Exhibit 2
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AGREEMENT AND PLAN OF MERGER
dated as of October 5, 1997
by and between
H. F. Ahmanson & Company
and
Coast Savings Financial, Inc.
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TABLE OF CONTENTS
Page
ARTICLE I
Certain Definitions
1.01 Certain Definitions.......................................1
ARTICLE II
The Merger
2.01 The Merger................................................7
2.02 Effective Date and Effective Time.........................8
ARTICLE III
Consideration; Exchange Procedures
3.01 Merger Consideration......................................8
3.02 Rights as Stockholders; Stock Transfers...................9
3.03 Fractional Shares.........................................9
3.04 Exchange Procedures.......................................9
3.05 Anti-Dilution Provisions.................................10
3.06 Options, Performance Shares and Stock
Appreciation Rights.....................................10
3.07 Dissenters Rights........................................12
ARTICLE IV
Actions Pending Acquisition
4.01 Forebearances of Coast...................................12
4.02 Forebearances of Ahmanson................................15
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Page
ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules.....................................15
5.02 Standard.................................................16
5.03 Representations and Warranties of Coast..................16
5.04 Representations and Warranties of Ahmanson...............26
ARTICLE VI
Covenants
6.01 Reasonable Best Efforts..................................30
6.02 Stockholder Approval.....................................30
6.03 Registration Statements..................................31
6.04 Press Releases...........................................32
6.05 Access; Information......................................32
6.06 Acquisition Proposals....................................33
6.07 Affiliate Agreements.....................................34
6.08 Takeover Laws............................................34
6.09 Certain Policies.........................................34
6.10 NYSE Listing.............................................35
6.11 Regulatory Applications..................................35
6.12 Indemnification..........................................35
6.13 Benefit Plan; Retention Bonuses..........................36
6.14 Accountants' Letters.....................................37
6.15 Notification of Certain Matters..........................37
6.16 Officers and Directors...................................37
6.17 CPR Trust................................................38
ARTICLE VII
Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to
Effect the Merger.......................................38
7.02 Conditions to Obligation of Coast........................39
7.03 Conditions to Obligation of Ahmanson.....................40
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Page
ARTICLE VIII
Termination
8.01 Termination..............................................41
8.02 Effect of Termination and Abandonment....................42
ARTICLE IX
Miscellaneous
9.01 Survival.................................................43
9.02 Waiver; Amendment........................................43
9.03 Counterparts.............................................43
9.04 Governing Law............................................43
9.05 Expenses.................................................43
9.06 Notices..................................................43
9.07 Entire Understanding; No Third Party Beneficiaries.......44
9.08 Interpretation; Effect...................................45
EXHIBIT A Form of Coast Affiliate Agreement
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AGREEMENT AND PLAN OF MERGER, dated as of October 5, 1997
(this "Agreement"), by and between Coast Savings Financial, Inc.
("Coast") and H. F. Ahmanson & Company ("Ahmanson").
RECITALS
A. Coast Savings Financial, Inc. Coast is a Delaware
corporation, having its principal place of business in Los
Angeles, California.
B. H. F. Ahmanson & Company. Ahmanson is a Delaware
corporation, having its principal place of business in Irwindale,
California.
C. Intentions of the Parties. It is the intention of the
parties to this Agreement that the business combination
contemplated hereby be treated as a "reorganization" under
Section 368 of the Internal Revenue Code of 1986, as amended (the
"Code").
D. Board Action. The respective Boards of Directors of each
of Ahmanson and Coast have determined that it is in the best
interests of their respective companies and their stockholders to
consummate the strategic business combination transaction
provided for herein.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants, representations, warranties and agreements
contained herein the parties agree as follows:
ARTICLE I
Certain Definitions
1.01 Certain Definitions. The following terms are used in
this Agreement with the meanings set forth below:
"Acquisition Proposal" means any tender or exchange offer,
proposal for a merger, consolidation or other business
combination involving Coast or any of its Subsidiaries or any
proposal or offer to acquire in any manner a substantial
equity interest in, or a substantial portion of the assets or
deposits of, Coast or any of its Subsidiaries, other than the
transactions contemplated by this Agreement.
"Agreement" means this Agreement, as amended or modified
from time to time in accordance with Section 9.02.
"Ahmanson" has the meaning set forth in the preamble to this
Agreement.
"Ahmanson Board" means the Board of Directors of Ahmanson.
"Ahmanson Common Stock" means the common stock, par value
$.01 per share, of Ahmanson.
"Ahmanson Preferred Stock" means the preferred stock, par
value $.01 per share, of Ahmanson, including its outstanding
shares of 8.40% Series C preferred stock and 6% Cumulative
Convertible Series D preferred stock.
"Ahmanson Registration Statement" has the meaning set forth
in Section 6.03.
"Ahmanson Rights" means the preferred share purchase rights
issued under the Ahmanson Rights Agreement.
"Ahmanson Rights Agreement" means the Rights Agreement,
dated as of July 26, 1988, between Ahmanson and Union Bank, as
rights agent.
"Ahmanson Stock" means, collectively, Ahmanson Common Stock
and Ahmanson Preferred Stock.
"Coast" has the meaning set forth in the preamble to this
Agreement.
"Coast Affiliate" has the meaning set forth in Section 6.07(a).
"Coast Board" means the Board of Directors of Coast.
"Coast By-Laws" means the By-laws of Coast.
"Coast Certificate" means the Certificate of Incorporation of
Coast.
"Coast Common Stock" means the common stock, par value $.01
per share, of Coast.
"Coast Federal" means Coast Federal Bank, Federal Savings Bank.
"Coast Meeting" has the meaning set forth in Section 6.02.
"Coast Performance Share Award Plan" means the Coast Performance
Share Plan for Key Employees.
"Coast Preferred Stock" means the serial preferred stock,
no par value per share, of Coast.
"Coast Rights" means the preferred share purchase rights
issued under the Coast Rights Agreement.
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"Coast Rights Agreement" means the Rights Agreement, dated
as of August 25, 1989, between Coast and Manufacturers Hanover
Trust of California, as rights agent.
"Coast Stock" means, collectively, Coast Common Stock and Coast
Preferred Stock.
"Coast Stock Option" has the meaning set forth in Section 3.06.
"Coast Stock Plans" means the 1996 Equity Incentive Plan and the
1985 Stock Option and Stock Appreciation Rights Plan.
"Code" has the meaning set forth in the recitals.
"Commitment" has the meaning set forth in Annex I hereto.
"Compensation and Benefit Plans" has the meaning set forth in
Section 5.03(m).
"Consultants" has the meaning set forth in Section 5.03(m).
"Costs" has the meaning set forth in Section 6.12(a).
"CPR Certificates" has the meaning set forth in Annex I hereto.
"CPR Prospectus" has the meaning set forth in Section 6.03.
"CPR Trust" means the trust formed for the purpose of issuing the
CPR Certificates.
"CPR Trust Registration Statement" has the meaning set forth in
Section 6.03.
"Delaware Secretary" has the meaning set forth in Section 2.01.
"DGCL" means the Delaware General Corporation Law.
"Directors" has the meaning set forth in Section 5.03(m).
"Disclosure Schedule" has the meaning set forth in Section 5.01.
"Dissenters' Shares" has the meaning set forth in Section 3.01(a).
"Dissenting Shareholders" has the meaning set forth in Section
3.01(a).
"Effective Date" means the date on which the Effective Time
occurs.
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"Effective Time" means the effective time of the Merger, as
provided for in Section 2.02.
"Employees" has the meaning set forth in Section 5.03(m).
"Environmental Laws" means all applicable local, state and
federal environmental, health and safety laws and regulations,
including, without limitation, the Resource Conservation and
Recovery Act, the Comprehensive Environmental Response,
Compensation, and Liability Act, the Clean Water Act, the
Federal Clean Air Act, and the Occupational Safety and Health
Act, each as amended, regulations promulgated thereunder, and
state counterparts.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"ERISA Affiliate" has the meaning set forth in Section 5.03(m).
"ERISA Affiliate Plan" has the meaning set forth in Section
5.03(m).
"Exchange Act" means the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder.
"Exchange Agent" has the meaning set forth in Section 3.04.
"Exchange Ratio" has the meaning set forth in Section 3.01.
"Expense Fund" has the meaning set forth in Annex I hereto.
"FDIC" means the Federal Deposit Insurance Corporation.
"FHLBSF" means the Federal Home Loan Bank of San Francisco.
"Governmental Authority" means any court, administrative
agency or commission or other federal, state or local
governmental authority or instrumentality.
"HOLA" means the Home Owners' Loan Act, as amended.
"Home Savings" means Home Savings of America, FSB.
"Indemnified Party" has the meaning set forth in Section 6.12(a).
"Insurance Amount" has the meaning set forth in Section 6.12(b).
"Insurance Policies" has the meaning set forth in Section 5.03(t).
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"Investment Company Act" means the Investment Company Act
of 1940, as amended, and the rules and regulations thereunder.
"IRS" has the meaning set forth in Section 5.03(m).
"Liens" means any charge, mortgage, pledge, security
interest, restriction, claim, lien, or encumbrance.
"Litigation Trustees" has the meaning set forth in Annex I hereto.
"Material Adverse Effect" means, with respect to Ahmanson
or Coast, any effect that (i) is material and adverse to the
financial position, results of operations or business of
Ahmanson and its Subsidiaries taken as a whole or Coast and
its Subsidiaries taken as a whole, respectively, or (ii) would
materially impair the ability of either Ahmanson or Coast to
perform its obligations under this Agreement or otherwise
materially impede the consummation of the Merger and the other
transactions contemplated by this Agreement, provided that
Material Adverse Effect shall not be deemed to include a
change in condition resulting from a general downturn in the
California economy.
"Merger" has the meaning set forth in Section 2.01.
"Merger Consideration" has the meaning set forth in Section 3.01.
"Multiemployer Plans" has the meaning set forth in Section 5.03(m).
"New Certificate" has the meaning set forth in Section 3.04.
"NYSE" means the New York Stock Exchange, Inc.
"Old Certificate" has the meaning set forth in Section 3.04.
"OTS" means the Office of Thrift Supervision.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Pension Plan" has the meaning set forth in Section 5.03(m).
"Person" means any individual, savings association, bank,
corporation, limited liability company, partnership,
association, joint-stock company, business trust or
unincorporated organization.
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"Previously Disclosed" by a party means information set forth
in its Disclosure Schedule.
"Proxy Statement" has the meaning set forth in Section 6.03.
"Registration Statements" has the meaning set forth in Section
6.03.
"Regulatory Authorities" has the meaning set forth in Section
5.03(i).
"Regulatory Documents" means documents filed with the SEC
or the OTS, as applicable, of the types referred to in Section
5.03(g) and Section 5.04(g).
"Replacement Option" has the meaning set forth in Section 3.06.
"Representatives" means, with respect to any Person, such
Person's directors, officers, employees, legal or financial
advisors or any representatives of such legal or financial
advisors.
"Rights" means, with respect to any Person, securities or
obligations convertible into or exercisable or exchangeable
for, or giving any person any right to subscribe for or
acquire, or any options, calls or commitments relating to, or
any stock appreciation right or other instrument the value of
which is determined in whole or in part by reference to the
market price or value of, shares of capital stock of such
person.
"SAIF" means the Savings Association Insurance Fund of the
Federal Deposit Insurance Corporation.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations thereunder.
"Subsidiary" and "Significant Subsidiary" have the meanings
ascribed to them in Rule 1-02 of Regulation S-X of the SEC.
"Surviving Corporation" has the meaning set forth in Section
2.01.
"Takeover Laws" has the meaning set forth in Section 5.03(o).
"Tax" and "Taxes" means all federal, state, local or
foreign taxes, charges, fees, levies or other assessments,
however denominated, including, without limitation, all net
income, gross income, gains, gross receipts, sales, use, ad
valorem, goods and services, capital, production,
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transfer, franchise, windfall profits, license, withholding,
payroll, employment, disability, employer health, excise,
estimated, severance, stamp, occupation, property,
environmental, unemployment or other taxes, custom duties,
fees, assessments or charges of any kind whatsoever, together
with any interest and any penalties, additions to tax or
additional amounts imposed by any taxing authority whether
arising before, on or after the Effective Date.
"Tax Returns" means any return, amended return or other
report (including elections, declarations, disclosures,
schedules, estimates and information returns) required to be
filed with respect to any Tax.
"Treasury Stock" shall mean shares of Coast Stock held by
Coast or any of its Subsidiaries or by Ahmanson or any of its
Subsidiaries, in each case other than in a fiduciary
(including custodial or agency) capacity or as a result of
debts previously contracted in good faith.
"Trust Agreement" has the meaning set forth in Annex I hereto.
"Trust Indenture Act" means the Trust Indenture Act of
1939, as amended, and the rules and regulations thereunder.
ARTICLE II
The Merger
2.01 The Merger. (a) At the Effective Time, Coast shall
merge with and into Ahmanson (the "Merger"), the separate corporate
existence of Coast shall cease and Ahmanson shall survive and
continue to exist as a Delaware corporation (Ahmanson, as the
surviving corporation in the Merger, sometimes being referred to
herein as the "Surviving Corporation"). Ahmanson may at any time
prior to the mailing of the Proxy Statement change the method of
effecting the combination with Coast (including, without
limitation, the provisions of this Article II) if and to the
extent it deems such change to be necessary, appropriate or
desirable; provided, however, that no such change shall (i) alter
or change the amount or kind of consideration to be issued to
holders of Coast Common Stock as provided for in this Agreement,
(ii) adversely affect the tax treatment of Coast's stockholders
as a result of the transactions contemplated hereby or any
payments made with respect to CPR Certificates or (iii)
materially impede or delay consummation of the transactions
contemplated by this Agreement.
(b) Subject to the satisfaction or waiver of the conditions
set forth in Article VII, the Merger shall become effective upon
the occurrence of the filing in the office of the Secretary of
State of Delaware (the "Delaware Secretary") of a certificate of
merger in accordance with
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Section 251 of the DGCL or such later date and time as may be set
forth in such certificate. The Merger shall have the effects
prescribed in the DGCL.
(c) Articles of Incorporation and By-Laws. The articles of
incorporation and by-laws of Ahmanson immediately after the
Merger shall be those of Ahmanson as in effect immediately prior
to the Effective Time.
(d) Directors and Officers of the Surviving Corporation.
Subject to Section 6.16, the directors and officers of Ahmanson
immediately after the Merger shall be the directors and officers
of Ahmanson immediately prior to the Effective Time, until such
time as their successors shall be duly elected and qualified.
2.02 Effective Date and Effective Time. Subject to the
satisfaction or waiver of the conditions set forth in Article
VII, the parties shall cause the effective date of the Merger
(the "Effective Date") to occur on (i) the fifth business day to
occur after the last of the conditions set forth in Section 7.01
shall have been satisfied or waived in accordance with the terms
of this Agreement (or, at the election of Ahmanson, on the last
business day of the month in which such day occurs or, if such
last business day occurs on one of the last five business days of
such month, on the last business day of the succeeding month) or
(ii) such other date to which the parties may agree in writing.
The time on the Effective Date when the Merger shall become
effective is referred to as the "Effective Time."
ARTICLE III
Consideration; Exchange Procedures
3.01 Merger Consideration. Subject to the provisions of
this Agreement, at the Effective Time, and except in the case of
the second paragraph of (a) below, automatically by virtue of the
Merger and without any action on the part of any Person:
(a) Outstanding Coast Common Stock and Coast Rights. Each
share (excluding (i) Treasury Stock and (ii) shares held by
holders of Coast Common Stock (each a "Dissenting Shareholder")
who perfect their rights to dissent under the DGCL (the
"Dissenters' Shares")) of Coast Common Stock issued and
outstanding immediately prior to the Effective Time, together
with each associated Coast Right, shall become and be converted
into the right to receive 0.8082 of a share of Ahmanson Common
Stock (the "Exchange Ratio") (with the appropriate number of
Ahmanson Rights as provided in the Ahmanson Rights Agreement,
whether or not such Ahmanson Rights shall still be attached to
such shares). The Exchange Ratio shall be subject to adjustment
as set forth in Section 3.05.
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Ahmanson shall enter into the Commitment with the CPR Trust
at or prior to the Effective Time and effective at the Effective
Time. The shares of Ahmanson Common Stock to be issued hereunder
and the entering into of the Commitment shall constitute the
"Merger Consideration."
(b) Outstanding Ahmanson Stock. Each share of Ahmanson
Stock issued and outstanding immediately prior to the Effective
Time shall remain issued and outstanding and unaffected by the
Merger.
(c) Treasury Shares. Each share of Coast Stock held as
Treasury Stock immediately prior to the Effective Time shall
be canceled and retired at the Effective Time and no
consideration shall be issued in exchange therefor.
