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EXHIBIT 10.1
AGREEMENT AND PLAN OF MERGER
By and Between
WASHINGTON MUTUAL, INC.
and
LONG BEACH FINANCIAL CORPORATION
Dated as of May 18, 1999
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1 DEFINITIONS..............................................................1
1.1 Defined Terms....................................................1
1.2 Other Definitional Provisions....................................3
2 THE MERGER...............................................................3
2.1 The Merger.......................................................3
2.2 Effective Time...................................................3
2.3 Effects of the Merger............................................4
2.4 Closing of the Merger............................................4
2.5 Conversion of Long Beach Common Stock............................4
2.6 Merger Consideration.............................................5
2.7 Preference Procedures............................................5
2.8 Washington Mutual Common Stock; Washington Mutual
Preferred Stock..................................................7
2.9 Options..........................................................7
2.10 Articles of Incorporation........................................8
2.11 Bylaws...........................................................8
2.12 Board of Directors...............................................8
2.13 Tax Consequences.................................................8
2.14 Reservation of Right to Revise Transaction Structure.............8
2.15 Stock Option Agreement...........................................8
3 EXCHANGE OF SHARES.......................................................8
3.1 Washington Mutual to Make Shares Available.......................8
3.2 Exchange of Shares...............................................9
4 REPRESENTATIONS AND WARRANTIES OF LONG BEACH............................11
4.1 Corporate Organization..........................................11
4.2 Capitalization..................................................11
4.3 Authority; No Violation.........................................12
4.4 Consents and Approvals..........................................13
4.5 Reports.........................................................14
4.6 Financial Statements............................................14
4.7 Broker's Fees...................................................15
4.8 Absence of Certain Changes or Events............................15
4.9 Legal Proceedings...............................................15
4.10 Taxes...........................................................16
4.11 Employees; Employee Benefit Plans...............................16
4.12 SEC Reports.....................................................18
4.13 Compliance with Applicable Law..................................19
4.14 Certain Contracts...............................................19
4.15 Agreements with Regulatory Agencies.............................20
4.16 Undisclosed Liabilities.........................................20
4.17 Rights Agreement; Anti-takeover Provisions......................20
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4.18 Long Beach Information..........................................20
4.19 Title to Property...............................................20
4.20 Insurance.......................................................21
4.21 Environmental Liability.........................................22
4.22 Opinion of Financial Advisor....................................22
4.23 Patents, Trademarks, Etc........................................22
4.24 Loan Matters....................................................22
4.25 Year 2000 Compliance............................................23
4.26 Labor Matters...................................................24
5 REPRESENTATIONS AND WARRANTIES OF WASHINGTON MUTUAL.....................24
5.1 Corporate Organization..........................................24
5.2 Capitalization..................................................24
5.3 Authority; No Violation.........................................25
5.4 Consents and Approvals..........................................26
5.5 Reports.........................................................26
5.6 Financial Statements............................................26
5.7 Broker's Fees...................................................27
5.8 Absence of Certain Changes or Events............................27
5.9 Legal Proceedings...............................................27
5.10 SEC Reports.....................................................28
5.11 Compliance with Applicable Law..................................28
5.12 Agreements with Regulatory Agencies.............................28
5.13 Washington Mutual Information...................................28
6 COVENANTS RELATING TO CONDUCT OF BUSINESS...............................29
6.1 Conduct of Businesses Prior to the Effective Time...............29
6.2 Long Beach Forbearances.........................................29
6.3 No Fundamental Washington Mutual Changes........................32
7 ADDITIONAL AGREEMENTS...................................................32
7.1 Regulatory Matters..............................................32
7.2 Access to Information...........................................33
7.3 Stockholder Approval............................................34
7.4 Legal Conditions to Merger......................................34
7.5 Affiliates......................................................35
7.6 Stock Exchange Listing..........................................35
7.7 Employees; Employee Benefit Plans...............................35
7.8 Indemnification; Directors' and Officers' Insurance.............36
7.9 Additional Agreements...........................................37
7.10 Advice of Changes...............................................38
7.11 Subsequent Interim and Annual Financial Statements..............38
8 CONDITIONS PRECEDENT....................................................38
8.1 Conditions to Each Party's Obligation to Effect the Merger......38
8.2 Conditions to Obligations of Washington Mutual..................39
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8.3 Conditions to Obligations of Long Beach.........................40
9 TERMINATION AND AMENDMENT...............................................41
9.1 Termination.....................................................41
9.2 Effect of Termination...........................................43
9.3 Amendment.......................................................44
9.4 Extension; Waiver...............................................44
10 GENERAL PROVISIONS......................................................44
10.1 Nonsurvival of Representations, Warranties and Agreements.......44
10.2 Expenses........................................................44
10.3 Notices.........................................................44
10.4 Interpretation..................................................45
10.5 Counterparts....................................................46
10.6 Entire Agreement................................................46
10.7 Governing Law...................................................46
10.8 Severability....................................................46
10.9 Publicity.......................................................46
10.10 Assignment; Third Party Beneficiaries...........................47
EXHIBITS
Exhibit 2.15 - Stock Option Agreement
ANNEXES
Annex A - Form of Tax Opinion
Annex B - Employment Agreements under Section 8.2(f)
Annex C - Noncompetition Agreements under Section 8.2(g)
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AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of May 18, 1999 (as amended,
supplemented or otherwise modified from time to time, this "Agreement"), is
entered into by and between WASHINGTON MUTUAL, INC., a Washington corporation
("Washington Mutual") and LONG BEACH FINANCIAL CORPORATION, a Delaware
corporation ("Long Beach").
The respective Boards of Directors of each of Washington Mutual and Long
Beach have determined that it is in the best interests of their respective
companies and the stockholders to consummate the business combination
transaction provided for herein. It is the intention of the parties to this
Agreement that the business combination contemplated hereby be treated as a
"reorganization" within the meaning of Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
Therefore, in consideration of the mutual covenants, representations,
warranties and agreements contained herein, and intending to be legally bound
hereby, the parties agree as follows:
1. DEFINITIONS
1.1 Defined Terms. The following terms shall have the meanings defined
for such terms in the Sections set forth below:
Term Section
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Agreement Preamble
Articles of Merger 2.2
Business Day 2.4
Cash Fraction 2.7(e)
Cash Preference Amount 2.7(e)
Cash Preference Shares 2.7(a)
Certificate of Merger 2.2
Change of Control 9.1(h)
Claims 7.8(a)
Closing 2.4
Closing Date 2.4
Code Preamble
Common Certificates 2.5(b)
Confidentiality Agreement 7.2(b)
Delaware Secretary 2.2
DGCL 2.1
DPC Shares 2.5(c)
Effective Date 2.2
Effective Time 2.2
Environmental Laws 4.21
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Term Section
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ERISA 4.11(a)
ERISA Affiliate 4.11(a)
Exchange Act 4.6
Exchange Agent 3.1
Exchange Fund 3.1
Exchange Ratio 2.9
GAAP 4.1
Governmental Entity 4.4
HSR Act 4.4
HUD 4.24(f)
Indemnified Parties 7.8(a)
Injunction 8.1(e)
Liens 4.2(b)
Loans 4.24(a)
Long Beach Preamble
Long Beach Common Stock 2.5(a)
Long Beach Contract 4.14(a)
Long Beach Disclosure Schedule 4.2(a)
Long Beach Option 2.9
Long Beach Preferred Stock 4.2(a)
Long Beach Reports 4.12
Long Beach Rights 2.5(a)
Long Beach Rights Agreement 2.5(a)
Long Beach Stock Option Plan 2.9
Mailing Date 2.7(a)
Market Value 2.6(b)
Material Adverse Effect (Long Beach) 4.1(a)
Material Adverse Effect (Washington Mutual) 5.1(a)
Merger 2.1
Merger Consideration 2.6(a)
NYSE 2.6(b)
No Preference Shares 2.7(b)
PBGC 4.11(c)
Plans 4.11(a)
Preference Deadline 2.7(b)
Preference Form 2.7(a)
Proxy Statement/Prospectus 4.4
Regulatory Agreement 4.15
REO 4.19(a)
Representatives 6.2(f)
Requisite Regulatory Approvals 8.1(c)
S-4 4.4
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Term Section
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SEC 4.4
Securities Act 4.12
Stock Option Agreement 2.15
Stock Preference Shares 2.7(a)
Subsidiary 2.5(a)
Superior Proposal 9.1(h)
Surviving Company 2.1
Takeover Proposal 6.2(f)
Tax Returns 4.10(c)
Taxes 4.10(b)
Trust Account Shares 2.5(c)
Washington Mutual Preamble
Washington Mutual Common Stock 2.5(c)
Washington Mutual Disclosure Schedule 5.2
Washington Mutual Preferred Stock 5.2
Washington Mutual Regulatory Agreement 5.12
Washington Mutual Reports 5.10
Washington Mutual Rights Agreement 5.2
Washington Secretary 2.2
WBCA 2.1
1.2 Other Definitional Provisions. The meanings given to terms defined
herein shall be equally applicable to both the singular and plural forms of such
terms.
2. THE MERGER
2.1 The Merger. Subject to the terms and conditions of this Agreement,
in accordance with the Washington Business Corporation Act (the "WBCA") and the
Delaware General Corporation Law (the "DGCL") at the Effective Time (as defined
in Section 2.2 hereof), Long Beach shall merge (the "Merger") with and into
Washington Mutual. Washington Mutual shall be the surviving corporation
(hereinafter sometimes called the "Surviving Company") in the Merger, and shall
continue its corporate existence under the laws of the State of Washington. The
name of the Surviving Company shall be Washington Mutual, Inc. Upon consummation
of the merger, the separate corporate existence of Long Beach shall terminate.
2.2 Effective Time. The Merger shall become effective as set forth in
the articles of merger (the "Articles of Merger") which shall be filed with the
Secretary of State of the State of Washington (the "Washington Secretary") and
in the certificate of merger (the "Certificate of Merger") which shall be filed
with the Secretary of State of the State of Delaware (the "Delaware Secretary"),
on the Closing Date (as defined in Section 2.4(b) hereof). The term "Effective
Time" shall mean the date (the "Effective Date") and time when the Merger
becomes effective, as set forth in the Articles of Merger and the Certificate of
Merger.
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2.3 Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in Chapter 11 of the WBCA and Section 252 of
the DGCL.
2.4 Closing of the Merger. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") will take place at 9:00
a.m. Pacific time, on a date to be specified by the parties, which shall be the
first Business Day following the later of (i) the date which is at least five
Business Days after the satisfaction or waiver (subject to applicable law) of
the latest to occur of the conditions set forth in Section 8 hereof, other than
conditions which by their terms are to be satisfied at Closing or (ii) 17
Business Days after the Preference Deadline (as defined in Section 2.7(b)), or
such other date or time as the parties may mutually agree (the "Closing Date").
For purposes of this Agreement, a "Business Day" shall mean any day that is not
a Saturday, a Sunday or other day on which the office of the Washington
Secretary or the Delaware Secretary is closed.
2.5 Conversion of Long Beach Common Stock. At the Effective Time,
without any action on the part of Washington Mutual, Long Beach or the holder of
any of the shares of common stock of Long Beach, the Merger shall be effected in
accordance with the following terms:
(a) Each share of the common stock, par value $.001 per share, of
Long Beach (the "Long Beach Common Stock") issued and outstanding immediately
prior to the Effective Time (other than shares of Long Beach Common Stock held
(x) in Long Beach's treasury or (y) directly or indirectly by Washington Mutual
or any of its Subsidiaries (as defined below) (except for Trust Account Shares
and DPC Shares, as such terms are defined below)), together with the rights (the
"Long Beach Rights") attached thereto issued pursuant to the Rights Agreement,
dated as of November 10, 1997 (as amended and supplemented, the "Long Beach
Rights Agreement"), between Long Beach and American Stock Transfer & Trust
Company, as Rights Agent, shall be converted into the right to receive the
Merger Consideration as provided below, without interest thereon. For purposes
of this Agreement, "Subsidiary" means, with respect to any person, any
corporation, partnership, joint venture, limited liability company or other
entity controlled by such person directly or indirectly through one or more
intermediaries.
(b) All of the shares of Long Beach Common Stock (and related
Long Beach Rights) converted into the right to receive the Merger Consideration
pursuant to this Section 2 shall no longer be outstanding and shall
automatically be cancelled and shall cease to exist as of the Effective Time,
and each certificate (each a "Common Certificate") previously representing any
such shares (and related Long Beach Rights) shall thereafter represent solely
the right to receive the Merger Consideration. Common Certificates previously
representing shares of Long Beach Common Stock (and related Long Beach Rights)
shall be exchanged for the Merger Consideration upon the surrender of such
Common Certificates in accordance with Section 3.2 hereof, without any interest
thereon.
(c) At the Effective Time, all shares of Long Beach Common Stock
that are owned by Long Beach as treasury stock and all shares of Long Beach
Common Stock that are owned directly or indirectly by Washington Mutual or Long
Beach or any of their respective Subsidiaries (other than shares of Long Beach
Common Stock held directly or indirectly in trust
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accounts, managed accounts and the like or otherwise held in a fiduciary or
nominee capacity that are beneficially owned by third parties (any such shares,
and shares of common stock, no par value per share, of Washington Mutual
("Washington Mutual Common Stock") which are similarly held, whether held
directly or indirectly by Washington Mutual or Long Beach or any of their
respective Subsidiaries, as the case may be, being referred to herein as "Trust
Account Shares") and other than any shares of Long Beach Common Stock held by
Washington Mutual or Long Beach or any of their respective Subsidiaries in
respect of a debt previously contracted (any such shares of Long Beach Common
Stock, and shares of Washington Mutual Common Stock which are similarly held,
whether held directly or indirectly by Washington Mutual or Long Beach or any of
their respective Subsidiaries, being referred to herein as "DPC Shares")) shall
be cancelled and shall cease to exist and no Merger Consideration shall be
delivered in exchange therefor.
(d) The holders of Long Beach Common Stock shall not be entitled
to appraisal rights under the DGCL in connection with the Merger.
2.6 Merger Consideration.
(a) For purposes of this Agreement, the "Merger Consideration"
shall be $15.50 per share.
(b) For purposes of this Agreement, "Market Value" means, with
respect to Washington Mutual Common Stock, the average of the daily closing
prices for such security on the New York Stock Exchange ("NYSE") (or such
principal exchange or market on which such security may then be listed or may
trade) for the five consecutive trading days commencing on the eighth trading
day prior to the Effective Date. During such five trading days, and for the two
trading days before the first such trading day, Washington Mutual and its
Subsidiaries and affiliates shall suspend all repurchases of Washington Mutual
Common Stock, whether pursuant to a previously authorized stock repurchase
program or otherwise.
(c) If prior to the Effective Time the outstanding shares of Long
Beach Common Stock shall, with the prior written consent of Washington Mutual
required by Section 6.2, have been increased, decreased, changed into or
exchanged for a different number or kind of shares or securities as a result of
a reorganization, recapitalization, reclassification, stock dividend, stock
split, reverse stock split, or other similar change in Long Beach Common Stock's
capitalization, then an appropriate and proportionate adjustment shall be made
to the Merger Consideration.
2.7 Preference Procedures.
(a) A preference form in such form as Washington Mutual and Long
Beach have mutually agreed ("Preference Form") will be mailed 30 days prior to
the anticipated Effective Time or on such other date as Washington Mutual and
Long Beach may mutually agree (the "Mailing Date") to each holder of record of
Long Beach Common Stock as of five Business Days prior to the Mailing Date. Each
Preference Form shall permit the holder through appropriate and customary
documentation and instructions to indicate an irrevocable and binding preference
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to receive only Washington Mutual Common Stock with respect to all or a portion
of such holder's Long Beach Common Stock ("Stock Preference Shares") or to
receive the Merger Consideration in cash for all or a portion of such holder's
Long Beach Common Stock ("Cash Preference Shares").
