PURCHASE AND ASSUMPTION AGREEMENT

Exhibit 2.1

EXECUTION COPY

PURCHASE AND ASSUMPTION AGREEMENT

by and among

Washington Mutual Bank,
WM Financial Services, Inc.
and
Franklin Bank, S.S.B.

June 20, 2005

TABLE OF CONTENTS

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TABLE OF CONTENTS
(continued)

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TABLE OF CONTENTS
(continued)

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SCHEDULES AND EXHIBITS

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INDEX OF DEFINED TERMS

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INDEX OF DEFINED TERMS
(continued)

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PURCHASE AND ASSUMPTION AGREEMENT

     THIS PURCHASE AND ASSUMPTION AGREEMENT (“Agreement”), dated this 20th day of June, 2005, is by and among Washington Mutual Bank , a federal savings bank (“Seller”), Franklin Bank, S.S.B., a Texas state savings bank (“Purchaser”) and WM Financial Services, Inc., a Washington corporation (“WMFS”) (with respect to Sections 1.11, 1.12, 5.11 and 9.02 only).

Recitals

     A. Seller is the owner of certain assets and, as an insured depository institution, has certain deposit and other liabilities at its branch offices located at 6150 Eastex Freeway, Beaumont, Texas; 1022 Nederland Avenue, Nederland, Texas; 3434 Twin City Hwy., Groves, Texas; 104 West Caney St., Wharton, Texas; and 201 West Jackson St., El Campo, Texas (each a “Branch” and collectively the “Branches”).

     B. Seller desires to sell, convey and transfer certain of such assets and liabilities to Purchaser, and Purchaser desires to purchase and acquire such assets from Seller, and to assume from Seller certain liabilities in connection therewith.

     C. As a result of the transaction contemplated hereby, Purchaser will commence the operation of branch banking facilities at the locations of the Branches and Seller will terminate the operation of its branch offices and relinquish all rights to any leasehold, real estate and certain personal property interests at such locations.

     D. WMFS owns certain brokerage assets and liabilities located at the Branches and has joined this Agreement solely with respect to Section 5.11, which relates to those brokerage assets and liabilities and Sections 1.11, 1.12 and 9.02, which relate to future conduct regarding those brokerage assets and liabilities.

     NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, Purchaser and Seller agree as follows:

SECTION 1

Purchase and Assumption

     1.01 Purchase and Sale of Assets . At the Closing (as hereinafter defined), upon and subject to the terms and subject to the conditions of this Agreement and subject to adjustment as provided herein, Purchaser shall purchase, acquire and accept from Seller, and Seller shall sell, transfer, convey, assign and deliver (or shall cause such actions) to Purchaser, all of Seller’s right, title and interest in and to, free and clear of all liabilities, obligations, liens, claims, charges, security interests and encumbrances of any character (other than liabilities, obligations, liens, claims, charges, security interests and encumbrances permitted hereunder or listed on Exhibit 1.01 ), to the following assets (collectively, the “Assets”):

     (a) Other than the Excluded Real Property, if any, all owned or leased real property interest and improvements thereon and all appurtenances thereto relating to and associated with

the Branches and legally described in Exhibit 1.01(a) hereto and incorporated herein by reference (the “Real Estate Interests”);

     (b) All personal property located at the Branches as of the Closing Date, including without limitation, all furniture, office equipment, vault, machinery, fixtures, signage poles, leasehold improvements (if any), security devices and systems and other similar items (but excluding any personal property upon which the name or logo or other intellectual property of Seller or any of its Affiliates or predecessors is affixed and excluding all computer equipment) (the “Personal Property”);

     (c) All inventories and supplies on hand at the Branches as of the Closing Date, except for supplies upon which the name or logo or other intellectual property of the Seller or any of its Affiliates or predecessors is affixed;

     (d) All of the loans owned by Seller as of the Closing Date that are attributable to the Branches, including overdraft protection loans or lines of credit relating to Deposits (as defined below) (the “Overdraft Protection Loans”), together with any and all related promissory notes, liens, mortgages, deeds of trust, instruments, documentation, collateral, security, guarantees, documents, security and pledge agreements, insurance policies, financing statements, participation agreements, intercreditor agreements and other rights and interests, including servicing rights, related to or pledged with respect to such loans (including the Overdraft Protection Loans, the “Loans”), including all balances relating to the Loans for which an escrow or other similar account is maintained under the terms of such Loans; provided, however, that such Loans shall exclude all Excluded Loans. An Excluded Loan means any loan (i) that is guaranteed by the Small Business Administration; (ii) that is 30 days delinquent as to principal or interest as of the Closing Date (as hereinafter defined); (iii) that has been 30 days delinquent twice in the 12 months prior to the Closing Date; (iv) that is in a non-accrual status (which term shall include loans for which the collateral securing such loan has been repossessed or as to which collection efforts have been instituted or claim and delivery of foreclosure proceedings have been filed or are in the process of being filed) as of the Closing Date; (v) whose obligor as of the Closing Date has filed a petition for relief under the United States Bankruptcy Code or otherwise has indicated a refusal to pay the loan as it becomes due; (vi) that has an internal credit risk rating or classification of Watch or Substandard or below as of the Closing Date; (vii) that is secured by a first lien on real property, other than home equity lines of credit; (viii) that is a student loan; (ix) whose obligor lives outside of any of the zip codes identified on Exhibit 1.01(d)(ix) hereto (the “Identified Texas Zip Code Area” ); (x) that is the subject of any pending litigation, mediation or arbitration as of the Closing Date or (xi) whose obligor has a primary banking relationship with a branch of Seller other than one of the Branches (each obligor with such a banking relationship is set forth on Exhibit 1.01(d)(xi) hereto);

