PURCHASE AND
ASSUMPTION AGREEMENT
This
Purchase and Assumption Agreement (this "Agreement") is made and
entered into this 24th day of April, 2009, by and between Sound
Community Bank, a federally chartered savings bank (the
"Purchaser"), and 1st Security Bank of Washington, a Washington
chartered mutual savings bank (the "Seller").
WHEREAS, Seller owns and operates a branch
facility located at 1405 E. Front Street, Port Angeles, Washington
(the "Branch"); and
WHEREAS, Seller desires to sell and Purchaser
agrees to acquire the Branch and, in that regard, Seller desires to
sell and Purchaser desires to acquire certain assets relating
thereto, all as set forth in this Agreement; and
WHEREAS, Seller desires to assign to Purchaser and
Purchaser desires to assume from Seller certain liabilities
relating to the Branch, all as set forth in this Agreement.
NOW THEREFORE, in consideration of the premises
and the mutual promises, Seller and Purchaser agree as follows:
ARTICLE
I
PURCHASE AND SALE OF ASSETS AND
ASSIGNMENT AND ASSUMPTION OF LIABILITIES
1.1 Purchase and Sale of Assets
. Upon the terms and subject to the conditions set forth
in this Agreement, Seller shall sell, convey, assign, transfer and
deliver to Purchaser, and Purchaser shall purchase and accept from
Seller, the following assets relating to the Branch (the
"Assets").
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A.
Personal Property . The personal property contained
in and used primarily for the operation of the Branch as described
in Exhibit 1.1A. hereto (the "Personal Property").
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B.
Loans .
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1. Such
loans (i) secured in whole or in part, by deposit accounts
("Deposit Account Loans") or (ii) automatically created as the
result of an overdraft of a deposit account pursuant to a
pre-approved overdraft protection program offered by the Seller
("Overdraft Protection Loans" and together with the Deposit Account
Loans, the "Branch Loans"), related to the Deposit Liabilities
being transferred and which are carried on the books and records of
the Branch as of the close of business on March 31, 2009, but
excluding those accounts which Purchaser declines to purchase for
any reason, as provided in Exhibit 1.1B(1) (the "Excluded Loans")
(collectively, the "Existing Loans"). Attached hereto as Exhibit
1.1B(2) is a list setting forth the outstanding principal balance
and accrued but unpaid interest on the Existing Loans as of the
close of business on March 31, 2009.
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2. Such
Branch Loans that are originated and entered on the books and
records of the Branch during the period from March 31, 2009 to the
close of business on the day immediately before the Closing Date
(as defined in Section 1.7) (the "Interim Loans"), provided that
Purchaser shall have the right to refuse to purchase any Interim
Loan for any reason so long as a written election for the exclusion
is made by Purchaser within seven (7) days after it receives all
pertinent information with respect to such Interim Loan, and any
such Interim Loan that Purchaser refuses to purchase shall also be
known as an "Excluded Loan."
3. For
purposes of this Agreement, the Existing Loans and Interim Loans
are collectively referred to the as the "Purchased Loans." The
Purchased Loans, together with interest accrued thereon but unpaid
as of the close of business on the day immediately before the
Closing Date (the "Accrued Loan Interest"), shall be purchased by
Purchaser. Seller will generate Exhibit 1.1B(3), which exhibit will
provide the same information as Exhibit 1.1(B)(2) for the Purchased
Loans and be current and made a part hereof as of the Closing
Date.
C.
Real Property . The real property, and all
improvements thereon, owned by Seller on which the Branch is
located (the "Real Property"), which shall be sold and purchased
pursuant to the real property sales contract attached hereto as
Exhibit 1.1C. ("Real Property Contract").
C.
Cash on Hand . Any cash on hand at the Branch as of
the start of business on the Closing Date (the "Cash on Hand").
E.
Records, Etc. All records, files, books of accounts
and other original documents and instruments pertaining to the
Assets and the Assumed Liabilities (as defined in Section 1.2)
being transferred and assumed, respectively.
F.
Rights Relating to Assets . Any statutory or common
law right, title and interest in and related to the Assets which
Seller may have and which Seller may assign, including, without
limitation, claims, causes of action, rights of recovery or set
offs, and credit of any kind or nature relating to the Assets of
the Branch (the "Rights").
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1.2 Assignment and Assumptions of
Liabilities . Upon the terms and subject to the
conditions set forth in this Agreement, Seller shall assign to
Purchaser, and Purchaser shall accept and assume from Seller, the
following liabilities relating to the Branch, which liabilities
Purchaser agrees to perform and discharge (the "Assumed
Liabilities"), as follows:
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A.
