<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL , 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
WASHINGTON MUTUAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WASHINGTON 6035 91-1653725
(STATE OR OTHER (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
JURISDICTION OF CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
INCORPORATION OR
ORGANIZATION)
1201 THIRD AVENUE
SEATTLE, WASHINGTON 98101
(206) 461-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
-------------------
MARC R. KITTNER
DEPUTY GENERAL COUNSEL
WASHINGTON MUTUAL, INC.
1201 THIRD AVENUE
SEATTLE, WASHINGTON 98101
(206) 461-2000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
-------------------
COPIES TO:
DAVID R. WILSON MADELEINE A. KLEINER ALISON S. RESSLER
FOSTER PEPPER & SENIOR EXECUTIVE VICE PRESIDENT SULLIVAN & CROMWELL
SHEFELMAN PLLC AND GENERAL COUNSEL 444 SOUTH FLOWER STREET
1111 THIRD AVENUE H. F. AHMANSON & COMPANY LOS ANGELES, CALIFORNIA
SEATTLE, WASHINGTON 98101 4900 RIVERGRADE ROAD 90071
(206) 447-4400 IRWINDALE, CALIFORNIA 91706 (213) 955-8000
(626) 814-7662
CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED(2) PER SHARE PRICE(3) FEE(3)
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Common stock, no par
value per share(1).... 139,342,937 $75.438 (common) $9,393,895,183 $1,048,147
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$1,550.938 (preferred)
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(1) Also includes associated Rights to purchase shares of the Registrant's
common stock, which Rights are not currently separable from the shares of
common stock and are not currently exercisable.
(2) The number of shares to be registered pursuant to this Registration
Statement is based upon the aggregate of the number of shares of H.F.
Ahmanson & Company ("Ahmanson") common stock, par value $.01 per share
("Ahmanson Common Stock"), currently outstanding, the number of shares of
Ahmanson Common Stock issuable upon exercise of outstanding options to
acquire shares of Ahmanson Common Stock and the number of shares of
Ahmanson Common Stock issuable upon conversion of outstanding shares of
Ahmanson preferred stock, multiplied by the exchange ratio of 1.12 shares
of common stock, no par value per share, of the Registrant.
(3) The registration fee was computed pursuant to Rules 457(f) and 457(c)
under the Securities Act of 1933, as amended (the "Securities Act") based
on (i) the average of the high and low sales prices of Ahmanson Common
Stock, as reported by the New York Stock Exchange (the "NYSE") on May 8,
1998, and (ii) the average of the high and low sales prices of depositary
shares of Ahmanson preferred stock as reported by the NYSE on May 8, 1998
(with each depositary share representing a one-tenth interest in one share
of Ahmanson preferred stock) multiplied by ten. In accordance with
Securities Act Rule 457(b), the calculated fee of $2,771,199 is reduced by
$1,723,052, the fee previously paid by the Registrant with respect to the
filing of its preliminary proxy statement under Schedule 14A of the
Securities and Exchange Act of 1934, as amended.
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement and the
satisfaction or waiver of all other conditions to the Merger described in the
Joint Proxy Statement/Prospectus.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [_]
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION
STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
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<PAGE>
[LOGO WASHINGTON MUTUAL, INC.]
1201 THIRD AVENUE, SUITE 1500
SEATTLE, WASHINGTON 98101
, 1998
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
Washington Mutual, Inc. ("Washington Mutual"), which will be held at the
Washington State Convention and Trade Center, 800 Convention Place, Seattle,
Washington, at p.m., , , 1998. I look forward to greeting as many
of our shareholders as possible.
At the special meeting, holders of Washington Mutual common stock will be
asked to consider and vote upon a proposal to approve the issuance of shares
of Washington Mutual common stock and preferred stock in connection with a
proposed merger (the "Merger") pursuant to which H. F. Ahmanson & Company
("Ahmanson") will merge with and into Washington Mutual. In the Merger, each
outstanding share of Ahmanson common stock will be converted into the right to
receive 1.12 shares of Washington Mutual common stock, with cash being paid in
lieu of fractional shares, and each outstanding share of Ahmanson preferred
stock (if any) will be converted into the right to receive one share of a new
series of Washington Mutual preferred stock, to be designated as Washington
Mutual 6% Cumulative Convertible Preferred Stock, Series G.
In addition, at the special meeting, holders of Washington Mutual common
stock and holders of the outstanding series of Washington Mutual preferred
stock will be asked to vote on a proposal to approve an amendment to
Washington Mutual's Restated Articles of Incorporation (the "Articles") to
increase the number of authorized shares of common stock from 800,000,000
shares to 2,000,000,000 shares. Approval of the amendment to the Articles is
not necessary to consummate the Merger.
More complete information about the Merger and the amendment to the Articles
is included in the accompanying Notice of Special Meeting of Shareholders and
the Joint Proxy Statement/Prospectus. YOUR BOARD OF DIRECTORS BELIEVES THE
PROPOSALS ARE IN THE BEST INTERESTS OF WASHINGTON MUTUAL AND ITS SHAREHOLDERS
AND, ACCORDINGLY, RECOMMENDS THAT YOU VOTE "FOR" EACH OF THEM.
Whether or not you attend the special meeting, it is important that your
shares be represented and voted at the special meeting. Therefore, I urge you
to sign, date and promptly return the enclosed proxy in the enclosed postage-
paid envelope. If you decide to attend the special meeting and vote in person,
you will, of course, have that opportunity.
Sincerely,
/s/ Kerry K. Killinger
Kerry K. Killinger
Chairman, President and Chief
Executive Officer
<PAGE>
[LOGO OF WASHINGTON MUTUAL, INC.]
---------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
, 1998
---------------------
A Special Meeting of Shareholders of Washington Mutual, Inc. ("Washington
Mutual") will be held at the Washington State Convention and Trade Center, 800
Convention Place, Seattle, Washington, on , , 1998 at :00 p.m. for the
following purposes:
1. To approve the issuance of shares of common stock and preferred stock
pursuant to the Agreement and Plan of Merger, dated as of March 16,
1998, by and between Washington Mutual and H. F. Ahmanson & Company; and
2. To approve an amendment to Washington Mutual's Restated Articles of
Incorporation (the "Articles") to increase the number of authorized
shares of common stock from 800,000,000 shares to 2,000,000,000 shares.
Both of these proposals are more fully described in the Joint Proxy
Statement/Prospectus, which follows. Only holders of shares of Washington
Mutual common stock and holders of outstanding shares of Washington Mutual
preferred stock of record at the close of business on , 1998 are entitled
to notice of, and to vote at, this special meeting, and any and all
postponements and adjournments thereof.
Holders of Washington Mutual common stock will be asked to vote on both
proposals. Holders of the outstanding series of Washington Mutual preferred
stock will be asked to vote with the holders of Washington Mutual common stock
only on the proposal to amend the Articles to increase the number of
authorized shares of common stock.
By Order of the Board of Directors,
/s/ William L. Lynch
William L. Lynch
Secretary
Seattle, Washington
, 1998
IMPORTANT
Whether or not you expect to attend in person, we urge you to vote on the
proposals by signing, dating and returning the enclosed proxy at your
earliest convenience. This will ensure the presence of a quorum at the
Special Meeting. PROMPTLY VOTING, SIGNING, DATING AND RETURNING THE PROXY
WILL SAVE WASHINGTON MUTUAL THE EXPENSE AND EXTRA WORK OF ADDITIONAL
SOLICITATION. An addressed envelope for which no postage is required if
mailed in the United States is enclosed for that purpose. Sending in your
proxy will not prevent you from voting your stock at the Special Meeting if
you desire to do so, as your proxy is revocable at your option in the
manner described in the Joint Proxy Statement/Prospectus.
<PAGE>
[LOGO OF H. F. AHMANSON & COMPANY]
, 1998
Dear Stockholder:
It is my pleasure to invite you to attend a Special Meeting of stockholders
of H. F. Ahmanson & Company ("Ahmanson") to be held at , at a.m., on
, 1998.
At this very important meeting, Ahmanson stockholders will be asked to
consider and vote upon a proposal to adopt the Agreement and Plan of Merger
(the "Merger Agreement"), dated as of March 16, 1998, by and between Ahmanson
and Washington Mutual, Inc., a Washington corporation ("Washington Mutual"),
providing for the merger (the "Merger") of Ahmanson with and into Washington
Mutual, and to approve the transactions contemplated by the Merger Agreement.
If the Merger is approved and consummated, each share of Ahmanson Common
Stock, par value $.01 per share, will be converted into the right to receive
1.12 shares (the "Exchange Ratio") of Washington Mutual common stock, no par
value per share. In addition, each outstanding share of 6% Cumulative
Convertible Preferred Stock, Series D of Ahmanson (the "Ahmanson Preferred
Stock") will be converted into a share of 6% Cumulative Convertible Preferred
Stock, Series G of Washington Mutual (the "Series G Preferred Stock"). The
terms, preferences, limitations, privileges and rights of the Series G
Preferred Stock will be substantially identical to those of the Ahmanson
Preferred Stock.
THE BOARD OF DIRECTORS OF AHMANSON (THE "AHMANSON BOARD") HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY, AND
BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS OF AHMANSON AND ITS
STOCKHOLDERS. THE AHMANSON BOARD RECOMMENDS THAT ALL STOCKHOLDERS VOTE "FOR"
THE MERGER PROPOSAL DESCRIBED IN THE ACCOMPANYING JOINT PROXY
STATEMENT/PROSPECTUS. Ahmanson's financial advisor, Credit Suisse First Boston
Corporation, has issued its written opinion to the Ahmanson Board that the
Exchange Ratio is fair to the stockholders of Ahmanson from a financial point
of view. A copy of the opinion of Credit Suisse First Boston Corporation is
attached as Appendix C to the Joint Proxy Statement/Prospectus enclosed
herewith and should be read in its entirety.
AHMANSON STOCKHOLDERS ARE URGED TO READ CAREFULLY THE ACCOMPANYING NOTICE OF
SPECIAL MEETING AND JOINT PROXY STATEMENT/PROSPECTUS, WHICH CONTAIN IMPORTANT
INFORMATION ABOUT THE MERGER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT.
Regardless of the number of shares you own, or whether you plan to attend
the meeting, it is very important that your shares be represented and voted at
the meeting. Because the affirmative vote of a majority of the outstanding
shares is required for adoption of the Merger Agreement and approval of the
transactions contemplated thereby, a failure to vote is the same as a vote
against such proposal. Please read the enclosed material carefully and
complete, sign and return the enclosed proxy in the envelope provided as soon
as possible.
On behalf of the Ahmanson Board, I thank you for your support and again urge
you to vote FOR adoption of the Merger Agreement and approval of the
transactions contemplated thereby.
Sincerely,
/s/ Charles R. Rinehart
Charles R. Rinehart
Chairman and
Chief Executive Officer
<PAGE>
[LOGO OF H. F. AHMANSON & COMPANY]
--------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1998
--------------------
Notice is hereby given that a Special Meeting of stockholders (the "Special
Meeting") of H. F. Ahmanson & Company ("Ahmanson") will be held at , at
a.m., on , 1998, for the following purposes, as more fully described
in the accompanying Joint Proxy Statement/Prospectus:
1. To consider and vote upon a proposal (the "Merger Proposal") to adopt an
Agreement and Plan of Merger (the "Merger Agreement"), dated as of March
16, 1998, between Ahmanson and Washington Mutual, Inc., a Washington
corporation, and to approve the transactions contemplated by the Merger
Agreement. The Merger Agreement is in the form of Appendix A to the
accompanying Joint Proxy Statement/Prospectus.
2. To transact such other business as may properly come before the Special
Meeting or any adjournment or postponement thereof.
Only holders of record of Ahmanson Common Stock, par value $.01 per share, at
the close of business on , 1998 are entitled to receive notice of and to
vote at the Special Meeting or any adjournment or postponement thereof.
THE BOARD OF DIRECTORS OF AHMANSON UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF AHMANSON VOTE "FOR" APPROVAL OF THE MERGER PROPOSAL.
By order of the Board of Directors,
/s/ Madeleine A. Kleiner
Madeleine A. Kleiner
Secretary
, 1998
THE APPROVAL OF THE MERGER PROPOSAL REQUIRES THE AFFIRMATIVE VOTE OF A
MAJORITY OF THE ISSUED AND OUTSTANDING SHARES OF AHMANSON COMMON STOCK.
THEREFORE, A FAILURE TO VOTE WILL HAVE THE SAME EFFECT AS A VOTE AGAINST
THE MERGER PROPOSAL. WHETHER OR NOT YOU PLAN TO ATTEND THE AHMANSON SPECIAL
MEETING, PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND MAIL IT
PROMPTLY IN THE ENCLOSED RETURN ENVELOPE, WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES. IF YOU ATTEND THE AHMANSON SPECIAL MEETING,
YOU MAY VOTE IN PERSON IF YOU WISH TO DO SO EVEN IF YOU HAVE PREVIOUSLY
SENT IN YOUR PROXY CARD.
<PAGE>
JOINT PROXY STATEMENT OF
WASHINGTON MUTUAL, INC. AND
H. F. AHMANSON & COMPANY
PROSPECTUS OF
WASHINGTON MUTUAL, INC.
This Joint Proxy Statement/Prospectus is being furnished to shareholders of
Washington Mutual, Inc., a Washington corporation ("Washington Mutual"), and
to stockholders of H. F. Ahmanson & Company, a Delaware corporation
("Ahmanson"), in connection with the solicitation of proxies by the respective
Boards of Directors of such corporations for use at the special meeting of
shareholders of Washington Mutual (including any adjournments, postponements
or reschedulings thereof, the "Washington Mutual Meeting") and the special
meeting of stockholders of Ahmanson (including any adjournments, postponements
or reschedulings thereof, the "Ahmanson Meeting," and, together with the
Washington Mutual Meeting, the "Special Meetings") to be held on , 1998,
and on , 1998, respectively. At the Ahmanson Meeting, holders ("Ahmanson
Stockholders") of Ahmanson common stock, par value $.01 per share ("Ahmanson
Common Stock"), will be asked to consider and vote upon a proposal (the
"Merger Proposal") to adopt the Agreement and Plan of Merger (the "Merger
Agreement"), dated as of March 16, 1998, by and between Washington Mutual and
Ahmanson, which provides for the merger of Ahmanson with and into Washington
Mutual (the "Merger"), and to approve the transactions contemplated thereby,
including the Merger. A copy of the Merger Agreement is attached hereto as
Appendix A and is incorporated in its entirety herein by reference.
At the Washington Mutual Meeting, holders of Washington Mutual common stock,
no par value ("Washington Mutual Common Stock"), will be asked to consider and
vote upon a proposal to approve the issuance of shares of Washington Mutual
Common Stock and the Series G Preferred Stock (as defined below) in the Merger
to the Ahmanson Stockholders and the holders of Ahmanson 6% Cumulative
Convertible Preferred Stock, Series D (the "Ahmanson Preferred Stock"),
respectively, pursuant to the Merger Agreement. In addition, at the Washington
Mutual Meeting, holders of Washington Mutual Common Stock and holders of the
outstanding Washington Mutual 7.60% Noncumulative Perpetual Preferred Stock,
Series E (the "Washington Mutual Preferred Stock") will be asked to vote on a
proposal to amend Washington Mutual's Restated Articles of Incorporation (the
"Washington Mutual Articles") to increase the number of authorized shares of
Washington Mutual Common Stock from 800,000,000 shares to 2,000,000,000
shares. Approval of the amendment to the Washington Mutual Articles is not a
condition to the consummation of the Merger.
This Joint Proxy Statement/Prospectus also constitutes a prospectus of
Washington Mutual with respect to up to 139,344,784 shares of Washington
Mutual Common Stock issuable upon consummation of the Merger to holders of
Ahmanson Common Stock, or persons who become holders of Ahmanson Common Stock
prior to the effective time of the Merger (the "Effective Time") as a result
of the exercise of options to acquire Ahmanson Common Stock, or upon any
conversion prior to the Effective Time of the Ahmanson Preferred Stock. This
Joint Proxy Statement/Prospectus is also being furnished to the holders of the
Ahmanson Depositary Shares (as defined herein) and the Ahmanson Preferred
Stock for informational purposes, but proxies are not being solicited from
such holders and such holders are not entitled, and are not being asked, to
vote at the Ahmanson Meeting.
At the Effective Time, (i) each outstanding share of Ahmanson Common Stock
(together with the associated Ahmanson Rights (as defined herein)) will be
converted into the right to receive 1.12 shares of Washington Mutual Common
Stock (the "Exchange Ratio") (together with the appropriate number of
Washington Mutual Rights (as defined herein)), with cash being paid in lieu of
fractional shares, and (ii) each outstanding share of Ahmanson Preferred Stock
will be converted into one share of Washington Mutual 6% Cumulative
Convertible
(continued on next page)
This Joint Proxy Statement/Prospectus and forms of proxies are first being
mailed to the shareholders of Washington Mutual and the Ahmanson Stockholders
on or about , 1998.
---------------------
The date of this Joint Proxy Statement/Prospectus is , 1998.
<PAGE>
(continued from previous page)
Preferred Stock, Series G (the "Series G Preferred Stock"). The terms,
preferences, limitations, privileges and rights of the Series G Preferred
Stock will be substantially identical to those of the Ahmanson Preferred
Stock. As in the case of the Ahmanson Preferred Stock, which is represented by
depositary shares each representing a one-tenth interest in a share of
Ahmanson Preferred Stock (the "Ahmanson Depositary Shares"), the Series G
Preferred Stock will be represented by depositary shares (the "New Washington
Mutual Depositary Shares"), each representing a one-tenth interest in a share
of the Series G Preferred Stock.
Based on the closing sales price of Washington Mutual Common Stock on the
National Market tier of the NASDAQ Stock Market ("NASDAQ") on , 1998, if
the Merger had occurred at such time, the Exchange Ratio would have resulted
in an indicated per share value for the Ahmanson Common Stock of $ . See
"Summary--Comparative Market Prices." Because the Exchange Ratio is fixed, any
change in the market price of the Washington Mutual Common Stock before the
Effective Time will affect the implied market value of the consideration to be
received by Ahmanson Stockholders in the Merger. THERE CAN BE NO ASSURANCE AS
TO THE MARKET PRICE PER SHARE OF WASHINGTON MUTUAL COMMON STOCK AT ANY TIME
PRIOR TO, AT OR AFTER THE EFFECTIVE TIME OF THE MERGER. Stockholders are urged
to obtain current market quotations. Washington Mutual Common Stock is
designated for quotation on NASDAQ under the symbol "WAMU." Ahmanson Common
Stock is listed on the New York Stock Exchange, Inc. (the "NYSE") and the
Pacific Exchange, Inc. (the "Pacific Exchange") under the symbol "AHM."
SEE "RISK FACTORS" BEGINNING ON PAGE 23 FOR FACTORS TO BE CONSIDERED WITH
RESPECT TO THE MERGER.
---------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT
PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE SECURITIES OFFERED HEREBY ARE NOT SAVINGS ACCOUNTS, DEPOSITS OR OTHER
OBLIGATIONS OF ANY BANK OR SAVINGS ASSOCIATION AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND, THE
SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER GOVERNMENTAL AGENCY.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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AVAILABLE INFORMATION..................................................... 1
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE........................... 1
SUMMARY................................................................... 2
The Special Meetings.................................................... 2
The Parties to the Merger............................................... 4
The Merger.............................................................. 5
Management and Operations of Washington Mutual Following the Merger..... 10
Description of Washington Mutual Capital Stock.......................... 11
SUMMARY FINANCIAL DATA OF WASHINGTON MUTUAL............................. 12
SUMMARY FINANCIAL DATA OF AHMANSON...................................... 14
SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA................ 16
COMPARATIVE PER SHARE DATA.............................................. 21
COMPARATIVE MARKET PRICES............................................... 22
RISK FACTORS.............................................................. 23
THE SPECIAL MEETINGS...................................................... 26
General................................................................. 26
Matters to be Considered at the Special Meetings........................ 26
Record Date and Voting.................................................. 26
Proxies and Voting Instructions......................................... 27
Quorum; Votes Required.................................................. 28
Solicitation of Proxies................................................. 28
THE MERGER................................................................ 30
General................................................................. 30
Background of the Merger................................................ 30
Reasons for the Merger; Recommendations of the Boards of Directors...... 32
Opinions of Financial Advisors.......................................... 36
Conversion of Ahmanson Capital Stock.................................... 44
Effective Time.......................................................... 44
Representations and Warranties.......................................... 45
Conduct of Business Pending the Merger and Other Agreements............. 45
Conditions to the Consummation of the Merger............................ 47
Regulatory Approvals Required........................................... 48
Termination of the Merger Agreement..................................... 49
Termination Fees........................................................ 49
Option Agreement........................................................ 50
Extension, Waiver and Amendment of the Merger Agreement................. 51
Interests of Certain Persons in the Merger.............................. 51
Employee Matters........................................................ 54
Accounting Treatment.................................................... 55
No Appraisal or Dissenters' Rights...................................... 55
Exchange of Certificates and Depositary Receipts; Fractional Shares..... 55
Certain Federal Income Tax Consequences................................. 57
Dividend Policy......................................................... 59
Resale of Washington Mutual Capital Stock Received by Ahmanson Common
Stockholders........................................................... 59
WASHINGTON MUTUAL......................................................... 61
General................................................................. 61
Principal Holders of Washington Mutual Common Stock..................... 61
Principal Holders of Washington Mutual Preferred Stock.................. 63
Security Ownership of Washington Mutual by Directors and Executive
Officers............................................................... 63
</TABLE>
i
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AHMANSON.................................................................. 65
General................................................................. 65
Principal Holders of Ahmanson Common Stock.............................. 66
MANAGEMENT AND OPERATIONS OF WASHINGTON MUTUAL FOLLOWING THE MERGER....... 68
General................................................................. 68
Board of Directors...................................................... 68
Operations After the Merger............................................. 68
PRO FORMA COMBINED FINANCIAL INFORMATION (UNAUDITED)...................... 70
COMPARISON OF RIGHTS OF WASHINGTON MUTUAL SHAREHOLDERS AND AHMANSON
STOCKHOLDERS............................................................. 81
Capital Stock........................................................... 81
Board of Directors...................................................... 81
Monetary Liability of Directors......................................... 81
Voting Rights........................................................... 81
Interested Shareholders................................................. 82
Removal of Directors and Filling Vacancies on the Board of Directors.... 82
Washington Mutual Rights Plan........................................... 83
Ahmanson Rights Plan.................................................... 83
CERTAIN DIFFERENCES BETWEEN WASHINGTON AND DELAWARE CORPORATE LAWS........ 84
Amendment of Articles/Certificates of Incorporation..................... 84
Right to Call Special Meeting of Shareholders........................... 84
Indemnification of Officers, Directors and Employees.................... 85
Provisions Affecting Control Share Acquisitions and Business
Combinations........................................................... 85
Mergers, Sales of Assets and Other Transactions......................... 86
Action Without a Meeting................................................ 87
Class Voting............................................................ 87
Transactions with Officers and Directors................................ 87
Dissenters' Rights...................................................... 88
Dividends............................................................... 88
DESCRIPTION OF WASHINGTON MUTUAL CAPITAL STOCK............................ 89
Washington Mutual Common Stock.......................................... 89
Washington Mutual Preferred Stock....................................... 89
Washington Mutual 6.0% Cumulative Convertible Preferred Stock, Series G. 90
New Washington Mutual Depositary Shares................................. 93
DESCRIPTION OF AHMANSON COMMON STOCK...................................... 96
PROPOSED AMENDMENT TO WASHINGTON MUTUAL ARTICLES OF INCORPORATION--
INCREASE IN AUTHORIZED SHARES............................................ 97
Current Capitalization.................................................. 97
Certain Effects of the Proposed Amendment............................... 98
LEGAL MATTERS............................................................. 99
EXPERTS................................................................... 99
STOCKHOLDER PROPOSALS..................................................... 99
</TABLE>
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Appendix A Agreement and Plan of Merger
Appendix B Opinion of Lehman Brothers Inc.
Appendix C Opinion of Credit Suisse First Boston Corporation
Appendix D Stock Option Agreement
</TABLE>
ii
<PAGE>
AVAILABLE INFORMATION
Washington Mutual and Ahmanson are both subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), and, in accordance therewith, file reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
The reports, proxy statements and other information filed by Washington Mutual
and Ahmanson with the Commission may be inspected and copied at the
Commission's public reference room located at 450 Fifth Street, N.W., Room
1024, Washington D.C. 20549, and at the public reference facilities in the
Commission's regional offices located at 7 World Trade Center, 13th Floor, New
York, New York 10048; and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, IL 60661. Copies of such material may be obtained at prescribed
rates by writing to the Commission, Public Reference Section, 450 Fifth
Street, N.W., Washington, D.C. 20549. Certain of such reports, proxy
statements and other information are also available from the Commission over
the Internet at http://www.sec.gov. The periodic reports, proxy statements and
other information filed by Ahmanson with the Commission may also be inspected
at the offices of the NYSE, 20 Broad Street, New York, New York 10005 and at
the offices of the Pacific Exchange, 301 Pine Street, San Francisco,
California 94104.
This Joint Proxy Statement/Prospectus is included as part of a registration
statement on Form S-4 (together with all amendments and exhibits thereto,
including documents and information incorporated by reference, the
"Registration Statement") filed with the Commission by Washington Mutual,
relating to the registration under the Securities Act of 1933, as amended (the
"Securities Act"), of up to 139,344,784 shares of Washington Mutual Common
Stock. This Joint Proxy Statement/Prospectus does not contain all of the
information set forth in the Registration Statement, certain portions of which
have been omitted pursuant to the rules and regulations of the Commission, to
which Registration Statement reference is hereby made for further information
with respect to Washington Mutual and Ahmanson and the Washington Mutual
Common Stock offered hereby. Statements contained herein concerning any
documents are not necessarily complete and, in each instance, reference is
made to the copies of such documents filed as exhibits to the Registration
Statement. Each such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Washington Mutual (File
No. 0-25188) are incorporated herein by reference: (a) Annual Report on Form
10-K for the year ended December 31, 1997, including the Form 10-K/A filed
March 31, 1998 (the "1997 Washington Mutual 10-K"); (b) Current Report on Form
8-K dated March 17, 1998, as amended on March 18, 1998; and (c) the
description of Washington Mutual capital stock contained in Item 5 of Current
Report on Form 8-K dated November 29, 1994, and any amendment or report filed
for the purpose of updating such description.
The following documents filed with the Commission by Ahmanson (File No. 1-
08930) are incorporated herein by reference: (a) Annual Report on Form 10-K
for the year ended December 31, 1997 (the "1997 Ahmanson 10-K"); (b)
Ahmanson's Current Reports on Form 8-K dated January 15, 1998; January 27,
1998; February 13, 1998; February 20, 1998; March 16, 1998; April 23, 1998;
and April 24, 1998; (c) the description of Ahmanson Common Stock set forth in
Ahmanson's registration statement on Form 8-A filed on June 24, 1985, and any
amendment or report filed for the purpose of updating such description; and
(d) the description of the Ahmanson Rights Plan (as defined herein) contained
in Item 1 of Ahmanson's registration statement on Form 8-A dated November 26,
1997 and any amendment or report filed for the purpose of updating such
description.
All documents filed by either Washington Mutual or Ahmanson pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the date of the Special Meetings shall be deemed to be
incorporated herein by reference and to be a part hereof from the date of such
filing. Any statement contained herein or in a document incorporated or deemed
to be incorporated herein by reference shall be deemed to be modified or
superseded for purposes hereof to the extent that a statement contained herein
or in any other subsequently filed document which also is, or is deemed to be,
incorporated herein by reference modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed to constitute a
part hereof, except as so modified or superseded.
THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE,
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER
THAN EXHIBITS TO SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED THEREIN BY REFERENCE) RELATING TO WASHINGTON MUTUAL ARE AVAILABLE
WITHOUT CHARGE UPON REQUEST TO: WASHINGTON MUTUAL, INC., 1201 THIRD AVENUE,
SEATTLE, WASHINGTON 98101, ATTENTION: INVESTOR RELATIONS OR BY CALLING (206)
461-3187, AND SUCH DOCUMENTS (OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS
SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED THEREIN BY REFERENCE) RELATING TO
AHMANSON ARE AVAILABLE WITHOUT CHARGE UPON REQUEST TO: H.F. AHMANSON &
COMPANY, 4900 RIVERGRADE ROAD, IRWINDALE, CALIFORNIA 91706, ATTENTION:
INVESTOR RELATIONS OR BY CALLING (626) 814-7986. IN ORDER TO ENSURE TIMELY
DELIVERY OF THE DOCUMENTS, REQUESTS SHOULD BE MADE BY , 1998.
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SUMMARY
The information below is qualified in its entirety by the more detailed
information appearing elsewhere in this Joint Proxy Statement/Prospectus,
including the documents incorporated by reference in this Joint Proxy
Statement/Prospectus. As used in this Joint Proxy Statement/Prospectus, the
term "Washington Mutual" refers to Washington Mutual and, unless the context
otherwise requires, its subsidiaries, and the term "Ahmanson" refers to
Ahmanson and, unless the context otherwise requires, its subsidiaries. The
term "Combined Company" is sometimes used herein to refer to Washington Mutual
following consummation of the Merger. All references to Ahmanson Common Stock
in this Joint Proxy Statement/Prospectus include the associated Ahmanson
Rights issued pursuant to the Ahmanson Rights Plan and all references to
Washington Mutual Common Stock include the associated Washington Mutual Rights
issued pursuant to the Washington Mutual Rights Plan (as defined herein).
Forward-looking statements are contained in this Joint Proxy
Statement/Prospectus and in documents incorporated by reference herein
regarding Washington Mutual, Ahmanson and the Combined Company. Actual results
may vary materially from the forward-looking statements contained in such
documents for reasons which include the factors set forth herein under "Risk
Factors" and in Washington Mutual's Current Report on Form 8-K dated March 17,
1998, as amended, which is incorporated by reference herein. See
"Incorporation of Certain Documents by Reference."
THE SPECIAL MEETINGS
The Washington Mutual Meeting
Time, Date and Place. The Washington Mutual Meeting will be held at :00
p.m., local time, on , 1998, at the Washington State Convention and
Trade Center, 800 Convention Place, Seattle, Washington. See "The Special
Meetings--General."
Matters to be Considered. Shareholders of Washington Mutual will be asked to
consider and vote upon proposals to (i) approve the issuance of shares of
Washington Mutual Common Stock and Series G Preferred Stock to Ahmanson
Stockholders and holders of Ahmanson Preferred Stock, respectively, pursuant
to the Merger Agreement (the "Share Issuance/Merger Proposal") and (ii) to
amend the Washington Mutual Articles to increase the number of authorized
shares of Washington Mutual Common Stock from 800,000,000 shares to
2,000,000,000 shares (the "Articles Amendment Proposal"). The approval of the
Articles Amendment Proposal is not a condition to the consummation of the
Merger. See "The Special Meetings--Matters To Be Considered at the Special
Meetings."
Record Date; Shares Entitled to Vote; Quorum. The Board of Directors of
Washington Mutual (the "Washington Mutual Board") has fixed the close of
business on , 1998 as the record date (the "Washington Mutual Record
Date") for the determination of the holders of Washington Mutual Common Stock
and holders of Washington Mutual Preferred Stock entitled to receive notice of
and to vote at the Washington Mutual Meeting.
As of the Washington Mutual Record Date, there were shares of Washington
Mutual Common Stock and 1,970,000 shares of Washington Mutual Preferred Stock
entitled to vote at the Washington Mutual Meeting. Each share of Washington
Mutual Common Stock is entitled to one vote on each of the matters properly
presented at the Washington Mutual Meeting. Each share of Washington Mutual
Preferred Stock is entitled to one vote only on the Articles Amendment
Proposal. For the vote on the Share Issuance/Merger Proposal, the presence, in
person or by proxy, of the holders of a majority of the outstanding shares of
Washington Mutual Common Stock will constitute a quorum. For the vote on the
Articles Amendment Proposal, the presence, in person or by proxy, of the
holders of a majority of (i) the outstanding shares of Washington Mutual
Common Stock (for the separate vote of holders of Washington Mutual Common
Stock as a class) and (ii) the aggregate of the outstanding shares of
Washington Mutual Common Stock and Washington Mutual Preferred Stock (for
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the vote of holders of Washington Mutual Common Stock and Washington Mutual
Preferred Stock as a single class) will constitute a quorum, respectively. See
"The Special Meetings--Record Date and Voting" and "--Quorum; Votes Required."
Votes Required. Under NASDAQ rules, the Share Issuance/Merger Proposal will
require the affirmative vote of a majority of the shares of Washington Mutual
Common Stock voting on such proposal. Under Washington law, approval of the
Articles Amendment Proposal will require the affirmative votes of the holders
of (i) two-thirds of the shares of Washington Mutual Common Stock and
Washington Mutual Preferred Stock entitled to vote at the Washington Mutual
Meeting voting together as a single class and (ii) two-thirds of the shares of
Washington Mutual Common Stock entitled to vote at the Washington Mutual
Meeting voting as a single class. Accordingly, assuming a quorum is present, a
failure to submit a proxy (or to vote in person at the Washington Mutual
Meeting), an abstention by a Washington Mutual shareholder or a broker non-
vote, which is an indication by a broker that it does not have discretionary
authority to vote on a particular matter, will have no effect on the Share
Issuance/Merger Proposal, but will have the same effect as a "NO" vote with
respect to the vote on the Articles Amendment Proposal. For shares of
Washington Mutual Common Stock or Washington Mutual Preferred Stock held in
street name by a broker, the failure of a Washington Mutual shareholder to
give such broker voting instructions with regard to any proposal on which such
shareholder is entitled to vote will result in a broker non-vote and will have
the effects described in the preceding sentence. See "The Special Meetings--
Record Date and Voting" and "--Quorum; Votes Required."
THE WASHINGTON MUTUAL BOARD HAS DETERMINED, BY A UNANIMOUS VOTE OF ALL
DIRECTORS PRESENT, THAT THE TERMS OF THE MERGER ARE FAIR AND IN THE BEST
INTERESTS OF WASHINGTON MUTUAL AND ITS SHAREHOLDERS AND, ACCORDINGLY,
RECOMMENDS THAT HOLDERS OF WASHINGTON MUTUAL COMMON STOCK VOTE "FOR" THE SHARE
ISSUANCE/MERGER PROPOSAL. IN ADDITION, THE WASHINGTON MUTUAL BOARD HAS
APPROVED, BY A UNANIMOUS VOTE OF ALL DIRECTORS PRESENT, THE ARTICLES AMENDMENT
PROPOSAL AND, ACCORDINGLY, RECOMMENDS THAT THE SHAREHOLDERS OF WASHINGTON
MUTUAL VOTE "FOR" THE ARTICLES AMENDMENT PROPOSAL.
For a discussion of the factors considered by the Washington Mutual Board in
reaching its decision to approve and adopt the Merger Agreement and approve
the Share Issuance/Merger Proposal, see "The Merger--Background of the Merger"
and "--Reasons for the Merger; Recommendations of the Boards of Directors."
The Ahmanson Meeting
Time, Date and Place. The Ahmanson Meeting will be held at :00 a.m., local
time, on , , 1998, at , , , California. See "The Special
Meetings--General."
Matters to be Considered. Ahmanson Stockholders will be asked to consider
and vote upon a proposal to adopt the Merger Agreement and to approve the
transactions contemplated thereby, including the Merger. See "The Special
Meetings--Matters to be Considered at the Special Meetings."
Record Date; Shares Entitled to Vote; Quorum. The Board of Directors of
Ahmanson (the "Ahmanson Board") has fixed the close of business on , 1998
as the record date (the "Ahmanson Record Date") for the determination of the
Ahmanson Stockholders entitled to receive notice of and to vote at the
Ahmanson Meeting. Holders of Ahmanson Depositary Shares and Ahmanson Preferred
Stock are not entitled, and are not being asked, to vote at the Ahmanson
Meeting.
As of the Ahmanson Record Date, there were issued and outstanding shares
of Ahmanson Common Stock. Each share of Ahmanson Common Stock is entitled to
one vote on the Merger Proposal and any other matters properly presented at
the Ahmanson Meeting. The presence, in person or by proxy, of the holders of a
majority of the issued and outstanding shares of Ahmanson Common Stock will
constitute a quorum. See "The Special Meetings--Record Date and Voting" and
"--Quorum; Votes Required."
Votes Required. Pursuant to Delaware law, the affirmative vote of the
holders of a majority of the shares of Ahmanson Common Stock entitled to vote
at the Ahmanson Meeting is required to approve the Merger
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Proposal. Accordingly, a failure to submit a proxy (or to vote in person at
the Ahmanson Meeting), an abstention by an Ahmanson Stockholder or a broker
non-vote, which is an indication by a broker that it does not have
discretionary authority to vote on a particular matter, will have the same
effect as a "NO" vote with respect to the vote on the Merger Proposal. For
shares of Ahmanson Common Stock held in street name by a broker, the failure
of an Ahmanson Stockholder to give such broker voting instructions with regard
to the Merger Proposal will result in a broker non-vote and will have the same
effect as a "NO" vote with respect to such proposal. Holders of Ahmanson
Preferred Stock are not entitled to and are not being asked to vote on
approval of the Merger Proposal or any other matters that may be considered at
the Ahmanson Meeting. See "The Special Meetings--Record Date and Voting" and
"--Quorum; Votes Required."
THE AHMANSON BOARD HAS UNANIMOUSLY DETERMINED THAT THE TERMS OF THE MERGER
ARE FAIR AND IN THE BEST INTERESTS OF AHMANSON AND THE STOCKHOLDERS OF
AHMANSON AND, ACCORDINGLY, RECOMMENDS THAT THE AHMANSON STOCKHOLDERS VOTE
"FOR" APPROVAL OF THE MERGER PROPOSAL.
THE PARTIES TO THE MERGER
Washington Mutual
Washington Mutual is a financial services company committed to serving
consumers and small to mid-sized businesses throughout the Western United
States. Through its subsidiaries, Washington Mutual engages in the following
activities:
. MORTGAGE LENDING AND CONSUMER BANKING ACTIVITIES. Through its principal
subsidiaries, Washington Mutual Bank, FA ("WMBFA"), Washington Mutual
Bank ("WMB") and Washington Mutual Bank fsb ("WMBfsb"), at December 31,
1997, Washington Mutual operated approximately 1,100 consumer financial
centers and home loan centers offering a full complement of mortgage
lending and consumer banking products and services. In 1997, Washington
Mutual's banking subsidiaries were the leading originators of one-to-
four family residential loans in California, Washington and Oregon.
. CONSUMER FINANCE ACTIVITIES. Through Aristar, Inc. and its subsidiaries
("Aristar"), Washington Mutual makes direct consumer installment loans
and purchases retail installment contracts from local retail
establishments through a network of approximately 500 branch offices
located in 22 states, primarily in the southeastern United States. It
also accepts deposits through its industrial banks in Colorado and Utah.
Aristar's business is generally conducted under the names Blazer, City
Finance and First Community.
. COMMERCIAL BANKING ACTIVITIES. Through the commercial banking division
of WMB, at December 31, 1997, Washington Mutual operated 47 financial
centers under the name of "Western Bank" and 23 business banking centers
offering a range of commercial banking products and services to small
and mid-sized businesses.
. SECURITIES ACTIVITIES. Washington Mutual offers a broad range of
securities brokerage services, including the distribution of mutual
funds, and acts as the investment advisor to and the distributor of
mutual funds.
Washington Mutual operates principally in California, Washington, Oregon,
Florida and Utah, but has operations in a total of 36 states. At December 31,
1997, Washington Mutual had consolidated assets of $96.98 billion, deposits of
$50.99 billion and stockholders' equity of $5.31 billion. Based on assets,
Washington Mutual was at that date the third largest banking organization in
California.
Washington Mutual has its principal executive offices at 1201 Third Avenue,
Seattle, Washington 98101, telephone number (206) 461-2000.
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Ahmanson
H. F. Ahmanson & Company is one of the largest residential real estate and
consumer and business financial services companies in the United States,
owning subsidiaries principally engaged in consumer and small business banking
and related financial services activities. Ahmanson was originally organized
in 1928 in California and changed its state of incorporation from California
to Delaware in 1985. Approximately 98% of Ahmanson's consolidated revenues in
1997 were derived from the operations of Home Savings of America, FSB, a
federally chartered savings bank ("Home Savings"), which is wholly-owned by
Ahmanson. Home Savings represented over 99% of Ahmanson's consolidated assets
at December 31, 1997. Home Savings is one of the largest savings institutions
in the United States and conducts the majority of its business in California.
At December 31, 1997, Ahmanson had total assets of $46.68 billion and total
deposits of $32.27 billion, substantially all of which were retail deposits.
At December 31, 1997, Ahmanson had 370 retail branches located in three states
and 126 loan offices in nine other states.
Over the past several years, Ahmanson has focused on enlarging its presence
and enhancing its market share in its key market of California and has
recognized that there are markets where Ahmanson cannot economically achieve
sufficient market share to be an effective competitor. Such focus resulted in,
among other things, the sale of Ahmanson's retail deposit branch system in New
York in 1995, the sale of three retail branches in Texas in 1996 and, in 1997,
the sale of four retail branches in Arizona and 12 retail branches in western
Florida. On December 4, 1997, Ahmanson announced a definitive agreement to
sell its remaining 27 retail branches in Florida with deposits at December 31,
1997 totaling approximately $3.28 billion. Such focus on California has also
resulted in the acquisition by Ahmanson of additional branches in California
and, on February 13, 1998, the consummation of a merger (the "Ahmanson-Coast
Merger") with Coast Savings Financial, Inc. ("Coast"). At December 31, 1997,
Coast had total assets of $8.84 billion and deposits of $6.42 billion and
operated 90 retail banking offices, all in the State of California. On a pro
forma basis at December 31, 1997, giving effect to the merger with Coast,
Ahmanson had assets of $55.99 billion and deposits of $38.69 billion.
Ahmanson has its principal executive offices at 4900 Rivergrade Road,
Irwindale, California 91706, telephone number (626) 960-6311.
THE MERGER
Exchange Ratio
At the Effective Time, (i) each outstanding share of Ahmanson Common Stock
(other than treasury stock) will be converted into the right to receive 1.12
shares of Washington Mutual Common Stock, with cash being paid in lieu of
fractional shares, and (ii) each outstanding share of Ahmanson Preferred Stock
will be converted into the right to receive one share of Series G Preferred
Stock. The terms, preferences, limitations, privileges and rights of the
Series G Preferred Stock will be substantially identical to those of the
Ahmanson Preferred Stock. In accordance with the Preferred Stock Deposit
Agreement (as defined herein), Ahmanson Depositary Shares outstanding at the
Effective Time shall thereafter represent shares of Series G Preferred Stock
until exchanged for New Washington Mutual Depositary Shares specifically
describing the Series G Preferred Stock.
On , 1998, the closing sales price of Washington Mutual Common Stock on
NASDAQ was $ per share. If the Merger had occurred at such time, the
Exchange Ratio would have resulted in an indicated per share value for the
Ahmanson Common Stock of $ . Because the Exchange Ratio is fixed, any change
in the market price of Washington Mutual Common Stock before the Effective
Time will affect the implied market value of the consideration to be received
by Ahmanson Stockholders in the Merger. See "Risk Factors--Effect of Stock
Price Changes on the Value of the Merger Consideration." There can be no
assurance as to the market price of Washington Mutual Common Stock at any time
before, at or after the Effective Time. Stockholders are urged to obtain
current market quotations. See "Risk Factors" and "The Merger--Conversion of
Ahmanson Capital Stock."
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At the Effective Time, each option to purchase shares of Ahmanson Common
Stock (each an "Ahmanson Common Stock Option") that is outstanding and
unexercised immediately prior to the Effective Time (whether or not vested)
will be converted automatically into an option to purchase shares of
Washington Mutual Common Stock (each a "Replacement Option"). The number of
shares of Washington Mutual Common Stock subject to each Replacement Option
will be equal to the product of the number of shares of Ahmanson Common Stock
underlying the Ahmanson Common Stock Option multiplied by the Exchange Ratio
and rounded down to the nearest share, and the exercise price per share of
Washington Mutual Common Stock subject to such Replacement Option will be
equal to (i) the aggregate exercise price for the shares of Ahmanson Common
Stock which were purchasable pursuant to such Ahmanson Common Stock Option
divided by (ii) the number of full shares of Washington Mutual Common Stock
subject to such Replacement Option (rounded up to the nearest whole cent). See
"The Merger--Conversion of Ahmanson Capital Stock."
Reasons for the Merger; Recommendations of the Boards of Directors
The Boards of Directors of Washington Mutual and Ahmanson believe that the
Merger represents a unique opportunity to create one of the premier consumer
banking franchises on the West Coast. As a result of the Merger, the Combined
Company would rank as the second largest banking organization in the western
United States and the seventh largest in the United States, with over 2,000
retail and business banking, consumer lending and mortgage lending offices
located in 36 states serving an estimated 5.8 million households. The Combined
Company would have a strong deposit market share in California, Washington,
Oregon and Utah, as well as a market presence in parts of Florida and Texas.
The Combined Company also would rank as one of the largest originators and
servicers of residential mortgage loans in the United States, giving it the
economies of scale and efficiencies that the respective Boards of Directors
believe are necessary to compete effectively in the rapidly consolidating
financial services industry.
In addition, management of Washington Mutual has identified potential cost
savings resulting from consolidation of back office operations, elimination of
redundant corporate overhead and staff positions, consolidation of retail
branches and loan offices, reduction of aggregate marketing expenses and
implementation of integrated technology platforms. Such cost savings are
expected to produce annual savings of operating costs currently estimated by
management of Washington Mutual at $199 million and $330 million (in each case
pre-tax) in 1999 and 2000, respectively. See "Management and Operations of
Washington Mutual Following the Merger--Operations After the Merger."
EACH OF THE WASHINGTON MUTUAL BOARD AND THE AHMANSON BOARD BELIEVES THAT THE
TERMS OF THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THEIR
RESPECTIVE SHAREHOLDERS. THE WASHINGTON MUTUAL BOARD AND THE AHMANSON BOARD
HAVE EACH, BY UNANIMOUS VOTE OF ALL DIRECTORS PRESENT, APPROVED THE MERGER
AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY. THE WASHINGTON MUTUAL
BOARD RECOMMENDS THAT HOLDERS OF WASHINGTON MUTUAL COMMON STOCK APPROVE AND
ADOPT THE SHARE ISSUANCE/MERGER PROPOSAL. THE AHMANSON BOARD RECOMMENDS THAT
THE AHMANSON STOCKHOLDERS APPROVE THE MERGER PROPOSAL.
IN ADDITION, THE WASHINGTON MUTUAL BOARD HAS, BY UNANIMOUS VOTE OF ALL
DIRECTORS PRESENT, APPROVED THE ARTICLES AMENDMENT PROPOSAL AND RECOMMENDS
THAT THE SHAREHOLDERS OF WASHINGTON MUTUAL VOTE TO APPROVE THE ARTICLES
AMENDMENT PROPOSAL.
For a discussion of the factors considered by each of the Washington Mutual
Board and the Ahmanson Board in reaching its decision to approve and adopt the
Merger Agreement, see "The Merger--Background of the Merger" and "--Reasons
for the Merger; Recommendations of the Boards of Directors."
Opinions of Financial Advisors
Lehman Brothers Inc. ("Lehman Brothers"), which is serving as financial
advisor to the Washington Mutual Board, has delivered its written opinion,
dated March 16, 1998 (the "Lehman Brothers Opinion"), to the Washington Mutual
Board, to the effect that, as of such date, and based upon and subject to
various
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qualifications and assumptions described therein, the Exchange Ratio was fair,
from a financial point of view, to Washington Mutual. THE FULL TEXT OF THE
LEHMAN BROTHERS OPINION, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS
CONSIDERED AND LIMITS ON ITS REVIEW, IS ATTACHED HERETO AS APPENDIX B AND IS
INCORPORATED IN ITS ENTIRETY BY REFERENCE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS.
Washington Mutual has agreed to pay fees to Lehman Brothers for its services
in connection with the Merger, which fees were payable, in part, upon
execution of the Merger Agreement and a substantial portion of which is
contingent upon consummation of the Merger. See "The Merger--Opinions of
Financial Advisors."
Credit Suisse First Boston Corporation ("CSFB"), which is serving as
financial advisor to the Ahmanson Board, has delivered its written opinion,
dated March 16, 1998 (the "CSFB Opinion"), to the Ahmanson Board to the effect
that, as of such date, and based upon and subject to various qualifications
and assumptions described therein, the Exchange Ratio was fair to Ahmanson
Stockholders from a financial point of view. THE FULL TEXT OF THE CSFB
OPINION, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS
ON ITS REVIEW, IS ATTACHED HERETO AS APPENDIX C, AND IS INCORPORATED IN ITS
ENTIRETY BY REFERENCE IN THIS JOINT PROXY STATEMENT/PROSPECTUS. AHMANSON
STOCKHOLDERS ARE URGED TO READ SUCH OPINION IN ITS ENTIRETY.
Ahmanson has agreed to pay fees to CSFB for its services in connection with
the Merger, which fees were payable, in part, upon execution of the Merger
Agreement and a substantial portion of which is contingent upon consummation
of the Merger. See "The Merger--Opinions of Financial Advisors."
Conditions to the Merger; Regulatory Approvals
The obligations of Washington Mutual and Ahmanson to consummate the Merger
are subject to various conditions, including, among others, obtaining the
requisite shareholder approvals; obtaining requisite regulatory approvals, as
described below (the "Requisite Regulatory Approvals"); the effectiveness of
the Registration Statement of which this Joint Proxy Statement/Prospectus is a
part; approval for listing on NASDAQ of the shares of Washington Mutual Common
Stock and the New Washington Mutual Depositary Shares representing an interest
in the Series G Preferred Stock to be issued in the Merger, subject to
official notice of issuance; receipt of opinions of counsel at the Effective
Time in respect of certain federal income tax consequences of the Merger; and
receipt of accountants' letters to the effect that the Merger qualifies for
"pooling-of-interests" accounting treatment.
The principal Requisite Regulatory Approval is approval of the Office of
Thrift Supervision (the "OTS") under the Home Owners' Loan Act and the Federal
Deposit Insurance Act. As described under "The Merger--Regulatory Approvals
Required," Washington Mutual has filed an application seeking OTS approval of
the Merger.
Termination of the Merger Agreement
The Merger Agreement may be terminated by mutual consent of the Washington
Mutual Board and the Ahmanson Board. The Merger Agreement may also be
terminated by either the Washington Mutual Board or the Ahmanson Board (i) if
the approval of any governmental authority required for the consummation of
the Merger and the other transactions contemplated by the Merger Agreement is
denied by final nonappealable action, (ii) if the Merger does not occur on or
before March 31, 1999, (iii) in certain events involving a material breach by
the other party of any of its representations, warranties, covenants or
agreements in the Merger Agreement, (iv) if the requisite approval of either
the holders of Washington Mutual Common Stock or the Ahmanson Stockholders is
not obtained at their respective Special Meetings, or (v) prior to the
Ahmanson Special Meeting, if the Ahmanson Board fails to recommend that the
Ahmanson Stockholders vote to approve the Merger Agreement or withdraws,
modifies or changes its recommendation of the Merger Proposal in a manner
adverse in any respect to the interests of Washington Mutual. The Merger
Agreement may also be terminated by the Washington Mutual Board if (i) a
Subsequent Triggering Event (as defined below) has
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occurred or (ii) a tender offer or exchange offer for 25% or more of the
Ahmanson Common Stock is commenced and the Ahmanson Board recommends that the
Ahmanson Stockholders tender their shares in such offer or otherwise fails to
recommend that the Ahmanson Stockholders reject such offer. The term
"Subsequent Triggering Event" means either (i) the acquisition by any person
of beneficial ownership of 25% or more of the then outstanding shares of
Ahmanson Common Stock or (ii) Ahmanson or any of its significant subsidiaries
shall have entered into an agreement to engage in an Acquisition Transaction
(other than with Washington Mutual or any of its subsidiaries) or the Ahmanson
Board shall have recommended that the Ahmanson Stockholders approve or accept
any Acquisition Transaction (other than with Washington Mutual or any of its
subsidiaries). As used in the definition of Subsequent Triggering Event, the
term "Acquisition Transaction" means (x) a merger or consolidation, or any
similar transaction, involving Ahmanson or a significant subsidiary of
Ahmanson, (y) a purchase, lease or other acquisition or assumption of all or a
substantial portion of the assets or deposits of Ahmanson or any significant
subsidiary of Ahmanson or (z) a purchase or other acquisition of securities
representing 25% or more of the voting power of all outstanding Ahmanson
securities. See "The Merger--Termination of the Merger Agreement."
Termination Fees and Option Agreement
The Merger Agreement requires Ahmanson to pay to Washington Mutual under
certain circumstances a termination fee of $85 million if the Merger Agreement
is terminated and an additional $190 million if Ahmanson is acquired or agrees
to be acquired by a person other than Washington Mutual within 18 months after
termination of the Merger Agreement. In the event the Merger Agreement is
terminated, depending on the circumstances, each party may be liable to the
other party for up to $15 million in out-of-pocket expenses. See "The Merger--
Termination Fees."
Ahmanson and Washington Mutual have entered into a Stock Option Agreement,
dated as of March 16, 1998 (the "Option Agreement"), which under certain
specified circumstances permits Washington Mutual (the "Option") to purchase
up to 21,796,426 shares of Ahmanson Common Stock at a price of $79.86 per
share. The number of shares subject to the Option (the "Option Shares") was
equal to approximately 19.9% of the shares of Ahmanson Common Stock issued and
outstanding on the date of the Option Agreement. A copy of the Option
Agreement is attached hereto as Appendix D and is incorporated in its entirety
herein by reference. Generally, the total profit that Washington Mutual can
make pursuant to the Option Agreement is $275 million (pre-tax). In addition,
Washington Mutual is not entitled to exercise the Option if it has made a
request for and received payment of termination fees and is not entitled to
receive termination fees if it has exercised all or any part of the Option.
See "The Merger--Option Agreement."
The termination fees and the Option, which Washington Mutual and Ahmanson
believe are customary and typical for transactions such as the Merger, are
intended, among other things, to increase the likelihood that the Merger will
be consummated on the terms set forth in the Merger Agreement and, if the
Merger is not consummated under certain circumstances involving an acquisition
or potential acquisition of Ahmanson by a third party, to compensate
Washington Mutual for its efforts undertaken, expenses incurred and business
opportunities lost in connection with the proposed Merger. These agreements
may have the effect of discouraging offers by third parties to acquire
Ahmanson prior to the Merger, even if such persons were prepared to offer to
pay consideration to Ahmanson Stockholders that has a higher current market
price than the shares of Washington Mutual Common Stock to be received by the
Ahmanson Stockholders pursuant to the Merger Agreement.
Certain Federal Income Tax Consequences
The Merger is intended to qualify as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
Accordingly, no gain or loss will be recognized by Ahmanson Stockholders or
the holders of Ahmanson Depositary Shares upon the receipt of Washington
Mutual Common Stock or New Washington Mutual Depositary Shares, respectively,
in exchange for Ahmanson Common Stock and Ahmanson Depositary Shares,
respectively, except with respect to any cash received in lieu of a fractional
share interest in Washington Mutual Common Stock.
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There will be no federal income tax consequences to the shareholders of
Washington Mutual as a result of either voting on the proposals described
herein or consummation of the Merger.
Consummation of the Merger is conditioned upon, among other things, the
receipt by Washington Mutual and Ahmanson of opinions from their respective
legal counsel that the Merger will qualify as a reorganization within the
meaning of Section 368 of the Code.
All shareholders should carefully read the discussion of the material
federal income tax consequences of the Merger under "The Merger--Certain
Federal Income Tax Consequences" and are urged to consult with their own tax
advisors as to the federal, state, local and foreign tax consequences of the
Merger in their particular circumstances.
Accounting Treatment
The Merger is expected to be treated as a pooling-of-interests for
accounting and financial reporting purposes. Accordingly, under generally
accepted accounting principles, the assets and liabilities of Ahmanson will be
recorded on the books of Washington Mutual at their values on the books of
Ahmanson at the Effective Time. If completed as proposed, no goodwill will be
created as a result of the Merger. See "The Merger--Accounting Treatment."
Interests of Certain Persons in the Merger
Certain members of Ahmanson management and the Ahmanson Board have interests
in the Merger in addition to their interests as stockholders of Ahmanson
generally. These include, among other things, provisions in the Merger
Agreement relating to indemnification, the appointment of three members to the
Washington Mutual Board following the Merger and benefits to be received under
certain employment agreements and certain employee benefit plans.
Pursuant to the Merger Agreement, Washington Mutual has agreed to indemnify
the present directors and officers of Ahmanson and its subsidiaries against
certain liabilities arising prior to the Effective Time to the fullest extent
that Ahmanson and its subsidiaries are permitted to indemnify its directors
and officers by law, under their respective charters and by-laws and under any
agreements entered into by Ahmanson or any of its subsidiaries and such
directors and officers. Washington Mutual has also agreed to use its
reasonable best efforts for six years after the Effective Time to provide
directors' and officers' liability insurance to former officers and directors
of Ahmanson or any of its subsidiaries with respect to claims against such
directors and officers arising prior to the Effective Time.
The Merger Agreement provides that Washington Mutual will cause three
directors of Ahmanson to be elected or appointed as directors of Washington
Mutual at the Effective Time. Such directors are to be selected mutually by
Washington Mutual and Ahmanson.
In addition, the Merger Agreement provides that all Ahmanson Common Stock
Options outstanding at the Effective Time, including those held by management
and members of the Ahmanson Board, will be assumed by Washington Mutual and
will thereafter constitute options to acquire shares of Washington Mutual
Common Stock.
Finally, certain Ahmanson executives will receive benefits under various
employment agreements and benefit plans as a result of the Merger being deemed
a change of control under such agreements and plans.
The Ahmanson Board was aware of these interests and considered them, among
other matters, in unanimously approving the Merger Agreement and transactions
contemplated thereby. For additional information, including amounts payable to
such executives, see "The Merger--Interests of Certain Persons in the Merger"
and "--Employee Matters."
9
<PAGE>
No Appraisal or Dissenters' Rights
Under Delaware law, holders of Ahmanson Common Stock and Ahmanson Preferred
Stock (including the holders of Ahmanson Depositary Shares) will have no
appraisal rights in connection with the Merger. Under Washington law, holders
of Washington Mutual Common Stock and Washington Mutual Preferred Stock will
have no dissenters' rights with respect to the Share Issuance/Merger Proposal
or the Articles Amendment Proposal. See "The Merger--No Appraisal or
Dissenters' Rights."
MANAGEMENT AND OPERATIONS OF WASHINGTON MUTUAL FOLLOWING THE MERGER
At the Effective Time, Ahmanson will merge with and into Washington Mutual,
with Washington Mutual as the surviving corporation. It is intended that,
after consummation of the Merger, Home Savings will merge into WMBFA (the
"Bank Merger") and the name of the surviving corporation will be "Washington
Mutual Bank, FA."
At the Effective Time, three representatives of the Ahmanson Board mutually
agreeable to Washington Mutual and Ahmanson will be added to the existing
Washington Mutual Board to form the Board of Directors of the Combined
Company.
Washington Mutual intends to consolidate the branch systems and loan offices
of WMBFA and Home Savings in California. It is anticipated that approximately
160-170 branches will be consolidated and approximately 75-100 loan offices
will be closed. Washington Mutual also intends to consolidate certain
administrative functions of the Combined Company. Initial branch and loan
office consolidations are expected to occur in 1999. These consolidations,
together with cost reductions which result from the introduction of Washington
Mutual's loan origination system and an integrated data/communications system
throughout the Home Savings branches and other steps, are expected to achieve
annual operating cost savings of approximately $199 million and $330 million
(in each case pre-tax) in 1999 and 2000, respectively.
Washington Mutual expects to accrue, at the Effective Time, incremental
transaction-related expenses of $373 million (pre-tax). These expenses
represent: (1) $165 million related to anticipated severance and benefit
expense for employee terminations identified as of the Effective Time for
which specific severance plans are in place; (2) $141 million related to
anticipated impairment of premises and equipment as the result of planned
branch consolidations and the elimination of other duplicate facilities; (3)
$16 million related to contract termination fees associated with contracts for
duplicate services which will be terminated; and (4) $51 million in other
expenses, primarily investment banking and professional fees.
Washington Mutual expects to incur other transaction-related expenses after
the Effective Time in order to combine operations and systems, train employees
and provide severance for employees, which expenses are not accruable at the
Effective Time. Washington Mutual cannot presently estimate the amount of
these other expenses.
The estimates of cost savings and transaction-related and other expenses
described above are forward-looking statements that, while prepared on the
basis of Washington Mutual's best judgments and currently available
information regarding Ahmanson's business and the future operating performance
of the two companies, are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are beyond the
control of either company, and upon assumptions with respect to future
business decisions that are subject to change. Accordingly, there can be no
assurance that such cost-savings will be realized in the amounts or within the
time periods currently estimated or that such charges for transaction-related
expenses will be sufficient. See "Risk Factors" and "Management and Operations
of Washington Mutual Following the Merger."
10
<PAGE>
DESCRIPTION OF WASHINGTON MUTUAL CAPITAL STOCK
Upon consummation of the Merger, holders of Ahmanson Common Stock will
become holders of Washington Mutual Common Stock. Holders of shares of
Washington Mutual Common Stock are entitled to one vote per share for each
share held. Subject to the rights of holders of shares of Washington Mutual
Preferred Stock, holders of shares of Washington Mutual Common Stock have
equal rights to participate in dividends when declared and, in the event of
liquidation, in the net assets of Washington Mutual available for distribution
to shareholders. Washington Mutual may not declare any dividends on Washington
Mutual Common Stock unless full preferential amounts to which holders of
Washington Mutual Preferred Stock are entitled have been paid or declared and
set apart for payment. Washington Mutual is also subject to certain regulatory
restrictions on the payment of dividends.
Each share of Washington Mutual Common Stock currently has attached thereto
a stock purchase right (a "Washington Mutual Right") issued under the
Washington Mutual Rights Plan.
Upon consummation of the Merger, the Ahmanson Preferred Stock will be
converted into the Series G Preferred Stock, which will have substantially
identical terms, limitations, privileges and rights as the Ahmanson Preferred
Stock, and the Ahmanson Depositary Shares will be converted into the New
Washington Mutual Depositary Shares.
For additional information concerning the capital stock of Washington Mutual
and certain differences between Washington and Delaware corporate laws, see
"Description of Washington Mutual Capital Stock" and "Certain Differences
Between Washington and Delaware Corporate Laws."
11
<PAGE>
SUMMARY FINANCIAL DATA OF WASHINGTON MUTUAL
The following table presents summary financial data for Washington Mutual
and is derived from and should be read in conjunction with Washington Mutual's
Consolidated Financial Statements and Notes thereto, which are incorporated
herein by reference from the 1997 Washington Mutual 10-K. The financial
information presented herein has been restated for the mergers of Washington
Mutual with Great Western Financial Corporation in 1997 and Keystone Holdings,
Inc. (the prior parent of American Savings Bank) in 1996, as if the respective
companies had been combined for all prior periods presented.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Interest income......... $ 6,810,964 $ 6,387,090 $ 6,158,371 $ 4,928,851 $ 4,883,407
Interest expense........ 4,154,491 3,814,143 3,860,018 2,642,806 2,509,827
----------- ----------- ----------- ----------- -----------
Net interest income..... 2,656,473 2,572,947 2,298,353 2,286,045 2,373,580
Provision for loan
losses................. 207,139 392,435 251,424 327,068 620,808
Other income............ 713,400 658,164 603,567 694,228 648,925
Other expense........... 2,261,608 2,428,599 1,802,886 1,883,348 1,922,639
----------- ----------- ----------- ----------- -----------
Income before income
taxes, extraordinary
items, cumulative
effect of accounting
changes, and minority
interest............... 901,126 410,077 847,610 769,857 479,058
Income taxes............ 402,116 141,220 273,006 265,180 126,034
Provision for payments
in lieu of taxes....... 17,232 25,187 7,887 (824) 14,075
Extraordinary items, net
of federal income tax
effect(/1/) ........... -- -- -- -- (8,953)
Cumulative effect of
change in tax
accounting method...... -- -- -- -- 13,365
Minority interest in
earnings of
consolidated
subsidiaries........... -- 13,570 15,793 13,992 13,991
----------- ----------- ----------- ----------- -----------
Net income.............. $ 481,778 $ 230,100 $ 550,924 $ 491,509 $ 329,370
=========== =========== =========== =========== ===========
Net income attributable
to common stock........ $ 460,346 $ 191,386 $ 507,325 $ 447,910 $ 298,796
=========== =========== =========== =========== ===========
Net income per common
share:
Basic................. $1.87 $0.81 $2.19 $1.98 $1.30
Diluted............... 1.86 0.81 2.16 1.96 1.30
Average number of shares
used to calculate net
income per common
share:
Basic................. 246,119,646 235,115,650 232,104,843 226,220,085 223,078,787
Diluted............... 247,045,339 237,683,414 244,555,332 232,633,542 224,329,524
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Assets.................. $96,981,099 $87,426,497 $86,613,386 $79,699,553 $71,961,681
Investment and mortgage-
backed securities...... 24,153,536 20,574,399 25,833,956 18,571,595 11,187,429
Loans................... 67,140,157 61,153,968 54,080,189 53,850,887 51,725,601
Deposits................ 50,986,017 52,666,914 53,697,888 52,044,953 54,876,165
Annuities............... -- 878,057 855,503 799,178 713,383
Borrowings.............. 38,998,647 27,407,744 25,169,766 21,078,049 10,416,757
Stockholders' equity.... 5,309,071 4,993,088 5,364,180 4,338,622 4,188,961
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA
Net interest
margin(/2/)............ 3.03% 3.13% 2.91% 3.30% n.a.
Efficiency ratio(/3/)... 67.11 75.16 62.13 63.19 63.61
Return on average
assets................. 0.52 0.27 0.66 0.67 0.36
Return on average
stockholders' equity... 9.21 4.40 11.58 11.36 6.14
Cash dividend declared
per common share:
Pre-business
combination(/4/)..... $1.06 $0.90 $0.77 $0.70 $0.50
Post-business
combination(/5/)..... 1.11 1.09 0.75 0.82 0.75
Dividend payout ratio
per common share..... 56.83% 112.13% 33.16% 38.73% 62.81%
Ratios of combined
earnings to fixed
charges:
Including interest on
deposits............. 1.22 1.11 1.22 1.29 1.19
Excluding interest on
deposits............. 1.45 1.26 1.56 1.92 1.68
<CAPTION>
DECEMBER 31,
---------------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Total stockholders'
equity as a percentage
of total assets........ 5.47% 5.71% 6.19% 5.44% 5.82%
Nonperforming assets as
a percentage of total
assets................. 0.83 0.92 1.14 1.46 1.99
Reserve for loan losses
as a percentage of:
Nonaccrual loans...... 112 118 85 81 78
Nonperforming assets.. 83 84 60 59 52
</TABLE>
- ---------------------
(/1/) Includes losses in 1993 of $2.3 million on the redemption of subordinated
capital notes and $10.8 million from the penalty for prepayment of FHLB
advances and the related income tax benefits of $4.1 million.
(/2/) Net interest income as a percentage of average earning assets.
(/3/) Other expense (including the amortization of goodwill) as a percentage of
the sum of net interest income and other income.
(/4/) Amounts paid by acquired companies prior to their combination with
Washington Mutual are not included.
(/5/) Based on dividends paid and earnings of Washington Mutual after
restatement of financial statements for significant transactions accounted
for as poolings-of-interests.
13
<PAGE>
SUMMARY FINANCIAL DATA OF AHMANSON
The following table presents summary financial data for Ahmanson and is
derived from and should be read in conjunction with the Consolidated Financial
Statements and Notes thereto, which are incorporated herein by reference from
the 1997 Ahmanson 10-K. Certain information has been restated to conform to
Washington Mutual's presentation.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Interest income......... $ 3,403,372 $ 3,514,795 $ 3,699,091 $ 3,095,375 $ 3,003,422
Interest expense........ 2,168,487 2,262,281 2,472,336 1,798,454 1,666,350
------------ ------------ ------------ ------------ ------------
Net interest income..... 1,234,885 1,252,514 1,226,755 1,296,921 1,337,072
Provision for loan
losses................. 67,091 144,924 119,111 176,557 574,970
Other income............ 329,570 251,798 698,409 260,356 317,828
Other expense........... 842,582 1,178,830 981,407 970,050 1,299,996
------------ ------------ ------------ ------------ ------------
Income (loss) before
income taxes,
extraordinary item, and
cumulative effect of
change in accounting
method................. 654,782 180,558 824,646 410,670 (220,066)
Income taxes (benefits). 241,000 35,300 373,700 173,312 (82,034)
------------ ------------ ------------ ------------ ------------
Income (loss) before
extraordinary item and
cumulative effect of
change in accounting
method................. 413,782 145,258 450,946 237,358 (138,032)
Extraordinary item, net
of federal income tax
effect(/1/)............ -- -- -- -- (21,607)
Cumulative effect of
change in accounting
for goodwill........... -- -- (234,742) -- --
------------ ------------ ------------ ------------ ------------
Net income (loss)....... $ 413,782 $ 145,258 $ 216,204 $ 237,358 $ (159,639)
============ ============ ============ ============ ============
Net income (loss)
attributable to common
stock.................. $ 380,183 $ 100,337 $ 165,774 $ 186,928 $ (197,770)
============ ============ ============ ============ ============
Net income (loss) per
common share:
Basic................. $3.91 $0.92 $1.41 $1.60 $(1.70)
Diluted............... 3.59 0.92 1.41 1.58 (1.70)
Weighted average number
of shares outstanding:
Basic................. 97,162,327 108,650,585 117,204,021 116,826,952 116,501,261
Diluted............... 110,827,985 108,650,585 129,888,329 129,183,669 116,501,261
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Assets.................. $46,678,752 $49,902,044 $50,529,586 $53,726,793 $50,871,245
Investment and mortgage-
backed securities...... 12,801,060 14,308,109 16,164,498 13,076,482 6,931,521
Loans................... 30,484,191 31,789,158 31,255,379 36,001,745 37,704,368
Deposits................ 32,268,375 34,773,945 34,244,481 40,655,016 38,018,653
Borrowings.............. 10,977,730 11,728,934 12,236,428 9,176,085 8,879,345
Stockholders' equity.... 2,395,445 2,433,049 3,056,922 2,964,601 2,949,031
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA
Net interest margin(/2/)............. 2.68% 2.63% 2.39% 2.64% 2.90%
Efficiency ratio(/3/)................ 53.86 78.36 50.98 62.29 78.55
Return on average assets............. 0.87 0.29 0.41 0.46 (0.32)
Return on average stockholders'
equity.............................. 17.27 5.26 7.47 8.00 (5.58)
Cash dividend declared per common
share............................... $0.88 $0.88 $0.88 $0.88 $0.88
Dividend payout ratio per common
share............................... 28.83% 97.48% 71.04% 64.62% (86.53)%
Ratios of combined earnings to fixed
charges:
Including interest on deposits..... 1.30 1.08 1.33 1.23 0.87
Excluding interest on deposits..... 1.95 1.24 2.30 1.81 0.40
<CAPTION>
DECEMBER 31,
---------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Total stockholders' equity as a
percentage of total assets.......... 5.13% 4.88% 6.05% 5.52% 5.80%
Nonperforming assets as a percentage
of total assets..................... 1.28 1.70 1.88 1.57 1.89
Reserve for loan losses as a
percentage of:
Nonaccrual loans................... 87 65 53 59 56
Nonperforming assets............... 63 46 40 47 46
</TABLE>
- ---------------------
(/1/) Represents loss on the early extinguishment of debt.