     (e) All cash on hand at the Branches as of the close of business on the Closing Date including vault cash, petty cash, ATM cash, if any, and tellers’ cash (“Vault Cash”);

     (f) All assets and property of any kind, character and description, tangible or intangible, located at the Branches and owned, used or held by Seller for use in connection with the safe deposit business at the Branches as of the close of business on the Closing Date;

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     (g) The contracts, leases and other agreements of Seller attributable to the Branches set forth on Exhibit 1.01(g) hereto (the “Assumed Contracts”); and

     (h) All records and documents related to the Assets transferred or Liabilities assumed (as hereinafter defined) by Purchaser including, but not limited to, all papers, data, financial and accounting records, microfiche, microfilm and computer records (including but not limited to, magnetic tape, disc storage, card forms and printed copy), maintained by the Seller relating directly to the Assets and Liabilities.

The Assets shall not include any assets, tangible or intangible, of Seller not specifically described herein or in the exhibits hereto. Without limiting the foregoing, Purchaser agrees and acknowledges that the Assets do not include loss reserves on any Loan and that no loan loss reserves are being transferred pursuant to this Agreement.

     1.02 Assumption of Liabilities . At the Closing, upon and subject to the terms and subject to the conditions of this Agreement and subject to adjustment as provided herein, Seller shall assign to Purchaser and Purchaser shall assume the liabilities and obligations of Seller to be discharged, performed, satisfied or paid after the Closing Date with respect to the following (collectively, the “Liabilities”):

     (a) The deposit accounts held at the Branches as of the Closing Date, whether represented by collected or uncollected funds, together with all accrued and unpaid interest thereon as of the close of business on the Closing Date, including the custodial obligations of Seller for individual retirement accounts (“IRAs”) which are funded by assumed deposit accounts, which deposit accounts are identified by account number, customer number, social security number, telephone number, complete address (including street, city, state and zip code), category, account type, balance, interest rate and, if applicable, due date, in an electronic data file provided by Seller to Purchaser on or prior to the date of this Agreement (the “Deposits”); provided, however, that such Deposits shall exclude all Excluded Deposits. An “Excluded Deposit” means any (i) deposit account that cannot be assumed by Purchaser because of legal impediments; (ii) deposit account that is security for or associated with equity lines of credit or deposit overdraft and collateral loans not acquired by Purchaser; (iii) deposit account of a Branch customer who maintains at least one address outside the Identified Texas Zip Code Area (each such deposit account customer identified on Exhibit 1.02(a)(iii) hereto), (iv) deposit account of any customer with a primary relationship with a branch of Seller other than one of the Branches (each such customer is identified on Exhibit 1.02(a)(iv) ); (v) brokered deposit account; (vi) deposit account that is involved in any pending or threatened litigation, mediation or arbitration as of the Closing Date; and (vii) IRA with respect to which the customer does not consent to the appointment of Purchaser or its designee as custodian or does not consent to Purchaser’s custodial agreement;

     (b) The Loans and the unfunded commitments or lines of credit relating to the Loans;

     (c) The safe deposit business of Seller at the Branches;

     (d) The Assumed Contracts;

     (e) The Real Estate Interests;

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     (f) The Personal Property; and

     (g) All reporting and filing obligations imposed by the Internal Revenue Service or any other regulatory authority with respect to any of the foregoing arising from and after the Closing Date.

The Liabilities shall not include any liabilities or obligations of Seller or Seller’s Affiliates of any kind, character or description not specifically identified herein or in the exhibits hereto.

Purchaser will assume and will pay, perform and discharge the Deposits to customers of Seller in accordance with all applicable laws and regulations. Purchaser may elect to make adjustments in interest payment periods, payment options and similar adjustments required to conform the accounts, including Deposits and Loans, to the data processing capabilities and account and product offerings of Purchaser. Purchaser will make such adjustments in accordance with its understanding of its legal rights and obligations and neither Seller nor its counsel expresses any opinion with respect to such legal rights or obligations. As between Purchaser and Seller, any such adjustments will have no effect on Purchaser’s agreement to pay the Deposits as herein stated, and Seller will have no liability to any customer as a result of any such adjustments.

