<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 4, 2000.
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
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)
<TABLE>
<S> <C> <C>
WASHINGTON 6036 91-1653725
(State or other jurisdiction (Primary standard (IRS Employer
of industrial Identification No.)
incorporation or organization) classification code number)
</TABLE>
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)
------------------------------
FAY L. CHAPMAN
GENERAL COUNSEL
WASHINGTON MUTUAL, INC.
1201 THIRD AVENUE
SEATTLE, WASHINGTON 98101
(206) 461-3187
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
<TABLE>
<S> <C>
DAVID R. WILSON CRAIG M. WASSERMAN
HELLER EHRMAN WHITE & MCAULIFFE LLP WACHTELL, LIPTON, ROSEN & KATZ
701 FIFTH AVENUE 51 WEST 52ND STREET
SEATTLE, WASHINGTON 98104 NEW YORK, NY 10019
(206) 447-0900 (212) 403-1000
</TABLE>
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
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. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED(2) PER SHARE OFFERING PRICE REGISTRATION FEE(4)
<S> <C> <C> <C> <C>
Common stock, no par value per share(1)..... 46,972,900 $39.52 $1,856,513,540 $490,120
8% Corporate Premium Income Equity
Securities(3)............................. 2,000,000 $61.19 $122,380,000 $32,308
Series H Preferred Stock, no par value per
share................................... -- -- -- --
Stock Purchase Contracts.................. -- -- -- --
Common Stock, no par value per share(1)... -- -- -- --
Total....................................... -- -- $1,978,893,540 $522,428
</TABLE>
(1) Also includes associated "rights" to purchase shares of common stock which
are not currently separable from the shares of common stock and are not
currently exercisable.
(2) Represents the maximum number of shares of common stock and 8% Corporate
Premium Equity Securities (including the related shares of Series H
Preferred Stock and stock purchase contracts and common stock purchasable
under the stock purchase contracts) to be issued upon consummation of the
merger described herein, including shares of common stock issuable upon the
exercise of outstanding options to acquire Bank United Corp. common stock,
which will be converted into options to acquire shares of Washington Mutual
common stock.
(3) The 8% Corporate Premium Income Equity Securities are units consisting of a
stock purchase contract and a share of Series H preferred stock. A maximum
total of 3,472,400 shares of common stock may be issued under the stock
purchase contracts included in the 2,000,000 8% Corporate Premium Income
Equity Securities being registered.
(4) The registration fee was computed pursuant to Rules 457(f) and 457(c) under
the Securities Act of 1933, as amended, based on the average of the high and
low sales prices of Bank United Corp. common stock as reported by NASDAQ
($51.38) and 8% Corporate Premium Income Equity Securities ("Bank United
Corp. PIES") as reported by the New York Stock Exchange ($61.19), on
September 29, 2000 and the estimated maximum number of shares of common
stock (36,133,000) and Bank United Corp. PIES (2,000,000) that may be
exchanged for the securities being registered.
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.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<PAGE>
EXPLANATORY NOTE
This Registration Statement on Form S-4 is being filed (i) in connection
with the registration and issuance of (a) shares of common stock, no par value
per share (including the associated "rights" to purchase shares of common stock
that are not currently separable from the shares of common stock and are not
currently exercisable), of Washington Mutual, Inc., a Washington corporation
(the "Registrant") and (b) 8% Corporate Premium Income Equity Securities of the
Registrant (including the related shares of preferred stock, stock purchase
contracts and common stock underlying those securities) in connection with the
proposed merger (the "Merger") of Bank United Corp. with and into the Registrant
pursuant to an Agreement and Plan of Merger, dated as of August 18, 2000, and
(ii) in connection with a special meeting of stockholders of Bank United Corp.
to be held in connection with the Merger. Prior to the completion of the Merger,
Bank United Corp. will effect a reorganization by merging a wholly-owned
subsidiary with and into itself (the "Reorganization"). In the Reorganization,
each share of Bank United Corp. common stock will be converted into (a) a new
share of Bank United Corp. common stock and (b) a contingent payment right to
receive a portion of the assets of trust that will be established to receive the
proceeds of any final judgment of Bank United Corp.'s litigation against the
United States. In addition, Bank United Corp.'s outstanding 8% Corporate Premium
Income Equity Securities and outstanding options to purchase common stock will
be similarly adjusted. These contingent payment rights will be represented by
certificates ("CPR Certificates"). It is expected that a registration statement
on Form S-4 (the "Trust Registration Statement") will be filed at a later date
by a trust to be formed by Bank United Corp. for the purpose of registering the
CPR Certificates. It is expected that the Trust Registration Statement will
contain a description of the CPR Certificates and of the trust itself. This
Registration Statement includes certain discussions of the trust and the CPR
Certificates which are expected to be included in the Trust Registration
Statement.
<PAGE>
PRELIMINARY COPY--SUBJECT TO COMPLETION--DATED OCTOBER 4, 2000
THE INFORMATION IN THIS PROXY STATEMENT/PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. WE MAY NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROXY
STATEMENT/PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES AND IS NOT
SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE
IS NOT PERMITTED.
<PAGE>
[BANK UNITED CORP. LOGO]
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The boards of directors of Bank United Corp. and Washington Mutual, Inc.
have approved a merger of our companies. Before the merger can be completed, we
must obtain the approval of Bank United Corp. stockholders. We are sending you
this proxy statement/prospectus to ask you to vote in favor of the merger.
In the merger, Bank United Corp. will merge with and into Washington Mutual.
Washington Mutual will be the surviving corporation in the merger, and the
separate corporate existence of Bank United Corp. will terminate. As a result of
the merger, common stockholders of Bank United Corp. will be entitled to receive
1.3 shares of Washington Mutual common stock in exchange for each share of Bank
United Corp. common stock that they own. Also as a result of the merger, each
holder of Bank United Corp. 8% Corporate Premium Income Equity Securities,
including related shares of preferred stock, will be entitled to receive one
share of Washington Mutual 8% Corporate Premium Income Equity Securities,
including related shares of preferred stock, in exchange for each share of that
Bank United Corp. security that they own.
We are also sending you this proxy statement/prospectus to ask you to vote
in favor of a reorganization of Bank United Corp. which will be effected through
the merger of a wholly owned subsidiary of Bank United Corp. with and into Bank
United Corp., immediately prior to the Washington Mutual merger. In that
reorganization, each share of Bank United Corp. common stock will be converted
into a corresponding share of new Bank United Corp. common stock and one
contingent payment right. The contingent payment rights will be represented by
certificates evidencing the right to receive a portion of the assets of a trust
that has been established to receive the proceeds of any final judgment or
settlement in the "forbearance" litigation of Bank United Corp. and Bank United,
a subsidiary of Bank United Corp., against the United States. That litigation
and those certificates are described in more detail beginning on page 102 of
this proxy statement/prospectus.
YOUR VOTE IS VERY IMPORTANT. Bank United Corp. will hold a special meeting
of stockholders to consider and vote on the agreements providing for the Bank
United Corp. reorganization and the merger of Bank United Corp. with Washington
Mutual. Whether or not you plan to attend the special meeting, please take the
time to vote by completing the enclosed proxy card and mailing it to Bank United
Corp. If you sign, date and mail your proxy card without indicating how you want
to vote, your proxy will be counted as a vote FOR the Bank United Corp.
reorganization and the Washington Mutual merger. If you do not return your card,
or if you do not instruct your broker how to vote any shares held for you in
"street name," your shares will not be voted at the special meeting.
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The special meeting of Bank United Corp. stockholders will
be held:
[day of week], [month] [day], 2000
[time][a.m./p.m.], Local Time
[address]
HOUSTON, TEXAS
THE BANK UNITED CORP. BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT BANK UNITED CORP. STOCKHOLDERS VOTE FOR THE
REORGANIZATION PLAN OF MERGER PROVIDING FOR THE BANK UNITED
CORP. REORGANIZATION MERGER AND THE MERGER AGREEMENT
PROVIDING FOR THE WASHINGTON MUTUAL MERGER.
</TABLE>
This proxy statement/prospectus gives you detailed information about the
proposed transactions and includes the merger agreement providing for the
Washington Mutual merger as Appendix A and the reorganization plan of merger
providing for the Bank United Corp. reorganization as Appendix B. We encourage
you to read carefully this entire document, include all its appendices. We
especially encourage you to read the section on "Risk Factors Relating to the
CPR Certificates" in this proxy statement/prospectus beginning on page 18.
[Insert signature block]
Barry C. Burkholder
PRESIDENT AND CHIEF EXECUTIVE OFFICER
BANK UNITED CORP.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS 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 FUND OR ANY OTHER GOVERNMENTAL
AGENCY.
THIS PROXY STATEMENT/PROSPECTUS IS DATED [MONTH] [DAY], 2000, AND IS BEING FIRST
MAILED TO STOCKHOLDERS ON OR ABOUT [MONTH] [DAY], 2000
<PAGE>
THIS PROXY STATEMENT/ PROSPECTUS INCORPORATES IMPORTANT BUSINESS AND FINANCIAL
INFORMATION ABOUT WASHINGTON MUTUAL AND BANK UNITED CORP. THAT IS NOT INCLUDED
IN OR DELIVERED WITH THIS DOCUMENT. THIS INFORMATION IS AVAILABLE WITHOUT CHARGE
TO BANK UNITED CORP. STOCKHOLDERS UPON WRITTEN OR ORAL REQUEST AT THE APPLICABLE
COMPANY'S ADDRESS AND TELEPHONE NUMBER LISTED BELOW:
<TABLE>
<S> <C>
WASHINGTON MUTUAL, INC. BANK UNITED CORP.
1201 THIRD AVENUE 3200 SOUTHWEST FREEWAY
SEATTLE, WASHINGTON 98101 SUITE 2600
ATTN: INVESTOR RELATIONS HOUSTON, TEXAS 77251-1370
(206) 461-3187 (713) 543-6500
</TABLE>
TO OBTAIN TIMELY DELIVERY, STOCKHOLDERS MUST REQUEST THE INFORMATION NO LATER
THAN [MONTH] [DAY], 2000.
<PAGE>
[BANK UNITED CORP. LOGO]
3200 Southwest Freeway
Suite 2600
Houston, Texas 77251-1370
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [DAY OF WEEK], [MONTH] [DAY], 2000
AT [TIME] [A.M./P.M.]
------------------------
To the Stockholders of Bank United Corp.:
A special meeting of stockholders of Bank United Corp. will be held on [day
of week], [month] [day], 2000, at [time] [a.m./p.m.], local time, at [address],
for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the
reorganization plan of merger, dated as of September 28, 2000, by and
between Bank United Corp. and CPR Merger Corporation, providing for the
merger of a wholly owned subsidiary of Bank United Corp. with and into
Bank United Corp.
2. To consider and vote upon a proposal to approve and adopt the merger
agreement, dated as of August 18, 2000, by and between Bank United Corp.
and Washington Mutual, Inc., providing for the merger of Bank United
Corp. with and into Washington Mutual, Inc.
Bank United Corp. stockholders must approve both of these proposals for the
Bank United Corp. reorganization and the Washington Mutual merger to occur. If
the stockholders fail to approve either of these proposals, neither the Bank
United Corp. reorganization nor the merger of Bank United Corp. with Washington
Mutual will occur.
Holders of record of shares of Bank United Corp. common stock and 8%
Corporate Premium Income Equity Securities, including related shares of
preferred stock, at the close of business on [month] [day], 2000 will be
entitled to notice of and to vote at the Bank United Corp. special meeting, or
any adjournment or postponement of the special meeting. A list of Bank United
Corp. stockholders entitled to vote at the special meeting will be available for
inspection at [location] during ordinary business hours for the ten-day period
prior to the special meeting.
THE BANK UNITED CORP. BOARD OF DIRECTORS HAS DETERMINED THAT THE PROPOSED
REORGANIZATION OF BANK UNITED CORP. AND MERGER WITH WASHINGTON MUTUAL AND OTHER
TRANSACTIONS CONTEMPLATED BY THE REORGANIZATION PLAN OF MERGER AND THE MERGER
AGREEMENT REPRESENT STRATEGIC BUSINESS TRANSACTIONS THAT ARE BOTH FAIR TO AND IN
THE BEST INTERESTS OF BANK UNITED CORP. AND ITS STOCKHOLDERS. ACCORDINGLY, THE
BANK UNITED CORP. BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT BANK UNITED
CORP. STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE REORGANIZATION PLAN OF
MERGER PROVIDING FOR THE BANK UNITED CORP. REORGANIZATION AND THE MERGER
AGREEMENT PROVIDING FOR THE MERGER OF BANK UNITED CORP. WITH WASHINGTON MUTUAL,
AT THE SPECIAL MEETING.
Admittance to the special meeting will be granted only to stockholders as of
the record date and guests of management. Please bring your identification and,
if you hold your shares in "street name" or otherwise not in your own name,
please bring proof of share ownership, such as an account statement, for
admittance.
PLEASE DO NOT SEND ANY BANK UNITED CORP. STOCK CERTIFICATES AT THIS TIME.
[Insert signature block]
Randolph C. Henson
SECRETARY
Houston, Texas
[month] [day], 2000
YOUR VOTE IS VERY IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE BANK UNITED
CORP. SPECIAL MEETING OF STOCKHOLDERS, PLEASE COMPLETE, DATE AND RETURN YOUR
PROXY CARD IN THE ENCLOSED ENVELOPE PROMPTLY.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
QUESTIONS AND ANSWERS ABOUT THE BANK UNITED CORP.
REORGANIZATION AND THE WASHINGTON MUTUAL MERGER........... 1
SUMMARY..................................................... 2
SELECTED UNAUDITED COMPARATIVE PER SHARE DATA............... 9
MARKET PRICE AND DIVIDEND INFORMATION....................... 10
SELECTED HISTORICAL FINANCIAL DATA OF WASHINGTON MUTUAL..... 12
SELECTED HISTORICAL FINANCIAL DATA OF BANK UNITED CORP...... 14
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA........ 16
RISK FACTORS RELATING TO THE CPR CERTIFICATES............... 18
THE BANK UNITED CORP. SPECIAL MEETING....................... 23
THE BANK UNITED CORP. REORGANIZATION AND THE WASHINGTON
MUTUAL MERGER............................................. 25
General................................................. 25
The Bank United Corp. Reorganization.................... 25
The Washington Mutual Merger Consideration.............. 25
Background of the Merger................................ 26
Reasons of Bank United Corp. for the Bank United Corp.
Reorganization and the Washington Mutual Merger;
Recommendation of the Bank United Corp. Board of
Directors.............................................. 28
Opinion of Bank United Corp.'s Financial Advisor........ 29
Reasons of Washington Mutual for the Merger............. 39
Effective Time of the Merger............................ 39
Exchange of Certificates in the Merger.................. 39
Fractional Shares....................................... 40
The Contingent Payment Rights Trust and Certificates.... 41
Certain Federal Income Tax Consequences................. 41
Management and Operations of Washington Mutual Following
the Merger............................................. 44
Post-Merger Compensation and Benefits................... 44
Interests of Certain Persons in the Merger.............. 45
Representations and Warranties in the Merger
Agreement.............................................. 50
Conditions to the Completion of the Merger.............. 51
Regulatory Approvals Required........................... 52
Amendment and Waiver of the Merger Agreement............ 53
Termination of the Merger Agreement..................... 54
Termination Fees........................................ 55
The Option Agreement.................................... 55
Conduct of Business Pending the Merger and Other
Agreements............................................. 57
Expenses and Fees....................................... 60
Accounting Treatment.................................... 60
Stock Exchange Listing of Washington Mutual Common Stock
and PIES............................................... 60
Resale of Washington Mutual Stock Received by Bank
United Corp. Stockholders.............................. 60
Appraisal Rights........................................ 60
INFORMATION ABOUT WASHINGTON MUTUAL......................... 63
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
INFORMATION ABOUT BANK UNITED CORP.......................... 65
DESCRIPTION OF THE WASHINGTON MUTUAL PIES................... 67
Corporate PIES.......................................... 67
Voting Rights........................................... 67
Removing the Preferred Stock from the Pledge Agreement
by Substituting Treasury Securities.................... 67
Recreating Corporate PIES............................... 68
Current Payments........................................ 69
Listing of the Corporate PIES, the Treasury PIES and the
Preferred Stock........................................ 69
Miscellaneous........................................... 69
DESCRIPTION OF THE PURCHASE CONTRACTS....................... 70
General................................................. 70
Settlement Through Remarketing.......................... 71
Notice to Settle With Cash.............................. 72
Early Settlement........................................ 73
Contract Adjustment Payments............................ 73
Anti-Dilution Adjustments............................... 75
Termination............................................. 76
Pledged Securities and Pledge Agreement................. 77
Book-Entry Issuance..................................... 77
Payment of Distributions, Settlement and Transfers...... 77
Modification of the Purchase Contracts and the Pledge
Agreement.............................................. 78
No Consent to Assumption................................ 79
Consolidation, Merger, Sale or Conveyance............... 79
Governing Law........................................... 79
Miscellaneous........................................... 79
DESCRIPTION OF THE PREFERRED STOCK.......................... 80
General................................................. 80
Ranking................................................. 80
Dividends............................................... 80
Dividend Rate Reset by Remarketing...................... 81
Redemption.............................................. 84
Liquidation Rights...................................... 84
Voting Rights........................................... 84
Book-Entry Issuance..................................... 85
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE WASHINGTON
MUTUAL PIES............................................... 86
Corporate PIES.......................................... 87
Preferred Stock......................................... 87
Purchase Contracts...................................... 88
Adjustment to the Settlement Rate....................... 90
Treasury PIES........................................... 90
Sale or Disposition of PIES............................. 91
Non-United States Holders............................... 91
Backup Withholding and Information Reporting............ 92
RISKS RELATED TO THE WASHINGTON MUTUAL PIES................. 92
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
COMPARISON OF RIGHTS OF WASHINGTON MUTUAL AND BANK UNITED
CORP. STOCKHOLDERS........................................ 93
Capital Stock........................................... 93
Board of Directors...................................... 93
Monetary Liability of Directors......................... 93
Interested Stockholders................................. 94
Removal of Directors and Filling Vacancies on the Board
of Directors........................................... 95
Rights Plan............................................. 95
CERTAIN DIFFERENCES BETWEEN WASHINGTON AND DELAWARE
CORPORATE LAWS............................................ 96
Amendment of Articles/Certificate of Incorporation...... 96
Right to Call Special Meeting of Stockholders........... 96
Indemnification of Officers, Directors and Employees.... 97
Provisions Affecting Control Share Acquisitions and
Business Combinations.................................. 97
Mergers, Sales of Assets and Other Transactions......... 99
Stockholder Action Without a Meeting.................... 100
Class Voting............................................ 100
Transactions With Officers or Directors................. 100
Dissenters' Rights...................................... 101
Dividends............................................... 101
THE CONTINGENT PAYMENT RIGHTS TRUST AND CERTIFICATES........ 102
Summary................................................. 102
Formation of the Contingent Payment Rights Trust........ 102
The Forbearance Litigation.............................. 103
The Bank United Corp. Reorganization and the
Distribution of CPR Certificates....................... 105
The Commitment Agreement................................ 105
Description of CPR Certificates......................... 107
Payment Procedures For CPR Certificates................. 108
Payment of the Proceeds Amount to the Contingent Payment
Rights Trust........................................... 109
Expenses and Retained Amount............................ 110
Tax Assumptions......................................... 110
Indemnification, Reimbursement and Limitations on
Liability.............................................. 113
Management of the Forbearance Litigation................ 116
Filing of Exchange Act Reports.......................... 118
Certain Federal Income Tax Consequences................. 118
VALIDITY OF THE WASHINGTON MUTUAL COMMON STOCK AND PIES..... 122
EXPERTS..................................................... 122
WHERE YOU CAN FIND MORE INFORMATION......................... 123
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 123
</TABLE>
<TABLE>
<S> <C>
Appendix A Agreement and Plan of Merger
Appendix B Reorganization Plan of Merger
Appendix C* Form of Declaration of Trust
Appendix D Form of Commitment Agreement
Appendix E* Opinion of Goldman, Sachs & Co.
Appendix F Stock Option Agreement
Appendix G Section 262 of the Delaware General Corporation Law
</TABLE>
------------------------
* To be filed by amendment
iv
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE BANK UNITED CORP. REORGANIZATION
AND THE WASHINGTON MUTUAL MERGER
Q. WHAT DO I NEED TO DO TO VOTE AT THE BANK UNITED CORP. SPECIAL MEETING OF
STOCKHOLDERS?
A. To vote, please mail your signed proxy card in the enclosed return envelope,
as soon as possible, so that your shares may be represented at the special
meeting of stockholders. In order to assure that we obtain your vote, please
give your proxy as instructed on your proxy card, even if you currently plan
to attend the special meeting in person.
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A. If you do not provide your broker with instructions on how to vote your
shares that are held in "street name", your broker will not be permitted to
vote them. You should therefore be sure to provide your broker with
instructions on how to vote these shares. Please check the voting form used
by your broker to see if your broker offers telephone or Internet voting.
If you do not give voting instructions to your broker, you will, in effect,
be voting against the Bank United Corp. reorganization and the merger of
Bank United Corp. with Washington Mutual.
Q. SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A. No. If the Washington Mutual merger is completed, Washington Mutual will
send to you written instructions for exchanging your Bank United Corp. stock
certificates. Please do not send in any Bank United Corp. stock certificates
until you have received these written instructions.
Q. WHEN DO YOU EXPECT THE TRANSACTIONS TO BE COMPLETED?
A. We expect to complete the transactions as quickly as practicable once all
the conditions to completion of the Washington Mutual merger, including
obtaining the approval of Bank United Corp. stockholders at the special
meeting of stockholders, are fulfilled. Fulfilling some of these conditions,
such as receiving certain governmental clearances or approvals, is not
entirely within our control. We hope to complete the merger during the
fourth quarter of calendar year 2000, assuming all the conditions of the
merger have been fulfilled at that time.
Q. WHOM DO I CALL IF I HAVE QUESTIONS ABOUT THE SPECIAL MEETING OF
STOCKHOLDERS, THE BANK UNITED CORP. REORGANIZATION OR THE WASHINGTON MUTUAL
MERGER?
A. You may direct your questions to MacKenzie Partners, Inc. at
(XXX) XXX-XXXX.
1
<PAGE>
SUMMARY
THIS SUMMARY ONLY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS AND DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE
IMPORTANT TO YOU. YOU SHOULD READ THIS ENTIRE PROXY STATEMENT/ PROSPECTUS AND
ITS APPENDICES AND THE DOCUMENTS TO WHICH IT REFERS BEFORE YOU DECIDE HOW TO
VOTE WITH RESPECT TO THE TRANSACTIONS. FOR A DESCRIPTION OF THE DOCUMENTS TO
WHICH THIS PROXY STATEMENT/PROSPECTUS REFERS, SEE "WHERE YOU CAN FIND MORE
INFORMATION" ON PAGE 123.
THIS PROXY STATEMENT/PROSPECTUS AND THE DOCUMENTS INCORPORATED HEREIN BY
REFERENCE CONTAIN FORWARD-LOOKING STATEMENTS REGARDING WASHINGTON MUTUAL, BANK
UNITED CORP. AND THE COMBINED COMPANY AFTER THE MERGER. THE ACTUAL RESULTS OF
THESE COMPANIES COULD DIFFER MATERIALLY FROM THOSE FORWARD-LOOKING STATEMENTS AS
A RESULT OF SEVERAL FACTORS. THESE FACTORS INCLUDE THE RISK FACTORS DESCRIBED IN
WASHINGTON MUTUAL'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31,
1999 AND BANK UNITED CORP.'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED
SEPTEMBER 30, 1999 WHICH ARE INCORPORATED INTO THIS PROXY STATEMENT/ PROSPECTUS
BY REFERENCE. SEE "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" ON PAGE 123.
THE PARTIES TO THE MERGER (SEE PAGE 63)
<TABLE>
<S> <C>
WASHINGTON MUTUAL, INC. BANK UNITED CORP.
1201 THIRD AVENUE 3200 SOUTHWEST FREEWAY, SUITE 2600
SEATTLE, WASHINGTON 98101 HOUSTON, TX 77027
(206) 461-2000 (713) 548-6500
WWW.WAMU.COM WWW.BANKUNITED.COM
Washington Mutual is a financial services Bank United Corp. is the largest publicly
company providing mortgage lending, consumer traded depository institution headquartered
banking, commercial banking, financial in Texas, providing consumers and businesses
services and products, and consumer finance in Texas and other selected markets
products to consumers and small to mid-sized throughout the United States with a broad
businesses. Washington Mutual operates array of financial services. Historically,
principally in California, Washington, Bank United Corp.'s operating strategy
Oregon, Florida, Texas and Utah, and has emphasized traditional single family mortgage
operations in 36 other states. At June 30, lending and deposit gathering activities.
2000, Washington Mutual had consolidated Over the past few years, Bank United Corp.
assets of $185.69 billion, deposits of $80.60 has pursued a strategy designed to transform
billion and stockholders' equity of $8.55 Bank United Corp.'s loan portfolio from a
billion. Based on assets, Washington Mutual high concentration of single family mortgages
was the largest savings institution and the to a more balanced portfolio of commercial,
eighth largest banking company in the United consumer and single family mortgage loans,
States. increase its non-interest revenues, and lower
its cost of funds. At June 30, 2000, Bank
United Corp. had $18.2 billion in assets,
$8.8 billion in deposits and $827.7 million
in stockholders' equity.
</TABLE>
2
<PAGE>
THE BANK UNITED CORP. SPECIAL MEETING (SEE PAGE 23)
The Bank United Corp. special meeting of stockholders will be held on [day
of week], [month] [day], 2000, at [time] [a.m./p.m.], local time, at [address].
At the special meeting, you will be asked to approve the reorganization plan of
merger and the merger agreement and the transactions contemplated by those
agreements, including the Bank United Corp. reorganization and the Washington
Mutual merger.
STOCKHOLDER VOTE REQUIRED (SEE PAGE 24)
You may vote at the special meeting if you owned shares of Bank United Corp.
common stock or 8% Corporate Premium Income Equity Securities (including related
shares of preferred stock) ("Bank United Corp. PIES") at the close of business
on [month] [day], 2000. On that date, there were [ ] shares of Bank
United Corp. common stock and [ ] shares of Bank United Corp. PIES
outstanding and entitled to vote at the special meeting. You may cast one vote
for each share of Bank United Corp. common stock you then owned and one-tenth of
one vote for each share of Bank United Corp. PIES you then owned.
Approval of the Bank United Corp. reorganization plan of merger and approval
of the merger agreement require the affirmative vote of the holders of a
majority of the total votes entitled to be cast by the holders of Bank United
Corp. common stock and Bank United Corp. PIES, voting together as a single
class. As of [month] [day], 2000, directors and executive officers of Bank
United Corp. beneficially owned [ ] shares of Bank United Corp.
common stock and [ ] shares of Bank United Corp. PIES, which
represents in the aggregate approximately [ ] percent of the total votes
entitled to be cast at the special meeting. These individuals have indicated
that they intend to vote FOR approval of the reorganization plan of merger and
the merger agreement.
THE BANK UNITED CORP. REORGANIZATION AND THE WASHINGTON MUTUAL MERGER
THE MERGER AGREEMENT FOR THE WASHINGTON MUTUAL MERGER IS ATTACHED TO THIS
PROXY STATEMENT/PROSPECTUS AS APPENDIX A AND THE REORGANIZATION PLAN OF MERGER
FOR THE BANK UNITED CORP. REORGANIZATION IS ATTACHED AS APPENDIX B. WE ENCOURAGE
YOU TO READ THESE AGREEMENTS CAREFULLY, AS THEY ARE THE LEGAL DOCUMENTS THAT
GOVERN THE MERGER OF BANK UNITED CORP. AND WASHINGTON MUTUAL AND THE BANK UNITED
CORP. REORGANIZATION.
WHAT BANK UNITED CORP. STOCKHOLDERS AND OPTION HOLDERS WILL RECEIVE IN THE BANK
UNITED CORP. REORGANIZATION (SEE PAGE 25)
The merger agreement provides that immediately prior to the Washington
Mutual merger, Bank United Corp. will effect a reorganization by merging a
wholly owned subsidiary of Bank United Corp. with and into Bank United Corp., as
more fully described in "--Reorganization of Bank United Corp. and Contingent
Payment Rights" below. This reorganization will be completed pursuant to the
reorganization plan of merger. At the effective time of this reorganization:
- each outstanding share of Bank United Corp. common stock will convert into
(1) a corresponding share of new Bank United Corp. common stock and (2) the
right to receive a certificate, which we will refer to as a CPR Certificate,
evidencing the right to receive a portion of the assets of the trust that has
been established to hold Bank United Corp.'s forbearance litigation against
the United States which is described in "--Reorganization of Bank United Corp.
and Contingent Payment Rights--The Forbearance Litigation" below;
- each of the outstanding Bank United Corp. PIES will be adjusted so that upon
settlement of the stock purchase contract underlying each PIES, each holder
will receive (1) one share of new Bank United Corp. common stock and (2) one
CPR Certificate, in each case for each share of Bank United Corp. common stock
that would have been purchasable under the
3
<PAGE>
related stock purchase contract prior to the Bank United Corp. reorganization;
and
- each outstanding option to acquire one share of Bank United Corp. common stock
will convert into an option to receive upon exercise (1) one share of Bank
United Corp. common stock and (2) one CPR certificate.
WHAT BANK UNITED CORP. STOCKHOLDERS AND OPTION HOLDERS WILL RECEIVE IN THE
WASHINGTON MUTUAL MERGER (SEE PAGE 25)
At the effective time of the Washington Mutual merger:
- each outstanding share of Bank United Corp. common stock will convert into the
right to receive 1.3 shares of Washington Mutual common stock;
- each of the Bank United Corp. PIES (including the outstanding shares of
preferred stock issued in connection with those PIES) will convert into the
right to receive one share of Washington Mutual's 8% Corporate Premium Income
Equity Securities (including the related shares of preferred stock)
("Washington Mutual PIES"); and
- each outstanding option to acquire Bank United Corp. common stock and CPR
Certificates after the Bank United Corp. reorganization will automatically be
converted into an option to purchase (a) 1.3 shares of Washington Mutual
common stock for each share of Bank United Corp. common stock purchasable
under the original option and (b) one CPR Certificate for each 1.3 shares of
Washington Mutual common stock for which the option is exercised. The exercise
price per share of these converted options will be based on the ratio for the
exchange of Washington Mutual common stock for Bank United Corp. common stock
in the Washington Mutual merger.
BANK UNITED CORP.'S REASONS FOR THE BANK UNITED CORP. REORGANIZATION AND THE
WASHINGTON MUTUAL MERGER (SEE PAGE 28)
Bank United Corp.'s board of directors believes that the proposed
reorganization of Bank United Corp. and merger with Washington Mutual and other
transactions contemplated by the merger agreement with Washington Mutual are
fair to, and in the best interests of, Bank United Corp. and its stockholders.
The board's reasons for its belief are set forth in detail on page 28 of this
document, and include the premium of 21% over the average closing price of Bank
United Corp.'s common stock for the 30-day period ended August 15, 2000, the
anticipated impact of the Washington Mutual merger on Bank United Corp.'s
various constituencies and the opinion of Bank United Corp.'s financial advisor
that, as of the date of that opinion, the consideration in the Washington Mutual
merger was fair to Bank United Corp.'s stockholders from a financial point of
view.
RECOMMENDATION OF BANK UNITED CORP.'S BOARD OF DIRECTORS (SEE PAGE 28)
The Bank United Corp. board of directors unanimously approved the
reorganization plan of merger for the Bank United Corp. reorganization and the
merger agreement for the Washington Mutual merger. The Bank United Corp. board
of directors believes that the proposed reorganization and merger and other
transactions contemplated by the merger agreement between Bank United Corp. and
Washington Mutual are fair to you and in your best interests and unanimously
recommends that you vote "FOR" approval of the reorganization plan of merger and
the merger agreement.
OPINION OF BANK UNITED CORP.'S FINANCIAL ADVISOR (SEE PAGE 29)
On August 18, 2000, Goldman, Sachs & Co. delivered its oral opinion to the
board of directors of Bank United Corp. that, as of that date, the merger
consideration was fair from a financial point of view to the holders of the
outstanding shares of common stock of Bank United Corp. Goldman Sachs
subsequently confirmed its earlier oral opinion by delivery of its written
opinion dated August 18, 2000. The opinion of Goldman Sachs does not constitute
a recommendation as to how any holder of Bank United Corp. shares should vote
with respect to the Bank United Corp. reorganization and the Washington Mutual
merger.
4
<PAGE>
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS IS ATTACHED AS
APPENDIX E. STOCKHOLDERS OF BANK UNITED CORP. ARE ENCOURAGED TO, AND SHOULD,
READ THE OPINION IN ITS ENTIRETY.
INTERESTS OF BANK UNITED CORP.'S EXECUTIVE OFFICERS AND DIRECTORS IN THE MERGER
(SEE PAGE 45)
In considering the recommendation of Bank United Corp.'s board of directors
to approve the Washington Mutual merger, you should be aware that certain
executive officers and directors of Bank United Corp. have employment and other
compensation agreements or plans that give them interests in the merger that are
somewhat different from, or in addition to, your interests.
FEDERAL INCOME TAX CONSEQUENCES OF THE BANK UNITED CORP. REORGANIZATION AND THE
WASHINGTON MUTUAL MERGER (SEE PAGE 41)
Washington Mutual and Bank United Corp. will not be required to complete the
merger between their companies unless they receive legal opinions to the effect
that the merger will qualify as a reorganization for United States federal
income tax purposes. Assuming that both the Bank United Corp. reorganization and
the Washington Mutual merger qualify as a reorganization, holders of Bank United
Corp. common stock will not recognize gain or loss in the exchanges made in the
Bank United Corp. reorganization and the Washington Mutual merger, except that
the holders will recognize (i) any gain realized in the exchange in an amount
not exceeding the fair market value of the CPR Certificates received in the Bank
United Corp. reorganization and (ii) any gain or loss attributable to cash
received in lieu of fractional shares of Washington Mutual stock. Holders of
Bank United Corp. PIES who exchange their PIES solely for Washington Mutual PIES
pursuant to the Washington Mutual merger will not recognize any gain or loss in
the merger.
You should read "The Bank United Corp. Reorganization and the Washington
Mutual Merger--Certain Federal Income Tax Consequences" starting on page 41 for
a more complete discussion of the federal income tax consequences of the Bank
United Corp. reorganization and the Washington Mutual merger. You should also
consult your own tax advisor with respect to other tax consequences of the Bank
United Corp. reorganization and the Washington Mutual merger or any special
circumstances that may affect the tax treatment of the consideration that you
receive in these transactions.
CONDITIONS TO THE WASHINGTON MUTUAL MERGER (SEE PAGE 51)
Completion of the Washington Mutual merger depends on a number of conditions
being satisfied, including the following:
- the Bank United Corp. stockholders must have approved the merger;
- we must have received all required regulatory approvals and all statutory
waiting periods must have expired;
- there must be no statute, rule, regulation, order, injunction or decree in
existence which prohibits or restricts the merger;
- no stop order suspending the effectiveness of the registration statement of
which this proxy statement/prospectus is a part, shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC;
- Bank United Corp. must have formed a trust to hold and enforce Bank United
Corp.'s right to receive the proceeds of any final judgment or settlement in
Bank United Corp.'s "forbearance" litigation against the United States (see
"--Reorganization of Bank United Corp. and Contingent Payment Rights--The
Forbearance Litigation" below); the registration statement for the CPR
Certificates representing an interest in that trust must have been declared
effective by the SEC; and no stop order suspending the registration
statement's effectiveness shall have been issued and no proceeding for that
purpose shall have been initiated or threatened by the SEC;
- the Bank United Corp. reorganization must have been completed;
5
<PAGE>
- the shares of Washington Mutual common stock and the Washington Mutual PIES to
be issued in the merger must be authorized for listing on the New York Stock
Exchange;
- the holders of no more than 10% of the outstanding shares of Bank United Corp.
common stock shall have exercised their dissenters' rights under Delaware law;
and
- both Washington Mutual and Bank United Corp. must have received a legal
opinion that the merger will qualify as a reorganization under federal income
tax laws.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 54)
Washington Mutual and Bank United Corp. may terminate the merger agreement
by mutual consent. The merger agreement may also be terminated unilaterally by
either Washington Mutual or Bank United Corp. if any of several conditions
occur. The reorganization plan of merger for the Bank United Corp.
reorganization will terminate automatically if the merger agreement terminates.
TERMINATION FEES (SEE PAGE 55)
The merger agreement requires Bank United Corp. to pay termination fees of
up to $52 million to Washington Mutual if the merger agreement terminates under
a number of specified circumstances.
STOCK OPTION AGREEMENT (SEE PAGE 55)
Bank United Corp. and Washington Mutual have entered into an option
agreement that permits Washington Mutual under a number of specified
circumstances to purchase shares of Bank United Corp. common stock representing
19.9% of the total number of outstanding shares of Bank United Corp. common
stock at a price of $42.375 per share. Washington Mutual's total profit under
the option agreement is limited to $52 million before taxes. The stock option
agreement may not be exercised to the extent Washington Mutual has received the
termination fees described above.
REGULATORY APPROVALS REQUIRED FOR THE WASHINGTON MUTUAL MERGER (SEE PAGE 52)
We cannot complete the proposed transactions without the prior approval of
the Office of Thrift Supervision, or OTS. We are in the process of seeking the
applicable approvals and making the applicable filings; however, we cannot
assure you that the OTS will grant its approval of the Washington Mutual merger
or that any other necessary approvals will be granted. Further, we cannot be
certain of the date that we will receive those approvals or whether there will
be any litigation challenging those approvals. In addition, it is possible that
the United States Department of Justice or a state attorney general may attempt
to challenge the Washington Mutual merger on antitrust grounds.
ACCOUNTING TREATMENT OF THE WASHINGTON MUTUAL MERGER (SEE PAGE 60)
The merger will be accounted for by Washington Mutual as a purchase in
accordance with accounting principles generally accepted in the United States.
This means that the assets, including intangible assets, and liabilities of Bank
United Corp. will be recorded at their fair values as of the closing date of the
merger. Accordingly, income (or loss) of Bank United Corp. prior to the
effective time of the merger will not be included in Washington Mutual's income
statement.
APPRAISAL RIGHTS (SEE PAGE 60)
Under the law of Delaware, where Bank United Corp. is incorporated, holders
of Bank United Corp. common stock who comply with the applicable requirements of
Delaware law will have the right to receive an appraisal of the value of their
shares in connection with the Bank United Corp. reorganization. You should be
aware that if you properly demand the appraised value of your Bank United Corp.
stock, you will cease to hold Bank United Corp. stock and therefore you will not
receive any consideration in the Washington Mutual merger.
Bank United Corp. stockholders will not, however, have any appraisal rights
with respect to the value of their shares in connection with
6
<PAGE>
the Washington Mutual merger. We have included a copy of Delaware General
Business Law--Section 262--Appraisal Rights as Appendix G to this proxy
statement/prospectus.
REORGANIZATION OF BANK UNITED CORP. AND CONTINGENT PAYMENT RIGHTS (SEE PAGE 102)
Immediately before the merger of Bank United Corp. with and into Washington
Mutual, Bank United Corp. will effect a reorganization by merging a wholly owned
subsidiary with and into itself. In that reorganization, each share of Bank
United Corp. common stock will convert into a corresponding share of new Bank
United Corp. common stock and one CPR Certificate. In addition, each outstanding
option to acquire Bank United Corp. common stock and each outstanding Bank
United Corp. PIES will be similarly adjusted as described above in "--The Bank
United Corp. Reorganization and the Washington Mutual Merger--What Bank United
Corp. Stockholders and Option Holders Will Receive in the Bank United Corp.
Reorganization." The CPR Certificates will represent the right to receive a
portion of the assets of a contingent payment rights trust that will be
established to receive Bank United Corp.'s and Bank United's portion of the
proceeds of any final judgment or settlement in Bank United Corp.'s
"forbearance" litigation against the United States, less certain taxes and
expenses.
FORMATION OF THE TRUSTS (SEE PAGE 102)
Prior to the Washington Mutual merger, Bank United Corp. will form two
trusts--the contingent payment rights trust and the payment trust. Both of these
trusts will be statutory business trusts created under Delaware law. The
contingent payment rights trust will be formed to hold and enforce the
commitment agreement, pursuant to which Bank United Corp. and Washington Mutual,
as Bank United Corp.'s successor after the Washington Mutual merger, will be
obligated to pay to the payment trust from time to time, an amount equal to the
commitment amount (as defined below) plus interest less taxes on that interest.
The payment trust will immediately pay to the contingent payment rights trust
the commitment amount plus interest, less any amounts withdrawn by Bank United
Corp. for certain taxes payable by it solely by reason of its ownership of the
payment trust; however, the payment trust will not make any payments to the
contingent payment rights trust until at least 366 days have passed since the
distribution of the CPR Certificates by Bank United Corp.
The commitment amount is Bank United Corp.'s and its subsidiary's, Bank
United's, portion of the proceeds of the litigation, less certain reimbursements
plus assumed tax benefits to Bank United Corp. relating to the trusts. A senior
executive (Jonathon K. Heffron) and a director (Salvatore Ranieri) of Bank
United Corp. with knowledge of the facts underlying the forbearance litigation
will be appointed as litigation trustees of the contingent payment rights trust,
and will be given full authority, together with a supervisory board that may be
formed prior to the Bank United Corp. reorganization, to instruct Bank United
Corp. and Bank United to dismiss, settle or cease the prosecution of the
litigation. Bank United Corp. will control the payment trust. Administration of
the trusts will be conducted by an institutional trustee. There will also be a
Delaware trustee in accordance with state law.
THE FORBEARANCE LITIGATION (SEE PAGE 103)
On July 25, 1995, Bank United Corp. and its co-plaintiffs, Bank United and
Hyperion Partners, filed suit against the United States in the U.S. Court of
Federal Claims for alleged failures of the United States to abide by its waiver
or forbearance of regulatory provisions with respect to regulatory capital
requirements, liquidity requirements, accounting requirements and other matters.
In March 1999, the U.S. Court of Federal Claims granted Bank United Corp.'s
motion for summary judgment on the issue of liability, holding the United States
liable for all claims. A decision by the court on damages is expected in
calendar year 2000. Bank United Corp. and its co-plaintiffs seek damages in
excess of $560 million. Under the terms of a forbearance agreement entered into
by the parties, Bank United Corp. and Bank United are collectively entitled to
approximately 85% of this amount.
7
<PAGE>
DISTRIBUTION OF CPR CERTIFICATES (SEE PAGE 105)
Prior to the Washington Mutual merger, the contingent payment rights trust
will issue to Bank United Corp. the CPR Certificates. Immediately prior to the
Washington Mutual merger, Bank United Corp. will effect the reorganization,
pursuant to which each share of Bank United Corp. common stock outstanding at
the time of the reorganization will be converted into one new share of Bank
United Corp. common stock and the right to receive one CPR Certificate. Each
outstanding Bank United Corp. PIES and option to acquire common stock will be
similarly adjusted.
DESCRIPTION OF CPR CERTIFICATES (SEE PAGE 107)
Each CPR Certificate will represent an assignable and transferable undivided
beneficial interest in the assets of the contingent payment rights trust and, as
a result of Bank United Corp. entering into the commitment agreement, will
represent an interest in the right to receive a pro rata share of the proceeds
amount received by the contingent payment rights trust, after certain deductions
for expenses and potential liabilities, plus interest and other income earned on
the proceeds amount.
MANAGEMENT OF THE FORBEARANCE LITIGATION (SEE PAGE 116)
The litigation trustees, together with a supervisory board composed of
former directors of Bank United Corp. that may be formed prior to the Bank
United Corp. reorganization, will have sole and exclusive right to instruct Bank
United Corp. and Bank United with respect to the prosecution of the litigation.
These trustees will have the right, together with the supervisory board, to
instruct Bank United Corp., Bank United and the successors of either of them,
including Washington Mutual, to dismiss, settle or cease prosecution of the
forbearance litigation at any time and on any terms.
EFFECT OF MERGER WITH WASHINGTON MUTUAL ON THE TRUSTS
In the merger agreement, Washington Mutual has agreed to honor and perform
the obligations of Bank United Corp. under both the declarations of trust and
the commitment agreement relating to the trusts and will be the successor to
Bank United Corp. under those agreements and the other related obligations of
Bank United Corp. Following the merger, Washington Mutual anticipates Bank
United Corp.'s subsidiary, Bank United, will merge into Washington Mutual Bank,
FA. Unless otherwise indicated, references to Bank United Corp. in this document
also refer to Washington Mutual upon the completion of the Washington Mutual
merger as contemplated by the merger agreement.
8
<PAGE>
SELECTED UNAUDITED COMPARATIVE PER SHARE DATA
The following table shows certain per common share data for Washington
Mutual common stock and Bank United Corp. common stock on a historical basis and
a pro forma basis reflecting the merger of Bank United Corp. and Washington
Mutual, accounted for as a purchase as if it had been consummated as of
January 1, 1999. This information is only a summary and you should read it in
conjunction with the financial information appearing elsewhere in this proxy
statement/prospectus and the documents incorporated by reference. The per share
pro forma data in the following table is presented for comparative purposes only
and is 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 completed during the periods
or as of the date for which this pro forma data is presented.
<TABLE>
<CAPTION>
FIRST SIX MONTHS OF
FISCAL 2000 1999 FISCAL YEAR
------------------- ----------------
<S> <C> <C>
WASHINGTON MUTUAL COMMON STOCK
Book value per share
Historical(1)........................................... $16.23 $16.18
Pro forma(2)............................................
Cash dividends per share
Historical(1)........................................... 0.55 0.98
Pro forma(3)............................................
Net income per basic share
Historical(1)........................................... 1.75 3.17
Pro forma(3)............................................
Net income per diluted share
Historical(1)........................................... 1.75 3.16
Pro forma(3)............................................
</TABLE>
<TABLE>
<CAPTION>
FIRST SIX MONTHS OF
FISCAL 2000 1999 FISCAL YEAR
------------------- ----------------
<S> <C> <C>
BANK UNITED CORP. COMMON STOCK
Book value per share
Historical(1)........................................... $24.64 $23.22
Pro forma equivalent(4).................................
Cash dividends per share
Historical(1)........................................... 0.37 0.69
Pro forma equivalent(4).................................
Net income per basic share
Historical(1)........................................... 1.83 3.34
Pro forma equivalent(4).................................
Net income per diluted share
Historical(1)........................................... 1.80 3.28
Pro forma equivalent(4).................................
</TABLE>
------------------------
(1) The historical per share amounts as of and for the first six months of
fiscal 2000 are presented as of and for the period ended June 30, 2000 for
Washington Mutual common stock and as of and for the period ended March 31,
2000 for Bank United Corp. common stock. This historical information for the
1999 fiscal year is presented as of and for the period ended December 31,
1999 for Washington Mutual common stock and as of and for the period ended
September 30, 1999 for Bank United Corp. common stock.
9
<PAGE>
(2) The pro forma book value per share for Washington Mutual common stock as of
June 30, 2000 combines the book value per share for Washington Mutual common
stock as of June 30, 2000 and the book value per share for Bank United Corp.
common stock as of March 31, 2000. For the 1999 fiscal year, this pro forma
information combines the book value per share for Washington Mutual common
stock as of December 31, 1999 and the book value per share for Bank United
Corp. common stock as of September 30, 1999.
(3) The pro forma cash dividend per share and net income per basic and diluted
share information for Washington Mutual common stock for the first six
months of fiscal 2000 combines the actual results for Washington Mutual
common stock for the six months ended June 30, 2000 and the actual results
for Bank United Corp. common stock for the six months ended March 31, 2000.
For the 1999 fiscal year, this pro forma information combines the actual
results for Washington Mutual common stock for its fiscal year ended
December 31, 1999 and the actual results for Bank United Corp. common stock
for its fiscal year ended September 30, 1999.
(4) The Bank United Corp. pro forma equivalent per share amounts for the first
six months of fiscal 2000 and the 1999 fiscal year are calculated by
multiplying the Washington Mutual pro forma per share amounts as of and for
the six months ended June 30, 2000 and as of and for the fiscal year ended
December 31, 1999, respectively, by the exchange ratio of 1.3.
MARKET PRICE AND DIVIDEND INFORMATION
The table below sets forth, for the periods indicated, historical high and
low sales price information for Washington Mutual common stock and Bank United
Corp. common stock. Washington Mutual common stock trades on the New York Stock
Exchange under the symbol "WM." Bank United Corp. common stock trades on The
Nasdaq National Market under the symbol "BNKU."
<TABLE>
<CAPTION>
WASHINGTON
MUTUAL BANK UNITED CORP.
COMMON STOCK(1) COMMON STOCK(2)
------------------- -------------------
HIGH LOW HIGH LOW
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Quarter ended March 31, 1998................................ $49.96 $36.75 $50.00 $37.25
Quarter ended June 30, 1998................................. 50.92 40.94 56.50 44.50
Quarter ended September 30, 1998............................ 46.06 31.13 49.75 30.00
Quarter ended December 31, 1998............................. 41.25 28.50 45.50 23.63
Quarter ended March 31, 1999................................ $45.25 $38.44 $43.31 $38.25
Quarter ended June 30, 1999................................. 41.94 34.63 44.00 38.25
Quarter ended September 30, 1999............................ 36.63 27.94 40.19 29.25
Quarter ended December 31, 1999............................. 35.94 25.13 40.81 26.63
Quarter ended March 31, 2000................................ $27.00 $21.81 $32.00 $22.38
Quarter ended June 30, 2000................................. 32.63 24.63 40.00 27.69
Quarter ended September 30, 2000............................ 40.56 30.19 52.13 34.25
</TABLE>
------------------------
(1) Data reflects high and low closing prices for the period indicated.
(2) Data reflects absolute high and low prices for the period indicated.
RECENT CLOSING PRICES
The following table sets forth the closing sale price per share of
Washington Mutual common stock and Bank United Corp. common stock, and the
equivalent per share price for Bank United Corp. common stock (which is the
closing price of Washington Mutual common stock multiplied by the
10
<PAGE>
exchange ratio of 1.3 shares of Washington Mutual common stock) as of
August 18, 2000 (the last full trading day before the public announcement of the
merger) and , 2000 (the last full trading day for which it was
practicable to obtain such information prior to the mailing of this proxy
statement/prospectus).
<TABLE>
<CAPTION>
WASHINGTON MUTUAL BANK UNITED CORP. EQUIVALENT PRICE
COMMON STOCK COMMON STOCK PER SHARE
----------------- ----------------- ----------------
<S> <C> <C> <C>
August 18, 2000............................... $32.81 $42.38 $42.66
, 2000............................
</TABLE>
Stockholders are urged to obtain current market quotations for Washington
Mutual common stock and Bank United Corp. common stock.
DIVIDEND INFORMATION
The following table sets forth cash dividends paid by Washington Mutual per
share of common stock.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
First Quarter....................................... $0.270 $0.230 $0.193
Second Quarter...................................... 0.280 0.240 0.200
Third Quarter....................................... 0.290 0.250 0.207
Fourth Quarter...................................... -- 0.260 0.220
</TABLE>
The following table sets forth cash dividends paid by Bank United Corp. per
share of common stock.
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
First Quarter....................................... $0.185 $0.157 $0.157
Second Quarter...................................... 0.185 0.157 0.163
Third Quarter....................................... 0.185 0.193 0.161
Fourth Quarter...................................... 0.185 0.185 0.162
</TABLE>
11
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF WASHINGTON MUTUAL
Washington Mutual is providing the following information to aid you in your
analysis of the financial aspects of the merger. Washington Mutual derived the
information for the years ended, and as of, December 31, 1995 through
December 31, 1999 from its historical audited financial statements for these
fiscal years. Washington Mutual derived the financial information for the six
months ended June 30, 1999 and June 30, 2000 and as of June 30, 2000 from its
unaudited financial statements that include, in the opinion of management, all
normal and recurring adjustments that management considers necessary for a fair
statement of the results. The operating results for the six months ended
June 30, 2000 are not necessarily indicative of the results that may be expected
for the year ended December 31, 2000. This information is only a summary and you
should read it in conjunction with Washington Mutual's consolidated financial
statements and notes thereto contained in Washington Mutual's 1999 annual report
on Form 10-K which has been incorporated into this proxy statement/ prospectus
by reference.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------------------- ---------------------------
2000 1999 1999 1998
------------ ------------ ------------ --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income.............. $ 6,665,649 $ 5,813,740 $ 12,062,198 $ 11,221,468
Interest expense............. 4,489,048 3,537,837 7,610,408 6,929,743
------------ ------------ ------------ --------------
Net interest income.......... 2,176,601 2,275,903 4,451,790 4,291,725
Provision for loan losses.... 85,238 84,557 167,076 161,968
Noninterest income........... 923,307 716,262 1,508,997 1,507,200
Noninterest expense.......... 1,519,781 1,478,491 2,909,551 3,267,500
------------ ------------ ------------ --------------
Income before income taxes,
cumulative effect of
accounting changes, and
minority interest.......... 1,494,889 1,429,117 2,884,160 2,369,457
Income taxes................. 545,635 532,325 1,067,096 882,525
Cumulative effect of change
in tax accounting method... -- -- -- --
Minority interest in earnings
of consolidated
subsidiaries............... -- -- -- --
------------ ------------ ------------ --------------
Net income................... $ 949,254 $ 896,792 $ 1,817,064 $ 1,486,932
============ ============ ============ ==============
Net income attributable to
common stock............... $ 949,254 $ 896,792 $ 1,817,064 $ 1,470,990
============ ============ ============ ==============
Net income per common share:
Basic...................... $ 1.75 $ 1.54 $ 3.17 $ 2.61(1)
Diluted.................... 1.75 1.54 3.16 2.56(1)
Average diluted common shares
used to calculate earnings
per share:................. 543,079,092 583,460,466 574,553,031 578,562,305(1)
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1997 1996 1995
-------------- -------------- --------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income.............. $ 10,202,531 $ 9,892,290 $ 9,860,408
Interest expense............. 6,287,038 6,027,177 6,306,724
-------------- -------------- --------------
Net interest income.......... 3,915,493 3,865,113 3,553,684
Provision for loan losses.... 246,642 498,568 344,624
Noninterest income........... 980,535 819,361 1,224,370
Noninterest expense.......... 3,111,117 3,595,271 2,761,174
-------------- -------------- --------------
Income before income taxes,
cumulative effect of
accounting changes, and
minority interest.......... 1,538,269 590,635 1,672,256
Income taxes................. 653,151 201,707 654,593
Cumulative effect of change
in tax accounting method... -- -- 234,742
Minority interest in earnings
of consolidated
subsidiaries............... -- 13,570 15,793
-------------- -------------- --------------
Net income................... $ 885,118 $ 375,358 $ 767,128
============== ============== ==============
Net income attributable to
common stock............... $ 830,087 $ 291,723 $ 673,099
============== ============== ==============
Net income per common share:
Basic...................... $ 1.56(1) $ 0.55(1) $ 1.23(1)
Diluted.................... 1.52(1) 0.54(1) 1.21(1)
Average diluted common shares
used to calculate earnings
per share:................. 556,759,023(1) 539,058,104(1) 585,045,390(1)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets............................... $185,687,190 $186,513,630 $165,493,281 $143,522,398 $137,328,541 $137,142,972
Available-for-sale securities........ 40,643,961 41,384,318 32,917,053 19,817,226 25,431,464 31,181,617
Held-to-maturity securities.......... 18,026,094 19,401,465 14,129,482 17,207,854 9,605,367 10,967,204
Loans, net of reserve for loan
losses............................. 113,655,154 113,497,225 108,370,906 97,624,348 92,943,126 85,335,568
Deposits............................. 80,596,348 81,129,768 85,492,141 83,429,433 87,509,358 88,019,469
Borrowings........................... 94,342,719 94,326,616 65,200,489 49,976,377 40,014,735 38,261,697
Stockholders' equity................. 8,551,765 9,052,679 9,344,400 7,601,085 7,426,137 8,421,102
</TABLE>
12
<PAGE>
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
------------------- --------------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
Cash dividends paid per common
share:
Pre-business combination(2).... $ 0.55 $ 0.47 $ 0.98 $ 0.82(1) $ 0.71(1) $ 0.60(1) $ 0.51(1)
Post-business combination(3)... 0.55 0.47 0.98 0.73(1) 0.66(1) 0.65(1) 0.51(1)
Common stock dividend payout
ratio.......................... 32.42% 30.67% 31.40% 29.32%(1)(3) 40.61%(1)(3) 94.12%(1)(3) 37.26%(1)
Return on average assets......... 1.03 1.06 1.04 0.96 0.63 0.28 0.56
Return on average stockholders'
equity......................... 21.78 18.91 19.66 16.62 11.73 4.70 10.02
Return on average common
stockholders' equity........... 21.78 18.91 19.66 16.67 11.95 3.95 10.14
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ----------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of stockholders'
equity total assets... 4.61% 4.85% 5.65% 5.30% 5.41% 6.14%
Diluted book value per
common share.......... $ 16.23(4) $ 16.18(4) $ 16.07(4) $ 13.23(4)(5) $ 12.52(4)(5) $ 13.31(5)
Number of common shares
outstanding at end of
period................ 538,780,421(4) 559,589,272(4) 581,408,525(4) 550,689,721(4)(5) 554,811,012(4)(5) 583,622,187(5)
</TABLE>
----------------------------------
(1) Net income per common share, average number of common shares and cash
dividends paid per common share for the periods presented have been adjusted
for a 3-for-2 stock split on June 1, 1998.
(2) Represents amounts paid by Washington Mutual without giving effect to
restatements for Washington Mutual's prior business combinations.
(3) Based on dividends paid and earnings of Washington Mutual after restatement
of financial statements for significant transactions accounted for as
poolings of interests.
(4) 12,000,000 shares of common stock issued to an escrow for the benefit of the
general and limited partners of Keystone Holdings and the FSLIC Resolution
Fund and their transferees were not included.
(5) Net of outstanding treasury shares and included potential conversion of
outstanding convertible preferred stock.
13
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA OF BANK UNITED CORP.
Bank United Corp. is providing the following historical selected financial
data to assist you in your analysis of the merger. Bank United Corp. derived the
financial information for the years ended and as of September 30, 1995 through
September 30, 1999 from its historical audited financial statements for these
fiscal years. Bank United Corp. derived the financial information for the nine
months ended June 30, 1999 and June 30, 2000 and as of June 30, 2000 from its
unaudited financial statements that include, in the opinion of management, all
normal and recurring adjustments that management considers necessary for a fair
statement of the results. The operating results for the nine months ended
June 30, 2000 are not necessarily indicative of the results that may be expected
for the year ended September 30, 2000. This information is only a summary and
you should read it in conjunction with Bank United Corp.'s consolidated
financial statements and notes thereto contained in Bank United Corp.'s annual
report on Form 10-K which has been incorporated in this proxy
statement/prospectus by reference.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JUNE 30, YEAR ENDED SEPTEMBER 30,
----------------------- --------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income...................... $ 936,686 $ 731,898 $1,007,986 $ 905,800 $ 816,483 $ 816,900 $ 750,861
Interest expense..................... 626,802 481,576 658,365 615,047 547,914 586,210 554,045
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net interest income.................. 309,884 250,322 349,621 290,753 268,569 230,690 196,816
Provision for loan losses............ 35,964 18,085 38,368 20,123 18,107 16,489 24,791
Noninterest income................... 111,271 88,953 119,961 81,653 84,004 96,797 104,718
Noninterest expense.................. 215,709 174,246 249,645 192,478 175,388 242,149 186,105
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes and
extraordinary items................ 169,482 146,944 181,569 159,805 159,078 68,849 90,638
Income tax expense (benefit)......... 57,471 55,015 53,659 25,862 60,986 (75,487) 37,545
Extraordinary items, net of federal
income tax effect (early
extinguishment of debt)............ -- -- -- -- 2,323 -- --
Preferred stock dividends and payment
in lieu of dividends............... 13,689 13,689 18,253 18,253 18,253 24,666 10,977
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income........................... $ 98,322 $ 78,240 $ 109,657 $ 115,690 $ 77,516 $ 119,670 $ 42,116
========== ========== ========== ========== ========== ========== ==========
Net income attributable to common
stock.............................. $ 91,166 $ 78,240 $ 107,955 $ 115,690 $ 77,516 $ 119,670 $ 42,116
========== ========== ========== ========== ========== ========== ==========
Net income per common share:
Basic.............................. $ 2.81 $ 2.42 $ 3.34 $ 3.59 $ 2.41 $ 4.01 $ 1.43
Diluted............................ 2.77 2.37 3.28 3.51 2.38 3.81 1.33
Average number of diluted shares used
to calculate net income per
share.............................. 32,895,691 32,932,949 32,940,965 32,975,769 32,535,715 29,927,387 29,481,113
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
JUNE 30, ------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets............................... $ 18,197,572 $ 16,244,679 $ 13,781,055 $ 12,054,368 $ 10,789,852 $ 12,042,812
Available-for-sale securities........ 752,358 820,146 577,580 1,104,153 1,094,342 464,122
Held-to-maturity securities.......... 280,750 327,394 465,470 549,797 637,477 2,058,137
Loans, net of reserve for loan
losses............................. 14,970,413 13,116,202 10,867,897 9,046,400 7,563,867 8,293,365
Deposits............................. 8,819,413 7,508,502 6,894,227 5,571,402 5,404,385 5,475,976
Borrowings........................... 7,992,962 7,329,132 5,827,261 5,525,081 4,439,940 5,671,726
Stockholders' equity................. 827,731 753,414 691,394 604,462 536,387 500,736
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
JUNE 30, YEAR ENDED SEPTEMBER 30,
------------------- --------------------------------------------------------------------
2000 1999 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
Cash dividends paid per common
share:
Pre-business combination(1)...... $ 0.56 $ 0.51 $ 0.69 $ 0.64 $ 0.56 $ 3.46(4) $ --(5)
Post-business combination........ 0.56 0.51 0.69 0.64 0.55 3.35(4) --(5)
Common stock dividend payout
ratio.......................... 19.76% 20.92% 20.72% 17.89% 22.83% 83.56%(4) --%(5)
Return on average assets(2)...... 0.87 0.84 0.85 1.04 0.86 1.28 0.51
Return on average stockholders'
equity......................... 15.44 14.50 14.81 17.81 13.53 22.98 8.80
Return on average common
stockholders' equity........... 15.44 14.50 14.81 17.81 13.53 22.98 8.80
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
JUNE 30, ------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of stockholders' equity to
total assets....................... 4.55% 4.64% 5.02% 5.01% 4.97% 4.16%
Diluted book value per common
share.............................. $ 25.49 $ 23.22 $ 21.47 $ 18.77 $ 17.96 $ 16.99
Number of common shares outstanding
at end of period(3)................ 32,476,697 32,448,926 32,196,712 32,177,554 32,208,643 29,474,020
</TABLE>
----------------------------------
(1) Amounts paid by acquired companies prior to their combination with Bank
United Corp. were not included.
(2) Return on average assets is net income without deduction of minority
interest, divided by average total assets.
(3) Excludes treasury shares.
(4) Higher dividends were paid in 1996 due to the initial public offering that
occurred in August 1996.
(5) No dividends were paid in 1995.
15
<PAGE>
SELECTED UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following table sets forth unaudited pro forma combined financial data
that gives effect to the merger of Bank United Corp. and Washington Mutual,
accounted for as a purchase as if it had been consummated as of January 1, 1999.
The pro forma income statement data for the first six months of fiscal 2000
combines the actual results of Washington Mutual for the six months ended
June 30, 2000 and the actual results of Bank United Corp. for the six months
ended March 31, 2000. The pro forma income statement data for the 1999 fiscal
year combines the actual results of Washington Mutual for the fiscal year ended
December 31, 1999 and the actual results of Bank United Corp. for the fiscal
year ended September 30, 1999. The allocation of fair values of Bank United
Corp.'s assets, intangible assets and liabilities are only preliminary
allocations based on Bank United Corp.'s June 30, 2000 balance sheet. Final
determination of these allocations will be made as of the effective time of the
merger. The information in the following table is presented for informational
purposes and is not necessarily indicative of the financial position or the
results of operations of the combined company that actually would have occurred
had the merger been consummated as of the dates or at the beginning of the
periods presented. This information is also not necessarily indicative of the
future financial position or future results of operations of the combined
company.
This information should be read in conjunction with, and is qualified in its
entirety by reference to, the historical consolidated financial statements and
the related notes of Washington Mutual and Bank United Corp. incorporated by
reference in this proxy statement/prospectus.
[EXPLANATORY NOTE: PRO FORMA INFORMATION IS NOT REQUIRED UNDER REG. S-X.
HOWEVER, BANK UNITED CORP. AND WASHINGTON MUTUAL WILL COMPLETE THESE TABLES
PRIOR TO EFFECTIVENESS.]
PRO FORMA COMBINED
<TABLE>
<CAPTION>
FIRST SIX MONTHS OF FISCAL 2000
------------------------------------------------------------
PRO FORMA PRO FORMA
ADJUSTMENTS INCLUDING
WASHINGTON BANK UNITED ------------------- BANK UNITED
MUTUAL CORP. DEBIT CREDIT CORP.
---------- ----------- -------- -------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income............................
Provision for loan losses......................
Noninterest income (expense), net..............
Income taxes...................................
Net income.....................................
Net income attributable to common stock........
Net income per common share:
Basic........................................
Diluted......................................
Average number of shares used to calculate net
income per common share:
Basic........................................
Diluted......................................
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
1999 FISCAL YEAR
------------------------------------------------------------
PRO FORMA PRO FORMA
ADJUSTMENTS INCLUDING
WASHINGTON BANK UNITED ------------------- BANK UNITED
MUTUAL CORP. DEBIT CREDIT CORP.
---------- ----------- -------- -------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net interest income............................
Provision for loan losses......................
Noninterest income (expense), net..............
Income taxes...................................
Minority interest..............................
Net income.....................................
Net income attributable to common stock........
Net income per common share:
Basic........................................
Diluted......................................
Average number of shares used to calculate net
income per common share:
Basic........................................
Diluted......................................
</TABLE>
<TABLE>
<CAPTION>
JUNE 30, 2000
------------------------------------------------------------
PRO FORMA PRO FORMA
ADJUSTMENTS INCLUDING
WASHINGTON BANK UNITED ------------------- BANK UNITED
MUTUAL CORP. DEBIT CREDIT CORP.
---------- ----------- -------- -------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets.........................................
Loans, net of reserve for loan losses..........
Deposits.......................................
Borrowings.....................................
Stockholders' equity...........................
Loans originated during the six months ended
June 30, 2000................................
Nonperforming assets...........................
Reserve for loan losses as a percentage of:
Nonaccrual loans.............................
Nonperforming assets.........................
</TABLE>
17
<PAGE>
RISK FACTORS RELATING TO THE CPR CERTIFICATES
IN CONSIDERING WHETHER TO VOTE IN FAVOR OF THE BANK UNITED CORP.
REORGANIZATION, YOU SHOULD CONSIDER ALL OF THE INFORMATION WE HAVE INCLUDED IN
THIS DOCUMENT AND ITS APPENDICES AND ALL OF THE INFORMATION INCLUDED IN THE
DOCUMENTS WE HAVE INCORPORATED BY REFERENCE. IN ADDITION, YOU SHOULD PAY
PARTICULAR ATTENTION TO THE FOLLOWING RISKS RELATED TO THE CPR CERTIFICATES THAT
WILL BE DISTRIBUTED TO HOLDERS OF BANK UNITED CORP. COMMON STOCK IN THE BANK
UNITED CORP. REORGANIZATION. SEE "THE CONTINGENT PAYMENT RIGHTS TRUST AND
CERTIFICATES." UNLESS OTHERWISE INDICATED, REFERENCES TO BANK UNITED CORP. IN
THIS PROXY STATEMENT/ PROSPECTUS ALSO REFER TO WASHINGTON MUTUAL UPON COMPLETION
OF THE WASHINGTON MUTUAL MERGER.
HOLDERS OF CPR CERTIFICATES WILL NOT CONTROL THE FORBEARANCE LITIGATION.
The declaration of trust governing the terms and conditions of the
contingent payment rights trust will provide that the litigation trustees have
the right to instruct Bank United Corp. and Bank United, and the successors of
both of them, with respect to the forbearance litigation (see "The Contingent
Payment Rights Trust and Certificates--The Forbearance Litigation"), including,
among other things, to dismiss, settle or cease prosecuting the litigation at
any time without regard to the impact of any such settlement on the value of the
CPR Certificates and without obtaining any cash or other recovery. See "The
Contingent Payment Rights Trust and Certificates--Management of the Forbearance
Litigation." The declaration of trust will also provide that the certificate
holders will not have any rights against the litigation trustees for any
decision regarding the conduct or disposition of the forbearance litigation,
including, without limitation, any decision to dispose of the litigation without
obtaining a cash or other recovery, unless it is established in a final judicial
determination by clear and convincing evidence that any decision or action of
the litigation trustees was undertaken with deliberate intent to injure the
certificate holders or with reckless disregard for the best interests of these
holders and, in any event, any liability will be limited to actual, proximate,
quantifiable damages. Although the litigation trustees currently intend to cause
Bank United Corp. and Bank United to continue to prosecute the forbearance
litigation and to seek a cash recovery, we cannot assure you that the litigation
trustees will not make a different determination in the future. We also cannot
assure you that either of the initial litigation trustees, both of whom have
knowledge of the facts underlying the litigation, will remain a litigation
trustee. The CPR certificate holders will have no rights to elect, remove or
replace any litigation trustee.
THE AMOUNT AND TYPE OF DAMAGES FROM THE FORBEARANCE LITIGATION IS UNKNOWN.
The forbearance litigation presents issues as to the amount, if any, and
type of damages that may be recoverable by the plaintiffs. See "The Contingent
Payment Rights Trust and Certificates--The Forbearance Litigation--Damages."
Although Bank United Corp. and Bank United were granted a favorable summary
judgment on the issue of liability, that judgment is likely to be appealed by
the federal government. Further, the court has not ruled on the amount, if any,
and type of damages. The United States has argued in similar cases that some or
all of the damages as to which recovery is sought by the plaintiffs are too
speculative to permit a recovery. For these and related reasons, we cannot
assure you as to the amount, if any, and type of damages that may be recovered.
Without limiting the generality of the foregoing, we cannot assure you that Bank
United Corp. or Bank United will obtain any monetary recovery in the forbearance
litigation, or, if there is a recovery, when it will be obtained. The delay in
receiving any recovery could be very lengthy.
PROCEEDS FROM THE FORBEARANCE LITIGATION MUST COVER THE EXPENSES, COSTS AND
REIMBURSEMENT AND INDEMNIFICATION OBLIGATIONS OF THE TRUSTS PRIOR TO
DISTRIBUTION TO THE HOLDERS OF CPR CERTIFICATES.
We cannot be certain how or when the forbearance litigation will be resolved
and when, if ever, Bank United Corp. or Bank United will receive cash or other
payments in respect of the litigation, or whether the value of any such recovery
will exceed the contingent payment rights trust's reimbursement
18
<PAGE>
obligations and any other expenses of the trusts. See "The Contingent Payment
Rights Trust and Certificates--The Commitment Agreement." Any proceeds of the
litigation will first be applied to the reimbursement of amounts for expenses of
the trusts advanced to the trusts by, as well as certain liabilities incurred
by, Bank United Corp. or its subsidiaries in connection with the trusts. The
litigation proceeds might not exceed the amount to be reimbursed. In addition,
after it receives a payment of any amounts payable under the commitment
agreement, the contingent payment rights trust will be obligated to hold and not
distribute to the holders of the CPR Certificates, a portion of the proceeds for
[ONE] year, or such longer period as the litigation trustees reasonably
determine may be necessary to cover all expenses, costs, claims and
indemnification obligations of the contingent payment rights trust which may be
incurred or which may arise after any and all amounts payable to the trust under
the commitment agreement are paid in full. See "The Contingent Payment Rights
Trust and Certificates--Description of the CPR Certificates--Expenses and
Retained Amount."
Even in the event that a favorable final judgment or settlement is obtained,
it is possible that some or all damages will be in the form of non-cash
proceeds, in which case Bank United Corp. will be obligated to monetize such
non-cash proceeds pursuant to the instructions of the litigation trustees. We
cannot assure you that Bank United Corp. will be able to convert such non-cash
proceeds into cash or, even if possible, that the cash obtained will be the
equivalent of the fair market value of the non-cash proceeds.
Even in the event that Bank United or Bank United Corp. receive cash
proceeds or monetizable non-cash proceeds that exceed the amount of the required
reimbursements, it is possible that Bank United. may not have sufficient funds
to pay any portion of its obligations under the commitment agreement to the
trusts when due.
THE CONTINGENT PAYMENT RIGHTS WILL BE SUBORDINATED TO THE CLAIMS OF SECURED
CREDITORS OF BANK UNITED CORP. OR ITS SUCCESSORS AND THEIR SUBSIDIARIES IN ANY
BANKRUPTCY OR INSOLVENCY PROCEEDING.
The payment trust's entitlement to payment of the commitment amount
represents a general unsecured senior obligation of Bank United Corp. that will
rank pari passu in right of payment with all existing and future senior
unsecured indebtedness of Bank United Corp. and will not have a preferential
entitlement to payment from the proceeds of the forbearance litigation payable
to Bank United Corp. Because Bank United Corp. is, and Washington Mutual
immediately after the Washington Mutual merger will be, a holding company with
no material assets other than the stock of its subsidiaries and the forbearance
litigation, Bank United Corp.'s cash flow, and consequently its ability to meet
its obligations to the payment trust from sources other than the portion of the
proceeds of the forbearance litigation which is payable to Bank United Corp.,
will depend upon the cash flows of its subsidiaries and the payment of funds by
such subsidiaries to Bank United Corp. in the form of loans, dividends or
otherwise. Thus the payment trust's claim to payment from sources other than the
portion of the proceeds of the forbearance litigation payable to Bank United
Corp. will also be effectively subordinated to all liabilities of subsidiaries
of Bank United Corp. In particular, because Bank United, though a plaintiff, is
not a party to the commitment agreement, the payment trust's entitlement to
payment of the portion of the proceeds of the forbearance litigation payable to
Bank United will be subordinated to the liabilities of Bank United.
