-------------------------------------------------
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AGREEMENT AND PLAN OF MERGER
BETWEEN
KITTITAS VALLEY BANCORP, INC.,
KITTITAS VALLEY BANK, N.A.
AND
INTERWEST BANCORP, INC.
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DATED AS OF APRIL 20, 1998
TABLE OF CONTENTS
PAGE
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ARTICLE I. MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.1 THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.2 EFFECTIVE DATE . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE II. CONSIDERATION . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.1 CONVERSION OF STOCK. . . . . . . . . . . . . . . . . . . . . . 8
2.2 CONVERSION ELECTION PROCEDURES AND ALLOCATION. . . . . . . . . 8
2.3 CONVERSION OF COMPANY OPTIONS. . . . . . . . . . . . . . . . .10
2.4 SHAREHOLDER RIGHTS; STOCK TRANSFERS. . . . . . . . . . . . . .11
2.5 FRACTIONAL SHARES. . . . . . . . . . . . . . . . . . . . . . .11
2.6 EXCHANGE PROCEDURES. . . . . . . . . . . . . . . . . . . . . .11
2.7 MERGER CONSIDERATION ADJUSTMENTS . . . . . . . . . . . . . . .12
2.8 EXCEPTION SHARES . . . . . . . . . . . . . . . . . . . . . . .12
2.9 RESERVATION OF RIGHT TO REVISE TRANSACTION . . . . . . . . . .12
ARTICLE III. ACTIONS PENDING CONSUMMATION . . . . . . . . . . . . . . . . .12
3.1 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . .12
3.2 DIVIDENDS, ETC . . . . . . . . . . . . . . . . . . . . . . . .12
3.3 INDEBTEDNESS; LIABILITIES; ETC . . . . . . . . . . . . . . . .13
3.4 LINE OF BUSINESS; OPERATING PROCEDURES; ETC. . . . . . . . . .13
3.5 LIENS AND ENCUMBRANCES . . . . . . . . . . . . . . . . . . . .13
3.6 COMPENSATION; EMPLOYMENT AGREEMENTS; ETC . . . . . . . . . . .13
3.7 BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . .13
3.8 CONTINUANCE OF BUSINESS. . . . . . . . . . . . . . . . . . . .13
3.9 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.10 CLAIMS . . . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.11 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . .13
3.12 LOANS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
3.13 TRANSACTION EXPENSES . . . . . . . . . . . . . . . . . . . . .14
ARTICLE IV. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . .14
4.1 THE COMPANY AND KITTITAS BANK REPRESENTATIONS AND
WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . .14
4.2 INTERWEST REPRESENTATIONS AND WARRANTIES . . . . . . . . . . .23
ARTICLE V. COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .25
5.1 BEST EFFORTS . . . . . . . . . . . . . . . . . . . . . . . . .25
5.2 THE PROXY. . . . . . . . . . . . . . . . . . . . . . . . . . .26
5.3 REGISTRATION STATEMENT COMPLIANCE WITH SECURITIES LAWS . . . .26
5.4 REGISTRATION STATEMENT EFFECTIVENESS . . . . . . . . . . . . .26
5.5 PRESS RELEASES . . . . . . . . . . . . . . . . . . . . . . . .26
5.6 ACCESS; INFORMATION. . . . . . . . . . . . . . . . . . . . . .26
5.7 ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . .27
5.8 REGISTRATION STATEMENT PREPARATION; REGULATORY
APPLICATIONS PREPARATION . . . . . . . . . . . . . . . . . . .27
i
5.9 BLUE-SKY FILINGS . . . . . . . . . . . . . . . . . . . . . . .27
5.10 AFFILIATE AGREEMENTS . . . . . . . . . . . . . . . . . . . . .27
5.11 CERTAIN POLICIES OF THE COMPANY AND KITTITAS BANK. . . . . . .28
5.12 STATE TAKEOVER LAW . . . . . . . . . . . . . . . . . . . . . .28
5.13 NO RIGHTS TRIGGERED. . . . . . . . . . . . . . . . . . . . . .28
5.14 SHARES LISTED. . . . . . . . . . . . . . . . . . . . . . . . .28
5.15 REGULATORY APPLICATIONS. . . . . . . . . . . . . . . . . . . .28
5.16 REGULATORY DIVESTITURES. . . . . . . . . . . . . . . . . . . .28
5.17 CURRENT INFORMATION. . . . . . . . . . . . . . . . . . . . . .29
5.18 INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . .29
5.19 EMPLOYEE OPTIONS . . . . . . . . . . . . . . . . . . . . . . .30
5.20 OFFICER BONUS PLAN . . . . . . . . . . . . . . . . . . . . . .30
5.21 OPERATION OF KITTITAS BANK . . . . . . . . . . . . . . . . . .30
ARTICLE VI. CONDITIONS TO CONSUMMATION OF THE MERGER. . . . . . . . . . . .30
6.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS . . . . . . . . . . . .30
6.2 CONDITIONS TO OBLIGATIONS OF INTERWEST . . . . . . . . . . . .31
6.3 CONDITIONS TO OBLIGATIONS OF COMPANY AND KITTITAS BANK . . . .32
ARTICLE VII. TERMINATION. . . . . . . . . . . . . . . . . . . . . . . . . .33
7.1 GROUNDS FOR TERMINATION. . . . . . . . . . . . . . . . . . . .33
7.2 CONSEQUENCES OF TERMINATION. . . . . . . . . . . . . . . . . .33
ARTICLE VIII. OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . .33
8.1 SURVIVAL . . . . . . . . . . . . . . . . . . . . . . . . . . .33
8.2 WAIVER; AMENDMENT. . . . . . . . . . . . . . . . . . . . . . .33
8.3 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . .34
8.4 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . .34
8.5 EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . .34
8.6 CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . .34
8.7 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . .34
8.8 ENTIRE UNDERSTANDING; NO THIRD PARTY BENEFICIARIES . . . . . .35
8.9 BENEFIT PLANS. . . . . . . . . . . . . . . . . . . . . . . . .35
8.10 HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . .35
EXHIBITS
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Exhibit A Approval by Directors of Kittitas Valley Bancorp, Inc.
Exhibit B Director's Agreement
Exhibit C Stock Option Agreement
Exhibit D Kittitas Valley Bancorp, Inc. Affiliate Undertakings and
Agreements
Exhibit E Employment Agreement of Xxxxxx X. Xxxxxxxxx
Exhibit F Employment Agreement of Xxxx Xxxxxxxx
Exhibit G Employment Agreement of Xxxxxx Xxxxxxx
Exhibit H Employment Agreement of Xxxx Xxxxxx
Exhibit I Severance Agreement for Xxxx Xxxxx
Exhibit J Severance Agreement for Xxxxx Xxxxxx
Exhibit K Legal Opinion of Xxxxxxx & XxXxxxxx, P.C.
Exhibit L Legal Opinion of Xxxxxx & Xxxx, P.C.
ii
SCHEDULES
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Company Disclosures
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Schedule 2.3(B) Outstanding Options
Schedule 3.4 Changes to Line of Business, Operating Procedures, etc.
Schedule 3.6 New or Changes to Compensation, Employment
Agreements, etc.
