SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant
to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: December 20, 1996
Washington Mutual, Inc.
(Exact Name of Registrant as specified in its charter)
Washington
(State or other jurisdiction of incorporation)
0-25188 91-1653725
(Commission File Number) (IRS Identification No.)
1201 Third Avenue, Seattle, Washington 98101
(Address of Principal Executive Office) (Zip Code)
206-461-2000
(Registrant's telephone number including area code)
Item 2. Acquisition or Disposition of Assets.
On December 20, 1996, the Company consummated its transaction with Keystone
Holdings, Inc. ("Keystone Holdings"), Keystone Holdings' sole shareholder and
certain of Keystone Holdings' wholly-owned subsidiaries (including American
Savings Bank, F.A. ("ASB")), whereby Keystone Holdings was merged with and into
the Company. The Company previously filed a Form 8-K describing the transaction
and the persons involved and included as exhibits to the Form 8-K copies of the
Agreement for Merger and certain additional documents about the transaction,
including a form of escrow agreement and a registration rights agreement
pursuant to which the recipients of the Company common stock to be issued in the
transaction would have rights to require registration of such stock with the
Securities and Exchange Commission pursuant to the Securities Act of 1933, as
amended.
Included herein at Exhibit 7(c) are copies of (i) the Agreement for Merger,
as amended, (ii) the final Escrow Agreement and (iii) the Registration Rights
Agreement.
In addition, in connection with the transaction and pursuant to the
Agreement for Merger, after the closing of the transaction the Company expanded
the size of its Board of Directors from 13 to 15 persons and appointed to fill
the vacancies two representatives nominated by Mr. Robert M. Bass, which
representatives were mutually agreeable to Washington Mutual. The two new
directors on the Company's Board of Directors are David Bonderman and J. Taylor
Crandall. The following is a brief description of each of such person's
background and business experience.
David Bonderman. David Bonderman, 53, was a Director of each of Keystone
Holdings and ASB from 1989 to December 20, 1996. Mr. Bonderman is a Principal of
Texas Pacific Group, an investment entity. From 1983 until 1992, Mr. Bonderman
was Chief Operating Officer of Keystone, Inc. (formerly Robert M. Bass Group,
Inc.), a company owned by Robert M. Bass and principally engaged in investment
activities. KH Group Management, Inc., a corporation of which Mr. Bonderman is
the sole director and president, is the managing general partner of Keystone
Holdings Partners, L.P., which was the sole shareholder of Keystone Holdings. He
is a director of National Re Holdings Corp., a reinsurance holding company, Bell
& Howell Company, Inc., an information handling, storage and retrieval company,
Carr Realty Co., a real estate investment trust, and is Chairman of the Board of
Continental Airlines, Inc.
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J. Taylor Crandall. J. Taylor Crandall, 42, was a Director of ASB from
December 1988 to December 20, 1996. He has been Chief Financial Officer and Vice
President of Keystone, Inc. and President of Acadia MGP, Inc., a general partner
of Acadia Partners, L.P., an investment partnership. In addition, since August
1989, Mr. Crandall has been a Vice President of National Re Holdings Corp., and
he served as Treasurer of that company until June 1990 and has been one of its
directors since November 1989. From July 1976 to October 1986, Mr. Crandall was
employed by The First National Bank of Boston, where he was Vice
President-Corporate Lending at the time of his departure. Mr. Crandall is also a
director of Bell & Howell Company, Inc. and Specialty Foods Acquisition
Corporation.
Item 7. Financial Statements and Exhibits
(c) Exhibits
1. Agreement for Merger, dated July 21, 1996, as amended November 1, 1996,
by and among Washington Mutual, Inc., Keystone Holdings Partners, L.P., Keystone
Holdings, Inc., New American Holdings, Inc., New American Capital, Inc., N.A.
Capital Holdings, Inc. and American Savings Bank, F.A.
2. Escrow Agreement, dated December 20, 1996, by and among Washington
Mutual, Inc., Keystone Holdings Partners, L.P., the Federal Deposit Insurance
Fund as manager of the FSLIC Resolution Fund and The Bank of New York.
3. Registration Rights Agreement, dated July 21, 1996, by and among
Washington Mutual, Inc., Keystone Holdings Partners, L.P. and the Federal
Deposit Insurance Fund as manager of the FSLIC Resolution Fund.
SIGNATURES
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.
WASHINGTON MUTUAL, INC.
/s/ Douglas C. Wisdorf
Date: January 3, 1997 By: Douglas C. Wisdorf
Its: Senor Vice President
<PAGE>
<PAGE>
AGREEMENT FOR MERGER
among
WASHINGTON MUTUAL, INC.,
KEYSTONE HOLDINGS PARTNERS, L.P.,
KEYSTONE HOLDINGS, INC.,
NEW AMERICAN HOLDINGS, INC.,
NEW AMERICAN CAPITAL, INC.,
N.A. CAPITAL HOLDINGS, INC.
and
AMERICAN SAVINGS BANK, F.A.
DATED AS OF
JULY 21, 1996
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TABLE OF CONTENTS
<TABLE>
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Page
<S> <C>
1. Table of Definitions..........................................................................................1
2. Merger.......................................................................................................12
2.1 Merger of Keystone Holdings and WMI.............................................................12
2.2 Conversion of Keystone Holdings Common Stock....................................................13
2.3 Litigation Escrow .............................................................................14
2.4 WMI Shareholder Approval........................................................................17
2.5 Issuance of WMI Stock and Registration Rights...................................................18
2.6 Accounting Treatment............................................................................19
3. Effective Time; Closing......................................................................................20
4. Representations and Warranties of Keystone Entities..........................................................20
4.1 Organization, Power, Good Standing, Etc.........................................................20
4.2 Subsidiaries .............................................................................22
4.3 Capitalization .............................................................................23
4.4 Loan Portfolio .............................................................................26
4.5 Reports .............................................................................28
4.6 Authority .............................................................................29
4.7 No Violation .............................................................................30
4.8 Consents and Approvals..........................................................................31
4.9 Financial Statements............................................................................31
4.10 Brokerage .............................................................................32
4.11 Absence of Certain Changes or Events...........................................................32
4.12 Litigation, Etc. .............................................................................32
4.13 Taxes, Payments in Lieu of Taxes and Tax
Returns......................................................................33
4.14 Employees; Employee Benefit Plans..............................................................34
4.15 Compliance With Applicable Law.................................................................38
4.16 Contracts and Agreements.......................................................................38
4.17 Affiliate Transactions.........................................................................39
4.18 Title to Property .............................................................................40
4.19 Patents, Trademarks, Etc.......................................................................42
4.20 Insurance .............................................................................42
4.21 Powers of Attorney.............................................................................42
4.22 Community Reinvestment Act Compliance..........................................................42
4.23 Agreements with the FRF........................................................................42
4.24 Agreements with Bank Regulators................................................................43
4.25 Regulatory Approvals...........................................................................43
4.26 Rights Agreement .............................................................................43
4.27 AREG Matters .............................................................................44
4.28 Investment Intent .............................................................................44
5. Representations and Warranties of WMI........................................................................44
5.1 Organization, Power, Good Standing, Etc.........................................................44
5.2 Subsidiaries .............................................................................45
5.3 Capitalization .............................................................................46
5.4 Reports .............................................................................46
5.5 Authority .............................................................................47
5.6 No Violation .............................................................................47
5.7 Consents and Approvals..........................................................................47
5.8 Financial Statements............................................................................48
5.9 Brokerage .............................................................................48
5.10 Absence of Material Adverse Change.............................................................48
5.11 Litigation .............................................................................48
5.12 Compliance With Applicable Law.................................................................49
5.13 CRA Compliance .............................................................................49
5.14 Agreements With Bank Regulators................................................................49
5.15 Regulatory Approvals...........................................................................49
5.16 Tax Matters .............................................................................50
5.17 WMI Rights Agreement...........................................................................50
6. Covenants of the Keystone Entities...........................................................................50
6.1 Conduct of the Business of Keystone Entities....................................................50
6.2 No Solicitation .............................................................................53
6.3 Access to Properties and Records................................................................53
6.4 Assignment of Contract Rights...................................................................54
6.5 Amendment to Environmental Policy...............................................................54
6.6 FRF Agreements .............................................................................54
6.7 New West .............................................................................54
6.8 Payment of Notes and Preferred Stock............................................................55
6.9 Tax Return and Section 9 Report Amendments......................................................55
6.10 Employees, Employee Benefit Plans..............................................................55
6.11 Assets of KH Partners..........................................................................57
6.12 New West Dissolution...........................................................................57
6.13 Waiver of Notice .............................................................................57
7. Covenants of the WM Entities.................................................................................57
7.1 Conduct of Business of WM Entities..............................................................57
7.2 Approval of WMI Stockholders....................................................................58
7.3 Employees; Employee Benefit Plans...............................................................58
7.4 WMI Board of Directors..........................................................................60
7.5 Tax Reorganization Matters......................................................................61
7.6 Access to Information/Updated Due Diligence.....................................................61
7.7 Indemnification and Insurance...................................................................61
8. Mutual Covenants of the Parties..............................................................................62
8.1 Current Information.............................................................................62
8.2 Reports .............................................................................63
8.3 Regulatory Matters .............................................................................63
8.4 Further Assurances .............................................................................64
8.5 Disclosure Supplements..........................................................................64
8.6 Confidentiality .............................................................................65
8.7 Public Announcements............................................................................65
8.8 Management Consultation Meetings................................................................66
8.9 Failure to Fulfill Conditions...................................................................66
9. Closing Conditions...........................................................................................66
9.1 Conditions to Each Party's Obligations Under
This Agreement...............................................................66
9.2 Conditions to the Obligations of the WM entities
under this
Agreement......................................................................................67
9.3 Conditions to the Obligations of KH Partners and
the Keystone
Entities Under This Agreement..................................................................71
10. Termination, Amendment and Waiver...........................................................................72
10.1 Termination .............................................................................72
10.2 Effect of Termination..........................................................................73
10.3 Amendment, Extension and Waiver................................................................73
11. Miscellaneous...............................................................................................74
11.1 Expenses .............................................................................74
11.2 Survival .............................................................................74
11.3 Notices .............................................................................74
11.4 Parties in Interest............................................................................76
11.5 Entire Agreement .............................................................................76
11.6 Counterparts .............................................................................76
11.7 Governing Law .............................................................................76
11.8 Headings .............................................................................76
</TABLE>
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EXHIBITS
Exhibit A Plan of Merger
Exhibit B Escrow Agreement
Exhibit C Form of "Affiliate" Letter
Exhibit D Press Release
<PAGE>
SCHEDULES
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Disclosure Schedule 4.2(a) Subsidiaries and Investment Entities
Disclosure Schedule 4.2(b) Certain Options with Respect to Capital Stock
Disclosure Schedule 4.4(c) Certain Loans Not Secured Primarily by Valid and
Perfected First Lien (as of March 31, 1996)
Disclosure Schedule 4.4(d) Certain Loans (as of March 31, 1996)
Disclosure Schedule 4.4(e) Certain Past Due Loans (as of March 31, 1996)
Disclosure Schedule 4.4(f) Exceptions to Section 4.4(f) Representations
Disclosure Schedule 4.4(g) Loans Sold with Repurchase Obligations (as of March 31,
1996)
Disclosure Schedule 4.4(h) Certain Loan Participations Purchased (as of March 31,
1996)
Disclosure Schedule 4.4(i)(a) Loans to Executive Officers of American Savings Bank
Disclosure Schedule 4.4(i)(c) Loans to Affiliates of American Savings Bank Not
Complying with Applicable Federal Laws and Regulations
Disclosure Schedule 4.4(k) Loans Acquired from the Receiver in the 1988 Acquisition
with Environmental Problems Relating to Real Property
Securing such Loans(as of March 31, 1996)
Disclosure Schedule 4.4(m) Outstanding Commitments, Letters of Credit, and
Unfunded Agreements to Lend (as of March 31, 1996)
Disclosure Schedule 4.7(a) Violations, Breaches, Defaults, Terminations,
Accelerations, Conflicts, Liens, Security Interests, Charges
or Other Encumbrances Resulting From Execution of
Agreement or Consummation
Disclosure Schedule 4.7(b) Violations, Breaches, Defaults, Terminations,
Accelerations, Conflicts, Liens, Security Interests, Charges
or Other Encumbrances Resulting From Liquidations
and/or the Bank Merger
Disclosure Schedule 4.10 Certain Fees
Disclosure Schedule 4.12 Material Litigation and Claims (as of June 30, 1996)
Disclosure Schedule 4.13 Taxes, Payments in Lieu of Taxes and Tax returns.
Disclosure Schedule 4.14(a)(i) Employment/Consulting Arrangements
Disclosure Schedule 4.14(a)(ii) Benefit Plans Resulting in Payments
Disclosure Schedule 4.14(b) Highly Compensated Employees
Disclosure Schedule 4.14(c) Material Employee Related Litigation and Claims
Disclosure Schedule 4.14(e) Exceptions to Section 4.14(e) Representations
Disclosure Schedule 4.14(e)(i) Benefit Plans
Disclosure Schedule 4.14(f) Individual Change of Control Agreements
Disclosure Schedule 4.16(i) Material Contracts
Disclosure Schedule 4.16(ii) Non-compete Agreements
Disclosure Schedule 4.17 Affiliate Transactions
Disclosure Schedule 4.18(a) Interests in Real Property
Disclosure Schedule 4.18(b) Environmental Matters
Disclosure Schedule 4.18(c) Encumbrances of Personal Property
Disclosure Schedule 4.19 Agreements Relating to American Savings Bank
Trademarks, Service Marks or Trade Names
Disclosure Schedule 4.20 Insurance
Disclosure Schedule 4.22 Noncompliance with Community Reinvestment Act of 1977
Disclosure Schedule 4.23 FRF Agreements; Consents
Disclosure Schedule 4.24 Other Agreements With Or Orders of Regulators
Disclosure Schedule 5.2 Subsidiaries
Disclosure Schedule 5.3 Capitalization
Disclosure Schedule 5.4 Reports
Disclosure Schedule 5.10 Absence of Material Adverse Change
Disclosure Schedule 5.11 Litigation
Disclosure Schedule 5.12(b) Compliance
Disclosure Schedule 6.1(a) 1996 Business Plan
</TABLE>
<PAGE>
AGREEMENT FOR MERGER
This Agreement for Merger (the "Agreement") is made and entered into
this 21st day of July, 1996 by and among Washington Mutual, Inc., a Washington
corporation ("WMI"), Keystone Holdings Partners, L.P., a Texas limited
partnership ("KH Partners"), Keystone Holdings, Inc., a Texas corporation
("Keystone Holdings"), New American Holdings, Inc., a Delaware corporation ("New
Holdings"), New American Capital, Inc., a Delaware corporation ("New Capital"),
N.A. Capital Holdings, Inc., a Delaware corporation ("NACH Inc."), and American
Savings Bank, F.A., a federal savings association ("American Savings Bank").
RECITALS
A. KH Partners owns all of the issued and outstanding shares of capital
stock of Keystone Holdings. Keystone Holdings owns all of the issued and
outstanding shares of capital stock of New Holdings and all of the issued and
outstanding shares of American Savings Bank Preferred Stock (as hereinafter
defined). New Holdings owns all of the issued and outstanding shares of common
stock of New Capital. New Capital owns all of the issued and outstanding shares
of capital stock of NACH Inc. NACH Inc. owns all of the issued and outstanding
common stock of American Savings Bank.
B. The parties desire for Keystone Holdings to merge with WMI in a
transaction which qualifies as a pooling of interests for accounting purposes
and a reorganization within the meaning of Section 368(a) of the Code (as
hereinafter defined) (the "Merger").
WMI shall be the surviving corporation.
Therefore, in consideration of the mutual covenants, representations,
warranties and agreements herein contained, the parties hereto agree as follows:
1. Table of Definitions. All capitalized terms used but not
otherwise defined in this Agreement shall have the meanings given
to them below:
"1988 Acquisition" shall have the meaning specified in
Section 4.4(f) hereof.
"1996 Business Plan" shall have the meaning specified in
Section 6.1(a) hereof.
"Adjustment Event" shall have the meaning specified in
Section 2.2(d) hereof.
<PAGE>
"Affiliated Person" shall have the meaning specified in
Section 4.17(b) hereof.
"Aggregate Escrow Distribution" shall mean the Distributed
Escrow Shares plus (i) all dividends and distributions (of whatever
nature) other than dividends payable in shares of WMI Common Stock paid
on or with respect to the Distributed Escrow Shares from the Effective
Time to and including the date the Distributed Escrow Shares are paid
pursuant to Section 2.3, (ii) any additional securities with respect
thereto, and (iii) any interest or earnings upon such dividends,
distributions or additional or substitute securities in accordance with
the terms of the Escrow Agreement. In the case of any Installment, the
Aggregate Escrow Distribution shall be determined in accordance with
the preceding sentence.
"American Savings Bank" shall have the meaning specified
in the preamble hereof.
"American Savings Bank Common Stock" shall have the meaning
specified in Section 4.3(e) hereof.
"American Savings Bank Environmental Policy" shall mean the
American Savings Bank Environmental Risk Policy, adopted October 24,
1995, a copy of which has been provided to WMI.
"American Savings Bank Preferred Stock" shall have the meaning
specified in Section 4.3(e) hereof.
"American Savings Bank Defined Compensation Plan" shall have
the meaning specified in Section 7.3(e) hereof.
"American Savings Bank SERP" 7.3(e) shall have the meaning
specified in Section 7.3(e) hereof.
"AREG" shall mean American Real Estate Group, Inc., a
Delaware corporation.
"Assistance Agreement" shall mean that certain Assistance
Agreement, dated December 28, 1988, by and among Keystone Holdings, New
West, New Holdings, New Capital, NACH Inc., American Savings Bank and
the FSLIC.
"Bank Merger" shall have the meaning specified in
Section 4.7(b) hereof.
"Bass Directors" shall have the meaning specified in
Section 7.4(b) hereof.
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"Bass Shares" shall have the meaning specified in Section
7.4(c) hereof.
"Benefit Plans" shall have the meaning specified in
Section 4.14(e) hereof.
"BIF" means the Bank Insurance Fund, administered by the
FDIC.
"Case" shall mean Case No. 92-782C resulting from a
complaint filed on December 28, 1992 in the United States
Court of Federal Claims and styled:
AMERICAN SAVINGS BANK, F.A.,
KEYSTONE HOLDINGS, INC.,
KEYSTONE HOLDINGS PARTNERS, L.P.,
N.A. CAPITAL HOLDINGS, INC.,
NEW AMERICAN CAPITAL, INC.
and
NEW AMERICAN HOLDINGS, INC.
v.
THE UNITED STATES
"Case Proceeds" shall equal the amount, if any, of cash
received by WMI or its subsidiaries (including the Keystone Entities
after the Effective Time) on or before the Escrow Expiration Date in
respect of (1) any judgment, fees, costs and expenses, interest and
other amounts that have been awarded to the plaintiffs (including any
successors thereto) in the Case, or (2) any final settlement of the
Case; provided, however, that any judgment referred to in (1) above
constitutes a final, nonappealable judgment in the Case. In the case of
any Installment, the Case Proceeds with respect to such Installment
shall be determined in accordance with the preceding sentence.
"CERCLA" shall have the meaning specified in
Section 4.18(b) hereof.
"Change of Control Agreements" has the meaning specified
in Section 4.14(f) hereof.
"Closing" shall have the meaning specified in Section 3
hereof.
"Closing Date" shall have the meaning specified in
Section 3 hereof.
"COBRA" shall mean the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended.
3
<PAGE>
"Code" shall mean the Internal Revenue Code of 1986, as
amended.
"Commercial Real Estate Loans" shall mean (i) loans secured by
real property other than one-to-four family residential real property
and (ii) builder construction loans.
"Controlling Person" shall have the meaning specified in
Section 4.17(c) hereof.
"CRA" shall have the meaning specified in Section 4.22
hereof.
"D&O" shall have the meaning specified in Section 7.7(b)
hereof.
"Deloitte & Touche" shall mean Deloitte & Touche LLP.
"Designated Representative" shall have the meaning
specified in Section 8.1 hereof.
"Director" shall mean the Director of Financial
Institutions of the State of Washington.
"Disclosure Schedules" shall mean all WMI Disclosure
Schedules and Keystone Entities Disclosure Schedules.
"Distributed Escrow Shares" shall mean that number of whole
shares of WMI Common Stock (or any substitute securities with respect
thereto) resulting from dividing the Net Case Proceeds by the Market
Price Per Share; provided that, in no event shall the Distributed
Escrow Shares exceed the number of Escrow Shares. The Distributed
Escrow Shares with respect to any Installment shall be calculated in
accordance with the preceding sentence except that in no event shall
the Distributed Escrow Shares, when added to the Distributed Escrow
Shares with respect to earlier Installments, exceed the number of
Escrow Shares.
"Effective Date" shall have the meaning specified in
Section 3 hereof.
"Effective Time" shall have the meaning specified in
Section 3 hereof.
"Environmental Laws" shall have the meaning specified in
Section 4.18(b) hereof.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended.
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<PAGE>
"Escrow Agent" shall mean the escrow agent under the
Escrow Agreement.
"Escrow Agreement" shall mean an agreement substantially in
the form of Exhibit B attached hereto.
"Escrow Expiration Date" shall mean the date that is the sixth
anniversary of the Effective Date; provided, however, that (i) if,
prior to such date, there has been any judgment granted or entered in
favor of WMI or its subsidiaries (including the Keystone Entities after
the Effective Time), then the Escrow Expiration Date shall be
automatically extended to the earlier of the tenth anniversary of the
Effective Date and the date upon which the number of Escrow Shares
equals zero and (ii) if, prior to such sixth anniversary or any
extension pursuant to clause (i) of this definition, there has been any
settlement or final nonappealable judicial resolution of the Case
involving two or more Installments, then the Escrow Expiration Date
shall not occur until all such Installments have been paid.
"Escrow Shares" shall mean eight million (8,000,000) shares of
WMI Common Stock; provided that the number of Escrow Shares shall be
appropriately adjusted to reflect any reclassification,
recapitalization, split-up, combination or exchange of shares of WMI
Common Stock, or any stock dividend thereon declared with a record date
between the date of this Agreement and the Escrow Expiration Date;
provided, further, that, in the event that the Escrow Expiration Date
is extended beyond the sixth anniversary of the Effective Date in
accordance with the definition of "Escrow Expiration Date" herein, the
number of Escrow Shares, as adjusted in accordance with the preceding
proviso, shall be reduced on the last day of each full calendar month
following the sixth anniversary of the Effective Date by an amount
equal to 1.25% of the number of Escrow Shares (as so adjusted) on the
sixth anniversary of the Effective Date; provided further, that if,
prior to the sixth anniversary of the Effective Date, there has been
any settlement or final nonappealable judicial resolution of the Case
involving two or more Installments, then there shall be no reduction in
the number of Escrow Shares pursuant to the immediately preceding
proviso.
"Family SB" shall mean Family Savings Bank, FSB, a federally
chartered savings association.
"FDIC" shall mean the Federal Deposit Insurance
Corporation.
"Federal Income Tax Returns" shall have the meaning
specified in 4.13(b).
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<PAGE>
"FHLB of San Francisco" shall mean the Federal Home Loan
Bank of San Francisco.
"FHLB of Seattle" shall mean the Federal Home Loan Bank
of Seattle.
"FHLMC" shall mean the Federal Home Loan Mortgage
Corporation.
"FIRREA" shall mean the Financial Institutions Reform,
Recovery, and Enforcement Act of 1989.
"Fixed Fee Agreement" shall have the meaning specified in
Section 2.3(e) hereof.
"FNMA" shall mean the Federal National Mortgage
Association.
"FRF" shall mean the FSLIC Resolution Fund, as successor to
the FSLIC, and which is managed by the FDIC.
"FRF Agreements" shall have the meaning specified in
Section 4.23 hereof.
"FRF Initial Shares" shall have the meaning specified in
Section 2.2(c) hereof.
"FRF Litigation Shares" shall have the meaning specified in
Section 2.2(c) hereof.
"FRF Warrant Agreement" shall mean that certain Warrant
Agreement dated December 28, 1988, between NACH Inc. and the
FSLIC.
"FRF Warrant Consideration" shall mean the shares of WMI
Common Stock to be paid to the FRF in exchange for the Warrants,
pursuant to the Warrant Exchange Agreement.
"FSLIC" shall mean the Federal Savings and Loan Insurance
Corporation.
"FTC" shall mean the Federal Trade Commission.
"GNMA" shall mean the Government National Mortgage
Association.
"HOLA" shall mean the Home Owners' Loan Act, as amended.
"Initial Shares" shall have the meaning specified in
Section 2.2(c) hereof.
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<PAGE>
"Installment" shall mean, in the event of a final,
nonappealable judicial resolution or a settlement of the Case occurring
after the Effective Time involving two or more installments or
structured payments of cash over a period of time, one of such
payments.
"Justice Department" shall have the meaning specified in
Section 4.8 hereof.
"Keystone Confidentiality Letter" shall mean that certain
letter, dated January 11, 1996, to Keystone Holdings and executed by
WMI.
"Keystone Consideration Shares" shall have the meaning
specified in Section 2.2(a) hereof.
"Keystone Entities" shall mean Keystone Holdings, New
Holdings, New Capital, NACH Inc. and American Savings Bank.
"Keystone Entities Disclosure Schedules" shall mean all of the
disclosure schedules required by this Agreement, dated as of the date
hereof, which have been delivered by KH Partners and the Keystone
Entities to WMI.
"Keystone Entity Subsidiary" shall have the meaning
specified in Section 4.2(b) hereof.
"Keystone Financial Statements" shall have the meaning
specified in Section 4.9 hereof.
"Keystone Holdings" shall have the meaning specified in
the preamble hereof.
"Keystone Holdings Common Stock" shall have the meaning
specified in Section 2.2 hereof.
"Keystone Initial Shares" shall have the meaning specified in
Section 2.2(a) hereof.
"Keystone Litigation Shares" shall have the meaning specified
in Section 2.2(a) hereof.
"Keystone March 1996 Financial Statements" shall have the
meaning specified in Section 4.9 hereof.
"KH Partners" shall have the meaning specified in the
preamble hereof.
"KPMG" means KPMG Peat Marwick LLP, the independent public
accountants for the Keystone Entities.
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"Liquidations" shall have the meaning specified in
Section 4.7(b) hereof.
"Litigation Escrow" shall mean the escrow described in
Section 2.3 hereof.
"Loans" shall have the meaning specified in Section
4.4(a) hereof.
"Long-Term Incentive Plan" shall have the meaning specified in
Section 6.10(c) hereof.
"Management Consultation Meetings" shall have the meaning
specified in Section 8.8 hereof.
"Market Price Per Share" shall mean the average closing price
of WMI Common Stock on The Nasdaq Stock Market (as reported in The Wall
Street Journal or, if not so reported, as otherwise publicly reported)
for the ten trading days preceding the third trading day before the
Effective Date; provided, however, that such price shall be
appropriately adjusted to reflect any reclassification,
recapitalization, split-up, combination or exchange of shares of WMI
Common Stock, or any stock dividend thereon declared with a record date
between the thirteenth day before the Effective Date and the Escrow
Expiration Date.
"Material Adverse Effect" or "Material Adverse Change" with
respect to a Person shall mean any change or effect that is reasonably
likely to be materially adverse to the business, operations,
properties, condition (financial or otherwise), assets or liabilities
of such Person and such Person's subsidiaries taken as a whole. Any
change in the current CRA rating of American Savings Bank or WM Bank or
a CRA rating given to WMBfsb that would cause the OTS to prohibit the
transactions contemplated hereby and in the Plan of Merger from being
consummated shall constitute a Material Adverse Change with respect to
the Keystone Entities or the WM Entities, as applicable, taken as a
whole.
"Material Contract" shall have the meaning specified in
Section 6.1(c)(v) hereof.
"Merger" shall have the meaning specified in Recital B
hereof.
"NACH Inc." shall have the meaning specified in the
preamble hereof.
"Net Case Proceeds" shall mean the Case Proceeds, minus the
sum of (1) the Tax on the Case Proceeds, (2) the out-of-
8
<PAGE>
pocket, third-party fees, costs and expenses paid or accrued by WMI or
its subsidiaries to attorneys, accountants, experts or other third
party service providers in connection with the Case from the date of
this Agreement (excluding any amount paid to Arnold & Porter under the
Fixed Fee Agreement), (3) 200% of the allocated time costs of employees
of WMI or its subsidiaries for time reasonably devoted to the Case from
the Effective Date, in each case, to and including the date the Case
Proceeds are paid to WMI or its subsidiaries (including the Keystone
Entities after the date hereof), (4) fees and other amounts, if any,
paid or accrued by WMI to the Escrow Agent pursuant to the Escrow
Agreement and (5) all amounts paid by any Keystone Entity to Arnold &
Porter under the Fixed Fee Agreement in excess of $10 million. In the
event that the Case Proceeds are payable in two or more Installments,
Net Case Proceeds with respect to any given Installment shall mean all
Case Proceeds received by WMI from such Installment and all prior
Installments, if any, minus (x) the sum of (I) the Tax on the Case
Proceeds with respect to all Installments or portions thereof (whether
received or to be received) includible, in WMI's judgment, in its
income for federal income tax purposes for the year in which such
Installment is received or in prior years and (II) the amounts
described in clauses (2), (3), (4) and (5) of the preceding sentence,
and (y) the aggregate Net Case Proceeds calculated pursuant to this
sentence with respect to all prior Installments, if any.
"Net Pre-Tax Case Proceeds" shall mean the amount , if any,
resulting from subtracting from Case Proceeds the sum of the amounts
described in Clauses (2), (3), (4) and (5) in the definition of Net
Case Proceeds.
"New Capital" shall have the meaning specified in the
preamble hereof.
"New Capital Common Stock" shall have the meaning specified in
Section 4.3(c) hereof.
"New Capital Preferred Stock" shall have the meaning specified
in Section 4.3(c) hereof.
"New Holdings" shall have the meaning specified in the
preamble hereof.
"New Holdings Common Stock" shall have the meaning specified
in Section 4.3(b) hereof.
"New West" shall mean New West Federal Savings and Loan
Association.
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"Offering Circulars" shall have the meaning specified in
Section 4.5(b) hereof.
"Old American" shall mean American Savings, a Federal
Savings and Loan Association.
"Other Returns" shall have the meaning specified in
Section 4.13(c) hereof.
"OTS" shall mean the Office of Thrift Supervision.
"PBGC" shall mean the Pension Benefit Guaranty
Corporation.
"Permits" shall have the meaning specified in
Section 4.15(a) hereof.
"Person" shall mean an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
incorporated association, joint venture, governmental authority or
other entity of whatever nature.
"Phantom Share Plan" shall have the meaning specified in
Section 6.10(c) hereof.
"Plan of Merger" shall have the meaning specified in
Section 2.1 hereof.
"Preferred Stock Circular" shall have the meaning
specified in Section 4.5(b) hereof.
"Receiver" shall have the meaning specified in
Section 4.4(f) hereof.
"Record Date" shall have the meaning specified in Section
7.4(b) hereof.
"Registration Rights Agreement" shall have the meaning
specified in Section 2.5 hereof.
"Regulation O" shall mean Part 215 of Title 12 of the
Code of Federal Regulations.
"REO" shall have the meaning specified in Section 4.18.
"Rights Agreement" shall mean that certain Rights Agreement,
dated as of October 16, 1990, between Washington Mutual Savings Bank
and First Interstate Bank of Washington, N.A., as supplemented by the
Supplement to Rights Agreement, dated as of November 29, 1994, between
WMI and First Interstate Bank of Washington, N.A.
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"SAIF" shall mean the Savings Association Insurance Fund,
administered by the FDIC.
"SEC" shall mean the Securities and Exchange Commission.
"SEC Reports" shall have the meaning specified in
Section 5.4.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and any rules and regulations promulgated thereunder.
"Securities Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, and any rules and regulations promulgated
thereunder.
"Securityholder Communications" shall have the meaning
specified in Section 4.5(b) hereof.
"Senior Note Circulars" shall have the meaning specified
in Section 4.5(b) hereof.
"Senior Notes" shall mean the Series B 9.60% Notes due 1999
issued by New Capital and the Series C Floating Rate Notes due 2000
issued by New Capital.
"Short-Term Incentive Plan" shall have the meaning specified
in Section 6.10(c) hereof.
"Subordinated Note Circular" shall have the meaning
specified in Section 4.5(b) hereof.
"Subordinated Notes" shall mean the Subordinated Notes due
1998 issued by New Capital and the 6 5/8% Subordinated Notes due
February 15, 2006 issued by American Savings Bank.
"Surviving FRF Agreements" shall have the meaning
specified in Section 9.1(g).
"Taxes" shall have the meaning specified in
Section 4.13(c) hereof.
"Tax on the Case Proceeds" shall mean (1) the product of .28
and the Net Pre-Tax Case Proceeds, in the event the Case Proceeds are
accrued for federal income tax purposes prior to the Effective Time,
and (2) the product of .355 and the Net Pre-Tax Case Proceeds, in the
event the Case Proceeds are accrued for federal income tax purposes on
or after the Effective Time.
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"Tax Settlement Agreement" shall have the meaning assigned it
in Section 9.2(m) hereof.
"Texas Secretary of State" shall mean the Secretary of
State of the State of Texas.
"Third Party Acquisition of WMI" shall mean the occurrence of
any of the following: (i) any Person or group (within the meaning of
Section 13(d)(3) of the Securities Exchange Act), other than KH
Partners or a Keystone Entity or an affiliate of either, purchases or
otherwise acquires securities representing a majority of the voting
shares of WMI or (ii) WMI or its board of directors enters into an
agreement or recommends to its shareholders an agreement or tender
offer or other transaction pursuant to which any such Person or group
would (A) merge or consolidate with, acquire a majority of the assets
and liabilities of, or enter into any similar transaction with WMI
whereby it would acquire securities representing a majority of the
voting shares of WMI or (B) purchase or otherwise acquire (including,
without limitation, by merger, consolidation, share exchange, tender
offer or any similar transaction) securities representing a majority of
the voting shares of WMI.
"Warrant Exchange Agreement" shall have the meaning specified
in Section 2.2(c) hereof.
"Warrants" shall mean the warrants issued to the FSLIC by NACH
Inc. pursuant to the FRF Warrant Agreement, and representing the right,
under certain circumstances specified in the FRF Warrant Agreement, to
purchase for the aggregate purchase price of $1.00 up to 3,000 shares
of Class B Common Stock of NACH Inc., none of which warrants has been
exercised as of the date hereof.
"Washington Secretary of State" shall mean the Secretary
of State of the State of Washington.
"WM Bank" shall mean Washington Mutual Bank, a Washington
stock savings bank and direct subsidiary of WMI.
"WMBfsb" shall mean Washington Mutual Bank fsb, a federal
savings association and direct subsidiary of WMI.
"WM Entities" shall mean WM Bank, WMBfsb and WMI.
"WMI" shall have the meaning specified in the preamble
hereof.
"WMI Common Stock" shall have the meaning specified in
Section 2.2 hereof.
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"WMI Confidentiality Letter" shall mean that certain letter,
dated January 17, 1996, addressed to WMI and executed by Keystone
Holdings.
"WMI Disclosure Schedules" shall mean all of the disclosure
schedules required by this Agreement, dated as of the date hereof,
which have been delivered by WMI to KH Partners.
"WMI Financial Statements" shall have the meaning
specified in Section 5.8 hereof.
"WMI Proxy Statement" shall have the meaning specified in
Section 2.4(a) hereof.
"WMI RSIP" shall have the meaning specified in Section
7.3(a) hereof.
"WMI Stockholder Approval" shall have the meaning specified in
Section 2.4(a) hereof.
"WMI Stockholders' Meeting" shall have the meaning specified
in Section 2.4(a) hereof.
"WMI Subsidiaries" shall have the meaning specified in
Section 5.2 hereof.
"WMI Welfare Benefit Plans" shall have the meaning specified
in Section 7.3(c) hereof.
It is understood that, as used in this Agreement, with respect to any
action to be taken by KH Partners (as distinct from the Keystone Entities and
the Keystone Entity Subsidiaries), the terms "reasonable efforts," "best
efforts," "reasonable best efforts" and any similar terms shall not, unless
otherwise indicated herein, require the payment by KH Partners of any money or
the agreement by KH Partners to suffer any economic harm.
2. Merger. Subject to the terms and conditions of this
Agreement, the Merger is to be accomplished in the manner described
herein.
2.1 Merger of Keystone Holdings and WMI. Keystone Holdings
shall at the Effective Time be merged with and into WMI with WMI being the
survivor in accordance with the Plan of Merger by and between WMI and Keystone
Holdings, substantially in the form attached hereto as Exhibit A (the "Plan of
Merger"). The Plan of Merger provides for the terms of the Merger and the manner
of carrying it into effect. The terms and conditions of the Plan of Merger are
incorporated herein and made a part hereof.
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2.2 Conversion of Keystone Holdings Common Stock. Subject to
the terms and conditions set forth herein and in the Plan of Merger, at the
Effective Time, all of the outstanding shares of common stock, par value $1.00
per share, of Keystone Holdings ("Keystone Holdings Common Stock") shall be
converted into the right to receive shares of common stock, no par value, of WMI
("WMI Common Stock"), as described below and in the Plan of Merger.
(a) Subject to the other provisions of this
Section 2.2, the outstanding shares of Keystone Holdings Common Stock will in
the aggregate be converted at the Effective Time into the right to receive the
Keystone Consideration Shares. The "Keystone Consideration Shares" shall mean
the sum of the Keystone Initial Shares and the Keystone Litigation Shares (if
any). The "Keystone Initial Shares" shall mean 26,000,000 newly issued shares of
WMI Common Stock. The "Keystone Litigation Shares" shall mean that number of
newly issued shares of WMI Common Stock equal to 65% of the Escrow Shares (as to
which KH Partners has contingent rights pursuant to Section 2.3 hereof).
Certificates evidencing the Keystone Initial Shares shall be delivered to KH
Partners at the Effective Time. Certificates evidencing the Keystone Litigation
Shares shall be delivered into the Litigation Escrow as of the Effective Time.
(b) If between the date of this Agreement and
the Effective Time, the shares of WMI Common Stock shall be changed into a
different number of shares by reason of any reclassification,
recapitalization, split-up, combination or exchange of shares, or if a
stock dividend thereon shall be declared with a record date within such
period, the number of Keystone Initial Shares and the number of FRF Initial
Shares (as contemplated by Section 2.2(c)) shall be adjusted accordingly.
(c) Concurrently with the execution of this
Agreement, the FDIC, WMI, KH Partners and certain other Persons are entering
into an agreement (the "Warrant Exchange Agreement") pursuant to which, among
other things, the FDIC and WMI are agreeing that, at the Effective Time, and in
exchange for the FDIC conveying any and all interest of the FRF in the Warrants
to WMI, WMI will convey (either directly to the FDIC or, at the direction of the
FDIC, to a trust for the benefit of the FRF) 14,000,000 newly issued shares of
WMI Common Stock (the "FRF Initial Shares" and, together with the Keystone
Initial Shares, the "Initial Shares"), together with a contingent right to 35%
of the Escrow Shares (the "FRF Litigation Shares"), all as more fully set forth
in Section 2.3 hereof and the Warrant Exchange Agreement. Certificates
evidencing the FRF Initial Shares shall be delivered to the FDIC, or, at the
direction of the FDIC, to a trust for the benefit of the FRF, and certificates
evidencing the FRF Litigation Shares shall be delivered to the Litigation
Escrow, all in exchange for the Warrants at the Effective Time.
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(d) The parties acknowledge that as of the date of
this Agreement, Keystone Holdings is in the process of rescinding certain
dividends paid to KH Partners in excess of the amount set forth in Section
6.1(b)(ii) hereof. Notwithstanding any other provision of this Agreement to the
contrary, (i) if for any reason such rescission is not completed within 30 days
from the date of this Agreement or (ii) if such rescission, although completed,
is subsequently annulled or reversed on or prior to the Effective Date, whether
voluntarily or as a result of the action of any regulatory authority, or (iii)
if WMI reasonably concludes that such rescission will be so annulled or reversed
following the Effective Date, as a result of the action of any regulatory
authority (the "Adjustment Event"), then the Keystone Initial Shares shall be
reduced to 25,883,333 shares of WMI Common Stock, and the percentages set forth
in Sections 2.2(a) and 2.2(c) shall be changed to 64.9% and 35.1%, respectively,
and all references to the numbers 40,000,000 and 26,000,000 in this Agreement,
the Registration Rights Agreement, the Escrow Agreement or any other document
executed in connection with the transactions contemplated by this Agreement
shall be changed to the numbers 39,883,333 and 25,883,333, respectively, subject
to any further adjustment required by Section 2.2(b).
