SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
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Date of Report (Date of earliest event reported):
March 18, 1998 (March 16, 1998)
H. F. Ahmanson & Company
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(Exact name of registrant as specified in its charter)
Delaware 1-8930 95-0479700
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(State of (Commission File Number) (IRS Employer
incorporation) Identification No.)
4900 Rivergrade Road, Irwindale, California 91706
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(Address of principal executive offices) (Zip Code)
(626) 960-6311
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(Registrant's telephone number,
including area code)
N/A
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(Former name or former address, if changed since last report)
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Item 5. Other Events.
(a) Agreement of Merger with Washington Mutual. On March 16, 1998, H.
F. Ahmanson & Company, a Delaware corporation ("Ahmanson") and Washington
Mutual, Inc., a Washington corporation ("Washington Mutual"), entered into an
Agreement and Plan of Merger (the "Merger Agreement"), pursuant to which
Ahmanson will merge with and into Washington Mutual (the "Merger"). Following
execution of the Merger Agreement, Ahmanson and Washington Mutual entered into a
Stock Option Agreement, dated as of March 16, 1998 (the "Stock Option
Agreement"), pursuant to which Ahmanson granted to Washington Mutual an option
(the "Option") to acquire up to 21,796,426 shares (representing approximately
19.9% of the outstanding shares) of Ahmanson Common Stock, par value $.01 per
share (the "Ahmanson Common Stock"), at a price per share equal to $79.86. The
option is exercisable only upon the occurrence of certain events, including: an
agreement by Ahmanson to enter into certain business combinations with a third
party or the acquisition of beneficial ownership by a third party of 25% or more
of the Ahmanson Common Stock.
In connection with the Merger Agreement and the Stock Option Agreement,
Ahmanson amended the Rights Agreement, dated as of November 7, 1997 (the "Rights
Agreement"), between Ahmanson and First Chicago Trust Company of New York, as
rights agent, in order to exclude from the definition of "Acquiring Person" (as
defined in the Rights Agreement) a person whose beneficial ownership of Ahmanson
Common Stock consists solely of one or more of the following, among others:
shares of Ahmanson Common Stock beneficially owned pursuant to the grant or
exercise of an option granted in connection with a merger agreement, shares of
Ahmanson Common Stock beneficially owned by such person at the time of grant of
such option, or the right to acquire shares of Common Stock as a result of
entering into any such merger agreement.
The Merger Agreement, the Stock Option Agreement, the amendment to the
Rights Agreement and the joint press release issued March 17, 1998 by Ahmanson
and Washington Mutual regarding the Merger appear as exhibits to this report and
are incorporated herein by reference. The foregoing summary is qualified in its
entirety by reference to such documents, as well as the Rights Agreement (which
also is incorporated by reference herein).
(b) Termination of Stock Repurchase Program. On March 17, 1998,
Ahmanson issued a press release announcing that its Board of Directors had
terminated its remaining stock repurchase program. The press release appears as
an exhibit to this report and is incorporated herein by reference. The foregoing
summary is qualified in its entirety by reference to such press release.
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Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
(a) Not Applicable.
(b) Not Applicable.
(c) Exhibits
The following exhibits are filed with this Current Report on
Form 8-K:
Exhibit
Number Description
2 Agreement and Plan of Merger, dated as of March
16, 1998, by and between H. F. Ahmanson & Company
and Washington Mutual, Inc.
4.1 Rights Agreement, dated as of November 7, 1997
between H. F. Ahmanson & Company and First Chicago
Trust Company of New York, as rights agent
(incorporated by reference to exhibit 4 to Ahmanson's
Current Report on Form 8-K filed on November 7, 1997).
4.2 Amendment to Rights Agreement, dated as of March 16,
1998, to Rights Agreement, dated as of November 7,
1997 between H. F. Ahmanson & Company and First
Chicago Trust Company of New York, as rights agent.
10 Stock Option Agreement, dated as of March 16,
1998, by and between H. F. Ahmanson & Company and
Washington Mutual, Inc.
20.1 Joint Press Release, dated March 17, 1998.
20.2 Ahmanson Press Release, dated March 17, 1998.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
H. F. AHMANSON & COMPANY
By:/s/ Madeleine A. Kleiner
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Madeleine A. Kleiner
Senior Executive Vice President
and General Counsel
Date: March 17, 1998
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EXHIBIT INDEX
Exhibit No. Description
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2 Agreement and Plan of Merger,
dated as of March 16, 1998, by
and between H. F. Ahmanson &
Company and Washington Mutual,
Inc.
4.1 Rights Agreement, dated as of
November 7, 1997 between H. F.
Ahmanson & Company and First
Chicago Trust Company of New
York, as rights agent
(incorporated by reference to
exhibit 4 to Ahmanson's Current
Report on Form 8-K filed November
7, 1997).
4.2 Amendment to Rights Agreement,
dated as of March 16, 1998, to
Rights Agreement, dated as of
November 7, 1997 between H. F.
Ahmanson & Company and First
Chicago Trust Company of New
York, as rights agent.
10 Stock Option Agreement, dated as
of March 16, 1998, by and between
H. F. Ahmanson & Company and
Washington Mutual, Inc.
20.1 Joint Press Release, dated March
17, 1998.
20.2 Ahmanson Press Release. dated March
17, 1998.
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AGREEMENT AND PLAN OF MERGER
dated as of March 16, 1998
by and between
WASHINGTON MUTUAL, INC.
and
H. F. AHMANSON & COMPANY
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TABLE OF CONTENTS
PAGE
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ARTICLE I
Certain Definitions
1.01 Certain Definitions............................................. 1
ARTICLE II
The Merger
2.01 The Merger...................................................... 8
2.02 Effective Date and Effective Time............................... 9
ARTICLE III
Consideration; Exchange Procedures
3.01 Merger Consideration............................................ 9
3.02 Rights as Stockholders; Stock Transfers.........................10
3.03 Fractional Shares...............................................10
3.04 Exchange Procedures.............................................11
3.05 Anti-Dilution Provisions........................................12
3.06 Options.........................................................12
ARTICLE IV
Actions Pending Acquisition
4.01 Forebearances of Ahmanson.......................................12
4.02 Forebearances of Washington Mutual..............................16
ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules............................................18
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5.02 [Reserved]......................................................18
5.03 Representations and Warranties of Ahmanson......................18
5.04 Representations and Warranties of Washington Mutual.............30
ARTICLE VI
Covenants
6.01 Reasonable Best Efforts.........................................38
6.02 Stockholder Approval............................................38
6.03 Registration Statement and Joint Proxy Statement................38
6.04 Press Releases..................................................39
6.05 Access; Information.............................................40
6.06 Acquisition Proposals...........................................40
6.07 Affiliate Agreements............................................41
6.08 Takeover Laws...................................................41
6.09 Nasdaq Listing..................................................42
6.10 Regulatory Applications.........................................42
6.11 Indemnification.................................................42
6.12 Benefit Plan; Retention Bonuses.................................43
6.13 Accountants' Letters............................................45
6.14 Notification of Certain Matters.................................45
6.15 Officers and Directors..........................................46
6.16 Financial Statements............................................46
6.17 Management Consultation Meetings and Distribution of
Information...................................................46
6.18 Year 2000 Plan..................................................46
6.19 Stock Option Agreement..........................................46
ARTICLE VII
Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger......46
7.02 Conditions to Obligation of Ahmanson............................47
7.03 Conditions to Obligation of Washington Mutual...................48
ARTICLE VIII
Termination
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8.01 Termination.....................................................50
8.02 Effect of Termination and Abandonment...........................51
ARTICLE IX
Miscellaneous
9.01 Survival........................................................52
9.02 Waiver; Amendment...............................................52
9.03 Counterparts....................................................52
9.04 Governing Law...................................................52
9.05 Expenses........................................................53
9.06 Notices.........................................................53
9.07 Entire Understanding; No Third Party Beneficiaries..............54
9.08 Interpretation; Effect..........................................54
EXHIBIT A Form of Stock Option Agreement
EXHIBIT B Form of Ahmanson Affiliate Agreement
EXHIBIT C Form of Washington Mutual Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER, dated as of March 16, 1998 (this
"Agreement"), by and between Washington Mutual, Inc. ("Washington Mutual") and
H. F. Ahmanson & Company ("Ahmanson").
RECITALS
A. Washington Mutual. Washington Mutual, Inc. is a Washington
corporation, having its principal place of business in Seattle, Washington.
B. Ahmanson. H. F. Ahmanson & Company is a Delaware corporation, having
its principal place of business in Irwindale, California.
C. Stock Option Agreement. As an inducement to the willingness of
Washington Mutual to continue to pursue the transactions contemplated by this
Agreement, Ahmanson will grant to Washington Mutual an option pursuant to the
Stock Option Agreement, substantially in the form of Exhibit A (the "Stock
Option Agreement").
D. 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"), and be accounted for as a pooling-of-interests.
E. Board Action. The respective Boards of Directors of each of
Washington Mutual and Ahmanson 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 Ahmanson 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, Ahmanson or any of its Subsidiaries, other than the
transactions contemplated by this Agreement.
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"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 Affiliate" has the meaning set forth in Section 6.07(a).
"Ahmanson Board" means the Board of Directors of Ahmanson.
"Ahmanson By-Laws" means the By-laws of Ahmanson.
"Ahmanson Certificate" means the Certificate of Incorporation of
Ahmanson.
"Ahmanson Common Stock" means the common stock, par value $.01 per
share, of Ahmanson.
"Ahmanson Compensation and Benefit Plans" has the meaning set forth in
Section 5.03(m).
"Ahmanson Draft 10-K" has the meaning set forth in Section 5.03(g).
"Ahmanson ERISA Affiliate" has the meaning set forth in Section
5.03(m).
"Ahmanson ERISA Affiliate Plan" has the meaning set forth in Section
5.03(m).
"Ahmanson FSB" means Home Savings of America, FSB, a federally
chartered savings bank.
"Ahmanson Meeting" has the meaning set forth in Section 6.02.
"Ahmanson Pension Plan" has the meaning set forth in Section 5.03(m).
"Ahmanson Preferred Stock" means the outstanding shares of 6%
Cumulative Convertible Series D Preferred Stock, par value $.01 per share,
of Ahmanson.
"Ahmanson Rights" means the preferred share purchase rights issued
under the Ahmanson Rights Agreement.
"Ahmanson Rights Agreement" means the Rights Agreement, dated as of
November 7, 1997, between Ahmanson and First Chicago Trust Company of New
York, as rights agent, as amended.
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"Ahmanson SEC Documents" has the meaning set forth in Section 5.03(g).
"Ahmanson Stock" means, collectively, Ahmanson Common Stock and
Ahmanson Preferred Stock.
"Ahmanson Stock Option" has the meaning set forth in Section 3.06.
"Ahmanson Stock Plans" means Ahmanson's 1996 Nonemployee Directors'
Stock Incentive Plan, Ahmanson's 1993 Stock Incentive Plan, Ahmanson's 1998
Directors' Stock Incentive Plan and Ahmanson's 1984 Stock Incentive Plan.
"Code" has the meaning set forth in the recitals.
"COFI" means the Federal Home Loan Bank Eleventh District Cost of Funds
Index.
"Confidentiality Letter" has the meaning set forth in Section 6.05(b).
"Consultants" has the meaning set forth in Section 5.03(m).
"Costs" has the meaning set forth in Section 6.11(a).
"Delaware Secretary" has the meaning set forth in Section 2.01(b).
"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.
"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.
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"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"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(a).
"Exchange Ratio" has the meaning set forth in Section 3.01(a).
"Expense Reimbursement" has the meaning set forth in Section 8.02.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLBSF" means the Federal Home Loan Bank of San Francisco.
"GAAP" means generally accepted accounting principles applied on a
consistent basis.
"Good Reason" has the meaning set forth in Section 6.12(c).
"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.
"Indemnified Party" has the meaning set forth in Section 6.11(a).
"Initial Termination Fee" has the meaning set forth in Section 8.02.
"Insurance Amount" has the meaning set forth in Section 6.11(b).
"IRS" has the meaning set forth in Section 5.03(m).
"Joint Proxy Statement" has the meaning set forth in Section 6.03(a).
"Liens" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
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"Material Adverse Effect" means, with respect to Washington Mutual or
Ahmanson, any effect that (a) is material and adverse to the financial
condition, results of operations or business of Washington Mutual and its
Subsidiaries taken as a whole or Ahmanson and its Subsidiaries taken as a
whole, respectively, or (b) would materially impair the ability of either
Washington Mutual or Ahmanson to consummate the Merger and the other
transactions contemplated by this Agreement on a timely basis, provided
that a Material Adverse Effect shall not be deemed to have occurred as a
result of (i) a change in general economic conditions, (ii) changes in the
institutions that are used to calculate COFI or changes in the calculation
of COFI, (iii) a change in law or regulation or (iv) developments in the
goodwill litigation of Ahmanson.
"Merger" has the meaning set forth in Section 2.01(a).
"Merger Consideration" has the meaning set forth in Section 3.01.
"Multiemployer Plans" has the meaning set forth in Section 5.03(m).
"Nasdaq" means the Nasdaq Stock Market.
"New Certificate" has the meaning set forth in Section 3.04(b).
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificate" has the meaning set forth in Section 3.04(a).
"OTS" means the Office of Thrift Supervision.
"PBGC" means the Pension Benefit Guaranty Corporation.
"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.
"Registration Statement" has the meaning set forth in Section 6.03(a).
"Regulatory Authorities" has the meaning set forth in Section 5.03(i).
"Replacement Option" has the meaning set forth in Section 3.06.
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"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.
"Special Severance Employees" has the meaning set forth in Section
6.12(c).
"Special Severance Payments" has the meaning set forth in Section
6.12(c).
"Special Severance Plan" has the meaning set forth in Section 6.12(c).
"Stock Option Agreement" has the meaning set forth in Recital C.
"Subsidiary" has the meaning ascribed to it in Rule 1-02 of Regulation
S-X of the SEC.
"Subsequent Termination Fee" has the meaning set forth in Section 8.02.
"Surviving Corporation" has the meaning set forth in Section 2.01(a).
"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
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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.
"Termination Fee" has the meaning set forth in Section 8.02.
"Treasury Stock" shall mean shares of Ahmanson Stock held by Ahmanson
or any of its Subsidiaries or by Washington Mutual 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.
"Washington Mutual" has the meaning set forth in the preamble to this
Agreement.
"Washington Mutual Affiliate" has the meaning set forth in Section
6.07(a).
"Washington Mutual Articles" means the Articles of Incorporation of
Washington Mutual.
"Washington Mutual Articles of Amendment" has the meaning set forth in
Section 2.01(c).
"Washington Mutual Board" means the Board of Directors of Washington
Mutual.
"Washington Mutual By-Laws" means the By-laws of Washington Mutual.
"Washington Mutual Common Stock" means the common stock, no par value
per share, of Washington Mutual.
"Washington Mutual Compensation and Benefit Plans" has the meaning set
forth in Section 5.04(k).
"Washington Mutual Depositary Shares" has the meaning set forth in
Section 3.01(a).
"Washington Mutual Draft 10-K" has the meaning set forth in Section
5.04(g).
"Washington Mutual ERISA Affiliate" has the meaning set forth in
Section 5.04(k).
"Washington Mutual ERISA Affiliate Plan" has the meaning set forth in
Section 5.04(k).
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"Washington Mutual Meeting" has the meaning set forth in Section 6.02.
"Washington Mutual Pension Plan" has the meaning set forth in Section
5.04(k).
"Washington Mutual Preferred Stock" has the meaning set forth in
Section 3.01(a)(ii).
"Washington Mutual Rights" means the common share purchase rights
issued under the Washington Mutual Rights Agreement.
"Washington Mutual Rights Agreement" means the Rights Agreement, dated
as of October 16, 1990, between Washington Mutual and First Interstate Bank
of Washington, as rights agent, as amended.
"Washington Mutual SEC Documents" has the meaning set forth in Section
5.04(g).
"Washington Mutual Stock" means, collectively, Washington Mutual Common
Stock and Washington Mutual Preferred Stock.
"Washington Mutual Subsidiary Depository Institution" means Washington
Mutual Bank, FA.
"Washington Secretary" has the meaning set forth in Section 2.01(b).
"WBCA" means the Washington Business Corporation Act.
"Year 2000 Plan" has the meaning set forth in Section 5.03(u).
ARTICLE II
THE MERGER
2.01 The Merger. (a) At the Effective Time, Ahmanson shall merge with
and into Washington Mutual (the "Merger"), the separate corporate existence of
Ahmanson shall cease and Washington Mutual shall survive and continue to exist
as a Washington corporation (Washington Mutual, as the surviving corporation in
the Merger, sometimes being referred to herein as the "Surviving Corporation").
Washington Mutual, prior to the mailing of the Joint Proxy Statement, may change
the method of effecting the combination with Ahmanson to that of a merger of a
Subsidiary of Washington Mutual with Ahmanson 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 Ahmanson Stock as provided for in this Agreement, (ii)
adversely affect the tax treatment of Ahmanson's
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stockholders as a result of the transactions contemplated hereby 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 the DGCL and the
filing in the office of the Secretary of State of the State of Washington (the
"Washington Secretary") of articles of merger in accordance with the WBCA, or
such later date and time as may be set forth in such certificate. The Merger
shall have the effects prescribed in the WBCA and the DGCL.