3.02 Rights as Stockholders; Stock Transfers. At the
Effective Time, holders of Coast Common Stock shall cease to be, and
shall have no rights as, stockholders of Coast, other than to receive
any dividend or other distribution with respect to such Coast
Common Stock with a record date occurring prior to the Effective
Time and the consideration provided under this Article III. After
the Effective Time, there shall be no transfers on the stock
transfer books of Coast or the Surviving Corporation of shares of
Coast Stock.
3.03 Fractional Shares. Notwithstanding any other provision
hereof, no fractional shares of Ahmanson Common Stock and no
certificates or scrip therefor, or other evidence of ownership
thereof, will be issued in the Merger; instead, Ahmanson shall
pay to each holder of Coast Common Stock who would otherwise be
entitled to a fractional share of Ahmanson Common Stock (after
taking into account all Old Certificates delivered by such
holder) an amount in cash (without interest) determined by
multiplying such fraction by the average of the last sale prices
of Ahmanson Common Stock, as reported by the NYSE Composite
Transactions Reporting System (as reported in The Wall Street
Journal or, if not reported therein, in another authoritative
source), for the five NYSE trading days immediately preceding the
Effective Date.
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3.04 Exchange Procedures.
(a) At or prior to the Effective Time, Ahmanson shall
deposit, or shall cause to be deposited, with a depository
institution of recognized standing selected by Ahmanson (in such
capacity, the "Exchange Agent"), for the benefit of the holders
of certificates formerly representing shares of Coast Common
Stock ("Old Certificates") to be exchanged in accordance with
this Article III, certificates representing the shares of
Ahmanson Common Stock ("New Certificates") to which the holders
of the Old Certificates are entitled pursuant to this Agreement,
together with an estimated amount of cash to be paid pursuant to
this Article III in exchange for outstanding shares of Coast
Common Stock.
(b) As promptly as practicable after the Effective Date,
Ahmanson shall send or cause to be sent to each former holder of
record of shares of Coast Common Stock immediately prior to the
Effective Time transmittal materials for use in exchanging such
stockholder's Old Certificates for the consideration set forth in
this Article III. Ahmanson shall cause the New Certificates
and/or any check in respect of any fractional share interests or
dividends or distributions which such person shall be entitled to
receive to be delivered to such stockholder upon delivery to the
Exchange Agent of Old Certificates representing such shares of
Coast Common Stock (or indemnity reasonably satisfactory to
Ahmanson and the Exchange Agent, if any of such certificates are
lost, stolen or destroyed) owned by such stockholder. No interest
will be paid on any such cash to be paid in lieu of fractional
share interests or in respect of dividends or distributions which
any such person shall be entitled to receive pursuant to this
Article III upon such delivery.
(c) Notwithstanding the foregoing, neither the Exchange
Agent nor any party hereto shall be liable to any former holder
of Coast Common Stock for any amount properly delivered to a
public official pursuant to applicable abandoned property,
escheat or similar laws.
(d) At the election of Ahmanson, no dividends or other
distributions with respect to Ahmanson Common Stock with a record
date occurring after the Effective Time shall be paid to the
holder of any unsurrendered Old Certificate representing shares
of Coast Common Stock converted in the Merger into the right to
receive shares of such Ahmanson Common Stock. Upon surrender of
Old Certificates (or indemnity reasonably satisfactory to
Ahmanson and the Exchange Agent, if any of such certificates are
lost, stolen or destroyed) in accordance with this Section 3.04,
the record holder thereof shall be entitled to receive any such
dividends or other distributions, without any interest thereon,
which theretofore had become payable with respect to shares of
Ahmanson Common Stock such holder had the right to receive upon
surrender of Old Certificates (or delivery of such indemnity).
3.05 Anti-Dilution Provisions. In the event Ahmanson changes
(or establishes a record date for changing) the number or kind of
shares of Ahmanson Common Stock issued and outstanding prior to
the Effective Date as a result of a stock split, stock dividend,
recapitalization,
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reclassification, reorganization or similar transaction with
respect to the outstanding Ahmanson Common Stock and the record
date therefor shall be prior to the Effective Date, the Exchange
Ratio shall be proportionately adjusted in such manner as Coast
and Ahmanson shall agree, which adjustment may include, as
appropriate, the issuance of securities, property or cash on the
same basis as that on which any of the foregoing shall have been
issued, distributed or paid to the holders of Ahmanson Common
Stock generally.
3.06 Options, Performance Shares and Stock Appreciation
Rights. (a) At the Effective Time, each outstanding option to
purchase shares of Coast Common Stock under the Coast Stock Plans
(each, a "Coast Stock Option"), whether vested or unvested, shall
be converted into an option (a "Replacement Option") to acquire,
on the same terms and conditions as were applicable under such
Coast Stock Option, (a) the number of shares of Ahmanson Common
Stock equal to (i) the number of shares of Coast Common Stock
subject to the Coast Stock Option, multiplied by (ii) the
Exchange Ratio (such product rounded down to the nearest whole
number), at an exercise price per share (rounded up to the
nearest whole cent) equal to (A) the aggregate exercise price for
the shares of Coast Common Stock which were purchasable pursuant
to such Coast Stock Option divided by (B) the number of full
shares of Ahmanson Common Stock subject to such Replacement
Option in accordance with the foregoing and (b) one CPR
Certificate for each share of Coast Common Stock that would have
been issuable upon exercise in full of such Coast Stock Option.
At or prior to the Effective Time, Coast shall take all necessary
action, if any, including obtaining any necessary consents from
optionees, with respect to the Coast Stock Plans to permit the
replacement of the outstanding Coast Stock Options by Replacement
Options pursuant to this Section and to permit Ahmanson to assume
the Coast Stock Plans. At the Effective Time, Ahmanson shall
assume the Coast Stock Plans; provided, that such assumption
shall be only in respect of the Replacement Options and that
Ahmanson shall have no obligation with respect to any awards
under the Coast Stock Plans other than the Replacement Options
and shall have no obligation to make any additional grants or
awards under such assumed Coast Stock Plans.
(b) Immediately prior to the Effective Time, each
outstanding performance share award under the Coast Performance
Share Award Plan shall be canceled and only entitle the holder
thereof to receive for each share of Coast Common Stock with
respect to such award (i) one CPR Certificate and (ii) an amount
in cash equal to the difference between (A) the result of
multiplying the Exchange Ratio by the average of the last sale
prices of one share of Ahmanson Stock, as reported by the NYSE
Composite Transactions Reporting System (as reported in The Wall
Street Journal or, if not reported therein, in another
authoritative source) for the five NYSE trading days immediately
prior to the Effective Date and (B) the base price under such
award. Prior to the Effective Date, Coast shall take all
necessary action with respect to such cancellation, including
obtaining any necessary consents from the holders of such awards.
(c) Immediately prior to the Effective Time, each
outstanding stock appreciation right under the Coast Stock Plans
shall be canceled and only entitle the holder thereof to receive for
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each share of Coast Stock with respect to such stock appreciation
right (i) one CPR Certificate and (ii) an amount in cash equal to
the difference between (A) the result of multiplying the Exchange
Ratio by the average of the last sale prices of one share of
Ahmanson Stock, as reported by the NYSE Composite Transactions
Reporting System (as reported in The Wall Street Journal or, if
not reported therein, in another authoritative source) for the
five NYSE trading days immediately prior to the Effective Date
and (B) the ▇▇▇▇▇ ▇▇▇▇▇ of such stock appreciation right. Prior
to the Effective Date, Coast shall take all necessary action with
respect to such cancellation, including obtaining any necessary
consents from the holders of such stock appreciation rights.
(d) If the necessary consents referred to in paragraphs (b)
and (c) above are not obtained, the holders who do not consent
shall only be entitled to (i) with respect to each outstanding
performance share award under the Coast Performance Share Award
Plan an amount in cash equal to the result of multiplying (A) the
difference between the average of the last sale prices of one
share of Coast Stock, as reported by the NYSE Composite
Transactions Reporting System (as reported in The Wall Street
Journal or, if not reported therein, in another authoritative
source) for the five NYSE trading days immediately prior to the
Effective Date and the base price under such award by (B) the
total number of shares of Coast Stock with respect to such award
and (ii) with respect to each outstanding stock appreciation
right under the Coast Stock Plans, an amount in cash equal to the
result of multiplying (A) the difference between the average of
the last sale prices of one share of Coast Stock, as reported by
the NYSE Composite Transactions Reporting System (as reported in
The Wall Street Journal or, if not reported therein, in another
authoritative source) for the five NYSE trading days immediately
prior to the Effective Date and the ▇▇▇▇▇ ▇▇▇▇▇ of such stock
appreciation right by (B) the total number of shares of Coast
Stock with respect to such stock appreciation right. All CPR
Certificates with respect to the performance share awards and
stock appreciation rights referred to in this Section shall be
issued to Ahmanson. In the event that between the date hereof and
the Effective Date any performance share awards or stock
appreciation rights are exercised, Ahmanson will be entitled to
retain any CPR Certificates that would otherwise have been
issuable with respect to such performance share awards or stock
appreciation rights upon such exercise at the Effective Date.
3.07 Dissenters Rights. Any Dissenting Shareholder who shall
be entitled to be paid the "fair value" of his or her Dissenters'
Shares, as provided in Section 262 of the DGCL, shall not be
entitled to the Merger Consideration in respect thereof provided
for under Section 3.01(a) unless and until such Dissenting
Shareholder shall have failed to perfect or shall have withdrawn
or lost such Dissenting Shareholder's right to dissent from the
Merger under the DGCL, and shall be entitled to receive only the
payment provided for by Section 262 of the DGCL with respect to
such Dissenters' Shares. If any Dissenting Shareholder shall fail
to perfect or shall have been withdrawn or lost such right to
dissent, the Dissenters' Shares held by such Dissenting
Shareholder shall thereupon be treated as though such Dissenters'
Shares had been converted into the right to receive the Merger
Consideration pursuant to Section 3.01(a) hereof.
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ARTICLE IV
Actions Pending Acquisition
4.01 Forebearances of Coast. From the date hereof until the
Effective Time, except as expressly contemplated by this
Agreement or as set forth in paragraph 4.01 of Coast's Disclosure
Schedule, without the prior written consent of Ahmanson, Coast
will not, and will cause each of its Subsidiaries not to:
(a) Ordinary Course. Conduct the business of Coast and its
Subsidiaries other than in the ordinary and usual course or
fail to use reasonable efforts to preserve intact their
business organizations and assets and maintain their rights,
franchises and existing relations with customers, suppliers,
employees and business associates, or take any action
reasonably likely to have an adverse effect upon Coast's
ability to perform any of its material obligations under this
Agreement.
(b) Capital Stock. Other than pursuant to Rights
Previously Disclosed and outstanding on the date hereof, (i)
issue, sell or otherwise permit to become outstanding, or
authorize the creation of, any additional shares of Coast
Stock or any Rights, (ii) enter into any agreement with
respect to the foregoing, or (iii) permit any additional
shares of Coast Stock to become subject to new grants of
employee or director stock options, other Rights or similar
stock-based employee rights.
(c) Dividends, Etc. (a) Make, declare, pay or set aside
for payment any dividend (other than dividends from wholly
owned Subsidiaries to Coast or another wholly owned Subsidiary
of Coast) on or in respect of, or declare or make any
distribution on any shares of Coast Stock or (b) directly or
indirectly adjust, split, combine, redeem, reclassify,
purchase or otherwise acquire, any shares of its capital
stock.
(d) Compensation; Employment Agreements; Etc. Enter into
or amend or renew any employment, consulting, severance or
similar agreements or arrangements with any director, officer
or employee of Coast or its Subsidiaries, or hire any new
employees at the rank of senior vice president or above, or
grant any salary or wage increase or increase any employee
benefit (including incentive or bonus payments), except (i)
for normal individual increases in compensation to employees
(other than any senior vice presidents or any employees
ranking senior to senior vice presidents) in the ordinary
course of business consistent with past practice as Previously
Disclosed, (ii) for other changes that are required by
applicable law, (iii) to satisfy Previously Disclosed
contractual obligations existing as of the date hereof, or
(iv) for grants of awards to newly hired employees consistent
with past practice as Previously Disclosed, (v) agreements to
provide retention bonuses to employees made pursuant to
Section 6.13(b), (vi) the annual rollover of executive
employment agreements Previously
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Disclosed or (vii) agreements to provide bonuses for the 1997
calendar year consistent with past practice up to an aggregate
of $1.9 million.
(e) Benefit Plans. Enter into, establish, adopt or amend
(except (i) as may be required by applicable law, (ii) to
satisfy Previously Disclosed contractual obligations existing
as of the date hereof or (iii) as otherwise provided herein)
any pension, retirement, stock option, stock purchase,
savings, profit sharing, deferred compensation, consulting,
bonus, group insurance or other employee benefit, incentive or
welfare contract, plan or arrangement, or any trust agreement
(or similar arrangement) related thereto, in respect of any
director, officer or employee of Coast or its Subsidiaries, or
take any action to accelerate the vesting or exercisability of
stock options, restricted stock or other compensation or
benefits payable thereunder.
(f) Dispositions. Except as Previously Disclosed, sell,
transfer, mortgage, encumber or otherwise dispose of or
discontinue any of its assets, deposits, business or
properties except in the ordinary course of business and in a
transaction that is not material to it and its Subsidiaries
taken as a whole.
(g) Acquisitions. Except as Previously Disclosed, acquire
(other than by way of foreclosures or acquisitions of control
in a bona fide fiduciary capacity or in satisfaction of debts
previously contracted in good faith, in each case in the
ordinary and usual course of business consistent with past
practice) all or any portion of, the assets, business,
deposits or properties of any other entity except in the
ordinary course of business and in a transaction that is not
material to it and its Subsidiaries taken as a whole.
(h) Governing Documents. Amend the Coast Certificate,
Coast By-laws or the certificate of incorporation or by-laws
(or similar governing documents) of any of Coast's Subsidiaries.
(i) Accounting Methods. Implement or adopt any change in
its accounting principles, practices or methods, other than
as may be required by generally accepted accounting
principles.
(j) Contracts. (i) Amend, or take any action adverse to
Ahmanson with respect to, the Coast Rights Agreement or (ii),
except in the ordinary course of business consistent with past
practice or with the consent of Ahmanson (which consent shall
not be unreasonably withheld or delayed), enter into or
terminate any contract material to its assets, business or
operations or amend or modify in any material respect any such
existing material contract.
(k) Claims. Except in the ordinary course of business
consistent with past practice or with the consent of Ahmanson
(which consent shall not be unreasonably withheld or delayed),
settle any claim, action or proceeding against it, except for
any claim, action or
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proceeding involving solely money damages in an amount,
individually or in the aggregate for all such settlements,
that is not material to Coast and its Subsidiaries, taken as a
whole and that does not create precedent for claims that are
reasonably likely to be material to Coast and its Subsidiaries
taken as a whole.
(l) Adverse Actions. (a) Take any action while knowing
that such action would, or is reasonably likely to, prevent or
impede the Merger from qualifying as a reorganization within
the meaning of Section 368 of the Code; or (b) take any action
that is intended or is known to be reasonably likely to result
in (i) any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material
respect at any time at or prior to the Effective Time, (ii)
any of the conditions to the Merger set forth in Article VII
not being satisfied or (iii) a material violation of any
provision of this Agreement except, in each case, as may be
required by applicable law or regulation.
(m) Risk Management. Except as required by applicable law or
regulation or with the consent of Ahmanson (which consent
shall not be unreasonably withheld or delayed), (i) implement
or adopt any material change in its interest rate and other
risk management policies, procedures or practices or (ii) fail
to follow in all material respects its existing policies or
practices with respect to managing its exposure to interest
rate and other risk.
(n) Indebtedness. Incur any indebtedness for borrowed money
other than in the ordinary course of business.
(o) Commitments. Agree or commit to do any of the foregoing.
4.02 Forebearances of Ahmanson. From the date hereof until
the Effective Time, except as expressly contemplated by this
Agreement, without the prior written consent of Coast, Ahmanson
will not:
(a) Dividends. Make, declare, pay or set aside for payment
any dividends other than quarterly dividends in an amount, and
with record and payment dates, consistent with past practice
(provided that Ahmanson may raise its regular quarterly
dividend rate by an amount not exceeding 20%).
(b) Adverse Actions. (a) Take any action while knowing
that such action would, or is reasonably likely to, prevent or
impede the Merger from qualifying as a reorganization within
the meaning of Section 368 of the Code; (b) repurchase any
Ahmanson Stock such that an Ahmanson stockholder vote would be
required for consummation of the Merger or which would have
the effect of a recapitalization of Ahmanson or at prices
reflecting a significant premium to the prices at which the
Ahmanson Common Stock is then trading; (c) take any action
that is intended or is known to be reasonably likely to result
in (i) any of its representations and warranties set forth in
this Agreement being or becoming untrue in any
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material respect at any time at or prior to the Effective
Time, (ii) any of the conditions to the Merger set forth in
Article VII not being satisfied or (iii) a material violation
of any provision of this Agreement except, in each case, as
may be required by applicable law or regulation; or
(c) Commitments. Agree or commit to do any of the foregoing.