Schedule 3.7 New or Modifications to Benefit Plans
Schedule 3.11 New or Changes to Material Contracts
Schedule 4.1(C) Shares Outstanding
Schedule 4.1(D) Subsidiaries
Schedule 4.1(G) No Defaults - Agreements Requiring Third Party Consent
Schedule 4.1(H) Financial Reports
Schedule 4.1(I) Undisclosed Liabilities
Schedule 4.1(J) No Events Causing Material Adverse Effect
Schedule 4.1(L) Litigation, Regulatory Action
Schedule 4.1(M) Compliance With Laws
Schedule 4.1(N) Material Contracts
Schedule 4.1(Q)(1) List of Employee Benefit Plans
Schedule 4.1(Q)(2) Employee Benefit Plans Not Qualified Under ERISA
Schedule 4.1(Q)(6) Obligations for Retiree Health and Life Benefits
Schedule 4.1(Q)(7) Agreements Resulting in Payments to Employees Under Any
Compensation and Benefit Plan with Respect to Proposed
Transaction
Schedule 4.1(T) Asset Classification
Schedule 4.1(V) Insurance
Schedule 4.1(W) Affiliates
Schedule 4.1(Z)(2) Pending Proceedings with Respect to Environmental
Matters
Schedule 4.1(Z)(3) Pending Proceedings with Respect to Environmental
Matters Involving Loan/Fiduciary Property
Schedule 4.1(Z)(4) Pending Proceedings with Respect to Environmental
Matters Listed in Sections 4.1(Z)(2) OR (3)
Schedule 4.1(Z)(5) Actions During Ownership Which could Have Material
Adverse Effect with Respect to Environmental Matters
Schedule 4.1(Z)(6) Actions Prior to Ownership Which could Have Material
Adverse Effect with Respect to Environmental Matters
Schedule 4.1(AA) Tax Reports Matters
Schedule 4.1(CC) Derivative Contracts
Schedule 4.1(EE)(1) Employment Contracts Requiring Payment in Connection
with Termination
Schedule 4.1(EE)(2) Leases with Aggregate Annual Rent Exceeding $10,000
Schedule 4.1(EE)(3) Material Contracts with Affiliates
iii
Interwest Disclosures
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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
iv
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of the 20th day of April, 1998
(this "Plan"), is between KITTITAS VALLEY BANCORP, INC. (the "Company"),
KITTITAS VALLEY BANK, N.A. ("Kittitas Bank"), and INTERWEST BANCORP, INC.
("InterWest").
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 Ellensburg, 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 2,000,000 authorized
shares of common stock, $1.00 par value per share ("Company Common Stock") (no
other class of capital stock being authorized), of which 178,787 shares of
Company Common Stock are issued and outstanding. As of the date of this Plan,
the Company has 40,000 shares of Company Common Stock reserved for issuance
under employee stock option plans pursuant to which options covering 10,950
shares of Company Common Stock are outstanding (the "Employee Options"). As of
the date of this Plan, the Company has 30,000 shares of Company Common Stock
reserved for issuance under director stock option plans pursuant to which
options covering 7,030 shares of Company Common Stock are outstanding (the
"Director Options"). As of December 31, 1997, the Company had capital of
$4,236,000, divided into common stock of $175,000, surplus of $3,482,000 and
undivided profits of $579,000.
(B) KITTITAS BANK. Kittitas Bank is a national banking association duly
organized and existing in good standing under the laws of the United States,
with its principal executive offices located in Ellensburg, Washington. As of
the date of this Plan, Kittitas Bank has 500,000 authorized shares of common
stock, $10.00 par value per share ("Kittitas Bank Common Stock") (no other class
of capital stock being authorized), of which 165,600 shares of Kittitas Bank
Common Stock are issued and outstanding. All of the issued and outstanding
shares of Kittitas Bank Common Stock are owned by the Company, the sole
shareholder of Kittitas Bank. As of December 31, 1997, Kittitas Bank had
capital of $3,767,000, divided into common stock of $1,656,000, surplus of
$1,823,000, and undivided profits of $288,000.
(C) 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 20,000,000 authorized shares of common
stock, $0.20 par value per share ("InterWest Common Stock") (no other class of
capital stock being authorized), of which 8,445,572 shares of InterWest Common
Stock are issued and outstanding. As of December 31, 1997, InterWest had
capital of $133,398,000, divided into common stock of $1,615,000, surplus of
$20,362,000 and undivided profits of $111,421,000.
(D) VOTING AGREEMENT. As a condition and an inducement to InterWest's
willingness to enter into this Plan, the directors and officers of Kittitas Bank
and the Company have entered into agreements in the forms attached to this Plan
as EXHIBIT A and EXHIBIT B, pursuant to which, among other things, each such
individual has agreed to vote his or her shares of Company Common Stock in favor
of approval of the actions contemplated by this Plan at the Meeting (as defined
below), to refrain from competing with InterWest and its Subsidiaries, and to
refrain from exercising prior to the Effective Date any vested Director Options
or Employee Options.
1
(E) 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.
(F) RIGHTS, ETC. Except as Previously Disclosed (as defined below) in
SCHEDULE 4. l(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 or Kittitas Bank authorized and reserved for
issuance; neither the Company nor Kittitas Bank has any Rights (as defined
below) issued or outstanding; and neither the Company nor Kittitas Bank has any
commitment to authorize, issue or sell any such shares or any Rights. The term
"Rights" means securities or obligations convertible into or exchangeable for,
or giving any Person any right to subscribe for or acquire, or any options,
calls or commitments relating to, shares of capital stock. There are no
preemptive rights with respect to the Company Common Stock.
(G) APPROVALS. At meetings of the respective Boards of Directors of the
Company, Kittitas Bank, 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:
"AGGREGATE NUMBER" has the meaning assigned to such term in Section
2.2(E)(3).
"APPRAISAL LAWS" has the meaning assigned to such term in Section 1.1(E).
"ASSET CLASSIFICATION" has the meaning assigned to such term in Section
4.l(T).
"BANK FINANCIAL REPORTS" has the meaning assigned to such term in Section
4.1(H).
"CAPITAL" means capital stock, surplus and retained earnings determined in
accordance with GAAP.
"CASH DISTRIBUTION" has the meaning assigned to such term in Section
2.1(B)(1).
"CASH ELECTION SHARES" has the meaning assigned to such term in Section
2.2(A).
"CODE" has the meaning assigned to such term in Section 4.1(Q)(2).
"COMPANY" has the meaning assigned to such term in the first paragraph to
this Plan.
"COMPANY COMMON STOCK" has the meaning assigned to such term in paragraph
(A) of the Recitals.
"COMPANY OPTION" means an Employee Option or Director Option.
"COMPENSATION AND BENEFIT PLANS" has the meaning assigned to such term in
Section 4.1(Q)(1).
2
"CONTINUING CORPORATION" has the meaning assigned to such term in Section
1.1(A).
"CONTINUING EMPLOYEES" has the meaning assigned to such term in Section
8.9.
"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 of the foregoing).
"DIRECTOR OPTIONS" has the meaning assigned to such term 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" means the date in the third calendar quarter of
1998, that is established by InterWest for determining shareholders of record
who will be entitled to receive the InterWest Dividend.
"EFFECTIVE DATE" has the meaning assigned to such term 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.
"ELECTION DEADLINE" means the date of the Meeting.
"EMPLOYEE OPTIONS" has the meaning assigned to such term in paragraph (A)
of the Recitals.
"EMPLOYMENT AGREEMENT" means any of Exhibits E, F, G and H.
"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" has the meaning assigned to such term in Section 4.1(Q)(2).
3
"ERISA AFFILIATE" has the meaning assigned to such term in Section
4.1(Q)(3).
"ERISA PLANS" has the meaning assigned to such term in Section 4.1(Q)(2).
"EXCEPTION SHARES" means shares held by any of the Company's Subsidiaries
or by InterWest or any of its Subsidiaries, in each case other than in a
fiduciary capacity or as a result of debts previously contracted.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations promulgated under such statute.
"EXCHANGE AGENT" has the meaning assigned to such term in Section 2.6.
"EXCHANGE RATIO" has the meaning assigned to such term in Section
2.1(B)(2).
"FDIC" means the Federal Deposit Insurance Corporation.
"FINANCIAL REPORTS" has the meaning assigned to such term in Section
4.1(H).
"FEDERAL RESERVE BOARD" means the Board of Governors of the Federal Reserve
System.
"FORM OF ELECTION" has the meaning assigned to such term in Section 2.2(A).
"GAAP" means generally accepted accounting principles.
"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" has the meaning assigned to such term
in Section 4.1(H).
"INDEMNIFIED PARTY" has the meaning assigned to such term in Section
5.18(A).
"INTERWEST" has the meaning assigned to such term in the first paragraph of
this Plan.
"INTERWEST COMMON STOCK" has the meaning assigned to such term in paragraph
(C) of the Recitals.
"INTERWEST DIVIDEND" means InterWest's regular quarterly cash dividend that
is declared in the third calendar quarter of 1998.
"INTERWEST OPTION" has the meaning assigned to such term in Section 2.3(B).
"KITTITAS BANK" has the meaning assigned to such term in the first
paragraph of this Plan.
