==============================================
AGREEMENT AND PLAN OF MERGER
BETWEEN
INTERWEST BANCORP, INC.
AND
LIBERTY BAY FINANCIAL CORPORATION
==============================================
DATED AS OF SEPTEMBER 14, 1999
TABLE OF CONTENTS
ARTICLE I. MERGER..............................................................6
1.1 THE MERGER.........................................................6
1.2 EFFECTIVE DATE.....................................................7
ARTICLE II. CONSIDERATION.......................................................7
2.1 CONSIDERATION......................................................7
2.2 SHAREHOLDER RIGHTS; STOCK TRANSFERS................................7
2.3 FRACTIONAL SHARES..................................................8
2.4 EXCHANGE PROCEDURES................................................8
2.5 EXCHANGE RATIO ADJUSTMENTS.........................................8
2.6 EXCEPTION SHARES...................................................8
2.7 RESERVATION OF RIGHT TO REVISE TRANSACTION.........................8
2.8 OPTIONS............................................................8
ARTICLE III. ACTIONS PENDING CONSUMMATION........................................9
3.1 CAPITAL STOCK......................................................9
3.2 DIVIDENDS, ETC.....................................................9
3.3 INDEBTEDNESS; LIABILITIES; ETC....................................10
3.4 LINE OF BUSINESS; OPERATING PROCEDURES; ETC.......................10
3.5 LIENS AND ENCUMBRANCES............................................10
3.6 COMPENSATION; EMPLOYMENT AGREEMENTS; ETC..........................10
3.7 BENEFIT PLANS.....................................................10
3.8 CONTINUANCE OF BUSINESS...........................................10
3.9 AMENDMENTS........................................................10
3.10 CLAIMS............................................................10
3.11 CONTRACTS.........................................................10
3.12 LOANS.............................................................11
3.13 TRANSACTION EXPENSES..............................................11
ARTICLE IV. REPRESENTATIONS AND WARRANTIES.....................................11
4.1 THE COMPANY'S REPRESENTATIONS AND WARRANTIES......................11
4.2 INTERWEST'S REPRESENTATIONS AND WARRANTIES........................20
4.3 EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES......................22
ARTICLE V. COVENANTS..........................................................22
5.1 BEST EFFORTS......................................................22
5.2 THE PROXY.........................................................23
5.3 REGISTRATION STATEMENT COMPLIANCE WITH SECURITIES LAWS............23
5.4 REGISTRATION STATEMENT EFFECTIVENESS..............................23
5.5 PRESS RELEASES....................................................23
5.6 ACCESS; INFORMATION...............................................24
5.7 STANDSTILL........................................................24
5.8 REGISTRATION STATEMENT PREPARATION; REGULATORY APPLICATIONS
PREPARATION.......................................................24
5.9 APPOINTMENT OF DIRECTOR...........................................25
5.10 BLUE-SKY FILINGS..................................................25
5.11 AFFILIATE AGREEMENTS..............................................25
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5.12 CERTAIN POLICIES OF THE COMPANY AND ITS SUBSIDIARIES..............25
5.13 STATE TAKEOVER LAW................................................25
5.14 NO RIGHTS TRIGGERED...............................................25
5.15 SHARES LISTED.....................................................26
5.16 REGULATORY APPLICATIONS...........................................26
5.17 REGULATORY DIVESTITURES...........................................26
5.18 CURRENT INFORMATION...............................................26
5.19 INDEMNIFICATION...................................................26
5.20 STOCK OPTIONS.....................................................27
5.21 POST-MERGER ACTIONS...............................................27
ARTICLE VI. CONDITIONS TO CONSUMMATION OF THE MERGER...........................28
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS............................28
6.2 CONDITIONS TO OBLIGATIONS OF INTERWEST............................29
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY..........................29
ARTICLE VII. TERMINATION........................................................30
7.1 GROUNDS FOR TERMINATION...........................................30
7.2 CONSEQUENCES OF TERMINATION.......................................30
ARTICLE VIII. OTHER MATTERS......................................................31
8.1 SURVIVAL..........................................................31
8.2 WAIVER; AMENDMENT.................................................31
8.3 COUNTERPARTS......................................................31
8.4 GOVERNING LAW.....................................................31
8.5 EXPENSES..........................................................31
8.6 CONFIDENTIALITY...................................................31
8.7 NOTICES...........................................................31
8.8 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES................32
8.9 BENEFIT PLANS.....................................................32
8.10 HEADINGS..........................................................33
EXHIBITS
Exhibit A Approval by Directors of Liberty Bay Financial Corporation
Exhibit B Director's Agreement
Exhibit C Stock Option Agreement
Exhibit D Affiliate Undertakings and Agreements
Exhibit E Employment Agreement of Xxxxxxx X. Xxxxxxxx
Exhibit F Employment Agreement of Xxxxxx X. Xxxxxxxx
Exhibit G Legal Opinion of Xxxxxx Xxxxxxxx LLP
Exhibit H Legal Opinion of Xxxxxx & Xxxx PC
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SCHEDULES
COMPANY 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 Modified Benefit Plans
Schedule 3.11 New or Amended Material Contracts
Schedule 4.1(C) Shares Outstanding
Schedule 4.1(D) Subsidiaries
Schedule 4.1(G) Agreements Requiring Third Party Consent
Schedule 4.1(H) Financial Reports
Schedule 4.1(I) Undisclosed Liabilities
Schedule 4.1(J) 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 MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of the 14th day of
September 1999 (this "Plan"), is between INTERWEST BANCORP, INC. ("InterWest")
and LIBERTY BAY FINANCIAL CORPORATION (the "Company").
RECITALS
(A) THE COMPANY. The Company is a corporation duly organized and
existing in good standing under the laws of the State of Washington, with its
principal executive offices located in Poulsbo, Washington. The Company is a
registered bank holding company under the Bank Holding Company Act of 1956, as
amended. As of the date of this Plan, the Company has 450,000 authorized shares
of common stock, $10 par value per share ("Company Common Stock") (no other
class of capital stock being authorized), of which 211,727 shares of Company
Common Stock are issued and outstanding. As of the date of this Plan, the
Company has 35,000 shares of Company Common Stock reserved for issuance under an
employee stock option plan ("Employee Options"), pursuant to which options
covering 10,350 shares of Company Common Stock are outstanding. As of the date
of this Plan, the Company has 15,000 shares of Company Common Stock reserved for
issuance under a director stock option plan ("Director Options"), pursuant to
which options covering 6,000 shares of Company Common Stock are outstanding.
(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. As of the date of this Plan, InterWest has 30,000,000 authorized shares
of common stock, no par value ("InterWest Common Stock") (no other class of
capital stock being authorized), of which [15,782,012] 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 Company have entered into an agreement in the form attached to this Plan as
EXHIBIT A pursuant to which, among other things, each such individual has agreed
to vote his or her shares of Company Common Stock in favor of approval of the
actions contemplated by this Plan at the Meeting (as defined below) and to
exercise his or her Director Options prior to Closing (as defined below).
Further, the directors of the Company (other than Xxxxxxx X. Xxxxxxxx, Xxxx X.
Xxxxxxx and Xxxxxx X. Xxxxxxxx) have entered into agreements in the form
attached to this Plan as EXHIBIT B pursuant to which each such individual has
agreed to refrain from competing with InterWest and its Subsidiaries.
(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 Company 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 Company is granting to InterWest
an option to purchase, under certain circumstances, shares of Company Common
Stock.
(E) RIGHTS, ETC. Except as Previously Disclosed (as defined below)
in SCHEDULE 4.1(C) or paragraph (A) of the Recitals to this Plan, or as
authorized by this Plan or the Stock Option Agreement: there are no shares of
capital stock of the Company authorized and reserved for issuance; the Company
has no Rights (as defined below) issued or outstanding; and the Company has no
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
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options, calls or commitments relating to, shares of capital stock. There are
no preemptive rights with respect to the Company Common Stock.
(F) APPROVALS. At meetings of the respective Boards of Directors
of the Company and InterWest, each such Board has approved and authorized the
execution of this Plan and the Stock Option Agreement in counterparts.
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:
"APPRAISAL LAWS" is defined in Section 1.1(E).
"ASSET CLASSIFICATION" is defined in Section 4.1(T).
"AVERAGE CLOSING PRICE" means the price equal to the average (rounded
to the nearest xxxxx) of each Daily Sales Price of InterWest Common Stock for
the Pricing Period.
"BANK FINANCIAL REPORTS" is defined in Section 4.1(H)
"CAPITAL" means capital stock, surplus and retained earnings determined
in accordance with GAAP.