     1.03 Closing Date Adjustments to Assets and Liabilities . At the Closing Date, Seller shall update, as of the date agreed pursuant to Section 1.06(c) hereof for computing the Estimated Amount, all exhibits provided for in and information required to be provided pursuant to Sections 1.01 and 1.02 and shall deliver such updated exhibits and information to Purchaser at the Closing.

     1.04 Consideration for Purchase and Assumption . In consideration for the sale of the Assets by Seller and/or Seller’s Affiliates and the assumption by Purchaser of the Liabilities, Seller shall make available and transfer to Purchaser, in the manner specified in Section 1.06 hereof, the Payment Amount. The “Payment Amount” means an amount equal to the sum of the aggregate balance of all of the Deposits (as set forth on the balance sheet of Seller at the close of business on Closing Date prepared in accordance with generally accepted accounting principles applied on a basis consistent with prior periods) including interest posted or accrued with respect to the Deposits as of the close of business on the Closing Date, less an amount equal to the sum of:

     (a) The face value of the Vault Cash;

     (b) The net book value of the Real Estate Interests on Seller’s books for the month ended immediately prior to the Closing Date;

     (c) The net book value of the Personal Property on Seller’s books for the month ended immediately prior to the Closing Date;

     (d) The outstanding unpaid principal balance and accrued interest thereon of Loans determined as of the close of business of the Branches on the Closing Date;

     (e) The Purchaser’s share of the pro rata adjustment of items required pursuant to Section 1.05; and

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     (f) An amount equal to 12.00% of the average daily Deposits for the 15-day period preceding the Closing Date (“Premium”) provided, however, that for purposes of calculating the Premium, Deposits that would be presumed to be abandoned under the Texas Property Code during the measurement period and Deposits of government units and other public entities shall be excluded from the Deposits during the measurement period.

     1.05 Pro Rata Adjustment and Reimbursement . Unless otherwise provided herein, it is the intention of the parties that Seller will operate the Branches for its own account until the close of business on Closing Date and that Purchaser shall operate the Branches, hold the Assets and assume the Liabilities for its own account after the close of business on the Closing Date. Thus, except as otherwise specifically provided herein, items of proration and other adjustments shall be prorated as of close of business of the Branches on the Closing Date and settled between Seller and Purchaser on the Closing Date whether or not such adjustment would normally be made as of such time. Items of proration and adjustment will be handled at Closing as an adjustment to the amount of funds to be delivered by Seller to Purchaser, or Purchaser to Seller, as appropriate, unless otherwise agreed.

     For purposes of this Agreement, items of proration and other adjustments shall include, without limitation: (i) sales, transfer, excise and use taxes and personal and real property taxes and assessments (including real property sales, transfer and excise taxes); (ii) FDIC deposit insurance assessments; (iii) safe deposit rental payments; and (iv) other prepaid expenses and items and accrued and unpaid liabilities, if any, as of the close of business on the Closing Date. To the extent that the amount of the foregoing items is not known on the Closing Date, such proration shall be based on the amount of such items for the prior month or year, as appropriate; provided, however, the parties shall apportion all real property taxes as provided in the following paragraph.

     Purchaser and Seller shall apportion pro rata all real property taxes paid or payable in connection with the Real Estate Interests. Such apportionment shall be made on a per diem basis as of the Closing Date and shall be based upon the fiscal year for which the same are assessed. In the event that the applicable tax bill, or other information reasonably necessary for computing any such apportionment is not available on the Closing Date, the apportionment shall be made at Closing on the basis of the prior period’s real estate taxes. Within thirty (30) days after receipt by the parties of the applicable tax bill or other information reasonably necessary for computing such apportionment, Purchaser and Seller shall apportion the actual taxes and, if either party paid more than its proper share thereof at Closing, the other party shall within seven (7) business days after written request therefore reimburse such party for the amount so expended. If, at Closing, the Real Estate Interests are affected by an assessment arising on or before the Closing Date which is payable in installments of which the current installment is then a charge or lien, or has been paid, then all unpaid installments of such assessments which are to become payable after the Closing shall be paid and discharged by Purchaser.

     1.06 Closing .

     (a) The consummation and closing (“Closing”) of the transactions contemplated by this Agreement shall take place as of the close of business of the Branches on October 14, 2005 or on such other date as shall be mutually agreed to by the parties hereto, provided that all

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conditions set forth in Sections 6 and 7 have been satisfied or waived. The date on which the Closing takes place is referred to herein as the “Closing Date” and the close of business shall be deemed to occur at 11:59 p.m. on such date. The Closing shall take place at Franklin Bank, S.S.B., 9800 Richmond, Suite 680, Houston, Texas, or at such other place as shall be mutually agreed to by the parties hereto.