(c) Articles of Incorporation and By-Laws. The articles of
incorporation and by-laws of Washington Mutual immediately after the Merger
shall be those of Washington Mutual as in effect immediately prior to the
Effective Time. At or prior to the Effective Time, Washington Mutual shall
execute and file with the Secretary of State of the State of Washington articles
of amendment (the "Washington Mutual Articles of Amendment") establishing the
Washington Mutual Preferred Stock in form and substance satisfactory to
Ahmanson.
(d) Directors and Officers of the Surviving Corporation. Subject to
Section 6.15, the directors and officers of Washington Mutual immediately after
the Merger shall be the directors and officers of Washington Mutual 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 (other than those relating to
the physical delivery of documents or similar matters to occur on the Effective
Date), the parties shall cause the effective date of the Merger (the "Effective
Date") to occur on (i) the first day between the 15th and 29th calendar days of
a month which is at least five business days 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 (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:
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(a) Outstanding Ahmanson Stock and Ahmanson Rights.
(i) Each share (excluding Treasury Stock) of Ahmanson Common
Stock issued and outstanding immediately prior to the Effective Time,
together with each associated Ahmanson Right, shall become and be converted
into the right to receive 1.12 shares of Washington Mutual Common Stock
(the "Exchange Ratio") (with the appropriate number of Washington Mutual
Rights as provided in the Washington Mutual Rights Agreement, whether or
not such Washington Mutual Rights shall still be attached to such shares).
The Exchange Ratio shall be subject to adjustment as set forth in Section
3.05.
(ii) Each share (excluding Treasury Stock) of Ahmanson Series
D Preferred Stock issued and outstanding immediately prior to the Effective
Time shall be converted into the right to receive one share of 6%
Cumulative Convertible Series G Preferred Stock of Washington Mutual (the
"Washington Mutual Preferred Stock"). The terms of the Washington Mutual
Preferred Stock shall be substantially the same as the terms of the
Ahmanson Preferred Stock.
(iii) At the Effective Time, Washington Mutual shall assume
the obligations of Ahmanson under the Deposit Agreement, dated as of August
5, 1993, between Ahmanson and Chase Trust Company of California (formerly
Chemical Trust Company of California), as depositary (relating to the
Ahmanson Preferred Stock). Washington Mutual shall instruct the applicable
depositary to treat the shares of Washington Mutual Preferred Stock
received by such depositary in exchange for and upon conversion of the
shares of Ahmanson Preferred Stock as new deposited securities under the
deposit agreement. In accordance with the terms of the deposit agreement,
the depositary receipts then outstanding shall thereafter represent the
shares of Washington Mutual Preferred Stock so received upon conversion and
exchange for the shares of Ahmanson Preferred Stock. Washington Mutual
shall request that such depositary call for the surrender of all
outstanding receipts to be exchanged for new receipts (the "Washington
Mutual Depositary Shares") specifically describing the series of Washington
Mutual Preferred Stock.
(b) Outstanding Washington Mutual Stock. Each share of Washington
Mutual 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 Ahmanson 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 Ahmanson Stock shall cease to be, and shall have no rights as,
stockholders of Ahmanson, other than to receive any dividend or other
distribution with respect to such Ahmanson Stock with a
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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 Ahmanson or the Surviving Corporation of shares of
Ahmanson Stock.
3.03 Fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of Washington Mutual Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, Washington Mutual shall pay to each holder of Ahmanson Common Stock who
would otherwise be entitled to a fractional share of Washington Mutual 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 closing sale prices of Washington Mutual Common Stock quoted
on Nasdaq (as reported in The Wall Street Journal or, if not reported therein,
in another authoritative source), for the five Nasdaq trading days immediately
preceding the Effective Date.
3.04 Exchange Procedures.
(a) At or prior to the Effective Time, Washington Mutual shall deposit,
or shall cause to be deposited, with Washington Mutual's transfer agent or a
depository or trust institution of recognized standing selected by Washington
Mutual (in such capacity, the "Exchange Agent"), for the benefit of the holders
of certificates formerly representing shares of Ahmanson Stock ("Old
Certificates") to be exchanged in accordance with this Article III, certificates
representing the shares of Washington Mutual 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 Ahmanson Common Stock.
(b) Promptly after the Effective Date, Washington Mutual shall send or
cause to be sent to each former holder of record of shares of Ahmanson 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. Washington Mutual 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 Ahmanson Stock (or indemnity reasonably satisfactory
to Washington Mutual 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) Neither the Exchange Agent nor any party hereto shall be liable to
any former holder of Ahmanson Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
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(d) No dividends or other distributions with respect to Washington
Mutual Common Stock or Washington Mutual Preferred Stock with a record date
occurring after the Effective Time shall be paid in respect of any unsurrendered
Old Certificate representing shares of Ahmanson Stock converted in the Merger
into the right to receive shares of Washington Mutual Stock. Upon surrender of
Old Certificates (or indemnity reasonably satisfactory to Washington Mutual 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
Washington Mutual 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 Washington Mutual changes
(or establishes a record date for changing) the number or kind of shares of
Washington Mutual 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 Washington Mutual 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 Ahmanson and Washington Mutual shall agree, which
adjustment may 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 Washington Mutual Common Stock
generally.
3.06 Options. At the Effective Time, each outstanding option to
purchase shares of Ahmanson Common Stock under the Ahmanson Stock Plans (each, a
"Ahmanson 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 Ahmanson Stock Option, the number of shares of
Washington Mutual Common Stock equal to (a) the number of shares of Ahmanson
Common Stock subject to the Ahmanson Stock Option, multiplied by (b) 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 (i) the
aggregate exercise price for the shares of Ahmanson Common Stock which were
purchasable pursuant to such Ahmanson Stock Option divided by (ii) the number of
full shares of Washington Mutual Common Stock subject to such Replacement Option
in accordance with the foregoing. At the Effective Time, Washington Mutual shall
assume the Ahmanson Stock Plans; provided, that such assumption shall be only in
respect of the Replacement Options and that Washington Mutual shall have no
obligation with respect to any awards under the Ahmanson Stock Plans other than
the Replacement Options and shall have no obligation to make any additional
grants or awards under such assumed Ahmanson Stock Plans.
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ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01 Forebearances of Ahmanson. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement or as set
forth in paragraph 4.01 of Ahmanson's Disclosure Schedule, without the prior
written consent of Washington Mutual (which consent shall not be unreasonably
withheld and a determination with respect thereto shall be made as promptly as
practicable under the circumstances), Ahmanson will not, and will cause each of
its Subsidiaries not to:
(a) Ordinary Course. Except as Previously Disclosed, conduct the
business of Ahmanson 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 Ahmanson's ability to perform any of its material obligations under
this Agreement.
(b) Capital Stock. Other than pursuant to Rights Previously Disclosed
and outstand ing on the date hereof, (i) issue, sell or otherwise permit to
become outstanding, or authorize the creation of, any additional shares of
Ahmanson Stock or any Rights, (ii) enter into any agreement with respect to
the foregoing or (iii) permit any additional shares of Ahmanson Stock to
become subject to new grants of employee or director stock options, other
Rights or similar stock-based employee rights.
(c) Dividends, Etc. (i) Make, declare, pay or set aside for payment any
dividend (other than (A) dividends from wholly owned Subsidiaries to
Ahmanson or another wholly owned Subsidiary of Ahmanson, (B) regular
quarterly dividends on Ahmanson Common Stock at a rate equal to the rate
paid by Ahmanson during the fiscal quarter immediately preceding the date
hereof, (C) in the case of Ahmanson Preferred Stock for regular quarterly
or semiannual dividends thereon at the rate set forth in the certificate of
designation for such securities and (D) regular quarterly or semi-annual
dividends payable by each of Ahmanson Capital Trust I and Ahmanson
Obligation Company, in each case in accordance with its governing
documents) on or in respect of, or declare or make any distribution on any
shares of Ahmanson Stock or (ii) except as Previously Disclosed, directly
or indirectly adjust, split, combine, redeem, reclassify, purchase or
otherwise acquire, any shares of its capital stock.
(d) Compensation; Employment Agreements; Etc. Except as Previously
Disclosed, enter into or amend or renew any employment, consulting,
severance or similar agreements or arrangements with any director, officer
or employee of Ahmanson or its Subsidiaries, or hire any new employees
above the rank of senior vice president, or grant any salary or wage
increase or increase any employee benefit (including incentive or bonus
payments), except (i)
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for normal individual increases in compensation to employees (other than
any employees ranking above senior vice presidents) in the ordinary course
of business consistent with past practice, (ii) for other changes that are
required by applicable law, (iii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof, (iv) for grants to
newly hired employees consistent with past practice of Ahmanson Stock
Options exercisable for 5,000 shares of Ahmanson Common Stock or less to
any individual and Ahmanson Stock Options exercisable for 50,000 shares of
Ahmanson Common Stock in the aggregate for all such newly hired employees,
in all cases such Ahmanson Stock Options to have an exercise price equal to
the fair market value of Ahmanson Common Stock at the time of grant, (v)
agreements to provide retention bonuses or other bonuses to employees made
pursuant to Section 6.12(b) or severance plans or arrangements contemplated
by Section 6.12(c), (vi) agreements to provide aggregate bonuses to
employees who remain employees through the Effective Date for the 1998
calendar year or portion thereof preceding the date of termination of the
employment of any such employee at an assumed 125% of the target bonus,
payable on the earlier of February 1, 1999 and the date of termination of
the employment of such employee, based on an allocation of the amount of
such bonuses made by Ahmanson in its sole discretion or (vii) agreements to
pay and payments in cash of the cash equivalents (determined in the manner
set forth in paragraph 4.01(d) of Ahmanson's Disclosure Schedule) of
Ahmanson Stock Options that would have been granted to employees pursuant
to annual grants in November 1998 and February 1999, consistent with past
practice at the time such grants would have been awarded, and amendments to
any existing agreements to permit such cash payments in lieu of the grant
of additional shares. There shall be no acceleration in the payment of
commissions owing to or accrued by employees, agents or independent
contractors by Ahmanson or any of its Subsidiaries.
(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 Ahmanson 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 for sales, transfers,
mortgages, encumbrances or other dispositions or discontinuances (which
include periodic dispositions of real estate investments) in the ordinary
course of business consistent with past practice and in a transaction that,
together with other such transactions, is not material to it and its
Subsidiaries taken as a whole.
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(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
consistent with past practice and in a transaction that, together with
other such transactions, is not material to it and its Subsidiaries taken
as a whole.
(h) Governing Documents. Amend the Ahmanson Certificate, Ahmanson
By-laws or the certificate of incorporation or by-laws (or similar
governing documents) of any of Ahmanson'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 or regulatory accounting
requirements.
(j) Contracts. Except as Previously Disclosed, (i) enter into, renew or
terminate, or make any payment not then required under, any contract or
agreement, other than loans made in the ordinary course of business, that
calls for aggregate annual payments of $1,000,000 or more and which is not
either (A) terminable at will on 60 days or less notice without payment of
a penalty or (B) has a term of less than one year; or (ii) make any
material change in any of its leases or contracts of a type described in
clause (i), other than renewals of contracts or leases for a term of one
year or less without materially adverse changes to the terms thereof.
(k) Claims. Settle any claim, action or proceeding against it, except
for any claim, action or proceeding in an amount or for such consideration,
individually or in the aggregate for all such settlements, that is not
material to Ahmanson and its Subsidiaries, taken as a whole and would not
impose any material restriction on the business of the Surviving
Corporation.
(l) Adverse Actions. (i) Notwithstanding anything herein to the
contrary, take any action that 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 qualifying for pooling-of-interests
accounting treatment or (ii) take any action that is intended or is
reasonably likely to result in (A) 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, (B) any of
the conditions to the Merger set forth in Article VII not being satisfied
or (C) a material violation of any provision of this Agreement except, in
each case, as may be required by applicable law or regulation.
(m) Capital Expenditures. Make any capital expenditures in excess of
(A) $500,000 per project or related series of projects or (B) $3,000,000 in
the aggregate, other than
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expenditures deemed necessary or desirable for any of Ahmanson or its
Subsidiaries to be Year 2000 compliant consistent with the Year 2000 Plan
as in effect from time to time or expenditures deemed necessary or
desirable to maintain existing assets in good repair or conduct its
business as presently conducted.
(n) Branch Offices. Make application for the opening, relocation or
closing of any, or open, relocate or close any, branch or loan production
office except for any closings or relocations resulting from (i) the
expiration of any lease, which lease has been Previously Disclosed, (ii)
the integration of Coast Savings Financial, Inc. and its Subsidiaries and
(iii) previously agreed upon sales Previously Disclosed.
(o) Loans. Make or acquire any loan other than loans committed as of
the date hereof or issue a commitment for any loan except for loans and
commitments that are made in the ordinary course of business consistent
with past practice or issue or agree to issue any letters of credit or
otherwise guarantee the obligations of any other persons except in the
ordinary course of business in order to facilitate the sale of real estate
owned.
(p) Foreclosures. Except after having followed the Ahmanson FSB
Environmental Policy, foreclose upon or otherwise acquire (whether by deed
in lieu of foreclosure or otherwise) any real property (other than 1-to-4
family residential properties in the ordinary course of business).
(q) Software Development Contracts. Enter into any contracts or
agreements or amendments or supplements thereto pertaining to any further
development of specialized software for Ahmanson or its Subsidiaries other
than any contracts or agreements deemed necessary or desirable for Ahmanson
or any of its Subsidiaries to be Year 2000 compliant, consistent with the
Year 2000 Plan as in effect from time to time, and those necessary or
desirable to operate the business of Ahmanson or its Subsidiaries as such
businesses are currently conducted.
(r) Banking Policies. Change in any material manner its lending or
pricing policies or approval policies for making loans, its investment
policies, its deposit pricing policies, its asset/liability management
policies, its environmental policies or any other material banking
policies.
(s) Rights Agreement. Take any action that would cause or that would
result in Washington Mutual becoming an "Acquiring Person" (as defined in
the Ahmanson Rights Agreement).
(t) Commitments. Agree or commit to do any of the foregoing.
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4.02 Forebearances of Washington Mutual. From the date hereof until the
Effective Time, except as expressly contemplated by this Agreement or as set
forth in paragraph 4.02 of Washington Mutual's Disclosure Schedule, without the
prior written consent of Ahmanson (which consent shall not be unreasonably
withheld and a determination with respect thereto shall be made as promptly as
practicable under the circumstances), Washington Mutual will not, and will cause
each of its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of Washington Mutual and its
Subsidiaries other than in the ordinary and usual course or take any action
reasonably likely to have an adverse effect upon Washington Mutual's
ability to perform any of its material obligations under this Agreement.
(b) Dividends. Make, declare, pay or set aside for payment any dividend
other than regular quarterly dividends on Washington Mutual Common Stock at
a rate equal to the rate paid by Washington Mutual during the fiscal
quarter immediately preceding the date hereof as such dividends may be
increased at the rate of $.01 per share per quarter and other than (i)
dividends from wholly owned Subsidiaries of Washington Mutual to Washington
Mutual or another wholly owned Subsidiary of Washington Mutual, (ii) in the
case of the Washington Mutual 7.60% Noncumulative Perpetual Preferred
Stock, Series E, for regular quarterly dividends thereon at the rate set
forth in the Washington Mutual Articles with respect to such securities and
at a rate of declaration of such dividends in the ordinary course of
business consistent with past practice and (iii) regular quarterly or
semi-annual dividends payable by each of Great Western Financial Trust I,
Great Western Financial Trust II and Washington Mutual Capital I, in each
case in accordance with its governing documents.
(c) 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 debt previously contracted in good faith, in
each case in the ordinary 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; provided,
however, Washington Mutual may enter into an agreement or agreements for,
and may consummate, business combination transactions with other companies
provided that (i) any business combination transactions involving the
acquisition of a savings association or savings bank or branches thereof
shall not, on or prior to the date which is 60 days after completion of the
systems conversion in connection with the acquisition of Great Western
Financial Corporation, involve acquired assets in excess of $1,000,000,000
in any one transaction or $3,000,000,000 in the aggregate for all such
transactions, and after completion of the systems conversion in connection
with the acquisition of Great Western Financial Corporation, involve
acquired assets in excess of $1,000,000,000 in any one transaction or
$5,000,000,000 in the aggregate for all such transactions and (ii) such
transaction or transactions would not materially delay or materially
adversely affect consummation of the Merger.
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(d) Governing Documents. (i) Amend the Washington Mutual Articles,
other than (A) as set forth in Section 2.01(c), (B) any amendment which
would not require the approval of the Washington Mutual shareholders under
the WBCA or (C) any amendment to increase the authorized shares of
Washington Mutual's capital stock, or (ii) amend the Washington Mutual
By-Laws or the certificate of incorporation or by-laws (or similar
governing documents) of any of Washington Mutual's Subsidiaries, in each of
cases (i) and (ii) in a manner that would materially and adversely affect
the ability of Washington Mutual to consummate the Merger.
