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EXHIBIT 2
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AGREEMENT AND PLAN OF MERGER
BETWEEN
CASCADE FINANCIAL CORPORATION
AND
CASCADE BANK
AND
ISSAQUAH BANCSHARES, INC.
AND
ISSAQUAH BANK
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DATED AS OF FEBRUARY 11, 2004
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TABLE OF CONTENTS
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RECITALS..........................................................................................................1
DEFINITIONS.......................................................................................................2
ARTICLE I.
THE
MERGER......................................................................................7
1.1 THE
CORPORATE
MERGER............................................................................7
1.2 THE BANK
MERGER.................................................................................8
1.3 CONVERSION
OF ISSAQUAH COMMON
STOCK.............................................................9
1.4 ELECTION
PROCEDURES............................................................................11
1.5 ISSAQUAH
OPTIONS...............................................................................13
1.4 DISSENTING
SHARES..............................................................................14
1.5 TAX
CONSEQUENCES...............................................................................14
ARTICLE II.
EXCHANGE OF
SHARES.............................................................................14
2.1 CASCADE TO
MAKE SHARES AND CASH
AVAILABLE......................................................14
2.2 EXCHANGE
OF
SHARES.............................................................................14
ARTICLE III. ACTIONS
PENDING
CLOSING........................................................................16
3.1 CAPITAL
STOCK..................................................................................16
3.2 DIVIDENDS,
ETC.................................................................................16
3.3
INDEBTEDNESS; LIABILITIES;
ETC.................................................................16
3.4 OPERATING
PROCEDURES; CAPITAL EXPENDITURES;
ETC................................................17
3.5
SUBSIDIARIES...................................................................................17
3.6
COMPENSATION; EMPLOYMENT AGREEMENTS,
ETC.......................................................17
3.7 BENEFIT
PLANS..................................................................................17
3.8
CONTINUANCE OF
BUSINESS........................................................................17
3.9
AMENDMENTS.....................................................................................17
3.10
CLAIMS.........................................................................................17
3.11
CONTRACTS......................................................................................17
3.12
LOANS..........................................................................................17
3.13
AGREEMENTS.....................................................................................18
ARTICLE IV.
CASCADE
FORBEARANCES...........................................................................18
4.1 CAPITAL
STOCK..................................................................................18
4.2 TAX-FREE
REORGANIZATION........................................................................18
4.3 AMENDMENT
OF
ARTICLES..........................................................................18
4.4 BUSINESS
COMBINATIONS..........................................................................18
4.5
AGREEMENTS.....................................................................................18
ARTICLE V.
REPRESENTATIONS AND
WARRANTIES.................................................................18
5.1 ISSAQUAH
AND ISSAQUAH BANK REPRESENTATIONS AND
WARRANTIES......................................18
5.2 CASCADE
AND CASCADE BANK REPRESENTATIONS AND
WARRANTIES........................................28
ARTICLE VI.
COVENANTS......................................................................................35
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Agreement and Plan of Merger
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6.1 BEST
EFFORTS...................................................................................35
6.2 PROXY
STATEMENT;
MEETING.......................................................................35
6.3
REGISTRATION STATEMENT COMPLIANCE WITH SECURITIES
LAWS.........................................35
6.4
REGISTRATION STATEMENT
EFFECTIVENESS...........................................................36
6.5 PUBLICITY;
PRESS
RELEASES......................................................................36
6.6 ACCESS;
INFORMATION............................................................................36
6.7
REGISTRATION STATEMENT
PREPARATION.............................................................36
6.8 AFFILIATE
AGREEMENTS...........................................................................36
6.9 STATE
TAKEOVER
LAWS............................................................................37
6.10
SHARES
LISTED..................................................................................37
6.11
NO RIGHTS
TRIGGERED............................................................................37
6.12
REGULATORY
APPLICATIONS........................................................................37
6.13
CURRENT
INFORMATION............................................................................37
6.14
INDEMNIFICATION AND
INSURANCE..................................................................37
6.15
TAX............................................................................................38
6.16
CERTAIN
ACTIONS................................................................................38
ARTICLE VII. CONDITIONS
PRECEDENT...........................................................................39
7.1 CONDITIONS
TO EACH PARTY'S
OBLIGATIONS.........................................................39
7.2 CONDITIONS
TO OBLIGATIONS OF
CASCADE...........................................................40
7.3 CONDITIONS
TO OBLIGATIONS OF
ISSAQUAH..........................................................42
ARTICLE VIII. TERMINATION AND
AMENDMENT......................................................................43
8.1
TERMINATION....................................................................................43
8.2 EFFECT OF
TERMINATION..........................................................................45
8.3
AMENDMENT......................................................................................46
8.4 EXTENSION;
WAIVER..............................................................................46
ARTICLE IX.
ADDITIONAL
AGREEMENTS..........................................................................46
9.1 ADDITIONAL
AGREEMENTS..........................................................................46
9.2 ADVISORY
BOARD.................................................................................46
9.3 EMPLOYEES
AND BENEFIT
PLANS....................................................................47
ARTICLE X.
GENERAL
PROVISIONS.............................................................................47
10.1
CLOSING; EFFECTIVE DATE;
DIVIDEND..............................................................48
10.2
SURVIVAL.......................................................................................48
10.3
COUNTERPARTS...................................................................................48
10.4
GOVERNING LAW;
VENUE...........................................................................48
10.5
EXPENSES.......................................................................................48
10.6
NOTICES........................................................................................48
10.7
ENTIRE
UNDERSTANDING...........................................................................49
10.8
ENFORCEMENT
PROCEEDINGS........................................................................49
10.9
HEADINGS.......................................................................................49
10.10
ENFORCEMENT OF CONFIDENTIALITY
AGREEMENT.......................................................49
10.11
SEVERABILITY...................................................................................49
10.12
ASSIGNMENT; NO THIRD PARTY
BENEFICIARIES.......................................................50
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Agreement and Plan of Merger
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT
AND PLAN OF MERGER, dated as of the 11th day of February,
2004 (this "Agreement"), is by and among
CASCADE FINANCIAL CORPORATION
("Cascade"); CASCADE BANK ("Cascade Bank");
ISSAQUAH BANCSHARES, INC.
("Issaquah"); and ISSAQUAH BANK ("Issaquah
Bank").
RECITALS
(A) CASCADE.
Cascade is a corporation duly organized and existing under the
laws of the state of Washington, with its
principal executive offices located in
Everett, Washington. Cascade is a
registered bank holding company and financial
holding company under the Bank Holding
Company Act of 1956, as amended. As of
the Execution Date, Cascade has 25,000,000
authorized shares of common stock,
$.01 par value per share ("Cascade Common
Stock") (no other class of capital
stock being authorized), of which 8,241,288
shares of Cascade Common Stock are
issued and outstanding. As of December 31,
2003, Cascade had capital of $64.0
million, divided into common stock of $.1
million, surplus of $11.9 million and
retained earnings of $52.0 million.
(B) CASCADE
BANK. Cascade Bank is a banking corporation duly organized and
existing under the laws of the state of
Washington. As of the Execution Date,
Cascade Bank has 40,000,000 authorized
shares of common stock, $1.00 par value
per share ("Cascade Bank Common Stock") (no
other class of capital stock being
authorized), of which 100 shares are issued
and outstanding and owned by
Cascade, the sole shareholder of Cascade
Bank.
(C) ISSAQUAH.
Issaquah is a corporation duly organized and existing under
the laws of the state of Washington, with
its principal executive offices
located in Issaquah, Washington. Issaquah
is a registered bank holding company
and financial holding company under the
Bank Holding Company Act of 1956, as
amended. As of the Execution Date, Issaquah
has 1,500,000 authorized shares of
common stock, $1.00 par value per share
("Issaquah Common Stock") (no other
class of capital stock being authorized),
of which 408,538 shares of Issaquah
Common Stock are issued and outstanding. As
of December 31, 2003, Issaquah had
capital of $10,495,828, divided into common
stock of $408,538, surplus of
$3,129,060 and retained earnings of
$5,384,660. As of the Execution Date,
Issaquah has 35,000 shares of Issaquah
Common Stock reserved for issuance under
its 1993 Employee Stock Option Plan and
1996 Director Stock Option Plan pursuant
to which options covering 29,010 shares of
Issaquah Common Stock are outstanding
("Issaquah Options").