(/2/) Net interest income as a percentage of average earning assets.
(/3/) Other expense (including amortization of goodwill) as a percentage of the
sum of net interest income and other income.
15
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth certain selected historical financial data
for Washington Mutual, Ahmanson and Coast and selected pro forma combined
financial data. The pro forma amounts included in the table below give effect
to the Merger as if it had been consummated on January 1, 1995 for income
statement information and December 31, 1997 for balance sheet information. Pro
forma adjustments made to arrive at the pro forma combined amounts are based
on the pooling-of-interests method of accounting.
This information should be read in conjunction with and is qualified in its
entirety by reference to the Consolidated Financial Statements and Notes
thereto from the 1997 Washington Mutual 10-K and the 1997 Ahmanson 10-K and
the 1997 Consolidated Financial Statements and Notes thereto of Coast from
Ahmanson's Form 8-K dated April 23, 1998 included in the documents described
under "Incorporation of Certain Documents by Reference," and the pro forma
combined financial statements and accompanying discussion and notes set forth
under "Pro Forma Combined Financial Information." The pro forma amounts in the
table below are presented for informational purposes and are not necessarily
indicative of the financial position or the results of operations of the
Combined Company that actually would have occurred had the Merger been
consummated as of the dates or for the periods presented. The pro forma
amounts are also not necessarily indicative of the future financial position
or future results of operations of the Combined Company. See "Management and
Operations of Washington Mutual Following the Merger--Operations After the
Merger."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
WASHINGTON MUTUAL
Net interest income..................... $ 2,656,473 $ 2,572,947 $ 2,298,353
Provision for loan losses............... 207,139 392,435 251,424
Other income (expense), net............. (1,548,208) (1,770,435) (1,199,319)
Income taxes............................ 419,348 166,407 280,893
Minority interest in earnings of
consolidated subsidiaries.............. -- 13,570 15,793
----------- ----------- -----------
Net income.............................. $ 481,778 $ 230,100 $ 550,924
=========== =========== ===========
Net income attributable to common stock. $ 460,346 $ 191,386 $ 507,325
=========== =========== ===========
Net income per common share:
Basic................................. $1.87 $0.81 $2.19
Diluted............................... 1.86 0.81 2.16
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
AHMANSON
Net interest income..................... $ 1,234,885 $ 1,252,514 $ 1,226,755
Provision for loan losses............... 67,091 144,924 119,111
Other income (expense), net............. (513,012) (927,032) (282,998)
----------- ----------- -----------
Income before income taxes and
accounting change ..................... 654,782 180,558 824,646
Income taxes............................ 241,000 35,300 373,700
Cumulative effect of change in
accounting for goodwill................ -- -- (234,742)
----------- ----------- -----------
Net income.............................. $ 413,782 $ 145,258 $ 216,204
=========== =========== ===========
Net income attributable to common stock. $ 380,183 $ 100,337 $ 165,774
=========== =========== ===========
Net income per common share:
Basic................................. $3.91 $0.92 $1.41
Diluted............................... 3.59 0.92 1.41
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1997
------------
(DOLLARS IN
THOUSANDS,
EXCEPT
PER SHARE
AMOUNTS)
<S> <C>
COAST
Net interest income................................................ $ 222,441
Provision for loan losses.......................................... 25,000
Other income (expense), net........................................ (114,291)
Income taxes....................................................... 25,923
---------
Net income......................................................... $ 57,227
=========
Net income attributable to common stock............................ $ 57,227
=========
Net income per common share:
Basic............................................................ $3.06
Diluted.......................................................... 2.97
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------
1997 1996 1995
----------- ----------- -----------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
PRO FORMA INCLUDING AHMANSON
Net interest income.................... $ 3,891,358 $ 3,825,461 $ 3,525,108
Provision for loan losses.............. 274,230 537,359 370,535
Other income (expense), net............ (2,061,220) (2,697,467) (1,482,317)
Income taxes........................... 660,348 201,707 654,593
Cumulative effect of change in
accounting for goodwill............... -- -- (234,742)
Minority interest in earnings of
consolidated subsidiaries............. -- 13,570 15,793
----------- ----------- -----------
Net income............................. $ 895,560 $ 375,358 $ 767,128
=========== =========== ===========
Net income attributable to common
stock................................. $ 840,529 $ 291,723 $ 673,099
=========== =========== ===========
Net income per common share:
Basic................................ $2.37 $0.82 $1.85
Diluted.............................. 2.31 0.81 1.82
Average number of shares used to
calculate net income per common share:
Basic................................ 354,941,452 356,804,305 363,373,347
Diluted.............................. 371,172,682 359,372,069 390,030,260
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------------------------------
PRO FORMA ADJUSTMENTS
--------------------------- PRO FORMA
WASHINGTON INCLUDING
MUTUAL AHMANSON DEBIT CREDIT AHMANSON
----------- ----------- ---------- ----------- ------------ ---
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Assets.................. $96,981,099 $46,678,752 $ 85,500(/1/) $ 232,000(/2/) $143,372,351
-- 141,000(/2/)
Loans................... 67,140,157 30,484,191 -- -- 97,624,348
Deposits(/3/)........... 50,986,017 32,268,375 -- -- 83,254,392
Borrowings.............. 38,998,647 10,977,730 -- -- 49,976,377
Stockholders' equity.... 5,309,071 2,395,445 257,000(/2/) 85,500(/1/) 7,586,016
-- 53,000(/4/)
Loans originated during
1997................... 29,602,656 5,896,909 -- -- 35,499,565
Nonperforming assets.... 806,646 595,338 -- -- 1,401,984
Reserve for loan losses. 670,494 377,351 -- -- 1,047,845
Stockholders' equity as
a percentage of total
assets................. 5.47% 5.13% -- -- 5.29%
Nonperforming assets as
a percentage of total
assets................. 0.83 1.28 -- -- 0.98
Reserve for loan losses
as a percentage of:
Nonaccrual loans...... 112 87 -- -- 110
Nonperforming assets.. 83 63 -- -- 75
</TABLE>
- ---------------------
(/1/) Assumes exercise of approximately 85% of outstanding Ahmanson Common
Stock Options.
(/2/) Transaction-related expenses anticipated to be recorded by Washington
Mutual are included in the pro forma including Ahmanson and Coast
statement of financial position as of December 31, 1997. Such
transaction-related expenses are summarized in the following table
(dollars in thousands):
<TABLE>
<S> <C>
Investment banking and professional fees........................ $ 51,000
Severance and benefits.......................................... 165,000
Premises and equipment.......................................... 141,000
Contract termination fees....................................... 16,000
---------
Total expenses................................................. 373,000
Tax benefit..................................................... (116,000)
---------
Net expenses................................................... $ 257,000
=========
</TABLE>
(/3/) On December 31, 1997 Ahmanson announced a definitive agreement to sell
its remaining 27 retail branches in Florida with deposits at December 31,
1997 totaling approximately $3.28 billion. This transaction has not been
included in the preceding pro forma adjustments.
(/4/) Assumed tax benefit of exercise of Ahmanson Common Stock Options.
18
<PAGE>
On February 13, 1998, the Ahmanson-Coast Merger was consummated. The
Ahmanson-Coast Merger was accounted for using the purchase method. The table
below sets forth pro forma combined financial statements for the year ended
and at December 31, 1997 to give effect to the Merger and to the Ahmanson-
Coast Merger and to give effect to the purchase accounting adjustments and
other assumptions described in the accompanying notes. The pro forma amounts
in the table below are presented for informational purposes and are not
necessarily indicative of the financial position or the results of operations
of the Combined Company that actually would have occurred had the Merger and
the Ahmanson-Coast Merger been consummated as of the dates or for the periods
presented. The pro forma amounts are also not necessarily indicative of the
future financial position or future results of operations of the Combined
Company. See "Management and Operations of Washington Mutual Following the
Merger--Operations After the Merger" and see notes 1(a) through 1(d) to pro
forma including Ahmanson and Coast statement of income on page 80.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1997
-------------------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE AMOUNTS)
<S> <C>
PRO FORMA INCLUDING AHMANSON AND COAST
Net interest income.............................. $ 4,121,658
Provision for loan losses........................ 299,230
Other income (expense), net...................... (2,205,452)
Income taxes (including provision for payments in
lieu of taxes).................................. 684,046
------------
Net income....................................... $ 932,930
============
Net income attributable to common stock.......... $ 877,899
============
Net income per common share:
Basic.......................................... $2.36
Diluted........................................ 2.30
Average number of shares used to calculate net
income per common share:
Basic.......................................... 371,843,048
Diluted........................................ 388,613,768
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------------------------------------
PRO FORMA
PRO FORMA ADJUSTMENTS INCLUDING
WASHINGTON ---------------------------- AHMANSON
MUTUAL AHMANSON COAST DEBIT CREDIT AND COAST
----------- ----------- ---------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Assets.................. $96,981,099 $46,678,752 $8,843,406 $ 5,750(/1/) $ 232,000(/3/) $152,685,666
85,500(/4/) 23,500(/1/)
1,025,535(/1/) 31,542(/1/)
141,000(/3/)
506,334(/1/)
Loans................... 67,140,157 30,484,191 5,946,644 23,500(/1/) 103,547,492
Deposits(/5/)........... 50,986,017 32,268,375 6,418,194 8,221(/1/) 89,680,807
Borrowings (including
annuities)............. 38,998,647 10,977,730 1,791,303 9,765(/1/) 51,777,445
Stockholders' equity.... 5,309,071 2,395,445 510,243 194(/1/) 921,339(/2/) 8,511,264
293,423(/1/) 85,500(/4/)
213,739(/1/) 53,000(/6/)
257,000(/3/) 1,022(/1/)
Loans originated during
1997................... 29,602,656 5,896,909 1,751,453 -- -- 37,251,018
Nonperforming assets.... 806,646 595,338 99,253 -- -- 1,501,237
Reserve for loan losses. 670,494 377,351 84,000 -- -- 1,131,845
Stockholders' equity as
a percentage of total
assets................. 5.47% 5.13% 5.77% -- -- 5.57%
Nonperforming assets as
a percentage of total
assets................. 0.83 1.28 1.12 -- -- 0.98
Reserve for loan losses
as a percentage of:
Nonaccrual loans...... 112 87 150 -- -- 112
Nonperforming assets.. 83 63 85 -- -- 75
</TABLE>
- -------------------
(/1/) Purchase accounting adjustments related to the Ahmanson-Coast Merger.
(/2/) Value of Ahmanson Common Stock issued in the Ahmanson-Coast Merger.
(/3/) Transaction-related expenses anticipated to be recorded by Washington
Mutual are included in the pro forma including Ahmanson and Coast
statement of financial position as of December 31, 1997. Such
transaction-related expenses are summarized in the following table
(dollars in thousands):
<TABLE>
<S> <C>
Investment banking and professional fees........................ $ 51,000
Severance and benefits.......................................... 165,000
Premises and equipment.......................................... 141,000
Contract termination fees....................................... 16,000
---------
Total expenses................................................ 373,000
Tax benefit..................................................... (116,000)
---------
Net expenses.................................................. $ 257,000
=========
</TABLE>
(/4/) Assumes exercise of approximately 85% of outstanding Ahmanson stock
options.
(/5/) On December 31, 1997, Ahmanson announced a definitive agreement to sell
its remaining 27 retail branches in Florida with deposits at December 31,
1997 totaling approximately $3.28 billion. This transaction has not been
included in the preceding pro forma adjustments.
(/6/) Assumed tax benefit of exercise of Ahmanson Common Stock Options.
20
<PAGE>
COMPARATIVE PER SHARE DATA
The following table shows certain per share data for Washington Mutual
Common Stock and Ahmanson Common Stock on an historical basis and a pro forma
and pro forma equivalent basis reflecting the Merger. The table should be read
in conjunction with the financial information appearing in this Joint Proxy
Statement/Prospectus and the documents incorporated by reference herein. The
per share pro forma and pro forma equivalent data in the following table are
presented for comparative purposes only and are not necessarily indicative of
the combined financial position or results of operations in the future or what
the combined financial position or results of operations would have been had
the Merger been consummated during the periods or as of the dates for which
this pro forma table is presented.
<TABLE>
<CAPTION>
1997 1996 1995
------ ----- -----
<S> <C> <C> <C>
WASHINGTON MUTUAL COMMON STOCK
Net income per basic share:
Historical................................................ $ 1.87 $0.81 $2.19
Pro forma (with Ahmanson) combined........................ 2.37 0.82 1.85
Pro forma (with Ahmanson and Coast) combined(/1/)......... 2.36 -- --
Net income per diluted share:
Historical(/2/)........................................... 1.86 0.81 2.16
Pro forma (with Ahmanson) combined........................ 2.31 0.81 1.82
Pro forma (with Ahmanson and Coast) combined(/1/)......... 2.30 -- --
Cash dividends paid per share:
Historical(/2/)........................................... 1.11 1.09 0.75
Pro forma (with Ahmanson and Coast) combined.............. 1.11 1.09 0.75
Book value per share at period end:
Historical................................................ 20.80 -- --
Pro forma (with Ahmanson) combined........................ 19.74 -- --
Pro forma (with Ahmanson and Coast) combined(/4/)(/1/).... 21.30 -- --
AHMANSON COMMON STOCK
Net income per basic share:
Historical................................................ 3.91 0.92 1.41
Pro forma (with Washington Mutual) equivalent(/3/)........ 2.65 0.92 2.07
Pro forma (with Washington Mutual and Coast) equiva-
lent(/4/)(/1/)........................................... 2.64 -- --
Net income per diluted share:
Historical................................................ 3.59 0.92 1.41
Pro forma (with Washington Mutual) equivalent(/3/)........ 2.59 0.91 2.04
Pro forma (with Washington Mutual and Coast) equiva-
lent(/4/)(/1/)........................................... 2.58 -- --
Cash dividends paid per share:
Historical................................................ 0.88 0.88 0.88
Pro forma (with Washington Mutual and Coast) equiva-
lent(/4/)(/1/)........................................... 1.24 1.22 0.84
Book value per share at period end:
Historical................................................ 20.57 -- --
Pro forma (with Washington Mutual) equivalent(/3/)........ 22.11 -- --
Pro forma (with Washington Mutual and Coast) equiva-
lent(/4/)(/1/)........................................... 23.85 -- --
</TABLE>
- ---------------------
(/1/)Financial information including Coast is presented for 1997 only. The
Ahmanson-Coast Merger was accounted for as a purchase.
(/2/)Cash dividends paid on a pre-business combination basis.
(/3/)The Ahmanson pro forma (with Washington Mutual) equivalent per share
amounts are calculated by multiplying the Washington Mutual (with
Ahmanson) pro forma combined per share amounts by the Exchange Ratio of
1.12.
(/4/)The Ahmanson pro forma (with Washington Mutual and Coast) equivalent per
share amounts are calculated by multiplying the Washington Mutual (with
Ahmanson and Coast) pro forma combined per share amounts by the Exchange
Ratio of 1.12. Embedded within the calculation is the issuance of
Ahmanson Common Stock in the Ahmanson-Coast Merger at an exchange ratio
of 0.8082.
21
<PAGE>
COMPARATIVE MARKET PRICES
The table below sets forth, for the periods indicated, historical high and
low closing sales price information for Washington Mutual Common Stock and
Ahmanson Common Stock. Washington Mutual Common Stock is designated for
quotation on NASDAQ under the symbol "WAMU." Ahmanson Common Stock trades on
the NYSE and the Pacific Exchange under the symbol "AHM."
<TABLE>
<CAPTION>
WASHINGTON
MUTUAL AHMANSON
COMMON STOCK COMMON STOCK
------------- -------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
1996
First Quarter................................... $32.00 $27.75 $26.75 $21.25
Second Quarter.................................. 30.13 26.50 27.63 22.25
Third Quarter................................... 38.13 28.75 28.38 23.38
Fourth Quarter.................................. 45.50 37.00 34.50 27.88
1997
First Quarter................................... $59.13 $42.25 $45.25 $32.00
Second Quarter.................................. 62.29 45.38 47.38 34.75
Third Quarter................................... 70.25 58.88 58.06 43.63
Fourth Quarter.................................. 72.38 60.31 68.00 54.19
1998
First Quarter................................... $75.44 $52.63 $81.38 $51.56
Second Quarter (through , 1998)............
</TABLE>
The following table sets forth the closing sales price per share of
Washington Mutual Common Stock on NASDAQ, the closing sales price per share of
Ahmanson Common Stock as reported on the NYSE Composite Transactions Reporting
System, and the equivalent per share price for the Ahmanson Common Stock
(which is the closing sales price of Washington Mutual Common Stock multiplied
by the Exchange Ratio) as of (i) March 16, 1998 (the last full trading day
before the public announcement of the Merger Agreement) and (ii) , 1998
(the last full trading day for which it was practicable to obtain such
information prior to the mailing of this Joint Proxy Statement/Prospectus):
<TABLE>
<CAPTION>
WASHINGTON EQUIVALENT
MUTUAL AHMANSON PER SHARE
COMMON STOCK COMMON STOCK PRICE
------------ ------------ ----------
<S> <C> <C> <C>
March 16, 1998.......................... $71.75 $65.50 $80.36
, 1998..........................
</TABLE>
Stockholders are urged to obtain current market quotations for Washington
Mutual Common Stock and Ahmanson Common Stock. Because the Exchange Ratio is
fixed, any change in the market price of Washington Mutual Common Stock before
the Merger will affect the market value of the consideration to be received by
Ahmanson Stockholders in the Merger. There can be no assurance as to the
market price of the Washington Mutual Common Stock at any time before, at or
after the Effective Time. See "The Merger--Conversion of Ahmanson Capital
Stock."
22
<PAGE>
RISK FACTORS
This Joint Proxy Statement/Prospectus contains forward-looking statements
and information regarding the operation of the Combined Company following the
Merger. Such forward-looking information includes statements concerning
operational benefits, cost savings and transaction-related expenses, among
others. The paragraphs below discuss some of the more significant factors that
may cause such forward-looking statements to differ from actual results and
that may cause the operating results of the Combined Company to differ
materially from the past results of Washington Mutual and Ahmanson as
individual companies. In addition to the other information set forth in this
Joint Proxy Statement/Prospectus, holders of Washington Mutual Common Stock
and Ahmanson Stockholders should consider the following before voting on the
Share Issuance/Merger Proposal and Merger Proposal, respectively.
Forward-Looking Statements May Not Prove Accurate. When used or incorporated
by reference in this Joint Proxy Statement/Prospectus, the words "anticipate,"
"estimate," "expect," "project" and similar expressions are intended to
identify forward-looking statements. Such statements are subject to certain
risks, uncertainties and assumptions, including those set forth below. Should
one or more of these risks or uncertainties materialize, or should underlying
assumptions prove incorrect, actual results may vary materially from those
anticipated, estimated, expected or projected. Several key factors that have a
direct bearing on Washington Mutual's ability to attain its goals for the
Combined Company are discussed below.
Expected Benefits of Combined Business May Not Be Achieved. Whether the
anticipated benefits of the Merger described under "The Merger--Reasons for
the Merger; Recommendations of the Boards of Directors" and "Management and
Operations of Washington Mutual Following the Merger" are ultimately achieved
will depend on a number of factors, including the ability of the Combined
Company to achieve operational and administrative cost savings at projected
levels within projected time frames and generate economies of scale and,
generally, the ability of the Combined Company to capitalize on its asset base
and strategic position. There can be no assurance that the expected benefits
of the Merger relative to the combined business will be achieved or that such
benefits will be achieved within the time periods anticipated. In addition,
when retail branches are consolidated or closed, financial institutions often
lose customers and deposits as a result. To the extent that the Combined
Company loses customers or deposits significantly in excess of anticipated
levels, the operations of the Combined Company could be materially adversely
affected, particularly in the short term. The forward-looking statements
assume, based on Washington Mutual's historical experience following
acquisitions, that the deposit base of both Washington Mutual and Home Savings
will remain substantially intact during the period presented in the forward-
looking statements. To the extent that the change in ownership of Ahmanson,
the consolidation of branches of Home Savings and WMBFA or other factors
result in a significant temporary or long-term loss of deposits, the Combined
Company's actual results of operations may vary materially from the forward-
looking information presented.
Integration Risks. In December 1996, through a merger with Keystone
Holdings, Washington Mutual acquired American Savings Bank ("ASB"), and, on
July 1, 1997, Washington Mutual consummated a business combination with Great
Western Financial Corporation ("Great Western"), each of which transactions
effectively doubled the size of Washington Mutual. As a result of those two
mergers, Washington Mutual became the third largest depository institution in
California, a state in which Washington Mutual had not previously had any
operations. The integration of ASB's operations is complete. The integration
of Great Western into Washington Mutual will continue until its anticipated
completion in October, 1998. In addition, in February 1998, Ahmanson completed
its acquisition of Coast and the integration of Coast's banking operations
into Home Savings is substantially complete.
Upon consummation of the Merger, Washington Mutual intends to merge Home
Savings into WMBFA, which will create the second largest depository
institution in California. At the same time, Washington Mutual is implementing
a program to test and document the readiness of its electronic systems,
programs and processes to recognize properly the year 2000. While Washington
Mutual does not believe that the process of making its systems, programs and
processes ready for year 2000 will result in a material cost, it is expected
that a substantial
23
<PAGE>
amount of management and staff time will be required on the year 2000 project.
In addition, the Federal Financial Institutions Examinations Council (the
"FFIEC") issues periodic guidelines that clarify federal regulatory
requirements for the testing and documentation of the readiness of an insured
depository institution's electronic systems, programs and processes to
recognize properly the year 2000. The FFIEC has recently published guidelines
that require additional date testing of Washington Mutual's systems, programs
and processes. These recent guidelines will cause Washington Mutual to perform
additional work and incur additional expense in order to be in complete
compliance with regulatory requirements. There can be no assurance that such
recent guidelines will not require additional work or cause Washington Mutual
to incur additional expenses beyond those that are currently contemplated by
Washington Mutual or delay the completion of Washington Mutual's Year 2000
preparations. In addition, there can be no assurance that the FFIEC or other
federal regulators will not issue new regulatory requirements that require
additional work by Washington Mutual and, if issued, that new regulatory
requirements will not increase the cost or delay the completion of Washington
Mutual's Year 2000 preparations. No assurance can be given that the ongoing
integration of Great Western into Washington Mutual, the completion of the
year 2000 project or the integration of Ahmanson into Washington Mutual will
proceed as anticipated or that the results of operations of the Combined
Company will not be adversely affected by difficulties and delays in these
projects.
Return on Incremental Cash and Capital. The forward-looking statements
estimate that the Combined Company will generate incremental cash and capital
from operations in excess of that which can be utilized in the Combined
Company's core lending business. The forward-looking statements assume that
such incremental cash will be invested at a 4% after-tax return and that
incremental capital will be leveraged and deployed in a manner to result in a
60 basis point after-tax spread. Washington Mutual believes that these returns
can be generated by purchasing loans, mortgage-backed securities or other
assets. To the extent that the Combined Company is unable to realize the
forecasted returns, the forecasts of net income contained in the forward-
looking statements may vary materially from actual results.
Concentration of Operations in California. Following the Merger, a
substantial portion of the Combined Company's loan portfolio, deposits and
operations will be in California. As a result, the financial condition and
results of operations of the Combined Company will be subject to general
economic conditions, and particularly the conditions in the single-family and
multi-family residential markets, in California. If economic conditions in
California worsen or if the market for residential real estate in California
declines, the Combined Company may suffer decreased net income or even losses
associated with higher default rates and decreased collateral values on its
existing portfolio, and may not be able to originate the volume or type of
loans or achieve the level of deposits currently anticipated.
The forward-looking statements regarding the Combined Company's results of
operations assume that the economy and real estate markets in the western U.S.
in general, and California in particular, will remain healthy. A worsening of
current economic conditions or a significant decline in real estate values in
the western U.S. as a whole or California alone could cause actual results to
vary materially from the forward-looking statements.
Entry Into New Markets. Ahmanson has more than 40 branches in Texas, a state
in which Washington Mutual does not currently conduct a banking business. No
assurance can be given that Washington Mutual's lack of experience with the
Texas markets will not adversely affect the Combined Company's business
activities following the Merger.
Risk of Loss of Key Personnel. The ability of the Combined Company to
operate efficiently, at least in the short term, will depend in part on its
ability to retain key management and operating personnel. If the Combined
Company is not able to retain a substantial number of such personnel, the
consolidation of the two companies may be more time-consuming, difficult and
expensive, which in turn may negatively affect the predicted cost savings.
Effect of Stock Price Changes on the Value of the Merger Consideration. The
Exchange Ratio is fixed at 1.12 shares of Washington Mutual Common Stock for
each share of Ahmanson Common Stock. Any change in
24
<PAGE>
the market price of Washington Mutual Common Stock prior to the Effective Time
will affect the implied value of the consideration Ahmanson Stockholders will
receive in the Merger. There can be no assurance as to the market price of
Washington Mutual Common Stock at any time prior to, at or after the Effective
Time.
Interest Rate Risk. Each of Washington Mutual and Ahmanson realizes its
income principally from the differential between the interest earned on loans,
investments and other interest-earning assets, and the interest paid on
deposits, borrowings and other interest-bearing liabilities. Washington Mutual
generally retains in its portfolio adjustable-rate mortgages ("ARMs") that it
originates and sells in the secondary market fixed-rate mortgages that it
originates. Ahmanson has largely followed the same policy. At the end of 1997,
long-term interest rates declined dramatically and the yield curve became and
has remained much flatter. In this type of interest rate environment,
borrowers tend to prefer fixed-rate loans to ARMs. Thus, the Combined
Company's ability to grow its assets by retaining ARMs in its portfolio could
be adversely affected if the current interest rate environment persists.
Competition. Washington Mutual and Ahmanson both face significant
competition in attracting and retaining deposits and in making loans in all of
their respective markets. The most direct competition has historically come
from other thrift institutions, credit unions and commercial banks doing
business in their primary markets in California, Washington, Oregon and
Florida. As with all banking organizations, however, both Washington Mutual
and Ahmanson have experienced increasing competition for customers' funds from
nonbanking sources, including mutual funds, corporate and government debt
securities and other investment alternatives. Additional competition for loans
comes principally from mortgage banking companies, consumer finance companies,
insurance companies and other institutional lenders. There can be no assurance
that competition from such sources will not increase in the future and
adversely affect the Combined Company's ability to achieve its financial goals
following the Merger.
25
<PAGE>
THE SPECIAL MEETINGS
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to holders of
Washington Mutual Common Stock and Washington Mutual Preferred Stock in
connection with the solicitation of proxies by the Washington Mutual Board for
use at the Washington Mutual Meeting to be held at :00 p.m., local time on
, 1998, at the Washington State Convention and Trade Center, 800
Convention Place, Seattle, Washington for the purposes set forth herein. This
Joint Proxy Statement/Prospectus is also being furnished to Ahmanson
Stockholders in connection with the solicitation of proxies by the Ahmanson
Board for use at the Ahmanson Meeting to be held at :00 a.m., local time on
, 1998, at at , , California, for the purposes set forth
herein.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
At the Washington Mutual Meeting, Washington Mutual shareholders will be
asked to vote upon (i) the Share Issuance/Merger Proposal and (ii) the
Articles Amendment Proposal. The approval of the Articles Amendment Proposal
is not a condition to consummation of the Merger. See "The Merger" and
"Proposed Amendment to Washington Mutual Articles of Incorporation--Increase
in Authorized Shares."
THE WASHINGTON MUTUAL BOARD HAS, BY UNANIMOUS VOTE OF ALL DIRECTORS PRESENT,
APPROVED EACH OF THESE PROPOSALS AND HAS DETERMINED THAT THEY ARE IN THE BEST
INTERESTS OF WASHINGTON MUTUAL AND ITS SHAREHOLDERS AND, ACCORDINGLY,
RECOMMENDS THAT THE HOLDERS OF WASHINGTON MUTUAL COMMON STOCK VOTE "FOR" EACH
OF THEM AND THAT THE HOLDERS OF WASHINGTON MUTUAL PREFERRED STOCK VOTE "FOR"
THE ARTICLES AMENDMENT PROPOSAL.
At the Ahmanson Meeting, Ahmanson Stockholders will be asked to consider and
vote upon the Merger Proposal, pursuant to which Ahmanson will be merged with
and into Washington Mutual with Washington Mutual as the surviving
corporation. Upon consummation of the Merger, (i) each outstanding share of
Ahmanson Common Stock will be converted into the right to receive 1.12 shares
of Washington Mutual Common Stock, with cash being paid in lieu of fractional
shares, and (ii) each outstanding share of Ahmanson Preferred Stock will be
converted into one share of Series G Preferred Stock. The terms, preferences,
limitations, privileges and rights of the Series G Preferred Stock will be
substantially identical to those of the Ahmanson Preferred Stock. As in the
case of the Ahmanson Preferred Stock, each share of Series G Preferred Stock
will continue to be represented by the outstanding Ahmanson Depositary Shares,
each representing a one-tenth interest in a share of the Series G Preferred
Stock until such time as the Ahmanson Depositary Shares are exchanged for New
Washington Mutual Depositary Shares. Holders of Ahmanson Preferred Stock and
Ahmanson Depositary Shares are not entitled, and are not being asked, to vote
on the Merger Proposal at the Ahmanson Meeting. For additional information
concerning the Ahmanson Board's consideration of the Merger Proposal, see "The
Merger--Background of the Merger."
THE AHMANSON BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
DETERMINED THAT THE TERMS OF THE MERGER ARE FAIR AND IN THE BEST INTERESTS OF
AHMANSON AND ITS STOCKHOLDERS AND, ACCORDINGLY, RECOMMENDS THAT AHMANSON
STOCKHOLDERS VOTE "FOR" THE MERGER PROPOSAL.
RECORD DATE AND VOTING
At the close of business on the Washington Mutual Record Date, there were
approximately holders of record of the shares of Washington Mutual
Common Stock outstanding. Each share of Washington Mutual Common Stock is
entitled to one vote on each of the matters properly presented at the
Washington Mutual Meeting. At the close of business on the Washington Mutual
Record Date, there were approximately holders of record of the 1,970,000
shares of Washington Mutual Preferred Stock outstanding. Each outstanding
share of Washington Mutual Preferred Stock is entitled to one vote on the
Articles Amendment Proposal. Only
26
<PAGE>
shareholders of record at the close of business on the Washington Mutual
Record Date will be entitled to notice of and to vote at the Washington Mutual
Meeting.
At the close of business on the Ahmanson Record Date, there were
approximately holders of record of the shares of Ahmanson Common Stock
outstanding. Each share of Ahmanson Common Stock is entitled to one vote on
the Merger Proposal and on any other matters properly presented at the
Ahmanson Meeting. Only Ahmanson Stockholders of record at the close of
business on the Ahmanson Record Date will be entitled to vote at the Ahmanson
Meeting.
PROXIES AND VOTING INSTRUCTIONS
Washington Mutual. Shares of Washington Mutual Common Stock and Washington
Mutual Preferred Stock represented by each proxy that is properly completed,
dated and executed will be voted at the Washington Mutual Meeting in
accordance with the instructions given thereon. If a properly executed proxy
is received without voting instructions, the shares of Washington Mutual
Common Stock and Washington Mutual Preferred Stock represented by such proxy
will be voted "FOR" approval of all matters on which such shares are entitled
to vote at the Washington Mutual Meeting. However, brokers do not have
discretionary authority to vote shares held in street name on either of the
two proposals. Therefore, the failure of beneficial owners of such shares to
give voting instructions to such broker will result in a broker non-vote which
will have the same effect as a "NO" vote on the Articles Amendment Proposal,
but will be disregarded and will have no effect on the outcome of the vote on
the Share Issuance/Merger Proposal.
As of the date of this Joint Proxy Statement/Prospectus, the Washington
Mutual Board is not aware of any business to be acted upon at the Washington
Mutual Meeting other than as described herein. If, however, any other matters
properly come before the Washington Mutual Meeting, the proxy also confers
discretionary authority on the persons named as proxies to vote upon such
matters. A Washington Mutual shareholder giving a proxy has the power to
revoke it at any time before it is voted. The proxy may be revoked by written
notice to the Secretary of Washington Mutual received at Washington Mutual's
offices at 1201 Third Avenue, Suite 1500, Seattle, Washington 98101, before
, 1998, by submitting a duly executed proxy bearing a later date, by
written notice delivered at the Washington Mutual Meeting to the Secretary of
Washington Mutual prior to the commencement of the Washington Mutual Meeting
or by appearing at the Washington Mutual Meeting and voting in person at such
meeting. Attendance at the Washington Mutual Meeting will not, in and of
itself, constitute revocation of a previously granted proxy.
Ahmanson. Shares of Ahmanson Common Stock represented by each proxy that is
properly completed, dated and executed will be voted at the Ahmanson Meeting
in accordance with the instructions given thereon by the applicable Ahmanson
Stockholder. If a properly executed proxy is received without voting
instructions, the shares of Ahmanson Common Stock represented by such proxy
will be voted "FOR" approval of all matters on which such shares are entitled
to vote at the Ahmanson Meeting. However, brokers do not have discretionary
authority to vote shares held in street name on the Merger Proposal.
Therefore, the failure of beneficial owners of such shares to give voting
instructions to such broker will result in a broker non-vote, and will have
the same effect as a "NO" vote on the Merger Proposal.
As of the date of this Joint Proxy Statement/Prospectus, the Ahmanson Board
is not aware of any business to be acted upon at the Ahmanson Meeting other
than the Merger Proposal. If, however, any other matters properly come before
the Ahmanson Meeting, the proxy also confers discretionary authority on the
persons named as proxies to vote upon such matters. An Ahmanson Stockholder
giving a proxy has the power to revoke it at any time before it is voted. The
proxy may be revoked by written notice to the Secretary of Ahmanson received
at Ahmanson's offices at 4900 Rivergrade Road, Irwindale, California 91706,
before the date of the Ahmanson Meeting, by submitting a duly executed proxy
bearing a later date or by written notice delivered in person at the Ahmanson
Meeting to the Secretary of Ahmanson prior to the commencement of the Ahmanson
Meeting. Attendance at the Ahmanson Meeting will not, in and of itself,
constitute revocation of a previously granted proxy.
27
<PAGE>
QUORUM; VOTES REQUIRED
Washington Mutual. For the vote on the Share Issuance/Merger Proposal, the
presence, in person or represented by proxy, of the holders of a majority of
the shares of Washington Mutual Common Stock issued and outstanding and
entitled to vote at the Washington Mutual Meeting will constitute a quorum.
For the vote on the Articles Amendment Proposal, the presence, in person or
represented by proxy, of the holders of a majority of (i) the shares of
Washington Mutual Common Stock issued and outstanding and entitled to vote at
the Washington Mutual Meeting (for the separate class vote of the holders of
Washington Mutual Common Stock) and (ii) the aggregate shares of Washington
Mutual Common Stock and Washington Mutual Preferred Stock issued and
outstanding and entitled to vote at the Washington Mutual Meeting (for the
vote of the holders of Washington Mutual Common Stock and Washington Mutual
Preferred Stock as a class) will constitute a quorum, respectively. For these
purposes, shares of Washington Mutual Common Stock and Washington Mutual
Preferred Stock that are present in person or represented by proxy will be
counted for quorum purposes regardless of whether the holder of such shares
fails to or abstains from voting on such proposals or whether a broker with
discretionary authority is unable to exercise such discretionary authority to
vote on such proposals.
Under NASDAQ rules, assuming a quorum is present, the approval of the Share
Issuance/Merger Proposal will require the affirmative vote of the holders of a
majority of the shares of Washington Mutual Common Stock voting thereon. As
described in "The Merger--Conditions to the Consummation of the Merger," such
shareholder approval is a condition to consummation of the Merger.
Approval of the Articles Amendment Proposal requires the affirmative vote of
the holders of at least (i) two-thirds of the combined shares of Washington
Mutual Common Stock and Washington Mutual Preferred Stock entitled to vote at
the Washington Mutual Meeting voting together as a class and (ii) two-thirds
of the shares of Washington Mutual Common Stock entitled to vote at the
Washington Mutual Meeting voting as a class. Approval of the Articles
Amendment Proposal is not a condition to consummation of the Merger.
Ahmanson. For the vote on the Merger Proposal, the presence, in person or
represented by proxy, of the holders of a majority of the shares of Ahmanson
Common Stock issued and outstanding and entitled to vote at the Ahmanson
Meeting will constitute a quorum.
Under Delaware law and the Ahmanson Amended and Restated Certificate of
Incorporation (the "Ahmanson Certificate") and the Bylaws of Ahmanson (the
"Ahmanson Bylaws"), approval of the Merger Proposal requires the affirmative
vote of the holders of a majority of the shares of Ahmanson Common Stock
entitled to vote at the Ahmanson Meeting.
SOLICITATION OF PROXIES
Each of Washington Mutual and Ahmanson will bear the cost of the
solicitation of proxies from its own stockholders, except that Washington
Mutual and Ahmanson will share equally the cost of printing this Joint Proxy
Statement/Prospectus. In addition to solicitation by mail, the directors,
officers and employees of Washington Mutual and Ahmanson and their
subsidiaries may, without being additionally compensated, solicit proxies from
stockholders of their respective companies by telephone, telegram, facsimile
or in person. Arrangements will also be made with brokerage houses and other
custodians, nominees and fiduciaries for the forwarding of solicitation
material to the beneficial owners of stock held of record by such persons, and
Washington Mutual and Ahmanson will reimburse such custodians, nominees and
fiduciaries for their reasonable out-of-pocket expenses in connection
therewith.
Washington Mutual has retained (" ") to assist Washington Mutual in
connection with its communications with its shareholders with respect to, and
to provide other services to Washington Mutual in connection with, the
Washington Mutual Meeting. will receive $ for its services and
reimbursement of out-of-pocket expenses in connection therewith. Washington
Mutual has agreed to indemnify against certain liabilities arising out of
or in connection with its engagement.
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In addition, in connection with Lehman Brothers' engagement as financial
advisor to the Washington Mutual Board, Washington Mutual anticipates that
certain employees of Lehman Brothers may communicate in person, by telephone
or otherwise with a limited number of institutions, brokers or other persons
who are Washington Mutual shareholders for the purpose of assisting in the
solicitation of proxies in favor of the Share Issuance/Merger Proposal and the
Articles Amendment Proposal. Lehman Brothers will not receive any fee for or
in connection with such solicitation activities by its employees apart from
the fee it is otherwise entitled to receive as described below. See "The
Merger--Opinions of Financial Advisors--Opinion of Lehman Brothers Inc."
Ahmanson has retained (" ") to assist Ahmanson in connection with its
communications with its stockholders with respect to, and to provide other
services to Ahmanson in connection with, the Merger. will receive $ for
its services and reimbursement of out-of-pocket expenses in connection
therewith. Ahmanson has agreed to indemnify against certain liabilities
arising out of or in connection with its engagement.
In addition, in connection with the engagement of CSFB as financial advisor
to the Ahmanson Board, Ahmanson anticipates that certain employees of each of
CSFB may communicate in person, by telephone or otherwise with a limited
number of institutions, brokers or other persons who are Ahmanson Stockholders
for the purpose of assisting in the solicitation of proxies in favor of the
Merger Proposal. CSFB will not receive any fee for or in connection with such
solicitation activities by its employees apart from the fee it is otherwise
entitled to receive as described below. See "The Merger--Opinions of Financial
Advisors--Opinion of CSFB."
SHAREHOLDERS OF WASHINGTON MUTUAL AND AHMANSON STOCKHOLDERS ARE REQUESTED TO
SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE-PREPAID ENVELOPE.
SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARDS. IF
THE MERGER IS CONSUMMATED, AHMANSON STOCKHOLDERS AND HOLDERS OF AHMANSON
DEPOSITARY SHARES WILL RECEIVE INSTRUCTIONS REGARDING THE PROPER PROCEDURES
FOR THE EXCHANGE OF THEIR STOCK CERTIFICATES AND RECEIPTS EVIDENCING
DEPOSITARY SHARES, RESPECTIVELY. SEE "THE MERGER--CONVERSION OF AHMANSON
CAPITAL STOCK."
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THE MERGER
GENERAL
The Boards of Directors of Washington Mutual and Ahmanson, by unanimous vote
of all directors present, have approved the Merger Agreement, which provides
for the merger, at the Effective Time, of Ahmanson with and into Washington
Mutual, with Washington Mutual as the surviving corporation. This section of
the Joint Proxy Statement/Prospectus describes certain aspects of the proposed
Merger, including the principal terms of the Merger Agreement. A copy of the
Merger Agreement is attached to this Joint Proxy Statement/Prospectus as
Appendix A and is incorporated in its entirety herein by reference. The
description set forth below of the terms of the Merger Agreement is qualified
in its entirety by reference thereto. All Washington Mutual shareholders and
Ahmanson Stockholders are urged to read the Merger Agreement in its entirety.
At the Effective Time, (i) each outstanding share of Ahmanson Common Stock
will be converted into the right to receive 1.12 shares of Washington Mutual
Common Stock, with cash being paid in lieu of fractional shares, and (ii) each
outstanding share of Ahmanson Preferred Stock will be converted into one share
of Series G Preferred Stock. The terms, preferences, limitations, privileges
and rights of the Series G Preferred Stock will be substantially identical to
those of the Ahmanson Preferred Stock. At the Effective Time, the separate
corporate existence of Ahmanson will terminate and the surviving corporation
of the merger will be Washington Mutual.
BACKGROUND OF THE MERGER
The Ahmanson Board, in consultation with Ahmanson's senior executive
management, has regularly considered a range of possible strategic options for
Ahmanson in order to enhance value for the stockholders of Ahmanson and to
remain competitive in a consolidating banking industry. The Ahmanson Board has
also periodically reviewed presentations by investment bankers with regard to
Ahmanson's strategic position, including possible business combinations
involving Ahmanson. Such strategic options have generally included (i)
pursuing acquisitions of other depository institutions, (ii) remaining
independent and focusing on improving financial performance through increasing
revenues from new business initiatives and continued reliance on share
repurchase programs and (iii) seeking to merge with another depository
institution. In furtherance of the first strategic option, in February 1997,
Ahmanson proposed a merger transaction with Great Western. However, the Great
Western Board of Directors rejected the proposal. In March 1997, Great Western
announced an agreement to merge with Washington Mutual; in June 1997, Ahmanson
withdrew its offer to merge with Great Western. Although Ahmanson completed
the acquisition of Coast in February 1998, Ahmanson's executive management
recognized that additional scale would be necessary in order to compete
effectively and to maximize stockholder value.
During the second half of February 1998, members of Ahmanson's senior
management team began to examine in detail Ahmanson's strategic options, in
particular a potential merger involving Ahmanson, and in connection therewith
consulted with Ahmanson's outside counsel and reviewed, among other things,
internally generated analytical, performance and valuation tools. In addition,
during that period, Charles R. Rinehart, Chairman of the Board and Chief
Executive Officer of Ahmanson, discussed Ahmanson's direction and strategic
business policy with members of the Ahmanson Board; such discussions included
the potential merger opportunities available to Ahmanson.
On February 23, 1998, representatives of Ahmanson held an initial discussion
with representatives of CSFB regarding the benefits that might be realized by
Ahmanson and the stockholders of Ahmanson from a business combination, and the
limitations inherent in Ahmanson's other strategic options. On February 26,
1998, representatives of Ahmanson's senior management met with representatives
of CSFB to further discuss Ahmanson's strategic options, including the
possibility of a merger of Ahmanson with another depository institution.
At a special meeting of the Ahmanson Board on March 3, 1998, which was also
attended by representatives of Ahmanson's outside counsel, representatives of
CSFB gave a presentation to the Ahmanson Board and to the
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senior executive management of Ahmanson concerning the strategic alternatives
available to Ahmanson. Such presentations included a discussion of the
difficulties Ahmanson would face over the long term in seeking to improve
financial performance, and thus stockholder value, either through acquisitions
of smaller depository institutions or through remaining independent and
continuing to focus on Ahmanson's new business initiatives and its share
repurchase programs. Such difficulties included the increasingly small number
of viable acquisition targets, given the consolidation in the banking and
thrift industries in recent years, the need for operational scale and greater
financial resources in competing with the resulting large banking and thrift
companies and the increasingly less efficient nature of the share repurchase
programs in light of the rising market prices for Ahmanson Common Stock. In
addition, CSFB reviewed the benefits to be achieved in a merger or other
business combination involving Ahmanson, and identified those entities that
CSFB believed to be the most attractive potential merger partners for
Ahmanson. CSFB discussed with the Ahmanson Board the possible premium to be
paid to Ahmanson Stockholders for their shares of Ahmanson Common Stock by
such merger candidates and the financial strength and potential of a
combination of Ahmanson with each of such merger candidates. CSFB explained to
the Ahmanson Board that Ahmanson was likely to maximize the premium if the
merger partner could account for the transaction as a pooling-of-interests,
and the Ahmanson Board was further advised that the Ahmanson-Coast Merger had
provided a unique opportunity for Ahmanson to account for a subsequent merger
as a pooling-of-interests. After a discussion of such factors, and the options
available to Ahmanson, the Ahmanson Board authorized CSFB to make contact with
the most desirable merger candidates in order to solicit bids from such
candidates, which bids were to be received within one week of such initial
contact. In addition, the Ahmanson Board ratified and approved the engagement
of CSFB as financial advisor to Ahmanson in connection with a possible merger
or other business combination involving Ahmanson.
Representatives of CSFB first contacted Washington Mutual and one other
merger candidate on March 4, 1998 to solicit from such entities an indication
of their interest in a potential business combination with Ahmanson. At that
time, Washington Mutual and the other merger candidate were informed that the
final bids with respect to a merger with Ahmanson would be due on March 11,
1998. On March 5, 1998, each of Washington Mutual and the other merger
candidate entered into confidentiality agreements with Ahmanson and each was
then sent a package of due diligence materials. On March 5, 1998, the
Corporate Development Committee of the Washington Mutual Board held a
telephone meeting in which the possibility of a proposed transaction with
Ahmanson was discussed, and management received authorization to continue its
analysis of the transaction. Washington Mutual personnel and outside
professional advisors commenced a review of such due diligence materials.
Thereafter, Ahmanson from time to time provided additional due diligence
materials to Washington Mutual and the other merger candidate upon their
request.
On March 11, 1998, Washington Mutual submitted a non-binding bid for
Ahmanson. Also on March 11, 1998, the other merger candidate informed CSFB
that it was interested in a merger with Ahmanson, but that it would not be in
a position to formally submit a bid by the deadline. After discussion among
Ahmanson, its financial advisors and its outside counsel, it was determined
that Washington Mutual's bid was not sufficiently near the range contemplated
by the Ahmanson Board in determining to pursue a strategic merger, and
Washington Mutual was requested to return the due diligence materials that had
been sent to it. Following discussions between Ahmanson, Washington Mutual and
their financial advisors on March 12 and 13, on March 13, Washington Mutual
submitted a revised offer of 1.12 shares of Washington Mutual Common Stock for
each share of Ahmanson Common Stock, for an aggregate consideration of
approximately $9.9 billion (based on the closing sales price of Washington
Mutual Common Stock on March 16, 1998). On the basis of that offer, Ahmanson
determined to pursue negotiations with Washington Mutual.
From March 14, 1998 until and including March 16, 1998, Washington Mutual
and Ahmanson conducted due diligence of each other's operations and
businesses, and representatives of Washington Mutual, Ahmanson and each of
their respective outside counsel negotiated the terms and conditions of the
Merger Agreement and the Option Agreement.
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On March 16, 1998, Ahmanson held a special meeting of the Ahmanson Board at
which the terms of the Merger Agreement, including the Exchange Ratio, and of
the Option Agreement were explained in detail to the Ahmanson Board by members
of Ahmanson's senior executive management, CSFB and Ahmanson's outside
counsel. At that special meeting, CSFB presented the reasons for and the
potential benefits of the Merger and rendered its opinion to the Ahmanson
Board that the Exchange Ratio was fair from a financial point of view to the
Ahmanson Stockholders. After a discussion of the Merger Agreement and the
transactions contemplated thereby and the Option Agreement, the Ahmanson Board
then unanimously approved and authorized the Merger Agreement and the Option
Agreement.
On March 16, 1998, Washington Mutual also held a special meeting of the
Washington Mutual Board, at which the terms of the Merger Agreement, including
the Exchange Ratio, and of the Option Agreement were explained in detail to
the Washington Mutual Board by members of Washington Mutual's senior executive
management, Lehman Brothers and Washington Mutual's outside counsel. At that
special meeting, Lehman Brothers presented the reasons for and the potential
benefits of the Merger and rendered its opinion to the Washington Mutual Board
that the Exchange Ratio was fair from a financial point of view to Washington
Mutual. After a discussion of the Merger Agreement and the transactions
contemplated thereby,the Washington Mutual Board then approved, by unanimous
vote of all directors present, the Merger Agreement. Effective March 16, 1998,
representatives of Washington Mutual and Ahmanson executed the Merger
Agreement and the Option Agreement.
REASONS FOR THE MERGER; RECOMMENDATIONS OF THE BOARDS OF DIRECTORS
Washington Mutual. The Washington Mutual Board believes that the Merger will
create a premier financial services company with the financial and managerial
resources to compete effectively in the rapidly changing market for banking
and financial services. The Combined Company will be the second largest
banking company on the West Coast and the seventh largest banking company in
the United States, based on pro forma total assets and total deposits as of
December 31, 1997.
The Washington Mutual Board determined that the Merger represents a unique
strategic fit between two financially sound institutions with similar business
strategies and complementary product capabilities. The Washington Mutual Board
believes that the Combined Company will be a stronger financial services
company than either Ahmanson or Washington Mutual is individually, with a
market leadership position in residential mortgage origination and with a
stronger, more competitive position from which to expand its consumer banking
franchise and commercial banking activities.
In reaching its conclusions, the Washington Mutual Board considered, among
other things: (i) information concerning the financial performance and
condition, business operations, capital levels, asset quality and prospects of
each of Washington Mutual and Ahmanson and their projected future results and
prospects as separate entities and on a combined basis; (ii) current industry,
economic and market conditions and trends, including the likelihood of
continuing consolidation and increasing competition in the banking and
financial services industries (and corresponding decrease in the number of
suitable merger partners for Washington Mutual), the growing importance of
financial resources and market position and economies of scale to a banking
institution's ability to compete successfully in this changing environment;
(iii) the structure of the transaction, including the ability to account for
the transaction as a pooling-of-interests and the ability to merge WMBFA and
Home Savings; (iv) the possibility of achieving significant cost savings and
operating efficiencies as a result of the Merger; (v) the terms of the Merger
Agreement, including the mutual covenants and conditions and the circumstances
under which Washington Mutual would receive a termination fee; (vi) the
opinion of its financial advisor described below as to the fairness to
Washington Mutual from a financial point of view of the Exchange Ratio (which
was determined through arm's-length negotiations between Washington Mutual and
Ahmanson) and the various analyses performed by its financial advisor in
connection with rendering its opinion, considered as a whole (see "The
Merger--Opinions of Financial Advisors--Opinion of Lehman Brothers Inc.");
(vii) the likelihood of obtaining the Required Regulatory Approvals; (viii)
the changing regulatory environment for banking and other financial services;
and (ix) the effect of the Merger on the depositors, employees, customers
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and communities served by Washington Mutual, including the effect of the
proposed branch and loan office consolidations on WMBFA and the communities in
which it operates. In reaching its decision to approve the Merger Agreement
and recommend the Share Issuance/Merger Proposal to shareholders, the
Washington Mutual Board did not assign any relative or specific weights to the
various factors considered, and individual directors may have given differing
weights to different factors.
The Washington Mutual Board believes that the Merger will further key
elements of its strategic plan by: (i) further strengthening Washington
Mutual's consumer banking franchise in California; (ii) providing an entry
into the Texas banking market; and (iii) obtaining cost savings and
efficiencies through consolidation of operations and facilities. In
particular, the following benefits were considered by the Washington Mutual
Board:
(i) The Merger will significantly increase Washington Mutual's share of
the consumer banking market in California, thereby building on the base
created by its recently completed acquisitions of ASB and Great Western.
WMBFA already has a statewide presence in California, with over 450
consumer financial centers and home loan centers in the state, of which
more than 150 are located in the Los Angeles and San Francisco areas. The
merger with Ahmanson will add over 350 branches and loan offices (before
consolidations) and substantially increase Washington Mutual's customer
base in California. As a result of the Merger, the Combined Company will
become the second largest depository institution in California (based on
deposits as of December 31, 1997);
(ii) Ahmanson has approximately 45 branches in Texas, providing
Washington Mutual with an entry into the Texas consumer banking market,
which has been a strategic objective of Washington Mutual; and
(iii) The consolidation of certain head office functions, back office
operations and retail branch and loan offices, together with cost savings
from reduced aggregate marketing expenses and implementation of its
technology platform, is expected to produce annual savings of operating
costs currently estimated by Washington Mutual's management at $199 million
and $330 million (in each case pre-tax) in 1999 and 2000, respectively. In
addition, the Combined Company will be one of the largest originators and
servicers of residential mortgage loans in the United States (ranking first
in California in residential loan originations based on combined 1997
origination volume). The Washington Mutual Board believes that the Merger
will significantly enhance Washington Mutual's ability to achieve the
economies of scale and efficiencies that are critical to compete
effectively in these business lines.
For additional details on anticipated cost savings from the Merger, see
"Management and Operations of Washington Mutual Following the Merger--
Operations After the Merger--Cost Savings."
The benefits described above are forward-looking statements, and actual
results may vary materially from such statements. See "Risk Factors" for
factors that may cause such variation.
BASED ON THE FOREGOING, THE WASHINGTON MUTUAL BOARD BELIEVES THAT THE MERGER
IS IN THE BEST INTERESTS OF WASHINGTON MUTUAL AND ITS SHAREHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF WASHINGTON MUTUAL COMMON STOCK VOTE
"FOR" APPROVAL OF THE SHARE ISSUANCE/MERGER PROPOSAL.
Ahmanson. In determining to approve the Merger Agreement and to recommend
approval of the Merger Proposal by the Ahmanson Stockholders, the Ahmanson
Board consulted with Ahmanson's senior executive management, as well as its
financial and legal advisors, and considered a number of factors, including
the following:
. Ahmanson's Strategic Options. The Ahmanson Board considered, based in
part on the presentations of Ahmanson's senior executive management and
its financial advisor, the strategic options available to Ahmanson for
enhancing stockholder value, including (a) pursuing additional
acquisitions, (b) remaining independent and (c) seeking to merge with
another depository institution. The Ahmanson Board concluded that the
available options to merging with another depository institution were
not
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likely to result in as great a value for the Ahmanson Stockholders as
the value expected to be realized in such a merger. In particular, the
Ahmanson Board took into account that the recent consolidation in the
banking industry, which has limited Ahmanson's ability to enhance
stockholder value through acquisitions, both by reducing the number of
available targets and increasing the likelihood that such targets would
generate significant interest from other potential acquirors. The
Ahmanson Board also noted that Ahmanson's recent strong financial
performance has been predicated upon, among other things, efficiency
gains and its share repurchase programs. Such share repurchase programs
have become increasingly less efficient as a result of the rise in
market prices for Ahmanson Common Stock and the Ahmanson Board believed
that additional efficiency gains would be more difficult to achieve. In
addition, the Ahmanson Board took into account that Ahmanson's success
in remaining independent and increasing revenue would depend upon the
outcome of recently initiated business strategies designed to increase
revenues, and would require meaningful capital investments over the next
few years for Ahmanson to remain competitive. In contrast, the Ahmanson
Board noted that a merger of Ahmanson with another depository
institution could provide a meaningful premium to the Ahmanson
Stockholders over current market prices for Ahmanson Common Stock, and
could address certain of the business limitations on Ahmanson's growth
noted immediately above. In addition, the Ahmanson Board also considered
the fact that Ahmanson was likely to maximize the premium if the merger
partner could account for the transaction as a pooling-of-interests, and
that the Ahmanson-Coast Merger had provided a unique opportunity for
Ahmanson to account for a subsequent merger as a pooling-of-interests.
. Economic and Competitive Environment. The Ahmanson Board considered the
operating environment for Ahmanson, including, but not limited to, the
unprecedented consolidation and increasing competition in the thrift,
banking and financial services industries both in California and
nationally. The Ahmanson Board considered the prospect for further
changes and consolidation in these industries and the difficulty
Ahmanson would face in competing with the resulting large depository
institutions. The Ahmanson Board noted the need for operational scale
and financial resources in order to remain competitive in such an
environment.
. Financial and Other Terms of the Merger Agreement. The Ahmanson Board
considered the terms of the Merger Agreement and the transactions
contemplated thereby, including the Option Agreement. The Ahmanson Board
took into account the fact that the Exchange Ratio reflects a 23%
premium for the Ahmanson Stockholders based on the closing price of
Ahmanson Common Stock on March 16, 1998 (the day immediately preceding
the public announcement of the Merger) and that the Merger would be
immediately and significantly accretive to Ahmanson's dividends per
share. In addition, the Ahmanson Board was advised that the stock market
had generally been receptive to "in-market" mergers, and that this
factor could positively affect the market price of the Washington Mutual
Common Stock. The Ahmanson Board also noted that the Ahmanson Preferred
Stock would be exchanged for a corresponding series of Washington Mutual
preferred stock. With respect to the Option Agreement and the
termination fees, the Ahmanson Board was aware that the existence of
such an agreement and such fees might discourage third parties from
seeking to acquire Ahmanson and that the Option Agreement might preclude
any third party from being able to effect a merger with Ahmanson that
would qualify for pooling-of-interests accounting treatment, but the
Ahmanson Board was also advised that such arrangements were virtually
standard in depository institution mergers and that Washington Mutual
had insisted upon such arrangements as a condition of the transaction.
See "--Termination of the Merger Agreement," "--Termination Fees" and
"--Option Agreement."
. Size and Competitiveness of Combined Company. The Ahmanson Board took
into account its assessment that the Combined Company might, as compared
to Ahmanson independently, better serve the convenience and needs of
Ahmanson's customers and the communities Ahmanson serves as a result of
being a substantially larger financial institution. The Ahmanson Board
considered that the Combined Company would potentially have access to
greater financial, managerial and technological resources and an ability
to offer an expanded range of products and services. The Ahmanson Board
noted that
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the Combined Company would rank second among depository institutions in
California in terms of total assets and seventh nationally (based on
deposits as of December 31, 1997).
. Advice of Financial Advisor and Fairness Opinion. The Ahmanson Board
considered the financial presentation of CSFB on March 16, 1998 and the
opinion of CSFB rendered to the Ahmanson Board on March 16, 1998 that,
as of such date, the Exchange Ratio was fair, from a financial point of
view, to the Ahmanson Stockholders. See "--Opinions of Financial
Advisors--Opinion of CSFB."
. Opportunities for Efficiencies and Cost Savings. The Ahmanson Board took
into account that, although no assurances can be given, there were
likely to be significant cost savings, operating efficiencies and
synergies available to the Combined Company from the Merger.
. Certain Financial and Other Information Concerning Ahmanson. The
Ahmanson Board took into account its familiarity with the business,
operations, financial condition and earnings of Ahmanson both on a
historical and a prospective basis.
. Certain Financial and Other Information Concerning the Combined
Company. Based in part on presentations by Ahmanson's senior management
and its financial advisor, the Ahmanson Board considered (a) the
business, operations, financial condition and earnings of Washington
Mutual and its long-term business strategies and direction and (b) the
pro forma financial condition, earnings and prospects of Washington
Mutual and Ahmanson on a combined basis after giving effect to the
Merger and the anticipated cost savings and operating synergies expected
to be achieved as a result of the Merger.
. Due Diligence Review. The Ahmanson Board considered the results of the
due diligence investigations of Washington Mutual conducted by Ahmanson
management and its financial advisor, including, among other things,
assessments of Washington Mutual's credit policies, asset quality,
adequacy of loan loss reserves, interest rate risk and year 2000
compliance, as well as Washington Mutual's continuing integration of
Great Western.
. Tax and Pooling-of-Interests Treatment of the Transaction. The Ahmanson
Board took into account the expectation that the Merger will generally
be a tax-free transaction to Ahmanson and its stockholders and will be
accounted for as a pooling-of-interests.
. Impact on Other Constituencies. The Ahmanson Board considered the
general impact that the Merger is expected to have on Ahmanson's various
constituencies, including its customers, employees and communities. In
this regard, the Ahmanson Board noted in particular the ability of
Ahmanson, pursuant to the Merger Agreement, to establish a $15,000,000
bonus plan for employees of Ahmanson below the rank of first vice
president to assist Ahmanson in the retention of employees important to
the on-going business of Ahmanson, with the allocation, and all other
terms and conditions of such bonuses, to be made by Ahmanson. The
Ahmanson Board also took note of the expressed need of Washington Mutual
for additional employees and staff in California. In addition, the
Ahmanson Board noted the ability of Ahmanson to establish additional
severance benefits for employees of Ahmanson to assist employees
displaced by the expected consolidation of the operations of Ahmanson
into Washington Mutual. Finally, the Ahmanson Board also considered
Washington Mutual's ratings under the Community Reinvestment Act and its
commitment to community needs in general.
In reaching its determination to approve and recommend the Merger, the
Ahmanson Board did not assign any relative or specific weights to the various
factors considered by it, and individual directors may have given differing
weights to different factors. The foregoing discussion of the information and
factors considered by the Ahmanson Board is not intended to be exhaustive but
is believed to include all material factors considered by the Ahmanson Board.
BASED ON THE FOREGOING, THE AHMANSON BOARD BELIEVES THAT THE MERGER IS IN
THE BEST INTERESTS OF AHMANSON AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT AHMANSON STOCKHOLDERS VOTE "FOR" APPROVAL OF THE MERGER PROPOSAL.
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OPINIONS OF FINANCIAL ADVISORS
Opinion of Lehman Brothers Inc. The Washington Mutual Board has retained
Lehman Brothers to act as its financial advisor in connection with the Merger.
Lehman Brothers has rendered its written opinion to the Washington Mutual
Board, dated March 16, 1998, to the effect that, based upon and subject to the
factors and assumptions set forth in such opinion, and as of the date of such
opinion, the Exchange Ratio was fair to Washington Mutual from a financial
point of view. The full text of the Lehman Brothers Opinion, which sets forth
assumptions made, procedures followed, matters considered and limits on the
review undertaken by Lehman Brothers, is attached hereto as Appendix B. The
summary set forth in this Joint Proxy Statement/Prospectus of the Lehman
Brothers Opinion is qualified in its entirety by reference to the full text of
the Lehman Brothers Opinion attached hereto.
No limitations were imposed by Washington Mutual on the scope of Lehman
Brothers' investigation or the procedures to be followed by Lehman Brothers in
rendering its opinion. Lehman Brothers was not requested to and did not make
any recommendation to the Washington Mutual Board as to the form or amount of
consideration to be offered by Washington Mutual to the Ahmanson Stockholders
in the Merger, which was determined through arm's-length negotiations between
the parties. In arriving at its opinion, Lehman Brothers did not ascribe a
specific range of value to Washington Mutual or Ahmanson, but rather made its
determination as to the fairness, from a financial point of view, of the
Exchange Ratio to be offered by Washington Mutual to the Ahmanson Stockholders
in the Merger on the basis of the financial and comparative analyses described
below. The Lehman Brothers Opinion is for the use and benefit of the
Washington Mutual Board and was rendered to the Washington Mutual Board in
connection with its consideration of the Merger. The Lehman Brothers Opinion
is not intended to be and does not constitute a recommendation to any holder
of Washington Mutual Common Stock as to how such holder should vote on the
Share Issuance/Merger Proposal. Lehman Brothers was not requested to opine as
to, and its opinion does not address, Washington Mutual's underlying business
decision to proceed with or effect the Merger.
In arriving at its opinion, Lehman Brothers reviewed and analyzed: (1) the
Merger Agreement and the specific terms of the Merger, (2) such publicly
available information concerning Washington Mutual and Ahmanson that it
believed to be relevant to its analysis including, without limitation, Form
10-K for the year ended December 31, 1996 and preliminary draft copies of Form
10-K for the year ended December 31, 1997, quarterly reports on Form 10-Q for
the periods ended March 31, June 30 and September 30, 1997 and recent press
releases of Washington Mutual and Ahmanson, (3) financial and operating
information with respect to the business, operations and prospects of
Washington Mutual and Ahmanson furnished to it by Washington Mutual and
Ahmanson, (4) a trading history of the common stocks of Washington Mutual and
Ahmanson and a comparison of that trading history with those of other
companies that it deemed relevant, (5) a comparison of the historical
financial results and present financial condition of Washington Mutual and
Ahmanson with those of other companies that it deemed relevant, (6) a
comparison of the financial terms of the Merger with the financial terms of
certain other recent transactions that it deemed relevant, (7) the potential
pro forma impact of the Merger on Washington Mutual and (8) the relative
contributions of Washington Mutual and Ahmanson to the Combined Company on a
pro forma basis. In addition, Lehman Brothers had discussions with the
management of Washington Mutual and Ahmanson concerning their respective
businesses, operations, assets, liabilities, financial conditions and
prospects, and the potential cost savings, operating synergies and strategic
benefits expected to result from a combination of the businesses of Washington
Mutual and Ahmanson, and undertook such other studies, analyses and
investigations as it deemed appropriate.
In arriving at its opinion, Lehman Brothers assumed and relied upon the
accuracy and completeness of the financial and other information used by it
without assuming any responsibility for independent verification of such
information, and further relied upon the assurances of management of
Washington Mutual and Ahmanson that they were not aware of any facts or
circumstances that would make such information inaccurate or misleading. With
respect to the financial projections of Washington Mutual and Ahmanson, upon
advice of Washington Mutual, Lehman Brothers assumed that such projections
were reasonably prepared on a basis
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reflecting the best currently available estimates and judgments of the
respective managements of Washington Mutual and Ahmanson, as to the future
financial performance of Washington Mutual and Ahmanson including, without
limitation, with respect to projected cost savings and operating synergies
expected to result from a combination of the businesses of Washington Mutual
and Ahmanson and that Washington Mutual and Ahmanson would perform, and that
the Combined Company will perform, substantially in accordance with such
projections. Upon advice of Washington Mutual and its legal and accounting
advisors, Lehman Brothers assumed that the Merger will qualify for pooling-of-
interests accounting treatment and as a reorganization within the meaning of
Section 368(a) of the Code, and therefore as a tax-free transaction. In
arriving at its opinion, Lehman Brothers did not conduct a physical inspection
of the properties and facilities of Ahmanson or Washington Mutual and did not
make or obtain any evaluations or appraisals of the assets or liabilities of
Ahmanson or Washington Mutual. In addition, Lehman Brothers noted that it is
not expert in the evaluation of loan portfolios or allowances for loan and
real estate owned losses and, upon advice of Washington Mutual, it assumed
that Ahmanson's current allowances for loan and real estate owned losses
(including for off-balance sheet items) were in the aggregate adequate to
cover all such losses. The Lehman Brothers Opinion necessarily was based upon
market, economic and other conditions as they existed on, and could be
evaluated as of, the date of its written opinion.
The following is a summary of the analyses Lehman Brothers performed in
arriving at its opinion. In connection with the preparation and delivery of
its opinion to the Washington Mutual Board, Lehman Brothers performed a
variety of financial and comparative analyses, as described below. The
preparation of a fairness opinion involves various determinations as to the
most appropriate and relevant methods of financial and comparative analysis
and the application of those methods to the particular circumstances and,
therefore, such an opinion is not readily susceptible to summary description.
Furthermore, in arriving at its opinion, Lehman Brothers did not attribute any
particular weight to any analysis or factor considered by it, but rather made
qualitative judgments as to the significance and relevance of each analysis
and factor. Accordingly, Lehman Brothers believes that its analyses must be
considered as a whole and that considering any portion of such analyses and
factors, without considering all analyses and factors, could create a
misleading or incomplete view of the process underlying its opinion. In its
analyses, Lehman Brothers made numerous assumptions with respect to industry
performance, general business and economic conditions and other matters, many
of which are beyond the control of Washington Mutual. Any estimates contained
in these analyses were not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or
less favorable than as set forth therein. In addition, analyses relating to
the value of businesses did not purport to be appraisals or to reflect the
prices at which businesses may actually be sold.