ARTICLE V
Representations and Warranties
5.01 Disclosure Schedules. On or prior to the date hereof,
Coast has delivered to Ahmanson a schedule (its "Disclosure
Schedule") setting forth, among other things, items the
disclosure of which is necessary or appropriate either in
response to an express disclosure requirement contained in a
provision hereof or as an exception to one or more
representations or warranties contained in Section 5.03 or to one
or more of its covenants contained in Article IV; provided, that
the mere inclusion of an item in a Disclosure Schedule as an
exception to a representation or warranty shall not be deemed an
admission by Coast that such item represents a material exception
or fact, event or circumstance or that such item is reasonably
likely to result in a Material Adverse Effect. Coast represents
and warrants that its Disclosure Schedule is true and correct in
all material respects and does not omit any item or information
material to the applicable paragraph in Section 5.03 and required
to be disclosed therein.
5.02 Standard. No representation or warranty of Coast or
Ahmanson contained in Section 5.03 or 5.04, shall be deemed
untrue or incorrect, and no party hereto shall be deemed to have
breached a representation or warranty, as a consequence of the
existence of any fact, event or circumstance unless such fact,
circumstance or event, individually or taken together with all
other facts, events or circumstances inconsistent with any
representation or warranty contained in Section 5.03 or 5.04 has
had or is reasonably likely to have a Material Adverse Effect on
the party making such representation or warranty.
5.03 Representations and Warranties of Coast. Subject to
Sections 5.01 and 5.02 and except as Previously Disclosed in the
applicable paragraph of its Disclosure Schedule, or any other
paragraph of the Disclosure Schedule so long as it is clear from
the context of the disclosure that the disclosure in such other
paragraph of the Disclosure Schedule is also applicable to the
paragraph of this Section 5.03 in question, Coast hereby
represents and warrants to Ahmanson:
(a) Organization, Standing and Authority. Coast is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Coast is
duly qualified to do business and is in good standing in the
states of the United States and any foreign jurisdictions
where its ownership or leasing of property or assets or the
conduct of its
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business requires it to be so qualified. Coast is duly
registered as a savings and loan holding company under HOLA.
Coast Federal is a qualified thrift lender pursuant to Section
10(m) of HOLA and its deposits are insured by the FDIC through
the SAIF to the fullest extent permitted by law. Coast Federal
is a member in good standing of the FHLBSF.
(b) Coast Stock. As of the date hereof, the authorized
capital stock of Coast consists solely of (i) 100,000,000
shares of Coast Common Stock, of which no more than 18,645,327
shares are outstanding as of the date hereof and (ii)
50,000,000 shares of Coast Preferred Stock, of which no shares
are outstanding as of the date hereof. As of the date hereof,
no shares of Coast Common Stock and no shares of Coast
Preferred Stock were held in treasury by Coast or otherwise
owned by Coast or its Subsidiaries. The outstanding shares of
Coast Common Stock have been duly authorized and are validly
issued and outstanding, fully paid and nonassessable, and
subject to no preemptive rights (and were not issued in
violation of any preemptive rights). As of the date hereof,
except as Previously Disclosed, there are no shares of Coast
Stock authorized and reserved for issuance, Coast does not
have any Rights issued or outstanding with respect to Coast
Stock, and Coast does not have any commitment to authorize,
issue or sell any Coast Stock or Rights. The number of shares
of Coast Common Stock which are issuable and reserved for
issuance upon exercise of Coast Stock Options as of the date
hereof (and the exercise price thereof) are Previously
Disclosed in Coast's Disclosure Schedule.
(c) Subsidiaries. (i)(A) Coast has Previously Disclosed in
its Disclosure Schedule a list of all of its Subsidiaries together
with the jurisdiction of organization of each such Subsidiary,
(B) except as Previously Disclosed, it owns, directly or
indirectly, all the issued and outstanding equity securities
of each of its Subsidiaries, (C) no equity securities of any of
its Subsidiaries are or may become required to be issued
(other than to it or its wholly-owned Subsidiaries) by reason
of any Right or otherwise, (D) there are no contracts,
commitments, understandings or arrangements by which any of
such Subsidiaries is or may be bound to sell or otherwise
transfer any equity securities of any such Subsidiaries (other
than to it or its wholly-owned Subsidiaries), (E) there are no
contracts, commitments, understandings, or arrangements
relating to its rights to vote or to dispose of such
securities and (F) all the equity securities of each Subsidiary
held by Coast or its Subsidiaries are fully paid and
nonassessable and are owned by Coast or its Subsidiaries free
and clear of any Liens.
(ii) Coast does not own beneficially, directly or
indirectly, any equity securities or similar interests of any
Person (other than in a fiduciary capacity or in connection
with the foreclosure of security interests or as a result of
similar enforcement remedies in connection with loans made in
the ordinary course of business), or any interest in a
partnership or joint venture of any kind, other than in its
Subsidiaries.
(iii) Each of Coast's Subsidiaries has been duly organized
and is validly existing in good standing under the laws of the
jurisdiction of its organization, and is duly qualified to
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do business and in good standing in the jurisdictions where
its ownership or leasing of property or the conduct of its
business requires it to be so qualified.
(d) Corporate Power. Coast and each of its Subsidiaries
has the corporate power and authority to carry on its business
as it is now being conducted and to own all its properties and
assets; and Coast has the corporate power and authority to
execute, deliver and perform its obligations under this
Agreement and to consummate the transactions contemplated
hereby.
(e) Corporate Authority. Subject in the case of this
Agreement to receipt of the requisite approval of the
agreement of merger set forth in this Agreement by the holders
of a majority of the outstanding shares of Coast Common Stock
entitled to vote thereon (which is the only stockholder vote
required thereon), this Agreement and the transactions
contemplated hereby have been authorized by all necessary
corporate action of Coast and the Coast Board on or prior to
the date hereof. This Agreement is a valid and legally binding
obligation of Coast, enforceable in accordance with its terms
(except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, fraudulent
transfer and similar laws of general applicability relating to
or affecting creditors' rights or by general equity
principles). The Coast Board has received the written opinion
of ▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co. to the effect that as of the date
hereof the consideration to be received by the holders of
Coast Common Stock in the Merger is fair to the holders of
Coast Common Stock from a financial point of view.
(f) Regulatory Approvals; No Defaults. (i) No consents or
approvals of, or filings or registrations with, any
Governmental Authority or with any third party are required to
be made or obtained by Coast or any of its Subsidiaries in
connection with the execution, delivery or performance by
Coast of this Agreement or to consummate the Merger except for
(A) filings and approvals of applications with and by the OTS,
(B) filings with the SEC and state securities authorities and
the approval of this Agreement by the stockholders of Coast,
and (C) the filing of a certificate of merger with the
Delaware Secretary pursuant to the DGCL. As of the date
hereof, Coast is not aware of any reason why the approvals set
forth in Section 7.01(b) will not be received without the
imposition of a condition, restriction or requirement of the
type described in Section 7.01(b).
(ii) Subject to receipt of the regulatory approvals
referred to in the preceding paragraph, and expiration of
related waiting periods, and required filings under federal
and state securities laws, the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A)
constitute a breach or violation of, or a default under, or
give rise to any Lien, any acceleration of remedies or any
right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of Coast or of any of its
Subsidiaries or to which Coast or any of its Subsidiaries or
properties is
-18-
subject or bound, (B) constitute a breach or violation of, or
a default under, the Coast Certificate or the Coast By-Laws,
or (C) require any consent or approval under any such law,
rule, regulation, judgment, decree, order, governmental permit
or license, agreement, indenture or instrument.
(g) Financial Reports and Regulatory Documents. (i) Coast's
Annual Reports on Form 10-K for the fiscal years ended December
31, 1994, 1995 and 1996, and all other reports, registration
statements, definitive proxy statements or information statements
filed or to be filed by it or any of its Subsidiaries subsequent
to December 31, 1994 under the Securities Act, under Section
13(a), 13(c), 14 or 15(d) of the Exchange Act or under the
securities regulations of the OTS, in the form filed or to be
filed (collectively, Coast's "Regulatory Documents") with the SEC
or the OTS, as applicable, as of the date filed, (A) complied or
will comply in all material respects as to form with the
applicable requirements under the Securities Act, the Exchange
Act or the securities regulations of the OTS, as the case may be,
and (B) did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; and each of the consolidated balance sheets contained
in or incorporated by reference into any such Regulatory Document
(including the related notes and schedules thereto) fairly
presents, or will fairly present, the consolidated financial
position of Coast and its Subsidiaries as of its date, and each
of the consolidated statements of income and changes in
stockholders' equity and cash flows or equivalent statements in
such Regulatory Documents (including any related notes and
schedules thereto) fairly presents, or will fairly present, the
consolidated results of operations, changes in stockholders'
equity and changes in cash flows, as the case may be, of Coast
and its Subsidiaries for the periods to which they relate, in
each case in accordance with generally accepted accounting
principles consistently applied during the periods involved,
except in each case as may be noted therein, subject to normal
year-end audit adjustments and the lack of complete footnote
disclosure in the case of unaudited statements.
(ii) Except as Previously Disclosed in its Disclosure
Schedule, since December 31, 1996, Coast and its Subsidiaries
have not incurred any liability other than in the ordinary
course of business consistent with past practice (other than
liabilities (A) with respect to expenses related to this
Agreement and the transactions contemplated hereby and (B)
with respect to other possible merger transactions all of
which have been expensed or reserved for).
(iii) Since December 31, 1996, (A) Coast and its Subsidiaries
have conducted their respective businesses in the ordinary and
usual course consistent with past practice (excluding the
incurrence of expenses related to this Agreement and the
transactions contemplated hereby and other possible merger
transactions) and (B) no event has occurred or circumstance
arisen that, individually or taken together with all other
facts, circumstances
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and events (described in any paragraph of Section 5.03 or
otherwise), is reasonably likely to have a Material Adverse
Effect with respect to Coast.
(h) Litigation. No litigation, claim or other proceeding
before any court or governmental agency is pending against Coast
or any of its Subsidiaries and, to Coast's knowledge, no such
litigation, claim or other proceeding has been threatened.
(i) Regulatory Matters. (i) Neither Coast nor any of its
Subsidiaries or properties is a party to or is subject to any
order, decree, agreement, memorandum of understanding or similar
arrangement with, or a commitment letter or similar submission
to, or extraordinary supervisory letter from, any federal or
state governmental agency or authority charged with the
supervision or regulation of financial institutions or issuers of
securities or engaged in the insurance of deposits (including,
without limitation, the OTS and the FDIC) or the supervision or
regulation of it or any of its Subsidiaries (collectively, the
"Regulatory Authorities").
(ii) Neither Coast nor any of its Subsidiaries has been
advised by any Regulatory Authority that such Regulatory
Authority is contemplating issuing or requesting (or is
considering the appropriateness of issuing or requesting) any
such order, decree, agreement, memorandum of understanding,
commitment letter, supervisory letter or similar submission.
(j) Compliance with Laws. Coast and each of its Subsidiaries:
(i) is in compliance with all applicable federal, state,
local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable thereto or
to the employees conducting such businesses, including,
without limitation, the Equal Credit Opportunity Act, the
Fair Housing Act, the Community Reinvestment Act, the Home
Mortgage Disclosure Act and all other applicable fair
lending laws and other laws relating to discriminatory
business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and
registrations with, all Governmental Authorities that are
required in order to permit them to own or lease their
properties and to conduct their businesses substantially as
presently conducted; all such permits, licenses,
certificates of authority, orders and approvals are in full
force and effect; and, to Coast's knowledge, no suspension
or cancellation of any of them is threatened; and
(iii) has received, since December 31, 1996, no
notification or communication from any Governmental Authority
(A) asserting that Coast or any of its Subsidiaries is not in
compliance with any of the statutes, regulations, or
ordinances which such Governmental Authority enforces or
(B) threatening to revoke any license, franchise, permit,
or governmental authorization (nor, to Coast's knowledge,
do any grounds for any of the foregoing exist).
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(k) Material Contracts; Defaults. (i) Except for those
agreements and other documents filed as exhibits to its
Regulatory Documents, neither Coast nor any of its
Subsidiaries is a party to, bound by or subject to any
agreement, contract, arrangement, commitment or understanding
(whether written or oral) (i) that is a "material contract"
within the meaning of Item 601(b)(10) of the SEC's Regulation
S-K or (ii) that materially restricts the conduct of business
by it or any of its Subsidiaries. Neither Coast nor any of its
Subsidiaries is in default in any material respect under any
material contract, agreement, commitment, arrangement, lease,
insurance policy or other instrument to which it is a party,
by which its respective assets, business, or operations may be
bound or affected, or under which it or its respective assets,
business, or operations receives benefits, or under any other
contract if such default could reasonably be expected to have
a Material Adverse Effect on Coast, and in either case there
has not occurred any event that, with the lapse of time or the
giving of notice or both, would constitute such a default.
(l) No Brokers. No action has been taken by Coast that would
give rise to any valid claim against any party hereto for a
brokerage commission, finder's fee or other like payment with
respect to the transactions contemplated by this Agreement,
excluding a Previously Disclosed fee to be paid to ▇▇▇▇▇▇▇,
▇▇▇▇▇ & Co.
(m) Employee Benefit Plans. (i) Section 5.03(m)(i) of Coast's
Disclosure Schedule contains a complete and accurate list of
all existing bonus, incentive, deferred compensation, pension,
retirement, profit-sharing, thrift, savings, employee stock
ownership, stock bonus, stock purchase, restricted stock,
stock option, severance, welfare and fringe benefit plans,
employment or severance agreements and all similar practices,
policies and arrangements in which any employee or former
employee (the "Employees"), consultant or former consultant
(the "Consultants") or director or former director (the
"Directors") of Coast or any of its Subsidiaries participates
or to which any such Employees, Consultants or Directors are a
party (the "Compensation and Benefit Plans"). Neither Coast
nor any of its Subsidiaries has any commitment to create any
additional Compensation and Benefit Plan or to modify or
change any existing Compensation and Benefit Plan.
(ii) Each Compensation and Benefit Plan has been operated and
administered in all material respects in accordance with its
terms and with applicable law, including, but not limited to,
ERISA, the Code, the Securities Act, the Exchange Act, the Age
Discrimination in Employment Act, or any regulations or rules
promulgated thereunder, and all filings, disclosures and
notices required by ERISA, the Code, the Securities Act, the
Exchange Act, the Age Discrimination in Employment Act and any
other applicable law have been timely made. Each Compensation
and Benefit Plan which is an "employee pension benefit plan"
within the meaning of Section 3(2) of ERISA (a "Pension Plan")
and which is intended to be qualified under Section 401(a) of
the Code has received a favorable determination letter
(including a determination that the related trust under such
Compensation and Benefit Plan is exempt from tax under Section
501(a) of the Code) from the Internal Revenue Service
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("IRS") for "TRA" (as defined in Rev. Proc. 93-39), or will
file for such determination letter prior to the expiration of
the remedial amendment period for such Compensation and
Benefit Plan, and Coast is not aware of any circumstances
likely to result in revocation of any such favorable
determination letter. There is no material pending or, to the
knowledge of Coast, threatened legal action, suit or claim
relating to the Compensation and Benefit Plans. Neither Coast
nor any of its Subsidiaries has engaged in a transaction, or
omitted to take any action, with respect to any Compensation
and Benefit Plan that would reasonably be expected to subject
Coast or any of its Subsidiaries to a tax or penalty imposed
by either Section 4975 of the Code or Section 502 of ERISA,
assuming for purposes of Section 4975 of the Code that the
taxable period of any such transaction expired as of the date
hereof.
(iii) No liability (other than for payment of premiums to the
PBGC which have been made or will be made on a timely basis)
under Title IV of ERISA has been or is expected to be incurred
by Coast or any of its Subsidiaries with respect to any
ongoing, frozen or terminated "single-employer plan", within
the meaning of Section 4001(a)(15) of ERISA, currently or
formerly maintained by any of them, or any single-employer
plan of any entity (an "ERISA Affiliate") which is considered
one employer with Coast under Section 4001(a)(14) of ERISA or
Section 414(b) or (c) of the Code (an "ERISA Affiliate Plan").
None of Coast, any of its Subsidiaries or any ERISA Affiliate
has contributed, or has been obligated to contribute, to a
multiemployer plan under Subtitle E of Title IV of ERISA
during the preceding five calendar years. No notice of a
"reportable event", within the meaning of Section 4043 of
ERISA for which the 30-day reporting requirement has not been
waived, has been required to be filed for any Compensation and
Benefit Plan or by any ERISA Affiliate Plan within the
12-month period ending on the date hereof, and no such notice
will be required to be filed as a result of the transactions
contemplated by this Agreement. The PBGC has not instituted
proceedings to terminate any Pension Plan or ERISA Affiliate
Plan and, to Coast's knowledge, no condition exists that
presents a material risk that such proceedings will be
instituted. To the knowledge of Coast, there is no pending
investigation or enforcement action by the PBGC, the
Department of Labor or IRS or any other governmental agency
with respect to any Compensation and Benefit Plan. Under each
Pension Plan and ERISA Affiliate Plan, as of the date of the
most recent actuarial valuation performed prior to the date of
this Agreement, the actuarially determined present value of
all "benefit liabilities", within the meaning of Section
4001(a)(16) of ERISA (as determined on the basis of the
actuarial assumptions contained in such actuarial valuation of
such Pension Plan or ERISA Affiliate Plan), did not exceed the
then current value of the assets of such Pension Plan or ERISA
Affiliate Plan and since such date there has been neither an
adverse change in the financial condition of such Pension Plan
or ERISA Affiliate Plan nor any amendment or other change to
such Pension Plan or ERISA Affiliate Plan that would increase
the amount of benefits thereunder which in either case
reasonably could be expected to change such result.
