Exhibit 2.1
EXECUTION VERSION
AGREEMENT AND PLAN OF MERGER
By and Among
FIRST STATE BANCORPORATION,
FIRST STATE BANK OF TAOS,
WASHINGTON MUTUAL FINANCE CORPORATION,
BLAZER FINANCIAL CORPORATION
and
FIRST COMMUNITY INDUSTRIAL BANK
Dated as of May 22, 2002
TABLE OF CONTENTS
ARTICLE I DEFINITIONS ............................................... 1
1.1 Defined Terms. .................................................. 1
1.2 Interpretation. ................................................. 10
ARTICLE II THE MERGER ............................................... 11
2.1 The Merger. ..................................................... 11
2.2 Effective Time. ................................................. 11
2.3 Effects of the Merger. .......................................... 12
2.4 Conversion of Bank Common Stock. ................................ 12
2.5 Merger Sub Common Stock. ........................................ 12
2.6 Articles of Incorporation. ...................................... 12
2.7 By-Laws. ........................................................ 13
2.8 Directors and Officers. ......................................... 13
2.9 Closing. ........................................................ 13
2.10 Deliveries at Closing. ......................................... 13
2.11 Withholding. ................................................... 14
2.12 Payment to Sole Stockholder. ................................... 14
2.13 Reservation of Right to Revise Transaction. .................... 15
ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER ..... 15
3.1 Organization. ................................................... 15
3.2 Capitalization. ................................................. 16
3.3 Authority; No Violation. ........................................ 17
3.4 Consents and Approvals. ......................................... 18
3.5 Reports. ........................................................ 19
3.6 Financial Statements. ........................................... 19
3.7 Broker's Fees. .................................................. 21
3.8 Absence of Certain Changes or Events. ........................... 21
3.9 Legal Proceedings. .............................................. 22
3.10 Taxes. ........................................................ 22
3.11 Employee Benefit Plans. ........................................ 24
3.12 Bank Information. .............................................. 26
3.13 Compliance with Applicable Law. ................................ 26
3.14 Bank Contracts. ................................................ 26
3.15 Agreements with Regulatory Agencies. ........................... 28
3.16 Property. ...................................................... 29
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3.17 Environmental Matters. ......................................... 30
3.18 Insurance. ..................................................... 31
3.19 Employee Matters. .............................................. 32
3.20 Investment Securities. ......................................... 32
3.21 Administration of Fiduciary Accounts. .......................... 32
3.22 Derivative Transactions. ....................................... 33
3.23 Loans. ......................................................... 33
3.24 Intellectual Property. ......................................... 35
3.25 No other Representations. ...................................... 36
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF BUYER .................. 36
4.1 Organization. ................................................... 36
4.2 Authority; No Violation. ........................................ 36
4.3 Consents and Approvals. ......................................... 38
4.4 Broker's Fees. .................................................. 38
4.5 Reports. ........................................................ 39
4.6 Legal Proceedings. .............................................. 39
4.7 Agreements with Regulatory Agencies; Approvals; Financing. ...... 39
4.8 No Other Representations. ....................................... 40
ARTICLE V ADDITIONAL COVENANTS ...................................... 40
5.1 Covenants relating to the Bank. ................................. 40
5.2 Loan, Accrual and Reserve Policies. ............................. 43
5.3 Buyer Forbearance. .............................................. 44
ARTICLE VI ADDITIONAL AGREEMENTS .................................... 44
6.1 Regulatory Matters. ............................................. 44
6.2 Access to Information. .......................................... 45
6.3 Financing; Cooperation; Legal Conditions to the Merger. ......... 46
6.4 Third Party Proposals. .......................................... 47
6.5 Further Assurances. ............................................. 48
6.6 Confidentiality. ................................................ 48
6.7 Certain Tax Matters. ............................................ 49
6.8 Books and Records. .............................................. 55
6.9 Subsequent Interim Financial Statements. ........................ 57
6.10 Notification of Certain Matters. ............................... 57
6.11 [Intentionally Omitted] ........................................ 57
6.12 Non-Solicitation ............................................... 57
6.13 Dividend. ...................................................... 58
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6.14 Intercompany Arrangements. ..................................... 59
6.15 Employees. ..................................................... 59
6.16 Other Real Estate Owned and Non-Performing Loans. .............. 61
6.17 Additional Loans. .............................................. 62
6.18 Computer Equipment. ............................................ 62
ARTICLE VII CONDITIONS PRECEDENT .................................... 63
7.1 Conditions to Each Party's Obligation to Effect the Merger. ..... 63
7.2 Conditions to Obligations of Buyer and Merger Sub. .............. 63
7.3 Conditions to Obligations of Parent, Seller and the Bank. ....... 65
ARTICLE VIII TERMINATION AND AMENDMENT .............................. 66
8.1 Termination. .................................................... 66
8.2 Effect of Termination. .......................................... 67
8.3 Termination Fee. ................................................ 67
8.4 Amendment. ...................................................... 68
8.5 Extension; Waiver. .............................................. 68
ARTICLE IX INDEMNIFICATION .......................................... 68
9.1 Survival Periods. ............................................... 68
9.2 Indemnification by Seller and Parent. ........................... 69
9.3 Indemnification by Buyer. ....................................... 71
9.4 Indemnification Procedure. ...................................... 71
9.5 Limitations. .................................................... 73
9.6 Exclusive Remedy. ............................................... 74
ARTICLE X GENERAL PROVISIONS ........................................ 75
10.1 Expenses. ...................................................... 75
10.2 Notices. ....................................................... 75
10.3 Counterparts. .................................................. 76
10.4 Entire Agreement. .............................................. 77
10.5 Governing Law. ................................................. 77
10.6 Enforcement of Agreement. ...................................... 77
10.7 Severability. .................................................. 77
10.8 Publicity. ..................................................... 77
10.9 Assignment; No Third Party Beneficiaries. ...................... 78
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Exhibit 2.1
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 22, 2002, by and
among First State Bancorporation, a New Mexico corporation ("Buyer"), First
State Bank of Taos, a New Mexico state chartered bank and a wholly owned
subsidiary of Buyer ("Merger Sub"), First Community Industrial Bank, an
industrial bank incorporated under the laws of the State of Colorado (the
"Bank"), Blazer Financial Corporation, a Louisiana corporation and the sole
stockholder of the Bank ("Seller"), and Washington Mutual Finance Corporation, a
Delaware corporation and the sole stockholder of the Seller ("Parent"). (Merger
Sub and the Bank are sometimes collectively referred to herein as the
"Constituent Corporations".)
WHEREAS, the Boards of Directors of Buyer, Merger Sub and the
Bank have determined that it is in the best interests of their respective
companies and their stockholders to consummate the business combination
transaction provided for herein in which the Bank will, subject to the terms and
conditions set forth herein, merge (the "Merger") with and into Merger Sub, with
Merger Sub surviving the Merger as a wholly owned subsidiary of Buyer; and
WHEREAS, the parties desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties agree as follows:
ARTICLE I
DEFINITIONS
1.1 Defined Terms. For all purposes of this Agreement (as defined below), the
following terms shall have the respective meanings set forth in this Section 1.1
(such definitions to be equally applicable to both the singular and plural forms
of the terms herein defined):
"Acquisition Proposal" has the meaning set forth in Section
6.4.
"Affiliate" means, as to any Person, any other Person which,
directly or indirectly, is in control of, is controlled by or is under common
control with, such Person. The term "control" (including, with correlative
meaning, the terms "controlled by" and "under common control with"), as applied
to any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities or other ownership interest,
by contract or otherwise.
"Affiliated Group" means an affiliated group, as that term is
defined by Section 1504(a) of the Code and the Treasury Regulations promulgated
thereunder, any similar group defined under state, local or foreign law, or any
group of which the Bank (or any predecessor of the Bank) is or was a member for
purposes of filing Consolidated or Combined Tax Returns."
"Agreement" means this Agreement and Plan of Merger, including
the Annexes, Schedules and Exhibits attached hereto and made a part hereof, as
the same may be amended from time to time in accordance with the provisions
hereof.
"Allocation" has the meaning set forth in Section 6.7(h).
"Articles of Merger" has the meaning set forth in Section 2.2.
"Bank" has the meaning set forth in the Recitals hereto.
"Bank Assets" has the meaning set forth in Section 3.16.
"Bank Balance Sheet" has the meaning set forth in Section
3.6(a).
"Bank Contracts" has the meaning set forth in Section 3.14(a).
"Bank Merger Act" means the Bank Merger Act of 1960, as
amended, and any successor to such statute.
"Basket" has the meaning set forth in Section 9.5(c).
"BHC Act" means the Bank Company Holding Act of 1956, as
amended, and any successor to such statute.
"Big Four Accounting Firms" has the meaning set forth in
Section 6.7(c).
"Business Day" means any day other than a Saturday, a Sunday
or a day on which banks in Albuquerque, New Mexico or Denver, Colorado are
authorized or obligated by Law or executive order to close.
"Buyer" has the meaning set forth in the Recitals.
"Buyer Disclosure Schedule" means the disclosure schedule
being delivered to Seller by Buyer prior to the execution and delivery of this
Agreement.
"Buyer Indemnified Party" means Buyer, Buyer's Affiliates
(which, after the Closing shall include the Bank), and each of their respective
directors, officers, shareholders, attorneys, accountants, agents and employees,
and the respective heirs, successors and assigns of each of the foregoing.
"Buyer Plans" has the meaning set forth in Section 6.15(a).
"Buyer Savings Plan" has the meaning set forth in Section
6.15(b).
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"CBC" has the meaning set forth in Section 2.1.
"CBCA" has the meaning set forth in Section 2.1.
"Certificate" has the meaning set forth in Section 2.4(b).
"Closing" has the meaning set forth in Section 2.2.
"Closing Date" has the meaning set forth in Section 2.2.
"Code" means the Internal Revenue Code of 1986, as amended.
"Common Stock" means the common stock, par value $10.00 per
share, of the Bank.
"Confidentiality Agreement" has the meaning set forth in
Section 6.2(b).
"Consolidated or Combined Tax Returns" means any and all Tax
Returns that include or included the Bank (or any predecessor or successor of
the Bank) that is or was required to be filed by any Person (including any Tax
Returns filed on a consolidated, combined, unitary or aggregate group basis of
which the Bank (or any predecessor or successor of the Bank) is or has been a
member).
"Constituent Corporations" has the meaning set forth in the
Recitals.
"Damages" has the meaning set forth in Section 9.2(a).
"Director of Financial Institutions Division" means the
Director of Financial Institutions Division of the Licensing and Regulation
Department of the State of New Mexico.
"Dividend" has the meaning set forth in Section 6.13.
"Dividend Adjustment Amount" means the amount, if any, by
which $37,500,000 exceeds the Dividend.
"Dividend Cut-Off Date" has the meaning set forth in Section
6.13.
"DOJ" has the meaning set forth in Section 8.1(b).
"Effective Time" has the meaning set forth in Section 2.2.
"Encumbrances" means any and all liens, charges, security
interests, options, claims, mortgages, pledges, proxies, voting trusts or
agreements, obligations, understandings or arrangements or other restrictions on
title or transfer of any nature whatsoever.
"Environmental Law" means all Laws (including common law),
past or current, relating to pollution or protection of human health or the
environment (including
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ambient air, surface water, ground water, land surface or subsurface strata, and
natural resources), including (i) those related to emissions, discharges,
exposures, Releases or threatened Releases of Hazardous Materials, or otherwise
relating to any environmental aspect of the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
Hazardous Materials and (ii) environmental provisions of Laws, past or current ,
other than Environmental Laws.
"ERISA" has the meaning set forth in Section 3.11(a).
"ERISA Affiliate" has the meaning set forth in Section
3.11(a).
"Estimated Payments" has the meaning set forth in Section
6.7(d).
"FDIC" means the Federal Deposit Insurance Corporation and any
successor thereto.
"Federal Reserve Board" has the meaning set forth in Section
3.4.
"Final Stub Period Taxable Income" has the meaning set forth
in Section 6.7(d).
"Final Stub Period Taxable Loss" has the meaning set forth in
Section 6.7(d).
"GAAP" means generally accepted accounting principles in the
United States.
"Governmental Entity" has the meaning set forth in Section
3.4.
"Hazardous Material" means any pollutant, contaminant,
substance, material, or waste defined as "hazardous" or "toxic" under applicable
Environmental Laws, including toxic substances, hazardous substances, petroleum
and petroleum products, polychlorinated biphenyls, asbestos or
asbestos-containing materials, lead or lead-based paints or materials, and
radon.
"Indemnification Event" means any event, action, proceeding or
claim for which a Person is entitled to indemnification under this Agreement.
"Indemnitor" means the indemnifying person, in the case of any
obligation to indemnify, pursuant to the terms of this Agreement.
"Injunction" has the meaning set forth in Section 7.1(b).
"Insurance Policies" has the meaning set forth in Section
3.18.
"Intellectual Property" has the meaning set forth in Section
3.24.
"Judgment" means any judgment, injunction, order, writ, ruling
or award of any Governmental Entity of competent jurisdiction.
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"KBW" has the meaning set forth in Section 4.4.
"Knowledge of Seller" or "Known to Seller" shall mean actual
knowledge of the persons listed on Section 1.1 of the Seller Disclosure
Schedule.
"Law" means all laws (including common law), statutes,
treaties, codes, ordinances, rules, regulations, orders and judgments of any
Governmental Entity, foreign or domestic.
"Leases" means all lease and sublease agreements and similar
agreements with respect to personal property entered into by the Bank, as
lessor, through the date hereof including all collateral security therefor such
as guarantees and all insurance policies or proceeds.
"Lien" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Loan Commitments" means the collective reference to each
commitment or obligation to extend credit to any person (including pursuant to a
letter of credit or banker's acceptance) or to participate therein, whether or
not such commitment, obligation or participation has been accepted or utilized
by such person.
"Loan Documents" means the agreements, instruments,
certificates, or other documents at any time evidencing or otherwise relating
to, governing, or executed in connection with, or as security for, a Loan or
Loan Commitment, including without limitation, notes, bond, loan agreements,
letter of credit applications, letters of credit, lease financing contracts,
bankers' acceptances, drafts, guarantees, deeds of trust, mortgages,
assignments, security agreements, pledges, subordination or priority agreement,
lien priority agreements, undertakings, security instruments, financing
statements, certificates, documents, legal opinions, participation and
assignment agreements and inter-creditor agreements, and all amendments,
modifications, renewals, extensions, rearrangements, and substitutions with
respect to any of the foregoing.
"Loan Property" has the meaning set forth in Section 3.17(f).
"Loan Request Documents" has the meaning set forth in Section
5.1b(vi).
"Loans" means loans, advances, notes, borrowing arrangements
or other extensions of credit including, without limitation, Leases, credit
enhancements, commitments, guarantees, interest-bearing assets, interests in
loan participations and assignments, customer liabilities on letters of credit,
bankers acceptances and participations in letters of credit (including in all
cases loans made to pay interest accruing on loans, whether or not due or
payable (sometimes referred to as capitalized interest)) and all amendments,
modifications, renewals, extensions, refinancings and refundings of or for any
of the foregoing.
"Material Adverse Effect" means a material adverse effect on
(i) in the case of the Bank, (x) the assets, properties, liabilities, business,
prospects, results of
5
operations or condition (financial or other) of the Bank or (y) the ability of
Parent, Seller and their Affiliates (including the Bank) to perform their
obligations hereunder and to consummate the transactions contemplated hereby or
(ii) in the case of Buyer, the ability of Buyer to perform its obligations
hereunder and to consummate the transactions contemplated hereby; provided,
however, that in determining whether a Material Adverse Effect has occurred,
there shall be excluded any effect the cause of which is (1) any change in
banking, savings association and similar Laws of general applicability or
interpretations thereof by courts or Governmental Entities, (2) any change in
GAAP or regulatory accounting requirements applicable to banks, savings
associations, or their holding companies generally, (3) the announcement of this
Agreement or any action or omission of either party or any Subsidiary thereof
required or permitted to be taken by it under this Agreement (including the
payment by the Bank of the Dividend and the sale or liquidation of Bank Assets
in accordance with Section 6.13 in order to have sufficient cash to pay the
Dividend but excluding with respect to the Bank, Parent and Seller compliance
with Section 5.1(a)), (4) any changes in general economic conditions affecting
banks, savings associations, or their holding companies generally, (5) any
change in national or international, political or social conditions, including
without limitation, the engagement of the United States in hostilities, whether
or not pursuant to the declaration of a national emergency or war, or the
occurrence of any military or terrorist attack upon or within the United States,
or any of its territories, possessions or diplomatic or consular offices or upon
any military installation, equipment or personnel of the United States, provided
that none of the changes or occurrences described in this clause (5) results in
the destruction or loss of use of the Bank Assets, (6) an increase in the level
of non-performing assets of the Bank following the date hereof (provided that
Seller and Parent are in compliance with their obligations under Sections
5.1(a), 5.1(b)(vi) and 6.16), (7) an increase in the rate of charge-offs after
the date hereof on Loans made by the Bank (provided that Parent and Seller are
in compliance with their obligations under Sections 5.1(a), 5.1(b)(vi), 5.2 and
6.16) and (8) any change in the Bank's net income associated with any reduction
of net Loans in the ordinary course of business consistent with past practice
(provided that Parent and Seller are in compliance with their obligations under
Sections 5.1(a) and 6.17).
"Merger" has the meaning set forth in the Recitals hereto.
"Merger Consideration" has the meaning set forth in Section
2.4(a).
"Merger Sub" has the meaning set forth in the Recitals hereto.
"NMBA" has the meaning set forth in Section 2.1.
"OREO" means other real estate owned.
"Participation Facility" has the meaning set forth in Section
3.17(f).
"Permitted Liens" means (i) Encumbrances reflected or reserved
on the Bank's Balance Sheet, (ii) statutory Liens for Taxes not yet due and
payable, (iii) mechanics', materialmen's, workmen's, repairmen's,
warehousemen's, carrier's and other
6
similar liens and encumbrances arising in the ordinary course of business, which
in the aggregate, are not material, and (iv) such encumbrances and imperfections
of title as do not materially detract from the value of the properties or assets
and do not materially interfere in the present or proposed use of such
properties or assets.
"Person" means any individual, partnership, limited
partnership, limited liability partnership, limited liability company, foreign
limited liability company, trust, estate, corporation, custodian, trustee,
executor, administrator, nominee, Governmental Entity or any other entity.
"Plans" has the meaning set forth in Section 3.11(a).
"Preliminary Stub Period Taxable Income" has the meaning set
forth in Section 6.7(d).
"Preliminary Stub Period Taxable Loss" has the meaning set
forth in Section 6.7(d).
"Purchase Price" means $67 million, plus the Dividend
Adjustment Amount, if any.
"Registration Statement" means the registration statement to
be filed by Buyer with the SEC under the Securities Act with respect to the
shares of common stock, no par value of Buyer (the "Buyer Common Stock"), to be
issued by Buyer in order to fund payment of a portion of the Purchase Price.
"Regulatory Agencies" has the meaning set forth in Section
3.5.
"Regulatory Agreement" means any agreement, consent agreement
or memorandum of understanding with, any commitment letter or similar
undertaking to, any order or directive by, any extraordinary supervisory letter
from, or any board resolutions adopted at the request of (whether or not set
forth in Section 3.15 of the Seller Disclosure Schedule or Section 4.7 of the
Buyer Disclosure Schedule), any Regulatory Agency or other Governmental Entity
"Release" means any spilling, leaking, pumping, pouring,
emitting, emptying, discharging, injecting, escaping, leaching, dumping, or
disposing into the environment.
"Representative" means, with respect to any Person, any
officer, director, employee, agent, advisor or other representative of such
Person.
"Requisite Regulatory Approvals" has the meaning set forth in
Section 7.1(a).
"SEC" means the U.S. Securities and Exchange Commission.
"Securities" has the meaning set forth in Section 6.3(b).
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"Securities Act" means the Securities Act of 1933, as amended.
"Seller" has the meaning set forth in the Recitals.
"Seller Disclosure Schedule" means the disclosure schedule
being delivered to Buyer by Seller prior to the execution and delivery of this
Agreement.
