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FILED PURSUANT TO RULE 424(B)(3)
REGISTRATION NO. 333-47308
[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 103 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:
Thursday, February 8, 2001
10:00 a.m., Local Time
THE HOLIDAY INN SELECT
WINDSOR I AND II BALLROOMS
2712 SOUTHWEST FREEWAY
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.
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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-1 (and an amendment to the merger
agreement as Appendix A-2) 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 16.
[/S/ BARRY C BURKHOLDER]
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 NOVEMBER 14, 2000, AND IS BEING FIRST
MAILED TO STOCKHOLDERS ON OR ABOUT JANUARY 10, 2001.
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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:
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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
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TO OBTAIN TIMELY DELIVERY, STOCKHOLDERS MUST REQUEST THE INFORMATION NO LATER
THAN FEBRUARY 1, 2001.
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[LOGO]
3200 Southwest Freeway
Suite 2600
Houston, Texas 77251-1370
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON THURSDAY, FEBRUARY 8, 2001
AT 10:00 A.M.
------------------------
To the Stockholders of Bank United Corp.:
A special meeting of stockholders of Bank United Corp. will be held on
Thursday, February 8, 2001, at 10:00 a.m., local time, at The Holiday Inn
Select, Windsor I and II Ballrooms, 2712 Southwest Freeway, Houston, Texas, 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, and as amended, 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 December 19, 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 Bank United Corp.'s headquarters set forth above 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.
[/S/ RANDOLPH C HENSON]
Randolph C. Henson
SECRETARY
Houston, Texas
January 9, 2001
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.
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TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE BANK UNITED CORP.
REORGANIZATION AND THE WASHINGTON MUTUAL MERGER........... 1
SUMMARY..................................................... 2
SELECTED UNAUDITED COMPARATIVE PER SHARE DATA............... 11
MARKET PRICE AND DIVIDEND INFORMATION....................... 12
SELECTED HISTORICAL FINANCIAL DATA OF WASHINGTON MUTUAL..... 14
SELECTED HISTORICAL FINANCIAL DATA OF BANK UNITED CORP...... 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........ 30
Reasons of Washington Mutual for the Merger............. 39
Effective Time of the Merger............................ 40
Exchange of Certificates in the Merger.................. 40
Fractional Shares....................................... 41
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................... 45
Interests of Certain Persons in the Merger.............. 46
Representations and Warranties in the Merger
Agreement.............................................. 50
Conditions to the Completion of the Merger.............. 52
Regulatory Approvals Required........................... 53
Amendment and Waiver of the Merger Agreement............ 54
Termination of the Merger Agreement..................... 55
Termination Fees........................................ 56
The Option Agreement.................................... 56
Conduct of Business Pending the Merger and Other
Agreements............................................. 58
Expenses and Fees....................................... 61
Accounting Treatment.................................... 61
Stock Exchange Listing of Washington Mutual Common Stock
and PIES............................................... 61
Resale of Washington Mutual Stock Received by Bank
United Corp. Stockholders.............................. 61
Appraisal Rights........................................ 61
INFORMATION ABOUT WASHINGTON MUTUAL......................... 64
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INFORMATION ABOUT BANK UNITED CORP.......................... 66
DESCRIPTION OF THE WASHINGTON MUTUAL PIES................... 68
Corporate PIES.......................................... 68
Voting Rights........................................... 68
Removing the Preferred Stock from the Pledge Agreement
by Substituting Treasury Securities.................... 68
Recreating Corporate PIES............................... 69
Current Payments........................................ 70
Listing of the Corporate PIES, the Treasury PIES and the
Preferred Stock........................................ 70
Miscellaneous........................................... 70
DESCRIPTION OF THE PURCHASE CONTRACTS....................... 71
General................................................. 71
Settlement Through Remarketing.......................... 72
Notice to Settle With Cash.............................. 73
Early Settlement........................................ 74
Contract Adjustment Payments............................ 74
Anti-Dilution Adjustments............................... 76
Termination............................................. 78
Pledged Securities and Pledge Agreement................. 78
Book-Entry Issuance..................................... 78
Payment of Distributions, Settlement and Transfers...... 79
Modification of the Purchase Contracts and the Pledge
Agreement.............................................. 79
No Consent to Assumption................................ 80
Consolidation, Merger, Sale or Conveyance............... 80
Governing Law........................................... 80
Miscellaneous........................................... 80
DESCRIPTION OF THE PREFERRED STOCK.......................... 81
General................................................. 81
Ranking................................................. 81
Dividends............................................... 81
Dividend Rate Reset by Remarketing...................... 82
Redemption.............................................. 85
Liquidation Rights...................................... 85
Voting Rights........................................... 85
Book-Entry Issuance..................................... 86
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE WASHINGTON
MUTUAL PIES............................................... 87
Corporate PIES.......................................... 88
Preferred Stock......................................... 88
Purchase Contracts...................................... 89
Adjustment to the Settlement Rate....................... 91
Treasury PIES........................................... 91
Sale or Disposition of PIES............................. 92
Non-United States Holders............................... 92
Backup Withholding and Information Reporting............ 93
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RISKS RELATED TO THE WASHINGTON MUTUAL PIES................. 93
COMPARISON OF RIGHTS OF WASHINGTON MUTUAL AND BANK UNITED
CORP. STOCKHOLDERS........................................ 94
Capital Stock........................................... 94
Board of Directors...................................... 94
Monetary Liability of Directors......................... 94
Interested Stockholders................................. 95
Removal of Directors and Filling Vacancies on the Board
of Directors........................................... 96
Washington Mutual Rights Plan........................... 96
CERTAIN DIFFERENCES BETWEEN WASHINGTON AND DELAWARE
CORPORATE LAWS............................................ 97
Amendment of Articles/Certificate of Incorporation...... 97
Right to Call Special Meeting of Stockholders........... 97
Indemnification of Officers, Directors and Employees.... 98
Provisions Affecting Control Share Acquisitions and
Business Combinations.................................. 98
Mergers, Sales of Assets and Other Transactions......... 100
Stockholder Action Without a Meeting.................... 101
Class Voting............................................ 101
Transactions With Officers or Directors................. 101
Dissenters' Rights...................................... 102
Dividends............................................... 102
THE TRUSTS.................................................. 103
THE FORBEARANCE LITIGATION.................................. 103
General................................................. 103
Related Cases........................................... 104
Damages................................................. 104
Management of the Forbearance Litigation................ 105
THE COMMITMENT AGREEMENT: PAYMENT PROCEDURE................. 106
DESCRIPTION OF THE CPR CERTIFICATES......................... 107
General................................................. 107
Resales of CPR Certificates............................. 108
Tradability............................................. 108
Payment Procedures for CPR Certificates................. 108
Timing of Payments...................................... 109
Expenses and Retained Amount............................ 109
THE COMMITMENT AGREEMENT: ADDITIONAL INFORMATION............ 109
Tax Effects on the Commitment Amount.................... 109
Indemnification and Related Obligations; Liability...... 111
Restrictions on the Conduct of Bank United Corp......... 114
THE BANK UNITED CORP. REORGANIZATION AND THE DISTRIBUTION OF
RIGHTS CERTIFICATES....................................... 114
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MATERIAL FEDERAL INCOME TAX CONSEQUENCES.................... 115
Characterization of the CPR Certificates and Trust...... 116
Characterization of the Commitment; Section 483......... 117
Sale of CPR Certificates................................ 118
Receipt of Payments on the Commitment................... 118
Lack of a Cash Recovery................................. 118
Other Characterizations................................. 118
Funding of Additional Expenses.......................... 118
Backup Withholding and Information Reporting............ 119
VALIDITY OF THE WASHINGTON MUTUAL COMMON STOCK AND PIES..... 119
EXPERTS..................................................... 119
WHERE YOU CAN FIND MORE INFORMATION......................... 120
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 120
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Appendix A-1 Agreement and Plan of Merger
Appendix A-2 Amendment No. 1 to Agreement and Plan of Merger
Appendix B Reorganization Plan of Merger
Appendix C-1 Form of Declaration of Trust (Contingent Payment Rights
Trust)
Appendix C-2 Form of Declaration of Trust (Payment 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
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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 first
quarter of calendar year 2001, 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 (800) 322-2885.
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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 120.
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, 2000 WHICH ARE INCORPORATED INTO THIS PROXY STATEMENT/ PROSPECTUS
BY REFERENCE. SEE "INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE" ON PAGE 120.
THE PARTIES TO THE MERGER (SEE PAGE 64)
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WASHINGTON MUTUAL, INC. BANK UNITED CORP.
1201 THIRD AVENUE 3200 SOUTHWEST FREEWAY, SUITE 2600
SEATTLE, WASHINGTON 98101 HOUSTON, TX 77027
(206) 461-2000 (713) 543-6500
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 lending and deposit gathering activities.
September 30, 2000, Washington Mutual had Over the past few years, Bank United Corp.
consolidated assets of $190.78 billion, has pursued a strategy designed to transform
deposits of $80.45 billion and stockholders' Bank United Corp.'s loan portfolio from a
equity of $9.33 billion. Based on assets, high concentration of single family mortgages
Washington Mutual was the largest savings to a more balanced portfolio of commercial,
institution and the eighth largest banking consumer and single family mortgage loans,
company in the United States. increase its non-interest revenues, and lower
its cost of funds. At September 30, 2000,
Bank United Corp. had $18.2 billion in
assets, $8.7 billion in deposits and $864.2
million in stockholders' equity.
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THE BANK UNITED CORP. SPECIAL MEETING (SEE PAGE 23)
The Bank United Corp. special meeting of stockholders will be held on
Thursday, February 8, 2001, at 10:00 a.m., local time, at The Holiday Inn,
Windsor I and II Ballrooms, 2712 Southwest Freeway, Houston, Texas. 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 December 19, 2000. On that date, there were 32,743,909 shares of Bank United
Corp. common stock and 2,000,000 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 December 19, 2000, directors and executive officers of Bank United
Corp. beneficially owned 2,450,750 shares of Bank United Corp. common stock and
no shares of Bank United Corp. PIES, which together represents in the aggregate
approximately 7.49 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-1 (AND AN AMENDMENT TO THE MERGER
AGREEMENT IS ATTACHED AS APPENDIX A-2) 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 "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
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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 30)
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 46)
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 52)
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
"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;
- the shares of Washington Mutual common stock and the Washington Mutual PIES to
be
5
<PAGE>
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 55)
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 56)
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 56)
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 53)
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 61)
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 61)
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 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.
6
<PAGE>
THE CPR CERTIFICATES (SEE PAGE 107)
The CPR Certificates will represent the right to receive Bank United Corp's
share of the proceeds of any judgment or settlement in its forbearance
litigation against the United States, subject to adjustments described in this
document. This right will be governed by two Delaware business trusts described
below and a commitment agreement that will be entered into between the two
trusts, Bank United Corp. and its wholly owned savings and loan subsidiary.
If Bank United Corp. succeeds in its litigation against the United States,
it is estimated that the holders of CPR Certificates could receive between $1.01
and $7.07 per CPR Certificate. This estimate is based on the three alternative
damage models asserted by Bank United Corp. in the litigation, estimates of
potential taxes and litigation expenses and the approximate number of CPR
Certificates to be issued as described in this prospectus. See "The Forbearance
Litigation--Damages" and "Description of the CPR Certificates--Expenses and
Retained Amount."
These potential recovery amounts do not include any discount for the time
value of money. In addition, the number of CPR Certificates outstanding at the
time of any payment could be greater than the number of CPR Certificates issued
in the reorganization, which would decrease the portion of any recovery proceeds
that will be received by each CPR Certificate. Securities based on contingent
recovery rights in cases similar to the Bank United Corp. forbearance litigation
currently trade at values significantly less than the per share value of the
potential recoveries. No assurance can be made as to the likely recovery per
rights certificate or the likely trading value of the CPR Certificates.
BANK UNITED CORP. STOCKHOLDERS MAY RECOGNIZE GAIN FOR FEDERAL INCOME TAX
PURPOSES AS A RESULT OF THE PROPOSED TRANSACTIONS (SEE PAGE 115)
A Bank United Corp. stockholder will generally recognize gain upon the
receipt of the CPR Certificates if the stockholder has a realized gain on the
transaction, that is, if the stockholder's basis in its Bank United Corp. common
stock is less than the sum of the fair market values of the CPR Certificates and
the Washington Mutual common stock received in the Washington Mutual merger. The
gain recognized will generally equal the full value of the CPR Certificates
received if the value of the CPR Certificates is equal to or greater than the
realized gain.
The CPR Certificates along with new shares of Bank United Corp. common stock
will be issued to stockholders of Bank United Corp. in the Bank United Corp.
reorganization as described below. See "The Bank United Corp. Reorganization and
Distribution of the CPR Certificates." Following the Bank United Corp.
reorganization, the new shares of Bank United Corp. common stock issued in the
Bank United Corp. reorganization will be exchanged for shares of Washington
Mutual common stock in the merger of Bank United Corp. and Washington
Mutual, Inc.
The Bank United Corp. reorganization and Washington Mutual merger have been
structured in a manner so as to qualify as a "reorganization" within the meaning
of Section 368(a) of the Internal Revenue Code. As a result, Bank United Corp.
stockholders who exchange their shares of Bank United Corp. common stock for new
shares of Bank United Corp. common stock and CPR Certificates in the Bank United
Corp. reorganization and then exchange those new shares of Bank United Corp.
common stock for shares of Washington Mutual common stock in the Washington
Mutual merger will recognize gain, but not loss, in the exchange. The gain, if
any, that is recognized in the exchange will be equal to the lesser of:
- the fair market value of the CPR Certificates received in the
reorganization or
- the amount of gain realized as a result of the exchange.
The amount of gain 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
7
<PAGE>
- the tax basis of the shares of Bank United Corp. common stock exchanged.
For example, assume that a Bank United Corp. stockholder with an aggregate
tax basis in its Bank United Corp. common stock of $500 receives CPR
Certificates with a fair market value of $50 and Washington Mutual common stock
with a fair market value of $700. The Bank United Corp. stockholder has a
realized gain of $250, that is, the sum of the fair market values of the CPR
Certificates ($50) and the Washington Mutual common stock ($700), less the
stockholder's basis in its Bank United Corp. common stock ($500). Because the
fair market value of the CPR Certificates received ($50) is less than the
stockholder's realized gain ($250), the stockholder will recognize a gain equal
to the full value of the CPR Certificates received. If, on the other hand, the
fair market value of the CPR Certificates received were more than the
stockholder's realized gain, the stockholder would recognize a gain equal to the
smaller realized gain, and if the stockholder had a realized loss, the
stockholder would not recognize any gain or loss.
The obligations of Bank United Corp. and Washington Mutual, Inc. to complete
the transactions are conditioned on receipt of legal opinions regarding the
federal income tax treatment of the transactions to the companies and their
stockholders. These opinions will not bind the Internal Revenue Service, which
could take a different view.
This tax treatment may not apply to all Bank United Corp. stockholders,
including those stockholders who dissent from the Bank United Corp.
reorganization. Determining the actual tax consequences of the transactions to
you can be complicated. They will depend on your specific situation and on
variables not within the control of Bank United Corp., Washington Mutual, Inc.
or the trusts. You should consult your own tax advisor for a full understanding
of the tax consequences to you.
RESALES OF CPR CERTIFICATES (SEE PAGE 108)
The CPR Certificates will be freely transferable by the holders of such CPR
Certificates, except for those holders who may be deemed to be "affiliates" of
the trust under applicable federal securities laws. See "Description of the CPR
Certificates--Resales of the Rights Certificates" and "Risk Factors."
APPLICATION FOR LISTING THE CPR CERTIFICATES ON THE NASDAQ NATIONAL MARKET
SYSTEM (SEE PAGE 108)
There is no current market for the CPR Certificates. Bank United Corp., on
behalf of the contingent payment rights trust, will promptly apply for quotation
of the rights certificates on the NASDAQ National Market System under the symbol
"BNKUZ."
THE FORBEARANCE LITIGATION (SEE PAGE 103)
On July 25, 1995, Bank United Corp. and its co-plaintiffs, Bank United and
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 to adhere to its
agreement to waive or forbear from enforcing certain provisions concerning
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. Bank United Corp. and its co-plaintiffs
seek damages in excess of $560 million. Under the terms of the recovery
agreement entered into by Bank United Corp., Bank United and Hyperion Partners
L.P., Bank United Corp. and Bank United are collectively entitled to 85% of any
recovery proceeds.
THE TRUSTS (SEE PAGE 103)
The CPR Certificates' right to receive Bank United Corp.'s share of the
proceeds of any judgment or settlement in its forbearance litigation against the
United States is an indirect right. This indirect right results from the CPR
Certificates' ownership interests in the assets of the Bank United Corp.
Litigation Contingent Payment Rights Trust created by Bank United Corp. The
assets of the contingent payment rights trust consist primarily of the right to
receive those proceeds, subject to certain adjustments described in this
document. This
8
<PAGE>
right is governed by the commitment agreement described below.
Bank United Corp. also created the Bank United Corp. Payment Rights Trust.
The payment trust was created to manage the payment of any proceeds from Bank
United Corp. to the contingent payment rights trust. The payment trust will
receive the applicable portion of any litigation recovery and pay that amount,
subject to certain adjustments described in this document, to the contingent
payment rights trust. See "--The Commitment Agreement and Payment to Rights
Certificate Holders."
The trusts will governed by their declarations of trust and Delaware law.
The declarations of trust will be substantially the same as Appendices C-1 and
C-2. The trusts will be managed by the litigation trustees. See "Management of
the Forbearance Litigation and the Trusts."
THE COMMITMENT AGREEMENT AND PAYMENT TO CPR CERTIFICATE HOLDERS (SEE PAGE 106)
Prior to the Bank United Corp. reorganization, Bank United Corp. will enter
into a commitment agreement, substantially the same as Appendix D. Under that
agreement Bank United Corp. will be obligated to pay to the payment trust the
commitment amount, which is the portion of the proceeds that Bank United Corp.
and its subsidiary, Bank United, receive in any recovery in their forbearance
litigation against the United States after making the adjustments described in
the next sentence. The payment will be reduced by an amount necessary to
reimburse Bank United Corp. for the expenses that Bank United Corp. advances to
the contingent payment rights trust and to pay certain other expenses and
obligations, but will be increased by the amount of the net tax benefits Bank
United Corp. receives as a result of advancing expenses and paying that amount.
When the payment trust receives the commitment amount, it will immediately
forward that amount to the contingent payment rights trust, with that amount
increased by any interest earned on that amount but reduced by any amounts Bank
United Corp. withdraws from that amount to pay taxes it owes solely by reason of
its ownership of the payment trust. If the commitment amount is paid to the
payment trust prior to the 366th day following the completion of the Bank United
Corp. reorganization, instead of forwarding payment to the contingent payment
rights trust, the payment trust will hold that amount in trust until the 366th
day following completion, at which time the payment trust will make the
applicable payment to the contingent payment rights trust.
Within 60 days of the receipt of any proceeds from the payment trust, the
contingent payment rights trust will pay to the holders of the CPR Certificates
the payment amount, which consists of the proceeds from the payment trust less
the amount held back to pay any of its accrued but unpaid expenses. In addition,
the litigation trustees may reduce the amount of that payment by $1.0 million or
such greater amount as the litigation trustees reasonably determine to be
necessary to pay additional expenses or to satisfy the contingent payment rights
trust's indemnification obligations. Any retained amounts will be retained for a
period of one year or any longer period that the litigation trustees reasonably
determine to be necessary. The contingent payment rights trust is obligated to
pay any remaining portion of the retained amounts within 90 days of the
expiration of the applicable retention period.
MANAGEMENT OF THE FORBEARANCE LITIGATION AND THE TRUSTS (SEE PAGE 105)
Jonathon K. Heffron, Executive Vice President, Chief Operating Officer and
General Counsel of Bank United Corp., and Salvatore A. Ranieri, a director of
Bank United Corp., will be the litigation trustees of the contingent payment
rights trust and the payment trust. Both Mr. Heffron and Mr. Ranieri have
knowledge of the facts underlying the forbearance litigation. As the litigation
trustees, they will have full authority to instruct Bank United Corp. and Bank
United to dismiss, settle or end the prosecution of the forbearance litigation.
Administration of the trusts will be conducted by an institutional trustee.
There will also be a Delaware trustee as required by Delaware law.
9
<PAGE>
In return for their services as litigation trustees for a three-year period
following the reorganization, Messrs. Heffron and Ranieri each will be paid
aggregate fees of $1.5 million, payable in cash in advance in 12 equal quarterly
installments. Any portion of these fees that has not been paid as of the final
resolution of the forbearance litigation will accelerate and be paid immediately
in a lump sum. In addition, the contingent payment rights trust will issue to
each of Mr. Heffron and Mr. Ranieri CPR Certificates equal to 0.75% of the total
number of CPR Certificates issued as a result of the Bank United Corp.
reorganization. These CPR Certificates will be subject to transfer restrictions
and potential forfeiture under limited circumstances.
EXPENSES OF THE TRUSTS (SEE PAGE 109)
Under the commitment agreement, Bank United Corp. is obligated to advance
amounts to pay expenses of the trusts, including expenses of the forbearance
litigation, fees and expenses of the litigation trustees and all administrative
expenses. The obligation of Bank United Corp. to advance amounts for expenses
will be capped at $10 million, but this cap will increase to $13 million if the
forbearance litigation is pursued through additional trial court proceedings and
appeals. Any advanced expenses will reduce the size of the commitment amount as
described above. The contingent payment rights trust may issue additional rights
certificates after the Bank United Corp. reorganization if necessary to pay
expenses. The contingent payment rights trust may borrow funds in order to pay
expenses if those borrowings represent debt of the contingent payment rights
trust and not ownership interests for federal income tax purposes. See "Risk
Factors--Relating to CPR Certificates."
THE REORGANIZATION AND DISTRIBUTION OF THE CPR CERTIFICATES (SEE PAGE 114)
Immediately before the merger of Bank United Corp. and Washington
Mutual, Inc. the contingent payment rights trust will issue CPR Certificates to
Bank United Corp. Bank United Corp. will then issue CPR Certificates to its
stockholders in the Bank United Corp. reorganization. Bank United Corp. will
also retain or issue CPR Certificates for Bank United Corp. stock options and
Bank United Corp. 8% premium income equity securities. See "The Bank United
Corp. Reorganization and the Distribution of the CPR Certificates."
A special meeting of Bank United Corp. stockholders will be held on
February 8, 2001 at 10:00 a.m., at The Holiday Inn Select, 2712 Southwest
Freeway, Windsor I and II Ballrooms, Houston, Texas, to approve the agreements
providing for the Bank United Corp. reorganization and the Washington Mutual
merger. Unless the Bank United Corp. stockholders approve both proposals and all
of the other conditions to the Bank United Corp. reorganization and the
Washington Mutual merger are satisfied or waived in accordance with the terms of
the agreements governing those transactions, the CPR Certificates will not be
distributed.
EFFECT OF THE MERGER
In the merger agreement between Bank United Corp. and Washington
Mutual, Inc., Washington Mutual, Inc. has agreed to perform the obligations of
Bank United Corp. under the commitment agreement, the declarations of trust and
the related agreements to which Bank United Corp. is a party. Unless otherwise
indicated, references to Bank United Corp. in this prospectus will also refer to
Washington Mutual, Inc. upon completion of the Washington Mutual merger.
10
<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 NINE MONTHS OF
FISCAL 2000 1999 FISCAL YEAR
-------------------- ----------------
<S> <C> <C>
WASHINGTON MUTUAL COMMON STOCK
Book value per share
Historical(1)........................................... $17.70 $16.18
Pro forma(2)............................................ 19.14 NA
Cash dividends per share
Historical(1)........................................... 0.84 0.98
Pro forma(3)............................................ 0.84 0.98
Net income per basic share
Historical(1)........................................... 2.61 3.17
Pro forma(3)............................................ 2.52 3.06
Net income per diluted share
Historical(1)........................................... 2.60 3.16
Pro forma(3)............................................ 2.51 3.05
</TABLE>
<TABLE>
<CAPTION>
FIRST NINE MONTHS OF
FISCAL 2000 1999 FISCAL YEAR
-------------------- ----------------
<S> <C> <C>
BANK UNITED CORP. COMMON STOCK
Book value per share
Historical(1)........................................... $25.49 $23.22
Pro forma equivalent(4)................................. 24.88 NA
Cash dividends per share
Historical(1)........................................... 0.56 0.69
Pro forma equivalent(4)................................. 1.09 1.27
Net income per basic share
Historical(1)........................................... 2.81 3.34
Pro forma equivalent(4)................................. 3.28 3.98
Net income per diluted share
Historical(1)........................................... 2.77 3.28
Pro forma equivalent(4)................................. 3.26 3.97
</TABLE>
------------------------
(1) The historical per share amounts as of and for the first nine months of
fiscal 2000 are presented as of and for the period ended September 30, 2000
for Washington Mutual common stock and as of and for the period ended
June 30, 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.
11
<PAGE>
(2) The pro forma book value per share for Washington Mutual common stock as of
September 30, 2000 combines the book value per share for Washington Mutual
common stock as of September 30, 2000 and the book value per share for Bank
United Corp. common stock as of September 30, 2000.
(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 nine
months of fiscal 2000 combines the actual results for Washington Mutual
common stock for the nine months ended September 30, 2000 and the actual
results for Bank United Corp. common stock for the nine months ended
June 30, 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
nine 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 nine months ended September 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................................ $49.95 $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
Quarter ended December 31, 2000............................. 55.88 37.88 72.13 47.06
January 1, 2001 through January 9, 2001..................... 51.63 44.63 68.25 56.31
</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
12
<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 January 9, 2001 (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
January 9, 2001............................... $46.69 $60.44 $60.70
</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...................................... 0.300 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>
13
<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 nine
months ended September 30, 1999 and September 30, 2000 and as of September 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 September 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>
NINE MONTHS ENDED
SEPTEMBER 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....... $ 10,150,590 $ 8,873,256 $ 12,062,198 $ 11,221,468
Interest expense...... 6,940,006 5,477,687 7,610,408 6,929,743
------------ ------------ ------------ ------------
Net interest income... 3,210,584 3,395,569 4,451,790 4,291,725
Provision for loan
losses.............. 132,803 125,356 167,076 161,968
Noninterest income.... 1,434,231 1,085,781 1,508,997 1,507,200
Noninterest expense... 2,304,536 2,177,947 2,909,551 3,267,500
------------ ------------ ------------ ------------
Income before income
taxes, extraordinary
items, cumulative
effect of accounting
changes, and
minority interest... 2,207,476 2,178,047 2,884,160 2,369,457
Income taxes.......... 805,729 811,275 1,067,096 882,525
Cumulative effect of
change in tax
accounting method... -- -- -- --
Minority interest in
earnings of
consolidated
subsidiaries........ -- -- -- --
------------ ------------ ------------ ------------
Net income............ $ 1,401,747 $ 1,366,772 $ 1,817,064 $ 1,486,932
============ ============ ============ ============
Net income
attributable to
common stock........ $ 1,401,747 $ 1,366,772 $ 1,817,064 $ 1,470,990
============ ============ ============ ============
Net income per common
share:
Basic............... $ 2.61 $ 2.37 $ 3.17 $ 2.61(1)
Diluted............. 2.60 2.37 3.16 2.56(1)
Average diluted common
shares used to
calculate earnings
per share........... 538,311,882 577,775,189 574,553,031 578,562,305(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, extraordinary
items, 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,
SEPTEMBER 30, ------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------- ------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets....................... $190,780,150 $186,513,630 $165,493,281 $143,522,398 $137,328,541 $137,142,972
Available-for-sale
securities................. 40,223,088 41,384,318 32,917,053 19,817,226 25,431,464 31,181,617
Held-to-maturity
securities................. 17,275,156 19,401,465 14,129,482 17,207,854 9,605,367 10,967,204
Loans, net of reserve for
loan losses................ 120,228,328 113,497,225 108,370,906 97,624,348 92,943,126 85,335,568
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, ------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------- ------------ ------------ ------------ ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Deposits..................... 80,453,345 81,129,768 85,492,141 83,429,433 87,509,358 88,019,469
Borrowings................... 98,348,117 94,326,616 65,200,489 49,976,377 40,014,735 38,261,697
Stockholders' equity......... 9,329,238 9,052,679 9,344,400 7,601,085 7,426,137 8,421,102
</TABLE>
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 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)...... $0.84 $0.72 $0.98 $0.82(1) $0.71(1) $0.60(1) $0.51(1)
Post-business combination(3)..... 0.84 0.72 0.98 0.73(1) 0.66(1) 0.65(1) 0.51(1)
Common stock dividend payout
ratio............................ 33.09% 30.74% 31.40% 29.32%(1)(3) 40.61%(1)(3) 94.12%(1)(3) 37.26%(1)
Return on average assets........... 1.00 1.06 1.04 0.96 0.63 0.28 0.56
Return on average stockholders'
equity........................... 21.37 19.58 19.66 16.62 11.73 4.70 10.02
Return on average common
stockholders' equity............. 21.37 19.58 19.66 16.67 11.95 3.95 10.14
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
SEPTEMBER 30, --------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Ratio of stockholders'
equity to total
assets............... 4.89% 4.85% 5.65% 5.30% 5.41% 6.14%
Diluted book value per
common share......... $ 17.70 $ 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............... 527,082,138 559,589,272(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.
15
<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, 1996 through
September 30, 2000 from its historical audited financial statements for these
fiscal years. 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>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------------------
2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest income............................ $1,287,061 $1,007,986 $ 905,800 $ 816,483 $ 816,900
Interest expense........................... 870,419 658,365 615,047 547,914 586,210
---------- ---------- ---------- ---------- ----------
Net interest income........................ 416,642 349,621 290,753 268,569 230,690
Provision for credit losses................ 40,669 38,368 20,123 18,107 16,489
Noninterest income......................... 150,018 119,961 81,653 84,004 96,797
Noninterest expense........................ 292,517 249,645 192,478 175,388 242,149
---------- ---------- ---------- ---------- ----------
Income before income taxes and
extraordinary items...................... 233,474 181,569 159,805 159,078 68,849
---------- ---------- ---------- ---------- ----------
Income tax expense (benefit)............... 80,304 53,659 25,862 60,986 (75,487)
---------- ---------- ---------- ---------- ----------
Extraordinary items, net of federal income
tax effect (early extinguishment of
debt).................................... -- -- -- 2,323 --
Preferred stock dividends and payment in
lieu of dividend)........................ 18,253 18,253 18,253 18,253 24,666
---------- ---------- ---------- ---------- ----------
Net income................................. $ 134,917 $ 109,657 $ 115,690 $ 77,516 $ 119,670
========== ========== ========== ========== ==========
Net income attributable to common stock.... $ 125,948 $ 107,955 $ 115,690 $ 77,516 $ 119,670
========== ========== ========== ========== ==========
Net income per common share:
Basic.................................... $ 3.88 $ 3.34 $ 3.59 $ 2.41 $ 4.01
Diluted.................................. 3.80 3.28 3.51 2.38 3.81
Average number of diluted shares used to
calculate net income per share:.......... 33,103,113 32,940,965 32,975,769 32,535,715 29,927,387
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Assets................................ $18,160,223 $16,244,679 $13,781,055 $12,054,368 $10,789,852
Available-for-sale securities......... 737,673 820,146 577,580 1,104,153 1,094,342
Held-to-maturity securities........... 272,089 327,394 465,470 549,797 637,477
Loans, net of allowance for credit
losses.............................. 14,966,968 13,116,202 10,867,897 9,046,400 7,563,867
Deposits.............................. 8,714,791 7,508,502 6,894,227 5,571,402 5,404,385
Borrowings............................ 7,989,614 7,329,132 5,827,261 5,525,081 4,439,940
Stockholders' equity.................. 864,240 753,414 691,394 604,462 536,387
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------
2000 1999 1998 1997 1996
-------- -------- -------- -------- ----------
<S> <C> <C> <C> <C> <C>
OTHER FINANCIAL DATA:
Cash dividends paid per common share:
Pre-business combination(1)............................ $ 0.74 $ 0.69 $ 0.64 $ 0.56 $ 3.46(4)
Post-business combination.............................. 0.74 0.69 0.64 0.55 3.35(4)
Common stock dividend payout ratio....................... 19.08% 20.72% 17.89% 22.83% 83.56%(4)
Return on average assets(2).............................. 0.87 0.85 1.04 0.86 1.28
Return on average stockholders' equity................... 15.67 14.81 17.81 13.53 22.98
Return on average common stockholders' equity............ 15.67 14.81 17.81 13.53 22.98
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------------------------------------------------------------
2000 1999 1998 1997 1996
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Ratio of stockholders' equity to total
assets.............................. 4.76% 4.64% 5.02% 5.01% 4.97%
Diluted book value per common share... $ 26.56 $ 23.22 $ 21.47 $ 18.77 $ 17.96
Number of common shares outstanding at
end of period(3).................... 32,541,847 32,448,926 32,196,712 32,177,554 32,208,643
</TABLE>
--------------------------
(1) Amounts paid by acquired companies prior to their combination with the 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.
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.
THE VALUE OF THE CPR CERTIFICATES MAY BE ADVERSELY AFFECTED BY ACTIONS OR
INACTIONS RELATING TO THE CONTROL OF THE FORBEARANCE LITIGATION
The litigation trustees will have the contractual right to instruct Bank
United Corp. and Bank United regarding the management of the forbearance
litigation, including, among other things, to dismiss, settle or cease
prosecuting the forbearance 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. However, because neither of the litigation
trustees controls Bank United Corp., there can be no assurance that Bank United
Corp. or Bank United will comply with the instructions of the litigation
trustees. In addition, 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, there can be no assurance that the
litigation trustees will not make a different determination in the future. There
can also be no assurance that either of the initial litigation trustees, both of
whom have knowledge of the facts underlying the forbearance litigation, will
remain a litigation trustee, and the holders of the CPR Certificates will have
no rights to elect, remove or replace any litigation trustee.
THE AMOUNT AND TYPE OF DAMAGES FROM THE FORBEARANCE LITIGATION ARE UNKNOWN
The forbearance litigation presents issues as to the amount, if any, and
type of damages that may be recoverable by the plaintiffs. Although Bank United
Corp. and Bank United were granted a favorable summary judgment on the issue of
liability, the court has not ruled on the amount, if any, and type of damages.
The United States has argued that some or all of the damages as to which
recovery is sought by the plaintiffs in similar cases are too speculative to
permit a recovery. In addition, even though the forbearance litigation was
prosecuted to an initial favorable judgment on the issue of liability, that
judgment is likely to be appealed by the federal government. For these and
related reasons, there can be no assurance as to the amount, if any, and type of
damages that Bank United Corp. and Bank United may recover. There can be no
assurance that Bank United will obtain any monetary recovery in the forbearance
litigation. In addition, if there is a recovery, there cannot be any assurance
as to the timing of the recovery. It could be a very lengthy time before any
payment is made and collected.
PAYMENTS, IF ANY, TO CPR CERTIFICATE HOLDERS CANNOT BE ASSURED
Any proceeds of the forbearance litigation received by Bank United Corp. or
its subsidiaries will first be applied to reimburse amounts advanced to the
contingent payment rights trust as well as any liability incurred by Bank United
Corp. from the contingent payment rights trust. After it receives a payment from
the payment trust, the contingent payment rights trust will be obligated to hold
a portion of the proceeds for one year or longer if the litigation trustees
determine a longer period is reasonably likely to be required to cover all
expenses, costs and claims and indemnification obligations that may be incurred
or arise after payment. Furthermore, it is impossible to predict the total
amount of any recovery available to be paid to the CPR Certificate holders
because any recovery in the forbearance litigation could be less than the fees,
costs, taxes and tax benefits associated with that recovery. To the extent that
Bank United Corp. or Bank United must engage in protracted litigation, those
fees and
18
<PAGE>
costs may increase significantly. See "The Contingent Payment Rights Trust and
Certificates--Description of the CPR Certificates."
Even in the event that a favorable final judgment or settlement is obtained,
some or all of the damages might not be cash, in which case Bank United Corp.
will have to liquidate these non-cash proceeds as instructed by the litigation
trustees. No assurance can be provided that Bank United Corp. will be able to
convert such non-cash proceeds into cash or, even if this is possible, that the
cash obtained will be the equivalent of the fair market value of the non-cash
proceeds.
Bank United Corp. is a savings and loan holding company within the meaning
of the Home Owner's Loan Act and is subject to regulation by the Office of
Thrift Supervision. Bank United is a federally chartered savings and loan
association holding federally insured deposits and is subject to regulation by
the Office of Thrift Supervision and other regulators, including the Federal
Deposit Insurance Corporation. Washington Mutual, Inc. and Washington Mutual
Bank, FA, are also subject to similar regulatory requirements. If any of the
regulations prohibit distribution of the commitment amount (or any part of that
amount), the commitment agreement permits payment to be delayed for up to
90 days after receipt so that any regulatory requirements can be satisfied. More
information concerning supervision and regulation can be found in the filings
Bank United Corp. and Washington Mutual, Inc. have made with the Securities and
Exchange Commission. See "Where You Can Find More Information."
Although Bank United Corp. will be obligated to pay the commitment amount to
the payment trust, the commitment agreement, the declaration of trust and the
CPR Certificates will provide that no CPR Certificate holder will have the right
to bring any action against Bank United Corp. and its affiliates or any of their
officers, directors or employees for a breach of that obligation. The contingent
payment rights trust, or the litigation trustees on behalf of the contingent
payment rights trust, however, will be authorized to bring suit against Bank
United Corp. for any breach of the commitment agreement.
THE CPR TRUST MAY NOT HAVE ADEQUATE FUNDS FOR EXPENSES
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, the Delaware trustee and the litigation trustees, the
contingent payment rights trust's indemnification obligations and liability
insurance for the contingent payment rights trust's indemnification obligations
and any liabilities of the litigation trustees. There is no assurance that the
amounts to be forwarded by Bank United Corp. will be sufficient to cover those
fees and expenses, and to the extent that Bank United Corp. and Bank United must
engage in protracted litigation, those fees and expenses may increase
significantly.
The contingent payment rights trust may issue additional CPR Certificates in
order to pay expenses. However, there may not be any willing purchasers of
additional CPR Certificates and there can be no assurance that, if there are any
such purchasers, the terms of any purchase would be reasonable. In the event
additional CPR Certificates are issued the existing CPR Certificate holders'
proportionate interest in the payment amount may be diluted. The contingent
payment rights trust will be authorized to borrow additional funds for the sole
purpose of funding expenses of the contingent payment rights trust, 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 and, if it is
able to borrow funds, there can be no assurance that the terms of such
borrowings will be reasonable.
19
<PAGE>
CPR CERTIFICATE HOLDERS WILL HAVE ONLY LIMITED RIGHTS WITH RESPECT TO THE
TRUSTS, THE TRUSTEES AND BANK UNITED CORP.
The litigation trustees will have no liability to CPR Certificate holders
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 CPR Certificate holders or with
reckless disregard for the best interests of those holders. In any event, any
liability will be limited to actual damages. In addition, the declaration of
trust for the contingent payment rights trust will provide that the
institutional trustee and the Delaware trustee to the contingent payment rights
trust will have no liability to the CPR Certificate holders other than for acts
or omissions committed with gross negligence or willful misconduct. Under
Delaware law, parties generally cannot agree to eliminate liability for acts or
omissions involving gross negligence or willful misconduct.
CPR Certificate holders will not have the right to bring any action against
the litigation trustees or otherwise 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
the dispute, and holders of at least a majority in interest of the issued and
outstanding CPR Certificates have given written notice to the holders seeking to
bring suit that they support the action brought to resolve that dispute.
Bank United Corp., Bank United, their affiliates, officers, directors,
employees or agents will have no liability to the holders of the CPR
Certificates. Without limiting the generality of the foregoing, none of the CPR
Certificate holders, the trustees or the trusts will have the right to enforce,
institute or maintain any suit, action or proceeding against Bank United Corp.,
Bank United, their affiliates, officers, directors, employees or agents relating
to the formation of the trusts, 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.
However, the contingent payments rights trust, or the litigation trustees on
behalf of the contingent payments rights trust, may bring suit against Bank
United Corp. for breach of the commitment agreement or failure to deliver any
CPR Certificate required to be returned when so required.
CPR Certificate holders will have no voting rights (except regarding certain
types of amendments to the declaration of trust for the contingent payment
rights trust and except for limited rights regarding removal of the
institutional trustee and the Delaware trustee to the contingent payments rights
trust), no liquidation preference and no rights to dividends or distributions
other than their pro rata share of the commitment amount plus any other
contingent payments rights trust assets. In addition, the contingent payments
rights trust will have no assets other than the commitment agreement and any
funds raised by the contingent payments rights trust.
THE CPR CERTIFICATES MAY BE DIFFICULT TO SELL DUE TO THE ABSENCE OF AN ACTIVE
TRADING MARKET FOR THE CPR CERTIFICATES
There is no current market for the rights certificates. Bank United Corp.,
on behalf of the contingent payments rights trust, will promptly apply for
quotation of the rights certificates on the NASDAQ National Market System under
the symbol "BNKUZ." No assurance can be given that the CPR Certificates will
satisfy the requirements for quotation on the NASDAQ National Market System or
any other trading system. If the CPR Certificates cannot be quoted or listed on
any trading system, there would likely be only minimal or no trading channels
for the CPR Certificates. This would result in severely reduced liquidity for
investors in the CPR Certificates. Even if the CPR Certificates are quoted or
listed on the Nasdaq or other trading market, there can be no assurance that an
active market will develop or be sustained.
20
<PAGE>
THE TRADING VALUE OF AN INVESTMENT IN CPR CERTIFICATES MAY FLUCTUATE WIDELY
The price of the CPR Certificates will depend on a number of factors. These
factors include, without limitation, the nature of court decisions and opinions
in the Bank United Corp. forbearance litigation and similar cases that may be
decided prior to the Bank United Corp. forbearance litigation and speculation
about the outcome of the forbearance litigation and litigation of those similar
cases, settlement of any similar cases and Bank United Corp.'s ability to pay
the commitment amount to the contingent payment rights trust. Consequently,
there could be wide fluctuations in the price of CPR Certificates over short
periods of time.
AN INVESTMENT IN CPR CERTIFICATES IS SUBSTANTIALLY DIFFERENT FROM AN INVESTMENT
IN A SAVINGS AND LOAN HOLDING COMPANY
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 policies or, in the case of corporate or institutional stockholders,
that such investment may be restricted by their charters. Such determinations by
holders of a large number of shares of Bank United Corp. common stock may result
in a quick sell-off of CPR Certificates by those holders, causing temporary
selling pressure that could adversely affect the price of the CPR Certificates
for some period following the effective time of the merger.
THERE MAY NOT BE INFORMATION REGARDING DEVELOPMENTS IN THE FORBEARANCE
LITIGATION AVAILABLE TO PERMIT AN INFORMED DECISION TO BUY, HOLD OR SELL CPR
CERTIFICATES
The contingent payment rights trust will file annual reports on Form 10-K
and quarterly reports on Form 10-Q that will include an overview of the status
of the forbearance litigation. The contingent payment rights trust will also
file a report on Form 8-K if there is a material judicial decision in the
forbearance litigation or any agreement to settle the forbearance litigation.
The contingent payment rights trust's ability to disclose details of the
forbearance 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.