(D) ISSAQUAH
BANK. Issaquah Bank is a banking corporation duly organized
and existing under the laws of the state of
Washington. As of the Execution Date
of this Agreement, Issaquah Bank has
600,000 authorized shares of common stock,
$1.00 par value per share ("Issaquah Bank
Common Stock") (no other class of
capital stock being authorized), of which
236,896 shares are issued and
outstanding and owned by Issaquah, the sole
shareholder of Issaquah Bank.
(E) VOTING
AGREEMENT. As a condition and an inducement to Cascade's and
Cascade Bank's willingness to enter into
this Agreement, (x) the directors and
executive officers of Issaquah have entered
into agreements in the form attached
to this Agreement as Exhibit A, pursuant to
which, among other things, each such
individual has agreed to vote his or her
shares of Issaquah Common Stock in
favor of approval of the actions
contemplated by this Agreement at the Meeting
(as defined below), and (y) each director
of Issaquah and Issaquah Bank has
entered into an agreement in the form
attached to
Agreement and Plan of Merger - Page 1
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this Agreement as Exhibit B pursuant to
which each such individual has agreed to
refrain from competing with Cascade and
Cascade Bank after the Effective Date.
(F) RIGHTS, ETC.
Except as Previously Disclosed (as defined below) in
Schedule 5.1(C), or paragraph (C) of the
Recitals to this Agreement, or as
authorized by this Agreement, there are no
shares of capital stock of Issaquah
authorized and reserved for issuance; and
Issaquah has no Rights (as defined
below) issued or outstanding, and has no
commitment to authorize, issue or sell
any such shares or any Rights. The term
"Rights" means securities or obligations
convertible into or exchangeable for, or
giving any Person any right to
subscribe for or acquire, or any options,
warrants, calls or commitments
relating to, shares of capital stock. There
are no preemptive rights with
respect to Issaquah Common Stock.
(G) APPROVALS.
At meetings of the respective Boards of Directors of
Cascade, Cascade Bank, Issaquah and
Issaquah Bank, each such Board has duly
approved and authorized the execution of
this Agreement.
In consideration
of their mutual promises and obligations, the parties
further agree as follows:
DEFINITIONS
(A) DEFINITIONS. Certain
capitalized terms used in this Agreement have the
following meanings:
"Acquisition
Agreement" has the meaning assigned to such term in Section
8.1(G).
"Acquisition
Proposal" has the meaning assigned to such term in Section
6.16(D).
"Agreement"
means this Agreement and Plan of Merger, together with all
Exhibits and Schedules annexed to, and
incorporated by specific reference as a
part of, this Agreement.
"Appraisal Laws"
has the meaning assigned to such term in Section 1.6.
"Business Day"
means any day other than a Saturday, Sunday, or legal
holiday in the state of Washington.
"Capital" means
capital stock, surplus and retained earnings determined in
accordance with GAAP.
"Cascade" means
Cascade Financial Corporation, a Washington corporation and
a registered bank holding company and
financial holding company.
"Cascade Average
Closing Price" means the price equal to the average
(rounded to the nearest ten thousandth) of
each Daily Sales Price of Cascade
Common Stock for the twenty Trading Days
immediately preceding the Determination
Date.
"Cascade Common
Stock" has the meaning assigned to such term in paragraph
(A) of the Recitals.
Agreement and Plan of Merger - Page 2
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"Cascade Financial
Reports" has the meaning assigned to such term in
Section 5.2(H).
"Cascade's
Knowledge," "Knowledge of Cascade" or words of similar meaning
means the actual conscious knowledge as of
the Execution Date, without any duty
of inquiry, of Cascade's officers, managers
and employees.
"Cascade Bank's
Knowledge," "Knowledge of Cascade Bank" or words of similar
meaning means the actual conscious
knowledge as of the Execution Date, without
any duty of inquiry, of Cascade Bank's
officers, managers and employees.
"Cascade Bank
Common Stock" has the meaning assigned to such term in
paragraph (B) of the Recitals.
"Cascade
Reports" has the meaning assigned to such term in Section
5.2(AA).
"Cascade
Transaction" means: (1) a merger, consolidation or similar
transaction involving Cascade, where
Cascade is not the corporation surviving
such transaction or where a change of
control of Cascade is otherwise effected,
(2) the disposition, by sale, lease,
exchange or otherwise, of assets or
deposits of Cascade or any of its
significant Subsidiaries representing in
either case 25% or more of the consolidated
assets or deposits of Cascade and
its Subsidiaries, or (3) the issuance, sale
or other disposition (including by
way of merger, consolidation, share
exchange or any similar transaction) of
securities representing 25% or more of the
voting power of Cascade or any of its
significant Subsidiaries other than the
issuance of Cascade Common Stock upon
the exercise of outstanding options or the
conversion of outstanding convertible
securities of Cascade.
"Certificate"
has the meaning assigned to such term in Section 1.3(B).
"Closing" has
the meaning assigned to such term in Section 10.1.
"Code" has the
meaning assigned to such term in Section 1.7.
"Compensation
and Benefit Plans" has the meaning assigned to such term in
Section 5.1(Q)(1).
"Confidentiality
Agreement" has the meaning assigned to such term in
Section 6.6(B).
"Continuing
Bank" has the meaning assigned to such term in Section 1.2(A).
"Continuing
Corporation" has the meaning assigned to such term in Section
1.1(A).
"Control" with
respect to any Person means the possession, directly or
indirectly, of the power to direct or cause
the direction of the management and
policies of such Person, whether through
the ownership of voting interests, by
contract, or otherwise.
"Daily Sales
Price" for any Trading Day means the daily closing price per
share of Cascade Common Stock on the NASDAQ
Stock Market reporting system, as
reported on the website of
www.nasdaq.com.
"Department"
means the Department of Financial Institutions of the state of
Washington.
Agreement and Plan of Merger - Page 3
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"Derivatives
Contract" means an exchange-traded or over-the-counter swap,
forward, future, option, cap, floor or
collar financial contract or any other
contract that: (1) is not included on the
balance sheet of the Issaquah
Financial Reports or the Cascade Financial
Reports, as the case may be, and (2)
is a derivative contract (including various
combinations thereof).
"Determination
Date" means the third Trading Day immediately prior to the
Effective Date.
"Dissenting
Shares" means the shares of Issaquah Common Stock held by those
shareholders of Issaquah who have timely
and properly exercised their
dissenters' rights in accordance with the
Appraisal Laws.
"DPC Shares" has
the meaning assigned to such term in Section 1.3(D).
"Effective Date"
has the meaning assigned to such term in Section 10.1.
"Employment
Agreement" shall mean the agreement with the Chief Executive
Officer of Issaquah described in Section
7.3(F).
"Environmental
Law" means (1) any federal, state, and/or local law,
statute, ordinance, rule, regulation, code,
license, permit, authorization,
approval, consent, legal doctrine, order,
judgment, decree, injunction,
requirement or agreement with any
governmental entity, relating to (a) the
protection, preservation or restoration of
the environment (including air, water
vapor, surface water, groundwater, drinking
water supply, surface land,
subsurface land, plant and animal life or
any other natural resource) or to
human health or safety, or (b) the exposure
to, or the use, storage, recycling,
treatment, generation, transportation,
processing, handling, labeling,
production, release or disposal of
Hazardous Material, in each case as amended
and as now in effect, including the Federal
Comprehensive Environmental
Response, Compensation, and Liability Act
of 1980, the Superfund Amendments and
Reauthorization Act, the Federal Water
Pollution Control Act of 1972, the
Federal Clean Air Act, the Federal Clean
Water Act, the Federal Resource
Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste
Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic
Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act,
and the Federal Occupational Safety and
Health Act of 1970, and (2) any common
law or equitable doctrine (including
injunctive relief and tort doctrines such
as negligence, nuisance, trespass and
strict liability) that may impose
liability or obligations for injuries or
damages due to, or threatened as a
result of, the presence of or exposure to
any Hazardous Material.
"ERISA" has the
meaning assigned to such term in Section 5.1(Q)(2).
"ERISA
Affiliate" has the meaning assigned to such term in Section
5.1(Q)(3).
"ERISA Plans"
has the meaning assigned to such term in Section 5.1(Q)(2).
"Exchange Act"
means the Securities Exchange Act of 1934, as amended,
together with the rules and regulations
promulgated under such statute.
"Exchange Agent"
has the meaning assigned to such term in Section 2.1.