"CHANGE OF CONTROL AGREEMENTS" means each of the Change of Control
Agreements dated June 3, 1998, as amended, between the Company, North Sound
Bank, and, respectively, Xxxx X. Xxxxxxx and Xxxxxx X. Xxxxxxx.
"CODE" is defined in Section 4.1(Q)(2).
"COMPANY" is defined in the first paragraph of this Plan.
"COMPANY COMMON STOCK" is defined in paragraph (A) of the Recitals.
"COMPANY OPTIONS" means Employee Options and Director Options.
"COMPENSATION AND BENEFIT PLANS" is defined in Section 4.1(Q)(1).
"CONTINUING CORPORATION" is defined in Section 1.1(A).
"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
(rounded to two decimals) of the closing bid and ask prices per share of
InterWest Common Stock on the NASDAQ Stock Market reporting system, as reported
in THE WALL STREET JOURNAL.
"DEPARTMENT" means the Department of Financial Institutions of the
State of Washington.
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"DERIVATIVES CONTRACT" means an exchange-traded or over-the-counter
swap, forward, future, option, cap, floor or collar financial contract or any
other contract that (1) is not included on the balance sheet of the Holding
Company Financial Reports or the InterWest Financial Reports, as the case may
be, and (2) is a derivative contract (including various combinations thereof).
"DIRECTOR" means the Director of the Department.
"DIRECTOR OPTIONS" is defined in paragraph (A) of the Recitals.
"DISSENTING SHARES" means the shares of Company Common Stock held by
those shareholders of the Company who have timely and properly exercised their
dissenters' rights in accordance with the Appraisal Laws.
"DIVIDEND RECORD DATE" is defined in Section 3.2(B).
"EFFECTIVE DATE" is defined in Section 1.2.
"ELIGIBLE COMPANY COMMON STOCK" means shares of Company Common Stock
validly issued and outstanding on the Effective Date other than Exception Shares
and Dissenting Shares.
"EMPLOYEE OPTIONS" is defined in paragraph (A) of the Recitals.
"EMPLOYMENT AGREEMENT" means Exhibit E and/or Exhibit F.
"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 to
human health or safety, or (b) the exposure to, or the use, storage, recycling,
treatment, generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Material, in each case as amended
and as now in effect, including the Federal Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water Pollution Control Act of 1972, the
Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource
Conservation and Recovery Act of 1976 (including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid Waste Disposal and the Federal Toxic
Substances Control Act, and the Federal Insecticide, Fungicide and Rodenticide
Act, the Federal Occupational Safety and Health Act of 1970, 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" is defined in Section 4.1(Q)(2).
"ERISA AFFILIATE" is defined in Section 4.1(Q)(3).
"ERISA PLANS" is defined in Section 4.1(Q)(2).
"EXCEPTION SHARES" means shares held by any of the Company's
Subsidiaries or by InterWest or any of its Subsidiaries, in each case other than
in a fiduciary capacity or as a result of debts previously contracted.
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"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated under such statute.
"EXCHANGE AGENT" is defined in Section 2.4.
"EXCHANGE RATIO" is defined in Section 2.1(B).
"FDIC" means the Federal Deposit Insurance Corporation.
"FINANCIAL REPORTS" is defined in Section 4.1(H).
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal
Reserve System.
"GAAP" means generally accepted accounting principles consistently
applied.
"HAZARDOUS MATERIAL" means any substance presently listed, defined,
designated or classified as hazardous, toxic, radioactive or dangerous, or
otherwise regulated, under any Environmental Law, whether by type or quantity,
including any oil or other petroleum product, toxic waste, pollutant,
contaminant, hazardous substance, toxic substance, hazardous waste, special
waste or petroleum or any derivative or by-product thereof, radon, radioactive
material, asbestos, asbestos containing material, urea formaldehyde foam
insulation, lead and polychlorinated biphenyl.
"HOLDING COMPANY FINANCIAL REPORTS" is defined in Section 4.1(H).
"INDEMNIFIED PARTY" is defined in Section 5.19(A).
"INTERWEST" is defined in the first paragraph of this Plan.
"INTERWEST COMMON STOCK" is defined in paragraph (B) of the Recitals.
"INTERWEST OPTION" is defined in Section 2.8.
"LOAN/FIDUCIARY PROPERTY" means any property owned or controlled by the
Company or any of its Subsidiaries or in which the Company or any of its
Subsidiaries holds a security or other interest, and, where required by the
context, includes any such property where the Company or any of its Subsidiaries
constitutes the owner or operator of such property, but only with respect to
such property.
"MATERIAL ADVERSE EFFECT" means, with respect to any Party, an event,
occurrence or circumstance (including (i) the making of any provisions for
possible loan and lease losses, write-downs of other real estate 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" is defined in Section 5.2.
"MERGER" is defined in Section 1.1(A).
"MULTIEMPLOYER PLANS" is defined in Section 4.1(Q)(2).
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"NASDAQ" means the National Association of Securities Dealers Automated
Quotations system.
"OPTION" is defined in the Stock Option Agreement.
"OPTION SHARES" is defined in the Stock Option Agreement.
"PARTICIPATION FACILITY" means any facility in which the Company or any
of its Subsidiaries participates in the management and, where required by the
context, includes the owner or operator of such facility.
"PARTY" means a party to this Plan.
"PENSION PLAN" is defined in Section 4.1(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.
"PLAN" means this Agreement and Plan of Merger.
"PREVIOUSLY DISCLOSED" with respect to information, means that the
information is provided by a Party in a Schedule that is delivered by that Party
to the other Party contemporaneously with the execution of this Plan.
"PRICING PERIOD" means the ten consecutive trading days on which shares
of InterWest Common Stock are traded, beginning on and including the twentieth
such trading day immediately preceding the Effective Date.
"PROXY STATEMENT" is defined in Section 5.2.
"REGISTRATION STATEMENT" is defined in Section 5.2.
"REGULATORY AUTHORITIES" means federal or state governmental agencies,
authorities or departments charged with the supervision and regulation of
depository institutions or engaged in the insurance of deposits.
"RCW" means the Revised Code of Washington, as amended.
"RIGHTS" is defined in paragraph (E) of the Recitals.
"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" is defined in paragraph (D) of the Recitals.
"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.
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"TAX RETURNS" is defined 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 relating to such taxes and any
interest charged on those additions or penalties.
"THIRD PARTY" means a person within the meaning of Sections 3(a)(9) and
13(d)(3) of the Exchange Act, excluding (1) the Company or any Subsidiary of the
Company, and (2) InterWest or any Subsidiary of InterWest.
(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. MERGER
1.1 THE MERGER. Subject to the provisions of this Plan, on the
Effective Date:
(A) THE CONTINUING CORPORATION. In accordance with the
terms of RCW Ch. 23B.11, the Company will merge into InterWest (the "Merger"),
the separate existence of the Company will cease and InterWest (the "Continuing
Corporation") will survive, and the name of the Continuing Corporation will be
"InterWest Bancorp, Inc."
(B) RIGHTS, ETC. Upon consummation of the Merger, the
Continuing Corporation will possess all of the rights, privileges, immunities
and franchises, of a public as well as of a private nature, of each of the
merging corporations; and all property, real, personal and mixed, and all debts
due on whatever account, and all other choses in action, and all and every other
interest, of or belonging to or due to each of the corporations so merged, shall
be deemed to be vested in the Continuing Corporation without further act or
deed; and the title to any real estate or any interest therein, vested in each
of such corporations, shall not revert or be in any way impaired by reason of
the Merger.
(C) LIABILITIES. The Continuing Corporation shall be
responsible and liable for all the liabilities, obligations and penalties of
each of the corporations so merged.
(D) ARTICLES OF INCORPORATION; BYLAWS; DIRECTORS;
OFFICERS. The Articles of Incorporation and Bylaws of the Continuing Corporation
shall be those of InterWest, as in effect immediately prior to the Merger
becoming effective. The directors and officers of InterWest in office
immediately prior to the Merger becoming effective, with the addition, pursuant
to Section 5.9, of Xxxxxxx X. Xxxxxxxx, the President and Chief Executive
Officer of the Company, shall be the directors
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and officers of the Continuing Corporation, who shall hold office until such
time as their successors are elected and qualified.
(E) DISSENTING SHARES. Notwithstanding anything to the
contrary in this Plan, each Dissenting Share whose holder, as of the Effective
Date of the Merger, has not effectively withdrawn or lost his dissenters' rights
under RCW 23B.13 (the "Appraisal Laws") shall not be converted into or represent
a right to receive InterWest Common Stock, but the holder of such Dissenting
Share shall be entitled only to such rights as are granted by the Appraisal
Laws, unless and until such holder has failed to perfect or has effectively
withdrawn or lost the right to payment under the Appraisal Laws, in which case
each such share shall be deemed to have been converted at the Effective Date
into the right to receive InterWest Common Stock without any interest thereon.
