-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FlJ+ZKayqZaLOVXLwmwXyttypnS5I/kOzg0G639hg4mCzWy8LKXFzVFBw37DwqaP GZ1LLdIPO4uYwdnXBxLcPw== 0000891836-06-000154.txt : 20060427 0000891836-06-000154.hdr.sgml : 20060427 20060427143423 ACCESSION NUMBER: 0000891836-06-000154 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 10 FILED AS OF DATE: 20060427 DATE AS OF CHANGE: 20060427 GROUP MEMBERS: TWO-FORTY ASSOCIATES FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Bolger David Fabius CENTRAL INDEX KEY: 0001357224 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: BUSINESS PHONE: (201) 670-9270 MAIL ADDRESS: STREET 1: L'AMBIANCE II 435 STREET 2: L'AMBIANCE DRIVE UNIT J904 CITY: LONG BOAT KEY STATE: FL ZIP: 34228-3924 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: CASCADE BANCORP CENTRAL INDEX KEY: 0000865911 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 931034484 STATE OF INCORPORATION: OR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-81598 FILM NUMBER: 06784603 BUSINESS ADDRESS: STREET 1: 1100 N W WALL ST STREET 2: P O BOX 369 CITY: BEND STATE: OR ZIP: 97709 BUSINESS PHONE: 5413856205 MAIL ADDRESS: STREET 1: 1100 NW WALL STREET STREET 2: P.O. BOX CITY: BEND STATE: OR ZIP: 97709 SC 13D 1 sc0060.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE OF 1934 (AMENDMENT NO. ___________)* Cascade Bancorp - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, no par value - -------------------------------------------------------------------------------- (Title of Class of Securities) 147154108 --------------------------------------------------------- (CUSIP Number) Mark J. Menting, Esq. Sullivan & Cromwell LLP 125 Broad Street New York, NY 10004 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) April 20, 2006 --------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13-1(g), check the following box.[ ] NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See ss.240.13d-7 for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). SCHEDULE 13D - --------------------------- --------------------------------- CUSIP NO. 147154108 PAGE 2 OF 9 PAGES - --------------------------- --------------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). David F. Bolger - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- SOURCE OF FUNDS (SEE INSTRUCTIONS) 4 SC - -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Florida, USA - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 5,173,142***/5,138,142**** SHARES ---------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH REPORTING 153,857 PERSON WITH ---------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 5,173,142***/5,138,142**** ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 153,857 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 5,326,999/5,291,999**** - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 23.7%/23.6%**** - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) IN - -------------------------------------------------------------------------------- - ---------------------- *** Prior to the consummation of the Merger (as defined below), Mr. Bolger owned 2,000 shares of Common Stock of the Company. As described below, Mr. Bolger received 5,171,142 shares of Common Stock in connection with the Merger and, following the consummation thereof, Mr. Bolger transferred 35,000 shares of Common Stock to various parties. **** After giving effect to the transfer of 35,000 shares described above. SCHEDULE 13D - --------------------------- --------------------------------- CUSIP NO. 147154108 PAGE 3 OF 9 PAGES - --------------------------- --------------------------------- - -------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS. I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY). Two-Forty Associates, a Pennsylvania Limited Partnership - -------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (SEE INSTRUCTIONS) (a) [X] (b) [ ] - -------------------------------------------------------------------------------- 3 SEC USE ONLY - -------------------------------------------------------------------------------- 4 SOURCE OF FUNDS (SEE INSTRUCTIONS) SC - -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) [ ] - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Pennsylvania, USA - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER NUMBER OF 0 SHARES ---------------------------------------------------------- BENEFICIALLY 8 SHARED VOTING POWER OWNED BY EACH REPORTING 153,857 PERSON WITH ---------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 0 ---------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 153,857 - -------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 153,857 - -------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS) [ ] - -------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 0.7% - -------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON (SEE INSTRUCTIONS) PN - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND ISSUER This Statement on Schedule 13D relates to the common stock, no par value (the "Common Stock") of Cascade Bancorp, an Oregon corporation and a registered financial holding company (the "Company"). The address of the principal executive offices of the Company is 1100 NW Wall Street, P.O. Box 369, Bend, Oregon 97709. ITEM 2. IDENTITY AND BACKGROUND (a), (b), (c) and (f). This Schedule 13D is being filed by the following persons (each, a "Reporting Person"), in each case with respect to the Common Stock indicated: (i) David F. Bolger. Mr. Bolger is a citizen of the United States, a director emeritus of the Company (described in Item 6 below) and the President of Bolger & Co., Inc., a real estate investment and investment banking company. His business address is 79 Chestnut Street, Ridgewood, New Jersey 07450. Mr. Bolger is the former chairman of F&M Holding Company ("F&M"), which merged with and into the Company effective April 20, 2006. (ii) Two-Forty Associates, a Pennsylvania Limited Partnership ("Two-Forty L.P."). Mr. Bolger serves as the sole trustee of The David F. Bolger Revocable Trust, which is the general partner of Two-Forty L.P. The limited partners of Two-Forty L.P. are Mr. Bolger and Mr. Bolger's three children. The principal business of Two-Forty L.P. is real estate investment and its business address is 79 Chestnut Street, Ridgewood, New Jersey 07450. (d) None of the Reporting Persons has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the Reporting Persons has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and, as a result of such proceeding, was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION Pursuant to the Agreement of Merger, dated as of December 27, 2005, as amended (the "Merger Agreement"), among the Company, F&M, F&M Acquisition Corporation ("Acquisition Corp.") and Mr. Bolger, Acquisition Corp. merged with and into F&M on April 20, 2006 (the "Merger"). In the Merger, the shareholders of F&M (which include the Reporting Persons) received 5,325,000 shares of Common Stock, $18,597,787 in cash and a right to receive a contingent cash payment of $3,902,213 in exchange for a total of 20,766 shares of F&M common stock. Mr. Bolger received 5,171,142 shares of Common Stock and Two-Forty L.P. received 153,857 shares of Common Stock. Based on the closing price of the Common Stock on December 23, 2005 (the last full trading day before the Merger Agreement was signed) of $23.39 per share, the total value of the consideration paid by the Company in connection with the Merger was approximately $147.1 million. Following the consummation of the Merger, Mr. Bolger transferred 35,000 shares of Common Stock as follows, in each case as an outright gift (collectively, the "Transfers"): (i) 20,000 shares were transferred to Thomas M. Wells, who is a former director of F&M and a current director of the Company, (ii) 10,000 shares were transferred to Clarence Jones, who is a former director of F&M and a current director of the Company and (iii) 5,000 shares were transferred to John Lambert (who is a former director of F&M) and Carol A. Lambert, jointly. After giving effect to the Transfers, Mr. Bolger beneficially owns 5,291,999 shares of Common Stock (5,138,142 shares that are owned directly as an individual and 153,857 that are owned through his status as the sole trustee of the general partner of Two-Forty L.P.). ITEM 4. PURPOSE OF THE TRANSACTION The Reporting Persons have acquired beneficial ownership of the shares of Common Stock as described in this Schedule 13D for investment purposes. Except as set forth below, as of the date of this Statement, none of the Reporting Persons has any present plans or proposals which would result in or relate to any of the actions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. Mr. Bolger intends to transfer an aggregate of aproximately 500,000 shares of Common Stock in the form of outright gifts to various charities. The Reporting Persons reserve the right to change their plans and intentions at any time, as they deem appropriate. The Reporting Persons may from time-to-time (i) acquire additional shares of Common Stock in the open market, in privately negotiated transactions or otherwise, or (ii) dispose of shares of Common Stock at prices deemed favorable in the open market, in privately negotiated transactions or otherwise. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) See items 11 and 13 of the cover pages to this Schedule 13D for the aggregate number and percentage of shares of Common Stock beneficially owned by each of the Reporting Persons. Based on information provided in the Company's Form 10-K for the fiscal year ended December 31, 2005, as of March 10, 2006 there were 22,432,513 shares of Common Stock outstanding. Upon the consummation of the Merger and before giving effect to the Transfers, Mr. Bolger beneficially owned 5,326,999 shares of Common Stock, which represented approximately 23.7% of the outstanding shares of Common Stock. This total was comprised of 5,173,142 shares of Common Stock that Mr. Bolger owns directly as an individual and 153,857 shares of Common Stock that Mr. Bolger owns by virtue of his status of the sole trustee of The David F. Bolger Revocable Trust, which is the general partner of Two-Forty L.P. After taking into account the Transfers, Mr. Bolger beneficially owns a total of 5,291,999 shares of Common Stock, or approximately 23.6% of the outstanding shares of Common Stock. Two-Forty L.P. beneficially owns 153,857 shares of Common Stock, which represents approximately 0.7% of the outstanding shares of Common Stock. Mr. Bolger beneficially owns these shares as the sole trustee of the entity that is the general partner of Two-Forty L.P. (b) Mr. Bolger had the sole power to vote or to direct the vote or to dispose or direct the disposition of 5,173,142 shares of Common Stock (5,138,142 shares after giving effect to the Transfers). Mr. Bolger, as the sole trustee of The David F. Bolger Revocable Trust (the general partner of Two-Forty L.P.) has shared power to vote or to direct the vote or to dispose or direct the disposition of 153,857 shares of Common Stock. Two-Forty L.P. has shared power to vote or to direct the vote or to dispose or direct the disposition of 153,857 shares of Common Stock. (c) As described in Item 3 above, in the Merger, on April 20, 2006 the shareholders of F&M (which include the Reporting Persons) received 5,325,000 shares of Common Stock, $18,597,787 in cash and a right to receive a contingent cash payment of $3,902,213 in exchange for a total of 20,766 shares of F&M common stock. Mr. Bolger received 5,171,142 shares of Common Stock and Two-Forty L.P. received 153,857 shares of Common Stock. The closing price of the Common Stock on December 23, 2005 (the last full trading day before the Merger Agreement was signed) was $23.39 per share and the closing price of the Common Stock on April 20, 2006 (the closing date of the Merger) was $29.55. Following the consummation of the Merger, Mr. Bolger transferred 35,000 shares of Common Stock, as described above. (d) As the sole trustee of The David F. Bolger Revocable Trust (which is the general partner of Two-Forty L.P.), Mr. Bolger has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the 153,857 shares of Common Stock that are held by Two-Forty L.P. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER Pursuant to the Shareholders Agreement, dated as of December 27, 2005, by and among the Company and the Reporting Persons (the "Shareholders Agreement"), the Company agreed to increase the size of its board of directors and the board of directors of the Company's banking subsidiary, Bank of the Cascades (the "Bank"), by two to enable it to nominate two individuals selected by Mr. Bolger and to elect these two individuals to the board of directors of the Company and the board of directors of the Bank on the day after the closing date of the Merger. Pursuant to the Shareholders Agreement, Mr. Bolger selected Thomas M. Wells and Clarence Jones as his nominees, and Messrs. Jones and Wells were elected to the board of directors of each of the Company and the Bank. Further, in connection with the Shareholders Agreement, Mr. Bolger was appointed a "director emeritus" of the Company after the closing of the Merger. In this capacity, and pursuant to the Shareholders Agreement, Mr. Bolger has no voting authority, will not receive any form of compensation and will not be an attendee at board meetings nor have access to confidential information. Under the terms of the Shareholders Agreement, if the Reporting Persons collectively own at least 15% of the outstanding shares of Common Stock, Mr. Bolger has the right to nominate two candidates for election to each of the board of directors of the Company and the board of directors of the Bank. If the Reporting Persons collectively own at least 5% but less than 15% of the outstanding shares of Common Stock, Mr. Bolger has the right to nominate one candidate for election to each of the board of directors of the Company and the board of directors of the Bank. In either case, the Company is obligated to cause such nominee or designee to be elected a director of the Bank. If any of such directors resigns or is unable to serve as a director of the Company or of the Bank, Mr. Bolger may designate a replacement and the appropriate board of directors must elect such replacement to the unexpired term of the replaced director so long as (i) Mr. Bolger is entitled to nominate a director as set forth above and (ii) such replacement is reasonably acceptable to the remaining members of the Company's board of directors (or nominating committee thereof) and is not an affiliate of a competitor of the Company. Pursuant to the Shareholders Agreement, the Reporting Persons also agreed to, for a period of three years following the effective date of the Merger, vote their shares of Common Stock (i) in favor of all persons nominated by the Company's board of directors to become directors of the Company and (ii) in favor of any matters submitted to the Company's shareholders by the Company's board of directors other than with respect to a "change in control" of the Company, as such term is defined in the Shareholders Agreement. Until the occurrence of a "performance event," as such term is defined in the Shareholders Agreement, the Reporting Persons also agreed, except under certain circumstances, not to solicit proxies from other shareholders of the Company, not to initiate any tender offer for shares of the Common Stock and not to take any steps to initiate a change in control of the Company. Until the occurrence of a "performance event" and subject to certain exceptions, the Reporting Persons further agreed to communicate only with the Company's board of directors any concerns they may have regarding the Company or the Bank. The Reporting Persons also agreed not to transfer their shares of Common Stock except as permitted in the Shareholders Agreement. Additionally, the Company agreed, under certain circumstances set forth in the Shareholders Agreement, to register the shares of Common Stock held by the Reporting Persons under the Securities Act of 1933. Each of Mr. Bolger and Two-Forty L.P. entered into an investor representation letter, dated as of April 20, 2006, with the Company, pursuant to which each of Mr. Bolger and Two-Forty L.P. made various representations, warranties and acknowledgements with respect to the shares of Common Stock that they received in connection with the Merger. In connection with the Transfers, each of Thomas M. Wells, Clarence Jones, and John Lambert and Carol A. Lambert also entered into an investor representation letter with the Company and Mr. Bolger. Furthermore, in connection with the Transfers, Mr. Bolger and the Company entered into a letter agreement pursuant to which the Company consented to the Transfers under the Shareholders Agreement. See also Item 3 above for a description of the Merger Agreement. The documents, filings and exhibits are expressly incorporated herein by reference and the descriptions herein are qualified thereby. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS Exhibit No. Description - ----------- ----------- 1. Agreement of Merger, dated as of December 27, 2005, by and among Cascade Bancorp, F&M Holding Company, F&M Acquisition Corporation and David F. Bolger. 2. Investor Representation Letter, dated as of April 20, 2006, between Cascade Bancorp and David F. Bolger. 3. Investor Representation Letter, dated as of April 20, 2006, between Cascade Bancorp and Two-Forty Associates, a Pennsylvania limited partnership. 4. Shareholders Agreement, dated as of December 27, 2005, by and among Cascade Bancorp, David F. Bolger and each person listed on Schedule A thereto. 5. Amendment No. 1 to Agreement of Merger, dated as of April 13, 2006, by and among Cascade Bancorp, F&M Holding Company, F&M Acquisition Corporation and David F. Bolger. 6. Investor Representation Letter, dated as of April 20, 2006, among Cascade Bancorp, David F. Bolger and Clarence Jones. 7. Investor Representation Letter, dated as of April 20, 2006, among Cascade Bancorp, David F. Bolger and Thomas M. Wells. 8. Investor Representation Letter, dated as of April 20, 2006, among Cascade Bancorp, David F. Bolger, and John Lambert and Carol A. Lambert. 9. Letter Agreement, dated as of April 20, 2006, between Cascade Bancorp and David F. Bolger. SIGNATURES After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Date: April 26, 2006 /s/ DAVID F. BOLGER ----------------------------------- David F. Bolger TWO-FORTY ASSOCIATES, a Pennsylvania Limited Partnership By: The David F. Bolger Revocable Trust, its General Partner By: /s/ DAVID F. BOLGER ------------------------------- David F. Bolger, its Trustee INDEX OF EXHIBITS Exhibit No. Description - ----------- ----------- 1. Agreement of Merger, dated as of December 27, 2005, by and among Cascade Bancorp, F&M Holding Company, F&M Acquisition Corporation and David F. Bolger. 2. Investor Representation Letter, dated as of April 20, 2006, between Cascade Bancorp and David F. Bolger. 3. Investor Representation Letter, dated as of April 20, 2006, between Cascade Bancorp and Two-Forty Associates, a Pennsylvania limited partnership. 4. Shareholders Agreement, dated as of December 27, 2005, by and among Cascade Bancorp, David F. Bolger and each person listed on Schedule A thereto. 5. Amendment No. 1 to Agreement of Merger, dated as of April 13, 2006, by and among Cascade Bancorp, F&M Holding Company, F&M Acquisition Corporation and David F. Bolger. 6. Investor Representation Letter, dated as of April 20, 2006, among Cascade Bancorp, David F. Bolger and Clarence Jones. 7. Investor Representation Letter, dated as of April 20, 2006, among Cascade Bancorp, David F. Bolger and Thomas M. Wells. 8. Investor Representation Letter, dated as of April 20, 2006, among Cascade Bancorp, David F. Bolger, and John Lambert and Carol A. Lambert. 9. Letter Agreement, dated as of April 20, 2006, between Cascade Bancorp and David F. Bolger. EX-99.1 2 exh-1.txt AGREEMENT OF MERGER Exhibit 1 AGREEMENT OF MERGER THIS AGREEMENT OF MERGER (this "Agreement"), dated as of December 27, 2005, is among F&M Holding Company, an Idaho corporation and a registered bank holding company ("F&M"), Cascade Bancorp, an Oregon corporation and a registered financial holding company ("Cascade"), Igloo Acquisition Corporation, an Oregon corporation and a wholly-owned subsidiary of Cascade ("Acquisition Co.") and David F. Bolger (the "Bolger Shareholder"). Certain capitalized terms used herein are defined in Section 9.2 hereof. RECITALS: The respective boards of directors of F&M, Cascade and Acquisition Co. have determined that a business combination between the parties, on the terms described herein, is in the best interests of their respective companies and shareholders. Accordingly, the respective boards of directors of F&M, Cascade and Acquisition Co. have approved this Agreement and deem it advisable and in the best interests of their respective shareholders to approve the merger of Acquisition Co. with and into F&M, upon the terms and subject to the conditions set forth in this Agreement. AGREEMENT: NOW, THEREFORE, the parties agree as follows: ARTICLE I. THE MERGER ---------- Section 1.1 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, Acquisition Co. shall be merged with and into F&M at the Effective Time (the "Merger"), in accordance with the Oregon Business Corporation Act and the Idaho Business Corporation Act. The separate corporate existence of Acquisition Co. shall cease as of the Effective Time and F&M shall continue as the surviving corporation. F&M, as the surviving corporation after the Merger, is hereinafter sometimes referred to as the "Surviving Corporation." Section 1.2 Closing. The closing of the Merger (the "Closing") will take place on a date on or after April 1, 2006, and time to be specified by the parties (the "Closing Date"), which shall be no later than the fifth (5th) Business Day after satisfaction or waiver of the conditions set forth in Article VI (other than those conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of those conditions), unless another time or date is agreed to by the parties. The Closing will be held at the offices of Davis Wright Tremaine LLP located in Portland, Oregon, or at such other location as the parties may agree. The Merger will be effective at noon Idaho time on the Closing Date (such date and time being referred to herein as the "Effective Time"). On the Closing Date, articles of merger (in a form mutually agreed to by the parties) shall be filed with the Oregon Secretary of State and the Idaho Secretary of State to effect the Merger, and the parties shall cause to be delivered the various certificates, instruments and documents referred to in Article VI. 1 Section 1.3 Effects of the Merger. The Merger shall have the effects set forth in the Oregon Business Corporation Act, the Idaho Business Corporation Act and as set forth in Article II below. Section 1.4 Bank Merger. As soon as possible following the Effective Time, Cascade intends to (a) cause the merger (the "Subsidiary Merger") of the Surviving Corporation with and into Cascade, and (b) cause the merger (the "Bank Merger" and collectively with the Merger and the Subsidiary Merger, the "Mergers") of Farmers & Merchants State Bank, an Idaho chartered stock bank and, as of the date of this Agreement, a wholly-owned subsidiary of F&M ("F&M Bank") with and into Bank of the Cascades, an Oregon chartered stock bank and a wholly-owned subsidiary of Cascade ("Cascade Bank"). ARTICLE II. EFFECT OF THE MERGER -------------------- Section 2.1 Effect on Capital Stock. By virtue of the Merger and without any action on the part of any shareholder of F&M, Cascade or Acquisition Co.: (a) The F&M common stock issued and outstanding immediately before the Merger shall be converted into the right to receive from Cascade the following (the "Merger Consideration"): (i) 5,325,000 shares of Cascade common stock, no par value (the "Merger Shares"), (ii) $18,597,787 by wire transfer of immediately available funds (the "Cash Consideration"), and (iii) a contingent additional cash payment in an amount not to exceed $3,902,213 plus interest thereon, as more particularly described in Schedule 2.1 attached hereto (the "Contingent Consideration"). Each share of F&M common stock issued and outstanding immediately prior to the Effective Time (all such shares, the "F&M Effective Time Shares") shall be converted into the right to receive from Cascade (x) the number of shares of Cascade common stock, no par value, equal to the quotient of (i) the Merger Shares divided by (ii) the F&M Effective Time Shares, (y) an amount in immediately available funds equal to the quotient of (i) the Cash Consideration divided by (ii) the F&M Effective Time Shares, and (z) a contingent additional cash payment in an amount not to exceed the amount equal to the quotient of (i) the Contingent Consideration divided by (ii) the F&M Effective Time Shares. No fractional shares of Cascade common stock shall be issued as part of the Merger Consideration, and in lieu thereof Cascade shall pay to the holder of a fractional share cash in an amount determined as the product of the amount of such fractional share multiplied by the last reported sale price of a share of Cascade common stock on the Business Day immediately preceding the Closing Date. Immediately following the Effective Time and except as provided in Section 2.1(b), no shares of F&M common stock shall be outstanding, all shares of F&M common stock shall automatically be canceled and retired and shall cease to exist, and the holders of F&M common stock shall cease to have any rights with respect thereto, except the right to receive the Merger Consideration upon surrender of certificates therefor in accordance with Section 2.4. If Cascade is unable to obtain the available Cash Consideration to meet its obligations hereunder, then the F&M Holders shall have the option to substitute trust preferred securities of Cascade or any of its Subsidiaries having a face value equal to the Cash Consideration on the same terms, conditions and pricing as Cascade's most recent privately placed, pooled trust preferred securities. 2 (b) Each share of Acquisition Co. common stock issued and outstanding before the Merger shall be converted into one share of common stock, par value $1 per share, of the Surviving Corporation. Section 2.2 Anti-Dilution. In the event Cascade changes (or establishes a record date for changing) the number of shares of Cascade common stock issued and outstanding prior to the Closing Date as a result of a stock split, reverse stock split, stock dividend, recapitalization or other similar event ("Recapitalization Event") and the record date therefor shall be prior to the Closing Date, the number of Merger Shares to be issued in the Merger shall be proportionately adjusted to reflect such Recapitalization Event. Section 2.3 Certain Expenses. The Bolger Shareholder will pay all the costs and expenses incurred by F&M for legal and financial advisory services rendered in connection with the negotiation and consummation of the Merger as described in Section 2.3 of the F&M Disclosure Schedule and neither F&M nor Cascade shall have any responsibility for any such costs and expenses. F&M will pay all other costs and expenses incurred by it in connection with the negotiation and consummation of the Merger. Section 2.4 Exchange of Certificates. (a) Not more than four (4) Business Days prior to the Closing Date, F&M will deliver a true and correct list of all the holders of F&M common stock (the "F&M Holders") who will hold F&M Effective Time Shares, showing the number of shares and certificate numbers to be held by each. At the Closing, each F&M Holder holding F&M Effective Time Shares shall deliver to Cascade: (i) a duly executed letter of transmittal in the form attached hereto as Exhibit A (each, a "Letter of Transmittal"), (ii) any documents or instruments required by the Letter of Transmittal to be delivered, (iii) an investor representation letter in the form attached hereto as Exhibit B (each, an "Investor Letter"), and (iv) his, her or its certificate or certificates representing F&M Effective Time Shares (each, a "Certificate" and collectively, the "Certificates"), duly endorsed for transfer or cancellation. On the Closing Date, simultaneously with the Effective Time, (x) Cascade shall deliver to each F&M Holder holding F&M Effective Time Shares, in accordance with the instructions contained in such holder's Letter of Transmittal (i) a certificate representing that number of Merger Shares that such holder has the right to receive pursuant to the provisions of this Article II, and (ii) a non-transferable certificate representing that amount of Contingent Consideration that such holder has the right to receive pursuant to the provisions of this Article II, (y) Cascade shall pay in U.S. dollars by wire transfer of immediately available funds to the account or accounts designated in writing by the respective holders at least two (2) Business Days prior to the Closing Date (i) the portion of the Cash Consideration that such holder has the right to receive pursuant to the provisions of this Article II, and (ii) cash in result of any fractional shares resulting from the Merger that such holder has the right to receive pursuant to the provisions of this Article II. (b) The Merger Consideration shall be deemed to have been issued in full satisfaction of all rights pertaining to the shares of F&M common stock previously represented by such Certificates, and there shall be no further registration of transfers on the stock transfer books of the Surviving Corporation of the F&M Effective Time Shares. 3 (c) Except with respect to the repurchase of directors' qualifying shares, the stock transfer books of F&M shall be closed four (4) Business Days prior to the Closing Date. After such date, there shall be no further registration of transfers on the stock transfer books of F&M or Cascade of F&M Effective Time Shares. (d) If any portion of the Merger Consideration is to be issued or paid in a name or to a Person other than that in which the Certificate surrendered in exchange therefor is registered, it shall be a condition of payment thereof that the Person requesting such exchange shall have paid to Cascade any transfer or other taxes required by reason of the payment of cash in any name other than that of the registered holder of the Certificate surrendered, or established to the satisfaction of Cascade or any agent designated by it that such tax has been paid or is not payable. Section 2.5 Articles and Bylaws. The articles of incorporation and bylaws of F&M existing as of the Effective Time shall be the articles of incorporation and bylaws of the Surviving Corporation until thereafter changed or amended as provided therein or by applicable Law. Section 2.6 Boards of Directors. The directors of Acquisition Co. immediately prior to the Effective Time shall be the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. ARTICLE III. REPRESENTATIONS AND WARRANTIES OF CASCADE ----------------------------------------- Except as set forth on the disclosure schedule delivered by Cascade to F&M (the "Cascade Disclosure Schedule"), Cascade represents and warrants to F&M and the Bolger Shareholder that the following statements are true and correct as of the date of this Agreement: Section 3.1 Organization, Standing and Corporate Power. Cascade is a corporation duly organized and validly existing under the laws of the state of Oregon. Cascade is a financial holding company in good standing under the BHC Act. Acquisition Co. is a corporation duly organized and validly existing under the laws of the state of Oregon. Cascade Bank is duly organized, validly existing and in good standing as a stock bank chartered under the laws of the state of Oregon. Each of Cascade, Acquisition Co. and Cascade Bank has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of Cascade, Acquisition Co. and Cascade Bank is duly qualified or licensed to do business and is in good standing in each jurisdiction in which it conducts its business, except for those jurisdictions in which the failure to be so qualified or in good standing would not have a Material Adverse Effect. Cascade has delivered to F&M prior to the execution of this Agreement complete and correct copies of the Articles of Incorporation of each of Cascade and Acquisition Co. and the Charter of Cascade Bank, and the Bylaws of all of them, in each case as currently in effect. Section 3.2 Subsidiaries. Section 3.2 of the Cascade Disclosure Schedule sets forth the name, form of entity and jurisdiction of formation of each of Cascade's Subsidiaries. Each of Cascade's Subsidiaries is duly organized and validly existing in the jurisdiction of its formation. 4 Each Subsidiary of Cascade has all requisite power and authority to own or lease and operate its assets and carry on its business as presently conducted or proposed to be conducted. Each Subsidiary of Cascade is duly qualified to do business and is in good standing in each jurisdiction in which it currently conducts its business, except for those jurisdictions in which the failure to be so qualified or in good standing would not have a Material Adverse Effect. All the outstanding shares of capital stock of, or other equity interests in, each Subsidiary of Cascade have been validly issued and are fully paid and nonassessable and are owned directly or indirectly by Cascade, free and clear of all Liens and free of any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests. Except for the capital stock or other ownership interests of its Subsidiaries as disclosed in the Cascade Securities Filings or as disclosed in Section 3.2 of the Cascade Disclosure Schedule, Cascade does not beneficially own any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person. Section 3.3 Capital Structure. (a) The authorized capital stock of Cascade consists of 35,000,000 shares of common stock, no par value, of which 16,952,240 shares are outstanding. The authorized capital stock of Cascade Bank consists of 250,000 shares of common stock, par value $2.00 per share, of which 250,000 shares are outstanding and are held by Cascade. The authorized capital stock of Acquisition Co. consists of 1,000 shares of common stock, no par value, of which 1,000 shares are outstanding and are held by Cascade. (b) There are issued and outstanding Employee and Director Options exercisable for 943,232 shares of Cascade common stock, of which Employee and Director Options for 623,435 shares of Cascade common stock are currently exercisable. All outstanding shares of Cascade common stock and all shares that may be issued pursuant to any outstanding Employee and Director Option will be, when issued in accordance with the respective terms thereof, duly authorized, validly issued, fully paid and non-assessable. No class of capital stock of Cascade is entitled to preemptive rights. (c) Except as provided above in this Section 3.3 or in the Cascade Disclosure Schedule, there are (i) no other shares of capital stock or other voting securities of Cascade issued, reserved for issuance or outstanding; (ii) no rights to receive shares of Cascade common stock on a deferred basis granted under the Cascade Stock Plans or otherwise; (iii) no stock appreciation rights; (iv) no securities of Cascade (or any of its Subsidiaries) exercisable for, convertible into or exchangeable for shares of capital stock, ownership interests, or voting securities of Cascade (or its Subsidiaries); and (v) no warrants, calls, options or other rights to acquire from Cascade (or its Subsidiaries), and no obligation of Cascade or any of its Subsidiaries to issue, capital stock, voting securities or other ownership interests in or any securities convertible into or exchangeable for capital stock or voting securities of Cascade or any Subsidiary of Cascade. (d) No bonds, debentures, notes or other indebtedness of Cascade or any of its Subsidiaries having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of Cascade or any of its Subsidiaries may vote, are issued or outstanding. 5 (e) There are no outstanding obligations of Cascade or any Subsidiary of Cascade to repurchase, redeem or otherwise acquire any outstanding securities of Cascade or its Subsidiaries or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities. Cascade is not a party to any voting agreement with respect to the voting of its securities or any securities of any other Person (other than the Shareholders Agreement). There are no outstanding obligations of Cascade or any Subsidiary of Cascade to register any outstanding securities of Cascade or its Subsidiaries under the Securities Act, except for Cascade's obligations to register securities under the Shareholders Agreement. (f) When issued in accordance with the provisions of this Agreement, the Merger Shares will be duly authorized, validly issued, fully paid and non-assessable, and free and clear of all Liens and encumbrances (other than the Shareholders Agreement) created by or through Cascade. Section 3.4 Authority. Each of Cascade and Acquisition Co. has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. Except for the approval of Cascade's shareholders, the execution and delivery of this Agreement by Cascade and Acquisition Co. and the consummation by them of the transactions contemplated by this Agreement, have been duly authorized by all necessary corporate action on the part of Cascade and Acquisition Co. This Agreement has been duly executed and delivered by Cascade and Acquisition Co., and, assuming the due authorization, execution and delivery by each of the other parties hereto, constitutes the legal, valid and binding obligation of Cascade and Acquisition Co., enforceable against Cascade and Acquisition Co. in accordance with its terms. The Board of Directors of Cascade has adopted resolutions recommending the approval of the issuance of the Merger Shares to the Cascade shareholders. Section 3.5 Noncontravention. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not, conflict with, result in any violation of or default (with or without notice or lapse of time, or both) under, give rise to a right of termination, cancellation or acceleration of any obligation or loss of a benefit under, or result in the creation of any Lien upon any of the properties or assets of Cascade or any of it Subsidiaries under: (a) the Articles of Incorporation or Bylaws of Cascade or Acquisition Co., the Charter or Bylaws of Cascade Bank or the comparable organizational documents of any of Cascade's other Subsidiaries; (b) any Cascade Material Contract, permit, concession, franchise, license or similar authorization applicable to Cascade or its properties or assets or by which Cascade is bound, except for such conflicts, defaults, rights of termination, cancellation or acceleration, loss of benefit or creation of Lien that are set forth in Section 3.5 of the Cascade Disclosure Schedule; or (c) any Law, judgment, order or decree of any Governmental Entity applicable to Cascade or any of its Subsidiaries or any of their respective properties. Section 3.6 Regulatory Approvals Required. Except for (a) approval of the Bank Merger by the FDIC, the Oregon Director and the Idaho Director, (b) approval of, or waiver of jurisdiction by, the FRB of the Merger, and (c) any filings under the HSR Act in connection with the Merger, neither Cascade nor any of its Subsidiaries is required to obtain any approval, authorization, consent, license, clearance or order of, any declaration or notification to, or make 6 any filing or registration with, any Governmental Entity in order to permit Cascade to perform its obligations under this Agreement, or to prevent the termination of any material right, privilege, license or agreement of Cascade or any of its Subsidiaries, or any material loss or disadvantage to its business, upon consummation of the Mergers. Cascade has no reason to believe that any facts or circumstances relating to the business, financial condition, assets, results of operations or prospects of Cascade and its Subsidiaries are likely to cause the approvals of Governmental Entities required for the consummation of the transactions contemplated by this Agreement not to be obtained in a timely fashion. Section 3.7 Compliance with Lending Laws and Regulations. Except for such errors or oversights the financial effect of which are adequately reserved against: (a) Cascade and its Subsidiaries are now, and have at all times in the past been, in compliance in all material respects with all domestic Laws (including all applicable Laws governing or pertaining to fair housing, anti redlining, equal credit opportunity, truth in lending, real estate settlement procedures, fair credit reporting and every other prohibition against unlawful discrimination in residential lending, or governing consumer credit, including, but not limited to, the Community Reinvestment Act, the Consumer Credit Protection Act, Truth in Lending Act, and Regulation Z promulgated by the FRB, and the Real Estate Settlement Procedures Act of 1974) and, to the Knowledge of Cascade, all foreign Laws the violation of which, individually or in the aggregate, would have a Material Adverse Effect on Cascade. (b) All loans, leases, contracts and accounts receivable (billed and unbilled), security agreements, guarantees and recourse agreements, of Cascade or any of its Subsidiaries, as held in their portfolios or as sold with recourse into the secondary market, represent and are valid and binding obligations of their respective parties and debtors, enforceable in accordance with their respective terms, except for failures to be so valid, binding and enforceable that would not, individually or in the aggregate, have a Material Adverse Effect on Cascade; each of them is based on a valid, binding and enforceable contract or commitment, each of which has been executed and delivered in material compliance, in form and substance, with any and all Laws applicable to Cascade or any of its Subsidiaries, and to the other party or parties to the contract or commitment, including without limitation the Truth in Lending Act, Regulations Z and U of the FRB, Laws providing for nondiscriminatory practices in the granting of loans or credit, applicable usury Laws, and Laws imposing lending limits, except for failures to so comply that would not, individually or in the aggregate, have a Material Adverse Effect on Cascade; and all such contracts or commitments have been administered in material compliance with all applicable Laws the violation of which, individually or in the aggregate, would have a Material Adverse Effect on Cascade. (c) All loan files of Cascade Bank are complete and accurate in all material respects and have been maintained in accordance with good banking practice, except for failures to be so complete and accurate and to so maintain that would not, individually or in the aggregate, have a Material Adverse Effect on Cascade. (d) All notices of default, foreclosure proceedings or repossession proceedings against any real or personal property collateral have been issued, initiated and conducted by Cascade and its Subsidiaries in material formal and substantive compliance with 7 all applicable Laws the violation of which, individually or in the aggregate, would have a Material Adverse Effect on Cascade, and no material loss or impairment of any security interest, or material exposure to meritorious lawsuits or other proceedings against Cascade or any of its Subsidiaries has been or will be suffered or incurred by Cascade or any of its Subsidiaries in excess of such amounts as have been recognized in the Cascade Financial Statements except for such losses, impairments or exposures which, individually or in the aggregate, would not have a Material Adverse Effect on Cascade. (e) Neither Cascade nor any of its Subsidiaries is in material violation of any applicable servicer or any other requirements of the FHA, VA, FNMA, GNMA, FHLMC, SBA or any private mortgage insurer which insured or guaranteed any loans owned by Cascade or any of its Subsidiaries or as to which it has sold to other investors, the effect of which violation would constitute a Material Adverse Effect on Cascade, and with respect to such loans neither Cascade nor any of its Subsidiaries has done or failed to do, or caused to be done or omitted to be done, any act the effect of which act or omission impairs or invalidates (i) any FHA insurance or commitment of the FHA to insure, (ii) any VA guarantee or commitment of the VA to guarantee, (iii) any SBA guarantee or commitment of the SBA to guarantee, (iv) any private mortgage insurance or commitment of any private mortgage insurer to insure, (v) any title insurance policy, (vi) any hazard insurance policy, or (vii) any flood insurance policy required by the National Flood Insurance Act of 1968, as amended, which in each case or in the aggregate would have a Material Adverse Effect on Cascade. (f) As of the date hereof, neither Cascade nor any of its Subsidiaries is subject to any cease-and-desist or other order issued by, is a party to any written agreement, consent agreement or memorandum of understanding with, is a party to any commitment letter to, or is subject to any order or directive by, or a recipient of any extraordinary supervision letter from, and has adopted any board resolutions at the request of, any Governmental Entity, and has been advised by such Governmental Entity that they are contemplating issuing or requesting any of the foregoing. (g) Neither Cascade nor any of its Subsidiaries has knowingly engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any margin stock. (h) Cascade Bank's deposit accounts are insured by the FDIC to the fullest extent permitted under applicable Law, and all premiums and assessments required to be paid in connection therewith have been paid. (i) Cascade and its Subsidiaries have timely filed all reports and statements, together with any amendments required to be made with respect thereto, that they were required to file with the FDIC, the FRB, the Oregon Director or any other Governmental Entities having jurisdiction over Cascade or any of its Subsidiaries. Each of such reports and documents, including the financial statements, exhibits and schedules thereto, complied in all material respects with all of the Laws enforced or promulgated by the Governmental Entities with which they were filed, and were accurate and complete in all material respects as of the dates on which they were filed. 8 (j) Neither Cascade nor any of its Subsidiaries has ever pled guilty to, or been convicted of, any crime. Section 3.8 Absence of Certain Changes or Events. Since December 31, 2004 through the date hereof, Cascade and its Subsidiaries have conducted their business only in the ordinary course consistent with past practice, and there has not been: (a) any Material Adverse Change in Cascade; (b) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any capital stock of Cascade, except as has been disclosed in the Cascade Securities Filings filed prior to the date hereof; (c) any split, combination or reclassification of any capital stock of Cascade, or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock of Cascade, except as has been disclosed in the Cascade Securities Filings filed prior to the date hereof; (d) any (i) granting by Cascade or any of its Subsidiaries to any current or former director, executive officer or other employee of Cascade or its Subsidiaries of any increase in compensation, bonus or other benefits, except for normal increases in cash or equity-based compensation in the ordinary course of business or as required under any employment agreements in effect as of September 30, 2005; (ii) granting by Cascade or any of its Subsidiaries to any such current or former director, executive officer or employee of any increase in severance or termination pay, except as was required under any employment, severance or termination agreements in effect as of September 30, 2005; (iii) entry by Cascade or any of its Subsidiaries into, or any material amendments of, any employment, deferred compensation, consulting, severance, termination or indemnification agreement with any such current or former director, executive officer or employee; or (iv) material amendment to or modification of, any Employee and Director Options, in each case except as has been disclosed in the Cascade Securities Filings filed prior to the date hereof; (e) any damage, destruction or loss, whether or not covered by insurance, that individually or in the aggregate is reasonably likely to have a Material Adverse Effect on Cascade; (f) except insofar as may have been required by a change in GAAP or as has been disclosed in the Cascade Securities Filings filed prior to the date hereof, any change in accounting methods, principles or practices by Cascade or any of its Subsidiaries materially affecting their reported financial condition or results of operation; or (g) any tax election by Cascade or any of its Subsidiaries that individually or in the aggregate is reasonably likely to have a Material Adverse Effect on the tax liability or tax attributes of Cascade or any settlement or compromise of any material tax liability. Section 3.9 Public Reports. Cascade has timely filed all Cascade Securities Filings, and the financial information included in all of the Cascade Securities Filings has been prepared in accordance with GAAP and presents fairly the financial position and results of operation of 9 Cascade and its Subsidiaries on the dates and for the periods covered thereby. As of the date filed, each of the Cascade Securities Filings has been and, as to those reports to be filed between the date of this Agreement and the Closing, will be, accurate and complete as of the date filed, and each complies or will comply with all requirements of Law applicable to such filing, and no Cascade Securities Filing contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary to prevent the statements made from being misleading in light of the circumstances under which they were made. The financial statements included in the Cascade Securities Filings (a) comply as to form, as of their respective dates, in all material respects with applicable accounting requirements of the Financial Accounting Standards Board with respect thereto; (b) have been prepared in accordance with GAAP (except, in the case of unaudited statements, as to the absence of footnotes and except for normal and non-material year-end adjustments and other non-material adjustments permitted by GAAP) applied on a consistent basis during the periods involved; and (c) present fairly in all material respects the financial position of Cascade and its Subsidiaries as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal recurring year-end audit adjustments, none of which would be material in amount or scope). Section 3.10 Litigation. As of the date hereof, there is no suit, action or proceeding pending or, to the Knowledge of Cascade, threatened against or affecting Cascade or any of its Subsidiaries. Section 3.11 Contracts. Neither Cascade nor any of its Subsidiaries is in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice or both would cause such a violation of or default under) any Cascade Material Contract. Each of the Cascade Material Contracts is valid, binding and in full force and effect. Neither Cascade nor any of its Subsidiaries is a party to or bound by any non-competition agreement or any other similar agreement or obligation which purports to limit the manner in which, or the localities in which, any portion of the business of Cascade or any of its Subsidiaries is or may be conducted. To Cascade's Knowledge, no party to any Cascade Material Contract is in breach of, nor has any event or condition of default occurred, with respect to any Cascade Material Contract. Section 3.12 Employee Benefit Plans; ERISA. (a) Cascade has made available to F&M a true and complete copy of the following documents, to the extent that they are applicable: (i) Each Benefit Plan of Cascade and its Subsidiaries (collectively, the "Cascade Benefit Plans") and any related funding agreements (e.g., trust agreements or insurance contracts), including all amendments; (ii) The current draft of the summary plan description and all subsequent summaries of material modifications of each Cascade Benefit Plan; 10 (iii) The most recent Internal Revenue Service determination letter for each Cascade Benefit Plan that is intended to qualify for favorable income tax treatment under Section 401(a) or 501(c)(9) of the Code; and (iv) The two (2) most recent Form 5500s (including all applicable schedules and the opinions of the independent accountants) that were filed on behalf of the Cascade Benefit Plan. (b) All material costs of administering and contributions required to be made to each Cascade Benefit Plan under the terms of that Cascade Benefit Plan, ERISA, the Code, or any other applicable Law have been made on a timely basis, and are deductible in or with respect to the year for which they were paid. All other amounts that should be accrued to date as liabilities of Cascade under or with respect to each Cascade Benefit Plan (including administrative expenses and incurred but not reported claims) for the current plan year of the plan have been recorded on the financial statements of Cascade. (c) Each Cascade Benefit Plan has been operated at all times in all material respects in accordance with its terms, and complies in all material respects both in form and in operation, with all applicable Laws, including ERISA and the Code. The Internal Revenue Service has issued a favorable determination letter with respect to each Cascade Benefit Plan that is intended to qualify under Section 401(a) or 501(c)(9) of the Code, and, to the Knowledge of Cascade, no event has occurred (either before or after the date of the letter) that would disqualify the plan. (d) Neither Cascade nor any of its Subsidiaries maintains any plan that provides (or will provide) medical, death or other benefits to one or more former employees, directors, former directors, or independent contractors (including retirees) following termination of employment, other than fully insured arrangements or benefits that are required to be provided under COBRA or any state law continuation coverage or conversion rights. Cascade and its Subsidiaries have complied in all material respects with the continuation coverage requirements of COBRA. (e) There are no investigations, proceedings, lawsuits or claims pending or, to the Knowledge of Cascade, threatened, other than with respect to claims for benefits that are being processed and are expected to be paid in the ordinary course of business, relating to any Cascade Benefit Plan. The benefits under all Cascade Benefit Plans are as represented, and have not been increased subsequent to the date documents are provided to F&M. (f) None of the Cascade Benefit Plans provide any benefits that (i) become payable or become vested solely as a result of the consummation of this transaction or (ii) would result in excess parachute payments (within the meaning of Section 280G of the Code), either (A) solely as a result of the consummation of Mergers, or (B) as a result of the consummation of the Mergers and any actions taken by Cascade after the Effective Time. Furthermore, the consummation of Mergers will not require the funding of the benefits under any Cascade Benefit Plan (e.g., contributions to a "rabbi trust"). 11 (g) None of the assets of any Cascade Benefit Plan that is a "pension plan" within the meaning of Section 3(2) of ERISA are invested in a group annuity contract or other insurance contract that is subject to any surrender charge, interest rate adjustment or other similar expense upon its premature termination. None of the Cascade Benefit Plans are subject to Title IV of ERISA, nor are any Cascade Benefit Plans "multiemployer" plans as defined in Section 3(37) of ERISA, and at no time has Cascade or any of its Subsidiaries ever contributed to or had any liability with respect to a multiemployer plan. No Cascade Benefit Plan has any interest in any annuity contract or other investment or insurance contract issued by an insurance company that is the subject of bankruptcy, conservatorship, rehabilitation, or similar proceeding. (h) For purposes of this Section 3.12, the terms "Cascade" and "Subsidiaries" shall include any Person organized under the Laws of the United States or operating therein that is or would be aggregated with Cascade or its Subsidiaries, as applicable, under Section 414(b), (c), (m), or (o) of the Code, but other than as expressly referenced herein shall not include any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA). Section 3.13 Taxes. Cascade and its Subsidiaries have filed all material Returns required to be filed by them, or requests for extensions to file have been granted and have not expired, and all such Returns are complete and correct in all material respects. Cascade and its Subsidiaries have paid or caused to be paid all Taxes shown as due on such Returns or on subsequent assessments with respect thereto, and no other material Taxes are payable by Cascade or its Subsidiaries with respect to items or periods covered by such Returns (whether or not shown on or reportable on such Returns) for which the applicable statute of limitations has not expired, except for Taxes for which an adequate reserve has been established. Cascade and its Subsidiaries have withheld and paid over all Taxes required to have been withheld and paid over, and have complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid or owing to any employee, creditor, independent contractor, or other third party. There are no Liens on any of the assets of Cascade or any of its Subsidiaries with respect to Taxes, other than Liens for Taxes not yet due and payable or for Taxes that Cascade or any of its Subsidiaries, as applicable, is contesting in good faith through appropriate proceedings and for which appropriate reserves have been established. To the Knowledge of Cascade, no Returns of Cascade or any of its Subsidiaries are under audit by a government or taxing authority. No deficiencies for any Taxes have been proposed, asserted or assessed, in each case in writing, against Cascade or its Subsidiaries that are not adequately reserved for. No waiver or extension of any statute of limitations is in effect with respect to material Taxes or Returns of Cascade or any of its Subsidiaries. Cascade has no reason to believe that the Merger will not be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. Section 3.14 Labor and Employment Matters. There are no material controversies pending or, to the Knowledge of Cascade, threatened, between Cascade or its Subsidiaries and any of their employees. Neither Cascade nor any of its Subsidiaries is a party to any collective bargaining agreement or other labor union contract applicable to Persons employed by Cascade or any of its Subsidiaries, nor, to the Knowledge of Cascade, have any activities or proceedings of any labor union or group of employees to organize any such employees. Neither Cascade nor any of its Subsidiaries has breached or failed to comply with any provision of any collective bargaining agreement or other labor union contract, and there are no grievances outstanding 12 against Cascade or any of its Subsidiaries under such agreement or contract. There are no unfair labor practice complaints pending against Cascade or any of its Subsidiaries before the National Labor Relations Board or any similar foreign Governmental Entity, and to the Knowledge of Cascade, there are no current union representation questions involving the employees of Cascade or any of its Subsidiaries. There currently exists no work slowdown, work stoppage or lockout, nor to the Knowledge of Cascade is any such matter threatened, by or with respect to the employees of Cascade or any of its Subsidiaries. There are no contracts or agreements of Cascade which provide for or guaranty any employee of Cascade or any of its Subsidiaries a specific term of employment. Section 3.15 Assets. Cascade and its Subsidiaries own or have a valid leasehold interest, license in or right to use all real and personal property currently used by them in the conduct of their respective businesses. Section 3.16 Intellectual Property. Each of Cascade and its Subsidiaries holds good title to, or a valid license in, all patents, copyrights, trademarks and software necessary for the conduct of its respective businesses as presently conducted or proposed to be conducted. Section 3.17 Environmental Matters. Cascade and its Subsidiaries are, and at all times have been, in material compliance with all Environmental Laws. Neither Cascade nor any of its Subsidiaries has received, or to Cascade's Knowledge been threatened with, any order, notice, citation, directive or other communication from (i) any Governmental Entity or private citizen acting in the public interest, or (ii) the current or prior owner or operator of any of its facilities, alleging any actual or potential violation or failure to comply with any Environmental Law, or of any actual or threatened obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any of the facilities or any other properties or assets (whether real, personal, or mixed) which Cascade or any of its Subsidiaries owns, or with respect to any property or facility at or to which Hazardous Materials were generated, manufactured, refined, transferred, imported, used, or processed by Cascade or any of its Subsidiaries or any other Person for whose conduct Cascade or any of its Subsidiaries is held responsible, or from which Hazardous Materials have been transported, treated, stored, handled, transferred, disposed, recycled, or received. Section 3.18 Allowance for Credit Losses. Cascade Bank's allowance for credit losses, as established from time to time, is adequate as determined by the standards applied to Cascade Bank by the applicable bank regulatory agencies and pursuant to GAAP. Section 3.19 Repurchase Agreement. Cascade and its Subsidiaries have valid and perfected first position security interests in all government securities subject to repurchase agreements and the market value of the collateral securing each such repurchase agreement equals or exceeds the amount of the debt secured by such collateral under each such agreement. Section 3.20 Interests of Directors and Others. Except for loans and related arrangements extended and maintained in compliance with Regulation O, no officer or director of Cascade or any of its Subsidiaries has any material interest in any assets or property (whether real or personal, tangible or intangible) of or used in the business of Cascade or any of its Subsidiaries. 13 Section 3.21 No Misstatements or Omissions. None of the information provided by Cascade for inclusion in the Proxy Statement will be, at the time such Proxy Statement is filed, when first mailed to the Cascade shareholders and at the date of the meeting of the Cascade shareholders, false or misleading with respect to any material fact, or will omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Section 3.22 Brokers; Professional Fees. None of Cascade, its Subsidiaries or any of their directors, officers or other employees has employed any broker or finder or incurred any liability for any brokerage fees, commissions or finder's fees in connection with the transactions contemplated hereby, except that, in connection with this Agreement, Cascade has retained RBC Capital Markets Corporation as its financial advisor, and a complete and correct copy of its arrangement with RBC Capital Markets Corporation is included in the Cascade Disclosure Schedule. As of the date hereof, Cascade has received a written opinion of RBC Capital Markets Corporation, a complete and correct copy of which is included in the Cascade Disclosure Schedule, issued to Cascade, to the effect that the Merger Consideration is fair from a financial point of view to Cascade. Section 3.23 Shareholder Approval. The affirmative vote of the holders of a majority of the shares of outstanding common stock of Cascade present in person or by proxy at a meeting called for the purpose of approving the transactions contemplated by this Agreement and at which a quorum is present is the only vote of the holders of any class or series of capital stock of Cascade necessary to approve this Agreement, the issuance of the Merger Shares, and the transactions contemplated by this Agreement. Section 3.24 Appointment of Directors. Cascade has taken all corporate action necessary to elect Thomas M. Wells and Clarence Jones to the Board of Directors of Cascade effective immediately after the Effective Time. Cascade Bank has taken all corporate action necessary to elect Thomas M. Wells and Clarence Jones to the Board of Directors of Cascade Bank effective immediately after the effective time of the Bank Merger. Section 3.25 Anti-Takeover. (a) Cascade has taken, or will have taken prior to the Effective Time, all actions necessary to exempt the transactions contemplated by this Agreement, or such transactions are otherwise exempt, from any provisions of an anti-takeover nature contained in its organizational documents, and the provisions of any Takeover Laws. (b) A majority of the Continuing Directors (as defined in the Articles of Incorporation of Cascade) has voted in favor of recommending approval of the issuance of the Merger Shares and the transactions contemplated by this Agreement. Section 3.26 Financing. Cascade has sufficient funds available from internal sources together with written best effort undertakings from third parties (copies of which have previously been provided to F&M) to provide funds in an amount which is sufficient to satisfy its obligations in connection with the transactions contemplated by this Agreement. Cascade reasonably believes that, on a pro forma basis, upon consummation of the Mergers, it and 14 Cascade Bank will have the capital levels required to be "well capitalized" on a consolidated basis under applicable Law, assuming that the level of F&M's risk based capital does not adversely change between the date hereof and the Effective Time. Section 3.27 No Other Cascade Representations or Warranties. Except as expressly set forth in this Article III Cascade has not made or is not making any other express or implied representations, or any express or implied warranty, either written or oral, with respect to the subject matter hereof. ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF F&M ------------------------------------- Except as set forth on the disclosure schedule delivered by F&M to Cascade (the "F&M Disclosure Schedule"), F&M represents and warrants to Cascade that the following statements are true and correct as of the date of this Agreement: Section 4.1 Organization, Standing and Corporate Power. F&M is a corporation duly organized and validly existing under the laws of the state of Idaho. F&M Bank is duly organized, validly existing and in good standing as a stock bank chartered under the laws of the state of Idaho. Each of F&M and F&M Bank has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. Each of F&M and F&M Bank is duly qualified or licensed to do business and is in good standing in each jurisdiction in which it conducts its business, except for those jurisdictions in which the failure to be so qualified or in good standing would not have a Material Adverse Effect. F&M has delivered to Cascade prior to the execution of this Agreement complete and correct copies of the Articles of Incorporation of F&M and the Charter of F&M Bank, and the Bylaws of each of them, in each case as currently in effect. Section 4.2 Subsidiaries. Except for the capital stock of F&M Bank, F&M does not beneficially own any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person. F&M Bank does not have any Subsidiaries, nor does it beneficially own any capital stock, membership interest, partnership interest, joint venture interest or other equity interest in any Person. Section 4.3 Capital Structure. (a) The authorized capital stock of F&M consists of 100,000 shares of common stock, par value $1 per share, of which 20,774 shares are outstanding (eight (8) of which will be repurchased by F&M prior to the Closing Date). The authorized capital stock of F&M Bank consists of 50,000 shares of common stock, par value $100 per share, of which 41,039 shares are outstanding and are held by F&M. No class of capital stock of F&M is entitled to preemptive rights. (b) Except as provided above in this Section 4.3 or in the F&M Disclosure Schedule, there are (i) no other shares of capital stock or other voting securities of F&M or F&M Bank issued, reserved for issuance or outstanding; (ii) no rights to receive shares of F&M common stock or F&M Bank common stock on a deferred basis; (iii) no stock appreciation rights other than those issued under the F&M SAR Plan; (iv) no securities of F&M or F&M Bank exercisable for, convertible into or exchangeable for shares of capital stock, ownership 15 interests, or voting securities of F&M or F&M Bank; and (v) no warrants, calls, options or other rights to acquire from F&M or F&M Bank, and no obligation of F&M or F&M Bank to issue, capital stock, voting securities or other ownership interests in or any securities convertible into or exchangeable for capital stock or voting securities of F&M or F&M Bank. (c) Section 4.3 of the F&M Disclosure Schedule contains a true and correct list of all holders of units under the F&M SAR Plan, showing the number of units held by each and a true and correct calculation of the amount payable assuming accelerated vesting and full exercise thereof as of the Effective Time and the amount thereof allocable to such accelerated vesting. (d) No bonds, debentures, notes or other indebtedness of F&M or F&M Bank having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which shareholders of F&M or F&M Bank may vote, are issued or outstanding. (e) There are no outstanding obligations of F&M to repurchase, redeem or otherwise acquire any outstanding securities of F&M or to issue, deliver or sell, or cause to be issued, delivered or sold, any such securities. F&M is not a party to any voting agreement with respect to the voting of its securities or any securities of any other Person. Section 4.4 Authority. F&M has all requisite corporate power and authority to enter into this Agreement and to consummate the transactions contemplated by this Agreement. The execution and delivery of this Agreement by F&M and the consummation by it of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate action on the part of F&M, including without limitation the unanimous written consent of all shareholders of F&M. Contemporaneously with the execution and delivery of this Agreement, F&M has delivered to Cascade a true and correct copy of the unanimous written consent of all shareholders of F&M to the transactions contemplated by this Agreement. This Agreement has been duly executed and delivered by F&M, and, assuming the due authorization, execution and delivery by each of the other parties hereto, constitutes the legal, valid and binding obligation of F&M, enforceable against F&M in accordance with its terms. Section 4.5 Noncontravention. The execution and delivery of this Agreement does not, and the consummation of the transactions contemplated by this Agreement and compliance with the provisions hereof will not, conflict with, result in any violation of or default (with or without notice or lapse of time, or both) under, give rise to a right of termination, cancellation or acceleration of any obligation or loss of a benefit under, or result in the creation of any Lien upon any of the properties or assets of F&M or F&M Bank under: (a) the Articles of Incorporation or Bylaws of F&M or the Charter or Bylaws of F&M Bank; (b) any F&M Material Contract, permit, concession, franchise, license or similar authorization applicable to F&M or its properties or assets or by which F&M or F&M Bank is bound, except for such conflicts, defaults, rights of termination, cancellation or acceleration, loss of benefit or creation of Lien that are set forth in Section 4.5 of the F&M Disclosure Schedule; or (c) any Law, judgment, order or decree of any Governmental Entity applicable to F&M, F&M Bank or their properties. 16 Section 4.6 Regulatory Approvals Required. Except for (a) approval of the Bank Merger by the FDIC, the Oregon Director and the Idaho Director, (b) approval of, or waiver of jurisdiction by, the FRB of the Merger, (c) approval for the Bolger Shareholder and the Trust to acquire the Merger Shares by the FRB or any other Governmental Entity and, in the case of the Trust, to become a bank holding company under the BHC Act, and (d) any filings under the HSR Act in connection with the Merger, neither F&M nor F&M Bank is required to obtain any approval, authorization, consent, license, clearance or order of, any declaration or notification to, or make any filing or registration with, any Governmental Entity in order to permit F&M to perform its obligations under this Agreement, or to prevent the termination of any material right, privilege, license or agreement of F&M or F&M Bank, or any material loss or disadvantage to its business, upon consummation of the Mergers. Section 4.7 Compliance with Lending Laws and Regulations. Except for such errors or oversights the financial effect of which are adequately reserved against: (a) Each of F&M and F&M Bank is now, and has at all times in the past been, in compliance in all material respects with all domestic Laws (including all applicable Laws governing or pertaining to fair housing, anti redlining, equal credit opportunity, truth in lending, real estate settlement procedures, fair credit reporting and every other prohibition against unlawful discrimination in residential lending, or governing consumer credit, including, but not limited to, the Community Reinvestment Act, the Consumer Credit Protection Act, Truth in Lending Act, and Regulation Z promulgated by the FRB, and the Real Estate Settlement Procedures Act of 1974) and, to the Knowledge of F&M, all foreign Laws the violation of which, individually or in the aggregate, would have a Material Adverse Effect on F&M. (b) All loans, leases, contracts and accounts receivable (billed and unbilled), security agreements, guarantees and recourse agreements, of F&M and F&M Bank, as held in their portfolios or as sold with recourse into the secondary market, represent and are valid and binding obligations of their respective parties and debtors, enforceable in accordance with their respective terms, except for failures to be so valid, binding and enforceable that would not, individually or in the aggregate, have a Material Adverse Effect on F&M; each of them is based on a valid, binding and enforceable contract or commitment, each of which has been executed and delivered in material compliance, in form and substance, with any and all Laws applicable to F&M and F&M Bank and to the other party or parties to the contract or commitment, including without limitation the Truth in Lending Act, Regulations Z and U of the FRB, Laws providing for nondiscriminatory practices in the granting of loans or credit, applicable usury Laws, and Laws imposing lending limits, except for failures to so comply that would not, individually or in the aggregate, have a Material Adverse Effect on F&M; and all such contracts or commitments have been administered in material compliance with all applicable Laws the violation of which, individually or in the aggregate, would have a Material Adverse Effect on F&M. (c) All loan files of F&M and F&M Bank are complete and accurate in all material respects and have been maintained in accordance with good banking practice, except for failures to be so complete and accurate and to so maintain that would not, individually or in the aggregate, have a Material Adverse Effect on F&M. 17 (d) All notices of default, foreclosure proceedings or repossession proceedings against any real or personal property collateral have been issued, initiated and conducted by F&M and F&M Bank in material formal and substantive compliance with all applicable Laws the violation of which, individually or in the aggregate, would have a Material Adverse Effect on F&M, and no material loss or impairment of any security interest, or material exposure to meritorious lawsuits or other proceedings against F&M has been or will be suffered or incurred by F&M in excess of such amounts as have been recognized in the F&M Financial Statements except for such losses, impairments or exposures which, individually or in the aggregate, would not have a Material Adverse Effect on F&M. (e) Neither F&M nor F&M Bank is in material violation of any applicable servicer or any other requirements of the FHA, VA, FNMA, GNMA, FHLMC, SBA or any private mortgage insurer which insured or guaranteed any loans owned by F&M or F&M Bank as to which F&M or F&M Bank has sold to other investors, the effect of which violation would constitute a Material Adverse Effect on F&M, and with respect to such loans neither F&M nor F&M Bank has done or failed to do, or caused to be done or omitted to be done, any act the effect of which act or omission impairs or invalidates (i) any FHA insurance or commitment of the FHA to insure, (ii) any VA guarantee or commitment of the VA to guarantee, (iii) any SBA guarantee or commitment of the SBA to guarantee, (iv) any private mortgage insurance or commitment of any private mortgage insurer to insure, (v) any title insurance policy, (vi) any hazard insurance policy, or (vii) any flood insurance policy required by the National Flood Insurance Act of 1968, as amended, which in each case or in the aggregate would have a Material Adverse Effect on F&M. (f) As of the date hereof, neither F&M nor F&M Bank is subject to any cease-and-desist or other order issued by, is a party to any written agreement, consent agreement or memorandum of understanding with, is a party to any commitment letter to, or is subject to any order or directive by, or a recipient of any extraordinary supervision letter from, and has adopted any board resolutions at the request of, any Governmental Entity, and has been advised by such Governmental Entity that they are contemplating issuing or requesting any of the foregoing. As of the Closing Date, except with respect to any matter that is described or referenced in the F&M Disclosure Schedule or that was previously disclosed to Cascade, neither F&M nor F&M Bank will be subject to any cease-and-desist order issued by any Governmental Entity. (g) Neither F&M nor F&M Bank has knowingly engaged principally, or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any margin stock. (h) F&M Bank's deposit accounts are insured by the FDIC to the fullest extent permitted under applicable Law, and all premiums and assessments required to be paid in connection therewith have been paid. (i) Each of F&M and F&M Bank has timely filed all reports and statements, together with any amendments required to be made with respect thereto, that it was required to file with the FDIC, the FRB, the Idaho Director or any other Governmental Entities having jurisdiction over F&M or F&M Bank. Each of such reports and documents, including the 18 financial statements, exhibits and schedules thereto, complied in all material respects with all of the Laws enforced or promulgated by the Governmental Entities with which they were filed, and were accurate and complete in all material respects as of the dates on which they were filed. (j) Neither F&M nor F&M Bank has ever pled guilty to, or been convicted of, any crime. Section 4.8 Absence of Certain Changes or Events. Since December 31, 2004 through the date hereof, each of F&M and F&M Bank has conducted its business only in the ordinary course consistent with past practice, and there has not been: (a) any Material Adverse Change in F&M; (b) any declaration, setting aside or payment of any dividend or other distribution (whether in cash, stock or property) with respect to any capital stock of F&M; (c) any split, combination or reclassification of any capital stock of F&M, or any issuance or the authorization of any issuance of any other securities in respect of, in lieu of or in substitution for shares of capital stock of F&M, except as may be required pursuant to Section 6.2(g); (d) any (i) granting by F&M or F&M Bank to any current or former director, executive officer or other employee of F&M or F&M Bank of any increase in compensation, bonus or other benefits, except for normal increases in cash compensation in the ordinary course of business or as required under any employment agreements in effect as of December 31, 2004; (ii) granting by F&M or F&M Bank to any such current or former director, executive officer or employee of any increase in severance or termination pay, except as was required under any employment, severance or termination agreements in effect as of December 31, 2004, or (iii) entry by F&M or F&M Bank into, or any amendments of, any employment, deferred compensation, consulting, severance, termination or indemnification agreement with any such current or former director, executive officer or employee; (e) any damage, destruction or loss, whether or not covered by insurance, that individually or in the aggregate is reasonably likely to have a Material Adverse Effect on F&M; (f) except insofar as may have been required by a change in GAAP, any change in accounting methods, principles or practices by F&M or F&M Bank materially affecting their reported financial condition or results of operation; or (g) any tax election by F&M that individually or in the aggregate is reasonably likely to have a Material Adverse Effect on the tax liability or tax attributes of F&M or any settlement or compromise of any material tax liability. Section 4.9 Financial Statements; Absence of Undisclosed Liabilities. F&M has provided to Cascade the following financial statements: (i) independent auditors report and audited statement of financial condition of F&M Bank for the fiscal years ended December 31, 2004 and 2003, and the related statements of income, changes in stockholder equity and cash flow for the years then ended, and unaudited statement of financial condition of F&M Bank as of 19 November 30, 2005 and the related statement of income for the 11-month period then ended (collectively, the "F&M Bank Financial Statements"); and (ii) accountants compilation report and unaudited statement of financial condition of F&M for the fiscal years ended December 31, 2004 and 2003, and the related statements of income and changes in stockholder equity and comprehensive income for the years then ended, and unaudited statement of financial condition of F&M or F&M Bank as of November 30, 2005 and the related balance sheet as of that date and the statement of income for the period then ended (collectively, the "F&M Financial Statements"). The F&M Bank Financial Statements (a) comply as to form, as of their respective dates, in all material respects with applicable accounting requirements of the Financial Accounting Standards Board with respect thereto; (b) have been prepared in accordance with GAAP (except, in the case of unaudited statements, as to the absence of footnotes and except for normal and non-material year-end adjustments and other non-material adjustments permitted by GAAP) applied on a consistent basis during the periods involved; and (c) present fairly in all material respects the financial position of F&M Bank as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal recurring year-end audit adjustments, none of which would be material in amount or scope). The F&M Financial Statements (a) have been prepared in accordance with GAAP (except, in the case of unaudited statements, as to the absence of footnotes and except for normal and non-material year-end adjustments and other non-material adjustments permitted by GAAP) applied on a consistent basis during the periods involved; and (b) present fairly in all material respects the financial position of F&M as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal recurring year-end audit adjustments, none of which would be material in amount or scope). There are no liabilities or obligations of F&M of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there is no existing condition, situation or set of circumstances that could or reasonably expected to result in such liability or obligation other than: (i) liabilities or obligations provided for in the balance sheet of F&M as of November 30, 2005; (ii) liabilities or obligations incurred in the ordinary course of business consistent with past practices; or (iii) as of the date hereof, any liabilities or obligations that, individually or in the aggregate, do not exceed $50,000. Section 4.10 Permits. Section 4.10 of the F&M Disclosure Schedule sets forth a list of all material permits, licenses, variances, exemptions, orders, registrations, consents, franchises and approvals of all Governmental Entities which are currently held by or have been applied for by F&M or F&M Bank (the "F&M Permits") which constitutes all of the permits, licenses, variances, exemptions, orders, registrations, consents, franchises and approvals of all Governmental Entities which are required for the operation of the businesses of F&M or F&M Bank, as applicable, as presently conducted. F&M is not aware of any facts or circumstances currently existing which are likely to preclude F&M or F&M Bank from securing any permits, licenses, variances, exemptions, orders, registrations, consents, franchises and approvals of any Governmental Entity which are required for the operation of the businesses of F&M as planned to be conducted. F&M and F&M Bank are in compliance with the terms of the F&M Permits, except where the failure to so comply individually or in the aggregate is not reasonably likely to have a Material Adverse Effect on F&M. No action, demand, requirement or investigation by any Governmental Entity and no suit, action or proceeding by any Person, in each case with respect to F&M or F&M Bank or any of their properties, is pending or, to the Knowledge of F&M, threatened. 