"Exchange Fund"
has the meaning assigned to such term in Section 2.1.
Agreement and Plan of Merger - Page 4
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"Execution Date"
means the last date on which this Agreement is executed by
each of the parties hereto.
"Executive
Officer" has the meaning set forth in Rule 405 of Regulation C
under the Securities Act.
"FDIC" means the
Federal Deposit Insurance Corporation.
"Federal Reserve
Board" means the Board of Governors of the Federal Reserve
System.
"GAAP" means
generally accepted accounting principles consistently applied.
"Hazardous
Material" means any substance presently listed, defined,
designated or classified as hazardous,
toxic, radioactive or dangerous, or
otherwise regulated, under any
Environmental Law, whether by type or quantity,
including any oil or other petroleum
product, toxic waste, pollutant,
contaminant, hazardous substance, toxic
substance, hazardous waste, special
waste or petroleum or any derivative or
by-product thereof, radon, radioactive
material, asbestos, asbestos containing
material, urea formaldehyde foam
insulation, lead and polychlorinated
biphenyl.
"Issaquah" means
Issaquah Bancshares, Inc., a Washington corporation and a
registered bank holding company and
financial holding company.
"Issaquah Common Stock" has the
meaning assigned to such term in paragraph
(C) of the Recitals.
"Issaquah
Contract" has the meaning assigned to such term in Section
5.1(N).
"Issaquah
Financial Reports" has the meaning assigned to such term in
Section 5.1(H).
"Issaquah's
Knowledge," "Knowledge of Issaquah" or words of similar meaning
means the actual conscious knowledge as of
the Execution Date, without any duty
of inquiry, of Issaquah's officers,
managers and employees.
"Issaquah Bank's
Knowledge," "Knowledge of Issaquah Bank" or words of
similar meaning means the actual conscious
knowledge as of the Execution Date,
without any duty of inquiry, of Issaquah
Bank's officers, managers and
employees.
"Issaquah
Options" has the meaning assigned to such term in paragraph (C)
of the Recitals.
"Issaquah
Reports" has the meaning assigned to such term in Section
5.1(GG).
"Loan/Fiduciary
Property" means any property owned or controlled by a party
or any of its Subsidiaries or in which such
party or any of its Subsidiaries
holds a security or other interest, and,
where required by the context, includes
any such property where such party or any
of its Subsidiaries constitutes the
owner or operator of such property, but
only with respect to such property.
"Material
Adverse Effect" means, with respect to any party to this
Agreement, an event, occurrence or
circumstance (including (i) the making of any
provisions for possible loan and lease
losses,
Agreement and Plan of Merger - Page 5
<PAGE>
write-downs of other real estate owned and
taxes, and (ii) any breach of a
representation or warranty contained in
this Agreement by such party) that (a)
has or is reasonably likely to have a
material adverse effect on the financial
condition, results of operations, business
or prospects of such party and its
Subsidiaries, taken as a whole, or (b)
would materially impair such party's
ability to perform its obligations under
this Agreement or the consummation of
any of the transactions contemplated by
this Agreement.
"Meeting" has
the meaning assigned to such term in Section 6.2.
"Merger" means
(i) the merger of Issaquah with and into Cascade (the
"Corporate Merger") pursuant to Section
1.1, in exchange for cash and Cascade
Common Stock as set forth in Section 1.3,
and (ii) the merger of Issaquah Bank
with and into Cascade Bank (the "Bank
Merger"), pursuant to Section 1.2.
"Merger
Consideration" has the meaning assigned to such term in Section
1.3(A).
"Multiemployer
Plans" has the meaning assigned to such term in Section
5.1(Q)(2).
"NASDAQ" means
the National Association of Securities Dealers Automated
Quotations system.
"Participation
Facility" means any building or other facility in which a
party or any of its Subsidiaries
participates in the management and, where
required by the context, includes the owner
or operator of such facility.
"Pension Plan"
has the meaning assigned to such term in Section 5.1(Q)(2).
"Per Share Cash
Consideration" has the meaning assigned to such term in
Section 1.3(A).
"Per Share Stock
Consideration" has the meaning assigned to such term in
Section 1.3(A).
"Person" means
any individual, corporation (including any non-profit
corporation), general or limited
partnership, limited liability company, joint
venture, estate, trust, association,
organization, labor union, governmental
body, or other entity.
"Previously
Disclosed" means information provided by a party in a Schedule
that is delivered by that party to the
other party contemporaneously with the
Execution Date.
"Proxy
Statement" has the meaning assigned to such term in Section
6.2.
"RCW" means the
Revised Code of Washington, as amended.
"Registration
Statement" has the meaning assigned to such term in Section
6.2.
"Regulatory
Authorities" means federal or state governmental agencies,
authorities or departments charged with the
supervision or regulation of
depository institutions or engaged in the
insurance of deposits.
Agreement and Plan of Merger - Page 6
<PAGE>
"Rights" has the
meaning assigned to such term in paragraph (F) of the
Recitals to this Agreement.
"SEC" means the
Securities and Exchange Commission.
"Securities Act"
means the Securities Act of 1933, as amended, together
with the rules and regulations promulgated
under such statute.
"Subsidiary"
means, with respect to any entity, each partnership, limited
liability company, or corporation the
majority of the outstanding partnership
interests, membership interests, capital
stock or voting power of which is (or
upon the exercise of all outstanding
warrants, options and other rights would
be) owned, directly or indirectly, at the
time in question by such entity.
"Superior
Proposal" has the meaning assigned to such term in Section
6.16.
"Tax Returns"
has the meaning assigned to such term in Section 5.1(AA).
"Taxes" means
federal, state, local or foreign income, gross receipts,
windfall profits, severance, property,
production, sales, use, license, excise,
franchise, employment, withholding or
similar taxes imposed on the income,
properties or operations of the respective
party or its Subsidiaries, together
with any interest, additions, or penalties
with respect thereto and any interest
in respect of such additions or
penalties.
"Termination Fee
Amount" has the meaning assigned to such term in Section
8.2(B).
"Third Party"
means a person within the meaning of Sections 3(a)(9) and
13(d)(3) of the Exchange Act, excluding:
(1) Issaquah, Issaquah Bank or any
other Subsidiary of Issaquah, and (2)
Cascade, Cascade Bank or any other
Subsidiary of Cascade.
"Trading Day"
means a day that Cascade Common Stock is traded on NASDAQ.
"Trust Account
Shares" has the meaning assigned to such term in Section
1.3(D).
(B) GENERAL
INTERPRETATION. Except as otherwise expressly provided in this
Agreement or unless the context clearly
requires otherwise, the terms defined in
this Agreement include the plural as well
as the singular; the words "hereof,"
"herein," "hereunder," "in this Agreement"
and other words of similar import
refer to this Agreement as a whole and not
to any particular Article, Section or
other subdivision; and references in this
Agreement to Articles, Sections,
Schedules and Exhibits refer to Articles
and Sections of and Schedules and
Exhibits to this Agreement. Unless
otherwise stated, references to Subsections
refer to the Subsections of the Section in
which the reference appears. All
pronouns used in this Agreement include the
masculine, feminine and neuter
gender, as the context requires. All
accounting terms used in this Agreement
that are not expressly defined in this
Agreement have the respective meanings
given to them in accordance with GAAP.
ARTICLE I. THE MERGER
1.1 THE
CORPORATE MERGER. Subject to the provisions of this Agreement,
on
the Effective Date:
Agreement and Plan of Merger - Page 7
<PAGE>
(A) CONTINUING CORPORATION. Issaquah shall be merged with and
into
Cascade pursuant to the terms and
conditions set forth herein. Upon consummation
of the Corporate Merger, the separate
existence of Issaquah shall cease and
Cascade shall continue as the Continuing
Corporation.
(B) ARTICLES, BYLAWS, DIRECTORS, OFFICERS. The Articles of
Incorporation and Bylaws of the Continuing
Corporation shall be those of
Cascade, as in effect immediately prior to
the Effective Date. The directors and
officers of Cascade in office immediately
prior to the Effective Date shall be
the directors and officers of the
Continuing Corporation, together with such
additional directors and officers as may
thereafter be elected, who shall hold
office until such time as their successors
are elected and qualified.
