1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 28, 2001.
REGISTRATION NO. 333-
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WASHINGTON MUTUAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
WASHINGTON 6036 91-1653725
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
1201 THIRD AVENUE
SEATTLE, WASHINGTON 98101
(206) 461-2000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
FAY L. CHAPMAN
GENERAL COUNSEL
WASHINGTON MUTUAL, INC.
1201 THIRD AVENUE
SEATTLE, WASHINGTON 98101
(206) 461-3186
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
COPIES TO:
DAVID R. WILSON LEE MEYERSON MITCHELL S. EITEL
HELLER EHRMAN WHITE & MCAULIFFE LLP BRIAN STADLER SULLIVAN & CROMWELL
701 FIFTH AVENUE SIMPSON THACHER & BARTLETT 125 BROAD STREET
SEATTLE, WASHINGTON 98104 425 LEXINGTON AVENUE NEW YORK, NEW YORK 10004
(206) 447-0900 NEW YORK, NEW YORK 10017 (212) 558-4000
(212) 455-2000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this registration statement and the
satisfaction or waiver of all other conditions to the Merger described in the
proxy statement/ prospectus.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [ ]
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering: [ ]
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: [ ]
------------------------
CALCULATION OF REGISTRATION FEE
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(2) PER SHARE OFFERING PRICE(3) FEE(3)
-----------------------------------------------------------------------------------------------------------------------
Common stock, no par value per
share(1)......................... 98,000,000 N/A $4,154,761,400 $918,890
-----------------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------------
(1) Also includes associated "rights" to purchase shares of Washington Mutual
common stock which are not currently separable from the shares of Washington
Mutual common stock and are not currently exercisable.
(2) Represents the estimated maximum number of shares of common stock of
Washington Mutual, no par value per share, to be issued upon consummation of
the merger described herein, including shares of common stock issuable upon
the exercise of outstanding options to acquire, Dime Bancorp, Inc. common
stock, which will be converted into options to acquire shares of Washington
Mutual common stock, and upon the acquisition of warrants to purchase
preferred securities of Dime held by certain stockholders of Dime.
(3) The registration fee was computed pursuant to Rules 457(f) and 457(c) under
the Securities Act of 1933, as amended, based on the average of the high and
low sales prices of Dime common stock as reported by the New York Stock
Exchange on August 23, 2001 and the estimated maximum number of shares of
Dime common stock (133,482,441) that may be exchanged for the securities
being registered less the cash to be paid by Washington Mutual in the
merger.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
2
The information in this proxy statement/prospectus is not complete and may be
changed. We may not sell these securities until the registration statement filed
with the Securities and Exchange Commission is effective. This proxy
statement/prospectus is not an offer to sell these securities and is not
soliciting an offer to buy these securities in any state where the offer or sale
is not permitted.
[DIME BANCORP, INC. LOGO]
The board of directors of Dime Bancorp, Inc. has approved a merger of Dime
and Washington Mutual, Inc. As a result of the merger, Washington Mutual would
acquire Dime. We are sending you this document to ask you to vote on the
adoption of a merger agreement with Washington Mutual.
The value of the merger consideration per share of Dime common stock that
you would receive in the merger will be the sum of 0.7511 TIMES THE AVERAGE OF
THE CLOSING STOCK PRICES FOR WASHINGTON MUTUAL'S COMMON STOCK DURING THE TEN
CONSECUTIVE FULL TRADING DAYS ENDING ON THE TENTH BUSINESS DAY BEFORE THE
COMPLETION OF THE MERGER AND $11.6245.
You will be entitled to elect to receive merger consideration in the form
of Washington Mutual common stock, cash, or a combination thereof. However,
because the total amount of cash consideration payable in the merger is fixed at
$1,428,809,000, regardless of your choice, you may actually receive a
combination of cash and shares of Washington Mutual common stock for your Dime
shares depending on the election made by the other Dime stockholders. Based on
the average closing prices for Washington Mutual's common stock for the five
trading days prior to the announcement of the merger on June 25, 2001,
approximately 71.5% of the outstanding shares of Dime common stock would be
converted into Washington Mutual common stock and the remaining 28.5% would be
converted into cash. Washington Mutual common stock and Dime common stock are
listed under the symbols "WM" and "DME" on the NYSE .
YOUR VOTE IS VERY IMPORTANT
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE MERGER AND THE MERGER
AGREEMENT ARE FAIR AND IN THE BEST INTERESTS OF DIME AND ITS STOCKHOLDERS AND
UNANIMOUSLY RECOMMENDS THAT YOU VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT. The
merger cannot be completed unless a majority of the outstanding shares of Dime's
common stock vote to adopt the merger agreement. Whether or not you plan to
attend the special meeting, please take the time to vote by submitting a valid
proxy, either by completing the enclosed proxy card and mailing it to Dime or by
following the instructions set forth on the proxy card to vote by touchtone
telephone or through the internet. IF YOU SIGN, DATE AND MAIL YOUR PROXY CARD
WITHOUT INDICATING HOW YOU WANT TO VOTE, YOUR PROXY WILL COUNTED AS A VOTE "FOR"
ADOPTION OF THE MERGER AGREEMENT.
This document gives you detailed information about the special meeting of
stockholders, the merger and other related matters. You should read carefully
this entire document, including all its appendices. PLEASE SEE PAGE 15 FOR RISK
FACTORS RELATING TO THE MERGER WHICH YOU SHOULD CONSIDER.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE. THE SECURITIES OFFERED HEREBY ARE NOT
SAVINGS ACCOUNTS, DEPOSITS OR OTHER OBLIGATIONS OF ANY BANK OR SAVINGS
ASSOCIATION AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION,
THE BANK INSURANCE FUND, THE SAVINGS ASSOCIATION INSURANCE FUND OR ANY OTHER
GOVERNMENTAL AGENCY.
This document is dated [month] [day], 2001, and is being first mailed to
you on or about such date.
3
WHERE YOU CAN FIND MORE INFORMATION
This document incorporates important business and financial information
about Washington Mutual and Dime from documents that are not included in or
delivered with this one. These documents are available without charge to you
upon written or oral request at the applicable company's address and telephone
number listed below:
Washington Mutual, Inc. Dime Bancorp, Inc.
1201 Third Avenue 589 Fifth Avenue
Seattle, Washington 98101 New York, New York 10017
Attention: Investor Relations Attention: Investor Relations
(206) 461-3187 (212) 326-6170
To obtain timely delivery, you must request the information no later than
[month] [day], 2001.
Both Washington Mutual and Dime file annual, quarterly and special reports,
proxy statements and other information with the Securities and Exchange
Commission. You may read and copy these reports and other information at the
public reference facilities maintained by the SEC at Judiciary Plaza, Room 1024,
450 Fifth Street, N.W., Washington D.C. 20549; Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511; Seven World Trade Center, 13th
Floor, New York, New York 10048.
You may also obtain copies of these documents by mail from the public
reference room of the SEC at Judiciary Plaza, Room 1024, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Please call the SEC at
1-800-SEC-0330 for further information on the public reference rooms. In
addition, Washington Mutual and Dime file reports and other information with the
SEC electronically, and the SEC maintains a web site located at
http://www.sec.gov containing this information. Both Washington Mutual's and
Dime's common stock are listed on the New York Stock Exchange and Washington
Mutual's and Dime's reports and other information may also be inspected at the
offices of the New York Stock Exchange at 20 Broad Street, New York, New York
10005.
Washington Mutual has filed a registration statement on Form S-4 to
register with the SEC up to 98,000,000 shares of Washington Mutual common stock.
This document is a part of that registration statement. As permitted by SEC
rules, this document does not contain all of the information included in the
registration statement or in the exhibits or schedules to the registration
statement. You may read and copy the registration statement, including any
amendments, schedules and exhibits at the addresses set forth above. Statements
contained in this document as to the contents of any contract or other document
referred to in this document include all material terms of the contracts or
other documents but are not necessarily complete. In each case, you should refer
to the copy of the applicable contract or other document filed as an exhibit to
the registration statement. This document incorporates by reference documents
that Washington Mutual and Dime have previously filed with the SEC. They contain
important information about the companies and their financial condition. See
"Incorporation of Certain Documents by Reference" on page 78.
4
[DIME BANCORP, INC. LOGO]
DIME BANCORP, INC.
589 FIFTH AVENUE
NEW YORK, NEW YORK 10017
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
------------------------
To the Stockholders of Dime Bancorp, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of Dime stockholders will be
held on [day of week], [month] [day], 2001, at [time] [a.m./p.m.], New York
time, at [address], to vote to adopt the Agreement and Plan of Merger, dated as
of June 25, 2001, by and between Washington Mutual, Inc. and Dime Bancorp, Inc.
providing for the merger of Dime with and into Washington Mutual.
The proposed merger is described in more detail in the accompanying
document, which you should read carefully in its entirety before voting. A copy
of the merger agreement is attached as Appendix A to that document.
Only Dime stockholders of record at the close of business on [month] [day],
2001 are entitled to notice of and to vote at the special meeting, or any
adjournment or postponement thereof. A majority of the shares of Dime common
stock outstanding on the record date must be voted in favor of the merger
agreement in order for the merger to be completed. THEREFORE, YOUR VOTE IS
IMPORTANT.
All Dime stockholders are cordially invited to attend the special meeting.
However, we encourage you to vote by proxy so that your shares will be
represented and voted at the meeting even if you cannot attend. You may vote by
written proxy card, by touchtone telephone or through the Internet using the
instructions provided on your proxy card. Of course, this will not prevent you
from voting in person at the meeting. Your failure to vote your shares is the
same as voting against adoption of the merger agreement.
By order of the Board Of Directors,
/s/ ELIZABETH G. KNOERZER
Secretary
New York, New York
[month] [day], 2001
AFTER CAREFUL CONSIDERATION, DIME'S BOARD OF DIRECTORS HAS DETERMINED THAT
THE MERGER AGREEMENT AND THE MERGER ARE FAIR AND IN THE BEST INTERESTS OF DIME
AND ITS STOCKHOLDERS, HAS ADOPTED THE MERGER AGREEMENT AND UNANIMOUSLY
RECOMMENDS THAT DIME STOCKHOLDERS VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT.
5
TABLE OF CONTENTS
PAGE
----
WHERE YOU CAN FIND MORE INFORMATION......................... IFC
QUESTIONS AND ANSWERS ABOUT VOTING PROCEDURES FOR THE
SPECIAL MEETING........................................... 1
SUMMARY..................................................... 3
SELECTED HISTORICAL FINANCIAL DATA OF WASHINGTON MUTUAL..... 8
SELECTED HISTORICAL FINANCIAL DATA OF DIME.................. 10
SELECTED UNAUDITED COMPARATIVE PER SHARE DATA............... 12
MARKET PRICE AND DIVIDEND INFORMATION....................... 13
RISK FACTORS................................................ 15
DIME SPECIAL MEETING........................................ 17
THE MERGER AGREEMENT........................................ 20
Structure................................................. 20
Background of the Merger.................................. 20
Dime's Reasons for the Merger; Recommendation of Dime's
Board of Directors..................................... 22
Reasons of Washington Mutual for the Merger............... 36
Completion of the Merger.................................. 36
Conversion of Dime Common Stock and Dime Stock Options.... 36
Election of Cash or Stock Consideration................... 39
Exchange of Shares; Fractional Shares..................... 40
Litigation Tracking Warrants.............................. 41
Representations and Warranties............................ 41
Conduct of Business Pending the Merger.................... 42
Acquisition Proposals by Third Parties.................... 44
Dividends................................................. 45
Other Agreements.......................................... 45
Required Regulatory Approvals............................. 47
Conditions to Completion of Merger........................ 48
Employee Benefit Plans.................................... 48
Termination of the Merger Agreement....................... 50
Termination Fees.......................................... 50
Amendment, Extension and Waiver........................... 51
Expenses.................................................. 51
Material United States Federal Income Tax Consequences of
the Merger............................................. 51
Management and Operations of Washington Mutual Following
the Merger............................................. 54
Interests of Certain Persons in the Merger................ 55
Term Loan Agreement....................................... 59
Accounting Treatment...................................... 59
Stock Exchange Listing.................................... 59
Resale of Washington Mutual Stock Received by Dime
Stockholders........................................... 59
Appraisal Rights.......................................... 60
WARRANT PURCHASE AND VOTING AGREEMENT....................... 64
Warrant Purchase.......................................... 64
Voting.................................................... 65
Transfer and Solicitation Restrictions.................... 65
Termination............................................... 65
INFORMATION ABOUT WASHINGTON MUTUAL......................... 65
INFORMATION ABOUT DIME...................................... 66
DESCRIPTION OF WASHINGTON MUTUAL COMMON STOCK............... 66
COMPARISON OF RIGHTS OF WASHINGTON MUTUAL AND DIME
STOCKHOLDERS.............................................. 67
i
6
PAGE
----
MATERIAL DIFFERENCES BETWEEN WASHINGTON AND DELAWARE
CORPORATE LAWS............................................ 71
VALIDITY OF THE WASHINGTON MUTUAL COMMON STOCK.............. 77
EXPERTS..................................................... 77
OTHER MATTERS............................................... 77
STOCKHOLDER PROPOSALS....................................... 78
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 78
FORWARD-LOOKING STATEMENTS.................................. 79
Appendix A Agreement and Plan of Merger, dated as of June 25, 2001,
between Washington Mutual, Inc. and Dime Bancorp, Inc.
Appendix B Warrant Purchase and Voting Agreement, dated as of June 25,
2001, by and among Washington Mutual, Inc., Warburg, Pincus
Equity Partners, L.P., Warburg, Pincus Netherlands Equity
Partners I, C.V., Warburg, Pincus Netherlands Equity
Partners II, C.V., and Warburg, Pincus Netherlands Equity
Partners III, C.V.
Appendix C-1 Opinion of Credit Suisse First Boston Corporation
Appendix C-2 Opinion of Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Appendix D Section 262 of the Delaware General Corporation Law
ii
7
QUESTIONS AND ANSWERS ABOUT VOTING PROCEDURES FOR THE SPECIAL MEETING
Q. WHAT DO I NEED TO DO NOW?
A. First, carefully read this document in its entirety. Then, vote your shares
of Dime common stock by one of the following methods:
- calling the toll-free number , entering the 14-digit Voter
Control Number located on your proxy card, and following the directions
provided (stockholders residing outside the United States should call
collect on a touch-tone telephone); or
- going to the website www. , entering the 14-digit Voter
Control Number located on your proxy card, and following the instructions
provided; or
- marking, signing, dating and returning your proxy card in the enclosed
prepaid envelope; or
- attending the special meeting and submitting a properly executed proxy or
ballot. If a broker holds your shares in "street name," you will need to
get a proxy from your broker to vote your shares in person.
Q. WHY IS MY VOTE IMPORTANT?
A majority of the outstanding shares of Dime common stock must be represented
in person or by proxy at the special meeting for there to be a quorum. If you
do not vote using one of the methods described above, it will be more
difficult for Dime to obtain the necessary quorum to hold its special
meeting. In addition, if you fail to vote, that will have the same effect as
a vote against the merger agreement. The merger agreement must be adopted by
a majority of the outstanding shares of Dime common stock entitled to vote.
Q. IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER, WILL MY BROKER
AUTOMATICALLY VOTE MY SHARES FOR ME?
A. No. If you do not provide your broker with instructions on how to vote your
shares that are held in street name your broker will not be permitted to vote
them. Therefore, you should be sure to provide your broker with instructions
on how to vote these shares. Please check the voting form used by your broker
to see if your broker offers telephone or internet voting.
If you do not give voting instructions to your broker, you will, in effect,
be voting against the merger.
Q. CAN I CHANGE MY VOTE?
A. Yes. If you have not voted through your broker, there are several ways you
can change your vote after you have submitted a proxy.
- First, you may revoke your proxy by telephone or over the Internet;
- Second, you may send a written notice to Dime's Corporate Secretary stating
that you would like to revoke your proxy;
- Third, you may complete and submit a new proxy card. Any earlier proxy will
be revoked automatically; or
- Fourth, you may attend the meeting and vote in person. Any earlier proxy
will be revoked. However, simply attending the meeting without voting will
not revoke your earlier proxy.
If you have instructed a broker to vote your shares, you must follow
directions you receive from your broker to change your vote.
Q. SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A. No. As we get closer to the anticipated closing date of the merger,
Washington Mutual will send to you written instructions for exchanging your
Dime stock certificates. Please do not send in any Dime stock certificates
until you have received these written instructions. However, if you are not
sure where your stock certificates are located, now would be a good time to
find them so you don't encounter any delays in processing your exchange at
closing. Likewise, if your stock certificates are lost, please contact Dime's
Investor Relations Department at (212) 326-6170 to find out how to get a
replacement certificate.
1
8
Q. WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A. We expect to complete the merger during the first week of January 2002,
assuming all the conditions to completion of the merger, including obtaining
the approval of Dime stockholders at the special meeting and receiving
regulatory approvals, have been fulfilled. Fulfilling some of these
conditions, such as receiving certain governmental clearances or approvals,
is not entirely within our control. If all the conditions to completion of
the merger have not been fulfilled at that time, we expect to complete the
merger as quickly as practicable once the conditions are fulfilled.
Q. WHOM DO I CALL IF I HAVE QUESTIONS ABOUT THE SPECIAL MEETING OR THE MERGER?
A. You should direct any questions regarding the special meeting of stockholders
or the merger to Dime's Investor Relations Department at (212) 326-6170.
2
9
SUMMARY
This summary highlights selected information included in this document and
does not contain all of the information that may be important to you. You should
read this entire document and its appendices and the other documents to which we
refer you before you decide how to vote with respect to the merger agreement. In
addition, we incorporate by reference important business and financial
information about Dime and Washington Mutual into this document. For a
description of this information, see "Incorporation of Certain Documents by
Reference" on page 78. You may obtain the information incorporated by reference
into this document without charge by following the instructions in the section
entitled "Where You Can Find More Information" on the inside front cover of this
document. Each item in this summary includes a page reference directing you to a
more complete description of that item.
This document, including information included or incorporated by reference
in this document, contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements include, but are not limited to, statements about (i) the financial
condition, results of operations and business of Washington Mutual and Dime;
(ii) the benefits of the merger between Washington Mutual and Dime, including
future financial and operating results, cost savings and accretion to reported
earnings that may be realized from the merger; (iii) Washington Mutual's and
Dime's plans, objectives, expectations and intentions and other statements
contained in this filing that are not historical facts; and (iv) other
statements identified by words such as "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates," or words of similar meaning. These
forward-looking statements are based on current beliefs and expectations of
Washington Mutual's and Dime's management and are inherently subject to
significant business, economic and competitive uncertainties and contingencies,
many of which are beyond our control. In addition, these forward-looking
statements are subject to assumptions with respect to future business strategies
and decisions that are subject to change. Actual results may differ materially
from the anticipated results discussed in these forward-looking statements.
THE MERGER
THE MERGER AGREEMENT IS ATTACHED TO THIS DOCUMENT AS APPENDIX A. WE
ENCOURAGE YOU TO READ THIS AGREEMENT CAREFULLY, AS IT IS THE LEGAL DOCUMENT THAT
GOVERNS THE MERGER OF DIME WITH AND INTO WASHINGTON MUTUAL.
WHAT DIME STOCKHOLDERS WILL RECEIVE IN THE MERGER (SEE PAGE 36)
Dime Stockholders. You will be offered the opportunity to elect to receive
merger consideration in the form of Washington Mutual common stock, cash or a
combination thereof in exchange for your shares of Dime common stock. However,
because the total amount of cash consideration to be paid in the merger is fixed
at $1,428,809,000, regardless of your choice, you may actually receive a
combination of cash and shares of Washington Mutual common stock for your Dime
shares depending on the election made by other Dime stockholders and Warburg
affiliates that are parties to the Warrant Purchase and Voting Agreement. The
value of the merger consideration per Dime share that you would receive will be
the sum of:
- 0.7511 times the average of the closing prices for Washington Mutual's
common stock during the ten consecutive full trading days ending on the
tenth business day before the completion of the merger; and
- $11.6245.
If you elect to receive cash and you receive cash, the amount of cash will
be equal to the amount calculated by this formula. If you elect to receive
Washington Mutual common stock and you receive Washington Mutual common stock,
the number of shares of Washington Mutual common stock you will be entitled to
receive for each share of Dime common stock will be calculated based on an
exchange ratio equal to the amount calculated by this formula divided by the
average Washington Mutual common stock price during the same ten trading day
period.
Holders of Dime Litigation Tracking Warrants. Holders of Dime's litigation
tracking warrants will not be affected by the merger,
3
10
except that, upon any exercise of the litigation tracking warrants in accordance
with their terms, holders of litigation tracking warrants will be entitled to
receive shares of Washington Mutual common stock instead of Dime common stock on
similar terms as prior to the merger.
ELECTION OF CASH OR STOCK CONSIDERATION (SEE PAGE 39)
At least 15 business days before the expected date of completion of the
merger, we will send a form to you that you may use to indicate whether your
preference is to receive cash, Washington Mutual common stock or a combination
of cash and Washington Mutual common stock.
If the number of Dime stockholders and Warburg warrantholders who elect to
receive cash would require that an amount greater than $1,428,809,000 be payable
as cash consideration, the amount of cash consideration that each stockholder or
Warburg warrantholder electing to receive cash will receive will be reduced on a
pro rata basis. These stockholders and Warburg warrantholders will receive stock
consideration for any shares or "deemed warrant shares" for which they do not
receive cash.
If the number of Dime stockholders and Warburg warrantholders who elect to
receive Washington Mutual common stock would require that an amount less than
$1,428,809,000 would be payable as cash consideration, the amount of Washington
Mutual common stock that each stockholder and Warburg warrantholder electing to
receive Washington Mutual common stock will receive will be reduced on a pro
rata basis. These stockholders or Warburg warrantholders will receive cash
consideration for any shares or "deemed warrant shares" for which they do not
receive Washington Mutual common stock.
If you do not make an election, you will be deemed to have made an election
to receive Washington Mutual common stock.
NO FRACTIONAL SHARES (SEE PAGE 40)
No fractional shares of Washington Mutual stock will be issued in the
merger. Instead of fractional shares, Dime stockholders will receive an amount
of cash based on the average market value of Washington Mutual common stock over
the ten trading days prior to the date the merger is completed.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER (SEE PAGE 51)
Washington Mutual and Dime will not be required to complete the merger
unless they receive legal opinions to the effect that the merger will qualify as
a reorganization for United States federal income tax purposes.
We expect that, for United States federal income tax purposes, you
generally will not recognize any gain or loss with respect to your shares of
Dime common stock if you receive only shares of Washington Mutual common stock
in the merger, except with respect to any cash received in lieu of a fractional
share interest in Washington Mutual common stock.
If you receive cash in exchange for any of your shares of Dime common
stock, you will generally recognize gain, but not loss, with respect to the
excess of the cash and value of Washington Mutual common stock you receive over
your basis in the Dime common stock exchanged therefor, but in any case not in
excess of the amount of cash received by you in the merger.
You should read "Material United States Federal Income Tax Consequences of
the Merger" starting on page 51 for a more complete discussion of the federal
income tax consequences of the merger. Tax matters can be complicated and the
tax consequences of the merger to you will depend on your particular tax
situation. You should consult your tax advisor to fully understand the tax
consequences of the merger to you.
DIME'S BOARD OF DIRECTORS RECOMMENDS STOCKHOLDER APPROVAL (SEE PAGE 22)
Dime's board of directors believes that the merger presents a unique
opportunity to merge with a leading financial institution and work within a
combined company that will have significantly greater financial strength and
earnings power than Dime would have on its own as well as the added scale
necessary to assume and solidify leadership positions in key business lines.
As a result, Dime's board of directors approved the merger agreement.
Dime's board of directors believes that the merger and the merger
4
11
agreement are fair to Dime stockholders and in the best interests of Dime and
its stockholders and unanimously recommends that you vote "FOR" adoption of the
merger agreement.
OPINIONS OF DIME'S FINANCIAL ADVISORS (SEE PAGE 26)
In connection with the merger, Dime's board of directors received separate
written opinions from Dime's financial advisors, Credit Suisse First Boston
Corporation and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as to the
fairness, from a financial point of view, of the consideration to be received in
the merger by holders of Dime common stock. The full text of Credit Suisse First
Boston's opinion, dated June 25, 2001, is included in this document as Appendix
C-1 and the full text of Merrill Lynch's opinion, also dated June 25, 2001, is
included as Appendix C-2. We encourage you to read these opinions carefully in
their entirety for a description of the procedures followed, assumptions made,
matters considered and limitations of the review undertaken by Credit Suisse
First Boston and Merrill Lynch. THE OPINION OF EACH OF CREDIT SUISSE FIRST
BOSTON AND MERRILL LYNCH IS DIRECTED TO DIME'S BOARD OF DIRECTORS AND DOES NOT
CONSTITUTE RECOMMENDATIONS TO YOU OR ANY OTHER STOCKHOLDER AS TO THE FORM OF
CONSIDERATION TO BE ELECTED BY YOU OR ANY OTHER STOCKHOLDER IN THE MERGER, OR
ANY OTHER MATTER RELATING TO THE PROPOSED TRANSACTION.
SPECIAL MEETING OF DIME STOCKHOLDERS (SEE PAGE 17)
Dime will hold a special meeting of its stockholders on [day of week],
[month] [day], 2001, at [time] [a.m./p.m.], New York time, at [address]. At the
special meeting, you will be asked to vote to adopt the merger agreement.
You may vote at the special meeting if you owned shares of Dime common
stock at the close of business on the record date, [month] [day], 2001. On that
date, there were [ ] shares of Dime common stock outstanding and
entitled to vote at the special meeting. You may cast one vote for each share of
Dime common stock you owned on the record date.
STOCKHOLDER VOTE REQUIRED (SEE PAGE 18)
Adoption of the merger agreement requires the affirmative vote of the
holders of a majority of the shares of Dime common stock outstanding on the
record date. Accordingly, a failure to vote or an abstention will have the same
effect as a vote against the merger. As of the record date, directors and
executive officers of Dime beneficially owned [ ] shares of Dime
common stock, which represents approximately [ ] percent of the total votes
entitled to be cast at the special meeting. Dime expects that these individuals
will vote FOR adoption of the merger agreement. In addition, Warburg, Pincus
Equity Partners, L.P. and its affiliates collectively own 13,607,664 shares of
Dime common stock ( % of the total shares entitled to be cast at the special
meeting) and have agreed to vote FOR adoption of the merger agreement.
WARRANT PURCHASE AND VOTING AGREEMENT (SEE PAGE 64)
In connection with the execution of the merger agreement, Washington Mutual
entered into a warrant purchase and voting agreement with Warburg, Pincus Equity
Partners, L.P. and certain of its affiliates pursuant to which these Warburg
entities agreed with Washington Mutual, among other things, (1) to vote their
shares of Dime common stock in favor of the adoption of the merger agreement and
(2) to sell their warrants to purchase Dime common stock to Washington Mutual
concurrently with the completion of the merger.
APPRAISAL RIGHTS (SEE PAGE 60)
Under Delaware law, holders of Dime common stock may have the right to
receive an appraisal of the value of their shares of Dime common stock in
connection with the merger. To exercise appraisal rights, a Dime stockholder
must not vote for the adoption of the merger agreement and must strictly comply
with all of the procedures required by Delaware law. These procedures are
described more fully beginning on page 60.
We have included a copy of Delaware General Corporation Law -- Section
262 -- Appraisal Rights as Appendix D to this document.
INTERESTS OF DIME'S EXECUTIVE OFFICERS AND DIRECTORS IN THE MERGER (SEE PAGE 55)
In considering the recommendation of Dime's board of directors to approve
the merger you should be aware that executive officers and direc-
5
12
tors of Dime have employment and other compensation agreements or plans that
give them interests in the merger that are somewhat different from, or in
addition to, their interests as stockholders.
REGULATORY APPROVALS REQUIRED FOR THE MERGER (SEE PAGE 47)
We cannot complete the merger without the prior approval of the Office of
Thrift Supervision, or OTS. Washington Mutual and Dime are in the process of
seeking this approval. While we do not know of any reason why Washington Mutual
would not be able to obtain the necessary OTS approval in a timely manner, we
cannot assure you that the OTS will grant its approval of the merger or what the
timing may be.
CONDITIONS TO THE MERGER (SEE PAGE 48)
Completion of the merger depends on a number of conditions being satisfied
or waived, including the following:
- Dime stockholders must have adopted the merger agreement;
- with respect to each of us, the representations and warranties of the
other party to the merger agreement must be true and correct, except as
would not have or would not reasonably be expected to have, a material
adverse effect, and the other party to the merger agreement must have
performed its obligations under the merger agreement in all material
respects;
- we must have received OTS approval and all statutory waiting periods must
have expired;
- there must be no statute, rule, regulation, order, injunction or decree
in existence which prohibits or makes completion of the merger illegal;
- no stop order suspending the effectiveness of the registration statement
of which this document is a part shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by
the SEC;
- the shares of Washington Mutual common stock to be issued to Dime
stockholders in the merger must be authorized for listing on the New York
Stock Exchange;
- both Washington Mutual and Dime must have received a legal opinion that
the merger will qualify as a reorganization under United States federal
income tax laws.
We cannot be certain when, or if, the conditions to the merger will be
satisfied or waived or whether or not the merger will be completed.
TERMINATION OF THE MERGER AGREEMENT (SEE PAGE 50)
Washington Mutual and Dime may terminate the merger agreement by mutual
consent. The merger agreement may also be terminated unilaterally by either
Washington Mutual or Dime if any of several conditions occur.
TERMINATION FEES (SEE PAGE 50)
The merger agreement requires Dime to pay termination fees of up to $185
million to Washington Mutual if the merger agreement is terminated under a
number of specified circumstances.
INFORMATION ABOUT THE PARTIES TO THE MERGER
WASHINGTON MUTUAL (SEE PAGES 8 AND 65)
Washington Mutual is a financial services company providing mortgage
lending, consumer banking, commercial banking, financial services and products,
and consumer finance products to consumers and small to mid-sized businesses.
Washington Mutual operates principally in California, Washington, Oregon,
Florida, Texas and Utah, and has operations in 36 other states. At June 30,
2001, Washington Mutual had consolidated assets of $229.3 billion, deposits of
$97.0 billion and stockholders' equity of $13.4 billion. Based on assets at June
30, 2001, Washington Mutual was the largest savings institution and the seventh
largest banking company in the United States.
DIME (SEE PAGES 10 AND 66)
Dime is a unitary savings and loan holding company incorporated in Delaware
and headquartered in New York, New York. Through its principal subsidiary, The
Dime Savings Bank of New York, FSB, a federally chartered savings bank, Dime
serves consumers and businesses
6
13
throughout the greater New York City metropolitan area. Through Dime Savings
Bank and its mortgage banking subsidiary, North American Mortgage Company, Dime
also provides consumer loans, insurance products and mortgage banking services
throughout the United States. At June 30, 2001, Dime had consolidated assets of
$27.0 billion, deposits of $14.6 billion and stockholders' equity of $1.8
billion.
7
14
SELECTED HISTORICAL FINANCIAL DATA OF WASHINGTON MUTUAL
Washington Mutual is providing the following information to aid you in your
analysis of the financial aspects of the merger. Washington Mutual derived the
information for the years ended, and as of, December 31, 1996 through December
31, 2000 from its historical audited financial statements for these fiscal
years. Washington Mutual derived the financial information for the six months
ended June 30, 2000 and June 30, 2001 and as of June 30, 2001 from its unaudited
financial statements that include, in the opinion of management, all normal and
recurring adjustments that management considers necessary for a fair statement
of the results. The operating results for the six months ended June 30, 2001 are
not necessarily indicative of the results that may be expected for the year
ended December 31, 2001. This information is only a summary, and you should read
it in conjunction with Washington Mutual's consolidated financial statements and
notes thereto contained in Washington Mutual's 2000 Annual Report on Form 10-K,
which has been incorporated by reference into this document.
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- -------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------- ------- ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
Interest income.................................... $ 7,850 $ 6,665 $13,783 $12,062 $11,221 $10,203 $ 9,892
Interest expense................................... 4,817 4,489 9,472 7,610 6,929 6,287 6,027
Net interest income................................ 3,033 2,176 4,311 4,452 4,292 3,916 3,865
Provision for loan and lease losses................ 175 85 185 167 162 247 498
Noninterest income................................. 1,555 923 1,984 1,509 1,507 980 819
Noninterest expense................................ 2,132 1,519 3,126 2,910 3,268 3,111 3,595
Income before income taxes......................... 2,281 1,495 2,984 2,884 2,369 1,538 591
Net income......................................... 1,439 949 1,899 1,817 1,487 885 375
Net income attributable to common stock............ 1,436 949 1,899 1,817 1,471 830 292
Net income per common share:(1)
Basic............................................ 1.70 1.17 2.37 2.12 1.74(2) 1.04(2) 0.36(2)
Diluted.......................................... 1.68 1.17 2.36 2.11 1.71(2) 1.01(2) 0.36(2)
Average diluted common shares used to calculate
earnings per share (in thousands)(1)............. 855,029 814,619 804,695 861,830 867,843(2) 835,139(2) 808,587(2)
AS OF AS OF DECEMBER 31,
JUNE 30, ----------------------------------------------------
2001 2000 1999 1998 1997 1996
-------- -------- -------- -------- -------- --------
(DOLLARS IN MILLIONS)
BALANCE SHEET DATA:
Assets................................................... $229,298 $194,716 $186,514 $165,493 $143,522 $137,329
Securities............................................... 53,450 58,724 60,786 47,046 37,025 35,036
Loans held for sale...................................... 20,053 3,404 794 1,827 1,141 1,399
Loans held in portfolio.................................. 131,551 119,626 113,746 107,612 97,531 92,610
Deposits................................................. 96,954 79,574 81,130 85,492 83,429 87,509
Borrowings............................................... 113,804 101,656 94,327 65,200 49,976 40,015
Stockholders' equity..................................... 13,411 10,166 9,053 9,344 7,601 7,426
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ---------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------- ------- ------- ------- ------- ------- -------
OTHER FINANCIAL DATA:
Cash dividends paid per common share:
Pre-business combination(1)(3)............. $ 0.43 $ 0.37 $ 0.76 $ 0.65 $ 0.55(2) $ 0.47(2) $ 0.40(2)
Post-business combination(1)(4)............ 0.43 0.37 0.76 0.65 0.49(2) 0.44(2) 0.43(2)
Common stock dividend payout ratio(5)........ 25.29% 31.34% 32.07% 30.82% 27.97%(4) 42.31%(4) 120.37%(4)
Return on average assets..................... 1.32 1.03 1.01 1.04 0.96 0.63 0.28
Return on average stockholders' equity....... 23.59 21.78 21.15 19.66 16.62 11.73 4.70
Return on average common stockholders'
equity..................................... 23.59 21.78 21.15 19.66 16.67 11.95 3.95
8
15
AS OF AS OF DECEMBER 31,
JUNE 30, -------------------------------------------------
2001 2000 1999 1998 1997 1996
-------- ------- ------- ------- ------- -------
Ratio of stockholders' equity to total assets............ 5.85% 5.22% 4.85% 5.65% 5.30% 5.41%
Diluted book value per common share(1)(6)................ $ 14.94 $ 12.84 $ 10.78 $ 10.71(2) $ 9.20(2) $ 8.92(2)
Number of common shares outstanding at end of period (in
thousands)(1).......................................... 878,366 809,784 857,384 890,113(2) 844,035(2) 850,217(2)
-------------------------
(1) Reflects a 3-for-2 stock split on May 15, 2001.
(2) Reflects a 3-for-2 stock split on June 1, 1998.
(3) Represents amounts paid by Washington Mutual without giving effect to
restatements for Washington Mutual's prior business combinations.
(4) Based on basic net income per common share and post-business combination
dividends paid per share of Washington Mutual after restatement of financial
statements for significant transactions accounted for as poolings of
interests.
(5) Based on basic net income per common share and post-business combination
dividends paid per common share.
(6) 18,000,000 shares of common stock issued to an escrow for the benefit of the
general and limited partners of Keystone Holdings and the FSLIC Resolution
Fund and their transferees were not included.
9
16
SELECTED HISTORICAL FINANCIAL DATA OF DIME
Dime is providing the following historical selected financial data to
assist you in your analysis of the merger. Dime derived the financial
information for the years ended and as of December 31, 1996 through December 31,
2000 from its historical audited financial statements for these fiscal years.
Dime derived the financial information for the six months ended June 30, 2000
and June 30, 2001 and as of June 30, 2001 from its unaudited financial
statements that include, in the opinion of management, all normal and recurring
adjustments that management considers necessary for a fair statement of the
results. The operating results for the six months ended June 30, 2001 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 2001. This information is only a summary, and you should read it in
conjunction with Dime's consolidated financial statements and notes thereto
contained in Dime's 2000 Annual Report on Form 10-K, which has been incorporated
by reference into this document.
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
----------------- ------------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------- ------- -------- ------- ------- ------- -------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
INCOME STATEMENT DATA:
Interest income....................................... $ 853 $ 813 $ 1,701 $ 1,419 $ 1,421 $ 1,383 $ 1,350
Interest expense...................................... 518 502 1,078 841 894 900 889
Net interest income................................... 335 311 623 578 527 483 461
Provision for loan losses............................. 28 14 28 29 32 49 41
Noninterest income.................................... 405 267 468 568 525 145 86
Noninterest expense................................... 437 412 826 731 665 381 352
Income before income taxes, extraordinary items and
cumulative effect of a change in accounting
principle........................................... 275 152 237 386 355 198 154
Income tax expense.................................... 95 52 82 142 114 75 50
Extraordinary items, net of income tax effect (early
extinguishment of debt)............................. (4) (4) (1)
Cumulative effect of a change in accounting principle,
net of income tax effect............................ (11)
------- ------- -------- ------- ------- ------- -------
Net income............................................ 169 100 155 240 237 122 104
Net income attributable to common stock............... 169 100 152 240 237 122 104
Net income attributable to common stock plus assumed
conversions......................................... 169 100 154 240 237 122 104
Net income per common share:
Basic............................................... 1.47 0.90 1.39 2.15 2.09 1.14 1.00
Diluted............................................. 1.39 0.90 1.35 2.13 2.06 1.12 0.96
Average diluted shares used to calculate common
earnings per share (in thousands)................... 121,809 111,334 113,924 112,533 115,153 108,613 109,097
AS OF AS OF DECEMBER 31,
JUNE 30, -----------------------------------------------
2001 2000 1999 1998 1997 1996
-------- ------- ------- ------- ------- -------
(DOLLARS IN MILLIONS)
BALANCE SHEET DATA:
Assets...................................................... $27,047 $25,688 $23,921 $22,321 $21,848 $18,870
Available-for-sale securities............................... 2,194 2,851 3,850 3,329 4,992 2,590
Held-to-maturity securities................................. -- -- -- -- -- 4,364
Loans held for sale......................................... 4,858 2,805 1,734 3,885 1,842 115
Loans held in portfolio..................................... 16,089 16,143 15,067 12,643 12,880 10,632
Deposits.................................................... 14,632 13,977 14,261 13,651 13,847 12,857
Borrowings.................................................. 9,906 9,502 7,746 6,773 6,319 4,815
Stockholders' equity........................................ 1,833 1,725 1,516 1,386 1,315 1,022
10
17
SIX MONTHS
ENDED
JUNE 30, YEAR ENDED DECEMBER 31,
--------------- ------------------------------------------
2001 2000 2000 1999 1998 1997 1996
------ ------ ------ ------ ------ ------ ------
OTHER FINANCIAL DATA:
Cash dividends paid per common share........................ $ 0.22 $ 0.14 $ 0.32 $ 0.23 $ 0.19 $ 0.12 $ --
Common stock dividend payout ratio(1)....................... 15.83% 15.56% 23.70% 10.80% 9.22% 10.71% --%
Return on average assets.................................... 1.29 0.83 0.63 1.09 1.11 0.60 0.52
Return on average stockholders' equity...................... 19.42 12.92 9.39 16.46 17.84 11.04 10.36
Return on average common stockholders' equity............... 19.42 12.92 9.84 16.46 17.84 11.04 10.36
AS OF AS OF DECEMBER 31,
JUNE 30, -----------------------------------------------
2001 2000 1999 1998 1997 1996
-------- ------- ------- ------- ------- -------
Ratio of stockholders' equity to total assets............... 6.78% 6.71% 6.34% 6.21% 6.02% 5.42%
Book value per common share................................. $ 15.74 $ 14.76 $ 13.67 $ 12.42 $ 11.30 $ 9.76
Number of common shares outstanding at end of period (in
thousands)................................................ 116,451 116,851 110,895 111,570 116,358 104,744
-------------------------
(1) Based on diluted net income per common share and cash dividends paid per
common share.
11
18
SELECTED UNAUDITED COMPARATIVE PER SHARE DATA
The following table shows certain per common share data for Washington
Mutual common stock and Dime common stock on a historical and pro forma basis
reflecting the merger of Dime and Washington Mutual, accounted for as a purchase
as if it had been consummated as of January 1, 2000. This information is only a
summary, and you should read it in conjunction with the financial information
appearing elsewhere in this document and the other documents incorporated by
reference in this document. The per share pro forma data in the following table
is presented for comparative purposes only and is not necessarily indicative of
the combined financial position or results of operations in the future or what
the combined financial position or results of operations would have been had the
merger been completed during the periods or as of the date for which this pro
forma data is presented.
JUNE 30, DECEMBER 31,
2001 2000
-------- ------------
WASHINGTON MUTUAL COMMON STOCK
Book value per share
Historical........................................ $14.94 $12.84
Pro forma......................................... 15.39 13.45
Cash dividends per share
Historical........................................ 0.43 0.76
Pro forma......................................... 0.43 0.76
Net income per basic share
Historical........................................ 1.70 2.37
Pro forma......................................... 1.72 2.30
Net income per diluted share
Historical........................................ 1.68 2.36
Pro forma......................................... 1.69 2.29
DIME COMMON STOCK
Book value per share
Historical........................................ 15.74 14.76
Pro forma equivalent(1)........................... 16.16 14.12
Cash dividends per share
Historical........................................ 0.22 0.32
Pro forma equivalent(1)........................... 0.45 0.80
Net income per basic share
Historical........................................ 1.47 1.39
Pro forma equivalent(1)........................... 1.80 2.41
Net income per diluted share
Historical........................................ 1.39 1.35
Pro forma equivalent(1)........................... 1.78 2.40
-------------------------
(1) The Dime pro forma equivalent per share amounts are calculated by
multiplying the Washington Mutual pro forma per share amounts as of and for
the six months ended June 30, 2001, and as of and for the fiscal year ended
December 31, 2000, respectively, by an implied exchange ratio of 1.05, as
determined on the date we announced the merger, June 25, 2001.
12
19
MARKET PRICE AND DIVIDEND INFORMATION
The table below sets forth, for the periods indicated, historical high and
low closing price information for Washington Mutual common stock and Dime common
stock. Washington Mutual common stock trades on the New York Stock Exchange
under the symbol "WM." Dime common stock trades on the New York Stock Exchange
under the symbol "DME."
WASHINGTON MUTUAL DIME
COMMON STOCK COMMON STOCK
------------------ ----------------
HIGH LOW HIGH LOW
------- ------- ------ ------
Quarter ended March 31, 1999............................ $30.17 $25.63 $27.06 $23.19
Quarter ended June 30, 1999............................. 27.96 23.08 24.44 20.06
Quarter ended September 30, 1999........................ 24.42 18.63 21.56 16.56
Quarter ended December 31, 1999......................... 23.96 16.75 19.50 14.81
Quarter ended March 31, 2000............................ $18.00 $14.54 $18.50 $11.63
Quarter ended June 30, 2000............................. 21.75 16.42 19.25 15.75
Quarter ended September 30, 2000........................ 27.04 20.13 20.63 15.63
Quarter ended December 31, 2000......................... 37.25 25.25 30.00 21.69
Quarter ended March 31, 2001............................ $36.50 $29.38 $32.75 $25.56
Quarter ended June 30, 2001............................. 39.39 32.78 38.40 31.11
July 1, 2001 through August 13, 2001.................... 42.69 37.55 42.45 37.50
RECENT CLOSING PRICES
The following table sets forth the closing sale price per share of
Washington Mutual common stock and Dime common stock, and the equivalent per
share price for Dime common stock (which is the closing price of Washington
Mutual common stock multiplied by an implied exchange ratio of 1.05 shares of
Washington Mutual common stock) as of June 22, 2001 (the last full trading day
before the public announcement of the merger). See the section "Conversion of
Dime Common Stock and Dime Stock Options" beginning on page 36, for an
illustration of how the implied exchange may change in response to fluctuations
in the price of Washington Mutual common stock.
WASHINGTON MUTUAL DIME EQUIVALENT PRICE
COMMON STOCK COMMON STOCK PER SHARE
----------------- ------------ ----------------
June 22, 2001......................... $38.90 $36.88 $40.84
Stockholders are urged to obtain current market quotations for Washington
Mutual common stock and Dime common stock.
DIVIDEND INFORMATION
The following table sets forth cash dividends paid by Washington Mutual per
share of common stock.
2001 2000 1999
------ ------ ------
First Quarter............................................ $0.207 $0.180 $0.153
Second Quarter........................................... 0.220 0.187 0.160
Third Quarter............................................ 0.230 0.193 0.167
Fourth Quarter........................................... -- 0.200 0.173
13
20
The following table sets forth cash dividends paid by Dime per share of
common stock.
2001 2000 1999
------ ------ ------
First Quarter............................................ $0.100 $0.060 $0.050
Second Quarter........................................... 0.120 0.080 0.060
Third Quarter............................................ 0.120 0.080 0.060
Fourth Quarter........................................... -- 0.100 0.060
14
21
RISK FACTORS
In addition to the other information contained in or incorporated by
reference into this document, including the matters addressed under the caption
"Forward-Looking Statements" beginning on page 79, you should carefully consider
the following risk factors in deciding how to vote on the merger.
BECAUSE THE MARKET PRICE OF WASHINGTON MUTUAL COMMON STOCK MAY FLUCTUATE, YOU
CANNOT BE SURE OF THE VALUE OF THE MERGER CONSIDERATION THAT YOU WILL RECEIVE.
Upon completion of the merger, each share of Dime common stock will be
converted into merger consideration consisting of shares of Washington Mutual
common stock and/or cash pursuant to the terms of the merger agreement. The
value of the merger consideration to be received by Dime stockholders and
Warburg warrantholders will be based on the average price of Washington Mutual
common stock during the ten trading day measurement period ending on the tenth
business day prior to the completion of the merger. This average price may vary
from the price of Washington Mutual common stock on the date the merger was
announced, on the date that this document is mailed to Dime stockholders, and on
the date of the special meeting of Dime stockholders. Any change in the price of
Washington Mutual common stock prior to completion of the merger will affect the
value of the merger consideration that you will receive upon completion of the
merger. Stock price changes may result from a variety of factors, including
general market and economic conditions, changes in our respective businesses,
operations and prospects, and regulatory considerations. Many of these factors
are beyond our control.
Accordingly, at the time of the Dime special meeting you will not
necessarily know or be able to calculate the value of the cash consideration you
would receive or the exchange ratio used to determine the number of any shares
of Washington Mutual stock you would receive upon completion of the merger.
WASHINGTON MUTUAL MAY FAIL TO REALIZE THE ANTICIPATED BENEFITS OF THE MERGER.
The success of the merger will depend on, among other things, Washington
Mutual's ability to realize anticipated cost savings and to combine the
businesses of Washington Mutual and Dime in a manner that does not materially
disrupt the existing customer relationships of Dime nor result in decreased
revenues resulting from any loss of customers and that permits growth
opportunities to occur. If Washington Mutual is not able to successfully achieve
these objectives, the anticipated benefits of the merger may not be realized
fully or at all or may take longer to realize than expected.
Washington Mutual and Dime have operated and, until the completion of the
merger, will continue to operate, independently. It is possible that the
integration process could result in the loss of key employees, the disruption of
Dime's ongoing businesses or inconsistencies in standards, controls, procedures
and policies that adversely affect our ability to maintain relationships with
customers and employees or to achieve the anticipated benefits of the merger.
THE MARKET PRICE OF THE SHARES OF WASHINGTON MUTUAL COMMON STOCK MAY BE AFFECTED
BY FACTORS DIFFERENT FROM THOSE AFFECTING THE SHARES OF DIME COMMON STOCK.
Upon completion of the merger, certain holders of Dime common stock will
become holders of Washington Mutual common stock. Some of Washington Mutual's
current businesses and markets differ from those of Dime and, accordingly, the
results of operations of Washington Mutual after the merger may be affected by
factors different from those currently affecting the results of operations of
Dime. For a discussion of the businesses of Washington Mutual and Dime and of
certain factors to consider in connection with those businesses, see the
documents incorporated by reference into this document and referred to under
"Where You Can Find More Information."
YOU MAY NOT RECEIVE THE FORM OF MERGER CONSIDERATION THAT YOU ELECT
The merger agreement contains provisions that are designed to assure that
the aggregate cash consideration to be paid to Dime stockholders in the merger
will be $1,428,809,000. If elections are made
15
22
by Dime stockholders that would result in them receiving more or less cash than
this amount, either those electing to receive cash or those electing to receive
Washington Mutual common stock will have the consideration of the type they
selected reduced by a pro rata amount and will receive a portion of their
consideration in the form that they did not elect to receive. Accordingly, there
is a risk that you will not receive a portion of the merger consideration in the
form that you elect, which could result in, among other things, tax consequences
that differ from those that would have resulted had you received the form of
consideration you elected (including with respect to the recognition of taxable
gain to the extent cash is received). See "Material United States Federal Income
Tax Consequences of the Merger" beginning on page 51.
16
23
DIME SPECIAL MEETING
GENERAL
This proxy statement/prospectus and related form of proxy are first being
mailed by Dime to holders of Dime common stock on or about , 2001 in
connection with the solicitation of proxies by the Dime board of directors for
use at the special meeting to be held on at at ,
and at any adjournments or postponements of the meeting.
MATTERS TO BE CONSIDERED
The purpose of the special meeting is to consider and vote on a proposal to
adopt the merger agreement, dated as of June 25, 2001, by and between Washington
Mutual and Dime, providing for the merger of Dime with and into Washington
Mutual.
Dime stockholders must approve this proposal for the merger to occur. If
the stockholders fail to approve this proposal, the merger will not occur.
PROXIES
Even if you are currently planning to attend Dime's special meeting, you
should submit a properly executed proxy, either by filling out, signing and
sending back the accompanying proxy card, or by following the instructions
regarding touchtone telephone and Internet voting that are set forth on your
proxy card. You may revoke your proxy at any time before it is exercised by:
- calling the toll-free number listed on the proxy card and following the
instructions provided on the proxy card;
- going to the website listed on the proxy card and following the
instructions provided on the proxy card;
- submitting a written notice of revocation to Dime's Corporate Secretary;
- submitting a properly executed proxy on a later date; or
- voting in person at the special meeting, but simply attending the special
meeting without voting will not revoke an earlier proxy.
Written notices of revocation and other communications with respect to the
solicitation or revocation of proxies should be addressed to:
Dime Bancorp, Inc.
589 Fifth Avenue
New York, NY 10017
Attention: Elizabeth G. Knoerzer
Corporate Secretary.
If your shares are held in "street name," you should follow the instructions of
your broker regarding revocation of proxies.
No proxy that is voted against adoption of the merger agreement will be
voted for any adjournment or postponement of the special meeting for the purpose
of soliciting more proxies. However, if a stockholder abstains from voting on
the adoption of the merger agreement and makes no specification on an
adjournment or postponement for the purpose of soliciting more proxies, then his
or her proxy may be voted for the adjournment or postponement.
SOLICITATION OF PROXIES
Dime will bear the entire cost of soliciting proxies, except that (i) Dime
and Washington Mutual will each pay one half of the fees and expenses associated
with preparing, printing and mailing this document
17
24
and related materials and (ii) Washington Mutual will bear the entire cost of
fees in connection with the filing with the SEC of the registration statement of
which this document is a part.
In addition to solicitation by mail, the directors, officers and employees
of Dime may, without additional compensation, solicit proxies from Dime
stockholders by telephone, facsimile, or other electronic means or in person.
Dime will make arrangements with brokerage houses and other custodians, nominees
and fiduciaries to send the proxy materials to the beneficial owners of Dime
common stock held of record by these persons. Dime will reimburse these
custodians, nominees and fiduciaries for their reasonable expenses in connection
with the solicitation of proxies. Innisfree M&A Incorporated, a proxy
solicitation firm, will assist Dime in soliciting proxies and will be paid a fee
of approximately $10,000 plus expenses.
