deliver a written notice to all shareholders who
properly perfected their dissenters' rights. Such notice will, among other
things, (a) state where the payment demand must be sent and where and when
certificates for certificated shares must be deposited; (b) inform holders of
uncertificated shares to what extent transfer of the shares will be restricted
after the payment demand is received; (c) supply a form for demanding payment;
and (d) set a date by which InterWest must receive the payment demand, which
date will be between 30 and 60 days after notice is delivered.
A shareholder wishing to exercise dissenters' rights must at that time
file the payment demand and deliver share certificates as required in the
notice. Failure to do so will cause such person to lose his or her
dissenters' rights.
Within 30 days after the Merger occurs or receipt of the payment demand,
whichever is later, InterWest shall pay each dissenter with properly perfected
dissenters' rights InterWest's estimate of the "fair value" of the
shareholder's interest, plus accrued interest from the Effective Date of the
Merger. With respect to a dissenter who did not beneficially own Central
shares prior to the public announcement of the Merger, InterWest is required
to make the payment only after the dissenter has agreed to accept the payment
in full satisfaction of the dissenter's demands. "Fair value" means the value
of the shares immediately before the Effective Date of the Merger, excluding
any appreciation in anticipation of the Merger. The rate of interest is
generally required to be the rate at which InterWest can borrow money from
other banks. It is the current intention of InterWest to estimate the fair
value of Central Common Stock to be $ 23.00 per share, which represents the
price paid for Central Common Stock in the last transaction for which a price
is known to Central management prior to the date on which the Merger Agreement
was signed.
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A dissenter dissatisfied with InterWest's estimate of the fair value may
notify InterWest of the dissenter's estimate of the fair value. If InterWest
does not accept the dissenter's estimate and the parties do not otherwise
settle on a fair value then InterWest must within 60 days petition a court to
determine the fair value.
In view of the complexity of Chapter 13 of the WBCA, shareholders of
Central who may wish to dissent from the Merger and pursue appraisal rights
should consult their legal advisors.
AMENDMENT; WAIVER; TERMINATION
InterWest may elect to modify the structure of the Merger; provided,
however, that InterWest shall not have the right to make any revision to the
structure of the Merger which (i) changes the amount or kind of the
consideration which the Central shareholders are entitled to receive or (ii)
adversely affects the tax treatment to Central shareholders of receiving such
consideration. Prior to the Effective Date of the Merger, any condition of
the Merger Agreement may (to the extent allowed by law) be waived in writing
by the party benefitted by the provision or may be amended or modified by an
agreement in writing approved by the Boards of Directors of InterWest and
Central. After approval of the Merger Agreement by the shareholders of
Central, the Merger Agreement may not, without further approval of such
shareholders, be amended in any manner that would alter the consideration to
be received by Central shareholders in exchange for their Central Common
Stock.
The Merger Agreement may be terminated at any time prior to the
Effective Date of the Merger, either before or after approval by the InterWest
and Central shareholders, as follows: (i) by the mutual consent of the
parties; (ii) by either party if the other party has committed a material
breach that cannot be or has not been cured within 30 days after the giving of
written notice of such breach; (iii) by either party if the Closing Date shall
not have occurred by September 30, 1996; (iv) by either party if the
shareholders of InterWest or Central fail to approve the Merger Agreement; or
(v) by Central if the InterWest Price is less than $17.00 and InterWest, in
its sole discretion, does not elect to adjust the Exchange Ratio so that the
InterWest Price multiplied by the Exchange Ratio equals $28.90.
In the event of the valid termination of the Merger Agreement by either
InterWest or Central, the obligations of the parties to the Merger Agreement
shall terminate, and there will be no liability on the part of either party or
their officers or directors except for liability for breach of the Merger
Agreement or for any misstatement or misrepresentation made prior to such
termination.
RESALE OF INTERWEST COMMON STOCK
The shares of InterWest Common Stock issuable to shareholders of Central
upon consummation of the Merger have been registered under the Securities Act.
Such shares may be traded freely and without restriction by those shareholders
not deemed to be "affiliates" of Central or InterWest as that term is defined
in the rules under the Securities Act. InterWest Common Stock received by
those shareholders of Central who are deemed to be "affiliates" of Central may
be resold without registration as provided for by Rule 145, or as otherwise
permitted under the Securities Act. Persons who may be deemed to be
affiliates of Central generally include individuals or entities that control,
are controlled by or are under common control with, Central, and may include
the executive officers and directors of Central as well as certain principal
shareholders of Central. In the Merger Agreement, Central has agreed to use
its best efforts to cause each person who may be deemed to be an affiliate of
Central to enter into an agreement with InterWest providing that such
affiliate will not sell, transfer, or otherwise dispose of the shares of
InterWest Common Stock to be received by such person in the Merger except in
compliance with the applicable provisions of the Securities Act and the rules
and regulations promulgated thereunder. This Prospectus/Joint Proxy Statement
does not cover any resales of InterWest Common Stock received by affiliates of
Central.
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ACCOUNTING TREATMENT
It is expected that the pooling of interests method of accounting will
be used to reflect the Merger. As required by generally accepted accounting
principles, under pooling of interests accounting, as of the effective date of
the Merger, the assets and liabilities of Central would be added to those of
InterWest at their recorded book values and the shareholders' equity accounts
of InterWest and Central would be combined on InterWest's consolidated balance
sheet. On a pooling of interests accounting basis, income and other financial
statements of InterWest issued after consummation of the Merger would be
restated retroactively to reflect the consolidated combined financial position
and results of operations of InterWest and Central as if the Merger had taken
place prior to the periods covered by such financial statements. In order for
the Merger to qualify for pooling of interests accounting treatment, among
other things, substantially all (90% or more) of the outstanding Central
Common Stock must be exchanged for InterWest Common Stock.
The unaudited pro forma dates contained in this Prospectus/Joint Proxy
Statement has been prepared using the pooling of interests method of
accounting to account for the Merger. See "PRO FORMA FINANCIAL INFORMATION."
EXPENSES
The Merger Agreement provides that InterWest and Central will each pay
their own expenses in connection with the Merger Agreement and the
transactions contemplated thereby, except that printing expenses for this
Prospectus/Joint Proxy Statement will be shared equally.
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial statements
presented below reflect consummation of the Merger. The following unaudited
pro forma condensed combined statement of financial condition as of December
31, 1995 combines the historical consolidated statements of financial
condition of InterWest and Central as if the Merger had occurred on such date
after giving effect to certain pro forma adjustments described in the
accompanying notes. The following unaudited pro forma condensed combined
statements of income are presented as if the Merger had been consummated at
the beginning of each period presented. InterWest's fiscal year ends
September 30 and Central's fiscal year ends December 31. The unaudited pro
forma condensed combined statements of income for the three years ended
September 30, 1995, 1994 and 1993 present the results of operations of
InterWest for the fiscal year ended September 30, 1995, 1994 and 1993
combined with the results for operations of Central with the fiscal years
ended December 31, 1995, 1994 and 1993, respectively. The InterWest
historical consolidated financial statement data as of and for the three
months ended December 31, 1995 have been prepared on the same basis as the
historical information derived from audited financial statements, and in the
opinion of management, contain all adjustments, consisting only
of normal recurring accruals, necessary for the fair presentation of results
of operations for such periods. The pro forma condensed combined financial
statements have been prepared based on a 1.41 Exchange Ratio. The 1.41
Exchange Ratio used in the pro forma information is based on the last reported
sales price on the Nasdaq National Market of InterWest Common Stock, on April
19, 1996, which was $25.125 per share. The actual Exchange Ratio will depend
on the InterWest Price (which will not be known until shortly before the
Effective Date) and may be higher than 1.41.
The unaudited pro forma condensed combined financial statements and
notes thereto reflect the application of the pooling of interests method of
accounting. See "THE MERGER -- Accounting Treatment." The unaudited pro
forma condensed combined financial statements included herein are not
necessarily indicative of the future results of operations or the future
financial position of the combined entities or the results of operations and
financial position of the combined entities that would have actually occurred
had the transactions been in effect as of the dates or for the periods
presented.
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InterWest and Central estimate that they will incur direct transaction
costs of approximately $500,000 associated with the Merger which will be
charged to operations during the fiscal quarter in which the Merger is
consummated. There can be no assurance that InterWest will not incur charges
in subsequent quarters to reflect costs associated with the Merger or that
management will be successful in their efforts to integrate the
operations of the two companies. Proposed federal legislation to recapitalize
the SAIF would require savings institutions like the InterWest Savings to pay
a one-time assessment to increase SAIF's reserves to $1.25 per $100 of
deposits that is expected to be approximately 80 basis points on the amount of
deposits held by a SAIF-member institution at March 31, 1995. The payment of
a one-time fee would have the effect of immediately reducing the capital and
pre-tax earnings of SAIF-member institutions by the amount of the fee. Based
on InterWest Savings' assessable deposits of $838.0 million at March 31, 1995,
a one-time assessment of 80 basis points would equal approximately $6.7
million. The possible payment of such assessment has not been reflected in
the pro forma condensed combined financial statements.
The unaudited pro forma condensed combined financial statements should
be read in conjunction with the separate historical consolidated financial
statements of InterWest and Central, including the notes thereto, and the
other documents incorporated by reference herein. See "AVAILABLE
INFORMATION," "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" and the
Central 1995 Form 10-KSB accompanying this Prospectus/Joint Proxy Statement.
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Pro Forma Condensed Combined Statement of Financial Condition
December 31, 1995
(unaudited)
Pro Forma Pro Forma
InterWest Central Adjustments Combined
--------- ------- ----------- ---------
(In thousands)
Assets
Cash and deposits $ 94,157 $ 19,894 $ -- $ 114,051
Investment securities, net 1,006 38,054 -- 39,060
FHLB stock 15,249 910 -- 16,159
Mortgage-backed securities, net 345,088 5,001 -- 350,089
Loans held for sale 49,499 1,507 -- 51,006
Loans receivable, net 732,597 129,592 -- 862,189
Premises and equipment, net 24,998 6,074 -- 31,072
Real estate owned 8,373 -- -- 8,373
Accrued interest receivable 8,149 1,628 -- 9,777
Other assets 2,827 752 -- 3,579
Total assets $1,281,943 $ 203,412 -- $1,485,355
Liabilities and Stockholders' Equity
Savings accounts $ 782,657 $ 114,024 $ -- $ 896,681
NOW accounts 83,338 65,889 -- 149,227
Total deposits 865,995 179,913 -- 1,045,908
Current and deferred
income taxes 4,250 288 (315)(3) 4,223
Advances from FHLB 274,901 500 -- 275,401
Accrued transaction costs -- -- 900(3) 900
Other liabilities 45,104 6,858 -- 51,962
Total liabilities 1,190,250 187,559 585 1,378,394
Stockholders' equity 91,693 15,853 (585)(3) 106,961
Total liabilities and
stockholders' equity $1,281,943 $203,412 -- $1,485,355
See accompanying Notes to Pro Forma Condensed Combined Financial Statements.
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Pro Forma Condensed Combined Statement of Operations
Three Months Ended December 31, 1995
(unaudited)
Pro Forma
InterWest Central Combined
--------- ------- ---------
(In thousands, except per share data)
Interest income $24,683 $ 4,034 $28,717
Interest expense 15,303 1,620 16,923
Net interest income 9,380 2,414 11,794
Provision for loan losses 250 -- 250
Net interest income after
provision for loan losses 9,130 2,414 11,544
Other Income:
Service charges and
fee income 671 406 1,077
Income from real estate
operations -- -- --
Gains on sales of loans and
mortgage-backed securities 404 127 531
Other income 566 61 627
Total 1,641 594 2,235
Other Expenses:
Compensation and benefits 2,893 1,204 4,097
Occupancy and equipment 1,168 321 1,489
Other 1,560 647 2,207
Total 5,621 2,172 7,793
Income before taxes 5,150 836 5,986
Provision for federal
income taxes 1,755 362 2,117
Net income $ 3,395 $ 474 $3,869
Weighted average
shares outstanding 6,510,719 1,037,229 7,973,212
Net income per share $0.52 $0.46 $0.49
See accompanying Notes to Pro Forma Condensed Combined Financial Statements.
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Pro Forma Condensed Combined Statement of Operations
Year Ended September 30, 1995 (1)
(unaudited)
Pro Forma
InterWest Central Combined
--------- ------- ---------
(In thousands, except per share data)
Interest income $84,675 $15,589 $100,264
Interest expense 51,746 6,180 57,926
Net interest income 32,929 9,409 42,338
Provision for loan losses 600 120 720
Net interest income after provision
for loan losses 32,329 9,289 41,618
Other Income:
Service charges and fee income 2,327 1,604 3,931
Income from real estate
operations 16 -- 16
Gains on sales of loan
servicing 1,831 478 2,309
Gains on sales of loans and
mortgage-backed securities 726 -- 726
Other income 2,797 213 3,010
Total 7,697 2,295 9,992
Other Expenses:
Compensation and benefits 10,931 4,208 15,139
Occupancy and equipment 4,171 1,229 5,400
Other 7,031 2,332 9,363
Total 22,133 7,769 29,902
Income before taxes 17,893 3,815 21,708
Provision for federal
income taxes 6,087 1,260 7,347
Net income $11,806 $ 2,555 $ 14,361
Weighted average
shares outstanding 6,508,329 1,038,120 7,972,078
Net income per share $1.81 $2.46 $1.80
(1) The historical financial information for Central is for the year ended
December 31, 1995.
See accompanying Notes to Pro Forma Condensed Combined Financial Statements.
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Pro Forma Condensed Combined Statement of Operations
Year Ended September 30, 1994 (1)
(unaudited)
Pro Forma
InterWest Central Combined
--------- ------- ---------
(In thousands, except per share data)
Interest income $69,821 $12,449 $82,270
Interest expense 36,351 4,334 40,685
Net interest income 33,470 8,115 41,585
Provision for loan losses 900 -- 900
Net interest income after provision
for loan losses 32,570 8,115 40,685
Other Income:
Service charges and fee income 2,240 1,458 3,698
Income from real estate
operations 746 -- 746
Gains on sales of loans and
mortgage-backed securities 1,533 (201) 1,332
Other income 1,732 200 1,932
Total 6,251 1,457 7,708
Other Expenses:
Compensation and benefits 10,295 3,597 13,892
Occupancy and equipment 3,857 1,187 5,044
Other 6,551 2,159 8,710
Total 20,703 6,943 27,646
Income before taxes 18,118 2,629 20,747
Provision for federal
income taxes 6,416 864 7,280
Net income $11,702 $ 1,765 $13,467
Weighted average
shares outstanding 6,518,422 1,035,120 7,977,941
Net income per share $1.80 $1.70 $1.69
(1) The historical financial information for Central is for the year ended
December 31, 1994.
See accompanying Notes to Pro Forma Condensed Combined Financial Statements.
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Pro Forma Condensed Combined Statement of Operations
Year Ended September 30, 1993 (1)
(unaudited)
Pro Forma
InterWest Central Combined
--------- ------- ---------
(In thousands, except per share data)
Interest income $63,282 $9,753 $73,035
Interest expense 31,899 3,528 35,427
Net interest income 31,383 6,225 37,608
Provision for loan losses 1,399 -- 1,399
Net interest income after provision
for loan losses 29,984 6,225 36,209
Other Income:
Service charges and fee income 2,084 1,112 3,196
Income from real estate operations -- -- --
Gains on sales of loans and
mortgage-backed securities 3,157 399 3,556
Other income 2,040 122 2,162
Total 7,281 1,633 8,914
Other Expenses:
Compensation and benefits 9,443 2,653 12,096
Occupancy and equipment 4,077 1,006 5,083
Other 7,463 1,636 9,099
Total 20,983 5,295 26,278
Income before taxes 16,282 2,563 18,845
Provision for federal
income taxes 5,613 749 6,362
Net income $10,669 $1,814 $12,483
Weighted average
shares outstanding 6,466,541 1,023,001 7,908,972
Net income per share $1.65 $1.77 $1.58
(1) The historical financial information for Central is for the year ended
December 31, 1993.
See accompanying Notes to Pro Forma Condensed Combined Financial Statements.
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NOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
Note 1. Periods Combined
InterWest's consolidated statements of operation for each of the
years in the three-year period ended September 30, 1995 and the three months
ended December 31, 1995 have been combined with the Central consolidated
statements of operations for each of the years in the three-year period ended
December 31, 1995 and the three months ended December 31, 1995.
The InterWest consolidated statement of financial condition as of
December 31, 1995 has been combined with the Central consolidated statement of
financial condition as of December 31, 1995.
Note 2. Pro Forma Net Income Per Share
The pro forma condensed combined statement of income for InterWest
and Central have been prepared as if the Merger was completed at the beginning
of the periods presented. The pro forma combined net income per share is
based upon combined historical net income for InterWest and Central divided by
the average pro forma common shares of the combined entities.
Note 3. Basis of Presentation
Pro forma basis of presentation. The pro forma condensed combined
financial statements reflect the issuance of 1,430,537 shares of InterWest
common stock in exchange for an aggregate of 1,014,565 shares of Central
common stock in connection with Merger based on the exchange ratio of 1.41
shares of InterWest Common Stock for every share of Central Common Stock.
Merger transaction costs. InterWest and Central estimate they will
incur direct transaction costs of approximately $900,000 associated with the
Merger, consisting of transaction fees for investment bankers, attorneys,
accountants, financial printing and other related charges. These nonrecurring
costs will be charges to operations in the fiscal quarter in which the Merger
is consummated. The pro forma condensed combined statement of financial
condition gives effect to such expenses as if they had been accrued as of
December 31, 1995, but the effect of these costs have not been reflected in
the pro forma condensed combined statements of operations.
Note 4. Conforming Adjustments
There have been no adjustments required to conform the accounting
policies of the combined company. There are no intercompany transactions.
BUSINESSES OF THE PARTIES TO THE MERGER
INTERWEST AND INTERWEST SAVINGS
InterWest is a bank holding company registered under the BHC Act.
The business of InterWest consists primarily of holding 100% of the capital
stock of InterWest Savings. At December 31, 1995, InterWest had total assets
of $1.3 billion, total loans and mortgage-backed securities of $1.1 billion,
total deposits of $866.0 million and stockholders' equity of $97.1 million.
InterWest Savings is a state-chartered savings bank and is
regulated by the Department and by the FDIC, its primary federal regulator and
the insurer of its deposits. InterWest Savings' deposits are insured up to
applicable limits under the SAIF of the FDIC. InterWest Savings is a
community oriented savings bank which has traditionally offered a variety of
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savings products to its retail customers while concentrating its lending
activities on loans for the purchase or construction of residential real
estate. Lending activities have also included the origination of multi-family
residential, commercial real estate and consumer loans. In addition,
InterWest Savings has maintained a significant portion of its assets in
mortgage-backed and related securities. As of December 31, 1995, InterWest
Savings conducted its business through 30 full-service branch offices and one
lending office located in small cities and towns in the western and central
parts of the State of Washington. These smaller cities and towns are
generally outside Washington's most densely populated cities, such as Seattle
and Spokane. InterWest believes it is easier to develop long-term customer
relationships in outlying areas and that such relationships lead to increased
repeat business and greater customer loyalty.
Financial and other information relating to InterWest, including
information relating to InterWest's directors and executive officers, is set
forth in InterWest's Annual Report on Form 10-K for the year ended September
30, 1995, Quarterly Report on Form 10-Q for the period ended December 31, 1995
and Annual Meeting proxy statement, copies of which may be obtained from
InterWest as indicated under "AVAILABLE INFORMATION."
CENTRAL AND THE BANKS
Central is a bank holding company incorporated under the laws of
the State of Washington and is subject to the BHC Act, which places Central
under the supervision of the Board of Governors of the Federal Reserve System.
The principal role of Central is to supervise and coordinate the activities of
its wholly owned subsidiary banks, CWB and NCWB. At December 31, 1995,
Central had consolidated total assets of $203.4 million, total loans and
mortgage backed securities of $137.9 million, total customer deposits of
$179.9 million, and total stockholder equity of $15.9 million.
The Banks are each state chartered banks regulated by the
Department and by the FDIC. Generally, customer deposits accounts in the
Banks are insured by the FDIC's Bank Insurance Fund for up to a maximum of
$100,000. The Banks perform banking services for their customers which are
customary for banks of similar size and character. Such services include
retail banking services to individuals and small and medium size businesses,
as well as savings accounts, checking accounts, and certificates of deposits.
The Banks are also active in the consumer and commercial banking business, and
provide individuals and businesses a variety of loan programs including real
estate, commercial and agricultural loans. CWB conducts its business at six
locations, principally throughout Chelan and, to a lesser degree, Douglas,
Grant and Okanogan Counties. NCWB conducts its business at four locations
principally throughout Okanogan County.
DESCRIPTION OF INTERWEST CAPITAL STOCK
InterWest is authorized to issue 20,000,000 shares of Common Stock,
$0.20 par value per share. At the InterWest Record Date, _________ shares of
InterWest Common Stock were issued and outstanding. InterWest Common Stock is
listed for trading on the Nasdaq National Market under the symbol "IWBK."
Each share of InterWest Common Stock has the same relative rights and is
identical in all respects with every other share of InterWest Common Stock.
The following summary does not purport to be a complete description of the
applicable provisions of the InterWest Articles of Incorporation and Bylaws or
of applicable statutory or other law, and is qualified in its entirety by
reference thereto. See "AVAILABLE INFORMATION."
Voting Rights
The holders of InterWest Common Stock possess exclusive voting
rights in InterWest. Each holder of InterWest Common Stock is entitled to one
vote for each share held of record on all matters submitted to a vote of
holders of InterWest Common Stock. Holders of shares of InterWest Common
Stock are not entitled to cumulate votes for the election of directors.
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DIVIDENDS
The holders of InterWest Common Stock are entitled to such
dividends as the InterWest Board may declare from time to time out of funds
legally available therefor. Dividends from InterWest depend upon the receipt
by InterWest of dividends from InterWest Savings because InterWest has no
source of income other than dividends from InterWest Savings.
LIQUIDATION
In the event of liquidation, dissolution or winding up of
InterWest, the holders of shares of InterWest Common Stock are entitled to
share ratably in all assets remaining after payment of all debts and other
liabilities of InterWest.
OTHER CHARACTERISTICS
Holders of InterWest Common Stock do not have any preemptive,
conversion or other subscription rights with respect to any additional shares
of InterWest Common Stock which may be issued. Therefore, the InterWest Board
may authorize the issuance and sale of shares of capital stock of InterWest
without first offering them to existing shareholders of InterWest. InterWest
Common Stock is not subject to any redemption or sinking fund provisions. The
outstanding shares of InterWest Common Stock are, and the shares to be issued
in the Merger will be, fully paid and non-assessable.
The InterWest Articles of Incorporation and Bylaws contain
provisions that may have the effect of discouraging persons from acquiring
large blocks of InterWest Common Stock or delaying or preventing a change in
control of InterWest. These provisions include the classification of the
InterWest Board into three classes with the term of only one class expiring
each year and requirements for the approval of certain business combinations.
See "COMPARISON OF SHAREHOLDERS' RIGHTS."
COMPARISON OF SHAREHOLDERS' RIGHTS
InterWest is incorporated under the laws of the State of Washington
and, accordingly, the rights of InterWest's shareholders are governed by
InterWest's Articles of Incorporation, Bylaws and the WBCA. Central is also
incorporated under the laws of the State of Washington and, accordingly, the
rights of Central's shareholders are governed by Central's Articles of
Incorporation, Bylaws and the WBCA.
Upon consummation of the Merger, shareholders of Central will
become shareholders of InterWest, and, as such, their rights will be governed
by InterWest's Articles of Incorporation, Bylaws and the WBCA. The following
is a summary of material differences between the Articles of Incorporation and
Bylaws of InterWest and the Articles of Incorporation and Bylaws of Central.
This discussion is not intended to be a complete statement of the differences
affecting the rights of shareholders and is qualified in its entirety by
reference to the governing law and the articles of incorporation and bylaws of
each corporation.
PAYMENT OF DIVIDENDS
InterWest. Under Washington law, dividends may be paid only if,
after giving effect to the dividend, InterWest will be able to pay its debts
as they become due in the ordinary course of business and InterWest's total
assets will not be less than the sum of its total liabilities plus the amount
that would be needed, if InterWest were to be dissolved at the time of the
dividend, to satisfy the preferential rights of persons whose right to payment
is superior to those receiving the dividend.
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Central. Under Washington law, dividends may be paid only if,
after giving effect to the dividend, Central will be able to pay its debts as
they become due in the ordinary course of business and Central's total assets
will not be less than the sum of its total liabilities plus the amount that
would be needed, if Central were to be dissolved at the time of the dividend,
to satisfy the preferential rights of persons whose right to payment is
superior to those receiving the dividend.
SIZE OF BOARD OF DIRECTORS
InterWest. InterWest's Articles of Incorporation provide that its
Board of Directors shall consist of not less than five nor more than 15
members, with the current number set at nine by the Bylaws of InterWest. The
Bylaws of InterWest provide that the Board of Directors or the shareholders
may change the authorized number of directors within the stated range by
amending the Bylaws, which must be approved by a majority of the outstanding
shares entitled to vote or by a majority of the directors. Changes in the
size of the range may be made by an amendment to InterWest's Articles of
Incorporation, which must be approved by a majority of the outstanding shares
entitled to vote. The effect of such provisions may be to make it difficult
for a person or entity immediately to acquire control of InterWest through an
increase in the number of InterWest's directors and election of such person's
or entity's nominees to fill the newly created vacancies.
Central. Central's Articles of Incorporation provide that its
Board of Directors shall consist of not less than five nor more than 18
members, with the current number fixed by resolution approved by at least a
two-thirds vote of the total number of directors. The number of directors may
be increased by not more than two directors by the Central Board between
annual meetings of shareholders. Changes in the size of the stated range may
be made by an amendment to Central's Articles of Incorporation, which must be
approved by a majority of the outstanding shares entitled to vote.
CLASSIFIED BOARD OF DIRECTORS
InterWest. A classified board is one in which a certain number,
but not all, of the directors are elected on a rotating basis each year.
InterWest's Articles of Incorporation provide for a Board of Directors divided
into three classes, with members of each class of directors being elected for
a term of three years. This method of electing directors makes a change in
the composition of the Board of Directors, and a potential change in control
of a corporation, a lengthier and more difficult process. Since the terms of
only one-third of the incumbent directors expire each year, it requires at
least two annual elections for the shareholders to change a majority of the
directors. In the absence of the provisions of the Articles of Incorporation
classifying the Board, all of the directors would be elected each year.
Central. Central's Articles of Incorporation provide for a Board
of Directors divided into three classes, with members of each class of
directors being elected for a term of three years.
CUMULATIVE VOTING
InterWest. Cumulative voting entitles each shareholder to cast a
number of votes in the election of directors equal to the number of such
shareholders' shares of Common Stock multiplied by the number of directors to
be elected, and to distribute such votes among one or more of the nominees to
be elected. InterWest's Articles of Incorporation eliminate cumulative
voting. The absence of cumulative voting rights limits the ability of
minority shareholders to obtain representation on the InterWest Board.
Central. Central's Articles of Incorporation eliminate cumulative
voting.
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REMOVAL OF DIRECTORS
InterWest. InterWest's Articles of Incorporation provide that at a
meeting of shareholders called expressly for that purpose, any director or the
entire Board of Directors may be removed for cause by a vote of the holders of
a majority of the shares then entitled to vote at such meeting. The
requirement that directors may be removed only upon a majority vote and only
for cause makes it difficult for a person or entity immediately to acquire
control of InterWest's Board through the removal of existing directors and the
election of such person's or entity's nominees to fill the newly created
vacancies.
Central. Central's Articles of Incorporation provide that no
director may be removed from office without cause except by a vote of
two-thirds of the shares then entitled to vote at an election of directors.
VACANCIES ON THE BOARD OF DIRECTORS
InterWest. The Bylaws of InterWest provide that any vacancy on
the Board of Directors may be filled by the affirmative vote of a majority of
the remaining directors, and any director so appointed is to serve for the
unexpired term of his or her predecessor. A director appointed by reason of
an increase in the number of directors may serve only until the next election
of directors.
Central. Central's Articles of Incorporation provide that the
Board of Directors may appoint persons to fill vacancies created by an
increase in the size of the Central Board.
SPECIAL MEETINGS OF SHAREHOLDERS AND ACTION WITHOUT A MEETING
InterWest. The Articles of Incorporation of InterWest provide that
special meetings of shareholders may be called by the president, the board of
directors or holders of not less than a majority of the outstanding shares of
stock. This restriction on the calling of special shareholders' meetings may
deter hostile takeovers of InterWest by making it more difficult for a person
or entity to obtain immediate control of InterWest between one annual meeting
and the next. Pursuant to InterWest's Bylaws, any action required or
permitted to be taken at a meeting of shareholders may be taken without a
meeting if a consent in writing is signed by all of the shareholders entitled
to vote on the matter.
Central. The Bylaws of Central provide that special meetings of
shareholders may be called at any time by the Chairman, the President, a
majority of the Central Board, or any shareholder or shareholders
holding in the aggregate not less than one-tenth of all shares entitled to
vote at the special meeting. Pursuant to the WBCA, any action required or
permitted to be taken at a shareholders' meeting may be taken without
a meeting if a consent is signed in writing by all of the shareholders
entitled to vote on the action.