(C) RIGHTS, ETC. The Continuing Corporation shall thereupon and
thereafter possess all of the rights,
privileges, immunities and franchises, of
a public as well as of a private nature, of
each of the corporations so merged;
and all property, real, personal and mixed,
and all debts due on whatever
account, and all and every other interest,
of or belonging to or due to each of
the corporations so merged, shall be deemed
to be vested in the Continuing
Corporation without further act or deed;
and the title to any real estate or any
interest therein, vested in each of such
institutions, shall not revert or be in
any way impaired by reason of the Corporate
Merger.
(D) EFFECTS OF THE MERGER. The separate existence of Issaquah
shall
cease, and Issaquah shall be merged with
and into Cascade which, as the
Continuing Corporation, shall thereupon and
thereafter possess all of the
assets, rights, privileges, appointments,
powers, licenses, permits and
franchises of the two merged corporations,
whether of a public or a private
nature, and shall be subject to all of the
liabilities, restrictions,
disabilities and duties of both Cascade and
Issaquah.
(E) TRANSFER OF ASSETS. All rights, assets, licenses, permits,
franchises and interests of Cascade and
Issaquah in and to every type of
property, whether real, personal, or mixed,
whether tangible or intangible,
shall be deemed to be vested in Cascade as
the Continuing Corporation by virtue
of the Corporate Merger becoming effective
and without any deed or other
instrument or act of transfer
whatsoever.
(F) ASSUMPTION OF LIABILITIES. The Continuing Corporation shall
become
and be liable for all debts, liabilities,
obligations and contracts of Cascade
as well as those of Issaquah, whether the
same shall be matured or unmatured;
whether accrued, absolute, contingent or
otherwise; and whether or not reflected
or reserved against in the balance sheets,
other financial statements, books of
account or records of Cascade or
Issaquah.
1.2 THE BANK
MERGER. Subject to the provisions of this Agreement, on the
Effective Date:
(A) CONTINUING BANK. Issaquah Bank shall be merged with and
into
Cascade Bank pursuant to the terms and
conditions set forth herein. Upon
consummation of the Bank Merger, the
separate existence of Issaquah Bank shall
cease and Cascade Bank shall continue as
the Continuing Bank.
(B) ARTICLES, BYLAWS, DIRECTORS, OFFICERS. The Articles of
Incorporation and Bylaws of the Continuing
Bank shall be those of Cascade Bank,
as in effect
Agreement and Plan of Merger - Page 8
<PAGE>
immediately prior to the Effective Date.
The directors and officers of Cascade
Bank in office immediately prior to the
Effective Date shall be the directors
and officers of the Continuing Bank,
together with such additional directors and
officers as may thereafter be elected, who
shall hold office until such time as
their successors are elected and
qualified.
(C) RIGHTS, ETC. The Continuing Bank shall thereupon and
thereafter
possess all of the rights, privileges,
immunities and franchises, of a public as
well as of a private nature, of each of the
institutions so merged; and all
property, real, personal and mixed, and all
debts due on whatever account, and
all and every other interest, of or
belonging to or due to each of the
institutions so merged, shall be deemed to
be vested in the Continuing Bank
without further act or deed; and the title
to any real estate or any interest
therein, vested in each of such
institutions, shall not revert or be in any way
impaired by reason of the Bank Merger.
(D) EFFECTS OF THE BANK MERGER. The separate existence of Issaquah
Bank
shall cease, and Issaquah Bank shall be
merged with and into Cascade Bank which,
as the Continuing Bank, shall thereupon and
thereafter possess all of the
assets, rights, privileges, appointments,
powers, licenses, permits and
franchises of the two merged banks, whether
of a public or a private nature, and
shall be the subject of all of the
liabilities, restrictions, disabilities and
duties of both Cascade Bank and Issaquah
Bank.
(E) TRANSFER OF ASSETS. All rights, assets, licenses, permits,
franchises and interests of Cascade Bank
and Issaquah Bank in and to every type
of property, whether real, personal, or
mixed, whether tangible or intangible,
shall be deemed to be vested in Cascade
Bank as the Continuing Bank by virtue of
the Bank Merger becoming effective and
without any deed or other instrument or
act of transfer whatsoever.
(F) ASSUMPTION OF LIABILITIES. The Continuing Bank shall become and
be
liable for all debts, liabilities,
obligations and contracts of Cascade Bank as
well as those of Issaquah Bank, whether the
same shall be matured or unmatured;
whether accrued, absolute, contingent or
otherwise; and whether or not reflected
or reserved against in the balance sheets,
other financial statements, books of
account, or records of Cascade Bank or
Issaquah Bank.
1.3 CONVERSION
OF ISSAQUAH COMMON STOCK. Subject to the provisions of this
Agreement, on the Effective Date:
(A) OUTSTANDING ISSAQUAH COMMON STOCK. Each share of Issaquah
Common
Stock issued and outstanding at the
Execution Date shall, by virtue of the
Merger, automatically and without any
action on the part of the holder of such
share, be converted into and exchangeable
for the right to receive, at the
election of the holder thereof as provided
in and subject to the provisions of
Section 1.4, either: (1) a number of shares
of Cascade Common Stock equal to the
Per Share Stock Consideration, or (2) cash
in an amount equal to the Per Share
Consideration (the "Per Share Cash
Consideration"); the Per Share Stock
Consideration and the Per Share Cash
Consideration are referred to herein
collectively as the "Merger
Consideration."
For purposes of this Section 1.3(A):
"Aggregate
Consideration" shall mean the sum of (x) the Total Stock
Consideration and (y) the Total Cash
Amount.
Agreement and Plan of Merger - Page 9
<PAGE>
"Per Share
Consideration" shall mean the quotient, rounded to the nearest
ten-thousandth, obtained by dividing the
Aggregate Consideration by the total
number of shares of Issaquah Common Stock
outstanding as of the close of
business on the Execution Date.
"Per Share Stock
Consideration" shall mean the quotient, rounded to the
nearest ten-thousandth, obtained by
dividing the Per Share Consideration by the
Cascade Average Closing Price.
"Total Cash
Amount" shall mean an amount equal to $9,192,105.
"Total Stock
Amount" shall mean 1,188,268 shares of Cascade Common Stock;
provided, however, that (i) subject to
Section 8.1(H) if the Cascade Average
Closing Price is less than $14.44 then the
number of shares of Cascade Common
Stock shall be increased so that the Merger
Consideration is not less than
$64.50 per share of Issaquah Common Stock,
and (ii) if the Cascade Average
Closing Price is more than $21.66 then the
number of shares of Cascade Common
Stock shall be reduced so that the Merger
Consideration is not more than $85.50
per share of Issaquah Common Stock (unless
Cascade announces or enters into a
Cascade Transaction or an acquisition by
Cascade of the stock or assets of
another company representing ten percent
(10%) or more of the consolidated
assets or deposits of Cascade or its
Subsidiaries prior to the Effective Date,
in which case the number of shares of
Cascade Common Stock shall not be
reduced). An illustration of the
calculations of the Merger Consideration and
the Aggregate Consideration and the effect
of the foregoing "Collar" on the
Total Stock Amount is attached as Exhibit F
to this Agreement.
"Total Stock
Consideration" shall mean the product obtained by multiplying
(x) the Total Stock Amount and (y) the
Cascade Average Closing Price.
(B) All of the shares of Issaquah Common Stock converted into
the
Merger Consideration pursuant to this
ARTICLE I shall no longer be outstanding
and shall automatically be canceled and
shall cease to exist, and each holder of
a certificate (each a "Certificate")
previously representing any such shares of
Issaquah Common Stock shall thereafter
cease to have any rights with respect to
such securities, except the right to
receive (1) the Merger Consideration, (2)
any dividends and other distributions in
accordance with Section 2.2(B) hereof,
and (3) any cash to be paid in lieu of any
fractional share of Cascade Common
Stock in accordance with Section 2.2(E)
hereof.
(C) If, between the Execution Date and the Effective Date, the
shares
of Cascade Common Stock shall be changed
into a different number or class of
shares by reason of any reclassification,
recapitalization, split-up,
combination, exchange of shares or
readjustment, or a stock dividend thereon
shall be declared with a record date within
such period, appropriate adjustments
shall be made to the Per Share Cash
Consideration and the Per Share Stock
Consideration.
(D) As of the Effective Date, all shares of Issaquah Common Stock
that
are owned, directly or indirectly, by
Issaquah or Cascade or any of their
respective Subsidiaries [other than shares
of Issaquah Common Stock (x) held
directly or indirectly in trust accounts,
managed accounts and the like or
otherwise held in a fiduciary capacity for
the benefit of third parties (any
such shares, and shares of Cascade Common
Stock which are similarly held,
whether held directly or indirectly by
Cascade or Issaquah, as the case may be,
being referred to herein as "Trust Account
Shares") or (y) held by Cascade or
Issaquah or any of their respective
Subsidiaries in respect of a debt previously
contracted (any such shares of Issaquah
Common Stock, and shares of Cascade
Common Stock which are similarly held,
whether held directly or indirectly by
Cascade or Issaquah, being referred to
herein as "DPC Shares")]
Agreement and Plan of Merger - Page 10
<PAGE>
shall be canceled and shall cease to exist
and no stock of Cascade, cash or
other consideration shall be delivered in
exchange therefor.
(E) The calculations required by Section 1.3(A) shall be
prepared
jointly by Cascade and Issaquah prior to
the Effective Date.
1.4 ELECTION
PROCEDURES.
(A) An election form and other appropriate and customary
transmittal
materials (which shall specify that
delivery shall be effected, and risk of loss
and title to the certificates theretofore
representing shares of Issaquah Common
Stock shall pass, only upon proper delivery
of such certificates to the Exchange
Agent) in such form as Issaquah and Cascade
shall mutually agree (the "Election
Form") shall be mailed with the Proxy
Statement on the date of mailing of the
Proxy Statement or on such other date as
Cascade and Issaquah shall mutually
agree (the "Mailing Date") to each holder
of record of Issaquah Common Stock as
of the close of business on the fifth
business day prior to the Mailing Date
(the "Election Form Record Date").
(B) Each Election Form shall permit the holder (or the beneficial
owner
through appropriate and customary
documentation and instructions) to (x) elect
to receive (1) the Per Share Stock
Consideration in respect of all of such
holder's Issaquah Common Stock ("Stock
Election Shares"); (2) the Per Share Cash
Consideration in respect of all of such
holder's Issaquah Common Stock ("Cash
Election Shares"); (3) the Per Share Stock
Consideration in respect of that
portion of such holder's shares of Issaquah
Common Stock equal to the Stock
Percentage (as defined below), rounded to
the nearest whole share (the "Mixed
Stock Shares"), and the Per Share Cash
Consideration in respect of that portion
of such holder's shares of Issaquah Common
Stock equal to the Cash Percentage
(as defined below), rounded to the nearest
whole share (the "Mixed Cash Shares,"
and together with the Mixed Stock Shares,
the "Mixed Election Shares"); or (y)
to make no election with respect to such
holder's Issaquah Common Stock ("No
Election Shares"). Any Issaquah Common
Stock with respect to which the Exchange
Agent has not received an effective,
properly completed Election Form on or
before 5:00 p.m., Pacific Time, on the date
prior to the Determination Date (or
such other time and date as Cascade and
Issaquah may mutually agree) (the
"Election Deadline") shall also be deemed
to be "No Election Shares." "Cash
Percentage" shall mean the quotient,
rounded to the nearest thousandth, obtained
by dividing (x) the quotient obtained by
dividing the Total Cash Amount by the
Per Share Consideration, by (y) the total
number of shares of Issaquah Common
Stock outstanding as of the close of
business on the Determination Date. "Stock
Percentage" shall mean the amount equal to
one (1) minus the Cash Percentage.
(C) Cascade shall make available one or more Election Forms as
may
reasonably be requested from time to time
by all persons who become holders (or
beneficial owners) of Issaquah Common Stock
between the Election Form Record
Date and the close of business on the
business day prior to the Election
Deadline, and Issaquah shall provide to the
Exchange Agent all information
reasonably necessary for it to perform as
specified herein.
(D) Any such election shall have been properly made only if the
Exchange Agent shall have actually received
a properly completed Election Form
by the Election Deadline. An Election Form
shall be deemed properly completed
only if accompanied by one or more
certificates (or customary affidavits and
indemnification regarding the loss or
destruction of such certificates or the
guaranteed delivery of such certificates)
representing all shares of Issaquah
Common Stock covered by such Election
Agreement and Plan of Merger - Page 11
<PAGE>
Form, together with duly executed
transmittal materials included in the Election
Form. Any Election Form may be revoked or
changed by the person submitting such
Election Form at or prior to the Election
Deadline. In the event an Election
Form is revoked prior to the Election
Deadline, the shares of Issaquah Common
Stock represented by such Election Form
shall become No Election Shares and
Cascade shall cause the certificates
representing Issaquah Common Stock to be
promptly returned without charge to the
Person submitting the Election Form upon
written request to that effect from the
holder who submitted the Election Form.
Subject to the terms of this Agreement and
of the Election Form, the Exchange
Agent shall have reasonable discretion to
determine whether any election,
revocation or change has been properly or
timely made and to disregard
immaterial defects in the Election Forms,
and any good faith decisions of
Cascade regarding such matters shall be
binding and conclusive. Neither Cascade
nor the Exchange Agent shall be under any
obligation to notify any person of any
defect in an Election Form.
(E) Within ten business days after the Election Deadline, unless
the
Effective Date has not yet occurred, in
which case as soon thereafter as
practicable, Cascade shall cause the
Exchange Agent to effect the allocation
among the holders of Issaquah Common Stock
of rights to receive Cascade Common
Stock or cash in the Merger in accordance
with the Election Forms as follows:
(1) Cash Election Shares and Mixed Cash Shares More Than Total
Cash Amount. If the aggregate cash amount that would be paid upon
the
conversion in the Merger of the Cash Election Shares and the
Mixed
Cash Shares is greater than the Total Cash Amount, then:
(i) all Mixed Stock Shares, Stock Election Shares and No
Election Shares shall be converted into the right to receive
the
Per Share Stock Consideration;
(ii) the Exchange Agent shall then select from among the
Cash Election Shares, by a pro rata selection process, a
sufficient number of shares ("Stock Designated Shares") such
that
the aggregate cash amount that will be paid in the Merger
equals
as closely as practicable the Total Cash Amount, and all Stock
Designated Shares shall be converted into the right to receive
the Per Share Stock Consideration; and
(iii) the Cash Election Shares that are not Stock Designated
Shares and all Mixed Cash Shares will be converted into the
right
to receive the Per Share Cash Consideration.
(2) Cash Election Shares Plus Mixed Cash Shares Less Than Total
Cash Amount. If the aggregate cash amount that would be paid
upon
conversion in the Merger of the Cash Election Shares and the
Mixed
Cash Shares is less than the Total Cash Amount, then:
(i) all Cash Election Shares and Mixed Cash Shares shall be
converted into the right to receive the Per Share Cash
Consideration;
(ii) the Exchange Agent shall then select first from among
the No Election Shares and then (if necessary) from among the
Stock Election Shares, by a pro rata selection process, a
sufficient number of shares ("Cash Designated Shares") such
that
the aggregate cash amount that will be paid in the Merger
equals
as closely as practicable the Total Cash Amount, and all Cash
Designated Shares shall be converted into the right to receive
the Per Share Cash Consideration; and
Agreement and Plan of Merger - Page 12
<PAGE>
(iii) the Stock Election Shares and the No Election Shares
that are not Cash Designated Shares and all Mixed Stock Shares
shall be converted into the right to receive the Per Share
Stock
Consideration.
(3) Cash Election Shares Plus Mixed Cash Shares Equal to Total
Cash Amount. If the aggregate cash amount that would be paid
upon
conversion in the Merger of the Cash Election Shares and the
Mixed
Cash Shares is equal or nearly equal (as determined by the
Exchange
Agent) to the Total Cash Amount, then subparagraphs (1) and (2)
above
shall not apply, and all Cash Election Shares and Mixed Cash
Shares
shall be converted into the right to receive the Per Share Cash
Consideration, and all Stock Election Shares, Mixed Stock Shares,
and
No Election Shares shall be converted into the right to receive
the
Per Share Stock Consideration.
(F) The pro rata selection process to be used by the Exchange
Agent
shall consist of such equitable pro ration
processes as shall be determined by
Cascade and reasonably satisfactory to
Issaquah.