"Seller Pension Plan" has the meaning set forth in Section
6.15(e).
"Seller Savings Plan" has the meaning set forth in Section
6.15(b).
"Seller's Account" means an account designated by Seller by
written notice to Buyer given at least two (2) Business Days prior to the
Closing Date.
"Seller's Affiliated Group" has the meaning set forth in
Section 6.7(f).
"Settlement Party" has the meaning set forth in Section
6.7(c).
"Shares" means all of the issued and outstanding shares of
Common Stock.
"SRO" has the meaning set forth in Section 3.5.
"State Regulator" has the meaning set forth in Section 3.5.
"Straddle Period" means a taxable year or period beginning
before, and ending after, the Closing Date.
"Stub Notification Period" has the meaning set forth in
Section 6.7(d).
"Subsidiary" means, when used with respect to any Person, any
corporation, partnership, limited liability company or other organization,
whether incorporated or unincorporated, which is controlled by such Person,
directly or indirectly, or is consolidated with such Person for financial
reporting purposes.
"Surviving Bank" has the meaning set forth in Section 2.1.
"Tax" or "Taxes" means any tax, custom, duty, governmental fee
or other like assessment or charge of any kind whatsoever imposed by any
Governmental Entity (including, without limitation, any federal, state, local,
foreign or provincial income, gross receipts, property, sales, use, gains,
license, excise, franchise, employment, social security, withholding, payroll,
alternative or added minimum, ad valorem, transfer, value added, customs, or any
amount that could be imposed under section 1.1502-6 of the Treasury Regulations
or any similar provision of state, local, or foreign Law or imposed otherwise as
successor, transferee or by way of contract, and any other direct or indirect
sums imposed in lieu of any of the foregoing) together with any interest,
addition or penalty imposed thereon.
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"Tax Claim" has the meaning set forth in Section 6.7(c)(i).
"Tax Indemnified Party" has the meaning set forth in Section
6.7(c)(i).
"Tax Indemnifying Party" has the meaning set forth in Section
6.7(c)(i).
"Tax Records" means all Tax Returns and tax related workpapers
relating to the Bank or any of its assets.
"Tax Return" means all returns, reports, statements,
declarations, estimates and forms or other documents (including any related or
supporting information) required to be file with respect to Taxes.
"Tax Sharing Agreements" has the meaning set forth in Section
6.7(f).
"Termination Fee" has the meaning set forth in Section 8.3(a).
"Third Party Claim" has the meaning set forth in Section
9.4(b).
"Transferred Employees" has the meaning set forth in Section
6.15(a).
"Transfer Tax" or "Transfer Taxes" has the meaning set forth
in Section 6.7(g).
"Treasury Regulations" means the regulations promulgated under
the Code.
1.2 Interpretation. When a reference is made in this Agreement to Articles,
Sections, Exhibits or Schedules, such reference shall be to an Article or
Section of or Exhibit or Schedule to this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to May 22, 2002. The symbol "$" and the terms "dollar" and "dollars"
all refer to the lawful currency of the United States of America denominated in
dollars. Any disclosure in a particular section of a party's Disclosure Schedule
shall be deemed disclosed in respect of any other section thereof to the extent
it is reasonably readily apparent that such disclosure is applicable to such
other section; provided, however, that (i) there shall be no such deemed
disclosure to any such section or subsection that reads "none" or words of
similar import, and (ii) the parties acknowledge and agree that the terms,
provisions, impact or importance of any document or item listed shall not be
deemed disclosed for any reason hereunder except to the extent expressly
disclosed in the Disclosure Schedule.
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ARTICLE II
THE MERGER
2.1 The Merger. Subject to the terms and conditions of this Agreement, in
accordance with the applicable provisions of the Colorado Banking Code (the
"CBC"), the Colorado Business Corporation Act (the "CBCA"), and the New Mexico
Banking Act (the "NMBA") at the Effective Time, the Bank shall merge with and
into Merger Sub. Merger Sub shall be the surviving company (hereinafter
sometimes called the "Surviving Bank") in the Merger, and shall continue its
existence as a state charted bank under the laws of the State of New Mexico. The
Surviving Bank shall retain the name "First State Bank of Taos". Upon
consummation of the Merger, the separate existence of the Bank shall terminate.
2.2 Effective Time. Upon the terms and subject to the conditions of this
Agreement, on the Closing Date (or such other date as Buyer, Seller and the Bank
shall agree), Buyer, Merger Sub and the Bank shall (i) file with the Secretary
of State of the State of Colorado articles of merger and any other appropriate
documents (all of such documents the "Articles of Merger") executed and
acknowledged in accordance with the relevant provisions of the CBCA and (ii)
file with the Director of Financial Institutions Division pursuant to the NMBA
and the Public Regulation Commission of the State of New Mexico this Agreement
together with copies of the resolutions of Seller and Buyer approving this
Agreement and a certificate of the appropriate officers of each of Merger Sub
and the Bank that no shareholders of each such party voted against approval of
this Agreement. The Merger shall become effective upon the later of the date on
which the Articles of Merger have been duly filed with the Public Regulation
Commission of the State of Colorado and the date on which this Agreement has
been filed with the Director of Financial Institutions Division and the Public
Regulation Commission of the State of New Mexico or such other time as is agreed
upon by the parties and specified in the Articles of Merger, and such time is
hereinafter referred to as the "Effective Time".
2.3 Effects of the Merger. At and after the Effective Time, the Merger shall
have the effects set forth in Section 0-000-000 of the CBCA and Section 58-4-8
NMBA.
2.4 Conversion of Bank Common Stock. The aggregate amount to be paid by or on
behalf of Buyer as a result of the Merger shall equal the Purchase Price,
payable as follows:
(a) At the Effective Time, each share of Common Stock issued and outstanding
immediately prior to the Effective Time shall, by virtue of this Agreement
and without any action on the part of the holder thereof, be converted into
the right to receive an amount in cash, without interest, equal to the
Purchase Price divided by the number of Shares (the "Merger
Consideration").
(b) All of the shares of Common Stock converted into the right to receive
the Merger Consideration pursuant to this Article II shall no longer be
outstanding and shall
10
automatically be cancelled and shall cease to exist, and each certificate
(each a "Certificate") previously representing any such shares of Common
Stock shall thereafter only represent the right to receive the cash into
which the shares of Common Stock represented by such Certificate have been
converted pursuant to this Section 2.4. Certificates previously
representing shares of Common Stock shall be exchanged for cash upon the
surrender of such Certificates in accordance with Section 2.12 hereof,
without any interest thereon.
2.5 Merger Sub Common Stock. Each of the 22,500 shares of the common stock, par
value $100.00 per share, of Merger Sub issued and outstanding immediately prior
to the Effective Time shall remain issued and outstanding immediately after the
Effective Time and shall constitute all of the issued and outstanding shares of
the Surviving Bank.
2.6 Articles of Incorporation. At the Effective Time, the Articles of
Incorporation of Merger Sub as in effect at the Effective Time, shall be the
Articles of Incorporation of the Surviving Bank.
2.7 By-Laws. At the Effective Time, the By-Laws of Merger Sub, as in effect
immediately prior to Effective Time, shall be the By-Laws of the Surviving Bank
until thereafter amended in accordance with applicable law.
2.8 Directors and Officers. The directors and officers of Merger Sub immediately
prior to the Effective Time shall be the directors and officers of the Surviving
Bank, each to hold office in accordance with the Articles of Incorporation and
By-Laws of the Surviving Bank until their respective successors are duly elected
or appointed and qualified.
2.9 Closing. Subject to the terms and conditions of this Agreement, the closing
of the Merger (the "Closing") will take place at 10:00 a.m., local time, on the
first Business Day which is no earlier than the 11th calendar day of a month and
which follows the satisfaction or waiver (subject to applicable law) of the
latest to occur of the conditions set forth in Article VII (other than those
conditions which relate to actions to be taken at the Closing) (the "Closing
Date"), at the offices of Xxxxxx Xxxxxx White & XxXxxxxxx LLP in Seattle,
Washington, unless another time, date or place is agreed to in writing by the
parties hereto.
2.10 Deliveries at Closing.
(a) At the Closing, Buyer shall deliver, or cause to be delivered, to
Seller the officer's certificate contemplated by Section 7.3(c) and the
agreement described in Section 6.18.
(b) At the Closing, Seller shall deliver, or cause to be delivered, to Buyer:
(i) one or more Certificates representing all of the
Shares, duly executed in blank or accompanied by stock powers duly executed
in blank, in proper form for surrender pursuant to the Merger;
11
(ii) the officer's certificate contemplated by Section
7.2(c);
(iii) the other documents required to be delivered by
Seller at the Closing under this Agreement;
(iv) the agreement described in Section 6.18;
(v) the corporate minute books for the Bank; and
(vi) a certificate (in form and substance reasonably
satisfactory to Buyer) that, as of the Closing Date, Seller is not a
foreign person within the meaning of section 1445 of the Code and the
Treasury Regulations thereunder, such certificate to be substantially in
the form described in Treasury Regulations section 1.1445-2(b)(2)(iii)(B).
2.11 Withholding. Notwithstanding anything in this Agreement to the contrary, if
Seller does not deliver the certificate described in Section 2.10(b)(vi) at or
prior to the Closing, Buyer shall be permitted to withhold from the Merger
Consideration the amount required to be withheld pursuant to section 1445 of the
Code, as calculated by Buyer in good faith, and (a) Buyer shall not be deemed to
be in default of any of its obligations under this Agreement by virtue of having
withheld such amount and (b) the amount so withheld shall be deemed to have been
paid to Seller for all purposes under this Agreement.
2.12 Payment to Sole Stockholder. Subject to Section 2.11, no later than the
Business Day before the Closing Date, Buyer shall deposit into escrow the
aggregate amount of cash equal to the sum of (i) $67 million and (ii) the amount
of consideration Parent shall be entitled to receive pursuant to Section 6.18
with either a bank or trust company reasonably acceptable to each of Parent and
Buyer with mutually agreed upon escrow instructions to such bank or trust
company to pay such amount to Parent, by wire transfer of immediately available
funds to Seller's Account, as soon as reasonably practicable upon the occurrence
of the Effective Time. In addition, if the Dividend Adjustment Amount is greater
than $0, then, subject to Section 2.11, Buyer shall deposit the Dividend
Adjustment Amount into such escrow or at Buyer's option, Buyer may request that
the Bank deposit the Dividend Adjustment Amount into such escrow, in each case,
no later than the day prior to the Closing Date. If Buyer elects to have the
Bank deposit the Dividend Adjustment Amount into the escrow, Buyer shall so
notify Seller, Parent and the Bank in writing at least five Business Days prior
to the Closing Date, and Seller and Parent shall cause Bank to deposit the
Dividend Adjustment Amount into the escrow provided that all regulatory filings
or consents in connection with such deposit have been made or received. If any
such regulatory filing or consent is not made or obtained, then Buyer shall have
no obligation to deposit the Dividend Adjustment Amount into the escrow. The
escrow shall provide that if the Merger does not close, all amounts in the
escrow shall be returned to Buyer, provided, however, in the event that the Bank
deposits the Dividend Adjustment Amount into escrow, then the escrow shall
provide that in the
12
event the Merger does not close, an amount equal to the Dividend Adjustment
Amount, together with all interest earned thereon in the escrow, shall be
returned to the Bank.
2.13 Reservation of Right to Revise Transaction. With the prior written consent
of Seller, Buyer may at any time change the method of effecting the acquisition
of the Bank by Buyer; provided, however, that no such change shall (a) alter or
change the amount or kind of the Purchase Price, (b) adversely affect the tax
treatment to Seller as a result of receiving the Purchase Price or (c) delay or
jeopardize consummation of the Merger.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT AND SELLER
Each of Parent and Seller hereby jointly and severally represents and
warrants to Buyer as follows:
3.1 Organization.
(a) Seller is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Louisiana. Seller has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted.
(b) Parent is a corporation duly organized, validly existing and in good
standing under the Laws of the State of Delaware. Parent has the corporate
power and authority to own or lease all of its properties and assets and to
carry on its business as it is now being conducted.
(c) The Bank is an industrial bank duly organized under the Laws of the State
of Colorado. The Bank has the corporate power and authority to own or lease
all of its properties and assets and to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it
makes such licensing or qualification necessary, except where the failure
to be so licensed or qualified has not had and would not reasonably be
expected to have a Material Adverse Effect on the Bank. The copies of the
articles of incorporation, bylaws or similar governing documents of the
Bank, copies of which have previously been made available to Buyer, are
true, complete and correct copies of such documents as in effect as of the
date of this Agreement.
(d) The minute books of the Bank contain true and correct records of all
meetings and other corporate actions held or taken since December 31, 1997
of its stockholders and Board of Directors (including committees of its
Board of Directors).
13
3.2 Capitalization.
(a) The authorized capital stock of the Bank consists of 600,000 shares of
Common Stock. There are (i) 594,459.70 shares of Common Stock issued and
outstanding, (ii) no shares of preferred stock issued or outstanding and
(iii) no shares of Common Stock or preferred stock reserved for issuance
upon exercise of outstanding stock options or otherwise. All of the issued
and outstanding shares of Common Stock have been duly authorized and
validly issued and are fully paid and nonassessable, with no personal
liability attaching to the ownership thereof. Seller owns all of the issued
and outstanding shares of Common Stock, free and clear of any and all
Encumbrances. The Bank does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of capital
stock or any other equity security of the Bank or any securities
representing the right to purchase or otherwise receive any shares of
capital stock or any other equity security of the Bank. Without limiting
the generality of the foregoing, there is no outstanding option, warrant,
convertible or exchangeable security, right, subscription, call,
unsatisfied pre-emptive right or other agreement or right of any kind to
purchase or otherwise acquire (including, without limitation, by exchange
or conversion) any of the Bank's capital stock and, except as disclosed in
Section 3.2(a) of the Seller Disclosure Schedule, no oral or written
agreement, contract, arrangement, understanding, plan or instrument of any
kind to which any of Parent, Seller, the Bank or any of their Affiliates is
subject with respect to the issuance, voting or sale of issued or unissued
shares of the Bank's capital stock.
(b) The Bank has no Subsidiaries.
(c) Except as disclosed in Section 3.2(c) of the Seller Disclosure Schedule, the
Bank does not own beneficially, directly or indirectly, any equity
securities or similar interests of any Person, or any interest in a
partnership or joint venture of any kind.
3.3 Authority; No Violation.
(a) Parent has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Parent, and no other corporate proceedings on the
part of Parent or any of its Affiliates (other than Seller and the Bank)
are necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Parent and (assuming due authorization, execution and delivery
by Buyer and Merger Sub) this Agreement constitutes a valid and binding
obligation of Parent, enforceable
14
against Parent in accordance with its terms, except as enforcement may be
limited by general principles of equity whether applied in a court of law
or a court of equity and by bankruptcy, insolvency and similar Laws
affecting creditors' rights and remedies generally.
(b) Seller has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Seller, and no other corporate proceedings on the
part of Seller or any of its Affiliates (other than Parent and the Bank)
are necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Seller and (assuming due authorization, execution and delivery
by Buyer and Merger Sub) this Agreement constitutes a valid and binding
obligation of Seller, enforceable against Seller in accordance with its
terms, except as enforcement may be limited by general principles of equity
whether applied in a court of law or a court of equity and by bankruptcy,
insolvency and similar Laws affecting creditors' rights and remedies
generally.
(c) The Bank has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of the Bank, and by Seller as the sole shareholder of
the Bank and by Parent, and no other corporate proceedings on the part of
the Bank or any of its Affiliates (other than Parent and Seller) are
necessary to approve this Agreement and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by the Bank and (assuming due authorization, execution and
delivery by Buyer and Merger Sub) this Agreement constitutes a valid and
binding obligation of the Bank, enforceable against the Bank in accordance
with its terms, except as enforcement may be limited by general principles
of equity whether applied in a court of law or a court of equity and by
bankruptcy, insolvency and similar Laws affecting creditors' rights and
remedies generally.
(d) Neither the execution and delivery of this Agreement by Parent, Seller or
the Bank, nor the consummation by Parent or Seller or the Bank of the
transactions contemplated hereby, nor compliance by Parent or Seller or any
of their respective Affiliates (including the Bank) with any of the terms
or provisions hereof, will (i) violate any provision of the certificate of
incorporation, bylaws or similar governing documents of Parent or Seller or
the certificate of incorporation, bylaws or similar governing documents of
any of their respective Affiliates (including the Bank), or (ii) assuming
that the consents and approvals referred to in Section 3.4 hereof are duly
obtained, (A) violate any Law (or with respect to the Bank, any directive,
policy or guideline of any Governmental Entity which
15
has jurisdiction over the Bank) or Judgment applicable to Parent, Seller or
any of their respective Affiliates (including the Bank), or any of their
respective properties or assets, or (B) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by,
or result in the creation of any Encumbrance upon any of the respective
properties or assets of Parent, Seller or any of their respective
Affiliates (including the Bank) under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which Parent, Seller
or any of their respective Affiliates (including the Bank) is a party, or
by which they or any of their respective properties or assets may be bound
or affected, including the Bank Contracts, except, in the case of clause
(ii), for such violations, conflicts, defaults, terminations, accelerations
and Encumbrances which are described with particularity in Section 3.3(d)
of the Seller Disclosure Schedule or would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Bank.
3.4 Consents and Approvals. Except for (a) the filing of applications and
notices, as applicable, with the Board of Governors of the Federal Reserve
System (the "Federal Reserve Board") under the BHC Act and approval of such
applications and notices, (b) the filing of applications with each of the
Director of the Financial Institutions Division of the State of New Mexico, the
Banking Board of the State of Colorado and the Banking Commissioner of the State
of Utah and approval of such applications, (c) the filing of Articles of Merger
with the Secretary of State of the State of Colorado pursuant the CBCA, (d) the
filing of this Agreement together with copies of the resolutions of Seller and
Buyer approving this Agreement and a certificate of the appropriate officers of
each of Merger Sub and the Bank that no shareholders of each such party voted
against approval of this Agreement the Director of Financial Institutions
Division pursuant to the NMBA and the Public Regulation Commission of the State
of New Mexico, (e) such filings, authorizations or approvals as may be set forth
in Section 3.4 of the Seller Disclosure Schedule, and (f) consents, approvals,
filings or registrations the failure of which to be obtained or made will not
have and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on the Bank, Parent, Seller or Buyer, no
consents or approvals of or filings or registrations with any court,
administrative agency or commission or other governmental authority or
instrumentality (each a "Governmental Entity") or with any third party are
necessary in connection with (i) the execution and delivery by Parent, Seller or
the Bank of this Agreement or (ii) the consummation by Parent, Seller or any of
their respective Affiliates (including the Bank) of the Merger and the other
transactions contemplated hereby.
3.5 Reports. The Bank has timely filed all reports, registrations and
statements, together with any amendments required to be made with respect
thereto, that it was required to file since July 31, 1997 with (a) the Federal
Reserve Board, (b) the FDIC, (c) any state banking commissions or any other
state regulatory authority (each a "State Regulator") and (d) and any
self-regulatory organization ("SRO") (collectively, the
16
"Regulatory Agencies"), and has paid all fees and assessments due and payable in
connection therewith. Except for normal examinations conducted by a Regulatory
Agency in the regular course of the business of the Bank, no Regulatory Agency
has initiated any proceeding or, to the knowledge of Seller, investigation into
the business or operations of the Bank since July 31, 1997. There is no
unresolved material violation, criticism, or exception by any Regulatory Agency
with respect to any report or statement relating to any examinations of the
Bank.