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(iv) All contributions required to be made under the terms of
any Compensation and Benefit Plan or ERISA Affiliate Plan or
any employee benefit arrangements under any collective
bargaining agreement to which Coast or any of its Subsidiaries
is a party have been timely made or have been reflected on
Coast's financial statements to the extent required by
generally accepted accounting principles. Neither any Pension
Plan nor any ERISA Affiliate Plan has an "accumulated funding
deficiency" (whether or not waived) within the meaning of
Section 412 of the Code or Section 302 of ERISA and all
required payments to the PBGC with respect to each Pension
Plan or ERISA Affiliate Plan have been made on or before their
due dates. None of Coast, any of its Subsidiaries or any ERISA
Affiliate (x) has provided, or would reasonably be expected to
be required to provide, security to any Pension Plan or to any
ERISA Affiliate Plan pursuant to Section 401(a)(29) of the
Code, and (y) has taken any action, or omitted to take any
action, that has resulted, or would reasonably be expected to
result, in the imposition of a lien under Section 412(n) of
the Code or pursuant to ERISA.
(v) Neither Coast nor any of its Subsidiaries has any
obligations to provide retiree health and life insurance or
other retiree death benefits under any Compensation and
Benefit Plan, other than benefits mandated by Section 4980B of
the Code, and each such Compensation and Benefit Plan may be
amended or terminated without incurring liability thereunder.
There has been no communication to Employees by Coast or any
of its Subsidiaries that would reasonably be expected to
promise or guarantee such Employees retiree health or life
insurance or other retiree death benefits on a permanent
basis.
(vi) Coast and its Subsidiaries do not maintain any
Compensation and Benefit Plans covering foreign Employees.
(vii) With respect to each Compensation and Benefit Plan,
if applicable, Coast has provided or made available to Ahmanson,
true and complete copies of its existing (A) Compensation and
Benefit Plan documents and amendments thereto and (B) trust
instruments and insurance contracts.
(viii) The consummation of the transactions contemplated by
this Agreement would not, directly or indirectly (including,
without limitation, as a result of any termination of
employment prior to or following the Effective Time)
reasonably be expected to (A) entitle any Employee, Consultant
or Director to any payment (including severance pay or similar
compensation) or any increase in compensation, (B) result in
the vesting or acceleration of any benefits under any
Compensation and Benefit Plan or (C) result in any material
increase in benefits payable under any Compensation and
Benefit Plan.
(ix) Neither Coast nor any of its Subsidiaries maintains any
compensation plans, programs or arrangements the payments
under which would not reasonably be expected to be deductible
as a result of the limitations under Section 162(m) of the
Code and the regulations issued thereunder.
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(x) As a result, directly or indirectly, of the transactions
contemplated by this Agreement (including, without limitation,
as a result of any termination of employment prior to or
following the Effective Time), none of Ahmanson, Coast or the
Surviving Corporation, or any of their respective Subsidiaries
will be obligated to make a payment that would be
characterized as an "excess parachute payment" to an employee
or consultant of Coast who is a "disqualified individual" (as
such terms are defined in Section 280G of the Code), without
regard to whether such payment is reasonable compensation for
personal services performed or to be performed in the future.
(n) Labor Matters. Neither Coast 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 Coast 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 Coast or any such Subsidiary to bargain with
any labor organization as to wages or conditions of
employment, nor is there any strike or other labor dispute
involving it or any of its Subsidiaries pending or, to Coast's
knowledge, threatened, nor is Coast aware of any activity
involving its or any of its Subsidiaries' employees seeking to
certify a collective bargaining unit or engaging in other
organizational activity.
(o) Takeover Laws; Dissenters Rights. Coast has taken all
action required to be taken by it in order to exempt this
Agreement, and the transactions contemplated hereby from, and
this Agreement and the transactions contemplated hereby are
exempt from, the requirements of any "moratorium", "control
share", "fair price", "affiliate transaction", "business
combination" or other antitakeover laws and regulations of any
state (collectively, "Takeover Laws"), including, without
limitation, the State of Delaware, and including, without
limitation, Section 203 of the DGCL.
(p) Environmental Matters. To the best knowledge of Coast,
neither the conduct nor operation of Coast or its Subsidiaries
nor any condition of any property presently or previously
owned, leased or operated by any of them (including, without
limitation, in a fiduciary or agency capacity), or on which
any of them holds a Lien, violates or violated Environmental
Laws and no condition has existed or event has occurred with
respect to any of them or any such property that, with notice
or the passage of time, or both, is reasonably likely to
result in liability under Environmental Laws. Neither Coast
nor any of its Subsidiaries has received any notice from any
person or entity that Coast or its Subsidiaries or the
operation or condition of any property ever owned, leased,
operated, or held as collateral or in a fiduciary capacity by
any of them are or were in violation of or otherwise are
alleged to have liability under any Environmental Law,
including, but not limited to, responsibility (or potential
responsibility) for the cleanup or other remediation of any
pollutants, contaminants, or hazardous or toxic wastes,
substances or materials at, on, beneath, or originating from
any such property.
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(q) Tax Matters. (i)(A) All federal, state, local and
foreign Tax Returns (including information returns) required
to be filed by or on behalf of Coast or its Subsidiaries have
been prepared in good faith and duly and timely filed, and all
such filed Tax Returns are complete and accurate in all
material respects. (B) Coast and each of its Subsidiaries have
paid in full all Taxes due (including interest and penalties)
or have provided adequate reserves for any such Taxes in the
financial statements of Coast in accordance with generally
accepted accounting principles, whether or not shown as being
due on any of the Tax Returns referred to in clause (i)(A).
(C) Neither Coast nor any of its Subsidiaries has received any
memorandum or opinion from legal counsel that was sought in
order to satisfy the reasonable cause exception (set forth in
Section 6664(c) of the Code) applicable to the penalties for
certain underpayments of Taxes set forth in Sections 6662
through 6664 of the Code. (D) There is no pending or
threatened audit, examination, assessment or proposed
assessment of a deficiency, or refund litigation with respect
to any Taxes of Coast or its Subsidiaries. (E) All Taxes,
interest, additions and penalties due with respect to
completed and settled examinations or concluded litigation
relating to Taxes of Coast or its Subsidiaries have been paid
in full or adequate provision has been made for any such Taxes
(in accordance with generally accepted accounting principles)
on the financial statements of Coast. (F) Neither Coast nor
its Subsidiaries has executed an extension or waiver of any
statute of limitations on the assessment or collection of any
Tax due that is currently in effect. (G) No power of attorney
has been granted by or with respect to Coast or any of its
Subsidiaries with respect to any matter relating to Taxes. (H)
Neither Coast nor any of its Subsidiaries has made or will
make a material election as to Taxes during the period from
January 1, 1997 through the Effective Time, other than
elections made on tax returns filed for the year ended on
December 31, 1996.
(ii)(A) No liens or other security interests have been
imposed on any assets of Coast or its Subsidiaries in
connection with any failure (or alleged failure) to pay any
Tax. (B) Coast and its Subsidiaries have timely withheld, and
paid over to the relevant governmental authority or other
appropriate payee, all Taxes required to have been withheld
and paid in connection with amounts paid or owing to any
employee, independent contractor, creditor, stockholder, or
other person. (C) Neither Coast nor any of its Subsidiaries is
a party to any tax allocation or sharing agreement under which
it has obligations to a party other than Coast or its
Subsidiaries, is or has been a member of an affiliated group
filing consolidated or combined tax returns (other than a
group the common parent of which is or was Coast) or otherwise
has any liability for the Taxes of any person (other than
Coast or its Subsidiaries). (D) Neither Coast nor any of its
Subsidiaries has any deferred intercompany gain or loss
arising as a result of a deferred intercompany transaction
within the meaning of Treasury Regulation Section 1.1502-13
(or similar provision under state, local or foreign law) or
any excess loss accounts within the meaning of Treasury
Regulation Section 1.1502-19. (E) Coast is not and has not
been a United States real property holding corporation (as
defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(ii) of the
Code.
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(iii) As of the date hereof, neither Coast nor any of its
Subsidiaries has any reason to believe that any conditions
exist that might prevent or impede the Merger from qualifying
as a reorganization within the meaning of Section 368 of the
Code, or otherwise prevent the conditions in Section 7.02 from
being met.
(r) Risk Management Instruments. All interest rate swaps,
caps, floors, option agreements, futures and forward contracts
and other similar risk management arrangements, whether
entered into for Coast's own account, or for the account of
one or more of Coast's Subsidiaries or their customers (all of
which are listed on Coast's Disclosure Schedule), were entered
into (i) in accordance with all applicable laws, rules,
regulations and regulatory policies and (ii) with counterparties
believed to be financially responsible at the time; each of
them constitutes the valid and legally binding obligation of
Coast or one of its Subsidiaries, enforceable in accordance
with its terms (except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer and similar laws of general applicability
relating to or affecting creditors' rights or by general
equity principles), and are in full force and effect. Neither
Coast nor its Subsidiaries, nor to Coast's knowledge, any
other party thereto, is in breach of any of its obligations
under any such agreement or arrangement.
(s) Books and Records. The books and records of Coast and
its Subsidiaries have been fully, properly and accurately
maintained in all material respects, and there are no material
inaccuracies or discrepancies of any kind contained or
reflected therein, and they fairly present the financial
position of Coast and its Subsidiaries.
(t) Insurance. Coast's Disclosure Schedule sets forth all of
the insurance policies, binders, or bonds maintained by Coast
or its Subsidiaries ("Insurance Policies"). Coast and its
Subsidiaries are insured with reputable insurers against such
risks and in such amounts as the management of Coast
reasonably has determined to be prudent in accordance with
industry practices. All the Insurance Policies are in full
force and effect; Coast and its Subsidiaries are not in
material default thereunder; and all claims thereunder have
been filed in due and timely fashion.
(u) Disclosure. The representations and warranties contained
in this Section 5.03 do not contain any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements and information contained in this
Section 5.03 not misleading.
5.04 Representations and Warranties of Ahmanson. Subject to
Section 5.02, Ahmanson hereby represents and warrants to Coast as
follows:
(a) Organization, Standing and Authority. Ahmanson is a
corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware. Ahmanson is
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duly qualified to do business and is in good standing in the
states of the United States and foreign jurisdictions where
its ownership or leasing of property or assets or the conduct
of its business requires it to be so qualified. Ahmanson has
in effect all federal, state, local, and foreign governmental
authorizations necessary for it to own or lease its properties
and assets and to carry on its business as it is now
conducted. Ahmanson is duly registered as a savings and loan
holding company under HOLA.
(b) Ahmanson Stock. (i) As of the date hereof, the authorized
capital stock of Ahmanson consists solely of 220,000,000
shares of Ahmanson Common Stock, of which no more than
94,441,674 shares were outstanding as of the date hereof, and
10,000,000 shares of Ahmanson Preferred Stock, of which no
more than 780,000 shares of 8.40% Series C preferred stock and
575,000 shares of 6% Cumulative Convertible Series D preferred
stock were outstanding as of the date hereof. As of the date
hereof, except for Rights issued pursuant to the Ahmanson
Rights Agreement, Ahmanson's 1996 Nonemployee Directors' Stock
Incentive Plan, Ahmanson's 1993 Stock Incentive Plan,
Ahmanson's 1988 Directors' Stock Incentive Plan and Ahmanson's
1984 Stock Incentive Plan or upon conversion of Ahmanson's 6%
Cumulative Convertible Series D preferred stock, Ahmanson does
not have any Rights issued or outstanding with respect to
Ahmanson Stock and Ahmanson does not have any commitment to
authorize, issue or sell any Ahmanson Stock or Rights, except
pursuant to this Agreement.
(ii) The shares of Ahmanson Common Stock to be issued in
exchange for shares of Coast Common Stock in the Merger, when
issued in accordance with the terms of this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable
and not subject to pre-emptive rights.
(c) Subsidiaries. Each of Ahmanson's Significant
Subsidiaries has been duly organized and is validly existing
in good standing under the laws of the jurisdiction of its
organization, and is duly qualified to do business and in good
standing in the jurisdictions where its ownership or leasing
of property or the conduct of its business requires it to be
so qualified and it owns, directly or indirectly, all the
issued and outstanding equity securities of each of its
Significant Subsidiaries.
(d) Corporate Power. Ahmanson and each of its Significant
Subsidiaries has the corporate power and authority to carry on
its business as it is now being conducted and to own all its
properties and assets; and Ahmanson has the corporate power
and authority to execute, deliver and perform its obligations
under this Agreement and to consummate the transactions
contemplated hereby.
(e) Corporate Authority. (i) This Agreement and the
transactions contemplated hereby have been authorized by all
necessary corporate action of Ahmanson and the Ahmanson Board.
This Agreement is a valid and legally binding agreement of
Ahmanson enforceable in
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accordance with its terms (except as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer and similar laws of general
applicability relating to or affecting creditors' rights or by
general equity principles). No Ahmanson stockholder approval
is required for this Agreement and the transactions
contemplated hereby under the DGCL, Ahmanson's certificate of
incorporation or Ahmanson's by-laws or the rules of the NYSE.
(ii) The entering into of the Commitment has been
authorized by all necessary corporate action of Ahmanson. The
entering into of the Commitment will not (A) constitute a
breach or violation of, or a default under, or give rise to
any Lien, any acceleration of remedies or any right of
termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of Ahmanson or of any of
its Subsidiaries or to which Ahmanson or any of its
Subsidiaries or properties is subject or bound, (B) constitute
a breach or violation of, or a default under, the certificate
of incorporation or by-laws of Ahmanson, or (C) require any
consent or approval under any such law, rule, regulation,
judgment, decree, order, governmental permit or license,
agreement, indenture or instrument.
(f) Regulatory Approvals; No Defaults. (i) No consents or
approvals of, or filings or registrations with, any
Governmental Authority or with any third party are required to
be made or obtained by Ahmanson or any of its Subsidiaries in
connection with the execution, delivery or performance by
Ahmanson of this Agreement or to consummate the Merger except
for (A) the filings and approvals of applications with and by
the OTS; (B) approval of the listing on the NYSE of Ahmanson
Common Stock to be issued in the Merger; (C) the filing and
declaration of effectiveness of the Ahmanson Registration
Statement; (D) the filing of a certificate of merger with the
Delaware Secretary pursuant to the DGCL; and (E) such filings
as are required to be made or approvals as are required to be
obtained under the securities or "Blue Sky" laws of various
states in connection with the issuance of Ahmanson Stock in
the Merger. As of the date hereof, Ahmanson is not aware of
any reason why the approvals set forth in Section 7.01(b) will
not be received without the imposition of a condition,
restriction or requirement of the type described in Section
7.01(b).
(ii) Subject to receipt of the regulatory approvals
referred to in the preceding paragraph and expiration of the
related waiting periods, and required filings under federal
and state securities laws, the execution, delivery and
performance of this Agreement and the consummation of the
transactions contemplated hereby do not and will not (A)
constitute a breach or violation of, or a default under, or
give rise to any Lien, any acceleration of remedies or any
right of termination under, any law, rule or regulation or any
judgment, decree, order, governmental permit or license, or
agreement, indenture or instrument of Ahmanson or of any of
its Subsidiaries or to which Ahmanson or any of its
Subsidiaries or properties is subject or bound, (B) constitute
a breach or violation of, or a default under, the certificate
of incorporation or by-laws (or similar governing documents)
of Ahmanson or any
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of its Subsidiaries, or (C) require any consent or approval
under any such law, rule, regulation, judgment, decree, order,
governmental permit or license, agreement, indenture or
instrument.
(g) Financial Reports and Regulatory Documents; Material
Adverse Effect. (i) Ahmanson's Regulatory Documents, as of the
date filed, (A) complied or will comply in all material
respects as to form with the applicable requirements under the
Securities Act or the Exchange Act, as the case may be, and
(B) did not and will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not
misleading; and each of the balance sheets contained in or
incorporated by reference into any such Regulatory Document
(including the related notes and schedules thereto) fairly
presents, or will fairly present, the financial position of
Ahmanson and its Subsidiaries as of its date, and each of the
statements of income and changes in stockholders' equity and
cash flows or equivalent statements in such Regulatory
Documents (including any related notes and schedules thereto)
fairly presents, or will fairly present, the results of
operations, changes in stockholders' equity and changes in
cash flows, as the case may be, of Ahmanson and its
Subsidiaries for the periods to which they relate, in each
case in accordance with generally accepted accounting
principles consistently applied during the periods involved,
except in each case as may be noted therein, subject to normal
year-end audit adjustments and the lack of complete footnote
disclosure in the case of unaudited statements.