"KITTITAS BANK COMMON STOCK " has the meaning assigned to such term in
paragraph (B) of the Recitals.
4
"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.
"MAXIMUM CASH CONSIDERATION" means the dollar amount (rounded to the
nearest cent), equal to the product of $72.00 multiplied by the Maximum Cash
Election Number.
"MAXIMUM CASH ELECTION NUMBER" has the meaning assigned to such term in
Section 2.2(D).
"MAXIMUM STOCK ELECTION NUMBER" has the meaning assigned to such term in
Section 2.2(D).
"MEETING" has the meaning assigned to such term in Section 5.2.
"MERGER" has the meaning assigned to such term in Section 1.1(A).
"MERGER CONSIDERATION" means the aggregate of the Cash Distributions and
Stock Distributions payable or issuable pursuant to the Merger.
"MULTIEMPLOYER PLANS" has the meaning assigned to such term in Section
4.l(Q)(2).
"NASDAQ" means the National Association of Securities Dealers Automated
Quotations system.
"NON-ELECTION SHARES" has the meaning assigned to such term in Section
2.2(C).
"OFFICER BONUS PLAN" has the meaning assigned to such term in Section
4.1(GG).
"OPTION" has the meaning assigned to such term in the Stock Option
Agreement.
"OPTION SHARES" has the meaning assigned to such term in the Stock Option
Agreement.
"PARTICIPATION FACILITY" means any facility in which the Company or any of
its Subsidiaries participates in the management and, where required by the
context, includes the owner or operator of such facility.
"PARTY" means a party to this Plan.
"PENSION PLAN" has the meaning assigned to such term in Section 4.l(Q)(2).
5
"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
contemporaneously with the execution of this Plan.
"PROXY STATEMENT" has the meaning assigned to such term in Section 5.2.
"REGISTRATION STATEMENT" has the meaning assigned to such term in Section
5.2.
"REGULATORY AUTHORITIES" means federal or state governmental agencies,
authorities or departments charged with the supervision or regulation of
depository institutions or engaged in the insurance of deposits.
"RCW" means the Revised Code of Washington, as amended.
"RIGHTS" has the meaning assigned to such term in paragraph (F) 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.
"SEVERANCE AGREEMENT" means either of Exhibits I and J.
"STOCK DISTRIBUTION" has the meaning assigned to such term in Section
2.1(B).
"STOCK ELECTION SHARES" has the meaning assigned to such term in Section
2.2(A).
"STOCK OPTION AGREEMENT" has the meaning assigned to such term in paragraph
(E) 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.
"TAX RETURNS" has the meaning assigned to such term in Section 4.1(AA).
"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.
6
(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 shall merge into InterWest (the "Merger"), the
separate existence of the Company shall cease and InterWest (the "Continuing
Corporation") shall survive, and the name of the Continuing Corporation shall be
"InterWest Bancorp, Inc."
(B) RIGHTS, ETC. Upon consummation of the Merger, the
Continuing Corporation shall possess all of the rights, privileges, immunities
and franchises, of a public as well as of a private nature, of each of the
merging corporations; and all property, real, personal and mixed, and all debts
due on whatever account, and all other choses in action, and all and every other
interest, of or belonging to or due to each of the corporations so merged, shall
be deemed to be vested in the Continuing Corporation without further act or
deed; and the title to any real estate or any interest therein, vested in each
of such corporations, shall not revert or be in any way impaired by reason of
the 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 shall be the directors 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 any Merger Consideration, 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 shall have failed to perfect or shall have
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 a Non-Election Share. 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).
7
1.2 EFFECTIVE DATE. Unless the Parties agree upon another date, the
"Effective Date" will be the later of November 2, 1998, or 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. A business day is any day other than a Saturday,
Sunday or legal holiday in the State of Washington. If the Merger is not
consummated in accordance with this Plan on or prior to December 31, 1998, the
Company or InterWest may terminate this Plan in accordance with Article VII. 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 CONVERSION OF STOCK. Subject to the provisions of this Plan, on the
Effective Date, by virtue of the Merger and without any action on the part of
InterWest or the Company:
(A) OUTSTANDING INTERWEST COMMON STOCK. The shares of InterWest
Common Stock issued and outstanding immediately prior to the Effective Date
shall, on and after the Effective Date, remain as issued and outstanding shares
of InterWest Common Stock.
(B) OUTSTANDING COMPANY COMMON STOCK. Each share of Eligible
Company Common Stock issued and outstanding immediately prior to the Effective
Date shall, automatically and without any action on the part of the holder of
such share, be converted into the right to receive from InterWest either
(1) $72.00 in cash, without interest (the "Cash Distribution")
or
(2) 1.714 shares (the "Exchange Ratio") of InterWest Common
Stock (the "Stock Distribution")
in such proportions as the holder of such share of Eligible Company Common Stock
shall elect or be deemed to have elected as provided in Section 2.2(E).
2.2 CONVERSION ELECTION PROCEDURES AND ALLOCATION.
(A) ELECTION OPTIONS. Subject to the election and allocation
procedures set forth in this Section 2.2, each record holder of Company Common
Stock will be entitled to elect to receive (i) the Cash Distribution for all or
a portion of the holder's shares ("Cash Election Shares"), or (ii) the Stock
Distribution for all or a portion of the holder's shares ("Stock Election
Shares"). All such elections shall be made on a form designated by InterWest
for that purpose ("Form of Election"). InterWest and the Company shall mail the
Form of Election with the Proxy Statement to all holders of Company Common Stock
on the record date for the Meeting and shall make the Form of Election available
to all persons who become holders of Company Common stock subsequent to such
date and no later than the close of business on the business day immediately
prior to the Election Deadline.
(B) EFFECTIVE ELECTION. Any election for the purposes of this
Section 2.2 shall be effective only if the Exchange Agent shall have received a
properly completed and signed Form of Election by the Election Deadline. A Form
of Election may be revoked or changed by the person submitting such Form of
Election or any other person to whom the subject shares are subsequently
transferred by written notice by such person to the Exchange Agent at or prior
to the Election Deadline. All Forms of Elections shall be deemed to be revoked
if the Exchange Agent is notified in writing by either InterWest or the Company
that this Plan has been terminated in accordance with its terms.
8
(C) NON-ELECTION; DISCRETION OF EXCHANGE AGENT. Any holder of
Company Common Stock who does not submit a properly completed and signed Form of
Election that is received by the Exchange Agent prior to the Election Deadline,
and any holder who has failed to perfect or has effectively withdrawn or lost
the right to payment under the Appraisal Laws, shall be deemed to hold
"Non-Election Shares" for the purposes of Section 2.2(E). InterWest shall have
the discretion, which it may delegate in whole or in part to the Exchange Agent,
to determine whether Forms of Election have been properly completed and signed,
and to disregard immaterial defects in Forms of Election. If InterWest or the
Exchange Agent determines that any purported Cash Election or Stock Election was
not properly made, such purported election shall be deemed to be of no force and
effect and the holder making such election shall be deemed to have Non-Election
Shares for the purposes of Section 2.2(E). The decision of InterWest or the
Exchange Agent as to such matters shall be conclusive and binding. Neither
InterWest nor the Exchange Agent will be under any obligation to notify any
holder of any defect in a Form of Election submitted to the Exchange Agent.
(D) MAXIMUM CONVERSION AMOUNTS. The number of shares of Company
Common Stock to be converted into the right to receive cash in the Merger shall
not exceed 50% ("Maximum Cash Election Number") of the number of shares of
Company Common Stock outstanding immediately prior to the Effective Date
(excluding Dissenting Shares and shares exchanged for cash pursuant to Section
2.5). The number of shares of Company Common Stock to be converted into the
right to receive InterWest Common Stock in the Merger shall not exceed 50%
("Maximum Stock Election Number") of the number of shares of Company Common
Stock outstanding immediately prior to the Effective Date (excluding Dissenting
Shares and shares exchanged for cash pursuant to Section 2.5). If the
application of the provisions of Sections 2.2(A), 2.2(B) and 2.2(C) would
otherwise result in Cash Distributions or Stock Distributions in excess of the
limits set forth in this Section 2.2(D), then the Cash Distributions and Stock
Distributions shall be allocated in the manner set forth in Section 2.2(E).