(e) Adverse Actions. (a) Take any action that 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 qualifying for
pooling-of-interests accounting treatment; (b) take any action that is
intended or is 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
(f) 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, Washington
Mutual has delivered to Ahmanson a schedule and Ahmanson has delivered to
Washington Mutual a schedule (respectively, 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 5.04 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 a party that such item was required to be disclosed
therein.
5.02 [Reserved].
5.03 Representations and Warranties of Ahmanson. Subject to Section
5.01 and except as Previously Disclosed in the applicable paragraph of its
Disclosure Schedule, or any other paragraph of its Disclosure Schedule so long
as it is clear from the context of the disclosure that the disclosure in such
other paragraph of its Disclosure Schedule is also applicable to the
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paragraph of this Section 5.03 in question, Ahmanson hereby represents and
warrants to Washington Mutual:
(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 any foreign jurisdictions
where its ownership or leasing of property or assets or the conduct of its
business requires it to be so qualified, except for such jurisdictions
where the failure to be so qualified, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on
Ahmanson and its Subsidiaries. Ahmanson is duly registered as a savings and
loan holding company under HOLA. Ahmanson FSB is a qualified thrift lender
pursuant to Section 10(m) of HOLA and qualifies as a savings and loan
holding company of the type described in Section 10(c)(3)(A) of HOLA. Its
deposits are insured by the FDIC to the fullest extent permitted by law.
Ahmanson FSB is a member in good standing of the FHLBSF.
(b) Ahmanson Stock. As of the date hereof, the authorized capital stock
of Ahmanson consists solely of 220,000,000 shares of Ahmanson Common Stock,
of which 109,529,780 shares plus any additional shares issued upon exercise
or conversion of outstanding Rights since February 28, 1998 were
outstanding, and 10,000,000 shares of Ahmanson preferred stock, of which
567,388 shares less any shares with respect to which conversion rights were
exercised since February 28, 1998 were outstanding. Since February 28,
1998, the only shares of Ahmanson Common Stock that have been issued have
been upon exercise or conversion of Ahmanson Rights outstanding on February
28, 1998 in accordance with their terms. Except as Previously Disclosed, as
of the date hereof, no shares of Ahmanson Common Stock and no shares of
Ahmanson Preferred Stock were held in treasury by Ahmanson or otherwise
owned by Ahmanson or its Subsidiaries. The outstanding shares of Ahmanson
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 Ahmanson Stock
authorized and reserved for issuance, 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. The number of shares of Ahmanson Common Stock which are issuable
and reserved for issuance upon exercise of Ahmanson Stock Options as of the
date hereof (and the exercise price thereof) are Previously Disclosed in
Ahmanson's Disclosure Schedule.
(c) Subsidiaries. (i)(A) Ahmanson 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-
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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 Ahmanson or its Subsidiaries are fully paid and
nonassessable and are owned by Ahmanson or its Subsidiaries free and clear
of any Liens. Each Subsidiary is an investment permitted pursuant to HOLA
for a unitary savings and loan holding company and, for those owned by
Ahmanson FSB, for a federal savings association or its subsidiaries.
(ii) Except as Previously Disclosed, Ahmanson 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. Except as Previously Disclosed,
and except for its ownership of Ahmanson FSB, Ahmanson does not own any
stock or equity interest in any depository institution (as defined in 12
U.S.C. ss. 1813(c)(1)).
(iii) Each of Ahmanson'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, except for such
jurisdictions where the failure to be so qualified, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect on Ahmanson and its Subsidiaries.
(d) Powers. Ahmanson and each of its Subsidiaries has the corporate or
trust 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. 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
Ahmanson 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 Ahmanson and the Ahmanson Board on or prior to the date hereof. This
Agreement is a valid and legally binding obligation 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
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affecting creditors' rights or by general equity principles). The Ahmanson
Board has directed that the agreement of merger (within the meaning of
Section 251 of the DGCL) contained in this Agreement and the transactions
hereby be submitted to Ahmanson's stockholders for approval at a meeting of
such stockholders. The Ahmanson Board has received the written opinion of
Credit Suisse First Boston Corporation to the effect that, as of the date
hereof, the Exchange Ratio is fair to the holders of Ahmanson Common Stock
from a financial point of view.
(f) Approvals; No Defaults. (i) No consents or approvals of, or filings
or registrations with, any Governmental Authority 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) filings and approvals of applications
with and by the OTS, the Department of Justice and the Federal Trade
Commission, (B) filings with the SEC and state securities authorities and
the approval of this Agreement by the stockholders of Ahmanson and the
approval of the issuance of shares of Washington Mutual Stock contemplated
by this Agreement by the shareholders of Washington Mutual, and (C) the
filing of articles of merger with the Washington Secretary pursuant to the
WBCA and a certificate of merger with the Delaware Secretary pursuant to
the DGCL. As of the date hereof, Ahmanson is not aware of any reason why
the approvals set forth in Section 7.01(b) will not be promptly received
without the imposition of any restriction, term or condition that would
entitle Washington Mutual not to consummate the Merger.
(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, and except as
Previously Disclosed, 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 Ahmanson
Certificate or the Ahmanson 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.
(iii)If Washington Mutual determines to merge Ahmanson FSB with and
into Washington Mutual Subsidiary Depository Institution following the
Merger (the "Bank Merger"), subject to receipt of the regulatory approvals
referred to in paragraph (i) of this Section 5.03(f), and expiration of
related waiting periods, and required filings under federal and state
securities laws, and except as Previously Disclosed, the consummation of
the Bank Merger will not (A) constitute a breach or violation of, or a
default under, or give rise to any
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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 charter or bylaws of Ahmanson FSB or under the
Commitment Agreement dated as of February 13, 1998 between Ahmanson and the
Coast Federal Litigation Contingent Payment Rights Trust, 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 SEC Documents. (i) Ahmanson'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 subsequent to December 31,
1996 under the Securities Act or under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act, in the form filed or to be filed with the SEC, as of the date
filed, and the draft of Ahmanson's Annual Report on Form 10-K for the fiscal
year ended December 31, 1997 delivered to Washington Mutual on the date hereof
(the "Ahmanson Draft 10-K") as of the date hereof (collectively, "Ahmanson SEC
Documents"), (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 consolidated balance
sheets contained in or incorporated by reference into any such Ahmanson SEC
Document (including the related notes and schedules thereto) fairly presents, or
will fairly present, the consolidated financial position of Ahmanson 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 Ahmanson SEC 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 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) Except as Previously Disclosed or as set forth in Ahmanson's SEC
Documents filed prior to the date hereof or in the Ahmanson Draft 10-K,
since December 31, 1996, Ahmanson and its Subsidiaries have not incurred
any liability other than in the ordinary course of business consistent with
past practice (other than (A) liabilities with respect to expenses and
charges related to this Agreement, the transactions contemplated hereby and
other acquisitions, (B) liabilities incurred in acquisitions by operation
of law or as expressly contemplated by the agreements relating to such
acquisitions and (C) liabilities which in the aggregate are not material to
Ahmanson and its Subsidiaries).
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(iii) Except as Previously Disclosed or as set forth in Ahmanson's SEC
Documents filed prior to the date hereof or in the Ahmanson Draft 10-K,
since December 31, 1996, (A) Ahmanson and its Subsidiaries have conducted
their respective businesses in the ordinary and usual course consistent
with past practice (excluding the incurrence of (A) liabilities with
respect to expenses and charges related to this Agreement, the transactions
contemplated hereby and other acquisitions and (B) liabilities incurred in
acquisitions by operation of law or as expressly contemplated by the
agreements relating to such acquisitions) and 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 Ahmanson.
(h) Litigation. No litigation, claim or other proceeding before any
court or governmental agency is pending against Ahmanson or any of its
Subsidiaries and, to Ahmanson's knowledge, no such litigation, claim or other
proceeding has been threatened, other than for any litigation, claims or
proceedings that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on Ahmanson and its Subsidiaries.
(i) Regulatory Matters. (i) Except as Previously Disclosed, 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, 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 Ahmanson 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.
(iii)Neither Ahmanson nor any of its Subsidiaries has received any
written communication from a Regulatory Authority expressing concern about the
ability of Ahmanson or any of its Subsidiaries to be compliant with requirements
relating to "Year 2000" computer problems.
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(j) 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 lending or other
business practices, except for any such non- compliances that,
individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on Ahmanson and its Subsidiaries;
(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, except in each case as could not
reasonably be expected to have a Material Adverse Effect on Ahmanson
and its Subsidiaries; all such permits, licenses, certificates of
authority, orders and approvals are in full force and effect, and, to
Ahmanson's knowledge, no suspension or cancellation of any of them is
threatened, except in each case as, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on
Ahmanson and its Subsidiaries; and
(iii) except as Previously Disclosed, has not received any
outstanding notification or communication from any federal or state
(not including local) Governmental Authority (A) asserting that
Ahmanson or any of its Subsidiaries is not in compliance with, or may
not be in compliance with, any of the statutes, regulations, or
ordinances referred to in clause (i) which such federal or state (not
including local) 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).
(k) Material Contracts; Defaults. Except for those agreements and other
documents filed as exhibits to the Ahmanson SEC Documents, neither Ahmanson
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. Except
as Previously Disclosed, neither Ahmanson nor any of its Subsidiaries is a
party to or is bound by any contract, arrangement, commitment or
understanding (whether written or oral) which limits the freedom of
Ahmanson or any of its Subsidiaries to compete in any line of business, in
any geographic area or with any person. Neither Ahmanson nor any of its
Subsidiaries is in default in any material respect under any material
contract, agreement, commitment,
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arrangement, lease, insurance policy or other instrument and all contracts
which involved payments by Ahmanson or any of its Subsidiaries in 1997 of
more than $1,000,000 or which could reasonably be expected to involve
payments during 1998 of more than $1,000,000 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 reasonably be expected to have a Material Adverse Effect on Ahmanson,
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 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
Credit Suisse First Boston Corporation.
(m) Employee Benefit Plans. (i) Section 5.03(m)(i) of Ahmanson'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 Ahmanson
or any of its Subsidiaries participates or to which any such Employees,
Consultants or Directors are a party (the "Ahmanson Compensation and
Benefit Plans"). Except as Previously Disclosed, neither Ahmanson nor any
of its Subsidiaries has any commitment to create any additional Ahmanson
Compensation and Benefit Plan or to modify or change any existing Ahmanson
Compensation and Benefit Plan.
(ii) Each Ahmanson 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 Ahmanson Compensation and
Benefit Plan which is an "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA (a "Ahmanson 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 Ahmanson 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
Ahmanson Compensation and Benefit Plan, and Ahmanson is not aware of any
circumstances likely to result in revocation of any such favorable
determination letter.
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There is no material pending or, to the knowledge of Ahmanson, threatened
legal action, suit or claim relating to the Ahmanson Compensation and
Benefit Plans. Neither Ahmanson nor any of its Subsidiaries has engaged in
a transaction, or omitted to take any action, with respect to any Ahmanson
Compensation and Benefit Plan that would reasonably be expected to subject
Ahmanson or any of its Subsidiaries to any material 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 material 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 Ahmanson 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 (a "Ahmanson ERISA Affiliate") which is considered one
employer with Ahmanson under Section 4001(a)(14) of ERISA or Section 414(b)
or (c) of the Code (a "Ahmanson ERISA Affiliate Plan"). None of Ahmanson,
any of its Subsidiaries or any Ahmanson 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 Ahmanson Compensation and Benefit Plan or by any Ahmanson
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 Ahmanson Pension Plan or Ahmanson ERISA
Affiliate Plan and, to Ahmanson's knowledge, no condition exists that
presents a material risk that such proceedings will be instituted. To the
knowledge of Ahmanson, 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 Ahmanson Compensation and Benefit
Plan, except for any such investigations or actions as are not,
individually or in the aggregate, material to Ahmanson and its
Subsidiaries. Except as Previously Disclosed, under each Ahmanson Pension
Plan and Ahmanson 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 Section 4001(a)(16) of ERISA (as determined on the basis of
the actuarial assumptions contained in such actuarial valuation of such
Ahmanson Pension Plan or Ahmanson ERISA Affiliate Plan), did not exceed the
then current value of the assets of such Ahmanson Pension Plan or Ahmanson
ERISA Affiliate Plan and since such date there has been neither an adverse
change in the financial condition of such Ahmanson Pension Plan or Ahmanson
ERISA Affiliate Plan nor any amendment or other change to such Ahmanson
Pension Plan or Ahmanson ERISA Affiliate Plan that would increase the
amount of benefits thereunder which in either case reasonably could be
expected to change such result.
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<PAGE>
(iv) All contributions required to be made under the terms of any
Ahmanson Compensation and Benefit Plan or Ahmanson ERISA Affiliate Plan
have been timely made or have been reflected on Ahmanson's financial
statements to the extent required by generally accepted accounting
principles. Neither any Ahmanson Pension Plan nor any Ahmanson ERISA
Affiliate Plan has an material "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 Ahmanson
Pension Plan or Ahmanson ERISA Affiliate Plan have been made on or before
their due dates. None of Ahmanson, any of its Subsidiaries or any Ahmanson
ERISA Affiliate (x) has provided, or would reasonably be expected to be
required to provide, security to any Ahmanson Pension Plan or to any
Ahmanson 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
material lien under Section 412(n) of the Code or pursuant to ERISA.
(v) Except as Previously Disclosed, neither Ahmanson nor any of its
Subsidiaries has any obligations to provide retiree health and life
insurance or other retiree death benefits under any Ahmanson Compensation
and Benefit Plan, other than benefits mandated by Section 4980B of the
Code, and each such Ahmanson Compensation and Benefit Plan may be amended
or terminated without incurring liability thereunder. There has been no
written (or, to the knowledge of Ahmanson, oral) communication to Employees
by Ahmanson 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) Ahmanson and its Subsidiaries do not maintain any Ahmanson
Compensation and Benefit Plans covering foreign Employees.
(vii) With respect to each Ahmanson Compensation and Benefit Plan, if
applicable, Ahmanson has provided or made available to Washington Mutual,
true and complete copies of its existing (A) Ahmanson Compensation and
Benefit Plan documents and amendments thereto and (B) trust instruments and
insurance contracts.
(viii) Except as Previously Disclosed, neither Ahmanson 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.
(ix) Except as Previously Disclosed, neither Ahmanson nor any of its
Subsidiaries has any Ahmanson Compensation and Benefit Plan which provides
for or could result in the payment to any Ahmanson employee of any money or
other property or rights or accelerate the vesting or payment of such
amounts or rights to any employee as a result of the
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transactions contemplated by this Agreement, whether or not such payment or
acceleration would constitute a parachute payment within the meaning of
Code section 280G. Except as Previously Disclosed, since December 31, 1997,
neither Ahmanson nor any of its Subsidiaries has taken any action that
would result in the payment of any amounts, or the accelerated vesting of
any rights or benefits, under the Ahmanson Compensation and Benefit Plans
set forth in the Ahmanson Disclosure Schedule.
(n) Labor Matters. Neither Ahmanson 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 Ahmanson 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 Ahmanson or any such Subsidiary to bargain with any labor
organization as to wages or conditions of employment, nor is there any
strike or other material labor dispute or disputes involving it or any of
its Subsidiaries pending or, to Ahmanson's knowledge, threatened, nor,
except as Previously Disclosed, is Ahmanson 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) Rights Agreement; Takeover Laws; Dissenters Rights. Ahmanson has
taken all action necessary, including amending the Rights Agreement, to
ensure that neither the entering into of this Agreement, the consummation
of the Merger, the entering into of the Stock Option Agreement nor the
exercise of the Option (as defined therein) will cause Rights to be granted
to any person under Ahmanson's Rights Agreement, enable or require
Ahmanson's Rights issued under the Ahmanson Rights Agreement to be
exercised, distributed or triggered or cause Washington Mutual to become an
"Acquiring Person" (as defined in the Ahmanson Rights Agreement). Ahmanson
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 Ahmanson, neither
the conduct, participation in management nor operation by Ahmanson or its
Subsidiaries nor any condition of any property presently or previously
owned, leased, managed (including participation in management) 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 any
Environmental Law and no condition has existed or event has occurred with
respect to any of them or any such property that, in either case, with
notice or the passage of time, or both, is reasonably likely to result in
any material liability under any Environmental Law, which is
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not reflected in the consolidated financial statements of Ahmanson. Neither
Ahmanson nor any of its Subsidiaries has received any notice from any
Person that Ahmanson or its Subsidiaries or the operation or condition of
any property ever owned, leased, managed (including participation in
management), 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
any material liability under any Environmental Law, which is reasonably
likely to result in any material liability under any Environmental Law or
which is not reflected in the consolidated financial statements of
Ahmanson, 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. Except as Previously Disclosed, (i)(A) all federal,
state, local and foreign Tax Returns (including information returns)
required to be filed by or on behalf of Ahmanson 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)
Ahmanson 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 Ahmanson 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), except for such
Taxes as could not reasonably be expected to be material to Ahmanson and
its Subsidiaries; (C) neither Ahmanson 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 with respect
to any year for which the statute of limitations has not run; (D) there are
no pending or threatened audits, examinations, assessments or proposed
assessments of a deficiency, or refund litigations with respect to any
Taxes of Ahmanson or its Subsidiaries, except as could not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect
on Ahmanson and its Subsidiaries; (E) all Taxes, interest, additions and
penalties due with respect to completed and settled examinations or
concluded litigation relating to Taxes of Ahmanson 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 Ahmanson; (F) neither Ahmanson 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 Ahmanson or any of
its Subsidiaries with respect to any matter relating to Taxes; (H) neither
Ahmanson 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;
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(ii)(A) no liens or other security interests have been imposed on any
assets of Ahmanson or its Subsidiaries in connection with any failure (or
alleged failure) to pay any Tax, except for such liens and security
interests that are not, individually or in the aggregate, material to
Ahmanson and its Subsidiaries; (B) Ahmanson 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, stockholder, or other person, except for such Taxes
as could not reasonably be expected to be material to Ahmanson and its
Subsidiaries; (C) neither Ahmanson 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 Ahmanson 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 Ahmanson) or otherwise
has any liability for the Taxes of any person (other than Ahmanson or its
Subsidiaries); (D) Ahmanson 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, Ahmanson has no reason to believe that any
conditions exist that could reasonably be expected to prevent or impede the
Merger from qualifying as a reorganization within the meaning of Section
368 of the Code.