2.3 Litigation Escrow.
(a) Delivery of Shares into Escrow. As of the
Effective Time, KH Partners and the FDIC shall direct WMI to deliver, and WMI
shall deliver, the Escrow Shares to the Escrow Agent pursuant to an Escrow
Agreement in substantially the form attached hereto as Exhibit B. Pursuant to
the terms of the Escrow Agreement, the Escrow Agent shall hold such Escrow
Shares until the earlier of (i) the Escrow Expiration Date and (ii) the date
upon which the last Aggregate Escrow Distribution is distributed to KH Partners,
the FRF or their permitted assigns pursuant to Section 2.3(c). In the event that
the Escrow Expiration Date is extended beyond the sixth anniversary of the
Effective Date, and there are one or more reductions in the amount of Escrow
Shares as provided in the definition of "Escrow Shares" in Section 1, the shares
no longer required to be Escrow Shares shall, subject to the final sentence of
this Section 2.3(a), be returned by the Escrow Agent to WMI. In the event that
all of the Aggregate Escrow Distributions are not made pursuant to Section
2.3(b) by the Escrow Expiration Date (as it may be extended), the Escrow Agent
shall return Escrow Shares to WMI for cancellation. Upon any return of Escrow
Shares (and any additional or substitute securities with respect thereto) to WMI
pursuant hereto, the Escrow Agent shall also return all dividends and
distributions paid upon such shares from the Closing Date to and including the
date of such return plus any interest or earnings thereon in accordance with the
terms of the Escrow Agreement.
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(b) Payment of Aggregate Escrow Distribution.
Within thirty (30) days after Case Proceeds (including those attributable to an
Installment) are received by WMI or its subsidiaries, WMI shall instruct the
Escrow Agent to pay to KH Partners, the FRF or their respective successors and
permitted assigns the pro rata portion of the Aggregate Escrow Distribution
attributable to such Person with respect to such Case Proceeds as specified in
this Agreement, the Warrant Exchange Agreement and the Escrow Agreement and to
return any remaining Escrow Shares (and any additional or substitute securities
with respect thereto) to WMI for cancellation (together with the dividends and
distributions received thereon and any interest or earnings on such dividends),
except that if Case Proceeds are received in Installments, no such property
shall be returned to WMI until no such Installments remain to be paid. No
payment shall be made in respect of fractional shares.
(c) Assignability of Right to Receive Escrow
Shares. The Escrow Shares will not be registered under the Securities Act nor
will the contingent right to receive them be registered as a separate security.
If the FRF or any partner of KH Partners desires to transfer its right to
receive Escrow Shares (and any additional or substitute securities with respect
thereto), the proposed transferor shall be required to provide to WMI an opinion
of counsel reasonably satisfactory to WMI that such transfer is exempt from the
registration requirements of the Securities Act and similar requirements under
all applicable state securities laws, as well as such other documentation as may
be required by the Escrow Agreement.
(d) Voting of Escrow Shares. For so long as the
Escrow Shares are held by the Escrow Agent in accordance with the terms of this
Article 2 and the Escrow Agreement, the respective holder of the contingent
right to receive such shares shall have the absolute right to have its Escrow
Shares (and any additional or substitute securities with respect thereto) voted
in its absolute discretion in accordance with the written instructions of such
holder as given to the Escrow Agent with respect to all matters with respect to
which the vote of holders of WMI Common Stock is required or solicited.
(e) Control of Case.
(i) WMI shall, and shall cause the Keystone
Entities to continue to, prosecute the Case vigorously following the Effective
Time with a view to resolution of the Case as promptly as practicable. In
furtherance of this prosecution of the Case, the parties shall, prior to the
Effective Time (and thereafter), designate a special litigation committee
comprised of two individuals designated by KH Partners and one individual
designated by WMI (the "Litigation Committee"). The Litigation
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Committee shall have the exclusive right to oversee the prosecution of the Case
and to settle the case as hereinafter provided. Only the Litigation Committee
shall be authorized to make decisions relating to any proposal to dismiss,
settle, terminate, or cease prosecuting the Case, to decline to pursue any
appeal or to settle the Case prior to the Escrow Expiration Date; provided that
any settlement of the Case must involve a net cash payment or payments to the WM
Entities, as successors to the Keystone Entities; and, provided, further, that
without WMI's prior specific written approval, no settlement agreement shall
impose any obligation (other than standard settlement releases and related
obligations) on the WM Entities or restrict the operation of their business.
(ii) The Litigation Committee shall select
counsel of its choice to represent the WM Entities in the prosecution of the
Case; provided, that such selection shall be subject to the approval of WMI,
which approval will not be unreasonably withheld. WMI hereby consents to the
selection of Arnold & Porter. KH Partners represents, warrants and agrees that
prosecution of the Case will be pursuant to a fixed fee agreement between
Keystone Holdings and Arnold & Porter (the "Fixed Fee Agreement"). The Fixed Fee
Agreement (i) shall be in form and content acceptable to WMI, (ii) shall provide
for a one-time payment of not more than $11.5 million to Arnold & Porter, (iii)
shall be executed and delivered not more than 15 days after the date hereof,
(iv) shall be assigned to and assumed by WMI or a WMI Entity at the Effective
Time; and (v) shall provide that no WMI Entity or Keystone Entity shall have any
liability for any future costs or expenses associated with the prosecution of
the Case. The Litigation Committee shall have the right to replace counsel at
any time; provided, that such replacement counsel shall be subject to the
approval of WMI, which approval will not be unreasonably withheld and, provided
further, that such replacement counsel shall assume all of Arnold & Porter's
obligations, but not its rights, under the Fixed Fee Agreement and no WMI Entity
or Keystone Entity shall have any liability for any future costs or expenses
associated with the prosecution of the Case.
(iii) Counsel designated by the Litigation
Committee to prosecute the Case, and any outside counsel, experts, and/or
consultants that such counsel may retain to assist in the prosecution of the
Case, shall be authorized by this Agreement to accept directions from the
Litigation Committee on all matters concerning the Case that are within the
authority of the Litigation Committee, notwithstanding any possible conflict in
interest with respect to the Case between KH Partners on the one hand, and the
WM Entities on the other. The Litigation Committee shall have no duty to the WM
Entities to consider the interest any of such WM Entities may have in an early
termination or resolution of the Case.
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(iv) WMI shall have the right to remove any
individual from the Litigation Committee in the event such removal is requested
by any federal or state regulator having jurisdiction over WMI or any of its
subsidiaries. If any individual is so removed, his or her replacement will be
designated by KH Partners or, if KH Partners shall no longer exist, by Robert M.
Bass if the removed individual was originally designated by KH Partners or
Robert M. Bass; otherwise, the replacement will be designated by WMI.
(v) Nothing in this Agreement shall prevent KH
Partners from withdrawing as a plaintiff in the Case and KH Partners may
withdraw as a plaintiff in the Case at any time without creating any liability
to any WM Entity.
(f) No Settlement Prior to Closing.
Notwithstanding any other provision in this Agreement, in no event shall KH
Partners or any Keystone Entity settle the Case prior to the Effective Time.
(g) Waiver of Entitlement. After the Effective
Time, KH Partners will not assert entitlement (as against any of the WM Entities
or any of the Keystone Entities) to any proceeds from any settlement or judgment
in the Case, whether or not allocated by a court to KH Partners. KH Partners
will allow one or more of the Keystone Entities or the WM Entities directly to
receive such proceeds and will use its best efforts to cause such proceeds to be
paid directly to one or more Keystone Entities or WM Entities and not to KH
Partners. After the Effective Time, KH Partners will remit to WMI or its
designee any amounts actually recovered by it in the Case. In the event that KH
Partners remits to WMI or its designee any such proceeds, the WM Entities shall
indemnify each of the partners of KH Partners on a "grossed up" basis for the
amount of any increased tax liability incurred by such partner which results
from the fact that KH Partners received such proceeds and so remitted them
rather than such proceeds having been directly received by any of the WMI
Entities or any of the Keystone Entities. Nothing in this Section 2.3 is
intended to create any rights in the Keystone Entities or the WM Entities
against the United States, except as such parties may have had prior to the date
of this Agreement or may obtain by operation of law (whether by statutory merger
or otherwise).
(h) Tax Matters. The parties intend that the
Keystone Litigation Shares will be treated for income tax purposes as having
been received on the Closing Date pursuant to the Merger and that the "imputed
interest" rules of Section 483 of the Code (or any similar or successor
provision thereto) shall not apply to any Aggregate Escrow Distribution. The
parties agree that WMI intends to issue Forms 1099-DIV with respect to dividends
paid on the Escrow Shares and to report such dividends as ordinary
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dividends. The parties agree that WMI shall file all tax returns, declarations
and other reports in a manner consistent with this sub-section, and that any
transferee of the Initial Shares or the Escrow Shares shall be required, as a
condition of such transfer, to acknowledge the foregoing and waive any rights
against WMI in respect thereof. In the event that WMI shall not have received
prior to the Effective Time effective waivers from partners holding in the
aggregate no less than 90% of the beneficial interest in KH Partners of any and
all rights they may have against WMI in respect of the foregoing provisions of
this subsection (h), WMI shall be relieved of all obligations set forth in this
subsection (h).
2.4 WMI Shareholder Approval.
(a) WMI shall, as soon as practicable, hold a
meeting of its stockholders (the "WMI Stockholders' Meeting") to submit for
stockholder approval (the "WMI Stockholder Approval") this Agreement, the Plan
of Merger, the Merger and an amendment to its articles of incorporation
increasing WMI's authorized shares by not more than 100,000,000 shares. In
connection with the WMI Stockholder Approval, the parties hereto will cooperate
in the preparation of an appropriate proxy statement satisfying all applicable
regulations, rules and requirements of the SEC promulgated under the Securities
Exchange Act and satisfying any applicable state law (such proxy statement in
the form mailed by WMI to WMI stockholders, together with any and all amendments
or supplements thereto, being herein referred to as the "WMI Proxy Statement").
(b) WMI represents and warrants that the
information relating to the WM Entities to be contained in the WMI Proxy
Statement will not, at the time it is filed with the applicable governmental
authorities, as of the date of the WMI Proxy Statement or at the WMI
Stockholders' Meeting contain any untrue statement of a material fact or omit to
state a material fact, necessary to make such statements, in light of the
circumstances under which such statements were made, not misleading. KH Partners
and the Keystone Entities represent and warrant that the information relating to
the KH Partners and the Keystone Entities to be contained in the WMI Proxy
Statement will not, at the time it is filed with the applicable governmental
authorities, as of the date of the WMI Proxy Statement or at the WMI
Stockholders' Meeting contain any untrue statement of a material fact or omit to
state a material fact, necessary to make such statements, in light of the
circumstances under which such statements were made, not misleading.
(c) Keystone Holdings will furnish such information
concerning Keystone Holdings and its subsidiaries as is necessary in order
to cause the WMI Proxy Statement, insofar as it relates to such corporations, to
comply with Section 2.4(b). The Keystone
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Entities shall also cause KPMG to provide to WMI a letter substantially in
compliance with Statement of Auditing Standards #76 covering those items
relating to the Keystone Entities designated by WMI contained in the WMI Proxy
Statement. Keystone Holdings agrees promptly to advise WMI if at any time prior
to the WMI Stockholders' Meeting any information provided by Keystone Holdings
or its subsidiaries for inclusion in the WMI Proxy Statement becomes incorrect
or incomplete in any material respect and to provide the information needed to
correct such inaccuracy or omission. Keystone Holdings will continue to furnish
WMI with such supplemental information as may be necessary in order to cause the
WMI Proxy Statement, insofar as it relates to Keystone Holdings and its
subsidiaries, to comply with Section 2.4(b) after the mailing thereof to WMI
stockholders.
(d) WMI will, as promptly as practicable, file the
WMI Proxy Statement, as required by law, with the SEC and will use all
reasonable efforts to cause the WMI Proxy Statement to be cleared for mailing
under federal securities laws at the earliest practicable date. WMI will advise
Keystone Holdings promptly when the WMI Proxy Statement has been cleared for
mailing.
2.5 Issuance of WMI Stock and Registration Rights.
(a) All shares of WMI Common Stock issued in
connection with the Merger will be issued pursuant to an exemption under Section
4(2) of the Securities Act and initially will be "Restricted Securities" as
defined in Rule 144 promulgated under the Securities Act by the SEC.
(b) Concurrently with the execution and delivery of
this Agreement, WMI has executed a Registration Rights Agreement (the
"Registration Rights Agreement") pursuant to which WMI will use its best efforts
to make available to the recipients of WMI Common Stock pursuant to this
Agreement and the Warrant Exchange Agreement the rights contemplated by the
Registration Rights Agreement.
2.6 Accounting Treatment.
(a) The parties hereto intend for the Merger to be
treated as a pooling of interests for accounting purposes. WMI and KH Partners
have received from KPMG a poolability letter dated July 21, 1996, with respect
to Keystone Holdings and its subsidiaries, and WMI and KH Partners will, at
closing, receive from Deloitte & Touche a pooling letter with respect to the
Merger. None of KH Partners, the Keystone Entities or the WM Entities are aware
of any reason that the transaction contemplated hereby is not eligible to be
treated as a pooling of interests for accounting purposes. From and after the
date hereof and until the Effective Time and thereafter, neither WMI nor KH
Partners nor any of their
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respective subsidiaries or other affiliates shall (i) knowingly take any action,
or knowingly fail to take any action, that would jeopardize the treatment of the
Merger as a "pooling of interests" for accounting purposes; or (ii) enter into
any contract, agreement, commitment or arrangement with respect to any such
action or failure to act; provided, however, that the performance of the terms
of the Fixed Fee Agreement and Section 2.3(e)(ii) hereof shall not constitute a
violation of this Section 2.6(a). The persons specified on Annex I hereto may be
deemed to be "affiliates" of Keystone Holdings for purposes of the SEC's ASR
135. Keystone Holdings shall deliver to WMI within 30 days from the date of this
Agreement, a written agreement substantially in the form of Exhibit C hereto
from each of the Persons specified on Annex I. Prior to the Effective Time,
Keystone Holdings shall use all reasonable efforts to cause any additional
Person who becomes or is identified as an "affiliate" to execute such an
agreement.
(b) In order to ensure that the Merger will be
treated as a pooling of interests, the parties understand that the Keystone
Initial Shares and the contingent right to receive Escrow Shares to be received
by KH Partners as a result of the Merger shall be distributed to the partners of
KH Partners immediately after the Effective Time. To facilitate such
distribution, WMI agrees to prepare and have available at the Closing up to 85
stock certificates for KH Partners representing the shares of WMI Common Stock
to which each such partner is entitled (pursuant to the terms of the partnership
agreement of KH Partners, dated December 16, 1988, as amended, with respect to
equity distributions). No fractional shares of WMI Common Stock shall be issued.
KH Partners shall, at least ten days prior to the Effective Time, provide WMI
with the necessary information to prepare such stock certificates. KH Partners
agrees to endorse and deliver such certificates to such partners at the Closing.
(c) WMI shall have the right to place a restrictive
legend on all shares of WMI Common Stock to be received by any affiliate of
Keystone Holdings so as to preclude their transfer or disposition in violation
of the letters executed by such affiliates, to instruct its transfer agent not
to permit the transfer of any such shares and/or to take any other steps
reasonably necessary to ensure compliance with ASR 135.
3. Effective Time; Closing. The Merger shall become effective at the
time and date of the occurrence of both (a) the filing of articles of merger
with the Washington Secretary of State and (b) the filing of articles of merger
with the Texas Secretary of State, or at such later time and date after such
filings as may be provided in such articles of merger. As used herein, the term
"Effective Time" shall mean the date and time when the Merger becomes effective
which in no event shall occur before December 2,
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1996. As used herein, the term "Effective Date" shall mean the day on which the
Effective Time occurs. A closing (the "Closing") shall take place on or
immediately prior to the Effective Date at the offices of Foster Pepper &
Shefelman, 1111 Third Avenue, Suite 3400, Seattle, Washington, or at such other
place as the parties hereto may mutually agree upon for the Closing to take
place. "Closing Date" shall mean the date on which the Closing occurs.
4. Representations and Warranties of Keystone Entities.
Each of KH Partners and the Keystone Entities hereby jointly and
severally represents and warrants to the WM Entities as follows:
4.1 Organization, Power, Good Standing, Etc.
(a) KH Partners is a limited partnership duly
organized and validly existing under the laws of the State of Texas and is duly
qualified to do business and is in good standing in each other jurisdiction
where its ownership or lease of property or the nature of the business conducted
by it requires it to be so qualified, except for such jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect on it. KH Partners is a duly registered savings and loan
holding company under HOLA. There has been no change in the provisions of the KH
Partners partnership agreement dealing with equity distributions since before
1994.
(b) Keystone Holdings is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Texas and is duly qualified to do business and is in good standing in each other
jurisdiction where its ownership or lease of property or the nature of the
business conducted by it requires it to be so qualified, except for such
jurisdictions where the failure to be so qualified would not, individually or in
the aggregate, have a Material Adverse Effect on it. Keystone Holdings has
previously delivered to WMI true and complete copies of its articles of
incorporation and bylaws, each as currently in effect. Keystone Holdings has the
requisite corporate power and authority to own, lease and operate its properties
and assets and to carry on its business as it is now being conducted. Keystone
Holdings is a duly registered savings and loan holding company under HOLA. To
the knowledge of KH Partners and the Keystone Entities, OTS Order #92-66, dated
February 28, 1992, which approves the acquisition by Keystone Holdings of an
equity interest in Family SB in a Qualified Stock Issuance pursuant to Sections
10(a)(4) and 10(q) of HOLA and FDIC Order #92-98kk dated April 7, 1992,
Conditionally Granting Approval for Waiver of Cross-Guaranty, are, and at all
times since their respective dates have been, in full force and effect. The
Keystone Entities do not, directly or indirectly, or acting in concert with one
or more other Persons, or through one or more subsidiaries, own, control, or
hold with power to vote, or hold
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proxies representing more than 15 percent of the voting shares of Family SB.
(c) New Holdings is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified to do business and is in good standing in each other
jurisdiction where its ownership or lease of property or the nature of the
business conducted by it requires it to be so qualified, except for such
jurisdictions where the failure to be so qualified would not, individually or in
the aggregate, have a Material Adverse Effect on it. New Holdings has previously
delivered to WMI true and complete copies of its certificate of incorporation
and bylaws, each as currently in effect. New Holdings has the requisite
corporate power and authority to own, lease and operate its properties and
assets and to carry on its business as it is now being conducted. New Holdings
is a duly registered savings and loan holding company under HOLA.
(d) New Capital is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified to do business and is in good standing in each other
jurisdiction where its ownership or lease of property or the nature of the
business conducted by it requires it to be so qualified, except for such
jurisdictions where the failure to be so qualified would not, individually or in
the aggregate, have a Material Adverse Effect on it. New Capital has previously
delivered to WMI true and complete copies of its certificate of incorporation
and bylaws, each as currently in effect. New Capital has the requisite corporate
power and authority to own, lease and operate its properties and assets and to
carry on its business as it is now being conducted. New Capital is a duly
registered savings and loan holding company under HOLA.
(e) NACH Inc. is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and is duly qualified to do business and is in good standing in each other
jurisdiction where its ownership or lease of property or the nature of the
business conducted by it requires it to be so qualified, except for such
jurisdictions where the failure to be so qualified would not, individually or in
the aggregate, have a Material Adverse Effect on it. NACH Inc. has previously
delivered to WMI true and complete copies of its certificate of incorporation
and bylaws, each as currently in effect. NACH Inc. has the requisite corporate
power and authority to own, lease and operate its properties and assets and to
carry on its business as it is now being conducted. NACH Inc. is a duly
registered savings and loan holding company under HOLA.
(f) American Savings Bank is a federally chartered
stock savings association, duly organized, validly existing and in good standing
under the laws of the United States and is duly
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qualified to do business and is in good standing in each jurisdiction where its
ownership or lease of property or the nature of the business conducted by it
requires it to be so qualified, except for such jurisdictions where the failure
to be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on it. American Savings Bank has previously delivered to WMI true
and complete copies of its charter and bylaws, each as currently in effect.
American Savings Bank has the requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as it
is now being conducted. American Savings Bank is a member in good standing of
the FHLB of San Francisco and its deposits are insured by the SAIF to the
fullest extent permitted by law. American Savings Bank has previously delivered
or made available to WMI true and complete copies of all agreements and other
documents relating to American Savings Bank's membership in, borrowings from or
other financial arrangements with the FHLB of San Francisco. American Savings
Bank is and at all times since December 28, 1988 has been, a qualified thrift
lender pursuant to Section 10(m) of HOLA. American Savings Bank is a savings
association of the type described in Section 10(c)(3)(B)(i) of HOLA.
4.2 Subsidiaries.
(a) Except as disclosed on Disclosure
Schedule 4.2(a) and except for equity interests in other Keystone Entities, no
Keystone Entity beneficially owns or controls, directly or indirectly, any
shares of stock or other equity interest in any corporation, firm, partnership,
joint venture or other entity.
(b) Disclosure Schedule 4.2(a) includes a list of
each corporation, partnership, joint venture and other entity in which any
Keystone Entity or any Keystone Entity Subsidiary beneficially owns or controls,
directly or indirectly, more than a 9% equity interest (each, other than New
West and its subsidiaries, Family SB and other entities specifically excluded
pursuant to Disclosure Schedule 4.2(a), a "Keystone Entity Subsidiary"). Each
investment shown on Disclosure Schedule 4.2(a) is a legal investment for a
federal savings association or a unitary savings and loan holding company, as
the case may be. Except as otherwise disclosed on Disclosure Schedule 4.2(a), a
Keystone Entity owns, directly or indirectly through a wholly owned subsidiary,
100% of the capital stock, partnership interests, joint venture interests or
other equity interests in each Keystone Entity Subsidiary. There is no
federally-insured depository institution, other than American Savings Bank, New
West and Family SB, in which any Keystone Entity owns or controls, directly or
indirectly, more than a 9.9% equity interest. Except as disclosed in Disclosure
Schedule 4.2(a), neither any Keystone Entity nor any Keystone Entity Subsidiary
is the general partner of any partnership or
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joint venture or is under any obligation of any sort to acquire any capital
stock or other equity interest in any Person. There are no options, contracts,
commitments, understandings or arrangements of any kind which might require the
issuance, delivery or sale by any Keystone Entity or by any Keystone Entity
Subsidiary of any additional equity interests or any securities convertible into
or representing the right to purchase or subscribe for such equity interests,
except for the Warrants or as otherwise described on Disclosure Schedule 4.2(b)
(which, among other things, describes certain options with respect to a Keystone
Entity which are held by another Keystone Entity) free and clear of any claim,
lien, encumbrance, or agreement with respect thereto (including any agreements
with respect to the voting of such shares). All of the shares of capital stock
of each Keystone Entity Subsidiary that is a corporation are fully paid and
nonassessable, and all such shares are owned directly by a Keystone Entity or a
Keystone Entity Subsidiary as set forth on Disclosure Schedule 4.2(a). Each
Keystone Entity Subsidiary that is a corporation is a corporation duly
organized, validly existing and in good standing under the laws of its
respective jurisdiction of incorporation and is duly qualified to do business as
a foreign corporation in each other jurisdiction in which its ownership or lease
of property or the nature of the business conducted by it requires it to be so
qualified, except for such jurisdictions where the failure to be so qualified
would not, individually or in the aggregate, have a Material Adverse Effect on
American Savings Bank. Each Keystone Entity Subsidiary that is a corporation has
the corporate power to own, lease and operate its properties and assets and to
carry on its business as it is now being conducted.
(c) KH Partners and the Keystone Entities have each
previously delivered to, or made available for inspection by, WMI true and
complete copies of all agreements to which it is a party or by which it or any
of its assets may be bound, other than, in the case of American Savings Bank
only, loans, credit facility agreements or accounts in the ordinary course at
market rates and terms, with unaffiliated parties, (i) which relate to any
ownership interest by any Keystone Entity or Keystone Entity Subsidiary of an
equity interest in any partnership, joint venture, or similar enterprise, (ii)
pursuant to which either any Keystone Entity or Keystone Entity Subsidiary may
be required to transfer funds in respect of an equity interest to, make an
investment in, or guarantee or assume any debt, dividend or other obligation of,
any Person, or (iii) pursuant to which any of them are or may become an equity
investor in a real estate project.
(d) KH Partners has no assets other than (i) 100%
of the outstanding shares of Keystone Holdings, (ii) a note receivable in the
amount of $25,000 as of May 31, 1996, and (iii) its interest in the Case.
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4.3 Capitalization.
(a) The authorized capital stock of Keystone
Holdings consists of 100,000 shares of Keystone Holdings Common Stock. As of the
date hereof, 1,048.4483 shares of Keystone Holdings Common Stock are issued and
outstanding. No shares of stock are held in Keystone Holdings' treasury. All of
the issued and outstanding shares of Keystone Holdings Common Stock have been
duly authorized, validly issued, and are fully paid and non-assessable, with no
personal liability attaching to the ownership thereof. Except as described in
Disclosure Schedule 4.2(b) (which, among other things, describes certain options
with respect to a Keystone Entity which are held by another Keystone Entity),
there are no outstanding subscriptions, options, warrants, calls, commitments,
agreements, understandings or arrangements of any kind which call for or might
require the transfer, sale, delivery or issuance of any shares of Keystone
Holdings' capital stock or other equity securities thereof or any securities
representing the right to purchase or otherwise receive any shares of Keystone
Holdings' capital stock or any securities convertible into or representing the
right to purchase or subscribe for any such shares. There are no agreements or
understandings to which KH Partners or any Keystone Entity is a party with
respect to voting any shares of Keystone Holdings capital stock. All of the
issued and outstanding shares of Keystone Holdings' capital stock are owned,
beneficially and of record, by KH Partners, free and clear of any claim,
security interest, lien or other encumbrance.
(b) The authorized capital stock of New Holdings
consists of 100,000 shares of common stock, par value $0.10 per share ("New
Holdings Common Stock"). As of the date hereof, 1,000 shares of New Holdings
Common Stock are issued and outstanding. No shares of stock are held in New
Holdings' treasury. All of the issued and outstanding shares of New Holdings
Common Stock have been duly authorized, validly issued, and are fully paid and
non-assessable, with no personal liability attaching to the ownership thereof.
There are no outstanding subscriptions, options, warrants, calls, commitments,
agreements, understandings or arrangements of any kind which call for or might
require the transfer, sale, delivery or issuance of any shares of New Holdings'
capital stock or other equity securities of New Holdings or any securities
representing the right to purchase or otherwise receive any shares of New
Holdings' capital stock or any securities convertible into or representing the
right to purchase or subscribe for any such shares. There are no agreements or
understandings to which KH Partners or any Keystone Entity is a party with
respect to voting the shares of New Holdings Common Stock. All of the issued and
outstanding shares of New Holdings' capital stock are owned, beneficially and of
record, by Keystone Holdings, free and clear of any claim, security interest,
lien or other encumbrance.
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(c) The authorized capital stock of New Capital
consists of 1,000,000 shares of common stock, par value $0.10 per share ("New
Capital Common Stock") and 800,000 shares of Cumulative Redeemable Preferred
Stock, par value $0.10 per share ("New Capital Preferred Stock"). As of the date
hereof, 1,000 shares of New Capital Common Stock are issued and outstanding and
800,000 shares of New Capital Preferred Stock are issued and outstanding. No
shares of stock are held in New Capital's treasury. All of the issued and
outstanding shares of New Capital Common Stock and New Capital Preferred Stock
have been duly authorized, validly issued, and are fully paid and
non-assessable, with no personal liability attaching to the ownership thereof.
There are no outstanding subscriptions, options, warrants, calls, commitments,
agreements, understandings or arrangements of any kind which call for or might
require the transfer, sale, delivery or issuance of any shares of New Capital's
capital stock or other equity securities or any securities representing the
right to purchase or otherwise receive any shares of New Capital's capital stock
or any securities convertible into or representing the right to purchase or
subscribe for any such shares. There are no agreements or understandings to
which KH Partners or any Keystone Entity is a party with respect to voting any
shares of New Capital Common Stock. All of the issued and outstanding shares of
New Capital Common Stock are owned, beneficially and of record, by New Holdings,
free and clear of any claim, security interest, lien or other encumbrance.
(d) The authorized capital stock of NACH Inc.
consists of 8,400 shares of Class A common stock, without par value, 3,600
shares of Class B common stock, without par value, 3,000 shares of Class C
common stock, without par value, and 1,000 shares of preferred stock, without
par value. As of the date hereof, 7,000 shares of NACH Inc.'s Class A common
stock are issued and outstanding. As of the date hereof, no shares of NACH
Inc.'s Class B common stock, Class C common stock or preferred stock are issued
and outstanding. No shares of stock are held in NACH Inc.'s treasury. All of the
issued and outstanding shares of NACH Inc.'s Class A common stock have been duly
authorized, validly issued, and are fully paid and non-assessable, with no
personal liability attaching to the ownership thereof. Except for the Warrants,
there are no outstanding subscriptions, options, warrants, calls, commitments,
agreements, understandings or arrangements of any kind which call for or might
require the transfer, sale, delivery or issuance of any shares of NACH Inc.'s
capital stock or other equity securities or any securities representing the
right to purchase or otherwise receive any shares of NACH Inc.'s capital stock
or any securities convertible into or representing the right to purchase or
subscribe for any such shares. There are no agreements or understandings to
which KH Partners or any Keystone Entity is a party with respect to voting any
issued and outstanding shares of NACH Inc.'s Class A common stock. All of the
issued and outstanding shares of NACH Inc.'s Class A common stock are owned,
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beneficially and of record, by New Capital, free and clear of any claim,
security interest, lien or other encumbrance.
(e) The authorized capital stock of American
Savings Bank consists of 1,000,000 shares of common stock, par value $1.00 per
share ("American Savings Bank Common Stock") and 100,000 shares of Serial
Preferred Stock Series A, par value $0.01 per share ("American Savings Bank
Preferred Stock"), of which 10,000 shares of American Savings Bank Preferred
Stock have been designated as Participating Preferred Stock Series A and
authorized for issuance by the Board of Directors of American Savings Bank. As
of the date hereof, 97,000 shares of American Savings Bank Common Stock are
issued and outstanding and 3,503 shares of American Savings Bank Preferred Stock
are issued and outstanding. No shares of stock are held in American Savings
Bank's treasury. All of the issued and outstanding shares of American Savings
Bank Common Stock and American Savings Bank Preferred Stock have been duly
authorized, validly issued, and are fully paid and non-assessable, with no
personal liability attaching to the ownership thereof. Except as set forth on
Disclosure Schedule 4.2(b), there are no outstanding subscriptions, options,
warrants, calls, commitments, agreements, understandings or arrangements of any
kind which call for or might require the transfer, sale, delivery or issuance of
any shares of American Savings Bank's capital stock or other equity securities
or any securities representing the right to purchase or otherwise receive any
shares of American Savings Bank's capital stock or any securities convertible
into or representing the right to purchase or subscribe for any such shares, and
there are no agreements or understandings to which KH Partners or any Keystone
Entity is a party with respect to voting any of such shares. All of the issued
and outstanding shares of American Savings Bank Common Stock are owned,
beneficially and of record, by NACH Inc., free and clear of any claim, security
interest, lien or other encumbrance. All of the issued and outstanding shares of
American Savings Bank Preferred Stock are owned, beneficially and of record, by
Keystone Holdings, free and clear of any claim, security interest, lien or other
encumbrance.
4.4 Loan Portfolio. To the knowledge of KH Partners and
the Keystone Entities:
(a) All evidences of indebtedness reflected as
assets on the books and records of American Savings Bank ("Loans") were, as of
March 31, 1996 and will be as of the Closing Date, in all respects legal, valid
and binding obligations of the respective obligors named therein and no such
indebtedness is subject to any defenses which have been or may be asserted,
except for (i) defenses arising from applicable bankruptcy, insolvency,
moratorium or other similar laws relating to creditors' rights generally and
general principles of equity, and (ii) defenses advanced in defense of
foreclosure or other realization proceedings which are in every
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case fact specific and which are not indicative of any pattern or practice by
American Savings Bank or any employee thereof which might give rise to a
meritorious class-action or other multi-party lawsuit.
(b) American Savings Bank has good title to and is
the sole owner of record of each Loan or any participation interest therein
shown as an asset on the books of American Savings Bank as of the date of this
Agreement free of any lien, encumbrance or claim by any other person, except for
Loans securing borrowings in the ordinary course (including borrowings with the
FHLB of San Francisco) or Loans subject to repurchase obligations as set forth
herein.
(c) Except as disclosed on Disclosure
Schedule 4.4(c), all Loans in a principal amount in excess of $100,000 reflected
as assets in American Savings Bank's Financial Statements as of March 31, 1996
that are primarily secured by an interest in real property are secured by a
valid and perfected first lien.
(d) All Loans with a principal balance in excess of
$1,000,000 as of March 31, 1996 which are either unsecured or secured by
property other than 1-4 family residences are listed on Disclosure Schedule
4.4(d), which indicates, for each such Loan, the Loan number, the borrower's
name and the unpaid balance as of March 31, 1996.
(e) Except as disclosed on Disclosure Schedule
4.4(e), no Loan, all or any part of which is an asset of American Savings Bank
was, as of March 31, 1996, more than 30 days past due.
(f) Except for (i) Loans acquired from the FSLIC as
receiver (the "Receiver") for Old American, in the acquisition by American
Savings Bank of Old American on December 28, 1988 (the "1988 Acquisition"), (ii)
Loans purchased from other third parties or (iii) as otherwise disclosed on
Disclosure Schedule 4.4(f), each outstanding Loan or commitment to extend credit
was solicited and originated and is administered in accordance with the relevant
loan documents, American Savings Bank's then applicable underwriting standards
and in material compliance with all applicable requirements of federal, state
and local laws and regulations. All Loans acquired from the Receiver in the 1988
Acquisition or purchased from other third parties, have, since their acquisition
by American Savings Bank, been administered in accordance with American Savings
Bank's normal loan servicing practices as from time to time in effect and,
except for claims relating to such Loans disclosed on Disclosure Schedule 4.12,
no borrower or obligor on any such Loan has alleged that they were originated or
administered in violation of any requirement of applicable federal, state, or
local laws.
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(g) Except as disclosed on Disclosure
Schedule 4.4(g), none of the agreements pursuant to which American Savings Bank
has sold Loans or pools of Loans or participations in Loans or pools of Loans
contains any obligation to repurchase such Loans or interests therein solely on
account of a payment default by the obligor on any such Loan.
(h) Disclosure Schedule 4.4(h) sets forth, as of
March 31, 1996, as to each participation purchased, the total loan balance, the
percentage of interest purchased, the identity of the seller and an indication
of whether or not there are any put-back rights or indemnifications and whether
the percentage of interest purchased by American Savings Bank is superior to the
percentage of interest retained by the seller; provided, however, that as to 1-
to-4 family residential loans, such information is provided by loan package sold
instead of by individual loans.
(i) (a) Disclosure Schedule 4.4(i)(a) sets forth
all Loans by American Savings Bank to executive officers (as such term is
defined in Regulation O) of American Savings Bank; (b) there are no employee,
officer, director or other affiliate Loans on which the borrower is paying a
rate other than that reflected in the note or the relevant credit agreement or
on which the borrower is paying a rate which was below market at the time the
loan was made; and (c) except as listed on Disclosure Schedule 4.4(i)(c), all
such loans are and were made in compliance with all applicable federal laws and
regulations.
(j) All Loans which are assets of American Savings
Bank have been classified in accordance with the American Savings Bank Loan
classification policy, a copy of which has been provided to WMI.
(k) All Commercial Real Estate Loans were
originated in conformity with American Savings Bank's then-applicable
environmental policy, except for such Loans as were acquired from the Receiver
in the 1988 Acquisition, and such Loans as were purchased from other third
parties. Loans acquired from the Receiver in the 1988 Acquisition, and Loans
purchased from other third parties have been serviced in accordance with the
American Bank Environmental Policy and, except as disclosed on Disclosure
Schedule 4.4(k), KH Partners and the Keystone Entities have no knowledge of any
environmental contamination issues raised by or with respect to the properties
securing Loans acquired from the Receiver in the 1988 Acquisition. Pursuant to
the terms and subject to the conditions contained in certain of the FRF
Agreements, American Savings Bank is entitled to receive certain federal
assistance payments with respect to Loans acquired from the Receiver in the 1988
Acquisition that were secured by properties affected by certain specified
environmental conditions.
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(l) Except for Loans acquired from the Receiver in
the 1988 Acquisition and Loans purchased from other third parties, (i) each Loan
outstanding to an individual who is known to American Savings Bank to be an
individual who is not a resident of the United States was originated by American
Savings Bank in accordance with its Lending/Mortgage Origination Policy (Income
Property Lending - Foreign Borrowers), a copy of which has been provided to WMI,
and (ii) there are no Loans to a corporation or other entity headquartered
outside of the United States. There are no commitments outstanding to
nonresident individuals or entities to make loans or advances which, when made,
would not be in compliance with the preceding sentence.
(m) Except as shown on Disclosure Schedule 4.4(m),
as of March 31, 1996, American Savings Bank has no outstanding commitments,
including outstanding letters of credit and unfunded agreements to lend, in
excess of $500,000 for other than one-to-four family residential loans.
4.5 Reports.
(a) Each Keystone Entity has duly filed with the
FDIC and the OTS, in correct form in all material respects, the monthly,
quarterly, semiannual and annual reports required to be filed by it under
applicable law and regulations for all periods subsequent to December 31, 1992.
The Keystone Entities have previously delivered or made available to WMI
accurate and complete copies of such reports. At no time since January 1, 1989,
has any Keystone Entity had outstanding any securities registered under Section
12(b) or required to be registered under Section 12(g) of the Securities
Exchange Act.
(b) The Keystone Entities have previously delivered
or made available to WMI accurate and complete copies of (1) the Private
Placement Memorandum dated October 1991, and the final Offering Circular dated
March 16, 1995 relating to the Senior Notes (the "Senior Note Circulars"), (2)
the final Offering Circular dated February 5, 1996 relating to the 6 5/8%
Subordinated Notes due February 15, 2006 issued by American Savings Bank (the
"Subordinated Note Circular"), (3) the final Offering Circular dated July 28,
1995 relating to the New Capital Preferred Stock (the "Preferred Stock Circular"
and, together with the Senior Note Circulars and the Subordinated Note
Circulars, the "Offering Circulars") and (4) the Note Purchase Agreement dated
September 10, 1993 and each other written communication (other than general
advertising materials) mailed by any Keystone Entity to the holders of the
Senior Notes, the Subordinated Notes or the New Capital Preferred Stock (the
"Securityholder Communications"). None of the Offering Circulars, as of their
respective dates, contained an untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in light of the
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circumstances under which they were made, not misleading, except that with
respect to the Preferred Stock Circular, no representation is made concerning
(v) the terms of the Deferred Payments Agreement dated as of August 1, 1995 or
other arrangements between Merrill Lynch Capital Services, Inc. and NA Preferred
Partners, L.P., Acadia Partners, L.P. and Lerner Enterprises Limited Partnership
relating to the sale of the Preferred Stock referred to therein; (w) the
financial condition or results of operations of New Capital for any period
subsequent to March 31, 1995; (x) management of New Capital; (y) compensation of
executive officers and directors of New Capital or (z) the federal income tax
consequences of an investment in the New Capital Preferred Stock. WMI
acknowledges that each of the Offering Circulars states that it is not to be
relied upon as the sole basis for making an investment decision in the related
securities, and that the circumstances under which the statements in the
Offering Circulars were made include, among other things, the fact that
prospective investors were required to rely upon their own independent
investigation of New Capital or American Savings Bank, as the case may be, and
the terms of the related securities and their offering. None of the
Securityholder Communications, as of their respective dates, contained an untrue
statement of a material fact.
4.6 Authority.
(a) KH Partners has requisite partnership 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 approved by all necessary partnership action. This Agreement has been
duly and validly executed and delivered by KH Partners and, assuming the due
authorization, execution and delivery thereof by the WM Entities, constitutes
the valid and binding obligation of KH Partners, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, insolvency,
moratorium or other laws relating to creditors' rights generally and to general
principles of equity.
(b) Keystone Holdings has requisite corporate power
and authority to execute and deliver this Agreement and the Plan of Merger and
to consummate the transactions contemplated hereby and thereby. The execution
and delivery of this Agreement and the Plan of Merger and the consummation of
the transactions contemplated hereby and thereby have been duly and validly
approved by the Board of Directors of Keystone Holdings. Keystone Holdings has
obtained all stockholder approvals, if any, required under its articles, bylaws
or applicable law for the execution and delivery of this Agreement and the Plan
of Merger and the consummation of the transactions contemplated hereby or
thereby. No other corporate proceedings on the part of Keystone Holdings are
necessary to
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authorize this Agreement or the Plan of Merger or the transactions contemplated
hereby or thereby. This Agreement has been duly and validly executed and
delivered by Keystone Holdings and, assuming the due authorization, execution
and delivery thereof by the WM Entities, constitutes a valid and binding
obligation of Keystone Holdings, enforceable against it in accordance with its
terms, subject to applicable bankruptcy, insolvency, moratorium or other laws
relating to creditors' rights generally and to general principles of equity.