     (b) At the Closing, the parties to this Agreement will exchange the certificates and other documents provided for under this Agreement in order to consummate the transactions contemplated hereby and to determine whether any condition exists which would permit the parties hereto to terminate this Agreement. If no such condition then exists or if no party elects to exercise any right it may have to terminate this Agreement, then and thereupon the appropriate parties shall execute such documents and instruments as may be necessary or appropriate to consummate the transactions contemplated by this Agreement. Notwithstanding the foregoing, it is the intention of the parties as of the date hereof that the Closing become effective on the Closing Date by means of an exchange of documents without the physical meeting of the parties as set forth above unless such a meeting is necessary or advisable.

     (c) As of a date agreed to by Purchaser and Seller, which date shall be five to ten business days prior to the Closing Date, Purchaser and Seller will compute an amount (the “Estimated Amount”) equal to what the Payment Amount would be on such date as if such date were the Closing Date. At Closing, Seller will deliver and pay to Purchaser the Estimated Amount in immediately available United States Federal Funds. At least two business days prior to the Closing, Seller and Purchaser shall provide written notice to one another indicating the account and bank to which such funds shall be wire transferred.

     (d) The Payment Amount shall be as set forth and calculated in accordance with the settlement statement prepared in connection with the Closing, substantially in the form attached hereto as Exhibit 1.06(d) and post-closing adjustments and transactions will be handled as set forth in Section 1.10.

     1.07 Seller’s Actions at Closing . On the Closing Date, the Seller shall:

     (a) deliver to Purchaser such of the Assets as are capable of physical delivery, including, without limitation, all records, documents, data and files of Seller relating to the Assets and Liabilities and keys and combinations to the Branch premises, except as otherwise provided elsewhere in this Agreement;

     (b) execute, acknowledge and deliver to Purchaser all such endorsements, assignments, bills of sale, special warranty deeds, limited powers of attorney and other instruments of conveyance, assignment and transfer as shall reasonably be necessary or advisable to consummate the sale, assignment and transfer of the Assets to Purchaser as provided herein; provided that all of the documents and instruments to be delivered by Seller hereunder shall be in form and substance reasonably satisfactory to counsel for Purchaser;

     (c) execute, acknowledge and deliver such affidavits as shall be reasonably required by Purchaser’s title insurance company to enable Seller to deliver title to the Real Estate Interests as required by this Agreement;

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     (d) deliver title insurance policies issued by a title insurance company reasonably acceptable to Purchaser insuring Purchaser’s fee simple interest in the Real Estate Interests, at Seller’s expense;

     (e) deliver possession of the Real Estate Interests in the condition existing on the date hereof, reasonable wear and tear excepted;

     (f) assign, transfer and deliver to Purchaser each of the following records pertaining to the Deposits on the Closing Date: signature cards (in electronic format), orders and contracts between Seller and depositors and records of similar character; canceled checks and/or negotiable orders of withdrawal, if any; and all other miscellaneous records, statements and materials maintained by Seller at the Branches relative to any Deposit; provided, however, with respect to the records, statements, other data and materials not maintained at the Branches, Seller shall provide Purchaser with reasonable access to such records as provided in this Agreement;

     (g) transfer and deliver the contents, keys, documents and other records maintained at the Branches directly pertaining to the safe deposit boxes maintained at the Branches (whether rented or unrented) as the same exist as of the close of business on the Closing Date;

     (h) make available and transfer to Purchaser on the Closing Date any funds required to be paid to Purchaser pursuant to the terms of this Agreement;

     (i) execute, acknowledge and deliver a non-foreign person affidavit pursuant to Section 1445 of the Internal Revenue Code; and

     (j) execute, acknowledge and deliver to Purchaser the certificate provided for in Section 6.03 and all other certificates and other documents and information required to be delivered to Purchaser by Seller at the Closing pursuant to the terms of this Agreement, including without limitation the updated exhibits and information required by Section 1.03 hereof and an electronic file of data respecting the Deposits and Loans in a format acceptable to Purchaser.

     Seller agrees that it will preserve and safely keep, for so long as may be required under applicable law, all of the records, documents, data and files not transferred to Purchaser which relate to the Assets and Liabilities, for the mutual benefit of itself and Purchaser. Purchaser agrees that it will preserve and safely keep, for so long as may be required under applicable law, all of the files and records transferred to Purchaser which relate to the Assets and Liabilities, for the mutual benefit of itself and Seller. All files and records relating to the Assets or the Liabilities held by either party will be open for inspection for reasonable purposes by the other party and its authorized agents, representatives and regulators during regular business hours after the Closing Date, and the party with the right of inspection may, at its own expense, make copies of excerpts from such files and records as it deems desirable. For purposes of this Section 1.07, where possible, physical delivery may be accomplished by the transfer of control over the Branches from Seller to Purchaser at the Closing.