ADVANCE NOTICE REQUIREMENTS FOR NOMINATIONS OF DIRECTORS AND PRESENTATION OF
NEW BUSINESS AT MEETINGS OF SHAREHOLDERS
InterWest. The Bylaws of InterWest generally provide that any
shareholder desiring to make a nomination for the election of directors or a
proposal for new business at a meeting of shareholders must submit written
notice to InterWest at least 30 days and not more than 60 days in advance of
the meeting, together with certain information relating to the nomination or
new business. Failure to comply with these advance notice requirements will
preclude such nominations or new business from being considered at the
meeting. Management believes that it is in the best interests of InterWest
and its shareholders to provide sufficient time to enable management to
disclose to shareholders information about a dissident slate of nominations
for directors. This advance notice requirement may also give management time
to solicit its own proxies in an attempt to defeat any dissident slate of
nominations, should management determine that doing so is in the best interest
of shareholders generally. Similarly, adequate advance notice of shareholder
proposals will give management time to study such proposals and to determine
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whether to recommend to the shareholders that such proposals be adopted. In
certain instances, such provisions could make it more difficult to oppose
management's nominees or proposals, even if shareholders believe such nominees
or proposals are in their best interests.
Central. The Articles of Incorporation of Central provide that any
shareholder desiring to make a nomination for the election of directors must
submit such nomination in writing to the Chairman of Central not less than 14
days nor more than 50 days prior to any meeting of shareholders called for the
election of directors, provided that if less than 21 days' notice of the
meeting is given to shareholders, such nomination must be delivered or mailed
not later than the close of business on the seventh day following the day on
which the notice of the meeting was mailed. Such nomination must contain
certain information relating to the nomination. Nominations not made in
accordance with the Articles of Incorporation may be disregarded.
APPROVAL OF MERGERS, CONSOLIDATIONS, SALE OF SUBSTANTIALLY ALL ASSETS AND
DISSOLUTION
InterWest. Article X of InterWest's Articles of Incorporation requires
the approval of the holders of (i) at least 80% of InterWest's outstanding
shares of voting stock, and (ii) at least a majority of InterWest's
outstanding shares of voting stock, not including shares held by a "Related
Person," to approve certain "Business Combinations," except in cases where the
proposed transaction has been approved in advance by a majority of those
members of the InterWest Board who were directors prior to the time when the
Related Person became a Related Person. In the event the requisite approval
of the Board were given, the normal vote requirement of applicable Washington
law would apply, or, for certain transactions, no shareholder vote would be
necessary. The term "Related Person" is defined to include any individual,
corporation, partnership or other entity which owns beneficially or controls,
directly or indirectly, 10% or more of the outstanding shares of voting stock
of InterWest. The provisions of Article X apply to any "Business Combination"
which is defined to include among other things: (i) any merger or
consolidation of InterWest or any of its affiliates with or into any Related
Person; (ii) any sale, lease, exchange, mortgage, transfer, or other
disposition of all or a substantial part of the assets of InterWest or any of
its affiliates to any Related Person (the term "substantial part" is defined
to include more than 25% of InterWest's total assets); (iii) any sale, lease,
exchange, or other transfer by any Related Person to InterWest of all or a
substantial part of the assets of Related Person; (iv) the acquisition by
InterWest of any securities of the Related Person; (v) any reclassification of
InterWest Common Stock; and (vi) any agreement, contract or other arrangement
providing for any of the transactions described above. The increased
shareholder vote required to approve a Business Combination may have the
effect of foreclosing mergers and other business combinations which a majority
of shareholders deem desirable and place the power to prevent such a merger or
combination in the hands of a minority of shareholders.
InterWest's Articles of Incorporation require InterWest's Board of
Directors to consider certain factors in addition to the amount of
consideration to be paid when evaluating certain business combinations or a
tender or exchange offer. These additional factors include: (i) the social
and economic effects of the transaction; (ii) the business and financial
condition and earnings prospects of the acquiring person or entity; and (iii)
the competence, experience, and integrity of the acquiring person or entity
and its management.
Central. Central's Articles of Incorporation require the affirmative
vote of two-thirds of the total shares attributable to persons other than a
"Control Person" for approval of certain "Business Combinations" between
Central and any Control Person, except in cases where the proposed transaction
has been approved in advance by a majority of those members of the Central
Board who were directors prior to the time the Control Person acquired
beneficial ownership of 10% or more the outstanding shares of Central Common
Stock. The term "Control Person" is defined as any individual, corporation,
partnership or other entity which, together with affiliates and associates, is
the beneficial owner in the aggregate of 20% or more of the outstanding shares
of Central Common Stock. The term "Business Combination" is defined to mean
(i) any merger or consolidation of Central with a Control Person; (ii) any
sale, lease, exchange transfer or other disposition of 10% or more of the
assets of Central or a subsidiary to a Control Person; (iii) any merger or
consolidation of a Control person with Central; (iv) any sale, lease,
exchange, transfer or other disposition of 10% of the assets of a Control
Person to Central; (v) the issuance of any securities of Central to a Control
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Person; (vi) the acquisition by Central of any securities of a Control Person;
(vii) any reclassification of Central Common Stock or recapitalization
consummated with five years after a Control Person becomes a Control Person;
or (viii) any agreement, contract or other arrangement providing for any of
the transactions described above.
Central's Articles of Incorporation require the Central Board when
evaluating any offer of another party to make a tender or exchange offer for
any equity security of Central, to merge or consolidate Central with another
corporation or to purchase all or substantially all of the assets of Central
to give due consideration to the social and economic effects on the employees,
customers, suppliers and other constituents of Central and on the communities
in which Central operates or is located.
RIGHTS OF SHAREHOLDERS TO DISSENT
InterWest. Under the WBCA, shareholders of InterWest will
generally have dissenter's appraisal rights in connection with (i) a plan of
merger to which InterWest is a party; (ii) a plan of share exchange to which
InterWest is a party as the corporation whose shares will be acquired; (iii)
certain sales or exchanges of all, or substantially all, of InterWest's
property other than in the regular course of business; and (iv) amendments
to InterWest's Articles of Incorporation effecting a material reverse stock
split. However, shareholders generally will not have such dissenters' rights
if shareholder approval is not required by the WBCA for the corporate action.
Shareholders of InterWest do not have dissenters' rights in connection with
the Merger.
Central. Under the WBCA, shareholders of Central generally have
dissenter's appraisal rights in connection with (i) a plan of merger to which
Central is a party; (ii) a plan of share exchange to which Central is a party
as the corporation whose shares will be acquired; (iii) certain sales or
exchanges of all, or substantially all, of Central's property other than in
the regular course of business; and (iv) amendments to Central's Articles of
Incorporation effecting a material reverse stock split. However, shareholders
generally will not have such dissenters' rights if shareholder approval is not
required for the corporate action. Shareholders of Central have dissenters'
rights in connection with the Merger. See "THE MERGER -- Dissenters' Rights."
INDEMNIFICATION OF OFFICERS AND DIRECTORS AND LIMITATION OF LIABILITY
InterWest. Pursuant to InterWest's Articles of Incorporation
InterWest will, to the fullest extent permitted by the WBCA, indemnify the
officers, directors, agents and employees of InterWest with respect to
expenses, settlements, judgments and fines in suits in which such person has
made a party by reason of the fact that he or she is or was an agent of
InterWest. No such indemnification may be given if the acts or omissions of
the person are adjudged to be in violation of law, if such person is liable to
the corporation for an unlawful distribution, or if such person personally
received a benefit to which he or she was not entitled. In addition,
InterWest's Articles of Incorporation provide that the directors of InterWest
shall not be personally liable for monetary damages to InterWest for certain
breaches of their fiduciary duty as directors, except for liabilities that
involve intentional misconduct by the director, the authorization or illegal
distributions or receipt of an improper personal benefit from their actions as
directors. This provision might, in certain instances, discourage or deter
shareholders or management from bringing a lawsuit against directors for a
breach of their duties even though such an action, if successful, might have
benefitted InterWest.
Central. Pursuant to Central's Articles of Incorporation, Central
will indemnify the directors and officer-directors of Central for judgments,
penalties, fines, settlements and reasonable expenses in suits in which such
person has made a party by reason of the fact that such person is or was a
director or officer- director of Central. No such indemnification may be
given if the acts or omissions of the person are adjudged to involve
intentional misconduct or a knowing violation of law by the director, conduct
violating Section 23A.08.450 of the Revised Code of Washington or
participation in any transaction from which the director personally received a
benefit to which the director was not legally entitled. In addition,
Central's Articles of Incorporation provides that the directors and
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officer-directors of Central shall not be personally liable for monetary
damages to Central for conduct as directors or officer-directors, except for
liabilities that involve intentional misconduct or a knowing violation of law
by the director, conduct violating Section 23A.08.450 of the Revised Code of
Washington or participation in any transaction from which the director
personally received a benefit to which the director was not legally entitled.
AMENDMENT OF ARTICLES OF INCORPORATION AND BYLAWS.
InterWest. InterWest's Articles of Incorporation may be amended by
the vote of the holders of a majority of the outstanding shares of InterWest
Common Stock, except that the provisions of the Articles of Incorporation
governing approval of business combinations with "Related Persons" may not be
amended altered, changed or repeated except by the vote of the holders of at
least 80% of the outstanding shares of InterWest, unless any such amendment
has been approved by a majority of the members of the InterWest Board who were
directors prior to the time any Related Person became a Related Person. The
Bylaws of InterWest may be amended by a majority vote of the Board of
Directors or by the holders of at least a majority of the outstanding shares
of InterWest.
Central. Central's Articles of Incorporation may be amended by a
majority of the outstanding shares of Central Common Stock, except that
provisions of Central's Articles of Incorporation relating to business
combinations with "Control Persons" may not be repealed or amended except by
the affirmative vote of two- thirds of the outstanding shares of Central
Common Stock, or if there is a Control Person, by two-thirds of the total
shares attributable to shares owned by persons other than Control Persons.
Central's Bylaws may be amended, altered or repealed at any regular meeting of
the Central Board provided that two days prior written notice of such action
is provided.
ELECTION OF CENTRAL DIRECTORS
In addition to approving the Merger, Central's stockholders will be
asked to elect two directors to serve for a three year term or until their
successors are elected and qualified.
GENERAL
Central's Articles of Incorporation (the "Central Articles")
provide that the number of directors must fall within a range of five and
eighteen, the exact number to be determined by resolution of the Central
Board. The Central Articles also provide that the Central Board may increase
the number of directors by not more than three between shareholders' meetings,
and may fill the vacancies created by doing so, provided that the number of
directors shall at no time exceed eighteen.
Directors are elected for a term of three years and until their
successors have been elected and qualified. The Central Articles require that
the terms of the directors be staggered such that approximately one-third of
the directors are elected each year. Accordingly, the Central Board has
nominated Messrs. DeCamp and Cawdery for election as directors for three-year
terms to expire in 1999. If either Messrs. DeCamp or Cawdery should refuse or
be unable to serve, proxies will be voted for such person as shall be
designated by the Central Board to replace any such nominee. The Central
Board presently has no knowledge that any of the nominees will refuse or be
unable to serve.
Other nominations, if any, may be made only in accordance with the
prior notice provisions contained in the Central Articles.
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INFORMATION WITH RESPECT TO NOMINEES AND DIRECTORS WHOSE TERMS CONTINUE
The following table sets forth certain information with respect to
the nominees for director and for directors whose terms continue. The table
includes their ages, their principal occupations during the past five years,
and the year first elected a director of Central. All of the nominees are
presently directors of Central and CWB. The table also indicates the number
of shares of Central Common Stock beneficially owned by each individual on
January 1, 1996 and the percentage outstanding on that date that the
individual's holdings represented. However, where beneficial ownership was
less than one percent, the percentage is not reflected in the table.
Shares of Central
Name, Age and Principal Common Stock and
Occupation of Director Percent of Class
During Past Beneficially Owned on
Five Years * January 1, 1996
- ---------------------- ---------------------
Nominees for Director for Three-Year Term Expiring in 1999
Lonnie DeCamp, 64 31,346 (1)
Vice Chairman of the Board; President, (2.87%)
Sav-Mart, Inc. - Director since 1983
Gerald Cawdery, 62 19,212 (2)
Managing Partner, Triple C (1.76%)
Convalescent Centers - Director since 1983
The Board of Directors recommends that you vote FOR the nominees to be
elected as directors.
Directors with Term Expiring in 1997
Don Wm. Telford, 56 81,519 (3)
Chairman of the Board and Director; (7.46%)
of Central since 1983; Director of
NCWB since 1995; President, Far West
Services, Inc.
(1) Includes 26,346 shares over which Mr. DeCamp shares with his spouse
voting and investment power and 5,000 shares which could be acquired within 60
days by the exercise of stock options.
(2) Includes 5,000 shares which could be acquired within 60 days by the
exercise of stock options.
(3) Includes 19,155 shares owned by Mr. Telford's spouse over which he
exercises no voting or investment power. Also includes 5,208 shares owned by
Far West Services, Inc. Pension Plan & Trust, 7,608 shares owned by its Profit
Sharing Plan for which Mr. Telford serves as Trustee and over which he shares
voting and investment power, and 2,900 shares owned by Far West Services
Purchase Plan. Mr. Telford disclaims beneficial ownership of all shares owned
by his wife, the Far West Pension Plan & Trust, Profit Sharing Plan and
Purchase Plan. Also includes 5,000 shares which could be acquired within 60
days by the exercise of stock options.
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Gary M. Bolyard, 60 52,580 (4)
President, CEO, since 1984 and (4.81%)
Director of Central since
1985; President and CEO of CWB
since 1984, and Director since 1985;
Director of NCWB since 1995
Larry Carlson, 63 51,163 (5)
Secretary and Director of (4.68%)
Central since 1983;
Attorney, Carlson Drewelow &
McMahon, Inc. PS
Directors with Term Expiring in 1998
Alfred W. Cordell, 59 8,645 (6)
Partner, Cordell, Neher & Company,
Certified Public Accountants;
Previously Partner, Cordell & Conner -
Director since 1985
L. Courtney Guderian, 51 10,968 (7)
Executive Director, Supporters of the Center - (1.00%)
since 1994; previously, Marketing Specialist
Chelan/Douglas Transportation Benefit Area;
Past Exec. Dir., Wenatchee Downtown Association -
Director since 1985
William A. Liddell, 71 10,426 (8)
Retired General Manager, Wenoka Federation -
Director since 1991
* The directors of Central also serve as directors of CWB.
(4) Includes 11,817 shares over which Mr. Bolyard shares with his spouse
voting and investment power, 1,603 shares held by Piper, Jaffray & Hopwood in
an IRA for the benefit of Mr. Bolyard, and 34,686 shares which could be
acquired withing 60 days by the exercise of stock options.
(5) Includes 207 shares owned by Carlson Drewelow & McMahon, Inc. PS, of
which Mr. Calson is a principal, 2,499 shares held by Piper Jaffray & Hopwood
in an IRA for the benefit of Mr. Carlson and 2,471 shares owned by the Carlson
Drewelow & McMahon, Inc. PS 401K Plan for the benefit of Mr. Carlson. Also
includes 12,710 shares owned by Carlson Drewelow & McMahon, Inc. PS Profit
Sharing Plan, 750 shares owned by Carlson Drewelow & McMahon, Inc. PS Profit
Sharing Trust, 500 shares owned by Carlson Drewelow & McMahon, Inc. PS Profit
Sharing Plan and Trust and 5,000 shares which could be acquired within 60 days
by the exercise of stock options. Mr Carlson disclaims beneficial ownership
of the 12,710 shares owned by the Profit Sharing Plan, the 750 shares owned by
the Profit Sharing Trust, and the 500 shares owned by the Profit Sharing Plan
and Trust.
(6) Includes 2,730 shares over which Mr. Cordell shares with his spouse
voting and investment power, 600 shares held for Mr. Cordell's benefit by a
brokerage firm, and 5,000 shares which could be acquired within 60 days by the
exercise of stock options.
(7) Includes 100 shares over which Ms. Guderian acts as trustee of the Robert
B. Cox Trust and over which Ms. Guderian exercises sole voting and investment
power, 700 shares held for Ms. Guderian's benefit by a brokerage firm, and
5,000 shares which could be acquired within 60 days by the exercise of stock
options.
(8) Includes 247 shares held jointly with his spouse and 5,000 shares which
could be acquired within 60 days by the exercise of stock options.
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Central held eleven regular meetings in 1995. Each director
attended at least 75% of the total of all Board meetings and of all committee
meetings on which he or she served during the year, except for Mr. Cawdery who
attended 72% of the meetings.
CERTAIN COMMITTEES OF THE BOARD OF DIRECTORS
The Central Board has established certain standing committees,
including an Audit Committee and a Compensation Committee. There is presently
no standing nominating committee.
Audit Committee. The main functions performed by the Audit
Committee include reviewing and approving the services of the independent
auditors, reviewing the plan, scope, and audit results of the independent
auditors and reviewing the reports of bank regulatory authorities. The
Committee reviews the results of the audit, the annual reports to the
Securities and Exchange Commission and to the shareholders and the Annual
Meeting Proxy Statement. Current members of the Committee are Messrs.
Carlson, Cordell and DeCamp (Chairman). There were four meetings of the Audit
Committee during 1995.
Compensation Committee. The Compensation Committee reviews and
recommends compensation for senior management. Current members of the
Committee are Messrs. Cawdery (Chairman) and Liddell and Ms. Guderian. There
were two meetings of the Compensation Committee during 1995.
COMPENSATION OF DIRECTORS
Members of the Central Board, the Audit and the Compensation
Committees currently receive fees for each meeting they attend, unless a Board
or committee meeting is held jointly with a Central or CWB Board or committee
meeting, as follows:
1. Board Meetings -- Directors receive $200 for each meeting
attended, except the Chairman, who receives $300 for each meeting attended.
2. Audit Committee and/or Compensation Committee -- The Chairmen
receive $125 for each meeting attended; other members receive $75 for each
meeting attended.
Deferred Compensation Agreements. CWB has entered into Deferred
Compensation Agreements with six (6) of CWB's directors which allow the
directors, at their option, to defer regular monthly bank Board and Executive
Committee fees to be paid upon retirement or termination of the Agreements.
Under the terms of the Agreements, CWB agrees to pay the deferred amount plus
interest at retirement over a ten year period. CWB has purchased insurance
policies on the lives of these directors as a vehicle to fund the benefits
payable under the Agreements.
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EXECUTIVE COMPENSATION
The following table sets forth certain information concerning
compensation paid or accrued by Central during the fiscal year ended December
31, 1995, to or on behalf of Central's Chief Executive Officer and those
executive officers whose aggregate cash compensation exceeded $100,000 for the
prior fiscal year.
Summary Compensation Table (Part 1)
Annual Compensation
Other
Annual
Name and Principal Bonus Compensation
Position Year Salary ($)(1) ($)(2)
---- ------ ------ ------------
Gary M. Bolyard, 1995 $132,000 $96,395 $45,444
President and Chief 1994 132,000 36,925 38,546
Executive Officer, 1993 120,000 47,835 49,451
Central and Central
Joseph E. Riordan 1995 $ 70,000 $60,247 $ 6,484
Treasurer/Asst. 1994 64,917 23,078 0
Secretary Central; 1993 54,250 29,897 0
Vice President,
Secty/Treasurer
CWB; Assistant
Secretary NCWB
Scott Southwick 1995 $ 65,000 $48,197 $ 0
Vice President and 1994 62,500 18,463 0
Chief Lending 1993 47,601 22,422 0
Officer CWB
Marla Chase 1995 $ 53,333 $48,197 $ 0
Vice President and 1994 48,125 18,463 0
Chief Operations 1993 42,500 22,422 0
Officers CWB
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Summary Compensation Table (Part 2)
Long Term Compensation
Awards Payouts
Restricted
Stock LTIP All Other
Name and Principal Awards Options/ Payouts Compensation
Position Year ($) SARs(#) ($) ($)(3)(4)
---- ------- -------- ------- ------------
Gary M. Bolyard, 1995 0 0 0 $ 19,644
President and Chief 1994 0 5,000 0 3,465
Executive Officer, 1993 0 0 0 3,373
Central and Central
Joseph E. Riordan 1995 0 0 0 $ 8,970
Treasurer/Asst. 1994 0 0 0 1,876
Secretary Central; 1993 0 0 0 1,628
Vice President,
Secty/Treasurer
CWB; Assistant
Secretary NCWB
Scott Southwick 1995 0 0 0 $ 17,815
Vice President and 1994 0 0 0 781
Chief Lending 1993 0 0 9,650 0
Officer CWB
Marla Chase 1995 0 0 0 $ 6,540
Vice President and 1994 0 0 0 1,319
Chief Operations 1993 0 0 0 1,275
Officers CWB
(1) The amounts appearing in this column include amounts paid to the named
executive officers under Central's Incentive Compensation Plan.
(2) Includes amounts accrued under Central's Executive Deferred Compensation
Plan for the years 1995, 1994 and 1993. Does not include perquisites and
other amounts, such as car allowance, which, for the executive officer,
did not exceed, in the aggregate, the lesser of $50,000 or 10% of the
total annual salary and bonus for such executive officer.
(3) Includes vacation accrued in 1994 for Messrs. Bolyard, Riordan and
Southwick and Ms. Chase in the amounts of $15,228, $6,670, $6,010 and
$4,806, respectively, and paid in 1995 as a result of a change in
Central's vacation policy. Also includes the market value of an
automobile given to Mr. Southwick in lieu of other compensation.
(4) Includes amounts paid by Central on behalf of Messrs. Bolyard, Riordan
and Southwick and Ms. Chase in the amounts of $4,416, $2,300, $2,130 and
$1,744, respectively under Central's 401(k) Retirement Plan.
Option Grants in Last Fiscal Year. No options were granted to any of the
named executive officers during the fiscal year ended December 31, 1995.
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Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values. The following table sets forth certain information concerning
exercises of stock options pursuant to stock option plans by the named
executive officers during the year ended December 31, 1995 and stock options
held at year end.
Number of Value of
Unexercised Unexercised Options
Shares Options at Year End at Year End
Acquired Value Unexer- Unexer-
Name on Exercise Realized Exercisable cisable Exercisable cisable
----------- -------- ----------- ------- ----------- -------
Gary M.
Bolyard -- -- 34,686 -- $516,373(1) $--
Joseph E.
Riordan 4,824 $71,974 5,000 -- $74,300 $--
Scott
Southwick -- -- 2,758 6,892 $19,306 $48,244
Marla Chase 5,576 $80,134 -- -- $-- $--
(1) On December 31, 1995, the closing price of Central common stock was
$23.00. For purposes of the foregoing table, stock options with an exercise
price less than that amount are considered to be "in-the-money" and are
considered to have a value equal to the difference between this amount and the
exercise price of the stock option multiplied by the number of shares covered
by the stock option.
Deferred Compensation and Change in Control Agreements. In August,
1989, Central entered into an Executive Deferred Compensation Agreement (the
"Deferred Compensation Agreement") with Gary M. Bolyard, who, for both Central
and CWB, is President, CEO and a director. The Deferred Compensation
Agreement provides Mr. Bolyard with certain deferred payments, in
consideration of his services to Central and CWB and his contribution to their
growth and progress. Upon a "Retirement Date" of January 1, 2001, death or
termination in connection with a disability or change in control of Central,
Mr. Bolyard is entitled to receive $57,365 annually from the date of such
event (as such date is defined in the Deferred Compensation Agreement) for a
period of 15 years. If Mr. Bolyard's employment is terminated prior to the
Retirement Date, Mr. Bolyard is entitled to prorated payments for a 15 year
period from the date of termination, based on length of service between April
1989, and the Retirement Date. In connection with his obligations under the
Deferred Compensation Agreement, Central has obtained an insurance policy on
the life of Mr. Bolyard in the face amount of $500,000 which was purchased to
offset future payments which may be made under the Deferred Compensation
Agreement.
In June, 1995, Central entered into an Executive Deferred
Compensation Agreement (the "Deferred Compensation Agreement") with Joseph E.
Riordan, who is Treasurer/Assistant Secretary of Central, Vice President and
Secretary/Treasurer of CWB, and Assistant Secretary/Treasurer of NCWB. The
Deferred Compensation Agreement provides Mr. Riordan with certain deferred
payments, in consideration of his services to CWB and Central and his
contribution to their growth and progress. Upon a "Retirement Date" (any date
after June 30, 2009), death, or termination in connection with a disability,
Mr. Riordan is entitled to receive benefits in fifteen equal annual
installments consisting of principal and interest (at eight percent)
sufficient in amount to pay full Executive's Vested Deferred Compensation
Balance. If Mr. Riordan's employment is terminated prior to the Retirement
Date, Mr. Riordan is entitled to prorated payments for a 15-year period from
the date of termination, based on length of service between June 1995 and the
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Retirement Date. In connection with its obligation under the Deferred
Compensation Agreement, Central has obtained an insurance policy on the life
of Mr. Riordan with a face amount of $225,000 which was purchased to offset
future payments which may be made under the Deferred Compensation Agreement.
In May, 1990, Central entered into an Executive Severance Agreement
with Mr. Riordan to ensure that the Executive will be available to assist the
Central Board in responding to and, if deemed appropriate by the Central
Board, completing any proposed change in control of Central. Under the terms
of the agreement, in the event of the voluntary or involuntary termination of
Executive's employment within three years after a change in control, the
severance payment shall be an amount equal to the lesser of two (2) times the
compensation received by the Executive during the most recent twelve calendar
months or $114,000. The agreement was subsequently amended in January 1991
and January 1995.
In March, 1993, Central entered into an Executive Severance
Agreement with Mr. Southwick, CWB's Vice President and Chief Lending Officer
to ensure that the Executive will be available to assist the Central Board in
responding to and, if deemed appropriate by the Central Board, completing any
proposed change in control of Central. Under the terms of the agreement, in
the event of the voluntary or involuntary termination of Executive's
employment within three years after a change in control, the severance payment
shall be an amount equal to the lesser of one (1) times the compensation
received by the Executive during the most recent twelve calendar months or
$62,500.
In April, 1993, Central entered into an Executive Severance
Agreement with Ms. Chase, Central's Vice President of Operations to ensure
that the Executive will be available to assist the Central Board in responding
to and, if deemed appropriate by the Central Board, completing any proposed
change in control of Central. Under the terms of the agreement, in the event
of the voluntary or involuntary termination of the Executive's employment
within three years after a change in control, the severance payment shall be
an amount equal to the lesser of one (1) times the compensation received by
the Executive during the most recent twelve calendar months or $42,500.
Description of Employee and Director Profit and Incentive Plans.
Central has instituted and maintains an incentive compensation plan for key
employees and directors, as well as a 401(k) plan for its employees.
Incentive Compensation Plan ("ICP") was adopted in 1987 and is a
voluntary incentive plan for eligible persons deemed to be "key employees" of
Central. Under the ICP, participants receive additional compensation based on
Central's level of profitability. The amount of compensation provided under
the ICP is calculated as the ratio of Central's net income (excluding
extraordinary income and expense), before accrual of amounts under the ICP, as
adjusted for taxes ("Net Income") to Central's beginning equity. In 1995,
$264,000 was accrued under the ICP.
Directors' Incentive Compensation Plan ("Directors' ICP") was
adopted in 1990. Under the Directors' ICP, Directors are entitled to an
increase in their director fees based on the same ratio of Net Income to
beginning equity. In 1995, $21,000 was accrued under the Directors' ICP.
401(k) Savings and Profit Sharing Plan ("401(k) Plan") was adopted
on July 1, 1987 and designed to qualify under Sections 401(a) and 401(k) of
the Internal Revenue Code. All full-time employees of Central who have been
continuously employed for one year may elect to participate in the 401(k) Plan
by directing the deferral of between 2% to 10% of their regular pay ("Employee
Deferrals"). Under the 401(k) Plan, Central will contribute $.50 for each
$1.00 of Employee Deferrals, up to 3% of an employee's annual gross salary
("Matching Funds"). Also under the 401(k) Plan, Central, at its discretion,
may contribute an additional amount determined by Central's Board of Directors
based on the Bank's profits. For 1995, the Board determined not to make any
additional contributions pursuant to the 401(k) Plan. In 1995, $69,000 was
paid under the 401(k) Plan's matching funds provision.
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All funds in the 401(k) Plan are held by Fidelity Advisor.
Participants in the 401(k) Plan may direct the investment of their Employee
Deferrals in either or any of five funds: an income fund, consisting of
equity and bond investments; a short-term fixed income bond fund; a growth
fund consisting of equity investments; a money fund consisting of U.S.
Treasury bonds; and an overseas fund consisting of international equity and
bond investments.
Upon retirement or termination of employment, a participant is
entitled to receive all of his or her Employee Deferrals. The participant
also will be eligible to withdraw Matching Funds and, subject to a vesting
schedule, any amounts contributed by Central. A participant becomes fully
vested in five years, with vesting of 25% each year after the first year of
participation.
Description of Stock Option Plans. Central maintains a stock
option plan for both employees and nonemployee directors. Each plan is
administered by a committee appointed by the Board of Directors.
Employee Stock Option Plan (the "ESOP") was adopted by the Board of
Directors and approved by the shareholders in 1992. The ESOP replaced the
Incentive Stock Option Plan adopted in 1986 ("1986 Plan"). However, options
for 34,686 shares of Common Stock previously granted under the 1986 Plan
remain outstanding.
The ESOP provides for the issuance of options which qualify as
"incentive stock options" within the meaning of Section 422A of the Internal
Revenue Code, as well as the issuance of nonqualified stock options. Subject
to some exceptions, holders of incentive stock options generally incur no tax
(and Central is not entitled to a deduction) on the grant or exercise of such
options. When stock received upon exercise of an incentive stock option is
sold, the holder incurs tax at capital gain rates. In order to qualify under
Section 422A, incentive stock options are subject to a number of restrictions,
including the following: (i) the option price may not be less than the fair
market value of the stock at the time the option is granted, (ii) the market
value of the stock for which an employee's incentive stock options become
exercisable in any year may not exceed $100,000. All options granted under
the ESOP must be exercised within ten years from the date of grant.