(ii) Since December 31, 1996, no event has occurred or
circumstance arisen that, individually or taken together with
all other facts, circumstances and events (described in any
paragraph of Section 5.04 or otherwise), is reasonably likely
to have a Material Adverse Effect with respect to it.
(h) Litigation; Regulatory Action. (i) Other than as set
forth in its Regulatory Documents filed on or before the date
hereof, no litigation, claim or other proceeding before any
Governmental Authority is pending against Ahmanson or any of
its Subsidiaries and, to the best of Ahmanson's knowledge, no
such litigation, claim or other proceeding has been
threatened.
(ii) Neither Ahmanson nor any of its Subsidiaries or
properties is a party to or is subject to any order, decree,
agreement, memorandum of understanding or similar arrangement
with, or a commitment letter or similar submission to, or
extraordinary supervisory letter from a Regulatory Authority,
nor has Ahmanson or any of its Subsidiaries been advised by a
Regulatory Authority that such agency is contemplating issuing
or requesting (or is considering the appropriateness of
issuing or requesting) any such order, decree, agreement,
memorandum of understanding, commitment letter, supervisory
letter or similar submission.
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(i) Compliance with Laws. Ahmanson and each of its Subsidiaries:
(i) is in compliance with all applicable federal, state,
local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders or decrees applicable thereto or
to the employees conducting such businesses, including,
without limitation, the Equal Credit Opportunity Act, the
Fair Housing Act, the Community Reinvestment Act, the Home
Mortgage Disclosure Act and all other applicable fair
lending laws and other laws relating to discriminatory
business practices;
(ii) has all permits, licenses, authorizations, orders and
approvals of, and has made all filings, applications and
registrations with, all Governmental Authorities that are
required in order to permit them to conduct their
businesses substantially as presently conducted; all such
permits, licenses, certificates of authority, orders and
approvals are in full force and effect and, to the best of
its knowledge, no suspension or cancellation of any of them
is threatened; and
(iii) has received, since December 31, 1996, no
notification or communication from any Governmental
Authority (A) asserting that Ahmanson or any of its
Subsidiaries is not in compliance with any of the statues,
regulations, or ordinances which such Governmental
Authority enforces or (B) threatening to revoke any
license, franchise, permit, or governmental authorization
(nor, to Ahmanson's knowledge, do any grounds for any of
the foregoing exist).
(j) No Brokers. No action has been taken by Ahmanson that
would give rise to any valid claim against any party hereto
for a brokerage commission, finder's fee or other like payment
with respect to the transactions contemplated by this
Agreement, excluding a fee to be paid to ▇▇▇▇▇▇▇ Lynch,
Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated.
(k) Tax Matters. As of the date hereof, neither Ahmanson nor
any of its Subsidiaries has any reason to believe that any
conditions exist that might prevent or impede the Merger from
qualifying as a reorganization within the meaning of Section
368 of the Code, or otherwise prevent the conditions in
Section 7.03 from being met.
(l) Disclosure. The representations and warranties contained
in this Section 5.04 do not contain any untrue statement of a
material fact or omit to state any material fact necessary in
order to make the statements and information contained in this
Section 5.04 not misleading.
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ARTICLE VI
Covenants
6.01 Reasonable Best Efforts. Subject to the terms and
conditions of this Agreement, each of Coast and Ahmanson agrees
to use its reasonable best efforts in good faith to take, or
cause to be taken, all actions, and to do, or cause to be done,
all things necessary, proper or desirable, or advisable under
applicable laws, so as to permit consummation of the Merger as
promptly as practicable and otherwise to enable consummation of
the transactions contemplated hereby and shall cooperate fully
with the other party hereto to that end.
6.02 Stockholder Approval. Coast agrees to take in accordance
with applicable law and its certificate of incorporation and
by-laws all action necessary to convene a meeting of its
stockholders to consider and vote upon the approval and adoption
of this Agreement and the transactions contemplated hereby
(including the approval of the establishment of the CPR Trust,
the engagement of the Litigation Trustees (including the terms of
their engagement) and the terms of the Commitment and the rights
of holders of Trust Certificates) and any other matters required
to be approved by Coast's stockholders for consummation of the
Merger (including any adjournment or postponement, the "Coast
Meeting"), as promptly as practicable after the Registration
Statements are declared effective. Subject to the proviso in the
first sentence of Section 6.06, the Coast Board shall recommend
such approval, and Coast shall take all reasonable, lawful action
to solicit such approval by its stockholders.
6.03 Registration Statements. (a) Ahmanson agrees to prepare a
registration statement on Form S-4 or other applicable form (the
"Ahmanson Registration Statement") to be filed by Ahmanson with
the SEC in connection with the issuance of Ahmanson Common Stock
in the Merger (including the proxy statement and prospectus and
other proxy solicitation materials of Coast constituting a part
thereof (the "Proxy Statement") and all related documents). Coast
agrees to cooperate, and to cause its Subsidiaries to cooperate,
with Ahmanson, its counsel and its accountants, in the
preparation of the Ahmanson Registration Statement and the Proxy
Statement; and Coast agrees to file the Proxy Statement in
preliminary form with the SEC as promptly as reasonably
practicable, and Ahmanson agrees to file the Ahmanson
Registration Statement with the SEC as soon as reasonably
practicable after any SEC comments with respect to the
preliminary Proxy Statement are resolved. Each of Coast and
Ahmanson agrees to use all reasonable efforts to cause the
Ahmanson Registration Statement to be declared effective under
the Securities Act as promptly as reasonably practicable after
filing thereof. Ahmanson also agrees to use all reasonable
efforts to obtain all necessary state securities law or "Blue
Sky" permits and approvals required to carry out the transactions
contemplated by this Agreement. Coast agrees to furnish to
Ahmanson all information concerning Coast, its Subsidiaries,
officers, directors and stockholders as may be reasonably
requested in connection with the foregoing. Coast agrees to
prepare a registration statement on Form S-1 or other applicable
form (the "CPR Trust Registration Statement" and, together with
the Ahmanson Registration Statement, the
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"Registration Statements") to be filed by the CPR Trust with the
SEC in connection with the distribution of the CPR Certificates
(including the prospectus constituting a part thereof (the "CPR
Prospectus") and all related documents). Coast agrees to cause
the CPR Trust Registration Statement to be filed with the SEC as
soon as reasonably practicable after the date hereof. Coast
agrees to use all reasonable efforts to cause the CPR Trust
Registration Statement to be declared effective under the
Securities Act as promptly as reasonably practicable after filing
thereof and to cause the Trust Agreement to be qualified under
the Trust Indenture Act. Coast also agrees to use all reasonable
efforts to obtain all necessary state securities law or "Blue
Sky" permits and approvals required to carry out the distribution
of the CPR Certificates by Coast. Ahmanson agrees to furnish to
Coast all information concerning Ahmanson, its Subsidiaries,
officers, directors and stockholders as may be reasonably
requested in connection with the foregoing.
(b) Each of Coast and Ahmanson agrees, as to itself and its
Subsidiaries, that none of the information supplied or to be
supplied by it for inclusion or incorporation by reference in
(i) the Registration Statements will, at the time the Registration
Statements and each amendment or supplement thereto, if any,
becomes effective under the Securities Act, contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, (ii) the Proxy Statement and any amendment
or supplement thereto will, at the date of mailing to stockholders
and at the time of the Coast Meeting contain any untrue statement
of a material fact or omit to state any material fact required to
be stated therein or necessary to make the statements therein not
misleading or any statement which, in the light of the
circumstances under which such statement is made, will be false
or misleading with respect to any material fact, or which will
omit to state any material fact necessary in order to make the
statements therein not false or misleading or necessary to
correct any statement in any earlier statement in the Proxy
Statement or any amendment or supplement thereto and (iii) the CPR
Prospectus and any amendment or supplement thereto will, as of
its date, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading or any
statement which, in the light of the circumstances under which
such statement is made, will be false or misleading with respect
to any material fact, or which will omit to state any material
fact necessary in order to make the statements therein not false
or misleading or necessary to correct any statement in any
earlier statement in the CPR Prospectus or any amendment or
supplement thereto. Each of Coast and Ahmanson further agrees
that if it shall become aware prior to the Effective Date of any
information furnished by it that would cause any of the
statements in the Proxy Statement, CPR Prospectus, CPR Trust
Registration Statement or Ahmanson Registration Statement to be
false or misleading with respect to any material fact, or to omit
to state any material fact necessary to make the statements
therein not false or misleading, to promptly inform the other
party thereof and to take the necessary steps to correct the
Proxy Statement, CPR Prospectus, CPR Trust Registration Statement
or the Ahmanson Registration Statement.
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(c) Each of Ahmanson and Coast agrees to advise the other
party, promptly after Ahmanson or Coast, as the case may be,
receives notice thereof, of the time when the Ahmanson
Registration Statement or the CPR Trust Registration Statement,
as the case may be, has become effective or any supplement or
amendment has been filed, of the issuance of any stop order or
the suspension of the qualification of Ahmanson Common Stock or
the CPR Certificates as the case may be, for offering or sale in
any jurisdiction, of the initiation or threat of any proceeding
for any such purpose, or of any request by the SEC for the
amendment or supplement of the Ahmanson Registration Statement or
the CPR Trust Registration Statement, as the case may be, or for
additional information.
6.04 Press Releases. Each of Coast and Ahmanson agrees that it
will not, without prior consultation with the other party, issue
any press release or written statement for general circulation
relating to the transactions contemplated hereby, except as
otherwise required by applicable law or regulation or NYSE rules.
Each of Ahmanson and Coast will agree upon the joint initial
press release made with respect to the transactions contemplated
hereby.
6.05 Access; Information. Each of Coast and Ahmanson agrees
that upon reasonable notice and subject to applicable laws
relating to the exchange of information, it shall afford the
other party and the other party's officers, employees, counsel,
accountants and other authorized representatives, such access
during normal business hours throughout the period prior to the
Effective Time to the books, records (including, without
limitation, tax returns and work papers of independent auditors),
properties, personnel and to such other information as any party
may reasonably request and, during such period, it shall furnish
promptly to such other party (i) a copy of each material report,
schedule and other document filed by it pursuant to the
requirements of federal or state securities or banking laws, and
(ii) all other information concerning the business, properties
and personnel of it as the other may reasonably request.
(b) Each agrees that it will not, and will cause its
representatives not to, use any information obtained pursuant to
this Section 6.05 (as well as any other information obtained
prior to the date hereof in connection with the entering into of
this Agreement) for any purpose unrelated to the consummation of
the transactions contemplated by this Agreement. Subject to the
requirements of law, each party will keep confidential, and will
cause its representatives to keep confidential, all information
and documents obtained pursuant to this Section 6.05 (as well as
any other information obtained prior to the date hereof in
connection with the entering into of this Agreement) unless such
information (i) was already known to such party, (ii) becomes
available to such party from other sources not known by such
party to be bound by a confidentiality obligation, (iii) is
disclosed with the prior written approval of the party to which
such information pertains or (iv) is or becomes readily
ascertainable from published information or trade sources. In the
event that this Agreement is terminated or the transactions
contemplated by this Agreement shall otherwise fail to be
consummated, each party shall promptly cause all copies of
documents or extracts thereof containing information and data as
to another party hereto to be returned to the party which
furnished the same (or confirm in writing that all such
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copies have been destroyed). No investigation by either party of
the business and affairs of the other shall affect or be deemed
to modify or waive any representation, warranty, covenant or
agreement in this Agreement, or the conditions to either party's
obligation to consummate the transactions contemplated by this
Agreement.
(c) Except as contemplated by this Agreement and following
termination of this Agreement, each party hereto agrees that for
two years from September 18, 1997 it (and its affiliates) will
not, alone or with others, in any manner, (a) acquire, agree to
acquire, or make any offer or proposal (other than a confidential
request to the Chairman of the Board for permission to make an
offer or proposal) to acquire beneficial ownership of any
securities or material properties of the other party (and its
Subsidiaries), unless such acquisition or agreement or the making
of such offer or proposal, shall have been expressly first
approved by the other party's Board of Directors or (b) solicit
proxies from stockholders of the other party.
6.06 Acquisition Proposals. Coast agrees that it shall not,
and shall cause its Subsidiaries and its and its Subsidiaries'
officers, directors, agents, advisors and affiliates not to,
solicit or encourage inquiries or proposals with respect to, or
engage in any negotiations concerning, or provide any
confidential information to, or have any discussions with, any
person relating to, any Acquisition Proposal or waive any
provision of or amend the terms of the Coast Rights Agreement in
respect of an Acquisition Proposal; provided, however, that
nothing in this Agreement shall (x) require the Coast Board to
recommend stockholder approval of the Merger following an
Acquisition Proposal, (y) prevent Coast or the Coast Board from
(i) engaging in any discussions or negotiations with, or
providing any information to, any Person in response to an
unsolicited bona fide written Acquisition Proposal by any such
Person or (ii) recommending such an unsolicited bona fide written
Acquisition Proposal to the holders of Coast Common Stock or (z)
prevent Coast from waiving any provision of or amending the terms
of the Coast Rights Agreement in respect of an Acquisition
Proposal, if and only if, with respect to the actions described
in clause (x), (y) or (z), as applicable, (A) the Coast Board
concludes in good faith that the Acquisition Proposal, if
consummated, would result in a transaction more favorable to
holders of Coast Common Stock than the transaction contemplated
by this Agreement; (B) the Coast Board determines in good faith
based upon the advice of outside counsel that such action is
legally necessary for it to act in a manner consistent with its
fiduciary duties under applicable law; and (C) prior to providing
any information or data to any person or entering into
discussions or negotiations with any Person, the Coast Board
notifies Ahmanson immediately of such inquiries, proposals or
offers received by, any such information requested from, or any
such discussions or negotiations sought to be initiated or
continued with Coast or any Subsidiary thereof. Coast shall
immediately cease and cause to be terminated any activities,
discussions or negotiations conducted prior to the date of this
Agreement with any parties other than Ahmanson with respect to
any of the foregoing and shall use its reasonable best efforts to
enforce any confidentiality or similar agreement relating to an
Acquisition Proposal. Coast shall promptly (within 24 hours)
advise Ahmanson following the receipt by Coast of any Acquisition
Proposal and the substance thereof (including the identity of the
person making such Acquisition
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Proposal), and advise Ahmanson of any developments with respect
to such Acquisition Proposal immediately upon the occurrence
thereof.
6.07 Affiliate Agreements. (a) Not later than the 15th day prior
to the mailing of the Proxy Statement, Coast shall deliver to
Ahmanson a schedule of each person that, to the best of its
knowledge, is or is reasonably likely to be, as of the date of
the Coast Meeting, deemed to be an "affiliate" of Coast (each, a
"Coast Affiliate") as that term is used in Rule 145 under the
Securities Act or SEC Accounting Series Releases 130 and 135.
(b) Coast shall use its reasonable best efforts to cause
each person who may be deemed to be a Coast Affiliate to execute
and deliver to Ahmanson on or before the date of mailing of the
Proxy Statement an agreement in the form attached hereto as
Exhibit A.
6.08 Takeover Laws. No party hereto shall take any action that
would cause the transactions contemplated by this Agreement to be
subject to requirements imposed by any Takeover Law and each of
them shall take all necessary steps within its control to exempt
(or ensure the continued exemption of) the transactions
contemplated by this Agreement from, or if necessary challenge
the validity or applicability of, any applicable Takeover Law, as
now or hereafter in effect.
6.09 Certain Policies. Prior to the Effective Date, Coast
shall, consistent with generally accepted accounting principles
and on a basis mutually satisfactory to it and Ahmanson, modify
and change its loan, litigation and real estate valuation
policies and practices (including loan classifications and levels
of reserves) so as to be applied on a basis that is consistent
with that of Ahmanson; provided, however, that Coast shall not be
obligated to take any such action pursuant to this Section 6.09
unless and until Ahmanson acknowledges that all conditions to its
obligation to consummate the Merger have been satisfied.
6.10 NYSE Listing. Ahmanson agrees to use its reasonable best
efforts to list, prior to the Effective Date, on the NYSE,
subject to official notice of issuance, the shares of Ahmanson
Common Stock to be issued to the holders of Coast Common Stock in
the Merger.