NO TRADING MARKET CURRENTLY EXISTS FOR THE CPR CERTIFICATES, AND THEY MAY NOT BE
LISTED OR QUOTED ON A TRADING SYSTEM IN THE FUTURE
There is no current market for the CPR Certificates. Bank United Corp., on
behalf of the contingent payment rights trust, will promptly apply for quotation
of the CPR Certificates on the NASDAQ National Market System under the symbol
"BNKUZ". No assurance can be given that the CPR Certificates will satify the
requirements for quotation on the NASDAQ National Market System or any other
trading system. In the event that the CPR Certificates cannot be quoted or
listed on any trading system, there would likely be only minimal or no trading
channels for the CPR Certificates, resulting in severely reduced for no
liquidity for holders of the rights certificates. Even if the CPR Certificates
are quoted or listed, there can be no assurance as to the price at which the CPR
Certificates would trade at any time, and wuch price could be subject to rapid
and substantial change, depending primarily upon developments in the
forebearance litigation and similar pending litigation.
21
<PAGE>
THE PAYMENT TRUST'S RIGHT TO RECEIVE ANY LITIGATION PROCEEDS 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 right to receive a portion of any forbearance litigation
proceeds from Bank United Corp. is a general unsecured senior obligation of Bank
United Corp. Therefore, that right will rank equally with all existing and
future senior unsecured indebtedness of Bank United Corp. and the payment trust
will not have any preferential right to any litigation proceeds in the event of
any bankruptcy or insolvency proceeding involving Bank United Corp. or
Washington Mutual, Inc., as its successor. In addition, because Bank United is
not a party to the commitment agreement, the payment trust's right to receive
that portion of any forbearance litigation proceeds payable to Bank United will
be subordinated to the liabilities of Bank United.
22
<PAGE>
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 January 10, 2001 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 Thursday, February 8, 2001, at 10:00 a.m. at The Holiday
Inn Select, Windsor I and II Ballrooms, 2712 Southwest Freeway, Houston, Texas,
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.
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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 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 not
to exceed $10,000.
VOTES REQUIRED
The Bank United Corp. board of directors has fixed December 1, 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 32,743,909 shares of Bank
United Corp. common stock and 2,000,000 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 2,450,750 shares of Bank United Corp. common stock and no
Bank United Corp. PIES which entitles them to exercise approximately
7.49 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-1 AND AN AMENDMENT TO THE MERGER AGREEMENT
ATTACHED AS EXHIBIT A-2)) 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
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"Description of the Washington Mutual PIES", "Description of the Purchase
Contracts" and "Description of the Preferred Stock."
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,
including the right, for a period of 60 days beginning at the effective time of
the Washington Mutual merger, to surrender all or part of such option for (x)
cash in the amount equal to the number of such Bank United Corp. option shares
surrendered multiplied by the difference between (i) the highest reported per
share sales price of Bank United Corp. common stock during the 60 day period
prior to the Washington Mutual merger and (ii) the per share exercise price of
the surrendered Bank United Corp. option, plus (y) one CPR Certificate for each
Bank United Corp. share surrendered.
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
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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 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
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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.
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."
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(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 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.
Management and the Bank United Corp. board also concluded that a significant
benefit of the Washington Mutual merger would be the increased liquidity that
Bank United Corp. stockholders would have as prospective holders of Washington
Mutual common stock, thus enabling such stockholders (including members of
management and the Board) to better diversify their ownership interests in their
shares through sale or hedging transactions.
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.
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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,
- 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
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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.
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,
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- 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.
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,
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<PAGE>
- 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,
- 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.
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<PAGE>
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.
- 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.
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<PAGE>
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.
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.
35
<PAGE>
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,
- 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,
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<PAGE>
- 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.
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.
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<PAGE>
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
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.
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<PAGE>
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 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.
39
<PAGE>
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.
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.
40
<PAGE>
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.
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
41
<PAGE>
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
- 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.
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<PAGE>
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 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.
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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 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
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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."
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.
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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.
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.
Certain of these amounts
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may be paid prior to the effective date of the merger, and Washington Mutual has
agreed to reimburse such executives for certain adverse tax consequences which
could result from a prior payment. 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 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
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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 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. Certain of these amounts may be paid prior
to the effective date of the merger, and Washington Mutual has agreed to
reimburse Mr. Heffron for adverse tax consequences which could result from a
prior payment. 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.
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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 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.
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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
186,000.
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 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;
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<PAGE>
- 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;
- 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.
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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 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
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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 (including dissenters' rights in connection with the
Bank United Corp. reorganization merger) 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 "--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
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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 December 19, 2000, 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.
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.
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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
- 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.
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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.
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
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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 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
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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 Washington Mutual 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 Washington Mutual 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 September 30, 2000, it had stockholders' equity of
$9.33 billion. Based on consolidated assets of $190.78 billion at September 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 nine 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 1,500 automated
teller machines. The consumer banking group also has approximately 1,600
full time equivalent employees in its telephone banking centers. At
September 30, 2000, Washington Mutual had $78.71 billion in deposits and a
consumer loan portfolio of $7.32 billion.
- MORTGAGE BANKING. 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 banking operations are the origination of
single-family residential mortgages and residential construction loans and
the associated loan servicing activities. For the nine months ended
September 30, 2000, this group originated $30.99 billion of single-family
residential mortgage loans (excluding residential construction loans).
- 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 September 30, 2000, Washington Mutual had $20.29 billion of commercial
real estate and commercial business loans in its portfolio, of which
$15.59 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 September 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 $8.43 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 September 30, 2000, Washington Mutual Finance had assets of
$3.85 billion.
Long Beach Mortgage 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 Mortgage originates loans in all
50 states primarily through wholesale channels comprised of a nationwide
network of independent mortgage loan brokers and correspondents. Long
Beach Mortgage maintains a close working relationship with these brokers
through its sales force of over 300 account executives located in 60
offices. Long Beach Mortgage 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 September 30, 2000, Bank United Corp. had $18.2 billion in assets,
$8.7 billion in deposits and $864.2 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 operators. Business is
solicited in Texas and in other targeted markets throughout the United
States. At September 30, 2000, Bank United Corp.'s commercial banking
network consisted of 23 regional banking offices in 16 states. During the
year ended September 30, 2000, Bank United Corp.'s commercial loan
portfolio increased by $1.6 billion or 29% to $7.0 billion at
September 30, 2000.
- COMMUNITY BANKING. The community banking business operates throughout
Texas and other states and includes deposit gathering, consumer lending,
small business banking, and investment product sales. The platform for
these consumer and small business activities consists of a 157-branch
network, a 24-hour telephone banking center, a 161-unit ATM network and 16
Small Business Administration lending offices in 10 states. The community
banking business also has online banking and online bill payment services
available through its website. As of September 30, 2000, Bank United
Corp.'s community banking network maintained in excess of 509,000 deposit
accounts, including certificates of deposit for over 343,000 households
and businesses. During the year ended September 30, 2000, the number of
checking accounts increased by 18% to approximately 276,000.
- 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 ("GNMA") 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 September 30, 2000, Bank United
Corp.'s single family mortgage servicing portfolio totaled $31.8 billion
or 310,000 loans, including $5.0 billion of loans serviced for Bank United
Corp.'s own account. At September 30, 2000, Bank United Corp.'s deposits
included $304.6 million of advances from borrowers for taxes and insurance
("escrow") and $150.0 million of principal and interest held on behalf of
investors. At that time, the largest concentrations of the servicing
portfolio were in California and Texas.
- MORTGAGE PRODUCTION. The mortgage production 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 3,000 approved mortgage brokers. The mortgage
production business originated $2.8 billion and $3.7 billion of single
family loans in fiscal years 2000 and 1999. During fiscal years 2000 and
1999, $1.9 billion and $2.8 billion of single family mortgage loans were
sold in the secondary market. At September 30, 2000, the mortgage
production business had $2.6 billion of single family loans held for
investment.
- 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
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portfolio business acquires single family loans through traditional
secondary market sources, such as mortgage companies, financial
institutions and investment banks. In fiscal years 2000, 1999 and 1998,
Bank United Corp. purchased approximately $611.3 million, $1.8 billion,
and $1.2 billion of single family loans. At September 30, 2000, the
investment portfolio business held $4.5 billion of assets, which included
$3.5 billion of single family loans held for investment and MBS totaling
$868.2 million.
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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 to be chosen by Washington
Mutual, a Treasury security having a total principal amount at maturity of
$1,000; and
- transfer to the purchase contract agent to be chosen by Washington Mutual,
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 be chosen by Washington Mutual, 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 a remarketing agent to be chosen by
Washington Mutual, the remarketing agent will use its commercially reasonable
efforts to remarket those shares of preferred stock, together with any shares of
preferred
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stock not then a part of the Corporate PIES as 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 the remarketing agent for that remarketing. See
"Description of the Preferred Stock--Dividend Rate Reset by Remarketing" below.
If the remarketing agent 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 the remarketing agent 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.
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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 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.
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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
- 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;
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- 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;
- 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
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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
(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.
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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 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
It is anticipated that 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.
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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 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.
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;
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- 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 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.
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 preferred stock and that other capital stock will bear to each
other the same ratio that accrued and
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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, the remarketing
agent 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 the remarketing agent 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 the remarketing agent or, if the remarketing agent 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, the remarketing agent 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. Washington Mutual will enter into the remarketing
agreement which provides that the remarketing agent 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 efforts to appoint a successor remarketing agent and enter
into a remarketing agreement with that person as soon as reasonably practicable.
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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 statement/prospectus supplement and assuming that all offered shares
are issued and outstanding, the shares of preferred stock would represent, in
the aggregate, approximately .037% of the combined voting power of the shares of
preferred stock and the common stock.
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Whenever dividends on shares of the preferred stock shall be in arrears 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
It is anticipated that the preferred stock will be issued as one or more
global certificates registered in the name of DTC or its nominee. It is
anticipated that 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.
WASHINGTON MUTUAL RIGHTS PLAN
Washington Mutual has adopted a shareholder rights plan (the "Washington
Mutual Rights Plan") which provides that one right to purchase 1/1,000th of a
share of Washington Mutual Preferred Stock, Series RP, (the "Washington Mutual
Rights") is attached to each outstanding share of Washington Mutual Common
Stock. The Washington Mutual Rights have certain anti-takeover effects and are
intended to discourage coercive or unfair takeover tactics and to encourage any
potential acquiror to negotiate a price fair to all shareholders. The Washington
Mutual Rights may cause substantial dilution to an acquiring party that attempts
to acquire Washington Mutual on terms not approved by the Washington Mutual
Board, but they will not interfere with any merger or other business combination
that is approved by the Washington Mutual Board.
The Washington Mutual Rights are attached to the shares of Washington Mutual
Common Stock. The Rights are not presently exercisable. At the time a party
acquires beneficial ownership of 15% 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, the Rights will separate from the Common Stock and
will become exercisable. Each Washington Mutual Right entitles the holder to
purchase 1/1,000th share of Washington Mutual Preferred Stock, Series RP, for an
exercise price that is currently $200 per share. Once the Rights become
exercisable, any Washington Mutual Rights held by the acquiring party will be
void and, for the next 60 days, all other holders of Washington Mutual Rights
will receive upon exercise of the Right 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
January 4, 2011, may be redeemed by Washington Mutual for $0.001 per right prior
to becoming exercisable. Until a Washington Mutual Right is exercised, the
holder of that Washington Mutual Right will have no rights as a shareholder of
Washington Mutual, including, without limitation, the right to vote or receive
dividends.
Bank United Corp. has not adopted any shareholder 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 shareholders and the
shareholders 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
shareholders.
Under the WBCA, shareholder 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 shareholders 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, shareholder action that may be taken at a shareholders'
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 TRUSTS
The forbearance litigation is an asset of Bank United Corp. and Bank United
and thus will become an asset of Washington Mutual, Inc. as successor to Bank
United Corp. and as the parent company of Bank United upon completion of the
Washington Mutual merger. However, Bank United Corp. has established the
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. These assets will consist
primarily of the right to receive the commitment amount from Bank United Corp.
Under the declaration of trust for the contingent payment rights trust and
two related litigation trustee agreements, Jonathon K. Heffron, Executive Vice
President, Chief Operating Officer and General Counsel of Bank United Corp., and
Salvatore A. Ranieri, a director of Bank United Corp., each of whom has
knowledge of the facts underlying the forbearance litigation, will be appointed
as litigation trustees of the contingent payment rights trust. As the litigation
trustees, Mr. Heffron and Mr. Ranieri will have those rights described below
under "The Forbearance Litigation--Management of the Forbearance Litigation."
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, which will initially be First Union Trust Company,
National Association. As required by Delaware law, there will also be a Delaware
trustee, which will also initially be First Union Trust Company, National
Association. Prior to the reorganization, the declaration of trust for the
contingent payment rights trust will be amended so that it is substantially the
same as Appendix C-1.
In addition, Bank United Corp. has formed the payment trust, which also will
be a Delaware statutory business trust. The payment trust was created to manage
the payment of any litigation proceeds from Bank United Corp. to the rights
trust. See "The Commitment Agreement: Payment Procedure."
THE FORBEARANCE LITIGATION
GENERAL
The following description of the forbearance litigation 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.
As a result of 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 concerning 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 those forbearances or waivers 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.
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On July 25, 1995, Bank United Corp., Bank United and their then 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
- 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,
- to abide by its commitment to allow Bank United to count $110 million of
subordinated debt as regulatory capital for all purposes and
- to abide by an accounting goodwill treatment that would have allowed Bank
United to count 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 as capital for regulatory
purposes and to amortize that amount over a period of twenty five years.
In March 1999, the U.S. Court of Federal Claims granted the plaintiffs'
motion for summary judgment on the issue of liability and held that the United
States was liable. On August 5, 1999, the court denied a motion for summary
judgment filed by the United States in which the United States asserted that the
plaintiffs' claims for lost profits damages were too speculative to permit
recovery. The case proceeded to trial on the amount of damages on September 13,
1999. The evidentiary phase of the damages case ended on October 21, 1999. The
parties submitted post-trial briefs followed by closing argument on February 7,
2000. The plaintiffs seek damages of up to $560 million. The government argued
that the damages to plaintiffs as a result of the breach, if any, were
speculative and approached zero.
In July 1996, Bank United Corp. and Bank United entered into the recovery
agreement with Hyperion Partners L.P. acknowledging the relative value among the
parties of claims in the pending 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 are obligated to 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 U.S. Court of Federal Clams involving acquisitions of
failed savings institutions and alleging that changes in regulatory capital
calculation and capital regulations brought about by the Financial Institutions
Reform Recovery and Enforcement Act constitute a breach of the contract between
the acquiring institution and the federal government. Each of these 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 and the applicable capital calculations and capital
regulations addressed the resulting reduction in its regulatory capital in its
own fashion based on the unique facts and circumstances faced by the
institution. Accordingly, the extent and amount of any damages awarded to the
institutions that have brought actions against the federal government is
expected to be fact specific. Even if plaintiffs in
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similar cases are successful in securing damage awards, Bank United Corp. or
Bank United may not obtain 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 damages. The United States has argued in the plaintiff's case and in
similar cases that some or all of the damages alleged 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.
MANAGEMENT OF THE FORBEARANCE LITIGATION
GENERAL. The litigation trustees will be Salvatore A. 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.
Under the declaration of trust for the contingent payment rights trust and the
litigation trustee agreements, the litigation trustees will have the sole and
exclusive right to instruct Bank United Corp. and Bank United, and their
successors, with respect to all decisions regarding the prosecution of the
litigation. This right includes the right to direct Bank United Corp. to
dismiss, settle or cease prosecuting the forbearance litigation and to control
other aspects of the litigation, such as hiring, firing and supervising legal
counsel, Bank United Corp. will cause Bank United and its successors to follow
these instructions. Prior to the Washington Mutual merger, Bank United Corp. may
establish an advisory committee for the contingent payment rights trust composed
of present and former directors of Bank United Corp. with which the litigation
trustees may consult.
The declaration of trust for the contingent payment rights trust will
provide that the litigation trustees will have the right 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 for any
reason whatsoever. However, the litigation trustees may not cause 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 ruling if the agreement imposes any liability or obligation on
Bank United Corp. or any of its affiliates or adversely affects or restricts the
conduct of its business or adversely affects its tax posture with respect to
other matters, other than a standard settlement release relating only to the
forbearance litigation or other related claims that the plaintiffs could have
brought immediately prior to the Washington Mutual merger.
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The litigation trustee agreements will provide that the contingent payment
rights trust will compensate each litigation trustee, during the term of his
service as a litigation trustee, at a rate of $500,000 per year for three years,
except that if the forbearance litigation is terminated in less than three
years, the remainder of the fees that would be paid over the three-year period
will be accelerated upon final resolution of the litigation and receipt by Bank
United Corp. or any of its affiliates of the litigation proceeds. The litigation
trustees will also be entitled to 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 reorganization. In addition, on December 19, 2000,
the record date for the Bank United Corp. reorganization, Messrs. Heffron and
Ranieri beneficially own 33,826 and 431,000 shares of Bank United Corp. common
stock, respectively and 3,000 and 190,112 options to purchase shares of Bank
United Corp. common stock, respectively, all of which will have vested after
completion of the Washington Mutual merger. If the Bank United Corp.
reorganization had occurred on the record date, Messrs. Heffron and Ranieri
would have received 33,826 and 431,000 CPR Certificates, respectively, in
respect of the shares of Bank United Corp. common stock they beneficially owned
on that date, and 190,112 and 3,000 CPR Certificates, respectively, would be
issuable in connection with the exercise of Bank United Corp. options they
beneficially owned on that date.
The number of CPR Certificates actually received by each litigation trustee
will depend upon the number of shares of Bank United Corp. common stock, Bank
United Corp. stock options and Bank United Corp. 8% Premium Income Equity
Securities that the litigation trustee holds (if any) prior to the Bank United
Corp. reorganization. That number may be different than the number given as of
the record date.
The terms of the declaration of trust for the contingent payment rights
trust will require there to 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 trustee.
Those fees will not exceed the fees payable to the initial litigation trustees.
AUTHORITY. The declaration of trust for the contingent payment rights trust
will provide that the litigation trustees may adopt their own rules and
procedures, but may act only with the approval of both 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. The litigation trustees may, in their discretion, delegate to
one or more of the litigation trustees the authority to act on behalf of the
litigation trustees except regarding 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 COMMITMENT AGREEMENT: PAYMENT PROCEDURE
Prior to the Bank United Corp. reorganization, Bank United Corp., the
contingent payment rights trust and the payment trust will enter into the
commitment agreement, which will be substantially the same as Appendix D. Upon
completion of the Washington Mutual merger, Washington Mutual, Inc. 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 will be
equal to
- all cash and non-cash proceeds actually received by Bank United Corp. and
its affiliates (other than Hyperion Partners) under a final, nonappealable
judgment or a final settlement of the forbearance litigation,
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- less reimbursements to Bank United Corp.,
- plus 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 described below
under the commitment agreement, plus interest,
- Bank United Corp.'s assumed income tax liability resulting from the
receipt of the litigation proceeds,
- damages actually suffered by Bank United Corp. and related parties as a
result of
-- any matter whatsoever brought by the holders of the CPR Certificates
in their capacity as holders or
-- any matter brought by another party relating to the trusts, the CPR
Certificates and their distribution, the forbearance litigation and
any actions taken by the litigation trustees relating to the trusts
other than any damages arising from Bank United Corp.'s breach of the
commitment or other agreements described in this prospectus, failure
to deliver CPR Certificates when due or failure to deposit 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 under the
litigation trustee agreements, and
- expenses reasonably incurred by Bank United Corp. in connection with the
liquidation of any non-cash proceeds.
The payment trust will pay any amounts it receives from Bank United Corp.
promptly to the contingent payment rights trust after deducting any amounts
withdrawn by Bank United Corp. to cover taxes arising solely from its ownership
of the payment trust. The amount that the payment trust forwards to the
contingent payment rights trust will be increased by any after tax interest
earned on the commitment amount. However, in the event that Bank United Corp.
pays any portion of the commitment amount to the payment trust within 365 days
of the Bank United Corp. reorganization, the payment trust will not pay those
amounts to the contingent payment rights trust until the expiration of 366th day
following the Bank United Corp. reorganization. The payment trust will be
controlled by the trustees. Prior to the Washington Mutual merger the
declaration of trust for the payment trust will be amended so that it is
substantially the same as Appendix C-2.
The contingent payment rights trust will in turn make payment to the rights
certificate holders as described below under "Description of the CPR
Certificates."
DESCRIPTION OF THE CPR CERTIFICATES
GENERAL
Each CPR Certificate will represent a beneficial interest in the assets of
the contingent payment rights trust. As a result of Bank United Corp. entering
into the commitment agreement, each CPR Certificate will entitle the holder of
the CPR Certificate to receive a fraction (equal to 1 divided by the total
number of CPR Certificates then outstanding) of any payment amount within
60 days of receipt by the rights trust of that amount. Holders of CPR
Certificates will also be entitled to the same
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fractional share of the retained amount (as defined below) at the expiration of
the retained amount period. The payment amount will be equal to the amount
received from the payment trust.
- less the amount of any accrued but unpaid expenses payable by the
contingent payment rights trust, but
- plus any interest or income received by the contingent payment rights
trust on the proceeds amount.
In addition, this amount will be reduced by the retained amount, which is
the amount that the litigation trustees reasonably determine is necessary to
cover all expenses and claims of the rights trust which may be incurred or arise
after amounts payable by Bank United Corp. to the trusts under the commitment
agreement have been paid in full. The retained amount will be retained for a
period of one year or longer as reasonably determined by the litigation
trustees. The contingent payment rights trust will invest the retained amount in
designated types of investments until the expiration of the retained amount
period, subject to use of those funds to pay trust expenses.
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
holders of CPR Certificates who may be considered "affiliates" 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 under 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 for 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
it is not possible to do so, to trade on another market). Bank United Corp., on
behalf of the contingent payment rights trust, will promptly apply for inclusion
of the CPR Certificates on the Nasdaq National Market under the symbol "BNKUZ."
PAYMENT PROCEDURES FOR CPR CERTIFICATES
The declaration of trust for the contingent payment rights trust will
provide that if and when Bank United Corp. or any of its 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 rights trust will then have 30 days to agree or dispute
that calculation. If the trust agrees to the calculation during that period by
delivering a notice of agreement or by failing to object, Bank United Corp. must
deliver to the payment trust that portion of the commitment amount within five
business days of delivery of the notice of agreement or expiration of the period
without any objection. 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 will hire a mutually agreed upon independent certified
public accountant to recompute that portion of the commitment agreement and
determine the correct amount. Within five business days of a resolution of the
portion of the commitment amount then payable, Bank United Corp. must pay that
amount to the payment trust.
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TIMING OF PAYMENTS
Under the declaration of trust for the contingent payment rights trust and
the commitment agreement, the contingent payment rights trust will make payments
of the payment amount to the 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 under 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
The contingent payment rights trust may issue additional CPR Certificates
after the effective time of the Washington Mutual merger to raise funds to pay
expenses. The contingent payment rights trust will be authorized to borrow
additional funds for the sole purpose of funding its expenses, subject to
certain limitations. If the contingent payment rights trust accrues expenses in
excess of Bank United Corp's. funding obligations, it will deduct the amount of
those 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 provide the trusts
with funds to pay their expenses. The aggregate amount that Bank United Corp.
will be obligated to pay for the life of the trusts will not exceed
$10 million, unless the forbearance litigation is pursued through additional
trial court proceedings and appeals, in which case Bank United Corp. will be
obligated to pay those additional expenses subject to a maximum of $13 million.
In the commitment agreement, each of the trusts will agree 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 COMMITMENT AGREEMENT: ADDITIONAL INFORMATION
TAX EFFECTS ON THE COMMITMENT AMOUNT
The commitment agreement will provide that the commitment amount will be
decreased by certain tax liabilities to Bank United Corp. and increased by
certain tax benefits to Bank United Corp.
TAX LIABILITIES. The commitment agreement will provide that tax liabilities
include an amount equal to the income tax liability of Bank United Corp. and its
affiliates on the litigation proceeds computed as described below. Regardless of
any position taken by Bank United Corp. or its affiliates on any tax return or
claim for refund or of the actual payment or receipt of any taxes of those
proceeds, the tax liabilities will be computed based on the tax assumptions
described below unless it is determined that litigation proceeds are not
includible in gross income in whole or in part, in which case the assumptions
will be modified based on that determination.
ASSUMED TAX BENEFITS. The commitment agreement will provide that tax
benefits include an amount equal to the sum of
- the assumed tax benefit resulting from the payment of the portion of the
commitment amount that will be treated as interest and
- the assumed tax benefit resulting from the deduction for the payment of
the trust expenses and for the value of the CPR Certificates issued to the
trustees.
The assumed tax benefit under the first bullet point above will be computed
based on the tax assumptions described below unless it is determined that no tax
deduction is permitted (or any tax
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deduction is limited) for payments of the commitment amount, in which case the
assumed tax benefits will be modified based on that determination
The assumed tax benefit under the second bullet point above will be computed
based on the tax assumptions described below unless it is determined that a tax
deduction is allowed (in whole or in part) for expense advances to the trusts or
for the fair market value of the rights certificates issued to the trustees, in
which case the assumed tax benefits will be modified based on that
determination.
TAX ASSUMPTIONS. In the commitment agreement, "tax assumptions" will mean
the following assumptions unless a determination is made as described above, in
which case the assumptions will be modified as required by that determination:
- The litigation proceeds will be fully includible in Bank United Corp.'s
gross income as ordinary income.
- Payments of the commitment amount generally will not be tax deductible
except that payments of the commitment amount will be deductible to the
extent treated under Section 483(a) of the Internal Revenue Code as
interest expense except to the extent allocable to rights certificates
issued upon the exercise of stock options and other limited exceptions.
- Bank United Corp. and its affiliates will not be entitled to deduct
estimated expense amounts advanced to the trusts under the commitment
agreement or for the fair market value of the CPR Certificates issued to
the litigation trustees under the litigation trustee agreements.
- The income tax liability resulting from the inclusion of all or a portion
of the litigation proceeds in Bank United Corp.'s gross income as ordinary
income and the benefit of any tax deduction will be:
-- the product of (1) the amount of that income or deduction and (2) 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
-- the product of (1) that income or deduction and (2) the net combined
marginal rate of state and local income (or franchise) tax of the
relevant Bank United Corp. affiliate 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 federal income tax rate described above) of such state or local
income (or franchise) tax.
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 an estimated 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 estimated
calculation, the parties will recompute the assumed tax benefit or assumed tax
liability. No later than 30 days after the recomputation of the assumed tax
liability and the assumed tax benefit, Bank United Corp. will 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 of Bank United Corp.'s cost of funds as submitted
monthly to the Federal Home Loan Bank.
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INDEMNIFICATION AND RELATED OBLIGATIONS; LIABILITY
INDEMNIFICATION. Under their declarations of trust, the trusts will
indemnify and advance expenses to each litigation trustee, the institutional
trustee, and the Delaware trustee and members of any advisory committee
resulting from any threatened or actual proceeding arising out of or relating
to:
- the trust,
- the CPR Certificates,
- the distribution of the CPR 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, Inc. so long as those actions
relate to the contingent payment rights trust).
In the circumstances listed above, these persons will be indemnified against
any and all damages and expenses, including attorneys' fees and other expenses
incurred by the indemnified person in obtaining indemnification under the
declaration of trust.
However, in the case of the indemnification of any litigation trustee, if
the CPR Certificate holders establish in a final judicial determination by clear
and convincing evidence that the damages arose as the result of actions or
omissions of the litigation trustees with deliberate intent to injure the CPR
Certificate holders or with reckless disregard for the best interests of those
holders, no indemnification will 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 the damages arose because
such trustee was grossly negligent or engaged in willful misconduct, then no
indemnification will be permitted. Under Delaware law, parties generally cannot
agree to eliminate liability for acts or omissions involving gross negligence or
willful misconduct. The termination of any proceeding will 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 trusts will obtain liability insurance to cover
their indemnification obligations and any liabilities of the litigation
trustees.
REIMBURSEMENT OBLIGATIONS. Under the commitment agreement, Bank United
Corp. and its affiliates will be reimbursed from any litigation proceeds
received by Bank United Corp. for any damages actually suffered by them arising
from 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 rights certificates and
their distribution, the forbearance litigation and any actions taken by
Bank United Corp. relating to the trusts.
However, Bank United Corp. will not be reimbursed for damages arising from
claims
- 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,
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-- failure to deliver any CPR Certificates when due,
-- failure to deposit the trust expenses advanced to the trust, or
- against Bank United for breach of any depository relationship obligations
regarding 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 for-profit private corporations organized
under the Delaware General Corporation Law.
The declarations of trust for the trusts will provide that, except as set
forth in those documents, the trustees will not be personally liable for the
payment of any amounts to the trusts or CPR Certificate holders. Those payments
will be made solely from any proceeds amount, retained amount, and other assets
of the contingent payment rights trust.
EXCULPATION. The declarations of trust for the trusts will provide that, to
the fullest extent permitted by law, none of the trustees, their affiliates or
the members of any advisory committee will be liable to the trust or to each
other for any damages incurred because of any act or omission by that person.
However, the declarations of trust will provide for two exceptions to that
limitation:
- The litigation trustees will be liable for any damage incurred because of
any act or omission 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, non-speculative 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, non-speculative damages.
These provisions are not intended to limit the litigation trustees' right to
insurance obtained by the contingent payment rights trust and the proceeds of
that insurance.
The declarations of trust for the trusts will also provide that, to the
fullest extent permitted by law, none of the trustees, their affiliates or the
members of any advisory committee will have any liability to the trusts, the
trustees or the CPR Certificate holders.
The declarations of trust for the trusts will also provide that, to the
fullest extent permitted by law, none of trusts, the trustees or the rights
certificate holders will have the right to bring any action against any trustee,
any of their affiliates or any member of the Bank United Corp. litigation
committee relating to:
- the formation of the trusts,
- 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 trusts (or the litigation trustees on its behalf) may bring
actions against:
- Bank United Corp. for breach of its obligations under the declarations of
trust,
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- Bank United Corp. for breach of any of its obligations under the
commitment agreement or Bank United Corp.'s failure to deliver any CPR
Certificate when due,
- Bank United Corp. for failure to make payments to the trusts under the
commitment agreement, or
- Bank United for breach of any depository relationship obligations it may
have with respect to payments made by Bank United Corp. to the trusts,
and in each case, Bank United Corp. or Bank United, as the case may be, may be
liable to the trusts in connection with such action.
Fees and expenses incurred by Bank United Corp. or its affiliates in an
action of the sort described in the preceding paragraph shall not be set off
against the litigation proceeds when calculating the commitment amount if the
trust or the litigation trustees wins the suit. If the litigation trustees do
not win a suit of that sort, those fees and expenses will be considered expenses
of the trusts.
OTHER LIMITATION ON RIGHTS OF CPR CERTIFICATE HOLDERS. The declaration of
trust for the contingent payment rights trust will provide that no CPR
Certificate holder will have the right to bring any action against the
litigation trustees to enforce or otherwise act regarding the declaration of
trust unless the holder has previously given written notice to the litigation
trustees of the substance of the dispute. In addition, the holders of at least a
majority of the outstanding CPR Certificates must give written notice to the
parties of their support for the institution of the action to resolve the
dispute. CPR Certificate holders may have the right to institute and maintain
certain derivative actions under Section 3816 of the Delaware Business Trust
Act.
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.
The declaration of trust for the contingent payment rights 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 the amounts described in this
prospectus. The declaration of trust for the contingent payment rights trust
will provide that amendments to the declaration of trust must be approved by a
majority of the holders of rights certificates outstanding. No vote will be
required, however, and the declaration of trust may be amended by the
institutional trustees and a majority of the litigation trustees without a vote,
to
- cure any ambiguity;
- 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;
- 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;
- modify, eliminate or add to any provision of the declaration of trust to
ensure that the rights trust
-- will be classified for U.S. federal income tax purposes at all times
as a grantor trust,
-- will not be required to register as an "investment company" under the
Investment Company Act of 1940, or
-- is able to issue additional CPR Certificates.
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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 the contingent payment rights trust is in default of its payment
obligations, with or without cause. The holders of the CPR Certificates will
have no rights to elect, remove or replace the litigation trustees.
RESTRICTIONS ON THE CONDUCT OF BANK UNITED CORP.
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 result in an assignment of the forbearance litigation.
The commitment agreement will provide that Bank United Corp. will not
- sell or otherwise dispose of any shares of any series of voting stock of
Bank United or
- 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.
The commitment agreement will also provide that Bank United Corp. will not
permit Bank United to
- merge with another entity unless it or a controlled subsidiary of Bank
United Corp. will be the surviving entity in the merger or
- convey or transfer substantially all of its properties and assets to any
person other than Bank United Corp. or a controlled subsidiary of Bank
United Corp.
The commitment agreement will also contain provisions designed to provide
that Bank United Corp. will not create any mortgage or other encumbrance on the
voting stock of Bank United as security for indebtedness for borrowed money
without providing that the CPR Certificates will be secured equally with, or
prior to, that indebtedness. However, Bank United Corp. will be permitted to
create any mortgage or other encumbrance without regard to those restrictions so
long as after giving effect to that mortgage or other encumbrance 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 or other
encumbrance.
The commitment agreement will also provide that Bank United Corp. may avoid
the restrictions described in the two previous paragraphs if prior to any
transaction of that type:
- Bank United has unconditionally guaranteed payment of the commitment
amount, if any, when due;
- Bank United has obtained all regulatory approvals, if any, required to
permit the guarantee of the payment of the commitment amount; and
- Bank United Corp. has delivered to the institutional trustee an opinion of
counsel stating that Bank United Corp. has properly entered into the
guarantee of the payment of the commitment amount and the guarantee
constitutes an enforceable obligation of Bank United.
THE BANK UNITED CORP. REORGANIZATION AND THE
DISTRIBUTION OF RIGHTS CERTIFICATES
Bank United Corp. and Washington Mutual, Inc. entered into an agreement and
plan of merger dated August 18, 2000 (as amended), under which Bank United Corp.
will merge with and into Washington Mutual, Inc., with Washington Mutual, Inc.
surviving the merger. Immediately prior to the Washington Mutual merger, Bank
United Corp. will effect a reorganization of itself by merging a wholly owned
subsidiary of Bank United Corp. with and into Bank United Corp. As a result of
this
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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 equity-based securities will be appropriately and
proportionately adjusted. The contingent payment rights trust will issue to Bank
United Corp. the CPR Certificates prior to the Bank United Corp. reorganization.
Bank United Corp. will 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 Bank United Corp. reorganization for
delivery upon the exercise of stock options by the holder of the applicable
stock option or upon the election by the holder of the applicable stock options
to surrender all or part of the stock option for a combination of cash and CPR
certificates as provided under the Bank United Corp. stock plan under which the
applicable option was issued 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 "The Forbearance
Litigation--Management of the Forbearance Litigation."
In addition, Bank United Corp. will hold one CPR Certificate per share of
Bank United Corp. common stock associated with Bank United Corp. 8% Premium
Income Equity Securities that may be issued in accordance with the terms of
those securities. Upon completion of the Bank United Corp. reorganization and
the merger with Washington Mutual, Inc., the number of CPR Certificates that
will be issuable with respect to each $50 purchase contract under the Bank
United Corp. Bank United Corp. 8% Premium Income Equity Securities will be
between 1.1130 and 1.3356 rights certificates, depending upon the average
closing price per share of Washington Mutual, Inc. 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 under
Section 262 of the Delaware General Corporation Law of an intent to exercise
appraisal rights. If any notifying stockholder subsequently withdraws or loses
its right under Delaware law to appraisal, Bank United Corp. will deliver to the
stockholder rights certificates equal to the number of Bank United Corp. shares
as to which the appraisal demand was withdrawn or lost.
Prior to its reorganization, Bank United Corp. will deposit, with a
depository institution selected to act 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. Up to approximately 38.9 million CPR Certificates are
expected to be issued as a result of the reorganization and the compensation of
the litigation trustees.
MATERIAL 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. THIS TAX TREATMENT MAY NOT APPLY TO ALL BANK UNITED
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CORP. STOCKHOLDERS, INCLUDING THOSE STOCKHOLDERS WHO DISSENT FROM THE BANK
UNITED CORP. REORGANIZATION. DETERMINING THE ACTUAL TAX CONSEQUENCES OF THE
TRANSACTIONS TO YOU CAN BE COMPLICATED. THEY WILL DEPEND ON YOUR SPECIFIC
SITUATION AND ON VARIABLES NOT WITHIN THE CONTROL OF BANK UNITED CORP.,
WASHINGTON MUTUAL, INC. OR THE TRUST. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR
FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF THE TRANSACTION TO YOU.
This summary is 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.
The Bank United Corp. reorganization and the Washington Mutual merger have
been structured in a manner so as to qualify as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code, and it is a condition to
the obligations of both Bank United Corp. and Washington Mutual to complete the
Washington Mutual merger that they receive opinions of legal counsel that the
merger will qualify as a "reorganization." As a result, Bank United Corp.
stockholders who exchange their shares of Bank United Corp. common stock for new
shares of Bank United Corp. common stock and CPR Certificates in the
reorganization and then exchange those new shares of Bank United Corp. common
stock for shares of Washington Mutual common stock in the Washington Mutual
merger will recognize gain, but not loss, in the exchange. The gain, if any,
that is recognized in the exchange will be equal to the lesser of:
- the fair market value of the CPR Certificates received in the Bank United
Corp. reorganization or
- the amount of gain realized in the exchange.
The amount of gain 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.
CHARACTERIZATION OF THE CPR CERTIFICATES AND TRUST
It is anticipated that the contingent payment rights trust will be treated
as a grantor trust for federal income tax purposes and, therefore, each holder
of a CPR Certificate
- will be treated 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 at the same time those amounts are received by the
contingent payment rights trust.
Accordingly, depending upon a holder's basis in its interest in the assets of
the contingent payment rights trust, a holder may realize income attributable to
its interest in the payments received by the contingent payment rights trust
without regard to whether those payments have been distributed to that holder.
For federal income tax purposes, the contingent payment rights trust intends
to treat the expense fund as an asset of Bank United Corp. and to treat any
amounts paid out of the expense fund as expenditures of Bank United Corp. that
do not affect the contingent payment rights trust. 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. 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, that the contingent payment rights
trust will not itself be subject to any material federal income tax.
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Income of the contingent payment rights trust 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 as part of the
retained amount).
CHARACTERIZATION OF THE COMMITMENT; SECTION 483
The contingent payment rights trust intends to treat the payments made under
the commitment, to the extent attributable to CPR Certificates 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 and not 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 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 a CPR Certificate is sold, a portion of the amount received will
be treated under Section 483 as interest income. Interest income will be
ordinary income to the holder. The portion that will be treated as interest will
equal the amount received minus its present value as of the effective date of
the Washington Mutual merger based on a discount rate equal to 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
- 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
- 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 either 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 the payment has been fixed:
- the payment will be discounted to the date when it became fixed, using a
discount rate equal to the applicable federal rate that would apply as of
the time the fixed payment is due,
- the discount on the deferred payment is treated as interest accruing over
the period of deferral and
- the discounted amount is divided between interest and principal under
Section 483 as if it were paid in cash on the 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 buys CPR Certificates after the Bank
United Corp. reorganization may be treated as receiving interest under
Section 483 that includes interest for the period from the effective date of the
Bank United Corp. reorganization 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.
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SALE OF CPR 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 as described above, and the holder's adjusted tax
basis in the CPR Certificate. Any such gain or loss will be treated as capital
gain or loss. This gain or loss will be long-term gain or loss if the holder has
held the CPR 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 as described above, and the portion of
the holder's basis in the certificates that is allocable to such payment. If
multiple payments are received on the commitment, the holder may be required to
allocate its basis among those payments. The method for making such an
allocation is unclear under current law. 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 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 that the CPR Certificates have
no value, a certificate holder would be entitled to deduct as a capital loss, in
the year of that event, the 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 of the contingent payment
trust should be treated as a payment by Bank United Corp. or its successor to
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. 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 those expenses or a related interest factor would be treated as
additional amounts 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 as 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 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
If the contingent payment rights trust issues additional CPR Certificates to
pay expenses, any issuance of additional CPR Certificates will be treated as a
sale by holders of existing CPR Certificates of an interest in the contingent
payment right's trust assets equal to the portion of the assets represented by
the newly issued certificates.
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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.
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
November 10, 2000, individual attorneys at the firm who participated in the
transaction owned an aggregate of 7,829 shares of Washington Mutual common
stock.
EXPERTS
The consolidated financial statements of Washington Mutual incorporated by
reference in this proxy statement/prospectus 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, 2000 and 1999, and for the years 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 year
ended September 30, 1998, 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 for the year ended September 30,
1998, 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 auditors; and (b) Texas Central
Bancshares, Inc. and subsidiaries for the year ended December 31, 1998, 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:
<TABLE>
<S> <C> <C>
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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- Quarterly Report on Form 10-Q for the quarter ended September 30, 2000;
- 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
- Current Report on Form 8-K dated January 8, 2001; 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; and in
Form 8-A dated January 8, 2001.
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, 2000;
- Current Report on Form 8-K dated January 8, 2001;
- 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-1
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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PAGE NO.