(b) Any Long Beach Common Stock with respect to which the holder
(or the beneficial owner, as the case may be) does not submit to the Exchange
Agent (as defined in Section 3.1), an effective, properly completed Preference
Form, on or before 5:00 p.m., Pacific Time on the 20th day following the Mailing
Date (or such other time and date as Washington Mutual and Long Beach may
mutually agree) (the "Preference Deadline") shall be referred to herein as "No
Preference Shares." Any such preference shall be deemed properly completed only
if the Exchange Agent actually received a properly completed and duly executed
Preference Form and the certificates (or customary affidavits and
indemnification or bond regarding the loss or destruction of such certificates
or the guaranteed delivery of such certificates) evidencing the shares of Long
Beach Common Stock covered by such preference by the Preference Deadline. Once
submitted to the Escrow Agent, each Preference Form shall be irrevocable and
binding upon the person submitting such Preference Form and no changes shall be
permitted thereto. Subject to the terms of this Agreement and of the Preference
Form, the Exchange Agent will have reasonable discretion to determine whether
any expression of a preference has been properly or timely made and to disregard
immaterial defects in the Preference Forms, and any good faith decisions of the
Exchange Agent regarding such matters shall be binding and conclusive. Neither
Long Beach, Washington Mutual nor the Exchange Agent is under any obligation to
notify any person of any defect in a Preference Form.
(c) All No Preference Shares shall be deemed to constitute Stock
Preference Shares for the purpose of determining the form (cash or Washington
Mutual Common Stock) of Merger Consideration to be paid. At the Effective Time,
each Stock Preference Share will be converted into the right to receive that
number of shares of Washington Mutual Common Stock equal to the Exchange Ratio.
(d) With respect to Stock Preference Shares, Washington Mutual
and Long Beach shall cause the Exchange Agent to convert all Stock Preference
Shares into the right to receive Washington Mutual Common Stock.
(e) If the product of the aggregate number of Cash Preference
Shares and the Merger Consideration exceeds the product of (x) the Merger
Consideration and (y) 48% and (z) the total outstanding shares of Long Beach
Common Stock as of the Effective Time (the "Cash Preference Amount"), all Stock
Preference Shares and all No Preference Shares shall be converted into the right
to receive Washington Mutual Common Stock as specified in Section 2.7(c) above,
and the Cash Preference Shares shall be converted into the right to receive
Washington Mutual Common Stock and cash in the following manner:
each Cash Preference Share shall be converted into the right to receive
(A) an amount in cash, without interest, equal to the product of (1) the
Merger Consideration and (2) a fraction (the "Cash Fraction"), the
numerator of which shall be the Cash Preference Amount and the
denominator of which shall be the product of the total number of Cash
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Preference Shares and the Merger Consideration, and (B) a number of
shares of Washington Mutual Common Stock equal to the product of (1) the
Exchange Ratio and (2) a fraction equal to one minus the Cash Fraction.
If the product of the aggregate number of Cash Preference Shares and the
Merger Consideration does not exceed the Cash Preference Amount, then each Cash
Preference Share shall be converted into the right to receive $15.50 in cash.
2.8 Washington Mutual Common Stock; Washington Mutual Preferred Stock.
At and after the Effective Time, each share of Washington Mutual Common Stock
and each share of any preferred stock of Washington Mutual issued and
outstanding immediately prior to the Effective Time shall remain an issued and
outstanding share of common stock or preferred stock, as the case may be, of
Washington Mutual and shall not be affected by the Merger.
2.9 Options. At the Effective Time, each option (vested or unvested)
granted by Long Beach to purchase shares of Long Beach Common Stock (each a
"Long Beach Option") which is outstanding and unexercised immediately prior
thereto shall cease to represent a right to acquire shares of Long Beach Common
Stock and shall be converted automatically into a fully vested option to
purchase shares of Washington Mutual Common Stock in an amount and at an
exercise price determined as provided below (and otherwise subject to the terms
of the Long Beach's 1997 Stock Incentive Plan, as amended to date (the "Long
Beach Stock Option Plan"), and the agreements evidencing grants thereunder):
(a) the number of shares of Washington Mutual Common Stock to be
subject to the new option shall be equal to the product of the number of shares
of Long Beach Common Stock subject to the original option and the Exchange
Ratio, provided that any fractional shares of Washington Mutual Common Stock
resulting from such multiplication shall be rounded down to the nearest share;
and
(b) the exercise price per share of Washington Mutual Common
Stock under the new option shall be equal to the exercise price per share of
Long Beach Common Stock under the original option divided by the Exchange Ratio,
provided that such exercise price shall be rounded up to the nearest cent.
"Exchange Ratio" shall mean the quotient determined by dividing the
Merger Consideration by the Market Value of the Washington Mutual Common Stock.
In the case of any options which are "incentive stock options" (as
defined in Section 422 of the Code), the exercise price, the number of shares
purchasable pursuant to such options and the terms and conditions of exercise of
such options shall be determined in order to comply with Section 424(a) of the
Code. The duration and other terms of the new option shall be the same (other
than as to vesting) as the original option except that all references to Long
Beach shall be deemed to be references to Washington Mutual.
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2.10 Articles of Incorporation. At the Effective Time, the Articles of
Incorporation of Washington Mutual, as in effect at the Effective Time, shall be
the Articles of Incorporation of the Surviving Company, until thereafter amended
in accordance with applicable law.
2.11 Bylaws. At the Effective Time, the Bylaws of Washington Mutual, as
in effect immediately prior to the Effective Time, shall be the Bylaws of the
Surviving Company until thereafter amended in accordance with applicable law.
2.12 Board of Directors. The directors of Washington Mutual immediately
prior to the Effective Time shall continue to be the directors of the Surviving
Company, each to hold office in accordance with the Articles of Incorporation
and Bylaws of the Surviving Company, until their respective successors are duly
elected or appointed (as the case may be) and qualified.
2.13 Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization" as that term is used in
Section 354 of the Code.
2.14 Reservation of Right to Revise Transaction Structure. Washington
Mutual may at any time change the method of effecting the business combination
contemplated by this Agreement if and to the extent that it deems such change to
be desirable, including, without limitation, to provide for a merger of Long
Beach with and into a Subsidiary of Washington Mutual in which such Subsidiary
is the surviving corporation, provided, however, that no such change shall (A)
alter or change the amount or kind of Merger Consideration to be received by
holders of Long Beach Common Stock, or (B) materially and adversely affect (in
the opinion of Washington Mutual's outside tax counsel and Long Beach's outside
tax counsel) the anticipated tax consequences of the Merger to the holders of
Long Beach Common Stock.
2.15 Stock Option Agreement. As an inducement to Washington Mutual to
continue to pursue the transactions contemplated by this Agreement, Long Beach
will grant to Washington Mutual an option pursuant to the Stock Option
Agreement, substantially in the form of Exhibit 2.15 hereto (the "Stock Option
Agreement").
3. EXCHANGE OF SHARES
3.1 Washington Mutual to Make Shares Available. At or prior to the
Effective Time, Washington Mutual shall deposit, or shall cause to be deposited,
with a bank or trust company of recognized standing, or Washington Mutual's
transfer agent (the "Exchange Agent"), for the benefit of the holders of Common
Certificates, for exchange in accordance with this Section 3, certificates
representing the shares of Washington Mutual Common Stock and cash, including an
estimated amount of cash that may be payable in lieu of any fractional shares
(such cash, including the cash payable in lieu of fractional shares of
Washington Mutual Common Stock, and certificates for shares of Washington Mutual
Common Stock, together with any dividends or distributions with respect thereto,
being hereinafter referred to as the "Exchange Fund") to be issued pursuant to
Section 2.5 and paid pursuant to Section 3.2(a) in exchange for outstanding
shares of Long Beach Common Stock.
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3.2 Exchange of Shares.
(a) As soon as practicable after the Effective Time, the Exchange
Agent shall mail to each holder of record of a Common Certificate or
Certificates a form of letter of transmittal (which shall specify that delivery
shall be effected, and risk of loss and title to the Common Certificates shall
pass, only upon delivery of the Common Certificates to the Exchange Agent) and
instructions for use in effecting the surrender of the Common Certificates in
exchange for the Merger Consideration, into which the shares of Long Beach
Common Stock represented by such Common Certificate or Certificates shall have
been converted pursuant to this Agreement. Upon proper surrender of a Common
Certificate for exchange and cancellation to the Exchange Agent, together with
such properly completed letter of transmittal, duly executed, the holder of such
Common Certificate shall be entitled to receive in exchange therefor, as
applicable, (i) a certificate representing that number of shares of Washington
Mutual Common Stock to which such holder of Long Beach Common Stock shall have
become entitled pursuant to the provisions of Section 2 hereof, and (ii) a check
representing the amount of cash (if any) (including cash payable in lieu of
fractional shares of Washington Mutual Common Stock, if any) which such holder
has the right to receive in respect of the Common Certificate surrendered
pursuant to the provisions of this Section 3, and the Common Certificate so
surrendered shall forthwith be cancelled. No interest will be paid or accrued on
the cash (including cash payable in lieu of fractional shares).
(b) No dividends or other distributions with a record date after
the Effective Time with respect to Washington Mutual Common Stock shall be paid
to the holder of any unsurrendered Common Certificate entitled to receive shares
of Washington Mutual Common Stock hereunder until the holder thereof shall
surrender such Common Certificate in accordance with this Section 3. After the
surrender of a Common Certificate in accordance with this Section 3, the record
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which theretofore had become
payable with respect to shares of Washington Mutual Common Stock represented by
such Common Certificate.
(c) If any certificate representing shares of Washington Mutual
Common Stock is to be issued in the name of or cash is to be paid to a person
other than the registered holder of the Common Certificate surrendered in
exchange therefor, it shall be a condition of the issuance thereof that the
Common Certificate so surrendered shall be properly endorsed (or accompanied by
an appropriate instrument of transfer) and otherwise in proper form for
transfer, and that the person requesting such exchange shall pay to the Exchange
Agent in advance any transfer or other taxes required by reason of the issuance
of a certificate representing shares of Washington Mutual Common Stock in the
name of and payment of cash to any person other than the registered holder of
the Common Certificate surrendered, or required for any other reason, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not payable.
(d) At or after the Effective Time, there shall be no transfers
on the stock transfer books of Long Beach of the shares of Long Beach Common
Stock which were issued and outstanding immediately prior to the Effective Time.
If, after the Effective Time, Common Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall
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be cancelled and exchanged for certificates representing shares of Washington
Mutual Common Stock and payment of cash as provided in this Section 3.
(e) Notwithstanding anything to the contrary contained herein, no
certificates or scrip representing fractional shares of Washington Mutual Common
Stock shall be issued upon the surrender for exchange of Common Certificates, no
dividend or distribution with respect to Washington Mutual Common Stock shall be
payable on or with respect to any fractional share, and such fractional share
interests shall not entitle the owner thereof to vote or to any other rights of
a stockholder of Washington Mutual. In lieu of the issuance of any such
fractional share, Washington Mutual shall pay to each former holder of Long
Beach Common Stock who otherwise would be entitled to receive such fractional
share an amount in cash determined by multiplying (i) the Market Value of
Washington Mutual Common Stock as of the date on which the Effective Time occurs
by (ii) the fraction of a share of Washington Mutual Common Stock to which such
holder would otherwise be entitled to receive pursuant to Section 2.5 hereto.
For purposes of determining any such fractional share interests, all shares of
Long Beach Common Stock owned by any Long Beach stockholder shall be combined so
as to calculate the maximum number of shares of Washington Mutual Common Stock
issuable to such holder of Long Beach Common Stock.
(f) Any portion of the Exchange Fund that remains unclaimed by
the stockholders of Long Beach for twelve months after the Effective Time shall
be paid, at the request of Washington Mutual, to Washington Mutual. Any
stockholders of Long Beach who have not theretofore complied with this Section 3
shall thereafter look only to Washington Mutual for payment of the shares of
Washington Mutual Common Stock, cash (including cash in lieu of any fractional
shares) and unpaid dividends and distributions on the Washington Mutual Common
Stock deliverable in respect of each share of Long Beach Common Stock held by
such stockholder at the Effective Time as determined pursuant to this Agreement,
in each case, without any interest thereon. Notwithstanding anything to the
contrary contained herein, none of Washington Mutual, Long Beach, the Exchange
Agent or any other person shall be liable to any former holder of shares of Long
Beach Common Stock for any amount properly delivered to a public official
pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any Common Certificate shall have been lost,
stolen or destroyed, upon the making of an affidavit of that fact by the person
claiming such Common Certificate to be lost, stolen or destroyed and, if
required by Washington Mutual, the posting by such person of a bond in such
amount as Washington Mutual may determine is reasonably necessary as indemnity
against any claim that may be made against it with respect to such Common Stock
Certificate, the Exchange Agent will issue in exchange for such lost, stolen or
destroyed Common Certificate the shares of Washington Mutual Common Stock and
cash (including cash in lieu of fractional shares) deliverable in respect
thereof pursuant to this Agreement.
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4. REPRESENTATIONS AND WARRANTIES OF LONG BEACH
Long Beach hereby represents and warrants to Washington Mutual as
follows:
4.1 Corporate Organization.
(a) Long Beach is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware. Long Beach has the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted, and is duly licensed
or qualified to do business in each jurisdiction in which the nature of the
business conducted by it or the character or location of the properties and
assets owned or leased by it makes such licensing or qualification necessary,
except where the failure to be so licensed or qualified would not have nor
reasonably be expected to have a Material Adverse Effect (as defined below) on
Long Beach. As used in this Agreement, the term "Material Adverse Effect" means,
with respect to Long Beach, a material adverse effect on the business, results
of operations, financial condition or prospects of Long Beach and its
Subsidiaries taken as a whole or a material adverse effect on Long Beach's
ability to consummate the transactions contemplated hereby on a timely basis;
provided, however, that a Material Adverse Effect on Long Beach shall not be
deemed to have occurred as a result of (i) any changes in laws, regulations or
United States generally accepted accounting principles ("GAAP") or (ii) any
changes in general economic conditions affecting mortgage banking businesses or
their holding companies generally. The copies of the Certificate of
Incorporation and Bylaws of Long Beach which have previously been made available
to Washington Mutual are true, complete and correct copies of such documents as
in effect as of the date of this Agreement.
(b) Each Subsidiary of Long Beach (i) is duly organized and
validly existing as a corporation or partnership under the laws of its
jurisdiction of organization, (ii) is duly licensed or qualified to do business
and is in good standing in all jurisdictions (whether federal, state, local or
foreign) where its ownership or leasing of property or the conduct of its
business requires it to be so licensed or qualified and in which the failure to
be so qualified would have or reasonably be expected to have, either
individually or in the aggregate, a Material Adverse Effect on Long Beach, and
(iii) has all requisite corporate power and authority to own or lease its
properties and assets and to carry on its business as now conducted.
4.2 Capitalization.
(a) The authorized capital stock of Long Beach consists of
150,000,000 shares of Long Beach Common Stock and 25,000,000 shares of preferred
stock, par value $.001 per share (the "Long Beach Preferred Stock"). At the
close of business on May 14, 1999, there were 22,609,618 shares of Long Beach
Common Stock outstanding, no shares of Long Beach Preferred Stock outstanding
and 2,400,982 shares of Long Beach Common Stock held in Long Beach's treasury.
