<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 5, 1997.
REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
H. F. AHMANSON & COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 6035 95-0479700
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION) CLASSIFICATION CODE NO.) IDENTIFICATION NO.)
4900 RIVERGRADE ROAD
IRWINDALE, CALIFORNIA 91706
(626) 960-6311
---------------
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MADELEINE A. KLEINER
SENIOR EXECUTIVE VICE PRESIDENT AND GENERAL COUNSEL
H. F. AHMANSON & COMPANY
4900 RIVERGRADE ROAD
IRWINDALE, CALIFORNIA 91706
(626) 960-6311
---------------
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
---------------
WITH COPIES TO:
ALISON S. RESSLER AND VICTOR I. LEWKOW
SULLIVAN & CROMWELL CLEARY, GOTTLIEB, STEEN & HAMILTON
444 SOUTH FLOWER STREET ONE LIBERTY PLAZA
LOS ANGELES, CALIFORNIA 90071 NEW YORK, NEW YORK 10006
(213) 955-8000 (212) 225-2000
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE
OF THE SECURITIES TO THE PUBLIC:
As soon as practicable after this Registration Statement becomes effective.
---------------
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G check the following box. [ ]
---------------
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
=============================================================================================================
Proposed Maximum Proposed Maximum
Title of Each Class of Amount to be Offering Price Per Aggregate Offering Amount of
Securities to be Registered Registered(1) Unit Price Registration Fee
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common stock (including associated
stock purchase rights)........... 15,993,092 shares N/A N/A $130,384.16(2)(3)
=============================================================================================================
</TABLE>
(1) The number of shares of Common Stock, par value $.01 per share ("Ahmanson
Common Stock"), of H. F. Ahmanson & Company to be registered pursuant to
this Registration Statement is based upon the number of shares of Common
Stock, par value $.01 per share ("Coast Common Stock"), of Coast Savings
Financial, Inc. presently outstanding or reserved for issuance under
various plans or otherwise expected to be issued upon the consummation of
the proposed transaction to which this Registration Statement relates,
multiplied by the exchange ratio of 0.8082 shares of Ahmanson Common Stock
for each share of Coast Common Stock.
(2) Pursuant to Rules 457(f) and 457(c) under the Securities Act of 1933, as
amended, the registration fee is based on the average of the high and low
sales prices of Coast Common Stock, as reported by the New York Stock
Exchange on November 28, 1997 ($60.3125), and computed based on the
estimated maximum number of such shares (19,788,532) that may be exchanged
for the Ahmanson Common Stock being registered.
(3) A registration statement fee of $352,081.28 is payable hereunder; however,
a registration fee of $221,697.12 was previously paid in connection with
the filing by Coast of preliminary proxy solicitation materials, under
Section 14(g) and Rule 0-11(a)(2) of the Securities Exchange Act of 1934,
as amended, which fee, pursuant to Rule 457(b) under the Securities Act of
1933, as amended, has been credited against the registration fee payable
hereunder.
---------------
<PAGE> 2
EXPLANATORY NOTE
This Registration Statement on Form S-4 is being filed (i) in
connection with the registration and issuance of shares of common stock, par
value $.01 per share, of H.F. Ahmanson & Company, a Delaware corporation (the
"Registrant"), in connection with the proposed merger (the "Merger") of Coast
Savings Financial, Inc. ("Coast") with and into the Registrant pursuant to an
Amended and Restated Agreement and Plan of Merger, dated as of October 5, 1997,
and (ii) in connection with a special meeting of stockholders of Coast to be
held in connection with the Merger. It is expected that a registration statement
on Form S-1 (the "Form S-1") will be filed at a later date by a trust to be
formed by Coast for the purpose of registering such trust's securities. It is
expected that the Form S-1 will contain a description of the trust's securities
and of the trust itself, which will be formed by Coast in connection with
providing Coast's stockholders with an amount equal to any proceeds (net of
taxes calculated based on certain assumptions and expenses) from certain
litigation claims of Coast Federal Bank, FSB against the United States
government. Prior to the special meeting of Coast stockholders referred to
above, Coast stockholders will receive information including a proxy
statement/prospectus to be included in this Registration Statement, as it may be
amended or supplemented, and a prospectus to be included in the Form S-1, as it
may be amended or supplemented.
<PAGE> 3
[Coast Savings Financial, Inc. Letterhead & Logo]
[date]
Dear Stockholder:
It is my pleasure to invite you to attend a Special Meeting of
Stockholders of Coast Savings Financial, Inc. ("Coast") to be held on
____________, at ______________ a.m., at ________________________, Los Angeles,
California.
At this very important meeting, Coast stockholders will be asked
to consider and vote upon a proposal to approve the Amended and Restated
Agreement and Plan of Merger (the "Merger Agreement"), dated as of October 5,
1997, by and between Coast and H. F. Ahmanson & Company, a Delaware corporation
("Ahmanson"), and the transactions contemplated thereby, including the merger
(the "Merger") of Coast with and into Ahmanson.
If the Merger is approved and consummated, each share of Coast
common stock will be converted into the right to receive 0.8082 of a share of
Ahmanson common stock. In addition, immediately prior to the Merger each Coast
stockholder will receive one Contingent Payment Right Certificate (a "CPR
Certificate") for each of their shares of Coast common stock. The CPR
Certificates will be issued by the newly-formed Coast Federal Litigation
Contingent Payment Right Trust (the "CPR Trust"). Upon consummation of the
Merger, Ahmanson will be contractually bound to pay to the CPR Trust, for the
benefit of the holders of CPR Certificates, an amount equal to any proceeds (net
of taxes and expenses, computed under certain assumptions as described in the
accompanying Proxy Statement/Prospectus), that Coast Federal Bank, FSB ("Coast
Federal") (or its successors) may receive from its pending litigation claims
against the United States government relating to the government's alleged breach
of its agreement with respect to the permanent addition of approximately $299
million to Coast Federal's regulatory capital. Thus, in connection with the
Merger you will both receive Ahmanson common stock and retain an indirect
proportionate interest in our litigation claims against the government. The CPR
Certificates will be transferable[, and it is anticipated that they will be
included in the NASDAQ National Market System,] but no assurance can be given
that an active market for the CPR Certificates will develop or be sustained. The
CPR Certificates are highly speculative securities that involve a high degree of
risk.
THE BOARD OF DIRECTORS OF COAST (THE "COAST BOARD") HAS
UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED
THEREBY, AND BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF COAST AND ITS
STOCKHOLDERS. THE COAST BOARD RECOMMENDS THAT ALL STOCKHOLDERS VOTE "FOR" THE
MERGER PROPOSAL. Coast's financial advisor, Goldman Sachs & Co., has issued its
written opinion to the Coast Board of Directors that the consideration to be
received by holders of Coast common stock pursuant to the Merger Agreement is
fair from a financial point of view to Coast stockholders.
COAST STOCKHOLDERS ARE URGED TO READ CAREFULLY THE ACCOMPANYING
NOTICE OF SPECIAL MEETING AND PROXY STATEMENT/PROSPECTUS, WHICH CONTAIN
IMPORTANT INFORMATION ABOUT THE MERGER AND THE OTHER TRANSACTIONS CONTEMPLATED
BY THE MERGER AGREEMENT, INCLUDING IMPORTANT INFORMATION CONCERNING THE CPR
TRUST AND THE CPR CERTIFICATES. A COPY OF THE OPINION OF GOLDMAN, SACHS & CO. IS
ATTACHED AS APPENDIX D TO THE PROXY STATEMENT/PROSPECTUS ENCLOSED HEREWITH AND
SHOULD BE READ IN ITS ENTIRETY.
Regardless of the number of shares you own, or whether you plan
to attend the meeting, it is very important that your shares be represented and
voted at the meeting. Since the affirmative vote of a majority of the
outstanding shares is required for approval of the Merger Agreement and the
transactions contemplated thereby, a failure to vote is the same as a vote
against the Merger. Please read the enclosed material carefully and complete,
sign and return the enclosed proxy in the envelope provided as soon as possible.
<PAGE> 4
On behalf of the Coast Board of Directors, I thank you for your
support and again urge you to vote FOR the approval and adoption of the Merger
Agreement and the transactions contemplated thereby.
Sincerely,
Ray Martin
Chairman of the Board and
Chief Executive Officer
<PAGE> 5
COAST SAVINGS FINANCIAL, INC.
1000 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90017-2457
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON ______________
Notice is hereby given that a Special Meeting of shareholders
(the "Special Meeting") of Coast Savings Financial, Inc. ("Coast") will be held
on ____________, at _________________, at _____ a.m., at ____________, Los
Angeles, California, for the following purposes, as more fully described in the
accompanying Proxy Statement/ Prospectus:
1. To consider and vote upon a proposal to approve an Amended and
Restated Agreement and Plan of Merger (the "Merger Agreement"), dated as of
October 5, 1997, between Coast and H. F. Ahmanson & Company, a Delaware
corporation ("Ahmanson"), and the transactions contemplated thereby, including
the approval of the merger of Coast with and into Ahmanson (the "Merger"), the
establishment of and the terms of the Coast Federal Litigation Contingent
Payment Right Trust (the "CPR Trust"), the CPR Certificate Distribution (as
defined in the accompanying Proxy Statement/Prospectus), the engagement of the
Litigation Trustees (as defined in the accompanying Proxy Statement/Prospectus)
(including the terms of their engagement) and the rights of the holders of CPR
Certificates (as defined in the accompanying Proxy Statement/Prospectus)
(collectively, the "Transaction Proposal"). The Merger Agreement, the Amended
and Restated Declaration of Trust governing the CPR Trust and the Commitment
will be substantially in the form of Appendices A, B and C, respectively, to the
accompanying Proxy Statement/Prospectus.
2. To transact such other business as may properly come before
the Special Meeting or any adjournment or postponement thereof.
Only holders of Coast common stock of record at the close of
business on ____________ are entitled to receive notice of and to vote at the
Special Meeting or any adjournment or postponement thereof.
THE BOARD OF DIRECTORS OF COAST UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE "FOR" APPROVAL OF THE TRANSACTION PROPOSAL.
Holders of Coast common stock who do not vote in favor of the
Transaction Proposal will be entitled to dissenters' rights of appraisal under
Section 262 of the Delaware General Corporations Law. For a more complete
description of such dissenters' rights, see "Appraisal Rights" in the
accompanying Proxy Statement/Prospectus.
By order of the Board of Directors,
------------------------------------
Corporate Secretary
[date]
THE APPROVAL OF THE TRANSACTION PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF COAST COMMON STOCK. THEREFORE,
FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST THE TRANSACTION
PROPOSAL. WHETHER OR NOT YOU PLAN TO ATTEND THE COAST SPECIAL MEETING, PLEASE
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE
ENCLOSED RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED
STATES. IF YOU ATTEND THE COAST SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH TO DO SO EVEN IF YOU HAVE PREVIOUSLY SENT IN YOUR PROXY CARD.
<PAGE> 6
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED DECEMBER 5, 1997
PROXY STATEMENT OF COAST SAVINGS FINANCIAL, INC.
PROSPECTUS OF
H. F. AHMANSON & COMPANY
COMMON STOCK
(PAR VALUE $.01 PER SHARE)
---------------
This Proxy Statement/Prospectus is being furnished to holders of common
stock, $.01 par value ("Coast Common Stock"), of Coast Savings Financial, Inc.,
a Delaware corporation ("Coast"), in connection with the solicitation of proxies
by the Board of Directors of Coast (the "Coast Board") for use at a Special
Meeting of stockholders to be held on _________, 199_, at ____ a.m., at
_______________, Los Angeles, California and at any adjournments or
postponements thereof (the "Special Meeting").
The purpose of the Special Meeting is to consider and vote upon a
proposal to approve an Amended and Restated Agreement and Plan of Merger, dated
as of October 5, 1997 (the "Merger Agreement"), by and between Coast and H. F.
Ahmanson & Company, a Delaware corporation ("Ahmanson"), and the transactions
contemplated thereby, including the approval of the merger of Coast with and
into Ahmanson (the "Merger"), the establishment of and the terms of a trust to
be known as the Coast Federal Litigation Contingent Payment Right Trust (the
"CPR Trust"), the CPR Certificate Distribution (as defined herein), the
engagement of the Litigation Trustees (as defined herein) (including the terms
of their engagement) for the CPR Trust, the terms of the Commitment (as defined
herein) and the rights of the holders of CPR Certificates (as defined herein).
See "Summary" and "The Merger" and Appendices A and C to this Proxy
Statement/Prospectus.
Upon consummation of the Merger, each outstanding share of Coast Common
Stock, together with each associated Coast Right (as defined herein), shall
cease to be outstanding and each such share (other than (a) certain shares, if
any, held by Coast, Ahmanson or their subsidiaries and (b) shares, if any, held
by holders of Coast Common Stock ("Dissenters' Shares") who perfect their rights
to dissent from the Merger) shall be converted into and exchanged for 0.8082 of
a share (the "Exchange Ratio") of common stock, par value $.01 per share, of
Ahmanson ("Ahmanson Common Stock") (together with the appropriate number of
Ahmanson stock purchase rights ("Ahmanson Rights") issued as provided in the
Ahmanson Rights Plan (as defined herein)), with cash paid in lieu of fractional
shares. In addition, and as additional consideration to be received by the Coast
stockholders in the Merger, at or prior to the Effective Time (as defined
herein), Ahmanson will enter into the Commitment with the CPR Trust. See "The
Merger."
Pursuant to the Merger Agreement, at or prior to the Effective Time,
Ahmanson will enter into a contractual commitment (the "Commitment") with the
CPR Trust pursuant to which Ahmanson will be obligated to pay to the CPR Trust
from time to time an aggregate amount equal to the Commitment Amount. Generally,
the Commitment Amount is an amount equal to the proceeds, if any, received by
Ahmanson, Coast Federal or Ahmanson's subsidiary, Home Savings of America, FSB
("Home Savings") (or any other successor), as a result of the Litigation, net of
assumed tax liabilities attributable to such receipt (calculated on certain
assumptions described herein), certain expenses and interest, plus the amount of
certain assumed tax benefits (calculated on certain assumptions described
herein) to Ahmanson, if any, associated with payments under the Commitment, all
as more fully described herein. See "The Merger--Merger Consideration; Exchange
Ratio; Commitment." The Commitment will rank pari passu with other senior
indebtedness of Ahmanson. The Litigation will remain an asset of Coast Federal
and its successors.
This Proxy Statement/Prospectus also constitutes a prospectus of
Ahmanson in respect of the shares of Ahmanson Common Stock to be issued to
stockholders of Coast in connection with the Merger and, following consummation
of the Merger, in respect of any shares of Ahmanson Common Stock that are
issuable upon exercise of Replacement Options (as defined herein). Based on the
[ ] shares of Coast Common Stock outstanding on the Record
(continued on the next page)
<PAGE> 7
(cover page continued)
Date (as defined herein), the [ ] shares of Coast Common Stock issuable upon
exercise of outstanding stock options and assuming the exercise of all such
stock options prior to the Effective Time and the Exchange Ratio of 0.8082, up
to approximately [ ] Ahmanson Common Shares will be issuable upon consummation
of the Merger.
Both the Ahmanson Common Stock and the Coast Common Stock are listed and
traded on the New York Stock Exchange, Inc. ("NYSE") and the Pacific Exchange.
On October 3, 1997, the last business day prior to public announcement of the
execution of the Merger Agreement, the last reported sale prices per share of
Ahmanson Common Stock and Coast Common Stock on the NYSE Composite Transactions
Reporting System (the "NYSE Composite Tape") were $571/8 and $54, respectively,
and on _________ __, 1997, the latest practicable date prior to the mailing of
this Proxy Statement/Prospectus, such last reported sale prices per share were
$_______ and $ _______, respectively.
THE SHARES OF AHMANSON COMMON STOCK
OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
---------------
THE SHARES OF AHMANSON COMMON STOCK
OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF A BANK OR SAVINGS ASSOCIATION AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENTAL AGENCY.
---------------
The date of this Proxy Statement/Prospectus is ___________, 1997, and it is
first being mailed or otherwise delivered to Coast stockholders on or about such
date.
<PAGE> 8
TABLE OF CONTENTS
<TABLE>
<S> <C>
AVAILABLE INFORMATION........................................................................3
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE............................................5
SUMMARY......................................................................................7
Parties to the Merger.....................................................................7
Special Meeting; Record Date..............................................................8
The Merger................................................................................8
Market for Common Stock..................................................................13
Comparison of Certain Unaudited per Share Data...........................................13
Selected Consolidated Financial Data of Ahmanson (Historical)............................15
Selected Consolidated Financial Data of Coast (Historical)...............................17
Selected Unaudited Pro Forma Combined Financial Data.....................................19
GENERAL INFORMATION.........................................................................21
Special Meeting..........................................................................21
Record Date, Solicitation and Revocability of Proxies....................................21
Vote Required............................................................................22
Recommendation of Coast Board of Directors...............................................22
THE MERGER..................................................................................22
General..................................................................................23
Merger Consideration; Exchange Ratio; Commitment.........................................23
Background of the Merger.................................................................28
Reasons of Coast for the Merger..........................................................29
Opinion of Coast's Financial Advisor.....................................................31
Reasons of Ahmanson for the Merger.......................................................36
Effective Time...........................................................................36
Distribution of Ahmanson Common Stock Certificates.......................................37
Fractional Shares........................................................................37
The CPR Trust, the CPR Certificates and the CPR Certificate Distribution.................37
Stock Options; Performance Share Awards; SARs............................................38
Certain Federal Income Tax Consequences..................................................39
Management and Operations After the Merger...............................................40
Post-Acquisition Compensation and Benefits...............................................41
Interests of Certain Persons in the Transaction Proposal.................................41
Conditions to Consummation...............................................................44
Regulatory Approvals.....................................................................45
Amendment and Waiver.....................................................................46
Termination; Termination Fee.............................................................46
Conduct of Business Pending the Merger...................................................46
Expenses and Fees........................................................................48
Accounting Treatment.....................................................................48
Stock Exchange Listing of Ahmanson Common Stock..........................................49
Resales of Ahmanson Common Stock.........................................................49
Acquisition Proposals....................................................................49
Earnings Estimates.......................................................................50
APPRAISAL RIGHTS............................................................................51
</TABLE>
-i-
<PAGE> 9
<TABLE>
<S> <C>
AHMANSON AND COAST UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION.......................54
DESCRIPTION OF AHMANSON CAPITAL STOCK.......................................................63
Ahmanson Common Stock....................................................................63
Repurchases of Ahmanson Common Stock.....................................................63
Ahmanson Preferred Stock.................................................................64
Certain Regulatory Considerations........................................................65
CERTAIN DIFFERENCES IN THE RIGHTS OF AHMANSON STOCKHOLDERS AND
COAST STOCKHOLDERS.......................................................................71
Meetings of Stockholders.................................................................71
Number and Election of Directors.........................................................71
Indemnification..........................................................................72
Certain Voting Rights....................................................................72
Removal of Directors; Filling Vacancies on the Board of Directors........................73
Stockholder Action by Written Consent....................................................73
Amendment of By-laws.....................................................................73
Rights Plans.............................................................................73
COMPARATIVE MARKET PRICES AND DIVIDENDS.....................................................75
Ahmanson.................................................................................75
Coast....................................................................................76
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF COAST.......................................77
Principal Beneficial Owners..............................................................77
Shares Beneficially Owned By Directors and Executive Officers............................77
EXPERTS.....................................................................................78
VALIDITY OF AHMANSON COMMON STOCK...........................................................78
</TABLE>
APPENDICES:
APPENDIX A - Amended and Restated Agreement and Plan of Merger, dated as of
October 5, 1997, by and between Ahmanson and Coast
APPENDIX B - [Reserved]
APPENDIX C - Form of Commitment
APPENDIX D - Opinion of Goldman, Sachs & Co.
APPENDIX E - Section 262 of the DGCL
-ii-
<PAGE> 10
AVAILABLE INFORMATION
Ahmanson and Coast are each subject to the reporting and informational
requirements of the Securities Exchange Act of 1934, as amended, and the rules
and regulations thereunder (the "Exchange Act"), and, in accordance therewith,
file reports, proxy statements and other information relating to their business,
financial position, results of operations and other matters with the Securities
and Exchange Commission (the "Commission"). Such reports, proxy statements and
other information filed by Ahmanson and Coast with the Commission may be
inspected and copied at the principal office of the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and may be inspected at the
Commission's Regional Offices at 7 World Trade Center, New York, New York 10048,
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material may also be obtained from the Public
Reference Section of the Commission at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. Certain of such reports, proxy statements and other
information are also available from the Commission over the Internet at
http://www.sec.gov. In addition, Ahmanson Common Stock and Coast Common Stock
are traded on the NYSE and the Pacific Exchange. Reports, proxy statements, and
other information concerning Ahmanson and Coast may be inspected at the offices
of the NYSE, 20 Broad Street, New York, New York 10005 and at the offices of the
Pacific Exchange, 115 Sansome Street, 2nd Floor, San Francisco, California
94104.
Ahmanson has filed with the Commission a Registration Statement on Form
S-4 (together with any amendments thereto, the "Ahmanson Registration
Statement") under the Securities Act of 1933, as amended, and the rules and
regulations thereunder (the "Securities Act"), of which the following sections
of this Proxy Statement/Prospectus are a part: the Cover Page (other than the
fourth and seventh paragraphs and the first legend on the Cover Page) and the
sections of the Proxy Statement/Prospectus under the captions "Available
Information," "Incorporation of Certain Information by Reference," "Summary"
(other than "Summary--Formation of the CPR Trust and the CPR Certificate
Distribution," "Summary--Resale of CPR Certificates" and "Summary--No Existing
Trading Market for the CPR Certificates"), "General Information" (other than
"General Information--Special Meeting--CPR Trust Prospectus"), "The Merger"
(other than "The Merger--Distribution of the CPR Certificates"), "Appraisal
Rights," "Ahmanson and Coast Unaudited Pro Forma Combined Financial
Information," "Description of Ahmanson Capital Stock," "Certain Differences in
the Rights of Ahmanson Stockholders and Coast Stockholders," "Comparative Market
Prices and Dividends" (other than "Comparative Market Prices and Dividends--No
Existing Trading Market for the CPR Certificates"), "Voting Securities and
Principal Stockholders of Coast," "Experts" and "Validity of Ahmanson Common
Stock." The CPR Trust has filed with the Commission a Registration Statement on
Form S-1 (together with any amendments thereto, the "CPR Trust Registration
Statement" and, together with the Ahmanson Registration Statement, the
"Registration Statements") under the Securities Act, of which the following
sections of this Proxy Statement/Prospectus are a part: the fourth and seventh
paragraphs and the first legend of the Cover Page and the sections of the Proxy
Statement/Prospectus under the captions "Summary--Formation of the CPR Trust and
the CPR Certificate Distribution," "Summary--Resale of CPR Certificates,"
"Summary--No Existing Trading Market for the CPR Certificates," "General
Information--Special Meeting--CPR Trust Prospectus," "The Merger--Distribution
of the CPR Certificates," "Comparative Market Prices and Dividends--No Existing
Trading Market for the CPR Certificates" and "The CPR Trust and the CPR
Certificates". This Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statements, certain portions of which
have been omitted pursuant to the rules and regulations of the Commission and to
which portions reference is hereby made for further information. Statements
contained in this Proxy Statement/Prospectus concerning the provisions of
certain documents filed or incorporated by reference as exhibits to the
Registration Statements are necessarily brief descriptions thereof, and are not
necessarily complete, and each such statement is qualified in its entirety by
reference to the full text of such document.
All information contained herein with respect to Ahmanson and its
subsidiaries has been supplied by Ahmanson, and all information with respect to
Coast and its subsidiaries and the CPR Trust has been supplied by Coast and the
CPR Trust.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY AHMANSON, COAST OR THE CPR TRUST. NEITHER THE
<PAGE> 11
DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE
SECURITIES TO WHICH THIS PROXY STATEMENT/PROSPECTUS RELATES SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF AHMANSON, COAST OR ANY OF THEIR RESPECTIVE SUBSIDIARIES OR THE CPR
TRUST SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT
AS OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROXY STATEMENT/PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO PURCHASE, ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES OR AN OFFER TO SELL OR
A SOLICITATION OF AN OFFER TO PURCHASE THE SECURITIES OFFERED BY THIS PROXY
STATEMENT/PROSPECTUS IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION
IS NOT LAWFUL.
-4-
<PAGE> 12
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by Ahmanson with the Commission under
Section 13(a) or 15(d) of the Exchange Act are hereby incorporated by reference
in this Proxy Statement/Prospectus: (a) Ahmanson's Annual Report on Form 10-K as
of and for the year ended December 31, 1996 (the "1996 Ahmanson 10-K"); (b) the
portions of Ahmanson's Proxy Statement for the Annual Meeting of stockholders
held on April 21, 1997 that have been incorporated by reference in the 1996
Ahmanson 10-K; (c) Ahmanson's Quarterly Reports on Form 10-Q for the three
months ended March 31, 1997, the six months ended June 30, 1997 and the nine
months ended September 30, 1997; (d) the description of Ahmanson Common Stock
set forth in Ahmanson's registration statement on Form 8-A filed pursuant to
Section 12 of the Exchange Act on June 24, 1985, and any amendment or report
filed for the purpose of updating any such description; (e) Ahmanson's Current
Reports on Form 8-K, dated January 15, 1997, February 17, 1997, February 21,
1997, February 25, 1997, March 10, 1997, March 17, 1997, March 19, 1997, March
26, 1997, April 8, 1997, April 28, 1997, May 19, 1997, June 4, 1997, July 10,
1997, October 6, 1997, October 14, 1997 and November 7, 1997; and (f) the
description of the Ahmanson Rights contained in Item 1 of Ahmanson's
registration statement on Form 8-A dated August 2, 1988, and any amendment or
report filed for the purpose of updating such description.
The following documents filed by Coast with the Commission under Section
13(a) or 15(d) of the Exchange Act are hereby incorporated by reference in this
Proxy Statement/Prospectus: (a) Coast's Annual Report on Form 10-K for the year
ended December 31, 1996 (the "1996 Coast 10-K"); (b) the portions of Coast's
Proxy Statement for the Annual Meeting of stockholders held on April 23, 1997
that have been incorporated by reference in the 1996 Coast 10-K; (c) Coast's
Quarterly Reports on Form 10-Q for the three months ended March 31, 1997, the
six months ended June 30, 1997 and the nine months ended September 30, 1997; (d)
Coast's Current Report on Form 8-K, dated October 6, 1997; and (e) the
description of the Coast Rights contained in Item 1 of Coast's registration
statement on Form 8-A dated August 31, 1989, and any amendment or report filed
for the purpose of updating such description.
All documents filed by Ahmanson and Coast pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this Proxy
Statement/Prospectus and prior to the Special Meeting are hereby incorporated by
reference in this Proxy Statement/Prospectus and shall be deemed a part hereof
from the date of filing of such document.
Any statement contained herein, in any supplement hereto or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of the Registration Statements
and this Proxy Statement/Prospectus to the extent that a statement contained
herein, in any supplement hereto or in any other subsequently filed document
which also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of the
Registration Statements, this Proxy Statement/Prospectus or any supplement
hereto.
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN
DOCUMENTS THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS
ARE AVAILABLE WITHOUT CHARGE UPON REQUEST FROM: AS TO AHMANSON DOCUMENTS, H. F.
AHMANSON & COMPANY, 4900 RIVERGRADE ROAD, IRWINDALE, CALIFORNIA 91706,
ATTENTION: INVESTOR RELATIONS AND TELEPHONE REQUESTS MAY BE DIRECTED TO (626)
814-7986; AND, AS TO COAST DOCUMENTS, COAST SAVINGS FINANCIAL, INC., 1000
WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90017, ATTENTION: INVESTOR RELATIONS
AND TELEPHONE REQUESTS MAY BE DIRECTED TO (213) 362-2000. IN ORDER TO ENSURE
TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY __________,
1997.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
THIS PROXY STATEMENT/PROSPECTUS CONTAINS OR INCORPORATES BY REFERENCE
CERTAIN FORWARD LOOKING STATEMENTS WITHIN THE MEANING OF THE SECURITIES ACT, THE
EXCHANGE ACT AND THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 WITH
RESPECT TO THE FINANCIAL CONDITION, RESULTS OF OPERATIONS AND BUSINESS OF
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<PAGE> 13
AHMANSON AND, ASSUMING THE CONSUMMATION OF THE MERGER, A COMBINED AHMANSON/COAST
COMPANY, INCLUDING STATEMENTS RELATING TO: (A) THE COST SAVINGS AND ACCRETION TO
CASH EARNINGS AND REPORTED EARNINGS THAT WILL BE REALIZED FROM THE MERGER; (B)
THE IMPACT ON REVENUES OF THE PROPOSED MERGER, INCLUDING ESTIMATED ENHANCED
REVENUES AND COST SAVINGS; AND (C) THE RESTRUCTURING CHARGES EXPECTED TO BE
INCURRED IN CONNECTION WITH THE PROPOSED MERGER. THESE FORWARD LOOKING
STATEMENTS INVOLVE CERTAIN RISKS AND UNCERTAINTIES. NO ASSURANCE CAN BE GIVEN
THAT SUCH RESULTS WILL BE REALIZED. FACTORS THAT MAY CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH FORWARD LOOKING STATEMENTS
INCLUDE, AMONG OTHERS, THE FOLLOWING POSSIBILITIES: (1) EXPECTED COST SAVINGS
FROM THE PROPOSED MERGER CANNOT BE FULLY REALIZED OR REALIZED WITHIN THE
EXPECTED TIME FRAME; (2) REVENUES FOLLOWING THE PROPOSED MERGER ARE LOWER THAN
EXPECTED; (3) COMPETITIVE PRESSURE AMONG DEPOSITORY INSTITUTIONS INCREASES
SIGNIFICANTLY; (4) COSTS OR DIFFICULTIES RELATED TO THE INTEGRATION OF THE
BUSINESSES OF AHMANSON AND COAST ARE GREATER THAN EXPECTED; (5) CHANGES IN THE
INTEREST RATE ENVIRONMENT REDUCE INTEREST MARGINS; (6) GENERAL ECONOMIC
CONDITIONS, EITHER NATIONALLY OR IN THE STATES IN WHICH THE COMBINED COMPANY
WILL BE DOING BUSINESS, ARE LESS FAVORABLE THAN EXPECTED; AND (7) LEGISLATION OR
REGULATORY CHANGES ADVERSELY AFFECT THE BUSINESSES IN WHICH THE COMBINED COMPANY
WOULD BE ENGAGED.
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<PAGE> 14
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement/Prospectus. This summary is not intended to be a complete
description of the matters covered in this Proxy Statement/Prospectus and is
subject to and qualified in its entirety by reference to the more detailed
information contained elsewhere in this Proxy Statement/Prospectus, including
the Appendices hereto, and in the documents incorporated by reference in this
Proxy Statement/Prospectus. A copy of the Merger Agreement and the form of
Commitment are set forth as Appendices A and C to this Proxy
Statement/Prospectus, respectively, and reference is made thereto for a complete
description of the terms of the Merger and the terms of the Commitment,
respectively. Stockholders are urged to read carefully the entire Proxy
Statement/Prospectus, including the Appendices. As used in this Proxy
Statement/Prospectus, the terms "Ahmanson" and "Coast" refer to such
corporations, respectively, and where the context requires, such corporations
and their respective subsidiaries.
PARTIES TO THE MERGER
AHMANSON.
Ahmanson, a Delaware corporation, is a savings and loan holding company
which conducts its principal business operations through Home Savings, a
federally chartered savings bank. Ahmanson engages in residential real estate
lending, consumer and small business banking, and related financial services. At
September 30, 1997, Home Savings had 301 branches in California, 27 branches in
Florida and 43 branches in Texas.
At September 30, 1997, Ahmanson had total assets of $46.8 billion,
deposits of $32.4 billion and stockholders' equity of $2.4 billion. Based on
deposits, Ahmanson was at that date the fourth largest depository institution in
California and the 19th largest in the United States and the second largest
savings association in the United States. Home Savings maintains its capital
levels above the "well capitalized" standards established by the Office of
Thrift Supervision.
Ahmanson has its principal executive offices at 4900 Rivergrade Road,
Irwindale, California 91706, telephone number (626) 960-6311.
COAST.
Coast, a Delaware corporation, is a savings and loan holding company
which conducts its principal business operations through Coast Federal.
Substantially all of Coast's consolidated revenues are derived from the
operations of Coast Federal, and Coast Federal represented substantially all of
Coast's consolidated assets and liabilities at September 30, 1997.
Coast Federal, a federal savings bank headquartered in Los Angeles,
California, was founded in 1935 and converted from mutual to stock form in 1985.
Based on total deposits of $9.0 billion at September 30, 1997, Coast Federal was
the _____ largest savings association in the United States and the _____ largest
depository institution in California. Coast Federal's business is that of a
financial intermediary and consists primarily of attracting deposits from the
general public and using such deposits, together with borrowings and other
funds, to make mortgage loans secured by residential real estate located in
California. At September 30, 1997, Coast Federal operated 90 retail banking
offices, all of which are located in California.
Coast has its principal executive offices at 1000 Wilshire Boulevard,
Los Angeles, California 90017, telephone number (213) 362-2000.
-7-
<PAGE> 15
SPECIAL MEETING; RECORD DATE
The Special Meeting will be held at ____ a.m., on _______, _____ __,
199_, at _______________ ________________, Los Angeles, California. At the
Special Meeting, Coast stockholders will consider and vote upon approval and
adoption of the Merger Agreement and the transactions contemplated thereby,
including the approval of the Merger, the establishment of and the terms of the
CPR Trust, the CPR Certificate Distribution, the engagement of the Litigation
Trustees (including the terms of their engagement) for the CPR Trust, the terms
of the Commitment and the rights of the holders of CPR Certificates
(collectively, the "Transaction Proposal").
The Coast Board has fixed the close of business on ________ __, 1997, as
the record date for determining the Coast stockholders entitled to receive
notice of and to vote at the Special Meeting (the "Record Date"). As of the
Record Date, _____ shares of Coast Common Stock were issued and outstanding and
entitled to be voted at the Special Meeting. For additional information with
respect to the Special Meeting, including the Record Date and vote required for
approval, see "General Information."
THE MERGER
GENERAL.
The Merger Agreement provides that Coast will merge with and into
Ahmanson, which will be the surviving corporation in the Merger and will be
governed by the laws of the State of Delaware. If the Transaction Proposal is
approved at the Special Meeting, all required governmental and other consents
and approvals are obtained and all the other conditions to the obligations of
the parties to consummate the Merger are either satisfied or waived (if
permitted), the CPR Certificate Distribution will be effected and, immediately
thereafter, the Merger will be consummated. In addition, Ahmanson will enter
into the Commitment with the CPR Trust at or prior to the Effective Time and
effective at the Effective Time. A description of the Commitment and the related
Commitment Amount are more fully set forth below under "--Commitment" and "The
Merger--Merger Consideration; Exchange Ratio; Commitment." A copy of the Merger
Agreement and a copy of the form of Commitment are set forth as Appendices A and
C to this Proxy Statement/Prospectus, respectively. See "The Merger."
MERGER CONSIDERATION.
The merger consideration (the "Merger Consideration") pursuant to the
Merger Agreement consists of (a) the shares of Ahmanson Common Stock issuable in
exchange for shares of Coast Common Stock pursuant to the Merger Agreement, and
cash in lieu of fractional share interests, and (b) the entering into of the
Commitment by Ahmanson.
EXCHANGE RATIO.
At the time of the Merger, each outstanding share of Coast Common Stock
(other than (a) certain shares, if any, held by Coast, Ahmanson or their
subsidiaries and (b) Dissenters' Shares, if any) will be converted into and
exchanged for 0.8082 of a share of Ahmanson Common Stock (together with the
appropriate number of Ahmanson Rights as provided in the Ahmanson Rights Plan).
No fractional shares of Ahmanson Common Stock will be issued. Rather, cash
(without interest) will be paid in lieu of any fractional share interest to
which any Coast stockholder would be entitled upon consummation of the Merger,
determined by multiplying such fraction by the average of the last sale prices
of the Ahmanson Common Stock, as reported by the NYSE Composite Tape (as
reported in The Wall Street Journal or, if not reported therein, in another
authoritative source) for the five NYSE trading days immediately preceding the
Effective Date.
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<PAGE> 16
COMMITMENT.
Ahmanson will enter into the Commitment, substantially in the form
attached hereto as Appendix C, with the CPR Trust at or prior to the Effective
Time and effective at the Effective Time. Immediately prior to the Effective
Time, and provided that all other conditions to consummation of the Merger have
been either satisfied or waived (if permitted), the CPR Certificates will be
distributed to the Coast stockholders (and to the other persons specified in the
Merger Agreement and described herein under "The Merger--The CPR Trust, the CPR
Certificates and the CPR Certificate Distribution"). The Commitment will
obligate Ahmanson to pay to the CPR Trust from time to time an aggregate amount
equal to the Commitment Amount. As used in this Proxy Statement/Prospectus, the
Commitment Amount means an amount equal to the Litigation Proceeds (as defined
herein) minus the Reimbursements (as defined herein) plus the Assumed Tax
Benefit (as defined herein). Litigation Proceeds means any and all cash payments
actually received by Coast Federal or Home Savings or any of their affiliates
(the "Ahmanson Group") pursuant to a final, non-appealable judgment or a final
settlement of the Litigation (the "Cash Proceeds") and the non-cash payments, if
any, actually received by the Ahmanson Group pursuant to a final, non-appealable
judgment or a final settlement of the Litigation (the "Non-Cash Proceeds").
Reimbursements means (a) an amount equal to the Expense Fund (as defined herein)
plus (b) interest on the portions of the Expense Fund withdrawn by the CPR Trust
calculated from the time of any such withdrawal at an annual interest rate equal
to the Reference Rate of Bank of America (the "Reference Rate") in effect from
time to time plus 250 basis points, compounded quarterly plus (c) the Assumed
Tax Liability (as defined herein) plus (d) in the event Litigation Proceeds are
required to be included in income for federal income tax purposes in a taxable
year prior to the year such proceeds are received in cash (either because of the
accrual of Cash Proceeds before the payment thereof or the time required to
liquidate Non-Cash Proceeds), interest at the Reference Rate plus 250 basis
points from the date of such payment of taxes to the date of receipt of cash.
The Expense Fund means an amount equal to $20 million, less the expenses
relating to the Litigation incurred and paid between August 31, 1997 and the
Effective Date, which amount Ahmanson will deposit at the Effective Time in a
non-interest bearing demand-deposit account in the name of the CPR Trust at Home
Savings. Subject to certain exceptions, the Assumed Tax Liability will be
computed on the assumption that the Litigation Proceeds will be includible in
the Ahmanson Group's gross income as ordinary income in full at the highest net
marginal federal, state and local income tax rate. For additional information
concerning the Commitment, the Commitment Amount and related matters, see "The
Merger--Merger Consideration; Exchange Ratio; Commitment."
VOTE REQUIRED.
Approval of the Transaction Proposal requires the affirmative vote of a
majority of the outstanding shares of the Coast Common Stock entitled to vote at
the Special Meeting. As of the Record Date, the directors and executive officers
of Coast and their affiliates held _______ shares (or approximately ____% of the
outstanding shares) of Coast Common Stock, not including unissued shares deemed
beneficially owned pursuant to outstanding Coast Stock Options. As of the Record
Date, Ahmanson held ___ shares of Coast Common Stock and directors and executive
officers of Ahmanson and their affiliates held ___ shares of Coast Common Stock.
See "General Information--Vote Required" and "The Merger--Interests of Certain
Persons in the Transaction Proposal."
Approval of the Merger Agreement by holders of Ahmanson Common Stock is
not required under the Delaware General Corporation Law ("DGCL") or the rules of
the NYSE. See "General Information--Vote Required."
RECOMMENDATION OF THE COAST BOARD.
The Coast Board believes that approval of the Merger Agreement and the
transactions contemplated thereby, including the approval of the Merger, the
establishment of and the terms of the CPR Trust, the CPR Certificate
Distribution, the engagement of the Litigation Trustees (including the terms of
their engagement) for the CPR Trust, the terms of the Commitment and the rights
of the holders of CPR Certificates, is in the best interests of Coast and its
stockholders and unanimously recommends that the stockholders of Coast vote
"FOR" approval
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<PAGE> 17
of the Transaction Proposal. The Coast Board has unanimously approved the
Transaction Proposal. In deciding to approve the Transaction Proposal, the Coast
Board considered a number of factors, including the financial condition, results
of operations and future prospects of Coast and Ahmanson. See "The
Merger--Background of the Merger" and "--Reasons of Coast for the Merger." As a
result of the difficulty in establishing the value of the Litigation for
purposes of the Merger, the Coast Board determined that the ultimate value of
the Litigation should be retained by Coast's stockholders in connection with the
Merger and, thus, the Coast Board, as an integral part of its approval of the
Transaction Proposal, approved the establishment of the CPR Trust, the terms of
the CPR Certificates and the Commitment, the CPR Certificate Distribution and
related matters. See "The Merger--Interests of Certain Persons in the
Transaction Proposal."
THE COAST BOARD UNANIMOUSLY RECOMMENDS THAT COAST STOCKHOLDERS
VOTE "FOR" APPROVAL OF THE TRANSACTION PROPOSAL.
OPINION OF COAST'S FINANCIAL ADVISOR.
Goldman, Sachs & Co. ("Goldman Sachs"), Coast's financial advisor, has
rendered its written opinion, dated October 5, 1997, to the Coast Board to the
effect that, as of such date, based on and subject to the matters set forth in
such opinion, the proposed Consideration (as defined herein) to be received by
the holders of Coast Common Stock was fair from a financial point of view to the
Coast stockholders. Goldman Sachs has confirmed its October 5, 1997 opinion as
of the date of this Proxy Statement/Prospectus by delivery of its written
opinion to the Coast Board, dated the date hereof. For additional information,
see "The Merger--Opinion of Coast's Financial Advisor." The opinion of Goldman
Sachs, dated the date of this Proxy Statement/Prospectus, is attached as
Appendix D to this Proxy Statement/Prospectus. Holders of Coast Common Stock are
urged to read such opinion in its entirety for descriptions of the procedures
followed, matters considered and limitations on the reviews undertaken in
connection therewith.
EFFECTIVE TIME.
If the Transaction Proposal is approved by the requisite vote of the
Coast stockholders, all required governmental and other consents and approvals
are obtained and the other conditions to the obligations of the parties to
consummate the Merger are either satisfied or waived (if permitted), the CPR
Certificate Distribution will be effected on the Effective Date with a record
and payment date on the Effective Date immediately prior to the Effective Time
and the Merger will be consummated and will become effective on the date (the
"Effective Date") and at the time (the "Effective Time") that a certificate of
merger is filed with the Secretary of State of the State of Delaware or at the
time specified in such certificate. The Commitment will be entered into by
Ahmanson at or prior to the Effective Time and effective at the Effective Time.
Unless otherwise agreed by Coast and Ahmanson, and subject to the
conditions to the obligations of the parties to effect the Merger, the parties
have agreed to cause the Effective Date to occur on the fifth business day to
occur after the last of the conditions to the consummation of the Merger have
been satisfied or waived (or, at the election of Ahmanson, on the last business
day of the month in which such date occurs or, if such date occurs on one of the
last five business days of such month, on the last business day of the
succeeding month). Ahmanson and Coast each has the right, acting unilaterally,
to terminate the Merger Agreement should the Merger not be consummated by June
30, 1998 (unless the failure to consummate the Merger is a result of a breach by
the party seeking to terminate). See "The Merger--Effective Time" and
"--Termination; Termination Fee."
DELIVERY OF AHMANSON CERTIFICATES.
Promptly after the Effective Date, Ahmanson will send or will cause to
be sent transmittal materials to each record holder of shares of Coast Common
Stock outstanding at the Effective Time for use in exchanging those certificates
for shares of Ahmanson Common Stock and cash in lieu of fractional share
interests. See "The Merger--Distribution of Ahmanson Common Stock Certificates."
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<PAGE> 18
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.
The Merger is intended to be a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986 (the "Code") with the
consequence that no gain or loss will be recognized for federal income tax
purposes by Coast or Coast stockholders as a result of the Merger except in the
case of a Coast stockholder (a) for gain that may be recognized in an amount not
exceeding the fair market value at the Effective Time of the CPR Certificates
received by such stockholder (which will include a proportionate share of the
value attributable to Ahmanson's having entered into the Commitment) and (b)
with respect to any cash received in lieu of fractional share interests.
Consummation of the Merger is conditioned in part upon the receipt by
Ahmanson and Coast of opinions from their respective legal counsels that the
Merger will be a reorganization within the meaning of Section 368(a) of the
Code.
All stockholders should carefully read the discussion of the material
federal income tax consequences of the proposed Merger under "The
Merger--Certain Federal Income Tax Consequences." In addition, stockholders are
urged to consult with their own tax advisers as to the federal, state, local and
foreign tax consequences in their particular circumstances.
MANAGEMENT AFTER THE MERGER.
Ahmanson will be the surviving corporation resulting from the Merger and
will continue to be managed by its current executive officers. Ahmanson has
agreed to cause Mr. Ray Martin, Chairman of the Board and Chief Executive
Officer of Coast, to be elected or appointed as a director of Ahmanson. See "The
Merger--Management and Operations After the Merger."
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION PROPOSAL.
General. Certain members of Coast's management and the Coast Board have
interests in the Merger and the transactions contemplated thereby in addition to
their interests as stockholders of Coast generally. Those interests relate to,
among other things, provisions in the Merger Agreement regarding indemnification
and maintenance of directors and officers' liability insurance, the treatment of
outstanding Coast Stock Options and outstanding Coast Performance Share Awards
and Coast SARs with respect to Coast Common Stock, the appointment of Mr. Martin
as a director of Ahmanson, benefits to be paid to certain Coast executives in
connection with a change of control of Coast and the on-going role of certain
Coast executives in connection with the CPR Trust and their compensation in
connection therewith. See "The Merger--Interests of Certain Persons in the
Transaction Proposal" and "--Stock Options; Performance Share Awards; SARs"
below.
CONDITIONS TO CONSUMMATION.
Consummation of the Merger is subject to various conditions, including,
among other matters: (a) approval of the Transaction Proposal by the Coast
stockholders and notice from holders of no more than 5% of the outstanding
shares of Coast Common Stock that their shares of Common Stock be treated as
Dissenters' Shares; (b) receipt of all governmental and other consents and
approvals necessary to permit consummation of the Merger; (c) satisfaction of
certain other usual conditions, including the receipt of the tax opinions
discussed above; and (d) the establishment of the CPR Trust and the consummation
of the CPR Certificate Distribution, the execution and delivery of the
Commitment by Ahmanson and the transfer of the Expense Fund to the CPR Trust.