Any right of Bank United Corp. to participate in any distribution of assets
of its subsidiaries upon the liquidation, reorganization or insolvency of any
such subsidiary (and the consequent right of the holders of CPR Certificates to
participate in the distribution of those assets) will be subject to the prior
claims of the creditors of the respective subsidiaries.
The claims of the contingent payment rights trust will also be effectively
subordinated in right of payment to any secured debt of Bank United Corp. to the
extent of the assets of Bank United Corp. serving as security for such secured
debt.
19
<PAGE>
Under applicable provisions of the United States Bankruptcy Code (the
"Bankruptcy Code") or comparable provisions of state fraudulent transfer or
conveyance laws, a court could void, in whole or in part, the issuance of the
CPR Certificates and entry into the commitment agreement, or in the alternative,
subordinate the CPR Certificates to existing and future indebtedness of Bank
United Corp., if Bank United Corp., at the time it issued the CPR Certificates
and entered into the commitment agreement, (i) incurred such obligations with
intent to hinder, delay or defraud creditors or (ii) (a) received less than
reasonably equivalent value or fair consideration for incurring such obligations
and (b) (1) was insolvent at the time of incurrence, (2) was rendered insolvent
by reason of such incurrence, (3) was engaged or was about to engage in a
business or transaction for which the assets remaining with Bank United Corp.
constituted unreasonably small capital to carry on its businesses or
(4) intended to incur, or believed that it would incur, debts beyond its ability
to pay its debts as they mature.
The analysis of insolvency for purposes of the foregoing would vary
depending upon the law applied in such case. Generally, however, Bank United
Corp. would be considered insolvent if the sum of its debts, including
contingent liabilities, was greater than all of its assets at fair valuation or
if the present fair saleable value of its assets was less than the amount that
would be required to pay the probable liability on its existing debts, including
contingent liabilities, as they become absolute and matured. While there can be
no assurance that a court passing on such questions would agree with Bank United
Corp.'s view, Bank United Corp. believes that, for purposes of all such
insolvency, bankruptcy and fraudulent transfer or conveyance laws, the CPR
Certificates are being issued without the intent to hinder, delay or defraud
creditors and for proper purposes and in good faith and that Bank United Corp.,
after issuing the CPR Certificates and entering into the commitment agreement,
will be solvent, will have sufficient capital for carrying on its business and
will be able to pay its debts as they mature.
If Bank United Corp. were to become a debtor in a proceeding under the
Bankruptcy Code, it is possible that a court could terminate the commitment
agreement or the litigation trustee's control over the forbearance litigation or
otherwise seek to limit the rights of the payment trust and contingent payment
trust under the commitment agreement.
Pursuant to the commitment agreement (see "The Contingent Payment Rights
Trust and Certificates--The Commitment Agreement"), to the extent that Bank
United is not permitted due to regulatory restrictions to distribute to Bank
United Corp. any portion of the litigation proceeds it receives (and provided
that certain other conditions are met), Bank United Corp. will not be obligated
to pay any such portion of the litigation proceeds to the trusts for a period of
up to 90 days after receipt. In addition, applicable laws, rules or regulations
governing savings and loan holding companies then in effect could limit or
prevent payments by Bank United Corp. under the commitment agreement.
IF THE PROCEEDS FROM THE FORBEARANCE LITIGATION ARE NOT ADEQUATE TO COVER FEES
AND EXPENSES, THE HOLDERS OF CPR CERTIFICATES WILL NOT RECEIVE A DISTRIBUTION
OR MAY HAVE THEIR INTEREST DILUTED BY THE ISSUANCE OF ADDITIONAL CPR
CERTIFICATES.
The contingent payment rights trust will incur a variety of expenses,
including the costs of prosecuting the forbearance litigation (including the
fees and expenses of counsel, experts and consultants), compensation of the
institutional trustee (a third party that will be retained to administer the
trust), Delaware trustee (as required under Delaware law) and the litigation
trustees, the contingent payment rights trust's indemnification and
reimbursement obligations (see "The Contingent Payment Rights Trust and
Certificates--Indemnification, Reimbursement and Limitations on Liability") and
the cost of liability insurance for the contingent payment rights trust's
indemnification and reimbursement obligations and any liabilities of the
litigation trustees. It is possible that the amounts to be forwarded by Bank
United Corp. or its successors will not be sufficient to cover these fees and
expenses.
20
<PAGE>
The contingent payment rights trust may issue additional CPR Certificates
that represent pro rata interests in the assets of the contingent payment rights
trust in order to pay these expenses. See "The Contingent Payment Rights Trust
and Certificates--Expenses and Retained Amount." However, we cannot assure you
that the contingent payment rights trust will be able to find purchasers of the
additional certificates or that the terms of any purchases would be reasonable.
In the event the contingent payment rights trust issues additional certificates
and existing certificate holders are not given the opportunity to purchase, or
do not purchase, a pro rata amount in any such issuance, the existing
certificate holders' indirect interest in the payment amount will be diluted.
The contingent payment rights trust will be authorized to borrow additional
funds for the sole purpose of funding its expenses, but only if such borrowings
represent debt of the contingent payment rights trust and not ownership
interests for federal income tax purposes. Furthermore, it may not be possible
for the contingent payment rights trust to borrow funds or, if it is able to
borrow funds, on terms which are reasonable.
THERE ARE LIMITATIONS ON THE RIGHTS OF CPR CERTIFICATE HOLDERS.
The declaration of trust of the contingent payment rights trust will provide
that the litigation trustees will have no liability to holders of CPR
Certificates unless it is established in a final judicial determination by clear
and convincing evidence that any action or omission of the litigation trustees
was undertaken with deliberate intent to injure the certificate holders or with
reckless disregard for the best interests of the certificate holders and, in any
event, any liability will be limited to actual, proximate, quantifiable damages.
In addition, the declaration of trust will provide that the institutional
trustee and the Delaware trustee to the contingent payment rights trust will
have no liability to the holders of CPR Certificates other than for acts or
omissions committed with gross negligence or willful misconduct. See "The
Contingent Payment Rights Trust and Certificates--Indemnification, Reimbursement
and Limitations on Liability."
The commitment agreement, the declaration of trust of the contingent payment
rights trust and the CPR Certificates also will provide that the trustees, their
affiliates and the members of the Bank United Corp. litigation committee will
have no liability to the holders of CPR Certificates. Further, none of the
certificate holders, the trustees or the contingent payment rights trust will
have the right to enforce, institute or maintain any suit, action or proceeding
against the trustees, their affiliates or the members of the supervisory board,
if formed, relating to the formation of the contingent payment rights trust, the
entering into of the commitment agreement, the distribution of the CPR
Certificates, the forbearance litigation or the performance by the litigation
trustees of their duties as litigation trustees. Notwithstanding the foregoing,
the trusts, or the litigation trustees on behalf of the trusts, may enforce,
institute or maintain a suit, action or proceeding against Bank United Corp. for
breach of the commitment agreement, including by failure to pay the commitment
amount provided by that agreement and the declarations of trust for each of the
payment trust and the contingent payment rights trust, or failure to deliver any
CPR Certificate required to be returned.
The declaration of trust of the contingent payment rights trust will provide
that no CPR Certificate holder will have the right to enforce, institute or
maintain any suit, action or proceeding under the declaration of trust to
enforce or otherwise act in respect of the CPR Certificates unless the holder
has previously given written notice to the litigation trustees of the substance
of such dispute, and holders of at least a majority in interest of the issued
and outstanding CPR Certificates have given written notice to the parties of
their support of the institution of the proceeding to resolve the dispute.
The declaration of trust of the contingent payment rights trust will also
provide that the CPR certificate holders will have no voting rights, except in
connection with certain amendments to the declaration of trust and except for
limited rights in connection with the removal of the institutional trustee and
the Delaware trustee to the contingent payment rights trust, no liquidation
preference and no rights to dividends or distributions other than their pro rata
share of the payment amount plus any
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other trust assets. In addition, the contingent payment rights trust will have
no assets other than the commitment agreement and any funds raised by the
contingent payment rights trust.
THERE IS NO EXISTING TRADING MARKET FOR THE CPR CERTIFICATES, THERE MAY NEVER BE
AN ACTIVE TRADING MARKET FOR THE CPR CERTIFICATES AND, EVEN IF AN ACTIVE
TRADING MARKET DEVELOPS, THERE COULD BE WIDE FLUCTUATIONS IN THE MARKET PRICE
OF THE CPR CERTIFICATES.
There is currently no market for the CPR Certificates. Bank United Corp., on
behalf of the contingent payment rights trust, will apply for inclusion of the
certificates on the Nasdaq National Market under the symbol "[ ]". However, we
cannot assure you that the CPR Certificates will satisfy the listing
requirements for inclusion on the Nasdaq National Market or any other trading
market. In the event that the certificates cannot be listed on any trading
market, there likely would be only minimal or no trading channels for the CPR
Certificates, and the holders would have very limited or possibly no liquidity
in the CPR Certificates. Even if such listing is achieved, we cannot assure you
that an active market for the certificates would develop or be sustained.
The market price of the CPR Certificates may depend on a number of factors,
including without limitation the nature of court decisions and opinions in the
forbearance litigation and similar cases that may be decided prior to the
conclusion of the litigation and speculation about the outcome of the
forbearance litigation and similar cases, settlement of any similar cases and
the ability of Bank United Corp. or its successors to pay the commitment amount
to the payment trust. Consequently, there could be wide fluctuations in the
market price of the CPR Certificates over short periods of time. The contingent
payment rights trust will include reports of developments in the forbearance
litigation in its regular, periodic securities filings and reports. However,
important developments in the forbearance litigation and similar cases may occur
and become known publicly prior to disclosure in filings or reports.
The nature of an investment in the CPR Certificates differs from the nature
of an investment in a savings and loan holding company, such as Bank United
Corp. or Washington Mutual. Some current Bank United Corp. stockholders may
therefore determine that investment in the CPR Certificates does not comport
with their investment criteria or, in the case of corporate or institutional
stockholders, that such an investment may be restricted by their charters. Such
determinations by Bank United Corp.'s significant stockholders, or by a large
number of Bank United Corp. stockholders, may result in rapid divestment of
certificates by these stockholders, causing temporary selling pressure that
would adversely affect the price of the certificates for some period following
the effective time of the merger.
THE CONTINGENT PAYMENT RIGHTS TRUST'S ABILITY TO DISCLOSE INFORMATION REGARDING
THE FORBEARANCE LITIGATION MAY BE LIMITED.
The contingent payment rights trust will file annual and quarterly reports
that will include an overview of the status of the forbearance litigation, and
will also file reports upon the occurrence of material judicial decisions in the
litigation or in the event of any agreement to settle the litigation. The
contingent payment rights trust's ability to disclose details of the litigation
may be limited, however, by the inherent nature and rules of judicial
proceedings, including among other things proceedings and filings that are
sealed by the court, matters involving attorney-client privilege and proceedings
that are conducted on a confidential basis by agreement of the parties, such as
settlement negotiations. See "The Contingent Payment Rights Trust and
Certificates--Filing of Exchange Act Reports."
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THE BANK UNITED CORP. SPECIAL MEETING
GENERAL
This proxy statement/prospectus and related form of proxy are first being
mailed by Bank United Corp. to holders of Bank United Corp. common stock and
Bank United Corp. 8% Corporate Premium Equity Securities ("Bank United Corp.
PIES") on or about , 2000 in connection with the solicitation of
proxies by the Bank United Corp. board of directors for use at the special
meeting to be held on at at , and at any
adjournments or postponements of the meeting.
MATTERS TO BE CONSIDERED
The purpose of the special meeting is to consider and vote on (1) a proposal
to approve and adopt the reorganization plan of merger, dated September 28,
2000, by and between Bank United Corp. and CPR Merger Corporation, a
wholly-owned subsidiary of Bank United Corp., providing for the reorganization
of Bank United Corp. through the merger CPR Merger Corporation with and into
Bank United Corp., and (2) a proposal to approve and adopt the merger agreement,
dated August 18, 2000, by and between Bank United Corp. and Washington Mutual,
providing for the merger of Bank United Corp. into Washington Mutual.
Bank United Corp. stockholders must approve both of these proposals for the
Bank United Corp. reorganization and the Washington Mutual merger to occur.
Under the merger agreement between Bank United Corp. and Washington Mutual,
completion of the Washington Mutual merger is conditioned upon completion of the
Bank United Corp. reorganization. If the stockholders fail to approve either of
these proposals, neither the Bank United Corp. reorganization nor the Washington
Mutual merger will occur.
PROXIES
Bank United Corp. stockholders should fill out and send back the
accompanying form of proxy even if they are able to attend the special meeting
in person. Bank United Corp. stockholders may revoke their proxies at any time
before they are exercised by:
- delivering written notice of revocation to Bank United Corp.'s corporate
secretary;
- completing and submitting a later-dated proxy card; or
- attending the special meeting and voting in person.
Written notices of revocation and other communications with respect to the
solicitation or revocation of proxies should be addressed to Bank United Corp.,
care of Randolph C. Henson, Secretary, 3200 Southwest Freeway, Suite 2600,
Houston, Texas, 77251. All shares represented by valid proxies received and not
revoked before they are exercised will be voted in the manner specified in the
proxies. If no specification is made, the proxies will be voted for approval of
the reorganization plan of merger and the merger agreement. No proxy that is
voted against the reorganization plan of merger or the merger agreement will be
voted for any adjournment or postponement of the special meeting for the purpose
of soliciting more proxies. However, if a stockholder abstains from voting on
the adoption of the reorganization plan of merger and the merger agreement and
makes no specification on an adjournment or postponement for the purpose of
soliciting more proxies, then the proxies may be voted for the adjournment or
postponement.
SOLICITATION OF PROXIES
Bank United Corp. will bear the entire cost of soliciting proxies, except
that Bank United Corp. and Washington Mutual will share equally the amount of
filing fees, printing costs and other expenses
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incurred in connection with the cost of filing, printing and distributing this
proxy statement/prospectus and related materials. In addition to solicitation by
mail, the directors, officers, and employees of Bank United Corp. may, without
additional compensation, solicit proxies from Bank United Corp. stockholders by
telephone, facsimile, or other electronic means or in person. Bank United Corp.
will make arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send the proxy materials to the beneficial owners of Bank United
Corp. common stock held of record by these persons. Bank United Corp. will
reimburse these custodians, nominees, and fiduciaries for their reasonable
expenses in connection with the solicitation of proxies. MacKenzie
Partners, Inc., a proxy solicitation firm, will assist Bank United Corp. in
soliciting proxies and will be paid a fee of approximately $ .
VOTES REQUIRED
The Bank United Corp. board of directors has fixed , 2000 as the
record date for determining the Bank United Corp. stockholders entitled to
notice of and to vote at the Bank United Corp. special meeting. Therefore, only
stockholders of record at the close of business on the record date will receive
this notice and be able to vote at the Bank United Corp. special meeting. At the
close of business on the record date, there were shares of Bank
United Corp. common stock and Bank United Corp. PIES outstanding.
Each share of common stock is entitled to one vote and each of the outstanding
Bank United Corp. PIES is entitled to one tenth of one vote at the meeting.
Shares representing a majority of the outstanding voting power must be present
at the special meeting, either in person or by proxy, in order for there to be a
quorum at the special meeting. There must be a quorum in order for the vote on
the proposals to occur.
Shares of Bank United Corp. stock present in person at the Bank United Corp.
special meeting but not voting, and shares for which Bank United Corp. has
received proxies but with respect to which holders of these shares have
abstained, will be counted as present at the special meeting for purposes of
determining whether a quorum exists. Brokers who hold shares in nominee or
"street" name for customers who are the beneficial owners of the shares may not
give a proxy to vote shares held for these customers without specific
instructions from them. However, broker non-votes will be counted as present at
the special meeting for purposes of determining whether a quorum exists.
Under Delaware law, shares representing a majority of the outstanding voting
power entitled to vote at the Bank United Corp. special meeting must vote "for"
both proposals in order for them to be adopted by Bank United Corp. BECAUSE
APPROVAL OF BOTH PROPOSALS REQUIRES THE AFFIRMATIVE VOTE OF THE OUTSTANDING
SHARES REPRESENTING A MAJORITY OF THE VOTING POWER OF THE BANK UNITED CORP.
STOCK ENTITLED TO VOTE AT THE SPECIAL MEETING, ABSTENTIONS AND BROKER NONVOTES
WILL HAVE THE SAME EFFECT AS VOTING AGAINST THE PROPOSALS. THEREFORE, THE BANK
UNITED CORP. BOARD OF DIRECTORS URGES ITS STOCKHOLDERS TO COMPLETE, DATE, AND
SIGN THE ACCOMPANYING PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED, POSTAGE-PAID
ENVELOPE.
As of the record date, Bank United Corp.'s directors and executive officers
beneficially owned shares of Bank United Corp. common stock and
Bank United Corp. PIES which entitles them to exercise approximately
percent of the voting power of the Bank United Corp. stock entitled to
vote at the special meeting. Bank United Corp. expects that each of these
directors and executive officers will vote his or her shares in favor of both of
the proposals.
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THE BANK UNITED CORP. REORGANIZATION AND THE WASHINGTON MUTUAL MERGER
THIS SECTION DESCRIBES THE MATERIAL ASPECTS OF THE BANK UNITED CORP.
REORGANIZATION, THE WASHINGTON MUTUAL MERGER AND THE MERGER AND OPTION
AGREEMENTS RELATED TO THE WASHINGTON MUTUAL MERGER. WHILE WE BELIEVE THAT THIS
DESCRIPTION ADDRESSES THE MATERIAL TERMS OF THE BANK UNITED CORP.
REORGANIZATION, THE WASHINGTON MUTUAL MERGER AND THE RELATED TRANSACTIONS, THIS
SUMMARY MAY NOT CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. YOU
SHOULD READ THE REORGANIZATION PLAN OF MERGER FOR THE BANK UNITED CORP.
REORGANIZATION (ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS APPENDIX B) AND
THE MERGER AGREEMENT FOR THE WASHINGTON MUTUAL MERGER (ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS AS APPENDIX A) AND THE OTHER DOCUMENTS WE REFER TO
CAREFULLY FOR A MORE COMPLETE UNDERSTANDING OF THE TRANSACTIONS.
GENERAL
The merger agreement between Bank United Corp. and Washington Mutual
provides for the merger of Bank United Corp. with and into Washington Mutual
following the reorganization of Bank United Corp. through the merger of a
wholly-owned subsidiary of Bank United Corp. with and into Bank United Corp. At
the effective time of the Washington Mutual merger, the separate corporate
existence of Bank United Corp. will terminate and the surviving corporation of
the merger will be Washington Mutual.
THE BANK UNITED CORP. REORGANIZATION
Immediately prior to the Washington Mutual merger, Bank United Corp. will
effect a reorganization by merging a wholly owned subsidiary of Bank United
Corp. with and into itself. As a result of this reorganization, each share of
Bank United Corp. common stock outstanding at the effective time of this
reorganization, other than shares held by persons properly exercising
dissenters' appraisal rights (see "--Appraisal Rights"), will automatically
convert into (1) a corresponding share of new Bank United Corp. common stock and
(2) the right to receive a CPR Certificate, as described below under "The
Contingent Payment Rights Trust and Certificates." In addition, each share of
Bank United Corp. PIES outstanding at the effective time of this reorganization
will cease to represent the obligation to purchase Bank United Corp. common
stock and instead will be converted automatically into the obligation to
purchase new shares of Bank United Corp. common stock and one CPR Certificate
for each share of new Bank United Corp. common stock purchased. Also as a result
of this reorganization, each option to purchase shares of Bank United Corp.
common stock outstanding at the effective time of this reorganization will
automatically be converted into an option to purchase a corresponding number of
shares of new Bank United Corp. common stock and CPR Certificates.
THE WASHINGTON MUTUAL MERGER CONSIDERATION
CONVERSION OF BANK UNITED CORP. COMMON STOCK. At the effective time of the
Washington Mutual merger, each share of Bank United Corp. common stock (as such
shares are constituted after the Bank United Corp. reorganization), other than
shares held in Bank United Corp.'s treasury, will automatically convert into the
right to receive 1.3 shares of Washington Mutual common stock, together with the
"rights" attached to these shares.
CONVERSION OF THE BANK UNITED CORP. PIES. At the effective time of the
Washington Mutual merger, each of the outstanding Bank United Corp. PIES
(including the shares of preferred stock issued in connection with the PIES) (as
such securities are constituted after the Bank United Corp. reorganization) will
automatically convert into the right to receive one of Washington Mutual's PIES
(including the shares of Washington Mutual preferred stock to be issued in
connection with these PIES). The terms of the Washington Mutual PIES and related
preferred stock are described below in "Description of the Washington Mutual
PIES", "Description of the Purchase Contracts" and "Description of the Preferred
Stock.".
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TREASURY STOCK AND SHARES HELD BY WASHINGTON MUTUAL OR BANK UNITED
CORP. Each outstanding share of Bank United Corp. common stock and Bank United
Corp. PIES held in Bank United Corp.'s treasury or owned directly or indirectly
by Washington Mutual or Bank United Corp. or their subsidiaries (other than
shares held in a fiduciary or nominee capacity and beneficially owned by third
parties and shares held in respect of a previous debt) will be canceled at the
effective time of the merger without the payment of any consideration.
CONVERSION OF BANK UNITED CORP. COMMON STOCK OPTIONS. At the effective time
of the Washington Mutual merger, each outstanding and unexercised option (vested
or unvested) to purchase shares of Bank United Corp. common stock and CPR
Certificates (as such options are constituted after the Bank United Corp.
reorganization) will automatically convert into a fully-vested option to
purchase (a) 1.3 shares (rounded to the nearest share) of Washington Mutual
common stock for each share of Bank United Corp. common stock purchasable under
the original option and (b) one CPR Certificate for each 1.3 shares of
Washington Mutual common stock for which the option is exercised. The exercise
price per share of Washington Mutual common stock under each option will be
equal to the quotient of (a) the exercise price per share under the Bank United
Corp. option, divided by (b) 1.3 (rounded to the nearest cent). Except for the
number of shares and the exercise price, each converted option will have the
same terms as the Bank United Corp. stock option from which it was converted.
BACKGROUND OF THE MERGER
The management of Bank United Corp. has periodically explored and assessed,
and discussed with the Bank United Corp. board of directors, strategic options
for Bank United Corp. These options included a range of strategies for the
growth of Bank United Corp.'s business, both through business and marketing
initiatives and by targeted acquisitions of other financial institutions. In
addition, Bank United Corp. has considered, in view of the accelerating trend
toward consolidation in the banking and thrift industry both in Texas and
nationwide, the possibility of a strategic business combination involving Bank
United Corp. and a variety of financial institutions of equivalent or larger
size.
From time to time beginning in March 2000, representatives of Bank United
Corp. and Washington Mutual informally discussed the possibility of a business
combination between the two companies, but did not discuss the specific terms of
a possible combination. Also during this time, Goldman Sachs, as Bank United
Corp.'s financial advisor, contacted other companies that it believed might be
interested in discussing the possibility of a business combination with Bank
United Corp., although none of these contacts resulted in any advanced
discussions regarding the potential terms of such a combination.
In May and June 2000, Barry Burkholder, Chief Executive Officer of Bank
United Corp., and Kerry Killinger, Chief Executive Officer of Washington Mutual
met telephonically in an attempt to advance these informal discussions.
Messrs. Burkholder and Killinger recognized the potential strategic value of a
combination between their companies. At that meeting, Messrs. Burkholder and
Killinger discussed a number of the issues potentially presented by such a
transaction, including the structure of the transaction, the form of
consideration, valuation ranges, the exchange ratio, treatment of the Bank
United Corp. forbearance litigation and management issues with respect to the
combined entity and forbearance litigation. Although no agreement was reached on
the definitive terms of such a transaction, Messrs. Burkholder and Killinger
agreed that further discussions should take place to determine if an agreement
on definitive terms could be reached.
During the following month, further discussions took place between the
senior management of Bank United Corp. and Washington Mutual with respect to the
terms of a possible business combination. Working with their respective
financial advisors, Bank United Corp. and Washington Mutual discussed the
outline of the terms of a possible business combination, including a range of
possible exchange ratios, the need to determine the exchange ratio independently
of the value
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attributable to any expected recovery in the Bank United Corp. forbearance
litigation and the desire to structure any combination as a stock-for-stock
merger that would qualify as a "reorganization" for purposes of Section 368(a)
of the Internal Revenue Code. From time to time during this period,
Mr. Burkholder and other members of Bank United Corp.'s senior management
informally updated certain of the members of the Bank United Corp. board of
directors as to the status of the discussions with Washington Mutual.
Beginning in late July and continuing through August 11, 2000, Mr. Lewis
Ranieri, Chairman of the Bank United Corp. board of directors, together with
Mr. Burkholder and Mr. Jonathon Heffron, Bank United Corp.'s Chief Operating
Officer and General Counsel, negotiated many of the key terms of the transaction
with Washington Mutual, including the exchange ratio and the general means of
addressing the potential value of the Bank United Corp. forbearance litigation.
During the period from August 4, 2000, to August 18, 2000 the executive
management of Bank United Corp. and Washington Mutual and their respective
financial advisors continued negotiations with respect to the other definitive
terms of a merger. Also during this period, the parties began negotiating a
merger agreement, a stock option agreement and the employment agreements
described in this document under "--Interests of Certain Persons in the
Merger--Employment Agreements." The parties also discussed the structure
relating to the treatment of Bank United Corp.'s forbearance litigation and,
upon finalizing that structure, the parties began to negotiate the terms of the
declaration of trust for the contingent payment trust and the commitment
agreement related to that trust, as well as the litigation management agreements
described in this document under "--Interests of Certain Persons in the
Merger--Litigation Trustee Agreements." Also during this period, representatives
of Washington Mutual conducted due diligence investigations of Bank United
Corp., and representatives of Bank United Corp. conducted due diligence
investigations of Washington Mutual.
On August 18, 2000, the Bank United Corp. board of directors held a special
meeting to discuss the proposed transaction. At this meeting, the board of
directors heard management presentations, and asked questions of management,
regarding the reasons for and potential benefits of the mergers and related
transactions (including those reasons set forth under the heading "--Reasons of
Bank United Corp. for the Merger; Recommendation of the Bank United Corp. Board
of Directors" and other business issues related to the proposed merger
agreement. Bank United Corp.'s board of directors also reviewed the financial
terms of the proposed merger in detail, the proposed accounting and tax
treatment of the transaction, the proposed post-closing employment agreements
with Messrs. Burkholder, Nocella and Coben, the proposed arrangements with
respect to the management of the Bank United Corp. forbearance litigation, and
the amendment to Mr. Lewis Ranieri's consulting agreement with Bank United
Corp., and also reviewed financial and other information relating to Washington
Mutual and pro forma information for the combined company. Goldman Sachs also
reviewed for the Bank United Corp. board of directors the various valuation
methodologies it had used in connection with its assessment of the proposed
transaction and then rendered to the Bank United Corp. board of directors its
opinion that, based upon and subject to various assumptions, the merger
consideration was fair, from a financial point of view, to the holders of the
outstanding shares of common stock of Bank United Corp. See "--Opinion of Bank
United Corp.'s Financial Advisor." Bank United Corp.'s legal advisors then
reviewed for Bank United Corp.'s board of directors the key provisions of the
merger agreement, the stock option agreement and the agreements providing for
the issuance and governance of the CPR Certificates. Bank United Corp.'s legal
advisors also reviewed for Bank United Corp.'s board of directors the proposed
employment and litigation management arrangements described in this document
under "--Interests of Certain Persons in the Merger." Following discussion and
questions to Bank United Corp.'s executive management and Bank United Corp.'s
financial and legal advisors, the Bank United Corp. board of directors
unanimously approved the merger agreement, the stock option agreement and the
other matters and transactions contemplated by those agreements.
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On August 18, 2000, Washington Mutual held a special meeting of its board of
directors. Members of Washington Mutual's management team, its legal counsel,
and representatives of Lehman Brothers, Inc., and its financial advisor, also
attended. Washington Mutual's management team and legal counsel explained the
terms of the merger agreement and the option agreement, as well as the reasons
for and potential benefits of the merger to the board. Lehman Brothers reviewed
the various valuation methodologies it had used in connection with its
assessment of the merger and then rendered its opinion to the board of directors
that the merger was fair from a financial point of view to the stockholders of
Washington Mutual. After a discussion of the merger agreement and the
contemplated merger, the Washington Mutual board then approved, by the unanimous
vote of all the directors present, the merger agreement and the merger.
REASONS OF BANK UNITED CORP. FOR THE BANK UNITED CORP. REORGANIZATION AND
THE WASHINGTON MUTUAL MERGER; RECOMMENDATION OF THE BANK UNITED CORP. BOARD
OF DIRECTORS
The Bank United Corp. board of directors believes that the proposed
reorganization of Bank United Corp. and merger with Washington Mutual and other
transactions contemplated by the reorganization plan of merger and the merger
agreement are fair to, and in the best interests of, Bank United Corp. and its
stockholders. Accordingly, the Bank United Corp. board has approved the
reorganization plan of merger and the merger agreement and unanimously
recommends that Bank United Corp. stockholders vote for the adoption of these
agreements.
In making this determination, the board considered a number of factors,
including the following:
(1) the board's familiarity with Bank United Corp.'s business, operations,
financial condition, earnings and prospects;
(2) the board's conclusion that, in view of the trend toward consolidation
in the financial services industry, the Washington Mutual merger would provide
Bank United Corp. stockholders with an opportunity for continued equity
participation in a larger enterprise;
(3) the board's understanding of the business, operations, financial
condition, earnings and prospects of Washington Mutual. In making its
determination, the Bank United Corp. board took into account the result of Bank
United Corp.'s due diligence review of Washington Mutual;
(4) the consideration Bank United Corp. stockholders will receive if the
merger is completed, including the premium of 21% to the average closing price
of Bank United Corp. common stock for the 30 trading days ended August 15, 2000,
based on the average closing price of Washington Mutual common stock over that
period;
(5) the fact that Bank United Corp. stockholders will retain certain rights
in any final judgment or settlement of Bank United Corp.'s forbearance
litigation against the United States by virtue of their ownership of CPR
Certificates, as described below in "The Contingent Payment Rights Trust and
Certificates."
(6) the presentation of Goldman Sachs & Co. to the board on August 18, 2000,
including Goldman Sachs' oral opinion that the merger consideration was fair,
from a financial point of view, to the holders of outstanding shares of common
stock of Bank United Corp.;
(7) the historical performance of Washington Mutual's common stock and
Washington Mutual's historical financial performance;
(8) the board's review of other strategic alternatives potentially available
to Bank United Corp.;
(9) the terms and conditions of the merger agreement, including the fact
that Bank United Corp.'s obligation to consummate the merger is conditioned upon
the establishment of the contingent payment trust and the issuance of the CPR
Certificates, as described below in "The Contingent
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Payment Rights Trust and Certificates," and the receipt of an opinion from Bank
United Corp.'s legal counsel that the Washington Mutual merger will be
accomplished on a tax-free basis for Bank United Corp. stockholders for U.S.
federal income tax purposes (except for cash received instead of fractional
shares);
(10) the general impact of the transaction on Bank United Corp.'s
constituencies, including the limited disruption of employment of Bank United
Corp. employees as a result of the limited geographic overlap of Bank United
Corp. and Washington Mutual, the positive impact of the transaction on Bank
United Corp.'s customers expected to result from the expanded product and
service offerings of Washington Mutual and Washington Mutual's support for the
communities in which it conducts business;
(11) the likelihood that the Washington Mutual merger will be approved by the
appropriate regulatory authorities;
(12) the employment, benefit and retention arrangements involving various
employees of Bank United Corp. agreed to in connection with the Washington
Mutual merger, including the employment agreements with Messrs. Burkholder,
Nocella and Coben, and the litigation management agreements with
Messrs. Jonathon K. Heffron and Salvatore A. Ranieri, as well as the amendment
to Mr. Lewis S. Ranieri's consulting agreement with Bank United Corp. agreed to
in connection with the merger; and
(13) the judgment and advice of Bank United Corp.'s senior management.
This discussion of the factors considered by the Bank United Corp. board is
not intended to be exhaustive. However, it does include all of the material
factors considered by the Bank United Corp. board in approving the merger
agreement and reorganization plan of merger contemplated by that agreement and
recommending that Bank United Corp. stockholders vote to adopt the
reorganization plan of merger and the merger agreement. In reaching this
determination, the Bank United Corp. board did not assign any relative or
specific weights to the individual factors. Individual directors may have
weighed the individual factors differently.
The Bank United Corp. board believes that the reorganization of Bank United
Corp. and the merger with Washington Mutual are in the best interests of Bank
United Corp. and its stockholders. ACCORDINGLY, THE BANK UNITED CORP. BOARD
UNANIMOUSLY RECOMMENDS THAT BANK UNITED CORP.'S STOCKHOLDERS VOTE FOR APPROVAL
AND ADOPTION OF THE REORGANIZATION PLAN OF MERGER AND THE MERGER AGREEMENT AND
THE TRANSACTIONS CONTEMPLATED BY THOSE AGREEMENTS, INCLUDING THE BANK UNITED
CORP. REORGANIZATION AND THE WASHINGTON MUTUAL MERGER.
OPINION OF BANK UNITED CORP.'S FINANCIAL ADVISOR
On August 18, 2000, Goldman Sachs delivered its oral opinion to the board of
directors of Bank United Corp. that as of the date of that opinion, the merger
consideration was fair from a financial point of view to the holders of the
outstanding shares of common stock of Bank United Corp. Goldman Sachs
subsequently confirmed its earlier oral opinion by delivery of its written
opinion dated August 18, 2000.
THE FULL TEXT OF THE WRITTEN OPINION OF GOLDMAN SACHS DATED AUGUST 18, 2000,
WHICH IDENTIFIES ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE
REVIEW UNDERTAKEN IN CONNECTION WITH THE OPINION, IS ATTACHED AS APPENDIX E.
STOCKHOLDERS OF BANK UNITED CORP. ARE URGED TO, AND SHOULD, READ THIS OPINION IN
ITS ENTIRETY.
In connection with its opinion, Goldman Sachs reviewed, among other things:
- the merger agreement,
29
<PAGE>
- the Annual Reports to Stockholders and Annual Reports on Form 10-K of Bank
United Corp. and Washington Mutual for the five fiscal years ended
September 30, 1999 and for the five years ended December 31, 1999,
respectively,
- various interim reports to stockholders and Quarterly Reports on
Form 10-Q of Bank United Corp. and Washington Mutual,
- various other communications from Bank United Corp. and Washington Mutual
to their respective stockholders, and
- various internal financial analyses and forecasts for Bank United Corp.
and Washington Mutual prepared by their respective managements, including
certain cost savings and operating synergies projected by the management
of Washington Mutual to result from the merger.
Goldman Sachs also held discussions with members of the senior managements
of Bank United Corp. and Washington Mutual regarding their assessment of the
strategic rationale for, and the potential benefits of, the merger and the past
and current business operations, financial condition, and future prospects of
their respective companies. In addition, Goldman Sachs:
- reviewed the reported price and trading activity for Bank United Corp.
common stock and Washington Mutual common stock,
- compared certain financial and stock market information for Bank United
Corp. and Washington Mutual with similar information for other companies
the securities of which are publicly traded,
- reviewed the financial terms of certain recent business combinations in
the thrift industry specifically and in other industries generally, and
- performed such other studies and analyses as it considered appropriate.
Goldman Sachs relied upon the accuracy and completeness of all of the
financial and other information discussed with or reviewed by it and assumed its
accuracy and completeness for purposes of rendering its opinion. In addition,
Goldman Sachs did not review individual credit files or make an independent
evaluation or appraisal of the assets and liabilities of Bank United Corp. or
Washington Mutual or any of their subsidiaries (including any derivative or off
balance sheet assets or liabilities of Bank United Corp. or Washington Mutual or
any of their subsidiaries) and Goldman Sachs was not furnished with any such
evaluation or appraisal. Goldman Sachs is not an expert in the valuation of loan
portfolios for purposes of assessing the adequacy of the allowances for losses
with respect thereto and it assumed, with the consent of Bank United Corp.'s
board of directors, that these allowances for Washington Mutual are adequate to
cover all such losses. Goldman Sachs also assumed that all material
governmental, regulatory or other consents and approvals necessary for the
consummation of the merger will be obtained without any adverse effect on Bank
United Corp., Washington Mutual or on the contemplated benefits of the
transaction. Goldman Sachs did not express any opinion as to the prices at which
the CPR Certificates may trade if and when they are issued. The advisory
services and opinion of Goldman Sachs was provided for the information and
assistance of the board of directors of Bank United Corp. in connection with the
merger and its opinion does not constitute a recommendation as to how any
stockholder of Bank United Corp. should vote with respect to the Bank United
Corp. reorganization and the Washington Mutual merger.
The following is a summary of the material financial analyses used by
Goldman Sachs in connection with providing its oral opinion to Bank United
Corp.'s board of directors on August 18, 2000. Goldman Sachs utilized
substantially the same type of financial analyses in connection with providing
the written opinion attached as Appendix E.
THE FOLLOWING SUMMARIES OF FINANCIAL ANALYSES INCLUDE INFORMATION PRESENTED
IN TABULAR FORMAT. YOU SHOULD READ THESE TABLES TOGETHER WITH THE TEXT OF EACH
SUMMARY.
30
<PAGE>
1. TRANSACTION ANALYSIS. Goldman Sachs calculated the value of each share
of Bank United common stock assuming:
- an exchange ratio of 1.3 Washington Mutual shares and one CPR Certificate
for each Bank United Corp. share,
- closing prices on August 15, 2000 for the common stock of each of Bank
United Corp. and Washington Mutual of $39.69 and $34.19, respectively, and
- publicly available financial data as of June 30, 2000.
Based on these assumptions, Goldman Sachs determined that one share of Bank
United Corp. common stock would be valued at $44.44 assuming a CPR Certificate
value of $0, and $47.44 assuming a CPR Certificate value of $3, compared to the
closing price of Bank United Corp. common stock of $39.69 on August 15, 2000.
Goldman Sachs did not analyze the value or likelihood of any potential
settlement or judgment in the Bank United Corp. forbearance litigation. It
implied a value to the settlement based on the market value of publicly traded
securities involving goodwill litigations. The value range for the CPR
Certificates of $0 to $3 does not reflect any opinion as to the prices at which
the CPR Certificates may trade if and when issued or the value or likelihood of
any potential settlement or judgment in the Bank United Corp. forbearance
litigation.
Goldman Sachs also calculated various multiples assuming earnings per share
for fiscal years 2000 and 2001 based on the Institutional Brokers Estimate
System median estimates. Based upon this assumption, Goldman Sachs calculated
the total consideration offered pursuant to the merger agreement as a multiple
of Bank United Corp.'s:
- earnings per share for estimated fiscal years 2000 and 2001 based on the
Institutional Brokers Estimate System median estimates for Bank United
Corp., and
- book value and tangible book value per share based on publicly available
information for Bank United Corp. as of June 30, 2000.
The total consideration offered pursuant to the merger agreement would
represent a multiple of:
- 11.4x estimated fiscal year 2000 earnings per share assuming a value of
the CPR Certificates of $0,
- 12.2x estimated fiscal year 2000 earnings per share assuming a value of
the CPR Certificates of $3,
- 10.3x estimated fiscal year 2001 earnings per share, assuming a value of
the CPR Certificates of $0,
- 11.0x estimated fiscal year 2001 earnings per share, assuming a value of
the CPR Certificates of $3,
- 1.7x book value per share as of June 30, 2000, assuming a value of the CPR
Certificates of $0,
- 1.9x book value per share as of June 30, 2000, assuming a value of the CPR
Certificates of $3,
- 1.9x tangible book value per share as of June 30, 2000, assuming a value
of the CPR Certificates of $0, and
- 2.1x tangible book value per share as of June 30, 2000, assuming a value
of the CPR Certificates of $3.
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<PAGE>
Goldman Sachs also calculated the core deposit premium for the transaction
by dividing:
- the total consideration offered pursuant to the merger agreement based on
the closing price for Washington Mutual common stock on August 15, 2000
less tangible book value of Bank United Corp. as publicly reported by Bank
United Corp. as of June 30, 2000, by
- core deposits as publicly reported by Bank United Corp. as of June 30,
2000.
Goldman Sachs also calculated the core deposit premium for Bank United Corp.
using the market capitalization of Bank United Corp. as of August 15, 2000 based
on the closing price for Bank United Corp. common stock on August 15, 2000, the
tangible book value of Bank United Corp. as publicly reported by Bank United
Corp. as of June 30, 2000, and publicly available core deposits as of March 31,
2000.
Such analyses indicated that the merger represented a core deposit premium
of 12% assuming a value of the CPR Certificates of $0, and 13% assuming a value
of the CPR Certificates of $3, whereas the core deposit premium for Bank United
Corp. using similar data represented a premium of 8.4%.
2. PREMIUM ANALYSIS. Goldman Sachs calculated the premium of the total
consideration offered pursuant to the merger agreement, assuming a value of the
CPR Certificates of $0 to $3, over:
- the closing price per share of Bank United Corp. using closing prices for
Bank United Corp. and Washington Mutual common stock for each of the
thirty business days ended August 15, 2000,
- the closing price of Bank United Corp. using closing prices for Bank
United Corp. and Washington Mutual common stock on August 15, 2000 of
$39.69 and $34.19, respectively, and
- the closing price for Bank United Corp. using the average closing price
for Bank United Corp. for the thirty business days ended August 15, 2000
and the closing price for Washington Mutual common stock as of August 15,
2000.
Such analyses indicated that the total consideration pursuant to the merger
agreement represented a premium of:
- 6% to 25%, with a median of 14%, to the closing price per share of Bank
United Corp. common stock for each of the thirty business days ended
August 15, 2000 using the closing price for each of Bank United Corp. and
Washington Mutual common stock for each of the thirty business days ended
August 15, 2000 and assuming a value of the CPR Certificates of $0,
- 8% to 28%, with a median of 17%, to the closing price per share of Bank
United Corp. common stock for each of the thirty business days ended
August 15, 2000 using the closing price for each of Bank United Corp. and
Washington Mutual common stock for each of the thirty business days ended
August 15, 2000 and assuming a value of the CPR Certificates of $1,
- 11% to 31%, with a median of 19%, to the closing price per share of Bank
United Corp. common stock for each of the thirty business days ended
August 15, 2000 using the closing price for each of Bank United Corp. and
Washington Mutual common stock for each of the thirty business days ended
August 15, 2000 and assuming a value of the CPR Certificates of $2,
- 14% to 34%, with a median of 22%, to the closing price per share of Bank
United Corp. common stock for each of the thirty business days ended
August 15, 2000 using the closing price for each of Bank United Corp. and
Washington Mutual common stock for each of the thirty business days ended
August 15, 2000 and assuming a value of the CPR Certificates of $3,
- 12% to the closing price of Bank United Corp. common stock on August 15,
2000 using the closing prices for Bank United Corp. and Washington Mutual
common stock on August 15, 2000 and assuming a value of the CPR
Certificates of $0,
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<PAGE>
- 20% to the closing price of Bank United Corp. common stock on August 15,
2000 using the closing prices for Bank United Corp. and Washington Mutual
common stock on August 15, 2000 and assuming a value of the CPR
Certificates of $3,
- 21% to the average closing market price for Bank United Corp. common stock
using the average closing price for Bank United Corp. common stock for the
thirty business days ended August 15, 2000 and the closing price for
Washington Mutual common stock August 15, 2000 and assuming a value of the
CPR Certificates of $0, and
- 30% to the average closing market price Bank United Corp. common stock
using the average closing prices for each of Bank United Corp. and
Washington Mutual common stock for the thirty business days ended
August 15, 2000 and assuming a value of the CPR Certificates of $3.
3. PRO FORMA MERGER ANALYSIS. Goldman Sachs prepared pro forma analyses of
the financial impact of the merger using earnings estimates for Bank United
Corp. and Washington Mutual prepared by Washington Mutual and estimates provided
by Institutional Brokers Estimate System. For each of the years 2001 and 2002,
Goldman Sachs analyzed the impact on Washington Mutual's:
- earnings per share under accounting principles generally accepted in the
United States, or GAAP, and
- cash earnings per share.
Based on estimates provided by Washington Mutual, the proposed transaction
would be:
- slightly dilutive to Washington Mutual's stockholders on a GAAP earning
per share basis in both fiscal year 2001 and 2002, and
- accretive to Washington Mutual's stockholders on a cash earning per share
basis in both fiscal year 2001 and 2002.
Based on estimates provided by Institutional Brokers Estimate System, the
proposed transaction would be:
- moderately dilutive to Bank United Corp.'s stockholders on a GAAP earning
per share basis in fiscal year 2001 and accretive in fiscal year 2002,
- accretive to Washington Mutual's stockholders on a cash earning per share
basis in both fiscal year 2001 and 2002.
In addition based on the current dividend paid on the Bank United Corp.
common stock of $0.74 per share and the Washington Mutual common stock of $1.16
per share, Bank United Corp. stockholders would receive a dividend of $1.51 per
Bank United Corp. share. This represents an increase of 104% in dividend income
over the current Bank United Corp. dividend.
4. SELECTED COMPANIES ANALYSIS. Goldman Sachs reviewed and compared certain
financial information relating to Bank United Corp. and Washington Mutual to
corresponding financial information, ratios and public market multiples for the
following eleven publicly traded corporations in the thrift industry:
- Golden West Financial Corporation
- Charter One Financial, Inc.
- Banknorth Group, Inc.
- GreenPoint Financial Corporation
- Golden State Bancorp, Inc.
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<PAGE>
- Dime Bancorp, Incorporated
- Sovereign Bancorp, Inc.
- Astoria Financial Corporation
- Webster Financial Corporation
- Roslyn Bancorp, Inc.
- Commercial Federal Corporation
Goldman Sachs reviewed and compared the same financial information relating
to Bank United Corp. and Washington Mutual to the following nine publicly traded
corporations in the banking industry:
- Bank One Corporation
- Comerica Incorporated
- AmSouth Bancorporation
- Regions Financial Corporation
- SouthTrust Corporation
- Compass Bancshares, Inc.
- Cullen/Frost Bankers, Inc.
- Colonial BancGroup, Inc.
- Southwest Bancorporation of Texas, Inc.
The selected companies were chosen because they are the largest publicly
traded thrifts or have a similar regional focus as Bank United Corp.
Goldman Sachs also calculated and compared various financial multiples and
ratios based on information it obtained from SEC filings and street research
estimates. These analyses were based on financial data for the twelve months
ended June 30, 2000 and market data and earnings estimates were based on
information and estimates as of August 15, 2000.
Goldman Sachs' analyses compared the estimated calendar year 2000 and 2001
price/earnings ratios for the selected thrifts and selected banks to estimates
for Bank United Corp. and Washington Mutual. The results of these analyses for
the selected thrifts are summarized as follows:
<TABLE>
<CAPTION>
SELECTED THRIFTS*
--------------------- BANK UNITED WASHINGTON
PRICE/EARNINGS RATIO: RANGE MEDIAN CORP.* MUTUAL*
--------------------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
2000............................... 6.9x-14.4x 9.6x 10.6x 9.8x
2001............................... 6.2x-12.6x 8.6x 9.5x 8.4x
</TABLE>
------------------------
* Based on Institutional Brokers Estimate System estimates.
34
<PAGE>
The results for the selected banks are summarized as follows:
<TABLE>
<CAPTION>
SELECTED BANKS*
--------------------- BANK UNITED WASHINGTON
PRICE/EARNINGS RATIO: RANGE MEDIAN CORP.* MUTUAL*
--------------------- ---------- -------- ----------- ----------
<S> <C> <C> <C> <C>
2000............................... 9.1x-21.6x 10.9x 10.6x 9.8x
2001............................... 8.2x-18.8x 9.5x 9.5x 8.4x
</TABLE>
------------------------
* Based on Institutional Brokers Estimate System estimates.
Goldman Sachs also considered:
- the five-year estimated earnings per share growth rate provided by
Institutional Brokers Estimate System,
- the ratio of market price to tangible book value per share,
- the core deposit premium,
- the ratio of tangible common equity to tangible assets,
- the return on average assets, and
- the return on average common equity.
The results of these analyses for the selected thrifts are summarized as
follows:
<TABLE>
<CAPTION>
SELECTED THRIFTS
----------------------- BANK UNITED WASHINGTON
RANGE MEDIAN CORP. MUTUAL
------------ -------- ----------- ----------
<S> <C> <C> <C> <C>
5 year earnings per share growth rate........... 10.0%-15.0% 11.0% 12.0% 12.5%
Price/tangible book value per share............. 1.4%-2.6% 2.3% 1.7% 2.5%
Core deposit premium*........................... 4.3%-21.4% 14.5% 8.4% 17.5%
Tangible common equity/tangible assets.......... 1.7%-8.2% 5.3% 4.1% 4.0%
Return on average assets........................ 0.2%-1.6% 1.0% 0.9% 1.0%
Return on average common equity................. 3.8%-22.2% 15.2% 18.8% 21.1%
</TABLE>
------------------------
* A portion of the core deposits for the selected thrifts were based on
March 31, 2000 information.
The results of these analyses for the selected banks are summarized as
follows:
<TABLE>
<CAPTION>
SELECTED BANKS
----------------------- BANK UNITED WASHINGTON
RANGE MEDIAN CORP. MUTUAL
------------ -------- ----------- ----------
<S> <C> <C> <C> <C>
5 year earnings per share growth rate........... 9.0%-15.0% 11.0% 12.0% 12.5%
Price/tangible book value per share............. 1.5%-4.5% 2.4% 1.7% 2.5%
Core deposit premium*........................... 6.4%-31.5% 19.4% 8.4% 17.5%
Tangible common equity/tangible assets.......... 5.4%-7.5% 6.4% 4.1% 4.0%
Return on average assets........................ 0.3%-1.8% 1.2% 0.9% 1.0%
Return on average common equity................. 3.8%-22.1% 18.2% 18.8% 21.1%
</TABLE>
------------------------
* A portion of the core deposits for the selected thrifts were based on
March 31, 2000 information.
5. SELECTED TRANSACTIONS ANALYSIS. Goldman Sachs analyzed certain
information relating to the following 33 selected transactions in the industry
since February 18, 1999:
SELECTED TRANSACTIONS IN 2000
- the acquisition of Premier National Bancorp by M&T Bank,
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<PAGE>
- the acquisition of Brenton Banks by Wells Fargo,
- the acquisition of Keystone Financial by M&T Bank,
- the acquisition of First United Bancshares by BancorpSouth,
- the acquisition of First Security by Wells Fargo,
- the acquisition of CCB Financial Corp. by National Commerce Bancorp,
- the acquisition of One Valley Bancorp by BB&T Corp.,
- the acquisition of First Commerce Bancshares by Wells Fargo, and
- the acquisition of Anchor Financial by Carolina First Corp.
SELECTED TRANSACTIONS IN 1999
- the acquisition of National Bancorp of Alaska by Wells Fargo,
- the acquisition of Carolina First Bancshares by First Charter Corp.,
- the acquisition of Grand Premier First by Old Kent Financial Corp.,
- the acquisition of Reliance Bancorp by North Folk Bancorp,
- the acquisition of Triangle Bancorp Inc. by Centura Banks Inc.,
- the acquisition of JSB Financial Inc. by North Folk Bancorp,
- the acquisition of Premier Bancshares by BB&T Corp.,
- the acquisition of JeffBanks Inc. by Hudson United Bancorp,
- the acquisition of UST Corporation by Royal Bank of Scotland,
- the acquisition of CNB Bancshares by Fifth Third Bancorp,
- the acquisition of Mahoning National Bancorp by Sky Financial Group,
- the acquisition of Banknorth by Peoples Heritage,
- the acquisition of First American by AmSouth,
- the acquisition of Western Bancorp by US Bancorp,
- the acquisition of St. Paul Bancorp by Charter One Financial,
- the acquisition of Republic New York by HSBC Holdings,
- the acquisition of Pioneer Bancorp by Zion Bancorp,
- the acquisition of Mercantile Bancorp by Firstar,
- the acquisition of First Liberty Financial by BB&T Corp.,
- the acquisition of F&M Bancorp by Citizens Banking,
- the acquisition of BankBoston by Fleet Financial,
- the acquisition of Republic Banking Corp. by Union Planters Corp.,
- the acquisition of Prime Bancorp Inc. by Summit Bancorp, and
- the acquisition of Bank of Commerce by U.S. Bancorp.
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<PAGE>
Goldman Sachs' analyses of the selected transactions compared the following
to the results for the proposed transaction:
- the ratio of transaction price to book value,
- the ratio of transaction price to tangible book value,
- the ratio of transaction price to earnings per share for the last twelve
months,
- the percentage of tangible book premium to core deposits, and
- the percentage premium or discount of the transaction price to market
price.
The results of these analyses for 1999 are summarized as follows:
<TABLE>
<CAPTION>
PROPOSED PROPOSED
SELECTED TRANSACTIONS IN 1999 TRANSACTION TRANSACTION
------------------------------------ CPR CERTIFICATE CPR CERTIFICATE
RANGE MEAN MEDIAN VALUE $0* VALUE $3*
----------- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Deal price/book value................. 1.5x-5.1x 3.1x 3.2x 1.7x 1.9x
Deal price/tangible book value........ 1.5x-5.1x 3.4x 3.4x 1.9x 2.1
Deal price/LTM earnings per share..... 12.3x-33.0x 22.1x 22.3x 12.1 12.9
Tangible book premium/core deposit.... 14.9x-48.1% 29.6% 30.9% 12% 13%
Premium (Discount)/market............. (6.3)x-71.7% 30.6% 27.9% 12% 20%
</TABLE>
------------------------
* Goldman Sachs did not analyze the value or likelihood of any potential
settlement or judgment in the Bank United Corp. forbearance litigation. It
implied a value to the settlement based on the market value of publicly
traded securities involving goodwill litigations. The value range for the
CPR Certificates of $0 to $3 does not reflect any opinion as to the prices
at which the CPR Certificates may trade if and when issued or the value or
likelihood of any potential settlement or judgment in the Bank United Corp.
forbearance litigation.
The results of these analyses for 2000 are summarized as follows:
<TABLE>
<CAPTION>
PROPOSED PROPOSED
SELECTED TRANSACTIONS IN 2000 TRANSACTION TRANSACTION
------------------------------------ CPR CERTIFICATE CPR CERTIFICATE
RANGE MEAN MEDIAN VALUE $0* VALUE $3*
----------- -------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Deal price/Book value................. 1.6x-3.3x 2.2x 1.9x 1.7x 1.9x
Deal price/Tangible book value........ 1.9x-3.3x 2.3x 2.0x 1.9x 2.1
Deal price/LTM earnings per share..... 10.2x-21.6x 15.1x 15.1x 12.1 12.9
Tangible book premium/Core deposit.... 11.5x-24.7% 16.4% 16.6% 12% 13%
Premium (Discount)/Market............. (5.7)x-57.0% 30.1% 30.5% 12% 20%
</TABLE>
------------------------
* Goldman Sachs did not analyze the value or likelihood of any potential
settlement or judgment in the Bank United Corp. forbearance litigation. It
implied a value to the settlement based on the market value of publicly
traded securities involving goodwill litigations. The value range for the
CPR Certificates of $0 to $3 does not reflect any opinion as to the prices
at which the CPR Certificates may trade if and when issued or the value or
likelihood of any potential settlement or judgment in the Bank United Corp.
forbearance litigation.
6. DIVIDEND DISCOUNT MODEL. Using a divided discount model, Goldman Sachs
estimated the net present value of the future streams of after-tax cash flows
that Washington Mutual could produce on a stand alone-basis from 2000 through
2005. In this analysis, Goldman Sachs used Institutional Brokers Estimate System
estimates for 2000 and 2001 and assumed that Washington Mutual's earnings would
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<PAGE>
grow thereafter at annual rates ranging from 8%, 10% and 12%. For each growth
rate, Goldman Sachs calculated the sum of:
- the estimated 2000-2005 aggregate dividends paid, projected such that
Washington Mutual's dividend payout ratio would be maintained at 20.6% and
discounted to present values at assumed discount rates ranging from 11% to
17%, and
- the terminal values per share of Washington Mutual common stock based on
assumed multiples of Washington Mutual's 2005 earnings ranging from 8x to
14x.
The discounted cash flow analysis indicated a reference range of $25 to $64 per
share of Washington Mutual common stock, compared to the closing price of
Washington Mutual common stock on August 15, 2000 of $39.69 per share.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analyses as a whole, could create an incomplete view of the processes
underlying Goldman Sachs' opinion. In arriving at its fairness determination,
Goldman Sachs considered the results of all such analyses. No company or
transaction used in the above analyses as a comparison is directly comparable to
Bank United Corp. or Washington Mutual or the contemplated transaction.
The analyses were prepared solely for purposes of Goldman Sachs' providing
its opinion to the Bank United Corp. board of directors as to the fairness from
a financial point of view to the holders of the outstanding shares of common
stock of Bank United Corp. These analyses do not purport to be appraisals or
necessarily reflect the prices at which businesses or securities actually may be
sold. Analyses based upon forecasts of future results are not necessarily
indicative of actual future results, which may be significantly more or less
favorable than suggested by such analyses. Because such analyses are inherently
subject to uncertainty, being based upon numerous factors or events beyond the
control of the parties or their respective advisors, none of Bank United Corp.,
Washington Mutual, Goldman Sachs or any other person assumes responsibility if
future results are materially different from those forecast.
As described above, Goldman Sachs' opinion to the board of directors of Bank
United Corp. was one of many factors taken into consideration by the Bank United
Corp. board of directors in making its determination to approve the merger
agreement. The foregoing summary does not purport to be a complete description
of the analyses performed by Goldman Sachs attached as Appendix G.
Goldman Sachs, as part of its investment banking business, is continually
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes. Goldman Sachs is
familiar with Bank United Corp., having acted as its financial advisor in
connection with, and having participated in certain negotiations leading to, the
merger agreement.
Goldman Sachs has also provided certain investment banking services to
Washington Mutual from time to time, including having acted as financial advisor
in Washington Mutual's September 1997 divestiture of W.M. Life Insurance
Company, as co-manager in Washington Mutual's August 1999 offering of 7.50%
Notes, and as lead manager in Washington Mutual's April 2000 offering of 8.25%
Subordinated Notes. Goldman Sachs may also provide investment banking services
to Washington Mutual in the future.
Goldman Sachs provides a full range of financial, advisory and brokerage
services and in the course of its normal trading activities may from time to
time effect transactions and hold positions in
38
<PAGE>
the securities or options on securities of Bank United Corp. and/or Washington
Mutual for its own account and for the account of customers.
Pursuant to a letter agreement dated December 8, 1999, Bank United Corp.
engaged Goldman Sachs to act as its financial advisor in connection with the
contemplated transaction. Pursuant to the terms of this engagement letter, Bank
United Corp. has agreed to pay Goldman Sachs upon consummation of the merger a
transaction fee 0.75% of the aggregate consideration paid by the acquirer.
Bank United Corp. has agreed to reimburse Goldman Sachs for its reasonable
out-of-pocket expenses, including attorneys' fees, and to indemnify Goldman
Sachs against certain liabilities, including certain liabilities under the
federal securities laws.
REASONS OF WASHINGTON MUTUAL FOR THE MERGER
Washington Mutual's board of directors believes that the merger with Bank
United Corp. will expand Washington Mutual's presence in the State of Texas and
allow it to capitalize on the growth potential of the Texas market. Washington
Mutual and Bank United Corp. share similar consumer banking strategies and have
compatible deposit products. Washington Mutual's board of directors also
believes that the commercial banking operations of Bank United Corp. will help
expand Washington Mutual's commercial banking segment.
In reaching its conclusions, Washington Mutual's board of directors
considered, among other things: (a) information concerning the financial
performance and condition, business operations, capital level and asset quality
of Bank United Corp. and projected results and prospects of Washington Mutual
and Bank United Corp. on a combined basis, including anticipated cost savings;
(b) the terms of the merger agreement, including the mutual covenants and
conditions and the circumstances under which Washington Mutual would receive a
termination fee; (c) the likelihood of obtaining the regulatory approvals
required to consummate the merger; and (d) the effect of the merger on the
depositors, employees, customers and communities served by Washington Mutual.
EFFECTIVE TIME OF THE MERGER
The Washington Mutual merger will become effective on the date and time set
forth in the certificate of merger filed with the Secretary of State of Delaware
and the articles of merger filed with the Secretary of State of Washington. The
parties will file the articles and certificate of merger on the first business
day following the fifth business day after the last of the conditions to closing
the merger has been satisfied, or any other date as Washington Mutual and Bank
United Corp. may mutually agree. The merger agreement may be terminated by
either party if, among other reasons, the merger is not completed on or before
March 31, 2001, which date will be extended to June 30, 2001 if the failure is
solely due to the failure to obtain the requisite regulatory approvals. See
"--Conditions to the Completion of the Merger" and "--Termination of the Merger
Agreement" below.
EXCHANGE OF CERTIFICATES IN THE MERGER
By the effective time of the merger, Washington Mutual will deposit with an
exchange agent, for exchange under the terms of the merger agreement,
(a) certificates for the Washington Mutual common stock and PIES issuable, and
(b) an estimated amount of cash in lieu of fractional shares of Washington
Mutual common stock payable, to Bank United Corp. stockholders in the Washington
Mutual merger.
As soon as practicable after the effective time of the Washington Mutual
merger, the exchange agent will mail a form of transmittal letter to each Bank
United Corp. stockholder and instructions for the surrender of their
certificates in exchange for the merger consideration.
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<PAGE>
After the effective time of the merger, Bank United Corp. stockholders who
have submitted a completed and executed letter of transmittal and surrendered
all certificates representing shares of Bank United Corp. common stock and PIES
held by them, will receive (a) a certificate representing the number of shares
of Washington Mutual common stock, (b) a certificate representing the number of
Washington Mutual PIES, and (c) a check representing the amount of cash payable
in respect of fractional shares, which the holder is entitled to receive under
the merger agreement. No interest will be payable or accrue on the cash payable
in lieu of fractional shares.
No dividends or other distributions declared with respect to Washington
Mutual common stock with a record date after the effective time of the merger
will be paid to the holder of any Bank United Corp. stock certificate until the
Bank United Corp. certificate has been surrendered for exchange. Holders of Bank
United Corp. stock will be paid the amount of dividends or other distributions
with a record date after the effective time of the merger after they surrender
their Bank United Corp. certificates but will not be paid interest on any
dividends or distributions.
Any portion of the certificates and cash delivered to the exchange agent
which remains unclaimed after twelve months will be paid to Washington Mutual
upon its request. Thereafter, former Bank United Corp. stockholders who have not
yet complied with the procedure to exchange their Bank United Corp. stock
certificates for Washington Mutual stock certificates or cash will be able only
to look to Washington Mutual for payment or delivery of certificates
representing Washington Mutual common stock or PIES and cash. None of Washington
Mutual, Bank United Corp., the exchange agent, or any other person will be
liable to any former holder of Bank United Corp. common stock or PIES for any
amount properly delivered to a public official under applicable abandoned
property, escheat or similar laws.
If a Bank United Corp. stock certificate has been lost, stolen or destroyed,
the exchange agent will issue the shares of Washington Mutual common stock or
PIES and cash issuable in lieu of fractional shares in exchange for that
certificate upon receipt of an affidavit as to the loss, theft or destruction
and, if required by Washington Mutual, the posting of a bond in an amount that
Washington Mutual may determine is reasonably necessary.
For a description of the differences between the rights of the holders of
Washington Mutual common stock and PIES and Bank United Corp. common stock and
PIES, see "Comparison of Rights of Washington Mutual and Bank United Corp.
Stockholders" and "Certain Differences Between Washington and Delaware Corporate
Laws."
FRACTIONAL SHARES
No fractional shares of Washington Mutual common stock will be issued to any
holder of Bank United Corp. common stock upon consummation of the Washington
Mutual merger. In lieu of each fractional share that would otherwise be issued,
Washington Mutual will pay cash in an amount equal to the fraction multiplied by
the average of the closing sale prices of Washington Mutual common stock on the
New York Stock Exchange for the five trading days immediately preceding the
effective time of the merger. No interest will be paid or accrued on the cash
payable in lieu of fractional shares. No holder will be entitled to dividends,
voting rights or any other rights as a stockholder in respect of any fractional
share of Washington Mutual common stock that they otherwise would have been
entitled to receive. To determine any fractional share interests all shares of
Bank United Corp. common stock owned by any Bank United Corp. stockholder will
be combined so as to calculate the maximum number of shares of Washington Mutual
common stock issuable to that Bank United Corp. stockholder.
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THE CONTINGENT PAYMENT RIGHTS TRUST AND CERTIFICATES
The CPR Certificates issued in the Bank United reorganization immediately
prior to the Washington Mutual merger (See "--The Bank United Corp.
Reorganization" above) will represent a right to receive a portion of the assets
of the contingent payment rights trust. The contingent payment rights trust will
be a statutory business trust created under Delaware law, formed to hold and
enforce Bank United Corp.'s right to receive its portion of the proceeds of any
final judgment or settlement in Bank United Corp.'s forbearance litigation
against the United States, less certain taxes and expenses. This trust will hold
and enforce this right through the commitment agreement, pursuant to which Bank
United Corp. and Washington Mutual, as successor to Bank United Corp. after the
Washington Mutual merger, will be obligated to pay to the trust (through an
intermediary payment trust) certain proceeds of the litigation, plus interest,
less taxes on that interest. One senior executive and one director of Bank
United Corp. with knowledge of the facts underlying the forbearance litigation
will be appointed as litigation trustees of the contingent payment rights trust,
and will be given full authority to make all decisions with respect to the
prosecution of the litigation on the behalf of Bank United Corp. and Bank United
Corp.'s subsidiary, Bank United, involved in the forbearance litigation. Each
CPR Certificate will represent an assignable and transferable undivided
beneficial interest in the assets of the contingent payment rights trust and, as
a result of Bank United Corp. entering into the commitment agreement, will
represent an interest in the right to receive a pro rata share of the amounts
received by the contingent payment rights pursuant to the commitment agreement,
less certain expenses and potential liabilities, plus interest and other income
earned on amounts received by the trust. The contingent payment rights trust and
the rights of the holders of the CPR Certificates are more fully described below
in "The Contingent Payment Rights Trusts and Certificates."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes the anticipated material United
States federal income tax consequences to (1) holders of Bank United Corp.
common stock who exchange such stock for new shares of Bank United Corp. common
stock and CPR Certificates in the Bank United Corp. reorganization and then
exchange such new shares of Bank United Corp. common stock for Washington Mutual
common stock in the Washington Mutual merger and (2) holders of Bank United
Corp. PIES whose PIES are adjusted in the Bank United Corp. reorganization and
then exchanged for Washington Mutual PIES in the Washington Mutual merger. This
discussion addresses only those stockholders who hold their Bank United Corp.
common stock or PIES as a capital asset, and does not address all of the United
States federal income tax consequences that may be relevant to particular
stockholders in light of their individual circumstances or to stockholders who
are subject to special rules, such as:
- financial institutions,
- mutual funds,
- tax-exempt organizations,
- insurance companies,
- dealers in securities or foreign currencies,
- traders in securities who elect to apply a mark-to-market method of
accounting,
- foreign holders,
- persons who hold such shares as a hedge against currency risk or as part
of a straddle, constructive sale or conversion transaction, or
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- holders who acquired their shares upon the exercise of employee stock
options or otherwise as compensation.
The following discussion is not binding on the Internal Revenue Service. It
is based upon the Internal Revenue Code of 1986, as amended, laws, regulations,
rulings and decisions in effect as of the date of this proxy
statement/prospectus, all of which are subject to change, possibly with
retroactive effect. Tax consequences under state, local and foreign laws and
federal laws other than federal income tax laws, are not addressed.
Holders of Bank United Corp. common stock and PIES are strongly urged to
consult their tax advisors as to the specific tax consequences to them of the
reorganization and the merger, including the applicability and effect of
federal, state, local and foreign income and other tax laws in their particular
circumstances.
Bank United Corp. will not be required to complete the merger unless it
receives an opinion from Wachtell, Lipton, Rosen & Katz, special counsel to Bank
United Corp., dated as of the closing date of the merger, to the effect that:
- the merger constitutes a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended;
- no gain or loss will be recognized by Bank United Corp. as a result of the
merger;
- no gain or loss will be recognized by a stockholder of Bank United Corp.
who receives shares of Washington Mutual common stock in exchange for
shares of Bank United Corp. common stock, except with respect to cash
received in lieu of any fractional share interest in Washington Mutual
common stock and gain that may be recognized in an amount not exceeding
the fair market value at the effective time of the merger of the CPR
Certificates issued to such stockholder in the Bank United Corp.
reorganization; and
- the contingent payment rights trust will not itself be subject to any
material federal income taxes.
Washington Mutual will not be required to complete the merger unless it
receives an opinion from Gibson, Dunn & Crutcher LLP, special tax counsel to
Washington Mutual, dated as of the closing date of the merger, to the effect
that:
- the merger constitutes a "reorganization" within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended; and
- Washington Mutual and Bank United Corp. will each be a party to that
reorganization within the meaning of Section 368(b) of the Internal
Revenue Code of 1986, as amended.
In rendering such opinions, such counsel will be entitled to rely upon
certain documentation including representations of officers of Bank United Corp.
and Washington Mutual. An opinion of counsel represents counsel's best legal
judgment and is not binding on the Internal Revenue Service or any court. No
ruling has been, or will be, sought from the Internal Revenue Service as to the
United States federal income tax consequences of the merger. The following
discussion assumes that the merger qualifies as a reorganization within the
meaning of Section 368 of the Internal Revenue Code of 1986, as amended.
Except as discussed below in connection with the receipt of cash in lieu of
fractional shares, holders of Bank United Corp. common stock who exchange such
stock for new shares of Bank United Corp. common stock and CPR Certificates in
the Bank United Corp. reorganization and then exchange such new shares of Bank
United Corp. common stock for shares of Washington Mutual common stock
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in the Washington Mutual merger, will recognize gain, but not loss, in the
exchange. The gain, if any, recognized will equal the lesser of:
- the fair market value of the CPR Certificates received in the Bank United
Corp. reorganization; and
- the amount of gain realized in the exchange.
The amount of gain that is realized in the exchange will equal the excess
of:
- the sum of the fair market value of the CPR Certificates and the fair
market value of the Washington Mutual common stock received in the
exchange, over
- the tax basis of the shares of Bank United Corp. common stock exchanged
therefor.
Any gain recognized will be treated as capital gain except in the case in
which it is determined that the receipt of the CPR Certificates has the effect
of the distribution of a dividend for United States federal income tax purposes
(under tests set forth in Sections 302 and 356 of the Internal Revenue Code of
1986, as amended) in which case such recognized gain generally will be treated
as ordinary dividend income. In general, the receipt of the CPR Certificates by
a stockholder of Bank United Corp. who does not actually or constructively
(under Section 318 of the Code) own any shares of Washington Mutual stock will
not have the effect of the distribution of a dividend. Stockholders should
consult their own tax advisors to determine the applicability of foregoing rules
in light of their specific facts and circumstances. Each stockholder's aggregate
tax basis in the shares of Washington Mutual common stock received in the
Washington Mutual merger will be equal to the aggregate tax basis in the shares
of Bank United Corp. common stock surrendered in the merger, decreased by the
fair market value of the CPR Certificates received in the Bank United
reorganization, and increased by the amount of gain, if any, recognized
(including any gain that is treated as a dividend). The holding period of the
Washington Mutual common stock received in the Washington Mutual merger will
include the holding period of the shares of Bank United Corp. common stock
surrendered in the Washington Mutual merger. The adjusted tax basis of the CPR
Certificates received by a holder in the Bank United Corp. reorganization will
equal the fair market value of the CPR Certificates as of the date that the
Washington Mutual merger is consummated, and the holding period of the CPR
Certificates will begin on that date.
Holders of Bank United Corp. PIES whose PIES are adjusted in the Bank United
Corp. reorganization and then exchanged for Washington Mutual PIES in the
Washington Mutual merger will not recognize gain or loss for United States
federal income tax purposes. Each holder's aggregate tax basis in the Washington
Mutual PIES received in the merger will be the same as his or her aggregate tax
basis in the Bank United Corp. PIES surrendered in the merger. The holding
period of the Washington Mutual PIES received in the merger by a holder of Bank
United Corp. PIES will include the holding period of Washington Mutual PIES that
he or she surrendered in the merger.
A holder of Bank United Corp. common stock who receives cash in lieu of a
fractional share of Washington Mutual common stock will generally recognize gain
or loss equal to the difference between the amount of cash received and his or
her tax basis in the Bank United Corp. common stock that is allocable to the
fractional share. That gain or loss generally will constitute capital gain or
loss. In the case of an individual stockholder, any such capital gain generally
will be subject to a maximum United States federal income tax rate of 20% if the
individual has held his or her Bank United Corp. common stock for more than
12 months on the date of the merger. The deductibility of capital losses is
subject to limitations for both individuals and corporations.
BECAUSE CERTAIN TAX CONSEQUENCES OF THE MERGER MAY VARY DEPENDING UPON THE
PARTICULAR CIRCUMSTANCES OF EACH STOCKHOLDER OF BANK UNITED CORP. AND OTHER
FACTORS, EACH SUCH STOCKHOLDER IS URGED TO CONSULT HIS
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OR HER OWN TAX ADVISOR AS TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH
STOCKHOLDER, INCLUDING THE APPLICATION AND EFFECT OF STATE AND LOCAL INCOME AND
OTHER TAX LAWS.
For a discussion of certain federal income tax consequences related to the
CPR Certificates, see "The Contingent Payment Rights Trust and
Certificates--Certain Federal Income Tax Consequences."