As of May 14, 1999, no shares of Long Beach Common Stock or Long Beach Preferred
Stock were reserved for issuance, except for 3,750,000 shares of Long Beach
Common Stock reserved for issuance upon the exercise of stock options pursuant
to the Long Beach Stock Option Plan (including 750,000 shares in the Long Beach
Stock Option Plan that are subject to stockholder approval) and 4,477,500 shares
of Long Beach Common Stock reserved for issuance
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upon exercise of the Option (as defined in the Stock Option Agreement). All of
the issued and outstanding shares of Long Beach Common Stock have been duly
authorized and validly issued and are fully paid, nonassessable and free of
preemptive rights, with no personal liability attaching to the ownership
thereof. As of the date of this Agreement, except (i) as set forth in Section
4.2(a) of the disclosure schedule of Long Beach delivered to Washington Mutual
concurrently herewith (the "Long Beach Disclosure Schedule"), (ii) as provided
in the Long Beach Rights Agreement (a true and correct copy of which, including
all amendments thereto, has been made available to Washington Mutual), (iii) the
Option and (iv) as set forth elsewhere in this Section 4.2(a), Long Beach does
not have and is not bound by any outstanding subscriptions, options, warrants,
calls, commitments or agreements of any character calling for the purchase or
issuance of any shares of Long Beach Common Stock or Long Beach Preferred Stock
or any other equity securities of Long Beach or any securities representing the
right to purchase or otherwise receive any shares of Long Beach Common Stock or
Long Beach Preferred Stock. Except as set forth in Section 4.2(a) of the Long
Beach Disclosure Schedule, since May 14, 1999, Long Beach has not issued any
shares of its capital stock or any securities convertible into or exercisable
for any shares of its capital stock, other than the exercise of employee stock
options granted prior to such date and as disclosed in Section 4.2(a) of the
Long Beach Disclosure Schedule.
(b) Section 4.2(b) of the Long Beach Disclosure Schedule lists
the name, jurisdiction of incorporation, authorized and outstanding shares of
capital stock and record and beneficial owners of such capital stock for each
Subsidiary of Long Beach. Except as set forth in Section 4.2(b) of the Long
Beach Disclosure Schedule, Long Beach owns, directly or indirectly, all of the
issued and outstanding shares of capital stock of or all other equity interests
in each of Long Beach's Subsidiaries, free and clear of any liens, charges,
encumbrances, adverse rights or claims and security interests whatsoever
("Liens"), and all of such shares are duly authorized and validly issued and are
fully paid, nonassessable and free of preemptive rights, with no personal
liability attaching to the ownership thereof. Neither Long Beach nor any
Subsidiary thereof has or is bound by any outstanding subscriptions, options,
warrants, calls, commitments or agreements of any character calling for the
purchase, sale or issuance of any shares of capital stock or any other equity
security of any Subsidiary of Long Beach or any securities representing the
right to purchase or otherwise receive any shares of capital stock or any other
equity security of any such Subsidiary.
(c) Except as disclosed in Section 4.2(c) of the Long Beach
Disclosure Schedule and for the ownership of Long Beach's Subsidiaries, neither
Long Beach nor any of its Subsidiaries beneficially owns or controls, directly
or indirectly, any shares of stock or other equity interest in any depository
institution (as defined in 12 U.S.C. Section 1813(c)), corporation, firm,
partnership, joint venture or other entity.
4.3 Authority; No Violation.
(a) Long Beach has full corporate power and authority to execute
and deliver this Agreement and the Stock Option Agreement and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby
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have been duly and validly approved by the Board of Directors of Long Beach. The
Board of Directors of Long Beach has directed that the agreement of merger
(within the meaning of Section 252 of the DGCL) contained in this Agreement and
the transactions contemplated hereby be submitted to Long Beach's stockholders
for approval at a meeting of such stockholders and, except for the adoption of
such agreement of merger by the affirmative vote of the holders of a majority of
the voting power represented by the outstanding shares of Long Beach Common
Stock, no other corporate proceedings on the part of Long Beach are necessary to
approve this Agreement or the Stock Option Agreement or to consummate the
transactions contemplated hereby and thereby. This Agreement and the Stock
Option Agreement have been duly and validly executed and delivered by Long Beach
and (assuming due authorization, execution and delivery by Washington Mutual)
each constitutes a valid and binding obligation of Long Beach, enforceable
against Long Beach in accordance with its terms, except as enforcement may be
limited by general principles of equity whether applied in a court of law or a
court of equity and by bankruptcy, insolvency and similar laws affecting
creditors' rights and remedies generally.
(b) Except as set forth in Section 4.3(b) of the Long Beach
Disclosure Schedule, neither the execution and delivery of this Agreement or the
Stock Option Agreement by Long Beach nor the consummation by Long Beach of the
transactions contemplated hereby or thereby, nor compliance by Long Beach with
any of the terms or provisions hereof or thereof, will (i) violate any provision
of the Certificate of Incorporation or Bylaws of Long Beach or any of the
similar governing documents of any of its Subsidiaries or (ii) assuming that the
consents and approvals referred to in Section 4.4 are duly obtained, (x) violate
any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or
injunction applicable to Long Beach or any of its Subsidiaries or any of their
respective properties or assets, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time, or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of Long Beach or any of its Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Long Beach
or any of its Subsidiaries is a party, or by which they or any of their
respective properties or assets may be bound or affected, except (in the case of
clause (y) above) for such violations, conflicts, breaches or defaults which,
either individually or in the aggregate, will not have and would not reasonably
be expected to have a Material Adverse Effect on Long Beach.
4.4 Consents and Approvals. Except for (i) approval of the listing of
Washington Mutual Common Stock to be issued in the Merger on NYSE, (ii) the
filing with the Securities and Exchange Commission (the "SEC") of a proxy
statement in definitive form relating to the meeting of Long Beach's
stockholders to be held to vote on approval of this Agreement and the Merger
(the "Proxy Statement/Prospectus") and the filing and declaration of
effectiveness of the registration statement on Form S-4 (the "S-4") in which the
Proxy Statement/Prospectus will be included as a prospectus and any filings or
approvals under applicable state securities laws, (iii) the filing of the
Articles of Merger with the Washington Secretary pursuant to the WBCA and the
Certificate of Merger with the Delaware Secretary pursuant to the DGCL, (iv) the
adoption of the agreement of merger (within the meaning of Section 252 of the
DGCL) contained in this Agreement by the requisite votes of the stockholders of
Long Beach, (v) the applicable
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requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (vi) the consents and approvals set forth in Section
4.4 of the Long Beach Disclosure Schedule, and (viii) the consents and approvals
of third parties which are not Governmental Entities (as defined below), the
failure of which to obtain will not have and would not be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect, no consents
or approvals of, or filings or registrations with, any court, administrative
agency or commission or other governmental authority or instrumentality or
self-regulatory organization (each a "Governmental Entity") or with any third
party are necessary in connection with (A) the execution and delivery by Long
Beach of this Agreement and (B) the consummation by Long Beach of the Merger and
the other transactions contemplated hereby.
4.5 Reports. Long Beach and each of its Subsidiaries have timely filed
all material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
May 2, 1997 with any Governmental Entity and have paid all fees and assessments
due and payable in connection therewith. Except for normal examinations
conducted by a Governmental Entity in the regular course of the business of Long
Beach and its Subsidiaries or as set forth in Section 4.5 of the Long Beach
Disclosure Schedule, no Governmental Entity has initiated any proceeding or, to
the best knowledge of Long Beach, threatened an investigation into the business
or operations of Long Beach or any of its Subsidiaries since May 2, 1997. Except
as set forth in Section 4.5 of the Long Beach Disclosure Schedule, there is no
material unresolved violation, criticism or exception by any Governmental Entity
with respect to any report or statement relating to any examinations of Long
Beach or any of its Subsidiaries.
4.6 Financial Statements. Long Beach has previously made available to
Washington Mutual copies of (a) the consolidated balance sheets of Long Beach
and its Subsidiaries, as of December 31, for the fiscal years 1997 and 1998, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the fiscal years 1996 through 1998, inclusive, as reported in Long
Beach's Annual Report on Form 10-K for the fiscal year ended December 31, 1998
filed with the SEC under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in each case accompanied by the audit report of Deloitte &
Touche LLP, independent auditors with respect to Long Beach, and (b) the
unaudited consolidated balance sheets of Long Beach and its Subsidiaries as of
March 31, 1998 and March 31, 1999 and the related unaudited consolidated
statements of operations, stockholders, equity and cash flows for the
three-month periods then ended, as reported in Long Beach's Quarterly Report on
Form 10-Q for the period ended March 31, 1999 filed with the SEC under the
Exchange Act. Each of the financial statements referred to in this Section 4.6
(including the related notes, where applicable) fairly present, and the
financial statements referred to in Section 7.11 hereof (including the related
notes, where applicable) will fairly present (subject, in the case of the
unaudited statements, to normal recurring adjustments, none of which are
expected to be material in nature or amount), the results of the consolidated
operations and changes in stockholders' equity and consolidated financial
position of Long Beach and its Subsidiaries for the respective fiscal periods or
as of the respective dates therein set forth. Each of such financial statements
(including the related notes, where applicable) complies, and the financial
statements referred to in Section 7.11 hereof (including the related notes,
where applicable) will comply, in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect
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thereto and each of such financial statements (including the related notes,
where applicable) has been, and the financial statements referred to in Section
7.11 (including the related notes, where applicable) will be, prepared in
accordance with GAAP consistently applied during the periods involved, except in
each case as indicated in such statements or in the notes thereto or, in the
case of unaudited statements, as permitted by Form 10-Q. The books and records
of Long Beach and its Subsidiaries have been, and are being, maintained in all
material respects in accordance with GAAP and any other applicable legal and
accounting requirements and reflect only actual transactions.
4.7 Broker's Fees. Except as set forth in Section 4.7 of the Long Beach
Disclosure Schedule, neither Long Beach nor any Subsidiary thereof nor any of
their respective officers or directors has employed any broker or finder or
incurred any liability for any broker's fees, commissions or finder's fees in
connection with any of the transactions contemplated by this Agreement. Copies
of all agreements with each broker or finder listed in Section 4.7 of the Long
Beach Disclosure Schedule have previously been furnished to Washington Mutual.
4.8 Absence of Certain Changes or Events.
(a) Except as publicly disclosed in the Long Beach Reports (as
defined in Section 4.12) filed prior to the date hereof, or as set forth in
Section 4.8(a) of the Long Beach Disclosure Schedule, since December 31, 1998,
no event has occurred which has had or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Long Beach.
(b) Except as publicly disclosed in the Long Beach Reports filed
prior to the date hereof, or as set forth in Section 4.8(b) of the Long Beach
Disclosure Schedule, since December 31, 1998, Long Beach and its Subsidiaries
have carried on their respective businesses in all material respects in the
ordinary course of business, and neither Long Beach nor any of its Subsidiaries
has (i) except for normal increases in the ordinary course of business
consistent with past practice and except as required by applicable law,
increased the wages, salaries, compensation, pension or other fringe benefits or
perquisites payable to any officer or director, other than persons newly hired
for or promoted to such position, from the amount thereof in effect as of
December 31, 1998, or granted any severance or termination pay, entered into any
contract to make or grant any severance or termination pay, or paid any bonus,
in each case to any such officer or director, other than pursuant to preexisting
agreements, arrangements or bonus plans, or (ii) suffered any strike, work
stoppage, slow-down or other labor disturbance.
4.9 Legal Proceedings.
(a) Except as set forth in Section 4.9(a) of the Long Beach
Disclosure Schedule, neither Long Beach nor any of its Subsidiaries is a party
to any, and there are no pending or, to the best of Long Beach's knowledge,
threatened legal, administrative, arbitral or other proceedings, claims, actions
or governmental or regulatory investigations of any nature against Long Beach or
any of its Subsidiaries or challenging the validity or propriety of the
transactions contemplated by this Agreement as to which there is a significant
possibility of an
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adverse determination and which, if adversely determined, would, individually or
in the aggregate, have or reasonably be expected to have a Material Adverse
Effect on Long Beach.
(b) Except as set forth in Section 4.9(b) of the Long Beach
Disclosure Schedule, there is no injunction, order, judgment, decree or
regulatory restriction specifically imposed upon Long Beach, any of its
Subsidiaries or the assets of Long Beach or any of its Subsidiaries which has
had, or would reasonably be expected to have, a Material Adverse Effect on Long
Beach or the Surviving Company.
4.10 Taxes.
(a) Except as set forth in Section 4.10(a) of the Long Beach
Disclosure Schedule: (x) each of Long Beach and its Subsidiaries has (i) duly
and timely filed (including pursuant to applicable extensions granted without
penalty) all material Tax Returns (as hereinafter defined) required to be filed
at or prior to the Effective Time, and such Tax Returns are true, correct and
complete in all material respects, and (ii) paid in full or made adequate
provision in the financial statements of Long Beach (in accordance with GAAP)
for all Taxes (as hereinafter defined) related to such Tax Returns; (y) no
material deficiencies for any Taxes have been proposed, asserted or assessed
against or with respect to Long Beach or any of its Subsidiaries; and (z) there
are no material Liens for Taxes upon the assets of either Long Beach or its
Subsidiaries except for statutory liens for current Taxes not yet due.
(b) For purposes of this Agreement, "Taxes" shall mean all taxes,
charges, fees, levies, penalties or other assessments imposed by any United
States federal, state, local or foreign taxing authority, including, but not
limited to income, excise, property, sales, transfer, franchise, payroll,
withholding, social security or other similar taxes, including any interest or
penalties attributable thereto.
(c) For purposes of this Agreement, "Tax Return" shall mean any
return, report, information return or other document (including any related or
supporting information) with respect to Taxes, including without limitation all
information returns relating to Taxes of third parties.
(d) Neither Long Beach nor any of its Subsidiaries has filed a
consent to the application of Section 341(f) of the Code.
4.11 Employees; Employee Benefit Plans.
(a) Section 4.11(a) of the Long Beach Disclosure Schedule sets
forth a true and complete list of each material employee benefit plan,
arrangement or agreement and any amendments or modifications thereof (including,
without limitation, all stock purchase, stock option, severance, employment,
change-in-control, health/welfare and Section 125 plans, fringe benefit, bonus,
incentive, deferred compensation and other agreements, programs, policies and
arrangements, whether or not subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) that is maintained as of the date of this
Agreement (the "Plans") by Long Beach or any of its Subsidiaries or by any trade
or business, whether or not incorporated (an
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"ERISA Affiliate"), all of which together with Long Beach would be deemed a
"single employer' within the meaning of Section 4001 of ERISA.
(b) Long Beach has previously made available to Washington Mutual
true and complete copies of each of the Plans and all related documents,
including but not limited to (i) the actuarial reports for each Plan (if
applicable) for each of the last two years, and (ii) the most recent
determination letter from the Internal Revenue Service (if applicable) for each
Plan.
(c) Except as set forth in Section 4.11(c) of the Long Beach
Disclosure Schedule, (i) each of the Plans has been operated and administered in
all material respects in accordance with applicable laws, including but not
limited to ERISA and the Code, (ii) each of the Plans intended to be "qualified"
within the meaning of Section 401(a) of the Code has been determined to be so
qualified by the Internal Revenue Service or will be submitted for such
determination within the applicable remedial amendment period, (iii) with
respect to each Plan which is subject to Title IV of ERISA, the present value of
accrued benefits under such Plan, based upon the actuarial assumptions used for
funding purposes in the most recent actuarial report prepared by such Plan's
actuary with respect to such Plan, did not, as of its latest valuation date,
exceed the then current value of the assets of such Plan allocable to such
accrued benefits, (iv) no Plan provides benefits, including without limitation
death or medical benefits (whether or not insured), with respect to current or
former employees of Long Beach, its Subsidiaries or any ERISA Affiliate beyond
their retirement or other termination of service, other than (w) coverage
mandated by applicable law, (x) death benefits or retirement benefits under any
"employee pension plan," as that term is defined in Section 3(2) of ERISA, (y)
deferred compensation benefits accrued as liabilities on the books of Long
Beach, its Subsidiaries or the ERISA Affiliates or (z) benefits the full cost of
which is borne by the current or former employee (or his beneficiary), (v) to
the best knowledge of Long Beach no liability under Title IV of ERISA has been
incurred by Long Beach, its Subsidiaries or any ERISA Affiliate that has not
been satisfied in full (other than payment of premiums not yet due to the
Pension Benefit Guaranty Corporation (the "PBGC")), and no condition exists that
presents a material risk to Long Beach, its Subsidiaries or any ERISA Affiliate
of incurring a material liability thereunder, (vi) no Plan is a "multi-employer
pension plan," as such term is defined in Section 3(37) of ERISA, (vii) to the
best knowledge of Long Beach all contributions or other amounts payable by Long
Beach or its Subsidiaries as of the Effective Time with respect to each Plan in
respect of current or prior plan years have been paid or accrued in accordance
with GAAP and Section 412 of the Code, (viii) to the best knowledge of Long
Beach neither Long Beach, its Subsidiaries nor any ERISA Affiliate has engaged
in a transaction in connection with which Long Beach, its Subsidiaries or any
ERISA Affiliate could be subject to either a material civil penalty assessed
pursuant to Section 409 or 502(i) of ERISA or a material tax imposed pursuant to
Section 4975 or 4976 of the Code, and (ix) to the best knowledge of Long Beach
there are no pending, threatened or anticipated claims (other than routine
claims for benefits) by, on behalf of or against any of the Plans or any trusts
related thereto which would, individually or in the aggregate, have or be
reasonably expected to have a Material Adverse Effect on Long Beach.