20 Section 4.11 Litigation. As of the date hereof, there is no suit, action or proceeding pending or, to the Knowledge of F&M, threatened against or affecting F&M or F&M Bank. Section 4.12 Contracts. Neither F&M nor F&M Bank is in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice or both would cause such a violation of or default under) any F&M Material Contract. Section 4.12 of the F&M Disclosure Schedule contains a complete list, as of the date of this Agreement, of (a) each loan or credit arrangement, credit commitment, note, mortgage, indenture, or lease in a principal amount exceeding $250,000 under which F&M or F&M Bank is a lender or lessor that is currently in effect; (b) each loan or credit arrangement, credit commitment, note, mortgage, indenture, or lease under which F&M is a borrower or lessee, and each contract, agreement, obligation, commitment, arrangement or understanding of F&M or F&M Bank involving actual or potential obligations or commitments, whether liquidated or contingent, of $50,000 or more that is currently in effect or that has been discharged since December 31, 2004; (c) each contract, agreement, obligation, commitment, arrangement or understanding of F&M or F&M Bank that is not terminable by F&M or F&M Bank, as applicable, upon not more than thirty (30) days' notice without payment of any termination fees or penalties; and (d) each contract, agreement, obligation, commitment, arrangement or understanding between or among F&M and any Affiliate of F&M other than ordinary course lending arrangements made and maintained in full compliance with Regulation O (all matters described in the foregoing clauses (a) through (d), the "F&M Material Contracts"). Each of the F&M Material Contracts is valid, binding and in full force and effect. Neither F&M nor F&M Bank is a party to or bound by any non-competition agreement or any other similar agreement or obligation which purports to limit the manner in which, or the localities in which, any portion of the business of F&M or F&M Bank is or may be conducted. To F&M's Knowledge, no party to any F&M Material Contract is in breach of, nor has any event or condition of default occurred, with respect to any F&M Material Contract. Section 4.13 Employee Benefit Plans; ERISA. (a) Section 4.13 of the F&M Disclosure Schedule sets forth a true, correct and complete list of all Benefit Plans of F&M and F&M Bank (the "F&M Benefit Plans"). (b) F&M has made available to Cascade a true and complete copy of the following documents, to the extent that they are applicable: (i) Each F&M Benefit Plan and any related funding agreements (e.g., trust agreements or insurance contracts), including all amendments; (ii) The current draft of the summary plan description and all subsequent summaries of material modifications of each F&M Benefit Plan; (iii) The most recent Internal Revenue Service determination letter for each F&M Benefit Plan that is intended to qualify for favorable income tax treatment under Section 401(a) or 501(c)(9) of the Code; and 21 (iv) The two (2) most recent Form 5500s (including all applicable schedules and the opinions of the independent accountants) that were filed on behalf of the F&M Benefit Plan. (c) All material costs of administering and contributions required to be made to each F&M Benefit Plan under the terms of that F&M Benefit Plan, ERISA, the Code, or any other applicable Law have been made on a timely basis, and are deductible in or with respect to the year for which they were paid. All other amounts that should be accrued to date as liabilities of F&M under or with respect to each F&M Benefit Plan (including administrative expenses and incurred but not reported claims) for the current plan year of the plan have been recorded on the financial statements of F&M. (d) Each F&M Benefit Plan has been operated at all times in all material respects in accordance with its terms, and complies in all material respects both in form and in operation, with all applicable Laws, including ERISA and the Code. The Internal Revenue Service has issued a favorable determination letter with respect to each F&M Benefit Plan that is intended to qualify under Section 401(a) or 501(c)(9) of the Code, and, to the Knowledge of F&M, no event has occurred (either before or after the date of the letter) that would disqualify the plan. (e) Neither F&M nor F&M Bank maintains any plan that provides (or will provide) medical, death or other benefits to one or more former employees, directors, former directors, or independent contractors (including retirees) following termination of employment, other than fully insured arrangements or benefits that are required to be provided under COBRA or any state law continuation coverage or conversion rights. Each of F&M and F&M Bank has complied in all material respects with the continuation coverage requirements of COBRA. (f) There are no investigations, proceedings, lawsuits or claims pending or, to the Knowledge of F&M, threatened, other than with respect to claims for benefits that are being processed and are expected to be paid in the ordinary course of business, relating to any F&M Benefit Plan. The benefits under all F&M Benefit Plans are as represented, and have not been increased subsequent to the date documents are provided to Cascade. (g) None of the F&M Benefit Plans provide any benefits that (i) become payable or become vested solely as a result of the consummation of this transaction or (ii) would result in excess parachute payments (within the meaning of Section 280G of the Code), either (A) solely as a result of the consummation of Mergers, or (B) as a result of the consummation of the Mergers and any actions taken by F&M after the Effective Time. Furthermore, the consummation of Mergers will not require the funding of the benefits under any F&M Benefit Plan (e.g., contributions to a "rabbi trust"). (h) None of the assets of any F&M Benefit Plan that is a "pension plan" within the meaning of Section 3(2) of ERISA are invested in a group annuity contract or other insurance contract that is subject to any surrender charge, interest rate adjustment or other similar expense upon its premature termination. None of the F&M Benefit Plans are subject to Title IV of ERISA, nor are any F&M Benefit Plans "multiemployer" plans as defined in Section 3(37) of ERISA, and at no time has F&M or F&M Bank ever contributed to or had any liability with 22 respect to a multiemployer plan. No F&M Benefit Plan has any interest in any annuity contract or other investment or insurance contract issued by an insurance company that is the subject of bankruptcy, conservatorship, rehabilitation, or similar proceeding. (i) For purposes of this Section 4.13, the terms "F&M" and "F&M Bank" shall include any Person organized under the Laws of the United States or operating therein that is or would be aggregated with F&M and F&M Bank, as applicable, under Section 414(b), (c), (m), or (o) of the Code, but other than as expressly referenced herein shall not include any "multiemployer plan" (as defined in Section 4001(a)(3) of ERISA). Section 4.14 Taxes. F&M and F&M Bank have filed all material Returns required to be filed by them, or requests for extensions to file have been granted and have not expired, and all such Returns are complete and correct in all material respects. F&M and F&M Bank have paid or caused to be paid all Taxes shown as due on such Returns or on subsequent assessments with respect thereto, and no other material Taxes are payable by F&M or F&M Bank with respect to items or periods covered by such Returns (whether or not shown on or reportable on such Returns) for which the applicable statute of limitations has not expired, except for Taxes for which an adequate reserve has been established. F&M and F&M Bank have withheld and paid over all Taxes required to have been withheld and paid over, and have complied with all information reporting and backup withholding requirements, including maintenance of required records with respect thereto, in connection with amounts paid or owing to any employee, creditor, independent contractor, or other third party. There are no Liens on any of the assets of F&M or F&M Bank with respect to Taxes, other than Liens for Taxes not yet due and payable or for Taxes that F&M or F&M Bank is contesting in good faith through appropriate proceedings and for which appropriate reserves have been established. To the Knowledge of F&M, no Returns of F&M or F&M Bank are under audit by a government or taxing authority. No deficiencies for any Taxes have been proposed, asserted or assessed, in each case in writing, against F&M or F&M Bank that are not adequately reserved for. No waiver or extension of any statute of limitations is in effect with respect to material Taxes or Returns of F&M or F&M Bank. Section 4.15 Labor and Employment Matters. There are no material controversies pending or, to the Knowledge of F&M, threatened, between F&M or F&M Bank and any of their employees. Neither F&M nor F&M Bank is a party to any collective bargaining agreement or other labor union contract applicable to Persons employed by F&M or F&M Bank, nor, to the Knowledge of F&M, have any activities or proceedings of any labor union or group of employees to organize any such employees. Neither F&M nor F&M Bank has breached or failed to comply with any provision of any collective bargaining agreement or other labor union contract, and there are no grievances outstanding against F&M or F&M Bank under such agreement or contract. There are no unfair labor practice complaints pending against F&M or F&M Bank before the National Labor Relations Board or any similar foreign Governmental Entity, and to the Knowledge of F&M, there are no current union representation questions involving the employees of F&M or F&M Bank. There currently exists no work slowdown, work stoppage or lockout, nor to the Knowledge of F&M is any such matter threatened, by or with respect to the employees of F&M or F&M Bank. There are no contracts or agreements of F&M or F&M Bank which provide for or guaranty any employee of F&M or F&M Bank a specific term of employment. 23 Section 4.16 Real Property and Assets. Section 4.16 of the F&M Disclosure Schedule contains a complete and accurate legal description of each parcel of real property owned or leased by F&M and F&M Bank (the "Real Property"). All improvements to the Real Property are in good condition and repair, ordinary wear and tear excepted. No Affiliate of F&M has any interest, directly or indirectly, in the Real Property. The Real Property and all improvements thereon and uses thereof have been developed in accordance with and do not violate or conflict with any applicable building, occupancy, and zoning Laws or any covenants, conditions, restrictions or easements that may affect the Real Property. No unpaid special or general assessments of the Real Property have been levied or, to the Knowledge of F&M, are threatened against all or part of the Real Property. Each of F&M and F&M Bank has good and marketable title in and to all of the Real Property owned by it, free and clear of all Liens, encumbrances, rights of way, building use restrictions, exceptions, variances, reservations, or limitations of any nature. Each of F&M and F&M Bank holds valid leasehold interests in the Real Property leased by it. None of the Real Property is subject to any decree or order of any Governmental Entity to be sold or condemned, expropriated or otherwise taken with or without payment of compensation therefor, nor to the Knowledge of F&M is any such proceeding threatened. Section 4.17 Personal Property. Each of F&M and F&M Bank has good title to all of its material personal property, free and clear of all Liens, encumbrances and charges of any kind or nature. All of F&M's or F&M Bank's tangible personal property is in good operating condition and repair, ordinary wear and tear excepted. Section 4.18 Intellectual Property. Each of F&M and F&M Bank holds good title to, or a valid license in, all material patents, copyrights, trademarks and software necessary for the conduct of its respective businesses as presently conducted or proposed to be conducted. Section 4.19 Environmental Matters. (a) Each of F&M and F&M Bank is, and at all times has been, in material compliance with all Environmental Laws. Neither F&M nor F&M Bank has received, or to F&M's Knowledge been threatened with, any order, notice, citation, directive or other communication from (i) any Governmental Entity or private citizen acting in the public interest, or (ii) the current or prior owner or operator of any of its facilities, alleging any actual or potential violation or failure to comply with any Environmental Law, or of any actual or threatened obligation to undertake or bear the cost of any Environmental, Health, and Safety Liabilities with respect to any of the facilities or any other properties or assets (whether real, personal, or mixed) which F&M or F&M Bank own, lease or operate (the "F&M Facilities"), or with respect to any property or facility at or to which Hazardous Materials were generated, manufactured, refined, transferred, imported, used, or processed by F&M or F&M Bank or any other Person for whose conduct F&M or F&M Bank is responsible, or from which Hazardous Materials have been transported, treated, stored, handled, transferred, disposed, recycled, or received. (b) There are no pending or, to the Knowledge of F&M, threatened claims, encumbrances, or other restrictions of any nature, resulting from any Environmental, Health, and Safety Liabilities or arising under or pursuant to any Environmental Law, with respect to or affecting any F&M Facilities. 24 (c) Neither F&M nor F&M Bank has incurred any Environmental, Health, and Safety Liabilities with respect to the F&M Facilities, or to F&M's Knowledge, at any property geologically or hydrologically adjoining the facilities or any such other property or assets. (d) Other than in material compliance with Environmental Laws, there are no Hazardous Materials present on or in the environment at the F&M Facilities or, to F&M's Knowledge, migrating on to any F&M Facilities from any geologically or hydrologically adjoining property, including any Hazardous Materials contained in barrels, above or underground storage tanks, landfills, land deposits, dumps, equipment (whether moveable or fixed) or other containers, either temporary or permanent, and deposited or located in land, water, sumps, or any other part of the F&M Facilities or coming from such adjoining property, or incorporated into any structure therein or thereon. Neither F&M nor F&M Bank has permitted or conducted, or is aware of, any Hazardous Activity conducted with respect to the F&M Facilities except in material compliance with all applicable Environmental Laws. (e) There has been no Release or, to the Knowledge of F&M, threat of Release, of any Hazardous Materials at or from the F&M Facilities. To F&M's Knowledge, there has been no Release of any Hazardous Materials at any property geologically or hydrologically adjoining the F&M Facilities, or at any other locations where any Hazardous Materials were generated, manufactured, refined, transferred, produced, imported, used, or processed from or by the F&M Facilities in circumstances that could reasonably be expected to result in material liability to F&M or F&M Bank. (f) F&M has delivered to Cascade true and complete copies of (or summaries of) all Phase I site assessments of all of the F&M Facilities in its possession, performed within three years prior to the date of this Agreement, and results of any other material reports, studies, analyses, tests, or monitoring possessed or initiated by F&M or F&M Bank pertaining to Hazardous Materials or Hazardous Activities in, on, or under the F&M Facilities, or concerning compliance by F&M, F&M Bank or any other Person for whose conduct they are responsible, with Environmental Laws. Section 4.20 Insurance. Section 4.20 of the F&M Disclosure Schedule includes a list of all insurance policies currently in effect with respect to F&M's and F&M Bank's business and real and personal property, and a brief summary of all claims made under such policies within the last five (5) years. Such policies are in full force and effect and all premiums with respect thereto covering all periods up to and including the Closing Date have been or will be paid, except for failures to be in full force and effect or to be so paid that would not cause F&M or F&M Bank to be uninsured with respect to risks the occurrence of which, individually or in the aggregate, would have a Material Adverse Effect on F&M. As of the date hereof, no notice of cancellation or termination has been received with respect to any such policy that has not been replaced on substantially the same terms prior to the date of such cancellation or termination, except for failures to so replace that would not cause F&M or F&M Bank to be uninsured with respect to risks the occurrence of which, individually or in the aggregate, have a Material Adverse Effect on F&M. The insurance policies covering F&M and F&M Bank are sufficient for compliance with all requirements of Law the violation of which, individually or in the 25 aggregate, would have a Material Adverse Effect on F&M, and all material agreements to which F&M or F&M Bank, as applicable, is a party or by which F&M or F&M Bank may be bound. Section 4.21 Investments. Section 4.21 of the F&M Disclosure Schedule sets forth the book and market value as of October 31, 2005, of the investment securities, mortgage-backed securities and securities held for sale by F&M and F&M Bank. Except for pledges to secure public and trust deposits, FRB borrowings, repurchase agreements and reverse repurchase agreements entered into in arms-length transactions pursuant to normal commercial terms and conditions and other pledges required by Law, none of the investments held by F&M or F&M Bank are subject to any restriction (contractual, statutory or otherwise) that would materially impair the ability of F&M or F&M Bank to dispose freely of such investment at any time. Section 4.22 Brokers. No broker, investment banker, financial advisor or other Person is entitled to any broker's, finder's, financial advisor's or other similar fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by or on behalf of F&M or F&M Bank. Section 4.23 Allowance for Credit Losses. F&M Bank's allowance for credit losses, as established from time to time, is adequate as determined by the standards applied to F&M by the applicable bank regulatory agencies and pursuant to GAAP. Since October 31, 2005, F&M Bank has not reversed any provision taken for credit losses, except to the extent required by F&M Bank's certified public accountants and any applicable bank regulatory agency. Section 4.24 Repurchase Agreement. Each of F&M and F&M Bank has valid and perfected first position security interests in all government securities subject to repurchase agreements and the market value of the collateral securing each such repurchase agreement equals or exceeds the amount of the debt secured by such collateral under each such agreement. Section 4.25 Interests of Directors and Others. Except for loans and related arrangements extended and maintained in compliance with Regulation O, no officer or director of F&M or F&M Bank has any material interest in any assets or property (whether real or personal, tangible or intangible) of or used in the business of F&M or F&M Bank. Section 4.26 No Misstatements or Omissions. None of the information provided by F&M for inclusion in the Proxy Statement will be, at the time such Proxy Statement is filed, when first mailed to the Cascade shareholders and at the date of the meeting of the Cascade shareholders, false or misleading with respect to any material fact, or will omit to state any material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. No representation or warranty of F&M in this Agreement contains or as of the Closing Date will contain any untrue statements of a material fact or omits or will omit to state any material fact necessary to prevent the statements made from being misleading in light of the circumstances under which they were made and after taking into consideration the information included in the F&M Disclosure Schedule and the information previously provided in writing to Cascade. Section 4.27 No Other F&M Representations or Warranties. Except as expressly set forth in this Article III, F&M has not made or is not making any other express or implied 26 representations, or any express or implied warranty, either written or oral, with respect to the subject matter hereof. ARTICLE V. COVENANTS OF PARTIES -------------------- Section 5.1 Conduct of F&M Business. During the period from the date of this Agreement to the Effective Time, F&M shall, and shall cause F&M Bank to, carry on its business in the ordinary course consistent with past practice, and in material compliance with all applicable Laws and, to the extent consistent therewith, use all reasonable best efforts to preserve and maintain existing relations and goodwill with employees, customers, brokers, suppliers and other Persons with which F&M or F&M Bank has significant business relations. Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time, except as consented to in writing by Cascade (which consent shall not be unreasonably withheld, delayed or conditioned), F&M shall not, and shall cause F&M Bank not to: (a) declare or pay any dividend or other distribution with respect to any share of its capital stock except with respect to the repurchase of directors' qualifying shares; (b) amend or otherwise modify its charter, articles of incorporation, bylaws or other comparable organizational documents; (c) issue, sell or deliver, or agree to issue, sell or deliver any shares of any class of its capital stock or any securities convertible into or exercisable for any shares of its capital stock except as may be required pursuant to Section 6.2(g), or issue any additional units under the F&M SAR Plan; (d) redeem or repurchase any shares of its capital stock other than a redemption or repurchase of directors' qualifying shares of F&M held by its directors pursuant to agreements existing as of the date hereof, copies of which have been included in the F&M Disclosure Schedule as set forth in Section 5.1(d) of the F&M Disclosure Schedule; (e) adopt any change, other than as required by applicable generally accepted accounting principles, in its accounting policies, procedures or practices; (f) except as expressly contemplated by this Agreement: (i) increase the rate or terms of compensation payable or to become payable by F&M or F&M Bank to their employees, other than (x) increases in base compensation in the ordinary course of business, not to exceed five percent for any employee, (y) year-end bonuses for the 2005 calendar year in an aggregate amount up to the amount set forth in Section 5.1(f) of the F&M Disclosure Schedule, and (z) bonuses for the 2006 calendar year pursuant to a bonus plan that shall be adopted in accordance with the guidelines set forth in Section 5.16 of the F&M Disclosure Schedule, (ii) enter into any new Benefit Plan or materially modify the terms of any F&M Benefit Plan, or (iii) enter into any new employment agreement or materially modify the terms of any existing employment agreement; 27 (g) enter into, amend or renew any F&M Material Contracts or any contracts that would constitute F&M Material Contracts, except those made in the ordinary course of business, consistent with past practice; (h) borrow or agree to borrow any monies or otherwise agree, whether directly or by way of guarantee or otherwise, to incur, assume or become liable for the repayment of borrowed money other than in the ordinary course of business, consistent with past practice; (i) sell, lease or transfer or agree to sell, lease or transfer any of its assets other than in the ordinary course of business, consistent with past practice; (j) grant or agree to grant any Lien or other encumbrance on any of its assets other than in the ordinary course of business, consistent with past practice; (k) acquire control of or any other ownership interest in any other corporation, association, joint venture, partnership, business trust or other business entity, except in the ordinary course of business through foreclosure or transfer in lieu thereof in the collection of loans to customers; (l) make any loans with a principal amount in excess of $500,000, provided that if Cascade fails to grant or deny its consent to the making of any such loan by the end of the Business Day following the day on which a written request for consent is delivered by F&M to Cascade, F&M Bank may make such loan without Cascade's consent; (m) renew, modify or amend the terms of any existing loan with a principal amount in excess of $500,000, or forgive any amount owing under the terms of any existing loan with a principal amount in excess of $100,000, in each case provided that if Cascade fails to grant or deny its consent to the renewal, modification, amendment or forgiveness of any such loan by the end of the Business Day following the day on which a written request for consent is delivered by F&M to Cascade, F&M Bank may renew, modify, amend or forgive such loan without Cascade's consent; (n) Except as set forth in or contemplated by Section 5.1(n) of the F&M Disclosure Schedule, make or commit to make any capital expenditures which individually exceed $50,000 or in the aggregate exceed $250,000; (o) take any action or omit to take any action that could reasonably be expected to result in any of the conditions to the consummation of the transactions contemplated by this Agreement not being satisfied in an expeditious and timely manner, or any action that could reasonably be expected to materially impair its ability to perform its obligations under this Agreement or to consummate the Merger and the transactions contemplated by this Agreement or materially impair F&M Bank's ability to consummate the Bank Merger; or (p) agree, authorize or commit to do any of the foregoing. Section 5.2 Conduct of Cascade Business. During the period from the date of this Agreement to the Effective Time, Cascade shall, and shall cause its Subsidiaries to, carry on its 28 business in the ordinary course consistent with past practice, and in material compliance with all applicable Laws and, to the extent consistent therewith, use all reasonable best efforts to preserve and maintain existing relations and goodwill with employees, customers, brokers, suppliers and other Persons with which Cascade or any of its Subsidiaries has significant business relations. Without limiting the generality of the foregoing, during the period from the date of this Agreement to the Effective Time, except as consented to in writing by F&M (which consent shall not be unreasonably withheld, delayed or conditioned), Cascade shall not, and shall cause its Subsidiaries not to: (a) declare or pay any dividend or other distribution with respect to any share of its capital stock, except that Cascade Bank may pay dividends to Cascade, and except that Cascade may pay regular quarterly cash dividends to its shareholders in accordance with the dividend policy as set forth in Section 5.2(a) of the Cascade Disclosure Schedule; (b) amend or otherwise modify its charter, articles of incorporation, bylaws or other comparable organizational documents; (c) issue, sell or deliver, or agree to issue, sell or deliver any shares of any class of its capital stock or any securities convertible into or exercisable for any shares of its capital stock, except that Cascade may (i) issue Employee and Director Options consistent with past practice, (ii) may issue shares as required under the terms of outstanding Employee and Director Options, (iii) may issue restricted shares to its employees and directors consistent with past practice, and (iv) may participate in the issuance of trust preferred stock required to finance the payment of Merger Consideration hereunder; (d) redeem or repurchase any shares of its capital stock; (e) take any action or omit to take any action that could reasonably be expected to result in any of the conditions to the consummation of the transactions contemplated by this Agreement not being satisfied in an expeditious and timely manner, or any action that could reasonably be expected to materially impair its ability to perform its obligations under this Agreement or to consummate the Merger and the transactions contemplated by this Agreement; (f) enter into any agreement or letter of intent regarding any Acquisition Proposal or accept or endorse any Acquisition Proposal that in either case does not contemplate the consummation of the Merger; or (g) agree, authorize or commit to do any of the foregoing. Section 5.3 No Solicitation. Between the date hereof and the Effective Time, Neither F&M nor the Bolger Shareholder shall, and F&M shall not knowingly permit its officers, directors or other representatives to enter into, approve or directly or indirectly initiate contact with any Person in an effort to solicit, any Change in Control Transaction. Between the date hereof and the Effective Time, F&M shall not authorize or knowingly permit any officer, director or any other person representing or retained by F&M to directly furnish or cause to be furnished any non-public information concerning its business, properties or assets to any Person in connection with any possible Change in Control Transaction. F&M and the Bolger Shareholder shall promptly notify Cascade of receipt by F&M or any of its officers or directors 29 or by the Bolger Shareholder, as applicable, of any proposal, solicitation, indication of interest or other communication by any Person relating to any potential Change in Control Transaction, whether oral or written, communicated by any Person to F&M or the Bolger Shareholder. Section 5.4 F&M Information. Between the date hereof and the Effective Time, promptly upon learning of any event or condition that would result, or that following only the giving of notice or passage of time would result, in a material breach of F&M's representations and warranties in Article IV above, F&M shall provide Cascade with a reasonably detailed written description of the event or condition as then known to F&M, and shall provide such additional information thereafter regarding such event or condition as Cascade may reasonably request. Section 5.5 Cascade Information. Between the date hereof and the Effective Time, promptly upon learning of any event or condition that would result, or that following only the giving of notice or passage of time would result, in a material breach of Cascade's representations and warranties in Article III above, Cascade shall provide F&M with a reasonably detailed written description of the event or condition as then known to Cascade, and shall provide such additional information thereafter regarding such event or condition as F&M may reasonably request. Section 5.6 Governmental Approvals. Between the date hereof and the Effective Time, the parties shall cooperate with each other, and shall furnish to each other all information necessary or desirable in connection with making any filing and shall pursue to completion the approvals by Governmental Entities necessary for the consummation of the Merger and the other transactions contemplated by this Agreement, including without limitation the approval of the Oregon Director, the Idaho Director and the FDIC of the Bank Merger, the approval of, or waiver of jurisdiction by, the FRB of the Merger, any filings, notices or approvals that may be required for any of the foregoing from the FRB or any other Governmental Entity for the Bolger Shareholder and the Trust to acquire the Merger Shares and, in case of the Trust, to become a bank holding company under the BHC Act, and any filings under the HSR Act in connection with the Merger. Section 5.7 Reasonable Efforts. Each party agrees to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other parties in doing, all things necessary, proper or advisable to consummate and make effective, in the most expeditious manner practicable, the Merger and the other transactions contemplated by this Agreement including using reasonable best efforts to accomplish the following: (a) the taking of all reasonable acts necessary to cause the conditions to Closing to be satisfied; (b) the filing of applications for approval of the Bank Merger by the Oregon Director, the Idaho Director and the FDIC and the approval of, or waiver of jurisdiction by the FRB of the Merger, any necessary filings with or notices to the FRB or any other Governmental Entity for the Bolger Shareholder and the Trust to acquire the Merger Shares and, in case of the Trust, to become a bank holding company under the BHC Act, and any filings under the HSR Act in connection with the Merger, in each case within 35 days after the date hereof (provided that notwithstanding the foregoing any filings under the HSR Act in connection with the Merger may be made within 60 days of the date hereof); (c) the mailing of the proxy statement to Cascade's shareholders within 65 days after the date hereof; (d) the obtaining of all 30 necessary actions or nonactions, waivers, consents and approvals from Governmental Entities and the making of all necessary registrations and filings (including filings with the Oregon Director, the Idaho Director, the FDIC and the FRB and under the HSR Act contemplated by Section 5.6 above) and the taking of all reasonable steps necessary to obtain an approval or waiver from, or to avoid an action or proceeding by any Governmental Entity, including, without limitation, any approvals or waivers required to be obtained by any F&M Holder that will be a bank holding company under the BHC Act following the Effective Time; (e) the obtaining of all necessary consents, approvals or waivers from third parties; and (f) the execution and delivery of any additional instruments necessary to consummate the transactions contemplated by, and to fully carry out the purposes of, this Agreement. The information provided by F&M for inclusion in any filing or application referenced in this Section 5.7 will be, at the time of such filing or application, true and complete in all material respects. Section 5.8 Access. During the period between the date hereof and the Effective Time and except as may be prohibited by Law, F&M will permit Cascade, and its employees, agents and representatives, during normal business hours and in a manner which does not unreasonably interfere with F&M's or F&M Bank's business operations, full access to its and F&M Bank's personnel, consultants, premises, books, files and records, including but not limited to loan files and litigation files. F&M will furnish to Cascade such financial and operating data and other information with respect to the business and assets of F&M and F&M Bank as Cascade shall reasonably request. During the period between the date hereof and the Effective Time and except as may be prohibited by Law, Cascade will permit F&M, and its employees, agents and representatives, during normal business hours and in a manner which does not unreasonably interfere with the business operations of Cascade or any of its Subsidiaries, full access to its and its Subsidiaries' personnel, consultants, premises, books, files and records, including but not limited to loan files and litigation files. Cascade will furnish to F&M such financial and operating data and other information with respect to the business and assets of Cascade and any of its Subsidiaries as F&M shall reasonably request. Section 5.9 Announcements. To the extent reasonably practicable, F&M and Cascade shall consult with each other before issuing, and provide each other the opportunity to review, comment upon and concur with, any press release or other public statements (including, without limitation, the Proxy Statement and any relevant portions of any reports filed pursuant to the Exchange Act) with respect to the transactions contemplated by this Agreement, including the Merger, and shall not issue any such press release or make any such public statement prior to such consultation. The parties agree that the initial press release to be issued with respect to the transactions contemplated by this Agreement shall be in the form heretofore agreed to by the parties. Notwithstanding any contrary provision of this Agreement, however, the parties acknowledge that shares of Cascade common stock are registered with the SEC pursuant to Section 12(g) of the Exchange Act and are traded on the Nasdaq Stock Market, and as such Cascade is required to file certain reports and deliver certain materials to the SEC and to Cascade's shareholders. To that end, in the event Cascade, on the advice of its counsel, determines that it is required to make public disclosure of information that otherwise would be prohibited or limited by this Section 5.9, Cascade may file such reports and issue such communications as it deems reasonably necessary to comply with Exchange Act regulations and Nasdaq listing qualification rules. In such event Cascade shall, to the extent practicable, consult 31 with F&M prior to the filing of any such report or communication, and shall provide F&M with a copy of such reports or communications promptly upon release thereof. Section 5.10 Shareholder Meeting. Cascade will call a meeting of its shareholders to consider and approve the issuance of the Merger Shares as required by the Nasdaq listing qualification rules. Cascade will deliver to its shareholders notice of the meeting, together with the Proxy Statement, in accordance with applicable Oregon and federal Law. The Cascade Board of Directors will recommend to the shareholders that they approve the issuance of the Merger Shares, this Agreement, the Merger and the transactions contemplated hereby unless, after consulting with legal counsel, the Cascade Board of Directors determines in good faith that its fiduciary duties otherwise require. Section 5.11 Proxy Statement. F&M shall provide to Cascade such information and assistance as may be reasonably necessary to permit Cascade to file with the SEC a proxy statement to be used by Cascade to solicit proxies from the Cascade shareholders for the shareholder meeting at which the Cascade shareholders will be asked to consider and vote on the issuance of the Merger Shares, this Agreement, the Merger and the transactions contemplated hereby (in its definitive form, the "Proxy Statement"). F&M will promptly advise Cascade in writing if at any time prior to the adjournment of the Cascade shareholders meeting F&M obtains Knowledge of any facts that would, in the opinion of F&M or its legal counsel, make it necessary to amend or supplement the Proxy Statement to make the statements therein not misleading or to comply with applicable Law. The information provided by F&M for inclusion in the Proxy Statement will be, at the time such Proxy Statement is filed, when first mailed to the Cascade shareholders and at