(E) ALLOCATION. As soon as practicable after the Effective
Date, InterWest shall cause the Exchange Agent to allocate among the holders of
Company Common Stock the rights to receive the Cash Distribution or the Stock
Distribution as follows:
(1) EXCESS CASH ELECTION SHARES. If the number of Cash Election
Shares exceeds the Maximum Cash Election Number, then:
(a) Each Stock Election Share shall be converted into the right
to receive the Stock Distribution;
(b) Each Non-Election Share shall be converted into the right to
receive the Stock Distribution; and
(c) The Exchange Agent will reallocate the Merger Consideration
payable to each holder of Cash Election Shares pro rata (based upon
the number of Cash Election Shares owned by such holder, as compared
with the total number of Cash Election Shares owned by all holders)
such that the holders of Cash Election Shares will receive an amount
of Cash Distributions that, in the aggregate, will equal the Maximum
Cash Consideration, and will receive the remainder of the Merger
Consideration due to them as Stock Distributions.
9
(2) EXCESS STOCK ELECTION SHARES. If the number of Stock
Election Shares exceeds the Maximum Stock Election Number, then:
(a) Each Cash Election Share shall be converted into the right
to receive the Cash Distribution;
(b) Each Non-Election Share shall be converted into the right to
receive the Cash Distribution; and
(c) The Exchange Agent will reallocate the Merger Consideration
payable to each holder of Stock Election Shares pro rata (based upon
the number of Stock Election Shares owned by such holder, as
compared with the total number of Stock Election Shares owned by all
holders) such that the holders of Stock Election Shares will
receive, as Stock Distributions, a number of shares of InterWest
Common Stock equal to the Maximum Stock Election Number, and will
receive the remainder of the Merger Consideration due to them as
Cash Distributions.
(3) NO EXCESS. If neither of Subsections (1) or (2) above is
applicable, all Cash Election Shares shall be converted into the right to
receive the Cash Distribution, all Stock Election Shares shall be converted into
the right to receive the Stock Distribution, and the Non-Election Shares shall
be converted into the right to receive the Cash Distribution and/or the Stock
Distribution as follows:
(a) If sum of the number of Non-Election Shares plus the number
of Cash Election Shares (the "Aggregate Number") equals or exceeds
the Maximum Cash Election Number, then (1) the number of
Non-Election Shares to be converted into the right to receive the
Stock Distribution shall be equal to the Aggregate Number minus the
Maximum Cash Election Number, (2) the remaining Non-Election Shares
shall be converted into the right to receive the Cash Distribution,
and (3) the Exchange Agent shall allocate the Merger Consideration
payable to each holder of a Non-Election Share in a manner that
minimizes the creation of fractional shares of InterWest Common
Stock.
(b) If the Aggregate Number is less than the Maximum Cash
Election Number, then (1) all Non-Election Shares shall be converted
into the right to receive the Cash Distribution, and (2) the
Exchange Agent will reallocate the Merger Consideration payable to
each holder of Stock Election Shares pro rata (based upon the number
of Stock Election Shares owned by such holder, as compared with the
total number of Stock Election Shares owned by all holders) such
that the holders of Stock Election Shares will receive, as Stock
Distributions, a number of shares of InterWest Common Stock equal to
the Maximum Stock Election Number, and will receive the remainder of
the Merger Consideration due to them as Cash Distributions.
(4) PRO RATA COMPUTATIONS. The pro rata computations performed
by the Exchange Agent pursuant to this Section 2.2(E) shall be binding and
conclusive as to the allocation of the Merger Consideration among holders of
Company Common Stock.
2.3 CONVERSION OF COMPANY OPTIONS.
(A) EXERCISE AFTER ELECTION DEADLINE. If any holder of an
Employee Option exercises such Employee Option after the Election Deadline, the
shares of Company Common
10
Stock issued upon such exercise will be deemed to be Non-Election Shares for
purposes of Section 2.2(E).
(B) CONVERSION ON EFFECTIVE DATE. On the Effective Date, by
virtue of the Merger, and without any action on the part of any holder of a
Company Option, each Company Option that is then outstanding and unexercised
shall be converted into and become an option to purchase InterWest Common Stock
("InterWest Option") on the same terms and conditions as are in effect with
respect to the Company Option immediately prior to the Effective Date, except
that (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 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 Company Option by the Exchange Ratio, and rounding up or
down to the nearest cent. The number of shares of Company Common Stock that are
issuable upon exercise of Options (whether vested or unvested) as of the date of
this Plan are Previously Disclosed in SCHEDULE 2.3(B).
2.4 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 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.
2.5 FRACTIONAL SHARES. Notwithstanding any other provision of this
Plan, no fractional shares of InterWest Common Stock and no certificates or
scrip for, 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 $72.00.
2.6 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 or Cash Distribution 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 exchange agent (the "Exchange
Agent") of the certificates representing all of such shares of Company Common
Stock (or indemnity satisfactory to InterWest and the Exchange Agent, in their
judgment, if any of such certificates are lost, stolen or destroyed). No
interest will be paid on any such fractional share checks or dividends to which
the holder of such shares shall be entitled to receive upon such delivery.
Certificates surrendered for exchange by any person constituting an "affiliate"
of the Company for purposes of Rule 145 of the Securities Act shall not be
exchanged for certificates representing InterWest Common Stock until InterWest
has received a written agreement from such person as specified in Section 5.10.
11
2.7 MERGER CONSIDERATION 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.
2.8 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.
2.9 RESERVATION OF RIGHT TO REVISE TRANSACTION. In its sole discretion,
and notwithstanding any other provision in this Plan to the contrary, InterWest
may at any time change the method of effecting its acquisition of the Company
and Kittitas Bank; PROVIDED, HOWEVER, that (A) no such change shall alter or
change the amount or kind of consideration to be issued to holders of Company
Common Stock as provided for in this Plan, (B) no such change shall adversely
affect the tax treatment to the Company shareholders as a result of receiving
such consideration, and (C) no delay caused by such a change shall 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 and Kittitas
Bank will cooperate with and assist InterWest with any necessary amendment to
this Plan, and with the preparation and filing of such applications, documents,
instruments and notices as may be necessary or desirable, in the opinion of
counsel for InterWest, to obtain all necessary shareholder approvals and
approvals of any regulatory agency, administrative body or other governmental
entity.
ARTICLE III. ACTIONS PENDING CONSUMMATION
Unless otherwise agreed to in writing by InterWest, each of the Company and
Kittitas Bank shall conduct its and each of its Subsidiaries' business in the
ordinary and usual course consistent with past practice and shall use its best
efforts to maintain and preserve its and each of its Subsidiaries' business
organization, employees and advantageous business relationships and retain the
services of its and each of its Subsidiaries' officers and key employees
identified by InterWest, and neither the Company nor Kittitas Bank, without the
prior written consent of InterWest, will (or cause or allow any of its
Subsidiaries to):
3.1 CAPITAL STOCK. Except for or as otherwise expressly permitted by
this Plan, the Stock Option Agreement, or Company Options, 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, Kittitas Bank
or any of their Subsidiaries, or any Rights with respect thereto, or enter into
any agreement with respect to the foregoing, or permit any additional shares of
Company Common Stock to become subject to grants of employee stock options,
stock appreciation rights or similar stock-based employee compensation rights.
3.2 DIVIDENDS, ETC. Make, declare or pay any dividend on or in respect
of, 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, prior to the Effective Date, the Company may declare
and pay, with respect to each share of Company Common Stock outstanding on the
Dividend Record Date, a per-share cash dividend for the quarter ending September
30, 1998, equal to (A) the product of the per-share dollar amount of the
InterWest Dividend multiplied by the Exchange Ratio, DIVIDED by (B) two. For
illustrative purposes only, if the dollar amount of the InterWest Dividend
12
were $0.20 per share, the Company could accordingly pay a dividend with respect
to Company Common Stock of $0.17 per share ($0.20 x 1.714 = $0.3428; $0.3428
DIVIDED BY 2 = $0.17 (rounded)).