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1. DEFINITIONS........................................................ A-1-1
1.1 Defined Terms............................................... A-1-1
1.2 Other Definitional Provisions............................... A-1-3
2. THE MERGER......................................................... A-1-3
2.1 The Merger.................................................. A-1-3
2.2 Effective Time.............................................. A-1-3
2.3 Effects of the Merger....................................... A-1-3
2.4 Closing of the Merger....................................... A-1-3
2.5 Conversion of Bank United Corp. Capital Stock............... A-1-4
2.6 Dissenting Shares........................................... A-1-5
2.7 Washington Mutual Common Stock; Washington Mutual Preferred
Stock....................................................... A-1-5
2.8 Options..................................................... A-1-6
2.9 Articles of Incorporation................................... A-1-6
2.10 Bylaws...................................................... A-1-6
2.11 Board of Directors.......................................... A-1-6
2.12 Tax Consequences............................................ A-1-6
2.13 Stock Option Agreement...................................... A-1-6
2.14 Reservation of Right to Revise Structure.................... A-1-6
3. EXCHANGE OF SHARES................................................. A-1-7
3.1 Washington Mutual to Make Shares Available.................. A-1-7
3.2 Exchange of Shares.......................................... A-1-7
4. REPRESENTATIONS AND WARRANTIES OF BANK UNITED CORP................. A-1-9
4.1 Corporate Organization...................................... A-1-9
4.2 Capitalization.............................................. A-1-10
4.3 Authority; No Violation..................................... A-1-11
4.4 Consents and Approvals...................................... A-1-12
4.5 Reports..................................................... A-1-12
4.6 Financial Statements........................................ A-1-13
4.7 Broker's Fees............................................... A-1-13
4.8 Absence of Certain Changes or Events........................ A-1-13
4.9 Legal Proceedings........................................... A-1-14
4.10 Taxes....................................................... A-1-14
4.11 Employees; Employee Benefit Plans........................... A-1-15
4.12 SEC Reports................................................. A-1-16
4.13 Compliance with Applicable Law.............................. A-1-17
4.14 Certain Contracts........................................... A-1-17
4.15 Agreements with Regulatory Agencies......................... A-1-17
4.16 Undisclosed Liabilities..................................... A-1-18
4.17 Anti-takeover Provisions.................................... A-1-18
4.18 Bank United Corp. Information............................... A-1-18
4.19 Title to Property........................................... A-1-18
4.20 Insurance................................................... A-1-19
4.21 Environmental Liability..................................... A-1-19
4.22 Opinion of Financial Advisor................................ A-1-20
4.23 Patents, Trademarks, Etc.................................... A-1-20
</TABLE>
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<TABLE>
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4.24 Loan Matters................................................ A-1-20
4.25 Community Reinvestment Act Compliance....................... A-1-21
4.26 Labor Matters............................................... A-1-21
5. REPRESENTATIONS AND WARRANTIES OF WASHINGTON MUTUAL................ A-1-21
5.1 Corporate Organization...................................... A-1-21
5.2 Capitalization.............................................. A-1-21
5.3 Authority; No Violation..................................... A-1-22
5.4 Consents and Approvals...................................... A-1-23
5.5 Reports..................................................... A-1-23
5.6 Financial Statements........................................ A-1-23
5.7 Broker's Fees............................................... A-1-24
5.8 Absence of Certain Changes or Events........................ A-1-24
5.9 Legal Proceedings........................................... A-1-24
5.10 Taxes....................................................... A-1-24
5.11 SEC Reports................................................. A-1-24
5.12 Compliance with Applicable Law.............................. A-1-25
5.13 Agreements with Regulatory Agencies......................... A-1-25
5.14 Undisclosed Liabilities..................................... A-1-25
5.15 Rights Agreement; Anti-takeover Provisions.................. A-1-25
5.16 Washington Mutual Information............................... A-1-25
5.17 Environmental Liability..................................... A-1-26
5.18 Opinion of Financial Advisor................................ A-1-26
5.19 Community Reinvestment Act Compliance....................... A-1-26
6. COVENANTS RELATING TO CONDUCT OF BUSINESS.......................... A-1-26
6.1 Conduct of Business Prior to the Effective Time............. A-1-26
6.2 Bank United Corp. Forbearances.............................. A-1-27
6.3 No Fundamental Washington Mutual Changes.................... A-1-29
7. ADDITIONAL AGREEMENTS.............................................. A-1-30
7.1 Regulatory Matters.......................................... A-1-30
7.2 Access to Information....................................... A-1-30
7.3 Stockholder Approval........................................ A-1-31
7.4 Legal Conditions to Merger.................................. A-1-32
7.5 Affiliates.................................................. A-1-32
7.6 Stock Exchange Listing...................................... A-1-32
7.7 Employees; Employee Benefit Plans........................... A-1-32
7.8 Indemnification; Directors' and Officers' Insurance......... A-1-33
7.9 Additional Agreements....................................... A-1-35
7.10 Advice of Changes........................................... A-1-35
7.11 Subsequent Interim and Annual Financial Statements.......... A-1-35
7.12 CPR Trust................................................... A-1-35
7.13 Reorganization.............................................. A-1-36
7.14 Exemption from Liability Under Section 16(b)................ A-1-36
7.15 Merger...................................................... A-1-36
</TABLE>
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<PAGE>
<TABLE>
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8. CONDITIONS PRECEDENT............................................... A-1-36
8.1 Conditions to Each Party's Obligation to Effect the
Merger...................................................... A-1-36
8.2 Conditions to Obligations of Washington Mutual.............. A-1-37
8.3 Conditions to Obligations of Bank United Corp............... A-1-38
9. TERMINATION AND AMENDMENT.......................................... A-1-39
9.1 Termination................................................. A-1-39
9.2 Effect of Termination....................................... A-1-40
9.3 Amendment................................................... A-1-41
9.4 Extension; Waiver........................................... A-1-42
10. GENERAL PROVISIONS................................................. A-1-42
10.1 Nonsurvival of Representations, Warranties and Agreements... A-1-42
10.2 Expenses.................................................... A-1-42
10.3 Notices..................................................... A-1-42
10.4 Interpretation.............................................. A-1-43
10.5 Counterparts................................................ A-1-43
10.6 Entire Agreement............................................ A-1-43
10.7 Governing Law............................................... A-1-43
10.8 Severability................................................ A-1-43
10.9 Publicity................................................... A-1-44
10.10 Assignment; Third Party Beneficiaries....................... A-1-44
</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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<PAGE>
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:
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
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
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
CPR Trust.................................... 4.4
CPR Trust Registration Statement............. 4.4
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)
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
TERM SECTION
---- -------
<S> <C>
Surviving Company............................ 2.1
Takeover Proposal............................ 6.2(f)
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
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<PAGE>
"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.
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
A-1-4
<PAGE>
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.
(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.
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<PAGE>
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 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
A-1-6
<PAGE>
United Corp. with a wholly-owned subsidiary of Washington Mutual; PROVIDED,
HOWEVER, that no such 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.
(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
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<PAGE>
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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<PAGE>
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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<PAGE>
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. Section
1813(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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<PAGE>
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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<PAGE>
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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<PAGE>
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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<PAGE>
(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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<PAGE>
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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<PAGE>
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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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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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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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 A-2
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
WASHINGTON MUTUAL, INC.
AND
BANK UNITED CORP.
DATED AS OF AUGUST 18, 2000
<PAGE>
AMENDMENT NO. 1
TO
AGREEMENT AND PLAN OF MERGER
This Amendment No. 1, dated January 5, 2001, amends the Agreement and Plan
of Merger (the "Agreement") originally made and entered into as of the 18th day
of August, 2000, by and between Washington Mutual, Inc., a Washington
corporation ("Washington Mutual") and Bank United Corp., a Delaware corporation.
WHEREAS, immediately prior to the merger (the "Merger") of Bank United Corp.
with and into Washington Mutual as set forth in the Agreement, Bank United Corp.
will effect a reorganization (the "Reorganization") by merging a wholly owned
subsidiary of Bank United Corp. with and into Bank United Corp.
WHEREAS, as a result of the Reorganization, each share of Bank United Corp.
common stock outstanding at the effective time of the Reorganization, other than
shares held by persons properly exercising dissenters' 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. In addition,
appropriate and proportionate adjustments will be made to all options to
purchase shares of Bank United Corp. common stock outstanding at the effective
time of the Reorganization and to all Bank United Corp. 8% Premium Income Equity
Securities.
WHEREAS, Washington Mutual and Bank United Corp. have agreed to amend the
Agreement to more accurately describe the treatment of options to purchase
shares of Bank United Corp. in connection with the Merger and to correct certain
cross-references.
WASHINGTON MUTUAL AND BANK UNITED CORP. AGREE AS FOLLOWS:
1. Each capitalized term used but not defined in this Amendment No. 1 shall
have the meaning provided for such term in the Agreement.
2. The reference in Section 1.1 of the Agreement to the section defining
the term "Stock Option Agreement" shall be changed from "2.12" to "2.13".
3. Section 2.5(e) of the Agreement shall be replaced in its entirety with
the following:
At the Effective Time, all shares of any class of the capital stock of
Bank United Corp. that are owned by Bank United Corp. as treasury stock and
all shares of any class of the capital stock of Bank United Corp. that are
owned directly or indirectly by Washington Mutual or Bank United Corp. or
any of their respective Subsidiaries (other than shares of any class of the
capital stock of Bank United Corp. 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 any class of the capital stock of Bank United Corp. 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.
4. The first sentence of Section 2.8 of the Agreement shall be replaced
with the following:
At the Effective Time, each option granted by Bank United Corp. to
purchase shares of Bank United Corp. Common Stock and CPR Certificates (each
a "BANK UNITED CORP. OPTION") which is outstanding 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
an option to purchase shares of Washington Mutual Common Stock and CPR
Certificates in an amount and
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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 the number of CPR Certificates subject to the
new option shall be equal to the number of CPR Certificates subject to
the original option; and
(b) the exercise price under the new option for one share of
Washington Mutual Common Stock and the corresponding fraction of a CPR
Certificate (which fraction shall equal 1 divided by the Exchange Ratio)
under the new option shall be equal to the exercise price per share
exercise price of the original option to acquire one share of Bank United
Corp. Common Stock and one CPR Certificate divided by the Exchange Ratio,
provided that such exercise price shall be rounded to the nearest cent.
5. The clause (a) of the first sentence of Section 4.6 of the Agreement
shall be replaced with the following:
(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 Bank United
Corp.'s independent auditors, and
6. Section 5.8 of the Agreement shall be amended so that the words
"Section 5.10" are replaced with the words "Section 5.11".
7. The first sentence of Section 6.2(f) of the Agreement shall be amended
so that the words "Section 7.3(b)" are replaced with the words "Section 7.3".
8. Section 8.2(h) of the Agreement shall be replaced in its entirety with
the following:
DISSENTING SHARES. The aggregate number of Dissenting Shares shall not
constitute more than 10% of all outstanding Bank United Common Stock and the
aggregate number of shares of Bank United Common Stock held by holders (if any)
who have not voted in favor of the merger described in Section 7.15 and who are
eligible to and have demanded appraisal rights (if any) with respect thereto in
accordance with Section 262 of the DGCL and, as of the effective time of the
merger described in Section 7.15, 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 shall not constitute more than 10% of all
outstanding Bank United Common Stock at the effective time of the merger
described in Section 7.15.
9. Except as specifically amended by this Amendment No. 1, the Agreement
shall remain in full force and effect.
10. This Amendment No. 1 may be executed in one or more counterparts, all of
which shall be considered one and the same agreement, and the executed
counterparts taken together shall be deemed to be one originally executed
document.
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<PAGE>
11. This Amendment No. 1 shall be governed and construed in accordance with
the laws of the State of Washington, without regard to any applicable conflicts
of law.
IN WITNESS WHEREOF, Washington Mutual and Bank United Corp. have caused this
Amendment No. 1 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/ FAY L. CHAPMAN
-----------------------------------------
Name: Fay L. Chapman
Title: SENIOR EXECUTIVE VICE PRESIDENT
</TABLE>
<TABLE>
<S> <C> <C>
BANK UNITED CORP.
By: /s/ JONATHON K. HEFFRON
-----------------------------------------
Name: Jonathon K. Heffron
Title: EXECUTIVE VICE PRESIDENT
</TABLE>
A-2-3
<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.
B-2
<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 C-1
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
BANK UNITED CORP. LITIGATION
CONTINGENT PAYMENT RIGHTS TRUST
FEBRUARY , 2001
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I.
INTERPRETATION AND DEFINITIONS
Section 1.01 Definitions................................................. C-1-2
ARTICLE II.
ORGANIZATION
Section 2.01 Name........................................................ C-1-6
Section 2.02 Office...................................................... C-1-6
Section 2.03 Purposes and Powers of the Litigation Trust................. C-1-7
Section 2.04 Title to Property of the Litigation Trust................... C-1-7
Section 2.05 Mergers..................................................... C-1-8
ARTICLE III.
TRUSTEES
Section 3.01 Authority................................................... C-1-9
Section 3.02 Number of Trustees.......................................... C-1-9
Section 3.03 Delaware Trustee............................................ C-1-9
Section 3.04 Institutional Trustee; Eligibility.......................... C-1-10
Section 3.05 Appointment, Removal and Resignation of the Institutional
and Delaware Trustees..................................... C-1-10
Section 3.06 Vacancies Among Relevant Trustees; Effect of Vacancies...... C-1-12
Section 3.07 The Litigation Trustees..................................... C-1-12
Section 3.08 Limitation on Liability of Litigation Trustees.............. C-1-12
Section 3.09 Resignation of a Litigation Trustee......................... C-1-12
Section 3.10 Appointment of Successor Litigation Trustees................ C-1-12
Section 3.11 Meetings of the Trustees.................................... C-1-13
Section 3.12 Powers and Duties of Sponsor, Litigation Trustees and
Institutional Trustee..................................... C-1-14
Section 3.13 Certain Duties and Responsibilities of the Trustees......... C-1-17
Section 3.14 Certain Rights of the Institutional Trustee................. C-1-19
Section 3.15 Lists of Holders of CPR Certificates........................ C-1-20
Section 3.16 Execution of Documents...................................... C-1-20
Section 3.17 Not Responsible for Recitals or Issuance of CPR
Certificates.............................................. C-1-21
Section 3.18 Filings with the Commission................................. C-1-21
Section 3.19 Default; Notice............................................. C-1-21
ARTICLE IV.
PAYMENTS TO HOLDERS
Section 4.01 Payment to Holders.......................................... C-1-21
Section 4.02 Timing of Payments.......................................... C-1-22
Section 4.03 Default; Waiver............................................. C-1-22
ARTICLE V.
EXPENSES AND THE RETAINED AMOUNT
Section 5.01 Expenses.................................................... C-1-22
Section 5.02 Return of Funds............................................. C-1-22
Section 5.03 Retained Amount............................................. C-1-22
</TABLE>
i
<PAGE>
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ARTICLE VI.
MANAGEMENT OF THE LITIGATION
Section 6.01 Authority of the Litigation Trustees........................ C-1-23
Section 6.02 Retention of Attorneys, Accountants and Other
Professionals............................................. C-1-23
Section 6.03 Cooperation by the Sponsor.................................. C-1-24
ARTICLE VII.
ISSUANCE AND DISTRIBUTION OF CPR CERTIFICATES
Section 7.01 General Provisions Regarding CPR Certificates............... C-1-25
Section 7.02 Paying Agent, Transfer Agent and Registrar.................. C-1-25
Section 7.03 Form and Dating............................................. C-1-26
Section 7.04 Mutilated, Destroyed, Lost or Stolen Certificates........... C-1-27
Section 7.05 Temporary CPR Certificates.................................. C-1-27
Section 7.06 Issuance of CPR Certificates on the Effective Date.......... C-1-27
Section 7.07 Redemption and Cancellation................................. C-1-27
Section 7.08 Issuance of CPR Certificates after the Effective Time....... C-1-28
ARTICLE VIII.
DISSOLUTION AND TERMINATION OF LITIGATION TRUST
Section 8.01 Dissolution and Termination of Litigation Trust............. C-1-28
ARTICLE IX.
TRANSFER OF INTERESTS
Section 9.01 General..................................................... C-1-29
Section 9.02 Transfer Procedures......................................... C-1-29
Section 9.03 Deemed CPR Certificate Holders.............................. C-1-31
Section 9.04 Notices to Clearing Agency.................................. C-1-31
Section 9.05 Appointment of Successor Clearing Agency.................... C-1-31
ARTICLE X.
HOLDERS OF CPR CERTIFICATES
Section 10.01 Limitations on Rights of Holders............................ C-1-32
Section 10.02 Limitations on Suits by Holders............................. C-1-32
ARTICLE XI.
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES,
TRUSTEES OR OTHERS
Section 11.01 Liability................................................... C-1-34
Section 11.02 Exculpation................................................. C-1-34
Section 11.03 Fiduciary Duty.............................................. C-1-35
Section 11.04 Indemnification............................................. C-1-35
Section 11.05 Outside Businesses.......................................... C-1-36
Section 11.06 Compensation; Fee........................................... C-1-37
ARTICLE XII.
ACCOUNTING
Section 12.01 Fiscal Year................................................. C-1-37
Section 12.02 Certain Accounting Matters.................................. C-1-37
Section 12.03 Banking..................................................... C-1-37
Section 12.04 Withholding................................................. C-1-38
</TABLE>
ii
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ARTICLE XIII.
AMENDMENTS AND MEETINGS
Section 13.01 Amendments.................................................. C-1-38
Section 13.02 Meetings of Holders of CPR Certificates; Action by Written
Consent................................................... C-1-39
ARTICLE XIV.
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
AND DELAWARE TRUSTEE
Section 14.01 Representations and Warranties of the Institutional
Trustee................................................... C-1-40
Section 14.02 Representations and Warranties of the Delaware Trustee...... C-1-40
ARTICLE XV.
MISCELLANEOUS
Section 15.01 Notices..................................................... C-1-41
Section 15.02 Governing Law............................................... C-1-43
Section 15.03 Intention of Parties........................................ C-1-43
Section 15.04 Headings.................................................... C-1-43
Section 15.05 Successors and Assigns...................................... C-1-43
Section 15.06 Partial Enforceability...................................... C-1-43
Section 15.07 Specific Performance........................................ C-1-43
Section 15.08 Counterparts................................................ C-1-43
Section 15.09 Consent of Jurisdiction..................................... C-1-44
Section 15.10 Default Rules............................................... C-1-44
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
BANK UNITED CORP. LITIGATION
CONTINGENT PAYMENT RIGHTS TRUST
FEBRUARY , 2001
This Amended and Restated Declaration of Trust (this "Declaration" or this
"Agreement") dated and effective as of February , 2001, by the Trustees (as
defined herein), Bank United Corp. (along with its successors, the "Sponsor")
and by the holders, from time to time, of undivided beneficial interests in the
assets of the Bank United Litigation Contingent Payment Rights Trust (the
"Litigation Trust") to be issued pursuant to this Declaration;
WHEREAS, the Delaware Trustee (as defined herein) and the Sponsor, by a
Declaration of Trust, dated and effective as of November 2, 2000 (the "Original
Declaration"), and by a Certificate of Trust filed with the Secretary of State
of the State of Delaware on the same date, established a statutory business
trust under the Delaware Business Trust Act (as defined herein) for the sole
purposes of holding the Commitment Amount (as defined herein) and of filing a
registration statement under the Securities Act (as defined herein) with the
Securities and Exchange Commission relating to the issuance of CPR Certificates
(as defined herein);
WHEREAS, the Institutional Trustee, the Delaware Trustee and the Sponsor, by
this declaration, hereby amend and restate the Original Declaration as set forth
herein;
WHEREAS, the Trustees (as defined herein) have established, or
simultaneously herewith will establish, the Bank United Corp. Payment Rights
Trust (the "Payment Trust"), a statutory business trust under the Business Trust
Act for the sole purpose of holding and distributing the Proceeds Amount (as
defined herein) to the Litigation Trust or its successor;
WHEREAS, the Sponsor holds all of the beneficial interests in the Payment
Trust;
WHEREAS, the Sponsor and Washington Mutual, Inc. ("Washington Mutual") have
entered into an Agreement and Plan of Merger (the "Merger Agreement"), dated as
of August 18, 2000, as amended, and the Sponsor and CPR Merger Corporation, a
wholly owned subsidiary of the Sponsor ("Merger Sub"), have entered into an
Agreement and Plan of Merger (the "Plan of Reorganization"), which together
contemplate that (i) immediately prior to the effective time of the merger (the
"Merger") of the Sponsor with and into Washington Mutual, (ii) Merger Sub will
merge (the "Reorganization") with and into the Sponsor, as a result of which
each share of Class A Common Stock, par value $0.01 per share, of the Sponsor
("Sponsor Common Stock"), issued and outstanding immediately prior to the
effective time of the Reorganization (the "Effective Time") will be
automatically converted into one new share of Sponsor Common Stock and the right
to receive one CPR Certificate, with appropriate and proportionate adjustments
to be made to other equity-based securities of the Sponsor, (iii) immediately
prior to the Effective Time, the Litigation Trust will issue CPR Certificates to
the Sponsor, which CPR Certificates will represent assignable and transferable
undivided beneficial interests in the assets of the Litigation Trust, in part to
be issued in the Reorganization, in part to be held for future issuance as more
fully provided in the Plan of Reorganization and herein, and in part to be
issued to the Litigation Trustees (as defined herein) as compensation pursuant
to the terms of the Litigation Trustee Agreements (as defined herein), and
(iv) at the Effective Time, and effective at the Effective Time, the Sponsor
will enter into a Commitment Agreement (the "Commitment"), in the form attached
hereto as EXHIBIT A, pursuant to which the Sponsor will be obligated to pay to
the Payment Trust from time to time an aggregate amount equal to the Commitment
Amount, and the Payment Trust will be obligated to distribute to the Litigation
Trust the Proceeds Amounts (as defined herein).
C-1-1
<PAGE>
WHEREAS, the Litigation Trust will hold the Commitment and the Litigation
Trustees (as defined herein) will, upon the effectiveness of the Commitment,
instruct the Sponsor and Bank United, a wholly-owned subsidiary of the Sponsor
(along with its successors, "Bank United") pursuant to the terms of this
Declaration as to the administration of the litigation claims of the Sponsor and
Bank United, and any of their successors, in the litigation filed on July 25,
1995, by the Sponsor, Bank United and Hyperion Partners L.P. against the United
States in the U.S. Court of Federal Claims for alleged failures of the United
States to adhere to its agreement to waive or forbear from enforcing certain
provisions concerning regulatory capital requirements, liquidity requirements,
accounting requirements and other matters, and or any substitute or ancillary
action, litigation or arbitration with respect to the claims made in such action
(the "Litigation");
WHEREAS, nothing in this Declaration shall be deemed to be or to effect an
assignment (within the meaning of 31 U.S.C. 3727) of the Litigation; and
WHEREAS, as of the date hereof, no interests in the Litigation Trust have
been issued;
NOW, THEREFORE, it being the intention of the parties hereto to establish
the Litigation Trust as a statutory business trust under the Business Trust Act
and that this Declaration constitute the governing instrument of such statutory
business trust, the Trustees declare that all assets contributed to the
Litigation Trust will be held in trust for the benefit of the holders of the
beneficial interests in the assets of the Litigation Trust, subject to the
provisions of this Declaration.
ARTICLE I.
INTERPRETATION AND DEFINITIONS
Section 1.01 DEFINITIONS.
Unless the context otherwise requires:
(a) capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this
Section 1.01;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to this
Declaration, in its entirety, as modified, supplemented or amended from time to
time, and not to any particular Article, Section or subsection;
(d) all references to "herein" or "hereunder" refer to this Declaration in
its entirety, as modified, supplemented or amended from time to time, and not to
any particular Article, Section or subsection;
(e) all references in this Declaration to Articles and Sections and Exhibits
are to Articles and Sections of and Exhibits to this Declaration unless
otherwise specified;
(f) a reference to the singular includes the plural and vice versa; and
(g) a reference to the masculine includes the feminine and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act or any successor Rule thereunder.
"Agreement" has the meaning set forth in the preamble hereof.
"Authorized Officer" of a Person means any Person that is authorized to bind
such Person.
"Bank United" has the meaning set forth in the recitals hereof.
"Bank United Group" means the Sponsor, Bank United and any of their
respective successors, their subsidiaries and Affiliates and the subsidiaries
and Affiliates of their respective successors,
C-1-2
<PAGE>
including without limitation Washington Mutual, Inc. and its Affiliates and
subsidiaries after the Washington Mutual 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
Section 3.11(b).
"Book Entry Interest" means a beneficial interest in one or more Global CPR
Certificates, ownership and transfers of which shall be maintained and made
through book entries by a Clearing Agency as described in Section 9.02.
"Business Day" means any day other than Saturday, Sunday or any other day on
which banking institutions in Seattle (in the State of Washington), Houston (in
the State of Texas), or Wilmington (in the State of Delaware) are permitted or
required by any applicable law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code,
12 Del. Code sec. 3801 et seq., as it may be amended from time to time, or any
successor legislation.
"Clearing Agency" means an organization registered as a "Clearing Agency"
pursuant to Section 17A of the Exchange Act that is acting as depositary for the
CPR Certificates and in whose name (or in the name of a nominee of that
organization) shall be registered a Global CPR Ceritificate and which shall
undertake to effect book entry transfers and pledges of the CPR Certificates.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time the Clearing Agency
effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Commitment" has the meaning set forth in the recitals hereof.
"Commitment Amount" has the meaning set forth in the Commitment.
"Corporate Trust Office" means the office of the Institutional Trustee at
which the corporate trust business of the Institutional Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at Rodney Square, Suite 102, 920 King
Street, New Castle County, Wilmington, Delaware 19801, Attention: ;
facsimile number .
"CPR Certificates" means the Contingent Payment Right Certificates,
including the Contingent Payment Right Certificates issued immediately prior to
the Effective Time and any other Contingent Payment Right Certificates issued by
the Litigation Trust.
"Damages" has the meaning set forth in Section 11.04(a).
"Declaration" has the meaning set forth in the preamble hereto.
"Default Rule" means a rule stated in the Business Trust Act that
(i) structures, defines or regulates the finances, governance, operations or
other aspects of a Delaware business trust organized under the Business Trust
Act and (ii) applies except to the extent it is negated or modified through the
provisions of a governing instrument.
"Definitive CPR Certificate" has the meaning set forth in Section 7.03(b).
"Delaware Trustee" has the meaning set forth in Section 3.03(a).
"Depositary" means, with respect to the CPR Certificates, DTC or another
Clearing Agency.
C-1-3
<PAGE>
"DTC" means The Depository Trust Company, New York, New York, the initial
Clearing Agency.
"Effective Time" has the meaning set forth in the recitals hereof.
"Effective Date" shall mean the date on which the Effective Time occurs.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.
"Fiscal Year" has the meaning set forth in Section 12.01.
"Global CPR Ceritificate" has the meaning set forth in Section 7.03(b).
"Holder" means a Person in whose name a CPR Ceritificate is registered on
the register maintained by the Registrar pursuant to Section 7.02, such Person
being a beneficial owner within the meaning of the Business Trust Act.
"Hyperion" means Hyperion Partners L.P., a Delaware limited partnership.
"Indemnified Person" means (a) the Institutional Trustee, the Delaware
Trustee, any Affiliate of the Institutional Trustee or the Delaware Trustee, and
any officers, directors, stockholders, members, partners, employees,
representatives, custodians, nominees or agents of the Institutional Trustee and
the Delaware Trustee; (b) any Litigation Trustee; (c) any Affiliate of any
Litigation Trustee; (d) any partners, employees, representatives, agents,
counsel and other advisors of any Litigation Trustee; (e) any member of the Bank
United Litigation Committee; (f) any officer, employee, representative, agent,
counsel or other advisors of the Litigation Trust or its Affiliates.
"Institutional Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 3.04 and duly appointed pursuant to this
Declaration.
"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"List of Holders" has the meaning set forth in Section 3.15.
"Litigation" has the meaning set forth in the recitals hereof.
"Litigation Proceeds" has the meaning set forth in the Commitment.
"Litigation Trust" has the meaning set forth in the first paragraph of this
Declaration.
"Litigation Trustees" has the meaning set forth in Section 3.07.
"Litigation Trustee Agreements" means the Litigation Trustee Agreements,
dated as of August 18, 2000, entered into by each of the initial Litigation
Trustees and the Sponsor, copies of which are attached as Exhibit B.
"Litigation Trust Property" means (a) the Commitment and all proceeds and
rights in respect of the Commitment and (b) any other assets that may be held
from time to time by the Litigation Trust.
"Litigation Trust Purpose" shall have the meaning set forth in
Section 2.03.
"Merger" has the meaning set forth in the recitals hereof.
"Merger Agreement" has the meaning set forth in the recitals hereof.
"Non-Cash Proceeds" has the meaning set forth in the Commitment.
"Officers' Certificates" means, (i) with respect to any Person other than
Litigation Trustees, a certificate signed by two Authorized Officers of such
Person, and (ii) with respect to the Litigation
C-1-4
<PAGE>
Trustees, a certificate signed by a majority of the Litigation Trustees then in
office. Any Officers' Certificate delivered with respect to compliance with a
condition or covenant provided for in the Declaration shall include:
(i) a brief statement of the nature and scope of the examination or
investigation undertaken by each Authorized Officer or Litigation Trustee in
rendering the Certificate; and
(ii) a statement as to whether, in the opinion of each such Authorized
Officer or Litigation Trustee, such condition or covenant has been complied
with.
"Paying Agent" has the meaning specified in Section 7.02.
"Payment Amount" shall mean, with respect to each distribution of the
Proceeds Amount received by the Litigation Trust pursuant to the Commitment,
such payment of the Proceeds Amount received by the Litigation Trust (including
the amount of cash resulting from the monetization by the Sponsor of any
Non-Cash Proceeds) less the amount of any accrued but unpaid expenses payable by
the Litigation Trust, plus interest or income, if any, received by the
Litigation Trust on such payment of the Proceeds Amount, less amounts retained
by the Litigation Trust as the Retained Amount.
"Payment Trust" has the meaning set forth in the recitals hereof.
"Payment Trust Agreement" means the Amended and Restated Declaration of
Trust, dated February , 2001 relating to the Payment Trust.
"Payment Trust Trustees" means the trustees of the Payment Trust.
"Permitted Investment" means [the Merrill Lynch Government Fund money market
fund (including any successor)] or, if at the time of the receipt of the
applicable payment of the Commitment Amount by the Litigation Trust (i) such
fund is not in existence, (ii) such fund is no longer limited to investing in
short-term obligations of or guaranteed by the United States government,
(iii) such fund is not accepting new investors or new investments or will not
accept the investment of the Commitment Amount or the Retained Amount, as the
case may be, or (iv) such fund is not AAA rated by Standard and Poor's, the [AAA
rated money market fund reported in the IBC Rated Money Fund Report to have the
largest amount of assets under management as of the end of the most recent year
for which information is publicly available and which will accept such
investment].
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Plan of Reorganization" has the meaning set forth in the recitals hereof.
"Proceeds Amount" has the meaning set forth in the Commitment.
"Recovery Agreement" has the meaning set forth in Section 6.01(e).
"Reference Rate" means the reference rate or an equivalent rate publicly
announced from time to time of 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 the
Sponsor), as in effect from time to time.
"Registrar" has the meaning set forth in Section 7.02.
"Reimbursements" has the meaning set forth in the Commitment.
"Relevant Trustee" has the meaning set forth in Section 3.05.
C-1-5
<PAGE>
"Replacement Options" has the meaning set forth in the Merger Agreement.
"Responsible Officer" means, with respect to the Institutional Trustee, any
officer within the Corporate Trust Office of the Institutional Trustee,
including any managing director, vice-president, any assistant vice-president,
any assistant secretary, the treasurer, any assistant treasurer or other officer
of the Corporate Trust Office of the Institutional Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate Litigation Trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.
"Retained Amount" has the meaning set forth in Section 5.03(a).
"Retained Amount Period" has the meaning set forth in Section 5.03(a).
"Securities Act" means the Securities Act of 1933, as amended from time to
time, or any successor legislation.
"Sponsor" has the meaning set forth in the first paragraph of this
Agreement.
"Successor Certificates" has the meaning set forth in
Section 2.05(b)(i)(B).
"Successor Delaware Trustee" has the meaning set forth in Section 3.05(b).
"Successor Entity" has the meaning set forth in Section 2.05(b)(i).
"Successor Institutional Trustee" has the meaning set forth in
Section 3.05(b).
"Transfer Agent" has the meaning set forth in Section 7.02.
"Trustee" or "Trustees" means each Person who has signed this Declaration as
a Trustee, so long as such Person shall continue in office in accordance with
the terms hereof, and all other Persons who may from time to time be duly
appointed, qualified and serving as Institutional Trustee, Delaware Trustee or
Litigation Trustee in accordance with the provisions hereof, and references
herein to a Trustee or the Trustees shall refer to such Person or Persons solely
in their capacity as Trustees hereunder.
"Washington Mutual" has the meaning set forth in the recitals hereof.
"Washington Mutual Merger" means the merger of the Sponsor with and into
Washington Mutual pursuant to the terms, and subject to the conditions, set
forth in the Merger Agreement.
ARTICLE II.
ORGANIZATION
Section 2.01 NAME. The Litigation Trust shall continue to be named "Bank
United Litigation Contingent Payment Rights Trust", as such name may be modified
from time to time by the Litigation Trustees following written notice to the
Holders. The Litigation Trust's activities may be conducted under the name of
the Litigation Trust or any other name deemed advisable by the Litigation
Trustees.
Section 2.02 OFFICE. The address of the principal office of the Litigation
Trust on the date of execution of this Declaration is:
c/o Bank United Corp.
3200 Southwest Freeway
Houston, Texas 77027
Attention: Jonathon K. Heffron
Facsimile: 713-543-7744
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On ten Business Days written notice to the Holders, the Institutional
Trustee may designate another principal office at the instruction of the
Litigation Trustees.
Section 2.03 PURPOSES AND POWERS OF THE LITIGATION TRUST.
(a) The exclusive purposes and functions of the Litigation Trust (each, a
"Litigation Trust Purpose") are (i) to hold and enforce the Commitment,
(ii) for the purpose of, and in a manner consistent with, achieving the
realization and distribution of amounts payable pursuant to the Commitment, upon
the effectiveness of the Commitment, to instruct the Sponsor, Bank United and
their successors to prosecute, appeal, resolve, settle, compromise or otherwise
pursue the Litigation and (iii) upon receipt of payments of the Proceeds Amount
pursuant to the Commitment, to distribute the Payment Amount as provided herein,
and thereafter to distribute any portion of the Retained Amount remaining at the
end of the Retained Amount Period as provided herein, to the Holders in as
prompt and orderly a fashion as possible consistent with this Declaration.
Anything to the contrary herein or in the Business Trust Act notwithstanding,
the Trustees shall not at any time, on behalf of the Litigation Trust or the
Holders, enter into or engage in any profit-making trade or business, and the
Trustees shall have no powers to take, and shall not take, any actions hereunder
other than such as are reasonably necessary and incidental to the achievement of
the foregoing exclusive Litigation Trust Purposes.
(b) Notwithstanding anything in this Declaration or in any Default Rule of
the Business Trust Act to the contrary, no Trustee shall have any power to
(i) modify the terms of the Commitment unless a breach of the Sponsor has
occurred thereunder or is reasonably foreseeable, (ii) invest money held by the
Litigation Trust except amounts held, pursuant to Sections 3.12(b)(ii)(d) and
5.03 hereof, pending their use to pay expenses or make distributions, or
(iii) after the Effective Time, issue any CPR Certificates except as
contemplated by this Agreement or pursuant to the Litigation Trustee Agreements.
(c) In order to raise funds for, or meet its obligation to pay, expenses
reasonably necessary to preserve or protect assets of the Litigation Trust or to
administer the Litigation Trust (including, without limitation, expenses related
to the Litigation and expenses related to the liability and indemnification
obligations of the Litigation Trust), and solely in furtherance of Litigation
Trust Purposes, the Litigation Trustees on behalf of the Litigation Trust may
undertake the following:
(i) enter into, subject to the limitations set forth in
Section 6.02(a), customary fee arrangements (including fees contingent on
receipt by the Litigation Trust of, and determined by reference to, all or
any portion of the Commitment Amount) with counsel for the Litigation, to
the Litigation Trust or to the Litigation Trustees, experts or consultants,
which arrangements either (x) provide for such counsel, experts or
consultants to receive amounts that represent for federal income tax
purposes arms-length compensation for services when paid in cash by the
Litigation Trust or (y) otherwise do not create ownership interests in the
Litigation Trust for federal income tax purposes other than CPR Certificates
of the same class as the CPR Certificates issued immediately prior to the
Merger representing pro rata interests in the Litigation Trust;
(ii) incur indebtedness that represents debt of the Litigation Trust
(and not an ownership interest) for federal income tax purposes;
(iii) issue additional CPR Certificates after the Reorganization; and
(iv) issue additional CPR Certificates in accordance with Section 7.08.
Section 2.04 TITLE TO PROPERTY OF THE LITIGATION TRUST. Legal title to all
assets of the Litigation Trust shall be vested in the Litigation Trust. The
Holders shall not have legal title to any part of the assets of the Litigation
Trust, but shall have an undivided beneficial interest in the assets of the
Litigation Trust.
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Section 2.05 MERGERS.
(a) The Litigation Trust may not consolidate, amalgamate, merge with or
into, or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except as
described in paragraph (b) of this Section 2.05 or in a liquidation of the
Litigation Trust in accordance with this Declaration.
(b) The Litigation Trust may, with the consent of the Institutional Trustee
(acting in reliance on the opinions delivered pursuant to this Section 2.05) and
a majority of the Litigation Trustees and without the consent of the Delaware
Trustee or the Holders of the CPR Certificates, consolidate, amalgamate, merge
with or into, or be replaced by a person organized as such under the laws of any
state of the United States; PROVIDED that:
(i) if the Litigation Trust is not the survivor, such successor entity
(the "Successor Entity") either:
(A) expressly assumes all of the obligations of the Litigation Trust
under the CPR Certificates; or
(B) substitutes for the CPR Certificates other securities having
substantially the same terms as the CPR Certificates (the "Successor
Certificates");
(ii) the Successor Certificates remain listed, or any Successor
Certificates will be listed or quoted upon notification of issuance, on any
national securities exchange or automated quotation system on which the CPR
Certificates are then listed or quoted, if any;
(iii) such merger, consolidation, amalgamation or replacement does not
result in any material alteration of the Litigation Trust Property or
adversely affect the rights, preferences and privileges of the Holders
(including any Successor Certificates) in any material respect (other than
with respect to any dilution of such Holders' interests in the Successor
Entity);
(iv) such Successor Entity has purposes that are substantially identical
to the Litigation Trust Purposes;
(v) prior to such merger, consolidation, amalgamation or replacement,
the Litigation Trust has received an opinion of nationally recognized
outside counsel to the Litigation Trust experienced in such matters and
selected by the Litigation Trustees to the effect that:
(a) such merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the Holders
(including any Successor Certificates) in any material respect (other
than with respect to any dilution of the Holders' interest in the
Successor Entity);
(b) such merger, consolidation, amalgamation or replacement, will not
cause the Litigation Trust (or the Successor Entity) to fail to be
classified as a grantor trust for United States federal income tax
purposes; PROVIDED, HOWEVER, that the Litigation Trust shall not be
required to receive the opinion set forth in clause (b) if a majority of
the Holders of CPR Certificates outstanding shall have approved such
merger, consolidation, amalgamation or replacement;
(vi) without the unanimous consent of the Litigation Trustees, such
merger, consolidation, amalgamation or replacement shall not result in any
material change to the rights of the Litigation Trustees, including, without
limitation, their rights to indemnification, exculpation and compensation
set forth in this Declaration and under Delaware law; and
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(vii) prior to such merger, consolidation, amalgamation or replacement
the Institutional Trustee shall have received an opinion of counsel to the
effect that all conditions precedent of this paragraph (b) to such
transaction have been satisfied.
(c) Pursuant to Section 3815(f) of the Business Trust Act, in the case of a
consolidation, amalgamation, or merger of the Litigation Trust with or into, or
the replacement by, a person organized as such under the laws of any state of
the United States, subject to the requirements described in Section 2.05(b)
above, the agreement of merger or consolidation may effect any amendment to this
Declaration, or effect the adoption of a new governing instrument of the
Litigation Trust if it is the surviving or resulting business trust in the
merger or consolidation. Such amendment or new governing instrument shall be
effective at the effective time or date of the merger or consolidation.
ARTICLE III.
TRUSTEES
Section 3.01 AUTHORITY. Except as specifically provided in this
Declaration, the Institutional Trustee and the Litigation Trustees shall have
exclusive and complete authority to carry out the Litigation Trust Purposes. An
action taken by a Trustee in accordance with its powers shall constitute the act
of and serve to bind the Litigation Trust, it being understood that except as
provided expressly herein the Litigation Trustees may act only upon the vote or
consent (such consent to be evidenced by a writing executed contemporaneously
with or promptly following any oral consent) of a majority of the Litigation
Trustees. In dealing with the Trustees acting on behalf of the Litigation Trust,
no Person shall be required to inquire into the authority of the Trustees to
bind the Litigation Trust. Persons dealing with the Litigation Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Declaration.
Section 3.02 NUMBER OF TRUSTEES. There shall be one Delaware Trustee if
required by Section 3.03; the Institutional Trustee may also serve as Delaware
Trustee if it meets the applicable requirements, in which case Section 3.03
shall have no application to such entity in its capacity as Institutional
Trustee. There shall be one Institutional Trustee as required by Section 3.04.
There shall be two initial Litigation Trustees, subject to change as provided in
Section 3.07.
Section 3.03 DELAWARE TRUSTEE.
(a) If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be:
(i) a natural person who is a resident of the State of Delaware; or
(ii) if not a natural person, an entity which has its principal place of
business in the State of Delaware, and otherwise meets the requirements of
applicable law, including Section 3807 of the Business Trust Act.
(b) The Delaware Trustee shall be either a natural person who is at least
21 years of age or a legal entity that shall act through one or more Authorized
Officers.
(c) The initial Delaware Trustee shall be First Union Trust Company,
National Association.
(d) Notwithstanding any other provision of this Declaration, the Delaware
Trustee shall not be entitled to exercise any powers, nor shall the Delaware
Trustee have any of the duties and responsibilities of any of the Trustees
described in this Declaration. Except as set forth in this Section 3.03, the
Delaware Trustee shall be a Trustee for the sole and limited purpose of
fulfilling the requirements of Section 3807 of the Business Trust Act.
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Section 3.04 INSTITUTIONAL TRUSTEE; ELIGIBILITY.
(a) There shall at all times be one Trustee which shall act as Institutional
Trustee, which Trustee shall:
(i) not be an Affiliate of the Sponsor;
(ii) not offer or provide credit or credit enhancement to the Litigation
Trust; and
(iii) be a corporation or banking association organized and doing
business under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of
at least 50 million U.S. dollars ($50,000,000), and subject to supervision
or examination by federal, state, territorial or District of Columbia
authority. If such corporation or banking association publishes reports of
condition at least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then for the purposes
of this Section 3.04(a)(iii), the combined capital and surplus of such
corporation or banking association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Institutional Trustee shall cease to be eligible to
so act under Section 3.04(a), the Institutional Trustee shall immediately resign
in the manner and with the effect set forth in Section 3.05(a).
(c) The initial Institutional Trustee shall be First Union Trust Company,
National Association.
(d) The Institutional Trustee shall continue to serve as a Trustee until
either:
(i) the Litigation Trust has been completely liquidated and all amounts
received or receivable or potentially receivable pursuant to the Commitment
(including the final payment of the Commitment Amount and any portion
remaining in the Retained Amount upon the expiration of the Retained Amount
Period) and not otherwise applied as provided herein and any other amounts
shall have been distributed to the Holders pursuant to the terms hereof and
of the CPR Certificates; or
(ii) a Successor Institutional Trustee has been appointed and has
accepted that appointment in accordance with Section 3.05.
Section 3.05 APPOINTMENT, REMOVAL AND RESIGNATION OF THE INSTITUTIONAL AND
DELAWARE TRUSTEES.
(a) No resignation or removal of the Institutional or Delaware Trustee
(each, a "Relevant Trustee") and no appointment of a successor Trustee pursuant
to this Article shall become effective until the acceptance of appointment by
the successor Trustee in accordance with the applicable requirements of this
Section 3.05.
(b) Subject to the immediately preceding paragraph, a Relevant Trustee may
resign at any time by giving written notice thereof to the Litigation Trustees
and the Holders. Upon the resignation of the Relevant Trustee, the Litigation
Trustees shall appoint a successor (the "Successor Institutional Trustee" or the
"Successor Delaware Trustee," as applicable) who shall execute an instrument of
acceptance as described in Section 3.05(e) below. If the instrument of
acceptance by the successor Relevant Trustee required by this Section 3.05 shall
not have been delivered to the Relevant Trustee within 60 days after the giving
of such notice of resignation, the Relevant Trustee may petition, at the expense
of the Litigation Trust, any court of competent jurisdiction for the appointment
of a successor Relevant Trustee. Such court may thereupon, after prescribing
such notice, if any, as it may deem proper, appoint a Relevant Trustee. The
resigning Relevant Trustee shall have no liability for the selection of such
successor pursuant to this Section 3.05.
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(c) The Institutional Trustee or the Delaware Trustee, or both of them, may
be removed by (i) the Litigation Trustees or (ii) Holders of a majority of the
CPR Certificates outstanding, in each case by delivery of notification of
removal to the Relevant Trustee (in its individual capacity and on behalf of the
Litigation Trust), with such removal by Holders being permitted (x) if no
default by the Litigation Trust with respect to its payment obligations under
Article IV shall have occurred and be continuing, only for cause and (y) if a
default by the Litigation Trust with respect to its payment obligations under
Article IV shall have occurred and be continuing, either with or without cause.