     1.08 Purchaser’s Actions at Closing . On the Closing Date, the Purchaser shall:

     (a) pay to Seller any funds required to be paid to Seller pursuant to the terms of this Agreement;

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     (b) execute, acknowledge and deliver to Seller all such endorsements, assignments, bills of sale, and other instruments of conveyance, assignment and transfer as shall reasonably be necessary or advisable to consummate the assumption of the Liabilities by Purchaser as provided herein; provided that all of the documents and instruments to be delivered by Purchaser hereunder shall be in form and substance reasonably satisfactory to counsel for Seller; and

     (c) execute, acknowledge and deliver to Seller the certificate provided for in Section 7.03, all other certificates and other documents and information required to be delivered to Seller by Purchaser at the Closing pursuant to the terms of this Agreement.

     1.09 Certain Pre-Closing Transitional Matters .

     (a) Seller shall provide such records and other information as shall be necessary to enable Purchaser to send, subject to applicable law, at least 30 days prior to the Closing Date, at Purchaser’s cost and expense, to each Deposit or Loan customer of a Branch (i) a letter jointly prepared by Purchaser and Seller and set forth on joint letterhead, notifying each such customer of the prospective assignment of the Liability and/or Asset pursuant to this Agreement and providing information about Purchaser and its banking and/or financial products and services and (ii) a letter or letters prepared by Purchaser and reasonably satisfactory to Seller notifying each such customer of changes to such person’s accounts or financial products and containing additional information regarding Purchaser’s products and services, including a change in fees and terms, to conform to Purchaser’s account and product offerings. Seller shall cooperate with Purchaser to enable Purchaser, at Purchaser’s expense, prior to the Closing, to reissue checks and other similar documents and instruments to depositors whose Liabilities are to be assumed by Purchaser hereunder or to otherwise facilitate the transfer of such customers’ business relationships to the Purchaser. Seller and Purchaser shall mutually agree on any correspondence or communication by Seller, Purchaser or an Affiliate of either to Branch customers whose Deposits, Loans or other business relationships with Seller or its Affiliates are not transferred to Purchaser.

     (b) Within such period prior to the Closing Date as is required by applicable law or regulation, Seller will, at its sole cost and expense, notify the depositors who maintain IRAs of Seller’s intent to resign as custodian as of Closing and to appoint Purchaser (or Purchaser’s designee) as successor custodian and the discharge and release of Seller from all liabilities as custodian from and after the effective time of its resignation. Purchaser will accept (or cause its designee to accept) such appointment as successor custodian, however, only if the customer accepts and agrees to such appointment and to Purchaser’s custodial IRA agreement. It is agreed that Seller is required to notify each such depositor only once, which notification will be by means of a letter approved (which approval shall not be unreasonably withheld) by Purchaser and accompanied by all appropriate forms and documents necessary to effect such replacement and release and to adopt Purchaser’s master agreement. The parties agree that for purposes of this Agreement a depositor who does not timely respond to such notice shall be deemed to have accepted and agreed to such appointment and to Purchaser’s custodial IRA agreement unless deeming a customer to have so accepted and agreed is prohibited by Purchaser’s custodial IRA agreement applicable to such IRA account and, in the reasonable opinion of Purchaser’s counsel, Purchaser’s custodial IRA agreement cannot be amended to remove such prohibition. The IRA

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account of any customer rejecting the appointment of Purchaser (or its designee) and Purchaser’s custodial IRA agreement will not be included in the Deposits.

     (c) In order to assist Purchaser with the conversion of Seller’s data concerning Branch operations to Purchaser’s systems, Seller shall, at its cost and expense, within 30 days of the date of this Agreement, provide to Purchaser an electronic master file original and record file layout tape(s) or file(s) concerning the Deposits and Loans and other deposit and loan accounts domiciled in or originated by the respective Branches and all product specifications to include all detail account coding. The foregoing shall include without limitation information on Deposits, Loans, safe deposit boxes, automated clearinghouse (“ACH”) transactions, ATM cards and check cards. Such electronic tape(s) or disk(s) and other information shall be as of a recent date mutually agreeable to Purchaser and Seller and shall be updated by Seller and delivered to Purchaser at and as of the Closing Date.

     (d) Seller and Purchaser agree to cooperate to identify prior to Closing any contracts, leases and other agreements of Seller attributable to the operation of the Branches, if any, to be added to Exhibit 1.01(g) .

     1.10 Certain Post-Closing Settlement and Transitional Matters .

     (a) On a date no more than fifteen (15) calendar days following the Closing Date (the “True-Up Date”), Seller shall provide to Purchaser all exhibits provided for in and information required to be provided pursuant to Sections 1.01 and 1.02, updated as of the Closing Date, and Purchaser and Seller will compute the amount of the Payment Amount according to the provisions of Section 1.06, and if the actual Payment Amount is different from the Estimated Amount calculated as provided in Section 1.06, then Purchaser (if the Estimated Amount exceeds the Payment Amount) or Seller (if the Payment Amount exceeds the Estimated Amount) will immediately pay such excess amount in immediately available funds to the other party, together with interest on such excess from the Closing Date to the date of payment at a simple per annum rate, without any compounding, at the effective federal funds rates based on the federal funds rate as quoted by the Federal Reserve Bank on Report H-15. Any additional payments or adjustments arising out of this Agreement may be computed and paid, with interest calculated pursuant to this Section 1.10, in subsequent settlements by mutual agreement of the parties.