(c) Each of New Holdings, New Capital, NACH Inc.
and American Savings Bank has the requisite corporate power and authority to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this Agreement by each of New
Holdings, New Capital, NACH Inc. and American Savings Bank and the consummation
by each of the transactions contemplated hereby have been duly and validly
approved by its respective Board of Directors. Each of New Holdings, New
Capital, NACH Inc. and American Savings Bank has obtained all stockholder
approvals, if any, required by its articles, charter or bylaws or under
applicable law to authorize the execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby. No other corporate
proceedings on the part of any of New Holdings, New Capital, NACH Inc. or
American Savings Bank are necessary to authorize this Agreement or the
consummation of the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by each of New Holdings, New Capital,
NACH Inc. and American Savings Bank and, assuming due authorization, execution
and delivery thereof by the WM Entities, constitutes a valid and binding
obligation of each of New Holdings, New Capital, NACH Inc. and American Savings
Bank, enforceable against each of them in accordance with its terms, subject to
applicable bankruptcy, insolvency, moratorium or other laws relating to
creditors' rights generally, to general principles of equity and, in the case of
American Savings Bank, applicable receivership and conservatorship laws.
4.7 No Violation.
(a) Neither the execution and delivery of this
Agreement by KH Partners and the Keystone Entities or the Plan of Merger by
Keystone Holdings nor the consummation of the transactions contemplated hereby
and thereby, nor compliance by KH Partners and the Keystone Entities with any of
the terms or provisions hereof or thereof, will (i) violate any provision of the
partnership agreement of KH Partners or the articles, charter or bylaws of any
Keystone Entity, (ii) assuming the consents and approvals referred to in Section
9.1 hereof are duly obtained, violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to KH
Partners, any
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Keystone Entity or any Keystone Entity Subsidiary, or any of its respective
properties or assets, or (iii) except for the agreements listed on Disclosure
Schedule 4.7(a), violate, conflict with, result in a breach of any provisions
of, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, require any consent or notice under, or
result in the creation of any lien, security interest, charge or other
encumbrance upon any of the properties or assets of KH Partners, any Keystone
Entity or any Keystone Entity Subsidiary, under any of the terms, conditions or
provisions of any note, bond, mortgage indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which KH Partners, any Keystone
Entity or any Keystone Entity Subsidiary is a party, or by which it or any of
its properties or assets may be bound or affected. The parties agree that the
phrase "transactions contemplated herein" and words of similar import used in
this Agreement shall not be deemed to include the Liquidations and the Bank
Merger.
(b) If WMI determines, after the Effective Time, to
liquidate (by statutory merger) each of New Holdings, New Capital and NACH Inc.
(the "Liquidations") and, after the Liquidations, to merge American Savings Bank
with WM Bank or WMBfsb (the "Bank Merger"), neither the Liquidations nor the
Bank Merger will, to the knowledge of KH Partners and the Keystone Entities, (i)
violate any provision of the articles, charter or bylaws of any Keystone Entity,
(ii) assuming that WMI obtains the necessary consents and approvals from
applicable regulatory authorities and the FDIC under the FRF Agreements, violate
any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to any Keystone Entity or any Keystone Entity Subsidiary,
or any of its respective properties or assets, or (iii) except for the
agreements listed on Disclosure Schedule 4.7(b) or as would not have a Material
Adverse Effect on KH Partners and the Keystone Entities taken as a whole,
violate, conflict with, result in a breach of any provisions of, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of, accelerate the
performance required by, require any consent or notice under, or result in the
creation of any lien, security interest, charge or other encumbrance upon any of
the properties or assets of any Keystone Entity or any Keystone Entity
Subsidiary, under any of the terms, conditions or provisions of any note, bond,
mortgage indenture, deed of trust, license, lease, agreement or other instrument
or obligation to which any Keystone Entity or any Keystone Entity Subsidiary is
a party, or by which it or any of its properties or assets may be bound or
affected.
4.8 Consents and Approvals. Except for (i) consents and
approvals of or filings, deliveries or registrations with the OTS,
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the FRF, the FDIC, the Director, the Washington Secretary of State, the Texas
Secretary of State, the FTC, the SEC, the United States Department of Justice
(the "Justice Department"), or other applicable governmental authorities and
(ii) the consents, approvals, filings or registrations required with respect to
the agreements set forth on Disclosure Schedule 4.7(a), 4.7(b) or 4.23, no
consents or approvals of or filings or registrations with any third party or
public body or authority are necessary in connection with the execution and
delivery of this Agreement by the Keystone Entities and KH Partners and the
consummation by the Keystone Entities and KH Partners of the transactions
contemplated hereby.
4.9 Financial Statements.
(a) The Keystone Entities have previously delivered
or made available to WMI copies of (i) the consolidated statements of financial
condition of each Keystone Entity as of December 31, in each of the three fiscal
years 1993, 1994 and 1995, and the related consolidated statements of income,
statements of stockholders' equity and statements of cash flows for each of the
three-year periods ending, respectively, on December 31, 1993, 1994 and 1995, in
each case accompanied by the audit reports of KPMG (the "Keystone 1993, 1994 and
1995 Financial Statements," respectively); and (ii) the unaudited consolidated
balance sheet of each Keystone Entity as of March 31, 1996 and the related
unaudited consolidated statements of income and statements of cash flows for the
three-month period then ended (the "Keystone March 1996 Financial Statements").
The Keystone 1993, 1994 and 1995 Financial Statements and the Keystone March
1996 Financial Statements are sometimes herein referred to collectively as the
Keystone Financial Statements. The consolidated statements of condition of each
Keystone Entity referred to herein (including the related notes) fairly present
in all material respects, using generally accepted accounting principles
consistently applied, the consolidated financial position of such Keystone
Entity as of the respective dates set forth therein, and the other financial
statements referred to herein (including the related notes) fairly present in
all material respects, using generally accepted accounting principles
consistently applied, the results of the consolidated operations and changes in
stockholders' equity and cash flows of such Keystone Entity for the respective
fiscal periods or as of the respective dates set forth therein, except that
interim unaudited financial statements are subject to normal adjustments.
(b) Each of the Keystone Financial Statements
(including the related notes) has been prepared in accordance with generally
accepted accounting principles consistently applied during the periods involved
(except as indicated in the notes thereto). To the knowledge of KH Partners and
the Keystone Entities, the books and records of each Keystone Entity have been,
and are being, maintained in all material respects in accordance
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with applicable legal and accounting requirements, using generally accepted
accounting principles consistently applied, and reflect only actual
transactions.
4.10 Brokerage. Except as disclosed on Disclosure Schedule
4.10 (which fees shall be payable by one or more of the Keystone Entities),
there are no claims for investment banking fees, brokerage commissions, finder's
fees or similar compensation arising out of or due to any act of KH Partners,
any Keystone Entity or any Keystone Entity Subsidiary in connection with the
transactions contemplated by this Agreement.
4.11 Absence of Certain Changes or Events. There has not been
any Material Adverse Change with respect to any of the Keystone Entities, from
that described in the Keystone March 1996 Financial Statements (except for
changes resulting from market and economic conditions which generally affect the
savings industry as a whole, including, without limitation changes in law or
regulation, and changes in generally accepted accounting principles or
interpretations thereof).
4.12 Litigation, Etc. As of June 30, 1996, except as disclosed
on Disclosure Schedule 4.12 or 4.14(c), there is no action, suit, claim,
inquiry, proceeding or, to the knowledge of KH Partners or any Keystone Entity,
investigation (other than condemnation or unlawful detainer actions and routine
bankruptcy matters involving Loans and the properties securing Loans) before any
court, commission, bureau, regulatory, administrative or governmental agency,
arbitrator, body or authority pending or, to the knowledge of KH Partners or any
Keystone Entity, threatened against any Keystone Entity or any Keystone Entity
Subsidiary which would reasonably be expected to result in any liabilities,
including defense costs, in excess of $100,000. Except as disclosed on
Disclosure Schedule 4.12 or 4.14(c), neither any Keystone Entity nor any
Keystone Entity Subsidiary is in default with respect to any orders, judgments
or decrees that in the aggregate require payment of more than $100,000.
4.13 Taxes, Payments in Lieu of Taxes and Tax Returns.
(a) Except as disclosed in Disclosure Schedule
4.13, (i) the amounts set up as provisions for taxes on the Keystone 1995
Financial Statements are sufficient for all material accrued and unpaid federal,
state, county and local taxes, interest and penalties of all corporations which
were or should have been included in the Keystone Holdings consolidated federal
income tax return, whether or not disputed, for the period ended December 31,
1995 and for all fiscal periods prior thereto; and (ii) the amounts stated as
provisions for payments in lieu of taxes in Note 18 of the 1995 financial
statements of American Savings Bank are sufficient for all material accrued and
unpaid amounts owed to the
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FRF, whether or not disputed, with respect to the period ended December 31, 1995
and for all fiscal periods prior thereto. The federal income tax returns for all
corporations which were or should have been included in the Keystone Holdings
consolidated federal income tax return for the fiscal years ending in 1992,
1993, 1994 and 1995 are the only such federal income tax returns open under the
statute of limitations provisions of the Code. With respect to California
franchise tax matters, franchise tax returns for American Savings Bank and the
subsidiaries of American Savings Bank for the income years ended December 31,
1988, 1989, 1990, 1992, 1993, 1994 and 1995 are open under the statute of
limitations provisions of the Revenue and Tax Code of the State of California.
Complete and correct copies of the income tax returns for all corporations which
were or should have been included in the Keystone Holdings consolidated federal
income tax return for the three fiscal years ending December 31, 1992, 1993 and
1994, as filed with the Internal Revenue Service and all state and local taxing
authorities, together with all related correspondence and notices, have
previously been delivered or made available to WMI.
(b) Each of the corporations which was or should
have been included in the Keystone Holdings consolidated federal income tax
return has timely and correctly filed all federal income tax returns and reports
(collectively, "Federal Income Tax Returns") required by applicable law to be
filed (including, without limitation, estimated tax returns or income tax
returns), except to the extent that the failure to timely or correctly file such
Federal Income Tax Returns does not, when aggregated with all failures to timely
or correctly file all Other Returns (as hereinafter defined), result in
aggregate penalties or assessments of more than $5.0 million, and has paid all
taxes, charges and withholdings shown by such Federal Income Tax Returns to be
owed, or which are otherwise due and payable and to the extent any material
liabilities for such Taxes have not been fully discharged, full and complete
reserves have been established on the Keystone 1995 Financial Statements.
(c) Each Keystone Entity and each Keystone Entity
Subsidiary (excluding any subsidiaries of New West) has timely and correctly
filed all federal, state, county and local tax returns and reports other than
Federal Income Tax Returns (collectively, "Other Returns") required by
applicable law to be filed (including, without limitation, estimated tax
returns, income tax returns, excise tax returns, sales tax returns, use tax
returns, property tax returns, franchise tax returns, information returns and
withholding, employment and payroll tax returns), or required by contractual
provisions (including, without limitation, reports to the FDIC), except to the
extent that the failure to timely or correctly file such Other Returns does not
result in aggregate penalties or assessments, when combined with such penalties
relating to Federal Income Tax Returns, of more than $5.0 million,
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and has paid all taxes, payments in lieu of taxes, levies, license and
registration fees, charges and withholdings of any nature whatsoever
(hereinafter called "Taxes") shown by such Other Returns to be owed, or which
are otherwise due and payable and to the extent any material liabilities
therefor have not been fully discharged, full and complete reserves have been
established on the Keystone 1995 Financial Statements.
(d) No entity which was or should have been
included in the Keystone Holdings consolidated federal income tax return is in
default in the payment of any federal income taxes or Taxes due or payable or
any assessments received in respect thereof except for those which are being
contested in good faith. No additional assessments of federal income taxes or
Taxes are known to KH Partners or the Keystone Entities to be proposed, pending
or threatened, other than federal income taxes or Taxes for periods for which
returns are not yet filed.
(e) No Keystone Entity or Keystone Entity
Subsidiary has filed a consent to the application of Section 341(f) of the Code.
(f) Keystone Holdings is not an investment company
as defined in section 368(a)(2)(F)(iii) and (iv) of the Code.
4.14 Employees; Employee Benefit Plans.
(a) To the knowledge of KH Partners or the Keystone
Entities, (A) except as set forth in Disclosure Schedule 4.14(a)(i) neither KH
Partners, any Keystone Entity nor any Keystone Entity Subsidiary is a party to
or bound by any contract, arrangement or understanding (whether written or oral)
with respect to the employment or compensation of any (x) consultants receiving
in excess of $50,000 annually or (y) employees and, (B) except as provided under
the Benefit Plans (as defined below) set forth in Disclosure Schedule
4.14(a)(ii) and other agreements or arrangements set forth in Disclosure
Schedule 4.14(a)(ii), consummation of the transactions contemplated by this
Agreement and the Plan of Merger will not (either alone or upon the occurrence
of any additional acts or events) result in any payment (whether of severance
pay or otherwise) becoming due from any Keystone Entity or any Keystone Entity
Subsidiary to any officer or employee thereof. The Keystone Entities have
previously delivered or made available to WMI true and complete copies of all
consulting agreements calling for payments in excess of $50,000 annually and
employment, and deferred compensation agreements that are in writing, to which
any Keystone Entity or any Keystone Entity Subsidiary is a party.
(b) Except as set forth on Disclosure Schedule
4.14(b) no employee of any Keystone Entity or any Keystone Entity
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Subsidiary received aggregate remuneration (bonus, salary and commissions) in
excess of $200,000 for 1995 or would reasonably be expected to receive aggregate
remuneration (excluding severance or other payments which, pursuant to an
agreement or arrangement set forth on Disclosure Schedule 4.14(a)(ii), are made
as a result of consummation of the transactions contemplated by this Agreement
and the Plan of Merger, either alone or upon the occurrence of any additional
acts or events) in excess of $200,000 in 1996.
(c) Except as disclosed on Disclosure
Schedule 4.14(c), as of the date of this Agreement, there are not, and have not
been at any time since January 1, 1994, any actions, suits, claims or
proceedings before any court, commission, bureau, regulatory, administrative or
governmental agency, arbitrator, body or authority (which in any case have been
served on KH Partners, any Keystone Entity or any Keystone Entity Subsidiary)
pending or, to the best of KH Partners' and the Keystone Entities' knowledge,
threatened by any employees, former employees or other persons relating to the
employment practices or activities of any Keystone Entity or any Keystone Entity
Subsidiary (except for actions which have subsequently been resolved). Neither
any Keystone Entity nor any Keystone Entity Subsidiary is a party to any
collective bargaining agreement, and no union organization efforts are pending
or, to the best of KH Partners' and the Keystone Entities' knowledge, threatened
nor have any occurred during the last three years.
(d) The Keystone Entities have made available to
WMI true and complete copies of all personnel codes, practices, procedures,
policies, manuals, affirmative action programs and similar materials.
(e) Except as disclosed on Disclosure Schedule
4.14(e), KH Partners and the Keystone Entities represent and
warrant as follows:
(i) All employee benefit plans, as defined in
Section 3(3) of ERISA, and any other pension, bonus, deferred compensation,
stock bonus, stock purchase, post-retirement medical, hospitalization, health
and other employee benefit plan, program or arrangement under which any Keystone
Entity or any Keystone Entity Subsidiary has any obligation or liability to any
employee or former employee (the "Benefit Plans") are set forth on Disclosure
Schedule 4.14(e)(i). All Benefit Plans that are subject to the funding
requirements in Title I, Subtitle B, Part 3 of ERISA or Section 412 of the Code,
are in compliance with such funding standards, and no waiver or variance from
such funding requirements has been obtained or applied for under Section 412(d)
of the Code. None of the Benefit Plans is subject to Title IV of ERISA or is a
"multiemployer plan," as such term is defined in Section 3(37) of ERISA.
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(ii) In all material respects, the terms of the
Benefit Plans are, and the Benefit Plans have been administered, in accordance
with the requirements of ERISA, the Code, applicable law and the respective plan
documents. None of the Benefit Plans is under audit or to the knowledge of the
Keystone Entities is the subject of an investigation by the Internal Revenue
Service, the U.S. Department of Labor or any other federal or state governmental
agency. All material reports and information required to be filed with, or
provided to, the U.S. Department of Labor, Internal Revenue Service, the PBGC
and plan participants and beneficiaries with respect to each Benefit Plan have
been timely filed or provided. With respect to each Benefit Plan for which an
annual report has been filed, to the knowledge of KH Partners and the Keystone
Entities, no material change has occurred with respect to the matters covered by
the most recent annual report since the date thereof.
(iii) Each of the Benefit Plans which is
intended to be "qualified" within the meanings of Section 401(a) of the Code is
so qualified and has been the subject of a determination letter from the
Internal Revenue Service to the effect that each such Plan is qualified and
exempt from Federal income taxes under Section 401(a) and 501(a), respectively,
of the Code.
(iv) Prior to the Closing, KH Partners and the
Keystone Entities shall deliver or make available to WMI complete and correct
copies (if any) of (w) the most recent Internal Revenue Service determination
letter relating to each Benefit Plan intended to be tax qualified under Section
401(a) and 501(a) of the Code, (x) the most recent annual report (Form 5500
Series) and accompanying schedules of each Benefit Plan, filed with the Internal
Revenue Service or an explanation of why such annual report is not required, (y)
the most current summary plan description for each Benefit Plan, and (z) the
most recent audited financial statements of each Benefit Plan.
(v) With respect to each Benefit Plan, all
contributions, premiums or other payments due or required to be made to such
plans as of the Effective Time have been or will be made prior to the Effective
Time.
(vi) To the knowledge of KH Partners and the
Keystone Entities, there are not now, nor have there been, any non-exempt
"prohibited transactions", as such term is defined in Section 4975 of the Code
or Section 406 of ERISA, involving any Keystone Entity or any Keystone Entity
Subsidiary, or any officer, director or employee thereof, with respect to the
Benefit Plans that could subject any Keystone Entity or any Keystone Entity
Subsidiary or, to the knowledge of KH Partners and the Keystone
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Entities, any other party-in-interest to the penalty or tax imposed under
Section 502(i) of ERISA and Section 4975 of the Code.
(vii) No claim, lawsuit, arbitration or other
action has been instituted, asserted (and no such lawsuit has been served on any
Keystone Entity or any Keystone Entity Subsidiary) or, to the best of KH
Partners' and the Keystone Entities' knowledge, threatened by or on behalf of
such Benefit Plan or by any employee alleging a breach of fiduciary duty or
violations of other applicable state or federal law with respect to such Benefit
Plans, which could result in liability on the part of any Keystone Entity, any
Keystone Entity Subsidiary or a Benefit Plan under ERISA or any other law, nor
is there any known basis for successful prosecution of such a claim, and WMI
will be notified promptly in writing of any such threatened or pending claim
arising between the date hereof and the Closing.
(viii) No Benefit Plan which is an "employee
welfare benefit plan" (within the meaning of Section 3(1) of ERISA) provides for
continuing benefits or coverage for any participant or beneficiary of a
participant after such participant's termination of employment, except as may be
required by COBRA, nor does any Keystone Entity or any Keystone Entity
Subsidiary have any material current or projected liability under any such plans
(such disclosure being made in accordance with the principles of Financial
Accounting Standard No. 106 of the Financial Accounting Standards Board).
(ix) Except for (y) the plan adopted by the
American Savings Bank Board of Directors on March 26, 1996 and reaffirmed with
amendments on June 6, 1996, and (z) the American Savings Bank Special Severance
Protection Program (as of January 1, 1994), copies of which have been provided
to WMI, the Keystone Entities and the Keystone Entity Subsidiaries have not
maintained or contributed to, and do not currently maintain or contribute to,
any severance pay plan.
(x) Except as disclosed on Disclosure Schedule
4.14(a)(ii), no individual will accrue or receive any additional benefits,
service, or accelerated rights to payment or vesting of benefits under any
Benefit Plan as a result of the transactions contemplated by this Agreement.
(xi) The Keystone Entities will obtain the
requisite stockholder approval, in accordance with Section 280G(b)(5)(B) of the
Code, prior to the Effective Time, of all payments to be made to individuals
under any Benefit Plan or otherwise as a result of the transactions contemplated
by this Agreement which would, without such approval, have constituted a
"parachute payment" as defined in Section 280G(b)(2) of the Code.
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(f) Disclosure Schedule 4.14(f) is a complete
listing of all individual agreements with employees which provide for the
possibility of bonus payments in the event of a change of control (the "Change
of Control Agreements").
(g) The termination and distribution of American
Savings Bank's defined benefit plan was done in accordance with all applicable
laws and regulations. An Internal Revenue Service letter of determination has
been requested by American Savings Bank and American Savings Bank has no reason
to believe it will not be issued in due course. Except for surplus trust assets
in the amount of approximately $1.3 million, all distributions have been made
and there are no employees (present or former) or retirees that are owed any
benefits under such terminated plan that have not been remitted in accordance
with all applicable laws and regulations. There are no outstanding obligations
or liabilities relating to the winding up of such plan.
4.15 Compliance With Applicable Law.
(a) Each Keystone Entity and Keystone Entity
Subsidiary holds all licenses, certificates, franchises, permits and other
governmental authorizations ("Permits") necessary for the lawful conduct of its
respective business and such Permits are in full force and effect, and each
Keystone Entity and Keystone Entity Subsidiary is in all respects complying
therewith except in each case where such failure to hold any Permit or to comply
with any Permit would not have a Material Adverse Effect on the Keystone
Entities.
(b) Each Keystone Entity and Keystone Entity
Subsidiary is and for the past three years has been in compliance with all
foreign, federal, state and local laws, statutes, ordinances, rules, regulations
and orders applicable to the operation, conduct or ownership of its business or
properties except for any noncompliance which is not reasonably likely to have
in the aggregate a Material Adverse Effect on any of the Keystone Entities.
4.16 Contracts and Agreements. To the knowledge of KH Partners
and the Keystone Entities, (i) except (A) with respect to deposits or other
borrowings in the ordinary course, (B) leases of and contracts relating to
interests in real property, (C) contracts, agreements, commitments or
instruments relating to loan servicing, insurance, tax or utility matters or the
employment or retention of (or compensation or other benefits payable with
respect to) employees or consultants (including attorneys and accountants, (D)
the FRF Agreements, the Senior Notes, the Subordinated Notes, the New Capital
Preferred Stock and the American Savings Bank Preferred Stock, (E) commitments,
contracts, agreements or other instruments which are terminable by the
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Keystone Entities or a Keystone Entity Subsidiary upon notice of not more than
90 days, and (F) as otherwise disclosed on Disclosure Schedule 4.16(i), neither
any Keystone Entity nor any Keystone Entity Subsidiary is a party to or bound by
any existing commitment, contract, agreement or other instrument which involved
payments by any Keystone Entity or any Keystone Entity Subsidiary to any party
(other than a Keystone Entity or a Keystone Entity Subsidiary) during 1995 of
more than $750,000 or which could reasonably be expected to involve payments
during 1996 of more than $750,000; and (ii) except as set forth on Disclosure
Schedule 4.16(ii), no commitment, contract, agreement or other instrument to
which any Keystone Entity or any Keystone Entity Subsidiary is a party or by
which it is bound, limits the freedom of any Keystone Entity or any Keystone
Entity Subsidiary to compete in any line of business, in any geographic area, or
with any Person.
4.17 Affiliate Transactions.
(a) To the knowledge of KH Partners and the
Keystone Entities and except as disclosed in Disclosure Schedule 4.17, since
July 31, 1994, neither any Keystone Entity nor any Keystone Entity Subsidiary
has engaged in, or is currently obligated to engage in (whether in writing or
orally), any transaction with any Affiliated Person (as defined below) involving
aggregate payments by or to a Keystone Entity or a Keystone Entity Subsidiary of
$60,000 or more during any consecutive 12 month period other than transactions
between or among Keystone Entities or Keystone Entity Subsidiaries which are not
in violation of Sections 23A and 23B of the Federal Reserve Act.
(b) For purposes of this Section 4.17, "Affiliated
Person" means:
(i) a director, executive officer or
Controlling Person (as defined below) of any Keystone Entity;
(ii) a spouse of a director, executive officer
or Controlling Person of any Keystone Entity;
(iii) a member of the immediate family of a
director, executive officer, or Controlling Person of any Keystone
Entity who has the same home as such person;
(iv) any company (other than a Keystone Entity)
of which a director, executive officer or Controlling Person of any Keystone
Entity directly or indirectly, or acting through or in concert with one or more
persons, (v) owns, controls or has the power to vote 25% or more of any class of
voting securities of the company; (w) controls in any manner the election of a
majority of the directors of the company; (x) has the power to exercise a
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controlling influence over the management or policies of the company; (y) is an
executive officer or director of the company and owns, controls or has the power
to vote more than 10% of any class of voting securities of the company; or (z)
owns, controls or has the power to vote more than 10% of any class of voting
securities of the company and no other person owns, controls or has the power to
vote a greater percentage of that class of voting securities;
(v) any trust or estate in which a director,
executive officer, or Controlling Person of any Keystone Entity or the spouse of
such person has a substantial beneficial interest or as to which such person or
his spouse serves as trustee or in a similar fiduciary capacity.
(c) For purposes of this Section 4.17 the term
"Controlling Person" means any person or entity which, either, directly or
indirectly, or acting in concert with one or more other persons or entities
owns, controls or holds with power to vote, or holds proxies representing ten
percent or more of the outstanding common stock of any entity.
(d) For purposes of this Section 4.17, the term
"director" means any director, trustee, or other person performing similar
functions with respect to any organization whether incorporated or
unincorporated.
(e) For purposes of this Section 4.17, the term
"executive officer" means the chief executive officer, the president, any
executive vice president, and any other person performing similar functions with
respect to any organization whether incorporated or unincorporated.
(f) For purposes of this Section 4.17, the term
"company" means any corporation, partnership, trust (business or otherwise),
association, joint venture, pool syndicate, sole proprietorship, unincorporated
organization or any other form of business entity other than a Keystone Entity.
4.18 Title to Property.
(a) Real Property. Disclosure Schedule 4.18(a)
contains a description of all interests in real property (other than real
property security interests received in the ordinary course of business or real
property acquired through foreclosure or deed in lieu thereof or other
realization proceedings ("REO")), whether owned, leased or otherwise claimed,
including a list of all leases of real property, in which any Keystone Entity or
Keystone Entity Subsidiary has or claims an interest as of the date of this
Agreement and any guarantees of any such leases by any of such parties. True and
complete copies of such leases have previously been delivered or made available
to WMI, together with all
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amendments, modifications, agreements or other writings related thereto which
are in the possession of any Keystone Entity or any Keystone Entity Subsidiary.
Except as disclosed on Disclosure Schedule 4.18(a), to the knowledge of the
Keystone Entities and the Keystone Entity Subsidiaries, each such lease is valid
and binding as between a Keystone Entity or a Keystone Entity Subsidiary and the
other party or parties thereto, and the occupant is a tenant or possessor in
good standing thereunder, free of any default or breach whatsoever (except as
otherwise disclosed on Disclosure Schedule 4.18(a)) and quietly enjoys the
premises provided for therein. Except as disclosed on Disclosure Schedule
4.18(a), to the knowledge of KH Partners and the Keystone Entities, each
Keystone Entity and Keystone Entity Subsidiary has owner's policies of title
insurance insuring it to be the owner of all real property owned by it on the
date of this Agreement, free and clear of all mortgages, liens, pledges, charges
or encumbrances of any nature whatsoever, except liens for current taxes not yet
due and payable and other standard exceptions commonly found in title policies
in the jurisdiction where such real property is located, and such encumbrances
and imperfections of title, if any, as do not materially detract from the value
of the properties and do not materially interfere with the present or proposed
use of such properties or otherwise materially impair such operations. All real
property and fixtures material to the business, operations or financial
condition of each Keystone Entity and each Keystone Entity Subsidiary are in
substantially good condition and repair.
(b) Environmental Matters. Except as set forth on
Disclosure Schedule 4.18(b), to the knowledge of KH Partners and the Keystone
Entities, real property owned or leased by any Keystone Entity or any Keystone
Entity Subsidiary on the date of this Agreement does not contain any underground
storage tanks, asbestos, ureaformaldehyde, uncontained polychlorinated
biphenyls, or, except for materials which are ordinarily used in office
buildings and office equipment such as janitorial supplies and do not give rise
to financial liability therefor under the hereafter defined Environmental Laws,
releases of hazardous substances as such terms may be defined by all applicable
federal, state or local environmental protection laws and regulations
("Environmental Laws"). As of the date of this Agreement (i) no part of any such
real property has been listed, or to the knowledge of KH Partners and the
Keystone Entities, proposed for listing on the National Priorities List pursuant
to the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") or on a registry or inventory of inactive hazardous waste sites
maintained by any state, and, (ii) except as set forth on Disclosure Schedule
4.18(b), no notices have been received alleging that any Keystone Entity or any
Keystone Entity Subsidiary is a potentially responsible person under CERCLA or
any similar statute, rule or regulation. Neither any Keystone Entity nor any
Keystone Entity Subsidiary knows of any violation of law, regulation, ordinance
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(including, without limitation, laws, regulations and ordinances with respect to
hazardous waste, zoning, environmental, city planning or other similar matters)
relating to its respective properties, which violations could have in the
aggregate a Materially Adverse Effect on any Keystone Entity.
(c) Personal Property. To the knowledge of KH
Partners and the Keystone Entities, American Savings Bank has good, valid and
marketable title to all tangible personal property owned by it on the date
hereof, free and clear of all liens, pledges, charges or encumbrances of any
nature whatsoever except as disclosed on Disclosure Schedule 4.18(c). With
respect to personal property used in the business of American Savings Bank which
is leased rather than owned, American Savings Bank is not in default under the
terms of any such lease the loss of which would have a Material Adverse Effect
on American Savings Bank.
(d) Repurchase Agreements. With respect to each
repurchase agreement where American Savings Bank is the purchaser of the
securities, the value of the collateral securing each such repurchase obligation
equals or exceeds the amount of the debt secured by the collateral under such
agreement and such collateral is held by American Savings Bank or a party other
than the repurchaser pursuant to an agreement substantially in the form of the
standard PSA agreement.
4.19 Patents, Trademarks, Etc. American Savings Bank owns or
possesses all legal rights to use all proprietary rights, including without
limitation all trademarks, trade names, service marks and copyrights, that are
material to the conduct of American Savings Bank's existing and proposed
businesses. Except for the agreements listed on Disclosure Schedule 4.19,
American Savings Bank is not bound by or a party to any options, licenses or
agreements of any kind with respect to any trademarks, service marks or trade
names which American Savings Bank claims to own. None of KH Partners or any
Keystone Entity has received any communications alleging that American Savings
Bank has violated or would violate any of the patents, trademarks, service
marks, trade names, copyrights or trade secrets or other proprietary rights of
any other person or entity.
4.20 Insurance. Disclosure Schedule 4.20 contains a true and
complete list and a brief description (including name of insurer, agent,
coverage and expiration date) of all insurance policies in force on the date
hereof with respect to the business and assets of the Keystone Entities (other
than insurance policies under which any Keystone Entity is named as a loss
payee, insured or additional insured as a result of its position as a secured
lender on specific Loans and mortgage insurance policies on specific Loans). The
Keystone Entities are in compliance with all of the material provisions of their
insurance policies and are not
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in default under any of the material terms thereof. Each such policy is
outstanding and in full force and effect and, except as set forth on Disclosure
Schedule 4.20, a Keystone Entity is the sole beneficiary of such policies. All
premiums and other payments due under any such policy have been paid.
4.21 Powers of Attorney. Neither any Keystone Entity nor any
Keystone Entity Subsidiary has any powers of attorney outstanding other than
those issued pursuant to the requirements of regulatory authority or in the
ordinary course of business with respect to routine matters.
4.22 Community Reinvestment Act Compliance. Except as
disclosed on Disclosure Schedule 4.22, American Savings Bank is in substantial
compliance with the applicable provisions of the Community Reinvestment Act of
1977 and the regulations promulgated thereunder (collectively, "CRA") and has
received a CRA rating of "outstanding" from the OTS in its most recent exam, and
neither KH Partners nor any Keystone Entity has knowledge of the existence of
any fact or circumstance or set of facts or circumstances which could be
reasonably expected to result in American Savings Bank failing to be in
substantial compliance with such provisions or having its current rating
lowered.
4.23 Agreements with the FRF. Disclosure Schedule 4.23
contains a true and complete list of all of the currently applicable agreements
between the Keystone Entities and the FRF arising from the 1988 Acquisition.
Except as disclosed on Disclosure Schedule 4.23, such agreements (hereinafter
the "FRF Agreements") are all in full force and effect and none of the Keystone
Entities is aware of (a) the existence of any event of default or breach by any
Keystone Entity or (b) any event or set of circumstances which, with the passage
of time, will constitute such a default or breach by any Keystone Entity under
any provisions thereof. All monies due to the FDIC or the FRF pursuant to the
terms of the FRF Agreements (other than pursuant to the FRF Warrant Agreement)
have been paid for all time periods through (i) June 30, 1993 (in the case of
certain loans sold prior to December 28, 1988 that New West is obligated to
repurchase in certain events, as managed by American Savings Bank pursuant to
the FRF Agreements); (ii) June 30, 1994 in all other cases, and (iii) to the
best of KH Partners' knowledge through December 31, 1995. The "Guaranteed
Minimum Amount" as defined in the Assistance Agreement, as modified by the July
21, 1992 Settlement Agreement, has been paid to New West for the benefit of the
FRF. Except as noted on Disclosure Schedule 4.23, no consent is required under
the FRF Agreements to the transactions contemplated by this Agreement.
4.24 Agreements with Bank Regulators. Except for the FRF
Agreements and as set forth in Disclosure Schedule 4.24, neither KH
Partners nor any Keystone Entity is a party to or is subject to any
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written order, decree, agreement or memorandum of understanding with, or a party
to any commitment letter or similar undertaking to, or is a recipient of any
currently applicable extraordinary supervisory letter from, any federal or state
governmental agency or authority charged with the supervision or regulation of
depository institutions or the insurance of deposits therein which is outside
the ordinary course of business or not generally applicable to entities engaged
in the same business. Neither KH Partners nor any Keystone Entity has been
advised within the last 18 months by any such regulatory authority that such
authority is contemplating issuing, requiring or requesting (or is considering
the appropriateness of issuing, requiring or requesting) any such order, decree,
agreement, memorandum of understanding, commitment letter or submission.
4.25 Regulatory Approvals. On the date of this Agreement,
there is no pending or, to the knowledge of KH Partners or any Keystone Entity,
threatened legal or governmental proceedings against any Keystone Entity or any
subsidiary or affiliate thereof which would affect the WM Entities' ability to
obtain any of the required regulatory approvals or any party's ability to
satisfy any of the other conditions required to be satisfied in order to
consummate the transactions contemplated by this Agreement. KH Partners will
promptly notify WMI if any of the representations contained in this Section 4.25
ceases to be true and correct.
4.26 Rights Agreement. Upon the distribution of shares of WMI
Common Stock to the partners of KH Partners immediately after the Effective Time
pursuant to Section 2.6(b), no such partner of KH Partners will be an "Acquiring
Person" as defined in the Rights Agreement.
4.27 AREG Matters. To the knowledge of KH Partners and
the Keystone Entities:
(a) (i) New West has not made any assertion denying
its obligation to indemnify AREG and American Savings Bank and their respective
officers, directors, agents, employees and stockholders to the extent set forth
in Section 8.03 of the AREG Management Agreement dated December 28, 1988 (as
such section was preserved in accordance with its terms by Section 3.1a of the
AMD Residual Agreement dated as of June 30, 1993) and Section 8.03 of the
Amended and Restated NA Management Agreement dated as of June 30, 1993,
respectively, and (ii) the FDIC, as manager of the FRF, has not made any
assertion that New West is not so obligated.
(b) AREG has conducted no business, other than
pursuant to the AREG Management Agreement dated December 28, 1988.
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4.28 Investment Intent. KH Partners is acquiring the Keystone
Consideration Shares hereunder for its own account and with no present intention
of distributing or selling such securities in violation of the Securities Act or
any applicable state securities law. KH Partners agrees that it will not sell or
otherwise dispose of any of the Keystone Consideration Shares being acquired
hereunder unless such sale or other disposition has been registered or is exempt
from registration under the Securities Act and has been registered or qualified
or is exempt from registration under applicable state securities laws. KH
Partners, alone or with its financial advisors, has such knowledge and
experience in financial business matters that it is capable of evaluating the
merits and risks of the investment to be made by it hereunder.
5. Representations and Warranties of WMI. WMI hereby
represents and warrants to KH Partners and the Keystone Entities as
follows:
5.1 Organization, Power, Good Standing, Etc.
(a) WMI is a corporation duly organized, validly
existing and in good standing under the laws of the State of Washington and is
duly qualified to do business and is in good standing in each other jurisdiction
where its ownership or lease of property or the nature of the business conducted
by it requires it to be so qualified, except for such jurisdictions where the
failure to be so qualified would not, individually or in the aggregate, have a
Material Adverse Effect on it. WMI has previously delivered to KH Partners true
and complete copies of its articles of incorporation and bylaws, each as
currently in effect. WMI has the requisite corporate power and authority to own,
lease and operate its properties and assets and to carry on its business as it
is now being conducted. WMI is a duly registered savings and loan holding
company under HOLA.
(b) WM Bank is a stock savings bank, duly
organized, validly existing and in good standing under the laws of the State of
Washington and is duly qualified to do business and is in good standing in each
other jurisdiction where its ownership or lease of property or the nature of the
business conducted by it requires it to be so qualified, except for such
jurisdictions where the failure to be so qualified would not, individually or in
the aggregate, have a Material Adverse Effect on it. WM Bank has previously
delivered to KH Partners true and complete copies of its amended and restated
articles of incorporation and charter and its bylaws, each as currently in
effect. WM Bank has the requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as it is now
being conducted. WM Bank is a member in good standing of the FHLB of Seattle and
its deposits are insured by the BIF and SAIF to the fullest extent permitted by
law.
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(c) WMBfsb is a federally chartered stock savings
bank, duly organized, validly existing and in good standing under the laws of
the United States and is duly qualified to do business and is in good standing
in each jurisdiction where its ownership or lease of property or the nature of
the business conducted by it requires it to be so qualified, except for such
jurisdictions where the failure to be so qualified would not, individually or in
the aggregate, have a Material Adverse Effect on it. WMBfsb has previously
delivered to KH Partners true and complete copies of its charter and bylaws,
each as currently in effect. WMBfsb has the requisite corporate power and
authority to own, lease and operate its properties and assets and to carry on
its business as it is now being conducted. WMBfsb is a member in good standing
of the FHLB of Seattle and its deposits are insured by the SAIF to the fullest
extent permitted by law.
5.2 Subsidiaries. As used herein, "WMI Subsidiaries" shall
mean WM Bank, WMBfsb and WM Life Insurance Company. Substantially all of the
business of WMI and its subsidiaries is done through WMI and the WMI
Subsidiaries. All of the WMI Subsidiaries' capital stock, which is issued and
outstanding, is owned by WMI directly or indirectly through wholly-owned
subsidiaries. There are outstanding no options, convertible securities, warrants
or other rights to purchase or acquire capital stock from any of the WMI
Subsidiaries, and there is no commitment of any of the WMI Subsidiaries to issue
any of the same. Except as set forth on Disclosure Schedule 5.2, no WMI
Subsidiary is the general partner of any partnership or joint venture or is
under any obligation of any sort to acquire any capital stock or other equity
interest in any corporation, partnership, joint venture or other entity.
5.3 Capitalization. As of June 30, 1996, the authorized
capital stock of WMI consists of the following: 100,000,000 shares of WMI Common
Stock, of which 72,200,356 shares were duly authorized and validly issued and
outstanding, fully paid and non-assessable, with no personal liability attaching
to the ownership thereof, and 10,000,000 shares of preferred stock, of which
6,122,500 shares were issued and outstanding, fully paid and nonassessable with
no personal liability attaching to the ownership thereof. Assuming receipt of
WMI Stockholder Approval, the WMI Common Stock to be issued in the Merger and
pursuant to the Warrant Exchange Agreement when issued in accordance with the
Plan of Merger and the Warrant Exchange Agreement, (i) will be duly authorized
and validly issued and fully paid and nonassessable, with no personal liability
attaching to the ownership thereof, and no shareholder of WMI will have any
preemptive rights thereto and (ii) will be exempt from registration under the
Securities Act. Upon consummation of the Merger, KH Partners and the FRF will
acquire valid title to such shares, free and clear of any and all liens, claims,
encumbrances and restrictions on transfer other than
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those contemplated by this Agreement. Except as provided for in this Agreement
or as set forth on Disclosure Schedule 5.3 hereto, there are no outstanding
subscriptions, options, warrants, calls, commitments, agreements, understandings
or arrangements of any kind which call for or might require the transfer, sale,
delivery or issuance of any shares of WMI capital stock or other equity
securities or any securities representing the right to acquire stock or
securities convertible into or representing the right to purchase or subscribe
for any such shares.