A Delaware Trustee who is a natural person may also be removed by the Litigation
Trustees if such Delaware Trustee becomes incompetent or incapacitated, and
shall be deemed removed if such Delaware Trustee dies. If a Relevant Trustee
shall be so removed, the Litigation Trustees shall promptly appoint a successor
Relevant Trustee or Trustees, and such successor Trustee or Trustees shall
comply with the applicable requirements of Section 3.03 or Section 3.04, as the
case may be. If no successor Relevant Trustee shall have been so appointed by
the Litigation Trustees and accepted appointment in the manner required by this
Section 3.05, within 30 days after delivery of notification of removal or after
the Litigation Trust receives notice of the Delaware Trustee's death,
incompetence or incapacity, any Holder who has been a Holder of CPR Certificates
for at least six months may, on behalf of himself and all others similarly
situated, or the Relevant Trustee being removed may, petition any court of
competent jurisdiction for the appointment of a successor Relevant Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a successor Relevant Trustee or Trustees.
(d) The Institutional Trustee shall give notice of each appointment of a
successor Relevant Trustee to all Holders. Each notice shall include the name of
the successor Relevant Trustee and the address of its Corporate Trust Office if
it is the Institutional Trustee.
(e) In the case of the appointment hereunder of a successor Relevant
Trustee, the retiring Relevant Trustee (except in the case of the death,
incompetence or incapacity of a Delaware Trustee who is a natural person) and
each successor Relevant Trustee shall execute and deliver an amendment hereto
wherein each successor Relevant Trustee shall accept such appointment and which
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers and duties of the retiring Relevant Trustee with respect to the CPR
Certificates and the Litigation Trust; it being understood that nothing herein
or in such amendment shall designate such Relevant Trustees as co-Trustees and
upon the execution and delivery of such amendment the resignation or removal of
the retiring Relevant Trustee shall become effective to the extent provided
therein and each such successor Relevant Trustee, without any further act, deed
or conveyance, shall become vested with all the rights, powers and duties of the
retiring Relevant Trustee; but, on request of the Litigation Trust or any
successor Relevant Trustee, such retiring Relevant Trustee shall duly assign,
transfer and deliver to such successor Relevant Trustee all Litigation Trust
Property, all proceeds thereof and money held by such retiring Relevant Trustee
hereunder with respect to the CPR Certificates and the Litigation Trust.
(f) No Institutional Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Institutional Trustee or Successor
Delaware Trustee, as the case may be.
(g) Any Person into which the Institutional Trustee or the Delaware Trustee,
as the case may be, may be merged or converted or with which either may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Institutional Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any Person succeeding to all or substantially
all the corporate trust business of the Institutional Trustee or the Delaware
Trustee, as the case may be, shall be the successor of the Institutional Trustee
or the Delaware Trustee, as the case may be, hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
PROVIDED that such Person shall be otherwise qualified and eligible under this
Article.
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Section 3.06 VACANCIES AMONG RELEVANT TRUSTEES; EFFECT OF VACANCIES.
The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to dissolve, terminate or annul the Litigation Trust. Whenever a
vacancy in the Institutional Trustee or the Delaware Trustee shall occur, until
such vacancy is filled by the appointment of a Trustee in accordance with
Section 3.05, the Institutional Trustee or the Delaware Trustee (as the case may
be) remaining in office shall have all the powers granted to both the
Institutional Trustee and the Delaware Trustee and shall discharge all the
duties imposed upon both the Institutional Trustee and the Delaware Trustee by
this Declaration.
Section 3.07 THE LITIGATION TRUSTEES.
(a) There shall be at all times no fewer than two Trustees (the "Litigation
Trustees") who shall be natural persons over the age of 21 years and who shall
have the powers, duties and responsibilities of the Litigation Trustees
hereunder. The initial Litigation Trustees shall be Jonathan K. Heffron and
Salvatore A. Ranieri.
(b) In compensation for his services as Litigation Trustee, each Litigation
Trustee shall be entitled to the payments and rights set forth in the Litigation
Trustee Agreements. Upon appointment of a successor Litigation Trustee by the
remaining Litigation Trustees pursuant to Section 3.10, such successor
Litigation Trustee shall receive fees as determined by the other Litigation
Trustees (but in no event more than the fees payable to an initial Litigation
Trustee).
Section 3.08 LIMITATION ON LIABILITY OF LITIGATION TRUSTEES. As set forth
in Section 11.02(a), the Litigation Trustees will have no liability to any
Indemnified Person or any member of the Bank United Group unless it shall be
established in a final and nonappealable judicial determination by clear and
convincing evidence that any decision or action of the Litigation Trustees was
undertaken with deliberate intent to injure the Holders or with reckless
disregard for the best interests of such Holders, and, in any event, any
liability will be limited to actual, proximate, and quantifiable damages.
Section 3.09 RESIGNATION OF A LITIGATION TRUSTEE. Any Litigation Trustee
may resign as such by executing an instrument in writing and delivering that
instrument to the remaining Litigation Trustee or Trustees, if any, and to the
Institutional Trustee. In the event of the resignation of a Litigation Trustee,
such Litigation Trustee shall promptly: (a) execute and deliver such documents,
instruments and other writings as may be reasonably requested by the remaining
Litigation Trustees or Litigation Trustee, or if there is no Litigation Trustee,
the Institutional Trustee, to effect the termination of such Litigation
Trustee's capacity under this Declaration; (b) deliver to the remaining
Litigation Trustees or Litigation Trustee all assets, documents, instruments,
records and other writings related to the Litigation Trust as may be in the
possession of such Trustee; and (c) otherwise assist and cooperate in effecting
the assumption of such Litigation Trustee's obligations and functions by his
successor Litigation Trustee.
Section 3.10 APPOINTMENT OF SUCCESSOR LITIGATION TRUSTEES.
(a) Upon the death, resignation or incompetency (determined by a court of
competent jurisdiction) of a Litigation Trustee, the remaining Litigation
Trustee or Litigation Trustees, and no other Person, shall have the power to
appoint a successor Litigation Trustee or Trustees, as applicable. In the event
of the death, resignation or incompetency (as determined by a court of competent
jurisdiction) of all of the Litigation Trustees so that there are no remaining
Litigation Trustees, two Litigation Trustees shall be appointed by the written
decision of a majority of the members of the Bank United Litigation Committee,
or, if such committee is not in existence, a majority of the Persons still
living who constituted the Board of Directors of the Sponsor immediately prior
to the Effective Time.
Such appointment shall specify the date on which such appointment shall be
effective. Every successor Litigation Trustee appointed hereunder shall execute,
acknowledge and deliver to the remaining Litigation Trustees (or, in the event
there are no remaining Litigation Trustees, the Bank
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United Litigation Committee or, if such committee is not in existence, the
persons who were members of the Board of Directors of the Sponsor immediately
prior to the Effective Time) and to the Institutional Trustee an instrument
accepting such appointment, and thereupon such successor Litigation Trustee,
without any further act, deed or conveyance, shall become vested with all the
rights, powers, Litigation Trusts and duties of a Litigation Trustee. No
successor Litigation Trustee shall have any duty to investigate the
administration of the Litigation Trust or the management of the Litigation for
any period prior to the effective date of such successor Litigation Trustee's
appointment, and no resigning Litigation Trustee shall be required or permitted,
prior to final termination of the Litigation (including any proceedings to
collect any recovery due the Litigation Trustees), to file any accounting
proceeding.
(b) The Holders will have no right to vote to appoint, remove or replace the
Litigation Trustees, which rights are vested exclusively in the Litigation
Trustees and, to the extent set forth in Section 3.10(a), the Bank United
Litigation Committee or, if such committee is not in existence, the persons who
were members of the Board of Directors of Sponsor immediately prior to the
Effective Time.
Section 3.11 MEETINGS OF THE TRUSTEES.
(a) Meetings of the Delaware Trustee, the Institutional Trustee and the
Litigation Trustees together may be held from time to time upon the call of the
Delaware Trustee, Institutional Trustee or any Litigation Trustee. Notice of any
in-person meetings of the Trustees shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
mail) not less than five Business Days before such meeting. Notice of any
telephonic meetings of such Trustees shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
mail) not less than two Business Days before a meeting. Notices shall contain a
brief statement of the time, place and anticipated purposes of the meeting. The
presence (whether in person or by telephone) of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except where such Trustee attends
a meeting for the express purpose of objecting to the transaction of any
activity on the ground that the meeting has not been lawfully called or
convened. Any Trustee may also waive such notice of in-person or telephonic
meetings in writing by hand delivering or otherwise delivering (including by
facsimile, with a hard copy by overnight mail) such written waiver to all other
Trustees. Unless provided otherwise in this Declaration, any action to be taken
by the Institutional Trustee together with the Litigation Trustees shall be
taken with the approval of the Institutional Trustee and each Litigation Trustee
(provided, that if there shall be more than two Litigation Trustees, a majority
of the Litigation Trustees voting in favor of an action shall constitute
approval by the Litigation Trustees unless otherwise provided in this
Declaration).
(b) The Litigation Trustees may adopt their own rules and procedures but,
unless otherwise provided by this Declaration, may act only with the unanimous
agreement of the two Litigation Trustees or the agreement of the sole remaining
Litigation Trustee prior to the appointment of a successor Litigation Trustee
pursuant to Section 3.10. The Litigation Trustees 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 the Sponsor or Bank United (or any successor thereto) or the Litigation
Trustees, or the approval of a settlement or dismissal of the Litigation).
Following the date hereof and prior to the effective time of the Washington
Mutual Merger, the initial Litigation Trustees and the Board of Directors of
Bank United Corp., in their sole discretion, may establish a committee comprised
of present or former members of the Board of Directors of Bank United Corp., or
such other persons as may be appointed by such Board, to assist and advise the
Litigation Trustees in connection with the Litigation (the "Bank United
Litigation Committee").
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Section 3.12 POWERS AND DUTIES OF SPONSOR, LITIGATION TRUSTEES AND
INSTITUTIONAL TRUSTEE.
(a) The Sponsor prior to the Effective Time, and the Institutional Trustee
and the Litigation Trustees, shall have the authority, subject to any
limitations set forth in Section 2.03, to conduct the affairs of the Litigation
Trust in accordance with the terms of this Declaration and the Recovery
Agreement.
(b) In addition, prior to the Effective Time, the Sponsor shall have the
authority to take the actions enumerated in (i) below on behalf of the
Litigation Trust and, in connection therewith, to enter into all transactions
and agreements determined by the Sponsor to be appropriate in exercising such
authority and to perform all acts in furtherance thereof:
(i) The Sponsor shall have the power and authority prior to the
Effective Time and is hereby authorized to act on behalf of the Litigation
Trust prior to the Effective Time with respect to the following matters:
(A) the issuance of the CPR Certificates issued immediately prior to
the Effective Time;
(B) the execution of the CPR Certificates issued immediately prior to
the Effective Time in accordance with this Declaration;
(C) compliance with (or obtaining or qualifying for exceptions from)
the Securities Act, the Exchange Act or applicable state securities or
blue sky laws;
(D) the execution and filing of the registration statement under the
Securities Act to register the CPR Certificates to be issued to the
Sponsor immediately prior to the Effective Time and prospectuses
(including any amendments or supplements thereto) and the preparation and
filing of all documents filed therewith;
(E) the use of its best efforts to permit trading of the CPR
Certificates pursuant to the NASDAQ National Market System (or if,
despite such best efforts, trading on the NASDAQ National Market System
is not possible, on such other NASDAQ market or other market as shall, in
the good faith judgment of the Sponsor, provide maximum available
liquidity), commencing on the Effective Date and continuing until such
time as there are fewer than 400 Holders;
(F) the notification of the Institutional Trustee and the Litigation
Trustees in writing when the CPR Certificates are listed on any stock
exchange or quoted on any automated quotation system, if prior to the
Effective Time; and
(G) the taking of any other actions necessary or desirable to carry
out any of the foregoing activities.
(ii) The Trustees on behalf of the Litigation Trust hereby (a) ratify
and approve all actions taken by the Sponsor on behalf of the Litigation
Trust or for its benefit prior to the Effective Time and all transactions
and agreements entered into in connection therewith; and (b) agree and
acknowledge that the Sponsor shall have no liability to the Litigation
Trust, the Trustees or the Holders for any such actions, transactions or
agreements and that the Litigation Trust, the Trustees and the Holders shall
no right to enforce, institute or maintain a suit, action or proceeding
against the Sponsor, its successors or their respective affiliates,
officers, directors, employees or agents relating to such actions,
transactions or agreements; it being understood that this
Section 3.12(a)(ii) does not constitute a waiver by the Litigation Trustees
of their rights under Section 7.8 of the Merger Agreement or a waiver by the
Trustees or the Litigation Trust of their rights under the Commitment.
(c) in accordance with subparagraphs (i) and (ii) of this Section 3.12(b),
the Institutional Trustee and the Litigation Trustees shall have the authority
to enter into all transactions and agreements
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determined by such Trustees to be appropriate in exercising the authority,
express or implied, otherwise granted to such Trustees under this Declaration,
and to perform all acts in furtherance thereof (and all such transactions or
agreements entered into or acts performed prior to the date hereof are hereby
ratified and approved), including, without limitation, the following:
(i) The Litigation Trustees shall have the power and authority and are
authorized to act on behalf of the Litigation Trust with respect to the
following matters and such other powers and authority as provided in the
Litigation Trustee Agreements:
(A) the issuance and determination of the terms (including the
quantity and price) of any CPR Certificates issued after the Effective
Time in accordance with this Declaration;
(B) the execution of any CPR Certificates issued after the Effective
Time in accordance with this Declaration;
(C) after the Effective Time, the execution and delivery on behalf of
the Litigation Trust, subject to Section 2.03(b), of any agreement with
the Sponsor, and such other agreements as may, in the opinion of a
majority of the Litigation Trustees, be necessary or desirable in
connection with the Litigation Trust Purposes, including agreements with
the Depositary and the Paying Agent;
(D) after the Effective Time, compliance with (or obtaining or
qualifying for exceptions from) the Securities Act, the Exchange Act or
applicable state securities or blue sky laws or other applicable laws;
(E) after the Effective Time, the execution and filing of one or more
registration statements and prospectuses (including any amendments or
supplements thereto) relating to the CPR Certificates and the preparation
and filing of all periodic and other reports and other documents pursuant
to the foregoing;
(F) after the Effective Time, the continuation of the designation of
the CPR Certificates for trading on any national stock exchange or
quotation on the NASDAQ Stock Market's National Market System or other
automated quotation system until such time as there are fewer than 400
Holders or such time as the CPR Certificates are no longer eligible for
such designation on any such exchange or quotation system;
(G) the carrying out of any of the powers or obligations of the
Litigation Trust or of the Litigation Trustees under the Commitment;
(H) upon the effectiveness of the Commitment and as necessary
thereafter, the instruction of the Sponsor and Bank United and their
successors as to the prosecution, appeal, resolution, settlement,
compromise or other means of pursuing the Litigation and the taking of
any action in connection with the prosecution of the Litigation by the
Sponsor and Bank United (or any successor to such Persons) or as
permitted by Article VI hereof;
(I) the payment of all expenses of the Litigation Trust (including,
without limitation, expenses of the Litigation, compensation and expenses
of the Trustees, liability insurance and indemnification obligations) out
of the funds of the Litigation Trust, including amounts received pursuant
to the Commitment, the Retained Amount and any other source (including,
without limitation, funds raised pursuant to Section 2.3(c));
(J) the sending of notices (other than notice of default), and other
information regarding the CPR Certificates to the Holders in accordance
with this Declaration;
(K) the taking of any action to cause the Litigation Trust not to be
deemed to be an Investment Company under the Investment Company Act;
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(L) the amendment of the Commitment subject to Section 2.03(b);
(M) the bringing, defense, payment, collection, compromise, taking of
legal action, or other adjustment of claims or demands of or against the
Sponsor or its successors which arise out of or in connection with a
breach by the Sponsor (or any successor thereto) of any of its
obligations under the Commitment, the Payment Trust of any of its
obligations under the Commitment or, subject to the limitations set forth
in Section 3.12(a)(ii), the Sponsor of any of its obligations hereunder;
(N) the approval of all applicable tax returns and tax information to
be filed by the Institutional Trustee with respect to the Litigation
Trust on behalf of the Litigation Trust;
(O) the compliance by the Litigation Trust with the indemnification
obligations of the Litigation Trust; and
(P) the taking of any other actions necessary or desirable to carry
out any of the foregoing activities.
(ii) The Institutional Trustee shall have the power, duty and authority
and is hereby authorized to act on behalf of the Litigation Trust with
respect to the following matters:
(A) the authentication of the CPR Certificates in accordance with
this Declaration;
(B) the application for a taxpayer identification number;
(C) the maintenance of the funds of the Litigation Trust in a
non-interest bearing demand deposit account at Bank United;
(D) upon receipt of a Proceeds Amount, and at the written direction
of the Litigation Trustees, the investment of the Proceeds Amount, until
disbursed pursuant to the terms of this Declaration, in a Permitted
Investment which is not sold prior to the date the Payment Amount is to
be disbursed to the Holders;
(E) the distribution through the Paying Agent of the Payment Amount
and other amounts owed to the Holders in respect of the CPR Certificates
in accordance with the terms of this Declaration;
(F) the sending of notices of a breach by the Sponsor of its
obligations under the Commitment or a breach by the Sponsor of its
obligations under this Declaration or default by the Litigation Trust of
its payment obligations pursuant to Article IV hereof;
(G) the execution and delivery of letters or documents to, or
instruments with, the Depositary relating to the CPR Certificates;
(H) to the extent provided in this Declaration, the winding up of the
affairs of and liquidation of the Litigation Trust and the execution and
filing of the certificate of cancellation with the Secretary of State of
the State of Delaware;
(I) the due preparation and filing, with the approval of the
Litigation Trustees, of all applicable tax returns and tax information
reports that are required to be filed with respect to the Litigation
Trust;
(J) the taking of all actions that may be necessary or appropriate
for the preservation and the continuation of the Litigation Trust's valid
existence, rights, franchises and privileges as a statutory business
trust under the laws of the State of Delaware and of each other
jurisdiction in which such existence is necessary to protect the limited
liability of the Holders or to enable the Litigation Trust to effect the
Litigation Trust Purposes;
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(K) the bringing, defense, payment, collection, compromise,
arbitration, taking of legal action, or other adjustment of claims or
demands of or against the Sponsor or its successors or the Litigation
Trust which arise out of or in connection with a breach by the Sponsor of
any of its obligations under the Commitment, the Payment Trust of any of
its obligations under the Commitment, or, subject to the limitations set
forth in Section 3.12(a)(ii), by the Sponsor of any of its obligations
hereunder;
(L) the taking of all actions and performance of such duties as may
be specifically required of the Institutional Trustee pursuant to the
terms of the CPR Certificates; and
(M) the taking of any action incidental to the foregoing as the
Institutional Trustee may from time to time determine to be necessary or
advisable to give effect to the terms of this Declaration for the benefit
of the Holders (without consideration of the effect of any such action on
any particular Holder).
(iii) The Institutional Trustee shall have the power and authority to
act on behalf of the Litigation Trust with respect to any of the duties,
liabilities, powers or the authority of the Litigation Trustees set forth in
Section 3.12(b)(i)(J) herein but shall not have a duty to do any such act
unless specifically requested to do so in writing by the Litigation
Trustees, and shall then be fully protected in acting pursuant to such
written request; and in the event of a conflict between the action of the
Litigation Trustees and the action of the Institutional Trustee, the action
of the Institutional Trustee shall prevail.
(d) The Trustees are authorized and directed to conduct the affairs of the
Litigation Trust and to operate the Litigation Trust so that the Litigation
Trust will not fail to be classified as a grantor trust for United States
federal income tax purposes. In this connection, the Trustees are authorized to
take any action, not inconsistent with applicable laws, the Certificate of
Litigation Trust or this Declaration, as amended from time to time, that the
Institutional Trustee or the Litigation Trustees, as the case may be, determines
in their discretion to be necessary or desirable for such purpose, even if such
action adversely affects the interests of the Holders.
(e) The Litigation Trustees may consult with counsel (which counsel may be
counsel to the Litigation Trust or counsel to any member of the Bank United
Group), outside consultants, advisors and other Persons as to matters the
Litigation Trustees reasonably believe are within such other Person's
professional or expert competence, and the advice of such Persons shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by them hereunder in good faith reliance on such advise. All
oral or written communications between any such counsel on the one hand, and the
Sponsor, Bank United, the Litigation Trust, any Trustee, the Payment Trust, the
Payment Trust Trustees any of their affiliates, or any successor entity or any
affiliate of any successor entity, on the other hand, will be protected by the
attorney-client privilege and/or the attorney work product doctrine, and no such
communication will result in the waiver of any applicable claim of
confidentiality or privilege.
(f) Any Trustee may also be a Holder or an officer, director, employee or
Affiliate of a Holder, and will have all the rights of such a Holder to the same
extent as if such Trustee were not a Trustee.
Section 3.13 CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEES.
(a) The Institutional Trustee, before the occurrence of any breach by the
Sponsor or the Payment Trust of any of their obligations under the Commitment or
a breach by the Sponsor after the Effective Time of any of its obligations under
this Declaration, and after the curing of any such breach by the Payment Trust
or the Sponsor, shall undertake to perform only such duties as are specifically
set forth in this Declaration and no implied covenants shall be read into this
Declaration against the Institutional Trustee. In case of a breach by either the
Sponsor or the Payment Trust of any of their obligations under the Commitment or
a breach by the Sponsor of its obligations hereunder after the
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Effective Time, the Institutional Trustee shall exercise such of the rights and
powers vested in it by this Declaration and use the same degree of care and
skill in their exercise as a prudent person would exercise or use under the
circumstances in the conduct of his or her own affairs.
(b) The duties and responsibilities of the Trustees shall be as provided by
this Declaration and the Business Trust Act. Notwithstanding the foregoing, no
provision of this Declaration shall require any Trustee to expend or risk such
Trustee's own funds or otherwise incur any financial liability in the
performance of any of such Trustee's duties hereunder, or in the exercise of any
of such Trustee's rights or powers. Whether or not therein expressly so
provided, every provision of this Declaration relating to the conduct or
affecting the liability of or affording protection to the Trustees shall be
subject to the provisions of this Article. To the extent that, at law or in
equity, a Trustee has duties and liabilities relating to the Litigation Trust or
to the Holders, such Trustee shall not be liable to the Litigation Trust or to
any Holder for such Trustee's good faith reliance on the provisions of this
Declaration. The provisions of this Declaration, to the extent that they
restrict the duties and liabilities of the Trustees otherwise existing at law or
in equity, are agreed by the Litigation Trust and the Holders to replace such
other duties and liabilities of the Trustees.
(c) All payments made by the Institutional Trustee or a Paying Agent in
respect of the CPR Certificates shall be made only from (i) payments received by
the Litigation Trust from the Payment Trust and only to the extent that the
Payment Amount is greater than zero or upon the expiration of the Retained
Amount Period, any remaining portion of the Retained Amount is greater than
zero, in each case so as to enable the Institutional Trustee or a Paying Agent
to make payments in accordance with the terms hereof and (ii) proceeds from the
liquidation of other assets of the Litigation Trust upon the winding up of the
Litigation Trust. Each Holder, by its acceptance of a CPR Ceritificate, agrees
that it will look solely to the Payment Amount and, upon the expiration of the
Retained Amount Period, to any remaining portion of the Retained Amount, to the
extent legally available for distribution to it as herein provided and that the
Trustees are not personally liable to such Holder for any amount distributable
in respect of any CPR Ceritificate or for any other liability in respect of any
CPR Ceritificate.
(d) No provision of this Declaration shall be construed to relieve the
Institutional Trustee from liability with respect to matters that are within the
authority of the Institutional Trustee under this Declaration for its own bad
faith, its own grossly negligent action, its own grossly negligent failure to
act, or its own willful misconduct, except that:
(i) the Institutional Trustee shall not be liable for any error or
judgment made in good faith by an authorized officer of the Institutional
Trustee, unless it shall be proved that the Institutional Trustee was
negligent in ascertaining the pertinent facts;
(ii) the Institutional Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of not less than a majority of the CPR
Certificates then outstanding, relating to the time, method and place of
conducting any proceeding for any remedy available to the Institutional
Trustee, or exercising any Litigation Trust or power conferred upon the
Institutional Trustee under this Declaration;
(iii) the Institutional Trustee's sole duty with respect to the custody,
safe-keeping and physical preservation of the Payment Amount shall be to
deal with such property in a similar manner as the Institutional Trustee
deals with similar property for its own account, subject to the protections
and limitations on liability afforded to the Institutional Trustee under
this Declaration;
(iv) the Institutional Trustee shall not be liable for any interest on
any money received by it except as it may otherwise agree in writing with
the Litigation Trustees; and money held by the Institutional Trustee need
not be segregated from other funds held by it except in relation to the
Proceeds Amount maintained by the Institutional Trustee pursuant to
Section 3.12(b)(ii)(d) and except to the extent otherwise required by law.
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Section 3.14 CERTAIN RIGHTS OF THE INSTITUTIONAL TRUSTEE. Subject to the
provisions of Section 3.13:
(a) the Institutional Trustee may conclusively rely and shall fully be
protected in acting or refraining from acting in good faith upon any resolution,
opinion of counsel, certificate, written representation of a Holder, transferee
or Litigation Trustee, certificate of auditors or any other certificate,
statement, instrument, opinion, report, notice, request, direction, consent,
order, approval, CPR Ceritificate, bond, debenture, note, other evidence of
indebtedness or other paper or document believed by it to be genuine and to have
been signed, sent or presented by the proper party or parties;
(b) if (i) in performing its duties under this Declaration, the
Institutional Trustee is required to decide between alternative courses of
action, or (ii) in construing any of the provisions of this Declaration, the
Institutional Trustee finds the same ambiguous or inconsistent with any other
provisions contained herein, or (iii) the Institutional Trustee is unsure of the
application of any provision of this Declaration, then, except as to any matter
as to which the Holders are entitled to vote under the terms of this
Declaration, the Institutional Trustee shall take such action, or refrain from
taking such action, as the Institutional Trustee in its sole discretion shall
deem advisable and in the best interests of the Holders, in which event the
Institutional Trustee shall have no liability except for its own bad faith,
negligence or willful misconduct;
(c) any direction or act of the Litigation Trustees contemplated by this
Declaration shall be sufficiently evidenced by an Officers' Certificate;
(d) the Institutional Trustee may consult with counsel (which counsel may be
counsel to the Litigation Trustees or appointed by the Sponsor or Bank United
(or any successor to such Persons) at the direction of the Litigation Trustees
to prosecute the Litigation) and the advice of such counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon and in
accordance with such advice; the Institutional Trustee shall have the right at
any time to seek instructions concerning the administration of this Declaration
from any court of competent jurisdiction. All oral or written communications
between any such counsel on the one hand, and the Sponsor, Bank United, the
Litigation Trust, any Trustee, any of their affiliates, or any successor entity
or any affiliate of any successor entity, on the other hand, will be protected
by the attorney-client privilege and/or the attorney work product doctrine, and
no such communication will result in the waiver of any applicable claim of
confidentiality or privilege.
(e) the Institutional Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Declaration at the request or
direction of any of the Holders pursuant to this Declaration, unless such
Holders shall have offered to the Institutional Trustee security or indemnity
reasonably satisfactory to it against the costs, expenses and liabilities which
might be incurred by it in compliance with such request or direction, provided
that nothing contained in this Section 3.14(e) shall be taken to relieve the
Institutional Trustee, upon breach by the Sponsor of any of its obligations
under the Commitment, or by the Sponsor or its successors after the Effective
Time of any of the obligations of the Sponsor hereunder, of its obligation to
exercise, upon the instructions of the Litigation Trustees, the rights and
powers vested in it by this Declaration;
(f) the Institutional Trustee shall not be required to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, CPR Ceritificate, bond, debenture, note or other evidence of
indebtedness or other paper or document, unless requested in writing to do so by
a majority of the Holders of CPR Certificates then outstanding, but the
Institutional Trustee may make such further inquiry or investigation into such
facts or matters as it may see fit;
(g) except as otherwise expressly provided in this Declaration, the
Institutional Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Declaration;
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(h) any action taken by the Institutional Trustee or its agents authorized
by this Declaration to be taken by the Institutional Trustee shall bind the
Litigation Trust and the Holders, and the signature of the Institutional Trustee
or its agents alone shall be sufficient and effective to perform any such action
and no third party shall be required to inquire as to the authority of the
Institutional Trustee to so act or as to its compliance with any of the terms
and provisions of this Declaration, both of which shall be conclusively
evidenced by the Institutional Trustee's or its agent's taking such action;
(i) no provision of this Declaration shall be deemed to impose any duty or
obligation on the Institutional Trustee to perform any act or acts or exercise
any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Institutional Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Institutional
Trustee shall be construed to be a duty;
(j) whenever in the administration of the provisions of this Declaration the
Institutional Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering any action to be taken
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of gross negligence or bad faith on
the part of the Institutional Trustee, be deemed to be conclusively proved and
established by an Officer's Certificate delivered to the Institutional Trustee
and such certificate, in the absence of gross negligence or bad faith on the
part of the Institutional Trustee, shall be full warrant to the Institutional
Trustee for any action taken, suffered or omitted by it under the provisions of
this Declaration upon the faith thereof;
(k) in no event shall the Institutional Trustee be liable for the selection
of investments for funds permitted to be invested hereunder or for investment
losses thereon, and the Institutional Trustee shall have no liability in respect
of losses incurred as a result of the liquidation of any investment prior to its
stated maturity or the failure of the Litigation Trustees to provide timely
written investment direction with respect to funds permitted to be invested
hereunder;
(l) the Institutional Trustee may execute any of its powers hereunder or
perform any duties hereunder either directly or by or through agents, attorneys,
custodians or nominees appointed with due care, and shall not be responsible for
any willful misconduct or gross negligence on the part of, or for the
supervision of, any agent, attorney, custodian or nominee so appointed; and
(m) the Institutional Trustee shall not be deemed to have notice of the
occurrence of the events described in Section 3.19 unless the Institutional
Trustee shall have received written notice of such event or a Responsible
Officer of the Institutional Trustee shall have obtained actual knowledge
thereof.
Section 3.15 LISTS OF HOLDERS OF CPR CERTIFICATES.
(a) At the Effective Time, the Sponsor shall provide to the Institutional
Trustee a list (the "List of Holders"), in such form as the Institutional
Trustee may reasonably require, of the names and addresses of the Holders as of
immediately prior to the Effective Time;
(b) The Paying Agent, if other than the Institutional Trustee, shall provide
to the Institutional Trustee a List of Holders upon the request of the
Institutional Trustee; and
(c) The Institutional Trustee shall preserve, in as current a form as is
reasonably practicable, all information contained in any List of Holders given
to it or which it receives in its capacity as Paying Agent (if acting in such
capacity), PROVIDED that the Institutional Trustee may destroy any List of
Holders previously given to it on receipt of a new List of Holders;
Section 3.16 EXECUTION OF DOCUMENTS.
(a) Unless otherwise determined in writing by the Institutional Trustee, and
except as otherwise required by the Business Trust Act, the Institutional
Trustee, or any one or more of the Litigation
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Trustees, as the case may be, is authorized to execute on behalf of the
Litigation Trust any documents that the Institutional Trustee or the Litigation
Trustees, as the case may be, have the power and authority to execute pursuant
to Section 3.12.
(b) Any Institutional or Delaware Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her or its power for the purpose of executing any documents
contemplated in Section 3.12.
Section 3.17 NOT RESPONSIBLE FOR RECITALS OR ISSUANCE OF CPR
CERTIFICATES. The recitals contained in this Declaration and the CPR
Certificates shall be taken as the statements of the Litigation Trust, and the
Trustees do not assume any responsibility for their correctness. The Sponsor and
the Trustees make no representations as to the value or condition of the
Litigation Trust Property or any part thereof. Except as otherwise specifically
provided in Article XIV, the Sponsor and the Trustees make no representations as
to the validity or sufficiency of this Declaration or the CPR Certificates.
Section 3.18 FILINGS WITH THE COMMISSION. So long as the Litigation Trust
is subject to the reporting obligations of the Exchange Act, the Litigation
Trustees shall, on behalf of the Litigation Trust, cause to be prepared and
filed with the Commission quarterly reports on Form 10-Q and an annual report on
Form 10-K. Unless otherwise required by the Commission, such reports will
contain only an overview of the status of the Litigation and disclosure of the
amounts that have been expended for the relevant period and any contingent or
incurred but unpaid expenses (including compensation deferred by the Litigation
Trustees) that the Litigation Trust will be obligated to pay in the future. The
Litigation Trustees shall also, on behalf of the Litigation Trust, cause to be
prepared and filed with the Commission, reports 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. It is hereby agreed and understood that such
reports on Form 10-Q, 10-K or 8-K will not include financial statements or any
valuation of the Litigation.
Section 3.19 DEFAULT; NOTICE. The Institutional Trustee shall, within
90 days after the occurrence of (i) a breach by the Sponsor of any of its
payment obligations under the Commitment, (ii) a breach by the Sponsor after the
Effective Time of its obligations hereunder, (iii) a default by the Litigation
Trust in payment of the Payment Amount to the Holders pursuant to Article IV
hereof, (iv) a default by the Litigation Trust upon the expiration of the
Retained Amount Period in payment of any remaining portion of the Retained
Amount pursuant to Article IV hereof, or (v) a breach by the Payment Trust of
its obligations under the Commitment, transmit by mail, first class postage
prepaid, to the Holders, notice of such default actually known to a Responsible
Officer of the Institutional Trustee, unless such default has been cured before
the giving of such notice; PROVIDED, HOWEVER, the Institutional Trustee shall be
protected in withholding such notice if and so long as a Responsible Officer of
the Institutional Trustee in good faith determines that the withholding of such
notice is in the best interests of the Holders.
ARTICLE IV.
PAYMENTS TO HOLDERS
Section 4.01 PAYMENT TO HOLDERS.
(a) The Litigation Trust will make payments from time to time to the Holders
of the Payment Amounts upon the receipt of the applicable payments of the
Proceeds Amount from the Payment Trust. Each CPR Ceritificate will entitle the
Holder thereof to receive a fraction (equal to 1 divided by the total number of
CPR Certificates then outstanding) of any Payment Amount within 60 days after
the Litigation Trust receives a Proceeds Amount.
(b) Within 90 days of the expiration of the Retained Amount Period, the
Litigation Trust will pay to the Holders any remaining portion of the Retained
Amount. Each CPR Ceritificate will entitle the
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Holder thereof to receive a fraction (equal to 1 divided by the total number of
CPR Certificates then outstanding) of the remaining portion of the Retained
Amount.
Section 4.02 TIMING OF PAYMENTS. The Litigation Trust will make payments
of amounts as contemplated by Section 4.1 to the Holders as of record dates
determined by the Litigation Trustees. Payment will be made on payment dates,
which will also be set by the Litigation Trustees. The Litigation Trustees shall
promptly notify the Institutional Trustee in writing of any such dates.
Section 4.03 DEFAULT; WAIVER. The Holders of a majority of the CPR
Certificates then outstanding may, by vote or consent, on behalf of the Holders
of all of the CPR Certificates, waive any breach by the Sponsor of any of its
obligations under the Commitment, any failure by the Payment Trust to fulfill
its obligations under the Commitment with respect to the Litigation Trust, or
any default by the Litigation Trust in payment of the Payment Amount or the
funds remaining in the Retained Amount to the Holders pursuant to this
Article IV.
ARTICLE V.
EXPENSES AND THE RETAINED AMOUNT
Section 5.01 EXPENSES. The Litigation Trustees on behalf of the Litigation
Trust shall have the right to draw on the funds of the Litigation Trust for the
purpose of funding any expenses of the Litigation Trust, including
administration expenses, expenses of the Litigation, compensation, fees and
expenses of the Trustees, amounts paid as indemnity to any Indemnified Person,
premiums for insurance for the Litigation Trustees, and fees and expenses of
attorneys, consultants and other experts retained by, or at the direction of,
the Litigation Trustees, pursuant to Section 6.02.
Section 5.02 RETURN OF FUNDS. Pursuant to Section 2.08 of the Commitment,
if (x) the amount of the Litigation Proceeds is such that there would be no
Commitment Amount payable under the Commitment to the Payment Trust and
(y) immediately prior to the termination of the Litigation Trust as provided by
this Declaration and the Commitment the Litigation Trust retains any funds
provided to the Litigation Trust pursuant to Section 2.04 of the Commitment but
not used, the Litigation Trust shall refund to the Sponsor such amounts less
expenses necessary, in the reasonable judgment of the Litigation Trustees, to
terminate the Litigation Trust pursuant to the terms of this Declaration and the
Commitment.
Section 5.03 RETAINED AMOUNT.
(a) The Litigation Trustees' obligation to make payments to the Holders
shall be subject to the requirement that the Litigation Trust retain the
Retained Amount for a period (the "Retained Amount Period") of one year (or such
longer period as the Litigation Trustees shall reasonably determine (initially
or at any time prior to the then scheduled termination of the Retained Amount
Period) may be reasonably likely to be required) to satisfy all expenses, costs
and claims and indemnification obligations of the Litigation Trust which may be
incurred or which may arise after the Proceeds Amount is paid in full. The
"Retained Amount" shall mean $1.0 million (or such greater amount as the
Litigation Trustees shall reasonably determine may be reasonably likely to be
required to pay additional expenses or to satisfy the Litigation Trust's
indemnification obligations). Any portion of the Retained Amount in excess of
$1.0 million or retained longer than one year shall promptly be distributed to
the Holders after the Litigation Trustees reasonably determine that such funds
are no longer needed for such purposes.
(b) The Litigation Trust shall invest the Retained Amount in a Permitted
Investment, to the extent that portions of the Retained Amount are not required
to be disbursed for expenses of the Litigation Trust, until the expiration of
the Retained Amount Period.
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ARTICLE VI.
MANAGEMENT OF THE LITIGATION
Section 6.01 AUTHORITY OF THE LITIGATION TRUSTEES.
(a) The Sponsor hereby agrees to, and agrees to cause Bank United and its
successors to, upon the effectiveness of the Commitment and as requested by the
Litigation Trustees thereafter, to follow and comply with all instructions of
the Litigation Trustees in connection with all aspects of the prosecution of the
Litigation, including, at the expense of the Litigation Trust, the retention of
attorneys, experts, consultants and others and the making of all decisions and
the taking of all actions necessary or appropriate to prosecute or otherwise
pursue the Litigation by litigation in trial or appellate courts, arbitration,
alternative dispute resolution, negotiation, settlement or compromise, or the
dismissal, settlement or cessation of prosecution of the Litigation, withdrawal
or abandonment of the Litigation; PROVIDED, that no settlement agreement or
other agreement entered into at the direction of the Litigation Trustees as part
of the resolution of the Litigation or a related Internal Revenue Service ruling
issued to a member of the Bank United Group in connection with such agreement
may impose any liability or obligation whatsoever (other than a standard
settlement release relating only to the Litigation or other related claims that
the Sponsor or Bank United's stockholders may have been able to bring as of
immediately prior to the Merger) on any member or members of 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. The Sponsor hereby agrees
not to, and to cause Bank United (or any successor thereto) not to, take any
action with respect to the Litigation except in accordance with the instructions
of the Litigation Trustees.
(b) Prior to the Effective Time, the Sponsor shall certify by an Officers'
Certificate that it has taken the necessary corporate action evidenced by
resolutions substantially in the form set forth in EXHIBIT C hereto, to follow
and comply, and to cause to cause Bank United and its successors to follow and
comply, with all instructions of the Litigation Trustees as required by
Section 6.1(a). Prior to the Effective Time, Bank United shall certify by an
Officer's Certificate that it has taken the necessary action evidenced by
resolutions to follow and comply with instructions of the Litigation Trustees.
(c) Nothing in this Declaration shall constitute a grant by the Sponsor,
Bank United or their successors of a power of attorney to the Litigation
Trustees to appear on behalf of the Sponsor, Bank United or their successors in
connection with the Litigation.
(d) Nothing in this Declaration shall be deemed to require the Sponsor to
advance or risk any funds or otherwise incur any financial liability in
connection with the Litigation or the Litigation Trust other than as provided by
the Commitment or as contemplated by paragraph (a) above.
(e) Each of the Sponsor and Bank United shall abide by the Recovery
Agreement dated July 24, 1996, by and among the Sponsor, Bank United and
Hyperion (as it may be hereafter amended from time to time, the "Recovery
Agreement"). Each of the Litigation Trustees acknowledges the obligations of the
Sponsor and Bank United under the Recovery Agreement.
Section 6.02 RETENTION OF ATTORNEYS, ACCOUNTANTS AND OTHER PROFESSIONALS.
(a) The Litigation Trustees shall retain, at the expense of the Litigation
Trust, such attorneys as counsel to the Litigation Trust (including, without
limitation, counsel to the Sponsor, Bank United or any successor to such Persons
in connection with the Litigation) as the Litigation Trustees in their sole
discretion may select, and the Litigation Trustees may dismiss such attorneys in
their sole discretion. The Litigation Trustees shall instruct the Sponsor and
Bank United (or any successor to such Persons), at the expense of the Litigation
Trust, to retain such attorneys as the Litigation Trustees may select to aid in
the prosecution of the Litigation and to perform such other functions as may be
appropriate in the Litigation Trustees' sole and absolute discretion, and the
Sponsor shall, and shall cause Bank United (or any successor thereto), in each
case at the expense of the Litigation Trust, to follow and
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comply with such instructions in the manner set forth in Section 6.01(a). The
Litigation Trustees may commit the Litigation Trust to and shall pay such
attorneys compensation from the funds of the Litigation Trust for services
rendered and expenses incurred and may enter into arrangements on such terms as
may be approved by the Litigation Trustees with such counsel, including terms
providing that all or a portion of such counsel's compensation may be contingent
and may be based on a percentage of any recovery, subject to
Section 2.03(c)(ii), PROVIDED, HOWEVER, that no such arrangement shall provide
for recourse against Bank United or its successors. The Litigation Trustees
shall have full authority to instruct the Sponsor or Bank United (or any
successor to such Persons) to dismiss any such attorneys retained by the Sponsor
or Bank United (or any successor to such Persons) and the Sponsor shall, and
shall cause Bank United (or any successor thereto), to comply with such
instructions.
Unless and until instructed to the contrary by the Litigation Trustees, the
attorneys currently retained to aid in the prosecution of the Litigation shall
continue in such role for the Sponsor and Bank United (or any successor to such
Persons), and all parties hereto, having been fully advised, waive any conflict
of interest, if any, which the attorneys currently retained may have with
respect to any party to this Declaration. In addition, any attorneys, experts,
advisors, consultants and investigators retained by or at the direction of the
Litigation Trustees and any experts, advisors, consultants and investigators
retained by attorneys to aid in the prosecution of the Litigation shall be
authorized by this Declaration to accept directions from the Litigation Trustees
with respect to the Litigation, notwithstanding any conflict of interest that
may arise by reason of such directions with the interests of any party to this
Declaration. The Litigation Trustees shall have no duty to the Sponsor or Bank
United (or any affiliate, successor entity, or affiliate of any successor
entity) to consider any interest the Sponsor, Bank United or any such entity may
have with respect to the Litigation. All oral and written communications between
any attorneys retained by or at the direction of the Litigation Trustees on one
hand, and the Sponsor, Bank United, the Litigation Trust, any Trustee, their
affiliates, or any successor entity or any affiliate of any successor entity, on
the other hand, relating to the Litigation and/or to the actions of the
Litigation Trustees, will be protected by the attorney-client privilege and/or
the attorney work product doctrine, and no such communication will result in the
waiver of any applicable claim of confidentiality or privilege.