Deposit Liabilities. All liabilities for payment of
deposits given an account number maintained at the Branch
including, without limitation, all savings accounts, certificates
of deposit, money market deposit accounts, checking and NOW
accounts and IRA accounts, and all other deposit accounts given an
account number maintained at the Branch or assigned to the Branch
in the ordinary course pursuant to the Seller's accounting system
(except to the extent of deposit liabilities transferred at the
request of a depositor as provided in Section 4.8), in each case as
of the close of business
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on March 31, 2009 (the "Cut-Off Date
Deposits"), all of which shall be listed in full on Exhibit 1.2A(1)
hereto (the "Deposit Balance"), together with any changes in the
Cut-Off Date Deposits and all new deposits from March 31, 2009
through the close of business on the day immediately before the
Closing Date (the "Interim Deposits") (the Cut-Off Date Deposits
and Interim Deposits, in each case as of the close of business on
the day immediately before the Closing Date are hereinafter
collectively referred to as the "Deposits" or the "Deposit
Liabilities"), in accordance with the terms of the agreements
pertaining to such Deposits, together with interest accrued thereon
but unpaid as of the close of business on the day immediately
before the Closing Date (the "Accrued Deposit Interest"). Said
Deposit Liabilities and Accrued Deposit Interest shall be specified
in Exhibit 1.2A(2) to be attached hereto and made a part hereof as
of the Closing Date.
B.
Contracts. All obligations of the Seller relating
to the period on and after the Closing Date under any and all
contracts relating to the operation of the Branch which are
assignable by Seller to Purchaser and which are all listed on
Exhibit 1.2B to this Agreement (the "Contracts").
C.
Safe Deposit Boxes . All obligations associated
with all safe deposit boxes located at the Branch (the "Safe
Deposit Boxes") relating to the period on and after the Closing
Date. Exhibit 1.2C sets forth the names and addresses of the Safe
Deposit Box holders as of March 31, 2009, which Exhibit shall be
updated as of the Closing Date.
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1.3 Transfer of Funds .
In connection with the acquisition by Purchaser of the Assets
(other than the Real Property) and the assumption by Purchaser of
the Assumed Liabilities of Seller, Seller shall transfer to the
Purchaser by wire transfer of immediately available funds (the
"Transfer Payment") an amount equal to:
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A. the
estimated amount of the Deposit Liabilities; plus
B. the
estimated amount of the Accrued Deposit Interest; minus
C. $0.00
representing the purchase price of the Personal Property;
minus
D. the
estimated unpaid principal amount of the Purchased Loans; minus
E. the
estimated amount of the Accrued Loan Interest; minus
F. the
amount of Cash on Hand; minus
G.
2.5% of the Deposit Liabilities (the "Deposit Premium"); plus or
minus
H. the
estimated amount of prorations, as provided in Section 1.6 hereof,
plus
I. the
amount of Earnest Money (as defined in Section 9.3).
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The parties agree that if the sum of
subsections A through I is less than zero, the Purchaser will
transfer to the Seller, by wire transfer on the Closing Date (or
the business day immediately before the Closing Date, if the
Closing Date occurs on a day when funds cannot be wired for same
day reinvestment), immediately available funds in the amount by
which such sum is less than zero. The parties further acknowledge
that the Real Property shall be sold and purchased, and payment of
the $750,000 purchase price with such prorations and adjustments
thereto shall be made, pursuant to the Real Property Contract
attached hereto as Exhibit 1.1C.
1.4 Adjustment Payment Date
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A. On
the fifteenth (15 th ) day after the Closing Date or
such earlier date as may be agreed to in writing by the parties
(the "Adjustment Payment Date"), Seller shall deliver the following
documents to Purchaser:
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(i) A
statement setting forth (a) the aggregate amount of Deposit
Liabilities and the Accrued Deposit Interest thereon transferred to
and assumed by Purchaser, calculated as of the close of business on
the day immediately before the Closing Date; and (b) any
corrections to the information contained in the Deposit Listing (as
defined in Section 6.8) delivered to the Purchaser on the Closing
Date;
(ii) A
statement of the Purchased Loans as of the close of business on the
day immediately before the Closing Date, setting forth the
aggregate unpaid principal amount of such Purchased Loans and the
Accrued Loan Interest and listing, for each such Purchased Loans,
the name and address of the borrower, the unpaid principal amount
thereof interest rate thereon and the amount of the Accrued Loan
Interest;
(iii) A
statement of the actual proration amounts to be paid in accordance
with Section 1.6 hereof as of the start of business on the Closing
Date; and
(iv) A
closing statement for execution by the parties.