The holder of a nonqualified stock option incurs a tax on the date
of exercise of such option. The holder is taxed on the difference between the
fair market value of the stock subject to the option, measured at the date of
grant and the date of exercise. The income is taxable at ordinary income
rates and is deductible by Central. The exercise price of nonqualified
options is granted under the ESOP may be at or below market price.
As of December 31, 1995, the ESOP had 60,000 shares reserved for
issuance, of which none had been issued pursuant to option exercises, 22,150
were granted subject to outstanding options, and 37,850 remained available for
future grant.
Directors Stock Option Plan ("DSOP Plan") was adopted by the
Directors and Shareholders in 1995. Under the DSOP Plan, 60,000 shares of
Common Stock are reserved for issuance upon the exercise of nonqualified stock
options granted to non-employee directors of Central and the Banks. The DSOP
Plan provides that the exercise price of options granted must be not less than
the greater of book value or market value at the time of grant. Each option
granted under the DSOP Plan expires ten years following the date of grant. As
of December 31, 1995, no shares had been issued pursuant to option exercises,
40,000 were granted subject to outstanding options, and 20,000 remained
available for future grant.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT
Central has adopted procedures to assist its directors and
executive officers with Section 16(a) of the Securities Exchange Act, which
includes assisting the officer or director in preparing forms for filing.
Based on the review of such forms, Central believes that all of its executive
officers and directors complied with all filing requirements applicable to
them.
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CERTAIN TRANSACTIONS
During 1995, many directors and executive officers of Central and
the Banks and their associates were also customers of the Banks. It is
anticipated that directors, executive officers, and their associates will
continue to be customers of the Banks in the future. All transactions between
the Banks and directors, executive officers, and their associates were made in
the ordinary course of business on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons and in the opinion of management did not
involve more than the normal risk of collectibility or present other
unfavorable features.
The law firm of Carlson Drewelow & McMahon, Inc. PS, of which
director Larry Carlson is a partner, serves as counsel to Central and the
Banks on various legal matters.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning
executive officers of Central and the Banks (other than those who also serve
as a director), as well as the beneficial owners of more than five percent of
the outstanding shares of Central. The information includes the number of
shares of Central common stock beneficially owned by each individual on
January 1, 1996 and the percentage outstanding on that date that the
individual's holdings represented. Where beneficial ownership was less than
one percent, the percentage is not reflected in the table.
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Principal Occupation Shares of Common
During the Past Five Years Stock and % of Class
Name, Age and and Certain Other Beneficially Owned on
Term of Office Directorships January 1, 1996
-------------- ------------- ----------------
Executive Officers
Larry K. Butterfield, 52 President and Director 1,314 (1)
Since 1994 of NCWB
Marla Chase, 50 Vice President and Chief 9,843
Since 1987 Operations Officer of CWB
Joseph E. Riordan, 42 Treasurer/Asst Secretary of 14,996 (2)
Central; Vice President and (1.37)%
Secretary/Treasurer of CWB;
Asst Secretary/Treasurer of
NCWB since 1994
Scott W. Southwick, 45 Vice President and Chief 2,858 (3)
Since 1993 Lending Officer of CWB
5% Shareholder(s)
Don Wm. Telford, 56 Chairman of the Board; 81,519 (4)
President Far West Services, (7.67)%
Inc.
Directors and Officers as a 294,967 (5)
Group (12 persons) (26.98)%
___________________________
1 Includes 750 shares which could be acquired within 60 days by exercise of
stock options.
2 Includes 153 shares held by Dain Bosworth in an IRA for the benefit of Mr.
Riordan, and 5000 shares which could be acquired within 60 days by exercise of
stock options.
3 Includes 2,758 shares which could be acquired within 60 days by exercise of
stock options.
4 See "Directors with Term Expiring in 1997", footnote 3.
5 Includes 78,194 shares held by the group which could be acquired within 60
days by exercise of stock options.
CERTAIN INFORMATION CONCERNING INTERWEST
Information regarding the names, ages, positions and business
backgrounds of the executive officers and directors of InterWest, as well as
additional information, including executive compensation, security ownership
of certain beneficial owners and management and certain relationships and
related transactions, is incorporated by reference to InterWest's Annual
Report on Form 10-K for the year ended September 30, 1995 (which incorporates
portions of InterWest's Proxy Statement dated December 15, 1995). See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." Shareholders desiring
copies of such documents may contact InterWest at the addresses or phone
numbers indicated under "AVAILABLE INFORMATION" above.
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LEGAL OPINIONS
The validity of the InterWest Common Stock to be issued in the
Merger is being passed upon for InterWest by Breyer & Aguggia, Washington,
D.C. Breyer & Aguggia will deliver an opinion concerning certain federal
income tax consequences of the Merger.
EXPERTS
The consolidated statement of financial condition of InterWest as
of September 30, 1995 and the related consolidated statements of income,
stockholders' equity and cash flows for the year then ended, incorporated by
reference in InterWest's Annual Report on Form 10-K for the year ended
September 30, 1995, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon incorporated by reference
therein and incorporated herein by reference. Such consolidated financial
statements are incorporated herein by reference in reliance upon such report
given upon the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of InterWest as of September
30, 1994 and for each of the two years in the period ended September 30, 1994
included in InterWest's 1995 Annual Report on Form 10-K and incorporated by
reference herein, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated by reference
herein, and has been so incorporated in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
The consolidated financial statements of Central as of December 31,
1995 and for the year then ended, included in Central's 1995 Annual Report on
Form 10-KSB incorporated by reference herein, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated by reference herein, and has been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
The consolidated financial statements of Central as of December 31,
1994 and for the two years then ended included in Central's 1995 Annual Report
on Form 10-KSB and incorporated by reference herein, have been audited by KPMG
Peat Marwick LLP, independent auditors, as stated in their report, which is
incorporated by reference herein, and has been so incorporated in reliance
upon the report of such firm given upon their authority as experts in
accounting and auditing.
OTHER MATTERS
The InterWest Board is not aware of any business to come before the
InterWest Special Meeting other than those matters described above in this
Prospectus/Joint Proxy Statement. However, if any other matters should
properly come before the InterWest Special Meeting, it is intended that
proxies in the accompanying form will be voted in respect thereof in
accordance with the judgment of the person or persons voting the proxies.
The Central Board is not aware of any business to come before the
Central Special Meeting other than those matters described above in this
Prospectus/Joint Proxy Statement. However, if any other matters should
properly come before the Central Special Meeting, it is intended that proxies
in the accompanying form will be voted in respect thereof in accordance with
the judgment of the person or persons voting the proxies.
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SHAREHOLDER PROPOSALS
In the event that the Merger Agreement is not approved or the
Merger is not consummated, any proposal intended to be presented by a
shareholder at the 1997 Annual Meeting of Central must have been received by
Central not later than ______, 199__ to be considered for inclusion in the
proxy statement for that meeting. Any such proposal should be mailed to the
Secretary of Central at Central's main office, 301 N. Chelan, Wenatchee,
Washington 98801. Inclusion of a shareholder's proposal in that proxy
statement is subject to the shareholder's eligibility and compliance with
other requirements under the Commission's proxy rules.
In order to be eligible for inclusion in the proxy materials of the
InterWest for next year's Annual Meeting of Shareholders, any shareholder
proposal to take action at such meeting must be received at InterWest's main
office at 1259 West Pioneer Way, Oak Harbor, Washington no later than August
12, 1996. Any such proposals shall be subject to the requirements of the
proxy rules adopted under the Exchange Act.
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APPENDIX A
AGREEMENT AND PLAN OF MERGERS
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<PAGE>
AGREEMENT AND PLAN OF MERGERS
Between
CENTRAL BANCORPORATION
CENTRAL WASHINGTON BANK
and
NORTH CENTRAL WASHINGTON BANK
and
INTERWEST BANCORP, INC.
and
INTERWEST SAVINGS BANK
Dated as of January 10, 1996
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<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. MERGERS. . . . . . . . . . . . . . . . . . . . A-10
1.1. THE CORPORATE MERGER. . . . . . . . . . . . . . . . . A-10
1.2. THE BANK MERGERS. . . . . . . . . . . . . . . . . . . A-11
1.3. EFFECTIVE DATE. . . . . . . . . . . . . . . . . . . . A-12
ARTICLE II. CONSIDERATION . . . . . . . . . . . . . . . . A-12
2.1 CORPORATE MERGER CONSIDERATION. . . . . . . . . . . . A-12
2.2. STOCKHOLDER RIGHTS; STOCK TRANSFERS . . . . . . . . . A-12
2.3. FRACTIONAL SHARES . . . . . . . . . . . . . . . . . . A-12
2.4. EXCHANGE PROCEDURES . . . . . . . . . . . . . . . . . A-12
2.5. ANTI-DILUTION PROVISIONS. . . . . . . . . . . . . . . A-13
2.6. EXCEPTION SHARES. . . . . . . . . . . . . . . . . . . A-13
2.7. RESERVATION OF RIGHT TO REVISE TRANSACTION. . . . . . A-13
2.8. OPTIONS . . . . . . . . . . . . . . . . . . . . . . . A-13
ARTICLE III. ACTIONS PENDING CONSUMMATION . . . . . . . . A-13
3.1. CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . A-13
3.2. DIVIDENDS, ETC. . . . . . . . . . . . . . . . . . . . A-14
3.3. INDEBTEDNESS; LIABILITIES; ETC. . . . . . . . . . . . A-14
3.4. LINE OF BUSINESS; OPERATING PROCEDURES; ETC.. . . . . A-14
3.5. LIENS AND ENCUMBRANCES. . . . . . . . . . . . . . . . A-14
3.6. COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. . . . . . . A-14
3.7. BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . A-14
3.8. CONTINUANCE OF BUSINESS . . . . . . . . . . . . . . . A-14
3.9. AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . A-14
3.10. CLAIMS . . . . . . . . . . . . . . . . . . . . . A-14
3.11. CONTRACTS. . . . . . . . . . . . . . . . . . . . A-14
3.12. LOANS. . . . . . . . . . . . . . . . . . . . . . A-15
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<PAGE>
ARTICLE IV. REPRESENTATIONS AND WARRANTIES. . . . . . . . A-15
4.1. THE COMPANY AND THE BANKS REPRESENTATIONS AND
WARRANTIES. . . . . . . . . . . . . . . . . . . . . . A-15
4.2. INTERWEST AND INTERWEST SAVINGS REPRESENTATIONS AND
WARRANTIES. . . . . . . . . . . . . . . . . . . . . . A-22
ARTICLE V. COVENANTS. . . . . . . . . . . . . . . . . . . A-24
5.1. BEST EFFORTS. . . . . . . . . . . . . . . . . . . . . A-24
5.2. THE PROXY . . . . . . . . . . . . . . . . . . . . . . A-25
5.3. REGISTRATION STATEMENT COMPLIANCE WITH SECURITIES LAWS
A-25
5.4. REGISTRATION STATEMENT EFFECTIVENESS. . . . . . . . . A-25
5.5. PRESS RELEASES. . . . . . . . . . . . . . . . . . . . A-25
5.6. ACCESS; INFORMATION . . . . . . . . . . . . . . . . . A-25
5.7. ACQUISITION PROPOSALS . . . . . . . . . . . . . . . . A-26
5.8. REGISTRATION STATEMENT PREPARATION; REGULATORY
APPLICATIONS PREPARATION. . . . . . . . . . . . . . . A-26
5.9. BLUE-SKY FILINGS. . . . . . . . . . . . . . . . . . . A-26
5.10. AFFILIATE AGREEMENTS . . . . . . . . . . . . . . A-26
5.11. CERTAIN POLICIES OF THE COMPANY AND THE BANKS. . A-26
5.12. STATE TAKEOVER LAW . . . . . . . . . . . . . . . A-26
5.13. NO RIGHTS TRIGGERED. . . . . . . . . . . . . . . A-27
5.14. SHARES LISTED. . . . . . . . . . . . . . . . . . A-27
5.15. REGULATORY APPLICATIONS. . . . . . . . . . . . . A-27
5.16. REGULATORY DIVESTITURES. . . . . . . . . . . . . A-27
5.17. CURRENT INFORMATION. . . . . . . . . . . . . . . A-27
5.18. INDEMNIFICATION. . . . . . . . . . . . . . . . . A-27
5.19. INTERWEST PROXY STATEMENT; SHAREHOLDER APPROVAL. A-28
5.20. OTHER EMPLOYMENT AGREEMENTS. . . . . . . . . . . A-28
ARTICLE VI. CONDITIONS TO CONSUMMATION OF THE MERGERS . . A-28
6.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS. . . . . . . . A-28
6.2. CONDITIONS TO OBLIGATIONS OF INTERWEST. . . . . . . . A-29
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6.3. CONDITIONS TO OBLIGATIONS OF COMPANY AND BANKS . . . A-30
ARTICLE VII. TERMINATION. . . . . . . . . . . . . . . . . A-30
7.1. MUTUAL CONSENT. . . . . . . . . . . . . . . . . . . . A-30
7.2. BREACH. . . . . . . . . . . . . . . . . . . . . . . . A-30
7.3. DELAY.. . . . . . . . . . . . . . . . . . . . . . . . A-31
7.4. NO STOCKHOLDER APPROVAL.. . . . . . . . . . . . . . . A-31
7.5. INTERWEST COMMON STOCK PRICE. . . . . . . . . . . . . A-31
7.6. CONSEQUENCES OF TERMINATION.. . . . . . . . . . . . . A-31
ARTICLE VIII. OTHER MATTERS . . . . . . . . . . . . . . . A-31
8.1. SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . A-31
8.2. WAIVER; AMENDMENT . . . . . . . . . . . . . . . . . . A-31
8.3. COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . A-31
8.4. GOVERNING LAW . . . . . . . . . . . . . . . . . . . . A-31
8.5. EXPENSES. . . . . . . . . . . . . . . . . . . . . . . A-31
8.6. CONFIDENTIALITY . . . . . . . . . . . . . . . . . . . A-32
8.7. NOTICES.. . . . . . . . . . . . . . . . . . . . . . . A-32
8.8. ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. . A-32
8.9. BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . A-32
8.10.HEADINGS . . . . . . . . . . . . . . . . . . . . . . A-33
EXHIBIT A - STOCK OPTION AGREEMENT
EXHIBIT B - VOTING AGREEMENT
EXHIBIT C - FORM OF AFFILIATE AGREEMENT
EXHIBIT D - EMPLOYMENT AGREEMENT WITH GARY M. BOLYARD
EXHIBIT E - EMPLOYMENT AGREEMENT WITH JOSEPH E. RIORDAN
EXHIBIT F - FORM OF EMPLOYMENT AGREEMENT
EXHIBIT G - FORM OF LEGAL OPINION OF COUNSEL TO THE COMPANY
AND THE BANKS
EXHIBIT H - FORM OF LEGAL OPINION OF COUNSEL TO INTERWEST
AND INTERWEST SAVINGS
<PAGE>
<PAGE>
AGREEMENT AND PLAN OF MERGERS
AGREEMENT AND PLAN OF MERGERS, dated as of the 10th day of January
1996 (this "Plan"), by and among CENTRAL BANCORPORATION (the "Company"),
CENTRAL WASHINGTON BANK ("CWB"), NORTH CENTRAL WASHINGTON BANK ("NCWB"),
INTERWEST BANCORP, INC. ("InterWest") and INTERWEST SAVINGS BANK ("InterWest
Savings").
RECITALS
(A) THE COMPANY. The Company is a corporation duly organized and
existing in good standing under the laws of the State of Washington, with its
principal executive offices located in Wenatchee, Washington. The Company is
a registered bank holding company under the Bank Holding Company Act of 1956,
as amended. As of the date hereof, the Company has 3,000,000 authorized
shares of common stock, $1.67 par value per share ("Company Common Stock")(no
other class of capital stock being authorized), of which 1,014,565 shares of
Company Common Stock are issued and outstanding. As of the date hereof, the
Company had 134,350 shares of Company Common Stock reserved for issuance under
employee and director stock option plans pursuant to which options covering
96,836 shares of Company Common Stock are outstanding as of the date hereof.
(B) CWB. CWB is a commercial bank duly organized and existing in good
standing under the laws of the State of Washington, with its principal
executive offices located in Wenatchee, Washington. As of the date hereof,
CWB has 171,406 authorized shares of common stock, $10.00 par value per share
("CWB Common Stock")(no other class of capital stock being authorized), of
which 154,509 shares of CWB Common Stock are issued and outstanding. All of
the issued and outstanding CWB Common Stock are owned by the Company. As of
September 30, 1995, CWB had capital of $12,345,000, divided into common stock
of $1,545,000, surplus of $3,934,000, and undivided profits of $6,917,000, net
of unrealized loss on investment securities of $51,000.
(C) NCWB. NCWB is a commercial bank duly organized and existing in good
standing under the laws of the State of Washington, with its principal
executive offices located in Omak, Washington. As of the date hereof, NCWB
has 1,000,000 authorized shares of common stock, no par value ("NCWB Common
Stock") (no other class of capital stock being authorized), of which 10,000
shares of NCWB Common Stock are issued and outstanding. All of the issued and
outstanding NCWB Common Stock are owned by the Company. As of September 30,
1995, NCWB had capital of $4,815,000, divided into common stock of $1,500,000,
surplus of $2,619,000, and undivided profits of $685,000, net of unrealized
gain on investment securities of $11,000.
(D) INTERWEST. InterWest is a corporation duly organized and existing
in good standing under the laws of the State of Washington, with its principal
executive offices located in Oak Harbor, Washington. As of the date hereof,
InterWest has 20,000,000 authorized shares of common stock, $.20 par value per
share ("InterWest Common Stock") (no other class of capital stock being
authorized), of which 6,398,398 shares of InterWest Common Stock were issued
and outstanding as of September 30, 1995.
(E) INTERWEST SAVINGS. InterWest Savings is a savings bank duly
organized and existing under the laws of the State of Washington, with its
principal executive offices located in Oak Harbor, Washington. As of the date
hereof, InterWest Savings has 6,000,000 authorized shares of common stock,
$.20 par value per share ("InterWest Savings Common Stock") (no other class of
capital stock being authorized), of which 200 shares are issued and
outstanding and owned by InterWest. As of September 30, 1995, InterWest
Savings had capital of $90,141,183, divided into common stock of $200, surplus
of $15,759,688 and undivided profits, including capital reserves, of
$74,381,315.
(F) STOCK OPTION AGREEMENT; VOTING AGREEMENT. Immediately
after the execution and delivery of this Plan, as a condition and an
inducement to InterWest's willingness to enter into this Plan, the Company and
InterWest agree to enter into a Stock Option Agreement (the "Stock Option
Agreement") in the
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<PAGE>
form attached hereto as Exhibit A, pursuant to which the Company is granting
to InterWest an option to purchase, under certain circumstances, shares of
Company Common Stock. As a condition and an inducement to InterWest's and
InterWest Savings' willingness to enter into this Plan, the directors and
officers of CWB and NCWB (collectively, the "Banks") and the Company have
entered into an agreement with InterWest and InterWest Savings in the form
attached hereto as Exhibit B, pursuant to which, among other things, each such
individual has agreed to vote his or her shares of Company Common Stock in
favor of approval of the transactions contemplated by this Plan at the Meeting
(as hereinafter defined).
(G) RIGHTS, ETC. Except as Previously Disclosed in Schedule 4.1(C),
there are no shares of capital stock of the Company or the Banks authorized
and reserved for issuance, neither the Company nor either Bank has any Rights
(as defined below) issued or outstanding and neither the Company nor either
Bank has any commitment to authorize, issue or sell any such shares or any
Rights, except pursuant to (i) this Plan or (ii) the Stock Option Agreement.
The terms "Rights" means securities or obligations convertible into or
exchangeable for, or giving any person any right to subscribe for or acquire,
or any options, calls or commitments relating to, shares of capital stock.
There are no preemptive rights in respect of the Company Common Stock.
(H) APPROVALS. The Board of Directors of each of the Company, CWB,
NCWB, InterWest and InterWest Savings has approved, at meetings of each of
such Board of Directors, this Plan and, in the case of the Company and
InterWest, the Stock Option Agreement and has authorized the execution hereof
and thereof in counterparts.
(I) OTHER. It is the intention of the Parties that the Mergers (as
hereinafter defined) shall include the right of InterWest to acquire the
assets and assume the liabilities of the subsidiaries of the Company and to
assign such right to any corporation which InterWest controls. Pursuant to
the foregoing and under the authority of Revenue Rulings 64-73 and 70-224,
InterWest may assign its right to acquire the assets and assume the
liabilities of the subsidiaries of the Company to InterWest Savings, and may
also direct each such subsidiary to transfer all of its assets and liabilities
to InterWest Savings on the Effective Date (as hereinafter defined), or at any
time thereafter, including by means of a statutory merger.
In consideration of their mutual promises and obligations, the Parties
further agree as follows:
DEFINITIONS
(A) DEFINITIONS. Capitalized terms used in this Plan have the following
meanings:
"Acquisition Transaction" means (1) a merger, consolidation or similar
transaction involving InterWest or any of its significant subsidiaries, (2)
the disposition, by sale, lease, exchange or otherwise, of assets or deposits
of InterWest or any of its significant subsidiaries representing in either
case 25% or more of the consolidated assets or deposits of InterWest and its
subsidiaries, or (3) the issuance, sale or other disposition (including by way
of merger, consolidation, share exchange or any similar transaction) of
securities representing 25% or more of the voting power of InterWest or any of
its significant subsidiaries other than the issuance of InterWest Common Stock
upon the exercise of outstanding options or the conversion of outstanding
convertible securities of InterWest.
"Appraisal Laws" has the meaning assigned to such term in Section 1.1(E).
"Asset Classification" has the meaning assigned to such term in Section
4.1(T).
"Banks" has the meaning assigned to such term in paragraph (F) of the
Recitals to this Plan.
"Bank Financial Reports" has the meaning assigned to such term in Section
4.1(H).
"Bank Mergers" has the meaning assigned to such term in Section 1.2(A).
<PAGE>
<PAGE>
"Business Day" means any day other than a Saturday, Sunday, or a legal
holiday in the State of Washington.
"Code" has the meaning assigned to such term in Section 4.1(Q)(2).
"Collar Price" means $20.00.
"Company Option" has the meaning assigned to such term in Section 2.8.
"Compensation and Benefit Plans" has the meaning assigned to such term in
Section 4.1(Q)(1).
"Continuing Bank" has the meaning assigned to such term in Section
1.2(A).
"Continuing Corporation" has the meaning assigned to such term in Section
1.1(A).
"Corporate Merger" has the meaning assigned to such term in Section
1.1(A).
"Daily Sales Price" for any trading day shall be equal to the average of
the bid and ask prices per share of all market makers, as reported on
Bloomberg Financial Markets, of InterWest Common Stock on the Nasdaq Stock
Market reporting system.
"Department" has the meaning assigned to such term in Section 4.1(H).
"Derivatives Contract" means an exchange-traded or over-the- counter
swap, forward, future, option, cap, floor or collar financial contract or any
other contract that (1) is not included on the balance sheet of the Holding
Company Financial Reports or the InterWest Financial Reports, as the case may
be, and (2) is a derivative contract (including various combinations thereof).
"Director" means the Director of the Department.
"Dissenting Shares" means the shares of Company Common stock held by
those shareholders of the Company who have timely and properly exercised their
dissenters' rights in accordance with the Appraisal Laws.
"Effective Date" has the meaning assigned to such term in Section 1.3.
"Eligible Company Common Stock" means shares of Company Common Stock
other than Exception Shares and Dissenting Shares.
"Employment Agreement" shall mean any of Exhibits D, E and F attached
hereto.
"Environmental Law" means (1) any federal, state and local law, statute,
ordinance, rule, regulation, code, license, permit, authorization, approval,
consent, legal doctrine, order, judgment, decree, injunction, requirement or
agreement with any governmental entity, relating to (a) the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, groundwater, drinking water supply, surface land, subsurface
land, plant and animal life or any other natural resource) or to human health
or safety, or (b) the exposure to, or the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling, production,
release or disposal of Hazardous Material, in each case as amended and as now
in effect, including the Federal Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic
Substances Control Act, and the Federal Insecticide, Fungicide and Rodenticide
Act, the Federal Occupational Safety and Health Act of 1970, each as amended
and as now in effect, and (2) any common law or equitable doctrine (including
injunctive relief and tort doctrines such as negligence, nuisance, trespass
and strict liability)
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that may impose liability or obligations for injuries or damages due to, or
threatened as a result of, the presence of or exposure to any Hazardous
Material.
"ERISA" has the meaning assigned to such term in Section 4.1(Q)(2).
"ERISA Affiliate" has the meaning assigned to such term in Section
4.1(Q)(3).
"ERISA Plans" has the meaning assigned to such term in Section 4.1(Q)(2).
"Exception Shares" means shares held by any of the Company's Subsidiaries
or by InterWest or any of its Subsidiaries, in each case other than in a
fiduciary capacity or as a result of debts previously contracted.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated thereunder.
"Exchange Agent" has the meaning assigned to such term in Section 2.4.
"Exchange Ratio" has the meaning assigned to such term in Section 2.1(B).
"FDIC" means the Federal Deposit Insurance Corporation.
"Financial Reports" has the meaning assigned to such term in Section
4.1(H).
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System.
"GAAP" means generally accepted accounting principles consistently
applied.
"Hazardous Material" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or quantity,
including any oil or other petroleum product, toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste or petroleum or any derivative or by-product thereof, radon, radioactive
material, asbestos, asbestos containing material, urea formaldehyde foam
insulation, lead and polychiorinated biphenyl.
"Holding Company Financial Reports" has the meaning assigned to such term
in Section 4.1(H).
"Indemnified Party" has the meaning assigned to such term in Section
5.18(A).
"InterWest Option" has the meaning assigned to such term in Section 2.8.
"InterWest Price" means the price equal to the average (rounded to the
nearest penny) of each Daily Sales Price of InterWest Common Stock for the ten
consecutive trading days beginning on and including the twentieth trading day
immediately preceding the Effective Date, subject to any adjustment that may
be required in connection with the adjustment of the Exchange Ratio pursuant
to Section 2.5.
"Loan/Fiduciary Property" means any property owned or controlled by the
Company or any of its Subsidiaries or in which the Company or any of its
Subsidiaries holds a security or other interest, and, where required by the
context, includes any such property where the Company or any of its
Subsidiaries constitutes the owner or operator of such property, but only with
respect to such property.
"Material Adverse Effect" means with respect to any Party an event,
occurrence or circumstance (including (i) the making of any provisions for
possible loan and lease losses, write-downs of other real estate and taxes and
(ii) any breach of a representation or warranty contained herein by such
Party) that (a) has or is reasonably likely to have a material adverse effect
on the financial condition, results of operations, business or prospects of
such Party and its subsidiaries, taken as a whole, or (b) would materially
impair such Party's ability
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to perform its obligations under this Plan or the Stock Option Agreement or
the consummation of any of the transactions contemplated hereby or thereby.
"Meeting" has the meaning assigned to such term in Section 5.2.
"Mergers" has the meaning assigned to such term in Section 1.2(A).
"Multiemployer Plans" has the meaning assigned to such term in Section
4.1(Q)(2).
"Nasdaq" means the National Association of Securities Dealers Automated
Quotations system.
"Option" has the meaning assigned to such term in the Stock Option
Agreement.
"Option Shares" has the meaning assigned to such term in the Stock Option
Agreement.
"Participation Facility" means any facility in which the Company or any
of its Subsidiaries participates in the management and, where required by the
context, includes the owner or operator of such facility.
"Party" means a party to this Plan.
"Pension Plan" has the meaning assigned to such term in Section
4.1(Q)(2).
"Previously Disclosed" means information provided by a Party in a
Schedule that is delivered by that Party to the other Party contemporaneously
with the execution of this Plan and specifically designated as information
"Previously Disclosed" pursuant to this Plan.
"Pre-Triggering Event InterWest Price" means the price equal to the
average (rounded to the nearest penny) of each Daily Sales Price of InterWest
Common Stock for the ten consecutive trading days beginning on and including
the twentieth trading day immediately preceding the date of the Triggering
Event, subject to any adjustment that may be required in connection with the
adjustment of the Exchange Ratio pursuant to Section 2.5.
"Proxy Statement" has the meaning assigned to such term in Section 5.2.
"Registration Statement" has the meaning assigned to such term in Section
5.2.
"Regulatory Authorities" means federal or state governmental agencies,
authorities or departments charged with the supervision or regulation of
depository institutions or engaged in the insurance of deposits.
"RCW" means the Revised Code of Washington.
"Rights" has the meaning assigned to such term in paragraph (G) of the
Recitals to this Plan.
"Securities Act" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated thereunder.
"SEC" means the Securities and Exchange Commission.
"Stock Option Agreement" has the meaning assigned to such term in
paragraph (F) of the Recitals to this Plan.
"Subsidiary" with respect to any entity means each partnership or
corporation, the majority of the outstanding partnership interests, capital
stock or voting power of which is (or upon the exercise of all outstanding
warrants, options and other rights would be) owned, directly or indirectly, at
the time in question by such entity.
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"Tax Returns" has the meaning assigned to such term in Section 4.1(BB).
"Taxes" means federal, state, local or foreign income, gross receipts,
windfall profits, severance, property, production, sales, use, license,
excise, franchise, employment, withholding or similar taxes imposed on the
income, properties or operations of the respective Party or its Subsidiaries,
together with any interest, additions, or penalties with respect thereto and
any interest in respect of such additions or penalties.
"Termination Date" has the meaning assigned to such term in Section 1.3.