(b) The Litigation Trustees may retain an independent public accounting firm
to audit the financial books and records of the Litigation Trust and to perform
such other reviews and/or audits as may be appropriate in the Litigation
Trustees' sole and absolute discretion. The Litigation Trustees may commit the
Litigation Trust, and shall cause the Litigation Trust, to pay such accounting
firm compensation from the funds of the Litigation Trust for services rendered
and expenses incurred. The Litigation Trustees shall have full authority to
dismiss such accounting firm.
(c) The Litigation Trustees may retain on behalf of the Litigation Trust or
instruct the Sponsor or Bank United (or any successor to such Persons) to retain
such other experts, advisors, consultants, investigators or other support staff,
assistants or employees as the Litigation Trustees, in their sole and absolute
discretion, may deem necessary or appropriate to assist the Litigation Trustees
to carry out their powers and duties under this Declaration. The Litigation
Trustees may commit the Litigation Trust to and shall cause the Litigation Trust
to pay all such persons or entities compensation from the funds of the
Litigation Trust for services rendered and expenses incurred. The Litigation
Trustees shall have full authority to dismiss such persons retained by the
Litigation Trust or to instruct the Sponsor or Bank United (or any successor to
such Persons) to dismiss such persons retained by the Sponsor or Bank United (or
any successor to such Persons).
Section 6.03 COOPERATION BY THE SPONSOR.
(a) The Sponsor shall provide, and shall cause Bank United to provide the
Litigation Trustees with such access to the books, records, offices, other
facilities, employees, agents, representatives and independent accountants of
the Sponsor and Bank United as the Litigation Trustees shall reasonably require
for the purpose of performing their duties and exercising their powers under
this Declaration.
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The Litigation Trustees shall have full authority on behalf of the Sponsor and
Bank United to consult with and instruct the attorneys for the Sponsor and Bank
United and their successors in connection with the Litigation.
(b) The Sponsor shall use its best efforts to cause the relevant officers of
the Sponsor and its successors and the agents and representatives of the Sponsor
and its successors, and to cause the relevant officers of Bank United and its
successors and the agents and representatives of Bank United and its successors,
to be available to provide testimony and to execute documents, in each case as
required, in the reasonable judgment of the Litigation Trustees, for the purpose
of prosecuting the Litigation, including execution of any complaints, motions,
answers and other pleadings, affidavits, requests and notices.
ARTICLE VII.
ISSUANCE AND DISTRIBUTION OF CPR CERTIFICATES
Section 7.01 GENERAL PROVISIONS REGARDING CPR CERTIFICATES.
(a) The Litigation Trust shall be authorized to issue one class of undivided
beneficial interests in the assets of the Litigation Trust, which may be issued
in an unlimited number and shall be represented by CPR Certificates
substantially in the form of Exhibit D.
(b) The CPR Certificates issued immediately prior to the Effective Time
shall be signed on behalf of the Litigation Trust by an Authorized Officer of
the Sponsor. Any CPR Certificates issued by the Litigation Trust following the
Merger shall be signed on behalf of the Litigation Trust by a majority of the
Litigation Trustees. Such signature shall be the facsimile or manual signature
of such Authorized Officer or Litigation Trustees, as applicable. In case any
Authorized Officer or Litigation Trustee, as applicable, who shall have signed
any of the CPR Certificates shall cease to be an Authorized Officer or
Litigation Trustee, as applicable, before the CPR Certificates so signed shall
be delivered by the Litigation Trust, such CPR Certificates nevertheless may be
delivered as though the person who signed such CPR Certificates had not ceased
to be an Authorized Officer or Litigation Trustee, as applicable; and any CPR
Ceritificate may be signed on behalf of the Litigation Trust by such persons
who, at the actual date of execution of such CPR Ceritificate, shall be an
Authorized Officer or Litigation Trustee, as applicable, of the Litigation
Trust, although at the date of the execution and delivery of the Declaration any
such person was not an Authorized Officer or Litigation Trustee, as applicable.
A CPR Ceritificate shall not be valid until authenticated by the manual
signature of a Responsible Officer of the Institutional Trustee. Such signature
shall be conclusive evidence that the CPR Ceritificate has been authenticated
under this Declaration. Upon written order of the Litigation Trust signed by one
Litigation Trustee, or upon the written order of an Authorized Officer of the
Sponsor with respect to CPR Certificates issued immediately prior to the
Effective Time, the Institutional Trustee shall authenticate the CPR
Certificates for original issue. The Institutional Trustee may appoint an
authenticating agent acceptable to the Litigation Trustees or the Sponsor, if
such appointment occurs prior to the Effective Time, to authenticate the CPR
Certificates.
(c) Upon issuance of the CPR Certificates as provided in this Declaration,
the CPR Certificates so issued shall be deemed to be validly issued, fully paid
and non-assessable.
(d) Every Person, by virtue of having become a Holder in accordance with the
terms of this Declaration, shall be deemed to have expressly assented and agreed
to the terms of, and shall be bound by, this Declaration.
Section 7.02 PAYING AGENT, TRANSFER AGENT AND REGISTRAR. The Litigation
Trust shall maintain in [ ], an office or agency where the CPR
Certificates may be presented for payment (the "Paying Agent"), and an office or
agency where CPR Certificates may be presented for registration of transfer (the
"Transfer Agent"). The Litigation Trust shall keep or cause to be kept at such
office or agency a register for the purpose of registering CPR Certificates and
transfers and exchanges of CPR
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Certificates, such register to be held by a registrar (the "Registrar"). The
Litigation Trustees may appoint the Paying Agent, the Registrar, and the
Transfer Agent and may appoint one or more additional Paying Agents or one or
more co-Registrars, or one or more co-Transfer Agents in such other locations as
they shall determine. The term "Paying Agent" includes any additional paying
agent, the term "Registrar" includes any additional registrar or co-Registrar
and the term "Transfer Agent" includes any additional or co-Transfer Agent. The
Litigation Trustees may change any Paying Agent without prior notice to any
Holder. The Litigation Trustees shall notify the Institutional Trustee of the
name and address of any Paying Agent, Transfer Agent and Registrar not a party
to this Declaration. The Litigation Trustees hereby appoint the Institutional
Trustee to act as Paying Agent, Transfer Agent and Registrar for the CPR
Certificates. The Institutional Trustee or any of its Affiliates may act as
Paying Agent, Transfer Agent or Registrar.
Section 7.03 FORM AND DATING.
(a) The CPR Certificates and the Institutional Trustee's certificate of
authentication thereon shall be substantially in the form of Exhibit D, which is
hereby incorporated in and expressly made a part of this Declaration. CPR
Certificates may be typed, printed, lithographed or engraved or may be produced
in any other manner as is reasonably acceptable to the Sponsor prior to the
Effective Time, and the Litigation Trustees after the Effective Time, as
conclusively evidenced by the execution thereof. The CPR Certificates may have
letters, numbers, notations or other marks of identification or designation and
such legends or endorsements required by law, stock exchange rule, agreements to
which the Litigation Trust is subject, if any, or usage (provided that any such
notation, legend or endorsement is in a form acceptable to the Sponsor prior to
the Effective Time, and the Litigation Trustees after the Effective Time). The
Litigation Trustees shall furnish any such legend not contained in Exhibit D to
the Institutional Trustee in writing. Each CPR Ceritificate shall be dated the
date of its authentication. The form of CPR Ceritificate set forth in Exhibit D
is part of the terms of this Declaration and to the extent applicable, the
Institutional Trustee, the Delaware Trustee, the Litigation Trustees and the
Sponsor, by their execution and delivery of this Declaration, expressly agree to
such terms and provisions and to be bound thereby. The Litigation Trust, in
issuing the CPR Certificates may use "CUSIP" numbers (if then generally in use),
and, if so, the Institutional Trustee shall indicate the "CUSIP" numbers of the
CPR Certificates in notices of redemption and related materials as a convenience
to Holders; PROVIDED that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the CPR
Certificates or as contained in any notice of redemption and related materials.
(b) Definitive and Global CPR Certificates. CPR Certificates shall be
issued, at the option of the Holder, in the form of individual certificates in
definitive, fully registered form without distribution coupons (each, a
"Definitive CPR Ceritificate"), or in the form of one or more permanent global
CPR Certificates in definitive, fully registered form without distribution
coupons with the appropriate global legends (each, a "Global CPR Ceritificate").
The number of CPR Certificates represented by the Global CPR Ceritificate may
from time to time be increased or decreased by adjustments made on the records
of the Registrar and the Depositary or its nominee as hereinafter provided.
(c) Book-Entry Provisions. This Section 7.03(c) shall apply only to the
Global CPR Certificates. If CPR Certificates are issued as provided in
Section 7.03(b), the Litigation Trust shall execute and the Institutional
Trustee shall, in accordance with this Section 7.03, authenticate and deliver
initially one or more Global CPR Certificates that (a) shall be registered in
the name of Cede & Co. or other nominee of such Depositary and (b) shall be
delivered by the Institutional Trustee to such Depositary or pursuant to such
Depositary's instructions or held by the Institutional Trustee as custodian for
the Depositary. Clearing Agency Participants shall have no rights under this
Declaration with respect to any Global CPR Certificates held on their behalf by
the Depositary or by the Institutional Trustee as the custodian of the
Depositary or under such Global CPR Certificates, and the Depositary may be
treated by the Litigation Trust, the Institutional Trustee and any officer,
director, employee, or agent of the
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Litigation Trust or the Institutional Trustee as the absolute owner of such
Global CPR Certificates for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Litigation Trust, the Institutional
Trustee or any agent of the Litigation Trust or the Institutional Trustee from
giving effect to any written certification, proxy or other authorization
furnished by the Depositary or impair, as between the Depositary and the
Clearing Agency Participants, the operation of customary practices of such
Depositary governing the exercise of the rights of a holder of a beneficial
interest in any Global CPR Certificates.
(d) Definitive CPR Certificates. Any Person with a beneficial interest in a
Global CPR Ceritificate may exchange such interest for Definitive CPR
Certificates.
Section 7.04 MUTILATED, DESTROYED, LOST OR STOLEN
CERTIFICATES. If: (a) any mutilated CPR Certificates should be surrendered to
the Registrar, or if the Registrar shall receive evidence to its satisfaction of
the destruction, loss or theft of any CPR Ceritificate; and (b) there shall be
delivered to the Institutional Trustee, the Registrar and the Litigation
Trustees such security or indemnity as may be required by them to keep each of
them harmless; then, in the absence of notice that such CPR Ceritificate shall
have been acquired by a protected purchaser, a majority of the Litigation
Trustees on behalf of the Litigation Trust shall execute and the Institutional
Trustee shall authenticate and deliver, in exchange for or in lieu of any such
mutilated, destroyed, lost or stolen CPR Ceritificate, a new CPR Ceritificate of
like denomination. In connection with the issuance of any new CPR Ceritificate
under this Section 7.04, the Registrar or the Institutional Trustee may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in connection therewith. Any duplicate CPR Ceritificate
issued pursuant to this Section shall constitute conclusive evidence of an
ownership interest in the relevant CPR Certificates, as if originally issued,
whether or not the lost, stolen or destroyed CPR Ceritificate shall be found at
any time.
Section 7.05 TEMPORARY CPR CERTIFICATES. Until definitive CPR Certificates
are ready for delivery, the Litigation Trustees may prepare and the
Institutional Trustee shall authenticate temporary CPR Certificates. Temporary
CPR Certificates shall be substantially in the form of definitive CPR
Certificates but may have variations that the Litigation Trustees consider
appropriate for temporary CPR Certificates. Without unreasonable delay, the
Litigation Trustee shall prepare and the Institutional Trustee shall
authenticate definitive CPR Certificates in exchange for temporary CPR
Certificates, whereafter such temporary CPR Certificates shall be cancelled and
be of no further force or effect.
Section 7.06 ISSUANCE OF CPR CERTIFICATES ON THE EFFECTIVE
DATE. Immediately prior to the Effective Time, the Litigation Trust shall issue
to the Sponsor (i) one CPR Ceritificate for each share of the Sponsor's common
stock outstanding as of immediately prior to the Effective Time, (ii) such
number of CPR Certificates required to satisfy the Sponsor's obligations under
the Litigation Trustee Agreements, (iii) one CPR Ceritificate for each share of
stock of the Sponsor underlying the stock options of the Sponsor outstanding
immediately prior to the Merger, for delivery by the Sponsor to the holders of
Replacement Options upon exercise of Replacement Options following the Merger,
or upon surrender of all or a part of such Replacement Option for cash as
provided in the relevant stock plan of Sponsor and award letter of the holder of
such Replacement Option following the Merger, as the case may be, and (v) one
CPR Ceritificate for each share of the Sponsor's common stock with respect to
which the Sponsor stockholders have provided a notice of intent to exercise
appraisal rights in the Merger.
Section 7.07 REDEMPTION AND CANCELLATION.
(a) The Sponsor and the Litigation Trustees at any time may deliver CPR
Certificates to the Institutional Trustee for cancellation. The Registrar shall
forward to the Institutional Trustee any CPR Certificates surrendered to it for
registration of transfer, redemption or payment. The Institutional Trustee shall
promptly cancel all CPR Certificates surrendered for registration of transfer,
payment, replacement or cancellation and shall destroy such canceled CPR
Certificates in accordance with its customary practices and procedures. The
Institutional Trustee may not issue new CPR Certificates to replace CPR
Certificates that have been paid in full or that have been delivered to the
Institutional Trustee for cancellation.
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<PAGE>
(b) The Litigation Trust shall mandatorily redeem for $0.01 in cash each CPR
Ceritificate issued to a stockholder of the Sponsor who provides a notice of
intent to exercise appraisal rights in the Merger with respect to shares of the
common stock of the Sponsor. If any such stockholder of the Sponsor subsequently
withdraws, or fails to perfect, such appraisal demand, Washington Mutual, in its
capacity as successor to the Sponsor, shall deliver to such stockholder one CPR
Ceritificate for each share of the common stock of the Sponsor as to which such
appraisal demand was withdrawn and not perfected.
(c) Except as contemplated by Section 7.08 below, the Sponsor shall only
retain CPR Certificates in an amount equal to, and shall return to the
Litigation Trust for cancellation any CPR Certificates held by it in excess of,
(i) the number of shares of the Sponsor's stock as to which former stockholders
of the Sponsor exercised and perfected and did not withdraw their appraisal
rights plus (ii) the number of CPR Certificates required to satisfy the
Sponsor's obligations under the Litigation Trustee Agreements, plus (iii) the
number of shares of the stock of underlying Bank United SARs and Bank United
Performance Share Awards that are exercised for cash prior to the Merger or
which are surrendered solely for cash in the Merger, plus (iv) that number of
CPR Certificates as is equal to the number of shares of stock of the Sponsor
underlying the stock options of the Sponsor outstanding immediately prior to the
Merger, for delivery by the Sponsor to the holders of Replacement Options upon
exercise of Replacement Options following the Merger. If any Replacement Options
are canceled or expire unexercised, the Sponsor shall return the related number
of CPR Certificates to the Litigation Trust and the Institutional Trustee shall
cancel such CPR Certificates.
Section 7.08 ISSUANCE OF CPR CERTIFICATES AFTER THE EFFECTIVE TIME. The
Trust may issue additional CPR Certificates to the Sponsor in such amounts and
at such times as determined in accordance with the adjustment provisions of the
8% Corporate Premium Income Equity Securities of the Sponsor (or, after the
Effective Time, the 8% Corporate Premium Income Equity Securities of Washington
Mutual into which such securities of the Sponsor were converted pursuant to the
Merger Agreement). In addition, the Trust may issue additional CPR Certificates
in accordance with Section 2.03(c).
ARTICLE VIII.
DISSOLUTION AND TERMINATION OF LITIGATION TRUST
Section 8.01 DISSOLUTION AND TERMINATION OF LITIGATION TRUST.
(a) The Litigation Trust shall dissolve:
(i) 30 days after the date on which the Institutional Trustee has
distributed any portion of the Retained Amount remaining upon the expiration
of the Retained Amount Period;
(ii) if the Litigation Trustees determine in writing that the final
Payment Amount is less than zero (whether because the Proceeds Amount is
less than or equal to zero or because the expenses of the Litigation Trust
exceed the Proceeds Amount) and there is no Retained Amount, thirty days
after such determination by the Litigation Trustees;
(iii) 30 days after the date of a final dismissal of the Litigation or a
determination by the Sponsor or Bank United (or any successor to such
Persons) not to continue to prosecute the Litigation, in either case upon
the instruction of the Litigation Trustees; or
(iv) if, prior to the Effective Time, the Sponsor so resolves in
writing; provided that such dissolution is consummated before the issuance
of any CPR Certificates.
(b) As soon as is practicable after the occurrence of an event referred to
in Section 8.1(a), and after completion of winding up of the Litigation Trust
and satisfaction of liabilities of the Litigation Trust in accordance with the
Business Trust Act, the Trustees shall terminate the Litigation Trust by filing
a certificate of cancellation with the Secretary of State of the State of
Delaware.
(c) The provisions of Sections 3.08, 3.13, 11.04 and 11.06 shall survive the
termination of the Litigation Trust.
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ARTICLE IX.
TRANSFER OF INTERESTS
Section 9.01 GENERAL.
(a) Where CPR Certificates are presented by or on behalf of a Holder to the
Registrar or a co-registrar with a request to register a transfer or to exchange
them for an equal number of CPR Certificates represented by different
certificates, the Registrar shall register the transfer or make the exchange if
its requirements for such transactions are met. To permit registrations of
transfer and exchanges, a majority of the Litigation Trustees shall execute and
the Institutional Trustee shall authenticate CPR Certificates at the Registrar's
request.
(b) CPR Certificates may only be transferred by a Holder, in whole or in
part, in accordance with the terms and conditions set forth in this Declaration
and in the terms of the CPR Certificates. Any transfer or purported transfer of
any CPR Certificate not made in accordance with this Declaration shall be null
and void and will be deemed to be of no legal effect whatsoever and any such
transferee shall be deemed not to be the holder of such CPR Certificates for any
purpose, including but not limited to the receipt of the Payment Amount, and
such transferee shall be deemed to have no interest whatsoever in such CPR
Certificates.
(c) The Registrar shall provide for the registration of CPR Certificates and
of transfers of CPR Certificates, which will be effected without charge but only
upon payment (with such indemnity as the Registrar may require) in respect of
any tax or other governmental charges that may be imposed in relation to it.
Upon surrender for registration of transfer of any CPR Certificates, the
Registrar shall cause one or more new CPR Certificates to be issued in the name
of the designated transferee or transferees. Every CPR Certificate surrendered
for registration of transfer shall be accompanied by a written instrument of
transfer in form satisfactory to the Registrar duly executed by the Holder or
such Holder's attorney duly authorized in writing. Each CPR Certificate
surrendered for registration of transfer shall be canceled by the Institutional
Trustee pursuant to Section 7.07. A transferee of a CPR Certificate shall be
entitled to the rights and subject to the obligations of a Holder hereunder upon
the receipt by such transferee of a CPR Certificate issued in the name of such
transferee and otherwise executed and authenticated as provided herein. By
acceptance of a CPR Certificate, each transferee shall be deemed to have agreed
to be bound by this Declaration.
Section 9.02 TRANSFER PROCEDURES.
(a) Transfer and Exchange of Definitive CPR Certificates. When Definitive
CPR Certificates are presented to the Registrar (x) to register the transfer of
such Definitive CPR Certificates, or (y) to exchange such Definitive CPR
Certificates for an equal number of Definitive CPR Certificates of another
number, the Registrar shall register the transfer or make the exchange as
requested if its reasonable requirements for such transaction are met; PROVIDED,
HOWEVER, that the Definitive CPR Certificates surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instrument of transfer in form reasonably satisfactory to the Litigation Trust
and the Registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing.
(b) Restrictions on Transfer of a Definitive CPR Certificate for a
Beneficial Interest in a Global CPR Certificate. A Definitive CPR Certificate
may not be exchanged for a beneficial interest in a Global CPR Certificate
except upon satisfaction of the requirements set forth below. Upon receipt by
the Institutional Trustee of a Definitive CPR Certificate, duly endorsed or
accompanied by appropriate instruments of transfer, together with written
instructions directing the Institutional Trustee to make, or to direct the
Depositary to make, an adjustment on its books and records with respect to a
Global CPR Certificate to reflect an increase in the number of the CPR
Certificates represented by the Global CPR Certificate, then the Institutional
Trustee shall cancel such Definitive CPR Certificate and cause, or direct the
Depositary to cause, the aggregate number of CPR Certificates represented by the
Global
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<PAGE>
CPR Certificate to be increased accordingly. If no Global CPR Certificates are
then outstanding, a majority of Litigation Trustees shall execute and the
Institutional Trustee or the Authenticating Agent shall authenticate, an
appropriate number of Global CPR Certificates.
(c) Transfer and Exchange of Global CPR Certificates. The transfer and
exchange of Global CPR Certificates or beneficial interests therein shall be
effected through the Depositary, in accordance with this Declaration and the
procedures of the Depositary therefor. Notwithstanding any other provisions of
this Declaration, a Global CPR Certificate may not be transferred as a whole
except by the Depositary to a nominee of the Depositary or another nominee of
the Depositary or by the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary.
(d) Transfer of a Beneficial Interest in a Global CPR Certificate for a
Definitive CPR Certificate.
(i) Any Person having a beneficial interest in a Global CPR Certificate
may upon request, and if accompanied by the information specified below,
exchange such beneficial interest for a Definitive CPR Certificate,
representing the same number of CPR Certificates. Upon receipt by the
Institutional Trustee from the Depositary or its nominee on behalf of any
Person having a beneficial interest in a Global CPR Certificate of written
instructions or such other form of instructions as is customary for the
Depositary or the Person designated by the Depositary as having such a
beneficial interest in such Global CPR Certificate, then the Institutional
Trustee shall cause, in accordance with the standing instructions and
procedures of the Depositary, the aggregate liquidation amount of the Global
CPR Certificate to be reduced on its books and records and, following such
reduction, a majority of the Litigation Trustees shall execute and the
Institutional Trustee or the Authenticating Agent shall authenticate, an
appropriate number of Definitive CPR Certificates.
(ii) Definitive CPR Certificate issued in exchange for a beneficial
interest in a Global CPR Certificate pursuant to this Section 9.02(d) shall
be registered in such names and in such authorized denominations as the
Depositary, pursuant to instructions from Clearing Agency Participants or
indirect participants or otherwise, shall instruct the Institutional
Trustee. The Institutional Trustee shall deliver such CPR Certificates to
the Persons in whose names such CPR Certificates are so registered in
accordance with the instructions of the Depositary.
(e) Definitive CPR Certificates If No Depositary.
If at any time:
(i) the Depositary notifies the Institutional Trustee and the Litigation
Trustees that the Depositary is unwilling or unable to continue as
Depositary for the Global CPR Certificates and a successor Depositary for
the Global CPR Certificates is not appointed by the Litigation Trust at the
direction of the Litigation Trustees within 90 days after delivery of such
notice; or
(ii) the Litigation Trustees notify the Institutional Trustee in writing
to issue Definitive CPR Certificates under this Declaration, then a majority
of the Litigation Trustee shall execute, and the Institutional Trustee or
Authenticating Agent, upon receipt of a written order of the Litigation
Trust signed by a Litigation Trustee requesting the authentication and
delivery of Definitive CPR Certificates to the Persons designated by the
Litigation Trustees, shall authenticate and deliver Definitive CPR
Certificates, in an aggregate amount equal to the amount of Global CPR
Certificates, in exchange for such Global CPR Certificates.
(f) Cancellation or Adjustment of a Global CPR Certificate. At such time as
all beneficial interests in a Global CPR Certificate have either been exchanged
for Definitive CPR Certificates to the extent permitted by this Declaration or
redeemed, repurchased or canceled in accordance with the terms of this
Declaration, such Global CPR Certificate shall be returned to the Depositary for
cancellation or retained and canceled by the Institutional Trustee. At any time
prior to such cancellation, if any
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<PAGE>
beneficial interest in a Global CPR Certificate is exchanged for Definitive CPR
Certificates, CPR Certificates represented by such Global CPR Certificate shall
be reduced and an adjustment shall be made on the books and records of the
Institutional Trustee (if it is then the custodian for such Global CPR
Certificate) with respect to such Global CPR Certificate, by the Institutional
Trustee to reflect such reduction.
(g) Obligations with Respect to Transfers and Exchanges of CPR Certificate.
(i) To permit registrations of transfers and exchanges, a majority of
the Litigation Trustees shall execute and the Institutional Trustee or
Authenticating Agent shall authenticate Definitive CPR Certificates and
Global CPR Certificates at the Registrar's or Depository's request, as
applicable.
(ii) Registrations of transfers or exchanges will be effected without
charge, but only upon payment (with such indemnity as the Institutional
Trustee or the Registrar may require) in respect of any tax or other
governmental charge that may be imposed in relation to it.
(iii) All CPR Certificates issued upon any registration of transfer or
exchange pursuant to the terms of this Declaration shall evidence the same
security and shall be entitled to the same benefits under this Declaration
as the CPR Certificates surrendered upon such registration of transfer or
exchange.
Section 9.03 DEEMED CPR CERTIFICATE HOLDERS. The Litigation Trust, the
Litigation Trustees, the Trustees, the Paying Agent, the Transfer Agent or the
Registrar may treat the Person in whose name any CPR Certificate shall be
registered on the books and records of the Litigation Trust as the sole holder
of such CPR Certificate (and of the undivided beneficial interest in the assets
of the Litigation Trust represented by such CPR Certificate) for purposes of
receiving payment of the Payment Amount and for all other purposes whatsoever
and, accordingly, shall not be bound to recognize any equitable or other claim
to or interest in such CPR Certificate or in the rights represented by such
Certificate on the part of any other Person, whether or not the Litigation
Trust, the Litigation Trustees, the Trustees, the Paying Agent, the Transfer
Agent or the Registrar shall have actual or other notice thereof.
With respect to Global CPR Certificates issued by the Litigation Trust:
(i) the Trustees may deal with the Depositary as the authorized representative
of the Holders; (ii) the rights of the holders of beneficial interests in the
Litigation Trust shall be exercised only through the Depositary and shall be
limited to those established by law and agreement between such holders of
beneficial interests and the Depositary and/or direct participants of the
Depositary; (iii) the Depositary will make book-entry transfers among the direct
participants of the Depositary and will receive and transmit distributions on
the CPR Certificates to such direct participants; and (iv) the direct
participants of the Depositary shall have no rights under this Declaration under
or with respect to any of the CPR Certificates held on their behalf by the
Depositary, and the Depositary may be treated by the Trustees and their
respective agents, employees, officers and directors as the absolute owner of
the CPR Certificates for all purposes whatsoever.
Section 9.04 NOTICES TO CLEARING AGENCY. Whenever a notice or other
communication to the Holders is required under this Declaration, unless and
until Definitive CPR Certificates shall have been issued to the beneficial
owners of CPR Certificates pursuant to Section 9.02(d) or Section 9.02(e), the
Trustees shall give all such notices and communications specified herein to be
given to the Holders to the Clearing Agency, and shall have no notice
obligations to the beneficial owners of CPR Certificates.
Section 9.05 APPOINTMENT OF SUCCESSOR CLEARING AGENCY. If any Clearing
Agency elects to discontinue its services as securities depositary with respect
to the CPR Certificates, the Litigation Trustees, in their sole discretion,
shall appoint a successor Clearing Agency with respect to such CPR Certificates.
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ARTICLE X.
HOLDERS OF CPR CERTIFICATES
Section 10.01 LIMITATIONS ON RIGHTS OF HOLDERS. The Holders of the CPR
Certificates acknowledge that:
(a) the Holders, in their capacities as Holders, are not stockholders of the
Sponsor, Bank United or any successor of either of them and will have no rights
to dividends, liquidation preferences or other distributions other than the
payments described in Article IV, and will have no voting rights except as
expressly described herein. The Commitment is solely a contractual obligation
among the Sponsor, the Litigation Trust and the Payment Trust, and the Holders
have no rights under the Commitment with respect to the Sponsor by reason of
their ownership of CPR Certificates and the Sponsor has no liability under the
Commitment to the Holders;
(b) the CPR Certificates are not savings accounts or deposits and are not
insured by the Federal Deposit Insurance Corporation;
(c) the Holders have no rights with respect to, or interest in, (i) the
Litigation, (ii) the Sponsor (or any successor thereto), (iii) Bank United (or
any successor thereto), or (iv) any amount received by the Sponsor or Bank
United or any other member of the Bank United Group with respect to the
Litigation, including any judgment or settlement proceeds;
(d) nothing in this Declaration shall be construed to create any partnership
or joint venture between the Sponsor, Bank United, Washington Mutual or any
member of the Bank United Group, and the Holders;
(e) (i) the Litigation is solely an asset of the Sponsor, Bank United,
Hyperion and their successors, (ii) the Litigation shall be conducted by and on
behalf of the Sponsor, Bank United and their successors solely in accordance
with the instructions of the Litigation Trustees pursuant to this Declaration,
(iii) the Litigation Trustees shall have the sole and exclusive right to direct
the Sponsor, Bank United and their successors to take (or not take) actions
relating to the Litigation as contemplated by this Declaration and the Recovery
Agreement and may, among other things, instruct the Sponsor, Bank United and
their successors to dismiss, settle or cease prosecuting the Litigation at any
time without obtaining any cash or other recovery, or upon obtaining any such
cash or other recovery as the Litigation Trustees may determine, (iv) the
Litigation Trustees have the sole and exclusive right to take or not take other
actions contemplated by this Declaration on behalf of the Sponsor, Bank United
and their successors relating to the Litigation (including, without limitation,
any decision with respect to the incurrence of expenses);
(f) the liability of the Trustees and members of the Bank United Group is
limited to the extent set forth in Article XI.
Section 10.02 LIMITATIONS ON SUITS BY HOLDERS.
(a) To the fullest extent permitted by law, no Holder of CPR Certificates
shall have any right by virtue or by availing itself of any provision of this
Declaration to institute any action or proceeding other than a suit by such
Holder for nonpayment of amounts due and owing with respect to such Holder's CPR
Certificates following a payment of the Proceeds Amount to the Litigation Trust
and payment of the Payment Amount by the Litigation Trust to other Holders, at
law or in equity or in bankruptcy or otherwise upon or under or with respect to
this Declaration, or for the appointment of a Trustee, receiver, liquidator,
custodian or other similar official or for any other remedy hereunder, unless
such Holder previously shall have given to the Institutional Trustee written
notice of default and of the continuance thereof as herein before provided, and
unless also the Holders of not less than 50% of the CPR Certificates outstanding
shall have made written request upon the Institutional Trustee to institute such
action or proceeding in its own name as Trustee hereunder and shall have offered
to the
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Institutional Trustee such reasonable indemnity as it may require against the
costs, expenses and liabilities to be incurred therein or thereby and the
Institutional Trustee for 60 days after its receipt of such notice, request and
offer of indemnity shall have failed to institute any such action or proceeding;
it being understood and intended, and being expressly covenanted by the Holder
of every CPR Certificate with every other Holder of CPR Certificates and the
Institutional Trustee, that no one or more Holders shall have any right in any
manner whatever by virtue or by availing itself or themselves of any provision
of this Declaration to effect, disturb or prejudice the rights of any other such
Holder, or to obtain or seek to obtain priority over or preference to any other
such Holder or to enforce any right under this Declaration, except in the manner
herein provided and for the equal, ratable and common benefit of all Holders.
For the protection and enforcement of the provisions of this Section, each and
every Holder and the Institutional Trustee shall be entitled to such relief as
can be given either at law or in equity.
(b) Any proceeding by Holders shall be instituted only in accordance with
the following procedures:
(i) The prospective plaintiff(s) shall deliver to the Institutional
Trustee (which shall promptly deliver a copy thereof to the Litigation
Trustees) a printed or typewritten statement not more than 10 pages in
length containing (i) the name(s) and address(es) of the prospective
plaintiff(s), (ii) a statement of the nature and amount of each plaintiff's
interest in the CPR Certificates, and (iii) a description of the nature and
grounds of the claims to be asserted and the relief or remedy sought.
(ii) The Institutional Trustee shall promptly notify the prospective
plaintiff(s) of the number of copies needed for distribution to Holders and
the postage, printing and administrative costs for preparing and mailing the
statement of the prospective plaintiff(s), a response by the Institutional
Trustee or the Litigation Trustees, as applicable, which shall not exceed 10
pages in length, a consent form described below and a return envelope. Upon
receipt of a certified check for such postage, printing and administrative
costs, the Institutional Trustee shall promptly mail these materials to the
Holders. Sixty days after mailing, the responses received shall be open to
inspection by the prospective plaintiff(s) or any Holder at reasonable times
during business hours at the office of the Litigation Trust designated for
such purposes.
(iii) The mailing to Holders shall include a consent form reading
substantially as follows:
"In response to the Bank United Litigation Contingent Payment Rights
Litigation Trust mailing dated ,
______ I HEREBY CONSENT TO SUCH SUIT.
______ I DO NOT CONSENT TO SUCH SUIT.
Signature
------------------------------------
Printed or Typed Name of Holder
Date:
------------------------------------
"If this response is not returned by____________, you will be considered as
not consenting to such suit."
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<PAGE>
ARTICLE XI.
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES,
TRUSTEES OR OTHERS
Section 11.01 LIABILITY.
(a) Except as expressly set forth in this Declaration, the Trustees shall
not be:
(i) 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 Holders,
which payment shall be made solely from the Proceeds Amount, if any, and the
Retained Amount, if any, respectively, and other assets of the Litigation
Trust, if any; or
(ii) required to pay to the Litigation Trust or to any Holder any
deficit upon dissolution of the Litigation Trust or otherwise.
(b) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of
the CPR Certificates shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
Section 11.02 EXCULPATION.
(a) To the fullest extent permitted by law, no Indemnified Person shall be
liable, responsible or accountable in damages or otherwise to the Litigation
Trust or any Indemnified Person for any loss, damage or claim incurred by reason
of any act or omission performed or omitted by such Indemnified Person, except
that (i) 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 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, and
(ii) the Institutional Trustee or the Delaware Trustee shall be liable for any
such loss, damage or claim incurred by reason of the Institutional Trustee's or
Delaware Trustee's (as the case may be) 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; PROVIDED, that nothing in
this Section 11.2(a) is intended to limit the Litigation Trustees' right to
insurance obtained by the Litigation Trust and the proceeds of such insurance.
(b) To the fullest extent permitted by law, no Indemnified Person shall have
any liability to the Litigation Trust, the Trustees or the Holders. Without
limiting the generality of the foregoing, to the fullest extent permitted by
law, none of the Holders (in their capacity as Holders), the Trustees or the
Litigation Trust shall have the right to enforce, institute or maintain a suit,
action or proceeding against a Indemnified Person relating to the formation of
the Litigation Trust, the entering into of the Commitment, the distribution of
the CPR Certificates, the maintenance of the Litigation at the direction of,or
the actions of the Litigation Trustees in their capacity (or purportedly in
their capacity) as, Litigation Trustees. Notwithstanding the preceding two
sentences of this Section 11.02(b), the Litigation Trust (or the Litigation
Trustees on behalf of the Litigation Trust) may enforce, institute or maintain a
suit, action or proceeding against (i), except as set forth in
Section 3.12(a)(ii), the Sponsor for breach of its obligations hereunder,
(ii) the Sponsor for breach of any of its obligations under the Commitment[or
the Payment Trust Agreement] or its failure to deliver any CPR Certificate when
due or to return to the Litigation Trust for cancellation any CPR Ceritificate
required to be returned pursuant to the Merger Agreement when so required,
(iii) the Sponsor for failure to make payments to the Litigation Trust under the
Commitment Agreement, (iv) Bank United for breach of any depository relationship
obligations it may have with respect to payments made by the Sponsor to the
Litigation
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<PAGE>
Trust., and in each case, the Sponsor and Bank United or their successors, as
the case may be, may be liable to the Litigation Trust in connection with such
suit, action or proceeding, or (v) Bank United for breach of its obligations
under the Commitment[or the Payment Trust Agreement]. Notwithstanding the
preceding two sentences, fees and expenses incurred by the Bank United Group in
such a suit, action or proceeding described in the preceding two sentences shall
not be set off against the Litigation Proceeds (in order to calculate the
Commitment Amount) if the Litigation Trust or the Litigation Trustees prevail in
such a suit, and, if in connection with suits brought pursuant to clauses
(i) through (iv) inclusive, shall be deemed expenses of the Litigation Trust
payable by the Litigation Trust out of the Commitment Amount, including any
Retained Amount, if the Litigation Trustees do not prevail.
(c) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Litigation Trust and upon such information, opinions,
reports or statements presented to the Litigation Trust by any Person as to
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and, if selected by such Indemnified
Person, has been selected by such Indemnified Person with reasonable care by or
on behalf of the Litigation Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which payment to Holders might properly be paid.
Section 11.03 FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Litigation Trust or to any other Indemnified Person, an Indemnified Person
acting under this Declaration shall not be liable to the Litigation Trust or to
any other Indemnified Person for its good faith reliance on the provisions of
this Declaration. The provisions of this Declaration, to the extent that they
restrict the duties and liabilities of an Indemnified Person otherwise existing
at law or in equity, are agreed by the parties hereto to replace such other
duties and liabilities of the Indemnified Person.
(b) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(i) in its "discretion" or under a grant of similar authority, the
Indemnified Person shall be entitled to consider such interests and factors
as it desires, including its own interests, and shall have no duty or
obligation to give any consideration to any interest of or factors affecting
the Litigation Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration or by
applicable law.
Section 11.04 INDEMNIFICATION.
(a) The Litigation Trust shall indemnify, to the fullest extent permitted by
law, any Indemnified Person 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 Litigation Trust, the CPR
Certificates, the distribution of the CPR Certificates, the Litigation or 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 the Sponsor or Washington Mutual so long as such actions
relate to the Litigation Trust including, without limitation, the negotiation of
the terms of the Litigation Trust and the CPR Certificates and the approval of
the establishment of the Litigation Trust and the distribution of the CPR
Certificates and related transactions, but otherwise excluding actions taken by
the Litigation Trustees in such capacities), against any and all losses,
liabilities, damages, judgments, demands, suits, claims, assessments, charges,
fines, penalties and other costs and expenses, including attorneys' fees and
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<PAGE>
expenses and other fees and expenses associated with the defense of a claim or
incurred by such Indemnified Person in obtaining indemnification under this
Declaration, whether or not in a formal proceeding (collectively, "Damages").
(b) Notwithstanding Section 11.04(a), no indemnification shall apply (i) in
the case of the indemnification of the Litigation Trustees, if Holders establish
in a final and nonappealable judicial determination by clear and convincing
evidence that such Damages arose as the result of acts or omissions of the
Litigation Trustees with deliberate intent to injure the CPR Ceritificate
Holders or with reckless disregard for the best interests of such Holders, or
(ii) in the case of the indemnification of the Delaware Trustee or the
Institutional Trustee, if 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. 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 (i) the Litigation Trustees acted or decided
with deliberate intent to injure the Holders or with reckless disregard for the
best interests of such Holders or (ii) the Delaware Trustee or Institutional
Trustee was grossly negligent or engaged in willful misconduct.
(c) To the fullest extent permitted by law, expenses (including attorneys'
fees and expenses) incurred by an Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding referred to
in Sections 11.04(a) shall be paid by the Litigation Trust in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking (without bond or security) by or on behalf of such Indemnified
Person to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the Litigation Trust as authorized in this
Section 11.04.
(d) All rights to indemnification under this Section 11.04 shall be deemed
to be provided by a contract between the Litigation Trust and each Indemnified
Person who serves in such capacity at any time while this Section 11.04 is in
effect. Any repeal or modification of this Section 11.04 shall not affect any
rights or obligations then existing.
(e) The Litigation Trust shall purchase and maintain insurance to cover its
indemnification obligations and any other liabilities of the Litigation
Trustees.
(f) For purposes of this Section 11.04, references to "the Litigation Trust"
shall include, in addition to the resulting or surviving entity, any constituent
entity (including any constituent of a constituent) absorbed in a consolidation
or merger involving the Litigation Trust, so that any Person who is or was a
director, Trustee, officer or employee of such constituent entity, or is or was
serving at the request of such constituent entity as a director, Trustee,
officer, employee or agent of another entity, shall stand in the same position
under the provisions of this Section 11.04 with respect to the resulting or
surviving entity as he would have with respect to such constituent entity if its
separate existence had continued.
(g) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section 11.04 shall continue as to a Person who has ceased to
be an Indemnified Person and shall inure to the benefit of the heirs, executors
and administrators of such a Person.
Section 11.05 OUTSIDE BUSINESSES. Any Indemnified Person or member of the
Bank United Group may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar or
dissimilar to the business of the Litigation Trust, and the Litigation Trust and
the Holders shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the pursuit
of any such venture, even if competitive with the business of the Litigation
Trust, shall not be deemed wrongful or improper. No Indemnified Person or member
of the Bank United Group shall be obligated to present any
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<PAGE>
particular investment or other opportunity to the Litigation Trust even if such
opportunity is of a character that, if presented to the Litigation Trust, could
be taken by the Litigation Trust, and any Indemnified Person or member of the
Bank United Group shall have the right to take for its own account (individually
or as a partner or fiduciary) or to recommend to others any such particular
investment or other opportunity. Any Indemnified Person or member of the Bank
United Group may engage or be interested in any financial or other transaction
with the Sponsor or any Affiliate of the Sponsor, or may act as depositary for,
Trustee or agent for, or act on any committee or body of holders of, securities
or other obligations of the Sponsor or its Affiliates.
Section 11.06 COMPENSATION; FEE. The Litigation Trust agrees:
(a) to pay to the Institutional Trustee and the Delaware Trustee from time
to time, upon the approval of the Litigation Trustees, reasonable compensation
for all services rendered by them hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a Trustee of an
express Litigation Trust); and
(b) except as otherwise expressly provided herein, to reimburse the Trustees
upon request for all expenses, disbursements and advances incurred or made by
the Trustees in accordance with any provision of this Declaration (including the
compensation and the expenses and disbursements of their respective agents and
counsel).
The provisions of Section 11.04 and this Section 11.06 shall survive the
dissolution of the Litigation Trust and the termination of this Declaration and
the removal or resignation of any Trustee.
ARTICLE XII.
ACCOUNTING
Section 12.01 FISCAL YEAR. The fiscal year ("Fiscal Year") of the
Litigation Trust shall be the calendar year, or such other year as is required
by the Code.
Section 12.02 CERTAIN ACCOUNTING MATTERS.
(a) At all times during the existence of the Litigation Trust, the
Litigation Trustees shall keep, or cause to be kept, full books of account,
records and supporting documents, which shall reflect in reasonable detail each
transaction of the Litigation Trust. The books of account shall be maintained on
the accrual method of accounting, in accordance with generally accepted
accounting principles, consistently applied. The books of account and the
records of the Litigation Trust shall be examined by and reported upon as of the
end of each Fiscal Year of the Litigation Trust by a firm of independent
certified public accountants selected by the Litigation Trustees.
(b) The Litigation Trustees shall cause to be duly prepared and delivered to
each of the Holders any annual United States federal income tax information
statement required by the Code, containing such information with regard to the
CPR Certificates held by each Holder as is required by the Code and the
regulations promulgated thereunder. Notwithstanding any right under the Code to
deliver any such statement at a later date, the Litigation Trustees shall
endeavor to deliver all such statements within 30 days after the end of each
Fiscal Year of the Litigation Trust.