Purchase Price Analysis. Based upon the Exchange Ratio, the closing price of
Washington Mutual Common Stock on March 13, 1998 of $70.38 represented a value
to be received by holders of Ahmanson Common Stock of $78.82 per share. Based
on this implied transaction value per share, Lehman Brothers calculated the
price-to-market, price-to-book, price-to-tangible book, adjusted price-to-
tangible book (wherein price and tangible book value were adjusted to reflect
a tangible common equity to tangible assets ratio of 5.00%) and price-to-
earnings ratios, and the implied core deposit premium paid, in the Merger. The
implied transaction value per share yielded a premium to market price ratio of
24% over the closing price of Ahmanson Common Stock of $63.81 on March 13,
1998. This analysis also yielded a price-to-book ratio of 2.92x, a price-to-
tangible book value ratio of 3.77x, an adjusted price-to-tangible book value
ratio of 3.76x, a price to estimated 1998 earnings ratio of 19.7x and a price
to estimated 1999 earnings ratio of 17.1x, (based on median estimates of
Ahmanson's 1998 and 1999 earnings published by First Call as of March 13,
1998) and an implied core deposit premium of 21.3%. First Call is a data
service that monitors and publishes a compilation of earnings estimates
produced by selected research analysts regarding companies of interest to
institutional investors.
Comparable Transaction Analysis. Using publicly available information,
Lehman Brothers reviewed certain terms and financial characteristics,
including historical price-to-earnings ratios, the price-to-book ratio, the
price-to-tangible book ratio, the adjusted price-to-tangible book ratio and
the core deposit premium paid at the time of transaction announcement, of five
savings institution pooling-of-interests transactions (the "Comparable Thrift
Transactions Group") with values greater than $500 million publicly announced
since June 30, 1997 which
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Lehman Brothers deemed to be comparable to the Merger. The Comparable Thrift
Transactions Group considered by Lehman Brothers in its analysis consisted of
the following transactions (identified by acquiror/acquiree): Commercial
Federal Corp/First Colorado Bancorp, Inc., Fifth Third Bancorp/CitiFed
Bancorp, Inc., Fifth Third Bancorp/State Savings Co., Peoples Heritage
Financial Group/CFX Corp. and North Fork Bancorp./New York Bancorp, Inc. The
median values for these transactions for the price to latest twelve months
earnings ratio, price to estimated 1998 earnings ratio, price-to-book ratio,
price-to-tangible book ratio and adjusted price-to-tangible book ratio were
25.6x, 22.3x, 3.34x, 3.34x and 4.71x, respectively. The range of values for
these parameters were from 20.0x to 28.2x, 16.9x to 24.4x, 2.41x to 4.80x,
2.46x to 4.80x and 4.28x to 5.18x, respectively. These compared to transaction
ratios of 23.4x, 19.7x, 2.92x, 3.77x and 3.76x for the Merger based on the
closing price of Washington Mutual Common Stock on March 13, 1998. The range
of core deposit premiums paid in these transactions was 27% to 44%, with a
median value of 32% compared to an implied core deposit premium of 21% for the
Merger based on the closing price of Washington Mutual Common Stock on March
13, 1998.
Using publicly available information, Lehman Brothers also reviewed certain
terms and financial characteristics, including historical price-to-earnings
ratios, the price-to-book ratio, the price-to-tangible book ratio and the
adjusted price-to-tangible book ratio and the core deposit premium paid at the
time of transaction announcement, of eight banking company pooling-of-
interests transactions (the "Comparable Bank Transactions Group") with values
greater than $1 billion publicly announced since June 30, 1997 which Lehman
Brothers deemed to be relevant to the Merger. The Comparable Bank Transactions
Group considered by Lehman Brothers in its analysis consisted of the following
transactions (identified by acquiror/acquiree): Union Planters Corp./Magna
Group Inc., Regions Financial Corp./First Commercial Corp., First American
Corp./Deposit Guaranty Corp., National City Corp./First of America Bank Corp.,
First Union Corp./CoreStates Financial Corp., Banc One Corp./First Commerce
Corp., NationsBank Corp./Barnett Banks Inc. and First Union Corp./Signet
Banking Corp. The median values for these transactions for the price to latest
twelve months earnings ratio, price to estimated 1998 earnings, price-to-book
ratio, price-to-tangible book ratio and adjusted price-to-tangible book were
25.7x, 21.6x, 3.91x, 4.26x and 5.66x, respectively. These compared to
transaction multiples of 23.4x, 19.7x, 2.92x, 3.77x and 3.76x for the Merger
based on the closing price of Washington Mutual Common Stock on March 13,
1998. The median value for the core deposit premium paid in these transactions
was 40%, compared to an implied core deposit premium of 21% for Washington
Mutual/Ahmanson based on the closing price of Washington Mutual Common Stock
on March 13, 1998.
Because the reasons for and circumstances surrounding each of the
transactions analyzed were so diverse and because of the inherent differences
in the businesses, operations, financial conditions and prospects of
Washington Mutual, Ahmanson and the companies included in the Comparable
Thrift Transactions Group and the Comparable Bank Transactions Group, Lehman
Brothers believed that a purely quantitative comparable transaction analysis
would not be particularly meaningful in the context of the Merger. Lehman
Brothers believed that the appropriate use of a comparable transaction
analysis in this instance would involve qualitative judgments concerning the
differences between the characteristics of these transactions and the Merger
which would affect the acquisition values of the acquired companies and
Ahmanson.
Comparable Company Analysis. Using publicly available information, Lehman
Brothers compared the financial performance and stock market valuation of
Ahmanson with the following selected savings institutions (the "Comparable
Thrift Group") deemed relevant by Lehman Brothers: Astoria Financial Corp.,
Bank United Corp., Bay View Capital Corp., Commercial Federal Corp., Charter
One Financial, Dime Bancorp Inc., Downey Financial Corp., FirstFed Financial
Corp., Golden West Financial Corp., GreenPoint Financial Corp., People's Bank
(MHC), Peoples Heritage Financial Group, Sovereign Bancorp Inc., St. Paul
Bancorp Inc., Washington Federal Inc. and Webster Financial Corp. Indications
of such financial performance and stock market valuation included
profitability (return on average assets and return on average equity for the
latest quarter ended December 31, 1997 annualized, adjusted for non-recurring
items, of 0.85% and 16.7%, respectively, for Ahmanson, and medians of 0.95%
and 13.5%, respectively, for the Comparable Thrift Group); the ratio of
tangible equity to tangible assets (4.56% for Ahmanson and a median of 5.67%
for the Comparable Thrift Group); the ratio of price to estimated 1998
earnings (15.8x for Ahmanson and a median of 16.3x for the Comparable Thrift
Group); the
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ratio of price-to-book (3.10x for Ahmanson and a median of 2.28x for the
Comparable Thrift Group) and the ratio of price-to-tangible book (3.63x for
Ahmanson and a median of 2.59x for the Comparable Thrift Group). These ratios
for the Comparable Thrift Group are based on public financial statements as of
December 31, 1997, closing stock market prices on March 13, 1998 and earnings
per share are based on the most recent median estimates for 1998 and 1999
earnings published by the Institutional Broker Estimate System ("IBES"). IBES
is a data service that monitors and publishes compilations of earnings
estimates produced by selected research analysts regarding companies of
interest to institutional investors. These ratios for Ahmanson are based on
public financial statements as of December 31, 1997, First Call 1998 and 1999
earnings per share estimates as of March 13, 1998 and the closing price for
Ahmanson Common Stock of $63.81 as of close of business on March 13, 1998.
Because of the inherent differences in the businesses, operations, financial
conditions and prospects of Ahmanson and the companies included in the
Comparable Thrift Group, Lehman Brothers believed that a purely quantitative
comparable company analysis would not be particularly meaningful in the
context of the Merger. Lehman Brothers believed that the appropriate use of a
comparable company analysis in this instance would involve qualitative
judgments concerning the differences between Ahmanson and the companies
included in the Comparable Thrift Group which would affect the trading values
of the comparable companies and Ahmanson.
Discounted Cash Flow Analysis. Lehman Brothers discounted four years of
estimated cash flows of Ahmanson and an estimated terminal value of Ahmanson
Common Stock, assuming a dividend rate sufficient to maintain a tangible
capital ratio (defined as tangible common equity divided by tangible assets)
of 5.50% and using a range of discount rates from 12% to 16%. Lehman Brothers
derived an estimate of a range of terminal values by applying multiples
ranging from 14x to 18x estimated year-end 2001 net income. These rates and
values were chosen to reflect different assumptions regarding the required
rates of return of holders or prospective buyers of Ahmanson Common Stock. In
connection with this analysis, Washington Mutual management provided Lehman
Brothers with net income projections. This analysis, and its underlying
assumptions, yielded a range of values for Ahmanson Common Stock from
approximately $77.85 to $86.10 per share, as compared to a per share
transaction value of $78.82, based on the closing price of Washington Mutual
Common Stock on March 13, 1998.
Pro Forma Merger Analysis. Lehman Brothers analyzed the impact of the Merger
on Washington Mutual's estimated earnings per share based on the most recent
estimates for the 1998 and 1999 earnings of Washington Mutual and Ahmanson
published by First Call and assumed growth rates of 15.0% and 11.0% from 1999
to 2000 for Washington Mutual and Ahmanson, respectively. In connection with
this analysis, management of each of Washington Mutual and Ahmanson provided
Lehman Brothers with projections for cost savings and operational synergies
from the Merger, which projections were incorporated in Lehman Brothers'
analyses. Based on such First Call estimates, assumed growth rates and
management projections of cost savings and operational synergies, Lehman
Brothers concluded that the Merger would result in dilution of 1.0% to
Washington Mutual's earnings per share in 1999 and accretion of 3.0% to
Washington Mutual's earnings per share in 2000.
Contribution Analysis. Lehman Brothers analyzed the respective contributions
of Ahmanson and Washington Mutual to the Combined Company's pro forma balance
sheet as of December 31, 1997 and pro forma historic net income for 1997,
without giving effect to any cost savings or operational synergies resulting
from the Merger. This analysis showed that Ahmanson would have contributed 35%
of total assets, 35% of total gross loans, 38% of total equity and 37% of
common equity on a pro forma basis as of December 31, 1997 and that Ahmanson's
contribution to the Combined Company's pre-tax net income, adjusted for non-
recurring items, and net income, adjusted for non-recurring items, would have
been 31% and 32%, respectively. This analysis also showed that, based on First
Call earnings estimates for 1998, without giving effect to any cost savings or
operational synergies resulting from the Merger, Ahmanson's contribution to
the Combined Company's net income would be 31% for 1998. Based upon the
Exchange Ratio, Ahmanson Stockholders would own an estimated 35.4% of the
Combined Company upon completion of the Merger.
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Lehman Brothers is an internationally recognized investment banking firm.
Lehman Brothers, as part of its investment banking business, is continuously
engaged in the valuation of businesses and securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes. The Washington Mutual Board
retained Lehman Brothers based upon Lehman Brothers' experience and expertise
and its familiarity with Washington Mutual and transactions similar to the
Merger. Pursuant to a letter agreement dated March 11, 1998, between
Washington Mutual and Lehman Brothers, Washington Mutual has agreed to pay
Lehman Brothers (i) a retainer of $400,000 paid upon signing of the letter
agreement, (ii) a fee of $3,600,000 upon delivery of the Lehman Brothers
Opinion and the signing of the Merger Agreement and (iii) a fee of $20 million
(less any amounts paid to Lehman Brothers under (i) and (ii)) for its services
in connection with the Merger upon consummation thereof. The letter agreement
with Lehman Brothers also provides that Washington Mutual will reimburse
Lehman Brothers for its out-of-pocket expenses and indemnify Lehman Brothers
and certain related persons and entities against certain liabilities,
including liabilities under securities laws, incurred in connection with its
services thereunder. Lehman Brothers has performed various investment banking
services for Washington Mutual and for Ahmanson in the past, and has received
customary fees for such services. In the ordinary course of its business,
Lehman Brothers and its affiliates actively trade in the debt and equity
securities of the Washington Mutual and Ahmanson for their own account and for
the accounts of its customers and, accordingly, may at any time hold a long or
short position in such securities. In connection with Lehman Brothers'
engagement as financial advisor to Washington Mutual, Washington Mutual
anticipates that certain employees of Lehman Brothers may communicate in
person, by telephone or otherwise with a limited number of institutions,
brokers or other persons who are Washington Mutual shareholders or Ahmanson
Stockholders for the purpose of assisting in the solicitation of proxies in
favor of the Share Issuance/Merger Proposal and the Articles Amendment
Proposal (in the case of the Washington Mutual shareholders) and the Merger
Proposal (in the case of the Ahmanson Stockholders). Lehman Brothers will not
receive any fee for or in connection with such solicitation activities by its
employees apart from the fee it is otherwise entitled to receive as described
above.
Opinion of CSFB. CSFB has acted as financial advisor to the Ahmanson Board
in connection with the Merger. CSFB was selected by the Ahmanson Board based
on CSFB's experience, expertise and familiarity with Ahmanson and its
business. CSFB is an internationally recognized investment banking firm and is
regularly engaged in the valuation of businesses and securities in connection
with mergers and acquisitions, leveraged buyouts, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements, and valuations for corporate and other
purposes.
In connection with CSFB's engagement, the Ahmanson Board requested that CSFB
evaluate the fairness of the Exchange Ratio to Ahmanson Stockholders from a
financial point of view. On March 16, 1998, at a meeting of the Ahmanson Board
held to review and consider the terms of the Merger, CSFB rendered to the
Ahmanson Board an oral opinion (which was subsequently confirmed by delivery
of a written opinion dated March 16, 1998) to the effect that, as of such
date, and based upon and subject to various qualifications and assumptions
described therein, the Exchange Ratio was fair to the Ahmanson Stockholders
from a financial point of view.
THE FULL TEXT OF CSFB OPINION, WHICH SETS FORTH THE PROCEDURES FOLLOWED,
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW UNDERTAKEN,
IS ATTACHED AS APPENDIX C TO THIS JOINT PROXY STATEMENT/PROSPECTUS AND IS
INCORPORATED HEREIN BY REFERENCE. AHMANSON STOCKHOLDERS ARE URGED TO READ THIS
OPINION CAREFULLY IN ITS ENTIRETY. CSFB HAS CONSENTED TO SUCH INCLUSION OF ITS
OPINION AND TO THE REFERENCES TO THAT OPINION IN THIS AND CERTAIN OTHER
SECTIONS OF THE JOINT PROXY STATEMENT/PROSPECTUS, BUT BY SO DOING, CSFB DOES
NOT ADMIT THAT IT COMES WITHIN THE CATEGORY OF PERSONS WHOSE CONSENT IS
REQUIRED UNDER SECTION 7 OF THE SECURITIES ACT OR THE RULES AND REGULATIONS OF
THE COMMISSION THEREUNDER, NOR DOES CSFB THEREBY ADMIT THAT IT IS AN "EXPERT"
AS THAT TERM IS USED IN THE SECURITIES ACT OR THE RULES AND REGULATIONS OF THE
COMMISSION THEREUNDER WITH RESPECT TO ANY PART OF THE REGISTRATION STATEMENT
OF WHICH THIS JOINT PROXY STATEMENT/PROSPECTUS FORMS A PART. THE CSFB OPINION
IS DIRECTED TO THE AHMANSON BOARD AND RELATES ONLY TO THE FAIRNESS OF THE
EXCHANGE RATIO TO AHMANSON STOCKHOLDERS FROM A FINANCIAL
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POINT OF VIEW, DOES NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY
RELATED TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY AHMANSON
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE AHMANSON SPECIAL
MEETING. THE SUMMARY OF THE CSFB OPINION SET FORTH IN THIS JOINT PROXY
STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL
TEXT OF SUCH OPINION.
In arriving at its opinion, CSFB reviewed the Merger Agreement and certain
publicly available business and financial information relating to Ahmanson and
Washington Mutual. CSFB also reviewed certain other information relating to
Ahmanson and Washington Mutual, including financial forecasts provided to CSFB
by Ahmanson and Washington Mutual, and met with the managements of Ahmanson
and Washington Mutual to discuss the businesses and prospects of Ahmanson and
Washington Mutual. CSFB also considered certain financial and stock market
data of Ahmanson and Washington Mutual and compared that data with similar
data for other publicly held companies in businesses similar to those of
Ahmanson and Washington Mutual, and considered the financial terms of certain
other business combinations and other transactions which were recently
effected. CSFB also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which
CSFB deemed relevant.
In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the information provided to or otherwise
reviewed by CSFB and relied on such information being complete and accurate in
all material respects. With respect to the financial forecasts (including the
estimates of future cost savings and operating synergies expected to be
achieved as a result of the Merger), CSFB assumed that such forecasts were
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the respective managements of Ahmanson and Washington Mutual.
In addition, CSFB was not requested to make, and did not make, an independent
evaluation or appraisal of the assets or liabilities (contingent or otherwise)
of Ahmanson or Washington Mutual, nor was CSFB furnished with any such
evaluations or appraisals. CSFB's opinion was necessarily based upon
financial, economic, market and other conditions as they existed and could be
evaluated on the date of its opinion. CSFB did not express any opinion as to
the actual value of the Washington Mutual Common Stock when issued pursuant to
the Merger or the prices at which the Washington Mutual Common Stock will
trade subsequent to the Merger.
In preparing its opinion to the Ahmanson Board, CSFB performed a variety of
financial and comparative analyses, including those described below. The
summary of CSFB's analyses set forth below does not purport to be a complete
description of the analyses underlying CSFB's opinion, but, rather, sets forth
a description of the material analyses performed by CSFB for purposes of such
opinion. The preparation of a fairness opinion is a complex analytic process
involving various determinations as to the most appropriate and relevant
methods of financial analyses and the application of those methods to the
particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. In arriving at its opinion, CSFB made
qualitative judgments as to the significance and relevance of each analysis
and factor considered by it. Accordingly, CSFB believes that its analyses must
be considered as a whole and that selecting portions of its analyses and
factors, without considering all analyses and factors, could create a
misleading or incomplete view of the processes underlying such analyses and
its opinion. In its analyses, CSFB made numerous assumptions with respect to
Ahmanson, Washington Mutual, industry performance, regulatory, general
business, economic, market and financial conditions, and other matters, many
of which are beyond the control of Ahmanson and Washington Mutual. No company,
transaction or business used in such analyses as a comparison is identical to
Ahmanson, Washington Mutual or the proposed Merger, nor is an evaluation of
the results of such analyses entirely mathematical; rather, such analyses
involve complex considerations and judgments concerning financial and
operating characteristics and other factors that could affect the acquisition,
public trading or other values of the companies, business segments or
transactions being analyzed. The estimates contained in such analyses and the
ranges of valuations resulting from any particular analysis are not
necessarily indicative of actual values or predictive of future results or
values, which may be significantly more or less favorable than those suggested
by such analyses. In addition, analyses relating to the value of businesses or
securities do not purport to be appraisals or to reflect the prices at which
businesses or securities actually may be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty. CSFB's opinion
and financial analyses were only one
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of many factors considered by the Ahmanson Board in its evaluation of the
proposed Merger and should not be viewed as determinative of the views of the
Ahmanson Board or management with respect to the Exchange Ratio or the
proposed Merger.
The following is a summary of each of the material financial analyses
performed by CSFB in connection with its opinion:
Calculation of Implied Value of Exchange Ratio. CSFB calculated the implied
value of the Exchange Ratio based on the closing stock price of Washington
Mutual Common Stock on March 16, 1998, which indicated an implied equity value
for Ahmanson of approximately $80.36 per share. The implied equity value of
$80.36 per share equated to implied multiples for Ahmanson's estimated
calendar 1998 earnings per share, estimated calendar 1999 earnings per share
and most recent book value and tangible book value of 20.0x, 17.4x, 3.0x and
3.8x, respectively, an implied premium to the closing price of Ahmanson Common
Stock on March 16, 1998 of approximately 23% and an implied premium to
Ahmanson's deposits of approximately 21%. CSFB then compared these results
with those derived from the analyses described below.
Selected Transactions Analysis. Using publicly available information, CSFB
analyzed the purchase prices and implied transaction multiples paid in two
sets of thrift transactions (collectively, the "Selected Transactions"). The
first set includes 18 thrift transactions which were announced since
January 1, 1997 and had a transaction value at announcement in excess of $300
million (collectively, the "National Transactions"). The second set includes
the following five largest thrift transactions in California which were
announced since January 1, 1996: H. F. Ahmanson & Co./Coast Savings Financial,
Inc.; Washington Mutual, Inc./Great Western Financial Corporation; First
Nationwide Bank/Cal Fed Bancorp, Inc.; Washington Mutual, Inc./American
Savings Bank; and Golden State Bancorp/First Nationwide Parent Holdings
(collectively, the "California Transactions"). All multiples were based on
information available at the time of announcement of the transaction. This
analysis indicated a range of multiples for the National Transactions of
estimated current-year earnings per share, estimated one-year forward earnings
per share and most recent book value and tangible book value of 11.9x to 24.1x
(with an average of 18.4x), 12.6x to 22.7x (with an average of 17.4x), 1.7x to
4.8x (with an average of 2.4x) and 1.7x to 4.8x (with an average of 2.5x),
respectively. In addition, CSFB reviewed the premiums to deposits paid in the
National Transactions, which indicated a range of premiums to deposits of
approximately 7 percent to 49 percent (with an average of 30 percent). This
analysis also indicated a range of multiples for the California Transactions
of estimated current-year earnings per share, estimated one-year forward
earnings per share and most recent book value and tangible book value of 11.0x
to 17.8x (with a median of 16.1x), 8.3x to 15.7x (with a median of 14.4x),
1.5x to 2.7x (with a median of 1.9x) and 1.5x to 3.1x (with a median of 2.0x),
respectively. In addition, CSFB reviewed the premiums to deposits paid in the
California Transactions, which indicated a range of premiums to deposits of
approximately 3% to 20% (with a median of 9%). CSFB then calculated an implied
per-share equity reference range for Ahmanson by applying the range of
multiples derived for the Selected Transactions to corresponding financial
data of Ahmanson, which indicated an implied equity reference range for
Ahmanson of approximately $70 to $80 per share based on the Selected
Transactions.
Discounted Cash Flow Analysis. CSFB estimated the present value of the
future streams of after-tax free cash flows that Ahmanson could produce on a
stand-alone basis through calendar year 2002 based on a projection of capital
available for distribution to Ahmanson Stockholders in the form of dividends
or share repurchases. CSFB also estimated the present value of the future
streams of after-tax cash flows that Ahmanson could produce through calendar
year 2002 based on a projection of capital available for distribution to the
Ahmanson Stockholders in the form of dividends or share repurchases after
giving effect to, among other things, certain cost savings and revenue
enhancements anticipated by the management of Washington Mutual to result from
the Merger. The range of estimated terminal values was calculated by applying
multiples ranging from 13x to 15x to the projected 2002 net income of
Ahmanson. The free cash flow streams and estimated terminal values were then
discounted to present values using discount rates ranging from 12% to 14%.
This analysis indicated an implied equity reference range for Ahmanson of
approximately $52 to $62 per share, without giving effect to
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certain cost savings and revenue enhancements anticipated by the management of
Washington Mutual to result from the Merger, and approximately $63 to $76 per
share after giving effect to such anticipated cost savings and revenue
enhancements.
Selected Companies Analysis. CSFB compared certain financial, operating and
stock market data of Ahmanson to corresponding data of selected publicly
traded companies in the thrift industry. Such companies included: Washington
Mutual, Inc.; Golden West Financial Corporation; Charter One Financial, Inc.;
Greenpoint Financial Corp.; and Dime Bancorp, Inc. (collectively, the
"Selected Companies"). Earnings per share estimates for the Selected Companies
and Ahmanson were based on estimates of selected investment banking firms as
compiled by First Call. All multiples were based on closing stock prices on
March 13, 1998. This analysis indicated a range of multiples for the Selected
Companies of estimated calendar 1998 earnings per share, estimated calendar
1999 earnings per share and most recent book value and tangible book value of
14.1x to 17.5x (with a median of 14.8x), 12.5x to 15.5x (with a median of
13.1x), 1.7x to 3.4x (with a median of 2.4x) and 2.0x to 7.7x (with a median
of 3.3x), respectively. CSFB then calculated an implied equity reference range
for Ahmanson by applying these multiples to corresponding financial data of
Ahmanson, which indicated an implied equity reference range for Ahmanson of
approximately $60 to $70 per share.
Contribution Analysis. CSFB analyzed the relative contributions of Ahmanson
and Washington Mutual to, among other things, the estimated net income of the
pro forma Combined Company for the year ended December 31, 1997 (before giving
effect to certain cost savings and revenue enhancements which the management
of Washington Mutual estimated could be achieved in the Merger), the total
assets of the pro forma Combined Company as at December 31, 1997 and the
tangible common equity of the pro forma Combined Company as at December 31,
1997. This analysis indicated that, without giving effect to such cost savings
and revenue enhancements, Ahmanson would contribute approximately 32% of the
net income, 35% of the total assets and 35% of the tangible common equity of
the Combined Company. Based on the Exchange Ratio, current Ahmanson
Stockholders and Washington Mutual shareholders would own approximately 36%
and 64%, respectively, of the Combined Company upon consummation of the
Merger.
Pro Forma Merger Analysis. CSFB analyzed the potential pro forma effect of
the Merger on Ahmanson's earnings per share during the calendar years 1999 and
2000 and on Ahmanson's tangible book value and dividends per share on a stand-
alone basis. This analysis indicated that the proposed Merger would be
accretive to earnings per share in each of the years analyzed, break-even to
tangible book value per share and accretive to Ahmanson's dividends per share,
assuming certain cost savings and revenue enhancements anticipated by the
management of Washington Mutual to result from the Merger are achieved. CSFB
also analyzed the potential pro forma effect of the Merger on Washington
Mutual's earnings per share during the calendar years 1999 and 2000 relative
to Washington Mutual on a stand-alone basis. This analysis indicated that the
Merger would be dilutive to Washington Mutual's earnings per share in calendar
year 1999, and accretive in calendar year 2000, assuming the cost savings and
revenue enhancements anticipated by the management of Washington Mutual to
result from the Merger are achieved and before taking into account any one-
time charges associated with the Merger.
Miscellaneous. Pursuant to the terms of CSFB's engagement, Ahmanson has
agreed to pay CSFB for its services in connection with the proposed Merger an
aggregate financial advisory fee of 0.25% of the fair market value of the
consideration to be received by the holders of Ahmanson Common Stock (which
would be approximately $25 million based on the aggregate transaction value of
$9.9 billion as of the date the Merger was announced, although the actual fee
payable will depend upon the value of the Washington Mutual Common Stock as of
the Effective Time), of which $2 million was payable upon execution of the
Merger Agreement, $2 million will be payable upon mailing of a proxy statement
to Ahmanson Stockholders describing the Merger, and the balance will be
payable upon consummation of the Merger. Ahmanson also has agreed to reimburse
CSFB for all reasonable out-of-pocket expenses and to indemnify CSFB and
certain related individuals and entities against certain liabilities,
including liabilities under the federal securities laws, arising out of CSFB's
engagement.
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CSFB has in the past provided financial services to Ahmanson and Washington
Mutual unrelated to the Merger, for which CSFB has received compensation. In
the ordinary course of business, CSFB and its affiliates may actively trade
the debt and equity securities of both Ahmanson and Washington Mutual for
their own accounts and for the accounts of customers, and accordingly, may at
any time hold a long or short position in such securities.
CONVERSION OF AHMANSON CAPITAL STOCK
Conversion of Ahmanson Common Stock. At the Effective Time, each outstanding
share of Ahmanson Common Stock, other than shares held in Ahmanson's treasury,
will automatically be converted into the right to receive 1.12 shares of
Washington Mutual Common Stock, with cash being paid in lieu of fractional
shares.
Conversion of Ahmanson Preferred Stock. At the Effective Time, each
outstanding share of Ahmanson Preferred Stock will be converted into the right
to receive one share of Series G Preferred Stock. The terms of the Series G
Preferred Stock will be substantially identical to the terms of the Ahmanson
Preferred Stock. At the Effective Time, Washington Mutual will assume the
obligations of Ahmanson under the Deposit Agreement, dated as of August 5,
1993 (the "Preferred Stock Deposit Agreement"), between Ahmanson and Chemical
Trust Company of California (now known as Chase Manhattan Bank and Trust
Company, National Association), as depositary (the "Preferred Stock
Depositary"). Washington Mutual will instruct the Preferred Stock Depositary
to treat the shares of Series G Preferred Stock received by it in exchange for
shares of Ahmanson Preferred Stock as newly deposited securities under the
Preferred Stock Deposit Agreement. In accordance with the terms of the
Preferred Stock Deposit Agreement, receipts evidencing Ahmanson Depositary
Shares ("Ahmanson Depositary Receipts") then outstanding would thereafter
represent New Washington Mutual Depositary Shares. Washington Mutual will
request that the Preferred Stock Depositary call for surrender all outstanding
Ahmanson Depositary Receipts to be exchanged for receipts evidencing New
Washington Mutual Depositary Shares ("New Washington Mutual Depositary
Receipts") promptly after the Effective Time. See "Description of Washington
Mutual Capital Stock."
Treasury Stock. Each outstanding share of Ahmanson Common Stock held in
Ahmanson's treasury would be canceled at the Effective Time and would be
retired, and no securities of Washington Mutual or other consideration would
be delivered in exchange therefor.
Conversion of Common Stock Options. At the Effective Time, each Ahmanson
Common Stock Option that is outstanding and unexercised immediately prior to
the Effective Time (whether or not vested) would be converted automatically
into a Replacement Option with (i) the number of shares of Washington Mutual
Common Stock subject to the Replacement Option being equal to the product of
the number of shares of Ahmanson Common Stock subject to the Ahmanson Common
Stock Option multiplied by the Exchange Ratio and rounded down to the nearest
share and (ii) the exercise price per share of Washington Mutual Common Stock
subject to such Replacement Option being equal to the aggregate exercise price
for the shares of Ahmanson Common Stock which were purchasable pursuant to
such Ahmanson Common Stock Option divided by the number of full shares of
Washington Mutual Common Stock subject to the Replacement Option (rounded up
to the nearest cent). Each Replacement Option will have the same terms as the
Ahmanson Common Stock Option from which it was converted. See "--Interests of
Certain Persons in the Merger."
EFFECTIVE TIME
The Effective Time will be the date and time when the Merger becomes
effective, which shall be upon the occurrence of the filing of a certificate
of merger with the Secretary of State of the State of Delaware and the filing
of articles of merger with the Secretary of State of the State of Washington,
or such later date and time as may be set forth in such certificate and
articles. The parties shall cause the Effective Time to occur on (i) the first
day between the 15th and 29th calendar days of a month which is at least five
business days after the last of the closing conditions has been satisfied or
(ii) such other date as Washington Mutual and Ahmanson may agree in writing.
The Merger Agreement may be terminated by either party if, among other
reasons, the Merger has
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not have been consummated on or before March 31, 1999. See "--Conditions to
the Consummation of the Merger" and "--Termination of the Merger Agreement"
below.
REPRESENTATIONS AND WARRANTIES
In the Merger Agreement, each of Washington Mutual and Ahmanson has made
certain representations and warranties to the other regarding, among other
things, (i) its corporate organization and existence; (ii) its capitalization;
(iii) its subsidiaries; (iv) its corporate power and authority to carry on its
business and to enter into, and its due authorization, execution and delivery
of, the Merger Agreement; (v) required governmental and third party approvals;
(vi) that neither the Merger Agreement nor the transactions contemplated
therein violates its charter and bylaws, applicable law and certain material
agreements; (vii) timely filing, compliance with applicable form and accuracy
of required regulatory reports; (viii) its financial statements and filings
with the Commission; (ix) the conduct of its business since December 31, 1996;
(x) the absence of certain material legal proceedings or regulatory actions;
(xi) the absence of certain materially adverse changes in its business since
December 31, 1996; (xii) its compliance with applicable law; (xiii) its
investment banking arrangements; (xiv) its employee benefit plans and related
matters; (xv) environmental liabilities; (xvi) the filing and accuracy of its
tax returns; (xvii) the accuracy of books and records; and (xviii) the
accurateness and completeness of its representations and warranties.
In addition, Ahmanson has made certain other representations and warranties
to Washington Mutual regarding, among other things, (i) the absence of certain
defaults under material contracts; (ii) labor matters; (iii) that neither the
Merger Agreement, the Merger, the Option Agreement nor the exercise of the
Option results or will result in the grant of any rights to any person under
the Ahmanson Rights Plan; (iv) insurance coverage; and (v) year 2000 software
compliance issues.
CONDUCT OF BUSINESS PENDING THE MERGER AND OTHER AGREEMENTS
Except as expressly contemplated by the Merger Agreement or in a disclosure
schedule thereto or consented to in writing by the other party, Washington
Mutual and Ahmanson have each agreed to, and to cause their respective
subsidiaries to, prior to the Effective Time, (i) conduct its business in the
ordinary and usual course and (ii) refrain from taking any action reasonably
likely to have an adverse effect upon its ability to perform its material
obligations under the Merger Agreement.
In addition, except as expressly contemplated by the Merger Agreement or
specified in a schedule thereto, Ahmanson has agreed that it and its
subsidiaries will not, without the prior written consent of Washington Mutual,
among other things: (i) fail to use reasonable efforts to preserve intact
their business organizations and assets and maintain their rights, franchises
and existing relations with customers, suppliers, employees and business
associates or take any action reasonably likely to have an adverse effect on
Ahmanson's ability to perform any of its material obligations under the Merger
Agreement; (ii) except upon conversion of outstanding Ahmanson Common Stock
Options, issue, sell or otherwise permit to become outstanding, or authorize
the creation of, any additional shares of Ahmanson Common Stock or Ahmanson
Preferred Stock or Ahmanson Rights; (iii) adjust, split, combine, reclassify,
redeem, purchase or otherwise acquire any capital stock, declare or pay
dividends (except cash dividends on Ahmanson Common Stock not greater than the
dividend paid during the fiscal quarter preceding the date of the Merger
Agreement, regular dividends on the Ahmanson Preferred Stock and certain other
permitted dividends); (iv) subject to certain exceptions, issue new Ahmanson
Common Stock Options or increase compensation or fringe benefits of any of its
employees or enter into or modify any employee benefit plans or employment
agreements or hire any new employees above the rank of senior vice president;
(v) sell, transfer, mortgage or encumber or otherwise dispose of any of its
properties or assets except for nonmaterial transactions in the ordinary
course of business consistent with past practice; (vi) except for nonmaterial
transactions in the ordinary course of business consistent with past practice,
make any acquisition of any property or assets of any other entity (other than
a wholly owned subsidiary); (vii) amend its certificate of incorporation or
bylaws; (viii) enter into, renew or terminate any contract or agreement, other
than loans made in the ordinary course of business, that calls for aggregate
annual payments of $1,000,000 or more and which
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either is not terminable at will on 60 days or less notice without payment of
a penalty or has a term of less than one year, or make any material change in
any of its leases or contracts of the type specified in the immediately
preceding clause other than certain renewals of contracts and leases for a
term of one year or less without material adverse changes to their terms; (ix)
make any changes in its accounting methods unless required to under generally
accepted accounting principles; (x) settle any material litigation; (xi) make
or acquire loans or issue commitments for any loans except in the ordinary
course of business consistent with past practice or issue or agree to issue
any letters of credit or otherwise guarantee the obligation of other persons
except in the ordinary course of business in order to facilitate the sale of
real estate owned; (xii) take any action that would prevent or impede the
Merger from qualifying (A) as a reorganization within the meaning of Section
368 of the Code or (B) for pooling-of-interests accounting treatment; (xiii)
take any action intended or reasonably expected to result in any of its
representations or warranties being or becoming untrue in any material
respect, or any closing condition not being satisfied or in a violation of any
provision of the Merger Agreement; (xiv) subject to certain exceptions, make
capital expenditures in excess of specified amounts; (xv) except in compliance
with its environmental policy, foreclose on or otherwise acquire any real
property other than 1-to-4 family residential properties; (xvi) subject to
certain exceptions, open, relocate or close any branch or loan production
office or make any application therefor; (xvii) enter into any agreements or
contracts or amendments or supplements thereto pertaining to any further
development of specialized software, subject to certain exceptions; (xviii)
change any of its material banking policies in any material manner; or (xix)
take any action that would cause or result in Washington Mutual becoming an
"Acquiring Person" under the Ahmanson Rights Plan.
In addition, except as expressly contemplated by the Merger Agreement or
specified in a disclosure schedule thereto, Washington Mutual has agreed that
it and its subsidiaries will not, without the prior written consent of
Ahmanson, among other things (i) make, declare, pay or set aside for payment
any dividend other than (A) regular quarterly dividends on Washington Mutual
Common Stock at a rate equal to the rate paid by Washington Mutual during the
fiscal quarter immediately preceding the date of the Merger Agreement as such
dividends may be increased at the rate of $.01 per share per quarter, (B)
regular quarterly dividends on Washington Mutual Preferred Stock and (C)
certain other permitted dividends; (ii) acquire the assets, business, deposits
or properties of any other entity except for nonmaterial transactions in the
ordinary course of business, provided that Washington Mutual may enter into an
agreement for, and may consummate, business combination transactions subject
to, in the case of savings associations or savings bank or branches thereof,
certain size limitations and subject to the requirement that such transactions
not materially delay or materially adversely affect consummation of the
Merger; (iii) subject to certain exceptions, amend its articles of
incorporation or bylaws in a manner that would materially and adversely affect
the ability of Washington Mutual to consummate the Merger; (iv) take any
action that would prevent or impede the Merger from qualifying (A) as a
reorganization within the meaning of Section 368 of the Code or (B) for
pooling-of-interests accounting treatment; or (v) take any action intended or
reasonably expected to result in any of its representations or warranties
being or becoming untrue in any material respect, in any condition to
consummation of the Merger not being satisfied or in a violation of any
provision of the Merger Agreement.
In the Merger Agreement, Ahmanson has agreed not to, and has agreed to cause
its subsidiaries and its subsidiaries' officers, directors, employees, agents,
advisors and affiliates (collectively, "Representatives") not to, solicit or
encourage any inquiries or proposals or participate in any negotiations
regarding, or provide any confidential information to, or have any discussions
with, any person relating to any Acquisition Proposal. However, at any time
prior to the time the Ahmanson Stockholders shall have voted to approve the
Merger Agreement, Ahmanson may, and may authorize and permit its
Representatives to, provide third parties with nonpublic information,
otherwise facilitate any effort or attempt by any third party to make or
implement any Acquisition Proposal, recommend or endorse any Acquisition
Proposal with or by any third party, and participate in discussions and
negotiations with any third party relating to any Acquisition Proposal, if the
Ahmanson Board has determined in good faith upon written advice of outside
counsel that such action is legally necessary for it to act in a manner
consistent with its fiduciary duties under applicable law. Prior to providing
any information or data to any third party or entering into discussions or
negotiations with any third party, Ahmanson shall advise Washington Mutual
immediately of any such inquiry or proposal. Ahmanson may not furnish any
nonpublic information to any third party except pursuant to the terms of a
confidentiality agreement containing terms
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substantially identical to the terms contained in the confidentiality
agreement between Ahmanson and Washington Mutual. As used herein, "Acquisition
Proposal" means any tender or exchange offer, proposal for a merger,
consolidation or other business combination involving Ahmanson or any of its
subsidiaries or any proposal or offer to acquire in any manner a substantial
equity interest in, or a substantial portion of the assets or deposits of,
Ahmanson or any of its subsidiaries, other than the transactions contemplated
or permitted by the Merger Agreement.
Washington Mutual and Ahmanson have also agreed to use their reasonable best
efforts to promptly prepare all documentation, to effect all filings, and to
obtain and to cooperate in obtaining permits, consents, approvals and
authorizations of all third parties and governmental entities necessary or
advisable to consummate the transactions contemplated by the Merger Agreement.
Washington Mutual and Ahmanson have, subject to the restrictions set forth in
the Merger Agreement, each agreed, upon request, to furnish to the other party
all information concerning themselves and their subsidiaries, directors,
officers and shareholders and such other matters as may be necessary in
furtherance of the Merger. Washington Mutual and Ahmanson have also agreed,
subject to the terms and conditions of the Merger Agreement, to use their
reasonable best efforts to take, or cause to be taken, all actions necessary,
proper or advisable to comply promptly with all legal requirements which may
be imposed on such party or its subsidiaries and to consummate the Merger.
Washington Mutual has further agreed to use its reasonable best efforts to
cause the shares of Washington Mutual Common Stock and the New Washington
Mutual Depositary Shares to be issued in the Merger to be approved for listing
on NASDAQ, subject to official notice of issuance.
Washington Mutual also will be obligated to indemnify the officers and
directors of Ahmanson and its subsidiaries for any liabilities incurred in
connection with any matters existing or occurring at or prior to the Effective
Time and to provide directors' and officers' liability insurance with respect
to such matters for six years. See "--Interests of Certain Persons in the
Merger."
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Each party's obligation to consummate the Merger is subject, among other
things, to satisfaction, at or prior to the Effective Time, of the following
conditions: (i) the Merger Proposal shall have been approved by the requisite
affirmative votes of the Ahmanson Stockholders and the Share Issuance/Merger
Proposal shall have been approved by the requisite affirmative vote of the
shareholders of Washington Mutual; (ii) the Requisite Regulatory Approvals
shall have been obtained and shall remain in full force and effect and all
statutory waiting periods in respect thereof shall have expired; (iii) no
order, injunction or decree issued by any court or agency of competent
jurisdiction or other legal restraint or prohibition preventing the
consummation of the Merger or any of the transactions contemplated by the
Merger Agreement shall be in effect and no statute, rule, regulation, order,
injunction or decree shall have been enacted, entered or promulgated which
prohibits, restricts or makes illegal consummation of the Merger; (iv) the
Registration Statement shall have become effective under the Securities Act,
no stop order suspending the effectiveness of the Registration Statement shall
have been issued and no proceedings for that purpose shall have been initiated
or threatened by the Commission and not withdrawn; (v) the shares of
Washington Mutual Common Stock and the New Washington Mutual Depositary Shares
to be issued in the Merger shall have been authorized for listing on NASDAQ,
subject to official notice of issuance; and (vi) each of Washington Mutual and
Ahmanson shall each have received a letter from Washington Mutual's
independent public accountants that the Merger will qualify for pooling-of-
interests accounting treatment.
Washington Mutual's obligation to consummate the Merger is also subject to,
among other things, the satisfaction or waiver by Washington Mutual at or
prior to the Effective Time of, among others, the following conditions: (i)
the representations and warranties of Ahmanson set forth in the Merger
Agreement shall be true and correct in all respects as of the date of the
Merger Agreement and (except to the extent such representations and warranties
speak as of an earlier date) as of the Effective Time as though made on and as
of the Effective Time; provided, however, that for purposes of determining the
satisfaction of the condition described in this clause (i), such
representations and warranties (other than certain representations regarding
capitalization and
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related matters) shall be deemed to be true and correct in all respects unless
the failure or failures of such representations and warranties to be so true
and correct, individually or in the aggregate, results or would reasonably be
expected to result in a Material Adverse Effect (as defined in the Merger
Agreement) on Ahmanson and its subsidiaries taken as a whole; (ii) Ahmanson
shall have performed in all material respects all obligations required to be
performed by it under the Merger Agreement at or prior to the Effective Time;
(iii) Washington Mutual shall have received an opinion of Foster Pepper &
Shefelman PLLC, addressed to Washington Mutual, substantially to the effect
that the Merger will qualify as a "reorganization" under Section 368 of the
Code; (iv) Washington Mutual shall have received a comfort letter from
Ahmanson's independent accountants; (v) the Ahmanson Rights issued pursuant to
the Ahmanson Rights Plan shall not have become nonredeemable, exercisable,
distributed or triggered pursuant to the terms of such plan; and (vi) none of
the Requisite Regulatory Approvals shall contain any restriction, term or
conditions which would be reasonably expected to have a Material Adverse
Effect on Washington Mutual after the Effective Time.
Ahmanson's obligation to effect the Merger is also subject to, among other
things, the satisfaction or waiver by Ahmanson, at or prior to the Effective
Time of, among others, the following conditions: (i) the representations and
warranties of Washington Mutual set forth in the Merger Agreement shall be
true and correct in all respects as of the date of the Merger Agreement and
(except to the extent such representations and warranties speak as of an
earlier date) as of the Effective Time as though made on and as of the
Effective Time, and provided, however, that, for purposes of the provision
described in this clause (i), such representations and warranties shall be
deemed to be true and correct in all respects unless the failure or failures
of such representations and warranties to be so true and correct, individually
or in the aggregate, results or would reasonably be expected to result in a
Material Adverse Effect on Washington Mutual and its subsidiaries taken as a
whole; (ii) Washington Mutual shall have performed in all material respects
all obligations required to be performed by it under the Merger Agreement at
or prior to the Effective Time; (iii) Ahmanson shall have received an opinion
of Sullivan & Cromwell, addressed to Ahmanson, substantially to the effect
that the Merger will qualify as a "reorganization" under Section 368 of the
Code; and (iv) Ahmanson shall have received a comfort letter from Washington
Mutual's independent accountants.
REGULATORY APPROVALS REQUIRED
Under the Merger Agreement, the obligations of both Washington Mutual and
Ahmanson to consummate the Merger are conditioned upon the receipt of all
Requisite Regulatory Approvals. See "Conditions to the Consummation of the
Merger." Each of Washington Mutual and Ahmanson has agreed to use its
reasonable best efforts to obtain the Requisite Regulatory Approvals.
The Merger and the Bank Merger are subject to the approval of the OTS under
the HOLA and the Federal Deposit Insurance Act, respectively, and related OTS
regulations. These approvals require consideration by the OTS of various
factors, including assessments of the competitive effect of the contemplated
transactions, the managerial and financial resources and future prospects of
the resulting institutions and the effect of the contemplated transactions on
the convenience and needs of the communities to be served. The Community
Reinvestment Act of 1977, as amended ("CRA"), also requires that the OTS, in
deciding whether to approve the Merger and the Bank Merger, assess the records
of performance of Home Savings and the bank subsidiaries of Washington Mutual
in meeting the credit needs of the communities they serve, including low and
moderate income neighborhoods. As part of the review process under the CRA, it
is not unusual for the OTS to receive protests and other adverse comments from
community groups and others. Each of Home Savings, WMB, WMBFA and WMBfsb
currently has an "outstanding" CRA rating from its primary regulator. The
regulations of the OTS require publication of notice of, and an opportunity
for public comment with respect to, the applications filed in connection with
the Merger and the Bank Merger and authorize the OTS to hold an informal
meeting in connection therewith upon the request of a commenter or on its own
initiative, and a formal meeting in connection therewith upon the request of
any participant to an informal meeting or on its own initiative. Any such
meeting or comments provided by third parties could prolong the period during
which the Merger and the Bank Merger are subject to review by the OTS.
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Washington Mutual has filed applications and notices seeking the requisite
OTS and other state agency approvals. The public comment period for the OTS
application is scheduled to expire on , 1998. To date, Washington Mutual
has not received any approvals or notices of disapproval. It is anticipated
that the OTS review of this application will involve an analysis of the status
of the systems integrations of Great Western into WMBFA and the proposed
timetable for the integration of Ahmanson as well as the readiness of the
Combined Company's electronic systems, programs and processes to prevent major
system failures or miscalculations relating to their ability to recognize
properly the year 2000. There can be no assurance that OTS or other state
agency approvals will be granted, and if granted there can be no assurance as
to the dates of such approvals or as to what conditions to such grants of
approval, if any, may be imposed. In addition, there can be no assurance that
the United States Department of Justice or the Attorney General of the State
of California or any other state will not challenge the Merger or, if
challenged, what the result of such a challenge would be.
Washington Mutual and Ahmanson are not aware of any other significant
governmental approvals that are required for consummation of the Merger except
as described above. Should any other approval or action be required, it is
presently contemplated that such approval would be sought. There can be no
assurance whether or when any such approval, if required, could be obtained.
TERMINATION OF THE MERGER AGREEMENT
The Merger Agreement may be terminated by mutual consent of the Washington
Mutual Board and the Ahmanson Board. The Merger Agreement may also be
terminated by either the Washington Mutual Board or the Ahmanson Board (i) if
the approval of any governmental authority required for the consummation of
the Merger and the other transactions contemplated by the Merger Agreement is
denied by final nonappealable action, (ii) if the Merger does not occur on or
before March 31, 1999, (iii) in certain events involving a material breach by
the other party of any of its representations, warranties, covenants or
agreements in the Merger Agreement, (iv) if the requisite approval of either
the holders of Washington Mutual Common Stock or the Ahmanson Stockholders is
not obtained at their respective Special Meetings, or (v) prior to the
Ahmanson Special Meeting if the Ahmanson Board fails to recommend that the
Ahmanson Stockholders vote to approve the Merger Agreement or withdraws,
modifies or changes its recommendation of the Merger Agreement in a manner
adverse in any respect to the interests of Washington Mutual. The Merger
Agreement may also be terminated by the Washington Mutual Board if (i) a
Subsequent Triggering Event has occurred or (ii) a tender offer or exchange
offer for 25% or more of the Ahmanson Common Stock is commenced and the
Ahmanson Board recommends that the Ahmanson Stockholders tender their shares
in such offer or otherwise fails to recommend that the Ahmanson Stockholders
reject such offer. The term "Subsequent Triggering Event" means either (i) the
acquisition by any person of beneficial ownership of 25% or more of the then
outstanding shares of Ahmanson Common Stock or (ii) Ahmanson or any of its
significant subsidiaries shall have entered into an agreement to engage in an
Acquisition Transaction (other than with Washington Mutual or any of its
subsidiaries) or the Ahmanson Board shall have recommended that the Ahmanson
Stockholders approve or accept any Acquisition Transaction (other than with
Washington Mutual or any of its subsidiaries). As used in the definition of
Subsequent Triggering Event, the term "Acquisition Transaction" means (x) a
merger or consolidation, or any similar transaction, involving Ahmanson or a
significant subsidiary of Ahmanson, (y) a purchase, lease or other acquisition
or assumption of all or a substantial portion of the assets or deposits of
Ahmanson or any significant subsidiary of Ahmanson or (z) a purchase or other
acquisition of securities representing 25% or more of the voting power of all
outstanding Ahmanson securities.
TERMINATION FEES
Pursuant to the Merger Agreement, Ahmanson has agreed to pay an $85 million
fee to Washington Mutual if (a) Washington Mutual terminates the Merger
Agreement because the Ahmanson Board fails to recommend that the Ahmanson
Stockholders vote to approve the Merger Agreement or withdraws, modifies or
changes in a manner adverse to Washington Mutual its recommendation of the
Merger Agreement, (b) Washington Mutual terminates the Merger Agreement
because the Ahmanson Board either recommends a third party tender or exchange
offer for 25% or more of the outstanding shares of Ahmanson Common Stock or
fails to recommend that Ahmanson Stockholders reject such tender or exchange
offer, (c) either Washington Mutual or Ahmanson
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terminates the Merger Agreement because the Ahmanson Stockholders fail to
approve the Merger Proposal, but only if at the time of such failure, an
alternative proposal to acquire Ahmanson has been publicly disclosed (or any
person shall have publicly disclosed an intention (whether or not conditional)
to make such an alternative proposal), or (d) Washington Mutual terminates the
Merger Agreement as a result of the willful breach by Ahmanson of any material
representation, warranty, covenant or other agreement in the Merger Agreement,
but only if at or prior to the time of termination, an alternative proposal to
acquire Ahmanson has been made known to Ahmanson or has been publicly
disclosed, whether or not such alternative proposal is rejected by Ahmanson or
withdrawn prior to the time of termination. An additional $190 million fee is
payable by Ahmanson to Washington Mutual if, within 18 months after
termination of the Merger Agreement under any of the circumstances described
above, Ahmanson enters into a definitive agreement with respect to or
consummates an alternative proposal for an acquisition of Ahmanson by a third
party. In addition, if the Merger Agreement is terminated by Washington Mutual
because of a material breach by Ahmanson, because the Ahmanson Stockholders
fail to approve the Merger Proposal or because there occurs an event described
in clause (a) or (b) of the first sentence of this paragraph, then Ahmanson
shall reimburse Washington Mutual for its documented, reasonable out-of-pocket
expenses, up to a maximum of $15 million in the aggregate. If the Merger
Agreement is terminated by Ahmanson because of a material breach thereof by
Washington Mutual, then Washington Mutual shall reimburse Ahmanson for its
documented, reasonable out-of-pocket expenses, up to a maximum of $15 million
in the aggregate.
OPTION AGREEMENT
After entering into the Merger Agreement, Ahmanson and Washington Mutual
entered into the Option Agreement, pursuant to which Ahmanson granted to
Washington Mutual an option to purchase up to 21,796,426 shares of Ahmanson
Common Stock at a price of $79.86 per share. The number of Option Shares was
equal to approximately 19.9% of the shares of Ahmanson Common Stock issued and
outstanding on the date of the Option Agreement. A copy of the Option
Agreement is attached hereto as Appendix D and is incorporated in its entirety
herein by reference.
The Option may be exercised in whole or in part if both an Initial
Triggering Event and a Subsequent Triggering Event occur prior to an Exercise
Termination Event. The term "Exercise Termination Event" means: (i) the
Effective Time; (ii) termination of the Merger Agreement in accordance with
its terms if such termination is prior to the occurrence of an Initial
Triggering Event; (iii) 18 months after the termination of the Merger
Agreement if such termination follows an Initial Triggering Event; or (iv)
delivery of a written request for payment of Termination Fees under the Merger
Agreement provided such Termination Fees are paid. The term "Initial
Triggering Event" means: (i) Ahmanson or any of its significant subsidiaries
shall have entered into an agreement with a third party to engage in an
Acquisition Transaction or the Ahmanson Board shall have recommended that the
Ahmanson Stockholders approve or accept a third party's Acquisition
Transaction; (ii) Ahmanson or any of its subsidiaries shall have authorized,
recommended, proposed or publicly announced its intention to authorize,
recommend or propose an Acquisition Transaction; (iii) Ahmanson's Board shall
have failed to make, or shall have publicly withdrawn or modified (or publicly
announced its intent to withdraw or modify) in a manner adverse to Washington
Mutual, its recommendation that Ahmanson Stockholders approve the Merger
Proposal; (iv) any person (other than Washington Mutual or any of its
subsidiaries or any Ahmanson subsidiary acting in a fiduciary duty in the
ordinary course of business) shall have acquired beneficial ownership of 10%
or more of the outstanding shares of Ahmanson Common Stock; (v) after any
person (other than Washington Mutual or any of its subsidiaries) shall have
made a bona fide proposal to Ahmanson by public announcement or written
communication that is or becomes the subject of public disclosure to engage in
an Acquisition Transaction, the Ahmanson Stockholders fail to approve the
Merger Agreement; (vi) after an overture is made by a third party to Ahmanson
or the Ahmanson Stockholders to engage in an Acquisition Transaction (whether
or not such overture becomes the subject of public disclosure), Ahmanson shall
have willfully breached any covenant, obligation, representation or warranty
in the Merger Agreement, such breach would entitle Washington Mutual to
terminate the Merger Agreement and such breach is not cured by the time
Washington Mutual sends a written notice exercising the Option; (vii) any
person (other than Washington Mutual or any of its subsidiaries) shall have
filed an application or notice with any federal or state bank regulatory
authority for approval to engage in an Acquisition Transaction; or (viii) any
person (other
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than Washington Mutual or a subsidiary) commences or publicly announces its
intention to commence a tender offer or exchange offer for securities
representing 10% or more of the voting power of all outstanding Ahmanson
securities. As used in the definition of "Initial Triggering Event," the term
"Acquisition Transaction" has the same meaning as the term "Acquisition
Transaction" in the definition of "Subsequent Triggering Event" except that
the percentage referred to in clause (z) is 10%.
Generally, the total profit that Washington Mutual can make pursuant to the
Option Agreement is limited to $275 million before taxes. In addition,
Washington Mutual is not entitled to exercise the Option if it has made a
request for payment of termination fees, and is not entitled to receive
termination fees if it has exercised all or any part of the Option.
The termination fees and Option described above, which Washington Mutual and
Ahmanson believe are customary and typical for transactions such as the
proposed Merger, are intended, among other things, to increase the likelihood
that the Merger will be consummated on the terms set forth in the Merger
Agreement and, if the Merger is not consummated under certain circumstances
involving an acquisition or potential acquisition of Ahmanson by a third
party, to compensate Washington Mutual for its efforts undertaken, expenses
incurred and business opportunities lost in connection with the proposed
Merger. These agreements may have the effect of discouraging offers by third
parties to acquire Ahmanson prior to the Merger, even if such persons were
prepared to offer to pay consideration to Ahmanson Stockholders that has a
then higher current market price than the shares of Washington Mutual Common
Stock to be received by the holders of Ahmanson Common Stock pursuant to the
Merger Agreement at the Effective Time. See "--Background of the Merger."
EXTENSION, WAIVER AND AMENDMENT OF THE MERGER AGREEMENT
At any time prior to the Effective Time, any provision of the Merger
Agreement may be (a) waived by the party benefited by the provision, or (b)
amended or modified by an agreement in writing between the parties, except
that (i) after the Ahmanson Meeting, the Merger Agreement may not be amended
if it would violate Delaware corporate law or reduce the consideration to be
received by stockholders of Ahmanson in the Merger and (ii) after the
Washington Mutual Meeting, the Merger Agreement may not be amended if it would
violate Washington law.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Certain members of Ahmanson management and the Ahmanson Board may be deemed
to have certain interests in the Merger and the transactions contemplated
thereby in addition to their interests as Ahmanson Stockholders. The Ahmanson
Board was aware of these interests in approving the Merger Agreement.
Ahmanson Board of Directors. As described above, the Merger Agreement
provides that Washington Mutual will cause three directors of Ahmanson to be
elected or appointed as directors of Washington Mutual at the Effective Time.
Such directors are to be selected mutually by Washington Mutual and Ahmanson.
Ahmanson Stock Options. All unvested Ahmanson Common Stock Options will vest
automatically either upon approval of the Merger by the Ahmanson Stockholders
or upon consummation of the Merger under the terms of the Ahmanson stock
option plan or the stock option agreements evidencing such options. It is not
anticipated that any options held by executive officers of Ahmanson will be
unvested at the Effective Time. In addition, the Merger Agreement provides
that all options to acquire Ahmanson Common Stock outstanding at the Effective
Time, including those held by management and members of the Ahmanson Board,
will be assumed by Washington Mutual. Each stock option will thereafter
constitute an option to acquire shares of Washington Mutual Common Stock as
set forth above under "--Conversion of Ahmanson Capital Stock--Conversion of
Common Stock Options."
Indemnification and Insurance. The Merger Agreement provides that following
the date on which the Effective Time occurs, Washington Mutual will indemnify,
defend and hold harmless the present directors and officers of Ahmanson and
its subsidiaries against all costs or expenses (including reasonable
attorneys' fees),
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judgments, fines, losses, claims, damages or liabilities as incurred, in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of actions or
omissions occurring at or prior to the Effective Time to the fullest extent
that Ahmanson and its subsidiaries are permitted to indemnify (and advance
expenses to) their directors and officers by law, under their respective
charters and by-laws and under any agreements entered into by Ahmanson or any
of its subsidiaries and such directors and officers. The Merger Agreement also
provides that Washington Mutual will use its reasonable best efforts for six
years after the Effective Time to provide directors' and officers' liability
insurance that serves to reimburse the present and former officers and
directors of Ahmanson or any of its subsidiaries with respect to claims
against such directors and officers arising from facts or events which
occurred at or prior to the Effective Time. Such insurance is to contain at
least the same coverage and amounts, and is to contain terms and conditions no
less advantageous, as the coverage currently provided by Ahmanson; provided,
however, that in no event will Washington Mutual be required to expend more
than 250% of the current amount expended by Ahmanson to maintain such
insurance and that if Washington Mutual is unable to maintain or obtain such
insurance, Washington Mutual will use its reasonable best efforts to obtain as
much comparable insurance as is available for such 250% amount.
Ahmanson Executive Agreements and Plans.
Change of Control. The Merger will constitute a "change of control" within
the meaning of the agreements and plans described below.
Employment Agreements. Ahmanson currently has employment agreements with its
Chief Executive Officer, President and Executive Vice Presidents, as well as
certain other officers of Ahmanson and its subsidiaries. The agreements with
Messrs. Rinehart, Bruce G. Willison, Kevin M. Twomey and Mesdames Madeleine A.
Kleiner and Anne-Drue M. Anderson provide for three year "evergreen" terms.
In the event that Ahmanson elects to terminate any of the executives'
employment without cause (as defined therein), or if the executive elects to
terminate his or her employment (i) due to Ahmanson's failure to comply with
certain conditions of service (including certain additional conditions
following a change in control of Ahmanson) or (ii) within the 30-day period
immediately following the one year anniversary of a change in control of
Ahmanson, the affected executive will be entitled to receive an amount equal
to the aggregate of the pro rata target bonus payments for existing bonus
cycles under both Ahmanson's Executive Short-Term Incentive Plan and
Ahmanson's Executive Long-Term Incentive Plan (using assumed performance
multipliers of 125%) and the base salary and target bonus under such Executive
Short-Term Incentive Plan (using an assumed performance multiplier of 125%)
due under the agreement for the balance of its term, and an amount equal to
three times the base salary and target bonus amount under Ahmanson's Executive
Short-Term Incentive Plan. Such amount is payable in one lump sum within 10
days after termination, if termination occurs after a change in control. In
addition, the executives will be entitled to receive, among other things,
medical, dental, life and directors' and officers' liability insurance
benefits, as well as continued crediting of years of service under Ahmanson's
Supplemental Executive Retirement Plan for a period of up to 36 months. In the
event of a change in control, each executive will also receive a gross-up
payment if the payments and benefits under the agreement and all other
contracts or arrangements, in the aggregate, exceed 110% of the maximum amount
that may be paid to the executive without triggering golden parachute
penalties under Section 280G of the Code and related provisions. Such gross-up
payment will be an amount which equals the excise taxes the executive must pay
under Section 4999 of the Code with respect to the payments and benefits for
which the executive is receiving the gross-up payment plus all income and
excise taxes on the gross-up payment. Assuming the Merger were consummated and
the employment of Ahmanson's executive officers were terminated on September
30, 1998, pursuant to the employment agreements described above, the severance
payments required to be made to Messrs. Rinehart, Willison and Twomey and
Mesdames Kleiner and Anderson would be approximately $9,185,903, $5,283,631,
$5,283,631, $2,969,333, and $2,385,655, respectively, as a result of the
Merger being deemed a change in control under such employment agreements.
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Supplemental Executive Retirement Plan of Ahmanson. Ahmanson currently has a
non-qualified supplemental executive retirement plan (the "Supplemental Plan")
to provide supplemental retirement benefits to its executive officers and
certain other senior officers of Ahmanson and its subsidiaries. Monthly
benefits are based upon a percentage of such participant's average monthly
earnings during the three highest paid consecutive years in the ten years
preceding retirement. Monthly benefits payable under the Supplemental Plan are
reduced (but not below a specified percentage of such average monthly
earnings) by the sum of the benefit payable to the executive under Ahmanson's
qualified pension plan, Social Security and certain other payments. In
general, benefits payable under the Supplemental Plan are reduced if a
participant retires prior to attaining age 65. The annual benefit payable to a
participant under the Supplemental Plan is equal to four percent of the
participant's average annual earnings multiplied by the participant's years of
cumulative service, subject to a maximum of 15 years of cumulative service
except for determination of whether a participant is entitled to benefits upon
early retirement. Service must generally continue to at least the
participant's normal retirement date for a participant to receive full
benefits under the Supplemental Plan. However, a participant may retire early
and receive reduced benefits upon early retirement if the sum of the
participant's age and years of service equals at least 75 and the participant
is at least 55. The Supplemental Plan provides for accelerated accrual and
vesting of participants' interests in the event of a change in control of
Ahmanson. Benefits generally commence under the Supplemental Plan upon the
participant's retirement and are paid on a modified joint and survivor basis,
which provides for a lesser annual benefit to the participant's designated
beneficiary upon the death of the participant. The Supplemental Plan provides
for a pre-retirement survivor benefit equal to the survivor benefits a
participant's spouse would have received if the participant had elected early
retirement, offset by executive life insurance. The Supplemental Plan permits
participants to elect to receive a lump sum benefit, equal to 90% of the
present value of the participant's accrued benefits at any time after
retirement or 100% of the present value of the participant's accrued benefits
upon retirement if the election is made in a timely manner before retirement.
Mr. Rinehart was granted additional years of service for purposes of the
Supplemental Executive Retirement Plan and has more than the maximum 15 full
years of cumulative service. Mr. Willison was granted seven years of service
for purposes of the Supplemental Executive Retirement Plan in connection with
his joining Ahmanson. Mr. Twomey and Mesdames Kleiner and Anderson were
granted 5, 4 and 2 years of service, respectively, for purposes of the
Supplemental Plan effective February, 2001 or earlier upon termination of
employment without cause. As of February 28, 1998, the full years of
cumulative service for Messrs. Willison and Twomey and Mesdames Kleiner and
Anderson were 8, 4, 2 and 4, respectively.
Deferred Compensation Plans. Ahmanson currently has unfunded deferred
compensation plans (the "Deferred Compensation Plans") that allow certain
designated employees and directors of Ahmanson to defer for receipt in a later
year a portion of their annual compensation. Each participant who elects to
defer compensation must also elect a time and manner for its receipt in a
later year in accordance with the terms of the Deferred Compensation Plan and
generally will not be permitted to receive such deferred compensation prior to
the elected time. Any such deferred compensation will be credited to an
account on behalf of a participant and will be credited with earnings based
upon a designated interest rate. Under certain plans, the interest rate
applicable to such amount is enhanced by 25% for participants with more than
five years of service and otherwise, upon a change in control. In the event a
participant's employment with Ahmanson is terminated before his or her normal
or early retirement date, Ahmanson must pay the participant a lump sum
distribution of such participant's account unless the plan permitted the
participant to defer such payment by making a timely election prior to a
change in control. Assuming termination of the employment of Ahmanson's
executive officers, lump sum distributions of their accounts would be made to
the executive officers. However, if the plan permitted participants to elect
to receive their accounts under the Deferred Compensation Plan over time after
a change of control and the executive made a timely election to do so, such
amounts will be paid out in accordance with the terms of such election as a
result of the Merger being deemed a change of control under the Deferred
Compensation Plan. A lump sum penalty equal to 5% of the account will apply in
certain circumstances after a change in control.
Contingent Deferred Compensation Plan. Ahmanson has a deferred compensation
plan (the "Contingent Deferred Compensation Plan") that was partially
terminated in 1994. Before its partial termination, Ahmanson
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would make discretionary deferred awards to eligible officers in an amount
equal to 10% of the officer's base salary. Awards under the Contingent
Deferred Compensation Plan vested in equal annual installments over 10 years.
Participants were permitted to elect a time and manner for its receipt after
10 years in accordance with the terms of the plan. Deferred compensation
awards are invested in variable insurance policies. Upon a change in control,
participants will become 100% vested in their accounts under the Contingent
Deferred Compensation Plan. In the event a participant's employment with
Ahmanson is terminated before his or her normal or early retirement date,
Ahmanson must pay the participant a lump sum distribution of the vested
portion of such participant's account, payable one year after the date of
termination or earlier at the discretion of the committee administering the
plan. As a result of the Merger being deemed a change in control under the
Contingent Deferred Compensation Plan, Ahmanson's executive officers would
become 100% vested in their awards under the Contingent Deferred Compensation
Plan and, assuming termination of their employment, would receive their entire
account balance in one lump sum distribution no later than one year after the
date of such termination. A lump sum penalty equal to 5% of the account will
apply in certain circumstances after a change in control.
Outside Director Retirement Plan. Ahmanson's Outside Director Retirement
Plan is a nonqualified retirement plan for directors of Ahmanson who are not
also employees of Ahmanson or any of its subsidiaries. Under the Outsider
Director Retirement Plan, a participating director receives an annual
retirement benefit equal to the director's annual fee during the 12 month
period immediately preceding the participant's retirement from the Ahmanson
Board. Benefits under the Outsider Director Retirement Plan generally are
payable in equal monthly installments for a period equal to the participant's
aggregate years and months of service on the Ahmanson Board plus time spent in
certain governmental service, with a lifetime benefit payable to participants
with 15 or more years of service. Benefit payments commence within 30 days
after the participant ceases being a director. Upon the death of the
participant, the participant's designated beneficiary is entitled to 50% of
the benefits otherwise payable to the participant. Such death benefits
commence one month after the participant's death and continue for the payment
period applicable to the participant or, if the participant had already begun
receiving benefits under the Plan, for the participant's remaining payment
period with a maximum of 15 years of payment. The Plan permits participants
and beneficiaries to elect to receive a lump sum benefit equal to 90% (95%
after a change in control) of the present value of the participant's accrued
benefits at any time after retirement or 100% of the present value of the
participant's accrued benefits upon retirement if the election is made in a
timely manner before retirement. No survivor benefit is payable if a deceased
director received a lump sum benefit.
Other Interests. Finally, pursuant to the Merger Agreement, Ahmanson and
Washington Mutual will mutually agree upon stay bonuses for certain of
Ahmanson's senior executives. The terms and conditions of such bonuses have
not yet been determined.