MANAGEMENT AND OPERATIONS OF WASHINGTON MUTUAL FOLLOWING THE MERGER
GENERAL. After consummation of the merger, it is anticipated that Bank
United Corp.'s wholly owned subsidiary, Bank United, will be merged with and
into Washington Mutual Bank, FA, (an indirect subsidiary of Washington Mutual)
with Washington Mutual Bank, FA as the surviving corporation.
OPERATIONS. Washington Mutual intends to integrate the Bank United retail
branches into Washington Mutual Bank, FA and to maintain and expand certain of
the commercial lending activities of Bank United Corp. Washington Mutual will
convert Bank United offices to Washington Mutual information and data processing
systems for certain major functions, including deposit operations and mortgage
originations. Bank United's government loan servicing operations will add to
Washington Mutual's capabilities.
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 elimination of redundant
corporate overhead and staff positions, consolidation of back office operations
and economies of scale associated with a greater presence in the state of Texas.
Washington Mutual estimates that these savings will be achieved in 2001 and will
consist of the following after-tax amounts:
<TABLE>
<CAPTION>
CATEGORY AMOUNT
-------- -------------
(IN MILLIONS)
<S> <C>
Compensation and benefits................................... $49.9
Occupancy................................................... 8.5
Data Processing............................................. 7.3
Other Non-Interest Expense.................................. 21.4
-----
Total................................................... $87.1
</TABLE>
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.
POST-MERGER COMPENSATION AND BENEFITS
EMPLOYMENT AGREEMENTS
In connection with the merger, Washington Mutual has entered into employment
agreements with Anthony J. Nocella, Ronald D. Coben and Barry C. Burkholder,
each of whom is a current executive of Bank United Corp. These individuals will
be employed as senior executives of Washington Mutual after the merger. The
terms of these employment agreements are more fully described below in
"--Interests of Certain Persons in the Merger--Employment Agreements."
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EMPLOYEE BENEFIT PLANS
Pursuant to the merger agreement, Washington Mutual has agreed from and
after the effective time of the merger to:
- comply with the Bank United Corp. compensation and benefit plans in
accordance with their terms;
- provide employees of Bank United Corp. or any of its subsidiaries who
remain as employees of Washington Mutual after the merger credit for years
of service with Bank United Corp. or any of its subsidiaries (and their
predecessors) prior to the effective time of the merger for purposes of
eligibility and vesting;
- permit employees who participated in Bank United Corp.'s 401(k) plan to
participate in Washington Mutual's 401(k) plan at the effective time of
the merger;
- honor all vacation and paid time off accrued as of the effective time of
the merger;
- cause any and all pre-existing condition limitations (to the extent such
limitations did not apply to pre-existing conditions under comparable Bank
United Corp. compensation and benefit plans) and eligibility waiting
periods under group health plans of Washington Mutual to be waived with
respect to former employees of Bank United Corp. who remain as employees
of Washington Mutual after the merger (and their eligible dependents) and
who become participants in these group health plans; and
- use its reasonable efforts to give credit for, or otherwise take into
account, the out-of-pocket expenses and annual expense limitations paid by
employees of Bank United Corp. who become employees of Washington Mutual
after the merger for the year in which the merger occurs.
However, Washington Mutual and its subsidiaries will be entitled to amend,
modify or terminate any Bank United Corp. compensation and benefit plans, or
other contracts, arrangements, commitments or understandings, in a manner
consistent with their terms and applicable law.
In addition, each employee of Bank United Corp. or any of its subsidiaries
who is terminated within 12 months after the effective time of the merger will
be entitled to severance benefits and payments under Bank United Corp.'s current
policies.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Some members of Bank United Corp.'s management, and the members of Bank
United Corp.'s board, have interests in the Washington Mutual merger that are in
addition to your interests as a stockholder. The Bank United Corp. board was
aware of these different interests and considered them, among other matters, in
approving the merger agreement and the transactions it contemplates.
EMPLOYMENT AGREEMENTS
In connection with the merger agreement, Washington Mutual entered into
employment agreements with Messrs. Barry C. Burkholder, Ronald D. Coben and
Anthony J. Nocella, each of whom is currently an executive of Bank United Corp.
The terms of each of the agreements are substantially similar. Mr. Coben's
and Mr. Nocella's agreements begin upon completion of the merger and end on the
one year anniversary of completion, while Mr. Burkholder's agreement begins on
completion of the merger and ends six months after completion. During the terms
of the agreements, each of these executives will serve in a senior executive
capacity with such responsibilities as the Chief Executive Officer of Washington
Mutual may assign. Mr. Burkholder will receive an annual base salary of
$675,000, Mr. Coben will receive an annual base salary of $275,000 and a bonus
of no less than $500,000, and Mr. Nocella will receive an annual base salary of
$350,000 and a bonus of no less than $650,000.
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During the terms of the agreements, the executives will be entitled to
participate in all employee benefit, retirement, welfare and other plans,
practices, policies and programs generally applicable to Senior Vice Presidents
of Washington Mutual on a basis no less favorable than those provided to such
Senior Vice Presidents. In addition, each of the executives will be entitled to
an office and to secretarial and administrative assistance, in each case on the
same basis as provided to him immediately prior to the merger. Each executive
will also be entitled to receive fringe benefits, including an automobile
allowance and financial planning, on the same basis and the same terms and
conditions as such benefits are provided to other Senior Vice Presidents of
Washington Mutual. Washington Mutual will also pay Mr. Nocella's and
Mr. Coben's club dues and expenses and will pay for an annual physical
examination on the same basis as those benefits were provided to him prior to
the merger.
Beginning at the end of their employment periods or earlier termination of
employment for any reason, Mr. Burkholder will be paid an annual retirement
benefit of $250,000 for his life and Mr. Nocella will be paid an annual
retirement benefit of $150,000 for his life. The current spouses of
Mr. Burkholder and Mr. Nocella will be paid an annual benefit of 50% of their
spouse's retirement benefit following their spouse's death for the remainder of
their lives. This retirement benefit will be in addition to any retirement
benefits payable to these executives under any retirement plan or program of, or
agreement with, Bank United Corp. or Washington Mutual.
Pursuant to the terms of the employment agreements, on the effective date of
the merger, the executives will each be entitled to a lump sum payment equal to
the payments to which they would have been paid under their August, 1996
employment agreements with Bank United Corp. had they been terminated by
Washington Mutual other than for "Cause" (as defined in the applicable prior
employment agreement) immediately after the effective date of the merger. In
addition, pursuant to the terms of their respective agreements, any rights under
stock options, restricted stock or other stock-based awards will vest and become
exercisable immediately upon the effective date of the merger. The executives
will also be entitled to a continuation of welfare benefits for the three years
after termination of employment, subject to certain exceptions.
In lieu of the lump sum cash payment described in the paragraph above,
Mr. Nocella may elect to receive a special retention bonus consisting of a grant
of restricted shares of Washington Mutual's common stock by notifying Washington
Mutual of such election at least ten days prior to the effective date of the
merger. The number of shares comprising this special retention bonus will be
calculated by dividing the amount of the lump sum cash payment by the fair
market value of one share of Washington Mutual's common stock on the effective
date of the merger. Restrictions on the sale of the shares will lapse on the
first anniversary of the effective date of the merger. Mr. Nocella may elect to
forfeit the shares in exchange for a deposit by Washington Mutual at the time
the restrictions lapse into his account in Washington Mutual's Senior Officers
Deferred Compensation Plan of an amount equal to the fair market value of the
shares on the day the restrictions lapse.
If, during the employment period, Washington Mutual terminates any of the
executives' employment other than for Cause (as defined in each agreement) or
Disability (as defined in each agreement) or any of the executives terminate
their employment for Good Reason (as defined in each agreement), Washington
Mutual will pay such executive a lump sum in cash equal to: the sum of (1) such
executive's base salary through the date of termination to the extent not
previously paid, (2) any compensation previously deferred by the executive (and
any accrued interest or earnings thereon) and any accrued vacation pay through
the date of termination, (3) in the case of Mr. Nocella and Mr. Coben, a pro
rata portion of the bonus for the year in which the date of termination occurs,
in each case to the extent not previously paid; and (4) an amount equal to the
product of the fraction of the employment period remaining after the date of
termination and their respective base salaries. In addition, upon any such
termination, the welfare benefits describe above and, in the case of
Messrs. Burkholder and Nocella, the additional retirement benefits described
above, will commence. In
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addition, if Mr. Nocella has elected to receive the special retention bonus
described above, restrictions on sale of shares comprising that bonus will
lapse.
If any of the executives' employment is terminated by reason of such
executive's death during the employment period, his employment agreement will
terminate without further obligations to the executives' legal representatives
under the agreement, other than for payment of base salary, deferred
compensation, if applicable, a pro rata bonus, as described above, and, in the
case of Messrs. Burkholder and Nocella, the commencement of the additional
retirement benefits described above to Messrs. Burkholder's and Nocella's
current spouses.
If any of the executives' employment is terminated by reason of any of the
executives' Disability (as defined in each agreement) during the employment
period, his employment agreement will terminate without further obligations to
the executive, other than for payment of base salary, deferred compensation and,
if applicable, a pro rata bonus, as described above, the timely payment or
provision of disability and other benefits as in effect generally with respect
to Senior Vice Presidents of Washington Mutual, the commencement of the welfare
benefits described above and, in the case of Messrs. Burkholder and Nocella, the
additional retirement benefits described above.
If any of the executives' employment is terminated for Cause or the
executives terminate their employment without Good Reason (as such terms are
defined in each agreement) during the employment period, such executive's
agreement will terminate without further obligations to the executive other than
the obligation to pay or provide to the executives (1) base salary, deferred
compensation and, if applicable, a pro rata bonus, as described above, (2) the
commencement of the welfare benefits described above and (3) in the cases of
Mr. Burkholder and Mr. Nocella, the retirement benefits described above. If
Mr. Nocella has elected to receive the special retention bonus described above,
all of his rights in the shares comprising that bonus will be forfeited. Under
the term of each of the executives' agreements, Washington Mutual has agreed
that in the event that any payments (other than for base salaries not made in
connection with a termination of employment) are subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code, the executive will be
entitled to receive an additional payment equal to the excise tax imposed upon
the payments including the excise tax imposed upon such additional payment.
LITIGATION TRUSTEE AGREEMENTS
Washington Mutual and the trusts have entered an agreement with each of
Salvatore A. Ranieri, a current member of Bank United Corp's board of directors
and brother of Lewis Ranieri, Chairman of Bank United Corp.'s board of
directors, and Jonathon K. Heffron, a current executive of Bank United Corp.,
with respect to management of that litigation. See "The Contingent Payment
Rights Trust and the Certificates--The Forbearance Litigation." The terms of
these agreements begin on the effective date of the Washington Mutual merger and
end upon the final resolution of the litigation. While serving as trustees,
Mr. Ranieri and Mr. Heffron will manage the forbearance litigation.
During the period that Mr. Ranieri and Mr. Heffron manage the forbearance
litigation, they will provide the services set forth in their respective
agreements and the declarations of trust of the trusts and will report with
respect to management of that litigation directly to a Bank United Corp.
litigation committee (if one is formed). During this period, Mr. Ranieri and
Mr. Heffron and the Bank United Corp. litigation committee, if any, will have
complete discretion to manage the forbearance litigation.
During the period that Mr. Ranieri and Mr. Heffron manage the forbearance
litigation, they agree to devote such attention and time as is reasonably
necessary to manage the litigation and to use their reasonable best efforts to
perform faithfully and efficiently their responsibilities as litigation
trustees. In consideration of the services to be provided by Mr. Ranieri and
Mr. Heffron, for a three year period following the completion of the Washington
Mutual merger, each of Mr. Ranieri and Mr. Heffron will be paid a fee in the
aggregate amount of $1.5 million. These fees will be payable in cash in advance
in
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12 equal quarterly installments commencing on the effective date of the
Washington Mutual merger. However, upon the final resolution of this litigation,
the unpaid portion of the fees will accelerate and be immediately paid in a lump
sum.
Pursuant to Mr. Heffron's agreement, on the effective date of the Washington
Mutual merger, Washington Mutual will make a lump sum cash payment to
Mr. Heffron equal to the payments to which he would be entitled to receive
pursuant to the change of control provisions of his August 1996 employment
agreement with Bank United Corp. if he were terminated by Washington Mutual
after the merger other than for "Cause" (as defined in Mr. Heffron's employment
agreement), including, without limitation, the amount provided in his employment
agreement for outplacement services, as well as an amount calculated in respect
of taxes arising from those payments. In addition, Mr. Heffron's rights under
his Bank United Corp. stock options, restricted stock awards and other
stock-based awards will vest and become exercisable immediately upon the
completion of the Washington Mutual merger. Commencing upon the expiration of
the period during which Mr. Ranieri and Mr. Heffron manage the forbearance
litigation, or, if earlier, the termination of Mr. Heffron's services under his
agreement for any reason, Washington Mutual will provide or cause to be provided
to Mr. Heffron certain welfare benefits for three years after his termination,
subject to certain exceptions.
In addition, on the effective date of the merger, the contingent payment
rights trust will issue to each of Mr. Ranieri and Mr. Heffron, as trustees, the
number of CPR Certificates equal to 0.75% of the total outstanding CPR
Certificates issued in connection with the Bank United Corp. reorganization,
without giving effect to the CPR Certificates issued to any other litigation
trustee in connection with his or her services as a litigation trustee. These
CPR Certificates will be non-transferable and subject to restrictions during the
management period, provided that, in the event that either Mr. Ranieri's or
Mr. Heffron's service as a litigation trustee is terminated (A) due to his death
or permanent and total disability, (B) by him due to a material breach by
Washington Mutual or the trusts of a material provision of the agreement or the
trust declaration, or (C) by Washington Mutual or the trusts other than due to
either of Mr. Ranieri's or Mr. Heffron's substantial failure to perform his
duties as a litigation trustee, the CPR Certificates owned by such trustee will
become immediately transferable and free of restrictions. In the event that the
service of either Mr. Ranieri or Mr. Heffron terminates prior to final
resolution of the litigation for reasons other than those described in clauses
(A), (B) and (C) of the preceding sentence, the applicable trustee's CPR
Certificates will be forfeited by him effective immediately upon such
termination. During the period in which they manage the litigation, Mr. Ranieri
and Mr. Heffron will be entitled to receive prompt reimbursement from Washington
Mutual for all reasonable expenses incurred by them in performance of their
services in connection with the litigation on the same basis as they were
entitled to expense reimbursement from Bank United Corp. prior to the effective
date of the merger.
In the case of Mr. Heffron, the agreement provides that he will be entitled
to receive the welfare benefits and other fringe benefits on the same basis and
the same terms and conditions as such benefits were provided to him immediately
prior to the effective date of the merger. During the period that Mr. Ranieri
and Mr. Heffron manage the litigation, at Mr. Heffron's request, Washington
Mutual will provide Mr. Heffron with access to the resources, offices, records
and personnel as may be requested at Washington Mutual's offices in Houston,
Texas. Under the terms of both of the agreements, Washington Mutual agrees to
indemnify and to advance expenses, without requirement of bond or other
security, to each of Mr. Ranieri and Mr. Heffron against any and all losses,
liabilities, damages, judgments, demands, suits, claims, assessments, charges,
fines, penalties, costs and expenses, including reasonable attorneys' fees and
expenses and other costs and expenses associated with defense of a claim or
incurred in obtaining indemnification under such agreements, whether or not in a
formal proceeding, arising out of or relating to (A) with respect to claims
brought by holders of CPR Certificates in their capacity as holders of CPR
Certificates, any matter whatsoever, and (B) with respect to claims brought by
any other party, any matter relating to either of the trusts, the CPR
Certificates, the CPR Certificate distribution, the litigation and any actions
taken by either of them that
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relate to either of the trusts, including, without limitation, the negotiation
of the terms of the trusts and the CPR Certificates and the approval of the
establishment of the trusts and the CPR Certificate distribution and related
transactions.
AMENDMENT OF EXISTING CONSULTING AGREEMENT
The consulting agreement between Bank United Corp. and Lewis S. Ranieri, the
Chairman of Bank United Corp.'s board of directors, dated August 1, 1999, was
amended to provide that at the effective time of the merger, the consulting
period will be automatically extended for a one-year period, commencing at the
effective time and ending on the first anniversary of the effective time. It was
amended further to provide that upon the expiration of the one-year period (or,
if earlier, upon the date that is 180 days after the date on which either
Mr. Ranieri or Bank United Corp. provides notice, upon the date on which
Mr. Ranieri becomes disabled or dies, or upon a change of control of Washington
Mutual), the consulting agreement will immediately be cancelled and Bank United
Corp. will pay Mr. Ranieri all accrued but unpaid consulting fees and the
parties will have no further rights or obligations under the agreement.
STOCK BASED RIGHTS
In the Bank United Corp. reorganization immediately prior to the Washington
Mutual merger, each outstanding option to acquire Bank United Corp. common stock
will be converted into an option to acquire upon exercise (a) one share of Bank
United Corp. common stock and (b) one CPR Certificate. Upon completion of the
Washington Mutual merger, each outstanding and unexercised stock option to
purchase shares of Bank United Corp.'s common stock will cease to represent the
right to acquire shares of Bank United Corp.'s common stock and will be
converted into an option to acquire (a) shares of Washington Mutual's common
stock and (b) one CPR Certificate for each 1.3 shares of Washington Mutual
common stock for which the option is exercised.
Under Bank United Corp.'s stock-based plans, unvested stock options will
become fully vested and exercisable, all restrictions on restricted stock awards
will lapse and all performance units will be deemed earned on a change in
control of Bank United Corp. The transactions provided for by the merger
agreement will constitute a change in control under these plans.
- The number of stock options to acquire shares of Bank United Corp.'s
common stock held by Bank United Corp.'s executive officers,
Messrs. Burkholder, Nocella, Heffron, Coben and Sadin, that will vest in
connection with the merger is 129,500, 90,000, 71,600, 61,000 and 64,000,
respectively.
- The number of shares of Bank United Corp. common stock underlying awards
of restricted stock held by Messrs. Burkholder, Nocella, Heffron, Coben,
and Sadin that will become freely transferable in connection with the
merger is 17,500, 16,000, 10,000, 10,000 and 10,000, respectively.
The total number of stock options to acquire shares of Bank United Corp.
common stock held by the members of the Bank United Corp. board of directors
that will become fully vested and exercisable in connection with the merger is
.
INDEMNIFICATION, DIRECTORS' AND OFFICERS' INSURANCE
The merger agreement requires Washington Mutual, subject to certain
exceptions, to indemnify and advance reasonable expenses to persons who were
directors, officers or employees of Bank United Corp. and its subsidiaries prior
to the merger who suffer liabilities or losses from any threatened or actual
claim or proceeding arising from the merger agreement or the fact that the
person was an officer, director or employee of Bank United Corp. or its
subsidiaries. The merger agreement also requires Washington Mutual, subject to
certain limitations regarding insurance premium amounts, to
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cause the officers and directors of Bank United Corp. immediately before the
merger to be covered for at least six years after the merger by Washington
Mutual's directors' and officers' liability insurance policy or a similar
policy. Washington Mutual has also agreed that all provisions of the charter
documents of Bank United Corp. and its subsidiaries in effect on August 18, 2000
regarding the indemnification and limitations on liability existing in favor of
such directors, officers and employees for matters occurring on or prior to
completion of the Washington Mutual merger will continue in effect after the
merger.
REPRESENTATIONS AND WARRANTIES IN THE MERGER AGREEMENT
In the merger agreement, Washington Mutual and Bank United Corp. each make
representations and warranties to the other regarding, among other things:
- its corporate organization and existence;
- its capitalization;
- its corporate power and authority to carry on its business and to enter
into the merger agreement;
- its due authorization, execution and delivery of the merger agreement and
related agreements;
- required governmental and third party approvals;
- that neither the merger agreement nor the transactions contemplated in the
merger agreement violate its charter, bylaws, applicable law or certain
material agreements;
- the timely filing and payment of required fees in connection with material
regulatory reports;
- its financial statements and filings with the SEC;
- certain material legal proceedings or regulatory actions;
- certain materially adverse changes in its business;
- its compliance with applicable law;
- the filing and accuracy of all tax returns and payment or provision for
all taxes;
- its agreements or understandings with, or the existence of any order
issued by, regulatory agencies;
- any broker's fees payable in connection with the merger;
- undisclosed liabilities; and
- the completeness and accuracy and compliance as to form of this proxy
statement/prospectus and prospectus, the related registration statement
and any other governmental filing in connection with the merger.
In addition, Bank United Corp. has made certain other representations and
warranties to Washington Mutual regarding, among other things:
- its subsidiaries;
- the conduct of its business since September 30, 1999;
- its employee benefit plans and related matters;
- its material contracts;
- its real and personal property;
- its insurance coverage;
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- certain environmental matters;
- the opinion of its financial advisor;
- its intellectual property;
- the loans reflected as assets on its books and records;
- its compliance with the Community Reinvestment Act of 1977;
- labor matters; and
- that neither the merger agreement, the merger, the option agreement nor
the exercise of the option (as described in "--The Option Agreement"
below) causes the application of certain anti-takeover provisions of
Delaware or Texas law or Bank United Corp.'s charter documents.
CONDITIONS TO THE COMPLETION OF THE MERGER
Washington Mutual's and Bank United Corp.'s obligations to effect the merger
are subject to among other things, satisfaction of the following conditions by
the effective time of the merger:
- the merger shall have been approved by the requisite affirmative vote of
the Bank United Corp. stockholders;
- all regulatory approvals required to complete the transactions
contemplated by the merger agreement shall have been obtained and shall
remain in full force and effect and all statutory waiting periods shall
have expired;
- no order, injunction or decree issued by any court or agency or other
legal restraint or prohibition preventing the completion of the merger or
any of the transactions contemplated by the merger agreement shall be in
effect;
- no statute, rule, regulation, order, injunction or decree shall have been
enacted that prohibits, restricts or makes illegal the completion of the
merger;
- no stop order suspending the effectiveness of the registration statement
of which this proxy statement/prospectus is a part shall have been issued,
and no proceedings for that purpose shall have been initiated or
threatened by the SEC;
- Bank United Corp. shall have formed the contingent payment rights trust
(See "The Contingent Payment Rights Trust and Certificates" below); the
registration statement for the CPR Certificates must have been declared
effective by the SEC; and no stop order suspending the registration
statement's effectiveness shall have been issued and no proceedings for
that purpose shall have been initiated; and
- the shares of Washington Mutual common stock and PIES to be issued in the
merger shall have been authorized for listing on the New York Stock
Exchange, subject to official notice of issuance.
Washington Mutual's obligation to effect the merger is also subject to,
among other things, the satisfaction or waiver by Washington Mutual, at or prior
to the effective time of the merger, of the following conditions:
- the representations and warranties of Bank United Corp. set forth in the
merger agreement shall be true and correct in all respects as of the date
of the merger agreement and as of the closing date of the merger, provided
that no effect shall be given to any exception in such representations and
warranties relating to materiality or material adverse effect and
provided, further, that such representations and warranties (other than
the capitalization representation, which shall be true and correct in all
material respects) shall be deemed to be true and correct
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in all respects unless the failure of such representation to be so true
and correct would reasonably be expected to result in a material adverse
effect on Bank United Corp.;
- Bank United Corp. shall have performed in all material respects all
obligations required to be performed by it under the merger agreement;
- none of the regulatory approvals required to consummate the merger shall
contain any restriction or condition which would be reasonably expected to
have a material adverse effect on Bank United Corp. or Washington Mutual;
- Washington Mutual shall have received resignations from each director of
Bank United Corp. and each of its subsidiaries requested by it;
- Bank United Corp. shall have (a) formed the contingent payment rights
trust, (b) caused the CPR Certificates be issued to Bank United Corp. and
distributed to the holders of Bank United Corp. common stock in the Bank
United Corp. reorganization merger, and (c) entered into a commitment
agreement providing for the payment of the litigation proceeds to the
trust as described in "The Contingent Payment Rights Trust and
Certificates" below;
- Bank United Corp. shall have completed the Bank United Corp.
reorganization;
- dissenters' rights shall not have been exercised with respect to more than
10% of the outstanding shares of Bank United Corp. common stock; and
- Washington Mutual shall have received an opinion, dated as of the
effective date of the merger, from Gibson, Dunn & Crutcher LLP, in a form
and substance reasonably satisfactory to Washington Mutual to the effect
the merger will qualify as a tax-free reorganization for federal income
tax purposes.
Bank United Corp.'s obligation to effect the merger is also subject to,
among other things, the satisfaction or waiver by Bank United Corp., at or prior
to the effective time of the merger, of the following conditions:
- 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 as of the closing date of the merger, provided
that no effect shall be given to any exception in such representations and
warranties relating to materiality or material adverse effect and
provided, further, that such representations and warranties (other than
the capitalization representation, which shall be true and correct in all
material respects) shall be deemed to be true and correct in all respects
unless the failure of such representation to be so true and correct would
reasonably be expected to result in a material adverse effect on
Washington Mutual;
- Washington Mutual shall have performed in all material respects all
obligations required to be performed by it under the merger agreement;
- Washington Mutual shall have executed an agreement assuming Bank United
Corp.'s obligations under the commitment agreement related to the
contingent payment rights trust, as described in "The Contingent Payment
Rights Trust and Certificates--The Commitment Agreement" below; and
- Bank United Corp. shall have received an opinion dated as of the effective
date of the merger from Wachtell, Lipton, Rosen & Katz, in a form and
substance reasonably satisfactory to Bank United Corp., with respect to
federal income tax laws.
REGULATORY APPROVALS REQUIRED
Under the merger agreement, the obligations of both Washington Mutual and
Bank United Corp. to consummate the merger are conditioned upon the receipt of
all requisite regulatory approvals. See
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"--Conditions to the Completion of the Merger" above. Each of Washington Mutual
and Bank United Corp. has agreed to use its reasonable best efforts to obtain
the requisite regulatory approvals. The merger of Bank United Corp. into
Washington Mutual and also the anticipated subsequent merger of Bank United
Corp.'s subsidiary, Bank United, into Washington Mutual Bank, FA (an indirect
subsidiary of Washington Mutual) are subject to the approval of the Office of
Thrift Supervision under the Home Owners' Loan Act of 1933 and the Federal
Deposit Insurance Act, respectively, and related Office of Thrift Supervision
regulations. These approvals require consideration by the Office of Thrift
Supervision 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, also requires that
the Office of Thrift Supervision, in deciding whether to approve the merger of
Bank United Corp. into Washington Mutual and also the merger of Bank United into
Washington Mutual Bank, FA, assess the records of performance of Bank United
Corp. 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 Community Reinvestment Act, it is not
unusual for the Office of Thrift Supervision to receive protests and other
adverse comments from community groups and others. Each of Bank United and
Washington Mutual's primary banking subsidiaries (Washington Mutual Bank,
Washington Mutual Bank, FA and Washington Mutual Bank fsb) currently has an
"outstanding" Community Reinvestment Act rating from its primary regulator. The
regulations of the Office of Thrift Supervision require publication of notice
of, and an opportunity for public comment with respect to, the applications
filed in connection with both of these mergers and authorize the Office of
Thrift Supervision to hold an informal meeting upon the request of a commenter
or on its own initiative, and a formal meeting upon the request of any
participant to an informal meeting or on its own initiative, in connection with
these applications. Any such meeting or comments provided by third parties could
prolong the period during which the mergers are subject to review by the Office
of Supervision.
Washington Mutual has filed applications and notices seeking the requisite
Office of Thrift Supervision approval. On , the Office of Thrift
Supervision deemed Washington Mutual's applications complete. To date,
Washington Mutual has not received any approvals or notices of disapproval. It
is anticipated that the Office of Thrift Supervision's review of these
applications will involve an analysis of the status of the systems integration
of Bank United into Washington Mutual Bank, FA and the proposed timetable for
the integration of Bank United Corp. We cannot be certain that Office of Thrift
Supervision approval will be granted and if granted, of the date of this
approval or as to what conditions to such grant of approval, if any, may be
imposed. In addition, it is possible that the United States Department of
Justice or the Attorney General of the State of Texas or another state will
challenge these mergers.
Washington Mutual and Bank United Corp. are not aware of any other
significant governmental approvals that are required for consummation of the
transactions except as described above. Should any other approval or action be
required, it is presently contemplated that such approval would be sought.
However, we cannot be certain whether or when any such approval, if required,
could be obtained.
AMENDMENT AND WAIVER OF THE MERGER AGREEMENT
The merger agreement may be amended by Washington Mutual and Bank United
Corp. at any time before or after approval by the Bank United Corp.
stockholders, so long as the amendment does not reduce or change the form of
consideration to be delivered to the Bank United Corp. stockholders after they
have approved the merger agreement. Any amendment to the merger agreement must
be in writing and signed on behalf of both Washington Mutual and Bank United
Corp.
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At any time prior to the effective time of the merger, Washington Mutual and
Bank United Corp. may:
- extend the time for performance of any of the other party's obligations,
- waive any inaccuracies contained in the representations and warranties in
the merger agreement or any document delivered pursuant to the merger
agreement, and
- waive compliance with any of the agreements or conditions contained in the
merger agreement.
Any agreement to an extension or waiver must be in a writing signed on
behalf of the party agreeing to the extension or waiver.
TERMINATION OF THE MERGER AGREEMENT
Washington Mutual and Bank United Corp. may terminate the merger agreement
by mutual consent. The merger agreement may also be terminated unilaterally by
either Washington Mutual or Bank United Corp.:
- if the approval of any governmental authority required for the completion
of the merger is denied by final, nonappealable action or any governmental
authority issues a final, non-appealable order enjoining the merger;
- if the merger does not occur on or before March 31, 2001, which date will
be extended to June 30, 2001 if the failure is solely due to the failure
to obtain the requisite regulatory approvals;
- upon breach by the other party of any covenant or representation of that
party in the merger agreement which breach (a) is not cured within
30 days of the breaching party receiving notice of the breach or is
incurable prior to the closing and (b) would entitle the non-breaching
party not to close the merger, provided that the party seeking to
terminate the merger agreement is not in material breach of any
representation or covenant in the merger agreement;
- if the requisite approval of the Bank United Corp. stockholders is not
obtained at their special meeting; or
- if there is a material adverse change since June 30, 2000 in the business,
results of operations, financial condition or prospects of the other party
and its subsidiaries, taken as a whole.
Washington Mutual may terminate the merger agreement if:
- Bank United Corp.'s board of directors shall have failed to recommend the
merger or shall have withdrawn, modified or changed in a manner adverse to
Washington Mutual, its recommendation that the Bank United Corp.
stockholders vote to approve the merger agreement;
- any person acquires beneficial ownership of 25% or more of the then
outstanding shares of Bank United Corp. common stock, or Bank United Corp.
or any of its significant subsidiaries shall have entered into an
agreement to engage in, or Bank United Corp.'s board of directors shall
have recommended that the Bank United Corp. stockholders approve or
accept, (a) a merger or consolidation, or any similar transaction,
involving Bank United Corp. or a significant subsidiary of Bank United
Corp., (b) a purchase, lease or other acquisition or assumption of all or
a substantial portion of the assets or deposits of Bank United Corp. or
any significant subsidiary of Bank United Corp. or (c) a purchase or other
acquisition of securities representing 25% or more of the voting power of
Bank United Corp. (any such event being referred to herein as a
"subsequent triggering event"); or
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- a tender offer or exchange offer for 25% or more of the Bank United Corp.
common stock is commenced and Bank United Corp.'s board of directors
recommends that the Bank United Corp. stockholders tender their shares in
this offer or otherwise fails to recommend that the Bank United Corp.
stockholders reject the offer within ten business days after commencement
of the offer.
TERMINATION FEES
The merger agreement requires Bank United Corp. to pay an initial
$15 million termination fee to Washington Mutual if the merger agreement is
terminated by Washington Mutual upon any of the following events:
- failure to recommend the merger or withdrawal, modification or change by
the Bank United Corp. board of directors of its recommendation to Bank
United Corp. stockholders to approve the merger after a third party has
made, or disclosed its intention to make, an inquiry, proposal or offer
relating to any tender or exchange offer, merger, or acquisition of 25% or
more of the voting stock or equity or assets of Bank United Corp. (a
"takeover proposal");
- willful breach by Bank United Corp. of any of its covenants or
representations in the merger agreement which (a) is not cured within
30 days after Bank United Corp. receives notice of the breach or is
incurable prior to the closing and (b) would entitle Washington Mutual not
to close the merger, if (1) at or prior to Bank United Corp.'s willful
violation a bona fide takeover proposal, or a bona fide intention to make
such a takeover proposal, was made known to the Bank United Corp. board or
was publicly disclosed to Bank United Corp.'s stockholders and
(2) Washington Mutual is not in material breach of any representation or
covenant in the merger agreement at the time of termination;
- a "subsequent triggering event" (as defined in "--Termination of the
Merger Agreement" above).
In addition, if, within 15 months after (a) the merger agreement is terminated
by Washington Mutual for any of the reasons stated above or (b) the merger
agreement is terminated by either Washington Mutual or Bank United Corp. because
the Bank United Corp. stockholders fail to approve the merger if a bona fide
takeover proposal to acquire Bank United Corp., or an intention to make such a
proposal, had been publicly disclosed at the time of such failure, Bank United
Corp. shall have entered into a definitive agreement with respect to that
takeover proposal or consummated a merger, consolidation or similar transaction
or sale of all or substantially all of its assets or any person shall have
acquired beneficial ownership of more than 50% of the outstanding shares of Bank
United Corp. common stock, Bank United Corp. shall pay Washington Mutual (1) an
additional termination fee of $37 million if the merger agreement was terminated
for a reason giving rise to the initial $15 million termination fee or (2) the
entire termination fee of $52 million if the initial termination fee was not
due. However, Washington Mutual will not be entitled to any termination fee if
it has exercised all or part of its option under the option agreement described
in "--The Option Agreement" below. If Bank United Corp. fails to timely pay the
termination fee, Bank United Corp. shall pay the costs and expenses incurred by
Washington Mutual to collect such payment, together with interest.
THE OPTION AGREEMENT
Bank United Corp. and Washington Mutual have entered into an option
agreement. Under the option agreement, Bank United Corp. granted to Washington
Mutual an option to purchase up to 6,462,862 shares of Bank United Corp. common
stock (approximately 19.9% of the issued and outstanding shares) at a price of
$42.375 per share. A copy of the option agreement is attached to this proxy
statement/prospectus as Appendix F and the following discussion is qualified by
reference to the full text of that agreement.
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The option may be exercised in whole or in part if both an "initial
triggering event" (as defined below) and a "subsequent triggering event" (as
defined above in "--Termination of the Merger Agreement") occur prior to
termination of Washington Mutual's ability to exercise the option. Under the
option agreement, an "initial triggering event" will occur if:
- Bank United Corp. or any of its significant subsidiaries shall have
entered into an agreement with a third party to engage in, or the Bank
United Corp. board shall have recommended that the Bank United Corp.
stockholders approve or accept a third party's offer to engage in, (a) a
merger or consolidation, or any similar transaction, involving Bank United
Corp. or a significant subsidiary of Bank United Corp., (b) a purchase,
lease or other acquisition or assumption of all or a substantial portion
of the assets or deposits of Bank United Corp. or any significant
subsidiary of Bank United Corp., or (c) a purchase or other acquisition of
securities representing 10% or more of the voting power of Bank United
Corp. (any such event being referred to herein as an "acquisition
transaction");
- Bank United Corp. or any of its significant subsidiaries shall have
authorized, recommended, proposed or publicly announced its intention to
authorize, recommend or propose an acquisition transaction with any third
party;
- Bank United Corp.'s board shall have failed to recommend the merger or
shall have withdrawn or modified in a way adverse to Washington Mutual its
recommendation that Bank United Corp. stockholders approve the merger, in
each case in anticipation of engaging in an acquisition transaction with
any third party;
- any third party shall have acquired beneficial ownership of 10% or more of
the outstanding shares of Bank United Corp. common stock;
- the Bank United Corp. stockholders shall have voted and failed to approve
the merger agreement (or the special meeting is not held in violation of
the merger agreement) after any third party shall have made a bona fide
proposal to Bank United Corp. to engage in an acquisition transaction;
- Bank United Corp. shall have willfully breached any covenant, obligation,
representation or warranty in the merger agreement, which would entitle
Washington Mutual to terminate the merger agreement, and such breach has
not been cured in a timely manner, after an overture is made by a third
party to Bank United Corp. or the Bank United Corp. stockholders to engage
in an acquisition transaction;
- any third party shall have filed an application or notice with any federal
or state bank regulatory authority for approval to engage in an
acquisition transaction; or
- any third party shall have commenced or publicly announced its bona fide
intention to commence a tender offer or exchange offer for securities
representing 10% or more of the voting power of Bank United Corp.
Washington Mutual's ability to exercise the option will terminate upon
(a) the effective time of the merger; (b) subject to certain exceptions,
termination of the merger agreement in accordance with its terms prior to the
occurrence of an initial triggering event; (c) 12 months after any termination
of the merger agreement that follows an initial triggering event or is a
termination by Washington Mutual because of a breach by Bank United Corp. of any
of its representations, warranties, covenants or agreements in the merger
agreement (subject to certain extensions stated in the option agreement); or
(d) delivery of a written request for payment of termination fees under the
merger agreement which are subsequently paid.
Washington Mutual may also require Bank United Corp. to repurchase the
option or the shares acquired upon exercise of the option (provided that a
subsequent triggering event has occurred prior to
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the expiration of Washington Mutual's ability to exercise the option) upon the
consummation of (a) any merger, consolidation or similar transaction involving
Bank United Corp., (b) any acquisition of all or a substantial portion of the
assets of Bank United Corp. or (c) any acquisition by any person of beneficial
ownership of 50% or more of the Bank United Corp. common stock.
The total profit that Washington Mutual can make pursuant to the option
agreement is limited to $52 million before taxes. In addition, Washington Mutual
is not entitled to exercise its option if it has made a request for payment of
termination fees.
Washington Mutual and Bank United Corp. believe the termination fees and
option described above are customary and typical for transactions such as the
proposed merger. These agreements are intended, among other things, to increase
the likelihood that the merger will be completed on the terms set forth in the
merger agreement and, if the merger is not completed under certain circumstances
involving an acquisition or potential acquisition of Bank United Corp. 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 Bank United Corp. prior to the merger, even if these
persons were prepared to pay consideration to Bank United Corp. stockholders
that has a higher current market price than the shares of Washington Mutual
common stock and PIES to be received by the holders of Bank United Corp. common
stock and PIES under the merger agreement.
CONDUCT OF BUSINESS PENDING THE MERGER AND OTHER AGREEMENTS
Except as expressly contemplated or permitted by the merger agreement or a
specified disclosure schedule, or required by applicable law, Bank United Corp.
has agreed to, and to cause each of its subsidiaries to, before the effective
time of the Washington Mutual merger:
- conduct its business in the ordinary and usual course consistent with past
practice;
- use its reasonable best efforts to maintain and preserve intact its
business organization, employees and advantageous business relationships
and retain the services of its officers and key employees; and
- refrain from taking any action reasonably expected to adversely affect or
delay its ability to obtain any governmental approvals necessary to
complete the transactions contemplated by the merger agreement.
In addition, except as expressly contemplated or permitted by the merger
agreement or a specified disclosure schedule, or required by applicable law,
Bank United Corp. has agreed that it will not, and that it will cause its
subsidiaries not to, without the prior written consent of Washington Mutual,
among other things:
- grant any stock appreciation rights or rights to acquire its capital
stock;
- adjust, split, combine, reclassify, redeem, purchase or otherwise acquire
any capital stock or declare or pay dividends except in the ordinary and
usual course of business consistent with past practices;
- subject to certain exceptions, increase compensation or fringe benefits of
any of its employees, pay any pension or retirement allowance not required
under an existing plan or agreement, or enter into or modify any employee
benefit plan or employment agreement;
- sell, transfer, mortgage or encumber or otherwise dispose of any of its
properties or assets or cancel, release or assign any indebtedness to any
person, except for nonmaterial transactions, or transactions in the
ordinary course of business consistent with past practice or required
pursuant to certain existing contracts;
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- make any acquisition or investment in, or make any property transfers to,
or material purchases of any property or assets of, any other entity
(other than a wholly-owned subsidiary) except pursuant to certain existing
contracts;
- amend its certificate of incorporation, bylaws or similar governing
documents;
- 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 $500,000 or more and which is neither (a) terminable at will
on 60 days or less notice without payment of a penalty in excess of
$50,000 nor (b) with a term of less than one year, or make any material
change in any of its leases or such contracts, other than certain renewals
of contracts or leases for a term of one year or less without material
adverse changes to their terms;
- make any changes in its accounting methods, unless otherwise required
under accounting principles generally accepted in the United States, law,
rule or regulation, as concurred by its independent public accountants;
- settle any litigation involving monetary damages except in the ordinary
course of business;
- make or acquire loans or issue commitments for any loans except for
(1) loans and commitments that are made in the ordinary course of business
consistent with past practice or (2) with a principal balance below
$10 million, other than with the prior consent of Washington Mutual, which
consent will not be unreasonably withheld;
- take any action that would result in a discretionary release of collateral
or guarantees or restructure any loan or commitment for any loan with a
principal balance in excess of $1,000,000, or agree to guarantee the
obligation of other persons;
- 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 closing condition not being satisfied, or in a material
violation of any provision of the merger agreement, except as required by
applicable law;
- subject to certain exceptions, make capital expenditures in excess of
specified amounts;
- subject to certain exceptions, open, relocate or close any branch or loan
production office or make any application therefor;
- materially change its investment securities portfolio policy or the manner
in which its portfolio is classified or reported, except in the ordinary
course of business consistent with past practice;
- make any material change in its policies and practices with respect to
underwriting, pricing, originating, acquiring, selling, servicing, or
buying or selling rights to service loans;
- make any material changes with respect to its policies and practices with
respect to hedging its loan positions or commitments;
- enter into any securitization of loans;
- engage or participate in any material transaction or incur or sustain any
material obligation not in the ordinary course of business, except as
otherwise permitted by the merger agreement;
- settle or compromise any material tax liability or agree to an extension
of the statute of limitations with respect to the assessment or
determination of any taxes, except in the ordinary course of business,
consistent with past practice; or
- agree to or make any commitment to take any of the foregoing actions.
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Bank United Corp. has also agreed to amend its 401 (k) plan to (a) remove
the availability of participant loans, (b) limit discretionary matching
contributions to 100% of a participant's contributions and 3% of a participant's
considered compensation, (c) require one year of service before employees who
have not, as of the date of this amendment, met the Bank United Corp.
eligibility requirements may become participants and (d) revise the vesting
schedule.
Bank United Corp. has agreed to cause its board of directors to recommend
approval of the merger to its stockholders unless its board of directors has
determined in its reasonable good faith judgment, based on advice of outside
counsel and financial advisors, that such action would breach its fiduciary
duties under applicable law. Bank United Corp. has also agreed not to authorize
or permit any of its officers, directors, employees, representatives or agents
to solicit or encourage any inquiries or proposals, participate in any
discussions or negotiations regarding, provide any confidential information to
any person relating to, or otherwise facilitate any effort or attempt to make or
implement, any "takeover proposal" (as defined below). However, at any time
before the Bank United Corp. stockholders vote to approve the merger agreement,
Bank United Corp. may provide third parties with nonpublic information and
participate in discussions and negotiations with any third party relating to a
takeover proposal that it has not solicited if it complies with certain
limitations. In particular, Bank United Corp. must advise Washington Mutual
immediately of any such inquiry or proposal and, unless its board of directors
has determined in its reasonable good faith judgment based on advice of outside
counsel and financial advisors that such action would breach its fiduciary
duties under applicable law, inform Washington Mutual of the terms and
conditions of any takeover proposal and the status thereof. Further, Bank United
Corp. may not furnish any nonpublic information to any third party except
pursuant to the terms of a confidentiality agreement on customary terms as
advised by its legal counsel. The merger agreement defines a "takeover proposal"
as any inquiry, proposal or offer relating to any tender or exchange offer, or
proposal for a merger, consolidation or other business combination involving
Bank United Corp., or the acquisition in any manner of 25% or more of the voting
stock or equity, or a substantial portion of the assets, of Bank United Corp. or
any of its subsidiaries, other than the transactions contemplated by the merger
agreement.
Washington Mutual and Bank United Corp. have also agreed to cooperate with
each other and to use their reasonable best efforts to promptly prepare all
necessary documentation, to effect all filings, and to obtain and comply with
the terms or conditions of, all permits, consents, approvals and authorizations
of all third parties and governmental entities necessary or advisable to
consummate the transactions contemplated by the merger agreement. In addition,
each party has agreed to provide the other with copies of their quarterly and
annual reports and Bank United Corp. has agreed to provide certain monthly
financial information to Washington Mutual. Washington Mutual and Bank United
Corp. have agreed, subject to the restrictions set forth in the merger
agreement, to furnish to the other party all information concerning themselves
and their subsidiaries, directors, officers and stockholders and such other
matters as may be necessary in furtherance of the merger upon request and to
permit reasonable access to their properties, books, contracts and records.
Washington Mutual and Bank United Corp. 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 or which are necessary
or advisable to complete and make the merger effective. Washington Mutual has
further agreed to use its reasonable best efforts to cause the shares of
Washington Mutual common stock and PIES to be issued in the merger to be
approved for listing on the New York Stock Exchange, subject to official notice
of issuance.
In addition, except as expressly contemplated or permitted by the merger
agreement or required by applicable law, Washington Mutual has agreed that it
will not, without the prior written consent of Bank United Corp., (a) amend its
articles of incorporation or bylaws in a manner that would materially and
adversely affect the economic benefits of the merger to holders of Bank United
Corp. common
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stock, (b) take any action intended or reasonably expected to result in any of
its representations or warranties becoming untrue in any material respect, in
any closing condition not being satisfied, or in a violation of any provision of
the merger agreement, except as required by applicable law, or (c) agree to or
make any commitment to take any such action.
Washington Mutual also will be obligated to indemnify the officers,
directors and employees of Bank United Corp. and its subsidiaries for any
liabilities incurred in connection with any matters existing or occurring at or
prior to the effective time of the merger or related to the merger agreement and
to provide directors' and officers' liability insurance with respect to such
matters for six years. See "--Interests of Certain Persons in the
Merger--Indemnification, Directors and Officers' Insurance" above.
EXPENSES AND FEES
Except for any termination fee that may become payable as discussed in
"--Termination Fees" above, all legal and other costs and expenses incurred in
connection with the merger agreement and related transactions will be borne by
the party incurring such costs and expenses unless otherwise specified in the
merger agreement.
ACCOUNTING TREATMENT
The merger will be accounted for by Washington Mutual as a purchase in
accordance with accounting principles generally accepted in the United States.
The reported results of operations of Washington Mutual will include the results
of Bank United Corp. from and after the closing date of the merger. The assets,
including intangible assets, and liabilities of Bank United Corp. will be
recorded at their fair values as of the closing date of the merger.
STOCK EXCHANGE LISTING OF WASHINGTON MUTUAL COMMON STOCK AND PIES
The merger agreement requires Washington Mutual to use its best efforts to
cause the shares of Washington Mutual common stock and PIES to be issued in the
merger to be approved for listing on the New York Stock Exchange, subject to
official notice of issuance. Listing of those securities is a condition to
closing the merger under the merger agreement.
RESALE OF WASHINGTON MUTUAL STOCK RECEIVED BY BANK UNITED CORP. STOCKHOLDERS
The shares of Washington Mutual common stock and PIES to be issued to Bank
United Corp. stockholders upon consummation of the merger will be registered
under the Securities Act and may be traded freely without restriction by those
stockholders who are not deemed to be "affiliates" of Bank United Corp. or
Washington Mutual, as that term is defined in rules promulgated under the
Securities Act.
Shares of Washington Mutual common stock and PIES received by those Bank
United Corp. stockholders who are deemed to be "affiliates" of Bank United Corp.
at the time of the Bank United Corp. stockholders' meeting with respect to the
merger 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.
APPRAISAL RIGHTS
In connection with the Bank United Corp. reorganization described above in
"--The Bank United Corp. Reorganization," Delaware law entitles the holders of
record of shares of Bank United Corp. common stock who follow the procedures
specified in Section 262 of the Delaware corporate law to have their shares
appraised by the Delaware Court of Chancery and to receive the "fair value" of
such
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shares as of the effective time of that reorganization, as determined by the
court, in place of the consideration that the holder would otherwise receive in
the Bank United Corp. reorganization. In order to exercise appraisal rights, a
common stockholder must demand and perfect the rights in accordance with
Section 262 of the Delaware corporate law. The Delaware law appraisal rights
discussed in this section of the proxy statement/prospectus only apply in
connection with the Bank United Corp. reorganization and do not apply in
connection with the Washington Mutual merger. You should be aware, however, that
if you demand and perfect appraisal rights in the Bank United Corp.
reorganization, you will cease to hold Bank United Corp. common stock and
therefore you will not receive any consideration in the Washington Mutual
merger.
The following is a summary of Section 262 of the Delaware corporate law and
is qualified in its entirety by reference to Section 262 of the Delaware
corporate law, a copy of which is attached to this document as Appendix G. Bank
United Corp. common stockholders should carefully review Section 262 of the
Delaware corporate law as well as information discussed below to evaluate their
rights to appraisal. If a holder of Bank United Corp. common stock elects to
exercise the right to an appraisal under Section 262 of the Delaware corporate
law, such common stockholder must:
- file with Bank United Corp. at its main office in Houston, Texas, a
written demand for appraisal of the shares of Bank United Corp. common
stock held (which demand must identify the common stockholder and
expressly request an appraisal) before the vote is taken on the Bank
United Corp. reorganization;
- vote against the reorganization at the Bank United Corp. special meeting;
and
- continuously hold such shares through the effective time of the Bank
United Corp. reorganization.
All written demands for appraisal should be addressed to: Jonathon Heffron,
Executive Vice President, Chief Operating Officer and General Counsel, Bank
United Corp., 3200 Southwest Freeway, Suite 2600, Houston, Texas 77027, before
the vote is taken on Bank United Corp. reorganization, and should be executed
by, or on behalf of, the holder of record. Such demand reasonably must inform
Bank United Corp. of the identity of the common stockholder and that such common
stockholder is thereby demanding appraisal of such stockholder's shares.
Within ten days after the effective time of the Bank United Corp.
reorganization, Bank United Corp., as the surviving company of the
reorganization, will give written notice of the effective time to each holder of
Bank United Corp. common stock who has satisfied the requirements of
Section 262 of the Delaware corporate law. Within 120 days after the effective
time, Bank United Corp. or any dissenting common stockholder may file a petition
in the court demanding a determination of the fair value of the shares of Bank
United Corp. common stock of all dissenting common stockholders. Any dissenting
common stockholder desiring the filing of such petition is advised to file such
petition on a timely basis unless the dissenting common stockholder receives
notice that such a petition has been filed by Bank United Corp. or another
dissenting common stockholder.
If a petition for appraisal is timely filed, the court will determine which
common stockholders are entitled to appraisal rights and thereafter will
determine the fair value of the shares of Bank United Corp. common stock held by
dissenting common stockholders, exclusive of any element of value arising from
the accomplishment or expectation of the Washington Mutual merger. In
determining such fair value, the court shall take into account all relevant
factors. The court may determine such fair value to be more than, less than or
equal to the consideration that such dissenting common stockholder would
otherwise be entitled to receive pursuant to the Bank United Corp.
reorganization plan of merger. If a petition for appraisal is not timely filed,
then the right to an appraisal shall cease. The costs of the appraisal
proceeding shall be determined by the court and taxed against the parties as the
court determines to be equitable under the circumstances. Upon the application
of any common stockholder,
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the court may determine the amount of interest, if any, to be paid upon the
value of the common stock to the common stockholders entitled thereto. Upon
application of a common stockholder, the court may order all or a portion of the
expenses incurred by any common stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorneys' fees and the
fees and expenses of experts, to be charged pro rata against the value of all
shares entitled to appraisal.
After the effective time of the Bank United Corp. reorganization, no
dissenting common stockholder shall have any rights of a Bank United Corp.
common stockholder with respect to such holder's shares for any purpose, except
to receive payment to which Bank United Corp. common stockholders of record as
of a date prior to the effective time are entitled, if any. If a dissenting
common stockholder delivers a written withdrawal of the demand for an appraisal
within 60 days after the effective time of the Bank United Corp. reorganization
or thereafter with the written approval of Bank United Corp. (or Washington
Mutual as the surviving company in the Washington Mutual merger), or if no
petition for appraisal is filed with the court within 120 days after the
effective time of the Bank United Corp. reorganization, then the right of such
dissenting common stockholder to an appraisal will cease and such dissenting
common stockholder will be entitled to receive only the shares of common stock
of Bank United Corp. common stock and CPR Certificates as provided in the
reorganization plan of merger for the Bank United Corp. reorganization.
The foregoing is only a summary of the applicable provision of the Delaware
General Corporation Law and is qualified in its entirety by reference to the
full text of such provision, which is included in Appendix G.
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INFORMATION ABOUT WASHINGTON MUTUAL
With a history dating back to 1889, Washington Mutual is a financial
services company committed to serving consumers and small to mid-sized
businesses. At June 30, 2000, it had stockholders' equity of $8.55 billion.
Based on consolidated assets of $185.69 billion at June 30, 2000, Washington
Mutual was the largest savings institution and the eighth largest banking
company in the United States.
On October 2, 2000, Washington Mutual signed a purchase agreement to acquire
the residential mortgage business of PNC Financial Services Group for
approximately $605 million in cash. Based on data for the first six months of
2000, the acquisition of the PNC mortgage business and the completion of the
merger with Bank United Corp. will make Washington Mutual the third-largest
mortgage originator and fourth-largest servicer of residential mortgages in the
United States. The acquisition is scheduled to close in the first quarter of
2001, subject to regulatory approvals.
Washington Mutual operates principally in California, Washington, Oregon,
Florida, Texas and Utah, and has operations in 36 other states. Through its
subsidiaries, Washington Mutual engages in the following activities:
- CONSUMER BANKING. The consumer banking business includes the sale of all
consumer deposit products, including checking accounts, money market
accounts and time deposits, and the associated servicing activities as
well as the origination of consumer loans through Washington Mutual's
consumer financial centers. These consumer loan products include second
equity mortgage loans and lines of credit, manufactured housing loans,
automobile, boat and recreational vehicle loans, education loans and small
business lines of credit. Washington Mutual conducts consumer banking in
eight states through over 1,000 financial centers and over 1,400 automated
teller machines. The consumer banking group also has approximately 1,600
full time equivalent employees in its telephone banking centers. At
June 30, 2000, Washington Mutual had $78.87 billion in deposits and a
consumer loan portfolio of $6.83 billion.
- MORTGAGE LENDING. Washington Mutual conducts mortgage lending through its
banking subsidiaries, Washington Mutual Bank, FA, Washington Mutual Bank,
and Washington Mutual Bank fsb. The principal activities conducted by
Washington Mutual's mortgage lending operations are the origination of
single-family residential mortgages and residential construction loans and
the associated loan servicing activities. For the six months ended
June 30, 2000, this group originated $19.82 billion of single-family
residential mortgage loans (excluding residential construction loans). At
June 30, 2000, Washington Mutual had a servicing portfolio of
$168.40 billion of single-family residential mortgage loans and
residential construction loans, including $59.79 billion of loans serviced
for others.
- COMMERCIAL BANKING. The commercial banking group is comprised of two
primary business lines: commercial banking, operating under the brand
names of WM Business Bank and Western Bank and commercial real estate
lending, operating under the Washington Mutual brand. The Western Bank
division operates primarily in Washington, Oregon, Idaho and Utah. WM
Business Bank commenced operations in California at the beginning of 1999.
The commercial banking group provides personalized commercial banking
services to small to mid-sized businesses. The commercial real estate
lending group makes available multi-family shelter-based lending,
commercial construction financing and other commercial real estate loans.
At June 30, 2000, Washington Mutual had $20.08 billion of commercial real
estate and commercial business loans in its portfolio, of which
$15.57 billion was secured by liens on apartment buildings.
- FINANCIAL SERVICES. The financial services business consists of WM
Financial Services, Inc., a licensed broker-dealer; WM Advisors, Inc., the
investment adviser to the WM Group of Funds; WM Funds Distributor, Inc.,
the distributor of the WM Group of Funds; and Washington Mutual Insurance
Services, Inc., a full-service insurance agency. Through its
broker-dealer, WM
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Financial Services, Washington Mutual offers a wide range of investment
products to its customers, including mutual funds, variable and fixed
annuities and general securities.
The WM Group of Funds is a proprietary mutual fund complex formed through
the consolidation of the Composite Funds, Sierra Trust Funds and the Griffin
Funds. At June 30, 2000, the WM Group of Funds consisted of 18 mutual funds,
five managed asset funds and one variable annuity. At that date, it had
$8.09 billion in assets under management.
Washington Mutual Insurance Services, Inc. supports the mortgage lending
process by offering customers property and casualty insurance products. The
group also offers insurance products to existing mortgage and deposit customers,
which include mortgage life and accidental death and dismemberment, property and
casualty, and life insurance.
- CONSUMER FINANCE. Washington Mutual conducts its consumer finance business
through Washington Mutual Finance (formerly, Aristar, Inc.) and Long Beach
Mortgage. Washington Mutual Finance makes direct consumer installment
loans and real estate secured loans and purchases retail installment
contracts from local retail establishments through a network of over 500
branch offices located in 25 states, primarily in the southeastern United
States. At June 30, 2000, Washington Mutual Finance had assets of
$3.74 billion.
Long Beach is engaged in the business of originating, purchasing and selling
specialty mortgage finance loans secured by first liens on one-to-four family
residences. Long Beach originates loans in all 50 states primarily through
wholesale channels comprised of a nationwide network of independent mortgage
loan brokers and correspondents. Long Beach maintains a close working
relationship with these brokers through its sales force of approximately 300
account executives located in 60 offices. Long Beach historically has followed a
strategy of selling all of its loan originations in the secondary market.
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INFORMATION ABOUT BANK UNITED CORP.
Bank United Corp. is the largest publicly traded depository institution
headquartered in Texas, providing consumers and businesses in Texas and other
selected markets throughout the United States with a broad array of financial
services. At June 30, 2000, Bank United Corp. had $18.2 billion in assets,
$8.8 billion in deposits and $827.7 million in stockholders' equity.
Through its subsidiaries, Bank United Corp. engages in the following
activities:
- COMMERCIAL BANKING. The commercial banking business provides credit and a
variety of cash management and other services primarily to mortgage
bankers, builders, developers and healthcare providers. Business is
solicited in Texas and in other targeted markets throughout the United
States. At June 30, 2000, Bank United Corp.'s commercial banking network
consisted of 23 regional banking offices in 16 states. During the nine
months ended June 30, 2000, Bank United Corp.'s commercial loan portfolio
increased by $1.5 million or 27% to $6.9 billion at June 30, 2000.
- COMMUNITY BANKING. The community banking business operates throughout
Texas and other states and includes deposit gathering, consumer lending,
small business and Small Business Administration banking, and investment
product sales. The platform for these consumer and small business
activities consists of a 155-branch network, a 24-hour telephone banking
center, a 158-unit ATM network and 19 Small Business Administration
lending offices in 13 states. The community banking business also has
online banking and online bill payment services available through its
website. As of June 30, 2000, Bank United Corp.'s community banking
network maintained approximately 518,000 deposit accounts, including
certificates of deposit for over 326,000 households and businesses. During
the nine months ended June 30, 2000, the number of checking accounts
increased by 13% to approximately 264,000.
- MORTGAGE SERVICING. Bank United Corp. operates one of the 25 largest
residential mortgage loan servicing businesses in the United States. The
servicing portfolio includes a large amount of Government National
Mortgage Association adjustable-rate mortgage loans and private-label
securities. Mortgage servicing activities include collecting and applying
loan payments from borrowers, remitting payments to investors, collecting
funds for and paying mortgage-related expenses, inspecting the collateral
as required, collecting from and foreclosing on delinquent borrowers,
disposing of properties received in foreclosures, and generally
administering loans. As of June 30, 2000, Bank United Corp.'s single
family mortgage servicing portfolio totaled $31.5 billion or 312,000
loans, including $5.1 billion of loans serviced for Bank United Corp.'s
own account. Escrow funds held on behalf of investors totaled
$173.7 million on June 30, 2000. At that time, the largest concentrations
of the servicing portfolio were in California and Texas.
- MORTGAGE BANKING. The mortgage banking business originates both fixed- and
adjustable-rate single family mortgage loans through 11 wholesale
production offices in 11 states. Loans originated by the wholesale offices
are retained for Bank United Corp.'s portfolio or are sold into the
secondary market. Bank United Corp. originates these loans through
approximately 3,700 approved mortgage brokers. The mortgage banking
business originated $3.7 billion and $3.6 billion of single family loans
in fiscal years 1999 and 1998. The mortgage banking business originated
$1.9 billion and $3.1 billion of single family loans during the nine
months ended June 30, 2000 and 1999. During fiscal years 1999 and 1998,
$2.8 billion and $1.9 billion of single family mortgage loans were sold in
the secondary market. During the nine months ended June 30, 2000 and 1999,
$1.1 billion and $2.6 billion of single family loans were sold in the
secondary market. At June 30, 2000, the mortgage banking business had
$2.8 billion of single family loans held for investment.
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- INVESTMENT PORTFOLIO. Bank United Corp. invests in single family loans,
short-term interest earning assets, securities and other investments, and
mortgage-backed securities. The investment portfolio business acquires
single family loans through traditional secondary market sources, such as
mortgage companies, financial institutions and investment banks. In fiscal
years 1999, 1998 and 1997, Bank United Corp. purchased approximately
$1.8 billion, $1.2 billion and $795.8 million of single family loans.
During the nine months ended June 30, 2000 and 1999, Bank United Corp.
purchased approximately $507.5 million and $1.3 billion of single family
loans. At June 30, 2000, the investment portfolio business held the
following assets: $3.8 billion of single family loans held for investment,
$516.6 million of repurchase agreements and federal funds sold,
$130.6 million of securities and other investments, and $902.5 million of
mortgage-backed securities.
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DESCRIPTION OF THE WASHINGTON MUTUAL PIES
CORPORATE PIES
In connection with the merger, Washington Mutual is issuing 2,000,000 shares
of its 8% Corporate Premium Income Equity Securities ("Washington Mutual PIES").
Each currently outstanding Bank United Corp. PIES will be converted into a
Washington Mutual PIES at the effective time of the merger. Each of the
Washington Mutual PIES is a unit initially consisting of:
- a purchase contract under which (1) the holder will purchase from
Washington Mutual on the purchase contract settlement date of August 16,
2002, or upon early settlement, for $50, (a) a number of newly issued
shares of common stock equal to the Settlement Rate described below under
"Description of the Purchase Contracts--General" and (b) one CPR
Certificate for each 1.3 shares of Washington Mutual common stock the
holder is obligated to purchase and (2) Washington Mutual will pay the
contract adjustment payments described below in "Description of the
Purchase Contracts--Contract Adjustment Payments" to the holder; and
- a share of Washington Mutual Series H preferred stock with a liquidation
preference of $50.
The CPR Certificates are described in "The Contingent Payment Rights Trust
and Certificates" below. If the litigation described in that section settles
before August 16, 2002, each CPR Certificate will, when purchased, entitle the
holder to receive all distributions made through the date of purchase with
respect to the CPR Certificates.
The purchase contracts are described in "Description of the Purchase
Contracts" below. The shares of Series H preferred stock are described in
"Description of the Preferred Stock" below. These shares will be pledged under
the pledge agreement, described below in "Description of the Purchase
Contracts--Pledged Securities and Pledge Agreement" to secure the holder's
obligation to purchase common stock under the purchase contract.
In this form, the Washington Mutual PIES are referred to as "Corporate
PIES".
VOTING RIGHTS
A Washington Mutual PIES itself carries no voting rights, but the
constituent share of preferred stock in each Corporate PIES will carry .10 of a
vote in connection with matters submitted generally to the holders of Washington
Mutual's common stock, and will vote together as a single class with shares of
the common stock and other capital stock of Washington Mutual entitled to vote
in respect of matters submitted to stockholders generally. See "Description of
the Preferred Stock--Voting Rights" below.
REMOVING THE PREFERRED STOCK FROM THE PLEDGE AGREEMENT BY SUBSTITUTING
TREASURY SECURITIES
Each holder of Corporate PIES may have the shares of preferred stock that
are part of their PIES removed from the pledge agreement by substituting for the
shares of preferred stock U.S. Treasury securities having an aggregate principal
amount at maturity equal to the aggregate purchase price of those shares of
preferred stock. Following this substitution, the PIES are referred to as
"Treasury PIES".
Each Treasury PIES will be a unit consisting of:
- a purchase contract under which (1) the holder will purchase from
Washington Mutual on the purchase contract settlement date of August 16,
2002, or upon early settlement, for $50, (a) a number of newly issued
shares of common stock equal to the Settlement Rate and (b) one CPR
Certificate for each 1.3 shares of common stock the holder is obligated to
purchase and (2) Washington Mutual will pay contract adjustment payments
to the holder; and
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- a 1/20 undivided beneficial ownership interest in a related U.S. Treasury
security having a principal amount at maturity equal to $1,000 and
maturing on or prior to the business day preceding the purchase contract
settlement date.
The term "business day" means any day other than Saturday or Sunday or a day
on which banking institutions in New York City are authorized or required by law
or executive order to remain closed.
The Treasury security will be pledged under the pledge agreement to secure
the holder's obligation to purchase common stock under the purchase contract.
Holders of Corporate PIES may create Treasury PIES at any time on or before
the seventh business day preceding the purchase contract settlement date.
Because Treasury securities are issued in integral multiples of $1,000 and the
Washington Mutual preferred stock has a liquidation preference of $50 per share,
holders of Corporate PIES may create Treasury PIES only in integral multiples of
20.
To create 20 Treasury PIES, a holder is required to:
- deposit with , the securities intermediary, a Treasury
security having a total principal amount at maturity of $1,000; and
- transfer to , the purchase contract agent, 20 Corporate PIES,
accompanied by a notice stating that the holder has deposited a Treasury
security with the securities intermediary and requesting that the purchase
contract agent instruct , the collateral agent, to release the
related shares of preferred stock with an aggregate liquidation preference
of $1,000.
Upon receiving instructions from the purchase contract agent and
confirmation of receipt of the Treasury security by the securities intermediary,
the collateral agent will cause the securities intermediary to release the
related 20 shares of preferred stock from the pledge and deliver them to the
purchase contract agent, on behalf of the holder, free and clear of Washington
Mutual's security interest. The purchase contract agent then will:
- cancel the 20 Corporate PIES;
- transfer the related shares of preferred stock with an aggregate
liquidation preference of $1,000 to the holder; and
- deliver 20 Treasury PIES to the holder.
The Treasury security will be substituted for the preferred stock and will
be pledged to the collateral agent to secure the holder's obligation to purchase
common stock under the related purchase contracts. The preferred stock
thereafter will trade separately from the Treasury PIES.
Holders who create Treasury PIES or recreate Corporate PIES, as discussed
below, will be responsible for any fees or expenses payable to the collateral
agent in connection with substitutions of collateral. See "Description of the
Purchase Contracts--Miscellaneous" below.
RECREATING CORPORATE PIES
Each holder of Treasury PIES may recreate Corporate PIES by:
- depositing with the securities intermediary shares of preferred stock with
an aggregate liquidation preference of $1,000; and
- transferring to the purchase contract agent 20 Treasury PIES, accompanied
by a notice stating that that holder has deposited shares of preferred
stock with an aggregate liquidation preference of $1,000 with the
securities intermediary and requesting that the purchase contract agent
instruct the collateral agent to release the related Treasury security.
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Upon receiving instructions from the purchase contract agent and
confirmation of receipt of the shares of preferred stock by the securities
intermediary, the collateral agent will cause the securities intermediary to
release the related Treasury security from the pledge and deliver it to the
purchase contract agent, on behalf of the holder, free and clear of the security
interest of Washington Mutual in that Treasury security. The purchase contract
agent then will:
- cancel the 20 Treasury PIES;
- transfer the related Treasury security to the holder; and
- deliver 20 Corporate PIES to the holder.
Holders of Treasury PIES may recreate Corporate PIES at any time on or
before the seventh business day preceding the purchase contract settlement date.
CURRENT PAYMENTS
Holders of Corporate PIES will be entitled to receive aggregate cash
distributions at a rate of 8.00% of the $50 stated amount per annum from and
after the effective time of the merger. These distributions will be payable
quarterly in arrears and subject to increase as described under "Description of
the Purchase Contracts--Contract Adjustment Payments" below. These quarterly
payments on the Corporate PIES will consist of (1) cumulative cash dividend
payments payable on the related shares of preferred stock at the rate of 7.25%
of the liquidation preference per annum and (2) contract adjustment payments
payable by Washington Mutual at the rate of 0.75% of the stated amount per annum
until August 16, 2002.
If a holder of Corporate PIES creates Treasury PIES by substituting Treasury
securities for the preferred stock, the only payments that that holder will
receive on the Treasury PIES will be the quarterly contract adjustment payments.
Instead of payments with respect to preferred stock, original issue discount
will accrue on the related Treasury securities.
LISTING OF THE CORPORATE PIES, THE TREASURY PIES AND THE PREFERRED STOCK
As a condition of the merger, Washington Mutual will apply to list the
Corporate PIES on the New York Stock Exchange. If the Treasury PIES and the
preferred stock are separately traded to a sufficient extent that applicable
listing requirements are met, Washington Mutual intends to try to cause them to
be listed or traded on the same national securities exchange or automated
quotation system as the Corporate PIES are listed or traded.
MISCELLANEOUS
Washington Mutual or its affiliates may purchase from time to time any of
the Washington Mutual PIES that are then outstanding by tender, in the open
market or by private agreement.
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DESCRIPTION OF THE PURCHASE CONTRACTS
GENERAL
In the discussion that follows:
- "Applicable Market Value" means the average of the Closing Prices of the
common stock on each of the 20 consecutive Trading Days ending on the
third Trading Day preceding the purchase contract settlement date.
- "Closing Price" of the common stock, on any date of determination, means:
(1) the closing sale price or, if no closing sale price is reported, the
last reported sale price of the common stock on the NYSE on that date
or, if the common stock is not listed for trading on the NYSE on that
date, as reported in the composite transactions for the principal
United States securities exchange on which the common stock is so
listed; or
(2) if the common stock is not so reported, the last quoted bid price for
the common stock in the over-the-counter market as reported by the
National Quotation Bureau or a similar organization, or, if that bid
price is not available, the average of the mid-point of the last bid
and ask prices of the common stock on that date from at least three
nationally recognized independent investment banking firms retained
for this purpose by Washington Mutual.
- "Trading Day" means a day on which the common stock:
(1) is not suspended from trading on any national or regional securities
exchange or association or over-the-counter market at the close of
business; and
(2) has traded at least once on the national or regional securities
exchange or association or over-the-counter market that is the
primary market for the trading of the common stock.
Each purchase contract that is a part of a Washington Mutual PIES will
obligate its holder to purchase, and Washington Mutual to sell, for $50 in cash,
(1) a number of newly issued shares of common stock, equal to the rate described
below, which we call the "Settlement Rate," and (2) one CPR Certificate for each
1.3 shares of Washington Mutual common stock, on the purchase contract
settlement date of August 16, 2002, unless the purchase contract terminates
before that date or is settled early at the holder's option, as described below
under "--Early Settlement." The number of shares of common stock and CPR
Certificates that may be issued upon settlement of each purchase contract on the
purchase contract settlement date will be determined as follows, subject to
adjustment as described under "--Anti-dilution Adjustments" below:
- If the Applicable Market Value is equal to or greater than the "Threshold
Appreciation Price" of $44.9250, then each purchase contract will be
settled for 1.4469 shares of common stock and 1.1130 CPR Certificates. The
Threshold Appreciation Price represents an appreciation of 20.00% above
the "Reference Price" of $37.4375.
- If the Applicable Market Value is less than the Threshold Appreciation
Price but greater than the Reference Price, then each purchase contract
will be settled for a number of shares of common stock determined by
dividing the liquidation preference of $50 by the Applicable Market Value
and multiplying the quotient by 1.3, and a number of CPR Certificates
equal to the quotient of the liquidation preference divided by the
Applicable Market Value.
- If the Applicable Market Value is less than or equal to the Reference
Price, then each purchase contract will be settled for 1.7362 shares of
common stock and 1.3356 CPR Certificates.
For illustrative purposes only, the following table shows the number of
shares of common stock that would be issued upon settlement of each purchase
contract at various assumed Applicable Market
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Values. The table assumes that there will be no adjustments to the Settlement
Rate described under "--Anti-dilution Adjustments" below. There can be no
assurance that the actual Applicable Market Value will be within the range shown
below.
Given the Reference Price of $37.4375 and the Threshold Appreciation Price
of $44.9250, a holder of PIES would receive, on the purchase contract settlement
date, the following number of shares of common stock and CPR Certificates:
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF
APPLICABLE MARKET VALUE OF COMMON STOCK CPR CERTIFICATES
------------------------ ------------------------ ------------------------
<S> <C> <C>
$35.0000 1.7362 1.3356
37.4375 1.7362 1.3356
41.0000 1.5854 1.2195
44.9250 1.4469 1.1130
45.0000 1.4469 1.1130
</TABLE>
No fractional shares of common stock will be issued by Washington Mutual
upon settlement of a purchase contract. In lieu of a fractional share, the
holder will receive an amount of cash equal to the applicable fraction
multiplied by the Applicable Market Value. If, however, a holder surrenders for
settlement at one time more than one purchase contract, then the number of
shares of common stock that may be issued under those purchase contracts will be
computed based upon the aggregate number of purchase contracts surrendered.
Before the settlement of a purchase contract, the common stock underlying
the purchase contract will not be outstanding for any purpose, and the holder of
the purchase contract will not have any voting rights, rights to dividends or
other distributions, or other rights or privileges of a stockholder of
Washington Mutual by virtue of holding that purchase contract.