(c) The Litigation Trustees shall cause to be duly prepared and filed an
annual United States federal income tax return on a Form 1041 or such other form
required by United States federal income tax law, and any other annual income
tax returns required to be filed by the Litigation Trustees on behalf of the
Litigation Trust with any state or local taxing authority.
Section 12.03 BANKING. The Litigation Trust may maintain one or more bank
accounts in the name and for the sole benefit of the Litigation Trust; PROVIDED,
HOWEVER, that all payments received by the Litigation Trust pursuant to the
Commitment shall be maintained separately from other funds as provided by
Section 3.12(b)(ii)(D).
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<PAGE>
Section 12.04 WITHHOLDING. The Institutional Trustee or any Paying Agent
shall comply with all withholding requirements under United States federal,
state and local law. The Institutional Trustee or any Paying Agent shall
request, and the Holders shall provide to the Institutional Trustee or any
Paying Agent, such forms or certificates as are necessary to establish an
exemption from withholding with respect to each Holder, and any representations
and forms as shall reasonably be requested by the Institutional Trustee or any
Paying Agent to assist it in determining the extent of, and in fulfilling, its
withholding obligations. The Litigation Trustees shall file required forms with
applicable jurisdictions and, unless an exemption from withholding is properly
established by a Holder, shall remit amounts withheld with respect to the Holder
to applicable jurisdictions. To the extent that the Institutional Trustee or any
Paying Agent is required to withhold and pay over any amounts to any authority
with respect to distributions or allocations to any Holder, the amount withheld
shall be deemed to be a distribution in the amount of the withholding to the
Holder. In the event of any claimed overwithholding, Holders shall be limited to
an action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual distributions made, the Institutional
Trustee or any Paying Agent may reduce subsequent distributions by the amount of
such withholding.
ARTICLE XIII.
AMENDMENTS AND MEETINGS
Section 13.01 AMENDMENTS.
(a) Except as otherwise provided in this Declaration, this Declaration may
only be amended by a written instrument approved and executed by
(i) the Institutional Trustee;
(ii) the Litigation Trustees in accordance with the last sentence of
Section 3.11(a); and
(iii) if the amendment affects the rights, powers, duties, obligations
or immunities of the Delaware Trustee, the Delaware Trustee.
(b) Notwithstanding any other provision of this Article XIII, no amendment
shall be made, and any such purported amendment shall be void and ineffective
unless the Institutional Trustee shall have first received:
(A) an Officers' Certificate from the Litigation Trust that such
amendment is permitted by, and conforms to, the terms of this Declaration
(including the terms of the CPR Certificates); and
(B) an opinion of counsel (who may be counsel to the Litigation Trust or
the Litigation Trustees) that such amendment is permitted by, and conforms
to, the terms of this Declaration (including the terms of the CPR
Certificates).
(C) Except as provided in this Section 13.01, no amendment shall be
made, and any such purported amendment shall be void and ineffective unless
the Holders of a majority of the CPR Certificates then outstanding shall
have consented to such amendment.
(D) In addition to and notwithstanding any other provision in this
Declaration, without the consent of each affected Holder, this Declaration
may not, except as permitted by this Section 13.01, be amended to
(i) discriminate among Holders, (ii) restrict the right of a Holder to
institute suit for the enforcement of any such payment on or after such
occurrence, or (iii) modify the definition of Payment Amount or Retained
Amount.
(E) Section 2.03(a) and this Section 13.01 shall not be amended without
the consent of all of the Holders of the CPR Certificates then outstanding.
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<PAGE>
(F) Sections 11.02(b) and 11.04(b), (c)(iii), (d), (e), (f), (g) and
(h) shall not be amended without the consent of the Sponsor.
(G) Subject to Section 13.01(b), this Declaration may be amended by the
Institutional Trustee and the Litigation Trustees without the consent of the
Holders of the CPR Certificates:
(i) to cure any ambiguity;
(ii) to correct or supplement any provision in this Declaration that
may be defective or inconsistent with any other provision of this
Declaration;
(iii) to 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;
(iv) to modify, eliminate or add to any provision of this Declaration
to such extent as may be necessary to ensure that the Litigation Trust
(a) will be classified for United States 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 (including without
limitation to conform to any change in any applicable Rule under the
Investment Company Act or written change in interpretation or application
thereof by any legislative body, court, government agency or regulatory
authority) or (c) is able to issue additional CPR Certificates;
PROVIDED, HOWEVER, that no such modification, elimination or addition referred
to in clauses (i), (ii), (iii) or (iv) shall adversely affect the powers,
preferences or special rights of Holders or cause the Litigation Trust to fail
to continue to be classified as a grantor trust for purposes of United States
federal income taxation.
(H) The Institutional Trustee may, but shall have no obligation to,
execute any amendment which materially adversely affects its rights, powers,
immunities or indemnities.
Section 13.02 MEETINGS OF HOLDERS OF CPR CERTIFICATES; ACTION BY WRITTEN
CONSENT.
(a) Meetings of the Holders may be called at any time by the Litigation
Trustees to consider and act on any matter on which Holders are entitled to act
under the terms of this Declaration, the terms of the CPR Certificates or the
rules of any stock exchange or automated quotation system on which the CPR
Certificates are listed or admitted for trading, if any. The Litigation Trustees
shall call a meeting of the Holders if directed to do so by the Holders of at
least 25% of CPR Certificates Such direction shall be given by delivering to the
Litigation Trustees one or more calls in a writing stating that the signing
Holders wish to call a meeting and indicating the general or specific purpose
for which the meeting is to be called.
(b) Except to the extent otherwise provided in the terms of the CPR
Certificates, the following provisions shall apply to meetings of Holders:
(i) notice of any such meeting (with a copy to the Institutional
Trustee) shall be given to all the Holders having a right to vote thereat
at least 20 days and not more than 60 days before the date of such
meeting.
Whenever a vote, consent or approval of the Holders is permitted or required
under this Declaration or the rules of any stock exchange or automated quotation
system on which the CPR Certificates are listed or admitted for trading, if any,
such vote, consent or approval may be given at a meeting of the Holders. Any
action that may be taken at a meeting of the Holders may be taken without a
meeting if a consent in writing setting forth the action so taken is signed by
the Holders owning not less than the minimum amount of CPR Certificates that
would be necessary to authorize or take such action at a meeting at which all
Holders having a right to vote thereon were present and
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<PAGE>
voting. Prompt notice of the taking of action without a meeting shall be given
to the Holders entitled to vote who have not consented in writing. The
Litigation Trustees may specify that any written ballot submitted to the Holders
for the purpose of taking any action without a meeting shall be returned to the
Litigation Trust within the time specified by the Litigation Trustees;
(ii) each Holder may authorize any Person to act for it by proxy on
all matters in which a Holder is entitled to participate, including
waiving notice of any meeting, or voting or participating at a meeting.
No proxy shall be valid after the expiration of 11 months from the date
thereof unless otherwise provided in the proxy. Every proxy shall be
revocable at the pleasure of the Holder executing it. Except as otherwise
provided herein, all matters relating to the giving, voting or validity
of proxies shall be governed by the General Corporation Law of the State
of Delaware relating to proxies, and judicial interpretations thereunder,
as if the Litigation Trust were a Delaware corporation and the Holders
were stockholders of a Delaware corporation; each meeting of the Holders
shall be conducted by the Litigation Trustees or by such other Person
that the Litigation Trustees may designate; and
(iii) unless the Business Trust Act, this Declaration or the terms of
the CPR Certificates or the listing rules of any stock exchange on which
the CPR Certificates are then listed for trading, if any, otherwise
provide, the Litigation Trustees, in their sole discretion, shall
establish all other provisions relating to meetings of Holders, including
notice of the time, place or purpose of any meeting at which any matter
is to be voted on by any Holders, waiver of any such notice, action by
consent without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.
ARTICLE XIV.
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE
Section 14.01 REPRESENTATIONS AND WARRANTIES OF THE INSTITUTIONAL
TRUSTEE. The Trustee that acts as initial Institutional Trustee represents and
warrants to the Litigation Trust and to the Sponsor at the date of this
Declaration, and each Successor Institutional Trustee represents and warrants to
the Litigation Trust at the time of the Successor Institutional Trustee's
acceptance of its appointment as Institutional Trustee, that:
(a) the Institutional Trustee is a corporation or banking association with
trust powers, duly organized, validly existing and in good standing under the
laws of the United States or a State thereof with power and authority to execute
and deliver, and to carry out and perform its obligations under the terms of,
this Declaration;
(b) the execution, delivery and performance by the Institutional Trustee of
this Declaration has been duly authorized by all necessary corporate action on
the part of the Institutional Trustee. This Declaration has been duly executed
and delivered by the Institutional Trustee, and it constitutes a legal, valid
and binding obligation of the Institutional Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity (regardless of whether considered
in a proceeding in equity or at law); and
(c) the execution, delivery and performance of this Declaration by the
Institutional Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Institutional Trustee.
Section 14.02 REPRESENTATIONS AND WARRANTIES OF THE DELAWARE TRUSTEE. The
Trustee that acts as initial Delaware Trustee represents and warrants to the
Litigation Trust and to the Sponsor at the date of this Declaration, and each
Successor Delaware Trustee represents and warrants to the Litigation
C-1-40
<PAGE>
Trust at the time of the Successor Delaware Trustee's acceptance of its
appointment as Delaware Trustee, that:
(a) the Delaware Trustee, if other than an individual, is duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with power and authority to execute and deliver, and to carry out and perform
its obligations under the terms of, this Declaration;
(b) the Delaware Trustee has been authorized to perform its obligations
under the Certificate of Trust and this Declaration. This Declaration under
Delaware law constitutes a legal, valid and binding obligation of the Delaware
Trustee, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium, insolvency, and other similar
laws affecting creditors' rights generally and to general principles of equity
(regardless of whether considered in a proceeding in equity or at law); and
(c) the Delaware Trustee is a natural person who is a resident of the State
of Delaware or, if not a natural person, an entity which has its principal place
of business in the State of Delaware and, in either case, a Person that
satisfies for the Litigation Trust the requirements of Section 3807 of the
Business Trust Act.
ARTICLE XV.
MISCELLANEOUS
Section 15.01 NOTICES. All notices provided for in this Declaration shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) if given to the Litigation Trust, in care of the Institutional Trustee
at the Litigation Trust's mailing address set forth below (or such other address
as the Litigation Trust may give notice of to the Holders of the CPR
Certificates):
_______________________________________
______________________________________
Attention:
Facsimile:
with a copy to:
______________________________________
______________________________________
Attention:
Facsimile:
C-1-41
<PAGE>
(b) if given to the Delaware Trustee, at the mailing address set forth below
(or such other address as the Delaware Trustee may give notice of to the Holders
of the CPR Certificates):
_______________________________________
______________________________________
Attention:
Facsimile:
(c) if given to the Institutional Trustee, at the mailing address set forth
below (or such other address as the Institutional Trustee may give notice of to
the Holders of the CPR Certificates).
_______________________________________
______________________________________
Attention:
Facsimile:
(d) if given to the Litigation Trustees, at each mailing address set forth
below (or such other address as the Litigation Trust may give notice of to the
Holders of the CPR Certificates):
_______________________________________
______________________________________
Attention:
Facsimile:
_______________________________________
______________________________________
Attention:
Facsimile:
(e) if given to any Holder, at the address set forth on the books and
records of the Litigation Trust.
All such notices shall be deemed to have been given when received in person,
telecopied with receipt confirmed, or mailed by first class mail, postage
prepaid, except that if a notice or other document is refused delivery or cannot
be delivered because of a changed address of which no notice was given, such
notice or other document shall be deemed to have been delivered on the date of
such refusal or inability to deliver the same.
C-1-42
<PAGE>
Section 15.02 GOVERNING LAW. This Declaration and the rights of the
parties hereunder shall be governed by and interpreted in accordance with the
laws of the State of Delaware and all rights and remedies shall be governed by
such laws without regard to the principles of conflict of laws of the State of
Delaware or any other jurisdiction that would call for the application of the
law of any jurisdiction other than the State of Delaware; PROVIDED, HOWEVER,
that, to the fullest extent permitted by law, there shall not be applicable to
the Litigation Trust, the Trustees or this Declaration any provision of the laws
(statutory or common) of the State of Delaware pertaining to trusts that relate
to or regulate, in a manner inconsistent with the terms hereof (a) the filing
with any court or governmental body or agency of Trustee accounts or schedules
of Trustee fees and charges, (b) affirmative requirements to post bonds for
Trustees, officers, agents or employees of a trust, (c) the necessity for
obtaining court or other governmental approval concerning the acquisition,
holding or disposition of real or personal property, (d) fees or other sums
payable to trustees, officers, agents or employees of a trust, (e) the
allocation of receipts and expenditures to income or principal,
(f) restrictions or limitations on the permissible nature, amount or
concentration of trust investments or requirements relating to the titling,
storage or other manner of holding or investing trust assets or (g) the
establishment of fiduciary or other standards of responsibility or limitations
on the acts or powers of trustees that are inconsistent with the limitations or
liabilities or authorities and powers of the trustees as set forth or referenced
in this Declaration. Section 3540 and, to the fullest extent permitted by
applicable law, Section 3561, of Title 12 of the Delaware Code shall not apply
to the Litigation Trust.
Section 15.03 INTENTION OF PARTIES. It is the intention of the parties
hereto that the Litigation Trust be classified for United States federal income
tax purposes as a grantor trust that is formed to hold the Commitment and
liquidate the Commitment, as provided for herein. The provisions of this
Declaration shall be interpreted to further this intention of the parties.
Section 15.04 HEADINGS. Headings contained in this Declaration are
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.
Section 15.05 SUCCESSORS AND ASSIGNS. Whenever in this Declaration any of
the parties hereto is named or referred to, the successors and assigns of such
party shall be deemed to be included, and all covenants and agreements in this
Declaration by the Sponsor and the Trustees shall bind and inure to the benefit
of their respective successors and assigns, whether or not so expressed.
Section 15.06 PARTIAL ENFORCEABILITY. If any provision of this
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, or the application of
such provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
Section 15.07 SPECIFIC PERFORMANCE. The Sponsor hereby agrees that the
obligations imposed on it in this Declaration are special, unique and of an
extraordinary character, and that, in the event of breach by the Sponsor,
damages would not be an adequate remedy and the Sponsor shall be entitled to
specific performance and injunctive and other equitable relief, including
declaratory relief, in addition to any other remedy to which it may be entitled,
at law or in equity; and the Sponsor hereby further agrees to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or other equitable relief.
Section 15.08 COUNTERPARTS. This Declaration may contain more than one
counterpart of the signature page and this Declaration may be executed by the
affixing of the signature of each of the Trustees and the Sponsor to any of such
counterpart signature pages. All of such counterpart signature pages shall be
read as though one, and they shall have the same force and effect as though all
of the signers had signed a single signature page.
C-1-43
<PAGE>
Section 15.09 CONSENT TO JURISDICTION. The Trustees and any Person
becoming a Holder hereunder hereby consent to (i) the non-exclusive jurisdiction
of the Courts of the State of Delaware and any Federal Court sitting in
Wilmington, Delaware, and (ii) service of process by mail at their last known
address.
Section 15.10 DEFAULT RULES. Regardless of whether this Declaration
specifically refers to particular Default Rules:
(a) if any provision of this Declaration conflicts with a Default Rule, the
provision of this Declaration controls and the Default Rule is modified or
negated accordingly,
(b) if it is necessary to construe a Default Rule as modified or negated in
order to effectuate any provision of this Declaration, the Default Rule is
modified or negated accordingly, and
(c) the fact that some Default Rules are referred to herein shall not limit
the application of Section 15.10(a) or (b) in those instances where no Default
Rule has been referred to herein.
C-1-44
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
[_____________________________________]
as Delaware Trustee
By:___________________________________
Name:
Title:
[_____________________________________]
as Institutional Trustee
By:___________________________________
Name:
Title:
BANK UNITED CORP.,
as Sponsor
By:___________________________________
Name:
Title:
BANK UNITED LITIGATION
CONTINGENT PAYMENT RIGHTS LITIGATION
TRUST
By:___________________________________
______________, as Litigation Trustee
By:___________________________________
______________, as Litigation Trustee
C-1-45
<PAGE>
[TO BE UPDATED TO REFLECT FINAL AGREEMENT]
EXHIBIT B TO DECLARATION OF TRUST
FORM OF CONTINGENT PAYMENT RIGHT CERTIFICATE
[FORM OF FACE OF CERTIFICATE]
[The following two paragraphs apply only to Certificates in global form.]
[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY LITIGATION TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK,
NEW YORK, TO THE LITIGATION TRUST OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS IS REQUIRED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER
USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS
THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
[TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT
NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE DECLARATION
REFERRED TO BELOW.]
<TABLE>
<S> <C>
-------------------------------------------- --------------------------------------------
CERTIFICATE NUMBER NUMBER OF CONTINGENT PAYMENT RIGHT
CERTIFICATES
CUSIP NO
</TABLE>
C-1-46
<PAGE>
CERTIFICATE EVIDENCING UNDIVIDED BENEFICIAL INTERESTS IN THE ASSETS
OF
BANK UNITED CORP. LITIGATION CONTINGENT PAYMENT RIGHTS TRUST
CONTINGENT PAYMENT RIGHT CERTIFICATES
BANK UNITED CORP. LITIGATION CONTINGENT PAYMENT RIGHTS TRUST, a statutory
business trust created under the laws of the State of Delaware (the "Litigation
Trust"), hereby certifies that (the "Holder") is the registered
owner of certificates of the Litigation Trust representing undivided beneficial
interests in the assets of the Litigation Trust, designated the Contingent
Payment Right Certificates (the "CPR Certificates"). Subject to the Declaration
(as defined below), the CPR Certificates are transferable on the books and
records of the Litigation Trust, in person or by a duly authorized attorney,
upon surrender of this Certificate duly endorsed and in proper form for
transfer. The CPR Certificates represented hereby are issued pursuant to the
designation, rights, privileges, restrictions, preferences and other terms and
provisions of, and shall in all respects be subject to, the provisions of the
Amended and Restated Declaration of Trust of the Litigation Trust dated as of
February , 2001, among Jonathon K. Heffron and Salvatore A. Ranieri as
Litigation Trustees (the "Litigation Trustees"), First Union Trust Company,
National Association, as Delaware Trustee, First Union Trust Company, National
Association, as Institutional Trustee, Bank United Corp., as Sponsor, and the
holders from time to time of undivided beneficial interests in the assets of the
Litigation Trust, including the designation of the terms of the CPR
Certificates, as the same may be amended from time to time (the "Declaration").
Capitalized terms used herein but not defined shall have the meaning given them
in the Declaration. The [Institutional Trustee] will provide a copy of the
Declaration to the Holder without charge upon written request to the Litigation
Trust at its principal place of business.
Upon receipt of this CPR Certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
This CPR Certificate is governed by, and construed in accordance with, the
laws of the State of Delaware, without regard to principles of conflict of laws.
IN WITNESS WHEREOF, the Litigation Trust has duly executed this CPR
Certificate.
BANK UNITED CORP. LITIGATION
CONTINGENT PAYMENT RIGHTS TRUST
[By: Bank United Corp.] as Sponsor
By:
_____________________________________
Name
Title: [Authorized Officer]
[By: _________________________________
_____________________________________
Name:
Title: Litigation Trustee
C-1-47
<PAGE>
By: _________________________________
_____________________________________
Name:
Title: Litigation Trustee
By: __________________________________
_____________________________________
Name:
Title: Litigation Trustee
By: _________________________________
_____________________________________
Name:
Title: Litigation Trustee]
Dated:
C-1-48
<PAGE>
CERTIFICATE OF AUTHENTICATION
This is one of the CPR Certificates referred to in the within-mentioned
Declaration.
First Union Trust Company, National Association, as the
Institutional Trustee
By:
------------------------
[Authorized Officer]
[FORM OF REVERSE OF CERTIFICATE]
Distributions payable on each CPR Certificate will be payable from time to
time upon the receipt by the Bank United Corp. Litigation Contingent Payment
Rights Trust (The "Litigation Trust") of payments of the Proceeds Amount (as
defined herein) from the Bank United Corp. Payment Rights Trust, a Delaware
Business Trust (the "Payment Trust") pursuant to the Commitment (as defined
herein). The Payment Trust shall pay the Proceeds Amount to the Litigation Trust
upon its receipt of the Commitment Amount (as defined herein) from Bank United
Corp. Corp., a Delaware corporation (together with its successors, "Bank United
Corp."), pursuant to the Commitment. The Commitment means the Commitment
Agreement (the "Commitment") dated as of February , 2001, between Bank United
Corp., the Payment Trust and the Litigation Trust, entered into by Bank United
Corp. in connection with the merger (the "Merger") of Bank United Corp. with and
into Washington Mutual, a Washington corporation (together with its successors,
"Washington Mutual"). The Proceeds Amount means the Commitment Amount plus any
interest earned thereon less certain taxes. The Commitment Amount means an
amount equal to the Litigation Proceeds (as defined herein) minus the
Reimbursements (as defined herein) plus the Assumed Tax Benefit (as defined
herein). Litigation Proceeds means an amount equal to any and all cash payments
(the "Cash Proceeds") and non-cash payments (the "Non-Cash Proceeds") actually
received by Bank United Corp., Bank United (as defined herein) or any of their
affiliates other than Hyperion Partners L.P. (the "Bank United Group") pursuant
to a final, non-appealable judgment or a final settlement of the litigation
claims of Bank United Corp. and Bank United, a wholly-owned subsidiary of Bank
United Corp. (together with its successors, "Bank United"), in the litigation
filed on July 25, 1995, by the Sponsor, Bank United and Hyperion Partners L.P.
against the United States in the U.S. Court of Federal Claims for alleged
failures of the United States to adhere to its agreement to waive or forbear
from enforcing certain provisions concerning regulatory capital requirements,
liquidity requirements, accounting requirements and other matters, and any
substitute or ancillary action, litigation or arbitration with respect to the
claims made in such action (the "Litigation"). Reimbursements means an amount
equal to (a) the amounts paid by Bank United Corp. to the Litigation Trust and
the Payment Trust to pay such trusts' expenses pursuant to the Commitment (other
than amounts payable to the Litigation Trustees), plus (b) interest on the
amounts paid by Bank United Corp. to the Litigation Trust and the Payment Trust
to pay such trusts' expenses pursuant to the Commitment calculated from the time
of any such withdrawal at an annual interest rate equal to 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, and (C) fifteen percent (15%) on the amount of such aggregate
payments greater than $10,000,000, plus (c) the Assumed Tax Liability (as
defined herein), plus (d) in the event the 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 of seven percent (7%) compounded annually from the date of
such payment of taxes to the date of receipt of cash, plus (e) the aggregate
amount of any Damages (as defined herein) actually suffered by
C-1-49
<PAGE>
any Bank United party, plus (f) the aggregate amount of any indemnification
provided by Bank United to either of the Litigation Trustees in connection with
claims relating to the Litigation Trust or the Payment Trust, plus (g) any
expenses reasonably incurred by Bank United in connection with the liquidation
of any Non-Cash Proceeds. Assumed Tax Benefit means an amount equal to the tax
benefit that would be allowed to the Bank United Group under Section 483(a) of
the Internal Revenue Code, computed based on certain assumptions, from payments
on the Commitment plus an amount equal to the tax benefit that would be allowed
to the Bank United Group by reason of deductions for expenses of the trusts
(other than amounts payable to the Litigation Trustees) and for the fair market
value of the CPR Certificates issued to the Litigation Trustees pursuant to the
Litigation Trustee Agreements, computed on certain assumptions. The 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 on certain assumptions. The Payment Amount
means, with respect to each payment of the Proceeds Amount received by the
Litigation Trust pursuant to the Commitment, such payment of the Proceeds Amount
received by the Litigation Trust less the amount of any accrued but unpaid
expenses payable by the Litigation Trust, plus interest or income, if any,
received by the Litigation Trust on such payment of the Proceeds Amount, less
amounts retained by the Litigation Trust as the Retained Amount (as defined
herein). The Retained Amount means $1.0 million (or such greater amount as the
Litigation Trustees shall reasonably determine may be reasonably likely to be
required to pay additional expenses or to satisfy the Litigation Trust's
indemnification obligations). The Litigation Trustees' obligation to make
payments to the Holders shall be subject to the requirement that the Litigation
Trust retain, from payments of the Proceeds Amount, the Retained Amount for a
period (the "Retained Amount Period") of one year (or such longer period as the
Litigation Trustees shall reasonably determine (initially or at any time prior
to the then scheduled termination of the Retained Amount Period) may be
reasonably likely to be required) to satisfy all expenses, costs and claims and
indemnification obligations of the Litigation Trust which may be incurred or
which may arise after the Proceeds Amount is paid in full.
The Payment Trust will promptly make payments from time to time, but in no
event prior to the expiration of the 366 day period commencing with the
distribution of the CPR Certificates to the Holders, to the Litigation Trust of
the Proceeds Amount upon the receipt of the applicable payment of the Commitment
Amount from the Sponsor.
The Litigation Trust will make payments from time to time to the Holders of
the Payment Amounts upon the receipt of the applicable payments of the Proceeds
Amount from the Payment Trust. Each CPR Certificate will entitle the Holder
thereof to receive a fraction (equal to 1 divided by the total number of CPR
Certificates outstanding) of any Payment Amount within 60 days after the
Litigation Trust receives a Proceeds Amount.
Within 90 days of the expiration of the Retained Amount Period, the
Litigation Trust will pay to the Holders any remaining portion of the Retained
Amount. Each CPR Certificate will entitle the Holder thereof to receive a
fraction (equal to 1 divided by the total number of CPR Certificates then
outstanding) of the remaining portion of the Retained Amount.
The Litigation Trust shall mandatorily redeem for $0.01 in cash each CPR
Certificate issued to a Bank United Corp. stockholder who provides a notice of
intent to exercise appraisal rights in the Merger with respect to shares of Bank
United Corp. common stock. If any such Bank United Corp. stockholder
subsequently withdraws, or fails to perfect, such appraisal demand, Washington
Mutual in its capacity as successor to Bank United Corp., shall deliver to such
stockholder one CPR Certificate for each share of Bank United Corp. common stock
as to which such appraisal demand was withdrawn and not perfected.
C-1-50
<PAGE>
To the fullest extent permitted by law, no Indemnified Person (as defined in
the Declaration) shall be liable, responsible or accountable in damages or
otherwise to the Litigation Trust or any other Indemnified Person or member of
the Bank United Group for any loss, damage or claim incurred by reason of any
act or omission performed or omitted by such Indemnified Person, except that
(i) 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 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, and
(ii) the Institutional Trustee or the Delaware Trustee shall be liable for any
such loss, damage or claim incurred by reason of the Institutional Trustee's or
Delaware Trustee's (as the case may be) gross negligence or willful misconduct
with respect to such acts or omissions.
To the fullest extent permitted by law, no Indemnified Person (as defined in
the Declaration), shall have any liability to the Litigation Trust, the Payment
Trust, the Trustees of either Trust (the "Trustees") or the Holders. Without
limiting the generality of the foregoing, to the fullest extent permitted by
law, none of the Holders (in their capacity as Holders), the Trustees, the
Payment Trust, or the Litigation Trust shall have the right to enforce,
institute or maintain a suit, action or proceeding against an Indemnified Person
relating to the formation of the Litigation Trust, the entering into of the
Commitment, the distribution of the CPR Certificates, the Litigation or actions
of the Trustees in their capacity (or purportedly in their capacity) as
Trustees. The Litigation Trust (or the Litigation Trustees on behalf of the
Litigation Trust) may enforce, institute or maintain a suit, action or
proceeding against (i) Bank United Corp. for breach of its obligations under the
Declaration, (ii) Bank United Corp. for its breach of any of its obligations
under the Commitment or its failure to deliver any CPR Certificate when due or
to return to the Litigation Trust for cancellation any CPR Certificate required
to be returned pursuant to the Merger Agreement when so required, (iii) Bank
United Corp. for failure to make payments to the Litigation Trust pursuant to
the Commitment, (iv) Bank United for breach of any depository relationship
obligations it may have with respect to payments made by Bank United Corp. to
the Litigation Trust or the Payment Trust, or (v) the Payment Trust for breach
of the Commitment and in each case, Bank United Corp., the Payment Trust, Bank
United or their successors, as the case may be, may be liable to the Litigation
Trust in connection with such suit, action or proceeding; PROVIDED, that fees
and expenses incurred by the Bank United Group in such a suit, action or
proceeding shall not be set off against the Litigation Proceeds (in order to
calculate the Commitment Amount) if the Litigation Trust or the Litigation
Trustees prevail in such a suit, and, if in connection with suits brought
pursuant to clauses (i) through (v) inclusive, shall be deemed expenses of the
Litigation Trust payable by the Litigation Trust out of the Proceeds Amount,
including any Retained Amount, if the Litigation Trustees do not prevail.
The Holders will have no voting rights (except in connection with certain
amendments to the Declaration described in Article XIII of the Declaration and
except in connection with the removal of the Institutional Trustee and the
Delaware Trustee for cause, or, if a default by the Litigation Trust with
respect to its payment obligations under Article IV of the Declaration shall
have occurred and be continuing, with or without cause), 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 Litigation Trust
assets.
THE CPR CERTIFICATES ARE NOT SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION.
The Holders have no rights with respect to, or interest in, (i) the
Litigation, (ii) Bank United Corp., (iii) Bank United, or (iv) any amount
received by Bank United Corp., Bank United or any other member of the Bank
United Group with respect to the Litigation, including any judgment or
settlement proceeds.
C-1-51
<PAGE>
Each Holder acknowledges that: (i) the Litigation is solely an asset of Bank
United Corp., Bank United and their successors, (ii) the Litigation shall be
conducted by and on behalf of Bank United Corp., Bank United and their
successors solely in accordance with the instructions of the Litigation Trustees
pursuant to the Declaration, (iii) the Litigation Trustees shall have the sole
and exclusive right to direct Bank United Corp., Bank United and their
successors to take (or not take) actions relating to the Litigation as
contemplated by the Declaration and may, among other things, instruct Bank
United and its successors to dismiss, settle or cease prosecuting the Litigation
at any time without obtaining any cash or other recovery, or upon obtaining any
such cash or other recovery as the Litigation Trustees may determine, and
(iv) the Litigation Trustees have the sole and exclusive right to take or not
take other actions contemplated by the Declaration relating to the Litigation
(including, without limitation, any decision with respect to the incurrence of
expenses).
Nothing in the Declaration or this CPR Certificate shall be construed to
create any partnership or joint venture between Bank United Corp., Bank United,
Washington Mutual or any member of the Bank United Group, and the Holders.
C-1-52
<PAGE>
APPENDIX C-2
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
BANK UNITED CORP.
PAYMENT RIGHTS TRUST
FEBRUARY , 2001
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
ARTICLE I.
INTERPRETATION AND DEFINITIONS
Section 1.01 Definitions................................................. C-2-2
ARTICLE II.
ORGANIZATION
Section 2.01 Name........................................................ C-2-6
Section 2.02 Office...................................................... C-2-6
Section 2.03 Purposes and Powers of the Litigation Trust................. C-2-6
Section 2.04 Title to Property of the Litigation Trust................... C-2-7
Section 2.05 Mergers..................................................... C-2-7
Section 2.06 Nature of Obligations....................................... C-2-8
ARTICLE III.
TRUSTEES
Section 3.01 Authority................................................... C-2-8
Section 3.02 Number of Trustees.......................................... C-2-8
Section 3.03 Delaware Trustee............................................ C-2-8
Section 3.04 Institutional Trustee; Eligibility.......................... C-2-9
Section 3.05 Appointment, Removal and Resignation of the Institutional
and Delaware Trustees..................................... C-2-9
Section 3.06 Vacancies Among Relevant Trustees; Effect of Vacancies...... C-2-11
Section 3.07 The Litigation Trustees..................................... C-2-11
Section 3.08 Limitation on Liability of Litigation Trustees.............. C-2-11
Section 3.09 Resignation of a Litigation Trustee......................... C-2-11
Section 3.10 Appointment of Successor Litigation Trustees................ C-2-11
Section 3.11 Meetings of the Trustees.................................... C-2-12
Section 3.12 Powers and Duties of Sponsor, Litigation Trustees and
Institutional Trustee..................................... C-2-12
Section 3.13 Certain Duties and Responsibilities of the Trustees......... C-2-15
Section 3.14 Certain Rights of the Institutional Trustee................. C-2-16
Section 3.15 Lists of Holders of CPR Certificates........................ C-2-18
Section 3.16 Execution of Documents...................................... C-2-18
Section 3.17 Not Responsible for Recitals or Issuance of CPR
Certificates.............................................. C-2-18
Section 3.18 Filings with the Commission................................. C-2-18
Section 3.19 Default; Notice............................................. C-2-18
ARTICLE IV.
PAYMENTS TO HOLDERS
Section 4.01 Payment to Holders.......................................... C-2-18
Section 4.02 Timing of Payments.......................................... C-2-19
Section 4.03 Default; Waiver............................................. C-2-19
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C> <C>
ARTICLE V.
EXPENSES AND THE RETAINED AMOUNT
Section 5.01 Expenses.................................................... C-2-19
Section 5.02 Return of Funds............................................. C-2-19
ARTICLE VI.
[RESERVED] C-2-19
ARTICLE VII.
ISSUANCE AND DISTRIBUTION OF CPR CERTIFICATES
Section 7.01 The Beneficial Interest..................................... C-2-19
ARTICLE VIII.
DISSOLUTION AND TERMINATION OF PAYMENT TRUST
Section 8.01 Dissolution and Termination of Payment Trust................ C-2-19
ARTICLE IX.
TRANSFER OF INTERESTS
Section 9.01 General..................................................... C-2-20
ARTICLE X.
HOLDERS OF CPR CERTIFICATES
Section 10.01 Limitations on Rights of Holders............................ C-2-20
Section 10.02 Limitations on Suits by Holders............................. C-2-21
ARTICLE XI.
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES,
TRUSTEES OR OTHERS
Section 11.01 Liability................................................... C-2-21
Section 11.02 Exculpation................................................. C-2-21
Section 11.03 Fiduciary Duty.............................................. C-2-22
Section 11.04 Indemnification............................................. C-2-23
Section 11.05 Outside Businesses.......................................... C-2-24
Section 11.06 Compensation; Fee........................................... C-2-24
ARTICLE XII.
ACCOUNTING
Section 12.01 Fiscal Year................................................. C-2-24
Section 12.02 Certain Accounting Matters.................................. C-2-24
Section 12.03 Banking..................................................... C-2-25
Section 12.04 Withholding................................................. C-2-25
ARTICLE XIII.
AMENDMENTS AND MEETINGS
Section 13.01 Amendments.................................................. C-2-25
Section 13.02 Meetings of Holders of CPR Certificates; Action by Written
Consent................................................... C-2-26
</TABLE>
ii
<PAGE>
<TABLE>
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PAGE NO.
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<S> <C> <C>
ARTICLE XIV.
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE
AND DELAWARE TRUSTEE
Section 14.01 Representations and Warranties of the Institutional
Trustee................................................... C-2-27
Section 14.02 Representations and Warranties of the Delaware Trustee...... C-2-27
ARTICLE XV.
MISCELLANEOUS
Section 15.01 Notices..................................................... C-2-28
Section 15.02 Governing Law............................................... C-2-29
Section 15.03 Intention of Parties........................................ C-2-29
Section 15.04 Headings.................................................... C-2-29
Section 15.05 Successors and Assigns...................................... C-2-30
Section 15.06 Partial Enforceability...................................... C-2-30
Section 15.07 Specific Performance........................................ C-2-30
Section 15.08 Counterparts................................................ C-2-30
Section 15.09 Consent to Jurisdiction and Service of Process.............. C-2-30
Section 15.10 Default Rules............................................... C-2-30
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
BANK UNITED CORP.
PAYMENT RIGHTS TRUST
FEBRUARY , 2001
This Amended and Restated Declaration of Trust (the "Declaration" or, this
"Agreement") dated and effective as of February , 2001, by the Trustees (as
defined herein), Bank United Corp. (along with its successors, the "Sponsor")
and by Bank United Contingent Payment Rights Trust, a Delaware business trust
(the "Litigation Trust"), being the sole holder of the beneficial interest in
the assets of the Bank United Litigation Payment Trust (the "Payment Trust") to
be issued pursuant to this Declaration;
WHEREAS, the Delaware Trustee (as defined herein) and the Sponsor, by a
Declaration of Trust dated and effective as of January 8, 2001 and by a
Certificate of Trust filed with the Secretary of State of the State of Delaware
on the same date, established a statutory business trust under the Business
Trust Act (as defined herein) for the sole purposes of holding and distributing
the Proceeds Amount (as defined herein) to the Litigation Trust or its
successor;
WHEREAS, the Litigation Trust has been established as a statutory business
trust under the Business Trust Act for the sole purpose of holding the
Commitment Amount (as defined herein) and of filing a registration statement
under the Securities Act (as defined herein) with the Securities and Exchange
Commission relating to the issuance of CPR Certificates (as defined herein);
WHEREAS, pursuant to this Declaration, the sole beneficial interests in the
Payment Trust is being issued to the Sponsor;
WHEREAS, the Sponsor and Washington Mutual, Inc. ("Washington Mutual") have
entered into an Agreement and Plan of Merger (the "Merger Agreement"), dated as
of August 18, 2000, as amended, and the Sponsor and CPR Merger Corporation, a
wholly owned subsidiary of the Sponsor ("Merger Sub"), have entered into an
Agreement and Plan of Merger (the "Plan of Reorganization"), which together
contemplate that (i) immediately prior to the effective time of the merger (the
"Merger") of the Sponsor with and into Washington Mutual, (ii) Merger Sub will
merge (the "Reorganization") with and into the Sponsor, as a result of which
each share of Class A Common Stock, par value $0.01 per share, of the Sponsor
("Sponsor Common Stock"), issued and outstanding immediately prior to the
effective time of the Reorganization (the "Effective Time") will be
automatically converted into one new share of Sponsor Common Stock and the right
to receive one CPR Certificate, with appropriate and proportionate adjustments
to be made to other equity-based securities of the Sponsor, (iii) immediately
prior to the Effective Time, the Litigation Trust will issue CPR Certificates to
the Sponsor, which CPR Certificates will represent assignable and transferable
undivided beneficial interests in the assets of the Litigation Trust, in part to
be issued in the Reorganization, in part to be held for future issuance as more
fully provided in the Plan of Reorganization and herein, and in part to be
issued to the Litigation Trustees (as defined herein) as compensation pursuant
to the terms of the Litigation Trustee Agreements (as defined herein) and
(iv) at the Effective Time, and effective at the Effective Time, the Sponsor
will enter into a Commitment Agreement (the "Commitment"), in the form attached
hereto as EXHIBIT A, pursuant to which the Sponsor will be obligated to pay to
the Payment Trust from time to time an aggregate amount equal to the Commitment
Amount, and the Payment Trust will distribute to the Litigation Trust the
Proceeds Amounts (as defined herein).
WHEREAS, the Litigation Trust will hold the Commitment and the Litigation
Trustees of the Litigation Trust will, upon the effectiveness of the Commitment,
instruct the Sponsor and Bank United,
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<PAGE>
a wholly-owned subsidiary of the Sponsor (along with its successors, "Bank
United") pursuant to the terms of the Litigation Trust Declaration (as defined
herein) as to the administration of the litigation claims of the Sponsor and
Bank United, and any of their successors, in the litigation filed on July 25,
1995, by the Sponsor, Bank United and Hyperion Partners L.P. against the United
States in the U.S. Court of Federal Claims for alleged failures of the United
States to adhere to its agreement to waive or forbear from enforcing certain
provisions concerning regulatory capital requirements, liquidity requirements,
accounting requirements and other matters, and any substitute or ancillary
action, litigation or arbitration with respect to the claims made in such action
(the "Litigation");
WHEREAS, nothing in this Declaration shall be deemed to be or to effect an
assignment (within the meaning of 31 U.S.C. Section 3727) of the Litigation; and
NOW, THEREFORE, it being the intention of the parties hereto to establish
the Payment Trust as a statutory business trust under the Business Trust Act and
that this Declaration constitute the governing instrument of such statutory
business trust, the Trustees declare that all assets contributed to the Payment
Trust will be held in trust for the benefit of the Litigation Trust as the sole
holder of the beneficial interest in the assets of the Payment Trust, subject to
the provisions of this Declaration.
ARTICLE I.
INTERPRETATION AND DEFINITIONS
Section 1.01 DEFINITIONS.
Unless the context otherwise requires:
(a) capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in this
Section 1.01;
(b) a term defined anywhere in this Declaration has the same meaning
throughout;
(c) all references to "the Declaration" or "this Declaration" are to this
Declaration, in its entirety, as modified, supplemented or amended from time to
time, and not to any particular Article, Section or subsection;
(d) all references to "herein" or "hereunder" refer to this Declaration in
its entirety, as modified, supplemented or amended from time to time, and not to
any particular Article, Section or subsection;
(e) all references in this Declaration to Articles and Sections and Exhibits
are to Articles and Sections of and Exhibits to this Declaration unless
otherwise specified;
(f) a reference to the singular includes the plural and vice versa; and
(g) a reference to the masculine includes the feminine and vice versa.
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Securities Act or any successor Rule thereunder.
"Agreement" has the meaning set forth in the recitals hereof.
"Authorized Officer" of a Person means any Person that is authorized to bind
such Person.
"Bank United" has the meaning set forth in the recitals hereof.
"Bank United Group" means the Sponsor, Bank United and any of 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
Section 3.11(b).
C-2-2
<PAGE>
"Beneficial Interest" has the meaning set forth in Section 7.01(a).
"Business Day" means any day other than Saturday, Sunday or any other day on
which banking institutions in Seattle (in the State of Washington), Houston (in
the State of Texas), or Wilmington (in the State of Delaware) are permitted or
required by any applicable law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. Code sec. 3801 et seq., as it may be amended from time to time, or any
successor legislation.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time, or any successor legislation.
"Commission" means the Securities and Exchange Commission.
"Commitment" has the meaning set forth in the recitals hereof.
"Commitment Amount" has the meaning set forth in the Commitment.
"Corporate Trust Office" means the office of the Institutional Trustee at
which the corporate trust business of the Institutional Trustee shall, at any
particular time, be principally administered, which office at the date of
execution of this Declaration is located at Rodney Square, Suite 102, 920 King
Street, New Castle County, Wilmington, Delaware 19801, Attention:____________;
facsimile number____________.
"CPR Certificates" means the Contingent Payment right certificates,
including the Contingent Payment right certificates issued immediately prior to
the Effective Time and any other Contingent Payment right certificates issued by
the Litigation Trust.
"Damages" has the meaning set forth in Section 11.04(a).
"Declaration" has the meaning set forth in the preamble hereto.
"Default Rule" means a rule stated in the Business Trust Act (i) which
structures, defines, or regulates the finances, governance, operations or other
aspects of a Delaware business trust organized under the Business Trust Act, and
(ii) which applies except to the extent it is negated or modified through the
provisions of a governing instrument.
"Delaware Trustee" has the meaning set forth in Section 3.03(a).
"Effective Date" has the meaning set forth in the recitals hereof.
"Effective Time" has the meaning set forth in the recitals hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time, or any successor legislation.
"Fiscal Year" has the meaning set forth in Section 12.01.
"Holder" means the Litigation Trust as the sole holder of the Beneficial
Interest of the Payment Trust issued pursuant to this Declaration, such Person
being a beneficial owner within the meaning of the Business Trust Act.