EMPLOYEE MATTERS
Benefit Plans. Pursuant to the Merger Agreement, Washington Mutual has
agreed from and after the Effective Time, to (i) comply with the Ahmanson
compensation and benefit plans in accordance with their terms, (ii) provide
former employees of Ahmanson who remain as employees of Washington Mutual with
employee benefit plans no less favorable in the aggregate than those provided
to similarly situated employees of Washington Mutual, (iii) provide employees
of Ahmanson or any of its subsidiaries who remain as employees of Washington
Mutual credit for years of service with Ahmanson or any of its subsidiaries
prior to the Effective Time for the purpose of eligibility and vesting, (iv)
provide employees of Ahmanson who are terminated after the Effective Time with
health and dental benefits until the earlier of (A) six months after the end
of the applicable severance pay period and (B) such time as the relevant
employee obtains health and dental benefits under another employer-sponsored
plan and (v) cause any and all pre-existing condition limitations (to the
extent such limitations did not apply to the pre-existing condition under
comparable Ahmanson compensation and benefit plans) and eligibility waiting
periods under group health plans of Washington Mutual to be waived with
respect to former employees of Ahmanson who remain as employees of Washington
Mutual (and their eligible dependents) and who become participants in such
group health plans under all Ahmanson compensation and benefit plans, provided
that Washington Mutual and its subsidiaries will be entitled to amend, modify
or
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terminate any Ahmanson compensation and benefit plans, or other contracts,
arrangements, commitments or understandings, in a manner consistent with their
terms and applicable law.
Retention Bonuses. Pursuant to the Merger Agreement, Ahmanson may agree to
pay up to $15,000,000 as bonuses, to be allocated among employees of Ahmanson
below the rank of first vice president; provided, however, that Ahmanson may
agree to pay up to $500,000 of such $15,000,000 to employees as bonuses for
their work in connection with the acquisition of Coast. The allocation, and
all other terms and conditions, of all such payments shall be determined by
Ahmanson except that no bonuses shall be payable until the earlier of the
first anniversary of the Effective Time to eligible employees still employed
by Washington Mutual on such date and the date the employment of the eligible
employee is terminated by Ahmanson or Washington Mutual.
Special Severance Plan. Ahmanson has adopted a severance plan (the "Special
Severance Plan") which provides for payments to persons who are employees of
Ahmanson or any of its subsidiaries (but who are not of a type compensated
primarily by commission, including loan and multi-family loan consultants) on
the date of the Merger Agreement ("Special Severance Employees") of two weeks
severance pay for each year of service with Ahmanson or any of its
subsidiaries for (i) a minimum of 6 months and a maximum of 18 months
severance pay for employees of grades 48 to 58 on the date of the Merger
Agreement and (ii) a minimum of 3 months and a maximum of 12 months of
severance pay for employees of grade 47 or below on the date of the Merger
Agreement (the "Special Severance Payments"). Special Severance Payments shall
become due and payable within five business days after (x) the termination of
employment of a Special Severance Employee without cause by Washington Mutual
at any time prior to the one year anniversary of the Effective Time or (y) the
voluntary termination of a Special Severance Employee's employment with
Washington Mutual for certain specific reasons.
ACCOUNTING TREATMENT
The Merger is intended to be treated as a pooling-of-interests for
accounting purposes. Accordingly, under generally accepted accounting
principles, the assets and liabilities of Ahmanson will be recorded on the
books of Washington Mutual at their values on the books of Ahmanson at the
Effective Time. If completed as proposed, no goodwill will be created as a
result of the Merger.
Pursuant to the Merger Agreement, each of Ahmanson and Washington Mutual is
required to use its reasonable best efforts to cause each person who may be
deemed to be an "affiliate" of such party (collectively, the "Affiliates") for
the purposes of Commission Accounting Series Release No. 130, as amended by
Release No. 135, to deliver to the other party an affiliate letter, pursuant
to which, among other things, each Affiliate will agree, with certain limited
exceptions, not to sell or otherwise dispose of any interest in the Ahmanson
Common Stock, Ahmanson Preferred Stock, the Washington Mutual Common Stock or
the Series G Preferred Stock during the period commencing 30 days preceding
the Effective Time until such time as consolidated financial results covering
at least 30 days of Combined Company operations have been published.
NO APPRAISAL OR DISSENTERS' RIGHTS
Ahmanson. Ahmanson Stockholders do not have any appraisal rights under
Delaware law in connection with the Merger Proposal or the consummation of the
transactions contemplated by the Merger Agreement.
Washington Mutual. Washington Mutual shareholders do not have dissenters'
rights under Washington law in connection with the Merger, the Share
Issuance/Merger Proposal or the Articles Amendment Proposal.
EXCHANGE OF CERTIFICATES AND DEPOSITARY SHARES; FRACTIONAL SHARES
Ahmanson. At or prior to the Effective Time, Washington Mutual will deposit,
or cause to be deposited, with an exchange agent (the "Exchange Agent"), for
the benefit of the holders of shares of Ahmanson Common Stock and Ahmanson
Preferred Stock, certificates representing the shares of Washington Mutual
Common Stock and Series G Preferred Stock, respectively, to be issued in the
Merger (and cash in lieu of fractional shares of Washington Mutual Common
Stock, if applicable).
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Promptly after the Effective Time, the Exchange Agent will mail a form of
transmittal letter to the holders of certificates representing shares of
Ahmanson Common Stock. The form of transmittal letter will contain
instructions with respect to the surrender of such certificates in exchange
for shares of Washington Mutual Common Stock (and cash in lieu of fractional
shares of Washington Mutual Common Stock, if applicable).
The Preferred Stock Depositary is the only holder of record of shares of the
Ahmanson Preferred Stock, which is represented by the Ahmanson Depositary
Shares. The Exchange Agent will effect the exchange of certificates
representing the Ahmanson Preferred Stock for certificates representing the
new Series G Preferred Stock in connection with the Merger. All holders of
record of Ahmanson Depositary Shares will be instructed to follow the exchange
procedures outlined immediately below.
Promptly after the Effective Time, the Preferred Stock Depositary will mail
to each holder of record of Ahmanson Depositary Shares a notice advising the
holder of the effectiveness of the Merger together with a transmittal form
(the "Depositary Share Transmittal Form"). The Depositary Receipts Transmittal
Form will contain instructions with respect to the surrender of the Ahmanson
Depositary Receipts and will specify that delivery will be effected, and risk
of loss and title to such Ahmanson Depositary Receipts will pass, only upon
delivery of the Ahmanson Depositary Receipts to the Preferred Stock
Depositary. Upon surrender to the Preferred Stock Depositary of the Ahmanson
Depositary Receipts in accordance with the instructions contained in the
Depositary Share Transmittal Form, the holder thereof will be entitled to
receive in exchange therefor the appropriate number of New Washington Mutual
Depositary Receipts.
AHMANSON COMMON STOCK CERTIFICATES AND AHMANSON DEPOSITARY RECEIPTS SHOULD
NOT BE RETURNED WITH THE ENCLOSED PROXY CARD AND SHOULD NOT BE FORWARDED TO
THE EXCHANGE AGENT OR THE PREFERRED STOCK DEPOSITARY EXCEPT WITH A TRANSMITTAL
FORM, WHICH WILL BE PROVIDED TO HOLDERS FOLLOWING THE EFFECTIVE TIME.
No dividends or other distributions declared with respect to Washington
Mutual Common Stock or Series G Preferred Stock with a record date after the
Effective Time will be paid to the holder of any certificate representing
shares of Ahmanson Common Stock or Ahmanson Preferred Stock until such
certificate has been surrendered for exchange. Holders of shares of Ahmanson
Common Stock or Ahmanson Preferred Stock will be paid the amount of dividends
or other distributions with a record date after the Effective Time after
surrender of the certificates representing such shares, without any interest
thereon.
No fractional shares of Washington Mutual Common Stock will be issued to any
holder of Ahmanson Common Stock upon consummation of the Merger. In lieu of
each fractional share that would otherwise be issued, Washington Mutual will
pay cash in an amount equal to such fraction multiplied by the average of the
closing sale prices of Washington Mutual Common Stock on NASDAQ for the five
trading days immediately preceding the Effective Time. No interest will be
paid or accrued on the cash in lieu of fractional shares payable to holders of
such certificates. No such holder will be entitled to dividends, voting rights
or any other rights as a shareholder in respect of any fractional share of
Washington Mutual Common Stock that such holder otherwise would have been
entitled to receive.
None of Washington Mutual, Ahmanson, the Exchange Agent, the Preferred Stock
Depositary or any other person will be liable to any former holder of Ahmanson
Common Stock or an Ahmanson Depositary Share for any amount properly delivered
to a public official pursuant to applicable abandoned property, escheat or
similar laws.
If a certificate representing Ahmanson Common Stock has been lost, stolen or
destroyed, the Exchange Agent will issue the consideration properly payable in
accordance with the Merger Agreement upon receipt of appropriate evidence as
to such loss, theft or destruction, appropriate evidence as to the ownership
of such certificate or receipt by the claimant, and appropriate and customary
indemnification.
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For a description of the differences between the rights of the holders of
Washington Mutual Common Stock and Ahmanson Common Stock, see "Comparison of
Rights of Washington Mutual Shareholders and Ahmanson Stockholders." For a
description of Washington Mutual's capital stock, including the Series G
Preferred Stock and the New Washington Mutual Depositary Shares, see
"Description of Washington Mutual Capital Stock."
Shares of Washington Mutual Common Stock and Washington Mutual Preferred
Stock issued and outstanding immediately prior to the Effective Time will
remain issued and outstanding and be unaffected by the Merger, and holders of
such stock will not be required to exchange the certificates representing such
stock or take any other action by reason of the consummation of the Merger.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
THE FOLLOWING IS A SUMMARY OF THE MATERIAL FEDERAL INCOME TAX CONSEQUENCES
OF THE MERGER TO THE SHAREHOLDERS OF WASHINGTON MUTUAL AND THE STOCKHOLDERS OF
AHMANSON. THIS SUMMARY DOES NOT ADDRESS ALL THE TAX CONSEQUENCES OF THE
MERGER. EACH HOLDER'S INDIVIDUAL CIRCUMSTANCES MAY AFFECT THE TAX CONSEQUENCES
OF THE MERGER TO SUCH HOLDER. THIS SUMMARY MAY NOT APPLY TO CERTAIN CLASSES OF
TAXPAYERS, INCLUDING, WITHOUT LIMITATION, NON-RESIDENT ALIENS, INSURANCE
COMPANIES, TAX-EXEMPT ORGANIZATIONS, FINANCIAL INSTITUTIONS, DEALERS IN
SECURITIES, TRADERS IN SECURITIES THAT ELECT TO MARK TO MARKET, PERSONS WHO
ACQUIRED OR ACQUIRE SHARES PURSUANT TO THE EXERCISE OF DIRECTOR OR EMPLOYEE
STOCK OPTIONS OR RIGHTS OR OTHERWISE AS COMPENSATION AND PERSONS WHO HOLD
SHARES IN A HEDGING TRANSACTION OR AS PART OF A STRADDLE OR CONVERSION
TRANSACTION. IN ADDITION, NO INFORMATION IS PROVIDED HEREIN WITH RESPECT TO
THE TAX CONSEQUENCES OF THE MERGER TO HOLDERS UNDER APPLICABLE FOREIGN, STATE
OR LOCAL LAWS. CONSEQUENTLY, EACH HOLDER IS URGED TO CONSULT ITS OWN TAX
ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER.
Washington Mutual Shareholders
There will be no federal income tax consequences to Washington Mutual
shareholders as a result of either voting on the proposals described herein or
the consummation of the Merger.
Stockholders of Ahmanson
The Merger is expected to constitute a "reorganization" within the meaning
of Section 368 of the Code. Consummation of the Merger is conditioned upon,
among other things, the receipt of the opinions of counsel outlined below.
Such opinions will not, however, be binding upon the Internal Revenue Service
(the "IRS") or the courts. No ruling from the IRS will be applied for with
respect to the federal income tax consequences of the Merger. Accordingly,
there can be no assurance that the IRS will agree with the conclusions set
forth in this Joint Proxy Statement/Prospectus.
The obligation of Washington Mutual to consummate the Merger is conditioned
on the receipt by Washington Mutual of an opinion of Foster Pepper & Shefelman
PLLC, counsel to Washington Mutual, to the effect that for federal income tax
purposes the Merger constitutes a "reorganization" within the meaning of
Section 368 of the Code.
The obligation of Ahmanson to consummate the Merger is conditioned on the
receipt by Ahmanson of an opinion of Sullivan & Cromwell, special counsel to
Ahmanson, to the effect that the Merger constitutes a "reorganization" within
the meaning of Section 368 of the Code and that, accordingly, (i) no gain or
loss will be recognized by Ahmanson as a result of the Merger, (ii) no gain or
loss will be recognized by a holder of Ahmanson Common Stock who receives
shares of Washington Mutual Common Stock in exchange for shares of Ahmanson
Common Stock, except with respect to cash received in lieu of fractional share
interests and (iii) no
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gain or loss will be recognized by a holder who receives New Washington Mutual
Depositary Shares in exchange for Ahmanson Depositary Shares.
The above-described tax opinions will be based upon certain assumptions and
written representations referred to in the opinion letters.
Under the reorganization provisions of the Code, no gain or loss will be
recognized by holders of Ahmanson Common Stock or Ahmanson Depositary Shares
who exchange such stock solely for Washington Mutual Common Stock or New
Washington Mutual Depositary Shares, respectively, pursuant to the Merger
(except with respect to cash received in lieu of a fractional share interest
in Washington Mutual Common Stock). The aggregate tax basis of the Washington
Mutual Common Stock or New Washington Mutual Depositary Shares received in the
Merger will equal the aggregate tax basis of the Ahmanson Common Stock or
Ahmanson Depositary Shares, as the case may be, surrendered in exchange
therefor, reduced by the amount of tax basis of the Ahmanson Common Stock
allocable to any fractional share of Washington Mutual Common Stock in lieu of
which cash is received. Provided that the Ahmanson Common Stock or Ahmanson
Depositary Shares so surrendered were held as capital assets as of the
Effective Time, the holding period of the Washington Mutual Common Stock or
New Washington Mutual Depositary Shares received will include the holding
period of the Ahmanson Common Stock or Ahmanson Depositary Shares surrendered
in exchange therefor.
Each Ahmanson Stockholder who receives cash in lieu of a fractional share of
Washington Mutual Common Stock will be treated as receiving a distribution in
redemption of such share interest. In general, such distribution in redemption
will be treated as a payment in exchange for such fractional share interest,
subject to the provisions and limitations of Code Section 302 (which in
certain circumstances could result in the receipt of cash being treated as a
dividend). If treated as a payment in exchange for such fractional share
interest, gain or loss will be measured by the difference between the tax
basis allocable to the fractional share and the amount of cash received
therefor. Such gain or loss will be a capital gain or loss if the Ahmanson
Common Stock was held as a capital asset as of the Effective Time. Such
capital gain or loss will be treated as long-term capital gain or loss if the
Ahmanson Common Stock for which the fractional share interest is deemed
received was held for more than one year as of the Effective Time.
Backup Withholding
The cash payments, if any, due holders of Ahmanson Common Stock (other than
certain exempt entities and persons) pursuant to the Merger will be subject to
a 31% backup withholding tax by the Exchange Agent under federal income tax
law unless certain requirements are met. Generally, the Exchange Agent will be
required to deduct and withhold the tax if (i) the stockholder fails to
furnish a taxpayer identification number ("TIN") to the Exchange Agent or
fails to certify under penalty of perjury that such TIN is correct, (ii) the
IRS notifies the Exchange Agent that the stockholder has failed to report
interest, dividends or original issue discount in the past, or (iii) there has
been a failure by the stockholder to certify under penalty of perjury that
such stockholder is not subject to the 31% backup withholding tax. Any amounts
withheld by the Exchange Agent in collection of the 31% backup withholding tax
will generally be allowed as a credit against the federal income tax liability
of the stockholder from whom such tax was withheld. The TIN of an individual
stock holder is the stockholder's Social Security Number.
THE FOREGOING CONSTITUTES ONLY A GENERAL DESCRIPTION OF THE FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO STOCKHOLDERS OF AHMANSON UNDER CURRENTLY
EXISTING FEDERAL INCOME TAX LAWS, WITHOUT CONSIDERATION OF THE PARTICULAR
FACTS AND CIRCUMSTANCES OF EACH STOCKHOLDER'S SITUATION. EACH STOCKHOLDER OF
AHMANSON IS URGED TO CONSULT HIS OR HER OWN TAX AND FINANCIAL ADVISOR WITH
REGARD TO THE EFFECT OF THE MERGER ON SUCH STOCKHOLDER'S OWN SITUATION,
INCLUDING ANY ESTATE, GIFT, STATE, LOCAL OR FOREIGN TAX CONSEQUENCES ARISING
OUT OF THE MERGER AND/OR ANY SALE THEREAFTER OF WASHINGTON MUTUAL COMMON STOCK
OR NEW WASHINGTON MUTUAL DEPOSITARY SHARES RECEIVED IN THE MERGER.
58
<PAGE>
DIVIDEND POLICY
Washington Mutual
Dividends may be paid on the Washington Mutual Common Stock as and when
declared by the Washington Mutual Board out of funds legally available for the
payment of dividends. The factors affecting this determination include
Washington Mutual's long-term interests, current and projected earnings,
adequacy of capitalization, expected asset and deposit growth as well as other
financial conditions, legal, regulatory and contractual restrictions, and tax
considerations.
According to Washington law, Washington Mutual dividends may be paid only
if, after giving effect to the dividend, Washington Mutual will be able to pay
its debts as they become due in the ordinary course of business and Washington
Mutual's total assets will not be less than the sum of its total liabilities
plus the amount that would be needed, if Washington Mutual were to be
dissolved at the time of the dividend, to satisfy the preferential rights of
persons whose right to payment is superior to those receiving the dividend.
Because Washington Mutual is a holding company, its ability to pay dividends
to its shareholders is also dependent on the ability of WMBFA, WMB and other
subsidiary operations to pay dividends to Washington Mutual.
The outstanding Washington Mutual Preferred Stock ranks prior to the
Washington Mutual Common Stock and to all other classes and series of equity
securities of Washington Mutual, other than any classes or series of equity
securities of Washington Mutual ranking on a parity with the Washington Mutual
Preferred Stock.
The rights of holders of Washington Mutual Preferred Stock to receive
dividends is noncumulative. Accordingly, if the Washington Mutual Board fails
to declare a dividend on any dividend payment date, the holders of Washington
Mutual Preferred Stock will have no right to receive a dividend in respect of
the dividend period ending on such dividend payment date and Washington Mutual
will have no obligation to pay the dividend accrued for such period, whether
or not dividends are declared payable on any future dividend payment dates.
Full dividends on Washington Mutual Preferred Stock must be declared and
paid or set apart for payment for the most recent dividend period ended before
(i) any dividend (other than in Washington Mutual Common Stock) on stock
junior to the Washington Mutual Preferred Stock ("Junior Stock") may be
declared or paid or set aside for payment or other distribution made upon the
Washington Mutual Common Stock or on any other Junior Stock or (ii) Junior
Stock is redeemed (or any moneys are paid to or made available for a sinking
fund for the redemption of any share of any such stock) or any Junior Stock or
stock on a parity with Preferred Stock ("Parity Stock") is purchased or
otherwise acquired by Washington Mutual for any consideration except by
conversion into or exchange for Junior Stock.
The Washington Mutual Board may issue Washington Mutual Preferred Stock that
is entitled to such dividend rights as the Washington Mutual Board may
determine, including priority over Washington Mutual Common Stock in the
payment of dividends.
Ahmanson
Holders of shares of Ahmanson Common Stock are entitled to receive dividends
from funds legally available therefor when, as and if declared by the Ahmanson
Board. Each quarter, the Ahmanson Board considers the payment of dividends.
The factors affecting this determination include Ahmanson's long-term
interests, current and projected earnings, adequacy of capitalization,
expected asset and deposit growth, as well as other financial conditions,
legal, regulatory and contractual restrictions, and tax considerations.
RESALE OF WASHINGTON MUTUAL COMMON STOCK RECEIVED BY AHMANSON COMMON
STOCKHOLDERS
The shares of Washington Mutual Common Stock to be issued to Ahmanson
Stockholders upon consummation of the Merger have been registered under the
Securities Act and may be traded freely without
59
<PAGE>
restriction by those stockholders who are not deemed to be "affiliates" of
Ahmanson or Washington Mutual, as that term is defined in rules promulgated
under the Securities Act.
Shares of Washington Mutual Common Stock received by those Ahmanson
Stockholders who are deemed to be "affiliates" of Ahmanson at the time of the
Ahmanson Meeting may be resold without registration under the Securities Act
only as permitted by Rule 145 under the Securities Act or as otherwise
permitted under the Securities Act.
60
<PAGE>
WASHINGTON MUTUAL
GENERAL
Washington Mutual is a financial services company committed to serving
consumers and small to mid-sized businesses throughout the Western United
States. Through its subsidiaries, Washington Mutual engages in the following
activities:
. Mortgage Lending and Consumer Banking Activities. Through its principal
subsidiaries, Washington Mutual Bank, FA, Washington Mutual Bank, and
Washington Mutual Bank fsb, at December 31, 1997, Washington Mutual
operated approximately 1,100 consumer financial centers and home loan
centers offering a full complement of mortgage lending and consumer
banking products and services. In 1997 Washington Mutual's banking
subsidiaries were the leading originators of one-to-four family
residential loans in California, Washington and Oregon.
. Consumer Finance Activities. Through Aristar, Inc. and its subsidiaries,
Washington Mutual makes direct consumer installment loans and purchases
retail installment contracts from local retail establishments through a
network of approximately 500 branch offices located in 22 states,
primarily in the southeastern United States. It also accepts deposits
through its industrial banks in Colorado and Utah. Aristar's business is
generally conducted under the names Blazer, City Finance and First
Community.
. Commercial Banking Activities. Through the commercial banking division
of WMB, at December 31, 1997, Washington Mutual operated 47 financial
centers under the name Western Bank and 23 business banking centers
offering a range of commercial banking products and services to small
and mid-sized businesses.
. Securities Activities. Washington Mutual offers a broad range of
securities brokerage services, including the distribution of mutual
funds, and acts as the investment advisor to and the distributor of
mutual funds.
Washington Mutual operates principally in California, Washington, Oregon,
Florida and Utah, but has operations in a total of 36 states. At December 31,
1997, Washington Mutual had consolidated assets of $96.98 billion, deposits of
$50.99 billion and stockholders' equity of $5.31 billion. Based on assets,
Washington Mutual was at that date the third largest banking organization in
California.
PRINCIPAL HOLDERS OF WASHINGTON MUTUAL COMMON STOCK
The following table sets forth information regarding beneficial ownership of
Washington Mutual Common Stock by each person known to Washington Mutual to
have owned more than 5% of the outstanding shares of the Washington Mutual
Common Stock on April 24, 1998. The following is based solely on statements
filed with the Commission or other information believed by Washington Mutual
to be reliable. Each of the named shareholders has sole voting and investment
power with respect to the shares shown, except as noted below.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL SHARES OF COMMON STOCK
OWNER BENEFICIALLY OWNED PERCENT OF CLASS
------------------------------ ---------------------- ----------------
<S> <C> <C>
FMR Corp............................... 24,526,982(/1/) 9.5%
82 Devonshire Street
Boston, Massachusetts 02109
Group of partners of Keystone Holdings
Partners, L.P......................... 17,855,863(/2/) 6.9%
201 Main Street
Fort Worth, Texas 76102
Putnam Investments, Inc................ 14,500,802(/3/) 5.6%
One Post Office Box Square
Boston, Massachusetts 02109
</TABLE>
61
<PAGE>
- ---------------------
(/1/) Includes 22,044,068 shares of Washington Mutual Common Stock owned by
Fidelity Management & Research Company and 2,333,614 shares owned by
Fidelity Management Trust Company, each a wholly-owned subsidiary of FMR
Corp. Edward C. Johnson 3d, members of his family and trusts for their
benefit, through ownership of voting common stock of FMR Corp. and the
execution of shareholders' voting agreements, may be deemed, under the
Investment Company Act of 1940, to form a controlling group with FMR Corp.
The number of shares set forth opposite FMR's name in the table also
includes 149,300 shares owned by Fidelity International Limited ("Fidelity
International"), a corporation operated independently of FMR Corp. Mr.
Johnson is the Chairman of FMR Corp. and Fidelity International and,
through a partnership controlled by Mr. Johnson and members of his family,
owns shares of Fidelity International voting stock with the right to cast
39.9% of the total votes that may be cast. FMR Corp. and Fidelity
International may be deemed to constitute a "group" within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934, although each
disclaims that any such "group" exists.
(/2/) A Schedule 13D was filed by Robert M. Bass; Acadia Partners, L.P., a
Delaware limited partnership ("Acadia"); Acadia FW Partners, L.P., a
Delaware limited partnership ("Acadia FW"); Acadia MGP, Inc., a Texas
corporation ("Acadia MGP"); J. Taylor Crandall; Capital Partnership, a
Texas general partnership ("Capital"); Margaret Lee Bass 1980 Trust, a
trust existing under the laws of Texas ("MLBT"); Panther City Investment
Company, a Texas corporation ("Panther City"); W. Robert Cotham; KH Carl
Partners, L.P., a Delaware limited partnership ("KH Carl"); Bernard J.
Carl; Rosecliff-New American 1988 Partners, L.P., a Delaware limited
partnership ("Rosecliff"); and Daniel J. Doctoroff ("Mr. Doctoroff"). The
Schedule 13D indicated that, based on overlapping employment and
investment relationships, Mr. Bass, Acadia, Acadia FW, Acadia MGP, Mr.
Crandall, Capital, MLBT, Panther City, Mr. Cotham, KH Carl, Mr. Carl,
Rosecliff and Mr. Doctoroff may be deemed to constitute a "group" within
the meaning of Section 13(d)(3) of the Exchange Act, although the
foregoing persons expressly disclaim that any such "group" exists.
Mr. Bass beneficially owns 12,739,348 shares, approximately 4.9% of the
Washington Mutual Common Stock outstanding. This number includes 1,901,276
of the shares held in escrow for the benefit of Keystone Holdings
Partners, L.P. ("KH Partners") and its transferees pursuant to that
certain agreement for merger dated as of July 21, 1996; as amended
November 1, 1996, by and among Washington Mutual, KH Partners, Keystone
Holdings, and certain of its subsidiaries (the "Keystone Merger
Agreement"). Pursuant to the Keystone Merger Agreement, shares of
Washington Mutual Common Stock received by KH Partners and a governmental
entity were placed in escrow pending the outcome of certain litigation
between Keystone Holdings and the United States of America (the
"Litigation Escrow Shares"). Pursuant to the escrow, KH Partners and its
transferees have the sole right to vote the Litigation Escrow Shares
received by KH Partners while those shares are in escrow, KH Partners has
distributed such voting rights to its partners in accordance with their
sharing percentages, and Mr. Bass, as a limited partner of KH Partners,
may therefore be deemed to be the beneficial owner of such 1,901,276
Litigation Escrow Shares as to which voting rights have been distributed
to him. The shares beneficially owned by Mr. Bass also include 4,965,473
shares held by WAMU Partners, a Texas general partnership ("WAMU
Partners"), of which Mr. Bass and Mr. Crandall may be deemed to share
voting and investment power with respect to such shares; 732,624 shares
held by Keystone, Inc., a Texas corporation, of which Mr. Bass is the sole
stockholder; and 455 shares held by Group Holdings, Inc., a Delaware
corporation, of which Keystone, Inc., is the sole stockholder. Acadia
beneficially owns 1,151,316 shares of the Washington Mutual Common Stock
including 1,038,891 Litigation Escrow Shares, and based on their
relationship to Acadia, each of Acadia FW, Acadia MGP and Mr. Crandall, as
President and sole stockholder of Acadia MGP, may also be deemed the
beneficial owner of these 1,151,316 Shares. Capital owns 1,242,531 shares
of the Washington Mutual Common Stock, including 188,785 Litigation Escrow
Shares, and based on their relationship to Capital, each of MLBT, Panther
City and Mr. Cotham may also be deemed to be the beneficial owner of these
1,242,531 shares. Rosecliff owns 177,526 Litigation Escrow Shares and Mr.
Doctoroff, as sole general partner of Rosecliff, is also deemed to
beneficially own these 177,526 shares. Mr. Doctoroff also beneficially
owns an additional 106,620 shares of the Washington Mutual Common Stock.
Mr. Cotham also beneficially owns an additional
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<PAGE>
1,238 shares of the Washington Mutual Common Stock. Mr. Carl beneficially
owns 2,298,162 shares of the Washington Mutual Common Stock, of which
555,514 shares are owned by KH Carl. Of the total of 2,298,162 shares
beneficially owned by Mr. Carl, 383,972 are Litigation Escrow Shares.
Acadia MGP also beneficially owns an additional 14,122 shares of the
Washington Mutual Common Stock and, based on his relationship to Acadia
MGP, Mr. Crandall may also be deemed the beneficial owner of these 14,122
shares. Mr. Crandall also beneficially owns an additional 125,000 shares
of the Washington Mutual Common Stock (including 1,000 shares issuable
upon exercise of options granted by Washington Mutual to Mr. Crandall)
and, based on his relationship to WAMU Partners, Mr. Crandall may also be
deemed the beneficial owner of the 4,965,473 shares of the Washington
Mutual Common Stock held by WAMU Partners.
(/3/) Putnam Investments, Inc. ("Putnam"), a wholly-owned subsidiary of Marsh &
McLennan Companies., Inc. ("M&MC"), wholly owns Putnam Investment
Management, Inc. ("PIMI"), a registered investment adviser to certain
mutual funds, and The Putnam Advisory Company, Inc. ("PACI"), a registered
investment adviser to certain institutional clients. Both subsidiaries
have depository power over the shares as investment managers, but each of
the mutual funds' trustees has voting power over the shares held by each
fund, and PACI has shared voting power over the shares held by the
institutional clients. Pursuant to Exchange Act Rule 13d-4, M&MC and
Putnam, for purposes of Sections 13(d) and 13(g) of the Exchange Act,
disclaim beneficial ownership of the shares set forth opposite Putnam's
name in the table.
PRINCIPAL HOLDERS OF WASHINGTON MUTUAL PREFERRED STOCK
Washington Mutual knows of no person that owned more than 5% of the
outstanding shares of the Washington Mutual Preferred Stock as of April 24,
1998.
SECURITY OWNERSHIP OF WASHINGTON MUTUAL BY DIRECTORS AND EXECUTIVE OFFICERS
The following table provides a summary of the beneficial ownership of the
Washington Mutual Common Stock and Washington Mutual Preferred Stock as of
March 6, 1998, including options to acquire shares of Washington Mutual Common
Stock which are exercisable within 60 days of such date, by (i) directors,
(ii) Washington Mutual's Chief Executive Officer, (iii) the four highest
compensated executive officers other than the Chief Executive Officer and (iv)
the directors and executive officers as a group. The following summary is
based on information furnished by the respective directors and officers. Each
of the named directors and officers has sole voting and investment power with
respect to the shares shown, except as noted below.
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME OF SHARES(/1/) OPTIONS TOTAL OF CLASS
---- -------------- ------- --------- --------
<S> <C> <C> <C> <C>
Douglas P. Beighle......... 11,250 4,000 15,250 *
David Bonderman............ 2,006,421(/2/) 1,000 2,007,421 *
J. Taylor Crandall......... 6,254,911(/3/) 1,000 6,255,911 2.4%
Craig S. Davis............. 19,644 6,667 26,311 *
Roger H. Eigsti............ 3,000 4,000 7,000 *
John W. Ellis.............. 26,500 4,000 30,500 *
Anne V. Farrell............ 2,000 3,000 5,000 *
Stephen E. Frank........... 1,800 11,250 13,050 *
William P. Gerberding...... 3,835 4,000 7,835" *
Enrique Hernandez, Jr. .... 450 11,250 11,700 *
Kerry K. Killinger......... 614,973 568,916 1,183,889 *
William A. Longbrake....... 311,057 26,667 337,724 *
Samuel B. McKinney......... 4,250 2,000 6,250 *
Michael K. Murphy.......... 4,250 4,000 8,250 *
William G. Reed, Jr. ...... 24,375 4,000 28,375 *
James H. Stever............ 7,800 4,000 11,800 *
Craig E. Tall.............. 151,817 120,999 272,816 *
S. Liane Wilson............ 103,033 109,499 212,532 *
</TABLE>
63
<PAGE>
<TABLE>
<CAPTION>
NUMBER PERCENT
NAME OF SHARES(/1/) OPTIONS TOTAL OF CLASS
---- -------------- --------- ---------- --------
<S> <C> <C> <C> <C>
William B. Wood, Jr. ...... 450 18,000 18,450 *
All directors and executive
officers as a group
(25 persons).............. 9,823,979 1,086,515 10,910,494 4.2%
</TABLE>
- ---------------------
* Less than 1%.
(/1/) None of the above named officers and directors owned any shares of the
Washington Mutual Preferred Stock as of March 6, 1998. All officers and
directors as a group owned 200 shares of the Washington Mutual Preferred
Stock on such date, representing less than 1% of the class outstanding.
(/2/) Includes 303,858 shares held by KH Group Management, Inc. ("KH Group"), of
which Mr. Bonderman is president and sole stockholder, and 60,952
Litigation Escrow Shares held for the benefit of KH Partners and its
transferees pursuant to the Keystone Merger Agreement and as to which
voting rights have been distributed to KH Group as a limited partner of KH
Partners in accordance with its sharing percentage. Also includes 255,517
Litigation Escrow Shares as to which voting rights have been distributed
to Mr. Bonderman in accordance with his sharing percentage as a limited
partner of KH Partners. Also includes 111,393 shares owned by Bondo FTW,
Inc., of which Mr. Bonderman is president and sole stockholder, 200 shares
held by the Bonderman Family Limited Partnership, of which Mr. Bondernan
is general partner.
(/3/) Includes 4,965,473 shares beneficially owned by WAMU Partners, a Texas
general partnership of which Mr. Crandall is the managing partner.
Includes 112,425 shares owned by Acadia, and 1,038,891 Litigation Escrow
Shares held for the benefit of KH Partners and its transferees pursuant to
the Keystone Merger Agreement, as to which voting rights have been
distributed to Acadia in accordance with its sharing percentage as a
limited partner of KH Partners. Includes 14,122 shares owned by Acadia MGP
and an additional 55,428 Litigation Escrow Shares held for the benefit of
KH Partners and its transferees, as to which voting rights have been
distributed to Mr. Crandall in accordance with his sharing percentage as a
limited partner of KH Partners.
64
<PAGE>
AHMANSON
GENERAL
H. F. Ahmanson & Company is one of the largest residential real estate and
consumer and business financial services companies in the United States,
owning subsidiaries principally engaged in consumer and small business banking
and related financial services activities. Ahmanson was originally organized
in 1928 in California and changed its state of incorporation from California
to Delaware in 1985. Approximately 98% of Ahmanson's consolidated revenues in
1997 were derived from the operations of Home Savings, which is wholly-owned
by Ahmanson. Home Savings represented over 99% of Ahmanson's consolidated
assets at December 31, 1997. Home Savings is one of the largest savings
institutions in the United States and conducts the majority of its business in
California. Home Savings currently conducts certain of its savings and lending
operations outside California under the name "Savings of America, a division
of Home Savings of America, FSB." Home Savings also conducts certain of its
consumer lending operations under the name "Home Consumer Finance of America"
and certain of its real estate lending operations outside California through
Ahmanson Mortgage Company, a wholly-owned subsidiary. At December 31, 1997,
Home Savings had total deposits of $32.27 billion, substantially all of which
were retail deposits. At December 31, 1997, Ahmanson had 370 retail branches
located in California, Texas and Florida and 126 loan offices in nine other
states.
Ahmanson's principal business is attracting funds from the general public
and institutions and originating and investing in residential real estate
mortgage loans, consumer and small business loans, mortgage-backed securities
("MBS") and investment securities. Ahmanson's primary sources of revenues are
interest earned on loans and MBS, income from investment securities, gains on
sales of loans and MBS, fees earned in connection with loans and deposits, and
income earned on its portfolio of loans and MBS serviced for investors. Its
principal expense is interest incurred on interest-accruing liabilities,
including deposits and borrowings. Ahmanson's primary sources of funds are
deposits, principal and interest payments on loans and MBS, proceeds from
sales of loans and MBS and borrowings.
Over the past several years, Ahmanson has focused on enlarging its presence
and enhancing its market share in its key market of California and has
recognized that there are markets where Ahmanson cannot economically achieve
sufficient market share to be an effective competitor. Such focus resulted in,
among other things, the sale of three retail branches in Texas in 1996 and in
1997, the sale of four retail branches in Arizona and 12 retail branches in
west Florida. On December 4, 1997, Ahmanson announced a definitive agreement
to sell its remaining 27 retail branches in Florida with deposits at December
31, 1997 totalling approximately $3.28 billion. Such focus on California has
also resulted in the acquisition by Ahmanson of additional branches in
California and, on February 13, 1998, the consummation of the Ahmanson-Coast
Merger. At December 31, 1997, Coast had deposits of $6.42 billion and total
assets of $8.84 billion and operated 90 retail banking offices, all in the
State of California. Each holder of Coast common stock received 0.8082 of a
share of Ahmanson Common Stock for each share of Coast common stock. In
addition, immediately prior to the merger, each holder of the common stock of
Coast also received one Contingent Payment Right Certificate ("CPR
Certificate"), issued by the Coast Federal Litigation Contingent Payment
Rights Trust ("CPR Trust"), for each share of the common stock of Coast. The
CPR Certificates represent assignable and transferable undivided beneficial
interests in the assets of the CPR Trust, including a commitment by Ahmanson
to pay to the CPR Trust an amount equal to any proceeds (net of taxes and
expenses, computed under certain assumptions) that Coast Federal Bank, Federal
Savings Bank ("Coast Federal") (formerly a wholly-owned subsidiary of Coast),
or its successors, may receive from pending litigation claims against the
United States government relating to the government's alleged breach of its
agreement with respect to Coast Federal's regulatory capital. Coast Federal
was merged into Home Savings following the Ahmanson-Coast Merger.
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<PAGE>
PRINCIPAL HOLDERS OF AHMANSON COMMON STOCK
The following table sets forth information regarding beneficial ownership of
Ahmanson Common Stock by each person known to Ahmanson to have been the
beneficial owners of more than 5% of Ahmanson's equity securities on May 14,
1998. This information is based solely on statements filed with the Commission
or other information believed by Ahmanson to be reliable.
<TABLE>
<CAPTION>
PERCENT OF
AMOUNT AND NATURE OF OUTSTANDING
BENEFICIAL OWNERSHIP OF COMMON
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES OF COMMON STOCK STOCK
------------------------------------ ----------------------- -----------
<S> <C> <C>
Princeton Services, Inc. .............. 6,154,867/(1)/ 6.61%
800 Scudders Mill Road
Plainsboro, NJ 08536
Putnam Investments, Inc. .............. 8,150,210/(2)/ 8.75%
One Post Office Box Square
Boston, MA 02109
</TABLE>
- ---------------------
/(1)/ Princeton Services, Inc. ("PSI") is deemed to be the beneficial owner of
these shares because it serves as the corporate managing general partner
of Merrill Lynch Asset Management L.P. and Fund Asset Management L.P.,
both of which are registered investment advisers. The number of shares
reported includes 410 shares resulting from the assumed conversion of 200
Ahmanson Depositary Shares representing interests in the Ahmanson
Preferred Stock. PSI has shared voting and dispositive power in all of the
shares, and disclaims beneficial ownership of the shares.
/(2)/ Putnam is deemed to be the beneficial owner of these shares by virtue of
the direct or indirect investment and/or voting discretion that its
subsidiaries possess pursuant to the provisions of investment advisory
agreements with various clients, none of whom is known by Ahmanson to own
beneficially more than 5% of the outstanding shares of Ahmanson Common
Stock. PIMI holds shared dispositive power in 7,784,546 shares, sole
dispositive power in none of the shares and voting power in none of the
shares, and PACI holds shared voting power in 218,120 shares, sole voting
power in none of the shares, sole dispositive power in none of the shares
and shared dispositive power in 365,664 shares. Putnam and M&MC, of which
Putnam is a wholly-owned subsidiary, have both disclaimed beneficial
ownership of the shares.
SECURITY OWNERSHIP OF AHMANSON BY DIRECTORS AND EXECUTIVE OFFICERS
The following table and accompanying footnotes provide a summary of the
beneficial ownership of Ahmanson Common Stock as of March 31, 1998, including
Ahmanson Common Stock Options exercisable within 60 days of March 31, 1998, by
(i) directors, (ii) Ahmanson's Chief Executive Officer, (iii) the four highest
compensated executive officers other than the Chief Executive Officer and (iv)
the directors and executive officers as a group (24 persons). Beneficial
ownership is defined in accordance with the rules of the Commission and means
generally the power to vote or dispose of securities, regardless of any
economic interest. The following information is based on information furnished
by the respective directors and officers. Each of the named directors and
officers has sole voting and investment power with respect to the shares
shown, except as noted below.
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES OPTIONS VOTING POWER ONLY TOTAL PERCENT OF CLASS
---- ---------------- ------- ----------------- ------- ----------------
<S> <C> <C> <C> <C> <C>
Byron Allumbaugh........ 4,500 17,000 -- 21,500 *
Anne-Drue M. Anderson... 5,589 93,436 -- 99,025 *
Harold A. Black......... -- 5,000 -- 5,000 *
Richard M. Bressler..... 22,000 17,000 -- 39,000 *
John E. Bryson.......... -- -- -- -- *
David R. Carpenter...... 290 8,301 -- 8,591 *
Madeleine A. Kleiner.... 4,468 104,028 -- 108,496 *
Ray Martin.............. 79,000 -- -- 79,000 *
Phillip D. Matthews..... 6,000 8,301 -- 14,301 *
Richard L. Nolan........ 1,000 4,000 -- 5,000 *
</TABLE>
66
<PAGE>
<TABLE>
<CAPTION>
NAME NUMBER OF SHARES OPTIONS VOTING POWER ONLY TOTAL PERCENT OF CLASS
---- ---------------- --------- ----------------- --------- ----------------
<S> <C> <C> <C> <C> <C>
Delia M. Reyes........... -- 11,149 -- 11,149 *
Charles R. Rinehart...... 80,848 421,334 837,454(/1/) 1,339,636 1.22%
Frank M. Sanchez......... 2,000 4,485 -- 6,485 *
Elizabeth A. Sanders..... 3,000 14,000 -- 17,000 *
Arthur W. Schmutz........ 5,000 9,000 -- 14,000 *
William D. Schulte....... 2,500 13,000 -- 15,500 *
Kevin M. Twomey.......... 12,010 253,706 -- 265,716 *
Bruce G. Willison........ 35,000 162,071 -- 197,071 *
All directors and
executive officers as a
group (24 persons)........ 289,564 1,397,265 837,454 2,445,283 2.23%
</TABLE>
- ---------------------
* Less than 1%
(/1/) Mr. Rinehart has disclaimed beneficial ownership of such shares because
his interest in such shares is limited to an irrevocable proxy from Wells
Fargo Bank, as trustee. The trust instruments covering such shares provide
that the trustee shall grant to the Chairman of the Board of Ahmanson upon
request a proxy to vote such shares, and the trustee has granted an
irrevocable proxy for a term of seven years, expiring in January 2001, to
Mr. Rinehart as Chairman of the Board and his successors as Chairman of
the Board.
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<PAGE>
MANAGEMENT AND OPERATIONS OF WASHINGTON MUTUAL
FOLLOWING THE MERGER
The estimates of cost savings and transaction-related and other expenses
described below are forward-looking statements that, while prepared on the
basis of Washington Mutual's best judgments and currently available
information regarding Ahmanson's business and the future operating performance
of the two companies, are inherently subject to significant business, economic
and competitive uncertainties and contingencies, many of which are beyond the
control of either company, and upon assumptions with respect to future
business decisions that are subject to change. Accordingly, there can be no
assurance that such cost-savings will be realized in the amounts or within the
time periods currently estimated, or that such charges for transaction-related
expenses will be as estimated. See "Risk Factors."
GENERAL
The Merger Agreement provides for the merger of Ahmanson with and into
Washington Mutual, with Washington Mutual as the surviving corporation. The
separate existence of Ahmanson will cease upon completion of the Merger and
stockholders of Ahmanson will become shareholders of Washington Mutual as
described herein.
BOARD OF DIRECTORS
At the Effective Time, three directors of Ahmanson mutually agreeable to
Washington Mutual and Ahmanson will be added to the existing Washington Mutual
Board to form the Board of Directors of the Combined Company. Information
regarding the existing Washington Mutual Board is set forth in the 1997
Washington Mutual 10-K and information regarding the existing Ahmanson Board
is set forth in the 1997 Ahmanson 10-K, which are incorporated herein by
reference. See "Incorporation of Certain Documents by Reference" and
"Available Information."
OPERATIONS AFTER THE MERGER
General. After consummation of the Merger, it is anticipated that Home
Savings will be merged with and into WMBFA, with WMBFA as the surviving
corporation.
Operations. The Combined Company intends to utilize the Washington Mutual
products and sales and marketing systems which it has been introducing through
the WMBFA system and to provide these same products and systems to Ahmanson.
Washington Mutual also intends to consolidate and coordinate the operations,
sales, marketing and product selection of its broker-dealer subsidiaries and
those of Ahmanson. Washington Mutual will convert Ahmanson branches to
Washington Mutual's information and data processing systems for certain major
functions, including deposit operations, loan servicing and item processing.
Washington Mutual will also introduce its LoanWorks system for loan
origination throughout the Ahmanson network.
Cost Savings. Although no assurances can be given that any specific level of
expense savings will be realized or as to the timing thereof, Washington
Mutual currently expects to achieve substantial savings in the Combined
Company's operating expense base, primarily through consolidation of back
office operations, elimination of redundant corporate overhead and staff
positions, consolidation of retail branches and loan offices, reduction of
aggregate marketing expenses and implementation of integrated technology
platforms into Ahmanson's operations in order to reduce loan origination,
servicing and other operational costs. The following table provides details of
the estimated cost savings by business division and period in which they are
expected to be realized. All calculations are based on Ahmanson's 1998
budgeted expenses. The divisional cost savings are shown as a percentage of
Ahmanson's gross divisional operating expenses.
68
<PAGE>
<TABLE>
<CAPTION>
% OF % OF
AHMANSON AHMANSON
1999 OPERATING 2000 OPERATING
AMOUNT EXPENSES AMOUNT EXPENSES
------ --------- ------ ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Administration/Finance...... $26 37% $37 54%
Lending..................... 46 50% 58 63%
Corporate................... 88 25% 166 47%
Retail banking.............. 39 13% 69 22%
--- ---
Total pretax cost
savings................ 199 330
Total pretax cost savings as
a percentage of:
Net estimated operating
expenses................. 24% 40%
</TABLE>
The cost savings estimated above are based on information provided by
Ahmanson during Washington Mutual's due diligence investigation, the knowledge
and experience that Washington Mutual has accumulated from its prior
acquisitions and the following significant assumptions: (i) the consolidation
approximately 160-170 branch offices of the Combined Company in California;
(ii) the closing of approximately 75-100 loan offices of the Combined Company
in California and other states; (iii) the consolidation of other bank premises
and facilities and the outsourcing of the corporate properties management
function; (iv) the adoption of a common branch operating system for the
Combined Company, with an attendant reduction in per deposit account
origination and maintenance costs; (v) the reduction of aggregate advertising
expenditures due to market overlap between WMBFA and Ahmanson branch locations
and elimination of duplicative staff functions in marketing and research; (vi)
the elimination of duplicative back office functions, particularly in the
accounting, finance and human resources areas; (vii) a reduction in Ahmanson's
current cost to originate a loan (which brings such costs to a level that more
closely approximates the industry average and is still above the comparable
cost of such originations at Washington Mutual); and (viii) a reduction in the
cost of servicing loans, again to a level that is below the current Ahmanson
cost but still above the current cost at Washington Mutual.
The projected cost savings were determined by first identifying (i) all back
office functions of the two companies that are duplicative and can be
consolidated in a single location and (ii) all other potential office
consolidations. Subsequently, all fixed costs associated with consolidated
back office functions and other consolidated offices (such as occupancy
expense and management salaries and benefits) were identified as potential
cost savings. In addition, variable costs were identified and adjusted to more
closely approximate Washington Mutual's cost levels. This analysis involved
both per unit cost comparisons (e.g., servicing costs per loan) and
productivity comparisons (e.g., loans serviced per employee). This analysis
resulted in additional projected cost savings. The phase-in of all cost
savings was then projected based on Washington Mutual's estimates of the
transaction closing date, the various system conversion dates and its
estimated transition plan for systems integration.
Transaction-Related Expenses. Washington Mutual expects to accrue, at the
Effective Time, incremental transaction-related expenses of $373 million (pre-
tax). These expenses represent: (1) $165 million related to anticipated
severance and benefit expense for employee terminations identified as of the
Effective Time for which specific severance plans are in place; (2) $141
million related to anticipated impairment of premises and equipment as the
result of planned branch consolidations and the elimination of other duplicate
facilities; (3) $16 million related to contract termination fees associated
with contracts for duplicate services which will be terminated; and (4) $51
million in other expenses, primarily investment banking and professional fees.
Washington Mutual expects to incur other transaction-related expenses after
the Effective Time in order to combine operations and systems, train employees
and to provide severance for employees, which expenses are not accruable at
the Effective Time. Washington Mutual cannot presently estimate the amount of
these other expenses.
Management After the Merger. Washington Mutual is undertaking a review of
its management needs following the Merger and intends to retain those
personnel which it believes will contribute to the implementation of its
business strategy.
69
<PAGE>
PRO FORMA COMBINED FINANCIAL INFORMATION
(UNAUDITED)
The following pro forma combined unaudited consolidated statement of
financial position as of December 31, 1997 and the pro forma combined
unaudited consolidated statements of income for the three years ended December
31, 1997 are based upon the historical consolidated financial statements of
Washington Mutual, Ahmanson and Coast as previously filed with the Commission
under the Exchange Act, and incorporated by reference in this Joint Proxy
Statement/Prospectus, and should be read in conjunction with those
consolidated financial statements and related notes. These combined unaudited
pro forma financial statements are not necessarily indicative of the operating
results that would have been achieved had the Merger been consummated as of
the beginning of the periods presented and should not be construed as
representative of future operating results. These combined unaudited pro forma
financial statements give effect to the Merger by combining the results of
operations of Washington Mutual and Ahmanson using the "pooling-of-interests"
method of accounting.
70
<PAGE>
PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
---------------------------------------------------
PRO FORMA
WASHINGTON INCLUDING
MUTUAL AHMANSON AHMANSON
----------------- ---------------- ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C>
INTEREST INCOME
Loans.................... $ 5,205,507 $ 2,315,253 $ 7,520,760
Investment and mortgage-
backed securities....... 1,507,825 1,021,157 2,528,982
Cash equivalents and
other................... 97,632 66,962 164,594
---------------- ---------------- ----------------
Total interest income.. 6,810,964 3,403,372 10,214,336
INTEREST EXPENSE
Deposits................. 2,166,104 1,479,438 3,645,542
Borrowings............... 1,988,387 689,049 2,677,436
---------------- ---------------- ----------------
Total interest expense. 4,154,491 2,168,487 6,322,978
---------------- ---------------- ----------------
Net interest income.... 2,656,473 1,234,885 3,891,358
Provision for loan
losses.................. 207,139 67,091 274,230
---------------- ---------------- ----------------
Net interest income after
provision for loan
losses.................. 2,449,334 1,167,794 3,617,128
OTHER INCOME
Depositor and other
retail banking fees..... 365,883 115,431 481,314
Loan servicing fees...... 89,824 63,534 153,358
Securities fees and
commissions............. 132,071 5,958 138,029
Insurance fees and
commissions............. 47,759 13,929 61,688
Other operating income... 136,275 54,646 190,921
Gain (loss) on sale of
loans and leases........ (60,343) 18,274 (42,069)
Gain on sale of retail
deposit branch systems.. -- 57,566 57,566
Gain on sale of other
assets.................. 39,423 232 39,655
Write down of loans
securitized and
retained................ (27,621) -- (27,621)
Write off of consulting
fees.................... (9,871) -- (9,871)
---------------- ---------------- ----------------
Total other income..... 713,400 329,570 1,042,970
OTHER EXPENSE
Salaries and employee
benefits................ 821,446 355,744 1,177,190
Occupancy and equipment.. 322,441 104,217 426,658
Regulatory assessments... 34,873 25,014 59,887
Other operating expense.. 577,557 261,718 839,275
Transaction-related
expense................. 431,125 -- 431,125
Amortization of goodwill
and other intangibles... 63,588 25,763 89,351
REO operations........... 10,578 70,126 80,704
---------------- ---------------- ----------------
Total other expense.... 2,261,608 842,582 3,104,190
---------------- ---------------- ----------------
Income before income
taxes................... 901,126 654,782 1,555,908
Income taxes............. 402,116 241,000 643,116
Provision for payments in
lieu of taxes........... 17,232 -- 17,232
---------------- ---------------- ----------------
Net income............. $ 481,778 $ 413,782 $ 895,560
================ ================ ================
Net income attributable
to common stock....... $ 460,346 $ 380,183 $ 840,529
================ ================ ================
Net income per common
share:
Basic.................. $1.87 $3.91 $2.37
Diluted................ 1.86 3.59 2.31
Average number of common
shares used to calculate
net income per common
share:
Basic.................. 246,119,646 97,162,327 354,941,452
Diluted................ 247,045,339 110,827,985 371,172,682
</TABLE>
71
<PAGE>
PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1996
---------------------------------------------------
PRO FORMA
WASHINGTON INCLUDING
MUTUAL AHMANSON AHMANSON
----------------- ---------------- ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C>
INTEREST INCOME
Loans.................... $ 4,621,153 $ 2,296,786 $ 6,917,939
Investment and mortgage-
backed securities....... 1,677,373 1,161,891 2,839,264
Cash equivalents and
other................... 88,564 56,118 144,682
---------------- ---------------- ----------------
Total interest income.. 6,387,090 3,514,795 9,901,885
INTEREST EXPENSE
Deposits................. 2,240,302 1,523,873 3,764,175
Borrowings............... 1,573,841 738,408 2,312,249
---------------- ---------------- ----------------
Total interest expense. 3,814,143 2,262,281 6,076,424
---------------- ---------------- ----------------
Net interest income.... 2,572,947 1,252,514 3,825,461
Provision for loan
losses.................. 392,435 144,924 537,359
---------------- ---------------- ----------------
Net interest income after
provision for loan
losses.................. 2,180,512 1,107,590 3,288,102
OTHER INCOME
Depositor and other
retail banking fees..... 282,468 78,061 360,529
Loan servicing fees...... 86,987 68,365 155,352
Securities fees and
commissions............. 131,066 6,965 138,031
Insurance fees and
commissions............. 44,417 9,858 54,275
Other operating income... 88,836 49,955 138,791
Gain on sale of loans and
leases.................. 45,708 28,346 74,054
Gain on sale of retail
deposit branch systems.. -- 6,861 6,861
Gain on sale of other
assets.................. 17,021 3,387 20,408
Write down of loans
securitized and
retained................ (38,339) -- (38,339)
---------------- ---------------- ----------------
Total other income..... 658,164 251,798 909,962
OTHER EXPENSE
Salaries and employee
benefits................ 819,965 369,264 1,189,229
Occupancy and equipment.. 321,142 122,740 443,882
Regulatory assessments... 108,271 60,641 168,912
SAIF special assessment.. 312,552 243,862 556,414
Restructuring expense.... 68,293 -- 68,293
Other operating expense.. 556,556 257,601 814,157
Transaction-related
expense................. 158,121 -- 158,121
Amortization of goodwill
and other intangibles... 65,394 18,842 84,236
REO operations........... 18,305 105,880 124,185
---------------- ---------------- ----------------
Total other expense.... 2,428,599 1,178,830 3,607,429
---------------- ---------------- ----------------
Income before income
taxes and minority
interest................ 410,077 180,558 590,635
Income taxes............. 141,220 35,300 176,520
Provision for payments in
lieu of taxes........... 25,187 -- 25,187
---------------- ---------------- ----------------
Income before minority
interest.............. 243,670 145,258 388,928
Minority interest in
earnings of consolidated
subsidiaries............ 13,570 -- 13,570
---------------- ---------------- ----------------
Net income............. $ 230,100 $ 145,258 $ 375,358
================ ================ ================
Net income attributable
to common stock....... $ 191,386 $ 100,337 $ 291,723
================ ================ ================
Net income per common
share:
Basic.................. $0.81 $0.92 $0.82
Diluted................ 0.81 0.92 0.81
Average number of common
shares used to calculate
net income per common
share:
Basic.................. 235,115,650 108,650,585 356,804,305
Diluted................ 237,683,414 108,650,585 359,372,069
</TABLE>
72
<PAGE>
PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995
----------------------------------------------------
PRO FORMA
WASHINGTON INCLUDING
MUTUAL AHMANSON AHMANSON
----------------- ---------------- ----------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C>
INTEREST INCOME
Loans................... $ 4,449,738 $ 2,405,820 $ 6,855,558
Investment and mortgage-
backed securities...... 1,577,611 1,158,461 2,736,072
Notes receivable........ 58,841 -- 58,841
Cash equivalents and
other.................. 72,181 134,810 206,991
---------------- ---------------- ----------------
Total interest income. 6,158,371 3,699,091 9,857,462
INTEREST EXPENSE
Deposits................ 2,351,903 1,835,590 4,187,493
Borrowings.............. 1,508,115 636,746 2,144,861
---------------- ---------------- ----------------
Total interest ex-
pense................ 3,860,018 2,472,336 6,332,354
---------------- ---------------- ----------------
Net interest income... 2,298,353 1,226,755 3,525,108
Provision for loan loss-
es..................... 251,424 119,111 370,535
---------------- ---------------- ----------------
Net interest income
after provision for
loan losses.......... 2,046,929 1,107,644 3,154,573
OTHER INCOME
Depositor and other re-
tail banking fees...... 233,879 55,766 289,645
Loan servicing fees..... 84,474 60,490 144,964
Securities fees and com-
missions............... 135,655 5,396 141,051
Insurance fees and com-
missions............... 33,284 6,657 39,941
Other operating income.. 71,932 37,959 109,891
Gain on sale of loans
and leases............. 25,933 5,364 31,297
Gain on sale of retail
deposit branch systems. -- 514,671 514,671
Gain on sale of other
assets................. 19,830 12,106 31,936
Write down of loans
securitized and re-
tained................. (19,651) -- (19,651)
FDIC assistance on cov-
ered assets............ 55,630 -- 55,630
Loss on sale of covered
assets................. (37,399) -- (37,399)
---------------- ---------------- ----------------
Total other income.... 603,567 698,409 1,301,976
OTHER EXPENSE
Salaries and employee
benefits............... 793,971 378,851 1,172,822
Occupancy and equipment. 309,368 148,250 457,618
Regulatory assessments.. 121,274 86,909 208,183
Other operating expense. 490,516 254,050 744,566
Transaction-related ex-
pense.................. 2,000 -- 2,000
Amortization of goodwill
and other intangibles.. 68,592 26,559 95,151
REO operations.......... 17,165 86,788 103,953
---------------- ---------------- ----------------
Total other expense... 1,802,886 981,407 2,784,293
---------------- ---------------- ----------------
Income before income
taxes, accounting
change and minority
interest............... 847,610 824,646 1,672,256
Income taxes............ 273,006 373,700 646,706
Provision for payments
in lieu of taxes....... 7,887 -- 7,887
Cumulative effect of
change in accounting
for goodwill........... -- (234,742) (234,742)
---------------- ---------------- ----------------
Income before minority
interest............. 566,717 216,204 782,921
Minority interest in
earnings of consoli-
dated subsidiaries..... 15,793 -- 15,793
---------------- ---------------- ----------------
Net income............ $ 550,924 $ 216,204 $ 767,128
================ ================ ================
Net income attribut-
able to common stock. $ 507,325 $ 165,774 $ 673,069
================ ================ ================
Net income per common
share:
Basic................. $2.19 $1.41 $1.85
Diluted............... 2.16 1.41 1.82
Average number of common
shares used to
calculate net income
per common share
Basic................. 232,104,843 117,204,021 363,373,347
Diluted............... 244,555,332 129,888,329 390,030,260
</TABLE>
73
<PAGE>
PRO FORMA COMBINED CONSOLIDATEDSTATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------------------------------------------
PRO FORMA ADJUSTMENTS PRO FORMA
WASHINGTON --------------------------- INCLUDING
MUTUAL AHMANSON DEBIT CREDIT AHMANSON
----------- ----------- ---------- ----------- ------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash.................... $ 1,285,222 $ 603,797 $ -- $ 232,000(/1/) $ 1,657,019
Cash equivalents........ 275,668 555,310 85,500(/2/) -- 916,478
Trading securities...... 23,364 -- -- -- 23,364
Available for sale secu-
rities:
Mortgage-backed securi-
ties.................. 10,188,107 8,468,812 -- -- 18,656,919
Investment securities.. 1,185,815 7,248 -- -- 1,193,063
Held to maturity securi-
ties:
Mortgage-backed securi-
ties.................. 12,659,217 4,322,579 -- -- 16,981,796
Investment securities.. 120,397 2,421 -- -- 122,818
Loans:
Loans held in portfo-
lio................... 67,124,935 30,405,891 -- -- 97,530,826
Loans held for sale.... 685,716 455,651 -- -- 1,141,367
Reserve for loan loss-
es.................... (670,494) (377,351) -- -- (1,047,845)
----------- ----------- ---------- ----------- ------------
Total loans........... 67,140,157 30,484,191 -- -- 97,624,348
Investment in FHLBs..... 1,059,491 411,978 -- -- 1,471,469
Foreclosed assets....... 205,272 162,440 -- -- 367,712
Premises and equipment.. 937,198 364,626 -- 141,000(/1/) 1,160,824
Intangible assets aris-
ing from acquisitions.. 356,650 280,296 -- -- 636,946
Mortgage servicing
rights................. 215,360 96,120 -- -- 311,480
Other assets............ 1,329,181 918,934 -- -- 2,248,115
----------- ----------- ---------- ----------- ------------
Total assets.......... $96,981,099 $46,678,752 $ 85,500 $ 373,000 $143,372,351
=========== =========== ========== =========== ============
</TABLE>
74
<PAGE>
PRO FORMA COMBINED CONSOLIDATEDSTATEMENTS OF FINANCIAL POSITION--(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
---------------------------------------------------------------------
PRO FORMA ADJUSTMENTS PRO FORMA
WASHINGTON --------------------------- INCLUDING
MUTUAL AHMANSON DEBIT CREDIT AHMANSON
----------- ----------- ---------- ----------- ------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
LIABILITIES
Deposits(/4/):
Checking accounts...... $ 7,914,375 $ 3,271,579 $ -- $ -- $ 11,185,954
Savings accounts and
money market deposit
accounts.............. 14,940,045 7,813,730 -- -- 22,753,775
Time deposit accounts.. 28,131,597 21,183,066 -- -- 49,314,663
----------- ----------- ---------- ---------- ------------
Total deposits........ 50,986,017 32,268,375 -- -- 83,254,392
Federal funds purchased
and commercial paper... 2,928,282 837,861 -- -- 3,766,143
Securities sold under
agreements to
repurchase............. 12,279,040 1,675,000 -- -- 13,954,040
Advances from FHLBs..... 20,301,963 4,412,813 -- -- 24,714,776
Trust preferred
securities............. 800,000 148,464 -- -- 948,464
Other borrowings........ 2,689,362 3,903,592 -- -- 6,592,954
Other liabilities....... 1,687,364 1,037,202 116,000(/1/) -- 2,555,566
53,000(/5/) --
----------- ----------- ---------- ---------- ------------
Total liabilities..... 91,672,028 44,283,307 169,000 -- 135,786,335
STOCKHOLDERS' EQUITY
Preferred stock-
liquidation preference. 118,063 479,199 -- -- 597,262
Common stock............ -- 1,211 1,211(/3/) -- --
Capital surplus-common
stock.................. 1,943,294 677,396 85,500(/2/) 2,760,401
53,000(/5/)
1,211(/3/)
Valuation reserve for
available-for-sale
securities............. 134,610 31,118 -- -- 165,728
Retained earnings....... 3,113,104 2,138,881 257,000(/1/) -- 4,994,985
Common stock held in
treasury, at cost...... -- (932,360) (932,360)
----------- ----------- ---------- ---------- ------------
Total stockholders'
equity................ 5,309,071 2,395,445 258,211 139,711 7,586,016
----------- ----------- ---------- ---------- ------------
Total liabilities and
stockholders' equity.. $96,981,099 $46,678,752 $ 427,211 $ 139,711 $143,372,351
=========== =========== ========== ========== ============
</TABLE>
75
<PAGE>
NOTES TO PRO FORMA COMBINED CONSOLIDATED
STATEMENTS OF FINANCIAL POSITION
Statements of Financial Position. The pro forma adjustments reflected in the
unaudited pro forma combined statement of financial position of Washington
Mutual including Ahmanson as of December 31, 1997 give effect to the following
adjustments:
/(1)/ Transaction-related expenses anticipated to be recorded by Washington
Mutual are included in the pro forma including Ahmanson statement of
financial position as of December 31, 1997. Such transaction-related
expenses are summarized in the following table (dollars in thousands):
<TABLE>
<S> <C>
Investment banking and profes-
sional fees...................... $ 51,000
Severance and benefits............ 165,000
Premises and equipment............ 141,000
Contract termination fees......... 16,000
---------
Total expenses.................. 373,000
Tax benefit....................... (116,000)
---------
Net expenses.................. $ 257,000
=========
</TABLE>
/(2)/ Assumes exercise of approximately 85% of outstanding Ahmanson Common Stock
Options.
/(3)/ Conversion of Ahmanson Common Stock to Washington Mutual Common Stock (no
par value).
/(4)/ On December 4, 1997, Ahmanson announced a definitive agreement to sell its
remaining 27 retail branches in Florida with deposits at December 31, 1997
totaling approximately $3.28 billion. This transaction has not been
included in the preceding pro forma adjustments.
/(5)/ Assumed tax benefit of exercise of Ahmanson Common Stock Options.
On February 13, 1998, the Ahmanson-Coast Merger was consummated. The table
below sets forth pro forma combined unaudited financial statements for the
year ended and at December 31, 1997, to give effect to the Merger and to the
Ahmanson-Coast Merger and to give effect to the purchase accounting
adjustments and other assumptions described in the accompanying notes. The
following pro forma combined unaudited consolidated statement of financial
position as of December 31, 1997 and the pro forma combined unaudited
consolidated statements of income for the year ended December 31, 1997 are
based upon the historical consolidated financial statements of Washington
Mutual, Ahmanson and Coast as previously filed with the Commission under the
Exchange Act, and incorporated by reference in this Joint Proxy
Statement/Prospectus, and should be read in conjunction with those
consolidated financial statements and related notes. These combined unaudited
pro forma condensed financial statements give effect to the Merger by
combining the results of operations of Washington Mutual and Ahmanson using
the "pooling-of-interests" method of accounting. The Ahmanson-Coast Merger was
accounted for using the purchase method. The pro forma amounts in the table
below are presented for informational purposes and are not necessarily
indicative of the financial position or the results of operations of the
Combined Company that actually would have occurred had the Merger been
consummated as of the dates or for the periods presented. The pro forma
amounts are also not necessarily indicative of the future financial position
or future results of operations of the Combined Company.