5.4 Reports. WMI and the WMI Subsidiaries have duly filed with
the Director (or his predecessor), the FDIC, the OTS and the SEC in correct form
in all material respects, the monthly, quarterly, semi-annual and annual reports
required to be filed by them under applicable regulations for all periods
subsequent to December 31, 1992. The WM Entities have previously delivered or
made available to KH Partners accurate and complete copies of such reports.
Except as disclosed on Disclosure Schedule 5.4, WMI (or its predecessor
Washington Mutual Savings Bank) has timely filed all reports required to be
filed by it pursuant to the Securities Exchange Act and the rules and
regulations promulgated by the SEC and the FDIC thereunder ("SEC Reports"). The
WM Entities have previously delivered or made available to KH Partners an
accurate and complete copy of each (i) final registration statement, offering
circular, and definitive proxy statement filed by WMI or Washington Mutual
Savings Bank since January 1, 1993, with the SEC or the FDIC, and (ii)
communication (other than general advertising materials) mailed by WMI or
Washington Mutual Savings Bank to its stockholders since January 1, 1993. No
such SEC Report, registration statement, offering circular, proxy statement or
communication, as of its date, contained any untrue statement of a material fact
or omitted to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading.
5.5 Authority. WMI has full corporate power and authority to
execute and deliver this Agreement and the Plan of Merger and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Plan of Merger and the consummation of the transactions
contemplated hereby and thereby have been duly and validly approved by the Board
of Directors of WMI. Except for the approval of WMI's shareholders and an
amendment to WMI bylaws to increase the number of directors, no other corporate
proceedings on the part of WMI are required to authorize this Agreement, the
Plan of Merger or the transactions contemplated hereby. This Agreement has been
duly and validly executed and delivered by WMI and, assuming due authorization,
execution and delivery hereof by the Keystone Entities and KH Partners,
constitutes the valid and binding obligation of WMI, enforceable against it in
accordance with its terms, subject to
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applicable bankruptcy, insolvency, moratorium of other laws relating to
creditors' rights generally and to general principles of equity.
5.6 No Violation. Neither the execution and delivery of this
Agreement or the Plan of Merger by WMI nor the consummation by WMI of the
transactions contemplated hereby and thereby, nor compliance by WMI with any of
the terms hereof or thereof, will (i) assuming an increase in the authorized
shares of WMI stock and approval of an amendment to WMI's bylaws to increase the
number of directors violate any provision of the articles of incorporation or
charter or bylaws of any of the WM Entities, or (ii) assuming that the consents
and approvals referred to in Section 9.1 are duly obtained, violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to any of the WM Entities or any of their respective properties or
assets, or (iii) violate, conflict with, result in the breach of any provisions
of, constitute a default (or an event which, with notice or lapse of time, or
both, would constitute a default) under, result in the termination of,
accelerate the performance required by, or result in the creation of any lien,
security interest, charge or other encumbrance upon any of the respective
properties or assets of any WM Entity under, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to which any WM Entity is a
party, or by which they or any of their respective properties or assets may be
bound or affected, except, with respect to (iii) above, for such violations,
conflicts, breaches, defaults, terminations, accelerations or encumbrances which
in the aggregate will not prevent or delay the consummation of the transactions
contemplated hereby.
5.7 Consents and Approvals. Except for consents and approvals
of or filings, deliveries or registrations with the OTS, the FRF, the FDIC, the
Director, the Washington Secretary of State, the Texas Secretary of State, the
SEC, the FTC, the Justice Department and other applicable governmental
authorities, no consents or approvals of or filings or registrations with any
third party, public body or authority are necessary in connection with the
execution and delivery by WMI of this Agreement and the Plan of Merger and the
consummation of the transactions contemplated hereby by WMI.
5.8 Financial Statements. WMI has previously delivered or made
available to KH Partners copies of (i) audited consolidated statements of
financial condition for WMI and its subsidiaries as of the end of WMI's last
three fiscal years, and audited consolidated statements of income, stockholders'
equity, and cash flows for each of the last three fiscal years, including the
notes to such audited consolidated financial statements, together with the
reports of WMI's independent certified public accountants,
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pertaining to such audited consolidated financial statements (the "WMI 1993,
1994 and 1995 Financial Statements," respectively), and (ii) the unaudited
consolidated statement of financial condition as of March 31, 1996 and the
related unaudited consolidated statements of income, stockholders' equity and
cash flows for the three-month period then ended (the "WMI March 1996 Financial
Statements"). The WMI 1993, 1994 and 1995 Financial Statements and the WMI March
1996 Financial Statements are sometimes herein referred to collectively as the
WMI Financial Statements. The consolidated statements of financial condition of
WMI referred to herein (including the related notes) present fairly in all
material respects the financial condition of the companies indicated on a
consolidated basis at the dates thereof, using generally accepted accounting
principles consistently applied. Such audited and unaudited consolidated
statements of operations, stockholders' equity and cash flows present fairly in
all material respects the results of the operations of the companies indicated
on a consolidated basis for the periods or at the dates indicated, using
generally accepted accounting principles consistently applied. To the knowledge
of WMI and the WMI Subsidiaries, the books and records of WMI and the WMI
Subsidiaries have been, and are being, maintained in accordance with applicable
legal and accounting requirements using generally accepted accounting principles
consistently applied in all material respects and reflect only actual
transactions.
5.9 Brokerage. Except for payments owed to CS First Boston,
there are no claims for investment banking fees, brokerage commissions, finder's
fees or similar compensation arising out of or due to any act of WMI or any of
its subsidiaries in connection with the transactions contemplated by this
Agreement.
5.10 Absence of Material Adverse Change. Since March 31, 1996,
there has not been any Material Adverse Change with respect to WMI (except for
changes resulting from market and economic conditions which generally affect the
savings industry as a whole including, without limitation, changes in law or
regulation, and changes in generally accepted accounting principles or
interpretations thereof).
5.11 Litigation. Except as set forth on Disclosure Schedule
5.11 hereto, no action, suit, counterclaim or other litigation, investigation or
proceeding to which WMI or any of its subsidiaries is a party is pending, or is
known by the executive officers of WMI or any of its subsidiaries to be
threatened, against WMI or any of its subsidiaries before any court or
governmental or administrative agency, domestic or foreign which would be
reasonably expected to result in any liabilities which would, in the aggregate,
have a Material Adverse Effect on WMI. Except as set forth on Disclosure
Schedule 5.11 hereto, neither WMI nor any of its subsidiaries is in default with
respect to any
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orders, judgments, or decrees that would in the aggregate require payment of
more than $100,000.
5.12 Compliance With Applicable Law.
(a) Each of WMI and each WMI Subsidiary hold all
Permits necessary for the lawful conduct of their respective businesses and such
Permits are in full force and effect, and each of WMI and each WMI Subsidiary is
in all material respects complying therewith, except in each case where the
failure to possess or comply with such Permits would not have a Material Adverse
Effect on WMI.
(b) Except as set forth on Disclosure Schedule
5.12(b), each of WMI and each WMI Subsidiary is and since January 1, 1993 has
been in compliance with all foreign, federal, state and local laws, statutes,
ordinances, rules, regulations and orders applicable to the operation, conduct
or ownership of its business or properties except for any noncompliance which
has not and will not have in the aggregate a Material Adverse Effect on WMI.
5.13 CRA Compliance. Each of WM Bank and WMBfsb is in
substantial compliance with the applicable provisions of CRA. The most recent
CRA rating for WM Bank is "outstanding". WMBfsb has not received a CRA rating.
WMI has no knowledge of the existence of any fact or circumstance or set of
facts or circumstances which could reasonably be expected to result in WM Bank
or WMBfsb failing to be in substantial compliance with such provisions or, in
the case of WM Bank, having its current rating lowered.
5.14 Agreements With Bank Regulators. No WM Entity is a party
to or is subject to any written order, decree, agreement or memorandum of
understanding with, or a party to any commitment letter or similar undertaking
to, or is a recipient of any currently applicable extraordinary supervisory
letter from, any federal or state governmental agency or authority charged with
the supervision or regulation of depository institutions or the insurance of
deposits therein which is outside the ordinary course of business or not
generally applicable to entities engaged in the same business. No WM Entity has
been advised within the last 18 months by any such regulatory authority that
such authority is contemplating issuing, requiring or requesting (or is
considering the appropriateness of issuing, requiring or requesting) any such
order, decree, agreement, memorandum of understanding, commitment letter or
submission.
5.15 Regulatory Approvals. On the date of this
Agreement, there is no pending or, to the knowledge of WMI,
threatened legal or governmental proceeding against any WM Entity
or any subsidiary or affiliate thereof which would affect the WM
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Entities' ability to obtain any of the required regulatory approvals or satisfy
any of the other conditions required to be satisfied in order to consummate the
transactions contemplated by this Agreement. WMI will promptly notify KH
Partners if any of the representations contained in this Section 5.15 ceases to
be true and correct.
5.16 Tax Matters.
(a) Neither WMI nor any of its affiliates or
subsidiaries has any plan or intention of taking any action prior to, at or
after the Effective Time or of permitting any of the Keystone Entities to take
any action after the Effective Time, including any transfer or other disposition
of any assets of or any interest in any of the Keystone Entities, that would
cause the Merger to fail to qualify as a reorganization within the meaning of
section 368(a) of the Code.
(b) Neither WMI nor any of its affiliates or
subsidiaries has any plan or intention to acquire or reacquire, as the case may
be, any of the shares of WMI Common Stock to be issued as contemplated by this
Agreement.
(c) WMI has no plan or intention to sell or
otherwise dispose of any of the assets of Keystone Holdings acquired in the
Merger, except for dispositions made in the ordinary course of business or
transfers described in section 368(a)(2)(C) of the Code.
(d) WMI is not an investment company as defined in
section 368(a)(2)(F)(iii) and (iv) of the Code.
5.17 WMI Rights Agreement. Subject to the accuracy of the
representation of KH Partners and the Keystone Entities contained in Section
4.26 hereof, WMI has taken all necessary action so that the entering into of
this Agreement, the Merger and the other transactions contemplated hereby, and
the payment to KH Partners, and the distribution to its partners pursuant to
Section 2.6(b) hereof, of the Keystone Consideration Shares do not and will not
result in the grant of any rights to any person under the Rights Agreement or
enable or require the rights issued thereunder to be exercised, distributed,
triggered or adjusted.
6. Covenants of the Keystone Entities. In addition to other
covenants and agreements set forth herein, KH Partners and each
Keystone Entity covenant and agree as follows:
6.1 Conduct of the Business of Keystone Entities.
(a) During the period from the date of this
Agreement to the Effective Time, KH Partners and the Keystone
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Entities will conduct the business of each Keystone Entity and each Keystone
Entity Subsidiary in a manner consistent with prudent banking practice and with
the American Savings Bank 1996 Business Plan Presentation of November 28, 1995,
taken as a whole, and approved board changes made thereto as set forth in
Disclosure Schedule 6.1(a) (the "1996 Business Plan"). KH Partners and the
Keystone Entities will use their best efforts to (x) preserve the business
organization of American Savings Bank and each Keystone Entity Subsidiary
intact, (y) keep available to themselves and to the WM Entities the present
services of the employees of American Savings Bank and each Keystone Entity
Subsidiary, and (z) preserve for themselves and for the WM Entities the goodwill
of the customers of American Savings Bank and others with whom business
relationships exist.
(b) Without limiting the generality of the
foregoing, KH Partners and the Keystone Entities agree that from the date hereof
to the Effective Time, no Keystone Entity or Keystone Entity Subsidiary shall:
(i) change any provisions of its articles,
charter or bylaws or any similar governing documents;
(ii) change the number of shares of its
authorized or issued capital stock or issue, grant or amend any option, warrant,
call, commitment, subscription, right to purchase or agreement of any character
relating to the authorized or issued capital stock of any Keystone Entity or any
Keystone Entity Subsidiary, or any securities convertible into shares of such
stock, or split, combine or reclassify any shares of its capital stock, or
declare, set aside or pay any dividend, or other distributions (whether in cash,
stock or property or any combination thereof) in respect of the capital stock of
any Keystone Entity or any Keystone Entity Subsidiary, or redeem or otherwise
acquire any shares of such capital stock; provided, however, that Keystone
Holdings may make ordinary dividends or other distributions in cash during 1996
so long as the aggregate amount of such dividends and distributions made in 1996
does not exceed $56,500,000, subject to Section 2.2(d) hereof, and so long as
such dividends or other distributions are in accordance with an established
dividend policy and consistent with past dividend practice and do not preclude
the treatment of the Merger as a pooling transaction; provided, further, that
cash dividends may be declared and paid by direct and indirect wholly owned
subsidiaries of Keystone Holdings, subject to compliance with applicable
regulatory requirements, but in no event shall any dividend permitted by this
proviso be used to facilitate or fund any payment, and no dividend shall be
declared or paid, directly or indirectly, by Keystone Holdings, to Keystone
Partners or the partners thereof other than (A) as set forth in the preceding
proviso, (B) payments in the ordinary course consistent with past
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practice under existing agreements listed on Schedule 4.17, in an aggregate
amount not to exceed $3,000,000, or (C) as set forth on Annex II.
(iii) liquidate, sell, transfer, assign,
encumber or otherwise dispose of any shares of capital stock of any
Keystone Entity or Keystone Entity Subsidiary;
(iv) merge or consolidate with any other Person
or acquire any capital stock of or other equity interest in any
Person or create any subsidiary;
(c) KH Partners and the Keystone Entities agree
that from the date hereof to the Effective Time, no Keystone Entity or Keystone
Entity Subsidiary shall do any of the following without complying with the
notification procedure in Section 6.1(d) below:
(i) 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 expenditures necessary to maintain existing assets in good
repair;
(ii) make application for the opening,
relocation or closing of any, or open, relocate or close any,
branches;
(iii) 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
or any other material banking policies;
(iv) make or acquire any loan 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 REO;
(v) except for the Fixed Fee Agreement, enter
into, amend or terminate any contract (other than contracts for deposits at or
borrowings by American Savings Bank or agreements for American Savings Bank to
lend money or contracts involving capital markets transactions not otherwise
restricted under this Agreement, so long as such contract does not involve a
public offering of securities or an offering under Rule 144A of the Securities
Act) that calls for the payment by any Keystone Entity or Keystone Entity
Subsidiary of $250,000 or more after the date of this Agreement and that cannot
be terminated on not more than 30 days' notice without cause and without payment
or loss of any
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material amount as a penalty, bonus, premium or other compensation
for termination (a "Material Contract");
(vi) engage or participate in any material
transaction or incur or sustain any material obligation not in the
ordinary course of business;
(vii) except after having followed the American
Savings Bank 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);
(viii) liquidate, sell, transfer, assign,
encumber or otherwise dispose of any assets of any Keystone Entity or Keystone
Entity Subsidiary other than as has been customary in its ordinary course of
business; or
(ix) agree to do any of the foregoing.
(d) If any of the Keystone Entities or Keystone
Entity Subsidiaries wishes to engage in an activity listed in subsection (c)
above it shall provide notice to WMI at least 10 days prior to taking any
irrevocable action with regard to such activity. The notification shall be sent
to the attention of S. Liane Wilson and shall contain a brief description of the
proposed activity, the associated cost, if relevant, and the proper contact
person for discussing the proposal. If the designated contact person has not
heard from a representative of WMI within 10 days of providing such notice, it
shall be deemed conclusively that WMI has no objection to the action being
proposed. If WMI so requests within such 10 day period, the action shall be
delayed until after the next regularly scheduled Management Consultation Meeting
(as defined in Section 8.8 below).
(e) To the extent that it may be necessary in order
to effect satisfaction of the conditions set forth in Section 9.2(b)(i) and
(ii), Keystone Holdings may sell or transfer shares of Family SB to an
unaffiliated Person, provided such sale or transfer does not preclude the Merger
from being treated as a pooling of interests.
6.2 No Solicitation. Neither KH Partners, any Keystone Entity
nor any of their partners, directors, officers, representatives, agents or other
Persons controlled by any of them, shall directly or indirectly encourage or
solicit, or hold discussions or negotiations with, or provide any information
to, any person, entity or group, other than the WM Entities, concerning any
merger, sale of substantial assets not in the ordinary course of business, sale
of shares of capital stock or similar transactions involving any Keystone
Entity, any division thereof or
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any Keystone Entity Subsidiary. KH Partners and the Keystone
Entities will promptly communicate to WMI the terms of any proposal
that any of them may receive in respect of any such transaction.
6.3 Access to Properties and Records. Each Keystone Entity
shall, and American Savings Bank shall cause each Keystone Entity Subsidiary to,
give representatives of the WM Entities reasonable access to its properties, and
shall disclose and make available to the WM Entities all books, papers and
records relating to the assets, stock, ownership, properties, obligations,
operations and liabilities of the Keystone Entities and the Keystone Entity
Subsidiaries, including but not limited to, all books of account (including the
general ledger), tax records, minute books of directors and stockholders
meetings, organizational documents, bylaws, material contracts and agreements,
loan files, filings with any regulatory authority, accountants work papers
(subject to the consent of such accountants), litigation files, plans affecting
employees, and any other business activities or prospects in which a WM Entity
may have a reasonable interest in each case during normal business hours and
upon reasonable notice. The Keystone Entities and the Keystone Entity
Subsidiaries shall not be required to provide access to or disclose information
where such access or disclosure would jeopardize the attorney-client privilege
of any Keystone Entity or any Keystone Entity Subsidiary or would contravene any
law, rule, regulation, order, judgment, decree or binding agreement entered into
prior to the date hereof. The parties will use all reasonable efforts to make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
6.4 Assignment of Contract Rights. KH Partners and the
Keystone Entities shall use reasonable efforts (best efforts in the case of the
four branch leases previously identified to KH Partners) to obtain any consents,
waivers or revisions necessary to allow the WM Entities to accede to all of the
rights of each Keystone Entity and each Keystone Entity Subsidiary under all
existing real property and personal property leases, licenses and other
contracts, including without limitation loan servicing contracts, which WMI
wishes to have continue in effect after the Effective Time, without incurring
substantial costs in connection therewith. The WM Entities will reasonably
cooperate with KH Partners and the Keystone Entities in obtaining such consents,
waivers and revisions, it being understood that the obligation to use reasonable
efforts to obtain such consents, waivers and revisions shall nevertheless be the
obligation of KH Partners and the Keystone Entities.
6.5 Amendment to Environmental Policy. Promptly
following the execution of this Agreement, American Savings Bank
will amend the American Savings Bank Environmental Policy so that
between the date hereof and the Effective Time, American Savings
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Bank will not foreclose on any Commercial Real Estate Loan with an outstanding
principal balance of $1,000,000 or more without first having had conducted a
"Phase I" environmental study of the property serving as security for such Loan.
6.6 FRF Agreements. KH Partners and the Keystone Entities
shall (a) use their best efforts to obtain any necessary consents and
modifications so that the FRF Agreements shall be assumed by WM Bank, or such
other subsidiary or subsidiaries of WMI as WMI shall reasonably designate, at
Closing or provisions consistent with, or necessary to implement, the provisions
of Sections 6.7 and 6.12 hereof; (b) use their best efforts to resolve, without
material liability to the Keystone Entities or the WMI Entities, all material
outstanding differences between KH Partners and the Keystone Entities, on the
one hand, and the FDIC, on the other hand, relating to the FRF Agreements; and
(c) use their best efforts to facilitate a renegotiation of such agreements to
simplify the remaining effective provisions thereof.
6.7 New West. KH Partners and the Keystone Entities shall use
reasonable efforts to take such steps and obtain such approvals as shall be
necessary or advisable so that the shares of stock in New West, and any
obligation or liabilities in connection with the ownership, business or
operation thereof, are transferred to and assumed by an entity other than any
Keystone Entity or any Keystone Entity Subsidiary.
6.8 Payment of Notes and Preferred Stock. KH Partners and the
Keystone Entities shall take such steps as WMI may reasonably request in order
that the Senior Notes, the Subordinated Notes and the New Capital Preferred
Stock may be paid or redeemed at or as soon as practicable after the Effective
Time. It is agreed that KH Partners and the Keystone Entities shall be under no
obligation to issue irrevocable notices of redemption prior to the Effective
Time; provided, that KH Partners shall use reasonable efforts to obtain a waiver
of the right to receive prior irrevocable notice of redemption from Merrill
Lynch & Co.
6.9 Tax Return and Section 9 Report Amendments. KH
------------------------------------------
Partners and the Keystone Entities shall file or cause to be filed
with the IRS, amended consolidated federal income tax returns of
Keystone Holdings for the years 1992 and 1993 no later than
September 14, 1996. The amendments shall reduce the amount of the
addition to the qualifying real property loan loss reserve
established pursuant to Section 593 of the Code for 1992 to
approximately $88 million and the amount of such addition for 1993
to approximately $134 million. In addition, KH Partners and the
Keystone Entities shall cause to be filed no later than October 15,
1996 with the California Franchise Tax Board an amended return for
American Savings Bank reducing the amount of the tax bad debt
reserve at December 31, 1993 to approximately $369 million. KH
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Partners and the Keystone Entities shall contemporaneously cause to be provided
to the FDIC (i) copies of the amended tax returns referred to above and (ii)
revised computations of the amounts due to the FDIC under Section 9 of the
Assistance Agreement.
6.10 Employees, Employee Benefit Plans.
(a) Without the consultation and approval of WMI
(which shall not be unreasonably withheld, delayed or conditioned), American
Savings Bank shall not establish any Benefit Plan and shall not amend or
terminate any Benefit Plan (except as may be required by law) or make any
contribution to any Benefit Plan except in such amount and at such times as may
be required by law or as are consistent with past practices.
(b) American Savings Bank shall not disseminate or
make available any memoranda, notices, plan summaries, or other communications
regarding the terms and conditions of employment or benefits payable as a result
of employment or the Benefit Plans (other than materials customarily furnished
by American Savings Bank to new employees or as required by law or the
applicable Plan) without the consultation and approval of WMI or the Plan
Administration Committee of WMI (which shall not be unreasonably withheld,
delayed or conditioned).
(c) All necessary action shall be taken to initiate
termination of the American Savings Bank Phantom Share Plan (the "Phantom Share
Plan"), the American Savings Bank Executive Short- Term Incentive Plan (the
"Short-Term Incentive Plan") and the American Savings Bank Executive Long-Term
Incentive Plan (the "Long-Term Incentive Plan"), in each case in accordance with
its terms so that termination can occur within 120 days following Closing. All
amounts due and owing to participants in any of such plans shall be accrued as a
liability of American Savings Bank prior to Closing and thereafter paid in
accordance with their terms.
(d) Other than in the ordinary course of business
consistent with past practice or except as required by agreements disclosed on
Disclosure Schedule 4.14(a)(i), American Savings Bank shall not grant any
severance or termination pay to or enter into or amend any employment agreement
with, or increase the amount of payments or fees to, any of its employees,
officers or directors; provided that American Savings Bank may, with the prior
written consent of WMI, pay or agree to pay reasonable amounts to induce
officers and other employees to remain in the employ of American Savings Bank.
(e) No amendments will be made to the Change of
Control Agreements listed on Disclosure Schedule 4.14(f) except for a First
Amendment to Change of Control Agreement with respect to
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each such agreement, the form of which was approved by the Compensation
Committee of the board of directors of American Savings Bank and a copy of which
has been provided to WMI.
(f) Prior to Closing American Savings Bank shall
make all contributions required by the terms of that certain Grantor Trust/Trust
Agreement between American Savings Bank and Security Pacific National Bank dated
June 25, 1991. In addition, American Savings Bank shall, prior to Closing, cause
the trust to eliminate corporate owned life insurance from the trust assets.
(g) The Keystone Entities shall not make any
changes to the Phantom Share Plan, the Long-Term Incentive Plan, the Change of
Control Agreements and the Short-Term Incentive Plan without the prior written
consent of WMI. The total payments, net of accrual, to be made to employees
under such plans and agreements shall not exceed $27 million, assuming that the
applicable price per share of WMI Common Stock is less than or equal to $28.00
and without giving effect to any increase if such per share amount is greater
than $28.00.
(h) Prior to the Effective Time, KH Partners, the
Keystone Entities and the Keystone Entity Subsidiaries shall take all action
necessary to insure that no individual will receive an "excess parachute
payment," as defined in Section 280G(b)(1) of the Code, as a result of the
Closing or any change described in Section 280G(b)(2)(A)(i) of the Code.
(i) During the period from the date of this
Agreement to the Effective Time, American Savings Bank shall not authorize,
designate or permit any additional employee of American Savings Bank to
participate in the American Savings Bank Executive Compensation Program's Life
Insurance Plan.
(j) The Keystone Entities agree to amend their
401(k) plan prior to Closing so that participant loans are no longer available,
and may amend their 401(k) plan to allow partial repayments of existing loans
thereunder.
6.11 Assets of KH Partners. Prior to the Effective Time, KH
Partners shall take all steps necessary to contribute all of its assets to the
Keystone Entities, other than shares of Keystone Holdings, its claims in the
Case (which shall be subject to the provision set forth in Section 2.3(g)
hereof) and its rights hereunder.
6.12 New West Dissolution. KH Partners shall not permit New
West to be dissolved or liquidated without obtaining the prior written consent
of the FDIC to indemnify both AREG and American Savings Bank to the full extent
that AREG and American Savings Bank are currently indemnified by New West
pursuant to Section 8.03 of
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the AREG Management Agreement dated December 28, 1988 (as such section was
preserved by Section 3.1a of the AMD Residual Agreement dated as of June 30,
1993) and Section 8.03 of the Amended and Restated NA Management Agreement dated
as of June 30, 1993, respectively.
6.13 Waiver of Notice. On or prior to the Closing Date, KH
Partners and the Keystone Entities shall, and shall cause their affiliates to,
as the case may be, irrevocably waive the requirement of thirty days' written
notice of termination under each of the following two affiliate agreements which
are set forth on Disclosure Schedule 4.17: (i) the Consulting Agreement, dated
December 16, 1993, by and between Keystone Holdings and Keystone, Inc., a Texas
corporation, and (ii) the First Amended and Restated Service Agreement, dated
February 19, 1993, by and among Bass Enterprises Production Company, a Texas
corporation, and each of the Keystone Entities.
7. Covenants of the WM Entities. In addition to other
covenants and agreements set forth herein, each WM Entity covenants
and agrees as follows:
7.1 Conduct of Business of WM Entities. During the
period from the date of this Agreement to the Effective Time:
(a) The WM Entities will conduct the business of
WMI and each WMI Subsidiary in a manner consistent with prudent banking and (in
the case of WM Life Insurance Company) insurance practice and with the 1996 WMI
Strategic Plan.
(b) No WM Entity, or any of its directors,
officers, representatives, agents or other persons controlled by any of them,
shall directly or indirectly encourage or solicit, or hold discussions or
negotiations with, or provide any information to, any Person or group concerning
any transaction which, if consummated, would constitute a Third Party
Acquisition of WMI. WMI will promptly communicate to KH Partners the terms of
any proposal that it may receive in respect of any such transaction.
Notwithstanding the foregoing two sentences, if the board of directors of WMI
receives an unsolicited offer or inquiry with respect to such a transaction, the
board may respond to such offer if the board determines in its good faith
judgment (after receiving advice of counsel) that such response is reasonably
required in order to discharge its fiduciary duties.
(c) Without the prior written consent of KH
Partners, neither WMI nor any of its subsidiaries shall enter into, or agree to
enter into, any transaction whereby WMI or any of its subsidiaries would acquire
or assume, whether by merger, a purchase of stock, a purchase and assumption
agreement or otherwise, (i) another Person with more than $5,000,000,000 in
assets, (ii) assets
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of another Person in excess of $5,000,000,000 or (iii) deposits and other
liabilities of another Person in excess of $5,000,000,000.
7.2 Approval of WMI Stockholders. WMI will (a) take all steps
necessary duly to call, give notice of, convene and hold a meeting of its
stockholders as soon as practicable for the purpose of voting on this Agreement,
the Plan of Merger and the transactions contemplated hereby and of increasing
the number of authorized shares of WMI Common Stock and for such other purposes
as may be necessary or desirable, (b) include in the WMI Proxy Statement the
recommendation of WMI's Board of Directors that the WMI stockholders approve
this Agreement and the other transactions contemplated hereby and such other
matters as may be submitted to its stockholders in connection with this
Agreement, (c) use all reasonable efforts to obtain, as promptly as practicable,
the necessary approvals by WMI stockholders of this Agreement and the
transactions contemplated hereby. Prior to the Effective Time (subject to the
receipt of WMI Stockholder Approval), WMI will take all other necessary actions
to permit it to issue the number of shares of WMI Common Stock required pursuant
to the terms of this Agreement and the Warrant Exchange Agreement.
7.3 Employees; Employee Benefit Plans.
(a) All employees of American Savings Bank or the
Keystone Entity Subsidiaries who have worked for such entities for (i) at least
one year (a minimum of 1,000 hours in a calendar year) who continue as employees
of an WM Entity or any WMI Subsidiary or (ii) less than one year but who
continue as employees of an WM Entity or any WMI Subsidiary for the balance of
one year (a minimum of an aggregate of 1,000 hours in a calendar year) shall
receive service credit for employment at any Keystone Entity and any Keystone
Entity Subsidiary of one year for purposes of meeting all eligibility and
vesting requirements for participation in the WMI Retirement Savings and
Investment Plan (the "WMI RSIP").
(b) At the Effective Time or as soon thereafter as
is operationally reasonable for WMI, the Keystone Entities' 401(k) plan shall be
merged into the WMI RSIP. On the Effective Date, deferrals and contributions to
the Keystone Entities' 401(k) shall cease and such plan will be frozen. As soon
as practical following the Effective Date, the American Savings Bank employees
will be enrolled in the WMI RSIP. The profit sharing contribution for Keystone
Entity employees made for the period following the Effective Time shall be
prorated for the period of time that the Keystone Entity employee is a
participant in the merged plan.
(c) Effective as of the Effective Time, all
employees of American Savings Bank or the Keystone Entity Subsidiaries shall, at
the option of WMI, either continue to participate in the Benefit Plans that are
employee welfare benefit
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plans (within the meaning of Section 3(1) of ERISA) or "cafeteria plans" (within
the meaning of Section 125 of the Code) and are in effect immediately prior to
the Effective Time or become participants in similar WMI employee benefit plans,
practices and policies (the "WMI Welfare Benefit Plans") on the same terms and
conditions as similarly situated WMI employees. If any of the employees of
American Savings Bank or the Keystone Entity Subsidiaries shall become eligible
to participate in any WMI Welfare Benefit Plans that provide medical,
hospitalization or dental benefits, WMI shall waive any pre-existing condition
exclusions and actively at work requirements (to the extent that a waiver of the
actively at work requirement would be available to an employee of WMI or its
subsidiaries under similar circumstances, (but shall not waive general
requirements of formal employment with WMI or its subsidiaries).
(d) All vacation accrued and not used by employees
of American Savings Bank and the Keystone Entity Subsidiaries prior to the
Effective Time shall be maintained by WMI after the Effective Time; provided,
however, that following the Closing, such vacation shall accrue at the same rate
as for similarly situated WMI employees (counting service credit earned prior to
the Effective Time). All sick leave or short-term disability accrued by
employees of American Savings Bank and the Keystone Entity Subsidiaries prior to
the Effective Time shall be maintained by WMI after the Effective Time provided,
however, that following the Closing, such sick leave and short-term disability
shall accrue at the same rate as for similarly situated WMI employees (counting
service credit earned prior to the Effective Time). Promptly following Closing,
to the extent not inconsistent with specific employment agreements employees of
American Savings Bank and the Keystone Entity Subsidiaries shall be paid for any
vacation or sick leave accrued prior to the Effective Time to which such
employees will no longer be entitled as WMI employees.
(e) The American Savings Bank Grantor Trust which
is intended to provide the funding for the American Savings Bank Executive
Compensation Program's Supplemental Executive Retirement Plan I for both Senior
Vice Presidents and for the Executive Vice Presidents and above (collectively
the "American Savings Bank SERP") and for the American Savings Bank Executive
Compensation Program's Deferred Compensation Plan (as restated as of January 1,
1995) (the "American Savings Bank Deferred Compensation Plan"), the American
Savings Bank SERP and the Deferred Compensation Plan will be maintained for the
benefit of all persons with a vested interest in the American Savings Bank SERP
and/or the American Savings Bank Deferred Compensation Plan at Closing.
7.4 WMI Board of Directors.
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(a) As of the Effective Time, two representatives
mutually agreeable to Robert M. Bass and WMI will be invited to fill vacant
seats on the WMI board of directors. It is currently anticipated that, assuming
that the Effective Time occurs prior to the Record Date (as defined below) for
the 1997 annual meeting of the WMI stockholders, one director will be appointed
to the class whose term ends at the WMI annual meeting in 1997 and one will be
appointed to the class whose term ends at the WMI annual meeting in 1999.
(b) WMI agrees to propose these directors or their
successors mutually agreed to by Robert M. Bass and WMI (the "Bass Directors")
for reelection to the WMI board of directors in accordance with the following
arrangement:
(i) If, on the record date for any annual
meeting of the WMI stockholders at which directors are to be elected (a "Record
Date"), the number of Bass Shares outstanding exceeds the sum of (A) 8.5 million
and (B) 21.3% of the Escrow Shares (if any) released by the Escrow Agent to the
holders of the contingent right thereto as of such Record Date, then WMI will
renominate any and all Bass Directors whose terms are expiring in connection
with such meeting.
(ii) If on any Record Date the number of Bass
Shares outstanding is not greater than the sum of (A) and (B) in Section
7.4(b)(i) but is greater than the sum of (C) 5.0 million and (D) 21.3% of the
Escrow Shares (if any) released to the holders of the contingent right thereto
as of such Record Date, then WMI will renominate any Bass Director whose term is
expiring in connection with such meeting only if there is no other Bass Director
then serving on the WMI Board.
(iii) Notwithstanding subsections (i) and (ii)
above, if on any Record Date the Bass Shares constitute less than five percent
of the total number of shares of WMI Common Stock then outstanding, WMI will
have no obligation to renominate any Bass Director.
(c) For purposes of this Agreement, "Bass Shares"
shall be defined as shares of WMI Common Stock held of record or beneficially by
the Persons set forth on Annex III. Robert M. Bass shall be the sole
representative of the holders of the Bass Shares with respect to any proposal
for successors to the initial Bass Directors. Robert M. Bass shall have the
burden of establishing to WMI's satisfaction record or beneficial ownership for
the Bass Shares for purposes of this Section 7.4.
7.5 Tax Reorganization Matters.
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(a) WMI and its affiliates and subsidiaries shall
not take or permit any of the Keystone Entities to take any action after the
Closing, including any transfer or other disposition of any assets of or any
interest in any of the Keystone Entities, that would cause the Merger to fail to
qualify as a reorganization within the meaning of Section 368(a) of the Code.
(b) WMI shall report the Merger for income tax
purposes as a reorganization within the meaning of Section 368(a) of the Code
and any comparable state or local tax statute.
(c) Following the Merger, WMI will continue the
historic business of Keystone Holdings or use a significant portion of Keystone
Holdings' historic business assets in a business.
7.6 Access to Information/Updated Due Diligence. During
the 30 day period prior to Closing, KH Partners and its
representatives shall have a reasonable opportunity to conduct an
update of their due diligence review of WMI and its subsidiaries.
In order to permit such due diligence update, the WM Entities agree
to provide KH Partners and its representatives reasonable access to
the properties of WMI and its subsidiaries, and shall disclose and
make available to the KH Partners all books, papers and records
relating to the assets, stock, ownership, properties, obligations,
operations and liabilities of WMI and its subsidiaries, including,
but not limited to, all books of account (including the general
ledger), tax records, minute books of directors and stockholders
meetings, organizational documents, bylaws, material contracts and
agreements, loan files, filings with any regulatory authority,
accountants work papers (subject to such accountants' consents),
litigation files, plans affecting employees, and any other business
activities or prospects in which KH Partners may have a reasonable
interest in each case during normal business hours and upon
reasonable notice. WMI and its subsidiaries shall not be required
to provide access to or disclose information where such access or
disclosure would jeopardize the attorney-client privilege of WMI or
any WMI subsidiaries or would contravene any law, rule, regulation,
order, judgment, decree or binding agreement entered into prior to
the date hereof. The parties will use all reasonable efforts to
make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence
apply.
7.7 Indemnification and Insurance.
(a) From and after the Effective Time, WMI shall
indemnify and hold harmless each current and former director and officer of any
Keystone Entity or Keystone Entity Subsidiary, against any costs or expenses
(including advancing reasonable attorneys' fees and expenses as incurred,
subject to any undertaking to reimburse such advances required by applicable
law),
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judgments, fines, losses, claims, damages or liabilities incurred by reason of
the fact that he is or was a director or officer of such Keystone Entity or
Keystone Entity Subsidiary in connection with any claim, action, suit,
proceeding or investigation, whether civil, criminal, administrative or
investigative, arising out of matters existing or occurring at or prior to the
Effective Time, whether asserted or claimed prior to, at or after the Effective
Time, to the fullest extent permitted by the applicable Keystone Entity's or
Keystone Entity Subsidiary's Articles of Incorporation, bylaws, as well as
applicable law and regulations, subject to any limitations provided therein (all
as in effect on the date hereof); provided, however, that this indemnity shall
not apply to any costs, expenses, judgments, fines, losses, claims, damages or
liabilities incurred by or on behalf of the individuals listed on Annex IV in
connection with any claim, action, suit, proceeding or investigation (i) arising
out of actions or omissions relating to their service as officers, directors or
agents of New West, and (ii) made or alleged by any person who is or was a
direct or indirect beneficial owner of an interest in KH Partners. This
indemnity shall be exclusive with respect to the individuals listed on Annex IV
and shall supersede in its entirety any right to indemnity contained in the
articles or bylaws of any Keystone Entity or Keystone Entity Subsidiary or under
applicable law.
(b) WMI shall allow Keystone Holdings to purchase
discovery period or "runoff" directors and officers ("D&O") insurance coverage
with limits of not less than $50,000,000 and for a period of not less than 5
years for prior acts for all current and former directors and officers of the
Keystone Entities and the Keystone Entity Subsidiaries and those other entities
covered on Keystone Holding's current D&O policies.
8. Mutual Covenants of the Parties. In addition to other
covenants and agreements of the parties contained herein, the
parties agree and covenant as follows:
8.1 Current Information. No later than ten (10) business days
from the date of this Agreement, KH Partners and WMI will each designate an
individual acceptable to the other party (a "Designated Representative" and,
together, the "Designated Representatives") to be the recipients of updated
information, including any revisions to the Disclosure Schedules as discussed in
Section 8.5. The Keystone Designated Representative will promptly notify the WMI
Designated Representative of any governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated) or the
institution or the threat of any litigation involving any Keystone Entity or any
Keystone Entity Subsidiary, and will keep the WMI Designated Representative
fully informed of such events and the progress of any already existing
litigation. The WMI Designated
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Representatives shall likewise notify and keep informed the Keystone Designated
Representative.
8.2 Reports.
(a) As soon as reasonably available, but in no
event more than 45 days after the end of each fiscal quarter ending after the
date of this Agreement (other than the last quarter of any fiscal year), KH
Partners will deliver to WMI any quarterly reports provided to the holders of
New Capital Preferred Stock, the Senior Notes or the Subordinated Notes. As soon
as reasonably available but in no event more than 120 days after the end of each
fiscal year ending after the date of this Agreement, KH Partners will deliver to
WMI any annual reports provided to the holders of New Capital Preferred Stock,
the Senior Notes or the Subordinated Notes.
(b) As soon as reasonably available, but in no
event more than 45 days after the end of each fiscal quarter ending after the
date of this Agreement (other than the last quarter of any fiscal year), WMI
will deliver to KH Partners its quarterly report on Form 10-Q as filed under the
Securities Exchange Act. As soon as reasonably available, but in no event more
than 120 days after the end of each fiscal year ending after the date of this
Agreement, WMI will deliver to KH Partners its annual report on Form 10-K as
filed under the Securities Exchange Act.
(c) KH Partners shall provide WMI with copies of
director reports prepared for meetings of the Board of Directors of each
Keystone Entity no later than three business days after such meeting. WMI shall
provide KH Partners with copies of director reports prepared for meeting of the
board of directors of WMI no later than three business days after such meeting.
8.3 Regulatory Matters.
(a) The parties hereto will cooperate with each
other and use all reasonable efforts to prepare all necessary documentation, to
effect all necessary filings and to obtain all necessary permits, consents,
approvals and authorizations of all third parties and governmental bodies
necessary to consummate the transactions contemplated by this Agreement
including, without limitation, those that may be required from the SEC, the
FDIC, the OTS, the Justice Department and other regulatory authorities. KH
Partners and WMI shall each have the right to review reasonably in advance all
information relating to the WM Entities or the Keystone Entities, as the case
may be, and any of their respective subsidiaries, together with any other
information reasonably requested, which appears in any filing made with or
written material submitted to any governmental body in connection with the
transactions contemplated by this Agreement.
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(b) The KH Partners and WMI shall furnish each
other with all reasonable information concerning themselves, their subsidiaries,
directors, officers and stockholders and such other matters as may be necessary
or advisable in connection with the WMI Proxy Statement, or any other statement
or application made by or on behalf of WMI or the KH Partners, or any of their
respective subsidiaries to any governmental body in connection with the Merger
and the other transactions, applications or filings contemplated by this
Agreement.