RECORD DATE AND QUORUM
Dime's board of directors has fixed the close of business on ,
2001 as the record date for determining the Dime stockholders entitled to
receive notice of and vote at the special meeting. At that time, there were
shares of Dime common stock outstanding.
The presence, in person or by properly executed proxy, of the holders of a
majority of the shares of Dime common stock outstanding on the record date is
necessary to constitute a quorum at the special meeting. Abstentions will be
counted solely for the purpose of determining whether a quorum is present. There
must be a quorum in order for the vote on the proposal to occur.
VOTING RIGHTS AND VOTE REQUIRED
Shares representing a majority of the shares of Dime common stock
outstanding on the record date must vote "FOR" the proposal in order for it to
be adopted by Dime. You are entitled to one vote for each share of Dime common
stock you held on the record date.
Because adoption of the merger agreement requires the affirmative vote of a
majority of the shares of Dime common stock outstanding on the record date, the
failure to vote in person or by proxy and abstentions will have the same effect
as voting against adoption of the merger agreement. Therefore, Dime's board of
directors urges you to submit your proxy by mail, touchtone telephone or the
Internet. IF YOU SIGN, DATE AND MAIL YOUR PROXY CARD WITHOUT INDICATING HOW YOU
WANT TO VOTE, YOUR PROXY WILL BE COUNTED AS A VOTE "FOR" ADOPTION OF THE MERGER
AGREEMENT.
On the record date:
- Dime's directors and executive officers beneficially owned
shares, or %, of the Dime common stock outstanding. Dime
expects that each of these individuals will vote his or her shares in
favor of adoption of the merger agreement.
- Warburg, Pincus Equity Partners, L.P. and its affiliates collectively
owned 13,607,664 shares, or %, of the Dime common stock outstanding.
Warburg Pincus has agreed with Washington Mutual to vote all of these
shares in favor of adoption of the merger agreement.
CONFIDENTIAL VOTING POLICY
Dime has a policy on confidential voting that provides for all proxies,
ballots, and tabulations that identify the vote or instructions of a particular
stockholder to be held in confidence by the independent tabulators and
inspectors of election and not disclosed to any other person, including Dime's
directors, officers, and employees. There are certain limited circumstances
where this policy does not apply, including:
- to allow the inspectors of election to certify the results;
- if a bona fide dispute exists regarding the authenticity of any proxy or
ballot or the accuracy of any tabulation;
- as necessary to meet legal requirements or to pursue or defend legal
actions;
18
25
- when expressly authorized by a stockholder; and
- in the event of any proxy contest or solicitation in opposition to or not
in support of Dime.
However, the policy permits disclosure of any comments or other information
written on any proxy or ballot without reference to the vote or instructions of
the stockholder, except where included in, and necessary to an understanding of,
that written material.
RECOMMENDATION OF DIME'S BOARD OF DIRECTORS
Dime's board of directors has approved and declared advisable the merger
agreement and the transactions it contemplates. The board believes that the
merger agreement and the transactions it contemplates are fair to Dime
stockholders and are in the best interests of Dime and its stockholders and
unanimously recommends that you vote "FOR" the adoption of the merger agreement.
See "The Merger -- Dime's Reasons for the Merger; Recommendation of Dime's
Board of Directors" beginning on page 22 for a more detailed discussion of
Dime's board of directors' recommendation.
VOTING VIA TELEPHONE, INTERNET OR MAIL
Dime offers three ways for you to vote your proxy.
Option 1-Vote by Telephone:
Call toll-free and follow the instructions on the enclosed proxy
card. For stockholders residing outside the United States, call collect on a
touchtone phone .
Option 2-Vote on the Internet:
Access the proxy form at www. . Follow the instructions for
Internet voting found there and on the enclosed proxy card.
Option 3-Mail your Proxy Card:
If you do not wish to vote by touchtone phone or the Internet, please
complete, sign, date and return the enclosed proxy card.
In order to be effective, telephone or Internet proxy instructions must be
received before [time] [date], 2001 to allow for processing the results.
The telephone and Internet voting procedures used by Dime's transfer agent,
Equiserve, are designed to properly authenticate stockholders' identities and to
accurately record and count their proxies. If you vote via the Internet, please
be advised that there may be costs involved, including possibly access charges
from the Internet service providers and telephone companies. You will have to
bear these costs.
If your shares of Dime common stock are registered in the name of a
brokerage, bank or other nominee, you will not be able to use these telephone
and Internet voting procedures. Please refer to the voting materials you
receive, or contact your broker, bank or other nominee, to determine your
options.
19
26
THE MERGER AGREEMENT
This section contains material information pertaining to the merger
agreement. The following summary is not complete and is subject to, and
qualified in its entirety by reference to, the complete text of the merger
agreement, which is incorporated by reference and attached as Appendix A to this
document. WE URGE YOU TO READ CAREFULLY THE FULL TEXT OF THE MERGER AGREEMENT.
The warrant agreement is described in the section "Warrant Purchase and Voting
Agreement" beginning on page 64.
STRUCTURE
Subject to the terms and conditions of the merger agreement, and in
accordance with Washington and Delaware law, at the completion of the merger,
Dime will merge with and into Washington Mutual. Washington Mutual will be the
surviving corporation and will continue its corporate existence under the laws
of Washington and under the name "Washington Mutual, Inc." When the merger is
completed, the separate corporate existence of Dime will terminate. Washington
Mutual's articles of incorporation will be the articles of incorporation of the
combined company, and Washington Mutual's by-laws will be the by-laws of the
combined company. See "Comparison of Rights of Washington Mutual and Dime
Stockholders" beginning on page 67 and "Material Differences Between Washington
and Delaware Corporate Laws" beginning on page 71. After completion of the
merger, former Dime stockholders will own approximately % of the
outstanding common stock of the combined company and continuing Washington
Mutual stockholders will own approximately % of the combined company after
the merger is completed. The board of directors of Washington Mutual will
continue as the board of directors of the combined company, except that at or
promptly after the completion of the merger, Washington Mutual will take all
necessary action to appoint one member of Dime's board of directors, selected by
Washington Mutual after consulting with Dime, to the Washington Mutual board of
directors.
The merger agreement provides that Washington Mutual may change the
structure of the merger. However, no such change may reduce the amount or change
the form of consideration to be delivered to by Dime stockholders, adversely
affect the anticipated tax consequences to Dime stockholders in the merger, or
materially impede or delay the completion of the merger.
BACKGROUND OF THE MERGER
Dime has periodically considered the possibility of various forms of
strategic alternatives, including potential business combinations with a variety
of financial institutions, as well as various strategies for maximizing its
performance as an independent company. Dime from time to time evaluates the
potential benefits of various business combinations and assesses the potential
strategic fit with institutions based on, among other things, their lines of
business, prospects, management and geographic location and concentration.
In December 2000, Kerry K. Killinger, Chairman, President and Chief
Executive Officer of Washington Mutual, and Lawrence J. Toal, Chief Executive
Officer of Dime, met informally at a dinner function in New York City. A
follow-up meeting between Mr. Killinger and Mr. Toal took place in Chicago at
the end of January 2001 and Mr. Killinger and Mr. Toal had several telephone
conversations throughout the month of February.
A subsequent meeting involving Mr. Killinger and Anthony P. Terracciano,
Chairman of Dime, took place a few weeks later in New York in early March 2001.
Subsequently, Mr. Toal, Mr. Killinger and Craig E. Tall, Vice Chair of Corporate
Development and Specialty Finance for Washington Mutual, continued to have
general discussions relating to a possible strategic combination of Washington
Mutual and Dime.
The Strategic Planning Committee of Dime's board was apprised of Washington
Mutual's interest in Dime and the status of these preliminary discussions at its
meeting on March 16, 2001 and authorized Mr. Toal to pursue a possible
combination with Washington Mutual. In March 2001, Dime began to consult with
Credit Suisse First Boston Corporation, one of its financial advisors. Credit
Suisse First
20
27
Boston assisted Dime in reviewing the feasibility of a proposed combination with
Washington Mutual. On April 6, 2001, Washington Mutual sent a written
preliminary proposal to Dime which contained a possible range of share exchange
ratios in connection with a merger. The Strategic Planning Committee was updated
regarding this development at its meeting on April 19, 2001. At that meeting,
the Strategic Planning Committee discussed a possible transaction and the
potential benefits to Dime and its stockholders. The discussions focused on the
financial aspects of the proposal, including a review of Washington Mutual's
stock price and its value compared to other companies in the financial services
industry.
Following these events, the parties decided to conduct a limited exchange
of non-public information. Washington Mutual and Dime accordingly entered into
confidentiality agreements in early May 2001. Thereafter, the companies began to
share non-public business and financial information through an exchange of
documentation and high-level discussions among the principals. This information
included financial information, business strategies, and risk management and
asset quality data, among other things. In addition, Dime provided Washington
Mutual with Dime's budget, five-year plan, detailed financial information for
each of its business segments and human resource information. This preliminary
due diligence review took place throughout May and into June 2001. As a result
of this process, on the afternoon of June 13, 2001, Mr. Killinger and Mr. Toal
had a telephone conversation during which Washington Mutual made a specific
price proposal which represented an increase above the range suggested in its
April letter to Dime and introduced the possibility that Washington Mutual could
pay a portion of the aggregate consideration in cash.
During June 2001, Dime received an inquiry from a major commercial bank
about the possibility of a strategic transaction with Dime. However, following
several meetings involving Mr. Toal and Mr. Terracciano and senior officials
from the commercial bank, the commercial bank indicated that it had decided not
to proceed further and made no proposal for a transaction.
Dime's Strategic Planning Committee met on June 14, 2001 to consider
Washington Mutual's proposal. At that meeting, Credit Suisse First Boston and
Sullivan & Cromwell, Dime's legal counsel, reviewed with the committee the
financial and legal aspects of the potential transaction based on the specific
terms outlined by Mr. Killinger. Credit Suisse First Boston covered the proposed
value to be offered for each share of Dime common stock, the methodology of its
calculation and the cash/stock split, as well as Washington Mutual's dividend
rate, anticipated cost savings and restructuring charge. Following this review
and discussions among the Strategic Planning Committee members and Credit Suisse
First Boston, the committee voted to recommend the terms of the transaction to
Dime's full board. On June 15, 2001, Dime's board held a meeting for the purpose
of informing all of its members regarding a possible transaction with Washington
Mutual.
On June 18, 2001, another meeting of Dime's board took place to discuss in
detail the various terms of the proposed merger. During this meeting Mr. Toal
described the background of the proposed transaction and Credit Suisse First
Boston and Merrill Lynch, Pierce, Fenner & Smith Incorporated, Dime's other
financial advisor for the transaction, discussed with the board the financial
aspects of the potential transaction. Sullivan & Cromwell reviewed the major
terms of a possible merger agreement based on the discussions and preliminary
negotiations held to that point with Simpson Thacher & Bartlett, Washington
Mutual's counsel. The directors asked extensive questions of Mr. Toal and Mr.
Terracciano, as well as the financial and legal advisors present at the meeting.
On the basis of the information presented, Dime's board decided to authorize
Dime's management to proceed with further due diligence.
From June 19 to June 23, 2001, Washington Mutual had a team of its
employees, accountants, financial advisors and attorneys perform an on-site due
diligence review of Dime. Similarly, representatives from Dime, as well as its
accountants, financial advisors and attorneys, performed a due diligence review
of Washington Mutual. During that same period, Washington Mutual and Warburg
discussed the terms of a voting agreement, which Washington Mutual maintained
was a precondition to the merger, pursuant to which Warburg would agree to vote
its shares of Dime in favor of the merger.
21
28
Dime's board also met on June 22, 2001. At this meeting, the board had the
opportunity to meet Mr. Killinger and Mr. Tall. Mr. Killinger spoke to the board
about Washington Mutual, its philosophy, its plans for Dime in the event that a
merger were to proceed and the future of the franchise.
Dime's board met again on the evening of June 24, 2001 to consider the
transaction. Dime's financial and legal advisors were present to review, discuss
and answer questions relating to the terms of the proposed merger transaction.
The meeting began with an update from senior management on Dime's due diligence
review of Washington Mutual's business and financial position. This was followed
by Credit Suisse First Boston's and Merrill Lynch's financial analysis of the
proposed merger. Sullivan & Cromwell updated Dime's board on the status of
negotiations and related matters, including a review of the key provisions of
the merger agreement and the voting agreement, and reviewed with the directors
their fiduciary duties and responsibilities in a transaction of this type.
Again, the directors engaged in a discussion with the financial and legal
advisors and senior management. Following the discussion, Dime's board approved
the merger of Dime and Washington Mutual and the merger agreement, and voted to
recommend the adoption of the merger agreement to Dime's stockholders.
Early on the morning of June 25, 2001, following approval by Washington
Mutual's board of directors, the parties executed the merger agreement and
certain related agreements, and the transaction was publicly announced.
DIME'S REASONS FOR THE MERGER; RECOMMENDATION OF DIME'S BOARD OF DIRECTORS
Dime's board believes that the merger presents a unique opportunity to
merge with a leading financial institution and work within a combined company
that will have significantly greater financial strength and earnings power than
Dime would have on its own as well as the added scale necessary to assume and
solidify leadership positions in key business lines. Dime's board consulted with
management as well as financial and legal advisors and determined that the
merger is fair to, and in the best interests of, Dime and its stockholders. In
reaching its conclusion to approve the merger agreement, Dime's board considered
a number of factors, including those discussed below.
FINANCIAL CONSIDERATIONS
- Merger Consideration to Dime Stockholders. Dime's board took into account
the proposed merger consideration for Dime stockholders. Dime's board
assessed the merger consideration in light of the following factors:
- the historical stock price performance of both Dime and Washington
Mutual;
- the potential for Washington Mutual stock price appreciation;
- the cash portion of the aggregate consideration, which would serve to
reduce the impact of fluctuations in Washington Mutual's stock price
prior to the closing;
- the option of Dime stockholders, subject to certain limitations, to
choose to receive cash, stock or a combination thereof;
- the view that, although the premium over Dime's market price offered by
Washington Mutual was modest as compared to certain other transactions
in the financial services industry, the analysis both of Dime's stock
price over time and of comparable companies supported the view that Dime
stock may have been trading at a premium to its stand-alone valuation
due to media and other public speculation regarding the potential for a
change of control transaction involving Dime;
- the view that Washington Mutual had only very limited ability to offer a
higher premium without creating an adverse market reaction;
22
29
- the multiples, including price to book value, price to earnings and
price to tangible book value, implied by Washington Mutual's proposal
compare favorably to those realized in comparable transactions;
- a review of the stock price fluctuations of acquired companies in other
transactions involving modest premiums, which revealed that many of the
premiums increased significantly when calculated based on stock prices
determined over a longer historic period, and the significant decline in
the stock prices of acquiring companies in other transactions which paid
a substantial premium;
- the proposed transaction would be significantly accretive to Dime
stockholders in terms of earnings per share;
- Washington Mutual's projected 90% increase over Dime's current dividend
run rate; and
- the tax-free nature of the transaction to Dime stockholders with respect
to any consideration they receive in shares of Washington Mutual common
stock.
- Cash/Stock Consideration Election Structure. Dime's board considered the
election and allocation procedure that allows Dime stockholders to elect
between cash and stock, subject to limitations. Dime's board also viewed
the pricing mechanism as designed to maintain substantial equivalence
between the value of the Washington Mutual stock to be received in
exchange and the cash consideration paid for a share of Dime common
stock.
- Growth prospects. Dime's board considered the benefit to Dime
stockholders from increased growth prospects associated with the
Washington Mutual proposal and the belief that the merger represented
superior prospects when compared to a stand-alone strategy.
- Financial strength. Dime's board considered the expected financial
strength of the combined company following the merger, including its
ability to realize enhanced returns on capital and to take advantage of
various business opportunities with greater financial resources.
- Cost savings. Dime's board observed that the synergies expected from the
merger should result in expense reductions. Based on due diligence
reviews, fully phased-in annual pre-tax expense reductions of $150
million were identified. Dime's board expected that these cost saving
actions would result in pre-tax cost savings of approximately $100
million for the year 2002 and an additional $50 million for the year
2003. These cost savings are expected to be achieved through reductions
in various general and administrative expense categories.
- Value of North American Mortgage Company in Transaction. Dime's board
considered the value that Washington Mutual attached to Dime's mortgage
banking franchise.
- Costs Associated with a Change in Control. Dime's board considered the
costs associated with the merger, as would be incurred in any change in
control of Dime, which are related to Warburg's right to demand the
repurchase of warrants held by it as well as the fee payable in
connection with the termination agreement with Hudson United Bancorp.
- Credit Suisse First Boston/Merrill Lynch opinions. Dime's board evaluated
the financial analyses and financial presentation of Credit Suisse First
Boston and Merrill Lynch as well as their oral opinions, which opinions
were confirmed by delivery of written opinions dated June 25, 2001, the
date of the merger agreement, that, as of such date and based on and
subject to the considerations set forth in each of their opinions, the
merger consideration was fair from a financial point of view to holders
of Dime common stock. See "Opinion of Dime's Financial Advisors"
beginning on page .
23
30
STRATEGIC CONSIDERATIONS
- Comparison of prospects of the merged entity and a stand alone
strategy. Dime's board considered what it believes to be a number of
strategic advantages of the merger in comparison to a stand alone
strategy.
- Enhanced national retail banking presence. Dime's board considered that a
merger with Washington Mutual would create a leading national banking
franchise by combining Washington Mutual's strong banking presence in the
western states as well as Texas and Florida with Dime's strong retail
banking and commercial lending operations in the greater New York City
Metropolitan area, the nation's largest metropolitan market.
- Solidified position as national leader in mortgage lending. Dime's board
considered that the merger would increase the scale and scope of
opportunity for Dime's existing mortgage lending activities while
solidifying Washington Mutual's position as the nation's leading mortgage
lender and servicer.
- Strengthened position in commercial lending. Dime's board considered that
the merger with Washington Mutual would allow Washington Mutual to bring
its array of banking products to existing Dime customers. Dime's board
evaluated the ability of the combined company to better achieve the
target set by Dime's management in February 2001 for growth in its
business and commercial lending segment by 2004.
- Attractive markets. Dime's board noted the complementary nature of Dime's
and Washington Mutual's geographic markets for consumer financial service
products, which it believed to present a desirable strategic opportunity
for geographic expansion and diversification.
INTEGRATION CONSIDERATIONS
- Ability to integrate. Dime's board took note of the integration record of
Washington Mutual. In this regard, Dime's board evaluated several key
factors, including:
- that customer and employee disruption from consolidations in the
transition phase should not be significant due to the complementary
nature of the markets served by Dime and Washington Mutual;
- the strong records of both Dime and Washington Mutual managers in
integrating acquisitions smoothly while retaining profitability.
- Similarity of business strategy, philosophy and culture. Dime's board
noted that Dime and Washington Mutual share a similar commitment to their
stockholders, customers, employees and the communities they serve and are
both focused on maintaining strong profitability with high asset quality,
which Dime's board believed would facilitate the process of integration
of these two organizations. Dime's board also took note of Washington
Mutual's ongoing desire, similar to its own, to foster a sense of
community well-being throughout the various neighborhoods in which they
do business.
OTHER STRATEGIC ALTERNATIVES
- Continued Independence. Dime's board considered the substantial
consolidation that is occurring among depository institutions and
mortgage banking concerns, the high level of competition in banking,
mortgage banking and financial services generally, and the increasing
importance of scale in the industry. Dime's board further considered the
risks and potential problems involved in a strategy involving growth by
acquisition and the fact that a number of Dime's major competitors are
substantially larger than Dime and have substantially greater market
share in the greater New York City metropolitan area and, in particular,
in mortgage banking nationally.
24
31
- Limited Interest. Dime's board considered the absence of any substantial
interest in acquiring Dime in response to its examination of strategic
alternatives in May and June 2000, the wide speculation in May and June
2001 that Dime was involved in discussing an acquisition transaction, and
the absence of any other serious expression of interest (except the
commercial bank referred to above, which did not make a proposal).
- Alternative Strategic Transactions. Dime's board also noted that, while
the merger agreement prohibits Dime from seeking alternative
transactions, it permits Dime to consider and react appropriately to
alternative combination proposals made on an unsolicited basis.
GENERAL CONSIDERATIONS
In addition to the foregoing, Dime's board also took into consideration the
following factors:
- Dime's knowledge of Washington Mutual's business, operations, financial
condition, earnings, asset quality and prospects;
- Dime's board's review of the reports of management and outside legal
advisors concerning the operations, financial condition and prospects of
Washington Mutual.
- Dime's board's review with its legal advisors of the provisions of the
merger agreement. Some of the features of the merger agreement that
Dime's board considered are:
- The formula by which the merger consideration will be adjusted based on
the stock price performance of Washington Mutual during a prescribed
measurement period prior to the closing of the transaction.
- The ability of Dime's board to comply with its fiduciary duties if Dime
receives a superior acquisition proposal; and
- Washington Mutual's agreement to add one current director of Dime to the
board of directors of Washington Mutual upon the completion of the
merger.
- Dime's board also considered the terms of the voting agreement entered
into by Washington Mutual and Warburg, in particular:
- Washington Mutual's agreement to purchase Warburg's outstanding Dime
warrants based on the same consideration available to Dime's
stockholders; and
- Warburg's agreement to vote its shares of Dime common stock in favor of
the merger.
- Dime's board also considered potentially adverse factors in connection
with the merger, including the following:
- The challenges of integrating the businesses and operations of two large
financial services companies and the related risks given Washington
Mutual's continuing integration of recent acquisitions;
- The possibility that anticipated transaction synergies, including
anticipated cost savings, revenue enhancements and growth prospects,
would not be achieved or would be achieved later than planned;
- The possibility that Washington Mutual's stock price falls, which,
notwithstanding the cash component, would result in a decline in the
value of the merger consideration to be received by Dime stockholders;
- The risks associated with possible delays in obtaining necessary
regulatory and stockholder approvals and the terms of such regulatory
approvals;
- A market premium implied by Washington Mutual's proposal that is lower
than that received in certain other transactions resulting from the
recent appreciation of Dime's stock price, which is
25
32
believed to be primarily due to speculation in the market about a
potential transaction involving Dime; and
- The possibility that merger integration would occupy more of
management's time and attention than anticipated and therefore impact
other strategic and business priorities.
Dime's board realizes that there can be no assurance about future results,
including results expected or considered in the factors listed above. However,
the board concluded that the potential positive factors outweighed the potential
risks of consummating the merger.
This discussion of information and factors considered by Dime's board is
not intended to be exhaustive, but includes all material factors considered by
it. Dime's board did not assign specific weights to the foregoing factors and
individual directors may have given different weights to different factors.
After consideration of these factors, Dime's board concluded that the merger and
the merger agreement are in the best interests of Dime and its stockholders, and
they authorized and approved the merger agreement and recommended that Dime
stockholders adopt the merger agreement. It should be noted that this
explanation of Dime's board's reasoning and all other information presented in
this section is forward-looking in nature and, therefore, should be read in
light of the factors discussed under the heading "Forward-Looking Statements" on
page 79.
DIME'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT DIME STOCKHOLDERS
VOTE "FOR" THE ADOPTION OF THE MERGER AGREEMENT.
OPINIONS OF DIME'S FINANCIAL ADVISORS
CREDIT SUISSE FIRST BOSTON
Credit Suisse First Boston has acted as Dime's financial advisor in
connection with the merger. Dime selected Credit Suisse First Boston based on
Credit Suisse First Boston's experience, expertise, reputation and its
familiarity with Dime and its business. Credit Suisse First Boston is an
internationally recognized investment banking firm and is regularly engaged in
the valuation of businesses and securities in connection with mergers and
acquisitions, leveraged buyouts, negotiated underwritings, competitive biddings,
secondary distributions of listed and unlisted securities, private placements
and valuations for corporate and other purposes.
In connection with Credit Suisse First Boston's engagement, Dime requested
that Credit Suisse First Boston evaluate the fairness, from a financial point of
view, to the holders of Dime common stock of the consideration to be received in
the merger. On June 24, 2001, at a meeting of the Dime board of directors held
to evaluate the merger, Credit Suisse First Boston rendered to the Dime board of
directors an oral opinion, which opinion was confirmed by delivery of a written
opinion dated June 25, 2001, the date of the merger agreement, to the effect
that, as of that date and based on and subject to the matters described in its
opinion, the consideration to be received in the merger was fair, from a
financial point of view, to the holders of Dime common stock.
THE FULL TEXT OF CREDIT SUISSE FIRST BOSTON'S WRITTEN OPINION, DATED JUNE
25, 2001, TO THE DIME BOARD OF DIRECTORS, WHICH SETS FORTH THE PROCEDURES
FOLLOWED, ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON THE REVIEW
UNDERTAKEN, IS ATTACHED AS APPENDIX C-1 AND IS INCORPORATED INTO THIS DOCUMENT
BY REFERENCE. HOLDERS OF DIME COMMON STOCK ARE URGED TO, AND SHOULD, READ THIS
OPINION CAREFULLY AND IN ITS ENTIRETY. CREDIT SUISSE FIRST BOSTON'S OPINION IS
ADDRESSED TO DIME'S BOARD OF DIRECTORS AND RELATES ONLY TO THE FAIRNESS OF THE
CONSIDERATION TO BE RECEIVED IN THE MERGER FROM A FINANCIAL POINT OF VIEW, DOES
NOT ADDRESS ANY OTHER ASPECT OF THE PROPOSED MERGER OR ANY RELATED TRANSACTION
AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY STOCKHOLDER AS TO THE FORM OF
CONSIDERATION TO BE ELECTED BY ANY STOCKHOLDER IN THE MERGER OR ANY OTHER MATTER
RELATING TO THE PROPOSED TRANSACTION. THE SUMMARY OF CREDIT SUISSE FIRST
BOSTON'S OPINION IN THIS DOCUMENT IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF THE OPINION.
In arriving at its opinion, Credit Suisse First Boston reviewed publicly
available business and financial information relating to Dime and Washington
Mutual, as well as the merger agreement. Credit Suisse
26
33
First Boston also reviewed other information provided to or discussed with
Credit Suisse First Boston by Dime and Washington Mutual, including publicly
available financial forecasts for Dime and Washington Mutual, and met with the
managements of Dime and Washington Mutual to discuss the businesses and
prospects of Dime and Washington Mutual. Credit Suisse First Boston also
considered financial and stock market data of Dime and Washington Mutual, and
compared those data with similar data for other publicly held companies in
businesses similar to Dime and Washington Mutual and considered, to the extent
publicly available, the financial terms of other business combinations and
transactions that have been announced or effected. Credit Suisse First Boston
also considered other information, financial studies, analyses and
investigations and financial, economic and market criteria that it deemed
relevant. Credit Suisse First Boston also considered the views of Dime's and
Washington Mutual's managements concerning the business, operational and
strategic benefits and implications of the merger, including financial
information provided to Credit Suisse First Boston by Dime and Washington Mutual
relating to the synergistic values and operating cost savings expected to be
achieved through the combination of the operations of Dime and Washington
Mutual.
In connection with its review, Credit Suisse First Boston did not assume
any responsibility for independent verification of any of the information that
was provided to or otherwise reviewed by it and relied on that information being
complete and accurate in all material respects. Credit Suisse First Boston
reviewed and discussed with the managements of Dime and Washington Mutual
publicly available financial forecasts relating to Dime and Washington Mutual
and was advised, and assumed, that the forecasts represent reasonable estimates
and judgments as to the future financial performance of Dime and Washington
Mutual. In addition, Credit Suisse First Boston relied, without independent
verification, upon the estimates and judgments of the managements of Dime and
Washington Mutual as to the potential cost savings and other potential
synergies, including the amount, timing and achievability of those cost savings
and synergies anticipated to result from the merger. Dime also advised Credit
Suisse First Boston, and Credit Suisse First Boston assumed, that the merger
would be treated as a tax-free reorganization for federal income tax purposes.
Credit Suisse First Boston assumed, with Dime's consent, that in the course of
obtaining the necessary regulatory and third party approvals and consents for
the merger, no modification, delay, limitation, restriction or condition would
be imposed that would have a material adverse effect on the expected benefits of
the merger. Dime also advised Credit Suisse First Boston, and Credit Suisse
First Boston assumed, that the merger would be consummated in accordance with
the terms of the merger agreement, without waiver, amendment or modification of
any material term, condition or agreement contained in the merger agreement.
Credit Suisse First Boston was not requested to conduct, and did not
conduct, a review of individual credit files or make an independent evaluation
or appraisal of the assets or liabilities, contingent or otherwise, of Dime or
Washington Mutual, nor was Credit Suisse First Boston furnished with any
evaluations or appraisals, including loan or lease portfolios or the allowances
for losses with respect to loan or lease portfolios, and Credit Suisse First
Boston was advised, and therefore assumed, that allowances for losses with
respect to loan or lease portfolios for Dime and Washington Mutual are adequate
to cover the losses and will be in the aggregate adequate on a pro forma basis
for the combined entity. Credit Suisse First Boston's opinion did not address
the relative merits of the merger as compared to other business strategies that
may be available to Dime or the effect of any other transaction in which Dime
might engage, nor did it address the underlying business decision of Dime to
engage in the merger. Credit Suisse First Boston's opinion was necessarily based
upon information available to it, and financial, economic, market and other
conditions as they existed and could be evaluated on the date of the Credit
Suisse First Boston opinion. In connection with the merger, Credit Suisse First
Boston was not requested to, and did not, solicit third-party indications of
interest in the possible acquisition of all or a part of Dime. Credit Suisse
First Boston did not express any opinion as to the actual value of Washington
Mutual common stock when issued pursuant to the merger or the prices at which
Washington Mutual common stock would trade at any time.
Although Credit Suisse First Boston evaluated the consideration to be
received in the merger from a financial point of view, Credit Suisse First
Boston was not requested to, and did not, recommend the
27
34
specific consideration payable in the merger, which consideration was determined
between Dime and Washington Mutual. The Dime board of directors imposed no other
limitations on Credit Suisse First Boston with respect to investigations made or
procedures followed in rendering its opinion.
In preparing its opinion to the Dime board of directors, Credit Suisse
First Boston performed a variety of financial and comparative analyses,
including those described below. The summary of Credit Suisse First Boston's
analyses described below is not a complete description of the analyses
underlying Credit Suisse First Boston's opinion. The preparation of a fairness
opinion is a complex analytical process involving various determinations as to
the most appropriate and relevant methods of financial analyses and the
application of those methods to the particular circumstances and, therefore, a
fairness opinion is not readily susceptible to summary description. In arriving
at its opinion, Credit Suisse First Boston made qualitative judgments as to the
significance and relevance of each analysis and factor that it considered.
Accordingly, Credit Suisse First Boston believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors or
focusing on information presented in tabular format, without considering all
analyses and factors or the narrative description of the analyses, could create
a misleading or incomplete view of the processes underlying its analyses and
opinion.
In its analyses, Credit Suisse First Boston considered industry
performance, regulatory, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Dime and
Washington Mutual.
The estimates contained in Credit Suisse First Boston's analyses and the
ranges of valuations resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may
be significantly more or less favorable than those suggested by the analyses. In
addition, analyses relating to the value of businesses or securities do not
purport to be appraisals or to reflect the prices at which businesses or
securities actually may be sold. Accordingly, Credit Suisse First Boston's
analyses and estimates are inherently subject to substantial uncertainty.
Credit Suisse First Boston's opinion and financial analyses were only one
of many factors considered by the Dime board of directors in its evaluation of
the proposed merger and should not be viewed as determinative of the views of
the Dime board of directors or management with respect to the merger or the
consideration to be received in the merger.
MERRILL LYNCH
Merrill Lynch has acted as Dime's financial advisor in connection with the
merger. Dime selected Merrill Lynch based on Merrill Lynch's experience,
expertise, reputation and its familiarity with Dime and its business. Merrill
Lynch is an internationally recognized investment banking firm and is regularly
engaged in the valuation of businesses and securities in connection with mergers
and acquisitions, leveraged buyouts, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for corporate and other purposes.
In connection with Merrill Lynch's engagement, Dime requested that Merrill
Lynch evaluate the fairness, from a financial point of view, to the holders of
Dime common stock of the consideration to be received in the merger. On June 24,
2001, at a meeting of the Dime board of directors held to evaluate the merger,
Merrill Lynch rendered to the Dime board of directors an oral opinion, which
opinion was confirmed by delivery of a written opinion dated June 25, 2001, the
date of the merger agreement, to the effect that, as of that date and based on
and subject to the matters described in its opinion, the consideration to be
received in the merger was fair, from a financial point of view, to the holders
of Dime common stock.
THE FULL TEXT OF MERRILL LYNCH'S OPINION, DATED JUNE 25, 2001, WHICH SETS
FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED, AND QUALIFICATIONS AND
LIMITATIONS ON THE REVIEW UNDERTAKEN BY MERRILL LYNCH, IS ATTACHED AS APPENDIX
C-2 TO THIS DOCUMENT AND IS INCORPORATED INTO THIS DOCUMENT BY REFERENCE. THE
SUMMARY OF MERRILL LYNCH'S OPINION SET FORTH BELOW IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF THE OPINION. HOLDERS OF DIME COMMON STOCK ARE
URGED TO READ THE OPINION CAREFULLY IN ITS
28
35
ENTIRETY. MERRILL LYNCH'S OPINION WAS DELIVERED TO DIME'S BOARD OF DIRECTORS FOR
ITS INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS, FROM A FINANCIAL POINT OF
VIEW, TO THE HOLDERS OF DIME COMMON STOCK OF THE CONSIDERATION TO BE RECEIVED IN
THE MERGER, DOES NOT ADDRESS ANY OTHER ASPECT OF THE MERGER, INCLUDING THE
MERITS OF THE UNDERLYING DECISION BY DIME TO ENGAGE IN THE MERGER, AND DOES NOT
CONSTITUTE A RECOMMENDATION TO ANY DIME STOCKHOLDER AS TO THE FORM OF
CONSIDERATION IN THE MERGER TO BE ELECTED BY ANY STOCKHOLDER IN THE MERGER OR
ANY OTHER MATTER RELATING TO THE PROPOSED MERGER.
In arriving at its opinion, Merrill Lynch, among other things, did the
following:
(1) Reviewed publicly available business and financial information
relating to Dime and Washington Mutual that Merrill Lynch deemed to be
relevant;
(2) Reviewed information, including publicly available financial
forecasts, relating to the businesses, earnings, assets, liabilities and
prospects of Dime and Washington Mutual furnished to or discussed with
Merrill Lynch by senior managements of Dime and Washington Mutual, as well
as the amount and timing of cost savings and expenses expected to result
from the merger furnished to or discussed with Merrill Lynch by senior
managements of Dime and Washington Mutual;
(3) Conducted discussions with members of senior management and
representatives of Dime and Washington Mutual concerning the matters
described in clauses (1) and (2) above, as well as their respective
businesses and prospects before and after giving effect to the merger and
cost savings and expenses expected to result from the merger;
(4) Reviewed the market prices and valuation multiples for Dime common
stock and Washington Mutual common stock and compared them with those of
publicly traded companies that Merrill Lynch deemed to be relevant;
(5) Reviewed the respective publicly reported financial condition and
results of operations of Dime and Washington Mutual and compared them with
those of publicly traded companies that Merrill Lynch deemed to be
relevant;
(6) Compared the proposed financial terms of the merger with the
financial terms of other transactions that Merrill Lynch deemed to be
relevant;
(7) Participated in discussions and negotiations among representatives
of Dime and Washington Mutual and their respective financial and legal
advisors with respect to the merger;
(8) Reviewed the potential pro forma impact of the merger;
(9) Reviewed the merger agreement; and
(10) Reviewed other financial studies and analyses and took into
account other matters as Merrill Lynch deemed necessary, including Merrill
Lynch's assessment of general economic, market and monetary conditions.
In preparing its opinion, Merrill Lynch assumed and relied on the accuracy
and completeness of all information supplied or otherwise made available to
Merrill Lynch, discussed with or reviewed by Merrill Lynch or publicly
available, and did not assume any responsibility for independently verifying
such information, and Merrill Lynch did not undertake an independent evaluation
or appraisal of any of the assets or liabilities of Dime or Washington Mutual,
and was not furnished with any evaluations or appraisals. Merrill Lynch is not
an expert in the evaluation of allowances for loan losses, and neither made an
independent evaluation of the adequacy of the allowances for loan losses of Dime
or Washington Mutual, nor reviewed any individual credit files of Dime or
Washington Mutual nor was requested to conduct a review of any individual credit
files and, as a result, Merrill Lynch assumed that the allowances for loan
losses for both Dime and Washington Mutual are adequate to cover the losses and
will be adequate on a pro forma basis for the combined company. In addition,
Merrill Lynch did not assume any obligation to conduct, nor did it conduct, any
physical inspection of the properties or facilities of Dime or Washington
Mutual. Merrill Lynch reviewed and discussed with the managements of Dime and
Washington Mutual publicly available financial forecasts relating to Dime and
Washington Mutual and
29
36
was advised, and assumed, that the forecasts represent reasonable estimates and
judgments as to the future financial performance of Dime and Washington Mutual.
With respect to other financial and operating information, including, without
limitation, projections regarding the cost savings and expenses expected to
result from the merger, furnished to or discussed with Merrill Lynch by Dime or
Washington Mutual, Merrill Lynch assumed that they have been reasonably prepared
and reflect the best currently available estimates and judgments of the senior
managements of Dime or Washington Mutual. Merrill Lynch further assumed that the
merger will qualify as a tax-free reorganization for United States federal
income tax purposes.
Merrill Lynch's opinion is necessarily based upon market, economic and
other conditions as in effect on, and on the information made available to
Merrill Lynch as of, the date of the opinion. For the purposes of rendering its
opinion, Merrill Lynch assumed that the merger will be consummated substantially
in accordance with the terms set forth in the merger agreement, including in all
respects material to its analysis, that the representations and warranties of
each party in the merger agreement and in all related documents and instruments
that are referred to in the merger agreement are true and correct, that each
party to the merger agreement and all related documents will perform all of the
covenants and agreements required to be performed by that party under the merger
agreement and any related documents and that all conditions to the consummation
of the merger will be satisfied without any waivers. Merrill Lynch also assumed
that, in the course of obtaining the necessary regulatory or other consents or
approvals, contractual or otherwise, for the merger, no restrictions, including
any divestiture requirements or amendments or modifications, will be imposed
that would have a material adverse effect on the future results of operations or
financial condition of Dime, Washington Mutual or the combined entity, as the
case may be, or on the contemplated benefits of the merger, including the cost
savings and expenses expected to result from the merger.
Merrill Lynch did not consider, nor did it express, any opinion as to the
prices at which the Dime common stock or Washington Mutual common stock will
trade following the announcement of the merger or the price at which Washington
Mutual common stock will trade following the consummation of the merger. In
connection with preparation of its opinion, Merrill Lynch was not authorized by
Dime or the Dime board of directors to solicit, nor did Merrill Lynch solicit,
third-party indications of interest for the acquisition of all or any part of
Dime. Although Merrill Lynch evaluated the fairness, from a financial point of
view, of the consideration to be received in the merger, Merrill Lynch was not
requested to, and did not, recommend the specific consideration payable in the
merger, which consideration was determined through negotiations between Dime and
Washington Mutual and approved by the Dime board of directors. No other
limitation was imposed on Merrill Lynch with respect to the investigations made
or procedures followed by Merrill Lynch in rendering its opinion.
In preparing its opinion to the Dime board of directors, Merrill Lynch
performed a variety of financial and comparative analyses, including those
described below. The summary set forth below does not purport to be a complete
description of the analyses underlying Merrill Lynch's opinion or the
presentation made by Merrill Lynch to the Dime board of directors. The
preparation of a fairness opinion is a complex analytical process involving
various determinations as to the most appropriate and relevant methods of
financial analysis and the application of those methods to the particular
circumstances and, therefore, a fairness opinion is not readily susceptible to
partial analysis or summary description. In arriving at its opinion, Merrill
Lynch did not attribute any particular weight to any analysis or factor
considered by it, but rather made qualitative judgments as to the significance
and relevance of each analysis and factor. Accordingly, Merrill Lynch believes
that its analyses must be considered as a whole and that selecting portions of
its analyses and factors, or focusing on information presented in tabular
format, without considering all of the analyses and factors or the narrative
description of the analyses, would create a misleading or incomplete view of the
process underlying its opinion.
In performing its analyses, Merrill Lynch made numerous assumptions with
respect to industry performance, general business, economic, market and
financial conditions and other matters, many of which are beyond the control of
Merrill Lynch, Dime or Washington Mutual. Any estimates contained in the
analyses performed by Merrill Lynch are not necessarily indicative of actual
values or future results,
30
37
which may be significantly more or less favorable than suggested by such
analyses. Additionally, estimates of the value of businesses or securities do
not purport to be appraisals or to reflect the prices at which such businesses
or securities might actually be sold. Accordingly, such analyses and estimates
are inherently subject to substantial uncertainty. In addition, as described
above, Merrill Lynch's opinion was among several factors taken into
consideration by the Dime board of directors in making its determination to
approve the merger agreement and the merger. Consequently, Merrill Lynch's
analyses should not be viewed as determinative of the decision of the Dime board
of directors or Dime's management with respect to the fairness of the
consideration to be received in the merger set forth in the merger agreement.
FINANCIAL ANALYSES
The following is a summary of the material financial analyses underlying
Credit Suisse First Boston's and Merrill Lynch's opinions dated June 25, 2001
delivered to the Dime board of directors in a joint presentation in connection
with the merger. THE FINANCIAL ANALYSES SUMMARIZED BELOW INCLUDE INFORMATION
PRESENTED IN TABULAR FORMAT. IN ORDER TO FULLY UNDERSTAND CREDIT SUISSE FIRST
BOSTON'S AND MERRILL LYNCH'S FINANCIAL ANALYSES, THE TABLES MUST BE READ
TOGETHER WITH THE TEXT OF EACH SUMMARY. THE TABLES ALONE DO NOT CONSTITUTE A
COMPLETE DESCRIPTION OF THE FINANCIAL ANALYSES. CONSIDERING THE DATA IN THE
TABLES BELOW WITHOUT CONSIDERING THE FULL NARRATIVE DESCRIPTION OF THE FINANCIAL
ANALYSES, INCLUDING THE METHODOLOGIES AND ASSUMPTIONS UNDERLYING THE ANALYSES,
COULD CREATE A MISLEADING OR INCOMPLETE VIEW OF CREDIT SUISSE FIRST BOSTON'S AND
MERRILL LYNCH'S FINANCIAL ANALYSES.
SELECTED COMPANIES ANALYSIS
Dime. Credit Suisse First Boston and Merrill Lynch compared financial and
stock market data of Dime and the following five publicly-traded companies in
the thrift industry:
- Charter One Financial, Inc.
- Golden State Bancorp Inc.
- GreenPoint Financial Corp.
- Sovereign Bancorp, Inc.
- Astoria Financial Corporation
Credit Suisse First Boston and Merrill Lynch compared the common stock
prices for the selected companies and Dime as multiples of estimated earnings
per share, commonly referred to as EPS, and estimated cash EPS for calendar
years 2001 and 2002, and as multiples of book and tangible book values per share
as of March 31, 2001. Credit Suisse First Boston and Merrill Lynch then applied
the median multiples, upwardly adjusted by 30% to reflect a control premium, to
corresponding financial data for Dime in order to derive implied per share
values for Dime. All multiples were based on closing stock prices on June 22,
2001, the last trading day prior to public announcement of the merger. Estimated
financial data
31
38
for Dime and the selected companies were based on research analysts' estimates.
The results of this analysis were as follows:
MEDIAN OF
SELECTED
COMPANIES
MEDIAN OF WITH A 30% IMPLIED PER SHARE
SELECTED CONTROL VALUE FOR DIME
DIME COMPANIES PREMIUM COMMON STOCK
----- --------- ---------- -----------------
Multiple of Price to:
2001E EPS........................... 13.2x 11.5x 15.0x $41.73
2002E EPS........................... 12.0 10.3 13.4 41.24
2001E Cash EPS...................... 12.0 11.1 14.4 44.18
2002E Cash EPS...................... 11.0 10.0 13.0 43.49
Book Value.......................... 2.57 1.71 2.23 32.01
Tangible Book Value................. 3.61 2.82 3.66 37.46
Washington Mutual. Credit Suisse First Boston and Merrill Lynch compared
financial and stock market data of Washington Mutual and the following six
publicly-traded companies in the thrift industry:
- Golden West Financial Corporation
- Charter One Financial, Inc.
- Golden State Bancorp Inc.
- GreenPoint Financial Corp.
- Sovereign Bancorp, Inc.
- Astoria Financial Corporation
Credit Suisse First Boston and Merrill Lynch compared the common stock
prices for the selected companies and Washington Mutual as multiples of
estimated EPS and cash EPS for calendar years 2001 and 2002, and as multiples of
book and tangible book values per share as of March 31, 2001. Credit Suisse
First Boston and Merrill Lynch then applied the median multiples derived from
the selected companies to corresponding financial data for Washington Mutual in
order to derive implied per share values for Washington Mutual. All multiples
were based on closing stock prices on June 22, 2001, the last day of trading
prior to public announcement of the merger. Estimated financial data for
Washington Mutual and the selected companies were based on research analysts'
estimates. The results of this analysis were as follows:
MEDIAN OF
WASHINGTON SELECTED IMPLIED PER SHARE VALUE FOR
MUTUAL COMPANIES WASHINGTON MUTUAL COMMON STOCK
---------- --------- ------------------------------
Multiple of Price to:
2001E EPS...................... 12.0x 11.9x $38.47
2002E EPS...................... 11.0 10.7 37.88
2001E Cash EPS................. 11.6 11.2 37.30
2002E Cash EPS................. 10.5 10.1 36.56
Book Value..................... 2.71 1.85 27.32
Tangible Book Value............ 3.30 2.82 35.87
None of the selected companies is identical to Dime or Washington Mutual.
Accordingly, an analysis of the results of the Selected Companies Analysis
involves complex considerations of the selected companies and other factors that
could affect the public trading value of Dime, Washington Mutual and the
selected companies.
32
39
SELECTED TRANSACTIONS ANALYSIS. Using publicly available information,
Credit Suisse First Boston and Merrill Lynch reviewed the multiples implied by
the purchase prices paid or proposed to be paid, at the time of public
announcement, of the following 12 transactions announced since January 1, 2000
in the commercial banking and thrift industries with transaction values over $1
billion:
ACQUIROR TARGET
-------- ------
- BNP Paribas BancWest Corporation
- Citigroup Inc. European American Bank
- Royal Bank of Canada Centura Banks, Inc.
- BB&T Corporation F&M National Corporation
- ABN AMRO N.V. Michigan National Corporation
- Fifth Third Bancorp Old Kent Financial Corporation
- Comerica Incorporated Imperial Bancorp
- Fleet Boston Financial Corporation Summit Bancorp
- Washington Mutual, Inc. Bank United Corp.
- M&T Bank Corporation Keystone Financial, Inc.
- Wells Fargo & Company First Security Corporation
- BB&T Corporation, Inc. One Valley Bancorp, Inc.
Credit Suisse First Boston and Merrill Lynch compared equity values in the
selected transactions as multiples of the respective target's latest 12 months
EPS, forward EPS and its latest available book value and tangible book value to
the corresponding multiples implied by the consideration to be paid in the
merger of Dime and Washington Mutual based on the average closing price of
Washington Mutual common stock for the five trading days ending June 22, 2001.
Credit Suisse First Boston and Merrill Lynch then applied the median multiples
derived from the selected transactions to corresponding financial data for Dime
in order to derive implied per share values for Dime. The results of this
analysis were as follows:
WASHINGTON MEDIAN OF
MUTUAL/ SELECTED IMPLIED PER SHARE VALUE
DIME TRANSACTIONS FOR DIME COMMON STOCK
---------- ------------ -----------------------
Multiple of Price to:
Latest 12 Months EPS................. 17.9x 15.3x $37.39
Forward EPS.......................... 15.8 14.1 39.34
Book Value........................... 3.08 2.24 32.22
Tangible Book Value.................. 4.33 2.85 29.18
Credit Suisse First Boston and Merrill Lynch also compared equity values in
the two most recent selected transactions in the New York metropolitan area, the
Citigroup/European American Bank and FleetBoston/Summit transactions, as
multiples of the respective target's latest 12 months EPS, forward EPS and its
latest available book value and tangible book value with corresponding multiples
implied by the consideration to be paid in the merger of Dime and Washington
Mutual based on the average closing price of Washington Mutual common stock for
the five trading days ending June 22, 2001. Credit Suisse First Boston and
Merrill Lynch also compared the premium paid over tangible book value as a
percentage of deposits in the two most recent selected transactions with the
corresponding premium implied by the
33
40
consideration to be paid in the merger based on the average closing price of
Washington Mutual common stock for the five trading days ending June 22, 2001.
The results of this analysis were as follows:
WASHINGTON
MUTUAL/ CITIGROUP/EUROPEAN FLEETBOSTON/
DIME AMERICAN BANK SUMMIT
---------- ------------------ ------------
Multiple of Price to:
Latest 12 Months EPS..................... 17.9x 14.5x 14.2x
Forward EPS.............................. 15.8 13.1 12.5
Book Value............................... 3.08 2.56 2.35
Tangible Book Value...................... 4.33 3.34 2.91
Tangible Premium to Deposits............. 27.9% 13.1% 17.9%
No company or transaction used in the Selected Transactions Analysis is
identical to Dime, Washington Mutual or the proposed merger. Accordingly, an
analysis of the results of the Selected Transactions Analysis involves complex
considerations of the companies involved and the transactions and other factors
that could affect the acquisition value of the companies and Dime.
DISCOUNTED CASH FLOW ANALYSIS
Dime. Credit Suisse First Boston and Merrill Lynch performed a discounted
cash flow analysis of Dime to estimate the present value of the stand-alone
excess equity flows that Dime could generate for fiscal years 2001 through 2006.
Credit Suisse First Boston and Merrill Lynch calculated a range of estimated
terminal values by applying multiples ranging from 9.0x to 11.0x to Dime's
projected earnings for fiscal year 2006. Estimated financial data for Dime,
including Dime's long-term EPS growth rate of 11%, were based on research
analysts' estimates. The present value of the excess equity flows and terminal
value was calculated using discount rates ranging from 12% to 14%, which Credit
Suisse First Boston and Merrill Lynch viewed as the appropriate range of
discount rates for a company with Dime's risk characteristics. This analysis was
based on a 5.0% growth rate in assets for Dime and a target tangible common
ratio of 5.5% for Dime. "Tangible common ratio" refers to common stockholders
equity minus intangibles divided by total assets minus intangibles.
This analysis indicated the following implied per share reference range for
Dime:
IMPLIED PER SHARE REFERENCE RANGE
$29.00 to $36.55
Washington Mutual. Credit Suisse First Boston and Merrill Lynch performed a
discounted cash flow analysis of Washington Mutual to estimate the present value
of the stand-alone excess equity flows that Washington Mutual could generate for
fiscal years 2001 through 2006. Credit Suisse First Boston and Merrill Lynch
calculated a range of estimated terminal values by applying multiples ranging
from 9.0x to 11.0x to Washington Mutual's projected earnings for fiscal year
2006. Estimated financial data for Washington Mutual, including Washington
Mutual's long-term EPS growth rate of 13%, were based on research analysts'
estimates. The present value of the excess equity flows and terminal value was
calculated using discount rates ranging from 12% to 14%, which Credit Suisse
First Boston and Merrill Lynch viewed as the appropriate range of discount rates
for a company with Washington Mutual's risk characteristics. This analysis was
based on a 5.0% growth rate in assets for Washington Mutual and a target
tangible common ratio of 5.0% for Washington Mutual.
This analysis indicated the following implied per share reference range for
Washington Mutual:
IMPLIED PER SHARE REFERENCE RANGE
$37.05 to $46.65
AFFORDABILITY ANALYSIS. Credit Suisse First Boston and Merrill Lynch
analyzed the potential pro forma effect of the merger on Dime's and Washington
Mutual's estimated EPS for calendar years 2002 through 2004, based on research
analysts' estimates, including potential cost savings estimated by
34
41
management to be achieved in the merger. This analysis was based on an
allocation of the consideration to be paid in the merger of 30% in the form of
cash and 70% in the form of Washington Mutual common stock, estimated pre-tax
cost savings of $140 million, straight-line amortization of core deposit
intangibles of $480 million over a seven-year period, $323 million of value
attributed to warrants held by Warburg Pincus, a pre-tax restructuring charge of
$214 million and a termination fee payment of $76 million to Hudson United
Bancorp both financed at a pretax rate of 7.0%. For purposes of analyzing
accretion/ (dilution) to Dime's estimated EPS only, the analysis assumed that
100% of the consideration to be received in the merger by the holders of Dime
common stock would consist of Washington Mutual common stock. The Affordability
Analysis relies on GAAP as modified by the Financial Accounting Standards Board.
