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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
January 15, 1998
INTERWEST BANCORP, INC.
(Exact name of registrant as specified in its charter)
WASHINGTON
(State or other jurisdiction of incorporation)
0-26632 91-1691216
------------------------ -------------------------------
(Commission File Number) IRS Employer Identification No.
275 S.E. Pioneer Way
Oak Harbor, WA 98227
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: (360) 679-4181
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ITEM 5 - OTHER EVENTS
On January 15, 1998, InterWest Bancorp, Inc., Oak Harbor, Washington
("Interwest") entered into a definitive agreement (the "Agreement") with
Pacific Northwest Bank ("Pacific"). Under the terms of the Agreement, Pacific
will be reorganized as a separate banking subsidiary of InterWest.
The Agreement provides that Pacific's common stock will be exchanged for
shares of Interwest common stock pursuant to a fixed exchange ratio. The
aggregate value of the consideration is approximately $60 million.
In connection with the acquisition, Interwest and Pacific entered into a
Stock Option Agreement dated January 15, 1998 ("Option Agreement") whereby
Pacific granted Interwest an option to purchase 19.9% of Pacific's common stock
at a price of $85.00 per share. The Option Agreement is exercisable upon the
occurrence of certain transactions, all of which generally involve significant
sales of Pacific's assets and/or voting control to third parties.
Consummation of the acquisition is subject to several conditions,
including receipt of applicable regulatory approvals and approval by
shareholders of Pacific. For information regarding the terms of the proposed
transaction, reference is made to the Agreement, Option Agreement and the press
release dated January 15, 1998, which are attached hereto as Exhibits 2.1, 10
and 99, respectively, and incorporated herein by reference.
ITEM 7 - FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements - not applicable.
(b) Pro forma financial information - not applicable.
(c) Exhibits:
2 Agreement and Plan of Reorganization and Merger dated
January 15, 1998
10 Stock Option Agreement dated January 15, 1998
99 Press Release issued by Interwest dated January 15, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: January 15, 1998
INTERWEST BANCORP, INC.
By /s/ STEPHEN M. WALDEN
------------------------
Stephen M. Walden
President and Chief Executive Officer
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EXHIBIT 2
----------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
BETWEEN
PACIFIC NORTHWEST BANK
AND
INTERWEST BANCORP, INC.
----------------------------------------------
DATED AS OF JANUARY 15, 1998
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TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
ARTICLE I. REORGANIZATION............................................................6
1.1 THE REORGANIZATION.....................................................6
1.2 EFFECTIVE DATE.........................................................6
ARTICLE II. EXCHANGE CONSIDERATION...................................................6
2.1 EXCHANGE CONSIDERATION.................................................6
2.2 SHAREHOLDER RIGHTS; STOCK TRANSFERS....................................7
2.3 FRACTIONAL SHARES......................................................7
2.4 EXCHANGE PROCEDURES....................................................7
2.5 EXCHANGE RATIO ADJUSTMENTS.............................................7
2.6 EXCEPTION SHARES.......................................................7
2.7 DISSENTING SHARES......................................................7
2.8 RESERVATION OF RIGHT TO REVISE TRANSACTION.............................8
2.9 OPTIONS................................................................8
ARTICLE III. ACTIONS PENDING CONSUMMATION............................................8
3.1 CAPITAL STOCK..........................................................8
3.2 DIVIDENDS, ETC.........................................................8
3.3 INDEBTEDNESS; LIABILITIES; ETC.........................................9
3.4 LINE OF BUSINESS; OPERATING PROCEDURES; ETC............................9
3.5 LIENS AND ENCUMBRANCES.................................................9
3.6 COMPENSATION; EMPLOYMENT AGREEMENTS; ETC...............................9
3.7 BENEFIT PLANS..........................................................9
3.8 CONTINUANCE OF BUSINESS................................................9
3.9 AMENDMENTS.............................................................9
3.10 CLAIMS.................................................................9
3.11 CONTRACTS.............................................................10
3.12 LOANS.................................................................10
3.13 TRANSACTION EXPENSES..................................................10
ARTICLE IV. REPRESENTATIONS AND WARRANTIES..........................................10
4.1 THE BANK'S REPRESENTATIONS AND WARRANTIES.............................10
4.2 INTERWEST'S REPRESENTATIONS AND WARRANTIES............................19
ARTICLE V. COVENANTS................................................................21
5.1 BEST EFFORTS..........................................................21
5.2 THE PROXY.............................................................21
5.3 REGISTRATION STATEMENT COMPLIANCE
WITH SECURITIES LAWS..................................................21
5.4 REGISTRATION STATEMENT EFFECTIVENESS..................................22
5.5 PRESS RELEASES........................................................22
5.6 ACCESS; INFORMATION...................................................22
5.7 BREAK-UP FEES.........................................................22
5.8 REGISTRATION STATEMENT PREPARATION;
REGULATORY APPLICATIONS PREPARATION...................................23
5.9 APPOINTMENT OF DIRECTORS/OFFICERS; BYLAW AMENDMENTS...................23
5.10 BLUE-SKY FILINGS......................................................23
</TABLE>
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<TABLE>
<S> <C> <C>
5.11 AFFILIATE AGREEMENTS..................................................23
5.12 CERTAIN POLICIES OF THE BANK..........................................24
5.13 STATE TAKEOVER LAW....................................................24
5.14 NO RIGHTS TRIGGERED...................................................24
5.15 SHARES LISTED.........................................................24
5.16 REGULATORY APPLICATIONS...............................................24
5.17 REGULATORY DIVESTITURES...............................................24
5.18 CURRENT INFORMATION...................................................25
5.19 401(k) PLANS..........................................................25
5.20 INDEMNIFICATION.......................................................25
ARTICLE VI. CONDITIONS TO CONSUMMATION OF THE MERGER................................26
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS................................26
6.2 CONDITIONS TO OBLIGATIONS OF INTERWEST................................27
6.3 CONDITIONS TO OBLIGATIONS OF THE BANK.................................28
ARTICLE VII. TERMINATION............................................................28
7.1 EVENTS OF TERMINATION.................................................28
7.2 CONSEQUENCES OF TERMINATION...........................................29
ARTICLE VIII. OTHER MATTERS.........................................................29
8.1 SURVIVAL..............................................................29
8.2 WAIVER; AMENDMENT.....................................................29
8.3 COUNTERPARTS..........................................................29
8.4 GOVERNING LAW.........................................................30
8.5 EXPENSES..............................................................30
8.6 CONFIDENTIALITY.......................................................30
8.7 NOTICES...............................................................30
8.8 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES....................31
8.9 BENEFIT PLANS.........................................................31
8.10 HEADINGS..............................................................31
</TABLE>
EXHIBITS
Exhibit A Approval by Directors of Pacific Northwest Bank
Exhibit B Director Agreements
Exhibit C Stock Option Agreement
Exhibit D Affiliate Undertakings and Agreements
Exhibit E Employment Agreement of Patrick M. Fahey
Exhibit F Employment Agreement of David H. Straus
Exhibit G Employment Agreement of George P. Brace
Exhibit H Employment Agreement of Kim S. Brace
Exhibit I Employment Agreement of Roderick Budd
Exhibit J Legal Opinion of Keller Rohrback L.L.P.
Exhibit K Legal Opinion of Graham & Dunn, P.C.
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SCHEDULES
Bank Disclosures
- ----------------
Schedule 2.9 Outstanding Options
Schedule 3.4 Changes to Line of Business, Operating Procedures, etc.
Schedule 3.6 New or Changes to Compensation, Employment
Agreements, etc.
Schedule 3.7 New or Modifications to Benefit Plans
Schedule 3.11 New or Changes to Material Contracts
Schedule 4.1(C) Shares Outstanding
Schedule 4.1(D) Subsidiaries
Schedule 4.1(G) No Defaults - Agreements Requiring Third Party Consent
Schedule 4.1(H) Financial Reports
Schedule 4.1(J) No Events Causing Material Adverse Effect
Schedule 4.1(L) Litigation, Regulatory Action
Schedule 4.1(M) Compliance with Laws
Schedule 4.1(N) Material Contracts
Schedule 4.1(Q)(1) List of Employee Benefit Plans
Schedule 4.1(Q)(2) Employee Benefit Plans Not Qualified Under ERISA
Schedule 4.1(Q)(6) Obligations for Retiree Health and Life Benefits
Schedule 4.1(Q)(7) Agreements Resulting in Payments to Employees Under Any
Compensation and Benefit Plan with Respect to Proposed
Transaction
Schedule 4.1(T) Asset Classification
Schedule 4.1(V) Insurance
Schedule 4.1(W) Affiliates
Schedule 4.1(Z)(2) Pending Proceedings with Respect to Environmental Matters
Schedule 4.1(Z)(3) Pending Proceedings with Respect to Environmental
Matters Involving Loan/Fiduciary Property
Schedule 4.1(Z)(4) Pending Proceedings with Respect to Environmental
Matters Listed in Sections 4.1(Z)(2) or (3)
Schedule 4.1(Z)(5) Actions During Ownership Which Could Have Material
Adverse Effect with Respect to Environmental Matters
Schedule 4.1(Z)(6) Actions Prior to Ownership Which Could Have Material
Adverse Effect with Respect to Environmental Matters
Schedule 4.1(AA) Tax Reports Matters
Schedule 4.1(DD) Derivative Contracts
Schedule 4.1(FF) Commitments and Contracts
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InterWest Disclosures
Schedule 4.2(C) Shares
Schedule 4.2(F) No Defaults
Schedule 4.2(G) Financial Reports
Schedule 4.2(H) No Events Causing Material Adverse Effect
Schedule 4.2(I) Litigation, Regulatory Action
Schedule 4.2(L) Derivative Contracts
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AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of the 15th day of
January 1998 (this "Plan"), is between PACIFIC NORTHWEST BANK (the "Bank") and
INTERWEST BANCORP, INC. ("InterWest").