Each holder of Dissenting Shares who becomes entitled to payment for his Company
Common Stock pursuant to the provisions of the Appraisal Laws shall receive
payment for such Dissenting Shares from the Company (but only after the amount
thereof shall have been agreed upon or finally determined pursuant to the
Appraisal Laws).
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
Merger is not consummated in accordance with this Plan on or prior to May 1,
2000, the Company or InterWest may terminate this Plan in accordance with
Article VII. A business day is any day other than a Saturday, Sunday or legal
holiday in the State of Washington. On the Effective Date, InterWest and the
Company shall execute and deliver to the Secretary of State of the State of
Washington articles of merger in accordance with applicable law.
ARTICLE II. CONSIDERATION
2.1 CONSIDERATION. Subject to the provisions of this Plan, on the
Effective Date:
(A) OUTSTANDING INTERWEST COMMON STOCK. The shares of
InterWest Common Stock issued and outstanding immediately prior to the Effective
Date shall, on and after the Effective Date, remain as issued and outstanding
shares of InterWest Common Stock.
(B) OUTSTANDING COMPANY COMMON STOCK.
(1) GENERAL. Each share of Eligible Company
Common Stock issued and outstanding immediately prior to the Effective Date
shall, by virtue of the Merger, automatically and without any action on the part
of the holder of such share, be converted into the right to receive 11 shares of
InterWest Common Stock (as adjusted, pursuant to Sections 2.1(B)(2), 2.5 or
7.1(E), the "Exchange Ratio").
(2) IF AVERAGE CLOSING PRICE BETWEEN $20.00 AND
$21.00. If the Average Closing Price is equal to or greater than $20.00 but less
than $21.00, the Exchange Ratio shall be adjusted so that the Exchange Ratio
multiplied by the Average Closing Price equals $231.00.
(3) IF AVERAGE CLOSING PRICE LESS THAN $20.00.
If the Average Closing Price is less than $20.00, the Exchange Ratio shall be as
set forth in Section 2.1(B)(1) unless adjusted pursuant to Section 7.1(E).
2.2 SHAREHOLDER RIGHTS; STOCK TRANSFERS. On the Effective Date,
holders of Company Common Stock shall cease to be, and shall have no rights as,
shareholders of the Company, other than to receive the consideration provided
under this Article II. After the Effective Date, there shall
7
be no transfers on the stock transfer books of the Company or the Continuing
Corporation of the shares of Company Common Stock that were issued and
outstanding immediately prior to the Effective Date.
2.3 FRACTIONAL SHARES. Notwithstanding any other provision of this
Plan, no fractional shares of InterWest Common Stock and no certificates, scrip
or other evidence of ownership of fractional shares will be issued in the
Merger. InterWest shall pay to each holder of Company Common Stock who would
otherwise be entitled to a fractional share an amount in cash determined by
multiplying such fraction by the 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 Company of record immediately prior to the Effective Date
transmittal materials for use in exchanging such shareholder's certificates for
Company Common Stock for the consideration set forth in this Article II. The
certificates representing the shares of InterWest Common Stock into which shares
of such shareholder's Company Common Stock are converted 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's designee (the "Exchange Agent") of the certificates
representing all of such shares of Company Common Stock (or indemnity
satisfactory to InterWest and the Exchange Agent, in their judgment, if any of
such certificates are lost, stolen or destroyed). No interest will be paid on
any such fractional share checks or dividends to which the holder of such shares
shall be entitled to receive upon such delivery. Certificates surrendered for
exchange by any person constituting an "affiliate" of the Company for purposes
of Rule 145 of the Securities Act shall not be exchanged for certificates
representing InterWest Common Stock until InterWest has received a written
agreement from such person as specified in Section 5.11.
2.5 EXCHANGE RATIO ADJUSTMENTS. If, before the Effective Date,
InterWest changes the number of shares of InterWest Common Stock issued and
outstanding as a result of a stock split, stock dividend, recapitalization or
similar transaction, and the record date therefor shall be prior to the
Effective Date, the Exchange Ratio shall be proportionately adjusted.
2.6 EXCEPTION SHARES. Each of the Exception Shares of Company
Common Stock shall be canceled and retired upon consummation of the Merger, and
no consideration shall be issued in exchange therefor.
2.7 RESERVATION OF RIGHT TO REVISE TRANSACTION. In its sole
discretion and at its sole expense, 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 Company; PROVIDED, HOWEVER, that no such change
shall (A) alter or change the amount or kind of consideration to be issued to
holders of Company Common Stock as provided for in this Plan, or (B) adversely
affect the tax treatment to the Company shareholders as a result of receiving
such consideration, or (C) be the basis upon which InterWest terminates this
Plan pursuant to Section 7.1(C). If InterWest elects to change the method of
acquisition, the Company 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.
2.8 OPTIONS. Pursuant to the terms of EXHIBIT A, each Director
Option that is outstanding and unexercised shall be exercised prior to the
Effective Date, and any Director Option that is not exercised prior to the
Effective Date shall be terminated. On the Effective Date, by virtue of the
Merger,
8
and without any action on the part of any holder of an option, each
Employee 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 Employee
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 Company Common Stock subject to
such Employee 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 Employee Option by the Exchange Ratio, and rounding to the nearest cent. The
number of shares of Company Common Stock that are issuable upon exercise of
Employee Options as of the date of this Plan are Previously Disclosed in
SCHEDULE 2.8. Following the Effective Date, InterWest shall use its best efforts
to prepare and file with the SEC a registration statement on Form S-8 covering
shares of InterWest Common Stock to be issued upon the exercise of stock options
assumed by InterWest pursuant to this Section 2.8.
ARTICLE III. ACTIONS PENDING CONSUMMATION
Unless otherwise agreed to in writing by InterWest, the Company 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. Without the prior written consent of InterWest,
the Company will not (and will not cause or allow any of its Subsidiaries to):
3.1 CAPITAL STOCK. Except for the exercise of outstanding Company
Options or as otherwise expressly permitted by this Plan, 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 Company 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 Company Common Stock to become subject to grants of employee stock
options, stock appreciation rights or similar stock-based employee compensation
rights.
3.2 DIVIDENDS, ETC. Make, declare or pay any dividend on or in
respect of, or declare or make any distribution on, or directly or indirectly
combine, redeem, reclassify, purchase or otherwise acquire, any shares of its
capital stock or, other than as permitted in or contemplated by this Plan or the
Stock Option Agreement, authorize the creation or issuance of, or issue, any
additional shares of its capital stock or any Rights with respect thereto;
PROVIDED, HOWEVER that:
(A) the Company may declare and pay (i) a cash dividend
of up to $0.55 per share in October, 1999, and (ii) an additional cash dividend
of up to $0.60 per share in January, 2000, if the date on which such additional
cash dividend is declared is before the Effective Date; PROVIDED, HOWEVER, that
the payment of these cash dividends may not result in the failure of the Company
to comply with Section 6.2(E) or otherwise violate applicable state or federal
laws; and
(B) if the transactions contemplated by this Plan have
not been consummated on or before the date in March, 2000, that is established
by InterWest for determining shareholders of record entitled to receive
InterWest's cash dividend for that quarter (the "Dividend Record Date"), the
Company may declare and pay a per-share cash dividend equal to the amount each
share of Eligible Company Common Stock would have received if the Effective Date
had been the Dividend Record Date.
9
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
changes as 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 $25,000 individually or $75,000 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 (other than the Employment Agreements) or arrangement with any
of its directors, officers or employees, or grant any salary or wage increase,
amend the terms of any Company Option (other than as provided in EXHIBIT A with
respect to Director Options) 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,
and except as expressly contemplated by the Employment Agreement or EXHIBIT A,
enter into or modify (except as may be required by applicable law) any pension,
retirement, stock option, stock purchase, savings, profit sharing, deferred
compensation, consulting, bonus, group insurance or other employee benefit,
incentive or welfare contract, plan or arrangement, or any trust agreement
related thereto, in respect of any of its directors, officers or other
employees, including taking any action that accelerates the vesting or exercise
of any benefits payable thereunder.
3.8 CONTINUANCE OF BUSINESS. Dispose of or discontinue any portion
of its assets, business or properties, that is material to the Company and its
Subsidiaries taken as a whole, or merge or consolidate with, or acquire all or
any portion of, the business or property of any other entity that is material to
the Company and its Subsidiaries taken as a whole (except foreclosures or
acquisitions by the Company or its Subsidiaries 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 Company or any of its Subsidiaries.
3.11 CONTRACTS. Except as previously disclosed on SCHEDULE 3.11,
enter into, renew, terminate or make any change in any material contract,
agreement or lease, except in the ordinary course of business 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.