3.6 Financial Statements.
(a) Seller has previously made available to Buyer copies of (i) the statements
of financial condition of the Bank as of December 31 for the fiscal years
2001 and 2000, and the related statements of operations and comprehensive
income, stockholder's equity for the fiscal years then ended, accompanied
by the audit report of Deloitte & Touche LLP, independent public
accountants with respect to the Bank, and (ii) the unaudited statements of
financial condition of the Bank as of March 31, 2002 and the related
unaudited statement of operations for the three (3) month period then
ended. The December 31, 2001 statement of financial condition of the Bank
(including the related notes, where applicable) (the "Bank Balance Sheet")
fairly presents the consolidated financial position of the Bank as of the
date thereof, and the other financial statements referred to in this
Section 3.6 (including the related notes, where applicable) fairly present,
and the financial statements referred to in Section 6.9 hereof will fairly
present (subject, in the case of the unaudited statements, to recurring
audit adjustments normal in nature and amount) the financial position and
the results of the consolidated operations of the Bank for the respective
fiscal periods or as of the respective dates therein set forth; each of
such statements (including the related notes, where applicable) comply, and
the financial statements referred to in Section 6.9 hereof will comply, in
all material respects with applicable accounting requirements with respect
thereto; and each of such statements (including the related notes, where
applicable) has been, and the financial statements referred to in Section
6.9 hereof will be, prepared in accordance with GAAP consistently applied
during the periods involved, except as indicated in the notes thereto.
(b) Except (i) as disclosed in Section 3.6(b) of the Seller Disclosure
Schedule, (ii) to the extent reflected or reserved against in the March 31,
2002 balance sheet and (iii) for liabilities and obligations that (A) are
incurred after the date of such balance sheet in the ordinary course of
conducting its business consistent with past practices and (B) individually
or in the aggregate have not had and would not reasonably be expected to
have a Material Adverse Effect on the Bank, the Bank does not have any
liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise (including liabilities as guarantor, successor or
otherwise with respect to obligations of others) and whether due or to
become due. The foregoing representation shall not apply with respect to
Tax matters, which matters shall be governed solely by the tax
representations and warranties
17
in Section 3.10 of this Agreement and the indemnity provisions contained in
Section 6.7.
(c) The books and records of the Bank are maintained in accordance with GAAP
and any other applicable legal and accounting requirements and reflect all
transactions in a lawful manner. All assets and liabilities of the Bank and
all transactions thereof have been recorded in all material respects on the
books and records of the Bank in accordance with GAAP and accurately
present in all material respects the transactions described therein.
(d) Section 3.6(d) of the Seller Disclosure Schedule sets forth a true,
complete and correct list of each bank account and safe deposit box with
respect to which the Bank is a depositor and a list of the current
signatories with respect to such accounts and safe deposit boxes.
(e) The deposit accounts of the Bank are insured by the FDIC through the Bank
Insurance Fund to the fullest extent permitted by the Federal Deposit
Insurance Act, and all premiums and assessments required to be paid in
connection therewith have been paid by the Bank.
3.7 Broker's Fees. Neither Parent, Seller nor any Affiliate of Seller (including
the Bank) nor any of their respective officers or directors has employed any
broker or finder or incurred any liability for any broker's fees, commissions or
finder's fees in connection with any of the transactions contemplated by this
Agreement.
3.8 Absence of Certain Changes or Events.
(a) Since December 31, 2001, there has been no change, development, event or
circumstance or combination of changes, developments, events or
circumstances which, individually or in the aggregate, has had or would
reasonably be expected to have a Material Adverse Effect on the Bank.
(b) Except as set forth in Section 3.8(b) of the Seller Disclosure Schedule or
as contemplated by this Agreement or, from and after the date of this
Agreement, as permitted under Section 5.1, since December 31, 2001, the
Bank has carried on its business in the ordinary course consistent with
past practices.
(c) Since December 31, 2001, neither Seller nor any of its Affiliates (in each
case, only with respect to the Bank or its business), nor the Bank has (i)
except for normal increases in the ordinary course of business consistent
with past practices, and except as required by Law or by any contract
listed in Section 3.8(c) of the Seller Disclosure Schedule, increased the
compensation, pension, or other fringe benefits or perquisites payable to
any officer, employee or director of the Bank from the amount thereof in
effect as of December 31, 2001 (which amounts have been previously
disclosed to Buyer), granted any severance or termination pay,
18
entered into any contract to make or grant any severance or termination
pay, or paid any bonus or (ii) except as set forth in Section 3.8(c) of
the Seller Disclosure Schedule or as contemplated by this Agreement, taken
any of the actions set forth in Section 5.1(b) hereof nor has any matter,
event or circumstance described in Section 5.1(b) otherwise occurred or
arisen.
(d) Since December 31, 2001, the Bank has not, as of the date of this
Agreement, declared or paid any dividends on any shares of its capital
stock (including the Shares).
3.9 Legal Proceedings.
(a) Except as disclosed in Section 3.9(a) of the Seller Disclosure Schedule,
neither Parent, Seller or any of their respective Affiliates (in each
case, only with respect to the Bank's business) nor the Bank is a party to
any, and there are no pending or, to the Knowledge of Seller, threatened,
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Parent,
Seller or any of their respective Affiliates (in each case, only with
respect to the Bank's business) or the Bank, other than any such
proceedings, claims, actions or investigations which, individually or in
the aggregate, have not had or would not reasonably be expected to have, a
Material Adverse Effect on the Bank.
(b) Except as disclosed in Section 3.9(b) of the Seller Disclosure Schedule,
there is no Judgment or regulatory restriction imposed upon Parent, Seller
or any of their respective Affiliates (in each case, only with respect to
the Bank's business), the Bank or the assets of the Bank.
(c) There is no legal, administrative, arbitral or other proceeding, claim,
action or governmental or regulatory investigation of any nature pending
or, to the Knowledge of Seller, threatened against Seller or any of their
respective Affiliates which seeks to enjoin or obtain damages in respect
of the consummation of the transactions contemplated by this Agreement.
3.10 Taxes. Except as set forth in Section 3.10 of the Seller Disclosure
Schedules:
(a) All material Tax Returns required to be filed by the Bank and all
Consolidated and Combined Tax Returns have been filed with the appropriate
taxing authorities when due and in accordance with applicable Law, and all
such Tax Returns and Consolidated and Combined Tax Returns are true,
correct and complete in all material respects.
(b) All material Taxes owed by the Bank and all material Taxes owed by any
Person for which the Bank could be held responsible (whether or not shown
on any Tax
19
Return or any Consolidated or Combined Tax Return) have been duly and
timely paid.
(c) No claim has ever been made by an authority in any jurisdiction that the
Bank was required to file any Tax Return that was not filed.
(d) Seller has prior to the date hereof provided to Buyer copies of all Tax
Returns of the Bank and the portion of any Consolidated or Combined Tax
Return that includes the Bank for all periods ending on or after December
31, 1997.
(e) There are no outstanding agreements extending or waiving the statutory
period of limitations applicable to any claim for, or the period for the
collection or assessment of, Taxes due for any taxable period with respect
to any Tax for which the Bank may be subject or liable.
(f) There are no pending, or to the Knowledge of Seller, threatened, audits,
assessments, collections, investigations or other proceedings by any
Governmental Entity with respect to Taxes against the Bank.
(g) There are no Liens for Taxes upon the assets or properties of the Bank,
except for statutory Liens for current Taxes not yet due.
(h) The Bank is not a party to any agreement relating to the sharing or
allocation of Taxes or indemnification agreement with respect to Taxes or
similar contract or arrangement.
(i) The Bank has not entered into any closing agreement pursuant to section
7121 of the Code (or any similar provision of state, local or foreign tax
law) or any other agreement with similar Tax purposes.
(j) The Bank has no liability for Taxes of any Person (other than members of
the Affiliated Group of which Washington Mutual, Inc. is the common parent)
under section 1.1502-6 of the Treasury Regulations (or similar provisions
of state, local or foreign law), as a transferee or successor, by contract
or otherwise, except for any liability (i) pursuant to any lease agreement
or (ii) that is not material and is pursuant to a contract entered into in
the ordinary course of business.
(k) Since the date of the Bank Balance Sheet, the Bank has not incurred any
liability for Taxes other than in the ordinary course of business.
(l) No power of attorney is currently in force with respect to any matter
relating to Taxes of the Bank.
20
(m) The Bank has withheld and paid, or accrued on the Bank Balance Sheet all
Taxes required to have been withheld and paid in connection with amounts
paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(n) The Bank is not obligated to make any payments, and is not party to any
agreement that would obligate it to make any payments, that would not be
deductible under section 280G of the Code by reason of transactions
contemplated by this Agreement.
(o) Since July 3, 1997, the Bank has not been a member of an Affiliated Group
filing Combined or Consolidated Tax Returns (other than as a member of an
Affiliated Group the common parent of which was Washington Mutual, Inc.).
3.11 Employee Benefit Plans.
(a) Section 3.11(a) of the Seller Disclosure Schedule contains a true, complete
and correct list of each deferred compensation plan and each incentive
compensation plan, equity compensation plan, "welfare" plan, fund or
program (within the meaning of section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")); each "pension" plan,
fund or program (within the meaning of section 3(2) of ERISA); each
employment, termination or severance agreement; and each other employee
benefit plan, fund, program, agreement or arrangement, in each case, that
is sponsored, maintained or contributed to or required to be contributed
to by the Bank or any of its Affiliates or by any trade or business,
whether or not incorporated (an "ERISA Affiliate"), that together with the
Bank would be deemed a "single employer" within the meaning of section
4001(b) of ERISA, or to which the Bank or an ERISA Affiliate is party,
whether written or oral, for the benefit of any employee or former
employee of the Bank (the "Plans").
(b) With respect to each Plan, Seller has heretofore delivered or made
available to Buyer true and complete copies of the Plan and any amendments
thereto (or if the Plan is not a written Plan, a description thereof).
(c) No liability under Title IV or section 302 of ERISA has been incurred by
the Bank or any ERISA Affiliate that has not been satisfied in full, and
no condition exists that presents a material risk to the Bank or any ERISA
Affiliate of incurring any such liability, other than liability for
premiums due the Pension Benefit Guaranty Corporation (which premiums have
been paid when due).
(d) With respect to each Plan that is subject to Section 412 of the Code or
Title IV of ERISA, the present value of accrued benefits under such plan,
based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such plan's actuary with respect to
such plan did not exceed, as
21
of its latest valuation date, the then current value of the assets of such
plan allocable to such accrued benefits.
(e) No Plan is a "multiemployer pension plan," as defined in section 3(37) of
ERISA, nor is any Plan a plan described in section 4063(a) of ERISA.
(f) Each Plan has been operated and administered in all material respects in
accordance with its terms and applicable law, including but not limited to
ERISA and the Code.
(g) Each Plan intended to be "qualified" within the meaning of section 401(a)
of the Code has been determined to be so qualified by the Internal Revenue
Service and nothing has occurred that would reasonably be expected to
result in any such plan ceasing to be so qualified.
(h) Except as disclosed in Section 3.11(h) of the Seller Disclosure Schedule,
no Plan provides medical, surgical, hospitalization, death or similar
benefits (whether or not insured) for employees or former employees of the
Bank for periods extending beyond their retirement or other termination of
service, other than (i) coverage mandated by applicable law, (ii) death
benefits under any "pension plan," or (iii) benefits the full cost of
which is borne by the current or former employee (or his beneficiary).
(i) Except as disclosed in Section 3.11(i) of the Seller Disclosure Schedule,
the consummation of the transactions contemplated by this Agreement will
not, either alone or in combination with another event, (i) entitle any
current or former employee or officer of the Bank or any ERISA Affiliate
to severance pay, unemployment compensation or any other payment, except
as expressly provided in this Agreement, or (ii) accelerate the time of
payment or vesting, or increase the amount of compensation due any such
employee or officer.
(j) There are no pending or, to the Knowledge of Seller, threatened or
anticipated claims by or on behalf of any Plan, by any employee or
beneficiary covered under any such Plan, or otherwise involving any such
Plan (other than routine claims for benefits or claims which would not be
reasonably expected to have a Material Adverse Effect on the Bank).
3.12 Bank Information. None of the information supplied or to be supplied by
Parent, Seller or the Bank for the purpose of inclusion or incorporation by
reference in (a) any syndication and other materials (including in any
registration statement or prospectus to be filed under the Securities Act) to be
delivered to potential financing sources in connection with the transactions
contemplated by this Agreement or (b) any document to be filed with any
Regulatory Agency in connection with the transactions contemplated by this
Agreement will contain any untrue statement of material fact or omit to state
any
22
material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading.
3.13 Compliance with Applicable Law. The Bank holds and has at all times held,
all licenses, franchises, permits and authorizations necessary for the lawful
conduct of its business under and pursuant to all, and has complied in all
respects with and is not in default in any respect under any, applicable Law (or
any directive, policy or guideline of any Governmental Entity which has bank
regulatory jurisdiction over the Bank) or Judgment relating to the Bank or
applicable to the employees conducting the Bank's business, including the Equal
Credit Opportunity Act, the Fair Housing Act, the Community Reinvestment Act,
the Home Mortgage Disclosure Act and all other applicable fair lending Laws and
other Laws relating to discriminatory business practices, except where the
failure to hold such license, franchise, permit or authorization or such
noncompliance or default has not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the Bank.
The Bank has not received written notice of any violations of any of the above.
3.14 Bank Contracts.
(a) Except as set forth in Section 3.14(a) of the Seller Disclosure Schedule,
the Bank is not a party to or bound by any contract, arrangement,
commitment or understanding (whether written or oral):
(i) with respect to the employment or retention of any director,
officer, employee or consultant;
(ii) which, upon the consummation of the transactions contemplated by
this Agreement, will (either alone or upon the occurrence of any
additional acts or events) result in any payment or benefits (whether of
severance pay or otherwise) becoming due, or the acceleration or vesting
of any rights to any payment or benefits, from Buyer, the Bank, the
Surviving Bank or any of their respective Subsidiaries to any officer,
director, consultant or employee thereof;
(iii) which is a material contract (as defined in Item 601(b)(10) of
Regulation S-K of the SEC) to be performed in whole or in part after the
date of this Agreement;
(iv) which is a consulting agreement (including data processing,
software programming and licensing contracts) not terminable on 90 days or
less notice involving the payment of more than $5,000 per annum, in the
case of any such agreement with an individual, or $50,000 per annum, in
the case of any other such agreement;
23
(v) which materially restricts the conduct of any line of
business by the Bank or any of its Affiliates;
(vi) (including any stock option plan, stock appreciation
rights plan, restricted stock plan or stock purchase plan) any of the
benefits of which will be increased, or the vesting of the benefits of
which will be accelerated, by the occurrence of any of the
transactions contemplated by this Agreement, or the value of any of
the benefits of which will be calculated on the basis of any of the
transactions contemplated by this Agreement;
(vii) with any of Parent, Seller or its Affiliates (other than
the Bank), including any intercompany indebtedness, guaranty,
receivable, payable or other account maintained between the Bank, on
the one hand, and Parent, Seller or any of their respective other
Affiliates, on the other hand;
(viii) which relates to indebtedness owed by the Bank, or the
guarantee thereof (other than contracts evidencing deposit
liabilities, purchases of federal funds, fully-secured repurchase
agreements, trade payables and contracts relating to borrowings or
guarantees made in the ordinary course of business);
(ix) involving intellectual property or relating to the
provision of data processing, network communication or other technical
services to or by the Bank, other than agreements entered into in the
ordinary course of business;
(x) with respect to any mortgage, pledge, indenture or
security agreement or similar arrangement constituting an Encumbrance
upon the assets or properties of the Bank;
(xi) for the sale or purchase of personal property having a
value individually, with respect to all sales or purchases thereunder,
in excess of $10,000, other than in the ordinary course of business;
or
(xii) for the sale or purchase of fixed assets or real estate
having a value individually, with respect to all sales or purchases
thereunder, in excess of $10,000, other than the sale of OREO in the
ordinary course of business.
Each contract, arrangement, commitment or understanding of the type described in
this Section 3.14(a), whether or not set forth in Section 3.14(a) of the Seller
Disclosure Schedule, is referred to herein as a "Bank Contract". The Bank has
previously made available to Buyer true, complete and correct copies of each
Bank Contract.
24
(b) Except as set forth in Section 3.14(b) of the Seller Disclosure Schedules,
(i) each Bank Contract is valid and binding, in full force and effect and
enforceable in accordance with its respective terms, subject to general
principles of equity and to bankruptcy, insolvency and similar Laws
affecting creditors' rights and remedies generally, (ii) the Bank has
performed in all material respects all obligations required to be
performed by it to date under each Bank Contract and (iii) no event or
condition exists or has occurred which violates, conflicts with, results
in a breach of any provision of or the loss of any benefit under,
constitutes a default (or an event which, with notice or lapse of time, or
both, would constitute a default) on the part of any party under, results
in the termination of or a right of termination or cancellation on the
part of any party under, accelerates the performance required on the part
of any party by, or results in the creation of any Encumbrance (other than
Permitted Liens) upon any of the assets of the Bank under, any of the
terms, conditions or provisions of any Bank Contract, except, in each
case, where such failure to be valid and binding or in full force and
effect, failure to be enforceable, failure to perform or such violation,
conflict, breach or default, has not had and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse
Effect on the Bank.
3.15 Agreements with Regulatory Agencies. None of Parent, Seller or any of their
respective Affiliates (in each case, only with respect to the Bank) nor the Bank
is subject to any cease-and-desist or other order issued by any Regulatory
Agency or other Governmental Entity, or is a party to any Regulatory Agreement
that restricts the conduct of its business or that in any manner relates to its
capital adequacy, its credit policies, its management or its business, nor has
any of Parent, Seller or any of their respective Affiliates (in each case, with
respect to the Bank) or the Bank been advised in writing by any Regulatory
Agency or other Governmental Entity that it is considering issuing or requesting
any Regulatory Agreement. As of the date of this Agreement, none of Parent,
Seller, the Bank nor any of their respective Affiliates is aware of any fact or
circumstance which is reasonably likely to prevent Buyer or any of its
Subsidiaries from obtaining the governmental approvals and consents required in
connection with the consummation of the transactions contemplated hereby.
3.16 Property.
(a) Except as set forth in Section 3.16(a) of the Seller Disclosure Schedule,
the Bank has good and marketable title free and clear of all Encumbrances
to all of the properties and assets, real and personal, tangible or
intangible (other than OREO), which are reflected on the statement of
financial condition of the Bank as of December 31, 2001 or acquired after
such date (collectively, the "Bank Assets"), except for (i) dispositions
of such properties or assets in the ordinary course of business or, after
the date hereof, permitted by this Agreement, and (ii) Permitted Liens.
(b) Except as set forth in Section 3.16(b) of the Seller Disclosure Schedule,
the Bank owns or leases all properties and assets, real and personal,
tangible or intangible,
25
required to conduct its business in the ordinary course, consistent with
past practice.
(c) With respect to each lease pursuant to which the Bank, as lessee, leases
real or personal property, (i) such lease is valid and binding, in full
force and effect and enforceable in accordance with its respective terms
subject to general principles of equity and to bankruptcy, insolvency and
similar Laws affecting creditors' rights and remedies generally, (ii) the
Bank has performed in all material respects all obligations required to be
performed by it to date under such lease, (iii) no event or condition
exists or has occurred which violates, conflicts with, results in a breach
of any provision of or the loss of any benefit under, constitutes a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) on the part of any party under, results in the
termination of or a right of termination or cancellation on the part of
any party under, accelerates the performance required on the part of any
party by, or results in the creation of any Encumbrance (other than a
Permitted Lien) upon any of the assets of the Bank under, any of the
terms, conditions or provisions of any such lease, except, in each case,
where such failure to be valid and binding or in full force and effect,
failure to be enforceable, failure to perform or such violation, conflict,
breach or default, has not had and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Bank and (iv) without limiting the generality of Section 3.3(c), except as
set forth in Section 3.16(c) of the Seller Disclosure Schedule,
consummation of the transactions contemplated hereby will not violate,
conflict with, result in a breach of any provision of or the loss of any
benefit under, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) on the part of any
party under, result in the termination of or a right of termination or
cancellation on the part of any party under, accelerate the performance
required on the part of any party by, or result in the creation of any
Encumbrance upon any of the assets of the Bank under, any of the terms,
conditions or provisions of any such lease.
3.17 Environmental Matters.
(a) The Bank is and has been in compliance in all material respects with all
applicable Environmental Laws.
(b) The Bank possesses all permits, licenses, registrations, identification
numbers, authorizations and approvals required under applicable
Environmental Laws for the operation of its business as presently
conducted.