RECITALS
(A) THE BANK. The Bank is a banking corporation duly organized and
existing in good standing under the laws of the State of Washington, with its
principal executive offices located in Seattle, Washington. As of the date of
this Plan, the Bank has 800,000 authorized shares of common stock, $1.00 par
value per share ("Bank Common Stock") (no other class of capital stock being
authorized), of which 395,963 shares of Bank Common Stock are issued and
outstanding. As of December 31, 1997, the Bank had capital of $15,977,629,
divided into common stock of $389,926, surplus of $8,059,158, and undivided
profits of $7,494,650.
(B) 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. InterWest is a registered
bank holding company under the Bank Holding Company Act of 1956, as amended (the
"BHC Act"). As of the date of this Plan, InterWest has 20,000,000 authorized
shares of common stock, $0.20 par value per share ("InterWest Common Stock") (no
other class of capital stock being authorized), of which 8,054,625 shares of
InterWest Common Stock are issued and outstanding.
(C) DIRECTOR AND OFFICER AGREEMENTS. As a condition and an inducement to
InterWest's willingness to enter into this Plan, the directors of the Bank have
entered into agreements in the forms attached to this Plan as Exhibit A and
Exhibit B, pursuant to which, among other things, each director has agreed to
vote his or her shares of Bank Common Stock in favor of approval of the actions
contemplated by this Plan at the Meeting (as defined below) and to refrain from
competing with InterWest.
(D) STOCK OPTION 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 Bank and InterWest are entering into a Stock Option
Agreement (the "Stock Option Agreement") in the form attached to this Plan as
Exhibit C, pursuant to which the Bank is granting to InterWest an option to
purchase, under certain circumstances, shares of Bank Common Stock.
(E) RIGHTS, ETC. Except as Previously Disclosed (as defined below) in
Schedule 4.l(C) or as authorized by this Plan or the Stock Option Agreement:
there are no shares of capital stock of the Bank authorized and reserved for
issuance; the Bank does not have any Rights (as defined below) issued or
outstanding; and the Bank does not have any commitment to authorize, issue or
sell any such shares or any Rights. The term "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 with respect to the Bank
Common Stock.
(F) APPROVALS. At meetings of the respective Boards of Directors of the
Bank and InterWest, each such Board has approved and authorized the execution of
this Plan and the Stock Option Agreement in counterparts.
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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 Proposal" has the meaning assigned to such term in Section
5.7(A).
"Additional Shares" means the number equal to (1) the Bank's
undistributed net income (determined in accordance with GAAP) during the period
between June 30, 1998 and the Effective Date, divided by (2) the Average Closing
Price.
"Adjustment Factor" means the number equal to the Additional Shares
divided by 395,963.
"Appraisal Laws" has the meaning assigned to such term in Section 2.7.
"Asset Classification" has the meaning assigned to such term in Section
4.l(T).
"Average Closing 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 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.
"Bank Financial Reports" has the meaning assigned to such term in
Section 4.1(H).
"Bank Regulatory Reports" has the meaning assigned to such term in
Section 4.1(H).
"Bank Option" has the meaning assigned to such term in Section 2.9.
"Business Day" means any day other than a Saturday, Sunday, or legal
holiday in the State of Washington.
"Capital" means capital stock, surplus and retained earnings determined
in accordance with GAAP, the calculation of which shall exclude gains or losses
on securities available for sale, net of taxes.
"Code" has the meaning assigned to such term in Section 4.1(Q)(2).
"Compensation and Benefit Plans" has the meaning assigned to such term
in Section 4.1(Q)(1).
"Control" with respect to any Person means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policies of such Person, whether through the ownership of voting interests, by
contract, or otherwise.
"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 quoting both bid and asked
prices, as reported on Bloomberg Financial Markets, of InterWest Common Stock on
the NASDAQ Stock Market reporting system.
"Department" means the Department of Financial Institutions of the State
of Washington.
"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
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sheet of the Bank 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 Bank Common Stock held by those
shareholders of the Bank 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 1.2.
"Eligible Bank Common Stock" means shares of Bank Common Stock other
than Exception Shares and Dissenting Shares.
"Employment Agreement" shall mean any of Exhibits E through I.
"Environmental Law" means (1) any federal, state, and/or 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 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, and (2) any common
law or equitable doctrine (including injunctive relief and tort doctrines such
as negligence, nuisance, trespass and strict liability) that may impose
liability or obligations for injuries or damages due to, or threatened as a
result of, the presence of or exposure to any 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 Bank'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 under such statute.
"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).
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"FDIC" means the Federal Deposit Insurance Corporation.
"Fahey" has the meaning assigned to such term in Section 5.9(A).
"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.
"Final Capital Requirement" means a dollar amount equal to the sum of
$16 million plus $200,000 for each month elapsed between March 31, 1998 and the
Effective Date (with any partial month being pro-rated).
"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 polychlorinated biphenyl.
"Indemnified Party" has the meaning assigned to such term in Section
5.20(A).
"InterWest Option" has the meaning assigned to such term in Section 2.8.
"Loan/Fiduciary Property" means any property owned or controlled by the
Bank or any of its Subsidiaries or in which the Bank or any of its Subsidiaries
holds a security or other interest, and, where required by the context, includes
any such property where the Bank 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 owned and
taxes, and (ii) any breach of a representation or warranty contained in this
Plan 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 to perform its obligations under this
Plan or the Stock Option Agreement or the consummation of any of the
transactions contemplated by this Plan or the Stock Option Agreement.
"Meeting" has the meaning assigned to such term in Section 5.2.
"Multiemployer Plans" has the meaning assigned to such term in Section
4.l(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.
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"Participation Facility" means any facility in which the Bank 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.l(Q)(2).
"Person" means any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, governmental
body, or other entity.
"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.
"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.
"Reorganization" has the meaning assigned to such term in Section 1.1.
"RCW" means the Revised Code of Washington, as amended.
"Rights" has the meaning assigned to such term in paragraph (E) of the
Recitals to this Plan.
"Securities Act" means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated under such statute.
"SEC" means the Securities and Exchange Commission.
"Stock Option Agreement" has the meaning assigned to such term in
paragraph (D) of the Recitals to this Plan.
"Subsidiary" means, with respect to any entity, each partnership,
limited liability company, or corporation the majority of the outstanding
partnership interests, membership 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.
"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 1.2.
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"Third Party" means a person within the meaning of Sections 3(a)(9) and
13(d)(3) of the Exchange Act, excluding (1) the Bank or any Subsidiary of the
Bank, and (2) InterWest or any Subsidiary of InterWest.
(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. REORGANIZATION
1.1 THE REORGANIZATION. Subject to the provisions of this Plan and in
accordance with the terms of RCW 30.04.550-30.04.575, on the Effective Date, the
Bank shall be reorganized to become a wholly owned Subsidiary of InterWest (the
"Reorganization"). After the Effective Date, the Board of Directors of the Bank
shall be comprised of the directors of the Bank immediately preceding the
Effective Date plus such additional directors as InterWest may determine.
1.2 EFFECTIVE DATE. Unless the Parties agree upon another date, the
"Effective Date" will be the tenth Business Day 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 Reorganization
is not consummated in accordance with this Plan on or prior to September 30,
1998 (the "Termination Date"), the Bank or InterWest may terminate this Plan in
accordance with Article VII.
ARTICLE II. EXCHANGE CONSIDERATION
2.1 EXCHANGE 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 BANK COMMON STOCK. Each share of Eligible Bank
Common Stock issued and outstanding immediately prior to the Effective Date
shall, by virtue of the Reorganization, automatically and without any action on
the part of the holder of such share, be exchanged for the right to receive 3.95
shares of InterWest Common Stock (as adjusted, if applicable, pursuant to
Section 2.5) (the "Exchange Ratio").
2.2 SHAREHOLDER RIGHTS; STOCK TRANSFERS. On the Effective Date, holders
of Bank Common Stock shall cease to be, and shall have no rights as,
shareholders of the Bank, 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 Bank of the shares of Bank Common Stock that were
issued and outstanding immediately prior to the Effective Date.
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2.3 FRACTIONAL SHARES. Notwithstanding any other provision of this Plan,
no fractional shares of InterWest Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the
Reorganization. InterWest shall pay to each holder of Bank Common Stock who
would otherwise be entitled to a fractional share an amount in cash determined
by multiplying such fraction by the Average Closing Price.
2.4 EXCHANGE PROCEDURES. As promptly as practicable after the Effective
Date, InterWest shall send or cause to be sent to each former shareholder of the
Bank of record immediately prior to the Effective Date transmittal materials for
use in exchanging such shareholder's certificates for Bank Common Stock for the
consideration set forth in this Article II. The certificates representing the
shares of InterWest Common Stock for which shares of such shareholder's Bank
Common Stock are exchanged on the Effective Date, any fractional share checks
that such shareholder shall be entitled to receive, and any dividends paid on
such shares of InterWest Common Stock for which the record date for
determination of shareholders entitled to such dividends is on or after the
Effective Date, will be delivered to such shareholder only upon delivery to
InterWest Bank (the "Exchange Agent") of the certificates representing all of
such shares of Bank 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 Bank 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 5.11.
2.5 EXCHANGE RATIO ADJUSTMENTS. 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. In the event that the transactions
contemplated by this Plan have not been consummated on or before June 30, 1998,
then the Exchange Ratio shall be equal to 3.95 plus the Adjustment Factor.
2.6 EXCEPTION SHARES. Each of the Exception Shares of Bank Common Stock
shall be canceled and retired upon consummation of the Reorganization, and no
consideration shall be issued in exchange therefor.
2.7 DISSENTING SHARES. Notwithstanding anything to the contrary in this
Plan, each Dissenting Share whose holder, as of the Effective Date of the
Reorganization, has not effectively withdrawn or lost his dissenters' rights
under RCW 30.04.560 (the "Appraisal Laws") shall not be converted into or
represent a right to receive InterWest Common Stock, but the holder of such
Dissenting Share 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 Bank Common Stock pursuant to the provisions of the Appraisal Laws shall
receive payment for such Dissenting Shares from the Bank (but only after the
amount thereof shall have been agreed upon or finally determined pursuant to the
Appraisal Laws).
2.8 RESERVATION OF RIGHT TO REVISE TRANSACTION. In its sole discretion,
and notwithstanding any other provision in this Plan to the contrary, InterWest
may at any time change the method of effecting its acquisition of the Bank;
provided, however, that no such change shall (A) alter or change the amount or
kind of consideration to be issued to holders of Bank Common Stock as provided
for in this Plan, or (B) adversely affect the tax treatment to the Bank
shareholders as a result of
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receiving such consideration. If InterWest so elects to change the method of
acquisition, the Bank will cooperate with and assist InterWest with any
necessary amendment to this Plan, and with the preparation and filing of such
applications, documents, instruments and notices as may be necessary or
desirable, in the opinion of counsel for InterWest, to obtain all necessary
shareholder approvals and approvals of any regulatory agency, administrative
body or other governmental entity.
2.9 OPTIONS. On the Effective Date, by virtue of the Reorganization, and
without any action on the part of any holder of an option, each option granted
by the Bank to purchase shares of Bank Common Stock ("Bank 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 Bank Option immediately prior to
the Effective Date, except that (A) each such InterWest Option may be exercised
solely for shares of InterWest Common Stock, (B) the number of shares of
InterWest Common Stock subject to such InterWest Option shall be equal to the
number of shares of Bank Common Stock subject to such Bank 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 (C) the
per-share exercise price under each such InterWest Option shall be adjusted by
dividing the per-share exercise price of the Bank Option by the Exchange Ratio,
and rounding up to the nearest cent. The number of shares of Bank Common Stock
that are issuable upon exercise of Bank Options as of the date of this Plan are
Previously Disclosed in Schedule 2.9. 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
2.9.
ARTICLE III. ACTIONS PENDING CONSUMMATION
The Bank 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, and the Bank will not (and will not cause or allow any
of it Subsidiaries to):
3.1 CAPITAL STOCK. Except for or as otherwise expressly permitted in
this Plan or the Stock Option Agreement or as Previously Disclosed in Schedule
4.1(C), issue, sell or otherwise permit to become outstanding any additional
shares of capital stock of the Bank or any of its Subsidiaries, or any Rights
with respect thereto, or enter into any agreement with respect to the foregoing,
or permit any additional shares of Bank 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, 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 Plan, authorize the creation or issuance of, or issue, any additional
shares of its capital stock or any Rights with respect thereto; provided,
however, that (A) the Bank may declare and pay, consistent with past practice,
an annual cash dividend of $0.80 per share only to the extent that such dividend
does not result in the failure of the Bank to comply with Section 6.2(G), and
(B) in the event that the transactions contemplated by this Plan have not been
consummated on or before June 30, 1998, the Bank may declare and pay cash
dividends after such date in an aggregate amount up to the Bank's net income
(determined in accordance with GAAP) after June 30, 1998, to the extent that
such dividends would not preclude the Reorganization from being accounted for on
a pooling-of-interests basis.
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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, (A) 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 5.12,
or (B) 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 $50,000 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.
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 Bank
Option 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 Bank 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 Bank and its Subsidiaries taken as a whole (except foreclosures or
acquisitions by the Bank in its 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 Bank 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 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 or account for loans and leases other than in
accordance with existing lending policies and accounting practices. With regard
to any new extension of credit in excess of $1,000,000, the Chief Executive
Officer or Chief Credit Officer of the Bank shall report to the Chief
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<PAGE> 15
Executive Officer or Chief Financial Officer of InterWest, as expeditiously as
possible, the substance and nature of the transaction for the purpose of keeping
InterWest abreast of the ongoing credit quality at the Bank.
3.13 TRANSACTION EXPENSES. Incur expenses in connection with the
transactions contemplated by this Plan that exceed $130,000 in the aggregate.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
4.1 THE BANK'S REPRESENTATIONS AND WARRANTIES. The Bank hereby
represents and warrants to InterWest as follows:
(A) RECITALS. The facts set forth in the Recitals of this Plan with
respect to the Bank and its Subsidiaries are true and correct.
(B) ORGANIZATION, STANDING AND AUTHORITY. Each of the Bank 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 Bank 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. The
Bank is an "insured depository institution" as defined in the Federal Deposit
Insurance Act, as amended, and applicable regulations under such statute, and
its deposits are insured by the Bank Insurance Fund of the FDIC.
(C) SHARES. The outstanding shares of the Bank 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) and as provided under the Stock Option Agreement, there are no shares of
capital stock or other equity securities of the Bank or its Subsidiaries
outstanding and no outstanding Rights with respect thereto.
(D) SUBSIDIARIES. The Bank has Previously Disclosed in Schedule
4.1(D) a list of all of its Subsidiaries. No equity securities of any of the
Bank's Subsidiaries are or may become required to be issued (other than to the
Bank 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 Bank 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 Bank or one of
its Subsidiaries are fully paid and nonassessable and are owned by the Bank or
one of its Subsidiaries free and clear of any charge, mortgage, pledge, security
interest, restriction, claim, lien or encumbrance. 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), the Bank 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.
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<PAGE> 16
(E) CORPORATE POWER. Each of the Bank 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.
(F) CORPORATE AUTHORITY. Subject to any necessary receipt of
approval by its shareholders referred to in Section 6.1, this Plan and the Stock
Option Agreement have been authorized by all necessary corporate action of the
Bank and each of its Subsidiaries that is a Party, and each such agreement is a
valid and binding agreement of the Bank and such Subsidiaries, enforceable
against the Bank 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 Bank of the transactions contemplated by this Plan and the Stock Option
Agreement does not and will not (1) 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
Bank or of any of its Subsidiaries or to which the Bank 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, (2) constitute a breach or violation of,
or a default under, the articles of incorporation, charter or bylaws of it or
any of its Subsidiaries, or (3) 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), its audited consolidated balance sheet as of December 31, 1996 and the
related statements of income, changes in shareholders' equity and cash flows for
the fiscal year ended December 31, 1996 (collectively, the "Bank Financial
Reports"), and its call report for the fiscal year ended December 31, 1996, and
all other financial reports filed or to be filed subsequent to December 31,
1996, in the form filed with the FDIC and the Department (in each case, the
"Bank Regulatory Reports" and together with the Bank 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 shareholders' equity and
cash flows or equivalent statements in the Bank Regulatory Reports (including
any related notes and schedules thereto) fairly presents and will fairly present
the results of operations, changes in shareholders' 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 Bank 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 (1) as reflected in its Bank
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<PAGE> 17
Financial Reports prior to the date of this Plan, and (2) for commitments and
obligations made, or liabilities incurred, in the ordinary course of business
consistent with past practice since December 31, 1996. Since December 31, 1996,
neither the Bank 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) that,
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, 1996, no event has occurred that, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on it.
(K) PROPERTIES. Except as reserved against in its Bank Financial
Reports, the Bank 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 Financial Reports as being owned by the Bank 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 Bank 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.l(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 Bank 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 Bank 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 Bank 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 Bank 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;
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<PAGE> 18
(2) has received no notification or communication from any
Regulatory Authority or the staff thereof (a) asserting that the Bank 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 Bank or its
Subsidiaries, (b) 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 Bank or its
Subsidiaries, or (c) requiring any of the Bank 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
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.
(N) MATERIAL CONTRACTS. Except as Previously Disclosed in Schedule
4.1(N), none of the Bank or its Subsidiaries, nor any of their respective
assets, businesses or operations, is a party to, or is bound or affected by, or
receives benefits under, any material contract or agreement or amendment
thereto. Neither the Bank 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
Bank 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 Bank nor any of
its Subsidiaries is subject to or bound by any contract containing covenants
that limit the ability of the Bank or any of its Subsidiaries to compete in any
line of business or with any Person or that involve any restriction of
geographical area in which, or method by which, the Bank 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, 1993, each of the Bank 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 (1)
the Department, (2) the FDIC, (3) the Federal Reserve Board, and (4) any other
Regulatory Authorities having jurisdiction with respect to the Bank and its
Subsidiaries. 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 by this Plan 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.