10
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 Company shall report to and
seek approval from the Chief Executive Officer or Chief Credit Officer of
InterWest's wholly owned subsidiary, Pacific Northwest Bank, 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 Company.
3.13 TRANSACTION EXPENSES. Incur expenses in connection with the
transactions contemplated by this Plan that exceed $250,000 in the aggregate.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
4.1 THE COMPANY'S REPRESENTATIONS AND WARRANTIES. The Company
hereby represents and warrants to InterWest as follows:
(A) RECITALS. The facts set forth in the Recitals of
this Plan with respect to the Company and its Subsidiaries are true and
correct.
(B) ORGANIZATION, STANDING AND AUTHORITY. Each of the
Company and its Subsidiaries is duly qualified to do business and is in good
standing in the States of the United States and foreign jurisdictions where the
failure to be duly qualified, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on it. Each of the Company and its
Subsidiaries has in effect all federal, state, local and foreign governmental
authorizations necessary for it to own or lease its properties and assets and to
carry on its business as it is now conducted, the absence of which, individually
or in the aggregate, is reasonably likely to have a Material Adverse Effect on
it. North Sound 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 Company and its
Subsidiaries' capital stock are validly issued and outstanding, fully paid and
nonassessable (except with respect to the assessability of North Sound Bank's
common stock under RCW 30.12.180), and subject to no preemptive rights. Except
as Previously Disclosed in SCHEDULE 4.1(C) and paragraph (A) of the Recitals,
and as provided under the Stock Option Agreement, there are no shares of capital
stock or other equity securities of the Company or its Subsidiaries outstanding
and no outstanding Rights with respect thereto.
(D) THE COMPANY'S SUBSIDIARIES. The Company has
Previously Disclosed in SCHEDULE 4.1(D) a list of all of its Subsidiaries. No
equity securities of any of the Company's Subsidiaries are or may become
required to be issued (other than to the Company or one of its Subsidiaries) by
reason of any Rights with respect thereto. There are no contracts, commitments,
understandings or arrangements by which any of its Subsidiaries is or may be
bound to sell or otherwise issue any shares of such Subsidiary's capital stock,
and there are no contracts, commitments, understandings or arrangements relating
to the rights of the Company or its Subsidiaries, as applicable, to vote or to
dispose of such shares. All of the shares of capital stock of each of its
Subsidiaries held by the Company or one of its Subsidiaries are fully paid and
nonassessable (except with respect to the assessability of North Sound Bank's
common stock under RCW 30.12.180) and are owned by the Company or one of its
Subsidiaries free and clear of any charge, mortgage, pledge, security interest,
restriction, claim, lien or encumbrance. 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
11
the aggregate, to have a Material Adverse Effect on it. Except as Previously
Disclosed in SCHEDULE 4.1(D), it does not own beneficially, directly or
indirectly, any shares of any equity securities or similar interests of any
corporation, bank, partnership, joint venture, business trust, association or
other organization.
(E) CORPORATE POWER. Each of the Company and its
Subsidiaries has the corporate power and authority to carry on its business as
it is now being conducted and to own all its material properties and assets.
(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 Company and each of its Subsidiaries that is a Party, and each such
agreement is a valid and binding agreement of the Company and such Subsidiaries,
enforceable against the Company and such Subsidiaries in accordance with its
terms, subject to bankruptcy, insolvency and other laws of general applicability
relating to or affecting creditors' rights and to general equity principles.
(G) NO DEFAULTS. Subject to the approval by its
shareholders referred to in Section 6.1, the required regulatory approvals
referred to in Section 6.1, and the required filings under federal and state
securities laws, and except as Previously Disclosed in SCHEDULE 4.1(G), the
execution, delivery and performance of this Plan and the Stock Option Agreement
and the consummation by the Company and each of its Subsidiaries that is a Party
to the transactions contemplated by this Plan and the Stock Option Agreement do
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 Company or of any of
its Subsidiaries or to which the Company or any of its Subsidiaries or its or
their properties is subject or bound, which breach, violation or default is
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on it, (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), (1) as to the Company, its audited consolidated balance sheet
as of December 31, 1998 and the related consolidated statement of income,
consolidated statement of changes in shareholders' equity and consolidated
statement of cash flows for the fiscal year ended December 31, 1998
(collectively, the "Holding Company Financial Reports"), and (2) as to each of
the Company's Subsidiaries that is a bank, its call report for the fiscal year
ended December 31, 1998, and all other financial reports filed or to be filed
subsequent to December 31, 1998, in the form filed with the FDIC and the
Department (in each case, the "Bank Financial Reports" and together with the
Holding Company Financial Reports, the "Financial Reports") did not and will not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading; and
each of the balance sheets in or incorporated by reference into the Financial
Reports (including the related notes and schedules thereto) fairly presents and
will fairly present the financial position of the entity or entities to which it
relates as of its date, and each of the statements of income and changes in
shareholders' equity and cash flows or equivalent statements in the Bank
Financial Reports (including any related notes and schedules thereto) fairly
presents and will fairly present the results of operations, changes in
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
12
each case for the Holding Company Financial Reports in accordance with GAAP
during the periods involved, and in each case for the Bank Financial Reports
in accordance with regulatory accounting principles 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. Except as
Previously Disclosed on SCHEDULE 4.1(I), neither the Company nor any of its
Subsidiaries has any obligation or liability (contingent or otherwise) that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on it, except (1) as reflected in its 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, 1998. Except as Previously Disclosed on SCHEDULE
4.1(I), since December 31, 1998, neither the Company nor any of its Subsidiaries
has incurred or paid any obligation or liability (including any obligation or
liability incurred in connection with any acquisitions in which any form of
direct financial assistance of the federal government or any agency thereof has
been provided to any Subsidiary) 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, 1998, 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 Holding
Company Financial Reports, the Company and each of its Subsidiaries have good
and marketable title, free and clear of all liens, encumbrances, charges,
defaults, or equities of any character, to all of the properties and assets,
tangible and intangible, reflected in its Holding Company Financial Reports as
being owned by the Company or its Subsidiaries as of the dates thereof other
than those that, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect on it, except those sold or otherwise disposed of
in the ordinary course of business. All buildings and all material fixtures,
equipment, and other property and assets that are held under leases or subleases
by the Company or any of its Subsidiaries are held under valid leases or
subleases enforceable in accordance with their respective terms, other than any
such exceptions to validity or enforceability that, individually or in the
aggregate, are not reasonably likely to have a Material Adverse Effect on it.
(L) LITIGATION; REGULATORY ACTION. Except as Previously
Disclosed in SCHEDULE 4.1(L), no litigation, proceeding or controversy before
any court or governmental agency is pending that, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on the Company
or any of its Subsidiaries or that alleges claims under any fair lending law or
other law relating to discrimination, including the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act and the Home Mortgage
Disclosure Act, and, to the best of its knowledge, no such litigation,
proceeding or controversy has been threatened; and except as Previously
Disclosed in SCHEDULE 4.1(L), neither the Company nor any of its Subsidiaries or
any of its or their material properties or their officers, directors or persons
with Control over the Company or its Subsidiaries is a party to or is subject to
any order, decree, agreement, memorandum of understanding or similar arrangement
with, or a commitment letter or similar submission to, any Regulatory Authority,
and neither the Company nor any of its Subsidiaries has been advised by any of
such Regulatory Authorities that such authority is contemplating issuing or
requesting (or is considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum or understanding, commitment letter or
similar submission.
(M) COMPLIANCE WITH LAWS. Except as Previously Disclosed
in SCHEDULE 4.1(M), each of the Company and its Subsidiaries:
13
(1) has all permits, licenses, authorizations,
orders and approvals of, and has made all filings, applications and
registrations with, all Regulatory Authorities that are required in order to
permit it to own its businesses presently conducted and that are material to the
business of it and its Subsidiaries taken as a whole; all such permits,
licenses, certificates of authority, orders and approvals are in full force and
effect and, to its best knowledge, no suspension or cancellation of any of them
is threatened; and all such filings, applications and registrations are current;
(2) has received no notification or
communication from any Regulatory Authority or the staff thereof (a) asserting
that the Company or any of its Subsidiaries is not in compliance with any of the
statutes, regulations or ordinances which such Regulatory Authority enforces,
which, as a result of such noncompliance in any such instance, individually or
in the aggregate, is reasonably likely to have a Material Adverse Effect on the
Company or its Subsidiaries, (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 Company
or its Subsidiaries, or (c) requiring any of the Company or its Subsidiaries (or
any of its or their officers, directors or persons with Control over the Company
or its Subsidiaries) 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;
(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; and
(5) has adopted and is implementing a program
intended to address any problems associated with the capacity and capability of
the computer software, hardware, code and programs utilized by the Company, its
Subsidiaries and their vendors to properly process transactions after December
31, 1999.