Under the terms of the Merger Agreement, certain conditions to the Merger may
generally be waived by Ahmanson or Coast, as applicable. See "The
Merger--Conditions to Consummation" and "--Amendment and Waiver."
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<PAGE> 19
REGULATORY APPROVALS.
The Merger is subject to the prior approval of the Office of Thrift
Supervision (the "OTS") and may be subject to the approval of or notice to other
regulatory authorities. An Application for approval of the Merger has been filed
with the OTS. There can be no assurance that the approval of the OTS will be
obtained or as to the timing or conditions of such approval. See "The
Merger--Regulatory Approvals."
TERMINATION.
The Merger Agreement may be terminated, and the Merger abandoned, at any
time prior to the Effective Time by mutual action of the board of directors of
both Coast and Ahmanson, or by action of the board of directors of either
company under certain circumstances, including if the Merger is not consummated
by June 30, 1998, unless the failure to consummate by such time is due to
knowing action or inaction of the party seeking to terminate, which action or
inaction is in violation of such party's obligations under the Merger Agreement.
Ahmanson may terminate the Merger Agreement if the Coast Board withdraws its
recommendation of the Merger or modifies or changes such recommendation in a
manner adverse in any respect to the interests of Ahmanson. If the Merger
Agreement is terminated under certain specified circumstances, and within 12
months after such termination Coast or any of its subsidiaries enters into a
definitive agreement with respect to an acquisition proposal by a third party,
Coast will be obligated to pay to Ahmanson a termination fee equal to $35
million. See "The Merger--Termination; Termination Fee."
ACCOUNTING TREATMENT.
Upon consummation of the Merger, Ahmanson will account for the
acquisition of Coast using the purchase method of accounting. Accordingly, the
consideration to be paid in the Merger will be allocated to assets acquired and
liabilities assumed based on their estimated fair values at the Effective Date.
Income (or loss) of Coast prior to the Effective Date will not be included in
income of the combined company. See "The Merger--Accounting Treatment."
DISSENTERS' RIGHTS.
Any holder of record of shares of Coast Common Stock who does not vote
in favor of the Transaction Proposal, delivers a demand for appraisal prior to
the vote of the Coast stockholders on the Transaction Proposal and complies with
the additional procedures required under Delaware law will have the right to
obtain cash payment for the "fair value" of such stockholders' shares (excluding
any element of value arising from the accomplishment or expectation of the
Merger). In order to exercise such rights, a stockholder must comply with all
the procedural requirements of Section 262 of the DGCL, the full text of which
is attached as Appendix E to this Proxy Statement/Prospectus. Section 262 should
be read in its entirety. Any such dissenting stockholder will not be entitled to
the Merger Consideration in respect of such shares unless and until such
dissenting stockholder shall have failed to perfect or shall have timely
withdrawn such dissenting stockholder's right to dissent from the Merger, and
shall instead be entitled to receive the payment provided by Section 262 of the
DGCL. FAILURE TO TAKE ANY OF THE STEPS REQUIRED UNDER SECTION 262 IN A TIMELY
MANNER WILL RESULT IN A LOSS OF APPRAISAL RIGHTS. See "Appraisal Rights."
In connection with any appraisal proceeding, the "fair value" of shares
of Coast Common Stock is to be determined as of immediately prior to the CPR
Certificate Distribution and the Merger. Each CPR Certificate distributed to
each Coast stockholder will provide that it shall automatically be redeemed for
$0.01 in cash immediately following the Merger if the holder of the share as to
which such CPR Certificate was issued has given notice of an intent to exercise
appraisal rights. If any Coast stockholder who gives notice of intent to
exercise appraisal rights subsequently withdraws, or fails to perfect, such
appraisal demand, Ahmanson will deliver to such holder the number of CPR
Certificates equal to the number of shares of Coast Common Stock as to which
such appraisal demand was withdrawn or not perfected.
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<PAGE> 20
It is a condition to the obligation of Ahmanson to consummate the Merger
that holders of no more than 5% of the outstanding shares of Coast Common Stock
shall have given notice that their shares of Coast Common Stock be treated as
Dissenters' Shares. See "The Merger--Conditions to Consummation."
RESALES OF AHMANSON COMMON STOCK.
The Ahmanson Common Stock issuable in connection with the Merger will be
freely transferable by the holders of such shares, except for those holders who
may be deemed to be "affiliates" (generally including directors, certain
executive officers and 10% or more stockholders) of Coast or Ahmanson under
applicable federal securities laws. See "The Merger--Resales of Ahmanson Common
Stock."
MARKET FOR COMMON STOCK
Ahmanson Common Stock and Coast Common Stock are traded on the NYSE and
the Pacific Exchange. The following table sets forth the last sale price of
Ahmanson Common Stock, the last sale price of Coast Common Stock, and the
equivalent price per share (as explained below) of Coast Common Stock at the
close of business on October 3, 1997, the last trading day immediately preceding
public announcement of the Merger (as reported on the NYSE Composite Tape), and
on ________ __, 1997, the last practicable date prior to the mailing of this
Proxy Statement/Prospectus:
<TABLE>
<CAPTION>
Market Price Per Share
Ahmanson Coast Equivalent Per
Common Stock Common Stock(1) Share Price(1)(2)
------------ --------------- -----------------
<S> <C> <C> <C>
October 3, 1997 $57 1/8 $54 $46.17
________, 1997 $[ ] $[ ] $[ ]
</TABLE>
- ----------------
(1) The per share price of Coast Common Stock includes the value of the
Litigation as an asset of Coast. The equivalent per share price of Coast
Common Stock does not include the value of the Litigation as an asset of
Coast or the value of CPR Certificates to be received by Coast stockholders
in connection with the Merger.
(2) The equivalent per share price of Coast Common Stock at the specified dates
represents the last sale price of a share of Ahmanson Common Stock on such
date multiplied by the Exchange Ratio of 0.8082.
STOCKHOLDERS ARE ADVISED TO OBTAIN CURRENT MARKET QUOTATIONS FOR
AHMANSON COMMON STOCK. NO ASSURANCE CAN BE GIVEN AS TO THE MARKET PRICE OF
AHMANSON COMMON STOCK AT OR AFTER THE EFFECTIVE TIME.
SEE "COMPARATIVE MARKET PRICES AND DIVIDENDS."
COMPARISON OF CERTAIN UNAUDITED PER SHARE DATA
The following summary presents selected comparative unaudited per share
data for Ahmanson and Coast on an historical basis and on a pro forma combined
basis assuming the Merger had been effective during the periods presented. The
Merger will be accounted for under the purchase accounting method. The pro forma
data have been derived accordingly. The information shown below should be read
in conjunction with the historical financial data and statements of Ahmanson and
Coast incorporated by reference herein, including the respective notes thereto.
See "Available Information," "Incorporation of Certain Information by
Reference," "--Selected Consolidated Financial Data of Ahmanson (Historical),"
"--Selected Consolidated Financial Data of Coast (Historical)" and "The
Merger--Accounting Treatment."
The per share data set forth herein are presented for comparative
purposes only and are not necessarily indicative of the future combined
financial position, the results of the future operations or the actual results
or combined financial position of Ahmanson and Coast that would have been
achieved had the Merger been consummated as of the dates or at the beginning of
the periods indicated. While no assurance can be given, Ahmanson expects that it
will achieve substantial benefits from the Merger, including operating cost
savings and revenue enhancements. See "Ahmanson and Coast Unaudited Pro Forma
Combined Financial Information."
-13-
<PAGE> 21
However, the pro forma comparative unaudited per share data do not reflect any
direct costs, potential savings or revenue enhancements which Ahmanson expects
will result from the consolidation of operations of Coast and Ahmanson and,
therefore, do not purport to be indicative of the results of future operations
of Ahmanson.
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
1997 1996
----------------- ------------
<S> <C> <C>
H. F. AHMANSON & COMPANY
Net income per fully diluted common share
Historical $ 2.69 $ 0.91(1)
Pro forma combined 2.61 0.74
Dividends per common share (2)
Historical 0.66 0.88
Pro forma combined 0.66 0.88
Book value per common share (at period end)
Historical 20.17 19.09
Pro forma combined (3) 25.16 -
COAST SAVINGS FINANCIAL, INC.
Net income per fully diluted common share
Historical $ 2.30 $ 0.56 (1)
Equivalent Coast pro forma combined (4) 2.11 0.60
Dividends per common share
Historical - -
Equivalent Coast pro forma combined (4) 0.53 0.71
Book value per common share (at period end)
Historical 25.21 22.84
Equivalent Coast pro forma combined (4) 20.33 -
</TABLE>
- -----------------
(1) Income per common share for both Ahmanson and Coast in 1996 was
significantly affected by a special assessment in the third quarter to
recapitalize the Savings Association Insurance Fund which was mandated by
federal legislation.
(2) Pro forma dividends per share represent historical dividends paid by
Ahmanson. For a discussion of Ahmanson's current and future dividend
policy, see "Comparative Market Prices and Dividends--Ahmanson."
(3) Amount is calculated by dividing total pro forma common stockholders'
equity by the sum of the total outstanding shares of Ahmanson Common Stock
plus the new shares of Ahmanson Common Stock to be issued in the Merger
(based on the number of shares of Coast Common Stock outstanding at
September 30, 1997, excluding shares beneficially owned by Ahmanson and the
Exchange Ratio of 0.8082).
(4) Equivalent Coast pro forma combined amounts are computed by multiplying the
pro forma combined amounts by the Exchange Ratio of 0.8082.
-14-
<PAGE> 22
SELECTED CONSOLIDATED FINANCIAL DATA OF AHMANSON (HISTORICAL)
The following table sets forth selected historical financial data of
Ahmanson and has been derived from its consolidated financial statements. Such
selected historical financial data should be read in conjunction with Ahmanson's
audited consolidated financial statements, including the respective notes
thereto, and unaudited interim financial information, in each case incorporated
herein by reference. The interim financial information has been derived from
unaudited financial statements of Ahmanson, which, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for fair statement of the results for the unaudited interim periods.
Results for the interim periods are not necessarily indicative of results which
may be expected for any other interim or annual period. See "Incorporation of
Certain Information by Reference."
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
SEPTEMBER 30, -----------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- ----------- -----------
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF FINANCIAL CONDITION
Cash and investment securities ..... $ 1,084,310 $ 1,876,435 $ 1,645,450 $ 2,773,573 $ 3,906,044 $ 2,362,563
Loans and mortgage-backed securities 43,840,875 46,085,670 47,407,521 48,791,165 44,624,365 42,878,383
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Real estate ........................ 335,095 395,428 460,421 475,264 623,519 1,127,271
Premises and equipment ............. 368,825 424,567 410,947 614,817 673,879 686,693
Goodwill and other intangible assets 286,385 308,083 147,974 468,542 428,444 478,017
Other assets ....................... 883,667 811,861 457,273 603,432 614,994 607,580
----------- ----------- ----------- ----------- ----------- -----------
Total assets ..................... $46,799,157 $49,902,044 $50,529,586 $53,726,793 $50,871,245 $48,140,507
=========== =========== =========== =========== =========== ===========
Deposits ........................... $32,447,317 $34,773,945 $34,244,481 $40,655,016 $38,018,653 $39,273,192
Borrowings ......................... 10,575,923 11,580,521 12,236,428 9,176,085 8,879,345 4,978,583
Other liabilities .................. 1,241,139 966,116 991,755 931,091 1,024,216 1,143,088
Company-obligated Capital Securities
of Subsidiary Trust .............. 148,421 148,413 -- -- -- --
Stockholders' equity ............... 2,386,357 2,433,049 3,056,922 2,964,601 2,949,031 2,745,644
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities, Company-obligated
Capital Securities of Subsidiary
Trust and stockholders' equity ... $46,799,157 $49,902,044 $50,529,586 $53,726,793 $50,871,245 $48,140,507
=========== =========== =========== =========== =========== ===========
PER SHARE INFORMATION--COMMON
SHARES
Book value ......................... $ 20.17 $ 19.09 $ 20.75 $ 19.70 $ 19.61 $ 22.04
Tangible book value ................ 18.37 17.31 19.47 15.70 15.94 17.94
</TABLE>
-15-
<PAGE> 23
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
------------------------ -----------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
----------- ----------- ----------- ---------- ----------- ---------- -----------
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income .................. $ 2,561,081 $ 2,630,081 $ 3,514,795 $ 3,699,09 $ 3,095,375 $3,003,422 $ 3,428,979
Interest expense ................. 1,632,558 1,695,289 2,262,281 2,472,336 1,798,454 1,666,350 2,070,413
----------- ----------- ----------- ---------- ----------- ---------- -----------
Net interest income .............. 928,523 934,792 1,252,514 1,226,755 1,296,921 1,337,072 1,358,566
Provision for loan losses......... 57,080 115,626 144,924 119,111 176,557 574,970 367,366
----------- ----------- ----------- ---------- ----------- ---------- -----------
Net interest income after
provision for loan losses ...... 871,443 819,166 1,107,590 1,107,644 1,120,364 762,102 991,200
Gain on sales of retail deposit
branch systems ................. 57,566 - 6,861 514,671 77,901 - -
Other non-interest income ........ 207,221 173,790 244,937 183,738 182,455 317,828 266,857
SAIF recapitalization assessment . - 243,862 243,862 - - - -
Other non-interest expense ....... 635,442 710,796 934,968 981,407 970,050 1,299,996 968,443
----------- ----------- ----------- ---------- ----------- ---------- -----------
Income (loss) before provision for
income taxes (benefit)
extraordinary loss and
cumulative effect of
accounting changes ............. 500,788 38,298 180,558 824,646 410,670 (220,066) 289,614
Provision for income tax (benefit) 186,500 (15,713) 35,300 373,700 173,312 (82,034) 133,222
----------- ----------- ----------- ---------- ----------- ---------- -----------
Income (loss) before extraordinary
loss and cumulative effect of
accounting changes ............. 314,288 54,011 145,258 450,946 237,358 (138,032) 156,392
Extraordinary loss on early
extinguishment of debt (net of
tax benefit) ................... - - - - - (21,607) -
Cumulative effect of changes in
accounting for goodwill (1995)
and income taxes (1992) ........ - - - (234,742) - - 47,677
----------- ----------- ----------- ---------- ----------- ---------- -----------
Net income (loss) ................ $ 314,288 $ 54,011 $ 145,258 $ 216,204 $ 237,358 $ (159,639) $ 204,069
=========== =========== =========== =========== =========== =========== ===========
PER SHARE INFORMATION--COMMON
SHARES
Primary --
Income (loss) before
extraordinary loss and
cumulative effect of
accounting changes ........... $ 2.89 $ 0.16 $ 0.91 $ 3.39 $ 1.59 $ (1.51) $ 1.19
Net income (loss) .............. 2.89 0.16 0.91 1.40 1.59 (1.69) 1.60
Fully diluted--
Income (loss) before
extraordinary loss and
cumulative effect of
accounting changes ........... 2.69 0.16 0.91 3.20 1.58 (1.51) 1.19
Net income (loss) .............. 2.69 0.16 0.91 1.40 1.58 (1.69) 1.60
Dividends ...................... 0.66 0.66 0.88 0.88 0.88 0.88 0.88
</TABLE>
-16-
<PAGE> 24
SELECTED CONSOLIDATED FINANCIAL DATA OF COAST (HISTORICAL)
The following table sets forth selected historical financial data of
Coast and has been derived from its consolidated financial statements. Such
selected historical financial data should be read in conjunction with Coast's
audited consolidated financial statements, including the respective notes
thereto, and unaudited interim financial information, in each case incorporated
herein by reference. The interim financial information has been derived from
unaudited financial statements of Coast, which, in the opinion of management,
include all adjustments, consisting only of normal recurring adjustments,
necessary for fair statement of the results for the unaudited interim periods.
Certain items in these selected historical financial data of Coast have been
reclassified to conform to the Ahmanson presentation.
See "Incorporation of Certain Information by Reference."
<TABLE>
<CAPTION>
AT AT DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C>
SUMMARY OF FINANCIAL CONDITION
Cash and investment securities $ 591,731 $ 464,371 $ 308,733 $ 263,759 $ 728,311 $ 623,600
Loans and MBS ................ 8,136,645 7,899,377 7,638,297 7,526,910 6,979,497 7,286,179
Real estate .................. 46,886 41,259 31,696 44,168 100,721 160,756
Premises and equipment ....... 86,588 95,010 92,920 87,493 77,566 67,635
Goodwill and other intangible
assets .................. 5,441 6,238 7,332 11,504 12,927 13,841
Other assets ................. 173,122 198,697 172,702 262,683 195,795 199,815
---------- ---------- ---------- ---------- ---------- ----------
Total assets ............... $9,040,413 $8,704,952 $8,251,680 $8,196,517 $8,094,817 $8,351,826
========== ========== ========== ========== ========== ==========
Deposits ..................... $6,445,844 $6,356,448 $6,123,472 $5,879,808 $5,908,559 $6,136,130
Borrowings ................... 1,988,502 1,803,718 1,593,336 1,819,561 1,657,381 1,703,948
Other liabilities ............ 136,094 120,255 117,438 121,934 135,309 186,003
Stockholders' equity ......... 469,973 424,531 417,434 375,214 393,568 325,745
---------- ---------- ---------- ---------- ---------- ----------
Total liabilities and
stockholders' equity ..... $9,040,413 $8,704,952 $8,251,680 $1,196,517 $8,904,817 $8,351,826
========== ========== ========== ========== ========== ==========
PER SHARE INFORMATION--COMMON
SHARES
Book value ................... $ 25.21 $ 22.84 $ 22.46 $ 20.33 $ 21.32 $ 20.24
Tangible book value .......... 24.92 22.51 22.07 19.71 20.62 19.38
</TABLE>
-17-
<PAGE> 25
<TABLE>
<CAPTION>
NINE MONTHS ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31,
--------------------- ------------------------------------------------------------
1997 1996 1996 1995 1994 1993 1992
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE INFORMATION)
<S> <C> <C> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Interest income ................... $ 473,419 $ 449,891 $ 603,450 $ 613,181 $ 494,630 $ 515,647 $ 619,173
Interest expense .................. 307,173 288,855 388,650 412,130 306,719 314,081 409,496
--------- --------- --------- --------- --------- --------- ---------
Net interest income ............... 166,246 161,036 214,800 201,051 187,911 201,566 209,677
Provision for loan losses ......... 21,000 30,000 70,000 40,000 75,000 61,000 46,000
Net interest income after provision
for loan losses ................. 145,246 131,036 144,800 161,051 112,911 140,566 163,677
Other non-interest income ......... 37,437 37,858 50,105 57,619 42,924 60,293 64,669
SAIF recapitalization assessment .. - 41,978 41,978 - - - -
Other non-interest expense ........ 120,387 124,699 163,576 167,033 171,790 196,622 207,978
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before provision for
income taxes (benefit) and
cumulative effect of accounting
change .......................... 62,296 2,217 (10,649) 51,637 (15,955) 4,237 20,368
Provision for income taxes
(benefit) ....................... 17,164 1,020 (21,485) 18,835 (9,417) (12,999) (16,746)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before cumulative
effect of accounting change ..... 45,132 1,197 10,836 32,802 (6,538) 17,236 37,114
========= ========= ========= ========= ========= ========= =========
Cumulative affect of change in
accounting for income taxes ..... - - - - - - 10,914
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) ................. $ 45,132 $ 1,197 $ 10,836 $ 32,802 $ (6,538) $ 17,236 $ 48,028
========= ========= ========= ========= ========= ========= =========
PER SHARE INFORMATION-COMMON SHARES
Primary:
Income (loss) before cumulative
effect of accounting change ... $ 2.32 $ 0.06 $ 0.56 $ 1.72 $ (0.35) $ 0.94 $ 2.27
Net income (loss) ............... 2.32 0.06 0.56 1.72 (0.35) 0.94 2.94
Fully diluted:
Income (loss) before cumulative
effect of accounting change .. 2.30 0.06 0.56 1.71 (0.35) 0.94 2.25
Net income (loss) ............... 2.30 0.06 0.56 1.71 (0.35) 0.94 2.92
Dividends ......................... - - - - - - -
</TABLE>
-18-
<PAGE> 26
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth selected unaudited pro forma financial data of
Ahmanson giving effect to the Merger as if it occurred as of the beginning of
the periods indicated below, after giving effect to the pro forma adjustments
described in the Notes to Pro Forma Combined Financial Statements. The Merger
will be accounted for under the purchase method of accounting. Such selected
unaudited pro forma financial data should be read in conjunction with the
Ahmanson and Coast unaudited pro forma combined financial information, including
the notes thereto, appearing elsewhere in this Proxy Statement/Prospectus. The
unaudited pro forma combined financial information does not give effect to any
anticipated cost savings or revenue enhancements in connection with the Merger.
The unaudited Pro Forma Combined Statement of Financial Condition is not
necessarily indicative of the actual financial position that would have existed
had the Merger been consummated as of the date indicated below, or that may
exist in the future. The unaudited Pro Forma Combined Statement of Operations is
not necessarily indicative of the results that would have occurred had the
Merger been consummated for the periods presented or that may be achieved in the
future. See "Incorporation of Certain Information by Reference" and "Ahmanson
and Coast Unaudited Pro Forma Combined Financial Information."
<TABLE>
<CAPTION>
AT SEPTEMBER 30, 1997
----------------------------------
HISTORICAL
-------------------- PRO FORMA
AHMANSON COAST COMBINED
-------- ------- -------
(IN MILLIONS)
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA
MBS $13,157 $ 2,068 $15,236
Loans receivable 30,684 6,068 36,764
Goodwill and core deposit
intangibles 286 5 707
Assets 46,799 9,040 56,278
Deposits 32,447 6,446 38,903
Borrowings 10,576 1,989 12,571
Stockholders' equity 2,386 470 3,237
</TABLE>
-19-
<PAGE> 27
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1997 YEAR ENDED DECEMBER 31, 1996
------------------------------------ ------------------------------------
HISTORICAL HISTORICAL
--------------------- PRO FORMA --------------------- PRO FORMA
AHMANSON COAST COMBINED AHMANSON COAST COMBINED
-------- ------ -------- -------- ------ --------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
CONSOLIDATED SUMMARY OF OPERATIONS
Net interest income ........... $ 928 $ 166 $1,095 $1,253 $ 215 $1,469
Provision for loan losses ..... 57 21 78 145 70 215
Non-interest income ........... 265 37 302 252 50 302
Non-interest expense .......... 635 120 772 1,179 206 1,408
Net income .................... 314 45 345 146 11 139
PER COMMON SHARE--FULLY DILUTED
Net income .................... 2.69 2.30 2.61 0.91 0.56 0.74
Dividends declared ............ 0.66 - 0.66 0.88 - 0.88
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING--FULLY DILUTED .... 112.4 19.6 127.5 109.7 19.3 124.8
</TABLE>
-20-
<PAGE> 28
GENERAL INFORMATION
SPECIAL MEETING
This Proxy Statement/Prospectus is being furnished to the stockholders
of Coast in connection with the solicitation of proxies by the Coast Board for
use at the Special Meeting. The Special Meeting will be held at ____ a.m., on
__________, 199_, and at any adjournments and postponements thereof, to consider
and vote upon the approval and adoption of the Transaction Proposal, consisting
of the Merger Agreement and the transactions contemplated thereby, including the
approval of the Merger, the establishment of and the terms of the CPR Trust, the
CPR Certificate Distribution, the engagement of the Litigation Trustees
(including the terms of their engagement) for the CPR Trust, the terms of the
Commitment and the rights of the holders of CPR Certificates.
AHMANSON PROSPECTUS.
This Proxy Statement/Prospectus is also being furnished by Ahmanson as a
prospectus in respect of the shares of Ahmanson Common Stock to be issued to
stockholders of Coast in connection with the Merger and, following consummation
of the Merger, in respect of any shares of Ahmanson Common Stock that are
issuable upon exercise of the Coast Stock Options that were outstanding as of
the Effective Date and replaced with options to acquire shares of Ahmanson
Common Stock ("Replacement Options"). Based on the [ ] shares of Coast Common
Stock outstanding on the Record Date, the [ ] shares of Coast Common Stock
issuable upon exercise of outstanding stock options and assuming the exercise of
all such stock options prior to the Effective Time and the Exchange Ratio of
0.8082, up to approximately [ ] Ahmanson Common Shares will be issuable upon
consummation of the Merger.
RECORD DATE, SOLICITATION AND REVOCABILITY OF PROXIES
The Coast Board has fixed the close of business on _________ __, 1997,
as the record date for determining the Coast stockholders entitled to receive
notice of and to vote at the Special Meeting. Only holders of record of Coast
Common Stock as of the Record Date are entitled to notice of and to vote at the
Special Meeting. As of the Record Date, _______ shares of Coast Common Stock
were issued and outstanding and held by [___] record holders. Holders of Coast
Common Stock are entitled to one vote on each matter considered and voted on at
the Special Meeting for each share of Coast Common Stock held of record at the
close of business on the Record Date. The presence, in person or by properly
executed proxy, of the holders of a majority of the shares of Coast Common Stock
entitled to vote at the Special Meeting is necessary to constitute a quorum at
the Special Meeting. For purposes of determining the presence of a quorum,
abstentions will be counted as shares present but shares represented by a proxy
from a broker or nominee indicating that such person has not received
instructions from the beneficial owner or other person entitled to vote shares
("broker non-votes") will not be counted as shares present.
Proxies in the form accompanying this Proxy Statement/Prospectus are
being solicited by the Coast Board. Shares of Coast Common Stock represented by
properly executed proxies that have not been revoked will be voted in accordance
with the instructions indicated on the proxies. If no instructions are
indicated, such proxies will be voted "FOR" approval of the Transaction
Proposal, and as determined by the proxies named therein to any other matter
that may come before the Special Meeting or any adjournment or postponement
thereof including, among other things, a motion to adjourn or postpone the
Special Meeting to another time and/or place, for the purpose of soliciting
additional proxies or otherwise; provided, however, that no proxy which is voted
against the proposal to approve the Merger Agreement will be voted in favor of
any such adjournment or postponement for the purpose of soliciting additional
proxies.
A Coast stockholder who has given a proxy may revoke it at any time
prior to its exercise at the Special Meeting by (a) giving written notice of
revocation to the Secretary of Coast, (b) properly submitting to Coast a duly
executed proxy bearing a later date or (c) voting in person at the Special
Meeting. All written notices of revocation and other communications with respect
to revocation of proxies should be addressed to Coast as follows: 1000 Wilshire
Boulevard, Los Angeles, California 90017, Attention: Secretary (Telephone: (213)
362-2000). A proxy appointment will not be revoked by death or supervening
incapacity of the stockholder executing the proxy unless, before the shares are
voted,
-21-
<PAGE> 29
notice of such death or incapacity is filed with Coast's Secretary or other
person responsible for tabulating votes on behalf of Coast.
The expense of soliciting proxies for the Special Meeting will be paid
for by Coast, although pursuant to the Merger Agreement, Ahmanson has agreed to
share equally with Coast all filing fees and printing expenses payable in
connection with the Registration Statement[s] and this Proxy
Statement/Prospectus. In addition to the solicitation of stockholders of record
by mail, telephone or personal contact, Coast will be contacting brokers,
dealers, banks and voting trustees or their nominees who can be identified as
record holders of Coast Common Stock; such holders, after inquiry by Coast, will
provide information concerning the quantity of proxy and other materials needed
to supply such materials to beneficial owners, and Coast will reimburse them for
the expense of mailing the proxy materials to such persons.
Coast has retained ______________________ ("______") to assist Coast in
connection with its communications with its stockholders with respect to, and to
provide other services to Coast in connection with, the Special Meeting.
________________ will receive a fee of $_____ for its services and reimbursement
of out-of-pocket expenses in connection therewith. Coast has agreed to indemnify
______ against certain liabilities arising out of or in connection with its
engagement.
VOTE REQUIRED
Approval of the Transaction Proposal requires the affirmative vote of
the holders of a majority of the outstanding shares of Coast Common Stock. A
vote of the stockholders of Ahmanson is not required under the DGCL or the rules
of the NYSE for approval of the Merger Agreement or consummation of the
transactions contemplated thereby.
As of the Record Date, Coast directors and executive officers and their
affiliates held approximately ____% of the outstanding shares of Coast Common
Stock entitled to vote at the Special Meeting. Such persons have indicated to
Coast that they intend to vote in favor of the Transaction Proposal. As of the
Record Date, Ahmanson held ___ shares of Coast Common Stock and directors and
executive officers of Ahmanson and their affiliates held [no] [______] shares of
Coast Common Stock. See "The Merger--Interests of Certain Persons in the
Transaction Proposal."
RECOMMENDATION OF COAST BOARD OF DIRECTORS
For the reasons described in the section of this Proxy
Statement/Prospectus entitled "The Merger--Reasons of Coast for the Merger," the
Coast Board has unanimously approved the Transaction Proposal and adopted the
Merger Agreement. The Coast Board believes that approval of the Transaction
Proposal, consisting of the Merger Agreement and the transactions contemplated
thereby, including the approval of the Merger, the establishment of and the
terms of the CPR Trust, the CPR Certificate Distribution, the engagement of the
Litigation Trustees (including the terms of their engagement) for the CPR Trust,
the terms of the Commitment and the rights of the holders of CPR Certificates,
is in the best interests of Coast and its stockholders and unanimously
recommends that the stockholders of Coast vote "FOR" approval of the Transaction
Proposal. As a result of the difficulty in establishing the value of the
Litigation for purposes of the Merger, the Coast Board determined that the
ultimate value of the Litigation should be retained by Coast's stockholders in
connection with the Merger and, thus, the Coast Board, as an integral part of
its approval of the Transaction Proposal, approved the establishment of the CPR
Trust, the terms of the CPR Certificates and the Commitment, the CPR Certificate
Distribution and related matters. See "The Merger--Background of the Merger,"
"--Reasons of Coast for the Merger" and "--Interests of Certain Persons in the
Transaction Proposal."
-22-
<PAGE> 30
THE MERGER
The following information describes certain information pertaining to
the Merger and the other transactions contemplated by the Merger Agreement. This
description does not purport to be complete and is qualified in its entirety by
reference to the Appendices hereto, including the Merger Agreement and the form
of Commitment, which are attached as Appendices A and C hereto, respectively,
and are incorporated herein by reference. All stockholders are urged to read the
Appendices in their entirety.
GENERAL
The Merger Agreement provides for a transaction in which Coast will
merge with and into Ahmanson. Ahmanson will be the surviving corporation of the
Merger. If the Transaction Proposal is approved at the Special Meeting, all
required governmental and other consents and approvals are obtained and all of
the other conditions to the obligations of the parties to consummate the Merger
are either satisfied or waived (if permitted), the CPR Distribution will be
effected and, immediately thereafter, the Merger will be consummated. A copy of
the Merger Agreement is set forth as Appendix A to this Proxy
Statement/Prospectus.
MERGER CONSIDERATION; EXCHANGE RATIO; COMMITMENT
MERGER CONSIDERATION; EXCHANGE RATIO.
The Merger Consideration pursuant to the Merger Agreement consists of
(a) the shares of Ahmanson Common Stock issuable in exchange for the outstanding
shares of Coast Common Stock pursuant to the Merger Agreement, and cash in lieu
of fractional share interests, and (b) the entering into of the Commitment by
Ahmanson. At the Effective Time, each share of issued and outstanding Coast
Common Stock, together with each associated Coast Right, will cease to be
outstanding and each such share (other than (i) certain shares, if any, held by
Coast, Ahmanson or their subsidiaries and (ii) Dissenters' Shares, if any) will
be converted into and exchanged for 0.8082 of a share of Ahmanson Common Stock
(with the appropriate number of Ahmanson Rights as provided in the Ahmanson
Rights Plan). In addition, Ahmanson will enter into the Commitment with the CPR
Trust at or prior to the Effective Time and effective at the Effective Time.
COMMITMENT.
Ahmanson will enter into the Commitment, substantially in the form
attached hereto as Appendix C, with the CPR Trust at or prior to the Effective
Time and effective at the Effective Time. The Commitment will obligate Ahmanson
to pay to the CPR Trust from time to time an aggregate amount equal to the
Commitment Amount. As used in this Proxy Statement/Prospectus, the Commitment
Amount means the Litigation Proceeds minus the Reimbursements plus the Assumed
Tax Benefit. Litigation Proceeds means any and all cash payments (the "Cash
Proceeds") actually received by the Ahmanson Group pursuant to a final,
non-appealable judgment or a final settlement of the Litigation and the non-cash
payments (the "Non-Cash Proceeds"), if any, actually received by the Ahmanson
Group pursuant to a final, non-appealable judgment or a final settlement of the
Litigation. Reimbursements means (a) an amount equal to the Expense Fund plus
(b) interest on the portions of the Expense Fund withdrawn by the CPR Trust
calculated from the time of any such withdrawal at an annual interest rate equal
to the Reference Rate in effect from time to time plus 250 basis points,
compounded quarterly plus (c) the Assumed Tax Liability plus (d) in the event
Litigation Proceeds are required to be included in income for federal income tax
purposes in a taxable year prior to the year such proceeds are received in cash
(either because of the accrual of Cash Proceeds before the payment thereof or
the time required to liquidate Non- Cash Proceeds), interest at the Reference
Rate plus 250 basis points from the date of such payment of taxes to the date of
receipt of cash. The Expense Fund means an amount equal to $20 million, less the
expenses relating to the Litigation incurred and paid between August 31, 1997
and the Effective Date, which amount Ahmanson will deposit at the Effective Time
in a non-interest bearing demand-deposit account in the name of the CPR Trust at
Home Savings.
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ASSUMED TAX LIABILITY; ASSUMED TAX BENEFIT; TAX ASSUMPTIONS.
Pursuant to the Commitment, regardless of any position taken by the
Ahmanson Group on any tax return or in any claim for refund with respect to the
receipt of the Litigation Proceeds or payments on the Commitment (or of the
actual payment or actual receipt of any taxes with respect thereto), the Assumed
Tax Liability will, (i) if there is no Determination, be computed based on the
Tax Assumptions and (ii) if there is a Determination to the effect that
Litigation Proceeds are not includible in gross income in whole or in part, be
computed on the basis of the Tax Assumptions as such Tax Assumptions are
modified by such Determination. In addition, pursuant to the Commitment,
regardless of any position taken by the Ahmanson Group on any tax return or in
any claim for refund with respect to the receipt of the Litigation Proceeds or
payments on the Commitment (or of the actual payment or actual receipt of any
taxes with respect thereto), the Assumed Tax Benefit will, (i) if there is no
Determination, be computed based on the Tax Assumptions and (ii) if there is a
Determination that no deduction is allowed (or that any allowed deduction is
limited) with respect to the application of Section 483(a) to payments of the
Commitment Amount, be computed on the basis of the Tax Assumptions as such Tax
Assumptions are modified by such Determination.
As used herein, the "Assumed Tax Liability" means an amount equal to the
income (including franchise) tax liability of the Ahmanson Group (not including
any deduction attributable to Section 483(a) of the Code) attributable to the
receipt of the Litigation Proceeds computed in the manner set forth above. As
used herein, the "Assumed Tax Benefit" means an amount equal to the deduction
that would be allowed to the Ahmanson Group under Section 483(a) of the Code
computed in the manner set forth above.
As used herein, the "Tax Assumptions" mean the following assumptions:
(a) The Litigation Proceeds will be includible in gross income as
ordinary income in full.
(b) Payments on the Commitment will not be deductible except that
Section 483(a) will apply to payments on the Commitment, other than
those allocable to CPR Certificates issued on exercise of employee
options or otherwise in a transaction that is not a sale or exchange,
and payments of the Commitment Amount will be deductible to the extent
treated by Section 483(a) as interest expense; it being understood that
it is not intended that the distribution of the CPR Certificates
immediately prior to the Effective Time of the Merger will result in the
characterization of such distribution as not constituting "a sale or
exchange."
(c) The income tax liability attributable to the assumed
inclusion of all or a portion of the Litigation Proceeds in gross income
as ordinary income and the benefit of any deduction assumed to be
allowed under Section 483(a) will be (i) the product of the amount of
such income or deduction and the highest statutory rate of federal
income tax applicable to corporations for the year in which the income
is assumed to be included or the deduction is assumed to be realized
plus (ii) the product of such income or deduction and the net combined
marginal rate of state and local income (or franchise) tax of the
relevant member or members of the Ahmanson Group for the year in which
the income is assumed to be included and the deduction is assumed to be
realized, net of the federal income tax benefit (calculated based on the
rate in clause (i)) of such state or local income (or franchise) tax.
The relevant member or members of the Ahmanson Group will be the member
or members that is or are assumed to include the Litigation Proceeds in
income or is or are assumed to be allowed a deduction under Section
483(a).
(d) Any benefit from any deduction allowable to the Ahmanson
Group under paragraph (c) of these Tax Assumptions for payments made on
the Commitment will be assumed to be realized (i) when those payments
are made to the extent those payments do not exceed the Litigation
Proceeds included in income for the same taxable year, or (ii) otherwise
when, taking into account other deductions or losses or credits of the
Ahmanson Group, the deduction would reduce the tax otherwise payable or
result in a refund of tax already paid.
(e) Ahmanson will be entitled to rely on a written opinion of
either Sullivan & Cromwell or another nationally recognized law firm
with expertise on the matter on which the opinion is sought (with a copy
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of such opinion to the Litigation Trustees) that is selected by Ahmanson
and (unless such law firm is principal outside tax counsel to Ahmanson)
reasonably acceptable to the Litigation Trustees in determining whether
there has been a Determination and in otherwise applying the Tax
Assumptions to determine the income (including franchise) tax liability
of the Ahmanson Group attributable to the receipt of the Litigation
Proceeds and payments of the Commitment Amount and any tax benefit
attributable to payments on the Commitment Amount.
(f) If the Assumed Tax Liability or the Assumed Tax Benefit
cannot be computed at the time of the receipt of the Cash Proceeds or a
payment on the Commitment because of the absence of information as to
tax rates and other factors described in the definition of Assumed Tax
Liability or the definition of Assumed Tax Benefit, as the case may be,
the Ahmanson Group will compute a tentative Assumed Tax Liability or a
tentative Assumed Tax Benefit, as the case may be, based on such
assumptions that in the reasonable opinion of the Ahmanson Group would
protect the Ahmanson Group against any risk of loss. The payment of the
Commitment Amount will be based on such tentative Assumed Tax Liability
or such tentative Assumed Tax Benefit computation, as the case may be.
As soon as feasible, but in no event later than 12 months after the end
of the taxable year in which the Commitment Amount is paid, the Ahmanson
Group will recompute the Assumed Tax Liability or the Assumed Tax
Benefit, as the case may be, and pay to the CPR Trust any excess of the
re-computed Commitment Amount over the Commitment Amount that was
initially calculated plus interest for the period over which the payment
was deferred at a rate of Home Savings' cost of funds as submitted
monthly to the Federal Home Loan Bank of San Francisco.
Under the Commitment, a Determination that Litigation Proceeds are not
includible in gross income in whole or in part will be deemed to be made on the
earlier of (a) the date a final judicial determination to such effect, binding
upon Ahmanson, is made in the Litigation, (b) the date a final agreement to
which Ahmanson is a party with the federal government to such effect is entered
into at the direction of the Litigation Trustees as part of the resolution of
the Litigation or a related Internal Revenue Service ("IRS") ruling to such
effect issued to a member of the Ahmanson Group in connection with such
agreement (it being understood that the Ahmanson Group will be under no
obligation to seek such a ruling or refund or enter into such an agreement;
provided that if requested the Ahmanson Group will enter into such an agreement
if such agreement does not impose any liability or obligation whatsoever (other
than a standard settlement release relating only to the Litigation or other
related claims that Coast or Coast Federal or Coast's stockholders might have
been able to bring as of immediately prior to the Merger) on the Ahmanson Group
or adversely affect or restrict the conduct of its business or adversely affect
its tax posture with respect to other matters) and (iii) the effective date of a
law, regulation or IRS ruling to such effect that applies to Ahmanson or
taxpayers generally, and would be applicable to claims against the federal
government arising out of capital credits affected by Financial Institutions
Reform, Recovery and Enforcement Act of 1989 ("FIRREA"). Notwithstanding the
foregoing, no such Determination will be deemed to be made unless it is made
prior to the earlier of (x) thirty days before the date of filing by the
Ahmanson Group of the federal tax return for the taxable year in which the
Litigation Proceeds are assumed to be includible in gross income or (y) the
receipt by the Ahmanson Group of the Litigation Proceeds.
Under the Commitment, a Determination with respect to the application of
Section 483(a) to payments of the Commitment Amount will be deemed to be made on
the earlier of (i) the date a final judicial determination to such effect
binding upon Ahmanson is made in the Litigation, (ii) the date a final agreement
to which Ahmanson is a party with the federal government to such effect is
entered into at the direction of the Litigation Trustees as part of the
resolution of the Litigation or a related IRS ruling to such effect issued to a
member of the Ahmanson Group in connection with such agreement (it being
understood that the Ahmanson Group will be under no obligation to seek such a
ruling or refund or enter into such an agreement; provided that if requested the
Ahmanson Group will enter into such an agreement if such agreement does not
impose any liability or obligation whatsoever (other than a standard settlement
release relating only to the Litigation or other related claims that Coast or
Coast Federal or Coast's stockholders might have been able to bring as of
immediately prior to the Merger) on the Ahmanson Group or adversely affect or
restrict the conduct of its business or adversely affect its tax posture with
respect to other matters) and (iii) the effective date of a law, regulation or
IRS ruling or a judicial decision to such effect that applies to Ahmanson or
taxpayers generally. A deduction shall be considered allowed under Section
483(a) to the extent that a deduction is allowed, in an amount up to the
deduction calculated under Section 483(a), under another substantially
equivalent provision.
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Ahmanson will have no obligation to take or to refrain from taking any
action that would or could reduce the income tax liability of the Ahmanson Group
in respect of the Litigation Proceeds or obtain income tax benefits in respect
thereof on related payments.
PAYMENT PROCEDURES WITH RESPECT TO THE COMMITMENT AMOUNT.
Pursuant to the Commitment, within 10 days of the receipt by the
Ahmanson Group of the Litigation Proceeds, Ahmanson will deliver to the
Litigation Trustees a written notice (the "Proceeds Notice") specifying that the
Litigation Proceeds have been received and describing the type and amount of any
Non-Cash Proceeds received. Within 10 days of the delivery of the Proceeds
Notice, the Litigation Trustees will deliver to Ahmanson written instructions to
liquidate the Non-Cash Proceeds received. If so instructed, Ahmanson will then
liquidate the Non-Cash Proceeds in accordance with the instructions. As promptly
as practicable but in no event later than 30 days after the later of the receipt
by Ahmanson of the Litigation Proceeds and the liquidation by Ahmanson of
Non-Cash Proceeds, Ahmanson will deliver to the Litigation Trustees a
certificate (the "Ahmanson Certificate") setting forth the calculation of the
Commitment Amount, which Ahmanson Certificate will be valid and binding absent
manifest error. The Ahmanson Certificate will set forth each of the items
required under the Commitment to calculate the Commitment Amount, including the
amount of Litigation Proceeds and the amount of (and calculation of) each
component of the Reimbursements and the assumptions underlying the determination
of each item, and Ahmanson will attach to the Ahmanson Certificate financial and
other documentation reasonably sufficient to support each item and assumption
used to calculate the Commitment Amount. Notwithstanding the foregoing, with
respect to the combined marginal rate of state and local income (or franchise)
tax of the relevant member or members of the Ahmanson Group, for the purposes of
the calculation contained in the Ahmanson Certificate, Ahmanson will be entitled
to assume the most conservative rate reasonably possible. Within 15 days of
delivery of the Ahmanson Certificate, the CPR Trust will give written notice
specifying whether it agrees or objects to the calculation of the Commitment
Amount in the Ahmanson Certificate. If the CPR Trust delivers a written notice
to the effect that it agrees with the calculation, Ahmanson will then deliver
the Commitment Amount to the institutional trustee for the CPR Trust within 5
business days of such written notice. If the CPR Trust delivers a written notice
to the effect that it objects to the calculation, Ahmanson will deliver the
Commitment Amount only upon a Resolution.
If the CPR Trust delivers a written notice to the effect that it objects
to the calculation, the CPR Trust will simultaneously deliver to Ahmanson a
certificate (the "CPR Calculation Certificate") setting forth its calculation of
the Commitment Amount. The CPR Calculation Certificate will set forth each of
the items required under the Commitment to calculate the Commitment Amount,
including the amount of Litigation Proceeds and the amount of (and calculation
of) each component of the Reimbursements and the assumptions underlying the
determination of each item, and the CPR Trust will attach to the CPR Calculation
Certificate financial and other documentation reasonably sufficient to support
each item and assumption used to calculate the Commitment Amount. If Ahmanson
does not agree with the CPR Trust's calculation of the Commitment Amount, then
within 10 business days of the delivery by the CPR Trust of the CPR Calculation
Certificate, Ahmanson and the CPR Trust will submit the calculation of the
Commitment Amount to a mutually agreed upon independent certified public
accountant (the "Accountant"). If Ahmanson and the CPR Trust cannot agree upon
such independent certified public accountant, then the Commitment will provide
that the Accountant will be [__________]. The Accountant will be instructed to
determine whether the calculation set forth in the Ahmanson Certificate
contained manifest error and the Accountant will be instructed to conclude that
the calculation set forth in the Ahmanson Certificate does not contain manifest
error so long as the calculation is a reasonable calculation of the Commitment
Amount based upon a reasonable interpretation of the provisions of the
Commitment. If the Accountant determines (a) that the calculation set forth in
the Ahmanson Certificate did not contain manifest error, the Commitment Amount
will be as calculated in the Ahmanson Certificate or (b) that the calculation
set forth in the Ahmanson Certificate did contain manifest error, the Accountant
will recompute the Commitment Amount based upon the formulae and definitions set
forth in the Commitment and described herein and the Accountant's calculation
will be binding on both Ahmanson and Coast (in either of case (a) or (b), a
"Resolution"). In the event it is determined that Ahmanson's calculation
contained manifest error, in addition to the Commitment Amount, Ahmanson will
pay to the CPR Trust interest on the Commitment Amount calculated from the date
that the CPR Trust delivered its written notice of objection at an annual
interest rate equal to the Reference Rate plus 250 basis points.