By accepting a Corporate PIES or a Treasury PIES, a holder will be deemed to
have:
- irrevocably authorized the purchase contract agent as attorney-in-fact to
enter into and perform the related purchase contract on behalf of that
holder;
- agreed to be bound by, and to have consented to, the terms and provisions
of the related purchase contract;
- irrevocably authorized the purchase contract agent as attorney-in-fact to
enter into and perform the pledge agreement on behalf of that holder; and
- agreed to be bound by the pledge arrangement contained in the pledge
agreement.
In addition, each of those holders will be deemed to have agreed to treat
itself as the owner of the related preferred stock, in the case of Corporate
PIES, or the Treasury securities, in the case of Treasury PIES, in each case for
U.S. federal, state and local income and franchise tax purposes.
SETTLEMENT THROUGH REMARKETING
Holders of Corporate PIES who fail to notify the purchase contract agent, on
or before the seventh business day preceding the purchase contract settlement
date, of their intention to effect settlement of the related purchase contracts
with separate cash in the manner described under "--Notice to Settle With Cash,"
or who so notify the purchase contract agent but fail to deliver separate cash
on or before the fifth business day preceding the purchase contract settlement
date, will have their shares of preferred stock remarketed on the third business
day preceding the purchase contract settlement date. Under the remarketing
agreement between Washington Mutual and [LEHMAN BROTHERS], [LEHMAN BROTHERS]
will use its commercially reasonable efforts to remarket those shares of
preferred stock, together with any shares of preferred stock not then a part of
the Corporate PIES as
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to which the holders have requested remarketing, on that date at a price of
100.50% of the aggregate liquidation preference of those shares. The proceeds
from the remarketing of the shares of preferred stock that are a part of the
Corporate PIES will automatically be applied to satisfy in full those Corporate
PIES holders' obligations to purchase common stock under the related purchase
contracts and to pay the remarketing fee to [LEHMAN BROTHERS]for that
remarketing. See "Description of the Preferred Stock--Dividend Rate Reset by
Remarketing" below.
If [LEHMAN BROTHERS] cannot remarket the preferred stock, a "Failed
Remarketing" will occur, and Washington Mutual will be entitled to exercise its
rights as a secured party and, subject to applicable law, retain the preferred
stock pledged as collateral under the pledge agreement or sell it in one or more
private sales. In either case, the obligations of the holders under the related
purchase contracts would be satisfied in full. If Washington Mutual exercises
its rights as a secured creditor, any accrued and unpaid interest payments on
shares of preferred stock will be paid in cash by Washington Mutual to the
purchase contract agent for payment to the holders of the Corporate PIES of
which those shares are a part. Washington Mutual will cause a notice of the
Failed Remarketing to be published on the second business day preceding the
purchase contract settlement date in a daily newspaper in the English language
of general circulation in New York City, which is expected to be The Wall Street
Journal.
As long as the PIES or the preferred stock are evidenced by one or more
global security certificates deposited with The Depository Trust Company, or
DTC, Washington Mutual will request, not later than 15 nor more than 30 calendar
days prior to the remarketing date, that DTC notify its participants holding
preferred stock or Corporate PIES of the remarketing and of the procedures to be
followed for settlement with separate cash. Washington Mutual will try to have
in effect a registration statement covering the shares of preferred stock to be
remarketed in a form that Lehman Brothers may use in connection with the
remarketing process.
NOTICE TO SETTLE WITH CASH
A holder of a Corporate PIES or a Treasury PIES wishing to settle the
related purchase contract with separate cash must notify the purchase contract
agent by delivering a "Notice to Settle by Separate Cash" on or before
5:00 p.m., New York City time:
- on the seventh business day preceding the purchase contract settlement
date, in the case of a Corporate PIES; and
- on the second business day preceding the purchase contract settlement
date, in the case of a Treasury PIES.
A holder wishing to settle with separate cash must deliver to the securities
intermediary, cash payment in the form of a certified or cashier's check or by
wire transfer, in each case in immediately available funds payable to or upon
the order of the securities intermediary. Payment must be delivered before
11:00 a.m., New York City time, on the fifth business day before the purchase
contract settlement date in the case of a Corporate PIES, or on the business day
before the purchase contract settlement date in the case of Treasury PIES. If
the payment is not delivered by that time and date, then the related shares of
preferred stock will be remarketed or Washington Mutual will receive at maturity
the principal amount of the related Treasury securities in full satisfaction of
that holder's obligations under the related purchase contract. Upon receipt of
the cash payment, the related shares of preferred stock, in the case of
Corporate PIES, or Treasury securities, in the case of Treasury PIES, will be
released from the pledge arrangement and transferred to the purchase contract
agent for distribution to the holder of the related Corporate or Treasury PIES.
Any cash received by the securities intermediary upon separate cash
settlement will be invested promptly in permitted investments and paid to
Washington Mutual on the purchase contract settlement
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date. Any funds received by the securities intermediary in respect of the
investment earnings from those investments will be distributed to the purchase
contract agent for payment to the holders who settled with cash.
EARLY SETTLEMENT
A holder of Corporate PIES or Treasury PIES may settle the related purchase
contracts prior to the purchase contract settlement date by delivering to the
purchase contract agent:
- a completed "Election to Settle Early" form; and
- payment, payable to Washington Mutual in immediately available funds, in
an amount equal to $50 multiplied by the number of purchase contracts
being settled.
A holder of Corporate PIES may settle early the related purchase contracts
at any time on or before the seventh business day preceding the purchase
contract settlement date. A holder of Treasury PIES also may settle early at any
time before the second business day preceding the purchase contract settlement
date, but only in integral multiples of 20 Treasury PIES.
Upon early settlement, Washington Mutual will issue, and the holder will be
entitled to receive, newly issued shares of common stock for each Corporate PIES
or Treasury PIES, regardless of the market price of the common stock on the date
of early settlement but subject to adjustment under the circumstances described
under "--Anti-dilution Adjustments" below. The holder's right to receive future
contract adjustment payments will terminate. Washington Mutual will cause
(1) the common stock and CPR Certificates to be issued and (2) the related
shares of preferred stock, in the case of Corporate PIES, or Treasury
securities, in the case of Treasury PIES, securing those purchase contracts to
be released from the pledge under the pledge agreement, and, within three
business days following the settlement date (as determined in the manner set
forth below), each will be transferred to the purchase contract agent for
delivery to the holder or the holder's designee.
If the purchase contract agent receives a completed "Election to Settle
Early" and payment of $50 for each PIES being settled early by 5:00 p.m., New
York City time, on any business day, then that day will be considered the
settlement date. If the purchase contract agent receives the foregoing after
5:00 p.m., New York City time, on any business day or at any time on a day that
is not a business day, then the next business day will be considered the
settlement date. As long as the PIES are evidenced by one or more global
security certificates deposited with DTC, procedures for early settlement also
will be governed by standing arrangements between DTC and the purchase contract
agent.
CONTRACT ADJUSTMENT PAYMENTS
Contract adjustment payments will be fixed at a rate per annum of 0.75% of
the $50 stated amount per purchase contract, subject to increase as described
below. Contract adjustment payments payable for any period will be computed
(1) for any full quarterly period on the basis of a 360-day year of twelve
30-day months and (2) for any period shorter than a full quarterly period, on
the basis of a 30-day month and, for periods of less than a month, on the basis
of the actual number of days elapsed per 30-day month. Contract adjustment
payments have accrued from August 10, 1999 and will be payable quarterly in
arrears (to the extent not previously paid) on February 16, May 16, August 16
and November 16 of each year, beginning on the first February 16, May 16,
August 16 or November 16 following the effective time of the merger.
If a "Reset Transaction," as defined below, occurs, the rate at which the
contract adjustment payments accrue will be adjusted to equal the "Adjusted
Contract Adjustment Payment Rate" as defined below from the effective date of
the Reset Transaction to, but not including, the earlier of:
- the effective date of any later Reset Transaction, or
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- the purchase contract settlement date.
"Reset Transaction" means a (a) merger, consolidation or statutory share
exchange to which the entity that is the issuer of the common stock for which
the purchase contracts are then to be settled is a party, (b) a sale of all or
substantially all the assets of that entity, (c) a recapitalization of that
entity's common stock, or (d) a distribution described in clause (4) of the
first paragraph under "--Anti-Dilution Adjustments" below, which results in the
purchase contracts being settled for:
- shares of an entity the common stock of which had a "Dividend Yield" (as
defined below) for the four fiscal quarters of that entity preceding the
public announcement of that transaction or distribution that was more than
250 basis points (.250) higher than the Dividend Yield on the Washington
Mutual common stock, or other common stock then issuable upon settlement
of the purchase contracts, for the four fiscal quarters preceding the
public announcement of such transaction or distribution, or
- shares of an entity that announces a dividend policy prior to the
effective date of the transaction or distribution which policy, if
implemented, would result in a Dividend Yield on that entity's common
stock for the next four fiscal quarters that would result in such a 250
basis point increase.
The "Adjusted Contract Adjustment Payment Rate," with respect to any Reset
Transaction, will be the rate per annum that is the arithmetic average of the
rates quoted by two "Reference Dealers" (as defined below) selected by
Washington Mutual or its successor as the rate at which contract adjustment
payments should accrue so that the fair market value, expressed in dollars, of a
Corporate PIES immediately after the later of:
- the public announcement of the Reset Transaction, or
- the public announcement of a change in dividend policy in connection with
the Reset Transaction,
will equal the average Trading Price of a Corporate PIES for the 20 Trading Days
preceding the date of public announcement of the Reset Transaction. However, the
Adjusted Contract Adjustment Payment Rate will not be less than 0.75% per annum.
The "Dividend Yield" on any security for any period means the dividends paid
or proposed to be paid pursuant to an announced dividend policy on that security
for that period divided by, if with respect to dividends paid on that security,
the average Closing Price of that security during that period and, if with
respect to dividends proposed to be paid on that security, the Closing Price of
that security on the effective date of the related Reset Transaction.
"Reference Dealer" means a dealer engaged in the trading of convertible
securities.
"Trading Price" of a security on any date of determination means:
- the closing sale price or, if no closing sale price is reported, the last
reported sale price of a security, regular way, on the NYSE on that date;
- if that security is not listed for trading on the NYSE on any such date,
the closing sale price as reported in the composite transactions for the
principal United States securities exchange on which that security is so
listed;
- if that security is not so listed on a United States national or regional
securities exchange, the closing sale price as reported by the Nasdaq
National Market;
- if that security is not so reported, the price quoted by Interactive Data
Corporation for that security or, if Interactive Data Corporation is not
quoting such price, a similar quotation service selected by Washington
Mutual;
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- if that security is not so quoted, the average of the mid-point of the
last bid and ask prices for that security from at least two dealers
recognized as market-makers for such security; or
- if that security is not so quoted, the average of the last bid and ask
prices for that security from a Reference Dealer.
Contract adjustment payments will be payable to the holders of purchase
contracts as they are registered on the books and records of the purchase
contract agent on the relevant record dates. So long as the PIES remain in
book-entry only form that date will be the business day preceding the relevant
payment dates. Contract adjustment payments will be paid through the purchase
contract agent, which will hold amounts received in respect of the contract
adjustment payments for the benefit of the holders of the purchase contracts
that are a part of those PIES. Subject to any applicable laws and regulations,
each payment will be made as described under "--Payment of Distributions,
Settlement and Transfers" below. If the PIES do not remain in book-entry only
form, the relevant record dates will be the 15th business day before the
relevant payment dates. If any date on which contract adjustment payments are to
be made is not a business day, then payment of the contract adjustment payments
payable on that date will be made on the next day that is a business day and
without any interest in respect of any such delay. However, if such business day
is in the next calendar year, payment will be made on the prior business day.
ANTI-DILUTION ADJUSTMENTS
In this section, "Current Market Price" per share of common stock on any day
means the average of the daily Closing Prices for the five consecutive Trading
Days selected by Washington Mutual beginning not more than 30 Trading Days
before, and ending not later than the earlier of the day in question and the day
before the "ex date" with respect to the issuance or distribution requiring that
computation. In this paragraph, the term "ex date," when used with respect to
any issuance or distribution, will mean the first date on which the common stock
trades regular way on the applicable exchange or in the applicable market
without the right to receive that issuance or distribution.
The formula for determining the Settlement Rate will be subject to
adjustment upon the occurrence of specified events, including:
(1) the payment of dividends and other distributions on the common stock
made in common stock;
(2) the issuance to all holders of common stock of rights, options or
warrants entitling them, for a period of up to 45 days, to subscribe for
or purchase common stock at less than their Current Market Price;
(3) subdivisions, splits or combinations of common stock;
(4) distributions to all holders of common stock of evidences of
indebtedness or assets, including securities, but excluding any dividend
or distribution covered by clause (1) or (2) above and any dividend or
distribution paid exclusively in cash;
(5) distributions consisting exclusively of cash to all holders of common
stock in an aggregate amount that, together with (a) other all-cash
distributions made within the preceding 12 months and (b) any cash plus
the fair market value, as of the expiration of the tender or exchange
offer referred to below, of consideration payable in respect of any
tender or exchange offer by Washington Mutual or any of its subsidiaries
for the common stock concluded within the preceding 12 months, exceeds
15% of the total market capitalization of Washington Mutual on the date
of the distribution; total market capitalization is the product of the
Current Market Price of the common stock multiplied by the number of
shares of common stock then outstanding; and
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(6) the successful completion of a tender or exchange offer made by
Washington Mutual or any of its subsidiaries for the common stock that
involves an aggregate consideration having a fair market value that,
together with (a) any cash and the fair market value of other
consideration payable in respect of any tender or exchange offer by
Washington Mutual or any of its subsidiaries for the common stock
concluded within the preceding 12 months and (b) the total amount of any
all-cash distributions to all holders of Washington Mutual common stock
made within the preceding 12 months, exceeds 15% of the total market
capitalization of Washington Mutual on the expiration of that tender or
exchange offer.
In the case of certain reclassifications, consolidations, mergers, sales or
transfers of assets or other transactions pursuant to which the common stock is
converted into the right to receive other securities, cash or property, each
purchase contract then outstanding would become, without the consent of the
holder of the related Corporate PIES or Treasury PIES, a contract to purchase
only the kind and amount of securities, cash and other property receivable upon
consummation of the transaction by a holder of the number of shares of common
stock that would have been received by the holder of the related Corporate PIES
or Treasury PIES immediately before the date of consummation of the transaction
if the holder had then settled that purchase contract.
If at any time Washington Mutual makes a distribution of property to its
stockholders that would be taxable to stockholders as a dividend for United
States federal income tax purposes and, pursuant to the Settlement Rate
adjustment provisions of the purchase contract agreement, the Settlement Rate is
increased, that increase may give rise to a taxable dividend to holders of the
PIES.
In addition, Washington Mutual may make similar increases in the Settlement
Rate as it deems advisable in order to avoid or diminish any income tax to
holders of its capital stock resulting from any dividend or distribution of
capital stock, or rights to acquire capital stock, or from any event treated in
that way for income tax purposes or for any other reason.
Adjustments to the Settlement Rate will be calculated to the nearest
1/10,000th of a share. No adjustment in the Settlement Rate will be required
unless the adjustment would require an increase or decrease of at least 1% in
the Settlement Rate. However, any adjustments not required to be made by reason
of the above will be carried forward and taken into account in any subsequent
adjustment.
Whenever the Settlement Rate is adjusted, Washington Mutual must deliver to
the purchase contract agent a certificate setting forth the Settlement Rate,
detailing the calculation of the Settlement Rate and describing the facts upon
which the adjustment is based. In addition, Washington Mutual must notify the
holders of the PIES of the adjustment within 10 business days of any event
requiring that adjustment and describe in reasonable detail the method by which
the Settlement Rate was adjusted.
Each adjustment to the Settlement Rate will result in a corresponding
adjustment to the number of shares of common stock issuable upon early
settlement of a purchase contract.
If an adjustment is made to the Settlement Rate, an adjustment also will be
made to the Applicable Market Value solely to determine which Settlement Rate
will be applicable on the purchase contract settlement date.
TERMINATION
The purchase contracts and the obligations and rights of Washington Mutual
and of the holders of the PIES under the purchase contracts, including the
holders' right to receive accrued contract adjustment payments and the
obligation and right to purchase and receive common stock, will terminate
automatically upon the occurrence of certain events of bankruptcy, insolvency or
reorganization with respect to Washington Mutual. Upon termination, the
collateral agent will release the related preferred stock, in the case of
Corporate PIES, or Treasury securities, in the case of
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Treasury PIES, from the pledge arrangement and cause the securities intermediary
to transfer the preferred stock or Treasury securities to the purchase contract
agent for distribution to the PIES holders.
PLEDGED SECURITIES AND PLEDGE AGREEMENT
The shares of preferred stock that are a part of the Corporate PIES or, if
substituted, the Treasury securities that are a part of the Treasury PIES, which
we collectively call the "Pledged Securities," will be pledged to the collateral
agent, for the benefit of Washington Mutual under the pledge agreement to secure
the obligations of the holders of the PIES to purchase common stock under the
related purchase contracts. The rights of the holders of the PIES with respect
to the Pledged Securities will be subject to the security interest of Washington
Mutual in the Pledged Securities. No holder of Corporate PIES or Treasury PIES
will be permitted to withdraw the Pledged Securities related to Corporate PIES
or Treasury PIES from the pledge arrangement except:
(1) to substitute Treasury securities for preferred stock (see "Description
of the Washington Mutual PIES--Removing the Preferred Stock from the
Pledge Agreement by Substituting Treasury Securities" above);
(2) to substitute preferred stock for Treasury securities (see "Description
of the Washington Mutual PIES--Recreating Corporate PIES" above); and
(3) upon early settlement, settlement for separate cash or termination of
the related purchase contracts.
Subject to the security interest and the terms of the purchase contract
agreement and the pledge agreement, each holder of Corporate PIES will be
entitled, through the purchase contract agent and the collateral agent, to all
of the proportional rights and preferences of the related preferred stock,
including dividend payments, voting and repayment rights, and each holder of
Treasury PIES will retain beneficial ownership of the related Treasury
securities pledged in respect of the related purchase contracts. Washington
Mutual will have no interest in the Pledged Securities other than its security
interest.
The securities intermediary will distribute, upon receipt of interest on the
Pledged Securities, payments to the purchase contract agent, which in turn will
distribute those payments, together with contract adjustment payments received
from Washington Mutual, to the holders in whose names the PIES are registered at
the close of business on the record date prior to the date of such distribution.
BOOK-ENTRY ISSUANCE
The depositary for the PIES will be DTC. The PIES will be issued only as
fully-registered securities registered in the name of Cede & Co., DTC's nominee.
The PIES will be issued in accordance with DTC's standard procedures.
PAYMENT OF DISTRIBUTIONS, SETTLEMENT AND TRANSFERS
Distributions on the PIES will be payable, the purchase contracts and
documents related to the PIES will be settled, and transfers of the PIES will be
able to be registered at the office of , the purchase contract
agent, in . In addition, if the PIES do not remain in book-entry
form, Washington Mutual has the option to pay distributions on the PIES by check
mailed to the address of the person entitled to those distributions as shown on
the security register of Washington Mutual.
No service charge will be made for any registration of transfer or exchange
of the PIES, except for any tax or other governmental charge that may be imposed
in connection with a transfer or exchange.
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MODIFICATION OF THE PURCHASE CONTRACTS AND THE PLEDGE AGREEMENT
Subject to limited exceptions, Washington Mutual and the purchase contract
agent may not modify the terms of the purchase contracts or the purchase
contract agreement without the consent of the holders of not less than a
majority of the outstanding purchase contracts, except that no modification may,
without the consent of the holder of each outstanding purchase contract affected
thereby:
- change any payment date;
- change the amount or type of collateral required to be pledged to secure a
holder's obligations under the purchase contract, except for the right of
a holder of Corporate PIES to substitute Treasury securities for the
pledged preferred stock or the right of a holder of Treasury PIES to
substitute preferred stock for the pledged Treasury securities, impair the
right of the holder of any purchase contract to receive interest on the
collateral, or otherwise adversely affect the holder's rights in or to the
collateral;
- reduce any contract adjustment payments or change the place or currency of
payment;
- impair the right to institute suit for the enforcement of a purchase
contract;
- reduce the number of shares of common stock purchasable under a purchase
contract, increase the purchase price of the common stock on settlement of
any purchase contract, change the purchase contract settlement date or
otherwise adversely affect the holder's rights under a purchase contract;
or
- reduce the above-stated percentage of outstanding purchase contracts whose
holders' consent is required for the modification or amendment of the
provisions of the purchase contracts or the purchase contract agreement.
However, if any amendment or proposal would adversely affect only the
Corporate PIES or only the Treasury PIES, then only the affected class of
holders will be entitled to vote on the amendment or proposal, and the amendment
or proposal will not be effective except with the consent of the holders of not
less than a majority of the class or, if referred to in the listed items above,
all of the holders of the class.
Subject to limited exceptions, Washington Mutual, the collateral agent, the
securities intermediary and the purchase contract agent may not modify the terms
of the pledge agreement without the consent of the holders of not less than a
majority of the outstanding purchase contracts, except that no modification may,
without the unanimous consent of the holders of each outstanding PIES adversely
affected thereby:
- change the amount or type of collateral underlying a PIES, except for the
right of a holder of Corporate PIES to substitute Treasury securities for
the pledged preferred stock or the right of a holder of Treasury PIES to
substitute preferred stock for the pledged Treasury securities, impair the
right of the holder of any PIES to receive distributions on the underlying
collateral, or otherwise adversely affect the holder's rights in or to the
collateral;
- otherwise effect any action that, under the purchase contract agreement,
would require the consent of the holders of each outstanding PIES; or
- reduce the above-stated percentage of outstanding purchase contracts whose
holders' consent is required for the amendment.
However, if any amendment or proposal would adversely affect only the
Corporate PIES or only the Treasury PIES, then only the affected class of
holders will be entitled to vote on the amendment or proposal, and the amendment
or proposal will not be effective except with the consent of the holders
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of not less than a majority of the class or, if referred to in the items listed
above, all of the holders of the class.
NO CONSENT TO ASSUMPTION
Each holder of Corporate PIES or Treasury PIES will be deemed under the
terms of the purchase contract agreement, by his or her acceptance of such PIES,
to have expressly withheld any consent to the assumption, also known as
affirmance, of the related purchase contracts by Washington Mutual, its
receiver, liquidator or trustee in the event that Washington Mutual becomes the
subject of a case under the Bankruptcy Code or other similar state or federal
law providing for reorganization or liquidation.
CONSOLIDATION, MERGER, SALE OR CONVEYANCE
Washington Mutual will agree in the purchase contract agreement that it will
not merge or consolidate with any other entity or sell, assign, transfer, lease
or convey all or substantially all of its properties and assets to any other
entity or group of affiliated entities unless:
- either Washington Mutual is the continuing corporation or the successor
corporation is a corporation organized under the laws of the United States
of America, a state thereof or the District of Columbia and that
corporation expressly assumes all the obligations of Washington Mutual
under the purchase contracts, the purchase contract agreement and the
pledge agreement by one or more supplemental agreements in form reasonably
satisfactory to the purchase contract agent and the collateral agent; and
- Washington Mutual or that successor corporation is not, immediately after
such merger, consolidation, sale, assignment, transfer, lease or
conveyance, in default in the performance of any or condition underlying
the purchase contract, the PIES or the pledge agreement.
GOVERNING LAW
The purchase contracts, the purchase contract agreement and the pledge
agreement will be governed by, and construed in accordance with, the laws of the
State of New York.
MISCELLANEOUS
The purchase contract agreement will provide that Washington Mutual will pay
all fees and expenses related to (1) the retention of the collateral agent and
the securities intermediary and (2) the enforcement by the purchase contract
agent of the rights of the holders of the PIES. However, holders who elect to
substitute the related Pledged Securities, thus creating Treasury PIES or
recreating Corporate PIES, will be responsible for any fees or expenses payable
in connection with the substitution, as well as for any commissions, fees or
other expenses incurred in acquiring the Pledged Securities to be substituted.
Washington Mutual will not be responsible for any of those fees or expenses.
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DESCRIPTION OF THE PREFERRED STOCK
GENERAL
The Washington Mutual board of directors has authorized the issuance of a
series of preferred stock consisting of 2,000,000 shares. These shares of
preferred stock will be issued in connection with the Washington Mutual PIES and
constitute a single series of preferred stock of Washington Mutual, which will
be called the "Series H Preferred Stock." Washington Mutual may, in the future,
issue additional series of preferred stock. When issued, the preferred stock
will be duly and validly issued, fully paid and nonassessable. The preferred
stock will not be convertible into shares of common stock or any other class or
series of capital stock of Washington Mutual. The holders of the preferred stock
will have no preemptive rights with respect to any shares of Washington Mutual
capital stock or any other securities convertible into, or carrying rights or
options to purchase, any shares of Washington Mutual capital stock. The
preferred stock will not be subject to any sinking fund or other obligation by
Washington Mutual to repurchase or retire the preferred stock. The registrar,
transfer agent and dividend disbursing agent for the preferred stock is .
RANKING
The preferred stock will rank senior to the common stock with respect to the
payment of dividends and upon liquidation, dissolution or winding up of
Washington Mutual.
DIVIDENDS
Holders of the preferred stock will be entitled to receive, when and as
declared by the Washington Mutual board of directors out of assets of Washington
Mutual legally available for payment, cash dividends at the annual rate of 7.25%
of the $50 liquidation preference per share, equivalent to $3.6250 per share,
until the purchase contract settlement date of August 16, 2002, and at the Reset
Rate (described in "--Dividend Rate Reset by Remarketing" below) thereafter.
Dividends on the preferred stock will be payable quarterly in arrears on
February 16, May 16, August 16 and November 16 of each year, beginning the first
February 16, May 16, August 16 or November 16 following the effective time of
the merger, or if that date is not a business day, the next succeeding business
day. Dividends on the preferred stock will begin to accumulate and be cumulative
from the date of original issuance and will be payable to holders of record as
they appear on the stock books of Washington Mutual on the record dates for the
dividend payments. Those record dates will be, in the case of global
certificates, the business day preceding a payment date and, in all other cases,
15 business days before a payment date, and will be fixed by the board of
directors of Washington Mutual. However, holders of shares of preferred stock
called for redemption (as described in "--Redemption" below) on a redemption
date falling between a dividend payment record date and the dividend payment
date will receive the dividend payment together with all other accumulated and
unpaid dividends on the date fixed for redemption instead of on the dividend
payment date. Dividends payable on the preferred stock for any period longer or
shorter than a full dividend period will be computed on the basis of twelve
30-day months, a 360-day year and the actual number of days elapsed in the
period. Dividends payable per share of preferred stock for each quarterly
dividend period will be computed by dividing the annual dividend amount of
$3.6250 by four. Holders of the preferred stock will not be entitled to any
dividends, whether payable in cash, property or securities, in excess of the
full cumulative dividends, as described in this paragraph. No interest, or sum
of money in lieu of interest, will be payable in respect of any accumulated and
unpaid dividends.
If dividends are not paid in full, or declared in full and sums set apart
for their payment, on the preferred stock and on any other capital stock ranking
equally as to dividends with the preferred stock, all dividends declared on
shares of preferred stock and shares of that other capital stock will be
declared and paid pro rata so that in all cases the amount of dividends declared
per share on the
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preferred stock and that other capital stock will bear to each other the same
ratio that accrued and unpaid dividends per share on the shares of preferred
stock and that other capital stock bear to each other. Except as provided above,
unless full cumulative dividends on all outstanding shares of the preferred
stock have been paid or declared and sums set aside for their payment,
- dividends, other than dividends paid in common stock or other stock
ranking junior to the preferred stock as to dividends and upon
liquidation, dissolution or winding up, may not be declared or paid or set
apart for payment,
- other distributions may not be made on the common stock or on any other
stock of Washington Mutual ranking junior to the preferred stock as to
dividends, or upon liquidation, dissolution or winding up, and
- any common stock or any other stock of Washington Mutual ranking junior to
or on a parity with the preferred stock as to dividends or upon
liquidation, may not be acquired for any consideration by Washington
Mutual, except by conversion into or exchange for stock of Washington
Mutual ranking junior to the preferred stock as to dividends and upon
liquidation, dissolution or winding up.
DIVIDEND RATE RESET BY REMARKETING
The dividend rate on the preferred stock will be reset to the "Reset Rate"
on the third day preceding the purchase contract settlement date. The Reset Rate
will be the rate per annum that results from the remarketing of the shares of
preferred stock that are a part of the Corporate PIES as to which the holders
have not given notice of their election to settle the related purchase contracts
with cash, or have given notice but failed to deliver cash, and the shares of
preferred stock that are not a part of the Corporate PIES as to which the
holders have requested remarketing. On the remarketing date, [LEHMAN BROTHERS]
will use commercially reasonable efforts to remarket those shares of preferred
stock at a price equal to 100.50% of the aggregate liquidation preference of
those shares.
REMARKETING PROCEDURES. Below is a summary of the procedures to be followed
in connection with a remarketing of the preferred stock.
As long as the PIES or the preferred stock are evidenced by one or more
global security certificates deposited with DTC, Washington Mutual will request,
not later than 15 nor more than 30 calendar days prior to the remarketing date,
that DTC notify its participants holding preferred stock or Corporate PIES of
the remarketing.
Not later than 5:00 p.m., New York City time, on the seventh business day
preceding the purchase contract settlement date, which is also four business
days prior to the remarketing date, any holder of shares of preferred stock that
are a part of the Corporate PIES may elect to have those shares remarketed.
Holders of Corporate PIES that do not give notice before that time of their
intention to settle their related purchase contracts for separate cash, and
holders who give notice but fail to deliver cash before 11:00 a.m., New York
City time, on the fifth business day preceding the purchase contract settlement
date, will be deemed to have consented to the disposition of the shares of
preferred stock that are a part of their Corporate PIES in the remarketing.
Holders of shares of preferred stock that are not a part of the Corporate PIES
who wish to have their shares remarketed must give notice of their election
before 11:00 a.m., New York City time, on that fifth business day. Any such
notice will be irrevocable and may not be conditioned upon the level at which
the Reset Rate is established in the remarketing.
If none of the holders elects to have preferred stock remarketed in the
remarketing, the Reset Rate will be the rate determined by the remarketing
agent, in its sole discretion, as the rate that would have been established had
a remarketing been held on the remarketing date.
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If the remarketing agent determines that it will be able to remarket all the
shares of preferred stock tendered or deemed tendered for purchase at a price of
100.50% of the aggregate liquidation preference of those shares before
4:00 p.m., New York City time, on the remarketing date, the remarketing agent
will determine the Reset Rate, which will be the rate, rounded to the nearest
one-thousandth (0.001) of one percent, per annum that the remarketing agent
determines, in its sole judgment, to be the lowest rate per year that will
enable it to remarket all the shares of preferred stock tendered or deemed
tendered for remarketing at that price.
If, by 4:00 p.m., New York City time, on the remarketing date, the
remarketing agent is unable to remarket all the shares of preferred stock
tendered or deemed tendered for purchase, a Failed Remarketing will be deemed to
have occurred, and the remarketing agent will so advise DTC and Washington
Mutual. If a Failed Remarketing occurs, the Reset Rate will be equal to (1) the
"AA" Composite Commercial Paper Rate, as defined in the next paragraph, plus
(2) a spread ranging from 300 to 700 basis points based on the credit ratings of
the preferred stock at that time.
"'AA' Composite Commercial Paper Rate" on any date means:
- the interest equivalent of the 60-day rate on commercial paper placed on
behalf of issuers whose corporate bonds are rated "AA" by S&P or the
equivalent of that rating by S&P or another rating agency, as made
available on a discount basis or otherwise by the Federal Reserve Board
for the business day immediately preceding that date; or
- if the Federal Reserve Board does not make available any such rate, then
the arithmetic average of those rates, as quoted on a discount basis or
otherwise, by the Commercial Paper Dealers, as defined in the next
paragraph, to [LEHMAN BROTHERS] for the close of business on the business
day next preceding that date.
"Commercial Paper Dealers" means Lehman Commercial Paper Inc., Goldman,
Sachs & Co. and Merrill Lynch, Pierce, Fenner & Smith Incorporated or their
affiliates or successors, if they are commercial paper dealers.
If any Commercial Paper Dealer does not quote a rate required to determine
the "AA" Composite Commercial Paper Rate, the "AA" Composite Commercial Paper
Rate will be determined on the basis of the quotation or quotations furnished by
the remaining Commercial Paper Dealer or Commercial Paper Dealers and any
substitute commercial paper dealer or substitute commercial paper dealers
selected by [LEHMAN BROTHERS] or, if [LEHMAN BROTHERS] does not select any such
substitute commercial paper dealer or substitute commercial paper dealers, by
the remaining Commercial Paper Dealer or Commercial Paper Dealers.
By approximately 4:30 p.m., New York City time, on the remarketing date, so
long as there has not been a Failed Remarketing, [LEHMAN BROTHERS] will advise:
- DTC and Washington Mutual of the Reset Rate determined in the remarketing
and the number of shares of preferred stock sold in the remarketing;
- each person purchasing shares of preferred stock in the remarketing or the
appropriate DTC participant of the Reset Rate and the number of shares of
preferred stock that person is to purchase; and
- each of those purchasers to give instructions to its DTC participant to
pay the purchase price on the purchase contract settlement date in same
day funds against delivery of the shares of preferred stock purchased
through the facilities of DTC.
In accordance with DTC's normal procedures, on the purchase contract
settlement date, the transactions described above with respect to each share of
preferred stock tendered for purchase and sold in the remarketing will be
executed through DTC, and the accounts of the respective DTC
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participants will be debited and credited and those shares delivered by book
entry as necessary to effect purchases and sales of the shares of preferred
stock. DTC will make payment in accordance with its normal procedures.
If any holder selling shares of preferred stock in the remarketing fails to
deliver those shares, the direct or indirect DTC participant of the selling
holder and of any other person that was to have purchased shares of preferred
stock in the remarketing may deliver to that other person a number of shares of
preferred stock that is less than the number of shares of preferred stock that
otherwise was to be purchased by that person. In that event, the number of
shares of preferred stock to be so delivered will be determined by the direct or
indirect participant, and delivery of the lesser number of shares of preferred
stock will constitute good delivery.
The right of each holder to have shares of preferred stock tendered for
purchase will be limited to the extent that:
- the remarketing agent conducts a remarketing pursuant to the terms of the
remarketing agreement;
- shares of preferred stock tendered have not been called for redemption;
- the remarketing agent is able to find a purchaser or purchasers for
tendered shares of preferred stock; and
- the purchaser or purchasers deliver the purchase price for the shares of
preferred stock to the remarketing agent.
The remarketing agent is not obligated to purchase any shares of preferred
stock that would otherwise remain unsold in the remarketing. Neither Washington
Mutual nor the remarketing agent will be obligated in any case to provide funds
to make payment upon tender of preferred stock for remarketing.
Washington Mutual will be liable for any and all costs and expenses incurred
in connection with the remarketing.
REMARKETING AGENT. The remarketing agent will be [ ]. Washington
Mutual and [ ] will enter into the remarketing agreement which
provides that [ ] will act as the exclusive remarketing agent and
will use commercially reasonable efforts to remarket securities tendered or
deemed tendered for purchase in the remarketing at a price of 100.50% of their
liquidation preference. Under certain circumstances, some portion of the shares
of preferred stock tendered in the remarketing may be purchased by the
remarketing agent.
The remarketing agreement provides that the remarketing agent will incur no
liability to Washington Mutual or to any holder of the Corporate PIES or the
preferred stock in its individual capacity or as remarketing agent for any
action or failure to act in connection with a remarketing or otherwise, except
as a result of the negligence or willful misconduct on its part. The remarketing
agent will receive 0.50% of the amount of the proceeds received in the
remarketing as its remarketing fee.
Washington Mutual has agreed to indemnify the remarketing agent against
certain liabilities, including liabilities under the Securities Act, arising out
of or in connection with its duties under the remarketing agreement.
The remarketing agreement also will provide that the remarketing agent may
resign and be discharged from its duties and obligations under the remarketing
agreement. However, no resignation will become effective unless a nationally
recognized broker-dealer has been appointed by Washington Mutual as successor
remarketing agent and the successor remarketing agent has entered into a
remarketing agreement with Washington Mutual. In that case, Washington Mutual
will use reasonable
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efforts to appoint a successor remarketing agent and enter into a remarketing
agreement with that person as soon as reasonably practicable.
REDEMPTION
Shares of preferred stock will not be redeemable before October 16, 2002. On
or after that date, the shares of 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 not less than 30 or more than 60 days notice by mail, at a redemption
price of $50 per share, plus accrued and unpaid dividends to the date of
redemption.
On August 16, 2004, all outstanding shares of preferred stock will be
redeemed by Washington Mutual on not less than 30 or more than 60 days notice by
mail, at a redemption price of $50 per share, plus accrued and unpaid dividends
to the date of redemption.
After the date of a redemption, unless Washington Mutual is in default in
providing money for the payment of the redemption price, dividends will cease to
accrue on the preferred stock, and the shares of preferred stock will no longer
be deemed to be outstanding. On that date, all rights of the preferred stock
will cease, except the right to receive the moneys payable upon redemption,
without interest, upon surrender of the certificates evidencing the shares of
preferred stock.
LIQUIDATION RIGHTS
In the event of any liquidation, dissolution or winding up of Washington
Mutual, whether voluntary or involuntary, the holders of shares of preferred
stock will be entitled to receive, out of the assets of Washington Mutual
available for distribution to stockholders, the liquidation preference of $50
per share plus an amount equal to all dividends, whether or not earned or
declared, accumulated and unpaid to the payment date before any payment or
distribution of assets is made to holders of common stock or of any other class
of stock of Washington Mutual ranking junior to the preferred stock upon
liquidation, dissolution or winding up. If upon any liquidation, dissolution or
winding up of Washington Mutual, the amounts payable with respect to the
preferred stock and any other capital stock ranking as to any asset distribution
equally with the preferred stock are not paid in full, the holders of the
preferred stock and of that other capital stock will share ratably in that
distribution of assets in proportion to the full respective preferential amounts
to which they are entitled. After payment of the full amount of the liquidation
preference to which they are entitled, the holders of shares of preferred stock
will not be entitled to any further participation in any distribution of assets
of Washington Mutual. Neither a consolidation or merger of Washington Mutual
with another corporation nor a sale, lease, exchange or transfer of all or part
of the assets of Washington Mutual for cash, securities or other property will
be considered a liquidation, dissolution or winding up of Washington Mutual for
these purposes.
The liquidation preference amount relating to the preferred stock is not
necessarily indicative of the price at which the preferred stock will actually
trade at or after the time of their issuance. The preferred stock may trade at
prices below its liquidation preference amount. The market price of the
preferred stock can be expected to fluctuate with changes in the financial
markets and economic conditions, the financial condition and prospects of
Washington Mutual and other factors that generally influence the market prices
of securities.
VOTING RIGHTS
Each share of preferred stock will carry .10 of a vote in connection with
matters submitted generally to the holders of the common stock of Washington
Mutual, and will be entitled to vote together as a single class with shares of
the common stock and other capital stock of Washington Mutual entitled to vote
in respect of matters submitted to stockholders generally. Based on the number
of shares of common stock of Washington Mutual outstanding as of the date of
this proxy
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statement/prospectus supplement and assuming that all offered shares are issued
and outstanding, the shares of preferred stock would represent, in the
aggregate, approximately [0.96%] of the combined voting power of the shares of
preferred stock and the common stock.
Whenever dividends on shares of the preferred stock have not been paid in an
aggregate amount equal to at least six quarterly dividends on those shares,
whether or not consecutive, the holders of the preferred stock, voting
separately as a class with the holders of any stock ranking equally as to
dividends with the preferred stock on which similar voting rights have been
conferred and are exercisable, will be entitled to elect two directors to the
Washington Mutual board of directors either by written consent or at an annual
or special meeting of stockholders of Washington Mutual held during the period
those dividends remain in arrears. These voting rights will terminate when all
those dividends accrued and in default have been paid in full or declared and
funds for their payment in full have been set apart. At that time, the term of
office of all directors so elected will also terminate.
In addition, the affirmative vote or consent of the holders of at least
two-thirds of the outstanding shares of the preferred stock, voting as a
separate class, will be required for any amendment, alteration or repeal,
whether by merger, consolidation or otherwise, of any provisions of the articles
of incorporation of Washington Mutual that adversely affects the powers,
preferences, privileges or rights of the holders of the preferred stock. The
affirmative vote or consent of the holders of shares representing at least
two-thirds of the combined voting power of the preferred stock and any other
series of preferred stock of Washington Mutual ranking equally with the
preferred stock as to dividends or upon liquidation, dissolution or winding up
of Washington Mutual, voting as a single class without regard to series, will be
required to authorize or effect (1) the creation, authorization or issuance of,
(2) the reclassification of any authorized stock of Washington Mutual into or
(3) the creation, authorization or issuance of any obligation or security
convertible into or evidencing the right to purchase, any additional class or
series of stock ranking prior to the preferred stock as to dividends or upon
liquidation, dissolution or winding up of Washington Mutual.
Except as described above in this section on voting rights, or as required
by law, the preferred stock will have no other voting rights.
The above provisions are not applicable to the designation by the Washington
Mutual board of directors of any series of preferred stock other than the
Series H preferred stock.
BOOK-ENTRY ISSUANCE
The preferred stock will be issued as one or more global certificates
registered in the name of DTC or its nominee. The depositary for the preferred
stock will be DTC. The preferred stock will be issued only as fully-registered
securities registered in the name of Cede & Co., DTC's nominee. The preferred
stock will be issued in accordance with the standard procedures of the DTC and
Cede & Co.
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CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE WASHINGTON MUTUAL PIES
The following is a summary of the material United States federal income tax
consequences of the ownership and disposition of the Washington Mutual PIES, the
preferred stock and the common shares acquired under a purchase contract. Unless
otherwise stated, this summary applies only to "U.S. Holders" who hold the PIES,
the preferred stock and the common shares acquired under the purchase contract
as capital assets.
A "U.S. Holder" is:
- a person who is a citizen or resident of the United States;
- a corporation or partnership created or organized in or under the laws of
the United States or any state thereof or the District of Columbia;
- an estate the income of which is subject to United States federal income
taxation, regardless of its source; or
- a trust (1) that is subject to the supervision of a court with the United
States and the control of one or more United States persons as described
in Section 7701 (a) (30) of the Internal Revenue Code of 1986, as amended
or (2) that has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a United States person.
The tax treatment of a holder may vary depending on the holder's particular
situation. This summary does not deal with special classes of holders. For
example, this summary does not address:
- tax consequences to holders who may be subject to special tax treatment,
such as banks, thrifts, real estate investment trusts, regulated
investment companies, insurance companies, dealers in securities or
currencies, or tax-exempt investors,
- tax consequences to persons who will hold the PIES, the preferred stock or
the common shares acquired under the purchase contract as a position in a
"straddle," "synthetic security," "hedge," "integrated transaction,"
"constructive sale transaction" or "conversion transaction,"
- tax consequences to holders of PIES, preferred stock or common shares
acquired under a purchase contract whose functional currency is not the
U.S. dollar,
- tax consequences to stockholders, partners or beneficiaries of a holder of
PIES, preferred stock or common shares acquired under a purchase contract,
- alternative minimum tax consequences, if any, or
- the consequences of any state, local or foreign tax laws or any federal
laws other than those pertaining to the income tax.
IF YOU ARE NOT A UNITED STATES PERSON WITHIN THE MEANING OF
SECTION 7701 (A) (30) OF THE INTERNAL REVENUE CODE, YOU ARE URGED TO CONSULT
YOUR OWN TAX ADVISORS REGARDING THE UNITED STATES FEDERAL INCOME TAX
CONSEQUENCES OF AN INVESTMENT IN THE PIES, INCLUDING THE POTENTIAL APPLICATION
OF UNITED STATES WITHHOLDING TAXES.
This summary is based upon the Internal Revenue Code, Treasury regulations,
including proposed Treasury regulations, issued thereunder, IRS rulings and
pronouncements and judicial decisions now in effect, all of which are subject to
change, possibly on a retroactive basis. Any changes may be applied
retroactively in a manner that could cause the tax consequences to vary
substantially from the consequences described below, possibly adversely
affecting a U.S. Holder.
No statutory, administrative or judicial authority directly addresses the
treatment of the PIES or instruments similar to the PIES for United States
federal income tax purposes. As a result, we cannot
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assure you that the IRS will agree with the tax consequences described in this
proxy statement/ prospectus. YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO YOU OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE PIES IN LIGHT OF YOUR OWN PARTICULAR CIRCUMSTANCES, INCLUDING
THE TAX CONSEQUENCES UNDER FEDERAL, STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND
THE POSSIBLE EFFECTS OF CHANGES IN UNITED STATES FEDERAL OR OTHER TAX LAWS.
CORPORATE PIES
ALLOCATION OF PURCHASE PRICE
A U.S. Holder's acquisition of a Corporate PIES will be treated as an
acquisition of a unit consisting of the preferred stock and the purchase
contract that comprise the Corporate PIES. The purchase price of each Corporate
PIES will be allocated between the preferred stock and the purchase contract in
proportion to their respective fair market values at the time of purchase. This
allocation will establish the U.S. Holder's initial tax bases in the preferred
stock and the purchase contract. In the case of a holder who purchased Corporate
PIES at the initial offering, Bank United Corp. reported the fair market value
of each share of preferred stock as $50 and the fair market value of each
purchase contract as $0. This position was binding upon each U.S. Holder, but
not on the IRS, unless the U.S. Holder explicitly disclosed a contrary position
on a statement attached to the U.S. Holder's timely filed United States federal
income tax return for the taxable year in which a Corporate PIES was acquired.
Thus, absent that disclosure, a U.S. Holder was required to allocate the
purchase price for a Corporate PIES in accordance with the foregoing. The
remainder of this discussion assumes that this allocation of the purchase price
will be respected for United States federal income tax purposes.
PREFERRED STOCK
DISTRIBUTIONS
Distributions on the shares of the preferred stock, other than distributions
in redemption of shares of the preferred stock subject to Section 302(b) of the
Internal Revenue Code, will constitute dividends for federal income tax purposes
to the extent paid from current or accumulated earnings and profits of
Washington Mutual, as determined under federal income tax principles. Any
corporate U.S. Holder of the shares of the preferred stock that is otherwise
eligible for the 70% dividends-received deduction under the Internal Revenue
Code will be allowed that deduction with respect to dividends on the shares of
the preferred stock.
Washington Mutual expects that its current and accumulated earnings and
profits will be sufficient so that all distributions paid on the shares of
preferred stock will qualify as dividends for federal income tax purposes.
Nevertheless, any distributions on the shares of the preferred stock in excess
of Washington Mutual's current and accumulated earnings and profits will, to
that extent, not be eligible for the dividends-received deduction. This excess
will generally be treated for federal income tax purposes as a tax-free return
of capital, to the extent of a U.S. Holder's basis in its shares of preferred
stock, and any additional amount as a long-term or short-term capital gain.
Distributions that are treated as a return of capital reduce a U.S. Holder's
basis in the shares of the preferred stock and may subject the U.S. Holder to
the payment of tax, at long-term or short-term capital gain rates, when
distributions are made in excess of the U.S. Holder's remaining basis in its
shares of the preferred stock or if there is a subsequent sale or redemption of
the U.S. Holder's preferred stock.
U.S. Holders should consider that the Internal Revenue Code contains several
limitations on the availability of the dividends-received deduction even if
Washington Mutual has sufficient current or accumulated earnings and profits.
Section 246(c) of the Internal Revenue Code disallows the dividends-received
deduction with respect to any dividend on shares of stock held for 45 days or
fewer during the 90-day period beginning on the date which is 45 days before the
date on which the shares became
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exdividend with respect to the dividend. Any period in which a U.S. Holder has
an option to sell, is under a contractual obligation to sell, has made and not
closed a short sale of, or has granted certain options to buy, substantially
identical stock or securities, or held one or more other positions in
substantially similar or related property that diminishes the risk of loss from
holding the preferred stock, will not be counted toward the 45-day holding
period requirement. Furthermore, U.S. Holders should consider Section 1059 of
the Internal Revenue Code, which limits the benefit of the dividends-received
deduction by requiring a U.S. Holder to reduce its basis in the preferred stock
with respect to certain extraordinary dividends.
In addition, Section 246A of the Internal Revenue Code reduces the
dividends-received deduction allowed to a corporate U.S. Holder that has
incurred indebtedness "directly attributable" to its investment in portfolio
stock. U.S. Holders should be aware that in February 1999, the Clinton
Administration proposed to expand the applicability of Section 246A to include a
percentage of indirect financing. The proposed legislation would apply to
portfolio stock acquired after the date of enactment. It is not possible to
predict whether legislation modifying current rules regarding debt-financed
portfolio stock will be enacted, what form the legislation might take, or what
the effective date of any future legislation might be.
SALES, EXCHANGES OR OTHER DISPOSITIONS OF PREFERRED STOCK
A U.S. Holder will recognize capital gain or loss on a sale, exchange or
other disposition of preferred stock, including the remarketing thereof, in an
amount equal to the difference between the amount realized by the U.S. Holder on
the disposition of the preferred stock and the U.S. Holder's adjusted tax basis
in the preferred stock. Selling expenses incurred by a U.S. Holder will reduce
the amount of gain or increase the amount of loss recognized upon the sale,
exchange or other disposition of the preferred stock. Capital gains of
individuals derived from capital assets held for more than one year are subject
to reduced tax rates. A U.S. Holder's ability to deduct capital losses is
subject to limitations.
REDEMPTION
A redemption of the preferred stock will be treated under Section 302 of the
Internal Revenue Code as a dividend if Washington Mutual has sufficient earnings
and profits, unless the redemption satisfies the test set forth in
Section 302(b) of the Internal Revenue Code enabling the redemption to be
treated as a sale or exchange. The redemption will satisfy this test only if it
(1) is "substantially disproportionate," (2) constitutes a "complete termination
of the holder's stock interest" in Washington Mutual or (3) is "not essentially
equivalent to a dividend," each within the meaning of Section 302(b). In
determining whether any of these tests are met, shares considered to be owned by
the U.S. Holder by reason of certain constructive ownership rules set forth in
the Internal Revenue Code, as well as shares actually owned, must generally be
taken into account. Because the determination as to whether any of the
alternative tests of Section 302(b) of the Internal Revenue Code is satisfied
with respect to a particular holder of the preferred stock will depend on the
facts and circumstances as of the time the determination is made, U.S. Holders
are advised to consult their own tax advisors to determine their tax treatment
in light of their own particular investment circumstances.
PURCHASE CONTRACTS
INCOME FROM CONTRACT ADJUSTMENT PAYMENTS
There is no direct authority addressing the treatment of the contract
adjustment payments under current law, and the treatment is unclear. Contract
adjustment payments may constitute taxable income to a U.S. Holder when received
or accrued, in accordance with the U.S. Holder's method of tax accounting. If
Washington Mutual is required to file information returns with respect to
contract
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adjustment payments, it intends to report the contract adjustment payments as
taxable income to each U.S. Holder. U.S. Holders should consult their own tax
advisors concerning the treatment of contract adjustment payments, including the
possibility that any payment may be treated as a loan, purchase price
adjustment, rebate or payment analogous to an option premium, rather than being
includible in income on a current basis. The treatment of contract adjustment
payments could affect a U.S. Holder's tax basis in a purchase contract or in the
common shares acquired under a purchase contract or the amount realized by a
U.S. Holder upon the sale or disposition of a PIES or the termination of a
purchase contract. See "--Acquisition of Common Stock Under a Purchase
Contract," "--Termination of Purchase Contract" and "--Sale or Disposition of
PIES" below.
ACQUISITION OF COMMON STOCK UNDER A PURCHASE CONTRACT
A U.S. Holder generally will not recognize gain or loss on the purchase for
cash of shares of common stock and CPR Certificates under a purchase contract,
except with respect to any cash paid in lieu of a fractional share of common
stock. Subject to the discussion in this section, a U.S. Holder's aggregate
initial tax basis in the shares of common stock and CPR Certificates acquired
under a purchase contract generally should equal the purchase price paid for the
shares of common stock and CPR Certificates plus the U.S. Holder's tax basis in
the purchase contract, if any, less the portion of the purchase price and tax
basis allocable to the fractional share. Payments of contract adjustment
payments that have been received in cash by a U.S. Holder but not included in
income should reduce the U.S. Holder's tax basis in the purchase contract or in
the shares of common stock to be received under the purchase contract. See
"--Income from Contract Adjustment Payments," above. The holding period for
shares of common stock and CPR Certificates acquired under a purchase contract
will commence on the date of the acquisition of those shares of common stock and
CPR Certificates.
A U.S. Holder who surrenders shares of preferred stock to Washington Mutual
to satisfy the purchase contract will be treated as having redeemed a portion of
such holder's preferred stock in exchange for the CPR Certificates received in a
taxable transaction. You are urged to consult your own tax advisor with respect
to the tax consequences of this exchange.
OWNERSHIP OF COMMON STOCK ACQUIRED UNDER THE PURCHASE CONTRACT
Any dividend on common shares paid by Washington Mutual out of its current
or accumulated earnings and profits, as determined for United States federal
income tax purposes, will be includible in income by the U.S. Holder when
received. Any dividend includible in income will be eligible for the dividends
received deduction if received by an otherwise qualifying corporate U.S. Holder
that meets the holding period and other requirements for the dividends received
deduction.
Upon a sale or other disposition of shares of common stock, a U.S. Holder
generally will recognize capital gain or loss equal to the difference between
the amount realized and the U.S. Holder's adjusted tax basis in the common
shares. Capital gains of individuals derived in respect of capital assets held
for more than one year are subject to reduced tax rates. The deductibility of
capital losses is subject to limitations.
EARLY SETTLEMENT OF PURCHASE CONTRACTS
A U.S. Holder will not recognize gain or loss on the receipt of the
U.S. Holder's proportionate share of preferred stock or Treasury Securities upon
early settlement of a purchase contract, and the holder will have the same tax
basis in the preferred stock or Treasury Securities as the holder had before the
early settlement.
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TERMINATION OF PURCHASE CONTRACTS
If a purchase contract terminates, a U.S. Holder will recognize capital gain
or loss equal to the difference between the amount realized, if any, upon such
termination and the U.S. Holder's adjusted tax basis, if any, in the purchase
contract at the time of the termination. Any contract adjustment payments
received by a U.S. Holder but not included in income should either reduce the
U.S. Holder's tax basis in the purchase contract or result in an amount realized
on the termination of the purchase contract. Any contract adjustment payments
included in a U.S. Holder's income but not paid should increase the
U.S. Holder's tax basis in the purchase contract (see "--Income from Contract
Adjustment Payments" above). Capital gains of individuals derived in respect of
capital assets held for more than one year are subject to reduced maximum tax
rates. A U.S. Holder's ability to deduct capital losses is subject to
limitations. A U.S. Holder will not recognize gain or loss on the receipt of the
U.S. Holder's proportionate share of preferred stock or Treasury Securities upon
termination of the purchase contract and will have the same tax basis in that
preferred stock or Treasury Securities as before the distribution.
If a termination of the purchase contract occurs when it has negative value,
see "--Sale or Disposition of PIES" below. U.S. Holders should consult their tax
advisors regarding a termination of the purchase contract at a time when the
purchase contract has negative value.
ADJUSTMENT TO THE SETTLEMENT RATE
U.S. Holders of PIES might be treated as receiving a constructive
distribution from Washington Mutual if (1) the Settlement Rate is adjusted and
as a result of the adjustment the proportionate interest of U.S. Holders of PIES
in the assets or earnings and profits of Washington Mutual is increased and
(2) the adjustment is not made pursuant to a bona fide, reasonable anti-dilution
formula. An adjustment in the Settlement Rate would not be considered made
pursuant to a bona fide formula if the adjustment were made to compensate a
U.S. Holder for certain taxable distributions with respect to the common shares.
Thus, under certain circumstances, an increase in the Settlement Rate might give
rise to a taxable dividend to U.S. Holders of PIES even though the U.S. Holders
would not receive any cash related thereto.
TREASURY PIES
SUBSTITUTION OF TREASURY SECURITIES TO CREATE TREASURY PIES
A U.S. Holder of Corporate PIES that delivers Treasury Securities to the
securities intermediary in substitution for the preferred stock generally will
not recognize gain or loss upon the delivery of the Treasury Securities or the
release of the preferred stock to the U.S. Holder. The U.S. Holder will continue
to include in income any dividends on the preferred stock, and the
U.S. Holder's basis in the preferred stock and the purchase contract will not be
affected by the delivery and release.
OWNERSHIP OF TREASURY SECURITIES
A U.S. Holder's initial tax basis in the Treasury Securities that are part
of the Treasury PIES will be equal to the amount paid for the Treasury
Securities. A U.S. Holder generally will include in income any original issue
discount or acquisition discount includible with respect to the Treasury
Securities. In general, a U.S. Holder will be required to include in income each
year that the U.S. Holder holds a Treasury Security the portion of the original
issue discount or acquisition discount that accrues on the Treasury Security in
that year.
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SUBSTITUTION OF PREFERRED STOCK TO RECREATE CORPORATE PIES
A U.S. Holder of Treasury PIES that delivers preferred stock to the
securities intermediary to recreate Corporate PIES generally will not recognize
gain or loss upon the delivery of such preferred stock or the release of the
Treasury Securities to the U.S. Holder. The U.S. Holder will continue to include
in income any interest, original issue discount or acquisition discount with
respect to such Treasury Securities and the U.S. Holder's tax basis in the
Treasury Securities, the preferred stock and the purchase contract will not be
affected by such delivery and release.
SALE OR DISPOSITION OF PIES
Upon a disposition of PIES, a U.S. Holder will be treated as having sold,
exchanged or disposed of the purchase contracts and the preferred stock, or, in
the case of Treasury PIES, the Treasury Securities that comprise those PIES and
generally will have capital gain or loss equal to the difference between the
portion of the proceeds to the U.S. Holder allocable to the purchase contracts
and the preferred stock or Treasury Securities, as the case may be, and the
U.S. Holder's respective adjusted tax bases in the purchase contract and the
preferred stock or Treasury Securities. For purposes of determining gain or
loss, the U.S. Holder's proceeds will not include any amount equal to accrued
and unpaid interest on the Treasury Securities not previously included in
income, which amount will be treated as ordinary interest income. Capital cams
of individuals derived in respect of capital assets held for more than one year
are taxed at a reduced tax rate. The deductibility of capital losses is subject
to limitations. If a disposition of the PIES occurs when the purchase contract
has negative value, the U.S. Holder should be considered to have received
additional consideration for the preferred stock or Treasury Securities in an
amount equal to the negative value and to have paid the amount to be released
from the U.S. Holder's obligation under the purchase contract. U.S. Holders
should consult their tax advisors regarding a disposition of the PIES at a time
when the purchase contract has negative value.
Payments to a U.S. Holder of contract adjustment payments that have not
previously been included in the income of the U.S. Holder should either reduce
the U.S. Holder's tax basis in the purchase contract or result in an increase in
the amount realized on the disposition of the purchase contract. Any contract
adjustment payments included in a U.S. Holder's income but not paid should
increase the U.S. Holder's tax basis in the purchase contract. See "--Corporate
PIES--Purchase Contracts--Income from Contract Adjustment Payments."
NON-UNITED STATES HOLDERS
The following summary discusses the tax consequences to Non-United States
Holders. You are a "Non-United States Holder" if you are not a U.S. Holder. As
discussed above, the PIES will be treated by the holders and by Washington
Mutual as a unit consisting of a purchase contract and preferred stock or
Treasury Security, as the case may be. The following discussion is subject to
the discussion below concerning backup withholding.
Under present United States federal income tax laws, a Non-United States
Holder generally will be subject to United States federal income tax withholding
on dividend payments on the holder's preferred stock and any contract adjustment
payments at a rate of 30%. A Non-United States Holder may reduce or eliminate
the 30% withholding tax on dividends and contract adjustment payments discussed
above if the holder provides Washington Mutual, or its paying agent, as the case
may be, with a properly executed:
- IRS Form W-8 or a substantially similar form,
- IRS Form 1001 (or successor form) properly claiming an exemption from, or
a reduction of, such withholding tax under the benefit of an applicable
tax treaty, or
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- IRS Form 4224 (or successor form) stating that payment with respect to the
PIES, preferred stock, or common shares is not subject to withholding tax
because it is effectively connected with the beneficial owner's conduct of
a trade or business in the United States.
Under future regulations generally applicable to payments made after
December 31, 2000, Non-United States Holders will generally be required to
provide an IRS Form W-8 in lieu of IRS Form 1001 and IRS Form 4224, although
alternative documentation may be applicable in certain situations. The future
regulations also modify certain certification requirements.
Generally, a Non-United States Holder will not be subject to United States
federal income taxes on any amount that constitutes gain upon a sale, exchange,
or other disposition of a PIES, preferred stock, Treasury Security or common
shares, provided the gain is not effectively connected with the conduct of a
trade or business in the United States by the Non-United States Holder. Certain
other exceptions may be applicable, and a Non-United States Holder should
consult its tax advisor in this regard. However, as discussed previously, a
redemption of the preferred stock may be treated as a dividend, for federal
income tax purposes, and therefore may be subject to withholding on dividend
payments as described above. See "--Corporate PIES--Preferred Stock-Redemption".
Finally, Washington Mutual does not believe it is a "United States real
property holding corporation" for federal income tax purposes. However, if
Washington Mutual is, was, or becomes, during the five year period preceding
that disposition, a "United States real property holding corporation," a
Non-United States Holder who holds or held more than five percent of the class
of stock will be subject to federal tax on the sale or other disposition of such
stock, and those holders should contact their tax advisors.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Payments under the PIES, the preferred stock or the common shares and CPR
Certificates acquired under a purchase contract, the proceeds received with
respect to a fractional common share upon settlement of a purchase contract, and
the sale of the PIES, the preferred stock or the common shares and CPR
Certificates acquired under a purchase contract may be subject to information
reporting and United States federal backup withholding tax at the rate of 31% if
the U.S. Holder thereof fails to supply an accurate taxpayer identification
number or otherwise fails to comply with applicable United States information
reporting or certification requirements. No information reporting or backup
withholding will be required with respect to payments made by Washington Mutual
or any paying agent to Non-United States Holders if a statement described above
under "Non-United States Holders" has been received and the payor does not have
actual knowledge, or, after December 31, 2000, reason to know, that the
beneficial owner is a U.S. Holder. Any amounts so withheld will be allowed as a
credit against a U.S. Holder's United States federal income tax liability.
RISKS RELATED TO THE WASHINGTON MUTUAL PIES
The Washington Mutual PIES involve a number of risks. These risks are
substantially the same as those to which the Bank United Corp. PIES were subject
and which are set forth in the Prospectus with respect to the Bank United Corp.
PIES dated August 4, 1999. However, the number of shares of common stock you
will receive under a purchase contract and the opportunity for equity
appreciation will be dependent on the market price for Washington Mutual's
common stock, rather than Bank United Corp.'s common stock. You should carefully
consider the risks set forth in that Prospectus as they relate to the terms of
the PIES. In addition, the CPR Certificates, which you will purchase under the
purchase contract, are subject to the risks described above in "Risk Factors
Relating to the CPR Certificates."
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COMPARISON OF RIGHTS OF WASHINGTON MUTUAL
AND BANK UNITED CORP. STOCKHOLDERS
Washington Mutual is incorporated under the laws of the State of Washington
and Bank United Corp. is incorporated under the laws of the State of Delaware.
The rights of Bank United Corp. stockholders are governed by the Delaware
General Corporation Law, Bank United Corp.'s amended and restated certificate of
incorporation and Bank United Corp.'s bylaws. Once the Bank United Corp.
stockholders become Washington Mutual stockholders as a result of the merger,
their rights will be governed by the Washington Business Corporation Act,
Washington Mutual's articles of incorporation, and Washington Mutual's bylaws.
The following discussion summarizes certain material differences between the
rights of holders of Bank United Corp. common stock and Washington Mutual common
stock, resulting from the differences in their governing documents and
Washington and Delaware law. Additional differences between Washington and
Delaware law are discussed below in "Certain Differences Between Washington and
Delaware Corporate Laws."
The following summary is not a complete summary and is qualified in its
entirety by reference to the governing corporate documents of Washington Mutual
and Bank United Corp. and applicable law. See "Incorporation of Certain
Documents by Reference."
CAPITAL STOCK
Washington Mutual's articles of incorporation currently authorize
1,600,000,000 shares of common stock and 10,000,000 shares of preferred stock.
Bank United Corp.'s certificate of incorporation currently authorizes
80,000,000 shares of common stock (divided equally into two classes, one of
which has limited voting rights) and 10,000,000 shares of preferred stock.
BOARD OF DIRECTORS
Washington Mutual's articles of incorporation provide that the number of
directors comprising the Washington Mutual board of directors will be the number
stated in Washington Mutual's bylaws, provided that the number of directors
shall not be less than five. Washington Mutual's board of directors can amend
the bylaws to change the number of directors without stockholder approval.
Washington Mutual's bylaws currently provide that the Washington Mutual board of
directors shall consist of eighteen directors. Washington Mutual's board of
directors 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, with each
term expiring in a different year.
Bank United Corp.'s certificate of incorporation provides that the number of
directors comprising the Bank United Corp. board of directors will be the number
determined from time to time by Bank United Corp.'s board of directors, but in
no event fewer than three. Pursuant to a resolution of Bank United Corp.'s board
of directors, the number of directors of Bank United Corp. has been fixed at
twelve. Like Washington Mutual's articles of incorporation, Bank United Corp.'s
certificate of incorporation provides for a board of directors divided into
three classes, with approximately one-third of the directors elected annually
for three-year terms.
MONETARY LIABILITY OF DIRECTORS
Washington Mutual's articles of incorporation and Bank United Corp.'s
certificate of incorporation 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 Washington Mutual's
articles of incorporation and the provision in Bank United Corp.'s certificate
of incorporation
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incorporate future amendments to Washington and Delaware law, respectively,
regarding the elimination of such liability.
INTERESTED STOCKHOLDERS
Washington Mutual's articles of incorporation prohibit, except under certain
circumstances, Washington Mutual (or any subsidiary of Washington Mutual) from
engaging in certain significant business transactions with a "major
stockholder." A "major stockholder" is a person who, without the prior approval
of the Washington Mutual board of directors, acquires beneficial ownership of
five percent or more of Washington Mutual's outstanding 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;
- 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:
- Washington Mutual's board of directors prior to the major stockholder
involved having become a major stockholder;
- a vote of at least 80% of the "continuing directors" (defined as those
members of Washington Mutual's board prior to the involvement of the major
stockholder);
- a majority of the "continuing directors" if the major stockholder obtained
unanimous board approval to become a 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 majority vote of the shares of voting stock and the shares of voting
stock owned by stockholders other than any major stockholder if certain
other conditions are met.
Washington Mutual's articles of incorporation also provide that during the
time a major stockholder exists, Washington Mutual may voluntarily dissolve only
upon the unanimous consent of the Washington Mutual stockholders or an
affirmative vote of at least two-thirds of Washington Mutual's board of
directors and the holders of at least two-thirds of 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. In addition, the Washington Business Corporation
Act prohibits certain significant business combinations with 10% stockholders,
as more fully described in "Certain Differences Between Washington and Delaware
Corporate Laws--Provisions Affecting Control Share Acquisitions and Business
Combinations" below.
The Bank United Corp. certificate of incorporation does not contain a
similar provision. However, Section 203 of the Delaware General Corporation Law
prohibits certain "business combinations" with an "interested stockholder," as
more fully described in "Certain Differences Between Washington and Delaware
Corporate Laws--Provisions Affecting Control Share Acquisitions and Business
Combinations" below.
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REMOVAL OF DIRECTORS AND FILLING VACANCIES ON THE BOARD OF DIRECTORS
Washington Mutual's articles of incorporation provide that directors may
only be removed for "good cause," which is not defined. Under Washington
Mutual's 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. Washington Mutual's bylaws also provide that a vacancy on
Washington Mutual's 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.
Bank United Corp.'s certificate of incorporation provides that directors may
only be removed "for cause," which is also not defined, by a vote of a majority
of all outstanding voting shares. The Bank United Corp. bylaws provide that any
vacancy, whether arising through death, resignation, removal, disqualification,
an increase in the number of directors, or any other reason, may be filled by a
majority vote of the remaining directors, though less than a quorum. Neither the
Bank United Corp. certificate of incorporation nor the Bank United Corp. bylaws
provide for vacancies or newly-created directorships to be filled by stockholder
vote.
RIGHTS PLAN
Washington Mutual has adopted a stockholder rights plan which provides that
one right to purchase an additional share of Washington Mutual common stock is
attached to each outstanding share of Washington Mutual common stock. These
rights have certain anti-takeover effects and are intended to discourage
coercive or unfair takeover tactics and to encourage any potential acquirer to
negotiate a price fair to all stockholders. These rights may cause substantial
dilution to an acquiring party that attempts to acquire Washington Mutual on
terms not approved by Washington Mutual's board of directors, but they will not
interfere with any merger or other business combination that is approved by
Washington Mutual's 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 $17.78 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 16, 2000, may be redeemed by Washington Mutual for
$0.0044 per right prior to becoming exercisable. Until a Washington Mutual right
is exercised, the holder of that right will have no rights as a stockholder of
Washington Mutual, including, without limitation, the right to vote or receive
dividends.
Bank United Corp. has not adopted a rights plan.
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CERTAIN DIFFERENCES BETWEEN WASHINGTON
AND DELAWARE CORPORATE LAWS
The Washington Business Corporation Act (WBCA) governs the rights of current
Washington Mutual stockholders and will govern the rights of former Bank United
Corp. stockholders who become stockholders of Washington Mutual upon completion
of the merger. The Delaware General Corporation Law (DGCL) governs the rights of
current Bank United Corp. stockholders. The WBCA differs from the DGCL in many
respects. The following discussion summarizes some significant differences
between the provisions of the WBCA and the DGCL that could materially affect the
rights of Bank United Corp. stockholders.
AMENDMENT OF ARTICLES/CERTIFICATE OF INCORPORATION
Under the WBCA, the board of directors must generally recommend to the
stockholders amendments to a corporation's articles of incorporation, unless the
board of directors (a) determines that because of a conflict of interest or
other special circumstances it should not make a recommendation to the
stockholders and (b) communicates the basis for its determination to the
stockholders with the amendment. Under the WBCA, amendments to a corporation's
articles of incorporation must generally be approved by a majority of all the
votes entitled to be cast by any voting group entitled to vote unless another
proportion is specified in the articles of incorporation, by the board of
directors as a condition to its recommendation, or by the WBCA. Subject to some
exceptions, Washington Mutual's articles of incorporation require the
affirmative vote of the stockholders representing at least a majority of
Washington Mutual's issued capital stock at any regular meeting or special
meeting duly called for that purpose to effect an amendment. However, an
amendment to the provision related to business combinations with a major
stockholder described in "Comparison of Rights of Washington Mutual and Bank
United Corp. Stockholders--Interested Stockholders" above requires the
affirmative vote of 95% of the outstanding voting stock held by stockholders
other than the major stockholder.
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 the amendment. If a class vote on the amendment is
required by the DGCL, a majority of the outstanding stock of class is required,
unless a greater proportion is specified in the certificate of incorporation or
by other provisions of the DGCL. The Bank United Corp. certificate of
incorporation corresponds with Delaware law except that it requires the
affirmative vote of the holders of at least 80% of the total voting power of all
outstanding shares entitled to vote in order to amend the provisions of the Bank
United Corp. certificate of incorporation relating to: 1) the processes of
stockholder action, 2) the number, election, term of office and removal of
members of the board of directors, and 3) the process and votes required for
amending the certificate of incorporation and the bylaws.
RIGHT TO CALL SPECIAL MEETING OF STOCKHOLDERS
The WBCA provides that a special meeting of stockholders of a corporation
may be called by its board of directors, by holders of at least 10% of all the
votes entitled to be cast on any issue proposed to be considered at the special
meeting, or by other persons authorized to do so by the articles of
incorporation or bylaws of the corporation. However, the WBCA allows a
corporation's articles of incorporation to limit or deny entirely the right of
stockholders to call a special meeting. Washington Mutual's articles of
incorporation provide that Washington Mutual's board of directors or any person
authorized by Washington Mutual's bylaws may call a special meeting. However,
authority to call a special meeting is limited to holders of at least 25% of all
the votes entitled to be cast on any issue to be considered at the proposed
meeting. Washington Mutual's bylaws permit a special meeting to be called by
Washington Mutual's board of directors, the chairman of the Washington Mutual
board or upon the written request of any director.
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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. The Bank United Corp. bylaws permit only the board
of directors and the chairman of the board of directors to call a special
meeting of the stockholders
INDEMNIFICATION OF OFFICERS, DIRECTORS AND EMPLOYEES
The WBCA authorizes corporations to indemnify a director, officer or
employee made a party to a proceeding, or advance or reimburse expenses incurred
in a proceeding, under most circumstances. A corporation may not indemnify
officers, directors or employees for: (a) intentional misconduct or a knowing
violation of the law; (b) conduct finally adjudged to be an unlawful
distribution; or (c) any transaction in which that director, officer or employee
personally and improperly received a benefit in money, property or services. 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. Washington Mutual's articles
of incorporation provide that Washington Mutual shall indemnify its directors to
the fullest extent permitted by the WBCA. Washington Mutual's bylaws also permit
the board of directors to indemnify officers, employees and agents of Washington
Mutual.