3.2 INDEBTEDNESS; LIABILITIES; ETC. Other than in the ordinary course
of business consistent with past practice, incur any indebtedness for borrowed
money, assume, guarantee, endorse or otherwise as an accommodation become
responsible or liable for the obligations of any other individual, corporation
or other entity.
3.4 LINE OF BUSINESS; OPERATING PROCEDURES; ETC. Except as may be
directed by any regulatory agency, (A) change its lending, investment, liability
management or other material banking policies in any material respect, except
such changes as are in accordance and in an effort to comply with Section 5.11,
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 $100,000 in the aggregate.
3.5 LIENS AND ENCUMBRANCES. Impose, or suffer the imposition, on any
shares of stock of any of its Subsidiaries, any lien, charge or encumbrance, or
permit any such lien, charge or encumbrance to exist.
3.6 COMPENSATION; EMPLOYMENT AGREEMENTS; ETC. Except as Previously
Disclosed in SCHEDULE 3.6, enter into or amend any employment, severance or
similar agreement (other than the Employment Agreements and the Severance
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 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 agreement attached to this Plan as
EXHIBIT A and the Employment Agreements, 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 Kittitas Bank in its fiduciary capacity, in each case in the
ordinary course of business consistent with past practice).
3.9 AMENDMENTS. Amend its articles of incorporation or bylaws.
3.10 CLAIMS. Settle any claim, litigation, action or proceeding
involving any liability for material money damages or restrictions upon the
operations of the 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
13
of business consistent with past practice with respect to contracts, agreements
and leases that are terminable by it without penalty on no more than 60 days
prior written notice.
3.12 LOANS. Extend credit or account for loans and leases other than in
accordance with existing lending policies and accounting practices, except that
Kittitas Bank shall not, without the prior consent of InterWest's Chief
Executive Officer or Chief Financial Officer, make any new loan or modify,
restructure or renew any existing nonperforming loan (defined as on non-accrual
status, or 90 days or more past due) to any borrower if the amount of the
resulting loan, when aggregated with all other loans or extensions of credit to
such Person (or which would be required to be aggregated for
loans-to-one-borrower limitations), would be in excess of $300,000 for any new
customer or $600,000 to any customer as of the date of this Plan, except that
(i) single-family residential loans may be made in amounts that would not exceed
applicable FHLMC and FNMA limits, and (ii) such limits shall not apply to SBA,
FmHA, USDA Rural Development or other governmental or governmental agency
guaranteed amounts.
3.13 TRANSACTION EXPENSES. Incur expenses in connection with the
transactions contemplated by this Plan that exceed $125,000 in the aggregate.
ARTICLE IV. REPRESENTATIONS AND WARRANTIES
4.1 THE COMPANY AND KITTITAS BANK REPRESENTATIONS AND WARRANTIES. Each
of the Company and Kittitas Bank hereby represents and warrants to InterWest as
follows:
(A) RECITALS. The facts set forth in the Recitals of this Plan
with respect to the 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.
Kittitas 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 Kittitas Bank Common
Stock under 12 U.S.C. Section 55), 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 SUBSIDIARIES. The Company has Previously
Disclosed in SCHEDULE 4.1(D) a list of all of its Subsidiaries. Each of its
Subsidiaries that is a bank is an "insured depository institution" as defined in
the Federal Deposit Insurance Act, as amended, and applicable regulations under
such statute. No equity securities of any of its Subsidiaries are or may become
required to be issued (other than to the Company or one of its Subsidiaries) by
reason of any Rights with respect thereto. There are no contracts, commitments,
understandings or arrangements by which any of
14
its Subsidiaries is or may be bound to sell or otherwise issue any shares of
such Subsidiary's capital stock, and there are no contracts, commitments,
understandings or arrangements relating to the rights of the Company or its
Subsidiaries, as applicable, to vote or to dispose of such shares. All of the
shares of capital stock of each of its Subsidiaries held by the Company or one
of its Subsidiaries are fully paid and nonassessable and are owned by the
Company or one of its Subsidiaries free and clear of any charge, mortgage,
pledge, security interest, restriction, claim, lien or encumbrance. Each of its
Subsidiaries is in good standing under the laws of the jurisdiction in which it
is incorporated or organized, and is duly qualified to do business and in good
standing in the jurisdictions where the failure to be duly qualified is
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on it. Except as Previously Disclosed in SCHEDULE 4.1(D), it does not
own beneficially, directly or indirectly, any shares of any equity securities or
similar interests of any corporation, bank, partnership, joint venture, business
trust, association or other organization. In the case of representations by the
Company, the deposits of its Subsidiaries that are banks are insured by the Bank
Insurance Fund of the FDIC.
(E) CORPORATE POWER. Each of the Company and its Subsidiaries
has the corporate power and authority to carry on its business as it is now
being conducted and to own all its material properties and assets.
(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.
(F) NO DEFAULTS. Subject to the approval by its shareholders
referred to in Section 6.1, the required regulatory approvals referred to in
Section 6.1, and the required filings under federal and state securities laws,
and except as Previously Disclosed in SCHEDULE 4.1(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, 1997 and the related statements of income, changes in
shareholders' equity and cash flows for the fiscal year ended December 31, 1997
(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, 1997, and all other financial reports filed or to be filed
subsequent to December 31, 1997, in the form filed with the FDIC and the Office
of the Comptroller of the Currency (in each case, the "Bank Financial Reports"
and together with the Holding Company Financial Reports, the "Financial
Reports") did not and will not
15
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 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 Holding Company 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, 1997. Except as Previously Disclosed on SCHEDULE 4.1(I), since
December 31, 1997, 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.
(I) NO EVENTS. Except as Previously Disclosed on SCHEDULE
4.1(J), since December 31, 1997, 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.L(L), no litigation, proceeding or controversy before
any court or governmental agency is pending that, individually or in the
aggregate, is reasonably likely to have a Material Adverse Effect on the 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
16
or their officers, directors or controlling persons is a party to or is subject
to any order, decree, agreement, memorandum of understanding or similar
arrangement with, or a commitment letter or similar submission to, any
Regulatory Authority, and neither the Company nor any of its Subsidiaries has
been advised by any of such Regulatory Authorities that such authority is
contemplating issuing or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement, memorandum or
understanding, commitment letter or similar submission.
(M) COMPLIANCE WITH LAWS. Except as Previously Disclosed in
SCHEDULE 4.1(M), each of the Company and its Subsidiaries:
(1) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and registrations with, all
Regulatory Authorities that are required in order to permit it to own its
businesses presently conducted and that are material to the business of it and
its Subsidiaries taken as a whole; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect and, to its best
knowledge, no suspension or cancellation of any of them is threatened; and all
such filings, applications and registrations are current;
(2) has received no notification or communication from any
Regulatory Authority or the staff thereof (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 controlling persons) to enter into a cease
and desist order, agreement or memorandum of understanding (or requiring the
board of directors thereof to adopt any resolution or policy);
(3) is not required to give prior notice to any federal banking
or thrift agency of the proposed addition of an individual to its board of
directors or the employment of an individual as a senior executive;
(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 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
17
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, that it was required to file with (1)
the Office of the Comptroller of the Currency, (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
the other Parties and no action has been taken by it that would give rise to any
valid claim against any Party for a brokerage commission, finder's fee or other
like payment.
(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
18
transaction with respect to any ERISA Plan that could subject the Company or any
of its Subsidiaries to a tax or penalty imposed by either Section 4975 of the
Code or Section 502(i) of ERISA in an amount which would be material.
(3) No liability under Subtitle C or D of Title IV of ERISA has
been or is expected to be incurred by the Company or any of its Subsidiaries
with respect to any ongoing, frozen or terminated "single-employer plan," within
the meaning of Section 4001(a)(15) of ERISA, currently or formerly maintained by
any of them, or the single-employer plan of any entity which is considered one
employer with the Company under Section 4001(a)(15) of ERISA or Section 414 of
the Code (an "ERISA Affiliate"). Neither the Company nor any of its
Subsidiaries presently contributes to a Multiemployer Plan, nor have they
contributed to such a plan within the past five calendar years. No notice of a
"reportable event," within the meaning of Section 4043 of ERISA for which the
30-day reporting requirement has not been waived, has been required to be filed
for any Pension Plan or by any ERISA Affiliate within the past 12-month period.