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DUE DATE
Pursuant to the Commitment, Ahmanson will pay to the CPR Trust the
Commitment Amount (a) if the CPR Trust does not object to the calculation set
forth in the Certificate, within 5 business days of written notice from the CPR
Trust to the effect that it agrees with the calculation or (b) if the CPR Trust
does object to the calculation set forth in the Certificate, within 5 business
days of the Resolution (each, a "Due Date"). If Ahmanson does not pay the
Commitment Amount by the appropriate Due Date, Ahmanson will be obligated to pay
to the CPR Trust the Commitment Amount plus interest on the Commitment Amount
from the Due Date until the date the Commitment Amount is paid, calculated at an
annual interest rate equal to the Reference Rate plus 250 basis points.
Notwithstanding the foregoing, Ahmanson will not be obligated to pay the
Commitment Amount or any portion thereof at the Due Date and will be deemed not
to be in default of the Commitment and not to have violated its obligations
thereunder by virtue of not having paid the Commitment Amount or such portion
thereof (a) to the extent that Home Savings is not permitted due to regulatory
restrictions to distribute to Ahmanson the Litigation Proceeds and (b) if prior
to the Due Date, Ahmanson has delivered to the CPR Trust a certificate (an
"Officer's Certificate") from the [chief financial officer] of Home Savings
specifying that portion of the Litigation Proceeds that cannot be paid due to
regulatory restrictions and the applicable law, regulation or other action of a
regulatory authority that is the source of the regulatory restrictions
preventing the distribution by Home Savings [and an opinion of counsel, which
may be from a member of Ahmanson's internal legal department, substantially to
the effect that the distribution by Home Savings of the Litigation Proceeds or
the applicable portion thereof, as the case may be, would result in the
violation of the applicable law, regulation or other action of a regulatory
authority that is the source of the regulatory restrictions preventing the
distribution by Home Savings (an "Opinion of Counsel")]. [Under the Commitment,
Ahmanson will be entitled not to pay the Commitment Amount or any portion
thereof as specified in the immediately preceding sentence with the consequences
specified in the immediately preceding sentence for a period of [ ] years from
the Due Date on which the Commitment Amount or such portion thereof would
otherwise have been payable so long as (i) Home Savings continues not to be
permitted to distribute such portion of the Litigation Proceeds to Ahmanson due
to regulatory restrictions and (ii) Ahmanson delivers on a quarterly basis
beginning with the first full fiscal quarter following the Due Date an Officer's
Certificate [and an Opinion of Counsel]].
AHMANSON LITIGATION.
Ahmanson also has litigation pending against the U.S. government
involving the regulatory capital treatment of certain supervisory goodwill,
which claims are similar to the Litigation. Ahmanson intends to pursue that
litigation solely in the best interests of its stockholders and without regard
to any possible impact on the Litigation or the value of the CPR Certificates.
NO AHMANSON RESPONSIBILITY FOR THE LITIGATION.
The Litigation will remain an asset of Coast Federal and its successors.
As provided in the CPR Trust Agreement, the Litigation will be solely under the
control of the Litigation Trustees and Ahmanson will not participate in or have
any responsibility for any decisions regarding the administration of the
Litigation. The terms of the CPR Trust Agreement and the Commitment explicitly
provide that the holders of the CPR Certificates and the Litigation Trustees
shall have no rights to enforce, institute or maintain any suit, action or
proceeding against Ahmanson, Home Savings, its affiliates, officers, directors,
employees or agents relating to the formation of the CPR Trust, the entering
into of the Commitment, the distribution of the CPR Certificates, the Litigation
or the performance by the Litigation Trustees of their duties as Litigation
Trustees, except that the CPR Trust (or the Litigation Trustees on behalf of the
CPR Trust) may enforce, institute or maintain a suit, action or proceeding
against Ahmanson for breach of the Commitment or failure to deliver any CPR
Certificate when due or return to the CPR Trust for cancellation any CPR
Certificate required to be returned or against Ahmanson for failure to deposit
the Expense Fund at the Effective Time or against Home Savings for breach of any
depository relationship obligations it may have with respect to the Expense Fund
(and except to the extent that Ahmanson and Home Savings succeed to the
obligations of Coast and Coast Federal, respectively, under the CPR Trust
Agreement).
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The Commitment will provide that except as expressly set forth in the
Commitment (or in any other documents to which Ahmanson has succeeded as a
matter of law), Ahmanson will have no other obligations to the CPR Trust, the
Litigation Trustees or the holders of CPR Certificates. Without limiting the
generality of the foregoing and except as provided in the Merger Agreement,
Ahmanson will have no obligation to advance funds to the CPR Trust, the
Litigation Trustees or the holders of CPR Certificates.
BACKGROUND OF THE MERGER
The Coast Board and the management of Coast have recognized that in
order to remain competitive in the consolidating financial services industry, it
is essential to provide a broader array of consumer and business banking
products, to achieve economies of scale and to continue Coast's expansion of the
variety of products that it offers to customers. In an effort to address these
concerns, from time to time in the last year, Coast and its financial advisors
have had conversations with other financial institutions regarding possible
merger scenarios, and the Coast Board has discussed certain of these
possibilities, with the assistance of Goldman Sachs and outside counsel.
Also in the last year, the Coast Board and management discussed the
possibility of issuing securities relating to the Litigation to the Coast
stockholders, either in connection with a merger or in the absence of a merger.
In late August 1997, Ray Martin, Chairman and Chief Executive Officer of
Coast, arranged an informal meeting with Charles R. Rinehart, Chairman and Chief
Executive Officer of Ahmanson. Prior to this meeting, at Ahmanson's request
Goldman Sachs provided Ahmanson with certain publicly available financial
information. Robert L. Hunt II, Coast's Chief Operating Officer, and Kevin
Twomey, Ahmanson's Chief Financial Officer, also attended this meeting, during
which the parties discussed a possible business combination between Coast and
Ahmanson. Over the course of subsequent informal meetings, Mr. Martin, Mr. Hunt,
Mr. Twomey and selected officers of Coast and Ahmanson discussed the structure
of a potential merger, including Coast's desire to preserve the potential value
of the Litigation for the benefit of Coast stockholders, and Ahmanson's
agreement to that approach so that it did not have to value or pay Coast
stockholders for the Litigation.
During early September, Mr. Martin and Mr. Rinehart negotiated the
principal business terms of the Merger. On September 17, 1997, they reached
tentative agreement on the exchange ratio, subject to agreement on satisfactory
arrangements with respect to securities relating to the Litigation to be issued
to Coast stockholders, satisfactory completion of due diligence reviews of the
business and assets of the respective companies and approvals by the Coast Board
and Ahmanson's Board of Directors (the "Ahmanson Board"). The contemplated
exchange ratio was 0.81 of a share of Ahmanson Common Stock for each share of
Coast Common Stock, assuming that the closing price of Ahmanson Common Stock was
$57.00 or less on the last trading day immediately preceding execution of a
Merger Agreement. If the price of a share of Ahmanson Common Stock at that time
was in excess of $57.00, the proposed exchange ratio would be reduced so that
each share of Coast Common Stock would be exchanged for the number of shares of
Ahmanson Common Stock as would then have a market value of approximately $46.17.
In addition, it was contemplated that Coast stockholders would receive
securities relating, in the aggregate, to 100% of the net after-tax value of any
damage award in or settlement of the Litigation.
On September 18, 1997, Coast and Ahmanson entered into a customary
confidentiality agreement containing a "standstill" provision pursuant to which
each party agreed, for a period of two years following the date of such
agreement, not to take certain actions relating to an acquisition of the other
party's assets or securities without such other party's consent. Following the
execution and delivery of the confidentiality agreement, each of Coast and
Ahmanson began its due diligence review of the other.
In preparation for a September 19, 1997 meeting of the Coast Board to
discuss the status of discussions with Ahmanson, and in view of the retention of
special mergers and acquisition counsel to advise Coast and the Coast Board as
an entirety, at the request of several non-management directors Coast's regular
outside counsel was designated to meet separately with the non-management
directors. At the September 19, 1997 special telephonic meeting of the Coast
Board, Mr. Martin described the status of discussions between the parties.
Coast's senior management and Goldman Sachs discussed the reasons for the Merger
and the potential benefits to Coast and its stockholders from the Merger, and
also
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discussed the strategic and business rationale and financial aspects of the
Merger. Coast's special merger and acquisitions counsel reviewed the directors'
obligations in connection with the possible Merger with the entire Coast Board
and Coast's regular outside counsel reviewed such obligations separately with
the non-management directors.
At a September 21, 1997 special meeting of the Coast Board, the Coast
Board was provided with additional details regarding the history and status of
the discussions with Ahmanson. At that meeting, Goldman Sachs made a
presentation regarding the proposed financial terms of the Merger and Coast's
legal advisors described, and the Coast Board discussed, the terms of the draft
Merger Agreement that had been proposed by Ahmanson and the potential terms of
the securities relating to the Litigation. In addition, the Coast Board
evaluated with management, Goldman Sachs and counsel Coast's strategic
alternatives to the Merger, including the possibility of (i) seeking to merge
with some other banking organization, (ii) remaining independent and seeking to
merge with Ahmanson or another banking organization at a later date and (iii)
remaining independent indefinitely. The Coast Board also discussed with
management, counsel and Goldman Sachs the factors discussed below under
"--Reasons of Coast for the Merger," and the non-management directors discussed
separately with counsel the selection, role and compensation of the Litigation
Trustees.
During the period from September 18, 1997 to the meeting of the Coast
Board on October 5, 1997, the Merger Agreement and the terms of the CPR
Certificates were drafted, discussed and negotiated by Coast, Ahmanson and their
respective representatives.
During meetings between Coast, Ahmanson and their counsel on Friday,
October 3, 1997, all material issues with respect to the Merger Agreement
(including the terms of the CPR Certificates) were resolved. In view of the fact
that the closing price of Ahmanson Common Stock on October 3 was $57.125, the
Exchange Ratio was set at 0.8082 of a share of Ahmanson Common Stock for each
share of Coast Common Stock, representing a market value of $46.17 per share of
Coast Common Stock based on the October 3, 1997 closing price of Ahmanson Common
Stock.
On October 5, 1997, the Ahmanson Board met and approved the Merger
Agreement and the transactions contemplated thereby. Later that day, at a
special meeting of the Coast Board with all members of the Coast Board present,
Mr. Martin and senior management of Coast again presented the reasons for and
the potential benefits of the Merger. Coast's legal advisors reviewed the terms
of the Merger Agreement, including the terms of the CPR Trust and the CPR
Certificates, and Goldman Sachs updated its presentation regarding the financial
terms of the Merger and rendered its opinion that the Consideration (as defined
in "--Opinion of Coast's Financial Advisor") is fair, from a financial point of
view, to holders of Coast Common Stock. See "--Opinion of Coast's Financial
Advisor." After discussion of the Merger Agreement and of the factors discussed
below under "--Reasons of Coast for the Merger," the Coast Board unanimously
approved and authorized the execution of the Merger Agreement and approved the
transactions contemplated thereby, including the Merger, the establishment of
and the terms of the CPR Trust, the CPR Certificate distribution, the engagement
of the Litigation Trustees (including the terms of their engagement), the terms
of Ahmanson's obligation to pay the Commitment Amount to the CPR Trust and the
rights of the holders of the CPR Certificates.
REASONS OF COAST FOR THE MERGER
In determining to approve the Merger Agreement and the transactions
contemplated thereby and to recommend approval of the Transaction Proposal by
the Coast stockholders, the Coast Board reviewed and considered a number of
factors, including, without limitation, the following:
(a) Certain Financial and Other Information Concerning Coast. The
Coast Board took into account its familiarity with and review of the
financial condition, results of operations, cash flow, earnings and
business of Coast both on a historical and a prospective basis.
(b) Advice of Financial Advisor and Fairness Opinion. The Coast
Board considered the financial presentations of Goldman Sachs on
September 21 and October 5, 1997, and the opinion of Goldman Sachs
rendered to the Coast Board on October 5, 1997 that the Consideration is
fair, from a financial point of view, to the holders of Coast Common
Stock. See "--Opinion of Coast's Financial Advisor."
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(c) Economic Terms of the Merger. The Coast Board considered that
the terms of the Merger are beneficial to Coast stockholders in that
Coast stockholders will both (i) become stockholders of a combined
institution that will be a leading financial institution in California
and (ii) retain a 100% interest in an amount equal to the value of any
proceeds (after expenses and taxes calculated according to certain
assumptions) of the Litigation.
(d) The CPR Certificates. The Coast Board took into account the
terms of the CPR Certificates, including the fact that the CPR
Certificates are expected to be freely tradable. In this regard, the
Coast Board also took into account that although there can be no
assurance as to the development of a market for the CPR Certificates,
efforts will be made to list the CPR Certificates on the NASDAQ National
Market System and that a reasonably liquid market appeared to exist for
somewhat similar securities issued by California Federal Bank, A Federal
Savings Bank, with similar claims against the federal government.
(e) Other Terms of the Merger Agreement. The Coast Board
considered the terms of the Merger Agreement, including the fact that
the Coast Board's obligation under the Merger Agreement to recommend the
Merger to the Coast stockholders and the Coast Board's obligations not
to solicit, or to provide information or engage in discussions in
connection with, other proposals to acquire Coast, are both subject to
the Coast Board's fiduciary duties to the Coast stockholders in the
event that the Coast Board were to conclude in good faith that another
unsolicited acquisition proposal was superior to the Merger. The Coast
Board also took into account that if the Merger Agreement were
terminated under certain conditions and Coast or any of its subsidiaries
then entered into a definitive agreement with respect to a merger or
acquisition with a third party within 12 months of termination, Coast
would be required to pay a $35 million termination fee to Ahmanson.
(f) Certain Financial and Other Information Concerning Ahmanson.
The Coast Board considered information regarding (i) the strategy,
business, operations, earnings and financial condition of Ahmanson on
both an historical and a prospective basis and (ii) the historical stock
price performance of Ahmanson Common Stock, in each case based in part
on presentations by Goldman Sachs at the September 21 and October 5,
1997 meetings. See "--Opinion of Coast's Financial Advisor."
(g) Opportunities for Efficiencies and Cost Savings. The Coast
Board took into account that, although no assurances can be given, there
were likely to be anticipated cost savings, operating efficiencies and
synergies available to Ahmanson from the Merger and possible enhanced
revenue opportunities.
(h) Alternatives to the Merger Agreement. The Coast Board
considered strategic alternatives to enhance stockholder value,
including the possibility of (i) seeking to merge with some other
banking organiza tion, (ii) remaining independent and seeking to merge
with Ahmanson or another banking institution at a later date and (iii)
remaining independent indefinitely.
(i) Tax Treatment of the Transaction. The Coast Board took into
account the anticipated tax treatment of the Merger. See "--Certain
Federal Income Tax Consequences."
(j) Regulatory Approvals. The Coast Board took into account its
belief, after consultation with its legal counsel, that the regulatory
approvals necessary to consummate the Merger could be obtained. See
"--Regulatory Matters."
(k) Economic and Competitive Environment. The Coast Board
considered the operating environment for Coast, including, but not
limited to, the continuing consolidation and increasing competition in
the thrift, banking and financial services industries in California and
nationally [and the prospect for further changes in these industries and
the importance of operational scale and financial resources to remaining
competitive in the long term].
(l) Size and Competitiveness of Combined Company. The Coast Board
took into account its assessment that the combined company resulting
from the Merger might better serve the convenience and needs
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of its customers and the communities it serves as a result of being a
substantially larger financial institution, thereby potentially
affording access to greater financial, managerial and technological
resources and an ability to offer an expanded range of products and
services.
(m) Due Diligence Review. The Coast Board considered the results
of the due diligence investigations conducted by Coast management and
its advisors, including, among other things, assessments of Ahmanson's
credit policies, asset quality, adequacy of loan loss reserves and
interest rate risk.
(n) Impact on Coast's Constituencies. The Coast Board considered
the general impact the Merger would have on the various constituencies
served by Coast, including its employees. The Coast Board took into
account the potential for a substantial number of Coast employees to
retain their current positions or to obtain employment with Ahmanson.
The Coast Board also took into account Ahmanson's favorable ratings
under the Community Reinvestment Act.
In reaching its determination to approve and recommend the Merger, the
Coast Board did not assign any relative or specific weights to the various
factors considered by it, and individual directors may have given differing
weights to different factors. The foregoing discussion of the information and
factors considered by the Coast Board is not intended to be exhaustive but is
believed to include all material factors considered by the Coast Board.
BASED ON THE FOREGOING, THE COAST BOARD BELIEVES THAT THE MERGER IS IN
THE BEST INTEREST OF COAST AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT
COAST STOCKHOLDERS VOTE "FOR" APPROVAL OF THE TRANSACTION PROPOSAL.
OPINION OF COAST'S FINANCIAL ADVISOR
Goldman Sachs was retained by Coast to act as its financial advisor in
connection with the Merger and to render an opinion as to the fairness from a
financial point of view of the consideration to be received by Coast or its
stockholders pursuant to the Merger. At meetings of the Coast Board held on
September 21, 1997 and October 5, 1997, Goldman Sachs made presentations on
financial aspects of the Merger and at the October 5, 1997 meeting delivered to
the Coast Board its written opinion dated as of such date to the effect that, as
of the date of such opinion, based on and subject to the matters set forth in
such opinion, the consideration of 0.8082 of a share of Ahmanson Common Stock
and the proportionate interest in an amount equal to any recovery on the
Litigation (the "Consideration") to be received by the holders of shares of
Coast Common Stock pursuant to the Merger Agreement is fair from a financial
point of view to such holders. Goldman Sachs has confirmed its October 5, 1997
opinion as of the date of this Proxy Statement/Prospectus by delivery of its
written opinion to the Coast Board, dated the date of this Proxy
Statement/Prospectus.
Goldman Sachs has consented to the inclusion of its opinion, dated the
date hereof, in this Proxy Statement/Prospectus (the "Goldman Sachs Opinion").
The Goldman Sachs Opinion is addressed to the Coast Board and does not
constitute a recommendation to any of the stockholders of Coast as to how such
stockholders should vote with respect to the Merger.
THE FULL TEXT OF THE GOLDMAN SACHS OPINION, DATED THE DATE OF THIS PROXY
STATEMENT/PROSPECTUS, WHICH SETS FORTH THE ASSUMPTIONS MADE, PROCEDURES
FOLLOWED, MATTERS CONSIDERED AND LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED AS
APPENDIX D TO THIS PROXY STATEMENT/PROSPECTUS AND IS INCORPORATED HEREIN BY
REFERENCE. THE DESCRIPTION OF THE GOLDMAN SACHS OPINION SET FORTH HEREIN IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO APPENDIX D. COAST STOCKHOLDERS ARE
URGED TO READ THE GOLDMAN SACHS OPINION IN ITS ENTIRETY.
Goldman Sachs is a nationally recognized investment banking firm and was
selected by Coast based on the firm's reputation and experience in investment
banking in general, its recognized expertise in the valuation of businesses and
because of its familiarity with, and prior work for, Coast. As part of its
investment banking business, Goldman Sachs
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is continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes.
In connection with rendering its opinions dated October 5, 1997 and the
date hereof, Goldman Sachs, among other things: (i) reviewed the Merger
Agreement; (ii) reviewed Annual Reports to Stockholders and Annual Reports on
Form 10-K of Coast and Ahmanson for the five years ended December 31, 1996;
(iii) reviewed certain interim reports to stockholders and Quarterly Reports on
Form 10-Q of Coast and Ahmanson; (iv) reviewed certain other communications from
Coast and Ahmanson to their respective stockholders; (v) reviewed certain
internal financial analyses and forecasts for Coast and Ahmanson prepared by
their respective managements, including forecasts of certain cost savings (the
"Synergies") expected by Ahmanson to be achieved as a result of the Merger and
including share repurchase and capital management policies expected to be
fulfilled by Ahmanson following the Merger; (vi) held discussions with members
of the senior managements of Coast and Ahmanson regarding the past and current
business operations, regulatory relationships, financial condition and future
prospects of their respective companies and each senior management's assessment
of the Synergies; (vii) reviewed the reported price and trading activity for the
Coast Common Stock and the Ahmanson Common Stock; (viii) compared certain
financial and stock market information for Coast and Ahmanson with similar
information for certain other companies the securities of which are publicly
traded; (ix) reviewed the financial terms of certain recent business
combinations in the thrift industry specifically and in other industries
generally; and (x) performed such other studies and analyses as Goldman Sachs
deemed appropriate.
In connection with rendering the Goldman Sachs Opinion, as set forth
therein, Goldman Sachs relied without independent verification upon the accuracy
and completeness of all the financial and other information reviewed by it and
has assumed such accuracy and completeness for purposes of such opinion. With
Coast's consent, Goldman Sachs assumed that the financial forecasts of Coast and
Ahmanson (including, without limitation, the Synergies, the financial impact of
the anticipated repurchase of Ahmanson Common Stock and capital management
policies and the projections regarding under-performing and non-performing
assets and net charge-offs) were reasonably prepared on a basis reflecting the
best currently available judgments and estimates of Coast and Ahmanson, and that
such forecasts would be realized in the amounts and at the times contemplated
thereby. Goldman Sachs is not an expert in the evaluation of loan and lease
portfolios for purposes of assessing the adequacy of the allowances for losses
with respect thereto, and assumed, with Coast's consent, that such allowances
for each of Coast and Ahmanson are in the aggregate adequate to cover all such
losses. In addition, Goldman Sachs has not reviewed individual credit files nor
has it made an independent evaluation or appraisal of the assets and liabilities
of Coast or Ahmanson or any of their respective subsidiaries and has not been
furnished with any such evaluation or appraisal. Goldman Sachs has also assumed,
with Coast's consent, that obtaining any necessary regulatory approval and third
party consents for the Merger will not have an adverse impact on Coast, Ahmanson
or the combined company pursuant to the Merger.
Goldman Sachs is not a legal expert and has not expressed any opinion as
to the potential outcome or value of the Litigation and has not expressed any
opinion as to the prices at which the CPR Certificates may trade if and when
they are issued.
The following is a summary of the material financial analyses presented
by Goldman Sachs to the Coast Board on September 21, 1997 and October 5, 1997 in
connection with providing its opinion to the Coast Board on October 5, 1997, and
does not purport to be a complete description of the analyses performed by
Goldman Sachs. Goldman Sachs used substantially the same types of financial
analyses in preparing its written opinion dated as of the date of this Proxy
Statement/Prospectus as it used in providing its opinion dated as of October 5,
1997.
Summary of Terms of Proposed Transaction. Goldman Sachs reviewed the
terms of the proposed Merger, including the form of Consideration offered, the
expected method of accounting and the Notional Value (defined below) to be
received for each share of Coast Common Stock pursuant to the Merger. The
Notional Value is calculated on the basis of (i) the Exchange Ratio, (ii) the
closing price of Ahmanson Common Stock as of October 3, 1997 and (iii) the
implied value of the Litigation.
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Goldman Sachs indicated that the Consideration offered in connection
with the Merger consists of Ahmanson Common Stock and proportionate interests in
an amount equal to the net after-tax proceeds, if any, that may be received in
the Litigation, which will be represented by the CPR Certificates. The
anticipated method of accounting for the Merger is the purchase method. Goldman
Sachs stated that the notional price per share of Coast Common Stock for the
Merger as of October 3, 1997 was $59.10 (the "Notional Value"), which amount
represents the sum of (i) the product of the Exchange Ratio and the $57.125
closing price of the Ahmanson Common Stock on October 3, 1997, or $46.17 (the
"Stock Consideration") and (ii) the implied value per share of Coast Common
Stock of the Litigation (as described below), or $12.93. The Notional Value is
necessarily dependent on the closing prices of the Ahmanson Common Stock and of
the Goodwill Certificates (defined below) issued by California Federal Bank at a
specific time. Based upon the Notional Value, the aggregate Consideration to be
received by holders of Coast Common Stock in the Merger would be approximately
$1.162 billion.
In addition to reviewing the Notional Value resulting from the Merger,
the analyses described indicated values of the Stock Consideration resulting
from the Merger expressed as multiples of Coast's earnings for the 12 months
ended June 30, 1997 and of estimates of Coast's 1997 and 1998 earnings, as well
as multiples of various measures of Coast book value. In performing these
analyses, Goldman Sachs used estimates based upon IBES earnings estimates and
earnings estimates prepared by Coast management. IBES is a data service that
monitors and publishes compilations of earnings estimates by selected research
analysts regarding companies of interest to institutional investors. Using these
analyses, the Stock Consideration as of October 3, 1997 reflected (i) a multiple
of 19.7 times Coast earnings per share for the 12 months ending June 30, 1997,
(ii) multiples of 17.4 and 17.0 times the IBES median estimate and the Coast
management estimate, respectively, of Coast's 1997 earnings, and (iii) multiples
of 14.7 and 12.6 times the IBES median estimate and the Coast management
estimate of Coast's 1998 earnings, respectively. The indicated value of the
Stock Consideration as of October 3, 1997 also reflected (i) a multiple of 2.0
times Coast's stated book value as of June 30, 1997 and (ii) a multiple of 2.0
times Coast's tangible book value as of June 30, 1997.
Valuation of Contingent Payment Rights. The possibility exists that
Coast may receive a material payment from the federal government as compensation
for damages related to the Litigation. In attempting to consider the value to
stockholders of any such payment, Goldman Sachs considered the current trading
value of certain publicly traded certificates (the "Goodwill Certificates")
issued by California Federal Bank ("California Federal") in July 1995.
California Federal agreed to pay to holders of the Goodwill Certificates, which
were issued to all of its then existing shareholders, a portion of any damages
which California Federal might receive in relation to its supervisory goodwill
lawsuit, a lawsuit which raises similar issues to those involved in the
Litigation (although there can be no assurance that the Coast and California
Federal litigation will be resolved in a similar manner). The market value of
these Goodwill Certificates, divided by the supervisory goodwill required to be
written off by California Federal, provides a percentage basis upon which it is
possible to impute a value to other companies' regulatory capital claims
(including that of Coast) by multiplying the supervisory goodwill or capital
credits required to be written off, phased out or excluded from regulatory
capital by such companies by such percentage. However, the actual damages that
may be awarded to a plaintiff institution may differ significantly from the
amount of supervisory goodwill or capital credits required to be written off,
phased out or excluded from regulatory capital, as the case may be, because a
court would take into account the actual damages suffered by a plaintiff thrift
as a result of the required phase-out or exclusion.
Based on the $21.125 per certificate closing price of the Goodwill
Certificates on October 3, 1997, the ratio of the market value of the California
Federal legal claim to the aggregate amount of supervisory goodwill related
thereto was 87.5%. Applying this ratio to Coast's regulatory capital credit of
approximately $299 million implied a market value of $261 million, or $12.93 per
share of Coast Common Stock, attributable to the Litigation. However, although
the trading price of the Goodwill Certificates provides a likely indicator of
the market value of the Coast Common Stock attributable to the Litigation, there
is no assurance that the CPR Certificates will trade at $12.95.
Selected Transaction Analysis. Goldman Sachs reviewed certain
information relating to 9 thrift institution mergers in California, announced
since January 1, 1994 and prior to October 5, 1997, in which the aggregate
consideration paid was in excess of $100 million (the "California Thrift
Mergers"). The California Thrift Mergers consist of (buyer/seller): Golden
State/CENFED Financial, Bay View Capital/America First, Washington Mutual/Great
Western, Temple-Inland/California Financial, MacAndrews & Forbes/Cal Fed
Bancorp, Washington Mutual/Keystone Holdings,
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MacAndrews & Forbes/SFFed, First Interstate/Sacramento Savings and MacAndrews &
Forbes/First Nationwide. Such analysis indicated that the median multiples of
consideration paid to the latest 12 month earnings per share, current year
earnings, next year earnings, book value and tangible book value for the
California Thrift Mergers were 14.9, 12.5, 11.5, 1.6 and 1.6 times,
respectively, compared to multiples of the indicated value of the Stock
Consideration as of October 3, 1997 of (i) 19.7 times Coast earnings per share
for the 12 months ending June 30, 1997, (ii) 17.4 and 17.0 times the IBES median
estimate and the Coast management estimate, respectively, of Coast 1997
earnings, (iii) 14.7 and 12.6 times the IBES median estimate and the Coast
management estimate of Coast 1998 earnings, (iv) 2.0 times Coast's stated book
value as of June 30, 1997, and (v) 2.0 times Coast's tangible book value as of
June 30, 1997.
Selected Company Analysis. Based on publicly available information and
IBES earnings estimates, Goldman Sachs reviewed and compared (both including and
excluding the value attributable to the applicable company's regulatory capital
litigation) actual and estimated selected financial, operating and stock market
information and financial ratios of Coast and Ahmanson, a group of 2 California
large-capitalization thrift institutions consisting of Washington Mutual and
Golden West Financial (the "Selected California Large-Cap Thrifts"), a group of
4 California mid- capitalization thrift institutions consisting of Golden State,
Downey Financial, FirstFed Financial and Bay View Capital (the "Selected
California Mid-Cap Thrifts"), and a group of 6 selected non-California
large-capitalization thrift institutions consisting of Charter One Financial,
GreenPoint Financial, Dime Bancorp, Washington Federal, Bank United and People's
Heritage (the "Selected Non-California Large-Cap Thrifts"). Such information and
ratios included, among other things, equity market capitalization,
price-earnings ratios, price to book value ratios, price to tangible book value
ratios, earnings growth and certain profitability data.
Goldman Sachs noted for the Coast Board that, among other things, and
excluding the value attributable to the applicable company's regulatory capital
litigation: (i) Ahmanson had a ratio of market price to 1997 and 1998 IBES
estimated earnings as of September 19, 1997 of 17.1 and 14.7, respectively, as
compared with 19.0 and 16.0, respectively, for Coast and a median ratio of
market price to 1997 and 1998 IBES estimated earnings as of September 19, 1997
of 16.6 and 14.0 for the Selected California Large-Cap Thrifts, 17.2 and 14.4
for the Selected California Mid-Cap Thrifts and 16.0 and 14.0 for the Selected
Non-California Large Cap Thrifts; (ii) Ahmanson had a ratio of market price to
book value, as of September 19, 1997, of 2.8, as compared with 2.1 for Coast and
a median ratio of market price to book value for Selected California Large-Cap
Thrifts, Selected California Mid-Cap Thrifts and Selected Non-California
Large-Cap Thrifts, as of September 19, 1997, of 2.8, 1.7 and 2.1, respectively;
and (iii) Ahmanson had a ratio of market price to tangible book value, as of
September 19, 1997, of 3.3, as compared with 2.1 for Coast and a median ratio of
market price to tangible book value for Selected California Large-Cap Thrifts,
Selected California Mid-Cap Thrifts and Selected Non- California Large-Cap
Thrifts, as of September 19, 1997, of 2.9, 1.9 and 2.6, respectively.
Goldman Sachs also noted for the Coast Board that, among other things,
and including the value attributable to the applicable company's regulatory
capital litigation: (i) Ahmanson had a ratio of market price to 1997 and 1998
IBES estimated earnings as of September 19, 1997 of 15.6 and 13.3, respectively,
as compared with 14.2 and 11.9, respectively, for Coast and a median ratio of
market price to 1997 and 1998 IBES estimated earnings as of September 19, 1997
of 16.6 and 14.0 for the Selected California Large-Cap Thrifts, 16.5 and 12.7
for the Selected California Mid-Cap Thrifts and 14.7 and 13.0 for the Selected
Non-California Large Cap Thrifts; (ii) Ahmanson had a ratio of market price to
book value, as of September 19, 1997, of 2.5, as compared with 1.6 for Coast and
a median ratio of market price to book value for Selected California Large-Cap
Thrifts, Selected California Mid-Cap Thrifts and Selected Non-California
Large-Cap Thrifts, as of September 19, 1997, of 2.8, 1.7 and 2.1, respectively;
and (iii) Ahmanson had a ratio of market price to tangible book value, as of
September 19, 1997, of 3.0, as compared with 1.7 for Coast and a median ratio of
market price to tangible book value for Selected California Large-Cap Thrifts,
Selected California Mid-Cap Thrifts and Selected Non- California Large-Cap
Thrifts, as of September 19, 1997, of 2.9, 1.7 and 2.4, respectively.
Discounted Cash Flow Analysis. Using a discounted cash flow analysis,
Goldman Sachs estimated the present value of the future dividend streams, share
repurchases and terminal values (without reference to the Litigation) that Coast
could produce over the four-year period from January 1, 1998 to December 31,
2001. The estimate of Coast's future net income assumed earnings growth for the
four-year period based on Coast management's earnings estimates and on IBES
earnings estimates. Using assumed discount rates of 11.0%, 12.0% and 13.0% and
terminal values based on multiples of price to forward earnings for the 12-month
period ending December 31, 2002 ranging from 11.0 times
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to 13.0 times, Goldman Sachs calculated net present values ranging from $31 to
$46 per share of Coast Common Stock for the four-year period, excluding proceeds
from the Litigation. The analysis assumed no dividends, and ongoing repurchases
in amounts consistent with Coast's target capital ratios. This compares with the
indicated values of the Stock Consideration of $46.17 per share of Coast Common
Stock included in the Notional Value.
Pro Forma Analysis. Goldman Sachs also performed a pro forma analysis of
certain other financial aspects of the Merger, calculating, among other things,
the pro forma ratios of common equity to assets and tangible common equity to
tangible assets and the efficiency ratio of the combined entity to be 5.0%, 3.8%
and 44.6%, respectively and calculating the pro forma return on average equity
and return on average assets, on a GAAP and on a cash basis, of the combined
entity to be 16.3% and 0.82%, and 17.8% and 0.90%, respectively. Goldman Sachs
also analyzed the pro forma impact on estimated earnings per share of the
combined entity on a reported GAAP and on a cash (excluding goodwill
amortization) basis. On a reported GAAP basis, Goldman Sachs calculated pro
forma earnings per share accretion of 2.0% and 6.1% (using IBES earnings
estimates for both Coast and Ahmanson) for 1998 and 1999, respectively, and 3.1%
and 8.2% (using earnings per share estimates provided by the management of both
Coast and Ahmanson) for 1998 and 1999, respectively. On a cash basis, Goldman
Sachs calculated pro forma earnings per share accretion of 4.2% and 8.7% (using
IBES earnings per share estimates for both Coast and Ahmanson) for 1998 and
1999, respectively, and 5.2% and 10.5% (using earnings estimates provided by the
management of both Coast and Ahmanson) for 1998 and 1999, respectively.
The pro forma merger analysis assumed, among other things, that the
pre-tax expense savings realized from the merger would be $37.5 million in 1998
and $75.0 million in 1999 and thereafter. Goldman Sachs assumed a pretax
restructuring reserve of $75.0 million and a transaction closing date of March
31, 1998. Goldman Sachs also calculated pro forma share repurchases for Ahmanson
to target a pro forma ratio of tangible common equity to tangible assets for
Ahmanson of 4.25%. Additionally, Goldman Sachs assumed that goodwill created in
the transaction would be amortized over a period of 25 years.
Other Analyses. Goldman Sachs also reviewed, among other things,
selected investment research reports on, and earnings estimates for, Coast
Common Stock and Ahmanson Common Stock. Goldman Sachs prepared a summary of the
historical financial and market performance of Coast and Ahmanson, summarized
Coast and Ahmanson managements' respective estimates of financial performance in
1997, based on publicly available information, and analyzed Coast's and
Ahmanson's deposit market share and branch presence in the regions in which they
operate.
The summary set forth above describes the material analyses that Goldman
Sachs performed and presented to the Coast Board on September 21, 1997 and
October 5, 1997, and does not purport to be a complete description of such
analyses. The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or a summary description.
Goldman Sachs believes that its analyses must be considered as a whole
and that selecting portions of its analyses without considering all factors and
analyses would create an incomplete view of the analyses and processes
underlying its opinion. In its analyses, Goldman Sachs relied upon numerous
assumptions made by Coast and Ahmanson with respect to industry performance,
general business and economic conditions and other matters, many of which are
beyond the control of Coast or Ahmanson. Analyses based upon forecasts of future
results are not necessarily indicative of actual values, which may be
significantly more or less favorable than suggested by such analyses. No company
or transaction used as a comparison in the analyses is identical to Coast or
Ahmanson or to the Merger. Additionally, estimates of the value of businesses do
not purport to be appraisals or necessarily reflective of the prices at which
businesses actually may be sold. Because such estimates are inherently subject
to uncertainty, none of the Coast Board, Goldman Sachs, Ahmanson or any other
person assumes responsibility for the accuracy of such estimates. Goldman Sachs'
analyses were prepared solely for purposes of its opinions rendered October 5,
1997 and the date of this Proxy Statement/Prospectus provided to the Coast Board
regarding the fairness from a financial point of view of the Consideration
received by holders of Coast Common Stock pursuant to the Merger Agreement, and
do not purport to be appraisals or necessarily reflect the prices at which Coast
or its securities actually may be sold.
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For the services of Goldman Sachs as financial advisor to Coast in
connection with the Merger, pursuant to an engagement letter dated August 26,
1997, Coast has agreed to pay Goldman Sachs a transaction fee of 0.65% of the
aggregate consideration paid in connection with the Merger (not including
amounts payable in respect of the Litigation); provided, however, that such fee
may not be more than 0.65 multiplied by 110% of the "transaction value" at the
date of the Merger Agreement and may not be less than 0.65 multiplied by 90% of
the "transaction value" at the date of the Merger Agreement. Coast has also
agreed to pay Goldman Sachs its reasonable out-of-pocket expenses, including the
fees and disbursements of its counsel, and to indemnify Goldman Sachs against
certain liabilities, including certain liabilities arising under the federal
securities laws. Goldman Sachs has provided certain investment banking and
advisory services to Coast from time to time, for which it has received, and
will receive, customary compensation. In addition, Goldman Sachs has provided,
and may provide in the future, certain investment banking services to Ahmanson,
for which it has received, and will receive, customary compensation.
Goldman Sachs has advised Coast that, in the ordinary course of its
business as a full-service securities firm, Goldman Sachs may, subject to
certain restrictions, actively trade the equity and/or debt securities of Coast
or Ahmanson for its own account or for the accounts of its customers, and,
accordingly, may at any time hold a long or short position in such securities.
REASONS OF AHMANSON FOR THE MERGER
Ahmanson believes that the Merger enhances Ahmanson's presence in key
markets throughout California, as well as Ahmanson's ability to offer financial
products to both individuals and small businesses. In addition, the Merger
provides an opportunity to enhance Ahmanson's stockholder value by increasing
earnings per share, reducing costs and enhancing revenue growth prospects.
EFFECTIVE TIME
If the Transaction Proposal is approved by the requisite vote of the
Coast stockholders, all required governmental and other consents and approvals
are obtained and the other conditions to the obligations of the parties to
consummate the Merger are either satisfied or waived (if permitted), the CPR
Certificate Distribution will be effected on the Effective Date with a record
and payment date on the Effective Date immediately prior to the Effective Time
and the Merger will be consummated and will become effective on the Effective
Date and at the Effective Time (which will be the time that a certificate of
merger reflecting the Merger is filed with the Secretary of State of the State
of Delaware or at the time specified in such certificate). Unless otherwise
agreed by Coast and Ahmanson, and subject to the conditions to the obligations
of the parties to effect the Merger, the parties have agreed to cause the
Effective Date to occur on the fifth business day to occur after the last of the
conditions to the consummation of the Merger have been satisfied or waived (or,
at the election of Ahmanson, on the last business day of the month in which such
date occurs or, if such date occurs on one of the last five business days of
such month, on the last business day of the succeeding month). Ahmanson and
Coast each has the right, acting unilaterally, to terminate the Merger Agreement
should the Merger not be consummated by June 30, 1998. See "--Termination;
Termination Fee."
DISTRIBUTION OF AHMANSON COMMON STOCK CERTIFICATES
At or prior to the Effective Time, Ahmanson will deposit, or will cause
to be deposited, with a depository institution of recognized standing selected
by Ahmanson (in such capacity, the "Exchange Agent"), for the benefit of the
holders of certificates formerly representing shares of Coast Common Stock ("Old
Certificates") certificates representing the shares of Ahmanson Common Stock
("New Certificates") to which the holders of the Old Certificates are entitled
pursuant to the Merger Agreement, together with the estimated amount of cash to
be paid in exchange for fractional share interests.
Promptly after the Effective Time, Ahmanson will send or cause to be
sent transmittal materials to each record holder of Coast Common Stock for use
in exchanging those certificates for the shares of Ahmanson Common Stock to
which such stockholder is entitled as a result of the Merger. COAST STOCKHOLDERS
SHOULD NOT SURRENDER THEIR CERTIFICATES FOR EXCHANGE UNTIL THEY RECEIVE THE
LETTER OF
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TRANSMITTAL AND INSTRUCTIONS. Ahmanson will cause the New Certificates and/or
any check in respect of any fractional share interests or dividends or
distributions which a holder of Coast Common Stock will be entitled to receive
to be delivered to such stockholder upon delivery to the Exchange Agent of
certificates representing such shares of Coast Common Stock owned by such
stockholder (or indemnity reasonably satisfactory to Ahmanson and the Exchange
Agent, if any of such certificates are lost, stolen or destroyed). None of the
Exchange Agent, Ahmanson, Coast or the CPR Trust will be liable to a holder of
Coast Common Stock for any amount properly delivered to a public official
pursuant to any applicable abandoned property, escheat or similar law.
After the Effective Time, at the election of Ahmanson, no dividend or
other distribution with respect to Ahmanson Common Stock with a record date
occurring after the Effective Time will be paid to the holder of any
unsurrendered certificate for Coast Common Stock until the holder duly
surrenders such certificate. Upon such surrender, all undelivered dividends and
other distributions and, if applicable, a check for the amount to be paid in
lieu of any fractional share interest will be delivered to such stockholder, in
each case without interest.
After the Effective Time, there will be no transfers of shares of Coast
Common Stock on Coast's stock transfer books. If certificates representing
shares of Coast Common Stock are presented for transfer after the Effective
Time, they will be canceled and exchanged for the shares of Ahmanson Common
Stock and a check for the amount due in lieu of fractional shares, if any,
deliverable in respect thereof.
FRACTIONAL SHARES
Pursuant to the terms of the Merger Agreement, each holder of shares of
Coast Common Stock exchanged pursuant to the Merger who would otherwise have
been entitled to receive a fraction of a share of Ahmanson Common Stock shall
receive, in lieu thereof, an amount in cash (without interest) determined by
multiplying such fraction by the average of the last sale prices of Ahmanson
Common Stock, as reported by the NYSE Composite Tape (as reported in The Wall
Street Journal or, if not reported therein, in another authoritative source),
for the five NYSE trading days immediately preceding the Effective Date. No such
holder will be entitled to dividends, voting rights, or any other rights as a
stockholder with respect to any fractional shares. No interest will be paid on
any such cash to be paid in lieu of fractional share interests or in respect of
dividends or distributions which any such person may be entitled to receive upon
delivery of Old Certificates to the Exchange Agent.
THE CPR TRUST, THE CPR CERTIFICATES AND THE CPR CERTIFICATE DISTRIBUTION
In the Merger Agreement, Coast has agreed to take all actions necessary
to cause the CPR Trust to be formed. In addition, Coast has agreed to take all
actions necessary to cause the issuance of the CPR Certificates by the CPR Trust
to Coast and to effect the CPR Certificate Distribution with a record date and
payment date on the Effective Date immediately prior to the Effective Time.
However, Coast is not required to cause the CPR Trust to issue such CPR
Certificates or to effect the CPR Certificate Distribution until all conditions
to the Merger, other than such distribution, have been satisfied or waived. See
"--Conditions to Consummation."
Coast has also agreed to cause the CPR Trust to deliver to Coast
immediately prior to the Effective Time a number of CPR Certificates sufficient
for the delivery (or retention by Ahmanson as successor to Coast in certain
circumstances) of CPR Certificates required in connection with Coast Stock
Options, Coast Performance Share Awards, Coast SARs and appraisal rights that
are exercised. See "--Stock Options; Performance Share Awards; SARs" and
"Appraisal Rights." Ahmanson has agreed to return to the CPR Trust any CPR
Certificates with respect to options that expire prior to exercise.
STOCK OPTIONS; PERFORMANCE SHARE AWARDS; SARS
The Merger Agreement provides that each option to acquire shares of
Coast Common Stock (each, a "Coast Stock Option") which is outstanding at the
Effective Time, all of which are vested, will be converted into an option to
acquire, on the same terms and conditions as were applicable under Coast's 1996
Equity Incentive Plan or Coast's 1985 Stock Option and Stock Appreciation Rights
Plan (collectively, the "Coast Stock Plans"), as the case may be, (a) the
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number of shares of Ahmanson Common Stock equal to (i) the number of shares of
Coast Common Stock subject to such Coast Stock Option, multiplied by (ii) the
Exchange Ratio (such product rounded down to the nearest whole number), at an
exercise price per share (rounded up to the nearest whole cent) equal to (A) the
aggregate exercise price for the shares of Coast Common Stock which were
purchasable pursuant to such Coast Stock Option divided by (B) the number of
full shares of Ahmanson Common Stock subject to the Replacement Option in
accordance with the foregoing and (b) one CPR Certificate for each share of
Coast Common Stock that would have been issuable upon exercise in full of such
Coast Stock Option.
In addition, the Merger Agreement provides that each performance share
award (each, a "Coast Performance Share Award") which is outstanding at the
Effective Time under the Coast Performance Share Plan for Key Employees (the
"Coast Performance Share Award Plan") will be canceled and will only entitle the
holder thereof to receive for each share of Coast Common Stock with respect to
such award (a) one CPR Certificate and (b) an amount in cash equal to the
difference between (i) the result of multiplying the Exchange Ratio by the
average of the last sale prices of one share of Ahmanson Common Stock, as
reported by the NYSE Composite Tape (as reported in The Wall Street Journal or,
if not reported therein, in another authoritative source), for the five NYSE
trading days immediately prior to the Effective Date and (ii) the base price
under such award.
The Merger Agreement further provides that each outstanding stock
appreciation right (each, a "Coast SAR") under the Coast Stock Plans shall be
canceled and only entitle the holder thereof to receive for each share of Coast
Common Stock with respect to such stock appreciation right (a) one CPR
Certificate and (b) an amount in cash equal to the difference between (i) the
result of multiplying the Exchange Ratio by the average of the last sale prices
of one share of Ahmanson Common Stock, as reported by the NYSE Composite Tape
(as reported in The Wall Street Journal or, if not reported therein, in another
authoritative source), for the five NYSE trading days immediately prior to the
Effective Date and (ii) the grant price of such Coast SAR.