This analysis indicated the following accretion/(dilution) to Dime's and
Washington Mutual's estimated EPS:
2002 2003 2004
---- ---- ----
IMPACT TO WASHINGTON MUTUAL:
Accretion/(Dilution) -- GAAP.............................. (0.5)% 0.8% 0.7%
Accretion/(Dilution) -- Cash.............................. 0.6 1.7 1.5
IMPACT TO DIME:
Accretion/(Dilution) -- GAAP.............................. 13.6% 17.7% 20.3%
Accretion/(Dilution) -- Cash.............................. 16.5 20.3 22.7
The actual results achieved by the combined company may vary from projected
results and the variations may be material.
OTHER FACTORS. In rendering their opinions, Credit Suisse First Boston and
Merrill Lynch considered other factors for informational purposes, including
historical price performance of Dime common stock and Washington Mutual common
stock, the relationship between movements in Dime common stock and Washington
Mutual common stock and movements in comparable thrift and thrift-like bank
indices and the expected long-term EPS growth rates for Dime and Washington
Mutual as estimated by research analysts.
MISCELLANEOUS. Dime has agreed to pay each of Credit Suisse First Boston
and Merrill Lynch for their financial advisory services in connection with the
merger an aggregate fee equal to a percentage of the total consideration payable
in the merger. It is currently estimated that the aggregate fee payable to
Credit Suisse First Boston will be no more than approximately $18.75 million,
approximately $16.75 million of which is contingent upon consummation of the
merger. It is currently estimated that the aggregate fee payable to Merrill
Lynch will be no more than approximately $12.5 million, approximately $9.375
million of which is contingent upon consummation of the merger. Dime also has
agreed to reimburse Credit Suisse First Boston and Merrill Lynch for all
reasonable out-of-pocket expenses, including reasonable fees and expenses of
legal counsel of Credit Suisse First Boston and Merrill Lynch and, with Dime's
approval, any other advisor retained by Credit Suisse First Boston, and to
indemnify Credit Suisse First Boston, Merrill Lynch and related parties against
liabilities, including liabilities under the federal securities laws, arising
out of their engagement.
Credit Suisse First Boston, Merrill Lynch and/or their affiliates in the
past have provided, and may in the future provide, investment banking and
financial services to Dime and Washington Mutual unrelated to the merger, for
which services Credit Suisse First Boston and Merrill Lynch have received, and
expect to receive, compensation. Credit Suisse Group holds a 19.9% passive
profit interest in Warburg, Pincus & Co. and its affiliate, Warburg Pincus LLC,
the general partner and manager, respectively, of Warburg, Pincus Equity
Partners, L.P., an investment fund that, with certain of its affiliated
entities, owns shares of Dime common stock and warrants to purchase shares of
Dime common stock. In the ordinary course of business, Credit Suisse First
Boston, Merrill Lynch and their affiliates may actively trade the debt and
equity securities of Dime and Washington Mutual for their own accounts and for
the accounts of customers and, accordingly, may at any time hold long or short
positions in those securities.
35
42
REASONS OF WASHINGTON MUTUAL FOR THE MERGER
Washington Mutual's board of directors believes that the merger with Dime
will allow Washington Mutual to expand its presence in the State of New York and
in the greater New York City metropolitan area in particular. Washington Mutual
is currently the second largest single family residential mortgage originator in
the State of New York and the acquisition of Dime will provide it with a retail
banking presence as well as increased mortgage origination capabilities.
Washington Mutual and Dime share similar consumer banking strategies and have
compatible deposit products.
In reaching its conclusions, Washington Mutual's board of directors
considered, among other things:
- information concerning the financial performance and condition, business
operations, capital level and asset quality of Dime and projected results
and prospects of Washington Mutual and Dime on a combined basis,
including anticipated cost savings;
- the terms of the merger agreement, including the mutual covenants and
conditions and the circumstances under which Washington Mutual would
receive a termination fee;
- the likelihood of obtaining the regulatory approvals required to
consummate the merger; and
- the effect of the merger on the depositors, employees, customers and
communities served by Washington Mutual.
COMPLETION OF THE MERGER
The merger will become effective on the date and at the time set forth in
the articles of merger to be filed with the Secretary of State of the State of
Washington and the certificate of merger to be filed with the Secretary of State
of the State of Delaware. We plan to file the articles of merger and the
certificate of merger on the first Friday that is a business day and that is at
least two business days after the satisfaction or waiver of the closing
conditions in the merger agreement. See "-- Conditions to Completion of the
Merger" beginning on page 48. We may also mutually agree to a later time for
completion of the merger.
However, if the conditions to closing are met before January 4, 2002,
Washington Mutual, as permitted by the merger agreement, intends to deliver an
extension notice to Dime. The extension notice must be delivered to Dime within
the five business day period beginning on the first business day after the
closing conditions are satisfied or waived and would set January 4, 2002 as the
date of completion for the merger.
The merger agreement can be terminated by either party without penalty if
the merger is not completed on or before April 30, 2002, unless the failure to
complete the merger by that date is due to the failure of the party seeking to
terminate the merger agreement to perform its obligations under the merger
agreement.
CONVERSION OF DIME COMMON STOCK AND DIME STOCK OPTIONS
CONVERSION OF DIME COMMON STOCK. Upon completion of the merger, each
outstanding share of Dime common stock not held by Washington Mutual or Dime,
together with the associated rights issued under Dime's stockholder protection
rights agreement, will be converted into the right to receive, at the election
of each Dime stockholder (but subject to the limitations described below),
either:
- a number of shares of Washington Mutual common stock corresponding to an
exchange ratio calculated as described below, or
- an amount in cash calculated as described below under "Value Per Dime
Share" without interest.
36
43
The allocation of cash and common stock consideration will be dependent on the
election made by other Dime stockholders and Warburg warrantholders and may
result in a stockholder or Warburg warrantholder receiving a mixture of stock
and cash. See "-- Cash/Stock Election." Shares of Washington Mutual common stock
issued in the merger will be accompanied by the requisite number of rights under
Washington Mutual's shareholder rights agreement. See "Comparison of Rights of
Washington Mutual and Dime Stockholders -- Stockholder Rights Plans."
Aggregate Consideration. The aggregate consideration to be paid to Dime
stockholders and Warburg warrantholders in the transaction will consist of
$1,428,809,000 in cash and approximately 92.3 million shares of Washington
Mutual common stock. Based on the average closing price for Washington Mutual
shares of $38.89 for the five trading days prior to the announcement of the
merger on June 25, 2001, this represented approximately 28.5% and 71.5%,
respectively, of the value of the aggregate merger consideration (not including
merger consideration relating to stock options previously granted under Dime's
stock-based benefit plans initially valued at approximately $ million). To
the extent that the number of shares of Dime common stock outstanding changes as
a result of, for example, the exercise of stock options, the aggregate number of
shares of Washington Mutual common stock to be issued will change accordingly,
but the aggregate cash consideration to be paid will not change. The outcome of
the per share consideration adjustment and the cash/stock election procedure
(each of which is discussed below) will not change (i) the aggregate number of
shares of Washington Mutual common stock to be issued, except in the event that
there is a change in the number of Dime shares outstanding as noted above, or
(ii) the aggregate amount of cash to be paid by Washington Mutual as
consideration.
Value Per Dime Share. The value of the merger consideration per share of
Dime common stock will be calculated in accordance with the following formula:
the sum of (i) $11.6245 and (ii) 0.7511 times the average of the closing prices
of Washington Mutual common stock for the ten consecutive full trading days
ending on the tenth business day before completion of the merger. The
transaction initially valued Dime's common stock at $40.84 per share and
produced an implied exchange ratio equal to 1.05 shares of Washington Mutual
common stock for each share of Dime common stock based upon a price of $38.89
per share of Washington Mutual common stock, the average closing price for
Washington Mutual common stock for the five trading days prior to announcement
of the merger. The value of the merger consideration and the actual exchange
ratio per Dime share at the completion of the merger will vary from the initial
assumed value and implied exchange ratio if the average Washington Mutual common
stock price during the ten trading day measurement period is greater or less
than $38.89, which is likely.
Stock/Cash Effects of Fluctuations in Washington Mutual Common Stock
Price. Examples of the aggregate consideration and potential effects on the per
share merger consideration and the implied exchange ratio based on fluctuations
of Washington Mutual common stock price are illustrated below,
37
44
based upon a range of hypothetical average prices for Washington Mutual common
stock during the measurement period.
PERCENTAGE
CHANGE IN AGGREGATE AGGREGATE VALUE OF AGGREGATE
WM CASH VALUE OF STOCK AGGREGATE CONSIDERATION CASH/ IMPLIED
WM MEASUREMENT PERIOD STOCK CONSIDERATION CONSIDERATION CONSIDERATION PER DIME STOCK EXCHANGE
AVERAGE STOCK PRICE(1) PRICE(2) ($MM) ($MM)(3) ($MM)(3) SHARE(4) PERCENTAGE RATIO(4)
---------------------- ---------- ------------- -------------- ------------- ------------- ---------- --------
$48.6150............... +25% $1,429 $4,488 $5,917 $48.1396 24.2/75.8 0.9902x
46.6704............... +20 1,429 4,309 5,738 46.6790 24.9/75.1 1.0002
44.7258............... +15 1,429 4,129 5,558 45.2184 25.7/74.3 1.0110
42.7812............... +10 1,429 3,950 5,379 43.7578 26.6/73.4 1.0228
40.8366............... +5 1,429 3,770 5,199 42.2972 27.5/72.5 1.0358
38.8920............... -- 1,429 3,591 5,020 40.8366 28.5/71.5 1.0500
36.9474............... -5 1,429 3,411 4,840 39.3760 29.5/70.5 1.0657
35.0028............... -10 1,429 3,232 4,661 37.9154 30.7/69.3 1.0832
33.0582............... -15 1,429 3,052 4,481 36.4548 31.9/68.1 1.1028
31.1136............... -20 1,429 2,872 4,301 34.9942 33.2/66.8 1.1247
29.1690............... -25 1,429 2,693 4,122 33.5336 34.7/65.3 1.1496
-------------------------
(1) Average closing stock price of Washington Mutual common stock during the ten
trading day measurement period.
(2) Percentage difference between average Washington Mutual common stock price
during the ten trading day measurement period and $38.8920, which was the
average closing stock price for Washington Mutual common stock for the five
trading days prior to announcement of the transaction on June 25, 2001.
(3) Aggregate stock consideration valued using the pre-closing average stock
price for Washington Mutual common stock during the ten trading day
measurement period (see column 1) and assuming that 92,321,144 shares of
Washington Mutual common stock will be issued in the transaction (including
with respect to Warburg's "deemed warrant shares" but not including merger
consideration relating to stock options issued under Dime's stock-based
benefit plans).
(4) Stock consideration per Dime share and cash consideration per Dime share
valued using the pre-closing average stock price for Washington Mutual
common stock during the ten trading day measurement period (see column 1).
CONVERSION OF DIME STOCK OPTIONS. Each option to acquire Dime common stock
outstanding and unexercised immediately prior to completion of the merger will
be converted into an option to purchase Washington Mutual common stock, with the
following adjustments:
- the number of shares of Washington Mutual common stock subject to the
adjusted option will equal the product of the number of shares of Dime
common stock subject to the original option and the exchange ratio
(rounded up to the nearest share); and
- the exercise price per share of Washington Mutual common stock subject to
the adjusted option will equal the exercise price under the original
option divided by the exchange ratio (rounded down to the nearest cent).
The duration and other terms of each adjusted option will be the same as
the original Dime stock option. Options that are incentive stock options under
the federal tax code will be adjusted in the manner prescribed by the federal
tax code.
Where any Dime stock options have tandem stock appreciation rights
associated with them, the stock appreciation rights will be adjusted in the same
manner, and consistent with, the adjustment of the related stock option. Where
Dime stock options also, upon exercise, provide a right to receive Dime
Litigation Tracking Warrants (or their economic value), they will, upon
adjustment, provide a similar right with
38
45
respect to Litigation Tracking Warrants that relate to Washington Mutual, rather
than Dime, common stock.
Upon completion of the merger, the restrictions on each share of restricted
stock issued pursuant to Dime's stock-based benefit plans will lapse, and each
of these shares will be converted into the right to receive the same
consideration as a share of Dime common stock. See "Interests of Certain Persons
in the Merger -- Effect of the Merger on Existing Dime Stock-Based Rights,
Including Stock Options and Stock Grants" on page 55.
WASHINGTON MUTUAL STOCK. Each share of Washington Mutual common stock and
Washington Mutual preferred stock issued and outstanding at the time of the
merger will remain outstanding and those shares will be unaffected by the
merger.
ELECTION OF CASH OR STOCK CONSIDERATION
You will have the opportunity to elect to receive for each share of Dime
common stock you hold either (i) the value calculated by the formula set forth
under " -- Conversion of Dime Common Stock -- Value Per Dime Share" in cash or
(ii) a number of shares of Washington Mutual common stock equal to the cash
value of such amount, calculated based on the average Washington Mutual common
stock price during the ten trading day measurement period, ending on the tenth
business day prior to completion of the merger.
At least 15 business days before the expected date of completion of the
merger, we will mail an election form to each Dime stockholder and each holder
of warrants subject to the warrant purchase and voting agreement that they may
use to indicate whether they elect to receive their merger consideration in cash
or in Washington Mutual common stock. Your election for cash or stock is
potentially subject to proration because the amount of cash Washington Mutual
will pay in the merger is fixed at $1,428,809,000, and that amount will in all
likelihood either be oversubscribed or undersubscribed. For example, if the
product of (i) the value to be paid for each Dime share and (ii) the number of
Dime shares and warrants for which cash is elected would exceed $1,428,809,000,
the amount of cash consideration to be paid to each Dime stockholder or Warburg
warrantholder electing to receive cash will be reduced on a pro rata basis, and
they will instead receive stock consideration for any Dime shares or warrants
for which they do not receive cash. In that case, each Dime stockholder or
Warburg warrantholder electing to receive shares of Washington Mutual common
stock will receive the full merger consideration for his or her Dime shares in
Washington Mutual common stock. If the product of (i) the value to be paid for
each Dime share and (ii) the number of Dime shares and warrants for which cash
is elected would be less than $1,428,809,000, the amount of Washington Mutual
common stock to be distributed to each Dime stockholder and Warburg
warrantholder electing to receive stock for their Dime shares will be reduced on
a pro rata basis, and they will receive cash consideration for any Dime shares
or warrants for which they do not receive Washington Mutual common stock. In
that case, each Dime stockholder or Warburg warrantholder electing to receive
cash will receive the full merger consideration for his or her Dime shares in
cash.
39
46
Some examples of the effects of the proration of the merger consideration
are illustrated below (all percentages are approximate). The following examples
are based on the assumption that the average price of Washington Mutual common
stock during the ten trading day measurement period is $38.8920, the average
closing stock price for Washington Mutual common stock for the five trading days
prior to the announcement of the merger, and reflect a ten percent decrease and
increase in that price to $35.0028 and $42.7812, respectively. The percentage of
shares electing cash are shown for illustrative purposes only.
IF 85% OF SHARES AND WARRANTHOLDERS IF 15% OF SHARES AND WARRANTHOLDERS
ELECT CASH, THEN: ELECT CASH, THEN:
------------------------------------ ------------------------------------------
STOCKHOLDERS AND WARBURG STOCKHOLDERS AND WARBURG
WARRANTHOLDERS ELECTING STOCK WILL WARRANTHOLDERS ELECTING CASH WILL RECEIVE
RECEIVE ALL WM SHARES, AND ALL CASH, AND
------------------------------------ ------------------------------------------
STOCKHOLDERS AND WARBURG STOCKHOLDERS AND WARBURG
WARRANTHOLDERS ELECTING CASH WILL WARRANTHOLDERS ELECTING STOCK WILL
RECEIVE: RECEIVE:
------------------------------------ ------------------------------------------
WM AVERAGE PRICE DURING % OF DIME SHARES % OF DIME SHARES % OF DIME SHARES % OF DIME SHARES
PRE-CLOSING MEASUREMENT PERIOD IN WM SHARES IN CASH IN WM SHARES IN CASH
------------------------------ ---------------- ---------------- ------------------- -------------------
$42.7812..................... 69% 31% 87% 13%
$38.8920..................... 67% 33% 85% 15%
$35.0028..................... 65% 35% 83% 17%
This table is used solely for purposes of illustration. The actual
elections and the Washington Mutual stock price are likely to differ, perhaps
significantly. The three prices used for Washington Mutual common stock reflect
the average of the closing stock prices of Washington Mutual common stock for
the five trading days prior to announcement of the merger on June 25, 2001
($38.892) and a 10% change upwards and downwards.
If you do not make a proper election within the time prescribed in the
election form, then you will be deemed to have made an election to receive
Washington Mutual common stock. Election forms must be returned by 5:00 p.m.,
Eastern time, on the twentieth business day following but not including the date
of mailing of the election form or another date as agreed upon by Washington
Mutual and Dime. Dissenting stockholders will be deemed to have made an election
to receive cash, and will not be subject to proration. You may change or revoke
your election by written notice to the exchange agent if such notice is received
before the election deadline.
EXCHANGE OF SHARES; FRACTIONAL SHARES
Exchange of Shares. At or promptly after the election deadline, Washington
Mutual will deposit with an exchange agent, to be selected by Washington Mutual
with Dime's reasonable consent, certificates representing shares of Washington
Mutual common stock and sufficient cash for conversion of shares as described
under "-- Conversion of Dime Common Stock and Dime Stock Options".
DIME COMMON STOCK CERTIFICATES SHOULD NOT BE SENT TO DIME OR WASHINGTON
MUTUAL AT THIS TIME. DIME STOCKHOLDERS WILL RECEIVE INSTRUCTIONS FOR
SURRENDERING THEIR CERTIFICATES WITH THEIR ELECTION FORM AND RELATED LETTER OF
TRANSMITTAL.
Fractional Shares. Washington Mutual will not issue fractional shares of
Washington Mutual common stock to Dime stockholders in the merger. There will be
no dividends or voting rights with respect to any fractional shares. For each
fractional share of Washington Mutual common stock that would otherwise be
issued, Washington Mutual will pay cash, without interest, in an amount equal to
the product of:
- the fraction of a whole share that would otherwise have been issued
multiplied by
40
47
- the average of the closing sale prices of Washington Mutual common stock
on the New York Stock Exchange for the ten trading days immediately
preceding the date the merger is completed.
LITIGATION TRACKING WARRANTS
Holders of litigation tracking warrants are not required to take any action
at this time. Holders of Dime's litigation tracking warrants will be entitled to
receive, upon exercise of the litigation tracking warrants after completion of
the merger, in accordance with the terms of the warrant agreement governing the
issuance of the litigation tracking warrants, for each litigation tracking
warrant they hold, shares of Washington Mutual common stock instead of shares of
Dime common stock. In addition, holders of options to acquire Dime common stock,
shares of restricted Dime stock or other equity-based compensation that
currently entitle the holder to receive litigation tracking warrants (or where
there are stock appreciation rights, their value) will after the merger be
entitled to receive litigation tracking warrants (or their value) representing
the right to receive shares of Washington Mutual common stock upon exercise of
those litigation tracking warrants.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains various representations and warranties made
by each of Washington Mutual and Dime regarding the following matters, among
others:
- corporate organization, existence and good standing;
- capitalization;
- corporate power and authority to enter into the merger agreement and the
enforceability of the merger agreement;
- due authorization, execution and delivery of the merger agreement;
- the fact that neither the merger agreement nor the transactions
contemplated in the merger agreement violate:
- the certificate or articles of incorporation or the bylaws of either
party,
- applicable law, or
- certain material agreements, instruments or obligations;
- governmental and third party approvals;
- timeliness of regulatory filings;
- accuracy and content of its financial statements and filings with the
SEC;
- broker's fees payable in connection with the merger;
- the absence of material adverse changes in each party's business since
December 31, 2000;
- pending or threatened legal proceedings and regulatory actions;
- compliance with applicable law;
- agreements or understandings with regulatory agencies; and
- the absence of undisclosed liabilities.
41
48
Dime has also made certain other representations and warranties to
Washington Mutual regarding, among others things:
- the filing and accuracy of its tax returns and payment or provision for
its taxes;
- employee benefit plans and related matters;
- material contracts;
- title to real, personal and leased property;
- insurance coverage;
- environmental liabilities;
- the opinions of its financial advisors;
- loans;
- labor disputes and practices, including proceedings related to unfair
labor practices; and
- Community Reinvestment Act agreements.
CONDUCT OF BUSINESS PENDING THE MERGER
Dime. Except as expressly contemplated or permitted by the merger
agreement, or as required by applicable law, Dime has agreed to, and to cause
each of its subsidiaries to, until the completion of the merger:
- conduct its business in the ordinary and usual course consistent with
past practice;
- use its reasonable best efforts to preserve its business organization,
employees and advantageous business relationships and retain the services
of its officers and key employees; and
- refrain from taking any action reasonably likely to adversely affect or
delay its ability to complete the transactions described in the merger
agreement or to obtain any governmental approvals necessary to complete
those transactions.
Except as expressly contemplated or permitted by the merger agreement, or
as required by applicable law, Dime has agreed that prior to the completion of
the merger, without the prior written consent of Washington Mutual, it will not,
and it will cause its subsidiaries not to, among other things:
- adjust, split, combine, reclassify, redeem, purchase or otherwise acquire
any shares of its stock;
- grant any stock appreciation rights or rights to acquire its capital
stock;
- declare or pay any dividends or distributions on any shares of its stock,
except for:
- regular quarterly cash dividends on Dime common stock at the same rate
paid by it in the fiscal quarter during which the merger agreement was
signed, as long as it does not need to borrow money to pay that
dividend, and
- dividends paid by any of Dime's subsidiaries to Dime or any of its
wholly-owned subsidiaries;
- sell, transfer, mortgage or encumber or otherwise dispose of any of its
material properties or assets or cancel, release, or assign any material
indebtedness to any person;
- acquire or invest in, or make a material purchase of, any property or
assets of any other entity (other than a wholly owned subsidiary of
Dime);
- enter into, renew, extend or terminate any loan, lease, contract or other
agreement that involves amounts above a specified limit, make any change
to the lease relating to North American Mortgage Company's headquarters
in Tampa, Florida or make a material change in any of Dime's other leases
or other material agreements;
42
49
- materially increase compensation or fringe benefits of any of its
employees, pay any pension or retirement allowance not required under an
existing plan or agreement, enter into or modify any employee benefit
plan or employment agreement, hire any new executive officers, or
accelerate the vesting of any stock options;
- make capital expenditures relating to technology initiatives;
- expand its private banking business in any material respect;
- open, relocate or close any branch office or loan production or servicing
facility or make any application to do so;
- make or acquire loans or issue commitments for any loans above specified
limits;
- take any action that would result in a discretionary release of
collateral or guarantees, restructure any loan or commitment for any loan
with principal balances above a specified amount, or agree to guarantee
the obligations of any person other than its wholly owned subsidiaries;
- settle any litigation involving monetary damages or agree or consent to
the issuance of any injunction, decree, order, agreement or judgment
restricting its business or operations;
- amend its certificate of incorporation, bylaws or similar governing
documents or enter into a plan of merger, consolidation or other similar
agreement;
- materially change its investment securities portfolio or the manner in
which its portfolio is classified or reported;
- make any material change in its policies and practices with respect to
underwriting, pricing, originating, acquiring, selling, servicing, or
buying or selling rights to service loans;
- make any material change in its policies and practices with respect to
hedging its loan positions or commitments, or, without prior notice to
Washington Mutual, make any material change in its policies and practices
with respect to pricing of its other products and services;
- take any action intended or reasonably expected to result in any of its
representations or warranties included in the merger agreement being or
becoming untrue in any material respect, in any closing condition not
being satisfied, or in a material violation of any provision of the
merger agreement;
- make any changes in its accounting methods or method of tax accounting;
- enter into any commercial securitization of loans or create any special
purpose funding entity;
- enter into, amend or terminate any agreement between Dime or any of its
subsidiaries, on the one hand, and Warburg or any of its affiliates, on
the other;
- introduce any material new products or services, any material marketing
campaigns or any material new sales compensation or incentive programs or
arrangements, without prior notice to Washington Mutual;
- make or change any tax election, settle or compromise any material tax
liability, agree to an extension of the statute of limitations with
respect to the assessment or determination of any taxes, enter into any
closing agreement with respect to any tax or surrender any right to claim
a tax refund;
- intentionally take, or intentionally fail to take, any action that would
reasonably be expected to materially and adversely impair or delay the
transactions contemplated by the merger agreement; or
- agree to or make any commitment to take any of the actions listed above.
43
50
Washington Mutual. Except as expressly contemplated or permitted by the
merger agreement or required by applicable law, Washington Mutual has agreed
that prior to the completion of the merger it will not, without the prior
written consent of Dime:
- amend its articles of incorporation or bylaws in a manner that would
materially and adversely affect the economic benefits of the merger to
Dime's stockholders;
- take any action intended or reasonably expected to result in any of its
representations or warranties included in the merger agreement becoming
untrue in any material respect, or in any closing condition not being
satisfied or in a material violation of any provision of the merger
agreement;
- intentionally take, or intentionally fail to take, any action that would
reasonably be expected to materially and adversely impair or delay the
transactions contemplated by the merger agreement; or
- agree to or make any commitment to take any of the actions listed above.
ACQUISITION PROPOSALS BY THIRD PARTIES
Dime has agreed that it will not initiate, solicit, encourage or knowingly
facilitate inquiries or proposals with respect to, or engage in negotiations
concerning, or provide any nonpublic information to, or have discussions with,
any third party relating to any acquisition proposal, or waive, redeem or amend
its stockholder protection rights agreement (also known as a "poison pill") or
redeem the rights issued under its stockholder protection rights agreement in
connection with any acquisition proposal.
For purposes of the merger agreement, the term acquisition proposal means
(except for the transactions contemplated by the merger agreement) any:
- tender or exchange offer, or proposal for a merger, consolidation or
other business combination involving Dime or any of its subsidiaries,
- any proposal or offer to acquire more than 15% of the voting power in
Dime or any of its subsidiaries, or
- any proposal or offer to acquire more than 15% of the business, assets or
deposits of Dime or any of its subsidiaries.
However, if Dime receives an unsolicited bona fide acquisition proposal and
Dime's board of directors concludes in good faith that the proposal constitutes
or is reasonably likely to result in a superior proposal, Dime may provide
nonpublic information and engage in negotiations or have discussions relating to
the proposal to the extent its board of directors concludes in good faith (based
on the advice of Dime's outside legal counsel) that failure to take those
actions would more likely than not violate its fiduciary duties under applicable
law. Before providing any nonpublic information, Dime must enter into a
confidentiality agreement with the third party that is no less favorable to Dime
than the confidentiality agreement existing between Dime and Washington Mutual.
For purposes of the merger agreement, a superior proposal is a bona fide
written
- tender or exchange offer, or proposal for a merger, consolidation or
other business combination involving Dime,
- proposal or offer to acquire a majority of the voting power in Dime, or
- proposal or offer to acquire a majority of the business, assets or
deposits of Dime,
which Dime's board of directors concludes in good faith is more favorable, from
a financial point of view, to Dime's stockholders than the merger and the other
transactions contemplated by the merger agreement, after
- receiving the advice of its financial advisors (who must be nationally
recognized investment banking firms),
44
51
- taking into account the likelihood of completion of the proposed
transaction as compared to, and with due regard for, the terms of the
merger agreement, and
- taking into account all legal (with the advice of outside counsel),
financial (including the financing terms of the proposal), regulatory
and other aspects of the proposal, and any other relevant factors
permitted under applicable law.
Dime has also agreed to the following:
- that its board of directors will recommend approval of the merger to its
stockholders and will not withdraw, modify or take any other action or
make any public statement in connection with the special meeting that is
inconsistent with that recommendation unless (1) the board determines in
good faith, based on advice of outside counsel, that failure to take that
action would result in a violation of its fiduciary duties under
applicable law, and (2) if the board intends to take the action following
an acquisition proposal,
- the Dime board of directors must have complied with its obligations
relating to acquisition proposals described above;
- the Dime board of directors must have concluded in good faith that the
acquisition proposal constitutes a superior proposal, after considering
any changes which may be offered by Washington Mutual as described
below; and
- Dime must give Washington Mutual at least five business days to respond
to the acquisition proposal and Dime and its financial and legal
advisors must negotiate with Washington Mutual in good faith to make
adjustments to the merger agreement offered by Washington Mutual during
that time so that the acquisition proposal ceases to constitute a
superior proposal;
- to submit the merger agreement to its stockholders for their adoption,
even if the Dime board of directors has changed its recommendation
regarding the merger;
- not to submit any other acquisition proposal to its stockholders for
their approval;
- to cease any activities, negotiations or discussions with any persons
with respect to acquisition proposals and to use reasonable best efforts
to enforce any confidentiality or similar agreement relating to
acquisition proposals; and
- to promptly advise Washington Mutual of receiving an acquisition proposal
regarding the substance of the proposal and the identity of the person
making the proposal, and to keep Washington Mutual updated as to
developments relating to the acquisition proposal.
DIVIDENDS
We will coordinate the declaration and payment of regular quarterly cash
dividends on Washington Mutual common stock and Dime common stock with the
intent that Dime stockholders will not receive more than one dividend, or fail
to receive one dividend, for any single quarter.
OTHER AGREEMENTS
The merger agreement contains other agreements, in addition to the
covenants relating to the conduct of business described above, including the
following:
- to use our reasonable best efforts to complete the merger;
- to cooperate with each other and to promptly prepare and file all
necessary documentation to effect all applications, notices, petitions
and filings, including this document and the registration statement of
which this document is a part, and to obtain and comply with all permits,
consents, approvals and authorizations of all third parties and
governmental entities necessary or advisable to consummate the
transactions contemplated by the merger agreement;
45
52
- not to take any action that could prevent the merger from qualifying as a
reorganization under the Internal Revenue Code;
- to provide each other, upon request, with all information concerning
ourselves and our subsidiaries, directors, officers and stockholders and
other matters for purposes of this document and other filings and
statements made in connection with the merger;
- to notify each other of any communication from any governmental entity
that causes us to believe there is reasonable likelihood that any
requisite regulatory approval will not be obtained or will be materially
delayed or conditioned;
- to give notice to each other of any change or event that would have a
material adverse effect on us or that would be reasonably likely to cause
or constitute a material breach of any of our representations, warranties
or covenants in the merger agreement; and
- to have certain officers of Dime and Washington Mutual meet on a regular
basis regarding our businesses and operations.
Dime has also agreed:
- to provide Washington Mutual with other information concerning its
business, properties and personnel and to give Washington Mutual, upon
reasonable notice and subject to applicable law, with certain exceptions,
reasonable access to its properties, books, contracts, commitments and
records;
- to take all lawful action to call, give notice of, convene and hold the
special meeting of its stockholders as promptly as practicable to
consider and vote on the merger agreement and, subject to the right of
Dime's board of directors to change its recommendation regarding the
merger agreement, as described above under "-- Acquisition Proposal by
Third Parties," to take all lawful action to solicit the adoption of the
merger agreement by its stockholders;
- to use its reasonable best efforts to cause each of its directors,
executive officers and other affiliates to deliver to Washington Mutual a
written agreement relating to the transfer restrictions required by
federal securities laws regarding the Washington Mutual common stock held
by that person;
- to provide Washington Mutual with certain information regarding loans to
its directors, officers, employees and other affiliates;
- to provide Washington Mutual with certain information regarding the
insurance policies of Dime and its subsidiaries;
- to cooperate with Washington Mutual to facilitate the redesign of Dime's
branch offices.
Washington Mutual has also agreed:
- that, upon completion of the merger, it will indemnify and hold harmless
the officers, directors and employees of Dime and its subsidiaries for
any liabilities incurred in connection with any matters arising out of
(i) their service as an officer, director or employee of Dime, (ii) the
merger agreement, or (iii) the merger;
- subject to certain limitations, to use its best efforts to provide
directors' and officers' liability insurance to Dime's directors and
officers immediately prior to completion of the merger for six years
after the merger is completed on terms at least as advantageous to those
directors and officers as Dime's comparable insurance in place before the
completion of the merger;
- that all provisions of the charter documents of Dime and its subsidiaries
in effect on June 25, 2001 regarding the rights of directors, officers
and employees of Dime to indemnification and limitation of liability for
matters occurring on or prior to completion of the merger will continue
in effect after the merger;
46
53
- to enter into an agreement with the warrant agent confirming the rights
of holders of Dime litigation tracking warrants and to use its best
efforts to maintain the trading designation of the litigation tracking
warrants on the Nasdaq; and
- to use its best efforts to cause the shares of Washington Mutual common
stock issued in the merger to be approved for listing on the NYSE.
REQUIRED REGULATORY APPROVALS
We have agreed to use reasonable best efforts to obtain the regulatory
approvals required for the merger. We refer to these approvals, along with the
expiration of any statutory waiting periods related to these approvals, as the
"requisite regulatory approvals." See "-- Conditions to the Completion of the
Merger" above. The merger of Dime into Washington Mutual and the anticipated
merger of Dime's banking subsidiary, The Dime Savings Bank of New York, FSB,
into Washington Mutual's wholly owned depository institution, Washington Mutual
Bank, FA, are subject to the approval of the Office of Thrift Supervision under
the Home Owners' Loan Act of 1933 and the Federal Deposit Insurance Act,
respectively, and related Office of Thrift Supervision regulations. This
approval requires consideration by the Office of Thrift Supervision of various
factors, including assessments of the competitive effect of the contemplated
transactions, the managerial and financial resources and future prospects of the
resulting institutions and the effect of the contemplated transactions on the
convenience and needs of the communities to be served. The Community
Reinvestment Act of 1977, as amended, also requires that the Office of Thrift
Supervision, in deciding whether to approve the merger of Dime into Washington
Mutual and also the merger of Dime Savings Bank into Washington Mutual Bank, FA,
assess the records of performance of Dime and the bank subsidiaries of
Washington Mutual in meeting the credit needs of the communities they serve,
including low and moderate income neighborhoods. As part of the review process
under the Community Reinvestment Act, it is not unusual for the Office of Thrift
Supervision to receive protests and other adverse comments from community groups
and others. Each of Dime's and Washington Mutual's primary banking subsidiaries
(Dime Savings Bank, Washington Mutual Bank, FA, Washington Mutual Bank and
Washington Mutual Bank fsb) currently has an "outstanding" Community
Reinvestment Act rating from its primary regulator. The regulations of the
Office of Thrift Supervision require publication of notice of, and an
opportunity for public comment with respect to, the applications filed in
connection with both of these mergers and authorize the Office of Thrift
Supervision to hold an informal meeting upon the request of a commenter or on
its own initiative, and a formal meeting upon the request of any participant to
an informal meeting or on its own initiative, in connection with these
applications. Any such meeting or comments provided by third parties could
prolong the period during which the mergers are subject to review by the Office
of Thrift Supervision.
Washington Mutual shortly intends to file its application and related
notices seeking the requisite Office of Thrift Supervision approval. To date,
Washington Mutual has not received any approvals or notices of disapproval. It
is anticipated that the Office of Thrift Supervision's review of these
applications will involve an analysis of the status of the systems integration
of Dime Savings Bank into Washington Mutual Bank, FA and the proposed timetable
for the integration of Dime. We cannot be certain that Office of Thrift
Supervision approval will be granted and if granted, of the date of this
approval or as to what conditions to such grant of approval, if any, may be
imposed. In addition, it is possible that the United States Department of
Justice or state attorneys general will challenge these mergers.
Washington Mutual and Dime are not aware of any other significant
governmental approvals that are required for consummation of the transactions
except as described above. If any other approval or action is required, it is
presently contemplated that we would seek to obtain such approval, but we cannot
be certain whether or when it could be obtained.
47
54
CONDITIONS TO COMPLETION OF THE MERGER
Our obligations to complete the merger are subject to the satisfaction or
waiver, where permissible, of a number of conditions, including the following:
- the merger agreement must be adopted by the holders of a majority of the
outstanding shares of Dime common stock entitled to vote on it;
- the Washington Mutual common stock that is to be issued in the merger
must be approved for listing on the NYSE;
- the registration statement filed with the SEC of which this document is a
part must be effective, and no stop order suspending its effectiveness
will have been issued, or any proceeding for that purpose initiated or
threatened, by the SEC;
- all regulatory approvals required to complete the transactions
contemplated in the merger agreement must have been obtained and must
remain in full force and effect and any waiting periods required by law
must have expired;
- there must be no government action or other legal restraint or
prohibition preventing completion of the merger or any of the other
transactions contemplated by the merger agreement;
- the representations and warranties of the other party to the merger
agreement must be true and correct, except as would not or would not
reasonably be expected to have a material adverse effect, and the other
party to the merger agreement must have performed in all material
respects all obligations required to be performed by it under the merger
agreement;
- Dime must have received an opinion of Sullivan & Cromwell and Washington
Mutual must have received an opinion of Simpson Thacher & Bartlett, each
dated as of the date the merger is completed, that, on the basis of
facts, representations and assumptions set forth in each of these
opinions, the merger will be treated as a tax-free reorganization under
Section 368 of the Internal Revenue Code, each of Dime and Washington
Mutual will be a party to that reorganization and, in the case of
Sullivan & Cromwell's opinion, subject to customary exceptions and except
to the extent of any cash received, no gain or loss will be recognized by
Dime stockholders in the merger.
Washington Mutual's obligation to complete the merger is also subject to
the satisfaction or waiver, where permissible, of a number of additional
conditions, including the following:
- none of the regulatory approvals required to complete the merger contain
any restriction or condition which would be reasonably expected to have a
material adverse effect on Washington Mutual or the surviving
corporation;
- Washington Mutual must have received resignations from those directors of
Dime's subsidiaries specified by Washington Mutual; and
- all conditions to the purchase of warrants by Washington Mutual from each
Warburg affiliate under the warrant purchase and voting agreement must
have been satisfied or waived.
In the event that the conditions to closing are met before January 4, 2002
and Washington Mutual delivers an extension notice to Dime in accordance with
the merger agreement, Dime will have five business days after it receives the
extension notice to deliver to Washington Mutual a certificate confirming that
Dime's representations and warranties under the merger agreement are true and
correct as of the date on which Dime delivers the certificate.
EMPLOYEE BENEFIT PLANS
Washington Mutual has agreed from and after the completion of the merger
to:
- begin providing benefits to the employees of Dime and its subsidiaries
that are the same as those benefits provided to similarly situated
employees of Washington Mutual as soon as practicable after
48
55
the completion of the merger, but in no event later than the date such employees
are placed on the same payroll service as the employees of Washington Mutual,
and, until such time, to provide benefits no less favorable than the benefits
provided to similarly situated employees of Washington Mutual;
- comply with the contractual commitments and employee benefit obligations
of Dime to its current and former employees in accordance with their
terms, and honor all vacation and paid time off for the current employees
of Dime and its subsidiaries that has accrued through the date of the
merger, in accordance with the Dime policy as in effect on the date of
the signing of the merger agreement;
- provide employees of Dime and its subsidiaries who become employees of
Washington Mutual after the merger with credit for the most recent period
of uninterrupted service with Dime and any of its subsidiaries (and their
predecessors) prior to the completion of the merger (including certain
bridging or prior services credit) for all purposes under Washington
Mutual's or its subsidiaries' compensation and benefit plans;
- cause any and all pre-existing condition limitations (to the extent such
limitations did not apply to pre-existing conditions under comparable
Dime benefit plans) and eligibility waiting periods under group health
plans of Washington Mutual to be waived with respect to employees of Dime
and its subsidiaries who become employees of Washington Mutual after the
merger and who become participants in Washington Mutual's group health
plans (as well as their eligible dependents); and
- use its reasonable efforts to give credit for, or otherwise take into
account, the out-of-pocket expenses and annual expense limitations paid
by employees of Dime and its subsidiaries who become employees of
Washington Mutual after the merger under the comparable Washington Mutual
compensation and benefit plans in which these employees will participate
in respect of the year in which the merger occurs.
Subject to the limitations described above, Washington Mutual and its
subsidiaries will be entitled to amend, modify or terminate any compensation and
benefit plans, or other contracts, arrangements, commitments or understandings,
in a manner consistent with their terms and applicable law.
Dime has agreed, or to cause its subsidiaries to agree, to:
- amend all existing 401(k) plans to prevent any new loans from being made
to any participants in such plans;
- amend its severance pay programs for employees, before the merger is
completed, to require that all payments to be made to any participants
under those programs shall be in lump sum cash payments only, and not
paid in installments over time;
- use its reasonable best efforts to cause any employees of Dime or its
subsidiaries who have employment, change-in-control or severance
agreements to agree to receive any severance or other related payments to
which they are entitled under those agreements, which would otherwise be
paid in installments over time (other than if any such installments
payments are payable either in respect of a covenant not to solicit or
are expressly distinguished as not being in respect of any severance
obligation), in the form of a lump sum cash payment within thirty days
after the date any of these installment payments would otherwise begin to
be paid (or, if these installment payments have already begun to be paid,
after the date the agreements are amended); and
- cause the committees under its employee and director umbrella trusts
(which are vehicles used to fund or otherwise support participant rights
under certain compensation and benefit obligations that Dime and its
subsidiaries have with respect to its employees and directors), to each
be made up of three members (two of whom shall be Dime senior executive
officers and non-employee directors, respectively, with the third member
to be selected by Washington Mutual).
In addition, Dime will be permitted to pay up to an aggregate of $8 million
as retention bonuses to employees of Dime or its subsidiaries (but excluding any
employees who are already parties to any
49
56
individual employment or change in control agreements), with any of these bonus
amounts to be paid on the earlier to occur of (1) the first anniversary of the
completion of the merger and (2) the date an employee who is eligible to receive
any such bonus amount is terminated by Dime, Washington Mutual or any of their
respective subsidiaries.
TERMINATION OF THE MERGER AGREEMENT
The merger agreement may be terminated at any time before the merger is
completed by:
- our mutual consent of Dime and Washington Mutual;
- either of us if any governmental entity that must grant a regulatory
approval has denied approval of the merger by final and nonappealable
action or any governmental entity issues a final and nonappealable order
prohibiting the completion of the merger;
- either of us if the merger is not completed on or before April 30, 2002;
- either of us if the other party is in continuing breach of a
representation, warranty or covenant contained in the merger agreement
that is not cured within 30 days following written notice to the
breaching party or that cannot be cured before the completion of the
merger, as long as (1) the party seeking to terminate the merger
agreement is not in material breach of any of its representations,
warranties or covenants in the merger agreement and (2) the breach would
entitle the non-breaching party not to complete the merger;
- either of us if the required approval of the Dime stockholders is not
obtained at the special meeting;
- Washington Mutual if Dime's board of directors fails to recommend the
merger to Dime's stockholders or withdraws, modifies or changes in a
manner adverse to Washington Mutual its recommendation or if Dime
materially breaches its obligations in connection with the special
meeting to vote on the merger by failing to call, give notice of, convene
or hold the meeting as set forth in "-- Other Agreements";
- Washington Mutual if Dime materially breaches any of its agreements
described in the first and third paragraphs under "-- Acquisition
Proposals by Third Parties"; or
- Washington Mutual if a tender offer or exchange offer for 25% or more of
the outstanding Dime common stock is commenced and Dime's board of
directors recommends that Dime stockholders tender their shares in this
offer or otherwise fails to recommend that Dime stockholders reject the
offer within ten business days after commencement of the offer.
TERMINATION FEES
Dime must pay to Washington Mutual fees, in amounts described below, if the
merger agreement is terminated. If the merger agreement is terminated by:
- Washington Mutual for the reasons described in the last three bullet
points under "-- Termination of the Merger Agreement," then Dime must pay
to Washington Mutual a termination fee of $185 million on the second
business day after the date of termination;
- Washington Mutual for the reasons described in the fourth bullet point
under "-- Termination of the Merger Agreement" (as long as the applicable
breach by Dime is willful) and an acquisition proposal has been publicly
announced, communicated or made known to Dime's senior management or
board of directors before the date of termination (or an intention,
whether or not conditional, to make an acquisition proposal is announced
or communicated), then (1) Dime must pay to Washington Mutual $20 million
on the second business day after the date of termination and (2) if
within 18 months of the termination Dime or any of its subsidiaries
enters into a definitive agreement with respect to, or completes, any
acquisition proposal, Dime must pay to Washington
50
57
Mutual the remaining $165 million of the termination fee on the date of
the execution of that definitive agreement or the completion of the
transaction; or
- either of us if the required approval of Dime stockholders is not
obtained at the special meeting and an acquisition proposal has been
publicly announced, communicated or made known to Dime's senior
management or board of directors before the date of the special meeting
(or an intention, whether or not conditional, to make an acquisition
proposal is announced or communicated), then (1) Dime must pay to
Washington Mutual $20 million on the second business day after the date
of termination and (2) if within 18 months of the termination Dime or any
of its subsidiaries enters into a definitive agreement with respect to,
or completes, any acquisition proposal, Dime must pay to Washington
Mutual the remaining $165 million of the termination fee on the date of
the execution of that definitive agreement or the completion of the
transaction.
If Dime fails to timely pay the termination fee, Dime will pay the costs
and expenses incurred by Washington Mutual to collect such payment, together
with interest.
AMENDMENT, EXTENSION AND WAIVER
Subject to applicable law, we may amend the merger agreement at any time
before or after approval by Dime stockholders, so long as the amendment does not
reduce or change the form of consideration to be delivered to Dime stockholders
after they have adopted the merger agreement. Any amendment to the merger
agreement must be in writing and signed on behalf of both of us.
At any time before the completion of the merger, we may:
- extend the time for performance of any of the other party's obligations;
- waive any inaccuracies contained in the representations and warranties in
the merger agreement or any document delivered pursuant to the merger
agreement; and
- waive compliance with any of the agreements or conditions contained in
the merger agreement.
Any agreement to an extension or waiver must be in writing signed on behalf
of the party agreeing to the extension or waiver.
EXPENSES
The merger agreement provides that each of us will pay our own costs and
expenses in connection with the merger and the transactions contemplated by the
merger agreement.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion sets forth the material United States federal
income tax consequences of the merger to U.S. holders (as defined below) of Dime
common stock. This discussion does not address any tax consequences arising
under the laws of any state, locality or foreign jurisdiction. This discussion
is based upon the Internal Revenue Code, the regulations of the U.S. Treasury
Department and court and administrative rulings and decisions in effect on the
date of this document. These laws may change, possibly retroactively, and any
change could affect the continuing validity of this discussion.
For purposes of this discussion, we use the term "U.S. holder" to mean:
- a citizen or resident of the United States;
- a corporation created or organized under the laws of the United States or
any of its political subdivisions;
- a trust that (1) is subject to the supervision of a court within the
United States and the control of one or more United States persons or (2)
has a valid election in effect under applicable United States Treasury
regulations to be treated as a United States person; or
51
58
- an estate that is subject to United States federal income tax on its
income regardless of its source.
This discussion assumes that you hold your shares of Dime common stock as a
capital asset within the meaning of Section 1221 of the Internal Revenue Code.
Further, the discussion does not address all aspects of U.S. federal income
taxation that may be relevant to you in light of your particular circumstances
or that may be applicable to you if you are subject to special treatment under
the United States federal income tax laws, including if you are:
- a financial institution;
- a tax-exempt organization;
- an S corporation or other pass-through entity;
- an insurance company;
- a mutual fund;
- a dealer in securities or foreign currencies;
- a trader in securities who elects the mark-to-market method of accounting
for your securities;
- a Dime stockholder whose shares are qualified small business stock for
purposes of Section 1202 of the Internal Revenue Code or who may
otherwise be subject to the alternative minimum tax provisions of the
Internal Revenue Code;
- a Dime stockholder who received your Dime common stock through the
exercise of employee stock options or otherwise as compensation or
through a tax-qualified retirement plan;
- a person that has a functional currency other than the U.S. dollar;
- a holder of options granted under any Dime benefit plan; or
- a Dime stockholder who holds Dime common stock as part of a hedge,
straddle or a constructive sale or conversion transaction.
Based on representations contained in representation letters provided by
Washington Mutual and Dime and on certain customary factual assumptions, all of
which must continue to be true and accurate in all material respects as of the
effective time, it is the opinion of Simpson Thacher & Bartlett, counsel to
Washington Mutual, and Sullivan & Cromwell, counsel to Dime, that the material
United States federal income tax consequences of the merger are as follows:
- the merger will be treated as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code;
- you will not recognize gain or loss if you exchange your Dime common
stock solely for Washington Mutual common stock, except to the extent of
any cash received in lieu of a fractional share of Washington Mutual
common stock;
- you will recognize gain or loss if you exchange your Dime common stock
solely for cash in the merger in an amount equal to the difference
between the amount of cash you receive and your tax basis in your shares
of Dime common stock;
- subject to the following paragraph, you will recognize gain (but not
loss) if you exchange your Dime common stock for a combination of
Washington Mutual common stock and cash in an amount equal to the lesser
of:
- the excess, if any, of:
- the sum of the cash (excluding any cash received in lieu of a
fractional share of Washington Mutual common stock) and the fair
market value of the Washington Mutual common stock you receive
(including any fractional share of Washington Mutual common stock you
are deemed to receive and exchange for cash); over
52
59
- your tax basis in the Dime common stock surrendered in the merger; and
- the cash that you receive in the merger.
- your tax basis in the Washington Mutual common stock that you receive in
the merger (including any fractional share interest you are deemed to
receive and exchange for cash), will equal your tax basis in the Dime
common stock you surrendered, increased by the amount of taxable gain, if
any, you recognize on the exchange and decreased by the amount of any
cash received by you in the merger (excluding any cash received in lieu
of a fractional share of Washington Mutual common stock); and
- your holding period for the Washington Mutual common stock that you
receive in the merger will include your holding period for the shares of
Dime common stock that you surrender in the exchange.
If you acquired different blocks of Dime common stock at different times and at
different prices, any gain or loss you recognize will be determined separately
with respect to each block of Dime common stock, and the cash and Washington
Mutual common stock you receive will be allocated pro rata to each such block of
stock. In addition, your basis and holding period in your Washington Mutual
common stock may be determined with reference to each block of Dime common
stock.
Additional Considerations -- Recharacterization of Gain as a Dividend. All
or part of the gain you recognize could be treated as ordinary dividend income
rather than capital gain if (i) you are a significant shareholder of Washington
Mutual or (ii) if taking into account constructive ownership rules, your
percentage ownership in Washington Mutual after the merger is not less than what
your percentage ownership would have been if you had received Washington Mutual
common stock rather than cash in the merger. This could happen, for example,
because of your purchase of additional Washington Mutual common stock, a
purchase of Washington Mutual common stock by a person related to you or a share
repurchase by Washington Mutual from other Washington Mutual stockholders.
Because the possibility of dividend treatment depends upon your particular
circumstances, including the application of certain constructive ownership
rules, you should consult your own tax advisor regarding the potential tax
consequences of the merger to you.
Cash in Lieu of Fractional Shares. You will generally recognize capital
gain or loss on any cash received in lieu of a fractional share of Washington
Mutual common stock equal to the difference between the amount of cash received
and the basis allocated to such fractional share.
Dissenting Stockholders. Holders of Dime common stock who dissent with
respect to the merger as discussed in "-- Appraisal Rights" beginning on page
60, and who receive cash in respect of their shares of Dime common stock will
recognize capital gain or loss equal to the difference between the amount of
cash received and their aggregate tax basis in their shares.
Taxation of Capital Gain. Gain or loss that you recognize in connection
with the merger will generally constitute capital gain or loss and will
constitute long-term capital gain or loss if your holding period in your Dime
common stock is greater than one year as of the date of the merger. If you are a
non-corporate holder of Dime common stock, this long-term capital gain generally
will be taxed at a maximum United States federal income tax rate of 20%. The
deductibility of capital losses is subject to limitations.
It is a condition to the closing of the merger that each of Washington
Mutual and Dime receive an opinion from Simpson Thacher & Bartlett and Sullivan
& Cromwell, respectively, that (i) the merger constitutes a reorganization
within the meaning of Section 368(a) of the Code, (ii) each of Washington Mutual
and Dime will be a party to that reorganization within the meaning of Section
368(b) of the Code and (iii) in the case of Sullivan & Cromwell's opinion,
subject to customary exceptions, and, except to the extent of any cash received,
no gain or loss will be recognized by Dime stockholders in the merger, which
opinions are in addition to the opinions included in this section. These
opinions will be based on updated representation letters provided by Washington
Mutual and Dime to be delivered at the time of closing, and on customary factual
assumptions and will assume that the merger will be completed according to the
53
60
terms of the merger agreement. Although the merger agreement allows us to waive
this condition to closing, we currently do not anticipate doing so. If either of
us does waive this condition, we will inform you of this decision and ask you to
vote on the merger taking this into consideration.