(r) Books and Records. The books and records of Ahmanson 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 Ahmanson and its Subsidiaries.
(s) Insurance. Ahmanson and its Subsidiaries are insured with reputable
insurers against such risks and in such amounts as the management of
Ahmanson reasonably has determined to be prudent in accordance with
industry practices. All the Insurance Policies are in full force and
effect; Ahmanson and its Subsidiaries are not in material default
thereunder; and all claims thereunder have been filed in due and timely
fashion.
(t) Disclosure. The representations and warranties contained in this
Section 5.03 as modified by Ahmanson's Disclosure Schedule do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make statements and information contained in Section
5.03 not misleading.
(u) Year 2000 Plan and Compliance. Ahmanson has formulated a plan for
addressing Year 2000 software issues that has been initially reviewed by
the OTS (the "Year 2000 Plan"). Except as Previously Disclosed, Ahmanson
has been and is in material compliance with the Year 2000 Plan as in effect
on the date hereof.
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5.04 Representations and Warranties of Washington Mutual. Subject to
Section 5.01, except as Previously Disclosed in the applicable paragraph of its
Disclosure Schedule, or any other paragraph of its Disclosure Schedule so long
as it is clear from the context of the disclosure that the disclosure in such
other paragraph of its Disclosure Schedule is also applicable to the paragraph
of this Section 5.04 in question, Washington Mutual hereby represents and
warrants to Ahmanson as follows:
(a) Organization, Standing and Authority. Washington Mutual is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Washington. Washington Mutual 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, except for
such jurisdictions where the failure to be so qualified, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect on Washington Mutual and its Subsidiaries. Washington Mutual is duly
registered as a savings and loan holding company under HOLA. Washington
Mutual Subsidiary Depository Institution is a qualified thrift lender
pursuant to Section 10(m) of HOLA and its deposits are insured by the FDIC
to the fullest extent permitted by law. Washington Mutual Subsidiary
Depository Institution is a member in good standing of the FHLBSF.
(b) Washington Mutual Stock. (i) As of the date hereof, the authorized
capital stock of Washington Mutual consists solely of 800,000,000 shares of
Washington Mutual Common Stock, of which 257,958,669 shares plus any
additional shares issued upon exercise or conversion of outstanding Rights
since March 13, 1998 were outstanding, and 10,000,000 shares of preferred
stock of which 1,970,000 were outstanding. Since March 13, 1998, the only
shares of Washington Mutual Common Stock that have been issued have been
upon exercise or conversion of Rights outstanding on March 13, 1998 in
accordance with their terms. The outstanding shares of Washington Mutual
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 set forth in its Disclosure Schedule, Washington Mutual does not
have any Rights issued or outstanding with respect to Washington Mutual
Stock and Washington Mutual does not have any commitment to authorize,
issue or sell any Washington Mutual Stock or Rights, except pursuant to
this Agreement.
(ii) The shares of Washington Mutual Stock to be issued in exchange for
shares of Ahmanson 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 Washington Mutual's Subsidiaries has been
duly organized and is validly existing in good standing under the laws of
the jurisdiction of its organization,
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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, except for such jurisdictions
where the failure to be so qualified, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on
Washington Mutual and its Subsidiaries, and it owns, directly or
indirectly, all the issued and outstanding equity securities of each of its
Subsidiaries.
(d) Corporate Power. Washington Mutual 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 Washington
Mutual 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 by the shareholders of Washington Mutual
of the issuance of shares of Washington Mutual Stock as contemplated by
this Agreement, this Agreement and the transactions contemplated hereby
have been authorized by all necessary corporate action of Washington Mutual
and the Washington Mutual Board on or prior to the date hereof. This
Agreement is a valid and legally binding agreement of Washington Mutual
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). The
Washington Mutual Board has received the written opinion of Lehman Brothers
Inc. to the effect that, as of the date hereof, the Exchange Ratio is fair
to Washington Mutual from a financial point of view.
(f) Approvals; No Defaults. (i) No consents or approvals of, or filings
or registrations with, any Governmental Authority are required to be made
or obtained by Washington Mutual or any of its Subsidiaries in connection
with the execution, delivery or performance by Washington Mutual of this
Agreement or to consummate the Merger except for (A) the filings and
approvals of applications with and by the OTS, the Department of Justice
and the Federal Trade Commission; (B) approval of the quotation on Nasdaq
of Washington Mutual Stock to be issued in the Merger; (C) the filing and
declaration of effectiveness of the Registration Statement; (D) the filing
of articles of merger with the Washington Secretary pursuant to the WBCA
and of a certificate of merger with the Delaware Secretary pursuant to the
DGCL and the filing of the Washington Mutual Articles of Amendment with the
Washington Secretary; (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 Washington Mutual
Stock in the Merger and (F) those Previously Disclosed. As of the date
hereof, Washington Mutual is not aware of any reason why the approvals set
forth in Section 7.01(b) will not be promptly received without the
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imposition of any restriction, term or condition that would entitle
Washington Mutual not to consummate the Merger.
(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, and except as
Previously Disclosed, 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 Washington Mutual or of any of its Subsidiaries or to which
Washington Mutual 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
Washington Mutual 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 SEC Documents; Material Adverse Effect. (i)
Washington Mutual'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,
1996 under the Securities Act or under Section 13(a), 13(c), 14 or 15(d) of
the Exchange Act in the form filed or to be filed with the SEC, as of the
date hereof, and the draft of Washington Mutual's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 delivered to Ahmanson on
the date hereof (the "Washington Mutual Draft 10-K") as of the date hereof
(collectively, "Washington Mutual's SEC Documents"), (A) complied or will
comply in all material respects as to form with the applicable requirements
under the Securities Act or the Exchange Act, 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 Washington Mutual SEC Document (including the
related notes and schedules thereto) fairly presents, or will fairly
present, the financial position of Washington Mutual and its Subsidiaries
as of its date, and each of the statements of income and changes in
shareholders' equity and cash flows or equivalent statements in such
Washington Mutual SEC Documents (including any related notes and schedules
thereto) fairly presents, or will fairly present, the results of
operations, changes in shareholders' equity and changes in cash flows, as
the case may be, of Washington Mutual 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.
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(ii) Except as Previously Disclosed or as set forth in Washington
Mutual's SEC Documents filed prior to the date hereof or in the Washington
Mutual Draft 10-K, since December 31, 1996, Washington Mutual and its
Subsidiaries have not incurred any liability other than in the ordinary
course of business consistent with past practice (other than (A)
liabilities with respect to expenses and charges related to this Agreement,
the transactions contemplated hereby and other acquisitions, (B)
liabilities incurred in acquisitions by operation of law or as expressly
contemplated by the agreements relating to such acquisitions and (C)
liabilities which in the aggregate are not material to Washington Mutual
and its Subsidiaries).
(iii)Except as Previously Disclosed or as set forth in Washington
Mutual's SEC Documents filed prior to the date hereof or in the Washington
Mutual Draft 10-K, since December 31, 1996, (A) Washington Mutual and its
Subsidiaries have conducted their respective businesses in the ordinary and
usual course consistent with past practice (excluding the incurrence of (A)
liabilities with respect to expenses and charges related to this
Agreement), the transactions contemplated hereby and other acquisitions and
(B) liabilities incurred in acquisitions by operation of law or as
expressly contemplated by the agreements relating to such acquisitions) 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 5.04 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 the
Washington Mutual SEC Documents filed on or before the date hereof, no
litigation, claim or other proceeding before any court or Governmental
Authority is pending against Washington Mutual or any of its Subsidiaries
and, to the best of Washington Mutual's knowledge, no such litigation,
claim or other proceeding has been threatened, other than litigation,
claims and proceedings that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Washington
Mutual and its Subsidiaries.
(ii) Except as Previously Disclosed, neither Washington Mutual 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 Washington Mutual
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.
(iii) Except as Previously Disclosed, neither Washington Mutual nor any
of its Subsidiaries has received any written communication from a
Regulatory Authority expressing
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concern about the ability of Washington Mutual or any of its Subsidiaries
to be compliant with requirements relating to "Year 2000" computer
problems.
(i) Compliance with Laws. Washington Mutual 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 lending or other
business practices, except for such non-compliances that, individually
or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect on Washington Mutual and its Subsidiaries;
(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,
except in each case as, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Washington
Mutual and its Subsidiaries; 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, except in each case as, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect on Washington Mutual and its Subsidiaries; and
(iii) has not received any outstanding notification or
communication from any federal or state (but not local) Governmental
Authority (A) asserting that Washington Mutual or any of its
Subsidiaries is not in compliance with, or may not be in compliance
with, any of the statutes, regulations, or ordinances referred to in
clause (i) which such federal or state (but not local) Governmental
Authority enforces or (B) threatening to revoke any license, franchise,
permit, or governmental authorization (nor, to Washington Mutual's
knowledge, do any grounds for any of the foregoing exist).
(j) No Brokers. No action has been taken by Washington Mutual 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
Lehman Brothers Inc.
(k) Employee Benefit Plans.
(i) Each existing bonus, incentive, deferred compensation,
pension, retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase,
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restricted stock, stock option, severance, welfare and fringe benefit
plans, employment or severance agreements and all other similar
practices, policies and arrangements in which any employee or former
employee, consultant or former consultant or director or former
director of Washington Mutual or any of its Subsidiaries participates
or to which such current or former employees, consultants or directors
are a party (the "Washington Mutual Compensation and Benefit Plans")
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.
(ii) There is no material pending or, to the knowledge of
Washington Mutual, threatened legal action, suit or claim relating to
the Washington Mutual Compensation and Benefit Plans. Neither
Washington Mutual nor any of its Subsidiaries has engaged in a
transaction, or omitted to take any action, with respect to any
Washington Mutual Compensation and Benefit Plan that would reasonably
be expected to subject Washington Mutual or any of its Subsidiaries to
any material 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 material 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
Washington Mutual 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 (a
"Washington Mutual ERISA Affiliate") which is considered one employer
with Washington Mutual under Section 4001(a)(14) of ERISA or Section
414(b) or (c) of the Code (a "Washington Mutual ERISA Affiliate Plan").
None of Washington Mutual, any of its Subsidiaries or any Washington
Mutual ERISA Affiliate has contributed, or has been obligated to
contribute, to a multi-employer 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 Washington Mutual Compensation and Benefit
Plan or by any Washington Mutual 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 Washington Mutual Pension Plan or Washington Mutual ERISA Affiliate
Plan and, to Washington Mutual's knowledge, no condition exists that
presents a material risk that such proceedings will be instituted. To
the knowledge of Washington Mutual, there is no
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pending investigation or enforcement action by the PBGC, the Department
of Labor or IRS or any other governmental agency with respect to any
Washington Mutual Compensation and Benefit Plan, except for any such
investigation or actions as are not material to Washington Mutual and
its Subsidiaries. Under each Washington Mutual Pension Plan and
Washington Mutual 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 Section 4001(a)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained in such
actuarial valuation of such Washington Mutual Pension Plan or
Washington Mutual ERISA Affiliate Plan), did not exceed the then
current value of the assets of such Washington Mutual Pension Plan or
Washington Mutual ERISA Affiliate Plan and since such date there has
been neither an adverse change in the financial condition of such
Washington Mutual Pension Plan or Washington Mutual ERISA Affiliate
Plan nor any amendment or other change to such Washington Mutual
Pension Plan or Washington Mutual ERISA Affiliate Plan that would
increase the amount of benefits thereunder which in either case
reasonably could be expected to change such result.
(l) Environmental Matters. To the best knowledge of Washington Mutual,
neither the conduct, participation in management nor operation of
Washington Mutual 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 any Environmental Law
and no condition has existed or event has occurred with respect to any of
them or any such property that, in either case, with notice or the passage
of time, or both, is reasonably likely to result in any material liability
under any Environmental Law or which is not reflected in the consolidated
financial statements of Washington Mutual. Neither Washington Mutual nor
any of its Subsidiaries has received any notice from any Person that
Washington Mutual or its Subsidiaries or the operation or condition of any
property ever owned, leased, managed (including participation in
management), 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, which is reasonably likely to result
in any material liability under any Environmental Law or which is not
reflected in the consolidated financial statements of Washington Mutual,
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.
(m) Tax Matters. Except as Previously Disclosed, (i)(A) all federal,
state, local and foreign Tax Returns (including information returns)
required to be filed by or on behalf of Washington Mutual 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) Washington Mutual and each of its Subsidiaries have paid in
full all Taxes due (including
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interest and penalties) or have provided adequate reserves for any such
Taxes in the financial statements of Washington Mutual 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), except for such
Taxes as, individually or in the aggregate, could not reasonably be
expected to be material to Washington Mutual and its Subsidiaries. (ii) As
of the date hereof, Washington Mutual has no reason to believe that any
conditions exist that could reasonably be expected to prevent or impede the
Merger from qualifying as a reorganization within the meaning of Section
368 of the Code.
(n) Books and Records. The books and records of Washington Mutual 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 Washington Mutual and its Subsidiaries.
(o) Disclosure. The representations and warranties contained in this
Section 5.04 as modified by Washington Mutual's Disclosure Schedule do not
contain any untrue statement of a material fact or omit to state any
material fact necessary to make the statements and information contained in
Section 5.04 not misleading.
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. Subject to the terms and conditions of
this Agreement, each of Washington Mutual and Ahmanson agrees to use its
respective 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. Ahmanson understands that Washington Mutual has the
current intention of merging Ahmanson FSB with and into Washington Mutual
Subsidiary Depositary Institution, and Ahmanson agrees to take such steps prior
to the Effective Time as reasonably requested by Washington Mutual to effect
such merger as soon as practicable after the Effective Time.
6.02 Stockholder Approval. Each of Washington Mutual and Ahmanson
agrees to take in accordance with applicable law and its respective articles or
certificate of incorporation and by-laws all action necessary to convene a
meeting of its respective stockholders to consider and vote upon (i) in the case
of Washington Mutual, the approval of the issuance of shares of Washington
Mutual Stock as contemplated by this Agreement and any other matter required to
be approved by Washington Mutual's shareholders for consummation of the Merger
(including any adjournment or postponement, the "Washington Mutual Meeting")
and, (ii) in the case of
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Ahmanson, the approval and adoption of this Agreement and any other matters
required to be approved by Ahmanson's stockholders for consummation of the
Merger (including any adjournment or postponement, the "Ahmanson Meeting"), in
each case as promptly as practicable after the Registration Statement is
declared effective. The Washington Mutual Board shall recommend such approval,
and Washington Mutual shall take all reasonable, lawful action to solicit such
approval by its shareholders; subject to Section 6.06, the Ahmanson Board shall
recommend such approval, and Ahmanson shall take all reasonable, lawful action
to solicit such approval by its stockholders.
6.03 Registration Statement and Joint Proxy Statement. (a) Washington
Mutual agrees to prepare a registration statement on Form S-4 or other
applicable form (the "Registration Statement") to be filed by Washington Mutual
with the SEC in connection with the issuance of Washington Mutual Stock in the
Merger (including the proxy statement and prospectus and other proxy
solicitation materials of Washington Mutual and Ahmanson constituting a part
thereof (the "Joint Proxy Statement") and all related documents). Ahmanson
agrees to cooperate, and to cause its Subsidiaries to cooperate, with Washington
Mutual, its counsel and its accountants, in the preparation of the Registration
Statement and the Joint Proxy Statement; and provided that Ahmanson and its
Subsidiaries have cooperated as required above, Washington Mutual agrees to file
the Joint Proxy Statement in preliminary form with the SEC as promptly as
reasonably practicable, and to file the Registration Statement with the SEC as
soon as reasonably practicable after any SEC comments with respect to the
preliminary Joint Proxy Statement are resolved. Each of Washington Mutual and
Ahmanson agrees to use all reasonable efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
reasonably practicable after filing thereof. Washington Mutual 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. Ahmanson agrees to furnish to Washington Mutual all
information concerning Ahmanson, its Subsidiaries, officers, directors and
stockholders as may be reasonably requested in connection with the foregoing.