However, if Coast is unable to obtain from any holders of such Coast
Performance Share Awards or Coast SARs, as the case may be, the consents
necessary to effect such treatment, such holders will instead be entitled to (a)
with respect to each outstanding Coast Performance Share Award under the Coast
Performance Share Award Plan, an amount in cash equal to the result of
multiplying (i) the difference between the average of the last sale prices of
one share of Coast Common Stock, as reported by the NYSE Composite Tape (as
reported in The Wall Street Journal or, if not reported therein, in another
authoritative source), for the five NYSE trading days immediately prior to the
Effective Date and the base price under such award by (ii) the total number of
shares of Coast Common Stock with respect to such award and (b) with respect to
each outstanding Coast SAR under the Coast Stock Plans, an amount in cash equal
to the result of multiplying (i) the difference between the average of the last
sale prices of one share of Coast Common Stock, as reported by the NYSE
Composite Tape (as reported in The Wall Street Journal or, if not reported
therein, in another authoritative source), for the five NYSE trading days
immediately prior to the Effective Date and the grant price of such stock
appreciation right by (ii) the total number of shares of Coast Common Stock with
respect to such Coast SAR. All CPR Certificates with respect to the Coast
Performance Share Awards and Coast SARs as to which payments are made as
described in this paragraph will be retained by Ahmanson (as successor to
Coast). In addition, in the event that between the date of the Merger Agreement
and the Effective Date any Coast Performance Share Awards or Coast SARs are
exercised, Ahmanson (as successor to Coast) will be entitled to retain any CPR
Certificates that would otherwise have been issuable with respect to such Coast
Performance Share Awards or Coast SARs at the Effective Date.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material U.S. federal income tax
consequences of the Merger applies to a holder of Coast Common Stock that holds
its shares as capital assets. This summary may not apply to certain classes of
taxpayers, including foreign holders, insurance companies, tax-exempt
organizations, financial institutions, dealers in securities, traders in
securities that elect to mark to market, persons who acquired or acquire shares
of Coast Common Stock pursuant to the exercise of employee stock options or
otherwise as compensation and persons who hold shares of Coast Common Stock in a
hedging transaction or as part of a straddle or conversion transaction. Each
holder should consult its own tax adviser as to the specific tax consequences of
the Merger and the CPR Certificate Distribution to such holder.
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This summary represents the opinions of Sullivan & Cromwell, special
counsel to Ahmanson, and Cleary, Gottlieb, Steen & Hamilton, special counsel to
Coast. The parties do not intend to request any ruling from the IRS as to the
U.S. federal income tax consequences of the Merger.
The obligations of Ahmanson and Coast to consummate the Merger are
subject to the condition that they receive opinions (described further below) to
the effect that the Merger will be treated as a reorganization within the
meaning of Section 368(a) of the Code. In rendering such opinions, such counsel
may require and rely upon representations contained in letters from Coast,
Ahmanson and stockholders of Coast and assumptions set forth in the opinions.
Assuming the Merger is such a reorganization, the material federal income tax
consequences of the Merger to each of Ahmanson, Coast and a holder who exchanges
shares of Coast Common Stock for shares of Ahmanson Common Stock pursuant to the
Merger will be as follows:
(a) No gain or loss will be recognized by Ahmanson or Coast as a
result of the consummation of the Merger.
(b) No gain or loss will be recognized by a holder except as
follows: Gain or loss may be recognized by a holder who receives cash in
lieu of a fractional share interest in Ahmanson Common Stock (see (e)
below). In addition, gain (but not loss) may be recognized in an amount
not exceeding the fair market value of such holder's CPR Certificates at
the Effective Time (which will include a proportionate share of the
value attributable to Ahmanson's having entered into the Commitment)
(see (f) below).
(c) The aggregate adjusted tax basis of shares of Ahmanson Common
Stock (including any fractional share interest in Ahmanson Common Stock,
as described below) received by a holder will be the same as the
aggregate adjusted tax basis of the shares of Coast Common Stock
exchanged therefor, decreased by the value of the CPR Certificates
received by such holder (as such value is determined in (f)(i) below)
and increased by the amount of gain recognized upon the receipt of CPR
Certificates (as described in (f) below).
(d) The holding period of shares of Ahmanson Common Stock
(including a fractional share interest in Ahmanson Common Stock deemed
received and redeemed, as described below) received by a holder will
include the holding period of the Coast Common Stock exchanged therefor.
(e) A holder who receives cash in lieu of a fractional share
interest in Ahmanson Common Stock will be treated as having received the
fractional share interest and as having received the cash in redemption
of that fractional share interest. Under Section 302 of the Code, if the
deemed redemption is "substantially disproportionate" with respect to
the holder or is "not essentially equivalent to a dividend" after giving
effect to the constructive ownership rules of the Code, the holder will
generally recognize capital gain or loss equal to the difference between
the amount of cash received and the holder's adjusted tax basis in the
fractional share interest (determined under clause (c) above). Such
capital gain or loss will be long-term capital gain or loss if the
holder's holding period in the fractional share interest (determined
under clause (d) above) is more than one year (and will be taxed at the
rates set forth in the final sentence of (f) below).
(f) A holder will recognize gain to the extent of the lesser of:
(i) the fair market value of the holder's CPR Certificates at
the Effective Time (which, at the Effective Time, will include
the proportionate share of the value attributable to Ahmanson's
having entered into the Commitment); and
(ii)the excess of (A) the sum of (I) the fair market value of
the shares of Ahmanson Common Stock (including any fractional
share interest in Ahmanson Common Stock for which cash is
received) received by the holder and (II) the amount determined
in (i) above; over (B) the holder's adjusted federal income tax
basis for the shares of Coast Common Stock exchanged in the
Merger.
If the shares of Coast Common Stock exchanged in the Merger were held as
capital assets at the Effective Time, any such gain will be treated as
capital gain (which will be long-term capital gain if the shares of
Coast Common
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Stock were held for more than one year) provided the holder of Coast
Common Stock does not own, either directly or applying certain ownership
attribution rules, contemporaneously with the Merger any Ahmanson stock
other than the Ahmanson Common Stock received by the holder in the
Merger. A holder that owns such additional Ahmanson stock generally will
be entitled to treat such gain as capital gain only if a distribution of
CPR Certificates in a hypothetical redemption by Ahmanson immediately
following the Effective Time of an equivalent amount of Ahmanson Common
Stock would have qualified for capital gain treatment under the
standards of Section 302 of the Code. Holders owning additional shares
of Ahmanson stock should consult their own tax advisors concerning the
treatment of gain as capital gain or ordinary income. Long-term capital
gain of a non-corporate holder is generally subject to a maximum tax
rate of 28% in respect of property held for more than one year and to a
maximum tax rate of 20% in respect of property held for more than 18
months.
(g) The adjusted tax basis of CPR Certificates received by a
holder will equal the value of the CPR Certificates described in (f)(i)
above, and the holding period of the CPR Certificates will begin on the
Effective Date (and will not include the holding period of the holder's
Coast Common Stock).
Ahmanson's obligation to consummate the Merger is conditioned upon,
among other things, the receipt of an opinion of Sullivan & Cromwell, dated the
Effective Date, to the effect that the Merger is a reorganization under Section
368(a) of the Code and that no gain or income will be recognized by Ahmanson in
the Merger. Coast's obligation to consummate the Merger is conditioned upon,
among other things, the receipt of an opinion of Cleary, Gottlieb, Steen &
Hamilton, dated the Effective Date, to the effect that the Merger is a
reorganization within the meaning of Section 368(a) of the Code and that,
accordingly, (i) no gain or loss will be recognized by Coast as a result of the
Merger and (ii) no gain or loss will be recognized by a stockholder of Coast who
receives shares of Ahmanson Common Stock in exchange for shares of Coast Common
Stock, except (A) with respect to cash received in lieu of fractional share
interests and (B) for gain that may be recognized in an amount not exceeding the
fair market value at the time of the Merger of such stockholder's CPR
Certificates (which represent such stockholder's share of the Commitment
Amount). The opinion of Cleary, Gottlieb, Steen & Hamilton will not apply to
stockholders or persons receiving Ahmanson Common Stock or CPR Certificates as
compensation.
Under the terms of the Merger Agreement, the conditions to the Merger,
including receipt by each party of opinions of counsel relating to tax matters,
may generally be waived by Ahmanson or Coast, as applicable. See "--Conditions
to Consummation" and "--Amendment and Waiver."
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON
THE PARTICULAR CIRCUMSTANCES OF EACH HOLDER OF COAST COMMON STOCK AND OTHER
FACTORS, EACH SUCH HOLDER IS URGED TO CONSULT SUCH HOLDER'S OWN TAX ADVISER AS
TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER (INCLUDING THE
APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND OTHER TAX LAWS).
MANAGEMENT AND OPERATIONS AFTER THE MERGER
Ahmanson will be the surviving corporation resulting from the Merger and
will continue to be governed by the laws of the State of Delaware and will
operate in accordance with its certificate of incorporation and bylaws as in
effect immediately prior to the Effective Time until otherwise amended or
repealed after the Effective Time. Under the Merger Agreement, Ahmanson has
agreed to cause Mr. Martin, Chairman of the Board and Chief Executive Officer of
Coast, to be elected or appointed as director of Ahmanson at, or as promptly as
practicable after, the Effective Time. The directors and officers of Ahmanson in
office immediately prior to the Effective Time, together with such additional
director and such additional persons as may thereafter be elected, will serve as
the directors and officers of Ahmanson from and after the Effective Time in
accordance with Ahmanson's certificate of incorporation and bylaws.
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POST-ACQUISITION COMPENSATION AND BENEFITS
The Merger Agreement provides generally that Ahmanson will, from and
after the Effective Time, (a) honor in accordance with their terms all
employment or severance agreements entered into prior to the date of the Merger
Agreement that were previously disclosed, (b) provide former employees of Coast
who remain as employees of Ahmanson with employee benefit plans no less
favorable in the aggregate than those provided to similarly situated employees
of Ahmanson, (c) provide employees of Coast who remain as employees of Ahmanson
credit for years of service with Coast or any of its subsidiaries prior to the
Effective Time for the purpose of eligibility and vesting and (d) cause any and
all pre-existing condition limitations (to the extent such limitations did not
apply to a pre-existing condition under comparable compensation and benefit
plans of Coast) and eligibility waiting periods under group health plans of
Ahmanson to be waived with respect to former employees of Coast who remain as
employees of Ahmanson (and their eligible dependents) and who become
participants in such group health plans. The Merger Agreement provides, however,
that nothing therein will limit or restrict the right of Ahmanson to (i)
terminate the employment of any employee at any time for any reason whatsoever,
with or without cause, and (ii) modify, amend or terminate any employee benefit
or other plans of Ahmanson. In the Merger Agreement, Ahmanson agreed to pay up
to $2,000,000 as retention bonuses, payable upon dates following consummation of
the Merger specified in the Merger Agreement, to be allocated primarily among
non-executive employees of Coast.
On October 27, 1997, Ahmanson and Coast announced the adoption of the
Coast Federal Bank, Federal Savings Bank Change in Control Severance Pay Plan
(the "Severance Plan") effective from November 1, 1997 with respect to certain
employees of Coast. Ahmanson and Coast have agreed that the adoption of the
Severance Plan is deemed to satisfy and constitutes full performance by Ahmanson
of its obligations described in the last sentence of the immediately preceding
paragraph. The Severance Plan generally provides that employees of Coast Federal
whose employment is terminated without cause as a consequence of the Merger or
the consolidation of branches prior to December 31, 1998 will receive severance
compensation based upon the length of their service with Coast Federal.
INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION PROPOSAL
Certain members of Coast's management and the Coast Board may be deemed
to have certain interests in the Merger and the transactions contemplated
thereby in addition to their interests as Coast stockholders. The Coast Board
was aware of these interests in approving the Merger Agreement.
AHMANSON BOARD OF DIRECTORS.
As described above, the Merger Agreement provides that Ahmanson agrees
to cause Mr. Martin, Chairman of the Board and Chief Executive Officer of Coast,
to be elected or appointed as a director of Ahmanson at, or as promptly as
practicable after, the Effective Time.
INCENTIVE PLANS.
The Merger Agreement provides that all options to acquire Coast Common
Stock outstanding at the Effective Time under the Coast Stock Plans, including
those held by management and members of the Coast Board, will be assumed by
Ahmanson. Each stock option will thereafter constitute an option to acquire
shares of Ahmanson Common Stock and CPR Certificates as set forth above under
"--Stock Options; Performance Share Awards; SARs." In addition, the Merger
Agreement provides that each outstanding Coast Performance Share Award under the
Coast Performance Share Award Plan and each outstanding Coast SAR, including
those held by management, will be canceled (subject to the consent of the holder
of such Coast Performance Share Award or Coast SAR, as the case may be) and
entitle the holder thereof to a CPR Certificate and an amount in cash generally
based on an average of the Ahmanson Common Stock over a five day period over the
base price or grant price, as applicable. See "--Stock Options; Performance
Share Awards; SARs."
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INDEMNIFICATION AND INSURANCE.
The Merger Agreement provides that following the Effective Date,
Ahmanson will indemnify, defend and hold harmless the present directors and
officers of Coast and its subsidiaries against all costs or expenses (including
reasonable attorneys' fees), judgments, fines, losses, claims, damages or
liabilities as incurred, in connection with any claim, action, suit, proceeding
or investigation, whether civil, criminal, administrative or investigative,
arising out of actions or omissions occurring at or prior to the Effective Time
to the fullest extent that Coast is permitted to indemnify (and advance expenses
to) its directors and officers under the laws of the State of Delaware, the
certificate of incorporation of Coast (the "Coast Charter") and the by-laws of
Coast (the "Coast By-Laws") as in effect on October 5, 1997. The Merger
Agreement also provides that Ahmanson will use its reasonable best efforts for
four years after the Effective Time to provide directors' and officers'
liability insurance that serves to reimburse the present and former officers and
directors of Coast or any of its subsidiaries with respect to claims against
such directors and officers arising from facts or events which occurred at or
prior to the Effective Time, which insurance will contain at least the same
coverage and amounts, and will contain terms and conditions no less
advantageous, as the coverage currently provided by Coast; provided, however,
that in no event will Ahmanson be required to expend more than 200% of the
current amount expended by Coast to maintain such insurance and that if Ahmanson
is unable to maintain or obtain such insurance, Ahmanson will use its reasonable
best efforts to obtain as much comparable insurance as is available for such
200% amount.
COAST EXECUTIVE AGREEMENTS AND PLANS.
Change of Control. The Merger will constitute a "change of control"
within the meaning of the agreements and plans described below.
Employment Agreements. Coast Federal currently has employment agreements
with its Chief Executive Officer, President and Senior Executive Vice
Presidents, as well as certain other officers of Coast Federal and its
subsidiaries. Mr. Ray Martin's agreement provides for a three year term renewed
annually by the Coast Board. The agreements with Messrs. Robert Hunt, James
Boyle, Norman Raiden and James Barritt provide for two year terms renewed
annually by the Coast Board. However, in the event of a change in control of
Coast Federal, the term of such executives' agreements automatically converts to
three years renewable annually by the Board of Directors. In addition, in the
event of a change in control, for the remainder of the term of the agreement,
Coast Federal will pay each executive a base monthly compensation equal to his
monthly salary then in effect plus 1/12 of the aggregate amount of the higher of
the discretionary bonuses attributable to the last two bonus computation years
that ended before the change in control.
In the event that Coast Federal elects to terminate any of the
executives' employment without cause (as defined therein), or if the executive
elects to terminate his employment (i) within one year of a change of control of
Coast Federal for any reason (with respect to Mr. Martin only), (ii) due to
Coast Federal's failure to comply with certain conditions of service (including
certain additional conditions following a change in control of Coast Federal) or
(iii) within the 30-day period immediately following the one year anniversary of
a change in control of Coast Federal, the affected executive will be entitled to
receive a lump sum payment within 30 days of such termination equal to the
discounted present value of the compensation due under the agreement for the
balance of its term. In addition, the executives will be entitled to receive
medical insurance benefits for the remaining term of the agreement. In the event
of a change in control, each executive will also receive a gross-up payment if
the payments and benefits under the agreement and all other contracts or
arrangements, in the aggregate, exceed the maximum amount that may be paid to
the executive without triggering golden parachute penalties under Section 280G
of the Code and related provisions. Such gross-up payment will be an amount
which, after payment by the executive of all income and excise taxes on the
gross-up payment, equals the excise taxes the executive must pay under Section
4999 of the Code with respect to the payments and benefits for which the
executive is receiving the gross-up payment.
Severance Agreements. Coast Federal currently has severance agreements
with its _______ Senior Vice Presidents. The terms of such agreements commence
on the date of a change in control of Coast Federal and terminate one year from
the date of such change in control. Such agreements may be terminated earlier
upon 30 days notice by either party to the agreement, provided that if such
agreement is terminated by Coast Federal after a change in control, Coast
Federal will remain obligated to make payments under such agreement. If there
has been a change in control while
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the executive is still employed by Coast Federal and during the term of the
agreement the executive's employment with Coast Federal is subsequently
terminated, the executive will be entitled to a severance payment, unless such
termination of employment was (i) as a result of the executive's death,
disability (as defined therein) or retirement (as defined therein), or (ii) by
Coast Federal for cause (as defined therein) or (iii) by the executive other
than for good reason (as defined therein). Such severance payment would be a
lump sum amount equal to one year's salary (at the higher of the executive's
salary at the time of the change in control or of the termination of the
executive's employment), payable 50% within 5 days of the executive's
termination of employment and the remainder within 60 days of such termination.
Supplemental Executive Retirement Plan of Coast Federal. Coast Federal
currently has a non-qualified supplemental executive retirement plan (the
"Supplemental Plan") to provide supplemental retirement benefits to its Chief
Executive Officer, President, Senior Executive Vice Presidents, Senior Vice
Presidents and certain other senior officers of Coast Federal and its
subsidiaries. Monthly benefits are based upon a percent of such participant's
average monthly earnings during the three highest paid consecutive years in the
ten years preceding retirement. Monthly benefits payable under the Supplemental
Plan are reduced (but not below a specified percentage of such average monthly
earnings) by the sum of the benefit payable to the executive under Coast
Federal's qualified pension plan, Social Security and certain other payments. In
general, benefits payable under the Supplemental Plan are reduced if a
participant retires prior to attaining age 65. Participants are generally
eligible to receive benefits under the Supplemental Plan after the completion of
10 years of service with Coast Federal and attainment of age 60, after
completion of 25 years of service with Coast Federal and attainment of age 55,
or, regardless of the number of years of service, after attaining age 65.
Certain payments may also be made in the case of death or disability (as defined
therein) of the participant. If a participant's employment terminates prior to
eligibility for his or her benefit other than by reason of death or disability
or in the context of a change in control as set forth in the next sentence, such
participant forfeits his or her benefit under the Supplemental Plan, with the
exception of Messrs. Martin, Hunt, Boyle, Raiden and Barritt to whom such
benefit would be paid upon attainment of age 65 in such case. If a participant
is terminated by Coast Federal without cause (as defined therein) or voluntarily
resigns from Coast Federal for good reason (as defined therein) before the third
anniversary of a change in control of Coast Federal, Coast Federal will be
obligated to commence paying in the next calendar month following such change in
control such participant's benefit in an annuity or lump sum as chosen by the
participant (subject to certain reductions). The benefit payable to participants
in the case of a change in control may be reduced in order to avoid the
triggering of golden parachute penalties under Section 280G of the Code, with
the exception of Messrs.
Martin, Hunt, Boyle, Raiden and Barritt.
Deferred Compensation Plan. Coast Federal currently has an unfunded
deferred compensation plan (the "Deferred Compensation Plan") to allow certain
designated officers and directors of Coast Federal to defer for receipt in a
later year a portion of his or her annual compensation. Each participant who
elects to defer compensation must also elect a time and manner for its receipt
in a later year in accordance with the terms of the Deferred Compensation Plan
and generally will not be permitted to receive such deferred compensation prior
to the elected time. Any such deferred compensation will be credited to an
account on behalf of a participant and will be credited with earnings based upon
an interest rate determined by Coast Federal or, if permitted, deemed
investments chosen by the participant. In the event a participant's employment
with Coast Federal is terminated by Coast Federal following a change in control
of Coast Federal or the participant voluntarily terminates employment due to a
material reduction in responsibilities or compensation benefits following a
change in control of Coast Federal, Coast Federal must pay the participant a
lump sum distribution of such participant's account in January of the year
following the year of termination, unless the participant has requested
otherwise in writing at least one year prior to such change in control.
COAST EXECUTIVES AND THE CPR TRUST.
Four senior Coast executives (Messrs. Martin, Hunt, Raiden and Barritt)
with knowledge of the facts underlying the Litigation will be the Litigation
Trustees of the CPR Trust. Mr. Martin (currently Chairman of the Board and Chief
Executive Officers of Coast and Coast Federal), Mr. Hunt (currently President
and Chief Operating Officer of Coast and Coast Federal) and Mr. Barritt
(currently Senior Executive Vice President and Chief Financial Officer of Coast
and Coast Federal) were officers of Coast and Coast Federal both at the time
that Coast Federal entered into the agreement with the federal government to
treat certain amounts as a permanent addition to Coast Federal's regulatory
capital in connection with Coast Federal's acquisition of Central Savings and
Loan Association, and also at the time of the alleged breach of
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that agreement by the federal government that gave rise to the claims underlying
the Litigation. Mr. Martin, Mr. Hunt and Mr. Barritt, together with Mr. Raiden
(currently Senior Executive Vice President and General Counsel of Coast and
Coast Federal, and who joined Coast soon after the alleged breach of the
agreement by the federal government), have been involved in the prosecution of
the Litigation to date. The CPR Trust Agreement will provide that, as Litigation
Trustees, they will have sole and exclusive control of Coast Federal's (or its
successor's) pursuit of the Litigation. Litigation Trustees will not be
permitted to hold any other full-time employment during the term of their tenure
as Litigation Trustees prior to the receipt of the Litigation Proceeds by the
Ahmanson Group. Each of the initial Litigation Trustees will, as a condition of
his continuation as a Litigation Trustee, be obligated to retain at least 50% of
the CPR Certificates received in the CPR Certificate Distribution and the Merger
and upon exercise of Replacement Options, until the Litigation Proceeds are
received by the Ahmanson Group. Transfers by a Litigation Trustee to his family
members or to any trust created for the benefit of his family will be included
in such 50% calculation for so long as such transferees retain the CPR
Certificates.
The CPR Trust Agreement will provide that, as compensation, the CPR
Trust will pay each Litigation Trustee, during the term of his service as a
Litigation Trustee, fees of $400,000 per year for five years (except that if the
Litigation is sooner terminated, the remainder of such fees (but in no event
with respect to a period longer than two years after the year in which such
termination occurs) will be accelerated upon final resolution of the Litigation
and receipt by the Ahmanson Group of the Litigation Proceeds), plus
reimbursement of all reasonable out-of-pocket expenses. If the services of the
Litigation Trustees continue to be necessary after the initial five-year period
or such receipt of Litigation Proceeds, the Litigation Trustees will be entitled
to a fee of $200 per hour until termination of the CPR Trust.
The CPR Trust Agreement will provide that the Litigation Trustees will
have no liability to Ahmanson, Coast or CPR Certificate holders unless it is
established in a final judicial determination by clear and convincing evidence
that any decision or action was undertaken with deliberate intent to injure the
CPR Certificate holders or with reckless disregard for the best interests of
such holders, and, in any event, any liability will be limited to actual,
proximate, quantifiable damages. The CPR Trust will be obligated to indemnify
and advance expenses to, without requirement of bond or other security, each
Litigation Trustee against any and all losses, claims, costs, expenses and
liabilities arising out of or relating to, among other things, the Litigation
and the performance by the Litigation Trustees of their duties as Litigation
Trustees, except that if CPR Certificate holders meet the burden of establishing
in a final judicial determination by clear and convincing evidence that such
losses, claims, costs, expenses or liabilities arose as the result of actions or
decisions undertaken with deliberate intent to injure the CPR Certificate
holders or with reckless disregard for the best interests of such holders by
such Litigation Trustees, no indemnification shall apply. The CPR Trust will be
obligated to obtain liability insurance to cover its indemnification obligations
to the Litigation Trustees and others and any other liabilities of the
Litigation Trustees.
CONDITIONS TO CONSUMMATION
The obligations of Coast and Ahmanson to consummate the Merger are
subject to the satisfaction or written waiver of the following conditions: (a)
the Transaction Proposal shall have been duly adopted by the requisite vote of
the stockholders of Coast; (b) all regulatory approvals required to consummate
the transactions contemplated by the Merger Agreement shall have been obtained
and shall remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired and no such approvals shall contain any
conditions, restrictions or requirements which would reasonably be expected to
(i) following the Effective Time, have a Material Adverse Effect (as defined in
the Merger Agreement) on Ahmanson and its subsidiaries taken as a whole or (ii)
reduce the benefits of the Merger to such a degree that Ahmanson would not have
entered into the Merger Agreement had such conditions, restrictions or
requirements been known at the date of the Merger Agreement; (c) no
administrative agency or commission or other federal, state or local
governmental authority or instrumentality shall have taken any action
prohibiting the consummation of the transactions contemplated by the Merger
Agreement; (d) the Registration Statements shall have become effective and shall
not be subject to a stop order and, if required, the CPR Trust Agreement shall
have been duly qualified under the Trust Indenture Act of 1939, as amended, and
the rules and regulations thereunder; (e) the shares of Ahmanson Common Stock to
be issued in the Merger shall have been approved for listing on the NYSE,
subject to official notice of issuance; (f) Coast shall have received an opinion
of Cleary, Gottlieb, Steen & Hamilton, special counsel to Coast, as
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to certain tax matters; (g) Ahmanson shall have received an opinion of Sullivan
& Cromwell, special counsel to Ahmanson, as to certain tax matters; (h) the
other party's representations and warranties shall remain accurate and each
party shall have performed in all material respects all of the obligations
required to be performed by it pursuant to the Merger Agreement, and shall have
delivered certificates confirming satisfaction of the foregoing requirements;
(i) each party shall have received a letter of the other party's independent
accountants as to certain financial information of the other party; (j) in the
case of Coast, Ahmanson shall have executed and delivered the Commitment and
made the transfer to the CPR Trust with respect to the Expense Fund (as defined
herein); (k) in the case of Ahmanson, holders of no more than 5% of the
outstanding shares of Coast Common Stock shall have given notice that their
shares of Coast Common Stock be treated as Dissenters' Shares; and (l) in the
case of Ahmanson, Coast shall have established the CPR Trust and shall have
caused the CPR Trust to issue the CPR Certificates to Coast and shall have
distributed the CPR Certificates to the stockholders of Coast as required by the
Merger Agreement.
The conditions to consummation of the Merger may generally be waived, in
whole or in part, to the extent permissible under applicable law, by the party
for whose benefit the condition has been imposed, without the approval of the
Coast stockholders. See "--Amendment and Waiver."
No assurances can be provided as to when or if all of the conditions
precedent to the Merger can or will be satisfied or waived by the appropriate
party. As of the date of this Proxy Statement/Prospectus, Ahmanson and Coast
have no reason to believe that any of the conditions set forth above will not be
satisfied.
REGULATORY APPROVALS
The Merger is subject to the approval of the OTS, under the Home Owners'
Loan Act and related OTS regulations. Ahmanson filed an application for such
approval on November 3, 1997. Approval requires consideration by the OTS of
various factors, including assessments of the competitive effect of the
contemplated transaction, the managerial and financial resources and future
prospects of the resulting institution and the effect of the contemplated
transaction on the convenience and needs of the communities to be served. These
regulatory considerations also include, among other things, an assessment of
compliance with the Community Reinvestment Act of 1977 (the "CRA"). Each of Home
Savings and Coast Federal currently has an "outstanding" CRA rating. The
regulations of the OTS require publication of notice of, and an opportunity for
public comment with respect to, the application filed in connection with the
Merger. The public comment period with respect to the application will expire on
_______, 1997.
The Merger may not be consummated for a period of 15 to 30 days
following the OTS's approval (the precise length of the period to be determined
by the OTS with the concurrence of the Attorney General of the United States),
during which time the United States Department of Justice could challenge the
Merger on antitrust grounds. The commencement of an antitrust action would stay
the effectiveness of any approval granted by the OTS unless a court specifically
ordered otherwise.
The Merger Agreement provides that the obligation of each of Ahmanson
and Coast to consummate the Merger is conditioned upon, among other things, (i)
the receipt of all requisite regulatory approvals, including the approval of the
OTS, (ii) the termination or expiration of all statutory waiting periods in
respect thereof and (iii) no such approvals containing conditions, restrictions
or requirements which would reasonably be expected to, after the Effective Time,
have a Material Adverse Effect on Ahmanson and its subsidiaries taken as a whole
or reduce the benefits of the transactions contemplated in the Merger Agreement
to such a degree that Ahmanson would not have entered into the Merger Agreement
had such been known at the date of the Merger Agreement.
THE MERGER CANNOT PROCEED IN THE ABSENCE OF THE REQUISITE REGULATORY
APPROVALS. THERE CAN BE NO ASSURANCES THAT ALL SUCH REGULATORY APPROVALS WILL BE
OBTAINED OR AS TO THE DATES OF SUCH APPROVALS. THERE CAN ALSO BE NO ASSURANCE
THAT SUCH APPROVALS WILL NOT CONTAIN A CONDITION, RESTRICTION OR REQUIREMENT
THAT CAUSES SUCH APPROVALS TO FAIL TO SATISFY THE CONDITIONS SET FORTH IN THE
MERGER AGREEMENT. SEE "--THE EFFECTIVE TIME," "--CONDITIONS TO CONSUMMATION" AND
"--AMENDMENT AND WAIVER."
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AMENDMENT AND WAIVER
To the extent permitted by law, Coast and Ahmanson may amend the Merger
Agreement by written agreement at any time prior to the Effective Time. Prior to
the Effective Time, either Coast or Ahmanson may waive any default in the
performance of any term of the Merger Agreement by the other party, may waive or
extend the time for the fulfillment by the other party of any of its obligations
under the Merger Agreement, and may waive any of the conditions precedent to the
obligations of such party under the Merger Agreement, except any condition that,
if not satisfied, would result in the violation of an applicable law or
governmental regulation.
TERMINATION; TERMINATION FEE
The Merger Agreement may be terminated, and the Merger abandoned, at any
time prior to the Effective Time by mutual consent of the boards of directors of
Coast and Ahmanson. In addition, the Merger Agreement may be terminated, and the
Merger abandoned, prior to the Effective Time by (a) either Ahmanson or Coast
if: (i) the other party breaches, and does not timely cure any breach of, a
representation, warranty, covenant or other agreement contained in the Merger
Agreement and such breach, individually or in the aggregate, would be reasonably
likely to have a Material Adverse Effect (as defined in the Merger Agreement) on
the non-breaching party; (ii) any consent or approval of certain regulatory
authorities is denied by final nonappealable action of such authority or the
Coast stockholders fail to approve the Transaction Proposal; or (iii) the Merger
has not been consummated by June 30, 1998; or (b) by Ahmanson, if the Coast
Board has failed to recommend approval of the Merger, has withdrawn such
recommendation or has modified or changed such recommendation in a manner
adverse to Ahmanson.
Coast would be required to pay Ahmanson a Termination Fee of $35 million
if (a) the Merger Agreement is terminated (i) by Ahmanson due to a breach by
Coast of any representation, warranty or covenant contained in the Merger
Agreement, to a failure by the Coast Board to recommend approval of the Merger
to Coast stockholders, or to a withdrawal, modification, or change of such
recommendation in a manner adverse in any respect to the interests of Ahmanson,
or (ii) by Coast because the Coast stockholders vote to reject the Merger, if in
either case an acquisition proposal by a third party with respect to Coast or
any of its subsidiaries exists at the time the event giving rise to such
termination right occurs; and (b) a definitive agreement with respect to an
acquisition proposal by a third party is entered into by Coast or any of its
subsidiaries within 12 months of such termination.
CONDUCT OF BUSINESS PENDING THE MERGER
COAST.
Coast has agreed in the Merger Agreement, unless the prior written
consent of Ahmanson is obtained and except as otherwise previously disclosed,
not to, and to cause each of its subsidiaries not to:
(a) conduct the business of Coast and its subsidiaries other than in the
ordinary and usual course or fail to use reasonable efforts to preserve intact
their business organizations and assets and maintain their rights, franchises
and existing relations with customers, suppliers, employees and business
associates, or take any action reasonably likely to have an adverse effect upon
Coast's ability to perform any of its material obligations under the Merger
Agreement;
(b) other than pursuant to securities or obligations convertible into or
exercisable or exchangeable for, or giving any person any right to subscribe for
or acquire, or any options, calls or commitments relating to, or any stock
appreciation right or other instrument the value of which is determined in whole
or in part by reference to the market price or value of, shares of capital stock
of such person (each, a "Right") previously disclosed and outstanding on the
date of the Merger Agreement, (i) issue, sell or otherwise permit to become
outstanding, or authorize the creation of, any additional shares of Coast Common
Stock or Coast preferred stock or any Rights, (ii) enter into any agreement with
respect to the foregoing, or (iii) permit any additional shares of Coast Common
Stock or Coast preferred stock to become subject to new grants of employee or
director stock options, other Rights or similar stock-based employee rights.
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(c) (i) make, declare, pay or set aside for payment any dividend (other
than dividends from wholly owned subsidiaries to Coast or another wholly owned
subsidiary of Coast) on or in respect of, or declare or make any distribution on
any shares of Coast Common Stock or Coast preferred stock or (ii) directly or
indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise
acquire, any shares of its capital stock;
(d) enter into or amend or renew any employment, consulting, severance
or similar agreements or arrangements with any director, officer or employee of
Coast or its subsidiaries, or hire any new employees at the rank of senior vice
president or above, or grant any salary or wage increase or increase any
employee benefit (including incentive or bonus payments), except (i) for normal
individual increases in compensation to employees (other than any senior vice
presidents or any employees ranking senior to senior vice presidents) in the
ordinary course of business consistent with past practice as previously
disclosed, (ii) for other changes that are required by applicable law, (iii) to
satisfy contractual obligations previously disclosed and existing as of the date
of the Merger Agreement, or (iv) for grants of awards to newly hired employees
consistent with past practice and as previously disclosed, (v) agreements to
provide retention bonuses to employees made in accordance with the terms of the
Merger Agreement, (vi) the annual rollover of executive employment agreements as
previously disclosed or (vii) agreements to provide bonuses for the 1997
calendar year consistent with past practice up to an aggregate of $1.9 million;
(e) enter into, establish, adopt or amend (except (i) as may be required
by applicable law, (ii) to satisfy contractual obligations previously disclosed
and existing as of the date of the Merger Agreement or (iii) as otherwise
provided in the Merger Agreement) any pension, retirement, stock option, stock
purchase, savings, profit sharing, deferred compensation, consulting, bonus,
group insurance or other employee benefit, incentive or welfare contract, plan
or arrangement, or any trust agreement (or similar arrangement) related thereto,
in respect of any director, officer or employee of Coast or its subsidiaries, or
take any action to accelerate the vesting or exercisability of stock options,
restricted stock or other compensation or benefits payable thereunder;
(f) except as previously disclosed, sell, transfer, mortgage, encumber
or otherwise dispose of or discontinue any of its assets, deposits, business or
properties except in the ordinary course of business and in a transaction that
is not material to Coast and its subsidiaries taken as a whole;
(g) except as previously disclosed, acquire (other than by way of
foreclosures or acquisitions of control in a bona fide fiduciary capacity or in
satisfaction of debts previously contracted in good faith, in each case in the
ordinary and usual course of business consistent with past practice) all or any
portion of, the assets, business, deposits or properties of any other entity
except in the ordinary course of business and in a transaction that is not
material to Coast and its subsidiaries taken as a whole;
(h) amend the Coast Charter, Coast By-laws or the certificate of
incorporation or by-laws (or similar governing documents) of any of Coast's
subsidiaries;
(i) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by generally accepted
accounting principles;
(j) (i) amend, or take any action adverse to Ahmanson with respect to,
the Coast Rights Plan (as defined herein) or (ii), except in the ordinary course
of business consistent with past practice or with the consent of Ahmanson (which
consent shall not be unreasonably withheld or delayed), enter into or terminate
any contract material to its assets, business or operations or amend or modify
in any material respect any such existing material contract;
(k) except in the ordinary course of business consistent with past
practice or with the consent of Ahmanson (which consent shall not be
unreasonably withheld or delayed), settle any claim, action or proceeding
against it, except for any claim, action or proceeding involving solely money
damages in an amount, individually or in the aggregate for all such settlements,
that is not material to Coast and its subsidiaries, taken as a whole and that
does not create precedent for claims that are reasonably likely to be material
to Coast and its subsidiaries taken as a whole;
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(l) (i) take any action while knowing that such action would, or is
reasonably likely to, prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code; or (ii) take any
action that is intended or is known to be reasonably likely to result in (A) any
of its representations and warranties set forth in the Merger Agreement being or
becoming untrue in any material respect at any time at or prior to the Effective
Time, (B) any of the conditions to the Merger set forth under "--Conditions to
Consummation" not being satisfied or (C) a material violation of any provision
of the Merger Agreement except, in each case, as may be required by applicable
law or regulation;
(m) except as required by applicable law or regulation or with the
consent of Ahmanson (which consent shall not be unreasonably withheld or
delayed), (i) implement or adopt any material change in its interest rate and
other risk management policies, procedures or practices or (ii) fail to follow
in all material respects its existing policies or practices with respect to
managing its exposure to interest rate and other risk;
(n) incur any indebtedness for borrowed money other than in the ordinary
course of business; or
(o) agree or commit to do any of the foregoing.
AHMANSON.
Ahmanson has agreed in the Merger Agreement, unless the prior written
consent of Coast is obtained, and except as otherwise contemplated by the Merger
Agreement, not to:
(a) make, declare, pay or set aside for payment any dividends other than
quarterly dividends in an amount, and with record and payment dates, consistent
with past practice (provided that Ahmanson may raise its regular quarterly
dividend rate by an amount not exceeding 20%);
(b) (i) take any action while knowing that such action would, or is
reasonably likely to, prevent or impede the Merger from qualifying as a
reorganization within the meaning of Section 368 of the Code; (ii) repurchase
any Ahmanson Common Stock or Ahmanson Preferred Stock (as defined herein) such
that an Ahmanson stockholder vote would be required for consummation of the
Merger or which would have the effect of a recapitalization of Ahmanson or at
prices reflecting a significant premium to the prices at which the Ahmanson
Common Stock is then trading; or (iii) take any action that is intended or is
known to be reasonably likely to result in (A) any of its representations and
warranties set forth in the Merger Agreement being or becoming untrue in any
material respect at any time at or prior to the Effective Time, (B) any of the
conditions to the Merger set forth under "--Conditions to Consummation" not
being satisfied or (C) a material violation of any provision of the Merger
Agreement except, in each case, as may be required by applicable law or
regulation; or
(c) agree or commit to do any of the foregoing.
EXPENSES AND FEES
The Merger Agreement provides that each party shall be responsible for
all expenses incurred by it in connection with the Merger Agreement and the
transactions contemplated by the Merger Agreement, except that Ahmanson and
Coast have agreed to share equally all Commission filing fees and all printing
expenses payable in connection with the Registration Statement[s] and this Proxy
Statement/Prospectus. In the event of a termination of the Merger Agreement
under certain circumstances, Coast would be obligated to pay Ahmanson a fee of
$35 million. See "--Termination; Termination Fee."
ACCOUNTING TREATMENT
Upon consummation of the Merger, Ahmanson will account for the
acquisition of Coast using the purchase method of accounting. Accordingly, the
consideration to be paid in the Merger will be allocated to assets acquired and
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liabilities assumed based on their estimated fair values at the Effective Date.
Income (or loss) of Coast prior to the Effective Date will not be included in
income of the combined company.
STOCK EXCHANGE LISTING OF AHMANSON COMMON STOCK
Ahmanson has agreed to use its reasonable best efforts to list, prior to
the Effective Date, on the NYSE, subject to official notice of issuance, the
shares of Ahmanson Common Stock to be issued to the holders of Coast Common
Stock in the Merger, and such listing is a condition to consummation of the
Merger.
RESALES OF AHMANSON COMMON STOCK
The shares of Ahmanson Common Stock issued in connection with the Merger
will be freely transferable under the Securities Act, except for shares issued
to any stockholder who may be deemed to be an "affiliate" (generally including,
without limitation, directors, certain executive officers, and beneficial owners
of 10% or more of any class of capital stock) of Coast for purposes of Rule 145
under the Securities Act as of the date of the Special Meeting. Such affiliates
may not sell their shares of Ahmanson Common Stock acquired in connection with
the Merger except pursuant to an effective registration statement under the
Securities Act or other applicable exemption from the registration requirements
of the Securities Act.
Coast has agreed in the Merger Agreement to use its reasonable best
efforts to cause each person who may be deemed to be an "affiliate" of Coast to
execute and deliver to Ahmanson an agreement pursuant to which such person
agrees, among other things, not to offer to sell, transfer or otherwise dispose
of any of the shares of Ahmanson Common Stock distributed to them pursuant to
the Merger except in compliance with Rule 145 under the Securities Act, or in a
transaction that, in the opinion of counsel reasonably satisfactory to Ahmanson,
is otherwise exempt from the registration requirements of the Securities Act, or
in an offering which is registered under the Securities Act. Ahmanson may place
restrictive legends on certificates representing Ahmanson Common Stock issued to
all persons who are deemed to be "affiliates" of Coast under Rule 145. This
Proxy Statement/Prospectus does not cover resales of Ahmanson Common Stock
received by any person who may be deemed to be an affiliate of Coast.
ACQUISITION PROPOSALS
Coast has agreed in the Merger Agreement that it shall not, and shall
cause its subsidiaries and its and its subsidiaries' officers, directors,
agents, advisors and affiliates not to, solicit or encourage inquiries or
proposals with respect to, or engage in any negotiations concerning, or provide
any confidential information to, or have any discussions with, any person
relating to, any tender or exchange offer, proposal for a merger, consolidation
or other business combination involving Coast or any of its subsidiaries or any
proposal or offer to acquire in any manner a substantial equity interest in, or
a substantial portion of the assets or deposits of, Coast or any of its
subsidiaries (an "Acquisition Proposal"), or waive any provision of or amend the
terms of the Coast Rights Plan in respect of an Acquisition Proposal; provided,
however, that the Merger Agreement does not (a) require the Coast Board to
recommend stockholder approval of the Merger following an Acquisition Proposal,
(b) prevent Coast or the Coast Board from (i) engaging in any discussions or
negotiations with, or providing any information to, any person in response to an
unsolicited bona fide written Acquisition Proposal by any such person or (ii)
recommending such an unsolicited bona fide written Acquisition Proposal to the
holders of Coast Common Stock or (c) prevent Coast from waiving any provision of
or amending the terms of the Coast Rights Plan in respect of an Acquisition
Proposal, if and only if, with respect to the actions described in clause (a),
(b) or (c), as applicable, (A) the Coast Board concludes in good faith that the
Acquisition Proposal, if consummated, would result in a transaction more
favorable to holders of Coast Common Stock than the transaction contemplated by
the Merger Agreement, (B) the Coast Board determines in good faith based upon
the advice of outside counsel that such action is legally necessary for it to
act in a manner consistent with its fiduciary duties under applicable law; and
(C) prior to providing any information or data to any person or entering into
discussions or negotiations with any person, the Coast Board notifies Ahmanson
immediately of such inquiries, proposals or offers received by, any such
information requested from, or any such discussions or negotiations sought to be
initiated or continued with Coast or any subsidiary of Coast. Coast has agreed
promptly (within 24 hours) to advise Ahmanson following the receipt by Coast of
any Acquisition Proposal and the substance thereof (including the identity of
the person making such Acquisition
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Proposal), and to advise Ahmanson of any developments with respect to such
Acquisition Proposal immediately upon the occurrence thereof.
EARNINGS ESTIMATES
In connection with the announcement of the Merger, Ahmanson announced
that it estimated that the Merger will be accretive to Ahmanson's reported
earnings per share in 1998, 1999 and 2000 by 2%, 4% and 6%, respectively, and to
Ahmanson's cash earnings per share (i.e., reported earnings before amortization
of intangibles) in 1998, 1999 and 2000 by 6%, 10% and 10%, respectively. This
estimate includes Ahmanson's current estimates of annual cost savings equal to
$75 million pre-tax (substantially all of which Ahmanson expects to be able to
achieve within 12 months of the Effective Date) and no revenue enhancements.
Ahmanson estimates it will incur a $75 million pre-tax charge in connection with
the Merger. See "Cautionary Statement Regarding Forward-Looking Statements" on
page 4 hereof.
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APPRAISAL RIGHTS
Record holders of Coast Common Stock are entitled to appraisal rights
under Section 262 of the DGCL ("Section 262"). The following discussion
represents a summary of the material provisions of Section 262. For additional
information, reference is made to the full text of Section 262, which is
reprinted in its entirety as Appendix E to this Proxy Statement/Prospectus. A
person having a beneficial interest in shares of Coast Common Stock held of
record in the name of another person, such as a broker or nominee, must act
promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect the appraisal rights provided under
Section 262.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the case of the Special Meeting, not less than 20
days prior to the meeting, a constituent corporation must notify each of the
holders of its stock for which appraisal rights are available that such
appraisal rights are available and include in each such notice a copy of Section
262. THIS PROXY STATEMENT/PROSPECTUS SHALL CONSTITUTE SUCH NOTICE TO THE RECORD
HOLDERS OF COAST COMMON STOCK. ANY SUCH STOCKHOLDER WHO WISHES TO EXERCISE SUCH
APPRAISAL RIGHTS SHOULD REVIEW THE FOLLOWING DISCUSSION AND APPENDIX E
CAREFULLY, BECAUSE FAILURE TO TIMELY AND PROPERLY COMPLY WITH THE PROCEDURES
SPECIFIED WILL RESULT IN THE LOSS OF APPRAISAL RIGHTS UNDER THE DGCL. Moreover,
because of the complexities of the procedures for exercising the right to seek
appraisal of the Coast Common Stock, Coast recommends that Coast stockholders
who consider exercising such rights seek the advice of counsel.