6.11 Regulatory Applications. (a) Ahmanson and Coast and their
respective Subsidiaries shall cooperate and use their respective
reasonable best efforts to prepare all documentation, to effect
all filings and to obtain all permits, consents, approvals and
authorizations of all third parties and Governmental Authorities
necessary to consummate the transactions contemplated by this
Agreement. Each of Ahmanson and Coast shall have the right to
review in advance, and to the extent practicable each will
consult with the other, in each case subject to applicable laws
relating to the exchange of information, with respect to all
material written information submitted to any third party or any
Governmental Authority in connection with the transactions
contemplated by this Agreement. In exercising the foregoing
right, each of the parties hereto agrees to act reasonably and as
promptly as practicable. Each party hereto agrees that it will
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consult with the other party hereto with respect to the obtaining
of all material permits, consents, approvals and authorizations
of all third parties and Governmental Authorities necessary or
advisable to consummate the transactions contemplated by this
Agreement and each party will keep the other party appraised of
the status of material matters relating to completion of the
transactions contemplated hereby.
(b) Each party agrees, upon request, to furnish the other
party with all information concerning itself, its Subsidiaries,
directors, officers and stockholders and such other matters as
may be reasonably necessary or advisable in connection with any
filing, notice or application made by or on behalf of such other
party or any of its Subsidiaries to any third party or
Governmental Authority.
6.12 Indemnification. (a) Following the Effective Date, Ahmanson
shall indemnify, defend and hold harmless the present directors
and officers of Coast and its Subsidiaries (each, an "Indemnified
Party") against all costs or expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages or
liabilities (collectively, "Costs") as incurred, in connection
with any claim, action, suit, proceeding or investigation,
whether civil, criminal, administrative or investigative, arising
out of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the transactions
contemplated by this Agreement) to the fullest extent that Coast
is permitted to indemnify (and advance expenses to) its directors
and officers under the laws of the State of Delaware, the Coast
Certificate and the Coast By-Laws as in effect on the date hereof;
provided that any determination required to be made with respect
to whether an officer's or director's conduct complies with the
standards set forth under Delaware law, the Coast Certificate and
the Coast By-Laws shall be made by independent counsel (which
shall not be counsel that provides material services to Ahmanson)
selected by Ahmanson and reasonably acceptable to such officer or
director.
(b) For a period of four years from the Effective Time,
Ahmanson shall use its reasonable best efforts to provide that
portion of director's and officer's liability insurance that
serves to reimburse the present and former officers and directors
of Coast or any of its Subsidiaries (determined as of the
Effective Time) (as opposed to Coast) with respect to claims
against such directors and officers arising from facts or events
occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement) which insurance
shall contain at least the same coverage and amounts, and contain
terms and conditions no less advantageous, as that coverage
currently provided by Coast; provided, however, that in no event
shall Ahmanson be required to expend more than 200% of the
Previously Disclosed current amount expended by Coast (the
"Insurance Amount") to maintain or procure such directors and
officers insurance coverage; provided, further, that if Ahmanson
is unable to maintain or obtain the insurance called for by this
Section 6.12(b), Ahmanson shall use its reasonable best efforts
to obtain as much comparable insurance as is available for the
Insurance Amount; provided, further, that officers and directors
of Coast or any Subsidiary may be required to make
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application and provide customary representations and warranties
to Ahmanson's insurance carrier for the purpose of obtaining such
insurance.
(c) Any Indemnified Party wishing to claim indemnification
under Section 6.12(a), upon learning of any claim, action, suit,
proceeding or investigation described above, shall promptly
notify Ahmanson thereof; provided that the failure so to notify
shall not affect the obligations of Ahmanson under Section
6.12(a) unless and to the extent that Ahmanson is actually
prejudiced as a result of such failure.
(d) If Ahmanson or any of its successors or assigns shall
consolidate with or merge into any other entity and shall not be
the continuing or surviving entity of such consolidation or
merger or shall transfer all or substantially all of its assets
to any other entity, then and in each case, Ahmanson shall cause
proper provision to be made so that the successors and assigns of
Ahmanson shall assume the obligations set forth in this Section
6.12.
(e) The provisions of this Section 6.12 are intended to be
for the benefit of, and shall be enforceable by, each Indemnified
Party and his or her heirs and representatives.
6.13 Benefit Plan; Retention Bonuses. (a) Ahmanson shall,
from and after the Effective Time, (i) honor in accordance with their
terms all employment or severance agreements entered into prior
to the date hereof and Previously Disclosed, (ii) provide former
employees of Coast who remain as employees of Ahmanson with
employee benefit plans no less favorable in the aggregate than
those provided to similarly situated employees of Ahmanson, (iii)
provide employees of Coast who remain as employees of Ahmanson
credit for years of service with Coast or any of its subsidiaries
prior to the Effective Time for the purpose of eligibility and
vesting and (iv) cause any and all pre-existing condition
limitations (to the extent such limitations did not apply to a
pre-existing condition under comparable Compensation and Benefit
Plans) and eligibility waiting periods under group health plans
of Ahmanson to be waived with respect to former employees of
Coast who remain as employees of Ahmanson (and their eligible
dependents) and who become participants in such group health
plans. Nothing in this Agreement shall limit or restrict the
right of Ahmanson to (A) terminate the employment of any employee
at any time for any reason whatsoever, with or without cause, and
(B) modify, amend or terminate any employee benefit or other
plans of Ahmanson. Ahmanson acknowledges that the Merger
constitutes a change in control under the terms of the plans and
agreements listed in Coast's Disclosure Schedule under the
heading "Disclosures with respect to Section 5.03(m)(i):
Employee Benefit Plans."
(b) Prior to the Effective Time, Coast may agree to pay up to
$2,000,000 as retention bonuses, payable upon the day 180 days
following the Effective Date or on such earlier day as Ahmanson
may determine or upon the earlier termination of the applicable
employee by Ahmanson without cause, and to be allocated primarily
among non-executive employees of
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Coast. The allocation of all such payments shall be determined in
consultation with Ahmanson and shall be subject to the approval
of Ahmanson in its sole discretion.
6.14 Accountants' Letters. Each of Coast and Ahmanson shall
use its reasonable best efforts to cause to be delivered to the
other party, and to Ahmanson's directors and officers who sign
the Registration Statement, a letter of KPMG Peat Marwick LLP,
independent auditors for each of Coast and Ahmanson, dated (i)
the date on which the Registration Statement shall become
effective and (ii) a date shortly prior to the Effective Date,
and addressed to such other party, and such directors and
officers, in form and substance customary for "comfort" letters
delivered by independent accountants in accordance with Statement
of Accounting Standards No. 72.
6.15 Notification of Certain Matters. Each of Coast and
Ahmanson shall give prompt notice to the other of any fact, event
or circumstance known to it that (i) is reasonably likely,
individually or taken together with all other facts, events and
circumstances known to it, to result in any Material Adverse
Effect with respect to it or (ii) would cause or constitute a
material breach of any of its representations, warranties,
covenants or agreements contained herein.
6.16 Officers and Directors. Ahmanson agrees to cause ▇▇. ▇▇▇
▇▇▇▇▇▇ to be elected or appointed as a director of Ahmanson at,
or as promptly as practicable after, the Effective Time. Coast
shall cause such executive officers and directors of Coast
Federal as Ahmanson shall specify in writing to cease to be
executive officers and directors of Coast Federal prior to the
Effective Date.
6.17 CPR Trust. Coast agrees to take all actions necessary
to cause the CPR Trust to be formed. In addition, Coast agrees to
take all actions necessary to cause the issuance of the CPR
Certificates by the CPR Trust to Coast and to distribute such CPR
Certificates to the stockholders of Coast with a record date and
payment date on the Effective Date immediately prior to the
Effective Time; provided, however, that Coast shall not be
required to cause the CPR Trust to issue such CPR Certificates or
be required to so distribute the CPR Certificates until all
conditions to the Merger, other than such distribution, have been
satisfied or waived. Except as set forth in this Section, the
terms of the CPR Trust and the CPR Certificates shall be as set
forth in Annex I. Coast agrees to cause the CPR Trust immediately
prior to the Effective Time to deliver to Coast a number of CPR
Certificates sufficient for the delivery of CPR Certificates
required pursuant to Section 3.06. Ahmanson agrees to return to
the CPR Trust any CPR Certificates with respect to Replacement
Options that expire prior to exercise. Coast shall use its
reasonable best efforts to obtain a "no action" letter from the
SEC staff to the effect that the CPR Trust will not be required
to register under the Investment Company Act or an exemption from
any such registration requirement or, if such relief cannot be
obtained, to register the CPR Trust under the Investment Company
Act; provided, however, that if any conditions are imposed upon
such "no action" letter or exemption, or if such registration
would require modifications to Annex I hereto, Coast shall not be
obligated to accept such conditions or to register the CPR
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Trust if such conditions or such required modifications would be
materially burdensome to the CPR Trust or the holders of the CPR
Certificates in the reasonable judgment of the Coast Board.
ARTICLE VII
Conditions to Consummation of the Merger
7.01 Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each of Ahmanson and Coast
to consummate the Merger is subject to the fulfillment or written
waiver by Ahmanson and Coast prior to the Effective Time of each
of the following conditions:
(a) Stockholder Approvals. This Agreement and the
transactions contemplated hereby (including the approval of
the establishment of the CPR Trust, the engagement of the
Litigation Trustees (including their terms of engagement) and
the terms of the Commitment and the rights of holders of Trust
Certificates) and the Merger shall have been duly adopted by
the requisite vote of the stockholders of Coast.
(b) Regulatory 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 and no such approvals shall contain any conditions,
restrictions or requirements which would reasonably be
expected to (i) following the Effective Time, have a Material
Adverse Effect on the Surviving Corporation and its
Subsidiaries taken as a whole or (ii) reduce the benefits of
the transactions contemplated hereby to such a degree that
Ahmanson would not have entered into this Agreement had such
conditions, restrictions or requirements been known at the
date hereof.
(c) No Injunction. No Governmental Authority of competent
jurisdiction shall have enacted, issued, promulgated, enforced
or entered any statute, rule, regulation, judgment, decree,
injunction or other order (whether temporary, preliminary or
permanent) which is in effect and prohibits consummation of
the transactions contemplated by this Agreement.
(d) Registration Statements; Trust Indenture Act. The
Registration Statements shall have become effective under the
Securities Act and no stop order suspending the effectiveness
of the Registration Statements shall have been issued and be
in effect and no proceedings for that purpose shall have been
initiated or threatened by the SEC and not withdrawn. If
required, the Trust Agreement shall have been duly qualified
under the Trust Indenture Act.
.
(e) Listing. The shares of Ahmanson Common Stock to be
issued in the Merger shall have been approved for listing on
the NYSE, subject to official notice of issuance.
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(f) Investment Company Act. The CPR Trust shall be
registered as an investment company under the Investment
Company Act or the SEC shall have issued an order exempting
the CPR Trust from such registration or a "no action" position
with respect to such non-registration, as contemplated by
Section 6.17.
7.02 Conditions to Obligation of Coast. The obligation of
Coast to consummate the Merger is also subject to the fulfillment
or written waiver by Coast prior to the Effective Time of each of
the following conditions:
(a) Representations and Warranties. Subject to Sections 5.01
and 5.02, the representations and warranties of Ahmanson set
forth in this Agreement shall be true and correct as of the
date of this Agreement and as of the Effective Date as though
made on and as of the Effective Date (except that
representations and warranties that by their terms speak as of
the date of this Agreement or some other date shall be true
and correct as of such date), and Coast shall have received a
certificate, dated the Effective Date, signed on behalf of
Ahmanson by the Chief Executive Officer and the Chief
Financial Officer of Ahmanson to such effect.
(b) Performance of Obligations of Ahmanson. Ahmanson shall
have performed in all material respects all obligations
required to be performed by it under this Agreement at or
prior to the Effective Time, and Coast shall have received a
certificate, dated the Effective Date, signed on behalf of
Ahmanson by the Chief Executive Officer and the Chief
Financial Officer of Ahmanson to such effect.
(c) Opinion of Coast's Counsel. Coast shall have received an
opinion of Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, special counsel
to Coast, dated the Effective Date, to the effect that, on the
basis of facts, representations and assumptions set forth in
such opinion, (A) the Merger constitutes a "reorganization"
within the meaning of Section 368 of the Code that,
accordingly, (i) no gain or loss will be recognized by Coast
as a result of the Merger and (ii) no gain or loss will be
recognized by a stockholder of Coast who receives shares of
Ahmanson Common Stock in exchange for shares of Coast Common
Stock, except (x) with respect to cash received in lieu of
fractional share interests and (y) for gain that may be
recognized in an amount not exceeding the fair market value at
the time of the Merger of such stockholder's CPR Certificates
(which represent such stockholder's share of the Commitment
Amount), and (B) 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 Coast, Ahmanson and stockholders of
Coast. The foregoing opinion will not apply to stockholders or
persons receiving Ahmanson Common Stock or CPR Certificates as
compensation.
(d) Accountants' Letters. Coast and ▇▇. ▇▇▇▇▇▇ shall have
received the letters referred to in Section 6.14 from KPMG
Peat Marwick LLP, Ahmanson's independent auditors.
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(e) Commitment. Ahmanson shall have executed and delivered
the Commitment and made the transfer to the CPR Trust with respect
to the Expense Fund.
7.03 Conditions to Obligation of Ahmanson. The obligation of
Ahmanson to consummate the Merger is also subject to the
fulfillment or written waiver by Ahmanson prior to the Effective
Time of each of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Coast set forth in this Agreement shall be true
and correct as of the date of this Agreement and as of the
Effective Date as though made on and as of the Effective Date
(except that representations and warranties that by their
terms speak as of the date of this Agreement or some other
date shall be true and correct as of such date) and Ahmanson
shall have received a certificate, dated the Effective Date,
signed on behalf of Coast by the Chief Executive Officer and
the Chief Financial Officer of Coast to such effect.
(b) Performance of Obligations of Coast. Coast shall have
performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the
Effective Time, and Ahmanson shall have received a
certificate, dated the Effective Date, signed on behalf of
Coast by the Chief Executive Officer and the Chief Financial
Officer of Coast to such effect.
(c) Opinion of Ahmanson's Counsel. Ahmanson shall have
received an opinion of ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, special counsel to
Ahmanson, dated the Effective Date, to the effect that, on the
basis of facts, representations and assumptions set forth in
such opinion, the Merger constitutes a reorganization under
Section 368(a)(1)(A) of the Code and no gain or income will be
recognized by Ahmanson in the Merger. In rendering its
opinion, ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ may require and rely upon
representations contained in letters from Coast, Ahmanson and
stockholders of Coast.
(d) Accountants' Letters. Ahmanson and its directors and
officers who sign the Registration Statement shall have
received the letters referred to in Section 6.14 from KPMG
Peat Marwick LLP, Coast's independent auditors.
(e) Dissenters' Shares. Holders of no more than 5% of the
outstanding shares of Coast Common Stock shall have given
notice that their shares of Coast Common Stock be treated as
Dissenters' Shares.
(f) CPR Trust. Coast shall have established the CPR Trust
and shall have caused the CPR Trust to issue the CPR
Certificates to Coast and shall have distributed the CPR
Certificates to the stockholders of Coast as required by
Section 6.17 hereof.
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ARTICLE VIII
Termination
8.01 Termination. This Agreement may be terminated, and the
Acquisition may be abandoned:
(a) Mutual Consent. At any time prior to the Effective Time,
by the mutual consent of Ahmanson and Coast, if the Board of
Directors of each so determines by vote of a majority of the
members of its entire Board.
(b) Breach. At any time prior to the Effective Time, by
Ahmanson or Coast, if its Board of Directors so determines by
vote of a majority of the members of its entire Board, in the
event of either: (i) a breach by the other party of any
representation or warranty contained herein (subject if
applicable to the standard set forth in Section 5.02), which
breach cannot be or has not been cured within 20 calendar days
after the giving of written notice to the breaching party of
such breach; or (ii) a breach by the other party of any of the
covenants or agreements contained herein, which breach cannot
be or has not been cured within 20 calendar days after the
giving of written notice to the breaching party of such
breach, provided that such breach (whether under (i) or (ii))
would be reasonably likely, individually or in the aggregate
with other breaches, to result in a Material Adverse Effect.
(c) Delay. At any time prior to the Effective Time, by
Ahmanson or Coast, if its Board of Directors so determines by
vote of a majority of the members of its entire Board, in the
event that the Merger is not consummated by June 30, 1998,
except to the extent that the failure of the Merger then to be
consummated arises out of or results from the knowing action
or inaction of the party seeking to terminate pursuant to this
Section 8.01(c), which action or inaction is in violation of
its obligations under this Agreement.
(d) No Approval. By Coast or Ahmanson, if its Board of
Directors so determines by a vote of a majority of the members
of its entire Board, in the event (i) the approval of any
Governmental Authority required for consummation of the Merger
and the other transactions contemplated by this Agreement
shall have been denied by final nonappealable action of such
Governmental Authority or (ii) the stockholder approval
required by Section 7.01(a) herein is not obtained at the
Coast Meeting.
(e) Failure to Recommend, Etc. At any time prior to the
Coast Meeting, by Ahmanson if the Coast Board shall have
failed to make its recommendation referred to in Section 6.02,
withdrawn such recommendation or modified or changed such
recommendation in a manner adverse in any respect to the
interests of Ahmanson.