76
<PAGE>
PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1997
-------------------------------------------------------------------------------
PRO FORMA
ADJUSTMENTS
---------------------
PRO FORMA
INCLUDING
WASHINGTON AHMANSON
MUTUAL AHMANSON COAST DEBIT CREDIT AND COAST
------------ ------------ ----------- ------- ------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
INTEREST INCOME
Loans................... $ 5,205,507 $ 2,315,253 $ 478,641 $ -- $ -- $ 7,999,401
Investment and mortgage-
backed securities...... 1,507,825 1,021,157 136,619 -- -- 2,665,601
Cash equivalents and
other.................. 97,632 66,962 17,321 -- -- 181,915
------------ ------------ ----------- ------- ------- ------------
Total interest income.. 6,810,964 3,403,372 632,581 -- -- 10,846,917
INTEREST EXPENSE
Deposits................ 2,166,104 1,479,438 294,095 -- 5,562(/1/a) 3,934,075
Borrowings.............. 1,988,387 689,049 116,045 -- 2,297(/1/b) 2,791,184
------------ ------------ ----------- ------- ------- ------------
Total interest expense. 4,154,491 2,168,487 410,140 -- 7,859 6,725,259
------------ ------------ ----------- ------- ------- ------------
Net interest income.... 2,656,473 1,234,885 222,441 -- 7,859 4,121,658
Provision for loan
losses................. 207,139 67,091 25,000 -- -- 299,230
------------ ------------ ----------- ------- ------- ------------
Net interest income
after provision....... 2,449,334 1,167,794 197,441 -- 7,859 3,822,428
OTHER INCOME
Depositor and other
retail banking fees.... 365,883 115,431 20,730 -- -- 502,044
Loan servicing fees..... 89,824 63,534 11,702 -- -- 165,060
Securities fees and
commissions............ 132,071 5,958 6,114 -- -- 144,143
Insurance fees and
commissions............ 47,759 13,929 11,643 -- -- 73,331
Other operating income.. 136,275 54,646 651 -- -- 191,572
Gain (loss) on sale of
loans.................. (60,343) 18,274 257 -- -- (41,812)
Gain on sale of retail
deposit branch systems. -- 57,566 -- -- -- 57,566
Gain (loss) on sale of
other assets........... 39,423 232 (211) -- -- 39,444
Write down of loans
securitized and
retained............... (27,621) -- -- -- -- (27,621)
Write off of consulting
fees................... (9,871) -- -- -- -- (9,871)
------------ ------------ ----------- ------- ------- ------------
Total other income..... 713,400 329,570 50,886 -- -- 1,093,856
OTHER EXPENSE
Salaries and employee
benefits............... 821,446 355,744 80,119 -- -- 1,257,309
Occupancy and equipment. 322,441 104,217 37,626 -- -- 464,284
Regulatory assessments.. 34,873 25,014 5,884 -- -- 65,771
Other operating expense. 577,557 261,718 37,232 -- -- 876,507
Transaction-related
expense................ 431,125 -- -- -- -- 431,125
Amortization of goodwill
and other intangibles.. 63,588 25,763 1,056 30,997(/1/c) 1,056(/1/d) 120,348
REO operations.......... 10,578 70,126 3,260 -- -- 83,964
------------ ------------ ----------- ------- ------- ------------
Total other expense.... 2,261,608 842,582 165,177 30,997 1,056 3,299,308
------------ ------------ ----------- ------- ------- ------------
Income before income
taxes.................. 901,126 654,782 83,150 30,997 8,915 1,616,976
Income taxes............ 402,116 241,000 25,923 -- 2,225(/1/c) 666,814
Provision for payments
in lieu of taxes....... 17,232 -- -- -- -- 17,232
------------ ------------ ----------- ------- ------- ------------
Net income............. $ 481,778 $ 413,782 $ 57,227 $30,997 $11,140 $ 932,930
============ ============ =========== ======= ======= ============
Net income attributable
to common stock....... $ 460,346 $ 380,183 $ 57,227 $30,997 $11,140 $ 877,899
============ ============ =========== ======= ======= ============
Net income per common
share:
Basic................. $1.87 $3.91 $3.06 $2.36
Diluted............... 1.86 3.59 2.97 2.30
Average number of common
shares used to
calculate net income
per common share:
Basic................. 246,119,646 97,162,327 18,672,000 371,843,048
Diluted............... 247,045,339 110,827,985 19,268,000 388,613,768
</TABLE>
77
<PAGE>
PRO FORMA COMBINED CONSOLIDATEDSTATEMENTS OF FINANCIAL POSITION
<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------------------------------------------------
PRO FORMA
PRO FORMA ADJUSTMENTS INCLUDING
WASHINGTON -------------------------- AHMANSON
MUTUAL AHMANSON COAST DEBIT CREDIT AND COAST
----------- ----------- ---------- ---------- ---------- ------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash.................... $ 1,285,222 $ 603,797 $ 142,811 $ 5,750(/1/) $ 232,000(/3/) $ 1,805,580
Cash equivalents........ 275,668 555,310 135,729 85,500(/4/) -- 1,052,207
Trading securities...... 23,364 -- -- -- -- 23,364
Available for sale
securities:
Mortgage-backed
securities............ 10,188,107 8,468,812 282,104 -- -- 18,939,023
Investment securities.. 1,185,815 7,248 -- -- -- 1,193,063
Held to maturity
securities:
Mortgage-backed
securities............ 12,659,217 4,322,579 1,898,230 -- -- 18,880,026
Investment securities.. 120,397 2,421 48,127 -- -- 170,945
Loans:
Loans held in
portfolio............. 67,124,935 30,405,891 5,959,496 -- 223,000(/1/) 103,267,322
Loans held for sale.... 685,716 455,651 71,148 223,000(/1/) 23,500(/1/) 1,412,015
Reserve for loan
losses................ (670,494) (377,351) (84,000) -- -- (1,131,845)
----------- ----------- ---------- ---------- ---------- ------------
Total loans............ 67,140,157 30,484,191 5,946,644 223,000 246,500 103,547,492
Investment in FHLBs..... 1,059,491 411,978 101,120 -- -- 1,572,589
Foreclosed assets....... 205,272 162,440 43,174 -- -- 410,886
Premises and equipment.. 937,198 364,626 83,940 -- 31,542(/1/) 1,213,222
141,000(/3/)
Intangible assets
arising from
acquisitions........... 356,650 280,296 5,182 1,025,535(/1/) 506,334(/1/) 1,161,329
Mortgage servicing
rights................. 215,360 96,120 28,341 -- -- 339,821
Other assets............ 1,329,181 918,934 128,004 -- -- 2,376,119
----------- ----------- ---------- ---------- ---------- ------------
Total assets........... $96,981,099 $46,678,752 $8,843,406 $1,339,785 $1,157,376 152,685,666
=========== =========== ========== ========== ========== ============
</TABLE>
78
<PAGE>
PRO FORMA COMBINED CONSOLIDATEDSTATEMENTS OF FINANCIAL POSITION--(CONTINUED)
<TABLE>
<CAPTION>
DECEMBER 31, 1997
--------------------------------------------------------------------------------
PRO FORMA
PRO FORMA ADJUSTMENTS INCLUDING
WASHINGTON -------------------------- AHMANSON
MUTUAL AHMANSON COAST DEBIT CREDIT AND COAST
----------- ----------- ---------- ---------- ----------- ------------
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
LIABILITIES
Deposits(/6/):
Checking accounts...... $ 7,914,375 $ 3,271,579 $ 919,873 $ -- $ -- $12,105,827
Savings accounts and
money market deposit
accounts.............. 14,940,045 7,813,730 635,040 -- -- 23,388,815
Time deposit accounts.. 28,131,597 21,183,066 4,863,281 -- 8,221(/1/) 54,186,165
----------- ----------- ---------- --------- ----------- ------------
Total deposits......... 50,986,017 32,268,375 6,418,194 -- 8,221 89,680,807
Federal funds purchased
and commercial paper... 2,928,282 837,861 -- -- -- 3,766,143
Securities sold under
agreements to
repurchase............. 12,279,040 1,675,000 310,825 -- -- 14,264,865
Advances from FHLBs..... 20,301,963 4,412,813 1,321,500 -- 9,765(/1/) 26,046,041
Trust preferred
securities............. 800,000 148,464 -- -- -- 948,464
Other borrowings........ 2,689,362 3,903,592 158,978 -- -- 6,751,932
Other liabilities....... 1,687,364 1,037,202 123,666 116,000(/3/) 36,918(/1/) 2,716,150
53,000(/7/)
----------- ----------- ---------- --------- ----------- ------------
Total liabilities...... 91,672,028 44,283,307 8,333,163 169,000 54,904 144,174,402
STOCKHOLDERS' EQUITY
Preferred stock-
liquidation preference. 118,063 479,199 -- -- -- 597,262
Common stock............ -- 1,211 194 1,211(/5/) -- -
194(/1/)
Capital surplus-common
stock.................. 1,943,294 677,396 293,423 293,423(/1/) 85,500(/4/) 2,760,401
53,000(/7/)
1,211(/5/)
Valuation reserve for
available-for-sale
securities............. 134,610 31,118 2,887 -- 1,022(/1/) 169,637
Retained earnings....... 3,113,104 2,138,881 213,739 213,739(/1/) -- 4,994,985
257,000(/3/)
Common stock held in
treasury, at cost...... -- (932,360) -- -- 921,339(/2/) (11,021)
----------- ----------- ---------- --------- ----------- ------------
Total stockholders'
equity................ 5,309,071 2,395,445 510,243 765,567 1,062,072 8,511,264
----------- ----------- ---------- --------- ----------- ------------
Total liabilities and
stockholders' equity.. $96,981,099 $46,678,752 $8,843,406 $ 934,567 $ 1,116,976 $152,685,666
=========== =========== ========== ========= =========== ============
</TABLE>
79
<PAGE>
NOTES TO PRO FORMA COMBINED CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
Statements of Income and Financial Position. The pro forma adjustments
reflected in the unaudited pro forma combined statement of financial position
of Washington Mutual including Ahmanson and Coast as of December 31, 1997 give
effect to the following adjustments:
(/1/)Purchase accounting adjustments related to the Ahmanson-Coast Merger.
(/1/a)Reduction of interest expense on deposits by $5.6 million due to
amortization of purchase accounting adjustment. The amortization
period is based on the expected life of deposits, not to exceed four
years. Assumes no tax effect.
(/1/b)Reduction of interest expense on borrowings by $2.3 million due to
amortization of purchase accounting adjustment. The amortization
period is based on the expected life of borrowings, not to exceed
three years. Assumes no tax effect.
(/1/c)Assumes purchased goodwill is amortized over 25 years and purchased
core deposit intangibles ("CDI") is amortized over 10 years. The CDI
amortization was tax deductible.
(/1/d)Coast's CDI amortization will be eliminated. Assumes no tax effect.
(/2/)Value of Ahmanson Common Stock issued in the Ahmanson-Coast Merger.
(/3/)Transaction-related expenses anticipated to be recorded by Washington
Mutual are included in the pro forma including Ahmanson and Coast
statement of financial position as of December 31, 1997. Such
transaction-related expenses are summarized in the following table (in
thousands):
<TABLE>
<S> <C>
Investment banking and profes-
sional fees...................... $ 51,000
Severance and benefits............ 165,000
Premises and equipment............ 141,000
Contract termination fees......... 16,000
---------
Total expenses.................. 373,000
Tax benefit....................... (116,000)
---------
Net expenses.................... $ 257,000
=========
</TABLE>
(/4/) Assumes exercise of approximately 85% of outstanding Ahmanson Common
Stock Options.
(/5/) Conversion of Ahmanson Common Stock to Washington Mutual Common Stock
(no par value).
(/6/)On December 4, 1997, Ahmanson announced a definitive agreement to sell
its remaining 27 retail branches in Florida with deposits at December
31, 1997 totaling approximately $3.28 billion. This transaction has
not been included in the preceding pro forma adjustments.
(/7/) Assumed tax benefit of exercise of Ahmanson Common Stock Options.
80
<PAGE>
COMPARISON OF RIGHTS OF WASHINGTON MUTUAL SHAREHOLDERS
AND AHMANSON STOCKHOLDERS
Washington Mutual is incorporated under the laws of the State of Washington
and Ahmanson is incorporated under the laws of the State of Delaware. Upon
consummation of the Merger, the Ahmanson Stockholders, whose rights as
stockholders are currently governed by the Delaware General Corporation Law
("DGCL"), the Ahmanson Certificate of Incorporation and the Ahmanson Bylaws
will, upon the exchange of their Ahmanson Common Stock, become holders of
shares of Washington Mutual Common Stock and their rights as such will be
governed by the Washington Business Corporation Act ("WBCA"), the Washington
Mutual Articles, and the Washington Mutual Bylaws. The material differences
between the rights of holders of Ahmanson Common Stock and Washington Mutual
Common Stock, resulting from the differences in their governing documents and
the application of the DGCL or the WBCA thereto, are summarized below.
The following summary does not purport to be a complete summary and is
qualified in its entirety by reference to the governing corporate documents of
each of Washington Mutual and Ahmanson and applicable law. See "Incorporation
of Certain Documents by Reference."
CAPITAL STOCK
The Washington Mutual Articles currently authorize 800,000,000 shares of
Washington Mutual Common Stock and 10,000,000 shares of Washington Mutual
preferred stock. See "Description of Washington Mutual Capital Stock." If the
Articles Amendment Proposal is approved at the Washington Mutual Meeting, the
number of authorized shares of Washington Mutual Common Stock will be
increased to 2,000,000,000.
The Ahmanson Certificate currently authorizes 220,000,000 shares of Ahmanson
Common Stock and 10,000,000 shares of Ahmanson Preferred Stock.
BOARD OF DIRECTORS
The Washington Mutual Articles provide that the number of directors
comprising the Washington Mutual Board shall be as stated in the Washington
Mutual Bylaws, provided that the number of directors shall not be less than
five. The Washington Mutual Board can amend the Washington Mutual Bylaws to
change the number of directors without shareholder approval. The Washington
Mutual Bylaws currently provide that the Washington Mutual Board shall consist
of fifteen directors. The Washington Mutual Board is divided into three
classes of as equal a number of directors as possible. The term of office of
each different class is three years, each term expiring in a different year.
Upon consummation of the Merger, the Washington Mutual Bylaws will be amended
to increase the number of directors of the Combined Company to 18.
The Ahmanson Certificate provides that the number of directors comprising
the Ahmanson Board shall be fixed from time to time in the manner provided in
the Ahmanson Bylaws which, in turn, provide that the number of directors
comprising the Ahmanson Board shall be as determined from time to time by a
resolution adopted by the Ahmanson Board. The Ahmanson Certificate does not
provide for a classified board.
MONETARY LIABILITY OF DIRECTORS
The Washington Mutual Articles and the Ahmanson Certificate each provide for
the elimination of personal monetary liability of directors to the fullest
extent permissible under the laws of Washington and Delaware, respectively.
The provision in the Washington Mutual Articles and the provision in the
Ahmanson Certificate incorporate future amendments to Washington law and
Delaware Law, respectively, with respect to the elimination of such liability.
VOTING RIGHTS
Neither the Washington Mutual Articles nor the Ahmanson Certificate provides
for cumulative voting in the election of directors. Upon consummation of the
Merger, based on the capitalization of Washington Mutual
81
<PAGE>
and Ahmanson on March 31, 1998, Washington Mutual common shareholders and the
Ahmanson Stockholders will hold approximately shares and shares of
common stock of the Combined Company, respectively, constituting approximately
% and %, respectively, of the Combined Company's voting power.
Consequently, following the Merger, neither Washington Mutual nor the Ahmanson
Stockholders will possess the same relative voting power in the Combined
Company as they possessed with respect to Washington Mutual and Ahmanson,
respectively, prior to the Merger.
INTERESTED SHAREHOLDERS
The Washington Mutual Articles prohibit, except under certain circumstances,
Washington Mutual (or any subsidiary of Washington Mutual) from engaging in
certain significant business transactions with a "Major Stockholder" (defined
as a person who, without the prior approval of the Washington Mutual Board,
acquires beneficial ownership of five percent or more of the votes held by the
holders of the outstanding shares of Washington Mutual's voting stock).
Prohibited transactions include, among others, any merger with, disposition of
assets to, acquisition by Washington Mutual of the assets of, issuance of
securities of Washington Mutual to, or acquisition by Washington Mutual of
securities of a Major Stockholder, or any reclassification of the voting stock
of Washington Mutual or of any subsidiary beneficially owned by a Major
Stockholder, or any partial or complete liquidation, spin off, split off or
split up of Washington Mutual or any subsidiary. The above prohibitions do not
apply, in general, if the specific transaction is approved by the Washington
Mutual Board prior to the involvement of the Major Stockholder; a vote of at
least 80% of the Continuing Directors (defined as those members of the
Washington Mutual Board prior to the involvement of the Major Stockholder); a
vote of 95% of the outstanding shares of Washington Mutual voting stock other
than shares held by the Major Stockholder; or a supermajority vote of either
the Washington Mutual Board or the holders of voting stock owned other than by
any Major Stockholder. The Washington Mutual Articles also provide that during
the time a Major Stockholder exists, Washington Mutual may voluntarily
dissolve only upon the unanimous consent of the Washington Mutual shareholders
or an affirmative vote of at least two-thirds of the Washington Mutual Board
and the holders of at least two-thirds of both the shares entitled to vote on
such a dissolution and of each class of shares entitled to vote on such a
dissolution as a class, if any.
The Ahmanson Certificate provides that certain transactions between Ahmanson
and a substantial stockholder (generally a person or group holding capital
stock representing 10% or more of the outstanding voting power of Ahmanson)
require the approval of the holders of 80% of the capital stock of Ahmanson
entitled to vote for the election of directors, including (i) the repurchase
by Ahmanson of capital stock representing 10% or more of the total voting
power of Ahmanson from such a substantial stockholder under certain
circumstances, (ii) certain mergers, consolidations, combinations or
reorganizations of Ahmanson or the sale of all or a substantial part of the
assets of Ahmanson or its subsidiaries where such a substantial stockholder or
its affiliates are parties to the transaction and (iii) certain other
exchanges of securities, cash or other property or assets of Ahmanson
involving such a substantial stockholder or its affiliates, except, in the
case of (ii) or (iii), for any transaction which has been approved by the
Ahmanson Board, including by the vote of at least two-thirds of the directors
unaffiliated with the substantial stockholder and its affiliates.
REMOVAL OF DIRECTORS AND FILLING VACANCIES ON THE BOARD OF DIRECTORS
The Washington Mutual Articles provide that directors may only be removed
for "good cause" (which is not defined). Under the Washington Mutual Bylaws a
director may be removed by the vote of the holders of a majority of the shares
entitled to vote at an election of the director whose removal is sought. The
Washington Mutual Bylaws also provide that a vacancy on the Washington Mutual
Board arising through resignation, removal or death of an existing director,
or by reason of an authorized increase in the number of directors, may be
filled by the affirmative vote of four-fifths of the remaining directors,
though less than a quorum.
Under the DGCL, any or all directors of a corporation which does not have
cumulative voting or a classified board may be removed, with or without cause,
by the holders of a majority of the shares entitled to vote at the election of
directors, unless such corporation's certificate of incorporation provides
otherwise. The Ahmanson
82
<PAGE>
Certificate does not limit the right of the Ahmanson Stockholders to remove
directors with or without cause. Under the DGCL, unless otherwise provided in
a corporation's certificate of incorporation or by-laws, vacancies and newly-
created directorships resulting from any increase in the authorized number of
directors may be filled by a majority of the directors in office. Neither the
Ahmanson Certificate nor the Ahmanson Bylaws provides for vacancies or newly-
created directorships to be filled by stockholder vote.
WASHINGTON MUTUAL RIGHTS PLAN
Washington Mutual has adopted a shareholder rights plan (the "Washington
Mutual Rights Plan") which provides that one right to purchase an additional
share of Washington Mutual Common Stock (the "Washington Mutual Rights") is
attached to each outstanding share of Washington Mutual Common Stock. The
Washington Mutual Rights have certain anti-takeover effects and are intended
to discourage coercive or unfair takeover tactics and to encourage any
potential acquiror to negotiate a price fair to all shareholders. The
Washington Mutual Rights may cause substantial dilution to an acquiring party
that attempts to acquire Washington Mutual on terms not approved by the
Washington Mutual Board, but they will not interfere with any merger or other
business combination that is approved by the Washington Mutual Board.
The Washington Mutual Rights are not exercisable until the tenth day after a
party acquires beneficial ownership of 20% or more of the outstanding shares
of Washington Mutual Common Stock or commences or publicly announces for the
first time a tender offer to do so. Each Washington Mutual Right entitles the
holder to purchase one share of Washington Mutual Common Stock for an exercise
price that is currently $26.67 per share. In the event, among certain other
specified events, that an acquiring party thereafter gains control of 30% or
more of the outstanding shares of Washington Mutual Common Stock, any
Washington Mutual Rights held by that party will be void and, for the next 60
days, all other holders of Washington Mutual Rights are entitled to receive
that number of shares of Washington Mutual Common Stock having a market value
of two times the exercise price of the Washington Mutual Right. The Washington
Mutual Rights, which expire on October 26, 2000, may be redeemed by Washington
Mutual prior to becoming exercisable for $0.0044 per right. Until a Washington
Mutual Right is exercised, the holder of that Washington Mutual Right will
have no rights as a shareholder of Washington Mutual, including, without
limitation, the right to vote or receive dividends.
AHMANSON RIGHTS PLAN.
On November 7, 1997, the Ahmanson Board declared a dividend distribution of
one preferred stock purchase right (an "Ahmanson Right") to holders of
Ahmanson Common Stock outstanding on November 17, 1997 pursuant to the
Ahmanson Rights Agreement, dated as of November 7, 1997, between Ahmanson and
First Chicago Trust Company of New York, as rights agent (the "Ahmanson Rights
Agent"), as amended on March 16, 1998 (the "Ahmanson Rights Plan").
In the event that any person of affiliated group becomes the beneficial
owner of 15% or more of the outstanding shares of Ahmanson Common Stock, each
holder of an Ahmanson Right (other than Ahmanson Rights beneficially owned by
the 15% beneficial owner) will thereafter have the right to purchase from
Ahmanson that number of shares of Ahmanson Common Stock having a market value
equal to two times the exercise price of the Ahmanson Right. If Ahmanson
thereafter is acquired in a merger or other business combination transaction
or 50% or more its consolidated assets or earning power is sold, proper
provision will be made so that each holder of an Ahmanson Right will
thereafter have the right to receive, upon the exercise thereof at the then
current exercise price of the Ahmanson Right (currently, $240), that number of
shares of common stock of the acquiring person which at the time of such
transaction will have a market value of two times the exercise price of the
Right. On March 16, 1998, Ahmanson and the Rights Agent entered into an
amendment of the Ahmanson Rights Plan providing that no person would be deemed
to be a 15% beneficial owner by virtue, among other things, the beneficial
ownership of (i) shares of Ahmanson Common Stock pursuant to the grant or
exercise of an option granted to such person by Ahmanson in connection with an
agreement to merge with, or acquire, Ahmanson, (ii) shares of Ahmanson Common
Stock beneficially owned by such option holder or its affiliates at the time
of grant of such option or (iii) the right to acquire shares of Ahmanson
Common Stock as a result of entering into any such agreement to merge or the
acquisition of shares of Ahmanson Common Stock upon consummation of any such
merger.
83
<PAGE>
CERTAIN DIFFERENCES BETWEEN WASHINGTON
AND DELAWARE CORPORATE LAWS
The WBCA governs the rights of Washington Mutual shareholders and will
govern the rights of stockholders of Ahmanson who become shareholders of the
Combined Company upon consummation of the Merger. The WBCA and the DGCL differ
in many respects. Certain of the significant differences between the
provisions of the WBCA and the DGCL that could materially affect the rights of
stockholders of Ahmanson are discussed below.
AMENDMENT OF ARTICLES/CERTIFICATES OF INCORPORATION
Under the WBCA, with certain exceptions, amendments to a corporation's
articles of incorporation must be recommended to the shareholders by the board
of directors, unless the board of directors determines that because of a
conflict of interest or other special circumstances it should make no
recommendation and communicates the basis for its determination to the
shareholders with the amendment. All amendments to the Washington Mutual
Articles must be approved by a majority of all the votes entitled to be cast
by any voting group entitled to vote thereon unless another proportion is
specified in the articles of incorporation, by the board of directors as a
condition to its recommendation or by provision of the WBCA. The Washington
Mutual Articles require an amendment to the articles to receive the
affirmative vote of the shareholders representing at least two-thirds of
Washington Mutual's issued capital stock at any regular meeting or special
meeting duly called for that purpose. See "--Class Voting" below.
Under the DGCL, amendments to a corporation's certificate of incorporation
require the approval of stockholders holding a majority of the outstanding
shares entitled to vote on such amendment, and if a class vote on such
amendment is required by the DGCL, a majority of the outstanding stock of such
class, unless a greater proportion is specified in the certificate of
incorporation or by other provisions of the DGCL. The Ahmanson Certificate
provides that the affirmative vote of the holders of not less than 80% of the
total voting power of all outstanding securities entitled to vote is required
for an amendment to the Ahmanson Certificate that would (i) alter those
provisions of the Ahmanson Certificate that require the stockholders of
Ahmanson to take action at an annual or special meeting only, (ii) alter those
provisions of the Ahmanson Certificate that limit the authority to call
special meetings of the stockholders of Ahmanson to the Ahmanson Board, (iii)
alter those provisions of the Ahmanson Certificate that provide for appraisal
rights to the fullest extent permitted by Delaware law with respect to any
transaction described above under "--Comparison of Rights of Washington Mutual
Shareholders and Ahmanson Stockholders--Interested Shareholders" or (iv)
reduce or diminish in any manner any requirement for stockholder or director
approval for (A) amendments to the Ahmanson Bylaws or (B) transactions
described above under "--Comparison of Rights of Washington Mutual
Shareholders and Ahmanson Stockholders--Interested Shareholders."
RIGHT TO CALL SPECIAL MEETING OF SHAREHOLDERS
The WBCA provides that a special meeting of shareholders of a corporation
may be called by its board of directors, by holders of at least 10 percent of
all the votes entitled to be cast on any issue proposed to be considered at
the proposed special meeting, or by other persons authorized to do so by the
articles of incorporation or bylaws of the corporation. However, the WBCA
allows the right of shareholders to call a special meeting to be limited or
denied entirely by provision of the corporation's articles of incorporation.
The Washington Mutual Articles provide that the Washington Mutual Board or any
person authorized by the Washington Mutual Bylaws may call a special meeting.
However, authority to call a special meeting is limited to holders of at least
twenty-five percent of all the votes entitled to be cast on any issue to be
considered at the proposed meeting. The Washington Mutual Bylaws extend
authority to call a special meeting to the chairman of the Washington Mutual
Board and to any one director making a written request to call such a meeting.
Under the DGCL, a special meeting of stockholders may be called by the board
of directors or by any other person authorized to do so in the certificate of
incorporation or the bylaws. Pursuant to the Ahmanson Certificate, only the
Ahmanson Board may call special meetings of the stockholders of Ahmanson.
84
<PAGE>
INDEMNIFICATION OF OFFICERS, DIRECTORS AND EMPLOYEES
Under the WBCA, if authorized by its articles of incorporation, a bylaw
adopted or ratified by its shareholders, or a resolution adopted or ratified,
before or after the event, by its shareholders, a corporation has the power to
indemnify a director, officer or employee made a party to a proceeding, or
advance or reimburse expenses incurred in a proceeding, under any
circumstances, except that no such indemnification shall be allowed for: (a)
acts or omissions of a director, officer or employee finally adjudged to have
engaged in intentional misconduct or a knowing violation of the law; (b)
conduct of a director, officer or employee finally adjudged to be an unlawful
distribution; or (c) any transaction with respect to which it was finally
adjudged that such director, officer or employee personally received a benefit
in money, property or services to which the director, officer or employee was
not legally entitled. The WBCA's legislative history suggests that a
corporation may indemnify its directors, officers and employees for amounts
paid in settlement of derivative actions, provided that the director's,
officer's or employee's conduct does not fall within one of the categories set
forth above. Generally, the Washington Mutual Bylaws provide that Washington
Mutual shall indemnify its directors, officers and employees to the fullest
extent permitted by the WBCA, including indemnification of persons seeking to
enforce indemnification rights through a proceeding authorized by the
Washington Mutual Board and initiated by such person.
Under the DGCL, directors and officers as well as other employees and
individuals may be indemnified against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation as a
derivative action) if the director, officer or employee acted in good faith
and in a manner the director, officer or employee reasonably believed to be
in, or not opposed to, the best interests, of the corporation, and, with
respect to a criminal action or proceeding, if the director, officer or
employee had no reasonable cause to believe that his or her conduct was
unlawful. The Ahmanson Bylaws provide for the indemnification of its directors
and officers to the fullest extent authorized by the DGCL.
PROVISIONS AFFECTING CONTROL SHARE ACQUISITIONS AND BUSINESS COMBINATIONS
The WBCA prohibits a "target corporation," with certain exceptions, from
engaging in certain "significant business transactions" with a person or group
of persons who or which beneficially owns 10% or more of the voting securities
of a target corporation (an "Acquiring Person") for a period of five years
after the acquisition of such securities, unless the transaction or
acquisition of shares is approved by a majority of the members of the target
corporation's board of directors prior to the date of the acquisition. A
significant business transaction includes, among other transactions, a merger
or consolidation with, disposition of assets to or with, or issuance or
redemption of stock to or from, the Acquiring Person, termination of 5% or
more of the employees of the target corporation employed in Washington State
as a result of the Acquiring Person's acquisition of 10% or more of the shares
or allowing the Acquiring Person to receive any disproportionate benefit as a
shareholder. Target corporations include domestic corporations with their
principal executive offices in Washington and either a majority or over 1,000
of their employees resident in Washington. Washington Mutual believes it
currently meets these standards and is subject to the statute. A corporation
may not "opt out" of this statute.
Section 203 of the DGCL prohibits a Delaware corporation from engaging in a
"business combination" with an "interested stockholder" for three years
following the date that such person becomes an interested stockholder. With
certain exceptions, an interested stockholder is a person or group who or
which owns 15% or more of the corporation's outstanding voting stock
(including any rights to acquire stock pursuant to an option, warrant,
agreement, arrangement or understanding, or upon the exercise of conversion or
exchange rights, and stock with respect to which the person has voting rights
only), or is an affiliate or associate of the corporation and was the owner of
15% or more of such voting stock at any time within the previous three years
(each, an "Interested Stockholder").
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the Interested Stockholder; sales
or other dispositions to the Interested Stockholder (except
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proportionately with the corporation's other stockholders) of assets of the
corporation or a subsidiary equal to 10% or more of the aggregate market value
of the corporation's consolidated assets or its outstanding stock; the
issuance or transfer by the corporation or a subsidiary of stock of the
corporation or such subsidiary to the Interested Stockholder (except for
certain transfers in a conversion or exchange or a pro rata distribution or
certain other transactions, none of which increase the interested
stockholder's proportionate ownership of any class or series of the
corporation's or such subsidiary's stock); or receipt by the Interested
Stockholder (except proportionately as a stockholder), directly or indirectly,
of any loans, advances, guarantees, pledges or other financial benefits
provided by or through the corporation or a subsidiary.
The three-year moratorium imposed on business combinations by Section 203
does not apply if: (i) prior to the date at which such stockholder becomes an
Interested Stockholder the board of directors approves either the business
combination or the transaction which resulted in the person becoming an
Interested Stockholder; (ii) the Interested Stockholder owns 85% of the
corporation's voting stock upon consummation of the transaction which made him
or her an Interested Stockholder (excluding from the 85% calculation shares
owned by directors who are also officers of the target corporation and shares
held by employee stock plans which do not permit employees to decide
confidentially whether to accept a tender or exchange offer); or (iii) on or
after the date such person becomes an Interested Stockholder, the board
approves the business combination and it is also approved at a shareholder
meeting by 66 2/3% of the voting stock not owned by the Interested
Stockholder. Section 203 does not apply if the business combination is
proposed prior to the consummation or abandonment, and subsequent to the
earlier of the public announcement or the notice required under Section 203,
of the proposed transaction which (i) constitutes certain (x) mergers or
consolidations, (y) sales or other transfers of assets having an aggregate
market value equal to 50% or more of the aggregate market value of all of the
assets of the corporation determined on a consolidated basis or the aggregate
market value of all the outstanding stock of the corporation or (z) proposed
tender or exchange offers for 50% or more of the corporation's outstanding
voting stock; (ii) is with or by a person who was either not an Interested
Stockholder during the last three years or who became an Interested
Stockholder with the approval of the corporation's board of directors; and
(iii) is approved or not opposed by a majority of the board members elected
prior to any person becoming an Interested Stockholder during the previous
three years (or their chosen successors).
A Delaware corporation may elect to "opt out" of, and not be governed by,
Section 203 through a provision in either its original certificate of
incorporation or its bylaws, or an amendment to its original certificate or
bylaws, which amendment must be approved by majority stockholder vote. With a
limited exception, such an amendment would not become effective until 12
months following its adoption. Ahmanson has not opted out of Section 203.
MERGERS, SALES OF ASSETS AND OTHER TRANSACTIONS
Under the WBCA, a merger, share exchange or dissolution of a corporation
must be approved by the affirmative vote of a majority of directors when a
quorum is present, and by each voting group entitled to vote separately on the
plan by two-thirds of all votes entitled to be cast on the plan by that voting
group, unless another proportion is specified in the articles of
incorporation. The Washington Mutual Articles provide for the affirmative vote
of shareholders holding a majority of the outstanding voting shares to approve
such a transaction.
The WBCA also provides that, in general, a corporation may sell, lease,
exchange or otherwise dispose of all, or substantially all, of its property,
other than in the usual and regular course of business, or dissolve if the
board of directors recommends the proposed transaction to the shareholders and
the shareholders approve the transaction by two-thirds of all the votes
entitled to be cast, unless another proportion is specified in the articles of
incorporation. The Washington Mutual Articles provide for the affirmative vote
of shareholders holding a majority of the outstanding voting shares to approve
such a transaction.
Under the DGCL, a merger, consolidation or sale of all, or substantially
all, of the assets of a corporation must be approved by the board of directors
and by a majority (unless the certificate of incorporation requires a higher
percentage) of outstanding stock of the corporation entitled to vote thereon,
provided that no vote of
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stockholders of a constituent corporation surviving a merger is required
(unless the corporation provides otherwise in its certificate of
incorporation) if (a) the merger agreement does not amend the surviving
corporation's certificate of incorporation, (b) each share of stock of the
surviving corporation outstanding immediately prior to the merger is to be an
identical outstanding or treasury share of the surviving corporation after the
merger, and (c) the number of shares to be issued by the surviving corporation
in the merger does not exceed twenty percent of the shares outstanding
immediately prior to the merger. The Ahmanson Certificate does not require a
higher percentage, except as set forth under "--Comparison of Rights of
Washington Mutual Shareholders and Ahmanson Stockholders--Interested
Shareholders" above.
ACTION WITHOUT A MEETING
Under the WBCA, shareholder action that may be taken at a shareholders'
meeting may be taken without a meeting if written consents describing such
action are signed by all shareholders entitled to vote thereon.
Under the DGCL, unless otherwise provided in a corporation's certificate of
incorporation, any action that may be taken at a meeting of stockholders may
be taken without a meeting, without prior notice and without a vote if the
holders of outstanding stock, having not less than the minimum number of votes
that would be necessary to authorize such action, consent in writing. The
Ahmanson Certificate provides that the stockholders of Ahmanson may only take
action at an annual or special meeting.
CLASS VOTING
Under the WBCA, a corporation's articles of incorporation may authorize one
or more classes of shares that have special, conditional or limited voting
rights, including the right to vote on certain matters as a group. The
articles of incorporation may not limit the rights of holders of a class to
vote as a group with respect to certain amendments to the articles of
incorporation and certain extraordinary transactions that adversely affect the
rights of holders of that class. The Washington Mutual Articles authorize for
issuance four series of preferred stock, no par value. Generally, each series
is vested with class voting rights limited to (i) issuance or authorization of
any additional class of equity stock ranking prior to the series affected and
(ii) any amendment of the Washington Mutual Articles which would adversely
affect the powers, preferences or other rights or privileges of the series.
Shares of only one series of preferred stock are presently outstanding.
The DGCL generally does not require class voting, except for amendments to
the certificate of incorporation that change the number of authorized shares
or the par value of shares of a specific class or that adversely affect such
class of shares. The Ahmanson Preferred Stock votes as a separate class on the
matters set forth under "Description of Washington Mutual Capital Stock--
Washington Mutual 6% Cumulative Preferred Stock, Series G--Voting Rights"
below. In addition, the Ahmanson Preferred Stock is vested with class voting
rights with respect to (i) the authorization or issuance, or increase in the
authorized amount, of any class of stock ranking senior to the Ahmanson
Preferred Stock or (ii) the approval of any amendment to the Ahmanson
Certificate that would materially and adversely change the specific terms of
the Ahmanson Preferred Stock.
TRANSACTIONS WITH OFFICERS OR DIRECTORS
The WBCA sets forth a safe harbor for transactions between a corporation and
one or more of its directors. A conflicting interest transaction may not be
enjoined, set aside or give rise to damages if: (i) it is approved by a
majority of qualified directors (but no fewer than two); (ii) it is approved
by the affirmative vote of the majority of all qualified shares after notice
and disclosure to the shareholders; or (iii) at the time of commitment, the
transaction is established to have been fair to the corporation. For purposes
of this provision, a "qualified director" is one who does not have either: (a)
a conflicting interest respecting the transaction or (b) a familial,
financial, professional or employment relationship with a second director who
does have a conflicting interest respecting the transaction, which
relationship would, in the circumstances, reasonably be expected to exert an
influence on the first director's judgment when voting on the transaction.
"Qualified shares" are defined
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generally as shares other than those beneficially owned, or the voting of
which is controlled, by a director (or an affiliate of the director) who has a
conflicting interest respecting the transaction.
Under the DGCL, certain contracts or transactions in which one or more of a
corporation's directors has an interest are not void or voidable because of
such interest provided that certain conditions, such as obtaining the required
approval and fulfilling the requirements of good faith and full disclosure,
are met. Under the DGCL, either (a) the stockholders or the board of directors
must approve any such contract or transaction after full disclosure of the
material facts or (b) the contract or transaction must have been "fair" as to
the corporation at the time it was approved. If board approval is sought, the
contract or transaction must be approved by a majority of disinterested
directors (even though less than a majority of quorum).
DISSENTERS' RIGHTS
Under the WBCA, a shareholder is entitled to dissent from and, upon
perfection of the shareholder's appraisal right, to obtain the fair value of
his or her shares in the event of certain corporate actions, including certain
mergers, share exchanges, sales of substantially all assets of the
corporation, and certain amendments to the corporation's articles of
incorporation that materially and adversely affect shareholder rights.
However, shareholders generally will not have such dissenters' rights if
shareholder approval is not required to effect the corporate action.
Under the DGCL, a stockholder of a corporation participating in certain
major corporate transactions may, under varying circumstances, be entitled to
appraisal rights pursuant to which such shareholder may receive cash in the
amount of the fair market value of his or her shares in lieu of the
consideration he or she would otherwise receive in the transaction. Unless a
corporation's certificate of incorporation provides otherwise, such appraisal
rights are not available (a) with respect to the sale, lease or exchange of
all or substantially all of the assets of the corporation, (b) with respect to
a merger or consolidation by the corporation the shares of which are either
listed on a national securities exchange or NASDAQ or are held of record by
more than 2,000 holders if such stockholders receive only shares of the
surviving corporation or shares of any other corporation which are either
listed on a national securities exchange or on NASDAQ or held of record by
more than 2,000 holders, plus cash in lieu of fractional shares, or (c) to
stockholders of the corporation surviving a merger if no vote of the
stockholders of the surviving corporation is required to approve the merger
because the merger agreement does not amend the existing certificate or
incorporation, each share of the surviving corporation outstanding prior to
the merger is an identical outstanding or treasury share after the merger, and
the number of shares to be issued in the merger does not exceed 20% of the
shares of the surviving corporation outstanding immediately prior to the
merger and if certain other conditions are met.
DIVIDENDS
Under the WBCA, a corporation may make a distribution in cash or in property
to its shareholders upon the authorization of its board of directors unless,
after giving effect to such distribution, (i) the corporation would not be
able to pay its debts as they become due in the usual course of business or
(ii) the corporation's total assets would be less than the sum of its total
liabilities plus, unless the articles of incorporation permit otherwise, the
amount that would be needed if the corporation were to be dissolved at the
time of the distribution to satisfy the preferential rights of shareholders
whose preferential rights are superior to those receiving the distribution.
The DGCL permits a corporation to declare and pay dividends out of statutory
surplus or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. In addition, the DGCL generally
provides that a corporation may redeem or repurchase its shares only if such
redemption or repurchase would not impair the capital of the corporation.
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DESCRIPTION OF WASHINGTON MUTUAL CAPITAL STOCK
The Washington Mutual Articles authorize the issuance of up to 800,000,000
shares of Washington Mutual Common Stock and up to 10,000,000 shares of
preferred stock, no par value per share, issuable in one or more series with
such terms and at such times and for such consideration as the Washington
Mutual Board determines. As described later herein, the Washington Mutual
Board is recommending that Washington Mutual shareholders approve an amendment
to the Washington Mutual Articles to increase the number of authorized shares
of Washington Mutual Common Stock from 800,000,000 shares to 2,000,000,000
shares. As of , 1998, there were issued and outstanding shares of
Washington Mutual Common Stock and 1,970,000 shares of Washington Mutual
Preferred Stock. In the Merger, Washington Mutual will issue approximately
shares of Washington Mutual Common Stock and shares of Series G Preferred
Stock and an additional shares of Washington Mutual Common Stock will
be reserved for issuance upon exercise of Replacement Options and the
conversion of Ahmanson Preferred Stock. See "Proposed Amendment to Washington
Mutual Articles of Incorporation--Increase in Authorized Shares."
The following description contains a summary of material features of the
capital stock of Washington Mutual but does not purport to be complete and is
subject in all respects to the applicable provisions of the WBCA, and is
qualified on its entirety by reference to the Washington Mutual Articles and
the terms of Washington Mutual Rights Agreement.
WASHINGTON MUTUAL COMMON STOCK
Each holder of Washington Mutual Common Stock is entitled to one vote for
each share held on all matters voted upon by shareholders. Shareholders are
not permitted to cumulate their votes for the election of directors.
In the event of the liquidation, dissolution or distribution of assets of
Washington Mutual, holders of Washington Mutual Common Stock will be entitled
to share ratably in any remaining assets of Washington Mutual legally
available for distribution to the shareholders after payment of all
liabilities and amounts owed with respect to Washington Mutual Preferred
Stock.
Holders of Washington Mutual Common Stock are not entitled to preemptive
rights with respect to any additional shares of capital stock that may be
issued.
The authorized but unissued and unreserved shares of Washington Mutual
Common Stock will be available for general corporate purposes, including but
not limited to possible issuance in exchange for capital notes, as stock
dividends or stock splits, in future mergers or acquisitions, under a cash
dividend reinvestment plan, for employee benefit plans, or in a future
underwritten or other public offering. Except as described above or as
otherwise required to approve the transactions in which the additional
authorized shares of Washington Mutual Common Stock would be issued, no
shareholder approval will be required for the issuance of these shares.
At March 31, 1998, options to purchase 5,193,761 shares of Washington Mutual
Common Stock under Washington Mutual's stock option plans had been granted,
but not exercised or terminated, leaving 1,598,328 shares available for
further grants under such plans.
WASHINGTON MUTUAL PREFERRED STOCK
Under the Washington Mutual Articles, the Washington Mutual Board is
authorized without further shareholder action to provide for the issuance of
up to 10,000,000 shares of Washington Mutual preferred stock in one or more
series with such voting powers, designations, preferences or relative,
participating, optional or other special rights, qualifications, limitations
and restrictions, as shall be set forth in resolutions providing for the issue
thereof adopted by the Washington Mutual Board. As of the date of this Joint
Proxy Statement/Prospectus, the only series of Washington Mutual preferred
stock outstanding is the Washington Mutual Preferred Stock.
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The Washington Mutual Preferred Stock has a liquidation preference of $25.00
per share plus dividends accrued and unpaid for the then-current dividend
period, and is not convertible into any other Washington Mutual securities.
Dividends on the Washington Mutual Preferred Stock, if and when declared by
the Washington Mutual Board, are at an annual rate of $1.90 per share, are
noncumulative and payable quarterly. On or after September 15, 1998,
Washington Mutual may at its option redeem the Washington Mutual Preferred
Stock. The Washington Mutual Preferred Stock is prior to the Washington Mutual
Common Stock as to dividends and liquidation. The Washington Mutual Preferred
Stock does not confer general voting rights, except as provided by Washington
law, or when any dividends in the Washington Mutual Preferred Stock are not
declared and paid for six full quarterly dividend periods. If such dividends
are not declared and paid, holders of Washington Mutual Preferred Stock,
together with holders of Washington Mutual preferred stock ranking on parity
with the Washington Mutual Preferred Stock, voting separately as a class,
shall have the right to elect an additional two directors to the Washington
Mutual Board to serve until the dividends have been declared and paid for four
consecutive dividend periods. The affirmative vote or consent of the holders
of at least two-thirds of the outstanding shares of the Washington Mutual
Preferred Stock, voting as a separate class, will be required for any
amendment of the Washington Mutual Articles (including any certificate of
designation or any similar document relating to any new series of preferred
stock of Washington Mutual) that (a) provides for the authorization or
issuance of any additional class of equity stock ranking prior to the
Washington Mutual Preferred Stock as to dividends, liquidations or dissolution
or is convertible into an additional class of equity stock; or (b) amends,
repeals, changes or adversely affects the powers, preferences, privileges or
rights of the Washington Mutual Preferred Stock; provided, however, that
amending the Washington Mutual Articles to increase the number of authorized
shares of Washington Mutual Common Stock or Washington Mutual preferred stock
is not within the scope of (b) above.
WASHINGTON MUTUAL 6% CUMULATIVE PREFERRED STOCK, SERIES G
The summary of terms of the Washington Mutual 6% Cumulative Preferred Stock,
Series G, contained herein does not purport to be complete and is subject to,
and qualified in its entirety by, the provisions of the Washington Mutual
Articles, as amended through the Effective Time, and the Preferred Stock
Deposit Agreement.
Pursuant to the terms of the Merger Agreement, each share of Ahmanson
Preferred Stock will be converted in the Merger into one share of Series G
Preferred Stock. The Series G Preferred Stock will be substantially identical
to the Ahmanson Preferred Stock.
Rank. The Series G Preferred Stock will rank on a parity as to payment of
dividends and distribution of assets upon dissolution, liquidation or winding
up of Washington Mutual with the Washington Mutual Preferred Stock. The Series
G Preferred Stock will rank prior to the Washington Mutual Common Stock with
respect to the payment of dividends and distribution of assets upon
dissolution, liquidation or winding up of Washington Mutual.
Dividends. The holder of shares of Series G Preferred Stock will be entitled
to receive, when, as and if declared by the Washington Mutual Board out of
funds of Washington Mutual legally available for payment, cumulative cash
dividends, payable quarterly, at the rate of 6% per annum, or $30 per share
(equivalent to $3 per New Washington Mutual Depositary Share). Dividends on
the Series G Preferred Stock will accrue day to day at such annual rate and be
payable quarterly on March 1, June 1, September 1 and December 1 of each year
(each, a "Dividend Payment Date"), commencing upon consummation of the Merger.
Each dividend will be payable to holders of record as they appear at the close
of business on the stock books of Washington Mutual (or, if applicable, the
records of the Preferred Stock Depositary) on such record dates, not exceeding
60 calendar days preceding the payment dates thereof, as shall be fixed by the
Washington Mutual Board (each of such dates, a "Record Date"). Dividends will
be cumulative from the date of original issue. Dividends payable on the Series
G Preferred Stock for any period less than a full dividend period shall be
computed on the basis of a 360-day year consisting of twelve 30-day months and
the actual number of days elapsed in the period. Dividends payable
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on the Series G Preferred Stock for each full dividend period shall be
computed by dividing the annual dividend rate by four.
Redemption. Shares of Series G Preferred Stock will be redeemable at the
option of Washington Mutual, in whole or in part, at any time or from time to
time, on or after September 1, 1998, on not less than 40 nor more than 70
days' notice (or not less than 30 nor more than 60 days' notice in the case of
the New Washington Mutual Depositary Shares) by mail, at a redemption price
commencing at $515 per share and declining to $500 per share on September 1,
2003 (equivalent to $51.50 and $50 per New Washington Mutual Depositary Share,
respectively) plus accrued and unpaid dividends to the redemption date. If
less than all of the outstanding shares of Series G Preferred Stock are
redeemed, the shares of the Series G Preferred Stock to be redeemed will be
selected pro rata or by lot or any other method that the Washington Mutual
Board determines to be equitable.
The Series G Preferred Stock will not be subject to any sinking fund or
other obligation of Washington Mutual to redeem or retire the Series G
Preferred Stock.
Liquidation Rights. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of Washington Mutual, the holders of
shares of Series G Preferred Stock are entitled to receive out of assets of
Washington Mutual available for distribution to shareholders, before any
distribution of assets is made to holders of Washington Mutual Common Stock or
of any other shares of stock of Washington Mutual ranking as to such a
distribution junior to the shares of Series G Preferred Stock, liquidating
distributions in the amount of $500.00 per share (equivalent to $50.00 per New
Washington Mutual Depositary Share) plus any accrued and unpaid dividends.
After payment of such liquidating distributions, the holders of shares of
Series G Preferred Stock will not be entitled to any further participation in
any distribution of assets by Washington Mutual.
Voting Rights. Except as indicated below or except as expressly required by
applicable law, the holders of the Series G Preferred Stock will not be
entitled to vote for any purpose.
If the equivalent of six quarterly dividends payable on the Series G
Preferred Stock are in arrears, the number of directors of Washington Mutual
will be increased by two and the holders of Series G Preferred Stock, voting
separately as a class together with any other series of Washington Mutual
preferred stock ranking on a parity with the Series G Preferred Stock as to
dividends and distributions of assets and which by its terms provides for
similar voting rights (the "Other Washington Mutual Preferred Stock"), will be
entitled to elect two directors at the next annual meeting of the Washington
Mutual Board to fill such vacancies. Such right to elect two additional
directors shall continue until dividends on the Series G Preferred Stock have
been paid in full for four consecutive dividend periods, including the last
preceding dividend period. Each director elected by the holders of shares of
the Series G Preferred Stock and the Other Washington Mutual Preferred Stock
shall continue to serve until the payment, or the declaration and setting
aside for payment, of dividends on the Series G Preferred Stock for four
consecutive dividend periods.
So long as any shares of the Series G Preferred Stock remain outstanding,
the consent or the affirmative vote of the holders of at least two-thirds of
the vote entitled to be cast with respect to the then outstanding shares of
such Series G Preferred Stock together with any Other Washington Mutual
Preferred Stock, voting as one class, either expressed in writing or at a
meeting called for that purpose, will be necessary (i) to permit, effect or
validate the authorization, or any increase in the authorized amount, of any
class or series of shares of Washington Mutual ranking prior to the Series G
Preferred Stock as to dividends, voting or upon distribution of assets or
otherwise and (ii) to repeal, amend or otherwise change any of the provisions
of the Washington Mutual Articles in any manner which would materially and
adversely change the specific terms of the Series G Preferred Stock. In case
the Series G Preferred Stock would be so affected by any such action referred
to in clause (ii) above in a different manner than one or more series of the
Other Washington Mutual Preferred Stock then outstanding, the holders of
shares of the Series G Preferred Stock, together with any series of the Other
Washington Mutual Preferred Stock which will be similarly affected, will be
entitled to vote as a class, and Washington Mutual will not take such action
without the consent or affirmative vote of the holders of at least
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two-thirds of the total number of votes entitled to be cast with respect to
each such series of the Series G Preferred Stock and the Other Washington
Mutual Preferred Stock then outstanding.
With respect to any matter as to which the Series G Preferred Stock is
entitled to vote, holders of the Series G Preferred Stock and any Other
Washington Mutual Preferred Stock will be entitled to cast the number of votes
assigned to the outstanding shares of Series G Preferred Stock. As a result of
the provisions described in the preceding paragraph requiring the holders of
shares of the Series G Preferred Stock to vote together as a class with the
holders of shares of one or more series of Other Washington Mutual Preferred
Stock, it is possible that the holders of such shares of Other Washington
Mutual Preferred Stock could approve action that would adversely affect Series
G Preferred Stock, including the creation of a class of capital stock ranking
prior to such series of Series G Preferred Stock as to dividends, voting or
distributions of assets.
Conversion Rights. The Series G Preferred Stock is convertible into shares
of Washington Mutual Common Stock, at the option of its holders, at a
conversion rate of approximately 23.01208 shares of Washington Mutual Common
Stock per share of Series G Preferred Stock (equivalent to 2.301208 New
Washington Mutual Depositary Shares), subject to adjustments upon the
occurrence of certain events described below. Fractional shares of Washington
Mutual Common Stock will not be delivered upon conversion, but cash will be
paid in respect of such fractional shares, based on the "current market price"
(as defined in the Certificate of Designations) of the Washington Mutual
Common Stock.
Shares of the Series G Preferred Stock (and the related New Washington
Mutual Depositary Shares) surrendered for conversion after the record date for
a dividend payment and prior to the next succeeding Dividend Payment Date for
the Series G Preferred Stock (except shares redeemed during such period or
prior to September 10, 1998) must be accompanied by payment of an amount equal
to the dividend thereon, if any, which is to be paid on such Dividend Payment
Date. Therefore, if a holder exercises conversion rights other than on a
Dividend Payment Date, such holder will forego dividends for the period from
the preceding Dividend Payment Date to the date of conversion and may not be
entitled to dividends declared and paid on the Washington Mutual Common Stock
during that period.
The conversion rate is subject to adjustment upon the occurrence of certain
events, including (i) payment of a dividend on the Washington Mutual Common
Stock payable in capital stock and stock splits, combinations or
reclassifications of the Washington Mutual Common Stock, (ii) issuance to all
holders of Washington Mutual Common Stock (not being available on an
equivalent basis to holders of the Series G Preferred Stock on conversion) of
rights or warrants to subscribe for or purchase shares of Washington Mutual
Common Stock at less than their then-current market price (as defined in the
Certificate of Designations), (iii) certain distributions of evidences of
indebtedness or assets (including securities but excluding cash dividends or
distributions paid out of retained earnings or dividends payable in Washington
Mutual Common Stock) or of subscription rights and warrants (excluding those
referred to in (ii) above) to holders of Washington Mutual Common Stock and
(iv) the events described in the following paragraph. Conversion rate
adjustments may, under certain circumstances, be treated as taxable dividends
to holders of Series G Preferred Stock. Washington Mutual may, but is not
obligated to, make such adjustments in the conversion rate, in addition to
those described above, as it considers to be advisable in order that any event
that otherwise would be treated for Federal income tax purposes as a taxable
dividend of stock or stock rights will not be taxable to the recipient. No
adjustment will be required to be made in the conversion rate until cumulative
adjustments require an adjustment of at least 1% of the conversion rate as
last adjusted. Except as set forth above, the conversion rate will not be
adjusted for the issuance of Washington Mutual Common Stock or any securities
convertible into or exchangeable for Washington Mutual Common Stock, or
carrying the right or option to purchase or otherwise acquire the foregoing,
in exchange for cash, other property or services.
In the event of (i) a consolidation or merger of Washington Mutual with or
into any entity (other than a consolidation or merger that does not result in
any reclassification, conversion, exchange or cancellation of outstanding
shares of the Washington Mutual Common Stock), (ii) a sale, transfer, lease or
conveyance of all or substantially all of the assets of Washington Mutual or
(iii) a reclassification, capital reorganization or change of
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the Washington Mutual Common Stock (other than solely a change in par value,
or from par value to no par value), then any holder of the Series G Preferred
Stock will be entitled, on or after the occurrence of any such event, to
receive on conversion of the Series G Preferred Stock the kind and amount of
shares of stock or other securities, cash or other property (or any
combination thereof) that the holder would have received had such holder
converted such holder's Series G Preferred Stock to Washington Mutual Common
Stock immediately prior to the occurrence of such event. If the consideration
into which the Series G Preferred Stock is convertible following any such
event consists of common stock of the surviving entity, then from and after
the occurrence of such event the conversion price for the conversion of each
share of Series G Preferred Stock into such common stock will be subject to
the same anti-dilution and other adjustments described in the preceding
paragraph, applied as if such common stock were Washington Mutual Common
Stock.
If after the distribution date fixed for purposes of distributing to holders
of the Washington Mutual Common Stock any stockholder protection, "poison
pill" or other similar rights to subscribe for securities of Washington Mutual
or any other entity ("Stockholder Rights"), converting holders of the Series G
Preferred Stock are not entitled to receive Stockholder Rights that would
otherwise be attributable (but for the date of conversion) to the shares of
Washington Mutual Common Stock received upon such conversion, then adjustment
of the conversion rate will be made under clause (iii) of the second preceding
paragraph as if the Stockholder Rights were then being distributed to holders
of Washington Mutual Common Stock. If such an adjustment is made and the
Stockholder Rights are later redeemed, invalidated or terminated, then a
corresponding reversing adjustment will be made to the conversion rate, on an
equitable basis, to take account of such event. However, Washington Mutual may
elect to make provision with respect to Stockholder Rights so that each share
of the Washington Mutual Common Stock issuable upon conversion of the Series G
Preferred Stock, whether or not issued after the distribution date for such
Stockholder Rights, will be accompanied by the Stockholder Rights that would
otherwise be attributable (but for the date of conversion) to such shares of
Washington Mutual Common Stock, in which event the preceding two sentences
will not apply. Washington Mutual has adopted a shareholder rights plan. See
"Comparison of Rights of Washington Mutual Shareholders and Ahmanson
Stockholders--Washington Mutual Rights Plan."
NEW WASHINGTON MUTUAL DEPOSITARY SHARES
At the Effective Time, Washington Mutual will assume the obligations of
Ahmanson under the Preferred Stock Deposit Agreement and will instruct the
Preferred Stock Depositary to treat the shares of Series G Preferred Stock as
new deposited securities under the Preferred Stock Deposit Agreement. In
accordance with the terms of the Preferred Stock Deposit Agreement, the
Ahmanson Depositary Shares then outstanding shall thereafter represent the
shares of Series G Preferred Stock. Washington Mutual will request that the
Preferred Stock Depositary call for surrender of all outstanding Ahmanson
Depositary Shares to be exchanged for New Washington Mutual Depositary Shares
specifically describing the Series G Preferred Stock.
Each New Washington Mutual Depositary Share will represent a one-tenth
interest in a share of Series G Preferred Stock. Washington Mutual has agreed
to use its reasonable best efforts to list the New Washington Mutual
Depositary Shares on NASDAQ, subject to official notice of issuance. The New
Washington Mutual Depositary Shares will be freely transferable under the
Securities Act.
Subject to the terms of the Preferred Stock Deposit Agreement, each holder
of a New Washington Mutual Depositary Share will be entitled through the
Preferred Stock Depositary, in proportion to the one-tenth interest in a share
of Series G Preferred Stock underlying such New Washington Mutual Depositary
Share, to all rights and preferences of a share of Series G Preferred Stock
(including, voting, redemption and liquidation rights). Because each share of
Series G Preferred Stock entitles the holder thereof to one vote on matters on
which the Series G Preferred Stock is entitled to vote, each related New
Washington Mutual Depositary Share, will, in effect, entitle the holder
thereof to one-tenth of a vote thereon, rather than one full vote. See "--
Washington Mutual 6% Cumulative Preferred Stock, Series G--Voting Rights."
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Pending the preparation of definitive, engraved certificates for New
Washington Mutual Depositary Shares, the Preferred Stock Depositary may, upon
the written order of Washington Mutual, issue temporary New Washington Mutual
Depositary Shares substantially identical to (and entitling the holders
thereof to all the rights pertaining to) the definitive form. Definitive New
Washington Mutual Depositary Shares will be prepared thereafter without
unreasonable delay, and temporary New Washington Mutual Depositary Shares will
be exchangeable for definitive New Washington Mutual Depositary Shares at
Washington Mutual's expense.
Dividends and Other Distributions. The Preferred Stock Depositary will
distribute all cash dividends or other cash distributions received in respect
of the Series G Preferred Stock to the record holders of New Washington Mutual
Depositary Shares in proportion, insofar as practicable, to the respective
numbers of New Washington Mutual Depositary Shares held by such holders on the
relevant record date. The Preferred Stock Depositary shall distribute only
such amount, however, as can be distributed without attributing to any holder
of New Washington Mutual Depositary Shares a fraction of one cent, and any
balance not so distributed shall be added to and treated as part of the next
sum received by the Preferred Stock Depositary for distribution to record
holders of New Washington Mutual Depositary Shares then outstanding.
In the event of a distribution other than in cash, the Preferred Stock
Depositary will distribute such amounts of the securities or property received
by it as are, as nearly as practicable, in proportion to the respective
numbers of New Washington Mutual Depositary Shares held by such holders on the
relevant record date, unless the Preferred Security Depositary determines that
it is not feasible to make such distribution, in which case the Preferred
Stock Depositary may, with the approval of Washington Mutual, adopt such
method as it deems equitable and practicable for the purpose of effecting such
distribution, including the sale of such securities or property.
The Preferred Stock Deposit Agreement also contains provisions relating to
the manner in which any subscription or similar rights offered by Washington
Mutual to holders of the Series G Preferred Stock shall be made available to
holders of the related New Washington Mutual Depositary Shares.
The amounts distributed in all of the foregoing cases will be reduced by any
amounts required to be withheld by Washington Mutual or the Preferred Stock
Depositary on account of taxes and governmental charges.
Redemption of New Washington Mutual Depositary Shares. If shares of Series G
Preferred Stock represented by New Washington Mutual Depositary Shares are
redeemed, the New Washington Mutual Depositary Shares will be redeemed from
the proceeds received by the Preferred Stock Depositary resulting from the
redemption, in whole or in part, of the Series G Preferred Stock held by the
Preferred Stock Depositary. The Preferred Stock Depositary shall mail notice
of redemption not less than 30 and not more than 60 days prior to the date
fixed for redemption to the record holders of the New Washington Mutual
Depositary Shares to be so redeemed at their respective addresses appearing in
the Preferred Stock Depositary's books. The redemption price per New
Washington Mutual Depositary Share will be equal to the applicable fraction of
the redemption price per share payable with respect to such series of the
Series G Preferred Stock plus all money and other property, if any, payable
with respect to such New Washington Mutual Depositary Share, including all
amounts payable by Washington Mutual in respect of any accumulated but unpaid
dividends. Whenever Washington Mutual redeems shares of Series G Preferred
Stock held by a Preferred Stock Depositary, the Preferred Stock Depositary
will redeem as of the same redemption date the number of New Washington Mutual
Depositary Shares representing shares of the Series G Preferred Stock so
redeemed. If less than all the New Depositary Shares are to be redeemed, the
New Washington Mutual Depositary Shares to be redeemed will be selected by lot
or pro rata (subject to rounding to avoid fractions of New Washington Mutual
Depositary Shares) as may be determined by the Preferred Stock Depositary.
After the date fixed for redemption, the New Washington Mutual Depositary
Shares so called for redemption will no longer be deemed to be outstanding and
all rights of the holders of such New Washington Mutual Depositary Shares will
cease, except the right to receive the redemption price payable and any money
or
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other property to which such holders were entitled upon such redemption upon
surrender to the Preferred Stock Depositary of the New Washington Mutual
Depositary Shares.
Voting the Series G Preferred Stock. Upon receipt of notice of any meeting
or action to be taken by written consent at or as to which the holders of the
Series G Preferred Stock are entitled to vote or consent, the Preferred Stock
Depositary will mail the information contained in such notice of meeting or
action to the record holders of the New Washington Mutual Depositary Shares.
Each record holder of such New Washington Mutual Depositary Shares on the
record date (which will be the same date as the record date for the Series G
Preferred Stock) will be entitled to instruct the Preferred Stock Depositary
as to the exercise of the voting rights or the giving or refusal of consent,
as the case may be, pertaining to the number of shares of the Series G
Preferred Stock represented by the New Washington Mutual Depositary Shares.
The Preferred Stock Depositary will endeavor, insofar as practicable, to vote,
or give or withhold consent with respect to, the maximum number of whole
shares of the Series G Preferred Stock represented by all New Washington
Mutual Depositary Shares as to which any particular voting or consent
instructions are received, and Washington Mutual will agree to take all action
which may be deemed necessary by the Preferred Stock Depositary in order to
enable the Preferred Stock Depositary to do so. The Preferred Stock Depositary
will abstain from voting, or giving consents with respect to, shares of the
Series G Preferred Stock to the extent it does not receive specific
instructions from the holders of New Washington Mutual Receipts evidencing New
Washington Mutual Depositary Shares.
Amendment and Termination of the Preferred Stock Deposit Agreement. The form
of certificate evidencing the New Washington Mutual Depositary Shares and any
provision of the Preferred Stock Deposit Agreement may at any time and from
time to time be amended by agreement between Washington Mutual and the
Preferred Stock Depositary in any respect which they may deem necessary or
desirable. However, any amendment which imposes or increases any fees, taxes
or charges upon holders of New Washington Mutual Depositary Shares or which
materially and adversely alters the existing rights of such holders will not
be effective unless such amendment has been approved by the record holders of
at least a majority of such New Washington Mutual Depositary Shares then
outstanding. Notwithstanding the foregoing, no such amendment may impair the
right of any holder of New Washington Mutual Depositary Shares to receive any
moneys or other property to which such holder may be entitled under the terms
of such New Washington Mutual Depositary Shares or the related Preferred Stock
Deposit Agreement at the times and in the manner and amount provided for
therein. The Preferred Stock Deposit Agreement may be terminated by Washington
Mutual or the Preferred Stock Depositary only after (i) all outstanding New
Washington Mutual Depositary Shares relating thereto have been redeemed and
any accumulated and unpaid dividends on the Series G Preferred Stock, together
with all other moneys and property, if any, to which holders of the related
New Washington Mutual Depositary Shares are entitled under the terms of such
New Washington Mutual Depositary Shares or the Preferred Stock Deposit
Agreement, have been paid or distributed as provided in the Preferred Stock
Deposit Agreement or provision therefor has been duly made or (ii) there has
been a final distribution in respect of the Series G Preferred Stock in
connection with any liquidation, dissolution or winding up of Washington
Mutual and such distribution has been distributed to the holders of the New
Washington Mutual Depositary Shares.
Miscellaneous. The Preferred Stock Depositary will forward to record holders
of New Washington Mutual Depositary Shares, at their respective addresses
appearing in the Preferred Stock Depositary's books, all reports and
communications from Washington Mutual which are delivered to the Preferred
Stock Depositary and which Washington Mutual is required to furnish to holders
of such New Washington Mutual Depositary Shares. The Preferred Stock Deposit
Agreement contains provisions relating to adjustments in the fraction of a
share of Series G Preferred Stock represented by New Washington Mutual
Depositary Shares in the event of a change in par or stated value, split-up,
combination or other reclassification of the Series G Preferred Stock or upon
any recapitalization, merger or sale of substantially all of the assets of
Washington Mutual.
Neither the Preferred Stock Depositary nor any of its agents nor any
registrar nor Washington Mutual will be (i) liable if it is prevented or
delayed by law or any circumstance beyond its control in performing its
obligations under the Preferred Stock Deposit Agreement, (ii) subject to any
liability under the Preferred Stock Deposit Agreement to holders of New
Washington Mutual Depositary Shares other than for the relevant party's
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gross negligence or willful misconduct, or (iii) obligated to prosecute or
defend any legal proceeding in respect of any New Washington Mutual Depositary
Shares or the Series G Preferred Stock unless satisfactory indemnity is
furnished. They may rely upon written advice of counsel or accountants, or
information provided by holders of New Washington Mutual Depositary Shares or
other persons in good faith believed to be competent and on documents
reasonably believed to be genuine.
Charges of the Preferred Stock Depositary. Washington Mutual will pay all
transfer and other taxes and governmental charges arising solely from the
existence of the depositary arrangements. Washington Mutual will pay charges
of the Preferred Stock Depositary in connection with the initial deposit of
the related Series G Preferred Stock and the initial issuance of the New
Washington Mutual Depositary Shares, any redemption of the Series G Preferred
Stock and any withdrawals of Series G Preferred Stock by the holders of New
Washington Mutual Depositary Shares. Holders of New Washington Mutual
Depositary Shares will pay other transfer and other taxes and governmental
charges and such other charges as are expressly provided in the Preferred
Stock Deposit Agreement to be for their accounts.
Resignation or Removal of the Preferred Stock Depositary. The Preferred
Stock Depositary may resign at any time by delivering to Washington Mutual
notice of its election to do so, and Washington Mutual may at any time remove
the Preferred Stock Depositary, any such resignation or removal to take effect
upon the appointment of a successor depositary and its acceptance of such
appointment. Such successor depositary must be appointed within 60 days after
delivery of the notice of resignation or removal.
DESCRIPTION OF AHMANSON COMMON STOCK
The holders of the outstanding shares of Ahmanson Common Stock have full
voting rights, one vote for each share held of record. Subject to the rights
of holders of preferred stock of Ahmanson, holders of Ahmanson Common Stock
are entitled to receive such dividends as may be declared by the Ahmanson
Board out of funds legally available therefor. Upon liquidation, dissolution,
or winding up of Ahmanson (but subject to the rights of holders of preferred
stock of Ahmanson), the assets legally available for distribution to holders
of Ahmanson Common Stock shall be distributed ratably among such holders.
Holders of Ahmanson Common Stock have no preemptive or other subscription or
conversion rights, and no liability for further calls upon shares. The
Ahmanson Common Stock is not subject to assessment.
The Transfer Agent and Registrar for the Ahmanson Common Stock is First
Chicago Trust Company of New York.
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PROPOSED AMENDMENT TO WASHINGTON MUTUAL ARTICLES OF INCORPORATION--
INCREASE IN AUTHORIZED SHARES
The Washington Mutual Board has adopted a resolution, and is seeking the
approval of the Washington Mutual shareholders, for an amendment to the
Washington Mutual Articles to increase the authorized shares of Washington
Mutual Common Stock from 800,000,000 shares to 2,000,000,000. Article II of
Washington Mutual's Articles currently provides that Washington Mutual has
authority to issue 800,000,000 shares of Washington Mutual Common Stock and
10,000,000 shares of Preferred Stock. The Washington Mutual Board has approved
and recommends that the shareholders adopt an amendment to Article II of the
Washington Mutual Articles to increase the number of authorized shares of
Washington Mutual Common Stock to 2,000,000,000. The amendment will not
increase or otherwise affect the number of authorized shares of Washington
Mutual preferred stock that may be issued. The proposed amendment to the
Washington Mutual Articles would amend and restate the first sentence of
Article II A. to read as follows:
The total number of shares of capital stock which the
Company has authority to issue is 2,010,000,000 shares of
which 2,000,000,000 shares shall be shares of common stock
with no par value per share and 10,000,000 shares shall be
shares of preferred stock with no par value per share.
If approved, the amendment to Article II would be effective upon the filing
of articles of amendment to the Washington Mutual Articles with the Washington
Secretary of State, which would occur promptly after the Washington Mutual
Meeting. Approval of the Articles Amendment Proposal is not a condition of the
Merger. If approved by the Washington Mutual shareholders, the Articles
Amendment Proposal would become effective even if the Merger is not
consummated.
CURRENT CAPITALIZATION
The primary reasons for the proposed increase in the number of authorized
shares are to provide additional available shares for use in future
transactions and to have available shares to give effect to the Washington
Mutual Rights Plan. As of the Washington Mutual Record Date, Washington Mutual
had a total of shares of Washington Mutual Common Stock issued and
outstanding and an aggregate of shares reserved for issuance upon the
exercise of outstanding stock options and upon the issuance of additional
stock options under Washington Mutual's 1994 Stock Option Plan. Consequently,
shares of Washington Mutual Common Stock are authorized, unissued and not
reserved for issuance ("Available Common Shares"). In addition, Washington
Mutual must have available sufficient shares for issuance to give effect to
the Washington Mutual Rights Plan.
Assuming shareholder approval of the Share Issuance/Merger Proposal,
Washington Mutual will issue approximately shares of Washington Mutual
Common Stock in connection with the Merger, and will reserve approximately an
additional shares of Washington Mutual Common Stock for issuance upon the
exercise of Ahmanson Stock Options converted to Washington Mutual Stock
Options in the Merger and the conversion of the Ahmanson Preferred Stock of
the Series G Preferred Stock. Accordingly, following the Merger, shares of
Washington Mutual Common Stock will be authorized, unissued and not reserved
for issuance and Washington Mutual will also need to have additional shares
available to give effect to the Washington Mutual Rights Plan.