(4) All contributions required to be made under the terms of any
ERISA Plan have been timely made. Neither any Pension Plan nor any
single-employer plan of an ERISA Affiliate has an "accumulated funding
deficiency"(whether or not waived) within the meaning of Section 412 of the Code
or Section 302 of ERISA. Neither the Company nor any of its Subsidiaries has
provided, or is required to provide, security to any Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant to Section 401(a)(29) of the
Code.
(5) Under each Pension Plan which is a single-employer plan, as
of the last day of the most recent plan year, the actuarially determined present
value of all "benefit liabilities," within the meaning of Section 4001(a)(16) of
ERISA (as determined on the basis of the actuarial assumptions contained in the
plan's most recent actuarial valuation) did not exceed the then current value of
the assets of such plan, and there has been no material change in the financial
condition of such plan since the last day of the most recent plan year.
(6) Neither the Company nor any of its Subsidiaries has any
obligations for retiree health and life benefits under any plan, except as set
forth in SCHEDULE 4.1(Q)(6). There are no restrictions on the rights of the
Company or any of its Subsidiaries to amend or terminate any such plan without
incurring any liability thereunder.
(7) Except as Previously Disclosed in SCHEDULE 4.l(Q)(7) and
except as expressly contemplated by the Employment Agreements and the Severance
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
19
(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 December 31, 1997 (the "Asset Classification"); and no amounts of loans,
extensions of credit or other assets that have been classified as of December
31, 1997 by any regulatory examiner as "Other Loans Specially Mentioned,"
"Substandard," "Doubtful" "Loss," or words of similar import are excluded from
the amounts disclosed in the Asset Classification, other than amounts of loans,
extensions of credit or other assets that were charged off by the Company or any
Subsidiary prior to December 31, 1997.
(U) ALLOWANCE FOR POSSIBLE LOAN LOSSES. The allowance for
possible loan losses shown on the consolidated balance sheets in the
December 31, 1997 Holding Company Financial Reports of the Company was, and the
allowance for possible loan losses to be shown on subsequent Holding Company
Financial Reports of the Company 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.l(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
20
any agreement to which the Company or any such Subsidiaries is a party, or (iii)
restrict or impair in any way the ability of the other Parties to exercise the
rights granted 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.
(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,
21
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) 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 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 of the Company, 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.
(BB) ACCURACY OF INFORMATION. The statements with respect to the
Company and its Subsidiaries contained in this Plan and the Stock Option
Agreement, the Schedules and any other written documents executed and delivered
by or on behalf of the Company or any other Party pursuant to the terms of or
relating to this Plan are true and correct in all material respects, and such
statements and documents do not omit any material fact necessary to make the
statements contained therein, in light of the circumstances under which they
were made, not misleading.
(CC) 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(CC). SCHEDULE 4.1(CC) includes a list of any assets of the Company or its
Subsidiaries that are pledged as security for each such Derivatives Contract.
(DD) ACCOUNTING CONTROLS. Each of the Company and its
Subsidiaries has devised and maintained systems of internal 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.
(EE) 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):
22
(1) except as Previously Disclosed in SCHEDULE 4.1(EE)(1), 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(EE)(2), any
real or personal property lease with annual rental payments aggregating $10,000
or more; or
(3) except as Previously Disclosed in SCHEDULE 4.1(EE)(3), any
material contract with any affiliate.
(FF) 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.
(GG) OFFICER BONUS PLAN. The Company's officer bonus plan in
effect as of the date of this Plan allocates 8% of the Company's pre-tax
earnings to payment of annual officer bonuses (such plan, the "Officer Bonus
Plan").
4.2 INTERWEST REPRESENTATIONS AND WARRANTIES. InterWest hereby
represents and warrants to the Company and Kittitas Bank as follows:
(A) RECITALS. The facts set forth in the Recitals of this Plan
with respect to InterWest are true and correct.
(B) ORGANIZATION, STANDING AND AUTHORITY. InterWest is duly
qualified to do business and is in good standing in the States of the United
States and foreign jurisdictions where the failure to be duly qualified,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on it. Each of InterWest and its Subsidiaries has in effect all
federal state, local, and foreign governmental authorizations necessary for it
to own or lease its properties and assets and to carry on its business as it is
now conducted, the absence of which, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on InterWest.
(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, the Stock Option Agreement
and each of the Employment Agreements and Severance Agreements 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.
(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
23
Previously Disclosed in SCHEDULE 4.2(F), the execution, delivery and performance
of this Plan and each of the Employment Agreements and the Severance Agreements
and the consummation by InterWest and each of its Subsidiaries that is a Party
of the transactions contemplated by this Plan does not and will not (1)
constitute a breach or violation of, or a default under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of InterWest or of any of its Subsidiaries or
to which InterWest or any of its Subsidiaries or its or their properties is
subject or bound, which breach, violation or default is reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on
InterWest, (2) constitute a breach or violation of, or a default under, the
articles of incorporation, charter or bylaws of its or any of its Subsidiaries,
or (3) require any consent or approval under any such law, rule, regulation,
judgment, decree, order, governmental permit or license or the consent or
approval of any other party to any such agreement, indenture or instrument,
other than any such consent or approval that, if not obtained, would not be
reasonably likely, individually or in the aggregate, to have a Material Adverse
Effect on InterWest.
(G) FINANCIAL REPORTS. Except as Previously Disclosed in
SCHEDULE 4.2(G), in the case of InterWest, its Annual Report on Form 10-K for
the fiscal year ended September 30, 1997, and all other documents filed or to be
filed subsequent to September 30, 1997 under Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act, in the form filed with the SEC (in each such case, the
"InterWest Financial Reports"), did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements made therein, in light of the
circumstances under which they were made, not misleading; and each of the
balance sheets in or incorporated by reference into the InterWest Financial
Reports (including the related notes and schedules thereto) fairly presents and
will fairly present the financial position of the entity or entities to which it
relates as of its date, and each of the statements of income and changes in
shareholders' equity and cash flows or equivalent statements in the InterWest
Financial Reports (including any related notes and schedules thereto) fairly
presents and will fairly present the results of operations, changes in
shareholders, equity and changes in cash flows, as the case may be, of the
entity or entities to which it relates for the periods set forth therein, in
each case in accordance with GAAP, except as may be noted therein, subject to
normal and recurring year-end audit adjustments in the case of unaudited
statements.
(H) NO EVENTS. Except as Previously Disclosed on SCHEDULE
4.2(H), since September 30, 1997, no event has occurred which is reasonably
likely to have a Material Adverse Effect on it.
(I) LITIGATION; REGULATORY ACTION. Except as Previously
Disclosed in SCHEDULE 4.2(I) no litigation, proceeding or controversy before any
court or governmental agency is pending that, individually or in the aggregate,
is reasonably likely to have a Material Adverse Effect on InterWest or its
Subsidiaries or that alleges claims under any fair lending law or other law
relating to discrimination, including the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act and the Home Mortgage Disclosure
Act, and, to the best of its knowledge, no such litigation, proceeding or
controversy has been threatened; and except as Previously Disclosed in
SCHEDULE 4.2(I), neither InterWest nor any of its Subsidiaries or any of its or
their material properties or their officers, directors or controlling persons is
a party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or similar
submission to, any Regulatory Authority, and neither InterWest nor any of its
Subsidiaries has been advised by any of such Regulatory Authorities that such
authority is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree, agreement,
memorandum of understanding, commitment letter or similar submission.
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(J) REPORTS. Since September 30, 1995, each of InterWest and
its Subsidiaries has filed all reports and statements, together with any
amendments required to be made with respect thereto, that it was required to
file with (1) the FDIC, (2) the Department of Financial Institutions of the
State of Washington, (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.
(J) ACCURACY OF INFORMATION. The statements with respect to
InterWest and its Subsidiaries contained in this Plan, the Schedules and any
other written documents executed and delivered by or on behalf of InterWest or
any other Party pursuant to the terms of this Plan are true and correct in all
material respects, and such statements and documents do not omit any material
fact necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading.