"Third Party" means a person within the meaning of Sections 3(a)(9) and
13(d)(3) of the Exchange Act, excluding (1) the Company or any Subsidiary of
the Company and (2) InterWest or any Subsidiary of InterWest.
"Total Consideration" means the dollar amount obtained by multiplying
$34.00 by the aggregate number of shares of Eligible Company Common Stock
issued and outstanding immediately prior to the Effective Date.
"Triggering Event" means any one or more of the following events:
(1) InterWest shall have authorized, recommended, publicly proposed
or publicly announced an intention to authorize, recommend or propose, or
entered into an agreement with any Third Party to effect an Acquisition
Transaction.
(2) Any Third Party shall have made a bona fide proposal to
InterWest or its stockholders by public announcement, or by written
communication that is or becomes the subject of public disclosure, to engage
in an Acquisition Transaction.
(3) Any Third Party, other than in connection with a transaction to
which the Company has given its prior written consent, shall have filed an
application or notice with the Federal Reserve Board, or other federal or
state bank regulatory authority, for approval to engage in an Acquisition
Transaction.
(4) Any Third Party shall have commenced (as such term is defined
in Rule 14d-2 under the Exchange Act) or shall have filed a registration
statement under the Securities Act with respect to, a tender offer or exchange
offer to purchase any shares of InterWest Common Stock such that, upon
consummation of such offer, such Third Party would own or control 20% or more
of the then outstanding shares of InterWest Common Stock.
(B) GENERAL INTERPRETATION. Except as otherwise expressly provided in
this Plan or unless the context clearly requires otherwise, the terms defined
in this Plan include the plural as well as the singular; the words "hereof,"
"herein," "hereunder," "in this Plan" and other words of similar import refer
to this Plan as a whole and not to any particular Article, Section or other
subdivision; and references in this Plan to Articles, Sections, Schedules, and
Exhibits refer to Articles and Sections of and Schedules and Exhibits to this
Plan. Whenever the words "include," "includes," or "including" are used in
this Plan, they shall be deemed to be followed by the words "without
limitation." Unless otherwise stated, references to Subsections refer to the
Subsections of the Section in which the reference appears. All pronouns used
in this Plan include the masculine, feminine and neuter gender, as the context
requires. All accounting terms used in this Plan that are not expressly
defined in this Plan have the respective meanings given to them in accordance
with GAAP.
ARTICLE I. MERGERS
1.1. THE CORPORATE MERGER. Subject to the provisions of this Plan, on
the Effective Date:
(A) THE CONTINUING CORPORATION. In accordance with the terms of RCW
Ch. 23B.11, the Company shall merge into InterWest (the "Corporate Merger"),
the separate existence of the Company shall cease and InterWest (the
"Continuing Corporation") shall survive, and the name of the Continuing
Corporation shall be "InterWest Bancorp, Inc."
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(B) RIGHTS, ETC. Upon consummation of the Corporate Merger, the
Continuing Corporation shall possess all of the rights, privileges, immunities
and franchises, of a public as well as of a private nature, of each of the
merging corporations; and all property, real, personal and mixed, and all
debts due on whatever account, and all other choses in action, and all and
every other interest, of or belonging to or due to each of the corporations so
merged, shall be deemed to be vested in the Continuing Corporation without
further act or deed; and the title to any real estate or any interest therein,
vested in each of such corporations, shall not revert or be in any way
impaired by reason of the Corporate Merger.
(C) LIABILITIES. The Continuing Corporation shall be responsible and
liable for all the liabilities, obligations and penalties of each of the
corporations so merged.
(D) ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS; OFFICERS.
The Articles of Incorporation and Bylaws of the Continuing Corporation shall
be those of InterWest, as in effect immediately prior to the Corporate Merger
becoming effective. The directors and officers of InterWest in office
immediately prior to the Corporate Merger becoming effective shall be the
directors and officers of the Continuing Corporation, together with such
additional directors and officers as may otherwise be agreed to by the Parties
and as may thereafter be elected, who shall hold office until such time as
their successors are elected and qualified.
(E) DISSENTING SHARES. Notwithstanding anything to the contrary herein,
each Dissenting Share whose holder, as of the Effective Date of the Merger,
has not effectively withdrawn or lost his dissenters' rights under RCW 23B.13
(the "Appraisal Laws") shall not be converted into or represent a right to
receive InterWest Common Stock, but the holder thereof shall be entitled only
to such rights as are granted by the Appraisal Laws. Each holder of
Dissenting Shares who becomes entitled to payment for his Company Common Stock
pursuant to the provisions of the Appraisal Laws shall receive payment
therefor from InterWest (but only after the amount thereof shall have been
agreed upon or finally determined pursuant to the Appraisal Laws).
1.2. THE BANK MERGERS. Immediately following consummation of the
Corporate Merger on the Effective Date or as soon thereafter as InterWest may
deem appropriate:
(A) THE CONTINUING BANK. The Banks shall be merged with and into
InterWest Savings (the "Bank Mergers" and together with the Corporate Merger,
the "Mergers"), the separate existence of the Banks shall cease and InterWest
Savings (the "Continuing Bank") shall survive, the name of the Continuing Bank
shall be "InterWest Savings Bank", and the Continuing Bank shall continue to
conduct the business of a savings bank at its main office in Oak Harbor,
Washington and at the legally established branches of the Banks and InterWest
Savings.
(B) RIGHTS, ETC. Upon consummation of the Bank Mergers, the Continuing
Bank shall possess all the rights, privileges, immunities and franchises, of a
public as well as of a private nature, of each of the Banks so merged; and all
property, real personal and mixed, and all debts due on whatever account, and
all other choses in action, and all and every other interest, of or belonging
to or due to each of the Banks so merged, shall be taken and deemed to be
transferred to and vested in the Continuing Bank without further act or deed,
including appointments, designations and nominations and all other rights and
interests in any fiduciary capacity; and the title to any real estate or any
interest therein, vested in each of such Banks, shall not revert or be in any
way impaired by reason of the Bank Mergers.
(C) LIABILITIES, ETC. The Continuing Bank shall be responsible and
liable for all the liabilities, obligations and penalties of the Banks so
merged (including liabilities arising out of the operation of any trust
departments). All rights of creditors and obligors and all liens on the
property of each of each of the Banks and InterWest Savings shall be preserved
unimpaired.
(D) CHARTER; BYLAWS; DIRECTORS; OFFICERS. The articles of incorporation
and bylaws of the Continuing Bank shall be those of InterWest Savings, as in
effect immediately prior to the Bank Mergers becoming effective. The
directors and officers of InterWest Savings in office immediately prior to the
Bank Mergers becoming effective shall be the directors and officers of the
Continuing Bank, together with such additional directors and officers as may
otherwise be agreed to by the Parties and as may thereafter be elected, who
shall hold office until such time as their successors are elected and
qualified.
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(E) OUTSTANDING STOCK OF THE CONTINUING BANK. The shares of
InterWest Savings Common Stock issued and outstanding immediately prior to the
Effective Date shall, on and after the Effective Date, remain as issued and
outstanding shares of InterWest Savings Common Stock, and the holders thereof
shall retain their rights therein.
(F) OUTSTANDING STOCK OF THE BANKS. The Continuing
Corporation shall deliver all of the issued and outstanding shares of the
Banks to the Continuing Bank for cancellation.
1.3. EFFECTIVE DATE. Unless the Parties agree upon another date, the
"Effective Date" will be the date ten (10) Business Days after the fulfillment
or waiver of each condition precedent set forth in, and the granting of each
approval (and expiration of any waiting period) required by, Article VI. If
the Mergers are not consummated in accordance with this Plan on or prior to
September 30, 1996 (the "Termination Date"), the Company or InterWest may
terminate this Plan in accordance with Article VII. Prior to the Effective
Date, InterWest and the Company shall execute and deliver to the Secretary of
State of the State of Washington articles of merger in accordance with
applicable law.
ARTICLE II. CONSIDERATION
2.1 CORPORATE MERGER CONSIDERATION. Subject to the
provisions of this Plan, on the Effective Date:
(A) OUTSTANDING INTERWEST COMMON STOCK. The shares of InterWest
Common Stock issued and outstanding immediately prior to the Effective Date
shall, on and after the Effective Date, remain as issued and outstanding
shares of InterWest Common Stock.
(B) OUTSTANDING COMPANY COMMON STOCK. Each share of Eligible
Company Common Stock issued and outstanding immediately prior to the Effective
Date shall, by virtue of the Corporate Merger, automatically and without any
action on the part of the holder thereof, become and be converted into the
right to receive 1.7 shares of InterWest Common Stock (as subject to
adjustment pursuant to this paragraph, the "Exchange Ratio"); provided,
however, that (1) in the event that the InterWest Price is greater than the
Collar Price and no Triggering Event has occurred, then each share of Eligible
Company Common Stock issued and outstanding immediately prior to the Effective
Date shall become and be converted into the right to receive the greater of:
(i) 1.41 shares of InterWest Common Stock or (ii) that number of shares of
InterWest Common Stock obtained by dividing the Total Consideration by the
InterWest Price, and by further dividing the quotient so reached by the
aggregate number of all shares of Eligible Company Common Stock issued and
outstanding immediately prior to the Effective Date and (2) in the event that
the InterWest Price is greater than the Collar Price and a Triggering Event
has occurred, then each share of Eligible Company Common Stock issued and
outstanding immediately prior to the Effective Date shall become and be
converted into the right to receive the greater of: (i) 1.41 shares of
InterWest Common Stock or (ii) that number of shares of InterWest Common Stock
obtained by dividing the Total Consideration by the Pre-Triggering Event
InterWest Price, and by further dividing the quotient so reached by the
aggregate number of all shares of Eligible Company Common Stock issued and
outstanding immediately prior to the Effective Date.
2.2. STOCKHOLDER RIGHTS; STOCK TRANSFERS. On the Effective Date,
holders of Company Common Stock shall cease to be, and shall have no rights
as, stockholders of the Company, other than to receive the consideration
provided under this Article II. After the Effective Date, there shall be no
transfers on the stock transfer books of the Company or the Continuing
Corporation of the shares of Company Common Stock which were issued and
outstanding immediately prior to the Effective Date.
2.3. FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of InterWest Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the
Corporate Merger; instead, InterWest shall pay to each holder of Company
Common Stock who would otherwise be entitled to a fractional share an amount
in cash determined by multiplying such fraction by the InterWest Price.
2.4. EXCHANGE PROCEDURES. As promptly as practicable after the Effective
Date, InterWest shall send or cause to be sent to each former stockholder of
the Company of record immediately prior to the
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Effective Date transmittal materials for use in exchanging such stockholder's
certificates for Company Common Stock for the consideration set forth in this
Article II. The certificates representing the shares of InterWest Common
Stock into which shares of such stockholder's Company Common Stock are
converted on the Effective Date, any fractional share checks which such
stockholder shall be entitled to receive, and any dividends paid on such
shares of InterWest Common Stock for which the record date for determination
of stockholders entitled to such dividends is on or after the Effective Date,
will be delivered to such stockholder only upon delivery to InterWest Savings
(the "Exchange Agent") of the certificates representing all of such shares of
Company Common Stock (or indemnity satisfactory to InterWest and the Exchange
Agent, in their judgment, if any of such certificates are lost, stolen or
destroyed). No interest will be paid on any such fractional share checks or
dividends to which the holder of such shares shall be entitled to receive upon
such delivery. Certificates surrendered for exchange by any person
constituting an "affiliate" of the Company for purposes of Rule 145 of the
Securities Act shall not be exchanged for certificates representing InterWest
Common Stock until InterWest has received a written agreement from such person
as specified in Section 5.10.
2.5. ANTI-DILUTION PROVISIONS. In the event InterWest changes the number
of shares of InterWest Common Stock issued and outstanding prior to the
Effective Date as a result of a stock split, stock dividend, recapitalization
or similar transaction with respect to the outstanding InterWest Common Stock
and the record date therefor shall be prior to the Effective Date, the
Exchange Ratio shall be proportionately adjusted.
2.6. EXCEPTION SHARES. Each of the Exception Shares of Company Common
Stock shall be canceled and retired at the effectiveness of the Corporate
Merger and no consideration shall be issued in exchange therefor.
2.7. RESERVATION OF RIGHT TO REVISE TRANSACTION. InterWest may at
any time change the method of effecting the acquisition of the Company and the
Banks by InterWest (including the provisions of this Article II) if and to the
extent it deems such change to be desirable; provided, however, that no such
change shall (i) alter or change the amount or kind of consideration to be
issued to holders of Company Common Stock as provided for in this Plan or (ii)
adversely affect the tax treatment to the Company stockholders as a result of
receiving such consideration.
2.8. OPTIONS. On the Effective Date, by virtue of the Corporate Merger,
and without any action on the part of any holder of an option, each option
granted by the Company to purchase shares of Company Common Stock ("Company
Option") that is then outstanding and unexercised shall be converted into and
become an option to purchase InterWest Common Stock ("InterWest Option") on
the same terms and conditions as are in effect with respect to the Company
Option immediately prior to the Effective Date, except that (i) each such
InterWest Option may be exercised solely for shares of InterWest Common Stock,
(ii) the number of shares of InterWest Common Stock subject to such InterWest
Option shall be equal to the number of shares of Company Common Stock subject
to such Option immediately prior to the Effective Date 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
InterWest Option shall be adjusted by dividing the per share exercise price of
the Company Option by the Exchange Ratio, and rounding up to the nearest cent.
The number of shares of Company Common Stock which are issuable upon exercise
of Options as of the date hereof are Previously Disclosed in Schedule 2.8.
Following the Effective Date, InterWest shall use its best efforts to prepare
and file with the SEC a registration statement on Form S-8 covering shares of
InterWest Common Stock to be issued upon the exercise of stock options assumed
by InterWest pursuant to this Section 2.8.
ARTICLE III. ACTIONS PENDING CONSUMMATION
Without the prior written consent of InterWest, each of the Company and
the Banks shall conduct its and each of its Subsidiaries' business in the
ordinary and usual course consistent with past practice and shall use its best
efforts to maintain and preserve its and each of its Subsidiaries' business
organization, employees and advantageous business relationships and retain the
services of its and each of its Subsidiaries' officers and key employees
identified by InterWest Savings, and each of the Company and the Banks will
not, and will cause each of its Subsidiaries not to, agree to:
3.1. CAPITAL STOCK. Except for or as otherwise permitted in or expressly
contemplated by this Plan or the Stock Option Agreement or as Previously
Disclosed in Schedule 4.1(C), issue, sell or otherwise
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permit to become outstanding any additional shares of capital stock of the
Company, the Banks or any of their Subsidiaries, or any Rights with respect
thereto, or enter into any agreement with respect to the foregoing, or permit
any additional shares of Company Common Stock to become subject to grants of
employee stock options, stock appreciation rights or similar stock- based
employee compensation rights.
3.2. DIVIDENDS, ETC. Make, declare or pay any dividend on or in respect
of (other than a $.40 per share dividend declared on Company Common Stock on
January 10, 1996 and an additional $.40 per share dividend to be declared on
July 10, 1996 if the Corporate Merger has not been completed by such date), or
declare or make any distribution on, or directly or indirectly combine,
redeem, reclassify, purchase or otherwise acquire, any shares of its capital
stock or, other than as permitted in or contemplated by this Plan or the Stock
Option Agreement, authorize the creation or issuance of, or issue, any
additional shares of its capital stock or any Rights with respect thereto.
3.3. INDEBTEDNESS; LIABILITIES; ETC. Other than in the ordinary course
of business consistent with past practice, incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other individual corporation
or other entity.
3.4. LINE OF BUSINESS; OPERATING PROCEDURES; ETC. Except as may be
directed by any regulatory agency, (i) change its lending, investment,
liability management or other material banking policies in any material
respect, except such changes as are in accordance and in an effort to comply
with Section 5.11, or (ii) commit to incur any further capital expenditures
beyond those Previously Disclosed in Schedule 3.4 other than in the ordinary
course of business and not exceeding $30,000 individually or $100,000 in the
aggregate.
3.5. LIENS AND ENCUMBRANCES. Impose, or suffer the imposition, on any
shares of stock of any of its Subsidiaries, any lien, charge or encumbrance,
or permit any such lien, charge or encumbrance to exist, except for an
existing lien that encumbers CWB Common Stock and secures a loan to the
Company from Key Bank of Washington.
3.6. COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. Except as
Previously Disclosed in Schedule 3.6, enter into or amend any employment,
severance or similar agreement or arrangement with any of its directors,
officers or employees, or grant any salary or wage increase, amend the terms
of any Company Option (except for an amendment to extend the period of
exercisability of any stock option held by a nonemployee director of the
Company for up to four years following the Effective Date) or increase any
employee benefit (including incentive or bonus payments), except normal
individual increases in regular compensation to employees in the ordinary
course of business consistent with past practice.
3.7. BENEFIT PLANS. Except as Previously Disclosed in Schedule 3.7,
enter into or modify (except as may be required by applicable law) any
pension, retirement, stock option, stock purchase, savings, profit sharing,
deferred compensation, consulting, bonus, group insurance or other employee
benefit, incentive or welfare contract, plan or arrangement, or any trust
agreement related thereto, in respect of any of its directors, officers or
other employees, including taking any action that accelerates the vesting or
exercise of any benefits payable thereunder.
3.8. CONTINUANCE OF BUSINESS. Dispose of or discontinue any portion of
its assets, business or properties, that is material to the Company and its
Subsidiaries taken as a whole, or merge or consolidate with, or acquire all or
any portion of, the business or property of any other entity that is material
to the Company and its Subsidiaries taken as a whole (except foreclosures or
acquisitions by the Banks in their fiduciary capacity, in each case in the
ordinary course of business consistent with past practice).
3.9. AMENDMENTS. Amend its Articles of Incorporation or Bylaws.
3.10. CLAIMS. Settle any claim, litigation, action or proceeding
involving any liability for material money damages or restrictions upon the
operations of the Company or any of its Subsidiaries.
3.11. CONTRACTS. Except as previously disclosed on Schedule 3.11, enter
into, renew, terminate or make any change in any material contract, agreement
or lease, except in the ordinary course of business
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consistent with past practice with respect to contracts, agreements and leases
that are terminable by it without penalty on no more than 60 days prior
written notice.
3.12. LOANS. Extend credit other than in accordance with existing lending
policies, except that the Banks shall not, without the prior written consent
of InterWest, make any new loan or modify, restructure or renew any existing
nonperforming loan to any borrower if the amount of the resulting loan, when
aggregated with all other loans or extensions of credit to such person or
entity (or which would be required to be aggregated for loans to one borrower
limitations) would be in excess of $250,000 for any new customer or $750,000
to any customer as of the date of this Plan.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
4.1. THE COMPANY AND THE BANKS REPRESENTATIONS AND WARRANTIES.
Each of the Company and the Banks hereby represents and warrants to InterWest
and InterWest Savings as follows:
(A) RECITALS. The facts set forth in the Recitals of this Plan with
respect to the Company and its Subsidiaries are true and correct.
(B) ORGANIZATION, STANDING AND AUTHORITY. Each of the Company
and its Subsidiaries is duly qualified to do business and is in good standing
in the States of the United States and foreign jurisdictions where the failure
to be duly qualified, individually or in the aggregate, is reasonably likely
to have a Material Adverse Effect on it. Each of the Company and its
Subsidiaries has in effect all federal state, local, and foreign governmental
authorizations necessary for it to own or lease its properties and assets and
to carry on its business as it is now conducted, the absence of which,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on it.
(C) SHARES. The outstanding shares of the Company and its Subsidiaries'
capital stock are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights. Except as Previously
Disclosed in Schedule 4.1(C), there are no shares of capital stock or other
equity securities of the Company or its Subsidiaries outstanding and no
outstanding Rights with respect thereto (except as provided under the Stock
Option Agreement).
(D) THE COMPANY SUBSIDIARIES. The Company has Previously Disclosed in
Schedule 4.1(D) a list of all of its Subsidiaries. Each of its Subsidiaries
that is a bank is an "insured depository institution" as defined in the
Federal Deposit Insurance Act, as amended, and applicable regulations
thereunder. No equity securities of any of its Subsidiaries are or may become
required to be issued (other than to the Company or one of its Subsidiaries)
by reason of any Rights with respect thereto. There are no contracts,
commitments, understandings or arrangements by which any of its Subsidiaries
is or may be bound to sell or otherwise issue any shares of such Subsidiary's
capital stock, and there are no contracts, commitments, understandings or
arrangements relating to the rights of the Company or its Subsidiaries, as
applicable, to vote or to dispose of such shares. All of the shares of
capital stock of each of its Subsidiaries held by the Company or one of its
Subsidiaries are fully paid and nonassessable and are owned by the Company or
one of its Subsidiaries free and clear of any charge, mortgage, pledge,
security interest, restriction, claim, lien or encumbrance (except for the
lien that encumbers CWB Common Stock and secures a loan to the Company from
Key Bank of Washington). Each of its Subsidiaries is in good standing under
the laws of the jurisdiction in which it is incorporated or organized, and is
duly qualified to do business and in good standing in the jurisdictions where
the failure to be duly qualified is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on it. Except as Previously
Disclosed in Schedule 4.1(D), it does not own beneficially, directly or
indirectly, any shares of any equity securities or similar interests of any
corporation, bank, partnership, joint venture, business trust, association or
other organization. In the case of representations by the Company, the
deposits of its Subsidiaries that are banks are insured by the Bank Insurance
Fund of the FDIC.
(E) CORPORATE POWER. Each of the Company and its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its material properties and assets.
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(F) CORPORATE AUTHORITY. Subject to any necessary receipt of approval
by its stockholders referred to in Section 6.1, this Plan and the Stock Option
Agreement have been authorized by all necessary corporate action of the
Company and each of its Subsidiaries that is a Party, and each such agreement
is a valid and binding agreement of the Company and such Subsidiaries,
enforceable against the Company and such Subsidiaries in accordance with its
terms, subject to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(G) NO DEFAULTS. Subject to the approval by its shareholders referred
to in Section 6.1, the required regulatory approvals referred to in Section
6.1, and the required filings under federal and state securities laws, and
except as Previously Disclosed in Schedule 4.1(G), the execution, delivery and
performance of this Plan and the Stock Option Agreement, and the consummation
by the Company and each of its Subsidiaries that is a Party of the
transactions contemplated hereby and thereby, does not and will not (i)
constitute a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of the Company or of any of its
Subsidiaries or to which the Company or any of its Subsidiaries or its or
their properties is subject or bound, which breach, violation or default is
reasonably likely, individually or in the aggregate, to have a Material
Adverse Effect on it, (ii) constitute a breach or violation of, or a default
under, the Articles of Incorporation, Charter or Bylaws of its or any of its
Subsidiaries, or (iii) require any consent or approval under any such law,
rule, regulation, judgment, decree, order, governmental permit or license or
the consent or approval of any other party to any such agreement, indenture or
instrument, other than any such consent or approval that, if not obtained,
would not be reasonably likely, individually or in the aggregate, to have a
Material Adverse Effect on it.
(H) FINANCIAL REPORTS. Except as Previously Disclosed in Schedule
4.1(H), (i) as to the Company, its Annual Report on Form 10-K for the fiscal
year ended December 31, 1994, and all other documents filed or to be filed
subsequent to December 31, 1994 under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act, in the form filed with the SEC (in each such case, the "Holding
Company Financial Reports"), and (ii) as to each of the Company's
Subsidiaries that is a bank, its call report for the fiscal year ended
December 31, 1994, and all other financial reports filed or to be filed
subsequent to December 31, 1994, in the form filed with the FDIC and the
Department of Financial Institutions of the State of Washington ("Department")
(in each case, the "Bank Financial Reports" and together with the Holding
Company Financial Reports, the "Financial Reports") did not and will 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 made
therein, in light of the circumstances under which they were made, not
misleading; and each of the balance sheets in or incorporated by reference
into the Financial Reports (including the related notes and schedules thereto)
fairly presents and will fairly present the financial position of the entity
or entities to which it relates as of its date, and each of the statements of
income and changes in stockholders' equity and cash flows or equivalent
statements in the Bank Financial Reports (including any related notes and
schedules thereto) fairly presents and will fairly present the results of
operations, changes in stockholders' equity and cash flows, as the case may
be, of the entity or entities to which it relates for the periods set forth
therein, in each case in accordance with GAAP during the periods involved,
except in each case as may be noted therein, subject to normal and recurring
year-end audit adjustments in the case of unaudited statements.
(I) ABSENCE OF UNDISCLOSED LIABILITIES. Neither the Company nor any
of its Subsidiaries has any obligation or liability (contingent or otherwise)
that, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on it, except (i) as reflected in its Holding Company
Financial Reports prior to the date of this Plan and (ii) for commitments and
obligations made, or liabilities incurred, in the ordinary course of business
consistent with past practice since December 31, 1994. Since December 31,
1994, neither the Company nor any of its Subsidiaries has incurred or paid any
obligation or liability (including any obligation or liability incurred in
connection with any acquisitions in which any form of direct financial
assistance of the federal government or any agency thereof has been provided
to any Subsidiary) which, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on it.
(J) NO EVENTS. Except as Previously Disclosed on Schedule 4.1(J), since
December 31, 1994, no event has occurred that, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on it.
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(K) PROPERTIES. Except as reserved against in its Holding Company
Financial Reports, the Company and each of its Subsidiaries have good and
marketable title, free and clear of all liens, encumbrances, charges,
defaults, or equities of any character, to all of the properties and assets,
tangible and intangible, reflected in its Holding Company Financial Reports as
being owned by the Company or its Subsidiaries as of the dates thereof other
than those that, individually or in the aggregate, are not reasonably likely
to have a Material Adverse Effect on it, except those sold or otherwise
disposed of in the ordinary course of business. All buildings and all
material fixtures, equipment, and other property and assets that are held
under leases or subleases by the Company or any of its Subsidiaries are held
under valid leases or subleases enforceable in accordance with their
respective terms, other than any such exceptions to validity or enforceability
that, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect on it.
(L) LITIGATION; REGULATORY ACTION. Except as Previously Disclosed in
Schedule 4.1(L), no litigation, proceeding or controversy before any court or
governmental agency is pending that, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on the Company or any of
its Subsidiaries or that alleges claims under any fair lending law or other
law relating to discrimination, including the Equal Credit Opportunity Act,
the Fair Housing Act, the Community Reinvestment Act and the Home Mortgage
Disclosure Act, and, to the best of its knowledge, no such litigation,
proceeding or controversy has been threatened; and except as Previously
Disclosed in Schedule 4.1(L), neither the Company nor any of its Subsidiaries
or any of its or their material properties or their officers, directors or
controlling persons is a party to or is subject to any order, decree,
agreement, memorandum of understanding or similar arrangement with, or a
commitment letter or similar submission to, any Regulatory Authority, and
neither the Company nor any of its Subsidiaries has been advised by any of
such Regulatory Authorities that such authority is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum or understanding, commitment
letter or similar submission.
(M) COMPLIANCE WITH LAWS. Except as Previously Disclosed in Schedule
4.1(M), each of the Company and its Subsidiaries:
(1) has all permits, licenses, authorizations, orders and approvals of, and
has made all filings, applications and registrations with, all Regulatory
Authorities that are required in order to permit it to own its businesses
presently conducted and that are material to the business of it and its
Subsidiaries taken as a whole; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to its best
knowledge, no suspension or cancellation of any of them is threatened; and all
such filings, applications and registrations are current;
(2) has received no notification or communication from any Regulatory
Authority or the staff thereof (i) asserting that the Company or any of its
Subsidiaries is not in compliance with any of the statutes, regulations or
ordinances which such Regulatory Authority enforces, which, as a result of
such
noncompliance in any such instance, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on the Company or its
Subsidiaries, (ii) threatening to revoke any license, franchise, permit or
governmental authorization, which revocation, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on the
Company or its Subsidiaries, or (iii) requiring any of the Company or its
Subsidiaries (or any of its or their officers, directors or controlling
persons) to enter into a cease and desist order, agreement or memorandum of
understanding (or requiring the board of directors thereof to adopt any
resolution or policy);
(3) is not required to give prior notice to any federal banking or thrift
agency of the proposed addition of an individual to its board of directors or
the employment of an individual as a senior executive; and
(4) is in compliance in all material respects with all fair lending laws or
other laws relating to discrimination, including the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act and the Home
Mortgage Disclosure Act.
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(N) MATERIAL CONTRACTS. Except as Previously Disclosed in Schedule
4.1(N), none of the Company or its Subsidiaries, nor any of its respective
assets, businesses or operations, is a party to, or is bound or affected by,
or receives benefits under, any contract or agreement or amendment thereto
that in each case would be required to be filed as an exhibit to a Form 10-K
filed by the Company that has not been filed as an exhibit to the Company's
Form 10-K filed for the fiscal year ended December 31, 1994. Neither the
Company nor any of its Subsidiaries is in default under any contract,
agreement, commitment, arrangement, lease, insurance policy or other
instrument to which it is a party, by which its respective assets, business or
operations may be bound or affected, or under which it or any of its
respective assets, business or operations receives benefits, which default,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on the Company or its Subsidiaries, 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. Except as Previously Disclosed in Schedule 4.1(N),
neither the Company nor any of its Subsidiaries is subject to or bound by any
contract containing covenants which limit the ability of the Company or any of
its Subsidiaries to compete in any line of business or with any person or
which involve any restriction of geographical area in which, or method by
which, the Company or any of its Subsidiaries may carry on its business (other
than as may be required by law or any applicable Regulatory Authority).