Under the DGCL, a corporation may indemnify directors, officers and other
employees and individuals 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 Bank
United Corp. 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," (as defined below) with certain
exceptions, from engaging in certain "significant business transactions" (as
defined below) with a person or group of persons that beneficially owns 10% or
more of the voting securities of a target corporation (an "acquiring person")
for a period of five years after the acquiring person acquired its securities,
unless the transaction or acquisition of shares is approved by a majority of the
members of the target corporation's board of directors before the date of the
acquisition. A "significant business transaction" includes, among other
transactions:
- a merger or consolidation with the acquiring person;
- sales or other dispositions of assets, in one or more transactions having
an aggregate market value equal to five percent or more of all assets or
outstanding shares of the target corporation or representing five percent
or more of the earning power or net income of the target corporation to or
with the acquiring person;
- the issuance or redemption of stock to or from the acquiring person;
- termination of five percent 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 of the target
corporation over the five-year period following the share acquisition by
the acquiring person; or
- allowing the acquiring person to receive any benefit from the corporation,
other than proportionately as a stockholder.
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"Target corporations" include all domestic corporations with securities
registered under the Securities Exchange Act of 1934, as amended. Washington
Mutual is, therefore, 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" (as defined below) with an "interested stockholder" (as
defined below) for three years following the time that this person becomes an
interested stockholder. With certain exceptions, an "interested stockholder" is
a person or group that 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 the voting stock at any time within the previous three years.
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
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 the 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:
- prior to the time at which a stockholder becomes an interested stockholder
the board of directors approves either the business combination or the
transaction that resulted in the person becoming an interested
stockholder;
- the interested stockholder owns 85% of the corporation's voting stock upon
completion of the transaction that 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 that do not permit employees to decide confidentially
whether to accept a tender or exchange offer); or
- at or subsequent to such time this person becomes an interested
stockholder, the board approves the business combination and it is also
approved at a stockholder 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 before
the completion or abandonment, and subsequent to the earlier of the public
announcement or the notice required under Section 203, of a proposed transaction
that:
- constitutes a certain (x) merger or consolidation, (y) sale or other
transfer 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 offer for 50% or more of the corporation's outstanding voting
stock;
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- 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 or under certain other
circumstances; and
- 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 that was approved by majority stockholder vote. With a limited exception,
this amendment would not become effective until 12 months following its
adoption. Bank United Corp. has not opted out of Section 203.
MERGERS, SALES OF ASSETS AND OTHER TRANSACTIONS
Under the WBCA, a merger or share exchange 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 a
different percentage is specified in the articles of incorporation. Washington
Mutual's articles of incorporation reduce this percentage to a majority of all
votes entitled to be cast by each voting group if two-thirds of the directors
vote to recommend the transaction to the stockholders.
The WBCA also provides that, in general, a corporation may not sell, lease,
exchange or otherwise dispose of all, or substantially all, of its property,
other than in the usual and regular course of business, unless the board of
directors recommends the proposed transaction to the stockholders and the
stockholders approve the transaction by two-thirds of all the votes entitled to
be cast, unless a different percentage is specified in the articles of
incorporation. Washington Mutual's articles of incorporation reduce this
percentage to a majority of all votes entitled to be cast by each voting group
if two-thirds of the directors vote to recommend the transaction to the
stockholders.
Under the WBCA, stockholder approval of a merger is not required if (a) the
articles of incorporation of the surviving corporation will not differ as a
result of the merger, (b) each stockholder of the surviving corporation will
retain the same number of shares held prior to the merger and the designations
and relative rights of those shares are not changed, (c) the number of voting
shares of the surviving corporation after the merger does not exceed the number
of voting shares authorized by the surviving corporation's articles of
incorporation, and (d) the number of shares of the surviving corporation
authorized to participate in distributions after the merger does not exceed the
number of such participating shares authorized by the surviving corporation's
articles of incorporation. Therefore, under the WBCA, the approval of the merger
of Washington Mutual and Bank United Corp. by the stockholders of Washington
Mutual is not required.
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. However,
no vote of 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 before the merger is to be
converted into 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 before the merger. The Bank United Corp. certificate
does not require a higher percentage. Therefore, under Delaware law, a majority
of the holders of Bank United Corp. common stock must approve the Bank United
Corp. reorganization and the Washington Mutual merger.
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STOCKHOLDER ACTION WITHOUT A MEETING
Under the WBCA, stockholder action that may be taken at a stockholders'
meeting may be taken without a meeting if written consents describing the action
are signed by all stockholders entitled to vote on that matter. The bylaws of
Washington Mutual permit stockholder action by written consent.
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. However, the
Bank United Corp. certificate and bylaws specifically prohibit stockholder
action by written consent unless such consent is unanimous.
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 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.
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:
- it is approved by a majority of the "qualified directors" on the board or
a duly empowered committee (but no fewer than two);
- it is approved by the affirmative vote of the majority of all "qualified
shares" after notice and disclosure to the stockholders; or
- 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 has 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 generally as shares other than those beneficially
owned, or the voting of which is controlled, by a director (or an affiliate of a
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 some 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 a quorum.
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DISSENTERS' RIGHTS
Under the WBCA, a stockholder is entitled to dissent from and, upon
perfection of the stockholder'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 of the assets of the
corporation, and amendments to the corporation's articles of incorporation that
materially reduce the number of shares owned by a stockholder to a fraction of a
share which is to be acquired with cash. However, stockholders generally will
not have such dissenters' rights if stockholder 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 the stockholder 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, these appraisal
rights are not available
- with respect to the sale, lease or exchange of all or substantially all of
the assets of the corporation,
- 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 the terms of the merger or
consolidation allow the stockholders to receive only shares of the
surviving corporation or shares of any other corporation that 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
- 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 of incorporation, each share of the surviving corporation
outstanding prior to the merger is converted into 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 some other
conditions are met.
DIVIDENDS
Under the WBCA, a corporation may make a distribution in cash or in property
to its stockholders upon the authorization of its board of directors unless,
after giving effect to this distribution, (a) the corporation would not be able
to pay its debts as they become due in the usual course of business or (b) 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 stockholders 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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THE CONTINGENT PAYMENT RIGHTS TRUST AND CERTIFICATES
SUMMARY
The forbearance litigation will remain a contingent asset of Bank United
Corp., Bank United and their successors, and thus will become a contingent asset
of Washington Mutual, as successor to Bank United Corp. and as parent company of
Bank United, upon completion of the merger. However, prior to the Washington
Mutual merger, Bank United Corp. will establish the Bank United Corp. Litigation
Contingent Payment Rights Trust, a statutory business trust under Delaware law,
which will issue CPR Certificates representing the right to receive a portion of
the assets of the contingent payment rights trust. This trust will hold and
enforce Bank United Corp.'s obligation to pay to the trust Bank United Corp.'s
and Bank United's portion of the proceeds of any final judgment or settlement in
the forbearance litigation less certain taxes, expenses and reimbursements.
Immediately before the Washington Mutual merger, each share of Bank United Corp.
common stock will be converted into a corresponding share of new Bank United
Corp. common stock and one CPR Certificate pursuant to the Bank United Corp.
reorganization. Unless otherwise indicated, references to Bank United Corp. in
this proxy statement/prospectus also refer to Washington Mutual upon completion
of the Washington Mutual merger.
FORMATION OF THE CONTINGENT PAYMENT RIGHTS TRUST
The contingent payment rights trust will be a statutory business trust
created under Delaware law pursuant to a declaration of trust and a certificate
of trust to be filed with the Delaware Secretary of State. The purpose of the
contingent payment rights trust will be to hold and enforce the commitment
agreement, described below in "--The Commitment Agreement.". Prior to the merger
of Bank United Corp. with and into Washington Mutual, Inc., Bank United Corp.,
the litigation trustees, [ ] as the institutional trustee, and
[ ] as the Delaware trustee will enter into a declaration of trust
substantially in the form attached to this document as Appendix C. This
declaration of trust will govern the terms and conditions of the contingent
payment rights trust along with the commitment agreement and the litigation
trustee agreements described above in "The Bank United Corp. Reorganization and
the Washington Mutual Merger--Interest of Certain Persons in the
Merger--Litigation Trustee Agreements."
Pursuant to the declaration of trust of the contingent payment rights trust
and two related litigation trustee agreements, one senior executive (Jonathon C.
Heffron) and one director (Salvatore Ranieri) of Bank United Corp. with
knowledge of the facts underlying the forbearance litigation will be appointed
as litigation trustees of the contingent payment rights trust, and will instruct
Bank United Corp. and its successors, to dismiss, settle or cease the
prosecution of the litigation, including selection and supervision of existing
and any new counsel and deciding whether or not to accept any settlement offer.
See "--Management of the Forbearance Litigation" below. Administration of the
contingent payment rights trust, including transfers of CPR Certificates and
receipt, holding and payment of funds, will be conducted by the institutional
trustee. As required by Delaware law, there will also be a Delaware trustee.
In addition, Bank United Corp. will form another Delaware statutory business
trust, called the payment trust, in connection with the reorganization. The
purpose of this trust will be to receive and hold in trust any payments by Bank
United Corp. of the commitment amount, plus interest less taxes on such
interest. The commitment amount is Bank United Corp.'s portion of the proceeds
of the forbearance litigation, less certain reimbursements and plus assumed tax
benefits. Under the commitment agreement, the payment trust will pay any such
amounts it receives from Bank United Corp. (less any amounts withdrawn by Bank
United Corp. to cover taxes solely relating to ownership of the payment trust)
promptly to the contingent payment rights trust. However, in the event that Bank
United Corp. pays any portion of the commitment amount to the payment trust
prior to the expiration
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of the 366 day period after the Bank United Corp. reorganization, the payment
trust will not pay any such amounts to the contingent payment trust until the
expiration of such period. The payment trust will be owned and controlled by
Bank United Corp.
THE FORBEARANCE LITIGATION
The following description of the forbearance litigation underlying the
contingent payment rights trust does not purport to be a full or complete
description of the legal or factual issues presented, the court opinions
rendered or the relevant law, and the description is in all respects qualified
by reference to the documents filed in connection with the relevant litigation,
opinions and law.
In connection with Bank United Corp.'s original acquisition of certain of
the assets and liabilities of United Savings Association of Texas in 1988, the
Federal Home Loan Bank Board approved a forbearance letter issued on
February 15, 1989. Under the terms of the forbearance letter, the Federal
Savings and Loan Insurance Corporation agreed to waive or forbear from enforcing
certain regulatory provisions with respect to regulatory capital requirements,
liquidity requirements, accounting requirements and other matters. After the
enactment of the Financial Institutions Reform Recovery and Enforcement Act of
1989, the Office of Thrift Supervision took the position that the capital
standards set forth in the act applied to all savings institutions, including
those institutions that had been operating under previously granted capital and
accounting forbearances, and that the act eliminated those forbearances. While
Bank United has not had to rely on such forbearances or waivers in order to
remain in compliance with existing capital requirements as interpreted by the
Office of Thrift Supervision, the position of the Office of Thrift Supervision
adversely affected Bank United by curtailing the growth and reducing the
leverage contemplated by the terms of the forbearance letter. Bank United has
been, and continues to be, in compliance with regulatory capital provisions and,
accordingly, has not had to rely on the waivers or forbearances provided in
connection with the original acquisition.
On July 25, 1995, Bank United Corp., Bank United and their affiliate,
Hyperion Partners L.P., filed suit against the United States in the U.S. Court
of Federal Claims for alleged failures of the United States (1) to abide by a
capital forbearance that would have allowed Bank United to operate for ten years
under negotiated capital levels lower than the levels required by the then
existing regulations or successor regulations, (2) to abide by its commitment to
allow Bank United to count $110 million of subordinated debt as regulatory
capital for all purposes and (3) to abide by an accounting goodwill treatment
that would have allowed Bank United to count as capital for regulatory purposes,
and to amortize over a period of twenty five years, the $30.7 million difference
between Federal Savings and Loan Insurance Corporation payment obligations to
Bank United and the discounted present value of future payments.
In March 1999, the U.S. Court of Federal Claims granted the plaintiffs'
motion for summary judgment on the issue of liability, holding that the United
States was liable for claims in the case filed by the plaintiffs. On August 5,
1999, the court denied a motion for summary judgment filed by the United States
on the issue of lost profits damages. The case proceeded to trial on the amount
of damages on September 13, 1999, and the taking of evidence by the court was
concluded on October 21, 1999. The parties submitted post-trial briefs followed
by closing argument on February 7, 2000. A decision by the court is expected in
calendar year 2000. The plaintiffs seek, and offered evidence in support of,
damages in excess of $560 million. The government argued that the damages to
plaintiffs as a result of the breach, if any, were speculative and approached
zero. Bank United Corp. is unable to predict the outcome of the plaintiffs' suit
against the United States and the amount of judgment for damages, if any, that
may be awarded. No assurances can be given on the outcome of this case.
In July 1996, Bank United Corp. and Bank United entered into an agreement
with Hyperion Partners L.P. acknowledging the relative value, as among the
parties, of claims in the pending
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forbearance litigation. The agreement confirms that Bank United Corp. and Bank
United are entitled to receive 85% of the amount, if any, recovered as a result
of any settlement of or a judgment on these claims, and that Hyperion Partners
is entitled to receive 15% of this amount. The agreement was approved by the
disinterested directors of Bank United Corp. The plaintiffs will continue to
cooperate in good faith and will use their best efforts to maximize the total
amount, if any, that they may recover.
RELATED CASES
The forbearance litigation is one of a number of cases filed against the
federal government in the claims court involving acquisitions of failed savings
institutions and alleging that, among other things, changes in regulatory
capital calculation brought about by the Financial Institutions Reform Recovery
and Enforcement Act and capital regulations constitute a breach of the contract
between the acquiring institution and the federal government. Each of these
related cases presents facts that are specific to the parties to the litigation,
and the plaintiffs in these cases allege diverse legal theories of damages. A
small number of cases have gone to trial, of which only a few have been decided.
Each of those cases is on appeal, and no appellate decisions have been issued
with respect to damages claims.
DAMAGES
Each savings institution affected by the Financial Institutions Reform
Recovery and Enforcement Act's and capital regulations' limitation on its
regulatory capital reacted to the resulting reduction in its regulatory capital
in an individual fashion dictated by the unique facts and circumstances faced by
the institution. Accordingly, the extent and amount of damages awarded to each
institution that has brought an action against the federal government is
expected to be fact specific. Even if the plaintiffs in similar cases have been
successful in securing damage awards, Bank United Corp. or Bank United may not
obtain such a damage award.
At the trial in the U.S. Court of Federal Claims, plaintiffs offered
evidence in support of three alternative damages models. The first model
calculated the plaintiffs' lost profits damages from the government's three
breaches of contract relating to capital levels, subordinated debt, and
goodwill. The damages calculated totaled $553,291,000. A second model calculated
lost profits damages arising solely from the breach of the subordinated debt
promise, which totaled $96,085,000. The third model calculated what the cost of
raising substitute capital in 1989 to repair the government's three breaches
would have been, which was calculated to be $117,227,000. In addition to any
recovery under the alternative models, the plaintiffs sought recovery of
$4,884,283 in out-of-pocket costs caused by the government's breach of the
subordinated debt promise.
Although Bank United Corp. and Bank United have conducted reviews of the
damages suffered, no judicial determination has been made regarding the amount
or type of such damages. The United States has argued in similar cases that some
or all of the damages alleged by the plaintiffs are too speculative to permit
recovery. The determination of damages in other cases may adversely affect some
or all of Bank United Corp.'s and Bank United's damage claims to the extent they
are decided prior to any determination in Bank United Corp.'s case. In addition,
rulings in other cases representing similar claims may also adversely affect
some or all of Bank United Corp.'s and Bank United's damage claims. For these
and related reasons, even though Bank United Corp. and Bank United prevailed in
establishing the liability of the United States at the trial court level, there
can be no assurance as to the amount, if any, and type of damages that Bank
United Corp. or Bank United may recover. Further, it is possible that Bank
United Corp. or Bank United may not obtain any monetary recovery in the
forbearance litigation.
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THE BANK UNITED CORP. REORGANIZATION AND THE DISTRIBUTION OF CPR
CERTIFICATES
Prior to the Washington Mutual merger, Bank United Corp. will effect a
reorganization of itself by merging a wholly-owned subsidiary formed for the
purpose of the reorganization into Bank United Corp. Pursuant to this
reorganization, each share of Bank United Corp. common stock outstanding at the
time of the reorganization will be converted to a new share of Bank United Corp.
common stock and the right to receive one CPR Certificate and Bank United
Corp.'s other outstanding securities will be similarly adjusted. The contingent
payment rights trust will issue to Bank United Corp. the CPR Certificates prior
to the reorganization.
In addition to the CPR Certificates to be distributed to holders of Bank
United Corp. common stock in the Bank United Corp. reorganization, the
contingent payment rights trust will initially issue to Bank United Corp.
(1) one additional CPR Certificate for each share of common stock underlying
Bank United Corp. stock appreciation rights and performance awards outstanding
immediately prior to the reorganization and (2) one additional CPR Certificate
for each share of Bank United Corp. common stock with respect to which appraisal
rights are exercised in connection with the reorganization. Bank United Corp.
will retain and will be able to sell CPR Certificates in an amount equal to
(x) the number of Bank United Corp. shares as to which stockholders have
demanded the exercise of appraisal rights, plus (y) the number of Bank United
Corp. shares underlying the stock appreciation rights and performance awards
that are exercised for cash prior to the reorganization or which are surrendered
solely for cash (rather than a combination of cash and certificates) in the
reorganization. Bank United Corp. will also retain the number of CPR
Certificates that is equal to (1) the number of shares underlying Bank United
Corp. stock options outstanding immediately prior to the reorganization, for
delivery by Bank United Corp. upon exercise of those stock options and (2) the
number of CPR Certificates required to satisfy Bank United Corp.'s obligations
under the litigation trustee agreements with respect to compensation of the
litigation trustees (See "--Management of the Forbearance Litigation--The
Litigation Trustees--General" below). In addition, the contingent payment rights
trust will issue CPR Certificates in respect of Bank United Corp. PIES in
accordance with the terms of those securities. Upon completion of the Bank
United Corp. reorganization and the merger with Washington Mutual, the number of
CPR Certificates that will be issuable with respect to each $50 purchase
contract under the Bank United Corp. PIES will be between 1.1130 and 1.3356
Certificates, depending upon the average closing price per share of Washington
Mutual common stock for the 20 trading days ending on the third trading day
before August 16, 2002.
Each CPR Certificate distributed by the contingent payment rights trust to
each Bank United Corp. stockholder will be automatically redeemed for $0.01 in
cash immediately following the Bank United Corp. reorganization if the holder of
the share as to which the certificate was issued has given notice, pursuant to
Section 262 of the Delaware General Corporation Law, of an intent to exercise
appraisal rights. If any such stockholder subsequently withdraws, or fails to
perfect, as required by Section 262, his or her appraisal demand, Bank United
Corp. will deliver to the stockholder CPR Certificates equal to the number of
Bank United Corp. shares as to which the appraisal demand was withdrawn or not
perfected.
Prior to its reorganization, Bank United Corp. will deposit, or will cause
to be deposited, with a depository institution of recognized standing, known as
an exchange agent, the CPR Certificates for the benefit of the holders of Bank
United Corp. common stock. The exchange agent will cause the certificates to be
delivered to the holders of Bank United Corp. common stock as soon as
practicable after the Bank United Corp. reorganization.
THE COMMITMENT AGREEMENT
Prior to its reorganization, Bank United Corp. will enter into a commitment
agreement, substantially in the form attached to this document as Appendix D.
Upon completion of the merger
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with Washington Mutual, Washington Mutual will assume the rights and obligations
of Bank United Corp. under the commitment agreement. Under the terms of the
commitment agreement, Bank United Corp. will be obligated to pay to the payment
trust from time to time an amount equal to the commitment amount plus interest
less taxes on that interest. The "commitment amount" means an amount equal to
(1) all cash and non-cash proceeds actually received by Bank United Corp. and
its affiliates (other than Hyperion Partners) pursuant to a final, nonappealable
judgment or a final settlement of the forbearance litigation, less
(2) reimbursements to Bank United Corp., plus (3) any assumed tax benefits to
Bank United Corp. The reimbursements that Bank United Corp. may subtract from
the litigation proceeds are as follows:
- amounts paid by Bank United Corp. to the expense fund pursuant to the
commitment agreement plus interest,
- Bank United Corp.'s assumed income tax liability attributable to the
receipt of the litigation proceeds,
- damages actually suffered by Bank United Corp. in connection with, arising
out of or relating to (1) any matter whatsoever brought by the holders of
the CPR Certificates in their capacity as holders or (2) any matter
relating to the trusts, the CPR Certificates and their distribution, the
forbearance litigation and any actions taken by Bank United Corp. or
Washington Mutual so long as such actions relate to the trusts,
However, Bank United Corp. will not be reimbursed for damages arising from
claims against (A) Bank United Corp. for breach of the commitment agreement,
the litigation trustee agreements, any payment trust agreement, the trust
agreement or the Washington Mutual merger agreement; (B) Bank United Corp.
for failure to deliver any CPR Certificates when due or return to the trust
for cancellation when so required; (C) Bank United Corp. for failure to
deposit the trust expenses advanced to the trusts; or (D) Bank United Corp.
for breach of any depository relationship obligations with respect to trust
expenses advanced to the trusts;
- interest on any cash payment of taxes if proceeds are included in income
of Bank United Corp. or Bank United for federal income tax purposes in a
taxable year prior to the year such proceeds are received in cash,
- any indemnification amounts provided to the litigation trustees pursuant
to the litigation trustee agreements, and
- expenses reasonably incurred by Bank United Corp. in connection with the
liquidation of non-cash proceeds.
The payment trust will pay the proceeds amount to the contingent payment
rights trust promptly after it receives the commitment amount from Bank United
Corp. However, the payment trust will not pay the proceeds amount (as defined
below) to the contingent payment rights trust prior to the expiration of the
366 day period starting on the date of distribution of the CPR Certificates to
the Bank United Corp. stockholders. The "proceeds amount" means an amount equal
to the commitment amount paid to the payment trust plus interest on such amounts
less any amounts withdrawn by Bank United Corp. equal to any taxes payable by
Bank United Corp. solely by reason of the ownership of the payment trust.
The commitment agreement will have the same liquidation preference as Bank
United Corp.'s other senior indebtedness. The terms of the commitment agreement
will provide that Bank United Corp. will not, and will not permit Bank United
to, assign any interest in the forbearance litigation. In the commitment
agreement, the parties will acknowledge that any merger of Bank United Corp. or
Bank United with any other party will not be deemed to be or to effect an
assignment of the forbearance litigation.
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The commitment agreement will provide that Bank United Corp. will not
(a) sell, transfer or otherwise dispose of any shares of any series of voting
stock of Bank United or (b) permit Bank United to issue, sell or otherwise
dispose of shares of its voting stock unless in either case Bank United remains
a controlled subsidiary of Bank United Corp. It also provides that Bank United
Corp. will not permit Bank United to (a) merge or consolidate unless it or a
controlled subsidiary of Bank United Corp. is the surviving entity or
(b) convey or transfer its properties and assets substantially as an entirety to
any person, except to Bank United Corp. or a controlled subsidiary of Bank
United Corp.
The commitment agreement will also provide that Bank United Corp. shall not
create, assume, incur or suffer to exist, as security for indebtedness for
borrowed money, any mortgage, pledge, encumbrance, lien or charge of any kind
upon the voting stock of Bank United, other than directors' qualifying shares,
without effectively providing that the CPR Certificates shall be secured equally
and ratably with, or prior to, that indebtedness. However, Bank United Corp. may
create, assume, incur or suffer to exist any such mortgage, pledge, encumbrance,
lien or charge without regard to the foregoing provisions so long as after
giving effect to that mortgage, pledge, encumbrance, lien or charge Bank United
Corp. will own directly or indirectly at least 80% of the voting stock of Bank
United then issued and outstanding, free and clear of the mortgage, pledge,
encumbrance, lien or charge. Under the commitment agreement, the term "voting
stock" will be defined to mean, with respect to any person, stock of any class
or classes, however designated, having ordinary voting power for the election of
a majority of the board of the person, other than stock having power only by
reason of the happening of a contingency.
The commitment agreement will also provide that, notwithstanding the
foregoing, Bank United Corp. may avoid the restrictions described in the
previous paragraph if prior to any such transaction:
- Bank United shall have unconditionally guaranteed payment when due of the
commitment amount, if any;
- Bank United shall have obtained all regulatory approvals, if any, required
to permit the guarantee of the payment of the commitment amount; and
- Bank United Corp. shall have delivered to the institutional trustee an
opinion of counsel stating that the guarantee of the payment of the
commitment amount by Bank United has been duly authorized, executed and
delivered and constitutes a valid, legally binding and enforceable
obligation of Bank United.
Under the commitment agreement, at the request of the contingent payment
rights trust or the payment trust, Bank United Corp. must deposit amounts
relating to the estimated unpaid expenses of the trusts in an expense fund with
Bank United. The aggregate amount that Bank United Corp. is obligated to pay for
the life of the trusts is not more than $10 million unless the forbearance
litigation is pursued through additional trial court proceedings and any related
appeals, in which case Bank United Corp. will be obligated to pay such
additional expenses provided; that in no event will the aggregate amount Bank
United Corp. is obligated to pay exceed $13 million.
DESCRIPTION OF CPR CERTIFICATES
GENERAL
Each CPR Certificate will represent an assignable and transferable undivided
beneficial interest in the assets of the contingent payment rights trust and, as
a result of Bank United Corp. entering into the commitment agreement, will
represent an interest in the right to receive a pro rata share of the payment
amount (as defined below) and a pro rata share of the retained amount (as
defined below) at the expiration of the retained amount period. The "payment
amount" means any payments of the proceeds amount received by the contingent
payment rights trust from the payment trust, less (1) the amount of any accrued
but unpaid expenses payable by that trust, plus (2) any interest or income
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received by that trust on such proceeds amount, less (3) the retained amount.
The "retained amount" means the amount retained by the contingent payment rights
trust for [ONE] year or such longer period called the "retained amount period"
as the litigation trustees reasonably determine is necessary to cover all
expenses, costs, and claims and indemnification obligations of the contingent
payment rights trust which may be incurred or may arise after any and all
amounts payable by Bank United Corp. to the trusts under the commitment
agreement have been paid in full. Each CPR Certificate will entitle the holder
to receive (1) a fraction of the payment amount equal to one divided by the
total number of CPR Certificates then outstanding and (2) a fraction of the
retained amount remaining at the expiration of the retained amount period equal
to one divided by the total number of CPR Certificates then outstanding.
RESALES OF CPR CERTIFICATES
The CPR Certificates will be freely transferable by the holders of the
certificates under the Securities Act, except for certificates issued to any
holder of CPR Certificates who may be deemed to be an "affiliate" of the
contingent payment rights trust for purposes of Rule 145 under the Securities
Act as of the date of the special meeting of stockholders of Bank United Corp.
These affiliates may not sell their certificates except pursuant to an effective
registration statement under the Securities Act or other applicable exemption
from the registration requirements of the Securities Act.
TRADABILITY
The declaration of trust of the contingent payment rights trust will require
the contingent payment rights trust to use its reasonable best efforts to permit
trading of the CPR Certificates on the Nasdaq National Market (or, if such
trading is not possible, on such other Nasdaq or other market selected in an
effort to maximize liquidity). Bank United Corp., on behalf of the contingent
payment rights trust, will apply for inclusion of the certificates on the Nasdaq
National Market.
No assurance can be given that the CPR Certificates will satisfy the listing
requirements for inclusion on the Nasdaq National Market or any other trading
system. In the event that the CPR Certificates cannot be listed on any trading
market, there would likely be only minimal or no trading channels for the CPR
Certificates, resulting in severely reduced or no liquidity for investors in the
certificates. Even if such listing is achieved, an active market for the CPR
Certificates may not develop or be sustained. Further, the price at which the
CPR Certificates would trade at any time could be subject to rapid and
substantial change, depending upon among other things developments in the
forbearance litigation and similar pending litigation.
PAYMENT PROCEDURES FOR CPR CERTIFICATES
The declaration of trust of the contingent payment rights trust will provide
that if and when Bank United Corp. or any of its subsidiaries or affiliates
receive any litigation proceeds Bank United Corp. will deliver to the trustees a
written notice regarding the proceeds within ten days of receipt of those
proceeds. Within 30 days of receipt of those litigation proceeds, Bank United
Corp. will send to the litigation trustees a certificate setting forth the
calculation of the portion of the commitment amount with respect to those
litigation proceeds. The contingent payment trust will then have 30 days to
agree or dispute that calculation. If the trust agrees to the calculation in
such time by delivering a notice of agreement or fails to object in such time,
Bank United Corp. must deliver that portion of the commitment amount within five
business days of delivery of that notice of agreement. If the contingent payment
rights trust disputes Bank United Corp.'s calculation of that portion of the
commitment amount, it must prepare a certificate setting forth its calculation
as well as supporting documentation. If Bank United Corp. disagrees with that
calculation, Bank United Corp. and the trust shall hire a mutually agreed upon
independent certified public accountant, who will be instructed to recompute
such portion of the commitment agreement and determine the correct amount.
Within five business
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days of a resolution of the portion of the commitment amount then payable, Bank
United Corp. must pay such amount to the payment trust.
The declaration of trust of the contingent payment rights trust will further
provide that in the event that Bank United is unable to distribute to Bank
United Corp. any portion of the litigation proceeds due to regulatory
restrictions, the date by which Bank United Corp. must have paid such portion of
the litigation proceeds to the payment trust will be extended until Bank United
secures regulatory approval. However, in no event will this due date be extended
later than 90 days after receipt of those litigation proceeds.
PAYMENT OF THE PROCEEDS AMOUNT TO THE CONTINGENT PAYMENT RIGHTS TRUST
PAYMENT OF THE COMMITMENT AMOUNT TO THE PAYMENT TRUST
The terms of the commitment agreement will require Bank United Corp. to pay
to the payment trust the commitment amount (as described above under "--The
Commitment Agreement") within the time specified above under "--Payment
Procedures for CPR Certificates." Any litigation proceeds actually received by
Bank United Corp. or its subsidiaries and affiliates, other than Hyperion
Partners, will first be applied to the reimbursements and damages actually
suffered by Bank United Corp., among other items described in "--The Commitment
Agreement" above. The commitment amount may be paid to the payment trust in
installments if the terms of the judgment or settlement of the forbearance
litigation provide that the litigation proceeds are to be paid in installments
or if Bank United Corp. receives the litigation proceeds in installments.
PAYMENT OF THE PROCEEDS AMOUNT TO THE CONTINGENT PAYMENT RIGHTS TRUST
Under the commitment agreement, the payment trust will agree that, promptly
after it receives the commitment amount or any portion of such amount from Bank
United Corp., the payment trust will pay the proceeds amount (as described above
under "--The Commitment Agreement") or the corresponding portion of such amount
to the contingent payment rights trust. However, the payment trust will not pay
any portion of the proceeds amount to the contingent payment rights trust prior
to the expiration of the 366 day period starting on the date of distribution of
the CPR Certificates to the Bank United Corp. stockholders.
PAYMENT OF PAYMENT AMOUNT TO HOLDERS
The declaration of trust of the contingent payment rights trust will require
that the contingent payment rights trust make payments from time to time to the
CPR Certificate holders of the payment amount (as described above under
"--Description of the CPR Certificates--General") upon the receipt of the
applicable proceeds amount from the payment trust. The declaration of trust of
the contingent payment rights trust will also provide that upon the expiration
of the retained amount period, the contingent payment rights trust will pay to
each certificate holder its pro rata share of any funds left in the retained
amount (as described above under "--Description of the CPR
Certificates--General") at such time. See "--Expenses and Retained Amount"
below.
Pursuant to the declaration of trust of the contingent payment rights trust,
each CPR Certificate will entitle the holder to receive (1) a fraction of the
payment amount equal to one divided by the total number of CPR Certificates then
outstanding, and (2) a fraction of the amount remaining in the retained amount
at the expiration of the retained amount period equal to one divided by the
total number of certificates then outstanding.
TIMING OF PAYMENTS
Pursuant to the declaration of trust of the contingent payment rights trust
and the commitment agreement, the contingent payment rights trust will make
payments of the payment amount to the
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holders of CPR Certificates as of the record dates determined by the litigation
trustees. Payment of the payment amount will be made on the payment dates, which
will also be set by the litigation trustees, and which will be within 60 days
after the contingent payment rights trust receives a payment from the payment
trust pursuant to the commitment agreement. Within 90 days of expiration of the
retained amount period, the contingent payment rights trust will pay any
remaining portion of the retained amount to the holders of the CPR Certificates.
EXPENSES AND RETAINED AMOUNT
Under the declaration of trust, the contingent payment rights trust may
issue additional CPR Certificates after the effective time of the merger with
Washington Mutual that represent pro rata interests in the contingent payment
rights trust in order to raise funds for or pay expenses. The contingent payment
rights trust will be authorized to borrow additional funds for the sole purpose
of funding its expenses so long as such indebtedness represents debt of the
contingent payment rights trust and not an ownership interest for federal income
tax purposes. If the contingent payment rights trust accrues expenses, including
interest on borrowings, in addition to the amounts forwarded to the contingent
payment rights trust by Bank United Corp., it will deduct the amount of such
expenses from the proceeds amount in order to calculate the payment amount.
Under the commitment agreement, at the request of the contingent payment
rights trust or the payment trust, Bank United Corp. must deposit amounts
relating to the estimated unpaid expenses of the trusts in an expense fund at
Bank United. The aggregate amount that Bank United Corp. is obligated to pay for
the life of the trusts is not more than $10 million, unless the forbearance
litigation is pursued through additional trial court proceedings and related
appeals, in which case Bank United Corp. will be obligated to pay such
additional expenses; provided that in no event will the aggregate amount Bank
United Corp. is obligated to pay exceed $13 million. In the commitment
agreement, each of the trusts has agreed that, immediately prior to its
termination, it will refund to Bank United Corp. any amount provided to it in
the expense fund but not used, provided that each of the trusts may retain a
reasonable reserve of funds to pay for termination expenses.
The litigation trustees' obligation to make payments to the holders of the
CPR Certificates shall be subject to the requirement that the contingent payment
rights trust retain the retained amount for the retained amount period which
shall be of [ONE] year, or such longer period as the litigation trustees
reasonably determine is necessary to cover all expenses, costs and claims and
the indemnification obligations of the contingent payment rights trust which may
be incurred or which may arise after payment of the commitment amount is paid in
full. The "retained amount" shall be $[ ] million, or such greater amount as
the litigation trustees reasonably determine is necessary pay additional
expenses or to satisfy the contingent payment rights trust's indemnification
obligations.
The contingent payment rights trust shall invest the retained amount in
certain investments, to the extent that portions of the retained amount are not
required to be disbursed for expenses of the contingent payment rights trust,
until the expiration of the retained amount period.
TAX ASSUMPTIONS
The commitment agreement will set forth how to determine, for the purpose of
calculating the total reimbursements to Bank United Corp., the assumed tax
liability and, for the purpose of calculating the commitment amount, assumed tax
benefits.
ASSUMED TAX LIABILITY. The commitment agreement will provide that assumed
tax liability means an amount equal to the income (including franchise) tax
liability of the Bank United Corp. and its subsidiaries and affiliates (referred
to in this section as the Bank United Corp. group) (without giving effect to any
deductions attributable to payments of the commitment amount) attributable to
the receipt of the litigation proceeds computed as follows. Regardless of any
position taken by Bank United
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Corp. or its subsidiaries or affiliates on any tax return or in any claim for
refund with respect to the receipt of the litigation proceeds or payments of the
commitment amount (or of the actual payment or actual receipt of any taxes with
respect thereto), the assumed tax liability shall, (a) if there is no
determination to the effect that litigation proceeds are not includible in gross
income in whole or in part, be computed based on the tax assumptions described
below and (b) if there is such a determination, be computed on the basis of the
tax assumptions described below as such tax assumptions are modified by such
determination.
ASSUMED TAX BENEFIT. The commitment agreement will provide that the assumed
tax benefit is equal to the sum of (a) the assumed tax benefit with respect to
Section 483 of the Internal Revenue Code and by reason of the payment of the
portion of the commitment amount that is treated as interest and (b) the assumed
tax benefit by reason of a deduction for the payment of the trust expenses and
for the value of the CPR Certificates issued to the trustees (See "--Management
of the Forbearance Litigation--The Litigation Trustees--General"). The assumed
tax benefit with respect to Section 483 shall, (a) if there is no determination
that no deduction is allowed (or that any allowed deduction is limited) with
respect to payments of the commitment amount under Section 483(a), be computed
based on the tax assumptions and (b) if there is such a determination, be
computed on the basis of the tax assumptions as such tax assumptions are
modified by such determination, regardless in either case of any position taken
by the Bank United Corp. group on any tax return or in any claim for refund with
respect to the receipt of the litigation proceeds or payments of the commitment
amount (or of the actual payment or actual receipt of any taxes with respect
thereto).
The assumed tax benefit with respect to the trust expense shall (a) if there
is no determination that a deduction is allowed in whole or in part for
estimated expense amounts advanced to the trusts pursuant to the commitment
agreement or for the fair market value of the CPR Certificates issued to the
litigation trustees pursuant to the litigation trustee agreements, be computed
based on the tax assumptions and (b) if there is such a determination, be
computed based on the tax assumptions as modified by such determination,
regardless in each case of any position taken by the Bank United Corp. group on
any tax return or in any claim for refund with respect to the receipt of
litigation proceeds, payment of the commitment amount or the issuance of CPR
Certificates to the litigation trustees pursuant to the litigation trustee
agreements (or of the actual payment or actual receipt of any taxes with respect
thereto).
A determination with respect to the inclusion in income of the litigation
proceeds, the application of Section 483(a) of the Internal Revenue Code to
payments of the commitment amount and the deductibility of the trust expenses
and of the value of the CPR Certificates issued to the litigation trustees will
be deemed to be made on the earlier of:
- the date a final judicial determination to such effect binding upon the
Bank United Corp. group is made in the litigation;
- the date a final agreement to which a member of the Bank United Corp.
group is a party with the federal government to such effect is entered
into at the direction of the litigation trustees as part of the resolution
of the litigation or a related Internal Revenue Service ruling to such
effect is issued to a member of the Bank United Corp. group in connection
with such agreement; and
- the effective date of a law, regulation or Internal Revenue Service ruling
or a judicial decision to such effect that applies to the Bank United
Corp. group or taxpayers generally.
Notwithstanding the foregoing, no determination shall be deemed to be made:
- with respect to the inclusion in income of the litigation proceeds, unless
it is made prior to the earlier of (i) 30 days before the date of the
filing of the federal tax return for the taxable year in which the
litigation proceeds are assumed to be included in gross income, or
(ii) the receipt of the litigation proceeds;
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- with respect to the application of Section 483(a) of the Internal Revenue
Code to the payments of the commitment amount, unless such determination
is made prior to the later of (i) the end of the 30th day following the
delivery to the trust of a certificate setting forth the calculation of
the commitment amount or (ii) the end of the 30th day following the
resolution of a dispute with respect to the calculation of that amount;
and
- with respect to the deductibility of the trust expenses and of the value
of the CPR Certificates issued to the litigation trustees, unless it is
made prior to the receipt of the litigation proceeds.
TAX ASSUMPTIONS. In the commitment agreement, "tax assumptions" will mean
(a), if there is no determination, the following assumptions or (b), if there is
a determination, the following assumptions as modified by such determination:
- The litigation proceeds will be includible in gross income as ordinary
income in full.
- Payments of the commitment amount will not be deductible except that
Section 483(a) of the Internal Revenue Code will apply to payments of the
commitment amount, other than those allocable to CPR Certificates issued
on exercise of employee options or otherwise in a transaction that is not
a sale or exchange, and payments of the commitment amount will be
deductible to the extent treated by Section 483(a) as interest expense.
- The members of the Bank United Corp. group will not be entitled to a
deduction for estimated expense amounts advanced to the trusts pursuant to
the commitment agreement and for the fair market value of the CPR
Certificates issued to the litigation trustees pursuant to the litigation
trustee agreements.
- The income tax liability attributable to the assumed inclusion of all or a
portion of the litigation proceeds in gross income as ordinary income and
the benefit of any deduction shall be:
(a) the product of the amount of such income or deduction and the highest
statutory rate of federal income tax applicable to corporations for the
year in which the income is assumed to be included or the deduction is
assumed to be realized, plus
(b) the product of such income or deduction and the net combined marginal
rate of state and local income (or franchise) tax of the relevant member
or members of our group for the year in which the income is assumed to be
included and the deduction is assumed to be realized, net of the federal
income tax benefit (calculated based on the rate described in clause (a)
above) of such state or local income (or franchise) tax.
The relevant member or members of the Bank United Corp. group shall be the
member or members of the group including Bank United Corp. and its subsidiaries
and affiliates that is or are assumed to include the litigation proceeds in
income or is or are assumed to be allowed the relevant deduction.
RECONCILIATION PAYMENTS. The commitment agreement will provide that, in the
event that any assumed tax liability or any assumed tax benefit cannot be
calculated at the time of the receipt of the cash proceeds of the litigation or
the payment of the commitment amount, the commitment amount must be paid based
on a tentative calculation of any assumed tax benefit or assumed tax liability.
The commitment agreement will further provide that 12 months after the end of
the taxable year in which the commitment is paid based on the tentative
calculation, the parties shall recompute the assumed tax benefit or assumed tax
liability. As promptly as practicable but in no event later than 30 days after
the recomputation of the assumed tax liability and the assumed tax benefit, Bank
United Corp. shall pay to the payment trust any excess of the re-computed
commitment amount or portion thereof over the commitment amount or portion
thereof that was initially calculated plus interest for the period over which
the payment was deferred at a rate of Bank United Corp.'s cost of funds as
submitted monthly
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to the Federal Home Loan Bank. Along with such payment, Bank United Corp. shall
provide to the trustees a certificate setting forth the re-calculation of the
commitment amount or portion thereof.
INDEMNIFICATION, REIMBURSEMENT AND LIMITATIONS ON LIABILITY.
INDEMNIFICATION OBLIGATIONS
Pursuant to its declaration of trust, the contingent payment rights trust
will indemnify and advance expenses, without requirement of bond or other
security, to each litigation trustee, the institutional trustee, and the
Delaware trustee and members of the Bank United Corp. litigation committee in
connection with any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative, arising out of or
relating to:
- the contingent payment rights trust,
- the CPR Certificates,
- the distribution of those certificates,
- the forbearance litigation,
- any acts or omissions of the trustees in their capacity or purportedly in
their capacity as trustees, or
- actions taken by the litigation trustees (including actions taken by the
litigation trustees in their capacity as officers, directors or agents of
Bank United Corp. or Washington Mutual so long as such actions relate to
the contingent payment rights trust including, without limitation, the
negotiation of the terms of the contingent payment rights trust and the
CPR Certificates and the approval of the establishment of the contingent
payment rights trust and the distribution of the certificates and related
transactions, but otherwise excluding actions taken by the litigation
trustees in such capacities).
In the circumstances listed above, these persons will be indemnified against
any and all losses, liabilities, damages, judgments, demands, suits, claims,
assessments, charges, fines, penalties and other costs and expenses, including
attorneys' fees and expenses and other fees and expenses associated with the
defense of a claim or incurred by such indemnified person in obtaining
indemnification under the declaration of trust, whether or not in a formal
proceeding.
However, in the case of the indemnification of any litigation trustee, if
the CPR Certificate holders meet the burden of establishing in a final judicial
determination by clear and convincing evidence that such damages arose as the
result of actions or omissions of the litigation trustees with deliberate intent
to injure the certificate holders or with reckless disregard for the best
interests of such holders, no indemnification shall apply. Moreover, in the case
of the indemnification of the Delaware trustee or the institutional trustee, if
CPR Certificate holders establish in a final and nonappealable judicial
determination by clear and convincing evidence that such damages arose because
such trustee was grossly negligent or engaged in willful misconduct, then no
indemnification shall be permitted. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the litigation trustees acted or decided with deliberate intent to injure the
certificate holders or with reckless disregard for the best interests of such
holders or that the Delaware trustee or institutional trustee was grossly
negligent or engaged in willful misconduct
LIABILITY INSURANCE
The contingent payment rights trust will obtain liability insurance to cover
its indemnification obligations and any liabilities of the litigation trustees.
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REIMBURSEMENT OBLIGATIONS
Pursuant to the commitment agreement, Bank United Corp. and its subsidiaries
and affiliates will be reimbursed from any litigation proceeds received by Bank
United Corp. for any damages actually suffered by them in connection with,
arising out of or relating to claims:
- brought by the holders of the CPR Certificates in their capacity as
holders regarding any matter whatsoever, or
- regarding any matter relating to the trusts, the CPR Certificates and
their distribution, the forbearance litigation and any actions taken by
Bank United Corp. so long as such actions relate to the trusts.
However, Bank United Corp. will not be reimbursed for damages arising from
claims (a) against Bank United Corp. for breach of the commitment agreement, the
litigation trustee agreements, the declarations of trust or the merger agreement
relating to the Washington Mutual merger, for failure to delivery any CPR
Certificates when due or return to the trust for cancellation when so required
or for failure to deposit the trust expenses advanced to the trust, or
(b) against Bank United for breach of any depository relationship obligations
with respect to estimated trust expenses advanced to the trusts.
LIABILITY OF CERTIFICATE HOLDERS AND TRUSTEES
In accordance with Delaware law, CPR Certificate holders will be entitled to
the same limitation of personal liability extended to stockholders of private
corporations for profit organized under the Delaware General Corporation Law.
The declaration of trust will provide that, except as set forth in that
document, the trustees will not be personally liable for the payment of any
amounts, including, without limitation, the payment amount or any portion of the
retained amount remaining upon the expiration of the retained amount period, to
the CPR Certificate holders. Those payments will be made solely from the
proceeds amount, if any, and the retained amount, if any, respectively, and
other assets of the contingent payment rights trust, if any. In addition, except
as set forth in that document, the trustees will not be required to pay to the
contingent payment rights trust or to any CPR Certificate holder any deficit
upon dissolution of the contingent payment rights trust or otherwise.
EXCULPATION
The declaration of trust of the contingent payment rights trust will provide
that, to the fullest extent permitted by law, none of the trustees, their
affiliates or the members of the Bank United Corp. litigation committee will be
liable, responsible or accountable in damages or otherwise to the contingent
payment rights trust or to each other for any loss, damage or claim incurred by
reason of any act or omission performed or omitted by such person. However, the
declaration of trust will provide two exceptions to that statement:
- The litigation trustees shall be liable for any such loss, damage or claim
incurred by reason of any act or omission performed or omitted by them if
it shall be established in a final and nonappealable judicial
determination by clear and convincing evidence that any such act or
omission of the litigation trustees was undertaken with deliberate intent
to injure the CPR Certificate holders or with reckless disregard for the
best interests of such holders and, in any event, any liability will be
limited to actual, proximate, quantifiable damages.
- The institutional trustee or the Delaware trustee shall be liable for any
such loss, damage or claim incurred by reason of the its gross negligence
or willful misconduct with respect to such acts or omissions and, in any
event, any liability will be limited to actual, proximate, quantifiable
damages.
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These provisions are not intended to limit the litigation trustees' right to
insurance obtained by the contingent payment rights trust and the proceeds of
such insurance.
The declaration of trust of the contingent payment rights trust will also
provide that, to the fullest extent permitted by law, none of the trustees,
their affiliates or the members of the Bank United Corp. litigation committee
will have any liability to the contingent payment rights trust, the trustees or
the CPR Certificate holders.
The declaration of trust of the contingent payment rights trust will also
provide to the fullest extent permitted by law, none of contingent payment
rights trust, the trustees or the CPR Certificate holders will have the right to
enforce, institute or maintain a suit, action or proceeding against any trustee,
any of their affiliates or any member of the Bank United Corp. litigation
committee relating to:
- the formation of the contingent payment rights trust,
- the entering into of the commitment agreement,
- the distribution of the CPR Certificates,
- the maintenance of the forbearance litigation at the direction of the
litigation trustees, or
- the actions of the litigation trustees in their capacity (or purportedly
in their capacity) as, litigation trustees.
However, the contingent payment rights trust (or the litigation trustees on
its behalf) may enforce, institute or maintain a suit, action or proceeding
against:
- Bank United Corp. for breach of its obligations under the declaration of
trust,
- Bank United Corp. for breach of any of its obligations under the
commitment agreement or the payment trust agreement or Bank United Corp.'s
failure to deliver any CPR Certificate when due or to return to the
contingent payment rights trust for cancellation any CPR Certificate
required to be returned pursuant to the merger agreement when so required,
- Bank United Corp. for failure to make payments to the contingent payment
rights trust under the commitment agreement,
- Bank United for breach of any depository relationship obligations it may
have with respect to payments made by Bank United Corp. to the contingent
payment rights trust,
and in each case, Bank United Corp. or Bank United, as the case may be, may be
liable to the contingent payment rights trust in connection with such suit,
action or proceeding.
Fees and expenses incurred by Bank United Corp. or its subsidiaries or
affiliates in such a suit, action or proceeding described in the preceding
paragraph shall not be set off against the litigation proceeds (in order to
calculate the commitment amount) if the contingent payment rights trust or the
litigation trustees prevail in such a suit, and, shall be deemed expenses of the
contingent payment rights trust payable by it out of the payment amount,
including any retained amount, if the litigation trustees do not prevail.
OTHER LIMITATION ON RIGHTS OF CPR CERTIFICATE HOLDERS
The declaration of trust of the contingent payment trust will provide that
no CPR Certificate holder will have the right to enforce, institute or maintain
any suit, action or proceeding against the litigation trustees to enforce or
otherwise act in respect of the declaration of trust, unless the holder has
previously given written notice to the litigation trustees of the substance of
the dispute, and holders of at least a majority in interest of the issued and
outstanding CPR Certificates have given written notice to the parties of their
support for the institution of the proceeding to resolve the dispute.
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The commitment agreement will provide that except as set forth in the two
declarations of trust, the commitment agreement, the litigation trustee
agreements or the merger agreement for the Washington Mutual merger, Bank United
Corp. will have no other obligations to the trusts, the litigation trustees or
the holders of CPR Certificates. Without limiting the generality of the
foregoing and except as provided in those agreements, Bank United Corp. will
have no obligation to advance funds to the contingent payment rights trust, the
payment trust, the litigation trustees or the holders of CPR Certificates.
The declaration of trust of the contingent payment trust will provide that
the CPR Certificate holders will have no voting rights, except the rights
described in the following two sentences, no liquidation preference and no
rights to dividends or distributions other than their pro rata share of the
payment amount and any portion of the retained amount remaining at the
expiration of the retained amount period, plus any other trust assets. The
declaration of trust of the contingent payment rights trust provides that
amendments to the declaration of trust must be approved by a majority of the
holders of CPR Certificates outstanding, except that the declaration of trust
may be amended by the institutional trustees and a majority of the litigation
trustees without the consent of the holders of certificates to (1) cure any
ambiguity; (2) correct or supplement any provision in the declaration of trust
that may be defective or inconsistent with any other provision of the
declaration of trust; (3) add to the covenants, restrictions or obligations of
the litigation trustees or to alter the allocation of duties between the
litigation trustees and the institutional trustee; (4) modify, eliminate or add
to any provision of the declaration of trust to ensure that the contingent
payment rights trust (a) will be classified for U.S. federal income tax purposes
at all times as a grantor trust, (b) will not be required to register as an
"investment company" under the Investment Company Act of 1940, or (c) is able to
issue additional CPR Certificates. In addition, the holders of a majority of the
outstanding CPR Certificates may remove either the institutional trustee or the
Delaware trustee with cause or, if a default by the contingent payment rights
trust with respect to its payment obligations has occurred and is continuing,
with or without cause. The holders of the CPR Certificates will have no rights
to elect, remove or replace the litigation trustees.
MANAGEMENT OF THE FORBEARANCE LITIGATION
THE LITIGATION TRUSTEES--GENERAL
The litigation trustees will be Salvatore Ranieri, a director of Bank United
Corp., and Jonathon K. Heffron, Executive Vice President, Chief Operating
Officer and General Counsel of Bank United Corp., both of whom have knowledge of
the facts underlying the forbearance litigation. Messrs. Ranieri and Heffron
have been involved in the prosecution of the litigation to date. Pursuant to the
declaration of trust of the contingent payment rights trust and the litigation
trustee agreements, the litigation trustees will, together with an advisory
board for the contingent payment rights trust (sometimes also called the
litigation committee) composed of present and former directors of Bank United
Corp., if such board is formed, have sole and exclusive right to instruct Bank
United Corp. and Bank United, and their successors, with respect to the
prosecution of the litigation, including all decisions as to retention,
dismissal and the terms of engagement of existing or new counsel for Bank United
Corp. and Bank United, which retention may involve fees that are partly
contingent, and other advisors, and Bank United Corp. shall cause Bank United,
and its successors, to follow these instructions.
The declaration of trust of the contingent payment rights trust will provide
that the litigation trustees will have the right, together with the contingent
payment rights trust advisory board, for any reason whatsoever, to instruct Bank
United Corp. and Bank United, and their successors, to dismiss, settle or cease
prosecution of the forbearance litigation at any time and on any terms. However,
the litigation trustees may not permit Bank United Corp. or Bank United to enter
into any settlement agreement or other ruling or agreement as part of the
resolution of the litigation or a related Internal Revenue Service in connection
with such agreement if such agreement imposes any liability or
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obligation whatsoever, other than a standard settlement release relating only to
the forbearance litigation or other related claims that Bank United Corp., its
stockholders or Bank United might have been able to bring as of immediately
prior to the Washington Mutual merger, on Washington Mutual or any of its
subsidiaries or affiliates or adversely affects or restricts the conduct of its
business or adversely affects its tax posture with respect to other matters.
The litigation trustee agreements will provide that as compensation, the
contingent payment rights trust will pay each litigation trustee, during the
term of his service as a litigation trustee, fees of $500,000 per year for three
years, except that if the forbearance litigation is sooner terminated, the
remainder of such fees will be accelerated upon final resolution of the
litigation and receipt by the Washington Mutual or any of its subsidiaries or
affiliates of the litigation proceeds, plus reimbursement of all reasonable
out-of-pocket expenses.
In addition, as an incentive to the litigation trustees, each of them will
receive CPR Certificates representing 0.75% of the total outstanding CPR
Certificates issued in the Bank United Corp. reorganization. In addition, as of
the record date for the Bank United Corp. reorganization, Messrs. Ranieri and
Heffron beneficially own and shares of Bank United Corp. common
stock, respectively. Assuming the reorganization had occurred on the record
date, Messrs. Ranieri and Heffron would have received and CPR
Certificates, respectively, in respect of the shares of Bank United Corp. common
stock they beneficially owned on that date.
The number of CPR Certificates received by each litigation trustee in the
distribution of the certificates and in respect of Bank United Corp. performance
share awards, Bank United Corp. stock appreciation rights and/or options will
depend upon the number of shares of Bank United Corp. common stock, Bank United
Corp. performance share awards, Bank United Corp. stock appreciation rights
and/or Bank United Corp. stock options that such litigation trustee holds prior
to the Bank United Corp. reorganization, which number may be different than the
number held as of the date of this document.
The terms of the declaration of trust of the contingent payment rights trust
will require that there must be at least two litigation trustees at all times.
If a litigation trustee resigns, dies, becomes incapacitated, or is no longer
qualified, the remaining litigation trustee will appoint a successor litigation
trustee who will receive fees as determined by the other litigation trustees,
but in no event more than the fees payable to the initial litigation trustees.
THE LITIGATION TRUSTEES--AUTHORITY
The declaration of trust of the contingent payment rights trust will provide
that the litigation trustees may adopt their own rules and procedures, but may
act only with the unanimous approval of both the litigation trustees or the sole
remaining litigation trustee then in office. If the number of litigation
trustees is increased above two, then approval of the litigation trustees
requires the affirmative vote of a majority of the litigation trustees then in
office. They may, in their discretion, delegate to one or more of the litigation
trustees the authority to act on behalf of the litigation trustees as the
litigation trustees may determine appropriate, other than with respect to the
retention or dismissal of counsel for Bank United Corp. or the litigation
trustees or the approval of a settlement or dismissal of the forbearance
litigation. The declaration of trust will provide that the litigation trustees
shall also have the authority to retain or dismiss counsel for the litigation
trustees and other experts, consultants or support staff as the litigation
trustees deem appropriate. Together with any advisory board, the litigation
trustees will have full authority on behalf of Bank United Corp. and its
successors, to consult with and instruct the attorneys for Bank United Corp. and
its successors, in connection with the litigation. Pursuant to the declaration
of trust, Bank United Corp. and its successors will provide the litigation
trustees with access to the books, records, facilities, representatives and
independent accountants of Bank United Corp. and Bank United, as the litigation
trustees may reasonably require.
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FILING OF EXCHANGE ACT REPORTS
The CPR Certificates will be registered under the Securities Exchange Act of
1934, as amended. So long as the certificates remain so registered, the
contingent payment rights trust will be subject to the reporting obligations of
Section 13(a) of the Securities Exchange Act, and will be obligated thereby to
file with the Securities and Exchange Commission annual reports on Form 10-K and
quarterly reports on Form 10-Q. Unless otherwise required by the Securities and
Exchange Commission, these reports will contain only an overview of the status
of the forbearance litigation and disclosure of any contingent or incurred
expenses that the contingent payment rights trust will be obligated to reimburse
to Bank United Corp. in the future. The contingent payment rights trust will
also file a report on Form 8-K upon the occurrence of a material judicial
decision in the litigation or in the event of any agreement to settle the
litigation. Such reports will not include financial statements or any valuation
of the litigation. The contingent payment rights trust's ability to disclose
details of the litigation may be limited, however, by the inherent nature and
rules of judicial proceedings, including, among other things, proceedings and
filings that are sealed by the court, matters involving attorney-client
privilege and proceedings that are conducted on a confidential basis by
agreement of the parties, such as settlement negotiations.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following summary of the material U.S. federal income tax consequences
of the holding and sale of CPR Certificates applies to holders of Bank United
Corp. common stock who receive the CPR Certificates in the Bank United Corp.
reorganization and hold them as capital assets. The discussion may not apply to
certain classes of taxpayers, including foreign holders, insurance companies,
tax-exempt organizations, financial institutions, dealers in securities, traders
in securities that elect to apply a mark-to-market method of accounting, persons
who hold the certificates in a hedging transaction or as part of a straddle or
conversion transaction and persons to whom the certificates are issued on the
exercise of employee options or otherwise in a transaction that is not a sale or
exchange.
THERE ARE NO AUTHORITIES CONSIDERING THE TAX TREATMENT OF INSTRUMENTS THAT
ARE SUBSTANTIALLY THE SAME AS THE CPR CERTIFICATES. AS A RESULT, THEIR TAX
TREATMENT IS SOMEWHAT UNCERTAIN, AND COULD DIFFER FROM THE TREATMENT DESCRIBED
IN THIS DOCUMENT. CERTIFICATE HOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS
REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO THEM OF THE
RECEIPT, OWNERSHIP AND DISPOSITION OF THE CERTIFICATES.
This summary represents the opinion of Wachtell, Lipton, Rosen & Katz,
special counsel to Bank United Corp. The parties do not intend to request any
ruling from the Internal Revenue Service as to the U.S. federal income tax
treatment of the CPR Certificates or contingent payment rights trust.
CHARACTERIZATION OF THE CPR CERTIFICATES AND TRUST
The following is a summary of the opinion of Wachtell, Lipton, Rosen & Katz,
special counsel to Bank United Corp. The CPR Certificates represent pro rata
beneficial interests in the contingent payment rights trust. It is anticipated
that the contingent payment rights trust will be treated as a grantor trust for
federal income tax purposes, rather than as a separate taxable entity, and it is
a condition to Bank United Corp.'s obligation to consummate the Washington
Mutual merger that it receive an opinion of Wachtell, Lipton, Rosen & Katz,
dated the closing date of the Washington Mutual merger, to the effect that the
contingent payment rights trust will not itself be subject to any material
federal income tax. Under the grantor trust rules, each holder of a CPR
Certificate will be treated for federal income tax purposes as the owner of a
pro rata share of the contingent payment rights trust's assets and will be
treated as receiving any amounts received by the contingent payment rights trust
when those amounts are received by the contingent payment rights trust (and as
making any payments to third parties when those amounts are paid by the
contingent payment rights trust).
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Accordingly, a holder may (depending upon such holder's basis in its interest in
the assets of the contingent payment rights trust) realize income attributable
to its pro rata share of the payments received by the contingent payment rights
trust without regard to whether those payments have been distributed to the
holder. Following the effective time of the Washington Mutual merger, the assets
of the contingent payment rights trust will consist of the commitment agreement,
rights to apply amounts in the expense fund to forbearance litigation and trust
related expenses and any other amounts raised by the trust to fund expenses. For
federal income tax purposes, the contingent payment rights trust intends to
treat the expense fund as an asset of Washington Mutual, and to treat any
amounts paid out of the expense fund as expenditures of Washington Mutual that
do not affect the contingent payment rights trust, except to the extent they
result in reduction in the commitment amount. In the absence of a change in law,
the contingent payment rights trust will file returns and report to holders of
CPR Certificates in a manner consistent with this intention.
Income of the contingent payment rights trust, which will be taxable to
holders whether or not distributed, will include income attributable to the
commitment as well as income from the temporary investment of proceeds of the
commitment by the contingent payment rights trust (including proceeds that are
retained by the contingent payment rights trust for a period of [ONE] year or
more as part of the retained amount).
CHARACTERIZATION OF THE COMMITMENT; SECTION 483
As described above, for federal income tax purposes, the CPR Certificates
are equivalent to an ownership interest in the commitment. The contingent
payment rights trust intends, under current law, that the payments made under
the commitment, to the extent attributable to CPR Certificates issued to Bank
United Corp. stockholders in the Bank United Corp. reorganization, will be
treated as payments under a contract for the sale or exchange of Bank United
Corp. common stock that are subject to Section 483 of the Internal Revenue Code.
Given the wholly contingent nature of the commitment, it is not anticipated that
the commitment will be treated as a debt instrument for purposes of the original
issue discount provisions of the Internal Revenue Code.
Under Section 483 of the Internal Revenue Code, a holder of a CPR
Certificate will not be required to include any amount in income with respect to
the certificate until payments on the commitment are received by the contingent
payment rights trust (or in some circumstances described below, until the right
to those payments becomes fixed), or the CPR Certificate is sold. When a payment
is received on the commitment or the certificate is sold, a portion of the
amount received will be treated under Section 483 as interest income that is
ordinary income to the holder. The interest amount will equal the excess of the
amount received over its present value as of the effective date of the
Washington Mutual merger, calculated using as the discount rate the applicable
federal rate. The applicable federal rate is a rate reflecting an average of
market yields on Treasury debt obligations for different ranges of maturities
that is published monthly by the Internal Revenue Service. The relevant
applicable federal rate will be the lower of (1) the lowest applicable federal
rate in effect during the 3-month period ending with the month which includes
the date on which the agreement was signed or (2) the lowest applicable federal
rate in effect during the 3-month period ending with the month which includes
the effective date of the Washington Mutual merger; in each case, the maturity
range of the relevant applicable federal rate will correspond to the period from
the effective date of the Washington Mutual merger to the date the amount is
received or deemed received. Where a payment is due more than six months after
it is fixed, (1) the payment will be discounted back to the date when it became
fixed, using a discount rate equal to the applicable federal rate that would
apply under Section 483 to a payment on the initial commitment that is made when
the fixed payment is due, (2) the discount on the deferred payment is treated as
interest accruing over the period of deferral and (3) the discounted amount is
divided between interest and principal under Section 483 as if it were paid in
cash on the
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date it became fixed. The Section 483 interest must be included in income by a
holder under its regular method of accounting (e.g., the accrual method or the
cash method).
The calculation of interest income realized by a holder under Section 483
does not depend on the period for which the holder has held its CPR
Certificates. Accordingly, a holder who bought certificates after the effective
date of the Washington Mutual merger may be treated as receiving interest under
Section 483 that includes interest for the period from the effective date of the
Washington Mutual merger to the date of the holder's purchase of the CPR
Certificates. Although there are no specific rules addressing the issue under
current law, it is reasonable to assume that a purchaser of CPR Certificates
would be permitted to treat the portion of the purchase price that is treated as
interest to the seller under Section 483 as a payment of accrued interest that
may be offset against the portion of any amount received by the purchaser that
is treated as interest under Section 483.
SALE OF CERTIFICATES
Upon a sale of a CPR Certificate, a holder will recognize gain or loss equal
to the difference between the amount realized on the sale, net of imputed
interest under Section 483, and the holder's adjusted tax basis in the
certificate. Any such gain or loss will be treated as capital gain or loss
(which will be long-term if the holder has held the certificates for more than
one year). Long-term capital gain of a non-corporate holder is generally subject
to a maximum tax rate of 20%.
RECEIPT OF PAYMENTS ON THE COMMITMENT
When a payment is received on the commitment by the contingent payment
rights trust, a holder of CPR Certificates will recognize gain equal to the
difference between the amount of the payment allocated to the CPR Certificates,
net of imputed interest under Section 483, and the portion of the holder's basis
in the certificates that is allocable to such payment. If multiple payments may
be received on the commitment, the holder may be required to allocate its basis
among those payments. The method for making such allocation is unclear. If a
holder receives a payment that is less than its basis in the commitment, the
holder may not be allowed a loss until it is determined that no further payments
will be made. Where the receipt of a payment terminates all rights of the
contingent payment rights trust under the commitment, any gain or loss
attributable to the payment generally would be capital gain or loss under
Section 1234A of the Internal Revenue Code. It is not clear whether the same
treatment would apply to a partial payment.
LACK OF A CASH RECOVERY
If identifiable events occur which establish the worthlessness of the CPR
Certificates, a certificate holder would be entitled to deduct as a capital
loss, in the year of such identifiable event, such holder's adjusted tax basis
in its certificates.
OTHER CHARACTERIZATIONS
Although unlikely, the Internal Revenue Service could take the position that
amounts drawn from the expense fund to pay expenses should be treated as a
payment by Bank United Corp. or its successor to the contingent payment rights
trust that is applied to pay expenses of the contingent payment rights trust.
Such a payment could potentially be treated as current income to the contingent
payment rights trust or as a deemed loan. Such a deemed loan would be repayable,
with interest, solely out of future payments on the commitment. Under this
characterization, reductions in the commitment amount paid to the contingent
payment rights trust that are attributable to the reimbursement of such expenses
or a related interest factor would be treated as additional amounts on the
commitment that are paid to the contingent payment rights trust and applied by
it to make payments of principal and interest on the deemed loan. Deductions
would be allowed for interest deemed paid only to the extent
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permitted under the general rules of the Internal Revenue Code. Further, if the
deemed loan is not repaid, the contingent payment rights trust could have
discharge of indebtedness income when the loan is deemed to be discharged. In
addition, any holders of CPR Certificates that are pension plans or other
tax-exempt organizations subject to the tax on unrelated business taxable income
may be required to treat income attributable to the portion of the commitment
that is considered debt financed as unrelated business taxable income.
FUNDING OF ADDITIONAL EXPENSES
The declaration of trust of the contingent payment rights trust permits the
issuance of additional CPR Certificates that represent pro rata interests in the
contingent payment rights trust and permits borrowings to pay expenses so long
as the indebtedness represents debt of the contingent payment rights trust (and
not an ownership interest) for federal income tax purposes. Any such issuance of
additional certificates will be treated as a sale by holders of existing
certificates of a pro rata interest in the commitment corresponding to the
interest in the commitment allocated to the newly issued certificates. Any
borrowing will have the consequences described in "--Other Characterizations"
above.
BACKUP WITHHOLDING AND INFORMATION REPORTING
A CPR Certificate holder may be subject to a backup withholding tax of 31%
on the receipt of proceeds of a sale, exchange, redemption or satisfaction of
the CPR Certificates. In general, backup withholding will only apply if a holder
fails to comply with certain identification requirements. Backup withholding is
not an additional tax and may be claimed as a credit against the U.S. federal
income tax liability of a holder, provided that the required information is
furnished to the Internal Revenue Service. Holders should consult their tax
advisors regarding their qualification for exemption from backup withholding and
the procedure for obtaining any applicable exemption. Payments of amounts
treated as interest under Section 483 will also be subject to information
reporting unless an exemption applies.
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VALIDITY OF THE WASHINGTON MUTUAL COMMON STOCK AND PIES
The validity of the shares of Washington Mutual common stock and PIES which
will be issued in connection with the Washington Mutual merger and certain legal
matters in connection with that merger will be passed upon for Washington Mutual
by Heller Ehrman White & McAuliffe, LLP, Seattle, Washington. As of
, 2000, individual attorneys at the firm who participated in the
transaction owned an aggregate of shares of Washington Mutual common
stock.
EXPERTS
The consolidated financial statements of Washington Mutual incorporated in
this proxy statement/ prospectus by reference from its Annual Report on
Form 10-K for the year ended December 31, 1999, have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing. Insofar as the report of Deloitte & Touche LLP relates to the amounts
included for H.F. Ahmanson & Company and its subsidiaries for 1997, it is based
solely on the report of KPMG LLP, independent auditors; such report being
incorporated by reference herein and has been incorporated in reliance upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of Bank United Corp. as of
September 30, 1999 and for the year then ended have been incorporated by
reference herein in reliance upon the report of KPMG LLP, independent certified
public accountants, incorporated by reference herein, and upon the authority of
said firm as experts in accounting and auditing. The report of KPMG LLP includes
an explanatory paragraph which states that such firm has also audited the
combination of the consolidated financial statements for the years ended
September 1998 and 1997, after restatement for the 1999 pooling of interests of
Bank United Corp. and subsidiaries and Texas Central Bancshares, Inc. and
subsidiaries. Insofar as the report of KPMG LLP relates to the amounts included
for: (a) Bank United Corp. and subsidiaries as of September 30, 1998 and 1997,
and for the years then ended, prior to the restatement for the
pooling-of-interests with Texas Central Bancshares, Inc. and subsidiaries, it is
based solely on the report of Deloitte & Touche LLP, independent certified
public accountants; and (b) Texas Central Bancshares, Inc. and subsidiaries for
December 31, 1998 and 1997 and for the years then ended, it is based solely on
the report of Payne Falkner Smith & Jones, P.C., independent certified public
accountants; such reports being incorporated by reference herein and have been
incorporated in reliance upon the reports of such firms given upon their
authority as experts in accounting and auditing.
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WHERE YOU CAN FIND MORE INFORMATION
Both Washington Mutual and Bank United Corp. file annual, quarterly and
special reports, proxy statements and other information with the Securities and
Exchange Commission. You may read and copy these reports and other information
at the public reference facilities maintained by the SEC at:
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Judiciary Plaza Citicorp Center Seven World Trade Center
Room 1024 500 West Madison Street 13th Floor
450 Fifth Street, N.W. Suite 1400 New York, New York 10048
Washington, D.C. 20549 Chicago, Illinois 60661-2511
</TABLE>
You may also obtain copies of these documents by mail from the public
reference room of the SEC at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. In
addition, Washington Mutual and Bank United Corp. file reports and other
information with the SEC electronically, and the SEC maintains a web site
located at http://www.sec.gov containing this information. Washington Mutual's
common stock is listed on the New York Stock Exchange and Washington Mutual's
reports and other information may also be inspected at the offices of the New
York Stock Exchange at 20 Broad Street, New York, New York 10005. Bank United
Corp.'s common stock is quoted on the Nasdaq National Market and Bank United
Corp.'s reports and other information may also be inspected at the offices of
Nasdaq Operations, 1735 K Street, N.W., Washington, D.C. 20006.
Washington Mutual has filed a registration statement on Form S-4 to register
with the SEC up to 46,972,900 shares of Washington Mutual common stock and
2,000,000 Washington Mutual PIES (including the related shares of Series H
preferred stock, stock purchase contracts and up to 3,472,400 shares of common
stock underlying the PIES) that may be issued in the merger. This proxy
statement/ prospectus is a part of that registration statement. As permitted by
the SEC rules, this proxy statement/ prospectus does not contain all of the
information included in the registration statement or in the exhibits or
schedules to the registration statement. You may read and copy the registration
statement, including any amendments, schedules and exhibits at the addresses set
forth above. Statements contained in this proxy statement/prospectus as to the
contents of any contract or other document referred to in this document include
all material terms of the contracts or other documents but are not necessarily
complete. In each case, you should refer to the copy of the applicable contract
or other document filed as an Exhibit to the registration statement,
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows Washington Mutual and Bank United Corp. to incorporate
certain information into this proxy statement/prospectus by reference to other
information that has been filed with the SEC. The information incorporated by
reference is deemed to be part of this proxy statement/ prospectus, except for
any information that is superseded by information in this proxy statement/
prospectus. The documents that are incorporated by reference contain important
information about the companies and you should read this proxy
statement/prospectus together with any documents incorporated by reference.
This proxy statement/prospectus incorporates by reference the following
documents that have previously been filed with the SEC by Washington Mutual
(File No. 001-14667):
- Annual Report on Form 10-K for the year ended December 31, 1999;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
- Quarterly Report on Form 10-Q for the quarter ended June 30, 2000;
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- Current Report on Form 8-K dated April 4, 2000;
- Current Report on Form 8-K dated April 21, 2000;
- Current Report on Form 8-K dated July 21, 2000;
- Current Report on Form 8-K dated August 21, 2000; and
- 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 this description.
This proxy statement/prospectus also incorporates by reference the following
documents that have previously been filed with the SEC by Bank United Corp.
(File No. 001-15227):
- Annual Report on Form 10-K for the year ended September 30, 1999;
- Quarterly Report on Form 10-Q for the quarter ended December 31, 1999;
- Quarterly Report on Form 10-Q for the quarter ended March 31, 2000;
- Quarterly Report on Form 10-Q for the quarter ended June 30, 2000;
- Current Report on Form 8-K dated August 28, 2000;
- the description of Bank United Corp. PIES set forth in Bank United Corp.'s
registration statement on Form 8-A filed on August 9, 1999, and any
amendment or report filed for the purpose of updating this description;
and
- the description of Bank United Corp. common stock set forth in Bank United
Corp.'s registration statement on Form 8-A filed on July 12, 1996, and any
amendment or report filed for the purpose of updating this description.
In addition, Washington Mutual and Bank United Corp. are incorporating by
reference any documents they may file under the Exchange Act after the date of
this proxy statement/prospectus and prior to the date of the special meeting of
Bank United Corp. stockholders.
