AGREEMENT AND PLAN OF MERGER

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

 

 

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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

 

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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.

 

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“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).

“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,

 

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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 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).

 

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“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.

“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

 

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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 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.

 

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“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 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.

 

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“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).

“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

 

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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.

“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

 

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“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.

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 7-111-106 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

 

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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 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 Heller Ehrman White & McAuliffe 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.

 

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(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;

(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

 

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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 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.

 

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(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).

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

 

18

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 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

 

19

(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 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

 

20

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 “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

 

21

due. The foregoing representation shall not apply with respect to Tax matters, which matters shall be governed solely by the tax representations and warranties 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

 

22

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, 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.

 

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(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 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.

 

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(l)	No power of attorney is currently in force with respect to any matter relating to Taxes of the Bank.

 

(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).

 

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(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 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

 

26

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 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

 

27

case of any such agreement with an individual, or $50,000 per annum, in the case of any other such agreement;

(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

 

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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.

 

(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.

 

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(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, 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

 

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Law or any alleged liability involving the presence of any Hazardous Material pursuant to any Environmental Law.

 

(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

 

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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 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 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