the date of the meeting of the Cascade shareholders, true and complete in all material respect. Section 5.12 Closing Balance Sheet. Not fewer than five (5) days prior to the Closing Date, F&M will prepare and deliver to Cascade an updated, unaudited consolidated balance sheet of F&M Bank dated as of fifteen (15) days prior to the Closing Date (the "Closing Balance Sheet"). The Closing Balance Sheet shall be prepared in accordance with GAAP (except for the absence of footnotes and except for normal and non-material year-end adjustments and other non-material adjustments permitted by GAAP) applied on a consistent basis and in accordance with F&M Bank's past accounting methods, policies, practices and procedures and in the same manner, with consistent classification and estimation methodology, as the unaudited consolidated balance sheet included in the unaudited statement of financial condition of F&M Bank as of November 30, 2005 was prepared, and shall include the consolidated shareholders' equity without giving effect to any negative mark to market bond portfolio adjustment in excess of $800,000 (the "Closing Consolidated Shareholders' Equity"). Section 5.13 Indemnity. Subject to the provisions of Oregon law, from and after the Effective Time, Cascade will indemnify and advance expenses to F&M's and F&M Bank's current officers and directors to the same extent that F&M is obligated to indemnify and advance expenses to such officers and directors under its articles of incorporation or charter and bylaws or under any indemnification agreement between F&M or F&M Bank and any current officer or director. Notwithstanding the foregoing, Cascade will have no obligation to indemnify F&M's and F&M Bank's officers or directors against any claim, action, suit or proceeding (including any shareholder derivative or similar proceeding) initiated or brought by the Bolger Shareholder 32 or any Affiliate of the Bolger Shareholder, or in which the Bolger Shareholder or his Affiliate is the real party in interest. Section 5.14 SAR Plan. Between the date hereof and the Effective Time, F&M shall use its reasonable best efforts to obtain written agreements from all holders of units under F&M's Year 2000 Stock Appreciation Right Plan (the "SAR Plan") providing for the acceleration of vesting, payment by Cascade and cancellation, immediately following the Effective Time, of all units issued thereunder. Section 5.15 Transition. (a) Cascade shall continue to pay each person who was an employee of F&M or F&M Bank immediately prior to the Effective Time the base salary such former employee was paid as of immediately prior to the Effective Time, until the first anniversary of the Effective Time or the termination of such person's employment with Cascade or its Subsidiaries, whichever occurs first; provided that nothing herein shall require Cascade or any of its Subsidiaries to retain any such employee for any particular period following the Effective Time, and that all such employees shall continue to be at-will employees; and provided, further, that Cascade may change the base salary of any such employee following a transfer of such employee to a new position at Cascade that requires the performance of materially different duties. (b) Following the Bank Merger, the existing Board of Directors of F&M Bank shall be constituted as an advisory board of Cascade Bank, and shall continue to receive directors' fees in accordance with F&M Bank's director compensation policies as in effect on the date of this Agreement through the date that they serve as members of an advisory board of Cascade Bank (which the parties agree shall be at least through December 31, 2006). In addition, simultaneously with the Closing, Cascade shall pay $25,000 by wire transfer of immediately available funds to each former non-management director of F&M Bank to the account or accounts designated in writing by each such non-management director. (c) Cascade shall allocate an amount equal to $1,000,000, less (i) the aggregate amount of the $25,000 payments to non-management directors described in Section 5.15(b), (ii) the amount paid with respect to the units under the SAR Plan the vesting of which was accelerated as of the Effective Time in connection with the Merger, as set forth in Section 5.15(c) of the F&M Disclosure Schedule, provided that the amount deducted pursuant to this clause (ii) shall not exceed $150,000 in the aggregate, and (iii) an amount equal to the severance payments made to former employees of F&M or F&M bank following the Closing Date, provided that the amount deducted pursuant to this clause (iii) shall not exceed $250,000 in the aggregate, as additional compensation and benefits payable to F&M employees (the "Retention Compensation"). The Retention Compensation may include, without limitation, salary adjustments, option or restricted stock grants and cash bonuses, or combinations thereof. The Retention Compensation shall be allocated prior to the Closing Date as agreed by the Presidents of Cascade and F&M Bank, and may be paid prior to or after the Effective Time, as agreed by the Presidents of Cascade and F&M Bank prior to the Closing Date. (d) After the Effective Time, Cascade and its Subsidiaries will either continue the F&M Benefit Plans maintained by F&M and F&M Bank immediately prior to the Effective 33 Time or may terminate any such F&M Benefit Plans and shift the former employees of F&M and F&M Bank to the comparable Benefit Plan then made available to employees of Cascade and its Subsidiaries; provided that Cascade and its Subsidiaries may terminate the F&M Benefit Plans described in Section 5.15(d) to the Cascade Disclosure Schedule without providing comparable coverage under Cascade Benefit Plans; and provided, further, that if requested by Cascade prior to the Effective Time, the Board of Directors of F&M shall adopt a resolution terminating the F&M 401(k) plan effective immediately prior to the Effective Time. For purposes of determining eligibility to participate in and vesting under any "employee benefit plan" (as defined in Section 3(3) of ERISA) of Cascade or any of its Subsidiaries, for determining the fringe benefits and banking privileges applicable to the former employees of F&M or F&M Bank, and for benefit and accrual purposes for vacation, sickness benefits and severance benefits, each such former F&M or F&M Bank employee will be credited with the years of service he or she has been credited with under comparable F&M or F&M Bank employee benefit plans. If Cascade elects to shift former employees of F&M and F&M Bank to Cascade's vacation benefit plan, any vacation taken in 2006 prior to the Effective Time will be subtracted under the Cascade vacation plan from the employee's vacation entitlement for 2006. With respect to any individuals who were covered participants under the welfare benefit plans of F&M or F&M Bank immediately prior to the Effective Time, Cascade will (i) waive any preexisting conditions and waiting periods under the welfare benefit plans of Cascade or any of its Subsidiaries that provide healthcare and disability benefits to the same extent that such conditions and waiting periods were satisfied under the comparable F&M or F&M Bank employee benefit plan, and (ii) cause such plans to honor any expenses incurred by such individuals under similar healthcare and disability benefit plans of F&M or F&M Bank during the portion of the calendar year in which the Merger occurs for purposes of satisfying applicable deductible, co-insurance, maximum out-of-pocket, and similar expenses. Section 5.16 2006 Bonus Plan. F&M shall implement, following consultation with Cascade, a bonus plan for the 2006 calendar year applicable to employees of F&M and F&M Bank in accordance with the guidelines set forth in Section 5.16 of the F&M Disclosure Schedule. Section 5.17 Certain Obligations. F&M shall use its commercially reasonable efforts to have its obligation to J. Michael Gwartney described in Section 5.17 of the F&M Disclosure Schedule be fully satisfied or to have F&M be released from any liability therefor. The parties understand that there are no financial implications to F&M associated with retaining such obligation. Section 5.18 Bolger Trust. The parties understand and agree that promptly after the Effective Time the Bolger Shareholder may transfer any Merger Shares received in the Merger to a trust as to which the Bolger Shareholder is the settlor and the initial trustee thereof (the "Trust"). In such event, the Trust may act in all respect for the Bolger Shareholder hereunder. Section 5.19 Takeover Laws; No Rights Triggered. If any Takeover Law may become, or may purport to be, applicable to the transactions contemplated hereby, each of Cascade and F&M and the members of their respective Boards of Directors will grant such approvals and take such actions as are necessary (other than any action requiring the approval of the Cascade shareholders) so that the transactions contemplated by this Agreement may be consummated as 34 promptly as practicable on the terms contemplated hereby and otherwise act to eliminate or minimize the effects of any Takeover Law on any of the transactions contemplated by this Agreement. ARTICLE VI. CONDITIONS PRECEDENT -------------------- Section 6.1 Conditions to Each Party's Obligation To Effect the Merger. The respective obligation of each party to effect the Merger is subject to the satisfaction, or waiver by each party, on or prior to the Closing Date of the following conditions: (a) The issuance of the Merger Shares shall have been approved by the affirmative vote of the holders of a majority of the shares of Cascade common stock present in person or by proxy at a meeting called for the purpose of approving such issuance at which a quorum is present. (b) All consents, approvals or orders of authorization of, or actions by any Governmental Entities required for the consummation of the Merger and the other actions contemplated by this Agreement shall have been obtained, including without limitation the approval of the FDIC, the Idaho Director, the Oregon Director and the FRB, any necessary approvals from the FRB or any other Governmental Entity for the Bolger Shareholder and the Trust to acquire the Merger Shares, the expiration or termination of the waiting periods applicable to the consummation of the transactions contemplated by this Agreement under the HSR Act and all registrations, declarations or filings with any Governmental Entities shall have been made. (c) No judgment, order, decree or Law entered, enacted, promulgated, enforced or issued by any court or other Governmental Entity of competent jurisdiction or other legal restraint or prohibition (collectively, "Restraints") shall be in effect enjoining or otherwise prohibiting the consummation of the Merger or which otherwise is reasonably likely to have a Material Adverse Effect on Cascade or F&M. Section 6.2 Conditions to Obligations of Cascade. The obligation of Cascade to effect the Merger is further subject to satisfaction or waiver of the following conditions: (a) The representations and warranties of F&M set forth in Article IV (except for (i) the representations and warranties set forth in set forth in Sections 4.1, 4.2, 4.3, 4.4, 4.5(a), 4.7(f), 4.7(h), 4.8(b), 4.8(c), 4.22 and 4.25 or (ii) the portions of any representations and warranties qualified with respect to a Material Adverse Effect on F&M) qualified as to materiality shall be true and correct in all respects, and those not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such date), except to the extent that the failure thereof to be so true and correct, individually or in the aggregate, shall not have or constitute a Material Adverse Effect on F&M; the representations and warranties of F&M set forth in Sections 4.1, 4.2, 4.3, 4.4, 4.5(a), 4.7(f), 4.7(h), 4.8(b), 4.8(c), 4.22 and 4.25 herein qualified as to materiality shall be true and correct in all respects, and those not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date (except to the extent expressly made as of an earlier 35 date, in which case as of such date); and the portions of any representations and warranties of F&M qualified with respect to a Material Adverse Effect on F&M shall be true and correct in all respects, in each case as of the date of this Agreement and as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such date). (b) F&M and the Bolger Shareholder shall have performed in all material respects all obligations required to be performed by each of them under this Agreement at or prior to the Closing Date, and shall have executed and delivered all documents required to be delivered by each of them pursuant to this Agreement. (c) There shall not have been, since November 30, 2005, any Material Adverse Change in F&M. (d) F&M Bank's allowance for loan loss balance shall not have fallen below 1.45% of the total gross loans. (e) Cascade shall have received from Davis Wright Tremaine LLP, counsel to Cascade, on the Closing Date, an opinion, in a form and of the substance reasonably acceptable to Cascade and dated as of the Closing Date to the effect that the Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. (f) Cascade shall have received the audited financial statements of F&M for the fiscal years ended December 31, 2004 and 2005. The audited financial statements shall be prepared in accordance with GAAP applied on a consistent basis and in accordance with F&M Bank's past accounting methods, policies, practices and procedures and in the same manner, with consistent classification and estimation methodology, as the F&M Bank Financial Statements were prepared. (g) The Closing Consolidated Shareholders' Equity shall not be less than $45,000,000, provided, that if the Closing Consolidated Shareholders' Equity is less than $45,000,000, the Bolger Shareholder shall purchase shares of F&M common stock immediately prior to the Effective Time with an aggregate purchase price equal to the difference between $45,000,000 and the Closing Consolidated Shareholders' Equity. The purchase price per share shall be approximately equal to the value of the Merger Consideration on a per share basis. Once the Bolger Shareholder makes such purchase, the condition included in this Section 6.2(g) shall be deemed satisfied. Any shares of F&M common stock purchased pursuant to this Section 6.2(g) shall constitute F&M Effective Time Shares. (h) F&M shall have executed and/or delivered, or shall be prepared to execute and/or deliver, all documents and instruments required to be executed and/or delivered by it on the Closing Date under this Agreement. Section 6.3 Conditions to Obligations of F&M and the Bolger Shareholder. The obligation of F&M and the Bolger Shareholder to effect the Merger is further subject to satisfaction or waiver by F&M and the Bolger Shareholder of the following conditions: 36 (a) The representations and warranties of Cascade set forth in Article III (except for (i) the representations and warranties set forth in Sections 3.1, 3.2, 3.3, 3.4, 3.5(a), 3.7(f), 3.7(h), 3.8(b), 3.8(c), 3.20 and 3.22 or (ii) the portions of any representations and warranties qualified with respect to a Material Adverse Effect on Cascade) qualified as to materiality shall be so true and correct in all respects, and those not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such date), except to the extent that the failure thereof to be true and correct, individually or in the aggregate, shall not have or constitute a Material Adverse Effect on Cascade; the representations and warranties of Cascade set forth in Sections 3.1, 3.2, 3.3, 3.4, 3.5(a), 3.7(f), 3.7(h), 3.8(b), 3.8(c), 3.20 and 3.22 herein qualified as to materiality shall be true and correct in all respects, and those not so qualified shall be true and correct in all material respects, in each case as of the date of this Agreement and as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such date); and the portions of any representations and warranties of Cascade qualified with respect to a Material Adverse Effect on Cascade shall be true and correct in all respects, in each case as of the date of this Agreement and as of the Closing Date (except to the extent expressly made as of an earlier date, in which case as of such date). (b) Cascade shall have performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing Date, and shall have executed and delivered all documents required to be delivered by it pursuant to this Agreement. (c) The Bolger Shareholder shall have received from Sullivan & Cromwell LLP, special counsel to the Bolger Shareholder, on the Closing Date, an opinion, in a form and of the substance reasonably acceptable to the Bolger Shareholder and dated as of the Closing Date to the effect that the Merger will be treated for federal income tax purposes as a reorganization within the meaning of Section 368(a) of the Code. (d) The Bolger Shareholder shall have received from Davis Wright Tremaine LLP, counsel to Cascade, on the Closing Date, an opinion, in the form attached hereto as Exhibit C and dated as of the Closing Date, to the effect that, the Merger Shares have been duly authorized and validly issued and are fully paid and non-assessable and have not been issued in violation of any preemptive rights. (e) Cascade shall have executed and/or delivered, or shall be prepared to execute and/or deliver, all documents and instruments required to be executed and/or delivered by it on the Closing Date under this Agreement. Section 6.4 Deliveries by Cascade. At the Closing, Cascade shall execute and deliver, or shall cause to be executed and delivered, the following: (a) The Articles of Merger, duly executed by Cascade; (b) Copies of the resolutions of the Board of Directors of Cascade authorizing the execution, delivery and performance of this Agreement and copies of the resolutions of the 37 shareholders of Cascade authorizing the issuance of the Merger Shares, in each case, certified as of the Closing Date by the secretary or an assistant secretary of Cascade; (c) A certificate of existence for Cascade issued by the Oregon Secretary of State or other evidence of existence as of the fifth (5th) Business Day preceding the Closing Date; (d) A certificate dated the Closing Date, duly executed by the chief executive officer and the chief financial officer of Cascade, certifying that the conditions described in Section 6.3(a) and (b) have been satisfied; (e) An opinion of Davis Wright Tremaine LLP, counsel to Cascade, in the form attached hereto as Exhibit C and dated as of the Closing Date that the Merger Shares have been duly authorized and validly issued and are fully paid and non-assessable and have not been issued in violation of any preemptive rights; (f) Proof of payment in U.S. dollars by wire transfer of immediately available funds in the amount of $25,000 to each non-management director of F&M Bank to the account or accounts designated in writing by each such non-management director pursuant to Section 5.15(b); (g) Payment in U.S. dollars by wire transfer of immediately available funds of the Cash Consideration to the account or accounts designated in writing by the respective F&M Holders pursuant to Section 2.4(a); (h) Certificates evidencing the number of Merger Shares and certificates evidencing the amount of Contingent Consideration, in each case that the respective F&M Holders have the right to receive pursuant to Section 2.4(a). Section 6.5 Deliveries by F&M. At the Closing, F&M shall execute and deliver, or shall cause to be executed and delivered, the following: (a) Copies of the resolutions of the Board of Directors and shareholders of F&M authorizing the execution, delivery and performance of this Agreement, certified as of the Closing Date by the secretary or assistant secretary of F&M; (b) A certificate of existence for F&M issued by the Idaho Secretary of State or other evidence of existence and a certificate of existence for F&M Bank issued by the Idaho Director or other evidence of existence, in each case as of the fifth (5th) Business Day preceding the Closing Date; (c) A certificate dated the Closing Date, duly executed by the chief executive officer and the chief financial officer of F&M, certifying that the conditions described in Section 6.2(a), (b) and (c) have been satisfied; (d) An opinion of Davison & Copple, LLP, special counsel to F&M, in the form attached hereto as Exhibit D; 38 (e) The Certificates, duly endorsed; (f) The Letters of Transmittal, duly executed; and (g) The Investor Letters, duly executed. ARTICLE VII. TERMINATION, AMENDMENT AND WAIVER --------------------------------- Section 7.1 Termination. This Agreement may be terminated at any time prior to the Effective Time, whether before or after Cascade shareholder approval: (a) by mutual written consent of F&M and Cascade; (b) by either F&M or Cascade: (i) if the Merger shall not have been consummated on or before September 29, 2006; provided, however, that the right to terminate this Agreement pursuant to this Section 7.1(b)(i) shall not be available to any party whose failure to perform any of its obligations under this Agreement results in the failure of the Merger to be consummated by such time; (ii) if (A) there shall be any Law that makes consummation of the Merger illegal or otherwise prohibited or (B) any judgment, injunction, order or decree of any court or other Governmental Entity having competent jurisdiction enjoining F&M and Cascade from consummating the Merger is entered and such judgment, injunction or order shall have become final and non-appealable; or (iii) if any Restraint shall be in effect and shall have become final and non-appealable. (c) by F&M, if the shareholders of Cascade have not approved the issuance of the Merger Shares prior to June 30, 2006. (d) by F&M, if the Board of Directors of Cascade or management of Cascade fails to recommend in good faith the approval of the issuance of the Merger Shares, or rescinds or adversely modifies any such recommendation, in each case for any reason. (e) by F&M, if Cascade shall have misrepresented, breached or failed to perform in any material respect any of its representations, covenants or other agreements contained in this Agreement and, as a result, the conditions to F&M's obligation to close the transactions contemplated by this Agreement are not capable of being satisfied (a "Cascade Default"); provided that if such Cascade Default is curable by Cascade through the exercise of commercially reasonable efforts, then F&M may not terminate this Agreement under this Section 7.1(e) unless F&M gives Cascade written notice of the Cascade Default and Cascade fails to cure such Cascade Default within twenty (20) days after delivery of such notice. (f) by Cascade, if F&M shall have misrepresented, breached or failed to perform in any material respect any of its representations, covenants or other agreements 39 contained in this Agreement and, as a result, the conditions to Cascade's obligation to close the transactions contemplated by this Agreement are not capable of being satisfied (a "F&M Default"); provided that if such F&M Default is curable by F&M through the exercise of commercially reasonable efforts, then Cascade may not terminate this Agreement under this Section 7.1(f) unless Cascade gives F&M written notice of the F&M Default and F&M fails to cure such F&M Default within twenty (20) days after delivery of such notice. Section 7.2 Effect of Termination. (a) In the event of termination of this Agreement by either Cascade or F&M as provided in Section 7.1, this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of F&M, the Bolger Shareholder or Cascade, except as expressly set forth in this Section 7.2. The provisions of this Section 7.2 and of Article IX shall survive any such termination. (b) If the Merger is not consummated as a result of a willful breach by Cascade, on the one hand, or F&M and the Bolger Shareholder, on the other hand, or a willful failure of performance by Cascade, on the one hand, or F&M and the Bolger Shareholder, on the other hand, in any material respect of any of the representations, warranties, covenants or other agreements contained in this Agreement of Cascade, on the one hand, or F&M and the Bolger Shareholder, on the other hand, as applicable, then F&M shall be entitled to payment by Cascade, in case of a willful breach or failure on Cascade's part, or Cascade shall be entitled to payment by F&M, in the case of a willful breach or failure on F&M's or the Bolger Shareholder's part, of a termination fee of $7 million, as liquidated damages. The parties agree that damages in the event of a willful breach or failure of this Agreement may be difficult or impossible to ascertain, and that the payments required hereunder represent a reasonable estimate of the actual damages to be incurred by the non-breaching party or parties. If the Merger is not consummated as a result a non-willful breach by Cascade, on the one hand, or F&M and the Bolger Shareholder, on the other hand, or a non-willful failure of performance by Cascade, on the one hand, or F&M and the Bolger Shareholder, on the other hand, in any material respect of any of the representations, warranties, covenants or other agreements contained in this Agreement of Cascade, on the one hand, or F&M and the Bolger Shareholder, on the other hand, as applicable, then F&M and the Bolger Shareholder shall be entitled to payment by Cascade, in case of a non-willful breach or failure on Cascade's part, or Cascade shall be entitled to payment by F&M, in the case of a non-willful breach or failure on F&M's or the Bolger Shareholder's part, in an amount equal to the non-breaching party's or parties' out-of-pocket expenses, not to exceed $1 million, in connection with the negotiation, execution and performance of such party's or parties' obligations under this Agreement, including the expenses referred to in Section 2.3. In no event shall any party be entitled to more than one fee payment pursuant to Section 7.2(b) and Section 7.2(c). The parties agree that (i) the failure of the shareholders of Cascade to approve the issuance of the Merger Shares in and of itself shall not be considered a per se willful breach of this Agreement; provided, however, that the foregoing does not preclude in any way a willful breach relating to any act or omission that gave rise to, affected or influenced in any way, such failure; and (ii) a failure by Cascade to have available the Cash Consideration immediately prior to the Effective Time shall constitute a willful breach unless one or more third party financing sources has refused to provide financing to Cascade following the occurrence of a Material Finance Event. 40 (c) If (x) the shareholders of Cascade fail to approve the issuance of the Merger Shares at a meeting of shareholders called and held pursuant to Section 5.10 of this Agreement at which a vote takes place and prior to such vote a Triggering Event occurs or (y) the shareholders have not approved the issuance of the Merger Shares and a Triggering Event has occurred, then in either case F&M shall be entitled to receive a termination fee of $5 million from Cascade upon termination of this Agreement for any event or by any party. In no event shall any party be entitled to more than one fee payment pursuant to Section 7.2(b) and Section 7.2(c). A "Triggering Event" means any of the following: (i) the Board of Directors of Cascade or management of Cascade fails to recommend in good faith the approval of the issuance of the Merger Shares, or rescinds or adversely modifies any such recommendation, in each case for any reason, or (ii) Cascade, the Board of Directors of Cascade or management of Cascade do not use their good faith reasonable best efforts to obtain the approval of the issuance of the Merger Shares, or (iii) Cascade, the Board of Directors of Cascade or management of Cascade make any public statement inconsistent with a favorable recommendation of the issuance of the Merger Shares, or (iv) an Acquisition Proposal is publicly made. Section 7.3 Amendment. This Agreement may be amended by the parties at any time before or after the Cascade shareholder approval is obtained; provided, however, that after the Cascade shareholder approval is obtained, there shall not be made any amendment that by Law requires further approval by the shareholders of Cascade without such approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties. Section 7.4 Extension; Waiver. At any time prior to the Effective Time, a party may (a) extend the time for the performance of any of the obligations or other acts of the other parties; (b) waive any inaccuracies in the representations or warranties of the other parties contained in this Agreement or in any document delivered pursuant to this Agreement; or (c) waive any condition to Closing that lawfully may be waived. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of such rights. ARTICLE VIII. INDEMNIFICATION --------------- Section 8.1 Survival of Representations, Warranties, Covenants and Agreements. All representations and warranties of Cascade contained in this Agreement or made pursuant hereto shall terminate as of the Effective Time, except for Section 3.1, Section 3.3(a), (b) and (f) and Section 3.25 (collectively, the "Cascade Exceptions"), which shall survive indefinitely, and except with respect to claims involving fraud by Cascade or its Subsidiaries, which shall survive until the expiration of the applicable statue of limitations. All representations and warranties of F&M contained in this Agreement or made pursuant hereto, shall survive the Effective Time and shall terminate eighteen (18) months following the Effective Time and thereafter shall be of no force or effect, except for Section 4.1 and Section 4.3 (collectively, the "F&M Exceptions"), which shall survive indefinitely, and except for any claim with respect to which notice has been given to the party to be charged prior to such expiration date; provided, however, that the representations and warranties contained in Section 4.14, and with respect to claims involving fraud by F&M or F&M Bank, which shall survive until the expiration of the applicable statute of limitations. Disbelief or knowledge of breach prior to or as of the Closing Date by Cascade shall 41 not constitute a waiver or be a defense to any indemnity claim hereunder. All covenants and agreements in this Agreement shall continue in full force and effect and survive until performed in accordance with their respective terms by the relevant party or parties. Section 8.2 Indemnification by Bolger Shareholder. Subject to the Closing having occurred and the other provisions of this Article VIII (including the limitations set forth in Section 8.6), the Bolger Shareholder shall defend, indemnify, and hold Cascade, its officers, directors, agents, shareholders, employees and their respective successors and assigns (each, an "Indemnitee") harmless from and against any claims, demands, damages, losses, suits, actions, fines, penalties, interest, expenses and reasonable attorneys fees ("Losses") suffered by an Indemnitee that results from or, to the extent that the Losses relate to, any (a) breach of any of the representations or warranties of, or of any covenants or agreements made by, F&M contained in this Agreement, (b) failure of the Bolger Shareholder to pay the fees and expenses described in Section 2.3 hereof, or (c) claim or other amount payable to, or as a result of, any holder of units under the SAR Plan not having delivered a SAR Letter as of the Closing Date in excess of the amount to which such holder would have been entitled if he or she had executed and delivered a SAR Letter. Section 8.3 Claims. Any claim for indemnification under Section 8.2 must be made promptly in writing and be delivered as a notice by the Indemnitee to the Bolger Shareholder specifying in reasonable detail the nature and estimated amount of the claim. The failure to give timely notice of any claim for indemnification shall affect the rights of the Indemnitee to the extent that such failure has a prejudicial effect on the defenses or other rights available with respect to such claim. Section 8.4 Third Party Claims. (a) As used herein, a "Third-Party Claim" means Losses or potential Losses for which indemnification is claimed by an Indemnitee under the provisions of Section 8.2 and which is consequent to a claim against the Indemnitee by a Person by commencement against the Indemnitee of a legal action or proceeding or receipt by the Indemnitee of an assertion of a claim by a third party for which indemnification is provided pursuant to the provisions of Section 8.2 by the Bolger Shareholder. (b) The Indemnitee will give prompt notice of a Third-Party Claim to the Bolger Shareholder stating the nature thereof and enclosing copies of any complaint, summons, written assertion of such Third-Party Claim or similar document. No claim for indemnification on account of a Third-Party Claim shall be made and no indemnification therefor shall be available under the provisions of Section 8.2 until the Indemnitee shall have given initial written notice of its claim to the Bolger Shareholder. The failure to give timely notice of any Third Party Claim for indemnification shall affect the rights of the Indemnitee to the extent that such failure has a prejudicial effect on the defenses or other rights available with respect to such Third Party Claim. The Bolger Shareholder shall have fifteen (15) Business Days after his receipt of the claim notice to notify the Indemnitee whether the Bolger Shareholder agrees that the Third-Party Claim is subject to indemnification pursuant to the provisions of Section 8.2, and whether the Bolger Shareholder elects to defend such Third-Party Claim at his own expense. 42 (c) If the Bolger Shareholder elects to defend a Third-Party Claim, the Indemnitee shall reasonably cooperate with such defense, provided that the Indemnitee shall have no obligation to incur out-of-pocket expenses in connection therewith unless such expenses are reimbursed by the Bolger Shareholder. The Bolger Shareholder will cause his counsel to consult with the Indemnitee as appropriate as to the defense of such claim, and the Indemnitee may, at its own expense, participate in such defense, assistance or enforcement, but the Bolger Shareholder shall control such defense, assistance or enforcement. The Bolger Shareholder will cause such counsel engaged by the Bolger Shareholder to keep the Indemnitee informed at all times of the status of such defense, assistance or enforcement. (d) If the Bolger Shareholder does not timely elect to defend a Third-Party Claim pursuant to Section 8.4(b), the Indemnitee may conduct the defense of, or settle, such claim at the risk and expense, and without the consent, of the Bolger Shareholder. (e) Notwithstanding the engagement of counsel by the Bolger Shareholder, the Indemnitee shall have the right, at its own expense, to engage counsel at its own expense to participate jointly with the Bolger Shareholder in, and to control jointly with the Bolger Shareholder, the defense of a Third-Party Claim if the Third-Party Claim involves remedies other than monetary damages and such remedies, in the Indemnitee's reasonable judgment, could have an effect on the conduct of the Indemnitee's business. (f) If the Indemnitee chooses to exercise its right to appoint counsel to conduct a joint defense under Section 8.4(e), the Indemnitee shall deliver notice promptly thereof to the Bolger Shareholder setting forth in reasonable detail why it believes that it has such right and the name of the counsel it proposes to employ. The Indemnitee may deliver such notice at any time that the conditions to the exercise of such right appear to be fulfilled, it being recognized that in the course of litigation, the scope of litigation and the amount at stake may change. The Indemnitee shall thereupon have the right to appoint such counsel at its own expense. (g) The Bolger Shareholder may settle any Third-Party Claim solely involving monetary damages only if the amount of such settlement is to be paid entirely by the Bolger Shareholder pursuant to the provisions of Section 8.2. The Bolger Shareholder will not enter into a settlement of a Third-Party Claim which involves a non-monetary remedy or which will not be paid entirely by the Bolger Shareholder pursuant to the provisions of Section 8.2 without the written consent of the Indemnitee (which consent shall not be unreasonably withheld, delayed or conditioned). As to any Third-Party Claim of the type described in Section 8.4(e), the Indemnitee and the Bolger Shareholder shall consult as to any proposed settlement. If the Indemnitee notifies the Bolger Shareholder that it wishes to accept a proposed settlement and the Bolger Shareholder is unwilling to do so, if the amount for which the Third-Party Claim is ultimately resolved is greater than the amount for which the Indemnitee desired to settle, then (i) the Indemnitee shall be liable only for the amount, if any, which it would have paid had the Third-Party Claim been settled as proposed by the Indemnitee, and (ii) all reasonable attorneys' fees and expenses and costs of suit incurred by the Indemnitee subsequent to the time of the proposed settlement shall be paid or reimbursed by the Bolger Shareholder. 43 (h) Any indemnification contemplated by this Section 8.4 shall be pursuant to the provisions of Section 8.2 and subject to the limitations set forth in this Article VIII. Section 8.5 Claims Other Than Third-Party Claims. If the claim does not relate to a Third-Party Claim, the Bolger Shareholder shall have thirty (30) days after prompt receipt of the claim notice to notify the Indemnitee in writing whether the Bolger Shareholder accepts liability for all or any part of the claim and the method and timing of any proposed payment. Section 8.6 Limitations on Indemnification. No indemnity claim shall be payable by the Bolger Shareholder pursuant to the provisions of this Article VIII unless and until the aggregate indemnity claims asserted against the Bolger Shareholder under the provisions of this Article VIII equals $150,000 (the "Deductible"), and the Bolger Shareholder shall be liable for indemnity claims thereafter only to the extent of the excess. The Bolger Shareholder shall not be liable to indemnify the Indemnitees to the extent that the aggregate indemnification liability under the provisions of this Article VIII exceeds $3,000,000. The Bolger Shareholder shall not be liable to indemnify any claims under this Article VIII where the Loss relating thereto is less than $25,000 and such claims shall not be aggregated or included for purposes of determining the Deductible. The above limitations shall not apply to (i) indemnification claims or Losses involving fraud by F&M or F&M Bank, or (ii) indemnification claims under clauses (b) or (c) of Section 8.2 or (iii) indemnification claims with respect to any monetary penalties described in Section 4.7 of the F&M Disclosure Schedule in excess of the applicable reserves established for such penalties at F&M Bank as set forth in Section 4.7 of the F&M Disclosure Schedule. Section 8.7 Insured Losses. Notwithstanding any other term or provision of this Article, the Bolger Shareholder shall not be required to indemnify an Indemnitee for Losses to the extent that the Losses have been reimbursed by the Indemnitee's receipt of insurance proceeds. In the event that insurance does not cover the full amount of the Losses, the Bolger Shareholder shall remain liable for the difference between the insurance payment as described above and the amount of the Losses (subject to the limitations contained in this Article VIII). Section 8.8 Indemnification by Cascade. Subject to the Closing having occurred and the other provisions of this Article VIII, Cascade shall defend, indemnify, and hold Bolger Shareholder and its Affiliates harmless from and against any Losses suffered that results from or, to the extent that the Losses relate to, (a) claims involving fraud by Cascade or its Subsidiaries, (b) any of the Cascade Exceptions or (c) any fundamental defect in the Merger Shares. Section 8.9 Exclusivity of Remedies. From and after the Effective Time, the parties acknowledge and agree that their respective sole and exclusive remedy for monetary damages with respect to any and all claims against the other parties, their affiliates and any indemnification for breach of any covenant, agreement or representation contained in this Agreement or in connection with this Agreement or the Mergers, shall be pursuant to the indemnification provisions contained in this Article VIII and shall be in lieu of any rights the parties may have under Law with respect thereto, except with respect to claims involving fraud, the Cascade Exceptions, the F&M Exceptions, Sections 5.13, 5.15, 5.16, and 5.19 and any matters relating to the Shareholders Agreement. 