(N) MATERIAL CONTRACTS. Except as Previously Disclosed
in SCHEDULE 4.1(N), none of the Company 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 Company nor any of its Subsidiaries is in
default under any contract, agreement, commitment, arrangement, lease,
insurance policy or other instrument to which it is a party, by which its
respective assets, business or operations may be bound or affected or under
which it or any of its respective assets, business or operations receives
benefits, which default, individually or in the aggregate, is reasonably
likely to have a Material Adverse Effect on the Company or its Subsidiaries,
and there has not occurred any event that, with the lapse of time or the
giving of notice or both, would constitute such a default. Except as
Previously Disclosed in SCHEDULE 4.1(N), neither the Company nor any of its
Subsidiaries is subject to or bound by any contract containing covenants that
limit the ability of the Company 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 Company or any of its
Subsidiaries may carry on its business (other than as may be required by law
or any applicable Regulatory Authority).
(O) REPORTS. Since January 1, 1993, each of the
Company and its Subsidiaries has filed all reports and statements, together with
any amendments required to be made with respect thereto,
14
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 Company 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 InterWest, 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.
(Q) EMPLOYEE BENEFIT PLANS.
(1) SCHEDULE 4.1(Q)(1) contains a complete list
of all bonus, deferred compensation, pension, retirement, profit-sharing,
thrift savings, employee stock ownership, stock bonus, stock purchase,
restricted stock and stock option plans, all employment or severance
contracts, all medical, dental, health and life insurance plans, all other
employee benefit plans, contracts or arrangements and any applicable "change
of control" or similar provisions in any plan, contract or arrangement
maintained or contributed to by the Company or any of its Subsidiaries for
the benefit of employees, former employees, directors, former directors or
their beneficiaries (the "Compensation and Benefit Plans"). True and complete
copies of all Compensation and Benefit Plans of the Company and its
Subsidiaries, including any trust instruments and/or insurance contracts, if
any, forming a part thereof, and all amendments thereto, have been supplied
to the other Parties.
(2) All "employee benefit plans" within the
meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), other than "multiemployer plans" within the
meaning of Section 3(37) of ERISA ("Multiemployer Plans"), covering employees
or former employees of the Company and its Subsidiaries (the "ERISA Plans"),
to the extent subject to ERISA, are in substantial compliance with ERISA.
Except as Previously Disclosed in SCHEDULE 4.1(Q)(2) each ERISA Plan which is
an "employee pension benefit plan" within the meaning of Section 3(2) of
ERISA ("Pension Plan") and which is intended to be qualified under Section
401(a) of the Internal Revenue Code of 1986 (as amended, the "Code") has
received a favorable determination letter from the Internal Revenue Service,
and it is not aware of any circumstances reasonably likely to result in the
revocation or denial of any such favorable determination letter or the
inability to receive such a favorable determination letter. There is no
material pending or, to its knowledge, threatened litigation relating to the
ERISA Plans. Neither the Company nor any of its Subsidiaries has engaged in a
transaction with respect to any ERISA Plan that could subject the Company or
any of its Subsidiaries to a tax or penalty imposed by either Section 4975 of
the Code or Section 502(i) of ERISA in an amount which would be material.
(3) No liability under Subtitle C or D of
Title IV of ERISA has been or is expected to be incurred by the Company or
any of its Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan," within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or the single-employer plan
of any entity which is considered one employer with the Company under Section
4001(a)(15) of ERISA or Section 414 of the Code (an "ERISA Affiliate").
Neither the Company nor any of its Subsidiaries presently contributes to a
15
Multiemployer Plan, nor have they contributed to such a plan within the past
five calendar years. No notice of a "reportable event," within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Pension Plan or by any ERISA
Affiliate within the past 12-month period.
(4) All contributions required to be made
under the terms of any ERISA Plan have been timely made. Neither any Pension
Plan nor any single-employer plan of an ERISA Affiliate has an "accumulated
funding deficiency"(whether or not waived) within the meaning of Section 412
of the Code or Section 302 of ERISA. Neither the Company nor any of its
Subsidiaries has provided, or is required to provide, security to any Pension
Plan or to any single-employer plan of an ERISA Affiliate pursuant to Section
401(a)(29) of the Code.
(5) Under each Pension Plan which is a
single-employer plan, as of the last day of the most recent plan year, the
actuarially determined present value of all "benefit liabilities," within the
meaning of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in the plan's most recent actuarial
valuation) did not exceed the then current value of the assets of such plan,
and there has been no material change in the financial condition of such plan
since the last day of the most recent plan year.
(6) Neither the Company nor any of its
Subsidiaries has any obligations for retiree health and life benefits under
any plan, except as set forth in SCHEDULE 4.1(Q)(6). There are no
restrictions on the rights of the Company or any of its Subsidiaries to amend
or terminate any such plan without incurring any liability thereunder.
(7) Except as Previously Disclosed in SCHEDULE
4.1(Q)(7) and except as expressly contemplated by the Employment Agreements
and the Change of Control Agreements, 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 Company or any of its Subsidiaries under any Compensation
and Benefit Plan or otherwise from the Company 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 Company 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 Company nor any of
its Subsidiaries is a party to or is bound by any collective bargaining
agreement, contract or other agreement or understanding with a labor union or
labor organization, nor is the Company or any of its Subsidiaries the subject
of a proceeding asserting that it or any such Subsidiary has committed an
unfair labor practice (within the meaning of the National Labor Relations
Act) or seeking to compel it or such Subsidiary to bargain with any labor
organization as to wages and conditions of employment, nor is there any
strike or other labor dispute involving it or any of its Subsidiaries pending
or, to the best of its knowledge, threatened, nor is it aware of any activity
involving its or any of the Subsidiaries' employees seeking to certify a
collective bargaining unit or engaging in any other organization activity.
(T) ASSET CLASSIFICATION. The Company and its
Subsidiaries have Previously Disclosed in SCHEDULE 4.1(T) a list, accurate
and complete in all material respects, of the aggregate amounts of loans,
extensions of credit or other assets of the Company and its Subsidiaries that
have been classified by it as of August 31, 1999 (the "Asset
Classification"); and no amounts of loans, extensions of
16
credit or other assets that have been classified as of August 31, 1999 by any
regulatory examiner as "Other Loans Specially Mentioned," "Substandard,"
"Doubtful" "Loss," or words of similar import are excluded from the amounts
disclosed in the Asset Classification, other than amounts of loans,
extensions of credit or other assets that were charged off by the Company or
any Subsidiary prior to August 31, 1999.
(U) ALLOWANCE FOR POSSIBLE LOAN LOSSES. The
allowance for possible loan losses shown on the consolidated balance sheets in
the December 31, 1998 Holding Company Financial Reports was, and the allowance
for possible loan losses to be shown on subsequent Holding Company Financial
Reports was and will be, adequate in the opinion of the Board of Directors of
the Company to provide for possible losses, net of recoveries relating to loans
previously charged off, on loans outstanding (including accrued interest
receivable) as of the date thereof.
(V) INSURANCE. Each of the Company and its
Subsidiaries has taken all requisite action (including the making of claims and
the giving of notices) pursuant to its directors' and officers' liability
insurance policy or policies in order to preserve all rights thereunder with
respect to all matters that are known to the Company, except for such matters
that, individually or in the aggregate, are not reasonably likely to have a
Material Adverse Effect on the Company or its Subsidiaries. Set forth in
SCHEDULE 4.1(V) is a list of all insurance policies maintained by or for the
benefit of the Company or its Subsidiaries or their respective directors,
officers, employees or agents.
(W) AFFILIATES. Except as Previously Disclosed
in SCHEDULE 4.1(W), to the best of the Company's knowledge, there is no person
who, as of the date of this Plan, may be deemed to be an "affiliate" of the
Company as that term is used in Rule 145 under the Securities Act.
(X) STATE TAKEOVER LAWS, ARTICLES OF INCORPORATION. The
Company and its Subsidiaries have taken all necessary action to exempt this
Plan and the Stock Option Agreement and the transactions contemplated 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 Company's and its Subsidiaries'
articles of incorporation.
(Y) NO FURTHER ACTION. The Company and its Subsidiaries
have taken all action so that the entering into of this Plan and the Stock
Option Agreement and the consummation of the transactions contemplated by
this Plan and the Stock Option Agreement (including the Merger 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 Company or any
of its Subsidiaries or under any agreement to which the Company or any such
Subsidiaries is a party, except as provided for in the Change of Control
Agreements, or (3) 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 Company's knowledge, it and each of
its Subsidiaries, the Participation Facilities and the Loan/Fiduciary
Properties are, and have been, in compliance with all Environmental Laws,
except for instances of noncompliance that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on the
Company or its Subsidiaries.