(b) Each of Washington Mutual 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 (i) the Registration Statement will,
at the time the Registration Statement 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 and (ii) the
Joint Proxy Statement and any amendment or supplement thereto will, at the date
of mailing to stockholders and at the time of the Washington Mutual Meeting or
the Ahmanson Meeting, as the case may be, 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, in the light of the circumstances
under which such statement was made, not misleading. Each of Washington Mutual
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 Joint Proxy Statement or the
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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 Joint Proxy Statement or the
Registration Statement.
(c) Washington Mutual agrees to advise Ahmanson, promptly after
Washington Mutual receives notice thereof, of the time when the Registration
Statement 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
Washington Mutual Stock 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 Registration Statement or for
additional information.
6.04 Press Releases. Washington Mutual and Ahmanson shall consult with
each other before issuing any press release with respect to the Merger or this
Agreement and shall not issue any such press release or make any such public
statement without the prior consent of the other party, which shall not be
unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party (but after prior consultation, to the extent
practicable in the circumstances) issue such press release or make such public
statement as may upon the advice of outside counsel be required by law or the
rules and regulations of the NYSE (in the case of Ahmanson) or Nasdaq (in the
case of Washington Mutual). Without limiting the reach of the preceding
sentence, Washington Mutual and Ahmanson shall cooperate to develop all public
announcement materials and make appropriate management available at
presentations related to the transactions contemplated by this Agreement as
reasonably requested by the other party. In addition, Ahmanson and its
Subsidiaries shall (a) consult with Washington Mutual regarding communications
with customers, stockholders, prospective investors and employees related to the
transactions contemplated hereby and (b) provide Washington Mutual with
stockholder lists of Ahmanson.
6.05 Access; Information. (a) Each of Washington Mutual 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 of Washington Mutual and Ahmanson shall hold all information
furnished by the other party or any of such party's subsidiaries or
representatives pursuant to this Section 6.05 in confidence to the extent
required by, and in accordance with, the provisions of the letter, dated
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March 5, 1998, between Washington Mutual and Ahmanson (the "Confidentiality
Letter"). 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.
6.06 Acquisition Proposals. Ahmanson 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 Ahmanson Rights Agreement in respect of an Acquisition Proposal;
provided, however, that, at any time prior to the time its stockholders shall
have voted to approve this Agreement, Ahmanson may, and may authorize and permit
its officers, directors, employees, representatives or agents to, provide third
parties with nonpublic information, otherwise facilitate any effort or attempt
by any third party to make or implement an Acquisition Proposal, recommend or
endorse any Acquisition Proposal with or by any third party, and participate in
discussions and negotiations with any third party relating to any Acquisition
Proposal, if the Ahmanson Board determines in good faith upon the written 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 prior to
providing any information or data to any person or entering into discussions or
negotiations with any Person, the Ahmanson Board notifies Washington Mutual
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 Ahmanson or any Subsidiary thereof. Ahmanson shall
not furnish any nonpublic information to any other party pursuant to this
Section 6.06 except pursuant to the terms of a confidentiality agreement
containing terms substantially identical to the terms contained in the
Confidentiality Letter. Ahmanson 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 Washington Mutual 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. Ahmanson shall promptly (within 24 hours) advise Washington Mutual
following the receipt by Ahmanson of any Acquisition Proposal and the substance
thereof (including the identity of the person making such Acquisition Proposal),
and advise Washington Mutual of any developments with respect to such
Acquisition Proposal promptly upon the occurrence thereof.
6.07 Affiliate Agreements. (a) Not later than the 15th day prior to the
mailing of the Joint Proxy Statement, (i) Washington Mutual 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 Washington Mutual Meeting or if
there is no Washington Mutual Meeting, the Ahmanson Meeting, deemed to be an
"affiliate" of Washington Mutual (each, a "Washington Mutual Affiliate"), as
that term is used in SEC Accounting Series Releases 130 and 135; and (ii)
Ahmanson shall deliver to
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Washington Mutual 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 Ahmanson Meeting, deemed
to be an "affiliate" of Ahmanson (each, a "Ahmanson Affiliate") as that term is
used in Rule 145 under the Securities Act or SEC Accounting Series Releases 130
and 135.
(b) Each of Washington Mutual and Ahmanson shall use its respective
reasonable best efforts to cause each person who may be deemed to be a
Washington Mutual Affiliate or a Ahmanson Affiliate to execute and deliver to
Washington Mutual and Ahmanson on or before the date of mailing of the Joint
Proxy Statement an agreement in substantially the form attached hereto as
Exhibit B or Exhibit C, respectively.
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 Nasdaq Listing. Washington Mutual agrees to use its reasonable
best efforts to list, prior to the Effective Date, on Nasdaq, subject to
official notice of issuance, the shares of Washington Mutual Common Stock to be
issued in the Merger and the Washington Mutual Depositary Shares.
6.10 Regulatory Applications. (a) Washington Mutual and Ahmanson and
their respective Subsidiaries shall cooperate and use their respective
reasonable best efforts to prepare as promptly as possible 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 and Washington Mutual
shall make all necessary regulatory filings as soon as practicable and shall use
its best efforts to make such filings no later than 30 days of the date hereof.
Each of Washington Mutual and Ahmanson 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.
6.11 Indemnification. (a) Following the Effective Date, Washington
Mutual shall indemnify, defend and hold harmless the present directors and
officers of Ahmanson 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 Ahmanson and its Subsidiaries is permitted to indemnify (and advance
expenses to) their respective directors and officers under the laws of their
respective jurisdictions of incorporation, their respective charters, their
respective by-laws and any agreements entered into between Ahmanson or any of
its Subsidiaries and such directors and officers.
(b) For a period of six years from the Effective Time, Washington
Mutual shall use its reasonable best efforts to provide director's and officer's
liability insurance that serves to reimburse the present and former officers and
directors of Ahmanson or any of its Subsidiaries (determined as of the Effective
Time) with respect to claims against such directors and officers arising from
facts or events occurring at or prior to the Effective Time (including, without
limitation, 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
Ahmanson; provided, however, that in no event shall Washington Mutual be
required to expend more than 250% of the Previously Disclosed current amount
expended by Ahmanson (the "Insurance Amount") to maintain or procure such
directors and officers insurance coverage; provided, further, that if Washington
Mutual is unable to maintain or obtain the insurance called for by this Section
6.11(b), Washington Mutual 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 Ahmanson or any Subsidiary may be
required to make application and provide customary representations and
warranties to Washington Mutual's insurance carrier for the purpose of obtaining
such insurance.
(c) Any Indemnified Party wishing to claim indemnification under
Section 6.11(a), upon learning of any claim, action, suit, proceeding or
investigation described above, shall promptly notify Washington Mutual thereof;
provided that the failure so to notify shall not affect the obligations of
Washington Mutual under Section 6.11(a) unless and to the extent that Washington
Mutual is actually and materially prejudiced as a result of such failure.
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(d) If Washington Mutual 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,
Washington Mutual shall cause proper provision to be made so that the successors
and assigns of Washington Mutual shall assume the obligations set forth in this
Section 6.11.
(e) The provisions of this Section 6.11 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
6.12 Benefit Plan; Retention Bonuses. (a) Washington Mutual shall, from
and after the Effective Time, (i) comply with the Ahmanson Compensation and
Benefit Plans in accordance with their terms, (ii) provide former employees of
Ahmanson who remain as employees of Washington Mutual with employee benefit
plans no less favorable in the aggregate than those provided to similarly
situated employees of Washington Mutual, (iii) provide employees of Ahmanson who
remain as employees of Washington Mutual credit for years of service with
Ahmanson or any of its Subsidiaries prior to the Effective Time for the purpose
of eligibility and vesting, (iv) provide employees of Ahmanson who are
terminated after the Effective Date with health and dental benefits until the
earlier of (A) six months after the end of the applicable severance pay period
and (B) such time as the relevant employee obtains health and dental benefits
under another employer-sponsored plan and (v) cause any and all pre-existing
condition limitations (to the extent such limitations did not apply to a
pre-existing condition under comparable Ahmanson Compensation and Benefit Plans)
and eligibility waiting periods under group health plans of Washington Mutual to
be waived with respect to former employees of Ahmanson who remain as employees
of Washington Mutual (and their eligible dependents) and who become participants
in such group health plans under all Ahmanson Compensation and Benefit Plans.
Nothing in this Section 6.12 shall be interpreted as preventing Washington
Mutual or its Subsidiaries from amending, modifying or terminating any Ahmanson
Compensation and Benefit Plans, or other contracts, arrangements, commitments or
understandings, in a manner consistent with their terms and applicable law.
(b) Notwithstanding anything to the contrary herein, prior to the Effective
Time, Ahmanson may agree to pay up to $15,000,000 as bonuses, to be allocated
among employees of Ahmanson below the rank of first vice president; provided,
however, Ahmanson may agree to pay up to $500,000 of such $15,000,000 to
employees as bonuses for their work in connection with the acquisition of Coast
Savings Financial, Inc. The allocation, and all other terms and conditions, of
all such payments shall be determined by Ahmanson in its sole discretion,
provided that no such payment shall be made to any employee whose employment is
terminated for cause. Such bonuses shall be payable on the earlier of the first
anniversary of the Effective Date to eligible employees still employed by the
Surviving Corporation on such date and the date the employment of the eligible
employee is terminated by Ahmanson or the Surviving Corporation.
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(c) Notwithstanding anything to the contrary herein, prior to the
Effective Date, Ahmanson may adopt a severance plan (the "Special Severance
Plan") which provides for payments to persons who are employees of Ahmanson or
any of its Subsidiaries (but who are not of a type compensated primarily by
commission, including loan and multi-family loan consultants) on the date hereof
("Special Severance Employees") of two weeks severance pay for each year of
service with Ahmanson or any of its Subsidiaries for (i) a minimum of 6 months
and a maximum of 18 months severance pay for employees of grades 48 to 58 on the
date hereof and (ii) a minimum of 3 months and a maximum of 12 months of
severance pay for employees of grade 47 or below on the date hereof (the
"Special Severance Payments"). Special Severance Payments shall become due and
payable within five business days after (x) the termination of employment of a
Special Severance Employee without cause by the Surviving Corporation at any
time prior to the one year anniversary of the Effective Date or (y) the
voluntary termination of a Special Severance Employee's employment with the
Surviving Corporation for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, with respect to a Special Severance Employee, (i) the
Surviving Corporation changes such employee's duties, which new duties, taken as
a whole, are not within the employee's scope of knowledge and experience as of
the Effective Date, (ii) any reduction of such employee's base salary plus
target incentive compensation, provided that in the case of incentive
compensation for which a "target" is not defined, such as sales commissions, the
pay opportunity of the incentive component shall be the average incentive
compensation of employees in the same job classification, and provided further,
that changes in the allocation of such employee's compensation between salary
and incentive compensation, and changes to the criteria or method for
determining incentive compensation amounts actually earned, shall not constitute
"Good Reason" for such employee's resignation, or (iii) if (x) such employee's
work location on the date hereof and on the Effective Date is Ahmanson's
Irwindale "campus" and the Surviving Corporation designates a new work location
for such employee which is greater than 35 air miles from such employee's
primary residence on the date hereof set forth in Ahmanson's records or (y) the
Surviving Corporation designates a new work location for such employee which is
greater than 40 air miles from such employee's work location prior to the
Effective Date; provided, however, that notwithstanding the foregoing, "Good
Reason" shall exist only if the Surviving Corporation shall fail to cure any
event set forth in clause (i), (ii) or (iii) giving rise to the Good Reason
within 15 days after its receipt of a written demand for cure specifying the
circumstances constituting "Good Reason"; provided further, that such employee
shall be treated as having resigned for "Good Reason" only if the effective date
of his or her resignation is within 60 days after the effective date of the
circumstance constituting "Good Reason". Notwithstanding anything to the
contrary herein, prior to the Effective Date, Washington Mutual and Ahmanson
shall mutually agree upon a "stay bonus" for the top 10 Ahmanson executives.
(d) Ahmanson agrees to amend its 401(k) plan prior to the Effective Time
and effective immediately prior to the Effective Time so that participant loans
are no longer available, and may amend its 401(k) plan to allow partial
repayment of existing loans thereunder.
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6.13 Accountants' Letters. Each of Washington Mutual and Ahmanson shall
use its respective reasonable best efforts to cause to be delivered to the other
party a letter of Deloitte & Touche and KPMG Peat Marwick LLP, respectively,
independent auditors, 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, in form and substance customary for "comfort"
letters delivered by independent accountants in accordance with Statement of
Accounting Standards No. 72.
6.14 Notification of Certain Matters. Each of Washington Mutual 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.
6.15 Officers and Directors. Washington Mutual agrees to cause to be
elected or appointed as directors of Washington Mutual at the Effective Time
three directors of Ahmanson at the Effective Time, such directors to be selected
mutually by Washington Mutual and Ahmanson.
6.16 Financial Statements. Washington Mutual shall file as promptly as
practicable, and in any event within 30 days after the end of the first full
calendar month following the Effective Date, financial statements containing at
least 30 days of combined operations in form and substance sufficient to enable
Ahmanson Affiliates to sell Washington Mutual Stock within the requirements of
Accounting Series Releases 130 and 135 and Staffing Accounting Bulletin 65.
6.17 Management Consultation Meetings and Distribution of Information.
From the date of this Agreement until the Effective Time, senior management
responsible for the integration of Washington Mutual and Ahmanson shall confer
on a regular basis regarding the business and operations of Ahmanson and
Washington Mutual. The parties shall agree upon a mutually convenient time and
place for such meetings which shall occur no less frequently than weekly unless
otherwise mutually agreed. Washington Mutual and Ahmanson will mutually agree on
communications to be made and information to be distributed to employees of
Washington Mutual and Ahmanson concerning the matters contemplated by this
Agreement, including transition matters and the business of the Surviving
Corporation.
6.18 Year 2000 Plan. Except as required by any Governmental Authority,
Ahmanson shall not make any material change in the Year 2000 Plan that would
have an adverse impact on the conversion plans relating to integration of
Ahmanson with Washington Mutual. Ahmanson shall on a regular (but no less than
monthly) basis provide Washington Mutual with reasonably detailed written
updates with respect to Ahmanson's compliance with the Year 2000 Plan and any
changes thereto.
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6.19 Stock Option Agreement. Ahmanson shall, on or before March 17,
1998 (but after the execution and delivery hereof), execute and deliver the
Stock Option Agreement.
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 Washington Mutual and Ahmanson to consummate
the Merger is subject to the fulfillment or written waiver by Washington Mutual
and Ahmanson prior to the Effective Time of each of the following conditions:
(a) Stockholder Approvals. This Agreement and the Merger shall have
been duly adopted by the requisite votes of the stockholders of Ahmanson
and the issuance of shares of Washington Mutual Stock as contemplated by
this Agreement shall have been duly approved by the shareholders of
Washington Mutual.
(b) Regulatory Approvals. Any consents, waivers, clearances, approvals
and authorizations of Governmental Authorities that are necessary to permit
consummation of the Merger shall have been obtained and shall remain in
full force and effect and all statutory waiting periods in respect thereof
shall have expired.
(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 Merger. No statute, rule, regulation, order, injunction
or decree shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits or makes illegal the consummation of
the Merger.
(d) Registration Statement. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement 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.
(e) Listing. The shares of Washington Mutual Stock to be issued in the
Merger and the Washington Mutual Depositary Shares shall have been approved
for listing on the Nasdaq, subject to official notice of issuance.
(f) Pooling-of-Interests. Each of Washington Mutual and Ahmanson shall
have received a letter from Washington Mutual's independent public
accountants, dated the Closing Date, in form and substance reasonably
satisfactory to Washington Mutual and
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Ahmanson, respectively, to the effect that the Merger will qualify for
pooling-of-interests accounting treatment.
7.02 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 Washington Mutual set forth in this Agreement shall be true and correct
in all respects as of the date of this Agreement and (except to the extent
such representations and warranties speak as of the earlier date) as of the
Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of determining the satisfaction of this
condition, no effect shall be given to any exception in such
representations and warranties relating to materiality or a Material
Adverse Effect, and provided, further, however, that, for purposes of this
condition, such representations and warranties (other than the
representations and warranties contained in Section 5.03(b), which shall be
true and correct in all material respects) shall be deemed to be true and
correct in all respects unless the failure or failures of such
representations and warranties to be so true and correct, individually or
in the aggregate, results or would reasonably be expected to result in a
Material Adverse Effect on Washington Mutual and its Subsidiaries taken as
a whole. Ahmanson shall have received a certificate signed on behalf of
Washington Mutual by the Chief Executive Officer and Chief Financial
Officer of Washington Mutual to the foregoing effect.