The Washington Mutual Board believes that having additional shares of
Washington Mutual Common Stock authorized and available for issuance at the
Washington Mutual Board's discretion is in the best interest of Washington
Mutual and its shareholders and would provide several long-term advantages to
Washington Mutual and its shareholders. Washington Mutual would have greater
flexibility in considering future actions involving the issuance of stock and
in determining the Company's proper capitalization, such as through stock
dividends or splits and other employee and shareholder distributions.
Additional authorized shares could also be used to raise cash through sales of
stock to public and private investors. The Washington Mutual Board also would
have
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greater flexibility to authorize the Company to pursue additional acquisitions
that involve the issuance of stock and that the Washington Mutual Board
believes provide the potential for growth and profit.
Under the Washington Mutual Rights Plan, each share of Washington Mutual
Common Stock has attached to it the right to buy an additional share of
Washington Mutual Common Stock upon the occurrence of certain triggering
events. The rights have certain antitakeover effects and are intended to
discourage coercive or unfair takeover tactics and to encourage any potential
acquiror to negotiate a price fair to all shareholders. In order for the
Washington Mutual Rights Plan to have its intended effect, Washington Mutual
must have a sufficient number of Available Common Shares so that the rights
can be fully exercised by Washington Mutual shareholders. Upon consummation of
the Merger, Washington Mutual estimates that approximately Available
Common Shares will be required for the Washington Mutual Rights Plan to have
its intended effect and that at that time, Washington Mutual will have only
Available Common Shares. Accordingly, the Washington Mutual Board is
recommending that Washington Mutual shareholders approve the increase in the
number of authorized shares of Common Stock, in part to provide the additional
shares necessary to give full effect to the Shareholder Rights Plan.
CERTAIN EFFECTS OF THE PROPOSED AMENDMENT
In certain circumstances, an increase in the authorized shares of Washington
Mutual Common Stock could be used to enhance the Washington Mutual Board's
bargaining capability on behalf of Washington Mutual's shareholders in a
takeover situation and could render more difficult or discourage a merger,
tender offer or proxy contest. Similarly, an increase in the authorized shares
of Washington Mutual Common Stock could have an anti-takeover effect in that
such additional shares could be used to dilute the stock ownership of persons
seeking to obtain control of Washington Mutual. Washington Mutual is not aware
of any present efforts to gain control of Washington Mutual or to organize a
proxy contest. If such proposal was presented, management would make a
recommendation based upon the best interests of Washington Mutual's
shareholders.
In the event the Articles Amendment Proposal is approved, further
shareholder approval of the issuance of the 1.2 billion additional shares of
Washington Mutual Common Stock will not be sought prior to such issuance
unless such issuance relates to a merger, consolidation or other transaction
that otherwise requires shareholder approval. Upon issuance, such shares will
have the same rights as the outstanding shares of Washington Mutual Common
Stock. Holders of Washington Mutual Common Stock have no preemptive rights.
Other than the 139,344,784 shares to be issued and reserved for issuance
pursuant to the Merger and except as otherwise described in this Joint Proxy
Statement/Prospectus, Washington Mutual has no present plans to issue
additional shares of Washington Mutual Common Stock. The proposed increase in
the number of authorized shares will not change the number of shares currently
outstanding or the rights of the holders of such stock.
THE WASHINGTON MUTUAL BOARD, BY UNANIMOUS VOTE OF ALL DIRECTORS PRESENT,
APPROVED THE AMENDMENT TO THE WASHINGTON MUTUAL ARTICLES TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF WASHINGTON MUTUAL COMMON STOCK AND RECOMMENDS
THAT SHAREHOLDERS VOTE "FOR" THE AMENDMENT.
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LEGAL MATTERS
The validity of the shares of Washington Mutual Common Stock which will be
issued in connection with the Merger and certain legal matters in connection
with the Merger will be passed upon for Washington Mutual by Foster Pepper &
Shefelman PLLC, Seattle, Washington.
EXPERTS
The consolidated financial statements of Washington Mutual as of December
31, 1997 and 1996, and for each of the years in the three-year period ended
December 31, 1997, have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of Deloitte & Touche LLP,
independent auditors. Insofar as the report of Deloitte & Touche LLP relates
to the amounts included for: (i) Great Western Financial Corporation and
subsidiaries for 1996 and 1995, it is based solely on the report of Price
Waterhouse LLP, independent accountants; and (ii) Keystone Holdings, Inc. and
subsidiaries for 1995, it is based solely on the report of KPMG Peat Marwick
LLP, independent auditors; such reports being incorporated by reference
herein, and given on the authority of said firms as experts in auditing and
accounting.
The consolidated financial statements of Ahmanson incorporated in this
Prospectus by reference to the Annual Report on Form 10-K for the year ended
December 31, 1997, have been so incorporated in reliance on the report of KPMG
Peat Marwick LLP, independent auditors, given on the authority of said firm as
experts in auditing and accounting.
The consolidated financial statements of Coast incorporated in this
Prospectus by reference to Ahmanson's Current Report on Form 8-K dated April
23, 1998 for the year ended December 31, 1997, have been so incorporated in
reliance on the report of KPMG Peat Marwick LLP, independent auditors, given
on the authority of said firm as experts in auditing and accounting.
STOCKHOLDER PROPOSALS
Any Washington Mutual shareholder who wishes to submit a proposal for
presentation to the 1999 Annual Meeting of Shareholders must submit the
proposal to Washington Mutual, 1201 Third Avenue, Seattle, Washington 98101,
Attention: Office of the Secretary, not later than December 18, 1998, for
inclusion, if appropriate, in Washington Mutual's proxy statement and the form
of proxy relating to the 1999 Annual Meeting.
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APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
dated as of March 16, 1998
by and between
WASHINGTON MUTUAL, INC.
and
H. F. AHMANSON & COMPANY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
Certain Definitions
<C> <S> <C>
1.01 Certain Definitions................................................. 1
ARTICLE II
The Merger
2.01 The Merger.......................................................... 5
2.02 Effective Date and Effective Time................................... 6
ARTICLE III
Consideration; Exchange Procedures
3.01 Merger Consideration................................................ 6
3.02 Rights as Stockholders; Stock Transfers............................. 7
3.03 Fractional Shares................................................... 7
3.04 Exchange Procedures................................................. 7
3.05 Anti-Dilution Provisions............................................ 8
3.06 Options............................................................. 8
ARTICLE IV
Actions Pending Acquisition
4.01 Forebearances of Ahmanson........................................... 8
4.02 Forebearances of Washington Mutual.................................. 11
ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules................................................ 12
5.02 [Reserved].......................................................... 12
5.03 Representations and Warranties of Ahmanson.......................... 12
5.04 Representations and Warranties of Washington Mutual................. 20
ARTICLE VI
Covenants
6.01 Reasonable Best Efforts............................................. 25
6.02 Stockholder Approval................................................ 25
6.03 Registration Statement and Joint Proxy Statement.................... 26
6.04 Press Releases...................................................... 26
6.05 Access; Information................................................. 27
6.06 Acquisition Proposals............................................... 27
6.07 Affiliate Agreements................................................ 27
6.08 Takeover Laws....................................................... 28
6.09 Nasdaq Listing...................................................... 28
6.10 Regulatory Applications............................................. 28
6.11 Indemnification..................................................... 28
6.12 Benefit Plan; Retention Bonuses..................................... 29
6.13 Accountants' Letters................................................ 30
</TABLE>
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<C> <S> <C>
6.14 Notification of Certain Matters..................................... 30
6.15 Officers and Directors.............................................. 30
6.16 Financial Statements................................................ 31
6.17 Management Consultation Meetings and Distribution of Information.... 31
6.18 Year 2000 Plan...................................................... 31
6.19 Stock Option Agreement.............................................. 31
ARTICLE VII
Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the Merger.......... 31
7.02 Conditions to Obligation of Ahmanson................................ 32
7.03 Conditions to Obligation of Washington Mutual....................... 32
ARTICLE VIII
Termination
8.01 Termination......................................................... 33
8.02 Effect of Termination and Abandonment............................... 34
ARTICLE IX
Miscellaneous
9.01 Survival............................................................ 35
9.02 Waiver; Amendment................................................... 35
9.03 Counterparts........................................................ 35
9.04 Governing Law....................................................... 35
9.05 Expenses............................................................ 35
9.06 Notices............................................................. 35
9.07 Entire Understanding; No Third Party Beneficiaries.................. 36
9.08 Interpretation; Effect.............................................. 36
</TABLE>
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<C> <S> <C>
EXHIBIT A Form of Stock Option Agreement [INCLUDED AS APPENDIX D]........
EXHIBIT B Form of Ahmanson Affiliate Agreement........................... 38
EXHIBIT C Form of Washington Mutual Affiliate Agreement.................. 40
</TABLE>
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AGREEMENT AND PLAN OF MERGER, dated as of March 16, 1998 (this "Agreement"),
by and between Washington Mutual, Inc. ("Washington Mutual") and H. F.
Ahmanson & Company ("Ahmanson").
RECITALS
A. Washington Mutual. Washington Mutual, Inc. is a Washington corporation,
having its principal place of business in Seattle, Washington.
B. Ahmanson. H. F. Ahmanson & Company is a Delaware corporation, having its
principal place of business in Irwindale, California.
C. Stock Option Agreement. As an inducement to the willingness of Washington
Mutual to continue to pursue the transactions contemplated by this Agreement,
Ahmanson will grant to Washington Mutual an option pursuant to the Stock
Option Agreement, substantially in the form of Exhibit A (the "Stock Option
Agreement").
D. Intentions of the Parties. It is the intention of the parties to this
Agreement that the business combination contemplated hereby be treated as a
"reorganization" under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and be accounted for as a pooling-of-interests.
E. Board Action. The respective Boards of Directors of each of Washington
Mutual and Ahmanson have determined that it is in the best interests of their
respective companies and their stockholders to consummate the strategic
business combination transaction provided for herein.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants, representations, warranties and agreements contained herein the
parties agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.01 Certain Definitions. The following terms are used in this Agreement
with the meanings set forth below:
"Acquisition Proposal" means any tender or exchange offer, proposal for a
merger, consolidation or other business combination involving Ahmanson or
any of its Subsidiaries or any proposal or offer to acquire in any manner a
substantial equity interest in, or a substantial portion of the assets or
deposits of, Ahmanson or any of its Subsidiaries, other than the
transactions contemplated by this Agreement.
"Agreement" means this Agreement, as amended or modified from time to
time in accordance with Section 9.02.
"Ahmanson" has the meaning set forth in the preamble to this Agreement.
"Ahmanson Affiliate" has the meaning set forth in Section 6.07(a).
"Ahmanson Board" means the Board of Directors of Ahmanson.
"Ahmanson By-Laws" means the By-laws of Ahmanson.
"Ahmanson Certificate" means the Certificate of Incorporation of
Ahmanson.
"Ahmanson Common Stock" means the common stock, par value $.01 per share,
of Ahmanson.
"Ahmanson Compensation and Benefit Plans" has the meaning set forth in
Section 5.03(m).
"Ahmanson Draft 10-K" has the meaning set forth in Section 5.03(g).
"Ahmanson ERISA Affiliate" has the meaning set forth in Section 5.03(m).
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"Ahmanson ERISA Affiliate Plan" has the meaning set forth in Section
5.03(m).
"Ahmanson FSB" means Home Savings of America, FSB, a federally chartered
savings bank.
"Ahmanson Meeting" has the meaning set forth in Section 6.02.
"Ahmanson Pension Plan" has the meaning set forth in Section 5.03(m).
"Ahmanson Preferred Stock" means the outstanding shares of 6% Cumulative
Convertible Series D Preferred Stock, par value $.01 per share, of
Ahmanson.
"Ahmanson Rights" means the preferred share purchase rights issued under
the Ahmanson Rights Agreement.
"Ahmanson Rights Agreement" means the Rights Agreement, dated as of
November 7, 1997, between Ahmanson and First Chicago Trust Company of New
York, as rights agent, as amended.
"Ahmanson SEC Documents" has the meaning set forth in Section 5.03(g).
"Ahmanson Stock" means, collectively, Ahmanson Common Stock and Ahmanson
Preferred Stock.
"Ahmanson Stock Option" has the meaning set forth in Section 3.06.
"Ahmanson Stock Plans" means Ahmanson's 1996 Nonemployee Directors' Stock
Incentive Plan, Ahmanson's 1993 Stock Incentive Plan, Ahmanson's 1998
Directors' Stock Incentive Plan and Ahmanson" 1984 Stock Incentive Plan.
"Code" has the meaning set forth in the recitals.
"COFI" means the Federal Home Loan Bank Eleventh District Cost of Funds
Index.
"Confidentiality Letter" has the meaning set forth in Section 6.05(b).
"Consultants" has the meaning set forth in Section 5.03(m).
"Costs" has the meaning set forth in Section 6.11(a).
"Delaware Secretary" has the meaning set forth in Section 2.01(b).
"DGCL" means the Delaware General Corporation Law.
"Directors" has the meaning set forth in Section 5.03(m).
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Effective Time" means the date on which the Effective Time occurs.
"Effective Time" means the effective time of the Merger, as provided for
in Section 2.02.
"Employees" has the meaning set forth in Section 5.03(m).
"Environmental Laws" means all applicable local, state and federal
environmental, health and safety laws and regulations, including, without
limitation, the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response, Compensation, and Liability Act, the Clean Water
Act, the Federal Clean Air Act, and the Occupational Safety and Health Act,
each as amended, regulations promulgated thereunder, and state
counterparts.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04(a).
"Exchange Ratio" has the meaning set forth in Section 3.01(a).
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"Expense Reimbursement" has the meaning set forth in Section 8.02.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLBSF" means the Federal Home Loan Bank of San Francisco.
"GAAP" means generally accepted accounting principles applied on a
consistent basis.
"Good Reason" has the meaning set forth in Section 6.12(c).
"Governmental Authority" means any court, administrative agency or
commission or other federal, state or local governmental authority or
instrumentality.
"HOLA" means the Home Owners' Loan Act, as amended.
"Indemnified Party" has the meaning set forth in Section 6.11(a).
"Initial Termination Fee" has the meaning set forth in Section 8.02(b).
"Insurance Amount" has the meaning set forth in Section 6.11(b).
"IRS" has the meaning set forth in Section 5.03(m).
"Joint Proxy Statement" has the meaning set forth in Section 6.03(a).
"Lien" means any charge, mortgage, pledge, security interest,
restriction, claim, lien, or encumbrance.
"Material Adverse Effect" means, with respect to Washington Mutual or
Ahmanson, any effect that (a) is material and adverse to the financial
condition, results of operations or business of Washington Mutual and its
Subsidiaries taken as a whole or Ahmanson and its Subsidiaries taken as a
whole, respectively, or (b) would materially impair the ability of either
Washington Mutual or Ahmanson to consummate the Merger and the other
transactions contemplated by this Agreement on a timely basis, provided
that a Material Adverse Effect shall not be deemed to have occurred as a
result of (i) a change in general economic conditions, (ii) changes in the
institutions that are used to calculate COFI or changes in the calculation
of COFI, (iii) a change in law or regulation or (iv) developments in the
goodwill litigation of Ahmanson.
"Merger" has the meaning set forth in Section 2.01(a).
"Multiemployer Plans" has the meaning set forth in Section 5.03(m).
"Nasdaq" means the Nasdaq Stock Market.
"New Certificate" has the meaning set forth in Section 3.04(a).
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificate" has the meaning set forth in Section 3.04(a).
"OTS" means the Office of Thrift Supervision.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means any individual, savings association, bank, corporation,
limited liability company, partnership, association, joint-stock company,
business trust or unincorporated organization.
"Previously Disclosed" by a party means information set forth in its
Disclosure Schedule.
"Registration Statement" has the meaning set forth in Section 6.03(a).
"Regulatory Authorities" has the meaning set forth in Section 5.03(i).
"Replacement Option" has the meaning set forth in Section 3.06.
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"Representatives" means, with respect to any Person, such Person's
directors, officers, employees, legal or financial advisors or any
representatives of such legal or financial advisors.
"Rights" means, with respect to any Person, securities or obligations
convertible into or exercisable or exchangeable for, or giving any other
Person any right to subscribe for or acquire, or any options, calls or
commitments relating to, or any stock appreciation right or other
instrument the value of which is determined in whole or in part by
reference to the market price or value of, shares of capital stock of such
first Person.
"SAIF" means the Savings Association Insurance Fund of the Federal
Deposit Insurance Corporation.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations thereunder.
"Special Severance Employees" has the meaning set forth in Section
6.12(c).
"Special Severance Payments" has the meaning set forth in Section
6.12(c).
"Special Severance Plan" has the meaning set forth in Section 6.12(c).
"Stock Option Agreement" has the meaning set forth in Recital C.
"Subsidiary" has the meaning ascribed to it in Rule 1-02 of Regulation S-
X of the SEC.
"Subsequent Termination Fee" has the meaning set forth in Section
8.02(b).
"Surviving Corporation" has the meaning set forth in Section 2.01(a).
"Takeover Laws" has the meaning set forth in Section 5.03(o).
"Tax" and "Taxes" means all federal, state, local or foreign taxes,
charges, fees, levies or other assessments, however denominated, including,
without limitation, all net income, gross income, gains, gross receipts,
sales, use, ad valorem, goods and services, capital, production, transfer,
franchise, windfall profits, license, withholding, payroll, employment,
disability, employer health, excise, estimated, severance, stamp,
occupation, property, environmental, unemployment or other taxes, custom
duties, fees, assessments or charges of any kind whatsoever, together with
any interest and any penalties, additions to tax or additional amounts
imposed by any taxing authority whether arising before, on or after the
Effective Time.
"Tax Returns" means any return, amended return or other report (including
elections, declarations, disclosures, schedules, estimates and information
returns) required to be filed with respect to any Tax.
"Termination Fee" has the meaning set forth in Section 8.02(b).
"Treasury Stock" shall mean shares of Ahmanson Stock held by Ahmanson or
any of its Subsidiaries or by Washington Mutual or any of its Subsidiaries,
in each case other than in a fiduciary (including custodial or agency)
capacity or as a result of debts previously contracted in good faith.
"Washington Mutual" has the meaning set forth in the preamble to this
Agreement.
"Washington Mutual Affiliate" has the meaning set forth in Section
6.07(a).
"Washington Mutual Articles" means the Articles of Incorporation of
Washington Mutual.
"Washington Mutual Articles of Amendment" has the meaning set forth in
Section 2.01(c).
"Washington Mutual Board" means the Board of Directors of Washington
Mutual.
"Washington Mutual By-Laws" means the By-laws of Washington Mutual.
"Washington Mutual Common Stock" means the common stock, no par value per
share, of Washington Mutual.
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"Washington Mutual Compensation and Benefit Plans" has the meaning set
forth in Section 5.04(k).
"Washington Mutual Depositary Shares" has the meaning set forth in
Section 3.01(a).
"Washington Mutual Draft 10-K" has the meaning set forth in Section
5.04(g).
"Washington Mutual ERISA Affiliate" has the meaning set forth in Section
5.04(k).
"Washington Mutual ERISA Affiliate Plan" has the meaning set forth in
Section 5.04(k).
"Washington Mutual Meeting" has the meaning set forth in Section 6.02.
"Washington Mutual Pension Plan" has the meaning set forth in Section
5.04(k).
"Washington Mutual Preferred Stock" has the meaning set forth in Section
3.01(a).
"Washington Mutual Rights" means the common share purchase rights issued
under the Washington Mutual Rights Agreement.
"Washington Mutual Rights Agreement" means the Rights Agreement, dated as
of October 16, 1990, between Washington Mutual and First Interstate Bank of
Washington, as rights agent, as amended.
"Washington Mutual SEC Documents" has the meaning set forth in Section
5.04(g).
"Washington Mutual Stock" means, collectively, Washington Mutual Common
Stock and Washington Mutual Preferred Stock.
"Washington Mutual Subsidiary Depository Institution" means Washington
Mutual Bank, FA.
"Washington Secretary" has the meaning set forth in Section 2.01(b).
"WBCA" means the Washington Business Corporation Act.
"Year 2000 Plan" has the meaning set forth in Section 5.03(u).
ARTICLE II
THE MERGER
2.01 The Merger. (a) At the Effective Time, Ahmanson shall merge with and
into Washington Mutual (the "Merger"), the separate corporate existence of
Ahmanson shall cease and Washington Mutual shall survive and continue to exist
as a Washington corporation (Washington Mutual, as the surviving corporation
in the Merger, sometimes being referred to herein as the "Surviving
Corporation"). Washington Mutual, prior to the mailing of the Joint Proxy
Statement, may change the method of effecting the combination with Ahmanson to
that of a merger of a Subsidiary of Washington Mutual with Ahmanson if and to
the extent it deems such change to be necessary, appropriate or desirable;
provided, however, that no such change shall (i) alter or change the amount or
kind of consideration to be issued to holders of Ahmanson Stock as provided
for in this Agreement, (ii) adversely affect the tax treatment of Ahmanson's
stockholders as a result of the transactions contemplated hereby or (iii)
materially impede or delay consummation of the transactions contemplated by
this Agreement.
(b)Subject to the satisfaction or waiver of the conditions set forth in
Article VII, the Merger shall become effective upon the occurrence of the
filing in the office of the Secretary of State of Delaware (the "Delaware
Secretary") of a certificate of merger in accordance with the DGCL and the
filing in the office of the Secretary of State of the State of Washington (the
"Washington Secretary") of articles of merger in accordance with the WBCA, or
such later date and time as may be set forth in such certificate. The Merger
shall have the effects prescribed in the WBCA and the DGCL.
(c)Articles of Incorporation and By-Laws. The articles of incorporation and
by-laws of Washington Mutual immediately after the Merger shall be those of
Washington Mutual as in effect immediately prior to the Effective Time. At or
prior to the Effective Time, Washington Mutual shall execute and file with the
Washington
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Secretary articles of amendment (the "Washington Mutual Articles of
Amendment") establishing the Washington Mutual Preferred Stock in form and
substance satisfactory to Ahmanson.
(d)Directors and Officers of the Surviving Corporation. Subject to Section
6.15, the directors and officers of Washington Mutual immediately after the
Merger shall be the directors and officers of Washington Mutual immediately
prior to the Effective Time, until such time as their successors shall be duly
elected and qualified.
2.02 Effective Date and Effective Time. Subject to the satisfaction or
waiver of the conditions set forth in Article VII (other than those relating
to the physical delivery of documents or similar matters to occur on the
Effective Date), the parties shall cause the effective date of the Merger (the
"Effective Date") to occur on (i) the first day between the 15th and 29th
calendar days of a month which is at least five business days after the last
of the conditions set forth in Section 7.01 shall have been satisfied or
waived in accordance with the terms of this Agreement or (ii) such other date
to which the parties may agree in writing. The time on the Effective Date when
the Merger shall become effective is referred to as the "Effective Time."
ARTICLE III
CONSIDERATION; EXCHANGE PROCEDURES
3.01 Merger Consideration. Subject to the provisions of this Agreement, at
the Effective Time, and except in the case of the second paragraph of (a)
below, automatically by virtue of the Merger and without any action on the
part of any Person:
(a)Outstanding Ahmanson Stock and Ahmanson Rights.
(i) Each share (excluding Treasury Stock) of Ahmanson Common Stock issued
and outstanding immediately prior to the Effective Time, together with each
associated Ahmanson Right, shall become and be converted into the right to
receive 1.12 shares of Washington Mutual Common Stock (the "Exchange
Ratio") (with the appropriate number of Washington Mutual Rights as
provided in the Washington Mutual Rights Agreement, whether or not such
Washington Mutual Rights shall still be attached to such shares). The
Exchange Ratio shall be subject to adjustment as set forth in Section 3.05.
(ii) Each share (excluding Treasury Stock) of Ahmanson Series D Preferred
Stock issued and outstanding immediately prior to the Effective Time shall
be converted into the right to receive one share of 6% Cumulative
Convertible Series G Preferred Stock of Washington Mutual (the "Washington
Mutual Preferred Stock"). The terms of the Washington Mutual Preferred
Stock shall be substantially the same as the terms of the Ahmanson
Preferred Stock.
(iii) At the Effective Time, Washington Mutual shall assume the
obligations of Ahmanson under the Deposit Agreement, dated as of August 5,
1993, between Ahmanson and Chase Trust Company of California (formerly
Chemical Trust Company of California), as depositary (relating to the
Ahmanson Preferred Stock). Washington Mutual shall instruct the applicable
depositary to treat the shares of Washington Mutual Preferred Stock
received by such depositary in exchange for and upon conversion of the
shares of Ahmanson Preferred Stock as new deposited securities under the
deposit agreement. In accordance with the terms of the deposit agreement,
the depositary receipts then outstanding shall thereafter represent the
shares of Washington Mutual Preferred Stock so received upon conversion and
exchange for the shares of Ahmanson Preferred Stock. Washington Mutual
shall request that such depositary call for the surrender of all
outstanding receipts to be exchanged for new receipts (the "Washington
Mutual Depositary Shares") specifically describing the series of Washington
Mutual Preferred Stock.
(b)Outstanding Washington Mutual Stock. Each share of Washington Mutual
Stock issued and outstanding immediately prior to the Effective Time shall
remain issued and outstanding and unaffected by the Merger.
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(c)Treasury Shares. Each share of Ahmanson Stock held as Treasury Stock
immediately prior to the Effective Time shall be canceled and retired at the
Effective Time and no consideration shall be issued in exchange therefor.
3.02 Rights as Stockholders; Stock Transfers. At the Effective Time, holders
of Ahmanson Stock shall cease to be, and shall have no rights as, stockholders
of Ahmanson, other than to receive any dividend or other distribution with
respect to such Ahmanson Stock with a record date occurring prior to the
Effective Date and the consideration provided under this Article III. After
the Effective Time, there shall be no transfers on the stock transfer books of
Ahmanson or the Surviving Corporation of shares of Ahmanson Stock.
3.03 Fractional Shares. Notwithstanding any other provision hereof, no
fractional shares of Washington Mutual Common Stock and no certificates or
scrip therefor, or other evidence of ownership thereof, will be issued in the
Merger; instead, Washington Mutual shall pay to each holder of Ahmanson Common
Stock who would otherwise be entitled to a fractional share of Washington
Mutual Common Stock (after taking into account all Old Certificates delivered
by such holder) an amount in cash (without interest) determined by multiplying
such fraction by the average of the closing sale prices of Washington Mutual
Common Stock quoted on Nasdaq (as reported in The Wall Street Journal or, if
not reported therein, in another authoritative source), for the five Nasdaq
trading days immediately preceding the Effective Time.
3.04 Exchange Procedures.
(a)At or prior to the Effective Time, Washington Mutual shall deposit, or
shall cause to be deposited, with Washington Mutual's transfer agent or a
depository or trust institution of recognized standing selected by Washington
Mutual (in such capacity, the "Exchange Agent"), for the benefit of the
holders of certificates formerly representing shares of Ahmanson Stock ("Old
Certificates") to be exchanged in accordance with this Article III,
certificates representing the shares of Washington Mutual Stock ("New
Certificates") to which the holders of the Old Certificates are entitled
pursuant to this Agreement, together with an estimated amount of cash to be
paid pursuant to this Article III in lieu of fractional shares of Ahmanson
Common Stock.
(b)Promptly after the Effective Time, Washington Mutual shall send or cause
to be sent to each former holder of record of shares of Ahmanson Stock
immediately prior to the Effective Time transmittal materials for use in
exchanging such stockholder's Old Certificates for the consideration set forth
in this Article III. Washington Mutual shall cause the New Certificates and/or
any check in respect of any fractional share interests or dividends or
distributions which such Person shall be entitled to receive to be delivered
to such stockholder upon delivery to the Exchange Agent of Old Certificates
representing such shares of Ahmanson Stock (or indemnity reasonably
satisfactory to Washington Mutual and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned by such stockholder. No
interest will be paid on any such cash to be paid in lieu of fractional share
interests or in respect of dividends or distributions which any such Person
shall be entitled to receive pursuant to this Article III upon such delivery.
(c)Neither the Exchange Agent nor any party hereto shall be liable to any
former holder of Ahmanson Stock for any amount properly delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(d)No dividends or other distributions with respect to Washington Mutual
Stock with a record date occurring after the Effective Date shall be paid in
respect of any unsurrendered Old Certificate representing shares of Ahmanson
Stock converted in the Merger into the right to receive shares of Washington
Mutual Stock. Upon surrender of Old Certificates (or indemnity reasonably
satisfactory to Washington Mutual and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) in accordance with this Section
3.04, the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon, which
theretofore had become payable with respect to shares of Washington Mutual
Stock such holder had the right to receive upon surrender of Old Certificates
(or delivery of such indemnity).
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3.05 Anti-Dilution Provisions. In the event Washington Mutual changes (or
establishes a record date for changing) the number or kind of shares of
Washington Mutual Common Stock issued and outstanding prior to the Effective
Time as a result of a stock split, stock dividend, recapitalization,
reclassification, reorganization or similar transaction with respect to the
outstanding Washington Mutual Common Stock and the record date therefor shall
be prior to the Effective Time, the Exchange Ratio shall be proportionately
adjusted in such manner as Ahmanson and Washington Mutual shall agree, which
adjustment may include, as appropriate, the issuance of securities, property
or cash on the same basis as that on which any of the foregoing shall have
been issued, distributed or paid to the holders of Washington Mutual Common
Stock generally.
3.06 Options Options. At the Effective Time, each outstanding option to
purchase shares of Ahmanson Common Stock under the Ahmanson Stock Plans (each,
a "Ahmanson Stock Option"), whether vested or unvested, shall be converted
into an option (a "Replacement Option") to acquire, on the same terms and
conditions as were applicable under such Ahmanson Stock Option, the number of
shares of Washington Mutual Common Stock equal to (a) the number of shares of
Ahmanson Common Stock subject to the Ahmanson Stock Option, multiplied by (b)
the Exchange Ratio (such product rounded down to the nearest whole number), at
an exercise price per share (rounded up to the nearest whole cent) equal to
(i) the aggregate exercise price for the shares of Ahmanson Common Stock which
were purchasable pursuant to such Ahmanson Stock Option divided by (ii) the
number of full shares of Washington Mutual Common Stock subject to such
Replacement Option in accordance with the foregoing. At the Effective Time,
Washington Mutual shall assume the Ahmanson Stock Plans; provided, that such
assumption shall be only in respect of the Replacement Options and that
Washington Mutual shall have no obligation with respect to any awards under
the Ahmanson Stock Plans other than the Replacement Options and shall have no
obligation to make any additional grants or awards under such assumed Ahmanson
Stock Plans.
ARTICLE IV
ACTIONS PENDING ACQUISITION
4.01 Forebearances of Ahmanson. From the date hereof until the Effective
Time, except as expressly contemplated by this Agreement or as set forth in
paragraph 4.01 of Ahmanson's Disclosure Schedule, without the prior written
consent of Washington Mutual (which consent shall not be unreasonably withheld
and a determination with respect thereto shall be made as promptly as
practicable under the circumstances), Ahmanson will not, and will cause each
of its Subsidiaries not to:
(a)Ordinary Course. Except as Previously Disclosed, conduct the business
of Ahmanson and its Subsidiaries other than in the ordinary and usual
course or fail to use reasonable efforts to preserve intact their business
organizations and assets and maintain their rights, franchises and existing
relations with customers, suppliers, employees and business associates, or
take any action reasonably likely to have an adverse effect upon Ahmanson's
ability to perform any of its material obligations under this Agreement.
(b)Capital Stock. Other than pursuant to Rights Previously Disclosed and
outstanding on the date hereof, (i) issue, sell or otherwise permit to
become outstanding, or authorize the creation of, any additional shares of
Ahmanson Stock or any Rights, (ii) enter into any agreement with respect to
the foregoing or (iii) permit any additional shares of Ahmanson Stock to
become subject to new grants of employee or director stock options, other
Rights or similar stock-based employee rights.
(c)Dividends, Etc. (i) Make, declare, pay or set aside for payment any
dividend (other than (A) dividends from wholly owned Subsidiaries to
Ahmanson or another wholly owned Subsidiary of Ahmanson, (B) regular
quarterly dividends on Ahmanson Common Stock at a rate equal to the rate
paid by Ahmanson during the fiscal quarter immediately preceding the date
hereof, (C) in the case of Ahmanson Preferred Stock for regular quarterly
or semiannual dividends thereon at the rate set forth in the certificate of
designation for such securities and (D) regular quarterly or semi-annual
dividends payable by each of Ahmanson Capital Trust I and Ahmanson
Obligation Company (in each case in accordance with its
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governing documents) on or in respect of, or declare or make any
distribution on any shares of Ahmanson Stock or (ii) except as Previously
Disclosed, directly or indirectly adjust, split, combine, redeem,
reclassify, purchase or otherwise acquire, any shares of its capital stock.
(d)Compensation; Employment Agreements; Etc. Except as Previously
Disclosed, enter into or amend or renew any employment, consulting,
severance or similar agreements or arrangements with any director, officer
or employee of Ahmanson or its Subsidiaries, or hire any new employees
above the rank of senior vice president, or grant any salary or wage
increase or increase any employee benefit (including incentive or bonus
payments), except (i) for normal individual increases in compensation to
employees (other than any employees ranking above senior vice president) in
the ordinary course of business consistent with past practice, (ii) for
other changes that are required by applicable law, (iii) to satisfy
Previously Disclosed contractual obligations existing as of the date
hereof, (iv) for grants to newly hired employees consistent with past
practice of Ahmanson Stock Options exercisable for 5,000 shares of Ahmanson
Common Stock or less to any individual and Ahmanson Stock Options
exercisable for 50,000 shares of Ahmanson Common Stock in the aggregate for
all such newly hired employees, in all cases such Ahmanson Stock Options to
have an exercise price equal to the fair market value of Ahmanson Common
Stock at the time of grant, (v) agreements to provide retention bonuses or
other bonuses to employees made pursuant to Section 6.12(b) or severance
plans or arrangements contemplated by Section 6.12(c), (vi) agreements to
provide aggregate bonuses to employees who remain employees through the
Effective Time for the 1998 calendar year or portion thereof preceding the
date of termination of the employment of any such employee at an assumed
125% of the target bonus, payable on the earlier of February 1, 1999 and
the date of termination of the employment of such employee, based on an
allocation of the amount of such bonuses made by Ahmanson in its sole
discretion or (vii) agreements to pay and payments in cash of the cash
equivalents (determined in the manner set forth in paragraph 4.01(d) of
Ahmanson's Disclosure Schedule) of Ahmanson Stock Options that would have
been granted to employees pursuant to annual grants in November 1998 and
February 1999, consistent with past practice at the time such grants would
have been awarded, and amendments to any existing agreements to permit such
cash payments in lieu of the grant of additional shares. There shall be no
acceleration in the payment of commissions owing to or accrued by
employees, agents or independent contractors by Ahmanson or any of its
Subsidiaries.
(e)Benefit Plans. Enter into, establish, adopt or amend (except (i) as
may be required by applicable law, (ii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof or (iii) as
otherwise provided herein) any pension, retirement, stock option, stock
purchase, savings, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or welfare
contract, plan or arrangement, or any trust agreement (or similar
arrangement) related thereto, in respect of any director, officer or
employee of Ahmanson or its Subsidiaries, or take any action to accelerate
the vesting or exercisability of stock options, restricted stock or other
compensation or benefits payable thereunder.
(f)Dispositions. Except as Previously Disclosed, sell, transfer,
mortgage, encumber or otherwise dispose of or discontinue any of its
assets, deposits, business or properties except for sales, transfers,
mortgages, encumbrances or other dispositions or discontinuances (which
include periodic dispositions of real estate investments) in the ordinary
course of business consistent with past practice and in a transaction that,
together with other such transactions, is not material to it and its
Subsidiaries taken as a whole.
(g)Acquisitions. Except as Previously Disclosed, acquire (other than by
way of foreclosures or acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debts previously contracted in good faith,
in each case in the ordinary and usual course of business consistent with
past practice) all or any portion of the assets, business, deposits or
properties of any other entity except in the ordinary course of business
consistent with past practice and in a transaction that, together with
other such transactions, is not material to it and its Subsidiaries taken
as a whole.
(h)Governing Documents. Amend the Ahmanson Certificate, Ahmanson By-laws
or the certificate of incorporation or by-laws (or similar governing
documents) of any of Ahmanson's Subsidiaries.
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(i)Accounting Methods. Implement or adopt any change in its accounting
principles, practices or methods, other than as may be required by
generally accepted accounting principles or regulatory accounting
requirements.
(j)Contracts. Except as Previously Disclosed, (i) enter into, renew or
terminate, or make any payment not then required under, any contract or
agreement, other than loans made in the ordinary course of business, that
calls for aggregate annual payments of $1,000,000 or more and which is not
either (A) terminable at will on 60 days or less notice without payment of
a penalty or (B) has a term of less than one year; or (ii) make any
material change in any of its leases or contracts of a type described in
clause (i), other than renewals of contracts or leases for a term of one
year or less without materially adverse changes to the terms thereof.
(k)Claims. Settle any claim, action or proceeding against it, except for
any claim, action or proceeding in an amount or for such consideration,
individually or in the aggregate for all such settlements, that is not
material to Ahmanson and its Subsidiaries, taken as a whole and would not
impose any material restriction on the business of the Surviving
Corporation.
(l)Adverse Actions. (i) Notwithstanding anything herein to the contrary,
take any action that would, or is reasonably likely to, prevent or impede
the Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code or qualifying for pooling-of-interests accounting
treatment or (ii) take any action that is intended or is reasonably likely
to result in (A) any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect at any time
at or prior to the Effective Time, (B) any of the conditions to the Merger
set forth in Article VII not being satisfied or (C) a material violation of
any provision of this Agreement except, in each case, as may be required by
applicable law or regulation.
(m)Capital Expenditures. Make any capital expenditures in excess of (A)
$500,000 per project or related series of projects or (B) $3,000,000 in the
aggregate, other than expenditures deemed necessary or desirable for any of
Ahmanson or its Subsidiaries to be Year 2000 compliant consistent with the
Year 2000 Plan as in effect from time to time or expenditures deemed
necessary or desirable to maintain existing assets in good repair or
conduct its business as presently conducted.
(n)Branch Offices. Make application for the opening, relocation or
closing of any, or open, relocate or close any, branch or loan production
office except for any closings or relocations resulting from (i) the
expiration of any lease, which lease has been Previously Disclosed, (ii)
the integration of Coast Savings Financial, Inc. and its Subsidiaries and
(iii) previously agreed upon sales Previously Disclosed.
(o)Loans. Make or acquire any loan other than loans committed as of the
date hereof or issue a commitment for any loan except for loans and
commitments that are made in the ordinary course of business consistent
with past practice or issue or agree to issue any letters of credit or
otherwise guarantee the obligations of any other Persons except in the
ordinary course of business in order to facilitate the sale of real estate
owned.
(p)Foreclosures. Except after having followed the Ahmanson FSB
Environmental Policy, foreclose upon or otherwise acquire (whether by deed
in lieu of foreclosure or otherwise) any real property (other than 1-to-4
family residential properties in the ordinary course of business).
(q)Software Development Contracts. Enter into any contracts or agreements
or amendments or supplements thereto pertaining to any further development
of specialized software for Ahmanson or its Subsidiaries other than any
contracts or agreements deemed necessary or desirable for Ahmanson or any
of its Subsidiaries to be Year 2000 compliant, consistent with the Year
2000 Plan as in effect from time to time, and those necessary or desirable
to operate the business of Ahmanson or its Subsidiaries as such businesses
are currently conducted.
(r)Banking Policies. Change in any material manner its lending or pricing
policies or approval policies for making loans, its investment policies,
its deposit pricing policies, its asset/liability management policies, its
environmental policies or any other material banking policies.
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(s)Rights Agreement. Take any action that would cause or that would
result in Washington Mutual becoming an "Acquiring Person" (as defined in
the Ahmanson Rights Agreement).
(t)Commitments. Agree or commit to do any of the foregoing.
IV.2 Forebearances of Washington Mutual. Forebearances of Washington Mutual.
From the date hereof until the Effective Time, except as expressly
contemplated by this Agreement or as set forth in paragraph 4.02 of Washington
Mutual's Disclosure Schedule, without the prior written consent of Ahmanson
(which consent shall not be unreasonably withheld and a determination with
respect thereto shall be made as promptly as practicable under the
circumstances), Washington Mutual will not, and will cause each of its
Subsidiaries not to:
(a)Ordinary Course. Conduct the business of Washington Mutual and its
Subsidiaries other than in the ordinary and usual course or take any action
reasonably likely to have an adverse effect upon Washington Mutual's
ability to perform any of its material obligations under this Agreement.
(b)Dividends. Make, declare, pay or set aside for payment any dividend
other than regular quarterly dividends on Washington Mutual Common Stock at
a rate equal to the rate paid by Washington Mutual during the fiscal
quarter immediately preceding the date hereof as such dividends may be
increased at the rate of $.01 per share per quarter thereafter and other
than (i) dividends from wholly owned Subsidiaries of Washington Mutual to
Washington Mutual or another wholly owned Subsidiary of Washington Mutual,
(ii) in the case of the Washington Mutual 7.60% Noncumulative Perpetual
Preferred Stock, Series E, for regular quarterly dividends thereon at the
rate set forth in the Washington Mutual Articles with respect to such
securities and at a rate of declaration of such dividends in the ordinary
course of business consistent with past practice and (iii) regular
quarterly or semi-annual dividends payable by each of Great Western
Financial Trust I, Great Western Financial Trust II and Washington Mutual
Capital I, in each case in accordance with its governing documents.
(c)Acquisitions. Except as Previously Disclosed, acquire (other than by
way of foreclosures or acquisitions of control in a bona fide fiduciary
capacity or in satisfaction of debt previously contracted in good faith, in
each case in the ordinary course of business consistent with past practice)
all or any portion of the assets, business, deposits or properties of any
other entity except in the ordinary course of business and in a transaction
that is not material to it and its Subsidiaries taken as a whole; provided,
however, that Washington Mutual may enter into an agreement or agreements
for, and may consummate, business combination transactions with other
companies provided that (i) any business combination transactions involving
the acquisition of a savings association or savings bank or branches
thereof shall not, on or prior to the date which is 60 days after
completion of the systems conversion in connection with the acquisition of
Great Western Financial Corporation, involve acquired assets in excess of
$1,000,000,000 in any one transaction or $3,000,000,000 in the aggregate
for all such transactions, and after completion of the systems conversion
in connection with the acquisition of Great Western Financial Corporation,
involve acquired assets in excess of $1,000,000,000 in any one transaction
or $5,000,000,000 in the aggregate for all such transactions and (ii) such
transaction or transactions would not materially delay or materially
adversely affect consummation of the Merger.
(d)Governing Documents. (i) Amend the Washington Mutual Articles, other
than (A) as set forth in Section 2.01(c), (B) any amendment which would not
require the approval of the Washington Mutual shareholders under the WBCA
or (C) any amendment to increase the authorized shares of Washington
Mutual's capital stock, or (ii) amend the Washington Mutual By-Laws or the
certificate of incorporation or by-laws (or similar governing documents) of
any of Washington Mutual's Subsidiaries, in each of cases (i) and (ii) in a
manner that would materially and adversely affect the ability of Washington
Mutual to consummate the Merger.
(e)Adverse Actions. (a) Take any action that would, or is reasonably
likely to, prevent or impede the Merger from qualifying as a reorganization
within the meaning of Section 368 of the Code or qualifying for pooling-of-
interests accounting treatment; (b) take any action that is intended or is
reasonably likely to result in (i) any of its representations and
warranties set forth in this Agreement being or becoming untrue in any
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material respect at any time at or prior to the Effective Time, (ii) any of
the conditions to the Merger set forth in Article VII not being satisfied
or (iii) a material violation of any provision of this Agreement except, in
each case, as may be required by applicable law or regulation.
(f)Commitments. Agree or commit to do any of the foregoing.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Disclosure Schedules. On or prior to the date hereof, Washington Mutual
has delivered to Ahmanson a schedule and Ahmanson has delivered to Washington
Mutual a schedule (respectively, its "Disclosure Schedule") setting forth,
among other things, items the disclosure of which is necessary or appropriate
either in response to an express disclosure requirement contained in a
provision hereof or as an exception to one or more representations or
warranties contained in Section 5.03 or 5.04 or to one or more of its
covenants contained in Article IV; provided, that the mere inclusion of an
item in a Disclosure Schedule as an exception to a representation or warranty
shall not be deemed an admission by a party that such item was required to be
disclosed therein.
5.02 [Reserved].
5.03 Representations and Warranties of Ahmanson. Subject to Section 5.01 and
except as Previously Disclosed in the applicable paragraph of its Disclosure
Schedule, or any other paragraph of its Disclosure Schedule so long as it is
clear from the context of the disclosure that the disclosure in such other
paragraph of its Disclosure Schedule is also applicable to the paragraph of
this Section 5.03 in question, Ahmanson hereby represents and warrants to
Washington Mutual as follows:
(a)Organization, Standing and Authority. Ahmanson is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware. Ahmanson is duly qualified to do business and is in good
standing in the states of the United States and any foreign jurisdictions
where its ownership or leasing of property or assets or the conduct of its
business requires it to be so qualified, except for such jurisdictions
where the failure to be so qualified, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on
Ahmanson and its Subsidiaries. Ahmanson is duly registered as a savings and
loan holding company under HOLA. Ahmanson FSB is a qualified thrift lender
pursuant to Section 10(m) of HOLA and qualifies as a savings and loan
holding company of the type described in Section 10(c)(3)(A) of HOLA. Its
deposits are insured by the FDIC to the fullest extent permitted by law.
Ahmanson FSB is a member in good standing of the FHLBSF.
(b)Ahmanson Stock. As of the date hereof, the authorized capital stock of
Ahmanson consists solely of 220,000,000 shares of Ahmanson Common Stock, of
which 109,529,780 shares plus any additional shares issued upon exercise or
conversion of outstanding Rights since February 28, 1998 were outstanding,
and 10,000,000 shares of Ahmanson preferred stock, of which 567,388 shares
less any shares with respect to which conversion rights were exercised
since February 28, 1998 were outstanding. Since February 28, 1998, the only
shares of Ahmanson Common Stock that have been issued have been upon
exercise or conversion of Ahmanson Rights outstanding on February 28, 1998
in accordance with their terms. Except as Previously Disclosed, as of the
date hereof, no shares of Ahmanson Common Stock and no shares of Ahmanson
Preferred Stock were held in treasury by Ahmanson or otherwise owned by
Ahmanson or its Subsidiaries. The outstanding shares of Ahmanson Stock have
been duly authorized and are validly issued and outstanding, fully paid and
nonassessable, and subject to no preemptive rights (and were not issued in
violation of any preemptive rights). As of the date hereof, except as
Previously Disclosed, there are no shares of Ahmanson Stock authorized and
reserved for issuance, Ahmanson does not have any Rights issued or
outstanding with respect to Ahmanson Stock, and Ahmanson does not have any
commitment to authorize, issue or sell any Ahmanson Stock or Rights. The
number of shares of Ahmanson Common Stock which are
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issuable and reserved for issuance upon exercise of Ahmanson Stock Options
as of the date hereof (and the exercise price thereof) are Previously
Disclosed in Ahmanson's Disclosure Schedule.
(c)Subsidiaries. (i)(A) Ahmanson has Previously Disclosed in its
Disclosure Schedule a list of all of its Subsidiaries together with the
jurisdiction of organization of each such Subsidiary, (B) except as
Previously Disclosed, it owns, directly or indirectly, all the issued and
outstanding equity securities of each of its Subsidiaries, (C) no equity
securities of any of its Subsidiaries are or may become required to be
issued (other than to it or its wholly-owned Subsidiaries) by reason of any
Right or otherwise, (D) there are no contracts, commitments, understandings
or arrangements by which any of such Subsidiaries is or may be bound to
sell or otherwise transfer any equity securities of any such Subsidiaries
(other than to it or its wholly-owned Subsidiaries), (E) there are no
contracts, commitments, understandings, or arrangements relating to its
rights to vote or to dispose of such securities and (F) all the equity
securities of each Subsidiary held by Ahmanson or its Subsidiaries are
fully paid and nonassessable and are owned by Ahmanson or its Subsidiaries
free and clear of any Liens. Each Subsidiary of Ahmanson is an investment
permitted pursuant to HOLA for a unitary savings and loan holding company
and, for those owned by Ahmanson FSB, for a federal savings association or
its subsidiaries.
(ii)Except as Previously Disclosed, Ahmanson does not own beneficially,
directly or indirectly, any equity securities or similar interests of any
Person (other than in a fiduciary capacity or in connection with the
foreclosure of security interests or as a result of similar enforcement
remedies in connection with loans made in the ordinary course of business),
or any interest in a partnership or joint venture of any kind, other than
in its Subsidiaries. Except as Previously Disclosed, and except for its
ownership of Ahmanson FSB, Ahmanson does not own any stock or equity
interest in any depository institution (as defined in 12 U.S.C.
(S) 1813(c)(1)).
(iii) Each of Ahmanson's Subsidiaries has been duly organized and is
validly existing in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good standing in
the jurisdictions where its ownership or leasing of property or the conduct
of its business requires it to be so qualified, except for such
jurisdictions where the failure to be so qualified, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse
Effect on Ahmanson and its Subsidiaries.
(d)Powers. Ahmanson and each of its Subsidiaries has the corporate or
trust power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and Ahmanson has the
corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
(e)Corporate Authority. Subject in the case of this Agreement to receipt
of the requisite approval of the agreement of merger set forth in this
Agreement by the holders of a majority of the outstanding shares of
Ahmanson Common Stock entitled to vote thereon (which is the only
stockholder vote required thereon), this Agreement and the transactions
contemplated hereby have been authorized by all necessary corporate action
of Ahmanson and the Ahmanson Board on or prior to the date hereof. This
Agreement is a valid and legally binding obligation of Ahmanson,
enforceable in accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability relating to
or affecting creditors' rights or by general equity principles). The
Ahmanson Board has directed that the agreement of merger (within the
meaning of Section 251 of the DGCL) contained in this Agreement and the
transactions hereby be submitted to Ahmanson's stockholders for approval at
a meeting of such stockholders. The Ahmanson Board has received the written
opinion of Credit Suisse First Boston Corporation to the effect that, as of
the date hereof, the Exchange Ratio is fair to the holders of Ahmanson
Common Stock from a financial point of view.
(f)Approvals; No Defaults. (i) No consents or approvals of, or filings or
registrations with, any Governmental Authority are required to be made or
obtained by Ahmanson or any of its Subsidiaries in connection with the
execution, delivery or performance by Ahmanson of this Agreement or to
consummate the Merger except for (A) filings and approvals of applications
with and by the OTS, the Department of
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Justice and the Federal Trade Commission, (B) filings with the SEC and
state securities authorities and the approval of this Agreement by the
stockholders of Ahmanson and the approval of the issuance of shares of
Washington Mutual Stock contemplated by this Agreement by the shareholders
of Washington Mutual, and (C) the filing of articles of merger with the
Washington Secretary pursuant to the WBCA and a certificate of merger with
the Delaware Secretary pursuant to the DGCL. As of the date hereof,
Ahmanson is not aware of any reason why the approvals set forth in Section
7.01(b) will not be promptly received without the imposition of any
restriction, term or condition that would entitle Washington Mutual not to
consummate the Merger.
(ii)Subject to receipt of the regulatory approvals referred to in the
preceding paragraph, and expiration of related waiting periods, and
required filings under federal and state securities laws, and except as
Previously Disclosed, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby do
not and will not (A) constitute a breach or violation of, or a default
under, or give rise to any Lien, any acceleration of remedies or any right
of termination under, any law, rule or regulation or any judgment, decree,
order, governmental permit or license, or agreement, indenture or
instrument of Ahmanson or of any of its Subsidiaries or to which Ahmanson
or any of its Subsidiaries or properties is subject or bound, (B)
constitute a breach or violation of, or a default under, the Ahmanson
Certificate or the Ahmanson By-Laws, or (C) require any consent or approval
under any such law, rule, regulation, judgment, decree, order, governmental
permit or license, agreement, indenture or instrument.
(iii) If Washington Mutual determines to merge Ahmanson FSB with and into
Washington Mutual Subsidiary Depository Institution following the Merger
(the "Bank Merger"), subject to receipt of the regulatory approvals
referred to in paragraph (i) of this Section 5.03(f), and expiration of
related waiting periods, and required filings under federal and state
securities laws, and except as Previously Disclosed, the consummation of
the Bank Merger will not (A) constitute a breach or violation of, or a
default under, or give rise to any Lien, any acceleration of remedies or
any right of termination under, any law, rule, or regulation or any
judgment, decree, order, governmental permit or license, or agreement,
indenture or instrument of Ahmanson or of any of its Subsidiaries or to
which Ahmanson or any of its Subsidiaries or properties is subject or
bound, (B) constitute a breach or violation of, or a default under, the
charter or bylaws of Ahmanson FSB or under the Commitment Agreement dated
as of February 13, 1998 between Ahmanson and the Coast Federal Litigation
Contingent Payment Rights Trust, or (C) require any consent or approval
under any such law, rule, regulation, judgment, decree, order, governmental
permit or license, agreement, indenture or instrument.
(g)Financial Reports and SEC Documents. (i) Ahmanson's Annual Reports on
Form 10-K for the fiscal years ended December 31, 1994, 1995 and 1996, and
all other reports, registration statements, definitive proxy statements or
information statements filed or to be filed by it subsequent to December
31, 1996 under the Securities Act or under Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, in the form filed or to be filed with the SEC,
as of the date filed, and the draft of Ahmanson's Annual Report on Form 10-
K for the fiscal year ended December 31, 1997 delivered to Washington
Mutual on the date hereof (the "Ahmanson Draft 10-K") as of the date hereof
(collectively, "Ahmanson SEC Documents"), (A) complied or will comply in
all material respects as to form with the applicable requirements under the
Securities Act or the Exchange Act, as the case may be, and (B) did not and
will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and each of the consolidated balance sheets contained
in or incorporated by reference into any such Ahmanson SEC Document
(including the related notes and schedules thereto) fairly presents, or
will fairly present, the consolidated financial position of Ahmanson and
its Subsidiaries as of its date, and each of the consolidated statements of
income and changes in stockholders' equity and cash flows or equivalent
statements in such Ahmanson SEC Documents (including any related notes and
schedules thereto) fairly presents, or will fairly present, the
consolidated results of operations, changes in stockholders' equity and
changes in cash flows, as the case may be, of Ahmanson and its Subsidiaries
for the periods to which they relate, in each case in
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accordance with GAAP consistently applied during the periods involved,
except in each case as may be noted therein, subject to normal year-end
audit adjustments and the lack of complete footnote disclosure in the case
of unaudited statements.
(ii)Except as Previously Disclosed or as set forth in the Ahmanson SEC
Documents filed prior to the date hereof or in the Ahmanson Draft 10-K,
since December 31, 1996, Ahmanson and its Subsidiaries have not incurred
any liability other than in the ordinary course of business consistent with
past practice (other than (A) liabilities with respect to expenses and
charges related to this Agreement, the transactions contemplated hereby and
other acquisitions, (B) liabilities incurred in acquisitions by operation
of law or as expressly contemplated by the agreements relating to such
acquisitions and (C) liabilities which in the aggregate are not material to
Ahmanson and its Subsidiaries).
(iii) Except as Previously Disclosed or as set forth in the Ahmanson SEC
Documents filed prior to the date hereof or in the Ahmanson Draft 10-K,
since December 31, 1996, (A) Ahmanson and its Subsidiaries have conducted
their respective businesses in the ordinary and usual course consistent
with past practice (excluding the incurrence of (A) liabilities with
respect to expenses and charges related to this Agreement, the transactions
contemplated hereby and other acquisitions and (B) liabilities incurred in
acquisitions by operation of law or as expressly contemplated by the
agreements relating to such acquisitions) and no event has occurred or
circumstance arisen that, individually or taken together with all other
facts, circumstances and events (described in any paragraph of Section 5.03
or otherwise), is reasonably likely to have a Material Adverse Effect with
respect to Ahmanson.
(h)Litigation. No litigation, claim or other proceeding before any court or
governmental agency is pending against Ahmanson or any of its Subsidiaries
and, to Ahmanson's knowledge, no such litigation, claim or other proceeding
has been threatened, other than for any litigation, claims or proceedings
that, individually or in the aggregate, could not reasonably be expected to
have a Material Adverse Effect on Ahmanson and its Subsidiaries.
(i)Regulatory Matters. (i) Except as Previously Disclosed, neither
Ahmanson nor any of its Subsidiaries or properties is a party to or is
subject to any order, decree, agreement, memorandum of understanding or
similar arrangement with, or a commitment letter or similar submission to,
or extraordinary supervisory letter from, any federal or state governmental
agency or authority charged with the supervision or regulation of financial
institutions or issuers of securities or engaged in the insurance of
deposits (including, without limitation, the OTS and the FDIC) or the
supervision or regulation of it or any of its Subsidiaries (collectively,
the "Regulatory Authorities").
(ii)Neither Ahmanson nor any of its Subsidiaries has been advised by any
Regulatory Authority that such Regulatory Authority is contemplating
issuing or requesting (or is considering the appropriateness of issuing or
requesting) any such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(iii) Neither Ahmanson nor any of its Subsidiaries has received any
written communication from a Regulatory Authority expressing concern about
the ability of Ahmanson or any of its Subsidiaries to be compliant with
requirements relating to "Year 2000" computer problems.
(j)Compliance with Laws. Ahmanson and each of its Subsidiaries:
(i)is in compliance with all applicable federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto or to the employees conducting their businesses,
including, without limitation, the Equal Credit Opportunity Act, the Fair
Housing Act, the Community Reinvestment Act, the Home Mortgage Disclosure
Act and all other applicable fair lending laws and other laws relating to
discriminatory lending or other business practices, except for any such
non-compliances that, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Ahmanson and
its Subsidiaries;
(ii)has all permits, licenses, authorizations, orders and approvals of,
and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them
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to own or lease their properties and to conduct their businesses
substantially as presently conducted, except in each case as could not
reasonably be expected to have a Material Adverse Effect on Ahmanson and
its Subsidiaries; all such permits, licenses, certificates of authority,
orders and approvals are in full force and effect, and, to Ahmanson's
knowledge, no suspension or cancellation of any of them is threatened,
except in each case as, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Ahmanson and
its Subsidiaries; and
(iii) except as Previously Disclosed, has not received any outstanding
notification or communication from any federal or state (not including
local) Governmental Authority (A) asserting that Ahmanson or any of its
Subsidiaries is not in compliance with, or may not be in compliance with,
any of the statutes, regulations, or ordinances referred to in clause (i)
which such federal or state (not including local) Governmental Authority
enforces or (B) threatening to revoke any license, franchise, permit, or
governmental authorization (nor, to Ahmanson's knowledge, do any grounds
for any of the foregoing exist).
(k)Material Contracts; Defaults. Except for those agreements and other
documents filed as exhibits to the Ahmanson SEC Documents, neither Ahmanson
nor any of its Subsidiaries is a party to, bound by or subject to any
agreement, contract, arrangement, commitment or understanding (whether written
or oral) (i) that is a "material contract" within the meaning of Item
601(b)(10) of the SEC's Regulation S-K or (ii) that materially restricts the
conduct of business by it or any of its Subsidiaries. Except as Previously
Disclosed, neither Ahmanson nor any of its Subsidiaries is a party to or is
bound by any contract, arrangement, commitment or understanding (whether
written or oral) which limits the freedom of Ahmanson or any of its
Subsidiaries to compete in any line of business, in any geographic area or
with any Person. Neither Ahmanson nor any of its Subsidiaries is in default in
any material respect under any material contract, agreement, commitment,
arrangement, lease, insurance policy or other instrument and all contracts
which involved payments by Ahmanson or any of its Subsidiaries in 1997 of more
than $1,000,000 or which could reasonably be expected to involve payments
during 1998 of more than $1,000,000 to which it is a party, by which its
respective assets, business, or operations may be bound or affected, or under
which it or its respective assets, business, or operations receives benefits,
or under any other contract if such default could reasonably be expected to
have a Material Adverse Effect on Ahmanson, and in either case there has not
occurred any event that, with the lapse of time or the giving of notice or
both, would constitute such a default.
(l)No Brokers. No action has been taken by Ahmanson that would give rise to
any valid claim against any party hereto for a brokerage commission, finder's
fee or other like payment with respect to the transactions contemplated by
this Agreement, excluding a fee to be paid to Credit Suisse First Boston
Corporation.
(m)Employee Benefit Plans. (i) Section 5.03(m)(i) of Ahmanson's Disclosure
Schedule contains a complete and accurate list of all existing bonus,
incentive, deferred compensation, pension, retirement, profit-sharing, thrift,
savings, employee stock ownership, stock bonus, stock purchase, restricted
stock, stock option, severance, welfare and fringe benefit plans, employment
or severance agreements and all similar practices, policies and arrangements
in which any employee or former employee (the "Employees"), consultant or
former consultant (the "Consultants") or director or former director (the
"Directors") of Ahmanson or any of its Subsidiaries participates or to which
any such Employees, Consultants or Directors are a party (the "Ahmanson
Compensation and Benefit Plans"). Except as Previously Disclosed, neither
Ahmanson nor any of its Subsidiaries has any commitment to create any
additional Ahmanson Compensation and Benefit Plan or to modify or change any
existing Ahmanson Compensation and Benefit Plan.
(ii)Each Ahmanson Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its terms and with
applicable law, including, but not limited to, ERISA, the Code, the
Securities Act, the Exchange Act, the Age Discrimination in Employment Act,
or any regulations or rules promulgated thereunder, and all filings,
disclosures and notices required by ERISA, the Code, the Securities Act,
the Exchange Act, the Age Discrimination in Employment Act and any other
applicable law have been timely made. Each Ahmanson Compensation and
Benefit Plan which is an "employee pension benefit plan" within the meaning
of Section 3(2) of ERISA (an "Ahmanson Pension
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Plan") and which is intended to be qualified under Section 401(a) of the
Code has received a favorable determination letter (including a
determination that the related trust under such Ahmanson Compensation and
Benefit Plan is exempt from tax under Section 501(a) of the Code) from the
Internal Revenue Service ("IRS") for "TRA" (as defined in Rev. Proc. 93-
39), or will file for such determination letter prior to the expiration of
the remedial amendment period for such Ahmanson Compensation and Benefit
Plan, and Ahmanson is not aware of any circumstances likely to result in
revocation of any such favorable determination letter. There is no material
pending or, to the knowledge of Ahmanson, threatened legal action, suit or
claim relating to the Ahmanson Compensation and Benefit Plans. Neither
Ahmanson nor any of its Subsidiaries has engaged in a transaction, or
omitted to take any action, with respect to any Ahmanson Compensation and
Benefit Plan that would reasonably be expected to subject Ahmanson or any
of its Subsidiaries to any material tax or penalty imposed by either
Section 4975 of the Code or Section 502 of ERISA, assuming for purposes of
Section 4975 of the Code that the taxable period of any such transaction
expired as of the date hereof.
(iii)No material liability (other than for payment of premiums to the
PBGC which have been made or will be made on a timely basis) under Title IV
of ERISA has been or is expected to be incurred by Ahmanson or any of its
Subsidiaries with respect to any ongoing, frozen or terminated "single-
employer plan", within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or any single-employer
plan of any entity (an "Ahmanson ERISA Affiliate") which is considered one
employer with Ahmanson under Section 4001(a)(14) of ERISA or Section 414(b)
or (c) of the Code (an "Ahmanson ERISA Affiliate Plan"). None of Ahmanson,
any of its Subsidiaries or any Ahmanson ERISA Affiliate has contributed, or
has been obligated to contribute, to a multiemployer plan under Subtitle E
of Title IV of ERISA during the preceding five calendar years. No notice of
a "reportable event", within the meaning of Section 4043 of ERISA for which
the 30-day reporting requirement has not been waived, has been required to
be filed for any Ahmanson Compensation and Benefit Plan or by any Ahmanson
ERISA Affiliate Plan within the 12-month period ending on the date hereof,
and no such notice will be required to be filed as a result of the
transactions contemplated by this Agreement. The PBGC has not instituted
proceedings to terminate any Ahmanson Pension Plan or Ahmanson ERISA
Affiliate Plan and, to Ahmanson's knowledge, no condition exists that
presents a material risk that such proceedings will be instituted. To the
knowledge of Ahmanson, there is no pending investigation or enforcement
action by the PBGC, the Department of Labor or IRS or any other
governmental agency with respect to any Ahmanson Compensation and Benefit
Plan, except for any such investigations or actions as are not,
individually or in the aggregate, material to Ahmanson and its
Subsidiaries. Except as Previously Disclosed, under each Ahmanson Pension
Plan and Ahmanson ERISA Affiliate Plan, as of the date of the most recent
actuarial valuation performed prior to the date of this Agreement, the
actuarially determined present value of all "benefit liabilities", within
the meaning of Section 4001(a)(16) of ERISA (as determined on the basis of
the actuarial assumptions contained in such actuarial valuation of such
Ahmanson Pension Plan or Ahmanson ERISA Affiliate Plan), did not exceed the
then current value of the assets of such Ahmanson Pension Plan or Ahmanson
ERISA Affiliate Plan and since such date there has been neither an adverse
change in the financial condition of such Ahmanson Pension Plan or Ahmanson
ERISA Affiliate Plan nor any amendment or other change to such Ahmanson
Pension Plan or Ahmanson ERISA Affiliate Plan that would increase the
amount of benefits thereunder which in either case reasonably could be
expected to change such result.
(iv)All contributions required to be made under the terms of any Ahmanson
Compensation and Benefit Plan or Ahmanson ERISA Affiliate Plan have been
timely made or have been reflected on Ahmanson's financial statements to
the extent required by GAAP. Neither any Ahmanson Pension Plan nor any
Ahmanson ERISA Affiliate Plan has an material "accumulated funding
deficiency" (whether or not waived) within the meaning of Section 412 of
the Code or Section 302 of ERISA and all required payments to the PBGC with
respect to each Ahmanson Pension Plan or Ahmanson ERISA Affiliate Plan have
been made on or before their due dates. None of Ahmanson, any of its
Subsidiaries or any Ahmanson ERISA Affiliate (x) has provided, or would
reasonably be expected to be required to provide, security to any Ahmanson
Pension Plan or to any Ahmanson ERISA Affiliate Plan pursuant to Section
401(a)(29) of the
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Code, and (y) has taken any action, or omitted to take any action, that has
resulted, or would reasonably be expected to result, in the imposition of a
material lien under Section 412(n) of the Code or pursuant to ERISA.
(v) Except as Previously Disclosed, neither Ahmanson nor any of its
Subsidiaries has any obligations to provide retiree health and life
insurance or other retiree death benefits under any Ahmanson Compensation
and Benefit Plan, other than benefits mandated by Section 4980B of the
Code, and each such Ahmanson Compensation and Benefit Plan may be amended
or terminated without incurring liability thereunder. There has been no
written (or, to the knowledge of Ahmanson, oral) communication to Employees
by Ahmanson or any of its Subsidiaries that would reasonably be expected to
promise or guarantee such Employees retiree health or life insurance or
other retiree death benefits on a permanent basis.
(vi) Ahmanson and its Subsidiaries do not maintain any Ahmanson
Compensation and Benefit Plans covering foreign Employees.
(vii) With respect to each Ahmanson Compensation and Benefit Plan, if
applicable, Ahmanson has provided or made available to Washington Mutual,
true and complete copies of its existing (A) Ahmanson Compensation and
Benefit Plan documents and amendments thereto and (B) trust instruments and
insurance contracts.
(viii) Except as Previously Disclosed, neither Ahmanson nor any of its
Subsidiaries maintains any compensation plans, programs or arrangements the
payments under which would not reasonably be expected to be deductible as a
result of the limitations under Section 162(m) of the Code and the
regulations issued thereunder.
(ix) Except as Previously Disclosed, neither Ahmanson nor any of its
Subsidiaries has any Ahmanson Compensation and Benefit Plan which provides
for or could result in the payment to any Ahmanson employee of any money or
other property or rights or accelerate the vesting or payment of such
amounts or rights to any employee as a result of the transactions
contemplated by this Agreement, whether or not such payment or acceleration
would constitute a parachute payment within the meaning of Code section
280G. Except as Previously Disclosed, since December 31, 1997, neither
Ahmanson nor any of its Subsidiaries has taken any action that would result
in the payment of any amounts, or the accelerated vesting of any rights or
benefits, under the Ahmanson Compensation and Benefit Plans set forth in
the Ahmanson Disclosure Schedule.
(n)Labor Matters. Neither Ahmanson nor any of its Subsidiaries is a party to
or is bound by any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization, nor is
Ahmanson or any of its Subsidiaries the subject of a proceeding asserting that
it or any such Subsidiary has committed an unfair labor practice (within the
meaning of the National Labor Relations Act) or seeking to compel Ahmanson or
any such Subsidiary to bargain with any labor organization as to wages or
conditions of employment, nor is there any strike or other material labor
dispute or disputes involving it or any of its Subsidiaries pending or, to
Ahmanson's knowledge, threatened, nor, except as Previously Disclosed, is
Ahmanson aware of any activity involving its or any of its Subsidiaries'
employees seeking to certify a collective bargaining unit or engaging in other
organizational activity.
(o)Rights Agreement; Takeover Laws. Ahmanson has taken all action necessary,
including amending the Rights Agreement, to ensure that neither the entering
into of this Agreement, the consummation of the Merger, the entering into of
the Stock Option Agreement nor the exercise of the Option (as defined therein)
will cause Rights to be granted to any Person under the Ahmanson Rights
Agreement, enable or require Ahmanson's Rights issued under the Ahmanson
Rights Agreement to be exercised, distributed or triggered or cause Washington
Mutual to become an "Acquiring Person" (as defined in the Ahmanson Rights
Agreement). Ahmanson has taken all action required to be taken by it in order
to exempt this Agreement, and the transactions contemplated hereby from, and
this Agreement and the transactions contemplated hereby are exempt from, the
requirements of any "moratorium", "control share", "fair price", "affiliate
transaction", "business combination" or other
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antitakeover laws and regulations of any state (collectively, "Takeover
Laws"), including, without limitation, the State of Delaware, and including,
without limitation, Section 203 of the DGCL.