(c) The KH Partners and WMI will promptly furnish
each other with copies of written communications received by WMI or American
Savings Bank or any of their respective subsidiaries from, or delivered by any
of the foregoing to, any governmental body in respect of the transactions
contemplated hereby other than any such written communications received or
delivered in connection with any proposed settlement of the Case where the
furnishing of such communications would reasonably be expected to jeopardize the
attorney-client privilege of KH Partners or any Keystone Entity.
8.4 Further Assurances. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In case at any time after the Effective Time any further action is reasonably
necessary or desirable to carry out the purposes of this Agreement, the proper
officers and directors of each party to this Agreement shall take all reasonably
necessary action, subject to the terms and conditions of this Agreement.
8.5 Disclosure Supplements.
(a) As soon as practicable after the end of each
calendar quarter, at such other times as WMI may reasonably request and on the
date five business days prior to Closing, KH Partners and the Keystone Entities
will promptly supplement or amend the Disclosure Schedules delivered in
connection herewith with respect to any matter hereafter arising and known to KH
Partners or any Keystone Entity which, if existing, occurring or known at the
date of this Agreement would have been required to be set forth or described in
such Schedules or which is necessary to correct any information in such
Schedules which has been rendered inaccurate thereby. Notwithstanding this
provision, no supplement or amendment to the Disclosure Schedules shall be
deemed to modify any representation or warranty for the purpose of determining
satisfaction of the conditions hereinafter set forth in Section 9.2(a)(ii) and
(iii).
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(b) As soon as practicable after the end of each
calendar quarter, at such other times as KH Partners may reasonably request and
at least five business days prior to Closing, the WM Entities will promptly
supplement or amend the Disclosure Schedules delivered in connection herewith
with respect to any matter hereafter arising and known to any of the WM Entities
which, if existing, occurring or known at the date of this Agreement would have
been required to be set forth or described in such Schedules or which is
necessary to correct any information in such Schedules which has been rendered
inaccurate thereby. Notwithstanding this provision, no supplement or amendment
to such Schedules shall be deemed to modify any representation or warranty for
the purpose of determining satisfaction of the conditions hereinafter set forth
in Section 9.3(b).
8.6 Confidentiality.
(a) All information furnished by, or on behalf of,
any Keystone Entity or any Keystone Entity Subsidiary to the WM Entities or
their representatives or affiliates pursuant to, or in any negotiation in
connection with, this Agreement shall be treated as the sole property of the
Keystone Entity or the Keystone Entity Subsidiary until consummation of the
Merger and, if the Merger shall not occur, the WM Entities and their agents and
advisers shall return to the Keystone Entity or the Keystone Entity Subsidiary,
as appropriate, all documents or other materials containing, reflecting,
referring to such information, and shall keep confidential all such information
and shall not disclose or use such information for competitive purposes.
The obligation to keep such information confidential shall not apply to
any information which would be excluded from the definition of "Evaluation
Materials" pursuant to the last sentence of the first paragraph of the WMI
Confidentiality Letter. Disclosure of any confidential information pursuant to
federal securities laws or under the terms of a subpoena, discovery request or
other order issued by a court of competent jurisdiction or other government
agency shall be handled in the same manner as provided in the WMI
Confidentiality Letter for such disclosure of Evaluation Material.
(b) All information furnished by, or on behalf of,
any WM Entity or any WM Bank Subsidiary to the Keystone Entities or their
representatives or affiliates pursuant to, or in any negotiation in connection
with, this Agreement shall be treated as the sole property of the WM Entity or
the WM Bank Subsidiary, and upon consummation of the Merger or termination of
this Agreement in accordance with Section 10.1, the Keystone Entities and their
agents and advisers shall return to the WM Entity or the WM Bank Subsidiary, as
appropriate, all documents or other materials containing, reflecting, referring
to such information, and shall
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keep confidential all such information and shall not disclose or use such
information for competitive purposes.
The obligation to keep such information confidential shall not apply to
any information which would be excluded from the definition of "Evaluation
Materials" pursuant to the last sentence of the first paragraph of the Keystone
Confidentiality Letter. Disclosure of any confidential information pursuant to
federal securities laws or under the terms of a subpoena, discovery request or
other order issued by a court of competent jurisdiction or other government
agency shall be handled in the same manner as provided in the Keystone
Confidentiality Letter for such disclosure of Evaluation Material.
8.7 Public Announcements. The mutually agreed upon initial
press release announcing this Agreement and the Merger is attached hereto as
Exhibit D. Thereafter, no release or other public disclosures shall be made by
any of the WM Entities, on the one hand, or by KH Partners or any of the
Keystone Entities, on the other hand, with respect to this Agreement or any of
the transactions contemplated hereby without the prior consultation and approval
of KH Partners, on the one hand, or of WMI, on the other hand (which shall not
be unreasonably withheld, delayed or conditioned), except as may be otherwise
required by law.
8.8 Management Consultation Meetings. From the date of this
Agreement until the Effective Time, management of WMI and of American Savings
Bank shall confer on a regular basis regarding the business and operations of
American Savings Bank and WMI. The parties shall agree upon a mutually
convenient time and place for such meetings (the "Management Consultation
Meetings"), which shall occur no less frequently than monthly.
8.9 Failure to Fulfill Conditions. In the event that WMI or KH
Partners determines that a condition to its obligation to consummate the
transactions contemplated hereby cannot be, or is not likely to be, fulfilled on
or prior to June 30, 1997 and that it will not waive that condition, it will
promptly notify the other party.
9. Closing Conditions.
9.1 Conditions to Each Party's Obligations Under This
Agreement. The respective obligations of each party under this Agreement to
consummate the Merger shall be subject to the fulfillment at or prior to the
Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement, the Plan
of Merger, the increase in WMI's authorized shares of common stock,
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and the transactions contemplated hereby shall have been approved by the
requisite vote of the stockholders of WMI.
(b) Regulatory Approvals. All necessary regulatory
or governmental approvals and consents required to consummate the transactions
contemplated hereby shall have been obtained and shall remain in full force and
effect and all statutory or regulatory waiting periods in respect thereof shall
have expired.
(c) No Injunction. No party hereto shall be
subject to any order, decree or injunction of a court or agency of competent
jurisdiction which enjoins or prohibits the consummation of the Merger.
(d) Tax Opinion. An opinion shall be obtained from
Foster Pepper & Shefelman in a form reasonably satisfactory to WMI and KH
Partners with respect to federal income tax laws substantially to the effect
that the Merger will qualify as a "reorganization" under Section 368(a) of the
Code. No opinion will be expressed with respect to the tax consequences of
receiving cash in lieu of fractional shares of WMI Common Stock.
(e) Antitrust Law. Any applicable pre-merger
notification provisions of Section 7A of the Clayton Act shall have been
complied with by the parties hereto, and no other statutory or regulatory
requirements with respect to the Clayton Act shall be applicable other than
Section 18(c) of the Federal Deposit Insurance Act and rules and regulations in
connection therewith. There shall be no pending or threatened proceedings by the
California Attorney General or any other public entity under any applicable
antitrust law of the State of California.
(f) New West. The shares of stock in New West,
together with any obligations or liabilities in connection with the ownership,
business or operation thereof, shall have been transferred to and assumed by an
entity other than a Keystone Entity or a Keystone Entity Subsidiary, without any
substantial cost being incurred by any Keystone Entity.
(g) FRF Matters. The FDIC, WMI, the Keystone
Entities, KH Partners and certain other Persons shall have entered into,
concurrently with the execution of this Agreement, the Warrant Exchange
Agreement and such agreement shall be in full force and effect and be
consummated concurrently with the Closing hereunder. Pursuant to the Warrant
Exchange Agreement certain of the FRF Agreements, namely the Securityholders
Agreement, the FRF Warrant Agreement and the Option Agreement, shall be
terminated (all of the FRF Agreements except for the Warrant Agreement, the
Securityholders Agreement and the Option Agreement are hereinafter referred to
as the "Surviving FRF Agreements."). The Keystone Entities shall have obtained
all consents relating to and
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modifications of the Surviving FRF Agreements necessary in order for the Merger
to be consummated and so that the FRF Agreements may be assumed by the WMI
Entities at the Effective Time. Notwithstanding any other provision of this
Agreement, the condition in the first sentence of this Section 9.1(g) shall not
be waivable by any of the parties hereto.
(h) Pooling Letter. Deloitte & Touche shall have
delivered a letter addressed to WMI and KH Partners, in a form reasonably
satisfactory to each of WMI and KH Partners, that the transaction contemplated
hereby qualifies for pooling of interests accounting treatment.
(i) Execution of Escrow Agreement. The Escrow
Agreement shall have been duly executed by all parties thereto.
9.2 Conditions to the Obligations of the WM Entities under
this Agreement. The obligations of the WM Entities under this Agreement shall be
further subject to the satisfaction, at or prior to the Effective Time, of the
following conditions, any one or more of which may be waived by the WM Entities.
(a) (i) Each of the obligations or covenants of KH
Partners and the Keystone Entities required to be performed by them at or prior
to the Closing pursuant to the terms of this Agreement shall have been duly
performed and complied with in all material respects and (ii) each of the
representations and warranties of KH Partners and the Keystone Entities
contained in this Agreement shall be true and correct as of the date of this
Agreement and as of the Effective Time as though made at and as of the Effective
Time (except as to any representation or warranty that specifically relates to
an earlier date, which shall be true and correct as of such earlier date),
except where the failure of such representations and warranties to be true and
correct would not in the aggregate (without regard to any materiality standard
contained in any such representation and warranty) have a Material Adverse
Effect on the Keystone Entities taken as a whole and (iii) each of the
representations and warranties of KH Partners and Keystone Entities contained in
Sections 4.1, 4.2(a), (b) and (d), 4.3, 4.6, 4.7 (other than clause (iii) of
each of (a) and (b)), 4.8, 4.14(a), 4.23, 4.25, 4.26 and 4.28 of this Agreement
shall be true and correct in all material respects as of the date of this
Agreement and as of the Effective Time as though made at and as of the Effective
Time (except as to any representation or warranty that specifically relates to
an earlier date, which shall be true and correct as of such earlier date).
(b) (i) Any consents, waivers, clearances,
approvals and authorizations of regulatory or governmental bodies that are
necessary in connection with the consummation of the transactions contemplated
hereby shall have been obtained, and none
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of such consents, waivers, clearances, approvals or authorizations shall contain
any term or condition that (x) is a term or condition that has not heretofore
been normally imposed in such transactions and which would have a Material
Adverse Effect on the Keystone Entities or WMI, or (y) would require WM Bank or
WMBfsb to raise additional capital other than to increase either or both of such
institutions' leverage capital (as defined in Appendix B to 12 C.F.R. Part 325
as proposed or adopted by the FDIC) or core capital (as defined in 12 C.F.R.
Part 567 as proposed or adopted by the OTS) to a level no higher than 5.0
percent (as adjusted to account for the Merger). It is hereby agreed that any
term or condition contained in any previous approval granted to a WM Entity for
a merger or acquisition transaction shall be deemed a "normal" condition for
purposes of this Section 9.2(b). For purposes of Section 10 hereof, any
"approval" which contains any of the foregoing unacceptable terms or conditions
shall be deemed to be a regulatory "denial."
(ii) WMI shall have received (x) from the OTS
confirmation that upon consummation of the Merger, WMI will not be deemed to
control Family SB for purposes of 12 U.S.C. ss. 1467a and (y) from the FDIC
either confirmation that upon consummation of the Merger, WMI will not be deemed
to control Family SB for purposes of 12 U.S.C. ss. 1815(e) or a waiver for
subsidiaries of WMI that are insured depository institutions from
"cross-guaranty" liability under 12 U.S.C. ss. 1815(e) with respect to the
default of Family SB; provided, however, that WMI agrees that it will accept
conditions from the OTS and the FDIC that are identical to or as stringent as
but no more stringent than those contained in OTS Order Number 92- 66 dated
February 28, 1992 and FDIC Order Conditionally Granting Approval for Waiver of
Cross-Guaranty Number 92-98kk dated April 7, 1992, respectively.
(iii) All material outstanding differences
between KH Partners and the Keystone Entities, on the one hand, and the FDIC, on
the other hand, relating in any way to the FRF Agreements or the Keystone
Entities shall have been resolved without material liability to the Keystone
Entities.
(c) The WM Entities shall have received an opinion
or opinions reasonably satisfactory to them in form and substance, dated the
date of the Closing, from Cleary, Gottlieb, Steen & Hamilton and Kelly, Hart &
Hallman, special counsel to KH Partners.
(d) WMI shall have received an opinion reasonably
satisfactory to it from CS First Boston, a financial advisory firm, dated as of
the date of the WMI Proxy Statement, as to the fairness, from a financial point
of view, of the consideration to be paid by WMI pursuant to this Agreement.
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(e) Since the date of this Agreement there shall
have been no Material Adverse Change with respect to the Keystone Entities and
the Keystone Entity Subsidiaries (except for changes resulting from market and
economic conditions which generally affect the savings industry as a whole
including, without limitation, changes in law or regulation or changes in
generally accepted accounting principles or interpretations thereof); provided,
however, that the following expenses and adjustments shall be excluded in
determining whether a Material Adverse Change has occurred: (i) fees and
expenses relating to the negotiation and consummation of the transactions
contemplated hereby, (ii) charges for severance and other payments to officers
and employees made or expected to be made in connection with the transactions
contemplated hereby, (iii) other closing adjustments requested by WMI, and (iv)
payments under the Fixed Fee Agreement.
(f) Except as otherwise requested by WMI, the
directors of each Keystone Entity and each Keystone Entity Subsidiary shall have
executed letters of resignation effective on or prior to the Effective Time and,
in such letters (or in a separate letter, in the case of any former director
listed on Annex IV) all Persons listed on Annex IV shall have waived any and all
rights they may have to make claims for indemnification, other than the rights
specifically provided in Section 7.7.
(g) KH Partners and the Keystone Entities shall
have furnished the WM Entities with such certificates of their officers and such
other documents to evidence fulfillment of the conditions set forth in this
Section 9.2 as WMI may reasonably request.
(h) KH Partners and the Keystone Entities shall
have obtained (i) all Keystone Entities' real property lease transfer consents
necessary, as a result of consummation of the Merger, to permit American Savings
Bank to continue 90% of its branch deposit operations in the ordinary course
(measured by deposit balances at March 31, 1996) without having incurred
substantial costs to the Keystone Entities or the Keystone Entity Subsidiaries,
and (ii) all of the other consents, waivers and revisions described in Section
6.4, without having incurred substantial costs to the Keystone Entities or the
Keystone Entity Subsidiaries in connection therewith, except for any such
consents, waivers and revisions the failure to obtain which would, in the
aggregate, cause material disruption of such operations.
(i) KH Partners shall have obtained the consents
and modifications referred to in Section 6.6(a).
(j) Affiliates of KH Partners shall have waived the
right to receive irrevocable notice in connection with the
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redemption of the Subordinated Notes or the New Capital Preferred Stock owned by
such Affiliates.
(k) The amendments to the 1992 and 1993 Federal
Income Tax Returns referred to in Section 6.9 hereof shall have been filed with
the appropriate authorities (including the provision of copies thereof to the
FDIC) within the time limits specified in Section 6.9; none of those amendments
shall have been challenged by the relevant taxing authority; and no additional
payment to the FRF of more than $500,000 by any Keystone Entity shall have
resulted from such amendments.
(l) The FDIC Office of Inspector General (the
"OIG") shall have completed a compliance audit (the "Audit") of the schedules of
activity maintained by New West and American Savings Bank in the Special Reserve
Accounts (as described in the Assistance Agreement), both debits and credits,
and any related book value adjustments resulting from such debits and credits or
from FRF contributions or payments, for the period from July 1, 1994 through
December 31, 1995 or such later date as is reasonably practicable, including
without limitation, with respect to the Intercompany Note and the Liquidity
Account (each as defined in the Assistance Agreement) and to credits and
payments pursuant to Section 9 of the Assistance Agreement for the period from
January 1, 1994 through the tax return filed or anticipated to be filed no later
than September 15, 1996 for the year ended December 31, 1995. In addition, as
(x) tax returns for years 1988 through 1991 were amended during this audit
period and (y) tax returns for the years 1992 and 1993 will be amended by
September 15, 1996, tax benefits generated from all such amended returns shall
also be included in the audit.
All disputes arising with respect to items or periods covered by the
Audit will be resolved without the payment of additional amounts in excess of
$500,000 in the aggregate by all Keystone Entities, and the FDIC and the
Keystone Entities shall have entered into a release in which the FDIC shall
agree that, absent a finding of fraud or mathematical error, all matters covered
by the Audit will be deemed approved at all levels of audit review and for all
purposes, and shall constitute (and shall state that it is) a final resolution
for purposes of further challenges by the FDIC to any entries covered by the
Audit; provided, however, that the FDIC may reserve its rights with respect to
the matters covered by the Tax Settlement Agreement (as defined in section
9.2(m)) in the event this Agreement is terminated in accordance with Article 10
hereof.
(m) The tax settlement agreement, dated as of July
21, 1996, by and among the Keystone Entities, New West and the FDIC (the "Tax
Settlement Agreement"), shall be in full force and effect and shall not have
been modified or amended in any respect without the prior consent of WMI, which
shall not be unreasonably withheld.
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9.3 Conditions to the Obligations of KH Partners and the
Keystone Entities Under This Agreement. The obligations of KH Partners and the
Keystone Entities under this Agreement shall be further subject to the
satisfaction, at or prior to the Effective Time, of the following conditions,
any one or more of which may be waived by the KH Partners and the Keystone
Entities:
(a) Each of the obligations or covenants of the WM
Entities required to be performed by them at or prior to the Closing pursuant to
the terms of this Agreement shall have been duly performed and complied with in
all material respects.
(b) Each of the representations and warranties of
the WM Entities contained in this Agreement shall be true and correct as of the
date of this Agreement and as of the Effective Time as though made at and as of
the Effective Time (except as to any representation or warranty which
specifically relates to an earlier date, which shall be true and correct as of
such earlier date), except where the failure of any such representation and
warranty to be true and correct would not in the aggregate (without regard to
any materiality standard contained in such representations and warranties) have
a Material Adverse Effect on WMI, and each of the representations and warranties
contained in Sections 5.1, 5.2, 5.3, 5.5, 5.6 (other than clause (iii)), 5.7,
5.15 and 5.17 of this Agreement shall be true and correct in all material
respects as of the date of this Agreement and as of the Effective Time as though
made at and as of the Effective Time (except as to any representation or
warranty that specifically relates to an earlier date, which shall be true and
correct as of such earlier date).
(c) The KH Partners shall have received an opinion
reasonably satisfactory to it in form and substance, dated the date of the
Closing, from Foster, Pepper & Shefelman, counsel to the WM Entities. Foster,
Pepper & Shefelman may rely as to certain matters of New York law on an opinion,
dated as of the Closing Date, of Gibson, Dunn & Crutcher, special counsel to
WMI.
(d) Since the date of this Agreement, there shall
have been no Material Adverse Change with respect to WMI (except for changes
resulting from market and economic conditions which generally affect the savings
industry as a whole including, without limitation, changes in law or regulation
or changes in general accepted accounting principles or interpretations
thereof); provided, however, that fees and expenses relating to the negotiation
and consummation of the transactions contemplated hereby shall be excluded in
determining whether a Material Adverse Change has occurred.
(e) The WM Entities shall have furnished KH
Partners with such certificates of its officers or others and such
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other documents to evidence fulfillment of the conditions set forth in this
Section 9.3 as KH Partners may reasonably request.
(f) WMI shall have instructed its transfer agent
with respect to the issuance of WMI Common Stock to the Keystone Holdings
stockholder at least two days prior to Closing.
10. Termination, Amendment and Waiver.
10.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after
approval of the Merger by the WMI stockholders:
(a) by mutual written consent of all the parties
hereto;
(b) by any party hereto (i) if the Effective Time
shall not have occurred on or prior to June 30, 1997, unless the failure of such
occurrence shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe its agreements and conditions set forth herein
to be performed or observed by such party at or before the Effective Time; or
(ii) 31 days after the date on which any application for regulatory approval
prerequisite to the consummation of the transactions contemplated hereby shall
have been denied or withdrawn at the request of the applicable regulatory
authority; provided, that, if prior to the expiration of such 31-day period WMI
is engaged in litigation or an appeal procedure relating to an attempt to obtain
such approval, KH Partners and the Keystone Entities may not terminate this
Agreement until the earlier of (A) June 30, 1997 and (B) 31 days after the
completion of such litigation and appeal procedures, and of any further
regulatory or judicial action pursuant thereto, including any further action by
a government agency as a result of any judicial remand, order or directive or
otherwise; or (iii) 10 days after written certification of the vote of the WMI's
stockholders is delivered to KH Partners indicating that such stockholders
failed to adopt the resolution to approve this Agreement and the transactions
contemplated hereby at the stockholders' meeting (or any adjournment thereof)
contemplated by Section 2.4 hereof;
(c) by the WM Entities (i) if at the time of such
termination there shall have been a Material Adverse Change with respect to the
Keystone Entities from that set forth in March 1996 Keystone Financial
Statements (except for changes resulting from market and economic conditions
which generally affect the savings industry as a whole, including, without
limitation, changes in law or regulation or changes in generally accepted
accounting principles or interpretations thereof), it being understood that any
of the matters set forth in the Keystone Entities' Disclosure Schedules as of
the date of this Agreement or any of the matters
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described in clauses (i) or (ii) of Section 9.2(e) are not deemed to be a
Material Adverse Change for purposes of this paragraph (c); or (ii) if there
shall have been any material breach of any covenant of KH Partners or the
Keystone Entities hereunder and such breach shall not have been remedied within
45 days after receipt by American Savings Bank of notice in writing from WMI
specifying the nature of such breach and requesting that it be remedied;
(d) by KH Partners and the Keystone Entities (i) if
at the time of such termination there shall have been a Material Adverse Change
with respect to WMI from that set forth in WMI's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996 (except for changes resulting from market
and economic conditions which generally affect the savings industry as a whole
including, without limitation, changes in law or regulation or changes in
generally accepted accounting principles or interpretations thereof), it being
understood that any of the matters set forth in WM Entities' Disclosure
Schedules as of the date of this Agreement or items described in the proviso in
Section 9.3(d) are not deemed to be a Material Adverse Change for purposes of
this paragraph (d); (ii) if there shall have been any material breach of any
covenant of the WM Entities hereunder and such breach shall have not been
remedied within 45 days after receipt by WMI of notice in writing from KH
Partners specifying the nature of such breach and requesting that it be
remedied; or (iii) if a Third Party Acquisition of WMI shall have occurred.
10.2 Effect of Termination. In the event of termination of
this Agreement by any party as provided in Section 10.1, this Agreement shall
forthwith become void (other than Section 8.6, this Section 10.2, Section 11.1
and Section 11.7 hereof, which shall remain in full force and effect) and, there
shall be no further liability on the part of any party or its officers or
directors except for the liability of the WM Entities under Section 8.6.
10.3 Amendment, Extension and Waiver. Subject to applicable
law, at any time prior to the consummation of the Merger, whether before or
after approval thereof by the stockholders of WMI, the parties may (a) amend
this Agreement (including the Plans of Merger incorporated herein), (b) extend
the time for the performance of any of the obligations or other acts of any
other party hereto, (c) waive any inaccuracies in the representations and
warranties of any other party contained herein or in any document delivered
pursuant hereto, or (d) waive compliance with any of the agreements or
conditions contained herein; provided, however, that after any approval of the
Merger by the WMI stockholders, there may not be, without further approval of
such stockholders, any amendment or waiver of this Agreement (or the Plan of
Merger) that changes the amount of consideration to be delivered to the Keystone
Holdings stockholders. This Agreement may not be amended except by an instrument
in writing signed on
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behalf of each of the parties hereto. Any agreement on the part of a party
hereto to any extension or waiver shall be valid only if set forth in an
instrument in writing signed on behalf of such party, but such waiver or failure
to insist on strict compliance with such obligation, covenant, agreement or
condition shall not operate as a waiver of, or estoppel with respect to, any
subsequent or other failure.
11.Miscellaneous.
11.1 Expenses. All legal and other costs and expenses incurred
by KH Partners in connection with this Agreement and the transactions
contemplated hereby shall be the responsibility of the Keystone Entities and not
KH Partners, other than legal fees incurred in connection with negotiations with
the FDIC to determine the appropriate consideration the FDIC will receive in
exchange for the Warrants, which fees shall be the responsibility of KH
Partners. All other legal and other costs and expenses shall be borne by the
party incurring such costs and expenses unless otherwise specified in this
Agreement.
11.2 Survival. Except for the covenants of Sections 7.3, 7.4,
7.5, 7.7, the second sentence of Section 8.4, Sections 2.3(a)- (e), (g) and (h),
the third sentence of Section 2.6(a), the first sentence of Section 2.6(b),
Sections 2.6(c), 8.6(b), 11.1, 11.2, 11.3, 11.4, 11.5, 11.6, 11.7 and 11.8, the
respective representations and warranties, covenants and agreements set forth in
this Agreement and all Disclosure Schedules shall not survive the Effective
Time.
11.3 Notices. All notices, requests, claims, demands or other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by delivery, by registered or
certified mail (return receipt requested) or by cable, telecopier, or telex to
the respective parties as follows:
(a) If to a WM Entity, to:
Washington Mutual, Inc.
1201 Third Avenue, 15th Floor
Seattle, WA 98101
Attn: Marc R. Kittner, Senior Vice President
Telecopy Number: (206) 554-2790
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With copies to:
Foster Pepper & Shefelman
1111 Third Avenue Bldg., 34th Floor
Seattle, WA 98101
Attn: Fay L. Chapman
Telecopy Number: (206) 447-9700
and
Gibson, Dunn & Crutcher
One Montgomery Street, Telesis Tower
San Francisco, CA 94104-4505
Attn: Todd H. Baker
Telecopy Number: (415) 986-5309
If to KH Partners or a Keystone Entity, to:
Keystone Holdings Partners, L.P.
201 Main Street, 23rd Floor
Fort Worth, TX 76102
Attn: Ray L. Pinson
Telecopy Number: (817) 338-2047
With copies to:
Kelly, Hart & Hallman
201 Main Street, Suite 2500
Ft. Worth, TX 76102
Attn: Billie J. Ellis, Jr.
Telecopy Number: (817) 878-9280
and
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Attn: Michael L. Ryan
Telecopy Number: (212) 225-3999
and
Paul Weiss Rifkind Wharton & Garrison
1285 Avenue of the Americas
New York, NY 10019
Attn: David R. Sicular
Telecopy Number: (212) 757-3990
or such other address as shall be furnished in writing by any party to the
others in accordance herewith, except that notices of change of address shall
only be effective upon receipt.
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11.4 Parties in Interest. This Agreement shall be binding upon
and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any party
hereto without the prior written consent of the other parties. Nothing in this
Agreement is intended to confer, expressly or by implication, upon any other
Person any rights or remedies under or by reason of this Agreement (except for
Sections 2.3(e), 7.3, 7.4 and 7.7, which are intended to benefit third party
beneficiaries) and except for Sections 2.2(c), 2.2(d), 2.3 (a)-(d), 2.3(f), the
second sentence of Section 3, Sections 6.1(b)(ii), 6.13, 8.4 and the second
sentence of 10.3, which provisions are also intended for the benefit of the
FDIC.
11.5 Entire Agreement. This Agreement, including the documents
and other writings referred to herein or delivered pursuant hereto (including
without limitation the Warrant Exchange Agreement), contains the entire
agreement and understanding of the parties with respect to its subject matter.
There are no restrictions, agreements, promises, warranties, covenants or
undertakings between the parties other than those expressly set forth herein or
therein. This Agreement supersedes all prior agreements and understandings
between the parties, both written and oral, with respect to its subject matter
other than the terms of the WMI Confidentiality Letter and the Keystone
Confidentiality Letter incorporated by reference in Section 8.6 hereof.
11.6 Counterparts. This Agreement may be executed in one or
more counterparts all of which shall be considered one and the same agreement
and each of which shall be deemed an original.
11.7 Governing Law. This Agreement, in all respects, including
all matters of construction, validity and performance, is governed by the
internal laws of the State of New York as applicable to contracts executed and
delivered in New York by citizens of such state to be performed wholly within
such state without giving effect to the principles of conflicts of laws thereof.
11.8 Headings. The Section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
WASHINGTON MUTUAL, INC.
/s/ Craig E. Tall
By: Craig E. Tall
Its Executive Vice President
KEYSTONE HOLDINGS PARTNERS, L.P.
By: KH Group Management, Inc.,
its General Partner
/s/ Ray L. Pinson
By: Ray L. Pinson
Its Vice President
KEYSTONE HOLDINGS, INC.
/s/ Ray L. Pinson
By: Ray L. Pinson
Its Senior Vice President
NEW AMERICAN HOLDINGS INC.
/s/ Ray L. Pinson
By: Ray L. Pinson
Its Senior Vice President
NEW AMERICAN CAPITAL, INC.
/s/ Ray L. Pinson
By: Ray L. Pinson
Its Senior Vice President
N.A. CAPITAL HOLDINGS, INC.
/s/ Ray L. Pinson
By: Ray L. Pinson
Its Senior Vice President
AMERICAN SAVINGS BANK, F.A.
/s/ Mario Antoci
By: Mario Antoci
Its Chief Executive Officer
<PAGE>
FIRST AMENDMENT
TO
AGREEMENT FOR MERGER
This First Amendment to Agreement for Merger (the "First Amendment") is
made and entered into as of the 1st day of November, 1996 by and among
WASHINGTON MUTUAL, INC., a Washington corporation, KEYSTONE HOLDINGS PARTNERS,
L.P., a Texas limited partnership, KEYSTONE HOLDINGS, INC., a Texas corporation,
NEW AMERICAN HOLDINGS, INC., a Delaware corporation, NEW AMERICAN CAPITAL, INC.,
a Delaware corporation, N.A. CAPITAL HOLDINGS, INC., a Delaware corporation, and
AMERICAN SAVINGS BANK, F.A., a federal savings association.
The parties to this First Amendment are the parties to that certain
Agreement for Merger (the "Merger Agreement") dated July 21, 1996. The parties
now desire to amend certain provisions of the Merger Agreement.
THEREFORE, the parties hereby agree as follows:
1. Section 2.4(a) of the Agreement is hereby amended by deleting
"100,000,000" in the first sentence and substituting therefor "250,000,000".
2. Section 2.6(a) of the Agreement is hereby amended by deleting the phrase
"within 30 days from the date of this Agreement," in the sixth sentence and
substituting therefor the phrase "no later than November 12, 1996".
3. Section 6.10(f) of the Agreement is hereby amended by deleting the
second sentence thereof.
4. Exhibit C to the Agreement is hereby amended to read in its entirety as
set forth on Annex I attached hereto.
5. Except as expressly amended by this First Amendment, the Merger
Agreement remains in full force and effect.
6. This First Amendment may be executed in one or more counterparts all of
which shall be considered one and the same agreement and each of which shall be
deemed an original.
7. This First Amendment, in all respects, including all matters of
construction, validity and performance, is governed by the internal laws of the
State
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of New York as applicable to contracts executed and delivered in New York by
citizens of such state to be performed wholly within such state without giving
effect to the principles of conflicts of laws thereof.
Executed as of the date first above written.
WASHINGTON MUTUAL, INC.
By: /s/ Craig E. Tall
Its: Executive Vice President
KEYSTONE HOLDINGS PARTNERS, L.P.
By: KH Group Management, Inc.,
Its: General Partner
By: /s/ Ray Pinson
Its: Vice President
KEYSTONE HOLDINGS, INC.
By: /s/ Ray Pinson
Its: Senior Vice President
NEW AMERICAN HOLDINGS INC.
By: /s/ Ray Pinson
Its: Senior Vice President
NEW AMERICAN CAPITAL, INC.
By: /s/ Ray Pinson
Its: Senior Vice President
N.A. CAPITAL HOLDINGS, INC.
By: /s/ Ray Pinson
Its: Senior Vice President
AMERICAN SAVINGS BANK, F.A.
By: /s/ Mario Antoci
Its: Chairman
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ESCROW AGREEMENT
THIS ESCROW AGREEMENT ("Agreement") is made this 20th day of December,
1996, by and among THE BANK OF NEW YORK, a New York banking corporation (the
"Escrow Agent"), WASHINGTON MUTUAL, INC., a Washington corporation ("WMI"),
KEYSTONE HOLDINGS PARTNERS, L.P., a Texas limited partnership ("KH Partners"),
and the FEDERAL DEPOSIT INSURANCE CORPORATION (the "FDIC"), as manager of the
FSLIC Resolution Fund (the "FRF"), as successor in interest to the Federal
Savings and Loan Insurance Corporation.
Recitals
WHEREAS, WMI and KH Partners, together with certain of KH Partners'
affiliates, have entered into an Agreement for Merger, dated as of July 21, 1996
and amended as of November 1, 1996 (as amended, the "Merger Agreement"),
pursuant to which Keystone Holdings, Inc. ("Keystone Holdings") will merge with
and into WMI (the "Merger");
WHEREAS, pursuant to Section 2 of the Merger Agreement, the Escrow
Shares (as defined in Section 1 below) are to be delivered by WMI into escrow at
the direction of KH Partners and the FDIC;
WHEREAS, KH Partners owned all of the issued and outstanding stock of
Keystone Holdings immediately prior to the Merger and has under the Merger
Agreement a contingent right to have 64.9% of the Escrow Shares released to it
from the Escrow (as defined in Section 1 below);
WHEREAS, the FDIC is selling, assigning, transferring and delivering
certain warrants to WMI at the closing of the Merger pursuant to a Warrant
Exchange Agreement, dated as of July 21, 1996 (the "Warrant Exchange
Agreement"), by and among WMI, the Keystone Entities (as defined in the Section
1 below), KH Partners, New West Federal Savings and Loan Association, certain
other persons and the FDIC and, as part of the consideration to be received in
exchange for the Warrants, has a contingent right to have 35.1% of the Escrow
Shares released to it from the Escrow; and
WHEREAS, the parties desire to appoint the Escrow Agent as escrow agent
hereunder, and the Escrow Agent desires to accept such appointment.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Definitions. All capitalized terms used but not otherwise defined in
this Agreement shall have the meanings given to them below:
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"Aggregate Escrow Distribution" shall mean the Distributed Escrow
Shares plus (i) all dividends and distributions (of whatever nature) other than
dividends payable in shares of WMI Common Stock paid on or with respect to the
Distributed Escrow Shares from the Effective Time to and including the date the
Distributed Escrow Shares are paid pursuant to Section 2.3 of the Merger
Agreement and the terms hereof; (ii) any additional securities with respect
thereto, and (iii) any interest or earnings upon such dividends, distributions
or additional or substitute securities in accordance with the terms hereof. In
the case of any Installment, the Aggregate Escrow Distribution shall be
determined in accordance with the preceding sentence.
"Agreement" shall have the meaning specified in the preamble hereof.
"Case" shall mean Case No. 92-782C resulting from a complaint filed on
December 28, 1992 in the Untied States Court of Federal Claims and styled:
AMERICAN SAVINGS BANK, F.A.,
KEYSTONE HOLDINGS, INC.,
KEYSTONE HOLDINGS PARTNERS, L.P.,
N.A. CAPITAL HOLDINGS, INC.,
NEW AMERICAN CAPITAL, INC. and
NEW AMERICAN HOLDINGS, INC.
v.
THE UNITED STATES
"Case Proceeds" shall equal the amount, if any, of cash received by WMI
or its subsidiaries (including the Keystone Entities after the Effective Time)
on or before the Escrow Expiration Date in respect of (1) any judgment, fees,
costs and expenses, interest and other amounts that have been awarded to the
plaintiffs (including any successors thereto) in the Case, or (2) any final
settlement of the Case; provided, however, that any judgment referred to in (1)
above constitutes a final, nonappealable judgment in the Case. In the case of
any Installment, the Case Proceeds with respect to such Installment shall be
determined in accordance with the preceding sentence.
"Distributed Escrow Shares" shall mean that number of whole shares of
WMI Common Stock (or any substitute securities with respect thereto) resulting
from dividing the Net Case Proceeds by the Market Price Per Share; provided
that, in no event shall the Distributed Escrow Shares exceed the number of
Escrow Shares. The Distributed Escrow Shares with respect to any Installment
shall be calculated in accordance with the preceding sentence except that in no
event shall the Distributed Escrow Shares, when added to the Distributed Escrow
Shares with respect to earlier Installments, exceed the number of Escrow Shares.
"Effective Date" shall mean December 20, 1996.
"Effective Time" shall mean 2:00 p.m., Pacific Standard Time, on the
Effective Date.
"Escrow" shall mean the escrow created hereby.
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"Escrow Agent" shall have the meaning specified in the preamble hereof.
"Escrow Expiration Date" shall mean the date that is the sixth
anniversary of the Effective Date; provided, however, that (i) if, prior to such
date, there has been any judgment granted or entered in favor of WMI or its
subsidiaries (including the Keystone Entities after the Effective Time), then
the Escrow Expiration Date shall be automatically extended to the earlier of the
tenth anniversary of the Effective Date and the date upon which the number of
Escrow Shares equals zero and (ii) if, prior to such sixth anniversary or any
extension pursuant to clause (i) of this definition, there has been any
settlement or final nonappealable judicial resolution of the Case involving two
or more Installments, then the Escrow Expiration Date shall not occur until all
such Installments have been paid.
"Escrow Fund" shall have the meaning specified in Section 3 hereof.
"Escrow Shares" shall mean eight million (8,000,000) shares of WMI
Common Stock; provided that the number of Escrow Shares shall be appropriately
adjusted to reflect any reclassification, recapitalization, split-up,
combination or exchange of shares of WMI Common Stock, or any stock dividend
thereon declared with a record date between the date of this Agreement and the
Escrow Expiration Date; provided, further, that, in the event that the Escrow
Expiration Date is extended beyond the sixth anniversary of the Effective Date
in accordance with the definition of "Escrow Expiration Date" herein, the number
of Escrow Shares, as adjusted in accordance with the preceding proviso, shall be
reduced on the last day of each full calendar month following the sixth
anniversary of the Effective Date by an amount equal to 1.25% of the number of
Escrow Shares (as so adjusted) on the sixth anniversary of the Effective Date;
provided further, that if, prior to the sixth anniversary of the Effective Date,
there has been any settlement or final nonappealable judicial resolution of the
Case involving two or more Installments, then there shall be no reduction in the
number of Escrow Shares pursuant to the immediately preceding proviso.
"FDIC" shall have the meaning specified in the preamble hereof.
"Fixed Fee Agreement" shall mean that certain Fixed Fee Agreement dated
as of August 9, 1996 between Arnold & Porter and Keystone Holdings.
"FRF" shall have the meaning specified in the preamble hereof.
"Holder" shall have the meaning specified in Section 6 hereof.
"Installment" shall mean, in the event of a final, nonappealable
judicial resolution or a settlement of the Case occurring after the Effective
Time involving two or more installments or structured payments of cash over a
period of time, one of such payments.
"Investment Rate" shall have the meaning specified in Exhibit 1 hereto.
"Keystone Entities" shall mean Keystone Holdings, New American Holdings,
Inc., a Delaware corporation, New American Capital, Inc., a Delaware
corporation, N.A. Capital
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Holdings, Inc., a Delaware corporation, and American Savings Bank, F.A., a
federal savings association.
"KH Partners" shall have the meaning specified in the preamble hereof.
"Market Price Per Share" shall mean $41.6125; provided, however, that
such price shall be appropriately adjusted to reflect any reclassification,
recapitalization, split-up, combination or exchange of shares of WMI Common
Stock, or any stock dividend thereon declared with a record date between the
date hereof and the Escrow Expiration Date.
"Merger" shall have the meaning specified in the Recitals hereof.
"Net Case Proceeds" shall mean the Case Proceeds, minus the sum of (1)
the Tax on the Case Proceeds, (2) the out-of-pocket, third-party fees, costs and
expenses paid or accrued by WMI or its subsidiaries to attorneys, accountants,
experts or other third party service providers in connection with the Case from
July 21, 1996 (excluding any amount paid to Arnold & Porter under the Fixed Fee
Agreement), (3) 200% of the allocated time costs of employees of WMI or its
subsidiaries for time reasonably devoted to the Case from the Effective Date,in
each case, to and including the date the Case Proceeds are paid to WMI or its
subsidiaries (including the Keystone Entities after the date hereof), (4) fees
and other amounts, if any, paid or accrued by WMI to the Escrow Agent pursuant
to this Agreement (5) all amounts paid by any Keystone Entity to Arnold & Porter
under the Fixed Fee Agreement in excess of $10 million. In the event that the
Case Proceeds are payable in two or more Installments, Net Case Proceeds with
respect to any given Installment shall mean all Case Proceeds received by WMI
from such Installment and all prior Installments, if any, minus (x) the sum of
(I) the Tax on the Case Proceeds with respect to all Installments or portions
thereof (whether received or to be received) includible, in WMI's judgment, in
its income for federal income tax purposes for the year in which such
Installment is received or in prior years and (II) the amounts described in
clauses (2), (3), (4) and (5) of the preceding sentence, and (y) the aggregate
Net Case Proceeds calculated pursuant to this sentence with respect to all prior
Installments, if any.