(b) Performance of Obligations of Washington Mutual. Washington Mutual
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 Washington Mutual by the Chief Executive Officer and
the Chief Financial Officer of Washington Mutual 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" within the meaning of Section 368 of the Code that,
accordingly, (i) no gain or loss will be recognized by Ahmanson as a result
of the Merger and (ii) no gain or loss will be recognized by a stockholder
of Ahmanson who receives shares of Washington Mutual Stock in exchange for
shares of Ahmanson Stock, except with respect to cash received in lieu of
fractional share interests. In rendering its opinion, such counsel may
require and rely upon representations contained in letters from Ahmanson,
Washington Mutual and stockholders of Ahmanson. The foregoing opinion will
not apply to stockholders or persons receiving Washington Mutual Common
Stock as compensation.
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(d) Accountants' Letters. Ahmanson shall have received the letters
referred to in Section 6.13 from Deloitte & Touche LLP, Washington Mutual's
independent auditors.
7.03 Conditions to Obligation of Washington Mutual. The obligation of
Washington Mutual to consummate the Merger is also subject to the fulfillment or
written waiver by Washington Mutual prior to the Effective Time of each of the
following conditions:
(a) Representations and Warranties. The representations and warranties
of Ahmanson set forth in this Agreement shall be true and correct in all
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of the earlier date) as of the
Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of determining the satisfaction of this
condition, no effect shall be given to any exception in such
representations and warranties relating to materiality or a Material
Adverse Effect, and provided, further, however, that, for purposes of this
condition, such representations and warranties (other than the
representations and warranties contained in Section 5.04(b), which shall be
true and correct in all material respects) shall be deemed to be true and
correct in all respects unless the failure or failures of such
representations and warranties to be so true and correct, individually or
in the aggregate, results or would reasonably be expected to result in a
Material Adverse Effect on Ahmanson and its Subsidiaries taken as a whole.
Washington Mutual shall have received a certificate signed on behalf of
Ahmanson by the Chief Executive Officer and Chief Financial Officer of
Ahmanson to the foregoing 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
Washington Mutual 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 Washington Mutual's Counsel. Washington Mutual shall
have received an opinion of Foster Pepper & Shefelman PLLC, counsel to
Washington Mutual, 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 within the meaning of Section
368(a)(1)(A) of the Code. In rendering its opinion, Foster Pepper &
Shefelman PLLC may require and rely upon written representations from
Ahmanson, Washington Mutual and stockholders of Ahmanson.
(d) Accountants' Letters. Washington Mutual shall have received the
letters referred to in Section 6.13 from KPMG Peat Marwick LLP, Ahmanson's
independent auditors.
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(e) Ahmanson Rights Agreement. The rights issued pursuant to the
Ahmanson Rights Agreement shall not have become nonredeemable, exercisable,
distributed or triggered pursuant to the terms of such agreement.
(f) Restriction, Term or Condition. None of the consents, waivers,
clearances, approvals or authorizations referred to in Section 7.01(b)
shall contain any restriction, term or condition which would reasonably be
expected to, following the Effective Time, have a Material Adverse Effect
on the Surviving Corporation and its Subsidiaries taken as a whole.
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 Washington Mutual and Ahmanson, 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 Washington
Mutual or Ahmanson, 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, which breach cannot be or has not been cured within 30 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 contained herein, which breach cannot be or has not been cured
within 30 calendar days after the giving of written notice to the breaching
party of such breach, provided that such breach would entitle the
non-breaching party not to consummate the Merger under Article VII hereof.
(c) Delay. At any time prior to the Effective Time, by Washington
Mutual or Ahmanson, 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 March 31, 1999, 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 Ahmanson or Washington Mutual, 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
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nonappealable action of such Governmental Authority or (ii) the stockholder
approval required by Section 7.01(a) hereof is not obtained at the
Washington Mutual Meeting or the Ahmanson Meeting.
(e) Failure to Recommend, Etc. (i) At any time prior to the Ahmanson
Meeting, by Washington Mutual or Ahmanson if the Ahmanson 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 Washington Mutual; or (ii) by
the Washington Mutual Board if a tender offer or exchange offer for 25% or
more of the outstanding shares of Ahmanson Common Stock is commenced (other
than by Washington Mutual) and the Ahmanson Board recommends that the
stockholders of Ahmanson tender their shares in such tender or exchange
offer or otherwise fails to recommend that such stockholders reject such
tender offer or exchange offer within ten business days after the
commencement thereof (which, in the case of an exchange offer, shall be the
effective date of the registration statement relating to such exchange
offer).
(f) Subsequent Triggering Event. By the Board of Directors of
Washington Mutual, if a Subsequent Triggering Event (as defined in the
Stock Option Agreement) has occurred.
8.02 Effect of Termination and Abandonment. In the event of termination
of this Agreement and the abandonment of the Merger pursuant to this Article
VIII, no party to this Agreement shall have any liability or further obligation
to any other party hereunder except as set forth below and except that
termination will not relieve a breaching party from liability for any breach of
this Agreement giving rise to such termination and except that Sections 8.02 and
9.05 shall survive any termination of this Agreement.
(a) If this Agreement is terminated by Washington Mutual pursuant to
Section 8.01(b), 8.01(d)(ii) (but only if Ahmanson stockholders have failed
to approve the Merger) or (e), or by Ahmanson pursuant to Section 8.01(b),
then the other party shall, at the written request of the terminating
party, reimburse the terminating party for its documented, reasonable
out-of-pocket expenses (including fees and expenses of legal, financial and
accounting advisors), up to a maximum of $15 million in the aggregate (the
"Expense Reimbursement").
(b) If this Agreement is terminated (i) by Washington Mutual pursuant
to Section 8.01(e), (ii) by Washington Mutual or Ahmanson pursuant to
Section 8.01(d)(ii) because of a failure to obtain the required approval of
the stockholders of Ahmanson after an Acquisition Proposal for Ahmanson
shall have been publicly disclosed, or any Person shall have publicly
disclosed an intention (whether or not conditional) to make an Acquisition
Proposal, or (iii) by Washington Mutual pursuant to Section 8.01(b) if the
breach by Ahmanson giving rise to such termination was willful and, at or
prior to such termination, an Acquisition Proposal shall have been made
known to Ahmanson or any of its Subsidiaries or shall have been publicly
disclosed to Ahmanson's stockholders, or any Person shall have made known
to Ahmanson or any of its Subsidiaries or otherwise publicly disclosed an
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intention (whether or not conditional) to make an Acquisition Proposal, and
regardless of whether such Acquisition Proposal shall have been rejected by
Ahmanson or withdrawn prior to the time of such termination, then in any
such case Ahmanson shall pay to Washington Mutual a termination fee of $85
million (the "Initial Termination Fee"). In addition, if, within 18 months
after any such termination described in the preceding sentence that gave
rise to an obligation to pay the Initial Termination Fee, Ahmanson enters
into a definitive agreement with respect to, or consummates a transaction
contemplated, in any Acquisition Proposal with any Person, Ahmanson shall
pay to Washington Mutual an additional termination fee equal to $190
million (the "Subsequent Termination Fee" and together with the Initial
Termination Fee, the "Termination Fee"). Notwithstanding the foregoing,
Washington Mutual shall not be entitled to either the Initial Termination
Fee or the Subsequent Termination Fee if Washington Mutual has exercised
all or any part of the Option (as defined in the Stock Option Agreement).
(c) Any Termination Fee or Expense Reimbursement that becomes payable
pursuant to Section 8.02(a) and/or 8.02(b) shall be paid promptly following
the receipt of a written request for Termination Fee and/or Expense
Reimbursement (including documentation supporting the Expense Reimbursement
fees and expenses). Notwithstanding the foregoing, in no event shall either
party be obligated to pay any Termination Fee or Expense Reimbursement if
such party shall be entitled to terminate this Agreement pursuant to
Section 8.01(b).
(d) Ahmanson and Washington Mutual agree that the agreements contained
in Section 8.02(a) and 8.02(b) above are an integral part of the
transactions contemplated by this Agreement, and that without such
agreements Washington Mutual would not have entered into this Agreement.
ARTICLE IX
MISCELLANEOUS
9.01 Survival. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than
Sections 6.11 and 6.12 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 (a) waived by the party benefitted by the provision, or
(b) 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 (i)
after the Ahmanson Meeting, this Agreement may not be amended if it would
violate the DGCL or reduce the consideration to be received by Ahmanson
stockholders in the Merger and (ii) after the Washington Mutual Meeting, this
Agreement may not be amended if it would violate Washington law.
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9.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
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 or WBCA are
applicable).
9.05 Expenses. Except as provided in Section 8.02, 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 Ahmanson and Washington Mutual.
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 Washington Mutual, to:
Washington Mutual, Inc.
1201 Third Avenue
Seattle, Washington 98101
Attention: Marc R. Kittner
Facsimile: (206) 554-2790
With a copy to:
Gibson, Dunn & Crutcher LLP
1 Montgomery Street, 31st Floor
San Francisco, California 94104
Attention: Todd H. Baker, Esq.
Facsimile: (415) 956-5309
and a copy to:
Foster Pepper & Shefelman
1111 Third Avenue, Suite 3400
Seattle, Washington 98101
Attention: Bernard Russell, Esq.
Facsimile: (206) 447-9700
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If to Ahmanson, to:
H. F. Ahmanson & Company
4900 Rivergrade Road
Irwindale, California 91706
Attention: Madeleine Kleiner
Facsimile: (626) 814-6750
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 and Schedules 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 except for the Confidentiality
Letter. Except for Sections 6.11 and 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 or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule 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 Washington Mutual, 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.
WASHINGTON MUTUAL, INC.
By: /s/ Fay L. Chapman
-------------------------------
Name: Fay L. Chapman
Title: Executive Vice President
H. F. AHMANSON & COMPANY
By: /s/ Bruce G. Willison
-------------------------------
Name: Bruce G. Willison
Title: President and Chief Operating
Officer
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AMENDMENT TO
RIGHTS AGREEMENT
AMENDMENT TO RIGHTS AGREEMENT (this "Amendment"), dated as of March 16,
1998, amends the Rights Agreement, dated as of November 7, 1997 (the "Rights
Agreement"), between H. F. Ahmanson & Company (the "Company") and First Chicago
Trust Company of New York, as Rights Agent (the "Rights Agent"). Certain
capitalized terms used herein are defined in the Rights Agreement unless
otherwise specified herein.
WHEREAS, the Company wishes to amend the Rights Agreement as set forth
herein;
WHEREAS, the Independent Directors (as defined in the Rights Agreement)
of the Board of Directors of the Company have consented to the Amendment, and
have directed the appropriate officers of the Company to amend the Rights
Agreement as set forth herein; and
WHEREAS, the Rights Agent has been directed by the Company to execute
this Amendment, and the Rights Agent has received a certificate from an
appropriate officer of the Company in connection herewith.
NOW, THEREFORE, in accordance with Section 27 of the Rights Agreement,
the Company and the Rights Agent agree as follows:
1. The definition of the term "Acquiring Person" in the Rights
Agreement shall be amended to delete the word "and" before clause (iii) in
the first sentence and to add a new clause (iv) at the end of the first
sentence which reads as follows:
; and (iv) no Person shall be deemed an "Acquiring Person" if such
Person's Beneficial Ownership of shares of Common Stock consists solely
of one or more of (A) shares of Common Stock Beneficially Owned
pursuant to the grant or exercise of an option granted to such Person
(an "Option Holder") by the Company in connection with an agreement to
merge with, or acquire, the Company entered into prior to a Flip-In
Event, (B) shares of Common Stock (or securities convertible into,
<PAGE>
exchangeable into or exercisable for Common Stock), Beneficially Owned
by such Option Holder or its Affiliates or Associates at the time of
grant of such option, (C) the right to acquire shares of Common Stock
as a result of entering into any such agreement to merge entered into
prior to a Flip-In Event or the acquisition of shares of Common Stock
upon consummation of any such merger prior to a Flip-In Event and (D)
shares of Common Stock (or securities convertible into, exchangeable
into or exercisable for Common Stock) which are acquired (i) by an
Affiliate or Associate that is an investment bank of the other party to
any such agreement to merge as a result of engaging in brokerage,
discretionary money management, financing activities for third parties,
arbitrage, research, and trading activities in the normal and usual
course of its business or (ii) by any subsidiary broker-dealers,
investment advisors or trust departments of the other party to any such
agreement to merge as a result of purchasing securities of the Company
in the ordinary course of business.
2. Except as specifically amended by this Amendment, all terms,
conditions and provisions of the Rights Agreement shall remain in full force
and effect.
3. THIS AMENDMENT TO THE RIGHTS AGREEMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER THE LAWS OF THE STATE OF DELAWARE AND FOR ALL PURPOSES
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH STATE
APPLICABLE TO CONTRACTS TO BE MADE AND PERFORMED ENTIRELY WITHIN SUCH STATE.
4. This Amendment may be executed in any number of counterparts and
each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and
the same instrument.
-2-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered by their duly authorized officers as of the date first
above written.
H.F. Ahmanson & Company
By:/s/ Bruce G. Willison
------------------------------
Name: Bruce G. Willison
Title: President and Chief
Operating Officer
FIRST CHICAGO TRUST COMPANY OF NEW YORK
as Rights Agent
By:/s/ Joanne Gorostiola
------------------------------
Name: Joanne Gorostiola
Title: Assistant Vice President
-3-
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN PROVISIONS
CONTAINED HEREIN AND TO RESALE RESTRICTIONS UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated March 16, 1998, between H.F. Ahmanson &
Company, a Delaware corporation ("Issuer"), and Washington Mutual, Inc., a
Washington corporation ("Grantee").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Stock Option Agreement
(this "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement
and in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. Grant of Option.
(a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to an
aggregate of 21,796,426 fully paid and nonassessable shares of Issuer's Common
Stock, par value $.01 per share ("Common Stock"), at a price of $79.86 per share
(the "Option Price"); provided, however, that in no event shall the number of
shares of Common Stock for which this Option is exercisable exceed 19.9% of the
Issuer's issued and outstanding shares of Common Stock without giving effect to
any shares subject to or issued pursuant to the Option. The number of shares of
Common Stock that may be received upon the exercise of the Option and the Option
Price are subject to adjustment as herein set forth.
(b) In the event that any shares of Common Stock are either (i) issued
or otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5 hereof) or (ii) redeemed, repurchased, retired or otherwise cease to
be outstanding after the date of this Agreement, the number of shares of Common
Stock subject to the Option shall be increased or decreased, as appropriate, so
that, after such issuance or such redemption, repurchase, retirement or other
action, such number equals 19.9% of the number of shares of Common Stock then
issued and outstanding without giving effect to any shares subject or issued
pursuant to the Option. Nothing contained in this Section 1(b) or elsewhere in
this Agreement shall be deemed to authorize Issuer or Grantee to issue, redeem,
repurchase or retire shares in breach of any provision of the Merger Agreement.
2. Exercise of Option.
(a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as hereinafter defined)
shall have occurred prior to the occurrence of an Exercise
<PAGE>
Termination Event (as hereinafter defined), provided that the Holder shall have
sent the written notice of such exercise (as provided in subsection (e) of this
Section 2) within ninety days following such Subsequent Triggering Event (or
such longer period as provided in Section 10), provided further, however, that
if the Option cannot be exercised on any day because of any injunction, order or
similar restraint issued by a court of competent jurisdiction, the period during
which the Option may be exercised shall be extended so that the Option shall
expire no earlier than on the tenth business day after such injunction, order or
restraint shall have been dissolved or when such injunction, order or restraint
shall have become permanent and no longer subject to appeal, as the case may be.
Each of the following shall be an "Exercise Termination Event": (i) the
Effective Time (as defined in the Merger Agreement); (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event; or (iv) delivery
of a written request for payment of Termination Fees pursuant to Section 8.02 of
the Merger Agreement (provided that no such Exercise Termination Event shall be
deemed to have occurred unless such Termination Fees are paid in accordance with
such Section 8.02; (iii) the passage of 18 months after termination of the
Merger Agreement if such termination follows the occurrence of an Initial
Triggering Event; or (iv) delivery of a written request for payment of
Termination Fees pursuant to Section 8.02 of the Merger Agreement (provided that
no such Exercise Termination Event shall be deemed to have occurred unless such
Termination Fees are paid in accordance with such Section 8.02. The term
"Holder" shall mean the holder or holders of the Option. Notwithstanding
anything to the contrary herein, (i) the Option may not be exercised at any time
when Grantee shall be in breach of any of its representations, warranties,
covenants or agreements contained in the Merger Agreement such that Issuer would
be entitled to terminate the Merger Agreement pursuant to Section 8.01(b)
thereof and (ii) this Agreement shall automatically terminate upon the
termination of the Merger Agreement pursuant to Section 8.01(b) thereof as a
result of the breach by Grantee of its representations, warranties, covenants or
agreements contained in the Merger Agreement.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Significant Subsidiaries, as defined in
Rule 1-02 of Regulation S-X promulgated by the Securities and Exchange
Commission (each an "Issuer Subsidiary"), without having received
Grantee's prior written consent, shall have entered into an agreement
to engage in an Acquisition Transaction (as hereinafter defined) with
any person (the term "person" for purposes of this Agreement having the
meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the
rules and regulations thereunder) other than Grantee or any of its
Subsidiaries (each a "Grantee Subsidiary") or the Board of Directors of
Issuer shall have recommended that the stockholders of Issuer approve
or accept any Acquisition Transaction with any person other than
Grantee or a Subsidiary of Grantee. For purposes of this Agreement,
"Acquisition Transaction" shall mean (x) a merger or consolidation, or
any similar transaction, involving Issuer or any Issuer Subsidiary ,
(y) a purchase, lease or other acquisition or assumption of all or a
substantial portion of the assets or deposits of Issuer or any
Significant Subsidiary of Issuer, or (z) a purchase or other
acquisition (including by way of merger, consolidation, share exchange
or otherwise) of securities representing 10% or more of the voting
power of Issuer; provided, however, that in no event shall any merger,
<PAGE>
consolidation, purchase or similar transaction involving only the
Issuer and one or more of its Subsidiaries or involving only two or
more of such Subsidiaries, be deemed to be an Acquisition Transaction,
provided that any such transaction is not entered into in violation of
the terms of the Merger Agreement;
(ii) (A) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, to engage in an Acquisition Transaction with any person other
than Grantee or a Grantee Subsidiary, or (B) the Board of Directors of
Issuer shall have failed to make its recommendation that the
stockholders of the Issuer approve the transactions contemplated by the
Merger Agreement, or (C) the Board of Directors of Issuer shall have
publicly withdrawn or modified, or publicly announced its interest to
withdraw or modify, in any manner adverse to Grantee, its
recommendation that the stockholders of Issuer approve the transactions
contemplated by the Merger Agreement.