(d) Except as set forth in Section 4.11(d) of the Long Beach
Disclosure Schedule, no Plan exists which provides for or could result in the
payment to any Long Beach employee of any money or other property or rights or
accelerate the vesting or payment of such
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amounts or rights to any Long Beach employee as a result of the transactions
contemplated by this Agreement, including the Merger, whether or not such
payment or acceleration would constitute a parachute payment within the meaning
of Code Section 280G. Except as set forth in Section 4.11(d) of the Long Beach
Disclosure Schedule, since December 31, 1998, neither Long Beach nor any of its
Subsidiaries has taken any action that would result in the payment of any
amounts, or the accelerated vesting of any rights or benefits, under any Plan
set forth in Section 4.11(d) of the Long Beach Disclosure Schedule.
(e) To the best knowledge of Long Beach, (i) except as set forth
in Section 4.11(e) of the Long Beach Disclosure Schedule, neither Long Beach nor
any of its Subsidiaries is a party to or is bound by any contract, arrangement
or understanding (whether written or oral) with respect to the employment or
compensation of any (x) consultants receiving in excess of $50,000 annually and
(y) employees, and (ii) except as provided under the Plans set forth in Sections
4.11(d) and (e) of the Long Beach Disclosure Schedule and other agreements or
arrangements set forth in Sections 4.11(d) and (e) of the Long Beach Disclosure
Schedule, consummation of the transactions contemplated by this Agreement will
not (either alone or upon the occurrence of any additional acts or events)
result in any payment (whether of severance pay or otherwise) becoming due from
Long Beach or any Subsidiary to any officer or employee thereof. Long Beach has
previously delivered or made available to Washington Mutual true and complete
copies of all consulting agreements calling for payments in excess of $50,000
annually and employment and deferred compensation agreements (or forms thereof)
that are in writing to which Long Beach or any of its Subsidiaries is a party.
(f) Except as set forth in Section 4.11(f) of the Long Beach
Disclosure Schedule, no current employee of Long Beach or any of its
Subsidiaries received aggregate remuneration (bonus, salary and commission) in
excess of $200,000 for 1998 or would reasonably be expected to receive aggregate
remuneration (excluding severance or other payments which, pursuant to an
agreement or arrangement set forth in Section 4.11(e) of the Long Beach
Disclosure Schedule, are made as a result of consummation of the transactions
contemplated by this Agreement, either alone or upon the occurrence of any
additional acts or events) in excess of $200,000 in 1999.
4.12 SEC Reports. Long Beach has previously made available to Washington
Mutual an accurate and complete copy of each final registration statement,
prospectus, report, schedule and definitive proxy statement filed since January
1, 1997 and prior to the date hereof by Long Beach or any of its Subsidiaries
with the SEC pursuant to the Securities Act of 1933, as amended (the "Securities
Act"), or the Exchange Act (the "Long Beach Reports"), and no such registration
statement, prospectus, report, schedule or proxy statement contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light
of the circumstances in which they were made, not misleading. Long Beach and its
Subsidiaries have timely filed all Long Beach Reports and other documents
required to be filed by them under the Securities Act and the Exchange Act, and,
as of their respective dates, all Long Beach Reports complied in all material
respects with the published rules and regulations of the SEC with respect
thereto.
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4.13 Compliance with Applicable Law. Except as disclosed in Section 4.13
of the Long Beach Disclosure Schedule, Long Beach and each of its Subsidiaries
hold, and have at all times held, all licenses, franchises, permits and
authorizations necessary for the lawful conduct of their respective businesses
under and pursuant to all, and have complied with and are not in violation in
any material respect under any, applicable law, statute, order, rule,
regulation, policy and/or guideline of any Governmental Entity relating to Long
Beach or any of its Subsidiaries, except where the failure to hold such license,
franchise, permit or authorization or such noncompliance or violation would not,
individually or in the aggregate, have or reasonably be expected to have a
Material Adverse Effect on Long Beach, and neither Long Beach nor any of its
Subsidiaries knows of, or has received notice of, any violations of any of the
above which, individually or in the aggregate, would have or would reasonably be
expected to have a Material Adverse Effect on Long Beach. Set forth in Section
4.13 of the Long Beach Disclosure Schedule is a list of all states where Long
Beach or any of its Subsidiaries holds a consumer finance company, consumer
credit company, mortgage company, banking or similar license or charter,
together with a description of the license or charter held.
4.14 Certain Contracts.
(a) Except as publicly disclosed in the Long Beach Reports filed
prior to the date hereof or as set forth in Section 4.14(a) of the Long Beach
Disclosure Schedule, neither Long Beach nor any of its Subsidiaries is a party
to or is bound by any contract, arrangement, commitment or understanding
(whether written or oral) (i) which is a material contract (as defined in Item
601(b)(10) of Regulation S-K of the SEC) to be performed after the date of this
Agreement, (ii) which limits the freedom of Long Beach or any of its
Subsidiaries to compete in any line of business, in any geographic area or with
any person, or (iii) with or to a labor union or guild (including any collective
bargaining agreement). Each contract, arrangement, commitment or understanding
of the type described in this Section 4.14(a), whether or not publicly disclosed
in the Long Beach Reports filed prior to the date hereof or set forth in Section
4.14(a) of the Long Beach Disclosure Schedule, is referred to herein as a "Long
Beach Contract," and neither Long Beach nor any of its Subsidiaries knows of, or
has received notice of, any violation of the above by any of the other parties
thereto which, individually or in the aggregate, would have or would reasonably
be expected to have a Material Adverse Effect on Long Beach. Long Beach has made
available all contracts which involved payments by Long Beach or any of its
Subsidiaries in fiscal year 1998 of more than $500,000 or which could reasonably
be expected to involve payments during fiscal year 1999 of more than $500,000.
(b) Except as set forth in Section 4.14(b) of the Long Beach
Disclosure Schedule, each Long Beach Contract is valid and binding and in full
force and effect, (ii) Long Beach and each of its Subsidiaries has in all
material respects performed all obligations required to be performed by it to
date under each Long Beach Contract, and (iii) no event or condition exists
which constitutes or, after notice or lapse of time or both, would constitute a
material default on the part of Long Beach or any of its Subsidiaries under any
such Long Beach Contract, except, in each case, where such invalidity, failure
to be binding, failure to so perform or default, individually or in the
aggregate, would not have or reasonably be expected to have a Material Adverse
Effect on Long Beach.
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4.15 Agreements with Regulatory Agencies. Except as set forth in Section
4.15 of the Long Beach Disclosure Schedule, neither Long Beach nor any of its
Subsidiaries is subject to any cease-and-desist or other order issued by, or is
a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has adopted any
board resolutions at the request of (each, whether or not set forth in Section
4.15 of the Long Beach Disclosure Schedule, a "Regulatory Agreement"), any
Governmental Entity that restricts the conduct of its business or that in any
manner relates to its capital adequacy, its credit policies, its management or
its business, nor has Long Beach or any of its Subsidiaries been advised by any
Governmental Entity that it is considering issuing or requesting any Regulatory
Agreement. Long Beach is in full compliance with the settlement agreement dated
September 5, ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇'▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
Department of Justice.
4.16 Undisclosed Liabilities. Except (i) for those liabilities that are
fully reflected or reserved against on the consolidated balance sheet of Long
Beach included in the Long Beach Form 10-K for the year ended December 31, 1998
or (ii) for liabilities incurred in the ordinary course of business consistent
with past practice since December 31, 1998, neither Long Beach nor any of its
Subsidiaries has incurred any liability of any nature whatsoever (whether
absolute, accrued or contingent or otherwise and whether due or to become due)
that, either alone or when combined with all the liabilities not described in
clause (i) or (ii), has had, or would be reasonably expected to have, a Material
Adverse Effect on Long Beach.
4.17 Rights Agreement; Anti-takeover Provisions. Long Beach has taken
all necessary action so that the entering into of this Agreement, the
consummation of the transactions contemplated hereby, the entering into of the
Stock Option Agreement and the exercise of the Option (as defined therein) do
not and will not result in the grant of any rights to any person under the Long
Beach Rights Agreement or enable or require the Long Beach Rights to be
exercised, distributed or triggered. The Board of Directors of Long Beach has
taken all necessary action so that the provisions of Section 203 of the DGCL
(and any applicable provisions of the takeover laws of any other state) do not
and will not apply to this Agreement, the Merger or the transactions
contemplated hereby, the Stock Option Agreement or the exercise of the Option.
4.18 Long Beach Information. The information relating to Long Beach and
its Subsidiaries to be provided by Long Beach for inclusion in the Proxy
Statement/Prospectus and the S-4, or in any other document filed with any other
Governmental Entity in connection herewith, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in light of the circumstances in which they are made,
not misleading. The Proxy Statement/Prospectus (except for such portions thereof
as relate only to Washington Mutual or any of its Subsidiaries) will comply as
to form in all material respects with the provisions of the Exchange Act and the
rules and regulations thereunder.
4.19 Title to Property.
(a) Real Property. Section 4.19(a) of the Long Beach Disclosure
Schedule contains a description of all interests in real property (other than
real property security interests received in the ordinary course of business or
real property acquired through foreclosure or deed
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in lieu thereof of other realization proceedings ("REO")), whether owned, leased
or otherwise claimed, including a list of all leases of real property, in which
Long Beach or any Subsidiary thereof has or claims in interest as of the date of
this Agreement and any guarantees of any such leases by any of such parties.
True and complete copies of such leases have previously been delivered or made
available to Washington Mutual, together with all amendments, modifications,
agreements or other writings related thereto which are in the possession of Long
Beach or any Subsidiary thereof. Except as disclosed on Section 4.19(a) of the
Long Beach Disclosure Schedule, to the best knowledge of Long Beach, each such
lease is valid and binding as between Long Beach or a Subsidiary thereof and the
other party or parties thereto, and the occupant is a tenant or possessor in
good standing thereunder, free of any default or breach whatsoever (except as
otherwise disclosed on Section 4.19(a) of the Long Beach Disclosure Schedule)
and quietly enjoys the premises provided for therein. Except as disclosed on
Section 4.19(a) of the Long Beach Disclosure Schedule, Long Beach and its
Subsidiaries have owner's policies of title insurance insuring them to be the
owners of all real property owned by them on the date of this Agreement, free
and clear of all mortgages, liens, pledges, charges or encumbrances of any
nature whatsoever, except liens for current taxes not yet due and payable and
other standard exceptions commonly found in title policies in the jurisdiction
where such real property is located, and such encumbrances and imperfections of
title, if any, as do not materially detract from the value of the properties and
do not materially interfere with the present or proposed use of such properties
or otherwise materially impair such operations. All real property and fixtures
material to the business, operations of financial condition of Long Beach and
its Subsidiaries are in substantially good condition and repair.
(b) Personal Property. Long Beach and its Subsidiaries have good,
valid and marketable title to all tangible personal property owned by them on
the date hereof, free and clear of all liens, pledges, charges or encumbrances
of any nature whatsoever except as publicly disclosed in the Long Beach Reports
filed prior to the date hereof or as disclosed on Section 4.19(b) of the Long
Beach Disclosure Schedule. With respect to personal property used in the
business of Long Beach and its Subsidiaries which is leased rather than owned,
neither Long Beach nor any Subsidiary thereof is in default under the terms of
any such lease the loss of which would have a Material Adverse Effect on Long
Beach.
4.20 Insurance. Section 4.20 of the Long Beach Disclosure Schedule
contains a true and complete list and a brief description (including name of
insurer, agent, coverage and expiration date) of all insurance policies in force
on the date hereof with respect to the business and assets of the Long Beach and
its Subsidiaries (other than insurance policies under which Long Beach or any
Subsidiary thereof is named as a loss payee, insured or additional insured as a
result of its position as a secured lender on specific Loans and mortgage
insurance policies on specific Loans). Long Beach and its Subsidiaries are in
compliance with all of the material provisions of their insurance policies and
are not in default under any of the material terms thereof. Each such policy is
outstanding and in full force and effect and, except as set forth on Section
4.20 of the Long Beach Disclosure Schedule, Long Beach or the relevant
Subsidiary thereof is the sole beneficiary of such policies. All premiums and
other payments due under any such policy have been paid.
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4.21 Environmental Liability. Except as set forth in Section 4.21 of the
Long Beach Disclosure Schedule, there are no legal, administrative, arbitral or
other proceedings, claims, actions, causes of action, private environmental
investigations or remediation activities or governmental investigations of any
nature seeking to impose, or that reasonably could be expected to result in the
imposition, on Long Beach or any of its Subsidiaries of any liability or
obligation arising under common law standards relating to environmental
protection, human health or safety, or under any local, state or federal
environmental statute, regulation or ordinance, including, without limitation,
the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended (collectively, the "Environmental Laws"), pending or, to the
knowledge of Long Beach, threatened against Long Beach or any of its
Subsidiaries, which liability or obligation would have or would reasonably be
expected to have a Material Adverse Effect on Long Beach. To the knowledge of
Long Beach, there is no reasonable basis for any such proceeding, claim, action
or governmental investigation that would impose any liability or obligation that
would have or would reasonably be expected to have a Material Adverse Effect on
Long Beach. To the knowledge of Long Beach, during or prior to the period of (i)
its or any of its Subsidiaries, ownership or operation of any of their
respective current properties, (ii) its or any of its Subsidiaries,
participation in the management of any property, or (iii) its or any of its
Subsidiaries' holding of a security interest or other interest in any property,
there were no releases or threatened releases of hazardous, toxic, radioactive
or dangerous materials or other materials regulated under Environmental Laws in,
on, under or affecting any such property which would reasonably be expected to
have a Material Adverse Effect on Long Beach. Neither Long Beach nor any of its
Subsidiaries is subject to any agreement, order, judgment, decree, letter or
memorandum by or with any court, governmental authority, regulatory agency or
third party imposing any material liability or obligation pursuant to or under
any Environmental Law that would have or would reasonably be expected to have a
Material Adverse Effect on Long Beach.
4.22 Opinion of Financial Advisor. Long Beach has received the opinion
of Friedman, Billings, ▇▇▇▇▇▇ & Co., Inc., dated May 18, 1999, to the effect
that, as of such date, the Merger Consideration is fair from a financial point
of view to the holders of Long Beach Common Stock.
4.23 Patents, Trademarks, Etc. Long Beach and each of its Subsidiaries
owns or possesses all legal rights to use all proprietary rights, including
without limitation all trademarks, trade names, service marks and copyrights,
that are material to the conduct of their existing businesses. Except for the
agreements listed on Section 4.23 of the Long Beach Disclosure Schedule, neither
Long Beach nor any of its Subsidiaries is bound by or a party to any options,
licenses or agreements of any kind with respect to any trademarks, service marks
or trade names which it claims to own. Neither Long Beach nor any of its
Subsidiaries has received any communications alleging that any of them has
violated or would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity.
4.24 Loan Matters
(a) All evidences of indebtedness ("Loans") reflected as assets
on the books and records of Long Beach and its Subsidiaries were, as of March
31, 1999 and will be as of the
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Closing Date, in all respects legal, valid and binding obligations of the
respective obligors named therein and no such indebtedness is subject to any
defenses which have been or may be asserted, except for defenses arising from
applicable bankruptcy, insolvency, moratorium or other similar laws relating to
creditors' rights generally and general principles of equity.