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B. If
the statement delivered in accordance with the foregoing subsection
A requires an adjustment to be made to the Transfer Payment, Seller
or Purchaser, as the case may be, shall make an adjustment payment
to the other party (the "Adjustment Payment") to correct any
discrepancy between the amount of the estimated Transfer Payment
paid under Section 1.3 and the amount of the Transfer Payment as
finally determined pursuant to Section 1.4A. Seller shall provide
Purchaser with the worksheets it used to calculate the Adjustment
Payment. Any Adjustment Payment due to either party on the
Adjustment Payment Date pursuant to this provision shall be paid to
such party on the Adjustment Payment Date by the other party by
wire transfer, and shall bear interest from and including the
Closing Date to the date of payment at the effective federal funds
rate as published daily by the Federal Reserve Bank of San
Francisco during the period(s) involved.
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1.5 Purchase Price . The
purchase price is to be paid by the Purchaser to Seller for the
assets to be acquired under this Agreement. The "Purchase Price"
shall be equal to the sum of the amounts referred to in subsections
C, D, E, F, G and H of Section 1.3 herein and the purchase price of
the Real Property, as the same are adjusted pursuant to Section
1.4.
1.6 Prorations . It is
the intention of the parties hereto that Seller shall operate for
its own account the business being transferred pursuant to this
Agreement until the close of business on the day immediately before
the Closing Date, and that Purchaser shall operate for its own
account the business being transferred pursuant to this Agreement
from and after the Closing Date. Thus, except as otherwise
specifically provided in this Agreement (including the Real Estate
Contract), items of income and expense allocable to the Assets and
Liabilities shall be prorated as of the close of business on the
day immediately before the Closing Date using the accrual method of
accounting, whether or not such adjustment would normally be made
as of such time. For purposes of this Agreement and except as set
forth in the Real Estate Contract, items of proration and other
adjustments shall include, but not be limited to; (i) personal
property taxes; (ii) FDIC deposit insurance assessments (prorated
in accordance with the number of days elapsed during the quarter in
which the Closing Date occurs and applicable FDIC assessment
rates); (iii) other accrued expenses (including but not limited to
those under the Contracts) and prepaid expenses (but only including
prepaids that will inure directly to the benefit of Purchaser and
excluding all others, such as by way of example, prepaid
advertising) for the Branch and (iv) Safe Deposit Box revenue from
the Branch.
1.7 Closing Date: Closing; Real Estate
Transfer . The consummation of the purchase and
assumption transactions (the "Closing") provided for in this
Agreement, including the Real Property Contract, shall occur (i) no
later than fifteen (15) calendar days after receipt by the parties
of all required regulatory approvals and all other approvals
required by law or contract for consummation of the transactions
provided for herein and lapse of all required waiting periods
associated therewith (such date referred to hereinafter as the
"Closing Date"), with a target date of June 15, 2009 or (ii) such
other date as is mutually agreed upon in writing by the parties
hereto. In any event, the Closing Date may be extended to December
30, 2009,if regulatory approvals and waiting periods necessitate,
in accordance with paragraph 9.4D herein. Delivery of the documents
and instruments to be delivered by Seller and Purchaser, payment of
the Transfer Payment by Seller or Purchaser, closing of the sale
and purchase pursuant to the Real Property Contract, and other
transactions herein contemplated to take place concurrently with
such deliveries, assumptions and payments, shall take place on the
Closing Date at 8:00 a.m. (local time) at the offices of Seller in
the State of Washington (or at such other time and place as are
agreed to by both parties), and all such transactions shall be
deemed effective as of the close of business on the day immediately
before the Closing Date; provided, however, that any payment to be
made by either party to the other by wire transfer of immediately
available funds on the Closing Date shall be made by wire transfer
initiated prior to 10:00 a.m. (local time) on the Closing Date (or
on the business day immediately before the Closing Date, if the
Closing Date occurs on a day when funds cannot be wired for same
day reinvestment). Any deliveries, conveyances, assignments or
transfers required under this Agreement, other than the foregoing,
shall be made at the time and date specified in this Agreement (and
where no time is specified, on or before the start of business on
the date specified) and in the manner and place specified in this
Agreement
(of, where not specified, in
the manner and place as reasonably requested in writing by the
party that is to receive such delivery, conveyances, assignment or
transfer).
1.9 Limitations On Assumption of
Liabilities . The parties agree that Purchaser shall
assume only the Assumed Liabilities. Purchaser assumes no other
liabilities of the Seller or Seller's banking operations.