17
(2) There is no proceeding pending or, to the
Company's knowledge, threatened before any court, governmental agency or
board or other forum in which the Company or any 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 Hazardous Material, whether or
not occurring at or on a site owned, leased or operated by the Company or any
of its Subsidiaries or any Participation Facility, except for such
proceedings pending or threatened that are not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on the
Company or its Subsidiaries or have been Previously Disclosed in SCHEDULE
4.1(Z)(2).
(3) There is no proceeding pending or, to the
Company's knowledge, threatened before any court, governmental agency or
board or other forum in which any Loan/Fiduciary Property (or the Company or
any of its Subsidiaries in respect of any Loan/Fiduciary Property) has been,
or with respect to threatened proceedings, reasonably would be expected to
be, named as a defendant or potentially responsible party (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 Company or have been Previously Disclosed in SCHEDULE
4.1(Z)(3).
(4) To the Company's knowledge, there is no
reasonable basis for any proceeding of a type described in subparagraph (2)
or (3) of this paragraph (Z), except as has been Previously Disclosed in
SCHEDULE 4.1(Z)(4).
(5) To the Company's knowledge, during the
period of (a) ownership or operation by the Company or any of its
Subsidiaries of any of their respective current properties, (b) participation
in the management of any Participation Facility by the Company or any of its
Subsidiaries, or (c) holding of a security or other interest in a
Loan/Fiduciary Property by the Company or any of its Subsidiaries, there have
been no releases of Hazardous Material in, on, under or affecting any such
property, Participation Facility or Loan/Fiduciary Property, except for such
releases that are not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on the Company or its Subsidiaries or have
been Previously Disclosed in SCHEDULE 4.1(Z)(5).
(6) To the Company's knowledge, prior to the
period of (a) ownership or operation by the Company or any of its
Subsidiaries of any of their respective current properties, (b) participation
in the management of any Participation Facility by the Company or any of its
Subsidiaries, or (c) holding of a security or other interest in a
Loan/Fiduciary Property by the Company or any of its Subsidiaries, there were
no releases of Hazardous Material in, on, under or affecting any such
property, Participation Facility or Loan/Fiduciary Property, except for such
releases that are not reasonably likely, individually or in the aggregate, to
have a Material Adverse Effect on the Company or its Subsidiaries or have
been Previously Disclosed in SCHEDULE 4.1(Z)(6).
(AA) OPTION SHARES. The Option Shares, when issued upon
exercise of the Option, will be validly issued, fully paid and nonassessable and
subject to no preemptive rights.
(BB) TAX REPORTS. Except as Previously Disclosed in
SCHEDULE 4.1(AA), (1) all reports and returns with respect to Taxes that are
required to be filed by or with respect to the Company or its Subsidiaries,
including consolidated federal income tax returns of the Company and its
Subsidiaries (collectively, the "Tax Returns"), have been duly filed, or
requests for extensions have been timely filed
18
and have not expired, for periods ended on or prior to the most recent fiscal
year-end, except to the extent all such failures to file, taken together, are
not reasonably likely to have a Material Adverse Effect on the Company or its
Subsidiaries, and such Tax Returns were true, complete and accurate in all
material respects, (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 Company or its Subsidiaries, except as reserved against in the
Holding Company 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 Company or its Subsidiaries.
(CC) ACCURACY OF INFORMATION. The statements with respect
to the Company and its Subsidiaries contained in this Plan, the Stock Option
Agreement, the Schedules and any other written documents executed and delivered
by or on behalf of the Company or its Subsidiaries 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.
(DD) DERIVATIVES CONTRACTS. None of the Company or its
Subsidiaries is a party to or has agreed to enter into a Derivatives Contract or
owns securities that are referred to as "structured notes" except for those
Derivatives Contracts and structured notes Previously Disclosed in SCHEDULE
4.1(DD). SCHEDULE 4.1(DD) includes a list of any assets of the Company or its
Subsidiaries that are pledged as security for each such Derivatives Contract.
(EE) ACCOUNTING CONTROLS. Each of the Company 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 Company 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 Company nor
any of its Subsidiaries is a party or subject to any of the following (whether
written or oral, express or implied):
(1) except as Previously Disclosed in SCHEDULE
4.1(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 Company or any such Subsidiary
without any obligation on the part of the Company or any such Subsidiary to make
any payment in connection with such termination);
(2) except as Previously Disclosed in SCHEDULE
4.1(FF), any real or personal property lease with annual rental payments
aggregating $10,000 or more; or
19
(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 Company 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.
(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 Stock Option
Agreement 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
Stock Option Agreement 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 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 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, 1998, and
20
all other documents filed or to be filed subsequent to September 30, 1998
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, 1998, no event has occurred which is reasonably
likely to have a Material Adverse Effect on it.
(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 persons with Control over
InterWest or its Subsidiaries 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 of understanding, commitment letter or
similar submission.
(J) REPORTS. Since September 30, 1996, 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
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.
21
(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, 1998. Since September 30, 1998, 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.
(N) NO KNOWLEDGE. InterWest and its Subsidiaries know of
no reason why the regulatory approvals referred to in Section 6.1 should not be
obtained.
4.3 EXCEPTIONS TO REPRESENTATIONS AND WARRANTIES.
(A) DISCLOSURE OF EXCEPTIONS. Each exception set forth in
a Schedule is disclosed only for the purposes of the representations and
warranties referenced in that exception; but the following conditions apply:
(1) no exception is required to be set forth in
a Schedule if its absence would not result in the
related representation or warranty being found untrue
or incorrect under the standard established by Section
4.3(B); and
(2) the mere inclusion of an exception in a
Schedule is not an admission by a party that such
exception represents a material fact, material set of
facts, or material event or would result in a Material
Adverse Effect with respect to that party.
(B) NATURE OF EXCEPTIONS. No representation or
warranty contained in Section 4.1 or 4.2 will be found untrue or incorrect,
and no party to this Plan will have breached a representation or warranty, as
a consequence of the existence of any fact, circumstance, or event, if the
fact, circumstance or event, individually or taken together with other facts,
circumstances or events, would not, or in the case of Section 4.1(L), 4.1(M)
or 4.2(I), is not reasonably likely to, have a Material Adverse Effect with
respect to such Party.
ARTICLE V. COVENANTS
Except as otherwise specified below, the Company hereby covenants to
InterWest, and InterWest hereby covenants to the Company, 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 Merger by March 31, 2000, and to otherwise enable consummation of the
transactions contemplated by this Plan and the Stock Option
22
Agreement, and shall cooperate fully with the other Parties to that end (it
being understood that any amendments to the Registration Statement or a
resolicitation of proxies as a consequence of an InterWest Transaction shall
not violate this covenant). For the purposes of this Section 5.1, an
"InterWest Transaction" means (1) a merger, consolidation or similar
transaction involving InterWest or any of its significant subsidiaries, (2)
the disposition, by sale, lease, exchange or otherwise, of assets or deposits
of InterWest or any of its significant subsidiaries representing in either
case 25% or more of the consolidated assets or deposits of InterWest and its
subsidiaries, or (3) the issuance, sale or other disposition (including by
way of merger, consolidation, share exchange or any similar transaction) of
securities representing 25% or more of the voting power of InterWest or any
of its significant subsidiaries other than the issuance of InterWest Common
Stock upon the exercise of outstanding options or the conversion of
outstanding convertible securities of InterWest.
5.2 THE PROXY. The Company shall promptly assist InterWest in the
preparation of a proxy statement (the "Proxy Statement") to be mailed to the
holders of the Company Common Stock in connection with the transactions
contemplated 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 Company Common Stock to be
held as soon as practicable for purposes of voting upon the transactions
contemplated by this Plan and the Company shall use all reasonable efforts to
solicit and obtain votes of the holders of Company 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 Company shall recommend approval
of such transactions by such holders.
5.3 REGISTRATION STATEMENT COMPLIANCE WITH SECURITIES LAWS. When
the Registration Statement or any post-effective amendment or supplement thereto
shall become effective, and at all times subsequent to such effectiveness, up to
and including the date of the Meeting, such Registration Statement, and all
amendments or supplements thereto, with respect to all information set forth
therein furnished or to be furnished by or on behalf of the Company relating to
the Company or its Subsidiaries and by or on behalf of InterWest relating to
InterWest or its Subsidiaries, (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 Company, promptly after InterWest receives notice thereof, of the time when
the Registration Statement has become effective or any supplement or amendment
has been filed, of the issuance of any stop order or the suspension of the
qualification of the InterWest Common Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
5.5 PRESS RELEASES. The Company will not, without the prior
approval of InterWest, and InterWest will not, without the prior approval of the
Company, issue any press release or written statement for general circulation
relating to the transactions contemplated by this Plan, except as otherwise
required by law.