(b) Each Loan outstanding at any time since May 2, 1997 and each
commitment to extend credit has been solicited and originated and is
administered and serviced in all material respects in accordance with the
relevant loan documents, Long Beach's underwriting standards and in material
compliance with all applicable requirements of federal, state and local laws,
regulations and rules.
(c) None of the agreements pursuant to which Long Beach or any
Subsidiary has sold Loans or pools of Loans or participations in Loans or pools
of Loans contain any obligation to repurchase such Loans or interests therein
solely on account of a payment default by the obligor on any such Loans (other
than a first payment default). Except as disclosed in Section 4.24(c) of the
Long Beach Disclosure Schedule, neither Long Beach nor any of its Subsidiaries
is in default under any such agreement or has received any notice alleging
default.
(d) All brokers and other third parties who originate or have
originated Loans since May 2, 1997 have all required licenses and approvals from
all jurisdictions requiring licenses and approvals and to the best knowledge of
Long Beach, have complied and are not in violation of any applicable law,
regulation, order, rule, policy or guideline of any Governmental Entity.
(e) Neither Long Beach nor any Long Beach Subsidiary has since
May 2, 1997 entered into any agreement, arrangement or commitment to securitize
Loans.
(f) Since May 2, 1997, the practices of Long Beach and its
Subsidiaries with respect to compensation paid to mortgage brokers comply with
the policy statement issued by Department of Housing and Urban Development
("HUD") in March 1999.
(g) Long Beach is an approved residential subprime loan servicer
by Standard & Poor's, is an approved FNMA seller/servicer and is licensed as a
non-supervised mortgagee by HUD.
4.25 Year 2000 Compliance. All computer hardware and software owned,
used or licensed by Long Beach or any of its Subsidiaries, including but not
limited to system and application programs, files, databases and computer
services, the failure or disfunctionality of which would individually or in the
aggregate have a Material Adverse Effect on Long Beach, is Year 2000 Compliant.
"Year 2000 Compliant" means that such hardware and software will (a) correctly
process date data from at least January 1, 1900 through December 31, 2000
without error or interruption due to date, (b) maintain functionality with
respect to the input, storing, processing or output of records or data
containing dates falling on or after January 1, 2000, and (c) be interoperable
with other Year 2000 compliant hardware or software owned, used or licensed by
Long Beach or any of its Subsidiaries which may deliver records to, receive
records from or otherwise interact with such hardware or software in the course
of processing records or data.
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4.26 Labor Matters. Neither Long Beach 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 Long
Beach 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 Long Beach or
any such Subsidiary to bargain with any labor organization as to wages or
conditions of employment, nor is there any strike or other material labor
dispute or disputes involving it or any of its Subsidiaries pending, or to Long
Beach's knowledge, threatened, nor is Long Beach aware of any activity involving
its or any of its Subsidiaries' employees seeking to certify a collective
bargaining unit or engaging in other organizational activity.
5. REPRESENTATIONS AND WARRANTIES OF WASHINGTON MUTUAL
Washington Mutual hereby represents and warrants to Long Beach as
follows:
5.1 Corporate Organization. Washington Mutual is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington. Washington Mutual has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not have or reasonably be expected to have a
Material Adverse Effect (as defined below) on Washington Mutual. As used in this
Agreement, the term "Material Adverse Effect" means, with respect to Washington
Mutual, a material adverse effect on the business, results of operations,
financial condition or prospects of Washington Mutual and its Subsidiaries taken
as a whole or a material adverse effect on Washington Mutual's ability to
consummate the transactions contemplated hereby on a timely basis; provided,
however, that a Material Adverse Effect on Washington Mutual shall not be deemed
to have occurred as a result of (i) any changes in laws, regulations or GAAP or
(ii) any changes in general economic conditions affecting banks, savings
associations or their holding companies generally. The copies of the Articles of
Incorporation and Bylaws of Washington Mutual which have previously been made
available to Long Beach are true, complete and correct copies of such documents
as in effect as of the date of this Agreement.
5.2 Capitalization. The authorized capital stock of Washington Mutual
consists of 1,600,000,000 shares of Washington Mutual Common Stock and
10,000,000 shares of preferred stock, no par value ("Washington Mutual Preferred
Stock"). At the close of business on April 30, 1999, there were 594,850,100
shares of Washington Mutual Common Stock outstanding and no shares of Washington
Mutual Preferred Stock outstanding. As of April 30, 1999, no shares of
Washington Mutual Common Stock or Washington Mutual Preferred Stock were
reserved for issuance. All of the issued and outstanding shares of Washington
Mutual Common Stock have been duly authorized and validly issued and are fully
paid, nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof. As of the date of this Agreement, except (i)
as set forth in Section 5.2(a) of the disclosure schedule of Washington Mutual
delivered to Long Beach concurrently herewith (the "Washington Mutual Disclosure
Schedule"), (ii) as provided in the Rights Agreement, dated as of October 16,
1990, between
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Washington Mutual and First Interstate Bank of Washington (as amended and
supplemented, the "Washington Mutual Rights Agreement"), and (iii) as set forth
elsewhere in this Section 5.2(a), Washington Mutual does not have and is not
bound by any outstanding subscriptions, options, warrants, calls, commitments or
agreements of any character calling for the purchase or issuance of any shares
of Washington Mutual Common Stock or Washington Mutual Preferred Stock or any
other equity securities of Washington Mutual or any securities representing the
right to purchase or otherwise receive any shares of Washington Mutual Common
Stock or Washington Mutual Preferred Stock. The shares of Washington Mutual
Common Stock to be issued pursuant to the Merger will be duly authorized and
validly issued and, at the Effective Time, all such shares will be fully paid,
nonassessable and free of preemptive rights, with no personal liability
attaching to the ownership thereof.
5.3 Authority; No Violation.
(a) Washington Mutual has full corporate power and authority to
execute and deliver this Agreement and the Stock Option Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Stock Option Agreement and the consummation
of the transactions contemplated hereby (including the issuance of the
Washington Mutual Common Stock constituting Merger Consideration) and thereby
have been duly and validly approved by the Board of Directors of Washington
Mutual and no other corporate proceedings on the part of Washington Mutual are
necessary to approve this Agreement or the Stock Option Agreement or to
consummate the transactions contemplated hereby and thereby. This Agreement and
the Stock Option Agreement have been duly and validly executed and delivered by
Washington Mutual and (assuming due authorization, execution and delivery by
Long Beach) each constitutes a valid and binding obligation of Washington
Mutual, enforceable against Washington Mutual in accordance with its terms,
except as enforcement may be limited by general principles of equity whether
applied in a court of law or a court of equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights and remedies generally.
(b) Except as set forth in Section 5.3(b) of the Washington
Mutual Disclosure Schedule, neither the execution and delivery of this Agreement
or the Stock Option Agreement by Washington Mutual, nor the consummation by
Washington Mutual of the transactions contemplated hereby or thereby, nor
compliance by Washington Mutual with any of the terms or provisions hereof or
thereof, will (i) violate any provision of the Articles of Incorporation or
Bylaws of Washington Mutual or any of the similar governing documents of any of
its Subsidiaries or (ii) assuming that the consents and approvals referred to in
Section 5.4 are duly obtained, (x) violate any statute, code, ordinance, rule,
regulation, judgment, order, writ, decree or injunction applicable to Washington
Mutual or any of its Subsidiaries or any of their respective properties or
assets, or (y) violate, conflict with, result in a breach of any provision of or
the loss of any benefit under, constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, result in
the termination of or a right of termination or cancellation under, accelerate
the performance required by, or result in the creation of any Lien upon any of
the respective properties or assets of Washington Mutual or any of its
Subsidiaries under, any of the terms, conditions or provisions of any note,
bond, mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Washington Mutual or any of its Subsidiaries
is a party, or by which they or any of their respective properties or assets
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may be bound or affected, except (in the case of clause (y) above) for such
violations, conflicts, breaches or defaults which either individually or in the
aggregate will not have and would not reasonably be expected to have a Material
Adverse Effect on Washington Mutual.
5.4 Consents and Approvals. Except for (i) approval of the listing of
the Washington Mutual Common Stock to be issued in the Merger on the NYSE, (ii)
the filing with the SEC of the Proxy Statement/Prospectus and the filing and
declaration of effectiveness of the S-4, (iii) the filing of the Articles of
Merger with the Washington Secretary pursuant to the WBCA and the Certificate of
Merger with the Delaware Secretary pursuant to the DGCL, (iv) the adoption of
the agreement of merger (within the meaning of Section 252 of the DGCL)
contained in this Agreement by the requisite votes of the stockholders of Long
Beach, (v) the applicable requirements of the HSR Act, (vi) the consents and
approvals set forth in Section 5.4 of the Washington Mutual Disclosure Schedule,
and (vii) the consents and approvals of third parties which are not Governmental
Entities, the failure of which to obtain will not have and would not be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect, no consents or approvals of, or filings or registrations with,
any Governmental Entity or any third party are necessary in connection with (A)
the execution and delivery by Washington Mutual of this Agreement and (B) the
consummation by Washington Mutual of the Merger and the other transactions
contemplated hereby.
5.5 Reports. Washington Mutual and each of its Subsidiaries have timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since January 1, 1997 with any Governmental Entities, and have paid all
fees and assessments due and payable in connection therewith. Except as set
forth in Section 5.5 of the Washington Mutual Disclosure Schedule and except for
normal examinations conducted by a Governmental Entity in the regular course of
the business of Washington Mutual and its Subsidiaries, no Governmental Entity
has initiated any proceeding or, to the best knowledge of Washington Mutual,
investigation into the business or operations of Washington Mutual or any of its
Subsidiaries since January 1, 1997. There is no material unresolved violation,
criticism, or exception by any Government Entity with respect to any report or
statement relating to any examinations of Washington Mutual or any of its
Subsidiaries.
5.6 Financial Statements. Washington Mutual has previously made
available to Long Beach copies of (a) the consolidated balance sheets of
Washington Mutual and its Subsidiaries, as of December 31, for the fiscal years
1997 and 1998, and the related consolidated statements of income, changes in
stockholders' equity and cash flows for the fiscal years 1996 through 1998,
inclusive, as reported in Washington Mutual's Annual Report on Form 10-K for the
fiscal year ended December 31, 1998 filed with the SEC under the Exchange Act,
in each case accompanied by the audit report of Deloitte & Touche, LLP,
independent public accountants with respect to Washington Mutual, and (b) the
unaudited consolidated balance sheets of Washington Mutual and its Subsidiaries
as of March 31, 1998 and March 31, 1999 and the related unaudited consolidated
statements of income, cash flows and changes in stockholders' equity for the
three-month periods then ended, as reported in Washington Mutual's Quarterly
Report on Form 10-Q for the period ended March 31, 1999 filed with the SEC under
the Exchange Act. Each of the financial statements referred to in this Section
5.6 (including the related
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notes, where applicable) fairly present, and the financial statements referred
to in Section 7.11 hereof (including the related notes, where applicable) will
fairly present (subject, in the case of the unaudited statements, to normal
recurring adjustments, none of which are expected to be material in nature and
amount), the results of the consolidated operations and changes in stockholders'
equity and consolidated financial position of Washington Mutual and its
Subsidiaries for the respective fiscal periods or as of the respective dates
therein set forth. Each of such financial statements (including the related
notes, where applicable) complies, and the financial statements referred to in
Section 7.11 hereof (including the related notes, where applicable) will comply,
in all material respects with applicable accounting requirements and with the
published rules and regulations of the SEC with respect thereto; and each of
such financial statements (including the related notes, where applicable) has
been, and the financial statements referred to in Section 7.11 (including the
related notes, where applicable) will be, prepared in accordance with GAAP
consistently applied during the periods involved, except in each case as
indicated in such statements or in the notes thereto or, in the case of
unaudited statements, as permitted by Form 10-Q. The books and records of
Washington Mutual and its Subsidiaries have been, and are being, maintained in
all material respects in accordance with GAAP and any other applicable legal and
accounting requirements and reflect only actual transactions.
5.7 Broker's Fees. Except as set forth in Section 5.7 of the Washington
Mutual Disclosure Schedule, neither Washington Mutual nor any Subsidiary thereof
nor any of their respective officers or directors has employed any broker or
finder or incurred any liability for any broker's fees, commissions or finder's
fees in connection with any of the transactions contemplated by this Agreement.
5.8 Absence of Certain Changes or Events. Except as publicly disclosed
in Washington Mutual Reports (as defined in Section 5.10) filed prior to the
date hereof or as set forth in Section 5.8 of the Washington Mutual Disclosure
Schedule, since March 31, 1999, no event has occurred which has had or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Washington Mutual.
5.9 Legal Proceedings.
(a) Neither Washington Mutual nor any of its Subsidiaries is a
party to any, and there are no pending or, to the best of Washington Mutual's
knowledge, threatened legal, administrative, arbitral or other proceedings,
claims, actions or governmental or regulatory investigations of any nature
against Washington Mutual or any of its Subsidiaries or challenging the validity
or propriety of the transactions contemplated by this Agreement as to which
there is a significant possibility of an adverse determination and which, if
adversely determined, would, individually or in the aggregate, have or
reasonably be expected to have a Material Adverse Effect on Washington Mutual.
(b) There is no injunction, order, judgment, decree, or
regulatory restriction imposed upon Washington Mutual, any of its Subsidiaries
or the assets of Washington Mutual or any of its Subsidiaries which has had, or
would reasonably be expected to have, a Material Adverse Effect on Washington
Mutual.
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5.10 SEC Reports. Washington Mutual has previously made available to
Long Beach an accurate and complete copy of each final registration statement,
prospectus, report, schedule and definitive proxy statement filed since January
1, 1998 and prior to the date hereof by Washington Mutual with the SEC pursuant
to the Securities Act or the Exchange Act (the "Washington Mutual Reports"), and
no such registration statement, prospectus, report, schedule or proxy statement
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading. Washington Mutual has timely filed all Washington Mutual Reports and
other documents required to be filed by it under the Securities Act and the
Exchange Act, and, as of their respective dates, all Washington Mutual Reports
complied in all material respects with the published rules and regulations of
the SEC with respect thereto.
5.11 Compliance with Applicable Law. Except as disclosed in Section 5.11
of the Washington Mutual Disclosure Schedule, Washington Mutual and each of its
Subsidiaries hold, and have at all times held, all material licenses,
franchises, permits and authorizations necessary for the lawful conduct of their
respective businesses under and pursuant to all, and have complied with and are
not in default in any material respect under any, applicable law, statute,
order, rule, regulation, policy and/or guideline of any Governmental Entity
relating to Washington Mutual or any of its Subsidiaries, except where the
failure to hold such license, franchise, permit or authorization or such
noncompliance or default would not, individually or in the aggregate, have or
reasonably be expected to have a Material Adverse Effect on Washington Mutual,
and neither Washington Mutual nor any of its Subsidiaries knows of, or has
received notice of, any material violations of any of the above which,
individually or in the aggregate, would have or reasonably be expected to have a
Material Adverse Effect on Washington Mutual.
5.12 Agreements with Regulatory Agencies. Except as set forth in Section
5.12 of the Washington Mutual Disclosure Schedule, neither Washington Mutual nor
any of its Subsidiaries is subject to any cease-and-desist or other order issued
by, or is a party to any written agreement, consent agreement or memorandum of
understanding with, or is a party to any commitment letter or similar
undertaking to, or is subject to any order or directive by, or has adopted any
board resolutions at the request of (each, whether or not set forth in Section
5.12 of the Washington Mutual Disclosure Schedule, a "Washington Mutual
Regulatory Agreement"), any Governmental Entity that restricts the conduct of
its business or that in any manner relates to its capital adequacy, its credit
policies, its management or its business, nor has Washington Mutual or any of
its Subsidiaries been advised by any Governmental Entity that it is considering
issuing or requesting any Regulatory Agreement.