(L) DERIVATIVES CONTRACTS. None of InterWest or its
Subsidiaries is a party to or has agreed to enter into a Derivatives Contract or
owns securities that are referred to as "structured notes" except for those
Derivatives Contracts and structured notes Previously Disclosed in SCHEDULE
4.2(L). SCHEDULE 4.2(L) includes a list of any assets of InterWest or its
Subsidiaries that are pledged as security for each such Derivatives Contract.
(M) ABSENCE OF UNDISCLOSED LIABILITIES. Neither InterWest nor
any of its Subsidiaries has any obligation or liability (contingent or
otherwise) that, individually or in the aggregate, is reasonably likely to have
a Material Adverse Effect on it, except (1) as reflected the InterWest Financial
Reports prior to the date of this Plan, and (2) for commitments and obligations
made, or liabilities incurred, in the ordinary course of business consistent
with past practice since September 30, 1997. Since September 30, 1997, neither
InterWest nor any of its Subsidiaries has incurred or paid any obligation or
liability (including any obligation or liability incurred in connection with any
acquisitions in which any form of direct financial assistance of the federal
government or any agency thereof has been provided to any Subsidiary) that,
individually or in the aggregate, is reasonably likely to have a Material
Adverse Effect on it.
ARTICLE V. COVENANTS
Each of the Company and Kittitas Bank hereby covenants to InterWest, and
InterWest hereby covenants to the Company and Kittitas Bank, that:
5.1 BEST EFFORTS. Subject to the terms and conditions of this Plan and,
in the case of the Company and Kittitas Bank, to the exercise by their
respective Boards of Directors of such Boards' fiduciary duties, each party
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 November 2, 1998, and to otherwise enable consummation of the
transactions contemplated by this Plan and the Stock Option Agreement, and shall
cooperate fully with the other Parties to that end.
25
5.2 THE PROXY. In the case of the Company: it shall promptly assist
InterWest in the preparation of a proxy statement (the "Proxy Statement") to be
mailed to the holders of the Company Common Stock in connection with the
transactions contemplated 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 its best
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. In the case of InterWest: it
will advise the Company, promptly after InterWest receives notice thereof, of
the time when the Registration Statement has become effective or any supplement
or amendment has been filed, of the issuance of any stop order or the suspension
of the qualification of the InterWest Common Stock for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Registration Statement or for additional information.
5.5 PRESS RELEASES. The Company and Kittitas Bank will not, without the
prior approval of InterWest, and InterWest will not (and will cause its
Subsidiaries not to), 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.
5.6 ACCESS; INFORMATION.
(A) Upon reasonable notice, the Company and Kittitas Bank shall
afford InterWest and its officers, employees, counsel, accountants and other
authorized representatives, access, during normal business hours throughout the
period up to the Effective Date, to all of the properties, books, contracts,
commitments and records of the Company and its Subsidiaries and, during such
period, the Company and Kittitas Bank shall furnish promptly (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 or Kittitas Bank in this Plan or
the
26
conditions to the obligations of the Company and Kittitas Bank to consummate the
transactions contemplated by this Plan; and
(B) InterWest will not use any information obtained pursuant to
this Section 5.6 for any purpose unrelated to the consummation of the
transactions contemplated by this Plan and, if this Plan is terminated, will
hold all confidential information and documents obtained pursuant to this
paragraph in confidence (as provided in Section 8.6) unless and until such time
as such information or documents become publicly available other than by reason
of any action or failure to act by InterWest or as it is advised by counsel that
any such information or document is required by law or applicable stock exchange
rule to be disclosed, and in the event of the termination of this Plan,
InterWest will, upon request by the Company, deliver to the Company all
documents so obtained by InterWest or destroy such documents and, in the case of
destruction, will certify such fact to the Company.
5.7 ACQUISITION PROPOSALS. 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 to the extent that the Board of Directors of the Company determines in
its good faith judgment after receipt of advice of counsel that such response is
reasonably required in order to discharge its fiduciary duties, furnish any
nonpublic information relating to or participate in any negotiations or
discussions concerning, any acquisition or purchase of all or a substantial
portion of the assets of, or a substantial equity interest in, the Company or
any of its Subsidiaries or any merger or other business combination with the
Company or any of its Subsidiaries other than as contemplated by this Plan; it
shall instruct its and its Subsidiaries' officers, directors, agents, advisors
and affiliates to refrain from doing any of the foregoing; and it shall notify
InterWest immediately if any such inquiries or proposals are received by, or any
such negotiations or discussions are sought to be initiated with, the Company or
any of its Subsidiaries.
5.8 REGISTRATION STATEMENT PREPARATION; REGULATORY APPLICATIONS
PREPARATION. In the case of InterWest: InterWest shall, as promptly as
practicable following the date of this Plan, prepare and file the Registration
Statement with the SEC 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.
5.9 BLUE-SKY FILINGS. In the case of InterWest: InterWest shall use
its best efforts to obtain, prior to the effective date of the Registration
Statement, 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.
5.10 AFFILIATE AGREEMENTS. InterWest and the Company will use their best
efforts to induce each person who may be deemed to be an "affiliate" of,
respectively, InterWest or 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 agrees to use its best efforts to maintain the
availability of Rule 145 for use by such "affiliates".
27
5.11 CERTAIN POLICIES OF THE COMPANY AND KITTITAS BANK. In the case of
each of the Company and Kittitas Bank: Each shall, at InterWest's request,
modify and change its loan, litigation and other reserve and real estate
valuation policies and practices (including loan classifications and levels of
reserves), and generally conform its operating, lending and compliance policies
and procedures, immediately prior to the Effective Date so as to be consistent
on a basis satisfactory to InterWest; 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 and Kittitas Bank'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 5.11.
5.12 STATE TAKEOVER LAW. In the case of the Company: The Company shall
not take any action that would cause the transactions contemplated by this Plan
or the Stock Option Agreement to be subject to any applicable state takeover
statute, and the Company shall take all necessary steps to exempt (or ensure the
continued exemption of) the transactions contemplated by this Plan and the Stock
Option Agreement from, or, if necessary, challenge the validity or applicability
of, any applicable state takeover law.
5.13 NO RIGHTS TRIGGERED. In the case of the Company: Except for those
consents of Third Parties Previously Disclosed on SCHEDULE 4.1(G), the Company
shall take all necessary steps to ensure that the entering into of this Plan and
the Stock Option Agreement and the consummation of the transactions contemplated
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, 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.
5.14 SHARES LISTED. In the case of InterWest: InterWest shall use its
best efforts to cause to be listed, prior to the Effective Date, on the NASDAQ
National Market upon official notice of issuance the shares of InterWest Common
Stock to be issued to the holders of Company Common Stock.
5.15 REGULATORY APPLICATIONS. InterWest shall, and shall cause its
Subsidiaries to (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.
5.16 REGULATORY DIVESTITURES. In the case of the Company: 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 conditions
set forth in Section 6.1(G), have been satisfied or waived.
28
5.17 CURRENT INFORMATION.
(A) During the period from the date of this Plan to the
Effective Date, each of the Company and InterWest shall, and shall cause its
representatives to, confer on a regular and frequent basis with representatives
of the other.
(B) Each of the Company and InterWest shall promptly notify the
other of (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.
5.18 INDEMNIFICATION.
(A) From and after the Effective Date, InterWest shall
indemnify, defend and hold harmless the present and former directors, officers
and employees of the Company and its Subsidiaries (each, an "Indemnified Party")
against all costs or expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages or liabilities incurred in connection with any
claim, action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, and arising out of matters existing or
occurring at or prior to the Effective Date (including the transactions
contemplated by this Plan and the Stock Option Agreement), whether asserted or
claimed prior to, at or after the Effective Date, to the fullest extent that the
Company would have been permitted under Washington law and its articles of
incorporation or bylaws in effect on the date of this Plan to indemnify such
person (and InterWest will also advance expenses as incurred to the fullest
extent permitted under applicable law so long as the person to whom expenses are
advanced provides an undertaking to repay such advances within a reasonable
period of time if it is ultimately determined that applicable law does not allow
for such indemnification).