1.5 ISSAQUAH
OPTIONS. Notwithstanding anything to the contrary in this
Agreement, and in addition to the Aggregate
Consideration:
(A) Each holder of Issaquah Options, who exercises such options
between
the Execution Date and the Effective Date,
shall receive shares of Issaquah
Common Stock all of which shall be
converted on the Effective Date into either
(x) the Per Share Stock Consideration or
the Per Share Cash Consideration or
Mixed Cash Shares and Mixed Stock Shares
based on his or her Election Form
submitted pursuant to the election
procedures in Section 1.4 (without regard to
the pro rata selection process of Section
1.4(E) and Section 1.4(F)), or (y) if
no effective election is made, (1) the Per
Share Stock Consideration in respect
of that portion of such holder's shares of
Issaquah Common Stock acquired upon
exercise of his option equal to the Stock
Percentage (as defined in Section
1.4(B)), rounded to the nearest whole
share, and (2) the Per Share Cash
Consideration in respect of that portion of
such shares of Issaquah Common Stock
equal to the Cash Percentage (as defined in
Section 1.4(B)).
(B) Each holder of an Issaquah Option that is unexercised on
the
Effective Date, shall receive consideration
for each share of Issaquah Common
Stock into which the option is exercisable,
equal to the difference or spread
between the Per Share Consideration and the
exercise price of such option,
payable in (x) the Per Share Stock
Consideration in respect of that portion of
such option shares equal to the Stock
Percentage (as defined in Section 1.4(B)),
rounded to the nearest whole share, and (y)
the Per Share Cash Consideration in
respect of that portion of such option
shares equal to the Cash Percentage (as
defined in Section 1.4(B)).
(C) Provided, however, that at least fifty percent (50%) of the sum
of
(1) the Aggregate Consideration (as defined
in Section 1.3(A)) and (2) any
additional consideration with respect to
Issaquah Options pursuant to this
Agreement shall be paid in Cascade Common
Stock. If and to the extent that such
limitation would not otherwise be
satisfied, then a portion of the amount
otherwise payable under this Section 1.5
shall instead be paid to such holders
on a pro rata basis in Cascade Common Stock
(based on the Cascade Average
Closing Price).
(D) The names of the holders, dates of issuance and expiration,
the
number of shares subject to each such
option, and the exercise price for all
Issaquah Options as of the Execution Date
are
Agreement and Plan of Merger - Page 13
<PAGE>
Previously Disclosed in Schedule 1.5(D).
All such Issaquah Options shall be 100%
vested and exercisable on the Effective
Date, and be terminated by the Board of
Directors of Issaquah on the day after the
Effective Date. The Board of
Directors of Issaquah shall notify all
optionees in writing of such
exercisability of their options, and the
termination of their options after the
Effective Date, at least sixty (60) days
prior to the Effective Date pursuant to
the 1993 Employee Stock Option Plan and the
1996 Director Stock Option Plan.
1.6 DISSENTING
SHARES. Notwithstanding anything to the contrary in this
Agreement, each Dissenting Share whose
holder, as of the Effective Date of the
Merger, has not effectively withdrawn or
lost his dissenters' rights under RCW
23B.13 (the "Appraisal Laws") shall not be
converted into or represent a right
to receive Cascade Common Stock, but the
holder of such Dissenting Share shall
be entitled only to such rights as are
granted by the Appraisal Laws, unless and
until such holder shall have failed to
perfect or shall have effectively
withdrawn or lost the right to payment
under the Appraisal Laws, in which case
each such share shall be deemed to have
been converted at the Effective Date
into the right to receive Cascade Common
Stock (based on the Per Share Stock
Consideration defined in Section 1.3(A))
without any interest thereon. Each
holder of Dissenting Shares who becomes
entitled to payment for his Issaquah
Common Stock pursuant to the provisions of
the Appraisal Laws shall receive
payment for such Dissenting Shares from
Cascade (but only after the amount
thereof shall have been agreed upon or
finally determined pursuant to the
Appraisal Laws).
1.7 TAX
CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of
Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code") and that
this Agreement shall constitute a plan
of reorganization for the purposes of
Section 368 of the Code.
ARTICLE II. EXCHANGE OF SHARES
2.1 CASCADE TO
MAKE SHARES AND CASH AVAILABLE. On or before the Effective
Date, Cascade shall deposit, or shall cause
to be deposited, with a bank or
trust company (the "Exchange Agent")
selected by Cascade and reasonably
satisfactory to Issaquah, for the benefit
of the holders of Certificates, for
exchange in accordance with this ARTICLE
II: (A) certificates representing the
shares of Cascade Common Stock to be issued
pursuant to Section 1.3 and Section
2.2(A) in exchange for outstanding shares
of Issaquah Common Stock; (B) such
cash as shall be necessary to pay the Per
Share Cash Consideration in accordance
with Section 1.3 and 2.2(A); and (C) the
cash in lieu of fractional shares to be
paid in accordance with Section 2.2(E).
Such cash and certificates for shares of
Cascade Common Stock, together with any
dividends or distributions with respect
thereto, are hereinafter referred to as the
"Exchange Fund."
2.2 EXCHANGE OF
SHARES.
(A) As soon as practicable after the Effective Date, and in no
event
more than five business days thereafter,
the Exchange Agent shall mail to each
holder of record of a Certificate or
Certificates who theretofore has not
submitted such holder's Certificate or
Certificates with an Election Form, a
form letter of transmittal (which shall
specify that delivery shall be effected,
and risk of loss and title to the
Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent) and
instructions for use in effecting
the surrender of the Certificates in
exchange for the Merger Consideration.
After completion of the allocation
procedure set forth in Section 1.4 and upon
surrender of a Certificate or Certificates
for exchange and cancellation to the
Exchange Agent, together with a
Agreement and Plan of Merger - Page 14
<PAGE>
properly executed letter of transmittal or
Election Form, as the case may be,
the holder of such Certificate or
Certificates shall be entitled to receive in
exchange therefor (x) a certificate
representing that number of whole shares of
Cascade Common Stock which such holder of
Issaquah Common Stock became entitled
to receive pursuant to the provisions of
ARTICLE I hereof and/or (y) a check
representing the aggregate Per Share Cash
Consideration and/or the amount of
cash in lieu of fractional shares, if any,
which such holder has the right to
receive in respect of the Certificate or
Certificates surrendered pursuant to
the provisions of ARTICLE I, and the
Certificate or Certificates so surrendered
shall forthwith be canceled. No interest
will be paid or accrued on the Per
Share Cash Consideration, the cash in lieu
of fractional shares or the unpaid
dividends and distributions, if any,
payable to holders of Certificates.
(B) No dividends or other distributions declared after the
Effective
Time with respect to Cascade Common Stock
and payable to the holders of record
thereof shall be paid to the holder of any
unsurrendered Certificate until the
holder thereof shall surrender such
Certificate in accordance with this ARTICLE
II. After the surrender of a Certificate in
accordance with this ARTICLE II, the
record holder thereof shall be entitled to
receive any such dividends or other
distributions, without any interest
thereon, which theretofore has become
payable with respect to shares of Cascade
Common Stock represented by such
Certificate.
(C) If any certificate representing shares of Cascade Common Stock
is
to be issued in a name other than that in
which the Certificate surrendered in
exchange therefor is registered, it shall
be a condition of the issuance thereof
that the Certificate so surrendered shall
be properly endorsed (or accompanied
by an appropriate instrument of transfer)
and otherwise in proper form for
transfer, and that the person requesting
such exchange shall pay to the Exchange
Agent in advance any transfer or other
taxes required by reason of the issuance
of a certificate representing shares of
Cascade Common Stock in any name other
than that of the registered holder of the
Certificate surrendered, or required
for any other reason, or shall establish to
the satisfaction of the Exchange
Agent that such tax has been paid or is not
payable.
(D) After the Effective Date, there shall be no transfers on the
stock
transfer books of Issaquah of the shares of
Issaquah Common Stock which were
issued and outstanding immediately prior to
the Effective Date. If, after the
Effective Date, Certificates representing
such shares are presented for transfer
to the Exchange Agent, they shall be
canceled and exchanged for certificates
representing shares of Cascade Common Stock
or cash or both, as provided in this
ARTICLE II.