5.13 Washington Mutual Information. The information relating to
Washington Mutual and its Subsidiaries to be provided by Washington Mutual to be
contained in the Proxy Statement/Prospectus and the S-4, or in any other
document filed with any other Governmental Entity in connection herewith, will
not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements therein, in light of the circumstances in
which they are made, not misleading. The Proxy Statement/Prospectus (except for
such portions thereof that relate only to Long Beach or any of its Subsidiaries)
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations
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thereunder. The S-4 will comply as to form in all material respects with the
provisions of the Securities Act and the rules and regulations thereunder.
6. COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1 Conduct of Businesses Prior to the Effective Time. Except as set
forth in Section 6.1 or 6.2 of the Long Beach Disclosure Schedule, as expressly
contemplated or permitted by this Agreement, or as required by applicable law,
rule or regulation, during the period from the date of this Agreement to the
Effective Time, Long Beach shall, and shall cause each of its Subsidiaries to,
(i) conduct its business in the usual, regular and ordinary course consistent
with past practice, (ii) use reasonable best efforts to maintain and preserve
intact its business organization, employees and advantageous business
relationships and retain the services of its officers and key employees and
(iii) take no action which would reasonably be expected to adversely affect or
delay its ability to obtain any approvals of any Governmental Entity required to
consummate the transactions contemplated hereby or to consummate the
transactions contemplated hereby.
6.2 Long Beach Forbearances. Except as set forth in Section 6.2 of the
Long Beach Disclosure Schedule, as expressly contemplated or permitted by this
Agreement, or as required by applicable law, rule or regulation, during the
period from the date of this Agreement to the Effective Time, Long Beach shall
not, and shall not permit any of its Subsidiaries to, without the prior written
consent of Washington Mutual:
(a) adjust, split, combine or reclassify any capital stock; set
any record or payment dates for the payment of any dividends or distributions on
its capital stock except in the ordinary and usual course of business consistent
with past practice; make, declare or pay any dividend or make any other
distribution on, or directly or indirectly redeem, purchase or otherwise
acquire, any shares of its capital stock or any securities or obligations
convertible into or exchangeable for any shares of its capital stock, or except
as otherwise permitted by this paragraph (a) grant any stock appreciation rights
or grant any individual, corporation, joint venture or other entity any right to
acquire any shares of its capital stock (except for dividends paid by any of the
wholly owned Subsidiaries of Long Beach to Long Beach or any of its wholly owned
Subsidiaries); or issue any additional shares of capital stock except pursuant
to the exercise of stock options outstanding as of the date hereof;
(b) incur any indebtedness for borrowed money, other than
short-term borrowings pursuant to warehouse and similar credit facilities in
effect on the date of this Agreement or any replacement facilities with
commercially reasonable terms as credit facilities existing as of the date
hereof, or sell, transfer, mortgage, encumber or otherwise dispose of any of its
assets or properties to any individual, corporation or other entity (other than
a direct wholly owned Subsidiary), or cancel, release or assign any indebtedness
to any such person or any claims held by any such person, in each case that is
material to such party, except (i) in the ordinary course of business consistent
with past practice or (ii) as expressly required by the terms of any contracts
or agreements in force at the date of this Agreement and set out in Section 6.2
of the Long Beach Disclosure Schedule;
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(c) make any acquisition or investment, whether by purchase or
other acquisition of stock or other equity interests, by merger, consolidation
or other business combination, or by contributions to capital, or make any
property transfers or material purchases of any property or assets, in or from
any other individual, corporation, joint venture or other entity other than a
wholly owned Subsidiary of Long Beach;
(d) enter into, renew or terminate any contract or agreement,
other than loans made in the ordinary course of business, that calls for
aggregate annual payments of $200,000 and which is not either (i) terminable at
will on 60 days or less notice without payment of a penalty in excess of $50,000
or (ii) has a term of less than one year; or make any material change in any of
its leases or contracts, other than renewals of contracts or leases for a term
of one year or less without material adverse changes to the terms thereof;
(e) other than general salary increases consistent with past
practices for employees other than executive officers, increase in any material
respect the compensation or fringe benefits of any of its employees or pay any
pension or retirement allowance not required by any existing plan or agreement
to any such employees or become a party to, amend (other than amendments
required by law) or commit itself to any pension, retirement, profit-sharing or
welfare benefit plan or agreement or employment agreement with or for the
benefit of any employee or accelerate the vesting of any stock options or other
stock-based compensation;
(f) authorize or permit any of its officers, directors,
employees, representatives or agents (collectively, "Representatives") to
directly or indirectly solicit, initiate or encourage any inquiries relating to
or that may reasonably be expected to lead to, or the making of any proposal
which constitutes, a Takeover Proposal (as defined below), or recommend or
endorse any Takeover Proposal, or participate in any discussions or
negotiations, or provide third parties with any nonpublic information, relating
to any such Takeover Proposal or otherwise facilitate any effort or attempt to
make or implement a Takeover Proposal; provided, however, that, at any time
prior to the time its stockholders shall have voted to approve this Agreement
and the Merger, Long Beach may, and may authorize and permit its Representatives
to, provide third parties with nonpublic information and participate in
discussions and negotiations with any third party in response to a Takeover
Proposal which was not solicited subsequent to the date hereof, if Long Beach's
Board of Directors, based on the advice of its financial advisers and outside
counsel, has determined in its reasonable good faith judgment that the failure
to do so would constitute a breach of its fiduciary duties. Long Beach shall (i)
advise Washington Mutual orally (within one day) and in writing (as promptly as
practicable) of the receipt after the date hereof of any Takeover Proposal by it
or by any of its Subsidiaries or any of its Representatives and (ii) unless its
Board of Directors, based on the advice of its financial advisers and outside
counsel, has determined in its reasonable good faith judgment that such action
would constitute a breach of its fiduciary duties, inform Washington Mutual
orally and in writing, as promptly as practicable after the receipt thereof, of
the material terms and conditions of any such Takeover Proposal (including the
identity of the party making such inquiry or proposal) and shall keep Washington
Mutual informed of the status (including any changes in the material terms and
conditions) thereof. Long Beach shall not furnish any nonpublic information to
any other party pursuant to this Section 6.2(f) except pursuant to the terms of
a confidentiality agreement containing terms substantially identical to the
terms contained in the Confidentiality Agreement (as defined in
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Section 7.2(b) hereof). Long Beach will immediately cease and cause to be
terminated any activities, discussions or negotiations conducted prior to the
date of this Agreement with any parties other than Washington Mutual with
respect to any Takeover Proposal and require the return (or if permitted by the
terms of the applicable confidentiality agreement, the certified destruction) of
all confidential information previously provided to such parties. As used in
this Agreement, "Takeover Proposal" shall mean any inquiry, proposal or offer
relating to any tender or exchange offer, proposal for a merger, consolidation
or other business combination involving Long Beach or any of its Subsidiaries or
the acquisition in any manner of 25% or more of the voting stock or equity, or a
substantial portion of the assets, of Long Beach or any of its Subsidiaries,
other than the transactions contemplated by this Agreement;
(g) make any capital expenditures in excess of (A) $200,000 per
project or related series of projects or (B) $400,000 in the aggregate, other
than expenditures necessary to maintain existing assets in good repair;
(h) except in the ordinary course of business, make application
for the opening, relocation or closing of any, or open, relocate or close any,
office or loan production or servicing facility;
(i) make or acquire any loan or issue a commitment for any loan
except for loans and commitments that are made in the ordinary course of
business consistent with past practice, or agree to guarantee the obligations of
any other persons;
(j) except as otherwise expressly permitted elsewhere in this
Section 6.2, engage or participate in any material transaction or incur or
sustain any material obligation not in the ordinary course of business;
(k) except as otherwise expressly permitted hereby, foreclose
upon or otherwise acquire (whether by deed in lieu of foreclosure or otherwise)
any real property (other than 1-to-4 family residential properties in the
ordinary course of business);
(l) settle any claim, action or proceeding involving monetary
damages, except in the ordinary course of business consistent with past
practice, or agree or consent to the issuance of any injunction, decree, order
or judgment restricting its business or operations;
(m) amend its certificate of incorporation, bylaws or similar
governing documents or the Long Beach Rights Agreement, or redeem or agree to
redeem the Long Beach Rights;
(n) except in the ordinary course of business consistent with
past practice, materially change its investment securities portfolio policy, or
the manner in which the portfolio is classified or reported;
(o) make any material changes in its policies and practices with
respect to (i) underwriting, pricing, originating, acquiring, selling,
servicing, or buying or selling rights to service loans or (ii) hedging its loan
positions or commitments;
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(p) take any action that is intended or may reasonably be
expected to result in any of its representations and warranties set forth in
this Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set forth
in Section 8 not being satisfied or in a violation of any provision of this
Agreement, except, in every case, as may be required by applicable law;
(q) make any changes in its accounting methods, practices or
policies, except as may be required under law, rule, regulation or GAAP, in each
case as concurred in by Long Beach's independent public accountants;
(r) enter into any securitizations of any loans; or
(s) agree to, or make any commitment to, take any of the actions
prohibited by this Section 6.2.
6.3 No Fundamental Washington Mutual Changes. Except as expressly
contemplated or permitted by this Agreement and except for amendments to its
articles of incorporation approved at its annual meeting of shareholders held on
April 20, 1999, or as required by applicable law, rule or regulation, during the
period from the date of this Agreement to the Effective Time, Washington Mutual
shall not, without the prior written consent of Long Beach, amend its articles
of incorporation or bylaws in a manner that would materially and adversely
affect the economic benefits of the Merger to the holders of Long Beach Common
Stock, or agree to, or make any commitment to, take any such action.
7. ADDITIONAL AGREEMENTS
7.1 Regulatory Matters.
(a) Washington Mutual and Long Beach shall promptly prepare and
file with the SEC the Proxy Statement/Prospectus and the S-4, in which the Proxy
Statement/Prospectus will be included as a prospectus. Each of Washington Mutual
and Long Beach shall use all reasonable efforts to have the S-4 declared
effective under the Securities Act as promptly as practicable after such filing,
and Long Beach shall thereafter mail the Proxy Statement/Prospectus to its
stockholders.
(b) Subject to the other provisions of this Agreement, the
parties hereto shall cooperate with each other and use reasonable best efforts
to promptly prepare and file all necessary documentation, to effect all
applications, notices, petitions and filings, to obtain as promptly as
practicable all permits, consents, approvals and authorizations of all third
parties and Governmental Entities which are necessary or advisable to consummate
the transactions contemplated by this Agreement (including without limitation
the Merger) and to comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such third parties and
Governmental Entities.
(c) Washington Mutual and Long Beach shall, upon request, furnish
each other with all information concerning themselves, their Subsidiaries,
directors, officers and stockholders and such other matters as may be reasonably
necessary or advisable in connection with the Proxy
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Statement/Prospectus, the S-4 or any other statement, filing, notice or
application made by or on behalf of Washington Mutual, Long Beach or any of
their respective Subsidiaries to any Governmental Entity in connection with the
merger and the other transactions contemplated by this Agreement.
(d) Washington Mutual and Long Beach shall promptly advise each
other upon receiving any communication from any Governmental Entity whose
consent or approval is required for consummation of the transactions
contemplated by this Agreement which causes such party to believe that there is
a reasonable likelihood that any Requisite Regulatory Approval (as defined in
Section 8.1(c) below) will not be obtained or that the receipt of any such
approval will be materially delayed.
7.2 Access to Information.
(a) Upon reasonable notice and subject to applicable laws
relating to the exchange of information, Long Beach shall, and shall cause each
of its Subsidiaries to, afford to the officers, employees, accountants, counsel
and other Representatives of Washington Mutual access, during normal business
hours during the period prior to the Effective Time, to all its properties,
books, contracts, commitments and records, and to its officers, employees,
accountants, counsel and other representatives and, during such period, Long
Beach shall, and shall cause its Subsidiaries to, make available to Washington
Mutual (i) a copy of each report, schedule, registration statement and other
document filed or received by it during such period pursuant to the requirements
of Federal securities laws or Federal or state banking, mortgage lending, real
estate or consumer finance or protection laws (other than reports or documents
which Long Beach is not permitted to disclose under applicable law) and (ii) all
other information concerning its business, properties and personnel as such
other party may reasonably request. Neither Long Beach nor any of its
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of its
customers, jeopardize the attorney-client privilege of the institution in
possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) Washington Mutual shall hold all information furnished by
Long Beach or any of its Subsidiaries or representatives pursuant to Section
7.2(a) in confidence to the extent required by, and in accordance with, the
provisions of the Confidentiality Agreement, dated November 3, 1998, between
Washington Mutual and Long Beach (the "Confidentiality Agreement").
(c) During the 30-day period prior to the Closing and from time
to time after the date of this Agreement upon Long Beach's reasonable request,
Long Beach and its Representatives shall have a reasonable opportunity to
conduct an update of their due diligence review of Washington Mutual and its
Subsidiaries. In order to permit such due diligence update, upon reasonable
notice and subject to applicable laws relating to the exchange of information,
Washington Mutual shall afford Long Beach and its Representatives reasonable
access, during
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normal business hours during such 30-day period, to all its properties, books,
contracts and records relating to the assets, stock ownership, properties,
obligations, operations and liabilities of Washington Mutual and its
Subsidiaries in which Long Beach may have a reasonable interest. Washington
Mutual and its Subsidiaries shall not be required to provide access to or
disclose information where such access or disclosure would violate or prejudice
the rights of its customers, jeopardize the attorney-client privilege of
Washington Mutual or any of its Subsidiaries or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement. The parties hereto will make
appropriate substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(d) No investigation by either of the parties or their respective
Representatives shall affect the representations, warranties, covenants or
agreements of the other set forth herein.
7.3 Stockholder Approval. Long Beach shall duly call, give notice of,
convene and hold a meeting of its stockholders to be held as soon as practicable
following the date hereof for the purpose of obtaining the requisite stockholder
approval required in connection with this Agreement and the Merger. Long Beach
shall, through its Board of Directors, recommend to its stockholders approval of
the Merger; provided, however, that this Section 7.3 shall not prohibit accurate
disclosure by Long Beach of information that is required in the Proxy
Statement/Prospectus or any other document required to be filed with the SEC
(including without limitation a disclosure statement on Schedule 14D-9) or
otherwise required by applicable law or regulation or the rules of The Nasdaq
Stock Market to be publicly disclosed.
7.4 Legal Conditions to Merger.
(a) Subject to the terms and conditions of this Agreement, each
of Washington Mutual and Long Beach shall, and shall cause its Subsidiaries to,
use their reasonable best efforts (i) to take, or cause to be taken, all actions
necessary, proper or advisable to comply promptly with all legal requirements
which may be imposed on such party or its Subsidiaries with respect to the
Merger and, subject to the conditions set forth in Section 8 hereof, to
consummate the transactions contemplated by this Agreement and (ii) to obtain
(and to cooperate with the other party to obtain) any consent, authorization,
order or approval of, or any exemption by, any Governmental Entity and any other
third party which is required to be obtained by Long Beach or Washington Mutual
or any of their respective Subsidiaries in connection with the Merger and the
other transactions contemplated by this Agreement.
(b) Subject to the terms and conditions of this Agreement, each
of Washington Mutual and Long Beach agrees to use reasonable best efforts to
take, or cause to be taken, all actions, and to do, or cause to be done, all
things necessary, proper or advisable to consummate and make effective, as soon
as practicable after the date of this Agreement, the transactions contemplated
hereby, including, without limitation, using reasonable best efforts to (i)
modify or amend any contracts, plans or arrangements to which Washington Mutual
or Long Beach is a party (to the extent permitted by the terms thereof) if
necessary in order to satisfy the conditions to closing set forth in Section 8
hereof, (ii) lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
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contemplated hereby, and (iii) defend any litigation seeking to enjoin, prevent
or delay the consummation of the transactions contemplated hereby or seeking
material damages.