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(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 Bank 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 Bank 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
Bank 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 the Bank is not aware of any circumstances
reasonably likely to result in the revocation or 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 Bank nor any of its Subsidiaries has
engaged in a transaction with respect to any ERISA Plan that could subject the
Bank 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 Bank 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 Bank under Section 4001(a)(15) of ERISA or Section 414 of the
Code (an "ERISA Affiliate"). Neither the Bank 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 Bank 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
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<PAGE> 20
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 Bank 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 Bank
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.l(Q)(7),
neither the execution and delivery of this Plan nor the consummation of the
transactions contemplated by this Plan will (a) result in any payment (including
severance, unemployment compensation, golden parachute or otherwise) becoming
due to any director or any employee of the Bank or any of its Subsidiaries under
any Compensation and Benefit Plan or otherwise from the Bank or any of its
Subsidiaries, (b) increase any benefits otherwise payable under any Compensation
and Benefit Plan, or (c) result in any acceleration of the time of payment or
vesting of any such benefit.
(R) NO KNOWLEDGE. The Bank and its Subsidiaries know of no reason
why the regulatory approvals referred to in Section 6.1 should not be obtained.
(S) LABOR AGREEMENTS. Neither the Bank 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 Bank 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 Subsidiaries' employees
seeking to certify a collective bargaining unit or engaging in any other
organization activity.
(T) ASSET CLASSIFICATION. The Bank 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 Bank and its Subsidiaries that have been classified by it as
of December 31, 1997 (the "Asset Classification"); and no amounts of loans,
extensions of credit or other assets that have been classified as of December
31, 1997 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 Bank or any
Subsidiary prior to December 31, 1997.
(U) ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for possible
loan losses shown on the consolidated balance sheets in the December 31, 1996,
Bank Financial Reports and the September 30, 1997, Bank Regulatory Reports was,
and the allowance for possible loan losses to be shown on subsequent Bank
Financial Reports was and will be, adequate in the opinion of the Board of
Directors of the Bank 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 Bank 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
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<PAGE> 21
that are known to the Bank, except for such matters that, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect on the
Bank or its Subsidiaries. Set forth in Schedule 4.l(V) is a list of all
insurance policies maintained by or for the benefit of the Bank 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 Bank's knowledge, there is no person who, as of the date of
this Plan, may be deemed to be an "affiliate" of the Bank as that term is used
in Rule 145 under the Securities Act.
(X) STATE TAKEOVER LAWS, ARTICLES OF INCORPORATION. The Bank and its
Subsidiaries have taken all necessary action to exempt this Plan and the Stock
Option Agreement and the transactions contemplated by this Plan and the Stock
Option Agreement from, and this Plan and the Stock Option Agreement and such
transactions are exempt from (1) any applicable state takeover laws, including,
but not limited to, RCW Ch. 23B.19, as amended, and (2) any takeover-related
provisions of the Bank's and its Subsidiaries' articles of incorporation.
(Y) NO FURTHER ACTION. The Bank 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 by this Plan and the Stock
Option Agreement (including the Reorganization and the exercise of the Option)
or any other action or combination of actions, or any other transactions,
contemplated by this Plan and the Stock Option Agreement do not and will not (1)
require a vote of shareholders (other than as set forth in Section 6.1), or (2)
result in the grant of any rights to any Person under the articles of
incorporation, charter or bylaws of the Bank or any of its Subsidiaries or under
any agreement to which the Bank 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 under this Plan or the Stock Option Agreement
(Z) ENVIRONMENTAL MATTERS.
(1) To the Bank'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 that are not reasonably likely, individually or in the aggregate,
to have a Material Adverse Effect on the Bank or its Subsidiaries.
(2) There is no proceeding pending or, to the Bank's knowledge,
threatened before any court, governmental agency or board or other forum in
which the Bank or any 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 (a) for alleged
noncompliance (including by any predecessor) with any Environmental Law, or (b)
relating to the release or threatened release into the environment of any
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Hazardous Material, whether or not occurring at or on a site owned, leased or
operated by the Bank 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 Bank or its Subsidiaries or have been Previously Disclosed in Schedule
4.1(Z)(2).
(3) There is no proceeding pending or, to the Bank's knowledge,
threatened before any court, governmental agency or board or other forum in
which any Loan/Fiduciary Property (or the Bank 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 (a) for alleged noncompliance (including by any
predecessor) with any Environmental Law, or (b) 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 Bank or have been Previously
Disclosed in Schedule 4.1(Z)(3).
(4) To the Bank's knowledge, there is no reasonable basis for
any proceeding of a type described in subparagraph (2) or (3) of this paragraph
(Z), except as has been Previously Disclosed in Schedule 4.1(Z)(4).
(5) To the Bank's knowledge, during the period of (a) ownership
or operation by the Bank or any of its Subsidiaries of any of their respective
current properties, (b) participation in the management of any Participation
Facility by the Bank or any of its Subsidiaries, or (c) holding of a security or
other interest in a Loan/Fiduciary Property by the Bank 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 Bank or its Subsidiaries or
have been Previously Disclosed in Schedule 4.1(Z)(5).
(6) To the Bank's knowledge, prior to the period of (a)
ownership or operation by the Bank or any of its Subsidiaries of any of their
respective current properties, (b) participation in the management of any
Participation Facility by the Bank or any of its Subsidiaries, or (c) holding of
a security or other interest in a Loan/Fiduciary Property by the Bank 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 Bank 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(AA), (1) all reports and returns with respect to Taxes that are required to
be filed by or with respect to the Bank or its Subsidiaries, including
consolidated federal income tax returns of the Bank 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 Bank or its Subsidiaries, and such Tax Returns were true, complete
and accurate in all material respects, (2) all Taxes shown to be due on the Tax
Returns have been paid in full, (3) 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 which such
Tax Returns were required to be filed has expired, (4) all Taxes due with
respect to completed and settled examinations have been paid in full, (5) 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 Bank or its Subsidiaries, except as reserved against in
the Bank Financial Reports, and (6) 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 Bank or its Subsidiaries.
(CC) ACCURACY OF INFORMATION. The statements with respect to the
Bank 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 Bank or any other Party pursuant to the
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<PAGE> 23
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.
(DD) DERIVATIVES CONTRACTS. None of the Bank 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(DD).
Schedule 4.1(DD) includes a list of any assets of the Bank or its Subsidiaries
that are pledged as security for each such Derivatives Contract.
(EE) ACCOUNTING CONTROLS. Each of the Bank and its Subsidiaries has
devised and maintained systems of internal accounting controls sufficient to
provide reasonable assurances that (1) all material transactions are executed in
accordance with management's general or specific authorization, (2) 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, (3) access to the material property and assets of the Bank and its
Subsidiaries is permitted only in accordance with management's general or
specific authorization, and (4) the recorded accountability for items is
compared with the actual levels at reasonable intervals and appropriate action
is taken with respect to any differences.
(FF) COMMITMENTS AND CONTRACTS. Neither the Bank 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(FF), 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 Bank or any such Subsidiary without
any obligation on the part of the Bank or any such Subsidiary to make any
payment in connection with such termination);
(2) except as Previously Disclosed in Schedule 4.1(FF), 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(FF), any
material contract with any affiliate.
4.2 INTERWEST'S REPRESENTATIONS AND WARRANTIES. InterWest hereby
represents and warrants to the Bank as follows:
(A) RECITALS. The facts set forth in the Recitals of this Plan with
respect to InterWest are true and correct.
(B) ORGANIZATION, STANDING AND AUTHORITY. InterWest 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 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.
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(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. InterWest 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. This Plan and the Employment Agreement of
Pat Fahey (Exhibit E) have been authorized by all necessary corporate action of
InterWest and each such agreement is a valid and binding agreement of InterWest,
enforceable against InterWest 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. As of the date of
this Plan, no approval by InterWest's shareholders of this Plan and the
Employment Agreements is required.
(F) NO DEFAULTS. Subject to receipt of 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 Employment
Agreement of Pat Fahey (Exhibit E) and the consummation by InterWest and each of
its Subsidiaries that is a Party of the transactions contemplated by this Plan
does not and will not (1) 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, (2) 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 (3) 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, 1997, and all other documents filed or to be filed
subsequent to September 30, 1997 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 shareholders' 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 shareholders, 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 GAAP,
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, 1997, no event has occurred which is reasonably likely to
have a Material Adverse Effect on it.
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<PAGE> 25
(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 or 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, 1997, 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 (1)
the FDIC, (2) the Department, (3) the Federal Reserve Board, and (4) any other
Regulatory Authorities having jurisdiction with respect to InterWest and its
Subsidiaries. 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 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 (1) as reflected the InterWest Financial Reports
prior to the date of this Plan, and (2) for commitments and obligations made, or
liabilities incurred, in the ordinary course of business consistent with past
practice since September 30, 1997. Since September 30, 1997, 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) that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on it.