Washington Mutual and Dime have not and will not seek any ruling from the
Internal Revenue Service regarding any matters relating to the merger, and as a
result, there can be no assurance that the Internal Revenue Service will not
disagree with or challenge any of the conclusions described herein.
Backup Withholding. If you are a non-corporate holder of Dime common stock
you may be subject to information reporting and backup withholding on any cash
payments you receive. You will not be subject to backup withholding, however, if
you:
- furnish a correct taxpayer identification number and certify that you are
not subject to backup withholding on the substitute Form W-9 or successor
form included in the election form/letter of transmittal you will
receive; or
- are otherwise exempt from backup withholding.
Any amounts withheld under the backup withholding rules will be allowed as
a refund or credit against your United States federal income tax liability,
provided you furnish the required information to the Internal Revenue Service.
Reporting Requirements. If you receive Washington Mutual common stock as a
result of the merger, you will be required to retain records pertaining to the
merger and you will be required to file with your United States federal income
tax return for the year in which the merger takes place a statement setting
forth certain facts relating to the merger.
THIS DISCUSSION DOES NOT ADDRESS TAX CONSEQUENCES THAT MAY VARY WITH, OR
ARE CONTINGENT ON, INDIVIDUAL CIRCUMSTANCES. MOREOVER, IT DOES NOT ADDRESS ANY
NON-INCOME TAX OR ANY FOREIGN, STATE OR LOCAL TAX CONSEQUENCES OF THE MERGER.
TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER TO YOU
WILL DEPEND UPON THE FACTS OF YOUR PARTICULAR SITUATION. ACCORDINGLY, WE
STRONGLY URGE YOU TO CONSULT WITH A TAX ADVISOR TO DETERMINE THE PARTICULAR
FEDERAL, STATE, LOCAL OR FOREIGN INCOME OR OTHER TAX CONSEQUENCES TO YOU OF THE
MERGER.
MANAGEMENT AND OPERATIONS OF WASHINGTON MUTUAL FOLLOWING THE MERGER
General. After the merger is completed, it is anticipated that Dime's
wholly owned subsidiary, Dime Savings Bank, will be merged with and into
Washington Mutual Bank, FA (an indirect subsidiary of Washington Mutual), with
Washington Mutual Bank, FA as the surviving corporation.
Operations. Washington Mutual intends to introduce its products and
services into the existing Dime system and to maintain and expand certain of the
commercial lending activities of Dime. Washington Mutual will convert Dime
branches to Washington Mutual information and data processing systems for
certain major functions, including deposit operations, loan servicing and item
processing.
Cost Savings. Although no assurances can be given that any specific level
of expense savings will be realized or as to the timing thereof, Washington
Mutual currently expects to achieve substantial savings in the combined
company's operating expense base, primarily through elimination of redundant
corporate overhead and staff positions and consolidation of back office
operations. Washington Mutual estimates that these savings will be fully
realized by 2003 and will be approximately $150 million per year on a pre-tax
basis; Washington Mutual estimates that it will realize approximately $100
million of pre-tax cost savings in 2002. Washington Mutual estimates that it
will record a restructuring charge of approximately $308 million pre-tax in
connection with the merger.
Management After the Merger. Washington Mutual is undertaking a review of
its management needs following the merger and intends to retain those personnel
it believes will contribute to the implementation of its business strategy.
54
61
Board of Directors After the Merger. The board of directors of the combined
company following the merger will be the same as the Washington Mutual board of
directors prior to the merger, except that promptly after the completion of the
merger, Washington Mutual will appoint one member of Dime's board of directors
to Washington Mutual's board. The Dime member appointed to the Washington Mutual
Board will be appointed by Washington Mutual after consultation with Dime.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Effect of the Merger on Existing Dime Stock-Based Rights, including Stock
Options and Stock Grants
The merger agreement provides that, on completion of the merger, each
outstanding and unexercised stock option to purchase shares of Dime common stock
under Dime's stock-based benefit plans will no longer represent the right to
acquire shares of Dime common stock and will become a right to acquire
Washington Mutual common stock. The number of underlying shares of Washington
Mutual common stock and the exercise price for each option will be adjusted
based upon the exchange ratio, subject to applicable requirements under the
Internal Revenue Code with respect to incentive stock options. Rights under
existing options with respect to Litigation Tracking Warrants will continue
after the merger, subject to appropriate adjustment.
Adoption of the merger agreement by Dime stockholders will also constitute
approval of the conversion of Dime stock options (and related rights with
respect to Litigation Tracking Warrants) into Washington Mutual stock options
(and related rights to receive Litigation Tracking Warrants) as described above
and the assumption by Washington Mutual of the stock-based benefit plans of
Dime.
All outstanding stock options issued under Dime's stock-based benefit plans
prior to September , 2001 that are not then exercisable will become
exercisable at the completion of the merger under the terms of those plans. For
those options accompanied by tandem stock appreciation rights, or SARs, the SARs
will generally be exercisable within 60 days after the completion of the merger.
Any restrictions on restricted stock issued prior to September , 2001 under
Dime's stock-based benefit plans will lapse at the completion of the merger as
well.
As of September , 2001, there were shares of Dime common stock
that were the subject of options granted under Dime's stock-based benefit plans
that were not then exercisable, with tandem SARs. As of the same date,
there were shares of restricted stock issued under Dime's stock-based
benefit plans that remained subject to restrictions. Of these amounts, options
with respect to shares of stock, of which are accompanied by
tandem SARs, and shares of restricted stock will become exercisable or
free of restrictions upon the completion of the merger. The value of those
options (based on the difference between stock value and exercise price) and
restricted shares, on September , 2001, was $ million.
Effects of the Merger on Existing Dime Incentive Plans, Deferred
Compensation Plans and Severance Plans and Agreements
Dime maintains a Supplemental Executive Retirement Plan -- also known as a
SERP -- in which 16 current officers participate, which will be assumed by
Washington Mutual. The SERP provides for a benefit, offset by other defined
benefit pension plan benefits, generally equal to a stated percentage of average
salary and bonus, payable in the form of a single life annuity at age 65, with
other forms of benefits available as well and actuarially reduced benefits
available commencing at earlier ages. For most SERP participants, average salary
and bonus is determined over the three year period that produces the highest
average, and bonus amounts may include the value of restricted stock paid in
lieu of cash bonuses. Under the SERP, the pension goal (the percentage of
average salary and bonus to be payable as an annual SERP benefit) for
participants is generally 50% (Mr. Toal's pension goal is 60%). SERP benefits
generally require ten years of service to fully vest, except that under the
terms of the SERP, in the event of an involuntary termination other than for
cause, or a voluntary termination after a material diminution in
responsibilities, duties or functions or a reduction in salary, within a stated
time frame after the signing of
55
62
the merger agreement or completion of the merger, the SERP benefits will fully
vest (and in the case of Mr. Toal, certain adjustments will be made to the
calculation of his average salary and bonus).
Dime, Dime Savings Bank or their subsidiaries are parties to employment
agreements with 23 current executives and change in control agreements with 74
executives, each of which provides for certain payments and benefits following a
change in control. For the purposes of each of these agreements, a change in
control will occur at the completion of the merger and was also deemed to have
occurred upon the signing of the merger agreement.
The terms of the employment agreements generally extend to March 1, 2004,
subject to annual renewal. If, after a change in control and during the term of
the agreement in effect at the time of the change in control, any of the covered
executives' employment is involuntarily terminated other than for cause
(including non-renewal of the agreement), or if any of the covered executives
terminates his or her employment after a decrease in annual salary or a material
downgrading of duties or responsibilities, the covered executive will receive
enhanced severance payments and benefits. Those enhanced payments and benefits
generally include:
(i) payment equal to two or three times the sum of annual salary and
target cash incentives for which the officer was eligible immediately
before the termination;
(ii) continuation of all life, disability, medical and dental
insurance coverage for the remaining term of the agreement at the time of
the termination, subject to certain conditions specified in the agreements;
(iii) continued exercisability of vested stock options for the
remainder of their terms;
(iv) all unvested stock options will continue to vest and become
exercisable as if there had not been a termination of service upon the
change in control; and
(v) a supplemental benefit is generally provided to make up for any
lost vesting in defined contribution plan benefits provided by Dime.
Relocation benefits are provided in many of the agreements.
Most of the employment agreements described above also provide that, in the
event of a change in control, if an excise tax is payable under Section 4999 of
the Internal Revenue Code because benefits provided and the amounts payable
under the employment agreements or otherwise that the covered executives receive
are deemed to constitute "excess parachute payments" within the meaning of
Section 280G of the Internal Revenue Code, Dime, or Washington Mutual, as the
case may be, will generally make an additional payment or payments (referred to
as "280G gross-up payments") so as to provide the executive with the benefits he
or she would have received in the absence of such tax. Dime, or Washington
Mutual, as the case may be, will not be entitled to a federal income tax
deduction for any excess parachute payments, including any 280G gross-up
payments.
One executive vice president will also receive the enhanced payments and
benefits described above if he voluntarily terminates his employment during a
special 90-day period beginning six months after the completion of the merger.
If he terminates his employment voluntarily within this special window period,
although his SERP benefit will not become fully vested, he will be provided with
a benefit to make up any lost vesting in other defined benefit plans or defined
contribution plans maintained by Dime. This same special vesting benefit is
provided to other officers with employment agreements who do not otherwise
participate in the SERP and will apply as well in the event of an involuntary
termination of employment (without cause) or a termination of employment
following a reduction in pay or a material reduction in responsibilities.
The executives who are parties to change in control agreements with Dime or
its subsidiaries will generally receive a payment of up to three times annual
salary and target bonus after a change in control, on an involuntary termination
of employment, or a voluntary termination following a reduction in salary, as
described above. Certain of the change in control agreements also provide
benefits after other voluntary terminations of employment, generally following a
material downgrading of duties or responsibilities.
56
63
Executives with change in control agreements would also generally be eligible
for continued life, disability, medical and dental insurance coverage for a
stated period after covered terminations of employment. The change in control
agreements generally provide for cutbacks to avoid excise taxes on excess
parachute payments under Section 280G of the Internal Revenue Code, although
three of these change in control agreements provide for 280G gross-up payments
in lieu of a cutback, and ten of these agreements provide for limited exceptions
from the cutback requirement. The change in control agreements generally have a
current term until March 1, 2003, subject to renewal.
If the employment of each of the officers covered by agreements described
above were to be terminated in a manner resulting in the payment of all benefits
thereunder, it is anticipated that the aggregate cash payments, other than SERP
benefits, that would be payable to them would be approximately
$ million. That total estimated cost, and the other estimated costs
described in this section, would only be incurred if each of the officers
terminated employment under circumstances entitling all of them to the benefits
described. If a similar triggering event applied to the special SERP vesting
benefits described above and it applied to all of the covered officers, it is
estimated that the increased cost of such SERP vesting would total approximately
$ million. It is estimated that the cost of the 280G gross-up payments
described above, net of reduction for cutbacks, where appropriate, could, if all
eligible employees were entitled to such 280G gross-ups, add an additional
$ million in estimated cost.
For nine current officers of Dime Savings not already vested, death
benefits provided under the Dime Savings Bank Key Executive Life Insurance/Death
Benefit Plan will be fully vested at the completion of the merger or if, prior
to the completion of the merger, there is an involuntary termination of service
or a termination after a reduction in salary or a material diminution of duties.
The plan provides death benefits of up to six times annual compensation for
participants and up to three times annual compensation for other
participants. In the absence of a change in control, these death benefits would
normally vest depending on length of plan participation, with full vesting only
after ten years. Of these participants, if their employment continues into the
first quarter of 2002, death benefits totaling approximately $
million, or life insurance benefits in a reduced amount, that would not have
been vested will become vested upon completion of the merger.
The otherwise applicable severance pay programs of Dime and its
subsidiaries also provide for enhanced severance payments to all employees in
the event of an involuntary termination of employment after a change in control.
Under the severance pay programs, in the event the termination of employment
occurs after the signing of the merger agreement or the completion of the
merger, but before January 1, 2002, an additional payment will be required to be
made equal to 25% of the amount of severance pay that is otherwise payable to
the affected employee, with a minimum payment also to be made to certain
employees of North American Mortgage Company who had not otherwise satisfied the
service requirements for severance pay under North American's program. In
addition, 383 employees of Dime and its subsidiaries are parties to agreements
that will provide additional payments in excess of this generally applicable 25%
amount in the same circumstances. If the employment of all of the employees
subject to these plan provisions or special agreements were to be involuntarily
terminated prior to January 1, 2002, the additional cost of the enhanced
severance benefits payable to those employees would total approximately $18.5
million. However, it is not currently anticipated that a significant number of
these employees will be terminated prior to January 1, 2002.
Participants in Dime's Senior Officer Incentive Plan, Senior Management
Incentive Plan and Middle Management Incentive Plan will be entitled to receive
guaranteed bonus payments for the year 2001 (generally unless the merger is
abandoned) and, if they are in service at the completion of the merger, for the
year of the completion of the merger, that are not less than their target bonus
opportunities for those years (pro-rated if they work less than the full year).
Dime currently estimates that the guaranteed bonus payments for 2001 will total
$15.1 million.
Dime's voluntary deferred compensation plans also provide for a special
minimum investment return if a deemed investment option is eliminated after the
completion of the merger or the signing of the merger agreement. Special
valuation rules, based upon the highest closing price of Dime common stock
during the
57
64
90-day period ending at the completion of the merger, will also apply with
respect to deemed investments in Dime phantom stock (and, as appropriate,
phantom litigation tracking warrants) under Dime's voluntary deferred
compensation plans for both employees and directors. Certain plan participants
will receive a distribution of their deferred compensation plan balances upon
the completion of the merger.
Dime and Dime Savings maintain four umbrella trusts, whose purposes are to
assure the payment of benefits when due to directors and employees under Dime's
benefit plans and arrangements (including employment and change in control
agreements). Three of the trusts provide that, on or prior to a change in
control (with the completion of the merger constituting a change in control),
Dime is to provide the trust with sufficient funds to cover 110% of the present
value of the projected cost of cash-based benefits covered by that trust, plus
additional amounts to cover trust administration costs and other trust-related
expenses. Each of these trusts is administered by an independent trustee. Three
of the trusts provide that benefit payments under the plans and arrangements
covered by those trusts that are not paid by Dime or Dime Savings (or, as
appropriate, Washington Mutual) when due will be paid by the trustee out of
trust assets. The fourth trust is a benefit protection trust that is intended to
provide legal support to affected employees if, following a change in control,
benefits are not paid when due under Dime plans and arrangements that are not
covered under another umbrella trust. Any assets of these trusts in excess of
those required to cover benefit payments or other expenses are to be returned to
Dime or its successor, and all assets of the trust are available to satisfy
claims of creditors of Dime. Assets of the trusts remain included on the balance
sheet of Dime (and, after the merger, Washington Mutual) until used for trust
purposes.
The merger agreement provides that the trusts will be amended so that after
the merger the directors' committee under the trust regarding covered plans for
the benefit of directors will be made up of two current non-employee directors
of Dime selected by the current director committee (each referred to as a Dime
member) and one individual named by Washington Mutual. The employees' committee
under the trusts regarding covered plans and arrangements for the benefit of
employees will be made up of two current senior executive officers of Dime (each
also referred to as a "Dime member") and one individual selected by Washington
Mutual. In the event that a Dime member of either committee ceases to serve on
the committee, he or she will name his or her successor (or, in the event of
death or disability, the other remaining Dime member will name the successor).
Following a change in control, decisions as to the amount, form and timing
of payments to be made by the trusts of the covered benefits may be made by the
directors' committee (in the case of covered plans for the benefit of directors)
or the employees' committee (in the case of covered plans and arrangements for
the benefit of employees).
Indemnification, Directors' and Officers' Insurance
The merger agreement requires Washington Mutual, subject to certain
exceptions, to indemnify and advance reasonable expenses to persons who were
directors, officers or employees of Dime and its subsidiaries prior to the
merger who suffer liabilities or losses from any threatened or actual claim or
proceeding arising from the merger agreement or the fact that the person was an
officer, director or employee of Dime or its subsidiaries. The merger agreement
also requires Washington Mutual, subject to certain limitations regarding
insurance premium amounts, to cause the officers and directors of Dime
immediately before the merger to be covered for six years after the merger by
Washington Mutual's directors' and officers' liability insurance policy or a
similar policy. Washington Mutual has also agreed that all provisions of the
charter documents of Dime and its subsidiaries in effect on June 25, 2001
regarding the indemnification and limitations on liability existing in favor of
such directors, officers and employees for matters occurring on or prior to
completion of the merger will continue to apply after the completion of the
merger.
58
65
TERM LOAN AGREEMENT
On July 23, 2001, Dime and Washington Mutual entered into a term loan
agreement pursuant to which Dime borrowed $175,000,000 from Washington Mutual.
Dime used these funds for general corporate purposes, including the repayment of
$150,000,000 principal amount of, together with accrued interest on its
outstanding senior debt that matured on July 25, 2001. The maturity date of the
term loan is the earliest of:
- April 30, 2002;
- 30 calendar days after the termination of the merger agreement (other
than a termination by Dime under the fourth bullet point under
"-- Termination of the Merger Agreement"); or
- 15 calendar days after Dime is required to pay a termination fee under
the merger agreement.
Interest on the term loan accrues at an interest rate of 4.96% per annum,
subject to an adjustment in the interest rate in the event that the merger
agreement is terminated as described in the second bullet point above. In the
event of a termination of the term loan agreement triggered by the termination
of the merger agreement, the adjusted interest rate would be equal to the
prevailing market interest rate as determined by the average of quotes obtained
from three nationally recognized brokers. In addition, if Dime breaches any of
its representations and warranties or fails to comply with certain of its
covenants under the merger agreement and such failure continues for 30 days
following notice from Washington Mutual, such breach or failure would constitute
an event of default under the term loan agreement. In such event or in the event
of any other event of default under the term loan agreement, Washington Mutual
could declare the loan to be due and payable in full. The loan may be prepaid in
whole or in part without premium or penalty at any time by Dime upon three
business days notice. If not paid sooner, the loan will be extinguished upon
completion of the merger since Dime as borrower will be merged with and into
Washington Mutual as lender.
ACCOUNTING TREATMENT
We intend to treat the merger as a purchase by Washington Mutual of Dime
under generally accepted accounting principles. Under the purchase method of
accounting, the assets and liabilities of Dime will be recorded, as of
completion of the merger, at their respective fair values and added to those of
Washington Mutual. Financial statements and reported results of operations of
Washington Mutual issued after completion of the merger will reflect these
values, but will not be restated retroactively to reflect the historical
financial position or results of operations of Dime.
STOCK EXCHANGE LISTING
Washington Mutual has agreed to use its best efforts to list on the NYSE
the shares of Washington Mutual common stock to be issued (1) in the merger, (2)
to the Warburg affiliates pursuant to the warrant purchase and voting agreement
and (3) to litigation tracking warrant holders pursuant to the litigation
tracking warrant agreement. It is a condition to the consummation of the merger
that those shares be approved for listing on the NYSE, subject to official
notice of issuance. Following the merger, the shares of Washington Mutual will
continue to trade on the NYSE under the symbol "WM."
RESALE OF WASHINGTON MUTUAL COMMON STOCK RECEIVED BY DIME STOCKHOLDERS
The shares of Washington Mutual common stock that Dime stockholders will
own following the merger have been registered under the Securities Act of 1933.
They may be traded freely and without restriction by you if you are not an
"affiliate" of Dime under the Securities Act. An affiliate of Dime, as defined
by the rules under the Securities Act, is a person that directly, or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, Dime. Persons who are affiliates of Dime at the time the
merger is submitted for vote of the Dime stockholders may not sell their shares
of Washington Mutual common stock acquired in the merger except pursuant to an
effective registration statement under the Securities Act or an applicable
exemption from the registration
59
66
requirements of the Securities Act, including Rules 144 and 145 issued by the
SEC under the Securities Act. Affiliates generally include directors, executive
officers and beneficial owners of 10% or more of any class of capital stock.
The merger agreement requires Dime to use its reasonable best efforts to
cause each of its affiliates to execute a written agreement to the effect that
those affiliates will not offer or sell or otherwise dispose of any of the
shares of Washington Mutual issued to those affiliates in the merger in
violation of the Securities Act or the related SEC rules and regulations.
This document does not cover any resale of Washington Mutual common stock
received in the merger by any person that may be deemed to be an affiliate of
Dime.
APPRAISAL RIGHTS
Under Delaware Law, holders of Dime common stock who do not wish to accept
the merger consideration may elect to have the fair value of their shares of
Dime common stock judicially determined and paid in cash, together with a fair
rate of interest, if any. The valuation will exclude any element of value
arising from the accomplishment or expectation of the merger. A stockholder may
only exercise these appraisal rights by complying with the provisions of Section
262 of the Delaware General Corporation Law.
The following summary of the provisions of Section 262 of the Delaware
General Corporation Law is not a complete statement of the law pertaining to
appraisal rights under the Delaware General Corporation Law, and is qualified in
its entirety by reference to the full text of Section 262 of the Delaware
General Corporation Law, a copy of which is attached to this document as
Appendix D and is incorporated into this summary by reference. If you wish to
exercise appraisal rights or wish to preserve your right to do so, you should
carefully review Section 262 and are urged to consult a legal advisor before
electing or attempting to exercise these rights.
All references in Section 262 and in this summary to a "stockholder" are to
the record holder of the shares of Dime common stock as to which appraisal
rights are asserted. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES OF DIME
COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A BROKER OR
NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW PROPERLY THE
STEPS SUMMARIZED BELOW AND IN A TIMELY MANNER TO PERFECT APPRAISAL RIGHTS.
Under Section 262, where a proposed merger is to be submitted for approval
at a meeting of stockholders, as in the case of Dime's special meeting, the
corporation, not less than 20 days prior to the meeting, must notify each of its
stockholders entitled to appraisal rights that these appraisal rights are
available and include in the notice a copy of Section 262. This document
constitutes notice to the Dime stockholders and the applicable statutory
provisions of the Delaware General Corporation Law are attached to this document
as Appendix D.
Any Dime stockholder wishing to exercise the right to demand appraisal
under Section 262 of the Delaware General Corporation Law must satisfy each of
the following conditions:
- the holder must deliver to Dime a written demand for appraisal of its
shares before the vote on the merger agreement at Dime's special meeting.
This demand will be sufficient if it reasonably informs Dime of the
identity of the stockholder and that the stockholder intends by that
writing to demand the appraisal of its shares;
- the holder must not vote its shares of common stock in favor of the
merger agreement. A proxy which does not contain voting instructions
will, unless revoked, be voted in favor of the merger agreement.
Therefore, a Dime stockholder who votes by proxy and who wishes to
exercise appraisal rights must vote against the merger agreement or
abstain from voting on the merger agreement; and
- the holder must continuously hold its shares from the date of making the
demand through the completion of the merger. A stockholder who is the
record holder of shares of common stock on
60
67
the date the written demand for appraisal is made but who thereafter
transfers those shares prior to the completion of the merger will lose
any right to appraisal in respect of those shares.
Voting against, abstaining from voting on or failing to vote on the
proposal to adopt the merger agreement will not constitute a written demand for
appraisal within the meaning of Section 262. The written demand for appraisal
must be in addition to and separate from any proxy you deliver or vote you cast
in person.
Only a holder of record of shares of common stock is entitled to assert
appraisal rights for those shares registered in that holder's name. A demand for
appraisal should:
- be executed by or on behalf of the stockholder of record, fully and
correctly, as its name appears on the stock transfer records of Dime, and
- specify the following:
- the stockholder's name and mailing address,
- the number of shares of common stock owned by the stockholder, and
- that the stockholder intends thereby to demand appraisal of its common
stock.
If the shares are owned of record by a person in a fiduciary capacity, such
as a trustee, guardian or custodian, the demand should be executed in that
capacity. If the shares are owned of record by more than one person as in a
joint tenancy or tenancy in common, the demand should be executed by or on
behalf of all owners. An authorized agent, including an agent for two or more
joint owners, may execute a demand for appraisal on behalf of a stockholder;
however, the agent must identify the record owner or owners and expressly
disclose the fact that, in executing the demand, the agent is acting as agent
for such owner or owners. A record holder such as a broker who holds shares as
nominee for several beneficial owners may exercise appraisal rights with respect
to the shares held for one or more beneficial owners while not exercising these
rights with respect to the shares held for one or more other beneficial owners.
In this case, the written demand should set forth the number of shares as to
which appraisal is sought, and where no number of shares is expressly mentioned
the demand will be presumed to cover all shares held in the name of the record
owner. STOCKHOLDERS WHO HOLD THEIR SHARES IN BROKERAGE ACCOUNTS OR OTHER NOMINEE
FORMS AND WHO WISH TO EXERCISE APPRAISAL RIGHTS ARE URGED TO CONSULT WITH THEIR
BROKERS TO DETERMINE APPROPRIATE PROCEDURES FOR THE MAKING OF A DEMAND FOR
APPRAISAL BY SUCH NOMINEE.
A stockholder who elects to exercise appraisal rights pursuant to Section
262 should mail or deliver a written demand to:
DIME BANCORP, INC.
589 FIFTH AVENUE
NEW YORK, NEW YORK 10017
ATTENTION: ELIZABETH G. KNOERZER,
CORPORATE SECRETARY
Within ten days after the completion of the merger, Washington Mutual must
send a notice as to the completion of the merger to each of Dime's former
stockholders who has made a written demand for appraisal in accordance with
Section 262 and who has not voted to adopt the merger agreement. Within 120 days
after the completion of the merger, but not after that date, either Washington
Mutual or any stockholder who has complied with the requirements of Section 262
may file a petition in the Delaware Court of Chancery demanding a determination
of the value of the shares of common stock held by all stockholders demanding
appraisal of their shares. Washington Mutual is under no obligation to, and has
no present intent to, file a petition for appraisal, and stockholders seeking to
exercise appraisal rights should not assume that Washington Mutual will file a
petition or that it will initiate any negotiations with respect to the fair
value of the shares. Accordingly, stockholders who desire to have their shares
appraised should initiate any petitions necessary for the perfection of their
appraisal rights within the time periods and in the manner prescribed in Section
262. Since Washington Mutual has no obligation to file a petition, thus
61
68
failure of affected stockholders to do so within the period specified could
nullify any previous written demand for appraisal.
Under the merger agreement, Dime has agreed to give Washington Mutual
prompt notice of any demands for appraisal it receives. Washington Mutual has
the right to participate in all negotiations and proceedings with respect to
demands for appraisal. Dime will not, except with the prior written consent of
Washington Mutual, make any payment with respect to any demands for appraisal,
offer to settle, or settle, any demands.
Within 120 days after the completion of the merger, any stockholder that
complies with the provisions of Section 262 to that point in time will be
entitled to receive from Washington Mutual, upon written request, a statement
setting forth the aggregate number of shares not voted in favor of the merger
agreement and with respect to which Dime received demands for appraisal and the
aggregate number of holders of those shares. Washington Mutual must mail this
statement to the stockholder by the later of ten days after receipt of the
request or ten days after expiration of the period for delivery of demands for
appraisals under Section 262.
A stockholder who timely files a petition for appraisal with the Delaware
Court of Chancery must serve a copy upon Washington Mutual. Washington Mutual
must then within 20 days file with the Delaware Register in Chancery a duly
verified list containing the names and addresses of all stockholders who have
demanded appraisal of their shares and who have not reached agreements with it
as to the value of their shares. After notice to stockholders as may be ordered
by the Delaware Court of Chancery, the Delaware Court of Chancery is empowered
to conduct a hearing on the petition to determine which stockholders are
entitled to appraisal rights. The Delaware Court of Chancery may require
stockholders who have demanded an appraisal for their shares and who hold stock
represented by certificates to submit their certificates to the Register in
Chancery for notation on the certificates of the pendency of the appraisal
proceedings, and if any stockholder fails to comply with the requirement, the
Delaware Court of Chancery may dismiss the proceedings as to that stockholder.
After determining what stockholders are entitled to an appraisal, the
Delaware Court of Chancery will appraise the "fair value" of their shares. This
value will exclude any element of value arising from the accomplishment or
expectation of the merger, but will include a fair rate of interest, if any, to
be paid upon the amount determined to be the fair value. The costs of the action
may be determined by the Delaware Court of Chancery and taxed upon the parties
as the Delaware Court of Chancery deems equitable. However, costs do not include
attorneys' or expert witness fees. Upon application of a stockholder, the
Delaware Court of Chancery may also order that all or a portion of the expenses
incurred by any stockholder in connection with the appraisal proceeding be
charged pro rata against the value of all of the shares entitled to appraisal.
These expenses may include, without limitation, reasonable attorneys' fees and
the fees and expenses of experts. STOCKHOLDERS CONSIDERING SEEKING APPRAISAL
SHOULD BE AWARE THAT THE FAIR VALUE OF THEIR SHARES AS DETERMINED UNDER SECTION
262 COULD BE MORE THAN, THE SAME AS, OR LESS THAN THE MERGER CONSIDERATION THEY
WOULD BE ENTITLED TO RECEIVE PURSUANT TO THE MERGER AGREEMENT IF THEY DID NOT
SEEK APPRAISAL OF THEIR SHARES. STOCKHOLDERS SHOULD ALSO BE AWARE THAT
INVESTMENT BANKING OPINIONS AS TO FAIRNESS FROM A FINANCIAL POINT OF VIEW ARE
NOT NECESSARILY OPINIONS AS TO FAIR VALUE UNDER SECTION 262.
In determining fair value and, if applicable, a fair rate of interest, the
Delaware Court of Chancery is to take into account all relevant factors. In
Weinberger v. UOP, Inc., the Delaware Supreme Court discussed the factors that
could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered, and that "fair price obviously requires
consideration of all relevant factors involving the value of a company."
Section 262 provides that fair value is to be "exclusive of any element of
value arising from the accomplishment or expectation of the merger." In Cede &
Co. v. Technicolor, Inc., the Delaware Supreme Court stated that such exclusion
is a "narrow exclusion [that] does not encompass known elements of value," but
which rather applies only to the speculative elements of value arising from such
62
69
accomplishment or expectation. In Weinberger, the Delaware Supreme Court
construed Section 262 to mean that "elements of future value, including the
nature of the enterprise, which are known or susceptible of proof as of the date
of the merger and not the product of speculation, may be considered."
Any stockholder who has duly demanded an appraisal in compliance with
Section 262 will not, after the completion of the merger, be entitled to vote
the shares subject to that demand for any purpose or be entitled to the payment
of dividends or other distributions on those shares. However, stockholders will
be entitled to dividends or other distributions payable to holders of record of
shares as of a record date prior to the completion of the merger.
Any stockholder may withdraw its demand for appraisal and accept the merger
consideration by delivering to Washington Mutual a written withdrawal of the
stockholder's demands for appraisal. Any attempt to withdraw made more than 60
days after the effectiveness of the merger will require written approval of
Washington Mutual and no appraisal proceeding before the Delaware Court of
Chancery as to any stockholder shall be dismissed without the approval of the
Delaware Court of Chancery, and this approval may be conditioned upon any terms
the Delaware Court of Chancery deems just.
If Washington Mutual does not approve a stockholder's request to withdraw a
demand for appraisal when the approval is required or if the Delaware Court of
Chancery does not approve the dismissal of an appraisal proceeding, the
stockholder would be entitled to receive only the appraised value determined in
any such appraisal proceeding. This value could be higher or lower than, or the
same as, the value of the merger consideration.
FAILURE TO FOLLOW THE STEPS REQUIRED BY SECTION 262 OF THE DELAWARE GENERAL
CORPORATION LAW FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE LOSS OF
APPRAISAL RIGHTS, IN WHICH EVENT YOU WILL BE ENTITLED TO RECEIVE THE
CONSIDERATION WITH RESPECT TO YOUR DISSENTING SHARES IN ACCORDANCE WITH THE
MERGER AGREEMENT. IN VIEW OF THE COMPLEXITY OF THE PROVISIONS OF SECTION 262 OF
THE DELAWARE GENERAL CORPORATION LAW, IF YOU ARE A DIME STOCKHOLDER AND ARE
CONSIDERING EXERCISING YOUR APPRAISAL RIGHTS UNDER THE DELAWARE GENERAL
CORPORATION LAW, YOU SHOULD CONSULT YOUR OWN LEGAL ADVISOR.
63
70
WARRANT PURCHASE AND VOTING AGREEMENT
In May 2000, following the receipt of an unsolicited hostile takeover bid
by North Fork Bancorporation, Inc. and the termination of a merger agreement
that Dime had entered into with Hudson United Bancorp, Dime's board undertook an
examination of the company's overall strategy. At that time, Dime's board of
directors concluded that it was in the best interests of both the company and
its stockholders to evaluate all strategic alternatives, including possible
mergers and acquisitions as well as the maintenance of the company's
independence. In July 2000, the Dime board of directors approved an investment
agreement with Warburg, Pincus Equity Partners, L.P., pursuant to which Warburg
and certain of its affiliates invested an aggregate of approximately $238
million in Dime. Warburg acquired approximately 12.5% of Dime's outstanding
common stock and warrants to purchase another 12.5% of Dime's outstanding common
stock. In addition, as part of the investment agreement, Warburg was granted the
right to have one representative serve on Dime's board of directors and two
non-voting observers present at Dime board meetings.
In connection with the execution and delivery of the merger agreement,
Washington Mutual entered into a warrant purchase and voting agreement with
Warburg, Warburg, Pincus Netherlands Equity Partners I, C.V., Warburg, Pincus
Netherlands Equity Partners II, C.V., and Warburg, Pincus Netherlands Equity
Partners III, C.V., under which these entities agreed, among other things, (1)
to sell to Washington Mutual, concurrently with the completion of the merger,
the warrants held by them to purchase shares of Dime common stock and (2) to
vote all their shares of Dime common stock in favor of the adoption of the
merger agreement. In this document, the entities listed above are sometimes
referred to as Warburg.
WARRANT PURCHASE
Warburg owned, as of the date of the warrant purchase and voting agreement,
13,607,664 shares of Dime common stock, warrants to acquire 8,142.738 shares of
Dime Series C junior nonvoting convertible preferred stock, par value $0.01 per
share and liquidation preference of $0.01 per share, and warrants to acquire
5,464.926 shares of Dime Series D junior nonvoting convertible preferred stock,
par value $0.01 per share and liquidation preference of $0.01 per share. Under
the warrant purchase and voting agreement, Warburg agreed to sell to Washington
Mutual, concurrently with the completion of the merger, all of its warrants. In
consideration of the sale of the warrants, Warburg will be entitled to receive
for its warrants the same amount of merger consideration that it would have
received if it were to own an additional 7,903,073 shares of Dime common stock,
in lieu of the warrants, immediately prior to the completion of the merger.
Warburg will also be able to elect whether it would prefer to receive stock or
cash for its shares and will be subject to proration in the same manner as if
they were actual shares.
Warburg and Washington Mutual agreed that the 7,903,073 deemed warrant
shares for which Warburg will be entitled to receive merger consideration would
replace the number of shares of Dime common stock that Warburg would have been
entitled to receive if it had exercised certain rights held by it under the
investment agreement between Warburg and Dime. Under the investment agreement,
Warburg may require Dime to repurchase the warrants upon certain events,
including the execution of definitive documentation relating to a transaction
like the merger. Washington Mutual and Warburg agreed that the investment
agreement will terminate upon the completion of the merger.
The number of deemed warrant shares for which Warburg is entitled to
receive merger consideration is subject to adjustment if the implied exchange
ratio in the merger is changed due to a recapitalization, stock dividend, stock
split or similar events or if the merger consideration is otherwise increased.
Washington Mutual has agreed not to modify, waive or amend any provision of the
merger agreement in a manner that affects the consideration payable to Warburg
in connection with the purchase of the warrants.
The completion of the purchase of the warrants is subject to customary
conditions, including the concurrent completion of the merger, receipt of
required regulatory approvals, and the absence of injunctions preventing the
warrant purchase.
64
71
VOTING
Pursuant to the warrant purchase and voting agreement, Warburg agreed (1)
to vote all of the shares of Dime common stock owned beneficially or held of
record by it in favor of the adoption of the merger agreement, and any other
action required in furtherance thereof, (2) to vote against any action or
agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of Dime contained in the merger
agreement or of Warburg contained in the warrant purchase and voting agreement
and (3) to vote against any acquisition proposal or any other action, agreement
or transaction that is intended to, or could reasonably be expected to,
materially impede, interfere or be inconsistent with, delay, postpone,
discourage or materially and adversely affect the merger or the warrant purchase
and voting agreement.
Under the warrant purchase and voting agreement, Warburg granted a proxy to
certain officers of Washington Mutual to vote the shares of Dime common stock
held by Warburg. The proxy becomes effective upon the receipt by Washington
Mutual of all necessary regulatory approvals and consents required to exercise
the voting powers granted by the proxy.
TRANSFER AND SOLICITATION RESTRICTIONS
The warrant purchase and voting agreement prohibits, subject to limited
exceptions, Warburg from selling, transferring, pledging, encumbering, assigning
or otherwise disposing of any shares of Dime common stock held by it. Warburg
has agreed not to solicit or facilitate, participate in negotiations relating
to, or provide any nonpublic information to any person with respect to, any
offer to purchase its shares of Dime common stock or any acquisition proposal
relating to Dime. The restrictions described in the preceding sentence do not
apply to any actions taken by an affiliate of Warburg in his or her capacity as
a director of Dime.
TERMINATION
Either Washington Mutual or Warburg may terminate the warrant purchase and
voting agreement on or after the date of termination of the merger agreement in
accordance with its terms.
INFORMATION ABOUT WASHINGTON MUTUAL
With a history dating back to 1889, Washington Mutual is a financial
services company committed to serving consumers and small to mid-sized
businesses. At June 30, 2001, it had stockholders' equity of $13.4 billion.
Based on consolidated assets of $229.3 billion at June 30, 2001, Washington
Mutual was the largest savings institution and the seventh largest banking
company in the United States.
Washington Mutual operates principally in California, Washington, Oregon,
Florida, Texas and Utah, and has operations in 36 other states. Washington
Mutual's business, including business conducted through its subsidiaries, is
divided into three operating segments:
- BANKING AND FINANCIAL SERVICES. The banking and financial services group
offers a comprehensive line of consumer and business financial products
and services to individuals and small and middle market businesses. In
addition to traditional banking products, the banking and financial
services group offers investment management, securities brokerage
services and annuity products through Washington Mutual's subsidiaries
and affiliates. The group's services are provided to over five million
consumer and business households and are offered through multiple
delivery channels, including branches, business banking centers, ATMs,
the internet and 24-hour telephone banking centers.
- HOME LOANS AND INSURANCE SERVICES. The home loans and insurance services
group originates, purchases, and services Washington Mutual's
single-family residential mortgage assets. These mortgage assets may
either be retained in Washington Mutual's loan portfolio, or sold or
securitized through secondary market channels. The group's products are
made available to consumers through
65
72
various distribution channels, which include retail home loan centers,
wholesale home loan centers, financial centers and the internet. This
group also includes the activities of Washington Mutual Insurance
Services, Inc., an insurance agency that supports the mortgage lending
process, as well as the insurance needs of all consumers doing business
with Washington Mutual. Additionally, this group manages the activities
of Washington Mutual's captive reinsurance programs.
- SPECIALTY FINANCE. The specialty finance group conducts operations
through Washington Mutual's banking subsidiaries and Washington Mutual
Finance Corporation. This group offers an array of commercial products,
all under the Washington Mutual brand name and consumer finance products
through Washington Mutual Finance Corporation. Syndicated, asset-based,
franchise, and mortgage banker financing are also part of the specialty
lending activities conducted by this group. The specialty finance group
also provides real estate secured financing for commercial and
multi-family properties and residential builder construction finance.
RECENT DEVELOPMENTS
In a merger that closed in February 2001, Washington Mutual acquired Bank
United Corp., the parent company of Bank United, a federal savings association
headquartered in Texas. Bank United was merged into Washington Mutual's indirect
federal savings association subsidiary, Washington Mutual Bank, FA. The
acquisition of Bank United significantly increased Washington Mutual's market
share in Texas.
Washington Mutual also acquired the mortgage origination and securitization
operations of The PNC Financial Services Group, Inc. in January 2001. At that
time, the mortgage operations of PNC had assets of approximately $7.3 billion.
In June 2001, Washington Mutual also acquired Fleet Mortgage Corp. and certain
other mortgage lending operations of Fleet National Bank. Fleet's mortgage
operations had assets of approximately $7.8 billion at the time of the
acquisition. With the acquisitions of the mortgage operations of PNC and Fleet
and of Bank United, Washington Mutual is the largest servicer and second largest
originator of single-family residential loans in the United States. At June 30,
2001, Washington Mutual had a servicing portfolio of approximately $365.7
billion.
INFORMATION ABOUT DIME
Dime is a unitary savings and loan holding company incorporated in the
State of Delaware and headquartered in New York, New York. Through its principal
subsidiary, Dime Savings Bank, a federally-chartered savings bank, Dime operates
123 banking branches serving consumers and businesses throughout the greater New
York City metropolitan area. Through its mortgage banking subsidiary, North
American Mortgage Company, Dime also provides consumer loans, insurance products
and mortgage banking services throughout the United States. At June 30, 2001,
Dime had consolidated assets of $27.0 billion, deposits of $14.6 billion and
stockholders' equity of $1.8 billion.
DESCRIPTION OF WASHINGTON MUTUAL CAPITAL STOCK
Washington Mutual's articles of incorporation currently authorize
1,600,000,000 shares of common stock, no par value per share, and 10,000,000
shares of preferred stock, no par value per share.
COMMON STOCK
Each share of common stock is entitled to one vote on all matters properly
presented at a meeting of shareholders. Shareholders are not entitled to
cumulative voting in the election of directors.
PREFERRED STOCK
Washington Mutual has outstanding 2,000,000 shares of Series H Preferred
Stock. The Series H Preferred Stock is senior to Washington Mutual common stock
with respect to the payment of dividends
66
73
and upon liquidation, dissolution or winding up of Washington Mutual. Holders of
Series H Preferred Stock are entitled to receive, when and as declared by the
board of directors of Washington Mutual, cash dividends at the annual rate of
7.25% of the $50 per share liquidation preference, equivalent to $3.625 per
share, until August 16, 2002 and thereafter at a rate to be set upon the
remarketing of the Series H Preferred Stock. Dividends on Washington Mutual
common stock may not be paid at any time that the full cumulative dividends on
the Series H Preferred Stock have not been paid.
The Series H Preferred Stock may be redeemed by Washington Mutual, in whole
or in part, at any time on or after October 16, 2002 at a redemption price of
$50 per share plus accrued and unpaid dividends to the date of redemption. On
August 16, 2004, all outstanding shares of Series H Preferred Stock will be
redeemed by Washington Mutual at a redemption price of $50 per share plus
accrued and unpaid dividends.
Each share of Series H Preferred Stock carries .10 vote on all matters
submitted generally to the shareholders of Washington Mutual, and votes together
as a single class with Washington Mutual common stock.
More information regarding the corporate structure and governance of
Washington Mutual is contained in the section entitled "Comparison of Rights of
Washington Mutual and Dime Stockholders" beginning on page 67.
COMPARISON OF RIGHTS OF WASHINGTON MUTUAL
AND DIME STOCKHOLDERS
Washington Mutual is incorporated under the laws of the State of Washington
and Dime is incorporated under the laws of the State of Delaware. The rights of
Dime stockholders are governed by the Delaware General Corporation Law, Dime's
amended and restated certificate of incorporation and Dime's amended and
restated bylaws. The rights of Dime stockholders who receive Washington Mutual
shares as a result of the merger, will be governed by the Washington Business
Corporation Act, Washington Mutual's amended and restated articles of
incorporation and Washington Mutual's restated bylaws. The following discussion
summarizes certain material differences between the rights of holders of Dime
common stock and Washington Mutual common stock resulting from the differences
in their governing documents and Washington and Delaware law. Additional
differences between Washington and Delaware law are discussed below in "Certain
Differences Between Washington and Delaware Corporate Laws."
The following summary is not a complete summary and is qualified in its
entirety by reference to the governing corporate documents of Washington Mutual
and Dime and applicable law. See "Incorporation of Certain Documents by
Reference" on page 78.
CAPITAL STOCK
Washington Mutual. Washington Mutual's articles of incorporation authorize
1,600,000,000 shares of common stock, no par value per share, and 10,000,000
shares of preferred stock, no par value per share. As of July 31, 2001, there
were 879,443,435 shares of Washington Mutual common stock and 2,000,000 shares
of Washington Mutual Series H preferred stock issued and outstanding.
Dime. Dime's certificate of incorporation currently authorizes the issuance
of 390,000,000 shares of capital stock, consisting of 350,000,000 shares of
common stock, par value $.01 per share, and 40,000,000 shares of preferred
stock, par value $.01 per share. As of July 31, 2001, there were 117,343,344
shares of Dime common stock and no shares of Dime preferred stock issued and
outstanding.
BOARD OF DIRECTORS
Washington Mutual. Washington Mutual's articles of incorporation provide
that the number of directors on the Washington Mutual board of directors will be
stated in Washington Mutual's bylaws, provided that there shall not be fewer
than five directors. Washington Mutual's board of directors can
67
74
amend the bylaws to change the number of directors without stockholder approval,
subject to the simultaneous power of stockholders to amend Washington Mutual's
bylaws by a two-thirds affirmative vote. Washington Mutual's bylaws currently
provide that the Washington Mutual board of directors shall consist of 16
directors. Washington Mutual's board of directors is divided into three classes,
with each class comprising as near as possible to one-third of the total number
of directors. All the directors of a particular class are elected in the same
year for a three-year term of office; only one class of directors is up for
election in any particular year. There is no cumulative voting on the election
of directors.
Dime. Dime's certificate of incorporation provides that the number of
directors on the Dime board of directors will be fixed from time to time by a
vote of the majority of the directors then in office. Dime's bylaws provide that
the board will consist of not less than seven nor more than 24 directors. Dime
currently has 18 directors. Like Washington Mutual's articles of incorporation,
Dime's certificate of incorporation provides for a board of directors divided
into three classes, with as close as possible to one-third of the directors
elected annually for three-year terms. There is no cumulative voting on the
election of directors.
MONETARY LIABILITY OF DIRECTORS
Washington Mutual's articles of incorporation and Dime's certificate of
incorporation each provide for the elimination of personal monetary liability of
directors to the fullest extent permissible under the laws of Washington and
Delaware, respectively. Washington Mutual's articles of incorporation and Dime's
certificate of incorporation each provide that, if Washington or Delaware law,
as the case may be, is amended so as to allow further limitations on director
liability, then the articles of incorporation or the certificate of
incorporation, as the case may be, will automatically incorporate these further
limitations.
INTERESTED STOCKHOLDERS
Washington Mutual. Washington Mutual's articles of incorporation prohibit,
except under certain circumstances, Washington Mutual (or any subsidiary of
Washington Mutual) from engaging in certain significant business transactions
with a "major stockholder." A "major stockholder" is a person who, together with
its associates, acquires without the prior approval of the Washington Mutual
board of directors beneficial ownership of five percent or more of Washington
Mutual's outstanding voting stock.
Prohibited transactions include, among others:
- any merger with, disposition of at least a substantial part of its assets
to, acquisition by Washington Mutual of at least a substantial part of
the assets of, issuance of securities of Washington Mutual to, or
acquisition by Washington Mutual of securities of, a major stockholder;
- any reclassification of the voting stock of Washington Mutual,
recapitalization or other transaction having the effect of increasing the
percentage of the voting stock of Washington Mutual, or any subsidiary,
owned by a major stockholder; or
- any partial or complete liquidation, spin off, split off or split up of
Washington Mutual or any subsidiary.
The above prohibitions do not apply, in general, if the specific
transaction is approved by:
- Washington Mutual's board of directors prior to the major stockholder
involved in such transaction having become a major stockholder;
- a vote of at least 80% of the "continuing directors" (defined as those
members of Washington Mutual's board prior to the involvement of the
major stockholder);
- a majority of the "continuing directors" if the major stockholder
obtained unanimous prior board approval to become a major stockholder;
- a vote of at least 95% of the outstanding shares of Washington Mutual
voting stock, other than shares held by the major stockholder; or
68
75
- a majority vote of the shares of voting stock and a majority vote of the
shares of voting stock owned by stockholders other than any major
stockholder if certain other conditions are met.
Washington Mutual's articles of incorporation also provide that during the
time a major stockholder exists, Washington Mutual may voluntarily dissolve only
upon (1) the unanimous consent of the Washington Mutual stockholders or (2)(A)
the affirmative vote of at least two-thirds of Washington Mutual's board of
directors, (B) the affirmative vote of the holders of at least two-thirds of the
shares entitled to vote on such a matter and (C) the affirmative vote of the
holders of at least two-thirds of the shares of each class of shares entitled to
vote on such a matter as a class, if any. In addition, the Washington Business
Corporation Act prohibits certain significant business combinations with 10%
stockholders, as more fully described in "Certain Differences Between Washington
and Delaware Corporate Laws -- Provisions Affecting Control Share Acquisitions
and Business Combinations" below.
Dime. Dime's certificate of incorporation does not contain a similar
provision. However, Section 203 of the Delaware General Corporation Law
prohibits certain "business combinations" with an "interested stockholder," as
more fully described in "Certain Differences Between Washington and Delaware
Corporate Laws -- Provisions Affecting Control Share Acquisitions and Business
Combinations" below.
STOCKHOLDER PROTECTION RIGHTS PLANS
Dime. Each share of Dime common stock has attached to it one right issued
pursuant to a stockholder protection rights agreement, dated October 20, 1995,
as amended, between Dime and Dime Savings Bank, as successor to The First
National Bank of Boston, as rights agent.
Each right entitles its holder to purchase one-hundredth of a share of
Dime's participating preferred stock at an exercise price of $50, subject to
adjustment, after the separation time, which is after the close of business on
the earlier of:
- the tenth business day after commencement of a tender or exchange offer
that, if consummated, would result in a person becoming an acquiring
person, which is defined in the rights agreement as a person who, under
certain circumstances, becomes the beneficial owner of 20% or more of the
outstanding shares of Dime common stock, and
- the tenth business day after the first date of public announcement that a
person has become an acquiring person, which is also called the flip-in
date.
The rights will not be exercisable until the business day following the
separation time. The rights will expire on the earliest of:
- the tenth business day immediately following Dime's 2002 annual
stockholders' meeting,
- their redemption, as described below,
- an exchange of the rights for Dime common stock, as described below, or
- Dime's merger into another corporation pursuant to an agreement entered
into prior to a flip-in date.
Dime's board of directors may, at any time prior to the occurrence of a
flip-in date, redeem all the rights at a price of $0.01 per right.
If a flip-in date occurs, each right, other than those held by the
acquiring person or any affiliate or associate of the acquiring person or by any
transferees of any of these persons, will constitute the right to purchase
shares of Dime common stock having an aggregate market price equal to $100 in
cash, subject to adjustment. In addition, the Dime board of directors may, at
any time between a flip-in date and the time that an acquiring person becomes
the beneficial owner of more than 50% of the outstanding shares of Dime common
stock, elect to exchange all of the outstanding rights (other than those held by
an acquiring person) for shares of Dime common stock at an exchange ratio of one
share of Dime common stock per right appropriately adjusted to reflect any stock
split, stock dividend or similar transaction. Dime may, at
69
76
its option, substitute shares of certain types of preferred stock, at a ratio of
one one-hundredth of a share of preferred stock for each share of common stock
issuable under the rights plan.
Under the rights agreement, Dime may not consolidate or merge with, sell
substantially all of its assets to, or engage in other similar transactions
with, an acquiring person without entering into a supplemental agreement with
the acquiring person providing that, upon consummation or occurrence of the
transaction, (i) each right shall thereafter constitute the right to purchase
common stock of the acquiring person having an aggregate market price equal to
$100 in cash, subject to adjustment, and (ii) the acquiring person assumes all
of Dime's obligations under the rights agreement.
The rights agreement will not apply to a tender offer that has at least a
50% cash component for all shares and sufficient liquidity in any securities
component, provided that the offer is accepted by the beneficial owners of at
least 75% of Dime's outstanding common stock.