(B) Any Indemnified Party wishing to claim indemnification under
paragraph (A) of this Section 5.18, upon learning of such claim, action, suit,
proceeding or investigation, shall promptly notify InterWest thereof, PROVIDED,
HOWEVER, that the failure so to notify shall not affect the obligations of
InterWest under paragraph (A) of this Section 5.18 (unless such failure
materially and adversely increases InterWest's liability under such paragraph
(A)). In the event of any such claim, action, suit, proceeding or investigation
(whether arising before or after the Effective Date), (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 5.18.
29
(D) InterWest shall pay all expenses, including attorneys' fees,
that may be incurred by any Indemnified Party in enforcing the indemnity and
other obligations provided for in this Section 5.18. The rights of each
Indemnified Party under this Section 5.18 shall be in addition to any other
rights such Indemnified Party may have under the articles of incorporation or
bylaws of the Company or under applicable Washington law.
5.19 EMPLOYEE OPTIONS. The Company will use its best efforts to
encourage each Employee Option holder not to exercise such option prior to the
Effective Date.
5.20 OFFICER BONUS PLAN. InterWest will cause the Officer Bonus Plan to
remain in effect through December 31, 1999, and the Officer Bonus Plan will be
administered without taking into account any adjustments to the policies and
practices of the Company or the Bank that are made pursuant to Section 5.11.
5.21 OPERATION OF KITTITAS BANK. Kittitas Bank shall operate as a
separately chartered subsidiary of InterWest until at least December 31, 1999.
The board of directors of Kittitas Bank immediately after the Effective Date
shall consist of the directors of Kittitas Bank immediately prior to the
Effective Date, who shall continue as directors of Kittitas Bank through
December 31, 1998, plus Xxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxx. Effective
January 1, 1999, the board of directors of Kittitas Bank will consist of five to
seven current directors designated by Kittitas Bank, plus Xxxx X. Xxxxxxx and
Xxxxxxx X. Xxxxxx.
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 not normally imposed in such transactions 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.
30
(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 the Merger,
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) FAIRNESS OPINION. The Company shall have received,
immediately prior to the mailing of the Proxy Statement to the Company's
shareholders, an opinion of Xxxxxxxx Financial to the effect that the financial
terms of the Merger are fair from a financial point of view to the Company's
shareholders.
(I) EMPLOYMENT CONTRACTS. The Employment Agreements attached as
EXHIBITS E, F, G AND H shall have been duly executed and delivered by all
parties to such Employment Agreements.
(J) SEVERANCE AGREEMENTS. The Severance Agreements attached as
EXHIBITS I AND J shall have been duly executed and delivered by all parties to
such Severance Agreements.
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 Xxxxxxx & XxXxxxxx, P.C., counsel for the Company
and Kittitas Bank, in the form of EXHIBIT K.
(B) OFFICERS' CERTIFICATE. (1) Each of the representations and
warranties contained in this Plan of the Company and Kittitas Bank 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 except as otherwise
provided in Section 5.11, and (2) each and all of the agreements and covenants
of the Company and Kittitas Bank to be performed and complied with pursuant to
this Plan on or prior to the Effective Date shall have been duly performed and
complied with in all material respects, and InterWest shall have received a
certificate signed by the chief executive officers, chief financial officers,
and chief lending officers of the Company and Kittitas Bank 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
5.10.
31
(D) ADVERSE CHANGE. During the period from December 31, 1997 to
the Effective Date, there shall not have been any material adverse change in the
financial position or results of operations of the Company or Kittitas Bank, nor
shall the Company or Kittitas Bank have sustained any loss or damage to its
properties, whether or not insured, that materially affects its ability to
conduct its business; and InterWest shall have received a certificate dated the
Effective Date signed by the Chief Executive Officers of the Company and
Kittitas Bank to such effect.
(E) DISSENTERS' RIGHTS. The number of shares of Company Common
Stock for which cash is to be paid because dissenters' rights of appraisal under
the Appraisal Laws shall have been effectively preserved as of the Effective
Date or because of payment of cash in lieu of fractional shares of InterWest
Common Stock shall not exceed in the aggregate 5% of the outstanding shares of
Company Common Stock.
(F) CAPITAL. The Company's Capital shall not be less than $4.2
million (not including capital contributions upon exercise of Company Options
and net of transaction expenses) on the Effective Date.
(G) ALLOWANCE FOR LOAN AND LEASE LOSSES. Kittitas Bank's
allowance for possible loan and lease losses shall not be less than 1% of
Kittitas Bank's total outstanding loans and leases and will be adequate to
absorb Kittitas Bank's anticipated loan and lease losses.
6.3 CONDITIONS TO OBLIGATIONS OF COMPANY AND KITTITAS BANK. The
obligations of the Company and Kittitas Bank to consummate the transactions
contemplated by this Plan also are subject to the written waiver by the Company
and Kittitas Bank or the fulfillment on or prior to the Effective Date of each
of the following conditions:
(A) LEGAL OPINION. The Company and Kittitas Bank shall have
received an opinion, dated the Effective Date, of Xxxxxx & Xxxx, P.C., special
counsel for InterWest, in the form of EXHIBIT L.
(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 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 and Kittitas Bank shall have
received a certificate signed by an executive officer of InterWest dated the
Effective Date, to such effect.
(C) ADVERSE CHANGE. During the period from September 30, 1997
to the Effective Date, there shall not have been any material adverse change in
the financial position or results 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.
32
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 the entire
Board, in the event that the Merger is not consummated by December 31, 1998;
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.
7.2 CONSEQUENCES OF TERMINATION.
(A) GENERAL CONSEQUENCES. Subject to subsection (B) of this
Section 7.2, in the event of the termination or abandonment of this Plan
pursuant to the provisions of Section 7.1, this Plan shall become void and have
no force or effect, without any liability on the part of the Parties or any of
their respective directors or officers or shareholders with respect to this
Plan.
(B) 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 5.6(B), 8.5 and 8.6 shall survive such abandonment and
termination.
8.2 WAIVER; AMENDMENT. Prior to the Effective Date, any provision of
this Plan may be (A) waived in writing by the Party benefited by the provision,
or (B) amended or modified at any time
33
(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 2.9.
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.
8.5 EXPENSES. Each Party will bear all expenses incurred by it in
connection with this Plan and the transactions contemplated by this Plan, except
printing expenses which shall be shared equally between the 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 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.
0000 Xxxx 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
34
If to the Company or Kittitas Bank, to:
Kittitas Valley Bancorp, Inc.
000 Xxxx 0xx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxxx, President and CEO
Copies to:
Xxxxxxx X. Xxxxxxx
Xxxxxxx & XxXxxxxx, P.C.
000 Xxxxxxxx Xxxx, Xxxxx 000
Xxxxxxx, XX 00000
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 and its Subsidiaries except for those employees who are parties to the
Employment Agreements (all such employees being "Continuing Employees"). From
and after the Effective Date, employees of the Company and its Subsidiaries
shall be entitled to participate in the pension, employee benefit and similar
plans (including employee stock ownership, stock option, bonus or other
incentive plans) on substantially the same terms and conditions as similarly
situated employees of InterWest and its Subsidiaries. For the purpose of
determining eligibility to participate in such plans and the vesting and related
calculations of benefits under such plans (but not for the accrual of benefits),
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. Notwithstanding the foregoing, if, under
InterWest's existing benefit plans, the Continuing Employees must pay more for
medical, dental and similar health benefits than they previously paid for such
benefits as employees of the Company or its Subsidiaries, then InterWest shall
pay the Continuing Employees additional compensation so as to maintain their
level of after-tax compensation.
8.10 HEADINGS. The headings contained in this Plan are for reference
purposes only and are not part of this Plan.
35
8.10 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. Xxxxxx
---------------------------------------
NAME: XXXXXXX X. XXXXXX
TITLE: PRESIDENT AND CHIEF EXECUTIVE OFFICER
KITTITAS VALLEY BANCORP, INC.
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------------
NAME: XXXXXX X. XXXXXXXXX
TITLE: PRESIDENT AND CHIEF EXECUTIVE OFFICER
KITTITAS VALLEY BANK, N.A.
By: /s/ Xxxxxx X. Xxxxxxxxx
---------------------------------------
NAME: XXXXXX X. XXXXXXXXX
TITLE: PRESIDENT AND CHIEF EXECUTIVE OFFICER
36