(p)Environmental Matters. To the best knowledge of Ahmanson, neither the
conduct, participation in management nor operation by Ahmanson or its
Subsidiaries nor any condition of any property presently or previously owned,
leased, managed (including participation in management) or operated by any of
them (including, without limitation, in a fiduciary or agency capacity), or on
which any of them holds a Lien, violates or violated any Environmental Law and
no condition has existed or event has occurred with respect to any of them or
any such property that, in either case, with notice or the passage of time, or
both, is reasonably likely to result in any material liability under any
Environmental Law, which is not reflected in the consolidated financial
statements of Ahmanson. Neither Ahmanson nor any of its Subsidiaries has
received any notice from any Person that Ahmanson or its Subsidiaries or the
operation or condition of any property ever owned, leased, managed (including
participation in management), operated, or held as collateral or in a
fiduciary capacity by any of them are or were in violation of or otherwise are
alleged to have any material liability under any Environmental Law, which is
reasonably likely to result in any material liability under any Environmental
Law or which is not reflected in the consolidated financial statements of
Ahmanson, including, but not limited to, responsibility (or potential
responsibility) for the cleanup or other remediation of any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on,
beneath, or originating from any such property.
(q)Tax Matters. Except as Previously Disclosed, (i)(A) all federal, state,
local and foreign Tax Returns (including information returns) required to be
filed by or on behalf of Ahmanson or its Subsidiaries have been prepared in
good faith and duly and timely filed, and all such filed Tax Returns are
complete and accurate in all material respects; (B) Ahmanson and each of its
Subsidiaries have paid in full all Taxes due (including interest and
penalties) or have provided adequate reserves for any such Taxes in the
financial statements of Ahmanson in accordance with GAAP, whether or not shown
as being due on any of the Tax Returns referred to in clause (i)(A), except
for such Taxes as could not reasonably be expected to be material to Ahmanson
and its Subsidiaries; (C) neither Ahmanson nor any of its Subsidiaries has
received any memorandum or opinion from legal counsel that was sought in order
to satisfy the reasonable cause exception (set forth in Section 6664(c) of the
Code) applicable to the penalties for certain underpayments of Taxes set forth
in Sections 6662 through 6664 of the Code with respect to any year for which
the statute of limitations has not run; (D) there are no pending or threatened
audits, examinations, assessments or proposed assessments of a deficiency, or
refund litigations with respect to any Taxes of Ahmanson or its Subsidiaries,
except as could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect on Ahmanson and its Subsidiaries; (E) all
Taxes, interest, additions and penalties due with respect to completed and
settled examinations or concluded litigation relating to Taxes of Ahmanson or
its Subsidiaries have been paid in full or adequate provision has been made
for any such Taxes (in accordance with GAAP) on the financial statements of
Ahmanson; (F) neither Ahmanson nor its Subsidiaries has executed an extension
or waiver of any statute of limitations on the assessment or collection of any
Tax due that is currently in effect; (G) no power of attorney has been granted
by or with respect to Ahmanson or any of its Subsidiaries with respect to any
matter relating to Taxes; (H) neither Ahmanson nor any of its Subsidiaries has
made or will make a material election as to Taxes during the period from
January 1, 1997 through the Effective Time, other than elections made on tax
returns filed for the year ended on December 31, 1996;
(ii)(A) no liens or other security interests have been imposed on any
assets of Ahmanson or its Subsidiaries in connection with any failure (or
alleged failure) to pay any Tax, except for such liens and security
interests that are not, individually or in the aggregate, material to
Ahmanson and its Subsidiaries; (B) Ahmanson and its Subsidiaries have
timely withheld, and paid over to the relevant governmental authority or
other appropriate payee, all Taxes required to have been withheld and paid
in connection with amounts paid or owing to any employee, independent
contractor, creditor, stockholder, or other person, except for such Taxes
as could not reasonably be expected to be material to Ahmanson and its
Subsidiaries; (C) neither Ahmanson nor any of its Subsidiaries is a party
to any tax allocation or sharing agreement under which it has obligations
to a party other than Ahmanson or its Subsidiaries, is or has been a member
of an affiliated
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group filing consolidated or combined tax returns (other than a group the
common parent of which is or was Ahmanson) or otherwise has any liability
for the Taxes of any person (other than Ahmanson or its Subsidiaries); (D)
Ahmanson is not and has not been a United States real property holding
corporation (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(ii) of the Code;
(iii) as of the date hereof, Ahmanson has no reason to believe that any
conditions exist that could reasonably be expected to prevent or impede the
Merger from qualifying as a reorganization within the meaning of Section
368 of the Code.
(r)Books and Records. The books and records of Ahmanson and its
Subsidiaries have been fully, properly and accurately maintained in all
material respects, and there are no material inaccuracies or discrepancies
of any kind contained or reflected therein, and they fairly present the
financial position of Ahmanson and its Subsidiaries.
(s)Insurance. Ahmanson and its Subsidiaries are insured with reputable
insurers against such risks and in such amounts as the management of
Ahmanson reasonably has determined to be prudent in accordance with
industry practices. All their insurance policies are in full force and
effect; Ahmanson and its Subsidiaries are not in material default
thereunder; and all claims thereunder have been filed in due and timely
fashion.
(t)Disclosure. The representations and warranties contained in this
Section 5.03 as modified by Ahmanson's Disclosure Schedule do not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make statements and information contained in Section
5.03 not misleading.
(u)Year 2000 Plan and Compliance. Ahmanson has formulated a plan for
addressing Year 2000 software issues that has been initially reviewed by
the OTS (the "Year 2000 Plan"). Except as Previously Disclosed, Ahmanson
has been and is in material compliance with the Year 2000 Plan as in effect
on the date hereof.
5.04 Representations and Warranties of Washington Mutual. Subject to Section
5.01, except as Previously Disclosed in the applicable paragraph of its
Disclosure Schedule, or any other paragraph of its Disclosure Schedule so long
as it is clear from the context of the disclosure that the disclosure in such
other paragraph of its Disclosure Schedule is also applicable to the paragraph
of this Section 5.04 in question, Washington Mutual hereby represents and
warrants to Ahmanson as follows:
(a) Organization, Standing and Authority. Washington Mutual is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Washington. Washington Mutual is duly qualified to do
business and is in good standing in the states of the United States and
foreign jurisdictions where its ownership or leasing of property or assets
or the conduct of its business requires it to be so qualified, except for
such jurisdictions where the failure to be so qualified, individually or in
the aggregate, could not reasonably be expected to have a Material Adverse
Effect on Washington Mutual and its Subsidiaries. Washington Mutual is duly
registered as a savings and loan holding company under HOLA. Washington
Mutual Subsidiary Depository Institution is a qualified thrift lender
pursuant to Section 10(m) of HOLA and its deposits are insured by the FDIC
to the fullest extent permitted by law. Washington Mutual Subsidiary
Depository Institution is a member in good standing of the FHLBSF.
(b) Washington Mutual Stock. (i) As of the date hereof, the authorized
capital stock of Washington Mutual consists solely of 800,000,000 shares of
Washington Mutual Common Stock, of which 257,958,669 shares plus any
additional shares issued upon exercise or conversion of outstanding Rights
since March 13, 1998 were outstanding, and 10,000,000 shares of preferred
stock of which 1,970,000 were outstanding. Since March 13, 1998, the only
shares of Washington Mutual Common Stock that have been issued have been
upon exercise or conversion of Rights outstanding on March 13, 1998 in
accordance with their terms. The outstanding shares of Washington Mutual
Stock have been duly authorized and are validly issued and
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outstanding, fully paid and nonassessable, and subject to no preemptive
rights (and were not issued in violation of any preemptive rights). As of
the date hereof, except as set forth in its Disclosure Schedule, Washington
Mutual does not have any Rights issued or outstanding with respect to
Washington Mutual Stock and Washington Mutual does not have any commitment
to authorize, issue or sell any Washington Mutual Stock or Rights, except
pursuant to this Agreement.
(ii) The shares of Washington Mutual Stock to be issued in exchange for
shares of Ahmanson Stock in the Merger, when issued in accordance with the
terms of this Agreement, will be duly authorized, validly issued, fully
paid and nonassessable and not subject to pre-emptive rights.
(c) Subsidiaries. Each of Washington Mutual's Subsidiaries has been duly
organized and is validly existing in good standing under the laws of the
jurisdiction of its organization, and is duly qualified to do business and in
good standing in the jurisdictions where its ownership or leasing of property
or the conduct of its business requires it to be so qualified, except for such
jurisdictions where the failure to be so qualified, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect
on Washington Mutual and its Subsidiaries, and it owns, directly or
indirectly, all the issued and outstanding equity securities of each of its
Subsidiaries.
(d) Corporate Power. Washington Mutual and each of its Subsidiaries has the
corporate power and authority to carry on its business as it is now being
conducted and to own all its properties and assets; and Washington Mutual has
the corporate power and authority to execute, deliver and perform its
obligations under this Agreement and to consummate the transactions
contemplated hereby.
(e)Corporate Authority. Subject in the case of this Agreement to receipt of
the requisite approval by the shareholders of Washington Mutual of the
issuance of shares of Washington Mutual Stock as contemplated by this
Agreement, this Agreement and the transactions contemplated hereby have been
authorized by all necessary corporate action of Washington Mutual and the
Washington Mutual Board on or prior to the date hereof. This Agreement is a
valid and legally binding agreement of Washington Mutual enforceable in
accordance with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to or affecting
creditors' rights or by general equity principles). The Washington Mutual
Board has received the written opinion of Lehman Brothers Inc. to the effect
that, as of the date hereof, the Exchange Ratio is fair to Washington Mutual
from a financial point of view.
(f) Approvals; No Defaults. (i) No consents or approvals of, or filings or
registrations with, any Governmental Authority are required to be made or
obtained by Washington Mutual or any of its Subsidiaries in connection with
the execution, delivery or performance by Washington Mutual of this Agreement
or to consummate the Merger except for (A) the filings and approvals of
applications with and by the OTS, the Department of Justice and the Federal
Trade Commission; (B) approval of the quotation on Nasdaq of Washington Mutual
Stock to be issued in the Merger; (C) the filing and declaration of
effectiveness of the Registration Statement; (D) the filing of articles of
merger with the Washington Secretary pursuant to the WBCA and of a certificate
of merger with the Delaware Secretary pursuant to the DGCL and the filing of
the Washington Mutual Articles of Amendment with the Washington Secretary; (E)
such filings as are required to be made or approvals as are required to be
obtained under the securities or "Blue Sky" laws of various states in
connection with the issuance of Washington Mutual Stock in the Merger and (F)
those Previously Disclosed. As of the date hereof, Washington Mutual is not
aware of any reason why the approvals set forth in Section 7.01(b) will not be
promptly received without the imposition of any restriction, term or condition
that would entitle Washington Mutual not to consummate the Merger.
(ii)Subject to receipt of the regulatory approvals referred to in the
preceding paragraph and expiration of the related waiting periods, and
required filings under federal and state securities laws, and except as
Previously Disclosed, the execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby do
not and will not (A) constitute a breach or violation of, or a default
under, or give rise to any Lien, any acceleration of remedies or any right
of termination under, any law,
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rule or regulation or any judgment, decree, order, governmental permit or
license, or agreement, indenture or instrument of Washington Mutual or of
any of its Subsidiaries or to which Washington Mutual or any of its
Subsidiaries or properties is subject or bound, (B) constitute a breach or
violation of, or a default under, the certificate of incorporation or by-
laws (or similar governing documents) of Washington Mutual or any of its
Subsidiaries, or (C) require any consent or approval under any such law,
rule, regulation, judgment, decree, order, governmental permit or license,
agreement, indenture or instrument.
(g) Financial Reports and SEC Documents; Material Adverse Effect. (i)
Washington Mutual's Annual Reports on Form 10-K for the fiscal years ended
December 31, 1994, 1995 and 1996, and all other reports, registration
statements, definitive proxy statements or information statements filed or to
be filed by it or any of its Subsidiaries subsequent to December 31, 1996
under the Securities Act or under Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act in the form filed or to be filed with the SEC, as of the date
hereof, and the draft of Washington Mutual's Annual Report on Form 10-K for
the fiscal year ended December 31, 1997 delivered to Ahmanson on the date
hereof (the "Washington Mutual Draft 10-K") as of the date hereof
(collectively, "Washington Mutual SEC Documents"), (A) complied or will comply
in all material respects as to form with the applicable requirements under the
Securities Act or the Exchange Act, and (B) did not and will not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading; and each of
the balance sheets contained in or incorporated by reference into any such
Washington Mutual SEC Document (including the related notes and schedules
thereto) fairly presents, or will fairly present, the financial position of
Washington Mutual and its Subsidiaries as of its date, and each of the
statements of income and changes in shareholders' equity and cash flows or
equivalent statements in such Washington Mutual SEC Documents (including any
related notes and schedules thereto) fairly presents, or will fairly present,
the results of operations, changes in shareholders' equity and changes in cash
flows, as the case may be, of Washington Mutual and its Subsidiaries for the
periods to which they relate, in each case in accordance with GAAP
consistently applied during the periods involved, except in each case as may
be noted therein, subject to normal year-end audit adjustments and the lack of
complete footnote disclosure in the case of unaudited statements.
(ii)Except as Previously Disclosed or as set forth in the Washington
Mutual SEC Documents filed prior to the date hereof or in the Washington
Mutual Draft 10-K, since December 31, 1996, Washington Mutual and its
Subsidiaries have not incurred any liability other than in the ordinary
course of business consistent with past practice (other than (A)
liabilities with respect to expenses and charges related to this Agreement,
the transactions contemplated hereby and other acquisitions, (B)
liabilities incurred in acquisitions by operation of law or as expressly
contemplated by the agreements relating to such acquisitions and
(C) liabilities which in the aggregate are not material to Washington
Mutual and its Subsidiaries).
(iii) Except as Previously Disclosed or as set forth in the Washington
Mutual SEC Documents filed prior to the date hereof or in the Washington
Mutual Draft 10-K, since December 31, 1996, (A) Washington Mutual and its
Subsidiaries have conducted their respective businesses in the ordinary and
usual course consistent with past practice (excluding the incurrence of (A)
liabilities with respect to expenses and charges related to this Agreement,
the transactions contemplated hereby and other acquisitions and (B)
liabilities incurred in acquisitions by operation of law or as expressly
contemplated by the agreements relating to such acquisitions) and (B) no
event has occurred or circumstance arisen that, individually or taken
together with all other facts, circumstances and events (described in any
paragraph of Section 5.04 or otherwise), is reasonably likely to have a
Material Adverse Effect with respect to it.
(h) Litigation; Regulatory Matters. (i) Other than as set forth in the
Washington Mutual SEC Documents filed on or before the date hereof, no
litigation, claim or other proceeding before any court or Governmental
Authority is pending against Washington Mutual or any of its Subsidiaries and,
to the best of Washington Mutual's knowledge, no such litigation, claim or
other proceeding has been threatened, other than litigation, claims and
proceedings that, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on Washington Mutual and its
Subsidiaries.
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(ii) Except as Previously Disclosed, neither Washington Mutual nor any of
its Subsidiaries or properties is a party to or is subject to any order,
decree, agreement, memorandum of understanding or similar arrangement with,
or a commitment letter or similar submission to, or extraordinary
supervisory letter from a Regulatory Authority, nor has Washington Mutual
or any of its Subsidiaries been advised by a Regulatory Authority that such
agency is contemplating issuing or requesting (or is considering the
appropriateness of issuing or requesting) any such order, decree,
agreement, memorandum of understanding, commitment letter, supervisory
letter or similar submission.
(iii) Except as Previously Disclosed, neither Washington Mutual nor any
of its Subsidiaries has received any written communication from a
Regulatory Authority expressing concern about the ability of Washington
Mutual or any of its Subsidiaries to be compliant with requirements
relating to "Year 2000" computer problems.
(i) Compliance with Laws. Washington Mutual and each of its Subsidiaries:
(i) is in compliance with all applicable federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders
or decrees applicable thereto or to the employees conducting such
businesses, including, without limitation, the Equal Credit Opportunity
Act, the Fair Housing Act, the Community Reinvestment Act, the Home
Mortgage Disclosure Act and all other applicable fair lending laws and
other laws relating to discriminatory lending or other business practices,
except for such non-compliances that, individually or in the aggregate,
could not reasonably be expected to have a Material Adverse Effect on
Washington Mutual and its Subsidiaries;
(ii) has all permits, licenses, authorizations, orders and approvals of,
and has made all filings, applications and registrations with, all
Governmental Authorities that are required in order to permit them to
conduct their businesses substantially as presently conducted, except in
each case as, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect on Washington Mutual and its
Subsidiaries; all such permits, licenses, certificates of authority, orders
and approvals are in full force and effect and, to the best of its
knowledge, no suspension or cancellation of any of them is threatened,
except in each case as, individually or in the aggregate, could not
reasonably be expected to have a Material Adverse Effect on Washington
Mutual and its Subsidiaries; and
(iii) has not received any outstanding notification or communication from
any federal or state (but not local) Governmental Authority (A) asserting
that Washington Mutual or any of its Subsidiaries is not in compliance
with, or may not be in compliance with, any of the statutes, regulations,
or ordinances referred to in clause (i) which such federal or state (but
not local) Governmental Authority enforces or (B) threatening to revoke any
license, franchise, permit, or governmental authorization (nor, to
Washington Mutual's knowledge, do any grounds for any of the foregoing
exist).
(j) No Brokers. No action has been taken by Washington Mutual that would
give rise to any valid claim against any party hereto for a brokerage
commission, finder's fee or other like payment with respect to the
transactions contemplated by this Agreement, excluding a fee to be paid to
Lehman Brothers Inc.
(k) Employee Benefit Plans.
(i) Each existing bonus, incentive, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock ownership,
stock bonus, stock purchase, restricted stock, stock option, severance,
welfare and fringe benefit plans, employment or severance agreements and
all other similar practices, policies and arrangements in which any
employee or former employee, consultant or former consultant or director or
former director of Washington Mutual or any of its Subsidiaries
participates or to which such current or former employees, consultants or
directors are a party (the "Washington Mutual Compensation and Benefit
Plans") has been operated and administered in all material respects in
accordance with its terms and with applicable law, including, but not
limited to, ERISA, the Code, the Securities Act, the Exchange Act, the Age
Discrimination in Employment Act, or any regulations or rules promulgated
thereunder, and all filings, disclosures and notices required by ERISA, the
Code, the Securities Act, the Exchange Act, the Age Discrimination in
Employment Act and any other applicable law have been timely made.
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(ii) There is no material pending or, to the knowledge of Washington
Mutual, threatened legal action, suit or claim relating to the Washington
Mutual Compensation and Benefit Plans. Neither Washington Mutual nor any of
its Subsidiaries has engaged in a transaction, or omitted to take any
action, with respect to any Washington Mutual Compensation and Benefit Plan
that would reasonably be expected to subject Washington Mutual or any of
its Subsidiaries to any material tax or penalty imposed by either Section
4975 of the Code or Section 502 of ERISA, assuming for purposes of Section
4975 of the Code that the taxable period of any such transaction expired as
of the date hereof.
(iii) No material liability (other than for payment of premiums to the
PBGC which have been made or will be made on a timely basis) under Title IV
of ERISA has been or is expected to be incurred by Washington Mutual or any
of its Subsidiaries with respect to any ongoing, frozen or terminated
"single-employer plan", within the meaning of Section 4001(a)(15) of ERISA,
currently or formerly maintained by any of them, or any single-employer
plan of any entity (a "Washington Mutual ERISA Affiliate") which is
considered one employer with Washington Mutual under Section 4001(a)(14) of
ERISA or Section 414(b) or (c) of the Code (a "Washington Mutual ERISA
Affiliate Plan"). None of Washington Mutual, any of its Subsidiaries or any
Washington Mutual ERISA Affiliate has contributed, or has been obligated to
contribute, to a multi-employer plan under Subtitle E of Title IV of ERISA
during the preceding five calendar years. No notice of a "reportable
event", within the meaning of Section 4043 of ERISA for which the 30-day
reporting requirement has not been waived, has been required to be filed
for any Washington Mutual Compensation and Benefit Plan or by any
Washington Mutual ERISA Affiliate Plan within the 12-month period ending on
the date hereof, and no such notice will be required to be filed as a
result of the transactions contemplated by this Agreement. The PBGC has not
instituted proceedings to terminate any Washington Mutual Pension Plan or
Washington Mutual ERISA Affiliate Plan and, to Washington Mutual's
knowledge, no condition exists that presents a material risk that such
proceedings will be instituted. To the knowledge of Washington Mutual,
there is no pending investigation or enforcement action by the PBGC, the
Department of Labor or IRS or any other governmental agency with respect to
any Washington Mutual Compensation and Benefit Plan, except for any such
investigation or actions as are not material to Washington Mutual and its
Subsidiaries. Under each Washington Mutual Pension Plan and Washington
Mutual ERISA Affiliate Plan, as of the date of the most recent actuarial
valuation performed prior to the date of this Agreement, the actuarially
determined present value of all "benefit liabilities," within the meaning
of Section 4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such actuarial valuation of such
Washington Mutual Pension Plan or Washington Mutual ERISA Affiliate Plan),
did not exceed the then current value of the assets of such Washington
Mutual Pension Plan or Washington Mutual ERISA Affiliate Plan and since
such date there has been neither an adverse change in the financial
condition of such Washington Mutual Pension Plan or Washington Mutual ERISA
Affiliate Plan nor any amendment or other change to such Washington Mutual
Pension Plan or Washington Mutual ERISA Affiliate Plan that would increase
the amount of benefits thereunder which in either case reasonably could be
expected to change such result.
(l) Environmental Matters. To the best knowledge of Washington Mutual,
neither the conduct, participation in management nor operation of Washington
Mutual or its Subsidiaries nor any condition of any property presently or
previously owned, leased or operated by any of them (including, without
limitation, in a fiduciary or agency capacity), or on which any of them holds
a Lien, violates or violated any Environmental Law and no condition has
existed or event has occurred with respect to any of them or any such property
that, in either case, with notice or the passage of time, or both, is
reasonably likely to result in any material liability under any Environmental
Law or which is not reflected in the consolidated financial statements of
Washington Mutual. Neither Washington Mutual nor any of its Subsidiaries has
received any notice from any Person that Washington Mutual or its Subsidiaries
or the operation or condition of any property ever owned, leased, managed
(including participation in management), operated, or held as collateral or in
a fiduciary capacity by any of them are or were in violation of or otherwise
are alleged to have liability under any Environmental Law, which is reasonably
likely to result in any material liability under any Environmental Law or
which is not reflected in the consolidated financial statements of Washington
Mutual, including, but not limited to, responsibility (or potential
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responsibility) for the cleanup or other remediation of any pollutants,
contaminants, or hazardous or toxic wastes, substances or materials at, on,
beneath, or originating from any such property.
(m) Tax Matters. Except as Previously Disclosed, (i)(A) all federal, state,
local and foreign Tax Returns (including information returns) required to be
filed by or on behalf of Washington Mutual or its Subsidiaries have been
prepared in good faith and duly and timely filed, and all such filed Tax
Returns are complete and accurate in all material respects; (B) Washington
Mutual and each of its Subsidiaries have paid in full all Taxes due (including
interest and penalties) or have provided adequate reserves for any such Taxes
in the financial statements of Washington Mutual in accordance with GAAP,
whether or not shown as being due on any of the Tax Returns referred to in
clause (i)(A), except for such Taxes as, individually or in the aggregate,
could not reasonably be expected to be material to Washington Mutual and its
Subsidiaries. (ii) As of the date hereof, Washington Mutual has no reason to
believe that any conditions exist that could reasonably be expected to prevent
or impede the Merger from qualifying as a reorganization within the meaning of
Section 368 of the Code.
(n)Books and Records. The books and records of Washington Mutual and its
Subsidiaries have been fully, properly and accurately maintained in all
material respects, and there are no material inaccuracies or discrepancies of
any kind contained or reflected therein, and they fairly present the financial
position of Washington Mutual and its Subsidiaries.
(o) Disclosure. The representations and warranties contained in this Section
5.04 as modified by Washington Mutual's Disclosure Schedule do not contain any
untrue statement of a material fact or omit to state any material fact
necessary to make the statements and information contained in Section 5.04 not
misleading.
ARTICLE VI
COVENANTS
6.01 Reasonable Best Efforts. Subject to the terms and conditions of this
Agreement, each of Washington Mutual and Ahmanson agrees to use its respective
reasonable best efforts in good faith to take, or cause to be taken, all
actions, and to do, or cause to be done, all things necessary, proper or
desirable, or advisable under applicable laws, so as to permit consummation of
the Merger as promptly as practicable and otherwise to enable consummation of
the transactions contemplated hereby and shall cooperate fully with the other
party hereto to that end. Ahmanson understands that Washington Mutual has the
current intention of merging Ahmanson FSB with and into Washington Mutual
Subsidiary Depositary Institution, and Ahmanson agrees to take such steps
prior to the Effective Time as reasonably requested by Washington Mutual to
effect such merger as soon as practicable after the Effective Time.
6.02 Stockholder Approval. Each of Washington Mutual and Ahmanson agrees to
take in accordance with applicable law and its respective articles or
certificate of incorporation and by-laws all action necessary to convene a
meeting of its respective stockholders to consider and vote upon (i) in the
case of Washington Mutual, the approval of the issuance of shares of
Washington Mutual Stock as contemplated by this Agreement and any other matter
required to be approved by Washington Mutual's shareholders for consummation
of the Merger (including any adjournment or postponement, the "Washington
Mutual Meeting") and, (ii) in the case of Ahmanson, the approval and adoption
of this Agreement and any other matters required to be approved by Ahmanson's
stockholders for consummation of the Merger (including any adjournment or
postponement, the "Ahmanson Meeting"), in each case as promptly as practicable
after the Registration Statement is declared effective. The Washington Mutual
Board shall recommend such approval, and Washington Mutual shall take all
reasonable, lawful action to solicit such approval by its shareholders;
subject to Section 6.06, the Ahmanson Board shall recommend such approval, and
Ahmanson shall take all reasonable, lawful action to solicit such approval by
its stockholders.
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6.03 Registration Statement and Joint Proxy Statement. (a) Washington Mutual
agrees to prepare a registration statement on Form S-4 or other applicable
form (the "Registration Statement") to be filed by Washington Mutual with the
SEC in connection with the issuance of Washington Mutual Common Stock in the
Merger (including the proxy statement and prospectus and other proxy
solicitation materials of Washington Mutual and Ahmanson constituting a part
thereof (the "Joint Proxy Statement") and all related documents). Ahmanson
agrees to cooperate, and to cause its Subsidiaries to cooperate, with
Washington Mutual, its counsel and its accountants, in the preparation of the
Registration Statement and the Joint Proxy Statement; and provided that
Ahmanson and its Subsidiaries have cooperated as required above, Washington
Mutual agrees to file the Joint Proxy Statement in preliminary form with the
SEC as promptly as reasonably practicable, and to file the Registration
Statement with the SEC as soon as reasonably practicable after any SEC
comments with respect to the preliminary Joint Proxy Statement are resolved.
Each of Washington Mutual and Ahmanson agrees to use all reasonable efforts to
cause the Registration Statement to be declared effective under the Securities
Act as promptly as reasonably practicable after filing thereof. Washington
Mutual also agrees to use all reasonable efforts to obtain all necessary state
securities law or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement. Ahmanson agrees to furnish to
Washington Mutual all information concerning Ahmanson, its Subsidiaries,
officers, directors and stockholders as may be reasonably requested in
connection with the foregoing.
(b)Each of Washington Mutual and Ahmanson agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be supplied by it
for inclusion or incorporation by reference in (i) the Registration Statement
will, at the time the Registration Statement and each amendment or supplement
thereto, if any, becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading and (ii) the Joint Proxy Statement and any amendment or supplement
thereto will, at the date of mailing to stockholders and at the time of the
Washington Mutual Meeting or the Ahmanson Meeting, as the case may be, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which such statement was made, not
misleading. Each of Washington Mutual and Ahmanson further agrees that if it
shall become aware prior to the Effective Time of any information furnished by
it that would cause any of the statements in the Joint Proxy Statement or the
Registration Statement to be false or misleading with respect to any material
fact, or to omit to state any material fact necessary to make the statements
therein not false or misleading, to promptly inform the other party thereof
and to take the necessary steps to correct the Joint Proxy Statement or the
Registration Statement.
(c)Washington Mutual agrees to advise Ahmanson, promptly after Washington
Mutual receives notice thereof, of the time when the Registration Statement
has become effective or any supplement or amendment has been filed, of the
issuance of any stop order or the suspension of the qualification of
Washington Mutual Stock for offering or sale in any jurisdiction, of the
initiation or threat of any proceeding for any such purpose, or of any request
by the SEC for the amendment or supplement of the Registration Statement or
for additional information.
6.04 Press Releases. Washington Mutual and Ahmanson shall consult with each
other before issuing any press release with respect to the Merger or this
Agreement and shall not issue any such press release or make any such public
statement without the prior consent of the other party, which shall not be
unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party (but after prior consultation, to the extent
practicable in the circumstances) issue such press release or make such public
statement as may upon the advice of outside counsel be required by law or the
rules and regulations of the NYSE (in the case of Ahmanson) or Nasdaq (in the
case of Washington Mutual). Without limiting the reach of the preceding
sentence, Washington Mutual and Ahmanson shall cooperate to develop all public
announcement materials and make appropriate management available at
presentations related to the transactions contemplated by this Agreement as
reasonably requested by the other party. In addition, Ahmanson and its
Subsidiaries shall (a) consult with Washington Mutual regarding communications
with customers, stockholders, prospective investors and employees related to
the transactions contemplated hereby and (b) provide Washington Mutual with
stockholder lists of Ahmanson.
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6.05 Access; Information. (a) Each of Washington Mutual and Ahmanson agrees
that upon reasonable notice and subject to applicable laws relating to the
exchange of information, it shall afford the other party, and the other
party's officers, employees, counsel, accountants and other authorized
representatives, such access during normal business hours throughout the
period prior to the Effective Time to the books, records (including, without
limitation, tax returns and work papers of independent auditors), properties,
personnel and to such other information as any party may reasonably request
and, during such period, it shall furnish promptly to such other party (i) a
copy of each material report, schedule and other document filed by it pursuant
to the requirements of federal or state securities or banking laws, and (ii)
all other information concerning the business, properties and personnel of it
as the other may reasonably request.
(b)Each of Washington Mutual and Ahmanson shall hold all information
furnished by the other party or any of such party's Subsidiaries or
representatives pursuant to this Section 6.05 in confidence to the extent
required by, and in accordance with, the provisions of the letter, dated March
5, 1998, between Washington Mutual and Ahmanson (the "Confidentiality
Letter"). No investigation by either party of the business and affairs of the
other shall affect or be deemed to modify or waive any representation,
warranty, covenant or agreement in this Agreement, or the conditions to either
party's obligation to consummate the transactions contemplated by this
Agreement.
6.06 Acquisition Proposals. Ahmanson agrees that it shall not, and shall
cause its Subsidiaries and its and its Subsidiaries' officers, directors,
agents, advisors and affiliates not to, solicit or encourage inquiries or
proposals with respect to, or engage in any negotiations concerning, or
provide any confidential information to, or have any discussions with, any
Person relating to, any Acquisition Proposal or waive any provision of or
amend the terms of the Ahmanson Rights Agreement in respect of an Acquisition
Proposal; provided, however, that, at any time prior to the time its
stockholders shall have voted to approve this Agreement, Ahmanson may, and may
authorize and permit its officers, directors, employees, representatives or
agents to, provide third parties with nonpublic information, otherwise
facilitate any effort or attempt by any third party to make or implement an
Acquisition Proposal, recommend or endorse any Acquisition Proposal with or by
any third party, and participate in discussions and negotiations with any
third party relating to any Acquisition Proposal, if the Ahmanson Board
determines in good faith upon the written advice of outside counsel that such
action is legally necessary for it to act in a manner consistent with its
fiduciary duties under applicable law; and prior to providing any information
or data to any Person or entering into discussions or negotiations with any
Person, the Ahmanson Board notifies Washington Mutual immediately of such
inquiries, proposals or offers received by, any such information requested
from, or any such discussions or negotiations sought to be initiated or
continued with Ahmanson or any Subsidiary thereof. Ahmanson shall not furnish
any nonpublic information to any other Person pursuant to this Section 6.06
except pursuant to the terms of a confidentiality agreement containing terms
substantially identical to the terms contained in the Confidentiality Letter.
Ahmanson shall immediately cease and cause to be terminated any activities,
discussions or negotiations conducted prior to the date of this Agreement with
any Persons other than Washington Mutual with respect to any of the foregoing
and shall use its reasonable best efforts to enforce any confidentiality or
similar agreement relating to an Acquisition Proposal. Ahmanson shall promptly
(within 24 hours) advise Washington Mutual following the receipt by Ahmanson
of any Acquisition Proposal and the substance thereof (including the identity
of the person making such Acquisition Proposal), and advise Washington Mutual
of any developments with respect to such Acquisition Proposal promptly upon
the occurrence thereof.
6.07 Affiliate Agreements. (a) Not later than the 15th day prior to the
mailing of the Joint Proxy Statement, (i) Washington Mutual shall deliver to
Ahmanson a schedule of each Person that, to the best of its knowledge, is or
is reasonably likely to be, as of the date of the Washington Mutual Meeting or
if there is no Washington Mutual Meeting, the Ahmanson Meeting, deemed to be
an "affiliate" of Washington Mutual (each, a "Washington Mutual Affiliate"),
as that term is used in SEC Accounting Series Releases 130 and 135; and
(ii) Ahmanson shall deliver to Washington Mutual a schedule of each person
that, to the best of its knowledge, is or is reasonably likely to be, as of
the date of the Ahmanson Meeting, deemed to be an "affiliate" of Ahmanson
(each, an "Ahmanson Affiliate") as that term is used in Rule 145 under the
Securities Act or SEC Accounting Series Releases 130 and 135.
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(b)Each of Washington Mutual and Ahmanson shall use its respective
reasonable best efforts to cause each Person who may be deemed to be a
Washington Mutual Affiliate or a Ahmanson Affiliate to execute and deliver
to Washington Mutual and Ahmanson on or before the date of mailing of the
Joint Proxy Statement an agreement in substantially the form attached
hereto as Exhibit B or Exhibit C, respectively.
6.08 Takeover Laws. No party hereto shall take any action that would cause
the transactions contemplated by this Agreement to be subject to requirements
imposed by any Takeover Law and each of them shall take all necessary steps
within its control to exempt (or ensure the continued exemption of) the
transactions contemplated by this Agreement from, or if necessary challenge
the validity or applicability of, any applicable Takeover Law, as now or
hereafter in effect.
6.09 Nasdaq Listing. Washington Mutual agrees to use its reasonable best
efforts to list, prior to the Effective Time, on Nasdaq, subject to official
notice of issuance, the shares of Washington Mutual Common Stock to be issued
in the Merger and the Washington Mutual Depositary Shares.
6.10 Regulatory Applications. (a) Washington Mutual and Ahmanson and their
respective Subsidiaries shall cooperate and use their respective reasonable
best efforts to prepare as promptly as possible all documentation, to effect
all filings and to obtain all permits, consents, approvals and authorizations
of all third parties and Governmental Authorities necessary to consummate the
transactions contemplated by this Agreement and Washington Mutual shall make
all necessary regulatory filings as soon as practicable and shall use its best
efforts to make such filings no later than 30 days of the date hereof. Each of
Washington Mutual and Ahmanson shall have the right to review in advance, and
to the extent practicable each will consult with the other, in each case
subject to applicable laws relating to the exchange of information, with
respect to all material written information submitted to any third party or
any Governmental Authority in connection with the transactions contemplated by
this Agreement. In exercising the foregoing right, each of the parties hereto
agrees to act reasonably and as promptly as practicable. Each party hereto
agrees that it will consult with the other party hereto with respect to the
obtaining of all material permits, consents, approvals and authorizations of
all third parties and Governmental Authorities necessary or advisable to
consummate the transactions contemplated by this Agreement and each party will
keep the other party appraised of the status of material matters relating to
completion of the transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other party with all
information concerning itself, its Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or
advisable in connection with any filing, notice or application made by or
on behalf of such other party or any of its Subsidiaries with or to any
third party or Governmental Authority.
6.11 Indemnification. (a) Following the Effective Time, Washington Mutual
shall indemnify, defend and hold harmless the present directors and officers
of Ahmanson and its Subsidiaries (each, an "Indemnified Party") against all
costs or expenses (including reasonable attorneys' fees), judgments, fines,
losses, claims, damages or liabilities (collectively, "Costs") as incurred, in
connection with any claim, action, suit, proceeding or investigation, whether
civil, criminal, administrative or investigative, arising out of actions or
omissions occurring at or prior to the Effective Time (including, without
limitation, the transactions contemplated by this Agreement) to the fullest
extent that Ahmanson and its Subsidiaries are permitted to indemnify (and
advance expenses to) their respective directors and officers under the laws of
their respective jurisdictions of incorporation, their respective charters,
their respective by-laws and any agreements entered into between Ahmanson or
any of its Subsidiaries and such directors and officers.
(b) For a period of six years from the Effective Time, Washington Mutual
shall use its reasonable best efforts to provide director's and officer's
liability insurance that serves to reimburse the present and former
officers and directors of Ahmanson or any of its Subsidiaries (determined
as of the Effective Time) with respect to claims against such directors and
officers arising from facts or events occurring at or prior to the
Effective Time (including, without limitation, the transactions
contemplated by this Agreement) which insurance shall contain at least the
same coverage and amounts, and contain terms and conditions no less
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advantageous, as that coverage currently provided by Ahmanson; provided,
however, that in no event shall Washington Mutual be required to expend
more than 250% of the Previously Disclosed current amount expended by
Ahmanson (the "Insurance Amount") to maintain or procure such directors and
officers insurance coverage; provided, further, that if Washington Mutual
is unable to maintain or obtain the insurance called for by this Section
6.11(b), Washington Mutual shall use its reasonable best efforts to obtain
as much comparable insurance as is available for the Insurance Amount;
provided, further, that officers and directors of Ahmanson or any
Subsidiary may be required to make application and provide customary
representations and warranties to Washington Mutual's insurance carrier for
the purpose of obtaining such insurance.
(c) Any Indemnified Party wishing to claim indemnification under Section
6.11(a), upon learning of any claim, action, suit, proceeding or investigation
described above, shall promptly notify Washington Mutual thereof; provided
that the failure so to notify shall not affect the obligations of Washington
Mutual under Section 6.11(a) unless and to the extent that Washington Mutual
is actually and materially prejudiced as a result of such failure.
(d) If Washington Mutual or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be the
continuing or surviving entity of such consolidation or merger or shall
transfer all or substantially all of its assets to any other entity, then and
in each case, Washington Mutual shall cause proper provision to be made so
that the successors and assigns of Washington Mutual shall assume the
obligations set forth in this Section 6.11.
(e) The provisions of this Section 6.11 are intended to be for the benefit
of, and shall be enforceable by, each Indemnified Party and his or her heirs
and representatives.
6.12 Benefit Plan; Retention Bonuses. (a) Washington Mutual shall, from and
after the Effective Time, (i) comply with the Ahmanson Compensation and
Benefit Plans in accordance with their terms, (ii) provide former employees of
Ahmanson who remain as employees of Washington Mutual with employee benefit
plans no less favorable in the aggregate than those provided to similarly
situated employees of Washington Mutual, (iii) provide employees of Ahmanson
who remain as employees of Washington Mutual credit for years of service with
Ahmanson or any of its Subsidiaries prior to the Effective Time for the
purpose of eligibility and vesting, (iv) provide employees of Ahmanson who are
terminated after the Effective Time with health and dental benefits until the
earlier of (A) six months after the end of the applicable severance pay period
and (B) such time as the relevant employee obtains health and dental benefits
under another employer-sponsored plan and (v) cause any and all pre-existing
condition limitations (to the extent such limitations did not apply to a pre-
existing condition under comparable Ahmanson Compensation and Benefit Plans)
and eligibility waiting periods under group health plans of Washington Mutual
to be waived with respect to former employees of Ahmanson who remain as
employees of Washington Mutual (and their eligible dependents) and who become
participants in such group health plans under all Ahmanson Compensation and
Benefit Plans. Nothing in this Section 6.12 shall be interpreted as preventing
Washington Mutual or its Subsidiaries from amending, modifying or terminating
any Ahmanson Compensation and Benefit Plans, or other contracts, arrangements,
commitments or understandings, in a manner consistent with their terms and
applicable law.
(b)Notwithstanding anything to the contrary herein, prior to the Effective
Time, Ahmanson may agree to pay up to $15,000,000 as bonuses, to be allocated
among employees of Ahmanson below the rank of first vice president; provided,
however, that Ahmanson may agree to pay up to $500,000 of such $15,000,000 to
employees as bonuses for their work in connection with the acquisition of
Coast Savings Financial, Inc. The allocation, and all other terms and
conditions, of all such payments shall be determined by Ahmanson in its sole
discretion, provided that no such payment shall be made to any employee whose
employment is terminated for cause. Such bonuses shall be payable on the
earlier of the first anniversary of the Effective Time to eligible employees
still employed by the Surviving Corporation on such date and the date the
employment of the eligible employee is terminated by Ahmanson or the Surviving
Corporation.
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(c)Notwithstanding anything to the contrary herein, prior to the Effective
Time, Ahmanson may adopt a severance plan (the "Special Severance Plan") which
provides for payments to persons who are employees of Ahmanson or any of its
Subsidiaries (but who are not of a type compensated primarily by commission,
including loan and multi-family loan consultants) on the date hereof ("Special
Severance Employees") of two weeks severance pay for each year of service with
Ahmanson or any of its Subsidiaries for (i) a minimum of 6 months and a
maximum of 18 months severance pay for employees of grades 48 to 58 on the
date hereof and (ii) a minimum of 3 months and a maximum of 12 months of
severance pay for employees of grade 47 or below on the date hereof (the
"Special Severance Payments"). Special Severance Payments shall become due and
payable within five business days after (x) the termination of employment of a
Special Severance Employee without cause by the Surviving Corporation at any
time prior to the one year anniversary of the Effective Time or (y) the
voluntary termination of a Special Severance Employee's employment with the
Surviving Corporation for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean, with respect to a Special Severance Employee, (i) the
Surviving Corporation changes such employee's duties, which new duties, taken
as a whole, are not within the employee's scope of knowledge and experience as
of the Effective Time, (ii) any reduction of such employee's base salary plus
target incentive compensation, provided that in the case of incentive
compensation for which a "target" is not defined, such as sales commissions,
the pay opportunity of the incentive component shall be the average incentive
compensation of employees in the same job classification, and provided
further, that changes in the allocation of such employee's compensation
between salary and incentive compensation, and changes to the criteria or
method for determining incentive compensation amounts actually earned, shall
not constitute "Good Reason" for such employee's resignation, or (iii) if (x)
such employee's work location on the date hereof and on the Effective Time is
Ahmanson's Irwindale "campus" and the Surviving Corporation designates a new
work location for such employee which is greater than 35 air miles from such
employee's primary residence on the date hereof set forth in Ahmanson's
records or (y) the Surviving Corporation designates a new work location for
such employee which is greater than 40 air miles from such employee's work
location prior to the Effective Time; provided, however, that notwithstanding
the foregoing, "Good Reason" shall exist only if the Surviving Corporation
shall fail to cure any event set forth in clause (i), (ii) or (iii) giving
rise to the Good Reason within 15 days after its receipt of a written demand
for cure specifying the circumstances constituting "Good Reason"; provided
further, that such employee shall be treated as having resigned for "Good
Reason" only if the effective date of his or her resignation is within 60 days
after the effective date of the circumstance constituting "Good Reason".
Notwithstanding anything to the contrary herein, prior to the Effective Time,
Washington Mutual and Ahmanson shall mutually agree upon a "stay bonus" for
the top 10 Ahmanson executives.
(d)Ahmanson agrees to amend its 401(k) plan prior to the Effective Time and
effective immediately prior to the Effective Time so that participant loans
are no longer available, and may amend its 401(k) plan to allow partial
repayment of existing loans thereunder.
6.13 Accountants' Letters. Each of Washington Mutual and Ahmanson shall use
its respective reasonable best efforts to cause to be delivered to the other
party a letter of Deloitte & Touche LLP and KPMG Peat Marwick LLP,
respectively, independent auditors, dated (i) the date on which the
Registration Statement shall become effective and (ii) a date shortly prior to
the Effective Time, and addressed to such other party, in form and substance
customary for "comfort" letters delivered by independent accountants in
accordance with Statement of Accounting Standards No. 72.
6.14 Notification of Certain Matters. Each of Washington Mutual and Ahmanson
shall give prompt notice to the other of any fact, event or circumstance known
to it that (i) is reasonably likely, individually or taken together with all
other facts, events and circumstances known to it, to result in any Material
Adverse Effect with respect to it or (ii) would cause or constitute a material
breach of any of its representations, warranties, covenants or agreements
contained herein.
6.15 Officers and Directors. Washington Mutual agrees to cause to be elected
or appointed as directors of Washington Mutual at the Effective Time three
directors of Ahmanson at the Effective Time, such directors to be selected
mutually by Washington Mutual and Ahmanson.
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6.16 Financial Statements. Washington Mutual shall file as promptly as
practicable, and in any event within 30 days after the end of the first full
calendar month following the Effective Time, financial statements containing
at least 30 days of combined operations in form and substance sufficient to
enable Ahmanson Affiliates to sell Washington Mutual Stock within the
requirements of Accounting Series Releases 130 and 135 and Staffing Accounting
Bulletin 65.
6.17 Management Consultation Meetings and Distribution of Information. From
the date of this Agreement until the Effective Time, senior management
responsible for the integration of Washington Mutual and Ahmanson shall confer
on a regular basis regarding the business and operations of Ahmanson and
Washington Mutual. The parties shall agree upon a mutually convenient time and
place for such meetings which shall occur no less frequently than weekly
unless otherwise mutually agreed. Washington Mutual and Ahmanson will mutually
agree on communications to be made and information to be distributed to
employees of Washington Mutual and Ahmanson concerning the matters
contemplated by this Agreement, including transition matters and the business
of the Surviving Corporation.
6.18 Year 2000 Plan. Except as required by any Governmental Authority,
Ahmanson shall not make any material change in the Year 2000 Plan that would
have an adverse impact on the conversion plans relating to integration of
Ahmanson with Washington Mutual. Ahmanson shall on a regular (but no less than
monthly) basis provide Washington Mutual with reasonably detailed written
updates with respect to Ahmanson's compliance with the Year 2000 Plan and any
changes thereto.
6.19 Stock Option Agreement. Ahmanson shall, on or before March 17, 1998
(but after the execution and delivery hereof), execute and deliver the Stock
Option Agreement.
ARTICLE VII
CONDITIONS TO CONSUMMATION OF THE MERGER
7.01 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligation of each of Washington Mutual and Ahmanson to consummate
the Merger is subject to the fulfillment or written waiver by Washington
Mutual and Ahmanson prior to the Effective Time of each of the following
conditions:
(a) Stockholder Approvals. This Agreement and the Merger shall have been
duly adopted by the requisite votes of the stockholders of Ahmanson and the
issuance of shares of Washington Mutual Stock as contemplated by this
Agreement shall have been duly approved by the shareholders of Washington
Mutual.
(b) Regulatory Approvals. Any consents, waivers, clearances, approvals and
authorizations of Governmental Authorities that are necessary to permit
consummation of the Merger shall have been obtained and shall remain in full
force and effect and all statutory waiting periods in respect thereof shall
have expired.
(c) No Injunction. No Governmental Authority of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any statute, rule,
regulation, judgment, decree, injunction or other order (whether temporary,
preliminary or permanent) which is in effect and prohibits consummation of the
Merger. No statute, rule, regulation, order, injunction or decree shall have
been enacted, entered, promulgated or enforced by any Governmental Authority
which prohibits or makes illegal the consummation of the Merger.
(d)Registration Statement. The Registration Statement shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and be in
effect and no proceedings for that purpose shall have been initiated or
threatened by the SEC and not withdrawn.
(e)Listing. The shares of Washington Mutual Stock to be issued in the Merger
and the Washington Mutual Depositary Shares shall have been approved for
listing on the Nasdaq, subject to official notice of issuance.
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(f)Pooling-of-Interests. Each of Washington Mutual and Ahmanson shall have
received a letter from Washington Mutual's independent public accountants,
dated the Closing Date, in form and substance reasonably satisfactory to
Washington Mutual and Ahmanson, respectively, to the effect that the Merger
will qualify for pooling-of-interests accounting treatment.
7.02 Conditions to Obligation of Ahmanson. The obligation of Ahmanson to
consummate the Merger is also subject to the fulfillment or written waiver by
Ahmanson prior to the Effective Time of each of the following conditions:
(a)Representations and Warranties. The representations and warranties of
Washington Mutual set forth in this Agreement shall be true and correct in all
respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date; provided, however, that for
purposes of determining the satisfaction of this condition, no effect shall be
given to any exception in such representations and warranties relating to
materiality or a Material Adverse Effect, and provided, further, however,
that, for purposes of this condition, such representations and warranties
(other than the representations and warranties contained in Section 5.03(b),
which shall be true and correct in all material respects) shall be deemed to
be true and correct in all respects unless the failure or failures of such
representations and warranties to be so true and correct, individually or in
the aggregate, results or would reasonably be expected to result in a Material
Adverse Effect on Washington Mutual and its Subsidiaries taken as a whole.
Ahmanson shall have received a certificate signed on behalf of Washington
Mutual by the Chief Executive Officer and Chief Financial Officer of
Washington Mutual to the foregoing effect.
(b)Performance of Obligations of Washington Mutual. Washington Mutual shall
have performed in all material respects all obligations required to be
performed by it under this Agreement at or prior to the Effective Time, and
Ahmanson shall have received a certificate, dated the Effective Time, signed
on behalf of Washington Mutual by the Chief Executive Officer and the Chief
Financial Officer of Washington Mutual to such effect.
(c)Opinion of Ahmanson's Counsel. Ahmanson shall have received an opinion of
Sullivan & Cromwell, special counsel to Ahmanson, dated the Effective Time, to
the effect that, on the basis of facts, representations and assumptions set
forth in such opinion, the Merger constitutes a "reorganization" within the
meaning of Section 368 of the Code and that, accordingly, (i) no gain or loss
will be recognized by Ahmanson as a result of the Merger and (ii) no gain or
loss will be recognized by a stockholder of Ahmanson who receives shares of
Washington Mutual Stock in exchange for shares of Ahmanson Stock, except with
respect to cash received in lieu of fractional share interests. In rendering
its opinion, such counsel may require and rely upon representations contained
in letters from Ahmanson, Washington Mutual and stockholders of Ahmanson. The
foregoing opinion will not apply to stockholders or persons receiving
Washington Mutual Common Stock as compensation.
(d)Accountants' Letters. Ahmanson shall have received the letters referred
to in Section 6.13 from Deloitte & Touche LLP, Washington Mutual's independent
auditors.
7.03 Conditions to Obligation of Washington Mutual. The obligation of
Washington Mutual to consummate the Merger is also subject to the fulfillment
or written waiver by Washington Mutual prior to the Effective Time of each of
the following conditions:
(a)Representations and Warranties. The representations and warranties of
Ahmanson set forth in this Agreement shall be true and correct in all respects
as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date; provided, however, that for
purposes of determining the satisfaction of this condition, no effect shall be
given to any exception in such representations and warranties relating to
materiality or a Material Adverse Effect, and provided, further, however,
that, for purposes of this condition, such representations and warranties
(other than the representations and warranties contained in Section 5.03(b),
which shall be true and correct in all material respects) shall be deemed to
be true and correct in all respects unless the failure or failures of such
representations and warranties to be so true and correct, individually or in
the aggregate, results or would
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reasonably be expected to result in a Material Adverse Effect on Ahmanson and
its Subsidiaries taken as a whole. Washington Mutual shall have received a
certificate signed on behalf of Ahmanson by the Chief Executive Officer and
Chief Financial Officer of Ahmanson to the foregoing effect.
(b)Performance of Obligations of Ahmanson. Ahmanson shall have performed in
all material respects all obligations required to be performed by it under
this Agreement at or prior to the Effective Time, and Washington Mutual shall
have received a certificate, dated the Effective Time, signed on behalf of
Ahmanson by the Chief Executive Officer and the Chief Financial Officer of
Ahmanson to such effect.
(c)Opinion of Washington Mutual's Counsel. Washington Mutual shall have
received an opinion of Foster Pepper & Shefelman PLLC, counsel to Washington
Mutual, dated the Effective Time, to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, the Merger
constitutes a reorganization within the meaning of Section 368(a)(1)(A) of the
Code. In rendering its opinion, Foster Pepper & Shefelman PLLC may require and
rely upon written representations from Ahmanson, Washington Mutual and
stockholders of Ahmanson.
(d)Accountants' Letters. Washington Mutual shall have received the letters
referred to in Section 6.13 from KPMG Peat Marwick LLP, Ahmanson's independent
auditors.
(e)Ahmanson Rights Agreement. The rights issued pursuant to the Ahmanson
Rights Agreement shall not have become nonredeemable, exercisable, distributed
or triggered pursuant to the terms of such agreement.
(f)Restriction, Term or Condition. None of the consents, waivers,
clearances, approvals or authorizations referred to in Section 7.01(b) shall
contain any restriction, term or condition which would reasonably be expected
to, following the Effective Time, have a Material Adverse Effect on the
Surviving Corporation and its Subsidiaries taken as a whole.
ARTICLE VIII
TERMINATION
8.01 Termination. This Agreement may be terminated, and the Merger may be
abandoned:
(a)Mutual Consent. At any time prior to the Effective Time, by the mutual
consent of Washington Mutual and Ahmanson, if the Board of Directors of each
so determines by vote of a majority of the members of its entire Board.
(b)Breach. At any time prior to the Effective Time, by Washington Mutual or
Ahmanson, if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event of either: (i) a breach by the other
party of any representation or warranty contained herein, which breach cannot
be or has not been cured within 30 calendar days after the giving of written
notice to the breaching party of such breach; or (ii) a breach by the other
party of any of the covenants or agreements contained herein, which breach
cannot be or has not been cured within 30 calendar days after the giving of
written notice to the breaching party of such breach, provided that such
breach would entitle the non-breaching party not to consummate the Merger
under Article VII hereof.
(c)Delay. At any time prior to the Effective Time, by Washington Mutual or
Ahmanson, if its Board of Directors so determines by vote of a majority of the
members of its entire Board, in the event that the Merger is not consummated
by March 31, 1999, except to the extent that the failure of the Merger then to
be consummated arises out of or results from the knowing action or inaction of
the party seeking to terminate pursuant to this Section 8.01(c), which action
or inaction is in violation of its obligations under this Agreement.
(d)No Approval. By Ahmanson or Washington Mutual, if its Board of Directors
so determines by a vote of a majority of the members of its entire Board, in
the event (i) the approval of any Governmental Authority
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required for consummation of the Merger and the other transactions
contemplated by this Agreement shall have been denied by final nonappealable
action of such Governmental Authority or (ii) the stockholder approval
required by Section 7.01(a) hereof is not obtained at the Washington Mutual
Meeting or the Ahmanson Meeting.
(e)Failure to Recommend, Etc. (i) At any time prior to the Ahmanson
Meeting, by Washington Mutual or Ahmanson if the Ahmanson Board shall have
failed to make its recommendation referred to in Section 6.02, withdrawn
such recommendation or modified or changed such recommendation in a manner
adverse in any respect to the interests of Washington Mutual; or (ii) by
the Washington Mutual Board if a tender offer or exchange offer for 25% or
more of the outstanding shares of Ahmanson Common Stock is commenced (other
than by Washington Mutual) and the Ahmanson Board recommends that the
stockholders of Ahmanson tender their shares in such tender or exchange
offer or otherwise fails to recommend that such stockholders reject such
tender offer or exchange offer within ten business days after the
commencement thereof (which, in the case of an exchange offer, shall be the
effective date of the registration statement relating to such exchange
offer).
(f)Subsequent Triggering Event. By the Board of Directors of Washington
Mutual, if a Subsequent Triggering Event (as defined in the Stock Option
Agreement) has occurred.
8.02 Effect of Termination and Abandonment. In the event of termination of
this Agreement and the abandonment of the Merger pursuant to this Article
VIII, no party to this Agreement shall have any liability or further
obligation hereunder to the other party hereto except as set forth below and
except that termination will not relieve a breaching party from liability for
any breach of this Agreement giving rise to such termination and except that
Sections 8.02 and 9.05 shall survive any termination of this Agreement.
(a)If this Agreement is terminated by Washington Mutual pursuant to
Section 8.01(b), 8.01(d)(ii) (but only if Ahmanson stockholders have failed
to approve the Merger) or 8.01(e), or by Ahmanson pursuant to Section
8.01(b), then the other party shall, at the written request of the
terminating party, reimburse the terminating party for its documented,
reasonable out-of-pocket expenses (including fees and expenses of legal,
financial and accounting advisors), up to a maximum of $15 million in the
aggregate (the "Expense Reimbursement").
(b)If this Agreement is terminated (i) by Washington Mutual pursuant to
Section 8.01(e), (ii) by Washington Mutual or Ahmanson pursuant to Section
8.01(d)(ii) because of a failure to obtain the required approval of the
stockholders of Ahmanson after an Acquisition Proposal for Ahmanson shall
have been publicly disclosed, or any Person shall have publicly disclosed
an intention (whether or not conditional) to make an Acquisition Proposal,
or (iii) by Washington Mutual pursuant to Section 8.01(b) if the breach by
Ahmanson giving rise to such termination was willful and, at or prior to
such termination, an Acquisition Proposal shall have been made known to
Ahmanson or any of its Subsidiaries or shall have been publicly disclosed
to Ahmanson's stockholders, or any Person shall have made known to Ahmanson
or any of its Subsidiaries or otherwise publicly disclosed an intention
(whether or not conditional) to make an Acquisition Proposal, and
regardless of whether such Acquisition Proposal shall have been rejected by
Ahmanson or withdrawn prior to the time of such termination, then in any
such case Ahmanson shall pay to Washington Mutual a termination fee of $85
million (the "Initial Termination Fee"). In addition, if, within 18 months
after any such termination described in the preceding sentence that gave
rise to an obligation to pay the Initial Termination Fee, Ahmanson enters
into a definitive agreement with respect to, or consummates a transaction
contemplated, in any Acquisition Proposal with any Person, Ahmanson shall
pay to Washington Mutual an additional termination fee equal to $190
million (the "Subsequent Termination Fee" and together with the Initial
Termination Fee, the "Termination Fee"). Notwithstanding the foregoing,
Washington Mutual shall not be entitled to either the Initial Termination
Fee or the Subsequent Termination Fee if Washington Mutual has exercised
all or any part of the Option (as defined in the Stock Option Agreement).
(c)Any Termination Fee or Expense Reimbursement that becomes payable
pursuant to Section 8.02(a) and/or 8.02(b) shall be paid promptly following
the receipt of a written request for Termination Fee
34
<PAGE>
and/or Expense Reimbursement (including documentation supporting the
Expense Reimbursement fees and expenses). Notwithstanding the foregoing, in
no event shall either party be obligated to pay any Termination Fee or
Expense Reimbursement if such party shall be entitled to terminate this
Agreement pursuant to Section 8.01(b).
(d)Ahmanson and Washington Mutual agree that the agreements contained in
Sections 8.02(a) and 8.02(b) above are an integral part of the transactions
contemplated by this Agreement, and that without such agreements Washington
Mutual would not have entered into this Agreement.
ARTICLE IX
MISCELLANEOUS
9.01 Survival. No representations, warranties, agreements and covenants
contained in this Agreement shall survive the Effective Time (other than
Sections 6.11 and 6.12 and this Article IX which shall survive the Effective
Time).
9.02 Waiver; Amendment. Prior to the Effective Time, any provision of this
Agreement may be (a) waived by the party benefitted by the provision, or (b)
amended or modified at any time, by an agreement in writing between the
parties hereto executed in the same manner as this Agreement, except that (i)
after the Ahmanson Meeting, this Agreement may not be amended if it would
violate the DGCL or reduce the consideration to be received by Ahmanson
stockholders in the Merger and (ii) after the Washington Mutual Meeting, this
Agreement may not be amended if it would violate Washington law.
9.03 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
9.04 Governing Law. This Agreement shall be governed by, and interpreted in
accordance with, the laws of the State of California applicable to contracts
made and to be performed entirely within such State (except to the extent that
mandatory provisions of Federal law or of the DGCL or WBCA are applicable).
9.05 Expenses. Except as provided in Section 8.02, each party hereto will
bear all expenses incurred by it in connection with this Agreement and the
transactions contemplated hereby, except that printing expenses and SEC fees
shall be shared equally between Ahmanson and Washington Mutual.
9.06 Notices. All notices, requests and other communications hereunder to a
party shall be in writing and shall be deemed given if personally delivered,
telecopied (with confirmation) or mailed by registered or certified mail
(return receipt requested) to such party at its address set forth below or
such other address as such party may specify by notice to the parties hereto.
If to Washington Mutual, to:
Washington Mutual, Inc.
1201 Third Avenue
Seattle, Washington 98101
Attention: Marc R. Kittner
Facsimile: (206) 554-2790
With a copy to:
Gibson, Dunn & Crutcher LLP
One Montgomery Street, 31st Floor
San Francisco, California 94104
Attention: Todd H. Baker, Esq.
Facsimile: (415) 986-5309
35
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and a copy to:
Foster Pepper & Shefelman PLLC
1111 Third Avenue, Suite 3400
Seattle, Washington 98101
Attention: Bernard Russell, Esq.
Facsimile: (206) 447-9700
If to Ahmanson, to:
H. F. Ahmanson & Company
4900 Rivergrade Road
Irwindale, California 91706
Attention: Madeleine Kleiner
Facsimile: (626) 814-6750
With a copy to:
Sullivan & Cromwell
444 S. Flower Street, 12th Floor
Los Angeles, California 90071
Attention: Alison S. Ressler
Facsimile: (213) 683-0457
9.07 Entire Understanding; No Third Party Beneficiaries. This Agreement,
including the Exhibits and Schedules to this Agreement, represents the entire
understanding of the parties hereto with reference to the transactions
contemplated hereby and thereby and this Agreement supersedes any and all
other oral or written agreements heretofore made except for the
Confidentiality Letter. Except for Sections 6.11 and 6.12, nothing in this
Agreement expressed or implied is intended to confer upon any Person, other
than the parties hereto or their respective successors, any rights, remedies,
obligations or liabilities under or by reason of this Agreement.
9.08 Interpretation; Effect. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of, or
Exhibit or Schedule to, this Agreement unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference
purposes only and are not part of this Agreement. Whenever the words
"include," "includes" or "including" are used in this Agreement, they shall be
deemed to be followed by the words "without limitation." No provision of this
Agreement shall be construed to require Washington Mutual, Ahmanson or any of
their respective Subsidiaries, affiliates or directors to take any action or
omit to take any action which action or omission would violate applicable law
(whether statutory or common law), rule or regulation.
* * *
36
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in counterparts by their duly authorized officers, all as of the day
and year first above written.
WASHINGTON MUTUAL, INC.
/s/ Fay L. Chapman
By___________________________________
Name: Fay L. Chapman
Title: Executive Vice President
H. F. AHMANSON & COMPANY
/s/ Bruce G. Willison
By___________________________________
Name: Bruce G. Willison
Title: President and Chief
Operating Officer
37
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EXHIBIT B
, 1998
H.F. Ahmanson & Company
4900 Rivergrade Road
Irwindale, California 91706
Washington Mutual, Inc.
1201 Third Avenue
Seattle, Washington 98101
Ladies and Gentlemen:
I have been advised that I might be considered to be an "affiliate" of
Washington Mutual, Inc., a Washington corporation ("Washington Mutual"), for
purposes of generally accepted accounting principles ("GAAP"), as such term
relates to pooling-of-interests accounting treatment for certain business
combinations under GAAP and the interpretations of the Securities and Exchange
Commission (the "SEC") or its staff, including, without limitation, Section
201.01 of the SEC's Codification of Financial Reporting Policies
("Section 201.01") and the SEC's Staff Accounting Bulletin No. 65.
Washington Mutual and H.F. Ahmanson & Company, a Delaware corporation
("Ahmanson"), have entered into an Agreement and Plan of Merger, dated as of
March 16, 1998 (the "Merger Agreement"), pursuant to which, among other
things, Ahmanson will merge with and into Washington Mutual (the "Merger").
This agreement is hereinafter referred to as this "Letter Agreement."
A. I represent and warrant to, and agree with, Ahmanson and Washington
Mutual as follows:
1. I have read this Letter Agreement and the Merger Agreement and have
discussed their requirements and other applicable limitations upon my
ability to sell, pledge, transfer or otherwise dispose of shares of the
common stock, no par value, of Washington Mutual ("Washington Mutual Common
Stock") and/or shares of the 6% Cumulative Convertible Series G Preferred
Stock of Washington Mutual (together with the Washington Mutual Common
Stock, the "Washington Mutual Stock") and shares of common stock, par value
$0.01 per share, of Ahmanson ("Ahmanson Common Stock") and/or 6% Cumulative
Convertible Series D Preferred Stock, par value $0.01 per share, of
Ahmanson (together with the Ahmanson Common Stock, the "Ahmanson Stock") to
the extent I felt necessary, with my counsel or counsel for Washington
Mutual.
2. Notwithstanding any other agreements on my part in connection with
Washington Mutual Stock and Ahmanson Stock, I hereby agree that I will not,
without the prior written consent of Washington Mutual, pledge, sell or
otherwise reduce my risk relative to any shares of Washington Mutual Stock
or Ahmanson Stock during the period commencing 30 days prior to the
effective date of the Merger and continuing until financial results
covering at least thirty (30) days of combined operations have been
published following the effective date of the Merger within the meaning of
Section 201.01; provided, however, that this paragraph shall not prevent me
from selling, transferring, or disposing of (in each case with prior
written approval of Washington Mutual) such number of shares of Washington
Mutual Stock or Ahmanson Stock as will not, in the reasonable judgment of
accountants to Washington Mutual, interfere with or prevent the Merger from
being accounted for as a "pooling-of-interests."
3. I understand that Washington Mutual and Ahmanson may give stop
transfer instructions to the transfer agents of Washington Mutual and
Ahmanson, with respect to the shares of Washington Mutual Stock and the
shares of Ahmanson Stock, respectively, in connection with the restrictions
set forth herein.
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4. Execution of this Letter Agreement should not be construed as an
admission on my part that I am an "affiliate" of Washington Mutual as
described in the first paragraph of this Letter Agreement or as a waiver of
any rights I may have to object to any claim that I am such an affiliate on
or after the date of this Letter Agreement.
It is understood and agreed that this Letter Agreement shall terminate and
be of no further force and effect if the Merger Agreement is terminated in
accordance with its terms. It is also understood and agreed that this Letter
Agreement shall terminate and be of no further force and effect when financial
results covering at least thirty (30) days of combined operations following
the effective date of the Merger have been published within the meaning of
Section 201.01.
This Letter Agreement shall be binding on my heirs, legal representatives
and successors.
Very truly yours,
_____________________________________
Name:
ACCEPTED this day of , 1998
H.F. AHMANSON & COMPANY
By: _________________________________
Name: ____________________________
Title: ___________________________
ACCEPTED this day of , 1998
WASHINGTON MUTUAL, INC.
By: _________________________________
Name: ____________________________
Title: ___________________________
39
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EXHIBIT C
, 1998
Washington Mutual, Inc.
1201 Third Avenue
Seattle, Washington 98101
Gentlemen:
I have been advised that I might be considered to be an "affiliate" of H.F.
Ahmanson & Company, a Delaware corporation ("Ahmanson"), for purposes of
paragraphs (c) and (d) of Rule 145 promulgated by the Securities and Exchange
Commission (the "SEC") under the Securities Act of 1933, as amended (the
"Act"), and for purposes of generally accepted accounting principles ("GAAP")
as such term relates to pooling-of-interests accounting treatment for certain
business combinations under GAAP and the interpretations of the SEC or its
staff, including, without limitation, Section 201.01 of the SEC's Codification
of Financial Reporting Policies ("Section 201.01") and the SEC's Staff
Accounting Bulletin No. 65.
Washington Mutual, Inc., a Washington corporation ("Washington Mutual"), and
Ahmanson have entered into an Agreement and Plan of Merger, dated as of March
16, 1998 (the "Merger Agreement"), pursuant to which, among other things,
Ahmanson will merge with and into Washington Mutual (the "Merger"). Upon
consummation of the Merger, I will be entitled to receive shares of common
stock, no par value, of Washington Mutual ("Washington Mutual Common Stock")
and shares of the 6% Cumulative Convertible Series G Preferred Stock of
Washington Mutual (together with the Washington Mutual Common Stock, the
"Washington Mutual Stock") in exchange for my shares of common stock, par
value $0.01 per share, of Ahmanson ("Ahmanson Common Stock") and shares of 6%
Cumulative Convertible Series D Preferred Stock, par value $0.01 per share, of
Ahmanson (together with the Ahmanson Common Stock, the "Ahmanson Stock"),
respectively. This agreement is hereinafter referred to as this "Letter
Agreement."
A. I represent and warrant to, and agree with, Washington Mutual as follows;
1. I have read this Letter Agreement and the Merger Agreement and have
discussed their requirements and other applicable limitations upon my ability
to sell, pledge, transfer or otherwise dispose of shares of Washington Mutual
Stock and Ahmanson Stock, to the extent I felt necessary, with my counsel or
counsel for Ahmanson.