(c) The Bank has not received any written claim, notice of violation or
citation concerning any violation or alleged violation of any applicable
Environmental Law or any alleged liability involving the presence of any
Hazardous Material pursuant to any Environmental Law.
26
(d) There are no writs, injunctions, decrees, orders or judgments outstanding,
or any actions, suits, proceedings or investigations pending or, to the
Knowledge of Seller, threatened in writing, before any Governmental Entity
or other forum in which the Bank, any Participation Facility or, to the
Knowledge of Seller, any Loan Property, has been or, with respect to
threatened proceedings, may be, named as a defendant (i) for alleged
noncompliance (including by any predecessor) with any Environmental Laws,
or (ii) relating to the Release, threatened Release or exposure to any
Hazardous Material whether or not occurring at or on a site owned, leased
or operated by the Bank, any Participation Facility or any Loan Property.
(e) During the period of (i) the Bank's ownership or operation of any of its
respective current or former properties, (ii) the Bank's participation in
the management of any Participation Facility, or (iii), to the knowledge of
Seller, the Bank's interest in a Loan Property, there has been no Release
of Hazardous Materials which would require either reporting or remediation
or would result in liability pursuant to any Environmental Law in, on,
under or affecting any such property, Participation Facility or Loan
Property. To the Knowledge of Seller, prior to the period of (1) the Bank's
ownership or operation of any of its respective current or former
properties, (2) the Bank's participation in the management of any
Participation Facility, or (3) the Bank's interest in a Loan Property,
there was no Release or threatened Release of Hazardous Materials in, on,
under or affecting any such property, Participation Facility or Loan
Property.
(f) The following definitions apply for purposes of this Section 3.17: (i)
"Loan Property" means any property in which the Bank holds a security
interest, and, where required by the context, said term means the owner or
operator of such property; and (ii) "Participation Facility" means any
facility in which the Bank participates in the management and, where
required by the context, said term means the owner or operator of such
property.
(g) Notwithstanding any other representation and warranty in this Article III,
the representations and warranties contained in this Section 3.17
constitute the sole representations and warranties of Seller with respect
to any Environmental Law.
3.18 Insurance. Section 3.18 of the Seller Disclosure Schedule sets forth a
true, complete and correct list of the names, types, insurance policy numbers,
insurance carriers, principal amounts of coverage and deductible amounts for all
insurance policies maintained by Seller or any of its Affiliates (including the
Bank) with respect to the Bank or its business (the "Insurance Policies"). Each
of the Insurance Policies is in full force and effect, all premiums with respect
thereto covering all periods up to and including the date of this Agreement have
been paid, such premiums covering all periods from the date hereof up to and
including the Closing Date shall have been paid on or before the Closing Date,
to the extent then due and payable. Each of the Insurance Policies is valid and
enforceable in accordance with its respective terms, subject to general
principles of equity and to bankruptcy, insolvency and similar Laws affecting
creditors' rights and
27
remedies generally. Neither Seller nor any of its Affiliates (including the
Bank) has been refused any insurance with respect to the Bank's business, nor
has any coverage been limited or terminated by any insurance carrier to which
any of the foregoing has applied for such insurance or with which any of the
foregoing has carried insurance during the last three (3) years.
3.19 Employee Matters. Except as set forth in Section 3.19 of the Seller
Disclosure Schedule, (a) the Bank is and has been in compliance with all
applicable Laws respecting employment and employment practices, terms and
conditions of employment, health and safety, and wages and hours; (b) the Bank
has not received written notice of any charge or complaint against the Bank
pending before the Equal Employment Opportunity Commission, the National Labor
Relations Board, or any other government agency or court or other tribunal
regarding an unlawful employment practice; (c) the Bank is not party to any
collective bargaining agreement and there is no labor strike, slowdown, dispute
or work stoppage actually pending or threatened against or affecting the Bank;
(d) the Bank has not received written notice that any representation petition
respecting the employees of the Bank has been filed with the National Labor
Relations Board; (e) to Seller's Knowledge, there are no union claims to
represent any of the Bank's employees and to Seller's Knowledge, there has been
no labor union prior to the date hereof organizing any employees of the (a) Bank
into one or more collective bargaining units; (f) there are no complaints,
lawsuits, arbitrations or other proceedings pending, or to Seller's Knowledge,
threatened by or on behalf of any present or former employee of the Bank
alleging breach of any express or implied contract of employment; (g) the Bank
is and has been in compliance with all notice and other requirements under the
Worker Adjustment and Retraining Notification Act ("WARN") or similar state or
local statute.
3.20 Investment Securities. Section 3.20 of the Seller Disclosure Schedule sets
forth (a) the book and estimated fair value as of December 31, 2001 of the
investment securities, mortgage-backed securities and securities held or
available for sale of the Bank and (b) an investment securities report as of
such date which includes security descriptions, CUSIP numbers, pool face values,
book values and coupon rates. Except as set forth in Section 3.20 of the Seller
Disclosure Schedule, none of such securities are denominated in currencies other
than U.S. dollars.
3.21 Administration of Fiduciary Accounts. The Bank has properly administered
all accounts for which it acts as a fiduciary, including but not limited to
accounts for which it serves as a trustee, agent, custodian, personal
representative, guardian, conservator or investment advisor, in accordance with
the terms of the governing documents and applicable state and federal law and
regulation and common law. Neither the Bank nor any of its directors, officers,
employees or agents has committed any breach of trust with respect to any such
fiduciary account, and the accountings for each such fiduciary account are true,
complete and correct and accurately reflect the assets of such fiduciary
account.
28
3.22 Derivative Transactions. Since December 31, 2001, the Bank has not engaged
in transactions in or involving forwards, futures, options on futures, swaps or
other derivative instruments except (a) as agent on the order and for the
account of others or (b) as principal for purposes of hedging interest rate risk
on U.S. dollar-denominated securities and other financial instruments and, in
any case, in accordance with all applicable Laws and all directives, policies or
guidelines of any Governmental Entity which has bank regulatory jurisdiction
over the Bank. None of the counterparties to any contract or agreement with
respect to any such instrument is in default with respect to such contract or
agreement and no such contract or agreement, were it to be a Loan (as defined
below) held by the Bank, would be classified as "Other Loans Specially
Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss", "Classified",
"Criticized", "Credit Risk Assets", "Concerned Loans" or words of similar
import. The financial position of the Bank under or with respect to each such
instrument has been reflected in the books and records of the Bank in accordance
with GAAP consistently applied, and no open exposure of the Bank with respect to
any such instrument (or with respect to multiple instruments with respect to any
single counterparty) exceeds $50,000.
3.23 Loans.
(a) Except as set forth in Section 3.23(a) of the Seller Disclosure Schedule,
the Bank as a lender is not a party to any written or oral (i) non-U.S.
dollar denominated Loans, with or to any obligor, (ii) Loan with any
director or executive officer of the Bank, or any person, corporation or
enterprise controlling, controlled by or under common control with the
Bank, other than residential mortgage loans and consumer credit in
accordance with applicable bank regulatory Laws and all applicable
directives, policies or guidelines of any Governmental Entity which has
bank regulatory jurisdiction over the Bank, or (iii) Loan which was, as of
May 16, 2002 (A) more than ninety (90) days past due with respect to any
scheduled payment of principal or interest, (B) classified as "Other Loans
Specially Mentioned", "Special Mention", "Substandard", "Doubtful", "Loss",
"Classified", "Criticized", "Credit Risk Assets", "Concerned Loans" or
words of similar import by any federal or state regulator or by the Bank's
internal credit review system, (C) on non-accrual status as a result of the
Bank's loan review procedures, or (D) which is a "negotiated loan" as that
term is defined in Financial Accounting Standards No. 15.
(b) Except for the Loans acquired pursuant to Section 6.17, each Loan or Loan
Commitment was made or acquired by the Bank in the ordinary course of
business consistent with past practice at the time such Loan or Loan
Commitment was made or acquired, as the case may be. Section 3.23(b) of the
Seller Disclosure Schedule contains the following true, complete and
correct information (as of a date no earlier than March 31, 2002) with
respect to each Loan or Loan Commitment: (i) the unpaid principal balance
of each such Loan as well as the aggregate amount of each Loan Commitment,
(ii) the payment status and maturity date of each such Loan, (iii) an
indication whether such Loan is secured or unsecured and if secured, the
priority of such security, (iv) the Bank's
29
percentage of ownership of any such Loan or Loan Commitment (including such
percentage of ownership of any participation arrangement relating to any
Loan or Loan Commitment), and (v) the rate associated with each Loan and
Loan Commitment. The credit files contain a true, complete and correct
description of the collateral (including the Lien position of such
collateral) securing each Loan or Loan Commitment.
(c) With respect to each Loan or Loan Commitment:
(i) Each Loan Document contains customary and enforceable
provisions such as to render the rights and remedies of the holder thereof
adequate for the practical realization (including realization by judicial
foreclosure) of the benefits intended to be provided thereby, including by
the security interest or Lien, if any, created and granted (or purported to
be created or granted) by such Loan Document, subject to general principles
of equity whether applied in a court of law or a court of equity and to
bankruptcy, insolvency and similar Laws affecting creditors' rights and
remedies generally;
(ii) Each Loan, Loan Commitment and related Loan Document
was issued, made and maintained in accordance with applicable Law and all
applicable directives, policies or guidelines of any Governmental Entity
which has bank regulatory jurisdiction over the Bank, and constitutes a
valid, legal and binding obligation of the obligor thereunder, enforceable
in accordance with its terms; there is no valid claim against the Bank with
respect to, or valid defense to the enforcement by the Bank of, such Loan
or Loan Commitment, subject to general principles of equity whether applied
in a court of law or a court of equity and to bankruptcy, insolvency and
similar Laws affecting creditors' rights and remedies generally;
(iii) All Liens in any collateral described in each Loan
Commitment and Loan Document as security for each Loan and Loan Commitment
constitute valid and perfected Liens in such collateral (assuming the
relevant person obligated on or in respect to such Loan or Loan Commitment,
including any guarantor, hypothecator or other provider of security) has
rights in the collateral as to permit attachment), subject to (x) general
principles of equity whether applied in a court of law or a court of equity
and to bankruptcy, insolvency and similar Laws affecting creditors' rights
and remedies generally and (y) federal and state laws relating to
fraudulent conveyances and preferences;
(iv) None of the rights or remedies under the Loan Documents
in favor of the Bank have been amended, modified, waived,
30
supplemented, subordinated or otherwise altered by the Bank other than in
good faith and in the ordinary course of business;
(v) All writings and other documents relating to any such
amendment, modification, waiver, supplement, subordination or other
alteration of any Loan or Loan Commitment are included among the Loan
Documents; and
(vi) Section 3.23(c)(vi) of the Seller Disclosure Schedule
identifies all separate accounts, including, but not limited to, all
lockboxes, escrow accounts (other than for loans serviced by others), cash
collateral accounts, investment accounts and security deposits held or
maintained by or on behalf of the Bank or any debtor in connection with any
Loan or Loan Commitment.
(d) Except as set forth in Section 3.23(d) of the Seller Disclosure Schedule,
each file of Loan Documents pertaining to each Loan and Loan Commitment
includes all documents relating to each such Loan or Loan Commitment that
are necessary to enforce such Loan or Loan Commitment and the collateral
security therefor, if any, and any commitment fees with respect thereto, if
any.
(e) Section 3.23(e) of the Seller Disclosure Schedule sets forth, as of April
30, 2002, the aggregate principal balance of Loans that are (i) 1 to 29
days past due, (ii) 30 to 59 days past due, (iii) 60 to 89 days past due
and (iv) more than 89 days past due.
3.24 Intellectual Property. Except to the extent it uses marks or names
involving the name of "Washington Mutual" or logos thereof, the Bank owns or
possesses valid and binding licenses and other rights to use without payment all
material patents, copyrights, trade secrets, trade names, servicemarks and
trademarks (the "Intellectual Property") used in its business; and neither
Seller nor any of its Affiliates (including the Bank) has received any notice of
conflict with respect thereto that asserts the right of others. The Bank has
performed in all material respects all the obligations required to be performed
and is not in default in any material respect under any contract, agreement,
arrangement or commitment relating to the Intellectual Property.
3.25 No other Representations. Except for the representations and warranties
contained in this Article III, neither Parent, Seller nor any other Person or
entity makes any representation or warranty, express or implied, on behalf of
Parent, Seller or any of their Affiliates.
31
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF BUYER
Buyer hereby represents and warrants to Parent and Seller as follows:
4.1 Organization.
(a) Buyer is a corporation duly organized, validly existing and in good
standing under the Laws of the State of New Mexico.
(b) Merger Sub is a bank duly organized, validly existing and in good standing
under the Laws of the State of New Mexico and is a member of the Federal
Reserve System.
4.2 Authority; No Violation.
(a) (i) Buyer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated
hereby, it being understood that "transactions contemplated hereby" as
used in this Article IV (other than in Section 4.2(a)(ii) or Section
4.2(b)) include the filing of any registration statements or prospecti
and the issuance of any securities in connection with financing
required to be made in connection with consummation of the Merger.
(ii) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby have been duly and
validly approved by the Board of Directors of Buyer and no other corporate
proceedings on the part of Buyer are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by Buyer and (assuming due authorization,
execution and delivery by Parent, Seller and the Bank) this Agreement
constitutes a valid and binding obligation of Buyer, enforceable against Buyer
in accordance with its terms, except as enforcement may be limited by general
principles of equity whether applied in a court of law or a court of equity and
by bankruptcy, insolvency and similar Laws affecting creditors' rights and
remedies generally.
(b) Merger Sub has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly approved by the
Board of Directors of Merger Sub and no other corporate proceedings on the
part of Merger Sub are necessary to approve this Agreement and to
consummate the transactions contemplated hereby. This Agreement has been
duly and validly
32
executed and delivered by Merger Sub and (assuming due authorization,
execution and delivery by Parent, Seller and the Bank) this Agreement
constitutes a valid and binding obligation of Merger Sub, enforceable
against Merger Sub in accordance with its terms, except as enforcement may
be limited by general principles of equity whether applied in a court of
law or a court of equity and by bankruptcy, insolvency and similar Laws
affecting creditors' rights and remedies generally.
(c) Neither the execution and delivery of this Agreement by Buyer on Merger
Sub, nor the consummation by Buyer or Merger Sub of the transactions
contemplated hereby, nor compliance by Buyer or Merger Sub with any of the
terms or provisions hereof, will (i) violate any provision of the Articles
of Incorporation or bylaws of Buyer, or the articles of incorporation or
bylaws or similar governing documents of any of its Subsidiaries (including
Merger Sub) or (ii) assuming that the consents and approvals referred to in
Section 4.3 are duly obtained, (A) violate any Law or Judgment applicable
to Buyer or any of its Subsidiaries (including Merger Sub) or any of their
respective properties or assets, or (B) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by,
or result in the creation of any Encumbrance upon any of the respective
properties or assets of Buyer or any of its Subsidiaries under, any of the
terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation
to which Buyer or any of its Subsidiaries is a party, or by which they or
any of their respective properties or assets may be bound or affected,
except, in the case of clause (ii)(B), for such violations, conflicts,
defaults, terminations, accelerations and Encumbrances which would not
have, individually or in the aggregate, a Material Adverse Effect on Buyer.
4.3 Consents and Approvals. Except for (a) the filing of applications and
notices, as applicable, with the Federal Reserve Board under the BHC Act and
approval of such applications and notices, (b) the filing of applications with
each of the Director of the Financial Institutions Division of the State of New
Mexico, the Banking Board of the State of Colorado and the Banking Commissioner
of the State of Utah and approval of such applications, (c) the filing with the
SEC of the Registration Statement and the declaration of effectiveness thereof,
(d) filings under state securities and blue sky laws, (e) approval of the
listing of the Buyer Common Stock on The Nasdaq Stock Market, (f) NASD approval
of underwriting arrangements, (g) the filing of Articles of Merger with the
Secretary of State of the State of Colorado pursuant to the CBCA, (h) the filing
of this Agreement together with copies of the resolutions of Seller and Buyer
approving this Agreement and a certificate of the appropriate officers of each
of Merger Sub and the Bank that no shareholders of each such party voted against
approval of this Agreement with the Director of Financial Institutions Division
pursuant to the NMBA and the Public Regulation Commission of the State of New
Mexico and (i) such filings, authorizations
33
or approvals as may be set forth in Section 4.3 of the Buyer Disclosure
Schedule, no consents or approvals of or filings or registrations with any
Governmental Entity or with any third party are necessary in connection with (i)
the execution and delivery by Buyer and Merger Sub of this Agreement and (ii)
the consummation by Buyer and Merger Sub of the Merger and the other
transactions contemplated hereby, other than consents, approvals, filings or
registrations which have been obtained or made or which, if not obtained or
made, would not have, individually or in the aggregate, a Material Adverse
Effect on Buyer.
4.4 Broker's Fees. Neither Buyer, Merger Sub nor any of their respective
officers or directors has employed any broker or finder or incurred any
liability for any broker's fees, commissions or finder's fees in connection with
any of the transactions contemplated by this Agreement, except for underwriting
and similar fees in connection with financings and except that Buyer has
engaged, and will pay a fee to, Xxxxx, Xxxxxxxx & Xxxxx, Inc. ("KBW") in
accordance with the terms of the agreement dated May 26, 2002 between Buyer and
KBW.
4.5 Reports. Buyer and each of its Subsidiaries have timely filed all material
reports, registrations and statements, together with any amendments required to
be made with respect thereto, that they were required to file since July 31,
1997 with any Governmental Entities and have paid all fees and assessments due
and payable in connection therewith. Except for normal examinations conducted by
a Governmental Entity in the regular course of business of Buyer and its
Subsidiaries, no Governmental Entity has initiated any proceeding or, to the
knowledge of Buyer's, investigation into the business or operations of Buyer or
any of its Subsidiaries since July 31, 1997. There is no material unresolved
violation, criticism, or exceptions by any Governmental Entity with respect to
any report or statement relating to any examinations of Buyer or any of its
Subsidiaries.
4.6 Legal Proceedings.
(a) Neither Buyer nor any of its Subsidiaries is a party to any, and there are
no pending or, to the best of Buyer's knowledge, threatened legal,
administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Buyer or
any of its Subsidiaries or challenging the validity or propriety of the
transactions contemplated by this Agreement, other than any proceedings,
claims, actions or investigations which, individually or in the aggregate,
have not had or would not reasonably be expected to have a Material Adverse
Effect on Buyer.
(b) There is no injunction, order, judgment, decree, or regulatory restriction
imposed upon Buyer, any of its Subsidiaries or the assets of Buyer or any
of its Subsidiaries which has had, or would reasonably be expected to have,
a Material Adverse Effect on Buyer.
4.7 Agreements with Regulatory Agencies; Approvals; Financing. Except as set
forth in Section 4.7 of the Buyer Disclosure Schedule, neither Buyer nor any of
its Subsidiaries
34
is subject to any cease-and-desist or other order issued by, or is a party to
any written Regulatory Agreement that restricts the conduct of its business or
relates to its capital adequacy, its credit policies, its management or its
business, nor has Buyer or any of its Subsidiaries been advised by any
Government Entity that it is considering issuing or requesting any Regulatory
Agreement. As of the date of this Agreement, Buyer is not aware of any fact or
circumstance which is reasonably likely to prevent it or any of its Subsidiaries
from obtaining the governmental approvals and consents or the financings
required in connection with the consummation of the transactions contemplated
hereby. Buyer has received a letter from KBW stating that KBW is highly
confident that Buyer will be able to obtain the financing required to consummate
the transactions contemplated hereby, and as of the date of this Agreement,
Buyer is not aware of any incorrect or incomplete facts on which KBW relied in
issuing such letter.
4.8 No Other Representations. Except for the representations and warranties
contained in this Article IV, neither Buyer, Merger Sub nor any other Person or
entity makes any representation or warranty, express or implied, on behalf of
Buyer or any of its Affiliates.