     (b) Purchaser and Seller agree to use their best efforts to agree on the calculation of and all other matters pertaining to the Payment Amount.

     (i) In the event that the parties should fail to agree either on (i) the mathematical calculation of the Payment Amount or (ii) the appropriate accounting treatment of any asset or liability, or item of income or expense, that affects the calculation of the Payment Amount, then the parties shall refer such disputed matters to an independent firm of certified public accountants of national standing (an “Accountant”) reasonably acceptable to Purchaser and Seller, and Purchaser and Seller agree to be bound by the determination of such firm with respect to such disputed matters. Purchaser and Seller shall agree upon an Accountant within 7 days after the date on which either Purchaser or Seller notifies the other in writing that the referral of a

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disputed matter within the scope of this Section 1.10(b) is necessary. If Purchaser and Seller shall fail to agree on an Accountant within such 7-day period, then either of them may seek the appointment of an Accountant in a court of law. Purchaser and Seller agree to share equally the fees and charges of an Accountant appointed hereunder for its services in resolving disputes within the scope of this Section 1.10(b).

     (ii) The provisions of Section 1.10(b) are not intended to and shall not be interpreted to require that the parties refer to an Accountant (a) any dispute arising out of a breach by one of the parties of its obligations under this Agreement, (b) any dispute the resolution of which requires a construction or interpretation of this Agreement, or (c) any other dispute other than (in the case of this clause (b)) a dispute related to the mathematical calculation of the Payment Amount or the accounting treatment of any asset or liability, or item of income or expense, that affects the calculation of the Payment Amount, or both. The parties reserve all rights and remedies, including at law or in equity, to resolve disputes other than those within the scope of Section 1.10(b).

     (iii) If, in the resolution of any dispute, it is determined that the amount of the Payment Amount is changed and one party owes an amount to the other party, the paying party will also pay interest on such amount from the date it should have been paid to the date of payment at the same rate as provided in Section 1.10(a).

     (c) Seller and Purchaser agree that each party shall be solely responsible for providing to the Internal Revenue Service and to each depositor, other holder of a Liability or customer, to the extent required by law, Forms 1098, 1099 INT, 1099R and 5498 and other applicable reporting forms with respect to each of the Liabilities and Assets for the period during which Seller or Purchaser, as applicable, administers such Liabilities and Assets during 2005.

     (d) Within twenty (20) business days following the Closing Date, Seller shall prepare and mail closing statements for each Deposit for which there has been any activity (other than the accrual of interest) between the last statement prior to Closing and the close of business on the Closing Date, for the period from the date of the last statement to and including the Closing Date, and provide Purchaser with a copy.

     (e) Holds that have been placed on particular Liabilities by Seller or on individual checks, draws or other instruments shall be continued by Purchaser under the same terms. In order for Purchaser to comply with the foregoing, Seller shall deliver to Purchaser a complete and accurate list and a tape or electronic file (which such tape or data file may be a part of the conversion data file provided by Seller to Purchaser) in a format acceptable to Purchaser of any such holds at the Closing.

     (f) Seller will promptly and fully recompense Purchaser for items returned within 90 calendar days after the Closing Date to Purchaser or Seller on account of fraud, negligence, errors or improper banking practices or procedures, which are drawn on or chargeable to Deposits assumed by Purchaser hereunder and for which the transaction date on the item was on or prior to the Closing Date. Notwithstanding the foregoing, Seller shall not be charged for any item unless Purchaser has sustained a loss with respect to such item, after normal collection efforts (normal collection efforts, however, shall not require Purchaser to institute a lawsuit or

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any other legal action). At time of payment by Seller to Purchaser pursuant to this Section 1.10(f), Purchaser shall assign to Seller any rights Purchaser may have to prosecute a claim against a third party relating to the items.

     (g) For a period of 30 calendar days after the Closing Date, Seller will continue to clear checks or drafts drawn on checking accounts, NOW accounts and money market deposit accounts drawn on accounts transferred to Purchaser pursuant to this Agreement, and Purchaser will reimburse Seller for the amount of funds paid on such checks or drafts as herein provided. During such 30 calendar day period, Seller or its servicing agent will transmit to Purchaser by 2:00 p.m. of each business day (Texas time) all such checks or drafts for the preceding business day, and Purchaser will pay Seller the amount of such checks and drafts by the close of business on the following business day by means of a wire transfer from Purchaser’s account to Seller’s account; Seller will provide Purchaser with wiring instructions at or prior to Closing. During such 30 calendar day period, Seller or its servicing agent will place all such checks or drafts received for collection on deposit accounts into the possession of a courier for delivery to Purchaser by the morning of the second business day following such receipt. Purchaser will be responsible for determining if each such check or draft delivered is properly payable. If any such check or draft is not properly payable, Purchaser may dishonor such check or draft and return it to Seller, which will return such check or draft to the Federal Reserve Bank with jurisdiction over Seller and Purchaser for credit to Seller’s account. Seller will be obligated to reimburse Purchaser for such amount, and it is agreed that Purchaser may deduct the amount of any returned check or draft from its next daily transfer of funds. However, Seller will have no obligation to reimburse Purchaser in the event its account at the Federal Reserve Bank is not so credited, and, in such an event, Purchaser will be obligated to pay back to Seller the amount it had previously deducted pursuant to the preceding sentence. After the 30 calendar day period, Seller will not accept any such checks and such checks will be returned marked “Unable to Locate.” Any additional charges by Seller’s servicing agent in order to comply with this Section 1.10(g) will be shared equally between Purchaser and Seller. Seller agrees that it shall notify Purchaser of any information received regarding the settlement and clearance of any foreign checks, savings bonds, or coupons deposited with it on or prior to the Closing Date.