Washington Mutual. Washington Mutual has adopted a shareholder rights plan
which provides that one right to purchase 1/1,000th of a share of Washington
Mutual Preferred Stock, Series RP (the "Washington Mutual Rights") is attached
to each outstanding share of Washington Mutual common stock. The Washington
Mutual Rights have certain anti-takeover effects and are intended to discourage
coercive or unfair takeover tactics and to encourage any potential acquirer to
negotiate a price fair to all shareholders. The Washington Mutual Rights may
cause substantial dilution to an acquiring party that attempts to acquire
Washington Mutual on terms not approved by Washington Mutual's board of
directors, but they will not interfere with any merger or other business
combination that is approved by Washington Mutual's board of directors.
The Washington Mutual Rights are attached to the shares of Washington
Mutual common stock. The Washington Mutual Rights are not presently exercisable.
At the time an acquiring party (i) acquires beneficial ownership of 15% or more
of the outstanding shares of Washington Mutual common stock without the approval
of Washington Mutual's board of directors or (ii) commences or publicly
announces for the first time a tender offer to do so, the Washington Mutual
Rights will separate from the common stock and will become exercisable. Each
Washington Mutual Right entitles the holder to purchase 1/1,000th share of
Washington Mutual Preferred Stock, Series RP, for an exercise price that is
currently $200 per share. Once the Washington Mutual Rights become exercisable,
any Washington Mutual Rights held by the acquiring party will be void and, for
the next 60 days, all other holders of Washington Mutual Rights will receive,
upon exercise of the right, that number of shares of Washington Mutual common
stock having a market value of two times the exercise price of the Washington
Mutual Right. At any time after the Washington Mutual Rights become exercisable,
the Washington Mutual board of directors may exchange all or part of the
exercisable rights for common stock in accordance with the rights agreement. The
Washington Mutual Rights, which expire on January 4, 2011, may be redeemed by
Washington Mutual for $0.001 per right prior to becoming exercisable. Until a
Washington Mutual Right is exercised, the holder of that Washington Mutual Right
will have no rights as a shareholder of Washington Mutual, including, without
limitation, the right to vote or receive dividends.
REMOVAL OF DIRECTORS
Washington Mutual. Washington Mutual's articles of incorporation provide
that directors may only be removed for "good cause," which is not defined. Under
Washington Mutual's bylaws, a director may be removed by the vote of the holders
of a majority of the shares entitled to vote at an election of the director
whose removal is sought.
Dime. Dime's certificate of incorporation and bylaws provide that directors
may be removed only for cause by a vote of at least two-thirds of all
outstanding voting shares. Cause for removal will be deemed to exist with
respect to a director only if such director (i) has been convicted of a felony
by a court of competent jurisdiction, or (ii) has been held liable by a court of
competent jurisdiction for gross negligence or misconduct in the performance of
such director's duties to Dime and such adjudication is not subject to direct
appeal. In addition, the board of directors may, by a majority vote, remove any
director who has been removed by the appropriate federal banking agency.
70
77
FILLING VACANCIES ON THE BOARD OF DIRECTORS
Washington Mutual. Washington Mutual's bylaws provide that a vacancy on
Washington Mutual's board arising through resignation, removal or death of an
existing director, or by reason of an authorized increase in the number of
directors, may be filled by the affirmative vote of four-fifths of the remaining
directors, though less than a quorum. A director elected to fill a vacancy shall
serve only until the next election of directors by shareholders. If the vacant
office was held by a director elected by the holders of one or more authorized
classes or series of shares, only the holders of those series may vote to fill
the vacancy.
Dime. Dime's certificate of incorporation and bylaws provide that any
vacancy, whether arising through death, resignation, removal, an increase in the
number of directors or any other reason, may be filled by a majority vote of the
remaining directors, even if such directors remaining in office constitute less
than a quorum. If, and only if, the directors fail so to act to fill a vacancy,
Dime's stockholders will fill the vacancy at the next annual meeting of
stockholders. Any newly elected director shall hold office for the remainder of
the full term expiring at the annual meeting of stockholders at which the term
of the class of directors to which the newly elected director has been elected
expires. If the number of directors is changed, any increase or decrease shall
be apportioned among the classes so as to make all classes as nearly equal in
number as possible.
MATERIAL DIFFERENCES BETWEEN WASHINGTON AND DELAWARE CORPORATE LAWS
The Washington Business Corporation Act (WBCA) governs the rights of
Washington Mutual stockholders and will govern the rights of Dime stockholders
who become stockholders of Washington Mutual upon completion of the merger. The
Delaware General Corporation Law (DGCL) governs the rights of current Dime
stockholders until completion of the merger. The WBCA differs from the DGCL in
many respects. The following discussion summarizes some significant differences
between the provisions of the WBCA and the DGCL that could materially affect the
rights of Dime stockholders. The following summary is not a complete summary and
is qualified in its entirety by reference to the WBCA and the DGCL. See
"Incorporation of Certain Documents by Reference" on page 78.
AMENDMENT OF ARTICLES/CERTIFICATE OF INCORPORATION
Washington Mutual. Under the WBCA, Washington Mutual's board of directors
must generally recommend to the stockholders amendments to a corporation's
articles of incorporation, unless the board of directors (a) determines that
because of a conflict of interest or other special circumstances it should not
make such recommendation to the stockholders and (b) communicates the basis for
its determination to the stockholders with the amendment. Under the WBCA,
amendments to a public corporation's articles of incorporation must generally be
approved by a majority of all the votes entitled to be cast by any voting group
entitled to vote unless another proportion is specified (i) in the articles of
incorporation, (ii) by the board of directors as a condition to its
recommendation, or (iii) by other provisions of the WBCA. Subject to some
exceptions, Washington Mutual's articles of incorporation require the
affirmative vote of the stockholders representing at least a majority of
Washington Mutual's issued capital stock at any regular meeting or special
meeting duly called for that purpose to effect an amendment. However, an
amendment to the provision related to business combinations with a major
stockholder described in "Comparison of Rights of Washington Mutual and Dime
Stockholders -- Interested Stockholders" above requires the affirmative vote of
95% of the outstanding voting stock held by stockholders other than the major
stockholder.
Dime. Under the DGCL, amendments to a corporation's certificate of
incorporation require the approval of stockholders holding a majority of the
outstanding shares entitled to vote on the amendment. If a class vote on the
amendment is required by the DGCL, a majority of the outstanding stock of the
class is required, unless a greater proportion is specified in the certificate
of incorporation or by other provisions of the DGCL. Dime's certificate of
incorporation corresponds with Delaware law except that it requires the
affirmative vote of the holders of at least 66 2/3% of the total voting power of
all outstanding shares entitled
71
78
to vote in order to amend the provisions of Dime's certificate of incorporation
relating to: (i) the processes of stockholder action, (ii) the number, election,
term of office and removal of members of the board of directors, or (iii) the
process and votes required for amending the certificate of incorporation and the
bylaws.
RIGHT TO CALL SPECIAL MEETING OF STOCKHOLDERS
Washington Mutual. The WBCA provides that a special meeting of stockholders
of a corporation may be called by its board of directors, by holders of at least
10% of all the votes entitled to be cast on any issue proposed to be considered
at the special meeting, or by other persons authorized to do so by the articles
of incorporation or bylaws of the corporation. However, the WBCA allows a
corporation's articles of incorporation to limit or deny entirely the right of
stockholders to call a special meeting. Washington Mutual's articles of
incorporation provide that Washington Mutual's board of directors or any person
authorized by Washington Mutual's bylaws may call a special meeting. However,
authority to call a special meeting is limited to holders of at least 25% of all
the votes entitled to be cast on any issue to be considered at the proposed
meeting. Washington Mutual's bylaws permit a special meeting to be called by
Washington Mutual's board of directors, the chairman of the Washington Mutual
board or upon the written request of any director.
Dime. Under the DGCL, a special meeting of stockholders may be called by
the board of directors or by any other person authorized to do so in the
certificate of incorporation or the bylaws. Dime's bylaws permit a special
meeting of the stockholders to be called only by the chairman of the board (or,
if there is no chairman, the chief executive officer) or at the written request
of a majority of the directors.
INDEMNIFICATION OF OFFICERS, DIRECTORS AND EMPLOYEES
Washington Mutual. The WBCA authorizes corporations to indemnify a
director, officer or employee made a party to a proceeding, or advance or
reimburse expenses incurred in a proceeding, under most circumstances. A
corporation may not indemnify officers, directors or employees for:
- intentional misconduct or a knowing violation of the law;
- conduct finally adjudged to be an unlawful distribution; or
- any transaction in which that director, officer or employee personally
and improperly received a benefit in money, property or services.
The WBCA's history suggests that a corporation may indemnify its directors,
officers and employees for amounts paid in settlement of derivative actions,
provided that the director's, officer's or employee's conduct does not fall
within one of the categories set forth above. Washington Mutual's articles of
incorporation provide that Washington Mutual shall indemnify its directors to
the fullest extent permitted by the WBCA. Washington Mutual's bylaws also permit
the board of directors to indemnify officers, employees and agents of Washington
Mutual.
Dime. Under the DGCL, a corporation may indemnify directors, officers and
other employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation as a
derivative action) if the director, officer or employee acted in good faith and
in a manner the director, officer or employee reasonably believed to be in, or
not opposed to, the best interests of the corporation, and, with respect to a
criminal action or proceeding, if the director, officer or employee had no
reasonable cause to believe that his or her conduct was unlawful. The DGCL also
provides that a corporation may indemnify directors, officers and other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlements in connection with an action by
or in the right of the corporation. However, if such individual has been
adjudged liable to the corporation, he or she may be indemnified only if the
Court of Chancery or the court, in which the action was brought determines, in
view of all of
72
79
the circumstances, that indemnification is fair and reasonable. Dime's
certificate of incorporation provides for the indemnification of its directors
and officers to the fullest extent authorized by the DGCL.
PROVISIONS AFFECTING CONTROL SHARE ACQUISITIONS AND BUSINESS COMBINATIONS
Washington Mutual. The WBCA prohibits a "target corporation," (as defined
below) with certain exceptions, from engaging in certain "significant business
transactions" (as defined below) with a person or group of persons that
beneficially owns 10% or more of the voting securities of a target corporation
(an "acquiring person") for a period of five years after the acquiring person
acquired its securities, unless the transaction or acquisition of shares is
approved by a majority of the members of the target corporation's board of
directors before the date of the acquisition. A "significant business
transaction" includes, among other transactions:
- a merger or consolidation with an acquiring person;
- sales or other dispositions of assets to an acquiring company, in one or
more transactions having an aggregate market value equal to five percent
or more of all assets or outstanding shares of the target corporation or
representing five percent or more of the earning power or net income of
the target corporation;
- the issuance or redemption of stock to or from the acquiring person;
- termination of five percent or more of the employees of the target
corporation employed in Washington State as a result of the acquiring
person's acquisition of 10% or more of the shares of the target
corporation over the five-year period following the share acquisition by
the acquiring person; or
- allowing the acquiring person to receive any benefit from the
corporation, other than proportionately as a stockholder.
"Target corporations" include all domestic corporations with securities
registered under the Securities Exchange Act of 1934, as amended. Washington
Mutual is, therefore, subject to the statute. A corporation may not "opt out" of
this statute.
Dime. Section 203 of the DGCL prohibits a Delaware corporation from
engaging in a "business combination" (as defined below) with an "interested
stockholder" (as defined below) for three years following the time that the
stockholder becomes an interested stockholder. With certain exceptions, an
"interested stockholder" is a person or group that owns 15% or more of the
corporation's outstanding voting stock (including any rights to acquire stock
pursuant to an option, warrant, agreement, arrangement or understanding, or upon
the exercise of conversion or exchange rights, and stock with respect to which
the person has voting rights only), or is an affiliate or associate of the
corporation and was the owner of 15% or more of the voting stock at any time
within the previous three years.
For purposes of Section 203, the term "business combination" is defined
broadly to include:
- mergers with or caused by the interested stockholder;
- sales or other dispositions to the interested stockholder (except
proportionately as a stockholder of the corporation of assets of the
corporation or a subsidiary equal to 10% or more of the aggregate market
value of the corporation's consolidated assets or its outstanding stock);
- the issuance or transfer by the corporation or any subsidiary of stock of
the corporation or the subsidiary to the interested stockholder (except
for certain transfers in a conversion, exchange, pro rata distribution or
certain other transactions, none of which increase the interested
stockholder's proportionate ownership of any class or series of the
corporation's or the subsidiary's stock);
- any transaction involving the corporation or any subsidiary which has the
direct or indirect effect of increasing an interested stockholder's
proportionate ownership of any class or series of the corporation's or
the subsidiary's stock except for certain immaterial transactions; or
73
80
- receipt by the interested stockholder (except proportionately as a
stockholder), directly or indirectly, of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the
corporation or any subsidiary.
The three-year moratorium imposed on business combinations by Section 203
does not apply if:
- prior to the time at which a stockholder becomes an interested
stockholder the board of directors approves either the business
combination or the transaction that resulted in the person becoming an
interested stockholder;
- the interested stockholder owns 85% of the corporation's voting stock
upon completion of the transaction that made him or her an interested
stockholder (excluding from the 85% calculation shares owned by directors
who are also officers of the target corporation and shares held by
employee stock plans that do not permit employees to decide
confidentially whether to accept a tender or exchange offer); or
- at or subsequent to such time this person becomes an interested
stockholder, the board approves the business combination and it is also
approved at a stockholder meeting by 66 2/3% of the voting stock not
owned by the interested stockholder.
Section 203 does not apply if, among other things, the business combination
is proposed before the completion or abandonment, and subsequent to the earlier
of the public announcement or the notice required under Section 203, of a
proposed transaction that:
- constitutes a certain (a) merger or consolidation, (b) sale or other
transfer of assets having an aggregate market value equal to 50% or more
of the aggregate market value of all of the assets of the corporation
determined on a consolidated basis or the aggregate market value of all
the outstanding stock of the corporation or (c) proposed tender or
exchange offer for 50% or more of the corporation's outstanding voting
stock;
- is with or by a person who was either not an interested stockholder
during the last three years or who became an interested stockholder with
the approval of the corporation's board of directors or under certain
other circumstances; and
- is approved or not opposed by a majority of the board members elected
prior to any person becoming an interested stockholder during the
previous three years (or their chosen successors).
A Delaware corporation may elect to "opt out" of, and not be governed by,
Section 203 through a provision in either its original certificate of
incorporation or its bylaws, or an amendment to its original certificate or
bylaws that was approved by majority stockholder vote. With a limited exception,
this amendment would not become effective until 12 months following its
adoption. Dime has not opted out of Section 203.
MERGERS, SALES OF ASSETS AND OTHER TRANSACTIONS
Washington Mutual. Under the WBCA, a merger or share exchange of a
corporation must be approved by the affirmative vote of a majority of directors
when a quorum is present, and by each voting group entitled to vote separately
on the plan by two-thirds of all votes entitled to be cast on the plan by that
voting group, unless a different percentage is specified in the articles of
incorporation. Washington Mutual's articles of incorporation reduce this
percentage to a majority of all votes entitled to be cast by each voting group
if two-thirds of the directors vote to recommend the transaction to the
stockholders.
The WBCA also provides that, in general, a corporation may not sell, lease,
exchange or otherwise dispose of all, or substantially all, of its property,
other than in the usual and regular course of business, unless the board of
directors recommends the proposed transaction to the shareholders and the
shareholders approve the transaction by two-thirds of all the votes entitled to
be cast, unless a different percentage is specified in the articles of
incorporation. Washington Mutual's articles of incorporation
74
81
reduce this percentage to a majority of all votes entitled to be cast by each
voting group if two-thirds of the directors vote to recommend the transaction to
the shareholders.
Under the WBCA, shareholder approval of a merger is not required if (a) the
articles of incorporation of the surviving corporation will not differ as a
result of the merger, (b) each stockholder of the surviving corporation will
retain the same number of shares held prior to the merger and the designations
and relative rights of those shares are not changed, (c) the number of voting
shares of the surviving corporation after the merger does not exceed the number
of voting shares authorized by the surviving corporation's articles of
incorporation, and (d) the number of shares of the surviving corporation
authorized to participate in distributions after the merger does not exceed the
number of such participating shares authorized by the surviving corporation's
articles of incorporation. Therefore, under the WBCA, Washington Mutual is not
required to seek the approval of its shareholders to complete the merger of
Washington Mutual and Dime.
Dime. Under the DGCL, a merger, consolidation or sale of all, or
substantially all, of the assets of a corporation must be approved by the board
of directors and by a majority (unless the certificate of incorporation requires
a higher percentage) of outstanding stock of the corporation entitled to vote.
However, no vote of stockholders of a constituent corporation surviving a merger
is required (unless the corporation provides otherwise in its certificate of
incorporation) if (a) the merger agreement does not amend the surviving
corporation's certificate of incorporation, (b) each share of stock of the
surviving corporation outstanding immediately before the merger is to be
converted into an identical outstanding or treasury share of the surviving
corporation after the merger, and (c) the number of shares to be issued by the
surviving corporation in the merger does not exceed twenty percent of the shares
outstanding immediately before the merger. Dime's certificate of incorporation
does not require a higher percentage. Therefore, under Delaware law, holders of
a majority of the Dime common stock must approve the merger of Washington Mutual
and Dime.
STOCKHOLDER ACTION WITHOUT A MEETING
Washington Mutual. Under the WBCA, shareholder action that may be taken at
a shareholders' meeting may be taken without a meeting if written consents
describing the action are signed by all stockholders entitled to vote on that
matter. The bylaws of Washington Mutual permit stockholder action by unanimous
written consent.
Dime. Under the DGCL, unless otherwise provided in a corporation's
certificate of incorporation, any action that may be taken at a meeting of
stockholders may be taken without a meeting, without prior notice and without a
vote if the holders of outstanding stock, having not less than the minimum
number of votes that would be necessary to authorize such action, consent in
writing. However, Dime's certificate of incorporation and bylaws specifically
prohibit stockholder action by written consent unless such consent is unanimous.
CLASS VOTING
Washington Mutual. Under the WBCA, a corporation's articles of
incorporation may authorize one or more classes of shares that have special,
conditional or limited voting rights, including the right to vote on certain
matters as a group. The articles of incorporation may not limit the rights of
holders of a class to vote as a group with respect to certain amendments to the
articles of incorporation and certain extraordinary transactions that adversely
affect the rights of holders of that class.
Dime. The DGCL generally does not require class voting, except for
amendments to the certificate of incorporation that change the number of
authorized shares or the par value of shares of a specific class or that
adversely affect such class of shares.
75
82
TRANSACTIONS WITH OFFICERS OR DIRECTORS
Washington Mutual. The WBCA sets forth a safe harbor for transactions
between a corporation and one or more of its directors. A conflicting interest
transaction may not be enjoined, set aside or give rise to damages if:
- it is approved by a majority of the "qualified directors" on the board or
a duly empowered committee (but no fewer than two);
- it is approved by the affirmative vote of the majority of all "qualified
shares" after notice and disclosure to the stockholders; or
- at the time of commitment, the transaction is established to have been
fair to the corporation.
For purposes of this provision, a "qualified director" is one who does not
have either: (a) a conflicting interest respecting the transaction or (b) a
familial, financial, professional or employment relationship with a second
director who has a conflicting interest respecting the transaction, which
relationship would, in the circumstances, reasonably be expected to exert an
influence on the first director's judgment when voting on the transaction.
"Qualified shares" are defined generally as shares other than those beneficially
owned, or the voting of which is controlled, by a director (or an affiliate of a
director) who has a conflicting interest respecting the transaction.
Dime. Under the DGCL, certain contracts or transactions in which one or
more of a corporation's directors has an interest are not void or voidable
because of such interest provided that some conditions, such as obtaining the
required approval and fulfilling the requirements of good faith and full
disclosure, are met. Under the DGCL, either (a) the stockholders or the board of
directors must approve any such contract or transaction after full disclosure of
the material facts or (b) the contract or transaction must have been "fair" as
to the corporation at the time it was approved. If board approval is sought, the
contract or transaction must be approved by a majority of disinterested
directors, even though less than a majority of a quorum.
DISSENTERS' RIGHTS
Washington Mutual. Under the WBCA, a stockholder is entitled to dissent
from and, upon perfection of the stockholder's appraisal right, to obtain the
fair value of his or her shares in the event of certain corporate actions,
including certain mergers, share exchanges, sales of substantially all of the
assets of the corporation, and amendments to the corporation's articles of
incorporation that materially reduce the number of shares owned by a stockholder
to a fraction of a share which is to be acquired with cash. However,
stockholders generally will not have such dissenters' rights if stockholder
approval is not required to effect the corporate action.
Dime. Under the DGCL, a stockholder of a corporation participating in
certain major corporate transactions may, under varying circumstances, be
entitled to appraisal rights pursuant to which the stockholder may receive cash
in the amount of the fair market value of his or her shares in lieu of the
consideration he or she would otherwise receive in the transaction. Unless a
corporation's certificate of incorporation provides otherwise, these appraisal
rights are not available:
- with respect to the sale, lease or exchange of all or substantially all
of the assets of the corporation,
- with respect to a merger or consolidation by the corporation the shares
of which are either listed on a national securities exchange or Nasdaq or
are held of record by more than 2,000 holders if the terms of the merger
or consolidation allow the stockholders to receive only shares of the
surviving corporation or shares of any other corporation that are either
listed on a national securities exchange or on Nasdaq or held of record
by more than 2,000 holders, plus cash in lieu of fractional shares, or
- to stockholders of the corporation surviving a merger if no vote of the
stockholders of the surviving corporation is required to approve the
merger because the merger agreement does not amend the
76
83
existing certificate of incorporation, each share of the surviving
corporation outstanding prior to the merger is converted into an
identical outstanding or treasury share after the merger, and the number
of shares to be issued in the merger does not exceed 20% of the shares of
the surviving corporation outstanding immediately prior to the merger and
if some other conditions are met.
DIVIDENDS
Washington Mutual. Under the WBCA, a corporation may make a distribution in
cash or in property to its stockholders upon the authorization of its board of
directors unless, after giving effect to this distribution, (a) the corporation
would not be able to pay its debts as they become due in the usual course of
business or (b) the corporation's total assets would be less than the sum of its
total liabilities plus, unless the articles of incorporation permit otherwise,
the amount that would be needed if the corporation were to be dissolved at the
time of the distribution to satisfy the preferential rights of stockholders
whose preferential rights are superior to those receiving the distribution.
Dime. The DGCL permits a corporation to declare and pay dividends out of
statutory surplus or, if there is no surplus, out of net profits for the fiscal
year in which the dividend is declared and/or for the preceding fiscal year as
long as the amount of capital of the corporation following the declaration and
payment of the dividend is not less than the aggregate amount of the capital
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets.
VALIDITY OF THE WASHINGTON MUTUAL COMMON STOCK
The validity of the shares of Washington Mutual common stock which will be
issued in connection with the merger will be passed upon for Washington Mutual
by Heller Ehrman White & McAuliffe, LLP, Seattle, Washington. As of
, 2001, individual attorneys at the firm who participated in the
transaction owned an aggregate of shares of Washington Mutual common
stock.
EXPERTS
The consolidated financial statements incorporated in this proxy/prospectus
by reference from Washington Mutual's Annual Report on Form 10-K for the year
ended December 31, 2000, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The consolidated financial statements of Dime and its subsidiaries as of
December 31, 2000 and 1999 and for each of the years in the three-year period
ended December 31, 2000 included in Dime's Annual Report on Form 10-K have been
incorporated by reference herein in reliance upon the report by KPMG LLP,
independent certified public accountants, included in Dime's 2000 Annual Report
on Form 10-K, and upon the authority of said firm as experts in accounting and
auditing.
OTHER MATTERS
As of the date of this document, Dime's board of directors knows of no
other matters that will be presented for consideration at its special meeting
other than as described in this document. If any other matters properly come
before the special meeting of Dime stockholders, or any adjournments or
postponements of the special meeting are proposed, and are properly voted upon,
the enclosed proxies will be deemed to confer discretionary authority on the
individuals that they name as proxies to vote the shares represented by these
proxies as to any of these matters. The individuals named as proxies intend to
vote or not to vote in accordance with the recommendation of Dime's management.
77
84
STOCKHOLDER PROPOSALS
Dime will hold an annual meeting of its stockholders in 2002 only if the
merger is not completed. If Dime's 2002 annual meeting is to be held, in order
to be considered for inclusion in Dime's proxy statement for the meeting,
stockholder proposals must be submitted to Dime's Corporate Secretary at 589
Fifth Avenue, New York, New York 10017, on or before January 10, 2002. Under
Dime's bylaws, in order to be considered for possible action by stockholders at
the 2002 annual meeting but not included in Dime's 2002 proxy statement,
stockholder proposals must be submitted to Dime's Corporate Secretary not less
than 60 nor more than 90 days in advance of May 10, 2002. In addition,
stockholder proposals must meet other applicable criteria set forth in Dime's
bylaws in order to be considered at the 2002 annual meeting. Dime's board will
review any stockholder proposals that are filed as required and will determine
whether they meet applicable criteria for consideration at the 2002 annual
meeting.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC allows Washington Mutual and Dime to incorporate certain
information into this document by reference to other information that has been
filed with the SEC. The information incorporated by reference is deemed to be
part of this document, except for any information that is superseded by
information in this document. The documents that are incorporated by reference
contain important information about the companies and you should read this
document together with any other documents incorporated by reference in this
document.
This document incorporates by reference the following documents that have
previously been filed with the SEC by Washington Mutual (File No. 001-14667):
- Annual Report on Form 10-K for the year ended December 31, 2000;
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001 and
June 30, 2001;
- Current Reports on Form 8-K dated January 8, 2001; January 17, 2001;
January 18, 2001; January 22, 2001; as amended January 23, 2001; April 3,
2001; April 18, 2001; April 20, 2001; April 30, 2001; June 25, 2001; July
5, 2001; and July 18, 2001;
- the description of Washington Mutual capital stock contained in Item 5 of
Current Report on Form 8-K dated November 29, 1994, and any amendment or
report filed for the purpose of updating this description; and
- Form 8-A/12B dated February 8, 2001, as amended.
This document also incorporates by reference the following documents that
have previously been filed with the SEC by Dime (File No. 001-13094):
- Annual Report on Form 10-K for the year ended December 31, 2000, as
amended;
- Quarterly Reports on Form 10-Q for the quarters ended March 31, 2001 and
June 30, 2001; and
- Current Reports on Form 8-K dated January 19, 2001; January 19, 2001, as
amended; January 22, 2001; February 5, 2001; February 21, 2001; March 13,
2001; April 20, 2001; June 26, 2001; June 27, 2001; July 6, 2001; and
July 19, 2001; and
- Solicitation Material filed pursuant to Rule 14a-12 on July 19, 2001 and
August 2, 2001.
In addition, Washington Mutual and Dime are incorporating by reference any
documents they may file under the Exchange Act after the date of this proxy
statement/prospectus and prior to the date of the special meeting of Dime
stockholders.
78
85
FORWARD-LOOKING STATEMENTS
This document, including information included or incorporated by reference
in this document may contain forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. These forward-looking
statements include, but are not limited to, (i) statements about the benefits of
the merger, including future financial and operating results, cost savings
enhancements to revenue and accretion to reported earnings that may be realized
from the merger; (ii) statements about our respective plans, objectives,
expectations and intentions and other statements that are not historical facts;
and (iii) other statements identified by words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates," or words of similar
meaning. These forward-looking statements are based on current beliefs and
expectations of our management and are inherently subject to significant
business, economic and competitive uncertainties and contingencies, many of
which are beyond our control. In addition, these forward-looking statements are
subject to assumptions with respect to future business strategies and decisions
that are subject to change.
The following factors, among others, could cause actual results to differ
materially from the anticipated results or other expectations expressed in the
forward-looking statements:
- our businesses may not be combined successfully, or such combination may
take longer to accomplish than expected;
- delays or difficulties in the integration by Washington Mutual of
recently acquired businesses;
- the growth opportunities and cost savings from the merger may not be
fully realized or may take longer to realize than expected;
- operating costs, customer losses and business disruption following the
merger, including adverse effects of relationships with employees, may be
greater than expected;
- governmental approvals of the merger may not be obtained, or adverse
regulatory conditions may be imposed in connection with governmental
approvals of the merger;
- adverse governmental or regulatory policies may be enacted;
- the interest rate environment may change, causing margins to compress and
adversely affecting net interest income;
- the risks associated with continued diversification of assets and adverse
changes to credit quality;
- competition from other financial services companies in our markets;
- the concentration of Washington Mutual's operations in California may
adversely affect results if the California economy or real estate market
declines; and
- the risk of an economic slowdown that would adversely affect credit
quality and loan originations.
Additional factors that could cause actual results to differ materially
from those expressed in the forward-looking statements are discussed in our
respective reports filed with the SEC.
All subsequent written and oral forward-looking statements concerning the
proposed transaction or other matters attributable to either of us or any person
acting on our behalf are expressly qualified in their entirety by the cautionary
statements above. Neither of us undertake any obligation to update any forward-
looking statement to reflect circumstances or events that occur after the date
the forward-looking statements are made.
79
86
APPENDIX A
EXECUTION COPY
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
BY AND BETWEEN
WASHINGTON MUTUAL, INC.
AND
DIME BANCORP, INC.
DATED AS OF JUNE 25, 2001
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
87
TABLE OF CONTENTS
PAGE
----
1. Definitions................................................. A-1
1.1. Defined Terms........................................ A-1
1.2. Other Definitional Provisions........................ A-4
2. The Merger.................................................. A-4
2.1. The Merger........................................... A-4
2.2. Effective Time....................................... A-4
2.3. Effects of the Merger................................ A-4
2.4. Closing of the Merger................................ A-4
2.5. Conversion of Dime Capital Stock..................... A-4
2.6. Election Procedures.................................. A-5
2.7. No Fractional Shares................................. A-5
2.8. Washington Mutual Common Stock; Washington Mutual
Preferred Stock............................................. A-5
2.9. Treatment of Options and Other Stock-Based Awards.... A-5
2.10. Litigation Tracking Warrant Conversion............... A-8
2.11. Articles of Incorporation............................ A-9
2.12. Bylaws............................................... A-9
2.13. Board of Directors................................... A-9
2.14. Tax Consequences..................................... A-9
2.15. Reservation of Right to Revise Structure............. A-9
3. Exchange Of Certificates for Merger Consideration........... A-9
3.1. Washington Mutual to Make Merger Consideration
Available................................................... A-9
3.2. Exchange of Shares................................... A-10
4. Representations and Warranties of Dime...................... A-11
4.1. Corporate Organization............................... A-11
4.2. Capitalization....................................... A-12
4.3. Authority; No Violation.............................. A-13
4.4. Consents and Approvals............................... A-14
4.5. Reports.............................................. A-14
4.6. Financial Statements................................. A-14
4.7. Broker's Fees........................................ A-15
4.8. Absence of Certain Changes or Events................. A-15
4.9. Legal Proceedings.................................... A-15
4.10. Taxes................................................ A-16
4.11. Employees; Employee Benefit Plans.................... A-17
4.12. SEC Reports.......................................... A-19
4.13. Compliance With Applicable Law....................... A-19
4.14. Certain Contracts.................................... A-19
4.15. Agreements With Regulatory Agencies.................. A-20
4.16. Undisclosed Liabilities.............................. A-20
4.17. Rights Agreement; Anti-Takeover Provisions........... A-20
4.18. Dime Information..................................... A-20
4.19. Title to Property.................................... A-20
4.20. Insurance............................................ A-21
4.21. Environmental Liability.............................. A-21
4.22. Opinion Of Financial Advisor......................... A-21
4.23. Loan Matters......................................... A-22
4.24. Labor Matters........................................ A-22
4.25. CRA Agreements....................................... A-22
A-i
88
PAGE
----
5. Representations and Warranties of Washington Mutual......... A-22
5.1. Corporate Organization............................... A-22
5.2. Capitalization....................................... A-22
5.3. Authority; No Violation.............................. A-23
5.4. Consents and Approvals............................... A-23
5.5. Reports.............................................. A-24
5.6. Financial Statements................................. A-24
5.7. Broker's Fees........................................ A-24
5.8. Absence of Certain Changes or Events................. A-25
5.9. Legal Proceedings.................................... A-25
5.10. SEC Reports.......................................... A-25
5.11. Compliance With Applicable Law....................... A-25
5.12. Agreements With Regulatory Agencies.................. A-25
5.13. Undisclosed Liabilities.............................. A-26
5.14. Washington Mutual Information........................ A-26
6. Covenants Relating to Conduct Of Business................... A-26
6.1. Conduct of Business Prior to the Effective Time...... A-26
6.2. Dime Forbearances.................................... A-26
6.3. No Fundamental Washington Mutual Changes............. A-29
6.4. Dividends............................................ A-30
7. Additional Agreements....................................... A-30
7.1. Regulatory Matters................................... A-30
7.2. Access to Information................................ A-31
7.3. Stockholder Approval................................. A-31
7.4. Legal Conditions to Merger........................... A-32
7.5. Affiliates........................................... A-32
7.6. Stock Exchange Listing............................... A-32
7.7. Employees; Employee Benefit Plans.................... A-32
7.8. Indemnification; Directors' and Officers'
Insurance................................................... A-34
7.9. Advice of Changes; Other Matters..................... A-35
7.10. Subsequent Interim and Annual Financial Statements... A-35
7.11. Reorganization....................................... A-36
7.12. Exemption From Liability Under Section 16(b)......... A-36
7.13. Warrant Agreement Assumption......................... A-36
7.14. Board of Directors................................... A-36
7.15. Insider Loan Disclosure.............................. A-36
7.16. Insurance Disclosure................................. A-36
7.17. Management Consultation Meetings and Distribution of
Information................................................. A-36
7.18. Redesign of Branches................................. A-37
8. Conditions Precedent........................................ A-37
8.1. Conditions to Each Party's Obligation to Effect the
Merger...................................................... A-37
8.2. Conditions to Obligations of Washington Mutual....... A-37
8.3. Conditions To Obligations Of Dime.................... A-38
9. Termination and Amendment................................... A-39
9.1. Termination.......................................... A-39
9.2. Effect of Termination................................ A-39
9.3. Amendment............................................ A-40
9.4. Extension; Waiver.................................... A-40
10. General Provisions.......................................... A-41
10.1. Nonsurvival of Representations, Warranties and
Agreements.................................................. A-41
A-ii
89
PAGE
----
10.2. Expenses............................................ A-41
10.3. Notices............................................. A-41
10.4. Interpretation...................................... A-41
10.5. Counterparts........................................ A-42
10.6. Entire Agreement.................................... A-42
10.7. Governing Law....................................... A-42
10.8. Severability........................................ A-42
10.9. Publicity........................................... A-42
10.10. Assignment; Third Party Beneficiaries............... A-42
EXHIBITS
Exhibit A -- Voting/Purchase Agreement
A-iii
90
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER, dated as of June 25, 2001 (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 Dime Bancorp, Inc., a Delaware corporation ("Dime").
The respective Boards of Directors of each of Washington Mutual and Dime
have determined that it is in the best interests of their respective companies
and stockholders to consummate the business combination transaction provided for
herein. It is the intention of the parties to this Agreement that the business
combination contemplated hereby be treated as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code").
Simultaneously with the execution of this Agreement, Washington Mutual is
entering into an agreement with Warburg, Pincus Equity Partners, L.P.
("Warburg") in the form of Exhibit A hereto (the "Voting/Purchase Agreement")
pursuant to which Warburg has agreed, among other things, to vote its shares of
Dime Common Stock in favor of the adoption of this Agreement and to sell to
Washington Mutual on the Closing Date (as defined below) all of the warrants it
holds to purchase Dime securities, all on the terms set forth therein.
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
---- -------
401(k) Plan............................................... 7.7(b)
Acquisition Proposal...................................... 6.2(f)
Agreement................................................. Preamble
Articles of Merger........................................ 2.2
Average Market Price...................................... 2.5(b)
BIF....................................................... 4.1(c)
Business Day.............................................. 2.4
Cash Conversion Shares.................................... 2.6
Cash Election Price....................................... 2.5(c)
Cash Percentage........................................... 2.6
Cash Proration Factor..................................... 2.6
Certificate............................................... 3.2
Certificate of Merger..................................... 2.2
Change in Dime Recommendation............................. 7.3(a)
Closing................................................... 2.4
Closing Date.............................................. 2.4
Code...................................................... Preamble
Confidentiality Agreement................................. 7.2(b)
Controlled Entity......................................... 4.2(b)
Covered Employees......................................... 7.7(a)
Deemed Shares............................................. 2.6
Delaware Secretary........................................ 2.2
DGCL...................................................... 2.1
Dime...................................................... Preamble
Dime Cash Election Shares................................. 2.6
Dime Common Stock......................................... 2.5(a)
A-1
91
TERM SECTION
---- -------
Dime Contract............................................. 4.14(a)
Dime Disclosure Schedule.................................. 4.2(a)
Dime Insiders............................................. 7.12
Dime Member............................................... 7.7(f)
Dime Option............................................... 2.9(a)
Dime Phantom Stock Plans.................................. 2.10
Dime Preferred Stock...................................... 4.2(a)
Dime Reports.............................................. 4.12
Dime Rights............................................... 2.5(b)
Dime Savings Bank......................................... 4.1(c)
Dime Stock Election Shares................................ 2.6
Dime Stockholders Meeting................................. 7.3
Dime Stock Option Plans................................... 2.9(a)
Director Committee........................................ 7.7(f)
Director Umbrella Trusts.................................. 4.11(g)
Dissenting Shareholder.................................... 2.5(d)
Dissenting Shares......................................... 2.5(d)
Effective Time............................................ 2.2
Election Deadline......................................... 2.6
Election Form............................................. 2.6
ELP....................................................... 2.10
Employee Committee........................................ 7.7(f)
Employee Umbrella Trusts.................................. 4.11(g)
Environmental Laws........................................ 4.21
ERISA..................................................... 4.11(a)
ERISA Affiliate........................................... 4.11(a)
ETC....................................................... 2.10
Exchange Act.............................................. 4.6
Exchange Agent............................................ 2.6
Exchange Fund............................................. 3.1
Exchange Ratio............................................ 2.5(b)
Expense Amount............................................ 9.2(b)
Extension Notice.......................................... 2.4
FDIC...................................................... 4.1(c)
FHLB...................................................... 4.1(c)
Freddie Mac............................................... 4.24(b)
GAAP...................................................... 4.1(a)
Ginnie Mae................................................ 4.24(b)
Governmental Entity....................................... 4.4
HOLA...................................................... 4.1(a)
HUD....................................................... 4.24(b)
Indemnified Parties....................................... 7.8(a)
Injunction................................................ 8.1(e)
Insurance Amount.......................................... 7.8(c)
Liens..................................................... 4.2(b)
Loans..................................................... 7.15
LTW....................................................... 2.10
Material Adverse Effect................................... 4.1(a)
A-2
92
TERM SECTION
---- -------
Merger.................................................... 2.1
Merger Consideration...................................... 2.15
NYSE...................................................... 2.7
Option Conversion Ratio................................... 2.9(a)
OTS....................................................... 4.4
PBGC...................................................... 4.11(c)
Per Share Consideration Value............................. 2.5(b)
Plans..................................................... 4.11(a)
Proxy Statement/Prospectus................................ 4.4
Regulatory Agreement...................................... 4.15
Representatives........................................... 6.2(f)
Requisite Regulatory Approvals............................ 8.1(c)
Restricted Share.......................................... 2.9(b)
Rights Plan............................................... 4.2(a)
S-4....................................................... 4.18
SAIF...................................................... 4.1(c)
SEC....................................................... 4.4
Second Merger............................................. 7.1(b)
Section 16 Information.................................... 7.12
Securities Act............................................ 4.12
Stock Conversion Shares................................... 2.6
Stock Percentage.......................................... 2.6
Stock Proration Factor.................................... 2.6
Subsidiary................................................ 4.1(a)
Superior Proposal......................................... 6.2(f)
Surviving Company......................................... 2.1
Tax Return................................................ 4.10(k)
Taxes..................................................... 4.10(j)
Termination Fee........................................... 9.2(b)
Umbrella Trust Agreements................................. 4.11(g)
VA........................................................ 4.24(b)
Valuation Period.......................................... 2.5(b)
Voting/Purchase Agreement................................. Preamble
Warburg................................................... Preamble
Warburg Agreement......................................... 4.2(a)
Warrant Agent............................................. 2.10
Warrant Agreement......................................... 2.10
Warrant Holder............................................ 2.6
Washington Mutual......................................... Preamble
Washington Mutual Common Stock............................ 2.5(a)
Washington Mutual Disclosure Schedule..................... 5.2
Washington Mutual Regulatory Agreement.................... 5.12
Washington Mutual Reports................................. 5.10
Washington Mutual Rights.................................. 2.5(b)
Washington Mutual Rights Agreement........................ 5.2
Washington Mutual Share Price............................. 2.7
Washington Secretary...................................... 2.2
WBCA...................................................... 2.1
A-3
93
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), Dime 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 Dime shall terminate.
2.2. Effective Time. The Merger shall become effective as set forth in the
articles of merger (the "Articles of Merger") which shall be filed with the
Secretary of State of the State of Washington (the "Washington Secretary") and
in the certificate of merger (the "Certificate of Merger") which shall be filed
with the Secretary of State of the State of Delaware (the "Delaware Secretary"),
on the Closing Date (as defined in Section 2.4 hereof). The term "Effective
Time" shall mean the time on the Closing Date when the Merger becomes effective,
as set forth in the Articles of Merger and the Certificate of Merger.
2.3. Effects of the Merger. At and after the Effective Time, the Merger
shall have the effects set forth in the WBCA and the DGCL.
2.4. Closing of the Merger. Subject to the terms and conditions of this
Agreement, except as provided in the following paragraph, the closing of the
Merger (the "Closing") will take place at the offices of Simpson Thacher &
Bartlett at 425 Lexington Avenue, New York, New York at 9:00 a.m. Pacific time
on the first Friday which is a Business Day occurring at least two Business Days
after the satisfaction or waiver (subject to applicable law) of the latest to
occur of the conditions set forth in Section 8 hereof, other than conditions
which by their terms are to be satisfied at Closing, or such other date or time
as the parties may mutually agree (the "Closing Date"). For purposes of this
Agreement, a "Business Day" shall mean any day that is not a Saturday, a Sunday
or other day on which the office of the Washington Secretary or the Delaware
Secretary is closed.
If the Closing shall not have occurred prior to January 4, 2002, at any
time during the five-Business Day period beginning on the first Business Day
following the satisfaction of the conditions set forth in Sections 8.1 and 8.2
(other than conditions which by their terms are to be satisfied at Closing),
Washington Mutual may deliver a notice to Dime (the "Extension Notice")
specifying that the Closing Date shall be January 4, 2002. Upon receipt of the
Extension Notice, Dime shall within five Business Days deliver to Washington
Mutual a certificate signed on behalf of Dime by the Chief Executive Officer and
Chief Financial Officer of Dime to the effect set forth in Section 8.2(a) as of
such date of delivery. If the certificate referred to in the immediately
preceding sentence has been delivered in response to an Extension Notice, the
certificate contemplated to be delivered at Closing pursuant to Section 8.2(a)
will be required to certify only that there have been no intentional breaches of
the representations and warranties contained in Section 4, subject to the
standard in the proviso contained in Section 8.2(a), and upon delivery thereof
Section 8.2(a) will be deemed satisfied.
2.5. Conversion of Dime Capital Stock. At the Effective Time, without any
action on the part of Washington Mutual, Dime or the holder of any of the shares
of common stock of Dime, the Merger shall be effected in accordance with the
following terms:
(a) All shares of common stock, par value $0.01 per share, of Dime
(the "Dime Common Stock") owned directly by Dime (including treasury
shares) or Washington Mutual (other than shares in trust accounts, managed
accounts and the like or shares held in satisfaction of a debt previously
contracted) shall be cancelled and retired and shall not represent capital
stock of the Surviving Company and shall not be exchanged for shares of
common stock, no par value, of Washington Mutual ("Washington Mutual Common
Stock"), cash or other consideration.
A-4
94
(b) Each outstanding share of Dime Common Stock together with the
associated rights (the "Dime Rights") issued pursuant to the Rights Plan
(as defined in Section 4.2(a)) which under the terms of Section 2.6 is to
be converted into the right to receive shares of Washington Mutual Common
Stock shall, subject to Section 2.7, be converted into and become the right
to receive a number of shares of Washington Mutual Common Stock (together
with the requisite number of rights (the "Washington Mutual Rights") issued
pursuant to the Washington Mutual Rights Agreement (as defined in Section
5.2)) equal to the Cash Election Price divided by the Average Market Price
(the "Exchange Ratio"). For purposes of this Agreement, "Average Market
Price" shall mean the average of the closing prices of shares of Washington
Mutual Common Stock as reported on the New York Stock Exchange Composite
Transactions Tape for the ten consecutive full trading days (the "Valuation
Period") ending on the tenth Business Day prior to the Closing Date. The
Average Market Price shall be calculated to the nearest one-hundredth of
one cent and the Exchange Ratio shall be calculated to the nearest ten
thousandth.
(c) Each outstanding share of Dime Common Stock which under the terms
of Section 2.6 is to be converted into the right to receive cash shall be
converted into the right to receive the sum of (x) 0.715341 times 1.05
times the Average Market Price and (y) 0.284659 times $40.8366 (the "Cash
Election Price").
(d) Each outstanding share of Dime Common Stock the holder of which
has perfected his right to dissent under applicable law and has not
effectively withdrawn or lost such right as of the Effective Time (the
"Dissenting Shares") shall not be converted into or represent a right to
receive shares of Washington Mutual Common Stock or cash hereunder, and the
holder thereof shall be entitled only to such rights as are granted by
applicable law. Dime shall give Washington Mutual prompt notice upon
receipt by Dime of any such demands for payment of the fair value of such
shares of Dime Common Stock and of withdrawals of such notice and any other
instruments provided pursuant to applicable law (any shareholder duly
making such demand being hereinafter called a "Dissenting Shareholder"),
and Washington Mutual shall have the right to participate in all
negotiations and proceedings with respect to any such demands. Dime shall
not, except with the prior written consent of Washington Mutual,
voluntarily make any payment with respect to, or settle or offer to settle,
any such demand for payment, or waive any failure to timely deliver a
written demand for appraisal or the taking of any other action by such
Dissenting Shareholder as may be necessary to perfect appraisal rights
under the DGCL. Any payments made in respect of Dissenting Shares shall be
made by the Surviving Company.
(e) If any Dissenting Shareholder shall effectively withdraw or lose
(through failure to perfect or otherwise) his right to such payment at or
prior to the Effective Time, such holder's shares of Dime Common Stock
shall be converted into a right to receive cash or Washington Mutual Common
Stock in accordance with the applicable provisions of this Agreement. If
such holder shall effectively withdraw or lose (through failure to perfect
or otherwise) his right to such payment after the Effective Time, each
share of Dime Common Stock of such holder shall be converted on a share by
share basis into either the right to receive the Cash Election Price or
Washington Mutual Common Stock as Washington Mutual shall determine in its
sole discretion.
(f) The Exchange Ratio set forth above shall be subject to appropriate
adjustments in the event that, subsequent to the date of this Agreement but
prior to the Effective Time, the outstanding Washington Mutual Common Stock
shall have been increased, decreased, changed into or exchanged for a
different number or kind of shares or securities through reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse
stock split, or other like changes in Washington Mutual's capitalization.
2.6. Election Procedures. An election form as Washington Mutual and Dime
shall mutually agree ("Election Form") will be sent no later than 15 Business
Days prior to the expected Effective Time (provided that it need not be sent
until the Requisite Regulatory Approvals (as defined in Section 8.1(c)) have
been obtained) to each holder of record of Dime Common Stock and to each holder
of record of
A-5
95
warrants (each, a "Warrant Holder") with respect to Deemed Shares (as defined in
the Voting/Purchase Agreement) permitting such holder (or in the case of nominee
record holders, the beneficial owner through proper instructions and
documentation) (i) to elect to receive Washington Mutual Common Stock with
respect to each share of such holder's Dime Common Stock as provided herein or,
in the case of each Warrant Holder, Deemed Shares as provided herein (the "Dime
Stock Election Shares") or (ii) to elect to receive cash with respect to each
share of such holder's Dime Common Stock as provided herein or, in the case of
each Warrant Holder, with respect to the Deemed Shares as provided herein (the
"Dime Cash Election Shares"). Any shares of Dime Common Stock or Deemed Shares
with respect to which the holder thereof or the Warrant Holder shall not, as of
the Election Deadline, have made such an election by submission to an exchange
agent that Washington Mutual shall designate with Dime's reasonable consent (the
"Exchange Agent"), on an effective, properly completed Election Form shall be
deemed to be Dime Stock Election Shares. Any Dissenting Shares shall be deemed
to be Dime Cash Election Shares, and with respect to such shares the holders
thereof shall in no event receive consideration comprised of Washington Mutual
Common Stock.
The term "Election Deadline", as used below, shall mean 5:00 p.m., Eastern
time, on the 20th Business Day following but not including the date of mailing
of the Election Form or such other date as Dime and Washington Mutual shall
mutually agree upon.
Any election to receive Washington Mutual Common Stock or cash shall have
been properly made only if the Exchange Agent shall have actually received a
properly completed Election Form by the Election Deadline. Any Election Form may
be revoked or changed by the person submitting such Election Form to the
Exchange Agent by written notice to the Exchange Agent only if such notice is
actually received by the Exchange Agent at or prior to the Election Deadline.
The certificate or certificates representing Dime Common Stock relating to any
revoked Election Form shall be promptly returned without charge to the person
submitting the Election Form to the Exchange Agent. The Exchange Agent shall
have discretion to determine when any election, modification or revocation is
received and whether any such election, modification or revocation has been
properly made.
Within five Business Days after the Election Deadline, the Exchange Agent
shall calculate the allocation among holders of Dime Common Stock (and each
Warrant Holder with respect to Deemed Shares) of rights to receive Washington
Mutual Common Stock or cash in the Merger in accordance with the Election Forms
as follows:
(i) If the number of Dime Cash Election Shares is greater than the
quotient of (x) $1,428,809,000 divided by (y) the Cash Election Price (the
"Cash Conversion Shares"), then:
(1) all Dime Stock Election Shares will be converted into the right
to receive Washington Mutual Common Stock, and
(2) each Dime Cash Election Share will be converted into the right
to receive Washington Mutual Common Stock and cash in the following
manner:
(A) a proration factor (the "Cash Proration Factor") shall be
determined by dividing (x) $1,428,809,000-, by (y) the product of the
number of Dime Cash Election Shares multiplied by the Cash Election
Price;
(B) the number of Dime Cash Election Shares held by each holder
of shares of Dime Common Stock that will be converted into the right
to receive cash pursuant to the terms of Section 2.5(c) shall be
determined by multiplying the Cash Proration Factor by the number of
Dime Cash Election Shares held by such holder; and
(C) all Dime Cash Election Shares other than those shares
converted into the right to receive cash in accordance with the
preceding subparagraph (B) shall be converted into the right to
receive Washington Mutual Common Stock in accordance with the terms
of Section 2.5(b); or
A-6
96
(ii) If the number of Dime Cash Election Shares is less than the Cash
Conversion Shares, then:
(1) all Dime Cash Election Shares (subject to the provisions of
Section 2.5(d) with respect to any Dissenting Shares) will be converted
into the right to receive cash, and
(2) each Dime Stock Election Share will be converted into the right
to receive Washington Mutual Common Stock and cash in the following
manner:
(A) a proration factor (the "Stock Proration Factor") shall be
determined by dividing the Stock Conversion Shares (as defined below)
by the number of Dime Stock Election Shares. The "Stock Conversion
Shares" shall mean the difference between (x) the total number of
shares of Dime Common Stock outstanding immediately prior to the
Effective Time plus the Deemed Shares minus (y) the Cash Conversion
Shares;
(B) the number of Dime Stock Election Shares held by each holder
of shares of Dime Common Stock that will be converted into the right
to receive shares of Washington Mutual Common Stock pursuant to the
terms of Section 2.5(b) shall be determined by multiplying the Stock
Proration Factor by the number of Dime Stock Election Shares held by
such holder; and
(C) all Dime Stock Election Shares other than those shares
converted into the right to receive Washington Mutual Common Stock in
accordance with the preceding subparagraph (B) shall be converted
into the right to receive cash in accordance with the terms of
Section 2.5(c); or
(iii) If the number of Dime Stock Election Shares is equal to the
number of Stock Conversion Shares and the number of Dime Cash Election
Shares is equal to the number of Cash Conversion Shares, then subparagraphs
(i) and (ii) above shall not apply and all Dime Stock Election Shares will
be converted into the right to receive Washington Mutual Common Stock and
all Dime Cash Election Shares (subject to the provisions of Section 2.5(d))
will be converted into the right to receive cash.