(E) Notwithstanding anything to the contrary contained herein,
no
certificates or scrip representing
fractional shares of Cascade Common Stock
shall be issued upon the surrender for
exchange of Certificates, no dividend or
distribution with respect to Cascade Common
Stock shall be payable on or with
respect to any fractional share, and such
fractional share interests shall not
entitle the owner thereof to vote or to any
other rights of a shareholder of
Cascade. In lieu of the issuance of any
such fractional share, Cascade shall pay
to each former shareholder of Issaquah who
otherwise would be entitled to
receive a fractional share of Cascade
Common Stock an amount in cash determined
by multiplying (1) the Cascade Average
Closing Price by (2) the fraction of a
share of Cascade Common Stock which such
holder would otherwise be entitled to
receive pursuant to Section 1.3 hereof.
(F) Any portion of the Exchange Fund that remains unclaimed by
the
shareholders of Issaquah for twelve months
after the Effective Date shall be
paid to Cascade. Any shareholders of
Issaquah who have not theretofore complied
with this ARTICLE II shall thereafter look
only to Cascade
Agreement and Plan of Merger - Page 15
<PAGE>
for payment of the Merger Consideration,
the cash in lieu of fractional shares
and/or the unpaid dividends and
distributions on the Cascade Common Stock
deliverable in respect of each share of
Issaquah Common Stock such shareholder
holds as determined pursuant to this
Agreement, in each case, without any
interest thereon. Notwithstanding the
foregoing, none of Cascade, Cascade Bank,
Issaquah, Issaquah Bank, the Exchange Agent
or any other person shall be liable
to any former holder of shares of Issaquah
Common Stock for any amount properly
delivered to a public official pursuant to
applicable abandoned property,
escheat or similar laws.
(G) In the event any Certificate shall have been lost, stolen
or
destroyed, upon the making of an affidavit
of that fact by the person claiming
such Certificate to be lost, stolen or
destroyed and, if required by Cascade,
the posting by such person of a bond in
such amount as Cascade may direct as
indemnity against any claim that may be
made against it with respect to such
Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or
destroyed Certificate the Merger
Consideration deliverable in respect thereof
pursuant to this Agreement.
(H) Certificates surrendered for exchange by any person
constituting an
"affiliate" of Issaquah for purposes of
Rule 145 of the Securities Act shall not
be exchanged for certificates representing
Cascade Common Stock until Cascade
has received a written agreement from such
person as specified in Section 6.8.
ARTICLE III. ACTIONS PENDING CLOSING
Unless otherwise
agreed to in writing by Cascade, following the Execution
Date until the Effective Date, Issaquah and
Issaquah Bank shall conduct their
businesses in the ordinary and usual course
consistent with past practice and
shall use their best efforts to maintain
and preserve their business
organizations, employees and advantageous
business relationships and retain the
services of their officers and key
employees identified by Cascade Bank.
Further, Issaquah and Issaquah Bank,
without the prior written consent of
Cascade, will not:
3.1 CAPITAL STOCK. Except
for the exercise of outstanding Issaquah Options,
or as Previously Disclosed in Schedule
5.1(C), issue, sell or otherwise permit
to become outstanding any additional shares
of capital stock of Issaquah, or any
Rights with respect thereto, or enter into
any agreement with respect to the
foregoing, or permit any additional shares
of Issaquah Common Stock to become
subject to grants of stock options,
warrants, stock appreciation rights, or any
other stock-based employee compensation
rights.
3.2 DIVIDENDS,
ETC. Except as permitted by Section 10.1, make, declare or
pay any dividend on or in respect of, or
declare or make any distribution on, or
directly or indirectly combine, split,
subdivide, redeem, reclassify, purchase
or otherwise acquire, any shares of its
capital stock or, other than as
permitted in or contemplated by this
Agreement (and except for the acquisition
of Trust Account Shares and DPC Shares),
authorize the creation or issuance of,
or issue, any additional shares of its
capital stock or any Rights with respect
thereto.
3.3
INDEBTEDNESS; LIABILITIES; ETC. Other than in the ordinary course
of
business consistent with past practice,
incur any indebtedness for borrowed
money, assume, guarantee, endorse or
otherwise as an accommodation become
responsible or liable for the obligations
of any other individual, corporation
or other entity.
Agreement and Plan of Merger - Page 16
<PAGE>
3.4 OPERATING
PROCEDURES; CAPITAL EXPENDITURES; ETC. Except as may be
directed by any regulatory agency, (A)
change its lending, investment, liability
management or other material banking
policies in any material respect, or (B)
commit to incur any further capital
expenditures beyond those Previously
Disclosed in Schedule 3.4 other than in the
ordinary course of business and not
exceeding $25,000 individually or $100,000
in the aggregate.
3.5
SUBSIDIARIES. Organize or acquire, directly or indirectly, any
Subsidiaries.
3.6
COMPENSATION; EMPLOYMENT AGREEMENTS, ETC. Except as Previously
Disclosed in Schedule 3.6, enter into or
amend any consulting, employment,
severance or similar agreement or
arrangement with any of its directors,
officers or employees, or grant any salary
or wage increase, amend the terms of
any Issaquah Option or increase any
employee benefit (including incentive or
bonus payments), except normal individual
increases in regular compensation to
employees in the ordinary course of
business consistent with past practice and,
provided, however, that Robert M. Ittes
shall be entitled to receive, on the
Effective Date, a change of control payment
from Issaquah in the amount
calculated pursuant to paragraph 1(c) of
his existing Severance/Change of
Control Agreement with Issaquah and
Issaquah Bank.
3.7 BENEFIT
PLANS. Except as Previously Disclosed in Schedule 3.7, enter
into or modify (except as may be required
by applicable law) any pension,
retirement, stock option, stock purchase,
savings, profit sharing, deferred
compensation, consulting, bonus, group
insurance or other employee benefit,
incentive or welfare contract, plan or
arrangement, or any trust agreement
related thereto, in respect of any of its
directors, officers or other
employees, including taking any action that
accelerates the vesting or exercise
of any benefits payable thereunder.
3.8 CONTINUANCE
OF BUSINESS. Dispose of or discontinue any portion of its
assets, business or properties that exceeds
$25,000 in value or is otherwise
material to its business, or merge or
consolidate with, or acquire all or any
portion of, the business or property of any
other entity that exceeds $100,000
in value or is otherwise material to it
(except foreclosures or acquisitions by
Issaquah Bank in its fiduciary capacity and
loan participations, in each case in
the ordinary course of business consistent
with past practice).
3.9 AMENDMENTS.
Amend its Articles of Incorporation or Bylaws.
3.10 CLAIMS.
Settle any claim, litigation, action or proceeding involving
any liability for money damages in excess
of $25,000 or material restrictions
upon its operations.
3.11 CONTRACTS.
Except as previously disclosed on Schedule 3.11, enter
into, renew, terminate or make any change
in any (A) Issaquah Contract involving
future payments in excess of $10,000 in any
12-month period, except in the
ordinary course of business consistent with
past practice with respect to
contracts and agreements that are
terminable by it without penalty on no more
than 90 days' prior written notice, or (B)
in any branch, office or building
lease or sublease.
3.12 LOANS.
Extend credit or account for loans and leases other than in
accordance with existing lending policies
and accounting practices or, without
prior notice to and consultation with
Cascade's Chief Executive Officer, make
any new loan or extend or renew any
existing loan in a principal amount in
excess of $250,000, or sell any existing
loan.
Agreement and Plan of Merger - Page 17
<PAGE>
3.13 AGREEMENTS.
Agree to, or make any commitment to, take any of the
actions prohibited by this ARTICLE III.
ARTICLE IV. CASCADE FORBEARANCES
Following the
Execution Date until the Effective Date, except as expressly
contemplated or permitted by this
Agreement, Cascade and Cascade Bank shall not,
without the prior written consent of
Issaquah:
4.1 CAPITAL
STOCK. Reclassify any of its capital stock or make, declare, or
pay any dividend or make any other
distribution on, any shares of its capital
stock or any securities or obligations,
convertible into or exchangeable for any
shares of its capital stock (except for
regular quarterly cash dividends at a
rate not in excess of such rate as Cascade
from time to time adopts as its
regular quarterly dividend rate and except
for dividends paid by any of its
wholly owned Subsidiaries or any of their
wholly owned Subsidiaries).
4.2 TAX-FREE
REORGANIZATION. Take any action that would prevent or impede
the Merger from qualifying as a
reorganization within the meaning of Section
368(a) of the Code.
4.3 AMENDMENT OF
ARTICLES. Amend its Articles of Incorporation.
4.4 BUSINESS
COMBINATIONS. Effect a Cascade Transaction.