"Hyperion" means Hyperion Partners L.P., a Delaware limited partnership.
"Indemnified Person" means (a) the Institutional Trustee, the Delaware
Trustee, any Affiliate of the Institutional Trustee or the Delaware Trustee, and
any officers, directors, stockholders, members, partners, employees,
representatives, custodians, nominees or agents of the Institutional Trustee and
the Delaware Trustee; (b) any Litigation Trustee; (c) any Affiliate of any
Litigation Trustee; (d) any partners, employees, representatives, agents,
counsel and other advisors of any Litigation Trustee;
C-2-3
<PAGE>
(e) any member of the Bank United Litigation Committee; (f) any officer,
employee, representative, agent, counsel or other advisors of the Payment Trust
or its Affiliates.
"Institutional Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 3.04 and duly appointed pursuant to this
Declaration.
"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time, or any successor legislation.
"Litigation" has the meaning set forth in the recitals hereof.
"Litigation Proceeds" has the meaning set forth in the Commitment.
"Litigation Trust" has the meaning set forth in the first paragraph of this
Declaration.
"Litigation Trust Declaration" means the Amended and Restated Declaration of
Trust entered into on even date herewith by the Trustees (as defined therein),
the Sponsor, and by the holders, from time to time, of CPR Certificates.
"Litigation Trustees" has the meaning set forth in Section 3.07.
"Litigation Trustee Agreements" means the Litigation Trustee Agreements,
dated as of August 18, 2000, entered into by each of the initial Litigation
Trustees and the Sponsor.
"Litigation Trust Holder" means a Person in whose name a CPR Certificate is
registered on the register maintained by the Registrar pursuant to the
Litigation Trust Declaration, such Person being a beneficial owner of the
Litigation Trust within the meaning of the Business Trust Act.
"Litigation Trust Property" means (a) the Commitment and all proceeds and
rights in respect of the Commitment and (b) any other assets that may be held
from time to time by the Litigation Trust.
"Merger" has the meaning set forth in the recitals hereof.
"Merger Agreement" has the meaning set forth in the recitals hereof.
"Non-Cash Proceeds" has the meaning set forth in the Commitment.
"Officers' Certificates" means, (i) with respect to any Person other than
Litigation Trustees, a certificate signed by two Authorized Officers of such
Person, and (ii) with respect to the Litigation Trustees, a certificate signed
by a majority of the Litigation Trustees then in office. Any Officers'
Certificate delivered with respect to compliance with a condition or covenant
provided for in the Declaration shall include:
(i) a brief statement of the nature and scope of the examination or
investigation undertaken by each Authorized Officer or Litigation Trustee in
rendering the Certificate; and
(ii) a statement as to whether, in the opinion of each such Authorized
Officer or Litigation Trustee, such condition or covenant has been complied
with.
"Payment Amount" shall mean, with respect to each distribution of the
Proceeds Amount received by the Litigation Trust pursuant to the Commitment,
such payment of the Proceeds Amount received by the Litigation Trust (including
the amount of cash resulting from the monetization by the Sponsor of any
Non-Cash Proceeds) less the amount of any accrued but unpaid expenses payable by
the Litigation Trust, plus interest or income, if any, received by the
Litigation Trust on such payment of the Proceeds Amount, less amounts retained
by the Litigation Trust as the Retained Amount.
"Payment Trust" has the meaning set forth in the recitals hereof.
C-2-4
<PAGE>
"Payment Trust Declaration" means this Amended and Restated Declaration of
Trust, dated February , 2001 relating to the Payment Trust.
"Payment Trust Purpose" shall have the meaning set forth in Section 2.03.
"Payment Trust Trustees" means the trustees of the Payment Trust.
"Permitted Investment" means [________] or, if at the time of the receipt of
the applicable payment of the Commitment Amount by the Litigation Trust
(i) such fund is not in existence, (ii) such fund is no longer limited to
investing in short-term obligations of or guaranteed by the United States
government, (iii) such fund is not accepting new investors or new investments or
will not accept the investment of the Commitment Amount or the Retained Amount,
as the case may be, or (iv) such fund is not AAA rated by Standard and Poor's,
the [________].
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Plan of Reorganization" has the meaning set forth in the recitals hereof.
"Proceeds Amount" has the meaning set forth in the Commitment.
"Recovery Agreement" means the Recovery Agreement dated July 24, 1996, by
and among the Sponsor, Bank United and Hyperion (as it may be hereafter amended
from time to time, the "Recovery Agreement").
"Reference Rate" means the reference rate or an equivalent rate publicly
announced from time to time of____________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 the
Sponsor), as in effect from time to time.
"Reimbursements" has the meaning set forth in the Commitment.
"Relevant Trustee" has the meaning set forth in Section 3.05.
"Replacement Options" has the meaning set forth in the Merger Agreement.
"Responsible Officer" means, with respect to the Institutional Trustee, any
officer within the Corporate Trust Office of the Institutional Trustee,
including any managing director, vice-president, any assistant vice-president,
any assistant secretary, the treasurer, any assistant treasurer or other officer
of the Corporate Trust Office of the Institutional Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
"Retained Amount" has the meaning set forth in Section 5.03(a) of the
Litigation Trust Declaration.
"Retained Amount Period" has the meaning set forth in Section 5.03(a) of the
Litigation Trust Declaration.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, or any successor legislation.
"Sponsor" has the meaning set forth in the first paragraph of this
Agreement.
"Successor Delaware Trustee" has the meaning set forth in Section 3.05(b).
C-2-5
<PAGE>
"Successor Entity" has the meaning set forth in Section 2.05(b)(i).
"Successor Institutional Trustee" has the meaning set forth in
Section 3.05(b).
"Trustee" or "Trustees" means each Person who has signed this Declaration as
a Trustee, so long as such Person shall continue in office in accordance with
the terms hereof, and all other Persons who may from time to time be duly
appointed, qualified and serving as Institutional Trustee, Delaware Trustee or
Litigation Trustee in accordance with the provisions hereof, and references
herein to a Trustee or the Trustees shall refer to such Person or Persons solely
in their capacity as Trustees hereunder.
"Washington Mutual" has the meaning set forth in the recitals hereof.
ARTICLE II.
ORGANIZATION
Section 2.01 NAME. The Payment Trust shall continue to be named "Bank
United Litigation Payment Trust", as such name may be modified from time to time
by the Litigation Trustees following written notice to the Holder. The Payment
Trust's activities may be conducted under the name of the Payment Trust or any
other name deemed advisable by the Litigation Trustees.
Section 2.02 OFFICE. The address of the principal office of the Payment
Trust on the date of execution of this Declaration is:
c/o Bank United Corp.
3200 Southwest Freeway
Houston, Texas 77027
Attention: Jonathan K. Heffron
Facsimile: 713-543-7744
On ten Business Days written notice to the Holder, the Litigation Trustees
may designate another principal office.
Section 2.03 PURPOSES AND POWERS OF THE PAYMENT TRUST.
(a) The exclusive purposes and functions of the Payment Trust (each, a
"Payment Trust Purpose") are holding and distributing the Proceeds Amount to the
Litigation Trust or its successor. Anything to the contrary herein or in the
Business Trust Act notwithstanding, the Trustees shall not at any time, on
behalf of the Payment Trust or the Holder, enter into or engage in any
profit-making trade or business, and the Trustees shall have no powers to take,
and shall not take, any actions hereunder other than such as are reasonably
necessary and incidental to the achievement of the foregoing exclusive Payment
Trust Purposes.
(b) Notwithstanding anything in this Declaration or in any Default Rule of
the Business Trust Act to the contrary, no Trustee shall have any power to
(i) modify the terms of the Commitment unless a breach of the Sponsor has
occurred thereunder or is reasonably foreseeable, (ii) invest money held by the
Payment Trust except amounts held, pursuant to Sections 3.12(a)(ii)(B), pending
their use to pay expenses or make distributions, or (iii) admit as a beneficial
owner any Person other than the Holder.
(c) In order to raise funds for, or meet its obligation to pay, expenses
reasonably necessary to preserve or protect assets of the Payment Trust or to
administer the Payment Trust (including, without limitation, expenses related to
the Litigation and expenses related to the liability and indemnification
C-2-6
<PAGE>
obligations of the Payment Trust), and solely in furtherance of Payment Trust
Purposes, the Litigation Trustees on behalf of the Payment Trust may undertake
the following:
(i) enter into, subject to the limitations set forth in
Section 6.02(a), customary fee arrangements (including fees contingent on
receipt by the Payment Trust of, and determined by reference to, all or any
portion of the Commitment Amount) with counsel for the Litigation, to the
Payment Trust or to the Litigation Trustees, experts or consultants, which
arrangements provide for such counsel, experts or consultants to receive
amounts that represent for federal income tax purposes arms-length
compensation for services when paid in cash by the Payment Trust; and
(ii)[ incur indebtedness that represents debt of the Payment Trust
(and not an ownership interest) for federal income tax purposes.]
Section 2.04 TITLE TO PROPERTY OF THE PAYMENT TRUST. Legal title to all
assets of the Payment Trust shall be vested in the Payment Trust. The Holder
shall not have legal title to any part of the assets of the Payment Trust, but
shall have the sole undivided beneficial interest in the assets of the Payment
Trust.
Section 2.05 MERGERS.
(a) The Payment Trust may not consolidate, amalgamate, merge with or into,
or be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other body, except (i) as
described in paragraph (b) of this Section 2.05, or (ii) in a liquidation of the
Payment Trust in accordance with this Declaration.
(b) The Payment Trust may, with the consent of the Institutional Trustee
(acting in reliance on the opinions delivered pursuant to this Section 2.05) and
a majority of the Litigation Trustees and without the consent of the Delaware
Trustee or the Litigation Trust Holders, consolidate, amalgamate, merge with or
into, or be replaced by a trust organized as such under the laws of any state of
the United States; provided that:
(i) if the Payment Trust is not the survivor, such successor entity (the
"Successor Entity") expressly assumes all of the obligations of the Payment
Trust hereunder;
(ii) such merger, consolidation, amalgamation or replacement does not
result in any material alteration of the property of the Payment Trust or
the Litigation Trust Property or adversely affect the rights, preferences
and privileges of the Holder or the Litigation Trust Holders in any material
respect (other than with respect to any dilution of the Holder's interests
in the Successor Entity);
(iii) such Successor Entity has purposes that are substantially
identical to the Payment Trust Purposes;
(iv) prior to such merger, consolidation, amalgamation or replacement,
the Payment Trust has received an opinion of nationally recognized outside
counsel to the Payment Trust experienced in such matters to the effect that:
(a) such merger, consolidation, amalgamation or replacement does not
adversely affect the rights, preferences and privileges of the Holder or
the Litigation Trust Holders in any material respect;
(b) such merger, consolidation, amalgamation or replacement, will not
cause the Payment Trust or the Litigation Trust (or the Successor Entity) to
fail to be classified as a grantor trust for United States federal income
tax purposes; PROVIDED, HOWEVER, that the Payment Trust shall not be
required to receive the opinion set forth in clause (b) if the Holder and a
majority of the Litigation Trust Holders outstanding shall have approved
such merger, consolidation, amalgamation or replacement;
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<PAGE>
(v) without the unanimous consent of the Litigation Trustees, such
merger, consolidation, amalgamation or replacement shall not result in any
material change to the rights of the Litigation Trustees, including, without
limitation, their rights to indemnification, exculpation and compensation
set forth in this Declaration and under Delaware law; and
(vi) prior to such merger, consolidation, amalgamation or replacement
the Institutional Trustee shall have received an opinion of counsel to the
effect that all conditions precedent of this paragraph (b) to such
transaction have been satisfied.
(c) Pursuant to Section 3815(f) of the Business Trust Act, in the case of a
consolidation, amalgamation, or merger of the Payment Trust with or into, or the
replacement by, a trust organized as such under the laws of any state of the
United States, subject to the requirements described in Section 2.5(b) above,
the agreement of merger or consolidation may effect any amendment to this
Declaration, or effect the adoption of a new governing instrument of the Payment
Trust if it is the surviving or resulting business trust in the merger or
consolidation. Such amendment or new governing instrument shall be effective at
the effective time or date of the merger or consolidation.
Section 2.06 NATURE OF OBLIGATIONS. The Litigation Trust shall not have
any preferred claim on, nor any beneficial ownership interest in, any of the
assets of the Trust before the Proceeds Amount is paid to the Litigation Trust
pursuant to the terms of this Declaration, the Litigation Trust Declaration and
the Commitment Agreement, and all rights created under such documents shall be
unsecured contractual rights of the Litigation Trust against the Payment Trust
and the Bank United Group. The assets of the Trust shall at all times be subject
to the claims of the general creditors of the Sponsor in the event of any
bankruptcy or insolvency proceeding involving Bank United Corp. or Washington
Mutual, Inc., as its successor.
ARTICLE III.
TRUSTEES
Section 3.01 AUTHORITY. Except as specifically provided in this
Declaration, the Institutional Trustee and the Litigation Trustees shall have
exclusive and complete authority to carry out the Payment Trust Purposes. An
action taken by a Trustee in accordance with its powers shall constitute the act
of and serve to bind the Payment Trust, it being understood that except as
provided expressly herein the Litigation Trustees may act only upon the vote or
consent (such consent to be evidenced by a writing executed contemporaneously
with or promptly following any oral consent) of a majority of the Litigation
Trustees. In dealing with the Trustees acting on behalf of the Payment Trust, no
Person shall be required to inquire into the authority of the Trustees to bind
the Payment Trust. Persons dealing with the Payment Trust are entitled to rely
conclusively on the power and authority of the Trustees as set forth in this
Declaration.
Section 3.02 NUMBER OF TRUSTEES. There shall be one Delaware Trustee if
required by Section 3.03; the Institutional Trustee may also serve as Delaware
Trustee if it meets the applicable requirements, in which case Section 3.03
shall have no application to such entity in its capacity as Institutional
Trustee. There shall be one Institutional Trustee as required by Section 3.04.
There shall be two initial Litigation Trustees, subject to change as provided in
Section 3.07.
Section 3.03 DELAWARE TRUSTEE.
(a) If required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be:
(i) a natural person who is a resident of the State of Delaware; or
(ii) if not a natural person, an entity which has its principal place of
business in the State of Delaware, and otherwise meets the requirements of
applicable law, including Section 3807 of the Business Trust Act.
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<PAGE>
(b) The Delaware Trustee shall be either a natural person who is at least
21 years of age or a legal entity that shall act through one or more Authorized
Officers.
(c) The initial Delaware Trustee shall be First Union Trust Company,
National Association.
(d) Notwithstanding any other provision of this Declaration, the Delaware
Trustee shall not be entitled to exercise any powers, nor shall the Delaware
Trustee have any of the duties and responsibilities of any of the Trustees
described in this Declaration. Except as set forth in this Section 3.03, the
Delaware Trustee shall be a Trustee for the sole and limited purpose of
fulfilling the requirements of Section 3807 of the Business Trust Act.
Section 3.04 INSTITUTIONAL TRUSTEE; ELIGIBILITY.
(a) There shall at all times be one Trustee which shall act as Institutional
Trustee, which Trustee shall:
(i) not be an Affiliate of the Sponsor;
(ii) not offer or provide credit or credit enhancement to the Payment
Trust; and
(iii) be a corporation or banking association organized and doing
business under the laws of the United States of America or any State or
Territory thereof or of the District of Columbia, authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of
at least 50 million U.S. dollars ($50,000,000), and subject to supervision
or examination by federal, state, territorial or District of Columbia
authority. If such corporation or banking association publishes reports of
condition at least annually, pursuant to law or to the requirements of the
supervising or examining authority referred to above, then for the purposes
of this Section 3.04(a)(iii), the combined capital and surplus of such
corporation or banking association shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition so
published.
(b) If at any time the Institutional Trustee shall cease to be eligible to
so act under Section 3.04(a), the Institutional Trustee shall immediately resign
in the manner and with the effect set forth in Section 3.05(a).
(c) The initial Institutional Trustee shall be First Union Trust Company,
National Association.
(d) The Institutional Trustee shall continue to serve as a Trustee until
either:
(i) the Payment Trust has been completely liquidated and all amounts
received or receivable or potentially receivable pursuant to the Commitment
and not otherwise applied as provided herein and any other amounts shall
have been distributed to the Holder; or
(ii) a Successor Institutional Trustee has been appointed and has
accepted that appointment in accordance with Section 3.05.
Section 3.05 APPOINTMENT, REMOVAL AND RESIGNATION OF THE INSTITUTIONAL AND
DELAWARE TRUSTEES.
(a) No resignation or removal of the Institutional or Delaware Trustee (each
a "Relevant Trustee") and no appointment of a successor Trustee pursuant to this
Article shall become effective until the acceptance of appointment by the
successor Trustee in accordance with the applicable requirements of this
Section 3.05.
(b) Subject to the immediately preceding paragraph, a Relevant Trustee may
resign at any time by giving written notice thereof to the Litigation Trustees
and the Holder. Upon the resignation of the Relevant Trustee, the Litigation
Trustees shall appoint a successor (the "Successor Institutional Trustee" or the
"Successor Delaware Trustee," as applicable) who shall execute an instrument of
acceptance as described in Section 3.05(e) below. If the instrument of
acceptance by the successor Relevant Trustee
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required by this Section 3.05 shall not have been delivered to the Relevant
Trustee within 60 days after the giving of such notice of resignation, the
Relevant Trustee may petition, at the expense of the Payment Trust, any court of
competent jurisdiction for the appointment of a successor Relevant Trustee. Such
court may thereupon, after prescribing such notice, if any, as it may deem
proper, appoint a Relevant Trustee. The resigning Relevant Trustee shall have no
liability for the selection of such successor pursuant to this Section 3.05.
(c) The Institutional Trustee or the Delaware Trustee, or both of them, may
be removed with or without cause by (i) the Litigation Trustees or (ii) the
Holder, in each case by delivery of notification of removal to the Relevant
Trustee. A Delaware Trustee who is a natural person may also be removed by the
Litigation Trustees if such Delaware Trustee becomes incompetent or
incapacitated, and shall be deemed removed if such Delaware Trustee dies. If a
Relevant Trustee shall be so removed, the Litigation Trustees shall promptly
appoint a successor Relevant Trustee or Trustees, and such successor Trustee or
Trustees shall comply with the applicable requirements of Section 3.03 or
Section 3.04, as the case may be. If no successor Relevant Trustee shall have
been so appointed by the Litigation Trustees and accepted appointment in the
manner required by this Section 3.05, within 30 days after delivery of
notification of removal or after the Payment Trust receives notice of the
Delaware Trustee's death, incompetence or incapacity, the Holder may appoint a
successor Relevant Trustee, and such successor Trustee or Trustees shall comply
with the applicable requirements of Section 3.03 or Section 3.04, as the case
may be.
(d) The Institutional Trustee shall give notice of each appointment of a
successor Relevant Trustee to the Holder. Each notice shall include the name of
the successor Relevant Trustee and the address of its Corporate Trust Office if
it is the Institutional Trustee.
(e) In the case of the appointment hereunder of a successor Relevant
Trustee, the retiring Relevant Trustee (except in the case of the death,
incompetence or incapacity of a Delaware Trustee who is a natural person) and
each successor Relevant Trustee shall execute and deliver an amendment hereto
wherein each successor Relevant Trustee shall accept such appointment and which
shall contain such provisions as shall be necessary or desirable to transfer and
confirm to, and to vest in, each successor Relevant Trustee all the rights,
powers, and duties of the retiring Relevant Trustee with respect to the Payment
Trust; it being understood that nothing herein or in such amendment shall
designate such Relevant Trustees as co-Trustees and upon the execution and
delivery of such amendment the resignation or removal of the retiring Relevant
Trustee shall become effective to the extent provided therein and each such
successor Relevant Trustee, without any further act, deed or conveyance, shall
become vested with all the rights, powers, and duties of the retiring Relevant
Trustee; but, on request of the Payment Trust or any successor Relevant Trustee,
such retiring Relevant Trustee shall duly assign, transfer and deliver to such
successor Relevant Trustee all property of the Payment Trust, all proceeds
thereof and money held by such retiring Relevant Trustee hereunder with respect
to the Payment Trust.
(f) No Institutional Trustee or Delaware Trustee shall be liable for the
acts or omissions to act of any Successor Institutional Trustee or Successor
Delaware Trustee, as the case may be.
(g) Any Person into which the Institutional Trustee or the Delaware Trustee,
as the case may be, may be merged or converted or with which either may be
consolidated, or any Person resulting from any merger, conversion or
consolidation to which the Institutional Trustee or the Delaware Trustee, as the
case may be, shall be a party, or any Person succeeding to all or substantially
all the corporate trust business of the Institutional Trustee or the Delaware
Trustee, as the case may be, shall be the successor of the Institutional Trustee
or the Delaware Trustee, as the case may be, hereunder, without the execution or
filing of any paper or any further act on the part of any of the parties hereto;
PROVIDED that such Person shall be otherwise qualified and eligible under this
Article.
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Section 3.06 VACANCIES AMONG RELEVANT TRUSTEES; EFFECT OF VACANCIES.
(a) The death, resignation, retirement, removal, bankruptcy, dissolution,
liquidation, incompetence or incapacity to perform the duties of a Trustee shall
not operate to dissolve, terminate or annul the Payment Trust. Whenever a
vacancy in the Institutional Trustee or the Delaware Trustee shall occur, until
such vacancy is filled by the appointment of a Trustee in accordance with
Section 3.05, the Institutional Trustee or the Delaware Trustee (as the case may
be) remaining in office shall have all the powers granted to both the
Institutional Trustee and the Delaware Trustee and shall discharge all the
duties imposed upon both the Institutional Trustee and the Delaware Trustee by
this Declaration.
Section 3.07 THE LITIGATION TRUSTEES.
(a) There shall be at all times no fewer than two Trustees (the "Litigation
Trustees") who shall be natural persons over the age of 21 years and who shall
have the powers, duties and responsibilities of the Litigation Trustees
hereunder. The initial Litigation Trustees shall be Jonathan K. Heffron and
Salvatore A. Ranieri.
(b) Upon appointment of a successor Litigation Trustee by the remaining
Litigation Trustees pursuant to Section 3.10, such successor Litigation Trustee
shall receive fees as determined by the other Litigation Trustees (but in no
event more than the fees payable to an initial Litigation Trustee).
Section 3.08 LIMITATION ON LIABILITY OF LITIGATION TRUSTEES. As set forth
in Section 11.02(a), the Litigation Trustees will have no liability to any
Indemnified Person or any member of the Bank United Group unless it shall be
established in a final and nonappealable judicial determination by clear and
convincing evidence that any decision or action of the Litigation Trustees was
undertaken with deliberate intent to injure the Holder or with reckless
disregard for the best interests of the Holder, and, in each such event, any
liability will be limited to actual, proximate, and quantifiable damages.
Section 3.09 RESIGNATION OF A LITIGATION TRUSTEE. Any Litigation Trustee
may resign as such by executing an instrument in writing and delivering that
instrument to the remaining Litigation Trustee or Trustees, if any, and to the
Institutional Trustee. In the event of the resignation of a Litigation Trustee,
such Litigation Trustee shall promptly: (a) execute and deliver such documents,
instruments and other writings as may be reasonably requested by the remaining
Litigation Trustees or Litigation Trustee, or if there is no Litigation Trustee,
the Institutional Trustee, to effect the termination of such Litigation
Trustee's capacity under this Declaration; (b) deliver to the remaining
Litigation Trustees or Litigation Trustee all assets, documents, instruments,
records and other writings related to the Payment Trust as may be in the
possession of such Trustee; and (c) otherwise assist and cooperate in effecting
the assumption of such Litigation Trustee's obligations and functions by his
successor Litigation Trustee.
Section 3.10 APPOINTMENT OF SUCCESSOR LITIGATION TRUSTEES.
(a) Upon the death, resignation or incompetency (determined by a court of
competent jurisdiction) of a Litigation Trustee, the remaining Litigation
Trustee or Litigation Trustees, and no other Person, shall have the power to
appoint a successor Litigation Trustee or Trustees, as applicable. In the event
of the death, resignation or incompetency (as determined by a court of competent
jurisdiction) of all of the Litigation Trustees so that there are no remaining
Litigation Trustees, two Litigation Trustees shall be appointed by the written
decision of a majority of the members of the Bank United Litigation Committee,
or, if such committee is not in existence, a majority of the Persons still
living who constituted the Board of Directors of the Sponsor immediately prior
to the Effective Time.
Such appointment shall specify the date on which such appointment shall be
effective. Every successor Litigation Trustee appointed hereunder shall execute,
acknowledge and deliver to the remaining Litigation Trustees (or, in the event
there are no remaining Litigation Trustees, the Bank United Litigation Committee
or, if such committee is not in existence, the persons who were members of the
Board of Directors of the Sponsor immediately prior to the Effective Time) and
to the
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Institutional Trustee an instrument accepting such appointment, and thereupon
such successor Litigation Trustee, without any further act, deed or conveyance,
shall become vested with all the rights, powers, and duties of a Litigation
Trustee. No successor Litigation Trustee shall have any duty to investigate the
administration of the Payment Trust or the management of the Litigation for any
period prior to the effective date of such successor Litigation Trustee's
appointment, and no resigning Litigation Trustee shall be required or permitted,
prior to final termination of the Litigation (including any proceedings to
collect any recovery due the Litigation Trustees), to file any accounting
proceeding.
(b) The Holder will have no right to vote to appoint, remove or replace the
Litigation Trustees, which rights are vested exclusively in the Litigation
Trustees, the Bank United Litigation Committee or, if such committee is not in
existence, the persons who were members of the Board of Directors of the Sponsor
immediately prior to the Effective Time, as applicable.
Section 3.11 MEETINGS OF THE TRUSTEES.
(a) Meetings of the Delaware Trustee, the Institutional Trustee and the
Litigation Trustees together may be held from time to time upon the call of the
Delaware Trustee, Institutional Trustee or any Litigation Trustee. Notice of any
in-person meetings of the Trustees shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
mail) not less than five Business Days before such meeting. Notice of any
telephonic meetings of such Trustees shall be hand delivered or otherwise
delivered in writing (including by facsimile, with a hard copy by overnight
mail) not less than two Business Days before a meeting. Notices shall contain a
brief statement of the time, place and anticipated purposes of the meeting. The
presence (whether in person or by telephone) of a Trustee at a meeting shall
constitute a waiver of notice of such meeting except where such Trustee attends
a meeting for the express purpose of objecting to the transaction of any
activity on the ground that the meeting has not been lawfully called or
convened. Any Trustee may also waive such notice of in-person or telephonic
meetings in writing by hand delivering or otherwise delivering (including by
facsimile, with a hard copy by overnight mail) such written waiver to all other
Trustees. Unless provided otherwise in this Declaration, any action to be taken
by the Institutional Trustee together with the Litigation Trustees shall be
taken with the approval of the Institutional Trustee and each Litigation Trustee
(PROVIDED, that if there shall be more than two Litigation Trustees, a majority
of the Litigation Trustees voting in favor of an action shall constitute
approval by the Litigation Trustees unless otherwise provided in this
Declaration).
(b) The Litigation Trustees may adopt their own rules and procedures but,
unless otherwise provided by this Declaration, may act only with the unanimous
agreement of the two Litigation Trustees or the agreement of the sole remaining
Litigation Trustee prior to the appointment of a successor Litigation Trustee
pursuant to Section 3.10. The Litigation Trustees 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 the Sponsor or Bank United (or any successor thereto) or the Litigation
Trustees, or the approval of a settlement or dismissal of the Litigation).
Following the date hereof and prior to the effective time of the Merger, the
initial Litigation Trustees and the Board of Directors of Bank United Corp., in
their sole discretion, may establish a committee comprised of present or former
members of the Board of Directors of Bank United Corp., or such other persons as
may be appointed by such Board, to assist and advise the Litigation Trustees in
connection with the Litigation (the "Bank United Litigation Committee").
Section 3.12 POWERS AND DUTIES OF SPONSOR, LITIGATION TRUSTEES AND
INSTITUTIONAL TRUSTEE.
(a) The Sponsor prior to the Effective Time, and the Institutional Trustee
and the Litigation Trustees, shall have the authority, subject to any
limitations set forth in Section 2.03, to conduct the affairs of the Payment
Trust in accordance with the terms of this Declaration and the Recovery
Agreement.
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(b) In addition, prior to the Effective Time, the Sponsor shall have the
authority to take the actions enumerated in (i) below on behalf of the Payment
Trust and, in connection therewith, to enter into all transactions and
agreements determined by the Sponsor to be appropriate in exercising such
authority and to perform all acts in furtherance thereof:
(i) The Sponsor shall have the power and authority prior to the
Effective Time and is hereby authorized to act on behalf of the Payment
Trust prior to the Effective Time with respect to the execution and filing
of a registration statement under the Securities Act describing, among other
things, the Payment Trust and prospectuses (including any amendments or
supplements thereto) and the preparation and filing of all documents filed
therewith.
(ii) The Trustees on behalf of the Payment Trust hereby (a) ratify and
approve all actions taken by the Sponsor on behalf of the Payment Trust or
for its benefit prior to the Effective Time and all transactions and
agreements entered into in connection therewith; and (b) agree and
acknowledge that the Sponsor shall have no liability to the Payment Trust,
the Trustees or the Holder for any such actions, transactions or agreements
and that the Payment Trust, the Trustees and the Holder shall no right to
enforce, institute or maintain a suit, action or proceeding against the
Sponsor, its successors or their respective affiliates, officers, directors,
employees or agents relating to such actions, transactions or agreements; it
being understood that this Section 3.12(a)(ii) does not constitute a waiver
by the Litigation Trustees of their rights under Section 7.8 of the Merger
Agreement or a waiver by the Trustees or the Payment Trust of their rights
under the Commitment.
(c) in accordance with subparagraphs (i) and (ii) of this Section 3.12(b),
the Institutional Trustee and the Litigation Trustees shall have the authority
to enter into all transactions and agreements determined by such Trustees to be
appropriate in exercising the authority, express or implied, otherwise granted
to such Trustees under this Declaration, and to perform all acts in furtherance
thereof (and all such transactions or agreements entered into or acts performed
prior to the date hereof are hereby ratified and approved), including, without
limitation, the following:
(i) The Litigation Trustees shall have the power and authority and are
authorized to act on behalf of the Payment Trust with respect to the
following matters and such other powers and authority as provided in the
Litigation Trustee Agreements:
(A) after the Effective Time, the execution and delivery on behalf of
the Payment Trust, subject to Section 2.03(b), of any agreement with the
Sponsor, and such other agreements as may, in the opinion of a majority
of the Litigation Trustees, be necessary or desirable in connection with
the Payment Trust Purposes;
(B) after the Effective Time, the execution and filing of one or more
registration statements and prospectuses (including any amendments or
supplements thereto) relating to, among other things, the Payment Trust,
and filing of all periodic and other reports and other documents pursuant
to the foregoing;
(C) the carrying out of any of the powers or obligations of the
Payment Trust or of the Litigation Trustees under the Commitment;
(D) the payment of all expenses of the Payment Trust (including,
without limitation, expenses of the Litigation, compensation and expenses
of the Trustees, liability insurance and indemnification obligations) out
of the funds of the Payment Trust, including amounts received pursuant to
the Commitment, and any other source (including, without limitation,
funds raised pursuant to Section 2.03(c));
(E) the sending of notices (other than notice of default), and other
information to the Holder in accordance with this Declaration;
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(F) the taking of any action to cause the Payment Trust not to be
deemed to be an Investment Company under the Investment Company Act;
(G) the amendment of the Commitment subject to Section 2.03(b);
(H) the bringing, defense, payment, collection, compromise, taking of
legal action, or other adjustment of claims or demands of or against the
Sponsor or its successors which arise out of or in connection with a
breach by the Sponsor (or any successor thereto) of any of its
obligations under the Commitment or, subject to the limitations set forth
in Section 3.12(a)(ii), the Sponsor of any of its obligations hereunder;
(I) the approval of all applicable tax returns and tax information to
be filed by the Institutional Trustee with respect to the Payment Trust
on behalf of the Payment Trust;
(J) the compliance by the Payment Trust with the indemnification
obligations of the Payment Trust; and
(K) the taking of any other actions necessary or desirable to carry
out any of the foregoing activities.
(ii) The Institutional Trustee shall have the power, duty and authority
and is hereby authorized to act on behalf of the Payment Trust with respect
to the following matters:
(A) the application for a taxpayer identification number;
(B) the maintenance of the funds of the Payment Trust in a
non-interest bearing demand deposit account at Bank United;
(C) upon receipt of a Proceeds Amount, and at the written direction
of the Litigation Trustees, the investment of the Proceeds Amount, until
disbursed to the Holder pursuant to the terms of this Declaration, in a
Permitted Investment which is not sold prior to the date the Payment
Amount is to be disbursed to the Holder;
(D) the distribution of any amounts owed to the Holder in accordance
with the terms of this Declaration;
(E) the sending of notices of a breach by the Sponsor of its
obligations under the Commitment or a breach by the Sponsor of its
obligations under this Declaration or default by the Payment Trust of its
payment obligations pursuant to Article IV hereof;
(F) to the extent provided in this Declaration, the winding up of the
affairs of and liquidation of the Payment Trust and the execution and
filing of the certificate of cancellation with the Secretary of State of
the State of Delaware;
(G) the due preparation and filing of all applicable tax returns and
tax information reports that are required to be filed with respect to the
Payment Trust on behalf of the Payment Trust, with the approval of the
Litigation Trustees;
(H) the taking of all actions that may be necessary or appropriate
for the preservation and the continuation of the Payment Trust's valid
existence, rights, franchises and privileges as a statutory business
trust under the laws of the State of Delaware and of each other
jurisdiction in which such existence is necessary to protect the limited
liability of the Holder or to enable the Payment Trust to effect the
Payment Trust Purposes;
(I) the bringing, defense, payment, collection, compromise,
arbitration, taking of legal action, or other adjustment of claims or
demands of or against the Sponsor or its successors or the Payment Trust
which arise out of or in connection with a breach by the Sponsor of any
of its obligations under the Commitment, the Payment Trust of any of its
obligations under
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the Commitment, or, subject to the limitations set forth in
Section 3.12(a)(ii), by the Sponsor of any of its obligations hereunder;
(J) the taking of any action incidental to the foregoing as the
Institutional Trustee may from time to time determine to be necessary or
advisable to give effect to the terms of this Declaration for the benefit
of the Holder (without consideration of the effect of any such action on
any particular Holder).
(iii) The Institutional Trustee shall have the power and authority to
act on behalf of the Payment Trust with respect to any of the duties,
liabilities, powers or the authority of the Litigation Trustees set forth in
Section 3.12(b)(i) herein but shall not have a duty to do any such act
unless specifically requested to do so in writing by the Litigation
Trustees, and shall then be fully protected in acting pursuant to such
written request; and in the event of a conflict between the action of the
Litigation Trustees and the action of the Institutional Trustee, the action
of the Institutional Trustee shall prevail.
(d) The Trustees are authorized and directed to conduct the affairs of the
Payment Trust and to operate the Payment Trust so that the Payment Trust will
not fail to be classified as a grantor trust for United States federal income
tax purposes. In this connection, the Trustees are authorized to take any
action, not inconsistent with applicable laws, the Certificate of Trust or this
Declaration, as amended from time to time, that the Institutional Trustee or the
Litigation Trustees, as the case may be, determines in their discretion to be
necessary or desirable for such purpose, even if such action adversely affects
the interests of the Holder.
(e) The Litigation Trustees may consult with counsel (which counsel may be
counsel to the Payment Trust or counsel to any member of the Bank United Group),
outside consultants, advisors and other Persons as to matters the Litigation
Trustees reasonably believe are within such other Person's professional or
expert competence, and the advice of such Persons shall be full and complete
authorization and protection in respect of any action taken, suffered or omitted
by them hereunder in good faith reliance on such advise. All oral or written
communications between any such counsel on the one hand, and the Sponsor, Bank
United, the Payment Trust, any Trustee, any of their affiliates, or any
successor entity or any affiliate of any successor entity, on the other hand,
will be protected by the attorney-client privilege and/or the attorney work
product doctrine, and no such communication will result in the waiver of any
applicable claim of confidentiality or privilege.
(f) Any Trustee may also be a Holder or an officer, director, employee or
Affiliate of a Holder, and will have all the rights of such a Holder to the same
extent as if such Trustee were not a Trustee.
Section 3.13 CERTAIN DUTIES AND RESPONSIBILITIES OF THE TRUSTEES.
(a) The Institutional Trustee, before the occurrence of any breach by the
Sponsor or the Payment Trust of any of their obligations under the Commitment or
a breach by the Sponsor after the Effective Time of any of its obligations under
this Declaration, and after the curing of any such breach by the Payment Trust
or the Sponsor, shall undertake to perform only such duties as are specifically
set forth in this Declaration and no implied covenants shall be read into this
Declaration against the Institutional Trustee. In case of a breach by either the
Sponsor or the Payment Trust of any of their obligations under the Commitment or
a breach by the Sponsor of its obligations hereunder after the Effective Time,
the Institutional Trustee shall exercise such of the rights and powers vested in
it by this Declaration and use the same degree of care and skill in their
exercise as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(b) The duties and responsibilities of the Trustees shall be as provided by
this Declaration and the Business Trust Act. Notwithstanding the foregoing, no
provision of this Declaration shall require any Trustee to expend or risk such
Trustee's own funds or otherwise incur any financial liability in the
performance of any of such Trustee's duties hereunder, or in the exercise of any
of such Trustee's rights
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or powers. Whether or not therein expressly so provided, every provision of this
Declaration relating to the conduct or affecting the liability of or affording
protection to the Trustees shall be subject to the provisions of this Article.
To the extent that, at law or in equity, a Trustee has duties and liabilities
relating to the Payment Trust or to the Holder, such Trustee shall not be liable
to the Payment Trust or to the Holder for such Trustee's good faith reliance on
the provisions of this Declaration. The provisions of this Declaration, to the
extent that they restrict the duties and liabilities of the Trustees otherwise
existing at law or in equity, are agreed by the Payment Trust and the Holder to
replace such other duties and liabilities of the Trustees.
(c) No provision of this Declaration shall be construed to relieve any
Trustee from liability with respect to matters that are within the authority of
such Trustee under this Declaration for its own bad faith, its own grossly
negligent action, its own grossly negligent failure to act, or its own willful
misconduct, except that:
(i) a Trustee shall not be liable for any error or judgment made in good
faith by, in the case of any entity, an authorized officer of such Trustee,
unless it shall be proved that such Trustee was negligent in ascertaining
the pertinent facts;
(ii) a Trustee shall not be liable with respect to any action taken or
omitted to be taken by it in good faith in accordance with the direction of
the Holder relating to the time, method and place of conducting any
proceeding for any remedy available to the Institutional Trustee, or
exercising any trust or power conferred upon the Institutional Trustee under
this Declaration;
(iii) the Institutional Trustee's sole duty with respect to the custody,
safe-keeping and physical preservation of any amounts paid pursuant to the
Commitment Agreement shall be to deal with such property in a similar manner
as the Institutional Trustee deals with similar property for its own
account, subject to the protections and limitations on liability afforded to
the Institutional Trustee under this Declaration;
(iv) the Institutional Trustee shall not be liable for any interest on
any money received by it except as it may otherwise agree in writing with
the Litigation Trustees; and money held by the Institutional Trustee need
not be segregated from other funds held by it except in relation to the
Proceeds Amount maintained by the Institutional Trustee pursuant to
Section 3.12(b)(ii)(d) and except to the extent otherwise required by law.
Section 3.14 CERTAIN RIGHTS OF THE INSTITUTIONAL TRUSTEE. Subject to the
provisions of Section 3.13:
(a) the Institutional Trustee may conclusively rely and shall fully be
protected in acting or refraining from acting in good faith upon any resolution,
opinion of counsel, certificate, written representation of the Holder,
transferee or Litigation Trustee, certificate of auditors or any other
certificate, statement, instrument, opinion, report, notice, request, direction,
consent, order, approval, CPR Certificate, bond, debenture, note, other evidence
of indebtedness or other paper or document believed by it to be genuine and to
have been signed, sent or presented by the proper party or parties;
(b) if (i) in performing its duties under this Declaration, the
Institutional Trustee is required to decide between alternative courses of
action, or (ii) in construing any of the provisions of this Declaration, the
Institutional Trustee finds the same ambiguous or inconsistent with any other
provisions contained herein, or (iii) the Institutional Trustee is unsure of the
application of any provision of this Declaration, then, except as to any matter
as to which the Holder is entitled to vote under the terms of this Declaration,
the Institutional Trustee shall take such action, or refrain from taking such
action, as the Institutional Trustee in its sole discretion shall deem advisable
and in the best interests of the Holder, in which event the Institutional
Trustee shall have no liability except for its own bad faith, negligence or
willful misconduct;
(c) any direction or act of the Litigation Trustees contemplated by this
Declaration shall be sufficiently evidenced by an Officers' Certificate;
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(d) the Institutional Trustee may consult with counsel (which counsel may be
counsel to the Litigation Trustees or appointed by the Sponsor or Bank United
(or any successor to such Persons) at the direction of the Litigation Trustees
to prosecute the Litigation) and the advice of such counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in reliance thereon and in
accordance with such advice; the Institutional Trustee shall have the right at
any time to seek instructions concerning the administration of this Declaration
from any court of competent jurisdiction. All oral or written communications
between any such counsel on the one hand, and the Sponsor, Bank United, the
Payment Trust, any Trustee, any of their affiliates, or any successor entity or
any affiliate of any successor entity, on the other hand, will be protected by
the attorney-client privilege and/or the attorney work product doctrine, and no
such communication will result in the waiver of any applicable claim of
confidentiality or privilege.
(e) the Institutional Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Declaration at the request or
direction of the Holder pursuant to this Declaration, unless the Holder shall
have offered to the Institutional Trustee security or indemnity reasonably
satisfactory to it against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction, provided that
nothing contained in this Section 3.14(e) shall be taken to relieve the
Institutional Trustee, upon breach by the Sponsor of any of its obligations
under the Commitment, or by the Sponsor or its successors after the Effective
Time of any of the obligations of the Sponsor hereunder, of its obligation to
exercise, upon the instructions of the Litigation Trustees, the rights and
powers vested in it by this Declaration;
(f) the Institutional Trustee shall not be required to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
approval, CPR Certificate, bond, debenture, note or other evidence of
indebtedness or other paper or document, unless requested in writing to do so by
the Holder, but the Institutional Trustee may make such further inquiry or
investigation into such facts or matters as it may see fit;
(g) except as otherwise expressly provided in this Declaration, the
Institutional Trustee shall not be under any obligation to take any action that
is discretionary under the provisions of this Declaration;
(h) any action taken by the Institutional Trustee or its agents authorized
by this Declaration to be taken by the Institutional Trustee shall bind the
Payment Trust and the Holder, and the signature of the Institutional Trustee or
its agents alone shall be sufficient and effective to perform any such action
and no third party shall be required to inquire as to the authority of the
Institutional Trustee to so act or as to its compliance with any of the terms
and provisions of this Declaration, both of which shall be conclusively
evidenced by the Institutional Trustee's or its agent's taking such action;
(i) no provision of this Declaration shall be deemed to impose any duty or
obligation on the Institutional Trustee to perform any act or acts or exercise
any right, power, duty or obligation conferred or imposed on it, in any
jurisdiction in which it shall be illegal, or in which the Institutional Trustee
shall be unqualified or incompetent in accordance with applicable law, to
perform any such act or acts, or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Institutional
Trustee shall be construed to be a duty;
(j) whenever in the administration of the provisions of this Declaration the
Institutional Trustee shall deem it necessary or desirable that a matter be
proved or established prior to taking or suffering any action to be taken
hereunder, such matter (unless other evidence in respect thereof be herein
specifically prescribed) may, in the absence of gross negligence or bad faith on
the part of the Institutional Trustee, be deemed to be conclusively proved and
established by an Officer's Certificate delivered to the Institutional Trustee
and such certificate, in the absence of gross negligence or bad faith on the
part of the Institutional Trustee, shall be full warrant to the Institutional
Trustee for any action taken, suffered or omitted by it under the provisions of
this Declaration upon the faith thereof;
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(k) in no event shall the Institutional Trustee be liable for the selection
of investments for funds permitted to be invested hereunder or for investment
losses thereon, and the Institutional Trustee shall have no liability in respect
of losses incurred as a result of the liquidation of any investment prior to its
stated maturity or the failure of the Litigation Trustees to provide timely
written investment direction with respect to funds permitted to be invested
hereunder;
(l) the Institutional Trustee may execute any of its powers hereunder or
perform any duties hereunder either directly or by or through agents, attorneys,
custodians or nominees appointed with due care, and shall not be responsible for
any willful misconduct or gross negligence on the part of, or for the
supervision of, any agent, attorney, custodian or nominee so appointed; and
(m) the Institutional Trustee shall not be deemed to have notice of the
occurrence of the events described in Section 3.19 unless the Institutional
Trustee shall have received written notice of such event or a Responsible
Officer of the Institutional Trustee shall have obtained actual knowledge
thereof.