2.7. No Fractional Shares. Notwithstanding any other provision of this
Agreement, neither certificates nor scrip for fractional shares of Washington
Mutual Common Stock shall be issued in the Merger. Each holder who otherwise
would have been entitled to a fraction of a share of Washington Mutual Common
Stock shall receive in lieu thereof cash (without interest) in an amount
determined by multiplying the fractional share interest to which such holder
would otherwise be entitled (after taking into account all shares of Dime Common
Stock owned by such holder at the Effective Time) by the Washington Mutual Share
Price. The "Washington Mutual Share Price" shall mean the average of the closing
sale prices of one share of Washington Mutual Common Stock for the ten trading
days immediately preceding the Closing Date on the New York Stock Exchange (the
"NYSE") as reported by The Wall Street Journal. No such holder shall be entitled
to dividends, voting rights or any other rights in respect of any fractional
share.
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. Treatment of Options and Other Stock-Based Awards. (a) At the
Effective Time, each option granted or heretofore assumed by Dime to purchase
shares of Dime Common Stock (each an "Dime Option") which is outstanding and
unexercised (whether or not exercisable) immediately prior thereto shall cease
to represent a right to acquire shares of Dime Common Stock and shall be
converted automatically into an option to purchase shares of Washington Mutual
Common Stock in an amount and at an exercise price determined as provided below
(and otherwise shall remain subject to the terms of the Dime Stock Incentive
Plan, as amended to the date hereof, the Dime 1991 Stock Incentive Plan, as
A-7
97
amended to the date hereof, the Dime Stock Incentive Plan for Outside Directors,
as amended to the date hereof, the Dime 1992 Stock Option Plan, as amended to
the date hereof, the Dime 1990 Stock Option Plan, as amended to the date hereof,
the Dime 1997 Stock Incentive Plan, as amended to the date hereof, the Dime 1997
Stock Incentive Plan for Outside Directors, as amended to the date hereof, the
Dime Pride Shares Program, as amended to the date hereof, the Dime Pride Shares
II Program, as amended to the date hereof, the Dime 1993 Employee Stock Purchase
Plan, as amended to the date hereof, and the North American Mortgage Company
Incentive Stock Option Plan, as amended to the date hereof, as applicable
(collectively, the "Dime Stock Option Plans"), and the agreements or letters
evidencing grants thereunder):
(i) the number of shares of Washington Mutual Common Stock to be
subject to the converted option shall be equal to the product of (x) the
number of shares of Dime Common Stock subject to the Dime Option and (y)
the Exchange Ratio (the "Option Conversion Ratio"), provided that any
fractional shares of Washington Mutual Common Stock resulting from such
multiplication shall be rounded up to the nearest whole share; and
(ii) the exercise price per share of Washington Mutual Common Stock
under the converted option shall be equal to the exercise price per share
of Dime Common Stock under the Dime Option divided by the Option Conversion
Ratio, provided that such exercise price shall be rounded down to the
nearest cent.
In the case of any Dime 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 and to avoid a "modification" of any such option
under Code Section 424(h). Except as otherwise provided in this Section
2.9, the duration and other terms of each converted option shall be the
same as the applicable Dime Option except that all references to Dime shall
be deemed to be references to Washington Mutual.
In addition to the foregoing, in the event that any Dime Option has
associated with it a stock appreciation right and/or limited stock
appreciation right, the number and kind of shares subject to such right and
the exercise price thereof shall be adjusted in the same manner as provided
above for such Dime Option, and the terms and conditions thereof shall
otherwise remain the same as they were immediately prior to the Effective
Time.
(b) At the Effective Time, each share of restricted stock (a "Restricted
Share" and, collectively, the "Restricted Shares") outstanding as of the
Effective Time and issued pursuant to a Dime Stock Option Plan or any other
equity-based plans or agreements of or with Dime or any of its Subsidiaries
providing for the grant of Restricted Share awards, to the extent not already
vested, shall vest and shall represent a right to receive the same rights
provided to other holders of Dime Common Stock pursuant to Section 2.5 above.
(c) Except as provided herein or as otherwise agreed to by the parties, the
Dime Stock Option Plans and any other plan, program or arrangement providing for
the issuance or grant of any other interest in respect of the capital stock of
Dime or any Subsidiary thereof shall terminate as of the Effective Time, and
Dime shall ensure that following the Effective Time no holder of a Dime Option
nor any holder of a Restricted Share or any other equity-based right shall have
any right to acquire equity securities of Dime or the Surviving Corporation
(except to the extent required under any qualified plan maintained by Dime or
any of its Subsidiaries).
2.10. Litigation Tracking Warrant Conversion. At and following the
Effective Time, each outstanding Litigation Tracking Warrant ("LTW") issued by
Dime pursuant to the Warrant Agreement, dated as of December 21, 2000 (the
"Warrant Agreement"), among Dime, the EquiServe Trust Company, N.A. ("ETC") and
EquiServe Limited Partnership ("ELP", and together with ETC, the "Warrant
Agent") shall entitle the holder thereof to receive upon exercise of such LTW,
in accordance with the terms of the Warrant Agreement, Merger Consideration
consistent with the terms thereof. In addition, in
A-8
98
accordance with the provisions of the Dime Stock Option Plans and the Dime
Voluntary Deferred Compensation Plan, the Dime Voluntary Deferred Compensation
Plan for Directors, the Deferred Compensation Plan for Board Members of The Dime
Savings Bank of New York, FSB, and the Benefit Restoration Plan of The Dime
Savings Bank of New York, FSB (the "Dime Phantom Stock Plans"), any Dime
Options, shares of restricted Dime Common Stock, and any other Dime equity-based
compensation (including the phantom Dime Common Stock provided for in the Dime
Phantom Stock Plans) that are outstanding immediately prior to the Effective
Time and that, as of such time, entitle the holder thereof to receive LTWs (or,
as applicable, the economic value of such LTWs), shall at and following the
Effective Time entitle the holder or beneficiary thereof to receive LTWs (or, as
applicable, their economic value), representing the right to receive shares of
Washington Mutual Common Stock upon the exercise of such LTWs, consistent with
the methodology and procedures described in resolutions heretofore adopted by
the Board of Directors and Compensation Committee of Dime.
2.11. Articles of Incorporation. At the Effective Time, the Articles of
Incorporation of Washington Mutual, as in effect immediately prior to the
Effective Time, shall be the Articles of Incorporation of the Surviving Company,
until thereafter amended in accordance with applicable law.
2.12. 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.
2.13. Board of Directors. Subject to Section 7.14, 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.
2.14. Tax Consequences. It is intended that the Merger shall constitute a
reorganization within the meaning of Section 368(a) of the Code, and that this
Agreement shall constitute a "plan of reorganization" as that term is used in
Sections 354 and 361 of the Code.
2.15. Reservation of Right to Revise Structure. Washington Mutual may at
any time change the method of effecting the business combination contemplated by
this Agreement if and to the extent that it deems such a change to be desirable,
including, without limitation, to provide for a merger of Dime with a wholly
owned subsidiary of Washington Mutual; provided, however, that no such change
shall (A) alter or change the amount or kind of consideration to be received by
holders of Dime Common Stock under this Agreement (the "Merger Consideration")
or their method of electing such Merger Consideration, or (B) adversely affect
the anticipated tax consequences of the Merger to the holders of Dime Common
Stock as a result of receiving the Merger Consideration, or (C) materially
impede or delay consummation of the Merger. In the event Washington Mutual
elects to make such a change, the parties agree to execute appropriate documents
to reflect the change.
3. EXCHANGE OF CERTIFICATES FOR MERGER CONSIDERATION
3.1. Washington Mutual to Make Merger Consideration Available. At or
promptly after the Election Deadline (but in no event prior to the Effective
Time), Washington Mutual shall deposit, or shall cause to be deposited, with the
Exchange Agent, for the benefit of the holders of Certificates (as defined
below) and for the benefit of each Warrant Holder in respect of the purchase
price under the Voting/Purchase Agreement, for exchange in accordance with this
Section 3, certificates representing the shares of Washington Mutual Common
Stock and an estimated amount of cash sufficient to pay the aggregate Cash
Election Price payable hereunder and thereunder and any cash that may be payable
in lieu of any fractional shares (such cash 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").
A-9
99
3.2. Exchange of Shares.
(a) As soon as practicable after the Effective Time, the Exchange Agent
shall mail to each holder of record of a certificate formerly representing
shares of Dime Common Stock (a "Certificate") a form of letter of transmittal
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon delivery of the Certificates to the
Exchange Agent) and instructions for use in effecting the surrender of the
Certificates in exchange for certificates representing, as the case may be, the
shares of Washington Mutual Common Stock, cash in respect of the Cash Election
Price and cash in lieu of fractional shares of Washington Mutual Common Stock,
if any, into which the shares of Dime Capital Stock represented by such
Certificate or Certificates shall have been converted pursuant to this
Agreement. Upon proper surrender of a Certificate for exchange and cancellation
to the Exchange Agent, together with a properly completed letter of transmittal,
duly executed, the holder of such Certificate shall be entitled to receive in
exchange therefor, as applicable, (i) a certificate representing that number of
shares of Washington Mutual Common Stock (if any) to which such former holder of
Dime Common Stock shall have become entitled pursuant to the provisions of
Section 2 hereof, (ii) a check representing that amount of cash (if any) to
which such former holder of Dime Common Stock shall have become entitled in
respect of the Cash Election Price pursuant to the provisions of Section 2
hereof and (iii) a check representing the amount of cash (if any) payable in
lieu of fractional shares of Washington Mutual Common Stock, which such former
holder has the right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Section 3, and the Certificate so surrendered
shall forthwith be cancelled. No interest will be paid or accrued on the cash
payable in lieu of fractional shares.
(b) No dividends or other distributions with a record date after the
Effective Time with respect to Washington Mutual Common Stock shall be paid to
the holder of any unsurrendered Certificate until the holder thereof shall
surrender such Certificate in accordance with this Section 3. After the
surrender of a Certificate in accordance with this Section 3, the record holder
thereof shall be entitled to receive any such dividends or other distributions,
without any interest thereon, which theretofore had become payable with respect
to shares of Washington Mutual Common Stock represented by such Certificate.
(c) If any certificate representing shares of Washington Mutual Common
Stock is to be issued in the name of other than the registered holder of the
Certificate surrendered in exchange therefor, it shall be a condition of the
issuance thereof that the Certificate so surrendered shall be properly endorsed
(or accompanied by an appropriate instrument of transfer) and otherwise in
proper form for transfer, and that the person requesting such exchange shall pay
to the Exchange Agent in advance any transfer or other taxes required by reason
of the issuance of a certificate representing shares of Washington Mutual Common
Stock in the name of and payment of cash to any person other than the registered
holder of the Certificate surrendered, or required for any other reason relating
to such holder or requesting person, or shall establish to the reasonable
satisfaction of the Exchange Agent that such tax has been paid or is not
payable.
(d) At or after the Effective Time, there shall be no transfers on the
stock transfer books of Dime of the shares of Dime Capital Stock which were
issued and outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates representing such shares are presented for transfer
to the Exchange Agent, they shall be cancelled and exchanged for certificates
representing shares of Washington Mutual Common Stock or payment of cash as
provided in this Section 3.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of Dime for six months after the Effective Time shall be paid, at
the request of Washington Mutual, to Washington Mutual. Any stockholders of Dime
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, 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 Dime 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, Dime, the Exchange Agent or any other person shall be liable
to any former holder of shares of Dime Common
A-10
100
Stock, for any amount properly delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
(f) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Washington
Mutual, the posting by such person of a bond in such amount as Washington Mutual
may determine is reasonably necessary as indemnity against any claim that may be
made against it with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate the shares of
Washington Mutual Common Stock, cash and cash in lieu of fractional shares
deliverable in respect thereof pursuant to this Agreement.
(g) As soon as practicable after the Election Deadline, the Exchange Agent
shall deliver to each Warrant Holder (i) a certificate representing that number
of shares of Washington Mutual Common Stock (if any) and a check representing
the amount of cash (if any) in respect of the Cash Election Price to which each
Warrant Holder would have become entitled pursuant to Section 2 hereof with
respect to the Deemed Shares if the Deemed Shares were outstanding shares of
Dime Common Stock as of the Effective Time, and (ii) a check representing the
amount of cash (if any) payable in lieu of fractional shares of Washington
Mutual Common Stock to which each Warrant Holder would have become entitled
pursuant to Section 2.7 with respect to the Deemed Shares if the Deemed Shares
were outstanding shares of Dime Common Stock as of the Effective Time.
(h) Washington Mutual or the Exchange Agent will be entitled to deduct and
withhold from the consideration otherwise payable pursuant to this Agreement or
the transactions contemplated hereby to any holder of Dime Common Stock or to
any Warrant Holder such amounts as Washington Mutual (or any Affiliate thereof)
or the Exchange Agent are required to deduct and withhold with respect to the
making of such payment under the Code, or any applicable provision of U.S.
federal, state, local or non-U.S. tax law. To the extent that such amounts are
properly withheld by Washington Mutual or the Exchange Agent, such withheld
amounts will be treated for all purposes of this Agreement as having been paid
to the holder of the Dime Common Stock or to any Warrant Holder in respect of
whom such deduction and withholding were made by Washington Mutual or the
Exchange Agent.
4. REPRESENTATIONS AND WARRANTIES OF DIME
Dime hereby represents and warrants to Washington Mutual as follows:
4.1. Corporate Organization.
(a) Dime is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Dime 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 Dime. As used in this Agreement,
the term "Material Adverse Effect" means, with respect to Dime, Washington
Mutual or the Surviving Corporation, as the case may be, a material adverse
effect on the business, results of operations or financial condition of such
party and its Subsidiaries taken as a whole or a material adverse effect on such
party's ability to consummate the transactions contemplated hereby on a timely
basis; provided, however, that in determining whether a Material Adverse Effect
has occurred, there shall be excluded any effect on the referenced party the
cause of which is (i) any change in banking, savings association and similar
laws, rules or regulations of general applicability or interpretations thereof
by courts or governmental authorities, (ii) any change in generally accepted
accounting principles ("GAAP") or regulatory accounting requirements applicable
to banks, savings associations, or their holding companies generally, (iii) the
announcement of this Agreement or any action of either party or any Subsidiary
thereof required to be taken by it under this Agreement and (iv) any changes in
general economic conditions affecting banks, savings associations, or their
holding companies generally, provided that the effect of such changes
A-11
101
described in this clause (iv) (including, without limitation, changes in the
interest rates) shall not be excluded to the extent of any materially
disproportionate impact (if any) they have on such party. For purposes of this
Agreement, "Subsidiary" means, with respect to any person, any corporation,
partnership, joint venture, limited liability company or any other entity that
is consolidated with such person for financial reporting purposes. Dime is duly
registered as a savings and loan holding company under the Home Owners' Loan
Act, as amended ("HOLA"), and qualifies as a savings and loan holding company of
the type described in Section 10(c)(3)(A) of HOLA. The copies of the Certificate
of Incorporation and Bylaws of Dime 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 Dime (i) is duly organized and validly existing as a
savings bank, corporation or partnership under the laws of its jurisdiction of
organization, (ii) is duly licensed or qualified to do business and is in good
standing in all jurisdictions (whether federal, state, local or foreign) where
its ownership or leasing of property or the conduct of its business requires it
to be so licensed or qualified and in which the failure to be so qualified would
have or would reasonably be expected to have, either individually or in the
aggregate, a Material Adverse Effect on Dime and (iii) has all requisite
corporate power and authority to own or lease its properties and assets and to
carry on its business as now conducted.
(c) Except for its ownership of The Dime Savings Bank of New York, FSB
("Dime Savings Bank"), Dime does not beneficially own, either directly or
through its Subsidiaries, any stock or equity interest in any depository
institution (as defined in 12 U.S.C. Section 1813(c)(1)). Dime Savings Bank is a
qualified thrift lender pursuant to Section 10(m) of HOLA and its deposits are
insured by the Federal Deposit Insurance Corporation (the "FDIC") through the
Savings Association Insurance Fund ("SAIF") and the Bank Insurance Fund ("BIF")
to the fullest extent permitted by law. Dime Savings Bank is a member in good
standing of the Federal Home Loan Bank ("FHLB") of New York.
4.2. Capitalization.
(a) The authorized capital stock of Dime consists of 350,000,000 shares of
Dime Common Stock and 40,000,000 shares of preferred stock, par value $0.01 per
share, of Dime (the "Dime Preferred Stock"). As of the close of business on June
22, 2001, there were 115,010,263 shares of Dime Common Stock outstanding, no
shares of Dime Preferred Stock outstanding and 5,244,031 shares of Dime Common
Stock held in Dime's treasury. No other shares of Dime Common Stock or Dime
Preferred Stock were outstanding. As of the close of business on June 22, 2001,
no shares of Dime Common Stock or Dime Preferred Stock were reserved for
issuance, except for 19,471,485 shares of Dime Common Stock reserved for
issuance in connection with the LTWs, 13,607,664 shares of Dime Common Stock
reserved for issuance in connection with the Investment Agreement, dated as of
July 6, 2000, between Dime and Warburg, Pincus Equity Partners, L.P. (the
"Warburg Agreement"), and 9,546,033 shares of Dime Common Stock reserved for
issuance upon the exercise of stock options pursuant to the Dime Stock Option
Plans and shares of Dime Preferred Stock reserved for issuance upon the exercise
of rights granted under Dime's Stockholder Protection Rights Agreement, dated as
of October 20, 1995 and amended as of July 6, 2000 (the "Rights Plan"). All of
the issued and outstanding shares of Dime 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 Dime delivered to Washington Mutual concurrently herewith
(the "Dime Disclosure Schedule"), (ii) for up to 112,975,607 LTWs, warrants to
acquire 8,142.738 shares of Series C junior nonvoting convertible preferred
stock (which are convertible into 8,142,738 shares of Dime Common Stock) and
warrants to acquire 5,464.926 shares of Series D junior nonvoting convertible
preferred stock (which are convertible into 5,464,926 shares of Dime Common
Stock) and (iii) as set forth elsewhere in this Section 4.2(a), Dime 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 Dime Common Stock or Dime Preferred Stock or any other
equity securities of Dime or any securities representing the right to purchase
or otherwise receive any shares of Dime capital stock (including, without
limitation, any rights plan or
A-12
102
agreement). Except as set forth in Section 4.2(a) of the Dime Disclosure
Schedule, since May 31, 2001, Dime has not issued any shares of its capital
stock or any securities convertible into or exercisable for any shares of its
capital stock, other than upon the exercise of employee stock options or
pursuant to restricted stock awards granted prior to such date and disclosed in
this Section 4.2(a).
(b) Section 4.2(b) of the Dime Disclosure Schedule lists the name,
jurisdiction of incorporation, authorized and outstanding shares of capital
stock and record and beneficial owners of such capital stock (with respect to
owners other than Dime or any Dime Subsidiary, to the extent known to Dime) for
each entity in which Dime beneficially owns or controls, directly or indirectly,
any equity interest (regardless of whether such entity is a Subsidiary) (a
"Controlled Entity") that is a Significant Subsidiary (as such term is defined
in Rule 1-02 of Regulation S-X) of Dime. Each Controlled Entity in which Dime or
any Dime Subsidiary beneficially owns or controls, directly or indirectly, more
than a 9.9% equity interest is a legal investment for a unitary savings and loan
holding company and, with respect to those owned by Dime Savings Bank, for a
federal savings association. Except as set forth in Section 4.2(b) of the Dime
Disclosure Schedule, Dime owns, directly or indirectly, all of the issued and
outstanding shares of capital stock of or all other equity interests in each of
Dime'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 Dime 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 Dime
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) No bonds, debentures, notes or other indebtedness having the right to
vote on any matters on which stockholders may vote are outstanding.
4.3. Authority; No Violation.
(a) Dime has full corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The Board of
Directors of Dime at a meeting held on June 24, 2001 has duly (i) determined
that this Agreement and the Merger are fair to and in the best interests of Dime
and its stockholders and declared this Agreement and the Merger to be advisable,
(ii) approved the Merger, the execution and delivery of this Agreement and the
consummation of the transaction contemplated hereby and (iii) recommended that
stockholders of Dime adopt this Agreement and directed that such matter be
submitted for consideration by Dime's stockholders at the Dime Stockholders
Meeting (as defined below). Except for the adoption of this Agreement by the
affirmative vote of the holders of a majority of the outstanding shares of Dime
Common Stock, no other corporate proceedings on the part of Dime are necessary
to approve this Agreement or to consummate the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by Dime and
(assuming due authorization, execution and delivery by Washington Mutual)
constitutes a valid and binding obligation of Dime, enforceable against Dime 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) Neither the execution and delivery of this Agreement by Dime nor the
consummation by Dime of the transactions contemplated hereby, nor compliance by
Dime with any of the terms or provisions hereof, will (i) violate any provision
of the Certificate of Incorporation or Bylaws of Dime 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 Dime 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, or require
redemption or repurchase or otherwise require the purchase or sale of any
securities, 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,
A-13
103
accelerate the performance required by, or result in the creation of any Lien
upon any of the respective properties or assets of Dime 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 Dime 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, defaults or other events which, either individually or in
the aggregate, will not have and would not reasonably be expected to have a
Material Adverse Effect on Dime.
4.4. Consents and Approvals. Except for (i) the approval of the Merger by
the Office of Thrift Supervision (the "OTS"), (ii) approval of the listing of
the Washington Mutual Common Stock to be issued in the Merger on NYSE, (iii) the
filing with the Securities and Exchange Commission (the "SEC") of a proxy
statement in definitive form relating to the meeting of Dime's stockholders to
be held to vote on approval of this Agreement and the Merger (the "Proxy
Statement/Prospectus") and any filings or approvals under applicable state
securities laws, (iv) the filing of the Certificate of Merger with the Delaware
Secretary pursuant to the DGCL, (vi) the adoption of this Agreement by the
requisite votes of the stockholders of Dime, (vii) the consents and approvals
set forth in Section 4.4 of the Dime Disclosure Schedule, and (viii) the
consents and approvals of third parties which are not Governmental Entities (as
hereinafter defined), the failure of which to be obtained will not have and
would not be reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect on Dime or Washington Mutual, 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 required
to be obtained by Dime or its Subsidiaries in connection with (A) the execution
and delivery by Dime of this Agreement and (B) the consummation by Dime of the
Merger and the other transactions contemplated hereby.
4.5. Reports. Dime and each of its Subsidiaries have timely filed all
material reports, registrations and statements, together with any amendments
required to be made with respect thereto, that they were required to file since
January 1, 1998 with any Governmental Entity and have paid all fees and
assessments due and payable in connection therewith, except for such failures to
file or make payment which will not have and would not be reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect on Dime.
Except for normal examinations conducted by a Governmental Entity in the regular
course of the business of Dime and its Subsidiaries or as set forth in Section
4.5 of the Dime Disclosure Schedule, no Governmental Entity has initiated any
proceeding or, to the best knowledge of Dime, threatened an investigation into
the business or operations of Dime or any of its Subsidiaries since January 1,
1998. Except as set forth in Section 4.5 of the Dime 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
Dime or any of its Subsidiaries, except for such violations, criticisms or
exceptions will not have and would not be reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on Dime.
4.6. Financial Statements. Dime has previously made available to Washington
Mutual copies of (a) the consolidated statements of financial condition of Dime
and its Subsidiaries as of December 31, 1999 and 2000 and the related
consolidated statements of operations, stockholders' equity and cash flows for
the years ended December 31, 1998 through 2000, inclusive, as reported in Dime's
Annual Report on Form 10-K for the year ended December 31, 2000 filed with the
SEC under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
accompanied by the audit report of KPMG LLP, independent auditors with respect
to Dime, and (b) the unaudited consolidated statements of financial condition of
Dime and its Subsidiaries as of March 31, 2000 and March 31, 2001, and the
related unaudited consolidated statements of operations, stockholders, equity
and cash flows for the three-month periods then ended, as reported in Dime's
Quarterly Report on Form 10-Q for the period ended March 31, 2001, 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 7.10(a) hereof (including
the related notes, where applicable) will fairly present when filed with the SEC
(subject, in the case of the unaudited statements, to normal recurring
adjustments, none of which
A-14
104
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 Dime 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 7.10(a) hereof (including the related notes,
where applicable) will comply when filed with the SEC, 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 7.10(a) (including the related
notes, where applicable) will be when filed with the SEC, 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 Dime
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 for Credit Suisse First Boston Corporation and
Merrill Lynch & Co., neither Dime 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 Credit Suisse First Boston Corporation and Merrill Lynch & Co.
have previously been furnished to Washington Mutual.
4.8. Absence of Certain Changes or Events.
(a) Except as publicly disclosed in the Dime Reports (as defined in Section
4.12) filed with the SEC prior to the date hereof, or as set forth in Section
4.8(a) of the Dime Disclosure Schedule, since December 31, 2000, no event has
occurred which has had or would reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Dime.
(b) Except as publicly disclosed in the Dime Reports filed prior to the
date hereof, as set forth in Section 4.8(b) of the Dime Disclosure Schedule or
as contemplated by this Agreement or permitted under Section 6.2, since December
31, 2000, Dime and its Subsidiaries have carried on their respective businesses
in all material respects in the ordinary course of business, and neither Dime
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, 2000 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 publicly disclosed in the Dime Reports filed with the SEC
prior to the date hereof, neither Dime nor any of its Subsidiaries is a party to
any, and there are no pending or, to the best of Dime's knowledge, threatened
legal, administrative, arbitral or other proceedings, claims, actions or
governmental or regulatory investigations of any nature against Dime or any of
its Subsidiaries or challenging the validity or propriety of the transactions
contemplated by this Agreement which can reasonably be expected to have 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 Dime.
(b) There is no injunction, order, judgment, decree or regulatory
restriction specifically imposed upon Dime, any of its Subsidiaries or the
assets of Dime or any of its Subsidiaries which has had, or would reasonably be
expected to have, a Material Adverse Effect on Dime or the Surviving Company.
A-15
105
4.10. Taxes.
(a)(x) Each of Dime and its Subsidiaries has (i) duly and timely filed
(including pursuant to applicable extensions granted without penalty) all
material Tax Returns (as hereinafter defined) required to be filed by it, and
such Tax Returns are true, correct and complete in all material respects, and
(ii) paid in full all Taxes due or made adequate provision in the financial
statements of Dime (in accordance with GAAP) for any such Taxes (as hereinafter
defined), whether or not shown as due on such Tax Returns; (y) no material
deficiencies for any Taxes have been proposed, asserted or assessed in writing
against or with respect to any Taxes due by or Tax Returns of Dime or any of its
Subsidiaries; and (z) there are no material Liens for Taxes upon the assets of
either Dime or its Subsidiaries except for statutory liens for current Taxes not
yet due or Liens for Taxes that are being contested in good faith by appropriate
proceedings and for which reserves adequate in accordance with GAAP have been
provided.
(b) Except as set forth in Section 4.10(b) of the Dime Disclosure Schedule,
neither Dime nor any of its Subsidiaries (A) is or has ever been a member of an
affiliated group (other than a group the common parent of which is Dime) filing
a consolidated tax return or (B) has any material liability for Taxes of any
person arising from the application of Treasury Regulation Section 1.1502-6 or
any analogous provision of state, local or foreign law, or as a transferee or
successor, by contract, or otherwise.
(c) Except as set forth in Section 4.10(c) of the Dime Disclosure Schedule,
none of the Dime or any of its Subsidiaries is a party to, is bound by or has
any obligation under any Tax sharing or Tax indemnity agreement or similar
contract or arrangement for which liability is material. No closing agreement
pursuant to Section 7121 of the Code (or any similar provision of state, local
or foreign law) has been entered into by or with respect to Dime or any of its
Subsidiaries for which liability is material.
(d) None of the Dime or any of its Subsidiaries has been a party to any
distribution occurring during the last two years in which the parties to such
distribution treated the distribution as one to which Section 355 of the Code is
applicable.
(e) All material Taxes required to be withheld, collected or deposited by
or with respect to Dime and each Subsidiary have been timely withheld, collected
or deposited as the case may be, and to the extent required, have been paid to
the relevant taxing authority.
(f) Neither Dime nor any of its Subsidiaries has requested, or been granted
any waiver of any federal, state, local or foreign statute of limitations with
respect to, or any extension of a period for the assessment of, any Tax.
(g) Except as set forth in Section 4.10(g) of the Dime Disclosure Schedule,
neither Dime nor any of its Subsidiaries is a party to any agreement, contract,
arrangement or plan that has resulted or would result, individually or in the
aggregate, in connection with this Agreement in the payment of any "excess
parachute payments" within the meaning of Section 280G of the Code and neither
Dime nor any of its Subsidiaries has made any payments and is not a party to any
agreement, and does not maintain any plan, program or arrangement, that could
require it to make any payments (including any deemed payment of compensation
upon the exercise of a Dime Option or upon the issuance of any Dime Common
Stock), that would not be fully deductible by reason of Section 162(m) of the
Code.
(h) Neither Dime nor any of its Subsidiaries has filed a consent to the
application of Section 341(f) of the Code.
(i) Dime is not aware of any fact or circumstance that could reasonably be
expected to prevent the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code.
(j) For purposes of this Agreement, "Taxes" shall mean all taxes, charges,
levies, penalties or other assessments imposed by any United States federal,
state, local or foreign taxing authority, including, but not limited to income,
excise, property, sales, transfer, franchise, payroll, withholding, social
security or other similar taxes, including any interest or penalties
attributable thereto.
A-16
106
(k) For purposes of this Agreement, "Tax Return" shall mean any return,
report, information return or other document (including any related or
supporting information) required to be filed with any taxing authority with
respect to Taxes, including without limitation all information returns relating
to Taxes of third parties, any claims for refunds of Taxes and any amendments or
supplements to any of the foregoing.
4.11. Employees; Employee Benefit Plans.
(a) Section 4.11(a) of the Dime Disclosure Schedule sets forth a true and
complete list or description 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 plans, fringe benefit, bonus, incentive,
deferred compensation, pension and other agreements, programs, policies and
arrangements, whether or not subject to the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")) that is maintained or contributed to as of
the date of this Agreement (the "Plans") by Dime or any of its Subsidiaries or
by any trade or business related thereto, whether or not incorporated (an "ERISA
Affiliate"), all of which together with Dime would be deemed a "single employer"
within the meaning of Section 4001 of ERISA.
(b) Except as set forth in Section 4.11(b) of the Dime Disclosure Schedule,
Dime has previously provided or 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 Dime 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 and nothing has occurred that would be
reasonably expected to result in any such plan ceasing to be qualified, (iii)
with respect to each Plan that 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 Dime, 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 Dime, its
Subsidiaries or the ERISA Affiliates or (z) benefits the full cost of which is
borne by the current or former employee (or his beneficiary), (v) no liability
under Title IV of ERISA has been incurred by Dime, 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 would be reasonably expected to result in Dime, its
Subsidiaries or any ERISA Affiliate incurring a material liability thereunder,
(vi) no Plan is a "multi-employer pension plan", as such term is defined in
Section 3(37) of ERISA, (vii) all contributions or other amounts payable by Dime
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) neither Dime, its Subsidiaries nor
any ERISA Affiliate has engaged in a transaction in connection with which Dime,
its Subsidiaries or any ERISA Affiliate could be subject to either a material
civil penalty assessed pursuant to Section 409 or 502(i) of ERISA or a material
tax imposed pursuant to Section 4975 or 4976 of the Code, and (ix) there are no
pending, or, to the knowledge of Dime, 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.
(d) Except as set forth in Section 4.11(d) of the Dime Disclosure Schedule,
no Plan exists which provides for or could result in the payment to any Dime
employee of any money or other property or rights
A-17
107
or accelerate the vesting or payment of such amounts or rights to any Dime
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 Dime Disclosure Schedule, since March 31,
2001, neither Dime nor any of its Subsidiaries has taken any action that would
result in a payment or acceleration described in the preceding sentence.
(e) Except as set forth in Section 4.11(e) of the Dime Disclosure Schedule,
(i) neither Dime nor any of its Subsidiaries is a party to or is bound by any
written contract or arrangement with respect to the employment or compensation
of any (x) consultants receiving in excess of $100,000 annually and (y)
employees receiving compensation (salary, bonus and commission) in excess of
$250,000 annually, and (ii) except as provided under the Plans set forth in
Sections 4.11(d) and (e) of the Dime Disclosure Schedule and other agreements or
arrangements set forth in Sections 4.11(d) and (e) of the Dime 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
Dime or any Subsidiary to any officer or employee thereof. No officer or
employee of Dime or any Subsidiary is, nor shall be, entitled to receive
duplicative severance payments and benefits under both (i) an employment or
severance agreement and (ii) a severance or change-in-control plan, program, or
other arrangement. Dime has previously delivered or made available to Washington
Mutual true and complete copies of all consulting agreements calling for
payments in excess of $150,000 annually, and employment and deferred
compensation agreements (or forms thereof) providing for compensation (salary,
bonus and commission) in excess of $250,000 annually that are in writing to
which Dime or any of its Subsidiaries is a party.
(f) Except as set forth in Section 4.11(f) of the Dime Disclosure Schedule,
no current employee of Dime or any of its Subsidiaries received aggregate
remuneration (bonus, salary and commission) in excess of $250,000 for 2000 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 Dime Disclosure Schedule, are made as a result
of consummation of the transactions contemplated by this Agreement, either alone
or upon the occurrence of any additional acts or events) in excess of $250,000
in 2001.
(g) With respect to the Amended and Restated Umbrella Trust Agreements
among Dime Bancorp, Inc., The Dime Savings Bank of New York, FSB and HSBC Bank
USA, as Trustee, with respect to the Covered Arrangements of The Dime Savings
Bank of New York, FSB and Related Entities, the Umbrella Trust Agreement among
Dime Bancorp, Inc., The Dime Savings Bank of New York, FSB and HSBC Bank USA, as
Trustee with respect to the Designated Arrangements of The Dime Savings Bank of
New York, FSB and Related Entities, and the Benefit Protection Trust Agreement
among Dime Bancorp, Inc., The Dime Savings Bank of New York, FSB and HSBC Bank
USA, as Trustee (together, the "Employee Umbrella Trusts") and the Amended and
Restated Umbrella Trust Agreement among Dime Bancorp, Inc., The Dime Savings
Bank of New York, FSB and HSBC Bank USA, as Trustee with respect to the Covered
Arrangements for Outside Directors of The Dime Savings Bank of New York, FSB and
Related Entities, (the "Director Umbrella Trust" and, collectively with the
Employee Umbrella Trusts, the "Umbrella Trust Agreements"): (i) there has been
no Irrevocable Election (as defined in each such agreement); (ii) all Covered
Arrangements (as defined in each such agreement) have been disclosed to
Washington Mutual prior to the date of this Agreement, and there shall be no
additional Covered Arrangements both approved and entered into after June 22,
2001, and (iii) except as provided in Section 7.7(f), at no time on or after the
date of this Agreement and prior to the Effective Time shall the Committee (as
defined in the Umbrella Trust Agreements during such time period) amend the
Umbrella Trust Agreements in any way without the prior written consent of
Washington Mutual.
(h) Effective as of the date of this Agreement, all Dime Stock Option Plans
under which grants may be made prospectively have been amended to delete all
references to "the publication or dissemination of an announcement of action
intended to result in a Terminating Event" (as defined in each applicable Dime
Stock Option Plan) with respect to future payments.
A-18
108
4.12. SEC Reports. Dime 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, 1999 and
prior to the date hereof by Dime 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 "Dime 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. Dime and its Subsidiaries
have timely filed all material Dime 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 Dime Reports complied as to form in all material respects
with the published rules and regulations of the SEC with respect thereto.
4.13. Compliance With Applicable Law. Except as disclosed in Section 4.13
of the Dime Disclosure Schedule, Dime 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 Dime 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 Dime, and neither Dime 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 Dime.
4.14. Certain Contracts.
(a) Except as publicly disclosed in the Dime Reports filed prior to the
date hereof or as set forth in Section 4.14(a) of the Dime Disclosure Schedule,
neither Dime 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 materially
limits the freedom of Dime or any of its Subsidiaries to compete in any material
line of business, in any geographic area or with any person, or which requires
exclusive referrals of material business or requires Dime or any of its
Subsidiaries to make available investment opportunities of a material nature or
magnitude to any person on a priority or exclusive basis, 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 Dime Reports filed
prior to the date hereof or set forth in Section 4.14(a) of the Dime Disclosure
Schedule, is referred to herein as a "Dime Contract", and neither Dime 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 Dime. Dime has made available all contracts which involved payments by
Dime or any of its Subsidiaries in fiscal year 2000 of more than $700,000 or
which could reasonably be expected to involve payments during fiscal year 2001
of more than $700,000, other than any such contract that is terminable at will
on 60 days or less notice without payment of a penalty in excess of $125,000 and
other than any contract entered into on or after the date hereof that is
permitted under the provisions of Section 6.2.
(b) Except as set forth in Section 4.14(b) of the Dime Disclosure Schedule,
(i) each Dime Contract is valid and binding on Dime and in full force and
effect, and, to the knowledge of Dime, is valid and binding on the other parties
thereto, (ii) Dime and each of its Subsidiaries has in all material respects
performed all obligations required to be performed by it to date under each Dime
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 Dime or any of its Subsidiaries under any such Dime 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 Dime.
A-19
109
4.15. Agreements With Regulatory Agencies. Except as set forth in Section
4.15 of the Dime Disclosure Schedule, neither Dime 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 Dime Disclosure
Schedule, a "Regulatory Agreement"), any Governmental Entity that currently
restricts or by its terms will in the future restrict the conduct of its
business or relates to its capital adequacy, its credit policies, its management
or its business, nor has Dime or any of its Subsidiaries been advised by any
Governmental Entity that it is considering issuing or requesting any Regulatory
Agreement. Dime is not aware of any fact or circumstance which is reasonably
likely to prevent it or Washington Mutual from obtaining the governmental
approvals and consents required in connection with the consummation by Dime of
the Merger and the other transactions contemplated hereby.
4.16. Undisclosed Liabilities. Except (i) for those liabilities that are
fully reflected or reserved against on the consolidated balance sheet of Dime
included in the Dime Form 10-Q for the quarter ended March 31, 2001 or (ii) for
liabilities incurred in the ordinary course of business consistent with past
practice since March 31, 2001, neither Dime 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 Dime.
4.17. Rights Agreement; Anti-Takeover Provisions. Dime has taken all action
necessary so that the entering into of this Agreement and the Voting/Purchase
Agreement and the consummation of the transactions contemplated hereby and
thereby do not and will not result in the grant of any rights to any person
under the Rights Agreement or enable or require the rights issuable thereunder
to be exercised, distributed or triggered. The Board of Directors of Dime 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 (and any
comparable provisions of Dime's Certificate of Incorporation and Bylaws), do not
and will not apply to this Agreement, the Voting/Purchase Agreement, the Merger
or the transactions contemplated hereby or thereby.
4.18. Dime Information. The information relating to Dime and its
Subsidiaries to be provided by Dime for inclusion in the Proxy
Statement/Prospectus, the registration statement on Form S-4 (the "S-4") in
which the Proxy Statement/Prospectus will be included as a prospectus, any
filings or approvals under applicable state securities laws, any filing pursuant
to Rule 165 or Rule 425 under the Securities Act or Rule 14a-12 under the
Exchange Act, 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. Except as disclosed in Section 4.19(a) of the Dime
Disclosure Schedule, Dime and its Subsidiaries have good, valid and marketable
title to all material real property owned by them free and clear of all Liens,
except Liens for current taxes not yet due and payable and other standard
exceptions commonly found in title policies in the jurisdiction where such real
property is located, and such encumbrances and imperfections of title, if any,
as do not materially detract from the value of the properties and do not
materially interfere with the present or proposed use of such properties or
otherwise materially impair such operations. All real property and fixtures
material to the business, operations or financial condition of Dime and its
Subsidiaries are in substantially good condition and repair except as would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Dime.
A-20
110
(b) Personal Property. Dime and its Subsidiaries have good, valid and
marketable title to all tangible personal property owned by them on the date
hereof, free and clear of all Liens except as publicly disclosed in the Dime
Reports filed prior to the date hereof or as disclosed in Section 4.19(b) of the
Dime Disclosure Schedule or as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Dime. With
respect to personal property used in the business of Dime and its Subsidiaries
which is leased rather than owned, neither Dime nor any Subsidiary thereof is in
default under the terms of any such lease the loss of which would reasonably be
expected to have, either individually or in the aggregate, a Material Adverse
Effect on Dime.
(c) Leased Property. All leases of real property and all other leases
material to Dime and its Subsidiaries under which Dime or a Subsidiary, as
lessee, leases real or personal property are valid and binding in accordance
with their respective terms, there is not under such lease any material existing
default by Dime or such Subsidiary or any event which with notice or lapse of
time would constitute such a default, and Dime or such Subsidiary quietly enjoys
the premises provided for in such lease except as would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect on
Dime.
4.20. Insurance. Dime and its Subsidiaries are insured with reputable
insurers against such risks and in such amounts as the management of Dime
reasonably has determined to be prudent in accordance with industry practice.
Dime and its Subsidiaries are in material compliance with their insurance
policies and are not in default under any of the material terms thereof. Each
such policy is outstanding and in full force and effect and, except as set forth
on Section 4.20 of the Dime Disclosure Schedule and except for policies insuring
against potential liabilities of officers, directors and employees of Dime and
its Subsidiaries, Dime or the relevant Subsidiary thereof is the sole
beneficiary of such policies. All premiums and other payments due under any such
policy have been paid, and all claims thereunder have been filed in due and
timely fashion.
4.21. Environmental Liability. Except as set forth in Section 4.21 of the
Dime 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 Dime 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 Dime,
threatened against Dime or any of its Subsidiaries, which liability or
obligation would have or would reasonably be expected to have a Material Adverse
Effect on Dime. To the knowledge of Dime, 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 Dime. To the knowledge of Dime, 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 Dime. Neither Dime
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 Dime.
4.22. Opinion Of Financial Advisor. Dime has received the opinions of
Credit Suisse First Boston Corporation and Merrill Lynch & Co., each dated as of
the date of this Agreement, to the effect that, as of such date, the Merger
Consideration to be received by holders of Dime Common Stock in the Merger is
fair from a financial point of view to such holders of Dime Common Stock.
A-21
111
4.23. Loan Matters.
(a) Each outstanding Loan and each commitment to extend credit has been
solicited and originated and is administered and serviced in accordance with the
relevant loan documents and Dime's underwriting standards, except to the extent
that any such failure would not have and would not reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect on
Dime.
(b) Each of Dime and its Subsidiaries which is required to be so
approved is approved by and is in good standing: (i) as a supervised mortgagee
by the Department of Housing and Urban Development ("HUD") to originate and
service Title I and Title I FHA mortgage loans; (ii) as a GNMA I and II Issuer
by the Government National Mortgage Association ("Ginnie Mae"); (iii) by the
Veteran's Administration ("VA") to originate and service VA loans; and (iv) as a
seller/servicer by Fannie Mae and the Federal Home Loan Mortgage Corporation
("Freddie Mac") to originate and service conventional residential and
multi-family mortgage loans.
4.24. Labor Matters. Neither Dime 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 Dime 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 Dime 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 Dime's knowledge, threatened except
for such disputes as would not have and would not reasonably be expected to
have, either individually or in the aggregate, a Material Adverse Effect on
Dime, nor is Dime 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.
4.25. CRA Agreements. Except as disclosed in Section 4.25 of the Dime
Disclosure Schedule, neither Dime nor any of its Subsidiaries is a party to any
"agreement" (as such term is defined in 12 U.S.C. Section 1831y(e)(1)), whether
entered into before or after the enactment date of the Gramm-Leach-Bliley Act.
5. REPRESENTATIONS AND WARRANTIES OF WASHINGTON MUTUAL
Washington Mutual hereby represents and warrants to Dime as follows:
5.1. Corporate Organization. Washington Mutual is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Washington. Washington Mutual has the corporate power and authority to own or
lease all of its properties and assets and to carry on its business as it is now
being conducted, and is duly licensed or qualified to do business in each
jurisdiction in which the nature of the business conducted by it or the
character or location of the properties and assets owned or leased by it makes
such licensing or qualification necessary, except where the failure to be so
licensed or qualified would not have or reasonably be expected to have a
Material Adverse Effect on Washington Mutual. Washington Mutual is duly
registered as a savings and loan holding company under HOLA. The copies of the
Articles of Incorporation and Bylaws of Washington Mutual which have previously
been made available to Dime are true, complete and correct copies of such
documents as in effect as of the date of this Agreement. Washington Mutual Bank,
FA is a qualified thrift lender pursuant to Section 10(m) of HOLA and its
deposits and insured by the FDIC primarily through the SAIF, to the fullest
extent permitted by law. Washington Mutual Bank, FA is a member in good standing
of the FHLB of San Francisco.
5.2. Capitalization. The authorized capital stock of Washington Mutual
consists of 1,600,000,000 shares of Washington Mutual Common Stock and
10,000,000 shares of preferred stock, no par value. As of the close of business
on May 31, 2001, there were 895,957,472 shares of Washington Mutual Common Stock
outstanding and 2,000,000 shares of Washington Mutual Series H Preferred Stock
outstanding. As of the close of business on May 31, 2001, except for 4,006,680
shares of Washington Mutual Common Stock reserved for issuance in connection
with the Washington Mutual Series H Preferred Stock and
A-22
112
27,786,300 shares of Washington Mutual common stock reserved for issuance in
connection with Washington Mutual's Trust Preferred Income Equity Redeemable
Securities Units, 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 of the disclosure
schedule of Washington Mutual delivered to Dime concurrently herewith (the
"Washington Mutual Disclosure Schedule"), (ii) as provided in the Rights
Agreement, dated as of December 20, 2000, between Washington Mutual and Mellon
Investor Services L.L.C. (as amended and supplemented, the "Washington Mutual
Rights Agreement"), and (iii) as set forth elsewhere in this Section 5.2,
Washington Mutual does not have and is not bound by any outstanding
subscriptions, options, warrants, calls, commitments or agreements of any
character calling for the purchase or issuance of any shares of Washington
Mutual Common Stock or Washington Mutual preferred stock or any other equity
securities of Washington Mutual or any securities representing the right to
purchase or otherwise receive any shares of Washington Mutual Common Stock or
Washington Mutual preferred stock. The shares of Washington Mutual Common Stock
to be issued pursuant to the Merger will be duly authorized and validly issued
and, at the Effective Time, all such shares will be fully paid, nonassessable
and free of preemptive rights, with no personal liability attaching to the
ownership thereof.
5.3. Authority; No Violation.
(a) Washington Mutual has full corporate power and authority to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby (including the issuance of Washington Mutual
Common Stock hereunder) 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 to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by Washington Mutual and (assuming due authorization,
execution and delivery by Dime) 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 by
Washington Mutual, nor the consummation by Washington Mutual of the transactions
contemplated hereby, nor compliance by Washington Mutual with any of the terms
or provisions hereof, will (i) violate any provision of the Articles of
Incorporation or Bylaws of Washington Mutual or any of the similar governing
documents of any of its Subsidiaries or (ii) assuming that the consents and
approvals referred to in Section 5.4 are duly obtained, (x) violate any statute,
code, ordinance, rule, regulation, judgment, order, writ, decree or injunction
applicable to Washington Mutual or any of its Subsidiaries or any of their
respective properties or assets, or (y) violate, conflict with, result in a
breach of any provision of or the loss of any benefit under, constitute a
default (or an event which, with notice or lapse of time or both, would
constitute a default) under, result in the termination of or a right of
termination or cancellation under, accelerate the performance required by, or
result in the creation of any Lien upon any of the respective properties or
assets of Washington Mutual or any of its Subsidiaries under, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust,
license, lease, agreement or other instrument or obligation to which Washington
Mutual or any of its Subsidiaries is a party, or by which they or any of their
respective properties or assets may be bound or affected, except (in the case of
clause (y) above) for such violations, conflicts, breaches, defaults or other
events 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) the approval of the Merger by
the OTS, (ii) approval of the listing of the Washington Mutual Common Stock to
be issued in the Merger on the NYSE, (iii) the filing with the SEC of the Proxy
Statement/Prospectus and the filing and declaration of
A-23
113
effectiveness of the S-4, (iv) the filing of the Articles of Merger with the
Washington Secretary pursuant to the WBCA and the Certificate of Merger with the
Delaware Secretary pursuant to the DGCL, (v) the adoption this Agreement by the
requisite vote of the stockholders of Dime, (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 be obtained will not have and would not be reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect on
Washington Mutual, no consents or approvals of, or filings or registrations
with, any Governmental Entity or any third party are necessary in connection
with (A) the execution and delivery by Washington Mutual of this Agreement and
(B) the consummation by Washington Mutual of the Merger and the other
transactions contemplated hereby.
5.5. Reports. Washington Mutual and each of its Subsidiaries have timely
filed all material reports, registrations and statements, together with any
amendments required to be made with respect thereto, that they were required to
file since January 1, 1998 with any Governmental Entities, and have paid all
fees and assessments due and payable in connection therewith. Except as set
forth in Section 5.5 of the Washington Mutual Disclosure Schedule and except for
normal examinations conducted by a Governmental Entity in the regular course of
the business of Washington Mutual and its Subsidiaries, no Governmental Entity
has initiated any proceeding or, to the best knowledge of Washington Mutual,
investigation into the business or operations of Washington Mutual or any of its
Subsidiaries since January 1, 1998. 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 Dime copies of (a) the consolidated balance sheets of Washington Mutual and
its Subsidiaries as of December 31, 1999 and 2000, and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
years ending December 31, 1998 through 2000, inclusive, as reported in
Washington Mutual's Annual Report on Form 10-K for the year ended December 31,
2000 filed with the SEC under the Exchange Act, 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, 2000, and March 31, 2001,
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, 2001 filed with the SEC under the Exchange Act. Each of the
financial statements referred to in this Section 5.6 (including the related
notes, where applicable) fairly present, and the financial statements referred
to in Section 7.10 hereof (including the related notes, where applicable) will
fairly present when filed with the SEC (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 7.10 hereof (including the related notes,
where applicable) will comply when filed with the SEC, 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 7.10 (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
A-24
114
directors has employed any broker or finder or incurred any liability for any
broker's fees, commissions or finder's fees in connection with any of the
transactions contemplated by this Agreement.
5.8. Absence of Certain Changes or Events. Except as publicly disclosed in
Washington Mutual Reports (as defined in Section 5.10) filed prior to the date
hereof or as set forth in Section 5.8 of the Washington Mutual Disclosure
Schedule, since December 31, 2000, no event has occurred which has had or would
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Washington Mutual.
5.9. Legal Proceedings.
(a) Neither Washington Mutual nor any of its Subsidiaries is a party to
any, and there are no pending or, to the best of Washington Mutual's knowledge,
threatened legal, administrative, arbitral or other proceedings, claims, actions
or governmental or regulatory investigations of any nature against Washington
Mutual or any of its Subsidiaries or challenging the validity or propriety of
the transactions contemplated by this Agreement as to which there is a
reasonable possibility of an adverse determination and which, if adversely
determined, would, individually or in the aggregate, have or reasonably be
expected to have a Material Adverse Effect on Washington Mutual.
(b) There is no injunction, order, judgment, decree, or regulatory
restriction imposed upon Washington Mutual, any of its Subsidiaries or the
assets of Washington Mutual or any of its Subsidiaries which has had, or would
reasonably be expected to have, a Material Adverse Effect on Washington Mutual.
5.10. SEC Reports. Washington Mutual has previously made available to Dime
an accurate and complete copy of each final registration statement, prospectus,
report, schedule and definitive proxy statement filed since January 1, 1999 and
prior to the date hereof by Washington Mutual with the SEC pursuant to the
Securities Act or the Exchange Act (the "Washington Mutual Reports"), and no
such registration statement, prospectus, report, schedule or proxy statement
contained any untrue statement of a material fact or omitted to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances in which they were made, not
misleading. Washington Mutual and its Subsidiaries have timely filed all
Washington Mutual Reports and other documents required to be filed by them under
the Securities Act and the Exchange Act, and, as of their respective dates, all
Washington Mutual Reports complied as to form 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 relates to its capital adequacy, its credit policies, its
management or its business, nor has Washington Mutual or any
A-25
115
of its Subsidiaries been advised by any Governmental Entity that it is
considering issuing or requesting any Regulatory Agreement. Washington Mutual is
not aware of any fact or circumstance which is reasonably likely to prevent it
or Dime from obtaining the governmental approvals and consents required in
connection with the consummation by Washington Mutual of the Merger and the
other transactions contemplated hereby.