1.10 IRA Accounts .
(a) Included
in the Deposit Liabilities are deposits of customers of the Branch
relating to IRA accounts (which the parties acknowledge include SEP
IRA accounts, SIMPLE IRA accounts and any other type of retirement
account reflected in the deposit balances of the Branch) pursuant
to which Seller is currently acting as custodian.
(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 such IRA accounts of Seller's
intent to resign as custodian as of Closing and to appoint
Purchaser 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 such
appointment as successor custodian, unless the customer objects in
writing to such appointment or to Purchaser's master 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
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 IRA account of any customer not
accepting the appointment of Purchaser and the Purchaser's master
plan will not be included in the Deposit Liabilities.
(c) Purchaser
agrees that, with respect to the IRA accounts transferred to
Purchaser pursuant to Section 1.10(b) above, Purchaser will make no
payment to any such customer to satisfy the minimum distribution
requirements beginning the first day of April of the year following
the year in which the customer reaches age 70 1/2 until such
customer provides Purchaser with a written payment instruction in a
form satisfactory to Purchaser.
ARTICLE
II
REPRESENTATIONS AND WARRANTIES OF SELLER
Seller
hereby makes the following representations and warranties to
Purchaser:
2.1 Corporate Organization
. Seller is a state chartered mutual savings bank duly
organized and existing in good standing under the laws of the State
of Washington and possesses full corporate power and all necessary
approvals to own and operate the Branch and to carry on its
business as presently owned, operated, and conducted by it.
Seller's deposit liabilities are insured by the Federal Deposit
Insurance Corporation ("FDIC") to the fullest extent permitted
under federal law. No proceedings for the termination or revocation
of such insurance are pending or to Seller's knowledge threatened,
and Seller is not currently under any cease and desist order by any
regulatory agency, nor to Seller's knowledge is any such action
threatened which would preclude Seller from entering into or
consummating this Agreement.
2.2 Corporate Authority and Action
. Seller has full right, power and authority to sell,
convey, assign, transfer and deliver the Assets and the Assumed
Liabilities to Purchaser and to otherwise fully perform Seller's
obligations under this Agreement, subject however to (i) Seller's
receipt of all required regulatory approvals and (ii) compliance by
Purchaser with all of its obligations under this Agreement. Seller
has full right, power and authority to execute and deliver this
Agreement and each of the documents and instruments contemplated
hereby. This Agreement, and each such other document and
instrument, constitutes a valid and binding obligation of Seller
enforceable in accordance with its terms except as the same may be
limited by bankruptcy, insolvency, reorganization, or other laws
relating to or affecting the enforcement of creditors' rights
including, without limitation, the avoidance powers of the FDIC
pursuant to the Federal Deposit Insurance Act and except as courts
of equity may limit certain remedies such as specific performance.
This Agreement and the transactions contemplated hereby have been
approved by the Board of Directors of Seller and no other corporate
or member action is required on the part of Seller relating to this
Agreement and the transactions contemplated hereby.
2.3 No Default Effected .
The execution and delivery of this Agreement by Seller and the
consummation by Seller of the transactions contemplated hereby,
subject to the fulfillment of the terms and compliance with the
provisions hereof and all regulatory approvals, will not conflict
with, or result in the breach of, or a default (or an occurrence
which, with the lapse of time or action by a third party, could
result in a breach or default) with respect to (i) any of the
terms, conditions, or provisions of any laws applicable to Seller,
or of the articles of incorporation or bylaws of Seller; (ii) any
agreement or other instrument to which Seller is a party or is
subject, or by which Seller or any of its properties or assets are
bound; or (iii) any order, judgment, injunction, decree, directive,
or award of any court, arbitrator, government agency, or public
official by which Seller is bound.
2.4 Brokers . All
negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on by Seller without the
intervention of any other person acting on behalf of Seller in such
manner as to give rise to any valid claim by any person against
Seller or Purchaser for reimbursement of expenses or a finder's
fee, brokerage commission, or other similar payment, and Seller
shall pay all commissions, fees, costs and expenses, directly or
indirectly, due any such person and indemnify Purchaser against all
commissions, fees, costs, expenses, or other similar payments in
connection therewith.
2.5 Litigation . There
are no actions, causes of action, claims, suits or proceedings,
pending or, to Seller's knowledge, threatened, against Seller
affecting the Branch, the Assets or the Assumed Liabilities whether
at law, in equity or before or by a governmental department,
commission, board, bureau, agency or instrumentality, domestic or
foreign, and to Seller's knowledge, there are no unresolved
disputes under any written or oral agreement, whether express or
implied, to which Seller is a party or by which it is bound that
would adversely affect the Branch, the Assets, the Assumed
Liabilities or the transactions contemplated hereby, and Seller has
no knowledge of any state of facts or the occurrence of any event
which would form the basis for any claim which would adversely
affect the Branch, the Assets, the Assumed Liabilities or the
transactions contemplated hereby.
2.6 Deposits . The
Deposits are insured by FDIC to the fullest extent permitted under
federal law. The Deposits (i) are in all respects genuine and
enforceable obligations of Seller and have been acquired and
maintained in full compliance with all applicable laws, including
(but not limited to) the Truth in Savings Act and regulations
promulgated thereunder; (ii) were acquired in the ordinary course
of Seller's business; and (iii) are not subject to any claims that
are superior to the rights of persons shown on the records
delivered to Purchaser indicating the owners of the Deposits, other
than claims against such Deposit owners, such as state and federal
tax liens, garnishments, and other judgment claims, which have
matured or may mature into claims against the respective
Deposits.
2.7 Title to Assets .
Seller has good and marketable title to the Assets, and complete
and unrestrictive power to sell, transfer and assign the Assets to
Purchaser subject to the receipt of all required regulatory
approvals and, except as set forth in the Real Property Contract,
free and clear of any and all claims, liens, encumbrances or rights
of third parties. Seller has no knowledge of any defects in, or
damage to, any of the Real Property or Personal Property,
reasonable wear and tear excepted, other than such as would be
plainly visible upon a due diligence inspection. However, Seller
makes no other representation relating to the physical condition of
the Real Property or the Personal Property. The Personal Property
and the Real Property, except as otherwise expressly stated herein
or in the Real Property Contract, shall be conveyed in "AS IS"
condition without any representation as to suitability for any
particular purpose.
2.8 Proceedings Relating to Branch and
Real Property . No proceedings to take all or any part
of the Branch premises or the Real Property by condemnation or
right of eminent domain are pending or, to Seller's knowledge,
threatened. Seller's use of the Branch and Real Property are not,
and no complaints have been received by Seller that Seller is, in
violation of applicable building, zoning, platting, subdivision,
use, safety, building, energy and environmental or similar laws,
ordinances, regulations and restrictions. The Branch and Real
Property are adequately serviced by all utilities necessary for
effective operation as presently used for a financial institution
branch office.
2.9 Contracts and Agreements
. A true and complete copy of each Contract to be assumed
by Purchaser is attached to Exhibit 1.2B of this Agreement. Each
such Contract is valid and enforceable according to its terms,
Seller is not in default under any Contract and there has been no
event which, with notice or the lapse of time, or both, would
constitute a default under any such Contract by Seller including,
but not limited to, the consummation of the transactions
contemplated by this Agreement.
2.10 Compliance with Laws .
Insofar as it may affect the transactions contemplated by this
Agreement, to Seller's knowledge, Seller is in compliance with all
laws applicable to the operation of its business as presently
conducted at the Branch, specifically including, without
limitation, compliance with all regulations concerning
truth-in-savings, consumer protection, occupational safety, civil
rights, and labor and/or employment laws.
2.11 IRS Reporting . Seller has
timely filed all applicable reports, returns and filing information
data required to be filed with any and all federal and state
banking authorities and any
and all other governmental
authorities and regulatory agencies, it being acknowledged and
agreed that the Purchaser shall file Form 1099s with respect to the
Branch Deposits up to and including the day before the Closing
Date; provided that, within five (5) business days after the
Closing Date, Seller shall provide Purchaser with all the
information necessary to allow Purchaser to complete said Form
1099s, such information to be in the form reasonably acceptable to
the Purchaser.
2.12 Environmental Matters .
There is no legal, administrative, arbitral or other proceeding,
claim, action, cause of action or governmental investigation
pending or, to Seller's knowledge, threatened which seeks to impose
on Seller or any, predecessor of Seller in connection with the Real
Property any liability arising under any environmental laws, nor to
Seller's knowledge is there any basis for any of the foregoing.
Seller is not subject to any agreement, order, judgment, decree or
memorandum by or with any court, governmental authority, regulatory
agency or third party imposing any such liability with respect to
the Real Property. To Seller's knowledge, there are no
environmental conditions such as above ground or under ground
storage tanks, discharges or emissions or releases of hazardous
materials which constitute a violation of any environmental laws
present at, on, under, or above the Real Property.
2.13 Taxes . Seller shall be
entitled to the tax deduction (to the extent permitted by
applicable law) for the accrued interest on the Deposit Liabilities
prior to th