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ARTICLE V. COVENANTS
The Bank hereby covenants to InterWest, and InterWest hereby covenants
to the Bank, 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 applicable laws, so as to permit consummation of
the Reorganization by June 30, 1998 and to otherwise enable consummation of the
transactions contemplated by this Plan and the Stock Option Agreement, and shall
cooperate fully with the other Parties to that end.
5.2 THE PROXY. The Bank shall promptly assist InterWest in the
preparation of a proxy statement (the "Proxy Statement") to be mailed to the
holders of the Bank Common Stock in connection with the transactions
contemplated by this Plan 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 Bank Common Stock to be held
as soon as practicable for purposes of voting upon the transactions contemplated
by this Plan and the Bank shall use its best efforts to solicit and obtain votes
of the holders of Bank Common Stock in favor of the transactions contemplated by
this Plan and, subject to the exercise of its fiduciary duties, the Board of
Directors of the Bank 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 Bank relating to the
Bank or its Subsidiaries and by or on behalf of InterWest relating to InterWest
or its Subsidiaries, (A) will comply in all material respects with the
provisions of the Securities Act and any other applicable statutory or
regulatory requirements, and (B) 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. InterWest will advise the
Bank, 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 Bank will not, without the prior approval of
InterWest, and InterWest will not, without the prior approval of the Bank, issue
any press release or written statement for general circulation relating to the
transactions contemplated by this Plan, except as otherwise required by law.
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5.6 ACCESS; INFORMATION.
(A) Upon reasonable notice, the Bank 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
Bank and its Subsidiaries and, during such period, the Bank shall promptly
furnish (and cause its accountants and other agents to promptly furnish) to
InterWest (1) a copy of each material report, schedule and other document filed
by the Bank and its Subsidiaries with any Regulatory Authority, (2) such
representations and certifications as are necessary for purposes of the pooling
letter described in Section 6.2(F), and (3) all other information concerning the
business, properties and personnel of the Bank 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 Bank in this Plan or the conditions to the obligations of the Bank
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
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 Bank, deliver to the Bank all documents so
obtained by InterWest or destroy such documents and, in the case of destruction,
will certify such fact to the Bank.
5.7 BREAK-UP FEES.
(A) Without the prior written consent of InterWest, the Bank 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 Bank (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 Bank or any of its Subsidiaries or any merger or other business
combination with the Bank or any of its Subsidiaries other than as contemplated
by this Plan ("Acquisition Proposal"); 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 Bank or any of its
Subsidiaries.
(B) If (1) an Acquisition Proposal occurs prior to the Meeting, (2)
the shareholder approval contemplated by Section 6.1 is not obtained at the
Meeting, and (3) prior to June 30, 1999, Control of the Bank is acquired by a
Third Party, by merger, purchase of assets, acquisition of stock or otherwise,
then unless the representations and warranties of InterWest in this Plan were
false in any material respect as of the date of such Meeting or InterWest was in
material default of its covenants in this Plan as of such date, the Bank will
promptly pay to InterWest the amount of $250,000.
(C) In the event that a Party terminates or abandons this Plan other
than pursuant to the provisions of Section 7.1, such Party will promptly pay to
the other Party the amount of $250,000 as liquidated damages for such
termination or abandonment.
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5.8 REGISTRATION STATEMENT PREPARATION; REGULATORY APPLICATIONS
PREPARATION. InterWest shall, as promptly as practicable following the date of
this Plan, prepare and file the Registration Statement with the SEC with respect
to the shares of InterWest Common Stock to be issued to the holders of Bank
Common Stock pursuant to this Plan, 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 Regulatory Authorities having jurisdiction with respect to the transactions
contemplated by this Plan.
5.9 APPOINTMENT OF DIRECTORS/OFFICERS; BYLAW AMENDMENTS.
(A) InterWest shall exercise its best efforts prior to the Effective
Date to make such amendments to its bylaws as may be necessary to facilitate the
appointment of Patrick M. Fahey ("Fahey") to serve on the Board of Directors of
InterWest following the Effective Date; and
(B) Immediately after the Effective Date, InterWest shall cause (1)
the appointment of Fahey to the Board of Directors of InterWest to hold office
until such time as his successor is elected and qualified, (2) the appointment
of Fahey to the Executive Committee of the Board of Directors of InterWest, and
(3) the appointment of Fahey as InterWest's Vice Chairman/Commercial Banking
Activities.
(C) Immediately after the Effective Date, the Bank shall amend its
Bylaws to expand its Board of Directors to include those InterWest
representatives designated pursuant to Section 1.1.
5.10 BLUE-SKY FILINGS. InterWest shall use its best efforts to obtain,
prior to the effective date of the Registration Statement, any 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.
5.11 AFFILIATE AGREEMENTS. The Bank will use its best efforts to induce
each person who may be deemed to be an "affiliate" of the Bank 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 D restricting the disposition of such
affiliate's shares of the Bank Common Stock and the shares of InterWest Common
Stock to be received by such person in exchange for such person's shares of Bank
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".
5.12 CERTAIN POLICIES OF THE BANK. The Bank shall, at InterWest's
request, modify and change its loan, litigation and other reserve and real
estate valuation policies and practices (including loan classifications and
levels of reserves), and 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 by this Plan, other than
the condition set forth in Section 6.1(G), have been satisfied or waived. The
Bank's 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 pursuant to this Section
5.12.
5.13 STATE TAKEOVER LAW. The Bank 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
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<PAGE> 29
state takeover statute, and the Bank 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.
5.14 NO RIGHTS TRIGGERED. Except for those consents of Third Parties
Previously Disclosed on Schedule 4.1(G), the Bank 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 by this Plan and the Stock
Option Agreement (including the Reorganization) and any other action or
combination of actions, or any other transactions contemplated by this Plan, do
not and will not (A) result in the grant of any rights to any Person under the
articles of incorporation or bylaws of the Bank or under any agreement to which
the Bank or any of its Subsidiaries is a party, or (B) restrict or impair in any
way the ability of InterWest to exercise the rights granted under this Plan or
the Stock Option Agreement.
5.15 SHARES LISTED. 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 Bank Common Stock.
5.16 REGULATORY APPLICATIONS. InterWest shall (A) promptly prepare and
submit applications to the appropriate Regulatory Authorities for approval of
the Reorganization, and (B) promptly make all other appropriate filings to
secure all other approvals, consents and rulings that are necessary for the
consummation of the Reorganization by InterWest.
5.17 REGULATORY DIVESTITURES. Effective on or before the Effective Date,
the Bank shall cease engaging in such activities as InterWest shall advise the
Bank 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 Bank shall divest any Subsidiary engaged in activities or holding
assets that are impermissible for InterWest or InterWest Bank, 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
by this Plan, other than the condition set forth in Section 6.1(G), have been
satisfied or waived.
5.18 CURRENT INFORMATION.
(A) During the period from the date of this Plan to the Effective
Date, each of the Bank 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 Bank and InterWest shall promptly notify the other
of (1) any material change in the business or operations of it or its
Subsidiaries, (2) 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, (3) the initiation or threat of
material litigation involving or relating to it or its Subsidiaries, or (4) any
event or condition that might reasonably be expected to cause any of its
representations or warranties set forth in this Plan 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 under this Plan.
5.19 401(K) PLANS. Prior to execution of this Plan, the Bank shall take
necessary steps to restrict its contributions to its 401(k) plan to cash
contributions.
24
<PAGE> 30
5.20 INDEMNIFICATION.
(A) For a period of four years from and after the Effective Date,
InterWest shall indemnify, defend and hold harmless the present and former
directors and officers of the Bank 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
Bank 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 applicable law does not allow
for such indemnification).
(B) Any Indemnified Party wishing to claim indemnification under
paragraph (A) of this Section 5.20, upon learning of such claim, action, suit,
proceeding or investigation, shall promptly notify InterWest thereof, provided,
however, that the failure so to notify shall not affect the obligations of
InterWest under paragraph (A) of this Section 5.20 (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), (1) 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
all Indemnified Parties in any jurisdiction for any single action, suit or
proceeding, (2) the Indemnified Parties will cooperate in the defense of any
such matter, and (3) 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 5.20.
(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 5.20. The rights of each
Indemnified Party under this Section 5.20 shall be in addition to any other
rights such Indemnified Party may have under the articles of incorporation or
bylaws of the Bank or under applicable Washington law.
ARTICLE VI. CONDITIONS TO CONSUMMATION OF THE MERGER
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS. The respective obligations
of each Party to consummate the transactions contemplated by this Plan are
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 VOTE. This Plan shall have been duly approved by the
requisite vote of the Bank's shareholders under applicable law and the articles
of incorporation and bylaws of the Bank.
25
<PAGE> 31
(B) REGULATORY APPROVALS. The Parties shall have procured all
necessary regulatory consents and approvals by the appropriate Regulatory
Authorities, and any waiting periods relating thereto shall have expired;
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 by this Plan.
(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
Reorganization.
(F) TAX OPINION. InterWest and the Bank shall have received an
opinion from Graham & Dunn, P.C. to the effect that (1) the Reorganization
constitutes a reorganization under Section 368 of the Code, and (2) no gain or
loss will be recognized by shareholders of the Bank who receive shares of
InterWest Common Stock in exchange for their shares of the Bank 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, Graham & Dunn may
require and rely upon representations contained in certificates of officers of
InterWest, the Bank 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.