"Net Pre-Tax Case Proceeds" shall mean the amount, if any, resulting
from subtracting from Case Proceeds the sum of the amounts described in Clauses
(2), (3), (4) and (5) in the definition of Net Case Proceeds.
"Notes" shall have the meaning specified in Section 8 hereof.
"Person" shall mean an individual, partnership, corporation, limited
liability company, business trust, joint stock company, trust, incorporated
association, joint venture, governmental authority or other entity of whatever
nature.
"Tax on the Case Proceeds" shall mean (1) the product of .28 and the
Net Pre-Tax Case Proceeds, in the event the Case Proceeds are accrued for
federal income tax purposes prior to the Effective Time, and (2) the product of
.355 and the Net Pre-Tax Case Proceeds, in the event the Case Proceeds are
accrued for federal income tax purposes on or after the Effective Time.
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"Warrant Exchange Agreement" shall have the meaning specified in the
Recitals hereof.
"WMI" shall have the meaning specified in the preamble hereof.
"WMI Common Stock" shall mean the common stock, no par value, of WMI.
2. Appointment of Escrow Agent. WMI, KH Partners, and the FDIC hereby
appoint the Escrow Agent, and the Escrow Agent hereby accepts its appointment,
as escrow agent to hold and dispose of the Escrow Fund solely in accordance with
the terms hereof.
3. Delivery of Escrow Shares. Concurrently with the execution and
delivery of this Agreement, KH Partners and the FDIC have directed WMI to
deliver, or cause to be delivered, and WMI has so delivered or caused to be
delivered, the Escrow Shares, registered in the name of the Escrow Agent, to the
Escrow Agent. By execution hereof, the Escrow Agent evidences its receipt from
WMI of the Escrow Shares. The term "Escrow Fund" shall mean the Escrow Shares
together with (i) all dividends and distributions (of whatever nature) (other
than dividends payable in shares of WMI Common Stock paid on or with respect to
the Escrow Shares), (ii) any additional or substitute securities with respect
thereto, and (iii) any interest or earnings upon such dividends, distributions
or additional or substitute securities in accordance with the terms of this
Agreement (including without limitation amounts payable under the Notes.
4. Subaccounts. The Escrow Agent shall establish and maintain a subaccount
with respect to each Holder (as defined herein) representing the pro rata
portion of the Escrow Fund attributable to each such Holder.
5. Investment of Funds.
(a) The Escrow Agent shall invest and reinvest the cash
portion of the Escrow Fund in the Institutional Service Shares of the Federated
U.S. Treasury Cash Reserves Fund except as otherwise directed in a joint letter
signed by both KH Partners and the FDIC.
The Escrow Agent shall not be liable for any loss suffered in
connection with any investments made pursuant to Section 5(a) hereof or to joint
instructions received from KH Partners and the FDIC. No instructions, requests
or notices from KH Partners and the FDIC to the Escrow Agent shall be effective
until received by the Escrow Agent in writing, and no such instructions,
requests or notices shall be effective unless executed by both KH Partners and
the FDIC.
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(b) As and when any amounts invested as aforesaid may be
needed for disbursement from the Escrow Fund required hereunder (including the
funding of loans made pursuant to Section 8 hereof), the Escrow Agent shall
cause a sufficient amount of such investments to be sold or otherwise converted
into cash to the credit of the Escrow Fund. Any written request by a Holder for
a loan pursuant to Section 8 hereof shall also be deemed written authority to
the Escrow Agent from such Holder for the Escrow Agent to sell or otherwise
convert a portion of the assets in such Holder's subaccount necessary to fund
the loan. The Escrow Agent shall not be held liable for any loss of income due
to the liquidation of any investment which the Escrow Agent, acting in good
faith, believes necessary to make payments or disbursements in accordance with
this Agreement.
6. Transfers. KH Partners and the FDIC are the initial holders of
contingent rights to receive the Escrow Shares. It is understood that KH
Partners intends to distribute its contingent right in the Escrow Fund to the
partners of KH Partners immediately after the Effective Time. Such partners, the
FDIC and their transferees may transfer any or all of their respective
contingent rights to the Escrow Fund, provided that no transfer shall be
effective unless and until the proposed transferor has delivered to WMI the
following documents:
(a) an opinion of counsel reasonably satisfactory to WMI that
such transfer is exempt from the registration requirements of the Securities Act
of 1933 and similar requirements under all applicable state securities laws,
accompanied by such other documentation as WMI shall reasonably require to
demonstrate compliance with applicable requirements of federal and state
securities laws, and
(b) a written instrument executed by the proposed transferee
whereby such party agrees to be bound by all applicable obligations contained in
this Agreement.
As used herein, the term "Holder" shall mean any Person owning from
time to time a contingent right to receive a portion of the Escrow Fund. No
Holder shall be allowed to transfer such Holder's contingent right to its
allocated portion of the Escrow Fund until the Holder has repaid all outstanding
Notes (as defined below in Section 8). The Escrow Agent shall not be required to
treat any purported transfer as effective until such time as it has received (x)
written notice of such transfer from the transferor, (y) written notice from WMI
that the opinion of counsel and other documentation described above has been
received, and (z) receipt of any tax or other information or documents
reasonably requested by the Escrow Agent. The Escrow Agent shall maintain a list
of the Holders and their addresses.
7. Voting of Escrow Shares. For so long as any Escrow Shares (or any
additional or substitute securities with respect thereto) are held by the Escrow
Agent in accordance with the terms of this Agreement, each Holder of the
contingent right to receive such shares shall have the absolute right to have
its pro rata portion of the Escrow Shares (and any additional or substitute
securities with respect thereto) voted on all matters with respect to which the
vote of the holders of WMI Common Stock is required or solicited in accordance
with the written instructions of such Holder at the time of the applicable
record date as given to the Escrow Agent. WMI shall provide the Escrow Agent
written notice of any such record date. The right of a Holder to instruct the
Escrow Agent to vote any portion of the Escrow Shares shall be
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determined as of the record date established by WMI with respect to such vote.
If no written instructions are timely received by the Escrow Agent from a
Holder, then the Escrow Agent shall not vote any of the shares in the Escrow
Fund to which such Holder owns a contingent right.
8. Loans from the Escrow Fund. Each Holder shall have the right to
request that the Escrow Agent make a loan to it out of the cash portion of the
subaccount established with respect to it pursuant to Section 4. Such request
must be delivered in writing to the Escrow Agent no later than 30 days following
notice to such Holder of the payment to the Escrow Agent of any cash dividends
or distributions on the Escrow Shares attributable to such Holder. Notice to
Holders of such payments shall be given by the Escrow Agent. Such request may be
for a loan in a principal amount equal to no more than 45 percent of the amount
of such dividend or distribution. Such request shall be accompanied by (a) an
executed promissory note substantially in the form attached hereto as Exhibit 1
(the "Note"), (b) an opinion of counsel substantially in the form attached
hereto as Exhibit 2 that the Note will not violate any applicable usury or
similar laws and (c) receipt of any tax or other information or documents
reasonably requested by the Escrow Agent. The loan shall accrue interest and be
payable as provided in Exhibit 1. The Escrow Agent shall calculate the
Investment Rate as defined in Exhibit 1 within 30 days following the end of each
calendar quarter and notify the borrowers of such rate.
9. Release of Escrow Funds. The Escrow Agent will hold the Escrow Fund
in its possession until authorized hereunder to deliver the Escrow Fund or any
specified portion thereof as provided in this Section 9. The Escrow Agent shall
take all actions called for in any notice delivered by WMI under this Section 9
within ten (10) business days of the date such notice is received; provided that
the Escrow Agent shall not deliver to any Holder that Holder's Aggregate Escrow
Distribution until any such Holder's Notes have been fully repaid or offset
pursuant to subsection (d).
(a) Unless the Escrow Expiration Date shall have occurred,
within thirty (30) days of the date on which Case Proceeds are received by WMI
or its subsidiaries (including the Keystone Entities), WMI shall deliver written
instructions to the Escrow Agent to deliver to each Holder such Holder's pro
rata portion of the Aggregate Escrow Distribution and, (unless the provisions of
subsection (c) apply) after making such distribution as to each and every Holder
(or after setting aside a Holder's allocable portion of the Aggregate Escrow
Distribution with respect to any Holder who has not repaid any outstanding Note
or who has not delivered information or documents reasonably requested by the
Escrow Agent), to return any remaining Escrow Shares to WMI for cancellation
(together with the remainder of the Escrow Fund). The Escrow Agent shall not be
required to make any payment to any Holder until such time as it has received
any tax or other information or documents reasonably requested by it. No Holder
shall be entitled to receive or shall receive any fractional shares of WMI
Common Stock or cash in lieu of fractional shares.
(b) In the event that the Escrow Expiration Date has occurred
and no Case Proceeds have been received by WMI or its subsidiaries (including
the Keystone Entities), then WMI shall deliver written instructions to the
Escrow Agent to return the Escrow Shares to WMI for cancellation together with
the remainder of the Escrow Fund.
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(c) Unless the Escrow Expiration Date shall have occurred, in
the event that the Case Proceeds are received in Installments, then, within
thirty (30) days of the date on which any Installment is received by WMI or its
subsidiaries (including the Keystone Entities), WMI shall deliver written
instructions to the Escrow Agent (i) to pay each Holder the pro rata portion of
the Aggregate Escrow Distribution with respect to such Installment attributable
to such Person, and (ii) after making the last Aggregate Escrow Distribution
with respect to the last Installment as to each and every Holder (or after
setting aside a Holder's allocable portion of the Escrow Fund with respect to
any Holder who has not repaid any outstanding Note or who has not delivered
information or documents reasonably requested by the Escrow Agent), to return
any remaining Escrow Shares to WMI for cancellation, (together with the
remainder of the Escrow Fund). No Holder shall be entitled to receive or shall
receive any fractional shares of WMI Common Stock or cash in lieu of fractional
shares.
(d) Upon receipt of the instructions described in (a), (b) or
(c) above, the Escrow Agent shall promptly notify the obligors under each
outstanding Note that such Note is due and payable in full within seven days of
the date of such notice and shall take all reasonable steps to effect such
distribution within 30 days of receipt of WMI's written instructions. In the
event that any obligor fails to pay the Note in full within ten (10) days of the
date of such notice, the Escrow Agent shall offset the amount of the Note (plus
any interest or other amounts due thereunder) from the pro rata portion of the
Aggregate Escrow Distribution otherwise due such obligor. In the event that (i)
any obligor fails to pay such obligor's Note in full within ten (10) days of the
date of such notice; (ii) the Escrow Expiration Date has occurred; and (iii) no
Case Proceeds have been received by WMI or its subsidiaries (including the
Keystone Entities) or such Case Proceeds were insufficient to pay off the Note,
then the Note shall be in default and the Escrow Agent shall deliver the Note to
WMI and assign all of its right, title and interest in the Note to WMI, without
recourse.
(e) Beginning on the last day of the full calendar month
immediately following the sixth anniversary of this Agreement and on the last
day of every succeeding month, WMI shall deliver written instructions to the
Escrow Agent to return to WMI a number of shares equal to 1.25% of the number of
Escrow Shares (as adjusted pursuant to the definition of Escrow Shares in the
Merger Agreement) held by the Escrow Agent on the sixth anniversary of this
Agreement (together with any dividends and distributions received on such shares
and any interest or earnings on such dividends); provided, that if there has
been a final, nonappealable judicial resolution or settlement of the Case
involving two or more Installments prior to the sixth anniversary of this
Agreement, the provisions of this subsection shall not apply.
10. Escrow Agent's Responsibility.
(a) The Escrow Agent's sole responsibility shall be for the
safekeeping of the Escrow Fund, the establishment and maintenance of subaccounts
pursuant to Section 4, the investment of the Escrow Fund pursuant to Section 5,
the providing of loans as provided in Section 8, the disbursement thereof in
accordance with Section 9 and such other duties and obligations expressly set
forth in this Agreement. The Escrow Agent shall not be required to take any
other action with reference to any matters which might arise in connection with
the
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Escrow Fund, this Agreement, the Merger Agreement, the Warrant Exchange
Agreement or any other agreement between or among any or all of the parties
hereto (other than the Escrow Agent) or to which any such party is a party or to
comply with any direction or instruction (other than those contained herein or
delivered in accordance with this Agreement). The Escrow Agent may act upon any
written instruction or other instrument which the Escrow Agent in good faith
believes to be genuine and to be signed and sent by the proper Persons. The
Escrow Agent shall not be required to take any action until such time as it has
received written instructions as provided above and any tax or other information
or documents reasonably requested by it. The Escrow Agent shall not be required
to expend or risk any of its own funds or otherwise incur any financial
liability (other than as expressly set forth herein) in the performance of its
duties hereunder. The Escrow Agent shall not be liable for any action taken by
it in good faith and believed to be authorized or within the rights or powers
conferred upon it by this Escrow Agreement or for anything which the Escrow
Agent may do or refrain from doing in connection herewith unless the Escrow
Agent is guilty of gross negligence, bad faith or willful misconduct. The Escrow
Agent shall not incur any liability for not performing any act or fulfilling any
duty, obligation or responsibility hereunder by reason of any occurrence beyond
the control of the Escrow Agent (including but not limited to any act or
provision of any present or future law or regulation or governmental authority,
any act of God or war, or the unavailability of the Federal Reserve Bank wire or
telex or other wire or communication facility unless such unavailability is the
result of the Escrow Agent's willful misconduct, bad faith or gross negligence).
The Escrow Agent may from time to time consult with legal counsel of its own
choice for advice concerning its obligations under this Agreement, and it shall
have full and complete authorization and protection for any action taken or
suffered by it hereunder in good faith and in accordance with the opinion of
such counsel. The Escrow Agent has no duty to determine or inquire into the
occurrence of any event or the performance or failure of performance of any of
the parties hereto with respect to any agreements or arrangements with each
other or with any other party or parties including, without limitation, the
Merger Agreement or the Warrant Exchange Agreement.
(b) The duties and obligations of the Escrow Agent shall be
determined solely by the express provisions of this Agreement, and no duties and
obligations shall be inferred or implied. The Escrow Agent's duties and
obligations are purely ministerial in nature, and nothing herein shall be
construed to give rise to any fiduciary obligations of the Escrow Agent. In the
event of any disagreement or the presentation of any adverse claim or demand in
connection with the disbursement of the Escrow Fund, the Escrow Agent shall, at
its option, be entitled to refuse to comply with any such claims or demands
during the continuance of such disagreement and may refrain from delivering any
items affected thereby, and in so doing, the Escrow Agent shall not become
liable to the undersigned or to any other Person, due to its failure to comply
with such adverse claim or demand. The Escrow Agent shall be entitled to
continue, without liability, to refrain and refuse to act:
(i) until authorized to disburse by a court order
from a court having jurisdiction of the parties and the money, after
which time the Escrow Agent shall be entitled to act in conformity with
such adjudication; or
-9-
<PAGE>
(ii) until all differences shall have been adjusted
by agreement and the Escrow Agent shall have been notified thereof and
shall have been directed in writing, signed jointly or in counterpart
by the undersigned and by all Persons making adverse claims or demands,
at which time the Escrow Agent shall be protected in acting in
compliance therewith.
(c) If at any time the Escrow Agent is served with any
judicial or administrative order, judgment, decree, writ or other form of
judicial or administrative process (collectively, "order") which in any way
affects Escrow Property (including but not limited to orders of attachment or
garnishment or other forms of levies or injunctions or stays relating to the
transfer of the Escrow Fund), the Escrow Agent shall deliver prompt notice of
the order to other parties hereto and to each Holder so that any party or Holder
may, solely at its own expense, intervene, and the Escrow Agent is otherwise
authorized to comply with any such final order in any manner as it or its legal
counsel of its own choosing deems appropriate; and if the Escrow Agent complies
with any such final order, Escrow Agent shall not be liable to any of the
parties hereto or to any other person or entity even though such final order,
may be subsequently modified or vacated or otherwise determined to have been
without legal force or effect.
(d) The Escrow Agent shall treat all communications pursuant
to this Agreement, whether oral or written, confidentially and shall not make
any public disclosure of communications to or from any party hereto. In the
event that the Escrow Agent is requested in any proceeding to disclose any
communications, the Escrow Agent shall give prompt notice to KH Partners, the
FDIC, any Holder and WMI of such request so that KH Partners, the FDIC, such
Holder or WMI may seek an appropriate protective order or other remedy.
11. Indemnification of Escrow Agent. WMI agrees to indemnify and hold
the Escrow Agent and its officers and employees harmless for and from all
claims, losses, liabilities and expenses (including, without limitation,
reasonable legal fees and expenses, including any legal fees in any appeal or
bankruptcy proceeding) arising out of or in connection with its acting as Escrow
Agent under this Agreement, except in those instances where the Escrow Agent has
been guilty of gross negligence, bad faith or willful misconduct. In addition,
WMI agrees to pay to the Escrow Agent its reasonable fees and expenses in
connection with the performance of its duties under this Agreement as set forth
in the Escrow Fee Schedule as Schedule 1. Under no circumstances shall the
Escrow Agent be entitled to charge the Escrow Fund for any amounts otherwise due
to the Escrow Agent from WMI. The provisions of this Section 11 shall survive
the termination of this Agreement and/or the removal or resignation of the
Escrow Agent.
12. Termination. This Agreement shall terminate upon the complete
disbursement of the remaining assets constituting the Escrow Fund in accordance
with this Agreement. Upon such termination, the Escrow Agent shall close its
records, and all of the Escrow Agent's liability and obligations in connection
with the Escrow Fund and this Agreement shall terminate, other than liabilities
and obligations incurred by it hereunder prior to such resignation becoming
effective.
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<PAGE>
13. Notices and Communications. All notices and communications
hereunder shall be in writing and shall be deemed to be duly given if delivered
in person or by courier, if by facsimile transmission (with receipt thereof
acknowledged), or if sent by certified mail, return receipt requested and shall
be deemed to have been received on the date of delivery in person, by courier,
or by facsimile transmission, or on the date set forth in the return receipt, as
follows:
If to the Escrow Agent, at:
The Bank of New York
101 Barclay Street
12 East
New York, New York 10286
Attn: Specialized Agency Group
Facsimile Number: (212) 815-7157
Telephone Number: (212) 815-5728
If to KH Partners, at:
Keystone Holdings Partners, L.P.
201 Main Street, 23rd Floor
Fort Worth, TX 76102
Attn: Ray L. Pinson
Facsimile Number: (817) 338-2047
Telephone Number: (817) 338-2047
Copies to:
Kelly, Hart & Hallman
201 Main Street, Suite 2500
Ft. Worth, TX 76102
Attn: Billie J. Ellis, Jr.
Facsimile Number: (817) 878-9280
Telephone Number: (817) 878-3539
and
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, NY 10006
Attn: Michael L. Ryan
Facsimile Number: (212) 225-3999
Telephone Number: (212) 225-2520
-11-
<PAGE>
If to the FDIC, at:
Federal Deposit Insurance Corporation
801 17th Street, N.W.
Washington, D.C. 20434-0001
Attn: Director, Division of Resolutions
Facsimile Number: (202) 898-7024
Telephone Number: (202) 736-0368
Copy to:
Legal Division
Federal Deposit Insurance Corporation
1717 H Street, N.W.
Washington, D.C. 20434-0001
Attn: David M. Gearin, Senior Counsel
Facsimile Number: (202) 736-0382
Telephone Number: (202) 736-3027
If to WMI, at:
Washington Mutual, Inc.
1201 Third Avenue, 15th Floor
Seattle, WA 98101
Attn: Marc R. Kittner, Senior Vice President
Facsimile Number: (206) 554-2790
Telephone Number: (206) 461-2005
Copy to:
Foster Pepper & Shefelman
1111 Third Avenue, Suite 3400
Seattle, WA 98101
Attn: Fay L. Chapman
Facsimile Number: (206) 447-9700
Telephone Number: (206) 447-8937
Any party may change its address for notice purposes by providing
written notice thereof in accordance with this Section. Notices to a Holder
other than KH Partners or the FDIC shall be made in the manner described above
to the address of such Holder as shown on the Escrow
Agent's records. Whenever under the terms hereof the time for giving a notice
or performing an act falls upon a Saturday, Sunday, or banking holiday, such
time shall be extended to the next day on which the Escrow Agent is open for
business.
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<PAGE>
14. Resignation; Removal.
(a) The Escrow Agent may resign and be discharged from its
duties or obligations hereunder by giving 30 days' prior written notice of such
resignation to WMI, KH Partners and the FDIC, specifying a date when such
resignation shall take effect; provided, that no such resignation shall be
effective until a successor Escrow Agent shall have been appointed and shall
have accepted its appointment in writing as hereinafter set forth. Upon such
notice, KH Partners, the FDIC and WMI shall use commercially reasonable efforts
to mutually agree upon and appoint a successor Escrow Agent. If KH Partners, the
FDIC and WMI are unable to agree upon a successor Escrow Agent within 30 days
after such notice or such appointed Escrow Agent has not accepted such
appointment in writing within such 30 day period, the Escrow Agent shall be
entitled to appoint its successor, which shall be a commercial bank organized
under the laws of the United States or any state thereof that has a combined
capital and surplus of at least $1 billion. Upon delivery of the Escrow Property
to successor Escrow Agent, Escrow Agent shall have no further duties,
responsibilities or obligations hereunder.
(b) Any successor Escrow Agent (whether succeeding a resigning
or removed Escrow Agent) shall deliver a written acceptance of its appointment
to the resigning Escrow Agent, WMI, KH Partners, and the FDIC, and immediately
thereafter, (i) the resigning Escrow Agent shall transfer and deliver the Escrow
Fund to the successive Escrow Agent, whereupon the resignation of the resigning
Escrow Agent shall become effective, and (ii) the successor Escrow Agent shall
constitute the "Escrow Agent" for all purposes hereunder and all applicable
provisions of this Agreement shall apply to the successor Escrow Agent as though
it had been named herein. Any such resignation shall not relieve the resigning
Escrow Agent from any liability incurred by it hereunder prior to such
resignation becoming effective.
(c) The Escrow Agent shall continue to serve until its
successor accepts the duties of Escrow Agent hereunder. KH Partners, the FDIC
and WMI shall have the right at any time upon their mutual consent to remove the
Escrow Agent and substitute a new Escrow Agent, by giving 30 days' notice
thereof to the then acting Escrow Agent. Any successor Escrow Agent appointed
under this Section 14 shall be qualified to act as an escrow agent under
applicable law.
15. Miscellaneous.
(a) This Agreement, in all respects, including all matters of
construction, validity and performance, is governed by the internal laws of the
State of New York as applicable to contracts executed and delivered in New York
by citizens of such state to be performed wholly within such state without
giving effect to the principles of conflicts of laws thereof. Each of the
parties hereto hereby submits to the personal jurisdiction of and each agrees
that all proceedings relating hereto shall be brought in courts located within
the City and State of New York.
(b) Unless the context otherwise requires, under this
Agreement words in the singular number include the plural, and words in the
plural include the singular; and words of
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<PAGE>
the masculine gender include the feminine and the neuter, and when the context
so indicates words of the neuter gender may refer to any gender.
(c) All titles and headings in this Agreement are intended
solely for convenience of reference and shall in no way limit or otherwise
affect the interpretation of any of the provisions hereof.
(d) The provisions of this Agreement may be waived, altered,
amended or supplemented, in whole or in part, only by a writing signed by all of
the parties hereto or their successors or assigns.
(e) Neither this Agreement nor, except as explicitly provided
in this Agreement, any right or interest hereunder may be assigned in whole or
in part by any party without the prior written consent of the other parties.
(f) This Agreement constitutes the entire agreement between
the Escrow Agent, on the one hand, and KH Partners, the FDIC and WMI, on the
other hand. This Agreement supersedes all proposals, oral or written, and all
other communications, oral or written, between the parties relating to the
subject matter of this Agreement.
(g) This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(h) Each party hereto and each Holder, except the Escrow
Agent, shall provide the Escrow Agent with their Tax Identification Number (TIN)
as assigned by the Internal Revenue Service.
(i) If any provision hereunder shall require the action by or
notice to KH Partners, the provision shall be read to require the action by or
notice to Robert M. Bass if KH Partners shall no longer be in existence.
(j) The rights and remedies conferred upon the parties hereto
shall be cumulative, and the exercise or waiver of any such right or remedy
shall not preclude or inhibit the exercise of any additional rights or remedies.
The waiver of any right or remedy hereunder shall not preclude the subsequent
exercise of such right or remedy.
(k) Each party hereby represents and warrants (i) that this
Agreement has been duly authorized, executed and delivered on its behalf and
constitutes its legal, valid and binding obligation and (ii) that the execution,
delivery and enforcement of this Agreement by such party does not and will not
violate any applicable law or regulation.
(l) The Escrow Agent does not have any interest in the Escrow
Fund but is serving as escrow holder only and having only possession thereof.
WMI shall pay or reimburse the Escrow Agent upon request for any transfer taxes,
stamp taxes or other similar taxes relating to the Escrow Fund incurred in
connection herewith and shall indemnify the Escrow Agent for
-14-
<PAGE>
and hold the Escrow Agent harmless from any amounts that it is obligated to pay
in the way of such taxes. WMI, KH Partners and the FDIC acknowledge that any
such taxes paid by WMI shall be deemed an "amount" paid to the Escrow Agent
pursuant to clause (4) of the first sentence in the definition of Net Case
Proceeds herein and in Section 1 of the Merger Agreement. Any payments of income
from this Escrow Account shall be subject to withholding regulations then in
force with respect to United States taxes. The parties hereto will provide the
Escrow Agent with appropriate W-9 forms for tax I.D., number certifications, or
W-8 forms for non-resident alien certifications. It is understood that the
Escrow Agent shall be responsible for income reporting only with respect to
income earned on investment of funds which are a part of the Escrow Fund and is
not responsible for any other reporting. This paragraph shall survive
notwithstanding any termination of this Escrow Agreement or the resignation or
removal of the Escrow Agent.
(m) At any time the Escrow Agent may request an instruction in
writing from WMI, the FDIC and KH Partners, and may at its own option include in
such request the course of action it proposes to take and the date on which it
proposes to act, regarding any matter arising in connection with its duties and
obligations hereunder. The Escrow Agent shall not be liable for acting in
accordance with such a proposal on or after the date specified therein, provided
that the specified date shall be at least three business days after WMI, the
FDIC and KH Partners receive the Escrow Agent's request for instructions and its
proposed course of action, and provided further that, prior to so acting, the
Escrow Agent has not received the written instructions requested.
(n) In the event of any ambiguity or uncertainty hereunder or
in any notice, instruction or other communication received by the Escrow Agent
hereunder, Escrow Agent may, in its sole discretion, refrain from taking any
action other than retain possession of the Escrow Fund, unless the Escrow Agent
receives written instructions, signed by all the parties hereto (other than the
Escrow Agent) , which eliminates such ambiguity or uncertainty.
(o) In the event of any dispute between or conflicting claims
by or among the parties hereto (other than the Escrow Agent) and/or any other
person or entity with respect to any of the Escrow Fund, the Escrow Agent shall
be entitled, in its sole discretion, to refuse to comply with any and all
claims, demands or instructions with respect to the Escrow Fund so long as such
dispute or conflict shall continue, and the Escrow Agent shall not be or become
liable in any way to the parties hereto for failure or refusal to comply with
such conflicting claims, demands or instructions. The Escrow Agent shall be
entitled to refuse to act until, in its sole discretion, either (i) such
conflicting or adverse claims or demands shall have been determined by a final
order, judgment or decree of a court of competent jurisdiction, which order,
judgment or decree is not subject to appeal, or settled by agreement between the
conflicting parties as evidenced in a writing reasonably satisfactory to the
Escrow Agent or (ii) the Escrow Agent shall have received an indemnity
satisfactory to it sufficient to hold it harmless from and against any and all
losses which it may incur by reason of so acting. The Escrow Agent may, in
addition, elect, in its sole discretion, to commence an interpleader action or
seek other judicial relief or orders as it may deem, in its sole discretion,
necessary. The costs and expenses (including reasonable attorneys' fees and
expenses) incurred by the Escrow Agent in connection with such proceeding shall
be paid by WMI.
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<PAGE>
IN WITNESS WHEREOF, the parties, by their officers thereunto duly
authorized, have executed and delivered this Agreement the date first above
written.
KEYSTONE HOLDINGS PARTNERS, L.P.
By: KH Group Management, Inc.
Its General Partner
By: /s/ Ray L. Pinson
Name: Ray L. Pinson
WASHINGTON MUTUAL, INC.
By: /s/ Kerry K. Killinger
Name: Kerry K. Killinger
Title: President and Chief Executive Officer
FEDERAL DEPOSIT INSURANCE CORPORATION,
as manager of the FSLIC Resolution Fund
By: /s/ James A. Meyer
Name: James A. Meyer
Title: Assistant Director
THE BANK OF NEW YORK
By: /s/ Enrico D. Reyes
Name: Enrico D. Reyes
Title: Vice President
-16-
<PAGE>
EXHIBIT 1
PROMISSORY NOTE
$____________________(U.S.) [Insert Location of Escrow Agent's Office]
[Insert Date of Note]
FOR VALUE RECEIVED, the undersigned ("Borrower") hereby
promises to pay to the order of The Bank of New York as Escrow Agent (the
"Escrow Agent") under that certain Escrow Agreement dated __________________
(the "Escrow Agreement") among the Escrow Agent, Washington Mutual, Inc.,
Keystone Holdings Partners, L.P. and the Federal Deposit Insurance Corporation,
as manager of the FSLIC Resolution Fund, at the Escrow Agent's office at
_________________________________________, or at such other place as the holder
of this Note (hereinafter, "Holder") may from time to time designate in writing,
the sum of $__________________, in lawful money of the United States, together
with interest thereon at a variable rate as set forth below. Interest for each
full calendar quarter during the term of this Note shall be calculated on the
basis of a 360-day year of four 90-day quarters. Interest for any partial
calendar quarter at the beginning or end of the term of this Note shall be
calculated on the basis of a 365 or 366-day year and the actual number of days
in that quarter.
Section 1. Interest Rate.
This Note shall bear interest at a variable rate, adjusted as
of the first day of each calendar quarter, equal to the greater of: (i) the
Applicable Federal Rate and (ii) the Investment Rate. "Applicable Federal Rate"
shall mean a per annum rate equal to the applicable Federal rate as set forth in
Section 7872(f)(2) of the Internal Revenue Code of 1986, as amended, or any
successor provision. "Investment Rate" shall mean a per annum rate of interest
equal to the per annum rate of return on the investment of the cash portion of
the Escrow Fund for the immediately preceding calendar quarter as calculated by
the Escrow Agent.
Section 2. Interest Payments.
Beginning on [insert the last day of the calendar quarter in
which the date of the Note occurs] and on the last day of each and every
calendar quarter thereafter throughout the term of this Note, Borrower shall
make quarterly payments to Holder of all accrued and unpaid interest.
Section 3. Maturity.
Unless sooner repaid by Borrower, the entire unpaid principal
amount plus all accrued but unpaid interest, and all other amounts owing
hereunder shall be due and payable in full on the Maturity Date.
Exhibit 1, Page 1
<PAGE>
As used herein, "Maturity Date" shall mean the earlier to
occur of (i) the day which is seven days following notice given by the Escrow
Agent as provided in Section 9 of the Escrow Agreement or (ii) the Escrow
Expiration Date.
Section 4. Default; Remedies.
If the payment of any amount payable hereunder is not made
within ten days of when due, then, at the option of Holder, the entire
indebtedness evidenced hereby shall become immediately due and payable and all
such amounts, including all accrued but unpaid interest, shall thereafter bear
interest at a variable rate, adjusted at the time at which the rate would
otherwise have been adjusted pursuant to Section 1, of five percent (5%) per
annum above the rate hereunder that would have been applicable from time to time
had there been no default (the "Default Rate") until such default is cured.
Failure to exercise this option shall not waive the right to exercise the same
in the event of any subsequent default. In the event of such default the
undersigned promise to pay all collection expenses, including reasonable
attorneys' fees incurred with or without suit and on appeal. Interest at the
Default Rate shall commence to accrue upon default under this Note, including
the failure to pay this Note on the Maturity Date. In addition, upon default,
Holder shall deliver this Note to Washington Mutual, Inc. and shall assign all
of its rights, title and interest in the Note to Washington Mutual, Inc.,
without recourse.
Section 5. Consent to Jurisdiction; Waiver of Immunities.
Borrower hereby irrevocably submits to the jurisdiction of any
state or federal court sitting in Seattle, Washington, in any action or
proceeding brought to enforce or otherwise arising out of or relating to this
Note and hereby waives any objection to venue in any such court, and waives any
claim that such forum is an inconvenient forum. Borrower agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing herein shall impair the right of Holder to bring any
action or proceeding against Borrower, or any of its property, in the courts of
any other jurisdiction.
Section 6. Late Charge.
If any amount payable hereunder is paid more than ten (10)
days after the due date thereof, Borrower promises to pay a late charge of five
percent (5%) of the delinquent amount as liquidated damages for the extra
expense of handling past due payments.
Section 7. Miscellaneous.
(a) Every person or entity at any time liable for the payment
of the indebtedness evidenced hereby waives presentment for payment, demand and
notice of nonpayment of this Note. Every such person or entity further hereby
consents to any extension of the time of payment hereof or other modification of
the terms of payment of this Note, the release of all or any part of the
security herefor or the release of any party liable for the payment of the
indebtedness evidenced hereby at any time and from time to time at the request
Exhibit 1, Page 2
<PAGE>
of anyone now or hereafter liable therefor. Any such extension or release may be
made without notice to any of such persons or entities and without discharging
their liability.
(b) Each person or entity who signs this Note is jointly and
severally liable for the full repayment of the entire indebtedness evidenced
hereby.
(c) The headings to the various sections have been inserted
for convenience of reference only and do not define, limit, modify, or expand
the express provisions of this Note.
(d) This Note is made with the reference to and is to be
construed in accordance with the laws of the state of New York.
DATED as of the day and year first above written.
[BORROWER'S SIGNATURE]
Exhibit 1, Page 3
<PAGE>
EXHIBIT 2
FORM OF LEGAL OPINION
[Date]
[Escrow Agent's Name and Address]
Ladies and Gentlemen:
The undersigned has acted as counsel to [Name of Borrower] ("Borrower") in
connection with a loan (the "Loan") being made pursuant to that certain Escrow
Agreement dated December 20, 1996 by and among The Bank of New York, Washington
Mutual, Inc., Keystone Holdings Partners, L.P. and the Federal Deposit Insurance
Corporation, as manager of the FSLIC Resolution Fund, as successor in interest
to the Federal Savings and Loan Insurance Corporation. The Loan is being made
out of the Escrow Fund (as defined in the Escrow Agreement) and will be
evidenced by a note substantially in the form attached hereto. This opinion is
being delivered pursuant to Section 8 of the Escrow Agreement.
Subject to the assumptions and limitations set forth below, it is our opinion
that:
1. The Loan will not violate any applicable usury law of the states of
___________, _____________ or _________________ [insert state of Borrower's
residence, state where Escrow Agent maintains Escrow Fund and state whose law
governs the note].
2. Under the laws of such states, Borrower will not be able to raise
the defense of usury in any proceeding brought to enforce or collect the Loan or
the note evidencing the Loan.
This opinion is limited to the internal laws of the states of _______________,
______________ and ______________, without reference to choice of law doctrine.
[Counsel may, if such counsel deems it appropriate, rely on a certificate from
Borrower as to the purpose of the Loan or the intended use of the Loan
proceeds.]
[Deviations from this form of opinion shall be permitted only with the written
consent of Washington Mutual, Inc., which consent will not be unreasonably
withheld.]
Exhibit 1, Page 4
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (this "Agreement") is made and
entered into as of July 21, 1996, by and among Keystone Holdings Partners L.P.,
a Texas limited partnership (the "Partnership"), the Federal Deposit Insurance
Corporation ("FDIC"), as manager of the FSLIC Resolution Fund (the "FRF")
(collectively with the FDIC, the "Initial Securities Holders"), and Washington
Mutual, Inc., a Washington corporation (the "Company").
WHEREAS, the Partnership owns all of the outstanding capital stock of
Keystone Holdings Inc., a Delaware corporation ("Keystone");
WHEREAS, the Partnership, Keystone, the Company, and certain direct and
indirect subsidiaries of Keystone are concurrently with the execution of this
Agreement entering into an Agreement for Merger (the "Merger Agreement"),
providing for the merger of Keystone with and into the Company in exchange for
26,000,000 newly issued shares of Common Stock, no par value, of the Company
("Common Stock") to be issued to the Partnership, all in accordance with the
terms of the Merger Agreement;
WHEREAS, the Partnership, the FDIC, the Company, Keystone, certain of
Keystone's direct and indirect subsidiaries and certain other parties are,
concurrently with the execution of this Agreement, entering into that certain
agreement (the "Warrant Exchange Agreement") pursuant to which the FDIC is to
transfer at the Effective Time (as defined in the Merger Agreement) warrants
that the FRF holds for capital stock of N.A. Capital Holdings, Inc. to the
Company in exchange for 14,000,000 newly issued shares of Common Stock, all in
accordance with the terms of the Warrant Exchange Agreement;
WHEREAS, pursuant to the Merger Agreement and the Warrant Exchange
Agreement, the Company will issue at the Effective Time an additional 8,000,000
newly issued shares of Common Stock (the "Litigation Shares") and deliver such
shares to an escrow agent for release on a proportional basis to the Initial
Securities Holders, or their permitted assigns, in the event of a cash recovery
in the Case after the Closing, all in accordance with the terms of the Merger
Agreement, the Warrant Exchange Agreement and the Escrow Agreement (as defined
in the Merger Agreement);
WHEREAS, the transactions contemplated by the Merger Agreement
and the Warrant Exchange Agreement are to be consummated at the Closing;
WHEREAS, in connection with the Merger Agreement and the Warrant
Exchange Agreement, the Company has agreed to provide the registration rights
set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein, the parties hereto hereby agree as follows:
SECTION 1. DEFINITIONS.
1.1 Defined Terms. (a) As used in this Agreement, the following
terms shall have the following meanings:
"affiliate" shall have the meaning ascribed thereto in Rule
12b-2 promulgated by the Commission under the Exchange Act as in effect
on the date hereof.
"Agreement" shall mean this Registration Rights Agreement, as
it may be amended, supplemented or otherwise modified from time to
time.
"Closing" shall have the meaning assigned to such term in the
Recitals.
"Closing Date" shall mean the date on which the Closing
occurs.
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<PAGE>
"Commission" shall mean the United States Securities and
Exchange Commission or any successor thereto.
"Common Stock" shall have the meaning assigned to such term
in the Recitals.
"Company" shall have the meaning assigned to such term in the
Preamble.
"Company Public Sale Event" shall mean any sale by the Company
of Common Stock for its own account as contemplated by subsection 4.1
pursuant to an effective Registration Statement filed by the Company,
filed on Form S-1 or any other form for the general registration of
securities with the Commission (other than a Registration Statement
filed by the Company on either Form S-4 or Form S-8 or any registration
in connection with a standby underwriting in connection with the
redemption of outstanding convertible securities).
"Company Sale Notice" shall mean a Notice of Offering pursuant
to Subsection 4.1 from the Company to each Security Holder stating that
the Company proposes to effect a Company Public Sale Event.
"Effective Time" shall have the meaning assigned to such term
in the Recitals.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and any rules and regulations promulgated thereunder, and
any successor federal statute, rules or regulations.
"FDIC" shall have the meaning assigned to such term in the
Preamble.
"Form S-1" shall mean such form of registration statement
under the Securities Act as in effect on the date hereof or any
successor form thereto.
"Form S-3" shall mean such form of registration statement
under the Securities Act as in effect on the date hereof or any
successor form thereto.
"Form S-4" shall mean such form of registration statement
under the Securities Act as in effect on the date hereof or any
successor form thereto.
"Form S-8" shall mean such form of registration statement
under the Securities Act as in effect on the date hereof or any
successor form thereto.
"FRF" shall have the meaning assigned to such term in the
Preamble.
"Initial Merger Shares" shall mean the aggregate of 40,000,000
newly issued shares of Common Stock issued by the Company pursuant to
the terms of the Merger Agreement and the Warrant Exchange Agreement at
the Effective Time, which shall consist of the 26,000,000 Keystone
Initial Shares (as defined in the Merger Agreement) and the 14,000,000
FRF Initial Shares (as defined in the Merger Agreement).
Notwithstanding the foregoing, if an Adjustment Event (as defined in
the Merger Agreement) shall have occurred, then the Keystone Initial
Shares shall be reduced to 25,883,333 shares of Common Stock, and the
numbers 40,000,000 and 26,000,000 in this Agreement, shall be changed
to the numbers 39,883,333 and 25,883,333, respectively, subject to
Section 2.2(c) of the Merger Agreement.