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
WASHINGTON MUTUAL, INC.
AND
BANK UNITED CORP.
DATED AS OF AUGUST 18, 2000
<PAGE>
TABLE OF CONTENTS
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1. DEFINITIONS........................................................ A-1
1.1 Defined Terms............................................... A-1
1.2 Other Definitional Provisions............................... A-3
2. THE MERGER......................................................... A-3
2.1 The Merger.................................................. A-3
2.2 Effective Time.............................................. A-3
2.3 Effects of the Merger....................................... A-3
2.4 Closing of the Merger....................................... A-3
2.5 Conversion of Bank United Corp. Capital Stock............... A-4
2.6 Dissenting Shares........................................... A-5
2.7 Washington Mutual Common Stock; Washington Mutual Preferred
Stock....................................................... A-5
2.8 Options..................................................... A-5
2.9 Articles of Incorporation................................... A-6
2.10 Bylaws...................................................... A-6
2.11 Board of Directors.......................................... A-6
2.12 Tax Consequences............................................ A-6
2.13 Stock Option Agreement...................................... A-6
2.14 Reservation of Right to Revise Structure.................... A-6
3. EXCHANGE OF SHARES................................................. A-7
3.1 Washington Mutual to Make Shares Available.................. A-7
3.2 Exchange of Shares.......................................... A-7
4. REPRESENTATIONS AND WARRANTIES OF BANK UNITED CORP................. A-9
4.1 Corporate Organization...................................... A-9
4.2 Capitalization.............................................. A-10
4.3 Authority; No Violation..................................... A-11
4.4 Consents and Approvals...................................... A-12
4.5 Reports..................................................... A-12
4.6 Financial Statements........................................ A-13
4.7 Broker's Fees............................................... A-13
4.8 Absence of Certain Changes or Events........................ A-13
4.9 Legal Proceedings........................................... A-14
4.10 Taxes....................................................... A-14
4.11 Employees; Employee Benefit Plans........................... A-15
4.12 SEC Reports................................................. A-16
4.13 Compliance with Applicable Law.............................. A-17
4.14 Certain Contracts........................................... A-17
4.15 Agreements with Regulatory Agencies......................... A-17
4.16 Undisclosed Liabilities..................................... A-18
4.17 Anti-takeover Provisions.................................... A-18
4.18 Bank United Corp. Information............................... A-18
4.19 Title to Property........................................... A-18
4.20 Insurance................................................... A-19
4.21 Environmental Liability..................................... A-19
4.22 Opinion of Financial Advisor................................ A-20
4.23 Patents, Trademarks, Etc.................................... A-20
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4.24 Loan Matters................................................ A-20
4.25 Community Reinvestment Act Compliance....................... A-21
4.26 Labor Matters............................................... A-21
5. REPRESENTATIONS AND WARRANTIES OF WASHINGTON MUTUAL................ A-21
5.1 Corporate Organization...................................... A-21
5.2 Capitalization.............................................. A-21
5.3 Authority; No Violation..................................... A-22
5.4 Consents and Approvals...................................... A-23
5.5 Reports..................................................... A-23
5.6 Financial Statements........................................ A-23
5.7 Broker's Fees............................................... A-24
5.8 Absence of Certain Changes or Events........................ A-24
5.9 Legal Proceedings........................................... A-24
5.10 Taxes....................................................... A-24
5.11 SEC Reports................................................. A-24
5.12 Compliance with Applicable Law.............................. A-25
5.13 Agreements with Regulatory Agencies......................... A-25
5.14 Undisclosed Liabilities..................................... A-25
5.15 Rights Agreement; Anti-takeover Provisions.................. A-25
5.16 Washington Mutual Information............................... A-25
5.17 Environmental Liability..................................... A-26
5.18 Opinion of Financial Advisor................................ A-26
5.19 Community Reinvestment Act Compliance....................... A-26
6. COVENANTS RELATING TO CONDUCT OF BUSINESS.......................... A-26
6.1 Conduct of Business Prior to the Effective Time............. A-26
6.2 Bank United Corp. Forbearances.............................. A-27
6.3 No Fundamental Washington Mutual Changes.................... A-29
7. ADDITIONAL AGREEMENTS.............................................. A-30
7.1 Regulatory Matters.......................................... A-30
7.2 Access to Information....................................... A-30
7.3 Stockholder Approval........................................ A-31
7.4 Legal Conditions to Merger.................................. A-32
7.5 Affiliates.................................................. A-32
7.6 Stock Exchange Listing...................................... A-32
7.7 Employees; Employee Benefit Plans........................... A-32
7.8 Indemnification; Directors' and Officers' Insurance......... A-33
7.9 Additional Agreements....................................... A-35
7.10 Advice of Changes........................................... A-35
7.11 Subsequent Interim and Annual Financial Statements.......... A-35
7.12 CPR Trust................................................... A-35
7.13 Reorganization.............................................. A-36
7.14 Exemption from Liability Under Section 16(b)................ A-36
7.15 Merger...................................................... A-36
</TABLE>
A-iii
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8. CONDITIONS PRECEDENT............................................... A-36
8.1 Conditions to Each Party's Obligation to Effect the
Merger...................................................... A-36
8.2 Conditions to Obligations of Washington Mutual.............. A-37
8.3 Conditions to Obligations of Bank United Corp............... A-38
9. TERMINATION AND AMENDMENT.......................................... A-39
9.1 Termination................................................. A-39
9.2 Effect of Termination....................................... A-40
9.3 Amendment................................................... A-41
9.4 Extension; Waiver........................................... A-42
10. GENERAL PROVISIONS................................................. A-42
10.1 Nonsurvival of Representations, Warranties and Agreements... A-42
10.2 Expenses.................................................... A-42
10.3 Notices..................................................... A-42
10.4 Interpretation.............................................. A-43
10.5 Counterparts................................................ A-43
10.6 Entire Agreement............................................ A-43
10.7 Governing Law............................................... A-43
10.8 Severability................................................ A-43
10.9 Publicity................................................... A-44
10.10 Assignment; Third Party Beneficiaries....................... A-44
</TABLE>
EXHIBITS
Exhibit A -- Bank United Corp. Executives
Exhibit 2.12 -- Stock Option Agreement
Exhibit 4.4 -- Trust Agreement
Exhibit 6.2(e) -- Bonuses for Certain Employees
Exhibit 8.2(f) -- Commitment Agreement
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of August 18, 2000 (as amended,
supplemented or otherwise modified from time to time, this "AGREEMENT"), is
entered into by and between WASHINGTON MUTUAL, INC., a Washington corporation
("WASHINGTON MUTUAL") and BANK UNITED CORP., a Delaware corporation ("BANK
UNITED CORP.").
The respective Boards of Directors of each of Washington Mutual and Bank
United Corp. have determined that it is in the best interests of their
respective companies and stockholders to consummate the business combination
transaction provided for herein. It is the intention of the parties to this
Agreement that the business combination contemplated hereby be treated as a
"reorganization" within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "CODE").
Simultaneously with the execution of this Agreement, Washington Mutual is
entering into employment agreements and litigation trustee agreements, as
applicable, with each of the Bank United Corp. executives listed on EXHIBIT A
hereto.
Therefore, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
1. DEFINITIONS
1.1 DEFINED TERMS. The following terms shall have the meanings defined for
such terms in the Sections set forth below:
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TERM SECTION
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401(k) Plan 7.7(a)
Agreement.................................... Preamble
Articles of Amendment........................ 4.4
Articles of Merger........................... 2.2
Association Merger........................... 4.3(a)
Bank United Corp............................. Preamble
Bank United Corp. Capital Stock.............. 2.5(b)
Bank United Corp. Common Stock............... 2.5(a)
Bank United Corp. Contract................... 4.14(a)
Bank United Corp. Disclosure Schedule........ 4.2(a)
Bank United Corp. Option..................... 2.8
Bank United Corp. PIES....................... 2.5(b)
Bank United Corp. Preferred Stock............ 4.2(a)
Bank United Corp. Reports.................... 4.12
Bank United Corp. Stock Option Plans......... 2.8
Business Day................................. 2.4
Certificate of Merger........................ 2.2
Certificates................................. 2.5(d)
Claims....................................... 7.8(a)
Class B Common Stock......................... 4.2(a)
Closing...................................... 2.4
Closing Date................................. 2.4
Code......................................... Preamble
Commitment................................... 8.2(h)
Common Certificate........................... 2.5(c)
Confidentiality Agreement(s)................. 7.2(c)
Controlled Entity............................ 4.2(b)
CPR Certificates............................. 4.4
CPR Trust.................................... 4.4
CPR Trust Registration Statement............. 4.4
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION
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<S> <C>
CRA.......................................... 4.25
Delaware Secretary........................... 2.2
DGCL......................................... 2.1
Dissenting Shares............................ 2.6
DPC Shares................................... 2.5(e)
Effective Time............................... 2.2
Environmental Laws........................... 4.21
ERISA........................................ 4.11(a)
ERISA Affiliate.............................. 4.11(a)
Exchange Act................................. 4.6
Exchange Agent............................... 3.1
Exchange Fund................................ 3.1
Exchange Ratio............................... 2.5(a)
FDIC......................................... 4.1(d)
FHLB......................................... 4.1(d)
Freddie Mac.................................. 4.24(d)
GAAP......................................... 4.1(a)
Ginnie Mae................................... 4.24(d)
Governmental Entity.......................... 4.4
HOLA......................................... 4.1(a)
Holdings..................................... 4.1(c)
HUD.......................................... 4.24(d)
Indemnified Parties.......................... 7.8(a)
Initial Termination Fee...................... 9.2(b)
Injunction................................... 8.1(f)
Liens........................................ 4.2(b)
Litigation................................... 4.4
Loans........................................ 4.23(a)
Material Adverse Effect...................... 4.1(a)
Merger....................................... 2.1
Merger Consideration......................... 2.13
NYSE......................................... 3.2(e)
OTS.......................................... 4.1(d)
PBGC......................................... 4.11(c)
PIES Certificate............................. 2.5(d)
Plans........................................ 4.11(a)
Proxy Statement/Prospectus................... 4.4
Regulatory Agreement......................... 4.15
Representatives.............................. 6.2(f)
Requisite Regulatory Approvals............... 8.1(c)
S-4.......................................... 4.4
SAIF......................................... 4.1(d)
SEC.......................................... 4.4
Second Merger................................ 4.3(a)
Securities Act............................... 4.12
Stock Option Agreement....................... 2.12
Subsequent Termination Fee................... 9.2(b)
Subsidiary................................... 2.5(a)
Surviving Company............................ 2.1
Takeover Proposal............................ 6.2(f)
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION
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<S> <C>
Tax Returns.................................. 4.10(c)
Taxes........................................ 4.10(b)
Termination Fee.............................. 9.2(b)
Trust Account Shares......................... 2.5(e)
Trust Agreement.............................. 4.4
Trust Indenture Act.......................... 7.1(b)
VA........................................... 4.24(d)
Washington Mutual............................ Preamble
Washington Mutual Capital Stock.............. 2.5(b)
Washington Mutual Common Stock............... 2.5(a)
Washington Mutual Disclosure Schedule........ 5.2
Washington Mutual PIES....................... 2.5(b)
Washington Mutual Regulatory Agreement....... 5.13
Washington Mutual Reports.................... 5.11
Washington Mutual Rights..................... 2.5(a)
Washington Mutual Rights Agreement........... 5.2
Washington Secretary......................... 2.2
WBCA......................................... 2.1
</TABLE>
1.2 OTHER DEFINITIONAL PROVISIONS. The meanings given to terms defined
herein shall be equally applicable to both the singular and plural forms of such
terms.
2. THE MERGER
2.1 THE MERGER. Subject to the terms and conditions of this Agreement, in
accordance with the Washington Business Corporation Act (the "WBCA") and the
Delaware General Corporation Law (the "DGCL") at the Effective Time (as defined
in Section 2.2 hereof), Bank United Corp. shall merge (the "MERGER") with and
into Washington Mutual. Washington Mutual shall be the surviving corporation
(hereinafter sometimes called the "SURVIVING COMPANY") in the Merger, and shall
continue its corporate existence under the laws of the State of Washington. The
name of the Surviving Company shall be Washington Mutual, Inc. Upon consummation
of the merger, the separate corporate existence of Bank United Corp. shall
terminate.
2.2 EFFECTIVE TIME. The Merger shall become effective as set forth in the
articles of merger (the "ARTICLES OF MERGER") which shall be filed with the
Secretary of State of the State of Washington (the "WASHINGTON SECRETARY") and
in the certificate of merger (the "CERTIFICATE OF MERGER") which shall be filed
with the Secretary of State of the State of Delaware (the "DELAWARE SECRETARY"),
on the Closing Date (as defined in Section 2.4 hereof). The term "EFFECTIVE
TIME" shall mean the time on the Closing Date when the Merger becomes effective,
as set forth in the Articles of Merger and the Certificate of Merger.
2.3 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
shall have the effects set forth in Chapter 11 of the WBCA and Section 259 of
the DGCL.
2.4 CLOSING OF THE MERGER. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "CLOSING") will take place at
9:00 a.m. Pacific time, on a date to be specified by the parties, which shall be
the first Business Day which is at least five Business Days after the
satisfaction or waiver (subject to applicable law) of the latest to occur of the
conditions set forth in Section 8 hereof, other than conditions which by their
terms are to be satisfied at Closing, or such other date or time as the parties
may mutually agree (the "CLOSING DATE"). For purposes of this Agreement, a
"BUSINESS DAY" shall mean any day that is not a Saturday, a Sunday or other day
on which the office of the Washington Secretary or the Delaware Secretary is
closed.
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2.5 CONVERSION OF BANK UNITED CORP. CAPITAL STOCK. At the Effective Time,
without any action on the part of Washington Mutual, Bank United Corp. or the
holder of any of the shares of common stock of Bank United Corp., the Merger
shall be effected in accordance with the following terms:
(a) Each share of the Class A common stock, par value $0.01 per share,
of Bank United Corp. (the "BANK UNITED CORP. COMMON STOCK") issued and
outstanding immediately prior to the Effective Time (other than Dissenting
Shares (as defined in Section 2.6), if any, and shares of Bank United Corp.
Common Stock held (x) in Bank United Corp.'s treasury or (y) directly by
Washington Mutual (except for Trust Account Shares and DPC Shares, as such
terms are defined below)) shall be converted into the right to receive 1.3
shares (the "EXCHANGE RATIO") of common stock, no par value, of Washington
Mutual ("WASHINGTON MUTUAL COMMON STOCK"), together with the number of
rights ("WASHINGTON MUTUAL RIGHTS") issued pursuant to the Washington Mutual
Rights Agreement (as defined in Section 5.2 hereof) associated therewith.
For purposes of this Agreement, "SUBSIDIARY" means, with respect to any
person, any corporation, partnership, joint venture, limited liability
company or other entity that is consolidated with such person for financial
reporting purposes.
(b) Each share of Bank United Corp.'s 8% Corporate Premium Income Equity
Securities (including the shares of Redeemable Preferred Stock Series B of
Bank United Corp. issued and outstanding in connection therewith, the "BANK
UNITED CORP. PIES") issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive one share of
Washington Mutual's 8% Corporate Premium Income Equity Securities (including
the shares of preferred stock of Washington Mutual to be issued and
outstanding in connection therewith, the "WASHINGTON MUTUAL PIES"). The
terms of the Washington Mutual PIES shall be substantially the same as the
terms of the Bank United Corp. PIES. For purposes of this Agreement,
(i) the Bank United Corp. Common Stock and Bank United Corp. PIES are
sometimes collectively referred to herein as the "BANK UNITED CORP. CAPITAL
STOCK" and (ii) the Washington Mutual Common Stock and Washington Mutual
PIES and sometimes collectively referred to herein as the "WASHINGTON MUTUAL
CAPITAL STOCK."
(c) All of the shares of Bank United Corp. Common Stock converted into
the right to receive the Washington Mutual Common Stock pursuant to this
Section 2.5 shall no longer be outstanding and shall automatically be
cancelled and shall cease to exist as of the Effective Time, and each
certificate (each a "COMMON CERTIFICATE") previously representing any such
shares shall thereafter represent solely the right to receive (i) a
certificate representing the number of whole shares of Washington Mutual
Common Stock and (ii) the cash in lieu of fractional shares into which the
shares of Bank United Corp. Common Stock represented by such Common
Certificate have been converted pursuant to this Section 2.5 and
Section 3.2 hereof. Common Certificates previously representing shares of
Bank United Corp. Common Stock shall be exchanged for certificates
representing shares of Washington Mutual Common Stock upon the surrender of
such Common Certificates in accordance with Section 3.2 hereof, without any
interest thereon.
(d) All of the shares of Bank United Corp. PIES converted into the right
to receive Washington Mutual PIES pursuant to this Section 2.5 shall no
longer be outstanding and shall automatically be cancelled and shall cease
to exist as of the Effective Time, and each certificate (each a "PIES
CERTIFICATE," and collectively with the Common Certificates, the
"CERTIFICATES") previously representing any such shares of Bank United Corp.
PIES shall thereafter represent the right to receive a certificate
representing the number of shares of corresponding Washington Mutual PIES
into which the shares of Bank United Corp. PIES represented by such PIES
Certificate have been converted pursuant to this Section 2.5. PIES
Certificates previously representing shares of Bank United Corp. PIES shall
be exchanged for certificates representing shares of corresponding
Washington Mutual PIES issued in consideration therefor upon the surrender
of such PIES Certificates in accordance with Section 3.2 hereof, without any
interest thereon.
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(e) At the Effective Time, all shares of Bank United Corp. Capital Stock
that are owned by Bank United Corp. as treasury stock and all shares of Bank
United Corp. Capital Stock that are owned directly or indirectly by
Washington Mutual or Bank United Corp. or any of their respective
Subsidiaries (other than shares of Bank United Corp. Capital Stock held
directly or indirectly in trust accounts, managed accounts and the like or
otherwise held in a fiduciary or nominee capacity that are beneficially
owned by third parties (any such shares being referred to herein as "TRUST
ACCOUNT SHARES") and other than any shares of Bank United Corp. Capital
Stock held by Washington Mutual or Bank United Corp. or any of their
respective Subsidiaries in respect of a debt previously contracted (any such
shares of Bank United Corp. Capital Stock being referred to herein as "DPC
SHARES")) shall be cancelled and shall cease to exist and no capital stock
or warrants of Washington Mutual or other consideration shall be delivered
in exchange therefor.
(f) If prior to the Effective Time the outstanding shares of Bank United
Corp. Common Stock or the outstanding shares of Washington Mutual Common
Stock shall have been increased, decreased, changed into or exchanged for a
different number or kind of shares or securities as a result of a
reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split, or other similar change in Bank United Corp.'s
capitalization or Washington Mutual's capitalization, respectively, then an
appropriate and proportionate adjustment shall be made to the Exchange
Ratio.
2.6 DISSENTING SHARES. Notwithstanding anything to the contrary contained
in this Agreement, the shares of Bank United Corp. Common Stock issued and
outstanding immediately prior to the Effective Time held by holders (if any) who
have not voted in favor of the Merger or consented thereto in writing and who
are eligible to and who have demanded appraisal rights (if any) with respect
thereto in accordance with Section 262 of the DGCL and, as of the Effective
Time, shall not have failed to perfect or shall not have effectively withdrawn
or lost their rights to appraisal and payment (if any) under Section 262 of the
DGCL (the "DISSENTING SHARES") shall not be converted into the right to receive
shares of Washington Mutual Common Stock as described in Section 2.5, but
holders of such shares shall instead be entitled to receive payment of the
appraised value of such Dissenting Shares in accordance with the provisions of
such Section 262, except that any Dissenting Shares held by a holder which shall
have failed to perfect or shall have effectively withdrawn or lost its right to
appraisal and payment under Section 262 of the DGCL shall thereupon be deemed to
have been converted into the right to receive shares of Washington Mutual Common
Stock as described in Section 2.5, without interest thereon. In addition, to the
extent required under the DGCL, holders of Dissenting Shares which have
perfected and have not effectively withdrawn or lost their rights to appraisal
and payment under Section 262 of the DGCL shall be required to surrender all CPR
Certificates relating to the Dissenting Shares. Bank United Corp. shall give
Washington Mutual (i) prompt notice of any written demands for appraisal of any
shares, attempted withdrawals of such demands, and any other instruments served
pursuant to the DGCL received by Bank United Corp. relating to stockholders'
rights of appraisal and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the DGCL. Bank United
Corp. shall not, except with the prior written consent of Washington Mutual,
voluntarily make any payment with respect to any demands for appraisals of
capital stock of Bank United Corp., offer to settle or settle any such demands
or approve any withdrawal of any such demands.
2.7 WASHINGTON MUTUAL COMMON STOCK; WASHINGTON MUTUAL PREFERRED STOCK. At
and after the Effective Time, each share of Washington Mutual Common Stock and
each share of any preferred stock of Washington Mutual issued and outstanding
immediately prior to the Effective Time shall remain an issued and outstanding
share of common stock or preferred stock, as the case may be, of Washington
Mutual and shall not be affected by the Merger.
2.8 OPTIONS. At the Effective Time, each option granted by Bank United
Corp. to purchase shares of Bank United Corp. Common Stock (each a "BANK UNITED
CORP. OPTION") which is outstanding
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and unexercised immediately prior thereto shall cease to represent a right to
acquire shares of Bank United Corp. Common Stock and shall be converted
automatically into (i) the right to receive, upon exercise of the option, one
CPR Certificate for each share of Bank United Corp. Common Stock that would have
been issuable upon exercise in full of such Bank United Corp. Option and
(ii) an option to purchase shares of Washington Mutual Common Stock in an amount
and at an exercise price determined as provided below (and otherwise subject to
the terms of the Bank United Corp. 1999 Stock Incentive Plan, as amended to
date, the Bank United Corp. 1996 Stock Incentive Plan, as amended to date, the
Bank United Corp. 2000 Stock Incentive Plan, as amended to date, the Executive
Management Compensation Program, as amended to date or the Bank United Corp.
Director Stock Plan, as amended to date, as applicable (collectively, the "BANK
UNITED CORP. STOCK OPTION PLANS"), and the agreements evidencing grants
thereunder):
(a) the number of shares of Washington Mutual Common Stock to be subject
to the new option shall be equal to the product of the number of shares of
Bank United Corp. Common Stock subject to the original option and the
Exchange Ratio, provided that any fractional shares of Washington Mutual
Common Stock resulting from such multiplication shall be rounded to the
nearest share; and
(b) the exercise price per share of Washington Mutual Common Stock under
the new option shall be equal to the exercise price per share of Bank United
Corp. Common Stock under the original option divided by the Exchange Ratio,
provided that such exercise price shall be rounded to the nearest cent.
In the case of any options which are "incentive stock options" (as defined
in Section 422 of the Code), the exercise price, the number of shares
purchasable pursuant to such options and the terms and conditions of exercise of
such options shall be determined in order to comply with Section 424(a) of the
Code. The duration and other terms of each new option shall be the same as the
applicable original option except that all references to Bank United Corp. shall
be deemed to be references to Washington Mutual.
2.9 ARTICLES OF INCORPORATION. At the Effective Time, the Articles of
Incorporation of Washington Mutual, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving Company,
until thereafter amended in accordance with applicable law.
2.10 BYLAWS. At the Effective Time, the Bylaws of Washington Mutual, as in
effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Company until thereafter amended in accordance with applicable law.
2.11 BOARD OF DIRECTORS. The directors of Washington Mutual immediately
prior to the Effective Time shall continue to be the directors of the Surviving
Company, each to hold office in accordance with the Articles of Incorporation
and Bylaws of the Surviving Company, until their respective successors are duly
elected or appointed (as the case may be) and qualified.
2.12 TAX CONSEQUENCES. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization" as that term is used in
Sections 354 and 361 of the Code.
2.13 STOCK OPTION AGREEMENT. As an inducement to Washington Mutual to
continue to pursue the transactions contemplated by this Agreement, Bank United
Corp. is granting to Washington Mutual an option pursuant to the Stock Option
Agreement in the form of Exhibit 2.12 hereto (the "STOCK OPTION AGREEMENT").
2.14 RESERVATION OF RIGHT TO REVISE STRUCTURE. Washington Mutual may at
any time change the method of effecting the business combination contemplated by
this Agreement if and to the extent that it deems such a change to be desirable,
including, without limitation, to provide for a merger of Bank United Corp. with
a wholly-owned subsidiary of Washington Mutual; PROVIDED, HOWEVER, that no such
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change shall (A) alter or change the amount or kind of consideration to be
received by holders of Bank United Corp. Capital Stock under this Agreement (the
"MERGER CONSIDERATION"), or (B) adversely affect the anticipated tax
consequences of the Merger to the holders of Bank United Corp. Capital Stock as
a result of receiving the Merger Consideration, or (C) materially impede or
delay consummation of the Merger. In the event Washington Mutual elects to make
such a change, the parties agree to execute appropriate documents to reflect the
change.
3. EXCHANGE OF SHARES
3.1 WASHINGTON MUTUAL TO MAKE SHARES AVAILABLE. At or prior to the
Effective Time, Washington Mutual shall deposit, or shall cause to be deposited,
with either a bank or trust company reasonably acceptable to each of Washington
Mutual and Bank United Corp. or with Washington Mutual's transfer agent (the
"EXCHANGE AGENT"), for the benefit of the holders of Certificates, for exchange
in accordance with this Section 3, certificates representing the shares of
Washington Mutual Common Stock and Washington Mutual PIES and an estimated
amount of cash that may be payable in lieu of any fractional shares (such cash
(plus any additional cash necessary if the estimated amount of cash is
insufficient to pay in lieu of fractional share interests) and, certificates for
shares of Washington Mutual Common Stock and Washington Mutual PIES, together
with any dividends or distributions with respect thereto, being hereinafter
referred to as the "EXCHANGE FUND") to be issued pursuant to Section 2.5 and
paid pursuant to Section 3.2(a) in exchange for outstanding shares of Bank
United Corp. Capital Stock.
3.2 EXCHANGE OF SHARES.
(a) As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record of a Certificate or Certificates a form of
letter of transmittal (which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent) and instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing, as the
case may be, the shares of Washington Mutual Common Stock or Washington Mutual
PIES and cash in lieu of fractional shares of Washington Mutual Common Stock, if
any, into which the shares of Bank United Corp. Capital Stock represented by
such Certificate or Certificates shall have been converted pursuant to this
Agreement. Upon proper surrender of a Certificate for exchange and cancellation
to the Exchange Agent, together with a properly completed letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor, as applicable, (i) a certificate representing that number of
shares of Washington Mutual Common Stock to which such former holder of Bank
United Corp. Common Stock shall have become entitled pursuant to the provisions
of Section 2 hereof, and (ii) a certificate representing that number of shares
of Washington Mutual PIES to which such former holder of Bank United Corp. PIES
shall have become entitled pursuant to the provisions of Section 2 hereof and
(iii) a check representing the amount of cash (if any) payable in lieu of
fractional shares of Washington Mutual Common Stock, which such former holder
has the right to receive in respect of the Common Certificate surrendered
pursuant to the provisions of this Section 3, and the Certificate so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on the cash
payable in lieu of fractional shares.
(b) No dividends or other distributions with a record date after the
Effective Time with respect to Washington Mutual Common Stock or Washington
Mutual PIES shall be paid to the holder of any unsurrendered Certificate until
the holder thereof shall surrender such Certificate in accordance with this
Section 3. After the surrender of a Certificate in accordance with this
Section 3, 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
Common Stock or Washington Mutual PIES represented by such Certificate.
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(c) If any certificate representing shares of Washington Mutual Common Stock
or Washington Mutual PIES is to be issued in the name of other than the
registered holder of the Certificate surrendered in exchange therefor, it shall
be a condition of the issuance thereof that the Certificate so surrendered shall
be properly endorsed (or accompanied by an appropriate instrument of transfer)
and otherwise in proper form for transfer, and that the person requesting such
exchange shall pay to the Exchange Agent in advance any transfer or other taxes
required by reason of the issuance of a certificate representing shares of
Washington Mutual Common Stock or Washington Mutual PIES in the name of and
payment of cash to any person other than the registered holder of the
Certificate surrendered, or required for any other reason relating to such
holder or requesting person, or shall establish to the reasonable satisfaction
of the Exchange Agent that such tax has been paid or is not payable.
(d) At or after the Effective Time, there shall be no transfers on the stock
transfer books of Bank United Corp. of the shares of Bank United Corp. Capital
Stock which were issued and outstanding immediately prior to the Effective Time.
If, after the Effective Time, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be cancelled and
exchanged for certificates representing shares of Washington Mutual Capital
Stock as provided in this Section 3.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Washington Mutual Common
Stock shall be issued upon the surrender for exchange of Common Certificates, no
dividend or distribution with respect to Washington Mutual Common Stock shall be
payable on or with respect to any fractional share, and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights of
a stockholder of Washington Mutual. In lieu of the issuance of any such
fractional share, Washington Mutual shall pay to each former holder of Bank
United Corp. Common Stock who otherwise would be entitled to receive such
fractional share an amount in cash determined by multiplying (i) the average of
the closing prices of Washington Mutual Common Stock on The New York Stock
Exchange ("NYSE") as reported by the Wall Street Journal for the five trading
days immediately preceding the Closing Date by (ii) the fraction of a share of
Washington Mutual Common Stock which such holder would otherwise be entitled to
receive pursuant to Section 2.5 hereof. For purposes of determining any such
fractional share interests, all shares of Bank United Corp. Common Stock
beneficially owned by any Bank United Corp. stockholder shall be combined so as
to calculate the maximum number of shares of Washington Mutual Common Stock
issuable to such holder of Bank United Corp. Common Stock.
(f) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of Bank United Corp. for twelve months after the Effective Time
shall be paid, at the request of Washington Mutual, to Washington Mutual. Any
stockholders of Bank United Corp. who have not theretofore complied with this
Section 3 shall thereafter look only to Washington Mutual for payment of the
shares of Washington Mutual Common Stock, Washington Mutual PIES, cash in lieu
of any fractional shares and unpaid dividends and distributions on the
Washington Mutual Common Stock or Washington Mutual PIES, as the case may be,
deliverable in respect of each share of Bank United Corp. Common Stock or Bank
United Corp. PIES, as the case may be, held by such stockholder at the Effective
Time as determined pursuant to this Agreement, in each case, without any
interest thereon. Notwithstanding anything to the contrary contained herein,
none of Washington Mutual, Bank United Corp., the Exchange Agent or any other
person shall be liable to any former holder of shares of Bank United Corp.
Common Stock or Bank United Corp. PIES, for any amount properly delivered to a
public official pursuant to applicable abandoned property, escheat or similar
laws.
(g) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Washington
Mutual, the posting by such person of a bond in such amount as Washington Mutual
may determine is reasonably necessary as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate the shares of
Washington Mutual Common Stock and cash in lieu of fractional shares or the
Washington Mutual PIES, as the case may be, deliverable in respect thereof
pursuant to this Agreement.
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4. REPRESENTATIONS AND WARRANTIES OF BANK UNITED CORP.
Bank United Corp. hereby represents and warrants to Washington Mutual as
follows:
4.1 CORPORATE ORGANIZATION.
(a) Bank United Corp. is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Bank United Corp. has
the corporate power and authority to own or lease all of its properties and
assets and to carry on its business as it is now being conducted, and is duly
licensed or qualified to do business in each jurisdiction in which the nature of
the business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have nor
reasonably be expected to have a Material Adverse Effect (as defined below) on
Bank United Corp.. As used in this Agreement, the term "MATERIAL ADVERSE EFFECT"
means, with respect to Bank United Corp., Washington Mutual or the Surviving
Corporation, as the case may be, a material adverse effect on the business,
results of operations, financial condition or prospects of such party and its
Subsidiaries taken as a whole or a material adverse effect on such party's
ability to consummate the transactions contemplated hereby on a timely basis;
PROVIDED, HOWEVER, that in determining whether a Material Adverse Effect has
occurred, there shall be excluded any effect on the referenced party the cause
of which is (i) any change in banking, savings association and similar laws,
rules or regulations of general applicability or interpretations thereof by
courts or governmental authorities, (ii) any change in generally accepted
accounting principles ("GAAP") or regulatory accounting requirements applicable
to banks, savings associations, or their holding companies generally, (iii) the
announcement of this Agreement or action or omission of Bank United Corp. or
Washington Mutual or any Subsidiary of either of them taken in accordance with
this Agreement or with the prior written consent of Washington Mutual or Bank
United Corp., as applicable, in contemplation of the transactions contemplated
by this Agreement and (iv) any changes in general economic conditions affecting
banks, savings associations, or their holding companies generally, PROVIDED that
the effect of such changes described in this clause (iv) (including, without
limitation, changes in the interest rates) shall not be excluded to the extent
of the disproportionate impact (if any) they have on such person. Bank United
Corp. is duly registered as a savings and loan holding company under the Home
Owners' Loan Act, as amended ("HOLA"), and qualifies as a savings and loan
holding company of the type described in Section 10(c)(3)(A) of HOLA. The copies
of the Certificate of Incorporation and Bylaws of Bank United Corp. which have
previously been made available to Washington Mutual are true, complete and
correct copies of such documents as in effect as of the date of this Agreement.
(b) Each Subsidiary of Bank United Corp. (i) is duly organized and validly
existing as a corporation or partnership under the laws of its jurisdiction of
organization, (ii) is duly licensed or qualified to do business and is in good
standing in all jurisdictions (whether federal, state, local or foreign) where
its ownership or leasing of property or the conduct of its business requires it
to be so licensed or qualified and in which the failure to be so qualified would
have or would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on Bank United Corp., and (iii) has all
requisite corporate power and authority to own or lease its properties and
assets and to carry on its business as now conducted.
(c) LBW Holdings, Inc. ("HOLDINGS") is duly registered as a savings and loan
holding company under HOLA and qualifies as a savings and loan holding company
of the type described in Section 10(c)(3)(A) of HOLA.
(d) Except for its ownership of Bank United of Texas, Bank United Corp. does
not own any stock or equity interest in any depository institution (as defined
in 12 U.S.C. Section 1813(c)(1)). Bank United of Texas is a qualified thrift
lender pursuant to Section 10(m) of HOLA and its deposits are insured by the
Federal Deposit Insurance Corporation (the "FDIC") through the Savings
Association Insurance
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Fund ("SAIF") to the fullest extent permitted by law. Bank United of Texas is a
member in good standing of the Federal Home Loan Bank ("FHLB") of Dallas. Bank
United of Texas has not been advised by the Office of Thrift Supervision ("OTS")
that it does not qualify as a savings association described in
Section 10(c)(3)(B)(i) of HOLA.
4.2 CAPITALIZATION.
(a) The authorized capital stock of Bank United Corp. consists of 40,000,000
shares of Bank United Corp. Common Stock, 40,000,000 shares of Class B common
stock, par value $0.01 per share, of Bank United Corp. (the "CLASS B COMMON
STOCK") and 10,000,000 shares of preferred stock, par value $0.01 per share, of
Bank United Corp. (the "BANK UNITED CORP. PREFERRED STOCK"). At the close of
business on July 31, 2000, there were 32,476,697 shares of Bank United Corp.
Common Stock outstanding, 2,000,000 shares of Bank United Corp. Redeemable
Preferred Stock Series B (issued in connection with the Bank United Corp. PIES)
outstanding and 21,216 shares of Bank United Corp. Common Stock held in Bank
United Corp.'s treasury. No other shares of Bank United Corp. Common Stock, Bank
United Corp. Preferred Stock or Class B Common Stock were outstanding. As of
July 31, 2000, no shares of Bank United Corp. Common Stock or Bank United Corp.
Preferred Stock were reserved for issuance, except for 4,636,091 shares of Bank
United Corp. Common Stock reserved for issuance upon the exercise of stock
options pursuant to the Bank United Corp. Stock Option Plans and 6,462,862
shares of Bank United Corp. Common Stock reserved for issuance upon exercise of
the Option (as defined in the Stock Option Agreement). All of the issued and
outstanding shares of Bank United Corp. Common Stock have been duly authorized
and validly issued and are fully paid, nonassessable and free of preemptive
rights, with no personal liability attaching to the ownership thereof. As of the
date of this Agreement, except (i) as set forth in Section 4.2(a) of the
disclosure schedule of Bank United Corp. delivered to Washington Mutual
concurrently herewith (the "BANK UNITED CORP. DISCLOSURE SCHEDULE"),
(ii) pursuant to the Option, (iii) pursuant to the Bank United Corp. PIES and
(iv) as set forth elsewhere in this Section 4.2(a), Bank United Corp. does not
have and is not bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of Bank United Corp. Common Stock or Bank United Corp.
Preferred Stock or any other equity securities of Bank United Corp. or any
securities representing the right to purchase or otherwise receive any shares of
Bank United Corp. capital stock (including, without limitation, any rights plan
or agreement). Except as set forth in Section 4.2(a) of the Bank United Corp.
Disclosure Schedule, since July 31, 2000, Bank United Corp. has not issued any
shares of its capital stock or any securities convertible into or exercisable
for any shares of its capital stock, other than upon the exercise of employee
stock options granted prior to such date, as would be permitted under
Section 6.2 or upon the exercise of the Option.
(b) Section 4.2(b) of the Bank United Corp. Disclosure Schedule lists the
name, jurisdiction of incorporation, authorized and outstanding shares of
capital stock and record and beneficial owners of such capital stock for each
entity in which Bank United Corp. beneficially owns or controls, directly or
indirectly, any equity interest (regardless of whether such entity is a
Subsidiary) (a "CONTROLLED ENTITY") that is a Significant Subsidiary (as such
term is defined in Rule 1-02 of Regulation S-X) of Bank United Corp.. Each
Controlled Entity in which Bank United Corp. or any Bank United Corp. Subsidiary
beneficially owns or controls, directly or indirectly, more than 9.9% equity
interest is a legal investment for a unitary savings and loan holding company
and, with respect to those owned by Bank United of Texas, for a federal savings
association. Except as set forth in Section 4.2(b) of the Bank United Corp.
Disclosure Schedule, Bank United Corp. owns, directly or indirectly, all of the
issued and outstanding shares of capital stock of or all other equity interests
in each of Bank United Corp.'s Subsidiaries, free and clear of any liens,
charges, encumbrances, adverse rights or claims and security interests
whatsoever ("LIENS"), and all of such shares are duly authorized and validly
issued and are fully paid, nonassessable and free of preemptive rights, with no
personal liability attaching to the ownership thereof. Neither Bank United Corp.
nor any Subsidiary thereof has or is bound by any
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outstanding subscriptions, options, warrants, calls, commitments or agreements
of any character calling for the purchase, sale or issuance of any shares of
capital stock or any other equity security of any Subsidiary of Bank United
Corp. or any securities representing the right to purchase or otherwise receive
any shares of capital stock or any other equity security of any such Subsidiary.
(c) Except as disclosed in Section 4.2(c) of the Bank United Corp.
Disclosure Schedule and for the ownership of Bank United Corp.'s Subsidiaries,
neither Bank United Corp. nor any of its Controlled Entities beneficially owns
or controls, directly or indirectly, any shares of stock or other equity
interest in any depository institution (as defined in 12 U.S.C. Section1813(c)),
corporation, firm, partnership, joint venture or other entity.
4.3 AUTHORITY; NO VIOLATION.
(a) Bank United Corp. has full corporate power and authority to execute and
deliver this Agreement and the Stock Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly and validly approved
by the Board of Directors of Bank United Corp.. Subject to the terms and
conditions of this Agreement, the Board of Directors of Bank United Corp. has
resolved to submit the agreement of merger (within the meaning of Section 252 of
the DGCL) contained in this Agreement and the transactions contemplated hereby
to Bank United Corp.'s stockholders for approval at a meeting of such
stockholders and, except for the adoption of such agreement of merger by the
affirmative vote of the holders of a majority of the voting power represented by
the outstanding shares of Bank United Corp. Common Stock, no other corporate
proceedings on the part of Bank United Corp. are necessary to approve this
Agreement or the Stock Option Agreement or to consummate the transactions
contemplated hereby and thereby. This Agreement and the Stock Option Agreement
have been duly and validly executed and delivered by Bank United Corp. and
(assuming due authorization, execution and delivery by Washington Mutual) each
constitutes a valid and binding obligation of Bank United Corp., enforceable
against Bank United Corp. in accordance with its terms, except as enforcement
may be limited by general principles of equity whether applied in a court of law
or a court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally. Bank United Corp. acknowledges that
Washington Mutual may elect at or promptly after the Effective Time to cause the
merger of Holdings and one of Washington Mutual's wholly owned Subsidiaries (the
"SECOND MERGER") and the merger of Bank United of Texas and Washington Mutual
Bank, FA, a wholly owned depository institution subsidiary of Washington Mutual
(the "ASSOCIATION MERGER"); PROVIDED, HOWEVER, that Washington Mutual agrees
that the structure of the Second Merger and the Association Merger shall not
adversely affect the ability of the Merger to be treated as a reorganization
within the meaning of Section 368(a) of the Code. Holdings and Bank United of
Texas each has full corporate power and authority to consummate the Second
Merger and the Association Merger, respectively.
(b) Except as set forth in Section 4.3(b) of the Bank United Corp.
Disclosure Schedule, neither the execution and delivery of this Agreement or the
Stock Option Agreement by Bank United Corp. nor the consummation by Bank United
Corp. of the transactions contemplated hereby or thereby, nor compliance by Bank
United Corp. with any of the terms or provisions hereof or thereof, nor the
consummation of the Second Merger or the Association Merger will (i) violate any
provision of the Certificate of Incorporation or Bylaws of Bank United Corp. or
any of the similar governing documents of any of its Subsidiaries or
(ii) assuming that the consents and approvals referred to in Section 4.4 are
duly obtained, (x) violate any statute, code, ordinance, rule, regulation,
judgment, order, writ, decree or injunction applicable to Bank United Corp. or
any of its Subsidiaries or any of their respective properties or assets, or
(y) violate, conflict with, result in a breach of any provision of or the loss
of any benefit under, constitute a default (or an event which, with notice or
lapse of time, or both, would constitute a default) under, result in the
termination of or a right of termination or cancellation under, accelerate the
performance required by, or result in the creation of any Lien upon any of the
respective
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properties or assets of Bank United Corp. or any of its Subsidiaries under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
deed of trust, license, lease, agreement or other instrument or obligation to
which Bank United Corp. or any of its Subsidiaries is a party, or by which they
or any of their respective properties or assets may be bound or affected, except
(in the case of clause (y) above) for such violations, conflicts, breaches or
defaults which, either individually or in the aggregate, will not have and would
not reasonably be expected to have a Material Adverse Effect on Bank United
Corp..
4.4 CONSENTS AND APPROVALS. Except for (i) the approval of the Merger, the
Second Merger and the Association Merger by the OTS, (ii) approval of the
listing of the Washington Mutual Common Stock and Washington Mutual PIES to be
issued in the Merger on NYSE, (iii) the filing with the Securities and Exchange
Commission (the "SEC") of a proxy statement in definitive form relating to the
meeting of Bank United Corp.'s stockholders to be held to vote on approval of
this Agreement and the Merger (the "PROXY STATEMENT/PROSPECTUS") and the filing
and declaration of effectiveness of the registration statement on Form S-4 (the
"S-4") in which the Proxy Statement/Prospectus will be included as a prospectus
and any filings or approvals under applicable state securities laws, (iv) the
filing with the SEC by the trust (the "CPR TRUST") to be established and
operated by Bank United Corp. pursuant to the declaration of trust substantially
in the form of Exhibit 4.4 hereto (the "TRUST AGREEMENT") prior to the Effective
Time for the purpose of managing the Litigation (as defined below) and
administering the proceeds, if any, received by Bank United of Texas (or any
other successor) as a result of the Litigation and declaration of effectiveness
of the registration statement on Form S-1 or other applicable form, which may be
the S-4 if permitted by applicable law (the "CPR TRUST REGISTRATION STATEMENT")
in connection with the distribution of the certificates (the "CPR CERTIFICATES")
which represent assignable and beneficial interests in the assets of the CPR
Trust, and any filings or approvals under applicable state securities laws,
(v) the filing of the Articles of Merger with the Washington Secretary pursuant
to the WBCA and the Certificate of Merger with the Delaware Secretary pursuant
to the DGCL, (vi) the filing of Articles of Amendment to Washington Mutual's
Articles of Incorporation (the "ARTICLES OF AMENDMENT") by Washington Mutual
with the Washington Secretary pursuant to the WBCA to provide for the terms of
the Washington Mutual Preferred Stock, (vii) the adoption of the agreement of
merger (within the meaning of Section 252 of the DGCL) contained in this
Agreement by the requisite votes of the stockholders of Bank United Corp.,
(viii) the consents and approvals set forth in Section 4.4 of the Bank United
Corp. Disclosure Schedule, and (ix) the consents and approvals of third parties
which are not Governmental Entities (as hereinafter defined), the failure of
which to obtain will not have and would not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect, no consents or
approvals of, or filings or registrations with, any court, administrative agency
or commission or other governmental authority or instrumentality or
self-regulatory organization (each a "GOVERNMENTAL ENTITY") or with any third
party are necessary in connection with (A) the execution and delivery by Bank
United Corp. of this Agreement and (B) the consummation by Bank United Corp. of
the Merger and the other transactions contemplated hereby. The "LITIGATION"
means the case brought by Bank United Corp., Bank United of Texas and Hyperion
Partners L.P. against the United States government relating to the failure to
abide by certain forbearances and commitments made by the United States
government in 1988, in connection with Bank United Corp.'s acquisition of Bank
United of Texas in 1988.
4.5 REPORTS. Bank United Corp. and each of its Subsidiaries have timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since October 1, 1997 with any Governmental Entity and have paid all fees
and assessments due and payable in connection therewith. Except for normal
examinations conducted by a Governmental Entity in the regular course of the
business of Bank United Corp. and its Subsidiaries or as set forth in
Section 4.5 of the Bank United Corp. Disclosure Schedule, no Governmental Entity
has initiated any proceeding or, to the best knowledge of Bank United Corp.,
threatened an investigation into the business or operations of Bank United Corp.
or any of its
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Subsidiaries since October 1, 1997. Except as set forth in Section 4.5 of the
Bank United Corp. Disclosure Schedule, there is no material unresolved
violation, criticism or exception by any Governmental Entity with respect to any
report or statement relating to any examinations of Bank United Corp. or any of
its Subsidiaries.
4.6 FINANCIAL STATEMENTS. Bank United Corp. has previously made available
to Washington Mutual copies of (a) the consolidated statements of financial
conditions of Bank United Corp. and its Subsidiaries, as of September 30, for
the fiscal years 1998 and 1999 and the related consolidated statements of
operations, stockholders' equity and cash flows for the fiscal years 1997
through 1999, inclusive, as reported in Bank United Corp.'s Annual Report on
Form 10-K for the fiscal year ended September 30, 1999 filed with the SEC under
the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), in each
case accompanied by the audit report of KPMG LLP, independent auditors with
respect to Bank United Corp., and (b) the unaudited consolidated statements of
financial condition of Bank United Corp. and its Subsidiaries as of March 31,
1999 and March 31, 2000, and the related unaudited consolidated statements of
operations, stockholders, equity and cash flows for the three-month periods then
ended, as reported in Bank United Corp.'s Quarterly Report on Form 10-Q for the
period ended March 31, 2000, filed with the SEC under the Exchange Act. Each of
the financial statements referred to in this Section 4.6 (including the related
notes, where applicable) fairly present, and the financial statements referred
to in Section 7.11(a) hereof (including the related notes, where applicable)
will fairly present, (subject, in the case of the unaudited statements, to
normal recurring adjustments, none of which are expected to be material in
nature or amount), the results of the consolidated operations and changes in
stockholders' equity and consolidated financial position of Bank United Corp.
and its Subsidiaries for the respective fiscal periods or as of the respective
dates therein set forth. Each of such financial statements (including the
related notes, where applicable) complies, and the financial statements referred
to in Section 7.11(a) hereof (including the related notes, where applicable)
will comply, in all material respects with applicable accounting requirements
and with the published rules and regulations of the SEC with respect thereto and
each of such financial statements (including the related notes, where
applicable) has been, and the financial statements referred to in
Section 7.11(a) (including the related notes, where applicable) will be,
prepared in accordance with GAAP consistently applied during the periods
involved, except in each case as indicated in such statements or in the notes
thereto or, in the case of unaudited statements, as permitted by Form 10-Q. The
books and records of Bank United Corp. and its Subsidiaries have been, and are
being, maintained in all material respects in accordance with GAAP and any other
applicable legal and accounting requirements and reflect only actual
transactions.
4.7 BROKER'S FEES. Except as set forth in Section 4.7 of the Bank United
Corp. Disclosure Schedule, neither Bank United Corp. nor any Subsidiary thereof
nor any of their respective officers or directors has employed any broker or
finder or incurred any liability for any broker's fees, commissions or finder's
fees in connection with any of the transactions contemplated by this Agreement.
Copies of all agreements with each broker or finder listed in Section 4.7 of the
Bank United Corp. Disclosure Schedule have previously been furnished to
Washington Mutual.
4.8 ABSENCE OF CERTAIN CHANGES OR EVENTS.
(a) Except as publicly disclosed in the Bank United Corp. Reports (as
defined in Section 4.12) filed prior to the date hereof, or as set forth in
Section 4.8(a) of the Bank United Corp. Disclosure Schedule, since
September 30, 1999, no event has occurred which has had or would reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Bank United Corp..
(b) Except as publicly disclosed in the Bank United Corp. Reports filed
prior to the date hereof, as set forth in Section 4.8(b) of the Bank United
Corp. Disclosure Schedule or as contemplated by this Agreement or permitted
under Section 6.2, since September 30, 1999, Bank United Corp. and its
Subsidiaries have carried on their respective businesses in all material
respects in the ordinary course of
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business, and neither Bank United Corp. nor any of its Subsidiaries has
(i) except for normal increases in the ordinary course of business consistent
with past practice and except as required by applicable law, increased the
wages, salaries, compensation, pension or other fringe benefits or perquisites
payable to any officer or director, other than persons newly hired for or
promoted to such position, from the amount thereof in effect as of
September 30, 1999 or granted any severance or termination pay, entered into any
contract to make or grant any severance or termination pay, or paid any bonus,
in each case to any such officer or director, other than pursuant to preexisting
agreements, arrangements or bonus plans, or (ii) suffered any strike, work
stoppage, slow-down or other labor disturbance.
4.9 LEGAL PROCEEDINGS.
(a) Except as set forth in Section 4.9(a) of the Bank United Corp.
Disclosure Schedule, neither Bank United Corp. nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of Bank United Corp.'s
knowledge, threatened legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory investigations of any nature
against Bank United Corp. or any of its Subsidiaries or challenging the validity
or propriety of the transactions contemplated by this Agreement as to which
there is a reasonable possibility of an adverse determination and which, if
adversely determined, would, individually or in the aggregate, have or
reasonably be expected to have a Material Adverse Effect on Bank United Corp..
(b) Except as set forth in Section 4.9(b) of the Bank United Corp.
Disclosure Schedule, there is no injunction, order, judgment, decree or
regulatory restriction specifically imposed upon Bank United Corp., any of its
Subsidiaries or the assets of Bank United Corp. or any of its Subsidiaries which
has had, or would reasonably be expected to have, a Material Adverse Effect on
Bank United Corp. or the Surviving Company.
4.10 TAXES.
(a) Except as set forth in Section 4.10(a) of the Bank United Corp.
Disclosure Schedule: (x) each of Bank United Corp. and its Subsidiaries has
(i) duly and timely filed (including pursuant to applicable extensions granted
without penalty) all material Tax Returns (as hereinafter defined) required to
be filed by it, and such Tax Returns are true, correct and complete in all
material respects, and (ii) paid in full or made adequate provision in the
financial statements of Bank United Corp. (in accordance with GAAP) for all
Taxes (as hereinafter defined) related to such Tax Returns; (y) no material
deficiencies for any Taxes have been proposed, asserted or assessed in writing
against or with respect to Bank United Corp. or any of its Subsidiaries; and
(z) there are no material Liens for Taxes upon the assets of either Bank United
Corp. or its Subsidiaries except for statutory liens for current Taxes not yet
due or Liens for Taxes that are being contested in good faith by appropriate
proceedings for which reserves adequate in accordance with GAAP have been
provided.
(b) For purposes of this Agreement, "TAXES" shall mean (x) all taxes,
charges, levies, penalties or other assessments imposed by any United States
federal, state, local or foreign taxing authority, including, but not limited to
income, excise, property, sales, transfer, franchise, payroll, withholding,
social security or other similar taxes, including any interest or penalties
attributable thereto, and (y) any liability with respect to the foregoing, as a
result of being a member of any affiliated, consolidated, combined, unitary or
similar group, as a result of any transferee liability in respect of the
forgoing, as a result of any agreements, or otherwise by operation of law.
(c) For purposes of this Agreement, "TAX RETURN" shall mean any return,
report, information return or other document (including any related or
supporting information) required to be filed with any taxing authority with
respect to Taxes, including without limitation all information returns relating
to Taxes of third parties, any claims for refunds of Taxes and any amendments or
supplements to any of the foregoing.
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(d) Except as set forth in Section 4.10(d) of the Bank United Corp.
Disclosure Schedule, neither Bank United Corp. nor any of its Subsidiaries is a
party to any agreement, contract, arrangement or plan that has resulted or would
result, individually or in the aggregate, in connection with this Agreement in
the payment of any "excess parachute payments" within the meaning of
Section 280G of the Code.
(e) Neither Bank United Corp. nor any of its Subsidiaries has filed a
consent to the application of Section 341(f) of the Code.
(f) Bank United Corp. is not aware of any fact or circumstance that could
reasonably be expected to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
4.11 EMPLOYEES; EMPLOYEE BENEFIT PLANS.
(a) Section 4.11(a) of the Bank United Corp. Disclosure Schedule sets forth
a true and complete list of each employee benefit plan, arrangement or agreement
and any amendments or modifications thereof (including, without limitation, all
stock purchase, stock option, severance, employment, change-in-control,
health/welfare and Section 125 plans, fringe benefit, bonus, incentive, deferred
compensation and other agreements, programs, policies and arrangements, whether
or not subject to the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) that is maintained or contributed to as of the date of this
Agreement (the "PLANS") by Bank United Corp. or any of its Subsidiaries or by
any trade or business, whether or not incorporated (an "ERISA AFFILIATE"), all
of which together with Bank United Corp. would be deemed a "single employer'
within the meaning of Section 4001 of ERISA.
(b) Bank United Corp. has previously made available to Washington Mutual
true and complete copies of each of the Plans and all related documents,
including but not limited to (i) the actuarial reports for each Plan (if
applicable) for each of the last two years, and (ii) the most recent
determination letter from the Internal Revenue Service (if applicable) for each
Plan.
(c) Except as set forth in Section 4.11(c) of the Bank United Corp.
Disclosure Schedule, (i) each of the Plans has been operated and administered in
all material respects in accordance with applicable laws, including but not
limited to ERISA and the Code, (ii) each of the Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined to be so
qualified by the Internal Revenue Service or will be submitted for such
determination within the applicable remedial amendment period, (iii) with
respect to each Plan which is subject to Title IV of ERISA, the present value of
accrued benefits under such Plan, based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared by such Plan's
actuary with respect to such Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such Plan allocable to such
accrued benefits, (iv) no Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees of Bank United Corp., its Subsidiaries or any ERISA Affiliate
beyond their retirement or other termination of service, other than
(w) coverage mandated by applicable law, (x) death benefits or retirement
benefits under any "employee pension plan," as that term is defined in
Section 3(2) of ERISA, (y) deferred compensation benefits accrued as liabilities
on the books of Bank United Corp., its Subsidiaries or the ERISA Affiliates or
(z) benefits the full cost of which is borne by the current or former employee
(or his beneficiary), (v) no liability under Title IV of ERISA has been incurred
by Bank United Corp., its Subsidiaries or any ERISA Affiliate that has not been
satisfied in full (other than payment of premiums not yet due to the Pension
Benefit Guaranty Corporation (the "PBGC")), and no condition exists that
presents a material risk to Bank United Corp., its Subsidiaries or any ERISA
Affiliate of incurring a material liability thereunder, (vi) no Plan is a
"multi-employer pension plan," as such term is defined in Section 3(37) of
ERISA, (vii) all contributions or other amounts payable by Bank United Corp. or
its Subsidiaries as of the Effective Time with respect to each Plan in
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respect of current or prior plan years have been paid or accrued in accordance
with GAAP and Section 412 of the Code, (viii) neither Bank United Corp., its
Subsidiaries nor any ERISA Affiliate has engaged in a transaction in connection
with which Bank United Corp., its Subsidiaries or any ERISA Affiliate could be
subject to either a material civil penalty assessed pursuant to Section 409 or
502(i) of ERISA or a material tax imposed pursuant to Section 4975 or 4976 of
the Code, and (ix) there are no pending, or, to the knowledge of Bank United
Corp., threatened or anticipated claims (other than routine claims for benefits)
by, on behalf of or against any of the Plans or any trusts related thereto which
would, individually or in the aggregate, have or be reasonably expected to have
a Material Adverse Effect on Bank United Corp..
(d) Except as set forth in Section 4.11(d) of the Bank United Corp.
Disclosure Schedule, no Plan exists which provides for or could result in the
payment to any Bank United Corp. employee of any money or other property or
rights or accelerate the vesting or payment of such amounts or rights to any
Bank United Corp. employee as a result of the transactions contemplated by this
Agreement, including the Merger, whether or not such payment or acceleration
would constitute a parachute payment within the meaning of Code Section 280G.
Except as set forth in Section 4.11(d) of the Bank United Corp. Disclosure
Schedule, since September 30, 1999, neither Bank United Corp. 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 any Plan
set forth in Section 4.11(d) of the Bank United Corp. Disclosure Schedule.
(e) To the best knowledge of Bank United Corp., (i) except as set forth in
Section 4.11(e) of the Bank United Corp. Disclosure Schedule, neither Bank
United Corp. nor any of its Subsidiaries is a party to or is bound by any
written contract or arrangement with respect to the employment or compensation
of any (x) consultants receiving in excess of $100,000 annually and
(y) employees receiving compensation (salary, bonus and commission) in excess of
$250,000 annually, and (ii) except as provided under the Plans set forth in
Sections 4.11(d) and (e) of the Bank United Corp. Disclosure Schedule and other
agreements or arrangements set forth in Sections 4.11(d) and (e) of the Bank
United Corp. Disclosure Schedule, consummation of the transactions contemplated
by this Agreement will not (either alone or upon the occurrence of any
additional acts or events) result in any payment (whether of severance pay or
otherwise) becoming due from Bank United Corp. or any Subsidiary to any officer
or employee thereof. Bank United Corp. has previously delivered or made
available to Washington Mutual true and complete copies of all consulting
agreements calling for payments in excess of $150,000 annually, and employment
and deferred compensation agreements (or forms thereof) providing for
compensation (salary, bonus and commission) in excess of $250,000 annually that
are in writing to which Bank United Corp. or any of its Subsidiaries is a party.
(f) Except as set forth in Section 4.11(f) of the Bank United Corp.
Disclosure Schedule, no current employee of Bank United Corp. or any of its
Subsidiaries received aggregate remuneration (bonus, salary and commission) in
excess of $250,000 for 1999 or would reasonably be expected to receive aggregate
remuneration (excluding severance or other payments which, pursuant to an
agreement or arrangement set forth in Section 4.11(e) of the Bank United Corp.
Disclosure Schedule, are made as a result of consummation of the transactions
contemplated by this Agreement, either alone or upon the occurrence of any
additional acts or events) in excess of $250,000 in 2000.
4.12 SEC REPORTS. Bank United Corp. has previously made available to
Washington Mutual an accurate and complete copy of each final registration
statement, prospectus, report, schedule and definitive proxy statement filed
since October 1, 1997 and prior to the date hereof by Bank United Corp. or any
of its Subsidiaries with the SEC pursuant to the Securities Act of 1933, as
amended (the "SECURITIES ACT"), or the Exchange Act (the "BANK UNITED CORP.
REPORTS"), and no such registration statement, prospectus, report, schedule or
proxy statement contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances in which they were
made, not misleading.
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Bank United Corp. and its Subsidiaries have timely filed all Bank United Corp.
Reports and other documents required to be filed by them under the Securities
Act and the Exchange Act, and, as of their respective dates, all Bank United
Corp. Reports complied in all material respects with the published rules and
regulations of the SEC with respect thereto.
4.13 COMPLIANCE WITH APPLICABLE LAW. Except as disclosed in Section 4.13
of the Bank United Corp. Disclosure Schedule, Bank United Corp. and each of its
Subsidiaries hold, and have at all times held, all licenses, franchises, permits
and authorizations necessary for the lawful conduct of their respective
businesses under and pursuant to all, and have complied with and are not in
violation in any material respect under any, applicable law, statute, order,
rule, regulation, policy and/or guideline of any Governmental Entity relating to
Bank United Corp. or any of its Subsidiaries, except where the failure to hold
such license, franchise, permit or authorization or such noncompliance or
violation would not, individually or in the aggregate, have or reasonably be
expected to have a Material Adverse Effect on Bank United Corp., and neither
Bank United Corp. nor any of its Subsidiaries knows of, or has received notice
of, any violations of any of the above which, individually or in the aggregate,
would have or would reasonably be expected to have a Material Adverse Effect on
Bank United Corp..
4.14 CERTAIN CONTRACTS.
(a) Except as publicly disclosed in the Bank United Corp. Reports filed
prior to the date hereof or as set forth in Section 4.14(a) of the Bank United
Corp. Disclosure Schedule, neither Bank United Corp. nor any of its Subsidiaries
is a party to or is bound by any contract, arrangement, commitment or
understanding (whether written or oral) (i) which is a material contract (as
defined in Item 601(b)(10) of Regulation S-K of the SEC) to be performed after
the date of this Agreement, (ii) which limits the freedom of Bank United Corp.
or any of its Subsidiaries to compete in any line of business, in any geographic
area or with any person, or (iii) with or to a labor union or guild (including
any collective bargaining agreement). Each contract, arrangement, commitment or
understanding of the type described in this Section 4.14(a), whether or not
publicly disclosed in the Bank United Corp. Reports filed prior to the date
hereof or set forth in Section 4.14(a) of the Bank United Corp. Disclosure
Schedule, is referred to herein as a "BANK UNITED CORP. CONTRACT," and neither
Bank United Corp. nor any of its Subsidiaries knows of, or has received notice
of, any violation of the above by any of the other parties thereto which,
individually or in the aggregate, would have or would reasonably be expected to
have a Material Adverse Effect on Bank United Corp.. Bank United Corp. has made
available all contracts which involved payments by Bank United Corp. or any of
its Subsidiaries in fiscal year 1999 of more than $500,000 or which could
reasonably be expected to involve payments during fiscal year 2000 of more than
$500,000, other than any such contract that is terminable at will on 60 days or
less notice without payment of a penalty in excess of $50,000 and other than any
contract entered into on or after the date hereof that is permitted under the
provisions of Section 6.2.
(b) Except as set forth in Section 4.14(b) of the Bank United Corp.
Disclosure Schedule, (i) each Bank United Corp. Contract is valid and binding on
Bank United Corp. and in full force and effect, and, to the knowledge of Bank
United Corp., is valid and binding on the other parties thereto, (ii) Bank
United Corp. and each of its Subsidiaries has in all material respects performed
all obligations required to be performed by it to date under each Bank United
Corp. Contract, and (iii) no event or condition exists which constitutes or,
after notice or lapse of time or both, would constitute a material default on
the part of Bank United Corp. or any of its Subsidiaries under any such Bank
United Corp. Contract, except, in each case, where such invalidity, failure to
be binding, failure to so perform or default, individually or in the aggregate,
would not have or reasonably be expected to have a Material Adverse Effect on
Bank United Corp..
4.15 AGREEMENTS WITH REGULATORY AGENCIES. Except as set forth in
Section 4.15 of the Bank United Corp. Disclosure Schedule, neither Bank United
Corp. nor any of its Subsidiaries is subject to any cease-and-desist or other
order issued by, or is a party to any written agreement, consent agreement or
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memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or has
adopted any board resolutions at the request of (each, whether or not set forth
in Section 4.15 of the Bank United Corp. Disclosure Schedule, a "REGULATORY
AGREEMENT"), any Governmental Entity that currently restricts or by its terms
will in the future restrict the conduct of its business or relates to its
capital adequacy, its credit policies, its management or its business, nor has
Bank United Corp. or any of its Subsidiaries been advised by any Governmental
Entity that it is considering issuing or requesting any Regulatory Agreement.
4.16 UNDISCLOSED LIABILITIES. Except (i) for those liabilities that are
fully reflected or reserved against on the consolidated balance sheet of Bank
United Corp. included in the Bank United Corp. Form 10-Q for the quarter ended
March 31, 2000 or (ii) for liabilities incurred in the ordinary course of
business consistent with past practice since March 31, 2000, neither Bank United
Corp. nor any of its Subsidiaries has incurred any liability of any nature
whatsoever (whether absolute, accrued or contingent or otherwise and whether due
or to become due) that, either alone or when combined with all the liabilities
not described in clause (i) or (ii), has had, or would be reasonably expected to
have, a Material Adverse Effect on Bank United Corp..
4.17 ANTI-TAKEOVER PROVISIONS. The Board of Directors of Bank United Corp.
has taken all necessary action so that the provisions of Section 203 of the
DGCL, any applicable provisions of the takeover laws of the State of Texas, the
provisions of Section 2.11 of the Bylaws of Bank United Corp. and the provisions
of Article 4, Section 4 of the Certificate of Incorporation of Bank United Corp.
do not and will not apply to this Agreement, the Merger or the transactions
contemplated hereby, the Stock Option Agreement or the exercise of the Option.
4.18 BANK UNITED CORP. INFORMATION. The information relating to Bank
United Corp. and its Subsidiaries to be provided by Bank United Corp. for
inclusion in the Proxy Statement/Prospectus, the S-4 and the CPR Trust
Registration Statement, or in any other document filed with any other
Governmental Entity in connection herewith, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they are made,
not misleading. The Proxy Statement/Prospectus (except for such portions thereof
as relate only to Washington Mutual or any of its Subsidiaries) will comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder. The CPR Trust Registration Statement (except
for such portions thereof as relate only to Washington Mutual or any of its
Subsidiaries) will comply as to form in all material respects with the
provisions of the Securities Act and the rules and regulations thereunder.
4.19 TITLE TO PROPERTY.
(a) REAL PROPERTY. Except as disclosed on Section 4.19(a) of the Bank
United Corp. Disclosure Schedule, Bank United Corp. and its Subsidiaries have
good, valid and marketable title to all real property owned by them free and
clear of all Liens, except Liens for current taxes not yet due and payable and
other standard exceptions commonly found in title policies in the jurisdiction
where such real property is located, and such encumbrances and imperfections of
title, if any, as do not materially detract from the value of the properties and
do not materially interfere with the present or proposed use of such properties
or otherwise materially impair such operations. All real property and fixtures
material to the business, operations or financial condition of Bank United Corp.
and its Subsidiaries are in substantially good condition and repair except as
would not reasonably be expected to have, in the aggregate, a Material Adverse
Effect on Bank United Corp..
(b) PERSONAL PROPERTY. Bank United Corp. and its Subsidiaries have good,
valid and marketable title to all tangible personal property owned by them on
the date hereof, free and clear of all Liens except as publicly disclosed in the
Bank United Corp. Reports filed prior to the date hereof or as disclosed on
Section 4.19(b) of the Bank United Corp. Disclosure Schedule or as would not
reasonably be expected to have, in the aggregate, a Material Adverse Effect on
Bank United Corp.. With respect
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to personal property used in the business of Bank United Corp. and its
Subsidiaries which is leased rather than owned, neither Bank United Corp. nor
any Subsidiary thereof is in default under the terms of any such lease the loss
of which would have a Material Adverse Effect on Bank United Corp..
(c) LEASED PROPERTY. All leases of real property and all other leases
material to Bank United Corp. and its Subsidiaries under which Bank United Corp.
or a Subsidiary, as lessee, leases real or personal property are valid and
binding in accordance with their respective terms, there is not under such lease
any material existing default by Bank United Corp. or such Subsidiary or any
event which with notice or lapse of time would constitute such a default, and
Bank United Corp. or such Subsidiary quietly enjoys the premises provided for in
such lease except as would not reasonably be expected to have, in the aggregate,
a Material Adverse Effect on Bank United Corp..
4.20 INSURANCE. Bank United Corp. and is Subsidiaries are insured with
reputable insurers against such risks and in such amounts as the management of
Bank United Corp. reasonably has determined to be prudent in accordance with
industry parties. Section 4.20 of the Bank United Corp. Disclosure Schedule
contains a true and complete list and a brief description (including name of
insurer, agent, coverage and expiration date) of all insurance policies in force
on the date hereof with respect to the business and assets of the Bank United
Corp. and its Subsidiaries (other than insurance policies under which Bank
United Corp. or any Subsidiary thereof is named as a loss payee, insured or
additional insured as a result of its position as a secured lender on specific
loans and mortgage insurance policies on specific loans). Bank United Corp. and
its Subsidiaries are in material compliance with their insurance policies and
are not in default under any of the material terms thereof. Each such policy is
outstanding and in full force and effect and, except as set forth on
Section 4.20 of the Bank United Corp. Disclosure Schedule and except for
policies insuring against potential liabilities of officers, directors and
employees of Bank United Corp. and its Subsidiaries, Bank United Corp. or the
relevant Subsidiary thereof is the sole beneficiary of such policies. All
premiums and other payments due under any such policy have been paid, and all
claims thereunder have been filed in due and timely fashion.
4.21 ENVIRONMENTAL LIABILITY. Except as set forth in Section 4.21 of the
Bank United Corp. Disclosure Schedule, there are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that reasonably could be
expected to result in the imposition, on Bank United Corp. or any of its
Subsidiaries of any liability or obligation arising under common law standards
relating to environmental protection, human health or safety, or under any
local, state or federal environmental statute, regulation or ordinance,
including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (collectively, the
"ENVIRONMENTAL LAWS"), pending or, to the knowledge of Bank United Corp.,
threatened against Bank United Corp. or any of its Subsidiaries, which liability
or obligation would have or would reasonably be expected to have a Material
Adverse Effect on Bank United Corp.. To the knowledge of Bank United Corp.,
there is no reasonable basis for any such proceeding, claim, action or
governmental investigation that would impose any liability or obligation that
would have or would reasonably be expected to have a Material Adverse Effect on
Bank United Corp.. To the knowledge of Bank United Corp., during or prior to the
period of (i) its or any of its Subsidiaries, ownership or operation of any of
their respective current properties, (ii) its or any of its Subsidiaries,
participation in the management of any property, or (iii) its or any of its
Subsidiaries' holding of a security interest or other interest in any property,
there were no releases or threatened releases of hazardous, toxic, radioactive
or dangerous materials or other materials regulated under Environmental Laws in,
on, under or affecting any such property which would reasonably be expected to
have a Material Adverse Effect on Bank United Corp.. Neither Bank United Corp.
nor any of its Subsidiaries is subject to any agreement, order, judgment,
decree, letter or memorandum by or with any court, governmental authority,
regulatory agency or third party imposing any material liability or obligation
pursuant to or
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under any Environmental Law that would have or would reasonably be expected to
have a Material Adverse Effect on Bank United Corp..
4.22 OPINION OF FINANCIAL ADVISOR. Bank United Corp. has received the
opinion of Goldman, Sachs & Co., dated August 18, 2000, to the effect that, as
of such date, the Exchange Ratio is fair from a financial point of view to the
holders of Bank United Corp. Common Stock.
4.23 PATENTS, TRADEMARKS, ETC. Bank United Corp. and each of its
Subsidiaries owns or possesses all legal rights, or is licensed or otherwise has
the right to use, all proprietary rights, including without limitation all
trademarks, trade names, service marks and copyrights, that are material to the
conduct of their existing businesses. Except for the agreements listed on
Section 4.23 of the Bank United Corp. Disclosure Schedule, neither Bank United
Corp. nor any of its Subsidiaries is bound by or a party to any options,
licenses or agreements of any kind with respect to any trademarks, service marks
or trade names which it claims to own. Neither Bank United Corp. nor any of its
Subsidiaries has received any communications alleging that any of them has
violated any of the patents, trademarks, service marks, trade names, copyrights
or trade secrets or other proprietary rights of any other person or entity.
4.24 LOAN MATTERS.
(a) (i) Section 4.24(a) of the Bank United Corp. Disclosure Schedule sets
forth all evidences of indebtedness reflected as assets on the books and records
of Bank United Corp. and its Subsidiaries ("LOANS") by Bank United Corp. and its
Subsidiaries to executive officers (as such term is defined in Part 215 of Title
12 of the Code of Federal Regulations) of Bank United Corp. or any of its
Subsidiaries; (ii) there are no employee, officer, director or other affiliate
Loans on which the borrower is paying a rate other than that reflected in the
note or the relevant credit agreement or on which the borrower is paying a rate
which was below market at the time the Loan was made; and (iii) except as listed
on Section 4.24(a) of the Bank United Corp. Disclosure Schedule, all such Loans
are and were made in compliance in all material respects with all applicable
federal laws and regulations.
(b) Each outstanding Loan and each commitment to extend credit has been
solicited and originated and is administered and serviced in all material
respects in accordance with the relevant loan documents, Bank United Corp.'s
underwriting standards and with all applicable requirements of federal, state
and local laws, regulations and rules.
(c) Except as set forth on Section 4.24(c) of the Bank United Corp.
Disclosure Schedule, none of the agreements pursuant to which Bank United Corp.
or any of its Subsidiaries has sold Loans or pools of Loans or participations in
Loans or pools of Loans contains any obligation to repurchase such Loans or
interests therein solely on account of a payment default by the obligor on any
such Loan.