44 ARTICLE IX. GENERAL PROVISIONS ------------------ Section 9.1 Notices. All notices, requests, claims, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally, sent by registered or certified mail, or sent by overnight courier (providing proof of delivery) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): To Cascade or Acquisition Co.: Address: Cascade Bancorp 1100 NW Wall Street P.O. Box 369 Bend, Oregon 97709 Attention: Patricia L. Moss, Chief Executive Officer Facsimile: (541) 617-3149 With a copy to: Address: Davis Wright Tremaine LLP 1300 SW Fifth Avenue Suite 2300 Portland, Oregon 97201 Attention: David C. Baca, Esq. Facsimile: (503) 778-5299 and Address: Karnopp Petersen LLP 1201 NW Wall St. Suite 300 Bend, Oregon 97701 Attention: James E. Peterson, Esq. Facsimile: (541) 388-5410 To F&M: Address: F&M Holding Company 121 North 9th Street Suite 200 Boise, Idaho 83702 Attention: Clarence Jones, President Fascimile: (208) 319-2444 45 With a copy to: Address: Wells, Jaworski, Liebman & Paton LLP 12 Route 17 North Paramus, New Jersey 07653 Attention: Thomas M. Wells, Esq. Facsimile: (201) 587-8845 and Address: Sullivan & Cromwell LLP 125 Broad Street New York, New York 10004 Attention: Mark J. Menting, Esq. Facsimile: (212) 558-3588 To the Bolger Shareholder: Address: David F. Bolger c/o Bolger & Co., Inc. 79 Chestnut Street Ridgewood, New Jersey 07450 Attention: David F. Bolger, President Facsimile: (201) 670-9685 With a copy to: Address: Wells, Jaworski, Liebman & Paton LLP 12 Route 17 North Paramus, New Jersey 07653 Attention: Thomas M. Wells, Esq. Facsimile: (201) 587-8845 and Address: Sullivan & Cromwell LLP 125 Broad Street New York, New York 10004 Attention: Mark J. Menting, Esq. Facsimile: (212) 558-3588 Section 9.2 Definitions. (a) For purposes of this Agreement: "Acquisition Proposal" means a tender or exchange offer to acquire 20% or more of the voting power in Cascade or any of its Subsidiaries, a proposal for a merger, consolidation or 46 other business combination involving Cascade or any of its Subsidiaries or any other proposal or offer to acquire in any manner 20% or more of the voting power in, or 20% or more of the business, assets or deposits of, Cascade or any of its Subsidiaries, other than the transactions contemplated hereby. An "Affiliate" of any Person means another Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such first Person, where "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management policies of a Person, whether through the ownership of voting securities, by contract, as trustee or executor, or otherwise. "Agreement" means this Agreement and any and all exhibits and schedules and amendments hereto. "Benefit Plans" means (a) Each termination, change in control or severance agreement involving F&M or Cascade, on the one hand, and any of its employees whose annual compensation is at a base rate equal to or exceeding $50,000 on the other hand; (b) All employee benefit plans of F&M, F&M Bank, Cascade or any of Cascade's Subsidiaries, as defined in ERISA Section 3(3); and (c) All other profit-sharing, bonus, stock option, stock purchase, stock bonus, restricted stock, stock appreciation right, phantom stock, vacation pay, holiday pay, tuition reimbursement, scholarship, severance, dependent care assistance, excess benefit, incentive compensation, salary continuation, supplemental retirement, employee loan or loan guarantee program, split dollar, cafeteria plan, and other benefits or compensation arrangements; in each case maintained or contributed to by F&M, F&M Bank, Cascade or any of Cascade's Subsidiaries for the benefit of its employees (or former employees), directors (or former directors) and/or their respective beneficiaries or under which F&M, F&M Bank, Cascade or any of Cascade's Subsidiaries may incur any liability. An arrangement will not fail to be a Benefit Plan simply because it only covers one individual, or because the obligations of F&M, F&M Bank, Cascade or any of Cascade's Subsidiaries under the plan arise by reason of its being a "successor employer" under applicable laws. Furthermore, a Voluntary Employees' Beneficiary Association under Section 501(c)(9) of the Code will be considered a Benefit Plan for this purpose. "BHC Act" means the Bank Holding Company Act of 1956, as amended. "Business Day" means any day other than Saturday, Sunday or any other day on which (i) banks are legally permitted to be closed in the State of Oregon, and (ii) the Nasdaq Stock Market is not open for the publication of securities trading information. "Cascade Material Contracts" means (a) each loan or credit arrangement, note, mortgage, indenture, or lease in a principal amount exceeding $250,000 under which Cascade or any of Cascade's Subsidiaries is a lender or lessor that is currently in effect; (b) each loan or credit 47 arrangement, credit commitment, note, mortgage, indenture, or lease under which Cascade or any of Cascade's Subsidiaries is a borrower or lessee, and each contract, agreement, obligation, commitment, arrangement or understanding of Cascade or any of Cascade's Subsidiaries involving actual or potential obligations or commitments, whether liquidated or contingent, of $50,000 or more that is currently in effect or that has been discharged since December 31, 2004; and (c) each contract, agreement, obligation, commitment, arrangement or understanding between or among Cascade and any Affiliate of Cascade other than ordinary course lending arrangements made and maintained in full compliance with Regulation O. "Cascade Securities Filings" means the documents filed with, furnished or delivered to the SEC by Cascade, or required to be so filed, furnished or delivered, pursuant to Section 13 or Section 15(d) of the Exchange Act, since January 1, 2000. "Cascade Stock Plans" means the plans and arrangements providing for the grant of options or warrants for the purchase of shares of Cascade common stock. "Change in Control Transaction" means a transaction pursuant to which any Person or any "group," as that term is interpreted for purposes of Section 13(d)(3) of the Exchange Act, would (i) merge or consolidate with F&M or cause F&M to merge or consolidate with such Person (including any "affiliate" of such Person, as that term is defined in Rule 144(a) under the Securities Act), (ii) directly or indirectly acquire all or a substantial portion of the assets or liabilities of, or enter into any similar transaction with F&M, or (iii) directly or indirectly purchase or otherwise acquire (including by merger, consolidation, share exchange or any similar transaction) securities representing or convertible into twenty percent (20%) or more of the stock of F&M. "Code" means the Internal Revenue Code of 1986, as amended. "Employee and Director Options" means the options to purchase shares of Cascade common stock granted or to be granted to current or former officers, directors, employees or consultants of Cascade or its Subsidiaries under Cascade Stock Plans. "Environmental, Health, and Safety Liabilities" means any cost, damages, expense, liability, obligation, or other responsibility arising from or under Environmental Law or Occupational Safety and Health Law and consisting of or relating to: (a) any environmental, health, or safety matters or conditions (including on-site or off-site contamination, occupational safety and health as it relates to Hazardous Material exposure, and regulation of chemical substances or products); (b) fines, penalties, judgments, awards, settlements, legal or administrative proceedings, damages, losses, claims, demands and response, investigative, remedial, or inspection costs and expenses arising under Environmental Law or Occupational Safety and Health Law; (c) financial responsibility under Environmental Law or Occupational Safety and Health Law for cleanup costs or corrective action, including any investigation, cleanup, removal, containment, or other remediation or response actions ("Cleanup") required by applicable 48 Environmental Law or Occupational Safety and Health Law (whether or not such Cleanup has been required or requested by any Governmental Entity or any other person) and for any natural resource damages; or (d) any other compliance, corrective, investigative, or remedial measures required under Environmental Law or Occupational Safety and Health Law. The terms "removal," "remedial," and "response action," include the types of activities covered by the United States Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C. ss. 9601 et seq., as amended ("CERCLA"). "Environmental Law" means any legal requirement that requires or relates to: (a) advising appropriate authorities, employees, and the public of intended or actual releases of pollutants or hazardous substances or materials, violations of discharge limits, or other prohibitions and of the commencements of activities, such as resource extraction that could have a significant impact on the environment; (b) preventing or reducing to acceptable levels the release of pollutants or hazardous substances or materials into the environment; (c) reducing the quantities, preventing the release, or minimizing the hazardous characteristics of wastes that are generated; (d) protecting resources, species, or ecological amenities; (e) reducing to acceptable levels the risks inherent in the transportation of hazardous substances, pollutants, oil, or other potentially harmful substances; (f) cleaning up pollutants that have been released, preventing the threat of release, or paying the costs of such clean up or prevention; or (g) making responsible parties pay private parties, or groups of them, for damages done to their health or the Environment, or permitting self-appointed representatives of the public interest to recover for injuries done to public assets. "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as amended. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "FDIC" means the Federal Deposit Insurance Corporation. "FHA" means the Federal Housing Administration. "FHLMC" means the Federal Home Loan Mortgage Corporation. "FNMA" means the Federal National Mortgage Association. 49 "FRB" means Federal Reserve Board. "GAAP" means U.S. generally accepted accounting principals, consistently applied. "GNMA" means the Government National Mortgage Association. "Governmental Entity" means any nation or government, foreign or domestic, any state or other political subdivision thereof, and any agency or other entity exercising executive, legislative, judicial, regulatory or administrative functions of government, including, without limitation, all taxing authorities. "Hazardous Activity" means the distribution, generation, handling, importing, management, manufacturing, processing, production, refinement, release, storage, transfer, transportation, treatment, or use (including any withdrawal or other use of groundwater) of Hazardous Materials in, on, under, about, or from the facilities or any part thereof into the environment, and any other act, business, operation, or thing that materially increases the danger, or risk of danger, or poses an unreasonable risk of harm to persons or property on or off the facilities, or that may affect the value of the facilities or F&M or F&M Bank. "Hazardous Materials" means any waste or other substance that is listed, defined, designated, or classified as, or otherwise determined to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or pursuant to any Environmental Law, including any admixture or solution thereof, and specifically including petroleum and all derivatives thereof or synthetic substitutes therefor and asbestos or asbestos-containing materials. "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. "Idaho Director" means the director of the Department of Finance of the State of Idaho. "Knowledge" of any Person that is not an individual means, with respect to any specific matter, the actual knowledge of such Person's executive officers and other officers having primary responsibility for such matter, together with such knowledge as would be obtained in the conduct of their duties in the ordinary course and in the exercise of reasonable inquiry under the circumstances. "Law" means statute, rule, common law, ordinance, regulation, order, writ, judgment, injunction, decree, determination, or award enacted or promulgated by a Governmental Entity. "Lien" means any interest, consensual or otherwise, in property securing a monetary obligation owed to, or a claim by, a Person other than the owner of the subject property, whether such interest is based on the common law, statute or contract. "Material Adverse Change" or "Material Adverse Effect" means, when used in connection with Cascade or F&M, any change, effect, event, occurrence or state of facts, including, without limitation, any departure of a material group of employees, that is, or is reasonably likely to be, (a) materially adverse to the business, financial condition, assets or results of operations of such party and its Subsidiaries taken as a whole, or (b) materially impairs 50 the ability of such party to consummate the Merger and the other transactions contemplated by this Agreement; provided, however, that in determining whether a Material Adverse Effect or Material Adverse Change has occurred there shall be excluded any change, effect, event, occurrence or state of facts to the extent attributable to or resulting from (1) events, conditions or trends in economic, business or financial conditions generally or affecting the banking or bank holding company businesses specifically (including changes in interest rates and changes in the markets for securities), except to the extent any such events, conditions or trends in economic, business or financial conditions have a materially disproportionate adverse effect upon Cascade or F&M, as the context may dictate, (2) actions or omissions of Cascade or F&M taken with the prior written consent of the other party in contemplation of the transactions contemplated hereby, (3) any change, effect, event or occurrence arising out of the announcement or performance of this Agreement and the transactions contemplated hereby, including any expenses incurred in connection therewith, (4) any changes in Laws, regulations or interpretations of Laws or regulations generally affecting the banking or bank holding company businesses, but not uniquely relating to Cascade or F&M, (5) any change in generally accepted accounting principles or regulatory accounting requirements, generally affecting the banking or bank holding company businesses, but not uniquely relating to Cascade or F&M, and (6) changes in national or international political or social conditions including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States. "Material Finance Event" means (1) a suspension or material limitation in trading in securities generally shall have occurred on NASDAQ, (2) a general moratorium on commercial banking activities shall have been declared for Oregon or Idaho either by federal, Oregon or Idaho authorities, and (3) changes in national or international political or social conditions including the engagement by the United States in hostilities, whether or not pursuant to the declaration of a national emergency or war, or the occurrence of any military or terrorist attack upon or within the United States, or any of its territories, possessions or diplomatic or consular offices or upon any military installation, equipment or personnel of the United States which, in each of the foregoing circumstances in the judgment of the placement agent for Cascade's securities, makes it impractical or inadvisable to proceed with the sale of the securities required to raise the financing. "Occupational Safety and Health Law" means any Law that requires or relates to the protection of or prevention of injury to employees, workers, contractors and others similarly situated in the workplace environment from exposure to any Hazardous Materials. "Oregon Director" means the director of the Department of Consumer and Business Services of the State of Oregon. "Person" means an individual, corporation, partnership, limited liability company, joint venture, association, trust, unincorporated organization or other entity. "Release" means any spilling, leaking, emitting, discharging, depositing, escaping, leaching, dumping, or other releasing into the environment, whether intentional or unintentional. 51 "Returns" means any federal, state, local, provincial and foreign Tax returns, declarations, statements, reports, schedules, forms and information returns and any amended Tax return relating to Taxes. "SBA" means the Small Business Administration. "SEC" means the Securities Exchange Commission. "Securities Act" means the Securities Act of 1933, as amended. "Shareholders Agreement" means the Shareholders Agreement among Cascade, the Bolger Shareholder and the Persons listed on Schedule A thereto, of even date herewith. A "Subsidiary" of any Person means another Person, an amount of the voting securities, other voting ownership, membership or partnership interests of which is sufficient to elect at least a majority of its board of directors or other governing body (or, if there are no such voting interests, 50% or more of the equity interests of which) is owned directly or indirectly by such first Person. "Takeover Laws" means any federal or state "anti-takeover", "fair price", "moratorium", "control share", "supermajority", "affiliate transaction", or "business combination" Law, including without limitation any provisions of the Oregon Business Corporation Act. "Taxes" includes all forms of taxation, whenever created or imposed, and whether of the United States or elsewhere, and whether imposed by a local, municipal, governmental, state, foreign, federal or other Governmental Entity, or in connection with any agreement with respect to Taxes, including all interest, penalties and additions imposed with respect to such amount. "VA" means the United States Veterans' Administration and any state governmental entity performing similar functions. (b) The following terms are defined in the following Sections of this Agreement: TERM SECTION Acquisition Co..........................................................Preamble Agreement...............................................................Preamble Bank Merger..................................................................1.4 Bolger Shareholder......................................................Preamble Cascade.................................................................Preamble Cascade Bank.................................................................1.4 Cascade Default...........................................................7.1(e) Cascade Disclosure Schedule..............................Preamble to Article III Cascade Exceptions...........................................................8.1 Cash Consideration........................................................2.1(a) Certificates..........................................................2.4(a)(iv) Closing......................................................................1.2 Closing Balance Sheet.......................................................5.12 52 Closing Consolidation Shareholders' Equity..................................5.12 Closing Date.................................................................1.2 Contingent Consideration..................................................2.1(a) Deductible...................................................................8.6 Effective Time...............................................................1.2 F&M.....................................................................Preamble F&M Bank.....................................................................1.4 F&M Bank Financial Statements................................................4.9 F&M Benefit Plans........................................................4.13(a) F&M Default...............................................................7.1(f) F&M Disclosure Schedule...................................Preamble to Article IV F&M Effective Time Shares.................................................2.1(a) F&M Exceptions...............................................................8.1 F&M Facilities...........................................................4.19(a) F&M Financial Statements.....................................................4.9 F&M Holders...............................................................2.1(a) F&M Material Contracts......................................................4.12 F&M Permits.................................................................4.10 Indemnitee...................................................................8.2 Investor Letter......................................................2.4(a)(iii) Letter of Transmittal..................................................2.4(a)(i) Losses.......................................................................8.2 Merger.......................................................................1.1 Merger Consideration......................................................2.1(a) Merger Shares.............................................................2.1(a) Mergers......................................................................1.4 Proxy Statement.............................................................5.11 Real Property...............................................................4.16 Recapitalization Event.......................................................2.2 Retention Compensation...................................................5.15(c) Restraints................................................................6.1(c) SAR Plan....................................................................5.14 Subsidiary Merger............................................................1.4 Surviving Corporation........................................................1.1 Third-Party Claim.........................................................8.4(a) Triggering Event..........................................................7.2(c) Trust.......................................................................5.18 Section 9.3 Interpretation. When a reference is made in this Agreement to an Article, Section or Exhibit, such reference shall be to an Article or Section of, or an Exhibit to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this 53 Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent; and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns. When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is not a Business Day, the period in question shall end on the next succeeding Business Day. Any reference in this Agreement to $ shall mean U.S. dollars. Section 9.4 Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument, may be delivered by facsimile and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. Section 9.5 Entire Agreement; No Third-Party Beneficiaries. This Agreement (including the documents and instruments referred to herein) (a) constitutes the entire agreement, and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter of this Agreement; and (b) except for the provisions of Article I, Article II, Article VIII and Section 5.13, are not intended to confer upon any Person other than the parties any rights or remedies. Section 9.6 Governing Law. This Agreement shall in all respects, including all matters of construction, validity and performance, be governed by, and construed and enforced in accordance with, the laws of the State of Oregon, without reference to any rules governing conflicts of laws. Section 9.7 Attorney's Fees. The prevailing party in any dispute arising out of this Agreement shall be entitled to recover its costs and attorney's fees in any proceeding, including any appeal. Section 9.8 Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned, in whole or in part, by operation of law or otherwise by either of the parties hereto without the prior written consent of the other parties. Any assignment in violation of the preceding sentence shall be void. Subject to the preceding two sentences, this Agreement will be binding upon, inure to the benefit of, and be enforceable by, the parties and their respective successors and assigns. Section 9.9 Enforcement. The parties agree that irreparable damage would occur and that the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were 54 otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any Federal or state court of competent jurisdiction, this being in addition to any other remedy to which they are entitled at law or in equity. Section 9.10 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible to the fullest extent permitted by applicable Law in an acceptable manner to the end that the transactions contemplated hereby are fulfilled to the extent possible. 55 IN WITNESS WHEREOF, F&M, Cascade, Acquisition Co. and the Bolger Shareholder have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above. CASCADE BANCORP By: /s/ Patricia L. Moss ------------------------------- Patricia L. Moss Chief Executive Officer F&M HOLDING COMPANY By: /s/ Clarence Jones ------------------------------- Clarence Jones President IGLOO ACQUISITION CORPORATION By: /s/ Patricia L. Moss ------------------------------- Patricia L. Moss President and CEO BOLGER SHAREHOLDER /s/ David F. Bolger - -------------------------------------- David F. Bolger 56 TABLE OF CONTENTS ARTICLE I. THE MERGER................................................1 Section 1.1 The Merger................................................1 Section 1.2 Closing...................................................1 Section 1.3 Effects of the Merger.....................................2 Section 1.4 Bank Merger...............................................2 ARTICLE II. EFFECT OF THE MERGER......................................2 Section 2.1 Effect on Capital Stock...................................2 Section 2.2 Anti-Dilution.............................................3 Section 2.3 Certain Expenses..........................................3 Section 2.4 Exchange of Certificates..................................3 Section 2.5 Articles and Bylaws.......................................4 Section 2.6 Boards of Directors.......................................4 ARTICLE III. REPRESENTATIONS AND WARRANTIES OF CASCADE.................4 Section 3.1 Organization, Standing and Corporate Power................4 Section 3.2 Subsidiaries..............................................4 Section 3.3 Capital Structure.........................................5 Section 3.4 Authority.................................................6 Section 3.5 Noncontravention..........................................6 Section 3.6 Regulatory Approvals Required.............................6 Section 3.7 Compliance with Lending Laws and Regulations..............7 Section 3.8 Absence of Certain Changes or Events......................9 Section 3.9 Public Reports............................................9 Section 3.10 Litigation...............................................10 Section 3.11 Contracts................................................10 57 Section 3.12 Employee Benefit Plans; ERISA............................10 Section 3.13 Taxes....................................................12 Section 3.14 Labor and Employment Matters.............................12 Section 3.15 Assets...................................................13 Section 3.16 Intellectual Property....................................13 Section 3.17 Environmental Matters....................................13 Section 3.18 Allowance for Credit Losses..............................13 Section 3.19 Repurchase Agreement.....................................13 Section 3.20 Interests of Directors and Others........................13 Section 3.21 No Misstatements or Omissions............................14 Section 3.22 Brokers; Professional Fees...............................14 Section 3.23 Shareholder Approval.....................................14 Section 3.24 Appointment of Directors.................................14 Section 3.25 Anti-Takeover............................................14 Section 3.26 Financing................................................14 Section 3.27 No Other Cascade Representations or Warranties...........15 ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF F&M....................15 Section 4.1 Organization, Standing and Corporate Power...............15 Section 4.2 Subsidiaries.............................................15 Section 4.3 Capital Structure........................................15 Section 4.4 Authority................................................16 Section 4.5 Noncontravention.........................................16 Section 4.6 Regulatory Approvals Required............................17 Section 4.7 Compliance with Lending Laws and Regulations.............17 Section 4.8 Absence of Certain Changes or Events.....................19 58 Section 4.9 Financial Statements; Absence of Undisclosed Liabilities..............................................19 Section 4.10 Permits..................................................20 Section 4.11 Litigation...............................................21 Section 4.12 Contracts................................................21 Section 4.13 Employee Benefit Plans; ERISA............................21 Section 4.14 Taxes....................................................23 Section 4.15 Labor and Employment Matters.............................23 Section 4.16 Real Property and Assets.................................24 Section 4.17 Personal Property........................................24 Section 4.18 Intellectual Property....................................24 Section 4.19 Environmental Matters....................................24 Section 4.20 Insurance................................................25 Section 4.21 Investments..............................................26 Section 4.22 Brokers..................................................26 Section 4.23 Allowance for Credit Losses..............................26 Section 4.24 Repurchase Agreement.....................................26 Section 4.25 Interests of Directors and Others........................26 Section 4.26 No Misstatements or Omissions............................26 Section 4.27 No Other F&M Representations or Warranties...............26 ARTICLE V. COVENANTS OF PARTIES.....................................27 Section 5.1 Conduct of F&M Business..................................27 Section 5.2 Conduct of Cascade Business..............................28 Section 5.3 No Solicitation..........................................29 Section 5.4 F&M Information..........................................30 Section 5.5 Cascade Information......................................30 59 Section 5.6 Governmental Approvals...................................30 Section 5.7 Reasonable Efforts.......................................30 Section 5.8 Access...................................................31 Section 5.9 Announcements............................................31 Section 5.10 Shareholder Meeting......................................32 Section 5.11 Proxy Statement..........................................32 Section 5.12 Closing Balance Sheet....................................32 Section 5.13 Indemnity................................................32 Section 5.14 SAR Plan.................................................33 Section 5.15 Transition...............................................33 Section 5.16 2006 Bonus Plan..........................................34 Section 5.17 Certain Obligations......................................34 Section 5.18 Bolger Trust.............................................34 Section 5.19 Takeover Laws; No Rights Triggered.......................34 ARTICLE VI. CONDITIONS PRECEDENT.....................................35 Section 6.1 Conditions to Each Party's Obligation To Effect the Merger...............................................35 Section 6.2 Conditions to Obligations of Cascade.....................35 Section 6.3 Conditions to Obligations of F&M and the Bolger Shareholder..............................................36 Section 6.4 Deliveries by Cascade....................................37 Section 6.5 Deliveries by F&M........................................38 ARTICLE VII. TERMINATION, AMENDMENT AND WAIVER........................39 Section 7.1 Termination..............................................39 Section 7.2 Effect of Termination....................................40 Section 7.3 Amendment................................................41 Section 7.4 Extension; Waiver........................................41 60 ARTICLE VIII. INDEMNIFICATION..........................................41 Section 8.1 Survival of Representations, Warranties, Covenants and Agreements...........................................41 Section 8.2 Indemnification by Bolger Shareholder....................42 Section 8.3 Claims...................................................42 Section 8.4 Third Party Claims.......................................42 Section 8.5 Claims Other Than Third-Party Claims.....................44 Section 8.6 Limitations on Indemnification...........................44 Section 8.7 Insured Losses...........................................44 Section 8.8 Indemnification by Cascade...............................44 Section 8.9 Exclusivity of Remedies..................................44 ARTICLE IX. GENERAL PROVISIONS.......................................45 Section 9.1 Notices..................................................45 Section 9.2 Definitions..............................................46 Section 9.3 Interpretation...........................................53 Section 9.4 Counterparts.............................................54 Section 9.5 Entire Agreement; No Third-Party Beneficiaries...........54 Section 9.6 Governing Law............................................54 Section 9.7 Attorney's Fees..........................................54 Section 9.8 Assignment...............................................54 Section 9.9 Enforcement..............................................54 Section 9.10 Severability.............................................55 61 EX-99.2 3 exh-2.txt EX-99.2, INVESTOR REPRESENTATION LETTER Exhibit 2 APRIL 20, 2006 CASCADE BANCORP 1100 NW WALL STREET P.O. BOX 369 BEND, OREGON 97709 RE: MERGER This Investor Representation Letter (the "Letter") is rendered and delivered in accordance with Section 2.4(a) of that certain Agreement of Merger, dated as of December 27, 2005 (as amended, modified or supplemented in accordance with the terms thereof, the "Merger Agreement"), by and among F&M Holding Company, an Idaho corporation and a registered bank holding company, Cascade Bancorp, an Oregon corporation and a registered bank holding company (the "Corporation"), F&M Acquisition Corporation (formerly known as Igloo Acquisition Corporation), an Oregon corporation and a wholly-owned subsidiary of the Corporation, and David F. Bolger. Capitalized terms used in but not otherwise defined in this Letter shall have the meanings given to such terms in the Merger Agreement. In connection with the transactions contemplated by the Merger Agreement and specifically in connection with the issuance of the Merger Shares (the "Securities") thereunder, the undersigned (the "Investor") hereby represents, warrants and acknowledges as follows: 1. The Securities are being issued in connection with the transactions contemplated by the Merger Agreement and the issuance of the Securities is subject to all of the terms and conditions set forth in the Merger Agreement; 2. Investor is resident in the jurisdiction set forth below on the signature page hereof; 3. The Securities have not been registered under the Securities Act of 1933, as amended (the "Securities Act") or any state securities laws, the Securities are being issued under an exemption from registration under the Securities Act for offers and sales of securities to accredited investors, the Securities are deemed to be "restricted securities" under the Securities Act and, accordingly, the Securities may not be transferred without subsequent registration or the availability of an exemption from registration under the Securities Act; 4. Investor is an accredited investor, as such term is defined in Appendix A attached hereto, and is acquiring the Securities for Investor's own account and not with a view to any resale, distribution or other disposition of the Securities in violation of the Securities Act; 5. As a result on the restrictions on transferability set forth above, the Securities are not readily transferable and, accordingly, may have to be held for an indefinite period of time; 6. Except as contemplated or permitted by the Merger Agreement or the Shareholders Agreement, dated as of December 27, 2005, among the Corporation, David F. Bolger and the persons listed on Schedule A thereto ("the "Shareholders Agreement"), Investor is investing in the Securities for investment for his or its own account and not with a view to, or offer or sale in connection with, any distribution thereof; 7. Investor has such knowledge and experience in financial and business matters that Investor is capable of evaluating the merits and risks of an investment in the Corporation and the Securities and is able to bear the economic risk of loss of Investor's investment in the Securities; 8. Investor further represents and acknowledges that Investor has been solely responsible for Investor's own "due diligence" investigation of the Corporation, the terms and conditions of the Merger and Merger Agreement and the transactions contemplated thereby, including the issuance of the Securities, for Investor's own analysis of the merits and risks of the investment in the Securities, and for Investor's own analysis of the fairness and desirability of the terms of such investment, provided, however, that nothing in this representation and acknowledgment shall affect any of Investor's rights under the Merger Agreement or the Shareholders Agreement; 9. Investor has not entered into the Merger Agreement and is not delivering this Letter as a result of any general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act), including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; 10. Investor will not offer, sell or otherwise transfer the Securities unless such securities are registered under the Securities Act or an exemption from such registration requirements is available and understands that upon the original issuance thereof, and until such time as the same is no longer required under applicable requirements of the Securities Act as evidenced by a legal opinion of counsel to the Investor, any certificates representing the Securities, and all securities issued in exchange therefor or in substitution thereof will bear and be subject to the terms of the following legend: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE CORPORATION"; 11. No securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities and any representation to the contrary is a criminal offense; 12. If a corporation, partnership, unincorporated association or other entity, Investor has the legal capacity to enter into and be bound by this Letter and all necessary approvals of directors, shareholders or otherwise have been given and obtained; 13. If an individual, Investor is of the full age of majority and is legally competent to execute this Letter and take all action pursuant hereto; 14. If required by applicable securities legislation, regulations, rules, policies or orders or by any securities commission, stock exchange or other regulatory authority, Investor will execute, deliver, file and otherwise assist the Corporation in filing, such reports, undertakings and other documents with respect to the issuance of the Securities; 15. The covenants, representations and warranties contained herein will survive the Closing. Dated effective the date first set forth above. The Corporation Investor Cascade Bancorp By /s/ Patricia L. Moss /s/ David F. Bolger ------------------------ ------------------- Patricia L. Moss, President David F. Bolger APPENDIX A DEFINITION OF U.S. ACCREDITED INVESTOR "Accredited Investor" means any person which comes within any of the following categories: (1) Any bank as defined in Section 3(a)(2) of the United States Securities Act of 1933 (the "U.S. Securities Act") or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act whether acting in its individual or fiduciary capacity; any broker dealer registered pursuant to Section 15 of the U.S. Securities Exchange Act of 1934 or any insurance company as defined in Section 2(13) of the U.S. Securities Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees if such plan has total assets in excess of US$5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of US$5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are U.S. Accredited Investors; (2) Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; (3) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of US$5,000,000; (4) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds US$1,000,000; (5) Any natural person who had an individual income in excess of US$200,000 in each of the two most recent years or joint income with that person's spouse in excess of US$300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (6) Any trust with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person (being defined as a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment); or (7) Any entity in which all of the equity owners are U.S. Accredited Investors. EX-99.3 4 exh-3.txt EX-99.3, INVESTOR REPRESENTATION LETTER Exhibit 3 APRIL 20, 2006 CASCADE BANCORP 1100 NW WALL STREET P.O. BOX 369 BEND, OREGON 97709 RE: MERGER This Investor Representation Letter (the "Letter") is rendered and delivered in accordance with Section 2.4(a) of that certain Agreement of Merger, dated as of December 27, 2005 (as amended, modified or supplemented in accordance with the terms thereof, the "Merger Agreement"), by and among F&M Holding Company, an Idaho corporation and a registered bank holding company, Cascade Bancorp, an Oregon corporation and a registered bank holding company (the "Corporation"), F&M Acquisition Corporation (formerly known as Igloo Acquisition Corporation), an Oregon corporation and a wholly-owned subsidiary of the Corporation, and David F. Bolger. Capitalized terms used in but not otherwise defined in this Letter shall have the meanings given to such terms in the Merger Agreement. In connection with the transactions contemplated by the Merger Agreement and specifically in connection with the issuance of the Merger Shares (the "Securities") thereunder, the undersigned (the "Investor") hereby represents, warrants and acknowledges as follows: 1. The Securities are being issued in connection with the transactions contemplated by the Merger Agreement and the issuance of the Securities is subject to all of the terms and conditions set forth in the Merger Agreement; 2. Investor is resident in the jurisdiction set forth below on the signature page hereof; 3. The Securities have not been registered under the Securities Act of 1933, as amended (the "Securities Act") or any state securities laws, the Securities are being issued under an exemption from registration under the Securities Act for offers and sales of securities to accredited investors, the Securities are deemed to be "restricted securities" under the Securities Act and, accordingly, the Securities may not be transferred without subsequent registration or the availability of an exemption from registration under the Securities Act; 4. Investor is an accredited investor, as such term is defined in Appendix A attached hereto, and is acquiring the Securities for Investor's own account and not with a view to any resale, distribution or other disposition of the Securities in violation of the Securities Act; 5. As a result on the restrictions on transferability set forth above, the Securities are not readily transferable and, accordingly, may have to be held for an indefinite period of time; 6. Except as contemplated or permitted by the Merger Agreement or the Shareholders Agreement, dated as of December 27, 2005, among the Corporation, David F. Bolger and the persons listed on Schedule A thereto ("the "Shareholders Agreement"), Investor is investing in the Securities for investment for his or its own account and not with a view to, or offer or sale in connection with, any distribution thereof; 7. Investor has such knowledge and experience in financial and business matters that Investor is capable of evaluating the merits and risks of an investment in the Corporation and the Securities and is able to bear the economic risk of loss of Investor's investment in the Securities; 8. Investor further represents and acknowledges that Investor has been solely responsible for Investor's own "due diligence" investigation of the Corporation, the terms and conditions of the Merger and Merger Agreement and the transactions contemplated thereby, including the issuance of the Securities, for Investor's own analysis of the merits and risks of the investment in the Securities, and for Investor's own analysis of the fairness and desirability of the terms of such investment, provided, however, that nothing in this representation and acknowledgment shall affect any of Investor's rights under the Merger Agreement or the Shareholders Agreement; 9. Investor has not entered into the Merger Agreement and is not delivering this Letter as a result of any general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act), including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; 10. Investor will not offer, sell or otherwise transfer the Securities unless such securities are registered under the Securities Act or an exemption from such registration requirements is available and understands that upon the original issuance thereof, and until such time as the same is no longer required under applicable requirements of the Securities Act as evidenced by a legal opinion of counsel to the Investor, any certificates representing the Securities, and all securities issued in exchange therefor or in substitution thereof will bear and be subject to the terms of the following legend: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE CORPORATION"; 11. No securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities and any representation to the contrary is a criminal offense; 12. If a corporation, partnership, unincorporated association or other entity, Investor has the legal capacity to enter into and be bound by this Letter and all necessary approvals of directors, shareholders or otherwise have been given and obtained; 13. If an individual, Investor is of the full age of majority and is legally competent to execute this Letter and take all action pursuant hereto; 14. If required by applicable securities legislation, regulations, rules, policies or orders or by any securities commission, stock exchange or other regulatory authority, Investor will execute, deliver, file and otherwise assist the Corporation in filing, such reports, undertakings and other documents with respect to the issuance of the Securities; 15. The covenants, representations and warranties contained herein will survive the Closing. Dated effective the date first set forth above. The Corporation Investor Cascade Bancorp Two-Forty Associates, a Pennsylvania limited partnership By /s/ Patricia L. Moss By: The David F. Bolger Revocable ------------------------ Trust, its general partner Patricia L. Moss, President By /s/ David F. Bolger --------------------- David F. Bolger, Trustee APPENDIX A DEFINITION OF U.S. ACCREDITED INVESTOR "Accredited Investor" means any person which comes within any of the following categories: (1) Any bank as defined in Section 3(a)(2) of the United States Securities Act of 1933 (the "U.S. Securities Act") or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act whether acting in its individual or fiduciary capacity; any broker dealer registered pursuant to Section 15 of the U.S. Securities Exchange Act of 1934 or any insurance company as defined in Section 2(13) of the U.S. Securities Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees if such plan has total assets in excess of US$5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of US$5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are U.S. Accredited Investors; (2) Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; (3) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of US$5,000,000; (4) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds US$1,000,000; (5) Any natural person who had an individual income in excess of US$200,000 in each of the two most recent years or joint income with that person's spouse in excess of US$300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (6) Any trust with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person (being defined as a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment); or (7) Any entity in which all of the equity owners are U.S. Accredited Investors. EX-99.4 5 exh-4.txt EX-99.4, SHAREHOLDERS AGREEMENT Exhibit 4 SHAREHOLDERS AGREEMENT This Shareholders Agreement (this "Agreement") is made as of the 27th day of December, 2005 by and among Cascade Bancorp, an Oregon corporation (the "Company"), David F. Bolger, in his individual capacity (together with his future estate, "Bolger"), and each Person listed on Schedule A hereto executing this Agreement or a Joinder (as defined below) hereto (together with Bolger, the "Shareholders"). RECITALS A. The Shareholders are the holders of virtually all of the outstanding capital stock of F&M Holding Company ("F&M") (other than certain directors' qualifying shares). Simultaneously with entering into this Agreement, the Company is entering into an agreement (the "Merger Agreement"), dated as of 27th day of December, 2005, pursuant to which a wholly-owned subsidiary of the Company will merge with and into F&M (the "Merger"), and the Shareholders will receive cash and shares of Common Stock (the "Shares") as consideration in the Merger. B. The parties deem it in their respective best interests to provide for an agreed composition of the Board of Directors of the Company (the "Board" or "Board of Directors") and the Board of Directors of Company Bank and for certain restrictions on the transfer of any Shares, and the parties believe that such restrictions will minimize the business disruption that could result from transfers not made in accordance with this Agreement. C. The Company has taken all necessary actions to elect and has elected Thomas M. Wells and Clarence Jones (the "Initial Seller Nominees") to its Board of Directors and the Board of Directors of Company Bank effective immediately after the Effective Date. THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending legally to be bound, agree as follows: AGREEMENT 1. DEFINITIONS AND INTERPRETATION 1.01 DEFINITIONS Whenever used in the Agreement and the Exhibits and Schedules hereto, the following terms shall have the respective meanings set forth in this Section 1.01. Capitalized terms used in this Agreement have the definitions provided in the Merger Agreement, unless otherwise defined herein. "Affiliate" means, with respect to any Person, any other Person directly or indirectly through one or more intermediaries controlling, controlled by, or under common control with such Person. For purposes of this definition, an entity shall be deemed to be controlled by a Person if (and only for so long as) (i) such Person has the right to vote by ownership, proxy or otherwise securities constituting 10% or more of the voting power of such entity if such entity has equity securities registered and files reports under the Exchange Act or 20% or more of the voting power of such entity if such entity does not have equity securities registered under the Exchange Act; (ii) such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such entity, whether through the ownership of voting securities, membership on the board or other governing entity, by contract or otherwise; or (iii) with respect to a charitable trust, foundation or nonprofit corporation, such Person is the sole trustee or director or has the power to appoint 20% or more of the trustees or directors thereof. "Change of Control" means (i) with respect to any entity, a transfer of all or substantially the assets of that entity; (ii) with respect to any entity, any "person" (as such term is defined in Section 3(a)(9) of the Exchange Act and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the entity representing 50% or more of the combined voting power of the entity's then outstanding securities eligible to vote for the election of the board of directors or other similar body; (iii) with respect to any entity, the consummation of a merger, consolidation, statutory share exchange or similar form of corporate transaction involving the entity or any of its subsidiaries that requires the approval of the entity's shareholders, whether for such transaction or the issuance of securities in the transaction (a "Business Combination"), unless immediately following such Business Combination 50% or more of the total voting power of the corporation resulting from such Business Combination is represented by voting securities of such entity that were outstanding immediately prior to such Business Combination and such voting power among the holders thereof is in substantially the same proportion as the voting power of such voting securities of the entity among the holders thereof immediately prior to the Business Combination; or (iv) with respect to the Company, any change in the Board of Directors in which a majority of the members are replaced within any three (3) year period by Directors who were not nominated by the previous Directors. "Common Stock" means the shares of common stock, no par value, of the Company. "Company Bank" means Bank of the Cascades, an Oregon chartered stock bank and a wholly owned subsidiary of the Company, or any successors thereto that are the principal banking subsidiary of the Company. "Effective Date" means the Closing Date of the Merger. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Governing Documents" means the articles of incorporation and by-laws of the Company, each as amended and restated from time to time. "Incidental Registration Statement" means a registration statement of the Company which covers the offer and sale of Shares in respect of an Incidental Registration pursuant to the provisions of Section 4.04 and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference (or deemed to be incorporated by reference) therein. 2 "Performance Event" means the occurrence of any of the following after the third anniversary of the Effective Date: (a) a cease and desist order is issued (whether or not consensually) by a state or federal agency having jurisdiction over the Company or its subsidiaries with respect to the banking operations of the Company or its subsidiaries and such order is not withdrawn within 30 days; (b) the Company Bank is not "adequately capitalized" as defined for purposes of the "prompt corrective action" provisions of the Federal Deposit Insurance Act; (c) (A) the number obtained by dividing (i) the average of the daily closing prices of a share of the Common Stock on the NASDAQ Small Cap Market or NASDAQ National Market, whichever is applicable, over the twelve (12) calendar month period ending on the last day of a calendar quarter (the "ending twelve (12) month period") by (ii) the average of the daily closing prices of a share of the Common Stock on the NASDAQ Small Cap Market or NASDAQ National Market, whichever is applicable, over the twelve (12) calendar month period ending on the last day of the same calendar quarter in the preceding calendar year (the "starting twelve (12) month period") (appropriately adjusted for any stock dividends, splits or similar transaction) is less than (B) the product of (i) the number obtained by dividing the average of the daily closing prices of the NASDAQ Banking Index over the ending twelve (12) month period by the average of the daily closing prices of the NASDAQ Banking Index over the starting twelve (12) month period multiplied by (ii) 0.70; (d) the return on average tangible equity of the Company is less than 100% of the median return on average tangible equity of the companies in the NASDAQ Banking Index, in each case measured over the prior four (4) calendar quarters; or (e) Patricia Moss is no longer chief executive officer of the Company for any reason and has not been replaced within nine (9) months of her no longer being the chief executive officer of the Company by a chief executive officer selected by the Board of Directors after good faith consultations with Bolger. "Person" means any individual, corporation, partnership, company, trust or other entity. "Prospectus" means the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus filed as part of an effective registration statement in reliance upon Rule 430A under the Securities Act and any free-writing prospectus), as amended or supplemented by any prospectus supplement, with respect to the terms of the offering of any portion of Shares covered by such Registration Statement, and all amendments and supplements to such prospectus, including all documents incorporated or deemed to be incorporated by reference in such prospectus. "Registration Statement" means any Incidental Registration Statement, the Shelf Registration Statement or any Demand Registration Statement, as the case may be. "Rule 144" means Rule 144 under the Securities Act, as amended. "Rule 415" means Rule 415 under the Securities Act, as amended. "SEC" means the Securities and Exchange Commission. "Securities Act" means the Security Act of 1933, as amended. "Shelf Registration Period" has the meaning set forth in Section 4.01(e) hereof. "Shelf Registration Statement" means any "shelf" registration statement of the Company filed pursuant to the provisions of Section 4.01 hereof which covers resales of the Shares on Form S-3 or on another appropriate form (as determined by the Company) for an offering to be made on a delayed or continuous basis pursuant to Rule 415 and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference (or deemed to be incorporated by reference) therein. 3 "Shareholder Information" means, with respect to any Shareholder, information with respect to such Shareholder required to be included in any Registration Statement or the related Prospectus pursuant to the requirements of the Securities Act and which information is included therein in reliance upon and in conformity with information furnished to the Company in writing by such Shareholder specifically for inclusion therein. "Suspension Period" has the meaning set forth in Section 4.01(f) hereof. "Takeover Laws" means any federal or state "anti-takeover", "fair price", "moratorium", "control share", "supermajority", "affiliate transaction", or "business combination" Law, including without limitation any provisions of the Oregon Business Corporation Act. "Total Outstanding Common Stock" means, at the time of measurement, all the issued and outstanding Common Stock. "Underwriters" means the underwriters, if any, of an offering being registered under the Securities Act. "Underwritten Offering" means a sale of securities of the Company to Underwriters for reoffering to the public. 1.02 INTERPRETATION When a reference is made in this Agreement to an Article, Section, Schedule or Exhibit, such reference shall be to an Article or Section of, or a Schedule or an Exhibit to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include", "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." The words "hereof", "herein" and "hereunder" and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent; and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. When calculating 4 the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded. If the last day of such period is not a Business Day, the period in question shall end on the next succeeding Business Day. Any reference in this Agreement to $ shall mean U.S. dollars. 2. RESTRICTIONS ON TRANSFERS 2.01 DEFINITION OF A TRANSFER "Transfer" means any direct or indirect sale, assignment, award, confirmation, distribution, bequest, donation, trust, pledge, encumbrance, hypothecation, or other transfer or disposition, for consideration or otherwise, whether voluntarily, involuntarily, by operation of law or otherwise, by a Shareholder of a Share, or any legal or beneficial ownership therein, including, without limitation, voting or economic interests therein and warrants, options or other rights to acquire a Share or a legal or beneficial ownership therein, including any Change of Control of a Shareholder. 2.02 GENERAL RESTRICTIONS A Shareholder subject to this Agreement may not Transfer any Shares except as permitted under this Agreement. 2.03 PERMITTED TRANSFERS Notwithstanding anything to the contrary contained in this Agreement, a Shareholder may effectuate, and the restrictions on Transfers in this Agreement shall not apply to, any of the following Transfers (each, a "Permitted Transfer"): (a) Any Transfer pursuant to Rule 144. (b) Any Transfer to one or more non-Affiliates of a Shareholder pursuant to a registration effected pursuant to Section 4 hereof. (c) Any Transfer of any amount of Shares by a Shareholder to a transferee Affiliated with such Shareholder or a Transfer of five percent (5%) or more of the Total Outstanding Common Stock to a donee not Affiliated with such Shareholder, provided that any such transferee or donee agrees to be bound by the provisions of this Agreement and has executed and delivered a Joinder in the form attached as Exhibit A in favor of the Company and each Shareholder, stating that by acquiring such Shares, such transferee or donee has agreed to all the terms and conditions of this Agreement as if such transferee or donee were an original party hereto. (d) Any Transfer of less than five percent (5%) of the Total Outstanding Common Stock by a Shareholder to a donee not Affiliated with such Shareholder, provided that any such donee receiving more than one percent (1%) of the Total Outstanding Common Stock must, prior to such Transfer, agree in writing with the Company that it will not sell more than one percent 5 (1%) of the Total Outstanding Common Stock in any 90-day period without the prior written consent of the Company. (e) Any Transfer to one or more non-Affiliates of a Shareholder as to which the transferring Shareholder reasonably believes (which belief may be based on a representation of any such non-Affiliate) that, immediately following and as a result of such Transfer, such transferee would not hold five percent (5%) or more of the Total Outstanding Common Stock. (f) Any pledge of Shares pursuant to a bona fide loan transaction (with no rights to vote the Shares) and any related Transfer, provided that foreclosure of such pledge is not a Permitted Transfer if it involves five percent (5%) or more of the Total Outstanding Common Stock unless the pledgee has executed and delivered a Joinder in the form attached as Exhibit A. (g) Any Transfer in connection with a share exchange, merger, consolidation, reorganization, tender offer, exchange offer or similar type of transaction involving the Company or its shareholders that is approved by the Company or its shareholders. (h) Any Transfer pursuant to a public tender offer or exchange offer that was open to all shareholders of the Company or an open market repurchase program of the Company. (i) Any Transfer by a Shareholder with the prior written consent of the Company, which it may withhold in its sole and absolute discretion. (j) Any Transfer, by operation or law or otherwise, to the estate of a Shareholder or pursuant to any will or testamentary vehicle, provided that the estate or other recipient of Shares pursuant to such will or testamentary vehicle executes and delivers a Joinder in the form attached as Exhibit A in favor of the Company and each Shareholder, stating that the recipient has agreed to all the terms and conditions of this Agreement as if it were an original party hereto. (k) Any Transfer to a trust by Bolger as to which he is the settlor and the initial trustee thereof (the "Trust"), provided that the Trust has executed and delivered a Joinder in the form attached as Exhibit A in favor of the Company and each Shareholder, stating that the Trust has agreed to all the terms and conditions of this Agreement as if it were an original party hereto. Notwithstanding anything to the contrary contained in this Agreement, a Permitted Transfer of Shares shall not be subject to any restrictions or obligations whatsoever set forth in this Agreement and the transferee shall not become a Shareholder under this Agreement unless such restrictions or obligations or the requirement to become a Shareholder hereunder are specifically provided for in the relevant exception that makes such a Transfer a Permitted Transfer. 2.04 CONDITION PRECEDENT TO CERTAIN TRANSFERS In connection with any Permitted Transfer not effected pursuant to a registration under the Securities Act as provided in Section 4 hereto, the Company may, as a condition to registration of such proposed Transfer, require that the Shareholder proposing to Transfer Shares provide the Company with an opinion of counsel reasonably satisfactory to the Company, which 6 in all cases may include Sullivan & Cromwell LLP or Wells, Jaworski, Liebman & Paton LLP, stating that the Transfer is exempt from the registration requirements of the Securities Act. 2.05 COMPANY TO COOPERATE WITH ALL PERMITTED TRANSFERS The Company shall cooperate, to the full extent of, and in accordance with, acceptable business practices, with any and all Permitted Transfers and Transfers made in accordance with the provisions of this Agreement. 3. BOARD PARTICIPATION AND VOTING RIGHTS 3.01 DIRECTORS (a) The Company hereby represents that (i) the Company has increased the size of its Board of Directors and the Board of Directors of Company Bank to enable it to appoint the two Initial Seller Nominees as members of the Board of Directors and the Board of Directors of Company Bank effective as of immediately following the Effective Date and (ii) each of the Board of Directors and the Board of Directors of Company Bank has elected each of the two Initial Seller Nominees to the Board of Directors and the Board of Directors of Company Bank, respectively, to serve in such capacities until their successors shall have been duly elected or appointed and qualified or until their earlier death, resignation or retirement in accordance with the Governing Documents or the governing documents of the Company Bank, as applicable, effective immediately following the Effective Date. Notwithstanding anything to the contrary in the policies of the Company, the Company Bank, the Board of Directors or the Board of Directors of the Company Bank, Seller Nominees shall be elected by plurality of the votes cast by the Shares entitled to vote at a meeting at which a quorum is present. (b) As long as the Shareholders collectively own at least 15% of the Total Outstanding Common Stock, Bolger shall have the right to nominate two candidates for election to each of the Board of Directors and the Board of Directors of Company Bank as candidates recommended by the Board of Directors, unless both Seller Nominees are still serving as Directors on each board and will continue to serve after the relevant election. As long as the Shareholders collectively own at least 5% but less than 15% of the Total Outstanding Common Stock, Bolger shall have the right to nominate one candidate for election to each of the Board of Directors and the Board of Directors of Company Bank as a candidate recommended by the Board of Directors, unless a Seller Nominee is still serving as a Director on each board and will continue to serve after the relevant election. In all cases, the Company shall cause the nominee or designee to be elected a Director of the Board of Directors of Company Bank. (c) Notwithstanding anything to the contrary contained herein, if any Seller Nominee resigns or is unable to continue to serve as a Director of the Company or as a Director of Company Bank, Bolger may designate a replacement Director and the relevant Board of Directors shall elect such person a Director; provided, however, that, in each case, Bolger remains entitled to nominate and designate Directors pursuant to this Section 3.01 and such action is taken in accordance with this Section 3.01; and provided further, however, that the replacement Director designated pursuant to this Section 3.01(c) must be reasonably acceptable to the remaining members of the Board of Directors (or nominating committee thereof), and, 7 without the consent of the Board of Directors (or nominating committee thereof), shall not include any individual who is an Affiliate of a competitor of the Company. Any person nominated or designated pursuant to this Section 3.01 shall be a "Seller Nominee". (d) Any Director of the Company may be removed from the Board of the Directors or from the Board of Directors of Company Bank in accordance with law and the Governing Documents or the governing documents of Company Bank, as applicable, provided, however, that with respect to a Director nominated or designated pursuant to this Section 3.01 any such removal shall require the prior affirmative consent of Bolger unless such removal is required by law or such Director is no longer qualified to serve as a Director pursuant to applicable SEC or regulatory requirements or a generally applicable policy of the applicable board of directors. (e) Any vacancies on the Board of Directors and on the Board of Directors of Company Bank shall be filled in accordance with the applicable by-laws and, if the vacancy is with respect to a Director originally nominated or designated by Bolger, this Section 3.01. (f) The Company, the Board of Directors and the Board of Directors of Company Bank shall ensure that any Directors nominated or designated pursuant to this Section 3.01 shall enjoy the same rights, capacities, entitlements and compensation as any other members of the Board of Directors and the Board of Directors of Company Bank, as applicable. (g) The Company shall not take any action to remove any Directors nominated or designated pursuant to this Section 3.01 unless such removal is required by law or such Director is no longer qualified to serve as a Director pursuant to applicable SEC or regulatory requirements or a generally applicable policy of the Board of Directors. (h) Each Shareholder will vote its Shares (at any meeting of Shareholders of the Company or in any consent in lieu of such a meeting), and shall take all other actions necessary to give effect to the provisions of this Section 3.01. (i) The Company and the Board of Directors shall not take any action that would result in any amendment to the Governing Documents inconsistent with the provisions of this Section 3.01. 3.02 VOTING FOR DIRECTORS Until the third anniversary of the Effective Date or the earlier termination of this Section 3.02, in any election of Directors of the Company, each Shareholder shall vote its Shares in favor of all persons nominated by the Board of Directors for election to the Board. 3.03 VOTING ON OTHER MATTERS (a) Until the third anniversary of the Effective Date or the earlier termination of this Section 3.03(a), the Shareholders shall vote all of their Shares in favor of any matter submitted to the shareholders of the Company by the Board of Directors other than with respect to a transaction or matter that would result in a Change of Control of the Company. 8 (b) Until the occurrence of a Performance Event or the earlier termination of this Section 3.03(b), the Shareholders shall not (i) solicit any proxies from other shareholders of the Company, (ii) initiate any tender offers in connection with the Common Stock or (iii) take any other steps to initiate, directly or indirectly, a Change of Control of the Company, provided, however, that the Shareholders may vote their Shares in favor of a transaction or matter that would result in a Change of Control of the Company in their sole and absolute discretion and a communication not prohibited by Section 3.04 shall not be prohibited by this Section 3.03(b). 3.04 COMMUNICATIONS Until the occurrence of a Performance Event or the earlier termination of this Section 3.04, the Shareholders shall communicate any recommendations or concerns with respect to the Company or Company Bank directly with the Board of Directors, any member thereof or the Chief Executive Officer of the Company, and shall not communicate, directly or indirectly, with other shareholders of the Company with respect to the Company or the Company Bank except (i) as required by law, (ii) that the Shareholders may communicate with any of their family members, Affiliates or advisors, or with any other Shareholders and their family members, Affiliates or advisors, or (iii) in informal communications in a manner that is not in material opposition to positions taken by the Board of Directors or the Chief Executive Officer of the Company. Notwithstanding anything to the contrary included in this Section 3.04, the Shareholders will not be in breach of this Section 3.04 in connection with and as a result of any statements that they may make to refute an inaccurate statement made regarding such Shareholder or such Shareholder's permitted communications. 3.05 BOLGER (a) As of the Effective Date, the Company shall appoint Bolger as a "Director Emeritus." The privileges and entitlements of the post "Director Emeritus" shall be established from time to time by the Board of Directors but shall include recognition of the Director Emeritus' past contributions at the Annual Shareholder's Meeting and sponsored public events where they are in attendance, and an invitation to the annual board/management dinner and other events in the Board's discretion. A Director Emeritus, however, will have no voting authority, will not receive any form of compensation and will not be an attendee at board meetings nor have access to confidential information. (b) Bolger shall not nominate himself to serve as a Director of the Company or Company Bank, shall not accept an appointment or nomination to stand for election as such a Director, and no Shareholder may vote its shares in favor of Bolger as a Director of the Company or Company Bank. 3.06 INCONSISTENT VOTES If any Shareholder fails to vote the Shareholder's Shares in accordance with this Section 3, any votes contrary to the terms of this Section 3 shall be null and void. 9 4. REGISTRATION PROVISIONS 4.01 SHELF REGISTRATION (a) The Company shall, at its expense, upon written demand by a Shareholder, prepare and file with the SEC, a Shelf Registration Statement with respect to resales of the Shares by the Shareholders from time to time on a delayed or continuous basis pursuant to Rule 415 and in accordance with the methods of distribution set forth in such Shelf Registration Statement and thereafter shall use its reasonable best efforts to cause such Shelf Registration Statement to be declared effective under the Securities Act within 30 days of receipt of such demand. The Company shall supplement or amend the Shelf Registration Statement if required by the rules, regulations or instructions applicable to the registration form used by the Company for the Shelf Registration Statement, or by the Securities Act, the Exchange Act or the SEC. Upon the expiration of a Shelf Registration Statement during the Shelf Registration Period, the Company shall be obligated to file a new Shelf Registration Statement under this Section 4.01 on the same terms and conditions as it is required to file the first Shelf Registration Statement it is required to file. (b) The Company shall name each Shareholder that delivers a properly completed and signed reasonable and relevant notice and questionnaire (the "Notice and Questionnaire") to the Company as a selling securityholder of Shares in the Shelf Registration Statement. A Shareholder may include Shares in the Shelf Registration Statement only if the Shareholder sends by first-class registered mail or by courier with delivery confirmation, a properly completed Notice and Questionnaire to the Company. The Company shall deliver the form of Notice and Questionnaire to the Shareholders within five (5) Business Days of receipt of a written demand to register Shares. In order to be included in the Shelf Registration Statement at the time of its effectiveness, the completed Notice and Questionnaire must be received by the Company on or prior to the 10th Business Day after the date the Notice and Questionnaire is delivered by the Company in accordance with this Section 4.01(b) (or, in the case of a Shareholder that is a transferee of Shares, on or prior to the earlier of (x) the 20th Business Day after the completion of the Transfer of Shares to the transferee and (y) 9:00 a.m., New York time, on the fifth Business Day prior to initial effectiveness of the Shelf Registration Statement, in each case provided that the Company has delivered the form of Notice and Questionnaire in accordance with this Section 4.01(b)) (in any case, the "Questionnaire Deadline"). (c) Following the effectiveness of the Shelf Registration Statement, upon receipt of a completed Notice and Questionnaire from a Shareholder, the Company will, as promptly as practicable, but in any event within ten (10) Business Days after its receipt thereof, file any supplements to the related Prospectus or file any post-effective amendment to the Shelf Registration Statement that is required by applicable law to cause a Shareholder to be named as a selling securityholder in the Shelf Registration Statement and permit such Shareholder to deliver the Prospectus to purchasers of Shares (a "Post-Effective Amendment") (subject to the right of the Company to suspend the use of the Prospectus as described in Section 4.01(f) hereof); provided, however, that (i) if a supplement to the related Prospectus is required to permit the Shareholder (or other Shareholders not included in the Shelf Registration Statement upon effectiveness) to deliver the Prospectus to purchasers of Shares, the Company shall not be required to file more than one (1) such supplement during any thirty (30) day period and (ii) if a 10 post effective amendment to the Shelf Registration Statement is required to permit the Shareholder (or other Shareholders not included in the Shelf Registration Statement upon effectiveness) to deliver the Prospectus to purchasers of Shares, the Company shall not be required to file more than one (1) post-effective amendment to the Shelf Registration Statement in any ninety (90) day period. The Company shall use its reasonable best efforts to cause any such post-effective amendment to become effective under the Securities Act as promptly as is practicable; provided, that if a Notice and Questionnaire is delivered to the Company during a Suspension Period, the Company shall not be obligated to amend the Shelf Registration Statement or supplement the Prospectus until the termination of such Suspension Period. (d) Each Shareholder as to which the Shelf Registration Statement is being effected shall furnish promptly to the Company (x) such other information as the Company may reasonably request for use in connection with the Shelf Registration Statement or Prospectus or in any application to be filed with or under state securities laws and (y) all information required to be disclosed in order to make the information previously furnished to the Company by such Shareholder not misleading. (e) The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended under the Securities Act in order to permit the Prospectus forming a part thereof to be usable, subject to Section 4.01(c) hereof, by all participating Shareholders until there ceases to be any Shares outstanding that may not be sold in any one 90-day period pursuant to Rule 144 (such period being called the "Shelf Registration Period"). The Company will, in order to fulfill its obligations and this Section 4.01(e): (i) subject to Section 4.01(b) and 4.01(c), use its reasonable best efforts to prepare and file with the SEC such supplements, amendments and post-effective amendments to the Shelf Registration Statement as may be necessary to keep the Shelf Registration Statement continuously effective for the Shelf Registration Period; (ii) subject to Section 4.01(b) and 4.01(c), cause the related Prospectus to be supplemented by any required supplement, and as so supplemented to be filed pursuant to Rule 424 (or any similar provisions then in force) or as otherwise permitted under the Securities Act; and (z) comply in all material respects with the provisions of the Securities Act with respect to the disposition of all Shares covered by the Shelf Registration Statement during the Shelf Registration Period. (f) The Company may suspend the availability of any Shelf Registration Statement and the use of any Prospectus (the period during which the availability of any Shelf Registration Statement and any Prospectus may be suspended herein referred to as the "Suspension Period"), for a period not to exceed: (i) 45 consecutive days at any one time or (ii) 60 days in the aggregate during any 12-month period, in each case only for valid business reasons, to be determined in good faith by the Company in its reasonable judgment (which shall not include the avoidance of the Company's obligations hereunder), including, without limitation, the acquisition or divestiture of assets, pending corporate developments, events listed in Section 4.04(c)(v)-(vi), public filings with the SEC and similar events; provided, that the Company promptly thereafter complies with the requirements of Section 4.01(c) hereof, if applicable, and provided further that, if a Post-Effective Amendment is required by applicable law to cause a Shareholder to be named as a selling securityholder in the Shelf Registration Statement, the period of time between the filing and the effectiveness of any Post-Effective Amendment shall be not deemed to be a 11 Suspension Period hereunder. The first day of any Suspension Period must be at least two (2) trading days after the last day of any prior Suspension Period. 