"Initial Securities Holders" shall have the meaning assigned
to such term in the Preamble of this Agreement.
"Initial Underwriting" shall mean the underwritten public
offering referred to in Section 2.
"Keystone" shall have the meaning assigned in the first
Recital.
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"Litigation Shares" shall have the meaning assigned to such
term in the Recitals.
"Litigation Shelf" shall have the meaning assigned to such
term in subsection 3.1(b) hereof.
"Merger Agreement" shall have the meaning assigned to such
term in the Recitals.
"NASD" shall mean the National Association of Securities
Dealers, Inc. or any successor thereto.
"Notice of Offering" shall mean a written notice with respect
to (a) the Initial Underwriting, or (b) a proposed underwritten public
offering pursuant to the Shelf Registration Statement or (c) a Company
Public Sale Event, in each case setting forth (i) the expected maximum
and minimum number of shares of Registrable Common or Common Stock, as
the case may be, proposed to be offered and sold, (ii) the lead
managing underwriter, if applicable or selected and (iii) the proposed
method of distribution and the expected timing of the offering.
"Partnership" shall have the meaning assigned to such term in
the Preamble of this Agreement.
"Person" shall mean an individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, governmental authority or
other entity of whatever nature.
"Piggybacking Securities Holder" shall mean Securities Holders
selling Registrable Common in connection with a Company Public Sale
Event pursuant to subsection 4.3.
"Preliminary Prospectus" shall mean each preliminary
prospectus included in a Registration Statement or in any amendment
thereto prior to the date on which such Registration Statement is
declared effective under the Securities Act, including any prospectus
filed with the Commission pursuant to Rule 424(a) under the Securities
Act.
"Prospectus" shall mean each prospectus included in a
Registration Statement (including, without limitation, a prospectus
that discloses information previously omitted from a prospectus filed
as part of an effective Registration Statement in accordance with Rule
430A), together with any supplement thereto, and any material
incorporated by reference into such Prospectus, all as filed with, or
transmitted for filing to, the Commission pursuant to Rule 424(b) under
the Securities Act.
"Public Sale Event" shall mean the Initial Underwriting, an
underwritten public offering under the Shelf Registration Statement or
the Litigation Shelf, or a Company Public Sale Event, as the case may
be.
"Purchase Agreement" shall mean any written agreement entered
into by any Securities Holder providing for the sale of Registrable
Common in the manner contemplated by a related Registration Statement,
including the sale thereof to an underwriter for an offering to the
public.
"Registrable Common" shall mean (a) the Initial Merger Shares
and (b) any other securities issued as (or issuable upon the conversion
or exercise of any warrant, right, option or other security which is
issued as) a dividend or other distribution with respect to, or in
exchange for or in replacement of, the Initial Merger Shares; provided,
however, that any such Registrable Common shall cease to be Registrable
Common when (i) a Registration Statement with respect to the sale of
such Registrable Common has been declared effective under the
Securities Act and such securities have been disposed of in accordance
with the plan of distribution set forth in such Registration Statement,
(ii) such shares are disposed of pursuant to Rule 144 (or any similar
provisions then in force) under the Securities Act, (iii) such
Registrable Common shall have been otherwise transferred, new
certificates for them not bearing a legend restricting further transfer
under the Securities Act shall have been delivered by the Company and
they may be resold without subsequent registration or qualification
under the Securities Act or any state securities laws then in force, or
(iv) such securities shall cease to be outstanding; provided, further,
that any securities that have
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ceased to be Registrable Common cannot thereafter become Registrable
Common, and any security that is issued or distributed in respect to
securities that have ceased to be Registrable Common shall not be
Registrable Common.
"Registrable Litigation Shares" shall mean (a) the Litigation
Shares and (b) any other securities issued as (or issuable upon the
conversion or exercise of any warrant, right, option or other security
which is issued as) a dividend or other distribution with respect to,
or in exchange for or in replacement of, the Litigation Shares;
provided, however, that any such Registrable Litigation Shares shall
cease to be Registrable Litigation Shares when (i) a Registration
Statement with respect to the sale of such Registrable Litigation
Shares has been declared effective under the Securities Act and such
securities have been disposed of in accordance with the plan of
distribution set forth in such Registration Statement, (ii) such shares
are disposed of pursuant to Rule 144 (or any similar provisions then in
force) under the Securities Act, (iii) such Registrable Litigation
Shares shall have been otherwise transferred, new certificates for them
not bearing a legend restricting further transfer under the Securities
Act shall have been delivered by the Company and they may be resold
without subsequent registration or qualification under the Securities
Act or any state securities laws then in force, or (iv) such securities
shall cease to be outstanding; provided, further, that any securities
that have ceased to be Registrable Litigation Shares cannot thereafter
become Registrable Litigation Shares, and any security that is issued
or distributed in respect to securities that have ceased to be
Registrable Litigation Shares shall not be Registrable Litigation
Shares.
"Registration" shall mean a registration of securities
pursuant to the Securities Act.
"Registration Statement" shall mean any registration statement
(including the Preliminary Prospectus, the Prospectus, any amendments
(including any post-effective amendments) thereof, any supplements and
all exhibits thereto and any documents incorporated therein by
reference pursuant to the rules and regulations of the Commission),
filed by the Company with the Commission under the Securities Act in
connection with any Public Sale Event.
"Responsible Officer" shall mean, as to the Company, the chief
executive officer, the president, the chief financial officer or any
executive or senior vice president of the Company.
"Rule 144" shall mean Rule 144 promulgated by the Commission
under the Securities Act, or any successor to such Rule.
"Rule 415" shall mean Rule 415 promulgated by the Commission
under the Securities Act, or any successor to such Rule.
"Rule 424" shall mean Rule 424 promulgated by the Commission
under the Securities Act, or any successor to such Rule.
"Rule 430A" shall mean Rule 430A promulgated by the Commission
under the Securities Act, or any successor to such Rule.
"Sale Event" shall mean any sale by the Company of Common
Stock pursuant to a Company Public Sale Event or any sale by any
Securities Holder of Registrable Common pursuant to the Initial
Underwriting or the Shelf Registration Statement, or Registrable
Litigation Shares pursuant to the Litigation Shelf.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and any rules and regulations promulgated thereunder and, any
successor federal statutes, rules or regulations.
"Securities Holder" shall mean any Initial Securities Holder
and any transferee thereof to whom are transferred the rights and
obligations of a Securities Holder pursuant to subsection 6.8.
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"Securities Holders' Counsel" shall mean the single law firm
from time to time representing the Securities Holders collectively as
appointed by Securities Holders owning a majority of the Registrable
Common and Registrable Litigation Shares held by Securities Holders at
the time of such appointment.
"Securities Holder's Questionnaire" shall mean the
questionnaire to be provided by each Securities Holder to the Company,
substantially in the form of Annex A, as the same from time to time may
be amended, supplemented or otherwise modified.
"Shelf Registration Statement" shall have the meaning assigned
to such term in subsection 3.1.
"Significant Securities Holder" shall mean, on any date of
determination thereof, a Securities Holder then holding or beneficially
owning in the aggregate more than 5% of the number of shares of the
Common Stock then outstanding.
"Supplemental Addendum" shall mean a Supplemental Addendum
substantially in the form of Annex B to this Agreement.
"Termination Date" shall mean the later of the respective
dates on which the Company has no further obligation under the terms of
this Agreement to file or keep effective the Shelf Registration
Statement or the Litigation Shelf, as the case may be.
"Warrant Exchange Agreement" shall have the meaning assigned
to it in the Recitals.
(b) The words "hereof", "herein" and "hereunder" and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and
not to any particular provision of this Agreement. Unless otherwise specified,
references to sections, subsections, schedules and exhibits are references to
such in this Agreement.
SECTION 2. INITIAL UNDERWRITING.
2.1 Underwritten Offering. The Company will use its best efforts to
cause to be effective on the Closing Date, or as soon as practicable thereafter
(recognizing that time is of the essence), a Registration Statement with respect
to an underwritten public offering of not less than 7.5 million and not more
than 20 million shares of Registrable Common; provided, however, that the
Company agrees that it shall not cause such Registration Statement to be
effective on the Closing Date or as soon as practicable thereafter if the
Company and the holders of a majority of the Registrable Common participating in
the Initial Underwriting mutually agree prior to the Closing Date, or
thereafter, to cause such Registration Statement to be declared effective on
another date, which date shall not be under any circumstances later than the
date three (3) days after the Company publishes financial results covering
thirty (30) days or more of post-Merger combined operations. Promptly after the
execution hereof, the Company shall send a Notice of Offering to the Initial
Securities Holders with respect to the Initial Underwriting. The Initial
Securities Holders shall thereafter have thirty (30) days within which to submit
a written response to the Company expressing their interest in participating in
the Initial Offering and specifying the number of shares of Registrable Common
they desire to sell in the Offering. Subject to subsection 2.3 hereof, all
Securities Holders will be entitled to participate in the Initial Underwriting
in accordance with the related Notice of Offering to the full extent of their
Registrable Common; provided, however, that no Securities Holder shall be
entitled to participate in the Initial Underwriting if such participation would
be a violation of the pooling representation letter given by such Securities
Holder to the Company pursuant to the Merger Agreement.
2.2 Underwriters. The underwriters for the Initial Underwriting will be
nationally recognized underwriters chosen by Securities Holders owning a
majority of the Registrable Common held by Securities Holders anticipated to be
participating in the Initial Underwriting, as previously identified to the
Company.
2.3 Allocation in Initial Underwriting. If all the eligible
shares of Registrable Common requested to be included in the Initial
Underwriting cannot be so included as a result of the limit on the aggregate
number of
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shares of Registrable Common set forth in subsection 2.1, the number of shares
of Registrable Common that may be so included shall be allocated among the
Securities Holders pro rata on the basis of the number of shares of Registrable
Common held by such eligible Securities Holders; provided, however, that such
allocation shall not operate to reduce the aggregate number of shares of
Registrable Common that may be so included in such underwriting. If any
Securities Holder does not request inclusion of the maximum number of eligible
shares of Registrable Common allocated to it pursuant to the above-described
procedure, the remaining portion of its allocation shall be reallocated among
those requesting eligible Securities Holders whose allocation did not satisfy
their requests pro rata on the basis of the number of shares of Registrable
Common held by such Securities Holders, and this procedure shall be repeated
until all of the shares of Registrable Common which may be included in the
underwriting have been so allocated.
SECTION 3. SHELF REGISTRATION.
3.1 Shelf Registration. (a) The Company agrees to prepare and file with
the Commission a "shelf" Registration Statement on Form S-3 for an offering to
be made on a continuous basis pursuant to Rule 415 covering all of the
Registrable Common not previously sold in the Initial Underwriting (the "Shelf
Registration Statement"). The permitted methods of distribution of shares of
Registrable Common under the Shelf Registration Statement shall be limited to
transactions complying with the provisions of Rule 144(f) and underwritten
offerings of shares of Registrable Common under the Shelf Registration Statement
in accordance with this Section 3. The Company will use its best efforts to have
such Registration Statement declared effective by the Commission on or as soon
as practicable after the date that is nine (9) months after the Effective Date
(as defined in the Merger Agreement). The Company shall use its best efforts to
keep the Shelf Registration Statement continuously effective until the earlier
of (A) the date three (3) years after the effective date of the Shelf
Registration Statement (subject to any "black-out" periods and extensions of
such three-year period pursuant to subsection 5.1) and (B) the date on which no
Registrable Common remains outstanding.
(b) The Company agrees to prepare and file with the Commission
a "shelf" Registration Statement on Form S-3 for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the Litigation Shares that
are distributed to the Initial Securities Holders or their permitted assigns
pursuant to the Merger Agreement (the "Litigation Shelf"). The permitted method
of distribution of such Litigation Shares shall be limited to transactions
complying with the provisions of Rule 144(f). The Company will use its best
efforts to (i) have such Registration Statement declared effective by the
Commission on or as soon as practicable after the first date any Litigation
Shares are distributed from the escrow established at the Closing under the
Merger Agreement, and (ii) to keep such Registration Statement continuously
effective until the earlier of (A) the date three (3) years thereafter (subject
to any "black-out" periods and extensions of such three-year period pursuant to
subsection 5.1), and (B) the date on which no Registrable Litigation Shares
remain outstanding. Notwithstanding the foregoing, in the event any Aggregate
Escrow Distribution (as defined in the Merger Agreement) is made over time as a
result of Installments (as defined in the Merger Agreement), the Company shall
be obligated to use its best efforts to keep the Litigation Shelf continuously
effective until the earlier of (I) the date one (1) year after the last
distribution of Litigation Shares from the escrow (so long as such date is at
least three (3) years after the first date any Litigation Shares are distributed
from such escrow) and (II) the date on which no Registrable Litigation Shares
remain outstanding.
3.2 Demand Underwritings. (a) If the Company shall at any time receive
a Notice of Offering from any Securities Holder or Securities Holders holding a
minimum of 15% of the Registrable Common then outstanding (but in no event less
than 3,000,000 shares) requesting an underwritten public offering of Registrable
Common under the Shelf Registration Statement that has anticipated aggregate
proceeds at the time of the request (net of underwriting discounts, commissions
and expenses) in excess of $10,000,000, the Company shall, subject to the terms
and conditions hereof, be obligated to use its best efforts to facilitate such
proposed underwritten public offering pursuant to the terms of this Agreement.
The provisions of this subsection 3.2 shall not be applicable to Registrable
Litigation Shares.
(b) Following receipt of the notice referred to in subsection
3.2(a), the Company shall promptly give a Notice of Offering to all Securities
Holders (other than the demanding Securities Holders), which
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shall set forth the right of such Securities Holders to include any or all
shares of Registrable Common held by such Securities Holders in the proposed
offering, subject to the terms of this Agreement. Subject to subsection 3.2(e),
the Company shall use its best efforts to facilitate the inclusion in the
proposed underwritten public offering of the number of shares of Registrable
Common specified in written requests from such Securities Holders that are
received by the Company within fifteen (15) days after the Company provides its
Notice of Offering to all Securities Holders.
(c) The Securities Holders shall be entitled to a total of
four (4) underwritten public offerings of Registrable Common under the Shelf
Registration Statement during the three (3) year period following the effective
date of the Shelf Registration Statement (subject to any "black out" periods and
extensions of such three (3) year period pursuant to subsection 5.1); provided,
that no more than two of such underwritten public offerings may take place in
any twelve (12) month period.
(d) All underwritten public offerings of Registrable Common
under the Shelf Registration Statement shall be broadly distributed. If at any
time any of the Securities Holders of the Registrable Common covered by the
Shelf Registration Statement desire to sell Registrable Common in an
underwritten offering in accordance with the limitations of this subsection 3.2,
the investment banker or investment bankers that will manage the offering will
be nationally recognized underwriters selected jointly by the Company and by the
Securities Holders owning a majority of the Registrable Common held by
Securities Holders included in such offering.
(e) If all the shares of Registrable Common requested to be
included in any underwritten public offering pursuant to this Section 3 cannot
be so included as a result of any reasonable limit established by the
underwriters on the aggregate number of shares of Registrable Common included in
such underwriting, the number of shares of Registrable Common that may be so
included shall be allocated among the Securities Holders pro rata on the basis
of the number of shares of Registrable Common held by such Securities Holders;
provided, however, that such allocation shall not operate to reduce the
aggregate number of shares of Registrable Common that may be so included in such
underwriting. If any Securities Holder does not request inclusion of the maximum
number of shares of Registrable Common allocated to it pursuant to the
above-described procedure, the remaining portion of its allocation shall be
reallocated among those requesting Securities Holders whose allocation did not
satisfy their requests pro rata on the basis of the number of shares of
Registrable Common held by such Securities Holders, and this procedure shall be
repeated until all of the Registrable Shares which may be included in the
underwriting have been so allocated.
(f) Securities Holders holding a majority of the Registrable
Common exercising a demand right for an underwritten public offering under this
subsection 3.2 may withdraw the exercise of such right on behalf of all such
exercising Securities Holders as a result of a material adverse change in the
earnings, condition, financial or otherwise, or prospects of the Company, or a
material adverse change in the market for equity securities generally by giving
written notice to the Company prior to the date the Purchase Agreement for such
underwritten public offering is signed, and such withdrawn demand registration
right shall not be deemed to be one of the four demand rights provided under
Section 3.2(c); provided, however, that the Company shall not be required to
deliver a Notice of Offering with respect to a renewed or new demand for an
underwritten public offering pursuant to subsection 3.2 or to take any other
action with respect to any such renewed or new demand for a period of ninety
(90) days following any such notice of withdrawal.
SECTION 4. COMPANY SALE EVENTS.
4.1 Determination. Subject to subsection 5.2, the Company may at any
time effect a Company Public Sale Event pursuant to a Registration Statement
filed by the Company if the Company gives each Securities Holder a Company Sale
Notice, provided that such Company Sale Notice is given not less than 21 days
prior to the initial filing of the related Registration Statement. The
obligation of the Company to give to each Securities Holder a Company Sale
Notice and to permit piggyback registration rights to Securities Holders with
respect to Registrable Common in connection with Company Sale Events in
accordance with this Section 4 shall terminate on the earlier of (A) the date
three (3) years after the effective date of the Shelf Registration Statement
(subject to any "black-out" periods and extensions of such three-year period
pursuant to subsection 5.1) and (B) the date on which no
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Registrable Common remains outstanding. The provisions of this Section 4 shall
not be applicable to Registrable Litigation Shares.
4.2 Notice. The Company Sale Notice shall offer the Securities Holders
the opportunity to participate in such offering and include the number of shares
of Registrable Common which represents the best estimate of the lead managing
underwriter (or, if not known or applicable, the Company) that will be available
for sale by the Securities Holders in the proposed offering.
4.3 Piggyback Rights of Securities Holders. (a) If the Company shall
have delivered a Company Sale Notice, Securities Holders shall be entitled to
participate on the same terms and conditions as the Company in the Company
Public Sale Event to which such Company Sale Notice relates and to offer and
sell shares of Registrable Common therein only to the extent provided in this
subsection 4.3. Each Securities Holder desiring to participate in such offering
shall notify the Company no later than ten (10) days following receipt of a
Company Sale Notice of the aggregate number of shares of Registrable Common that
such Securities Holder then desires to sell in the offering.
(b) Each Securities Holder desiring to participate in a Company Public
Sale Event may include shares of Registrable Common in any Registration
Statement relating to a Company Public Sale Event to the extent that the
inclusion of such shares shall not reduce the number of shares of Common Stock
to be offered and sold by the Company to be included therein. If the lead
managing underwriter selected by the Company for a Company Public Sale Event
advises the Company in writing that the total number of shares of Common Stock
to be sold by the Company together with the shares of Registrable Common which
such holders intend to include in such offering would be reasonably likely to
adversely affect the price or distribution of the Common Stock offered in such
Company Public Sale Event or the timing thereof, then there shall be included in
the offering only that number of shares of Registrable Common, if any, that such
lead managing underwriter reasonably and in good faith believes will not
jeopardize the marketing of the offering; provided that if the lead managing
underwriter determines that such factors require a limitation on the number of
shares of Registrable Common to be offered and sold as aforesaid and so notifies
the Company in writing, the number of shares of Registrable Common to be offered
and sold by Securities Holders desiring to participate in the Company Public
Sale Event, shall be allocated among those Securities Holders desiring to
participate in such Company Public Sale Event on a pro rata basis based on their
holdings of Registrable Common. If any Securities Holder does not request
inclusion of the maximum number of shares of Registrable Common allocated to it
pursuant to the above-described procedure, the remaining portion of its
allocation shall be reallocated among those requesting Securities Holders whose
allocation did not satisfy their requests pro rata on the basis of the number of
shares of Registrable Common held by such Securities Holders, and this procedure
shall be repeated until all of the shares of Registrable Common which may be
included in the underwriting have been so allocated.
4.4 Discretion of the Company. In connection with any Company Public
Sale Event, subject to the provisions of this Agreement, the Company, in its
sole discretion, shall determine whether (a) to proceed with, withdraw from or
terminate such Company Public Sale Event, (b) to enter into a purchase agreement
or underwriting agreement for such Company Public Sale Event, and (c) to take
such actions as may be necessary to close the sale of Common Stock contemplated
by such offering, including, without limitation, waiving any conditions to
closing such sale which have not been fulfilled. No public offering effected
pursuant to this Section 4 shall be deemed to have been effected pursuant to
Section 2 or Section 3 hereof.
SECTION 5. BLACK-OUT PERIODS.
5.1 Black-Out Periods for Securities Holders. (a) No Securities Holder
shall offer to sell or sell any shares of Registrable Common pursuant to the
Shelf Registration Statement or Registrable Litigation Shares pursuant to the
Litigation Shelf during the 60-day period immediately following the effective
date of any Registration Statement filed by the Company in respect of a Company
Public Sale Event.
(b) No Securities Holder shall offer to sell or sell any
shares of Registrable Common pursuant to the Shelf Registration Statement or
Registrable Litigation Shares pursuant to the Litigation Shelf, and the
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Company shall not be required to supplement or amend any Registration Statement
or otherwise facilitate the sale of Registrable Common or Registrable Litigation
Shares pursuant thereto, during the 90-day period (or such lesser number of days
until the Company makes its next required filing under the Exchange Act)
immediately following the receipt by each Securities Holder of a certificate of
an authorized officer of the Company to the effect that the Board of Directors
of the Company has determined in good faith that such offer, sale, supplement or
amendment is likely to (1) interfere with or affect the negotiation or
completion of any transaction that is being contemplated by the Company (whether
or not a final decision has been made to undertake such transaction) at the time
the right to delay is exercised, or (2) involve initial or continuing disclosure
obligations that might not be in the best interest of the Company or its
stockholders. If any proposed sale is so postponed as provided herein,
Securities Holders having filed the Notice of Offering pursuant to subsection
3.2 to which the deferral relates may, within 30 days after receipt of the
notice of postponement, advise the Company in writing that it has determined to
withdraw its request for registration, and such demand registration request
shall be deemed to be withdrawn and such request shall be deemed not have been
exercised for purposes of determining whether such holders retain the right to
demand registrations pursuant to Section 3.2(c). Any period described in
subsection 5.1(a) or 5.1(b) during which Securities Holders are not able to sell
shares of Registrable Common pursuant to the Shelf Registration Statement or
Registrable Litigation Shares pursuant to the Litigation Shelf is herein
referred to as a "black-out" period. The Company shall notify each Securities
Holder of the expiration or earlier termination of any "black-out" period (the
nature and pendency of which need not be disclosed during such "black-out"
period).
(c) The period during which the Company is required pursuant
to subsection 3.1(a) or 3.1(b), respectively, to keep the Shelf Registration
Statement or the Litigation Shelf continuously effective shall be extended by a
number of days equal to the number of days, if any, of any "black-out" period
applicable to Securities Holders pursuant to this subsection 5.1 occurring
during such period, plus a number of days equal to the number of days during
such period, if any, of any period during which the Securities Holders are
unable to sell any shares of Registrable Common pursuant to the Shelf
Registration Statement or Registrable Litigation Shares pursuant to the
Litigation Shelf as a result of the happening of any event of the nature
described in subsection 6.3(c)(ii), 6.3(c)(iii) or 6.3(c)(v).
5.2 Black-Out Period for the Company. Except for offers to sell and
sales of Common Stock pursuant to a Registration Statement on Form S-8 or on
Form S-4, standby underwritings in connection with the redemption of outstanding
convertible securities, the conversion of outstanding convertible securities or
in connection with the acquisition by the Company of another company or
business, the Company shall not publicly offer to sell or sell any shares of
capital stock of the Company during the 60-day period immediately following the
initial sale of shares by any Securities Holder in an underwritten public
offering of shares of Registrable Common pursuant to Sections 2 or 3.
5.3 Financial Reporting. The Company agrees that during the period from
and after the Effective Time to and including the date 90 days thereafter, it
will not publish financial results covering 30 or more days of post-Merger
combined operations, except as part of the publication of financial results in
the ordinary course for a quarterly operating period that includes such
post-Merger combined operations, unless otherwise required by law.
SECTION 6. AGREEMENTS CONCERNING OFFERINGS.
6.1 Obligations of Securities Holders. (a) Each Securities
Holder shall, upon the reasonable request of the Company, advise the Company
of the number of shares of Registrable Common and Registrable Litigation
Shares then held or beneficially owned by it.
(b) It shall be a condition precedent to the obligations of
the Company to effect a Registration of, or facilitate any Public Sale Event
with respect to, any shares of Registrable Common or Registrable Litigation
Shares for any Securities Holder that such Securities Holders shall have
furnished to the Company a complete Securities Holder's Questionnaire and such
additional information regarding such Securities Holder, the Registrable Common
or Registrable Litigation Shares held by them and the intended method of
disposition of such securities as shall be required by law, the Commission or
the NASD, and any other information relating to such Registration reasonably
required by the Company.
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6.2 Obligations of the Company. Whenever required under this Agreement
to proceed with a Registration of any Registrable Common or Registrable
Litigation Shares, the Company shall, subject to the terms and conditions of
this Agreement, use its best efforts to proceed as expeditiously as reasonably
possible to:
(a) Prepare and file with the Commission a Registration
Statement with respect to such Registrable Common or Registrable Litigation
Shares and use its best efforts to cause such Registration Statement to become
effective; provided, however, that before filing a Registration Statement or
Prospectus or any amendments or supplements thereto, the Company will furnish to
the Security Holders covered by such Registration Statement and to Securities
Holders' counsel copies of any such Registration Statement or Prospectus
proposed to be filed.
(b) Prepare and file with the Commission such amendments
(including post-effective amendments) to such Registration Statement and
supplements to the related Prospectus used in connection with such Registration
Statement, and otherwise use its best efforts, to the end that such Registration
Statement reflects the plan of distribution of the securities registered
thereunder that is included in the relevant Notice of Offering and is effective
until the completion of the distribution contemplated by such Registration
Statement or so long thereafter as a broker or dealer is required by law to
deliver a Prospectus in connection with the offer and sale of the shares of
Registrable Common or Registrable Litigation Shares covered by such Registration
Statement and/or as shall be necessary so that neither such Registration
Statement nor the related Prospectus shall 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 not misleading and so that such
Registration Statement and the related Prospectus will otherwise comply with all
applicable legal and regulatory requirements. The Company shall not be deemed to
have effected a Registration for any purpose under this Agreement unless and
until such Registration Statement is declared effective by the Commission.
(c) Provide to any Securities Holder requesting to include
Registrable Common or Registrable Litigation Shares in such Registration
Statement and any managing underwriter(s) participating in any distribution
thereof and to any attorney, accountant or other agent retained by such
Securities Holder or managing underwriter(s), reasonable access to appropriate
officers and directors of the Company, its independent auditors and counsel to
ask questions and to obtain information (including any financial and other
records and pertinent corporate documents) reasonably requested by any such
Securities Holder, managing underwriter(s), attorney, accountant or other agent
in connection with such Registration Statement or any amendment thereto,
provided, however, that (i) in connection with any such access or request, any
such requesting Persons shall cooperate to the extent reasonably practicable to
minimize any disruption to the operation by the Company of its business and (ii)
any records, information or documents shall be kept confidential by such
requesting Persons, unless (i) such records, information or documents are in the
public domain or otherwise publicly available or (ii) disclosure of such
records, information or documents is required by court or administrative order
or by applicable law (including, without limitation, the Securities Act).
(d) Furnish at the Company's expense to the participating
Securities Holders and any managing underwriter(s) and to any attorney,
accountant or other agent retained by such Securities Holder or managing
underwriter(s), such number of copies of any Registration Statement and
Prospectus, including any Preliminary Prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of the shares of
Registrable Common or Registrable Litigation Shares owned by them.
(e) Prior to any Public Sale Event, use its best efforts to
register and qualify the securities covered by such Registration Statement (to
the extent exemptions are not available) under securities or "Blue Sky" laws of
such other jurisdictions as shall be reasonably requested by the Securities
Holders or the managing underwriter(s) and to keep each such registration or
qualification effective during the period required for such Public Sale Event to
be consummated; provided that the Company shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdictions in
which it has not already done so.
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(f) Enter into and perform its obligations under a Purchase
Agreement, if the offering is an underwritten offering, in usual and customary
form, with the managing underwriter(s) of such underwritten offering; provided,
however, that each Securities Holder participating in such Public Sale Event
shall also enter into and perform its obligations under such Purchase Agreement
so long as such obligations are usual and customary obligations of selling
stockholders in a registered public offering.
(g) Use its best efforts to cause the Registrable Common or
Registrable Litigation Shares covered by the Registration Statement to be listed
on each national securities exchange in the United States on which the Common
Stock is then listed or quoted on each inter-dealer quotation system on which
the Common Stock is then quoted.
(h) Provide for or designate a transfer agent and registrar
(which may be the same entity) for the Registrable Common or Registrable
Litigation Shares covered by the Registration Statement from and after the
effective date of such Registration Statement.
(i) Cooperate with the selling Securities Holders of
Registrable Common and any managing underwriters to facilitate the timely
issuance and delivery to any underwriters to which any Securities Holder may
sell Registrable Common in such offering certificates evidencing shares of the
Registrable Common not bearing any restrictive legends and in such denominations
and registered in such names as the managing underwriters may request.
6.3 Agreements Related to Offerings. Subject to the terms and
conditions hereof, in connection with the Registration Statement covering the
Initial Underwriting, any Company Public Sale Event, the Shelf Registration
Statement and the Litigation Shelf, as applicable:
(a) The Company will cooperate with the underwriters for any
underwritten public offering of Registrable Common proposed to be sold pursuant
to a Registration Statement, and will, unless the parties to the Purchase
Agreement otherwise agree, use its best efforts to enter into a Purchase
Agreement not inconsistent with the terms and conditions of this Agreement and
containing such other terms and conditions of a type and form reasonable and
customary for companies of similar size and credit rating (including, but not
limited to, such provisions for delivery of a "comfort letter" and legal opinion
as are customary), and use its best efforts to take all such other reasonable
actions as are necessary or advisable to permit, expedite and facilitate the
disposition of such shares of Registrable Common in the manner contemplated by
such Registration Statement in each case to the same extent as if all the shares
of Registrable Common then being offered were for the account of the Company.
(b) Neither such Registration Statement nor any amendment or
supplement thereto will be filed by the Company until Securities Holders'
Counsel shall have had a reasonable opportunity to review the same and to
exercise its rights under subsection 6.2(c) with respect thereto. No amendment
to such Registration Statement naming any Securities Holder as a selling
security holder shall be filed with the Commission until such Securities Holder
shall have had a reasonable opportunity to review such Registration Statement as
originally filed. Neither such Registration Statement nor any related Prospectus
or any amendment or supplement thereto shall be filed by the Company with the
Commission which shall be disapproved (for reasonable cause) by the managing
underwriters named therein or Securities Holders' Counsel within a reasonable
period after notice thereof.
(c) The Company will use its reasonable efforts to keep the
Securities Holders informed of the Company's best estimate of the earliest date
on which such Registration Statement or any post-effective amendment thereto
will become effective and will notify each Securities Holder, Securities
Holders' Counsel and the managing underwriter(s), if any, participating in the
distribution pursuant to such Registration Statement promptly (i) when such
Registration Statement or any post-effective amendment to such Registration
Statement is filed or becomes effective, (ii) of any request by the Commission
for an amendment or any supplement to such Registration Statement or any related
Prospectus, or any other information request by any other governmental agency
directly relating to the offering, and promptly deliver to each Securities
Holder participating in the offering and the managing underwriter(s), if any,
copies of all correspondence between the Commission or any such governmental
agency or self-regulatory body and all written memoranda relating to discussions
with the Commission
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<PAGE>
or its staff with respect to the Registration Statement or proposed sale of
shares, to the extent not covered by attorney-client privilege or constituting
attorney work product, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of such Registration Statement or of any order
preventing or suspending the use of any related Prospectus or the initiation or
threat of any proceeding for that purpose, (iv) of `the suspension of the
qualification of any shares of Common Stock included in such Registration
Statement for sale in any jurisdiction or the initiation or threat of a
proceeding for that purpose, (v) of any determination by the Company that an
event has occurred (the nature and pendency of which need not be disclosed
during a "black-out period" pursuant to subsection 5.1(b)) which makes untrue
any statement of a material fact made in such Registration Statement or any
related Prospectus or which requires the making of a change in such Registration
Statement or any related Prospectus in order that the same 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 light of the
circumstances under which they were made, not misleading, (vi) of the completion
of the distribution contemplated by such Registration Statement if it relates to
a Company Sale Event, and (vii) if at any time the representations and
warranties of the Company under Section 7 cease to be true and correct in all
material respects.
(d) In the event of the issuance of any stop order suspending
the effectiveness of such Registration Statement or of any order suspending or
preventing the use of any related Prospectus or suspending the qualification of
any shares of Common Stock included in such Registration Statement for sale in
any jurisdiction, the Company will use its reasonable best efforts to obtain its
withdrawal at the earliest possible time.
(e) The Company agrees to otherwise use its best efforts to
comply with all applicable rules and regulations of the Commission, and make
available to the Security Holders, as soon as reasonably practicable, but not
later than fifteen months after the effective date of such Registration
Statement, an earnings statement covering the period of at least twelve months
beginning with the first full fiscal quarter after the effective date of such
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Securities Act.
(f) The Company shall, subject to permitted "black-out"
periods, upon the happening of any event of the nature described in subsection
6.3(c)(ii), 6.3(c)(iii) or 6.3(c)(v), as expeditiously as reasonably possible,
prepare a supplement or post-effective amendment to the applicable Registration
Statement or a supplement to the related Prospectus or any document incorporated
therein by reference or file any other required documents and deliver a copy
thereof to each Securities Holder so that, as thereafter delivered to the
purchasers of the Registrable Common or Registrable Litigation Shares being sold
thereunder, such Prospectus will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading.
6.4 Certain Expenses. The Company shall pay all fees, disbursements and
expenses in connection with the Initial Underwriting, any Company Sale Event,
the Shelf Registration Statement and the Litigation Shelf and the performance of
its obligations hereunder (including those pursuant to Section 3.2 hereof),
including, without limitation, to the extent applicable, all registration and
filing fees, printing, messenger and delivery expenses, fees of the Company's
auditors, listing fees, registrar and transfer agents' fees, reasonable fees and
disbursements of Securities Holders' Counsel in connection with the registration
but not the disposition of the Registrable Common and Registrable Litigation
Shares (provided that the Company shall have no obligation to reimburse the fees
and disbursements of any other counsel to any Securities Holder), fees and
disbursements for counsel for the Company, fees and expenses (including
reasonable fees and disbursements of counsel) of complying with applicable state
securities or "Blue Sky" laws and the fees of the NASD in connection with its
review of any offering contemplated in any such Registration Statement, but not
including underwriting discounts and commissions or brokerage commissions on any
shares of Registrable Common or Registrable Litigation Shares sold in any such
offering.
6.5 Reports Under the Exchange Act. (a) From the date hereof to
the Termination Date, the Company agrees to:
(i) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act or
the Exchange Act; and
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<PAGE>
(ii) furnish to any Securities Holder, forthwith upon
request (A) a written statement by the Company that it has complied
with the current public information and reporting requirements of Rule
144 and the Exchange Act, (B) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so
filed by the Company, and (C) such other information as may be
reasonably requested in connection with any Securities Holder availing
itself of any rule or regulation of the Commission which permits the
selling of any such securities without Registration or pursuant to such
rule or regulation.
(b) If any Securities Holder is required to file a Form 144
with respect to any sale of shares of Registrable Common or Registrable
Litigation Shares, such Securities Holder shall promptly deliver to the Company
a copy of such completed Form 144 filed with the Commission.
6.6 Limitations on Subsequent Registration Rights. From the date hereof
to the Termination Date, the Company shall not, without the prior written
consent of Securities Holders owning a majority of the shares of Registrable
Common and Registrable Litigation Shares held by Securities Holders at such
time, enter into any agreement (other than this Agreement) which would allow any
holder or prospective holder of Common Stock to include such securities in the
Shelf Registration Statement or the Litigation Shelf, or which would provide any
holder or prospective holder of Common Stock piggyback registration rights for
such Common Stock unless the piggyback registration rights provided to the
Securities Holders hereunder shall have priority in the event of any cutback.
6.7 Indemnification and Contribution. (a) In connection with (x) the
Shelf Registration Statement and the Litigation Shelf, subsections 6.7(a)(i),
(ii) and (v), 6.7(c) and 6.5(e) hereof shall be in full force and effect upon
the effective date of the Shelf Registration Statement or the Litigation Shelf,
as the case may be, and (y) a Registration Statement which covers the Initial
Underwriting or Registrable Common being sold by Piggybacking Securities Holders
or in connection with an underwritten offering pursuant to the Shelf
Registration Statement under subsection 3.2, provisions substantially in
conformity with the following provisions shall be contained in the related
Purchase Agreement unless the parties to such Purchase Agreement agree otherwise
(references in such provisions to a Securities Holder or an underwriter being
references to a Securities Holder or an underwriter participating in the
offering covered by such Registration Statement):
(i) The Company agrees to indemnify and hold harmless each
Securities Holder and each Person, if any, who controls such Securities
Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, and each of their respective officers,
directors and employees against any losses, claims, damages or
liabilities, joint or several, or actions in respect thereof to which
such Securities Holder or Persons may become subject under the
Securities Act, or otherwise (collectively, "Losses"), insofar as such
Losses arise out of, or are based upon, any untrue statement or alleged
untrue statement of any material fact contained in such Registration
Statement, any related Preliminary Prospectus or any related
Prospectus, or any amendment or supplement thereto, or arise out of, or
are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse such Securities
Holder or Persons for any legal or other expenses reasonably incurred
by them in connection with investigating or defending any such Losses;
provided, however, that the Company shall not be so liable to the
extent that any such Losses arise out of, or are based upon, an untrue
statement or alleged untrue statement of a material fact or an omission
or alleged omission to state a material fact in said Registration
Statement in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of such Securities Holder
specifically for use therein. Notwithstanding the foregoing, the
Company shall not be liable in any such instance to the extent that any
such Losses arise out of, or are based upon, an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Preliminary Prospectus if (i) after the Company had made available
sufficient number of copies of the Prospectus, such Securities Holder
failed to send or deliver a copy of the Prospectus with or prior to the
delivery of written confirmation of the sale of Registrable Common to
the Person asserting such Losses or who purchased the Registrable
Common the purchase of which is the basis of the action if, in either
instance, such delivery by such Securities Holder is required by the
Securities Act and (ii) the Prospectus would have corrected such untrue
statement
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<PAGE>
or alleged untrue statement or alleged omission; and the Company shall
not be liable in any such instance to the extent that any such Losses
arise out of, or are based upon, an untrue statement or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact in the Prospectus, if such untrue statement or alleged
untrue statement, omission or alleged omission is corrected in an
amendment or supplement to the Prospectus and if, having previously
been furnished by or on behalf of the Company with copies of the
Prospectus as so amended or supplemented, such Securities Holder
thereafter fails to deliver such Prospectus as so amended or
supplemented, prior to or concurrently with the sale of Registrable
Common if such delivery by such Securities Holder is required by the
Securities Act. This indemnity agreement will be in addition to any
liability which the Company may otherwise have and shall remain in full
force and effect regardless of any investigation made by or on behalf
of such holder or any such Person and shall survive the Termination
Date and the transfer of Registrable Common by such holder as otherwise
permitted hereby.
(ii) Each Securities Holder severally agrees to indemnify
and hold harmless the Company, each other Securities Holder and each
Person, if any, who controls the Company or such other Securities
Holder within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, and their respective officers,
directors and employees, against any Losses to which the Company, such
other Securities Holder or such Persons may become subject under the
Securities Act, or otherwise, insofar as such Losses arise out of, or
are based upon, any untrue statement or alleged untrue statement of any
material fact contained in such Registration Statement, any related
Preliminary Prospectus or any related Prospectus, or any amendment or
supplement thereto, or arise out of, or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse the Company, such other Securities Holder or such
Persons for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such Losses, in each
instance to the extent, but only to the extent, that any such Losses
arise out of, or are based upon, an untrue statement or alleged untrue
statement of a material fact or an omission or alleged omission to
state a material fact in said Registration Statement, said Preliminary
Prospectus or said Prospectus, or any said amendment or supplement
thereto in reliance upon, and in conformity with, written information
furnished to the Company by or on behalf of such Securities Holder
specifically for use therein; provided, however, that the liability of
each Securities Holder under this subsection 6.7(a)(ii) shall be
limited to an amount equal to the proceeds of the sale of shares of
Registrable Common by such Securities Holder in the offering which gave
rise to the liability (net of all costs and expenses (including
underwriting commissions and disbursements) paid or incurred by such
Securities Holder in connection with the registration, if any, and
sale).