(O) REPORTS. Since January 1, 1991, each of the Company and its
Subsidiaries has 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 Department, (iii) the Federal Home Loan Bank
and the Federal Home Loan Bank System, and (iv) any other applicable
Regulatory Authorities. As of their respective dates (and without giving
effect to any amendments or modifications filed after the date of this Plan
with respect to reports and documents filed before the date of this Plan),
each of such reports and documents, including the financial statements,
exhibits and schedules thereto, complied in all material respects with all of
the statutes, rules and regulations enforced or promulgated by the Regulatory
Authority with which they were filed and did not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements made therein, in light of the circumstances under which
they were made, not misleading.
(P) NO BROKERS. All negotiations relative to this Plan and the
transactions contemplated hereby have been carried on by it directly with the
other Parties and no action has been taken by it that would give rise to any
valid claim against any Party for a brokerage commission, finder's fee or
other like payment (except for a fee to be paid by the Company to Columbia
Financial Advisors, Inc.).
(Q) EMPLOYEE BENEFIT PLANS.
(1) Schedule 4.1(Q)(1) contains a complete list of all bonus, deferred
compensation, pension, retirement, profit-sharing, thrift savings, employee
stock ownership, stock bonus, stock purchase restricted stock and stock option
plans, all employment or severance contracts, all medical, dental, health and
life insurance plans, all other employee benefit plans, contracts or
arrangements and any applicable "change of control" or similar provisions in
any plan, contract or arrangement maintained or contributed to by the Company
or any of its Subsidiaries for the benefit of employees, former employees,
directors, former directors or their beneficiaries (the "Compensation and
Benefit Plans"). True and complete copies of all Compensation and Benefit
Plans of the Company and its Subsidiaries, including any trust instruments
and/or insurance contracts, if any, forming a part thereof, and all amendments
thereto, have been supplied to the other Parties.
(2) All "employee benefit plans" within the meaning of Section 3(3) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA"), other
than "multiemployer plans" within the meaning of Section 3(37) of ERISA
("Multiemployer Plans"), covering employees or former employees of the Company
and its Subsidiaries (the "ERISA Plans"), to the extent subject to ERISA, are
in substantial compliance with ERISA. Except as Previously Disclosed in
Schedule 4.1(Q)(2), each ERISA Plan which is an "employee pension benefit
plan" within the meaning of Section 3(2) of ERISA ("Pension Plan") and which
is intended to be qualified under Section 401(a) of the Internal Revenue Code
of 1986 (as amended, the "Code") has received a favorable determination letter
from the Internal Revenue Service, and it is not aware of any circumstances
reasonably likely to result in the revocation or
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denial of any such favorable determination letter or the inability to receive
such a favorable determination letter. There is no material pending or, to
its knowledge, threatened litigation relating to the ERISA Plans. Neither the
Company nor any of its Subsidiaries has engaged in a transaction with respect
to any ERISA Plan that could subject the Company or any of its Subsidiaries to
a tax or penalty imposed by either Section 4975 of the Code or Section 502(i)
of ERISA in an amount which would be material.
(3) No liability under Subtitle C or D of Title IV of ERISA has been or is
expected to be incurred by the Company or any of its Subsidiaries with respect
to any ongoing, frozen or terminated "single-employer plan," within the
meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by
any of them, or the single-employer plan of any entity which is considered one
employer with the Company under Section 4001(a)(15) of ERISA or Section 414 of
the Code (an "ERISA Affiliate"). Neither the Company nor any of its
Subsidiaries presently contributes to a Multiemployer Plan, nor have they
contributed to such a plan within the past five calendar years. No notice of
a "reportable event," within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to be
filed for any Pension Plan or by any ERISA Affiliate within the past 12-month
period.
(4) All contributions required to be made under the terms of any ERISA Plan
have been timely made. Neither any Pension Plan nor any single-employer plan
of an ERISA Affiliate has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of ERISA.
Neither the Company nor any of its Subsidiaries has provided, or is required
to provide, security to any Pension Plan or to any single-employer plan of an
ERISA Affiliate pursuant to Section 401(a)(29) of the Code.
(5) Under each Pension Plan which is a single-employer plan, as of the last
day of the most recent plan year, the actuarially determined present value of
all "benefit liabilities," within the meaning of Section 4001(a)(16) of ERISA
(as determined on the basis of the actuarial assumptions contained in the
plan's most recent actuarial valuation) did not exceed the then current value
of the assets of such plan, and there has been no material change in the
financial condition of such plan since the last day of the most recent plan
year.
(6) Neither the Company nor any of its Subsidiaries has any obligations for
retiree health and life benefits under any plan, except as set forth in
Schedule 4.1(Q)(6). There are no restrictions on the rights of the Company or
any of its Subsidiaries to amend or terminate any such plan without incurring
any liability thereunder.
(7) Except as Previously Disclosed in Schedule 4.1(Q)(7), neither the
execution and delivery of this Plan nor the consummation of the transactions
contemplated hereby will (i) result in any payment (including severance,
unemployment compensation, golden parachute or otherwise) becoming due to any
director or any employee of the Company or any of its Subsidiaries under any
Compensation and Benefit Plan or otherwise from the Company or any of its
Subsidiaries, (ii) increase any benefits otherwise payable under any
Compensation and Benefit Plan, or (iii) result in any acceleration of the time
of payment or vesting of any such benefit.
(R) NO KNOWLEDGE. The Company and its Subsidiaries know of no reason
why the regulatory approvals referred to in Section 6.2 should not be
obtained.
(S) LABOR AGREEMENTS. Neither the Company nor any of its Subsidiaries
is a party to or is bound by any collective bargaining agreement, contract or
other agreement or understanding with a labor union or labor organization, nor
is the Company or any of its Subsidiaries the subject of a proceeding
asserting that it or any such Subsidiary has committed an unfair labor
practice (within the meaning of the National Labor Relations Act) or seeking
to compel it or such Subsidiary to bargain with any labor organization as to
wages and conditions of employment, nor is there any strike or other labor
dispute involving it or any of its Subsidiaries, pending or, to the best of
its knowledge, threatened, nor is it aware of any activity involving its or
any of the
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Subsidiaries' employees seeking to certify a collective bargaining unit or
engaging in any other organization activity.
(T) ASSET CLASSIFICATION. The Company and its Subsidiaries have
Previously Disclosed in Schedule 4.1(T) a list, accurate and complete in all
material respects, of the aggregate amounts of loans, extensions of credit or
other assets of the Company and its Subsidiaries that have been classified by
it as of December 31, 1995 (the "Asset Classification"); and no amounts of
loans, extensions of credit or other assets that have been classified as of
December 31, 1995 by any regulatory examiner as "Other Loans Specially
Mentioned," "Substandard," "Doubtful" "Loss," or words of similar import are
excluded from the amounts disclosed in the Asset Classification, other than
amounts of loans, extensions of credit or other assets that were charged off
by the Company or any Subsidiary prior to December 31, 1995.
(U) ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible
loan losses shown on the consolidated balance sheets in the December 31, 1994
Holding Company Financial Reports of the Company was, and the allowance for
possible loan losses to be shown on subsequent Holding Company Financial
Reports of the Company will be, adequate in the opinion of the Board of
Directors of the Company to provide for possible losses, net of recoveries
relating to loans previously charged off, on loans outstanding (including
accrued interest receivable) as of the date thereof.
(V) INSURANCE. Each of the Company and its Subsidiaries has taken all
requisite action (including the making of claims and the giving of notices)
pursuant to its directors' and officers' liability insurance policy or
policies in order to preserve all rights thereunder with respect to all
matters that are known to the Company, except for such matters which,
individually or in the aggregate, are not reasonably likely to have a Material
Adverse Effect on the Company or its Subsidiaries. Set forth in Schedule
4.1(V) is a list of all insurance policies maintained by or for the benefit of
the Company or its Subsidiaries or their respective directors, officers,
employees or agents.
(W) AFFILIATES. Except as Previously Disclosed in Schedule 4.1(W), to
the best of the Company's knowledge, there is no person who, as of the date of
this Plan, may be deemed to be an "affiliate" of the Company as that term is
used in Rule 145 under the Securities Act.
(X) STATE TAKEOVER LAWS; ARTICLES OF INCORPORATION. The
Company and its Subsidiaries have taken all necessary action to exempt this
Plan and the Stock Option Agreement and the transactions contemplated hereby
and thereby from, and this Plan and the Stock Option Agreement and the
transactions contemplated hereby and thereby are exempt from (i) any
applicable state takeover laws, including, but not limited to, RCW Ch. 23B.19,
and (ii) any takeover-related provisions of the Company's and its
Subsidiaries' Articles of Incorporation.
(Y) NO FURTHER ACTION. The Company and its Subsidiaries have taken all
action so that the entering into of this Plan and the Stock Option Agreement,
and the consummation of the transactions contemplated hereby and thereby
(including the Mergers and the exercise of the Option) or any other action or
combination of actions, or any other transactions, contemplated hereby or
thereby do not and will not (i) require a vote of shareholders (other than as
set forth in Section 6.1), or (ii) result in the grant of any rights to any
person under the Articles of Incorporation, Charter or Bylaws of the Company
or any of its Subsidiaries or under any agreement to which the Company or any
such Subsidiaries is a party, or (iii) restrict or impair in any way the
ability of the other Parties to exercise the rights granted hereunder or under
the Stock Option Agreement.
(Z) ENVIRONMENTAL MATTERS.
(1) To the Company's knowledge, it and each of its Subsidiaries, the
Participation Facilities and the Loan/Fiduciary Properties are, and have been,
in compliance with all Environmental Laws, except for instances of
noncompliance which are not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company or its
Subsidiaries.
(2) There is no proceeding pending or, to the Company's knowledge, threatened
before any court, governmental agency or board or other forum in which the
Company or any
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of its Subsidiaries or any Participation Facility has been, or with respect to
threatened proceedings, reasonably would be expected to be, named as a
defendant or potentially responsible party (i) for alleged noncompliance
(including by any predecessor) with any Environmental Law or (ii) relating to
the release or threatened release into the environment of any Hazardous
Material, whether or not occurring at or on a site owned, leased or operated
by the Company or any of its Subsidiaries or any Participation Facility,
except for such proceedings pending or threatened that are not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
the Company or its Subsidiaries or have been Previously Disclosed in Schedule
4.1(Z)(2).
(3) There is no proceeding pending or, to the Company's knowledge, threatened
before any court, governmental agency or board or other forum in which any
Loan/Fiduciary Property (or the Company or any of its Subsidiaries in respect
of any Loan/Fiduciary Property) has been, or with respect to threatened
proceedings, reasonably would be expected to be, named as a defendant or
potentially responsible party (i) for alleged noncompliance (including by any
predecessor) with any Environmental Law or (ii) relating to the release or
threatened release into the environment of any Hazardous Material, whether or
not occurring at or on a Loan/Fiduciary Property, except for such proceedings
pending or threatened that are not reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on the Company or have been
Previously Disclosed in Schedule 4.1(Z)(3).
(4) To the Company's knowledge, there is no reasonable basis for any
proceeding of a type described in subparagraphs (2) or (3) of this paragraph
(Z), except as has been Previously Disclosed in Schedule 4.1(Z)(4).
(5) To the Company's knowledge, during the period of (i) ownership or
operation by the Company or any of its Subsidiaries of any of their respective
current properties, (ii) participation in the management of any Participation
Facility by the Company or any of its Subsidiaries, or (iii) holding of a
security or other interest in a Loan/Fiduciary Property by the Company or any
of its Subsidiaries, there have been no releases of Hazardous Material in, on,
under or affecting any such property, Participation Facility or Loan/Fiduciary
Property, except for such releases that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on the
Company or its Subsidiaries or have been Previously Disclosed in Schedule
4.1(Z)(5).
(6) To the Company's knowledge, prior to the period of (i) ownership or
operation by the Company or any of its Subsidiaries of any of their respective
current properties, (ii) participation in the management of any Participation
Facility by the Company or any of its Subsidiaries, or (iii) holding of a
security or other interest in a Loan/Fiduciary Property by the Company or any
of its Subsidiaries, there were no releases of Hazardous Material in, on,
under or affecting any such property, Participation Facility or Loan/Fiduciary
Property, except for such releases that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on the
Company or its Subsidiaries or have been Previously Disclosed in Schedule
4.1(Z)(6).
(AA) OPTION SHARES. The Option Shares, when issued upon exercise of the
Option, will be validly issued, fully paid and nonassessable and subject to no
preemptive rights.
(BB) TAX REPORTS. Except as Previously Disclosed in Schedule 4.1(BB),
(i) all reports and returns with respect to Taxes that are required to be
filed by or with respect to the Company or its Subsidiaries, including
consolidated federal income tax returns of the Company and its Subsidiaries
(collectively, the "Tax Returns"), have been duly filed, or requests for
extensions have been timely filed and have not expired, for periods ended on
or prior to the most recent fiscal year-end, except to the extent all such
failures to file, taken together, are not reasonably likely to have a Material
Adverse Effect on the Company or its Subsidiaries, and such Tax Returns were
true, complete and accurate in all material respects, (ii) all Taxes shown to
be due on the Tax Returns have been paid in full, (iii) the Tax Returns have
been examined by the Internal Revenue Service or the appropriate state, local
or foreign taxing authority or the period for assessment of the Taxes in
respect of
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which such Tax Returns were required to be filed has expired, (iv) all Taxes
due with respect to completed and settled examinations have been paid in full,
(v) no issues have been raised by the relevant taxing authority in connection
with the examination of any of the Tax Returns which are reasonably likely,
individually or in the aggregate, to result in a determination that would have
a Material Adverse Effect on the Company or its Subsidiaries, except as
reserved against in the Holding Company Financial Reports of the Company, and
(vi) no waivers of statutes of limitations (excluding such statutes that
relate to years under examination by the Internal Revenue Service) have been
given by or requested with respect to any Taxes of the Company or its
Subsidiaries.
(CC) ACCURACY OF INFORMATION. The statements with respect to the
Company and its Subsidiaries contained in this Plan, the Stock Option
Agreement, the Schedules and any other written documents executed and
delivered by or on behalf of the Company or any other Party pursuant to the
terms of or relating to this Plan are true and correct in all material
respects, and such statements and documents do not omit any material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(EE) DERIVATIVES CONTRACTS. None of the Company or its Subsidiaries is a
party to or has agreed to enter into a Derivatives Contract or owns securities
that are referred to as "structured notes" except for those Derivatives
Contracts and structured notes Previously Disclosed in Schedule 4.1(EE).
Schedule 4.1(EE) includes a list of any assets of the Company or its
Subsidiaries that are pledged as security for each such Derivatives Contract.
(FF) ACCOUNTING CONTROLS. Each of the Company and its Subsidiaries has
devised and maintained systems of internal accounting controls sufficient to
provide reasonable assurances that (i) all material transactions are executed
in accordance with management's general or specific authorization, (ii) all
material transactions are recorded as necessary to permit the preparation of
financial statements in conformity with GAAP, and to maintain proper
accountability for items, (iii) access to the material property and assets of
the Company and its Subsidiaries is permitted only in accordance with
management's general or specific authorization, and (iv) the recorded
accountability for items is compared with the actual levels at reasonable
intervals and appropriate action is taken with respect to any differences.
(GG) COMMITMENTS AND CONTRACTS. Neither the Company nor any of its
Subsidiaries is a party or subject to any of the following (whether written or
oral, express or implied):
(1) except as Previously Disclosed in Schedule 4.1(GG), any employment
contract or understanding (including any understandings or obligations with
respect to severance or termination pay liabilities or fringe benefits) with
any present or former officer, director or employee (other than those which
are terminable at will by the Company or any such Subsidiary without any
obligation on the part of the Company or any such Subsidiary to make any
payment in connection with such termination);
(2) except as Previously Disclosed in Schedule 4.1(GG), any real or personal
property lease with annual rental payments aggregating $10,000 or more; or
(3) except as Previously Disclosed in Schedule 4.1(GG), any material contract
with any affiliate.
4.2. INTERWEST AND INTERWEST SAVINGS REPRESENTATIONS AND
WARRANTIES. Each of InterWest and InterWest Savings hereby represents and
warrants to the Company and the Banks as follows:
(A) RECITALS. The facts set forth in the Recitals of this Plan with
respect to InterWest and InterWest Savings are true and correct.
(B) ORGANIZATION, STANDING AND AUTHORITY. Each of InterWest and
InterWest Savings is duly qualified to do business and is in good standing in
the States of the United States and foreign jurisdictions where the failure to
be duly qualified, individually or in the aggregate, is reasonably likely to
have a
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Material Adverse Effect on it. Each of InterWest and its Subsidiaries has in
effect all federal state, local, and foreign governmental authorizations
necessary for it to own or lease its properties and assets and to carry on its
business as it is now conducted, the absence of which, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on
InterWest.
(C) SHARES. The outstanding shares of InterWest's capital stock are
validly issued and outstanding, fully paid and nonassessable, and subject to
no preemptive rights. Except as Previously Disclosed in Schedule 4.2(C),
there are no shares of capital stock or other equity securities of it or its
Subsidiaries outstanding and no outstanding Rights with respect thereto.
(D) CORPORATE POWER. Each of InterWest and InterWest Savings has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its material properties and assets.
(E) CORPORATE AUTHORITY. Subject to any necessary receipt of approval
by its stockholders referred to in Section 6.1, this Plan, the Stock Option
Agreement and each of the Employment Agreements have been authorized by all
necessary corporate action of InterWest and InterWest Savings and each such
agreement is a valid and binding agreement of InterWest and InterWest Savings,
enforceable against InterWest and InterWest Savings in accordance with its
terms, subject to bankruptcy, insolvency and other laws of general
applicability relating to or affecting creditors' rights and to general equity
principles.
(F) NO DEFAULTS. Subject to the approval by its shareholders referred
to in Section 6.1, the required regulatory approvals referred to in Section
6.1, and the required filings under federal and state securities laws, and
except as Previously Disclosed in Schedule 4.2(F), the execution, delivery and
performance of this Plan, and the Stock Option Agreement, and each of the
Employment Agreements and the consummation by InterWest and each of its
Subsidiaries that is a Party to the transactions contemplated hereby and
thereby, does not and will not (i) constitute a breach or violation of, or a
default under, any law, rule or regulation or any judgment, decree, order,
governmental permit or license, or agreement, indenture or instrument of
InterWest or of any of its Subsidiaries or to which InterWest or any of its
Subsidiaries or its or their properties is subject or bound, which breach,
violation or default is reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on InterWest, (ii) constitute a breach or
violation of, or a default under, the Articles of Incorporation, Charter or
Bylaws of its or any of its Subsidiaries, or (iii) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license or the consent or approval of any other party
to any such agreement, indenture or instrument, other than any such consent or
approval that, if not obtained, would not be reasonably likely, individually
or in the aggregate, to have a Material Adverse Effect on InterWest.
(G) FINANCIAL REPORTS. Except as Previously Disclosed in Schedule
4.2(G), in the case of InterWest, its Annual Report on Form 10-K for the
fiscal year ended September 30, 1995, and all other documents filed or to be
filed subsequent to September 30, 1995 under Sections 13(a), 13(c), 14 or
15(d) of the Exchange Act, in the form filed with the SEC (in each such case,
the "InterWest Financial Reports"), did not and will 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 made therein, in light of
the circumstances under which they were made, not misleading; and each of the
balance sheets in or incorporated by reference into the InterWest Financial
Reports (including the related notes and schedules thereto) fairly presents
and will fairly present the financial position of the entity or entities to
which it relates as of its date and each of the statements of income and
changes in stockholders' equity and cash flows or equivalent statements in the
InterWest Financial Reports (including any related notes and schedules
thereto) fairly presents and will fairly present the results of operations,
changes in stockholders' equity and changes in cash flows, as the case may be,
of the entity or entities to which it relates for the periods set forth
therein, in each case in accordance with generally accepted accounting
principles consistently applied during the periods involved, except as may be
noted therein, subject to normal and recurring year-end audit adjustments in
the case of unaudited statements.
(H) NO EVENTS. Except as Previously Disclosed on Schedule 4.2(H), since
September 30, 1995, no event has occurred which is reasonably likely to have a
Material Adverse Effect on it.
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(I) LITIGATION; REGULATORY ACTION. Except as Previously Disclosed in
Schedule 4.2(I), no litigation, proceeding or controversy before any court or
governmental agency is pending that, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on InterWest and its
Subsidiaries or that alleges claims under any fair lending law or other law
relating to discrimination, including the Equal Credit Opportunity Act, the
Fair Housing Act, the Community Reinvestment Act and the Home Mortgage
Disclosure Act, and, to the best of its knowledge, no such litigation,
proceeding or controversy has been threatened; and except as Previously
Disclosed in Schedule 4.2(I), neither InterWest nor any of its Subsidiaries or
any of its or their material properties or their officers, directors or
controlling persons is a party to or is subject to any order, decree,
agreement, memorandum of understanding or similar arrangement with, or a
commitment letter or similar submission to, any Regulatory Authority, and
neither InterWest nor any of its Subsidiaries has been advised by any of such
Regulatory Authorities that such authority is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting)
any such order, decree, agreement, memorandum or understanding, commitment
letter or similar submission.
(J) REPORTS. Since September 30, 1995, each of InterWest and its
Subsidiaries has 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 Department, (iii) the Federal Home Loan Bank
and the Federal Home Loan Bank System, and (iii) any other applicable
Regulatory Authorities. As of their respective dates (and without giving
effect to any amendments or modifications filed after the date of this Plan
with respect to reports and documents filed before the date of this Plan),
each of such reports and documents, including the financial statements,
exhibits and schedules thereto, complied in all material respects with all of
the statutes, rules and regulations enforced or promulgated by the Regulatory
Authority with which they were filed and did not contain any untrue statement
of a material fact or omit to state any material fact necessary in order to
make the statements made therein, in light of the circumstances under which
they were made, not misleading.
(K) ACCURACY OF INFORMATION. The statements with respect to InterWest
and its Subsidiaries contained in this Plan, the Stock Option Agreement, the
Schedules and any other written documents executed and delivered by or on
behalf of InterWest or any other Party pursuant to the terms of this Plan are
true and correct in all material respects, and such statements and documents
do not omit any material fact necessary to make the statements contained
therein, in light of the circumstances under which they were made, not
misleading.
(L) DERIVATIVES CONTRACTS. None of InterWest or its Subsidiaries is a
party to or has agreed to enter into a Derivatives Contract or owns securities
that are referred to as "structured notes" except for those Derivatives
Contracts and structured notes Previously Disclosed in Schedule 4.2(L).
Schedule 4.2(L) includes a list of any assets of InterWest or its
Subsidiaries that are pledged as security for each such Derivatives Contract.
(M) ABSENCE OF UNDISCLOSED LIABILITIES. Neither InterWest nor any of
its Subsidiaries has any obligation or liability (contingent or otherwise)
that, individually or in the aggregate, is reasonably likely to have a
Material Adverse Effect on it, except (i) as reflected the Interwest
Financial Reports prior to the date of this Plan and (ii) for commitments and
obligations made, or liabilities incurred, in the ordinary course of business
consistent with past practice since September 30, 1995. Since September 30,
1995, neither InterWest nor any of its Subsidiaries has incurred or paid any
obligation or liability (including any obligation or liability incurred in
connection with any acquisitions in which any form of direct financial
assistance of the federal government or any agency thereof has been provided
to any Subsidiary) which, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on it.
ARTICLE V. COVENANTS
Each of the Company and the Banks hereby covenants to InterWest and
InterWest Savings, and each of InterWest and InterWest Savings hereby
covenants to the Company and the Banks, that:
5.1. BEST EFFORTS. Subject to the terms and conditions of this Plan and
to the exercise by its Board of Directors of such Board's fiduciary duties, it
shall use its best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under
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applicable laws, so as to permit consummation of the Mergers by June 30, 1996
and to otherwise enable consummation of the transactions contemplated hereby
and (in the case of the Company and InterWest) by the Stock Option Agreement,
and shall cooperate fully with the other Parties to that end (it being
understood that any amendments to the Registration Statement or a
resolicitation of proxies as a consequence of an Acquisition Transaction in
which InterWest or any of its subsidiaries is involved shall not violate this
covenant).
5.2. THE PROXY. In the case of the Company: it shall promptly assist
InterWest in the preparation of a proxy statement (the "Proxy Statement") to
be mailed to the holders of the Company Common Stock in connection with the
transactions contemplated hereby and to be filed by InterWest in a
registration statement (the "Registration Statement") with the SEC as provided
in Section 5.8, which shall conform to all applicable legal requirements, and
it shall call a special meeting (the "Meeting") of the holders of Company
Common Stock to be held as soon as practicable for purposes of voting upon the
transactions contemplated hereby and the Company shall use its best efforts to
solicit and obtain votes of the holders of Company Common Stock in favor of
the transactions contemplated hereby and, subject to the exercise of its
fiduciary duties, the Board of Directors of the Company shall recommend
approval of such transactions by such holders.
5.3. REGISTRATION STATEMENT COMPLIANCE WITH SECURITIES LAWS.
When the Registration Statement or any post-effective amendment or supplement
thereto shall become effective, and at all times subsequent to such
effectiveness, up to and including the date of the Meeting, such Registration
Statement, and all amendments or supplements thereto, with respect to all
information set forth therein furnished or to be furnished by or on behalf of
the Company relating to the Company or its Subsidiaries and by or on behalf of
InterWest relating to InterWest or its Subsidiaries, (i) will comply in all
material respects with the provisions of the Securities Act and any other
applicable statutory or regulatory requirements and (ii) will 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 contained therein not
misleading; provided, however, in no event shall any Party be liable for any
untrue statement of a material fact or omission to state a material fact in
the Registration Statement made in reliance upon, and in conformity with,
written information concerning another Party furnished by or on behalf of such
other Party specifically for use in the Registration Statement.
5.4. REGISTRATION STATEMENT EFFECTIVENESS. In the case of InterWest:
it will advise the Company, promptly after InterWest 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 InterWest 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.
5.5. PRESS RELEASES. The Company and the Banks will not, without the
prior approval of InterWest, and InterWest and InterWest Savings will not,
without the prior approval of the Company, issue any press release or written
statement for general circulation relating to the transactions contemplated
hereby, except as otherwise required by law.
5.6. ACCESS; INFORMATION.
(A) Upon reasonable notice, the Company and the Banks shall afford
InterWest and its 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 the Company and its Subsidiaries and,
during such period, the Company and the Banks shall furnish promptly to
InterWest (i) a copy of each material report, schedule and other document
filed by the Company and its Subsidiaries with any Regulatory Authority and
(ii) all other information concerning the business, properties and personnel
of the Company and its Subsidiaries as InterWest may reasonably request,
provided that no investigation pursuant to this Section 5.6 shall affect or be
deemed to modify or waive any representation or warranty made by the Company
or the Banks in this Plan or the conditions to the obligations of the Company
and the Banks to consummate the transactions contemplated by this Plan; and
(B) InterWest will not use any information obtained pursuant to
this Section 5.6 for any purpose unrelated to the consummation of the
transactions contemplated by this Plan and, if this Plan is terminated, will
hold all confidential information and documents obtained pursuant to this
paragraph in
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confidence (as provided in Section 8.6) unless and until such time as such
information or documents become publicly available other than by reason of any
action or failure to act by InterWest or as it is advised by counsel that any
such information or document is required by law or applicable stock exchange
rule to be disclosed, and in the event of the termination of this Plan,
InterWest will, upon request by the Company, deliver to the Company all
documents so obtained by InterWest or destroy such documents and, in the case
of destruction, will certify such fact to the Company.
5.7. ACQUISITION PROPOSALS. In the case of the Company: Without the
prior written consent of InterWest, the Company shall not, and it shall cause
its Subsidiaries not to, solicit, initiate or encourage inquiries or proposals
with respect to, or, except as required by the fiduciary duties of the Board
of Directors of the Company (as advised in writing by its outside counsel),
furnish any nonpublic information relating to or participate in any
negotiations or discussions concerning, any acquisition or purchase of all or
a substantial portion of the assets of, or a substantial equity interest in,
the Company or any of its Subsidiaries or any merger or other business
combination with the Company or any of its Subsidiaries other than as
contemplated by this Plan; it shall instruct its and its Subsidiaries'
officers, directors, agents, advisors and affiliates to refrain from doing any
of the foregoing; and it shall notify InterWest immediately if any such
inquiries or proposals are received by, or any such negotiations or
discussions are sought to be initiated with, the Company or any of its
Subsidiaries.
5.8. REGISTRATION STATEMENT PREPARATION; REGULATORY
APPLICATIONS PREPARATION. In the case of InterWest: InterWest shall, as
promptly as practicable following the date of this Plan, prepare and file the
Registration Statement with the SEC and InterWest shall use its best efforts
to cause the Registration Statement to be declared effective as soon as
practicable after the filing thereof. InterWest shall, as promptly as
practicable following the date of this Plan, prepare and file all necessary
notices or applications with the FDIC, the Federal Reserve Board, and the
Department.
5.9. BLUE-SKY FILINGS. In the case of InterWest: InterWest shall use its
best efforts to obtain, prior to the effective date of the Registration
Statement, all necessary state securities laws or "blue sky" permits and
approvals, provided that InterWest shall not be required by virtue thereof to
submit to general jurisdiction in any state.
5.10. AFFILIATE AGREEMENTS. In the case of the Company: The Company
will use its best efforts to induce each person who may be deemed to be an
"affiliate" of the Company for purposes of Rule 145 under the Securities Act
to execute and deliver to InterWest on or before the mailing of the Proxy
Statement for the Meeting an agreement in the form attached hereto as Exhibit
C restricting the disposition of such affiliate's shares of the Company Common
Stock and the shares of InterWest Common Stock to be received by such person
in exchange for such person's shares of Company Common Stock. In the case of
InterWest: InterWest agrees to use its best efforts to maintain the
availability of Rule 145 for use by such "affiliates".