Under the DGCL, a record holder of shares of Coast Common Stock who
makes the demand described below with respect to such shares, who continuously
is the record holder of such shares through the Effective Time, who otherwise
complies with the statutory requirements set forth in Section 262 and who
neither votes in favor of approval of the Transaction Proposal nor consents
thereto in writing will be entitled to have their shares of Coast Common Stock
appraised by the Delaware Court of Chancery and to receive payment of the "fair
value" of such shares as described below. Accordingly, in connection with any
appraisal proceeding, the "fair value" of shares of Coast Common Stock is to be
determined as of immediately prior to the CPR Certificate Distribution and the
Merger. Such holders are, in such circumstances, entitled to appraisal rights
because they hold stock of a constituent corporation to the Merger and may be
required by the Merger Agreement to accept consideration in the Merger, at least
in part, other than in the form of Ahmanson Common Stock. Specifically,
Ahmanson's entering into of the Commitment constitutes part of the Merger
Consideration to the stockholders of Coast. Since holders of shares of Coast
Common Stock wishing to exercise appraisal rights must not vote in favor of
approval of the Transaction Proposal, such holders should not deliver unmarked
proxies (i.e., proxies without instructions) to Coast as such proxies will be
voted FOR such approval.
A holder of shares of Coast Common Stock wishing to exercise his or her
appraisal rights must deliver to the Secretary of Coast, before the vote on the
Merger Agreement at the Special Meeting, a written demand for appraisal of his
or her shares of Coast Common Stock. Merely voting or delivering a proxy
directing a vote against approval of the Transaction Proposal will not
constitute a demand for appraisal. A written demand is essential. Such written
demand must reasonably inform Coast of the identity of the holder and that such
holder intends thereby to demand appraisal of the holder's shares. All written
demands for appraisal of Coast Common Stock should be sent or delivered to Coast
Savings Financial, Inc., 1000 Wilshire Boulevard, Los Angeles, California 90017,
Attn: Corporate Secretary. In addition, a holder of shares of Coast Common Stock
wishing to exercise his or her appraisal rights must hold such shares of record
on the date the written demand for appraisal is made and must hold such shares
continuously through the Effective Time. A demand for appraisal should be
executed by or on behalf of the stockholder of record, fully and correctly, as
such stockholder's name appears on such stockholder's stock certificates, should
specify the stockholder's name and mailing address, the number of shares of
Coast Common Stock owned and that such stockholder intends thereby to demand
appraisal of such stockholder's stock. However, such demand will be sufficient
if it reasonably informs Coast of the stockholder's identity and intent to
demand the appraisal of his shares. If the shares are owned of record in a
fiduciary capacity, such as by a trustee, guardian or custodian, execution of
the demand should be made in that capacity, and if the shares of the Coast
Common Stock are owned of record by more than one person, as in a joint tenancy
or tenancy in common, the demand should be executed by or on behalf of all joint
owners. An authorized agent, including one or more joint owners, may execute a
demand for appraisal on behalf of a holder of record; however, the agent must
identify the record owner or owners and expressly disclose the fact that in
executing the demand for appraisal, the agent is agent for
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such owner or owners. A record holder (such as a broker) who holds shares of
Coast Common Stock as a nominee for several beneficial owners may exercise
appraisal rights with respect to the shares of Coast Common Stock held for one
or more beneficial owners while not exercising such rights with respect to the
shares of Coast Common Stock held for other beneficial owners; in such case, the
written demand should set forth the number of shares as to which appraisal is
sought and where no number of shares is expressly mentioned, the demand will be
presumed to cover all shares of Coast Common Stock held in the name of the
record owner. Stockholders who hold their shares of Coast Common Stock in
brokerage accounts or other nominee forms and who wish to exercise appraisal
rights must take all necessary steps in order that a demand for appraisal is
made by the record holder of such shares and are urged to consult with their
brokers to determine the appropriate procedures for the making of a demand for
appraisal by the record holder.
Within ten days after the Effective Time of the Merger, Ahmanson, as the
surviving corporation, must send a notice as to the effectiveness of the Merger
to each person who has satisfied the appropriate provisions of Section 262 and
who is entitled to appraisal rights under Section 262. Within 120 days after the
Effective Time, any holder of record of shares of Coast Common Stock who has
complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the surviving corporation, a
statement setting forth (a) the aggregate number of shares of Coast Common Stock
not voted in favor of the Merger Agreement and with respect to which demands for
appraisal have been received and (b) the aggregate number of holders of such
shares. Any such statement must be mailed within ten days after a written
request therefor has been received by Ahmanson, as the surviving corporation.
Within 120 days after the Effective Time, but not thereafter, Ahmanson,
as the surviving corporation, or any holder of shares of Coast Common Stock who
has complied with the foregoing procedures and who is entitled to appraisal
rights under Section 262 may file a petition in the Delaware Court of Chancery
demanding a determination of the "fair value" of such shares. Ahmanson, as the
surviving corporation, is not under any obligation to file a petition with
respect to the appraisal of the "fair value" of the shares of Coast Common Stock
and neither Ahmanson nor Coast presently intends that Ahmanson, as the surviving
corporation, file such a petition. Accordingly, it is the obligation of the
stockholders to initiate all necessary action to perfect their appraisal rights
within the time prescribed in Section 262. A holder of shares of Coast Common
Stock will fail to perfect, or effectively lose, his or her right to appraisal
if no petition for appraisal of shares of Coast Common Stock is filed within 120
days after the Effective Time.
If a petition for an appraisal is timely filed, after a hearing on such
petition, the Delaware Court of Chancery will determine the holders of shares of
Coast Common Stock entitled to appraisal rights and will appraise the "fair
value" of the shares of Coast Common Stock, exclusive of any element of value
arising from the accomplishment or expectation of the Merger. Holders
considering seeking appraisal should be aware that the "fair value" of their
shares of Coast Common Stock as determined under Section 262 could be more than,
the same as, or less than the value of the merger consideration they would
receive if they did not seek appraisal. The Delaware Supreme Court has stated
that "proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered in the appraisal proceedings. The Delaware Supreme Court has also
stated that, in making this determination of fair value, the court must consider
market value, asset value, dividends, earnings prospects, the nature of the
enterprise and any other facts which could be ascertained as of the date of the
merger that throw any light on future prospects of the merged corporation. The
Delaware Supreme Court has also stated that "elements of future value, including
the nature of the enterprise, which are known or susceptible of proof as of the
date of the merger and not the product of speculation, may be considered." In
addition, Delaware courts have decided that the statutory appraisal remedy,
depending on factual circumstances, may or may not be a dissenter's exclusive
remedy.
The Delaware Court of Chancery will determine the amount of interest, if
any, to be paid upon the amounts to be received by persons whose shares of Coast
Common Stock have been appraised. The costs of the action may be determined by
such court and taxed upon the parties as the court deems equitable. The Delaware
Court of Chancery may also order that all or a portion of the expenses incurred
by any holder of shares of Coast Common Stock in connection with an appraisal,
including, without limitation, reasonable attorneys' fees and the fees and
expenses of experts utilized in the appraisal proceeding, be charged pro rata
against the value of all of the shares of Coast Common Stock entitled to
appraisal.
-52-
<PAGE> 60
A holder may withdraw his or her demand for appraisal by delivering to
Ahmanson, as the surviving corporation, a written withdrawal of his or her
demand for appraisal and acceptance of the Merger, except that any such attempt
to withdraw made more than 60 days after the Effective Time will require the
written approval of Ahmanson, as the surviving corporation. Failure to follow
the steps required by Section 262 for perfecting appraisal rights will result in
the loss of such rights.
Any holder of shares of Coast Common Stock who has duly demanded an
appraisal in compliance with Section 262 will not, after the Effective Time, be
entitled to vote the shares of Coast Common Stock subject to such demand for any
purpose or be entitled to the payment of dividends or other distributions on
those shares (except dividends or other distributions payable to holders of
record of shares of Coast Common Stock as of a date prior to the Effective
Time).
Each CPR Certificate distributed to each Coast stockholder provides that
it shall automatically be redeemed by Ahmanson, as the surviving corporation,
for $0.01 in cash immediately following the Merger if the holder of the share as
to which such CPR Certificate was issued has given notice of an intent to
exercise appraisal rights (if any). If any such Coast stockholder subsequently
withdraws, or fails to perfect, such appraisal demand, Ahmanson will deliver to
such holder CPR Certificates as to the number of Coast shares as to which such
appraisal demand was withdrawn or not perfected.
It is a condition to the obligation of Ahmanson to consummate the Merger
that holders of no more than 5% of the outstanding shares of Coast Common Stock
shall have given notice that their shares of Coast Common Stock be treated as
Dissenters' Shares.
FAILURE TO COMPLY STRICTLY WITH THE PROCEDURES SET FORTH IN SECTION 262
OF THE DGCL WILL RESULT IN THE LOSS OF A COAST STOCKHOLDER'S STATUTORY APPRAISAL
RIGHTS WITH RESPECT TO SHARES OF COAST COMMON STOCK. CONSEQUENTLY, ANY COAST
STOCKHOLDER WISHING TO EXERCISE APPRAISAL RIGHTS IS URGED TO CONSULT LEGAL
COUNSEL BEFORE ATTEMPTING TO EXERCISE SUCH RIGHTS.
-53-
<PAGE> 61
AHMANSON AND COAST UNAUDITED
PRO FORMA COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements were
prepared in connection with the proposed Merger (in which each outstanding share
of Coast Common Stock will be exchanged for 0.8082 of a share of Ahmanson Common
Stock, valued for purposes of accounting for the Merger at a price per share of
Ahmanson Common Stock of $56.45, based on the quoted market price of Ahmanson
Common Stock for a period of time shortly before and after the points in time
Ahmanson and Coast reached agreement on the purchase price and the terms and
conditions of the proposed Merger were publicly announced, and give effect to
the purchase accounting adjustments and other assumptions described in the
accompanying notes. The unaudited pro forma combined statement of financial
condition is based upon the condensed consolidated statements of financial
condition (unaudited) of Ahmanson and Coast as of September 30, 1997. The
unaudited pro forma combined statement of operations for the year ended December
31, 1996 is based upon the consolidated statements of operations of Ahmanson and
Coast for the year ended December 31, 1996. The unaudited pro forma combined
statement of operations for the nine months ended September 30, 1997 is based
upon the condensed consolidated statement of operations (unaudited) of Ahmanson
and Coast for the nine months ended September 30, 1997.
The adjustments included in the unaudited pro forma combined financial
statements are subject to update as additional information becomes available. An
increase in the unallocated portion of the purchase price remaining after fair
value adjustments will result in a greater final allocation to goodwill, which
will increase amortization expense and will reduce tangible common equity. A
decrease in the unallocated portion of the purchase price remaining after fair
value adjustments will have the opposite effects. Any CPR Certificates received
by Ahmanson in connection with the Merger will be recorded at fair value and
will also reduce goodwill. Accordingly, the final pro forma combined amounts
will differ from those set forth in the unaudited pro forma combined financial
statements set forth herein.
The information shown below should be read in conjunction with, and is
qualified in its entirety by reference to, the consolidated statement of
financial condition and consolidated statement of operations at and for the year
ended December 31, 1996 of Ahmanson and the consolidated statement of financial
condition and consolidated statement of operations at and for the year ended
December 31, 1996 of Coast. The pro forma data are presented for informational
purposes and are not necessarily indicative of the financial position or the
results of operations of the combined company that actually would have occurred
had the Merger been consummated as of the dates or at the beginning of the
periods presented. The pro forma amounts are also not necessarily indicative of
the future financial position or future results of operations of Ahmanson as the
surviving corporation. In particular, Ahmanson expects to achieve significant
operating cost savings as a result of the Merger. These cost savings, assuming
they are realized, would significantly reduce non-interest expense and increase
net income. Additionally, Ahmanson believes opportunities exist to enhance
certain revenues through the expansion of consumer and business loans, cash
management services, retail banking and investment sales generated through Coast
Federal branches. These revenue enhancements, if they are realized (which cannot
be assured as to amount or timing), would increase net interest income or fee
income and increase net income. No adjustment has been included in the pro forma
amounts for such cost savings or revenue enhancements.
-54-
<PAGE> 62
AHMANSON AND COAST
PRO FORMA COMBINED STATEMENT OF FINANCIAL CONDITION
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
----------------------- PRO FORMA PRO FORMA
AHMANSON COAST ADJUSTMENTS COMBINED
-------- -------- ----------- --------
(IN MILLIONS)
<S> <C> <C> <C> <C>
ASSETS
Cash and investment securities $ 1,084 $ 592 $ - $ 1,676
Mortgage-backed securities (MBS) 13,157 2,068 11 15,236
Loans, net of the allowance for loan losses 30,684 6,068 12 36,764
Goodwill and core deposit intangibles 286 5 416 707
Other assets 1,588 307 - 1,895
-------- -------- -------- --------
Total assets $ 46,799 $ 9,040 $ 439 $ 56,278
======== ======== ======== ========
LIABILITIES, COMPANY-OBLIGATED CAPITAL SECURITIES OF
SUBSIDIARY TRUST AND STOCKHOLDERS' EQUITY
Deposits $ 32,447 $ 6,446 $ 10 $ 38,903
Borrowings 10,576 1,989 6 12,571
Other liabilities 1,242 135 42 1,419
-------- -------- -------- --------
Total liabilities 44,265 8,570 58 52,893
Company-obligated Capital Securities of Subsidiary Trust 148 - - 148
Stockholders' equity
Preferred stock 483 - - 483
Common stock 1 - - 1
Additional paid-in capital, net of treasury stock (165) 267 584 686
Retained earnings 2,071 202 (202) 2,071
-------- -------- -------- --------
Other (4) 1 (1) (4)
-------- -------- -------- --------
Total stockholders' equity 2,386 470 381 3,237
-------- -------- -------- --------
Total liabilities, Company-obligated Capital Securities of
Subsidiary Trust and stockholders' equity $ 46,799 $ 9,040 $ 439 $ 56,278
======== ======== ======== ========
</TABLE>
See accompanying Notes to Pro Forma Combined Financial Statements.
-55-
<PAGE> 63
AHMANSON AND COAST
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO FORMA PRO-FORMA
AHMANSON COAST ADJUSTMENTS COMBINED
-------- ------ ----------- ---------
(IN MILLIONS, EXCEPT PER COMMON SHARE DATA)
<S> <C> <C> <C> <C>
Interest income
Loans $1,733 $ 359 $ (2) $2,090
MBS 777 97 (1) 873
Other 51 17 - 68
------ ------ ------ ------
Total interest income 2,561 473 (3) 3,031
------ ------ ------ ------
Interest expense
Deposits 1,115 220 (4) 1,331
Borrowings 518 87 - 605
------ ------ ------ ------
Total interest expense 1,633 307 (4) 1,936
------ ------ ------ ------
Net interest income 928 166 1 1,095
Provision for loan losses 57 21 - 78
------ ------ ------ ------
Net interest income after provision for loan losses 871 145 1 1,017
------ ------ ------ ------
Non-interest income 265 37 - 302
Non-interest expense 635 120 17 772
------ ------ ------ ------
Income before income taxes 501 62 (16) 547
Income taxes 187 17 (2) 202
------ ------ ------ ------
Net income $ 314 $ 45 $ (14) $ 345
====== ====== ====== ======
Net income applicable to common stock $ 289 $ 45 $ (14) $ 320
====== ====== ====== ======
Net income per common share
Primary $ 2.89 $ 2.78
====== ======
Fully diluted $ 2.69 $ 2.61
====== ======
Dividends declared $ 0.66 $ 0.66
====== ======
Weighted average common shares outstanding
Primary 100.0 15.1 115.1
====== ====== ======
Fully diluted 112.4 15.1 127.5
====== ====== ======
</TABLE>
See accompanying Notes to Pro Forma Combined Financial Statements.
-56-
<PAGE> 64
AHMANSON AND COAST
PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
HISTORICAL
------------------- PRO-FORMA PRO-FORMA
AHMANSON COAST ADJUSTMENTS COMBINED
-------- ------ ----------- ---------
(IN MILLIONS, EXCEPT PER COMMON SHARE DATA)
<S> <C> <C> <C> <C>
Interest income
Loans $2,297 $ 450 $ (2) $2,745
MBS 1,161 132 (2) 1,291
Other 57 22 - 79
------ ------ ------ ------
Total income 3,515 604 (4) 4,115
------ ------ ------ ------
Interest expense
Deposits 1,524 286 (5) 1,805
Borrowings 738 103 - 841
------ ------ ------ ------
Total interest expense 2,262 389 (5) 2,646
------ ------ ------ ------
Net interest income 1,253 215 1 1,469
Provision for loan losses 145 70 - 215
------ ------ ------ ------
Net interest income after provision for loan losses 1,108 145 1 1,254
------ ------ ------ ------
Non-interest income 252 50 - 302
Non-interest expense
SAIF recapitalization 244 42 286
Other 935 164 23 1,122
------ ------ ------ ------
Total non-interest expense 1,179 206 23 1,408
------ ------ ------ ------
Income before income taxes 181 (11) (22) 148
Income tax expense (benefit) 35 (22) (4) 9
------ ------ ------ ------
Net income $ 146 $ 11 $ (18) $ 139
====== ====== ====== ======
Net income applicable to common stock $ 100 $ 11 $ (18) $ 93
====== ====== ====== ======
Net income per common share
Primary $ 0.91 $ 0.75
====== ======
Fully diluted $ 0.91 $ 0.74
====== ======
Dividends declared $ 0.88 $ 0.88
====== ======
Weighted average common shares outstanding
Primary 109.7 15.1 124.8
====== ====== ======
Fully diluted 109.7 15.1 124.8
====== ====== ======
</TABLE>
See accompanying Notes to Pro Forma Combined Financial Statements.
-57-
<PAGE> 65
AHMANSON AND COAST
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A: BASIS OF PRESENTATION
The unaudited pro forma combined statement of financial condition
combines the historical consolidated statements of financial condition
(unaudited) of Ahmanson and Coast as if the Merger had become effective on
September 30, 1997. The unaudited pro forma combined statement of operations for
the year ended December 31, 1996 combines the audited historical consolidated
statements of operations of Ahmanson and Coast as if the Merger had become
effective prior to January 1, 1996. The unaudited pro forma combined statement
of operations for the nine months ended September 30, 1997 combines the
historical condensed consolidated statements of operations (unaudited) of
Ahmanson and Coast as if the Merger had become effective prior to January 1,
1997. Certain items in the unaudited pro forma combined financial statements
related to Coast have been reclassified to conform to the Ahmanson presentation.
The Merger will be accounted for as a purchase. Under this method of
accounting, assets and liabilities of Coast are adjusted to their estimated fair
value and combined with the recorded book values of the assets and liabilities
of Ahmanson. Applicable income tax effects of such adjustments are included as a
component of Ahmanson's net deferred tax asset with a corresponding offset to
goodwill.
For purposes of the pro forma financial statements, estimates of the
fair value of Coast's assets and liabilities as of September 30, 1997 have been
combined with the recorded values of the assets and liabilities of Ahmanson.
Fair value adjustments are subject to update as additional information becomes
available.
Following the Merger, Ahmanson intends to combine the operations of and,
subject to regulatory approvals, to merge Home Savings and Coast Federal as well
as certain other operations. Ahmanson expects to achieve significant operating
cost savings as a result of the Merger. These cost savings, assuming they are
realized, would significantly reduce non-interest expense and increase net
income. Additionally, Ahmanson believes opportunities exist to enhance certain
revenues through the expansion of consumer and business loans, cash management
services, retail banking and investment sales generated through Coast Federal
branches. These revenue enhancements, if they are realized (which cannot be
assured as to amount or timing), would increase net interest income or fee
income and increase net income. No adjustment has been included in the unaudited
pro forma combined financial statements for such cost savings or revenue
enhancements.
NOTE B: PURCHASE PRICE
The purchase price is based on exchanging 0.8082 of a share of Ahmanson
Common Stock for each outstanding share of Coast Common Stock. Shares issuable
upon the exercise of Coast Stock Options are not included in the number of
outstanding shares of Coast Common Stock on the assumption that all options will
become equivalent options to purchase Ahmanson Common Stock. In addition, the
number of the shares of Coast Common Stock used in calculating the total market
value of Ahmanson Common Stock to be issued in connection with the Merger
reflects an exchange of Ahmanson Common Stock for the outstanding shares of
Coast Common Stock, exclusive of Coast's common stock equivalents, which include
Coast Stock Options.
-58-
<PAGE> 66
AHMANSON AND COAST
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
The total market value of the Ahmanson Common Stock to be issued in
connection with the Merger is calculated as follows:
<TABLE>
<S> <C>
Coast's common shares outstanding on September 30, 1997 (in thousands).. 18,644
Exchange ratio.......................................................... .8082
-------
Ahmanson Common Stock to be issued (in thousands)....................... 15,068
Value per share of Ahmanson Common Stock................................ $ 56.45
-------
Total market value of Ahmanson Common Stock to be issued (in millions) $ 851
=======
</TABLE>
The shares of Ahmanson Common Stock to be issued to the stockholders of
Coast in connection with the proposed Merger have been valued at $56.45 per
share for purposes of the pro forma consolidated financial statements, based on
the quoted market price of Ahmanson Common Stock for a period of time shortly
before and after the points in time Ahmanson and Coast reached agreement on the
purchase price and the terms and conditions of the proposed Merger were publicly
announced.
In addition to the total market value of the Ahmanson Common Stock to be
issued, the total purchase price will include other direct acquisition costs,
such as investment banking, legal, accounting and other professional fees;
printing and mailing costs; Commission filing fees and other miscellaneous
expenses. These costs, which are not expected to be material to the transaction
and are preliminarily expected to be approximately $10 million, have not been
included in the unaudited pro forma combined financial statements.
NOTE C: RESTRUCTURING CHARGES
Ahmanson's management estimates that approximately $75 million of costs
related to premises, severance and other restructuring charges will be incurred
in connection with the Merger; these estimates of costs are not yet based on
sufficient factual data so as to be included as adjustments to the unaudited pro
forma combined financial statements and are subject to change as additional
information becomes available. Of this amount, approximately $57 million of
costs relate to Coast's premises, employees and operations and will affect the
final amount of goodwill as of the consummation of the Merger, which goodwill
will be amortized as described in Note G below. The remaining estimated amount
of approximately $18 million of costs relates to Ahmanson's premises, employees
and operations, as well as all costs relating to systems conversions and other
indirect integration costs, and will be expensed, either upon consummation of
the Merger or as incurred. With respect to timing, it has been assumed that the
integration will be complete and that the costs referred to above will be
incurred not later than 12 months after the closing of the Merger.
The estimated restructuring charges are expected to be incurred as set
forth in the following table:
-59-
<PAGE> 67
AHMANSON AND COAST
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
<TABLE>
<S> <C>
(IN MILLIONS)
Owned premises.......................................................... $ 25
Leased premises......................................................... 10
Severance............................................................... 22
Other restructuring..................................................... 18
-----
Total restructuring.................................................. $ 75
=====
</TABLE>
Ahmanson's management estimates that the total severance costs in
connection with the Merger will be approximately $22 million. The estimate is
based on anticipated aggregate terminations, assumptions regarding severance
benefits on an aggregate basis and Ahmanson's experience in the integration of
mergers and does not reflect any information as to which employees will be
terminated as this information is not yet available.
Ahmanson's estimate of $75 million in restructuring charges is in the
range of restructuring charges announced in connection with other similar
transactions and is based on the assumption that Ahmanson's experience in
integrating Coast's organization and operations will be similar to comparable
transactions in the past.
NOTE D: ALLOCATION OF PURCHASE PRICE
Certain matters are still pending that will have an effect on the
ultimate allocation of the purchase price. Accordingly, the allocation of the
purchase price has not been finalized and the portion of the purchase price
allocated to fair value adjustments, goodwill and the identifiable intangibles
(discussed below) is subject to change.
Subject to the foregoing, the purchase price has been allocated as
described in the table below:
<TABLE>
<CAPTION>
(IN MILLIONS)
<S> <C> <C>
Net assets applicable to Coast's common stock at September 30, 1997...... $470
Increase (decrease) to Coast's net asset value at September 30, 1997
as a result of estimated fair value adjustments (see Note G)*
Loans .............................................................. 7
MBS .............................................................. 7
Deposits............................................................. (6)
Borrowings........................................................... (4)
--
Estimated fair value adjustments (total excluding core
deposit intangibles) 4
Core deposit intangibles............................................. 58
--
Total estimated fair value adjustments........................... 62
Elimination of Coast's existing goodwill, net of applicable
income tax effects (5)
--
Total preliminary allocation of purchase price................... 527
Goodwill due to the Merger............................................... 324
---
Total purchase price............................................. $851
====
</TABLE>
- ---------------
* Amounts are net of applicable income tax effects, using an estimated marginal
tax rate of 40.0%.
NOTE E: CALCULATION OF GOODWILL ADJUSTMENT AND TOTAL GOODWILL DUE TO MERGER
<TABLE>
<S> <C>
(IN MILLIONS)
Purchase price.............................................................. $ 851
Coast total common stockholders' equity..................................... (470)
Estimated fair value adjustments (excluding core deposit intangibles)*...... (4)
</TABLE>
-60-
<PAGE> 68
AHMANSON AND COAST
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
<TABLE>
<S> <C>
Core deposit intangibles*................................................... (58)
------
Goodwill adjustment......................................................... 319
Coast existing goodwill..................................................... 5
------
Total goodwill due to Merger................................................ $ 324
======
</TABLE>
- ---------------
* Net of applicable income tax effects.
For purposes of the pro forma combined Statement of Financial Condition,
estimates have been made of the fair value of Coast's assets and liabilities as
of September 30, 1997.
NOTE F: STOCKHOLDERS' EQUITY
In the Merger, Ahmanson will issue .8082 of a share of Ahmanson Common
Stock in exchange for each of the 18,644,177 outstanding shares of Coast Common
Stock (based on the number of shares outstanding as of September 30, 1997).
Adjustments to stockholders' equity are as follows:
<TABLE>
<CAPTION>
COAST
PURCHASE COMMON
PRICE EQUITY ADJUSTMENT
-------- ------ ----------
<S> <C> <C> <C>
(IN MILLIONS)
Common stock .................... $ - $ - $ -
Additional paid-in capital ...... 851 (267) 584
Retained earnings ............... - (202) (202)
Other (net unrealized gains on
available-for-sale-securities) - (1) (10)
----- ----- -----
Total common stockholders' equity $ 851 $(470) $ 381
===== ===== =====
</TABLE>
NOTE G: PURCHASE ACCOUNTING ADJUSTMENTS
Adjustments are made to reflect recording the tangible assets and
liabilities at fair value and identifiable and unidentifiable intangibles as
well as to eliminate any intangible balances previously recorded by Coast in
accordance with the purchase method of accounting. Purchase accounting
adjustments as of September 30, 1997 will be booked on a gross basis with
related adjustments to Ahmanson's net deferred tax asset as follows:
-61-
<PAGE> 69
AHMANSON AND COAST
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
<TABLE>
<CAPTION>
RELATED (INCREASE)
(INCREASE) DECREASE TO
DECREASE TO NET INCOME
NET OF NET INCOME FOR NINE
APPLICABLE FOR YEAR MONTHS
INCOME ENDED ENDED
TAXES GROSS 12/31/96 9/30/97
---------- ----- ----------- ------------
<S> <C> <C> <C> <C>
(IN MILLIONS)
DEBIT (CREDIT)
Estimated fair value adjustments*
Loans ................................... $ 7 $ 12 $ 2 $ 1
MBS ..................................... 7 11 2 2
Deposits ................................ (6) (10) (5) (4)
Borrowings .............................. (4) (6) - -
----- ----- ----- -----
Estimated fair value adjustments (total excluding
core deposit intangibles) ................... 4 7 (1) (1)
Goodwill and core deposit intangibles of Coast .. (5) (5) - -
Goodwill due to the Merger ...................... 324 324 13 10
Core deposit intangibles due to the Merger ...... 58 97 10 7
----- ----- ----- -----
381 423 22 16
Adjustment to Ahmanson net deferred tax liability
related to purchase accounting adjustments ... - (42) (4) (2)
----- ----- ----- -----
Total ........................................... $ 381 $ 381 $ 18 $ 14
===== ===== ===== =====
</TABLE>
- -------------------
* Goodwill due to the Merger will be amortized on a straight-line basis over
25 years. Core deposit intangibles due to the Merger will be amortized on a
straight-line basis over 10 years. Fair value adjustments will be amortized
over the estimated remaining life of the related asset or liability.
The incremental effect on net income of the purchase accounting
adjustments is estimated to be a net after-tax expense of approximately $18
million for the first and second 12-month periods subsequent to the Merger, and
approximately $21 million for the third, fourth and fifth 12-month periods
subsequent to the Merger. Amounts exclude amortization of existing goodwill of
Coast.
NOTE H: OTHER LIABILITIES
Adjustments to other liabilities are as follows:
<TABLE>
<S> <C>
(IN MILLIONS)
Deferred tax liability from fair value adjustments ..................... $ 3
(excluding core deposit intangibles)
Deferred tax liability from core deposit intangibles.................... 39
-------
Total adjustment to other liabilities................................ $ 42
=======
</TABLE>
-62-
<PAGE> 70
DESCRIPTION OF AHMANSON CAPITAL STOCK
AHMANSON COMMON STOCK
Ahmanson is currently authorized to issue up to 220,000,000 shares of
Ahmanson Common Stock. As of September 30, 1997, there were 94,411,284 shares of
Ahmanson Common Stock issued and outstanding, outstanding options to purchase an
additional 3,430,419 shares of Ahmanson Common Stock and 11,814,238 shares of
Ahmanson Common Stock issuable upon conversion of the Ahmanson Series D
Preferred Stock (as defined herein).
Since 1995, Ahmanson has been engaged in stock repurchase programs. For
a description of these programs see "--Repurchases of Ahmanson Common Stock."
Holders of shares of Ahmanson Common Stock are entitled to one vote per
share for each share held.
Subject to the rights of holders of shares of the Ahmanson Preferred
Stock (as described below), holders of shares of Ahmanson Common Stock are
entitled to receive such dividends as may be declared by the Ahmanson Board from
funds legally available therefor and, in the event of liquidation, from the net
assets of Ahmanson available for distribution to stockholders. Ahmanson may not
declare any dividends on the Ahmanson Common Stock (other than in shares of
Ahmanson Common Stock) unless full preferential amounts to which holders of
Ahmanson Preferred Stock are entitled have been paid or declared and set apart
for payment upon all outstanding shares of Ahmanson Preferred Stock. Ahmanson is
also subject to regulatory restrictions on the payment of dividends. See
"--Certain Regulatory Considerations."
The holders of shares of Ahmanson Common Stock do not have preemptive
rights or preferential rights of subscription for any shares of Ahmanson Common
Stock or other securities of Ahmanson. Outstanding shares of Ahmanson Common
Stock are, and shares to be issued in the Merger will be, validly issued, fully
paid and nonassessable.
The Ahmanson Common Stock is listed on the NYSE and the Pacific
Exchange. Application will be made to list the shares of Ahmanson Common Stock
to be issued in the Merger on the NYSE and the Pacific Exchange.
For a description of the Ahmanson Rights Plan, see "Certain Differences
in the Rights of Ahmanson Stockholders and Coast Stockholders."
REPURCHASES OF AHMANSON COMMON STOCK
Starting with the fourth quarter of 1995, Ahmanson has announced four
stock purchase programs. As of September 30, 1997, Ahmanson had purchased an
aggregate of 25.8 million shares of Ahmanson Common Stock at an average purchase
price of $31.68 per share. Of the $250 million authorized for the fourth stock
purchase program, $83.5 million remained available for purchases of Ahmanson
Common Stock at September 30, 1997. Ahmanson intends to continue its repurchase
program on generally the same basis as it has been conducted over the last two
years, although it has suspended its stock repurchase program from the date one
business day prior to the date of mailing of this Proxy Statement/Prospectus
until the consummation of the Merger.
The source of funds for the repurchase plan will be primarily dividends
from Home Savings and other subsidiaries. Home Savings and Ahmanson's other
subsidiaries are projected to generate sufficient cash to provide the dividends
necessary to accomplish the contemplated repurchases while maintaining the
capital of Home Savings at a level sufficient to qualify as "well capitalized"
for regulatory purposes. Anticipated stock repurchases impact earnings per share
in two ways. Earnings per share are increased by reducing shares outstanding and
to a lesser extent earnings per share are decreased by lower net interest
margins.
-63-
<PAGE> 71
AHMANSON PREFERRED STOCK
The certificate of incorporation of Ahmanson (the "Ahmanson Charter")
provides that Ahmanson is authorized to issue 10,000,000 shares of Ahmanson
Preferred Stock. The Ahmanson Preferred Stock may be issued from time to time in
one or more series and the Ahmanson Board is authorized to fix the voting
rights, designations, powers, preferences and the relative, participating,
optional or other rights, if any, and the qualifications, limitations or
restrictions thereof, of any wholly unissued series of Ahmanson Preferred Stock,
and to fix the number of shares constituting such series, and to increase or
decrease the number of shares of any such series, all without further action by
the holders of Ahmanson Common Stock.
Because Ahmanson is a holding company, its rights, the rights of its
creditors and of its stockholders, including the holders of the shares of the
Ahmanson Preferred Stock, to participate in any distribution of the assets of
any subsidiary upon the latter's liquidation or recapitalization will be subject
to the prior claims of the subsidiary's creditors, except to the extent that
Ahmanson may itself be a creditor with recognized claims against the subsidiary.
The principal source of Ahmanson's revenues are dividends received from its
banking and other subsidiaries. Various statutory provisions limit the amount of
dividends its banking subsidiaries may pay without regulatory approval, and
various regulations can also restrict the payment of dividends. In addition,
federal statutes limit the ability of certain subsidiaries to make loans to
Ahmanson. See "--Certain Regulatory Considerations."
The following is a brief description of certain terms of the outstanding
series of Ahmanson Preferred Stock. This description does not purport to be
complete and is qualified in its entirety by reference to the Ahmanson
Certificate, including the certificate of designations with respect to each such
series.
The shares of Ahmanson Preferred Stock currently outstanding have
preference over Ahmanson Common Stock with respect to the payment of dividends
and the distribution of assets in the event of liquidation, winding up or
dissolution of Ahmanson. Each outstanding series ranks on a parity with the
other as to dividends and the distribution of assets upon liquidation, winding
up or dissolution.
Generally, the holders of each series of Ahmanson Preferred Stock have
no voting rights. However, if the equivalent of six quarterly dividends payable
on a series of Ahmanson Preferred Stock are in default, the number of directors
of Ahmanson will be increased by two and the holders of such outstanding series
of Ahmanson Preferred Stock together with the holders of shares of every other
series of Ahmanson Preferred Stock similarly entitled to vote for the election
of two directors, acting together as a single class, will be entitled to elect
two of the authorized number of members of the Ahmanson Board at the next annual
meeting and at each subsequent annual meeting of stockholders, to serve until
all dividends accumulated have been fully paid for four consecutive quarterly
dividend periods, including the last preceding quarterly dividend period.
Ahmanson Depositary Shares representing each series of Ahmanson Preferred Stock
are listed on the NYSE.
AHMANSON SERIES C PREFERRED STOCK.
As of September 30, 1997, there were issued and outstanding 780,000
shares of Ahmanson 8.40% Preferred Stock, Series C, liquidation preference $250
per share (the "Ahmanson Series C Preferred Stock"), represented by 7,800,000
depositary shares, each representing a one-tenth interest in a share of Ahmanson
Series C Preferred Stock. The Ahmanson Series C Preferred Stock is redeemable at
the option of Ahmanson in whole or in part, on and after March 1, 1998 at a
price of $250 per share (equivalent to $25 per depositary share) plus accrued
and unpaid dividends to the redemption date.
Dividends on the Ahmanson Series C Preferred Stock of $21.00 per share
(8.40% annualized rate) are cumulative and paid quarterly on the first day of
March, June, September and December (equivalent to $2.10 per annum per
depositary share).
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AHMANSON SERIES D PREFERRED STOCK.
As of September 30, 1997, there were issued and outstanding 575,000
shares of 6% Cumulative Convertible Preferred Stock, Series D, liquidation
preference $500 per share (the "Ahmanson Series D Preferred Stock"), evidenced
by 5,750,000 depositary shares, each representing a one-tenth interest in a
share of Ahmanson Series D Preferred Stock. The Ahmanson Series D Preferred
Stock is redeemable at the option of Ahmanson, in whole or in part, on and after
September 1, 1998 at a price commencing at $515 per share and declining to $500
per share on September 1, 2003 and thereafter, plus accrued and unpaid dividends
to the redemption date.
Dividends on the Ahmanson Series D Preferred Stock of $30 per share (6%
annualized rate) are cumulative and are paid quarterly on the first day of
March, June, September and December (equivalent to $3 per annum per depositary
share).
The Ahmanson Series D Preferred Stock is convertible into Ahmanson
Common Stock, at the option of its holders, at a conversion rate of
approximately 20.5465 shares of Ahmanson Common Stock per share of Ahmanson
Series D Preferred Stock (equivalent to a conversion rate of 2.05465 shares of
Ahmanson Common Stock per depositary share) (subject to adjustments upon the
occurrence of certain events).
CERTAIN REGULATORY CONSIDERATIONS
The following discussion addresses in general terms the regulatory
framework applicable to savings and loan holding companies and their
subsidiaries, and provides certain information relevant to Ahmanson. Regulation
of financial institutions such as Ahmanson and its subsidiaries is intended
primarily for the protection of depositors, the deposit insurance funds of the
Federal Deposit Insurance Corporation and the banking system as a whole, and
generally is not intended for the protection of stockholders or other investors.
GENERAL.
Ahmanson is a savings and loan holding company and, as such, is subject
to the OTS's regulations, examination, supervision and reporting requirements.
Home Savings is a federal savings bank and a member of the Federal Home Loan
Bank System, and its deposits are insured by the Federal Deposit Insurance
Corporation (the "FDIC"). It is subject to examination and supervision by the
OTS and the FDIC and to regulations governing such matters as capital standards,
mergers, establishment and closing of branch offices, subsidiary investments and
activities, and general investment authority.
The descriptions of the statutes and regulations that are applicable to
Ahmanson and the effects thereof that are set forth below and elsewhere in this
document do not purport to be a complete description of such statutes and
regulations and their effects on Ahmanson or to identify every statute and
regulation that may apply to Ahmanson.
SAVINGS AND LOAN HOLDING COMPANY REGULATIONS.
Subject to certain limited exceptions, control of a savings association
or a savings and loan holding company may only be obtained with the approval (or
in the case of an acquisition of control by an individual, the absence of
disapproval) of the OTS, after a public comment and application review process.
Any company acquiring control of a savings association becomes a savings and
loan holding company, must register and file periodic reports with the OTS, and
is subject to OTS examination.
AFFILIATE AND INSIDER TRANSACTIONS.
Savings associations are subject to affiliate and insider transaction
rules under section 11 of the Home Owner's Loan Act; including those applicable
to member banks of the Federal Reserve System set forth in sections 23A, 23B,
22(g) and 22(h) of the Federal Reserve Act. These provisions, among other
things, prohibit or limit a savings association
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from extending credit to, or entering into certain transactions with, its
affiliates (which generally include holding companies such as Ahmanson and any
company under common control with the savings association) and principal
stockholders, directors and executive officers of the savings association and
its affiliates.
LIMITATIONS ON ACQUISITIONS.
Ahmanson is generally prohibited, either directly or indirectly, from
acquiring control of any savings association or savings and loan holding company
absent prior approval by the OTS and from acquiring more than 5% of any class of
voting stock of any savings association or savings and loan holding company that
is not a subsidiary of Ahmanson.
PAYMENT OF DIVIDENDS.
Ahmanson's principal sources of funds are cash dividends paid to it by
Home Savings and other subsidiaries, investment income and borrowings. There are
restrictions on the ability of Home Savings to pay dividends to Ahmanson.
Savings association subsidiaries of savings and loan holding companies, such as
Home Savings, must notify the OTS of their intent to declare dividends at least
30 days before declaration. The OTS has the authority to preclude those
associates from declaring a dividend.
OTS regulations impose limitations upon certain "capital distributions"
by savings associations, including dividends. The regulations establish a
three-tiered system of regulation, with the greatest flexibility being afforded
to institutions that meet or exceed the fully phased-in capital requirements.
A savings institution that has capital immediately prior to, and on a
pro forma basis after giving effect to, a proposed capital distribution that is
at least equal to its fully phased-in capital requirements is considered a Tier
I institution ("Tier I Institution"). At September 30, 1997, Home Savings was a
Tier I Institution. A Tier I Institution may, without the approval of but with
prior notice to the OTS, make capital distributions during a calendar year up to
the greater of (1) 100% of its net income to date during the calendar year plus
the amount that would reduce the savings institution's "surplus capital ratio"
(the excess over its fully phased-in risk-based capital requirement) to one-half
of its surplus capital ratio at the beginning of the calendar year or (2) 75% of
the institution's net income over the most recent four quarter period. Any
additional capital distributions would require prior regulatory approval. The
OTS retains discretion to subject Tier I Institutions to the more stringent
capital distribution rules applicable to institutions with less capital if the
OTS determines that the institution is in need of more than normal supervision
and has provided the institution with notice to that effect. The OTS also
retains the authority to prohibit any capital distribution otherwise authorized
under the regulations if the OTS determines that the capital distribution would
constitute an unsafe or unsound practice.
DEPOSIT INSURANCE.
The FDIC administers two separate deposit insurance funds: the Bank
Insurance Fund (the "BIF"), which insures the deposits of institutions the
deposits of which were insured by the FDIC prior to the enactment of FIRREA, and
the Savings Association Insurance Fund (the "SAIF"), which insures the deposits
of institutions the deposits of which were insured by the Federal Savings and
Loan Insurance Corporation. Home Savings is a member of the BIF and currently is
obligated to pay deposit insurance assessments ratably to the SAIF and the BIF
based on 85% and 15% of total deposits, respectively. These percentages are
subject to change in the future based on future events.
The FDIC has established a risk-based system for setting deposit
insurance assessments. Under the risk-based assessment system, an institution's
insurance assessments vary depending upon the level of capital the institution
holds and the degree to which it is the subject of supervisory concern to the
FDIC. During the first three quarters of 1996, the assessment rate for SAIF
deposits varied from 0.23% of covered deposits for well-capitalized institutions
that were deemed to have no more than a few minor weaknesses, to 0.31% of
covered deposits for less than adequately capitalized institutions that posed
substantial supervisory concern. The lowest assessment rate for BIF deposits was
$2,000 per institution per year. The assessment rate for both SAIF and BIF
deposits currently varies from zero to 0.27% of covered
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deposits. Ahmanson paid $55.1 million in deposit insurance premiums to SAIF in
1996 compared to $79.9 million in 1995.
Prior to enactment of the Deposit Insurance Funds Act of 1996 ("DIFA"),
the SAIF's three major obligations were to fund losses associated with the
failure of institutions with SAIF-insured deposits; to increase its reserves to
1.25% of insured deposits over a reasonable period of time; and to make interest
payments on debt incurred through the Financing Corporation to provide funds to
the former Federal Savings and Loan Insurance Corporation ("FICO Debt"). The
reserves of the SAIF were lower than the reserves of the BIF and the BIF did not
have an obligation to pay interest on the FICO Debt. Therefore, premiums
assessed on deposits insured by the SAIF were higher than premiums assessed on
deposits insured by the BIF. Such a premium structure provided FDIC-insured
institutions whose deposits were exclusively or primarily BIF-insured (such as
almost all commercial banks) certain competitive advantages over institutions
whose deposits were primarily SAIF-insured (such as Home Savings).
DIFA required FDIC-insured depository institutions with SAIF-insured
deposits to pay a special assessment designed to increase the SAIF's reserves to
the required 1.25% of insured deposits. The amount of the special assessment
imposed on Home Savings was $243.9 million. DIFA also altered the obligation to
make interest payments on the FICO Debt so that assessments to collect the
necessary funds are imposed separately from the deposit insurance premium and
are now assessed on BIF-insured deposits, although at a lower rate, as well as
on SAIF-insured deposits. Because the reserves of both the SAIF and the BIF
equal or exceed the required minimum amount and FICO Debt assessments are
collected separately from deposit insurance assessments, deposit insurance
premiums are currently assessed on SAIF-insured and BIF-insured deposits
according to the same schedule.
The FDIC may initiate a proceeding to terminate an institution's deposit
insurance after a 30-day notice period if, among other things, the institution
is in an unsafe and unsound condition to continue operations. It is the policy
of the FDIC to deem an insured institution to be in an unsafe and unsound
condition if its ratio of Tier I capital to total assets is less than 2%. Tier I
capital is similar to core capital but includes certain investments in and
extensions of credit to subsidiaries engaged in activities not permitted for
national banks. In addition, the FDIC has the power to suspend temporarily a
savings association's insurance on deposits received after the issuance of a
suspension order in the event that the savings association has no tangible
capital.
FICO DEBT.
Until December 31, 1999 or, if earlier, the date on which the last
savings association ceases to exist, the rate at which SAIF-insured deposits are
assessed with respect to FICO Debt interest payments will be five times the rate
at which BIF-insured deposits are assessed. Accordingly, institutions whose
deposits are exclusively or primarily BIF-insured (such as almost all commercial
banks) continue to have a competitive advantage over institutions whose deposits
are primarily SAIF-insured (such as Home Savings) although the extent of the
advantage is less than the deposit insurance premium advantage which existed
prior to the enactment of DIFA.
CLASSIFICATION OF ASSETS.
Federal regulations require savings associations to review their assets
on a regular basis and to classify them as "substandard," "doubtful" or "loss"
if warranted. Adequate valuation allowances for loan losses are required for
assets classified as substandard or doubtful. If an asset is classified as loss,
the institution must either establish a specific allowance for loss in the
amount classified as loss or charge off such amount. The institution's OTS
District Director has the authority to approve, disapprove or modify any asset
classification and any amounts established as allowances for loan losses.
At present, certain general allowances may be included within regulatory
capital, while specific allowances may not. If an OTS examiner concludes that
additional assets should be classified or that the valuation allowances
established by the savings association are inadequate, the examiner may
determine, subject to internal review by the OTS, the need for and extent of
additional classification or any increase necessary in the savings association's
general or specific valuation allowances. An insured savings association is also
required to set aside adequate valuation allowances to the
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extent that an affiliate possesses assets posing a risk to the institution and
to establish liabilities for off-balance sheet items, such as letters of credit
when loss becomes probable and estimable.
CAPITAL REQUIREMENTS.