4.02 DEMAND REGISTRATION (a) Subject to the conditions of this Section 4.02, if the Company shall receive on not more than four (4) occasions, a written request from Bolger or any other Shareholder owning five percent (5%) or more of the Total Outstanding Common Stock with Bolger's prior written consent (for purposes of this Section 4.02, the "Initiating Holders") that the Company file a registration statement under the Securities Act (a "Demand Registration Statement") covering at least 500,000 Shares, then the Company shall, within twenty (20) days of the receipt thereof, give written notice of such request to all Shareholders, and subject to the limitations of this Section 4.02, use its best efforts to effect, as soon as practicable, the registration under the Securities Act of all Shares that the Shareholders request to be registered in a written request received by the Company within twenty (20) days of the mailing of the Company's notice pursuant to this Section 4.02(a). (b) If the Initiating Holders intend to distribute the Shares covered by their request by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to this Section 4.02 and the Company shall include such information in the written notice referred to in Section 4.02(a). In such event the right of any Shareholder to include its Shares in such registration shall be conditioned upon such Shareholder's participation in such underwriting and the inclusion of such Shareholder's Shares in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Shareholder) to the extent provided herein. All Shareholders proposing to distribute their Shares through such underwriting shall enter into an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting by the Initiating Holders. Notwithstanding any other provision of this Section 4.02, if the underwriter advises the Company that marketing factors require a limitation on the number of shares underwritten (including Shares), then the Company shall so advise all Shareholders of Shares that would otherwise be underwritten pursuant hereto, and the number of Shares that may be included in the underwriting shall be allocated to the Shareholders of such Shares pro rata based on the number of Shares held by all such Shareholders (including the Initiating Holders). Any Shares excluded or withdrawn from such underwriting shall be withdrawn from the registration. The Initiating Holders must obtain the consent of the Company prior to selecting any underwriters for the offering, which consent shall not be unreasonably withheld or delayed. (c) Notwithstanding the foregoing, the Company shall not be required to effect a registration pursuant to this Section 4.02: (i) in any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, unless the Company is already subject to service in such jurisdiction and except as may be required under the Securities Act; or (ii) after the Company has effected four (4) registrations pursuant to this Section 4.02, and such registrations have been declared or ordered effective; or 12 (iii) during the period starting with the date forty-five (45) days prior to the Company's good faith estimate of the date of the filing of and ending on a date ninety (90) days following the effective date of a Company-initiated registration subject to Section 4.03 below, provided that the Company is actively employing in good faith all commercially reasonable efforts to cause such registration statement to become effective; or (iv) during the period starting with the date the Company has effected another registration pursuant to this Section 4.02 and ending on a date ninety (90) days following the effective date of such registration; or (v) if the Initiating Holders do not request that such offering be firmly underwritten or the Company and the Initiating Holders are unable to obtain the commitment of the underwriters selected for the offering; or (vi) if the Company shall furnish to Shareholders requesting a Demand Registration Statement pursuant to this Section 4.02 a certificate signed by the Company's Chief Executive Officer or Chairman of the Board stating that in the good faith judgment of the Board of Directors, it would be seriously detrimental to the Company and its Shareholders for such Demand Registration Statement to be effected at such time, in which event the Company shall have the right to defer such filing for a period of not more than one hundred twenty (120) days after receipt of the request of the Initiating Holders, provided that such right shall be exercised by the Company not more than once in any twelve (12)-month period and provided further that the Company shall not register any securities for the account of itself or any other shareholder during such one hundred twenty (120) day period (other than a registration relating solely to the sale of securities of participants in a Company stock plan, a registration relating to a corporate reorganization or transaction under Rule 145 of the Securities Act, or a registration on any form that does not include substantially the same information as would be required to be included in a Demand Registration Statement covering the sale of the Shares). 4.03 INCIDENTAL REGISTRATION STATEMENT (a) If the Company at any time or from time to time proposes or is required to register any of its securities under the Securities Act (other than (x) in a registration on Form S-4, S-8 or S-3 (to the extent such form relates solely to a stock purchase or dividend reinvestment plan) or any successor form to such forms, or (y) at such times as a Shelf Registration Statement is effective) whether or not for sale for its own account, the Company shall deliver prompt written notice (which notice shall be given (i) in the event that the Company has publicly disclosed such proposed registration, at least thirty (30) calendar days prior to such proposed registration and (ii) in the event that the Company has not publicly disclosed such proposed registration (a "Non-Public Incidental Registration Notice"), no more than ten (10) Business Days prior to the filing of such proposed registration with the SEC (such period not in excess of ten (10) Business Days, the "Non-Public Incidental Registration Notice Period")) to all Shareholders of its intention to undertake such registration and describing a Shareholder's right to participate in such registration under this Section 4.03 as hereinafter provided. If the Shareholder elects to participate in such proposed registration, the Shareholder agrees to keep the contents of any Non-Public Incidental Registration Notice confidential prior to the filing of such proposed registration with the SEC and if the Shareholder has elected not to participate in such proposed registration, the 13 Shareholder agrees to keep the contents of any Non-Public Incidental Registration Notice confidential during the Non-Public Incidental Registration Notice Period. Subject to the other provisions of this Section 4.03 and Section 4.04, upon the written request of any Shareholder made within twenty (20) calendar days, or in the case of a Non-Public Incidental Registration Notice, within five (5) Business Days, after the receipt of such written notice from the Company (which request shall specify the amount of Shares to be registered and the intended method of disposition thereof), the Company shall effect the registration under the Securities Act of all Shares requested by Shareholders to be so registered (an "Incidental Registration"), to the extent requisite to permit the disposition (in accordance with the intended methods thereof as aforementioned) of the Shares so to be registered, by inclusion of such Shares in the Incidental Registration Statement and shall cause such Incidental Registration Statement to become and remain effective with respect to such Shares in accordance with the registration procedures set forth in Section 4.04. If an Incidental Registration involves an Underwritten Offering, immediately upon notification to the Company from the Underwriter of the price at which such securities are to be sold, the Company shall so advise each participating Shareholder. The Shareholders requesting inclusion in an Incidental Registration may, at any time prior to agreeing to the price at which the Shares are to be sold (and for any reason), revoke such request by delivering written notice to the Company revoking such requested inclusion. (b) If at any time after giving written notice of its intention to register any securities and prior to the effective date of the Incidental Registration Statement filed in connection with such registration, the Company shall determine for any reason not to register or to delay registration of such securities, the Company may, at its election, give written notice of such determination to each Shareholder and, thereupon, (i) in the case of a determination not to register, the Company shall be relieved of its obligation to register any Shares in connection with such registration (but not from its obligation to pay the fees and expenses incurred in connection therewith as set forth in Section 4.05), without prejudice, however, to the Company's obligation to effect a registration under Section 4.01 or 4.02, and (ii) in the case of a determination to delay such registration, the Company shall be permitted to delay the registration of such Shares for the same period as the delay in registering such other securities; provided, however, that if such delay shall extend beyond 90 days from the date the Company received a request to include Shares in such Incidental Registration, upon making the determination to proceed with such registration the Company shall again give all Shareholders the opportunity to participate therein and shall follow the notification procedures set forth in Section 4.03(a). There is no limitation on the number of such Incidental Registrations pursuant to this Section 4.03 which the Company is obligated to effect. (c) The registration rights granted pursuant to the provisions of this Section 4.03 shall be in addition to the registration rights granted pursuant to the other provisions of Section 4.01 and 4.02 hereof. (d) If an Incidental Registration involves an Underwritten Offering (on a firm commitment basis), and the sole or the lead managing Underwriter, as the case may be, of such Underwritten Offering shall advise the Company on or before the date that is five days prior to the date then scheduled for such offering that, in its opinion, the amount of securities (including the Shares) requested to be included in such registration exceeds the amount which can be sold in such offering without materially interfering with the successful marketing of the securities being 14 offered, the Company shall include in such registration, to the extent of the number which the Company is so advised may be included in such offering without such effect, (i) in the case of a registration initiated by the Company, (A) first, the securities that the Company proposes to register for its own account, (B) second, the securities of Shareholders who exercised a contractual right to demand that such registration statement be filed, (C) third, the Shares requested to be included in such registration by the Shareholders, allocated pro rata in proportion to the number of Shares requested to be included in such registration by each of them and (D) fourth, other securities of the Company to be registered on behalf of any other Person, and (ii) in the case of a registration initiated by any Person other than the Company, (A) first, the Shares requested to be registered by the Person other than the Company who initiated the registration, (B) second, the Shares requested to be included in such registration by the Shareholders, allocated pro rata in proportion to the number of Shares requested to be included in such registration by each of them, (C) third, any securities that the Company proposes to register for its own account and (D) fourth, other securities of the Company to be registered on behalf of any other Person. 4.04 REGISTRATION PROCEDURES In connection with any Registration Statement, the following provisions shall apply: (a) The Company shall: (i) furnish to the Shareholders without charge, within a reasonable period of time, but in any event within eight (8) Business Days prior to the filing thereof with the SEC in order to afford the Shareholders and their legal counsel a reasonable opportunity for review and to participate in the preparation thereof, a copy of each Registration Statement, and each amendment thereof, and a copy of each Prospectus, and each amendment or supplement thereto (excluding amendments caused by the filing of a report under the Exchange Act); and (ii) include information regarding any Shareholder that provided notice in accordance with Section 4.01, 4.02 or 4.03 (such Shareholder, a "Notice Shareholder") and the methods of distribution they have elected for their Shares provided to the Company in Notice and Questionnaires as necessary to permit such distribution by the methods specified therein. (b) Subject to Section 4.01(d), the Company shall ensure that: (i) any Registration Statement and any amendment thereto and any Prospectus forming a part thereof and any amendment or supplement thereto comply in all material respects with the Securities Act; (ii) any Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; and (iii) any Prospectus forming a part of any Registration Statement, and any amendment or supplement to such Prospectus, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the Company makes no representation with respect to any Shareholder Information. (c) The Company, as promptly as reasonably practicable (but in any event within two (2) Business Days), shall notify each Notice Shareholder: 15 (i) When a Registration Statement or any post-effective amendment thereto or any Prospectus or any supplement thereto has been filed with the SEC and when the Registration Statement or any post-effective amendment thereto has become effective which notice and confirmation can be made at the election of the Company by making a public announcement thereof by release made to Reuters Economic Services, Bloomberg Business News or a similar service; (ii) of any request, following effectiveness of the Registration Statement under the Securities Act, by the SEC or any other federal or state governmental authority for amendments or supplements to the Registration Statement or the Prospectus or for additional information (other than any such request relating to a review of the Company's Exchange Act filings); (iii) of the issuance by the SEC or any other federal or state governmental authority of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any Prospectus or the initiation or threat of any proceedings for that purpose; (iv) of the receipt by the Company of any notification with respect to the suspension of the qualification or exemption from qualification of the Shares included in any Registration Statement for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose; (v) of the occurrence of, but not the nature of or details concerning, any event or the existence of any condition that requires the making of any changes in the Registration Statement or the Prospectus or any document incorporated by reference therein so that, as of such date, the statements therein are not misleading and the Registration Statement or the Prospectus or any document incorporated by reference therein, as the case may be, does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading; (vi) of the Company's determination that a post-effective amendment to the Registration Statement is necessary (other than a post-effective amendment pursuant to Section 4.01(c)); and (vii) of the commencement (including as a result of any of the events or circumstances described in Section 4.04(c)(v)) and termination of any Suspension Period. (d) The Company shall use its reasonable best efforts to obtain: (i) the withdrawal of any order suspending the effectiveness of any Registration Statement and the use of any related Prospectus; and (ii) the lifting of any suspension of the qualification (or exemption from qualification) of any of the Shares for offer or sale in any jurisdiction in which they have been qualified for sale, in each case at the earliest possible time, and shall provide notice to each Notice Shareholder of the withdrawal of any such orders or suspensions. (e) The Company shall, at the effective date of the relevant Registration Statement, promptly provide each Notice Shareholder a copy of the Prospectus included in the Registration Statement and during the Shelf Registration Period or the period of time during which any 16 Demand Registration Statement or Incidental Registration Statement is effective, as applicable, promptly deliver to each Notice Shareholder, without charge, as many copies of the Prospectus (including each preliminary Prospectus) included in any Registration Statement, and any amendment or supplement thereto, as such person may reasonably request; and the Company hereby consents to the use of the Prospectus and any amendment or supplement thereto by each of the selling Notice Shareholders in connection with the offering and sale of the Shares covered by the Prospectus or any amendment or supplement thereto. (f) Prior to any offering of Shares pursuant to any Registration Statement, the Company shall register or qualify or cooperate with the Notice Shareholders and their legal counsel in connection with the registration or qualification (or exemption from such registration or qualification) of such Shares for offer and sale, under the securities or blue sky laws of such jurisdictions within the United States as any such Notice Shareholders reasonably requests and shall maintain such qualification in effect during the Shelf Registration Period or the period of time during which any Demand Registration Statement or Incidental Registration Statement is effective, as applicable, and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Shares covered by such Registration Statement; provided, however, that the Company will not be required to: (i) qualify generally to do business as a foreign corporation or as a dealer in securities in any jurisdiction where it is not then so qualified or; (ii) take any action which would subject it to service of process or taxation in excess of a nominal U.S. dollar amount in any such jurisdiction where it is not then so subject. (g) The Company shall cooperate with the Notice Shareholders to facilitate the timely preparation and delivery of certificates representing Shares sold pursuant to any Registration Statement free of any restrictive legends that are placed on such certificates in accordance with this Agreement. (h) Subject to the exceptions contained in (i) and (ii) of Section 4.04(f) above, the Company shall use its reasonable best efforts to cause the Shares covered by the applicable Registration Statement to be registered with or approved by such other federal, state and local governmental agencies or authorities, and self-regulatory organizations in the United States as may be necessary to enable the Notice Shareholders to consummate the disposition of such Shares as contemplated by the Registration Statement; without limitation to the foregoing, the Company and the Shareholders shall provide all such information as may be required by the NASD in connection with the offering under the Registration Statement of the Shares (including, without limitation, such as may be required by NASD Rule 2710 or 2720), and each shall cooperate with the other in connection with any filings required to be made with the NASD by such Notice Shareholder in that regard. (i) Upon the occurrence of any event described in Section 4.04(c)(v) or 4.04(c)(vi) hereof, the Company shall promptly prepare and file with the SEC a post-effective amendment to any Registration Statement, or an amendment or supplement to the related Prospectus, or any document incorporated therein by reference, or file a document which is incorporated or deemed to be incorporated by reference in such Registration Statement or Prospectus, as the case may be, so that, as thereafter delivered to purchasers of the Shares included therein, the Registration Statement and the Prospectus, in each case as then amended or supplemented, will not include an untrue statement of a material fact or omit to state any material fact required to be stated therein 17 or necessary in order to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made) not misleading and, in the case of a post-effective amendment, use its reasonable best efforts to cause it to become effective as promptly as practicable; provided that the Company's obligations under this Section 4.04(i) shall be suspended if the Company has suspended the use of the Prospectus in accordance with Section 4.01(f) hereof and given notice of such suspension to Notice Shareholders, it being understood that the Company's obligations under this Section 4.04(i) shall be automatically reinstated at the end of such Suspension Period. (j) The Company shall provide, prior to the effective date of any Registration Statement hereunder, a CUSIP number for the Shares registered under such Registration Statement. (k) The Company shall use its reasonable best efforts to comply with all applicable rules and regulations of the SEC and shall make generally available to its security holders an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 promulgated by the SEC thereunder (or any similar rule promulgated under the Securities Act) for a 12-month period. (l) The Company may require each Notice Shareholder to furnish to the Company such information regarding the Notice Shareholder and the distribution of such Shares sought by the Notice and Questionnaire and such additional information as may, from time to time, be required by the Securities Act and/or the SEC or any other federal or state governmental authority, and the obligations of the Company to any Notice Shareholder under this Agreement shall be expressly conditioned on the compliance of such Notice Shareholder with such request. (m) If reasonably requested in writing in connection with any disposition of Shares pursuant to a Registration Statement, the Company shall make reasonably available for inspection during normal business hours by a representative for the Notice Shareholders and any broker-dealers, attorneys and accountants retained or being utilized by such Notice Shareholders, all relevant financial and other records, pertinent corporate documents and properties of the Company and its subsidiaries, and cause the appropriate executive officers, directors and designated employees of the Company and its subsidiaries to be available to discuss or make reasonably available for inspection during normal business hours all relevant information reasonably requested by such representative for the Notice Shareholders or any such broker-dealers, attorneys or accountants in connection with such disposition, in each case as is customary for similar "due diligence" examinations; provided, however, that any information that is designated by the Company, in good faith, as confidential at the time of delivery of such information shall be kept confidential by such Persons, unless disclosure thereof is made in connection with a court, administrative or regulatory proceeding or required by law, or such information has become available to the public generally through the Company or through a third party without an accompanying obligation of confidentiality. (n) Each Notice Shareholder agrees that, upon receipt of notice of the happening of an event described in Sections 4.04(c)(ii) through and including 4.04(c)(vi), it shall forthwith discontinue (and shall cause its agents and representatives to discontinue) disposition of Shares and will not resume disposition of Shares until such Shareholder has received copies of an 18 amended or supplemented Prospectus contemplated by Section 4.04(a) hereof, or until such Notice Shareholder is advised in writing by the Company that the use of the Prospectus may be resumed or that the relevant Suspension Period has been terminated, as the case may be; provided, that the foregoing shall not prevent the sale, transfer or other disposition of Shares by a Shareholder in a transaction which is exempt from, or not subject to, the registration requirements of the Securities Act, so long as such Shareholder does not and is not required to deliver the applicable Prospectus or Registration Statement in connection with such sale, transfer or other disposition, as the case may be. (o) Each Notice Shareholder shall promptly notify the Company of any inaccuracies or changes in the information requiring an amendment to the applicable Registration Statement or Prospectus provided in such Notice Shareholder's Notice and Questionnaire that may occur subsequent to the date thereof at any time while the Registration Statement remains effective. (p) In the case of any Underwritten Offering, the Company shall use its reasonable best efforts to enter into an underwriting agreement customary in form and scope for underwritten secondary offerings of the nature contemplated by the applicable Registration Statement, which shall include and provide for indemnification and contribution for the Underwriters substantially similar to that provided for in Section 4.07. (q) The Company shall use its reasonable best efforts to obtain (i) a "cold comfort" letter from the Company's independent public accountants in customary form covering such matters of the type customarily covered by "cold comfort" letters as the Notice Shareholders or the managing Underwriter reasonably request and (ii) an opinion or opinions from counsel for the Company in customary form and covering such matters of the type customarily covered by opinions as the Notice Shareholders or the managing Underwriters reasonably request. 4.05 REGISTRATION EXPENSES The Company shall bear all fees and expenses incurred in connection with the performance of its obligations under Sections 4.01, 4.02, 4.03 and 4.04 hereof. The Company shall also reimburse the Shareholders for the reasonable fees and disbursements of one legal counsel to the Shareholders in an amount not to exceed U.S.$25,000 per registration. The fees and expenses to be borne by the Company shall include, without limitation: (i) all registration and filing fees and expenses (including filings made with the NASD); (ii) all fees and expenses of compliance with federal securities and state or foreign Blue Sky or securities laws; (iii) all expenses of printing (including printing of Prospectuses and certificates for the Shares) and filing and the Company's expenses for messenger and delivery services and telephone; (iv) all fees and disbursements of counsel to the Company; (v) all application and filing fees in connection with listing (or authorizing for quotation) the Shares on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company. The Company shall bear its internal expenses (including, without limitation, all salaries and expenses of their officers and employees performing legal, accounting or other duties), the expenses of any annual audit and the fees and expenses of any Person, including special experts, retained by the Company. Notwithstanding the provisions of this Section 4.05, each Shareholder shall bear the expense of any broker's 19 commission, agency fee and underwriter's discount or commission, if any, relating to the sale or disposition of such Shareholder's Shares pursuant to a Registration Statement. 4.06 HOLDBACK ARRANGEMENTS Each Shareholder agrees not to (i) sell, offer to sell, contract or agree to sell, hypothecate, hedge, pledge, grant any option to purchase or otherwise dispose of or agree to dispose of, directly or indirectly, any Shares or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of Shares, or warrants or other rights to purchase Shares, whether any such transaction is to be settled by delivery of such securities, in cash or otherwise (the agreements contained in clauses (i) and (ii) of this Section 4.06, collectively, the "Lock-Up Agreement"), during the time period reasonably requested by the sole or lead managing Underwriter not to exceed 90 days, beginning on the effective date of the Registration Statement for any sale of Common Stock or securities convertible into Common Stock issued by the Company with respect to which Section 4.03 applies (except as part of such Underwritten Offering or pursuant to registrations on Forms S-4, S-8 or S-3 (to the extent such form relates solely to a stock purchase or dividend reinvestment plan)) without the prior written consent of the sole or lead managing Underwriter (the "Public Offering Lock-Up Period"); provided, however, that if (i) during the period that begins on the date that is fifteen (15) calendar days plus three (3) Business Days before the last day of the Public Offering Lock-Up Period and ends on the last day of the Public Offering Lock-Up Period, the Company issues an earnings release or material news or a material event relating to the Company occurs, or (ii) prior to the expiration of the Public Offering Lock-Up Period, the Company announces that it will release earnings results during the sixteen (16) calendar day period beginning on the last day of the Public Offering Lock-Up Period, the restrictions imposed shall continue to apply until the expiration of the date that is fifteen (15) calendar days plus three (3) Business Days after the date on which the issuance of the earnings release or the material news or material event occurs. Notwithstanding the foregoing, the Shareholders shall not be obligated to enter into the Lock-Up Agreement unless (A) all executive officers and directors of the Company and all Persons holding at least 10% of the Company's voting securities enter into identical agreements, with the agreement of the Shareholders (including the proviso set forth in the immediately preceding sentence) being on no more onerous terms than any other agreements entered into by any other Person, and (B) the Lock-Up Agreement is explicitly conditioned on the Shareholder receiving the benefits of any release or modification of such agreement for any other Person subject to such an agreement or similar agreement. 4.07 INDEMNIFICATION AND CONTRIBUTION (a) The Company shall indemnify and hold harmless each Shareholder, the Shares of whom are covered by any Registration Statement, its underwriters, agents, broker-dealers, directors, officers, partners, members and employees and each Person, if any, who controls any such Shareholder within the meaning of either the Securities Act or the Exchange Act (collectively referred to for purposes of this Section 4.07 as a "Holder") against any losses, claims, damages or liabilities, joint or several, or actions in respect thereof, to which any of them may become subject, under the Securities Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, or in any Prospectus, 20 or any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein (in the case of any Prospectus, in the light of the circumstances under which they were made) not misleading, and will reimburse each such party for any legal or other expenses reasonably incurred by such party in connection with investigating or defending any such action or claim; provided, however, that: (i) the Company shall not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon Shareholder Information provided by such Shareholder; (ii) with respect to any untrue statement or omission of material fact made in any Registration Statement, or in any Prospectus, the indemnity agreement contained in this Section 4.07 shall not inure to the benefit of a Holder from whom the Person asserting any such loss, claim, damage or liability purchased the securities concerned, to the extent that any such loss, claim, damage or liability of such Holder occurs under the circumstance where it shall have been established that: (w) the Company had previously furnished copies of the Prospectus, and any amendments and supplements thereto, to such Holder; (x) delivery of the Prospectus, and any amendment or supplements thereto, was required by the Securities Act to be made to such Person; (y) the untrue statement or omission of a material fact contained in the Prospectus was corrected in amendments or supplements thereto; and (z) there was not received by such Person, at or prior to the written confirmation of the sale of such securities to such Person, a copy of such amendments or supplements to the Prospectus; and (iii) the indemnification provisions of this Section 4.07 shall not apply to amounts paid in settlement of any loss, claim, damage or liability if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed. This indemnity agreement will be in addition to any liability that the Company may otherwise have. This indemnity agreement will not apply to any loss, damage, expense, liability or claim arising from an offer or sale, occurring during a Suspension Period, of Shares by a Notice Shareholder who has previously received notice from the Company of the commencement of the Suspension Period pursuant to Section 4.01(f). (b) Each Holder, severally and not jointly, agrees to indemnify and hold harmless the Company, each of its directors and officers and each Person, if any, who controls the Company within the meaning of either the Securities Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to the Holders and shall reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any loss, claim, damage, liability or action, but only with reference to Shareholder Information supplied by such Holder. In no event shall any Holder be liable or responsible for any amount in excess of the net proceeds to such Holder as a result of the sale of Shares pursuant to such Registration Statement by reason of such untrue or alleged untrue statement or omission or alleged omission. This indemnity agreement will be in addition to any liability that such Holder may otherwise have. (c) Promptly after receipt by an indemnified party under this Section 4.07 of notice of any claim or the commencement of any action or proceeding (including any governmental investigation), such indemnified party will, if a claim for indemnification in respect thereof is to be made against the indemnifying party under Section 4.07(a) or 4.07(b) hereof, notify the indemnifying party in writing of the commencement thereof; but the omission to so notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party to the extent it is not materially prejudiced as a result thereof. In case any such action or 21 proceeding is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein (jointly with any other indemnifying party similarly notified), and to the extent that it may elect, by written notice delivered to such indemnified party promptly after receiving the aforementioned notice from such indemnified party, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, that if the defendants (including any impleaded parties) in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to defend such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election to so appoint counsel to defend such action and approval by the indemnified party of such counsel, the indemnifying party will not be liable to such indemnified party under this Section 4.07 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless: (i) the indemnified party shall have employed separate counsel in accordance with the proviso to the preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expense of more than one separate counsel (in addition to any local counsel), approved by the Holders in the case of Section 4.07(a), representing the indemnified parties under Section 4.07(a) who are parties to such action); (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice or commencement of the action; (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party; or (iv) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding. Subject to the provisions of the immediately following sentence, no indemnifying party shall be liable for any settlement, compromise or the consent to the entry of judgment in connection with any such action effected without its written consent, but if settled with its written consent or if there be a final judgment for the plaintiff in any such action other than a judgment entered with the consent of such indemnified party, the indemnifying party shall indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. If at any time an indemnified party shall have requested that an indemnifying party reimburse the indemnified party for reasonable fees and expenses of counsel as contemplated by this Section 4.07(c) and to which it would be entitled under Section 4.07(a) or 4.07(b) hereof, the indemnifying party agrees that it shall be liable for any settlement of any proceeding effected without its written consent if: (x) such settlement is entered into more than 60 days after receipt by such indemnifying party of such request for reimbursement, (y) such indemnifying party shall have received notice of the terms of such settlement at least 45 days prior to such settlement being entered into and (z) such indemnifying party shall not have reimbursed such indemnified party in accordance with such 22 request prior to the date of such settlement (unless such reimbursement is disputed in good faith). Each indemnified party shall furnish such information regarding itself or the claim in question as an indemnifying party may reasonably request in writing and as shall be reasonably required in connection with the defense of such claim and litigation arising therefrom. (d) In the event that the indemnity provided in Section 4.07(a) or 4.07(b) is unavailable to or insufficient to hold harmless an indemnified party for any reason, each indemnifying party shall contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively, "Losses") to which the indemnified party may be subject to the fullest extent permitted by law; provided, however, that in no case shall an indemnifying party that is a Holder be responsible for any amount in excess of the total price at which the Shares are sold by such Holder to a purchaser. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and such Holder shall contribute in such proportion as is appropriate to reflect not only the relative benefits but also the relative fault of the Company on the one hand and of such Holder on the other hand in connection with the statements or omissions which resulted in such Losses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and such Holder on the other hand shall be deemed to be in the same respective proportions as the total net proceeds from the sale of the securities (before deducting expenses) received by or on behalf of the Company under the Registration Statement, on the one hand, and the total net proceeds received by such Holder with respect to its sale of Shares under the Registration Statement, on the other hand, bear to the total net proceeds from the sale of securities under the Registration Statement. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the one hand or relates to Shareholder Information supplied by such Holder on the other hand and the relative knowledge, information and opportunity of the parties to correct or prevent such untrue statement or omission. The parties agree that it would not be just and equitable if contribution pursuant to this Section 4.07(d) were determined by pro rata allocation or any other method of allocation that does not take account of the equitable considerations referred to above. Notwithstanding the provisions of this Section 4.07(d), no Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person with respect to claims arising directly out of or relating to such fraudulent misrepresentation who was not guilty of such fraudulent misrepresentation. For purposes of this Section 4.07(d), each Person who controls such Holder within the meaning of either the Securities Act or the Exchange Act shall have the same rights to contribution as such Holder, and each Person who controls the Company within the meaning of either the Securities Act or the Exchange Act shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this Section 4.7(d). (e) The remedies provided for in this Section 4.07 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. (f) The provisions of this Section 4.07 will remain in full force and effect regardless of (i) the termination of this Agreement, (ii) any investigation made by or on behalf of any 23 Holder, any underwriter or the Company or any of the officers, directors or controlling Persons referred to in Section 4.07 hereof and (iii) the sale by a Holder of Shares covered by a Registration Statement. 4.08 RULE 144 The Company covenants that, so long as the Shares remain outstanding, it will continue to file the reports required to be filed by a reporting company under the Exchange Act in a timely manner or will otherwise make such information publicly available as may be required for the Shareholders to sell Shares within the exemptions provided by Rule 144. Upon the written request of any Shareholder, the Company shall deliver to such Shareholder a written statement as to whether it has complied with such requirements. 4.09 TRANSFEREE RIGHTS Any Person who receives by Transfer Shares in an amount equal to at least two percent (2%) of the Total Outstanding Common Stock shall be considered a "Shareholder" for purposes of this Section 4 (and only this Section 4) and shall be entitled to the same rights and subject to the same obligations as the other Shareholders pursuant to this Section 4. 5. LEGEND ON STOCK CERTIFICATES Each certificate representing Shares shall be endorsed with substantially the following legend: THIS CERTIFICATE AND THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED, OR IN ANY MANNER DISPOSED OF EXCEPT IN CONFORMITY WITH THE TERMS OF A WRITTEN SHAREHOLDERS AGREEMENT (THE "SHAREHOLDERS AGREEMENT") AMONG CASCADE BANCORP (THE "CORPORATION") AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT CONTAINS CERTAIN RIGHTS AND OBLIGATIONS REGARDING CORPORATE GOVERNANCE AND REGARDING THE VOTING, SALE, ASSIGNMENT, TRANSFER, ENCUMBRANCE OR OTHER DISPOSITION OF SUCH CORPORATION'S SHARES. THE CORPORATION WILL UPON WRITTEN REQUEST FURNISH A COPY OF THE SHAREHOLDERS AGREEMENT TO THE HOLDER HEREOF WITHOUT CHARGE. The legend provided by this Section 5 may be removed upon termination of Section 2.02 in accordance with the provisions of Section 7. 6. ANTI-TAKEOVER STATUTES 6.01 GENERAL The Company has taken, or will have taken prior to the Effective Date, all actions (except for actions that require shareholder approval) necessary to exempt the transactions contemplated by the Merger Agreement and this Agreement, or such transactions are otherwise exempt, from 24 any provisions of an anti-takeover nature contained in its organizational documents, and the provisions of any Takeover Laws. 6.02 TAKEOVER LAWS; NO RIGHTS TRIGGERED If any Takeover Law may become, or may purport to be, applicable to the transactions contemplated or permitted by this Agreement or by the Merger Agreement, the Company and the members of the Board of Directors will grant such approvals and take such actions (except for actions that require shareholder approval) as are necessary so that the transactions contemplated or permitted by this Agreement and the Merger Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and the Merger Agreement and otherwise act to eliminate or minimize the effects of any Takeover Law on any of the transactions contemplated or permitted by this Agreement or by the Merger Agreement. 