5.11. CERTAIN POLICIES OF THE COMPANY AND THE BANKS. In the
case of each of the Company and the Banks: Each shall, at InterWest's
request: (i) modify and change its loan, litigation and other reserve and
real estate valuation policies and practices (including loan classifications
and levels of reserves), and (ii) generally conform its operating, lending and
compliance policies and procedures, immediately prior to the Effective Date so
as to be consistent on a mutually satisfactory basis with those of InterWest
and GAAP; provided, however, that prior to any such modification or change,
InterWest shall certify that the conditions to the obligation of InterWest
under Section 6.1 and 6.2 to consummate the transactions contemplated hereby,
other than the condition set forth in Section 6.1(G) have been satisfied or
waived. The Company's and the Banks' representations, warranties and
covenants contained in this Plan shall not be deemed to be untrue or breached
in any respect for any purpose as a consequence of any modifications or
changes undertaken solely on account of this Section 5.11.
5.12. STATE TAKEOVER LAW. In the case of the Company: The Company
shall not take any action that would cause the transactions contemplated by
this Plan or the Stock Option Agreement to be subject to any applicable state
takeover statute and the Company shall take all necessary steps to exempt (or
ensure the continued exemption of) the transactions contemplated by this Plan
and the Stock Option Agreement from, or, if necessary, challenge the validity
or applicability of, any applicable state takeover law.
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5.13. NO RIGHTS TRIGGERED. In the case of the Company: Except for
those consents of third parties Previously Disclosed on Schedule 4.1(G) the
Company shall take all necessary steps to ensure that the entering into of
this Plan and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby (including the Mergers and the
exercise of the Option) and any other action or combination of actions, or any
other transactions contemplated hereby or thereby, do not and will not (i)
result in the grant of any rights to any person under the Articles of
Incorporation or Bylaws of the Company or under any agreement to which the
Company or any of its Subsidiaries is a party or (ii) restrict or impair in
any way the ability of InterWest or InterWest Savings to exercise the rights
granted hereunder or under the Stock Option Agreement.
5.14. SHARES LISTED. In the case of InterWest: InterWest shall use
its best efforts to cause to be listed, prior to the Effective Date, on the
Nasdaq National Market upon official notice of issuance the shares of
InterWest Common Stock to be issued to the holders of Company Common Stock.
5.15. REGULATORY APPLICATIONS. In the case of each of InterWest and
InterWest Savings each shall: (i) promptly prepare and submit applications to
the appropriate Regulatory Authorities for approval of the Merger, and (ii)
promptly make all other appropriate filings to secure all other approvals,
consents and rulings which are necessary for the consummation of the Mergers
by InterWest and InterWest Savings.
5.16. REGULATORY DIVESTITURES. In the case of the Company: Effective
on or before the Effective Date, the Company shall cease engaging in such
activities as InterWest shall advise the Company in writing are not permitted
to be engaged in by InterWest under applicable law following the Effective
Date and, to the extent required by any Regulatory Authority as a condition of
approval of the transactions contemplated by this Plan, the Company shall
divest any Subsidiary engaged in activities or holding assets that are
impermissible for InterWest or InterWest Savings, on terms and conditions
agreed to by InterWest; provided, however, that prior to taking such action,
InterWest shall certify that the conditions to the obligations of InterWest
under Sections 6.1 and 6.2 to consummate the transactions contemplated hereby,
other than the condition set forth in Section 6.1(G), have been satisfied or
waived.
5.17. CURRENT INFORMATION.
(A) During the period from the date of this Plan to the Effective Date,
each of the Company and InterWest shall, and shall cause its representatives
to, confer on a regular and frequent basis with representatives of the other.
(B) Each of the Company and InterWest shall promptly notify the other of
(i) any material change in the business or operations of it or its
Subsidiaries, (ii) any material complaints, investigations or hearings (or
communications indicating that the same may be contemplated) of any Regulatory
Authority relating to it or its Subsidiaries, (iii) the initiation or threat
of material litigation involving or relating to it or its Subsidiaries, or
(iv) any event or condition that might reasonably be expected to cause any of
its representations or warranties set forth herein not to be true and correct
in all material respects as of the Effective Date or prevent it or its
Subsidiaries from fulfilling its or their obligations hereunder.
5.18. INDEMNIFICATION.
(A) For a period of five years from and after the Effective Date,
InterWest shall indemnify, defend and hold harmless the present and former
directors, officers and employees of the Company and its Subsidiaries (each,
an "Indemnified Party") against all costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or liabilities
incurred in connection with any claim, action, suit, proceeding or
investigation, whether civil, criminal, administrative or investigative, and
arising out of matters existing or occurring at or prior to the Effective Date
(including the transactions contemplated by this Plan and the Stock Option
Agreement), whether asserted or claimed prior to, at or after the Effective
Date, to the fullest extent that the Company would have been permitted under
Washington law and its articles of incorporation or bylaws in effect on the
date of this Plan to indemnify such person (and InterWest will also advance
expenses as incurred to the fullest extent permitted under applicable law so
long as the person to whom expenses are advanced provides an undertaking to
repay such advances within a reasonable period of time if it is ultimately
determined that
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Washington law does not allow for such indemnification). InterWest further
agrees to review obtaining directors' and officers' liability insurance for
the board of directors and officers of InterWest.
(B) Any Indemnified Party wishing to claim indemnification under
paragraph (A) of this Section 5.18, upon learning of such claim, action, suit,
proceeding or investigation, shall promptly notify InterWest thereof;
provided, that the failure so to notify shall not affect the obligations of
InterWest under paragraph (A) of this Section 5.18 (unless such failure
materially and adversely increases InterWest's liability under such paragraph
(A)). In the event of any such claim, action, suit, proceeding or
investigation (whether arising before or after the Effective Date), (i)
InterWest shall have the right to assume the defense thereof and InterWest
shall pay all reasonable fees and expenses of such counsel for the Indemnified
Parties promptly as statements therefor are received; provided, however, that
InterWest shall be obligated pursuant to this paragraph (B) to pay for only
one firm of counsel for allIndemnified Parties in any jurisdiction for any
single action, suit or proceeding, (ii) the Indemnified Parties will cooperate
in the defense of any such matter, and (iii) InterWest shall not be liable for
any settlement effected without its prior written consent.
(C) If InterWest or any of its successors or assigns shall consolidate
with or merge into any other entity and shall not be the continuing or
surviving entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any entity, then and in each case, proper
provision shall be made so that the successors and assigns of InterWest shall
assume the obligations set forth in this Section 5.18.
(D) InterWest shall pay all expenses, including attorneys' fees, that
may be incurred by any Indemnified Party in enforcing the indemnity and other
obligations provided for in this Section 5.18. The rights of each Indemnified
Party hereunder shall be in addition to any other rights such Indemnified
Party may have under the articles of incorporation or bylaws of the Company or
under applicable Washington law.
5.19. INTERWEST PROXY STATEMENT; SHAREHOLDER APPROVAL.
InterWest shall call a meeting of shareholders to be held as soon as
reasonably practicable after the date of the Plan for the purpose of approving
the Plan, and such other related matters as it deems appropriate. In
connection with such meeting of shareholders, (i) InterWest shall prepare a
proxy statement to be filed with the SEC and with any other appropriate
Regulatory Authorities and shall mail or cause to be mailed such proxy
statement to the InterWest shareholders and shall provide the Company with the
opportunity to review and comment on the proxy statement, (ii) the Company
shall furnish to InterWest all information concerning the Company and the
Banks as InterWest may reasonably request in connection with the preparation
of the proxy statement, (iii) the Board of Directors of InterWest shall
recommend, subject to compliance with their legal and fiduciary duties as
advised in writing by counsel, to the InterWest shareholders the approval of
the Plan, and (iv) InterWest shall use its best efforts, subject to compliance
with its legal and fiduciary duties as advised in writing by counsel, to
obtain the approval of InterWest shareholders.
5.20. OTHER EMPLOYMENT AGREEMENTS. Prior to the Effective Date,
InterWest Savings shall offer to employ Scott Southwick, Marla Chase and Mark
Rasmussen following the Effective Date upon the terms and conditions of the
Employment Agreement substantially in the form attached hereto as Exhibit F at
an annual base salary not less than such officers received from the Company
and the Banks prior to the Effective Date.
ARTICLE VI. CONDITIONS TO CONSUMMATION OF THE MERGERS
6.1. CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective
obligations of each Party to consummate the transactions contemplated by this
Plan is subject to the written waiver by such Party or the fulfillment on or
prior to the Effective Date of each of the following conditions:
(A) SHAREHOLDER VOTES. This Plan shall have been duly approved by the
affirmative vote of the holders of at least two- thirds of the outstanding
shares of Company Common Stock and the holders of at least a majority of the
outstanding shares of InterWest Common Stock, in each case in accordance with
applicable law and the articles and bylaws of the Company and InterWest,
respectively.
(B) REGULATORY APPROVALS. Procurement by the Parties of all necessary
regulatory consents and approvals by the appropriate Regulatory Authorities
and the expiration of any waiting periods
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relating thereto; provided, however, that no such approval or consent shall
have imposed any condition or requirement that, in the opinion of InterWest,
would deprive InterWest of the material economic or business benefits of the
transactions contemplated by this Plan.
(C) NO INJUNCTION. There shall not be in effect any order, decree or
injunction of any court or agency of competent jurisdiction that enjoins or
prohibits consummation of any of the transactions contemplated hereby.
(D) EFFECTIVE REGISTRATION STATEMENT. The Registration Statement
shall have become effective and no stop order suspending the effectiveness of
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.
(E) BLUE-SKY PERMITS. InterWest shall have received all state
securities laws and "blue sky" permits necessary to consummate the Corporate
Merger.
(F) TAX OPINION. InterWest and the Company shall have received an
opinion from Breyer & Aguggia 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 stockholders of the Company who receive shares of
InterWest Common Stock in exchange for their shares of the Company Common
Stock, except that gain or loss may be recognized as to cash received in lieu
of fractional share interests, and, in rendering their opinion, Breyer &
Aguggia may require and rely upon representations contained in certificates of
officers of InterWest, the Company and others.
(G) NASDAQ LISTING. The shares of InterWest Common Stock to be issued
pursuant to this Plan shall have been approved for listing on the Nasdaq
National Market subject only to official notice of issuance.
(H) EMPLOYMENT CONTRACTS. The Employment Agreements attached as
Exhibits
D and E shall have been duly executed and delivered by all parties to such
agreements.
6.2. CONDITIONS TO OBLIGATIONS OF INTERWEST. The obligations of
InterWest and InterWest Savings to consummate the transactions contemplated by
this Plan also is subject to the written waiver by InterWest or the
fulfillment on or prior to the Effective Date of each of the following
conditions:
(A) LEGAL OPINION. InterWest shall have received an opinion, dated the
Effective Date, of Graham & Dunn, counsel for the Company and the Banks, in
form reasonably satisfactory to InterWest, which shall cover the matters
contained in Exhibit G.
(B) OFFICERS' CERTIFICATE. (i) Each of the representations and
warranties contained herein of the Company and the Banks shall be true and
correct as of the date of this Plan and upon the Effective Date with the same
effect as though all such representations and warranties had been made on the
Effective Date, except for any such representations and warranties that
specifically relate to an earlier date, which shall be true and correct as of
such earlier date and except as otherwise provided in Section 5.11 and (ii)
each and all of the agreements and covenants of the Company and the Banks to
be performed and complied with pursuant to this Plan on or prior to the
Effective Date shall have been duly performed and complied with in all
material respects, and InterWest and InterWest Savings shall have received a
certificate signed by the Chief Executive Officers and the Chief Financial
Officers of the Company and the Banks dated the Effective Date, to such
effect.
(C) DELOITTE & TOUCHE LETTERS. InterWest shall have received from
Deloitte & Touche LLP a letter, dated the date of or shortly prior to (i) the
mailing of the Proxy Statement and (ii) the Effective Date, in form and
substance satisfactory to InterWest, with respect to the Company's
consolidated financial position and results of operations, which letters shall
be based upon "agreed upon procedures" undertaken by such firm.
(D) RECEIPT OF AFFILIATE AGREEMENTS. InterWest shall have received
from each affiliate of the Company the agreement referred to in Section 5.10.
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(E) ADVERSE CHANGE. During the period from December 31, 1994 to the
Effective Date, there shall not have been any material adverse change in the
financial position or results of operations of the Company or the Banks nor
shall the Company or the Banks have sustained any loss or damage to its
properties, whether or not insured, that materially affects its ability to
conduct its business; and InterWest shall have received a certificate dated
the Effective Date signed by the Chief Executive Officers of the Company and
the Banks to such effect.
(F) DISSENTERS' RIGHTS. The number of shares of Company Common Stock
for which cash is to be paid because dissenters' rights of appraisal under the
Appraisal Laws shall have been effectively preserved as of the Effective Date
or because of the payment of cash in lieu of fractional shares of InterWest
Common Stock shall not exceed in the aggregate ten percent of the outstanding
shares of Company Common Stock.
(G) POOLING LETTERS. InterWest shall have received a letter dated as of
the Effective Date, in form and substance acceptable to InterWest, from Ernst
& Young LLP and Central shall have received a letter dated as of the Effective
Date from Deloitte & Touche LLP, in form and substance acceptable to
InterWest, to the effect that the Merger will qualify for pooling-of-interests
accounting treatment.
6.3. CONDITIONS TO OBLIGATIONS OF COMPANY AND BANKS. The
obligations of the Company and the Banks to consummate the transactions
contemplated by this Plan also are subject to the written waiver by the
Company and the Banks or the fulfillment on or prior to the Effective Date of
each of the following conditions:
(A) LEGAL OPINION. The Company and the Banks shall have received an
opinion, dated the Effective Date, of Breyer & Aguggia, special counsel for
InterWest, in form reasonably satisfactory to the Company, which shall cover
the matters contained in Exhibit H.
(B) OFFICER'S CERTIFICATE. (i) Each of the representations and
warranties contained herein of InterWest and InterWest Savings shall be true
and correct as of the date of this Plan and upon the Effective Date with the
same effect as though all such representations and warranties had been made on
the Effective Date, except for any such representations and warranties that
specifically relate to an earlier date, which shall be true and correct as of
such earlier date, and (ii) each and all of the agreements and covenants of
InterWest and InterWest Savings to be performed and complied with pursuant to
this Plan on or prior to the Effective Date shall have been duly performed and
complied with in all material respects, and the Company and the Banks shall
have received a certificate signed by an executive officer of each of
InterWest and InterWest Savings dated the Effective Date, to such effect.
(C) ADVERSE CHANGE. During the period from September 30, 1995 to the
Effective Date, there shall not have been any material adverse change in the
financial position or results of operations of the InterWest and InterWest
Savings nor shall InterWest or InterWest Savings have sustained any loss or
damage to its properties, whether or not insured, that materially affects its
ability to conduct its business; and InterWest shall have received a
certificate dated the Effective Date signed by the Chief Executive Officers of
InterWest and InterWest Savings to such effect.
VII. TERMINATION
This Plan may be terminated prior to the Effective Date, either before or
after receipt of required stockholder approvals:
7.1 MUTUAL CONSENT. By the mutual consent of InterWest and the
Company, if the Board of Directors of each so determines by vote of a majority
of the members of its entire board.
7.2 BREACH. By InterWest or the Company, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event of (i) a material breach by the other party of any representation or
warranty contained herein, which breach cannot be or has not been cured within
thirty (30) days after the giving of written notice to the breaching party of
such breach, or (ii) a breach by the other party of
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any of the material covenants or agreements contained herein, which breach
cannot be or has not been cured within thirty (30) days after the giving of
written notice to the breaching party of such breach.
7.3 DELAY. By InterWest or the Company, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event that the Corporate Merger is not consummated by September 30, 1996.
7.4 NO STOCKHOLDER APPROVAL. By InterWest or the Company, if its
Board of Directors so determines by a vote of a majority of the members of its
entire Board, in the event that any stockholder approval contemplated by
Section 6.1 is not obtained at the Meeting, including any adjournment or
adjournments thereof.
7.5 INTERWEST COMMON STOCK PRICE. By the Company, within five
Business Days after the end of the ten trading day period used to determine
the InterWest Price, if the InterWest Price is less than $17.00 and InterWest,
in its sole discretion, does not elect by written notice to the Company to
adjust the Exchange Ratio so that the InterWest Price multiplied by the
Exchange Ratio equals $28.90.
7.6 CONSEQUENCES OF TERMINATION.
(A) GENERAL CONSEQUENCES. Subject to subsection (B) of this Section
7.6, in the event of the termination or abandonment of this Plan pursuant to
the provisions of Sections 7.1 through 7.5, this Plan shall become void and
have no force or effect, without any liability on the part of the Parties or
any of their respective directors or officers or shareholders with respect to
this Plan.
(B) OTHER CONSEQUENCES. Notwithstanding anything in this Plan to the
contrary, no termination of this Plan will relieve any Party of any liability
for breach of this Plan or for any misrepresentation under this Plan or be
deemed to constitute a waiver of any remedy available for such breach or
misrepresentation. In any action or proceeding in connection with such breach
or misrepresentation, the prevailing party will be entitled to reasonable
attorneys' fees and expenses.
ARTICLE VIII OTHER MATTERS
8.1. SURVIVAL. Only those agreements and covenants in this Plan that by
their express terms apply in whole or in part after the Effective Date shall
survive the Effective Date. All other representations, warranties, and
covenants shall be deemed only to be conditions of the Mergers and shall not
survive the Effective Date. If the Mergers are abandoned and this Plan is
terminated, the provisions of Article VII shall apply and the agreements of
the Parties in Sections 5.6(B), 8.5 and 8.6 shall survive such abandonment and
termination.
8.2. WAIVER; AMENDMENT. Prior to the Effective Date, any provision of
this Plan may be (i) waived in writing by the Party benefitted by the
provision, or (ii) amended or modified at any time (including the structure of
the transactions contemplated hereby) by an agreement in writing among the
Parties approved by their respective Boards of Directors and executed in the
same manner as this Plan, except that, after the vote by the
stockholders of the Company, the consideration to be received by the
stockholders of the Company for each share of Company Common Stock shall not
thereby be altered. Nothing contained in this Section 8.2 is intended to
modify InterWest's rights pursuant to Section 2.7.
8.3. COUNTERPARTS. This Plan may be executed in one or more
counterparts, each of which shall be deemed to constitute an original. This
Plan shall become effective when one counterpart has been signed by each
Party.
8.4. GOVERNING LAW. This Plan shall be governed by, and interpreted in
accordance with, the laws of the State of Washington, except as federal law
may be applicable.
8.5. EXPENSES. Each Party will bear all expenses incurred by it in
connection with this Plan and the transactions contemplated hereby, except
printing expenses which shall be shared equally between the Company and
InterWest.
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8.6. CONFIDENTIALITY. Except as otherwise provided in Section 5.6(B),
each of the Parties and their respective agents, attorneys and accountants
will maintain the confidentiality of all information provided in connection
herewith which has not been publicly disclosed.
8.7. NOTICES. All notices, requests and other communications hereunder
to a Party shall be in writing and shall be deemed to have been duly given
when delivered by hand, telegram or telex (confirmed in writing) to such Party
at its address set forth below or such other address as such Party may specify
by notice to the Parties.
If to InterWest or InterWest Savings to:
InterWest Bancorp, Inc.
1259 West Pioneer Way
Oak Harbor, Washington 98277
Attn: Stephen Walden, President
Copies to:
Edward C. Beeksma
Zylstra, Beeksma, Waller and Skinner
3101-300 Avenue West
Oak Harbor, Washington 98277
John F. Breyer, Jr.
Breyer & Aguggia
1300 I Street, N.W.
Suite 470 East
Washington, D.C. 20005
If to the Company or the Banks to:
Central Bancorporation
301 N. Chelan
Wenatchee, Washington 98801
Attn: Gary M. Bolyard
Copies to:
Stephen M. Klein
Graham & Dunn
33rd Floor
1420 Fifth Avenue
Seattle, Washington 98101
8.8. ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This
Plan and the Stock Option Agreement together represent the entire
understanding of the Parties with reference to the transactions contemplated
hereby and thereby and supersede any and all other oral or written agreements
previously made. Nothing in this Plan or the Stock Option Agreement,
expressed or implied, is intended to confer upon any person, other than the
Parties or their respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Plan or the Stock Option Agreement.
8.9. BENEFIT PLANS. Upon consummation of the Corporate Merger, all
employees of the Company and its Subsidiaries shall be deemed as at-will
employees of InterWest and its Subsidiaries except for those employees who are
parties to the Employment Agreements. From and after the Effective Date,
employees of the Company and its Subsidiaries shall be generally entitled to
participate in the pension, benefit and similar plans on substantially the
same terms and conditions as employees of InterWest and its Subsidiaries. For
the purpose of determining eligibility to participate in such plans and the
vesting of benefits under such plans (but not for the
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accrual of benefits under such plans), InterWest shall give effect to years of
service with the Company or the Company's Subsidiaries, as the case may be, as
if such service were with InterWest or its Subsidiaries. InterWest shall use
its best efforts to facilitate the rollover of the 401(k) plan maintained by
the Company into the 401(k) plan maintained by InterWest Savings.
8.10. HEADINGS. The headings contained in this Plan are for
reference purposes only and are not part of this Plan.
IN WITNESS WHEREOF, the Parties have caused this instrument to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
INTERWEST BANCORP, INC.
By:/S/STEPHEN M. WALDEN
--------------------------------------------
NAME: STEPHEN M. WALDEN
TITLE: PRESIDENT AND CHIEF EXECUTIVE OFFICER
INTERWEST SAVINGS BANK
By:/S/STEPHEN M. WALDEN
---------------------------------------------
NAME: STEPHEN M. WALDEN
TITLE: PRESIDENT AND CHIEF EXECUTIVE OFFICER
CENTRAL BANCORPORATION
By:/S/GARY M. BOLYARD
---------------------------------------------
NAME: GARY M. BOLYARD
TITLE: PRESIDENT AND CHIEF EXECUTIVE OFFICER
CENTRAL WASHINGTON BANK
By:/S/GARY M. BOLYARD
---------------------------------------------
NAME: GARY M. BOLYARD
TITLE: PRESIDENT AND CHIEF EXECUTIVE OFFICER
NORTH CENTRAL WASHINGTON BANK
By:/S/GARY M. BOLYARD
--------------------------------------------
NAME: GARY M. BOLYARD
TITLE: DIRECTOR AND CHIEF EXECUTIVE OFFICER
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APPENDIX B
STOCK OPTION AGREEMENT
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STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of January 10, 1996 (the "Agreement"),
by and between Central Bancorporation, a Washington corporation ("Issuer"),
and InterWest Bancorp, Inc., a Washington corporation ("Grantee").
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Mergers dated as of January 10, 1996 (the "Plan"), providing for, among other
things, the merger of Issuer with and into Grantee, with Grantee as the
surviving corporation; and
WHEREAS, as a condition and inducement to Grantee's execution of the
Plan, Grantee has required that Issuer agree, and Issuer has agreed, to grant
Grantee the Option (as defined below);
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Plan, and intending to be legally bound hereby, Issuer and Grantee agree
as follows:
1. DEFINED TERMS. Capitalized terms which are used but not defined
herein shall have the meanings ascribed to such terms in the Plan.
2. GRANT OF OPTION. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option")
to purchase up to 201,898 shares (as adjusted as set forth herein, the "Option
Shares", which shall include the Option Shares before and after any transfer
of such Option Shares) of common stock, par value $1.67 per share ("Issuer
Common Stock"), of Issuer at a purchase price per Option Share (the "Purchase
Price") equal to $26.00.
3. EXERCISE OF OPTION.
(a) Provided that (i) Grantee or Holder (as defined below), as
applicable, shall not be in material breach of the agreements or covenants
contained in this Agreement or the Plan, and (ii) no preliminary or permanent
injunction or other order against the delivery of shares covered by the Option
issued by any court of competent jurisdiction in the United States shall be in
effect, the Holder may exercise the Option, in whole or in part, at any time
and from time to time following the occurrence of a Purchase Event (as
hereinafter defined); PROVIDED that the Option shall terminate and be of no
further force and effect upon the earliest to occur of (A) the Effective Date,
(B) termination of the Plan by Issuer in accordance with the terms thereof
prior to the occurrence of a Purchase Event or a Preliminary Purchase Event
(as hereinafter defined) (an "Issuer Termination"), (C) 15 months after the
termination of the Plan by Issuer in accordance with the terms thereof other
than pursuant to an Issuer Termination, and (D) 15 months after the
termination of the Plan by Grantee in accordance with the terms thereof;
PROVIDED, HOWEVER, that any purchase of shares upon exercise of the Option
shall be subject to compliance with applicable law, including, without
limitation, the Bank Holding Company Act of 1956, as amended (the "BHC Act").
The term "Holder" shall mean the holder or holders of the Option from time to
time, and which initially is Grantee.
(b) As used herein, a "Purchase Event" means any of the following events:
(i) Without Grantee's prior written consent, Issuer shall have
authorized, recommended, publicly proposed or publicly announced an intention
to authorize, recommend or propose, or entered into an agreement with any
person (other than Grantee or any subsidiary of Grantee) to effect an
Acquisition Transaction. As used herein, the term "Acquisition Transaction"
shall mean (A) a merger, consolidation or similar transaction involving Issuer
or any of its significant subsidiaries, (B) the disposition, by sale, lease,
exchange or otherwise, of assets or deposits of Issuer or any of its
significant subsidiaries representing in
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either case 20% or more of the consolidated assets or deposits of Issuer and
its subsidiaries, or (C) the issuance, sale or other disposition of (including
by way of merger, consolidation, share exchange or any similar transaction)
securities representing 20% or more of the voting power of Issuer or any of
its significant subsidiaries other than the issuance of Issuer Common Stock
upon the exercise of outstanding options or the conversion of outstanding
convertible securities of Issuer; or
(ii) any person (other than Grantee or any subsidiary of Grantee) shall
have acquired beneficial ownership (as such term is defined in Rule 13d-3
promulgated under the Exchange Act) of or the right to acquire beneficial
ownership of, or any "group" (as such term is defined under the Exchange Act)
shall have been formed which beneficially owns or has the right to acquire
beneficial ownership of, 15% or more (or if such person or group is the
beneficial owner of 15% or more on the date hereof, such person or group
acquires an additional 5% or more) of the voting power of Issuer or any of its
significant subsidiaries.
(c) As used herein, a "Preliminary Purchase Event" means any of the
following events:
(i) any person (other than Grantee or any subsidiary of Grantee)
shall have commenced (as such term is defined in Rule 14d-2 under the Exchange
Act) or shall have filed a registration statement under the Securities Act
with respect to, a tender offer or exchange offer to purchase any shares of
Issuer Common Stock such that, upon consummation of such offer, such person
would own or control 20% or more of the then outstanding shares of Issuer
Common Stock (such an offer being referred to herein as a "Tender Offer" or an
"Exchange Offer," respectively); or
(ii) the holders of Issuer Common Stock shall not have approved the
Plan at the Meeting, the Meeting shall not have been held or shall have been
canceled prior to termination of the Plan, or Issuer's Board of Directors
shall have withdrawn or modified in a manner adverse to Grantee the
recommendation of Issuer's Board of Directors with respect to the Plan, in
each case after it shall have been publicly announced that any person (other
than Grantee or any subsidiary of Grantee) shall have (A) made a proposal to
engage in an Acquisition Transaction, or (B) commenced a Tender Offer or filed
a registration statement under the Securities Act with respect to an Exchange
Offer; or
(iii) any person, other than Grantee or any subsidiary of Grantee,
shall have made a bona fide proposal to Issuer or its stockholders by public
announcement, or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction; or
(iv) after a bona fide proposal is made by a third party to Issuer
or its stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Plan and such breach
would entitle Grantee to terminate the Plan under Section 7.1(b) thereof
(without regard to the cure period provided for therein unless such cure is
promptly effected without jeopardizing consummation of the Mergers pursuant to
the terms of the Plan); or
(v) any person, other than Grantee or any subsidiary of Grantee,
other than in connection with a transaction to which Grantee has given its
prior written consent, shall have filed an application or notice with the
Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), or other federal or state bank regulatory authority, for approval to
engage in an Acquisition Transaction.
As used in this Agreement, "person" shall have the meaning specified
in Sections 3(a)(9) and 13(d)(3) of the Exchange Act.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Preliminary Purchase Event or Purchase Event (in either case, a
"Triggering Event"), it being understood that the giving of such notice by
Issuer shall not be a condition to the right of Holder to exercise the Option.
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(e) In the event Holder wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise, and (ii) a place and date not earlier than
three business days nor later than 15 business days from the Notice Date for
the closing (the "Closing") of such purchase (the "Closing Date"); PROVIDED,
HOWEVER, if any required application for listing such shares on the NASDAQ
National Market System has not been approved by the date so specified, such
date shall be extended for a period not to exceed 21 days from the Notice
Date. If prior notification to or approval of the Federal Reserve Board or any
other regulatory authority is required in connection with such purchase,
Issuer shall cooperate with the Holder in the filing of the required notice of
application for approval and the obtaining of such approval and the Closing
shall occur immediately following such regulatory approvals (and any mandatory
waiting periods). Any exercise of the Option shall be deemed to occur on the
Notice Date relating thereto.
4. PAYMENT AND DELIVERY OF CERTIFICATES.
(a) On each Closing Date, Holder shall (i) pay to Issuer, in immediately
available funds by wire transfer to a bank account designated by Issuer, an
amount equal to the Purchase Price multiplied by the number of Option Shares
to be purchased on such Closing Date, and (ii) present and surrender this
Agreement to the Issuer at the address of the Issuer specified in subsection
(f) of Section 11 hereof.