     (h) With respect to the direct pay and ACH transactions requested by customers of the Branches after the Closing Date, Purchaser agrees to use its best efforts to notify, within 30 days after Closing, its customers to redirect such direct pay and automated clearing house transactions from Seller to Purchaser. Seller agrees that for a period of 30 days following the Closing Date it will effectuate such requests in the same manner and with the same diligence as it would have prior to the Closing Date. Seller agrees to provide Purchaser with the daily detail necessary for Purchaser to timely credit or debit the customer’s account and to allow Purchaser to send notifications of changes. Seller and Purchaser agree to a timely net daily settlement of these transactions. At the end of such period of 30 days, Seller will discontinue accepting and forwarding ACH entries and funds and return them to the originators marked “Account Closed.” The parties may agree to other procedures to handle ACH transactions.

     (i) With respect to any items that are credited as of the Closing Date to an account being transferred to Purchaser pursuant hereto that are returned unpaid (a “Returned Item”), and if there are sufficient funds in the account to which such Returned Item was credited or any other accounts on deposit at the Branches standing in the name of the party liable for such Returned

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Item, and if Purchaser has a right of charge-back against the account to which such Returned Item was credited or a right of set-off against such other accounts in respect of the charge-back, Purchaser will debit any or all of such accounts an amount equal in the aggregate to the Returned Item and will repay that amount to Seller, reduced, however, by the amount of the Premium, if any, attributable to such Returned Item. If the charge-backs or set-offs do not provide sufficient funds for such purposes, Purchaser will have no obligation to repay Seller the amount of such deficiency unless and until Purchaser obtains reimbursement from the party liable for the Returned Item. Purchaser will use its Best Efforts to obtain such reimbursement.

     (j) Except as expressly provided for elsewhere in this Agreement, in settlement of transactions described in this Section 1.10, Seller agrees to provide Purchaser by facsimile or electronic mail a daily net settlement figure together with a detailed transaction listing for all such transactions and the parties agree that the party obligated to remit any funds thereunder shall do so by wire transfer before the close of business Texas time of such day. Seller shall provide the net settlement figure to Purchaser in a timely manner that permits Purchaser to remit funds by the deadline set forth in the prior sentence. Any settlement under this Section 1.10(j) shall be provisional pending receipt by the respective parties of the physical items relating to such settlement; the parties shall adjust the next daily settlement to reflect any adjustments resulting from its receipt of the physical items.

     (k) In case of any dispute with or inquiry by an account holder whose Deposit is assumed under this Agreement, which dispute or inquiry relates to the servicing of such Deposit by Seller prior to the date for which a Deposit history has been provided to Purchaser, Seller will provide Purchaser with the appropriate information regarding the Deposit and copies of pertinent documents or instruments to the extent available with respect to such dispute or inquiry so as to permit Purchaser to respond to the account holder within a period of time and in a manner which would comply with standard banking practices and customs. In the event that any account holder alleges that Seller violated an applicable law or regulation, Seller shall have the right to control communication to the account holder with respect to such allegation.

     (l) No later than the opening of business on the first business day following the Closing Date, Purchaser will cover or substitute its name and logo for the name and logo of the Seller on all interior and exterior signs located at the Branches and shall be entitled to remove and dispose of all signs which carry the name and logo of the Seller which Seller has not removed at its own cost. Purchaser may not use the names “Washington Mutual,” “Washington Mutual Bank,” “Washington Mutual Bank, FA” or any similar name in any way except as may be necessary to provide notice to customers of the Branches of the transactions made pursuant to this Agreement.