6.2 CONDITIONS TO OBLIGATIONS OF INTERWEST. The obligations of InterWest
to consummate the transactions contemplated by this Plan also are 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 Keller Rohrback L.L.P., counsel for the Bank, in the form
of Exhibit J.
(B) OFFICERS' CERTIFICATE. (1) Each of the representations and
warranties contained in this Plan of the Bank 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
(2) each and all of the agreements and covenants of the Bank 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
shall have received a certificate signed by the chief executive officers, chief
financial officers, and chief lending officers of the Bank dated the Effective
Date, to such effect.
(C) RECEIPT OF AFFILIATE AGREEMENTS. InterWest shall have received
from each affiliate of the Bank the agreement referred to in Section 5.11.
26
<PAGE> 32
(D) ADVERSE CHANGE. During the period from December 31, 1996 to the
Effective Date, there shall not have been any material adverse change in the
financial position or results of operations of the Bank nor shall the Bank 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 Bank to such effect.
(E) DISSENTERS' RIGHTS. The number of shares of Bank 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 10% of the outstanding shares of Bank
Common Stock.
(F) POOLING LETTER. InterWest shall have received a letter dated as
of the Effective Date, in form and substance acceptable to InterWest, from Ernst
& Young LLP to the effect that the Reorganization will qualify for
pooling-of-interests accounting treatment.
(G) CAPITAL. The Bank's Capital shall not be less than $16 million
at March 31, 1998, and not less than the Final Capital Requirement on the
Effective Date.
(H) ALLOWANCE FOR LOAN AND LEASE LOSSES. The Bank's allowance for
possible loan and lease losses shall not be less than 1.00% of the Bank's total
outstanding loans and leases and will be adequate to absorb the Bank's
anticipated loan and lease losses.
(I) EMPLOYMENT AGREEMENTS. The Employment Agreements attached as
Exhibits E, F, G, H, and I shall have been duly executed and delivered by all
individuals who are parties to such Employment Agreements.
(J) PURCHASE OF KEY MAN LIFE INSURANCE. The Bank shall have duly
authorized the sale to Fahey of, and Fahey shall have purchased from the Bank,
the "key man" life insurance policy relating to Fahey for a price equal to the
cash value of such policy on the date of purchase by Fahey.
6.3 CONDITIONS TO OBLIGATIONS OF THE BANK. The obligations of the Bank
to consummate the transactions contemplated by this Plan also are subject to the
written waiver by the Bank or the fulfillment on or prior to the Effective Date
of each of the following conditions:
(A) LEGAL OPINION. The Bank shall have received an opinion, dated
the Effective Date, of Graham & Dunn, special counsel for InterWest, in the form
of Exhibit K.
(B) OFFICER'S CERTIFICATE. (1) Each of the representations and
warranties of InterWest contained in this Plan 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
(2) each and all of the agreements and covenants of InterWest 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
Bank shall have received a certificate signed by an executive officer of
InterWest dated the Effective Date, to such effect.
(C) ADVERSE CHANGE. During the period from September 30, 1997 to the
Effective Date, there shall not have been any material adverse change in the
financial position or results
27
<PAGE> 33
of operations of InterWest nor shall InterWest have sustained any loss or damage
to its properties, whether or not insured, that materially affects its ability
to conduct its business; and the Bank shall have received a certificate dated
the Effective Date signed by the Chief Executive Officers of InterWest to such
effect.
(D) FAIRNESS OPINION. The Bank shall have received, immediately
prior to the mailing of the Proxy Statement to the Bank's shareholders, an
opinion of Columbia Financial Advisors, Inc. to the effect that the financial
terms of the Reorganization are fair from a financial point of view to the
Bank's shareholders.
ARTICLE VII. TERMINATION
7.1 EVENTS OF TERMINATION. This Plan may be terminated prior to the
Effective Date, either before or after receipt of required shareholder
approvals:
(A) MUTUAL CONSENT. By the mutual consent of InterWest and the Bank,
if the Board of Directors of each so determines by vote of a majority of the
members of its entire board.
(B) BREACH. By InterWest or the Bank, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event of (A) a material breach by the other Party of any representation or
warranty contained herein, which breach cannot be or has not been cured within
30 days after the giving of written notice to the breaching Party of such
breach, or (B) a breach by the other Party of any of the material covenants or
agreements contained herein, which breach cannot be or has not been cured within
30 days after the giving of written notice to the breaching Party of such
breach.
(C) DELAY. By InterWest or the Bank, if its Board of Directors so
determines by vote of a majority of the members of its entire Board, in the
event that the Reorganization is not consummated by September 30, 1998.
(D) NO SHAREHOLDER APPROVAL. By InterWest or the Bank, if its Board
of Directors so determines by a vote of a majority of the members of its entire
Board, in the event that the shareholder approval contemplated by Section 6.1 is
not obtained at the Meeting, including any adjournment or adjournments of the
Meeting.
(E) AVERAGE CLOSING PRICE BELOW $35.00. By InterWest or the Bank, if
the Average Closing Price is below $35.00.
7.2 CONSEQUENCES OF TERMINATION.
(A) GENERAL CONSEQUENCES. Subject to Sections 5.7(B) and 5.7(C), in
the event of the termination or abandonment of this Plan pursuant to the
provisions of Section 7.1, 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) ENFORCEMENT PROCEEDINGS. In any action or proceeding in
connection with the enforcement of this Plan, the prevailing party will be
entitled to reasonable attorneys' fees and expenses.
28
<PAGE> 34
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 Reorganization and shall not
survive the Effective Date. If the Reorganization is abandoned and this Plan is
terminated, the provisions of Article VII shall apply and the agreements of the
Parties in Sections 5.7(B), 5.7(C), 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 (A) waived in writing by the Party benefited by the provision,
or (B) amended or modified at any time (including the structure of the
transactions contemplated by this Plan) 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 shareholders of the
Bank, the consideration to be received by the shareholders of the Bank for each
share of Bank Common Stock shall not thereby be altered. Nothing contained in
this Section 8.2 is intended to modify InterWest's rights pursuant to Section
2.8.
8.3 COUNTERPARTS. This Plan may be executed in one or more facsimile
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 by this Plan, except
printing expenses which shall be shared equally between the Bank and InterWest.
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, 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
29
<PAGE> 35
Stephen M. Klein
Graham & Dunn, P.C.
1420 Fifth Avenue, Suite 3300
Seattle, Washington 98101
If to the Bank, to:
Pacific Northwest Bank
1111 3rd Avenue
Seattle, WA 98101-3207
Attn: Patrick M. Fahey, Chairman, Chief Executive
Officer, and President
Copies to:
Glen P. Garrison
Keller Rohrback L.L.P
1201 Third Avenue, Suite 3200
Seattle, Washington 98101-3052
8.8 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This Plan and
the Stock Option Agreement represents the entire understanding of the Parties
with reference to transactions contemplated by this Plan and the Stock Option
Agreement and supersedes 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 Reorganization, all
employees of the Bank and its Subsidiaries shall be deemed to be at-will
employees of the Bank except for those employees who are parties to the
Employment Agreements. From and after the Effective Date, employees of the Bank
and its Subsidiaries shall generally be entitled to (A) employee benefit
programs that, in the aggregate, are generally no less favorable to such
employees than those presently being provided to employees of the Bank, and (B)
participate in InterWest's stock option plans on substantially the same terms
and conditions as similarly situated 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 accrual of
benefits under such plans), InterWest shall give effect to years of service with
the Bank or the Bank's Subsidiaries, as the case may be, as if such service were
with InterWest or its Subsidiaries.
8.10 HEADINGS. The headings contained in this Plan are for reference
purposes only and are not part of this Plan.
30
<PAGE> 36
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
PACIFIC NORTHWEST BANK
By: /s/ Patrick M. Fahey
-------------------------------------------
NAME: PATRICK M. FAHEY
TITLE: CHAIRMAN, CHIEF EXECUTIVE OFFICER,
AND PRESIDENT
31
<PAGE> 1
EXHIBIT 10
STOCK OPTION AGREEMENT
This Stock Option Agreement ("Agreement"), dated as of January 15, 1998,
is between INTERWEST BANCORP, INC. ("InterWest") and PACIFIC NORTHWEST BANK
("PNB").
RECITALS
PNB and InterWest have executed a Plan and Agreement of Reorganization
("Plan"), of even date with this Agreement, under which PNB will become a wholly
owned subsidiary of InterWest upon completion of the reorganization
("Reorganization") contemplated in the Plan.
By negotiating and executing the Plan and by taking actions necessary or
appropriate to effect the transactions contemplated by the Plan, InterWest has
incurred and will incur substantial direct and indirect costs (including,
without limitation, the costs of management and employee time) and will forgo
the pursuit of certain alternative investments and transactions.
AGREEMENT
THEREFORE, in consideration of the promises set forth in this Agreement
and in the Plan, the parties agree as follows:
I. Grant of Option. Subject to the terms and conditions set forth in this
Agreement, PNB irrevocably grants an option ("Option") to InterWest to
purchase an aggregate of 107,855 authorized but unissued shares of PNB's
capital stock ("Common Stock") (which if issued, and assuming exercise
of outstanding options to acquire the Common Stock, would represent
approximately 19.9% of total stock issued and outstanding), at a per
share price of $85 ("Option Price").