ARTICLE V
ADDITIONAL COVENANTS
5.1 Covenants relating to the Bank.
(a) During the period from the date of this Agreement and continuing until the
Effective Time, except as expressly contemplated or permitted by this
Agreement or with the prior written consent of Buyer, each of Parent and
Seller shall cause the Bank to carry on its business in the ordinary course
consistent with past practice, and each of Parent and Seller shall use
commercially reasonable efforts to make available to Buyer the services of
the officers and employees of the Bank, to preserve (and to cause the Bank
to preserve) the good will and relationships with customers, suppliers and
others having business dealings with the Bank, to maintain (and to cause
the Bank to maintain) the Bank's assets that constitute tangible personal
property in normal operating condition and repair in accordance with past
practice (ordinary wear and tear excepted), to maintain (and to cause the
Bank to maintain) the books and records of the Bank in the regular manner,
to cause the Bank to perform in all material respects all of its
obligations under the Bank Contracts, and to cause the Bank to comply in
all material respects with all applicable Laws and all applicable
directives, policies or guidelines of any Governmental Entity which has
bank regulatory jurisdiction over the Bank.
(b) Without limiting the generality of clause (a), and except as set forth in
Section 5.1 of the Seller Disclosure Schedule or as otherwise contemplated
by this Agreement or consented to in writing by Buyer, each of Parent and
Seller shall not and shall not permit any of its Affiliates to (in each
case, only with respect to the Bank or its assets, liabilities, operations
or business) to, and shall not permit the Bank to:
35
(i) solely in the case of the Bank, declare or pay
any dividends on, or make other distributions in respect of, any shares of
its capital stock, other than cash dividends in accordance with Section
6.13 hereof;
(ii) (A) repurchase, redeem or otherwise acquire any
shares of the capital stock of the Bank, or any securities convertible into
or exercisable for any shares of the capital stock of the Bank, (B) split,
combine or reclassify any shares of its capital stock or issue or authorize
or propose the issuance of any other securities in respect of, in lieu of
or in substitution for shares of its capital stock, or (C) create, allot,
issue, deliver or sell, or authorize or propose the creation, allotment,
issuance, delivery or sale of, any shares of its capital stock or any
securities convertible into or exercisable for, or any rights, warrants or
options to acquire or right to subscribe in respect of any such shares, or
enter into any agreement with respect to any of the foregoing;
(iii) file any application to relocate or terminate
the operations of any branch or banking office of it;
(iv) make any equity investment or commitment to
make such an investment in real estate or in any real estate development
project, other than in connection with foreclosures, settlements in lieu of
foreclosure or troubled loan or debt restructurings in the ordinary course
of business consistent with prudent banking practices;
(v) except as permitted under Section 6.13,
restructure or materially change its investment securities portfolio or its
gap position, through purchases, sales or otherwise, or the manner in which
the portfolio is classified or reported;
(vi) except as may result from the loan purchase
required by Section 6.17, make or purchase, or commit to make or purchase,
any loan or loans, or extend any line of credit, to any borrower and its
affiliates in an aggregate principal amount greater than $500,000 or in an
amount which, when aggregated with any existing indebtedness to the Bank
and lines of credit from the Bank of such borrower and its affiliates,
would exceed $500,000; provided, however, that if at any time from the date
of this Agreement to the Closing Date, the Bank desires to make or
purchase, or commit to make or purchase, any such loan, or extend any such
line of credit, the Bank shall furnish to Buyer, promptly upon its
substantial completion, the information package prepared by the Bank's loan
committee with respect to such proposed loan requests and any other
information that Buyer may reasonably request (collectively, the "Loan
Request Documents"), and unless, within 72 hours of receiving the Loan
Request Documents, Buyer notifies the Bank (whether telephonically or in
writing) that Buyer objects to the making of such loan or the extension of
such credit, Buyer shall be deemed to have consented to such loan or
extension of credit;
36
(vii) amend its articles of incorporation, by-laws or other
similar governing documents or adopt resolutions inconsistent therewith;
(viii) other than pursuant to those agreements set forth on
Section 5.1(b)(viii) of the Seller Disclosure Schedule and entered into
prior to the date of this Agreement, make any capital expenditures in
excess of (A) $25,000 per project or related series of projects or (B)
$250,000 in the aggregate, other than expenditures necessary to maintain
existing assets in good repair;
(ix) enter into any new line of business;
(x) Acquire or agree to acquire, by merging or consolidating
with, or by purchasing a substantial equity interest in or a substantial
portion of the assets of, or by any other manner, any business or
anycorporation, partnership, association or other business organization or
division thereof ;
(xi) change any of the accounting methods used by it unless
required by GAAP,
(xii) make, revoke, change, or amend any election relating to
Taxes, enter into any closing agreement relating to Taxes, settle or
compromise any claim or assessment relating to Taxes, in each case other
than income Taxes, or amend any Tax Returns (other than income Tax
Returns);
(xiii) Except as disclosed in Section 5.1(b)(xiii) of the
Seller Disclosure Schedule, (A) adopt, amend or terminate (other than
terminations required by the express terms thereof) any employee benefit
plan or any agreement, arrangement, plan or policy between the Bank and one
or more of its current or former directors, officers or employees, or (B)
other than normal wage or salary increases in the ordinary course of
business consistent with past practice, increase in any manner the
compensation or fringe benefits of any director, officer or employee or pay
any benefit except as required by any plan or agreement as in effect as of
the date hereof and set forth in Section 3.11(a) of the Seller Disclosure
Schedule (including the granting of stock options, stock appreciation
rights, restricted stock, restricted stock units or performance units or
shares);
(xiv) other than as required by those agreements set forth in
Section 5.1(b)(xiv) of the Seller Disclosure Schedule, and, except as
permitted under Section 6.13 and Section 6.16, sell, lease, encumber,
assign or otherwise dispose of, or agree to sell, lease, encumber, assign
or otherwise dispose of, any of its assets, properties or other rights or
agreements;
(xv) incur any indebtedness for borrowed money or assume,
guarantee, endorse or otherwise as an accommodation become responsible for
the obligations of any other individual, corporation or other entity,
37
except for advances from a Federal Home Loan Bank made in the ordinary
course of business consistent with past practices;
(xvi) create, renew, amend or terminate or give notice of a
proposed renewal, amendment or termination of, any Bank Contract, agreement
or lease for goods, services or office space to which the Bank is a party
or by which the Bank or its properties is bound, other than the renewal in
the ordinary course of business of any lease the term of which expires
prior to the Closing Date;
(xvii) take any action intended or reasonably likely to
result in (A) a Material Adverse Effect on the Bank or Buyer, (B) any of
the representations and warranties of Seller set forth in this Agreement
being or becoming untrue in any material respect at any time at or prior to
the Closing Date, (C) any of the conditions to the Merger set forth in
Article VII not being satisfied in a timely manner or (D) a material
violation of any provision of this Agreement, except, in each case, as
required by applicable Law;
(xviii) settle any claim, action or proceeding against the
Bank in an amount in any one case in excess of $10,000 or $100,000 in the
aggregate;
(xix) enter into any contract, arrangement, commitment or
understanding (whether written or oral) with any of Seller or its
Affiliates (other than the Bank), including any intercompany indebtedness,
guaranty, receivable, payable or other account maintained between the Bank,
on the one hand, and Seller and any of its other Affiliates, on the other
hand; and
(xx) agree to do any of the foregoing.
5.2 Loan, Accrual and Reserve Policies. Notwithstanding that Seller believes
that the Bank and its Subsidiaries have established all reserves and taken all
provisions for possible loan losses required by GAAP and applicable Laws, Parent
and Seller recognize that Buyer may have adopted different loan, accrual and
reserve policies (including loan classifications and levels of reserves for
possible loan losses). From and after the date of this Agreement to the Closing
Parent and Seller shall cause the Bank to continue to make periodic provisions
(but in no event less than monthly) for reserves for possible loan losses in
accordance with the Bank's reserve methodology (but in no event shall such
provisions be less than the net charge-offs during such period). In addition, at
or prior to Closing, Parent and Seller shall cause the Bank to establish
additional reserves for possible loan losses in an amount equal to $1,000,000.
5.3 Buyer Forbearance. Except as expressly contemplated or permitted by this
Agreement, or as required by applicable Law or any applicable directive, policy
or guideline of any Governmental Entity which has bank regulatory jurisdiction
over Buyer or Merger Sub, during the period from the date of this Agreement to
the Closing Date, Buyer shall not, and shall not permit any of its Subsidiaries
to: (i) take any action that is
38
intended or may reasonably be expected to result in any of its representations
or warranties herein being or becoming untrue in any material respect at any
time prior to the Closing, in any of the conditions to the Merger set forth in
Article VII not being satisfied or in a material violation of any provision of
this Agreement, (ii) intentionally take any action or fail to take any action
which would reasonably be expected to materially and adversely impair or delay
consummation of the transactions contemplated hereby beyond the time period
contemplated by this Agreement, (iii) acquire, by merging or consolidating with,
or by purchasing a substantial equity interest in or a substantial portion of
the assets of, or by any other manner, any business or corporation, partnership,
association or other business organization or division thereof except as would
not be material to Buyer and other than in connection with foreclosures,
settlements in lieu of foreclosure or troubled loan or debt restructurings in
the ordinary course of business consistent with past practices, or (iv) agree
to, or make any commitment to, take any of the actions prohibited by this
Section 5.3.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Regulatory Matters.
(a) The parties hereto shall cooperate with each other and use their
commercially reasonable efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings,
and to obtain as promptly as practicable all permits, consents, approvals
and authorizations of all [third parties and] Governmental Entities which
are necessary or advisable to consummate the Merger and the other
transactions contemplated by this Agreement. Seller and Buyer shall have
the right to review in advance, and to the extent practicable each will
consult the other on, in each case subject to applicable Laws relating to
the exchange of information, all the information relating to Parent, Seller
or the Bank, on the one hand, or Buyer or Merger Sub, on the other hand,
and any of their respective Affiliates, which appears in any filing made
with, or written materials submitted to, any third party or any
Governmental Entity in connection with the transactions contemplated by
this Agreement. In exercising the foregoing right, each of the parties
hereto shall act reasonably and as promptly as practicable. The parties
hereto agree that they will consult with each other with respect to the
obtaining of all permits, consents, approvals and authorizations of all
third parties and Governmental Entities necessary or advisable to
consummate the transactions contemplated by this Agreement and each party
will keep the other apprised of the status of matters relating to
completion of the transactions contemplated herein.
(b) Buyer and Seller shall, upon request, promptly furnish each other with all
information concerning themselves, their Affiliates (including with respect
to Parent, Seller and the Bank), directors, officers and stockholders and
such other matters as may be reasonably necessary or advisable in
connection with any
39
statement, filing, notice or application made by or on behalf of Buyer,
Seller or any of their respective Affiliates to any Governmental Entity in
connection with the Merger and the other transactions contemplated by this
Agreement.
(c) Buyer and Seller shall promptly furnish each other with copies of written
communications received by Buyer or Seller, as the case may be, or any of
their respective Subsidiaries or Affiliates from, or delivered by any of
the foregoing to, any Governmental Entity in respect of the transactions
contemplated hereby.
6.2 Access to Information.
(a) Upon reasonable notice and subject to applicable Laws relating to the
exchange of information, each of Parent and Seller shall, and shall cause
each of its Affiliates (including the Bank) to, afford to the officers,
employees, accountants, counsel and other Representatives of Buyer, access,
during normal business hours during the period prior to the Closing, to all
of Parent and its Affiliates' (including the Bank) properties, books,
contracts, commitments, records, Tax Records, officers, employees,
accountants, counsel and other Representatives, in each case to the extent
related to the Bank or its business and in a manner not unreasonably
disruptive to the business of the Bank, and, during such period, each of
Parent and Seller shall, and shall cause each of its Affiliates (including
the Bank) to, make available to Buyer all information concerning the Bank's
business, properties and personnel as Buyer may reasonably request. Neither
Parent, Seller nor any of their Affiliates shall be required to provide
access to or to disclose information where such access or disclosure would
violate the rights of its customers, jeopardize any attorney-client or work
product privilege or contravene any Law, rule, regulation, Judgment or
fiduciary duty existing prior to the date of this Agreement or binding
agreement listed in Section 6.2 of the Seller Disclosure Schedule. The
parties hereto will make appropriate substitute disclosure arrangements
under circumstances in which the restrictions of the preceding sentence
apply.
(b) All information furnished to Buyer pursuant to Section 6.2(a) shall be
subject to, and Buyer shall hold all such information in confidence in
accordance with, the provisions of the Mutual Nondisclosure Agreement,
dated July 10, 2001 (the "Confidentiality Agreement"), between Affiliates
of Buyer and Seller. Notwithstanding the foregoing or any provision of the
Confidentiality Agreement, each of Parent and Seller acknowledges and
agrees that (and each of Parent and Seller shall cause each of its
Affiliates to acknowledge and agree that) from and after the Closing, all
information relating to the Bank or its business shall be deemed to be
confidential information of Buyer (except to the extent publicly available
or available from a third party not subject to a confidentiality obligation
with respect to such information) and shall not be subject to the terms of
the Confidentiality Agreement.
40
(c) No investigation by any of the parties or their respective Representatives
shall affect the representations, warranties, covenants or agreements of
the other set forth herein.
6.3 Financing; Cooperation; Legal Conditions to the Merger.
(a) Buyer shall promptly prepare and file with the SEC the Registration
Statement. Buyer shall use commercially reasonable efforts to have the
Registration Statement declared effective under the Securities Act as
promptly as practicable after such filing.
(b) Each of Parent and Seller shall, and shall cause its Affiliates (including
the Bank) to, cooperate with Buyer in respect of any proposed offering by
private placement, registered offering or otherwise, of securities (whether
debt or equity) (the "Securities"), the proceeds of which are to be used to
finance the transactions contemplated hereby and the payment of all related
fees, costs and expenses. Without limiting the generality of the foregoing,
each of Parent and Seller will cause (i) management of the Bank to
cooperate in the preparation of offering documents with respect to the sale
of any Securities and to provide Buyer and its Representatives with all
information (including additional financial information) concerning Parent,
Seller or the Bank and its activities as may, in Buyer's judgment, be
reasonably necessary or advisable in connection with the offering and sale
of the Securities by Buyer or any subsidiary of Buyer and (ii) Deloitte &
Touche LLP (and, if necessary, any other independent certified public
accountants of Parent, Seller or the Bank to provide any (A) consents
required in connection with such offering documents and (B) "cold comfort"
letters and updates thereof in form and substance reasonably satisfactory
to the managing underwriter or underwriters of such proposed offering,
addressed to each of the underwriters, such letters to be in customary form
and covering such matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offering of securities similar to
the Securities.
(c) Each of Buyer, on the one hand, and Parent and Seller, on the other hand,
shall, and shall cause its Affiliates to, use their commercially reasonable
efforts (i) to take, or cause to be taken, all actions necessary, proper or
advisable to comply promptly with all legal requirements which may be
imposed on such party or its Affiliates with respect to the Merger and,
subject to the conditions set forth in Article VII hereof, to consummate
the transactions contemplated by this Agreement and (ii) to obtain (and to
cooperate with the other party to obtain) any consent, authorization, order
or approval of, or any exemption by, any Governmental Entity and any other
third party which is required to be obtained by Parent, Seller or Buyer or
any of their respective Affiliates in connection with the Merger and the
other transactions contemplated by this Agreement, and to comply with the
terms and conditions of such consent, authorization, order or approval;
provided, however, that neither Buyer, on the one hand, nor Parent or
Seller, on the other hand, shall be obligated to pay any consideration
therefore to the third
41
party from whom any such consent, authorization or approval is requested
(other than filing fees and other similar fees payable to a Governmental
Entity).
6.4 Third Party Proposals. None of Parent, Seller, the Bank, any of their
respective Affiliates or any of their respective Representatives shall, directly
or indirectly solicit, encourage or facilitate inquiries or proposals, or enter
into any definitive agreement, with respect to, or initiate or participate in
any negotiations or discussions with any Person concerning, any acquisition or
purchase of all or any material portion of the assets of, or of any equity
interest in, the Bank or any merger or business combination with the Bank other
than as contemplated by this Agreement (each, an "Acquisition Proposal") or
furnish any information regarding the Bank to any such Person. Parent, Seller,
the Bank, each of their respective Affiliates and each of their respective
Representatives shall (a) notify Buyer immediately if any Acquisition Proposal
(including the terms thereof) is received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated with,
any of Parent, Seller, the Bank, or any of their respective Affiliates or
Representatives, and (b) immediately cease or cause to be terminated any
existing activities, including discussions or negotiations with any parties,
conducted prior to the date hereof with respect to any Acquisition Proposal and
to seek to have all materials distributed to such Persons by Parent, Seller, the
Bank, or any of their respective Affiliates and Representatives returned to
Seller promptly. None of Parent, Seller, the Bank, or any of their respective
Affiliates and Representatives shall amend, modify, waive or terminate, or
otherwise release any Person from, any standstill, confidentiality or similar
agreement or arrangement currently in effect with respect to the Bank. Parent
and Seller shall cause the Bank, each of its and the Bank's respective
Affiliates and each of their respective Representatives to comply with the
provisions of this Section 6.4. It is understood and acknowledged that this
Section 6.4 shall have no application to acquisition proposal with respect to
Parent or any Affiliate other than the Bank or Seller.
6.5 Further Assurances. Each party to this Agreement shall execute such
documents and other papers and perform such further acts as may be reasonably
required to carry out the provisions hereof and the transactions contemplated
hereby. Following the Closing Date upon the request of Buyer, Parent and Seller
shall promptly execute and deliver such further instruments of assignment,
transfer, conveyance, endorsement, direction or authorization and other
documents as Buyer may reasonably request to effectuate the purposes of this
Agreement.
6.6 Confidentiality. From and after the Closing Date, each of Parent and Seller
shall, and shall cause its Affiliates and their respective Representatives to
keep confidential all information relating to the Bank or its business (whether
in the possession of Seller, its Affiliate or such Representative at the time of
the Closing or subsequently obtained by Parent, Seller, any Affiliate of Parent
or any such Representative pursuant to this Agreement or any agreement entered
into in connection with the transactions contemplated hereby), and shall not
directly or indirectly use such information for any competitive purpose. The
obligation to keep such information confidential shall continue indefinitely
from the Closing Date and shall not apply to any information which (a) is in the
public domain, (b) is published or otherwise becomes part of the public domain
42
through no fault of Parent, Seller, any of their Affiliates or any of their
Representatives or (c) becomes available to Parent, Seller, any of their
Affiliates or any of their Representatives on a non-confidential basis from a
source that did not acquire such information (directly or indirectly) from
Seller or Buyer or any of their respective Affiliates or Representatives on a
confidential basis. Notwithstanding the foregoing, Parent, Seller, their
Affiliates and their respective Representatives may make disclosures required by
Law; provided, that Parent and Seller, to the extent practicable, shall provide
Buyer with prompt notice thereof so that Buyer may seek a protective order or
other appropriate remedy or waive compliance with the provisions of this Section
6.6. In the event that such protective order or other remedy is not obtained or
Buyer waives compliance with the provisions of this Section 6.6, Parent and
Seller shall or shall cause the Person required to disclose such information to
furnish only that portion of the information that such Person is advised in the
opinion of Seller's counsel is legally required, and, to the extent practicable,
Parent and Seller shall exercise their commercially reasonable efforts to obtain
reliable assurance that confidential treatment is accorded the information so
furnished.
6.7 Certain Tax Matters.
(a) Seller Tax Indemnification. Each of Parent and Seller, jointly and
severally, accepts full and exclusive liability for and agrees to indemnify
fully and hold harmless each Buyer Indemnified Party from and against:
(i) (A) any Taxes with respect to the Bank or the assets of
the Bank acquired by Merger Sub in the Merger (1) for any taxable year or
period that ends on or before the Closing Date and (2) for any Straddle
Period which are allocable to the portion of such Straddle Period deemed to
end on the Closing Date (as determined pursuant to Section 6.7(e) hereof),
(B) any Taxes with respect to any Affiliated Group of which the Bank (or
any predecessor of the Bank) is or was a Member prior to or on the Closing
Date which is attributable to, or resulting from, the application of
Treasury Regulation 1.1502-6 or any similar provision of state, local or
foreign Tax Law, and (C) any additional income Taxes with respect to Bank
or assets of Bank acquired by Merger Sub in the Merger for any taxable year
or period that ends after the Closing Date resulting from the Parent,
Seller, Bank or any of their respective Affiliates making, revoking,
changing or amending any election relating to Taxes on or after the date of
this Agreement and on or prior to the Closing Date without the prior
written consent of Buyer. Seller shall be entitled to a refund of Taxes
referred to in this Section 6.7(a)(i). The foregoing obligations shall not
apply to any Taxes resulting from any transaction (other than the Merger)
undertaken on the Closing Date after the Closing.
(b) Buyer Tax Indemnification. Buyer accepts full and exclusive liability for
and agrees to indemnify fully and hold harmless each Seller Indemnified
Party from and against any Taxes with respect to the Bank or the assets of
the Bank acquired
43
by Merger Sub in the Merger that are not the responsibility of Seller
pursuant to Section 6.7(a). Buyer shall be entitled to a refund of such
Taxes.
(c) Procedures Relating to Tax Indemnification.
(i) Notice of Tax Claims. If a claim for Taxes,
including, without limitation, notice of a pending or threatened audit,
shall be made by any taxing authority to the party seeking indemnification
(the "Tax Indemnified Party"), which, if successful, could result in an
indemnity payment pursuant to this Section 6.7 (a "Tax Claim"), the Tax
Indemnified Party shall promptly notify the other party (the "Tax
Indemnifying Party") in writing of the Tax Claim. Such notice will state
the nature and basis of the Tax Claim and the amount thereof, to the extent
known by the Tax Indemnified Party. If written notice of a Tax Claim is not
promptly given to the Tax Indemnifying Party in detail sufficient to
apprise the Tax Indemnifying Party of the nature of the Tax Claim, the Tax
Indemnifying Party shall not be liable to the Tax Indemnified Party to the
extent that the Tax Indemnifying Party's position is materially prejudiced
as a result thereof.
(ii) Defense of Tax Claims by Tax Indemnifying Party.
(A) Parent and Seller shall have the sole right
to represent the interests of any successor in interest of the Bank
(including Merger Sub) with respect to any Tax Claim relating to income
Taxes of the Bank for any taxable period ending on or before the Closing
Date and to employ nationally recognized counsel of its choice at its
expense in connection with such audit or proceeding. Seller shall be
entitled to consent to the entry of any judgment or settlement with respect
to any Tax Claim referred to in the preceding sentence provided that
Seller's contemplated judgment or settlement is only for monetary damages
and would not have a material impact on the Taxes of Merger Sub, Buyer or
their Affiliates for periods or years following the Closing Date.
Otherwise, Seller shall be required to obtain the prior written consent of
Buyer before entering into any judgment or settlement with respect to such
Tax Claim (not to be unreasonably withheld or delayed).
(B) Buyer shall have the sole right to represent
the interests of any successor in interest of the Bank (including Merger
Sub) with respect to any Tax Claim relating to any Taxes (other than for
any Tax Claim for Taxes referred to in Sections 6.7(c)(ii)(A), and to
employ counsel of its choice at its expense in connection with such Tax
Claim. Buyer shall be entitled to consent to the entry of any judgment or
settlement with respect to any Tax Claim referred to in the preceding
sentence. Notwithstanding the foregoing, Buyer shall keep Seller apprised
of all proceedings and correspondence and discussions with taxing
authorities with respect to Taxes for which Seller or Parent may be held
liable under the terms of this Agreement and shall not consent to the entry
of any judgment or settlement with respect to such Taxes without the prior
written
44
consent of the Seller (not to be unreasonably withheld or delayed). In the
event that Buyer does not exercise its right described in this Section
6.7(c)(ii)(B) to conduct the defense of any claim for Taxes for which
Seller or Parent may be held liable under this Agreement, Seller or Parent
may conduct such defense and consent to the entry of any judgment or
settlement with respect to such claim in a manner that it reasonably may
deem appropriate.
(iii) Tax Dispute Resolution Mechanism. Any dispute arising
in connection with the application of this Section 6.7 shall be submitted
to a jointly selected "Big Four Accounting Firm" or nationally recognized
law firm (the "Settlement Party") for resolution, which resolution shall be
final, conclusive and binding on the parties. Notwithstanding anything in
this Agreement to the contrary, the fees and expenses of the Settlement
Party in resolving a dispute shall be paid by Buyer and Seller in
proportion to each party's respective liability for Taxes which are the
subject of the dispute as determined by the Settlement Party. Any such
settlement shall be deemed a final arbitration award that is enforceable
pursuant to all terms of the Federal Arbitration Act, 9 U.S.C. xx.xx. 1 et.
seq. For purposes of this Section 6.7(c)(iii), a "Big Four Accounting Firm"
shall mean PricewaterhouseCoopers LLP, Ernst & Young LLP, KPMG LLP, and
Deloitte & Touche LLP or their successors.
(iv) Survival of Tax Provisions. Any Tax Claim to be made
pursuant to this Section 6.7 must be made within a reasonable period of
time before the expiration (with valid extensions) of the applicable
statutes of limitations relating to the Taxes at issue provided, that if
claimant complies with Section 6.7(c)(i) and such compliance results in
notification being delivered to the Tax Indemnifying Party after the
expiration of the applicable statute of limitation, such claim shall
survive.
(v) Purchase Price Adjustment. All indemnification
payments under this Section 6.7 and Article IX shall be deemed adjustments
to the Purchase Price.
(d) Return Filings and Tax Payment Obligations.
(i) Seller. Parent or Seller shall duly, properly and
timely file or cause to be duly, properly and timely filed the federal,
Colorado, and Utah income Tax Returns and all other Combined and
Consolidated Tax Returns that include the Bank for the period ending on or
before the Closing Date and shall pay or cause to be paid all Taxes due
with respect to such Tax Returns. The Bank shall pay to Seller on a
quarterly basis (but in no event later than the due date of taxes described
in this paragraph) estimated federal and state tax payments ("Estimated
Payments") in an amount equal to 39% of the Bank's federal taxable income
for the period commencing on January 1, 2002, and ending on the Closing
Date. For purposes of such calculation, the Bank's federal taxable income
shall be prepared on a separate basis in a manner consistent with prior
45
practice except such taxable income shall exclude any income or gain which
is recognized as a result of the Merger. Within 120 business days after the
Closing Date, Seller shall prepare and provide Buyer with a separate
taxable income computation for the Bank (together with appropriate
supporting documentation) for the period January 1, 2002 until the Closing
Date (the "Preliminary Stub Period Taxable Income" if positive and the
"Preliminary Stub Period Taxable Loss" if negative). Such Preliminary Stub
Period Taxable Income or Loss, as the case may be, shall be prepared in the
manner described in this paragraph and assuming the taxable year ended on
the Closing Date. Buyer shall have 20 business days after receiving such
calculation from Seller to inform Seller whether Buyer agrees with such
calculation ("Stub Notification Period"). If Buyer informs Seller within
the Stub Notification Period that Buyer agrees with such calculation, such
calculation shall become the "Final Stub Period Taxable Income" if positive
or "Final Stub Period Taxable Loss" if negative. If Buyer informs Seller
within the Stub Notification Period Buyer does not agree with such
calculation and the parties can not otherwise come to an agreement, the
parties shall resolve such dispute by the mechanism provided in Section
6.7(c)(iii) which shall determine the "Final Stub Period Taxable Income" or
"Final Stub Period Taxable Loss" as the case may be. Once determined by
either of the two preceding sentences, the Final Stub Period Taxable Income
or Final Stub Period Taxable Loss, as the case may be, shall be final and
shall not be modified thereafter except with the consent of both parties.
If the Estimated Payments exceed 39% of the Final Stub Period Taxable
Income, Parent and Seller, jointly and severally, shall reimburse the Buyer
for such excess within 5 business days of the determination of the Final
Stub Period Taxable Income. If the Estimated Payments are less than 39% of
the Final Stub Period Taxable Income, Buyer shall reimburse the Seller for
such excess within 5 business days of the determination of the Final Stub
Period Taxable Income. If there is a Final Stub Period Taxable Loss, Parent
and Seller, jointly and severally, shall reimburse Buyer for all of the
Estimated Payments plus 39% of the Final Stub Period Taxable Loss within 5
business days of the determination of the Final Stub Period Taxable Loss.
(ii) Buyer. Buyer shall file or cause to be filed when
due (a) all Tax Returns required to be filed with respect to the assets of
the Bank acquired by Merger Sub in the Merger for all taxable periods
ending after the Closing Date (including Straddle Period Tax Returns) and
(b) all Tax Returns of the Bank for periods ending on or before the Closing
Date (other than those described in Section 6.7(d)(i) of this Agreement).
Buyer shall pay (or cause to be paid) any Taxes due in respect of such Tax
Returns. All Straddle Period Tax Returns and all Tax Returns relating to
periods ending on or before the Closing Date that are prepared by Buyer
pursuant to this section shall be prepared in a manner consistent with
proper past practice. Such returns shall be submitted to the Seller no
later than 30 business days prior to the due date and filing thereof and
Seller shall have the right to review and comment thereon. Upon reasonable
review and comment by the Seller, such Tax Returns, as modified by
reasonable comments of the Seller, shall be filed with applicable taxing
authorities.
46
(iii) Cooperation. Parent, Seller, Buyer and Merger Sub
shall reasonably cooperate, and shall cause their respective Affiliates and
such parties' respective directors, officers, employees, agents, auditors
and representatives reasonably to cooperate, in preparing and filing all
Tax Returns (including claims for refund), including maintaining and making
available to each other all records necessary in connection with Taxes and
in resolving all disputes and audits with respect to all taxable periods
relating to Taxes.
(e) Allocation and Apportionment of Taxes. To the extent permitted or required
by law or administrative practice, the taxable year of the Bank which
includes the Closing Date shall be treated as closing on the Closing Date.
For all purposes of this Agreement, where it is necessary to apportion
between the Seller and the Buyer a Tax liability of the Bank for a Straddle
Period (which is not treated under the immediately preceding sentence as
closing on the Closing Date), such Tax liability shall be apportioned as
follows:
(i) in the case of Taxes that are either (A) based upon
or related to income or receipts or (B) imposed in connection with any sale
or other transfer or assignment of property (real or personal, tangible or
intangible), such Taxes shall be deemed equal to the amount that would be
payable if the taxable year ended on the Closing Date;
(ii) in the case of Taxes not described in Section
6.7(e)(i) that are imposed on a periodic basis and measured by the amount,
value or level of any item (such as personal property taxes and real estate
taxes), such Taxes shall be deemed to be the amount of such Taxes for the
entire period (or, in the case of such determined on an arrears basis, the
amount of such Taxes for the immediately preceding period) multiplied by a
fraction, the numerator of which is the number of calendar days in the
taxable period ending on (and including) the Closing Date, and the
denominator of which is the number of calendar days in the entire taxable
period.
(f) Tax Sharing Agreements. Any and all existing agreements relating to the
allocation and sharing of Taxes (the "Tax Sharing Agreements") between the
Bank and Parent, Seller and any member of the affiliated group, as defined
in Section 1504(a) of the Code, of which Seller, Parent or any Affiliate of
Seller or Parent is the common parent ("Seller's Affiliated Group") shall
be terminated as of the Closing Date. None of the Bank, Buyer, Merger Sub,
Seller, Parent and any Affiliate of Buyer, Merger Sub, Seller or Parent
shall have any further rights or obligations under any such Tax Sharing
Agreement.
(g) Transfer Taxes. Notwithstanding anything else contained in this Agreement,
all excise, sales, use, transfer (including real property transfer), stamp,
documentary, filing, recordation and other similar taxes, together with any
interest, additions or penalties with respect thereto and any interest in
respect of such additions or
47
penalties resulting from the transactions contemplated by this Agreement
("Transfer Taxes") shall be borne by Buyer. Notwithstanding section 6.7(d)
of this Agreement, which shall not apply to Tax Returns relating to
Transfer Taxes, any Tax Returns that must be filed in connection with
Transfer Taxes shall be prepared and filed when due by the party primarily
responsible under applicable local law for filing such Tax Returns, and
such party will use reasonably commercial efforts to provide such Tax
Returns to the other party at least 10 days prior to the due date for such
Tax Returns. Buyer and Seller shall, and Buyer and Seller shall cause each
of their respective Affiliates to, cooperate in the preparation, execution,
and filing of all Tax Returns relating to Transfer Taxes which become
payable in connection with the transactions contemplated by this Agreement.
(h) Allocation of Purchase Price. Within 120 days following the Closing Date,
Buyer shall provide Seller with a statement containing an allocation of the
Purchase Price plus the liabilities of the Bank assumed by Merger Sub in
the Merger among the assets of the Bank acquired by Merger Sub in the
Merger (the "Allocation"). The Allocation shall be made in accordance with
Section 1060 of the Code and the regulations promulgated thereunder. The
Allocation shall be subject to the reasonable approval of Seller and the
parties shall negotiate in good faith to resolve any dispute regarding the
Allocation. Each of Buyer, Merger Sub, Seller, and Parent shall (i) timely
file all forms (including Internal Revenue Service Form 8594) and Tax
Returns required to be filed in connection with the Allocation, (ii) be
bound by the Allocation for purposes of determining Taxes, (iii) prepare
and file, and cause its Affiliates to prepare and file, its Tax Returns on
a consistent basis with the Allocation and (iv) take no position, and cause
its Affiliates to take no position, inconsistent with such allocation on
any applicable Tax Return, in any audit or proceeding before any taxing
authority, in any report made for Tax, financial accounting or any other
purposes, or otherwise. In the event that the Allocation is disputed by any
taxing authority, the party receiving the notice of such dispute shall
promptly notify the other party hereto concerning the existence and
resolution of such dispute. Any indemnification payment treated as an
adjustment to Purchase Price shall be reflected as an adjustment to the
price allocated to a specific asset, if any, giving rise to the adjustment
and if any such adjustment does not relate to a specific asset, such
adjustment shall be allocated among the assets of the Bank acquired by
Merger Sub in the Merger in accordance with the price allocation method
provided in this Section 6.7(h).
(i) Tax Treatment. The parties intend for the Merger to be treated as a taxable
sale of assets by Bank to Merger Sub followed by a liquidation of Bank into
Seller.
(j) Coordination with Other Provisions. Except for the provisions in Section
9.4(d) of this Agreement, the provisions under this Section 6.7 (and not
any other provision in this Agreement) shall govern all indemnity claims
with respect to Taxes relating to the Bank or the assets of the Bank
acquired by Merger Sub in the Merger.
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6.8 Books and Records.
(a) At or as soon as reasonably practicable following the Closing, each of
Parent and Seller shall, and shall cause each of their Affiliates to,
deliver to Buyer any and all books of account, records, files and invoices,
including all equipment maintenance data, accounting records, sales and
sales promotional data and materials, advertising materials, sales training
materials, educational support program materials, customer lists, cost and
pricing information, supplier lists, business plans, correspondence,
litigation files and any other records and data, in each case principally
relating to the Bank or its business, provided, however, that (i) Parent
and Seller shall not be obligated to provide any information to the extent
that it does not relate to the Bank or its business and (ii) Parent and
Seller shall be entitled to retain copies of Tax Records of the Bank.
(b) For seven (7) years following the Closing Date, Buyer will retain, at
Buyer's sole expense, the books, records and other items transferred
pursuant to Section 6.8(a). During such period, Buyer will afford to
Seller, its counsel and accountants, during normal business hours,
reasonable access to such books and records retained by Buyer and permit
the copying thereof at Seller's expense. Following the expiration of such
period, Buyer may dispose of any such books and records, provided, that
Buyer shall give Seller 60 days prior written notice of its intent to
dispose of such books and records and offers to surrender such books and
records to Seller.
(c) After the Closing Date, Buyer shall, at the request of Seller, (i) provide
reasonable assistance in the collection of information or documents; (ii)
make Buyer's employees available when reasonably requested by Seller in
connection with claims or actions brought by or against third parties based
upon events or circumstances concerning the Bank or its business or assets
where Buyer's employees would have relevant knowledge or information; and
(iii) otherwise reasonably cooperate with Seller in connection with the
contest or defense of such claims or actions. Seller shall reimburse Buyer
for all reasonable out-of-pocket costs and expenses incurred by Buyer in
providing said assistance.
(d) For seven (7) years following the Closing Date, each of Parent and Seller
will retain, at Seller's sole expense, any records and documents relating
to the Bank or its business that were retained by Parent or Seller under
this Agreement. During such period, Parent and Seller will afford to Buyer,
its counsel and accountants, during normal business hours, reasonable
access to such records and documents relating to the Bank or its business
retained by Parent or Seller and permit the copying thereof at Buyer's
expense. Following the expiration of such period, Parent and Seller may
dispose of any such records and documents relating to the Bank or its
business, provided, that Parent and Seller shall give Buyer 60 days prior
written notice of its intent to dispose of such books and records and
offers to surrender such books and records to Buyer.
49
(e) After the Closing Date, each of Parent and Seller shall, at the request of
Buyer, (i) provide reasonable assistance in the collection of information
or documents; (ii) make Parent's and Seller's and their respective
Affiliates' employees available when reasonably requested by Buyer in
connection with claims or actions brought by or against third parties based
upon events or circumstances which either concern the Bank or its business
or as to which Seller's employees would have relevant knowledge or
information; and (iii) otherwise reasonably cooperate with Buyer in
connection with the contest or defense of such claims or actions. Except to
the extent that any such claim is indemnifiable by Seller under Article IX,
Buyer shall reimburse Seller for all reasonable out-of-pocket costs and
expenses incurred by Seller in providing said assistance.
6.9 Subsequent Interim Financial Statements. As soon as reasonably available,
but in no event more than 45 days after the end of each fiscal quarter,
including the fiscal quarter ended March 31, 2002, Parent shall deliver to Buyer
the Bank's statements of financial condition and related statements of
operations prepared in accordance with GAAP with respect to such most recently
completed fiscal quarter.
6.10 Notification of Certain Matters. Each of Buyer, on the one hand, and Parent
and Seller, on the other hand, shall give prompt written notice to the other of
any fact, event or circumstance known to it that would cause or constitute a
material breach of any of its representations, warranties, covenants or
agreements contained in this Agreement. In addition, each of Parent and Seller
shall give prompt written notice to Buyer of any fact, event or circumstance
Known to Parent or Seller that is reasonably likely, individually or taken
together with all other facts, events and circumstances known to it, to result
in any Material Adverse Effect on the Bank or Buyer.
6.11 [Intentionally Omitted]
6.12 Non-Solicitation
(a) For a period of two years following the Closing Date, Parent and Seller
shall not, and each of Parent and Seller shall cause their respective
Affiliates not to, directly or indirectly, solicit any of the banking
business of any Person who is a customer of the Bank as of the Closing
Date; provided, however, that the foregoing restriction shall not prohibit
(i) general advertising or general solicitations not targeted specifically
to the Bank's customers or (ii) solicitations to customers of the Bank who
have a banking or financial services relationship with the Parent, Seller
or an Affiliate other than their relationship with the Bank.
(b) For a period of two years following the Closing Date, Parent, and Seller
shall not, and each of Parent and Seller shall cause their respective
Affiliates not to, directly or indirectly, solicit for purposes of
employment (other than through general advertising or other general
solicitation not targeted to the Buyer's employees), any Person who is
employed by Buyer or of any of its Affiliates at the time of such
solicitation.
50
(c) Each of Parent and Seller acknowledges that the covenants contained in this
Section 6.12 were a material and necessary inducement for Buyer to agree to
the transactions contemplated hereby, and to ensure that the full value of
the Bank and its business being acquired is transferred to Buyer as
contemplated by the parties and that violation of any of the covenants
contained in this Section 6.12 will cause irreparable and continuing damage
to Bank, that Bank shall be entitled to injunctive or other equitable
relief from any court or other governmental authority of competent
jurisdiction restraining any further violation of such covenants and that
such injunctive relief shall be cumulative and in addition to any other
rights or remedies to which Bank may be entitled.