6.03 OREGON BUSINESS COMBINATION STATUTE The Board of Directors of the Company has duly adopted an irrevocable resolution as follows (the "Business Combination Exemption Resolution"): "RESOLVED, that pursuant to Section 60.835 of the Oregon Business Corporation Act ("OBCA"), the Board of Directors of the Corporation, for the specific purpose of establishing an irrevocable exemption from Section 60.835 of the OBCA, hereby approves thereunder (i) the entering into, and all of the transactions relating to and contemplated or permitted by, the Agreement of Merger, by and among F&M Holding Company, an Idaho corporation, the Corporation, Igloo Acquisition Corporation, an Oregon corporation and a wholly-owned subsidiary of the Corporation and David F. Bolger, and the Shareholders Agreement, by and among the Corporation, David F. Bolger and each person listed on Schedule A thereto to be entered into by the Corporation and such parties including, without limitation, (A) the assignment of any rights thereunder in accordance with the terms thereof or in connection therewith, (B) any person or entity becoming an "interested shareholder" as defined in Section 60.825 of the OBCA including, without limitation, David F. Bolger, the estate of David F. Bolger, any present or future affiliates or associates of David F. Bolger, any trust David F. Bolger may establish, Thomas M. Wells (whether individually or in another capacity) and Clarence Jones (collectively, the "Covered Persons"), (C) the transfer of any shares of common stock or other securities of the Corporation in accordance with the terms and conditions of the Shareholders Agreement and (D) the joinder of any party to such Shareholders Agreement, (ii) any transaction in which any Covered Person becomes an "interested shareholder" as defined in Section 60.825 of the OBCA or acquires additional shares of common stock or other securities of the Corporation thereafter and (iii) any 25 "business combination" as defined in Section 60.825 of the OBCA involving any Covered Person. This Resolution shall be of no further force and effect if the Merger Agreement is terminated. The foregoing resolution is referred to herein as the "Business Combination Exemption Resolution." 6.04 BUSINESS COMBINATION EXEMPTION The Business Combination Exemption Resolution adopted by the Company is a valid action of the Board of Directors of the Company, binding on the Company, and constitutes a valid and irrevocable exemption by the Company from Section 60.835 of the Oregon Business Corporation Act as to any transaction, person or entity described in such resolution. 6.05 APPROVAL BY CONTINUING DIRECTORS A majority of the Continuing Directors (as defined in the articles of incorporation of the Company) has voted in favor of the entering into of the Merger Agreement and this Agreement and approval of the transactions contemplated by the Merger Agreement and this Agreement. 7. TERMINATION (a) This Agreement may be terminated in its entirety by written consent of all of the Shareholders and the Company. (b) The provisions of Sections 2.02, 2.03, 2.04, 3.02, 3.03, 3.04, 3.05(b) and 3.06 shall terminate upon the earlier of (i) the Shareholders collectively holding less than five percent (5%) of the Total Outstanding Common Stock, (ii) the occurrence of a Change of Control of the Company and (iii) a Seller Nominee ceases to be a member of the Board of Directors and is not replaced by a substitute nominee or designee who is nominated or designated in accordance with the provisions of Section 3.01. (c) The provisions of Sections 3.02 and 3.03(a) shall terminate on the third anniversary of the Effective Date, and the Shareholders shall be free to vote their Shares in their sole and absolute discretion thereafter on any matters referred to therein. (d) The provisions of Sections 3.03(b) and 3.04 shall terminate upon the occurrence of a Performance Event. (e) This Agreement shall terminate in its entirety and shall have no force or effect upon the termination of the Merger Agreement prior to the Effective Date. 8. GENERAL PROVISIONS 8.01 APPLICATION OF THIS AGREEMENT This Agreement shall apply to (a) any share of capital stock or other security of the Company after issuance to any Shareholder for any reason, whether upon exercise of any warrant or option or otherwise, and (b) any share or other security of capital stock in the Company received by any Shareholders as a result of any stock dividend, stock split, reverse stock split, or other distribution of shares made upon or in exchange for the Shares except that the transfer restrictions contained in this Agreement shall not apply to any non-voting securities. Any such securities referenced in this Section 8.01 shall constitute "Shares" following their issuance by the Company and receipt by the Shareholders. 8.02 EFFECT OF NON-COMPLYING TRANSFERS If any Transfer in violation of this Agreement shall be attempted, or if any involuntary or other purported transfer by law of any Shares occurs or is attempted, it shall be void, and upon presentation for Transfer the Company shall not give effect to such purported Transfer. 8.03 ESCROW At the request of any Shareholder participating in a Transfer governed by this Agreement, an escrow shall be set up to effect the Transfer of any certificates or funds. Costs of such escrow shall be borne by such Shareholder. 8.04 SUCCESSORS AND ASSIGNS; THIRD PARTY BENEFICIARIES Except as otherwise provided herein, each party agrees that it will not assign, sell, transfer, delegate, or otherwise dispose of any right or obligation under this Agreement, whether voluntarily, involuntarily, by operation of law, or otherwise, except in accordance with the terms hereof, and except that upon a party's death, the rights and obligations under this Agreement shall be assigned to such party's estate without any further act. Any purported assignment, transfer, or delegation in violation of this Section 8.04 shall be null and void. Except as otherwise provided in this Agreement (including, without limitation, as contemplated by the last sentence of Section 2.03), the terms and conditions of this Agreement shall inure to the benefit of and be binding on the respective heirs, successors, devisees and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer on any party other than the parties to this Agreement or their respective heirs, successors, devisees and assigns any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as provided in this Agreement (including, without limitation, as contemplated by Section 4.09). 8.05 GOVERNING LAW This Agreement shall in all respects, including all matters of construction, validity, and performance, be governed by, and construed and enforced in accordance with, the laws of the state of Oregon, without reference to any rules governing conflicts of laws. 27 8.06 COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument, and may be delivered by facsimile. 8.07 NOTICES All notices, demands, requests or other communications that may be or are required to be given, served, transmitted or delivered by any party to any other party pursuant to this Agreement shall be in writing and shall be hand delivered, or transmitted by verified facsimile or internationally recognized air courier, addressed to the party to be notified at the address indicated for such party on the signature page hereof, or at such other address as such party may designate by 10 days' advance written notice to the other parties given in the foregoing manner. Each notice, demand, request or other communication that shall be hand delivered, telecopied or delivered in the manner described above shall be deemed sufficiently given, served, transmitted or delivered for all purposes at such time as it is delivered to the addressee (with the delivery receipt or, with respect to a telecopy, the answer back being deemed conclusive, but not exclusive, evidence of such delivery) or at such time as delivery is refused by the addressee upon presentation. 8.08 EXPENSES If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs, and necessary disbursements in addition to any other relief to which such party may be entitled. 8.09 AMENDMENTS AND WAIVERS Any term of this Agreement may be amended and the observance of any term may be waived (either generally or in a particular instance and either retroactively or prospectively) only with the written consent of the Company and all of the relevant Shareholders. Notwithstanding the foregoing, (i) Schedule A to this Agreement may be amended from time to time by (x) the Shareholders or the Company to reflect the actual holdings of the Shareholders of Shares without formally amending this Agreement or (y) a Joinder executed by a new Shareholder and the Company and delivered to all other Shareholders and (ii) Bolger and the Trust may amend or waive the observance of any term of this Agreement (either generally or in a particular instance and either retroactively or prospectively) with respect to themselves only with the written consent of the Company and without the need for a written consent of any other Shareholders. The failure of any party to insist on or to enforce strict performance by the other parties of any of the provisions of this Agreement or to exercise any right or remedy under this Agreement shall not be construed as a waiver or relinquishment to any extent of that party's right to assert or rely on any provisions, rights or remedies in that or any other instance; rather, the provisions, rights and remedies shall remain in full force and effect. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the 28 Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms. 8.10 FURTHER ASSURANCES Each party agrees from time to time to do and perform such other and future acts (including the taking of board and/or shareholder action) and execute and deliver any and all such other instruments as may be required by law or reasonably requested by the other parties to establish, maintain or protect the rights and remedies of the requesting party or to carry out and effect the intent and purpose of this Agreement. 8.11 DAMAGES AND INJUNCTIVE RELIEF It is acknowledged that it will be impossible to measure in money the damages that would be suffered if the parties fail to comply with any of the obligations herein imposed on them and that in the event of any such failure, an aggrieved party will be irreparably damaged and will not have an adequate remedy at law. Any such party shall, therefore, be entitled to injunctive relief, including specific performance, to enforce such obligations, and if any action shall be brought in equity to enforce any of the provisions of this Agreement, none of the parties hereto shall raise the defense that there is an adequate remedy at law and in any case no bond or other security shall be required. 8.12 ENTIRE AGREEMENT This Agreement (including the schedules and exhibits hereto, which are incorporated herein by this reference) supersedes all prior or contemporaneous agreements, and all related understandings, written or oral, among the parties with regard to the subject matter of this Agreement and constitutes the full and entire understanding and agreement between the parties with regard to the subject matter of this Agreement. The parties further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative, arbitration, or other legal proceeding involving this Agreement. 8.13 BOLGER TRUST The parties understand and agree that promptly after the Effective Date Bolger may transfer his Shares received in the Merger to a Trust. In such event, the Trust may act in all respects for Bolger hereunder. [REMAINDER OF PAGE IS INTENTIONALLY BLANK; SIGNATURE LINES ARE ON THE NEXT PAGE.] 29 IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above. COMPANY: CASCADE BANCORP By: /s/ Patricia L. Moss ------------------------------------------ Patricia L. Moss, its Chief Executive Officer Address: 1100 NW Wall Street P.O. Box 369 Bend, Oregon 97709 Attention: Patricia L. Moss, Chief Executive Officer Facsimile: (541) 617-3149 With a copy (which shall not constitute notice) to: Address: Davis Wright Tremaine LLP 1300 SW Fifth Avenue Suite 2300 Portland, Oregon 97201 Attention: David C. Baca, Esq. Facsimile: (503) 778-5299 and Address: Karnopp Petersen LLP 1201 NW Wall St Suite 300 Bend, Oregon 97701 Attention: James E. Peterson, Esq. Facsimile: (541) 388-5410 [Signature page to Shareholders Agreement] BOLGER: DAVID F. BOLGER /s/ David F. Bolger --------------------------------------------- David F. Bolger Address: c/o Bolger & Co., Inc. 79 Chestnut Street Ridgewood, New Jersey 07450 Attention: David F. Bolger, President Facsimile: (201) 670-9685 With a copy (which shall not constitute notice) to: Address: Wells, Jaworski, Liebman & Paton LLP 12 Route 17 North Paramus, New Jersey 07653 Attention: Thomas M. Wells, Esq. Facsimile: (201) 587-8845 and Address: Sullivan & Cromwell LLP 125 Broad Street New York, New York 10004 Attention: Mark J. Menting, Esq. Facsimile: (212) 558-3588 [Signature page to Shareholders Agreement] SHAREHOLDER: TWO-FORTY ASSOCIATES, a Pennsylvania Limited Partnership By: The David F. Bolger Revocable Trust, its General Partner By: /s/ David F. Bolger ------------------------------------------ David F. Bolger, its Trustee Address: c/o Bolger & Co., Inc. 79 Chestnut Street Ridgewood, New Jersey 07450 Attention: David F. Bolger, President Facsimile: (201) 670-9685 With a copy (which shall not constitute notice) to: Address: Wells, Jaworski, Liebman & Patton LLP 12 Route 17 North Paramus, New Jersey 07653 Attention: Thomas M. Wells, Esq. Facsimile: (201) 587-8845 and Address: Sullivan & Cromwell LLP 125 Broad Street New York, New York 10004 Attention: Mark J. Menting, Esq. Facsimile: (212) 558-3588 [Signature page to Shareholders Agreement] SCHEDULE A To the Shareholders Agreement of Cascade Bancorp LIST OF SHAREHOLDERS Two-Forty Associates EXHIBIT A To the Shareholders Agreement of Cascade Bancorp JOINDER In consideration of the permitted Transfer (as defined in the Shareholders Agreement) to the undersigned of shares of common stock in the Company, the undersigned hereby consents and agrees to become a party to and be bound by the Shareholders Agreement (the "Shareholders Agreement"), dated as of the 27th day of December, 2005, as amended (receipt of a copy of which is hereby acknowledged), as fully as if the undersigned were one of its original parties, and all shares of common stock of the Company owned by the undersigned shall be held in accordance with and restricted by the terms of such Shareholders Agreement. Dated: ------------------------------------- Name of Shareholder: ----------------------------------- Sign Name: ----------------------------------- Print Name: ----------------------------------- Address: ----------------------------------- ----------------------------------- ----------------------------------- SSN/EIN: ----------------------------------- Approved by the Company: COMPANY: CASCADE BANCORP By: ------------------------------- Name: Title: Dated: ---------------------------- EX-99.5 6 exh-5.txt EX-99.5, AMENDMENT NO. 1 Exhibit 5 AMENDMENT NO. 1 TO AGREEMENT OF MERGER This Amendment No. 1 (this "Amendment") to the Agreement of Merger, dated as of December 27, 2005 (the "Merger Agreement"), is entered into as of April 13, 2006, by and among F&M Holding Company ("F&M"), Cascade Bancorp ("Cascade"), F&M Acquisition Corporation (formerly Igloo Acquisition Corporation) ("Acquisition Co.") and David F. Bolger (the "Bolger Shareholder"). RECITALS WHEREAS, F&M, Cascade, Acquisition Corp. and the Bolger Shareholder are parties to the Merger Agreement, and wish to amend the Merger Agreement with respect to certain covenants and conditions precedent contained therein in order to facilitate the closing of the Merger. AGREEMENT NOW, THEREFORE, the parties agree as follows: 1. Definitions. All capitalized terms used and not defined herein shall have the meanings given to them in the Merger Agreement. 2. Closing Balance Sheet. The first sentence of Section 5.12 of the Merger Agreement is hereby amended and restated as follows: "Not fewer than five (5) days prior to the Closing Date, F&M will prepare and deliver to Cascade an updated, unaudited consolidated balance sheet of F&M Bank dated as of March 31, 2006 (the "Closing Balance Sheet")." 3. Certain Obligations. Cascade hereby agrees that the requirements and obligations set forth in Section 5.17 of the Merger Agreement are hereby waived. 4. Continued Force and Effect. The Merger Agreement, as amended by this Amendment, is hereby ratified and affirmed as of the date hereof, and shall continue to be in full force and effect. 5. Counterparts. This Amendment may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same instrument, may be delivered by facsimile and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other parties. 6. Headings and Captions. All headings and captions contained in this Amendment are inserted for convenience only and shall not be deemed a part of this Amendment. 7. Governing Law. This Amendment shall in all respects, including all matters of construction, validity and performance, be governed by, and construed and enforced in accordance with, the laws of the State of Oregon, without reference to any rules governing conflicts of laws. [The next page is a signature page.] IN WITNESS WHEREOF, F&M, Cascade, Acquisition Co. and the Bolger Shareholder have caused this Amendment to be signed by their respective officers thereunto duly authorized, all as of the date first written above. CASCADE BANCORP By: /s/ Patricia L. Moss -------------------- Patricia L. Moss Chief Executive Officer F&M HOLDING COMPANY By: /s/ Clarence Jones -------------------- Clarence Jones President F&M ACQUISITION CORPORATION By: /s/ Patricia L. Moss -------------------- Patricia L. Moss President and CEO BOLGER SHAREHOLDER /s/ David F. Bolger ------------------------ David F. Bolger EX-99.6 7 exh-6.txt EXHIBIT 6 -- INVESTMENT REPRESENTATION LETTER Exhibit 6 As of April 20, 2006 DAVID F. BOLGER C/O BOLGER & CO., INC. 79 CHESTNUT STREET RIDGEWOOD, NEW JERSEY 07450 CASCADE BANCORP 1100 NW WALL STREET P.O. BOX 369 BEND, OREGON 97709 RE: GIFT BY DAVID F. BOLGER OF 10,000 SHARES OF CASCADE BANCORP COMMON STOCK This Investor Representation Letter (the "Letter") is rendered and delivered in connection with the outright gift today by David F. Bolger (the "Gift") to the undersigned (the "Donee") of 10,000 shares of common stock, no par value (the "Securities"), of Cascade Bancorp, an Oregon corporation and a registered bank holding company (the "Corporation"). In connection with the Gift of the Securities, the Donee hereby represents, warrants and acknowledges and agrees as follows: 1. The transfer of the Securities by Mr. Bolger to the Donee is being made in the form of an outright gift and without receipt of any payment of consideration in exchange therefor, and Donee acknowledges the receipt of a stock power in blank by Mr. Bolger in connection therewith; 2. Donee is resident in the jurisdiction set forth below on the signature page hereof; 3. The Securities have not been registered under the Securities Act of 1933, as amended (the "Securities Act") or any state securities laws, the Securities are being issued under an exemption from registration under the Securities Act for offers and sales of securities to accredited investors, the Securities are deemed to be "restricted securities" under the Securities Act and, accordingly, the Securities may not be transferred without subsequent registration or the availability of an exemption from registration under the Securities Act; 4. Donee is an accredited investor, as such term is defined in Appendix A attached hereto, and is acquiring the Securities for Donee's own account and not with a view to any resale, distribution or other disposition of the Securities in violation of the Securities Act; 5. As a result of the restrictions on transferability set forth above, the Securities are not readily transferable and, accordingly, may have to be held for an indefinite period of time; 6. Donee is acquiring the Securities for investment for his or its own account and not with a view to, or offer or sale in connection with, any distribution thereof; 7. Donee has such knowledge and experience in financial and business matters that Donee is capable of evaluating the merits and risks of an investment in the Corporation and the Securities and is able to bear the economic risk of loss relating to the Securities; 8. Donee is not acquiring the Securities as a result of any general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act), including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; 9. Donee will not offer, sell or otherwise transfer the Securities unless such securities are registered under the Securities Act or an exemption from such registration requirements is available and understands that upon the original issuance thereof, and until such time as the same is no longer required under applicable requirements of the Securities Act as evidenced by a legal opinion of counsel to the Donee, any certificates representing the Securities, and all securities issued in exchange therefor or in substitution thereof will bear and be subject to the terms of the following legend: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE CORPORATION"; 10. No securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities and any representation to the contrary is a criminal offense; 11. If a corporation, partnership, unincorporated association or other entity, Donee has the legal capacity to enter into and be bound by this Letter and all necessary approvals of directors, shareholders or otherwise have been given and obtained; 12. If an individual, Donee is of the full age of majority and is legally competent to execute this Letter and take all action pursuant hereto; 13. If required by applicable securities legislation, regulations, rules, policies or orders or by any securities commission, stock exchange or other regulatory authority, Donee will execute, deliver, file and otherwise assist the Corporation in filing, such reports, undertakings and other documents with respect to the issuance of the Securities. 14. If any transfer of the Securities is to be made in reliance on an exemption under the Securities Act, the Corporation may require an opinion of counsel satisfactory to it that such transfer is exempt from registration under the Securities Act. 15. Sullivan & Cromwell LLP will and may so rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and agreements in rendering an opinion to the Corporation to the effect that registration of the Securities under the Securities Act is not required in connection with the Gift of the Securities to the Donee. 16. Donee acknowledges that Donee shall not be entitled to make any demand or request to the Corporation to file or withdraw a registration statement pursuant to Section 4 of the Shareholders Agreement, dated as of December 27, 2005, among the Corporation, Mr. Bolger and each person listed on Schedule A thereto. [The next page is a signature page] Dated effective the date first set forth above. DONEE /s/ Clarence Jones -------------------------------------- Clarence Jones DAVID F. BOLGER /s/ David F. Bolger -------------------------------------- David F. Bolger CASCADE BANCORP By /s/ Greg Newton -------------------------------------- Name: Greg Newton Title: Secretary APPENDIX A DEFINITION OF U.S. ACCREDITED INVESTOR "Accredited Investor" means any person which comes within any of the following categories: (1) Any bank as defined in Section 3(a)(2) of the United States Securities Act of 1933 (the "U.S. Securities Act") or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act whether acting in its individual or fiduciary capacity; any broker dealer registered pursuant to Section 15 of the U.S. Securities Exchange Act of 1934 or any insurance company as defined in Section 2(13) of the U.S. Securities Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees if such plan has total assets in excess of US$5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of US$5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are U.S. Accredited Investors; (2) Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; (3) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of US$5,000,000; (4) Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer; (5) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds US$1,000,000; (6) Any natural person who had an individual income in excess of US$200,000 in each of the two most recent years or joint income with that person's spouse in excess of US$300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (7) Any trust with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person (being defined as a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment); or (8) Any entity in which all of the equity owners are U.S. Accredited Investors. EX-99.7 8 exh-7.txt EXHIBIT 7 -- INVESTMENT REPRESENTATION LETTER Exhibit 7 As of April 20, 2006 DAVID F. BOLGER C/O BOLGER & CO., INC. 79 CHESTNUT STREET RIDGEWOOD, NEW JERSEY 07450 CASCADE BANCORP 1100 NW WALL STREET P.O. BOX 369 BEND, OREGON 97709 RE: GIFT BY DAVID F. BOLGER OF 20,000 SHARES OF CASCADE BANCORP COMMON STOCK This Investor Representation Letter (the "Letter") is rendered and delivered in connection with the outright gift today by David F. Bolger (the "Gift") to the undersigned (the "Donee") of 20,000 shares of common stock, no par value (the "Securities"), of Cascade Bancorp, an Oregon corporation and a registered bank holding company (the "Corporation"). In connection with the Gift of the Securities, the Donee hereby represents, warrants and acknowledges and agrees as follows: 1. The transfer of the Securities by Mr. Bolger to the Donee is being made in the form of an outright gift and without receipt of any payment of consideration in exchange therefor, and Donee acknowledges the receipt of a stock power in blank by Mr. Bolger in connection therewith; 2. Donee is resident in the jurisdiction set forth below on the signature page hereof; 3. The Securities have not been registered under the Securities Act of 1933, as amended (the "Securities Act") or any state securities laws, the Securities are being issued under an exemption from registration under the Securities Act for offers and sales of securities to accredited investors, the Securities are deemed to be "restricted securities" under the Securities Act and, accordingly, the Securities may not be transferred without subsequent registration or the availability of an exemption from registration under the Securities Act; 4. Donee is an accredited investor, as such term is defined in Appendix A attached hereto, and is acquiring the Securities for Donee's own account and not with a view to any resale, distribution or other disposition of the Securities in violation of the Securities Act; 5. As a result of the restrictions on transferability set forth above, the Securities are not readily transferable and, accordingly, may have to be held for an indefinite period of time; 6. Donee is acquiring the Securities for investment for his or its own account and not with a view to, or offer or sale in connection with, any distribution thereof; 7. Donee has such knowledge and experience in financial and business matters that Donee is capable of evaluating the merits and risks of an investment in the Corporation and the Securities and is able to bear the economic risk of loss relating to the Securities; 8. Donee is not acquiring the Securities as a result of any general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act), including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; 9. Donee will not offer, sell or otherwise transfer the Securities unless such securities are registered under the Securities Act or an exemption from such registration requirements is available and understands that upon the original issuance thereof, and until such time as the same is no longer required under applicable requirements of the Securities Act as evidenced by a legal opinion of counsel to the Donee, any certificates representing the Securities, and all securities issued in exchange therefor or in substitution thereof will bear and be subject to the terms of the following legend: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE CORPORATION"; 10. No securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities and any representation to the contrary is a criminal offense; 11. If a corporation, partnership, unincorporated association or other entity, Donee has the legal capacity to enter into and be bound by this Letter and all necessary approvals of directors, shareholders or otherwise have been given and obtained; 12. If an individual, Donee is of the full age of majority and is legally competent to execute this Letter and take all action pursuant hereto; 13. If required by applicable securities legislation, regulations, rules, policies or orders or by any securities commission, stock exchange or other regulatory authority, Donee will execute, deliver, file and otherwise assist the Corporation in filing, such reports, undertakings and other documents with respect to the issuance of the Securities. 14. If any transfer of the Securities is to be made in reliance on an exemption under the Securities Act, the Corporation may require an opinion of counsel satisfactory to it that such transfer is exempt from registration under the Securities Act. 15. Sullivan & Cromwell LLP will and may so rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and agreements in rendering an opinion to the Corporation to the effect that registration of the Securities under the Securities Act is not required in connection with the Gift of the Securities to the Donee. 16. Donee acknowledges that Donee shall not be entitled to make any demand or request to the Corporation to file or withdraw a registration statement pursuant to Section 4 of the Shareholders Agreement, dated as of December 27, 2005, among the Corporation, Mr. Bolger and each person listed on Schedule A thereto. [The next page is a signature page] Dated effective the date first set forth above. DONEE /s/ Thomas M. Wells --------------------------------------------- Thomas M. Wells DAVID F. BOLGER /s/ David F. Bolger --------------------------------------------- David F. Bolger CASCADE BANCORP By /s/ Greg Newton --------------------------------------------- Name: Greg Newton Title: Secretary APPENDIX A DEFINITION OF U.S. ACCREDITED INVESTOR "Accredited Investor" means any person which comes within any of the following categories: (1) Any bank as defined in Section 3(a)(2) of the United States Securities Act of 1933 (the "U.S. Securities Act") or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act whether acting in its individual or fiduciary capacity; any broker dealer registered pursuant to Section 15 of the U.S. Securities Exchange Act of 1934 or any insurance company as defined in Section 2(13) of the U.S. Securities Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees if such plan has total assets in excess of US$5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of US$5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are U.S. Accredited Investors; (2) Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; (3) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of US$5,000,000; (4) Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer; (5) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds US$1,000,000; (6) Any natural person who had an individual income in excess of US$200,000 in each of the two most recent years or joint income with that person's spouse in excess of US$300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (7) Any trust with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person (being defined as a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment); or (8) Any entity in which all of the equity owners are U.S. Accredited Investors. EX-99.8 9 exh-8.txt EXHIBIT 8 -- INVESTMENT REPRESENTATION LETTER Exhibit 8 As of April 20, 2006 DAVID F. BOLGER C/O BOLGER & CO., INC. 79 CHESTNUT STREET RIDGEWOOD, NEW JERSEY 07450 CASCADE BANCORP 1100 NW WALL STREET P.O. BOX 369 BEND, OREGON 97709 RE: GIFT BY DAVID F. BOLGER OF 5,000 SHARES OF CASCADE BANCORP COMMON STOCK This Investor Representation Letter (the "Letter") is rendered and delivered in connection with the outright gift today by David F. Bolger (the "Gift") to the undersigned (together, the "Donee") of 5,000 shares of common stock, no par value (the "Securities"), of Cascade Bancorp, an Oregon corporation and a registered bank holding company (the "Corporation"). In connection with the Gift of the Securities, the Donee hereby represents, warrants and acknowledges and agrees as follows: 1. The transfer of the Securities by Mr. Bolger to the Donee is being made in the form of an outright gift and without receipt of any payment of consideration in exchange therefor, and the Donee acknowledges the receipt of a stock power in blank by Mr. Bolger in connection therewith; 2. Donee is resident in the jurisdiction set forth below on the signature page hereof; 3. The Securities have not been registered under the Securities Act of 1933, as amended (the "Securities Act") or any state securities laws, the Securities are being issued under an exemption from registration under the Securities Act for offers and sales of securities to accredited investors, the Securities are deemed to be "restricted securities" under the Securities Act and, accordingly, the Securities may not be transferred without subsequent registration or the availability of an exemption from registration under the Securities Act; 4. Donee is an accredited investor, as such term is defined in Appendix A attached hereto, and is acquiring the Securities for the Donee's own account and not with a view to any resale, distribution or other disposition of the Securities in violation of the Securities Act; 5. As a result of the restrictions on transferability set forth above, the Securities are not readily transferable and, accordingly, may have to be held for an indefinite period of time; 6. Donee is acquiring the Securities for investment for Donee's own account and not with a view to, or offer or sale in connection with, any distribution thereof; 7. Donee has such knowledge and experience in financial and business matters that Donee is capable of evaluating the merits and risks of an investment in the Corporation and the Securities and is able to bear the economic risk of loss relating to the Securities; 8. Donee is not acquiring the Securities as a result of any general solicitation or general advertising (as those terms are used in Regulation D under the Securities Act), including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising; 9. Donee will not offer, sell or otherwise transfer the Securities unless such securities are registered under the Securities Act or an exemption from such registration requirements is available and understands that upon the original issuance thereof, and until such time as the same is no longer required under applicable requirements of the Securities Act as evidenced by a legal opinion of counsel to the Donee, any certificates representing the Securities, and all securities issued in exchange therefor or in substitution thereof will bear and be subject to the terms of the following legend: "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE CORPORATION"; 10. No securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities and any representation to the contrary is a criminal offense; 11. If a corporation, partnership, unincorporated association or other entity, Donee has the legal capacity to enter into and be bound by this Letter and all necessary approvals of directors, shareholders or otherwise have been given and obtained; 12. If an individual, Donee is of the full age of majority and is legally competent to execute this Letter and take all action pursuant hereto; 13. If required by applicable securities legislation, regulations, rules, policies or orders or by any securities commission, stock exchange or other regulatory authority, Donee will execute, deliver, file and otherwise assist the Corporation in filing, such reports, undertakings and other documents with respect to the issuance of the Securities. 14. If any transfer of the Securities is to be made in reliance on an exemption under the Securities Act, the Corporation may require an opinion of counsel satisfactory to it that such transfer is exempt from registration under the Securities Act. 15. Sullivan & Cromwell LLP will and may so rely upon the truth and accuracy of the foregoing representations, warranties, acknowledgements and agreements in rendering an opinion to the Corporation to the effect that registration of the Securities under the Securities Act is not required in connection with the Gift of the Securities to the Donee. 16. Donee acknowledges that Donee shall not be entitled to make any demand or request to the Corporation to file or withdraw a registration statement pursuant to Section 4 of the Shareholders Agreement, dated as of December 27, 2005, among the Corporation, Mr. Bolger and each person listed on Schedule A thereto. [The next page is a signature page] Dated effective the date first set forth above. DONEE /s/ John Lambert --------------------------------------------- John Lambert /s/ Carol A. Lambert --------------------------------------------- Carol A. Lambert DAVID F. BOLGER /s/ David F. Bolger --------------------------------------------- David F. Bolger CASCADE BANCORP By /s/ Greg Newton --------------------------------------------- Name: Greg Newton Title: Secretary APPENDIX A DEFINITION OF U.S. ACCREDITED INVESTOR "Accredited Investor" means any person which comes within any of the following categories: (1) Any bank as defined in Section 3(a)(2) of the United States Securities Act of 1933 (the "U.S. Securities Act") or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act whether acting in its individual or fiduciary capacity; any broker dealer registered pursuant to Section 15 of the U.S. Securities Exchange Act of 1934 or any insurance company as defined in Section 2(13) of the U.S. Securities Act; any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees if such plan has total assets in excess of US$5,000,000; any employee benefit plan within the meaning of the Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of US$5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are U.S. Accredited Investors; (2) Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; (3) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of US$5,000,000; (4) Any director, executive officer, or general partner of the issuer of the securities being offered or sold, or any director, executive officer, or general partner of a general partner of that issuer; (5) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his purchase exceeds US$1,000,000; (6) Any natural person who had an individual income in excess of US$200,000 in each of the two most recent years or joint income with that person's spouse in excess of US$300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (7) Any trust with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person (being defined as a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment); or (8) Any entity in which all of the equity owners are U.S. Accredited Investors. EX-99.9 10 exh-9.txt EXHIBIT 9 -- INVESTMENT REPRESENTATION LETTER Exhibit 9 April 20, 2006 Cascade Bancorp 1100 NW Wall Street P.O. Box 369 Bend, Oregon 97709 Re: Transfer of Shares to Thomas M. Wells, Clarence Jones and John Lambert and Carol A. Lambert Reference is made to the Shareholders Agreement, dated as of December 27, 2005, by and among Cascade Bancorp (the "Company"), myself and each person listed on Schedule A thereto (the "Shareholders Agreement"). Immediately or shortly following the effective time of the Merger (as such term is defined in the Shareholders Agreement), I intend to transfer by way of an outright gift and without receipt of any payment of consideration in exchange therefor 35,000 Shares (as such term is defined in the Shareholders Agreement) as follows: (i) 20,000 Shares to Thomas M. Wells, (ii) 10,000 Shares to Clarence Jones and (iii) 5,000 Shares to John Lambert and Carol A. Lambert, jointly (each of (i), (ii) and (iii), a "Transfer", and collectively, the "Transfers"). To my knowledge, after giving effect to the Transfers as outlined above, neither Thomas M. Wells, Clarence Jones, John Lambert nor Carol A. Lambert will own five percent (5%) or more of the Total Outstanding Common Stock (as such term is defined in the Shareholders Agreement). I hereby request, pursuant to Section 2.03(i) of the Shareholders Agreement, that the Company consent to each Transfer. If the Company so consents, I understand that upon receipt of their respective Shares, none of Thomas M. Wells, Clarence Jones, John Lambert or Carol A. Lambert will be a party to the Shareholders Agreement, and none of the Shares held by any or all of them will be subject to the Shareholders Agreement; provided, that each such person will be entitled to sell such person's Shares pursuant to an effective registration statement filed in connection with Section 4 of the Shareholders Agreement (subject to the restrictions set forth in each such person's Investor Representation Letter, dated the date hereof); provided, further, that none of such persons shall be entitled to make any demand or request to the Company to file or withdraw a registration statement pursuant to Section 4 of the Shareholders Agreement. /s/ David F. Bolger --------------------------- Name: David F. Bolger Accepted and agreed to as of the date first written above: CASCADE BANCORP By /s/ Patricia L. Moss --------------------------------- Name: Patricia L. Moss Title: President -----END PRIVACY-ENHANCED MESSAGE-----