II. Exercise of Option. Subject to the provisions of this Section 2 and of
Section 13(a) of this Agreement, this Option may be exercised by
InterWest or any transferee as set forth in Section 5 of this Agreement,
in whole or in part, at any time, or from time to time in any of the
following circumstances:
A. PNB or its board of directors enters into an agreement or
recommends to PNB shareholders an agreement (other than the Plan)
under which any entity, person or group (collectively "Person"),
within the meaning of Section 13(d)(3) of the Securities Exchange
Act of 1934, as amended ("Exchange Act"), would: (1) merge or
consolidate with, acquire 51% or more of the assets or liabilities
of, or enter into any similar transaction with PNB, or (2)
purchase or otherwise acquire (including by merger,
reorganization, consolidation, share exchange or any similar
transaction) securities representing 10% or more of PNB's voting
shares of PNB;
B. any Person (other than InterWest or any of its subsidiaries and
other than any Person owning as of the date of this Agreement 10%
or more of PNB's voting shares) acquires the beneficial ownership
or the right to acquire beneficial
<PAGE> 2
ownership of securities which, when aggregated with other such
securities owned by such Person, represents 10% or more of the
voting shares of PNB (the term "beneficial ownership" for purposes
of this Agreement has the meaning set forth in Section 13(d) of
the Exchange Act, and the regulations promulgated under the
Exchange Act); notwithstanding the foregoing, the Option will not
be exercisable in the circumstances described above in this
subsection 2 if a Person acquires the beneficial ownership of
securities which, when aggregated with other such securities owned
by such Person, represents 10% or more, but less than 25%, of
PNB's voting shares and the transaction does not result in, and is
not presumed to constitute, "control" as defined under Section
7(j) of the Federal Deposit Insurance Act or 12 CFR Part 303.4; or
C. failure of the shareholders to approve the Reorganization by the
required affirmative vote at a meeting of the shareholders, after
any Person (other than InterWest or a subsidiary of InterWest)
announces publicly or communicates, in writing, to PNB a proposal
to (1) acquire PNB (by merger, reorganization, consolidation, the
purchase of 51% or more of its assets or liabilities, or any other
similar transaction), (2) purchase or otherwise acquire securities
representing 25% or more of the voting shares of PNB or (3) change
the composition of the board of directors of PNB.
It is understood and agreed that the Option will become exercisable on
the occurrence of any of the above-described circumstances even though
the circumstance occurred as a result, in part or in whole, of the board
of PNB complying with its fiduciary duties.
Notwithstanding the foregoing, the Option may not be exercised if either
(1) any applicable and required governmental approvals have not been
obtained with respect to such exercise or if such exercise would violate
any applicable regulatory restrictions, or (2) at the time of exercise,
InterWest is failing in any material respect to perform or observe its
material covenants or conditions under the Plan, unless the reason for
such failure is that PNB is failing to perform or observe its covenants
or conditions under the Plan.
III. Notice, Time and Place of Exercise. Each time that InterWest or any
transferee wishes to exercise any portion of the Option, InterWest or
such transferee will give written notice of its intention to exercise
the Option specifying the number of shares as to which the Option is
being exercised ("Option Shares") and the place and date for the closing
of the exercise (which date may not be later than ten business days from
the date such notice is mailed). If any law, regulation or other
restriction will not permit such exercise to be consummated during this
ten-day period, the date for the closing of such exercise will be within
five days following the cessation of the restriction on consummation.
IV. Payment and Delivery of Certificate(s). At any closing for an exercise
of the Option or any portion thereof, (a) InterWest and PNB will each
deliver to the other certificates as to the accuracy, as of the closing
date, of their respective representations and warranties
<PAGE> 3
under this Agreement, (b) InterWest or the transferees will pay the
aggregate purchase price for the shares of Common Stock to be purchased
by delivery of a certified or bank cashier's check in immediately
available funds payable to the order of PNB, and (c) PNB will deliver to
InterWest or the transferees a certificate or certificates representing
the shares so purchased.
V. Transferability of the Option and Option Shares. Before the Option, or a
portion of the Option, becomes exercisable in accordance with the
provisions of Section 2 of this Agreement, neither the Option nor any
portion of the Option will be transferable. If any of the events or
circumstances set forth in Sections 2(a) through (c) above occur,
InterWest may freely transfer, subject to applicable federal and state
securities laws, the Option or any portion of the Option, or any of the
Option Shares.
For purposes of this Agreement, a Reorganization or consolidation of
InterWest (whether or not InterWest is the surviving entity) or an
acquisition of InterWest will not be deemed a transfer.
VI. Representations, Warranties and Covenants of PNB. PNB represents and
warrants to InterWest as follows:
A. Due Authorization. This Agreement has been duly authorized by all
necessary corporate action on the part of PNB, has been duly
executed by a duly authorized officer of PNB and constitutes a
valid and binding obligation of PNB. No shareholder approval by
PNB shareholders is required by applicable law or otherwise before
the exercise of the Option in whole or in part.
B. Option Shares. PNB 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 of this Agreement to such time as the
obligation to deliver shares under this Agreement terminates, will
have reserved for issuance, at the closing(s) upon exercise of the
Option, or any portion of the Option, the Option Shares (subject
to adjustment, as provided in Section 8 below), all of which, upon
issuance under this Agreement, will be duly and validly issued,
fully paid and nonassessable, and will be delivered free and clear
of all claims, liens, encumbrances and security interests,
including any preemptive right of any of the shareholders of PNB.
C. No Conflicts. Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated by it will
violate or result in any violation of or be in conflict with or
constitute a default under any term of the articles of
incorporation or bylaws of PNB or any agreement, instrument,
judgment, decree, law, rule or order applicable to PNB or any
subsidiary of PNB or to which PNB or any such subsidiary is a
party.
D. Notification of Record Date. At any time from and after the date
of this Agreement until the Option is no longer exercisable, PNB
will give InterWest or
<PAGE> 4
any transferee 30 days prior written notice before setting the
record date for determining the holders of record of the Common
Stock entitled to vote on any matter, to receive any dividend or
distribution or to participate in any rights offering or other
matters, or to receive any other benefit or right, with respect to
the Common Stock.
VII. Representations, Warranties and Covenants of InterWest. InterWest
represents and warrants to PNB as follows:
A. Due Authorization. This Agreement has been duly authorized by all
necessary corporate action on the part of InterWest, has been duly
executed by a duly authorized officer of InterWest and constitutes
a valid and binding obligation of InterWest.
B. Transfers of Common Stock. No shares of Common Stock acquired upon
exercise of the Option will be transferred except in a transaction
registered or exempt from registration under any applicable
securities laws.
(c) No Conflicts. Neither the execution and delivery of this
Agreement nor the consummation of the transactions contemplated
by it will violate or result in any violation of or be in
conflict with or constitute a default under any term of the
certificate of incorporation or bylaws of InterWest or any
agreement, instrument, judgment, decree, law, rule or order
applicable to InterWest or any subsidiary of InterWest or to
which InterWest or any such subsidiary is a party.
VIII. Adjustment Upon Changes in Capitalization. In the event of any change in
the Common Stock by reason of stock dividends, split-ups, mergers,
reorganizations, recapitalizations, combinations, exchanges of shares or
the like, the number and kind of shares or securities subject to the
Option and the purchase price per share of Common Stock will be
appropriately adjusted. If, before the Option terminates or is
exercised, PNB is acquired by another party, consolidates with or merges
into another corporation or liquidates, InterWest or any transferee will
thereafter receive, upon exercise of the Option, the securities or
properties to which a holder of the number of shares of Common Stock
then deliverable upon the exercise thereof would have been entitled upon
such acquisition, consolidation, merger, reorganization or liquidation,
and PNB will take all steps in connection with such acquisition,
consolidation, merger, reorganization or liquidation as may be necessary
to assure that the provisions of this agreement will thereafter be
applicable, as nearly as reasonably may be practicable, in relation to
any securities or property thereafter deliverable upon exercise of the
Option.
IX. Nonassignability. This Agreement binds and inures to the benefit of the
parties and their successors. This Agreement is not assignable by either
party, but InterWest may transfer the Option, the Option Shares or any
portion of the Option or Option Shares in accordance with Section 5. A
merger, reorganization or consolidation of InterWest
<PAGE> 5
(whether or not InterWest is the surviving entity) or an acquisition of
InterWest will not be deemed an assignment or transfer.
X. Regulatory Restrictions. PNB will use its best efforts to obtain or to
cooperate with InterWest or any transferee in obtaining all necessary
regulatory consents, approvals, waivers or other action (whether
regulatory, corporate or other) to permit the acquisition of any or all
Option Shares by InterWest or any transferee.
XI. Remedies. PNB agrees that if for any reason InterWest or any transferee
will have exercised its rights under this Agreement and PNB will have
failed to issue the Option Shares to be issued upon such exercise or to
perform its other obligations under this Agreement, unless such action
would violate any applicable law or regulation by which PNB is bound,
then InterWest or any transferee will be entitled to specific
performance and injunctive and other equitable relief. InterWest agrees
that if it fails to perform any of its obligations under this Agreement,
then PNB will be entitled to specific performance and injunctive and
other equitable relief. This provision is without prejudice to any other
rights that PNB or InterWest or any transferee may have against the
other party for any failure to perform its obligations under this
Agreement.
XII. No Rights as Shareholder. This Option, before it is exercised, will not
entitle its holder to any rights as a shareholder of PNB at law or in
equity. Specifically, this Option, before it is exercised, will not
entitle the holder to vote on any matter presented to the shareholders
of PNB or, except as provided in this Agreement, to any notice of any
meetings of shareholders or any other proceedings of PNB.
XIII. Miscellaneous.
A. Termination. This Agreement and the Option, to the extent not
previously exercised, will terminate upon the earliest of (1) June
30, 1999; (2) the mutual agreement of the parties to this
Agreement; (3) 31 days after the date on which any application for
regulatory approval for the Reorganization has been denied, but if
before the expiration of the 31-day period, PNB or InterWest is
engaged in litigation or an appeal procedure relating to an
attempt to obtain approval of the Reorganization, this Agreement
will not terminate until the earlier of (i) June 30, 1999, or (ii)
31 days after the completion of the litigation and appeal
procedure; (4) the 30th day following the termination of the Plan
for any reason other than a material noncompliance or default by
InterWest with respect to its obligations under it; or (5) the
date of termination of the Plan if the termination is due to a
material noncompliance or default by InterWest with respect to its
obligations under it; but if the Option has been exercised, in
whole or in part, before the termination of this Agreement, then
the exercise will close under Section 4 of this Agreement, even
though that closing date is after the termination of this
Agreement; and if the Option is sold before the termination of
this Agreement, the Option may be exercised by the transferee at
any time within 31 days after the
<PAGE> 6
date of termination even though such exercise or the closing of
such exercise occurs after the termination of this Agreement.
B. Amendments. This Agreement may not be modified, amended, altered
or supplemented, except upon the execution and delivery of a
written agreement executed by the parties.
C. Severability of Terms. Any provision of this Agreement that is
invalid, illegal or unenforceable is ineffective only to the
extent of the invalidity, illegality or unenforceability without
affecting in any way the remaining provisions or rendering any
other provisions of this Agreement invalid, illegal or
unenforceable. Without limiting the generality of the foregoing,
if the right of InterWest or any transferee to exercise the Option
in full for the total number of shares of Common Stock or other
securities or property issuable upon the exercise of the Option is
limited by applicable law, or otherwise, InterWest or any
transferee may, nevertheless, exercise the Option to the fullest
extent permissible.
D. Notices. All notices, requests, claims, demands and other
communications under this Agreement must be in writing and must be
given (and will be deemed to have been duly received if so given)
by delivery, by cable, telecopies or telex, or by registered or
certified mail, postage prepaid, return receipt requested, to the
respective parties at the addresses below, or to such other
address as either party may furnish to the other in writing.
Change of address notices will be effective upon receipt.
If to PNB to:
Pacific Northwest Bank
1111 3rd Avenue
Seattle, WA 98101-3207
Attn: Patrick M. Fahey, Chairman, Chief Executive
Officer, and President
With a copy to:
Glen P. Garrison
Keller Rohrback L.L.P
1201 Third Avenue, Suite 3200
Seattle, Washington 98101-3052
<PAGE> 7
If to InterWest, to:
InterWest Bancorp, Inc.
1259 West Pioneer Way
Oak Harbor, Washington 98277
Attn: Stephen Walden, President
With a copy to:
Stephen M. Klein, Esq.
Graham & Dunn, P.C.
1420 Fifth Avenue, 33rd Floor
Seattle, WA 98101-2390
A. Governing Law and Venue. The parties intend this Agreement and the
Option, in all respects, including all matters of construction,
validity and performance, to be governed by the laws of the State
of Washington, without giving effect to conflicts of law
principles. Any actions brought by either party against the other
arising under this Agreement must be filed in King County,
Washington, and each party consents to personal jurisdication in
King County.
B. Counterparts. This Agreement may be executed in several
counterparts, each of which is an original, and all of which
together constitute one and the same agreement.
C. Effects of Headings. The section headings in this Agreement are
for convenience only and do not affect the meaning of its
provisions.
Dated January 15, 1998:
INTERWEST BANCORP, INC.
By: /s/ Stephen M. Walden
-----------------------------------
Stephen M. Walden
Its: President
PACIFIC NORTHWEST BANK
By: /s/ Patrick M. Fahey
-----------------------------------
Patrick M. Fahey
Its: President
<PAGE> 1
EXHIBIT 99
FOR IMMEDIATE RELEASE - JANUARY 15, 1998
For more information contact:
InterWest Bancorp, Inc.:
H. Glenn Mouw, Executive Vice President/Chief Financial Officer (360) 679-4181
Clark W. Donnell, Executive Vice President/Chief Administrative Officer
(360) 679-4181
Pacific Northwest Bank:
Patrick M. Fahey, Chairman, President/Chief Executive Officer (206) 340-4727
PACIFIC NORTHWEST BANK AGREES TO COMBINE WITH
INTERWEST BANCORP, INC.
OAK HARBOR, WA - JANUARY 15, 1998 -(NASDAQ: IWBK) - InterWest Bancorp, Inc.
(InterWest) and Pacific Northwest Bank of Seattle, Washington, today jointly
announced the signing of a definitive agreement whereby Pacific Northwest Bank
will become a separate subsidiary of InterWest. This latest move reflects
InterWest's continued commitment to expand its commercial banking presence.
Pacific Northwest Bank is a leading financial services provider specializing in
meeting the needs of professionals and small to medium businesses through its
four offices in King and Snohomish Counties, located in Seattle, Bellevue, Kent
and Lynnwood, Washington.
Pacific Northwest Bank had assets of $197 million and equity of $16.0 million on
December 31, 1997. For the same period, the Bank earned $2,254,000 representing
a 1.28% return on average assets and a 15.43% return on average equity. For the
quarter ended December 31, 1997, the Bank earned $670,000, a 1.42% return on
average assets and a 17.09% return on average equity, notwithstanding the
start-up expenses associated with its new Kent, Washington, office.
The Bank has achieved double-digit growth in assets and earnings, a reflection
of its strong management team of banking professionals, many of whom have over
20 years of commercial banking experience. During its decade of operations, the
Bank has established a reputation as a premier institution serving Puget Sound
area businesses. Partnering with InterWest will allow Pacific Northwest Bank
increased capacity to better meet the financing and service needs of its
expanding customer base.
The transaction is structured with a fixed exchange ratio of 3.95 shares of
InterWest stock for every share of Pacific Northwest Bank common stock. With
InterWest's closing price of
<PAGE> 2
$39.00 per share, the transaction is valued at $61 million, which is
approximately 22.8 times Pacific Northwest Bank's fourth quarter earnings on an
annualized basis, and approximately 17.9 times 1998 estimated earnings. The
transaction is expected to be accretive to earnings during 1999 and is
structured to use the pooling of interests method of accounting.
The transaction has been unanimously approved by the Boards of Directors of both
companies. It is anticipated that the merger will be completed in the second
quarter of 1998, following the approval of applicable regulatory authorities and
the shareholders of Pacific Northwest Bank.
"This merger is a key element of our strategic plan to continue to diversify
into commercial banking activities, thereby enhancing the long-term
profitability and value of our company," said Stephen M. Walden, President and
CEO of InterWest Bancorp, Inc. "The addition of Pacific Northwest Bank will
enhance the commitment to commercial banking that commenced with the acquisition
of Central Bancorporation in Wenatchee, Washington, in 1996 and our acquisition
of Puget Sound Bancorp which was completed just today." Walden reiterated that
"It is our desire to continue expansion both to the south and east, becoming a
state-wide institution. We firmly believe that Pacific Northwest Bank is a
unique franchise which will allow us to significantly expand our commercial
banking presence through both internal growth and acquisition of other
attractive community banks. Our unique structure allows hometown banks the
ability to retain their local identity while enjoying the benefits of greater
efficiency, increased lending capacity and expanded product lines."
Pacific Northwest Bank, with the same management team and locally oriented board
of directors, will remain a separate entity under the InterWest Bancorp holding
company. "We will maintain our commitment to business and community banking that
has been the strength of our growth and success. Both our customers and
InterWest's should benefit from an expanded line of services available and an
enlarged network of facilities designed to meet their banking needs," stated
Patrick M. Fahey, Chairman, President and CEO of Pacific Northwest Bank. "Our
shareholders should benefit from the initial premium being paid, the trading of
InterWest's stock and the potential for further acquisitions of other community
banks located in the Northwest," added Fahey, who will continue as Chairman,
President and CEO of Pacific Northwest Bank and become Vice Chairman of
Commercial Banking of InterWest Bancorp.
InterWest Bank was founded in 1957 and continues to pursue its diversification
strategies. It offers a full range of non-traditional financial products through
InterWest Financial Services, Inc., insurance products and services through the
InterWest Insurance Agency, Inc., and brokered loan products through Cornerstone
Northwest Mortgage, Inc. The combined entity will have assets exceeding $2.3
billion and will have 46 offices covering 13 counties throughout Western and
Central Washington.
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