(d) Should any provision of this Section 6.12 for any reason be declared by any
Governmental Entity invalid, or partly or wholly unenforceable, such
declaration or decision shall not affect the validity or enforceability of
any of the other provisions of this Agreement, which remaining provisions
shall remain in full force and effect and the application of such invalid
or unenforceable provision to Persons or circumstances other than those as
to which it is held invalid or unenforceable shall be valid and enforced to
the fullest extent permitted under applicable Law.
6.13 Dividend. At any time prior to the end of the fifth Business Day preceding
the Closing Date (the "Dividend Cut-Off Date"), Seller shall be entitled to
cause the Bank to declare and pay, subject to compliance with applicable Laws
and all applicable directives, policies or guidelines of any Governmental Entity
which has bank regulatory jurisdiction over the Bank, one or more cash dividends
in an aggregate amount not to exceed $37,500,000 (without taking account of any
other payments that are required or permitted to be made by the Bank to Seller
or Parent under the terms of this Agreement, including payments under Section
6.7(d)(i) or under Section 6.14). The aggregate amount of all such cash
dividends actually declared and paid by the Bank on or prior to the Dividend
Cut-Off Date is referred to herein as the "Dividend."
In the event that the Bank does not have sufficient cash and
cash equivalents to pay the Dividend, the Bank shall first liquidate its
securities portfolio (or the necessary portion thereof) (other than FHLB stock
or other investments which may not be transferred) either through a sale of such
portfolio (or portions thereof) to one or more non-Affiliates or through an
in-kind dividend of such portfolio (or portions thereof) to Seller. If less than
all of the securities portfolio (other than FHLB stock and non-transferable
investments) is to be liquidated, Buyer and Seller shall mutually select the
securities to be liquidated. The Bank shall not be permitted to sell Loans to
fund the Dividend unless the value of the Bank's cash, cash equivalents and
securities portfolio (other than FHLB stock and other non-transferable
investments) is less than the amount required to be liquidated in order to fund
the Dividend. If it is necessary to sell or distribute Loans, then the Bank must
sell or distribute Loans selected by Buyer until aggregate net proceeds
sufficient to fund the Dividend have been realized. In any event, the Bank shall
use its commercially reasonable efforts to obtain the highest available price
for any asset sold to fund the Dividend and any such sale shall be conducted in
a
51
commercially reasonable manner.
6.14 Intercompany Arrangements.
(a) On or prior to the Closing Date, (i) the Bank shall pay and discharge all
amounts of intercompany indebtedness owed by the Bank to Seller or any
Affiliate of Seller (other than the Bank), including all amounts owed under
the tax sharing arrangement between the Bank, on the one hand, and Seller
or any Affiliate of Seller, on the other hand, for periods ending on or
before December 31, 2001, and (ii) Seller shall pay and discharge (or cause
to be paid and discharged) all amounts of intercompany indebtedness owed by
Seller or any Affiliate (other than the Bank) to the Bank. The payments
made pursuant to Section 6.14(a)(i) shall not include payments for income
Taxes that are covered by Section 6.7(d)(i).
(b) Other than as expressly contemplated by this Agreement and except for an
agreement dated July 1, 1999 to which an Affiliate services loans owned by
the Bank, Seller shall, and shall cause each of its Affiliates (other than
the Bank) to, terminate, effective at or prior to the Closing Date, in
accordance with their terms, any and all agreements (including without
limitation agreements granting Bank the right to use marks or names
involving the name of "Washington Mutual", "Wamu", "WM" or similar names or
logos thereof) then in effect as between Seller, any Affiliate of Seller
(other than the Bank) or any predecessor thereof, on the one hand, and the
Bank, on the other hand and, at such time, all rights under any such
agreement shall terminate and all liabilities under any such agreement
shall be paid and discharged in accordance with the provisions of Section
6.14(a) above.
6.15 Employees.
(a) Each person who is an employee of the Bank immediately
preceding the Closing Date (including employees on short-term leave but
excluding employees on long-term disability) shall continue as an employee of
the Surviving Bank after the Closing Date. Buyer shall provide each employee of
the Bank who continues employment with the Surviving Bank after the Closing
("Transferred Employee") with total cash compensation (including bonus,
commissions and incentives) that is for a period of twelve months following the
Effective Time comparable in the aggregate to the total cash compensation of
such Transferred Employee prior to the Effective Time and with participation in
the employee benefit plans, programs and arrangements of Buyer or Merger Sub, as
applicable (the "Buyer Plans"), on the same terms as such plans and benefits are
offered to similarly situated employees of Buyer or First State Bank, as
applicable; provided, however, that Buyer shall not be obligated to provide any
such Transferred Employee with coverage under any "bank-owned" life insurance
policy maintained by Buyer. In addition, Buyer and the Surviving Bank agree to
pay any Transferred Employee who is terminated within twelve months after the
Closing severance benefits which are no less than the amount to which such
Transferred Employee would have been entitled under the Bank's current severance
plan in effect as
52
of the Closing. With respect to Transferred Employees who are on short-term
leave as of the Closing, the Buyer and the Surviving Bank shall from and after
the Effective Time be liable for all obligations relating to such employees
under FMLA, COBRA and similar federal or state Laws.
(b) Buyer will, and will cause the Surviving Bank to, give
Transferred Employees full credit for purposes of eligibility, vesting, and
determination of the level of benefits under any employee benefit plans or
arrangements maintained by the Buyer or the Surviving Bank (but not for purposes
of benefit accruals under any defined benefit retirement plan maintained by, or
contributed to by, any such entity) in which such Transferred Employees are
eligible to participate for such Transferred Employees' service with the Bank to
the same extent recognized by the Bank immediately prior to the Closing Date.
Without limiting the generality of the foregoing, Buyer will, or will cause the
Surviving Bank to recognize such Transferred Employees' service with the Bank
for purposes of participation in any retirement, disability, medical insurance,
tuition reimbursement, vacation pay accrual and sick leave plans, policies,
programs or arrangements (but not for purposes of benefit accruals under any
defined benefit retirement plan maintained by, or contributed to by, any such
entity). Buyer shall, or shall cause the Surviving Bank to, (i) waive all
limitations as to preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to Transferred
Employees under any welfare plan that such employees may be eligible to
participate in after the Closing, other than limitations or waiting periods that
are already in effect with respect to such employees and that have not been
satisfied as of the Closing under any welfare plan maintained for the
Transferred Employees immediately prior to the Closing and (ii) provide each
Transferred Employee with credit for any co-payments and deductibles paid prior
to the Closing in satisfying any applicable deductible or out-of-pocket
requirements under any welfare plans that such employees are eligible to
participate in after the Closing. Upon or promptly following the Closing, the
Bank shall pay to each Transferred Employee his or her accrued vacation balance
as of the Closing Date. For a period of 12 months following the Closing Date,
Buyer agrees to allow each Transferred Employee to take unpaid leave for a
number of days equal to such employees' accrued vacation. Transferred Employees
shall become eligible for sick pay under Buyer's sick pay policies. For purposes
of the Transferred Employees participation in Buyer's sick pay policies, the
Transferred Employees will be given credit for their accrued sick leave with the
Bank prior to the Closing, but will be entitled to sick pay under Buyer's sick
pay policies no greater than the maximum amount of sick pay permitted under such
policies. Buyer agrees to take all actions necessary and appropriate to remove
any age restrictions contained in any qualified defined contribution plan
maintained by Buyer ("Buyer Savings Plan") which would, if not removed, prevent
Transferred Employees who were eligible to participate in any qualified defined
contribution maintained by Seller ("Seller Savings Plan") as of the Closing Date
from participating in such Buyer Savings Plan and to permit Transferred
Employees to enter the Buyer Savings Plan immediately following the Effective
Time.
(c) Seller shall be responsible for the payment of any
severance obligations, including, but not limited to, any amounts to be paid or
payable under any
53
employment or severance agreement or arrangement in effect as of the Closing,
with respect to any employee of the Bank as of the Closing who is not a
Transferred Employee.
(d) Seller agrees to indemnify Buyer, Merger Sub and the Bank
from any liability, cost or expense relating to any post-retirement medical and
life insurance benefits for which any current or former employee of the Bank is
entitled immediately prior to the Closing Date.
(e) Each Transferred Employee shall cease to accrue any
further benefits under either the Seller Savings Plan or the Seller's Cash
Balance Pension Plan (the "Seller Pension Plan") effective as of the Closing
Date, and each Transferred Employee who is a participant in the Seller Savings
Plan or the Seller Pension Plan shall be given the opportunity to receive, as
soon as practicable following the Closing Date, a distribution of his or her
account balance under such plan and, if Buyer agrees, shall be given the
opportunity to elect to "roll over" such account balance to the Buyer Savings
Plan, subject to and in accordance with the provisions of such plans and
applicable Law.
6.16 Other Real Estate Owned and Non-Performing Loans.
(a) Promptly following the date hereof, Seller or Parent shall purchase from
Bank all of the Bank's OREO as of April 30, 2002 at a price equal to the
net book value of such OREO on the Bank's books. In addition, (i) on or
before the 20th day of each month beginning in June 2002 and ending with
the month immediately preceding the Effective Time and (ii) on or before
Closing, Seller or Parent shall purchase from Bank all of the Bank's OREO
as of the last day of the previous month at a price equal to the net
realizable value of such OREO on the Bank's books.
(b) If, as of the last day of the last full calendar month prior to the Closing
Date, the outstanding principal balance (after reversing any accrued but
unpaid interest or other accrued but unpaid charges or fees) of Loans that
are 90 days or more delinquent exceeds $2,000,000, then at or prior to the
Closing Date Seller or Parent shall purchase from Bank a number of such
Loans (beginning with the most delinquent of such Loans and continuing
sequentially to the next most delinquent of such Loans) at the outstanding
principal balance (after reversing any accrued but unpaid interest or other
accrued but unpaid charges or fees) sufficient to reduce the outstanding
principal balance of Loans that are 90 days or more delinquent as of the
last day of the last full calendar month ending at least ten days prior to
the Closing Date to an amount not in excess of $2,000,000 (after reversing
any accrued but unpaid interest or other accrued but unpaid charges or
fees).
6.17 Additional Loans.
54
At any time prior to the 10th Business Day prior to Closing,
Buyer shall have the right to request that the Bank purchase up to $5,900,000 in
additional first lien single-family real estate loans with the geographic,
credit and other standards set forth on Section 6.17 of the Seller Disclosure
Schedule, and upon Buyer's timely request Parent and Seller shall cause the Bank
to, and the Bank shall, make such purchase prior to the Closing except to the
extent that making such purchase could be reasonably expected to preclude the
Bank from making a distribution of the Dividend in the full amount of
$37,500,000.
6.18 Computer Equipment.
On or prior to Closing, Parent and Merger Sub shall execute
and deliver an agreement in form and substance reasonably acceptable to each of
them pursuant to which, at the Effective Time, Parent shall sell and assign, and
Merger Sub shall purchase and assume, the computer equipment and the software
licenses set forth on Section 6.18 of the Seller Disclosure Schedule. In
consideration of sale and assignment described in the previous sentence, Buyer
shall pay Parent at the Effective Time an amount equal to the net book value of
such equipment as of the Closing Date. Merger Sub shall not be required to pay
any third party in connection with the transfer of such software licenses. The
agreement shall provide that the equipment and licenses shall be made available
to Merger Sub as of the Effective Time and Merger Sub shall be responsible for
moving the equipment. In the event that Merger Sub, after exercising
commercially reasonable efforts, is unable to relocate the equipment to
Albuquerque and to operate the equipment effectively in Albuquerque following
the Effective Time, then Parent agrees to provide operation of the equipment for
up to three months following the Effective Time, provided that Merger Sub shall
reimburse Parent for reasonable costs incurred in connection with such
operation. In addition, the agreement shall provide Merger Sub with reasonable
access to the equipment following the Closing for purposes of operating and
maintaining the equipment, preparing the equipment for relocation and moving the
equipment from Parent's premises.
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect the Merger. The respective
obligation of each party to effect the Merger shall be subject to the
satisfaction at or prior to the Closing of the following conditions:
(a) Regulatory Approvals. All regulatory approvals required to consummate the
transactions contemplated hereby, including the Merger, shall have been
obtained and shall remain in full force and effect and all statutory
waiting periods in respect thereof shall have expired (all such approvals
and the expiration of all such waiting periods being referred to herein as
the "Requisite Regulatory Approvals").
55
(b) No Injunctions or Restraints; Illegality. No Judgment or other legal
restraint or prohibition (an "Injunction") preventing the consummation of
the Merger shall be in effect. No Law shall have been enacted, entered,
promulgated or enforced by any Governmental Entity which prohibits or makes
illegal consummation of the Merger.
7.2 Conditions to Obligations of Buyer and Merger Sub. The obligation of Buyer
to effect the Merger is also subject to the satisfaction (or waiver by Buyer) at
or prior to the Closing of the following conditions:
(a) Representations and Warranties. (i) The representations and warranties of
Parent and Seller set forth in Section 3.2 (a) and (b) of this Agreement
shall be true and correct as of the date of this Agreement and (except to
the extent such representations and warranties speak as of an earlier date)
as of the Closing Date as though made on and as of the Closing Date; and
(ii) the representations and warranties of Parent and Seller set forth in
this Agreement (other than those set forth in Section 3.2(a) and (b)) shall
be true and correct as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as
of the Closing Date as though made on and as of the Closing Date, in each
case, without regard to any exception or qualification in such
representations and warranties relating to materiality or a Material
Adverse Effect; provided, however, that notwithstanding anything in this
Agreement to the contrary, the condition set forth in this Section 7.2(a)
(ii) shall be deemed to have been satisfied even if such representations
and warranties are not true and correct, unless the failure of any of such
representations and warranties to be so true and correct would reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect on the Bank.
(b) Performance of Obligations of Parent and Seller. Each of Parent and Seller
shall have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing Date.
(c) Certificate. Buyer shall have received a certificate signed on behalf of
Seller and Parent by an executive officer of Seller and Parent to the
effect that the conditions set forth in Sections 7.2(a) and (b) above have
been satisfied. No exceptions taken in such certificate will modify
Seller's or Parent's representations, warranties, covenants or agreements
made or deemed made hereunder or have any effect for purposes of Buyer's
closing conditions or indemnity rights hereunder.
(d) No Pending Governmental Actions. No proceeding initiated by any
Governmental Entity seeking an Injunction shall be pending.
(e) Consents. The consent, approval or waiver of each Person (other than the
Governmental Entities referred to in Section 3.4) whose consent to or
approval of the Merger shall be required under any loan or credit
agreement, note, mortgage,
56
indenture, lease, license or other agreement or instrument shall have been
obtained and shall remain in full force and effect, other than any consent,
approval or waiver the failure of which to obtain or to be in full force
and effect would not reasonably be expected to have a Material Adverse
Effect on the Bank. Without limiting the generality of the foregoing, the
contract or other third party consents specified in Section 7.2(e) of the
Buyer Disclosure Schedule will have been obtained.
(f) Regulatory Approvals. None of the approvals referred to in Section 7.1(a)
and no Law enacted, entered, promulgated or enforced by any Governmental
Entity after the date hereof shall have imposed any condition or
requirement which would be reasonably likely to have or result in a
material adverse effect on the economic or business benefits to Buyer of
the transactions contemplated by the Agreement.
(g) Financing. Buyer shall have obtained, upon terms and conditions satisfactory
to Buyer in its sole and absolute discretion, all financing required to
consummate the transactions contemplated hereby and to pay all related
fees, costs and expenses.
7.3 Conditions to Obligations of Parent, Seller and the Bank. The obligation of
Parent, Seller and the Bank to effect the Merger is also subject to the
satisfaction (or waiver by Seller) at or prior to the Closing of the following
conditions:
(a) Representations and Warranties. The representations and warranties of Buyer
set forth in this Agreement shall be true and correct as of the date of
this Agreement and (except to the extent such representations and
warranties speak as of an earlier date) as of the Closing Date as though
made on and as of the Closing Date; provided, however, that notwithstanding
anything in this Agreement to the contrary, the condition set forth in this
Section 7.3(a) shall be deemed to have been satisfied even if such
representations and warranties are not true and correct, unless the failure
of any of the representations and warranties to be so true and correct
would have, individually or in the aggregate, a Material Adverse Effect on
Buyer.
(b) Performance of Obligations of Buyer and Merger Sub. Each of Buyer and Merger
Sub shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Closing Date.
(c) Certificate. Seller shall have received a certificate signed on behalf of
Buyer by an executive officer of Buyer to the effect that the conditions
set forth in Sections 7.3(a) and (b) above have been satisfied. No
exceptions taken in such certificate will modify Buyer's representations,
warranties, covenants or agreements made or deemed made hereunder or have
any effect for purposes of Seller's closing conditions or indemnity rights
hereunder.
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(d) No Pending Governmental Actions. No proceeding initiated by any Governmental
Entity seeking an Injunction shall be pending.
(e) Consideration. Subject to Section 2.11, Buyer shall have deposited an amount
of cash equal to $67.0 million and the consideration Parent is entitled to
receive pursuant to Section 6.18 into escrow as set forth in Section 2.12
and either (i) the Dividend Adjustment Amount shall have been deposited in
escrow as provided in Section 2.12 or (ii) Seller shall have in its sole
discretion agreed to another procedure for payment of the Dividend
Adjustment Amount.
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written consent of Seller and Buyer;
(b) by either Buyer or Seller upon written notice to the other party (i) 60 days
after the date on which any request or application for a Requisite
Regulatory Approval shall have been denied by any Governmental Entity which
must grant such Requisite Regulatory Approval, unless within the 60-day
period following such denial or withdrawal a petition for rehearing or an
amended application has been filed with the applicable Governmental Entity,
provided, however, that no party shall have the right to terminate this
Agreement pursuant to this Section 8.1(b)(i) if such denial shall be due to
the failure of the party seeking to terminate this Agreement or an
Affiliate to perform or observe the covenants and agreements of such party
or Affiliate set forth herein or (ii) if any Governmental Entity of
competent jurisdiction shall have issued a final nonappealable order
enjoining or otherwise prohibiting the Merger;
(c) by either Buyer or Seller if the Merger shall not have been consummated on
or before October 11, 2002, unless the failure of the Closing to occur by
such date shall be due to the failure of the party seeking to terminate
this Agreement or an Affiliate to perform or observe the covenants and
agreements of such party set forth herein; provided, however, that at the
written request of Buyer such date shall be extended to November 12, 2002
provided that (a) Buyer is able to certify in writing that all regulatory
and shareholder approvals and the financing required to consummate the
transactions contemplated hereby are reasonably expected to be obtained
prior to November 12, 2002 and (b) Buyer delivers to Seller an updated
letter from KBW stating that KBW is highly confident that Buyer will be
able to obtain the financing required to consummate the transactions
contemplated hereby;
58
(d) by either Buyer or Seller (provided that the terminating party or an
Affiliate is not then in material breach of any representation, warranty,
covenant or other agreement contained herein) if there shall have been a
breach of any of the representations or warranties set forth in this
Agreement on the part of the other party or one of its Affiliates, which
breach is not cured within thirty (30) days following written notice to the
party committing (or whose Affiliate is committing) such breach, or which
breach, by its nature, cannot be cured prior to the Closing; provided,
however, that neither party shall have the right to terminate this
Agreement pursuant to this Section 8.1(d) unless the breach of
representation or warranty, together with all other such breaches, would
entitle the party receiving such representation not to consummate the
transactions contemplated hereby under Section 7.2(a) (in the case of a
breach of representation or warranty by Seller or an Affiliate) or Section
7.3(a) (in the case of a breach of representation or warranty by Buyer or
an Affiliate); or
(e) by either Buyer or Seller (provided that the terminating party or an
Affiliate is not then in material breach of any representation, warranty,
covenant or other agreement contained herein) if there shall have been a
material breach of any of the covenants or agreements set forth in this
Agreement on the part of the other party or an Affiliate, which breach
shall not have been cured within thirty (30) days following receipt by the
party committing (or whose Affiliate is committing) such breach of written
notice of such breach from the other party hereto, or which breach, by its
nature, cannot be cured prior to the Closing.