The OTS has adopted capital regulations ("Capital Regulations") for
savings associations which establish three capital requirements--a core capital
requirement, a tangible capital requirement and a risk-based capital
requirement. The capital standards contained in the Capital Regulations
generally must be no less stringent than the capital standards applicable to
national banks. The Capital Regulations require savings associations to maintain
core capital of at least 3% of adjusted total assets, tangible capital of at
least 1.5% of adjusted total assets and total capital (being the sum of Core
Capital and Supplementary Capital) of at least 8% of risk-weighted assets. In
addition, institutions whose exposure to interest-rate risk is deemed to be
above normal will be required to deduct a portion of such exposure in
calculating their risk-based capital. The OTS may establish, on a case by case
basis, individual minimum capital requirements for savings associations that
vary from the requirements that would otherwise apply under the Capital
Regulations. The OTS has not established such individual minimum capital
requirements for Home Savings. Home Savings was in compliance with the Capital
Regulations at September 30, 1997. As of September 30, 1997, Home Savings' core
capital ratio was 5.89%. The Capital Regulations do not apply to Ahmanson, on a
consolidated or non-consolidated basis.
Core capital generally includes common stockholders' equity (including
retained earnings but excluding the net unrealized gain or loss on securities
available for sale), noncumulative perpetual preferred stock and related surplus
and minority interests in the equity accounts of fully consolidated
subsidiaries. Intangible assets (other than a limited amount of mortgage
servicing rights and purchased credit card relationships) must be deducted from
core capital. Certain deferred tax assets also must be deducted.
Tangible capital generally means core capital less any intangible assets
(other than a limited amount of mortgage servicing rights).
Supplementary capital includes, among other things, certain types of
preferred stock and subordinated debt and, subject to certain limits, general
valuation loan and lease loss allowances. A savings association's supplementary
capital may be used to satisfy the risk-based capital requirement only to the
extent of that institution's core capital. Risk-weighted assets are determined
by multiplying each category of an institution's assets, including off balance
sheet equivalents, by a risk weight assigned by the OTS based on the credit risk
associated with those assets, and adding the resulting amounts. The risk weight
categories range from zero percent for cash and government securities to 100%
for assets that do not quality for preferential risk weighting as determined by
the OTS.
The Capital Regulations treat asset sales with recourse as if they did
not occur, and generally require a savings association to maintain capital
against the entire amount of assets sold with recourse, even if recourse is for
less than the full amount. However, when assets are sold with recourse and the
amount of recourse is less than the risk-based capital requirement for such
assets, the assets are not included in risk-weighted assets and capital is
required to be maintained in an amount equal to such recourse amount. A savings
association's retention of the subordinated portion of a senior/subordinated
loan participation or package of loans is treated in the same manner as an asset
sale with recourse.
The Capital Regulations contain special capital rules affecting savings
associations with certain kinds of subsidiaries. For purposes of determining
compliance with each of the capital standards, a savings association's
investments in and extensions of credit to subsidiaries engaged in activities
not permissible for a national bank are deducted from the savings association's
capital, net of reserves against such investment. Home Savings' REI subsidiary
is its only significant subsidiary engaged in activities not permissible for a
national bank. At September 30, 1997, Home Savings' investment in its REI
subsidiary aggregated $41.5 million, of which $38.3 million was required to be
deducted from Home Savings' capital.
Each bank regulatory agency and the OTS is required to review its
capital standards every two years to determine whether those standards require
sufficient capital to facilitate prompt corrective action to prevent or minimize
loss to the deposit insurance funds.
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PROMPT CORRECTIVE ACTION.
Under OTS regulations which implement the "prompt corrective action"
system established in the Federal Deposit Insurance Act (the "FDIA"), an
FDIC-insured savings association is well capitalized if its ratio of total
capital to risk-weighted assets is 10% or more, its ratio of core capital to
risk weighted assets is 6% or more, its ratio of core capital to total assets is
5% or more and it is not subject to any written agreement, order or directive to
meet a specified capital level. At September 30, 1997 Home Savings met these
standards. An institution which is not well capitalized is "adequately
capitalized" if its ratio of total capital to risk-weighted assets is at least
8%, its ratio of core capital to risk-adjusted assets is at least 4% and its
ratio of core capital to total assets is at least 4% (3% if the institution
receives the highest rating on the OTS's CAMEL rating system). Any institution
which is not adequately capitalized is undercapitalized, significantly
undercapitalized or critically undercapitalized, depending upon its capital
ratios.
An FDIC-insured savings association that is undercapitalized must submit
a capital restoration plan to the OTS. The plan may be approved only if the OTS
determines it is likely to succeed in restoring the institution's capital and
will not appreciably increase the risks to which the institution is exposed. The
association's performance under the plan must be guaranteed by any company which
controls the association, up to a maximum of 5% of the institution's assets. The
OTS may also require the association to take various actions deemed appropriate
to minimize potential losses to the deposit insurance fund. A significantly
undercapitalized association is subject to additional sanctions and a critically
undercapitalized association generally must be placed in receivership or
conservatorship.
ENFORCEMENT AND PENALTIES.
The FDIA contains extensive enforcement provisions applicable to all
FDIC-insured depository institutions, including savings associations and
"institution-affiliated parties," which includes, among others, directors,
officers, employees, agents and controlling stockholders of depository
institutions, including holding companies such as Ahmanson. An institution or
institution-affiliated party may be subject to a three tier penalty regime that
ranges from a maximum penalty of $5,000 per day for a simple violation to a
maximum penalty of $1 million per day for certain knowing violations including
the failure to submit or submission of incomplete, false or misleading reports.
An institution-affiliated party may also be subject to loss of voting rights
with respect to the stock of depository institutions.
Whenever the OTS has reasonable cause to believe that the continuation
by a savings and loan holding company of any activity or of ownership or control
of any subsidiary not insured by the FDIC constitutes a serious risk to the
financial safety, soundness or stability of a subsidiary savings association and
is inconsistent with the sound operation of the savings association, the OTS may
order the holding company to terminate such activities or divest such
non-insured subsidiary. The OTS, without notice or opportunity for hearing, may
also (a) limit the payment of dividends by the savings association, (b) limit
transactions between the savings association and its holding company or other
affiliates and (c) limit any activity of the savings association which creates a
serious risk that the liabilities of the holding company and its affiliates may
be imposed upon the savings association.
FDIA, as amended, requires the OTS to prescribe minimum operational and
managerial standards and standards for asset quality, earnings and stock
valuation for savings associations. Any savings association that fails to meet
the standards may be required to submit a plan for corrective action. If a
savings association fails to submit or implement an acceptable plan, the OTS may
require the association to take any action the OTS determines will best carry
out the purpose of prompt corrective action. The OTS and the bank regulatory
agencies have jointly published a regulation prescribing the required safety and
soundness standards. Home Savings believes that it is in compliance with the
regulation.
LOANS AND INVESTMENTS.
Aggregate loans to a single borrower are limited to specified
percentages of a savings association's capital, depending upon the existence and
type of any collateral. Aggregate loans secured by non-residential real property
are limited to a specified percentage of capital.
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Savings associations generally may not invest directly in equity
securities, non-investment grade securities or real estate. Indirect investments
in real estate are permitted through subsidiaries subject to limitations based,
generally, on the institution's capital ratios. Investments in subsidiaries, and
the activities conducted through subsidiaries, are subject to regulatory
restrictions.
FHLB SYSTEM.
The FHLBs provide a central credit facility for member institutions. As
a federal savings bank, Home Savings is required to be a member of the FHLB
System. Members of the FHLB System are required to own capital stock in an FHLB
at least equal to the greater of 1% of the member's outstanding home mortgage
loans and 5% of the member's advances from the FHLB. At September 30, 1997, Home
Savings' investment in FHLB stock was $405.6 million, substantially all of which
can not be withdrawn as long as Home Savings' real estate loan portfolio remains
at its current size.
FEDERAL RESERVE SYSTEM.
Home Savings is subject to various regulations promulgated by the
Federal Reserve Board, including, among others, Regulation B (Equal Credit
Opportunity), Regulation D (Reserves), Regulation E (Electronic Fund Transfers),
Regulation Z (Truth in Lending), Regulation CC (Availability of Funds) and
Regulation DD (Truth in Savings). As holders of loans secured by real property,
and as owners of real property, financial institutions, including Home Savings,
may be subject to potential liability under various statutes and regulations
applicable to property owners generally, including statutes and regulations
relating to the environmental condition of the property.
LIQUIDITY.
OTS regulations require a savings association to maintain, for each
calendar month, an average daily balance of liquid assets equal to at least 4%
of the average daily balance of its net withdrawable accounts plus short-term
borrowings during the preceding calendar month. The OTS may vary the required
percentage within a range of 4% to 10% and may also vary the definition of
liquid assets. Monetary penalties may be imposed for failure to meet liquidity
ratio requirements.
COMMUNITY REINVESTMENT ACT.
The CRA requires each savings association, as well as other depository
institutions, to identify the communities served by the institution's offices
and to identify the types of credit the institution is prepared to extend within
such communities. The CRA also requires the OTS to assess the performance of the
institution in meeting the credit needs of its community and to take such
assessments into consideration in reviewing applications for mergers,
acquisitions and other transactions. In connection with its assessment of a
savings association's CRA performance, the OTS will assign a rating of
"outstanding," "satisfactory," "needs to improve" or "substantial
noncompliance." Based on an examination conducted as of September 5, 1995, Home
Savings was rated "outstanding."
QUALIFIED THRIFT LENDER.
A savings association must invest at least 65% of its portfolio assets
in "qualified thrift investments" (each as defined by statute and OTS
regulations) on a monthly average basis in nine out of every 12 months on a
rolling 12-month "look back" basis. Home Savings was in compliance with this
requirement as of September 30, 1997 and would be in compliance on a pro forma
basis after giving effect to the Merger.
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CERTAIN DIFFERENCES IN THE RIGHTS OF AHMANSON
STOCKHOLDERS AND COAST STOCKHOLDERS
As a consequence of the Merger and the transactions contemplated
thereby, stockholders of Coast would become stockholders of Ahmanson. The
following is a summary of certain similarities and all material differences
between the rights of holders of shares of Coast Common Stock and the rights of
holders of Ahmanson Common Stock. Because each of Coast and Ahmanson is
organized under the laws of Delaware, these differences arise solely from
various provisions of the certificate of incorporation and by-laws of each of
Coast and Ahmanson, as well as from the Ahmanson Rights Agreement, dated as of
July 26, 1988, between Ahmanson and Union Bank, as rights agent (the "Ahmanson
Rights Plan") and the Coast Rights Agreement, dated as of August 25, 1989,
between Coast and Manufacturers Hanover Trust of California, as rights agent
(the "Coast Rights Plan").
The following summary does not purport to be a complete statement of the
rights of stockholders under the Coast Charter, the Coast By-laws and the Coast
Rights Plan as compared with the rights of Ahmanson's stockholders under the
Ahmanson Charter, the by-laws of Ahmanson (the "Ahmanson By-Laws") and the
Ahmanson Rights Plan, or a complete description of the specific provisions
referred to herein. The summary is qualified in its entirety by reference to the
governing corporate instruments, including the aforementioned instruments, of
Coast and Ahmanson, copies of which have been filed as exhibits hereto or to
documents incorporated herein by reference.
MEETINGS OF STOCKHOLDERS
Under Delaware law, special meetings of the stockholders may be called
by the board of directors or such other persons as may be authorized by the
certificate of incorporation or by-laws. The Coast Charter and By-Laws do not
authorize any other person to call a special meeting. The Ahmanson Charter and
By-Laws provide that a special meeting may also be called by a committee of the
Ahmanson Board which has been designated by the Ahmanson Board and authorized to
call a special meeting by a resolution of the Ahmanson Board or by the Ahmanson
By-Laws.
NUMBER AND ELECTION OF DIRECTORS
Number of Directors. Under Delaware law, the number of directors shall
be fixed by or in the manner provided in the by-laws, unless the certificate of
incorporation fixes the number of directors, in which case a change in the
number of directors shall be made only by amendment to the certificate. The
Coast Charter and By-laws provide that the number of directors shall be
determined by a resolution of the majority of the Coast Board. The Ahmanson
By-Laws provide that the number of directors shall be determined by a resolution
of the majority of the Ahmanson Board or a majority of the voting power of the
outstanding shares of voting stock.
Advance Notice of Stockholder Nominations of Directors. Under the Coast
By-laws, nominations of persons for election to the Coast Board may be made at a
meeting of stockholders by any stockholder, provided that the Secretary of Coast
receives written notice not less than 30 days prior to the annual meeting.
Under the Ahmanson By-Laws, nominations of persons for election to the
Ahmanson Board may be made at a meeting of stockholders by any stockholder,
provided that the Secretary of Ahmanson receives written notice not less than 60
days nor more than 120 days prior to the meeting. If less than 65 days' notice
or prior public disclosure of the date of the meeting is given or made by
Ahmanson to stockholders, the notice of a nomination must be received not later
than the close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or public disclosure was
made. Stockholder notices must state, among other things, a brief description of
the business desired to be brought before the annual meeting and the reasons for
conducting such business at the annual meeting, the name and record address of
the stockholder proposing the business, the class and number of shares of
Ahmanson stock beneficially owned by the stockholder, any material interest in
such business and any other information relating to the stockholder or the
proposal required to be disclosed in solicitations for proxies for the election
of directors pursuant to Regulation 14A under the Exchange Act.
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Classification of Board of Directors. Delaware law permits (but does not
require) a certificate of incorporation to provide that a board of directors be
divided into classes, with each class having a term of office longer than one
year but not longer than three years. The Coast Charter provides that the Coast
Board shall have three classes. The directors of each class shall serve for a
term ending at the third annual meeting following the annual meeting at which
they were elected. The Ahmanson Charter does not provide for a classified board.
Accordingly, all members of the Ahmanson Board are elected at each annual
meeting.
INDEMNIFICATION
The Coast Charter generally provides for the indemnification of persons
serving as a director or officer of Coast or at the request of Coast as a
director or officer of another corporation, partnership, joint venture, trust or
other enterprise against all costs and expenses reasonably incurred by such
person or on such person's behalf in connection with such action, suit or
proceeding and any appeal therefrom, if such person acted in good faith and in a
manner such person reasonably believed to be in the best interests of the
corporation and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The Ahmanson Charter and
By-Laws generally provide for the indemnification of persons serving as a
director, officer, employee or agent of Ahmanson or at the request of Ahmanson
as a director, officer, employee or agent of another corporation or of a
partnership, joint venture, trust or other enterprise, to the fullest extent
authorized by the DGCL. The Ahmanson By-Laws provide that such right to
indemnification may only be extended to employees and agents in a specific case
by action of the Ahmanson Board.
CERTAIN VOTING RIGHTS
With Respect to Proposed Mergers. Under Delaware law, certain mergers
and consolidations or the sale of all or substantially all of the assets of a
corporation requires the approval of the holders of a majority (unless the
certificate of incorporation requires a higher percentage) of the outstanding
shares of such corporation entitled to vote thereon. Neither the Coast Charter
nor the Ahmanson Charter requires a higher percentage generally, except under
certain situations involving substantial stockholders discussed below.
With Respect to Transactions with Substantial Stockholders. The Coast
Charter provides that certain transactions between Coast and a substantial
stockholder (generally a person holding more than 10% of the outstanding voting
stock of Coast) require the approval of the holders of two-thirds of all
outstanding shares of capital stock of Coast entitled to vote generally in the
election of directors, including (i) the merger or consolidation of Coast or any
subsidiary of Coast; (ii) the sale, lease or other disposition of any assets of
Coast having an aggregate fair market value of $20 million or more; (iii) the
issuance or transfer by Coast or any subsidiary of Coast of securities of Coast
or a subsidiary of Coast having an aggregate fair market value of $20 million or
more; (iv) the adoption of a plan or proposal for the liquidation of dissolution
of any subsidiary of Coast; (v) the reclassification of securities,
recapitalization, consolidation or any other transaction that has the direct or
indirect effect of increasing the voting power of any such substantial
stockholder in any class or series of capital stock of Coast or any subsidiary
of Coast; or (vi) any agreement, contract or other arrangement providing
directly or indirectly for any of the foregoing; except, in each case, for any
transaction approved by a vote of a majority of directors unaffiliated with the
Substantial Stockholder and its affiliates, or any transaction to be consummated
within three years after the Substantial Stockholder becomes a Substantial
Stockholder and if certain conditions are met.
The Ahmanson Charter provides that certain transactions between Ahmanson
and a substantial stockholder (generally a person or group holding capital stock
representing 10% or more of the outstanding voting power of Ahmanson) require
the approval of the holders of 80% of the capital stock of Ahmanson entitled to
vote for the election of directors, including (i) the repurchase by Ahmanson of
capital stock representing 10% or more of the total voting power of Ahmanson
from such a substantial stockholder under certain circumstances, (ii) certain
mergers, consolidations, combinations or reorganizations of Ahmanson or the sale
of all or a substantial part of the assets of Ahmanson or its subsidiaries where
such a substantial stockholder or its affiliates are parties to the transaction
and (iii) certain other exchanges of securities, cash or other properties or
assets of Ahmanson involving such a substantial stockholder or its affiliates,
except, in the case of (ii) or (iii), for any transaction which has been
approved by the Ahmanson Board,
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<PAGE> 80
including by the vote of at least two-thirds of the directors unaffiliated with
the substantial stockholder and its affiliates.
Cumulative Voting. Under Delaware law, stockholders of a corporation are
not entitled to cumulate their votes in the election of directors unless the
corporation's certificate of incorporation so provides. Neither the Coast
Charter nor the Ahmanson Charter provides for cumulative voting.
REMOVAL OF DIRECTORS; FILLING VACANCIES ON THE BOARD OF DIRECTORS
Under Delaware law, any or all directors of a corporation which does not
have cumulative voting or a classified board may be removed, with or without
cause, by the holders of a majority of the shares entitled to vote at an
election of directors, unless such corporation's certificate of incorporation
provides otherwise. Coast has a classified board and the Coast Charter provides
that directors may be removed only for cause, which is defined in the Coast
Charter to mean conviction for a felony or a non-appealable adjudication against
the director for gross negligence or misconduct. The Ahmanson Charter does not
limit the right of stockholders to remove directors with or without cause.
Under Delaware law, unless otherwise provided in the corporation's
certificate of incorporation or by-laws, vacancies and newly-created
directorships resulting from any increase in the authorized number of directors
may be filled by a majority of the directors in office. The Coast Charter
provides that any vacancy, whether arising through death, resignation,
retirement, disqualification, removal or other cause, may be filled only by a
majority vote of the remaining directors or by the sole remaining director if
only one such director remains or by the stockholders if the directors or
director fail to so act. Neither the Ahmanson Charter nor the Ahmanson By-Laws
provides for vacancies or newly-created directorships to be filled by
stockholder vote.
STOCKHOLDER ACTION BY WRITTEN CONSENT
Under Delaware law, unless otherwise provided in the certificate of
incorporation, any action which may be taken at any annual or special meeting
may be taken without a meeting and without prior notice if a consent in writing,
setting forth the action so taken, shall be signed by the holders of outstanding
shares having not less than the minimum number of votes that would be necessary
to authorize or take such action at a meeting at which all shares entitled to
vote thereon were present and voted. The Coast Charter and By-laws provide that
any action by written stockholder consent must be signed by all the stockholders
of Coast entitled to vote. The Ahmanson Charter prohibits any action by written
stockholder consent.
AMENDMENT OF BY-LAWS
Under Delaware law, the power to adopt, amend or repeal by-laws is
vested in the stockholders unless the certificate of incorporation confers the
power to adopt, amend or repeal by-laws upon the directors as well. Both the
Coast Charter and the Ahmanson Charter grant such power to their respective
boards of directors. The Coast By-laws provide that the Coast By-laws may not be
amended or repealed by the stockholders without the approval of the holders of
two-thirds of the voting stock of Coast.
RIGHTS PLANS
Ahmanson Rights Plan. On November 7, 1997, the Ahmanson Board declared a
dividend distribution of one preferred stock purchase right (a "Right"), to
holders of Ahmanson Common Stock outstanding on November 17, 1997.
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<PAGE> 81
In the event that any person or affiliated group becomes the beneficial
owner of 15% or more of the outstanding shares of Ahmanson Common Stock, each
holder of a Right (other than Rights beneficially owned by the 15% beneficial
owner) will thereafter have the right to purchase from Ahmanson that number of
shares of Ahmanson Common Stock having a market value equal to two times the
exercise price of the Right. If Ahmanson thereafter is acquired in a merger or
other business combination transaction or 50% or more of its consolidated assets
or earning power are sold, proper provision will be made so that each holder of
a Right other than Rights beneficially owned by the acquiring person, will
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Right (currently, $60), that number of shares of
common stock of the acquiring company which at the time of such transaction will
have a market value of two times the exercise price of the Right.
Coast Rights Plan. On August 23, 1989, the Coast Board declared a
dividend distribution of one Coast Right for each share of Coast Common Stock
outstanding on September 6, 1989.
In the event that any person becomes the beneficial owner of 15% or more
of the outstanding shares of Coast Common Stock, proper provision is required to
be made so that each holder of a Coast Right, other than Coast Rights
beneficially owned by the acquiring person, will thereafter have the right to
receive upon exercise that number of shares of Coast Common Stock having a
market value equal to two times the exercise price of the Coast Right. In the
event that, at any time following such acquisition of 15% or more of the
outstanding shares, Coast is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold
(with certain exceptions), proper provision will be made so that each holder of
a Coast Right will thereafter have the right to receive, upon the exercise
thereof at the then current exercise price of the Coast Right, that number of
shares of common stock of the acquiring company which at the time of such
transaction will have a market value equal to two times the exercise price of
the Coast Right. At the Effective Time, the Coast Rights, which currently trade
with, and are represented by the certificates for, Coast Common Stock, will be
canceled and no additional consideration will be payable with respect thereto.
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<PAGE> 82
COMPARATIVE MARKET PRICES AND DIVIDENDS
AHMANSON
Ahmanson Common Stock is traded on the NYSE under the symbol "AHM" and
is also listed on the Pacific Exchange. The following table sets forth, for the
indicated periods, the high and low closing sale prices for Ahmanson Common
Stock as reported on the NYSE Composite Tape, together with the per share
dividends declared by Ahmanson, during the indicated periods.
<TABLE>
<CAPTION>
PRICE RANGE
--------------------- CASH DIVIDENDS
QUARTER HIGH LOW DECLARED PER SHARE
------- ----------- ------- ------------------
1994:
<S> <C> <C> <C>
First ............................ $20 1/4 $16 3/8 $.22
Second ........................... 20 1/8 16 1/2 .22
Third ............................ 22 3/4 18 7/8 .22
Fourth ........................... 21 15 1/4 .22
1995:
First ............................ $18 5/8 $16 $.22
Second ........................... 23 3/4 18 1/8 .22
Third ............................ 25 3/4 20 5/8 .22
Fourth ........................... 28 3/8 24 1/8 .22
1996:
First ............................ $26 3/4 $21 1/4 .22
Second ........................... 27 5/8 22 1/4 .22
Third ............................ 28 3/8 23 3/8 .22
Fourth ........................... 34 1/2 27 7/8 .22
1997:
First ............................ $45 1/4 $32 .22
Second ........................... 47 3/8 34 3/4 .22
Third ............................ 58 1/16 43 5/8 .22
Fourth (through ______, 1997)
</TABLE>
On October 3, 1997, the last trading day before public announcement of
the Merger, the closing price per share of Ahmanson Common Stock on the NYSE was
$57 1/8 (as reported on the NYSE Composite Tape). On __________, the last
practicable date prior to the mailing of this Proxy Statement/Prospectus, the
closing price per share of Ahmanson Common Stock was __________(as reported on
the NYSE Composite Tape). Past price performance is not necessarily indicative
of future price performance. Holders of Coast Common Stock are urged to obtain
current market quotations for shares of Ahmanson Common Stock.
The holders of Ahmanson Common Stock are entitled to receive dividends
when and if declared by the Ahmanson Board out of funds legally available
therefor. Although Ahmanson currently intends to continue paying quarterly cash
dividends on the Ahmanson Common Stock, there can be no assurance that
Ahmanson's dividend policy will remain unchanged after completion of the Merger.
The declaration and payment of dividends thereafter will depend
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<PAGE> 83
upon business conditions, operating results, capital and reserve requirements,
and the Ahmanson Board's consideration of other relevant factors.
COAST
Coast Common Stock is traded on the NYSE under the symbol "CSA" and is
also listed on the Pacific Exchange. The following table sets forth, for the
indicated periods, the high and low closing sale prices for Coast Common Stock
as reported on the NYSE Composite Tape. Coast did not pay any dividends on the
Coast Common Stock for the periods indicated.
<TABLE>
<CAPTION>
PRICE RANGE
-------------
QUARTER HIGH LOW
------- ---- ---
1995:
<S> <C> <C>
First ........................... 16 3/8 13 5/8
Second .......................... 21 1/4 16 1/2
Third ........................... 28 1/8 19 3/4
Fourth .......................... 34 5/8 25 1/4
1996:
First ........................... 33 3/4 26 1/2
Second .......................... 34 29 1/4
Third ........................... 35 1/8 29 1/4
Fourth .......................... 37 3/8 31 3/8
1997:
First ........................... 48 3/4 35 7/8
Second .......................... 46 38 1/2
Third ........................... 52 3/4 44 7/16
Fourth (through _____, 1997).....
</TABLE>
On October 3, 1997, the last trading day before public announcement of
the Merger, the closing price per share of Coast Common Stock on the NYSE was
$54 (as reported on the NYSE Composite Tape). On __________, the last
practicable date prior to the mailing of this Proxy Statement/Prospectus, the
closing price per share of Coast Common Stock was _________ (as reported on the
NYSE Composite Tape). Past price performance is not necessarily indicative of
likely future price performance. Holders of Coast Common Stock are urged to
obtain current market quotations for shares of Coast Common Stock.
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<PAGE> 84
VOTING SECURITIES AND PRINCIPAL STOCKHOLDERS OF COAST
PRINCIPAL BENEFICIAL OWNERS
The following table lists the only stockholder known by Coast to be the
beneficial owner of more than five percent of outstanding Coast Common Stock.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER(1) BENEFICIAL OWNERSHIP(1) COMMON STOCK(1)
---------------------- ----------------------- ---------------
<S> <C> <C>
Jenswold, King and Associates, Inc. 1,041,166.00 5.46%
Two Post Oak Central
1980 Post Oak Boulevard, Suite 2400
Houston, Texas 77056-3898
</TABLE>
- ----------
(1) Information based on Schedule 13G filed by Jenswold, King and
Associates, Inc. on March 5, 1997.
SHARES BENEFICIALLY OWNED BY DIRECTORS AND EXECUTIVE OFFICERS
Following is a table which indicates as of September 30, 1997 the amount
and the percent of beneficial ownership of Coast Common Stock for each director,
the Chief Executive Officer and the four other most highly compensated executive
officers, and all directors and executive officers as a group. Unless otherwise
noted, each individual has sole voting and sole investment power with respect to
the number of shares set forth opposite his name.
<TABLE>
<CAPTION>
NUMBER OF
SHARES
NAME OF BENEFICIAL OWNER BENEFICIALLY
OR NUMBER OF PERSONS IN GROUP(1) OWNED
-------------------------------- ------------
<S> <C>
Leon S. Angvire 25,547(2)
John C. Argue 9,000(2)
James F. Barritt 133,985
Gerald D. Barrone 86,301
James R. Boyle 75,000
Joan Milke Flores 6,834(2)
Robert L. Hunt II 252,003
Jack P. Libby 7,000(2)
Ray Martin 319,956
Thomas V. McKernan, Jr 6,500(2)
James P. Miscoll 15,000(2)
Norman H. Raiden 111,772
Keith W. Renken 8,500(2)
Harold B. Starkey, Jr 10,600(2)
All directors and executive officers
as a group (16 persons) 1,142,349
</TABLE>
- ----------
(1) Each of the named persons owns less than 1% of the outstanding shares of
Common Stock except for Mr. Martin who owns 1.69% and Mr. Hunt who owns
1.34%. All directors and executive officers as a group own 5.83% of the
outstanding shares of Common Stock. The foregoing percentages and the
share amounts shown in the table include with respect to Messrs.
Barritt, Barrone, Boyle, Hunt, Martin, Raiden and all directors and
executive officers as a group (including those named) 132,185 shares,
79,301 shares, 70,000 shares, 208,211 shares, 295,441 shares, 105,772
shares and 1,004,661 shares, respectively, that are subject to options
which are exercisable.
(2) Includes 5,000 exercisable options.
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<PAGE> 85
EXPERTS
The consolidated financial statements of Ahmanson as of December 31,
1996 and 1995, and for each of the years in the three-year period ended December
31, 1996, have been incorporated by reference herein in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing.
The consolidated financial statements of Coast as of December 31, 1996
and 1995, and for each of the years in the three-year period ended December 31,
1996, have been incorporated by reference herein in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
VALIDITY OF AHMANSON COMMON STOCK
The validity of the shares of Ahmanson Common Stock being offered hereby
will be passed upon for Ahmanson by Sullivan & Cromwell, Los Angeles.
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<PAGE> 86
APPENDIX A
================================================================================
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
dated as of October 5, 1997
by and between
H. F. Ahmanson & Company
and
Coast Savings Financial, Inc.
================================================================================
<PAGE> 87
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I
Certain Definitions
1.01 Certain Definitions........................................................... A-1
ARTICLE II
The Merger
2.01 The Merger.................................................................... A-6
2.02 Effective Date and Effective Time............................................. A-6
ARTICLE III
Consideration; Exchange Procedures
3.01 Merger Consideration.......................................................... A-6
3.02 Rights as Stockholders; Stock Transfers....................................... A-7
3.03 Fractional Shares............................................................. A-7
3.04 Exchange Procedures........................................................... A-7
3.05 Anti-Dilution Provisions...................................................... A-8
3.06 Options, Performance Shares and Stock Appreciation Rights..................... A-8
3.07 Dissenters Rights............................................................. A-9
ARTICLE IV
Actions Pending Acquisition
4.01 Forebearances of Coast........................................................ A-9
4.02 Forebearances of Ahmanson..................................................... A-11
ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules.......................................................... A-12
5.02 Standard...................................................................... A-12
5.03 Representations and Warranties of Coast....................................... A-12
5.04 Representations and Warranties of Ahmanson.................................... A-19
ARTICLE VI
Covenants
6.01 Reasonable Best Efforts....................................................... A-22
6.02 Stockholder Approval.......................................................... A-22
6.03 Registration Statements....................................................... A-22
6.04 Press Releases................................................................ A-24
</TABLE>
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<PAGE> 88
<TABLE>
<S> <C>
6.05 Access; Information........................................................... A-24
6.06 Acquisition Proposals......................................................... A-24
6.07. Affiliate Agreements.......................................................... A-25
6.08 Takeover Laws................................................................. A-25
6.09 Certain Policies.............................................................. A-25
6.10 NYSE Listing.................................................................. A-25
6.11 Regulatory Applications....................................................... A-25
6.12 Indemnification............................................................... A-26
6.13 Benefit Plan; Retention Bonuses............................................... A-26
6.14 Accountants' Letters.......................................................... A-27
6.15 Notification of Certain Matters............................................... A-27
6.16 Officers and Directors........................................................ A-27
6.17 CPR Trust..................................................................... A-27
ARTICLE VII
Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger.................... A-28
7.02 Conditions to Obligation of Coast............................................. A-28
7.03 Conditions to Obligation of Ahmanson.......................................... A-29
ARTICLE VIII
Termination
8.01 Termination................................................................... A-30
8.02 Effect of Termination and Abandonment......................................... A-30
ARTICLE IX
Miscellaneous
9.01 Survival...................................................................... A-31
9.02 Waiver; Amendment............................................................. A-31
9.03 Counterparts.................................................................. A-31
9.04 Governing Law................................................................. A-31
9.05 Expenses...................................................................... A-31
9.06 Notices....................................................................... A-31
9.07 Entire Understanding; No Third Party Beneficiaries............................ A-32
9.08 Interpretation; Effect........................................................ A-32
EXHIBIT A Form of Coast Affiliate Agreement
</TABLE>
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<PAGE> 89
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of October
5, 1997 (this "Agreement"), by and between Coast Savings Financial, Inc.
("Coast") and H. F. Ahmanson & Company ("Ahmanson").
RECITALS
A. Coast Savings Financial, Inc. Coast is a Delaware corporation, having
its principal place of business in Los Angeles, California.
B. H. F. Ahmanson & Company. Ahmanson is a Delaware corporation, having
its principal place of business in Irwindale, California.
C. Intentions of the Parties. It is the intention of the parties to this
Agreement that the business combination contemplated hereby be treated as a
"reorganization" under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code").
D. Board Action. The respective Boards of Directors of each of Ahmanson
and Coast have determined that it is in the best interests of their respective
companies and their stockholders to consummate the strategic business
combination transaction provided for herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 Certain Definitions. The following terms are used in this Agreement
with the meanings set forth below:
"Acquisition Proposal" means any tender or exchange offer, proposal for
a merger, consolidation or other business combination involving Coast or any
of its Subsidiaries or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets or
deposits of, Coast or any of its Subsidiaries, other than the transactions
contemplated by this Agreement.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.02.
"Ahmanson" has the meaning set forth in the preamble to this Agreement.
"Ahmanson Board" means the Board of Directors of Ahmanson.
"Ahmanson Common Stock" means the common stock, par value $.01 per
share, of Ahmanson.
"Ahmanson Preferred Stock" means the preferred stock, par value $.01 per
share, of Ahmanson, including its outstanding shares of 8.40% Series C
preferred stock and 6% Cumulative Convertible Series D preferred stock.
"Ahmanson Registration Statement" has the meaning set forth in Section
6.03.
"Ahmanson Rights" means the preferred share purchase rights issued under
the Ahmanson Rights Agreement.
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<PAGE> 90
"Ahmanson Rights Agreement" means the Rights Agreement, dated as of July
26, 1988, between Ahmanson and Union Bank, as rights agent.
"Ahmanson Stock" means, collectively, Ahmanson Common Stock and Ahmanson
Preferred Stock.
"Coast" has the meaning set forth in the preamble to this Agreement.
"Coast Affiliate" has the meaning set forth in Section 6.07(a).
"Coast Board" means the Board of Directors of Coast.
"Coast By-Laws" means the By-laws of Coast.
"Coast Certificate" means the Certificate of Incorporation of Coast.
"Coast Common Stock" means the common stock, par value $.01 per share,
of Coast.
"Coast Federal" means Coast Federal Bank, Federal Savings Bank.
"Coast Meeting" has the meaning set forth in Section 6.02.
"Coast Performance Share Award Plan" means the Coast Performance Share
Plan for Key Employees.
"Coast Preferred Stock" means the serial preferred stock, no par value
per share, of Coast.
"Coast Rights" means the preferred share purchase rights issued under
the Coast Rights Agreement.
"Coast Rights Agreement" means the Rights Agreement, dated as of August
25, 1989, between Coast and Manufacturers Hanover Trust of California, as
rights agent.
"Coast Stock" means, collectively, Coast Common Stock and Coast
Preferred Stock.
"Coast Stock Option" has the meaning set forth in Section 3.06.
"Coast Stock Plans" means the 1996 Equity Incentive Plan and the 1985
Stock Option and Stock Appreciation Rights Plan.
"Code" has the meaning set forth in the recitals.
"Commitment" has the meaning set forth in Annex I hereto.
"Compensation and Benefit Plans" has the meaning set forth in Section
5.03(m).
"Consultants" has the meaning set forth in Section 5.03(m).
"Costs" has the meaning set forth in Section 6.12(a).
"CPR Certificates" has the meaning set forth in Annex I hereto.
"CPR Prospectus" has the meaning set forth in Section 6.03.
"CPR Trust" means the trust formed for the purpose of issuing the CPR
Certificates.
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<PAGE> 91
"CPR Trust Registration Statement" has the meaning set forth in Section
6.03.
"Delaware Secretary" has the meaning set forth in Section 2.01.
"DGCL" means the Delaware General Corporation Law.
"Directors" has the meaning set forth in Section 5.03(m).
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Dissenters' Shares" has the meaning set forth in Section 3.01(a).
"Dissenting Shareholders" has the meaning set forth in Section 3.01(a).
"Effective Date" means the date on which the Effective Time occurs.
"Effective Time" means the effective time of the Merger, as provided for
in Section 2.02.
"Employees" has the meaning set forth in Section 5.03(m).
"Environmental Laws" means all applicable local, state and federal
environmental, health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act, the Clean Water
Act, the Federal Clean Air Act, and the Occupational Safety and Health Act,
each as amended, regulations promulgated thereunder, and state counterparts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m).
"ERISA Affiliate Plan" has the meaning set forth in Section 5.03(m).
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04.
"Exchange Ratio" has the meaning set forth in Section 3.01.
"Expense Fund" has the meaning set forth in Annex I hereto.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLBSF" means the Federal Home Loan Bank of San Francisco.
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"HOLA" means the Home Owners' Loan Act, as amended.
"Home Savings" means Home Savings of America, FSB.
"Indemnified Party" has the meaning set forth in Section 6.12(a).
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<PAGE> 92
"Insurance Amount" has the meaning set forth in Section 6.12(b).
"Insurance Policies" has the meaning set forth in Section 5.03(t).
"IRS" has the meaning set forth in Section 5.03(m).
"Liens" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Litigation Trustees" has the meaning set forth in Annex I hereto.
"Material Adverse Effect" means, with respect to Ahmanson or Coast, any
effect that (i) is material and adverse to the financial position, results
of operations or business of Ahmanson and its Subsidiaries taken as a whole
or Coast and its Subsidiaries taken as a whole, respectively, or (ii) would
materially impair the ability of either Ahmanson or Coast to perform its
obligations under this Agreement or otherwise materially impede the
consummation of the Merger and the other transactions contemplated by this
Agreement, provided that Material Adverse Effect shall not be deemed to
include a change in condition resulting from a general downturn in the
California economy.
"Merger" has the meaning set forth in Section 2.01.
"Merger Consideration" has the meaning set forth in Section 3.01.
"Multiemployer Plans" has the meaning set forth in Section 5.03(m).
"New Certificate" has the meaning set forth in Section 3.04.
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificate" has the meaning set forth in Section 3.04.
"OTS" means the Office of Thrift Supervision.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" has the meaning set forth in Section 5.03(m).
"Person" means any individual, savings association, bank, corporation,
limited liability company, partnership, association, joint-stock company,
business trust or unincorporated organization.
"Previously Disclosed" by a party means information set forth in its
Disclosure Schedule.
"Proxy Statement" has the meaning set forth in Section 6.03.
"Registration Statements" has the meaning set forth in Section 6.03.
"Regulatory Authorities" has the meaning set forth in Section 5.03(i).
"Regulatory Documents" means documents filed with the SEC or the OTS, as
applicable, of the types referred to in Section 5.03(g) and Section 5.04(g).
"Replacement Option" has the meaning set forth in Section 3.06.
A-4
<PAGE> 93
"Representatives" means, with respect to any Person, such Person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any person
any right to subscribe for or acquire, or any options, calls or commitments
relating to, or any stock appreciation right or other instrument the value
of which is determined in whole or in part by reference to the market price
or value of, shares of capital stock of such person.
"SAIF" means the Savings Association Insurance Fund of the Federal
Deposit Insurance Corporation.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Subsidiary" and "Significant Subsidiary" have the meanings ascribed to
them in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Corporation" has the meaning set forth in Section 2.01.
"Takeover Laws" has the meaning set forth in Section 5.03(o).
"Tax" and "Taxes" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gains, gross receipts,
sales, use, ad valorem, goods and services, capital, production, transfer,
franchise, windfall profits, license, withholding, payroll, employment,
disability, employer health, excise, estimated, severance, stamp,
occupation, property, environmental, unemployment or other taxes, custom
duties, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority whether arising before, on or after the
Effective Date.
"Tax Returns" means any return, amended return or other report
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be filed with respect to any Tax.
"Treasury Stock" shall mean shares of Coast Stock held by Coast or any
of its Subsidiaries or by Ahmanson or any of its Subsidiaries, in each case
other than in a fiduciary (including custodial or agency) capacity or as a
result of debts previously contracted in good faith.
"Trust Agreement" has the meaning set forth in Annex I hereto.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended,
and the rules and regulations thereunder.
ARTICLE II
THE MERGER
2.01 The Merger. (a) At the Effective Time, Coast shall merge with and
into Ahmanson (the "Merger"), the separate corporate existence of Coast shall
cease and Ahmanson shall survive and continue to exist as a Delaware corporation
(Ahmanson, as the surviving corporation in the Merger, sometimes being referred
to herein as the "Surviving Corporation"). Ahmanson may at any time prior to the
mailing of the Proxy Statement change the method of effecting the combination
with Coast (including, without limitation, the provisions of this Article II) if
and to the extent it deems such change to be necessary, appropriate or
desirable; provided, however, that no such change shall (i) alter or change the
amount or kind of consideration to be issued to holders of Coast Common Stock as
provided for in this Agreement,
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(ii) adversely affect the tax treatment of Coast's stockholders as a result of
the transactions contemplated hereby or any payments made with respect to CPR
Certificates or (iii) materially impede or delay consummation of the
transactions contemplated by this Agreement.
(b) Subject to the satisfaction or waiver of the conditions set forth in
Article VII, the Merger shall become effective upon the occurrence of the
filing in the office of the Secretary of State of Delaware (the "Delaware
Secretary") of a certificate of merger in accordance with Section 251 of the
DGCL or such later date and time as may be set forth in such certificate.
The Merger shall have the effects prescribed in the DGCL.
(c) Articles of Incorporation and By-Laws. The articles of incorporation
and by-laws of Ahmanson immediately after the Merger shall be those of
Ahmanson as in effect immediately prior to the Effective Time.
(d) Directors and Officers of the Surviving Corporation. Subject to
Section 6.16, the directors and officers of Ahmanson immediately after the
Merger shall be the directors and officers of Ahmanson immediately prior to
the Effective Time, until such time as their successors shall be duly
elected and qualified.
2.02 Effective Date and Effective Time. Subject to the satisfaction or
waiver of the conditions set forth in Article VII, the parties shall cause the
effective date of the Merger (the "Effective Date") to occur on (i) the fifth
business day to occur after the last of the conditions set forth in Section 7.01
shall have been satisfied or waived in accordance with the terms of this
Agreement (or, at the election of Ahmanson, on the last business day of the
month in which such day occurs or, if such last business day occurs on one of
the last five business days of such month, on the last business day of the
succeeding month) or (ii) such other date to which the parties may agree in
writing. The time on the Effective Date when the Merger shall become effective
is referred to as the "Effective Time."
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01 Merger Consideration. Subject to the provisions of this Agreement,
at the Effective Time, and except in the case of the second paragraph of (a)
below, automatically by virtue of the Merger and without any action on the part
of any Person:
(a) Outstanding Coast Common Stock and Coast Rights. Each share
(excluding (i) Treasury Stock and (ii) shares held by holders of Coast
Common Stock (each a "Dissenting Shareholder") who perfect their rights to
dissent under the DGCL (the "Dissenters' Shares")) of Coast Common Stock
issued and outstanding immediately prior to the Effective Time, together
with each associated Coast Right, shall become and be converted into the
right to receive 0.8082 of a share of Ahmanson Common Stock (the "Exchange
Ratio") (with the appropriate number of Ahmanson Rights as provided in the
Ahmanson Rights Agreement, whether or not such Ahmanson Rights shall still
be attached to such shares). The Exchange Ratio shall be subject to
adjustment as set forth in Section 3.05.
Ahmanson shall enter into the Commitment with the CPR Trust at or prior
to the Effective Time and effective at the Effective Time. The shares of
Ahmanson Common Stock to be issued hereunder and the entering into of the
Commitment shall constitute the "Merger Consideration."
(b) Outstanding Ahmanson Stock. Each share of Ahmanson Stock issued and
outstanding immediately prior to the Effective Time shall remain issued and
outstanding and unaffected by the Merger.
(c)Treasury Shares. Each share of Coast Stock held as Treasury Stock
immediately prior to the Effective Time shall be canceled and retired at the
Effective Time and no consideration shall be issued in exchange therefor.
3.02 Rights as Stockholders; Stock Transfers. At the Effective Time,
holders of Coast Common Stock shall cease to be, and shall have no rights as,
stockholders of Coast, other than to receive any dividend or other distribution
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with respect to such Coast Common Stock with a record date occurring prior to
the Effective Time and the consideration provided under this Article III. After
the Effective Time, there shall be no transfers on the stock transfer books of
Coast or the Surviving Corporation of shares of Coast Stock.
3.03 Fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of Ahmanson Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, Ahmanson shall pay to each holder of Coast Common Stock who would
otherwise be entitled to a fractional share of Ahmanson Common Stock (after
taking into account all Old Certificates delivered by such holder) an amount in
cash (without interest) determined by multiplying such fraction by the average
of the last sale prices of Ahmanson Common Stock, as reported by the NYSE
Composite Transactions Reporting System (as reported in The Wall Street Journal
or, if not reported therein, in another authoritative source), for the five NYSE
trading days immediately preceding the Effective Date.
3.04 Exchange Procedures.
(a) At or prior to the Effective Time, Ahmanson shall deposit, or shall
cause to be deposited, with a depository institution of recognized standing
selected by Ahmanson (in such capacity, the "Exchange Agent"), for the
benefit of the holders of certificates formerly representing shares of Coast
Common Stock ("Old Certificates") to be exchanged in accordance with this
Article III, certificates representing the shares of Ahmanson Common Stock
("New Certificates") to which the holders of the Old Certificates are
entitled pursuant to this Agreement, together with an estimated amount of
cash to be paid pursuant to this Article III in exchange for outstanding
shares of Coast Common Stock.
(b) As promptly as practicable after the Effective Date, Ahmanson shall
send or cause to be sent to each former holder of record of shares of Coast
Common Stock immediately prior to the Effective Time transmittal materials
for use in exchanging such stockholder's Old Certificates for the
consideration set forth in this Article III. Ahmanson shall cause the New
Certificates and/or any check in respect of any fractional share interests
or dividends or distributions which such person shall be entitled to receive
to be delivered to such stockholder upon delivery to the Exchange Agent of
Old Certificates representing such shares of Coast Common Stock (or
indemnity reasonably satisfactory to Ahmanson and the Exchange Agent, if any
of such certificates are lost, stolen or destroyed) owned by such
stockholder. No interest will be paid on any such cash to be paid in lieu of
fractional share interests or in respect of dividends or distributions which
any such person shall be entitled to receive pursuant to this Article III
upon such delivery.
(c) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of Coast Common Stock for
any amount properly delivered to a public official pursuant to applicable
abandoned property, escheat or similar laws.