23
5.6 ACCESS; INFORMATION.
(A) Upon reasonable notice, the Company 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 or earlier termination of this Plan pursuant to Section
7.1, to all of the properties, books, contracts, commitments and records of the
Company and its Subsidiaries and, during such period, the Company shall promptly
furnish (and cause its accountants and other agents to furnish promptly) to
InterWest (1) a copy of each material report, schedule and other document filed
by the Company and its Subsidiaries with any Regulatory Authority, and (2) all
other information concerning the business, properties and personnel of the
Company and its Subsidiaries as InterWest may reasonably request, provided that
no investigation pursuant to this Section 5.6 shall affect or be deemed to
modify or waive any representation or warranty made by the Company in this Plan
or the conditions to the obligations of the Company to consummate the
transactions contemplated by this Plan; PROVIDED, that InterWest and its
representatives will not disrupt the business of the Company during the
investigations contemplated by this section; 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 Company, deliver to the Company all
documents so obtained or destroy such documents and, in the case of destruction,
will certify such fact to the Company.
5.7 STANDSTILL. Without the prior written consent of InterWest,
the Company shall not, and it shall cause its Subsidiaries not to, solicit,
initiate or encourage inquiries or proposals with respect to, or, except as
required by the fiduciary duties of the Board of Directors of the Company (as
advised in writing by its outside counsel), furnish any nonpublic information
relating to or participate in any negotiations or discussions concerning, any
acquisition or purchase of all or a substantial portion of the assets of, or a
substantial equity interest in, the Company or any of its Subsidiaries or any
merger or other business combination with the Company or any of its Subsidiaries
other than as contemplated by this Plan; it shall instruct its and its
Subsidiaries' officers, directors, agents, advisors and affiliates to refrain
from doing any of the foregoing; and it shall notify InterWest immediately if
any such inquiries or proposals are received by, or any such negotiations or
discussions are sought to be initiated with, the Company or any of its
Subsidiaries.
5.8 REGISTRATION STATEMENT PREPARATION; REGULATORY APPLICATIONS
PREPARATION. 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 Company
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.
24
5.9 APPOINTMENT OF DIRECTOR.
(A) Immediately after the Effective Date, InterWest shall
cause (i) the appointment of Xxxxxxx X. Xxxxxxxx to the Board of Directors of
InterWest and Pacific Northwest Bank, and (ii) the appointment of Xxxxxxx X.
Xxxxxxxx to the Executive Committee of the Board of Directors of InterWest.
(B) From the date of this Agreement, unless this Plan is
terminated, InterWest shall cause Xxxxxxx X. Xxxxxxxx to be kept informed on a
regular basis of the status of InterWest's pending review of, and any proposed
changes to, its data processing system.
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 Company will use its best efforts to
induce each person who may be deemed to be an "affiliate" of the Company, for
purposes of Rule 145 under the Securities Act, to execute and deliver to
InterWest on or before the mailing of the Proxy Statement for the Meeting, an
agreement in the form attached hereto as EXHIBIT D for "affiliates" of the
Company, restricting the disposition of such affiliate's shares of Company
Common Stock and the shares of InterWest Common Stock to be received by such
person in exchange for such person's shares of Company Common Stock. InterWest
will use its best efforts to maintain the availability of Rule 145 for use by
such "affiliates".
5.12 CERTAIN POLICIES OF THE COMPANY AND ITS SUBSIDIARIES. The
Company shall, at InterWest's request, modify and change its Subsidiaries' loan,
litigation and other reserve and real estate valuation policies and practices
(including loan classifications and levels of reserves), and generally conform
its Subsidiaries' 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 Company's
representations, warranties, covenants and conditions contained in this Plan
shall not be deemed to be untrue, breached or unsatisfied 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 Company shall not take any action that
would cause the transactions contemplated by this Plan or the Stock Option
Agreement to be subject to any applicable state takeover statute, and the
Company shall take all necessary steps to exempt (or ensure the continued
exemption of) the transactions contemplated by this Plan and the Stock Option
Agreement from, or, if necessary, challenge the validity or applicability of,
any applicable state takeover law.
5.14 NO RIGHTS TRIGGERED. Except for those consents of Third
Parties Previously Disclosed on SCHEDULE 4.1(G), the Company shall take all
necessary steps to ensure that the entering into of this Plan and the Stock
Option Agreement and the consummation of the transactions contemplated by this
Plan and the Stock Option Agreement (including the Merger) 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 Company or under any agreement to
which the Company or any of its Subsidiaries is a party, except as provided in
the Change
25
of Control Agreements, 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 Company Common Stock.
5.16 REGULATORY APPLICATIONS. InterWest shall (A) promptly prepare
and submit applications to the appropriate Regulatory Authorities for approval
of the Merger, and (B) promptly make all other appropriate filings to secure all
other approvals, consents and rulings that are necessary for the consummation of
the Merger by InterWest.
5.17 REGULATORY DIVESTITURES. No later than the Effective Date, the
Company shall cease engaging in such activities as InterWest shall advise the
Company in writing are not permitted to be engaged in by InterWest under
applicable law following the Effective Date and, to the extent required by any
Regulatory Authority as a condition of approval of the transactions contemplated
by this Plan, the Company shall divest any Subsidiary engaged in activities or
holding assets that are impermissible for InterWest or its Subsidiaries, 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 Company and InterWest shall, and shall cause its
representatives to, confer on a regular and frequent basis with representatives
of the other.
(B) Each of the Company and InterWest shall promptly
notify the other of (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 INDEMNIFICATION.
(A) After the Effective Date, InterWest shall indemnify,
defend and hold harmless the present and former directors and officers of the
Company and its Subsidiaries (each, an "Indemnified Party") against all costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities incurred in connection with any claim, action,
suit, proceeding or investigation, whether civil, criminal, administrative or
investigative, and arising out of matters existing or occurring at or prior to
the Effective Date (including the transactions contemplated by this Plan and the
Stock Option Agreement), whether asserted or claimed prior to, at or after the
Effective Date, to the fullest extent that the Company would have been permitted
under Washington law and its articles of incorporation or bylaws in effect on
the date of this Plan to indemnify such person (and InterWest will also advance
expenses as incurred to the fullest extent permitted under applicable law so
long as the person to whom expenses are advanced provides an undertaking to
repay such advances within a
26
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 5.19, 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 5.19
(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 5.19.
(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 5.19. The rights of
each Indemnified Party under this Section 5.19 shall be in addition to any other
rights such Indemnified Party may have under the articles of incorporation or
bylaws of the Company or under applicable Washington law.
5.20 STOCK OPTIONS. Upon receipt from the Company in January, 2000,
of a list of Company employees entitled to receive Employee Options under the
Restated Liberty Bay Financial Corporation Incentive Stock Option Plan II,
including the number of Company Option shares proposed to be granted to each
employee and the exercise price of such Employee Options, InterWest will
cooperate with the Company to finalize such list for approval by InterWest's
Board of Directors. In lieu of the Company granting such Employee Options,
InterWest will, as soon as practicable after the Effective Date, grant InterWest
Options to the persons on the finalized list, on the same terms and conditions
that would have been in effect if the Company had granted Employee Options to
such persons; PROVIDED, that (a) the exercise price shall be adjusted by
dividing the Employee Option per-share exercise price by the Exchange Ratio,
rounding to the nearest cent, (b) the number of shares shall be adjusted by
multiplying such number by the Exchange Ratio (the product being rounded, if
necessary, up or down to the nearest whole share), and (c) the InterWest Options
granted to Xxxx Xxxxxxx and Xxx Xxxxxxx pursuant to this Section 5.20 shall be
fully vested on the date of grant.
5.21 POST-MERGER ACTIONS. Following the Merger, neither InterWest
nor its affiliates shall take any action that will adversely affect the federal
income treatment of the Merger to the shareholders of the Company, including,
but not limited to, failing to continue at least one historic business line of
the Company or to use at least a significant portion of the Company's historic
assets in a business, in each case within the meaning of the Code.
27
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 Company's shareholders under applicable
law and the articles of incorporation and bylaws of the Company.
(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 Merger.
(F) TAX OPINION. InterWest and the Company shall have
received an opinion from Xxxxxx & Xxxx, P.C. to the effect that (1) the Merger
constitutes a reorganization under Section 368 of the Code, and (2) no gain or
loss will be recognized by shareholders of the Company who receive shares of
InterWest Common Stock in exchange for their shares of the Company Common Stock,
except that gain or loss may be recognized as to cash received in lieu of
fractional share interests, and, in rendering their opinion, Xxxxxx & Xxxx may
require and rely upon representations contained in certificates of officers of
InterWest, the Company and others.