8.2 Effect of Termination. In the event of termination of this Agreement by
either Buyer or Seller as provided in Section 8.1, this Agreement shall
forthwith become void and have no effect except (a) Sections 6.2(b), 8.2, 8.3
and 10.1 shall survive any termination of this Agreement and (b) that
notwithstanding anything to the contrary contained in this Agreement, no party
shall be relieved or released from any liabilities or damages arising out of its
willful breach of any provision of this Agreement; provided, however, that in
any instance where the Termination Fee is payable, the receipt of the
Termination Fee by Seller shall constitute the sole and exclusive remedy for
Parent, Seller and the Bank under this Agreement and neither Buyer nor Merger
Sub shall have any further liability under this Agreement.
8.3 Termination Fee.
(a) If this Agreement is terminated by either party for any reason other than
termination by Buyer pursuant either to Section 8.1(d) or Section 8.1(e),
then Buyer shall pay to Seller in immediately available funds a termination
fee in an amount equal to $2 million (the "Termination Fee"); provided,
however, that Buyer shall not be obligated to pay the Termination Fee (i)
in the event that at the time of termination there is a breach by Seller or
Parent of its representations or warranties contained herein which would
entitle Buyer not to consummate the transactions contemplated hereby under
Section 7.2(a) or there is a breach by Seller or an Affiliate of its
covenants and other agreements contained herein
59
which would entitle Buyer to terminate this Agreement under Section 8.1(e)
and (ii) if the condition set forth in Section 7.3(e) that the Dividend
Adjustment Amount is deposited into the escrow is not satisfied solely
because the Banking Board of the State of Colorado has objected to such
deposit.
(b) Any payment of the Termination Fee pursuant to this Section 8.3 shall be
made within three Business Days after termination of this Agreement by wire
transfer of immediately available funds.
8.4 Amendment. Subject to compliance with applicable Law, this Agreement may be
amended by the parties hereto. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
8.5 Extension; Waiver. At any time prior to the Closing, each of the parties
hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other party hereto,
(b) waive any inaccuracies in the representations and warranties of the other
party contained herein or in any document delivered pursuant hereto and (c)
waive compliance with any of the agreements or conditions of the other party
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party, but such extension or waiver or failure to
insist on strict compliance with an obligation, covenant, agreement or condition
shall not operate as a waiver of, or estoppel with respect to, any subsequent or
other failure.
ARTICLE IX
INDEMNIFICATION
9.1 Survival Periods. All representations and warranties of the parties
contained in this Agreement, the Seller Disclosure Schedule or any certificate
delivered in connection herewith shall survive the Closing and continue for a
period of eighteen (18) months following the Closing Date and, if notice of a
claim is provided on or prior to the end of such period, such claim shall
survive until the final resolution or adjudication thereof, provided that the
representations and warranties in Sections 3.1, 3.2, 3.3(b) and 3.16(a) shall
survive without limit and provided, further, that the representations and
warranties contained in Sections 3.10, 3.23(a), 3.23(b), 3.23(c)(i),
3.23(c)(iv), 3.23(vi), 3.23(d) and 3.23(e) shall not survive the Closing. In
addition, the right to indemnification, payment of damages or other remedy shall
survive and shall be unaffected by (and shall not be deemed waived by) any
investigation, audit, appraisal or inspection (actual or constructive) at any
time made by or on behalf of (a) Buyer or Merger Sub in the case of the Parent's
and Seller's indemnification of Buyer, and (b) Parent, Seller or the Bank, in
the case of Buyer's indemnification of Parent and Seller. Any covenant or other
agreement set forth herein shall survive the Closing without limitations.
9.2 Indemnification by Seller and Parent.
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(a) From and after the Closing and subject to the provisions of this Article IX,
each of Parent and Seller, jointly and severally, accepts full and
exclusive liability for and agrees to pay and to indemnify fully, hold
harmless and defend each Buyer Indemnified Party from and against any and
all claims, demands, liabilities, damages, penalties, judgments,
assessments, losses, costs and expenses in any case, whether arising under
strict liability or otherwise (including reasonable attorneys' fees and
expenses) (collectively, "Damages"), resulting from, arising out of, based
on or relating to:
(i) any breach of or inaccuracy in any representation or
warranty of Seller or Parent in this Agreement or in any certificate
furnished to Buyer pursuant to this Agreement (other than any
representations and warranties that do not survive the Closing);
(ii) any breach of or inaccuracy in any representation or
warranty of Seller or Parent in this Agreement as of the Closing Date
(other than any such representation or warranty which, by its terms, is
made as of a specific date and other than any representations and
warranties that do not survive the Closing), each of which representations
and warranties will be deemed for purposes of this Section 9.2(a)(ii) to
have been made by Seller and Parent as of the Closing Date; or
(iii) any breach of any covenant or agreement made by
Seller or Parent in this Agreement or in any certificate furnished to Buyer
pursuant to this Agreement.
(b) Notwithstanding anything in this Agreement to the contrary, for purposes of
this Section 9.2, (i) a breach of a representation or warranty shall be
deemed to exist either if such representation or warranty is actually
inaccurate or breached or would have been inaccurate or breached if such
representation or warranty had not contained any limitation or
qualification as to materiality, Material Adverse Effect on the Bank (which
instead will be read as any adverse effect or change) or similar language,
and (ii) the amount of Damages in respect of any breach of a representation
or warranty (including any deemed breach resulting from the application of
clause (i)) shall be determined without regard to any limitation or
qualification as to materiality, Material Adverse Effect on the Bank (which
instead will be read as any adverse effect or change) or similar language
set forth in such representation or warranty, it being the intention of the
parties hereto that (except as otherwise set forth in this Article IX) the
Buyer Indemnified Parties shall be indemnified and held harmless from and
against any and all Damages suffered or incurred by any of them resulting
from, arising out of, based on or relating to, the failure of any
representation or warranty to be true, correct and complete in any respect,
determined in each case without regard to any qualification as to
materiality or Material Adverse Effect on the Bank or similar language set
forth with respect thereto.
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(c) For the purposes of this Article IX, in computing such individual or
aggregate amounts of Damages, the amount of each Damage shall be deemed to
be an amount net of any net insurance proceeds and any net indemnity,
contribution or other similar payment actually received from any insurer or
other third party with respect thereto. A Buyer Indemnified Party (except
as otherwise provided below) may, but need not, commence legal or other
proceedings to collect indemnity, contribution or other payments from any
such insurer or other third party. If a Buyer Indemnified Party elects to
do so, the costs and expenses (including reasonable fees and disbursements
of counsel) reasonably incurred by the Buyer Indemnified Parties in
pursuing any insurance proceeds or indemnity, contribution or other similar
payment from any insurer or other third party shall be deemed to be Damages
with respect to the matter for which indemnification is being sought,
except to the extent such costs and expenses are paid or reimbursed by such
insurer or other third party and except that Buyer Indemnified Party shall
not be entitled to such costs and expenses incurred after Parent has agreed
to pay the Damages with respect to which indemnification is being sought
and Parent has requested that Buyer not seek payment from any insurer or
third party. If a Buyer Indemnified Party elects not to commence such legal
or other proceedings, the Buyer Indemnified Party shall so advise Parent
and, if requested by Parent, Buyer, at Parent's election, shall, to the
extent permissible, assign the right to pursue the applicable claim or
right to payment to Parent (whether by insurance coverage, contribution
claims, subrogation or otherwise), and the Buyer Indemnified Party shall
reasonably cooperate with Parent, furnish such documents, witness testimony
and other evidence, and execute and deliver any and all powers of attorney,
instruments of assignment and other documents, as Parent reasonably may
request, all at Parent's sole cost and expense, to facilitate Parent's
prosecution of the applicable claim or right to payment. If such assignment
is not permissible, the Buyer Indemnified Party will at the request of
Parent commence legal or other proceedings provided that Parent agrees to
pay the Damages and all costs, expenses or other Damages incurred by the
Buyer Indemnified Party in such proceeding.
9.3 Indemnification by Buyer. From and after the Closing and subject to the
provisions of this Article IX, Buyer agrees to pay and to indemnify fully, hold
harmless and defend each Seller Indemnified Party from and against any and all
Damages resulting from, arising out of, based on or relating to:
(a) any breach of or inaccuracy in any representation or warranty of Buyer in
this Agreement or in any certificate furnished to Seller pursuant to this
Agreement; or
(b) any breach of any covenant or agreement made by Buyer in this Agreement or
in any certificate furnished to Seller pursuant to this Agreement.
9.4 Indemnification Procedure. For the purposes of administering the
indemnification provisions of this Article IX, the following procedures shall
apply from and after the Closing Date:
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(a) An indemnified party shall notify the Indemnitor of any Indemnification
Event in writing within thirty (30) days following the receipt of notice of
the commencement of any action or proceeding or within sixty (60) days of
(A) the assertion of any claim against such indemnified party or (B) the
discovery by such indemnified party of any loss giving rise to indemnity
pursuant to this Article IX (any 30-day or 60-day notification requirement
shall begin to run, in the case of a claim amended to give rise to an
Indemnification Event, from the first day such claim is amended to include
any claim that is an Indemnification Event hereunder), such notice to
describe in reasonable detail (to the extent known) the basis of such
Indemnification Event. The failure to give notice as required by this
Section 9.4(a) in a timely fashion shall not result in a waiver of any
right to indemnification hereunder, except to the extent that the
Indemnitor's ability to defend against the event with respect to which
indemnification is sought is materially adversely affected by the failure
of the indemnified party to give notice in a timely fashion as required by
this Section 9.4(a).
(b) If a claim by a third party (a "Third Party Claim") is made against an
indemnified party, and if such indemnified party intends to seek indemnity
with respect thereto under this Article IX, such indemnified party shall
promptly notify in writing the Indemnitor of such claims; provided, that,
the failure to promptly notify the Indemnitor will not relieve the
Indemnitor of any liability it may have to the indemnified party, except to
the extent that the Indemnitor demonstrates that the defense of such
Third-Party Claim is prejudiced by the indemnified party's failure to give
notice within such time period. The Indemnitor shall have 30 days after
receipt of such notice to undertake, conduct and control, through counsel
of its own choosing and at its own expense, the settlement or defense
thereof, and the indemnified party shall cooperate with it in connection
therewith; provided that the Indemnitor shall permit the indemnified party
to participate in such settlement or defense through counsel chosen by such
indemnified party, provided that the fees and expenses of such counsel
shall be borne by such indemnified party. If the Indemnitor so chooses to
assume the defense it shall do so promptly and diligently. So long as the
Indemnitor is reasonably contesting any such claim in good faith, the
indemnified party shall not pay or settle any such claim. If the Indemnitor
does not notify the indemnified party in writing within 30 days after the
receipt of the indemnified party's written notice of a claim of indemnity
hereunder that it elects to undertake the defense thereof or if, after
giving such notice, the Indemnitor shall fail to reasonably contest such
claim in good faith or shall cease to do so, the indemnified party shall
have the right to contest, settle or compromise the claim but shall not
thereby waive any right to indemnity therefor pursuant to this Agreement.
The Indemnitor shall not, except with the written consent of the
indemnified party, enter into any settlement unless (A) there is no finding
or admission of any violation of applicable Law, (B) the sole relief
provided is monetary damages that are paid in full by the Indemnitor, (C)
neither the indemnified party nor any of its Affiliates shall have no
liability with respect to any compromise or settlement of such Third Party
Claim, and (D) the compromise or settlement provides to all indemnified
parties and their Affiliates
63
and agents an unconditional release from all liability with respect to such
Third-Party Claim or the facts underlying such Third-Party Claim. With
respect to any Third-Party Claim subject to the indemnification under this
Article IX, (i) both the indemnified party and the Indemnitor, as the case
may be, shall keep the other party reasonably informed of the status of
such Third-Party Claim and any related proceedings at all stages thereof,
(ii) the parties agree to render to each other such assistance as they may
reasonably require of each other and to cooperate in good faith with each
other in order to ensure the proper and adequate defense of any Third-Party
Claim and (iii) the parties agree to cooperate in such a manner as to
preserve in full (to the extent possible) the confidentiality of all
confidential information and the attorney-client and work-product
privileges.
(c) In the event indemnification is requested, the relevant Indemnitor and its
Representatives shall have access to the premises, books and records of the
indemnified party or parties seeking such indemnification and the
Affiliates of the indemnified party or parties to the extent reasonably
necessary (i) for the Indemnitor to determine if the indemnification claim
relates to an Indemnification Event and (ii) to assist the Indemnitor in
defending or settling any action, proceeding or claim; provided, however,
that (A) such access shall be conducted in such manner so as not to
interfere unreasonably with the operation of the business of the
indemnified party (or parties) or their Affiliates and (B) no such access
shall be required where such access would jeopardize any attorney-client or
work product privilege or contravene any Law, rule, regulation, Judgment or
fiduciary duty. The parties hereto will make appropriate substitute
disclosure arrangements under circumstances in which the restrictions of
(B) of the preceding sentence apply.
(d) Except as reasonably necessary (i) for the Indemnitor to determine if the
indemnification claim relates to an Indemnification Event and (ii) to
assist it in defending or settling such action, proceeding or claim, the
indemnified party (or parties) and their Affiliates shall not be required
to disclose any information with respect to themselves (or former
Affiliates), and the indemnified party (or parties) and their Affiliates
shall not be required to participate in the defense of any claim to be
indemnified hereunder (except as otherwise expressly set forth herein). In
addition, the amount of any Damages (including Taxes) for which
indemnification is provided under Section 6.7 or this Article IX shall be
reduced to take account of any net Tax benefit by the indemnified party
arising from the incurrence or payment of any Damages (including Taxes).
(e) Notwithstanding anything to the contrary in this Section 9.4, the
Indemnitor shall continue to pay the reasonable attorneys' fees and
disbursements and other costs of separate legal counsel for the indemnified
parties (as a group) (i) relating to their participation in any
Indemnification Event (whether or not the Indemnitor shall have assumed the
defense of such Indemnification Event) to the extent such participation
relates to a claim or defense that the Indemnitor does not have, cannot
assert on behalf of the indemnified party or that the indemnified party
shall
64
have reasonably concluded (based on advice of outside counsel) relates to a
claim or defense as to which the Indemnitor may have a conflict of
interest, or (ii) relating to discovery against or testimony of such
indemnified party and for participation of such indemnified party's own
counsel in such discovery and testimony.
(f) Subject to Section 7.2(c), each indemnified party under this Article IX
shall use its reasonable efforts to mitigate liabilities for which it seeks
or reasonably anticipates seeking indemnification hereunder.
9.5 Limitations.
(a) Notwithstanding any provision to the contrary contained in this Agreement,
the maximum aggregate amount of Damages relating to breaches of
representations or warranties payable by Seller and Parent pursuant to
Sections 9.2(a)(i) and (ii) of this Agreement shall not exceed $50,000,000.
(b) Notwithstanding any provision to the contrary contained in this Agreement,
the maximum aggregate amount of Damages relating to breaches of
representations or warranties payable by Buyer pursuant to Section 9.3(a)
of this Agreement shall not exceed $50,000,000.
(c) Notwithstanding anything to the contrary contained in this Agreement, no
claim shall be made against Parent or Seller for indemnification under
Section 9.2(a)(i) or (a)(ii) with respect to any Damages unless the
aggregate of all such Damages described in clauses (i) and (ii) of Section
9.2(a) shall exceed $1,000,000 (the "Basket"), and Parent and Seller shall
only be required to pay or be liable for any such Damages arising under
such clauses (i) and (ii) of Section 9.2(a) to the extent that their
aggregate amount exceeds the Basket, and then only with respect to Damages
incurred in excess of such amount, provided, however, that the Basket
contained in this Section 9.5(c) shall not apply to, and dollar-for-dollar
recovery shall be available with respect to, Damages suffered, incurred or
sustained which arise out of, result from or are attributable to breaches
of any of the representations or warranties contained in Section 3.2.
(d) Notwithstanding any other provision to the contrary, in no event shall
Buyer, on the one hand, or Parent or Seller, on the other hand, be liable
to the other for any consequential or punitive Damages resulting from any
breach of this Agreement except to the extent that they are recovered
against a Buyer Indemnified Party or a Seller Indemnified Party as an
indemnified party with respect to an indemnified Third Party Claim.
9.6 Exclusive Remedy. Except as provided in Sections 6.7 and 10.6, the right to
indemnification, if any, with respect to breaches of representations, warranties
and covenants pursuant to this Article IX shall after Closing constitute the
sole and exclusive
65
remedy with respect thereto, shall preclude any other monetary award
(whether at law or in equity) and shall preclude assertion by any party
hereto of any right to any such monetary award from the Indemnitor.
66
ARTICLE X
GENERAL PROVISIONS
10.1 Expenses. Except as may be contemplated by Section 6.7(g), all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such costs and
expenses.
10.2 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
if to Buyer, to:
First State Bancorporation
0000 Xxxxxxxxx XX
Xxxxxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxx Xxxxxxxxx
Chief Financial Officer
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
0000 Xxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxx Xx Xxxxxxx XX
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and
if to Parent or Seller, to:
Washington Mutual Finance Corporation
0000 Xxxxx Xxx Xxxxxx
Xxxxx, XX 00000
Attention: Xxx Xxxxxxx, Chief Executive Officer
and
Washington Mutual, Inc.
0000 Xxxxx Xxxxxx, XXX 0000
Xxxxxxx, XX 00000
Attention: Xxxx Xxxxx, Executive Vice President
and
Washington Mutual, Inc.
0000 Xxxxx Xxxxxx, XXX 0000
Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxx, Senior Vice
President and Assistant General Counsel
with a copy to:
Xxxxxx Xxxxxx White & XxXxxxxxx LLP
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
10.3 Counterparts. This Agreement may be executed in counterparts, all of which
shall be considered one and the same agreement and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterpart.
10.4 Entire Agreement. This Agreement (including the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement.
10.5 Governing Law. This Agreement shall be governed and construed in accordance
with the Laws of New York, without regard to any applicable conflicts of law
provisions thereof.
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10.6 Enforcement of Agreement. The parties hereto agree that irreparable damage
would occur in the event that Sections 6.4, 6.6 or 6.12 of this Agreement were
not performed in accordance with its specific terms or was otherwise breached.
It is accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of Sections 6.4, 6.6 or 6.12 this Agreement and
to enforce specifically the terms and provisions thereof in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
10.7 Severability. Any term or provision of this Agreement which is invalid or
unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective
to the extent of such invalidity or unenforceability without rendering invalid
or unenforceable the remaining terms and provisions of this Agreement or
affecting the validity or enforceability of any of the terms or provisions of
this Agreement in any other jurisdiction. If any provision of this Agreement is
so broad as to be unenforceable, the provision shall be interpreted to be only
so broad as is enforceable.
10.8 Publicity. Except as otherwise required by Law or the rules of the New York
Stock Exchange or The NASDAQ Stock Market, so long as this Agreement is in
effect, neither Buyer, Parent nor Seller shall, or shall permit any of its
Affiliates to, issue or cause the publication of any press release or other
public announcement with respect to, or otherwise make any public statement
concerning, the transactions contemplated by this Agreement without the consent
of the other parties, which consent shall not be unreasonably withheld or
delayed.
10.9 Assignment; No Third Party Beneficiaries. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other party. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns. Except as otherwise
expressly provided herein, this Agreement (including the documents and
instruments referred to herein) is not intended to confer upon any person other
than the parties hereto any rights or remedies hereunder.
69
Exhibit 2.1
IN WITNESS WHEREOF, Buyer, Merger Sub, Parent, Seller and the Bank have
caused this Agreement to be executed by their respective officers thereunto duly
authorized as of the date first above written.
FIRST STATE BANCORPORATION
By: /S/ XXXXXXX X. XXXXXXXX
----------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President & CEO
FIRST STATE BANK OF TAOS
By: /S/ XXXXXXX X. XXXXXXXX
----------------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: President & CEO
FIRST COMMUNITY INDUSTRIAL BANK
By: /S/ XXXX X. XXXXX
----------------------------------------------
Name: Xxxx X. Xxxxx
Title: Vice President of Mergers &
Acquisitions
WASHINGTON MUTUAL FINANCE
CORPORATION
By: /S/ XXXXXXX X. XXXX
---------------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Senior Vice President
BLAZER FINANCIAL CORPORATION
By: /S/ XXXXXXX X. XXXX
----------------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Senior Vice President