(d) At the election of Ahmanson, no dividends or other distributions
with respect to Ahmanson Common Stock with a record date occurring after the
Effective Time shall be paid to the holder of any unsurrendered Old
Certificate representing shares of Coast Common Stock converted in the
Merger into the right to receive shares of such Ahmanson Common Stock. Upon
surrender of Old Certificates (or indemnity reasonably satisfactory to
Ahmanson and the Exchange Agent, if any of such certificates are lost,
stolen or destroyed) in accordance with this Section 3.04, the record holder
thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Ahmanson Common Stock such holder had the
right to receive upon surrender of Old Certificates (or delivery of such
indemnity).
3.05 Anti-Dilution Provisions. In the event Ahmanson changes (or
establishes a record date for changing) the number or kind of shares of Ahmanson
Common Stock issued and outstanding prior to the Effective Date as a result of a
stock split, stock dividend, recapitalization, reclassification, reorganization
or similar transaction with respect to the outstanding Ahmanson Common Stock and
the record date therefor shall be prior to the Effective Date, the Exchange
Ratio shall be proportionately adjusted in such manner as Coast and Ahmanson
shall agree, which adjustment may
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include, as appropriate, the issuance of securities, property or cash on the
same basis as that on which any of the foregoing shall have been issued,
distributed or paid to the holders of Ahmanson Common Stock generally.
3.06 Options, Performance Shares and Stock Appreciation Rights. (a) At
the Effective Time, each outstanding option to purchase shares of Coast Common
Stock under the Coast Stock Plans (each, a "Coast Stock Option"), whether vested
or unvested, shall be converted into an option (a "Replacement Option") to
acquire, on the same terms and conditions as were applicable under such Coast
Stock Option, (a) the number of shares of Ahmanson Common Stock equal to (i) the
number of shares of Coast Common Stock subject to the Coast Stock Option,
multiplied by (ii) the Exchange Ratio (such product rounded down to the nearest
whole number), at an exercise price per share (rounded up to the nearest whole
cent) equal to (A) the aggregate exercise price for the shares of Coast Common
Stock which were purchasable pursuant to such Coast Stock Option divided by (B)
the number of full shares of Ahmanson Common Stock subject to such Replacement
Option in accordance with the foregoing and (b) one CPR Certificate for each
share of Coast Common Stock that would have been issuable upon exercise in full
of such Coast Stock Option. At or prior to the Effective Time, Coast shall take
all necessary action, if any, including obtaining any necessary consents from
optionees, with respect to the Coast Stock Plans to permit the replacement of
the outstanding Coast Stock Options by Replacement Options pursuant to this
Section and to permit Ahmanson to assume the Coast Stock Plans. At the Effective
Time, Ahmanson shall assume the Coast Stock Plans; provided, that such
assumption shall be only in respect of the Replacement Options and that Ahmanson
shall have no obligation with respect to any awards under the Coast Stock Plans
other than the Replacement Options and shall have no obligation to make any
additional grants or awards under such assumed Coast Stock Plans.
(b) Immediately prior to the Effective Time, each outstanding
performance share award under the Coast Performance Share Award Plan shall
be canceled and only entitle the holder thereof to receive for each share of
Coast Common Stock with respect to such award (i) one CPR Certificate and
(ii) an amount in cash equal to the difference between (A) the result of
multiplying the Exchange Ratio by the average of the last sale prices of one
share of Ahmanson Stock, as reported by the NYSE Composite Transactions
Reporting System (as reported in The Wall Street Journal or, if not reported
therein, in another authoritative source) for the five NYSE trading days
immediately prior to the Effective Date and (B) the base price under such
award. Prior to the Effective Date, Coast shall take all necessary action
with respect to such cancellation, including obtaining any necessary
consents from the holders of such awards.
(c) Immediately prior to the Effective Time, each outstanding stock
appreciation right under the Coast Stock Plans shall be canceled and only
entitle the holder thereof to receive for each share of Coast Stock with
respect to such stock appreciation right (i) one CPR Certificate and (ii) an
amount in cash equal to the difference between (A) the result of multiplying
the Exchange Ratio by the average of the last sale prices of one share of
Ahmanson Stock, as reported by the NYSE Composite Transactions Reporting
System (as reported in The Wall Street Journal or, if not reported therein,
in another authoritative source) for the five NYSE trading days immediately
prior to the Effective Date and (B) the grant price of such stock
appreciation right. Prior to the Effective Date, Coast shall take all
necessary action with respect to such cancellation, including obtaining any
necessary consents from the holders of such stock appreciation rights.
(d) If the necessary consents referred to in paragraphs (b) and (c)
above are not obtained, the holders who do not consent shall only be
entitled to (i) with respect to each outstanding performance share award
under the Coast Performance Share Award Plan an amount in cash equal to the
result of multiplying (A) the difference between the average of the last
sale prices of one share of Coast Stock, as reported by the NYSE Composite
Transactions Reporting System (as reported in The Wall Street Journal or, if
not reported therein, in another authoritative source) for the five NYSE
trading days immediately prior to the Effective Date and the base price
under such award by (B) the total number of shares of Coast Stock with
respect to such award and (ii) with respect to each outstanding stock
appreciation right under the Coast Stock Plans, an amount in cash equal to
the result of multiplying (A) the difference between the average of the last
sale prices of one share of Coast Stock, as reported by the NYSE Composite
Transactions Reporting System (as reported in The Wall Street Journal or, if
not reported therein, in another authoritative source) for the five NYSE
trading days immediately prior to the Effective Date and the grant
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price of such stock appreciation right by (B) the total number of shares of
Coast Stock with respect to such stock appreciation right. All CPR
Certificates with respect to the performance share awards and stock
appreciation rights referred to in this Section shall be issued to Ahmanson.
In the event that between the date hereof and the Effective Date any
performance share awards or stock appreciation rights are exercised,
Ahmanson will be entitled to retain any CPR Certificates that would
otherwise have been issuable with respect to such performance share awards
or stock appreciation rights upon such exercise at the Effective Date.
3.07 Dissenters Rights. Any Dissenting Shareholder who shall be entitled
to be paid the "fair value" of his or her Dissenters' Shares, as provided in
Section 262 of the DGCL, shall not be entitled to the Merger Consideration in
respect thereof provided for under Section 3.01(a) unless and until such
Dissenting Shareholder shall have failed to perfect or shall have withdrawn or
lost such Dissenting Shareholder's right to dissent from the Merger under the
DGCL, and shall be entitled to receive only the payment provided for by Section
262 of the DGCL with respect to such Dissenters' Shares. If any Dissenting
Shareholder shall fail to perfect or shall have been withdrawn or lost such
right to dissent, the Dissenters' Shares held by such Dissenting Shareholder
shall thereupon be treated as though such Dissenters' Shares had been converted
into the right to receive the Merger Consideration pursuant to Section 3.01(a)
hereof.
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01 Forebearances of Coast. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement or as set forth in
paragraph 4.01 of Coast's Disclosure Schedule, without the prior written consent
of Ahmanson, Coast will not, and will cause each of its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of Coast and its Subsidiaries
other than in the ordinary and usual course or fail to use reasonable
efforts to preserve intact their business organizations and assets and
maintain their rights, franchises and existing relations with customers,
suppliers, employees and business associates, or take any action reasonably
likely to have an adverse effect upon Coast's ability to perform any of its
material obligations under this Agreement.
(b) Capital Stock. Other than pursuant to Rights Previously Disclosed
and outstanding on the date hereof, (i) issue, sell or otherwise permit to
become outstanding, or authorize the creation of, any additional shares of
Coast Stock or any Rights, (ii) enter into any agreement with respect to the
foregoing, or (iii) permit any additional shares of Coast Stock to become
subject to new grants of employee or director stock options, other Rights or
similar stock-based employee rights.
(c) Dividends, Etc. (a) Make, declare, pay or set aside for payment any
dividend (other than dividends from wholly owned Subsidiaries to Coast or
another wholly owned Subsidiary of Coast) on or in respect of, or declare or
make any distribution on any shares of Coast Stock or (b) directly or
indirectly adjust, split, combine, redeem, reclassify, purchase or otherwise
acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc. Enter into or amend or
renew any employment, consulting, severance or similar agreements or
arrangements with any director, officer or employee of Coast or its
Subsidiaries, or hire any new employees at the rank of senior vice president
or above, or grant any salary or wage increase or increase any employee
benefit (including incentive or bonus payments), except (i) for normal
individual increases in compensation to employees (other than any senior
vice presidents or any employees ranking senior to senior vice presidents)
in the ordinary course of business consistent with past practice as
Previously Disclosed, (ii) for other changes that are required by applicable
law, (iii) to satisfy Previously Disclosed contractual obligations existing
as of the date hereof, or (iv) for grants of awards to newly hired employees
consistent with past practice as Previously Disclosed, (v) agreements to
provide retention bonuses to employees made pursuant to Section 6.13(b),
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(vi) the annual rollover of executive employment agreements Previously
Disclosed or (vii) agreements to provide bonuses for the 1997 calendar year
consistent with past practice up to an aggregate of $1.9 million.
(e)Benefit Plans. Enter into, establish, adopt or amend (except (i) as
may be required by applicable law, (ii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof or (iii) as otherwise
provided herein) any pension, retirement, stock option, stock purchase,
savings, profit sharing, deferred compensation, consulting, bonus, group
insurance or other employee benefit, incentive or welfare contract, plan or
arrangement, or any trust agreement (or similar arrangement) related
thereto, in respect of any director, officer or employee of Coast or its
Subsidiaries, or take any action to accelerate the vesting or exercisability
of stock options, restricted stock or other compensation or benefits payable
thereunder.
(f) Dispositions. Except as Previously Disclosed, sell, transfer,
mortgage, encumber or otherwise dispose of or discontinue any of its assets,
deposits, business or properties except in the ordinary course of business
and in a transaction that is not material to it and its Subsidiaries taken
as a whole.
(g) Acquisitions. Except as Previously Disclosed, acquire (other than by
way of foreclosures or acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously contracted in good faith, in
each case in the ordinary and usual course of business consistent with past
practice) all or any portion of, the assets, business, deposits or
properties of any other entity except in the ordinary course of business and
in a transaction that is not material to it and its Subsidiaries taken as a
whole.
(h) Governing Documents. Amend the Coast Certificate, Coast By-laws or
the certificate of incorporation or by-laws (or similar governing documents)
of any of Coast's Subsidiaries.
(i) Accounting Methods. Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by generally
accepted accounting principles.
(j) Contracts. (i) Amend, or take any action adverse to Ahmanson with
respect to, the Coast Rights Agreement or (ii), except in the ordinary
course of business consistent with past practice or with the consent of
Ahmanson (which consent shall not be unreasonably withheld or delayed),
enter into or terminate any contract material to its assets, business or
operations or amend or modify in any material respect any such existing
material contract.
(k) Claims. Except in the ordinary course of business consistent with
past practice or with the consent of Ahmanson (which consent shall not be
unreasonably withheld or delayed), settle any claim, action or proceeding
against it, except for any claim, action or proceeding involving solely
money damages in an amount, individually or in the aggregate for all such
settlements, that is not material to Coast and its Subsidiaries, taken as a
whole and that does not create precedent for claims that are reasonably
likely to be material to Coast and its Subsidiaries taken as a whole.
(l) Adverse Actions. (a) Take any action while knowing that such action
would, or is reasonably likely to, prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the
Code; or (b) take any action that is intended or is known to be reasonably
likely to result in (i) any of its representations and warranties set forth
in this Agreement being or becoming untrue in any material respect at any
time at or prior to the Effective Time, (ii) any of the conditions to the
Merger set forth in Article VII not being satisfied or (iii) a material
violation of any provision of this Agreement except, in each case, as may be
required by applicable law or regulation.
(m) Risk Management. Except as required by applicable law or regulation
or with the consent of Ahmanson (which consent shall not be unreasonably
withheld or delayed), (i) implement or adopt any material change in its
interest rate and other risk management policies, procedures or practices or
(ii) fail to follow in all material respects its existing policies or
practices with respect to managing its exposure to interest rate and other
risk.
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(n) Indebtedness. Incur any indebtedness for borrowed money other than
in the ordinary course of business.
(o) Commitments. Agree or commit to do any of the foregoing.
4.02 Forebearances of Ahmanson. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement, without the prior
written consent of Coast, Ahmanson will not:
(a) Dividends. Make, declare, pay or set aside for payment any dividends
other than quarterly dividends in an amount, and with record and payment
dates, consistent with past practice (provided that Ahmanson may raise its
regular quarterly dividend rate by an amount not exceeding 20%).
(b) Adverse Actions. (a) Take any action while knowing that such action
would, or is reasonably likely to, prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section 368 of the
Code; (b) repurchase any Ahmanson Stock such that an Ahmanson stockholder
vote would be required for consummation of the Merger or which would have
the effect of a recapitalization of Ahmanson or at prices reflecting a
significant premium to the prices at which the Ahmanson Common Stock is then
trading; (c) take any action that is intended or is known to be reasonably
likely to result in (i) any of its representations and warranties set forth
in this Agreement being or becoming untrue in any material respect at any
time at or prior to the Effective Time, (ii) any of the conditions to the
Merger set forth in Article VII not being satisfied or (iii) a material
violation of any provision of this Agreement except, in each case, as may be
required by applicable law or regulation; or
(c) Commitments. Agree or commit to do any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Schedules. On or prior to the date hereof, Coast has
delivered to Ahmanson a schedule (its "Disclosure Schedule") setting forth,
among other things, items the disclosure of which is necessary or appropriate
either in response to an express disclosure requirement contained in a provision
hereof or as an exception to one or more representations or warranties contained
in Section 5.03 or to one or more of its covenants contained in Article IV;
provided, that the mere inclusion of an item in a Disclosure Schedule as an
exception to a representation or warranty shall not be deemed an admission by
Coast that such item represents a material exception or fact, event or
circumstance or that such item is reasonably likely to result in a Material
Adverse Effect. Coast represents and warrants that its Disclosure Schedule is
true and correct in all material respects and does not omit any item or
information material to the applicable paragraph in Section 5.03 and required to
be disclosed therein.
5.02 Standard. No representation or warranty of Coast or Ahmanson
contained in Section 5.03 or 5.04, shall be deemed untrue or incorrect, and no
party hereto shall be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance unless such
fact, circumstance or event, individually or taken together with all other
facts, events or circumstances inconsistent with any representation or warranty
contained in Section 5.03 or 5.04 has had or is reasonably likely to have a
Material Adverse Effect on the party making such representation or warranty.
5.03 Representations and Warranties of Coast. Subject to Sections 5.01
and 5.02 and except as Previously Disclosed in the applicable paragraph of its
Disclosure Schedule, or any other paragraph of the Disclosure Schedule so long
as it is clear from the context of the disclosure that the disclosure in such
other paragraph of the Disclosure Schedule is also applicable to the paragraph
of this Section 5.03 in question, Coast hereby represents and warrants to
Ahmanson:
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(a) Organization, Standing and Authority. Coast is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Coast is duly qualified to do business and is in good standing
in the states of the United States and any foreign jurisdictions where its
ownership or leasing of property or assets or the conduct of its business
requires it to be so qualified. Coast is duly registered as a savings and
loan holding company under HOLA. Coast Federal is a qualified thrift lender
pursuant to Section 10(m) of HOLA and its deposits are insured by the FDIC
through the SAIF to the fullest extent permitted by law. Coast Federal is a
member in good standing of the FHLBSF.
(b) Coast Stock. As of the date hereof, the authorized capital stock of
Coast consists solely of (i) 100,000,000 shares of Coast Common Stock, of
which no more than 18,645,327 shares are outstanding as of the date hereof
and (ii) 50,000,000 shares of Coast Preferred Stock, of which no shares are
outstanding as of the date hereof. As of the date hereof, no shares of Coast
Common Stock and no shares of Coast Preferred Stock were held in treasury by
Coast or otherwise owned by Coast or its Subsidiaries. The outstanding
shares of Coast Common Stock have been duly authorized and are validly
issued and outstanding, fully paid and nonassessable, and subject to no
preemptive rights (and were not issued in violation of any preemptive
rights). As of the date hereof, except as Previously Disclosed, there are no
shares of Coast Stock authorized and reserved for issuance, Coast does not
have any Rights issued or outstanding with respect to Coast Stock, and Coast
does not have any commitment to authorize, issue or sell any Coast Stock or
Rights. The number of shares of Coast Common Stock which are issuable and
reserved for issuance upon exercise of Coast Stock Options as of the date
hereof (and the exercise price thereof) are Previously Disclosed in Coast's
Disclosure Schedule.
(c) Subsidiaries. (i)(A) Coast has Previously Disclosed in its
Disclosure Schedule a list of all of its Subsidiaries together with the
jurisdiction of organization of each such Subsidiary, (B) except as
Previously Disclosed, it owns, directly or indirectly, all the issued and
outstanding equity securities of each of its Subsidiaries, (C) no equity
securities of any of its Subsidiaries are or may become required to be
issued (other than to it or its wholly-owned Subsidiaries) by reason of any
Right or otherwise, (D) there are no contracts, commitments, understandings
or arrangements by which any of such Subsidiaries is or may be bound to sell
or otherwise transfer any equity securities of any such Subsidiaries (other
than to it or its wholly-owned Subsidiaries), (E) there are no contracts,
commitments, understandings, or arrangements relating to its rights to vote
or to dispose of such securities and (F) all the equity securities of each
Subsidiary held by Coast or its Subsidiaries are fully paid and
nonassessable and are owned by Coast or its Subsidiaries free and clear of
any Liens.
(ii) Coast does not own beneficially, directly or indirectly, any
equity securities or similar interests of any Person (other than in a
fiduciary capacity or in connection with the foreclosure of security
interests or as a result of similar enforcement remedies in connection with
loans made in the ordinary course of business), or any interest in a
partnership or joint venture of any kind, other than in its Subsidiaries.
(iii) Each of Coast's Subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good standing in
the jurisdictions where its ownership or leasing of property or the conduct
of its business requires it to be so qualified.
(d) Corporate Power. Coast and each of its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and Coast has the
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
(e) Corporate Authority. Subject in the case of this Agreement to
receipt of the requisite approval of the agreement of merger set forth in
this Agreement by the holders of a majority of the outstanding shares of
Coast Common Stock entitled to vote thereon (which is the only stockholder
vote required thereon), this Agreement and the transactions contemplated
hereby have been authorized by all necessary corporate action of Coast and
the Coast Board on or prior to the date hereof. This Agreement is a valid
and legally binding obligation of Coast, enforceable
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in accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles). The Coast Board has
received the written opinion of Goldman, Sachs & Co. to the effect that as
of the date hereof the consideration to be received by the holders of Coast
Common Stock in the Merger is fair to the holders of Coast Common Stock from
a financial point of view.
(f) Regulatory Approvals; No Defaults. (i) No consents or approvals of,
or filings or registrations with, any Governmental Authority or with any
third party are required to be made or obtained by Coast or any of its
Subsidiaries in connection with the execution, delivery or performance by
Coast of this Agreement or to consummate the Merger except for (A) filings
and approvals of applications with and by the OTS, (B) filings with the SEC
and state securities authorities and the approval of this Agreement by the
stockholders of Coast, and (C) the filing of a certificate of merger with
the Delaware Secretary pursuant to the DGCL. As of the date hereof, Coast is
not aware of any reason why the approvals set forth in Section 7.01(b) will
not be received without the imposition of a condition, restriction or
requirement of the type described in Section 7.01(b).
(ii) Subject to receipt of the regulatory approvals referred to in
the preceding paragraph, and expiration of related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A) constitute a breach
or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies or any right of termination under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license,
or agreement, indenture or instrument of Coast or of any of its Subsidiaries
or to which Coast or any of its Subsidiaries or properties is subject or
bound, (B) constitute a breach or violation of, or a default under, the
Coast Certificate or the Coast By-Laws, or (C) require any consent or
approval under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, agreement, indenture or instrument.
(g) Financial Reports and Regulatory Documents. (i) Coast's Annual
Reports on Form 10-K for the fiscal years ended December 31, 1994, 1995 and
1996, and all other reports, registration statements, definitive proxy
statements or information statements filed or to be filed by it or any of
its Subsidiaries subsequent to December 31, 1994 under the Securities Act,
under Section 13(a), 13(c), 14 or 15(d) of the Exchange Act or under the
securities regulations of the OTS, in the form filed or to be filed
(collectively, Coast's "Regulatory Documents") with the SEC or the OTS, as
applicable, as of the date filed, (A) complied or will comply in all
material respects as to form with the applicable requirements under the
Securities Act, the Exchange Act or the securities regulations of the OTS,
as the case may be, and (B) did not and will not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and each of
the consolidated balance sheets contained in or incorporated by reference
into any such Regulatory Document (including the related notes and schedules
thereto) fairly presents, or will fairly present, the consolidated financial
position of Coast and its Subsidiaries as of its date, and each of the
consolidated statements of income and changes in stockholders' equity and
cash flows or equivalent statements in such Regulatory Documents (including
any related notes and schedules thereto) fairly presents, or will fairly
present, the consolidated results of operations, changes in stockholders'
equity and changes in cash flows, as the case may be, of Coast and its
Subsidiaries for the periods to which they relate, in each case in
accordance with generally accepted accounting principles consistently
applied during the periods involved, except in each case as may be noted
therein, subject to normal year-end audit adjustments and the lack of
complete footnote disclosure in the case of unaudited statements.
(ii) Except as Previously Disclosed in its Disclosure Schedule,
since December 31, 1996, Coast and its Subsidiaries have not incurred any
liability other than in the ordinary course of business consistent with past
practice (other than liabilities (A) with respect to expenses related to
this Agreement and the transactions contemplated hereby and (B) with respect
to other possible merger transactions all of which have been expensed or
reserved for).
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(iii) Since December 31, 1996, (A) Coast and its Subsidiaries have
conducted their respective businesses in the ordinary and usual course
consistent with past practice (excluding the incurrence of expenses related
to this Agreement and the transactions contemplated hereby and other
possible merger transactions) and (B) no event has occurred or circumstance
arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of Section 5.03 or
otherwise), is reasonably likely to have a Material Adverse Effect with
respect to Coast.
(h) Litigation. No litigation, claim or other proceeding before any
court or governmental agency is pending against Coast or any of its
Subsidiaries and, to Coast's knowledge, no such litigation, claim or other
proceeding has been threatened.
(i) Regulatory Matters. (i) Neither Coast nor any of its Subsidiaries or
properties is a party to or is subject to any order, decree, agreement,
memorandum of understanding or similar arrangement with, or a commitment
letter or similar submission to, or extraordinary supervisory letter from,
any federal or state governmental agency or authority charged with the
supervision or regulation of financial institutions or issuers of securities
or engaged in the insurance of deposits (including, without limitation, the
OTS and the FDIC) or the supervision or regulation of it or any of its
Subsidiaries (collectively, the "Regulatory Authorities").
(ii) Neither Coast nor any of its Subsidiaries has been advised by
any Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(j) Compliance with Laws. Coast and each of its Subsidiaries:
(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto or to the employees conducting such businesses,
including, without limitation, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure
Act and all other applicable fair lending laws and other laws relating to
discriminatory business practices;
(ii) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to own or
lease their properties and to conduct their businesses substantially as
presently conducted; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect; and, to Coast's
knowledge, no suspension or cancellation of any of them is threatened; and
(iii) has received, since December 31, 1996, no notification or
communication from any Governmental Authority (A) asserting that Coast or
any of its Subsidiaries is not in compliance with any of the statutes,
regulations, or ordinances which such Governmental Authority enforces or (B)
threatening to revoke any license, franchise, permit, or governmental
authorization (nor, to Coast's knowledge, do any grounds for any of the
foregoing exist).
(k) Material Contracts; Defaults. Except for those agreements and other
documents filed as exhibits to its Regulatory Documents, neither Coast nor
any of its Subsidiaries is a party to, bound by or subject to any agreement,
contract, arrangement, commitment or understanding (whether written or oral)
(i) that is a "material contract" within the meaning of Item 601(b)(10) of
the SEC's Regulation S-K or (ii) that materially restricts the conduct of
business by it or any of its Subsidiaries. Neither Coast nor any of its
Subsidiaries is in default in any material respect under any material
contract, agreement, commitment, arrangement, lease, insurance policy or
other instrument to which it is a party, by which its respective assets,
business, or operations may be bound or affected, or under which it or its
respective assets, business, or operations receives benefits, or under any
other contract if such default could
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reasonably be expected to have a Material Adverse Effect on Coast, and in
either case there has not occurred any event that, with the lapse of time or
the giving of notice or both, would constitute such a default.
(l) No Brokers. No action has been taken by Coast that would give rise
to any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment with respect to the transactions
contemplated by this Agreement, excluding a Previously Disclosed fee to be
paid to Goldman, Sachs & Co.
(m) Employee Benefit Plans. (i) Section 5.03(m)(i) of Coast's Disclosure
Schedule contains a complete and accurate list of all existing bonus,
incentive, deferred compensation, pension, retirement, profit-sharing,
thrift, savings, employee stock ownership, stock bonus, stock purchase,
restricted stock, stock option, severance, welfare and fringe benefit plans,
employment or severance agreements and all similar practices, policies and
arrangements in which any employee or former employee (the "Employees"),
consultant or former consultant (the "Consultants") or director or former
director (the "Directors") of Coast or any of its Subsidiaries participates
or to which any such Employees, Consultants or Directors are a party (the
"Compensation and Benefit Plans"). Neither Coast nor any of its Subsidiaries
has any commitment to create any additional Compensation and Benefit Plan or
to modify or change any existing Compensation and Benefit Plan.
(ii) Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and with
applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act,
or any regulations or rules promulgated thereunder, and all filings,
disclosures and notices required by ERISA, the Code, the Securities Act, the
Exchange Act, the Age Discrimination in Employment Act and any other
applicable law have been timely made. Each Compensation and Benefit Plan
which is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA (a "Pension Plan") and which is intended to be qualified under
Section 401(a) of the Code has received a favorable determination letter
(including a determination that the related trust under such Compensation
and Benefit Plan is exempt from tax under Section 501(a) of the Code) from
the Internal Revenue Service ("IRS") for "TRA" (as defined in Rev. Proc.
93-39), or will file for such determination letter prior to the expiration
of the remedial amendment period for such Compensation and Benefit Plan, and
Coast is not aware of any circumstances likely to result in revocation of
any such favorable determination letter. There is no material pending or, to
the knowledge of Coast, threatened legal action, suit or claim relating to
the Compensation and Benefit Plans. Neither Coast nor any of its
Subsidiaries has engaged in a transaction, or omitted to take any action,
with respect to any Compensation and Benefit Plan that would reasonably be
expected to subject Coast or any of its Subsidiaries to a tax or penalty
imposed by either Section 4975 of the Code or Section 502 of ERISA, assuming
for purposes of Section 4975 of the Code that the taxable period of any such
transaction expired as of the date hereof.
(iii) No liability (other than for payment of premiums to the PBGC
which have been made or will be made on a timely basis) under Title IV of
ERISA has been or is expected to be incurred by Coast or any of its
Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or any single-employer plan
of any entity (an "ERISA Affiliate") which is considered one employer with
Coast under Section 4001(a)(14) of ERISA or Section 414(b) or (c) of the
Code (an "ERISA Affiliate Plan"). None of Coast, any of its Subsidiaries or
any ERISA Affiliate has contributed, or has been obligated to contribute, to
a multiemployer plan under Subtitle E of Title IV of ERISA during the
preceding five calendar years. No notice of a "reportable event", within the
meaning of Section 4043 of ERISA for which the 30-day reporting requirement
has not been waived, has been required to be filed for any Compensation and
Benefit Plan or by any ERISA Affiliate Plan within the 12-month period
ending on the date hereof, and no such notice will be required to be filed
as a result of the transactions contemplated by this Agreement. The PBGC has
not instituted proceedings to terminate any Pension Plan or ERISA Affiliate
Plan and, to Coast's knowledge, no condition exists that presents a material
risk that such proceedings will be instituted. To the knowledge of Coast,
there is no pending investigation or enforcement action by the PBGC, the
Department of Labor or IRS or any other governmental agency with respect to
any Compensation and Benefit Plan. Under each Pension Plan and ERISA
Affiliate Plan, as of the date of the most recent actuarial valuation
performed prior to the date of this Agreement, the actuarially determined
present value of all "benefit liabilities", within the meaning of
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Section 4001(a)(16) of ERISA (as determined on the basis of the actuarial
assumptions contained in such actuarial valuation of such Pension Plan or
ERISA Affiliate Plan), did not exceed the then current value of the assets
of such Pension Plan or ERISA Affiliate Plan and since such date there has
been neither an adverse change in the financial condition of such Pension
Plan or ERISA Affiliate Plan nor any amendment or other change to such
Pension Plan or ERISA Affiliate Plan that would increase the amount of
benefits thereunder which in either case reasonably could be expected to
change such result.
(iv) All contributions required to be made under the terms of any
Compensation and Benefit Plan or ERISA Affiliate Plan or any employee
benefit arrangements under any collective bargaining agreement to which
Coast or any of its Subsidiaries is a party have been timely made or have
been reflected on Coast's financial statements to the extent required by
generally accepted accounting principles. Neither any Pension Plan nor any
ERISA Affiliate Plan has an "accumulated funding deficiency" (whether or not
waived) within the meaning of Section 412 of the Code or Section 302 of
ERISA and all required payments to the PBGC with respect to each Pension
Plan or ERISA Affiliate Plan have been made on or before their due dates.
None of Coast, any of its Subsidiaries or any ERISA Affiliate (x) has
provided, or would reasonably be expected to be required to provide,
security to any Pension Plan or to any ERISA Affiliate Plan pursuant to
Section 401(a)(29) of the Code, and (y) has taken any action, or omitted to
take any action, that has resulted, or would reasonably be expected to
result, in the imposition of a lien under Section 412(n) of the Code or
pursuant to ERISA.
(v) Neither Coast nor any of its Subsidiaries has any obligations to
provide retiree health and life insurance or other retiree death benefits
under any Compensation and Benefit Plan, other than benefits mandated by
Section 4980B of the Code, and each such Compensation and Benefit Plan may
be amended or terminated without incurring liability thereunder. There has
been no communication to Employees by Coast or any of its Subsidiaries that
would reasonably be expected to promise or guarantee such Employees retiree
health or life insurance or other retiree death benefits on a permanent
basis.
(vi) Coast and its Subsidiaries do not maintain any Compensation and
Benefit Plans covering foreign Employees.
(vii) With respect to each Compensation and Benefit Plan, if
applicable, Coast has provided or made available to Ahmanson, true and
complete copies of its existing (A) Compensation and Benefit Plan documents
and amendments thereto and (B) trust instruments and insurance contracts.
(viii)The consummation of the transactions contemplated by this
Agreement would not, directly or indirectly (including, without limitation,
as a result of any termination of employment prior to or following the
Effective Time) reasonably be expected to (A) entitle any Employee,
Consultant or Director to any payment (including severance pay or similar
compensation) or any increase in compensation, (B) result in the vesting or
acceleration of any benefits under any Compensation and Benefit Plan or (C)
result in any material increase in benefits payable under any Compensation
and Benefit Plan.
(ix) Neither Coast nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments under which would
not reasonably be expected to be deductible as a result of the limitations
under Section 162(m) of the Code and the regulations issued thereunder.
(x) As a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without limitation, as a result
of any termination of employment prior to or following the Effective Time),
none of Ahmanson, Coast or the Surviving Corporation, or any of their
respective Subsidiaries will be obligated to make a payment that would be
characterized as an "excess parachute payment" to an employee or consultant
of Coast who is a "disqualified individual" (as such terms are defined in
Section 280G of the Code), without regard to whether such payment is
reasonable compensation for personal services performed or to be performed
in the future.
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(n) Labor Matters. Neither Coast nor any of its Subsidiaries is a party
to or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
Coast or any of its Subsidiaries the subject of a proceeding asserting that
it or any such Subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel Coast or
any such Subsidiary to bargain with any labor organization as to wages or
conditions of employment, nor is there any strike or other labor dispute
involving it or any of its Subsidiaries pending or, to Coast's knowledge,
threatened, nor is Coast aware of any activity involving its or any of its
Subsidiaries' employees seeking to certify a collective bargaining unit or
engaging in other organizational activity.
(o) Takeover Laws; Dissenters Rights. Coast has taken all action
required to be taken by it in order to exempt this Agreement, and the
transactions contemplated hereby from, and this Agreement and the
transactions contemplated hereby are exempt from, the requirements of any
"moratorium", "control share", "fair price", "affiliate transaction",
"business combination" or other antitakeover laws and regulations of any
state (collectively, "Takeover Laws"), including, without limitation, the
State of Delaware, and including, without limitation, Section 203 of the
DGCL.
(p) Environmental Matters. To the best knowledge of Coast, neither the
conduct nor operation of Coast or its Subsidiaries nor any condition of any
property presently or previously owned, leased or operated by any of them
(including, without limitation, in a fiduciary or agency capacity), or on
which any of them holds a Lien, violates or violated Environmental Laws and
no condition has existed or event has occurred with respect to any of them
or any such property that, with notice or the passage of time, or both, is
reasonably likely to result in liability under Environmental Laws. Neither
Coast nor any of its Subsidiaries has received any notice from any person or
entity that Coast or its Subsidiaries or the operation or condition of any
property ever owned, leased, operated, or held as collateral or in a
fiduciary capacity by any of them are or were in violation of or otherwise
are alleged to have liability under any Environmental Law, including, but
not limited to, responsibility (or potential responsibility) for the cleanup
or other remediation of any pollutants, contaminants, or hazardous or toxic
wastes, substances or materials at, on, beneath, or originating from any
such property.
(q) Tax Matters. (i)(A) All federal, state, local and foreign Tax
Returns (including information returns) required to be filed by or on behalf
of Coast or its Subsidiaries have been prepared in good faith and duly and
timely filed, and all such filed Tax Returns are complete and accurate in
all material respects. (B) Coast and each of its Subsidiaries have paid in
full all Taxes due (including interest and penalties) or have provided
adequate reserves for any such Taxes in the financial statements of Coast in
accordance with generally accepted accounting principles, whether or not
shown as being due on any of the Tax Returns referred to in clause (i)(A).
(C) Neither Coast nor any of its Subsidiaries has received any memorandum or
opinion from legal counsel that was sought in order to satisfy the
reasonable cause exception (set forth in Section 6664(c) of the Code)
applicable to the penalties for certain underpayments of Taxes set forth in
Sections 6662 through 6664 of the Code. (D) There is no pending or
threatened audit, examination, assessment or proposed assessment of a
deficiency, or refund litigation with respect to any Taxes of Coast or its
Subsidiaries. (E) All Taxes, interest, additions and penalties due with
respect to completed and settled examinations or concluded litigation
relating to Taxes of Coast or its Subsidiaries have been paid in full or
adequate provision has been made for any such Taxes (in accordance with
generally accepted accounting principles) on the financial statements of
Coast. (F) Neither Coast nor its Subsidiaries has executed an extension or
waiver of any statute of limitations on the assessment or collection of any
Tax due that is currently in effect. (G) No power of attorney has been
granted by or with respect to Coast or any of its Subsidiaries with respect
to any matter relating to Taxes. (H) Neither Coast nor any of its
Subsidiaries has made or will make a material election as to Taxes during
the period from January 1, 1997 through the Effective Time, other than
elections made on tax returns filed for the year ended on December 31, 1996.
(ii)(A) No liens or other security interests have been imposed on any
assets of Coast or its Subsidiaries in connection with any failure (or
alleged failure) to pay any Tax. (B) Coast and its Subsidiaries have timely
withheld, and paid over to the relevant governmental authority or other
appropriate payee, all Taxes required to have been withheld and paid in
connection with amounts paid or owing to any employee, independent
contractor, creditor,
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stockholder, or other person. (C) Neither Coast nor any of its Subsidiaries
is a party to any tax allocation or sharing agreement under which it has
obligations to a party other than Coast or its Subsidiaries, is or has been
a member of an affiliated group filing consolidated or combined tax returns
(other than a group the common parent of which is or was Coast) or otherwise
has any liability for the Taxes of any person (other than Coast or its
Subsidiaries). (D) Neither Coast nor any of its Subsidiaries has any
deferred intercompany gain or loss arising as a result of a deferred
intercompany transaction within the meaning of Treasury Regulation Section
1.1502-13 (or similar provision under state, local or foreign law) or any
excess loss accounts within the meaning of Treasury Regulation Section
1.1502-19. (E) Coast is not and has not been a United States real property
holding corporation (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(ii) of the Code.
(iii) As of the date hereof, neither Coast nor any of its Subsidiaries
has any reason to believe that any conditions exist that might prevent or
impede the Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code, or otherwise prevent the conditions in Section 7.02
from being met.
(r) Risk Management Instruments. All interest rate swaps, caps, floors,
option agreements, futures and forward contracts and other similar risk
management arrangements, whether entered into for Coast's own account, or
for the account of one or more of Coast's Subsidiaries or their customers
(all of which are listed on Coast's Disclosure Schedule), were entered into
in accordance with all applicable laws, rules, regulations and regulatory
policies and with counterparties believed to be financially responsible at
the time; each of them constitutes the valid and legally binding obligation
of Coast or one of its Subsidiaries, enforceable in accordance with its
terms (except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws
of general applicability relating to or affecting creditors' rights or by
general equity principles), and are in full force and effect. Neither Coast
nor its Subsidiaries, nor to Coast's knowledge, any other party thereto, is
in breach of any of its obligations under any such agreement or arrangement.
(s) Books and Records. The books and records of Coast and its
Subsidiaries have been fully, properly and accurately maintained in all
material respects, and there are no material inaccuracies or discrepancies
of any kind contained or reflected therein, and they fairly present the
financial position of Coast and its Subsidiaries.
(t) Insurance. Coast's Disclosure Schedule sets forth all of the
insurance policies, binders, or bonds maintained by Coast or its
Subsidiaries ("Insurance Policies"). Coast and its Subsidiaries are insured
with reputable insurers against such risks and in such amounts as the
management of Coast reasonably has determined to be prudent in accordance
with industry practices. All the Insurance Policies are in full force and
effect; Coast and its Subsidiaries are not in material default thereunder;
and all claims thereunder have been filed in due and timely fashion.
(u) Disclosure. The representations and warranties contained in this
Section 5.03 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 5.03 not misleading.
5.04 Representations and Warranties of Ahmanson. Subject to Section
5.02, Ahmanson hereby represents and warrants to Coast as follows:
(a) Organization, Standing and Authority. Ahmanson is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware. Ahmanson is duly qualified to do business and is in good
standing in the states of the United States and foreign jurisdictions where
its ownership or leasing of property or assets or the conduct of its
business requires it to be so qualified. Ahmanson has in effect all federal,
state, local, and foreign governmental authorizations necessary for it to
own or lease its properties and assets and to carry on its business as it is
now conducted. Ahmanson is duly registered as a savings and loan holding
company under HOLA.
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(b) Ahmanson Stock. (i) As of the date hereof, the authorized capital
stock of Ahmanson consists solely of 220,000,000 shares of Ahmanson Common
Stock, of which no more than 94,441,674 shares were outstanding as of the
date hereof, and 10,000,000 shares of Ahmanson Preferred Stock, of which no
more than 780,000 shares of 8.40% Series C preferred stock and 575,000
shares of 6% Cumulative Convertible Series D preferred stock were
outstanding as of the date hereof. As of the date hereof, except for Rights
issued pursuant to the Ahmanson Rights Agreement, Ahmanson's 1996
Nonemployee Directors' Stock Incentive Plan, Ahmanson's 1993 Stock Incentive
Plan, Ahmanson's 1988 Directors' Stock Incentive Plan and Ahmanson's 1984
Stock Incentive Plan or upon conversion of Ahmanson's 6% Cumulative
Convertible Series D preferred stock, Ahmanson does not have any Rights
issued or outstanding with respect to Ahmanson Stock and Ahmanson does not
have any commitment to authorize, issue or sell any Ahmanson Stock or
Rights, except pursuant to this Agreement.
(ii) The shares of Ahmanson Common Stock to be issued in exchange for
shares of Coast Common Stock in the Merger, when issued in accordance with
the terms of this Agreement, will be duly authorized, validly issued, fully
paid and nonassessable and not subject to pre-emptive rights.
(c) Subsidiaries. Each of Ahmanson's Significant Subsidiaries has been
duly organized and is validly existing in good standing under the laws of
the jurisdiction of its organization, and is duly qualified to do business
and in good standing in the jurisdictions where its ownership or leasing of
property or the conduct of its business requires it to be so qualified and
it owns, directly or indirectly, all the issued and outstanding equity
securities of each of its Significant Subsidiaries.
(d) Corporate Power. Ahmanson and each of its Significant Subsidiaries
has the corporate power and authority to carry on its business as it is now
being conducted and to own all its properties and assets; and Ahmanson has
the corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
(e) Corporate Authority. (i) This Agreement and the transactions
contemplated hereby have been authorized by all necessary corporate action
of Ahmanson and the Ahmanson Board. This Agreement is a valid and legally
binding agreement of Ahmanson enforceable in accordance with its terms
(except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and similar laws
of general applicability relating to or affecting creditors' rights or by
general equity principles). No Ahmanson stockholder approval is required for
this Agreement and the transactions contemplated hereby under the DGCL,
Ahmanson's certificate of incorporation or Ahmanson's by-laws or the rules
of the NYSE.
(ii) The entering into of the Commitment has been authorized by all
necessary corporate action of Ahmanson. The entering into of the Commitment
will not (A) constitute a breach or violation of, or a default under, or
give rise to any Lien, any acceleration of remedies or any right of
termination under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or instrument
of Ahmanson or of any of its Subsidiaries or to which Ahmanson or any of its
Subsidiaries or properties is subject or bound, (B) constitute a breach or
violation of, or a default under, the certificate of incorporation or
by-laws of Ahmanson, or (C) require any consent or approval under any such
law, rule, regulation, judgment, decree, order, governmental permit or
license, agreement, indenture or instrument.
(f) Regulatory Approvals; No Defaults. (i) No consents or approvals of,
or filings or registrations with, any Governmental Authority or with any
third party are required to be made or obtained by Ahmanson or any of its
Subsidiaries in connection with the execution, delivery or performance by
Ahmanson of this Agreement or to consummate the Merger except for (A) the
filings and approvals of applications with and by the OTS; (B) approval of
the listing on the NYSE of Ahmanson Common Stock to be issued in the Merger;
(C) the filing and declaration of effectiveness of the Ahmanson Registration
Statement; (D) the filing of a certificate of merger with the Delaware
Secretary pursuant to the DGCL; and (E) such filings as are required to be
made or approvals as are required to be obtained under the securities or
"Blue Sky" laws of various states in connection with the issuance of
Ahmanson Stock in the Merger. As of the date hereof, Ahmanson is not aware
of any reason why the approvals set forth in
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Section 7.01(b) will not be received without the imposition of a condition,
restriction or requirement of the type described in Section 7.01(b).
(ii) Subject to receipt of the regulatory approvals referred to in
the preceding paragraph and expiration of the related waiting periods, and
required filings under federal and state securities laws, the execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A) constitute a breach
or violation of, or a default under, or give rise to any Lien, any
acceleration of remedies or any right of termination under, any law, rule or
regulation or any judgment, decree, order, governmental permit or license,
or agreement, indenture or instrument of Ahmanson or of any of its
Subsidiaries or to which Ahmanson or any of its Subsidiaries or properties
is subject or bound, (B) constitute a breach or violation of, or a default
under, the certificate of incorporation or by-laws (or similar governing
documents) of Ahmanson or any of its Subsidiaries, or (C) require any
consent or approval under any such law, rule, regulation, judgment, decree,
order, governmental permit or license, agreement, indenture or instrument.
(g) Financial Reports and Regulatory Documents; Material Adverse Effect.
(i) Ahmanson's Regulatory Documents, as of the date filed, (A) complied or
will comply in all material respects as to form with the applicable
requirements under the Securities Act or the Exchange Act, as the case may
be, and (B) did not and will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading; and each of the balance sheets
contained in or incorporated by reference into any such Regulatory Document
(including the related notes and schedules thereto) fairly presents, or will
fairly present, the financial position of Ahmanson and its Subsidiaries as
of its date, and each of the statements of income and changes in
stockholders' equity and cash flows or equivalent statements in such
Regulatory Documents (including any related notes and schedules thereto)
fairly presents, or will fairly present, the results of operations, changes
in stockholders' equity and changes in cash flows, as the case may be, of
Ahmanson and its Subsidiaries for the periods to which they relate, in each
case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except in each case as may
be noted therein, subject to normal year-end audit adjustments and the lack
of complete footnote disclosure in the case of unaudited statements.
(ii) Since December 31, 1996, no event has occurred or circumstance
arisen that, individually or taken together with all other facts,
circumstances and events (described in any paragraph of Section 5.04 or
otherwise), is reasonably likely to have a Material Adverse Effect with
respect to it.
(h) Litigation; Regulatory Action. (i) Other than as set forth in its
Regulatory Documents filed on or before the date hereof, no litigation,
claim or other proceeding before any Governmental Authority is pending
against Ahmanson or any of its Subsidiaries and, to the best of Ahmanson's
knowledge, no such litigation, claim or other proceeding has been
threatened.
(ii) Neither Ahmanson nor any of its Subsidiaries or properties is a
party to or is subject to any order, decree, agreement, memorandum of
understanding or similar arrangement with, or a commitment letter or similar
submission to, or extraordinary supervisory letter from a Regulatory
Authority, nor has Ahmanson or any of its Subsidiaries been advised by a
Regulatory Authority that such agency is contemplating issuing or requesting
(or is considering the appropriateness of issuing or requesting) any such
order, decree, agreement, memorandum of understanding, commitment letter,
supervisory letter or similar submission.
(i) Compliance with Laws. Ahmanson and each of its Subsidiaries:
(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto or to the employees conducting such businesses,
including, without limitation, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure
Act and all other applicable fair lending laws and other laws relating to
discriminatory business practices;
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(ii) has all permits, licenses, authorizations, orders and approvals
of, and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to
conduct their businesses substantially as presently conducted; all such
permits, licenses, certificates of authority, orders and approvals are in
full force and effect and, to the best of its knowledge, no suspension or
cancellation of any of them is threatened; and
(iii) has received, since December 31, 1996, no notification or
communication from any Governmental Authority (A) asserting that Ahmanson or
any of its Subsidiaries is not in compliance with any of the statues,
regulations, or ordinances which such Governmental Authority enforces or (B)
threatening to revoke any license, franchise, permit, or governmental
authorization (nor, to Ahmanson's knowledge, do any grounds for any of the
foregoing exist).