(G) NASDAQ LISTING. The shares of InterWest Common Stock
to be issued pursuant to this Plan shall have been approved for listing on the
Nasdaq National Market subject only to official notice of issuance.
(H) EMPLOYMENT CONTRACT. The Employment Agreements
attached as EXHIBITS E AND F shall have been duly executed and delivered by all
parties to such Employment Agreement.
(I) FAIRNESS OPINION. The Company shall have received,
immediately prior to the mailing of the Proxy Statement to the Company's
shareholders, an opinion of a reputable financial advisor selected by the
Company and approved by InterWest, to the effect that the financial terms of the
Merger are fair from a financial point of view to the Company's shareholders.
28
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 Xxxxxx Xxxxxxxx L.L.P., counsel for the
Company, in the form of EXHIBIT G.
(B) OFFICERS' CERTIFICATE. (1) Each of the
representations and warranties contained in this Plan of the Company shall be
true and correct in all material respects (except the representations and
warranties in Section 4.1(C) and those representations and warranties that
are qualified by reference to "Material Adverse Effect" or any other
materiality caveat, which shall be true and correct in all respects) 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 Company 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 Company dated the Effective Date, to such effect.
(C) RECEIPT OF AFFILIATE AGREEMENTS. InterWest shall have
received from each affiliate of the Company the agreement referred to in Section
5.11.
(D) ADVERSE CHANGE. During the period from December 31,
1998 to the Effective Date, there shall not have been any material adverse
change in the financial position or results of operations of the Company nor
shall the Company have sustained any loss or damage to its properties, whether
or not insured, that materially affects its ability to conduct its business; and
InterWest shall have received a certificate dated the Effective Date signed by
the Chief Executive Officers of the Company to such effect.
(E) CAPITAL. The Company's Capital shall not be less than
$20.5 million (not including capital contributions upon exercise of outstanding
Company Options and net of transaction expenses) on the Effective Date.
(F) ALLOWANCE FOR LOAN AND LEASE LOSSES. The Company's
allowance for possible loan and lease losses shall not be less than 1.00% of the
Company's total outstanding loans and leases and will be adequate to absorb the
Company's anticipated loan and lease losses.
6.3 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of
the Company to consummate the transactions contemplated by this Plan also are
subject to the written waiver by the Company or the fulfillment on or prior to
the Effective Date of each of the following conditions:
(A) LEGAL OPINION. The Company shall have received an
opinion, dated the Effective Date, of Xxxxxx & Xxxx PC, special counsel for
InterWest, in the form of EXHIBIT H.
(B) OFFICER'S CERTIFICATE. (1) Each of the
representations and warranties of InterWest contained in this Plan shall be true
and correct in all material respects (except the representations and warranties
in Section 4.2(C) and those representations and warranties that are qualified by
reference to "Material Adverse Effect" or any other materiality caveat, which
shall be true and correct in all respects) as of the date of this Plan and upon
the Effective Date with the same effect as
29
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 Company 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,
1998 to the Effective Date, there shall not have been any material adverse
change in the financial position or results 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
Company shall have received a certificate dated the Effective Date signed by the
Chief Executive Officers of InterWest to such effect.
ARTICLE VII. TERMINATION
7.1 GROUNDS FOR 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 Company, 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 Company, 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 in this Agreement, 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 material breach by the other Party of
any of the covenants or agreements contained in this Agreement, 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 Company, if its Board of
Directors so determines by vote of a majority of the members of its entire
Board, in the event that the Merger is not consummated by May 1, 2000; PROVIDED,
HOWEVER, that a Party that is in material breach of any of the provisions of
this Plan shall not be entitled to terminate the Plan pursuant to this Section
7.1(C).
(D) NO SHAREHOLDER APPROVAL. By InterWest or the Company,
if its Board of Directors so determines by a vote of a majority of the members
of its entire Board, in the event that 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 LESS THAN $20.00. By the
Company, within five business days after the end of the Pricing Period, if (1)
the Average Closing Price is less than $20.00, and (2) InterWest, in its sole
discretion, does not elect (by written notice delivered to the Company within 2
business days of the end of the Pricing Period) to adjust the Exchange Ratio
(rounded to two decimals) so that the Average Closing Price multiplied by the
Exchange Ratio equals $231.00.
7.2 CONSEQUENCES OF TERMINATION.
(A) GENERAL CONSEQUENCES. Subject to Section 7.2(B), in
the event of the termination or abandonment of this Plan pursuant to the
provisions of Section 7.1, this Plan shall become
30
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) PAYMENTS. If this Plan is terminated pursuant to
Section 7.1(B), the party whose breach causes such termination shall pay to the
other party a termination fee of $500,000. If this Plan is terminated by the
Company pursuant to Section 7.1(E), InterWest will reimburse the Company for
documented actual expenses incurred by the Company in connection with the
transactions contemplated hereby of up to $250,000.
(C) OTHER CONSEQUENCES. Notwithstanding anything in this
Plan to the contrary, no termination of this Plan will relieve any Party of any
liability for breach of this Plan or for any misrepresentation under this Plan
or be deemed to constitute a waiver of any remedy available for such breach or
misrepresentation. In any action or proceeding in connection with such breach or
misrepresentation, the prevailing party will be entitled to reasonable
attorneys' fees and expenses.
ARTICLE VIII. OTHER MATTERS
8.1 SURVIVAL. Only those agreements and covenants in this Plan
that by their express terms apply in whole or in part after the Effective Date
shall survive the Effective Date. All other representations, warranties, and
covenants shall be deemed only to be conditions of the Merger and shall not
survive the Effective Date. If the Merger is abandoned and this Plan is
terminated, the provisions of Article VII shall apply and the agreements of the
Parties in Sections 7.2(B), 8.5 and 8.6 shall survive such abandonment and
termination.
8.2 WAIVER; AMENDMENT. Prior to the Effective Date, any provision
of this Plan may be (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
Company, the consideration to be received by the shareholders of the Company for
each share of Company Common Stock shall not thereby be altered. Nothing
contained in this Section 8.2 is intended to modify InterWest's rights pursuant
to Section 2.7.
8.3 COUNTERPARTS. This Plan may be executed in one or more
counterparts, including 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. Any actions brought by either Party arising under this
Agreement must be filed in Island County, Washington, and each Party consents to
personal jurisdiction in Island County, Washington.
8.5 EXPENSES. Except as set forth in Section 7.2, 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 Company 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, certified or
31
registered mail, overnight courier, telecopy 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.
000 X.X. Xxxxxxx Xxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Xxxxxx, President
Copies to:
Xxxxxx X. Xxxxxxx
Xxxxxxx, Xxxxxxx & Xxxxxx
000 X.X. Xxxxxxxxxx Xxxxx
Xxx Xxxxxx, Xxxxxxxxxx 00000
Xxxxxxx X. Xxxxx
Xxxxxx & Xxxx, P.C.
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000
If to the Company, to:
Liberty Bay Financial Corporation
00000 0xx Xxxxxx XX
Xxxxxxx, XX 00000-0000
Attn: Xxxxxxx X. Xxxxxxxx, President
Copies to:
Xxxx X. Xxxxxxxx
Xxxxxx Xxxxxxxx L.L.P
0000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxxxx 00000-0000
8.8 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES. This Plan
and the Stock Option Agreement represent the entire understanding of the Parties
with reference to transactions contemplated by this Plan and the Stock Option
Agreement and supersede any and all other oral or written agreements previously
made. Nothing in this Plan or the Stock Option Agreement, expressed or implied,
is intended to confer upon any Person, other than the Parties or their
respective successors, any rights, remedies, obligations or liabilities under or
by reason of this Plan or the Stock Option Agreement.
8.9 BENEFIT PLANS. Upon consummation of the Merger, all employees
of the Company and its Subsidiaries shall be deemed to be at-will employees of
InterWest except for those employees who are parties to the Employment
Agreements. From and after the Effective Date, employees of the Company and its
Subsidiaries shall 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 Company, and (B) participate in
InterWest's stock option plans on substantially the
32
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 Company or the Company'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.
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/ Xxxxxxx X. Xxxxx
-----------------------------------
NAME: XXXXXXX X. XXXXX
TITLE: VICE CHAIRMAN/COMMERCIAL BANKING
LIBERTY BAY FINANCIAL CORPORATION
By: /s/ Xxxxxxx X. Xxxxxxxx
--------------------------------------
NAME: XXXXXXX X. XXXXXXXX
TITLE: PRESIDENT AND CHIEF EXECUTIVE OFFICER
33