Section 3.15 [Intentionally Left Blank].
Section 3.16 EXECUTION OF DOCUMENTS.
(a) Unless otherwise determined in writing by the Institutional Trustee, and
except as otherwise required by the Business Trust Act, the Institutional
Trustee, or any one or more of the Litigation Trustees, as the case may be, is
authorized to execute on behalf of the Payment Trust any documents that the
Institutional Trustee or the Litigation Trustees, as the case may be, have the
power and authority to execute pursuant to Section 3.12.
(b) Any Institutional or Delaware Trustee may, by power of attorney
consistent with applicable law, delegate to any other natural person over the
age of 21 his or her or its power for the purpose of executing any documents
contemplated in Section 3.12.
Section 3.17 NOT RESPONSIBLE FOR RECITALS. The recitals contained in this
Declaration shall be taken as the statements of the Payment Trust, and the
Trustees do not assume any responsibility for their correctness. The Sponsor and
the Trustees make no representations as to the value or condition of the
property of the Payment Trust or any part thereof. Except as otherwise
specifically provided in Article XIV, the Sponsor and the Trustees make no
representations as to the validity or sufficiency of this Declaration.
Section 3.18 [Intentionally Left Blank].
Section 3.19 DEFAULT; NOTICE. The Institutional Trustee shall, within
90 days after the occurrence of (i) a breach by the Sponsor of any of its
payment obligations under the Commitment, (ii) a breach by the Sponsor after the
Effective Time of its obligations hereunder, or (iii) a breach by the Payment
Trust of its obligations under the Commitment, transmit by mail, first class
postage prepaid, to the Holder, notice of such default actually known to a
Responsible Officer of the Institutional Trustee, unless such default has been
cured before the giving of such notice; PROVIDED, HOWEVER, the Institutional
Trustee shall be protected in withholding such notice if and so long as a
Responsible Officer of the Institutional Trustee in good faith determines that
the withholding of such notice is in the best interests of the Holder.
ARTICLE IV.
PAYMENTS TO HOLDER
Section 4.01 PAYMENT TO HOLDER. From and after the expiration of the
366 day period starting on the date of initial distribution of the CPR
Certificates to the Bank United Corp. stockholders in the Reorganization, the
Institutional Trustee shall, in accordance with Section 4.02, pay any Proceeds
Amount to the Holder.
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Section 4.02 TIMING OF PAYMENTS. The Institutional Trustee on behalf of
the Payment Trust will make payments of amounts as contemplated by Section 4.01
to the Holder as of record dates determined by the Litigation Trustees. Payment
will be made on payment dates, which will also be set by the Litigation
Trustees. The Litigation Trustees shall promptly notify the Institutional
Trustee in writing of any such dates.
Section 4.03 DEFAULT; WAIVER. The Holders of a majority of the CPR
Certificates then outstanding may, by vote or consent, on behalf of the Holder,
waive any breach by the Sponsor of any of its obligations under the Commitment,
or any failure by the Payment Trust to fulfill its obligations under the
Commitment and with respect to the Holder.
ARTICLE V.
EXPENSES
Section 5.01 EXPENSES. The Litigation Trustees on behalf of the Payment
Trust shall have the right to draw on the funds of the Payment Trust for the
purpose of funding any expenses of the Payment Trust, including administration
expenses, compensation, fees and expenses of the Trustees, amounts paid as
indemnity to any Indemnified Person and premiums for insurance for the
Litigation Trustees.
Section 5.02 RETURN OF FUNDS. Pursuant to Section 2.08 of the Commitment,
immediately prior to its termination, the Payment Trust shall return to the
Sponsor any amounts provided to the Payment Trust pursuant to Section 2.04 of
the Commitment Agreement but not used by the Payment Trust, less a reasonable
reserve of funds to pay for termination expenses.
ARTICLE VI.
[INTENTIONALLY LEFT BLANK].
ARTICLE VII.
ISSUANCE OF THE BENEFICIAL INTEREST
Section 7.01 THE BENEFICIAL INTEREST
(a) The Payment Trust shall be authorized to issue one class of undivided
beneficial interest in the assets of the Payment Trust (the "Beneficial
Interest"), which may not be issued to more than one Person. Simultaneously with
the execution hereof, the Beneficial Interest shall be issued to the Sponsor.
(b) Upon issuance of the Beneficial Interest as provided in this
Declaration, the Beneficial Interest so issued shall be deemed to be validly
issued, fully paid and non-assessable.
(c) The Sponsor, by virtue of having become the Holder in accordance with
the terms of this Declaration, shall be deemed to have expressly assented and
agreed to the terms of, and shall be bound by, this Declaration.
ARTICLE VIII.
DISSOLUTION AND TERMINATION OF PAYMENT TRUST
Section 8.01 DISSOLUTION AND TERMINATION OF PAYMENT TRUST.
(a) The Payment Trust shall dissolve:
(i) 30 days after the date on which the Proceeds Amount has been paid in
full to the Litigation Trust;
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(ii) 30 days after the date of a final dismissal of the Litigation or a
determination by the Sponsor or Bank United (or any successor to such
Persons) not to continue to prosecute the Litigation, in either case upon
the instruction of the Litigation Trustees;
(iii) if, prior to the Effective Time, the Sponsor so resolves in
writing; provided that such dissolution is consummated before the issuance
of any CPR Certificates pursuant to the Litigation Trust Declaration; or
(iv) 30 days after the date that the Litigation Trust dissolves
(b) As soon as is practicable after the occurrence of an event referred to
in Section 8.01(a), and after completion of winding up of the Payment Trust and
satisfaction of liabilities of the Payment Trust in accordance with the Business
Trust Act, the Trustees shall terminate the Payment Trust by filing a
certificate of cancellation with the Secretary of State of the State of
Delaware.
(c) The provisions of Sections 3.08, 3.13, 11.04 and 11.06 shall survive the
termination of the Payment Trust.
ARTICLE IX.
TRANSFER OF INTERESTS
Section 9.01 GENERAL. The Beneficial Interest shall not be transferable in
whole or in part.
ARTICLE X.
THE HOLDER
Section 10.01 LIMITATIONS ON RIGHTS OF HOLDER. The Holder acknowledges
that:
(a) the Holder, in its capacity as the Holder, is not a stockholder of the
Sponsor, Bank United or any successor of either of them and will have no rights
to dividends, liquidation preferences or other distributions other than the
payments described in Article IV, and will have no voting rights except as
expressly described herein. The Commitment is solely a contractual obligation
among the Sponsor, the Litigation Trust and the Payment Trust;
(b) nothing in this Declaration shall be construed to create any partnership
or joint venture between or among the Sponsor, Bank United, Washington Mutual or
any member of the Bank United Group, and the Holder;
(c) (i) the Litigation is solely an asset of the Sponsor, Bank United,
Hyperion and their successors, (ii) the Litigation shall be conducted by and on
behalf of the Sponsor, Bank United and their successors solely in accordance
with the instructions of the Litigation Trustees pursuant to this Declaration,
(iii) the Litigation Trustees shall have the sole and exclusive right to direct
the Sponsor, Bank United and their successors to take (or not take) actions
relating to the Litigation as contemplated by this Declaration and the Recovery
Agreement and may, among other things, instruct the Sponsor, Bank United and
their successors to dismiss, settle or cease prosecuting the Litigation at any
time without obtaining any cash or other recovery, or upon obtaining any such
cash or other recovery as the Litigation Trustees may determine, (iv) the
Litigation Trustees have the sole and exclusive right to take or not take other
actions contemplated by this Declaration on behalf of the Sponsor, Bank United
and their successors relating to the Litigation (including, without limitation,
any decision with respect to the incurrence of expenses);
(d) the liability of the Trustees and members of the Bank United Group is
limited to the extent set forth in Article XI.
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Section 10.02 LIMITATIONS ON SUITS BY HOLDER.
(a) To the fullest extent permitted by law, the Holder shall not have any
right by virtue or by availing itself of any provision of this Declaration to
institute any action or proceeding other than a suit by such Holder for
nonpayment of amounts due and owing with respect to the Commitment, at law or in
equity or in bankruptcy or otherwise upon or under or with respect to this
Declaration, or for the appointment of a Trustee, receiver, liquidator,
custodian or other similar official or for any other remedy hereunder, unless
the Holder previously shall have given to the Institutional Trustee written
notice of default and of the continuance thereof as herein before provided, and
the Holder shall have made written request upon the Institutional Trustee to
institute such action or proceeding in its own name as Trustee hereunder and
shall have offered to the Institutional Trustee such reasonable indemnity as it
may require against the costs, expenses and liabilities to be incurred therein
or thereby and the Institutional Trustee for 60 days after its receipt of such
notice, request and offer of indemnity shall have failed to institute any such
action or proceeding; it being understood and intended, and being expressly
covenanted by the Holder with the Institutional Trustee, that the Holder shall
not have any right in any manner whatever by virtue of any provision of this
Declaration to effect, disturb or prejudice the rights of the Holder, or to
enforce any right under this Declaration, except in the manner herein provided.
For the protection and enforcement of the provisions of this Section, each of
the Holder and the Institutional Trustee shall be entitled to such relief as can
be given either at law or in equity.
(b) Any proceeding by the Holder shall be instituted only in accordance with
the following procedure:
(i) The Holder shall deliver to the Institutional Trustee (which shall
promptly deliver a copy thereof to the Litigation Trustees) a printed or
typewritten statement not more than 10 pages in length containing a
description of the nature and grounds of the claims to be asserted and the
relief or remedy sought.
ARTICLE XI.
LIMITATION OF LIABILITY OF HOLDERS OF SECURITIES, TRUSTEES OR OTHERS
Section 11.01 LIABILITY.
(a) Except as expressly set forth in this Declaration, the Trustees shall
not be:
(i) personally liable for the payment of any amounts, which payment
shall be made solely from the assets of the Payment Trust, if any; or
(ii) required to pay to the Payment Trust or to any Holder any deficit
upon dissolution of the Payment Trust or otherwise.
(b) Pursuant to Section 3803(a) of the Business Trust Act, the Holder shall
be entitled to the same limitation of personal liability extended to
stockholders of private corporations for profit organized under the General
Corporation Law of the State of Delaware.
Section 11.02 EXCULPATION.
(a) To the fullest extent permitted by law, no Indemnified Person shall be
liable, responsible or accountable in damages or otherwise to the Payment Trust
or any Indemnified Person for any loss, damage or claim incurred by reason of
any act or omission performed or omitted by such Indemnified Person, except that
(i) 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 Holder or with
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reckless disregard for the best interests of such Holder and, in any event, any
liability will be limited to actual, proximate, quantifiable damages, and
(ii) the Institutional Trustee or the Delaware Trustee shall be liable for any
such loss, damage or claim incurred by reason of the Institutional Trustee's or
Delaware Trustee's (as the case may be) 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; PROVIDED, that nothing in
this Section 11.02(a) is intended to limit the Litigation Trustees' right to
insurance obtained by the Payment Trust and the proceeds of such insurance.
(b) To the fullest extent permitted by law, no Indemnified Person shall have
any liability to the Payment Trust, the Trustees or the Holder. Without limiting
the generality of the foregoing, to the fullest extent permitted by law, none of
the Holder (in its capacity as Holder), the Trustees or the Payment Trust shall
have the right to enforce, institute or maintain a suit, action or proceeding
against a Indemnified Person relating to the formation of the Payment Trust, the
entering into of the Commitment, the maintenance of the Litigation at the
direction of,or the actions of the Litigation Trustees in their capacity (or
purportedly in their capacity) as, Litigation Trustees. Notwithstanding the
preceding two sentences of this Section 11.02(b), the Payment Trust (or the
Litigation Trustees on behalf of the Payment Trust) may enforce, institute or
maintain a suit, action or proceeding against (i), except as set forth in
Section 3.12(a)(ii), the Sponsor for breach of its obligations hereunder,
(ii) the Sponsor for breach of any of its obligations under the Commitment or
this Declaration, or (iii) Bank United for breach of any depository relationship
obligations it may have with respect to payments made by the Sponsor to the
Payment Trust, and in each case, the Sponsor and Bank United or their
successors, as the case may be, may be liable to the Payment Trust in connection
with such suit, action or proceeding, or (v) Bank United for breach of its
obligations under the Commitment or this Declaration. Notwithstanding the
preceding two sentences, fees and expenses incurred by the Bank United Group in
such a suit, action or proceeding described in the preceding two sentences shall
not be set off against the Litigation Proceeds (in order to calculate the
Commitment Amount) if the Payment Trust or the Litigation Trustees prevail in
such a suit, and, if in connection with suits brought pursuant to clauses
(i) through (iv) inclusive, shall be deemed expenses of the Payment Trust
payable by the Payment Trust out of the Commitment Amount.
(c) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Payment Trust and upon such information, opinions,
reports or statements presented to the Payment Trust by any Person as to matters
the Indemnified Person reasonably believes are within such other Person's
professional or expert competence and, if selected by such Indemnified Person,
has been selected by such Indemnified Person with reasonable care by or on
behalf of the Payment Trust, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which payment to Holder might properly be paid.
Section 11.03 FIDUCIARY DUTY.
(a) To the extent that, at law or in equity, an Indemnified Person has
duties (including fiduciary duties) and liabilities relating thereto to the
Payment Trust or to any other Indemnified Person, an Indemnified Person acting
under this Declaration shall not be liable to the Payment Trust or to any other
Indemnified Person for its good faith reliance on the provisions of this
Declaration. The provisions of this Declaration, to the extent that they
restrict the duties and liabilities of an Indemnified Person otherwise existing
at law or in equity, are agreed by the parties hereto to replace such other
duties and liabilities of the Indemnified Person.
(b) Whenever in this Declaration an Indemnified Person is permitted or
required to make a decision:
(i) in its "discretion" or under a grant of similar authority, the
Indemnified Person shall be entitled to consider such interests and factors
as it desires, including its own interests, and shall
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have no duty or obligation to give any consideration to any interest of or
factors affecting the Payment Trust or any other Person; or
(ii) in its "good faith" or under another express standard, the
Indemnified Person shall act under such express standard and shall not be
subject to any other or different standard imposed by this Declaration or by
applicable law.
Section 11.04 INDEMNIFICATION.
(a) The Payment Trust shall indemnify, to the fullest extent permitted by
law, any Indemnified Person 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 Payment Trust, the Litigation
or 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 the Sponsor or Washington Mutual so long as
such actions relate to the Payment Trust including, without limitation, the
negotiation of the terms of the Payment Trust and the approval of the
establishment of the Payment Trust and related transactions, but otherwise
excluding actions taken by the Litigation Trustees in such capacities), 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 this Declaration, whether or not in a formal proceeding
(collectively, "Damages").
(b) Notwithstanding Section 11.04(a), no indemnification shall apply (i) in
the case of the indemnification of the Litigation Trustees, if the Holder
establishes in a final and nonappealable judicial determination by clear and
convincing evidence that such Damages arose as the result of acts or omissions
of the Litigation Trustees with deliberate intent to injure the Holder or
(ii) in the case of the indemnification of the Delaware Trustee or the
Institutional Trustee, if the Holder 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. 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 (i) the Litigation Trustees acted or decided
with deliberate intent to injure the Holder or with reckless disregard for the
best interests of such Holder or (ii) the Delaware Trustee or Institutional
Trustee was grossly negligent or engaged in willful misconduct.
(c) To the fullest extent permitted by law, expenses (including attorneys'
fees and expenses) incurred by an Indemnified Person in defending a civil,
criminal, administrative or investigative action, suit or proceeding referred to
in Sections 11.04(a) shall be paid by the Payment Trust in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking
(without bond or security) by or on behalf of such Indemnified Person to repay
such amount if it shall ultimately be determined that he is not entitled to be
indemnified by the Payment Trust as authorized in this Section 11.04.
(d) All rights to indemnification under this Section 11.04 shall be deemed
to be provided by a contract between the Payment Trust and each Indemnified
Person who serves in such capacity at any time while this Section 11.04 is in
effect. Any repeal or modification of this Section 11.04 shall not affect any
rights or obligations then existing.
(e) The Payment Trust shall purchase and maintain insurance to cover its
indemnification obligations and any other liabilities of the Litigation
Trustees.
(f) For purposes of this Section 11.04, references to "the Payment Trust"
shall include, in addition to the resulting or surviving entity, any constituent
entity (including any constituent of a constituent) absorbed in a consolidation
or merger involving the Payment Trust, so that any Person who is or was a
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director, Trustee, officer or employee of such constituent entity, or is or was
serving at the request of such constituent entity as a director, Trustee,
officer, employee or agent of another entity, shall stand in the same position
under the provisions of this Section 11.04 with respect to the resulting or
surviving entity as he would have with respect to such constituent entity if its
separate existence had continued.
(g) The indemnification and advancement of expenses provided by, or granted
pursuant to, this Section 11.04 shall continue as to a Person who has ceased to
be an Indemnified Person and shall inure to the benefit of the heirs, executors
and administrators of such a Person.
Section 11.05 OUTSIDE BUSINESSES. Any Indemnified Person or member of the
Bank United Group may engage in or possess an interest in other business
ventures of any nature or description, independently or with others, similar or
dissimilar to the business of the Payment Trust, and the Payment Trust and the
Holder shall have no rights by virtue of this Declaration in and to such
independent ventures or the income or profits derived therefrom, and the pursuit
of any such venture shall not be deemed wrongful or improper.
Section 11.06 COMPENSATION; FEE. The Trustees on behalf of the Payment
Trust agree:
(a) to pay to the Institutional Trustee and the Delaware Trustee from time
to time, upon the approval of the Litigation Trustees, reasonable compensation
for all services rendered by them hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a Trustee of an
express trust); and
(b) except as otherwise expressly provided herein, to reimburse the Trustees
upon request for all expenses, disbursements and advances incurred or made by
the Trustees in accordance with any provision of this Declaration (including the
compensation and the expenses and disbursements of their respective agents and
counsel).
The provisions of Section 11.04 and this Section 11.06 shall survive the
dissolution of the Payment Trust and the termination of this Declaration and the
removal or resignation of any Trustee.
ARTICLE XII.
ACCOUNTING
Section 12.01 FISCAL YEAR. The fiscal year ("Fiscal Year") of the Payment
Trust shall be the calendar year, or such other year as is required by the Code.
Section 12.02 CERTAIN ACCOUNTING MATTERS.
(a) At all times during the existence of the Payment Trust, the Litigation
Trustees shall keep, or cause to be kept, full books of account, records and
supporting documents, which shall reflect in reasonable detail each transaction
of the Payment Trust. The books of account shall be maintained on the accrual
method of accounting, in accordance with generally accepted accounting
principles, consistently applied. The books of account and the records of the
Payment Trust shall be examined by and reported upon as of the end of each
Fiscal Year of the Payment Trust by a firm of independent certified public
accountants selected by the Litigation Trustees.
(b) The Litigation Trustees shall cause to be duly prepared and delivered to
each of the Holder any annual United States federal income tax information
statement required by the Code, containing such information with regard to the
Beneficial Interest held by the Holder as is required by the Code and the
regulations promulgated thereunder. Notwithstanding any right under the Code to
deliver any such statement at a later date, the Litigation Trustees shall
endeavor to deliver all such statements within 30 days after the end of each
Fiscal Year of the Payment Trust.
(c) The Litigation Trustees shall cause to be duly prepared and filed an
annual United States federal income tax return on a Form 1041 or such other form
required by United States federal income
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tax law, and any other annual income tax returns required to be filed by the
Litigation Trustees on behalf of the Payment Trust with any state or local
taxing authority.
Section 12.03 BANKING. The Payment Trust may maintain one or more bank
accounts in the name and for the sole benefit of the Payment Trust; PROVIDED,
HOWEVER, that all payments received by the Payment Trust pursuant to the
Commitment shall be maintained separately from other funds as provided by
Section 3.12(b)(ii)(D).
Section 12.04 WITHHOLDING. The Institutional Trustee or any Paying Agent
shall comply with all withholding requirements under United States federal,
state and local law. The Institutional Trustee or any Paying Agent shall
request, and the Holder shall provide to the Institutional Trustee or any Paying
Agent, such forms or certificates as are necessary to establish an exemption
from withholding with respect to the Holder, and any representations and forms
as shall reasonably be requested by the Institutional Trustee to assist it in
determining the extent of, and in fulfilling, its withholding obligations. The
Litigation Trustees shall file required forms with applicable jurisdictions and,
unless an exemption from withholding is properly established by the Holder,
shall remit amounts withheld with respect to the Holder to applicable
jurisdictions. To the extent that the Institutional Trustee or any Paying Agent
is required to withhold and pay over any amounts to any authority with respect
to distributions or allocations to the Holder, the amount withheld shall be
deemed to be a distribution in the amount of the withholding to the Holder. In
the event of any claimed overwithholding, the Holder shall be limited to an
action against the applicable jurisdiction. If the amount required to be
withheld was not withheld from actual distributions made, the Institutional
Trustee may reduce subsequent distributions by the amount of such withholding.
ARTICLE XIII.
AMENDMENTS AND MEETINGS
Section 13.01 AMENDMENTS.
(a) Except as otherwise provided in this Declaration, this Declaration may
only be amended by a written instrument approved and executed by
(i) the Institutional Trustee;
(ii) the Litigation Trustees in accordance with the last sentence of
Section 3.11(a); and
(iii) if the amendment affects the rights, powers, duties, obligations
or immunities of the Delaware Trustee, the Delaware Trustee.
(b) Notwithstanding any other provision of this Article XIII, no amendment
shall be made, and any such purported amendment shall be void and ineffective
unless the Institutional Trustee shall have first received:
(A) an Officers' Certificate from the Payment Trust that such amendment
is permitted by, and conforms to, the terms of this Declaration; and
(B) an opinion of counsel (who may be counsel to the Payment Trust or
the Litigation Trustees) that such amendment is permitted by, and conforms
to, the terms of this Declaration.
(C) Except as provided in Section 13.01(b)(D), any such purported
amendment shall be void and ineffective unless the Holder shall have
consented to such amendment.
(D) Subject to Section 13.01(b), this Declaration may be amended by the
Institutional Trustee and the Litigation Trustees without the consent of the
Holder:
(i) to cure any ambiguity;
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(ii) to correct or supplement any provision in this Declaration that
may be defective or inconsistent with any other provision of this
Declaration;
(iii) to 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;
(iv) to modify, eliminate or add to any provision of this Declaration
to such extent as may be necessary to ensure that the Payment Trust
(a) will be classified for United States federal income tax purposes at
all times as a grantor trust, or (b) will not be required to register as
an Investment Company under the Investment Company Act (including without
limitation to conform to any change in any applicable Rule under the
Investment Company Act or written change in interpretation or application
thereof by any legislative body, court, government agency or regulatory
authority);
PROVIDED, HOWEVER, that no such modification, elimination or addition referred
to in clauses (i), (ii), or (iii) shall adversely affect the powers, preferences
or special rights of the Holder or cause the Payment Trust to fail to continue
to be classified as a grantor trust for purposes of United States federal income
taxation.
(H) The Institutional Trustee may, but shall have no obligation to, execute
any amendment which materially adversely affects its rights, powers, immunities
or indemnities.
Section 13.02 MEETINGS OF THE HOLDER; ACTION BY WRITTEN CONSENT.
(a) Meetings of the Holder may be called at any time by the Litigation
Trustees to consider and act on any matter on which the Holder is entitled to
act under the terms of this Declaration. The Litigation Trustees shall call a
meeting of the Holder if directed to do so by the Holder. Such direction shall
be given by delivering to the Litigation Trustees one or more calls in a writing
stating that the signing Holder wishes to call a meeting and indicating the
general or specific purpose for which the meeting is to be called.
(b) The following provisions shall apply to meetings of the Holder:
(i) notice of any such meeting (with a copy to the Institutional
Trustee) shall be given to the Holder at least 20 days and not more than
60 days before the date of such meeting.
Whenever a vote, consent or approval of the Holder is permitted or required
under this Declaration, such vote, consent or approval may be given at a meeting
of the Holder. Any action that may be taken at a meeting of the Holder may be
taken without a meeting if a consent in writing setting forth the action so
taken is signed by the Holder. The Litigation Trustees may specify that any
written ballot submitted to the Holder for the purpose of taking any action
without a meeting shall be returned to the Payment Trust within the time
specified by the Litigation Trustees;
(ii) the Holder may authorize any Person to act for it by proxy on all
matters in which the Holder is entitled to participate, including waiving
notice of any meeting, or voting or participating at a meeting. No proxy
shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable at
the pleasure of the Holder. Except as otherwise provided herein, all matters
relating to the giving, voting or validity of proxies shall be governed by
the General Corporation Law of the State of Delaware relating to proxies,
and judicial interpretations thereunder, as if the Payment Trust were a
Delaware corporation and the Holder were stockholders of a Delaware
corporation; each meeting of the Holder shall be conducted by the Litigation
Trustees or by such other Person that the Litigation Trustees may designate;
and
(iii) unless the Business Trust Act or this Declaration otherwise
provides, the Litigation Trustees, in their sole discretion, shall establish
all other provisions relating to meetings of the
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Holder, including notice of the time, place or purpose of any meeting at
which any matter is to be voted on by the Holder, waiver of any such notice,
action by consent without a meeting, the establishment of a record date,
quorum requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.
ARTICLE XIV.
REPRESENTATIONS OF INSTITUTIONAL TRUSTEE AND DELAWARE TRUSTEE
Section 14.01 REPRESENTATIONS AND WARRANTIES OF THE INSTITUTIONAL
TRUSTEE. The Trustee that acts as initial Institutional Trustee represents and
warrants to the Payment Trust and to the Sponsor at the date of this
Declaration, and each Successor Institutional Trustee represents and warrants to
the Payment Trust at the time of the Successor Institutional Trustee's
acceptance of its appointment as Institutional Trustee, that:
(a) the Institutional Trustee is a corporation or banking association with
trust powers, duly organized, validly existing and in good standing under the
laws of the United States or a State thereof with power and authority to execute
and deliver, and to carry out and perform its obligations under the terms of,
this Declaration;
(b) the execution, delivery and performance by the Institutional Trustee of
this Declaration has been duly authorized by all necessary corporate action on
the part of the Institutional Trustee. This Declaration has been duly executed
and delivered by the Institutional Trustee, and it constitutes a legal, valid
and binding obligation of the Institutional Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy, reorganization,
moratorium, insolvency, and other similar laws affecting creditors' rights
generally and to general principles of equity (regardless of whether considered
in a proceeding in equity or at law); and
(c) the execution, delivery and performance of this Declaration by the
Institutional Trustee does not conflict with or constitute a breach of the
charter or by-laws of the Institutional Trustee.
Section 14.02 REPRESENTATIONS AND WARRANTIES OF THE DELAWARE TRUSTEE. The
Trustee that acts as initial Delaware Trustee represents and warrants to the
Payment Trust and to the Sponsor at the date of this Declaration, and each
Successor Delaware Trustee represents and warrants to the Payment Trust at the
time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee, that:
(a) the Delaware Trustee, if other than an individual, is duly organized,
validly existing and in good standing under the laws of the State of Delaware,
with power and authority to execute and deliver, and to carry out and perform
its obligations under the terms of, this Declaration;
(b) the Delaware Trustee has been authorized to perform its obligations
under the Certificate of Trust and this Declaration. This Declaration under
Delaware law constitutes a legal, valid and binding obligation of the Delaware
Trustee, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, reorganization, moratorium, insolvency, and other similar
laws affecting creditors' rights generally and to general principles of equity
(regardless of whether considered in a proceeding in equity or at law); and
(c) the Delaware Trustee is a natural person who is a resident of the State
of Delaware or, if not a natural person, an entity which has its principal place
of business in the State of Delaware and, in either case, a Person that
satisfies for the Payment Trust the requirements of Section 3807 of the Business
Trust Act.
C-2-27
<PAGE>
ARTICLE XV.
MISCELLANEOUS
Section 15.01 NOTICES. All notices provided for in this Declaration shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) if given to the Payment Trust, in care of the Institutional Trustee at
the Payment Trust's mailing address set forth below (or such other address as
the Payment Trust may give notice of to the Holder):
------------------------------------
------------------------------------
Attention:
Facsimile:
with a copy to:
------------------------------------
------------------------------------
Attention:
Facsimile:
(b) if given to the Delaware Trustee, at the mailing address set forth below
(or such other address as the Delaware Trustee may give notice of to the
Holder):
------------------------------------
------------------------------------
Attention:
Facsimile:
(c) if given to the Institutional Trustee, at the mailing address set forth
below (or such other address as the Institutional Trustee may give notice of to
the Holder).
------------------------------------
------------------------------------
Attention:
Facsimile:
C-2-28
<PAGE>
(d) if given to the Litigation Trustees, at each mailing address set forth
below (or such other address as the Payment Trust may give notice of to the
Holder):
------------------------------------
------------------------------------
Attention:
Facsimile:
------------------------------------
------------------------------------
Attention:
Facsimile:
(e) if given to any Holder, at the address set forth on the books and
records of the Payment Trust.
All such notices shall be deemed to have been given when received in person,
telecopied with receipt confirmed, or mailed by first class mail, postage
prepaid, except that if a notice or other document is refused delivery or cannot
be delivered because of a changed address of which no notice was given, such
notice or other document shall be deemed to have been delivered on the date of
such refusal or inability to deliver the same.
Section 15.02 GOVERNING LAW. This Declaration and the rights of the
parties hereunder shall be governed by and interpreted in accordance with the
laws of the State of Delaware and all rights and remedies shall be governed by
such laws without regard to the principles of conflict of laws of the State of
Delaware or any other jurisdiction that would call for the application of the
law of any jurisdiction other than the State of Delaware; PROVIDED, HOWEVER,
that, to the fullest extent permitted by law, there shall not be applicable to
the Payment Trust, the Trustees or this Declaration any provision of the laws
(statutory or common) of the State of Delaware pertaining to trusts that relate
to or regulate, in a manner inconsistent with the terms hereof (a) the filing
with any court or governmental body or agency of Trustee accounts or schedules
of Trustee fees and charges, (b) affirmative requirements to post bonds for
Trustees, officers, agents or employees of a trust, (c) the necessity for
obtaining court or other governmental approval concerning the acquisition,
holding or disposition of real or personal property, (d) fees or other sums
payable to Trustees, officers, agents or employees of a trust, (e) the
allocation of receipts and expenditures to income or principal,
(f) restrictions or limitations on the permissible nature, amount or
concentration of trust investments or requirements relating to the titling,
storage or other manner of holding or investing trust assets or (g) the
establishment of fiduciary or other standards of responsibility or limitations
on the acts or powers of Trustees that are inconsistent with the limitations or
liabilities or authorities and powers of the Trustees as set forth or referenced
in this Declaration. Section 3540 and, to the fullest extent permitted by
applicable law, Section 3561, of Title 12 of the Delaware Code shall not apply
to the Payment Trust.
Section 15.03 INTENTION OF PARTIES. It is the intention of the parties
hereto that the Payment Trust be classified for United States federal income tax
purposes as a grantor trust that is formed to hold the Commitment and liquidate
the Commitment, as provided for herein. The provisions of this Declaration shall
be interpreted to further this intention of the parties.
Section 15.04 HEADINGS. Headings contained in this Declaration are
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.
C-2-29
<PAGE>
Section 15.05 SUCCESSORS AND ASSIGNS. Whenever in this Declaration any of
the parties hereto is named or referred to, the successors and assigns of such
party shall be deemed to be included, and all covenants and agreements in this
Declaration by the Sponsor and the Trustees shall bind and inure to the benefit
of their respective successors and assigns, whether or not so expressed.
Section 15.06 PARTIAL ENFORCEABILITY. If any provision of this
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, or the application of
such provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
Section 15.07 SPECIFIC PERFORMANCE. The Sponsor hereby agrees that the
obligations imposed on it in this Declaration are special, unique and of an
extraordinary character, and that, in the event of breach by the Sponsor,
damages would not be an adequate remedy and the Sponsor shall be entitled to
specific performance and injunctive and other equitable relief, including
declaratory relief, in addition to any other remedy to which it may be entitled,
at law or in equity; and the Sponsor hereby further agrees to waive any
requirement for the securing or posting of any bond in connection with the
obtaining of any such injunctive or other equitable relief.
Section 15.08 COUNTERPARTS. This Declaration may contain more than one
counterpart of the signature page and this Declaration may be executed by the
affixing of the signature of each of the Trustees and the Sponsor to any of such
counterpart signature pages. All of such counterpart signature pages shall be
read as though one, and they shall have the same force and effect as though all
of the signers had signed a single signature page.
Section 15.09 CONSENT TO JURISDICTION AND SERVICE OF PROCESS. The
Trustees, the Sponsor, and the Litigation Trust hereby consent to (i) the
non-exclusive jurisdiction of the Courts of the State of Delaware and any
Federal Court sitting in Wilmington, Delaware, and (ii) service of process by
mail at their last known address.
Section 15.10 DEFAULT RULES. Regardless of whether this Declaration
specifically refers to particular Default Rules:
(a) if any provision of this Declaration conflicts with a Default Rule, the
provision of this Declaration controls and the Default Rules is modified or
negated accordingly,
(b) if it is necessary to construe a Default Rule as modified or negated in
order to effectuate any provision of this Declaration, the Default Rule is
modified or negated accordingly, and
(c) the fact that some Default Rules are referred to herein shall not limit
the application of Sections 15.10(a) or (b) in those instances where no Default
Rule has been referred to herein.
C-2-30
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
[ ]
as Delaware Trustee
By:
-------------------------------------
Name:
Title:
[ ]
as Institutional Trustee
By:
-------------------------------------
Name:
Title:
---------------------------------
, as Litigation Trustee
---------------------------------
, as Litigation Trustee
BANK UNITED CORP.,
as Sponsor
By:
-------------------------------------
Name:
Title:
C-2-31
<PAGE>
APPENDIX D
FORM OF
COMMITMENT AGREEMENT
This Commitment Agreement, dated as of February , 2001 (this "Agreement"),
by and among Bank United Corp., a Delaware corporation, the Bank United Corp.
Litigation Contingent Payment Rights Trust (the "Litigation Trust"), a Delaware
business trust and the Bank United Corp. Payment Rights 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 18, 2000 (as amended, 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, Bank United Corp. has entered into an Agreement and Plan of Merger,
dated as of September 18, 2000 (the "Plan of Reorganization"), with CPR Merger
Corporation, a wholly owned subsidiary of Bank United Corp. ("Merger Sub"),
pursuant to which Merger Sub will merge with and into Bank United Corp. (the
"Reorganization"), with Bank United Corp. as the surviving corporation in the
Reorganization.
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
<PAGE>
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.
"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
D-2
<PAGE>
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
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 the litigation filed on July 25, 1995, by Bank United
Corp., Bank United and Hyperion Partners L.P. against the United States in the
U.S. Court of Federal Claims for alleged failures of the United States to adhere
to its agreement to waive or forbear from enforcing certain provisions
concerning regulatory capital requirements, liquidity requirements, accounting
requirements and other matters, and any substitute or ancillary action,
litigation or arbitration with respect to the claims made in such action.
"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 Amended and Restated Declaration of
Trust, dated as of February , 2001, 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 August 18, 2000, between Jonathon K. Heffron and Bank United and the
Litigation Trustee Agreement, dated as of August 18, 2000, between Salvatore A.
Ranieri 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.
D-3
<PAGE>
"Payment Trust Agreement" means the Amended and Restated Declaration of
Trust, dated as of February , 2001, 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).
"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.
"Reorganization" has the meaning set forth in the recitals hereof.
"Resolution" has the meaning set forth in Section 2.02 hereof.
"Section 483(a)" means Section 483(a) of the Code.
"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
D-4
<PAGE>
Certificates pursuant to the Reorganization 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 (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.
D-5
<PAGE>
"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.
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
Reorganization. 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
D-6
<PAGE>
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 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
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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 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
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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 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
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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 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
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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 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.
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<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:
First Union Trust
Company, National Association
Rodney Square, Suite 102
920 King Street
Wilmington, Delaware 19801
Attention:
Facsimile:
With copies to:
c/o Bank United Corp.
3200 Southwest Freeway
Houston, Texas 77027
Attention: Jonathon K. Heffron, Esq.
Facsimile: (713) 543-7744
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<PAGE>
If to the Payment Trust to:
First Union Trust
Company, National Association
Rodney Square, Suite 102
920 King Street
Wilmington, Delaware 19801
Attention:
Facsimile:
With copies to:
c/o Bank United Corp.
3200 Southwest Freeway
Houston, Texas 77027
Attention: Jonathon K. Heffron, Esq.
Facsimile: (713) 543-7744
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.
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).
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<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>
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PERSONAL AND CONFIDENTIAL
August 18, 2000
Board of Directors
Bank United Corporation
3200 Southeast Freeway
Houston, TX 77027
Gentlemen and Madame:
You have requested our opinion as to the fairness from a financial point of view
to the holders of the outstanding shares of Class A Common Stock, par value
$0.01 per share (the "Shares"), of Bank United Corporation (the "Company") of
the Merger Consideration (as defined below) to be received by such holders
pursuant to the Agreement and Plan of Merger dated as of August 18, 2000,
between Washington Mutual, Inc. ("WAMU"), and the Company (the "Agreement").
Pursuant to the Agreement, the Company will merge with and into WAMU (the
"Merger") and each Share not held in the Company's treasury or directly or
indirectly by WAMU, the Company or any of their respective subsidiaries will be
exchanged for the right to receive 1.3 shares of Common Stock, no par value per
share, of WAMU ("WAMU Common Stock") and one CPR Certificate, as defined in the
Agreement (each a "Certificate" and, collectively with such 1.3 shares of WAMU
Common Stock, the "Merger Consideration").
Goldman, Sachs & Co., 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. We are familiar with
the Company, having acted as its financial advisor in connection with, and
having participated in certain of the negotiations leading to, the Agreement. We
also have provided certain investment banking services to the WAMU from time to
time, including having acted as financial advisor in WAMU's September 1997
divestiture of W.M. Life Insurance Company, as co-manager in WAMU's August 1999
offering of 7.50% Notes, and as lead manager in WAMU's April 2000 offering of
8.25% Subordinated Notes. We may also provide other investment banking services
to WAMU in the future. Goldman, Sachs & Co. provides a full range of financial
advisory and securities services and, in the course of its normal trading
activities, may from time to time effect transactions and hold securities,
including derivative securities, of the Company or WAMU for its own account and
for the accounts of customers.
In connection with this opinion, we have reviewed, among other things, the
Agreement; Annual Reports to Stockholders and Annual Reports on Form 10-K of the
Company and WAMU for the five fiscal years ended September 30, 1999 and for the
five years ended December 31, 1999, respectively; certain interim reports to
stockholders and Quarterly Reports on Form 10-Q of the Company and WAMU; certain
other communications from the Company and WAMU to their respective stockholders;
and certain internal financial analyses and forecasts for the Company and WAMU
prepared by their respective managements, including certain cost savings and
operating synergies projected by the management of WAMU to result from the
Merger. We also have held discussions with members of the senior management of
the Company and WAMU 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, we have reviewed the reported price and trading activity
for the Shares and WAMU Common Stock, compared certain financial and stock
market information for the Company and WAMU with similar information for certain
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 we considered appropriate.
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<PAGE>
We have relied upon the accuracy and completeness of all of the financial and
other information discussed with or reviewed by us and have assumed such
accuracy and completeness for purposes of rendering this opinion. In addition,
we have not reviewed individual credit files nor have we made an independent
evaluation or appraisal of the assets and liabilities of the Company or WAMU or
any of their subsidiaries (including any derivative or off balance sheet assets
or liabilities of the Company or WAMU or any of their subsidiaries) and we have
not been furnished with any such evaluation or appraisal. We are not experts in
the valuation of loan portfolios for purposes of assessing the adequacy of the
allowances for losses with respect thereto and have assumed, with your consent,
that these allowances for WAMU are adequate to cover all such losses. We have
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 the Company, WAMU or on the contemplated benefits of the
transaction. We are not expressing any opinion herein as to the prices at which
the Certificates may trade if and when they are issued. Our advisory services
and the opinion expressed herein are provided for the information and assistance
of the Board of Directors of the Company in connection with the Merger and such
opinion does not constitute a recommendation as to how any holder of Shares
should vote with respect to the Merger.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the Merger
Consideration to be received by the holders of Shares pursuant to the Agreement
is fair from a financial point of view to such holders.
Very truly yours,
/s/ GOLDMAN, SACHS & CO.
--------------------------------
(GOLDMAN, SACHS & CO.)
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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
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<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
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<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
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<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
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<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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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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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
Section 262 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 Section 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock under
the circumstances described in subsections (b) and (c) of this section. As used
in this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinarily meant by those
words and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251 (g) of this title), Section 252, Section 254, Section 257,
Section 258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc.or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of Section 251 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
Section 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or 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 Section 253 of this title is not owned by
the parent corporation immediately prior
<PAGE>
to the merger, appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections
(d) and (e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section.
Each stockholder electing to demand the appraisal of his shares shall
deliver to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of his shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or consolidation
shall not constitute such a demand. A stockholder electing to take such
action must do so by a separate written demand as herein provided. Within
10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not
voted in favor of or consented to the merger or consolidation of the date
that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section 228
or Section 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of stock
of such constituent corporation who are entitled to appraisal rights of the
approval of the merger or consolidation and that appraisal rights are
available for any or all shares of such class or series of stock of such
constituent corporation, and shall include in such notice a copy of this
section; provided that, if the notice is given on or after the effective
date of the merger or consolidation, such notice shall be given by the
surviving or resulting corporation to all such holders of any class or
series of stock of a constituent corporation that 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
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the notice is given prior to the effective date, the record date shall be
the close of business on the day next preceding the day on which the notice
is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw his demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and
(d) hereof, upon written request, shall be entitled to receive from the
corporation surviving the merger or resulting from the consolidation a statement
setting forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after his written request for such a
statement is received by the surviving or resulting corporation or within
10 days after expiration of the period for delivery of demands for appraisal
under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also 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
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<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.
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