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8.02 Effect of Termination and Abandonment. (a) In the
event of termination of this Agreement and the abandonment of the
Merger pursuant to this Article VIII, subject to the provisions
of Section 8.02(b), no party to this Agreement shall have any
liability or further obligation to any other party hereunder
except that termination will not relieve a breaching party from
liability for any breach of this Agreement giving rise to such
termination.
(b) If (a) this Agreement shall be terminated (i) by
Ahmanson pursuant to Section 8.01(b) or Section 8.01(e) and, at
the time of the occurrence of the circumstance permitting
termination pursuant to such Section, there shall exist an
Acquisition Proposal with respect to Coast or any of its
Subsidiaries, or (ii) by Coast pursuant to Section 8.01(d)(ii)
and, at the time of the occurrence of the circumstance permitting
termination pursuant to such Section, there shall exist an
Acquisition Proposal with respect to Coast or any of its
Subsidiaries, and (b) within 12 months after any such termination
Coast or any of its Subsidiaries enters into a definitive
agreement with respect to an Acquisition Proposal, Coast shall
promptly pay to Ahmanson a termination fee equal to $35 million.
ARTICLE IX
Miscellaneous
9.01 Survival. No representations, warranties, agreements and
covenants contained in this Agreement shall survive the Effective
Time (other than Section 6.12, the penultimate sentence of
Section 6.17 and this Article IX which shall survive the
Effective Time).
9.02 Waiver; Amendment. Prior to the Effective Time, any
provision of this Agreement may be (i) waived by the party
benefitted 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, except that after
the Coast Meeting, this Agreement may not be amended if it would
violate the DGCL or reduce the consideration to be received by
Coast stockholders in the Merger.
9.03 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to constitute an
original.
9.04 Governing Law. This Agreement shall be governed by, and
interpreted in accordance with, the laws of the State of
California applicable to contracts made and to be performed
entirely within such State (except to the extent that mandatory
provisions of Federal law or of the DGCL are applicable).
9.05 Expenses. Each party hereto will bear all expenses
incurred by it in connection with this Agreement and the
transactions contemplated hereby, except that printing expenses
and SEC
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fees shall be shared equally between Coast and Ahmanson. Coast's
expenses in connection with the transactions contemplated by this
Agreement, including without limitation fees of legal counsel and
financial advisors (but excluding expenses of any litigation
relating to the transactions contemplated by this Agreement,
printing and mailing expenses, SEC and Blue Sky filing fees and
accountants' fees) shall not exceed the amounts set forth in
paragraph 9.05 of Coast's Disclosure Schedule.
9.06 Notices. All notices, requests and other communications
hereunder to a party shall be in writing and shall be deemed
given if personally delivered, telecopied (with confirmation) or
mailed by registered or certified mail (return receipt requested)
to such party at its address set forth below or such other
address as such party may specify by notice to the parties
hereto.
If to Coast, to:
Coast Savings Financial, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With copies to:
Cleary, Gottlieb, ▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
and
▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Ahmanson, to:
H. F. Ahmanson & Company
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
9.01 Entire Understanding; No Third Party Beneficiaries. This
Agreement, including the Exhibits, Schedules and Annexes to this
Agreement represents the entire understanding of the parties
hereto with reference to the transactions contemplated hereby and
thereby and this Agreement supersedes any and all other oral or
written agreements heretofore made. Except for Section 6.12,
nothing in this Agreement expressed or implied is intended to
confer upon any person, other than the parties hereto or their
respective successors, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.08 Interpretation; Effect. When a reference is made in this
Agreement to Sections, Exhibits, Schedules or Annexes, such
reference shall be to a Section of, or Exhibit, Schedule or Annex
to, this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for
reference purposes only and are not part of this Agreement.
Whenever the words "include," "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the
words "without limitation." No provision of this Agreement shall
be construed to require Coast, Ahmanson or any of their
respective Subsidiaries, affiliates or directors to take any
action or omit to take any action which action or omission would
violate applicable law (whether statutory or common law), rule or
regulation.
* * *
-45-
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.
COAST SAVINGS FINANCIAL, INC.
By:/s/ ▇▇▇ ▇▇▇▇▇▇
________________________________
Name: ▇▇▇ ▇▇▇▇▇▇
Title: Chairman of the Board and
Chief Executive Officer
H. F. AHMANSON & COMPANY
By:/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
_______________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman of the Board and
Chief Executive Officer
-46-
Annex I to the Merger Agreement
Contingent Payment Right Certificates Term Sheet
General. Immediately prior to the Merger, Coast will
enter into a Trust Agreement establishing a
trust (the "CPR Trust") for the purpose of
administering and controlling the Coast Federal
goodwill litigation claims (the "Litigation").
The CPR Trust will issue to Coast certificates
(the "CPR Certificates") representing undivided
beneficial interests in the CPR Trust.
Immediately prior to the Effective Time of the
Merger (and when all conditions to consummation
of the Merger, other than the distribution
described herein and Ahmanson's entering into
the Commitment (as defined below) have been
satisfied or waived (and Ahmanson's obligations
to enter into the Commitment shall not be
subject to any other conditions)), Coast will
cause the CPR Trust (i) to issue to Coast for
distribution to Coast stockholders one CPR
Certificate for each share of Coast common stock
held by such stockholder (it being understood
that the record and payment dates for such
distribution shall be the Effective Date of the
Merger and immediately prior to the Effective
Time of the Merger); (ii) to issue to Coast one
additional CPR Certificate to Coast for each
share of Coast common stock underlying the stock
appreciation rights and performance awards to be
cashed out in the Merger which CPR Certificate
shall be retained by Coast; (iii) to issue one
additional CPR Certificate for each share of
Coast common stock as to which a Coast option
was outstanding immediately prior to the Merger
(to be made available by Ahmanson to holders of
Replacement Options upon exercise thereof); and
(iv) to issue to Coast one additional CPR
Certificate for each share of Coast common stock
with respect to which appraisal rights (if any)
are exercised and perfected and not withdrawn
(which CPR Certificates shall be retained by
Coast subject to the next sentence). Ahmanson
(as successor to Coast) will return to the CPR
Trust for cancellation any CPR Certificates
referred to in clauses (iii) and (iv) above the
amount required to satisfy such commitments.
Simultaneously with the Merger, Ahmanson will
enter into a binding contractual commitment (the
"Commitment"), which will constitute part of the
Merger Consideration, pursuant to which Ahmanson
will be obligated to pay to the CPR Trust from
time to time an amount equal to the Commitment
Amount (as described under "Payment Amounts"
below) at the time specified under "Payment
Procedures" below. The Commitment shall rank
pari passu with other senior indebtedness of
Ahmanson.
Ahmanson (as successor to Coast) shall retain
CPR Certificates in an amount equal to (i) the
number of Coast shares as to which appraisal
rights (if any) are exercised and perfected and
not withdrawn, plus (ii) the number of Coast
shares underlying Coast stock appreciation
rights and performance awards that are exercised
for cash prior to the Merger or which are
surrendered solely for cash (rather than a
combination of cash and CPR Certificates) in the
Merger plus (iii) the number of Coast shares
underlying Coast stock options outstanding
immediately prior to the Merger, for delivery
upon exercise of Replacement Options following
the Merger.
Each CPR Certificate will be an assignable and
transferable interest in the CPR Trust,
representing the right of the holder thereof,
after the consummation of the Merger, to receive
one or more payments as described below.
Payments will be made to holders based on
designated record dates. The CPR Trust will use
its reasonable best efforts to permit trading of
the CPR Certificates on the NASDAQ National
Market System (or, if such trading is not
possible, on such other NASDAQ or other market
selected in an effort to maximize liquidity).
Each CPR Certificate distributed to each Coast
shareholder shall be automatically redeemed for
$0.01 in cash immediately following the Merger
if the holder of the share as to which such CPR
Certificate was issued has given notice of an
intent to exercise appraisal rights (if any). If
any such Coast shareholder subsequently
withdraws, or fails to perfect, such appraisal
demand, Ahmanson shall deliver to such holder
CPR Certificates as to the number of Coast
shares as to which such appraisal demand was
withdrawn or not perfected.
-2-
Payment
Amounts. Ahmanson shall pay to the CPR Trust the
Commitment Amount (as defined herein) within the
time specified under "Payment Procedures" below.
Any cash payment (the "Cash Case Proceeds")
actually received by Coast Federal or Home
Savings or any of their affiliates (the
"Ahmanson Group") pursuant to a final,
non-appealable judgment or a final settlement of
the Litigation shall first be applied to the
reimbursement of the Ahmanson Group of the
following amounts: (i) an amount equal to the
Expense Fund (as defined below) plus (ii)
interest on the portions of the Expense Fund
withdrawn by the CPR Trust calculated from the
time of any such withdrawal at an annual
interest rate equal to the Reference Rate of
Bank of America in effect from time to time plus
250 basis points, compounded quarterly plus
(iii) the Assumed Tax Liability plus (iv) in the
event Case 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 (either because of the accrual
of Cash Case Proceeds before the payment thereof
or the time required to liquidate Non-Cash Case
Proceeds), interest at the Reference Rate of the
Bank of America plus 250 basis points from the
date of such payment of taxes to the date of
receipt of cash (collectively, the
"Reimbursements").
The Litigation Trustees (as defined herein)
shall instruct Ahmanson to promptly liquidate,
and Ahmanson shall liquidate solely in
accordance with such instructions (and Ahmanson
will have no liability with respect to such
liquidation or for failure to liquidate prior to
receipt of instructions), the non-cash payments,
if any (the "Non-Cash Case Proceeds"), actually
received by the Ahmanson Group pursuant to a
final, non-appealable judgment or a final
settlement of the Litigation.
As used herein, the Commitment Amount means the
Case Proceeds minus the Reimbursements plus the
income tax benefit to the Ahmanson Group,
computed based on the Tax Assumptions, from
payments on CPR Certificates. As used herein,
the Case Proceeds means any and all Cash Case
Proceeds and Non-Cash Case Proceeds.
-3-
The CPR Trust will make payments from time to
time on the CPR Certificates upon the receipt of
the applicable Commitment Amount from Ahmanson,
of all such amounts received (including the
amount of cash resulting from the monetization
by Ahmanson of any non-cash proceeds) less the
amount of any accrued but unpaid expenses
payable by the CPR Trust not covered by the
Expense Fund, except to the extent amounts are
retained by the CPR Trust as set forth under
"Retained Amounts" (the aggregate amounts not to
be so retained, the "Aggregate Certificate
Amount").
Each CPR Certificate will entitle the holder to
receive a fraction of the Aggregate Certificate
Amount equal to 1 divided by the total number of
CPR Certificates outstanding.
If Ahmanson does not timely pay the Commitment
Amount to the CPR Trust, it shall be obligated
to pay to the CPR Trust such Commitment Amount
plus interest accrued at the Reference Rate of
the Bank of America plus 250 basis points per
annum.
Timing of
Payments. The CPR Trust will make payments on the CPR
Certificates to the holders within 60 days after
the receipt of a Commitment Amount.
-4-
Payment
Procedures. Within 10 days of the receipt by Ahmanson of the
Case Proceeds, Ahmanson will deliver to the
Litigation Trustees a written notice (the
"Proceeds Notice") specifying that the Case
Proceeds have been received and describing the
type and amount of any Non-Cash Case Proceeds
received. Within 10 days of the delivery of the
Proceeds Notice, the Litigation Trustees shall
deliver to Ahmanson written instructions to
liquidate the Non-Cash Case Proceeds received.
If so instructed, Ahmanson will then liquidate
the Non-Cash Case Proceeds in accordance with
the instructions. As promptly as practicable but
in no event later than 30 days after the later
of the receipt by Ahmanson of the Case Proceeds
and the liquidation by Ahmanson of Non-Cash Case
Proceeds, Ahmanson will deliver to the
Litigation Trustees a certificate (the
"Certificate") setting forth the calculation of
the Commitment Amount, which Certificate shall
be valid and binding absent manifest error.
Within 15 days of delivery of the Certificate,
the CPR Trust will give written notice
specifying whether it agrees or objects to the
calculation of the Commitment Amount in the
Certificate. If the CPR Trust delivers a written
notice to the effect that it agrees with the
calculation, Ahmanson will then deliver the
Commitment Amount to the institutional trustee
or custodian for the CPR Trust within 5 business
days of such written notice. If the CPR Trust
delivers a written notice to the effect that it
objects to the calculation, Ahmanson will
deliver the Commitment Amount only upon
resolution of the dispute as to the calculation.
In the event that it is determined that
Ahmanson's calculation was incorrect, in
addition to the Commitment Amount Ahmanson will
pay to the CPR Trust interest on the Commitment
Amount calculated from the date that the CPR
Trust delivered its written notice of objection
at an interest rate equal to the Reference Rate
of the Bank of America plus 250 basis points per
annum.
Tax
Assumptions. Unless there is a Determination (as
defined below) regardless of any position taken
by the Ahmanson Group on any tax return or in
any claim for refund with respect to the receipt
of the Case Proceeds or payments on the
Commitment (or of the actual payment or actual
receipt of any taxes with respect thereto), the
Assumed Tax Liability shall mean an amount equal
to the income (including franchise) tax
liability of the Ahmanson Group attributable to
the receipt of the Case Proceeds computed on the
following assumptions ("Tax Assumptions") :
-5-
1. The Case Proceeds will be includible in gross
income as ordinary income in full.
2. Payments on the Commitment will not be
deductible except that Section 483 of the
Internal Revenue Code will apply to payments on
the Commitment, other than those allocable to
CPR Certificates issued on exercise of employee
options or otherwise not in a transaction that
is a sale or exchange and those payments will be
deductible to the extent treated by Section
483(a) as interest expense; it being understood
that it is not intended that the distribution of
the CPR Certificates immediately prior to the
Effective Time of the Merger would result in the
characterization of such distribution as not
constituting "a sale or exchange."
3. The income tax liability attributable to the
assumed inclusion of all or a portion of the
Case Proceeds in gross income as ordinary income
and the benefit of any deduction assumed to be
allowed under Section 483(a) shall be (a) the
product of the amount of such income or
deduction and the highest statutory rate of
federal income tax applicable to corporations
for the year in which the income is assumed to
be included or the deduction is assumed to be
realized plus (b) the product of such income or
deduction and the net combined marginal rate of
state and local income (or franchise) tax of the
relevant member or members of the Ahmanson 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 (a)) of
such state or local income (or franchise) tax.
The relevant member or members of the Ahmanson
Group shall be the member or members that is or
are assumed to include the Case Proceeds in
income or is or are assumed to be allowed a
deduction under Section 483(a).
4. Any benefit from any deduction allowable to
the Ahmanson Group under paragraph 3 for
payments made on the Commitment shall be assumed
to be realized (x) when those payments are made
to the extent those payments do not exceed the
Case Proceeds included in income for the same
taxable year, or (y) otherwise when, taking into
account other deductions or losses or credits of
the Ahmanson Group, the deduction would reduce
the tax otherwise payable or result in a refund
of tax already paid.
-6-
5. Ahmanson will be entitled to rely on a
written opinion of either ▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ or
another 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
Ahmanson and (unless such law firm is principal
outside tax counsel to Ahmanson) 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 Ahmanson Group
attributable to the receipt of the Case Proceeds
and payments on the CPR Certificates and any tax
benefit attributable to payments on the CPR
Certificates.
6. If the Assumed Tax Liability cannot be
computed at the time of the receipt of the Cash
Proceeds or a payment on the Commitment, because
of the absence of information as to tax rates
and other factors described in the definition of
Assumed Tax Liability, the Ahmanson Group shall
compute a tentative Assumed Tax Liability based
on such assumptions that in the reasonable
opinion of the Ahmanson Group would protect the
Ahmanson Group against any risk of loss. The
payment of the Commitment Amount shall be based
on such tentative Assumed Tax Liability
computation. 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, the Ahmanson Group shall recompute the
Assumed Tax Liability and pay to the CPR 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
Ahmanson's cost of funds as submitted monthly to
the FHLBSF.
-7-
Determination. A Determination will be considered to be
made to the effect that Case Proceeds are not
includible in gross income or to the effect that
no deduction is allowed in respect of payments on
the CPR Certificates under Section 483(a), in any
such case in whole or in part, on the earlier of
(a) the date of a final judicial determination to
such effect binding upon Ahmanson is made in the
Litigation, (b) the date a final agreement to
which Ahmanson is a party with the 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 Ahmanson Group in
connection with such agreement (it being
understood that the Ahmanson Group shall be under
no obligation to seek such a ruling or refund or
enter into such an agreement; provided that if
requested the Ahmanson Group will enter into such
an agreement if the requirements set forth under
"Litigation Trustees" below with respect to such
agreement are satisfied) and (c) the effective
date of a law, regulation or Internal Revenue
Service ruling (or with respect to Section 483, a
judicial decision) to such effect that applies
generally to taxpayers, including Ahmanson, and
would (in the case of Case Proceeds) be applicable
to claims against the government arising out of
capital credits affected by FIRREA, but in no
event later than the earlier of (x) thirty days
before the date of filing by the Ahmanson Group of
the federal tax return for the taxable year in
which the Case Proceeds are assumed to be
includible in gross income or (y) the receipt by
the Ahmanson Group of the Case Proceeds. A
deduction shall be considered allowed under
Section 483 to the extent that a deduction is
allowed, in an amount up to the deduction
calculated under Section 483, under another
substantially equivalent provision; it being
understood that the intention is to provide the
holders of the CPR Certificates with the benefit
of a deduction under Section 483(a) only to the
extent that such deduction is allowable by
Ahmanson under the applicable circumstances which
deduction the parties believe would be allowable
under current law.