2. I have been advised that any issuance of shares of Washington Mutual
Common Stock to me pursuant to the Merger will be registered with the SEC. I
have also been advised, however, that, because I may be an "affiliate" of
Ahmanson at the time the Merger will be submitted for a vote of the
shareholders of Washington Mutual and my offer, sale, transfer or other
disposition of shares of Washington Mutual Stock has not been registered under
the Act, I shall not make any offer, sale, pledge, transfer or other
disposition of such shares unless (i) such offer, sale, transfer or other
disposition of such shares is subject to an effective registration statement
and to the availability of a prospectus under the Act, (ii) a sale of such
shares is make in conformity with the provisions of Rule 145(d) under the Act
(and I agree to provide those representations as Washington Mutual may
reasonably request in order to determine such conformity) or (iii) in an
opinion of counsel, in form and substance reasonably satisfactory to
Washington Mutual, some other exemption from registration is available with
respect to any such proposed disposition of such shares.
3. Notwithstanding the foregoing and any other agreements on my part in
connection with Washington Mutual Stock and any other capital stock of
Washington Mutual and Ahmanson Stock and any other capital stock of Ahmanson,
I hereby agree that I will not, without the prior written consent of
Washington Mutual, pledge, sell or otherwise reduce my risk relative to any
shares of Ahmanson Stock or Washington Mutual Stock (whether received in the
Merger or otherwise) during the period commencing 30 days prior to the
effective date of the Merger and continuing until financial results covering
at least thirty (30) days of combined operations have been published following
the effective date of the Merger within the meaning of Section 201.01;
provided, however,
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that this paragraph shall not prevent me from selling, transferring or
disposing (in each case, with prior written approval of Washington Mutual) of
such number of shares of Washington Mutual Stock or Ahmanson Stock as will
not, in the reasonable judgment of accountants to Washington Mutual, interfere
with or prevent the Merger from being accounted for as a "pooling-of-
interests."
4. Stop transfer instructions may be given to the transfer agent of Ahmanson
with respect to the shares of Ahmanson Stock and to the transfer agent of
Washington Mutual with respect to the shares of Washington Mutual Stock in
connection with the restrictions set forth herein, and there will be placed on
the certificate representing shares of Washington Mutual Stock I receive
pursuant to the Merger, or any certificates delivered in substitution
therefor, a legend stating in substance:
The shares represented by this certificate were issued in a transaction to
which Rule 145 under the Securities Act of 1933 applies. The shares
represented by this certificate may only be transferred in accordance with
the terms of an agreement between the registered holder hereof and
Washington Mutual, a copy of which agreement is on file at the principal
offices of Washington Mutual. A copy of such agreement shall be provided to
the holder hereof without charge upon receipt by Washington Mutual of a
written request.
5. Unless a transfer of my shares of Washington Mutual Stock is a sale made
in conformity with the provisions of Rule 145(d) under the Act, or made
pursuant to any effective registration statement under the Act, Washington
Mutual reserves the right to put an appropriate legend on the certificates
issued to my transferee.
6. I recognize and agree that the foregoing provisions also apply to (i) my
spouse, (ii) any relative of mine or my spouse occupying my home, (iii) any
trust or estate in which I, my spouse or any such relative owns at least a 10%
beneficial interest or of which any of us serves as trustee, executor or in
any similar capacity and (iv) any corporation or other organization in which
I, my spouse or any such relative owns at least a 10% of any class of equity
securities or of the equity interest.
7. I further recognize that in the event I become a director or officer of
Washington Mutual upon consummation of the Merger, any purchase of sale of the
capital stock of Washington Mutual by me may be subject to liability pursuant
to Section 16(b) of the Securities Exchange Act of 1934, as amended.
8. Execution of this letter should not be construed as an admission on my
part that I am an "affiliate" of Ahmanson as described in the first paragraph
of this Letter Agreement or as a waiver of any rights I may have to object to
any claim that I am such an affiliate on or after that date of this Letter
Agreement.
It is understood and agreed that this Letter Agreement shall terminate and
be of no further force and effect if the Merger Agreement is terminated in
accordance with its terms. It is also understood and agreed that this Letter
Agreement shall terminate and be of no further force and effect and the stop
transfer instructions set forth in Paragraph 4 above shall be lifted forthwith
upon the later of (i) such time as financial results covering at least thirty
(30) days of combined operations following the effective date of the Merger
have been published within the meaning of Section 201.01 and (ii) delivery by
the undersigned to Washington Mutual of a copy of a letter from the staff of
the SEC, an opinion of counsel in form and substance reasonably satisfactory
to Washington Mutual, or representations or other evidence reasonably
satisfactory to Washington Mutual, to the effect that a transfer of my shares
of Washington Mutual Stock will not violate the Act or any of the rules and
regulations of the SEC thereunder. In addition, it is understood and agreed
that the legend set forth in Paragraph 4 above shall be removed forthwith from
the certificate or certificates representing my shares of Washington Mutual
Stock if I shall have delivered to Washington Mutual a copy of a letter from
the staff of the SEC, an opinion of counsel in form and substance reasonably
satisfactory to Washington Mutual or other representations or evidence
reasonably satisfactory to Washington Mutual that a transfer of my shares of
Washington Mutual Stock represented by such certificate or certificates will
be a sale made in conformity with the provisions of Rule 145(d) under the Act,
or made pursuant to an effective registration statement under the Act, or that
such legend is not required for purposes of the Securities Act or the rules
and regulation promulgated thereunder.
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This Letter Agreement shall be binding on my heirs, legal representative and
successors.
Very truly yours,
_____________________________________
Accepted this day
of , 1998
WASHINGTON MUTUAL, INC.
By: ___________________
Name:
Title:
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APPENDIX B
LEHMAN BROTHERS
March 16, 1998
Board of Directors
Washington Mutual, Inc.
1201 Third Avenue
Seattle, WA 98101
Members of the Board:
We understand that Washington Mutual, Inc. (the "Company") and H.F. Ahmanson
& Company ("Ahmanson") have entered into a definitive merger agreement
pursuant to which Ahmanson will be merged with and into the Company and each
share of common stock of Ahmanson will be converted into the right to receive
1.12 shares (the "Exchange Ratio") of common stock of the Company (the
"Merger"). The terms and conditions of the Merger are set forth in more detail
in the Agreement and Plan of Merger dated as of March 16, 1998 by and between
the Company and Ahmanson (the "Merger Agreement").
We have been requested by the Board of Directors of the Company to render
our opinion with respect to the fairness, from a financial point of view, to
the Company of the Exchange Ratio to be offered by the Company to the
stockholders of Ahmanson in the Merger. We have not been requested to opine as
to, and our opinion does not in any manner address, the Company's underlying
business decision to proceed with or effect the Merger.
In arriving at our opinion, we reviewed and analyzed: (1) the Merger
Agreement and the specific terms of the Merger, (2) such publicly available
information concerning the Company and Ahmanson that we believe to be relevant
to our analysis including, without limitation, the Forms 10-K for the year
ended December 31, 1996 and preliminary draft copies of Forms 10-K for the
year ended December 31, 1997, quarterly reports on Form 10-Q for the periods
ended March 31, June 30 and September 30, 1997 and recent press releases for
the Company and Ahmanson, (3) financial and operating information with respect
to the business, operations and prospects of the Company and Ahmanson
furnished to us by the Company and Ahmanson, (4) a trading history of the
common stock of the Company and Ahmanson and a comparison of that trading
history with those of other companies that we deemed relevant, (5) a
comparison of the historical financial results and present financial condition
of the Company and Ahmanson with those of other companies that we deemed
relevant, (6) a comparison of the financial terms of the Merger with the
financial terms of certain other recent transactions that we deemed relevant,
(7) the potential pro forma impact of the Merger on the Company, and (8) the
relative contributions of the Company and Ahmanson to the combined company on
a pro forma basis. In addition, we have had discussions with the management of
the Company and Ahmanson concerning their respective businesses, operations,
assets, liabilities, financial conditions and prospects, and the potential
cost savings, operating synergies and strategic benefits expected to result
from a combination of the businesses of the Company and Ahmanson, and have
undertaken such other studies, analyses and investigations as we deemed
appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information used by us without
assuming any responsibility for independent verification of such information
and have further relied upon the assurances of management of the Company and
Ahmanson that
<PAGE>
they are not aware of any facts or circumstances that would make such
information inaccurate or misleading. With respect to the financial
projections of the Company and Ahmanson, upon advice of the Company, we have
assumed that such projections have been reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
respective managements of the Company and of Ahmanson, as to the future
financial performance of the Company and Ahmanson including, without
limitation, with respect to projected cost savings and operating synergies
expected to result from a combination of the businesses of the Company and
Ahmanson and that the Company and Ahmanson would perform, and that the
combined company will perform, substantially in accordance with such
projections. Upon advice of the Company and its legal and accounting advisors,
we have assumed that the Merger will qualify for pooling accounting treatment
and as a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended, and therefore as a tax-free transaction. In
arriving at our opinion, we have not conducted a physical inspection of the
properties and facilities of Ahmanson or the Company and have not made or
obtained any evaluations or appraisals of the assets or liabilities of
Ahmanson or the Company. In addition, we are not experts in the evaluation of
loan portfolios or allowances for loan and real estate owned losses and, upon
advice of the Company, we have assumed that Ahmanson's current allowances for
loan and real estate owned losses (including for off-balance sheet items) are
in the aggregate adequate to cover all such losses. Our opinion necessarily is
based upon market, economic and other conditions as they exist on, and can be
evaluated as of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the
date hereof that, from a financial point of view, the Exchange Ratio to be
offered by the Company to the stockholders of Ahmanson in the Merger is fair
to the Company.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger. In addition, the Company
has agreed to indemnify us for certain liabilities that may arise out of the
rendering of this opinion. We also have performed various investment banking
services for the Company and for Ahmanson in the past, and have received
customary fees for such services. In the ordinary course of our business, we
actively trade in the debt and equity securities of the Company and Ahmanson
for our own account and for the accounts of our customers and, accordingly,
may at any time hold a long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Merger. This opinion is not intended to be and does not
constitute a recommendation to any stockholder of the Company as to how such
stockholder should vote with respect to the Merger.
Very truly yours,
Lehman Brothers
/s/ Philip R. Erlanger
By___________________________________
Philip R. Erlanger
Managing Director
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APPENDIX C
March 16, 1998
Board of Directors
H.F. Ahmanson & Co.
4900 Rivergrade Road
Irwindale, CA 91706
Dear Members of the Board:
You have asked us to advise you with respect to the fairness to the
stockholders of H.F. Ahmanson & Co. (the "Company") from a financial point of
view of the Exchange Ratio pursuant to the terms of the Merger Agreement, dated
as of March 16, 1998 (the "Merger Agreement"), between the Company and
Washington Mutual, Inc. (the "Acquiror"). The Merger Agreement provides for the
merger (the "Merger") of the Company with the Acquiror pursuant to which each
outstanding share of common stock, $0.01 par value per share, of the Company
will be converted into 1.12 shares of common stock, (the "Exchange Ratio") no
par value per share, of the Acquiror.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company and the Acquiror, as
well as the Merger Agreement. We have also reviewed certain other information,
including financial forecasts, provided to us by the Company and the Acquiror,
and have met with the Company's and the Acquiror's managements to discuss the
business and prospects of the Company and the Acquiror.
We have also considered certain financial and stock market data of the
Company and the Acquiror, and we have compared those data with similar data for
other publicly held companies in businesses similar to the Company and the
Acquiror and we have considered the financial terms of certain other business
combinations and other transactions which have recently been effected. We also
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility for
Independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts (including the estimates of future cost savings, operating
synergies and revenue enhancements expected to be achieved as a result of the
Merger), we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the
Company's and the Acquiror's managements. In addition, we have not been
requested to make, and have not made, an independent evaluation or appraisal of
the assets or liabilities (contingent or otherwise) of the Company or the
Acquiror, nor have we been furnished with any such evaluations or appraisals.
Our opinion is necessarily based upon financial, economic, market and other
conditions as they exist and can be evaluated on the date hereof. We are not
expressing any opinion as to the actual value of the common stock of the
Acquiror when issued to the Company's stockholders pursuant to the Merger or
the prices at which such common stock of the Acquiror will trade subsequent to
the Merger.
We have acted as financial advisor to the Company in connection with the
Merger and will receive a fee for our services, a significant portion of which
is contingent upon the consummation of the Merger.
In the ordinary course of our business, we and our affiliates may actively
trade the debt and equity securities of both the Company and the Acquiror for
our own and such affiliate's accounts and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors in connection with its consideration of the Merger, does not
constitute a recommendation to any stockholder as to how such stockholder
should vote with respect to the Merger, and is not to be quoted or referred to,
in whole or in part, in any
CREDIT SUISSE FIRST BOSTON
CREDITFIRST CORPORATION
SUISSEBOSTON
Telephone 212 325 2000
Eleven Madison Avenue
New York, NY 10010-3629
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registration statement, prospectus or proxy statement, or in any other document
used in connection with the offering or sale of securities, nor shall this
letter be used for any other purposes, without our prior written consent.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Exchange Ratio is fair to the stockholders of the Company from
a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
/s/ Michael E. Martin
By___________________________________
Michael E. Martin
Managing Director
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APPENDIX D
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO CERTAIN PROVISIONS
CONTAINED HEREIN AND TO RESALE RESTRICTIONS UNDER THE SECURITIES
ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated March 16, 1998, between H.F. Ahmanson &
Company, a Delaware corporation ("Issuer"), and Washington Mutual, Inc., a
Washington corporation ("Grantee").
WITNESSETH:
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has
been executed by the parties hereto immediately prior to this Stock Option
Agreement (this "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger Agreement and
in consideration therefor, Issuer has agreed to grant Grantee the Option (as
hereinafter defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein and in the Merger Agreement, the parties
hereto agree as follows:
1. Grant of Option.
(a) Issuer hereby grants to Grantee an unconditional, irrevocable option
(the "Option") to purchase, subject to the terms hereof, up to an aggregate of
21,796,426 fully paid and nonassessable shares of Issuer's Common Stock, par
value $.01 per share ("Common Stock"), at a price of $79.86 per share (the
"Option Price"); provided, however, that in no event shall the number of
shares of Common Stock for which this Option is exercisable exceed 19.9% of
the Issuer's issued and outstanding shares of Common Stock without giving
effect to any shares subject to or issued pursuant to the Option. The number
of shares of Common Stock that may be received upon the exercise of the Option
and the Option Price are subject to adjustment as herein set forth.
(b) In the event that any shares of Common Stock are either (i) issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 5 hereof) or (ii) redeemed, repurchased, retired or otherwise cease to
be outstanding after the date of this Agreement, the number of shares of
Common Stock subject to the Option shall be increased or decreased, as
appropriate, so that, after such issuance or such redemption, repurchase,
retirement or other action, such number equals 19.9% of the number of shares
of Common Stock then issued and outstanding without giving effect to any
shares subject or issued pursuant to the Option. Nothing contained in this
Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to issue, redeem, repurchase or retire shares in breach of
any provision of the Merger Agreement.
2. Exercise of Option.
(a) The Holder (as hereinafter defined) may exercise the Option, in whole or
part, and from time to time, if both an Initial Triggering Event (as
hereinafter defined) and a Subsequent Triggering Event (as hereinafter
defined) shall have occurred prior to the occurrence of an Exercise
Termination Event (as hereinafter defined), provided that the Holder shall
have sent the written notice of such exercise (as provided in subsection (e)
of this Section 2) within ninety days following such Subsequent Triggering
Event (or such longer period as provided in Section 10), provided further,
however, that if the Option cannot be exercised on any day because of any
injunction, order or similar restraint issued by a court of competent
jurisdiction, the period during which the Option may be exercised shall be
extended so that the Option shall expire no earlier than on the tenth business
day after such injunction, order or restraint shall have been dissolved or
when such injunction, order or restraint
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shall have become permanent and no longer subject to appeal, as the case may
be. Each of the following shall be an "Exercise Termination Event": (i) the
Effective Time (as defined in the Merger Agreement); (ii) termination of the
Merger Agreement in accordance with the provisions thereof if such termination
occurs prior to the occurrence of an Initial Triggering Event; (iii) the
passage of 18 months after termination of the Merger Agreement if such
termination follows the occurrence of an Initial Triggering Event; or (iv)
delivery of a written request for payment of Termination Fees pursuant to
Section 8.02 of the Merger Agreement (provided that no such Exercise
Termination Event shall be deemed to have occurred unless such Termination
Fees are paid in accordance with such Section 8.02). The term "Holder" shall
mean the holder or holders of the Option. Notwithstanding anything to the
contrary herein, (i) the Option may not be exercised at any time when Grantee
shall be in breach of any of its representations, warranties, covenants or
agreements contained in the Merger Agreement such that Issuer would be
entitled to terminate the Merger Agreement pursuant to Section 8.01(b) thereof
and (ii) this Agreement shall automatically terminate upon the termination of
the Merger Agreement pursuant to Section 8.01(b) thereof as a result of the
breach by Grantee of its representations, warranties, covenants or agreements
contained in the Merger Agreement.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Significant Subsidiaries, as defined in Rule 1-
02 of Regulation S-X promulgated by the Securities and Exchange Commission
(each an "Issuer Subsidiary"), without having received Grantee's prior
written consent, shall have entered into an agreement to engage in an
Acquisition Transaction (as hereinafter defined) with any person (the term
"person" for purposes of this Agreement having the meaning assigned thereto
in Sections 3(a)(9) and 13(d)(3) of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and the rules and regulations thereunder) other
than Grantee or any of its Subsidiaries (each a "Grantee Subsidiary") or
the Board of Directors of Issuer shall have recommended that the
stockholders of Issuer approve or accept any Acquisition Transaction with
any person other than Grantee or a Subsidiary of Grantee. For purposes of
this Agreement, "Acquisition Transaction" shall mean (x) a merger or
consolidation, or any similar transaction, involving Issuer or any Issuer
Subsidiary, (y) a purchase, lease or other acquisition or assumption of all
or a substantial portion of the assets or deposits of Issuer or any Issuer
Subsidiary or (z) a purchase or other acquisition (including by way of
merger, consolidation, share exchange or otherwise) of securities
representing 10% or more of the voting power of Issuer; provided, however,
that in no event shall any merger, consolidation, purchase or similar
transaction involving only the Issuer and one or more of Issuer
Subsidiaries or involving only two or more of Issuer Subsidiaries, be
deemed to be an Acquisition Transaction, provided that any such transaction
is not entered into in violation of the terms of the Merger Agreement;
(ii) (A) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, to engage in an Acquisition Transaction with any person other than
Grantee or a Grantee Subsidiary, or (B) the Board of Directors of Issuer
shall have failed to make its recommendation that the stockholders of
Issuer approve the transactions contemplated by the Merger Agreement, or
(C) the Board of Directors of Issuer shall have publicly withdrawn or
modified, or publicly announced its interest to withdraw or modify, in any
manner adverse to Grantee, its recommendation that the stockholders of
Issuer approve the transactions contemplated by the Merger Agreement.
(iii) Any person, other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
its business, shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding shares of
Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder);
(iv) After any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its stockholders by public
announcement or written communication that is or becomes the subject of
public disclosure to engage in an Acquisition Transaction, the stockholder
approval required by Section 7.01(a) of the Merger Agreement is not
obtained at the Ahmanson Meeting;
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(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction (whether such overture
becomes the subject of public disclosure or not), Issuer shall have
willfully breached any covenant or obligation contained in the Merger
Agreement or willfully breached any representation or warranty contained in
the Merger Agreement and such breach (x) would entitle Grantee to terminate
the Merger Agreement and (y) shall not have been cured prior to the Notice
Date (as defined below);
(vi) Any person other than Grantee or any Grantee Subsidiary, other than
in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Office
of Thrift Supervision ("OTS"), the Federal Reserve Board, or other federal
or state bank regulatory authority, which application or notice has been
accepted for processing, for approval to engage in an Acquisition
Transaction; or
(vii) Any person other than Grantee or any Grantee Subsidiary commences
or publicly announces its intention to commence a tender offer or exchange
offer for securities representing 10% or more of the voting power of
Issuer.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 25% or more
of the then outstanding shares of Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in Section
2(b)(i) hereof, except that the percentage referred to in clause (z)
thereof shall be 25%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of any
Initial Triggering Event or Subsequent Triggering Event of which it has
notice, it being understood that the giving of such notice by Issuer shall not
be a condition to the right of the Holder to exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being
herein referred to as the "Notice Date") specifying (i) the total number of
shares it will purchase pursuant to such exercise and (ii) a place and date
not earlier than three business days nor later than 60 business days from the
Notice Date for the closing of such purchase (the "Closing Date"); provided
that if prior notification to or approval of the Federal Reserve Board or the
OTS or any other regulatory or antitrust agency is required in connection with
such purchase, the Holder shall promptly file the required notice or
application for approval, shall promptly notify Issuer of such filing and
shall expeditiously process the same and the period of time that otherwise
would run pursuant to this sentence shall run instead from the date on which
any required notification periods have expired or been terminated or such
approvals have been obtained and any requisite waiting period or periods shall
have passed. Any exercise of the Option shall be deemed to occur on the Notice
Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of
Common Stock purchased pursuant to the exercise of the Option in immediately
available funds by wire transfer to a bank account designated by Issuer,
provided that failure or refusal of Issuer to designate such a bank account
shall not preclude the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Agreement for an Option evidencing the rights of
the Holder thereof to purchase the balance of the shares purchasable
hereunder, and the Holder shall deliver to Issuer this Agreement and a letter
agreeing that the Holder will not offer to sell or otherwise dispose of such
shares in violation of applicable law or the provisions of this Agreement.
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(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof and
H.F. Ahmanson & Company and to resale restrictions arising under the
Securities Act of 1933, as amended. A copy of such agreement is on file at
the principal office of H.F. Ahmanson & Company and will be provided to the
holder hereof without charge upon receipt by H.F. Ahmanson & Company of a
written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the Holder shall have delivered to Issuer a copy of a letter from
the staff of the Securities and Exchange Commission (the "SEC"), or an opinion
of counsel, in form and substance reasonably satisfactory to Issuer, to the
effect that such legend is not required for purposes of the 1933 Act; (ii) the
reference to the provisions of this Agreement in the above legend shall be
removed by delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions of this
Agreement and under circumstances that do not require the retention of such
reference in the opinion of counsel, in form and substance reasonably
satisfactory to Issuer; and (iii) the legend shall be removed in its entirety
if the conditions in the preceding clauses (i) and (ii) are both satisfied. In
addition, such certificates shall bear any other legend as may be required by
law.
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2
and the tender of the applicable purchase price in immediately available
funds, the Holder shall be deemed to be the holder of record of the shares
of Common Stock issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer shall then be closed or that certificates
representing such shares of Common Stock shall not then be actually
delivered to the Holder. Issuer shall pay all expenses, and any and all
United States federal, state and local taxes and other charges that may be
payable in connection with the preparation, issue and delivery of stock
certificates under this Section 2 in the name of the Holder or its
assignee, transferee or designee.
3. Certain Issuer Actions. Issuer agrees: (i) that it shall at all times
maintain, free from preemptive rights, sufficient authorized but unissued or
treasury shares of Common Stock so that the Option may be exercised without
additional authorization of Common Stock after giving effect to all other
options, warrants, convertible securities and other rights to purchase Common
Stock; (ii) that it will not, by charter amendment or through reorganization,
consolidation, merger, dissolution or sale of assets, or by any other
voluntary act, avoid or seek to avoid the observance or performance of any of
the covenants, stipulations or conditions to be observed or performed
hereunder by Issuer; (iii) promptly to take all action as may from time to
time be required (including (x) complying with all premerger notification,
reporting and waiting period requirements specified in 15 U.S.C. (S)18a and
regulations promulgated thereunder and (y) in the event, under any federal or
state banking law, prior approval of or notice to the Federal Reserve Board,
the OTS or to any state regulatory authority is necessary before the Option
may be exercised, cooperating fully with the Holder in preparing such
applications or notices and providing such information to the Federal Reserve
Board, the OTS or such state regulatory authority as they may require) in
order to permit the Holder to exercise the Option and Issuer duly and
effectively to issue shares of Common Stock pursuant hereto; and (iv) promptly
to take all action provided herein to protect the rights of the Holder against
dilution.
4. Exchange. This Agreement (and the Option granted hereby) are
exchangeable, without expense, at the option of the Holder, upon presentation
and surrender of this Agreement at the principal office of Issuer, for other
Agreements providing for Options of different denominations entitling the
holder thereof to purchase, on the same terms and subject to the same
conditions as are set forth herein, in the aggregate the same number of shares
of Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any Stock Option Agreements and related Options for which
this Agreement (and the Option granted hereby) may be exchanged. Upon receipt
by Issuer of evidence reasonably satisfactory to it or the loss, theft,
destruction
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or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender
and cancellation of this Agreement, if mutilated, Issuer will execute and
deliver a new Agreement of like tenor and date. Any such new Agreement
executed and delivered shall constitute an additional contractual obligation
on the part of Issuer, whether or not the Agreement so lost, stolen, destroyed
or mutilated shall at any time be enforceable by anyone.
5. Adjustment of Shares. In addition to the adjustment in the number of
shares of Common Stock that are purchasable upon exercise of the Option
pursuant to Section 1 of this Agreement, the number of shares of Common Stock
purchasable upon the exercise of the Option and the Option Price shall be
subject to adjustment from time to time as provided in this Section 5. In the
event of any change in, or distributions in respect of, the Common Stock by
reason of stock dividends, split-ups, mergers, recapitalizations,
combinations, subdivisions, conversions, exchanges of shares, distributions on
or in respect of the Common Stock that would be prohibited under the terms of
the Merger Agreement, or the like, the type and number of shares of Common
Stock purchasable upon exercise hereof and the Option Price shall be
appropriately adjusted in such manner as shall fully preserve the economic
benefits provided hereunder and proper provision shall be made in any
agreement governing any such transaction to provide for such proper adjustment
and the full satisfaction of the Issuer's obligations hereunder.
6. Registration Rights. Upon the occurrence of a Subsequent Triggering Event
that occurs prior to an Exercise Termination Event, Issuer shall, at the
request of Grantee (whether on its own behalf or on behalf of any subsequent
holder of this Option (or part thereof) or any of the shares of Common Stock
issued pursuant hereto) delivered within six months of such Subsequent
Triggering Event (or such longer period as provided in Section 10), promptly
prepare, file and keep current a shelf registration statement under the 1933
Act covering this Option and any shares issued and issuable pursuant to this
Option and shall use its reasonable best efforts to cause such registration
statement to become effective and remain current in order to permit the sale
or other disposition of this Option and any shares of Common Stock issued upon
total or partial exercise of this Option ("Option Shares") in accordance with
any plan of disposition requested by Grantee. Issuer will use its reasonable
best efforts to cause such registration statement first to become effective
and thereafter to remain effective for such period not in excess of 180 days
from the day such registration statement first becomes effective or such
shorter time as may be reasonably necessary to effect such sales or other
dispositions. Grantee shall have the right to demand two such registrations.
The foregoing notwithstanding, if, at the time of any request by Grantee for
registration of the Option or Option Shares as provided above, Issuer is in
registration with respect to an underwritten public offering of shares of
Common Stock, and if in the good faith judgment of the managing underwriter or
managing underwriters, or, if none, the sole underwriter or underwriters, of
such offering the inclusion of the Option or Option Shares would interfere
with the successful marketing of the shares of Common Stock offered by Issuer,
the number of Option Shares otherwise to be covered in the registration
statement contemplated hereby may be reduced; provided, however, that after
any such required reduction the number of Option Shares to be included in such
offering for the account of the Holder shall constitute at least 25% of the
total number of shares to be sold by the Holder and Issuer in the aggregate;
and provided further, however, that if such reduction occurs, then Issuer
shall file a registration statement for the balance as promptly as practicable
and no reduction shall thereafter occur. Each such Holder shall provide all
information reasonably requested by Issuer for inclusion any registration
statement to be filed hereunder. If requested by any such Holder in connection
with such registration, Issuer shall become a party to any underwriting
agreement relating to the sale of such shares, but only to the extent of
obligating itself in respect of representations, warranties, indemnities and
other agreements customarily included in secondary offering underwriting
agreements for Issuer.
Upon receiving any request under this Section 6 from any Holder, Issuer
agrees to send a copy thereof to any other person known to Issuer to be
entitled to registration rights under this Section 6, in each case by promptly
mailing the same, postage prepaid, to the address of record of the persons
entitled to receive such copies. Notwithstanding anything to the contrary
contained herein, in no event shall Issuer be obligated to effect more than
three registrations pursuant to this Section 6 by reason of the fact that
there shall be more than one Grantee as a result of any assignment or division
of this Agreement.
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7. Repurchase Right.
(a) (i) Following the occurrence of a Repurchase Event (as defined below),
and following a request of the Holder delivered prior to an Exercise
Termination Event, Issuer (or any successor thereto) shall repurchase the
Option from the Holder at a price (the "Option Repurchase Price") equal to the
amount by which (A) the Market/Offer Price (as defined below) exceeds (B) the
Option Price, multiplied by the number of shares for which this Option may
then be exercised; and (ii) at the request of the owner of Option Shares from
time to time (the "Owner"), delivered within 90 days of such occurrence (or
such longer period as provided in Section 10), Issuer shall repurchase such
number of the Option Shares from the Owner as the Owner shall designate at a
price (the "Option Share Repurchase Price") equal to the Market/Offer Price
multiplied by the number of Option Shares so designated.
The term "Market/Offer Price" shall mean the highest of (i) the price per
share of Common Stock at which a tender offer or exchange offer therefor has
been made, (ii) the price per share of Common Stock to be paid by any third
party pursuant to an agreement with Issuer, (iii) the highest closing price
for shares of Common Stock within the six-month period immediately preceding
the date the Holder gives notice of the required repurchase of this Option or
the Owner gives notice of the required repurchase of Option Shares, as the
case may be, or (iv) in the event of a sale of all or a substantial portion of
Issuer's assets, the sum of the price paid in such sale for such assets and
the current market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to Issuer, divided by the
number of shares of Common Stock of Issuer outstanding at the time of such
sale. In determining the Market/Offer Price, the value of consideration other
than cash shall be determined by a nationally recognized investment banking
firm selected by the Holder or Owner, as the case may be, and reasonably
acceptable to Issuer.
(b) The Holder or the Owner, as the case may be, may exercise its right to
require Issuer to repurchase the Option or any Option Shares pursuant to this
Section 7 by surrendering for such purpose to Issuer, at its principal office,
this Agreement or certificates for Option Shares, as applicable, accompanied
by a written notice or notices stating that the Holder or the Owner, as the
case may be, elects to require Issuer to repurchase this Option and/or the
Option Shares in accordance with the provisions of this Section 7. As promptly
as practicable, and in any event within five business days after the surrender
of the Option and/or certificates representing Option Shares and the receipt
of such notice or notices relating thereto, Issuer shall deliver or cause to
be delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor or the portion thereof that Issuer is
not then prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full,
Issuer shall immediately so notify the Holder and/or the Owner and thereafter
deliver or cause to be delivered, from time to time, to the Holder and/or the
Owner, as appropriate, the portion of the Option Repurchase Price and the
Option Share Repurchase Price, respectively, that it is no longer prohibited
from delivering, within five business days after the date on which Issuer is
no longer so prohibited; provided, however, that if Issuer at any time after
delivery of a notice of repurchase pursuant to paragraph (b) of this Section 7
is prohibited under applicable law or regulation or through commencement of
regulatory enforcement action from delivering to the Holder and/or the Owner,
as appropriate, the Option Repurchase Price and the Option Share Repurchase
Price, respectively, in full (and Issuer hereby undertakes to use its best
efforts to obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to accomplish such
repurchase), the Holder or Owner may revoke its notice of repurchase of the
Option or the Option Shares either in whole or to the extent of the
prohibition, whereupon, in the latter case, Issuer shall promptly (i) deliver
to the Holder and/or the Owner, as appropriate, that portion of the Option
Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering; and (ii) deliver, as appropriate, either (A) to
the Holder, a new Agreement evidencing the right of the Holder to purchase
that number of shares of Common Stock obtained by multiplying the number of
shares of Common Stock for which the surrendered Agreement was exercisable at
the time of delivery of the notice of repurchase by a fraction, the numerator
of which is the Option Repurchase Price less the portion thereof theretofore
delivered to the Holder
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and the denominator of which is the Option Repurchase Price, or (B) to the
Owner, a certificate for the Option Shares it is then so prohibited from
repurchasing.
(d) For purposes of this Section 7, a Repurchase Event shall be deemed to
have occurred (i) upon the consummation of any merger, consolidation or
similar transaction involving Issuer or any purchase, lease or other
acquisition of all or a substantial portion of the assets of Issuer, other
than any such transaction which would not constitute an Acquisition
Transaction pursuant to the provisos to the final sentence of Section 2(b)(i)
hereof or (ii) upon the acquisition by any person of beneficial ownership of
50% or more of the then outstanding shares of Common Stock, provided that no
such event shall constitute a Repurchase Event unless a Subsequent Triggering
Event shall have occurred prior to an Exercise Termination Event.
8. Substitute Option.
(a) In the event that prior to an Exercise Termination Event, Issuer shall
enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer
and Issuer shall be the continuing or surviving corporation, but, in
connection with such merger, the then outstanding shares of Common Stock shall
be changed into or exchanged for stock or other securities of any other person
or cash or any other property or the then outstanding shares of Common Stock
shall after such merger represent less than 50% of the outstanding voting
shares and voting share equivalents of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its Subsidiaries, then, and in each such case, the
agreement governing such transaction shall make proper provision so that the
Option shall, upon the consummation of any such transaction and upon the terms
and conditions set forth herein, be converted into, or exchanged for, an
option (the "Substitute Option"), at the election of the Holder, of either (x)
the Acquiring Corporation (as hereinafter defined) or (y) any person that
controls the Acquiring Corporation.
(b) The following terms have the meanings indicated;
(1) "Acquiring Corporation" shall mean (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (ii) Issuer in a merger in which Issuer is the continuing or
surviving person, or (iii) the transferee of all or substantially all of
Issuer's assets.
(2) "Substitute Common Stock" shall mean the common stock issued by the
issuer of the Substitute Option upon exercise of the Substitute Option.
(3) "Assigned Value" shall mean the Market/Offer Price, as defined in
Section 7.
(4) "Average Price" shall mean the average closing price of a share of
the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
(c) The Substitute Option shall have the same terms as the Option, provided,
that if the terms of the Substitute Option cannot, for legal reasons, be the
same as the Option, such terms shall be as similar as possible and in no event
less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement (after giving effect
for such purpose to the provisions of Section 9), which shall be applicable to
the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute
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<PAGE>
Common Stock shall then be equal to the Option Price multiplied by a fraction,
the numerator of which shall be the number of shares of Common Stock for which
the Option is then exercisable and the denominator of which shall be the
number of shares of Substitute Common Stock for which the Substitute Option is
exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of
Substitute Common Stock outstanding prior to exercise of the Substitute
Option.
In the event that the Substitute Option would be exercisable for more than
19.9% of the shares of Substitute Common Stock outstanding prior to exercise
but for this clause (e), the issuer of the Substitute Option (the "Substitute
Option Issuer") shall make a cash payment to Holder equal to the excess of (i)
the value of the Substitute Option without giving effect to the limitation in
this clause (e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this clause (e). This difference in value shall be
determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to the
Acquiring Corporation.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that
controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder.
9. Repurchase of Substitute Option.
(a) At the request of the holder of the Substitute Option (the "Substitute
Option Holder") delivered prior to an Exercise Termination Event, the
Substitute Option Issuer shall repurchase the Substitute Option from the
Substitute Option Holder at a price (the "Substitute Option Repurchase Price")
equal to the amount by which (i) the Highest Closing Price (as hereinafter
defined) exceeds (ii) the exercise price of the Substitute Option, multiplied
by the number of shares of Substitute Common Stock for which the Substitute
Option may then be exercised, and at the request of the owner (the "Substitute
Share Owner") of shares of Substitute Common Stock (the "Substitute Shares"),
the Substitute Option Issuer shall repurchase the Substitute Shares at a price
(the "Substitute Share Repurchase Price") equal to the Highest Closing Price
multiplied by the number of Substitute Shares so designated. The term "Highest
Closing Price" shall mean the highest closing price for shares of Substitute
Common Stock within the six-month period immediately preceding the date the
Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the case
may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant
to this Section 9 by surrendering for such purpose to the Substitute Option
Issuer, at its principal office, the agreement for such Substitute Option (or,
in the absence of such an agreement, a copy of this Agreement) and/or
certificates for Substitute Shares accompanied by a written notice or notices
stating that the Substitute Option Holder or the Substitute Share Owner, as
the case may be, elects to require the Substitute Option Issuer to repurchase
the Substitute Option and/or the Substitute Shares in accordance with the
provisions of this Section 9. As promptly as practicable, and in any event
within five business days after the surrender of the Substitute Option and/or
certificates representing Substitute Shares and the receipt of such notice or
notices relating thereto, the Substitute Option Issuer shall deliver or cause
to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or, in either case, the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation or through commencement of regulatory enforcement
action from repurchasing the Substitute Option and/or the Substitute Shares in
part or in full, the Substitute Option Issuer following a request for
repurchase pursuant to this Section 9 shall immediately so notify the
Substitute Option Holder and/or the Substitute Share Owner and
8
<PAGE>
thereafter deliver or cause to be delivered, from time to time, to the
Substitute Option Holder and/or the Substitute Share Owner, as appropriate,
the portion of the Substitute Option Repurchase Price and Substitute Share
Repurchase Price, respectively, which it is no longer prohibited from
delivering, within five business days after the date on which the Substitute
Option Issuer is no longer so prohibited; provided, however, that if the
Substitute Option Issuer is at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation or through commencement of regulatory enforcement
action from delivering to the Substitute Option Holder and/or the Substitute
Share Owner, as appropriate, the Substitute Option Repurchase Price and the
Substitute Share Repurchase Price, respectively, in full (and the Substitute
Option Issuer shall use its best efforts to receive all required regulatory
and legal approvals as promptly as practicable in order to accomplish such
repurchase), the Substitute Option Holder or Substitute Share Owner may revoke
its notice of repurchase of the Substitute Option or the Substitute Shares
either in whole or to the extent of the prohibition, whereupon, in the latter
case, the Substitute Option Issuer shall promptly (i) deliver to the
Substitute Option Holder or Substitute Share Owner, as appropriate, that
portion of the Substitute Option Repurchase Price or the Substitute Share
Repurchase Price that the Substitute Option Issuer is not prohibited from
delivering; and (ii) deliver, as appropriate, either (A) to the Substitute
Option Holder, a new Substitute Option evidencing the right of the Substitute
Option Holder to purchase that number of shares of the Substitute Common Stock
obtained by multiplying the number of shares of the Substitute Common Stock
for which the surrendered Substitute Option was exercisable at the time of
delivery of the notice of repurchase by a fraction, the numerator of which is
the Substitute Option Repurchase Price less the portion thereof theretofore
delivered to the Substitute Option Holder and the denominator of which is the
Substitute Option Repurchase Price, or (B) to the Substitute Share Owner, a
certificate for the Substitute Shares it is then so prohibited from
repurchasing.
10. Extension of Certain Periods. The 90-day or six-month period for
exercise of certain rights under each of Sections 2, 6, 7 and 14 shall be
extended: (i) to the extent necessary to obtain all regulatory approvals for
the exercise of such rights (for so long as the Holder, Owner, Substitute
Option Holder or Substitute Share Owner, as the case may be, is using its
reasonable best efforts to obtain such regulatory approval) and for the
expiration of all statutory waiting periods; and (ii) to the extent necessary
to avoid liability under Section 16(b) of the 1934 Act by reason of such
exercise.
11. Issuer Representations and Warranties. Issuer hereby represents and
warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
transactions so contemplated. This Agreement has been duly and validly
executed and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and reserve
and to permit it to issue, and at all times from the date hereof through the
termination of this Agreement in accordance with its terms will have reserved
for issuance upon the exercise of the Option, that number of shares of Common
Stock equal to the maximum number of shares of Common Stock at any time and
from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
(c) Issuer has taken all action (including, if required, redeeming all of
the Rights or amending or terminating the Ahmanson Rights Agreement) so that
the entering into of this Option Agreement, the acquisition of shares of
Common Stock hereunder and the other transactions contemplated hereby do not
and will not result in the grant of any rights to any person under the
Ahmanson Rights Agreement or enable or require the Ahmanson Rights to be
exercised, distributed or triggered.
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<PAGE>
12. Grantee Representations and Warranties. Grantee hereby represents and
warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter into
this Agreement and, subject to any approvals or consents to herein, to
consummate the transactions contemplated hereby. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Grantee. This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be,
acquired with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or
exempt from registration under the 1933 Act.
13. Limitation on Total Profit.
(a) Notwithstanding anything to the contrary contained herein, in no event
shall Grantee's Total Profit (as defined below in Section 13(c) hereof) exceed
$275 million.
(b) Notwithstanding anything to the contrary contained herein, the Option
may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below in Section 13(d)
hereof) of more than $275 million.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount received by Grantee pursuant
to Issuer's repurchase of the Option (or any portion thereof) pursuant to
Section 7 hereof, (ii) (x) the amount received by Grantee pursuant to Issuer's
repurchase of Option Shares pursuant to Section 7 hereof, less (y) Grantee's
purchase price for such Option Shares, (iii) (x) the net cash amounts received
by Grantee pursuant to the sale of Option Shares (or any other securities into
which such Option Shares shall be converted or exchanged) to any unaffiliated
party, less (y) Grantee's purchase price of such Option Shares, (iv) any
amounts received by Grantee on the transfer of the Option (or any portion
thereof) to any unaffiliated party, (v) any equivalent amount with respect to
the Substitute Option, including pursuant to Section 8(e); and (vi) the amount
of any Termination Fee actually received by Grantee pursuant to Section 8.02
of the Merger Agreement. For purposes of this Section 13, references to
Grantee shall be deemed to include references to any affiliate of the Grantee.
(d) As used herein, the term "Notional Total Profit" with respect to any
number of shares as to which Grantee may propose to exercise the Option shall
be the Total Profit determined as of the date of such proposed exercise
assuming that the Option were exercised on such date for such number of shares
and assuming that such shares, together with all other Option Shares held by
Grantee and its affiliates as of such date, were sold for cash at the closing
market price for the Common Stock as of the close of business on the preceding
trading day (less customary brokerage commissions).
14. Assignment. Neither of the parties hereto may assign any of its rights
or obligations under this Agreement or the Option created hereunder to any
other person, without the express written consent of the other party, except
that in the event a Subsequent Triggering Event shall have occurred prior to
an Exercise Termination Event, Grantee, subject to the express provisions
hereof, may assign in whole or in part its rights and obligations hereunder
within 90 days following such Subsequent Triggering Event (or such longer
period as provided in Section 10); provided, however, that until the date 15
days following the date on which the Federal Reserve Board or the OTS, as
applicable, approves an application by Grantee to acquire the shares of Common
Stock subject to the Option (if such approval is required by law), Grantee may
not assign its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one person acquires the
right to purchase in excess of 2% of the voting shares of Issuer, (iii) an
assignment to a single person (e.g., a broker or investment banker) for the
purpose of conducting a widely dispersed public distribution on Grantee's
behalf, or (iv) any other manner approved by the Federal Reserve Board or the
OTS, as applicable.
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<PAGE>
15. Filings. Each of Grantee and Issuer will use its best efforts to make
all filings with, and to obtain consents of, all third parties and
governmental authorities necessary to the consummation of the transactions
contemplated by this Agreement, including without limitation making
application to list the shares of Common Stock issuable hereunder on the New
York Stock Exchange upon official notice of issuance and applying to the
Federal Reserve Board and/or the OTS, as applicable, for approval to acquire
the shares issuable hereunder, but Grantee shall not be obligated to apply to
state banking authorities for approval to acquire the shares of Common Stock
issuable hereunder until such time, if ever, as it deems appropriate to do so.
16. Equitable Remedies. The parties hereto acknowledge that damages would be
an inadequate remedy for a breach of this Agreement by either party hereto and
that the obligations of the parties hereto shall be enforceable by either
party hereto through injunctive or other equitable relief.
17. Validity. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this
Agreement shall remain in full force and effect, and shall in no way be
affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Holder is not permitted to acquire, or Issuer is
not permitted to repurchase pursuant to Section 7, the full number of shares
of Common Stock provided in Section 1(a) hereof (as adjusted pursuant to
Section 1(b) or 5 hereof), it is the express intention of Issuer to allow the
Holder to acquire or to require Issuer to repurchase such lesser number of
shares as maybe permissible, without any amendment or modification hereof.
18. Notices. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail
(postage prepaid, return receipt requested) at the respective addresses of the
parties set forth in the Merger Agreement.
19. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws
thereof.
20. Counterparts. This Agreement may be executed in two counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
21. Expenses. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder,
including fees and expenses of its own financial consultants, investment
bankers, accountants and counsel.
22. Entire Agreement. Except as otherwise expressly provided herein or in
the Merger Agreement, this Agreement contains the entire agreement between the
parties with respect to the transactions, contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereof,
written or oral. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns. Nothing in this Agreement, expressed or
implied, is intended to confer upon any party, other than the parties hereto,
and their respective successors and permitted assigns, any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided herein.
23. Capitalized Terms. Capitalized terms used in this Agreement and not
defined herein shall have the meanings assigned thereto in the Merger
Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
H.F. AHMANSON & COMPANY
/s/ Bruce G. Willison
By: _________________________________
Name: Bruce G. Willison
Title:President and Chief
Operating Officer
WASHINGTON MUTUAL, INC.
/s/ Fay L. Chapman
By: _________________________________
Name: Fay L. Chapman
Title:Executive Vice President
12
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 23B.08.320 of the Washington Business Corporation Act (the
"Corporation Act") provides that the personal liability of directors to a
corporation imposed by Section 23B.08.310 of the Corporation Act may be
eliminated by the articles of incorporation of the corporation, except in the
case of acts or omissions involving certain types of conduct. At Article XIII
of its Restated Articles of Incorporation, the Registrant has elected to
eliminate the liability of directors to the Registrant to the extent permitted
by law. Thus, a director of the Registrant is not personally liable to the
Registrant or its shareholders for monetary damages for conduct as a director,
except for liability of the director (i) for acts or omissions that involve
intentional misconduct by the director or a knowing violation of law by the
director, (ii) for conduct violating Section 23B.08.310 of the Corporation
Act, or (iii) for any transaction from which the director will personally
receive a benefit in money, property or services to which the director is not
legally entitled. If Washington law is amended to authorize corporate action
that further eliminates or limits the liability of directors, then the
liability of Washington Mutual directors will be eliminated or limited to the
fullest extent permitted by Washington law, as so amended.
Section 23B.08.560 of the Corporation Act provides that if authorized by (i)
the articles of incorporation, (ii) a bylaw adopted or ratified by the
shareholders, or (iii) a resolution adopted or ratified, before or after the
event, by the shareholders, a corporation will have the power to indemnify
directors made party to a proceeding, or to obligate itself to advance or
reimburse expenses incurred in a proceeding, without regard to the limitations
on indemnification contained in Sections 23B.08.510 through 23B.08.550 of the
Corporation Act, provided that no such indemnity shall indemnify any director
(i) for acts or omissions that involve intentional misconduct by the director
or a knowing violation of law by the director, (ii) for conduct violating
Section 23B.08.310 of the Corporation Act, or (iii) for any transaction from
which the director will personally receive a benefit in money, property or
services to which the director is not legally entitled.
Pursuant to Article X of Washington Mutual's Restated Articles of
Incorporation and Article VIII of Washington Mutual's Bylaws, Washington
Mutual must, subject to certain exceptions, indemnify and defend its directors
against any expense, liability or loss arising from or in connection with any
actual or threatened action, suit or proceeding relating to service for or at
the request of Washington Mutual, including without limitation, liability
under the Securities Act. Washington Mutual is not permitted to indemnify a
director from or on account of acts or omissions of such director which are
finally adjudged to be intentional misconduct, or from or on account of
conduct in violation of RCW 23B.08.310, or a knowing violation of the law from
or on account of any transaction with respect to which it is finally adjudged
that such director received a benefit in money, property or services to which
he or she was not entitled. If Washington law is amended to authorize further
indemnification of directors, then Washington Mutual directors shall be
indemnified to the fullest extent permitted by Washington law, as so amended.
Also, pursuant to Article X of Washington Mutual's Restated Articles of
Incorporation and Article VIII of Washington Mutual's Bylaws, Washington
Mutual may, by action of the Washington Mutual Board, provide indemnification
and pay expenses to officers, employees and agents of Washington Mutual or
another corporation, partnership, joint venture, trust or other enterprise
with the same scope and effect as above described in relation to directors.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Washington
Mutual pursuant to the provisions described above, Washington Mutual has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is therefore
unenforceable.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger between the Registrant and Ahmanson,
dated March 16, 1998 (incorporated by reference to Appendix A of
the Joint Proxy Statement/Prospectus included in this Registration
Statement). Registrant agrees to furnish supplementally to the
Commission upon request a copy of any omitted schedule to the
Agreement and Plan of Merger.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
3.1* Restated Articles of Incorporation of the Registrant, as amended
(the "Washington Mutual Articles").
3.2* Bylaws of the Registrant (incorporated by reference to the
Registrant's Annual Report to the Securities and Exchange
Commission on Form 10-K for the year ended December 31, 1995.
(File No. 0-25188)).
4.1* Article II, Sections D(2), D(3), and D(4) of the Washington Mutual
Articles, which define the rights of holders of the Series E
Preferred Stock (filed together with Exhibit 3.1 hereto).
4.2** Rights Agreement, dated October 16, 1990.
4.3** Amendment No. 1 to the Rights Agreement, dated October 31, 1994.
4.4** Supplement to Rights Agreement, dated November 29, 1994.
4.5 The Registrant agrees to furnish the Securities and Exchange
Commission, upon request, with copies of all instruments defining
rights of holders of long-term debt of the Registrant and its
consolidated subsidiaries.
4.6 Form of Certificate of Designations of the Series G Preferred
Stock (to be filed by amendment).
4.7 Deposit Agreement for the New Washington Mutual Depositary Shares,
each representing a one-tenth interest in one share of the Series
G Preferred Stock to Exhibit 4.7 (to be filed by amendment).
5.1 Opinion of Foster Pepper & Shefelman PLLC (filed herewith).
8.1 Tax Opinion of Foster Pepper & Shefelman PLLC (to be filed by
amendment).
8.2 Tax Opinion of Sullivan & Cromwell (to be filed by amendment).
10.1 Stock Option Agreement between the Registrant and Ahmanson, dated
March 16, 1998 (incorporated by reference to Appendix D of the
Joint Proxy Statement/Prospectus included in this Registration
Statement).
21.1* List of Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP (filed herewith).
23.2 Consent of Price Waterhouse LLP (filed herewith).
23.3 Consent of KPMG Peat Marwick LLP (for incorporation by reference
of its report on the financial statements of Keystone Holdings,
Inc.) (filed herewith).
23.4 Consent of KPMG Peat Marwick LLP (for incorporation by reference
of its report on the Financial Statements of Coast Savings
Financial, Inc.) (filed herewith).
23.5 Consent of KPMG Peat Marwick LLP (for incorporation by reference
of its report on the Financial Statements of H. F. Ahmanson &
Company) (filed herewith).
23.6 Consent of Foster Pepper & Shefelman PLLC (included in its opinion
filed herewith as Exhibit 5.1 and in its opinion to be filed by
amendment as Exhibit 8.1).
23.7 Consent of Lehman Brothers Inc. (to be filed by amendment).
23.8 Consent of Credit Suisse First Boston Corporation (to be filed by
amendment).
23.9 Consent of Sullivan & Cromwell (included in its opinion to be
filed by amendment as Exhibit 8.2).
24.1 Powers of Attorney (included on the signature page of this
Registration Statement).
99.1 Form of Washington Mutual Proxy Card (Common) (filed herewith).
99.2 Form of Washington Mutual Proxy Card (Preferred) (filed herewith).
99.3 Form of Ahmanson Proxy Card (filed herewith).
</TABLE>
- ---------------------
* Incorporated by reference to the Registrant's Annual Report to the
Securities and Exchange Commission on Form 10-K for the year ended December
31, 1997, as Amended April 1, 1998 (File No. 0-25188).
** Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 29, 1994 (File No. 0-25188).
II-2
<PAGE>
ITEM 22. UNDERTAKINGS
The undersigned registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered with the prospectus, to each person to whom the prospectus is sent
or given, the latest annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Securities Exchange Act of
1934; and, where interim financial information required to be presented by
Article 3 of Regulation S-X is not set forth in the prospectus, to deliver, or
cause to be delivered to each person to whom the prospectus is sent or given,
the latest quarterly report that is specifically incorporated by reference in
the prospectus to provide such interim financial information.
The undersigned registrant hereby undertakes that, insofar as
indemnification for liabilities arising under the Securities Act of 1933 may
be permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel
the matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the registration statement through
the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in
the registration statement when it became effective.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c),
the issuer undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
The registrant undertakes that every prospectus: (i) that is filed pursuant
to paragraph (1) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Seattle,
State of Washington on April 21, 1998.
Washington Mutual, Inc.
By: /s/ Kerry K. Killinger
__________________________________
Kerry K. Killinger
Title: Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby constitutes and
appoints Fay L. Chapman and Marc R. Kittner, and each of them severally, as
his or her true and lawful attorney-in-fact with full power of substitution to
execute in the name and on behalf of such person, individually and in each
capacity stated below, and to file, any and all amendments to this
Registration Statement, including any and all post-effective amendments.
Pursuant to the requirement of the Securities Act of 1933, this Registration
Statement has been signed below by the following persons in the capacities
indicated below on the 21 day of April, 1998.
/s/ Kerry K. Killinger /s/ William A. Longbrake
_____________________________________ _____________________________________
Kerry K. Killinger William A. Longbrake
Chairman, President and Chief Executive Vice President and Chief
Executive Officer; Director Financial Officer (Principal
(Principal Executive Officer) Financial Officer)
/s/ Richard M. Levy
_____________________________________
Richard M. Levy
Senior Vice President and Controller
(Principal Accounting Officer)
/s/ Douglas P. Beighle /s/ William P. Gerberding
_____________________________________ _____________________________________
Douglas P. Beighle William P. Gerberding
Director Director
/s/ David Bonderman /s/ Enrique Hernandez, Jr.
_____________________________________ _____________________________________
David Bonderman Enrique Hernandez, Jr.
Director Director
/s/ J. Taylor Crandall /s/ Dr. Samuel B. McKinney
_____________________________________ _____________________________________
J. Taylor Crandall Dr. Samuel B. McKinney
Director Director
II-4
<PAGE>
/s/ Roger H. Eigsti /s/ Michael K. Murphy
_____________________________________ _____________________________________
Roger H. Eigsti Michael K. Murphy
Director Director
/s/ John W. Ellis /s/ William G. Reed, Jr.
_____________________________________ _____________________________________
John W. Ellis William G. Reed, Jr.
Director Director
/s/ Anne V. Farrell /s/ James H. Stever
_____________________________________ _____________________________________
Anne V. Farrell James H. Stever
Director Director
/s/ Stephen E. Frank /s/ Willis B. Wood, Jr.
_____________________________________ _____________________________________
Stephen E. Frank Willis B. Wood, Jr.
Director Director
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
2.1 Agreement and Plan of Merger between the Registrant and Ahmanson,
dated March 16, 1998. (incorporated by reference to Appendix A of
the Joint Proxy Statement/Prospectus included in this Registration
Statement.) Registrant agrees to furnish supplementally to the
Commission upon request a copy of any omitted schedule.
3.1* Restated Articles of Incorporation of the Registrant, as amended
(the "Washington Mutual Articles").
3.2* Bylaws of the Registrant (incorporated by reference to the
Registrant's Annual Report to the Securities and Exchange
Commission on Form 10-K for the year ended December 31, 1995.
(File No. 0-25188)).
4.1* Article II, Sections D(2), D(3), and D(4) of the Washington Mutual
Articles, which define the rights of holders of the Series E
Preferred Stock (filed together with Exhibit 3.1 hereto).
4.2** Rights Agreement, dated October 16, 1990.
4.3** Amendment No. 1 to the Rights Agreement, dated October 31, 1994.
4.4** Supplement to Rights Agreement, dated November 29, 1994.
4.5 The Registrant agrees to furnish the Securities and Exchange
Commission, upon request, with copies of all instruments defining
rights of holders of long-term debt of the Registrant and its
consolidated subsidiaries.
4.6 Form of Certificate of Designations of the Series G Preferred
Stock (to be filed by amendment).
4.7 Deposit Agreement for the New Washington Mutual Depositary Shares,
each representing a one-tenth interest in one share of the Series
G Preferred Stock to Exhibit 4.7 (to be filed by amendment).
5.1 Opinion of Foster Pepper & Shefelman PLLC (filed herewith).
8.1 Tax Opinion of Foster Pepper & Shefelman PLLC (to be filed by
amendment).
8.2 Tax Opinion of Sullivan & Cromwell (to be filed by amendment).
10.1 Stock Option Agreement between the Registrant and Ahmanson, dated
March 16, 1998 (incorporated by reference to Appendix D of the
Joint Proxy Statement/Prospectus included in this Registration
Statement).
21.1* List of Subsidiaries of the Registrant.
23.1 Consent of Deloitte & Touche LLP (filed herewith).
23.2 Consent of Price Waterhouse LLP (filed herewith).
23.3 Consent of KPMG Peat Marwick LLP (for incorporation by reference
of its report on the financial statements of Keystone Holdings,
Inc.) (filed herewith).
23.4 Consent of KPMG Peat Marwick LLP (for incorporation by reference
of its report on the Financial Statements of Coast Savings
Financial, Inc.) (filed herewith).
23.5 Consent of KPMG Peat Marwick LLP (for incorporation by reference
of its report on the Financial Statements of H. F. Ahmanson &
Company) (filed herewith).
23.6 Consent of Foster Pepper & Shefelman PLLC (included in its opinion
filed herewith as Exhibit 5.1 and in its opinion to be filed by
amendment as Exhibit 8.1).
23.7 Consent of Lehman Brothers Inc. (to be filed by amendment).
23.8 Consent of Credit Suisse First Boston Corporation (to be filed by
amendment).
23.9 Consent of Sullivan & Cromwell (included in its opinion to be
filed by amendment as Exhibit 8.2).
24.1 Powers of Attorney (included on the signature page of this
Registration Statement).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
99.1 Form of Washington Mutual Proxy Card (Common) (filed herewith).
99.2 Form of Washington Mutual Proxy Card (Preferred) (filed herewith).
99.3 Form of Ahmanson Proxy Card (filed herewith).
</TABLE>
- ---------------------
* Incorporated by reference to the Registrant's Annual Report to the
Securities and Exchange Commission on Form 10-K for the year ended December
31, 1997, as Amended April 1, 1998 (File No. 0-25188).
** Incorporated by reference to the Registrant's Current Report on Form 8-K
dated November 29, 1994 (File No. 0-25188).
<PAGE>
EXHIBIT 5.1
FOSTER PEPPER & SHEFELMAN, PLLC
May 14, 1998
Board of Directors
Washington Mutual, Inc.
1201 Third Avenue
Seattle, WA 98101
Re: Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel for Washington Mutual, Inc., a Washington
corporation (the "Company"), in connection with the preparation and filing of a
Registration Statement on Form S-4 ("Registration Statement") under the
Securities Act of 1933, as amended, for up to 139,344,784 shares (the "Shares")
of common stock, no par value per share (the "Common Stock"), of the Company to
be issued to the common stockholders and holders of options to acquire shares of
common stock of H.F. Ahmanson & Company ("Ahmanson") upon consummation of the
merger of Ahmanson into the Company, pursuant to the Agreement of Merger dated
March 16, 1998, between the Company and Ahmanson (the "Merger Agreement").
We have examined the Merger Agreement, the Registration Statement, the
actions of the Board of Directors of the Company in authorizing the Merger
Agreement and the issuance of the Shares pursuant thereto and such other
documents and records as we deem necessary for the purpose of the opinion.
Based on the foregoing, we are of the opinion that, upon consummation
of the Merger and the issuance of the Shares in accordance with the terms of the
Merger Agreement, including the approval of the issuance of the Shares by the
Company's common shareholders, the Shares will be legally issued, fully paid and
nonassessible.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to our firm under the heading "Legal
Matters" in the Prospectus included in the Registration Statement.
Very truly yours,
FOSTER PEPPER & SHEFELMAN PLLC
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement of
Washington Mutual, Inc. on Form S-4 of our report dated February 20, 1998,
appearing in the Annual Report on Form 10-K of Washington Mutual, Inc. for the
year ended December 31, 1997 and to the reference to us under the heading
"Experts" in the Prospectus, which is part of such Registration Statement.
Deloitte & Touche LLP
Los Angeles, California
May 14, 1998
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Washington
Mutual, Inc. of our report dated January 22, 1997, except as to Note 28, which
is as of March 7, 1997, relating to the consolidated financial statements of
Great Western Financial Corporation, which appears on page 62 of the
Washington Mutual, Inc. Annual Report on Form 10-K for the year ended December
31, 1997. We also consent to the reference to us under the heading "Experts"
in such Prospectus.
Price Waterhouse LLP
Los Angeles, California
May 14, 1998
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
Washington Mutual, Inc.,
as successor to
Keystone Holdings, Inc.:
We consent to incorporation by reference in the Registration Statement of
Washington Mutual, Inc. on Form S-4 of our report dated January 26, 1996,
except as to Note 27 to the consolidated financial statements, which is as of
February 8, 1996, relating to the consolidated statements of earnings,
stockholder's equity, and cash flows of Keystone Holdings, Inc. for the year
ended December 31, 1995, which report appears in the December 31, 1997, annual
report on Form 10-K of Washington Mutual, Inc. and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Los Angeles, California
May 14, 1998
<PAGE>
EXHIBIT 23.4
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
H.F. Ahmanson & Company:
We consent to incorporation by reference in the Registration Statement on Form
S-4 of Washington Mutual, Inc. of our report dated January 21, 1998, except as
to Note 19 of notes to Consolidated Financial Statements, which is as of
February 12, 1998, relating to the consolidated statements of financial
condition of Coast Savings Financial, Inc. as of December 31, 1997 and 1996
and the related consolidated statements of operations, stockholders' equity
and cash flows for each of the years in the three-year period ended December
31, 1997, which report appears in the December 31, 1997 Annual Report on Form
10-K of Coast Savings Financial, Inc. and to the reference to our firm under
the heading "Experts" in the Form S-4.
KPMG Peat Marwick LLP
Los Angeles, California
May 14, 1998
<PAGE>
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
H.F. Ahmanson & Company:
We consent to incorporation by reference in the Registration Statement on Form
S-4 of Washington Mutual, Inc. of our report dated January 15, 1998, except as
to Note 2 of notes to Consolidated Financial Statements, which is as of
February 13, 1998, and as to Note 19 of notes to Consolidated Financial
Statements, which is as of March 16, 1998, relating to the consolidated
statements of financial condition of H.F. Ahmanson & Company as of December
31, 1997 and 1996 and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1997, which report appears in the December 31, 1997
Annual Report on Form 10-K of H.F. Ahmanson & Company and to the reference to
our firm under the heading "Experts" in the Form S-4.
Our report on the Consolidated Financial Statements of the Company dated
January 15, 1998, except as to Note 2 of notes to Consolidated Financial
Statements, which is as of February 13, 1998, and as to Note 19 of notes to
Consolidated Financial Statements, which is as of March 16, 1998, contains an
explanatory paragraph which states, that as discussed in Note 1 to the
Consolidated Financial Statements, the Company changed its method of
accounting for goodwill in 1995.
KPMG Peat Marwick LLP
Los Angeles, California
May 14, 1998
<PAGE>
EXHIBIT 99.1
WASHINGTON MUTUAL, INC.
1201 THIRD AVENUE, SEATTLE, WA 98101
PROXY FOR THE , 1998 SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF WASHINGTON MUTUAL, INC.
The undersigned shareholder(s) of Washington Mutual, Inc. ("Washington
Mutual"), hereby appoints William L. Lynch and Marc R. Kitnner, and each of
them, as proxies, each with the power of substitution to represent and to
vote, as designated below, all the shares of Common Stock of Washington Mutual
held of record by the undersigned on , 1998, at the Special Meeting of
Shareholders to be held on , 1998, and at any and all postponements,
adjournments or reschedulings thereof.
Shares represented by all properly completed, dated and executed proxies
will be voted in accordance with instructions appearing on the proxy and in
the discretion of the proxy holders as to any other matter that may properly
come before the Special Meeting of Shareholders. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" ITEMS 1 AND 2. IN THE ABSENCE OF SPECIFIC
INSTRUCTIONS, PROXIES WILL BE VOTED FOR ITEMS 1 AND 2 AND IN THE DISCRETION OF
THE PROXY HOLDERS AS TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE
SPECIAL MEETING OF SHAREHOLDERS.
1. APPROVAL OF THE ISSUANCE OF SHARES OF COMMON STOCK AND THE ISSUANCE OF
SHARES OF 6% CUMULATIVE CONVERTIBLE PREFERRED STOCK, SERIES G pursuant to
the Agreement and Plan for Merger, dated as of March 16, 1998 between
Washington Mutual and H. F. Ahmanson & Company ("Ahmanson"), pursuant to
which Ahmanson will merge with and into Washington Mutual; and
[_] FOR [_] AGAINST [_] ABSTAIN
2. APPROVAL OF AMENDMENT OF ARTICLES OF INCORPORATION to increase the number
of authorized shares of common stock from 800,000,000 to 2,000,000,000
shares.
[_] FOR [_] AGAINST [_] ABSTAIN
3. SPECIAL MEETING R.S.V.P: I/We (enter number of people attending).
[_] WILL ATTEND [_] WILL NOT ATTEND
<PAGE>
The undersigned hereby acknowledges receipt of the Notice of Special Meeting
of Shareholders and the related Joint Proxy Statement/Prospectus dated, in
each case, , 1998.
Please sign your name below exactly
as it appears hereon. When signing
as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Date: _________________________, 1998
Signature: __________________________
Title: ______________________________
Signature (if held jointly):
_____________________________________
Title: ______________________________
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY.
<PAGE>
EXHIBIT 99.2
WASHINGTON MUTUAL, INC.
1201 THIRD AVENUE, SEATTLE, WA 98101
PROXY FOR THE , 1998 SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
OF WASHINGTON MUTUAL, INC.
The undersigned shareholder(s) of Washington Mutual, Inc. ("Washington
Mutual"), hereby appoints William L. Lynch and Marc R. Kittner, and each of
them, as proxies, each with the power of substitution to represent and to
vote, as designated below, all the shares of Preferred Stock of Washington
Mutual held of record by the undersigned on , 1998, at the Special
Meeting of Shareholders to be held on , 1998, and at any and all
postponements, adjournments or reschedulings thereof.
Shares represented by all properly completed, dated and executed proxies
will be voted in accordance with instructions appearing on the proxy and in
the discretion of the proxy holders as to any other matter that may properly
come before the Special Meeting of Shareholders. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" ITEM 1. IN THE ABSENCE OF SPECIFIC INSTRUCTIONS,
PROXIES WILL BE VOTED FOR ITEM 1 AND IN THE DISCRETION OF THE PROXY HOLDERS AS
TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE SPECIAL MEETING OF
SHAREHOLDERS.
1. APPROVAL OF AMENDMENT OF ARTICLES OF INCORPORATION to increase the number
of authorized shares of common stock from 800,000,000 to 2,000,000,000
shares.
[_] FOR [_] AGAINST [_] ABSTAIN
2. SPECIAL MEETING RSVP: I/We (enter number of people attending).
[_] WILL ATTEND [_] WILL NOT ATTEND
The undersigned hereby acknowledges receipt of the Notice of Special Meeting
of Shareholders and the related Joint Proxy Statement/Prospectus dated, in
each case, , 1998.
Please sign you name below exactly
as it appears hereon. When signing
as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a
partnership, please sign in
partnership name by authorized
person.
Date: _________________________, 1998
Signature: __________________________
Title: ______________________________
Signature (if held jointly):
_____________________________________
Title: ______________________________
PLEASE SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY.
<PAGE>
EXHIBIT 99.3
[X] Please mark
your vote as
this
H. F. AHMANSON & COMPANY
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SPECIAL MEETING OF STOCKHOLDERS
The undersigned stockholder of H. F. Ahmanson & Company, a Delaware
corporation (the "Company"), acknowledges receipt of the Notice of Special
Meeting of Stockholders and Joint Proxy Statement/Prospectus relating to the
Company's merger with Washington Mutual, Inc. pursuant to an Agreement and
Plan of Merger, dated as of March 16, 1998, and the transactions contemplated
thereby, and the undersigned revokes all other proxies and appoints
and , and each of them, the attorneys and proxies for the undersigned,
each with full power of substitution, to attend and act for the undersigned at
the Company's Special Meeting of Stockholders and at any adjournments or
postponements thereof in connection therewith to vote and represent all of the
shares of the Company's Common Stock which the undersigned would be entitled
to vote.
1. To adopt the Merger Agreement and to approve the transactions contemplated
by the Merger Agreement.
[_] FOR [_] AGAINST [_] ABSTAIN
2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting. Each of the above-named
proxies present at said meeting, either in person or by substitute, shall
have and exercise all the powers of said proxies hereunder.
THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE CHOICES SPECIFIED BY THE
UNDERSIGNED. IF NO SPECIFICATIONS TO THE CONTRARY ARE INDICATED HEREON, THIS
PROXY WILL BE TREATED AS A GRANT OF AUTHORITY TO VOTE FOR PROPOSAL 1. PLEASE
SIGN, DATE AND RETURN YOUR PROXY PROMPTLY IN THE POSTAGE PREPAID ENVELOPE
PROVIDED.
Dated: _____________________________________
Signature(s) _____________________________________
_____________________________________
NOTE: Please sign exactly as your
name appears hereon. When signing as
attorney, executor, administrator,
trustee or guardian, please give
full title as such. If shares are
held jointly, each holder should
sign.