7.5 Affiliates. Long Beach shall use its reasonable best efforts to
cause each director, executive officer and other person who is an "affiliate"
(for purposes of Rule 145 under the Securities Act) of Long Beach to deliver to
Washington Mutual, as soon as practicable after the date of this Agreement, and
in any event prior to the date of the stockholders meeting called by Long Beach
pursuant to Section 7.3 hereof, a written agreement, in the form and substance
reasonably satisfactory to Washington Mutual, relating to required transfer
restrictions on the Washington Mutual Common Stock received by them in the
Merger.
7.6 Stock Exchange Listing. Washington Mutual shall use its best efforts
to cause the shares of Washington Mutual Common Stock to be issued in the Merger
to be approved for listing on the NYSE, subject to official notice of issuance,
prior to the Effective Time.
7.7 Employees; Employee Benefit Plans.
(a) Washington Mutual shall, from and after the Effective Time,
(i) comply with the Plans in accordance with their terms, (ii) provide former
employees of Long Beach and its Subsidiaries who remain as employees of
Washington Mutual or its Subsidiaries credit for years of service with Long
Beach or any of its Subsidiaries (and their predecessors) prior to the Effective
Time for the purpose of eligibility and vesting and (iii) cause any and all
pre-existing condition limitations (to the extent such limitations did not apply
to a pre-existing condition under comparable Plans) and eligibility waiting
periods under group health plans of Washington Mutual to be waived with respect
to former employees of Long Beach who remain as employees of Washington Mutual
or its Subsidiaries (and their eligible dependents) and who become participants
in such group health plans. Nothing in this Section 7.7 shall be interpreted as
preventing Washington Mutual or its Subsidiaries from amending, modifying or
terminating any Plans or other contracts, arrangements, commitments or
understandings, in a manner consistent with their terms and applicable law.
(b) Long Beach agrees to amend its 401(k) plan prior to the
Effective Time so that participant loans are no longer available.
(c) If it is necessary under the Skadden, Arps, Slate, ▇▇▇▇▇▇▇ &
▇▇▇▇ LLP, SEC No-Action Letter, Fed. Sec. L. Rep. (CCH) P. 77,515 (Jan. 12,
1999), for Washington Mutual's Board of Directors to approve the Merger to
permit the acquisition of Washington Mutual Common Stock and options to purchase
Washington Mutual Common Stock by directors, officers or employees of Long Beach
who become directors or officers of Washington Mutual following the Effective
Time to be exempt from Section 16(b) of the Exchange Act pursuant to Rule
16b-3(d), then Washington Mutual's Board of Directors shall adopt appropriate
resolutions prior to the Effective Time.
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7.8 Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, in the event of any
threatened or actual claim, action, suit, proceeding or investigation, whether
civil, criminal or administrative, including, without limitation, any such
claim, action, suit, proceeding or investigation in which any person who is now,
or has been at any time prior to the date of this Agreement, or who becomes
prior to the Effective Time, a director, officer or employee of Long Beach or
any of its Subsidiaries (the "Indemnified Parties") is, or is threatened to be,
made a party based in whole or in part on, or arising in whole or in part out
of, or pertaining to (i) the fact that he is or was a director, officer or
employee of Long Beach, any of its Subsidiaries or any of their respective
predecessors or was prior to the Effective Time serving at the request of any
such party as a director, officer, employee, fiduciary or agent of another
corporation, partnership, trust or other enterprise or (ii) this Agreement, or
any of the transactions contemplated hereby and all actions taken by an
Indemnified Party in connection herewith, whether in any case asserted or
arising before or after the Effective Time, the parties hereto agree to
cooperate and use their best efforts to defend against and respond to such
proceedings to the extent set forth in the next sentence. It is understood and
agreed that after the Effective Time, Washington Mutual shall indemnify and hold
harmless, as and to the fullest extent permitted by the corporate governance
documents of Long Beach or its Subsidiaries as of the date hereof and by law,
each such Indemnified Party against any losses, claims, damages, liabilities,
costs, expenses (including reasonable attorneys' fees and expenses in advance of
the final disposition of any claim, suit, proceeding or investigation to each
Indemnified Parry to the fullest extent permitted by law upon receipt of an
undertaking from such Indemnified Party to repay such advanced expenses if it is
finally and unappealably determined that such Indemnified Party was not entitled
to indemnification hereunder), judgments, fines and amounts paid in settlement
in connection with any such threatened or actual claim, action, suit, proceeding
or investigation, and in the event of any such threatened or actual claim,
action, suit, proceeding or investigation (whether asserted or arising before or
after the Effective Time) (collectively, "Claims"), the Indemnified Parties may
retain counsel reasonably satisfactory to them after consultation with
Washington Mutual; provided, however, that (1) Washington Mutual shall have the
right to assume the defense thereof and upon such assumption Washington Mutual
shall not be liable to any Indemnified Party for any legal expenses of other
counsel or any other expenses subsequently incurred by any Indemnified Party in
connection with the defense thereof, except that if Washington Mutual elects not
to assume such defense or counsel for the Indemnified Parties reasonably advises
the Indemnified Parties that there are or may be (whether or not any have yet
actually arisen) issues which raise conflicts of interest between Washington
Mutual and the Indemnified Parties, the Indemnified Parties may retain counsel
reasonably satisfactory to them, and Washington Mutual shall pay the reasonable
fees and expenses of such counsel for the Indemnified Parties, (2) Washington
Mutual shall be obligated pursuant to this paragraph to pay for only one firm of
counsel for all Indemnified Parties, (3) Washington Mutual shall not be liable
for any settlement effected without its prior written consent (which consent
shall not be unreasonably withheld) and (4) Washington Mutual shall have no
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by the corporate governance
documents of Long Beach or its Subsidiaries or applicable law. Any
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Indemnified Party wishing to claim indemnification under this Section 7.8, upon
learning of any such claim, action, suit, proceeding or investigation, shall
notify Washington Mutual thereof, provided that the failure to so notify shall
not affect the obligations of Washington Mutual under this Section 7.8 except
(and only) to the extent such failure to notify materially' prejudices
Washington Mutual.
(b) Without limiting any of the obligations under paragraph (a)
of this Section 7.8, Washington Mutual agrees that all rights to indemnification
and all limitations of liability existing in favor of the Indemnified Parties as
provided in Long Beach's Certificate of Incorporation or Bylaws or in the
similar governing documents of any of Long Beach's Subsidiaries as in effect as
of the date of this Agreement with respect to matters occurring on or prior to
the Effective Time shall survive the Merger and shall continue in full force and
effect thereafter, without any amendment thereto; provided, however, that
nothing contained in this Section 7.8(b) shall be deemed to preclude the
liquidation, consolidation or merger of Long Beach or any Subsidiary thereof, in
which case all of such rights to indemnification and limitations on liability
shall be deemed to so survive and continue notwithstanding any such liquidation,
consolidation or merger and shall constitute rights which may be asserted
against Washington Mutual. Nothing contained in this Section 7.8(b) shall be
deemed to preclude any rights to indemnification or limitations on liability
provided in Long Beach's Certificate of Incorporation or Bylaws or the similar
governing documents of any of Washington Mutual's Subsidiaries with respect to
matters occurring subsequent to the Effective Time to the extent that the
provisions establishing such rights or limitations are not otherwise amended to
the contrary.
(c) Washington Mutual shall use its best efforts to cause the
persons serving as officers and directors of Long Beach immediately prior to the
Effective Time to be covered for a period of six (6) years from the Effective
Date by the directors' and officers' liability insurance policy maintained by
Long Beach (provided that Washington Mutual may substitute therefor policies of
at least the same coverage and amounts containing terms and conditions which are
not less advantageous to such directors and officers of Long Beach than the
terms and conditions of such existing policy and provided further that in no
event will Washington Mutual be required to expend in any one year an amount in
excess of 200% of the annual premiums currently paid by Long Beach for such
insurance) with respect to acts or omissions occurring prior to the Effective
Time which were committed by such officers and directors in their capacity as
such.
(d) The provisions of this Section 7.8 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
7.9 Additional Agreements. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement (including, without limitation, any merger between a Subsidiary of
Washington Mutual and a Subsidiary of Long Beach) or to vest the Surviving
Company with full title to all properties, assets, rights, approvals, immunities
and franchises of any of the parties to the Merger, the proper officers and
directors of each party to this Agreement and their respective Subsidiaries
shall take all such necessary action as may be reasonably requested by
Washington Mutual.
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7.10 Advice of Changes. Washington Mutual and Long Beach shall promptly
advise the other party of any change or event which, individually or in the
aggregate with other such changes or events, has a Material Adverse Effect on it
or which it believes would or would be reasonably likely to cause or constitute
a material breach of any of its representations, warranties or covenants
contained herein.
7.11 Subsequent Interim and Annual Financial Statements.
(a) As soon as reasonably available, but in no event more than 45
days after the end of each fiscal quarter (other than the fourth quarter of a
fiscal year) or 90 days after the end of each fiscal year ending after the date
of this Agreement, each party will deliver to the other party its Quarterly
Report on Form 10-Q or its Annual Report on Form 10-K, as the case may be, as
filed with the SEC under the Exchange Act.
(b) As soon as reasonably practicable and as soon as they are
available, but in no event more than 30 days, after the end of each calendar
month ending after the date of this Agreement, Long Beach shall furnish to
Washington Mutual (i) consolidated and consolidating financial statements
(including balance sheet, statement of operations and stockholders' equity) of
Long Beach and each of its Subsidiaries as of and for such month then ended,
(ii) servicing reports regarding cash flows, delinquencies and foreclosures on
asset pools serviced or master serviced by Long Beach or any of its
Subsidiaries, and (iii) any internal management reports relating to the
foregoing. All information furnished by Long Beach to Washington Mutual pursuant
to this Section 7.11(b) shall be held in confidence by Washington Mutual to the
extent required by, and in accordance with, the provisions of the
Confidentiality Agreement.
8. CONDITIONS PRECEDENT
8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) Stockholder Approval. The agreement of merger contained in
this Agreement shall have been approved and adopted by the requisite affirmative
vote of the stockholders of Long Beach entitled to vote thereon.
(b) NYSE Listing. The shares of Washington Mutual Common Stock
which shall be issued to the stockholders of Long Beach upon consummation of the
Merger shall have been authorized for listing on the NYSE, subject to official
notice of issuance.
(c) Other Approvals. All regulatory approvals required to
consummate the transactions contemplated hereby shall have been obtained and
shall remain in full force and effect and all statutory waiting periods in
respect thereof, including under the HSR Act, shall have expired or been
terminated (all such approvals and the expiration or termination of all such
waiting periods being referred to herein as the "Requisite ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇").
▇▇
▇▇
(▇) ▇-▇ Effectiveness. The S-4 shall have become effective under
the Securities Act, no stop order suspending the effectiveness of the S-4 shall
have been issued and no proceedings for that purpose shall have been initiated
or threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order,
injunction or decree issued by any court or agency of competent jurisdiction or
other legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger or any of the other transactions contemplated by this
Agreement shall be in effect. No statute, rule, regulation, order, injunction or
decree shall have been enacted, entered, promulgated or enforced by any
Governmental Entity which prohibits or makes illegal the consummation of the
Merger.
(f) Federal Tax Opinion. Washington Mutual and Long Beach shall
have received an opinion, dated as of the Effective Date, of ▇▇▇▇▇▇ Pepper &
Shefelman PLLC in a form and substance reasonably satisfactory to Washington
Mutual and Long Beach with respect to federal income tax laws substantially to
the effect set forth in Annex A hereto.
8.2 Conditions to Obligations of Washington Mutual. The obligations of
Washington Mutual to effect the Merger are also subject to the satisfaction or
waiver by Washington Mutual at or prior to the Effective Time of the following
conditions:
(a) Representations and Warranties. The representations and
warranties of Long Beach set forth in this Agreement shall be true and correct
in all respects as of the date of this Agreement and (except to the extent such
representations and warranties speak as of an earlier date) as of the Closing
Date as though made on and as of the Closing Date; provided, however, that for
purposes of determining the satisfaction of this condition, no effect shall be
given to any exception in such representations and warranties relating to
materiality or a Material Adverse Effect, and provided, further, that, for
purposes of this condition, such representations and warranties (other than the
representations and warranties contained in Section 4.2(a), which shall be true
and correct in all material respects) shall be deemed to be true and correct in
all respects unless the failure or failures of such representations and
warranties to be so true and correct, individually or in the aggregate, results
or would reasonably be expected to result in a Material Adverse Effect on Long
Beach and its Subsidiaries taken as a whole. Washington Mutual shall have
received a certificate signed on behalf of Long Beach by the Chief Executive
Officer and Chief Financial Officer of Long Beach to the foregoing effect.
(b) Performance of Obligations of Long Beach. Long Beach shall
have performed in all material respects all obligations required to be performed
by it under this Agreement at or prior to the Closing Date, and Washington
Mutual shall have received a certificate signed on behalf of Long Beach by the
Chief Executive Officer and the Chief Financial Officer of Long Beach to such
effect.
(c) Long Beach Rights Agreement. The Long Beach Rights issued
pursuant to the Long Beach Rights Agreement shall not have become nonredeemable,
exercisable, distributed or triggered pursuant to the terms of such agreement.
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(d) Burdensome Condition. There shall not be any action taken, or
any statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the transactions contemplated by this Agreement, by any
Governmental Entity, in connection with the grant of a Requisite Regulatory
Approval or otherwise, which imposes any restriction or condition which would be
reasonably likely to have or result in a Material Adverse Effect on Long Beach,
the Surviving Company or Washington Mutual or prevent Washington Mutual from
realizing substantially all of the contemplated benefits of the transactions
contemplated by this Agreement.
(e) Director Resignations. Washington Mutual shall have received
resignations from each director of Long Beach and each of its Subsidiaries,
except to the extent otherwise requested by Washington Mutual.
(f) Employment Agreements. Each of the employment agreements
entered into at the date of this Agreement between Washington Mutual and the
Long Beach executives set forth on Annex B shall be in full force and effect and
there shall have been no default by any employee thereunder.
(g) Noncompetition Agreements. Each of the noncompetition
agreements entered into at the date of this Agreement between Washington Mutual
and the Long Beach executives set forth on Annex C shall be in full force and
effect and there shall have been no default by any employee thereunder.
8.3 Conditions to Obligations of Long Beach. The obligation of Long
Beach to effect the Merger is also subject to the satisfaction or waiver by Long
Beach at or prior to the Effective Time of the following conditions:
(a) Representations and Warranties. The representations and
warranties of Washington Mutual set forth in this Agreement shall be true and
correct in all respects as of the date of this Agreement and (except to the
extent such representations and warranties speak as of an earlier date) as of
the Closing Date as though made on and as of the Closing Date; provided,
however, that for purposes of determining the satisfaction of this condition, no
effect shall be given to any exception in such representations and warranties
relating to materiality or a Material Adverse Effect, and provided, further,
that, for purposes of this condition, such representations and warranties shall
be deemed to be true and correct in all respects unless the failure or failures
of such representations and warranties to be so true and correct, individually
or in the aggregate, results or would reasonably be expected to result in a
Material Adverse Effect on Washington Mutual and its Subsidiaries taken as a
whole. Long Beach shall have received a certificate signed on behalf of
Washington Mutual by the chief Executive Officer and the Chief Financial Officer
of Washington Mutual to the foregoing effect.
(b) Performance of Obligations of Washington Mutual. Washington
Mutual shall have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing Date, and
Long Beach shall have received a certificate signed on behalf of Washington
Mutual by the Chief Executive Officer and the Chief Financial Officer of
Washington Mutual to such effect.