(j) No Brokers. No action has been taken by Ahmanson that would give
rise to any valid claim against any party hereto for a brokerage commission,
finder's fee or other like payment with respect to the transactions
contemplated by this Agreement, excluding a fee to be paid to Merrill Lynch,
Pierce, Fenner & Smith Incorporated.
(k) Tax Matters. As of the date hereof, neither Ahmanson nor any of its
Subsidiaries has any reason to believe that any conditions exist that might
prevent or impede the Merger from qualifying as a reorganization within the
meaning of Section 368 of the Code, or otherwise prevent the conditions in
Section 7.03 from being met.
(l) Disclosure. The representations and warranties contained in this
Section 5.04 do not contain any untrue statement of a material fact or omit
to state any material fact necessary in order to make the statements and
information contained in this Section 5.04 not misleading.
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, each of Coast and Ahmanson agrees to use its reasonable best
efforts in good faith to take, or cause to be taken, all actions, and to do, or
cause to be done, all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Merger as promptly as
practicable and otherwise to enable consummation of the transactions
contemplated hereby and shall cooperate fully with the other party hereto to
that end.
6.02 Stockholder Approval. Coast agrees to take in accordance with
applicable law and its certificate of incorporation and by-laws all action
necessary to convene a meeting of its stockholders to consider and vote upon the
approval and adoption of this Agreement and the transactions contemplated hereby
(including the approval of the establishment of the CPR Trust, the engagement of
the Litigation Trustees (including the terms of their engagement) and the terms
of the Commitment and the rights of holders of Trust Certificates) and any other
matters required to be approved by Coast's stockholders for consummation of the
Merger (including any adjournment or postponement, the "Coast Meeting"), as
promptly as practicable after the Registration Statements are declared
effective. Subject to the proviso in the first sentence of Section 6.06, the
Coast Board shall recommend such approval, and Coast shall take all reasonable,
lawful action to solicit such approval by its stockholders.
6.03 Registration Statements. (a) Ahmanson agrees to prepare a
registration statement on Form S-4 or other applicable form (the "Ahmanson
Registration Statement") to be filed by Ahmanson with the SEC in connection with
the issuance of Ahmanson Common Stock in the Merger (including the proxy
statement and prospectus and other proxy solicitation materials of Coast
constituting a part thereof (the "Proxy Statement") and all related documents).
Coast agrees to cooperate, and to cause its Subsidiaries to cooperate, with
Ahmanson, its counsel and its accountants, in the preparation of the Ahmanson
Registration Statement and the Proxy Statement; and Coast agrees to file the
Proxy Statement in preliminary form with the SEC as promptly as reasonably
practicable, and Ahmanson agrees to file the
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Ahmanson Registration Statement with the SEC as soon as reasonably practicable
after any SEC comments with respect to the preliminary Proxy Statement are
resolved. Each of Coast and Ahmanson agrees to use all reasonable efforts to
cause the Ahmanson Registration Statement to be declared effective under the
Securities Act as promptly as reasonably practicable after filing thereof.
Ahmanson also agrees to use all reasonable efforts to obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement. Coast agrees to furnish to Ahmanson
all information concerning Coast, its Subsidiaries, officers, directors and
stockholders as may be reasonably requested in connection with the foregoing.
Coast agrees to prepare a registration statement on Form S-1 or other applicable
form (the "CPR Trust Registration Statement" and, together with the Ahmanson
Registration Statement, the "Registration Statements") to be filed by the CPR
Trust with the SEC in connection with the distribution of the CPR Certificates
(including the prospectus constituting a part thereof (the "CPR Prospectus") and
all related documents). Coast agrees to cause the CPR Trust Registration
Statement to be filed with the SEC as soon as reasonably practicable after the
date hereof. Coast agrees to use all reasonable efforts to cause the CPR Trust
Registration Statement to be declared effective under the Securities Act as
promptly as reasonably practicable after filing thereof and to cause the Trust
Agreement to be qualified under the Trust Indenture Act. Coast also agrees to
use all reasonable efforts to obtain all necessary state securities law or "Blue
Sky" permits and approvals required to carry out the distribution of the CPR
Certificates by Coast. Ahmanson agrees to furnish to Coast all information
concerning Ahmanson, its Subsidiaries, officers, directors and stockholders as
may be reasonably requested in connection with the foregoing.
(b) Each of Coast and Ahmanson agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it
for inclusion or incorporation by reference in the Registration Statements
will, at the time the Registration Statements and each amendment or
supplement thereto, if any, becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, the Proxy Statement and any amendment or
supplement thereto will, at the date of mailing to stockholders and at the
time of the Coast Meeting contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading or any statement which, in the
light of the circumstances under which such statement is made, will be false
or misleading with respect to any material fact, or which will omit to state
any material fact necessary in order to make the statements therein not
false or misleading or necessary to correct any statement in any earlier
statement in the Proxy Statement or any amendment or supplement thereto and
the CPR Prospectus and any amendment or supplement thereto will, as of its
date, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading or any statement which, in the light of
the circumstances under which such statement is made, will be false or
misleading with respect to any material fact, or which will omit to state
any material fact necessary in order to make the statements therein not
false or misleading or necessary to correct any statement in any earlier
statement in the CPR Prospectus or any amendment or supplement thereto. Each
of Coast and Ahmanson further agrees that if it shall become aware prior to
the Effective Date of any information furnished by it that would cause any
of the statements in the Proxy Statement, CPR Prospectus, CPR Trust
Registration Statement or Ahmanson Registration Statement to be false or
misleading with respect to any material fact, or to omit to state any
material fact necessary to make the statements therein not false or
misleading, to promptly inform the other party thereof and to take the
necessary steps to correct the Proxy Statement, CPR Prospectus, CPR Trust
Registration Statement or the Ahmanson Registration Statement.
(c) Each of Ahmanson and Coast agrees to advise the other party,
promptly after Ahmanson or Coast, as the case may be, receives notice
thereof, of the time when the Ahmanson Registration Statement or the CPR
Trust Registration Statement, as the case may be, has become effective or
any supplement or amendment has been filed, of the issuance of any stop
order or the suspension of the qualification of Ahmanson Common Stock or the
CPR Certificates as the case may be, for offering or sale in any
jurisdiction, of the initiation or threat of any proceeding for any such
purpose, or of any request by the SEC for the amendment or supplement of the
Ahmanson Registration Statement or the CPR Trust Registration Statement, as
the case may be, or for additional information.
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6.04 Press Releases. Each of Coast and Ahmanson agrees that it will not,
without prior consultation with the other party, issue any press release or
written statement for general circulation relating to the transactions
contemplated hereby, except as otherwise required by applicable law or
regulation or NYSE rules. Each of Ahmanson and Coast will agree upon the joint
initial press release made with respect to the transactions contemplated hereby.
6.05 Access; Information. (a) Each of Coast and Ahmanson agrees that
upon reasonable notice and subject to applicable laws relating to the exchange
of information, it shall afford the other party and the other party's officers,
employees, counsel, accountants and other authorized representatives, such
access during normal business hours throughout the period prior to the Effective
Time to the books, records (including, without limitation, tax returns and work
papers of independent auditors), properties, personnel and to such other
information as any party may reasonably request and, during such period, it
shall furnish promptly to such other party (i) a copy of each material report,
schedule and other document filed by it pursuant to the requirements of federal
or state securities or banking laws, and (ii) all other information concerning
the business, properties and personnel of it as the other may reasonably
request.
(b) Each agrees that it will not, and will cause its representatives not
to, use any information obtained pursuant to this Section 6.05 (as well as
any other information obtained prior to the date hereof in connection with
the entering into of this Agreement) for any purpose unrelated to the
consummation of the transactions contemplated by this Agreement. Subject to
the requirements of law, each party will keep confidential, and will cause
its representatives to keep confidential, all information and documents
obtained pursuant to this Section 6.05 (as well as any other information
obtained prior to the date hereof in connection with the entering into of
this Agreement) unless such information (i) was already known to such party,
(ii) becomes available to such party from other sources not known by such
party to be bound by a confidentiality obligation, (iii) is disclosed with
the prior written approval of the party to which such information pertains
or (iv) is or becomes readily ascertainable from published information or
trade sources. In the event that this Agreement is terminated or the
transactions contemplated by this Agreement shall otherwise fail to be
consummated, each party shall promptly cause all copies of documents or
extracts thereof containing information and data as to another party hereto
to be returned to the party which furnished the same (or confirm in writing
that all such copies have been destroyed). No investigation by either party
of the business and affairs of the other shall affect or be deemed to modify
or waive any representation, warranty, covenant or agreement in this
Agreement, or the conditions to either party's obligation to consummate the
transactions contemplated by this Agreement.
(c) Except as contemplated by this Agreement and following termination
of this Agreement, each party hereto agrees that for two years from
September 18, 1997 it (and its affiliates) will not, alone or with others,
in any manner, (a) acquire, agree to acquire, or make any offer or proposal
(other than a confidential request to the Chairman of the Board for
permission to make an offer or proposal) to acquire beneficial ownership of
any securities or material properties of the other party (and its
Subsidiaries), unless such acquisition or agreement or the making of such
offer or proposal, shall have been expressly first approved by the other
party's Board of Directors or (b) solicit proxies from stockholders of the
other party.
6.06 Acquisition Proposals. Coast agrees that it shall not, and shall
cause its Subsidiaries and its and its Subsidiaries' officers, directors,
agents, advisors and affiliates not to, solicit or encourage inquiries or
proposals with respect to, or engage in any negotiations concerning, or provide
any confidential information to, or have any discussions with, any person
relating to, any Acquisition Proposal or waive any provision of or amend the
terms of the Coast Rights Agreement in respect of an Acquisition Proposal;
provided, however, that nothing in this Agreement shall (x) require the Coast
Board to recommend stockholder approval of the Merger following an Acquisition
Proposal, (y) prevent Coast or the Coast Board from (i) engaging in any
discussions or negotiations with, or providing any information to, any Person in
response to an unsolicited bona fide written Acquisition Proposal by any such
Person or (ii) recommending such an unsolicited bona fide written Acquisition
Proposal to the holders of Coast Common Stock or (z) prevent Coast from waiving
any provision of or amending the terms of the Coast Rights Agreement in respect
of an Acquisition Proposal, if and only if, with respect to the actions
described in clause (x), (y) or (z), as applicable, (A) the Coast Board
concludes in good faith that the Acquisition Proposal, if consummated, would
result in a transaction more favorable to holders of Coast Common Stock than the
transaction contemplated by this Agreement; (B) the Coast Board determines
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in good faith based upon the advice of outside counsel that such action is
legally necessary for it to act in a manner consistent with its fiduciary duties
under applicable law; and (C) prior to providing any information or data to any
person or entering into discussions or negotiations with any Person, the Coast
Board notifies Ahmanson immediately of such inquiries, proposals or offers
received by, any such information requested from, or any such discussions or
negotiations sought to be initiated or continued with Coast or any Subsidiary
thereof. Coast shall immediately cease and cause to be terminated any
activities, discussions or negotiations conducted prior to the date of this
Agreement with any parties other than Ahmanson with respect to any of the
foregoing and shall use its reasonable best efforts to enforce any
confidentiality or similar agreement relating to an Acquisition Proposal. Coast
shall promptly (within 24 hours) advise Ahmanson following the receipt by Coast
of any Acquisition Proposal and the substance thereof (including the identity of
the person making such Acquisition Proposal), and advise Ahmanson of any
developments with respect to such Acquisition Proposal immediately upon the
occurrence thereof.
6.07 Affiliate Agreements. (a) Not later than the 15th day prior to the
mailing of the Proxy Statement, Coast shall deliver to Ahmanson a schedule of
each person that, to the best of its knowledge, is or is reasonably likely to
be, as of the date of the Coast Meeting, deemed to be an "affiliate" of Coast
(each, a "Coast Affiliate") as that term is used in Rule 145 under the
Securities Act or SEC Accounting Series Releases 130 and 135.
(b) Coast shall use its reasonable best efforts to cause each person who
may be deemed to be a Coast Affiliate to execute and deliver to Ahmanson on
or before the date of mailing of the Proxy Statement an agreement in the
form attached hereto as Exhibit A.
6.08 Takeover Laws. No party hereto shall take any action that would
cause the transactions contemplated by this Agreement to be subject to
requirements imposed by any Takeover Law and each of them shall take all
necessary steps within its control to exempt (or ensure the continued exemption
of) the transactions contemplated by this Agreement from, or if necessary
challenge the validity or applicability of, any applicable Takeover Law, as now
or hereafter in effect.
6.09 Certain Policies. Prior to the Effective Date, Coast shall,
consistent with generally accepted accounting principles and on a basis mutually
satisfactory to it and Ahmanson, modify and change its loan, litigation and real
estate valuation policies and practices (including loan classifications and
levels of reserves) so as to be applied on a basis that is consistent with that
of Ahmanson; provided, however, that Coast shall not be obligated to take any
such action pursuant to this Section 6.09 unless and until Ahmanson acknowledges
that all conditions to its obligation to consummate the Merger have been
satisfied.
6.10 NYSE Listing. Ahmanson agrees to use its reasonable best efforts to
list, prior to the Effective Date, on the NYSE, subject to official notice of
issuance, the shares of Ahmanson Common Stock to be issued to the holders of
Coast Common Stock in the Merger.
6.11 Regulatory Applications. (a) Ahmanson and Coast and their
respective Subsidiaries shall cooperate and use their respective reasonable best
efforts to prepare all documentation, to effect all filings and to obtain all
permits, consents, approvals and authorizations of all third parties and
Governmental Authorities necessary to consummate the transactions contemplated
by this Agreement. Each of Ahmanson and Coast shall have the right to review in
advance, and to the extent practicable each will consult with the other, in each
case subject to applicable laws relating to the exchange of information, with
respect to all material written information submitted to any third party or any
Governmental Authority in connection with the transactions contemplated by this
Agreement. In exercising the foregoing right, each of the parties hereto agrees
to act reasonably and as promptly as practicable. Each party hereto agrees that
it will consult with the other party hereto with respect to the obtaining of all
material permits, consents, approvals and authorizations of all third parties
and Governmental Authorities necessary or advisable to consummate the
transactions contemplated by this Agreement and each party will keep the other
party appraised of the status of material matters relating to completion of the
transactions contemplated hereby.
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(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or
advisable in connection with any filing, notice or application made by or on
behalf of such other party or any of its Subsidiaries to any third party or
Governmental Authority.
6.12 Indemnification. (a) Following the Effective Date, Ahmanson shall
indemnify, defend and hold harmless the present directors and officers of Coast
and its Subsidiaries (each, an "Indemnified Party") against all costs or
expenses (including reasonable attorneys' fees), judgments, fines, losses,
claims, damages or liabilities (collectively, "Costs") as incurred, in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement) to the fullest
extent that Coast is permitted to indemnify (and advance expenses to) its
directors and officers under the laws of the State of Delaware, the Coast
Certificate and the Coast By-Laws as in effect on the date hereof; provided that
any determination required to be made with respect to whether an officer's or
director's conduct complies with the standards set forth under Delaware law, the
Coast Certificate and the Coast By-Laws shall be made by independent counsel
(which shall not be counsel that provides material services to Ahmanson)
selected by Ahmanson and reasonably acceptable to such officer or director.
(b) For a period of four years from the Effective Time, Ahmanson shall
use its reasonable best efforts to provide that portion of director's and
officer's liability insurance that serves to reimburse the present and
former officers and directors of Coast or any of its Subsidiaries
(determined as of the Effective Time) (as opposed to Coast) with respect to
claims against such directors and officers arising from facts or events
occurring at or prior to the Effective Time (including the transactions
contemplated by this Agreement) which insurance shall contain at least the
same coverage and amounts, and contain terms and conditions no less
advantageous, as that coverage currently provided by Coast; provided,
however, that in no event shall Ahmanson be required to expend more than
200% of the Previously Disclosed current amount expended by Coast (the
"Insurance Amount") to maintain or procure such directors and officers
insurance coverage; provided, further, that if Ahmanson is unable to
maintain or obtain the insurance called for by this Section 6.12(b),
Ahmanson shall use its reasonable best efforts to obtain as much comparable
insurance as is available for the Insurance Amount; provided, further, that
officers and directors of Coast or any Subsidiary may be required to make
application and provide customary representations and warranties to
Ahmanson's insurance carrier for the purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under Section
6.12(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify Ahmanson thereof;
provided that the failure so to notify shall not affect the obligations of
Ahmanson under Section 6.12(a) unless and to the extent that Ahmanson is
actually prejudiced as a result of such failure.
(d) If Ahmanson or any of its successors or assigns shall consolidate
with or merge into any other entity and shall not be the continuing or
surviving entity of such consolidation or merger or shall transfer all or
substantially all of its assets to any other entity, then and in each case,
Ahmanson shall cause proper provision to be made so that the successors and
assigns of Ahmanson shall assume the obligations set forth in this Section
6.12.
(e) The provisions of this Section 6.12 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or
her heirs and representatives.
6.13 Benefit Plan; Retention Bonuses. (a) Ahmanson shall, from and after
the Effective Time, (i) honor in accordance with their terms all employment or
severance agreements entered into prior to the date hereof and Previously
Disclosed, (ii) provide former employees of Coast who remain as employees of
Ahmanson with employee benefit plans no less favorable in the aggregate than
those provided to similarly situated employees of Ahmanson, (iii) provide
employees of Coast who remain as employees of Ahmanson credit for years of
service with Coast or any of its subsidiaries prior to the Effective Time for
the purpose of eligibility and vesting and (iv) cause any and all pre-existing
condition limitations (to the extent such limitations did not apply to a
pre-existing condition under comparable Compensation and Benefit Plans) and
eligibility waiting periods under group health plans of Ahmanson to be waived
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with respect to former employees of Coast who remain as employees of Ahmanson
(and their eligible dependents) and who become participants in such group health
plans. Nothing in this Agreement shall limit or restrict the right of Ahmanson
to (A) terminate the employment of any employee at any time for any reason
whatsoever, with or without cause, and (B) modify, amend or terminate any
employee benefit or other plans of Ahmanson. Ahmanson acknowledges that the
Merger constitutes a change in control under the terms of the plans and
agreements listed in Coast's Disclosure Schedule under the heading "Disclosures
with respect to Section 5.03(m)(i): Employee Benefit Plans."
(b) Prior to the Effective Time, Coast may agree to pay up to $2,000,000
as retention bonuses, payable upon the day 180 days following the Effective
Date or on such earlier day as Ahmanson may determine or upon the earlier
termination of the applicable employee by Ahmanson without cause, and to be
allocated primarily among non-executive employees of Coast. The allocation
of all such payments shall be determined in consultation with Ahmanson and
shall be subject to the approval of Ahmanson in its sole discretion.
6.14 Accountants' Letters. Each of Coast and Ahmanson shall use its
reasonable best efforts to cause to be delivered to the other party, and to
Ahmanson's directors and officers who sign the Registration Statement, a letter
of KPMG Peat Marwick LLP, independent auditors for each of Coast and Ahmanson,
dated (i) the date on which the Registration Statement shall become effective
and (ii) a date shortly prior to the Effective Date, and addressed to such other
party, and such directors and officers, in form and substance customary for
"comfort" letters delivered by independent accountants in accordance with
Statement of Accounting Standards No. 72.
6.15 Notification of Certain Matters. Each of Coast and Ahmanson shall
give prompt notice to the other of any fact, event or circumstance known to it
that (i) is reasonably likely, individually or taken together with all other
facts, events and circumstances known to it, to result in any Material Adverse
Effect with respect to it or (ii) would cause or constitute a material breach of
any of its representations, warranties, covenants or agreements contained
herein.
6.16 Officers and Directors. Ahmanson agrees to cause Mr. Ray Martin to
be elected or appointed as a director of Ahmanson at, or as promptly as
practicable after, the Effective Time. Coast shall cause such executive officers
and directors of Coast Federal as Ahmanson shall specify in writing to cease to
be executive officers and directors of Coast Federal prior to the Effective
Date.
6.17 CPR Trust. Coast agrees to take all actions necessary to cause the
CPR Trust to be formed. In addition, Coast agrees to take all actions necessary
to cause the issuance of the CPR Certificates by the CPR Trust to Coast and to
distribute such CPR Certificates to the stockholders of Coast with a record date
and payment date on the Effective Date immediately prior to the Effective Time;
provided, however, that Coast shall not be required to cause the CPR Trust to
issue such CPR Certificates or be required to so distribute the CPR Certificates
until all conditions to the Merger, other than such distribution, have been
satisfied or waived. Except as set forth in this Section, the terms of the CPR
Trust and the CPR Certificates shall be as set forth in Annex I. Coast agrees to
cause the CPR Trust immediately prior to the Effective Time to deliver to Coast
a number of CPR Certificates sufficient for the delivery of CPR Certificates
required pursuant to Section 3.06. Ahmanson agrees to return to the CPR Trust
any CPR Certificates with respect to Replacement Options that expire prior to
exercise.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of Ahmanson and Coast to consummate the Merger is
subject to the fulfillment or written waiver by Ahmanson and Coast prior to the
Effective Time of each of the following conditions:
(a) Stockholder Approvals. This Agreement and the transactions
contemplated hereby (including the approval of the establishment of the CPR
Trust, the engagement of the Litigation Trustees (including their terms of
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engagement) and the terms of the Commitment and the rights of holders of
Trust Certificates) and the Merger shall have been duly adopted by the
requisite vote of the stockholders of Coast.
(b) Regulatory Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby, shall have been obtained
and shall remain in full force and effect and all statutory waiting periods
in respect thereof shall have expired and no such approvals shall contain
any conditions, restrictions or requirements which would reasonably be
expected to (i) following the Effective Time, have a Material Adverse Effect
on the Surviving Corporation and its Subsidiaries taken as a whole or (ii)
reduce the benefits of the transactions contemplated hereby to such a degree
that Ahmanson would not have entered into this Agreement had such
conditions, restrictions or requirements been known at the date hereof.
(c) No Injunction. No Governmental Authority of competent jurisdiction
shall have enacted, issued, promulgated, enforced or entered any statute,
rule, regulation, judgment, decree, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and prohibits
consummation of the transactions contemplated by this Agreement.
(d) Registration Statements; Trust Indenture Act. The Registration
Statements shall have become effective under the Securities Act and no stop
order suspending the effectiveness of the Registration Statements shall have
been issued and be in effect and no proceedings for that purpose shall have
been initiated or threatened by the SEC and not withdrawn. If required, the
Trust Agreement shall have been duly qualified under the Trust Indenture
Act.
(e) Listing. The shares of Ahmanson Common Stock to be issued in the
Merger shall have been approved for listing on the NYSE, subject to official
notice of issuance.
7.02 Conditions to Obligation of Coast. The obligation of Coast to
consummate the Merger is also subject to the fulfillment or written waiver by
Coast prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. Subject to Sections 5.01 and 5.02,
the representations and warranties of Ahmanson set forth in this Agreement
shall be true and correct as of the date of this Agreement and as of the
Effective Date as though made on and as of the Effective Date (except that
representations and warranties that by their terms speak as of the date of
this Agreement or some other date shall be true and correct as of such
date), and Coast shall have received a certificate, dated the Effective
Date, signed on behalf of Ahmanson by the Chief Executive Officer and the
Chief Financial Officer of Ahmanson to such effect.
(b) Performance of Obligations of Ahmanson. Ahmanson shall have
performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Effective Time, and Coast
shall have received a certificate, dated the Effective Date, signed on
behalf of Ahmanson by the Chief Executive Officer and the Chief Financial
Officer of Ahmanson to such effect.
(c) Opinion of Coast's Counsel. Coast shall have received an opinion of
Cleary, Gottlieb, Steen & Hamilton, special counsel to Coast, dated the
Effective Date, to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion, (A) the Merger constitutes a
"reorganization" within the meaning of Section 368 of the Code that,
accordingly, (i) no gain or loss will be recognized by Coast as a result of
the Merger and (ii) no gain or loss will be recognized by a stockholder of
Coast who receives shares of Ahmanson Common Stock in exchange for shares of
Coast Common Stock, except (x) with respect to cash received in lieu of
fractional share interests and (y) for gain that may be recognized in an
amount not exceeding the fair market value at the time of the Merger of such
stockholder's CPR Certificates (which represent such stockholder's share of
the Commitment Amount), and (B) the CPR Trust will not itself be subject to
any material federal income taxes. In rendering its opinion, such counsel
may require and rely upon representations contained in letters from Coast,
Ahmanson and stockholders of Coast. The foregoing opinion will not apply to
stockholders or persons receiving Ahmanson Common Stock or CPR Certificates
as compensation.
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(d) Accountants' Letters. Coast and Mr. Martin shall have received the
letters referred to in Section 6.14 from KPMG Peat Marwick LLP, Ahmanson's
independent auditors.
(e) Commitment. Ahmanson shall have executed and delivered the
Commitment and made the transfer to the CPR Trust with respect to the
Expense Fund.
7.03 Conditions to Obligation of Ahmanson. The obligation of Ahmanson to
consummate the Merger is also subject to the fulfillment or written waiver by
Ahmanson prior to the Effective Time of each of the following conditions:
(a) Representations and Warranties. The representations and warranties
of Coast set forth in this Agreement shall be true and correct as of the
date of this Agreement and as of the Effective Date as though made on and as
of the Effective Date (except that representations and warranties that by
their terms speak as of the date of this Agreement or some other date shall
be true and correct as of such date) and Ahmanson shall have received a
certificate, dated the Effective Date, signed on behalf of Coast by the
Chief Executive Officer and the Chief Financial Officer of Coast to such
effect.
(b) Performance of Obligations of Coast. Coast shall have performed in
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Effective Time, and Ahmanson shall have
received a certificate, dated the Effective Date, signed on behalf of Coast
by the Chief Executive Officer and the Chief Financial Officer of Coast to
such effect.
(c) Opinion of Ahmanson's Counsel. Ahmanson shall have received an
opinion of Sullivan & Cromwell, special counsel to Ahmanson, dated the
Effective Date, to the effect that, on the basis of facts, representations
and assumptions set forth in such opinion, the Merger constitutes a
reorganization under Section 368(a)(1)(A) of the Code and no gain or income
will be recognized by Ahmanson in the Merger. In rendering its opinion,
Sullivan & Cromwell may require and rely upon representations contained in
letters from Coast, Ahmanson and stockholders of Coast.
(d) Accountants' Letters. Ahmanson and its directors and officers who
sign the Registration Statement shall have received the letters referred to
in Section 6.14 from KPMG Peat Marwick LLP, Coast's independent auditors.
(e) Dissenters' Shares. Holders of no more than 5% of the outstanding
shares of Coast Common Stock shall have given notice that their shares of
Coast Common Stock be treated as Dissenters' Shares.
(f) CPR Trust. Coast shall have established the CPR Trust and shall have
caused the CPR Trust to issue the CPR Certificates to Coast and shall have
distributed the CPR Certificates to the stockholders of Coast as required by
Section 6.17 hereof.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated, and the Acquisition
may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time, by the
mutual consent of Ahmanson and Coast, if the Board of Directors of each so
determines by vote of a majority of the members of its entire Board.
(b) Breach. At any time prior to the Effective Time, by Ahmanson or
Coast, if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event of either: (i) a breach by the
other party of any representation or warranty contained herein (subject if
applicable to the standard set forth in Section 5.02), which breach cannot
be or has not been cured within 20 calendar days after the giving of written
notice to the breaching party of such breach; or (ii) a breach by the other
party of any of the covenants or agreements
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contained herein, which breach cannot be or has not been cured within 20
calendar days after the giving of written notice to the breaching party of
such breach, provided that such breach (whether under (i) or (ii)) would be
reasonably likely, individually or in the aggregate with other breaches, to
result in a Material Adverse Effect.
(c) Delay. At any time prior to the Effective Time, by Ahmanson or
Coast, if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event that the Merger is not consummated
by June 30, 1998, except to the extent that the failure of the Merger then
to be consummated arises out of or results from the knowing action or
inaction of the party seeking to terminate pursuant to this Section 8.01(c),
which action or inaction is in violation of its obligations under this
Agreement.
(d) No Approval. By Coast or Ahmanson, if its Board of Directors so
determines by a vote of a majority of the members of its entire Board, in
the event (i) the approval of any Governmental Authority required for
consummation of the Merger and the other transactions contemplated by this
Agreement shall have been denied by final nonappealable action of such
Governmental Authority or (ii) the stockholder approval required by Section
7.01(a) herein is not obtained at the Coast Meeting.
(e) Failure to Recommend, Etc. At any time prior to the Coast Meeting,
by Ahmanson if the Coast Board shall have failed to make its recommendation
referred to in Section 6.02, withdrawn such recommendation or modified or
changed such recommendation in a manner adverse in any respect to the
interests of Ahmanson.
8.02 Effect of Termination and Abandonment. (a) In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, subject to the provisions of Section 8.02(b), no party to this
Agreement shall have any liability or further obligation to any other party
hereunder except that termination will not relieve a breaching party from
liability for any breach of this Agreement giving rise to such termination.
(b) If (a) this Agreement shall be terminated (i) by Ahmanson pursuant
to Section 8.01(b) or Section 8.01(e) and, at the time of the occurrence of
the circumstance permitting termination pursuant to such Section, there
shall exist an Acquisition Proposal with respect to Coast or any of its
Subsidiaries, or (ii) by Coast pursuant to Section 8.01(d)(ii) and, at the
time of the occurrence of the circumstance permitting termination pursuant
to such Section, there shall exist an Acquisition Proposal with respect to
Coast or any of its Subsidiaries, and (b) within 12 months after any such
termination Coast or any of its Subsidiaries enters into a definitive
agreement with respect to an Acquisition Proposal, Coast shall promptly pay
to Ahmanson a termination fee equal to $35 million.
ARTICLE IX
MISCELLANEOUS
9.01 Survival. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than Section
6.12, the penultimate sentence of Section 6.17 and this Article IX which shall
survive the Effective Time).
9.02 Waiver; Amendment. Prior to the Effective Time, any provision of
this Agreement may be (i) waived by the party benefitted by the provision, or
(ii) amended or modified at any time, by an agreement in writing between the
parties hereto executed in the same manner as this Agreement, except that after
the Coast Meeting, this Agreement may not be amended if it would violate the
DGCL or reduce the consideration to be received by Coast stockholders in the
Merger.
9.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
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9.04 Governing Law. This Agreement shall be governed by, and interpreted
in accordance with, the laws of the State of California applicable to contracts
made and to be performed entirely within such State (except to the extent that
mandatory provisions of Federal law or of the DGCL are applicable).
9.05 Expenses. Each party hereto will bear all expenses incurred by it
in connection with this Agreement and the transactions contemplated hereby,
except that printing expenses and SEC fees shall be shared equally between Coast
and Ahmanson. Coast's expenses in connection with the transactions contemplated
by this Agreement, including without limitation fees of legal counsel and
financial advisors (but excluding expenses of any litigation relating to the
transactions contemplated by this Agreement, printing and mailing expenses, SEC
and Blue Sky filing fees and accountants' fees) shall not exceed the amounts set
forth in paragraph 9.05 of Coast's Disclosure Schedule.
9.06 Notices. All notices, requests and other communications hereunder
to a party shall be in writing and shall be deemed given if personally
delivered, telecopied (with confirmation) or mailed by registered or certified
mail (return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
If to Coast, to:
Coast Savings Financial, Inc.
1000 Wilshire Boulevard
Los Angeles, California 90017-2457
Attention: Ray Martin
Facsimile: (213) 688-0837
With copies to:
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attention: Victor Lewkow
Facsimile: (212) 225-3999
and
Mayer, Brown & Platt
350 South Grand Avenue
Los Angeles, California 90017-1503
Attention: James R. Walther
Facsimile: (213) 625-0248
If to Ahmanson, to:
H. F. Ahmanson & Company
4900 Rivergrade Road
Irwindale, California 91706
Attention: Madeleine Kleiner
Facsimile: (626) 814-6750
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With a copy to:
Sullivan & Cromwell
444 S. Flower Street, 12th Floor
Los Angeles, California 90071
Attention: Alison S. Ressler
Facsimile: (213) 683-0457
9.07 Entire Understanding; No Third Party Beneficiaries. This Agreement,
including the Exhibits, Schedules and Annexes to this Agreement represents the
entire understanding of the parties hereto with reference to the transactions
contemplated hereby and thereby and this Agreement supersedes any and all other
oral or written agreements heretofore made prior to October 5, 1997. Except for
Section 6.12, nothing in this Agreement expressed or implied is intended to
confer upon any person, other than the parties hereto or their respective
successors, any rights, remedies, obligations or liabilities under or by reason
of this Agreement.
9.08 Interpretation; Effect. When a reference is made in this Agreement
to Sections, Exhibits, Schedules or Annexes, such reference shall be to a
Section of, or Exhibit, Schedule or Annex to, this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement are
for reference purposes only and are not part 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." No provision
of this Agreement shall be construed to require Coast, Ahmanson or any of their
respective Subsidiaries, affiliates or directors to take any action or omit to
take any action which action or omission would violate applicable law (whether
statutory or common law), rule or regulation.
* * *
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
COAST SAVINGS FINANCIAL, INC.
By:
------------------------------------
Name: Ray Martin
Title: Chairman and
Chief Executive Officer
H. F. AHMANSON & COMPANY
By:
------------------------------------
Name: Charles R. Rinehart
Title: Chairman and
Chief Executive Officer
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<PAGE> 121
APPENDIX C
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APPENDIX D
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APPENDIX E
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of stock
on the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to ss.228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss.251 (other than a merger effected pursuant to ss.251(g)
of this title), ss.252, ss.254, ss.257, ss.258, ss.263 or ss.264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of ss.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to ss.ss.251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depositary receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
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(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under ss.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of his shares shall deliver to the
corporation, before the taking of the vote on the merger or consolidation, a
written demand for appraisal of his shares. Such demand will be sufficient
if it reasonably informs the corporation of the identity of the stockholder
and that the stockholder intends thereby to demand the appraisal of his
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must do
so by a separate written demand as herein provided. Within 10 days after the
effective date of such merger or consolidation, the surviving or resulting
corporation shall notify each stockholder of each constituent corporation
who has complied with this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the merger or
consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to ss.228 or
253 of this title, each constituent corporation, either before the effective
date of the merger or consolidation or within ten days thereafter, shall
notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either notice,
each constituent corporation may fix, in advance, a record date that shall
be not more than 10 days prior to the date the notice is given, provided,
that if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such
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effective date. If no record date is fixed and the notice is given prior to
the effective date, the record date shall be the close of business on the
day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within 10
days after expiration of the period for delivery of demands for appraisal under
subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and
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the case of holders of shares represented by certificates upon the surrender to
the corporation of the certificates representing such stock. The Court's decree
may be enforced as other decrees in the Court of Chancery may be enforced,
whether such surviving or resulting corporation be a corporation of this State
or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
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PART II -
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 102(b)(7) of the DGCL, Article Sixteenth of the
Ahmanson Charter (Exhibit 4.2 hereto) eliminates the monetary liability of a
director to the corporation or its stockholders for breach of fiduciary duty as
a director, with the following exceptions, as required by Delaware law: (i)
breach of the director's duty of loyalty to the corporation or its stockholders;
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law; (iii) payment of unlawful dividends or making
unlawful stock purchases or redemptions; or (iv) transactions from which the
director derived an improper personal benefit.
In addition, under Section 145 of the DGCL, a corporation may indemnify a
director, officer, employee or agent of the corporation against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with any threatened,
pending or completed Proceeding (other than an action by or in the right of the
corporation) if he acted in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the corporation and,
with respect to any criminal action or proceeding, had no reasonable cause to
believe his conduct was unlawful. In the case of an action brought by or in the
right of the corporation, the corporation may indemnify a director, officer,
employee or agent of the corporation against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection with the defense or
settlement of any threatened, pending or completed action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation, except that no indemnification shall be made
in respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that a
court determines upon application that, in view of all the circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses as the court deems proper. Article VII of the Ahmanson By-laws (Exhibit
4.3 hereto) provides for indemnification of its directors, officers, employees,
and other agents to the fullest extent permitted by the DGCL.
Ahmanson has insured its liability where indemnification of its directors
and officers is proper under the foregoing provisions of the Ahmanson Charter
and the Ahmanson By-laws up to an aggregate of $55,000,000.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
2.1 Amended and Restated Agreement and Plan of Merger, dated as of
October 5, 1997, between the Registrant and Coast Savings
Financial, Inc. (included as Appendix A to the Proxy
Statement/Prospectus).
4.1 Form of Commitment to be entered into between the CPR Trust and
the Registrant (to be included in an amendment).
4.2 Composite Certificate of Incorporation of the Registrant dated
July 16,1984 (filed as Exhibit 3.1 to the Registrant's Annual
Report on Form 10-K for the year ended December 31, 1991).*
4.3 By-laws of the Registrant, as amended (filed as Exhibit 3 to the
Registrant's Current Report on Form 8-K for the event on
November 7, 1997).*
</TABLE>
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<TABLE>
<S> <C>
4.4 Rights Agreement, dated as of November 7, 1997, between the
Registrant and First Chicago Trust Company of New York, as Rights
Agent (filed as Exhibit 4 to the Registrant's Current Report on
Form 8-K for the event on November 7, 1997).*
4.5 Certificate of Designations of the 8.40% Preferred Stock, Series C
(Par Value $.01 Per Share), dated February 9, 1993 (filed as
Exhibit 3.5 to the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992).*
4.6 Certificate of Designations of the 6% Cumulative Convertible
Preferred Stock, Series D (Par Value $.01 Per Share), dated July
30, 1993 (filed as Exhibit 4.1 to the Registrant's Current Report
on Form 8-K for the event on July 24, 1993).*
5.1 Opinion of Sullivan & Cromwell (to be filed by amendment).
8.1 Tax opinion of Sullivan & Cromwell (to be filed by amendment).
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Sullivan & Cromwell (to be included in Exhibit 5.1).
23.4 Consent of Sullivan & Cromwell (to be included in Exhibit 8.1).
24.1 Powers of Attorney.
99.1 Form of Proxy (to be filed by amendment).
</TABLE>
- ----------
* Incorporated by reference.
ITEM 22. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement;
(i) To include any Prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the Prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
II-2
<PAGE> 129
(4) That prior to any public reoffering of the securities registered
hereunder through use of a Prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the Registrant undertakes that such reoffering
Prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other Items of
the applicable form.
(5) That every Prospectus (a) that is filed pursuant to paragraph (4)
immediately preceding, or (b) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the Registration Statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions (See Item 20), or
otherwise, the Registrant has been advised that in the opinion of the Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question of whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
(b) The undersigned Registrant hereby undertakes to respond to requests
for information that is incorporated by reference into the Prospectus pursuant
to Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
(c) The undersigned Registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
II-3
<PAGE> 130
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Irwindale,
State of California on December 4, 1997.
H. F. Ahmanson & Company
By: /s/ Tim S. Glassett
-------------------------------
Name: Tim S. Glassett
Title: First Vice President and
Assistant General Counsel
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Charles R. Rinehart* Chairman of the Board and Chief December 4, 1997
------------------------------ Executive Officer (Principal
Charles R. Rinehart Executive Officer)
/s/ Kevin M. Twomey* Senior Executive Vice President December 4, 1997
------------------------------ and Chief Financial Officer
Kevin M. Twomey (Principal Financial Officer)
/s/ George Miranda* First Vice President and Principal December 4, 1997
------------------------------ Accounting Officer
George Miranda
/s/ Byron Allumbaugh* Director December 4, 1997
------------------------------
Byron Allumbaugh
/s/ Harold A. Black* Director December 4, 1997
------------------------------
Harold A. Black
/s/ Richard M. Bressler* Director December 4, 1997
------------------------------
Richard M. Bressler
/s/ David R. Carpenter* Director December 4, 1997
------------------------------
David R. Carpenter
/s/ Phillip D. Matthews* Director December 4, 1997
------------------------------
Phillip D. Matthews
/s/ Richard L. Nolan* Director December 4, 1997
------------------------------
Richard L. Nolan
</TABLE>
II-4
<PAGE> 131
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Delia M. Reyes* Director December 4, 1997
------------------------------
Delia M. Reyes
/s/ Frank M. Sanchez* Director December 4, 1997
------------------------------
Frank M. Sanchez
/s/ Elizabeth A. Sanders* Director December 4, 1997
------------------------------
Elizabeth A. Sanders
/s/ Arthur W. Schmutz* Director December 4, 1997
------------------------------
Arthur W. Schmutz
/s/ William D. Schulte* Director December 4, 1997
------------------------------
William D. Schulte
/s/ Bruce G. Willison* Director December 4, 1997
------------------------------
Bruce G. Willison
*By: /s/ Tim S. Glassett
------------------------------
Tim S. Glassett
Attorney-in-fact
</TABLE>
II-5
<PAGE> 132
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<S> <C>
2.1 Amended and Restated Agreement and Plan of Merger, dated as of October 5, 1997,
between the Registrant and Coast Savings Financial, Inc. (included as Appendix A to
the Proxy Statement/Prospectus).
4.1 Form of Commitment to be entered into between the CPR Trust and the Registrant (to be
included in an amendment).
4.2 Composite Certificate of Incorporation of the Registrant dated July 16,1984 (filed as
Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991).*
4.3 By-laws of the Registrant, as amended (filed as Exhibit 3 to the Registrant's Current
Report on Form 8-K for the event on November 7, 1997).*
4.4 Rights Agreement, dated as of November 7, 1997, between the Registrant and First Chicago
Trust Company of New York, as Rights Agent (filed as Exhibit 4 to the Registrant's
Current Report on Form 8-K for the event on November 7, 1997).*
4.5 Certificate of Designations of the 8.40% Preferred Stock, Series C (Par Value $.01 Per
Share), dated February 9, 1993 (filed as Exhibit 3.5 to the Registrant's Annual Report on
Form 10-K for the year ended December 31, 1992).*
4.6 Certificate of Designations of the 6% Cumulative Convertible Preferred Stock, Series D
(Par Value $.01 Per Share), dated July 30, 1993 (filed as Exhibit 4.1 to the Registrant's
Current Report on Form 8-K for the event on July 24, 1993).*
5.1 Opinion of Sullivan & Cromwell (to be filed by amendment).
8.1 Tax opinion of Sullivan & Cromwell (to be filed by amendment).
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of KPMG Peat Marwick LLP.
23.3 Consent of Sullivan & Cromwell (to be included in Exhibit 5.1).
23.4 Consent of Sullivan & Cromwell (to be included in Exhibit 8.1).
24.1 Powers of Attorney.
99.1 Form of Proxy (to be filed by amendment).
</TABLE>
- ----------
* Incorporated by reference.
II-6
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
H.F. Ahmanson & Company
We consent to incorporation by reference in the Form S-4 Registration
Statement of H.F. Ahmanson & Company, of our report dated January 15, 1997,
except as to note 18 of notes to the consolidated financial statements which is
as of March 17, 1997, relating to the consolidated statements of financial
condition as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1996, which report appears in
the December 31, 1996 report on Form 10-K of H.F. Ahmanson & Company, and to the
reference to our firm under the heading "Experts" in the prospectus.
Our report dated January 15, 1997, except as to note 18 of notes to the
consolidated financial statements, which is as of March 17, 1997, contains an
explanatory paragraph that states that as discussed in Note 1 of the notes to
the consolidated financial statements, the Company changed its method of
accounting for goodwill in 1995.
/s/ KPMG PEAT MARWICK LLP
Los Angeles, California
December 5, 1997
<PAGE> 1
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
Coast Savings Financial Inc.
We consent to the incorporation by reference in the Registration Statement on
Form S-4 of H.F. Ahmanson & Company of our report dated January 23, 1997, with
respect to the consolidated statement of financial condition of Coast Savings
Financial Inc. as of December 31, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1996, which report appears in
the December 31, 1996 annual report on Form 10-K of Coast Savings Financial
Inc., and to the reference to our firm under the heading "Experts" in the
prospectus.
/s/ KPMG PEAT MARWICK LLP
Los Angeles, California
December 5, 1997
<PAGE> 1
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Charles R. Rinehart, Bruce G. Willison, Kevin M.
Twomey, Madeleine A. Kleiner and Tim S. Glassett, and each of them, as true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities to sign the Registration Statement on Form S-4 of H. F.
Ahmanson & Company pertaining to the Company's proposed merger of the Company
with Coast Savings Financial Inc. and to which this Power of Attorney is an
Exhibit and any or all amendments (including post-effective amendments) to the
Registration Statement and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, granting unto said attorneys-in-fact and agents and each of them,
full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the foregoing, as fully to all
intents and purposes as he or she might or could do in person, hereby ratifying
and confirming all that said attorneys-in-fact and agents or any of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue thereof.
<TABLE>
<CAPTION>
Signature Capacity Date
- --------- -------- ----
<S> <C> <C>
/s/ BYRON ALLUMBAUGH Director November 7, 1997
- ------------------------------
Byron Allumbaugh
/s/ HAROLD A. BLACK Director November 7, 1997
- ------------------------------
Harold A. Black
/s/ RICHARD M. BRESSLER Director November 7, 1997
- ------------------------------
Richard M. Bressler
/s/ JOHN E. BRYSON Director November 7, 1997
- ------------------------------
John E. Bryson
/s/ DAVID R. CARPENTER Director November 7, 1997
- ------------------------------
David R. Carpenter
</TABLE>
<PAGE> 2
<TABLE>
<S> <C> <C>
/s/ PHILLIP D. MATTHEWS Director November 7 , 1997
- ------------------------
Phillip D. Matthews
/s/ RICHARD L. NOLAN Director November 7, 1997
- ---------------------
Richard L. Nolan
/s/ DELIA M. REYES Director November 7, 1997
- -------------------
Delia M. Reyes
/s/ CHARLES R. RINEHART Chairman of the Board and November 7, 1997
- ------------------------ Chief Executive Officer
Charles R. Rinehart
/s/ FRANK M. SANCHEZ Director November 7, 1997
- ---------------------
Frank M. Sanchez
/s/ ELIZABETH SANDERS Director November 7, 1997
- ----------------------
Elizabeth Sanders
/s/ ARTHUR W. SCHMUTZ Director November 7, 1997
- ----------------------
Arthur W. Schmutz
/s/ WILLIAM D. SCHULTE Director November 7, 1997
- -----------------------
William D. Schulte
/s/ KEVIN M. TWOMEY Vice Chairman of the Board November 7, 1997
- -------------------- and Chief Financial Officer
Kevin M. Twomey
/s/ BRUCE G. WILLISON Director November 7, 1997
- ----------------------
Bruce G. Willison
/s/ GEORGE MIRANDA Principal Accounting Officer November 7, 1997
- -------------------
George Miranda
</TABLE>
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