(d) Each of Bank United Corp. and its Subsidiaries is approved by and is in
good standing: (i) as a supervised mortgagee by the Department of Housing and
Urban Development ("HUD") to originate and service Title I and Title I FHA
mortgage loans; (ii) as a GNMA I and II Issuer by the Government National
Mortgage Association ("GINNIE MAE"); (iii) by the Veteran's Administration
("VA") to originate and service VA loans; and (iv) as a seller/servicer by
Fannie Mae and the Federal Home Loan Mortgage Corporation ("FREDDIE MAC") to
originate and service conventional residential and multi-family mortgage loans.
(e) Except for indemnity agreements with any of such persons (a true and
complete list of all current such agreements having been previously provided to
Washington Mutual), none of Bank United Corp. or any of its Subsidiaries is now
nor has it ever been subject to any fine, suspension, settlement or other
agreement or other administrative agreement or sanction by, or any obligation to
indemnify, HUD, Ginnie Mae, VA, Fannie Mae, Freddie Mac or other investor, or
any federal or state agency relating to the origination, sale or servicing of
mortgage or consumer loans.
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(f) Each of Bank United Corp. and its Subsidiaries is in compliance in all
material respects with all applicable federal, state and local laws, rules and
regulations, including, without limitation, the Truth-In-Lending Act and
Regulation Z, the Equal Credit Opportunity Act and Regulation B, the Real Estate
Settlement Procedures Act and Regulation X, the Fair Credit Reporting Act, the
Fair Debt Collection Practices At and all HUD, Ginnie Mae, Fannie Mae, Freddie
Mac, other investor and mortgage insurance company requirements relating o the
origination, sale and servicing of mortgage and consumer loans.
4.25 COMMUNITY REINVESTMENT ACT COMPLIANCE. Bank United of Texas is in
compliance in all material respects with the applicable provisions of the
Community Reinvestment Act of 1977 and the regulations promulgated thereunder
(collectively, "CRA") and has received a CRA rating of "outstanding" from the
OTS in its most recent exam, and Bank United Corp. has no knowledge of the
existence of any fact or circumstance or set of facts or circumstances which
could be reasonably expected to result in Bank United of Texas failing to be in
compliance in all material respects with such provisions or having its current
rating lowered.
4.26 LABOR MATTERS. Neither Bank United Corp. 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 Bank United Corp. 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
Bank United Corp. 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 Bank United Corp.'s knowledge, threatened, nor is Bank United
Corp. 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.
5. REPRESENTATIONS AND WARRANTIES OF WASHINGTON MUTUAL
Washington Mutual hereby represents and warrants to Bank United Corp. as
follows:
5.1 CORPORATE ORGANIZATION. Washington Mutual is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington. Washington Mutual has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not have or reasonably be expected to have a
Material Adverse Effect on Washington Mutual. Washington Mutual is duly
registered as a savings and loan holding company under HOLA. The copies of the
Articles of Incorporation and Bylaws of Washington Mutual which have previously
been made available to Bank United Corp. are true, complete and correct copies
of such documents as in effect as of the date of this Agreement. Washington
Mutual Bank, FA is a qualified thrift lender pursuant to Section 10(m) of HOLA
and its deposits and insured by the FDIC primarily through the SAIF, to the
fullest extent permitted by law. Washington Mutual Bank, FA is a member in good
standing of the FHLB of San Francisco.
5.2 CAPITALIZATION. The authorized capital stock of Washington Mutual
consists of 1,600,000,000 shares of Washington Mutual Common Stock and
10,000,000 shares of preferred stock, no par value. At the close of business on
July 31, 2000, there were 538,875,901 shares of Washington Mutual Common Stock
outstanding and no shares of Washington Mutual preferred stock outstanding. As
of July 31, 2000, no shares of Washington Mutual Common Stock or Washington
Mutual preferred stock were reserved for issuance. All of the issued and
outstanding shares of Washington Mutual Common Stock have been duly authorized
and validly issued and are fully paid, nonassessable and free of preemptive
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rights, with no personal liability attaching to the ownership thereof. As of the
date of this Agreement, except (i) as set forth in Section 5.2 of the disclosure
schedule of Washington Mutual delivered to Bank United Corp. concurrently
herewith (the "WASHINGTON MUTUAL DISCLOSURE SCHEDULE"), (ii) as provided in the
Rights Agreement, dated as of October 16, 1990, between Washington Mutual and
First Interstate Bank of Washington (as amended and supplemented, the
"WASHINGTON MUTUAL RIGHTS AGREEMENT"), and (iii) as set forth elsewhere in this
Section 5.2, Washington Mutual does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Washington
Mutual Common Stock or Washington Mutual preferred stock or any other equity
securities of Washington Mutual or any securities representing the right to
purchase or otherwise receive any shares of Washington Mutual Common Stock or
Washington Mutual preferred stock. The shares of Washington Mutual Common Stock
to be issued pursuant to the Merger will be duly authorized and validly issued
and, at the Effective Time, all such shares will be fully paid, nonassessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof.
5.3 AUTHORITY; NO VIOLATION.
(a) Washington Mutual has full corporate power and authority to execute and
deliver this Agreement and the Stock Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Stock Option Agreement and the consummation of the
transactions contemplated hereby (including the issuance of Washington Mutual
Common Stock hereunder) and thereby have been duly and validly approved by the
Board of Directors of Washington Mutual and no other corporate proceedings on
the part of Washington Mutual are necessary to approve this Agreement or the
Stock Option Agreement or to consummate the transactions contemplated hereby and
thereby. This Agreement and the Stock Option Agreement have been duly and
validly executed and delivered by Washington Mutual and (assuming due
authorization, execution and delivery by Bank United Corp.) each constitutes a
valid and binding obligation of Washington Mutual, enforceable against
Washington Mutual in accordance with its terms, except as enforcement may be
limited by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
(b) Except as set forth in Section 5.3(b) of the Washington Mutual
Disclosure Schedule, neither the execution and delivery of this Agreement or the
Stock Option Agreement by Washington Mutual, nor the consummation by Washington
Mutual of the transactions contemplated hereby or thereby, nor compliance by
Washington Mutual with any of the terms or provisions hereof or thereof, will
(i) violate any provision of the Articles of Incorporation or Bylaws of
Washington Mutual or any of the similar governing documents of any of its
Subsidiaries or (ii) assuming that the consents and approvals referred to in
Section 5.4 are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Washington
Mutual or any of its Subsidiaries or any of their respective properties or
assets, or (y) violate, conflict with, result in a breach of any provision of or
the loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any Lien upon any of
the respective properties or assets of Washington Mutual or any of its
Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Washington Mutual or any of its Subsidiaries
is a party, or by which they or any of their respective properties or assets may
be bound or affected, except (in the case of clause (y) above) for such
violations, conflicts, breaches or defaults which either individually or in the
aggregate will not have and would not reasonably be expected to have a Material
Adverse Effect on Washington Mutual.
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5.4 CONSENTS AND APPROVALS. Except for (i) the approval of the Merger, the
Second Merger and the Association Merger by the OTS, (ii) approval of the
listing of the Washington Mutual Common Stock and Washington Mutual PIES to be
issued in the Merger on the NYSE, (iii) the filing with the SEC of the Proxy
Statement/Prospectus and the filing and declaration of effectiveness of the S-4,
(iv) the filing of the Articles of Merger with the Washington Secretary pursuant
to the WBCA and the Certificate of Merger with the Delaware Secretary pursuant
to the DGCL, (v) the adoption of the agreement of merger (within the meaning of
Section 252 of the DGCL) contained in this Agreement by the requisite votes of
the stockholders of Bank United Corp., (vi) the filing of the Articles of
Amendment by Washington Mutual with the Washington Secretary to provide for the
terms of the Washington Mutual Preferred Stock, (vii) the consents and approvals
set forth in Section 5.4 of the Washington Mutual Disclosure Schedule, and
(viii) the consents and approvals of third parties which are not Governmental
Entities, the failure of which to obtain will not have and would not be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect, no consents or approvals of, or filings or registrations with,
any Governmental Entity or any third party are necessary in connection with
(A) the execution and delivery by Washington Mutual of this Agreement and
(B) the consummation by Washington Mutual of the Merger and the other
transactions contemplated hereby.
5.5 REPORTS. Washington Mutual and each of its Subsidiaries have timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since January 1, 1998 with any Governmental Entities, and have paid all
fees and assessments due and payable in connection therewith. Except as set
forth in Section 5.5 of the Washington Mutual Disclosure Schedule and except for
normal examinations conducted by a Governmental Entity in the regular course of
the business of Washington Mutual and its Subsidiaries, no Governmental Entity
has initiated any proceeding or, to the best knowledge of Washington Mutual,
investigation into the business or operations of Washington Mutual or any of its
Subsidiaries since January 1, 1997. There is no material unresolved violation,
criticism, or exception by any Government Entity with respect to any report or
statement relating to any examinations of Washington Mutual or any of its
Subsidiaries.
5.6 FINANCIAL STATEMENTS. Washington Mutual has previously made available
to Bank United Corp. copies of (a) the consolidated balance sheets of Washington
Mutual and its Subsidiaries, as of December 31, for the fiscal years 1998 and
1999, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the fiscal years 1997 through 1999,
inclusive, as reported in Washington Mutual's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999 filed with the SEC under the Exchange Act,
in each case accompanied by the audit report of Deloitte & Touche, LLP,
independent public accountants with respect to Washington Mutual, and (b) the
unaudited consolidated balance sheets of Washington Mutual and its Subsidiaries
as of March 31, 1999, and March 31, 2000, and the related unaudited consolidated
statements of income, cash flows and changes in stockholders' equity for the
three-month periods then ended, as reported in Washington Mutual's Quarterly
Report on Form 10-Q for the period ended March 31, 2000 filed with the SEC under
the Exchange Act. Each of the financial statements referred to in this
Section 5.6 (including the related notes, where applicable) fairly present, and
the financial statements referred to in Section 7.11 hereof (including the
related notes, where applicable) will fairly present (subject, in the case of
the unaudited statements, to normal recurring adjustments, none of which are
expected to be material in nature and amount), the results of the consolidated
operations and changes in stockholders' equity and consolidated financial
position of Washington Mutual and its Subsidiaries for the respective fiscal
periods or as of the respective dates therein set forth. Each of such financial
statements (including the related notes, where applicable) complies, and the
financial statements referred to in Section 7.11 hereof (including the related
notes, where applicable) will comply, in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto; and each of such financial statements (including the
related notes, where applicable) has been, and the financial statements referred
to in Section 7.11 (including the related notes, where
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applicable) will be, prepared in accordance with GAAP consistently applied
during the periods involved, except in each case as indicated in such statements
or in the notes thereto or, in the case of unaudited statements, as permitted by
Form 10-Q. The books and records of Washington Mutual and its Subsidiaries have
been, and are being, maintained in all material respects in accordance with GAAP
and any other applicable legal and accounting requirements and reflect only
actual transactions.
5.7 BROKER'S FEES. Except as set forth in Section 5.7 of the Washington
Mutual Disclosure Schedule, neither Washington Mutual nor any Subsidiary thereof
nor any of their respective officers or directors has employed any broker or
finder or incurred any liability for any broker's fees, commissions or finder's
fees in connection with any of the transactions contemplated by this Agreement.
5.8 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as publicly disclosed in
Washington Mutual Reports (as defined in Section 5.10) filed prior to the date
hereof or as set forth in Section 5.8 of the Washington Mutual Disclosure
Schedule, since December 31, 1999, no event has occurred which has had or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Washington Mutual.
5.9 LEGAL PROCEEDINGS.
(a) Neither Washington Mutual nor any of its Subsidiaries is a party to any,
and there are no pending or, to the best of Washington Mutual's knowledge,
threatened legal, administrative, arbitral or other proceedings, claims, actions
or governmental or regulatory investigations of any nature against Washington
Mutual or any of its Subsidiaries or challenging the validity or propriety of
the transactions contemplated by this Agreement as to which there is a
reasonable possibility of an adverse determination and which, if adversely
determined, would, individually or in the aggregate, have or reasonably be
expected to have a Material Adverse Effect on Washington Mutual.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Washington Mutual, any of its Subsidiaries or the
assets of Washington Mutual or any of its Subsidiaries which has had, or would
reasonably be expected to have, a Material Adverse Effect on Washington Mutual.
5.10 TAXES. Except as set forth in Section 5.10 of the Washington Mutual
Disclosure Schedule, each of Washington Mutual and its Subsidiaries has
(i) duly and timely filed (including pursuant to applicable extensions granted
without penalty) all material Tax Returns required to be filed by it, and such
Tax Returns are to the best knowledge of Washington Mutual true, correct and
complete in all material respects, and (ii) paid in full or made adequate
provision in the financial statements of Washington Mutual (in accordance with
GAAP) for all Taxes related to such Tax Returns. Except as set forth in
Section 5.10 of the Washington Mutual Disclosure Schedule, no material
deficiencies for any Taxes have been proposed, asserted or assessed in writing
against or with respect to Washington Mutual or any of its Subsidiaries, and, to
the best knowledge of Washington Mutual, there are no material Liens for Taxes
upon the assets of either Washington Mutual or its Subsidiaries except for
statutory liens for current Taxes not yet due or Liens for Taxes that are being
contested in good faith by appropriate proceedings for which reserves adequate
in accordance with GAAP have been provided. Washington Mutual is not aware of
any fact or circumstance that could reasonably be expected to prevent the Merger
from qualifying as a reorganization within the meaning of Section 368(a) of the
Code.
5.11 SEC REPORTS. Washington Mutual has previously made available to Bank
United Corp. an accurate and complete copy of each final registration statement,
prospectus, report, schedule and definitive proxy statement filed since
January 1, 1999 and prior to the date hereof by Washington Mutual with the SEC
pursuant to the Securities Act or the Exchange Act (the "WASHINGTON MUTUAL
REPORTS"), and no such registration statement, prospectus, report, schedule or
proxy statement contained any untrue statement of a material fact or omitted to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances in which they were
made,
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not misleading. Washington Mutual and its Subsidiaries have timely filed all
Washington Mutual Reports and other documents required to be filed by them under
the Securities Act and the Exchange Act, and, as of their respective dates, all
Washington Mutual Reports complied in all material respects with the published
rules and regulations of the SEC with respect thereto.
5.12 COMPLIANCE WITH APPLICABLE LAW. Except as disclosed in Section 5.12
of the Washington Mutual Disclosure Schedule, Washington Mutual and each of its
Subsidiaries hold, and have at all times held, all material licenses,
franchises, permits and authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to all, and have complied with and are
not in default in any material respect under any, applicable law, statute,
order, rule, regulation, policy and/or guideline of any Governmental Entity
relating to Washington Mutual or any of its Subsidiaries, except where the
failure to hold such license, franchise, permit or authorization or such
noncompliance or default would not, individually or in the aggregate, have or
reasonably be expected to have a Material Adverse Effect on Washington Mutual,
and neither Washington Mutual nor any of its Subsidiaries knows of, or has
received notice of, any material violations of any of the above which,
individually or in the aggregate, would have or reasonably be expected to have a
Material Adverse Effect on Washington Mutual.
5.13 AGREEMENTS WITH REGULATORY AGENCIES. Except as set forth in
Section 5.13 of the Washington Mutual Disclosure Schedule, neither Washington
Mutual nor any of its Subsidiaries is subject to any cease-and-desist or other
order issued by, or is a party to any written agreement, consent agreement or
memorandum of understanding with, or is a party to any commitment letter or
similar undertaking to, or is subject to any order or directive by, or has
adopted any board resolutions at the request of (each, whether or not set forth
in Section 5.12 of the Washington Mutual Disclosure Schedule, a "WASHINGTON
MUTUAL REGULATORY AGREEMENT"), any Governmental Entity that restricts the
conduct of its business or relates to its capital adequacy, its credit policies,
its management or its business, nor has Washington Mutual or any of its
Subsidiaries been advised by any Governmental Entity that it is considering
issuing or requesting any Regulatory Agreement.
5.14 UNDISCLOSED LIABILITIES. Except for those liabilities that are fully
reflected on reserved against on the consolidated balance sheet of Washington
Mutual included in the Washington Mutual Form 10-Q for the quarter ended
March 31, 2000 or for liabilities incurred in the ordinary course of business
consistent with past practice since March 31, 2000, neither Washington Mutual
nor any of its Subsidiaries has incurred any liability of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether due or to become
due) that, either alone or when combined with all similar liabilities, has had,
or would reasonably be expected to have, a Material Adverse Effect on Washington
Mutual.
5.15 RIGHTS AGREEMENT; ANTI-TAKEOVER PROVISIONS. Washington Mutual has
taken all action (including, if required, redeeming all of the outstanding
Rights issued pursuant to the Washington Mutual Rights Agreement or amending or
terminating the Washington Mutual Rights Agreement) so that the entering into of
this Agreement and the consummation of the transactions contemplated hereby do
not and will not result in the grant of any rights to any person under the
Washington Mutual Rights Agreement or enable or require the Washington Mutual to
be exercised, distributed or triggered. The Board of Directors of Washington
Mutual has taken all necessary action so that the takeover laws of the
Washington Business Corporation Act and any comparable provisions of Washington
Mutual's Articles of Incorporation do not and will not apply to this Agreement,
the Merger or the transactions contemplated hereby.
5.16 WASHINGTON MUTUAL INFORMATION. The information relating to Washington
Mutual and its Subsidiaries to be provided by Washington Mutual to be contained
in the Proxy Statement/Prospectus, the S-4 and the CPR Trust Registration
Statement, or in any other document filed with any other Governmental Entity in
connection herewith, will not contain any untrue statement of a material fact
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or omit to state a material fact necessary to make the statements therein, in
light of the circumstances in which they are made, not misleading. The Proxy
Statement/Prospectus (except for such portions thereof that relate only to Bank
United Corp. or any of its Subsidiaries) will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder. The S-4 will comply as to form in all material respects with the
provisions of the Securities Act and the rules and regulations thereunder.
5.17 ENVIRONMENTAL LIABILITY. Except as set forth in Section 5.17 of the
Washington Mutual Disclosure Schedule, there are no legal, administrative,
arbitral or other proceedings, claims, actions, causes of action, private
environmental investigations or remediation activities or governmental
investigations of any nature seeking to impose, or that reasonably would be
expected to result in the imposition, on Washington Mutual or any of its
Subsidiaries of any liability or obligation arising under any Environmental Law,
pending or, to the knowledge of Washington Mutual, threatened, against
Washington Mutual or any of its Subsidiaries, which liability or obligation that
would reasonably be expected to have a Material Adverse Effect on Washington
Mutual. To the knowledge of Washington Mutual, there is no reasonable basis for
any such proceeding, claim, action or governmental investigation that would
impose any liability or obligation that would have or would reasonably be
expected to have a Material Adverse Effect on Washington Mutual. To the
knowledge of Washington Mutual, during or prior to the period of (i) its or any
of its Subsidiaries' ownership or operation of any of their respective current
properties, (ii) its or any of its Subsidiaries' participation in the management
of any property, or (iii) its or any of its Subsidiaries' holding of a security
interest or other interest in any property, there were no releases or threatened
releases of hazardous, toxic, radioactive or dangerous materials or other
materials regulated under Environmental Laws in, on, under or affecting any such
property, which would reasonably be expected to have a Material Adverse Effect
on Washington Mutual. Neither Washington Mutual nor any of its Subsidiaries is
subject to any agreement, order, judgment, decree, letter or memorandum by or
with any court, governmental authority, regulatory agency or third party
imposing any material liability or obligation pursuant to or under any
Environmental Law that would reasonably be expected to have a Material Adverse
Effect on Washington Mutual.
5.18 OPINION OF FINANCIAL ADVISOR. Washington Mutual has received the
opinion of Lehman Brothers, Inc., dated August 18, 2000, to the effect that, as
of such date, the Exchange Ratio is fair from a financial point of view to
Washington Mutual.
5.19 COMMUNITY REINVESTMENT ACT COMPLIANCE. Each of Washington Mutual
subsidiary depository institutions is in compliance in all material respects
with the applicable provisions of the CRA and has received a CRA rating of
"outstanding" from the OTS in its most recent exam, and Washington Mutual has no
knowledge of the existence of any fact or circumstances or set of facts or
circumstances which could be reasonably expected to result in any of such
institutions failing to be in compliance in all material respects with such
provisions or having its current rating lowered.
6. COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME. Except as set forth
in Section 6.1 or 6.2 of the Bank United Corp. Disclosure Schedule, as expressly
contemplated or permitted by this Agreement, or as required by applicable law,
rule or regulation, during the period from the date of this Agreement to the
Effective Time, Bank United Corp. shall, and shall cause each of its
Subsidiaries to, (i) conduct its business in the usual, regular and ordinary
course consistent with past practice, (ii) use reasonable best efforts to
maintain and preserve intact its business organization, employees and
advantageous business relationships and retain the services of its officers and
key employees and (iii) take no action which would reasonably be expected to
adversely affect or delay its ability to obtain any approvals of any
Governmental Entity required to consummate the transactions contemplated hereby
or to consummate the transactions contemplated hereby.
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6.2 BANK UNITED CORP. FORBEARANCES. Except as set forth in Section 6.2 of
the Bank United Corp. Disclosure Schedule, as expressly contemplated or
permitted by this Agreement, or as required by applicable law, rule or
regulation, during the period from the date of this Agreement to the Effective
Time, Bank United Corp. shall not, and shall not permit any of its Subsidiaries
to, without the prior written consent of Washington Mutual (which consent shall
not be unreasonably withheld):
(a) adjust, split, combine or reclassify any capital stock; set any record
or payment dates for the payment of any dividends or distributions on its
capital stock except in the ordinary and usual course of business consistent
with past practice; make, declare or pay any dividend or make any other
distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any shares of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital stock, or except
as otherwise permitted by this paragraph (a) or by paragraph (e) grant any stock
appreciation rights or grant any individual, corporation, joint venture or other
entity any right to acquire any shares of its capital stock, other than
(i) regular quarterly cash dividends on Bank United Corp. Common Stock equal to
the rate paid during the fiscal quarter immediately preceding the date hereof,
PROVIDED, HOWEVER, that no dividend shall be paid by Bank United Corp. on Bank
United Corp. Common Stock if Bank United Corp. shall be required to borrow to do
so; (ii) in the case of Bank United Corp. and Bank United of Texas series of
preferred stock outstanding on the date hereof, cash dividends thereon at the
rates set forth in the applicable certificate of incorporation, certificate of
designation or supplemental charter for such securities; (iii) dividends paid by
any of the Subsidiaries of Bank United Corp. so long as such dividends are only
paid to Bank United Corp. or any of its wholly owned Subsidiaries; provided that
no such dividend shall cause Bank United of Texas to cease to qualify as a "well
capitalized" institution under 12 CFR 565); or issue any additional shares of
capital stock except pursuant to the exercise of stock options outstanding as of
the date hereof or permitted to be issued under this Section 6.2;
(b) sell, transfer, mortgage, encumber or otherwise dispose of any of its
assets or properties to any individual, corporation or other entity (other than
a direct wholly owned Subsidiary), or cancel, release or assign any indebtedness
to any such person or any claims held by any such person, in each case that is
material to such party, except (i) in the ordinary course of business consistent
with past practice or (ii) as expressly required by the terms of any contracts
or agreements in force at the date of this Agreement and set out in Section 6.2
of the Bank United Corp. Disclosure Schedule;
(c) make any acquisition or investment, by purchase or other acquisition of
stock or other equity interests (other than in a fiduciary or agent capacity or
pursuant to written contracts or agreements entered into prior to the date
hereof (true and correct copies of which have been previously delivered to
Washington Mutual)), by merger, consolidation or other business combination, or
by contributions to capital; or make any material property transfers or material
purchases of any property or assets, in or from any other individual,
corporation, joint venture or other entity other than a wholly owned Subsidiary
of Bank United Corp., except as expressly required by the terms of any contracts
or agreements in force at the date of this Agreement and set out in Section 6.2
of the Bank United Corp. Disclosure Schedule;
(d) 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 $500,000 and which is not either (i) terminable at will on 60 days
or less notice without payment of a penalty in excess of $50,000 or (ii) has a
term of less than one year; or make any material change in any of its leases or
such contracts, other than renewals of such contracts or leases for a term of
one year or less without material adverse changes to the terms thereof;
(e) other than general salary increases consistent with past practices for
employees or as required by contractual commitments outstanding on the date
hereof (PROVIDED that any new salary increases resulting from the salary scale
adopted prior to the date hereof may be phased in by Bank United
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Corp. only in accordance with such salary scale increase program), increase in
any material respect the compensation or fringe benefits of any of its employees
or pay any pension or retirement allowance not required by any existing plan or
agreement to any such employees or become a party to, amend (other than
amendments required by law) or commit itself to any pension, retirement,
profit-sharing, severance or welfare benefit plan or agreement or employment
agreement with or for the benefit of any employee or accelerate the vesting of
any stock options or other stock-based compensation; PROVIDED, that Bank United
Corp. may pay a bonus to one or more of the Bank United Corp. employees set
forth on EXHIBIT 6.2 hereto so long as such bonus, in the aggregate, does not
exceed the amount set forth across from the applicable employee's name therein;
(f) authorize or permit any of its officers, directors, employees,
representatives or agents (collectively, "REPRESENTATIVES") to directly or
indirectly solicit, initiate or encourage any inquiries relating to, or that may
reasonably be expected to lead to, or the making of any proposal which
constitutes, a Takeover Proposal (as defined below), or recommend or endorse any
Takeover Proposal, or participate in any discussions or negotiations, or provide
third parties with any nonpublic information, relating to any such Takeover
Proposal or otherwise facilitate any effort or attempt to make or implement a
Takeover Proposal; PROVIDED, HOWEVER, that, at any time prior to the time its
stockholders shall have approved this Agreement and the Merger, Bank United
Corp. may, and may authorize and permit its Representatives to, (i) provide
third parties with nonpublic information and participate in discussions and
negotiations with any third party in response to a Takeover Proposal which was
not solicited subsequent to the date hereof if Bank United Corp.'s Board of
Directors, after consulting with its financial advisers and outside counsel, has
determined in its reasonable good faith judgment that such action is necessary
to comply with its fiduciary duties under applicable law and (ii) the Bank
United Corp. Board of Directors may take the actions described in the proviso in
the second sentence of Section 7.3(b) as permitted thereby; PROVIDED, FURTHER,
HOWEVER, that nothing contained in this Agreement shall prevent Bank United
Corp. or the Bank United Corp. Board of Directors from (A) complying with
Rule 14e-3 promulgated under the Exchange Act or (B) making any disclosure to
the holders of the Bank United Corp. Capital Stock required by applicable law.
Bank United Corp. shall (i) advise Washington Mutual orally (within one day) and
in writing (as promptly as practicable thereafter) of the receipt after the date
hereof of any Takeover Proposal by it or by any of its Subsidiaries or any of
its Representatives and (ii) unless its Board of Directors, after consulting
with its financial advisers and outside counsel, has determined in its
reasonable good faith judgment that it cannot take such action if it is to
comply with its fiduciary duties under applicable law, inform Washington Mutual
orally and in writing, as promptly as practicable after the receipt thereof, of
the material terms and conditions of any such Takeover Proposal (including the
identity of the party making such inquiry or proposal) and shall keep Washington
Mutual informed of the status (including any changes in the material terms and
conditions) thereof. Bank United Corp. shall not furnish any nonpublic
information to any other party pursuant to this Section 6.2(f) except pursuant
to the terms of a confidentiality agreement on customary terms as advised by its
outside legal counsel. Bank United Corp. will immediately cease and cause to be
terminated any activities, discussions or negotiations conducted prior to the
date of this Agreement with any parties other than Washington Mutual with
respect to any Takeover Proposal and require the return (or if permitted by the
terms of the applicable confidentiality agreement, the destruction) of all
confidential information previously provided to such parties. As used in this
Agreement, "TAKEOVER PROPOSAL" shall mean any inquiry, proposal or offer
relating to any tender or exchange offer, proposal for a merger, consolidation
or other business combination involving Bank United Corp. or any of its
Subsidiaries or the acquisition in any manner of 25% or more of the voting stock
or equity, or 25% or more of the consolidated assets, of Bank United Corp. or
any of its Subsidiaries, other than the transactions contemplated by this
Agreement;
(g) make any capital expenditures in excess of (A) $300,000 per project or
related series of projects or (B) $1,800,000 in the aggregate, other than
expenditures necessary to maintain existing assets in good repair;
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(h) except in the ordinary course of business, make application for the
opening, relocation or closing of any, or open, relocate or close any, branch
office or loan production or servicing facility;
(i) except for Loans or commitments for Loans that have previously been
approved by Bank United Corp. prior to the date of this Agreement, (A) make or
acquire any Loan or issue a commitment for any Loan (1) except for Loans and
commitments that are made in the ordinary course of business consistent with
past practice or (2) with a principal balance above $10,000,000, other than with
the prior consent of Washington Mutual, which consent will not be unreasonably
withheld (the parties hereby agreeing to work in a cooperative manner to
establish procedures by which such consent will be provided in order to ensure
that this consent process does not materially interfere with the continued
operations of Bank United Corp. in the ordinary course of business consistent
with past practice); (B) take any action that would result in any discretionary
releases of collateral or guarantees or otherwise restructure any Loan or
commitment for any Loan with a principal balance in excess of $1,000,000; or
(C) agree to guarantee the obligations of any person other than any wholly owned
Subsidiary of Bank United Corp.;
(j) except as otherwise expressly permitted elsewhere in this Section 6.2,
engage or participate in any material transaction or incur or sustain any
material obligation, in each case other than in the ordinary course of business;
(k) settle any claim, action or proceeding involving monetary damages,
except in the ordinary course of business consistent with past practice, or
agree or consent to the issuance of any injunction, decree, order or judgment
restricting its business or operations;
(l) amend its certificate of incorporation, bylaws or similar governing
documents;
(m) except in the ordinary course of business consistent with past practice,
materially change its investment securities portfolio policy, or the manner in
which the portfolio is classified or reported;
(n) make any material changes in its policies and practices with respect to
(i) underwriting, pricing, originating, acquiring, selling, servicing, or buying
or selling rights to service loans or (ii) hedging its loan positions or
commitments;
(o) take any action that is intended or may reasonably be expected to result
in any of its representations and warranties set forth in this Agreement being
or becoming untrue in any material respect at any time prior to the Effective
Time, or in any of the conditions to the Merger set forth in Section 8.1 or 8.2
not being satisfied or in a material violation of any provision of this
Agreement, except, in every case, as may be required by applicable law;
(p) make any changes in its accounting methods, practices or policies,
except as may be required under law, rule, regulation or GAAP, in each case as
concurred in by Bank United Corp.'s independent public accountants;
(q) enter into any securitizations of any loans or create any special
purpose funding entity;
(r) settle or compromise any material Tax liability of Bank United Corp. or
any of its Subsidiaries or, except in the ordinary course of business consistent
with past practice, agree to an extension of the statute of limitations with
respect to the assessment or determination of Taxes of Bank United Corp. or any
of its Subsidiaries; or
(s) agree to, or make any commitment to, take any of the actions prohibited
by this Section 6.2.
6.3 NO FUNDAMENTAL WASHINGTON MUTUAL CHANGES. Except as expressly
contemplated or permitted by this Agreement, or as required by applicable law,
rule or regulation, during the period from the date of this Agreement to the
Effective Time, Washington Mutual shall not, without the prior written consent
of Bank United Corp. (which consent shall not be unreasonably withheld),
(i) amend its articles of incorporation or bylaws in a manner that would
adversely affect the economic benefits of the
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Merger to the holders of Bank United Corp. Capital Stock, (ii) take any action
that is intended or may reasonably be expected to result in any of its
representations and warranties set forth in this Agreement being or becoming
untrue in any material respect at any time prior to the Effective Time, or in
any of the conditions to the Merger set forth in Section 8.1 or 8.3 not being
satisfied or in a material violation of any provision of this Agreement, except,
in every case, as may be required by applicable law, or (iii) agree to, or make
any commitment to, take any of the actions prohibited by this Section 6.3.
7. ADDITIONAL AGREEMENTS
7.1 REGULATORY MATTERS.
(a) Washington Mutual and Bank United Corp. shall promptly prepare and file
with the SEC the Proxy Statement/Prospectus and the S-4. Each of Washington
Mutual and Bank United Corp. shall use reasonable best efforts to have the S-4
declared effective under the Securities Act as promptly as practicable after
such filing, and Bank United Corp. shall thereafter mail the Proxy Statement/
Prospectus to its stockholders.
(b) Bank United Corp. shall promptly prepare and cause the CPR Trust to file
with the SEC the CPR Trust Registration Statement (except to the extent the CPR
Certificates can be registered under applicable law, and are registered, on the
S-4). Bank United Corp. shall use reasonable best efforts to have the CPR Trust
Registration Statement declared effective under the Securities Act as promptly
as practicable after such filing (except to the extent the CPR Certificates can
be registered under applicable law, and are registered, on the S-4), and to
cause the Trust Agreement to be qualified under the Trust Indenture Act of 1939,
as amended, including the rules and regulations thereunder (the "TRUST INDENTURE
ACT"), if required by applicable law.
(c) Subject to the other provisions of this Agreement, the parties hereto
shall cooperate with each other and use reasonable best efforts to promptly
prepare and file all necessary documentation, to effect all applications,
notices, petitions and filings, to obtain as promptly as practicable all
permits, consents, approvals and authorizations of all third parties and
Governmental Entities which are necessary or advisable to consummate the
transactions contemplated by this Agreement (including without limitation the
Merger) and to comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such third parties and
Governmental Entities.
(d) Washington Mutual and Bank United Corp. shall, upon request, furnish
each other with all information concerning themselves, their Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy Statement/ Prospectus, the
S-4 or any other statement, filing, notice or application made by or on behalf
of Washington Mutual, Bank United Corp. or any of their respective Subsidiaries
to any Governmental Entity in connection with the Merger and the other
transactions contemplated by this Agreement.
(e) Washington Mutual and Bank United Corp. shall promptly advise each other
upon receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any Requisite Regulatory Approval (as defined in Section 8.1(c)
below) will not be obtained or that the receipt of any such approval will be
materially delayed or conditioned.
7.2 ACCESS TO INFORMATION.
(a) Upon reasonable notice and subject to applicable laws relating to the
exchange of information, Bank United Corp. shall, and shall cause each of its
Subsidiaries to, afford to the officers, employees, accountants, counsel and
other Representatives of Washington Mutual access, during normal business hours
during the period prior to the Effective Time, to all its properties, books,
contracts, commitments and records, and to its officers, employees, accountants,
counsel and other representatives, in each case in
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a manner not unreasonably disruptive to the operation of the business of Bank
United Corp. and its Subsidiaries, and, during such period, Bank United Corp.
shall, and shall cause its Subsidiaries to, make available to Washington Mutual
(i) a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of
Federal securities laws or Federal or state banking, mortgage lending, real
estate or consumer finance or protection laws (other than reports or documents
which Bank United Corp. is not permitted to disclose under applicable law) and
(ii) all other information concerning its business, properties and personnel as
such other party may reasonably request. Neither Bank United Corp. nor any of
its Subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would violate or prejudice the
rights of its customers, jeopardize the attorney-client privilege of the
institution in possession or control of such information or contravene any law,
rule, regulation, order, judgment, decree, fiduciary duty or binding agreement
entered into prior to the date of this Agreement or in the ordinary course of
business consistent with past practice. The parties hereto will make appropriate
substitute disclosure arrangements under circumstances in which the restrictions
of the preceding sentence apply.
(b) During the 30-day period prior to the Closing and from time to time
after the date of this Agreement upon Bank United Corp.'s reasonable request,
Bank United Corp. and its Representatives shall have a reasonable opportunity to
conduct an update of their due diligence review of Washington Mutual and its
Subsidiaries. In order to permit such due diligence update, upon reasonable
notice and subject to applicable laws relating to the exchange of information,
and in a manner not unreasonably disruptive to the operation of the business of
Washington Mutual and its Subsidiaries, Washington Mutual shall afford Bank
United Corp. and its Representatives reasonable access, during normal business
hours during such 30-day period or upon such reasonable request, to all its
properties, books, contracts and records relating to the assets, stock
ownership, properties, obligations, operations and liabilities of Washington
Mutual and its Subsidiaries, and to its officers, employees, accountants,
counsel and other representatives, in all cases in which Bank United Corp. may
have a reasonable interest. Washington Mutual and its Subsidiaries shall not be
required to provide access to or disclose information where such access or
disclosure would violate or prejudice the rights of its customers, jeopardize
the attorney-client privilege of Washington Mutual or any of its Subsidiaries or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or
binding agreement entered into prior to the date of this Agreement or in the
ordinary course of business consistent with past practice. The parties hereto
will make appropriate substitute disclosure arrangements under circumstances in
which the restrictions of the preceding sentence apply.
(c) Washington Mutual and Bank United Corp. shall hold all information
furnished by the other party or any of its Subsidiaries or representatives
pursuant to Section 7.2(a) or (b) in confidence to the extent required by, and
in accordance with, the provisions of the Confidentiality Agreement(s), dated
March 23, 2000, between Washington Mutual and Bank United Corp. (the
"CONFIDENTIALITY AGREEMENT(S)").
(d) No investigation by either of the parties or their respective
Representatives shall affect the representations, warranties, covenants or
agreements of the other set forth herein.
7.3 STOCKHOLDER APPROVAL. Bank United Corp. shall duly call, give notice
of, convene and hold a meeting of its stockholders to be held as soon as
practicable following the date hereof for the purpose of obtaining the requisite
stockholder approval required in connection with this Agreement and the Merger;
PROVIDED, HOWEVER, that Bank United Corp. shall not be required to convene and
hold such meeting at any time substantially earlier than the time when
Washington Mutual anticipates receiving all requisite regulatory approvals for
the Merger. Bank United Corp. shall, through its Board of Directors, recommend
to its stockholders approval of the Merger; PROVIDED, HOWEVER, that this
Section 7.3 shall not prohibit accurate disclosure by Bank United Corp. of
information that is required in the Proxy Statement/Prospectus or any other
document required to be filed with the SEC (including without limitation a
disclosure statement on Schedule 14D-9) or otherwise required by applicable law
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or regulation or the rules of The Nasdaq Stock Market to be publicly disclosed;
PROVIDED, FURTHER, HOWEVER, that Bank United Corp. may withdraw or modify such
recommendation to the extent that its Board of Directors, after consulting with
its financial advisers and outside counsel, has determined in its reasonable
good faith judgment that such action is necessary to comply with its fiduciary
duties under applicable law. In the event that the Board of Directors of Bank
United Corp. withdraws or modifies its recommendation in accordance with the
preceding sentence, the Board shall nevertheless submit this Agreement and the
Merger to its stockholders for approval.
7.4 LEGAL CONDITIONS TO MERGER.
(a) Subject to the terms and conditions of this Agreement, each of
Washington Mutual and Bank United Corp. shall, and shall cause its Subsidiaries
to, use their reasonable best efforts (i) 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 with respect
to the Merger and, subject to the conditions set forth in Section 8 hereof, to
consummate the transactions contemplated by this Agreement and (ii) to obtain
(and to cooperate with the other party to obtain) any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity and any other
third party which is required to be obtained by Bank United Corp. or Washington
Mutual or any of their respective Subsidiaries in connection with the Merger and
the other transactions contemplated by this Agreement.
(b) Subject to the terms and conditions of this Agreement, each of
Washington Mutual and Bank United Corp. agrees to use reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective, as soon
as practicable after the date of this Agreement, the transactions contemplated
hereby, including, without limitation, using reasonable best efforts to
(i) modify or amend any contracts, plans or arrangements to which Washington
Mutual or Bank United Corp. is a party (to the extent permitted by the terms
thereof) if necessary in order to satisfy the conditions to closing set forth in
Section 8 hereof, (ii) lift or rescind any injunction or restraining order or
other order adversely affecting the ability of the parties to consummate the
transactions contemplated hereby, and (iii) defend any litigation seeking to
enjoin, prevent or delay the consummation of the transactions contemplated
hereby or seeking material damages.
7.5 AFFILIATES. Bank United Corp. shall use its reasonable best efforts to
cause each director, executive officer and other person who is an "affiliate"
(for purposes of Rule 145 under the Securities Act) of Bank United Corp. to
deliver to Washington Mutual, as soon as practicable after the date of this
Agreement, and in any event prior to the date of the stockholders meeting called
by Bank United Corp. pursuant to Section 7.3 hereof, a written agreement, in the
form and substance reasonably satisfactory to Washington Mutual, relating to
required transfer restrictions on the Washington Mutual Common Stock received by
them in the Merger pursuant to Rule 145.
7.6 STOCK EXCHANGE LISTING. Washington Mutual shall use its best efforts
to cause the shares of Washington Mutual Common Stock and the Washington Mutual
PIES to be issued in the Merger to be approved for listing on the NYSE, subject
to official notice of issuance, prior to the Effective Time.
7.7 EMPLOYEES; EMPLOYEE BENEFIT PLANS.
(a) From and after the Effective Time, the benefits to be provided to
employees of Bank United Corp. and its Subsidiaries as of the Effective Time
("Covered Employees") shall be the benefit plans and programs provided to
similarly situated employees of Washington Mutual. Washington Mutual shall, from
and after the Effective Time, (i) comply with the Plans and other contractual
commitments of Bank United Corp. to its current and former employees in
accordance with their terms and honor all employee benefit obligations to
current and former employees of Bank United Corp. and its Subsidiaries under the
Plans or the applicable contractual commitment, (ii) provide Covered Employees
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credit for the most recent period of uninterrupted service (including any
bridging or prior service credit, without regard to whether there has been an
interruption in service, solely to the extent provided by Bank United Corp. and
its Subsidiaries as of the date hereof) with Bank United Corp. or any of its
Subsidiaries (and their predecessors) prior to the Effective Time for all
purposes under employee benefit plans of Washington Mutual or its Subsidiaries
(other than Washington Mutual's noncontributory cash balance defined benefit
pension plan), (iii) permit each Covered Employee which was a participant in the
Bank United Corp. 401(k) plan (the "401(K) PLAN") immediately prior to the
Closing Date to commence participation in the Washington Mutual, Inc. 401(k)
plan on the Closing Date, (iv) cause any and all pre-existing condition
limitations (to the extent such limitations did not apply to a pre-existing
condition under comparable Plans) and eligibility waiting periods under group
health plans of Washington Mutual to be waived with respect to Covered Employees
(and their eligible dependents) who become participants in such group health
plans and (v) use reasonable efforts to give credit for or otherwise take into
account the out-of-pocket expenses and annual expense limitations paid by each
Covered Employee under the comparable Plans for the year in which the Effective
Time occurs. From and after the Effective Time, Washington Mutual shall honor
all vacation and paid time off of the Covered Employees accrued as of the
Effective Time, in accordance with the Bank United Corp. policy as in effect on
the date hereof. From and after the Effective Time, a Covered Employee who is
terminated (as defined in the applicable Bank United Corp. severance plan or
policy as in effect immediately prior to the Effective Time) during the period
commencing at the Effective Time and ending on the 12-month anniversary thereof
shall be entitled to receive the severance payments and benefits under the
applicable Bank United Corp. severance plan or policy as in effect on the date
hereof (without amendment on or after the Effective Time). Except as otherwise
prohibited under this Section 7.7, nothing in this Section 7.7 shall be
interpreted as preventing Washington Mutual or its Subsidiaries from amending,
modifying or terminating any Plans or other contracts, arrangements, commitments
or understandings, in a manner consistent with their terms and applicable law.
(b) Subject to applicable law and the amendment provisions of the 401(k)
Plan, Bank United Corp. agrees to amend the 401(k) Plan prior to the Effective
Time so that (i) participant loans are no longer available as of the Effective
Time, (ii) discretionary matching contributions on participant contributions
made after the Effective Time shall not exceed 100% of such participant's
contributions not in excess of three percent of each participant's considered
compensation, (iii) on and after the Effective Time, employees shall first
become participants in the 401(k) Plan only after completing one year of active
service with the plan sponsor and its related entities, and (iv) effective as of
the Effective Time, the vesting schedule shall be revised to conform to the
following: (A) less than two years vesting service = 0% vested; (B) two years
vesting service = 25% vested; (C) three years vesting service = 50% vested;
(D) four years vesting service = 75% vested; and (E) five or more years vesting
service = 100% vested. Bank United Corp. agrees that the plan does not currently
provide, and will not be amended to provide, benefit distribution options other
than lump sum distributions with respect to any portion of a participant's
account attributable to service with Bank United Corp..
7.8 INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE.
(a) From and after the Effective Time, in the event of any threatened or
actual claim, action, suit, proceeding or investigation, whether civil, criminal
or administrative, including, without limitation, any such claim, action, suit,
proceeding or investigation in which any person who is now, or has been at any
time prior to the date of this Agreement, or who becomes prior to the Effective
Time, a director, officer or employee of Bank United Corp. or any of its
Subsidiaries (the "INDEMNIFIED PARTIES") is, or is threatened to be, made a
party based in whole or in part on, or arising in whole or in part out of, or
pertaining to (i) the fact that he is or was a director, officer or employee of
Bank United Corp., any of its Subsidiaries or any of their respective
predecessors or was prior to the Effective Time serving at the request of any
such party as a director, officer, employee, fiduciary or agent of another
corporation, partnership, trust or other enterprise (a list of which with
respect to the directors, officers or employees
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of Bank United Corp. or any of its Subsidiaries as of the date of this Agreement
is set forth in Section 7.8(a) of the Bank United Corp. Disclosure Schedule) or
(ii) this Agreement, or any of the transactions contemplated hereby and all
actions taken by an Indemnified Party in connection herewith, whether in any
case asserted or arising before or after the Effective Time, the parties hereto
agree to cooperate in connection with defending against and responding to such
proceedings. It is understood and agreed that after the Effective Time,
Washington Mutual shall indemnify and hold harmless, as and to the fullest
extent permitted by the corporate governance documents of Bank United Corp. or
its Subsidiaries as of the date hereof and by law, each such Indemnified Party
against any losses, claims, damages, liabilities, costs, expenses (including
reasonable attorneys' fees and expenses in advance of the final disposition of
any claim, suit, proceeding or investigation to each Indemnified Parry to the
fullest extent permitted by law upon receipt of an undertaking, to the extent
required by the DGCL, from such Indemnified Party to repay such advanced
expenses if it is finally and unappealably determined that such Indemnified
Party was not entitled to indemnification hereunder), judgments, fines and
amounts paid in settlement in connection with any such threatened or actual
claim, action, suit, proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding or investigation (whether
asserted or arising before or after the Effective Time) (collectively,
"CLAIMS"), the Indemnified Parties may retain counsel reasonably satisfactory to
them after consultation with Washington Mutual; PROVIDED, HOWEVER, that
(1) Washington Mutual shall not be liable for any settlement effected without
its prior written consent (which consent shall not be unreasonably withheld) and
(2) Washington Mutual shall have no obligation hereunder to any Indemnified
Party when and if a court of competent jurisdiction shall ultimately determine,
and such determination shall have become final and nonappealable, that
indemnification of such Indemnified Party in the manner contemplated hereby is
prohibited by the corporate governance documents of Bank United Corp. or its
Subsidiaries or applicable law. Any Indemnified Party wishing to claim
indemnification under this Section 7.8, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify Washington Mutual thereof,
provided that the failure to so notify shall not affect the obligations of
Washington Mutual under this Section 7.8 except (and only) to the extent such
failure to notify materially prejudices Washington Mutual.
(b) Without limiting any of the obligations under paragraph (a) of this
Section 7.8, Washington Mutual agrees that all rights to indemnification and all
limitations of liability existing in favor of the Indemnified Parties as
provided in Bank United Corp.'s Certificate of Incorporation or Bylaws or in the
similar governing documents of any of Bank United Corp.'s Subsidiaries as in
effect as of the date of this Agreement with respect to matters occurring on or
prior to the Effective Time shall survive the Merger and shall continue in full
force and effect thereafter, without any amendment thereto; PROVIDED, HOWEVER,
that nothing contained in this Section 7.8(b) shall be deemed to preclude the
liquidation, consolidation or merger of Bank United Corp. or any Subsidiary
thereof, in which case all of such rights to indemnification and limitations on
liability shall be deemed to so survive and continue notwithstanding any such
liquidation, consolidation or merger and shall constitute rights which may be
asserted against Washington Mutual. Nothing contained in this Section 7.8(b)
shall be deemed to preclude any rights to indemnification or limitations on
liability provided in Washington Mutual's Articles of Incorporation or Bylaws or
the similar governing documents of any of Washington Mutual's Subsidiaries with
respect to matters occurring subsequent to the Effective Time to the extent that
the provisions establishing such rights or limitations are not otherwise amended
to the contrary.
(c) Washington Mutual shall use its best efforts to cause the persons
serving as officers and directors of Bank United Corp. immediately prior to the
Effective Time to be covered for a period of six (6) years from the Closing Date
by the directors' and officers' liability insurance policy or policies
maintained by Washington Mutual (provided that Washington Mutual's policy or
policies provide at least the same coverage and amounts containing terms and
conditions which are not less advantageous to such directors and officers of
Bank United Corp. than the terms and conditions of the existing directors' and
officers' liability insurance policy of Bank United Corp., and PROVIDED FURTHER
that in no
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event will Washington Mutual be required to expend in any one year an amount in
excess of 200% of the annual premiums currently paid by Bank United Corp. for
such insurance (the "INSURANCE AMOUNT"), and further provided, that if
Washington Mutual is unable to maintain or obtain the insurance called for by
this Section 7.8(c) as a result of the preceding proviso, Washington Mutual
shall use its reasonable best efforts to obtain as much comparable insurance as
available for the Insurance Amount) with respect to acts or omissions occurring
prior to the Effective Time which were committed by such officers and directors
in their capacity as such. The provisions of this Section 7.8 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified Party and his
or her heirs and representatives.
7.9 ADDITIONAL AGREEMENTS. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement (including, without limitation, any merger between a Subsidiary of
Washington Mutual and a Subsidiary of Bank United Corp.) or to vest the
Surviving Company with full title to all properties, assets, rights, approvals,
immunities and franchises of any of the parties to the Merger, the proper
officers and directors of each party to this Agreement and their respective
Subsidiaries shall take all such necessary action as may be reasonably requested
by Washington Mutual.
7.10 ADVICE OF CHANGES. Washington Mutual and Bank United Corp. shall
promptly advise the other party of any change or event which, individually or in
the aggregate with other such changes or events, has a Material Adverse Effect
on it or which it believes would or would be reasonably likely to cause or
constitute a material breach of any of its representations, warranties or
covenants contained herein.
7.11 SUBSEQUENT INTERIM AND ANNUAL FINANCIAL STATEMENTS.
(a) As soon as reasonably available, but in no event more than 45 days after
the end of each fiscal quarter (other than the fourth quarter of a fiscal year)
or 90 days after the end of each fiscal year ending after the date of this
Agreement, each party will deliver to the other party its Quarterly Report on
Form 10-Q or its Annual Report on Form 10-K, as the case may be, as filed with
the SEC under the Exchange Act.
(b) As soon as reasonably practicable and as soon as they are available, but
in no event more than 30 days, after the end of each calendar month ending after
the date of this Agreement, Bank United Corp. shall furnish to Washington Mutual
(i) consolidated and consolidating financial statements (including balance
sheet, statement of operations and stockholders' equity) of Bank United Corp.
and each of its Subsidiaries as of and for such month then ended,
(ii) servicing reports regarding cash flows, delinquencies and foreclosures on
asset pools serviced or master serviced by Bank United Corp. or any of its
Subsidiaries, and (iii) any internal management reports relating to the
foregoing. All information furnished by Bank United Corp. to Washington Mutual
pursuant to this Section 7.11(b) shall be held in confidence by Washington
Mutual to the extent required by, and in accordance with, the provisions of the
Confidentiality Agreement(s).
7.12 CPR TRUST. Bank United Corp. agrees to (i) take all actions necessary
to cause the CPR Trust to be formed prior to the Effective Time and to be
operated in accordance with the Trust Agreement and (ii) execute the Commitment
(as defined in Section 8.2) and perform its obligations thereunder. In addition,
Bank United Corp. agrees to take all actions necessary to cause the issuance of
the CPR Certificates by the CPR Trust to Bank United Corp. and the distribution
of such CPR Certificates to the holders of Bank United Corp. Common Stock prior
to the Effective Time pursuant to the merger described in Section 7.15. Except
as set forth in this Section 7.12, the terms of the CPR Trust and the CPR
Certificates shall be as set forth in the Trust Agreement. Bank United Corp.
agrees to cause the CPR Trust immediately prior to the Effective Time to deliver
to Washington Mutual a number of CPR Certificates sufficient for the delivery of
CPR Certificates required by Section 2.8. Washington Mutual hereby agrees to
honor and perform the obligations of Bank United Corp. under both the Trust
Agreement and the Commitment on and after the Effective Time.
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7.13 REORGANIZATION. Neither Washington Mutual nor Bank United Corp. shall
take, or cause or permit any of its Subsidiaries to take, any action that could
reasonably be expected to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
7.14 EXEMPTION FROM LIABILITY UNDER SECTION 16(B). Assuming that Bank
United Corp. delivers to Washington Mutual the Section 16 Information (as
defined below) reasonably in advance of the Effective Time, the Board of
Directors of Washington Mutual, or a committee of Non-Employee Directors thereof
(as such term is defined for purposes of Rule 16b-3(d) under the Exchange Act),
shall reasonably promptly thereafter and in any event prior to the Effective
Time adopt a resolution providing that the receipt by the Bank United Corp.
Insiders (as defined below) of Washington Mutual Common Stock in exchange for
shares of Bank United Corp. Common Stock, and of options to purchase Washington
Mutual Common Stock upon conversion of Bank United Corp. Options, in each case
pursuant to the transactions contemplated hereby and to the extent such
securities are listed in the Section 16 Information provided by Bank United
Corp. to Washington Mutual prior to the Effective Time, are intended to be
exempt from liability pursuant to Section 16(b) under the Exchange Act such that
any such receipt shall be so exempt. "SECTION 16 INFORMATION" shall mean
information accurate in all respects regarding the Bank United Corp. Insiders,
the number of shares of Bank United Corp. Common Stock held by each such Bank
United Corp. Insider and expected to be exchanged for Washington Mutual Common
Stock in the Merger, and the number and description of the Bank United Corp.
Options held by each such Bank United Corp. Insider and expected to be converted
into options to purchase shares of Washington Mutual Common Stock in connection
with the Merger. "BANK UNITED CORP. INSIDERS" shall mean those officers and
directors of Bank United Corp. who are subject to the reporting requirements of
Section 16(a) of the Exchange Act and who are listed in the Section 16
Information.
7.15 MERGER. Prior to the Effective Time, Bank United Corp. shall form a
new wholly owned Subsidiary and shall merge such Subsidiary with and into Bank
United Corp., with the surviving corporation being Bank United Corp.. In
connection with such merger and prior to the Effective Time, Bank United Corp.
shall cause the CPR Trust to issue the CPR Certificates to Bank United Corp. as
provided in Section 7.12. In such merger, (i) each share of Bank United Corp.
Common Stock shall be converted into the right to receive (A) one share of Bank
United Corp. Common Stock and (B) one CPR Certificate, and each share of stock
of such wholly owned Subsidiary shall be cancelled without consideration and
(ii) each of the Bank United Corp. PIES shall be adjusted in accordance with the
terms thereof to provide for the purchase of shares of Bank United Corp. Common
Stock and associated CPR Certificates reflecting the terms specified in
clause (i) above.
8. CONDITIONS PRECEDENT
8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. The agreement of merger contained in this
Agreement shall have been approved and adopted by the requisite
affirmative vote of the stockholders of Bank United Corp. entitled to
vote thereon.
(b) NYSE LISTING. The shares of Washington Mutual Common Stock and
the Washington Mutual PIES which shall be issued to the holders of Bank
United Corp. Capital Stock upon consummation of the Merger shall have
been authorized for listing on the NYSE, subject to official notice of
issuance.
(c) OTHER APPROVALS. All regulatory approvals required to
consummate the transactions contemplated hereby shall have been obtained
and shall remain in full force and effect and all statutory waiting
periods in respect thereof shall have expired or been terminated (all
such
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approvals and the expiration or termination of all such waiting periods
being referred to herein as the "REQUISITE REGULATORY APPROVALS").
(d) S-4 EFFECTIVENESS. The S-4 shall have become effective under
the Securities Act, no stop order suspending the effectiveness of the S-4
shall have been issued and no proceedings for that purpose shall have
been initiated or threatened by the SEC.
(e) CPR TRUST REGISTRATION STATEMENT EFFECTIVENESS; TRUST INDENTURE
ACT. The CPR Trust Registration Statement shall have become effective
under the Securities Act, no stop order suspending the effectiveness of
the CPR Trust Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by
the SEC (except to the extent the CPR Certificates can be registered
under applicable law, and are registered, on the S-4). If required by
applicable law, the Trust Agreement shall have been duly qualified under
the Trust Indenture Act.
(f) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No order, injunction
or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition (an "INJUNCTION") preventing the
consummation of the Merger or any of the other transactions contemplated
by this Agreement shall be in effect. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated
or enforced by any Governmental Entity which prohibits or makes illegal
the consummation of the Merger.
8.2 CONDITIONS TO OBLIGATIONS OF WASHINGTON MUTUAL. The obligations of
Washington Mutual to effect the Merger are also subject to the satisfaction or
waiver by Washington Mutual at or prior to the Effective Time of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Bank United Corp. 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, that, for purposes of
this condition, such representations and warranties (other than the
representations and warranties contained in Section 4.2(a), 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 Bank United Corp.. Washington Mutual shall
have received a certificate signed on behalf of Bank United Corp. by the
Chief Executive Officer and Chief Financial Officer of Bank United Corp.
to the foregoing effect.
(b) PERFORMANCE OF OBLIGATIONS OF BANK UNITED CORP.. Bank United
Corp. shall have performed in all material respects all obligations
required to be performed by it under this Agreement at or prior to the
Closing Date, and Washington Mutual shall have received a certificate
signed on behalf of Bank United Corp. by the Chief Executive Officer and
the Chief Financial Officer of Bank United Corp. to such effect.
(c) BURDENSOME CONDITION. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the transactions contemplated by this Agreement, by
any Governmental Entity, in connection with the grant of a Requisite
Regulatory Approval or otherwise, which imposes any restriction or
condition which would be reasonably likely to have or result in a
Material Adverse Effect on Bank United Corp., the Surviving Company or
Washington Mutual.
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(d) DIRECTOR RESIGNATIONS. Washington Mutual shall have received
resignations from each director of Bank United Corp. and each of its
Subsidiaries.
(e) CPR TRUST. Prior to the Effective Time, Bank United Corp. shall
have established the CPR Trust and shall have caused the issuance of the
CPR Certificates by the CPR Trust to Bank United Corp. and the
distribution of the CPR Certificates to the holders of Bank United Corp.
Common Stock pursuant to the merger described in Section 7.15 as required
by Section 7.12.
(f) COMMITMENT. Prior to the Effective Time, Bank United Corp.
shall have executed and delivered a Commitment Agreement substantially in
the form of EXHIBIT 8.2(F) hereto (the "COMMITMENT").
(g) MERGER. Prior to the Effective Time, Bank United Corp. shall
have formed a new wholly owned Subsidiary and shall have merged such
Subsidiary with and into Bank United Corp. as required by Section 7.15.
(h) DISSENTING SHARES. The aggregate number of Dissenting Shares
shall not constitute more than 10% of all outstanding Bank United Corp.
Common Stock.
(i) FEDERAL TAX OPINION. Washington Mutual shall have received an
opinion of Gibson, Dunn & Crutcher LLP, special counsel to Washington
Mutual, dated the Closing Date, to the effect that, on the basis of
facts, representations, and assumptions set forth in such opinion,
(i) the Merger constitutes a "reorganization" within the meaning of
Section 368(a) of the Code and (ii) Washington Mutual and Bank United
Corp. will each be a party to that reorganization within the meaning of
Section 368(b) of the Code. In rendering its opinion, Gibson, Dunn &
Crutcher LLP may require and rely upon written representations from Bank
United Corp., Washington Mutual and stockholders of Bank United Corp..
8.3 CONDITIONS TO OBLIGATIONS OF BANK UNITED CORP.. The obligation of Bank
United Corp. to effect the Merger is also subject to the satisfaction or waiver
by Bank United Corp. at or prior to the Effective Time 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, that, for purposes of
this condition, 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. Bank United Corp. shall
have received a certificate signed on behalf of Washington Mutual by the
chief Executive Officer and the 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
Closing Date, and Bank United Corp. shall have received a certificate
signed on behalf of Washington Mutual by the Chief Executive Officer and
the Chief Financial Officer of Washington Mutual to such effect.
(c) COMMITMENT. Washington Mutual shall have executed and delivered
an agreement providing for the assignment by Bank United Corp. and the
assumption by Washington
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Mutual of the Commitment as of the Effective Time, which agreement shall
be in form and substance satisfactory to Washington Mutual and Bank
United Corp..
(d) FEDERAL TAX OPINION. Bank United Corp. shall have received an
opinion of Wachtell, Lipton, Rosen & Katz, special counsel to Bank United
Corp., dated the Closing Date, to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion, (i) the Merger
constitutes a "reorganization" within the meaning of Section 368(a) of
the Code and that, accordingly, (A) no gain or loss will be recognized by
Bank United Corp. as a result of the Merger and (B) no gain or loss will
be recognized by a stockholder of Bank United Corp. who receives shares
of Washington Mutual Common Stock in exchange for shares of Bank United
Corp. Common Stock, except (x) with respect to cash received in lieu of
any fractional share interest in Washington Mutual Common Stock and
(y) for gain that may be recognized in an amount not exceeding the fair
market value at the Effective Time of such stockholder's CPR Certificates
(which represent such stockholder's share of the Commitment Amount (as
defined in the Commitment)), and (ii) the CPR Trust will not itself be
subject to any material federal income taxes. In rendering its opinion,
such counsel may require and rely upon representations contained in
letters from Bank United Corp., Washington Mutual and stockholders of
Bank United Corp.. The foregoing opinion will not apply to stock holders
or persons receiving Washington Mutual Common Stock or CPR Certificates
as compensation.
9. TERMINATION AND AMENDMENT
9.1 TERMINATION. This Agreement may be terminated at any time prior to the
Effective Time:
(a) by mutual consent of Washington Mutual and Bank United Corp. in a
written instrument, if the Board of Directors of each so determines;
(b) by either Washington Mutual or Bank United Corp. if (i) any
Governmental Entity which must grant a Requisite Regulatory Approval has
denied approval of the Merger and such denial has become final and
nonappealable or (ii) any Governmental Entity of competent jurisdiction
shall have issued a final nonappealable order enjoining or otherwise
prohibiting the consummation of the transactions contemplated by this
Agreement;
(c) by either Washington Mutual or Bank United Corp. if the Effective
Time shall not have occurred on or before March 31, 2001, unless the
failure of the Effective Time to occur by such date shall be due to the
failure of the party seeking to terminate this Agreement to perform or
observe the covenants and agreements of such party set forth herein;
PROVIDED, HOWEVER, if the failure of the Effective Time to occur by
March 31, 2001 is solely due to the failure to satisfy the condition set
forth in Section 8.1(c), then the termination right set forth in this
Section 9.1(c) shall not be exercisable until June 30, 2001;
(d) by either Washington Mutual or Bank United Corp. (provided that
the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein)
if the other party shall have breached (i) any of the covenants or
agreements made by such other party herein or (ii) any of the
representations or warranties made by such other party herein, and in
either case, such breach (x) is not cured within 30 days following
written notice to the party committing such breach, or which breach, by
its nature, cannot be cured prior to the Closing and (y) would entitle
the non-breaching party not to consummate the transactions contemplated
hereby under Section 8 hereof;
(e) by either Washington Mutual or Bank United Corp. if any approval
of the stockholders of Bank United Corp. contemplated by this Agreement
shall not have been
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obtained by reason of the failure to obtain the required vote at a duly
held meeting of stockholders or at any adjournment or postponement
thereof;
(f) by the Board of Directors of Washington Mutual, if the Board of
Directors of Bank United Corp. shall have failed to recommend the Merger,
or shall have withdrawn, modified or changed in a manner adverse to
Washington Mutual its approval;
(g) by the Board of Directors of Washington Mutual if a tender offer
or exchange offer for 25% or more of the outstanding shares of Bank
United Corp. Common Stock is commenced (other than by Washington Mutual
or a Subsidiary thereof), and the Board of Directors of Bank United Corp.
recommends that the stockholders of Bank United Corp. 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 10
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);
(h) by Washington Mutual if a Subsequent Triggering Event (as defined
in the Stock Option Agreement) has occurred;
(i) by Washington Mutual if a Material Adverse Change (as defined
below) has occurred with respect to Bank United Corp.; or
(j) by Bank United Corp. if a Material Adverse Change has occurred
with respect to Washington Mutual.
As used in this Agreement, the term "MATERIAL ADVERSE CHANGE" means, with
respect to Bank United Corp. or Washington Mutual, as the case may be, a
material adverse change since June 30, 2000, in the business, results of
operations, financial condition or prospects of such party and its Subsidiaries
taken as a whole; PROVIDED, HOWEVER, that in determining whether a Material
Adverse Change has occurred, there shall be excluded any change in the
referenced party the cause of which is (i) any change in banking, savings
association and similar laws, rules or regulations of general applicability or
interpretations thereof by courts or governmental authorities, (ii) any change
in GAAP or regulatory accounting requirements applicable to banks, savings
associations, or their holding companies generally, (iii) announcement of this
Agreement or any action or omission of Bank United Corp. or Washington Mutual or
any Subsidiary of either of them taken in accordance with this Agreement or with
the prior written consent of Washington Mutual or Bank United Corp., as
applicable, in contemplation of the transactions contemplated by this Agreement
and (iv) any changes in general economic conditions affecting banks, savings
associations, or their holding companies generally, PROVIDED that the effect of
such changes described in this clause (iv) (including, without limitation,
changes in the interest rates) shall not be excluded to the extent of the
disproportionate impact (if any) they have on such person.
9.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement by either Washington
Mutual or Bank United Corp. as provided in Section 9.1, this Agreement shall
forthwith become void and have no effect, and none of Washington Mutual, Bank
United Corp., any of their respective Subsidiaries or any of the officers or
directors of any of them shall have any liability of any nature whatsoever
hereunder, or in connection with the transactions contemplated hereby, except
that (i) Sections 7.2(b), 9.2, and 10.2 shall survive any termination of this
Agreement and (ii) notwithstanding anything to the contrary contained in this
Agreement, neither Washington Mutual nor Bank United Corp. shall be relieved or
released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement.
(b) If this Agreement is terminated (A) by Washington Mutual pursuant to
Section 9.1(f) if the failure to recommend or the withdrawal, modification or
change of recommendation forming the basis
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<PAGE>
for such termination occurs after a bona fide Takeover Proposal shall have been
made known to the Board of Directors of Bank United Corp. or shall have been
publicly disclosed to Bank United Corp.'s stockholders, or any person or entity
shall have made known to the Board of Directors of Bank United Corp., or
otherwise publicly disclosed, a bona fide intention (whether or not conditional)
to make a Takeover Proposal or pursuant to Section 9.1(g), (B) by Washington
Mutual pursuant to Section 9.1(h), or (C) by Washington Mutual pursuant to
Section 9.1(d) if the breach giving rise to such termination was willful and, at
or prior to such willful violation forming the basis for such termination, a
bona fide Takeover Proposal shall have been made known to the Board of Directors
of Bank United Corp. or shall have been publicly disclosed to Bank United
Corp.'s stockholders, or any person or entity shall have made known to the Board
of Directors of Bank United Corp., or otherwise publicly disclosed, a bona fide
intention (whether or not conditional) to make a Takeover Proposal, and
regardless of whether such Takeover Proposal shall have been rejected by Bank
United Corp. or withdrawn prior to the time of such termination, then in any
such case Bank United Corp. shall pay to Washington Mutual, upon Washington
Mutual's written request, a termination fee of $15 million (the "INITIAL
TERMINATION FEE"). In addition, if (x) within 15 months of any such termination
described in the preceding sentence that gave rise to an obligation to pay the
Initial Termination Fee or (y) within 15 months after this Agreement is
terminated by Washington Mutual or Bank United Corp. pursuant to Section 9.1(e)
because of a failure to obtain the required approval of the stockholders of Bank
United Corp. after a bona fide Takeover Proposal for Bank United Corp. shall
have been publicly disclosed, or any person or entity shall have publicly
disclosed a bona fide intention (whether or not conditional) to make a Takeover
Proposal, (1) Bank United Corp. shall have entered into a definitive agreement
with respect to, or consummated a transaction contemplated in, a Takeover
Proposal or (2) a Repurchase Event (as defined in the Option Agreement) shall
have occurred, then (a) in the case of clause (x) above, Bank United Corp. shall
pay to Washington Mutual, upon Washington Mutual's written request, an
additional termination fee equal to $37 million (the "SUBSEQUENT TERMINATION
FEE" and together with the Initial Termination Fee, the "TERMINATION FEE") or
(b) in the case of clause (y) above, Bank United Corp. shall pay to Washington
Mutual, upon Washington Mutual's written request, the entire Termination Fee
equal to $52 million. Washington Mutual shall not be entitled to either the
Initial Termination Fee or the Subsequent Termination Fee or the Termination Fee
if Washington Mutual has exercised all or any part of the Option.
(c) Any Termination Fee that becomes payable pursuant to Section 9.2(b)
shall be paid by wire transfer of immediately available funds to an account
designated by Washington Mutual within one Business Day following the receipt by
Bank United Corp. of a written request from Washington Mutual for payment of
such Termination Fee. Notwithstanding the foregoing, in no event shall Bank
United Corp. be obligated to pay any such fees to Washington Mutual if
immediately prior to the termination hereof Bank United Corp. was entitled to
terminate this Agreement pursuant to Section 9.1(d).
(d) Bank United Corp. and Washington Mutual agree that the agreements
contained in paragraphs (b) and (c) above are an integral part of the
transactions contemplated by this Agreement, that without such agreements
Washington Mutual would not have entered into this Agreement, and that such
amounts do not constitute a penalty. If Bank United Corp. fails to pay
Washington Mutual the amounts due under paragraph (b) above within the time
periods specified in paragraph (c) above, Bank United Corp. shall pay the costs
and expenses (including reasonable legal fees and expenses) incurred by
Washington Mutual in connection with any action, including the filing of any
lawsuit, taken to collect payment of such amounts, together with interest on the
amount of any such unpaid amounts at the publicly announced prime rate of The
Chase Manhattan Bank from the date such amounts were required to be paid.
9.3 AMENDMENT. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of
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<PAGE>
Bank United Corp.; PROVIDED, HOWEVER, that after any approval of the
transactions contemplated by this Agreement by Bank United Corp.'s stockholders,
there may not be, without further approval of such stockholders, any amendment
of this Agreement which reduces the amount or changes the form of the
consideration to be delivered to the Bank United Corp. stockholders hereunder
other than as contemplated by this Agreement or which negatively impacts the
intended tax treatment of the holders of Bank United Corp. Common Stock. This
Agreement may not be amended except by an instrument in writing signed on behalf
of each of the parties hereto.
9.4 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
10. GENERAL PROVISIONS
10.1 NONSURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein which by their terms apply in whole or in part after the Effective Time.
10.2 EXPENSES. Except as provided in Section 9.2 hereof, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense; PROVIDED,
HOWEVER, that notwithstanding anything to the contrary contained in this
Agreement, neither Washington Mutual nor Bank United Corp. shall be relieved or
released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement.
10.3 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
(a) if to Washington Mutual, to:
Washington Mutual
1201 Third Avenue, 15th Floor
Seattle, WA 98101
Fax: (206) 461-5739
Attn: James Fitzgerald
and:
Washington Mutual
1201 Third Avenue, 15th Floor
Seattle, WA 98101
Fax: (206) 461-5739
Attn: Fay Chapman
with a copy to:
Heller Ehrman White & McAuliffe
701 Fifth Avenue, Suite 6100
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<PAGE>
Seattle, WA 98104
Fax: (206) 447-0849
Attn: Bernard L. Russell
(b) if to Bank United Corp., to:
Bank United Corp.
3200 Southwest Freeway, Suite 2600
Houston, TX 77027
Fax: (713) 543-7744
Attn: Jonathon K. Heffron
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Fax: (212) 403-2000
Attn: Craig M. Wasserman, Esq.
10.4 INTERPRETATION. The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Article and Section references are to this Agreement unless otherwise specified.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation." The table of contents and headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. No provision of this Agreement shall be
construed to require Bank United Corp., Washington Mutual or any of their
respective Subsidiaries or affiliates to take any action which would violate or
conflict with any applicable law (whether statutory or common), rule or
regulation.
10.5 COUNTERPARTS. This Agreement may be executed in counterparts, all of
which shall be considered one and the same agreement and shall become effective
when counterparts have been signed by each of the parties and delivered to the
other parties, it being understood that all parties need not sign the same
counterpart.
10.6 ENTIRE AGREEMENT. This Agreement (together with the documents and the
instruments referred to herein) constitutes the entire agreement and supersedes
all prior agreements and understandings, both written and oral, among the
parties with respect to the subject matter hereof, other than the
Confidentiality Agreement(s).
10.7 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Washington, without regard to any
applicable conflicts of law provisions (except to the extent that mandatory
provisions of federal law or the DGCL are applicable).
10.8 SEVERABILITY. Any term or provision of this Agreement which is
determined by a court of competent jurisdiction to be invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction, and if any provision of this Agreement is
determined to be so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable, in all cases so long as
neither the economic nor legal substance of the transactions contemplated hereby
is affected in any manner materially adverse to any party or its stockholders.
Upon any such determination, the parties shall negotiate in good faith in an
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effort to agree upon a suitable and equitable substitute provision to effect the
original intent of the parties.