     1.11 Non-Solicitation of Business . In consideration of the purchase of Assets and assumption of Liabilities by Purchaser, neither Seller nor its Affiliates (including the directors, officers, employees or principal shareholders), successors or assigns will, for a period of three years after the Closing Date, solicit, on behalf of itself or others, deposits, loans, brokerage or other business from customers whose Deposits are assumed or whose Loans, safe deposit or any other business are acquired by Purchaser hereunder; provided, however, that nothing contained in this Section 1.11 shall be deemed to prohibit general solicitations not specifically directed or targeted to customers of the Branches. Notwithstanding the provisions of this Section 1.11,

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Seller or any Affiliate may continue to engage in all customary communications, including distribution of solicitations and promotional materials, with any customers of the Branches with whom Seller or any Affiliate maintains a banking, lending, brokerage or other financial relationship pursuant to or as permitted by the terms of this Agreement after the Closing Date (including obligors under Excluded Loans, holders of any Excluded Deposit) or independently of the Branches, provided , however, that WMFS Customers who remain customers of WMFS following the Closing may be solicited with respect to brokerage business only unless Seller or any Affiliate maintains a non-brokerage relationship pursuant to or as permitted by the terms of this Agreement after the Closing Date.

     1.12 Covenant Not to Compete . From and after the Closing, and for a period of three years following the Closing Date, Seller and its Affiliates, successors or assigns shall not, and shall not enter into any agreement to, acquire, lease, purchase, own, operate or use any building, office or other facility or premises located within a thirty (30) mile radius of any Branch location for the purpose of making loans, accepting deposits, cashing checks, originating mortgages, or offering brokerage or insurance services. This restriction shall not apply in the event that Seller or an affiliate is acquired by a company that directly or indirectly owns one or more branches or lending offices within a 30 mile radius of any Branch or in the event that Seller or an affiliate acquires a company that owns one or more branches or lending offices within a 30 mile radius of a Branch, provided that at least a majority of such acquired company’s branches are located outside such 30 mile radius.

SECTION 2

Representations and Warranties of Seller

     Except as specified in the Schedule of Exceptions accompanying this Agreement, Seller represents and warrants to Purchaser as follows:

     2.01 Corporate Organization and Related Matters . Seller is a federally chartered savings bank duly organized, validly existing and in good standing under the laws of the United States, with the corporate power and authority to transact business in the State of Texas and to engage in the savings bank business and all other businesses in which it engages and to own the Assets and hold the Deposits. Seller has the requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated hereby. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby violate, conflict with or constitute a breach of any provision of the charter of Seller or its Bylaws or any agreement or instrument to which it is a party or by which its assets are bound, or (subject to any consent required to be obtained in connection herewith) any law, rule or regulation or any order or decree applicable by its terms specifically to Seller or its assets.

     2.02 Execution of Agreement; Enforceability . The execution and delivery of this Agreement and each of the documents and instruments contemplated hereby, and the transactions contemplated hereby, have been duly authorized by all necessary corporate action on the part of Seller. This Agreement constitutes, and such documents and instruments will constitute, legal, valid and binding obligations of Seller, enforceable in accordance with their respective terms, subject to bankruptcy, insolvency, reorganization, moratorium, receivership,

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conservatorship and similar laws relating to the rights and remedies of creditors, as well as to general principles of equity.

     2.03 Title to and Condition of Assets . Except as set forth on Exhibit 1.01 and the procedures set forth in Section 5.09, Seller is the owner of the Assets and has good and marketable title thereto, free and clear of any mortgage, pledge, lien, security interest, conditional sales agreement, encumbrance or charge of any kind or description, other than liens for current taxes not yet due and payable and such encumbrances and imperfections in title, if any, which are not substantial in character or amount or which otherwise do not materially impair the use and enjoyment of such Assets. To Seller’s Knowledge: (i) no notice of any violation of zoning laws, building or fire codes or other statutes, ordinances or regulations or of restrictive covenants relating to the use or operation of the Real Estate Interests has been received by Seller and Seller has not undertaken any construction or improvements on the Real Estate Interests which could result in the imposition of any mechanics, materialmen or other similar liens on the Real Estate Interests, (ii) there are no condemnation proceedings pending or threatened against the Real Estate Interests or any part thereof, (iii) there is no pending or contemplated rezoning proceeding or special assessment affecting the Real Estate Interests, (iv) the Real Estate Interests are not subject to any special tax valuation or special tax exemption, which upon a change in use or ownership of the Real Estate Interests will result in a “rollback tax” or similar assessment, (v) the Real Estate Interests are not located in areas that have been identified as having special flood hazards, (vi) access to each of the Real Estate Interests is available over public streets, (vii) all water, sewer, gas, electric, telephone, cable, drainage and other utility equipment, facilities and services required by applicable laws and regulations or necessary for the current operation of the Real Estate Interests, are installed and connected pursuant to valid permits, are adequate to serve the Real Estate Interests for their intended use, and are in good operating condition, (viii) all utility lines servicing the Real Estate Interests are located either within the boundaries of such Real Estate Interests, within lands dedicated to the public use or within recorded, irrevocable, unsubordinated easements for such purpose, and are serviced and maintained by the appropriate public or quasi-public entity, (ix) Seller possesses all rights, privileges, licenses, franchises, permits and other authorizations (including certificates of occupancy) that are material to the current use, occupancy and operation of the Real Estate Interests, (x) all permits are in full force and effect and Seller has not received not