(iii) The Company will indemnify and hold harmless each
underwriter and each Person, if any, who controls any such underwriter
within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act, and their respective officers, directors and
employees, against any Losses to which such underwriter or Persons may
become subject under the Securities Act, or otherwise, insofar as such
Losses arise out of, or are based upon, any untrue statement or alleged
untrue statement of any material fact contained in such Registration
Statement, any related Preliminary Prospectus or any related
Prospectus, or any amendment or supplement thereto, or arise out of, or
are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse such underwriter
or Persons for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such Losses;
provided, however, that (i) the Company shall not be so liable to the
extent that any such Losses arise out of, or are based upon, an untrue
statement or alleged untrue statement of a material fact or an omission
or alleged omission to state a material fact in said Registration
Statement, said Preliminary Prospectus or said Prospectus or any said
amendment or supplement in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of such
underwriter specifically for use therein; and (ii) such indemnity with
respect to any Preliminary Prospectus shall not inure to the benefit of
any underwriter (or any Person controlling such underwriter) from whom
the Person asserting any such Losses purchased shares of Common Stock
if such Person did not receive a copy of the Prospectus (or the
Prospectus as amended or supplemented) at or prior to the confirmation
of the sale of such shares of
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<PAGE>
Common Stock to such Person in any case where such delivery is required
by the Securities Act and the untrue statement or alleged untrue
statement or omission or alleged omission of a material fact in such
Preliminary Prospectus was corrected in the Prospectus (or the
Prospectus as amended or supplemented); provided, further, that the
Company shall only be required to provide the indemnification described
in this subsection 6.7(a)(iii) to an underwriter and each Person, if
any, who controls such underwriter, and their respective officers,
directors and employees, if such underwriter agrees to indemnification
provisions substantially in the form set forth in subsection 6.7(b).
(iv) Each Securities Holder will severally indemnify and
hold harmless each underwriter and each Person, if any, who controls
such underwriter within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act, and their respective officers,
directors and employees, against any Losses to which such underwriter
or such Persons may become subject under the Securities Act, or
otherwise, insofar as such Losses arise out of, or are based upon, any
untrue statement or alleged untrue statement of any material fact
contained in such Registration Statement, any related Preliminary
Prospectus or any related Prospectus, or any amendment or supplement
thereto, or arise out of, or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will
reimburse such underwriter or such Persons for any legal or other
expenses reasonably incurred by them in connection with investigating
or defending any such Losses, in each case to the extent, but only to
the extent, that any such Losses arise out of, or are based upon, an
untrue statement or alleged untrue statement of a material fact or an
omission or alleged omission to state a material fact in said
Registration Statement in reliance upon, and in conformity with,
written information furnished to the Company by or on behalf of such
Securities Holder specifically for use therein; provided, however, that
such Securities Holder shall only be required to provide the
indemnification described in this subsection 6.7(a)(iv) to an
underwriter and each Person, if any, who controls such underwriter if
such underwriter agrees to indemnification provisions substantially in
the form set forth in subsection 6.7(b); and provided, further, that
such Securities Holder shall not be liable in any such case to the
extent that any such Losses arise out of, or are based upon, an untrue
statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus if (i) such underwriter failed to
send or deliver a copy of the Prospectus with or prior to the delivery
of written confirmation of the sale of Registrable Common to the Person
asserting such Loss who purchased the Registrable Common which is the
subject thereof where such delivery is required by the Securities Act
and (ii) the Prospectus would have corrected such untrue statement or
omission or alleged untrue statement or alleged omission; and such
Securities Holder shall not be liable in any such case to the extent
that any such Losses arises out of, or are based upon, an untrue
statement or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact in the Prospectus, if such
untrue statement or alleged untrue statement, omission or alleged
omission is corrected in an amendment or supplement to the Prospectus
and if, having previously been furnished by or on behalf of such
Securities Holder with copies of the Prospectus as so amended or
supplemented, such underwriter thereafter fails to deliver such
Prospectus as so amended or supplemented, prior to or concurrently with
the sale of Registrable Common to the Person asserting such Loss who
purchased such Registrable Common which is the subject thereof or where
such delivery is required by the Securities Act, and provided, further,
that the liability of such Securities Holder under this subsection
6.7(a)(iv) shall be limited to an amount equal to the proceeds of the
sale of shares of Common Stock by such Securities Holder in the
offering which gave rise to the liability (net of all costs and
expenses (including underwriting commissions and disbursements) paid or
incurred by such Securities Holders in connection with the
registration, if any, and sale).
(v) Promptly after any Person entitled to indemnification
under this subsection 6.7 or such Purchase Agreement receives notice of
any claim or the commencement of any action, the indemnified party
shall, if a claim in respect thereof is to be made against the
indemnifying party pursuant to the indemnification provisions of this
subsection 6.7 or such Purchase Agreement, notify the indemnifying
party in writing of the claim or the commencement of such action;
provided, however, that the failure or delay to so notify the
indemnifying party shall not relieve it from any liability which it may
have to the indemnified party hereunder unless and to the extent such
failure or delay has materially prejudiced the rights of the
indemnifying party and shall not, in any event, relieve it from any
liability which it may have
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<PAGE>
to the indemnified party other than pursuant to the indemnification
provisions of this subsection 6.7 or such Purchase Agreement. If any
such claim or action shall be brought against an indemnified party, and
it has notified the indemnifying party thereof in accordance with the
terms hereof, the indemnifying party shall be entitled to participate
in the defense of such claim, or, to the extent that it wishes, jointly
with any other similarly notified indemnifying party, to assume the
defense thereof with counsel reasonably satisfactory to the indemnified
party, upon written notice to the indemnified party of such assumption.
After notice from the indemnifying party to the indemnified party of
its election to assume the defense of such claim or action, (i) the
indemnifying party shall not be liable to the indemnified party
pursuant to the indemnification provisions hereof or of such Purchase
Agreement for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense thereof other than
reasonable costs of investigation, (ii) the indemnifying party shall
not be liable for the costs and expenses of any settlement of such
claim or action unless such settlement was effected with the consent of
the indemnifying party (which consent shall not be unreasonably
withheld or delayed) and (iii) the indemnified party shall be obligated
to cooperate with the indemnifying party in the investigation of such
claim or action; provided, however, that any indemnified party
hereunder shall have the right to employ separate counsel and to
participate in the defense of such claim assumed by the indemnifying
party, but the fees and expenses of such counsel shall be at the
expense of such indemnified party unless (a) the employment of such
counsel has been specifically authorized in writing by the indemnifying
party, (b) the indemnifying party shall have failed to assume the
defense of such claim from the Person entitled to indemnification
hereunder and failed to employ counsel within a reasonable period
following such assumption, or (c) in the reasonable judgment of the
indemnified party, based upon advice of its counsel, a material
conflict of interest may exist between such indemnified party and the
indemnifying party with respect to such claims or there may be one or
more material legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which
case, if the indemnified party notifies the indemnifying party in
writing that the indemnified party elects to employ separate counsel at
the expense of the indemnifying party, the indemnifying party shall not
have the right to assume the defense of such claim on behalf of the
indemnified party). Notwithstanding the foregoing, the Securities
Holders (together with their respective controlling Persons and
officers, directors and employees) and the underwriters (together with
their respective controlling Persons and officers, directors and
employees) shall, each as a separate group, have the right to employ at
the expense of the Company only one separate counsel for each such
group to represent such Securities Holders and such underwriters (and
their respective controlling Persons and officers, directors and
employees) who may be subject to liability arising out of any one
action (or separate but substantially similar actions in the same
jurisdiction arising out of the same general allegations or
circumstances) in respect of which indemnity may be sought by such
Securities Holders and underwriters against the Company pursuant to the
indemnification provisions of this subsection 6.7 or such Purchase
Agreement. If such defense is not assumed by the indemnifying party,
the indemnifying party will not be subject to any liability for any
settlement made without its consent (but such consent will not be
unreasonably withheld or delayed). No indemnifying party will consent
to entry of any judgment or enter into any settlement that does not
include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in
respect to such claim or litigation. All fees and expenses to be paid
by the indemnifying party hereunder shall be paid a commercially
reasonable time after they are billed to the indemnified party, subject
to receipt of a written undertaking from the indemnified party to repay
such fees and expenses if indemnity is not ultimately determined to be
available to such indemnified party under this subsection 6.7.
(b) As a condition to agreeing in any Purchase Agreement to
the indemnification provisions set forth in subsections 6.7(a)(iii) and
6.7(a)(iv) in favor of an underwriter participating in the offering covered by
the related Registration Statement, its controlling Persons, if any, and their
respective officers, directors and employees, the Company and the Securities
Holders participating in an offering pursuant to such Registration Statement may
require that such underwriter agree in the Purchase Agreement to provisions
substantially in the form set forth in subsection 6.7(a)(v) and to severally
indemnify and hold harmless the Company, each Securities Holder participating in
such offering, each Person, if any, who controls the Company or such Securities
Holder within the meaning of the Securities Act, and their respective officers,
directors and employees against any Loss to which the Company, such Securities
Holder or such Persons may become subject under the Securities Act, or
otherwise,
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<PAGE>
insofar as such Losses arise out of, or are based upon, any untrue statement or
alleged untrue statement of any material fact contained in such Registration
Statement in which such underwriter is named as an underwriter, any related
Preliminary Prospectus or any related Prospectus, or any amendment or supplement
thereto, or arise out of, or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, and to reimburse the Company, such
Securities Holder or such Persons for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such Losses
in each case to the extent, but only to the extent, that any such Loss arises
out of, or are based upon, an untrue statement or alleged untrue statement of a
material fact in said Registration Statement, said Preliminary Prospectus or
said Prospectus or any said amendment or supplement in reliance upon, and in
conformity with, written information furnished to the Company by or on behalf of
such underwriter specifically for use therein.
(c) In order to provide for just and equitable contribution
between the Company and such Securities Holders in circumstances in which the
indemnification provisions of this subsection 6.7 or the related Purchase
Agreement are for any reason insufficient or inadequate to hold the indemnified
party harmless, the Company and such Securities Holders shall contribute to the
aggregate Losses (including any investigation, legal and other fees and expenses
reasonably incurred in connection with, and any amount paid in settlement of,
any action, suit or proceeding or any claims asserted, but after deducting any
contribution actually received from Persons other than the Company and such
Securities Holders) to which the Company and one or more of its directors or its
officers who sign such Registration Statement or such Securities Holders or any
controlling Person of any of them, or their respective officers, directors or
employees may become subject, under the Securities Act, under any other statute,
at common law or otherwise, insofar as such Losses or actions in respect thereof
arise out of, or are based upon, any untrue statement or alleged untrue
statement of any material fact contained in such Registration Statement or arise
out of, or are based upon, the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading. Such contributions shall be in such amounts that the
portion of such Losses for which each such Securities Holder shall be
responsible under this subsection 6.7(c) shall be limited to the portion of such
Losses which are directly attributable to an untrue statement of a material fact
or an omission to state a material fact in said Registration Statement in
reliance upon, and in conformity with, written information furnished to the
Company by or on behalf of any such Securities Holder specifically for use
therein, and the Company shall be responsible for the balance of such Losses;
provided, however, that the liability of each such Securities Holder to make
such contribution shall be limited to an amount equal to the proceeds of the
sale of shares of Registrable Common by such Securities Holder in the offering
which gives rise to the liability (net of all cost and expenses (including
underwriting commissions and disbursements) paid or incurred in connection with
the registration, if any, and sale). As among themselves, such Securities
Holders agree to contribute to amounts payable by other such Securities Holders
in such manner as shall, to the extent permitted by law, give effect to the
provisions in subsection 6.7(a)(ii) and those provisions in the Purchase
Agreement comparable to such subsection 6.7(a)(ii). The Company and such
Securities Holders agree that it would not be just and equitable if their
respective obligations to contribute pursuant to this subsection were to be
determined by pro rata allocation (other than as set forth above) of the
aggregate Losses by reference to the proceeds realized by such Securities
Holders in a sale pursuant to said Registration Statement or said Prospectus or
by any other method of allocation which does not take account of the
considerations set forth in this subsection 6.7(c). No Person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution under this subsection from any
Person who was not guilty of such fraudulent misrepresentation.
(d) The Company and the Securities Holders participating in an
offering pursuant to a Registration Statement agree that, if the underwriters
participating in a Public Sale Event are agreeable, the Purchase Agreement, if
any, relating to such Registration Statement shall contain provisions to the
effect that in order to provide for just and equitable contribution between such
underwriters on the one hand and the Company and such Securities Holders on the
other hand in circumstances in which the indemnification provisions of such
Purchase Agreement are for any reason insufficient or inadequate to hold the
indemnified party harmless, the Company and such Securities Holders on the one
hand and such underwriters on the other hand will contribute on the basis herein
set forth to the aggregate Losses, (including any investigation, legal and other
expenses incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or claims asserted, but after deducting any
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contribution actually received from Persons other than the Company and such
Securities Holders and such underwriters) to which the Company and one or more
of its directors or its officers who sign such Registration Statement or such
Securities Holders or such underwriters or any controlling Person of any of
them, or their respective officers, directors or employees may become subject,
under the Securities Act, under any other statute, at common law or otherwise
insofar as such Losses, arise out of, or are based upon an untrue statement or
alleged untrue statement of any material fact contained in such Registration
Statement, any related Preliminary Prospectus or any related Prospectus, or any
amendment or supplement thereto, or arise out of, or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading. Such
contribution shall be in such proportions as is appropriate to reflect the
relative benefits received by the Company and such Securities Holders on the one
hand and such underwriters on the other hand from the offering of the shares of
Common Stock covered by such offering. The relative benefits received by the
Company and such Securities Holders on the one hand and such underwriters on the
other hand shall be deemed to be in the same proportion as the aggregate total
net proceeds from the offering (before deducting expenses) received by the
Company and such Securities Holders bear to the total underwriting discounts and
commissions received by such underwriters for such offering. Notwithstanding the
provisions set forth above, no underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the shares of
Common Stock underwritten by it and distributed to the public were offered to
the public exceeds the amount of any damages which such underwriter has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution under the provision set forth above from any
Person who was not guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and the Securities Holders
under the provisions of this subsection 6.7 and provisions in any Purchase
Agreement substantially similar to subsections 6.7(a), 6.7(b) 6.7(c) or 6.7(d)
shall survive the termination of any or all of the other provisions of this
Agreement or such Purchase Agreement.
6.8 Transfer of Rights Under this Agreement; Transfers of Registrable
Common. (a) During the period from the date hereof to the Termination Date, the
rights and obligations of a Securities Holder under this Agreement may be
transferred by a Securities Holder to a transferee of Registrable Common or
Registrable Litigation Shares (subject to the provisos to the definitions of
Registrable Common and Registrable Litigation Shares), provided that, within a
reasonable period of time (but in no event less than five (5) days) prior to
such transfer, (i) the transferring Securities Holder shall have furnished the
Company and the other Securities Holders written notice of the name and address
of such transferee and the number of shares of Registrable Common or Registrable
Litigation Shares with respect to which such rights are being transferred and
(ii) such transferee shall furnish the Company and the Securities Holders (other
than the transferring Securities Holder) a copy of a duly executed Supplemental
Addendum by which such transferee (A) assumes all of the obligations and
liabilities of its transferor hereunder, (B) enjoys all of the rights of its
transferor hereunder and (C) agrees itself to be bound hereby.
(b) If the stock certificates of a transferring Securities
Holder bear a restrictive legend pursuant to subsection 6.10, the stock
certificates of its transferee to whom the rights hereunder are being
transferred shall, subject to such subsection 6.10, also bear such a restrictive
legend.
(c) Except with respect to transfers pursuant to paragraph (a)
above, and subject to the provisions of paragraph (b) above, a transferee of
Registrable Common or Registrable Litigation Shares shall neither assume any
liabilities or obligations nor enjoy any rights hereunder and shall not be bound
by any of the terms hereof.
(d) Each Securities Holder hereby agrees that any transfer of
shares of Registrable Common or Registrable Litigation Shares by such Securities
Holder shall be made (i) in compliance with, or in a transaction exempt from,
the registration requirements set forth in the Securities Act and (ii) in
compliance with all other applicable laws. The Company may request, as a
condition to the transfer of any Registrable Common or Registrable Litigation
Shares, that the transferring Securities Holder provide the Company with (A)
evidence that the proposed transferee is an "accredited investor" as defined in
Rule 501 under the Securities Act and appropriate
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"private placement" representations pursuant to Section 4(2) of the Securities
Act, and (B) an opinion of securities counsel reasonably satisfactory to it with
regard to compliance with this subsection (d).
6.9 Restrictive Legend. Each certificate evidencing shares of
Registrable Common or Registrable Litigation Shares shall, unless and until such
shares are sold or otherwise transferred pursuant to an effective Registration
Statement under the Securities Act or unless, in the absence of such a
Registration Statement, the Company receives an opinion of counsel reasonably
satisfactory to it that the restrictive legend set forth below may be removed
without violation of applicable law (including, without limitation, the
Securities Act), be stamped or otherwise imprinted with a conspicuous legend in
substantially the following form:
"The transfer of the securities evidenced by this certificate
is subject to a Registration Rights Agreement dated as of July 21,
1996, with the issuer as from time to time amended, and no transfer of
the securities evidenced by this certificate shall be valid or
effective unless made in accordance with said Agreement. A copy of said
agreement is on file and may be inspected at the principal executive
office of the issuer. The securities evidenced by this certificate have
not been registered under the Securities Act of 1933, as amended, and
may not be offered or sold unless there is in effect with respect
thereto a registration statement under said Act or unless an opinion of
counsel reasonably satisfactory to the issuer has been furnished to the
issuer that registration is not required under said Act."
SECTION 7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
In connection with the Shelf Registration Statement and the Litigation
Shelf, the Company shall, on the respective date of effectiveness of each such
Registration Statement with the Commission (the "effective date"), certify to
each Securities Holder in a certificate of a Responsible Officer of the Company
to the effect that the representations and warranties set forth below are true
and correct at and as of such effective date. In connection with any other Sale
Event in which Securities Holders participate, except as otherwise may be agreed
upon by such participating Securities Holders and the Company, the Company shall
represent and warrant in the Purchase Agreement relating to such Sale Event to
the Securities Holders and any underwriters participating in such Sale Event as
follows (except as otherwise indicated, each reference in this Section to the
"Registration Statement" shall refer to the Shelf Registration Statement, the
Litigation Shelf or a Registration Statement in respect of any other such Sale
Event in which Securities Holders participate, as the case may be, including all
information deemed to be a part thereof, as amended, and each reference to "the
Prospectus" shall refer to the related Prospectus):
(a) At the time of filing, the Registration Statement (i)
complied in all material respects with the applicable requirements of the
Securities Act and (ii) did not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein in light of the circumstances under which
they were made not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or omitted from
the Registration Statement in reliance upon and in conformity with the
information furnished in writing to the Company by or on behalf of any
Securities Holder specifically for use in connection with the preparation
thereof or any information furnished in writing to the Company by or on behalf
of any underwriter specifically for use in connection with the preparation
thereof, other than that the Company has no knowledge of any such untrue
statement or omission in respect of such information.
(b) (i) When the Registration Statement became (in the case of
a Registration Statement filed pursuant to Rule 415) or shall become effective,
the Registration Statement did or will comply in all material respects with the
applicable requirements of the Securities Act; (ii) when the Prospectus is filed
in accordance with Rule 424(b), the Prospectus (and any supplements thereto)
will comply in all material respects with the applicable requirements of the
Securities Act; (iii) the Registration Statement did not or will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein not
misleading; and (iv) the Prospectus, if not filed pursuant to Rule 424(b), did
not or will not, and on the date of any filing pursuant to Rule 424(b), the
Prospectus (together with any supplement thereto) will not, include any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the
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statements therein, in the light of the circumstances under which they were
made, not misleading; provided, however, that the Company makes no
representations or warranties as to the information contained in or omitted from
the Registration Statement, or the Prospectus (or any supplement thereto) in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of any Securities Holder specifically for use in
connection with the preparation of the Registration Statement or the Prospectus
(or any supplement thereto) or any information furnished in writing to the
Company by or on behalf of any underwriter specifically for use in connection
with the preparation of the Registration Statement or the Prospectus (or any
supplement thereto), other than that the Company has no knowledge of any such
untrue statement or omission in respect of such information.
(c) The public accountants who certified the Company's
financial statements in the Registration Statement are independent certified
public accountants within the meaning of the Securities Act; the historical
consolidated financial statements, together with the related schedules and
notes, forming part of the Registration Statement and the Prospectus comply in
all material respects with the requirements of the Securities Act and have been
prepared, and present fairly the consolidated financial condition, results of
operations and changes in financial condition of the Company and its
consolidated subsidiaries at the respective dates and for the respective periods
indicated, in accordance with generally accepted accounting principles applied
consistently throughout such periods (except as specified therein); and the
historical consolidated financial data set forth in the Prospectus is derived
from the accounting records of the Company and its consolidated subsidiaries,
and is a fair presentation of the data purported to be shown; and the pro forma
consolidated financial statements (if any), together with the related notes,
forming part of the Registration Statement and the Prospectus, comply in all
material respects with the requirements of Regulation S-X under the Securities
Act.
SECTION 8. REPRESENTATIONS AND WARRANTIES OF THE SECURITIES HOLDERS.
Each participating Securities Holder shall, in connection with a Public
Sale Event, if required by the terms of a Purchase Agreement, if any, relating
to such Public Sale Event, for itself severally and not jointly represent and
warrant to the underwriter or underwriters and each other Securities Holder
participating in such Public Sale Event as follows:
(a) Such Securities Holder has all requisite power and
authority (or with respect to the FDIC statutory authority) to enter into and
carry out the terms of this Agreement and such Purchase Agreement and the other
agreements and instruments related to such agreements to which it is a party.
(b) Each of this Agreement and such Purchase Agreement has
been duly authorized, executed and delivered by or on behalf of such Securities
Holder and constitutes the legal, valid and binding obligation of such
Securities Holder, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
(c) Such Securities Holder, immediately prior to any sale of
shares of Registrable Common pursuant to such Purchase Agreement, will have good
title to such shares of Registrable Common, free and clear of all liens,
encumbrances, equities or claims (other than those created by this Agreement);
and, upon payment therefor, good and valid title to such shares of Registrable
Common will pass to the purchaser thereof, free and clear of any lien, charge or
encumbrance created or caused by such Securities Holder.
(d) Such Securities Holder has not taken and will not take,
directly or indirectly, any action designed to or which has constituted or which
might reasonably be expected to cause or result in, under the Exchange Act or
other applicable law, stabilization or manipulation of the price of any security
of the Company to facilitate the sale or resale of shares of Registrable Common.
(e) Written information furnished by or on behalf of such
Securities Holder to the Company expressly for use in the Registration Statement
or related Prospectus or amendment thereof or supplement thereto will not
contain as of the effective date of such Registration Statement or as of the
date of any Prospectus or as of
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the date of any amendment thereof or supplement thereto any untrue statement of
a material fact or omit to state any material fact required be stated or
necessary to make the statements in such information not misleading.
SECTION 9. DELIVERY OF COMFORT LETTERS AND LEGAL OPINIONS.
(a) On (i) the respective dates that the Shelf Registration
Statement and the Litigation Shelf are declared effective by the Commission,
(ii) the date a post-effective amendment to the Shelf Registration Statement or
the Litigation Shelf, if any, covering the most recent annual or quarterly
financial statements of the Company is declared effective by the Commission and
(iii) the date that a Registration Statement relating to a Sale Event in which
Securities Holders participate is declared effective by the Commission, the
Company shall comply with the following:
(x) The Company shall have received, and delivered to each Securities
Holder participating in such Sale Event, a copy of a "comfort" letter or
letters, orupdates thereof according to customary practice, of the independent
certified public accountants who have certified the Company's financial
statements included in the Registration Statement covering substantially the
same matters with respect to the Registration Statement (including the
Prospectus) and with respect to events subsequent to the date of the Company's
financial statements as are reasonably customarily covered in accountants'
letters delivered to underwriters in underwritten public offerings of
securities. The Company will use its best efforts to cause such "comfort"
letters to be addressed to such Securities Holders.
(y) Each Securities Holder participating in such offering shall have
received an opinion and any updates thereof of outside counsel to the Company
reasonably satisfactory to such Securities Holders and any underwriters or
purchasers covering substantially the same matters as are customarily covered in
opinions of issuer's counsel delivered to underwriters in underwritten public
offerings of securities, addressed to each of such Securities Holders and any
underwriters or purchasers participating in such offering and dated the closing
date thereof.
(b) On the Closing Date, the Company shall deliver to each
Initial Securities Holder an opinion of Gibson, Dunn & Crutcher, special outside
counsel to the Company, substantially to the effect that:
(i) The Company has the corporate power and authority to enter into and
carry out the terms of this Agreement; and
(ii) This Agreement has been duly authorized, executed and delivered by or
on behalf of the Company and, assuming the due authorization, execution and
delivery thereof by the other parties hereto, constitutes the valid and binding
obligation of the Company, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
(c) On the Closing Date, the FDIC shall deliver to the Company an opinion
of the General Counsel of the FDIC, substantially to the effect that:
(i) The FDIC has statutory authority to enter into and carry out the terms
of this Agreement; and except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally and by general equitable principles.
(ii) This Agreement has been duly authorized, executed and delivered by or
on behalf of the FDIC and, assuming the due authorization, execution and
delivery thereof by the other parties thereto, constitutes the valid and binding
obligation of the FDIC, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting
the enforcement of creditors' rights generally and by general equitable
principles.
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<PAGE>
(d) On the Closing Date the Partnership shall deliver to the
Company an opinion of Kelly, Hart & Hallman, special counsel to the Partnership,
substantially to the effect that:
(i) The Partnership has all requisite power and authority to enter into and
carry out the terms of this Agreement; and
(ii) This Agreement has been duly authorized, executed and delivered by or
on behalf of the Partnership and, assuming the due authorization, execution and
delivery thereof by the other parties thereto, constitutes the valid and binding
obligation of the Partnership, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting the enforcement of creditors' rights generally and by general
equitable principles.
SECTION 10. MISCELLANEOUS.
10.1 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
facsimile transmission), and shall be mailed by United States registered mail,
postage prepaid, return receipt requested, sent by facsimile or delivered by
hand or by courier or overnight delivery service. Unless otherwise expressly
provided herein, all such notices, requests and demands shall be deemed to have
been duly given or made, as the case may be, (a) five (5) days after deposit in
the United States mail, (b) when actually delivered by hand or by courier or
overnight delivery service to the designated address, or, (c) in the case of
facsimile transmission, when received and telephonically confirmed. All notices
shall be addressed as follows or to such other address as may be hereafter
designated in writing by the respective parties hereto:
The Company:
Marc R. Kittner
Senior Vice President
Washington Mutual, Inc.
1201 Third Avenue, Suite 1500
Seattle, WA 98101
with copies to:
Todd H. Baker, Esq.
Gibson, Dunn & Crutcher
One Montgomery Street, Telesis Tower
San Francisco, CA 94104-4505
Fay L. Chapman, Esq.
Foster Pepper & Shefelman
1111 Third Avenue, Suite 3400
Seattle, WA 98101
The Securities Holders:
Keystone Holdings Partners, L.P.
201 Main Street, 23rd Floor
Fort Worth, TX 76102
Attn: Ray L Pinson
Federal Deposit Insurance Corporation
801 17th Street, N.W.
Washington, D.C. 20434-0111
Attn: Director, Division of Resolutions
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with copies to:
Legal Division
Federal Deposit Insurance Corporation
1717 H Street, N.W., Room H-10025
Washington, D.C. 20434-00001
Attn: David M. Gearin, Senior Counsel
Cleary, Gottlieb, Steen & Hamilton
One Liberty Plaza
New York, New York 10006
Attn: Michael L. Ryan
Kelly, Hart & Hallman
201 Main Street, Suite 2500
Fort Worth, TX 76102
Attn: Billy J. Ellis
Dewey Ballantine
1775 Pennsylvania Avenue, N.W.
Washington, D.C. 20006
Attn: John K. Hughes
Telecopy (202) 862-1093
10.2 Amendments and Waivers. The Securities Holders of not less than
75% of the Registrable Common and Registrable Litigation Shares held or
beneficially owned by Securities Holders at any point in time and the Company
may from time to time enter into written amendments, supplements or
modifications to this Agreement for the purpose of adding any provisions hereto
or changing in any manner the rights of the Securities Holders or the Company
hereunder, and the Securities Holders of no less than 75% of the Registrable
Common and Registrable Litigation Shares held or beneficially owned by
Securities Holders at any time may execute a written instrument waiving, on such
terms and conditions as may be specified therein, any of the requirements of
this Agreement which are solely for the benefit of the Securities Holders and
where such waiver does not adversely affect the interests of the Company;
provided, however, that no such waiver and no such amendment, supplement or
modification shall (i) adversely affect the rights of a Securities Holder under
Section 2, 3, 4 or 5 hereof or (ii) amend, modify or waive any provision of
Section 6 or this subsection 10.2, in each case without the written consent of
each Securities Holder. Any such waiver and any such amendment, modification or
supplement shall apply equally to each of the Securities Holders and the
Company.
10.3 Termination. This Agreement and the respective obligations and
agreements of the parties hereto, except as otherwise expressly provided herein,
shall terminate on the Termination Date.
10.4 Survival of Representations and Warranties. Except as they may by
their terms relate to an earlier date, all representations and warranties made
hereunder and in any document, certificate or statement delivered pursuant
hereto or in connection herewith shall survive the execution and delivery of
this Agreement and the termination of any or all of the provisions of this
Agreement.
10.5 Headings. The descriptive headings of the several sections and
subsections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
10.6 Counterparts. This Agreement may be executed in any number of
counterparts and by the different parties hereto in separate counterparts, each
of which when so executed and delivered shall be an original, but all of such
counterparts shall together one and the same agreement.
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10.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT
REGARD TO CHOICE OF LAW PROVISIONS.
10.8 Adjustment of Shares. Each reference to a number of shares of
Common Stock in this Agreement shall be adjusted proportionately to reflect any
stock dividend, subdivision, split or reverse split or the like affected with
respect to all outstanding shares of Common Stock.
10.9 No Inconsistent Agreements. The Company will not on or after the
date of this Agreement enter into, and is not presently a party to, any
agreement with respect to its securities which is inconsistent with the rights
granted to the Securities Holders in this Agreement or otherwise conflicts with
the provisions hereof. The rights granted to the Securities Holders pursuant to
this Agreement shall be superior to, and take precedence over, any similar
rights granted to any other Person by the Company subsequent to the date hereof.
10.10 Severability. Any provisions of this Agreement prohibited or
rendered unenforceable by any applicable law of any jurisdiction shall as to
such jurisdiction be ineffective to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions hereof, any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
10.11 Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors and permitted assigns to each of the
parties hereunder as otherwise provided herein.
10.12 Entire Agreement. This Agreement constitutes the entire agreement and
understanding of the parties hereto in respect of the matters referred to herein
and supersedes all prior agreements and understandings among the parties hereto
with respect to the subject matter hereof.
10.13 Result if No Merger. Notwithstanding any provision of this
Agreement, or any rights that the Initial Securities Holders may have hereunder,
if the Closing does not occur for any reason, this Agreement shall be
terminated, shall be deemed null and void ab initio, and the Company shall have
no obligations or liabilities whatsoever to any Person under any of the terms of
this Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WASHINGTON MUTUAL, INC.
By /s/ Craig E. Tall
Name: Craig E. Tall
Title: Executive Vice President
KEYSTONE HOLDINGS PARTNERS, L.P.
By: KH Group Management, Inc., Its General Partner
By /s/ Ray L.Pinson
Name: Ray L. Pinson
Title: Vice President
FEDERAL DEPOSIT INSURANCE CORPORATION, AS
MANAGER OF THE FSLIC RESOLUTION FUND
By /s/ James A. Meyer
Name: James A. Meyer
Title: Assistant Director
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ANNEX A
SECURITIES HOLDER'S QUESTIONNAIRE
Please complete and return immediately to Washington Mutual, Inc. (the
"Company") at the following address:
Washington Mutual, Inc.
1201 Third Avenue, Suite 1500
Seattle, WA 98101
Attention:
The information requested below is required for purposes of any Public
Sale Event pursuant to the Registration Rights Agreement dated as of July 21,
1996 (the "Agreement"), that may be initiated from time to time. If you do not
furnish the Company with the requested information, you will not be entitled to
participate in any such registration. Unless otherwise defined herein,
capitalized terms shall have the meanings ascribed thereto in the Agreement
Please do not leave any request for information unanswered. If your
response to a request is "no" or "not applicable", please so state. If
additional space is required, please attach additional sheets to the end of this
Questionnaire, clearly identifying the portion hereof to which they relate.
If you have any questions regarding this Questionnaire, please contact
- -------------------.
A-1
<PAGE>
I. Information required for notices.
Institution Name: _______________________________
Street Address: _______________________________
Post Office Box: _______________________________
City/State/Zip: _______________________________
Fed. Tax ID. No.
(if any): _______________________________
Telecopier Number: __________ Type of Telecopier:____________
Contacts (Please include alternative contacts).
1. Name: _______________________________
Title: _______________________________
Function: _______________________________
Business Telephone: _______________________________
Home Telephone: _______________________________
2. Name: _______________________________
Title: _______________________________
Function: _______________________________
Business Telephone:
Home Telephone: _______________________________
II. Information required by the Securities Act of 1933, as amended, and
related regulations.
A. Federal Securities Laws
1. Name and Address. Give your name and address exactly as they should
appear in any Prospectus.
2. Ownership of Registrable Common. State the number of shares of
Registrable Common and Registrable Litigation Shares, if any, owned by you or
your affiliates as of a recent practicable date.
Shares of Registrable Common: ____________
Shares of Registrable Litigation Shares (assuming distribution
of the maximum amount thereof):
------------------------------
3. Beneficial Ownership of Common Stock. Please furnish the following
information, in the tabular form indicated, as to the shares of Common Stock
beneficially owned (see definition at end of Questionnaire) by you (including
amounts held in your Trust Department in discretionary accounts): If such
ownership is
shared with others,
indicate nature and
Number of Nature of extent of such shared
Shares* Beneficial Ownership** ownership
A-2
<PAGE>
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* Include shares which you have the right to acquire on or before 60
days after the estimated date of the Prospectus.
** Please indicate the extent to which you have sole voting power,
shared voting power, sole investment power and shared investment power with
respect to shares of Common Stock you beneficially own.
4. Disclaimer of Beneficial Ownership. Please indicate below the number and
description of any shares of Common Stock with respect to which you disclaim
beneficial ownership and whether such shares are included in the figure(s)
reported above.
5. Underwriters. Please describe briefly and state the nature of any
relationship or interest that you have or any associate of yours (see definition
at end of Questionnaire) has, in any underwriter of the securities to be
offered. If you are a member or controlling Person of a firm that may be an
underwriter of the securities to be offered, briefly describe your relationship
to, and interest in, such underwriter.
NOTE: The underwriters will be listed in the final amendment to the
Registration Statement, a copy of which will be sent to you at a later date.
B. NASD Relations.
6. NASD Membership. State whether you are a "member" of the National
Association of Securities Dealers, Inc. (the "NASD"), a "Person associated with
a member" or an "underwriter or a related Person" with respect to the proposed
offering. Yes _____ No _____
NOTES:
(1) The NASD By-Laws define "member" to mean
either any broker or dealer admitted to membership in the
NASD.
(2) The NASD By-Laws define "Person associated with a
member" to mean every sole proprietor, partner, officer,
director or branch manager of any member, or any natural
Person occupying a similar status or performing similar
functions, or any natural Person engaged in the investment
banking or securities business who is directly or indirectly
controlling or controlled by such member, whether or not any
such Person is registered or exempt from registration with the
NASD.
(3) The NASD has interpreted "underwriter or a
related Person" with respect to a proposed offering to include
an underwriter, underwriters' counsel, financial consultants
and advisers, finders, members of the selling or distribution
group, and any and all other Persons "associated with" or
"related to" any of such Persons.
7. Purchase by NASD Affiliates. If your answer to the preceding
question was "yes", please furnish the following information, in the tabular
form indicated, as to all purchases and acquisitions (including contracts to
purchase or to acquire) by you, of warrants, options or any other securities of
the Company or any subsidiary thereof, during the preceding 12 months, as well
as all proposed purchases or acquisitions by you which are to be consummated in
whole or in part prior to, at the time of or within twelve (12) months after the
effectiveness of the Registration Statement.
<TABLE>
<CAPTION>
Purchaser or Seller or Amount and Price or
Prospective Prospective Name of Other
Date Purchaser Seller Securities Consideration
============= ============= ============= ============= =============
- ------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C>
</TABLE>
8. Dealings with Company. Please describe any other dealings within the
preceding 12 months not already described in response to the foregoing questions
between the Company or any subsidiary or controlling shareholder thereof and any
underwriter, related Person of such underwriter, NASD member or Person
associated with such member affiliated with you, as such terms are defined in
the Notes to Question 7, including compensation or other items of value received
or to be received from the Company.
The undersigned hereby represents and warrants to any Person who may be
liable in respect of a Registration or other offering pursuant to the Agreement
that the answers given in this Questionnaire are correctly stated to the best of
the knowledge, information and belief of the undersigned. The undersigned hereby
agrees to promptly notify the Company of any change in the such answers which
may occur during the period beginning with the date below and ending on the date
90 days after the effective date of any Registration Statement relating to a
Registration or other offering pursuant to the Agreement. The undersigned hereby
agrees, following notice of any proposed Registration to update and amend this
Questionnaire if there is any material change in the above information and to
provide any additional information requested by the Company pursuant to the
Agreement
Dated: _________________________, 19__.
[Name of Holder]
By
Name:
Title:
A-3
<PAGE>
DEFINITIONS
As used in this Questionnaire:
"affiliate" means a Person or organization that directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is under
common control with, the Company.
An "associated person" means (1) any corporation or organization (other
than the Company or a majority owned subsidiary) of which you are an executive
officer or partner or are, directly or indirectly, the beneficial owner of 10%
or more of any class or equity securities and (2) any trust or other estate in
which you have substantial beneficial interest or to which you serve as trustee
or in a similar fiduciary capacity.
Securities "owned beneficially" by you are securities (whether or not
registered in your name) in which, you have or share (directly or indirectly
through any contract, arrangement, understanding, relationship or otherwise) (i)
voting power, which includes the power to vote or direct the voting of the
securities, or (ii) investment power, which includes the power to dispose, or
direct the disposition, of the securities. You are also deemed to be the
beneficial owner of any securities which you have the right to acquire
immediately or within 60 days (a) through the exercise of any option, warrant or
right, (b) through the conversion of a security or (c) pursuant to the power to
revoke, or the automatic termination of, a trust, discretionary account or
similar arrangement.
Thus, securities held in the name of other individuals, in the name of
an estate or trust or pursuant to a pledge agreement where you have either the
power to direct the voting of the securities or the disposition of such
securities should be listed as "owned beneficially" by you. The Commission has
also taken the position that securities held by your spouse, minor children, or
other relatives sharing your home should be shown as "owned beneficially" by you
on the theory that, absent special circumstances you are able to exercise a
controlling influence over the purchase, sale or voting of such securities.
A-4
<PAGE>
ANNEX B
SUPPLEMENTAL ADDENDUM
The undersigned is a holder of Common Stock of Washington
Mutual, Inc. (the "Company"). The undersigned hereby agrees as
follows:
The undersigned hereby accepts the terms of and becomes a party to (as
a Securities Holder) the Registration Rights Agreement dated as of July 21,
1996, by and among the Company and each Securities Holder named therein. In
connection therewith, the undersigned agrees to (A) assume all obligations and
liabilities thereunder, (B) enjoy all of the rights thereunder, (C) be bound
thereby and (D) perform and comply with the agreements and commitments on the
part of the undersigned set forth in the Registration Rights Agreement.
In connection with the acquisition of shares of Common Stock of the
Company by the undersigned, the undersigned makes the following representations
and warranties to the Company:
1. The undersigned understands that the Company is relying upon the
representations and covenants contained herein. If more than one person is
signing this document, each understanding, representation and warranty made
herein shall be a joint and several understanding, representation or warranty of
each such person.
2. The undersigned is familiar with Regulation D promulgated by the
Securities and Exchange Commission under the Securities Act of 1933 (the
"Securities Act"), and the undersigned is an "accredited investor" as defined
therein.
3. The undersigned represents that the shares of
Registrable Common or Registrable Litigation Shares are being
acquired by the undersigned for its own account, for investment
and not with a view to, or for resale in connection with, any
distribution.
4. The undersigned understands that the shares of Registrable Common or
Registrable Litigation Shares may be "restricted securities" within the meaning
of Rule 144 under the Securities Act and that unregistered resales may be made
only in conformity with Rule 144 or pursuant to another available exemption from
registration under the Securities Act, or pursuant to an effective Registration
Statement.
5. The undersigned represents and acknowledges that by
reason of its business or financial experience or the business or
financial experience of its professional advisors who are
unaffiliated with and who are not compensated by the Company or
any affiliate, either directly or indirectly, the undersigned has
B-1
<PAGE>
the capacity to protect its own interests in connection with the investment. The
undersigned understands the financial risks with respect to the investment.
As used in this Supplemental Addendum, capitalized terms defined in the
Registration Rights Agreement shall have their respective defined meanings.
Address: Name of
Holder:
By
Title:
Date: , 199
B-2
<PAGE>