5.13. Undisclosed Liabilities. Except for those liabilities that are fully
reflected or reserved against on the consolidated balance sheet of Washington
Mutual included in the Washington Mutual Form 10-Q for the quarter ended March
31, 2001 or for liabilities incurred in the ordinary course of business
consistent with past practice since March 31, 2001, neither Washington Mutual
nor any of its Subsidiaries has incurred any liability of any nature whatsoever
(whether absolute, accrued, contingent or otherwise and whether due or to become
due) that, either alone or when combined with all similar liabilities, has had,
or would reasonably be expected to have, a Material Adverse Effect on Washington
Mutual.
5.14. Washington Mutual Information. The information relating to Washington
Mutual and its Subsidiaries to be provided by Washington Mutual to be contained
in the Proxy Statement/Prospectus, the S-4, any filing pursuant to Rule 165 or
Rule 425 under the Securities Act or Rule 14a-12 under the Exchange Act, 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 Dime
or any of its Subsidiaries) will comply as to form in all material respects with
the provisions of the Exchange Act and the rules and regulations thereunder. The
S-4 will comply as to form in all material respects with the provisions of the
Securities Act and the rules and regulations thereunder.
6. COVENANTS RELATING TO CONDUCT OF BUSINESS
6.1. Conduct of Business Prior to the Effective Time. Except as expressly
contemplated or permitted by this Agreement, or as required by applicable law,
rule or regulation, during the period from the date of this Agreement to the
Effective Time, Dime 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. Dime Forbearances. Except as set forth in Section 6.2 of the Dime
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, Dime shall not, and shall not
permit any of its Subsidiaries to, without the prior written consent of
Washington Mutual (which consent shall not be unreasonably withheld):
(a) adjust, split, combine or reclassify any capital stock; set any
record or payment dates for the payment of any dividends or distributions
on its capital stock or 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
grant any stock appreciation rights or grant any individual, corporation,
joint venture or other entity any right to acquire any shares of its
capital stock, other than (i) subject to Section 6.4, regular quarterly
cash dividends on Dime Common Stock equal to the rate declared and paid
during the current fiscal quarter with record and payment dates consistent
with past practice, provided, however, that no dividend shall be paid by
Dime on Dime Common Stock if Dime shall be required to borrow to do so; and
(ii) dividends paid by any of the Subsidiaries of Dime so long as such
dividends are only paid to Dime or any of its other wholly owned
Subsidiaries; provided that no such dividend shall cause Dime Savings Bank
to cease to qualify as a "well capitalized" institution
A-26
116
under 12 CFR 565); or issue or commit to issue any additional shares of
capital stock (except pursuant to the exercise of stock options or warrants
outstanding as of the date hereof) or any securities convertible into or
exercisable for, or any rights, warrants or options to acquire, any
additional shares of capital stock;
(b) sell, transfer, mortgage, encumber or otherwise dispose of any of
its assets or properties to any individual, corporation or other entity
(other than a direct wholly owned Subsidiary), by merger, consolidation,
asset sale or other business combination 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 Dime, 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 Dime Disclosure Schedule;
(c) make any acquisition or investment, by purchase or other
acquisition of stock or other equity interests (other than in a fiduciary
or agent capacity or pursuant to written contracts or agreements entered
into prior to the date hereof (true and correct copies of which have been
delivered to Washington Mutual prior to the date of this Agreement)), by
merger, consolidation, asset purchase or other business combination, or by
contributions to capital, or make any material property transfers or
material purchases of any property or assets, in or from any other
individual, corporation, joint venture or other entity other than a wholly
owned Subsidiary of Dime, except as expressly required by the terms of any
contracts or agreements in force at the date of this Agreement and set out
in Section 6.2 of the Dime Disclosure Schedule;
(d) enter into, renew, extend or terminate any Loan, lease, contract
or other agreement, other than Loans made in the ordinary course of
business and in accordance with paragraph (i) below, that calls for
aggregate annual payments of $700,000 and which is not either (i)
terminable at will on 60 days or less notice without payment of a penalty
in excess of $70,000 or (ii) has a term of less than one year; make any
change to the lease relating to North American Mortgage Company's
headquarters in Tampa, Florida; or make any material change in any of its
other leases, material contracts or other material agreements, other than
renewals 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 officers above the level of Vice President) or as
required by contractual commitments outstanding on the date hereof, (i)
increase in any material respect the compensation or fringe benefits of any
of its employees, (ii) pay any pension or retirement allowance not required
by any existing plan or agreement to any such employees, (iii) become a
party to, amend (other than amendments required by law or by Washington
Mutual as set forth in Section 7.7) or commit itself (orally or in writing)
to any compensation (other than any retention plan approved in writing by
Washington Mutual), pension, retirement, profit-sharing, severance,
change-in-control or welfare benefit plan or agreement or employment
agreement with or for the benefit of any employee, (iv) hire any new
executive officers, or (v) accelerate the vesting of any stock options or
other stock-based compensation;
(f) authorize or permit its officers, directors, employees, agents,
advisors and affiliates (collectively, "Representatives") to (i) initiate,
solicit, encourage or knowingly facilitate any inquiries or proposals with
respect to, any Acquisition Proposal or (ii) engage in any negotiations
concerning, or provide any nonpublic information to, or have any
discussions with, any person relating to, any Acquisition Proposal, or
(iii) waive any provision of or amend the terms of the Rights Agreement (or
redeem the rights issued thereunder) in respect of an Acquisition Proposal;
provided that, in the event Dime receives an unsolicited bona fide
Acquisition Proposal and Dime's board of directors concludes in good faith
that such Acquisition Proposal constitutes or is reasonably likely to
result in a Superior Proposal, Dime may, and may permit its Subsidiaries
and its and their Representatives to, take any action described in clause
(ii) above to the extent that the board of directors of Dime concludes in
good faith (based on the advice of its outside counsel) that failure to
take such actions would more likely than not result in a violation of its
fiduciary duties under applicable law; provided that prior to
A-27
117
providing any nonpublic information permitted to be provided pursuant to
the foregoing proviso, Dime shall have entered into a confidentiality
agreement with such third party on terms no less favorable to Dime than the
Confidentiality Agreement. Dime will immediately cease and cause to be
terminated any activities, discussions or negotiations conducted before the
date of this Agreement with any persons other than Washington Mutual with
respect to any Acquisition Proposal and will use its reasonable best
efforts to enforce any confidentiality or similar agreement relating to an
Acquisition Proposal. Dime will promptly (within one Business Day) advise
Washington Mutual following receipt of any Acquisition Proposal of the
substance thereof (including the identity of the person making such
Acquisition Proposal), and will keep Washington Mutual apprised of any
related developments, discussions and negotiations (including the terms and
conditions of the Acquisition Proposal) on a current basis. Nothing
contained in this Agreement shall prevent Dime or its board of directors
from complying with Rule 14d-9 and Rule 14e-2 under the Exchange Act with
respect to an Acquisition Proposal, provided that such Rules will in no way
eliminate or modify the effect that any action pursuant to such Rules would
otherwise have under this Agreement. As used in this Agreement,
"Acquisition Proposal" shall mean any tender or exchange offer, proposal
for a merger, consolidation or other business combination involving Dime or
any of its Subsidiaries or any proposal or offer to acquire in any manner
more than 15% of the voting power in, or more than 15% of the business,
assets or deposits of, Dime or any of its Subsidiaries, other than the
transactions contemplated by this Agreement. As used in this Agreement,
"Superior Proposal" means any bona fide written Acquisition Proposal which
the board of directors of Dime concludes in good faith to be more favorable
from a financial point of view to its stockholders than the Merger and the
other transactions contemplated hereby, (1) after receiving the advice of
its financial advisors (who shall be nationally recognized investment
banking firms), (2) after taking into account the likelihood of
consummation of such transaction on the terms set forth therein (as
compared to, and with due regard for, the terms herein) and (3) after
taking into account all legal (with the advice of outside counsel),
financial (including the financing terms of any such proposal), regulatory
and other aspects of such proposal and any other relevant factors permitted
under applicable law; provided that for purposes of the definition of
"Superior Proposal", the references to "more than 15%" in the definition of
Acquisition Proposal shall be deemed to be references to "a majority" and
the definition of Acquisition Proposal shall only refer to a transaction
involving Dime and not its Subsidiaries;
(g) other than in accordance with contracts entered into prior to the
date of this Agreement which were disclosed to Washington Mutual prior to
the date hereof or otherwise in accordance with this Agreement, make (i)
any capital expenditures relating to technology initiatives (including
Internet web sites) or (ii) any other capital expenditures in excess of (A)
$400,000 per project or related series of projects or (B) $2,500,000 in the
aggregate, other than expenditures necessary to maintain existing assets in
good repair;
(h) expand its private banking business in any material respect or,
except in the ordinary course of business, make application for the
opening, relocation or closing of any, or open, relocate or close any,
branch office or loan production or servicing facility (provided that Dime
shall not open any new branch office or loan production or servicing
facility in any state in which it does not have such operations at the date
of this Agreement);
(i) except for Loans or commitments for Loans that have previously
been approved by Dime prior to the date of this Agreement, (A) make or
acquire any Loan or issue a commitment for any Loan other than Loans made
or acquired in the ordinary course of business consistent with past
practice which have (x) in the case of commercial and commercial real
estate Loans, (i) a principal balance not in excess of $10,000,000 and (ii)
involve aggregate borrowings by the applicable borrower not in excess of
$20,000,000, or (y) in the case of Loans for the purchase of single-family
residences, a principal balance not in excess of $1,500,000 unless, in each
such case, Dime promptly provides to Washington Mutual copies of the
approvals for such Loans; provided that Washington Mutual may in its
reasonable judgment determine to require that it consent in advance to
Loans of the types referred to in clauses (x) or (y) and in such event,
Washington Mutual and Dime will work in a cooperative
A-28
118
manner to establish procedures by which such consent will be provided in
order to ensure that this consent process does not materially interfere
with the continued operations of Dime in the ordinary course of business
consistent with past practice; (B) take any action that would result in any
discretionary releases of collateral or guarantees or otherwise restructure
any Loan or commitment for any Loan with a principal balance in excess of
the respective amounts set forth in clause (A) above; or (C) agree to
guarantee the obligations of any person other than any wholly owned
Subsidiary of Dime;
(j) 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,
agreement or judgment restricting its business or operations;
(k) amend its certificate of incorporation, bylaws or similar
governing documents, or enter into a plan of consolidation, merger, share
exchange or reorganization with any person (other than consolidations,
mergers or reorganizations solely among wholly owned subsidiaries of Dime),
or a letter of intent or agreement in principle with respect thereto;
(l) materially change its investment securities portfolio policy, or
the manner in which the portfolio is classified or reported;
(m) 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, (ii) hedging its
loan positions or commitments, or (iii) without prior notice to Washington
Mutual, pricing of its other products and services;
(n) take any action that is intended or may reasonably be expected to
result in any of its representations and warranties set forth in this
Agreement being or becoming untrue in any material respect at any time
prior to the Effective Time, or in any of the conditions to the Merger set
forth in Section 8.1 or 8.2 not being satisfied or in a material violation
of any provision of this agreement, except, in every case, as may be
required by applicable law;
(o) make any changes in its accounting methods or method of Tax
accounting, practices or policies, except as may be required under law,
rule, regulation or GAAP, in each case as concurred in by Dime's
independent public accountants;
(p) enter into any commercial loan securitizations or create any
special purpose funding entity;
(q) enter into any agreement or amend or terminate any agreement
between Dime or any of its Subsidiaries, on the one hand, and Warburg or
any of its affiliates, on the other, in each case other than agreements
entered into by Dime and its Subsidiaries with customers in the ordinary
course of its banking business;
(r) introduce any material new products or services, any material
marketing campaigns or any material new sales compensation or incentive
programs or arrangements, in each case without prior notice to Washington
Mutual;
(s) make or change any Tax election, settle or compromise any material
Tax liability of Dime or any of its Subsidiaries, agree to an extension of
the statute of limitations with respect to the assessment or determination
of Taxes of Dime or any of its Subsidiaries, enter into any closing
agreement with respect to any Tax or surrender any right to claim a Tax
refund;
(t) intentionally take any action or fail to take any action which
would reasonably be expected to materially and adversely impair or delay
consummation of the transactions contemplated hereby beyond the time period
contemplated by this Agreement; or
(u) agree to, or make any commitment to, take any of the actions
prohibited by this Section 6.2.
6.3. No Fundamental Washington Mutual Changes. Except as expressly
contemplated or permitted by this Agreement, or as required by applicable law,
rule or regulation, during the period from the date of
A-29
119
this Agreement to the Effective Time, Washington Mutual shall not, without the
prior written consent of Dime (which consent shall not be unreasonably
withheld), (i) 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 Dime Capital Stock, (ii) take any action that is intended or may
reasonably be expected to result in any of its representations and warranties
set forth in this Agreement being or becoming untrue in any material respect at
any time prior to the Effective Time, or in any of the conditions to the Merger
set forth in Section 8.1 or 8.3 not being satisfied or in a material violation
of any provision of this Agreement, (iii) intentionally take any action or fail
to take any action which would reasonably be expected to materially and
adversely impair or delay consummation of the transactions contemplated hereby
beyond the time period contemplated by this Agreement or (iv) agree to, or make
any commitment to, take any of the actions prohibited by this Section 6.3.
6.4. Dividends. Until the Effective Time, Dime and Washington Mutual shall
coordinate the declaration and payment of any dividends in respect of Dime
Common Stock and Washington Mutual Common Stock and the record dates and the
payment dates relating thereto, it being the intention of Dime and Washington
Mutual that holders of Dime Common Stock shall not receive two dividends, or
fail to receive one dividend, for any single calendar quarter with respect to
their shares of Dime Common Stock and/or any shares of Washington Mutual Common
Stock that any such holder receives in exchange therefor pursuant to the Merger.
7. ADDITIONAL AGREEMENTS
7.1. Regulatory Matters.
(a) Washington Mutual and Dime shall promptly prepare and file with the SEC
the Proxy Statement/Prospectus and the S-4. Each of Washington Mutual and Dime
shall use reasonable best efforts to have the S-4 declared effective under the
Securities Act as promptly as practicable after such filing, and Dime shall
thereafter mail the Proxy Statement/Prospectus to its stockholders.
(b) Dime acknowledges that Washington Mutual desires to cause at or
promptly following the Effective Time the merger (the "Second Merger") of Dime
Savings Bank with and into one of Washington Mutual's wholly owned depository
institution Subsidiaries to be selected by Washington Mutual.
(c) Subject to the other provisions of this Agreement, the parties hereto
shall cooperate with each other and use reasonable best efforts to promptly
prepare and file all necessary documentation, to effect all applications,
notices, petitions and filings, to obtain as promptly as practicable all
permits, consents, approvals and authorizations of all third parties and
Governmental Entities which are necessary or advisable to consummate the
transactions contemplated by this Agreement (including without limitation the
Merger and the Second Merger) and to comply with the terms and conditions of all
such permits, consents, approvals and authorizations of all such third parties
and Governmental Entities.
(d) Washington Mutual and Dime shall, upon request, furnish each other with
all information concerning themselves, their Subsidiaries, directors, officers
and stockholders and such other matters as may be reasonably necessary or
advisable in connection with the Proxy Statement/Prospectus, the S-4 or any
other statement, filing, notice or application made by or on behalf of
Washington Mutual, Dime or any of their respective Subsidiaries to any
Governmental Entity in connection with the Merger and the other transactions
contemplated by this Agreement.
(e) Washington Mutual and Dime shall promptly advise each other upon
receiving any communication from any Governmental Entity whose consent or
approval is required for consummation of the transactions contemplated by this
Agreement which causes such party to believe that there is a reasonable
likelihood that any Requisite Regulatory Approval (as defined in Section 8.1(c)
below) will not be obtained or that the receipt of any such approval will be
materially delayed or conditioned.
A-30
120
7.2. Access to Information.
(a) Upon reasonable notice and subject to applicable laws relating to the
exchange of information, Dime shall, and shall cause each of its Subsidiaries
to, afford to the officers, employees, accountants, counsel and other
Representatives of Washington Mutual access, during normal business hours during
the period prior to the Effective Time, to all its properties, books, contracts,
commitments and records, and to its officers, employees, accountants, counsel
and other representatives, in each case in a manner not unreasonably disruptive
to the operation of the business of Dime and its Subsidiaries, and, during such
period, Dime 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 Dime 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 Dime nor any of its
Subsidiaries shall be required to provide access to or to disclose information
where such access or disclosure would violate or prejudice the rights of its
customers, jeopardize the attorney-client privilege of the institution in
possession or control of such information or contravene any law, rule,
regulation, order, judgment, decree, fiduciary duty or binding agreement entered
into prior to the date of this Agreement or in the ordinary course of business
consistent with past practice. The parties hereto will make appropriate and
reasonable substitute disclosure arrangements under circumstances in which the
restrictions of the preceding sentence apply.
(b) Washington Mutual shall hold all information furnished by Dime 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 May 2, 2001, between Washington Mutual and Dime
(the "Confidentiality Agreement").
(c) 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.
(a) Dime shall duly take all lawful action to call, give notice of, convene
and hold a meeting of its stockholders as promptly as practicable following the
date upon which the Form S-4 becomes effective (the "Dime Stockholders Meeting")
for the purpose of obtaining the required vote of the holders of Dime Common
Stock with respect to the transactions contemplated by this Agreement and,
subject to Section 7.3(b), shall take all lawful action to solicit the adoption
of this Agreement by such stockholders. The Board of Directors of Dime shall
recommend adoption of this Agreement by the stockholders of Dime and shall not
(x) withdraw, modify or qualify in any manner adverse to Washington Mutual such
recommendation or (y) take any other action or make any other public statement
in connection with the Dime Stockholders Meeting inconsistent with such
recommendation (collectively, a "Change in Dime Recommendation"), except as and
to the extent expressly permitted by Section 7.3(b). Notwithstanding any Change
in Dime Recommendation, this Agreement shall be submitted to the stockholders of
Dime at the Dime Stockholders Meeting for the purpose of adopting this Agreement
and nothing contained herein shall be deemed to relieve Dime of such obligation.
In addition to the foregoing, Dime shall not submit to the vote of its
stockholders any Acquisition Proposal other than the Merger.
(b) Notwithstanding the foregoing Dime and its Board of Directors shall be
permitted to effect a Change in Dime Recommendation, if and only to the extent
that:
(i) Dime's Board of Directors, based on the advice of its outside
counsel, determines in good faith that failure to take such action would
result in a violation of its fiduciary duties under applicable law, and
(ii) If the Board of Directors of Dime intends to effect a Change in
Dime Recommendation following an Acquisition Proposal, prior to effecting
such Change in Dime Recommendation, (A) Dime shall have complied in all
material respects with Section 6.2(f), (B) the Board of
A-31
121
Directors of Dime shall have concluded in good faith that such Acquisition
Proposal constitutes a Superior Proposal after giving effect to all of the
adjustments which may be offered by Washington Mutual pursuant to clause
(D) below, (C) Dime shall notify Washington Mutual, at least five Business
Days in advance, of its intention to effect a Change in Dime Recommendation
in response to such Superior Proposal, specifying the material terms and
conditions of any such Superior Proposal and furnishing to Washington
Mutual a copy of the relevant proposed transaction agreements with the
party making such Superior Proposal and other material documents, and (D)
prior to effecting such a Change in Dime Recommendation, Dime shall, and
shall cause its financial and legal advisors to, during the period
following Dime's delivery of the notice referred to in clause (C) above,
negotiate with Washington Mutual in good faith (to the extent Washington
Mutual desires to negotiate) to make such adjustments in the terms and
conditions of this Agreement so that such Acquisition Proposal ceases to
constitute a Superior Proposal.
7.4. Legal Conditions to Merger.
(a) Subject to the terms and conditions of this Agreement, each of
Washington Mutual and Dime shall, and shall cause their respective 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 Dime or Washington Mutual or any
of their respective Subsidiaries in connection with the Merger and the other
transactions contemplated by this Agreement; provided, however, that no party
shall be required to take any action pursuant to the foregoing sentence if the
taking of such action or the obtaining of such consents, authorizations, orders,
approvals or exemptions is reasonably likely to result in a condition or
restriction having an effect of the type referred to in Section 8.2(c).
(b) Subject to the terms and conditions of this Agreement, each of
Washington Mutual and Dime 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 Dime is a party (to the extent permitted by the terms thereof) if necessary
in order to satisfy the conditions to closing set forth in Section 8 hereof,
(ii) lift or rescind any injunction or restraining order or other order
adversely affecting the ability of the parties to consummate the transactions
contemplated hereby, and (iii) defend any litigation seeking to enjoin, prevent
or delay the consummation of the transactions contemplated hereby or seeking
material damages.
7.5. Affiliates. Dime 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 Dime 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 Dime pursuant to Section 7.3
hereof, a written agreement, in the form and substance reasonably satisfactory
to Washington Mutual, relating to required transfer restrictions on the
Washington Mutual Common Stock received by them in the Merger pursuant to Rule
145.
7.6. Stock Exchange Listing. Washington Mutual shall use its best efforts
to cause the shares of Washington Mutual Common Stock to be issued in the
Merger, to each Warrant Holder pursuant to the Voting/Purchase Agreement and to
LTW holders pursuant to the Warrant Agreement 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) The benefits to be provided to employees of Dime and its Subsidiaries
as of the Effective Time ("Covered Employees") shall be the benefits provided to
similarly situated employees of Washington
A-32
122
Mutual, which shall be so provided as soon as practicable after the Effective
Time, but in no event later than the date the Covered Employees are placed on
the same payroll service as such employees of Washington Mutual; provided,
however, that until such time that the Covered Employees are placed on the same
payroll service as such employees of Washington Mutual, Washington Mutual shall,
or shall cause its Subsidiaries to, provide benefits no less favorable, in the
aggregate, than the benefits provided to similarly situated employees under
Washington Mutual's plans, programs and arrangements. Washington Mutual shall,
from and after the Effective Time, (i) comply with the contractual commitments
of Dime to its current and former employees in accordance with their terms and
honor all employee benefit obligations to current and former employees of Dime
and its Subsidiaries under the applicable contractual commitment, (ii) provide
Covered Employees credit for the most recent period of uninterrupted service
(including any bridging or prior service credit, without regard to whether there
has been an interruption in service, solely to the extent provided by Dime and
its Subsidiaries as of the date hereof) with Dime or any of its Subsidiaries
(and their predecessors) prior to the Effective Time for all purposes under
employee benefit plans of Washington Mutual or its Subsidiaries (including for
purposes of benefit accrual), (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 Covered Employees
(and their eligible dependents) who become participants in such group health
plans and (iv) use reasonable efforts to give credit for or otherwise take into
account the out-of-pocket expenses and annual expense limitations paid by each
Covered Employee under the comparable Plans for the year in which the Effective
Time occurs; provided, however, that no credits for service as described in
clause (ii) above shall be permitted if to do so would result in duplication of
benefits under such plans. From and after the Effective Time, Washington Mutual
shall honor all vacation and paid time off of the Covered Employees accrued as
of the Effective Time, in accordance with the Dime policy as in effect on the
date hereof. Except as otherwise prohibited under this Section 7.7, nothing in
this Section 7.7 shall be interpreted as preventing Washington Mutual or its
Subsidiaries from amending, modifying or terminating any Plans or other
contracts, arrangements, commitments or understandings, in a manner consistent
with their terms and applicable law.
(b) Subject to applicable law and the amendment provisions of any defined
contribution plans maintained by Dime or its Subsidiaries (the "401(k) Plans"),
Dime agrees to amend the 401(k) Plans prior to the Effective Time so that new
participant loans are no longer available as of the Effective Time.
(c) Dime shall be permitted to pay up to an aggregate of $8 million as
retention bonuses to such employees of Dime or any of its Subsidiaries as Dime
may determine (but not including any employees who are parties to any individual
employment or change in control agreements), with such bonus amounts payable on
the earlier of the first anniversary of the Effective Time or the date the
eligible employee's employment is terminated by Dime or Washington Mutual or any
of their Subsidiaries.
(d) With respect to the Severance Pay Program for Employees of Dime and
Participating Subsidiaries (including the programs in place for Non-Officers,
Vice Presidents or lower, and Senior Vice President), as soon as practicable
after the date hereof but in any event prior to the Effective Time, Dime shall,
or shall cause its Subsidiaries to, amend such plans to provide that the
payments to be made to any participants therein shall only be made in a lump sum
cash amount, and in no event shall Dime provide the participants the right to
elect to receive such payments in the form of an annuity. In addition, as soon
as practicable after the date hereof but in any event prior to the Effective
Time, Dime shall, or shall cause its Subsidiaries to, use reasonable best
efforts to cause Covered Employees who are parties to employment,
change-in-control or severance agreements (which have been previously disclosed
to Washington Mutual on Section 4.11(a) of the Dime Disclosure Schedule) to
agree to receive any severance or other related payments thereunder, which would
otherwise be paid in the form of an annuity, in a lump sum payment within thirty
(30) days after the date such payments would otherwise commence (or, if such
payments have already commenced, after the date of such amendment); provided,
however, that all such Covered Employees shall continue to be entitled to all
other rights and benefits to which they are previously entitled under any such
agreements, which shall remain in full force and effect, as modified to take
into account solely the provisions described herein; and provided, further,
however, that in no event shall any
A-33
123
such amendments be made to those agreements pursuant to which any Covered
Employee is entitled to receive an amount payable either (i) in respect of a
covenant not to solicit or (ii) expressly not in respect of any severance
obligation.
(e) With respect to the Dime Employee Stock Purchase Plan, Dime shall take
all actions necessary to cause the offering period commencing on July 1, 2001
under such plan to terminate effective prior to the Effective Time, and
Washington Mutual shall provide that all Covered Employees shall, effective as
of the Effective Time, be eligible to participate in the Washington Mutual
Employee Stock Purchase Plan, on the same terms and conditions as similarly
situated employees of Washington Mutual.
(f) With respect to the Committee as defined under the Employee Umbrella
Trusts (the "Employee Committee") and the Committee as defined under the
Director Umbrella Trust (the "Director Committee"), prior to the Effective Time,
Dime shall cause all actions necessary to be taken to provide that at and
following the Effective Time, each such committee shall be made up of three
members, selected as follows: (i) two of the members of the Employee Committee
shall be current senior executive officers of Dime and two of the members of the
Director Committee shall be nonemployee directors of Dime (and each such
committee member, a "Dime Member"), in each case selected by the Employee
Committee (or Director Committee, as applicable) as constituted immediately
prior to the Effective Time, and (ii) the third member of the Employee Committee
and the Director Committee shall be selected by Washington Mutual. In addition,
in the event that a Dime Member ceases to serve on the Employee Committee (or
Director Committee, as applicable), he or she shall be permitted to designate
his or her successor (or, in the case of his or her death or disability, the
other remaining Dime Member shall be permitted to so designate).
7.8. Indemnification; Directors' and Officers' Insurance.
(a) From and after the Effective Time, in the event of any 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 Dime 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 Dime, any of its
Subsidiaries or any of their respective predecessors or was prior to the
Effective Time serving at the request of any such party as a director, officer,
employee, fiduciary or agent of another corporation, partnership, trust or other
enterprise (a list of which directors, officers and employees of Dime or any of
its Subsidiaries who as of the date of this Agreement are serving in any such
capacity with another corporation, trust, partnership, trust or other enterprise
is set forth in Section 7.8(a) of the Dime Disclosure Schedule) or (ii) this
Agreement, or any of the transactions contemplated hereby and all actions taken
by an Indemnified Party in connection herewith, whether in any case asserted or
arising before or after the Effective Time, Washington Mutual shall indemnify
and hold harmless, as and to the fullest extent permitted by applicable 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 Party to the fullest extent permitted by law upon receipt of an
undertaking, to the extent required by law, from such Indemnified Party to repay
such advanced expenses if it is determined by a final and non-appealable
judgment of a court of competent jurisdiction 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). Any Indemnified Party wishing to claim
indemnification under this Section 7.8, upon learning of any such claim, action,
suit, proceeding or investigation, shall notify Washington Mutual thereof,
provided that the failure to so notify shall not affect the obligations of
Washington Mutual under this Section 7.8 except (and only) to the extent such
failure to notify materially prejudices Washington Mutual.
(b) Without limiting any of the obligations under paragraph (a) of this
Section 7.8, Washington Mutual agrees that all rights to indemnification and all
limitations of liability existing in favor of the
A-34
124
Indemnified Parties as provided in Dime's Certificate of Incorporation or Bylaws
or in the corresponding constituent documents of any of Dime'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 Dime or any Subsidiary
thereof, in which case all of such rights to indemnification and limitations on
liability shall be deemed to so survive and continue notwithstanding any such
liquidation, consolidation or merger and shall constitute rights which may be
asserted against Washington Mutual. Nothing contained in this Section 7.8(b)
shall be deemed to preclude any rights to indemnification or limitations on
liability provided in Washington Mutual's Articles of Incorporation or Bylaws or
the similar governing documents of any of Washington Mutual's Subsidiaries with
respect to matters occurring subsequent to the Effective Time to the extent that
the provisions establishing such rights or limitations are not otherwise amended
to the contrary.
(c) Washington Mutual shall use its best efforts to cause the persons
serving as officers and directors of Dime immediately prior to the Effective
Time to be covered for a period of six (6) years from the Closing Date by the
directors' and officers' liability insurance policy or policies maintained by
Washington Mutual (provided that Washington Mutual's policy or policies provide
at least the same coverage and amounts containing terms and conditions which are
in the aggregate no less advantageous to such directors and officers of Dime
than the terms and conditions of the existing directors' and officers' liability
insurance policy of Dime, 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 Dime for such insurance (the "Insurance
Amount"), and further provided, that if Washington Mutual is unable to maintain
or obtain the insurance called for by this Section 7.8(c) as a result of the
preceding proviso, Washington Mutual shall use its reasonable best efforts to
obtain as much comparable insurance as available for the Insurance Amount with
respect to acts or omissions occurring prior to the Effective Time which were
committed by such officers and directors in their capacity as such. The
provisions of this Section 7.8 are intended to be for the benefit of, and shall
be enforceable by, each Indemnified Party and his or her heirs and
representatives.
7.9. Advice of Changes; Other Matters.
(a) Washington Mutual and Dime 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.
(b) Dime will use all reasonable best efforts to implement, within 30 days
after the date of this Agreement, procedures developed jointly by the parties to
ensure compliance with state and local consumer protection laws relating to its
retail subprime loan origination and servicing businesses.
7.10. 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, Dime shall furnish to Washington Mutual (i)
consolidated and consolidating financial statements (including balance sheet,
statement of operations and stockholders' equity) of Dime 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 Dime or any of its Subsidiaries, and (iii) any internal
management reports relating to the foregoing. All information furnished by Dime
to Washington Mutual pursuant to this
A-35
125
Section 7.10(b) shall be held in confidence by Washington Mutual to the extent
required by, and in accordance with, the provisions of the Confidentiality
Agreement.
7.11. Reorganization. Neither Washington Mutual nor Dime shall take, or
cause or permit any of its Subsidiaries to take, any action that could
reasonably be expected to prevent the Merger from qualifying as a reorganization
within the meaning of Section 368(a) of the Code.
7.12. Exemption From Liability Under Section 16(b). Assuming that Dime
delivers to Washington Mutual the Section 16 Information (as defined below)
reasonably in advance of the Effective Time, the Board of Directors of
Washington Mutual, or a committee of Non-Employee Directors thereof (as such
term is defined for purposes of Rule 16b-3(d) under the Exchange Act), shall
reasonably promptly thereafter and in any event prior to the Effective Time
adopt a resolution providing that the receipt by the Dime Insiders (as defined
below) of Washington Mutual Common Stock in exchange for shares of Dime Common
Stock, and of options to purchase Washington Mutual Common Stock upon conversion
of Dime Options, in each case pursuant to the transactions contemplated hereby
and to the extent such securities are listed in the Section 16 Information
provided by Dime to Washington Mutual prior to the Effective Time, are intended
to be exempt from liability pursuant to Section 16(b) under the Exchange Act
such that any such receipt shall be so exempt. "Section 16 Information" shall
mean information accurate in all respects regarding the Dime Insiders, the
number of shares of Dime Common Stock held by each such Dime Insider and the
number and description of the Dime Options held by each such Dime Insider. "Dime
Insiders" shall mean those officers and directors of Dime who are subject to the
reporting requirements of Section 16(a) of the Exchange Act and who are listed
in the Section 16 Information.
7.13. Warrant Agreement Assumption. Washington Mutual shall enter into an
agreement with the Warrant Agent confirming the rights of holders of LTWs as
provided in Section 4.2(d) of the Warrant Agreement. Washington Mutual shall use
its best efforts to maintain the trading designation of the LTWs on the Nasdaq
Stock Market.
7.14. Board of Directors. At or promptly following the Effective Time,
Washington Mutual shall take all action necessary to appoint one member of
Dime's Board of Directors, selected by Washington Mutual after consultation with
Dime, to Washington Mutual's board of directors.
7.15. Insider Loan Disclosure. Within 30 days after the date of this
Agreement Dime shall prepare and deliver to Washington Mutual a schedule setting
forth the following information as of a date not more than 15 days prior to such
date of delivery: (i) all evidences of indebtedness reflected as assets on the
books and records of Dime and its Subsidiaries ("Loans") by Dime and its
Subsidiaries to executive officers (as such term is defined in Part 215 of Title
12 of the Code of Federal Regulations) of Dime or any of its Subsidiaries; (ii)
any such Loans to any employee, officer, director or other affiliate on which
the borrower is paying a rate other than that reflected in the note or the
relevant credit agreement or on which the borrower is paying a rate which was
below market at the time the Loan was made; and (iii) any such Loans which were
not made in compliance in all material respects with all applicable federal laws
and regulations.
7.16. Insurance Disclosure. Within 30 days after the date of this Agreement
Dime shall prepare and deliver to Washington Mutual a schedule setting forth the
following information as of a date not more than 15 days prior to such date of
delivery: a true and complete list and a brief description (including name of
insurer, agent, coverage and expiration date) of all insurance policies in force
with respect to the business and assets of Dime and its Subsidiaries (other than
insurance policies under which Dime 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).
7.17. Management Consultation Meetings and Distribution of
Information. From the date of this Agreement until the Effective Time, Steve
Freimuth the Washington Mutual senior manager responsible for the integration of
Washington Mutual and Dime, and an officer of Dime (who shall be an executive
vice president or higher selected by Dime and reasonably acceptable to
Washington Mutual) responsible
A-36
126
for the integration of Washington Mutual and Dime, shall confer on a regular
basis regarding the business and operations of Washington Mutual and Dime.
7.18. Redesign of Branches. Dime shall cooperate with Washington Mutual and
use reasonable efforts to take all actions, in a manner that does not
unreasonably interfere with the conduct of business, necessary to facilitate the
redesign of Dime's branch offices with the view toward obtaining all necessary
permits and completing all other steps reasonably necessary for construction, at
Washington Mutual's direction and expense, to begin as promptly as possible
after the Closing Date.
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 Dime entitled to vote thereon.
(b) NYSE Listing. The shares of Washington Mutual Common Stock to be
issued to the holders of Dime Common Stock upon consummation of the Merger,
to each Warrant Holder in respect of the Deemed Shares in accordance with
the terms of the Voting/Purchase Agreement and to LTW holders in accordance
with the Warrant Agreement shall have been authorized for listing on the
NYSE, subject to official notice of issuance.
(c) Other Approvals. All regulatory approvals required to consummate
the transactions contemplated hereby shall have been obtained and shall
remain in full force and effect and all statutory waiting periods in
respect thereof shall have expired or been terminated (all such approvals
and the expiration or termination of all such waiting periods being
referred to herein as the "Requisite Regulatory Approvals").
(d) S-4 Effectiveness. The S-4 shall have become effective under the
Securities Act, no stop order suspending the effectiveness of the S-4 shall
have been issued and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(e) No Injunctions or Restraints; Illegality. No order, injunction or
decree issued by any court or agency of competent jurisdiction or other
legal restraint or prohibition (an "Injunction") preventing the
consummation of the Merger or any of the other transactions contemplated by
this Agreement shall be in effect. No statute, rule, regulation, order,
injunction or decree shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits or makes illegal the
consummation of the Merger.
8.2. Conditions to Obligations of Washington Mutual. The obligations of
Washington Mutual to effect the Merger are also subject to the satisfaction or
waiver by Washington Mutual at or prior to the Effective Time of the following
conditions:
(a) Representations and Warranties. The representations and warranties
of Dime 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 instead, 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 Dime. Washington Mutual shall have received a
A-37
127
certificate signed on behalf of Dime by the Chief Executive Officer and
Chief Financial Officer of Dime to the foregoing effect.
(b) Performance of Obligations of Dime. Dime 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 Dime by the Chief Executive
Officer and the Chief Financial Officer of Dime to such effect.
(c) Burdensome Condition. There shall not be any action taken, or any
statute, rule, regulation or order enacted, entered, enforced or deemed
applicable to the transactions contemplated by this Agreement, by any
Governmental Entity, in connection with the grant of a Requisite Regulatory
Approval or otherwise, which imposes any restriction or condition which
would be reasonably likely to have or result in a Material Adverse Effect
on the Surviving Company or Washington Mutual.
(d) Director Resignations. Washington Mutual shall have received
resignations from each director of each Dime Subsidiary designated by
Washington Mutual.
(e) Tax Opinion. Washington Mutual shall have received an opinion of
Simpson Thacher & Bartlett, counsel to Washington Mutual, dated the Closing
Date, to the effect that, on the basis of facts, representations and
assumptions set forth in such opinion, (i) the Merger constitutes a
"reorganization" within the meaning of Section 368(a) of the Code and (ii)
each of Washington Mutual and Dime will be a party to that reorganization
within the meaning of Section 368(b) of the Code. In rendering its opinion,
such counsel may require and rely upon written representations from Dime,
Washington Mutual and stockholders of Dime.
(f) Satisfaction of Voting/Purchase Agreement Conditions. All
conditions precedent to the obligation of Washington Mutual to purchase
warrants from each Warrant Holder pursuant to the Voting/Purchase Agreement
shall have been duly satisfied or waived.
8.3. Conditions To Obligations Of Dime. The obligation of Dime to effect
the Merger is also subject to the satisfaction or waiver by Dime 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 instead, 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. Dime 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 Dime shall have received a certificate signed on behalf of Washington
Mutual by the Chief Executive Officer and the Chief Financial Officer of
Washington Mutual to such effect.
(c) Tax Opinion. Dime shall have received an opinion of Sullivan &
Cromwell, counsel to Dime, dated the Closing Date, to the effect that, on
the basis of facts, representations and assumptions set forth in such
opinion, (i) the Merger constitutes a "reorganization" within the meaning
of Section 368(a) of the Code, (ii) each of Dime and Washington Mutual will
be a party to that reorganization within the meaning of Section 368(b) of
the Code and (iii) subject to customary exceptions and, except to the
extent of any cash received, no gain or loss will be recognized by any of
A-38
128
the stockholders of Dime in the Merger. In rendering its opinion, such
counsel may require and rely upon written representations from Dime,
Washington Mutual and stockholders of Dime.
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 Dime in a written
instrument, if the Board of Directors of each so determines;
(b) by either Washington Mutual or Dime 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 Dime if the Effective Time shall
not have occurred on or before April 30, 2002, 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;
(d) by either Washington Mutual or Dime (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 Dime if any approval of the
stockholders of Dime contemplated by this Agreement shall not have been
obtained by reason of the failure to obtain the required vote at the Dime
Stockholders Meeting or at any adjournment or postponement thereof;
(f) by Washington Mutual if (i) the Board of Directors of Dime shall
have failed to recommend the Merger, or shall have withdrawn, modified or
changed in a manner adverse to Washington Mutual its recommendation of the
Merger (or shall have disclosed its intention to withdraw, modify or
adversely change such recommendation), (ii) Dime shall have breached the
terms of Section 6.2(f) hereof in any respect adverse to Washington Mutual,
or (iii) Dime shall have materially breached its obligations under Section
7.3 by failing to call, give notice of, convene and hold the Dime
Stockholders Meeting in accordance with Section 7.3; or
(g) by Washington Mutual if a tender offer or exchange offer for 25%
or more of the outstanding shares of Dime Common Stock is commenced (other
than by Washington Mutual or a Subsidiary thereof), and the Board of
Directors of Dime recommends that the stockholders of Dime tender their
shares in such tender or exchange offer or otherwise fails to recommend
that such stockholders reject such tender offer or exchange offer within
the 10 business day period specified in Rule 14e-2(a) under the Exchange
Act.
9.2. Effect of Termination.
(a) In the event of termination of this Agreement by either Washington
Mutual or Dime as provided in Section 9.1, this Agreement shall forthwith become
void and have no effect, and none of Washington Mutual, Dime, 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
A-39
129
Dime shall be relieved or released from any liabilities or damages arising out
of its willful breach of any provision of this Agreement.
(b) Dime shall pay Washington Mutual, by wire transfer of immediately
available funds, the sum of $185 million (the "Termination Fee") if this
Agreement is terminated as follows:
(i) if this Agreement is terminated by Washington Mutual pursuant to
Sections 9.1(f) or 9.1(g), then Dime shall pay the entire Termination Fee
on the second Business Day following such termination; and
(ii) if this Agreement is terminated by (A) Washington Mutual pursuant
to Section 9.1(d) if the breach giving rise to such termination was willful
or (B) by either Washington Mutual or Dime pursuant to Section 9.1(e) and
in any such case an Acquisition Proposal shall have been publicly announced
or otherwise communicated or made known to the senior management or Board
of Directors of Dime (or any person shall have publicly announced,
communicated or made known an intention, whether or not conditional, to
make an Acquisition Proposal) at any time after the date of this Agreement
and prior to the date of the taking of the vote of the stockholders of Dime
contemplated by this Agreement at the Dime Stockholders Meeting, in the
case of clause (B), or the date of termination, in the case of clause (A),
then Dime shall (x) pay Washington Mutual an amount equal to $20 million on
the second Business Day following such termination, and (y) if within 18
months after such termination, Dime or any of its Subsidiaries enters into
a definitive agreement with respect to, or consummates, an Acquisition
Proposal, then Dime shall pay the Termination Fee (net of any payment made
pursuant to clause (x) above) on the date of such execution or
consummation.
(c) Any amount that becomes payable pursuant to Section 9.2(b) shall be
paid by wire transfer of immediately available funds to an account designated by
Washington Mutual.
(d) Dime and Washington Mutual agree that the agreement contained in
paragraph (b) above is an integral part of the transactions contemplated by this
Agreement, that without such agreement Washington Mutual would not have entered
into this Agreement, and that such amounts do not constitute a penalty. If Dime
fails to pay Washington Mutual the amounts due under paragraph (b) above within
the time periods specified in such paragraph (b), Dime shall pay the costs and
expenses (including reasonable legal fees and expenses) incurred by Washington
Mutual in connection with any action in which Washington Mutual prevails,
including the filing of any lawsuit, taken to collect payment of such amounts,
together with interest on the amount of any such unpaid amounts at the prime
lending rate prevailing during such period as published in The Wall Street
Journal, calculated on a daily basis from the date such amounts were required to
be paid until the date of actual payment.
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 Dime;
provided, however, that after any approval of the transactions contemplated by
this Agreement by Dime'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 Dime
stockholders hereunder other than as contemplated by this Agreement or which
negatively impacts the intended tax treatment of the holders of Dime Common
Stock. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
9.4. Extension; Waiver. At any time prior to the Effective Time, the
parties hereto may, to the extent legally allowed, (a) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(b) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party, but such
extension or
A-40
130
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.
10.3. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or delivered by an overnight courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Washington Mutual, to:
Washington Mutual, Inc.
1201 Third Avenue -- WMT 1501
Seattle, WA 98101
Fax: (206) 461-5739
Attn: Craig E. Tall
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017
Fax: (212) 455-2502
Attn: Lee Meyerson
Brian Stadler
(b) if to Dime, to:
Dime Bancorp, Inc.
589 Fifth Avenue
New York, NY 10017
Fax: (212) 326-6110
Attn: James E. Kelly
with a copy to:
Sullivan & Cromwell
125 Broad Street
New York, NY 10004
Fax: (212) 558-3588
Attn: Mitchell S. Eitel
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
Section references are to this Agreement unless otherwise specified. Whenever
the words "include," "includes" or "including" are used in this Agreement, they
shall be deemed to be followed by the words "without limitation." The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. No provision of this Agreement shall be construed to require Dime,
Washington Mutual
A-41
131
or any of their respective officers, directors, Subsidiaries or affiliates to
take any action which would violate or conflict with any applicable law (whether
statutory or common), rule or regulation. It is agreed that any disclosure in a
particular section of a party's Disclosure Schedule shall be deemed disclosed in
respect of any other section thereof to the extent it is readily apparent that
such disclosure is applicable to such other section.
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, which shall survive the execution and delivery of
this Agreement to the extent provided in Section 7.2(b).
10.7. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Washington, without regard to any
applicable conflicts of law provisions (except to the extent that mandatory
provisions of federal law or the DGCL are applicable).
10.8. Severability. Any term or provision of this Agreement which is
determined by a court of competent jurisdiction to be invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction, and if any provision of this Agreement is
determined to be so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable, in all cases so long as
neither the economic nor legal substance of the transactions contemplated hereby
is affected in any manner materially adverse to any party or its stockholders.
Upon any such determination, the parties shall negotiate in good faith in an
effort to agree upon a suitable and equitable substitute provision to effect the
original intent of the parties.
10.9. Publicity. Washington Mutual and Dime 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. Without limiting the reach of the preceding sentence,
Washington Mutual and Dime 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, Dime and its Subsidiaries shall (a) consult with
Washington Mutual regarding communications with customers, stockholders,
prospective investors and employees related to the transactions contemplated
hereby, (b) provide Washington Mutual with stockholder lists of Dime and (c)
allow and facilitate Washington Mutual contact with stockholders of Dime and
other prospective investors.
10.10. Assignment; Third Party Beneficiaries. Neither this Agreement nor
any of the rights, interests or obligations of any party hereunder shall be
assigned by any of the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other party. Subject to the preceding
sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and permitted
assigns. Except as otherwise specifically provided in Section 7.8 hereof, this
Agreement (including the documents and instruments referred to herein) is not
intended to confer upon any person other than the parties hereto any rights or
remedies hereunder.
A-42
132
IN WITNESS WHEREOF, Washington Mutual and Dime 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: /s/ CRAIG E. TALL
------------------------------------
Name: Craig E. Tall
Title: Vice Chair
DIME BANCORP, INC.
By: /s/ LAWRENCE J. TOAL
------------------------------------
Name: Lawrence J. Toal
Title: Chief Executive Officer
A-43
133
APPENDIX B
EXECUTION COPY
WARRANT PURCHASE AND VOTING AGREEMENT
WARRANT PURCHASE AND VOTING AGREEMENT, dated as of June 25, 2001 (this
"Agreement"), between Washington Mutual, Inc., a Washington corporation
("Washington Mutual"), and Warburg, Pincus Equity Partners, L.P., a Delaware
limited partnership ("Warburg, Pincus"), Warburg, Pincus Netherlands Equity
Partners I, C.V., a Dutch limited partnership ("Warburg, Pincus Netherlands I"),
Warburg, Pincus Netherlands Equity Partners II, C.V., a Dutch limited
partnership ("Warburg, Pincus Netherlands II"), Warburg, Pincus Netherlands
Equity Partners III, C.V., a Dutch limited partnership ("Warburg, Pincus
Netherlands III") (each of Warburg, Pincus, Warburg, Pincus Netherlands I,
Warburg, Pincus Netherlands II and Warburg, Pincus Netherlands III, a
"Stockholder", and collectively, the "Stockholders").
WITNESSETH:
WHEREAS, Washington Mutual and Dime Bancorp, Inc., a Delaware corporation
("Dime"), are, concurrently with the execution and delivery of this Agreement,
entering into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement;" capitalized terms used without definition herein having the
meanings assigned to them in the Merger Agreement), providing for the merger of
Dime with and into Washington Mutual (the "Merger");
WHEREAS, as of the date hereof, the Stockholders are the record and
beneficial owners, collectively, of (i) 13,607,664 shares of common stock, par
value $0.01 per share, of Dime ("Dime Common Stock"), (the "Existing Shares"
and, together with any shares of Dime Common Stock or other voting capital stock
of Dime acquired by the Stockholders after the date hereof, whether upon the
exercise of warrants or options, the conversion of convertible securities or
otherwise, the "Shares"), (ii) warrants (the "Series C Warrants") to acquire
8,142.738 shares of Series C junior nonvoting convertible preferred stock, par
value $0.01 per share and liquidation preference of $0.01 per share, of Dime
(the "Series C Preferred Stock") and (iii) warrants (the "Series D Warrants"
and, together with the Series C Warrants, the "Warrants") to acquire 5,464.926
shares of Series D junior nonvoting convertible preferred stock, par value $0.01
per share and liquidation preference of $0.01 per share, of Dime (the "Series D
Preferred Stock"); and
WHEREAS, Dime and Warburg, Pincus are party to an Investment Agreement,
dated as of July 6, 2000 (the "Investment Agreement"), which, among other
things, grants the Stockholders certain rights with respect to the Warrants.
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
PURCHASE AND SALE OF THE WARRANTS
1.1. Purchase and Sale of the Warrants. On the terms and subject to the
conditions of this Agreement, at the Warrant Purchase Closing (as defined in
Section 1.2), the Stockholders shall sell, transfer and deliver to Washington
Mutual, and Washington Mutual shall purchase from the Stockholders, the Warrants
(such sale, transfer and delivery and such purchase is hereinafter referred to
as the "Warrant Purchase"). In consideration of the sale, transfer and delivery
of the Warrants by the Stockholders, the Stockholders shall be entitled to the
right to receive the same Merger Consideration with respect to the Deemed Shares
(as defined below) as if the Stockholders had been holders of the Deemed Shares
immediately prior to the Effective Time in accordance with the election
procedures set forth in Section 2.6
B-1
134
of the Merger Agreement. The "Deemed Shares" shall mean 7,903,073 shares of Dime
Common Stock, which the parties hereto hereby agree to in lieu of the number of
shares of Dime Common Stock which the Stockholders would have been entitled to
receive under Section 4.2(d) of the Investment Agreement had the Stockholders
exercised their rights under such Section immediately prior to the execution of
the Merger Agreement with respect to all of the Warrants and had Dime elected to
pay all of the purchase price payable to the Stockholders pursuant to such
Section in shares of Dime Common Stock. The parties hereto further agree that
(i) for purposes of valuation of the Warrants pursuant to Section 4.2(d) of the
Investment Agreement, (x) the Acquiror's Share Price (as defined in Exhibit 10
to the Investment Agreement) shall be deemed to be the average of the closing
prices of shares of Washington Mutual Common Stock as reported on the New York
Stock Exchange Composite Transactions Tape for the five consecutive trading days
ending on the trading day immediately preceding the announcement of the signing
of the Merger Agreement (such average closing price, the "Announcement Price")
and (y) in calculating the underlying security price for purposes of the
Black-Scholes model, the Merger shall be treated as a fixed exchange ratio
transaction and (ii) the Dime Common Stock that would have been payable pursuant
to Section 4.2(d) of the Investment Agreement shall be valued at 1.05 multiplied
by the Announcement Price. Notwithstanding the foregoing, (A) if the Exchange
Ratio is adjusted pursuant to Section 2.5(f) of the Merger Agreement,
appropriate adjustment shall be made to the Deemed Shares and (B) in the event
that the merger consideration payable under the Merger Agreement is otherwise
increased, this Section 1.1 shall be appropriately amended, taking into account
the methodology used herein and the terms of the Investment Agreement, including
Exhibit 10 thereto.
1.2. Closing. Unless this Agreement shall have been terminated pursuant to
Section 5.1, and subject to the satisfaction or waiver (where applicable) of the
conditions set forth in Section 1.3, the closing of the Warrant Purchase (the
"Warrant Purchase Closing") will take place concurrently with the Closing of the
Merger, at the time and place and on the date provided in Section 2.4 of the
Merger Agreement.
At the Warrant Purchase Closing, the Stockholders shall deliver to
Washington Mutual certificates representing the Warrants duly endorsed in blank
or accompanied by appropriate powers duly endorsed in blank or in proper form
for transfer, with appropriate transfer stamps, if any, affixed. Washington
Mutual shall cause the Exchange Agent to deliver to the Stockholders Election
Forms for the Stockholders' use, in accordance with the terms of Section 2.6 of
the Merger Agreement, with respect to the Deemed Shares.
1.3. Conditions to Closing of Warrant Purchase. (a) The obligations of
Washington Mutual to consummate the Warrant Purchase shall be subject to the
satisfaction or waiver by Washington Mutual of the following conditions:
(i) All regulatory approvals required to consummate the Warrant
Purchase shall have been obtained and shall remain in full force and effect
and all statutory waiting periods in respect thereof shall have expired or
been terminated.