10.9 PUBLICITY. Washington Mutual and Bank United Corp. 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 Washington Mutual) or The
Nasdaq Stock Market (in the case of Bank United Corp.). Without limiting the
reach of the preceding sentence, Washington Mutual and Bank United Corp. shall
cooperate to develop all public announcement materials and (b) make appropriate
management available at presentations related to the transactions contemplated
by this Agreement as reasonably requested by the other party. In addition, Bank
United Corp. and its Subsidiaries shall (a) consult with Washington Mutual
regarding communications with customers, stockholders, prospective investors and
employees related to the transactions contemplated hereby, (b) provide
Washington Mutual with stockholder lists of Bank United Corp. and (c) allow and
facilitate Washington Mutual contact with stockholders of Bank United Corp. and
other prospective investors.
10.10 ASSIGNMENT; THIRD PARTY BENEFICIARIES. Neither this Agreement nor
any of the rights, interests or obligations of any party hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns. Except as otherwise specifically provided in Section 7.8 hereof, this
Agreement (including the documents and instruments referred to herein) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
IN WITNESS WHEREOF, Washington Mutual and Bank United Corp. have caused this
Agreement to be executed by their respective officers hereunto duly authorized
as of the date first above written.
<TABLE>
<S> <C> <C>
WASHINGTON MUTUAL, INC.
By: /s/ JAMES FITZGERALD
-----------------------------------------
James Fitzgerald
SENIOR VICE PRESIDENT
BANK UNITED CORP.
By: /s/ JONATHON K. HEFFRON
-----------------------------------------
Jonathon K. Heffron
EXECUTIVE VICE PRESIDENT
</TABLE>
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<PAGE>
EXHIBIT A
EXECUTIVES WITH LITIGATION TRUSTEE AND EMPLOYMENT AGREEMENTS
LITIGATION TRUSTEE AGREEMENTS:
Salvatore A. Ranieri
Jonathon K. Heffron
EMPLOYMENT AGREEMENTS:
Barry Burkholder
Anthony J. Nocella
Ronald D. Coben
<PAGE>
APPENDIX B
AGREEMENT AND PLAN
OF
MERGER OF
CPR MERGER CORPORATION
WITH AND INTO
BANK UNITED CORP.
ARTICLE I
TERMS OF THE MERGER
1.1 THE MERGER
Subject to the terms and conditions herein, CPR Merger Corporation, a
Delaware corporation ("Merger Corp."), will merge (the "Reorganization Merger")
with and into Bank United Corp., a Delaware Corporation ("Parent"). Parent shall
be the surviving corporation (the "Surviving Corporation") in the Reorganization
Merger and shall continue its corporate existence under the laws of the State of
Delaware. Upon consummation of the Reorganization Merger, the separate corporate
existence of Merger Corp. shall end.
1.2 CERTIFICATE OF INCORPORATION
The Certificate of Incorporation of Parent shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with applicable law.
1.3 BYLAWS
The Bylaws of Parent shall be the Bylaws of the Surviving Corporation until
thereafter amended in accordance with applicable law.
ARTICLE II
MANNER OF CONVERTING SHARES
2.1 CONVERSION OF SHARES
(a) The Reorganization Merger shall become effective (the "Effective Time")
as set forth in the certificate of merger to be filed with the Secretary of
State of the State of Delaware on the closing date specified by the parties.
(b) At the Effective Time, by virtue of the Reorganization Merger and
without any action on the part of Merger Corp., Parent, any holder of Class A
common stock, par value $0.01 per share, of Parent ("Old Common Stock"), or any
holder of common stock, par value $0.01 per share, of Merger Corp. ("Merger
Corp. Common Stock"), other than shares of Old Common Stock held by persons who
properly demand and perfect rights to appraisal under Section 262 of the General
Corporation Law of the State of Delaware (and who have not withdrawn such demand
or lost such rights), (i) each issued and outstanding share of Merger Corp.
Common Stock shall automatically be cancelled and cease to exist and (ii) each
issued and outstanding share of Old Common Stock shall automatically be
converted into (x) one new share of Class A common stock, par value $0.01 per
share, of Parent ("New Common Stock") and (y) the right to receive one
certificate (a "CPR") evidencing the right to receive a portion of the assets of
a trust to be established to receive the proceeds of any final judgment or
settlement in the litigation between Parent and Bank United, a federally
chartered savings bank, among other persons, on the one hand, and the United
States, on the other hand, arising in connection with Parent's acquisition of
the assets and liabilities of United Saving Association of Texas in 1988, as
provided for in the Agreement and Plan of Merger, by and between Parent and
Washington Mutual, Inc., a Washington corporation, dated as of August 18, 2000
("Washington Mutual Merger Agreement").
<PAGE>
(c) All shares of Old Common Stock converted pursuant to Section 2.1(b)
shall no longer be outstanding and shall automatically be canceled and shall
cease to exist as of the Effective Time, and each certificate previously
representing any such shares (each, a "Certificate") shall thereafter represent,
without the requirement of any exchange thereof, that number of shares of New
Common Stock and that number of CPRs into which such shares of Old Common Stock
represented by such Certificate have been converted pursuant to Section 2.1(b).
(d) Parent shall take all requisite action such that, at the Effective Time,
each option granted by Parent to purchase shares of Old Common Stock that is
outstanding and unexercised immediately prior thereto shall cease to represent a
right to acquire shares of Old Common Stock and shall be converted automatically
into a right to purchase a number of shares of New Common Stock and CPRs equal
to the number of shares of Old Common Stock subject to such option immediately
prior to the Effective Time at an exercise price per share of New Common Stock
equal to the exercise price per share of Old Common Stock in effect immediately
prior to the Effective Time and otherwise subject to the terms of, as the case
may be, the Bank United Corp. 1996 Stock Incentive Plan, as amended, Bank United
Corp. 1999 Stock Incentive Plan, as amended, the Bank United Corp. 2000 Stock
Incentive Plan, as amended, the Executive Management Compensation Program, as
amended, or the Bank United Corp. Director Stock Plan. The adjustment provided
herein with respect to any options that are "incentive stock options" (as
defined in Section 422 of the Internal Revenue Code) shall be and is intended to
be effected in a manner which is consistent with Section 424(a) of the Internal
Revenue Code. The duration and other terms of the new option shall be the same
as the original option.
(e) Each share of Bank United Corp. 8% Corporate Premium Income Equity
Securities (including the Redeemable Preferred Stock Series B of Bank United
Corp. issued and outstanding in connection therewith, "PIES") issued and
outstanding immediately prior to the Effective Time shall be adjusted so that
upon settlement of the stock purchase contract underlying the PIES, the holder
thereof will receive (i) one share of New Common Stock and (ii) one CPR
Certificate, in each case for each share of Old Common Stock that would have
been purchasable under such stock purchase contract. All other terms and
conditions of the PIES will remain unchanged.
ARTICLE III
CONDITIONS TO CLOSING
Unless waived by the parties hereto, the obligations of the parties to
consummate the Reorganization Merger shall be conditioned upon (i) the approval
of this Agreement and Plan of Merger by the requisite affirmative vote of the
stockholders of Bank United Corp. entitled to vote hereon and (ii) the
satisfaction or waiver of the conditions to the consummation of the transactions
contemplated by the Washington Mutual Merger Agreement (other than those
conditions that by their terms are to be performed after the Effective Time).
ARTICLE IV
MODIFICATIONS--TERMINATION
This Agreement and Plan of Merger may be amended, modified or terminated at
any time prior to the Effective Time by mutual agreement of the parties hereto.
This Agreement and Plan of Merger will terminate automatically upon a
termination of the Washington Mutual Merger Agreement and may otherwise be
terminated by mutual agreement of the parties hereto.
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<PAGE>
IN WITNESS WHEREOF, Bank United Corp. and CPR Merger Corporation have caused
this Agreement and Plan of Merger to be executed by their respective officers
hereunto duly authorized as of the date first above written.
<TABLE>
<S> <C> <C>
BANK UNITED CORP.
By: /s/ JONATHON K. HEFFRON
--------------------------------------
Name: Jonathon K. Heffron
EXECUTIVE VICE PRESIDENT
CPR MERGER CORPORATION
By: /s/ RANDOLPH C. HENSON
--------------------------------------
Name: Randolph C. Henson
Title: VICE PRESIDENT AND SECRETARY
</TABLE>
B-3
<PAGE>
APPENDIX D
FORM OF
COMMITMENT AGREEMENT
This Commitment Agreement, dated as of , (this "Agreement"),
by and among Bank United Corp., a Delaware corporation, the Bank United
Litigation Contingent Payment Right Trust (the "Litigation Trust"), a Delaware
business trust and the Bank United Litigation Payment Trust (the "Payment
Trust"), a Delaware business trust.
RECITALS
WHEREAS, Bank United Corp. has entered into an Agreement and Plan of Merger,
dated as of August , 2000 (the "Merger Agreement"), with Washington
Mutual, Inc., a Washington corporation pursuant to which Bank United Corp. would
merge with and into Washington Mutual, Inc. (the "Merger"); and
WHEREAS, pursuant to the Merger Agreement, Bank United Corp. has agreed to
enter into this Agreement;
NOW, THEREFORE, in consideration of the premises and of the mutual covenants
and agreements contained herein the parties agree as follows:
ARTICLE I. CERTAIN DEFINITIONS
1.01 Certain Definitions.
(a) The following terms are used in this Agreement with the meanings set
forth below:
"Accountant" has the meaning set forth in Section 2.02 hereof.
"Assumed Section 483 Tax Benefit" means an amount equal to the tax benefit
that would be allowed to the Bank United Group under Section 483(a) by reason of
the payment of the Commitment Amount computed as set forth in Section 2.03
hereof.
"Assumed Tax Benefit" means any Assumed Section 483 Tax Benefit and Assumed
Trust Expense Tax Benefit.
"Assumed Tax Liability" means an amount equal to the income (including
franchise) tax liability of the Bank United Group (not giving effect to any
deductions attributable to payments of the Commitment Amount) attributable to
the receipt of the Litigation Proceeds computed as set forth in Section 2.03
hereof.
"Assumed Trust Expense Tax Benefit" means an amount equal to the tax benefit
that would be allowed to the Bank United Group by reason of deductions for
amounts paid to the Trusts pursuant to Section 2.04 (other than any amounts
payable under Section 3(b) of the Litigation Trust Agreement of Jonathon K.
Heffron) and for the fair market value of the CPR Certificates issued to the
Litigation Trustees pursuant to the Litigation Trustee Agreements as of the date
of such issuance, computed in each case as set forth in Section 2.03 hereof.
"Bank United" means Bank United Corp. and its successors (including
Washington Mutual, Inc. upon and after the Merger).
"Bank United Certificate" has the meaning set forth in Section 2.02 hereof.
"Bank United Group" means Bank United, Bank United, their respective
successors, their subsidiaries and affiliates and the subsidiaries and
affiliates of their respective successors, including without limitation
Washington Mutual, Inc. and its affiliates and subsidiaries after the Merger,
provided that Hyperion shall not be deemed to be a member of the Bank United
Group.
"Bank United Litigation Committee" has the meaning set forth in the
Litigation Trust Agreement.
<PAGE>
"Bank United Parties" means Bank United, Bank United, and their respective
affiliates, officers, directors, employees and agents (such persons and
entities, the "Bank United Parties" and, individually, a "Bank United Party").
"BNKU" means Bank United of Texas, fsb and its successors (including without
limitation, after the Merger, Washington Mutual Bank, FA or any other subsidiary
of Washington Mutual, Inc. into which BNKU is merged).
"Cash Proceeds" means an amount equal to any cash payment actually received
by the Bank United Group pursuant to a final, nonappealable judgment or a final
settlement of the Litigation. "Cash Proceeds" shall not include any amounts paid
or payable to Hyperion pursuant to the Recovery Agreement.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commitment Amount" means an amount equal to (A) the Litigation Proceeds,
minus (B) the Reimbursements plus (C) the Assumed Tax Benefit.
"Controlled Subsidiary" means any person at least 80% of the outstanding
shares of Voting Stock (except for directors' qualifying shares) of which is at
the time owned directly or indirectly by Bank United Corp.
"CPR Calculation Certificate" has the meaning set forth in Section 2.02
hereof.
"Damages" means with respect to Bank United Parties all losses, liabilities,
damages, judgments, demands, suits, claims, assessments, charges, fines,
penalties, costs and expenses, including reasonable attorney's fees and expenses
and other costs and expenses associated with defense of a claim, whether or not
in a formal proceeding (other than in connection with claims by stockholders of
Bank United against Bank United's directors with respect to actions taken at or
prior to the Merger), arising out of or relating to (i) with respect to claims
brought by holders of CPR Certificates in their capacity as holders of CPR
Certificates, any matter whatsoever and (ii) with respect to claims brought by
any other party, any matter relating to either of the Trusts, the CPR
Certificates, the CPR Certificate Distribution, the Litigation and any actions
taken by the Trustees (including actions taken by the Trustees in their capacity
as officers or directors of Bank United or Washington Mutual, Inc. so long as
such actions relate to either of the Trusts including, without limitation, the
negotiation of the terms of the Trusts and the CPR Certificates and the approval
of the establishment of the Trusts and the CPR Certificate Distribution and
related transactions, but otherwise excluding actions taken by the Trustees in
such capacities), other than with respect to Damages arising from claims against
(i) Bank United for breach of this Agreement, the Litigation Trust Agreement,
the Payment Trust Agreement, the Litigation Trustee Agreements or the Merger
Agreement, (ii) Bank United for failure to deliver any CPR Certificate when due
or to return to the Litigation Trust for cancellation of any CPR Certificate
required to be returned when so required, (iii) Bank United for failure to
deposit from time to time the amounts required pursuant to Section 2.04, or
(iv) BNKU for breach of any depository relationship obligations it may have with
respect to the amounts paid by Bank United pursuant to Section 2.04.
"Determination" means (a) a determination that Litigation Proceeds are in
whole or in part not includible in gross income, (b) a determination that no
deduction is allowed (or that any allowed deduction is limited) in respect of
payments of the Commitment Amount under Section 483(a) in whole or in part, or
(c) a determination that a deduction is allowed in whole or in part for amounts
paid to the Trusts pursuant to Section 2.04 or that a deduction is allowed for
the fair market value of the CPR Certificates issued to the Litigation Trustees
pursuant to the Litigation Trustee Agreements. With respect to clause (a), no
such Determination shall be deemed to be made unless it is made prior to the
earlier of (x) thirty days before the date of filing by the Bank United Group of
the federal tax return for the taxable year in which the Litigation Proceeds are
assumed to be includible in gross income or (y) the receipt by the Bank United
Group of the Litigation Proceeds. With respect to clause (b), no such
Determination shall be deemed to be made with respect to any payment of the
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<PAGE>
Commitment Amount unless such Determination is made prior to (a) the end of the
30th day following the delivery to the Litigation Trust of the Bank United
Certificate with respect to such payment of the Commitment Amount, if the
Litigation Trust does not deliver a Notice of Objection within such 30-day
period with respect to such Bank United Certificate, or (b) the Resolution with
respect to such payment of the Commitment Amount, if the Litigation Trust
delivers a Notice of Objection within the 30-day period referred to in
clause (a) above with respect to such Bank United Certificate. With respect to
clause (c), no such Determination shall be deemed to be made unless it is made
prior to the receipt by the Bank United Group of the Litigation Proceeds.
"Due Date" has the meaning set forth in Section 2.02 hereof.
"Expense Accounting" has the meaning set forth in Section 2.04(a) hereof.
"FHLB" means the Federal Home Loan Bank of which BNKU is a member as of the
relevant time.
"FIRREA" means the Financial Institutions Reform, Recovery and Enforcement
Act of 1989.
"Hyperion" means Hyperion Partners L.P., a Delaware limited partnership.
"IRS" means the Internal Revenue Service.
"LIBOR" means, as of a particular date, the 3-month London Inter-Bank Offer
Rate as quoted in the Wall Street Journal.
"Litigation" means [cite litigation].
"Litigation Proceeds" means any and all Cash Proceeds and Non-Cash Proceeds.
"Litigation Trust" has the meaning set forth in the preamble to this
Agreement.
"Litigation Trust Agreement" means the Declaration of Trust, dated as of
, among the trustees named therein and the sponsor of the Litigation
Trust.
"Litigation Trust Expense Amount" has the meaning set forth in Section 2.04
hereof.
"Litigation Trustee Agreements" means the Litigation Trustee Agreement,
dated as of , 2000, between [ ] and Bank United and the
Litigation Trustee Agreement, dated as of , 2000, between
[ ] and Bank United.
"Litigation Trustees" has the meaning set forth in the Litigation Trust
Agreement.
"Non-Cash Proceeds" means the non-cash payments, if any, actually received
by the Bank United Group pursuant to a final, non-appealable judgment or a final
settlement of the Litigation. "Non-Cash Proceeds" shall not include any such
amounts payable to Hyperion pursuant to the Recovery Agreement.
"Notice of Agreement" has the meaning set forth in Section 2.02 hereof.
"Notice of Objection" has the meaning set forth in Section 2.02 hereof.
"Payment Trust" has the meaning given in the first paragraph of this
Agreement.
"Payment Trust Agreement" means the Declaration of Trust, dated as of
, 2000, among the trustees named therein and the sponsor of the
Payment Trust.
"Payment Trust Expense Amount" has the meaning set forth in Section 2.04
hereof.
"Payment Trust Expense Notice" has the meaning set forth in Section 2.04
hereof.
"Proceeds Amount" means the amount paid to the Payment Trust pursuant to
Section 2.01(a) plus any interest earned thereon pursuant to Section 2.01(c),
less any amounts withdrawn by Bank United pursuant to Section 2.01(d).
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<PAGE>
"Proceeds Notice" has the meaning set forth in Section 2.02 hereof.
"Recovery Agreement" means that certain Recovery Agreement dated July 24,
1996, by and among Bank United, BNKU and Hyperion.
"Reference Rate" means the reference rate or an equivalent rate announced
from time to time of Bank of America or any successor (or, if no successor
remains in existence or publicly announces a rate, the commercial bank with the
largest amount of deposits in the State of New York as of the most recent year
end prior to the applicable date for which information is publicly available and
which publicly announces such a rate, as determined in good faith by Bank
United), as in effect from time to time.
"Reimbursements" means an amount equal to (i) the sum of the amounts paid to
the Trusts pursuant to Section 2.04 (other than any amounts payable under
Section 3(b) of the Litigation Trustee Agreement of Jonathon K. Heffron) plus
(ii) interest on the amounts paid to the Trusts pursuant to Section 2.04
calculated from the time of any such payment at an annual interest rate equal to
(A) seven percent (7%) on the amount of such aggregate payments not exceeding
$5,000,000, (B) ten percent (10%) on the amount of such aggregate payments
greater than $5,000,000 but not exceeding $10,000,000, and (C) fifteen percent
(15%) on the amount of such aggregate payments greater than $10,000,000, plus
(iii) the Assumed Tax Liability, plus (iv) in the event Litigation Proceeds are
required to be included in income for federal income tax purposes in a taxable
year prior to the year such proceeds are received in cash (because of either the
accrual of Cash Proceeds before the payment thereof or the time required to
liquidate Non-Cash Proceeds), interest on any cash payment of taxes on such
income at an annual interest rate equal to seven percent (7%) compounded
annually from the date of payment of taxes on such income to the date of receipt
of cash, plus (v) the aggregate amount of any Damages actually suffered by any
Bank United Party, plus (vi) the aggregate amount any indemnification provided
by Bank United pursuant to Section 3(c)(v) of the Litigation Trustee Agreement
of Jonathon K. Heffron and Section 3(b)(iv) of the Litigation Trustee Agreement
of Salvatore A. Ranieri; plus (vii) any expenses reasonably incurred by Bank
United in connection with the liquidation of Non-Cash Proceeds.
"Resolution" has the meaning set forth in Section 2.02 hereof.
"Section 483(a)" means Section 483(a) of the Code.
"Sub Merger" has the meaning set forth in the definition of Tax Assumptions
herein.
"Tax Assumptions" means (i), if there is no Determination, the following
assumptions or (ii), if there is a Determination, the following assumptions as
modified by such Determination:
(a) The Litigation Proceeds will be includible in gross income as ordinary
income in full.
(b) Payments of the Commitment Amount will not be deductible except that
Section 483(a) will apply to payments of the Commitment Amount, other than those
allocable to CPR Certificates issued on exercise of employee options or
otherwise in a transaction that is not a sale or exchange, and payments of the
Commitment Amount will be deductible to the extent treated by Section 483(a) as
interest expense; it being understood that it is not intended that the
distribution of the CPR Certificates pursuant to the merger of a wholly owned
subsidiary of Bank United with and into Bank United pursuant to the Merger
Agreement (the "Sub Merger") will result in the characterization of such
distribution as not constituting "a sale or exchange."
(c) The Bank United Group will not be entitled to a deduction for amounts
paid to the Trusts pursuant to Section 2.04 and for the fair market value of the
CPR Certificates issued to the Litigation Trustees pursuant to the Litigation
Trustee Agreements.
(d) The income tax liability attributable to the assumed inclusion of all or
a portion of the Litigation Proceeds in gross income as ordinary income and the
benefit of any deduction shall be
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(i) the product of the amount of such income or deduction and the highest
statutory rate of federal income tax applicable to corporations for the year in
which the income is assumed to be included or the deduction is assumed to be
realized plus (ii) the product of such income or deduction and the net combined
marginal rate of state and local income (or franchise) tax of the relevant
member or members of the Bank United Group for the year in which the income is
assumed to be included and the deduction is assumed to be realized, net of the
federal income tax benefit (calculated based on the rate in clause (i) of this
paragraph) of such state or local income (or franchise) tax. The relevant member
or members of the Bank United Group shall be the member or members that is or
are assumed to include the Litigation Proceeds in income or is or are assumed to
be allowed the relevant deduction.
(e) Any benefit from any deduction allowable to the Bank United Group for
amounts referred to in paragraphs (b) and (c) of these assumptions shall be
assumed to be realized (i) when those payments are made to the extent those
payments do not exceed the Litigation Proceeds included in income for the same
taxable year, or (ii) otherwise when, taking into account other deductions or
losses or credits of the Bank United Group, the deduction would reduce the tax
otherwise payable or result in a refund of tax already paid.
(f) Bank United will be entitled to rely on a written opinion of a
nationally recognized law firm with expertise on the matter on which the opinion
is sought (with a copy of such opinion to the Litigation Trustees) that is
selected by Bank United and (unless such law firm is principal outside tax
counsel to Bank United) reasonably acceptable to the Litigation Trustees in
determining whether there has been a Determination and in otherwise applying the
Tax Assumptions to determine the income (including franchise) tax liability of
the Bank United Group attributable to the receipt of the Litigation Proceeds and
any Assumed Tax Benefits.
(g) If the Assumed Tax Liability or the Assumed Tax Benefit cannot be
computed at the time of the receipt of the Cash Proceeds or a payment of the
Commitment Amount because of the absence of information as to tax rates and
other factors described in the definition of Assumed Tax Liability or the
definition of Assumed Tax Benefit, as the case may be, the Bank United Group
shall compute a tentative Assumed Tax Liability or a tentative Assumed Tax
Benefit, as the case may be, based on such reasonable assumptions, which are
consistent with respect to the Assumed Tax Liability and the Assumed Tax
Benefit, that in the reasonable opinion of the Bank United Group would protect
the Bank United Group against any risk of the loss. The payment of the
Commitment Amount shall be based on such tentative Assumed Tax Liability or such
tentative Assumed Tax Benefit computation, as the case may be. As soon as
feasible, but in no event later than 12 months after the end of the taxable year
in which the Commitment Amount is paid based on the tentative Assumed Tax
Liability and Assumed Tax Benefit, the Bank United Group shall recompute the
Assumed Tax Liability or the Assumed Tax Benefit, as the case may be, and pay to
the Payment Trust any excess of the re-computed Commitment Amount over the
Commitment Amount that was initially calculated plus interest for the period
over which the payment was deferred at a rate equal to BNKU's cost of funds as
submitted monthly to the FHLB.
"Trustees" means all of the trustees of the Litigation Trust together with
all of the trustees of the Payment Trust.
"Trusts" means the Litigation Trust and the Payment Trust.
"Voting Stock" means, with respect to any person, stock of any class or
classes, however designated, having ordinary voting power for the election of a
majority of the board of such person, other than stock having such power only by
reason of the happening of a contingency.
(b) Any capitalized terms used but not defined herein shall have the
meanings ascribed to such terms in the Merger Agreement.
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ARTICLE II. THE COMMITMENT
2.01 The Commitment.
(a) Bank United shall pay to the Payment Trust the Commitment Amount within
the time specified under Section 2.02 hereof, (i) increased an amount equal to
interest computed on the Commitment Amount at LIBOR from the date of the receipt
by Bank United Group of the applicable Litigation Proceeds until the date such
Litigation Proceeds are distributed to the Payment Trust, such rate and period
to be modified as specifically set forth in Section 2.02(b), 2.02(c) and
2.02(d), and (ii) decreased by the product of the interest computed in
clause (i) and the maximum applicable combined corporate federal and state
income tax rates in effect for the period of interest computation. In the event
that the Bank United Group receives the Litigation Proceeds in staggered
payments, the procedures described in this Article II with respect to the
calculation and payment of the Commitment Amount will apply in full force to
each such staggered payment of the Commitment Amount.
(b) The Payment Trust shall pay to the Litigation Trust the Proceeds Amount
promptly upon its receipt of the Commitment Amount; provided, however, that the
Payment Trust shall not pay the Proceeds Amount to the Litigation Trust prior to
the expiration of the 366 day period commencing on the date of the distribution
of the CPR Certificates to the stockholders of Bank United pursuant to the Sub
Merger. To the extent not inconsistent with the prior sentence, in the event
that the Payment Trust receives the Commitment Amount in staggered payments, the
Payment Trust will make staggered payments of the Proceeds Amount.
(c) During any period when the Payment Trust holds the Commitment Amount,
the Payment Trust may invest the Commitment Amount in any Permitted Investment
as such term is defined in the Payment Trust Agreement.
(d) Bank United shall have the right to withdraw from the Payment Trust,
from time to time, an amount equal to any taxes payable by the Bank United Group
solely by reason of the ownership of the Payment Trust. Any such taxes that are
income taxes shall be determined based the principles set forth in
Paragraph (d) of the definition of Tax Assumptions above; provided, however, if
any such income is exempt from federal, state or local income taxes, appropriate
adjustments shall be made to such principles to reflect such exemption.
2.02 Payment Procedures.
(a) Proceeds Notice; Bank United Certificate. Within 10 days of the receipt
by the Bank United Group of any Litigation Proceeds, Bank United will deliver to
the Trustees a written notice (the "Proceeds Notice") specifying that such
Litigation Proceeds have been received and describing the type and amount of any
Non-Cash Proceeds received. Within 10 days of the delivery of the Proceeds
Notice, the Litigation Trustees shall deliver to Bank United written
instructions to liquidate the Non-Cash Proceeds received. If so instructed, Bank
United will then liquidate or cause to be liquidated the Non-Cash Proceeds in
accordance with the instructions. Bank United shall promptly notify the
Litigation Trustees if such instructions cannot be followed and shall request
further instructions.
As promptly as practicable but in no event later than 30 days after the
later of the receipt by Bank United of such Litigation Proceeds and of the
liquidation by Bank United of Non-Cash Proceeds, Bank United will deliver to the
Litigation Trustees a certificate (the "Bank United Certificate") setting forth
the calculation of the portion of the Commitment Amount with respect to such
Litigation Proceeds. The Bank United Certificate shall set forth each of the
items required under this Agreement to calculate the Commitment Amount,
including the amount of Litigation Proceeds and the amount of (and calculation
of) each component of the Reimbursements and the assumptions underlying the
determination of each item and shall be substantially in the form of EXHIBIT A
hereto, and Bank United shall attach to the Bank United Certificate financial
and other documentation reasonably sufficient to support each item and
assumption used to calculate the Commitment Amount. Within 30 days of
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delivery of the Bank United Certificate, the Litigation Trust will give written
notice specifying whether it agrees or objects (a "Notice of Agreement" and a
"Notice of Objection", respectively) to the calculation in the Bank United
Certificate of the portion of the Commitment Amount with respect to such
Litigation Proceeds, and, in the case of a Notice of Objection, will specify in
reasonable detail the nature of such objection. If the Litigation Trust delivers
a Notice of Agreement, Bank United will then deliver the portion of the
Commitment Amount with respect to such Litigation Proceeds to the Payment Trust
within 5 business days of such Notice of Agreement. If the Litigation Trust
delivers a Notice of Objection within such 30-day period, Bank United will
deliver such portion of the Commitment Amount to the Payment Trust only upon a
Resolution (as defined herein).
(b) Dispute Resolution. If the Litigation Trust delivers a Notice of
Objection within such 30-day period, the Litigation Trust shall as promptly as
practicable following delivery of the Notice of Objection deliver to Bank United
a certificate (the "CPR Calculation Certificate") setting forth its calculation
of such portion of the Commitment Amount. The CPR Calculation Certificate shall
set forth each of the items required under this Agreement to calculate such
portion of the Commitment Amount, including the amount of Litigation Proceeds
and the amount of (and calculation of) each component of the Reimbursements and
the assumptions underlying the determination of each item and shall be
substantially in the form of EXHIBIT A hereto, and the Litigation Trust shall
attach to the CPR Calculation Certificate financial and other documentation
reasonably sufficient to support each item and assumption used to calculate such
portion of the Commitment Amount. If Bank United does not agree with the
Litigation Trust's calculation of such portion of the Commitment Amount, then
within 10 business days of the delivery by the Litigation Trust of the CPR
Calculation Certificate, Bank United and the Litigation Trust shall submit the
calculation of such portion of the Commitment Amount to a mutually agreed upon
independent certified public accountant (the "Accountant"). The Accountant shall
be instructed to resolve on an expedited basis in writing any and all matters
which remain in dispute and were identified in the Notice of Objection. The
Accountant shall be instructed to recompute such portion of the Commitment
Amount based upon the formulae and definitions set forth in this Agreement and
the Accountant's calculation shall be binding on both parties hereto (a
"Resolution"). In the event it is determined that Bank United's calculation was
incorrect, in addition to such portion of the Commitment Amount, Bank United
shall pay to the Payment Trust interest on such portion of the Commitment Amount
calculated from the date that the Litigation Trust delivered its Notice of
Objection at an annual interest rate equal to the Reference Rate plus 250 basis
points. Bank United and the Litigation Trust shall share equally the expenses of
the Accountant in connection with the performance of its duties described
herein. If the Litigation Trust delivers a Notice of Objection with respect to
the payment of any portion of the Commitment Amount within the applicable 30-day
period and prior to the Resolution there is a Determination to the effect that
no deduction is allowed (or that any allowed deduction is limited) in respect of
payments of the Commitment Amount under Section 483(a) in whole or in part, then
Bank United shall have the right to deliver a new Bank United Certificate with a
new calculation of that portion of the Commitment Amount, and the previously
delivered Bank United Certificate with respect to that portion of the Commitment
Amount shall be considered null and void; provided, however, that if Bank United
delivers such a new Bank United Certificate, Bank United shall be required to
pay interest on that portion of the Commitment Amount from the date of delivery
of the first Bank United Certificate relating to such portion of the Commitment
Amount to the date of delivery of the new Bank United Certificate relating to
such portion of the Commitment Amount at a rate equal to BNKU's cost of funds as
submitted monthly to the FHLB. The same procedures described in this
Section 2.02(b) for the resolution of any disputes with respect to the
calculation contained in a Bank United Certificate will apply equally to the
calculation in the new Bank United Certificate with respect to such portion of
the Commitment Amount.
(c) Timing of Payments. Bank United shall pay to the Payment Trust the
portion of the Commitment Amount with respect to the relevant Litigation
Proceeds (i) if the Litigation Trust does
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not deliver a Notice of Objection to the Bank United Certificate with respect to
such portion of the Commitment Amount within the 30-day period described above,
within 5 business days of the earlier of the delivery of the Notice of Agreement
with respect to such Bank United Certificate or the 30th day following the
delivery by Bank United of such Bank United Certificate, or (ii) if the
Litigation Trust does deliver a Notice of Objection with respect to such Bank
United Certificate within the 30-day period described above, within 5 business
days of the Resolution with respect to such portion of the Commitment Amount
(each, a "Due Date"). Notwithstanding the foregoing, to the extent that BNKU is
not permitted due to regulatory restrictions to distribute to either Bank United
or BNKU's immediate parent company all or a portion of the Litigation Proceeds,
the applicable Due Date with respect to such portion of the Litigation Proceeds
that BNKU cannot distribute due to such regulatory restrictions shall be
extended until BNKU secures regulatory approval of its distribution of such
portion of the Litigation Proceeds to Bank United or BNKU's immediate parent
company, provided that in no event shall the Due Date be extended pursuant to
this sentence later than the 90th day after the receipt by the Bank United Group
of such Litigation Proceeds. If Bank United does not pay such portion of the
Commitment Amount by the appropriate Due Date (subject to the adjustment in the
previous sentence), Bank United shall be obligated to pay to the Payment Trust
such portion of the Commitment Amount except that the interest on such portion
of the Commitment Amount shall be the annual interest rate equal to the
Reference Rate plus 250 basis points calculated from the Due Date until the date
such portion of the Commitment Amount is paid.
(d) Payment of Reconciliation Amount. As promptly as practicable but in no
event later than 30 days after the recomputation of the Assumed Tax Liability
and the Assumed Tax Benefit pursuant to paragraph (g) of the definition of "Tax
Assumptions" herein, Bank United shall pay to the Payment Trust any excess of
the re-computed Commitment Amount or portion thereof over the Commitment Amount
or portion thereof that was initially calculated plus interest for the period
over which the payment was deferred at a rate of BNKU's cost of funds as
submitted monthly to the FHLB. Along with such payment, Bank United shall
provide to the Trustees a Bank United Certificate setting forth the
re-calculation of the Commitment Amount or portion thereof. The standards and
procedures applicable to Bank United Certificates and the calculation of the
Commitment Amount and portions thereof set forth in this Section 2.02 shall
apply in full force to any Bank United Certificate delivered pursuant to this
paragraph (d).
2.03 Agreements With Respect to Federal Income Tax.
(a) Regardless of any position taken by the Bank United Group on any tax
return or in any claim for refund with respect to the receipt of the Litigation
Proceeds or payments of the Commitment Amount (or of the actual payment or
actual receipt of any taxes with respect thereto), the Assumed Tax Liability
shall, (i) if there is no Determination, be computed based on the Tax
Assumptions and (ii) if there is a Determination to the effect that Litigation
Proceeds are not includible in gross income in whole or in part, be computed on
the basis of the Tax Assumptions as such Tax Assumptions are modified by such
Determination.
(b) Regardless of any position taken by the Bank United Group on any tax
return or in any claim for refund with respect to the receipt of the Litigation
Proceeds or payments of the Commitment Amount (or of the actual payment or
actual receipt of any taxes with respect thereto), the Assumed Section 483 Tax
Benefit shall, (i) if there is no Determination, be computed based on the Tax
Assumptions and (ii) if there is a Determination that no deduction is allowed
(or that any allowed deduction is limited) with respect to payments of the
Commitment Amount under Section 483(a), be computed on the basis of the Tax
Assumptions as such Tax Assumptions are modified by such Determination.
(c) Regardless of any position taken by the Bank United Group on any tax
return or in any claim for refund with respect to the receipt of Litigation
Proceeds, payments of the Commitment Amount or
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the issuance of CPR Certificates to the Litigation Trustees pursuant to the
Litigation Trustee Agreement (or of the actual payment or actual receipt of any
taxes with respect thereto), the Assumed Trust Expense Tax Benefit shall (i) if
there is no Determination, be computed based on the Tax Assumptions and (ii) if
there is a Determination that a deduction is allowed in whole or in part for
amounts paid to the Trusts pursuant to Section 2.04 or for the fair market value
of the CPR Certificates issued to the Litigation Trustees pursuant to the
Litigation Trustee Agreements, be computed based on the Tax Assumptions as
modified by such Determination.
(d) A Determination that Litigation Proceeds are not includible in gross
income in whole or in part will be deemed to be made on the earlier of (i) the
date of a final judicial determination to such effect, binding upon BNKU (or its
successor), is made in the Litigation, (ii) the date a final agreement to which
Bank United is a party with the federal government to such effect is entered
into at the direction of the Litigation Trustees as part of the resolution of
the Litigation or a related IRS ruling to such effect issued to a member of the
Bank United Group in connection with such agreement (it being understood that
the Bank United Group shall be under no obligation to seek such a ruling or
refund or enter into such an agreement; provided that if requested the Bank
United Group will enter into such an agreement if such agreement does not impose
any liability or obligation whatsoever (other than a standard settlement release
relating only to the Litigation or other related claims that Bank United, BNKU
or Bank United's stockholders might have been able to bring as of immediately
prior to the Merger) on the Bank United Group or adversely affect or restrict
the conduct of its business or adversely affect its tax posture with respect to
other matters) and (iii) the effective date of a law, regulation or IRS ruling
to such effect that applies to Bank United or taxpayers generally, and would be
applicable to claims against the federal government arising out of capital
credits affected by FIRREA. Notwithstanding the foregoing, no such Determination
shall be deemed to be made unless it is made prior to the earlier of (x) thirty
days before the date of filing by the Bank United Group of the federal tax
return for the taxable year in which the Litigation Proceeds are assumed to be
includible in gross income or (y) the receipt by the Bank United Group of the
Litigation Proceeds.
(e) A Determination with respect to the application of Section 483(a) to
payments of the Commitment Amount will be deemed to be made on the earlier of
(i) the date a final judicial determination to such effect binding upon Bank
United is made in the Litigation, (ii) the date a final agreement to which Bank
United is a party with the federal government to such effect is entered into at
the direction of the Litigation Trustees as part of the resolution of the
Litigation or a related IRS ruling to such effect issued to a member of the Bank
United Group in connection with such agreement (it being understood that the
Bank United Group shall be under no obligation to seek such a ruling or refund
or enter into such an agreement; provided that if requested the Bank United
Group will enter into such an agreement if such agreement does not impose any
liability or obligation whatsoever (other than a standard settlement release
relating only to the Litigation or other related claims that Bank United or BNKU
or Bank United's stockholders might have been able to bring as of immediately
prior to the Merger) on the Bank United Group or adversely affect or restrict
the conduct of its business or adversely affect its tax posture with respect to
other matters) and (iii) the effective date of a law, regulation or IRS ruling
or a judicial decision to such effect that applies to Bank United or taxpayers
generally. For all purposes under this Agreement, a deduction shall be
considered allowed under Section 483(a) to the extent that a deduction is
allowed, in an amount up to the deduction calculated under Section 483(a), under
another provision of the Code treating a portion of the Commitment Amount as
interest expense (including original issue discount). Notwithstanding the
foregoing, no such Determination shall be deemed to be made with respect to any
payment of the Commitment Amount unless such Determination is made prior to
(a) the end of the 30th day following the delivery to the Litigation Trust of
the Bank United Certificate with respect to such payment of the Commitment
Amount, if the Litigation Trust does not deliver a Notice of Objection within
such 30-day period with respect to such Bank United Certificate, or (b) the
Resolution with respect to such payment of the Commitment Amount, if the
Litigation Trust delivers a Notice of Objection within such 30-day period
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with respect to such Bank United Certificate. Subject to a Determination, the
parties intend to treat a portion of each payment of the Commitment Amount as
interest to the extent such payment is treated as interest under
Section 483(a).
(f) A Determination that a deduction is allowed for amounts paid to the
Trusts pursuant to Section 2.04 or for the fair market value of the CPR
Certificates issued to the Litigation Trustees pursuant to the Litigation
Trustee Agreements will be deemed to be made on the earlier of (i) the date of a
final judicial determination to such effect, binding upon BNKU (or its
successor), is made in the Litigation, (ii) the date a final agreement to which
Bank United is a party with the federal government to such effect is entered
into at the direction of the Litigation Trustees as part of the resolution of
the Litigation or a related IRS ruling to such effect issued to a member of the
Bank United Group in connection with such agreement (it being understood that
the Bank United Group shall be under no obligation to seek such a ruling or
refund or enter into such an agreement; provided that if requested the Bank
United Group will enter into such an agreement if such agreement does not impose
any liability or obligation whatsoever (other than a standard settlement release
relating only to the Litigation or other related claims that Bank United, BNKU
or Bank United's stockholders might have been able to bring as of immediately
prior to the Merger) on the Bank United Group or adversely affect or restrict
the conduct of its business or adversely affect its tax posture with respect to
other matters) and (iii) the effective date of a law, regulation or IRS ruling
to such effect that applies to Bank United or taxpayers generally.
Notwithstanding the foregoing, no such Determination shall be deemed to be made
unless it is made prior to the receipt by the Bank United Group of the
Litigation Proceeds.
2.04 Payment of Expense Amounts.
(a) The "Litigation Trust Expense Amount" means the estimated unpaid
expenses of the Litigation Trust (including without limitation the management
fees and expenses of the Litigation Trustees (as defined in the Litigation Trust
Agreement), the fees for the other trustees of the Litigation Trust, and
expenses relating to the Litigation) minus any amounts previously provided by
Bank United pursuant to Section 2.04 in excess of the actual expenses of the
Litigation Trust. From time to time, but no more often than quarterly, the
Litigation Trust shall submit to Bank United a written notice (the "Litigation
Expense Notice") detailing the Litigation Trust Expense Amount. Bank United may
object to the Litigation Trust's calculation of the Litigation Trust Expense
Amount by delivering a written objection to the Litigation Trust within 10 days
of its receipt of the Litigation Expense Notice, which notice shall specify in
reasonable detail the nature of such objection. If Bank United so objects, and
the parties cannot mutually resolve the dispute, then within 5 days of receipt
of Bank United's notice of objection, Bank United and the Litigation Trust shall
submit the Litigation Expense Notice, along with any supporting documentation
provided by either party, to a mutually agreed upon independent certified public
accountant (the "Expense Accountant"). The Expense Accountant shall be
instructed to determine as soon as is practicable whether the Litigation Trust
Expense Amount as estimated by the Litigation Trust is reasonable. If the
Expense Accountant determines (a) that the Litigation Trust Expense Amount as
estimated by the Litigation Trust is reasonable then the Litigation Trust's
estimate shall be binding on the parties hereto or (b) that the Litigation Trust
Expense Amount as estimated by the Litigation Trust is not reasonable then the
Expense Accountant shall estimate the Litigation Trust Expense Amount and the
Expense Accountant's estimate shall be binding on the parties hereto. Bank
United and the Litigation Trust shall bear equally the expenses of the Expense
Accountant in connection with the performance of its duties described herein.
Bank United shall deposit the Litigation Trust Expense Amount in an interest
bearing demand-deposit account as specified by the Litigation Trustees in the
name of the Litigation Trust at BNKU promptly upon the resolution of any dispute
pursuant to this paragraph, if any.
(b) The "Payment Trust Expense Amount" means the estimated unpaid expenses
of the Payment Trust (including without limitation the fees for the trustees of
the Payment Trust) minus any amounts
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previously provided by Bank United in excess of the actual expenses of the
Payment Trust. From time to time but no more often than monthly, the Payment
Trust shall submit to Bank United a written notice (the "Payment Trust Expense
Notice") detailing the Payment Trust Expense Amount. Bank United may object to
the Litigation Trust's calculation of the Payment Trust Expense Amount in the
same manner described in Section 2.04(b) and the parties will resolve the
dispute and Bank United shall pay the Payment Trust Expense Amount in the manner
described in Section 2.04(b).
(c) Notwithstanding the foregoing, the aggregate amount which Bank United
shall be obligated to pay under Section 2.04(a) and 2.04(b) for the life of the
Trusts shall not exceed the sum of $10,000,000, PROVIDED that in the event that
the Litigation is pursued through additional trial court proceedings and any
appeals related thereto, then Bank United shall be obligated to pay additional
expenses, PROVIDED FURTHER that in no event shall the aggregate amount which
Bank United shall be obligated to pay under Section 2.04(a) and 2.04(b) exceed
the sum of $13,000,000. Bank United agrees and acknowledges that any amounts
payable under Section 3(b) of the Litigation Trustee Agreement of Jonathon K.
Heffron are not subject to the limitation expressed in this Section 2.04(c).
(d) In order to facilitate the prosecution of the Litigation in an efficient
manner and to minimize the likelihood of disputes with respect to determination
of the Litigation Trust Expense Amount, the Litigation Trustees agree to consult
in good faith with the Bank United Litigation Committee and to keep Bank United
reasonably informed with respect to the Litigation Trust Expense Amount.
2.05 Ranking. This Agreement shall rank pari passu with other senior
indebtedness of Bank United.
2.06 Restrictions on Sale or Pledge of Stock of BNKU.
(a) Bank United (i) shall not (a) sell, transfer or otherwise dispose of any
shares of any series of Voting Stock of BNKU or (b) permit BNKU to issue, sell
or otherwise dispose of shares of its Voting Stock unless in either case BNKU
remains a Controlled Subsidiary, and (ii) shall not permit BNKU to (a) merge or
consolidate unless the surviving entity is BNKU or a Controlled Subsidiary or
(b) convey or transfer its properties and assets substantially as an entirety to
any person, except to Bank United or a Controlled Subsidiary.
(b) Bank United shall not create, assume, incur or suffer to exist, as
security for indebtedness for borrowed money, any mortgage, pledge, encumbrance,
lien or charge of any kind upon the Voting Stock of BNKU (other than directors'
qualifying shares) without effectively providing that the CPR Certificates shall
be secured equally and ratably with (or prior to) such indebtedness; provided,
however, that Bank United may create, assume, incur or suffer to exist any such
mortgage, pledge, encumbrance, lien or charge without regard to the foregoing
provisions so long as after giving effect thereto Bank United will own directly
or indirectly at least 80% of the Voting Stock of BNKU then issued and
outstanding, free and clear of any such mortgage, pledge, encumbrance, lien or
charge.
(c) Notwithstanding the foregoing, Bank United may avoid the restrictions
described in the previous two paragraphs if prior to any such transaction BNKU
shall have unconditionally guaranteed payment when due of the Commitment Amount,
if any, BNKU shall have obtained all regulatory approvals, if any, required to
permit the guarantee of the payment of the Commitment Amount, and Bank United
shall have delivered to the institutional trustee for the Litigation Trust an
opinion of counsel stating that the guarantee of the payment of the Commitment
Amount by BNKU has been duly authorized, executed and delivered and constitutes
a valid, legally binding and enforceable obligation of BNKU.
D-11
<PAGE>
2.07 No Assignment of Claim. Bank United will not, and will not permit
BNKU to, "assign" (within the meaning of 31 U.S.C. Sec. 3727) any interest in
the Litigation. The parties intend and acknowledge that any merger of Bank
United or BNKU with any other party shall not be deemed to be or to effect an
assignment (within the meaning of 31 U.S.C. Sec. 3727) of the Litigation.
2.08 Return of Unused Funds. Each of the Trusts shall, immediately prior
to its termination as provided by its governing documents and this Agreement,
shall refund to Bank United any amount provided to such Trust pursuant to
Section 2.04 but not used, provided that each of the Trusts may retain a
reasonable reserve of funds to pay for termination expenses.
ARTICLE III. MISCELLANEOUS
3.01 Waiver; Amendment. Any provision of this Agreement may be (i) waived
by the party benefited by the provision, or (ii) amended or modified at any
time, by an agreement in writing between the parties hereto executed in the same
manner as this Agreement.
3.02 Counterparts. This Commitment may be executed in one or more
counterparts, each of which shall be deemed to constitute an original.
3.03 Governing Law. This Commitment shall be governed by, and interpreted
in accordance with, the laws of the State of Delaware applicable to contracts
made and to be performed entirely within such State.
3.04 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 Bank United at its address set forth in the Merger
Agreement with a copy sent to Washington Mutual, Inc. at its address set forth
in the Merger Agreement or to the Trusts their addresses set forth below or such
other address as such party may specify by notice to the other parties hereto.
If to the Litigation Trust to:
Attention:
Facsimile:
With copies to:
Attention:
Facsimile:
If to the Payment Trust to:
Attention:
Facsimile:
With copies to:
Attention:
Facsimile:
3.05 Entire Understanding. This Agreement and the Merger Agreement
represent 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 Merger
Agreement.
D-12
<PAGE>
3.06 No Third-Party Beneficiaries; Limitation on Liability. Except as
provided below, 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. The holders of the CPR Certificates, the Trusts and Trustees
shall have no rights to enforce, institute or maintain any suit, action or
proceeding against Bank United, BNKU, its affiliates, officers, directors,
employees or agents relating to the entering into of this Agreement, the
distribution of the CPR Certificates, the Litigation or the performance by the
Trustees of their duties as Trustees. Notwithstanding the foregoing, each of the
Trusts (or the Trustees on behalf of the each of the Trusts) may enforce,
institute or maintain a suit, action or proceeding against (i) Bank United for
breach of this Agreement, Litigation Trust Agreement, the Payment Trust
Agreement, or any Litigation Trustee Agreement, (ii) Bank United for failure to
deliver any CPR Certificate when due or to return to the Litigation Trust for
cancellation of any CPR Certificate required to be returned pursuant to the
Merger Agreement when so required, (iii) Bank United for failure to deposit from
time to time the amounts required pursuant to Section 2.04, or (v) BNKU for
breach of any depository relationship obligations it may have with respect to
the amounts paid by Bank United pursuant to Section 2.04.
3.07 No Other Obligations. Except as set forth in the Litigation Trust
Agreement, the Payment Trust Agreement, the Litigation Trustee Agreements, the
Merger Agreement or in this Agreement, Bank United shall have no other
obligations to the either of the Trusts, the Trustees or the holders of CPR
Certificates. Without limiting the generality of the foregoing and except as
provided in the Merger Agreement, the Litigation Trust Agreement, the Payment
Trust Agreement, the Litigation Trustee Agreements, or this Agreement, Bank
United shall have no obligation to advance funds to either of the Trusts, the
Trustees or the holders of CPR Certificates. Each of the Trusts hereby
acknowledge that it has no interest in any Litigation Proceeds received by the
Bank United Group except to the extent of the obligation of Bank United
hereunder to pay to the Litigation Trust or the Payment Trust, as the case may
be, the amount required to be paid pursuant to Section 2.01(a) or (b).
D-13
<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.
<TABLE>
<S> <C>
BANK UNITED CORP.
--------------------------------------------------
Name:
Title:
BANK UNITED LITIGATION CONTINGENT PAYMENT RIGHTS
TRUST
--------------------------------------------------
Name:
Title: Litigation Trustee
--------------------------------------------------
Name:
Title: Litigation Trustee
--------------------------------------------------
Name:
Title: Institutional Trustee
--------------------------------------------------
Name:
Title: Delaware Trustee
BANK UNITED LITIGATION PAYMENT TRUST
--------------------------------------------------
Name:
Title: Trustee
--------------------------------------------------
Name:
Title: Trustee
</TABLE>
D-14
<PAGE>
APPENDIX F
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 August 18, 2000, between Bank United Corp., 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
6,462,862 fully paid and nonassessable shares of Issuer's Class A Common Stock,
par value $0.01 per share ("COMMON STOCK"), at a price of $42.375 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 to 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 written notice
of such exercise (as provided in subsection (e) of this Section 2) within
3 months following such Subsequent Triggering Event (or such longer period as
provided in Section 10); provided further, however, that if the Option cannot be
exercised on any day because of any injunction, order or similar restraint
issued by a court of competent jurisdiction, the period during which the Option
may be exercised shall be extended so that the Option shall expire no earlier
than on the tenth business day after such injunction, order or restraint shall
have been dissolved or when such injunction, order or restraint shall have
become permanent and no longer subject to appeal, as the case may be. Each of
the following shall be an "EXERCISE TERMINATION EVENT": (i) the Effective Time
(as defined in the Merger Agreement); (ii) termination of the Merger Agreement
in accordance with the provisions thereof if such termination
<PAGE>
occurs prior to the occurrence of an Initial Triggering Event, except a
termination by Grantee pursuant to Section 9.1(d) of the Merger Agreement
(unless the breach by Issuer giving rise to such right of termination is
non-volitional); (iii) the passage of 12 months after termination of the Merger
Agreement if such termination follows or is concurrent with the occurrence of an
Initial Triggering Event or is a termination by Grantee pursuant to
Section 9.1(d) of the Merger Agreement (unless the breach by Issuer giving rise
to such right of termination is non-volitional); provided, that if the Initial
Triggering Event continues or occurs beyond such termination and prior to the
passage of such 12-month period, the Exercise Termination Event shall be
12 months from the expiration of the Last Triggering Event (as hereinafter
defined) but in no event more than 15 months after such termination; or
(iv) delivery of a written request for payment of termination fee pursuant to
Section 9.2 of the Merger Agreement (provided that no such Exercise Termination
Event shall be deemed to have occurred unless the full amount of such
termination fee provided for in such Section 9.2 has been paid). For purposes of
this Agreement, (A) "HOLDER" shall mean the holder or holders of the Option and
(B) "Last Triggering Event" shall mean the last Initial Triggering Event to
expire. 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 9.1(d) thereof and (ii) this Agreement shall automatically
terminate upon the termination of the Merger Agreement pursuant to
Section 9.1(d) 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 beneficial ownership (the
term "BENEFICIAL OWNERSHIP" for purposes of this Agreement having the
meaning assigned thereto in Section 13(d) of the Exchange Act, and the rules
and regulations thereunder) 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 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 in
anticipation of engaging in an Acquisition Transaction, or (C) the Board
F-2
<PAGE>
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 in anticipation of
engaging in an Acquisition Transaction;
(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;
(iv) The stockholders of Issuer shall have voted and failed to approve
and adopt the Merger Agreement and the Merger at a meeting that has been
held for that purpose or any adjournment or postponement thereof, or such
meeting shall not have been held in violation of the Merger Agreement if,
prior to such meeting (or if such meeting shall not have been held or shall
have been canceled, prior to such termination), 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;
(v) After a bona fide proposal or intention is made or made known by a
third party to Issuer or its stockholders to engage in an Acquisition
Transaction (whether such proposal or intention 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 bona fide 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 incorporated by reference
to the definition of Significant Subsidiary in subsection (x) and referred
to in subsection (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 any regulatory or
F-3
<PAGE>
antitrust agency is required in connection with such purchase, the Holder shall
promptly file the required notice or application for approval, shall promptly
notify Issuer of such filing and shall expeditiously process the same and the
period of time that otherwise would run pursuant to this sentence shall run
instead from the date on which any required notification periods have expired or
been terminated or such approvals have been obtained and any requisite waiting
period or periods shall have passed. Any exercise of the Option shall be deemed
to occur on the Notice Date relating thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Agreement for an Option evidencing the rights of
the Holder thereof to purchase the balance of the shares purchasable hereunder,
and the Holder shall deliver to Issuer this Agreement and a letter agreeing that
the Holder will not offer to sell or otherwise dispose of such shares in
violation of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is
subject to certain provisions of an agreement between the
registered holder hereof and Bank United Corp. 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
Bank United Corp. and will be provided to the holder hereof
without charge upon receipt by Bank United Corp. 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 subsections (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.
F-4
<PAGE>
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. Section 18a and regulations
promulgated thereunder and (y) in the event, under any federal or state law,
prior approval of or notice to any 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 such 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 of the loss, theft, destruction or mutilation of
this Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver 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 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 three 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
F-5
<PAGE>
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 in any registration statement to be
filed hereunder. If requested by any such Holder in connection with such
registration, Issuer shall become a party to any underwriting agreement relating
to the sale of such shares, but only to the extent of obligating itself in
respect of representations, warranties, indemnities and other agreements
customarily included in secondary offering underwriting agreements for 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 two registrations
pursuant to this Section 6 by reason of the fact that there shall be more than
one Grantee as a result of any assignment or division of this Agreement.
7. REPURCHASE RIGHT.
(a) (i) Following the occurrence of a Repurchase Event (as defined below),
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 no later than 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 the Option or the
Owner gives notice of the required repurchase of Option Shares, as the case
maybe, or (iv) in the event of a sale of all or a substantial portion of
Issuer's assets, the sum of the price paid in such sale for such assets and the
current market value of the remaining assets of Issuer as determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be, and reasonably acceptable to Issuer, divided by the
number of shares of Common Stock of Issuer outstanding at the time of such sale.
In
F-6
<PAGE>
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 the 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 the Option and/or the Option
Shares in accordance with the provisions of this Section 7. As promptly as
practicable, and in any event within five business days after the surrender of
the Option and/or certificates representing Option Shares and the receipt of
such notice or notices relating thereto, Issuer shall deliver or cause to be
delivered to the Holder the Option Repurchase Price and/or to the Owner the
Option Share Repurchase Price therefor or the portion thereof that Issuer is not
then prohibited under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at anytime after delivery of a
notice of repurchase pursuant to subsection (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 the Owner may revoke its notice of repurchase of the Option or the
Option Shares either in whole or to the extent of the prohibition, whereupon, in
the latter case, Issuer shall promptly (i) deliver to the Holder and/or the
Owner, as appropriate, that portion of the Option Repurchase Price or the Option
Share Repurchase Price that Issuer is not prohibited from delivering; and
(ii) deliver, as appropriate, either (A) to the Holder, a new Agreement
evidencing the right of the Holder to purchase that number of shares of Common
Stock obtained by multiplying the number of shares of Common Stock for which the
surrendered Agreement was exercisable at the time of delivery of the notice of
repurchase by a fraction, the numerator of which is the Option Repurchase Price
less the portion thereof theretofore delivered to the Holder and the denominator
of which is the Option Repurchase Price, or (B) to the Owner, a certificate for
the Option Shares it is then so prohibited from repurchasing.
(d) For purposes of this Section 7, a "REPURCHASE EVENT" shall be deemed to
have occurred (i) upon the consummation of any merger, consolidation or similar
transaction involving Issuer or any purchase, lease or other acquisition of all
or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the provisos to 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
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<PAGE>
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 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 subsections, 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 subsection (e), the issuer of the Substitute Option (the "SUBSTITUTE
OPTION ISSUER") shall make a cash payment to the Holder equal to the excess of
(i) the value of the Substitute Option without giving effect to the limitation
in this subsection (e) over (ii) the value of the Substitute Option after giving
effect to the limitation in this subsection (e). This difference in value shall
be determined by a nationally recognized investment
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<PAGE>
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 or the Substitute Share Owner, or both, as
the case may be, may exercise its respective right to require the Substitute
Option Issuer to repurchase the Substitute Option or the Substitute Shares, as
applicable, pursuant to this Section 9 by surrendering for such purpose to the
Substitute Option Issuer, at its principal office, the agreement for such
Substitute Option (or, in the absence of such an agreement, a copy of this
Agreement) and/or certificates for Substitute Shares accompanied by a written
notice or notices stating that the Substitute Option Holder or the Substitute
Share Owner, as the case may be, elects to require the Substitute Option Issuer
to repurchase the Substitute Option and/or the Substitute Shares in accordance
with the provisions of this Section 9. As promptly as practicable, and in any
event within five business days after the surrender of the Substitute Option
and/or certificates representing Substitute Shares and the receipt of such
notice or notices relating thereto, the Substitute Option Issuer shall deliver
or cause to be delivered to the Substitute Option Holder the Substitute Option
Repurchase Price and/or to the Substitute Share Owner the Substitute Share
Repurchase Price therefor or, in either case, the portion thereof which the
Substitute Option Issuer is not then prohibited under applicable law and
regulation from so delivering.
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation or through commencement of regulatory enforcement
action from repurchasing the Substitute Option and/or the Substitute Shares in
part or in full, the Substitute Option Issuer following a request for repurchase
pursuant to this Section 9 shall immediately so notify the Substitute Option
Holder and/or the Substitute Share Owner and thereafter deliver or cause to be
delivered, from time to time, to the Substitute Option Holder and/or the
Substitute Share Owner, as appropriate, the portion of the Substitute 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
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<PAGE>
Holder or the 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 the 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 three-month period, as the
case may be, 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.
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 referred 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.
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<PAGE>
13. LIMITATION ON TOTAL PROFIT.
(a) Notwithstanding anything to the contrary contained herein, in no event
shall Grantee's Total Profit (as defined in subsection (c) of this Section 13)
exceed $52 million and, if it otherwise would exceed such amount, the Grantee,
at its sole election, shall either (i) reduce the number of shares of Common
Stock subject to this Option, (ii) deliver to the Issuer for cancellation Option
Shares previously purchased by Grantee valued at fair market value at the time
of delivery, (iii) pay cash to the Issuer, or (iv) undertake any combination
thereof, so that Grantee's actually realized Total Profit shall not exceed
$52 million after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, 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 in subsection (d) of this
Section 13) of more than $52 million; provided, that nothing in this sentence
shall restrict any exercise of the Option permitted hereby on any subsequent
date.
(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 for 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 amounts 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 9.2 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.
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 for 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
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<PAGE>
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 may be
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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<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its officers thereunto duly authorized, all as of the
date first above written.
<TABLE>
<S> <C> <C>
BANK UNITED CORP.
By: /s/ JONATHON K. HEFFRON
-----------------------------------------
Jonathon K. Heffron
EXECUTIVE VICE PRESIDENT
WASHINGTON MUTUAL, INC.
By: /s/ JAMES B. FITZGERALD
-----------------------------------------
James B. Fitzgerald
SENIOR VICE PRESIDENT
</TABLE>
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<PAGE>
APPENDIX G
DELAWARE GENERAL CORPORATION LAW, SECTION 262
Section262 APPRAISAL RIGHTS.--(a) Any stockholder of a corporation of this
State who holds shares of stock on the date of the making of a demand pursuant
to subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to Section228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section251 (other than a merger effected pursuant to
Section251 (g) of this title), Section252, Section254, Section257, Section258,
Section263 or Section264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc.or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section251 of this title.
(2) Notwithstanding paragraph (l) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to Section251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section253 of this title is not owned by
the parent corporation immediately prior to
<PAGE>
the merger, appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section.
Each stockholder electing to demand the appraisal of his shares shall
deliver to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of his shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such
action must do so by a separate written demand as herein provided. Within
10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of the date
that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section228
or Section253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series of stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send such
a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima
facie evidence of the facts stated therein. For purposes of determining the
stockholders entitled to receive either notice, each constituent corporation
may fix, in advance, a record date that shall be not more than 10 days prior
to the date the notice is given, provided, that if the notice is given on or
after the effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the notice is
given prior to the
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<PAGE>
effective date, the record date shall be the close of business on the day
next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and
(d) hereof, upon written request, shall be entitled to receive from the
corporation surviving the merger or resulting from the consolidation a statement
setting forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within
10 days after expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also by given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in
G-3
<PAGE>
Chancery, if such is required, may participate fully in all proceedings until it
is finally determined that he is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided.
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within
60 days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation.
G-4
<PAGE>
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 XII of
its Amended and 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 stockholders 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
stockholders, or (iii) a resolution adopted or ratified, before or after the
event, by the stockholders, 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 IX of Washington Mutual's Amended and 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 IX of Washington Mutual's Amended and 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.
II-1
<PAGE>
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 Bank
United Corp., dated August 18, 2000. (Incorporated by
reference to Appendix A of the Proxy Statement/ Prospectus
included in this Registration Statement.) Registrant agrees
to furnish supplementally to the Commission upon request a
copy of any omitted schedule.
2.2 Reorganization Plan of Merger between Bank United Corp. and
CPR Merger Corporation dated September 28, 2000
(Incorporated by reference to Appendix B to the Proxy
Statement/Prospectus included in this Registration
Statement)
3.1 Restated Articles of Incorporation of the Registrant, as
amended (Incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999 (File No. 1-14667))
3.2 Restated Bylaws of the Registrant, as amended (Incorporated
by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000 (File
No. 1-14667))
3.3 Form of Declaration of Trust of the Bank United Litigation
Contingent Payment Rights Trust (Incorporated by reference
to Appendix C of the Proxy Statement/Prospectus included in
this Registration Statement)
4.1* Form of Certificate of Designation for the Series H
Preferred Stock
4.2 Rights Agreement, dated October 16, 1990 (Incorporated by
reference to the Registrant's Current Report on Form 8-K
dated November 29, 1994 (File No. 0-25188))
4.3 Amendment No. 1 to the Rights Agreement, dated October 31,
1994 (Incorporated by reference to the Registrant's Current
Report on Form 8-K dated November 29, 1994 (File No.
0-25188))
4.4 Supplement to Rights Agreement, dated November 29, 1994
(Incorporated by reference to the Registrant's Current
Report on Form 8-K dated November 29, 1994 (File No.
0-25188))
4.5* Form of Pledge Agreement
4.6* Form of Remarketing Agreement
5.1* Opinion of Heller Ehrman White & McAuliffe LLP
8.1* Tax Opinion of Wachtell, Lipton, Rosen & Katz
8.2* Tax Opinion of Gibson, Dunn & Crutcher LLP
10.1 Form of Commitment Agreement (Incorporated by reference to
Appendix D of the Proxy Statement/Prospectus included in
this Registration Statement)
10.2 Employment Agreement dated August 18, 2000 between the
Registrant and Ronald D. Coben
10.3 Employment Agreement dated August 18, 2000 between the
Registrant and Anthony J. Nocella
10.4 Employment Agreement dated August 18, 2000 between the
Registrant and Barry C. Burkholder
10.5 Litigation Trustee Agreement dated August 18, 2000 among the
Registrant, the Bank United Litigation Contingent Payment
Rights Trust, the Bank United Litigation Payment Trust and
Jonathon K. Heffron
10.6 Litigation Trustee Agreement dated August 18, 2000 among the
Registrant, the Bank United Contingent Payment Rights Trust,
the Bank United Litigation Payment Trust and Salvatore
Ranieri
21.1 List of Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP with respect to Washington
Mutual, Inc.
23.2 Consent of KPMG LLP with respect to HF Ahmanson & Company
23.3 Consent of KPMG LLP with respect to Bank United Corp.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
--------------------- ------------------------------------------------------------
<C> <S>
23.4 Consent of Deloitte & Touche LLP with respect to Bank United
Corp.
23.5 Consent of Payne Falkner Smith & Jones P.C. with respect to
Texas Central Bancshares, Inc.
23.6 Consent of Heller, Ehrman White & McAuliffe LLP (included in
its opinion filed as Exhibit 5.1)
23.7 Consent of Wachtell, Lipton, Rosen & Katz (included in its
opinion filed as Exhibit 8.1)
23.8 Consent of Gibson, Dunn & Crutcher LLP (included in its
opinion filed as Exhibit 8.2)
24.2 Powers of Attorney (included on the signature page of this
Registration Statement)
99.1 Form of Proxy Card of Bank United Corp.
99.2 Stock Option Agreement between the Registrant and Bank
United Corp., dated August 18, 2000 (Incorporated by
reference to Appendix F of the Proxy Statement/Prospectus
included in this Registration Statement).
99.3* Opinion of Goldman, Sachs & Co. (attached as Appendix E to
the Proxy Statement/ Prospectus contained in this
Registration Statement)
99.4* Consent of Goldman, Sachs & Co.
</TABLE>
------------------------
* To be filed by amendment
ITEM 22. UNDERTAKINGS
The Undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
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.
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
II-3
<PAGE>
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-4
<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 September 29, 2000.
<TABLE>
<S> <C> <C>
WASHINGTON MUTUAL, INC.
By: /s/ KERRY K. KILLINGER
-----------------------------------------
Kerry K. Killinger
Title: CHAIRMAN, PRESIDENT AND CHIEF
EXECUTIVE OFFICER
</TABLE>
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 29th day of September, 2000.
<TABLE>
<S> <C>
/s/ KERRY K. KILLINGER /s/ WILLIAM A. LONGBRAKE
------------------------------------------- -------------------------------------------
Kerry K. Killinger William A. Longbrake
CHAIRMAN, PRESIDENT AND VICE CHAIR AND
CHIEF EXECUTIVE OFFICER; DIRECTOR CHIEF FINANCIAL OFFICER
(PRINCIPAL EXECUTIVE OFFICER) (PRINCIPAL FINANCIAL OFFICER)
/s/ RICHARD M. LEVY
-------------------------------------------
Richard M. Levy
SENIOR VICE PRESIDENT AND CONTROLLER
(PRINCIPAL ACCOUNTING OFFICER)
/s/ DOUGLAS P. BEIGHLE /s/ DAVID BONDERMAN
------------------------------------------- -------------------------------------------
Douglas P. Beighle David Bonderman
DIRECTOR DIRECTOR
/s/ J. TAYLOR CRANDALL /s/ ROGER H. EIGSTI
------------------------------------------- -------------------------------------------
J. Taylor Crandall Roger H. Eigsti
DIRECTOR DIRECTOR
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C>
/s/ JOHN W. ELLIS /s/ ANNE V. FARRELL
------------------------------------------- -------------------------------------------
John W. Ellis Anne V. Farrell
DIRECTOR DIRECTOR
/s/ WILLIAM P. GERBERDING
------------------------------------------- -------------------------------------------
Stephen E. Frank William P. Gerberding
DIRECTOR DIRECTOR
/s/ ENRIQUE HERNANDEZ, JR. /s/ PHILLIP D. MATTHEWS
------------------------------------------- -------------------------------------------
Enrique Hernandez, Jr. Phillip D. Matthews
DIRECTOR DIRECTOR
/s/ MICHAEL K. MURPHY /s/ MARY E. PUGH
------------------------------------------- -------------------------------------------
Michael K. Murphy Mary E. Pugh
DIRECTOR DIRECTOR
/s/ ELIZABETH A. SANDERS
------------------------------------------- -------------------------------------------
William G. Reed, Jr. Elizabeth A. Sanders
DIRECTOR DIRECTOR
/s/ WILLIAM D. SCHULTE /s/ JAMES H. STEVER
------------------------------------------- -------------------------------------------
William D. Schulte James H. Stever
DIRECTOR DIRECTOR
/s/ WILLIS B. WOOD, JR.
-------------------------------------------
Willis B. Wood, Jr.
DIRECTOR
</TABLE>
II-6
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
--------------------- ------------------------------------------------------------
<C> <S>
2.1 Agreement and Plan of Merger between the Registrant and Bank
United Corp., dated August 18, 2000. (Incorporated by
reference to Appendix A of the Proxy Statement/ Prospectus
included in this Registration Statement.) Registrant agrees
to furnish supplementally to the Commission upon request a
copy of any omitted schedule.
2.2 Reorganization Plan of Merger between Bank United Corp. and
CPR Merger Corporation dated September 28, 2000
(Incorporated by reference to Appendix B to the Proxy
Statement/Prospectus included in this Registration
Statement)
3.1 Restated Articles of Incorporation of the Registrant, as
amended (Incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1999 (File No. 1-14667))
3.2 Restated Bylaws of the Registrant (Incorporated by reference
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2000 (File No. 1-14667))
3.3 Form of Declaration of Trust of the Bank United Litigation
Contingent Payment Rights Trust (Incorporated by reference
to Appendix C of the Proxy Statement/Prospectus included in
this Registration Statement)
4.1* Form of Certificate of Designation for the Series H
Preferred Stock
4.2 Rights Agreement, dated October 16, 1990 (Incorporated by
reference to the Registrant's Current Report on Form 8-K
dated November 29, 1994 (File No. 0-25188))
4.3 Amendment No. 1 to the Rights Agreement, dated October 31,
1994 (Incorporated by reference to the Registrant's Current
Report on Form 8-K dated November29, 1994 (File No.
0-25188))
4.4 Supplement to Rights Agreement, dated November 29, 1994
(Incorporated by reference to the Registrant's Current
Report on Form 8-K dated November 29, 1994 (File No.
0-25188))
4.5* Form of Pledge Agreement
4.6* Form of Remarketing Agreement
5.1* Opinion of Heller Ehrman White & McAuliffe LLP
8.1* Tax Opinion of Wachtell, Lipton, Rosen & Katz
8.2* Tax Opinion of Gibson, Dunn & Crutcher LLP
10.1 Form of Commitment Agreement (Incorporated by reference to
Appendix D of the Proxy Statement/Prospectus included in
this Registration Statement)
10.2 Employment Agreement dated August 18, 2000 between the
Registrant and Ronald D. Coben
10.3 Employment Agreement dated August 18, 2000 between the
Registrant and Anthony J. Nocella
10.4 Employment Agreement dated August 18, 2000 between the
Registrant and Barry C. Burkholder
10.5 Litigation Trustee Agreement dated August 18, 2000 among the
Registrant, the Bank United Litigation Contingent Payment
Rights Trust, the Bank United Litigation Payment Trust and
Jonathon K. Heffron
10.6 Litigation Trustee Agreement dated August 18, 2000 among the
Registrant, the Bank United Contingent Payment Rights Trust,
the Bank United Litigation Payment Trust and Salvatore
Ranieri
21.1 List of Subsidiaries of the Registrant
23.1 Consent of Deloitte & Touche LLP with respect to Washington
Mutual, Inc.
23.2 Consent of KPMG LLP with respect to HF Ahmanson & Company
23.3 Consent of KPMG LLP with respect to Bank United Corp.
23.4 Consent of Deloitte & Touche LLP with respect to Bank United
Corp.
23.5 Consent of Payne Falkner Smith & Jones P.C. with respect to
Texas Central Bancshares, Inc.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
--------------------- ------------------------------------------------------------
<C> <S>
23.6 Consent of Heller, Ehrman White & McAuliffe LLP (included in
its opinion filed as Exhibit 5.1)
23.7 Consent of Wachtell, Lipton, Rosen & Katz (included in its
opinion filed as Exhibit 8.1)
23.8 Consent of Gibson, Dunn & Crutcher LLP (included in its
opinion filed as Exhibit 8.2)
24.2 Powers of Attorney (included on the signature page of this
Registration Statement)
99.1 Form of Proxy Card of Bank United Corp.
99.2 Stock Option Agreement between the Registrant and Bank
United Corp., dated August 18, 2000 (Incorporated by
reference to Appendix F of the Proxy Statement/Prospectus
included in this Registration Statement).
99.3* Opinion of Goldman, Sachs & Co. (attached as Appendix E to
the Proxy Statement/ Prospectus contained in this
Registration Statement)
99.4* Consent of Goldman, Sachs & Co.
</TABLE>
------------------------
* To be filed by amendment.