(iii) Any person, other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course
of its business, shall have acquired beneficial ownership or the right
to acquire beneficial ownership of 10% or more of the outstanding
shares of Common Stock (the term "beneficial ownership" for purposes of
this Agreement having the meaning assigned thereto in Section 13(d) of
the 1934 Act, and the rules and regulations thereunder);
(iv) After any person other than Grantee or any Grantee Subsidiary
shall have made a bona fide proposal to Issuer or its stockholders by
public announcement or written communication that is or becomes the
subject of public disclosure to engage in an Acquisition Transaction,
the stockholder approval required by Section 7.01(a) of the Merger
Agreement is not obtained at the Company Y Meeting;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction (whether such
overture becomes the subject of public disclosure or not), Issuer shall
have willfully breached any covenant or obligation contained in the
Merger Agreement or willfully breached any representation or warranty
contained in the Merger Agreement and such breach (x) would entitle
Grantee to terminate the Merger Agreement and (y) shall not have been
cured prior to the Notice Date (as defined below);
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its
prior written consent, shall have filed an application or notice with
the Office of Thrift Supervision ("OTS"), the Federal Reserve Board, or
other federal or state bank regulatory authority, which application or
notice has been accepted for processing, for approval to engage in an
Acquisition Transaction; or
(vii) Any person other than Grantee or any Grantee Subsidiary
commences or publicly announces its intention to commence a tender
offer or exchange offer for securities representing 10% or more of the
voting power of Issuer.
<PAGE>
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 25%
or more of the then outstanding shares of Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
Section 2(b)(i) hereof, except that the percentage referred to in
clause (z) thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence
of any Initial Triggering Event or Subsequent Triggering Event of which it has
notice, it being understood that the giving of such notice by Issuer shall not
be a condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the Notice Date
for the closing of such purchase (the "Closing Date"); provided that if prior
notification to or approval of the Federal Reserve Board or the OTS or any other
regulatory or antitrust agency is required in connection with such purchase, the
Holder shall promptly file the required notice or application for approval,
shall promptly notify Issuer of such filing and shall expeditiously process the
same and the period of time that otherwise would run pursuant to this sentence
shall run instead from the date on which any required notification periods have
expired or been terminated or such approvals have been obtained and any
requisite waiting period or periods shall have passed. Any exercise of the
Option shall be deemed to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Agreement for an Option evidencing the rights of
the Holder thereof to purchase the balance of the shares purchasable hereunder,
and the Holder shall deliver to Issuer this Agreement and a letter agreeing that
the Holder will not offer to sell or otherwise dispose of such shares in
violation of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may
be endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Issuer
<PAGE>
and to resale restrictions arising under the Securities Act of
1933, as amended. A copy of such agreement is on file at the
principal office of Issuer and will be provided to the holder
hereof without charge upon receipt by Issuer of a written
request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the Securities and Exchange Commission (the "SEC"), or an opinion of counsel,
in form and substance reasonably satisfactory to Issuer, to the effect that such
legend is not required for purposes of the 1933 Act; (ii) the reference to the
provisions of this Agreement in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if the shares have been sold or
transferred in compliance with the provisions of this Agreement and under
circumstances that do not require the retention of such reference in the opinion
of counsel, in form and substance reasonably satisfactory to Issuer; and (iii)
the legend shall be removed in its entirety if the conditions in the preceding
clauses (i) and (ii) are both satisfied. In addition, such certificates shall
bear any other legend as may be required by law.
(i) Upon the giving by the Holder to Issuer of the written notice
of exercise of the Option provided for under subsection (e) of this
Section 2 and the tender of the applicable purchase price in
immediately available funds, the Holder shall be deemed to be the
holder of record of the shares of Common Stock issuable upon such
exercise, notwithstanding that the stock transfer books of Issuer shall
then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder. Issuer shall
pay all expenses, and any and all United States federal, state and
local taxes and other charges that may be payable in connection with
the preparation, issue and delivery of stock certificates under this
Section 2 in the name of the Holder or its assignee, transferee or
designee.
3. Certain Issuer Actions. Issuer agrees: (i) that it shall at all
times maintain, free from preemptive rights, sufficient authorized but unissued
or treasury shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase Common
Stock; (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other voluntary
act, avoid or seek to avoid the observance or performance of any of the
covenants, stipulations or conditions to be observed or performed hereunder by
Issuer; (iii) promptly to take all action as may from time to time be required
(including (x) complying with all premerger notification, reporting and waiting
period requirements specified in 15 U.S.C. ss.18a and regulations promulgated
thereunder and (y) in the event, under any federal or state banking law, prior
approval of or notice to the Federal Reserve Board, the OTS or to any state
regulatory authority is necessary before the Option may be exercised,
cooperating fully with the Holder in preparing such applications or notices and
providing such information to the Federal Reserve Board, the OTS or such state
regulatory authority as they may require) in order to permit the Holder to
exercise the Option and Issuer duly and effectively to issue shares of Common
Stock pursuant hereto; and (iv) promptly to take all action provided herein to
protect the rights of the Holder against dilution.
<PAGE>
4. Exchange. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the holder
thereof to purchase, on the same terms and subject to the same conditions as are
set forth herein, in the aggregate the same number of shares of Common Stock
purchasable hereunder. The terms "Agreement" and "Option" as used herein include
any Stock Option Agreements and related Options for which this Agreement (and
the Option granted hereby) may be exchanged. Upon receipt by Issuer of evidence
reasonably satisfactory to it of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver anew Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. Adjustment of Shares. In addition to the adjustment in the number of
shares of Common Stock that are purchasable upon exercise of the Option pursuant
to Section 1 of this Agreement, the number of shares of Common Stock purchasable
upon the exercise of the Option and the Option Price shall be subject to
adjustment from time to time as provided in this Section 5. In the event of any
change in, or distributions in respect of, the Common Stock by reason of stock
dividends, split-ups, mergers, recapitalizations, combinations, subdivisions,
conversions, exchanges of shares, distributions on or in respect of the Common
Stock that would be prohibited under the terms of the Merger Agreement, or the
like, the type and number of shares of Common Stock purchasable upon exercise
hereof and the Option Price shall be appropriately adjusted in such manner as
shall fully preserve the economic benefits provided hereunder and proper
provision shall be made in any agreement governing any such transaction to
provide for such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
6. Registration Rights. Upon the occurrence of a Subsequent Triggering
Event that occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee (whether on its own behalf or on behalf of any subsequent
holder of this Option (or part thereof) or any of the shares of Common Stock
issued pursuant hereto) delivered within six months of such Subsequent
Triggering Event (or such longer period as provided in Section 10), promptly
prepare, file and keep current a shelf registration statement under the 1933 Act
covering this Option and any shares issued and issuable pursuant to this Option
and shall use its reasonable best efforts to cause such registration statement
to become effective and remain current in order to permit the sale or other
disposition of this Option and any shares of Common Stock issued upon total or
partial exercise of this Option ("Option Shares") in accordance with any plan of
disposition requested by Grantee. Issuer will use its reasonable best efforts to
cause such registration statement first to become effective and thereto remain
effective for such period not in excess of 180 days from the day such
registration statement first becomes effective or such shorter time as may be
reasonably necessary to effect such sales or other dispositions. Grantee shall
have the right to demand two such registrations. The foregoing notwithstanding,
if, at the time of any request by Grantee for registration of the Option or
Option Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of
<PAGE>
the managing underwriter or managing underwriters, or, if none, the sole
underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practicable and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect of representations,
warranties, indemnities and other agreements customarily included in secondary
offering underwriting agreements for the Issuer.
Upon receiving any request under this Section 6 from any Holder, Issuer
agrees to send a copy thereof to any other person known to Issuer to be entitled
to registration rights under this Section 6, in each case by promptly mailing
the same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall Issuer be obligated to effect more than three registrations
pursuant to this Section 6 by reason of the fact that there shall be more than
one Grantee as a result of any assignment or division of this Agreement.
7. Repurchase Right.
(a) (i) Following the occurrence of a Repurchase Event (as defined
below), following a request of the Holder, delivered prior to an Exercise
Termination Event, Issuer (or any successor thereto) shall repurchase the Option
from the Holder at a price (the "Option Repurchase Price") equal to the amount
by which (A) the Market/Offer Price (as defined below) exceeds (B) the Option
Price, multiplied by the number of shares for which this Option may then be
exercised; and (ii) at the request of the owner of Option Shares from time to
time (the "Owner"), delivered within 90 days of such occurrence (or such longer
period as provided in Section 10), Issuer shall repurchase such number of the
Option Shares from the Owner as the Owner shall designate at a price (the
"Option Share Repurchase Price") equal to the Market/Offer Price multiplied by
the number of Option Shares so designated.
The term "Market/Offer Price" shall mean the highest of (i) the price
per share of Common Stock at which a tender offer or exchange offer therefor has
been made, (ii) the price per share of Common Stock to be paid by any third
party pursuant to an agreement with Issuer, (iii) the highest closing price for
shares of Common Stock within the six-month period immediately preceding the
date the Holder gives notice of the required repurchase of this Option or the
Owner gives notice of the required repurchase of Option Shares, as the case
maybe, or (iv) in the event of a sale of all or a substantial portion of
Issuer's assets, the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to Issuer, divided by the
number of shares of Common Stock of Issuer outstanding at the
<PAGE>
time of such sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the case may be, and
reasonably acceptable to Issuer.
(b) The Holder and the Owner, as the case may be, may exercise its
right to require Issuer to repurchase the Option and any Option Shares pursuant
to this Section 7 by surrendering for such purpose to Issuer, at its principal
office, this Agreement or certificates for Option Shares, as applicable,
accompanied by a written notice or notices stating that the Holder or the Owner,
as the case maybe, elects to require Issuer to repurchase this Option and/or the
Option Shares in accordance with the provisions of this Section 7. As promptly
as practicable, and in any event within five business days after the surrender
of the Option and/or certificates representing Option Shares and the receipt of
such notice or notices relating thereto, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor or the portion thereof that Issuer is not
then prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at anytime after delivery of a
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation or through commencement of regulatory
enforcement action from delivering to the Holder and/or the Owner, as
appropriate, the Option Repurchase Price and the Option Share Repurchase Price,
respectively, in full (and Issuer hereby undertakes to use its best efforts to
obtain all required regulatory and legal approvals and to file any required
notices as promptly as practicable in order to accomplish such repurchase), the
Holder or Owner may revoke its notice of repurchase of the Option or the Option
Shares either in whole or to the extent of the prohibition, whereupon, in the
latter case, Issuer shall promptly (i) deliver to the Holder and/or the Owner,
as appropriate, that portion of the Option Repurchase Price or the Option Share
Repurchase Price that Issuer is not prohibited from delivering; and (ii)
deliver, as appropriate, either (A) to the Holder, a new Agreement evidencing
the right of the Holder to purchase that number of shares of Common Stock
obtained by multiplying the number of shares of Common Stock for which the
surrendered Agreement was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Option Repurchase Price
less the portion thereof theretofore delivered to the Holder and the denominator
of which is the Option Repurchase Price, or (B) to the Owner, a certificate for
the Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed
to have occurred (i) upon the consummation of any merger, consolidation or
similar transaction involving Issuer or any purchase, lease or other acquisition
of all or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the provisos to Section 2(b)(i) hereof or (ii) upon the acquisition by any
person of beneficial ownership of 50% or more of the then outstanding shares of
Common Stock, provided that no such
<PAGE>
event shall constitute a Repurchase Event unless a Subsequent Triggering Event
shall have occurred prior to an Exercise Termination Event.
8. Substitute Option.
(a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged for stock or other securities of any other person or cash or any
other property or the then outstanding shares of Common Stock shall after such
merger represent less than 50% of the outstanding voting shares and voting share
equivalents of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provision so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of the Holder, of either (x) the Acquiring Corporation
(as hereinafter defined) or (y) any person that controls the Acquiring
Corporation.
(b) The following terms have the meanings indicated:
(1) "Acquiring Corporation" shall mean (i) the continuing or
surviving corporation of a consolidation or merger with Issuer (if other
than Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, and (iii) the transferee of all or substantially all
of Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the Market/ Offer Price, as defined
in Section 7.
(4) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than
the closing price of the shares of Substitute Common Stock on the day
preceding such consolidation, merger or sale; provided that if Issuer
is the issuer of the Substitute Option, the Average Price shall be
computed with respect to a share of common stock issued by the person
merging into Issuer or by any company which controls or is controlled
by such person, as the Holder may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
<PAGE>
Option in substantially the same form as this Agreement (after giving effect for
such purpose to the provisions of Section 9), which shall be applicable to the
Substitute Option.
(d) The Substitute Option shall be exercisable for such number of
shares of Substitute Common Stock as is equal to the Assigned Value multiplied
by the number of shares of Common Stock for which the Option is then
exercisable, divided by the Average Price. The exercise price of the Substitute
Option per share of Substitute Common Stock shall then be equal to the Option
Price multiplied by a fraction, the numerator of which shall be the number of
shares of Common Stock for which the Option is then exercisable and the
denominator of which shall be the number of shares of Substitute Common Stock
for which the Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option.
In the event that the Substitute Option would be exercisable for more
than 19.9% of the shares of Substitute Common Stock outstanding prior to
exercise but for this clause (e), the issuer of the Substitute Option (the
"Substitute Option Issuer") shall make a cash payment to Holder equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in this clause (e) over (ii) the value of the Substitute Option after
giving effect to the limitation in this clause (e). This difference in value
shall be determined by a nationally recognized investment banking firm selected
by the Holder or the Owner, as the case may be, and reasonably acceptable to the
Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in subsection
(a) of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. Repurchase of Substitute Option.
(a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder") delivered prior to an Exercise Termination Event the
Substitute Option Issuer shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied by
the number of shares of Substitute Common Stock for which the Substitute Option
may then be exercised, and at the request of the owner (the "Substitute Share
Owner") of shares of Substitute Common Stock (the "Substitute Shares"), the
Substitute Option Issuer shall repurchase the Substitute Shares at a price (the
"Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the
<PAGE>
Substitute Option and the Substitute Shares pursuant to this Section 9 by
surrendering for such purpose to the Substitute Option Issuer, at its principal
office, the agreement for such Substitute Option (or, in the absence of such an
agreement, a copy of this Agreement) and/or certificates for Substitute Shares
accompanied by a written notice or notices stating that the Substitute Option
Holder or the Substitute Share Owner, as the case may be, elects to require the
Substitute Option Issuer to repurchase the Substitute Option and/or the
Substitute Shares in accordance with the provisions of this Section 9. As
promptly as practicable, and in any event within five business days after the
surrender of the Substitute Option and/or certificates representing Substitute
Shares and the receipt of such notice or notices relating thereto, the
Substitute Option Issuer shall deliver or cause to be delivered to the
Substitute Option Holder the Substitute Option Repurchase Price and/or to the
Substitute Share Owner the Substitute Share Repurchase Price therefor or, in
either case, the portion thereof which the Substitute Option Issuer is not then
prohibited under applicable law and regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation or through commencement of regulatory enforcement
action from repurchasing the Substitute Option and/or the Substitute Shares in
part or in full, the Substitute Option Issuer following a request for repurchase
pursuant to this Section 9 shall immediately so notify the Substitute Option
Holder and/or the Substitute Share Owner and thereafter deliver or cause to be
delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; provided, however, that if the
Substitute Option Issuer is at any time after delivery of a notice of repurchase
pursuant to subsection (b) of this Section 9 prohibited under applicable law or
regulation or through commencement of regulatory enforcement action from
delivering to the Substitute Option Holder and/or the Substitute Share Owner, as
appropriate, the Substitute Option Repurchase Price and the Substitute Share
Repurchase Price, respectively, in full (and the Substitute Option Issuer shall
use its best efforts to receive all required regulatory and legal approvals as
promptly as practicable in order to accomplish such repurchase), the Substitute
Option Holder or Substitute Share Owner may revoke its notice of repurchase of
the Substitute Option or the Substitute Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, the Substitute Option Issuer
shall promptly (i) deliver to the Substitute Option Holder or Substitute Share
Owner, as appropriate, that portion of the Substitute Option Repurchase Price or
the Substitute Share Repurchase Price that the Substitute Option Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. Extension of Certain Periods. The 90-day or six-month period for
exercise of certain rights under each of Sections 2, 6, 7 and 14 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for the
exercise of such rights (for so long as the Holder, Owner, Substitute
<PAGE>
Option Holder or Substitute Share Owner, as the case may be, is using its
reasonable best efforts to obtain such regulatory approval) and for the
expiration of all statutory waiting periods; and (ii) to the extent necessary to
avoid liability under Section 16(b) of the 1934 Act by reason of such exercise.