4.5 AGREEMENTS.
Agree to, or make any commitment to, take any of the
actions prohibited by this ARTICLE IV.
ARTICLE V. REPRESENTATIONS AND WARRANTIES
5.1 ISSAQUAH AND
ISSAQUAH BANK REPRESENTATIONS AND WARRANTIES. Issaquah and
Issaquah Bank, jointly and severally,
hereby represent and warrant to Cascade
and Cascade Bank as follows:
(A)
RECITALS. The facts set forth in the Recitals of this Agreement
with respect to Issaquah and Issaquah Bank
are true and correct in all material
respects.
(B) ORGANIZATION, QUALIFICATION AND AUTHORITY. Each of Issaquah
and
Issaquah Bank is duly qualified to do
business in each state of the United
States where the failure to be duly
qualified is reasonably likely to have a
Material Adverse Effect on them. Each of
Issaquah and Issaquah Bank and their
Subsidiaries has in effect all federal,
state and local governmental
authorizations necessary for it to own or
lease its properties and assets and to
carry on its business as it is now
conducted, the absence of which, individually
or in the aggregate, is reasonably likely
to have a Material Adverse Effect on
Issaquah. Issaquah Bank is an "insured
depository institution" as defined in the
Federal Deposit Insurance Act, as amended,
and applicable regulations under such
statute, and its deposits are insured by
the Bank Insurance Fund of the FDIC to
the fullest extent permitted by law and all
premiums and assessments required to
be paid in connection therewith have been
paid.
(C) SHARES. The outstanding shares of Issaquah's capital stock
are
validly issued and outstanding, fully paid
and non-assessable, and subject to no
preemptive rights. Except as Previously
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<PAGE>
Disclosed in Schedule 5.1(C), there are no
shares of capital stock or other
equity securities of Issaquah or Issaquah
Bank outstanding and no outstanding
Rights with respect thereto.
(D) ISSAQUAH AND ISSAQUAH BANK SUBSIDIARIES. Issaquah and Issaquah
Bank
have no Subsidiaries other than Issaquah
Bank, which has no Subsidiaries. Except
as previously disclosed in Schedule 5.1(D),
Issaquah and Issaquah Bank do not
own beneficially, directly or indirectly,
any shares of any equity securities or
similar interests of any corporation, bank,
partnership, joint venture, business
trust, association or other
organization.
(E) CORPORATE POWER. Each of Issaquah and Issaquah Bank has the
corporate power and authority to carry on
its business as it is now being
conducted and to own all its material
properties and assets.
(F) CORPORATE AUTHORITY. Subject to any necessary receipt of
approval
by its shareholders referred to in Section
7.1(A), this Agreement has been
authorized by all necessary corporate
action of Issaquah and Issaquah Bank, and
each such agreement is a valid and binding
agreement of Issaquah and of Issaquah
Bank, enforceable against Issaquah and
Issaquah Bank in accordance with its
terms, subject to bankruptcy, insolvency
and other laws of general applicability
relating to or affecting creditors' rights
and to general equity principles.
(G) NO DEFAULTS. Subject to the approval by its shareholders
referred
to in Section 7.1(A), the required
regulatory approvals referred to in Section
7.1(B), and the required filings under
federal securities laws, and except as
Previously Disclosed in Schedule 5.1(G),
the execution, delivery and performance
of this Agreement and the consummation by
Issaquah and each of its Subsidiaries
of the transactions contemplated by this
Agreement do not and will not (1)
constitute a breach or violation of, or a
default under, any law, rule or
regulation or any judgment, decree, order,
governmental permit or license, or
agreement, indenture or instrument of
Issaquah or any of its Subsidiaries or to
which Issaquah or any of its Subsidiaries
or their properties is subject or
bound, which breach, violation or default
is reasonably likely, individually or
in the aggregate, to have a Material
Adverse Effect on Issaquah, (2) constitute
a breach or violation of, or a default
under, the Articles of Incorporation or
Bylaws of Issaquah any of its Subsidiaries,
or (3) require any consent or
approval under any such law, rule,
regulation, judgment, decree, order,
governmental permit or license or the
consent or approval of any other party to
any such agreement, indenture or
instrument, other than any such consent or
approval that, if not obtained, would not
be reasonably likely, individually or
in the aggregate, to have a Material
Adverse Effect on Issaquah.
(H) FINANCIAL REPORTS. Except as Previously Disclosed in
Schedule
5.1(H), (1) Issaquah's audited balance
sheet as of December 31 for the fiscal
years 2001 and 2002, and the related
consolidated statements of income, changes
in shareholders' equity and cash flows for
the fiscal years ended 2000 through
2002, inclusive, and such consolidated
financial statements for the fiscal year
2003 and all subsequent consolidated
quarterly financial statements of Issaquah,
and (2) Issaquah Bank's call report for the
fiscal year ended December 31, 2003,
and all other financial reports filed or to
be filed subsequent to December 31,
2003, in the form filed with the FDIC and
the Department (in each such case
under the foregoing clauses (1) and (2),
the "Issaquah Financial Reports"), did
not and will not contain any untrue
statement of a material fact or omit to
state a material fact required to be stated
therein or necessary to make the
statements made therein, in light of the
circumstances under which they were
made, not misleading; and each of the
balance sheets in or incorporated by
reference into the Issaquah Financial
Reports (including the related notes and
schedules thereto) fairly presents and will
fairly
Agreement and Plan of Merger - Page 19
<PAGE>
present the financial position of the
entity or entities to which it relates as
of its date, and each of the statements of
income and changes in shareholders'
equity and cash flows or equivalent
statements in the Issaquah Financial Reports
(including any related notes and schedules
thereto) fairly presents and will
fairly present the results of operations,
changes in shareholders' equity and
cash flows, as the case may be, of the
entity or entities to which it relates
for the periods set forth therein, in each
case in accordance with GAAP during
the periods involved, except in each case
as may be noted therein, and subject
to recurring year-end audit adjustments
normal in nature and amount in the case
of unaudited statements.
(I) ABSENCE OF UNDISCLOSED LIABILITIES. Except as Previously
Disclosed
on Schedule 5.1(I), neither Issaquah nor
Issaquah Bank has any obligation or
liability (contingent or otherwise) that,
individually or in the aggregate, is
reasonably likely to have a Material
Adverse Effect on it, except (1) as
reflected in the Issaquah Financial Reports
prior to the Execution Date, or (2)
for commitments and obligations made, or
liabilities incurred, in the ordinary
course of business consistent with past
practice. Except as Previously Disclosed
on Schedule 5.1(I), since December 31,
2002, neither Issaquah nor Issaquah Bank
has incurred or paid any obligation or
liability (including any obligation or
liability incurred in connection with any
acquisitions in which any form of
direct financial assistance of the federal
government or any agency thereof has
been provided to Issaquah and Issaquah
Bank) that, individually or in the
aggregate, is reasonably likely to have a
Material Adverse Effect on it.
(J) NO EVENTS. Except as Previously Disclosed on Schedule 5.1(J),
since
December 31, 2002, no event has occurred
that, individually or in the aggregate,
is reasonably likely to have a Material
Adverse Effect on it.
(K) PROPERTIES. Except as reserved against in the Issaquah
Financial
Reports, and as disclosed in title
insurance policies held by Issaquah, Issaquah
and each of its Subsidiaries has good and
marketable title, free and clear of
all liens, encumbrances, charges, defaults,
or equities of any character (each
an "Encumbrance"), to all of the properties
and assets, tangible and intangible,
reflected in the Issaquah Financial Reports
as being owned by Issaquah or its
Subsidiaries as of the dates thereof other
than those Encumbrances that,
individually or in the aggregate, are not
reasonably likely to have a Material
Adverse Effect on Issaquah and Issaquah
Bank and except those Encumbrances of
record. All buildings and all material
fixtures, equipment, and other property
and assets that are held under leases or
subleases by Issaquah or any of its
Subsidiaries are held under valid leases or
subleases enforceable in accordance
with their respective terms, other than any
such exceptions to validity or
enforceability that, individually or in the
aggregate, are not reasonably likely
to have a Material Adverse Effect on
it.
(L) LITIGATION; REGULATORY ACTION. Except as Previously Disclosed
in
Schedule 5.1(L), no litigation, proceeding
or controversy before any court or
governmental agency is pending that,
individually or in the aggregate, is
reasonably likely to have a Material
Adverse Effect on Issa