(ii) No Injunction preventing the consummation of the Warrant Purchase
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 Warrant Purchase.
(iii) The representations and warranties of the Stockholders contained
herein shall have been true and correct in all material respects as of the
date hereof and shall be true and correct in all material respects at and
as of the Closing Date as if made at and as of the Closing Date. The
Stockholders shall have performed in all material respects all of their
covenants and obligations contained herein required to be performed by them
on or prior to the Closing Date. Washington Mutual shall have received a
certificate signed on behalf of the Stockholders by their general partner
to the foregoing effect.
(iv) The Closing of the Merger shall occur concurrently.
B-2
135
(b) The obligations of the Stockholders to consummate the Warrant Purchase
shall be subject to the satisfaction or waiver by the Stockholders of the
following conditions:
(i) All regulatory approvals required to consummate the Warrant
Purchase shall have been obtained and shall remain in full force and effect
and all statutory waiting periods in respect thereof shall have expired or
been terminated.
(ii) No Injunction preventing the consummation of the Warrant Purchase
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 Warrant Purchase.
(iii) The representations and warranties of Washington Mutual
contained herein shall have been true and correct in all material respects
as of the date hereof and shall be true and correct in all material
respects as of the Closing Date. Washington Mutual shall have performed in
all material respects all of its covenants and obligations contained herein
required to be performed by it on or prior to the Closing Date. The
Stockholders 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.
(iv) The Closing of the Merger shall occur concurrently.
1.4. Termination of Investment Agreement. As of the Effective Time, the
Investment Agreement shall be terminated and shall be of no further force or
effect.
ARTICLE II
VOTING
2.1. Agreement to Vote. The Stockholders hereby agree that, from and after
the date hereof and until the date on which this Agreement is terminated
pursuant to Section 5.1, at the Dime Stockholders Meeting or any other meeting
of the stockholders of Dime, however called, or in connection with any written
consent of the stockholders of Dime, the Stockholders shall:
(a) appear at each such meeting or otherwise cause the Shares to be
counted as present thereat for purposes of calculating a quorum; and
(b) vote (or cause to be voted), in person or by proxy, or deliver a
written consent (or cause a consent to be delivered) covering, all the
Shares, and any other voting securities of Dime (whether acquired
heretofore or hereafter), that are beneficially owned by the Stockholders
or as to which the Stockholders have, directly or indirectly, the right to
vote or direct the voting, (i) in favor of adoption and approval of the
Merger Agreement and the Merger and any other action requested by
Washington Mutual in furtherance thereof; (ii) against any action or
agreement that would result in a breach of any covenant, representation or
warranty or any other obligation or agreement of Dime contained in the
Merger Agreement or of the Stockholders contained in this Agreement; and
(iii) against any Acquisition Proposal or any other action, agreement or
transaction that is intended, or could reasonably be expected, to
materially impede, interfere or be inconsistent with, delay, postpone,
discourage or materially and adversely affect the Merger or this Agreement,
including: (A) any extraordinary corporate transaction, such as a merger,
consolidation or other business combination involving Dime or its
Subsidiaries (other than the Merger); (B) a sale, lease or transfer of a
material amount of assets of Dime or any of its Subsidiaries or a
reorganization, recapitalization or liquidation of Dime or any of its
Subsidiaries; (C) a material change in the policies or management of Dime;
(D) an election of new members to the board of directors of Dime, except
where the vote is cast in favor of the nominees of a majority of the
existing directors; (E) any material change in the present capitalization
or dividend policy of Dime or any amendment or other change to Dime's
certificate of incorporation or bylaws; or (F) any other material change in
Dime's corporate structure or business; provided, however, that nothing in
this Agreement shall limit or affect
B-3
136
any actions taken by any member of the board of directors of Dime nominated
by, or appointed at the request of, the Stockholders solely in his or her
capacity as a director of Dime; provided, further, that nothing in this
Agreement shall be interpreted as obligating the Stockholders to exercise
any Warrants.
2.2. No Inconsistent Agreements. The Stockholders hereby covenant and agree
that, except for this Agreement, none of the Stockholders (a) has entered, and
none of the Stockholders shall enter at any time while this Agreement remains in
effect, into any voting agreement or voting trust with respect to the Shares and
(b) has not granted, and none of the Stockholders shall grant at any time while
this Agreement remains in effect, a proxy, a consent or power of attorney with
respect to the Shares or the Warrants.
2.3. Proxy. The Stockholders hereby grant a proxy, and appoint as
attorney-in-fact, Fay Chapman, William Longbrake and Craig Tall, in their
respective capacities as officers of Washington Mutual, and any individual who
shall hereafter succeed to any such officer of Washington Mutual, and any other
person designated in writing by Washington Mutual, each of them individually,
with full power of substitution, to vote the Shares in accordance with Section
2.1 hereof. This proxy is coupled with an interest and shall be irrevocable for
so long as this Agreement is in effect, and the Stockholders will take such
further action or execute such other instruments as may be necessary to
effectuate the intent of this proxy and hereby revokes any proxy previously
granted by any Stockholder with respect to the Shares. The foregoing proxy is
subject to, and shall only become effective upon, Washington Mutual having
received all necessary regulatory approvals and consents, if any, required under
applicable law to exercise the voting powers granted by such proxy. Washington
Mutual may terminate this proxy with respect to the Stockholders by written
notice.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1. Representations and Warranties of the Stockholders. The Stockholders,
jointly and severally, hereby represent and warrant to Washington Mutual as
follows:
(a) Organization; Authorization; Validity of Agreement; Necessary
Action. Each Stockholder is a limited partnership duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Each Stockholder has full power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to
consummate the transactions contemplated hereby. The execution, delivery
and performance by each Stockholder of this Agreement and the consummation
by it of the transactions contemplated hereby have been duly and validly
authorized by such Stockholder and no other actions or proceedings on the
part of such Stockholder or any general or limited partner therein are
necessary to authorize the execution and delivery by it of this Agreement
and the consummation by it of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by each Stockholder and,
assuming this Agreement constitutes a valid and binding obligation of
Washington Mutual, constitutes a valid and binding obligation of each
Stockholder, enforceable against it 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) Ownership. The Existing Shares and the Warrants are, and all of
the Shares and Warrants from the date hereof through and on the Closing
Date will be, owned beneficially and of record by the Stockholders. As of
the date hereof, (i) Warburg, Pincus holds of record 12,859,243 shares of
Dime Common Stock, 7694.8874 Series C Warrants and 5164.3551 Series D
Warrants, (ii) Warburg, Pincus Netherlands I holds of record 408,230 shares
of Dime Common Stock, 244.2821 Series C Warrants and 163.9478 Series D
Warrants, (iii) Warburg, Pincus Netherlands II holds of record 272,153
shares of Dime Common Stock, 162.8548 Series C Warrants and 109.2985 Series
D Warrants and (iv) Warburg, Pincus Netherlands III holds of record 68,038
shares of Dime Common
B-4
137
Stock, 40.7137 Series C Warrants and 27.3246 Series D Warrants. Each Series
C Warrant is exercisable for 1 share of Series C Preferred Stock, which is
convertible into 1,000 shares of Dime Common Stock. Each Series D Warrant
is exercisable for 1 share of Series D Preferred Stock, which is
convertible into 1,000 shares of Dime Common Stock. As of the date hereof,
(i) the Existing Shares constitute all of the shares of Dime Common Stock
and (ii) the Warrants constitute all warrants to acquire shares of Dime
Common Stock, in each case held of record, owned by or for which voting
power or disposition power is held or shared by the Stockholders or any of
their respective affiliates (but excluding 2,000 restricted shares of Dime
Common Stock and 3,000 options exercisable for Dime Common Stock, subject
to vesting, received by the Stockholders' representative member of Dime's
board of directors). The Stockholders (x) have and will have at all times
through the Closing Date, together with their general partner, sole voting
power, sole power of disposition, sole power to issue instructions with
respect to the matters set forth in Article II hereof, and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Existing Shares and with respect to all of the Shares
on the Closing Date, and (y) have and will have sole power of disposition
with respect to the Warrants, in each case with no limitations,
qualifications or restrictions on such rights, subject to applicable
federal securities laws and the terms of this Agreement. The Stockholders
have good and marketable title to the Existing Shares and the Warrants,
free and clear of any Liens. At the Warrant Purchase Closing, Washington
Mutual shall acquire good and marketable title to the Warrants, free and
clear of any Liens.
(c) No Violation. The execution and delivery of this Agreement by the
Stockholders does not, and the performance by the Stockholders of their
obligations under this Agreement will not, (i) conflict with or violate the
limited partnership agreement of any Stockholder, (ii) conflict with or
violate any law, ordinance or regulation of any Governmental Entity
applicable to any Stockholder or by which any of its assets or properties
is bound, or (iii) conflict with, result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become
a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or require payment under, or require
redemption or repurchase of or otherwise require the purchase or sale of
any securities, or result in the creation of any Lien on the properties or
assets of any Stockholder pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument
or obligation to which any Stockholder is a party or by which any
Stockholder or any of its assets or properties is bound, except for any of
the foregoing as could not reasonably be expected, either individually or
in the aggregate, to materially impair the ability of the Stockholders to
perform their obligations hereunder or to consummate the transactions
contemplated hereby on a timely basis.
(d) Consents and Approvals. The execution and delivery of this
Agreement by the Stockholders does not, and the performance by the
Stockholders of their obligations under this Agreement will not, require
any Stockholder to obtain any consent, approval, authorization or permit
of, or to make any filing with or notification to, any Governmental Entity
based on the law, ordinance or regulation of any applicable Governmental
Entity, except for any of the foregoing as could not reasonably be
expected, either individually or in the aggregate, to materially impair the
ability of the Stockholders to perform their obligations hereunder or to
consummate the transactions contemplated hereby on a timely basis.
(e) Absence of Litigation. There is no suit, action, investigation or
proceeding pending or, to the knowledge of the Stockholders, threatened
against any Stockholder before or by any Governmental Entity that could
reasonably be expected to materially impair the ability of the Stockholders
to perform their obligations hereunder or to consummate the transactions
contemplated hereby on a timely basis.
(f) Absence of Agreements with Dime. Except for the Investment
Agreement and the letter agreement (the "Letter Agreement") among the
Stockholders and Dime, dated as of the date hereof and attached as Exhibit
A hereto, there are no existing agreements or arrangements between any
B-5
138
Stockholder or any of its affiliates, on one hand, and Dime or any of its
Subsidiaries, on the other hand, relating to the Shares, the Warrants or
any other securities of or investment in Dime.
(g) Broker's Fees. Neither the Stockholders nor any of their
respective affiliates 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.
3.2. Representations and Warranties of Washington Mutual. Washington Mutual
hereby represents and warrants to the Stockholders as follows:
(a) Organization; Authorization; Validity of Agreement; Necessary
Action. Washington Mutual is a corporation duly organized under the laws of
the State of Washington and is validly existing and in good standing under
the laws of the State of Washington. Washington Mutual has full corporate
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby. The execution, delivery and performance by Washington Mutual of
this Agreement and the consummation by it of the transactions contemplated
hereby have been duly and validly authorized by Washington Mutual and no
other corporate actions or proceedings on the part of Washington Mutual are
necessary to authorize the execution and delivery by it of this Agreement
and the consummation by it of the transactions contemplated hereby. This
Agreement has been duly executed and delivered by Washington Mutual and,
assuming this Agreement constitutes a valid and binding obligation of the
Stockholders, constitutes a valid and binding obligation of Washington
Mutual, enforceable against it 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) No Violation. The execution and delivery of this Agreement by
Washington Mutual does not, and the performance by Washington Mutual of its
obligations under this Agreement will not, (i) conflict with or violate the
articles of incorporation or bylaws of Washington Mutual, (ii) conflict
with or violate any law, ordinance or regulation of any Governmental Entity
applicable to Washington Mutual or by which any of its assets or properties
is bound, or (iii) conflict with, result in any breach of or constitute a
default (or an event that with notice or lapse of time or both would become
a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or require payment under, or require
redemption or repurchase of or otherwise require the purchase or sale of
any securities, or result in the creation of any Lien on the properties or
assets of Washington Mutual pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise or other
instrument or obligation to which Washington Mutual is a party or by which
Washington Mutual or any of its assets or properties is bound, except for
any of the foregoing as could not reasonably be expected, either
individually or in the aggregate, to materially impair the ability of
Washington Mutual to perform its obligations hereunder or to consummate the
transactions contemplated hereby on a timely basis.
(c) Consents and Approvals. Except for those consents, approvals,
authorizations, permits, filings and notifications set forth in Section 5.4
of the Merger Agreement, the execution and delivery of this Agreement by
Washington Mutual does not, and the performance by Washington Mutual of its
obligations under this Agreement will not, require Washington Mutual to
obtain any consent, approval, authorization or permit of, or to make any
filing with or notification to, any Governmental Entity based on the law,
ordinance or regulation of any applicable Governmental Entity, except for
any of the foregoing as could not reasonably be expected, either
individually or in the aggregate, to materially impair the ability of
Washington Mutual to perform its obligations hereunder or to consummate the
transactions contemplated hereby on a timely basis.
(d) Absence of Litigation. There is no suit, action, investigation or
proceeding pending or, to the knowledge of Washington Mutual, threatened
against Washington Mutual before or by any Governmental Entity that could
reasonably be expected to materially impair the ability of Washington
B-6
139
Mutual to perform its obligations hereunder or to consummate the
transactions contemplated hereby on a timely basis.
(e) 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.
ARTICLE IV
OTHER COVENANTS
4.1. Further Agreements of the Stockholders. (a) The Stockholders hereby
agree, while this Agreement is in effect, and except as expressly contemplated
hereby, not to sell, transfer, pledge, encumber, assign, distribute, gift or
otherwise dispose of (collectively, a "Transfer") or enforce or permit the
execution of the provisions of any redemption, share purchase or sale,
recapitalization or other agreement with Dime or any other person or enter into
any contract, option or other arrangement or understanding with respect to any
Transfer (whether by actual disposition or effective economic disposition due to
hedging, cash settlement or otherwise) of, any of the Existing Shares, any
Shares acquired after the date hereof, any securities exercisable or
exchangeable for or convertible into Dime Common Stock (including the Warrants),
any other capital stock of Dime or any interest in any of the foregoing with any
person. Without limiting the foregoing, the Stockholders hereby agree that,
while this Agreement is in effect, they will not exercise their rights to
require Dime to repurchase the Warrants pursuant to Section 4.2(d) or (e) of the
Investment Agreement.
(b) In the event of a stock dividend or distribution, or any change in Dime
Common Stock by reason of any stock dividend or distribution, split-up,
recapitalization, combination, exchange of shares or the like, the term "Shares"
shall be deemed to refer to and include the Shares as well as all such stock
dividends and distributions and any securities into which or for which any or
all of the Shares may be changed or exchanged or which are received in such
transaction.
(c) The Stockholders hereby agree that during the term of this Agreement
they shall not, and shall not permit any of their respective Representatives to,
(i) initiate, solicit, encourage or knowingly facilitate, directly or
indirectly, any inquiries or the making of any proposal with respect to any
matter described in Section 4.1(a) or any Acquisition Proposal, (ii) participate
in any negotiations concerning, or provide to any other person any nonpublic
information or data relating to Dime or any of its Subsidiaries for the purpose
of, or have any discussions with, any person relating to, or cooperate with or
assist or participate in, or knowingly facilitate, any inquiries or the making
of any proposal which constitutes, or would reasonably be expected to lead to,
any effort or attempt by any other person to seek to effect any matter described
in Section 4.1(a) or any Acquisition Proposal, or (iii) agree to or release any
person from any obligation under any existing standstill agreement or
arrangement relating to Dime. The Stockholders agree immediately to cease and
cause to be terminated any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any possible Acquisition
Proposal, or any matter described in Section 4.1(a), and the Stockholders will
take the necessary steps to inform their respective Representatives of the
obligations undertaken by the Stockholders pursuant to this Section 4.1. Nothing
contained in this Section 4.1(c) shall prevent any representative of any
Stockholder from discharging his or her fiduciary duties as a member of the
board of directors of Dime.
(d) The Stockholders hereby agree, while this Agreement is in effect, to
notify Washington Mutual promptly in writing of (i) the number of any additional
shares of Dime Common Stock or other securities of Dime acquired by any
Stockholder, if any, after the date hereof and (ii) any such inquiries or
proposals which are received by, any such information which is requested from,
or any such negotiations or discussions which are sought to be initiated or
continued with, any Stockholder with respect to any matter described in Section
4.1(a) or (c).
B-7
140
(e) While this Agreement is in effect, the Stockholders hereby waive any
and all rights they may have pursuant to Sections 4.2(b)(5) and 4.10 of the
Investment Agreement.
4.2. Further Agreements of Washington Mutual. Washington Mutual hereby
agrees that while this Agreement is in effect it will not modify, waive or amend
any provision of the Merger Agreement in a manner that affects the type or
amount of consideration that the Stockholders are entitled to receive hereunder
in respect of the Warrant Purchase. Except for the foregoing, the Stockholders
shall not have any rights as third party beneficiaries or otherwise under or in
respect of the Merger Agreement.
ARTICLE V
MISCELLANEOUS
5.1. Termination. This Agreement shall terminate and no party shall have
any rights or duties hereunder if this Agreement is terminated in accordance
with the terms of this Section 5.1. Either of Washington Mutual or the
Stockholders may terminate this Agreement on or after the date of termination of
the Merger Agreement in accordance with its terms. Nothing in this Section 5.1
shall relieve or otherwise limit any party of liability for breach of this
Agreement.
5.2. Stop Transfer Order. In furtherance of this Agreement, the
Stockholders shall and hereby do authorize and instruct Dime to instruct its
transfer agent to enter a stop transfer order with respect to all of the
Existing Shares, the Warrants and all Shares acquired by the Stockholders after
the date hereof.
5.3. Further Assurances. From time to time, at the other party's request
and without further consideration, each party shall execute and deliver such
additional documents and take all such further action as may be necessary or
desirable to consummate the transactions contemplated by this Agreement.
5.4. No Ownership Interest. Nothing contained in this Agreement shall be
deemed to vest in Washington Mutual any direct or indirect ownership or
incidence of ownership of or with respect to any Shares or Warrants. All rights,
ownership and economic benefits of and relating to the Shares and the Warrants
shall remain vested in and belong to the Stockholders, and Washington Mutual
shall have no authority to manage, direct, superintend, restrict, regulate,
govern, or administer any of the policies or operations of Dime or exercise any
power or authority to direct the Stockholders in the voting of any of the
Shares, except as otherwise provided herein.
5.5. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed given if delivered personally, telecopied (with
confirmation) or delivered by an overnight courier (with confirmation) to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Washington Mutual to:
Washington Mutual, Inc.
1201 Third Avenue WMT 1501
Seattle, Washington 98101
Fax: (206) 461-5739
Attention: Craig E. Tall
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Lee Meyerson, Esq.
Brian Stadler, Esq.
B-8
141
(b) if to the Stockholders to:
Warburg, Pincus Equity Partners, L.P.
466 Lexington Avenue
New York, New York 10017
Fax: (212) 599-5617
Attention: Kewsong Lee
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 W. 52nd St.
New York, New York 10019
Fax: (212) 403-2000
Attention: Andrew R. Brownstein, Esq.
5.6. 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 Section references are to this
Agreement unless otherwise specified. Whenever the words "include," "includes"
or "including" are used in this Agreement, they shall be deemed to be followed
by the words "without limitation." The 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 Washington Mutual, the Stockholders 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.
5.7. Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
5.8. Entire Agreement. This Agreement (together with the Merger Agreement,
to the extent referred to herein) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter hereof.
5.9. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York applicable to contracts made
and performed entirely within such State. The parties hereby irrevocably submit
to the jurisdiction of the courts of the State of New York and the Federal
courts of the United States of America located in the State of New York solely
in respect of the interpretation and enforcement of the provisions of this
Agreement and in respect of the transactions contemplated hereby, and hereby
waive, and agree not to assert, as a defense in any action, suit or proceeding
for the interpretation or enforcement hereof, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a New York State or Federal court. The
parties hereby consent to and grant any such court jurisdiction over the person
of such parties and over the subject matter of such dispute (solely for purposes
of this Section 5.9 with respect to matters involving this Agreement and the
transactions provided for herein) and agree that mailing of process or other
papers in connection with any such action or proceeding in the manner provided
in Section 5.5 or in such other manner as may be permitted by law shall be valid
and sufficient service thereof.
5.10. Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
B-9
142
5.11. Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
Each of the parties further agrees to waive any requirements for the securing or
posting of any bond in connection with obtaining any such equitable relief.
5.12. Severability. Any term or provision of this Agreement which is
determined by a court of competent jurisdiction to be invalid or unenforceable
in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent
of such invalidity or unenforceability without rendering invalid or
unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this
Agreement in any other jurisdiction, and if any provision of this Agreement is
determined to be so broad as to be unenforceable, the provision shall be
interpreted to be only so broad as is enforceable, in all cases so long as
neither the economic nor legal substance of the transactions contemplated hereby
is affected in any manner materially adverse to any party or its stockholders or
limited partners. Upon any such determination, the parties shall negotiate in
good faith in an effort to agree upon a suitable and equitable substitute
provision to effect the original intent of the parties.
5.13. 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. This
Agreement is not intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
5.14. Release. Subject to the consummation of the Warrant Purchase, each
Stockholder, on behalf of itself and its affiliates, hereby releases and
discharges, and indemnifies and holds harmless, Dime and its affiliates and
their successors (including Washington Mutual as successor to Dime) and assigns
from all actions, cause of action, claims and demands arising out of or relating
to the Investment Agreement or the Letter Agreement.
5.15. Joint and Several Nature of Agreement. All representations,
warranties, covenants and agreements of any Stockholder contained in this
Agreement shall be deemed to be joint and several representations, warranties,
covenants and agreements of all of the Stockholders.
[Remainder of this page intentionally left blank]
B-10
143
IN WITNESS WHEREOF, Washington Mutual and the Stockholders have each caused
this Agreement to be signed by their respective officers or other authorized
person thereunto duly authorized as of the date first written above.
WARBURG, PINCUS EQUITY PARTNERS, L.P.
By: Warburg, Pincus & Co.,
its General Partner
By: /s/ KEWSONG LEE
------------------------------------
Name: Kewsong Lee
Title: Partner
WARBURG, PINCUS Netherlands EQUITY
PARTNERS I, C.V.
By: Warburg, Pincus & Co.,
its General Partner
By: /s/ KEWSONG LEE
------------------------------------
Name: Kewsong Lee
Title: Partner
WARBURG, PINCUS Netherlands EQUITY
PARTNERS II, C.V.
By: Warburg, Pincus & Co.,
its General Partner
By: /s/ KEWSONG LEE
------------------------------------
Name: Kewsong Lee
Title: Partner
WARBURG, PINCUS Netherlands EQUITY
PARTNERS III, C.V.
By: Warburg, Pincus & Co.,
its General Partner
By: /s/ KEWSONG LEE
------------------------------------
Name: Kewsong Lee
Title: Partner
B-11
144
WASHINGTON MUTUAL, INC.
By: /s/ CRAIG E. TALL
------------------------------------
Name: Craig E. Tall
Title: Vice Chairman
B-12
145
APPENDIX C-1
[LETTERHEAD OF CREDIT SUISSE FIRST BOSTON CORPORATION]
June 25, 2001
Board of Directors
Dime Bancorp, Inc.
589 Fifth Avenue
New York, NY 10017
Members of the Board:
You have asked us to advise you with respect to the fairness to holders of
common stock of Dime Bancorp, Inc. ("Dime") from a financial point of view of
the Merger Consideration (as defined below) set forth in the Agreement and Plan
of Merger, dated as of June 25, 2001 (the "Agreement"), between Dime and
Washington Mutual, Inc. ("Washington Mutual"). The Agreement provides for, among
other things, the merger of Dime with and into Washington Mutual (the "Merger")
pursuant to which Washington Mutual will be the surviving corporation and each
outstanding share of the common stock, par value $0.01 per share, of Dime ("Dime
Common Stock") will be converted into the right to receive, at the election of
the holder thereof and subject to certain procedures and limitations set forth
in the Agreement (as to which we express no opinion), (i) the number of shares
of the common stock, no par value, of Washington Mutual ("Washington Mutual
Common Stock") equal to the quotient of the Cash Election Price (as defined
below) divided by the Average Market Price (as defined below) (such quotient,
the "Exchange Ratio") or (ii) a cash amount equal to the sum of (x) 0.715341
times 1.05 times the Average Market Price and (y) 0.284659 times $40.8366 (the
"Cash Election Price" and, together with the Exchange Ratio, the "Merger
Consideration"). The "Average Market Price" means the average of the closing
prices of Washington Mutual Common Stock as reported on the New York Stock
Exchange Composite Transactions Tape for the ten consecutive full trading days
ending on the tenth business day prior to the closing date.
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to Dime and Washington Mutual, as
well as the Agreement. We also have reviewed certain other information provided
to or discussed with us by Dime and Washington Mutual, including publicly
available financial forecasts for Dime and Washington Mutual, and have met with
Dime's and Washington Mutual's managements to discuss the businesses and
prospects of Dime and Washington Mutual. We also have considered certain
financial and stock market data of Dime and Washington Mutual, and we have
compared those data with similar data for other publicly held companies in
businesses similar to Dime and Washington Mutual, and we have considered, to the
extent publicly available, the financial terms of certain other business
combinations and other transactions which have been announced or effected. We
also considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant. We also have considered the views of Dime's and Washington Mutual's
managements concerning the business, operational and strategic benefits and
implications of the Merger, including financial information provided to us by
Dime and Washington Mutual relating to the synergistic values and operating cost
savings expected to be achieved through the combination of the operations of
Dime and Washington Mutual.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
such information being complete and accurate in all material respects. We have
reviewed and discussed with the managements of Dime and Washington Mutual
publicly available financial forecasts relating to Dime and Washington Mutual
and have been advised, and have assumed, that such forecasts represent
reasonable estimates and judgments as to the future financial performance of
Dime and Washington Mutual. In addition, we have relied, without
C-1-1
146
independent verification, upon the estimates and judgments of the managements of
Dime and Washington Mutual as to the potential cost savings and other potential
synergies (including the amount, timing and achievability thereof) anticipated
to result from the Merger. You also have informed us, and we have assumed, that
the Merger will be treated as a tax-free reorganization for federal income tax
purposes. We have assumed, with your consent, that in the course of obtaining
the necessary regulatory and third party approvals and consents for the Merger,
no modification, delay, limitation, restriction or condition will be imposed
that will have a material adverse effect on the expected benefits of the Merger.
We also have assumed, with your consent, that the Merger will be consummated in
accordance with the terms of the Agreement, without waiver, amendment or
modification of any material term, condition or agreement contained therein. In
addition, we have not been requested to conduct, and have not conducted, a
review of individual credit files or made an independent evaluation or appraisal
of the assets or liabilities (contingent or otherwise) of Dime or Washington
Mutual, nor have we been furnished with any such evaluations or appraisals,
including loan or lease portfolios or the allowances for losses with respect
thereto, and have been advised and therefore have assumed, that such allowances
for Dime and Washington Mutual are adequate to cover such losses and will be in
the aggregate adequate on a pro forma basis for the combined entity. Our opinion
does not address the relative merits of the Merger as compared to other business
strategies that may be available to Dime or the effect of any other transaction
in which Dime might engage, nor does it address the underlying business decision
of Dime to engage in the Merger. Our opinion is necessarily based upon
information available to us, and financial, economic, market and other
conditions as they exist and can be evaluated on the date hereof. In connection
with the Merger, we were not requested to, and did not, solicit third party
indications of interest in the possible acquisition of all or a part of Dime. We
are not expressing any opinion as to the actual value of Washington Mutual
Common Stock when issued pursuant to the merger or the prices at which
Washington Mutual Common Stock will trade at any time.
We have acted as financial advisor to Dime in connection with the Merger
and will receive a fee for our services, a significant portion of which is
contingent upon the consummation of the Merger. We in the past have provided,
and may in the future provide, investment banking and financial services to Dime
and Washington Mutual unrelated to the Merger, for which services we have
received, and expect to receive, compensation. Credit Suisse First Boston and/or
its affiliates own a 19.9% equity interest in Warburg, Pincus & Co. and its
affiliate Warburg Pincus LLC, the general partner and manager, respectively, of
Warburg, Pincus Equity Partners, L.P., an investment fund that owns shares of
Dime Common Stock and warrants to purchase shares of Dime Common Stock. In the
ordinary course of our business, we and our affiliates may actively trade the
debt and equity securities of both Dime and Washington Mutual for our and such
affiliates' own accounts and for the accounts of customers and, accordingly, may
at any time hold a long or short position in such securities.
It is understood that this letter is for the information of the Board of
Directors of Dime in connection with its evaluation of the Merger and does not
constitute a recommendation to any holder of Dime Common Stock as to the form of
the Merger Consideration such holder should elect to receive or as to how such
holder should vote or act on any matter relating to the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger Consideration is fair to the holders of Dime Common
Stock from a financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
C-1-2
147
APPENDIX C-2
[LETTERHEAD OF MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED]
June 25, 2001
Board of Directors
Dime Bancorp, Inc.
589 Fifth Avenue
New York, NY 10017
Members of the Board:
We understand that Dime Bancorp, Inc. ("Dime") and Washington Mutual, Inc.
("Washington Mutual") have entered into an Agreement and Plan of Merger, dated
as of June 25, 2001 (the "Agreement"), pursuant to which, among other things,
Dime will be merged with and into Washington Mutual (the "Merger") pursuant to
which Washington Mutual will be the surviving corporation and each outstanding
share of the common stock, par value $0.01 per share, of Dime ("Dime Common
Stock") will be converted into the right to receive, at the election of the
holder thereof and subject to certain procedures and limitations set forth in
the Agreement (as to which we express no opinion), (i) the number of shares of
the common stock, no par value, of Washington Mutual ("Washington Mutual Common
Stock") equal to the quotient of the Cash Election Price (as defined below)
divided by the Average Market Price (as defined below) (such quotient, the
"Exchange Ratio") or (ii) a cash amount equal to the sum of (x) 0.715341 times
1.05 times the Average Market Price and (y) 0.284659 times $40.8366 (the "Cash
Election Price" and, together with the Exchange Ratio, the "Merger
Consideration"). The "Average Market Price" means the average of the closing
prices of Washington Mutual Common Stock as reported on the New York Stock
Exchange Composite Transactions Tape for the ten consecutive full trading days
ending on the tenth business day prior to the closing date.
You have asked us whether, in our opinion, the Merger Consideration to be
paid by Washington Mutual pursuant to the Agreement is fair, from a financial
point of view, to the holders of Dime Common Stock.
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed certain publicly available business and financial
information relating to Dime and Washington Mutual that we deemed
to be relevant;
(2) Reviewed certain information, including publicly available
financial forecasts, relating to the respective businesses,
earnings, assets, liabilities and prospects of Dime and
Washington Mutual furnished to or discussed with us by senior
management of Dime and Washington Mutual, as well as the amount
and timing of the cost savings and expenses expected to result
from the Merger (the "Expected Synergies") furnished to us by
senior managements of Dime and Washington Mutual;
(3) Conducted discussions with members of senior management and
representatives of Dime and Washington Mutual concerning the
matters described in clauses (1) and (2) above, as well as their
respective businesses and prospects before and after giving
effect to the Merger and the Expected Synergies;
(4) Reviewed the market prices and valuation multiples for Dime
Common Stock and Washington Mutual Common Stock and compared them
with those of certain publicly traded companies that we deemed to
be relevant;
C-2-1
148
(5) Reviewed the respective publicly reported financial condition and
results of operations of Dime and Washington Mutual and compared
them with those of certain publicly traded companies that we
deemed to be relevant;
(6) Compared the proposed financial terms of the Merger with the
financial terms of certain other transactions that we deemed to
be relevant;
(7) Participated in certain discussions and negotiations among
representatives of Dime and Washington Mutual and their
respective financial and legal advisors with respect to the
Merger;
(8) Reviewed the potential pro forma impact of the Merger;
(9) Reviewed the Agreement; and
(10) Reviewed such other financial studies and analyses and took into
account such other matters as we deemed necessary, including our
assessment of general economic, market and monetary conditions.
In preparing our opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us,
discussed with or reviewed by or for us, or publicly available, and we have not
assumed any responsibility for independently verifying such information or
undertaken an independent evaluation or appraisal of the assets or liabilities
of Dime or Washington Mutual or been furnished with any such evaluation or
appraisal. We are not experts in the evaluation of allowances for loan losses,
and we have neither made an independent evaluation of the adequacy of the
allowances for loan losses of Dime or Washington Mutual, nor have we reviewed
any individual credit files of Dime or Washington Mutual or been requested to
conduct such a review, and, as a result, we have assumed that the respective
allowances for loan losses for Dime and Washington Mutual are adequate to cover
such losses and will be adequate on a pro forma basis for the combined entity.
In addition, we have not assumed any obligation to conduct, nor have we
conducted, any physical inspection of the properties or facilities of Dime or
Washington Mutual. We have reviewed and discussed with the managements of Dime
and Washington Mutual publicly available financial forecasts relating to Dime
and Washington Mutual and have been advised, and have assumed, that such
forecasts represent reasonable estimates and judgements as to the future
financial performance of Dime and Washington Mutual. With respect to other
financial and operating information, including without limitation, projections
regarding the Expected Synergies, furnished to or discussed with us by Dime or
Washington Mutual, we have assumed that all such information has been reasonably
prepared and reflect the best currently available estimates and judgments of the
senior management of Dime and Washington Mutual. We have further assumed that
the Merger will qualify as a tax-free reorganization for U.S. federal income tax
purposes.
Our opinion is necessarily based upon market, economic and other conditions
as in effect on, and on the information made available to us as of, the date
hereof. For the purposes of rendering this opinion, we have assumed that the
Merger will be consummated substantially in accordance with the terms set forth
in the Agreement, including in all respects material to our analysis, that the
representations and warranties of each party in the Agreement and in all related
documents and instruments (collectively, the "Documents") that are referred to
therein are true and correct, that each party to the Documents will perform all
of the covenants and agreements required to be performed by such party under
such Documents and that all conditions to the consummation of the Merger will be
satisfied without waiver thereof. We have, also assumed that, in the course of
obtaining the necessary regulatory or other consents or approvals (contractual
or otherwise) for the Merger, no restrictions, including any divestiture
requirements or amendments or modifications, will be imposed that will have a
material adverse effect on the future results of operations or financial
condition of Dime, Washington Mutual, or the combined entity, as the case may
be, or on the contemplated benefits of the Merger, including the Expected
Synergies.
C-2-2
149
In connection with the preparation of this opinion, we have not been
authorized by Dime or the Board of Directors of Dime to solicit, nor have we
solicited, third-party indications of interest for the acquisition of all or any
part of Dime.
We have been retained by the Board of Directors of Dime to act as financial
advisor to Dime in connection with the Merger and will receive a fee from Dime
for our services, a significant portion of which is contingent upon the
consummation of the Merger. In addition, Dime has agreed to indemnify us for
certain liabilities arising out of our engagement. We have, in the past,
provided financial advisory, investment banking and other services to Dime and
Washington Mutual and have received fees for the rendering of such services, and
we may continue to provide such services in the future. In addition, in the
ordinary course of our business, we may actively trade Dime Common Stock and
other securities of Dime and its affiliates and Washington Mutual Common Stock
and other securities of Washington Mutual and its affiliates for our own account
and for the accounts of our customers, and, accordingly, may at any time hold
long or short positions in such securities.
This opinion is for the information of the Board of Directors of Dime in
connection with its consideration of the Merger. It is further understood that
this opinion will not be reproduced, summarized, described or referred to or
given to any person without Merrill Lynch's prior written consent. This opinion
does not address the merits of the underlying decision by Dime to engage in the
Merger and does not constitute a recommendation to any holder of Dime Common
Stock as to the form of the Merger Consideration such holder should elect to
receive or as to how such shareholder should vote on the proposed Merger or any
other matter related thereto.
We have not considered, nor are we expressing any opinion herein with
respect to, the prices at which Dime Common Stock or Washington Mutual Common
Stock will trade following the announcement of the Merger or the price at which
Washington Mutual Common Stock will trade following the consummation of the
Merger.
On the basis of and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Merger Consideration to be paid by Washington Mutual
pursuant to the Agreement is fair, from a financial point of view, to the
holders of Dime Common Stock.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
C-2-3
150
APPENDIX D
DELAWARE GENERAL CORPORATION LAW, SECTION 262
SECTION 262 APPRAISAL RIGHTS -- (a) Any stockholder of a corporation of
this State who holds shares of stock on the date of the making of a demand
pursuant to subsection (d) of this section with respect to such shares, who
continuously holds such shares through the effective date of the merger or
consolidation, who has otherwise complied with subsection (d) of this section
and who has neither voted in favor of the merger or consolidation nor consented
thereto in writing pursuant to Section 228 of this title shall be entitled to an
appraisal by the Court of Chancery of the fair value of the stockholder's shares
of stock under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a nonstock
corporation; the words "stock" and "share" mean and include what is ordinarily
meant by those words and also membership or membership interest of a member of a
nonstock corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251 (other than a merger effected pursuant to
Section 251 (g) of this title), Section 252, Section 254, Section 257, Section
258, Section 263 or Section 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of Section 251 of this title.
(2) Notwithstanding paragraph (l) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to Section
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
D-1
151
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under Section 253 of this title is not owned by
the parent corporation immediately prior to the merger, appraisal rights
shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsections (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section.
Each stockholder electing to demand the appraisal of his shares shall
deliver to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of his shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein
provided. Within 10 days after the effective date of such merger or
consolidation, the surviving or resulting corporation shall notify each
stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or Section 253 of this title, each constituent corporation, either
before the effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders
on or within 10 days after such effective date; provided, however, that if
such second notice is sent more than 20 days following the sending of the
first notice, such second notice need only be sent to each stockholder who
is entitled to appraisal rights and who has demanded appraisal of such
holder's shares in accordance with this subsection. An affidavit of the
secretary or assistant secretary or of the transfer agent of the
corporation that is required to give either notice that such notice has
been given shall, in the absence of fraud, be prima facie evidence of the
facts stated therein. For purposes of determining the stockholders entitled
to receive either notice, each constituent corporation may fix, in advance,
a record date that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or after the
effective date of the merger or consolidation, the record date shall be
such effective date. If no record date is fixed and the notice is given
prior to the effective date, the record date shall be the close of business
on the day next preceding the day on which the notice is given.
D-2
152
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also by given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted his
certificates of stock to the Register in Chancery, if such is required, may
participate fully in all proceedings until it is finally determined that he is
not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon
D-3
153
the surrender to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court of Chancery may
be enforced, whether such surviving or resulting corporation be a corporation of
this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided.
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within 60
days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 23B.08.320 of the Washington Business Corporation Act (the
"Corporation Act") provides that the personal liability of directors to a
corporation imposed by Section 23B.08.310 of the Corporation Act may be
eliminated by the articles of incorporation of the corporation, except in the
case of acts or omissions involving certain types of conduct. At Article XII of
its Amended and Restated Articles of Incorporation, the Registrant has elected
to eliminate the liability of directors to the Registrant to the extent
permitted by law. Thus, a director of the Registrant is not personally liable to
the Registrant or its stockholders for monetary damages for conduct as a
director, except for liability of the director (i) for acts or omissions that
involve intentional misconduct by the director or a knowing violation of law by
the director, (ii) for conduct violating Section 23B.08.310 of the Corporation
Act, or (iii) for any transaction from which the director will personally
receive a benefit in money, property or services to which the director is not
legally entitled. If Washington law is amended to authorize corporate action
that further eliminates or limits the liability of directors, then the liability
of Washington Mutual directors will be eliminated or limited to the fullest
extent permitted by Washington law, as so amended.
Section 23B.08.560 of the Corporation Act provides that if authorized by
(i) the articles of incorporation, (ii) a bylaw adopted or ratified by the
stockholders, or (iii) a resolution adopted or ratified, before or after the
event, by the stockholders, a corporation will have the power to indemnify
directors made party to a proceeding, or to obligate itself to advance or
reimburse expenses incurred in a proceeding, without regard to the limitations
on indemnification contained in Sections 23B.08.510 through 23B.08.550 of the
Corporation Act, provided that no such indemnity shall indemnify any director
(i) for acts or omissions that involve intentional misconduct by the director or
a knowing violation of law by the director, (ii) for conduct violating Section
23B.08.310 of the Corporation Act, or (iii) for any
D-4
154
transaction from which the director will personally receive a benefit in money,
property or services to which the director is not legally entitled.
Pursuant to Article IX of Washington Mutual's Amended and Restated Articles
of Incorporation and Article VIII of Washington Mutual's Bylaws, Washington
Mutual must, subject to certain exceptions, indemnify and defend its directors
against any expense, liability or loss arising from or in connection with any
actual or threatened action, suit or proceeding relating to service for or at
the request of Washington Mutual, including without limitation, liability under
the Securities Act. Washington Mutual is not permitted to indemnify a director
from or on account of acts or omissions of such director which are finally
adjudged to be intentional misconduct, or from or on account of conduct in
violation of RCW 23B.08.310, or a knowing violation of the law from or on
account of any transaction with respect to which it is finally adjudged that
such director received a benefit in money, property or services to which he or
she was not entitled. If Washington law is amended to authorize further
indemnification of directors, then Washington Mutual directors shall be
indemnified to the fullest extent permitted by Washington law, as so amended.
Also, pursuant to Article IX of Washington Mutual's Amended and Restated
Articles of Incorporation and Article VIII of Washington Mutual's Bylaws,
Washington Mutual may, by action of the Washington Mutual Board, provide
indemnification and pay expenses to officers, employees and agents of Washington
Mutual or another corporation, partnership, joint venture, trust or other
enterprise with the same scope and effect as above described in relation to
directors. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
Washington Mutual pursuant to the provisions described above, Washington Mutual
has been informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
D-5
155
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 23B.08.320 of the Washington Business Corporation Act (the
"Corporation Act") provides that the personal liability of directors to a
corporation imposed by Section 23B.08.310 of the Corporation Act may be
eliminated by the articles of incorporation of the corporation, except in the
case of acts or omissions involving certain types of conduct. In Article XII of
its Amended and Restated Articles of Incorporation, the Registrant has elected
to eliminate the liability of directors to the Registrant to the extent
permitted by law. Thus, a director of the Registrant is not personally liable to
the Registrant or its shareholders for monetary damages for conduct as a
director, except for liability of the director (i) for acts or omissions that
involve intentional misconduct by the director or a knowing violation of law by
the director, (ii) for conduct violating Section 23B.08.310 of the Corporation
Act, or (iii) for any transaction from which the director will personally
receive a benefit in money, property or services to which the director is not
legally entitled. If Washington law is amended to authorize corporate action
that further eliminates or limits the liability of directors, then the liability
of Washington Mutual directors will be eliminated or limited to the fullest
extent permitted by Washington law, as so amended.
Section 23B.08.560 of the Corporation Act provides that if authorized by
(i) the articles of incorporation, (ii) a bylaw adopted or ratified by the
shareholders, or (iii) a resolution adopted or ratified, before or after the
event, by the shareholders, a corporation will have the power to indemnify
directors made party to a proceeding, or to obligate itself to advance or
reimburse expenses incurred in a proceeding, without regard to the limitations
on indemnification contained in Sections 23B.08.510 through 23B.08.550 of the
Corporation Act, provided that no such indemnity shall indemnify any director
(i) for acts or omissions that involve intentional misconduct by the director or
a knowing violation of law by the director, (ii) for conduct violating Section
23B.08.310 of the Corporation Act, or (iii) for any transaction from which the
director will personally receive a benefit in money, property or services to
which the director is not legally entitled.
Pursuant to Article IX of Washington Mutual's Amended and Restated Articles
of Incorporation and Article VIII of Washington Mutual's Bylaws, Washington
Mutual must, subject to certain exceptions, indemnify and defend its directors
against any expense, liability or loss arising from or in connection with any
actual or threatened action, suit or proceeding relating to service for or at
the request of Washington Mutual, including without limitation, liability under
the Securities Act. Washington Mutual is not permitted to indemnify a director
from or on account of acts or omissions of such director which are finally
adjudged to be intentional misconduct, or from or on account of conduct in
violation of RCW 23B.08.310, or a knowing violation of the law from or on
account of any transaction with respect to which it is finally adjudged that
such director received a benefit in money, property or services to which he or
she was not entitled. If Washington law is amended to authorize further
indemnification of directors, then Washington Mutual directors shall be
indemnified to the fullest extent permitted by Washington law, as so amended.
Also, pursuant to Article IX of Washington Mutual's Amended and Restated
Articles of Incorporation and Article VIII of Washington Mutual's Bylaws,
Washington Mutual may, by action of the Washington Mutual Board, provide
indemnification and pay expenses to officers, employees and agents of Washington
Mutual or another corporation, partnership, joint venture, trust or other
enterprise with the same scope and effect as above described in relation to
directors. Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
Washington Mutual pursuant to the provisions described above, Washington Mutual
has been informed that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is therefore
unenforceable.
II-1
156
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT
NO. DESCRIPTION
------- -----------
2.1 Agreement and Plan of Merger between the Registrant and
Dime, dated June 25, 2001. (incorporated by reference to
Appendix A of the Proxy Statement/Prospectus included in
this Registration Statement.) Registrant agrees to furnish
supplementally to the Commission upon request a copy of any
omitted schedule.
2.2 Warrant Purchase and Voting Agreement dated as of June 25,
2001, among the Registrant, Warburg, Pincus Equity Partners,
L.P., Warburg, Pincus Netherlands Equity Partners I, C.V.,
Warburg, Pincus Netherlands Equity Partners II, C.V. and
Warburg, Pincus Netherlands Equity Partners III, C.V.
(incorporated by reference to Appendix B of the Proxy
Statement/Prospectus included in this Registration
Statement)
3.1 Restated Articles of Incorporation of the Registrant, as
amended (incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
2001)
3.2 Restated Bylaws of the Registrant, as amended (incorporated
by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000)
4.1 Rights Agreement, dated December 2000 between the Registrant
and Mellon Investor Services, L.L.C., as rights agent
(incorporated by reference to the Registrant's Current
Report on Form 8-K dated January 8, 2001)
5.1 Opinion of Heller Ehrman White & McAuliffe LLP
8.1* Tax Opinion of Simpson Thacher & Bartlett
8.2* Tax Opinion of Sullivan & Cromwell
21.1 List of Subsidiaries of the Registrant (incorporated by
reference to registrant's Form 10-K for the year ended
December 21, 2000)
23.1 Consent of Deloitte & Touche LLP with respect to Washington
Mutual, Inc.
23.2 Consent of KPMG LLP with respect to Dime Bancorp, Inc.
23.3 Consent of Heller, Ehrman White & McAuliffe LLP (included in
its opinion filed as Exhibit 5.1)
23.4 Consent of Simpson Thacher & Bartlett (included in its
opinion filed as Exhibit 8.1)
23.5 Consent of Sullivan & Cromwell (included in its opinion
files as Exhibit 8.2
24.1 Powers of Attorney (included on the signature page of this
Registration Statement)
99.1* Form of Proxy Card of Dime
99.2 Consent of Credit Suisse First Boston Corporation
99.3 Consent of Merrill Lynch, Pierce, Fenner & Smith,
Incorporated
-------------------------
* To be filed by amendment
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement;
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the registration statement
or any material change to such information in the registration
statement;
II-2
157
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
by a director, officer or controlling person of the Registrant in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the registration statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned registrant hereby undertakes as follows: that prior to any
public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
The registrant undertakes that every prospectus: (i) that is filed pursuant
to paragraph (1) immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-3
158
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Seattle,
State of Washington on August 24, 2001.
WASHINGTON MUTUAL, INC.
By: /s/ KERRY K. KILLINGER
------------------------------------
Kerry K. Killinger
Title: Chairman, President and
Chief Executive Officer
POWER OF ATTORNEY
Each person whose individual signature appears below hereby constitutes and
appoints Fay L. Chapman and William A. Longbrake, and each of them severally, as
his or her true and lawful attorney-in-fact with full power of substitution to
execute in the name and on behalf of such person, individually and in each
capacity stated below, and to file, any and all amendments to this Registration
Statement, including any and all post-effective amendments.
Pursuant to the requirement of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated below on the 24th day of August, 2001.
/s/ KERRY K. KILLINGER /s/ WILLIAM A. LONGBRAKE
----------------------------------------------------- ----------------------------------------------
Kerry K. Killinger William A. Longbrake
Chairman, President and Vice Chair and
Chief Executive Officer; Director Chief Financial Officer
(Principal Executive Officer) (Principal Financial Officer)
/s/ ROBERT H. MILES
----------------------------------------------
Robert H. Miles
Senior Vice President and Controller
(Principal Accounting Officer)
/s/ DOUGLAS P. BEIGHLE /s/ DAVID BONDERMAN
----------------------------------------------------- ----------------------------------------------
Douglas P. Beighle David Bonderman
Director Director
/s/ J. TAYLOR CRANDALL
----------------------------------------------------- ----------------------------------------------
J. Taylor Crandall Anne V. Farrell
Director Director
/s/ STEPHEN E. FRANK /s/ WILLIAM P. GERBERDING
----------------------------------------------------- ----------------------------------------------
Stephen E. Frank William P. Gerberding
Director Director
/s/ ENRIQUE HERNANDEZ, JR. /s/ PHILLIP D. MATTHEWS
----------------------------------------------------- ----------------------------------------------
Enrique Hernandez, Jr. Phillip D. Matthews
Director Director
/s/ MICHAEL K. MURPHY /s/ MARY E. PUGH
----------------------------------------------------- ----------------------------------------------
Michael K. Murphy Mary E. Pugh
Director Director
II-4
159
/s/ ELIZABETH A. SANDERS
----------------------------------------------------- ----------------------------------------------
William G. Reed, Jr. Elizabeth A. Sanders
Director Director
/s/ WILLIAM D. SCHULTE
----------------------------------------------------- ----------------------------------------------
William D. Schulte James H. Stever
Director Director
/s/ WILLIS B. WOOD, JR.
----------------------------------------------
Willis B. Wood, Jr.
Director
II-5
160
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
------- -----------
2.1 Agreement and Plan of Merger between the Registrant and
Dime, dated June 25, 2001. (incorporated by reference to
Appendix A of the Proxy Statement/Prospectus included in
this Registration Statement.) Registrant agrees to furnish
supplementally to the Commission upon request a copy of any
omitted schedule.
2.2 Warrant Purchase and Voting Agreement dated as of June 25,
2001, among the Registrant, Warburg, Pincus Equity Partners,
L.P., Warburg, Pincus Netherlands Equity Partners I, C.V.,
Warburg, Pincus Netherlands Equity Partners II, C.V. and
Warburg, Pincus Netherlands Equity Partners III, C.V.
(incorporated by reference to Appendix B of the Proxy
Statement/ Prospectus included in this Registration
Statement)
3.1 Restated Articles of incorporation of the Registrant, as
amended (incorporated by reference to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
2001
3.2 Restated Bylaws of the Registrant, as amended (incorporated
by reference to the Registrant's Quarterly Report on Form
10-Q for the quarter ended June 30, 2000
4.1 Rights Agreement, dated December 2000 between the Registrant
and Mellon Investor Services, L.L.C., as rights agent
(incorporated by reference to the Registrant's Current
Report on Form 8-K dated January 8, 2001)
5.1 Opinion of Heller Ehrman White & McAuliffe LLP
8.1* Tax Opinion of Simpson Thacher & Bartlett
8.2* Tax Opinion of Sullivan & Cromwell
21.1 List of Subsidiaries of the Registrant (incorporated by
reference to registrant's Form 10-K for the year ended
December 21, 2000)
23.1 Consent of Deloitte & Touche LLP with respect to Washington
Mutual, Inc.
23.2 Consent of KPMG LLP with respect to Dime Bancorp, Inc.
23.3 Consent of Heller, Ehrman White & McAuliffe LLP (included in
its opinion filed as Exhibit 5.1)
23.4 Consent of Simpson Thacher & Bartlett (included in its
opinion filed as Exhibit 8.1)
23.5 Consent of Sullivan & Cromwell (included in its opinion
files as Exhibit 8.2)
24.1 Powers of Attorney (included on the signature page of this
Registration Statement)
99.1* Form of Proxy Card of Dime
99.2 Consent of Credit Suisse First Boston Corporation
99.3 Consent of Merrill Lynch, Pierce, Fenner & Smith,
Incorporated
-------------------------
* To be filed by amendment