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9. TERMINATION AND AMENDMENT
9.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time:
(a) by mutual consent of Washington Mutual and Long Beach in a
written instrument, if the Board of Directors of each so determines;
(b) by either Washington Mutual or Long Beach if (i) any
Governmental Entity which must grant a Requisite Regulatory Approval has denied
approval of the Merger and such denial has become final and nonappealable or
(ii) any Governmental Entity of competent jurisdiction shall have issued a final
nonappealable order enjoining or otherwise prohibiting the consummation of the
transactions contemplated by this Agreement;
(c) by either Washington Mutual or Long Beach if the Effective
Time shall not have occurred on or before December 31, 1999, unless the failure
of the Effective Time to occur by such date shall be due to the failure of the
party seeking to terminate this Agreement to perform or observe the covenants
and agreements of such party set forth herein; provided, however, if the failure
of the Effective Time to occur by December 31, 1999 is solely due to the failure
to satisfy the condition set forth in Section 8.1(c), then the termination right
set forth in this Section 9.1(c) shall not be exercisable until March 31, 2000;
(d) by either Washington Mutual or Long Beach (provided that the
terminating party is not then in material breach of any representation,
warranty, covenant or other agreement contained herein) if the other party shall
have breached (i) any of the covenants or agreements made by such other party
herein or (ii) any of the representations or warranties made by such other party
herein, and in either case, such breach (x) is not cured within 30 days
following written notice to the party committing such breach, or which breach,
by its nature, cannot be cured prior to the Closing and (y) would entitle the
non-breaching party not to consummate the transactions contemplated hereby under
Section 8 hereof;
(e) by either Washington Mutual or Long Beach if any approval of
the stockholders of Long Beach contemplated by this Agreement shall not have
been obtained by reason of the failure to obtain the required vote at a duly
held meeting of stockholders or at any adjournment or postponement thereof;
(f) by the Board of Directors of Washington Mutual, if the Board
of Directors of Long Beach shall have withdrawn, modified or changed in a manner
adverse to Washington Mutual its approval or recommendation of this Agreement
and the transactions contemplated hereby or if a Change of Control (as defined
below) of Long Beach shall have occurred;
(g) by the Board of Directors of Washington Mutual if a tender
offer or exchange offer for 25% or more of the outstanding shares of Long Beach
Common Stock is commenced (other than by Washington Mutual or a Subsidiary
thereof), and the Board of Directors of Long Beach recommends that the
stockholders of Long Beach tender their shares in such tender or exchange offer
or otherwise fails to recommend that such stockholders reject such
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tender offer or exchange offer within 10 Business Days after the commencement
thereof (which, in the case of an exchange offer, shall be the effective date of
the registration statement relating to such exchange offer);
(h) by the Board of Directors of Long Beach prior to the date on
which the stockholders of Long Beach shall have voted to approve this Agreement
and the Merger, if (i) any person or entity shall have made (and shall not have
withdrawn) a Takeover Proposal that is determined by the Long Beach Board of
Directors to constitute a Superior Proposal (as defined below), and (ii) the
Long Beach Board of Directors determines in its good faith reasonable judgment,
based upon the advice of outside counsel, that failure to terminate this
Agreement in order to accept the Superior Proposal would constitute a breach of
fiduciary duty; provided, however, that Long Beach may not terminate this
Agreement pursuant to this Section 9.1(h) unless it has given Washington Mutual
10 Business Days prior written notice of its intention to so terminate this
Agreement (which notice must specify all material terms and conditions of such
Superior Proposal and the identity of the person or persons (or entity or
entities, as the case may be) making such Superior Proposal) and has offered
Washington Mutual the opportunity to amend the terms and conditions of this
Agreement so that the failure of the Long Beach Board of Directors to terminate
this Agreement, as so amended, in order to accept the Superior Proposal would
not constitute a breach of fiduciary duty; and provided, further, that the Long
Beach Board of Directors may not terminate this Agreement pursuant to this
Section 9.1(h) unless simultaneously with such termination Long Beach pays to
Washington Mutual the amount specified in Section 9.2(b) and enters into a
definitive acquisition, merger or similar agreement to effect and consummate
such Superior Proposal with the person or entity making such Superior Proposal.
For purposes of this Agreement, (i) a "Superior Proposal" shall mean any bona
fide Takeover Proposal made by an unaffiliated third party that the Long Beach
Board of Directors determines in its good faith reasonable judgment (based on
the advice of an independent financial advisor) represents superior value to the
holders of Long Beach Common Stock than the transactions contemplated by this
Agreement and for which any required financing is either committed or is, in the
good faith reasonable judgment of Long Beach's Board of Directors (based on the
advice of such independent financial advisor), reasonably capable of being
obtained on a timely basis by the person making such Takeover Proposal; and (ii)
a "Change of Control" shall mean the acquisition, directly or indirectly, by any
person or entity, together with its affiliates (as defined in Rule 12b-2 under
the Exchange Act), or any other group (as defined in Section 13(d) of the
Exchange Act), including through the formation of any such group or the
affiliation of any such persons or entities, of, or of the right to acquire or
direct the exercise of, 30% or more of the voting power of the capital stock of
Long Beach entitled to approve this Agreement and the Merger or to elect
directors of Long Beach; or
(i) by Washington Mutual if a Subsequent Triggering Event (as
defined in the Stock Option Agreement) has occurred.
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9.2 Effect of Termination.
(a) In the event of termination of this Agreement by either
Washington Mutual or Long Beach as provided in Section 9.1, this Agreement shall
forthwith become void and have no effect, and none of Washington Mutual, Long
Beach, any of their respective Subsidiaries or any of the officers or directors
of any of them shall have any liability of any nature whatsoever hereunder, or
in connection with the transactions contemplated hereby, except that (i)
Sections 7.2(b), 9.2, and 10.2 shall survive any termination of this Agreement
and (ii) notwithstanding anything to the contrary contained in this Agreement,
neither Washington Mutual nor Long Beach shall be relieved or released from any
liabilities or damages arising out of its willful breach of any provision of
this Agreement.
(b) If this Agreement is terminated (A) by Washington Mutual
pursuant to Section 9.1(f) or (g), (B) by Washington Mutual or Long Beach
pursuant to Section 9.1(e) because of a failure to obtain the required approval
of the stockholders of Long Beach after a Takeover Proposal for Long Beach shall
have been publicly disclosed, or any person or entity shall have publicly
disclosed an intention (whether or not conditional) to make a Takeover Proposal,
(C) by Long Beach pursuant to Section 9.1(h), (D) by Washington Mutual pursuant
to Section 9.1(i) or (E) by Washington Mutual pursuant to Section 9.1(d) if the
breach giving rise to such termination was willful and, at or prior to such
termination, a Takeover Proposal shall have been made known to Long Beach or any
of its Subsidiaries or shall have been publicly disclosed to Long Beach's
stockholders, or any person or entity shall have made known to Long Beach or any
of its Subsidiaries or otherwise publicly disclosed an intention (whether or not
conditional) to make a Takeover Proposal, and regardless of whether such
Takeover Proposal shall have been rejected by Long Beach or withdrawn prior to
the time of such termination, then in any such case Long Beach shall pay to
Washington Mutual a termination fee of $15 million. Washington Mutual shall not
be entitled to a termination fee if Washington Mutual has exercised all or any
part of the Option.
(c) Any termination fee that becomes payable pursuant to Section
9.1(b) shall be paid by wire transfer of immediately available funds to an
account designated by Washington Mutual within one Business Day following the
termination of this Agreement, except that any termination fee that is payable
as a result of the termination of this Agreement pursuant to Section 9.1(h) or
Section 9.1(i) shall be paid simultaneously with such termination.
Notwithstanding the foregoing, in no event shall Long Beach be obligated to pay
any such fees to Washington Mutual if immediately prior to the termination
hereof Long Beach was entitled to terminate this Agreement pursuant to Section
9.1(d).
(d) Long Beach and Washington Mutual agree that the agreements
contained in paragraphs (b) and (c) above are an integral part of the
transactions contemplated by this Agreement, that without such agreements
Washington Mutual would not have entered into this Agreement, and that such
amounts do not constitute a penalty. If Long Beach fails to pay Washington
Mutual the amounts due under paragraph (b) above within the time periods
specified in paragraph (c) above, Long Beach shall pay the costs and expenses
(including legal fees and expenses) incurred by Washington Mutual in connection
with any action, including the filing of any lawsuit, taken to collect payment
of such amounts, together with interest on the amount of
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any such unpaid amounts at the publicly announced prime rate of The Chase
Manhattan Bank from the date such amounts were required to be paid.
9.3 Amendment. Subject to compliance with applicable law, this Agreement
may be amended by the parties hereto, by action taken or authorized by their
respective Boards of Directors, at any time before or after approval of the
matters presented in connection with the Merger by the stockholders of Long
Beach; provided, however, that after any approval of the transactions
contemplated by this Agreement by Long Beach's stockholders, there may not be,
without further approval of such stockholders, any amendment of this Agreement
which reduces the amount or changes the form of the consideration to be
delivered to the Long Beach stockholders hereunder other than as contemplated by
this Agreement. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
9.4 Extension; Waiver. At any time prior to the Effective Time, the
parties hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or waiver or failure to insist on strict compliance with an
obligation, covenant, agreement or condition shall not operate as a waiver of,
or estoppel with respect to, any subsequent or other failure.
10. GENERAL PROVISIONS
10.1 Nonsurvival of Representations, Warranties and Agreements. None of
the representations, warranties, covenants and agreements in this Agreement or
in any instrument delivered pursuant to this Agreement shall survive the
Effective Time, except for those covenants and agreements contained herein and
therein which by their terms apply in whole or in part after the Effective Time.
10.2 Expenses. Except as provided in Section 9.2 hereof, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense; provided,
however, that notwithstanding anything to the contrary contained in this
Agreement, neither Washington Mutual nor Long Beach shall be relieved or
released from any liabilities or damages arising out of its willful breach of
any provision of this Agreement.
10.3 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation), mailed by registered or certified mail (return receipt requested)
or delivered by an express courier (with confirmation) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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(a) if to Washington Mutual, to:
Washington Mutual, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇ Tall
and:
Washington Mutual, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇ ▇. ▇▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇ ▇▇▇▇▇▇ White & ▇▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
(b) if to Long Beach, to:
Long Beach Financial Corporation
▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: M. ▇▇▇▇ ▇▇▇▇▇▇
with a copy to:
▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇
10.4 Interpretation. The words "hereof," "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any particular provision of this Agreement, and
Article and Section references are to this Agreement unless otherwise specified.
Whenever the words "include," "includes" or "including"
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are used in this Agreement, they shall be deemed to be followed by the words
"without limitation." The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. No provision of this Agreement
shall be construed to require Long Beach, Washington Mutual or any of their
respective Subsidiaries or affiliates to take any action which would violate or
conflict with any applicable law (whether statutory or common), rule or
regulation.
10.5 Counterparts. This Agreement may be executed in counterparts, all
of which shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that all parties need not
sign the same counterpart.
10.6 Entire Agreement. This Agreement (together with the documents and
the instruments referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, other than the
Confidentiality Agreement.
10.7 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Washington, without regard to any
applicable conflicts of law.
10.8 Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.
10.9 Publicity. Washington Mutual and Long Beach shall consult with each
other before issuing any press release with respect to the Merger or this
Agreement and shall not issue any such press release or make any such public
statement without the prior consent of the other party, which shall not be
unreasonably withheld; provided, however, that a party may, without the prior
consent of the other party (but after prior consultation, to the extent
practicable in the circumstances) issue such press release or make such public
statement as may upon the advice of outside counsel be required by law or the
rules and regulations of the NYSE (in the case of Washington Mutual) or The
Nasdaq Stock Market (in the case of Long Beach). Without limiting the reach of
the preceding sentence, Washington Mutual and Long Beach shall cooperate to
develop all public announcement materials and (b) make appropriate management
available at presentations related to the transactions contemplated by this
Agreement as reasonably requested by the other party. In addition, Long Beach
and its Subsidiaries shall (a) consult with Washington Mutual regarding
communications with customers, shareholders, prospective investors and employees
related to the transactions contemplated hereby, (b) provide Washington Mutual
with shareholder lists of Long Beach and (c) allow and facilitate Washington
Mutual contact with shareholders of Long Beach and other prospective investors.
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10.10 Assignment; Third Party Beneficiaries. Neither this Agreement nor
any of the rights, interests or obligations of any party hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns. Except as otherwise specifically provided in Section 7.8 hereof, this
Agreement (including the documents and instruments referred to herein) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
IN WITNESS WHEREOF, Washington Mutual and Long Beach have caused this
Agreement to be executed by their respective officers hereunto duly authorized
as of the date first above written.
WASHINGTON MUTUAL, INC.
By:______________________________________
Name: ▇▇▇▇▇ ▇. Tall
Title: Executive Vice President
LONG BEACH FINANCIAL CORPORATION
By:______________________________________
Name:____________________________________
Title:___________________________________
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ANNEX A
CONTENT OF TAX OPINION
The legal opinion to be delivered pursuant to Section 8.1(f) shall be
substantially to the effect that:
(i) The merger will qualify as a "reorganization" within the
meaning of Section 368(a) of the Code, and Washington Mutual and Long Beach will
each be a party to the reorganization under Section 368(b) of the Code.
(ii) No gain or loss will be recognized by a stockholder of Long
Beach who, pursuant to the Agreement, exchanges shares of Long Beach Common
Stock solely for shares of Washington Mutual Common Stock (except with respect
to cash received in lieu of a fractional share interest in Washington Mutual
Common Stock).
(iii) Each Long Beach stockholder who receives cash in lieu of a
fractional share of Washington Mutual Common Stock will be treated as receiving
a distribution in redemption of the fractional share interest, will be taxed on
the cash received in accordance with the provisions and limitations of Code
Section 302 (which in certain circumstances could result in the receipt of cash
being taxed as a dividend) and, in general, such distribution in redemption will
be recognized and treated as a payment in exchange for such fractional share
interest.
(iv) With respect to a Long Beach stockholder who exchanges
shares of Long Beach Common Stock partially for Washington Mutual Common Stock
and partially for cash, any gain realized on the Long Beach shares surrendered
in the Merger will be recognized but not in excess of the amount of cash
received (other than cash received in lieu of a fractional share); however, in
certain circumstances, the provisions and limitations of Code Section 302 could
result in the cash received being taxed in whole or part as a dividend. If a
Long Beach stockholder realizes a loss in such an exchange, the loss cannot be
recognized by the stockholder.
(v) A Long Beach stockholder who has different blocks of Long
Beach Common Stock, each with a different tax basis, must compute gain or loss
separately for each such block of Long Beach Common Stock and no netting of gain
or loss is allowed.
(vi) Gain or loss will be recognized with respect to each Long
Beach stockholder who holds Long Beach Common Stock and who exchanges such
shares solely for cash; however, the provisions and limitations of Code Section
302 could result in the cash received being taxed as a dividend in certain
circumstances.
(vii) Gain or loss recognized generally will be capital gain or
loss if the shares of Long Beach Common Stock were held by the Long Beach
stockholder as capital assets. For such stockholder, if the shares have been
held for more than one year the gain or loss will be long-term capital gain or
loss. Whether or not the character of any taxable gain or loss is material to a
Long Beach stockholder depends upon the particular circumstances of the
stockholder.
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(viii) The aggregate basis of the Washington Mutual Common Stock
received by a Long Beach stockholder who exchanges Long Beach Common Stock for
at least some Washington Mutual Common Stock will be the same as the aggregate
basis of the Long Beach Common Stock surrendered in exchange therefor, (a)
reduced by the basis allocable to any fractional share for which cash is
received and the amount of any cash payment received other than cash received in
lieu of a fractional share, and (b) increased by the amount treated as a
dividend, if any, and the amount of gain recognized due to the receipt of any
such cash payment.
(ix) The holding period of the Washington Mutual Common Stock
received by a Long Beach stockholder will include the period during which the
Long Beach Common Stock surrendered in exchange therefor was held if such Long
Beach Common Stock surrendered in exchange therefor was held by such Long Beach
stockholder as a capital asset at the Effective Time.
(x) The discussion in the Proxy Statement/Prospectus regarding
the material federal income tax consequences of the Merger, to the extent it
constitutes summaries of legal matters or legal conclusions, is accurate in all
material respects.
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ANNEX B
EMPLOYMENT AGREEMENTS UNDER SECTION 8.2(f)
M. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇
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ANNEX C
NONCOMPETITION AGREEMENTS UNDER SECTION 8.2(g)
M. ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
4