(b) At each Closing, simultaneously with the delivery of immediately
available funds and surrender of this Agreement as provided in subsection (a)
of this Section 4, (i) Issuer shall deliver to Holder (A) a certificate or
certificates representing the Option Shares to be purchased at such Closing,
which Option Shares shall be free and clear of all liens, claims, charges and
encumbrances of any kind whatsoever and subject to no preemptive rights, and
(B) if the Option is exercised in part only, an executed new agreement with
the same terms as this Agreement evidencing the right to purchase the balance
of the shares of Issuer Common Stock purchasable hereunder, and (ii) Holder
shall deliver to Issuer a letter agreeing that Holder shall not offer to sell
or otherwise dispose of such Option Shares in violation of applicable federal
and state law or of the provisions of this Agreement.
(c) In addition to any other legend that is required by applicable law,
certificates for the Option Shares delivered at each Closing shall be endorsed
with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF
___________ __, 1996. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER
HEREOF WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST
THEREFOR.
It is understood and agreed that the above legend shall be removed by
delivery of substitute certificate(s) without such legend if Holder shall have
delivered to Issuer a copy of a letter from the staff of the SEC, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer and
its counsel, to the effect that such legend is not required for purposes of
the Securities Act.
(d) Upon the giving by Holder to Issuer of the written notice of exercise
of the Option provided for under subsection (e) of Section 3 hereof, the
tender of the applicable purchase price in immediately available funds and the
tender of this Agreement to Issuer, Holder shall be deemed to be the holder of
record of the shares of Issuer Common Stock issuable upon such exercise,
notwithstanding that the stock transfer books of Issuer shall then be closed
or that certificates representing such shares of Issuer Common Stock shall not
then be actually delivered to Holder. Issuer shall pay all expenses, and any
and all United States federal, state, and local taxes and other charges that
may be payable in connection with the preparation, issuance and delivery of
stock certificates under this Section in the name of Holder or its assignee,
transferee, or designee.
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(e) Issuer agrees (i) that it shall at all times maintain, free from
preemptive rights, sufficient authorized but unissued or treasury shares of
Issuer Common Stock so that the Option may be exercised without additional
authorization of Issuer Common Stock after giving effect to all other options,
warrants, convertible securities and other rights to purchase Issuer Common
Stock, (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer, (iii) promptly to take all action as may from time to
time be required (including (A) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. Section 18a
and regulations promulgated thereunder and (B) in the event, under the BHC
Act, or the Change in Bank Control Act of 1978, as amended, or a state banking
law, prior approval of or notice to the Federal Reserve Board or to any state
regulatory authority is necessary before the Option may be exercised,
cooperating fully with Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board or such state
regulatory authority as they may require) in order to permit Holder to
exercise the Option and Issuer duly and effectively to issue shares of the
Issuer Common Stock pursuant hereto, and (iv) promptly to take all action
provided herein to protect the rights of Holder against dilution.
5. REPRESENTATIONS AND WARRANTIES OF ISSUER. Issuer hereby
represents and warrants to Grantee (and Holder, if different than Grantee) as
follows:
(a) Due Authorization. Issuer has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Issuer. This Agreement has been duly
executed and delivered by Issuer.
(b) Authorized Stock. Issuer has taken all necessary corporate and other
action to authorize and reserve and to permit it to issue, and, at all times
from the date hereof until the obligation to deliver Issuer Common Stock upon
the exercise of the Option terminates, will have reserved for issuance, upon
exercise of the Option, the number of shares of Issuer Common Stock necessary
for Holder to exercise the Option, and Issuer will take all necessary
corporate action to authorize and reserve for issuance all additional shares
of Issuer Common Stock or other securities which may be issued pursuant to
Section 7 upon exercise of the Option. The shares of Issuer Common Stock to be
issued upon due exercise of the Option, including all additional shares of
Issuer Common Stock or other securities which may be issuable pursuant to
Section 7, upon issuance pursuant hereto, shall be duly and validly issued,
fully paid and nonassessable, and shall be delivered free and clear of all
liens, claims, charges and encumbrances of any kind or nature whatsoever,
including any preemptive rights of any stockholder of Issuer.
6. REPRESENTATIONS AND WARRANTIES OF GRANTEE. Grantee hereby
represents and warrants to Issuer that:
(a) Due Authorization. Grantee has all requisite corporate power and
authority to enter into this Agreement and, subject to any approvals or
consents referred to herein, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Grantee. This Agreement has been
duly executed and delivered by Grantee.
(b) Purchase not for Distribution. This Option is not being, and any
Option Shares or other securities acquired by Grantee upon exercise of the
Option will not be, acquired with a view to the public distribution thereof
and will not be transferred or otherwise disposed of except in a transaction
registered or exempt from registration under the Securities Act.
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7. ADJUSTMENT UPON CHANGES IN ISSUER CAPITALIZATION, ETC.
(a) In the event of any change in Issuer Common Stock by reason of a
stock dividend, stock split, split-up, recapitalization, combination, exchange
of shares or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, shall be adjusted
appropriately, and proper provision shall be made in the agreements governing
such transaction so that Holder shall receive, upon exercise of the Option,
the number and class of shares or other securities or property that Holder
would have received in respect of Issuer Common Stock if the Option had been
exercised immediately prior to such event, or the record date therefor, as
applicable. If any additional shares of Issuer Common Stock are issued after
the date of this Agreement (other than pursuant to an event described in the
first sentence of this subsection (a), upon exercise of any option to purchase
Issuer Common Stock outstanding on the date hereof or upon conversion into
Issuer Common Stock of any convertible security of Issuer outstanding on the
date hereof), the number of shares of Issuer Common Stock subject to the
Option shall be adjusted so that, after such issuance, it, together with any
shares of Issuer Common Stock previously issued pursuant hereto, equals 19.9%
of the number of shares of Issuer Common Stock then issued and outstanding,
without giving effect to any shares subject to or issued pursuant to the
Option. No provision of this Section 7 shall be deemed to affect or change, or
constitute authorization for any violation of, any of the covenants or
representations in the Plan.
(b) In the event that Issuer shall enter in an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one
of its subsidiaries, to merge into Issuer and Issuer shall be the continuing
or surviving corporation, but, in connection with such merger, the then
outstanding shares of Issuer Common Stock shall be changed into or exchanged
for stock or other securities of Issuer or any other person or cash or any
other property or the outstanding shares of Issuer Common Stock immediately
prior to such merger shall after such merger represent less than 50% of the
outstanding shares and share equivalents of the merged company, or (iii) to
sell or otherwise transfer all or substantially all of its assets to any
person, other than Grantee or one of its subsidiaries, then, and in each such
case, the agreement governing such transaction shall make proper provisions so
that the Option shall, upon the consummation of any such transaction and upon
the terms and conditions set forth herein, be converted into, or exchanged
for, an option (the "Substitute Option"), at the election of Holder, of either
(x) the Acquiring Corporation (as hereinafter defined), (y) any person that
controls the Acquiring Corporation, or (z) in the case of a merger described
in clause (ii), Issuer (such person being referred to as "Substitute Option
Issuer").
(c) The Substitute Option shall have the same terms as the Option,
provided, that, if the terms of the Substitute Option cannot, for legal
reasons, be the same as the Option, such terms shall be as similar as possible
and in no event less advantageous to Holder. Substitute Option Issuer shall
also enter into an agreement with Holder in substantially the same form as
this Agreement, which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares
of Substitute Common Stock (as hereinafter defined) as is equal to the
Assigned Value (as hereinafter defined) multiplied by the number of shares of
Issuer Common Stock for which the Option was theretofore exercisable, divided
by the Average Price (as hereinafter defined). The exercise price of
Substitute Option per share of Substitute Common Stock (the "Substitute Option
Price") shall then be equal to the Option Price multiplied by a fraction in
which the numerator is the number of shares of Issuer Common Stock for which
the Option was theretofore exercisable and the denominator is the number of
shares of the Substitute Common Stock for which the Substitute Option is
exercisable.
(e) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than Issuer),
(ii) Issuer in a merger in which Issuer is the continuing or surviving person,
or
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(iii) the transferee of all or substantially all of Issuer's assets (or a
substantial part of the assets of its subsidiaries taken as a whole).
(2) "Substitute Common Stock" shall mean the common stock issued by
Substitute Option Issuer upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the highest of (x) the price per share
of Issuer Common Stock at which a Tender Offer or an Exchange Offer therefor
has been made, (y) the price per share of Issuer Common Stock to be paid by
any third party pursuant to an agreement with Issuer, and (z) the highest per
share closing price for shares of Issuer Common Stock within the six-month
period immediately preceding the consolidation, merger, or sale in question.
In the event that a Tender Offer or an Exchange Offer is made for Issuer
Common Stock or an agreement is entered into for a merger or consolidation
involving consideration other than cash, the value of the securities or other
property issuable or deliverable in exchange for Issuer Common Stock shall be
determined by a nationally recognized investment banking firm selected by
Holder or Owner, as the case may be (and if there are both a Holder and an
Owner, the Holder).
(4) "Average Price" shall mean the average closing price per share of
Substitute Common Stock for the one year immediately preceding the
consolidation, merger, or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer of
the Substitute Option, the Average Price shall be computed with respect to a
share of common stock issued by Issuer, the person merging into Issuer or by
any company which controls such person, as Holder may elect.
(f) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be
exercisable for more than 19.9% of the aggregate of the shares of Substitute
Common Stock but for the limitation in the first sentence of this subsection
(f), Substitute Option Issuer shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in the first sentence of this subsection (f) over (ii) the value of
the Substitute Option after giving effect to the limitation in the first
sentence of this subsection (f). This difference in value shall be determined
by a nationally-recognized investment banking firm selected by Holder.
(g) Issuer shall not enter into any transaction described in subsection
(b) of this Section 7 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Section 7 are given full force and effect (including,
without limitation, any action that may be necessary so that the holders of
the other shares of common stock issued by Substitute Option Issuer are not
entitled to exercise any rights by reason of the issuance or exercise of the
Substitute Option and the shares of Substitute Common Stock are otherwise in
no way distinguishable from or have lesser economic value (other than any
dimunition in value resulting from the fact that the Substitute Common Stock
are restricted securities, as defined in Rule 144 under the Securities Act)
than other shares of common stock issued by Substitute Option Issuer).
8. REGISTRATION RIGHTS.
(a) Demand Registration Rights. Issuer shall, subject to the conditions
of subparagraph (c) below, if requested by any Holder or Owner, as applicable,
including Grantee and any permitted transferee ("Selling Shareholder"), as
expeditiously as possible prepare and file a registration statement under the
Securities Act if such
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registration is necessary in order to permit the sale or other disposition of
any or all shares of Issuer Common Stock or other securities that have been
acquired by or are issuable to the Selling Shareholder upon exercise of the
Option in accordance with the intended method of sale or other disposition
stated by the Selling Shareholder in such request, including without
limitation a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and Issuer shall use its best
efforts to qualify such shares or other securities for sale under any
applicable state securities laws. Grantee shall have the right to demand no
more than two registrations pursuant to this paragraph. If requested by
Grantee in connection with any such registration, Issuer and Grantee shall
provide each other with representatives, warranties, indemnities and other
agreements customarily given in connection with such registration. If
requested by Grantee in connection with any such registration, Issuer and
Grantee shall become party to any underwriting agreement relating to the sale
of the Option Shares, but only to the extent of obligating themselves in
respect of representations, warranties, indemnities and other agreement
customarily included in such underwriting agreements.
(b) Additional Registration Rights. If Issuer at any time after the
exercise of the Option proposes to register any shares of Issuer Common Stock
under the Securities Act in connection with an underwritten public offering of
such Issuer Common Stock, Issuer will promptly give written notice to the
Selling Shareholders of its intention to do so and, upon the written request
of any Selling Shareholder given within 30 days after receipt of any such
notice (which request shall specify the number of shares of Issuer Common
Stock intended to be included in such underwritten public offering by the
Selling Shareholder), Issuer will cause all such shares for which a Selling
Shareholder requests participation in such registration, to be so registered
and included in such underwritten public offering; PROVIDED, HOWEVER, that
Issuer may elect to not cause any such shares to be so registered (i) if the
underwriters in good faith object for valid business reasons, or (ii) in the
case of a registration solely to implement an employee benefit plan or a
registration filed on Form S-4; PROVIDED, FURTHER, HOWEVER, that such election
pursuant to (i) may only be made two times. If some but not all the shares of
Issuer Common Stock, with respect to which Issuer shall have received requests
for registration pursuant to this subsection (b) shall be excluded from such
registration, Issuer shall make appropriate allocation of shares to be
registered among the Selling Shareholders desiring to register their shares
pro rata in the proportion that the number of shares requested to be
registered by each such Selling Shareholder bears to the total number of
shares requested to be registered by all such Selling Shareholders then
desiring to have Issuer Common Stock registered for sale.
(c) Conditions to Required Registration. Issuer shall use all reasonable
efforts to cause each registration statement referred to in subparagraph (a)
above to become effective and to obtain all consents or waivers of other
parties which are required therefor and to keep such registration statement
effective, PROVIDED, HOWEVER, that Issuer may delay any registration of Option
Shares required pursuant to subparagraph (a) above for a period not exceeding
180 days provided Issuer shall in good faith determine that any such
registration would adversely affect an offering or contemplated offering of
other securities by Issuer, and Issuer shall not be required to register
Option Shares under the Securities Act pursuant to subsection (a) above:
(i) prior to the earliest of (a) termination of the Plan pursuant to
Article VII thereof, (b) failure to obtain the requisite stockholder approval
pursuant to Section 6.1.(A) of the Plan, and (c) a Purchase Event or a
Preliminary Purchase Event;
(ii) on more than one occasion during any calendar year;
(iii) within 90 days after the effective date of a registration
referred to in subsection (b) above pursuant to which the Selling Shareholder
or Selling Shareholders concerned were afforded the opportunity to register
such shares under the Securities Act and such shares were registered as
requested; and
(iv) unless a request therefor is made to Issuer by Selling
Shareholders that hold at least 25% or more of the aggregate number of Option
Shares (including shares of Issuer Common Stock issuable upon exercise of the
Option) then
outstanding.
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In addition to the foregoing, Issuer shall not be required to maintain
the effectiveness of any registration statement after the expiration of nine
months from the effective date of such registration statement. Issuer shall
use all reasonable efforts to make any filings, and take all steps, under all
applicable state securities laws to the extent necessary to permit the sale or
other disposition of the Option Shares so registered in accordance with the
intended method of distribution for such shares, PROVIDED, HOWEVER, that
Issuer shall not be required to consent to general jurisdiction or qualify to
do business in any state where it is not otherwise required to so consent to
such jurisdiction or to so qualify to do business.
(d) Expenses. Except where applicable state law prohibits such payments,
Issuer will pay all expenses (including without limitation registration fees,
qualification fees, blue sky fees and expenses (including the fees and
expenses of counsel), legal expenses, including the reasonable fees and
expenses of one counsel to the holders whose Option Shares are being
registered, printing expenses and the costs of special audits or "cold
comfort" letters, expenses of underwriters, excluding discounts and
commissions but including liability insurance if Issuer so desires or the
underwriters so require, and the reasonable fees and expenses of any necessary
special experts) in connection with each registration pursuant to subsection
(a) or (b) above (including the related offerings and sales by holders of
Option Shares) and all other qualifications, notifications or exemptions
pursuant to subsection (a) or (b) above.
(e) Miscellaneous Reporting. Issuer shall comply with all reporting
requirements and will do all such other things as may be necessary to permit
the expeditious sale at any time of any Option Shares by the Selling
Shareholders thereof in accordance with and to the extent permitted by any
rule or regulation promulgated by the SEC from time to time, including,
without limitation, Rule 144A. Issuer shall at its expense provide the Selling
Shareholders with any information necessary in connection with the completion
and filing of any reports or forms required to be filed by them under the
Securities Act or the Exchange Act, or required pursuant to any state
securities laws or the rules of any stock exchange.
(f) Issuer Taxes. Issuer will pay all stamp taxes in connection with the
issuance and the sale of the Option Shares and in connection with the exercise
of the Option, and will save the Selling Shareholders harmless, without
limitation as to time, against any and all liabilities, with respect to all
such taxes.
9. QUOTATION; LISTING. If Issuer Common Stock or any other securities
to be acquired in connection with the exercise of the Option are then
authorized for quotation or trading or listing on the NASDAQ National Market
or any securities exchange, Issuer, upon the request of Holder, will promptly
file an application, if required, to authorize for quotation or trading or
listing the shares of Issuer Common Stock or other securities to be acquired
upon exercise of the Option on the NASDAQ National Market or such other
securities exchange and will use its best efforts to obtain approval, if
required, of such quotation or listing as soon as practicable.
10. DIVISION OF OPTION. This Agreement (and the Option granted hereby)
are exchangeable, without expense, at the option of Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase in the aggregate the same number of shares of
Issuer Common Stock purchasable hereunder. The terms "Agreement" and "Option"
as used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
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11. MISCELLANEOUS.
(a) Expenses. Each of the parties hereto shall bear and pay all costs
and expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be waived
at any time by the party that is entitled to the benefits of such provision.
This Agreement may not be modified, amended, altered or supplemented except
upon the execution and delivery of a written agreement executed by the parties
hereto.
(c) Entire Agreement: no Third-party Beneficiary;
Severability. This Agreement, together with the Plan and the other documents
and instruments referred to herein and therein, between Grantee and Issuer (a)
constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, between the parties with respect to the
subject matter hereof and (b) is not intended to confer upon any person other
than the parties hereto (other than any transferees of the Option Shares or
any permitted transferee of this Agreement pursuant to subsection (h) of this
Section 14) any rights or remedies hereunder. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction
or a federal or state regulatory agency to be invalid, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions of this
Agreement shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Option does not permit Holder or Owner to acquire,
or does not require Issuer to repurchase, the full number of shares of Issuer
Common Stock as provided in Section 3 (as adjusted pursuant to Section 7), it
is the express intention of Issuer to allow Holder or Owner to acquire or to
require Issuer to repurchase such lesser number of shares as may be
permissible without any amendment or modification hereof.
(d) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Washington without regard to any
applicable conflicts of law rules.
(e) Descriptive Headings. The descriptive headings contained herein are
for convenience of reference only and shall not affect in any way the meaning
or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or mailed by registered or certified mail (return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice):
if to Grantee: InterWest Bancorp, Inc.
1259 West Pioneer Way
Oak Harbor, Washington 98277
Attn: Stephen M. Walden
with a copy to: Edward C. Beeksma
Zylstra, Beeksma, Waller and Skinner
3101-300 Avenue West
Oak Harbor, Washington 98277
and to: John F. Breyer, Jr.
Breyer & Aguggia
1300 I Street
Suite 470 East
Washington, D.C. 20005
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<PAGE>
if to Issuer to: Central Bancorporation
301 N. Chelan
Wenatchee, Washington 98801
with a copy to: Stephen M. Klein
Graham & Dunn
33rd Floor
1420 Fifth Avenue
Seattle, Washington 98101
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed, it being understood that both parties need not sign the same
counterpart.
(h) Assignment. Neither this Agreement nor any of the rights, interests
or obligations hereunder or under the Option shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party, except that Holder may assign this
Agreement to a wholly-owned subsidiary of Holder and Holder may assign its
rights hereunder in whole or in part after the occurrence of a Purchase Event.
Subject to the preceding sentence, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the parties and their respective
successors and assigns.
(i) Further Assurances. In the event of any exercise of the Option by
the Holder, Issuer and the Holder shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(j) Specific Performance. The parties hereto agree that this Agreement
may be enforced by either party through specific performance, injunctive
relief and other equitable relief. Both parties further agree to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such equitable relief and that this provision is without
prejudice to any other rights that the parties hereto may have for any failure
to perform this Agreement.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the day and year first written above.
CENTRAL BANCORPORATION
By: /S/GARY M. BOLYARD
--------------------------
NAME: GARY M. BOLYARD
TITLE: PRESIDENT AND CHIEF
EXECUTIVE OFFICER
INTERWEST BANCORP, INC.
By: /S/STEPHEN M. WALDEN
--------------------------
NAME: STEPHEN M. WALDEN
TITLE: PRESIDENT AND CHIEF
EXECUTIVE OFFICER
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APPENDIX C
OPINION OF SANDLER O'NEILL & PARTNERS, L.P.
<PAGE>
APPENDIX C
[Sandler O'Neill Letterhead]
March __, 1996
Board of Directors
InterWest Bancorp, Inc.
1259 West Pioneer Way
Oak Harbor, WA 98277
Ladies and Gentlemen:
InterWest Bancorp, Inc. ("InterWest") and Central Bancorporation
("Central") have entered into an Agreement and Plan of Merger dated as January
10, 1996 (the "Agreement") pursuant to which Central will be merged with and
into InterWest with InterWest being the surviving corporation of the merger
(the "Merger"). Pursuant to the Merger, each outstanding share of Central
common stock, par value $1.67 per share (the "Central Shares"), will be
converted into the right to receive from 1.41 to 1.70 shares (the "Exchange
Ratio") of common stock, par value $.20 per share, of InterWest (the
"InterWest Shares"). The actual Exchange Ratio will be determined based upon
the average of the bid and ask prices per share of all market makers of
InterWest common stock on the NASDAQ Stock Market for the ten trading days
beginning on and including the twentieth trading day immediately preceding the
closing date of the Merger. The terms and conditions of the Merger are more
fully set forth in the Agreement. You have requested our opinion as to the
fairness, from a financial point of view, of the Exchange Ratio to the
shareholders of InterWest.
Sandler O'Neill Corporate Strategies, a division of Sandler O'Neill &
Partners, L.P., as part of its investment banking business is regularly engage
in the evaluation of financial institutions and their securities in connection
with mergers and acquisitions and other corporate transactions.
In connection with this opinion we have reviewed, among other things: (i)
the Agreement; (ii) the Stock Option Agreement dated as of January 10, 1996 by
and between InterWest and Central; (iii) a draft of InterWest's and Central's
joint proxy statement for their respective special meetings of shareholders to
consider and vote upon the Agreement; (iv) InterWest's audited consolidated
financial statements and management's discussion and analysis of the financial
condition and results of operations contained in its annual report to
shareholders for the year ended September 30, 1995; (v) Central's audited
financial statements for the year ended December 31, 1995; (vi) InterWest's
unaudited consolidated financial statements and management's discussion and
analysis of the financial condition and results of operations contained in its
Quarterly Report on Form 10-Q for the quarter ended December 31, 1995; (vii)
certain financial analyses and forecasts of InterWest prepared by and reviewed
with management of InterWest; (viii) the views of senior management of
InterWest and Central of their respective past and current business
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operations, results thereof, financial condition and future prospects; (ix)
the pro forma impact of the Merger on InterWest; (x) the historical reported
price and trading activity for Central's and InterWest's common stock,
including a comparison of certain financial and stock market information for
Central and InterWest with similar information for certain other companies the
securities of which are publicly traded; (xi) the financial terms of recent
business combinations in the savings institution and banking industries; (xii)
the current market environment generally and the banking environment in
particular; and (xiii) such other information, financial studies, analyses and
investigations and financial, economic and market criteria as we considered
relevant.
In performing our review, we have assumed and relied upon, without
independent verification, the accuracy and completeness of all the financial
information, analyses and other information reviewed by and discussed with us,
and we did not make an independent evaluation or appraisal of the specific
assets, the collateral securing assets or the liabilities of InterWest or
Central or any of their subsidiaries, or the collectibility of any such assets
(relying, where relevant, on the analyses and estimates of InterWest and
Central). With respect to the financial projections reviewed with management,
we have assumed that they have been reasonably prepared on bases reflecting
the best currently available estimates and judgments of the respective
managements of the respective future financial performances of InterWest and
Central and that such performances will be achieved. We have also assumed
that there has been no material change in InterWest's or Central's assets,
financial condition, results of operations, business or prospects since the
date of the last financial statements noted above. We have assumed that the
Merger will qualify for pooling of interests accounting treatment and have
further assumed that InterWest will remain as a going concern for all periods
relevant to our analyses and that the conditions precedent in the Agreement
are not waived.
Our opinion is necessarily based on economic, market and other conditions
as in effect on, and the information made available to us as of, the date
hereof. Events occurring after the date hereof could materially affect the
assumptions used in preparing this opinion. We have not undertaken to
reaffirm or revise this opinion or otherwise comment upon events occurring
after the date hereof.
We have acted as InterWest's financial advisor in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon consummation of the Merger. We will also receive a fee for
rendering this opinion.
In the ordinary course of our business, we may actively trade the equity
securities of InterWest and Central for our own account and for the accounts
of our customers and, accordingly, may at any time hold a long or short
position in such securities.
Our opinion is directed to the Board of Directors of the Company and does
not constitute a recommendation to any stockholder of the Company as to how
such stockholder should vote at the special meeting of stockholders to
consider and vote upon the Merger. Our opinion is not to be quoted or
referred to, in whole or in part, in a registration statement, prospectus,
proxy statement or in any other document, nor shall this opinion be used for
any other purposes, without Sandler O'Neill's prior written consent; provided,
however, that we hereby consent to the inclusion of this opinion as an exhibit
to the InterWest's and Central's joint proxy statement dated _______, 1996 so
long as the opinion is quoted in full in such proxy statement.
Based upon and subject to the foregoing, it is our opinion that the
Exchange Ratio is fair to the holders of the InterWest Shares from a financial
point of view, to such holders.
Very truly yours,
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APPENDIX D
OPINION OF COLUMBIA FINANCIAL ADVISORS, INC.
Appendix D
March 15, 1996
Board of Directors
Central Bancorporation
301 North Chelan
Wenatchee, Washington 98801
Members of the Board:
You have requested our opinion as to the fairness, from a financial point
of view, to the shareholders of Central Bancorporation ("CBWA" or the
"Company"), of the merger consideration to be received by such shareholders
pursuant to the terms of the Merger Agreement and Plan of Merger, dated
January 10, 1996, ("Agreement") between CBWA and InterWest Bancorp, Inc.
("IWBK").
Pursuant to the Agreement, the Company will be acquired in a transaction
(the "Acquisition") and each issued and outstanding share of the Company
common stock (along with its associated rights) at the effective time of the
Merger (other than (I) shares of holders who are exercising appraisal rights
pursuant to applicable law, and (ii) shares held directly by or indirectly by
CBWA, its parent company or any subsidiary thereof other than shares held in a
fiduciary capacity or in satisfaction of a debt previously contracted) shall
be converted into the right to receive 1.7 shares in IWBK common stock if the
average of the bid and ask price per share of all market makers, as reported
on Bloomberg Financial Markets, of IWBK common stock is $20.00 or less, if the
IWBK price is above $20.00 and less than $24.12, the number of shares in IWBK
common stock based on $34.00 divided by the IWBK price, or 1.41 shares in IWBK
common stock if the IWBK price is equal to or greater than $24.12 (the "Merger
Consideration"), except for fractional shares which will receive a
proportional amount of cash.
Columbia Financial Advisors, Inc. ("CFAI") as a part of its investment
banking services, is periodically engaged in the valuation of banks and
advises the directors, officers and shareholders of both public and private
banks and thrift institutions with respect to the fairness, from a financial
point of view, of the consideration to be received in transactions such as
that proposed by the Agreement. CFAI has served as financial advisor to the
management and Board of Directors of CBWA since January 1995. In that role,
we advised on and participated in negotiations with respect to the Merger
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Agreement. With particular regard to our qualifications for rendering an
opinion as to the fairness, from a financial point of view, of the
Consideration to be received by holders of the shares from IWBK pursuant to
the Merger, CFAI has advised Washington and Oregon community banks regarding
fairness of capital transactions. CBWA has agreed to pay CFAI a fee for this
opinion letter.
In connection with rendering this opinion, we have, among other things:
(i) reviewed the Agreement; (ii) reviewed CBWA's financial and related audited
financial information for the twelve months ended September 30, 1995 including
the Form 10-KSB filed with the U.S. Securities and Exchange Commission; (iii)
reviewed certain internal financial analyses and certain other forecasts for
the Company prepared by and reviewed with the management of the Company; (iv)
conducted interviews with senior management of the Company regarding the past
and current business operations, results thereof, financial condition and
future prospects of the Company; (v) reviewed the current market environment
generally and the banking and thrift environment in particular; (vi) reviewed
the prices paid in certain recent mergers and acquisitions in the banking and
thrift industries on a regional basis; (vii) reviewed IWBK's audited financial
information for the fiscal year ended September 30, 1995; (ix) reviewed the
price ranges and dividend history for IWBK common stock; (x) and reviewed such
other information, studies and analyses and performed such other
investigations and took into account such other matters as we deemed
appropriate.
In conducting our review and arriving at our opinion we have relied on
the accuracy and completeness of all information supplied or otherwise made
available to us, and we have not independently verified such information nor
have we undertaken an independent appraisal of the assets or liabilities of
the Company. With respect to the financial forecasts referred to above, we
have assumed that they have been reasonably prepared on bases reflecting the
best currently available estimates and judgment of the senior management of
the Company. This opinion is necessarily based upon circumstances and
conditions as they exist and can be evaluated as of the date of this letter.
This opinion is not intended to be and does not constitute a
recommendation to any stockholder as to how such stockholder should vote with
respect to the merger.
In reliance upon and subject to the foregoing, it is our opinion that, as
of the date hereof, the Merger Consideration to be received by the
shareholders of CBWA pursuant to the Agreement is fair, from a financial point
of view, to the shareholders of CBWA.
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<PAGE>
We hereby consent to the reference to our firm in the proxy statement or
prospectus related to the merger transaction and to the inclusion of our
opinion as an exhibit to the proxy statement or prospectus related to the
merger transaction.
Very truly yours,
COLUMBIA FINANCIAL ADVISORS, INC.
/s/ Robert J. Rogowski
By: _____________________________
Robert J. Rogowski
Principal
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APPENDIX E
CHAPTER 13 OF THE WASHINGTON BUSINESS CORPORATION ACT
23B.13.010 Definitions. As used in this chapter:
(1) "Corporation" means the issuer of the shares held by a dissenter
before the corporate action, or the surviving or acquiring corporation by
merger or share exchange of that issuer.
(2) "Dissenter" means a shareholder who is entitled to dissent from
corporate action under RCW 23B.13.020 and who exercises that right when and in
the manner required by RCW 23B.13.200 through 23B.13.280.
(3) "Fair value," with respect to a dissenter's shares, means the value
of the shares immediately before the effective date of the corporate action to
which the dissenter objects, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(4) "Interest" means interest from the effective date of the corporate
action until the date of payment, at the average rate currently paid by the
corporation on its principal bank loans or, if none, at a rate that is fair
and equitable under all the circumstances.
(5) "Record shareholder" means the person in whose name shares are
registered in the records of a corporation or the beneficial owner of shares
to the extent of the rights granted by a nominee certificate on file with a
corporation.
(6) "Beneficial shareholder" means the person who is a beneficial owner
of shares held in a voting trust or by a nominee as the record shareholder.
(7) "Shareholder" means the record shareholder or the beneficial
shareholder.
23B.13.020 Right to dissent. (1) A shareholder is entitled to dissent from,
and obtain payment of the fair value of the shareholder's shares in the event
of, any of the following corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party (i) if shareholder approval is required for the merger by RCW
23B.11.030, 23B.11.080, or the articles of incorporation and the shareholder
is entitled to vote on the merger, or (ii) if the corporation is a subsidiary
that is merged with its parent under RCW 23B.11.040;
(b) Consummation of a plan of share exchange to which the
corporation is a party as the corporation whose shares will be acquired, if
the shareholder is entitled to vote on the plan;
(c) Consummation of a sale or exchange of all, or substantially all,
of the property of the corporation other than in the usual and regular course
of business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to court
order or a sale for cash pursuant to a plan by which all or substantially all
of the net proceeds of the sale will be distributed to the shareholders within
one year after the date of sale;
(d) An amendment of the articles of incorporation that materially
reduces the number of shares owned by the shareholder to a fraction of a share
if the fractional share so created is to be acquired for cash under RCW
23B.06.040; or
(e) Any corporate action taken pursuant to a shareholder vote to the
extent the articles of incorporation, bylaws, or a resolution of the board of
directors provides that voting or nonvoting shareholders are entitled to
dissent and obtain payment for their shares.
(2) A shareholder entitled to dissent and obtain payment for the
shareholder's shares under this chapter may not challenge the corporate action
creating the shareholder's entitlement unless the action fails to comply with
the
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procedural requirements imposed by this title, RCW 25.10.900 through 25.10.955
the articles of incorporation, or the bylaws, or is fraudulent with respect to
the shareholder or the corporation.
(3) The right of a dissenting shareholder to obtain payment of the fair
value of the shareholder's shares shall terminate upon the occurrence of any
one of the following events:
(a) The proposed corporate action is abandoned or rescinded;
(b) A court having jurisdiction permanently enjoins or sets aside
the corporate action; or
(c) The shareholder's demand for payment is withdrawn with the
written consent of the corporation.
23B.13.030 Dissent by nominees and beneficial owners. (1) A record
shareholder may assert dissenters' rights as to fewer than all the shares
registered in the shareholder's name only if the shareholder dissents with
respect to all shares beneficially owned by any one person and notifies the
corporation in writing of the name and address of each person on whose behalf
the shareholder asserts dissenters' rights. The rights of a partial dissenter
under this subsection are determined as if the shares as to which the
dissenter dissents and the dissenter's other shares were registered in the
names of different shareholders.
(2) A beneficial shareholder may assert dissenters' rights as to shares
held on the beneficial shareholder's behalf only if:
(a) The beneficial shareholder submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights; and
(b) The beneficial shareholder does so with respect to all shares of
which such shareholder is the beneficial shareholder or over which such
shareholder has power to direct the vote.
23B.13.200 Notice of dissenters' rights. (1) If proposed corporate action
creating dissenters' rights under RCW 23B.13.020 is submitted to a vote at a
shareholders' meeting, the meeting notice must state that shareholders are or
may be entitled to assert dissenters' rights under this chapter and be
accompanied by a copy of this chapter.
(2) If corporate action creating dissenters' rights under RCW 23B.13.020
is taken without a vote of shareholders, the corporation, within ten days
after the effective date of such corporate action, shall notify in writing all
shareholders entitled to assert dissenters' rights that the action was taken
and send them the dissenters' notice described in RCW 23B.13.220.
23B.13.210 Notice of intent to demand payment. (1) If proposed corporate
action creating dissenters' rights under RCW 23B.13.020 is submitted to a vote
at a shareholders' meeting, a shareholder who wishes to assert dissenters'
rights must (a) deliver to the corporation before the vote is taken written
notice of the shareholder's intent to demand payment for the shareholder's
shares if the proposed action is effected, and (b) not vote such shares in
favor of the proposed action.
(2) A shareholder who does not satisfy the requirements of subsection (1)
of this section is not entitled to payment for the shareholder's shares under
this chapter.
23B.13.220 Dissenters' notice. (1) If proposed corporate action creating
dissenters' rights under RCW 23B.13.020 is authorized at a shareholders'
meeting, the corporation shall deliver a written dissenters' notice to all
shareholders who satisfied the requirements of RCW 23B.13.210.
(2) The dissenters' notice must be sent within ten days after the
effective date of the corporate action, and must:
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(a) State where the payment demand must be sent and where and when
certificates for certificated shares must be deposited;
(b) Inform holders of uncertificated shares to what extent transfer
of the shares will be restricted after the payment demand is received;
(c) Supply a form for demanding payment that includes the date of
the first announcement to news media or to shareholders of the terms of the
proposed corporate action and requires that the person asserting dissenters'
rights certify whether or not the person acquired beneficial ownership of the
shares before that date;
(d) Set a date by which the corporation must receive the payment
demand, which date may not be fewer than thirty nor more than sixty days after
the date the notice in subsection (1) of this section is delivered; and
(e) Be accompanied by a copy of this chapter.
23B.13.230 Duty to demand payment. (1) A shareholder sent a dissenters'
notice described in RCW 23B.13.220 must demand payment, certify whether the
shareholder acquired beneficial ownership of the shares before the date
required to be set forth in the dissenters' notice pursuant to RCW
23B.13.220(2)(c), and deposit the shareholder's certificates in accordance
with the terms of the notice.
(2) The shareholder who demands payment and deposits the shareholder's
share certificates under subsection (1) of this section retains all other
rights of a shareholder until the proposed corporate action is effected.
(3) A shareholder who does not demand payment or deposit the
shareholder's share certificates where required, each by the date set in the
dissenters' notice, is not entitled to payment for the shareholder's shares
under this chapter.
23B.13.240 Share restrictions. (1) The corporation may restrict the transfer
of uncertificated shares from the date the demand for their payment is
received until the proposed corporate action is effected or the restriction is
released under RCW 23B.13.260.
(2) The person for whom dissenters' rights are asserted as to
uncertificated shares retains all other rights of a shareholder until the
effective date of the proposed corporate action.
23B.13.250 Payment. (1) Except as provided in RCW 23B.13.270, within thirty
days of the later of the effective date of the proposed corporate action, or
the date the payment demand is received, the corporation shall pay each
dissenter who complied with RCW 23B.13.230 the amount the corporation
estimates to be the fair value of the shareholder's shares, plus accrued
interest.
(2) The payment must be accompanied by:
(a) The corporation's balance sheet as of the end of a fiscal year
ending not more than sixteen months before the date of payment, an income
statement for that year, a statement of changes in shareholders' equity for
that year, and the latest available interim financial statements, if any;
(b) An explanation of how the corporation estimated the fair value
of the shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's right to demand payment under RCW
23B.13.280; and
(e) A copy of this chapter.
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23B.13.260 Failure to take action. (1) If the corporation does not effect the
proposed action within sixty days after the date set for demanding payment and
depositing share certificates, the corporation shall return the deposited
certificates and release any transfer restrictions imposed on uncertificated
shares.
(2) If after returning deposited certificates and releasing transfer
restrictions, the corporation wishes to undertake the proposed action, it must
send a new dissenters' notice under RCW 23B.13.220 and repeat the payment
demand procedure.
23B.13.270 After-acquired shares. (1) A corporation may elect to withhold
payment required by RCW 23B.13.250 from a dissenter unless the dissenter was
the beneficial owner of the shares before the date set forth in the
dissenters' notice as the date of the first announcement to news media or to
shareholders of the terms of the proposed corporate action.
(2) To the extent the corporation elects to withhold payment under
subsection (1) of this section, after taking the proposed corporate action, it
shall estimate the fair value of the shares, plus accrued interest, and shall
pay this amount to each dissenter who agrees to accept it in full satisfaction
of the dissenter's demand. The corporation shall send with its offer an
explanation of how it estimated the fair value of the shares, an explanation
of how the interest was calculated, and a statement of the dissenter's right
to demand payment under RCW 23B.13.280.
23B.13.280 Procedure if shareholder dissatisfied with payment or offer. (1)
A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and amount of interest
due, and demand payment of the dissenter's estimate, less any payment under
RCW 23B.13.250, or reject the corporation's offer under RCW 23B.13.270 and
demand payment of the dissenter's estimate of the fair value of the
dissenter's shares and interest due, if:
(a) The dissenter believes that the amount paid under RCW 23B.13.250
or offered under RCW 23B.13.270 is less than the fair value of the dissenter's
shares or that the interest due is incorrectly calculated;
(b) The corporation fails to make payment under RCW 23B.13.250
within sixty days after the date set for demanding payment; or
(c) The corporation does not effect the proposed action and does not
return the deposited certificates or release the transfer restrictions imposed
on uncertificated shares within sixty days after the date set for demanding
payment.
(2) A dissenter waives the right to demand payment under this section
unless the dissenter notifies the corporation of the dissenter's demand in
writing under subsection (1) of this section within thirty days after the
corporation made or offered payment for the dissenter's shares.
23B.13.300 Court action. (1) If a demand for payment under RCW 23B.13.280
remains unsettled, the corporation shall commence a proceeding within sixty
days after receiving the payment demand and petition the court to determine
the fair value of the shares and accrued interest. If the corporation does
not commence the proceeding within the sixty-day period, it shall pay each
dissenter whose demand remains unsettled the amount demanded.
(2) The corporation shall commence the proceeding in the superior court
of the county where a corporation's principal office, or, if none in this
state, its registered office, is located. If the corporation is a foreign
corporation without a registered office in this state, it shall commence the
proceeding in the county in this state where the registered office of the
domestic corporation merged with or whose shares were acquired by the foreign
corporation was located.
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(3) The corporation shall make all dissenters, whether or not residents
of this state, whose demands remain unsettled, parties to the proceeding as in
an action against their shares and all parties must be served with a copy of
the petition. Nonresidents may be served by registered or certified mail or
by publication as provided by law.
(4) The corporation may join as a party to the proceeding any shareholder
who claims to be a dissenter but who has not, in the opinion of the
corporation, complied with the provisions of this chapter. If the court
determines that such shareholder has not complied with the provisions of this
chapter, the shareholder shall be dismissed as a party.
(5) The jurisdiction of the court in which the proceeding is commenced
under subsection (2) of this section is plenary and exclusive. The court may
appoint one or more persons as appraisers to receive evidence and recommend
decision on the question of fair value. The appraisers have the powers
described in the order appointing them, or in any amendment to it. The
dissenters are entitled to the same discovery rights as parties in other civil
proceedings.
(6) Each dissenter made a party to the proceeding is entitled to judgment
(a) for the amount, if any, by which the court finds the fair value of the
dissenter's shares, plus interest, exceeds the amount paid by the corporation,
or (b) for the fair value, plus accrued interest, of the dissenter's
after-acquired shares for which the corporation elected to withhold payment
under RCW 23B.13.270.
23B.13.310 Court costs and counsel fees. (1) The court in a proceeding
commenced under RCW 23B.13.300 shall determine all costs of the proceeding,
including the reasonable compensation and expenses of appraisers appointed by
the court. The court shall assess the costs against the corporation, except
that the court may assess the costs against all or some of the dissenters, in
amounts the court finds equitable, to the extent the court finds the
dissenters acted arbitrarily, vexatiously, or not in good faith in demanding
payment under RCW 23B.13.280.
(2) The court may also assess the fees and expenses of counsel and
experts for the respective parties, in amounts the court finds equitable:
(a) Against the corporation and in favor of any or all dissenters if
the court finds the corporation did not substantially comply with the
requirements of RCW 23B.13.200 through 23B.13.280; or
(b) Against either the corporation or a dissenter, in favor of any
other party, if the court finds that the party against whom the fees and
expenses are assessed acted arbitrarily, vexatiously, or not in good faith
with respect to the rights provided by chapter 23B.13 RCW.
(3) If the court finds that the services of counsel for any dissenter
were of substantial benefit to other dissenters similarly situated, and that
the fees for those services should not be assessed against the corporation,
the court may award to these counsel reasonable fees to be paid out of the
amounts awarded the dissenters who were benefitted.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Sections 23B.08.500 through 28B.08.600 of the WBCA contain specific
provisions relating to indemnification of directors and officers of
Washington corporations. In general, the statute provides that (i) a
corporation must indemnify a director or officer who is wholly successful in
his defense of a proceeding to which he is a party because of his status as
such, unless limited by the articles of incorporation, and (ii) a corporation
may indemnify a director or officer if he is not wholly successful in such
defense, if it is determined as provided in the statute that the director
meets a certain standard of conduct, provided when a director is liable to the
corporation, the corporation may not indemnify him. The statute also permits
a director or officer of a corporation who is a party to a proceeding to apply
to the courts for indemnification or advance of expenses, unless the articles
of incorporation provide otherwise, and the court may order indemnification or
advance of expenses under certain circumstances set forth in the statute. The
statute further provides that a corporation may in its articles of
incorporation or bylaws or by resolution provide indemnification in addition
to that provided by the statute, subject to certain conditions set forth in
the statute.
Pursuant to InterWest's Articles of Incorporation, InterWest will
indemnify the officers, directors, agents and employees of InterWest with
respect to expenses, settlements, judgments and fines in suits in which such
person has made a party by reason of the fact that he or she is or was an
agent of InterWest. No such indemnification may be given if the acts or
omissions of the person are adjudged to be in violation of law, if
such person is liable to the corporation for an unlawful distribution, or if
such person personally received a benefit to which he or she was not entitled.
InterWest's Articles of Incorporation provide that the directors of
InterWest shall not be personally liable for monetary damages to InterWest for
certain breaches of their fiduciary duty as directors, except for liabilities
that involve intentional misconduct by the director, the authorization or
illegal distributions or receipt of an improper personal benefit from their
actions as directors.
Item 21. Exhibits and Financial Statement Schedules
(a) Exhibits
Exhibit
Number Description of Document
2.1 Agreement and Plan of Mergers dated January 10, 1996 by and between
InterWest Bancorp, Inc. and InterWest Savings Bank, and Central
Bancorporation, Central Washington Bank and North Central Washington
Bank (incorporated by reference to Appendix A to the Prospectus/Joint
Proxy Statement contained in this Registration Statement).
5 Opinion of Breyer & Aguggia regarding legality of securities.(a)
8 Form of opinion of Breyer & Aguggia regarding federal income tax
consequences.
10 Stock Option Agreement dated as of January 10, 1996 between InterWest
Bancorp, Inc. and Central Bancorporation (included as Appendix B to
the Prospectus/Joint Proxy Statement contained in this Registration
Statement).
21 Subsidiaries of InterWest Bancorp, Inc.(a)
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23.1 Consent of Breyer & Aguggia. (a)
23.2 Consent of Breyer & Aguggia as to its tax opinion.
23.3 Consent of Ernst & Young LLP, InterWest's independent auditors.
23.4 Consent of Deloitte Touche LLP, InterWest's former independent
auditors.
23.5 Consent of Deloitte & Touche LLP, Central's independent auditors.
23.6 Consent of KPMG Peat Marwick LLP, Central's former independent
auditors.
23.7 Consent of Sandler O'Neill & Partners, L.P.
23.8 Consent of Columbia Financial Advisors, Inc. (contained in opinion
included as Appendix D to the Prospectus/Joint Proxy Statement
contained in this Registration Statement)
24 Power of Attorney.(a)
99.1 Form of proxy to be mailed to shareholders of InterWest Bancorp,
Inc.(a)
99.2 Form of proxy to be mailed to shareholders of Central
Bancorporation.(a)
99.3 Rule 438 Consent of Gary M. Bolyard.(a)
99.4 Rule 438 Consent of Larry Carlson.(a)
(a) Previously filed
(b) Financial Statement Schedules
Not applicable.
(c) Reports, Opinions or Appraisals
1. Opinion of Sandler O'Neill & Partners, L.P. (incorporated by
reference to Appendix C to the Prospectus/Joint Proxy
Statement).
2. Opinion of Columbia Financial Advisors (incorporated by
reference to Appendix D to the Prospectus/Joint Proxy
Statement).
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Item 22. Undertakings
(a) (1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act of 1933, as amended ("Securities Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range may
be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no
more than 20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective registration
statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the registration
statement or any material change to such information in the registration
statement.
(2) The undersigned registrant hereby undertakes that, for purposes
of determining any liability under the Securities Act of 1933 each filing of
the registrant's annual report pursuant to Section 13(a) or
Section 15(d) of the Securities Exchange Act of 1934 that is incorporated by
reference in the registration statement shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
(3) Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions referred to
in Item 20 of this registration statement, or otherwise, the registrant has
been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registrant in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with
the securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by
the final adjudication of such issue.
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(b) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the prospectus
pursuant to Item 4, 10(b), 11, or 13 of this form, within one business day of
receipt of such request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means
of a post effective amendment all information concerning a transaction, and
the company being acquired involved therein, that was not the subject of, and
included in the registration statement when it became effective.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant has duly caused this amended Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized in the City
of Oak Harbor, State of Washington on _________ __, 1996.
INTERWEST BANCORP, INC.
By:_________________________
Pursuant to the requirements of the Securities Act of 1933, as amended,
this amended Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated.
/s/ Stephen M. Walden President, Chief Executive Officer April 26, 1996
- --------------------- and Director
Steven M. Walden (Principal Executive Officer)
/s/ H. Glenn Mouw Executive Vice President and April 26, 1996
- ------------------ Chief Financial Officer
H. Glenn Mouw (Principal Financial Officer)
/s/ Carla Tucker* Vice President and April 26, 1996
- ----------------- Controller (Principal
Carla Tucker Accounting Officer)
/s/ Barney R. Beeksma* Director April 26, 1996
- ----------------------
Barney R. Beeksma
/s/ Michael Crawford* Director April 26, 1996
- --------------------
Michael Crawford
/s/ Jean Gorton* Director April 26, 1996
- ----------------
Jean Gorton
/s/ Henry Koetje* Director April 26, 1996
- -----------------
Henry Koetje
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/s/ C. Stephen Lewis* Director April 26, 1996
- ---------------------
C. Stephen Lewis
/s/ Clark Mock* Director April 26, 1996
- ---------------
Clark Mock
/s/ Russel E. Olson* Director April 26, 1996
- --------------------
Russel E. Olson
/s/ Vern Sims* Director April 26, 1996
- --------------
Vern Sims
*By power of attorney dated March 15, 1996.
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EXHIBIT INDEX
Exhibit
Number Description of Document Page
- ------- ----------------------- ----
2.1 Agreement and Plan of Mergers dated January 10, 1996 by and between
InterWest Bancorp, Inc. and InterWest Savings Bank, and Central
Bancorporation, Central Washington Bank and North Central Washington
Bank (incorporated by reference to Appendix A to the Prospectus/Proxy
Statement contained in this Registration Statement).
5 Opinion of Breyer & Aguggia regarding legality of securities. (a)
8 Form of opinion of Breyer & Aguggia regarding federal income tax
consequences.
10 Stock Option Agreement dated as of January 10, 1996 between InterWest
Bancorp, Inc. and Central Bancorporation (included as Appendix B to
the Prospectus/Joint Proxy Statement contained in this Registration
Statement).
21 Subsidiaries of InterWest Bancorp, Inc. (a)
23.1 Consent of Breyer & Aguggia. (a)
23.2 Consent of Breyer & Aguggia as to its tax opinion.
23.3 Consent of Ernst & Young LLP, InterWest's independent auditors.
23.4 Consent of Deloitte Touche LLP, InterWest's former independent auditors.
23.5 Consent of Deloitte & Touche LLP, Central's independent auditors.
23.6 Consent of KPMG Peat Marwick LLP, Central's former independent auditors.
23.7 Consent of Sandler O'Neill & Partners, L.P.
23.8 Consent of Columbia Financial Advisors, Inc. (contained in opinion
included as Appendix D to the Prospectus/Joint Proxy Statement contained
in this Registration Statement)
24 Power of Attorney. (a)
99.1 Form of proxy to be mailed to shareholders of InterWest Bancorp, Inc. (a)
99.2 Form of proxy to be mailed to shareholders of Central Bancorporation. (a)
99.3 Rule 438 Consent of Gary M. Bolyard. (a)
99.4 Rule 438 Consent of Larry Carlson. (a)
____________
(a) Previously filed.
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Exhibit 8
Form of Opinion of Breyer & Aguggia
Regarding Federal Income Tax Consequences
Form of Federal Tax Opinion
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FORM OF FEDERAL TAX OPINION
_______ __, 1996
Board of Directors
Central Bancorporation
301 N. Chelan
Wenatchee, Washington 98801
Board of Directors
InterWest Bancorp, Inc.
1259 W. Pioneer Way
Oak Harbor, Washington 98277
Gentlemen and Ladies:
You have requested our opinions as to the federal income tax consequences
of the proposed merger (the "Merger") of Central Bancorporation ("Central")
with and into InterWest Bancorp, Inc. ("InterWest") pursuant to the Agreement
and Plan of Mergers dated January 10, 1996 by and among InterWest, InterWest
Savings Bank, Central, Central Washington Bank and North Central Washington
Bank (the "Merger Agreement").
In issuing the opinions set forth in this letter, we have relied upon (1)
factual representations made by Central in written statements dated
________________ and the factual representations made by InterWest in written
statements dated ________________ (the "Representations"), (2) the Merger
Agreement, and (3) the facts, information and documentation set forth in the
Registration Statement on Form S-4 of InterWest filed with the Securities and
Exchange Commission in connection with the Merger ("Registration Statement").
The opinions set forth in this letter are predicated upon our
understanding of the facts set forth in the Merger Agreement, the
Representations, and the Registration Statement. Any change in such facts may
adversely affect our opinions. Furthermore, as explained below, our opinions
are based upon our understanding of the existing provisions of the Internal
Revenue Code of 1986, as amended (the "Code"), currently applicable
regulations promulgated under the Code, current published administrative
positions of the Internal Revenue Service such as revenue rulings and revenue
procedures, and existing judicial decisions, all of which are subject to
change either prospectively or retroactively.
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Any change in such authorities may adversely affect our opinions. We
assume no obligation to update our opinions for any deletions or additions to
or modification of any law applicable to the Merger.
Based on our review of the Merger Agreement, the Representations, and the
Registration Statement, and assuming that the transactions described therein
are completed as described, our opinions as to federal income tax consequences
of the Merger are as follows.
1. The Merger will constitute a reorganization within the meaning of
Sections 368(a)(1)(A) of the Code. Central and InterWest will each be a
"party to a reorganization" within the meaning of Section 368(b) of the Code.
2. Pursuant to Section 354(a)(1) of the Code, no gain or loss will be
recognized by Central shareholders who exchange all of their Central common
stock solely for shares of InterWest's voting common stock.
3. Pursuant to Section 358(a)(1) of the Code, the basis of the
InterWest voting common stock received by those Central shareholders receiving
solely InterWest common stock will be the same, in each instance, as the basis
of the Central common stock surrendered in exchange therefor.
4. Pursuant to Section 1223(1) of the Code, the holding period of
InterWest voting common stock received by the Central shareholders will
include, in each instance, the period during which the Central common stock
surrendered in exchange therefor was held, provided the Central common stock
is held as a capital asset in the hands of the Central shareholders on the
date of exchange.
5. Pursuant to Revenue Ruling 66-365, 1966-2 C.B. 116, and Revenue
Procedure 77-41, 1977-2 C.B. 574, if a cash payment is received by a
shareholder of Central in lieu of a fractional share interest of Central
voting stock, the cash payment will be treated as received by the shareholder
as a distribution in redemption of that fractional share interest and will be
treated as a distribution in full payment in exchange for the fractional share
redeemed subject to the provisions and limitations of Section 302 of the Code
and considering the application of Section 318 of the Code.
We express no opinion with regard to the federal income tax consequences
of the Merger not addressed expressly by the above opinions. In addition, we
express no opinion as to any state, local or foreign tax consequences with
respect to the Merger.
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This opinion is being furnished in connection with the Merger and may not
be used or relied upon for any other purpose and may not be circulated, quoted
or otherwise referred to for any other purpose without our express written
consent.
The shareholders of Central should consult with a qualified tax advisor
with respect to any reporting requirements which may be applicable, or to any
tax considerations other than those expressly mentioned herein.
Very truly yours,
BREYER & AGUGGIA
--------------------
BREYER & AGUGGIA
<PAGE>
Consent of Breyer & Aguggia
as to its Tax Opinion
April 26, 1996
Board of Directors
InterWest Bancorp, Inc.
1259 West Pioneer Way
Oak Harbor, Washington 98277
RE: InterWest Bancorp, Inc.
Registration Statement on Form S-4
Gentlemen and Lady:
We hereby consent to the filing of the form of our federal tax opinion as
an exhibit to the Registration Statement and to the reference to us in the
Prospectus/Joint Proxy Statement included therein under the headings "THE
MERGER -- Certain Federal Income Tax Consequences" and "LEGAL OPINIONS."
Very truly yours,
/s/ Breyer & Aguggia
---------------------
BREYER & AGUGGIA
Washington, D.C.
<PAGE>
Consent of Ernst & Young LLP,
InterWest's Independent Auditors
Exhibit 23.3
Consent of Independent Auditors
We consent to the reference of our firm under the caption "Experts"
in the Registration Statement (Form S-4) and related Prospectus of
InterWest Bancorp, Inc. for the registration of 1,889,381 shares of
its common stock and to the incorporation by reference therein of
our report dated October 13, 1995, with respect to the consolidated
financial statements of InterWest Bancorp, Inc. included in its
Annual Report (Form 10-K) for the year ended September 30, 1995,
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
----------------------
Seattle, Washington
April 25, 1996
<PAGE>
Consent of Deloitte & Touche LLP,
InterWest's Former Independent Auditors
Exhibit 23.4
Independent Auditor's Consent
Board of Directors
InterWest Bancorp, Inc.
Oak Harbor, Washington
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement of InterWest Bancorp, Inc. on Form S-4 of our report
dated October 28, 1994, for Interwest Savings Bank and Subsidiaries,
incorporated by reference in the Annual Report on Form 10-K of InterWest
Bancorp, Inc. for the year ended September 30, 1995, and to the reference to
us under the heading "Experts" in the Prospectus, which is part of this
Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
April 25, 1996
<PAGE>
Consent of Deloitte & Touche LLP,
Central's Independent Auditors
Exhibit 23.5
Independent Auditor's Consent
Board of Directors
Central Bancorporation
Wenatchee, Washington
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement of InterWest Bancorp, Inc. on Form S-4 of our report
dated January 19, 1996, for Central Bancorporation and subsidiaries, appearing
in the Annual Report on Form 10-KSB of Central Bancorporation for the year
ended December 31, 1995, and to the reference to us under the heading
"Experts" in the Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
April 25, 1996
<PAGE>
Consent of KPMG Peat Markwick LLP
Central's Former Independent Auditors
Exhibit 23.6
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
The Board of Directors
Central Bancorporation:
We consent to the use of our report incorporated herein by
reference dated January 20, 1995, relating to the consolidated
balance sheet of Central Bancorporation and subsidiary as of
December 31, 1994 and the related consolidated statements of
operations, stockholders' equity, and cash flows for the year then
ended, which report appears in the December 31, 1995 annual report
on Form 10-KSB of Central Bancorporation, and to the reference to
our firm under the heading "Experts" in the prospectus.
Our report refers to a change in the method of accounting for
certain investments in debt and equity securities.
/s/ KPMG Peat Marwick LLP
- -------------------------
Seattle, Washington
April 26, 1996
<PAGE>
Consent of Sandler, O'Neill & Partners, L.P.
Interwest's Financial Advisors
Exhibit 23.7
CONSENT OF FINANCIAL ADVISORS
SANDLER O'NEILL
Board of Directors
InterWest Bancorp, Inc.
We hereby consent to the inclusion of our opinion as Appendix C to the
Prospectus/Joint Proxy Statement filed as part of the Registration Statement
on Form S-4 (Reg. No. 333-2452) of InterWest Bancorp, Inc. and to the
references to our firm as financial advisor to InterWest Bancorp, Inc. and to
our opinion contained in said Prospectus/Joint Proxy Statement. In giving
such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of
1933 of the rules and regulations of the Securities and Exchange Commission.
/s/ Sandler O'Neill & Partners, L.P.
------------------------------------
Sandler O'Neill & Partners, L.P.
April 29, 1996
<PAGE>