11. Issuer Representations and Warranties. Issuer hereby represents and
warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including, if required, redeeming all
of the Rights or amending or terminating the Company Y Rights Agreement) so that
the entering into of this Option Agreement, the acquisition of shares of Common
Stock hereunder and the other transactions contemplated hereby do not and will
not result in the grant of any rights to any person under the Company Y Rights
Agreement or enable or require the Company Y Rights to be exercised, distributed
or triggered.
12. Grantee Representations and Warranties. Grantee hereby represents and
warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter
into this Agreement and, subject to any approvals or consents to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of Grantee.
This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the 1933 Act.
13. Limitation on Total Profit.
<PAGE>
(a) Notwithstanding anything to the contrary contained herein, in no
event shall Grantee's Total Profit (as defined below in Section 13(c)hereof)
exceed $275 million.
(b) Notwithstanding anything to the contrary contained herein, the
Option may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below in Section 13(d)
hereof) of more than $275 million..
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant
to Section 7 hereof, (ii) (x) the amount received by Grantee pursuant to
Issuer's repurchase of Option Shares pursuant to Section 7 hereof, less (y)
Grantee's purchase price for such Option Shares, (iii) (x) the net cash amounts
received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares shall be converted or exchanged) to any
unaffiliated party, less (y) Grantee's purchase price of such Option Shares,
(iv) any amounts received by Grantee on the transfer of the Option (or any
portion thereof) to any unaffiliated party, (v) any equivalent amount with
respect to the Substitute Option, including pursuant to Section 8(e); and (vi)
the amount of any Termination Fee actually received by Grantee pursuant to
Section 8.02 of the Merger Agreement. For purposes of this Section 13,
references to Grantee shall be deemed to include references to any affiliate of
the Grantee.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of shares as to which Grantee may propose to exercise the Option
shall be the Total Profit determined as of the date of such proposed exercise
assuming that the Option were exercised on such date for such number of shares
and assuming that such shares, together with all other Option Shares held by
Grantee and its affiliates as of such date, were sold for cash at the closing
market price for the Issuer Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).
14. Assignment. Neither of the parties hereto may assign any of its
rights or obligations under this Agreement or the Option created hereunder to
any other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to an
Exercise Termination Event, Grantee, subject to the express provisions hereof,
may assign in whole or in part its rights and obligations hereunder within 90
days following such Subsequent Triggering Event (or such longer period as
provided in Section 10); provided, however, that until the date 15 days
following the date on which the Federal Reserve Board or the OTS, as applicable,
approves an application by Grantee to acquire the shares of Common Stock subject
to the Option (if such approval is required by law), Grantee may not assign its
rights under the Option except in (i) a widely dispersed public distribution,
(ii) a private placement in which no one party acquires the right to purchase in
excess of 2% of the voting shares of Issuer, (iii) an assignment to a single
party (e.g., a broker or investment banker) for the purpose of conducting a
widely dispersed public distribution on Grantee's behalf, or (iv) any other
manner approved by the Federal Reserve Board or the OTS, as applicable.
15. Filings. Each of Grantee and Issuer will use its best efforts to
make all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation
<PAGE>
making application to list the shares of Common Stock issuable hereunder on the
New York Stock Exchange upon official notice of issuance and applying to the
Federal Reserve Board and/or the OTS, as applicable, for approval to acquire the
shares issuable hereunder, but Grantee shall not be obligated to apply to state
banking authorities for approval to acquire the shares of Common Stock issuable
hereunder until such time, if ever, as it deems appropriate to do so.
16. Equitable Remedies. The parties hereto acknowledge that damages
would be an inadequate remedy for a breach of this Agreement by either party
hereto and that the obligations of the parties hereto shall be enforceable by
either party hereto through injunctive or other equitable relief.
17. Validity. If any term, provision, covenant or restriction contained
in this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer is not permitted to
repurchase pursuant to Section 7, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof), it is the express intention of Issuer to allow the Holder to acquire or
to require Issuer to repurchase such lesser number of shares as maybe
permissible, without any amendment or modification hereof.
18. Notices. All notices, requests, claims, demands and other
communications hereunder shall be deemed to have been duly given when delivered
in person, by cable, telegram, telecopy or telex, or by registered or certified
mail (postage prepaid, return receipt requested) at the respective addresses of
the parties set forth in the Merger Agreement.
19. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
20. Counterparts. This Agreement may be executed in two counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same agreement.
21. Expenses. Except as otherwise expressly provided herein, each of
the parties hereto shall bear and pay all costs and expenses incurred by it or
on its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
22. Entire Agreement. Except as otherwise expressly provided herein or
in the Merger Agreement, this Agreement contains the entire agreement between
the parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
<PAGE>
23. Capitalized Terms. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the Merger Agreement.
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
H.F. AHMANSON & COMPANY
By: /s/ Bruce G. Willison
------------------------------------
Name: Bruce G. Willison
Title: President and Chief
Operating Officer
WASHINGTON MUTUAL, INC.
By: /s/ Fay L. Chapman
------------------------------------
Name: Fay L. Chapman
Title: Executive Vice President
WASHINGTON H.F. AHMANSON
MUTUAL & COMPANY
Media Contact: Washington Mutual H.F. Ahmanson
(California) Mary Trigg
Tim McGarry 626-814-7922
818-775-3658
Washington Mutual
(Media outside of California)
Libby Hutchinson
206-461-2484
Investor Contact: Washington Mutual H.F. Ahmanson
Doug Wisdorf Steve Swartz
206-461-3805 626-814-7986
For Washington Mutual
and Ahmanson: Abernathy MacGregor Frank
Mike Pascale (212) 371-5999 March 17, 1998
Ian Campbell (213) 630-6550 FOR IMMEDIATE RELEASE
WASHINGTON MUTUAL, AHMANSON TO MERGER
ENHANCES GROWTH POTENTIAL; SOLIDIFIES NATIONAL CONSUMER
AND SMALL BUSINESS BANKING FRANCHISE
SEATTLE AND IRWINDALE, CA -- Washington Mutual, Inc. (Nasdaq: WAMU) and
H.F. Ahmanson & Company (NYSE: AHM) today announced that they have signed a
definitive agreement for Washington Mutual to acquire Ahmanson in a tax-free
exchange of common stock. The merger will create the nation's seventh-largest
banking company based on total 1997 year-end assets of nearly $150 billion. The
combined company will have deposits of $86.3 billion, and will serve nearly 6
million households through more than 2,000 consumer banking branches, loan
offices, consumer finance locations and commercial banking branches.
Additionally, the combined company will be the nation's leading adjustable-rate
mortgage lender and will further strengthen its position as the West
1
<PAGE>
Coast's number one mortgage lender. The transaction expands Washington Mutual's
consumer banking reach into Texas where Ahmanson currently operates more than 40
branches.
Terms of the transaction call for the tax-free exchange of 1.12 shares of
Washington Mutual common stock for each of Ahmanson's outstanding common shares.
This ratio represents a price of $80.36 per share for Ahmanson common stock,
based on Washington Mutual's closing price on March 16, 1998. At that price, the
transaction would have an initial value of $9.9 billion, and the combined
company would have a market capitalization of over $27 billion.
"With this transaction, we are creating a premier institution that will
have the size and scope of the largest banks yet continue its focus on consumers
and small business. It further distinguishes our company from the competition,"
said Kerry Killinger, chairman, president and chief executive officer of
Washington Mutual. "Our combination strengthens Washington Mutual's platform for
high growth, creating additional shareholder value and enabling us to better
serve our communities. We look forward to adding the many talented Ahmanson
employees to the already strong team at Washington Mutual."
"The combination of our two companies will create a West Coast-based
financial institution competitive with the nation's largest banking companies,"
said Charles R. Rinehart, chairman and chief executive officer of Ahmanson. "The
people of Ahmanson and Home Savings have substantially transformed our company
over the last several years, in order to meet our customers' needs in today's
competitive banking environment. I am especially proud of them. Their
extraordinary efforts have been a major factor in bringing us to this point in
our history. Because of its strong balance sheet, its tradition of
consumer-friendly service, and its well known commitment to community needs, I
believe Washington Mutual is clearly the best partner for Ahmanson's
shareholders, customers, and the communities we have served for many years."
ADDITIONAL TERMS OF THE TRANSACTION
The definitive agreement has been unanimously approved by the boards of
directors of Washington Mutual and Ahmanson. The transaction is subject to the
approval of the shareholders of both companies and the Office of Thrift
Supervision. The transaction will be structured as a tax-free exchange, and will
be accounted for as a pooling of interests. Closing is expected to take
2
<PAGE>
place late in the third quarter of 1998. Any proceeds from Ahmanson's goodwill
lawsuit will be shared by the shareholders of the combined company.
As part of the agreement, Ahmanson has agreed to pay a $275 million
break-up fee to Washington Mutual if the merger agreement is terminated under
certain circumstances. The break-up fee is payable either in cash or through
exercise of an option to purchase up to 19.9 percent of Ahmanson's common stock.
In addition, as part of the transaction, Washington Mutual will incur a
transaction-related charge of $370 million ($254 million after-tax).
Administration and operations areas will be combined by the summer of 1999.
Three current Ahmanson directors will join the Washington Mutual board of
directors upon completion of the merger, increasing to 19 the size of that
board. Killinger will continue in his present role in the combined company,
which will be called Washington Mutual, Inc.
STRONG CALIFORNIA PRESENCE
"With this transaction, we have significantly strengthened our competitive
position in California, the nation's most populous state," said Killinger. "The
combination of the Home Savings, Great Western, American Savings and Coast
Savings franchises makes California integral to Washington Mutual's future.
Consequently, we intend to continue to be closely and personally involved with
our California communities as we are in all of our other markets, while
continuing to offer consumer banking and home mortgage expertise to better serve
the financial needs of low- and moderate-income families and individuals."
Following completion of the merger, Washington Mutual will become
California's second-largest depository institution with a 17 percent market
share. It will serve the state with 700 financial centers (retail branches). The
company will be among the top three institutions, based on deposit market share,
in every major metropolitan market in California. The combined company's
California operations will be managed from its current Chatsworth, Irvine,
Stockton locations and from Washington Mutual's headquarters in Seattle.
INTEGRATION
Washington Mutual and Ahmanson will immediately begin planning the
integration of the two companies' operations. "A smooth integration of Great
Western remains our immediate priority
3
<PAGE>
for the first half of 1998. Once that integration has been completed, we will
turn our focus on the integration of Ahmanson," said Killinger. "Conversion of
Ahmanson's systems will occur in two phases: Texas in the fourth quarter of 1998
and California in the second quarter of 1999."
"Having completed 21 mergers and acquisitions in the last decade, our
company has successfully managed multiple integrations in the past," said
Killinger. "Our recent integration of American Savings, completed last July, was
conducted while the planning for the conversion of Great Western was underway."
"While in a transaction of this magnitude it is inevitable that positions
will be eliminated, the actual number of job losses should be significantly
lessened as a result of strong growth and natural attrition," Killinger said.
"The company anticipates that approximately 3,000-3,500 positions will be
consolidated as a result of the merger, due to both branch consolidations and
redundant administrative functions.
Washington Mutual anticipates that between 160-170 branches will be
consolidated as a result of the transaction. In those branches, the company will
give special consideration to the needs of low- and moderate-income
communities," Killinger said.
The company projects cost savings equal to approximately 40 percent of
Ahmanson's existing cost structure. Annual savings of $330 million are expected
to be realized by 2000. Washington Mutual expects the transaction to be
accretive to earnings per share in the year 2000.
COMMITMENT TO THE COMMUNITY
Washington Mutual's banking subsidiaries and Ahmanson's banking
subsidiaries have "outstanding" ratings under the Community Reinvestment Act
(CRA).
Throughout its history, Washington Mutual has demonstrated a strong
commitment to serving the financial needs of its local communities," said
Killinger. "In consultation with a wide variety of community-based
organizations, we will listen carefully to the needs of their constituents. We
are seeking to expand our relationships as our presence in California and other
areas grows. We will continue to strive to be the leader in meeting the
financial requirements of low to moderate income individuals and families."
4
<PAGE>
"At a time when large bank mergers have sometimes come under attack for the
depersonalization of customer service and civic involvement, Washington Mutual
has consciously built a company that combines all the conveniences of large
commercial banks with the highly personalized services that reflect the
communities it serves," Killinger continued. "As we go forward with our new
partners at Ahmanson, we intend to build on the commitments to community that
have grown out of our prior expansions."
With a history dating back to 1889, Washington Mutual is a financial
services company that provides a diversified line of products and services to
consumers and small- to mid-sized businesses. At Dec. 31, 1997, Washington
Mutual and its subsidiaries had assets of $97.0 billion. The company operates
more than 1,600 offices throughout the nation.
Ahmanson, with more than $52.5 billion in assets, is the parent company of
Home Savings of America, one of the nation's largest full-service consumer and
small business banks.
###
EDITOR'S NOTE: Washington Mutual's press releases are available at no charge
through the News On Demand Plus System. For a menu of Washington Mutual press
releases or to retrieve a specific release, call 1-(800) 329-6236. On the
Internet, press releases may be accessed at
http://www.businesswire.com/cnn/wamu.htm.
This press release contains forward-looking statements regarding the benefits of
the merger of Washington Mutual and Ahmanson, including cost savings to be
realized, earnings accretion, transaction charges and additional loan-loss
reserves and revenue enhancement opportunities following the merger. Actual
results may vary from the forward-looking statements as described in Washington
Mutual's Current Report on Form 8-K dated March 17, 1998, to which reference is
made. These factors include without limitation possible delays in integration of
Ahmanson's operations into Washington Mutual's, competitive factors which could
adversely affect consumer banking strategy and general economic conditions which
could negatively impact the volume of loan originations and the amount of loan
losses.
5
<PAGE>
Washington Mutual/H.F. Ahmanson
At-A-Glance
December 31, 1997 figures (all dollar figures in thousands, except per share
prices). Financial ratios reflect year-to-date figures. Ahmanson figures reflect
the acquisition of Coast Savings. Pro Forma numbers include adjustments for
transaction charges and other pro forma adjustments.
<TABLE>
<CAPTION>
Washington Ahmanson Pro Forma
Mutual
---------- --------- ---------
<S> <C> <C> <C>
Total Assets $96,981.1 $52,511.2 $149,176.3
Total Deposits $50,986.0 $35,386.6 $86,372.6
Total Loans $67,140.2 $36,405.8 $103,546.0
Net Income $481.8* $413.8 $895.6
Nonperforming Assets $806.6 $694.6 $1,501.2
Nonperforming Assets/Assets 0.83% 1.32% 1.01%
Reserves $670.5 $484.3 $1,154.8
Reserves/Nonperforming Loans 112% 99% 106%
Stockholders' Equity/Assets 5.47% 5.95% 5.47%
Book Value Per Share $20.80 $25.87 $20.91
Closing Stock Price Per Share (3/16/98) $71.75 $65.50
Market Capitalization (billions) (3/16/98) $17.9 $7.9 $27.6
Retail Branches 892 409 1,252
Loan Offices 187 120 307
Commercial Bank Offices 54 0 54
Consumer Finance Offices 502 0 502
Total ATM Locations +1,000 541 +1,541
Total Banking Locations 2,635 1,070 3,705
Households Served (mm) 3.9 2.0 5.9
Employees 22,000 9,380 31,380
<FN>
* includes one-time restructuring and other charges associated with the Great Western transaction
</FN>
</TABLE>
6
H. F. AHMANSON & COMPANY HOME SAVINGS OF AMERICA
- ------------------------------ SAVINGS OF AMERICA
4900 Rivergrade Road, Irwindale, California 91706 - (818) 814-7922
FOR IMMEDIATE RELEASE Contacts:
- --------------------- Media: Mary Trigg
(626) 814-7922
Investor: Steve Swartz
(626) 814-7986
AHMANSON TERMINATES STOCK REPURCHASE PROGRAM
In connection with its proposed merger with Washington Mutual, Inc.
(Nasdaq: WAMU), H. F. Ahmanson & Company (NYSE: AHM) today announced that its
Board of Directors terminated its remaining stock repurchase program. The $400
million repurchase program was announced in November 1997.
H. F. Ahmanson & Company, with more than $52.5 billion in assets, is the
parent company of Home Savings of America, one of the nation's largest
full-service consumer and small business banks.
###