-8-
Litigation
Trustees. The CPR Trust will be administered by a custodian
or an institutional trustee and Litigation Trustees
(as defined below). Sole and exclusive
control of the Litigation (including all
decisions as to retention, dismissal and terms
of engagement of counsel for Coast Federal
(which retention may involve fees that are
partly contingent) and other advisors) will rest
with the litigation trustees (the "Litigation
Trustees"), who shall be the four senior Coast
executives (▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇▇▇▇▇
Raiden and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇) with knowledge of
the facts underlying the Litigation. Without
limiting the foregoing, the Litigation Trustees
will have the right, in their sole discretion
and for any reason whatsoever, to dismiss,
settle or cease prosecuting the Litigation at
any time and on any terms; provided that, no
settlement agreement or other ruling or
agreement contemplated under clause (b) under
"Determination" may impose any liability or
obligation whatsoever (other than a standard
settlement release relating only to the
Litigation or other related claims that Coast or
Coast Federal or Coast's Shareholders might have
been able to bring as of immediately prior to
the Merger) on the Ahmanson Group or adversely
affect or restrict the conduct of its business
or adversely affect its tax posture with respect
to other matters. As compensation, each
Litigation Trustee will be entitled, so long as
such Litigation Trustee remains as a Litigation
Trustee, to fees payable by the CPR Trust of
$400,000 per year for five years (with the
remainder of such fees (but in no event with
respect to a period longer than the remainder of
such year plus two additional years) accelerated
upon final resolution of the Litigation and
receipt by Coast Federal of the Case Proceeds),
plus reimbursement of all reasonable out-of
pocket expenses. Litigation Trustees may hold no
other full-time employment during the term of
their tenure as Litigation Trustees prior to the
receipt of the Case Proceeds by Coast Federal.
Each Litigation Trustee shall have the right to
defer all or part of his compensation until such
time as the Case Proceeds are received by Coast
Federal and the related Commitment Amount is
paid to the CPR Trust. After such five-year
period or such receipt of Case Proceeds, the
Litigation Trustees shall be entitled to a fee
of $200 per hour until termination of the CPR
Trust.
-9-
The Litigation Trustees may adopt their own
rules and procedures but may act only with the
concurrence of a majority of the Litigation
Trustees then in office. They may, in their
discretion, delegate to one or more of the
Litigation Trustees the authority to act on
behalf of the Litigation Trustees as the
Litigation Trustees may determine appropriate
(other than with respect to the retention or
dismissal of counsel for Coast Federal or the
Litigation Trustees, or the approval of a
settlement or dismissal of the Litigation). The
Litigation Trustees shall also have the
authority to retain or dismiss counsel for the
Litigation Trustees and other experts,
consultants or support staff as the Litigation
Trustees deem appropriate. The Litigation
Committee shall have full authority on behalf of
Coast Federal to consult with and instruct the
attorneys for Coast Federal in connection with
the Litigation. Ahmanson will provide the
Litigation Trustees with access to the books,
records, facilities, representatives and
independent accountants of Coast and Coast
Federal as the Litigation Trustees may
reasonably require.
Each of the initial Litigation Trustees shall,
as a condition of his continuation as such, be
obligated to retain not less than 50% of the CPR
Certificates received in the distribution and
the Merger and upon exercise of Replacement
Options, until such time as the Case Proceeds
are received by Coast Federal (it being
understood that transfers by such Litigation
Trustee to his family members or to any trust
created for the benefit of his family members
shall be included in such 50% calculation for so
long as they retain the CPR Certificates).
At all times there shall be at least two
Litigation Trustees. If a Litigation Trustee
resigns, dies, becomes incapacitated, or is no
longer qualified, and as a result there would be
fewer than three Litigation Trustees, the
Litigation Trustees may (and if there are only
one or two Litigation Trustees, the Litigation
Trustees shall) appoint a successor Litigation
Trustee who shall receive fees as determined by
the other Litigation Trustees (but in no event
more than the initial Litigation Trustees).
-10-
Litigation and
Administration
Expenses. At the Effective Time of the Merger, Ahmanson
will transfer to the CPR Trust an amount
(the "Expense Fund") equal to $20 million less
the expenses relating to the Litigation
incurred and paid between August 31,
1997 and the Effective Date, which amount the
CPR Trust shall place in a demand deposit
non-interest bearing account at Home Savings.
The CPR Trust shall have the right to draw on
the Expense Fund for the purpose of funding all
expenses of the CPR Trust, including
administration expenses, expenses of the
Litigation, fees and expenses of the Litigation
Trustees and the custodian or institutional
trustee, amounts paid as indemnity to the
Litigation Trustees or Ahmanson, 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. As described in (b)(ii)
under "Payment Amounts" above, the Case Proceeds
to be paid to the CPR Trust would be reduced by
the amount of the Expense Fund plus interest
accrued on amounts withdrawn from the Expense
Fund account by the CPR Trust at the Reference
Rate of the Bank of America in effect from time
to time, plus 250 basis points. The CPR Trust
would reserve the right to raise additional
funds through the issuance of additional CPR
Certificates and/or through borrowings.
Ahmanson will have no liability to the
Litigation Trustee, the institutional trustee,
the custodian, or the CPR Certificate holders,
except as set forth under "Limitation on Rights
of Certificate Holders."
Liability; The Litigation Trustees will have no liability to
Indemnification. Ahmanson, Coast or CPR Certificate holders unless
it shall be established in a final judicial
determination by clear and convincing evidence
that any decision or action was undertaken with
deliberate intent to injure the CPR Certificate
holders or with reckless disregard for the best
interests of such holders, and, in any event,
any liability will be limited to actual,
proximate, quantifiable damages.
-11-
The CPR Trust will indemnify and advance
expenses, without requirement of bond or other
security, to (i) each Litigation Trustee, the
institutional trustee or the custodian, and (ii)
Ahmanson, Home Savings, its affiliates,
officers, directors, employees and agents (the
persons and entities listed in clause (ii), the
"Ahmanson Indemnified Parties"), against any and
all losses, claims, costs, expenses and
liabilities (other than in connection with
claims by shareholders of Ahmanson against
Ahmanson's directors with respect to actions
taken at or prior to the Merger) arising out of
or relating to the formation of the CPR Trust,
the distribution of the CPR Certificates, the
Litigation and the performance by the Litigation
Trustees of their duties as Litigation Trustees,
except, in the case of the indemnification of
the Litigation Trustees, if CPR Certificate
holders substantiate the burden of establishing
in a final judicial determination by clear and
convincing evidence that such losses, claims,
costs, expenses or liabilities arose as the
result of actions or decisions undertaken with
deliberate intent to injure the CPR Certificate
holders or with reckless disregard for the best
interests of such holders by such Litigation
Trustee, no indemnification shall apply.
The CPR Trust will obtain liability insurance to
cover its indemnification obligations and any
liabilities of the Litigation Trustees.
Limitation on
Rights of
Certificate
Holders. No CPR Certificate holder will have the right to
enforce, institute or maintain any suit,
action or proceeding against the Litigation
Trustees to enforce or otherwise act in respect
of the CPR Certificates unless such holder
has previously given written notice to the Litigation
Trustees of the substance of such dispute, and holders
of at least a majority in interest of the issued and
outstanding CPR Certificates have given written
notice to such parties of their support for the
institution of such proceeding to resolve such
dispute.
-12-
No CPR Certificate holder or the CPR Trust will
have the right to enforce, institute or maintain
any suit, action or proceeding against Ahmanson,
Home Savings, its affiliates, officers,
directors, employees or agents relating to the
formation of the CPR Trust, the entering into of
the Commitment, the distribution of the CPR
Certificates, the Litigation or the performance
by the Litigation Trustees of their duties as
Litigation Trustees, except that the CPR Trust
(or the Litigation Trustees on behalf of the CPR
Trust) may enforce, institute or maintain a
suit, action or proceeding against Ahmanson for
failure to pay the Commitment Amount when due or
deliver any CPR Certificate when due or return
to the CPR Trust for cancellation any CPR
Certificate required to be returned or against
Ahmanson or Home Savings for breach of
obligations in connection with the Expense Fund.
Fees and expenses incurred by Ahmanson in such a
suit, action or proceeding shall not be set off
against the Case Proceeds if the CPR Trust or
the Litigation Trustees prevail, and shall be
payable by the CPR Trust out of the Case
Proceeds, including any Retained Amounts, if the
Litigation Trustees do not prevail.
The CPR Certificate holders will have no voting
rights, no liquidation preference and no rights
to dividends or distributions other than their
pro rata share of the Commitment Amount plus any
other CPR Trust assets.
Retained
Amounts. The Litigation Trustees' obligation to
make payments to the holders of the CPR
Certificates shall be subject to the requirement
that the Litigation Trustees retain at least the
excess of $10 million (or such greater amount as
they shall reasonably determine may be
reasonably likely to be required) over amounts
remaining in the Expense Fund (the "Retained
Amount") of the Commitment Amount (or, if
received in installments, the final installment
of the Commitment Amount) for two years (or such
longer period as they shall determine may be
reasonably likely to be required) to cover all
expenses, costs and claims which may be incurred
or which may arise after payment of the
Commitment Amount and the indemnification
obligations of the CPR Trust.
-13-
Tax Consequences
of Merger. It is anticipated that the Merger will qualify as
a reorganization for federal income tax purposes
and that the CPR Certificates will be treated
as "boot" in an amount equal to their initial
fair market value. Accordingly, each Coast
shareholder will recognize gain in the Merger
equal to the lesser of (x) the excess of the
initial fair market value of his or her CPR
Certificates and the Ahmanson stock he or she
receives over his tax basis in his Coast shares
or (y) the initial value of the CPR Certificates
he or she receives. It is anticipated that the
CPR Trust will not be a taxable entity.
No Assignment of
Litigation. Ahmanson will not, and will not permit Coast Federal
or Home Savings to, "assign" (within the meaning of
31 U.S.C. ss.3727) any interest in the
Litigation following consummation of the Merger.
Definitive
Documentation. Coast and Ahmanson shall enter into such agreements
and other documents required to establish the
CPR Trust and to issue the CPR Certificates
on terms mutually satisfactory to
Coast and Ahmanson. All continuing obligations
of Ahmanson under such agreements and documents
and under the terms of this Annex I relating to
the CPR Certificates shall be binding upon
Ahmanson's successors and any entities into
which Ahmanson merges or transfers all or
substantially all of its assets. If it is
determined that qualification of any such
agreement under the Trust Indenture Act is
required for the legal and valid issuance of the
CPR Certificates, Coast, Ahmanson and the CPR
Trust will use their reasonable best efforts to
ensure such agreement is qualified under the
Trust Indenture Act. Coast shall cause the CPR
Trust to register the CPR Certificates under the
Securities Act of 1933 prior to the Effective
Time. If required, Ahmanson will cause the
Commitment to be registered under the Securities
Act of 1933 prior to the Effective Time.
Each payment of the Commitment Amount will be
described in the documents as consisting in part
of stated interest in an amount equal to the
excess of the amount of the payment over the
present value of the payment at the time of the
Merger, calculated using a discount rate equal
to the Section 483 test rate assumed to be
applicable to the payment.
Covenant. The Commitment will contain a covenant by
Ahmanson (substantially the same as in its
existing public indenture) not to sell or pledge
the stock of its principal subsidiary except
under the circumstances provided in such
indenture.
-14-
Definitions. Capitalized terms used but not defined herein will
have the meanings assigned to them in the Merger
Agreement.
-15-
EXHIBIT A
____________, 1997
H. F. Ahmanson & Company
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▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Ladies and Gentlemen:
I have been advised that I may be deemed to be, but do
not admit that I am, an "affiliate" of Coast Savings Financial,
Inc., a Delaware corporation ("Coast"), as that term is used in
Rule 145 promulgated by the Securities and Exchange Commission
(the "SEC") under the Securities Act of 1933, as amended (the
"Securities Act"), and/or SEC Accounting Series Releases 130 and
135. I understand that pursuant to the terms of the Agreement and
Plan of Merger, dated as of October 5, 1997 (the "Merger
Agreement"), by and between Coast and H. F. Ahmanson & Company, a
Delaware corporation ("Ahmanson"), Coast plans to merge with and
into Ahmanson (the "Merger") and that the Merger is intended to
be accounted for under the "purchase" accounting method.
I further understand that as a result of the Merger, I
may receive shares of common stock, par value $.01 per share, of
Ahmanson ("Ahmanson Stock") (i) in exchange for shares of common
stock, par value $.01 per share, of Coast ("Coast Stock") or (ii)
as a result of the exercise of Rights (as defined in the Merger
Agreement).
I have carefully read this letter and reviewed the
Merger Agreement and discussed their requirements and other
applicable limitations upon my ability to sell, transfer, or
otherwise dispose of Ahmanson Stock and Coast Stock, to the
extent I felt necessary, with my counsel or counsel for Coast.
I represent, warrant and covenant with and to
Ahmanson that in the event I receive any Ahmanson Stock as a
result of the Merger:
1. I shall not make any sale, transfer, or other disposition
of such Ahmanson Stock unless (i) such sale, transfer or
other disposition has been registered under the
Securities Act, (ii) such sale, transfer or other
disposition is made in conformity with the provisions of
Rule 145 under the Securities Act (as such rule may be
amended from time to time), or (iii) in the opinion of
counsel in form and substance reasonably satisfactory to
Ahmanson, or under a "no-
action" letter obtained by me from the staff of the SEC,
such sale, transfer or other disposition will not violate
or is otherwise exempt from registration under the
Securities Act.
2. I understand that Ahmanson is under no obligation to
register the sale, transfer or other disposition of
shares of Ahmanson Stock by me or on my behalf under the
Securities Act or to take any other action necessary in
order to make compliance with an exemption from such
registration available.
3. I understand that stop transfer instructions will be
given to Ahmanson's transfer agent with respect to shares
of Ahmanson Stock issued to me as a result of the Merger
and that there will be placed on the certificates for
such shares, or any substitutions therefor, a legend
stating in substance:
"The shares represented by this certificate were
issued in a transaction to which Rule 145 promulgated
under the Section Act of 1933 applies. The shares
represented by this certificate may be transferred
only in accordance with the terms of a letter
agreement, dated __, 199_, between the registered
holder hereof and Ahmanson, a copy of which agreement
is on file at the principal offices of Ahmanson."
4. I understand that, unless transfer by me of the Ahmanson
Stock issued to me as a result of the Merger has been
registered under the Securities Act or such transfer is
made in conformity with the provisions of Rule 145(d)
under the Securities Act, Ahmanson reserves the right, in
its sole discretion, to place the following legend on the
certificates issued to my transferee:
"The shares represented by this certificate have not
been registered under the Securities Act of 1933 and
were acquired from a person who received such shares
in a transaction to which Rule 145 under the
Securities Act of 1933 applies. The shares have been
acquired by the holder not with a view to, or for
resale in connection with, any distribution thereof
within the meaning of the Securities Act of 1933 and
may not be offered, sold, pledged or otherwise
transferred except in accordance with an exemption
from the registration requirements of the Securities
Act of 1933."
It is understood and agreed that the legends set forth in
paragraphs (3) and (4) above shall be removed by delivery of
substitute certificates without such legends if I shall have
delivered to Ahmanson (i) a copy of a "no action" letter from the
staff of the
SEC, or an opinion of counsel in form and substance reasonably
satisfactory to Ahmanson, to the effect that such legend is not
required for purposes of the Securities Act, or (ii) evidence or
representations satisfactory to Ahmanson that Ahmanson Stock
represented by such certificates is being or has been sold in
conformity with the provisions of Rule 145(d).
I further understand and agree that this letter agreement
shall apply to all shares of Coast Stock and Ahmanson Stock that
I am deemed to beneficially own pursuant to applicable federal
securities law and I further represent, warrant and covenant with
and to Ahmanson that I will have, and will cause each of the
other parties whose shares are deemed to be beneficially owned by
me to have, all shares of Coast Stock or Ahmanson Stock owned by
me or such parties registered in my name or the name of such
parties, as applicable, prior to the effective date of the Merger
and not the name of any bank, broker or dealer, nominee or
clearing house.
Very truly yours,
By__________________________
Name:
Accepted this ____ day of
_______________, 1997.
H. F. AHMANSON & COMPANY
By________________________
Name:
Title: